NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations, Basis of Consolidation, and Other General Principles
PHI, Inc. and its subsidiaries (“PHI,” the “Company,” “we,” “us,” or “our”) provide transportation services to, from, and among offshore facilities for customers engaged in the oil and gas exploration, development, and production industry. We provide these offshore services primarily in the United States and to a lesser extent in Canada, Trinidad, Australia, New Zealand, the Philippines, West Africa and the Middle East. We also provide air medical transportation services for hospitals and emergency service agencies, as well as aircraft maintenance and repair services to third parties in North America.
The consolidated financial statements include the accounts of PHI, Inc. and its subsidiaries after the elimination of all intercompany accounts and transactions. We apply the equity method of accounting for investments in entities, if we have the ability to exercise significant influence over the operating and financial policies of the entity. We report our share of earnings or losses of equity investees in the accompanying Consolidated Statements of Operations as equity in (loss) profit of unconsolidated affiliate.
At
December 31, 2018
, Al A. Gonsoulin, Chairman of the Board and Chief Executive Officer, beneficially owned stock representing approximately
70.9%
of the total voting power. As a result, he exercises control over the election of PHI’s directors and the outcome of matters requiring a shareholder vote.
Chapter 11 Cases
As of December 31, 2018, the Company’s total senior indebtedness was
$630 million
, consisting of (i)
$500.0 million
principal amount of our
5.25%
Senior Notes due March 15, 2019 and (ii)
$130.0 million
principal amount of borrowings under its
two
-year term loan with the financing affiliate of its controlling shareholder (in each case excluding debt issuance costs). The Company also had
$19.8 million
of letters of credit outstanding at December 31, 2018. As of December 31, 2018, the Company had approximately
$159.5 million
of aggregate lease commitments. As discussed further elsewhere herein, the Company borrowed an additional
$70 million
on March 13, 2019.
Beginning in late 2017, the Company considered its options for refinancing its unsecured senior notes due March 15, 2019. However, in light of the challenging operating environment for companies providing offshore energy services generally, the financing market was constrained and the Company was not able to identify a refinancing option that it believed provided a suitable capital platform to promote the best interests of the Company and its stakeholders.
In the fall of 2018, the Company announced that it had engaged financial advisors to assist the Company in exploring and evaluating a broad range of potential strategic alternatives. After working closely with the Company’s advisors, communicating with the Company’s various stakeholders, and carefully evaluating all possible options, the Board concluded that pursuing Chapter 11 protection was the most appropriate course of action to address the Company’s maturing debt and strengthen its balance sheet.
Prior to the maturity of the Company’s unsecured senior notes, on March 14, 2019 (the “Petition Date”), the Company and its principal U.S. subsidiaries. PHI Tech Services, Inc., AM Equity Holdings, L.L.C., PHI Air Medical, L.L.C. and PHI Helipass, L.L.C. (together with the Company, collectively, the “Debtors”) filed voluntary petitions (the “Chapter 11 Cases”) in the United States Bankruptcy Court for the Northern District of Texas (the “Bankruptcy Court”) seeking relief under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”). The Debtors have requested joint administration of their Chapter 11 Cases under the caption In re: PHI, Inc., et al., Main Case No. 19-30923. The Debtors continue to operate their businesses and manage their properties as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. To ensure their ability to continue operating in the ordinary course of business, the Debtors have filed with the Bankruptcy Court motions seeking a variety of “first-day” relief (collectively, the “First Day Motions”), including authority to pay employee wages and benefits, honor customer programs, and pay utilities providers, insurance providers and other vendors and suppliers in the ordinary course for all goods and services provided after the Petition Date.
We currently retain the exclusive right to propose a Chapter 11 plan of reorganization. If the Bankruptcy Court terminates that right, however, or the exclusivity period expires, our ability to achieve confirmation of a Chapter 11 plan of reorganization could be materially adversely affected.
Going Concern
The Company expects to continue operations in the normal course during the pendency of the Chapter 11 Cases described immediately above under the heading "Chapter 11 Cases".
The significant risks and uncertainties related to the company’s Chapter 11 Case raise substantial doubt about the company's ability to continue as a going concern. The consolidated financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities and commitments in the normal course of business. The consolidated financial statements do not include any adjustments that might result from the outcome of the going concern uncertainty.
See Note 19 for further information and details on the Company’s restructuring and Chapter 11 proceedings.
Use of Estimates
The preparation of financial statements is in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.
Significant estimates include:
Estimates of contractual allowances applicable to billings in the Air Medical segment,
Valuation reserve related to obsolete and excess inventory,
Reserves related to unpaid accounts,
Depreciable lives and salvage values of property and equipment,
Valuation allowance for deferred tax assets,
Fair values of assets acquired and liabilities assumed,
Income taxes,
Healthcare insurance claims and workers’ compensation liability, and
Impairment of long-lived assets,
Impairment of Goodwill and Intangible assets.
Cash and Cash Equivalents
We consider all highly liquid investments with maturities of
three months or less
, when purchased, to be cash equivalents.
Trade Receivables, net
Trade and other receivables are stated at net realizable value. Air Medical trade receivables are presented net of allowances for contractual discounts and uncompensated care. We estimate contractual allowances and uncompensated care based on historical collection experience by payor category. The main payor categories are Medicare, Medicaid, private insurance, and self-pay. We analyze our historical payment of accounts by payor category on a monthly basis, and adjust our accounts receivable allowance based upon each category’s historical collection percentage plus any adjustments for current trends in payor behavior.
Provisions for contractual discounts and uncompensated care that we applied to our Air Medical trade receivables (expressed as a percentage of total segment accounts receivable at December 31 were as follows:
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
Allowance for contractual discounts
|
|
51%
|
|
53%
|
|
Allowance for uncompensated care
|
|
22%
|
|
24%
|
Short-term Investments
Short-term investments consist of commercial paper, debt issued by the U.S. government or its agencies, and corporate bonds and notes, which represent funds available for current operations. In accordance with GAAP, these short-term investments are classified as available for sale.
Inventories of Spare Parts
The Company’s inventories are stated at average cost and consist primarily of spare aircraft parts. Portions of the Company’s inventories are used parts that are often exchanged with parts removed from aircraft, reworked to a useable condition according
to manufacturers’ and FAA specifications, and returned to inventory. Reusable aircraft parts are included in inventory at the average cost of comparable parts. The rework costs are expensed as incurred. The Company also records an allowance for obsolete and slow-moving parts, relying principally on specific identification of such inventory. Valuation reserves related to obsolescence and slow-moving inventory were
$17.9 million
and
$20.9 million
at
December 31, 2018
and
2017
, respectively.
Property and Equipment
The Company records its property and equipment at cost less accumulated depreciation. For financial reporting purposes, the Company uses the straight-line method to compute depreciation based upon estimated useful lives of
5
to
15
years for flight equipment and
3
to
10
years for other equipment. Leasehold improvements are amortized over the shorter of the life of the respective asset or the term of the lease agreement and range from
6
to
10
years. The salvage value used in calculating depreciation of aircraft ranges from
25%
to
54%
of the aircraft’s carrying value, based upon historical aircraft sales data. The cost of scheduled inspections and modifications for flight equipment are charged to maintenance expense as incurred. We charge maintenance and repair costs to earnings as the costs are incurred. The cost of certain aircraft components are covered under contractual arrangements with the applicable aircraft manufacturer, commonly referred to as “power-by-the-hour” contracts. Under these agreements, we are charged an agreed amount per hour of flying time. The costs charged under these contractual arrangements are recognized in the period in which the flight hours occur. To the extent that we have not yet been billed for costs incurred under these arrangements, these costs are included in accrued expenses on our consolidated balance sheets. Modifications that enhance the operating performance or extend the useful lives of the aircraft are capitalized and depreciated over the remaining life of the aircraft. Upon selling or otherwise disposing of property and equipment, the Company removes the cost and accumulated depreciation from the accounts and reflects any resulting gain or loss in earnings at the time of sale or other disposition.
The Company reviews its long-lived tangible assets for impairment annually, or more frequently if events or a change of circumstances indicate that an impairment may have occurred. In such evaluation, the estimated future undiscounted cash flows generated by a particular asset group are compared with the book value of the asset group to determine if an impairment charge is necessary. Similar aircraft model types are grouped together for impairment testing purposes. The Company measures recoverability of assets to be held and used by comparing the carrying amount of an asset to future undiscounted net cash flows that it expects the asset to generate. When the Company determines that an asset is impaired, the Company recognizes that impairment amount, which is measured by the amount that the carrying value of the asset exceeds its fair value. In addition to the periodic review of its active long-lived tangible assets for impairment when circumstances warrant, the Company also performs a review of its parked aircraft not expected to return to service annually or whenever changes in circumstances indicate the carrying amount of an aircraft may not be recoverable. Management estimates the fair value of each aircraft not expected to return to service by considering items such as the aircraft’s age, length of time parked, likelihood of return to active service, and actual recent sales of similar aircraft. For more significant aircraft carrying values, we obtain an estimate of the fair value of the parked aircraft from third-party appraisers for use in our determination of fair value estimates. The Company records an impairment charge when the carrying value of a parked aircraft not expected to return to active service exceeds its estimated fair market value.
During the twelve months ended
December 31, 2018
, we sold or disposed of
one
heavy,
three
medium and
one
light aircraft and related parts inventory utilized in our Oil and Gas segment and one light aircraft in our Air Medical segment. Cash proceeds totaled
$14.2 million
, resulting in a loss of
$0.8 million
. These aircraft no longer met our strategic needs.
During the twelve months ended
December 31, 2017
, we sold or disposed of
six
medium,
one
fixed wing aircraft and related parts inventory previously utilized in our Oil and Gas segment. Cash proceeds totaled $
1.3 million
, resulting in a loss of $
0.3 million
. These aircraft no longer met our strategic needs.
During the twelve months ended December 31, 2016, we sold
twelve
light,
eleven
medium aircraft, and related parts inventory previously utilized in our Oil and Gas segment. Cash proceeds totaled
$15.0 million
, resulting in a gain of
$3.3 million
. These aircraft no longer met our strategic needs.
Impairment Losses for Aircraft
The Company estimates cash flows and asset appraisals based upon historical data adjusted for the Company’s best estimate of expected future market performance. If an asset group fails the undiscounted cash flow test or appraisal value, the Company compares the market value to the book value of each asset group in order to determine if impairment exists (considered Level 3, as defined by ASC 820, Fair Value Measurements and Disclosures). If impairment exists, the book value of the asset group is reduced to its estimated fair value. We recorded an impairment loss in the year ended
December 31, 2018
for
two
light,
seventeen
medium and
one
heavy aircraft and related spare parts in our Oil and Gas segment. The carrying value of these aircraft was
$109.6 million
. Following a market analysis, we determined that the market value for these aircraft is
$85.2 million
(based on a Level 3 review, as defined by ASC 820, Fair Value Measurements and Disclosures). As a result of this analysis, we recorded an aggregate non-cash pre-tax impairment loss of
$23.2 million
for
2018
. We had
$0.4 million
impairment losses in the year ended
December 31, 2017
. We had
$0.4 million
impairment losses for the year ended
December 31, 2016
. (see note 18)
Fair Value of Assets and Liabilities Acquired and Identification of Associated Goodwill and Intangible Assets
In conjunction with each acquisition we make, we must allocate the cost of the acquired entity to the assets and liabilities assumed based on their estimated fair values at the date of acquisition. As additional information becomes available, we may adjust the original estimates within a short time period subsequent to the acquisition. In addition, we are required to recognize intangible assets separately from goodwill. Determining the fair value of assets and liabilities acquired, as well as intangible assets that relate to such items as customer relationships, contracts, trade names and non-compete agreements involves professional judgment and is ultimately based on acquisition models and management’s assessment of the value of the assets acquired, and to the extent available, third party assessments. Intangible assets with finite lives are amortized over their estimated useful life as determined by management. Whenever events or changes in circumstances indicate that the carrying amount of the intangible assets may not be recoverable, the intangible assets will be reviewed for impairment. Goodwill is not amortized but instead is periodically assessed for impairment. Uncertainties associated with these estimates include fluctuations in economic obsolescence factors in the area and potential future sources of cash flow. We cannot provide assurance that actual amounts will not vary significantly from estimated amounts. (see note 2)
Goodwill
Goodwill represents the amount the purchase price exceeds the fair value of net assets acquired in a business combination. Goodwill has an indefinite useful life and is not amortized, but is assessed for impairment annually or when events or changes in circumstances indicate that a potential impairment exists.
The Company performs the goodwill impairment test on an annual basis during the fourth quarter or on an interim basis if events or circumstances indicate that the fair value of the asset has decreased below its carrying value. The company performed its goodwill impairment test in the fourth quarter. In order to estimate the fair value of the reporting units (which is consistent with the reported business segments), the Company used a weighting of the discounted cash flow method and the public company guideline method of determining fair value of each reporting unit. The Company weighted the discounted cash flow method
80%
and the public company guideline method
20%
due to differences between the Company’s reporting units and the peer companies’ size, profitability and diversity of operations. These fair value estimates were then compared to the carrying value of the reporting units. If the fair value of the reporting unit exceeds the carrying amount, no impairment loss is recognized. If the estimated fair value of the reporting unit is below the carrying value, then an impairment is recorded, which represents the amount by which a reporting unit’s carrying value exceeds its fair value. The inputs used to determine fair value were classified as level 3 in the fair value hierarchy. A significant amount of judgment was involved in performing these evaluations since the results are based on estimated future events. At December 31, 2018, the Company’s accumulated impairments of goodwill was
$61.6 million
. As of December 31, 2018 there is no remaining goodwill in our financial statements. (see note 18).
Other Intangible Assets
In connection with our acquisition of the HNZ Offshore Business, we also recognized in the fourth quarter of 2017 intangible assets for customer relationship, non-compete and tradenames. Intangible assets with finite useful lives are amortized over estimated useful lives on a straight-line basis. The Company reviews its intangible assets for impairment annually, or more frequently if events or a change of circumstances indicate that the carrying amount of any such asset may not be recoverable. The determination of recoverability is made based upon the estimated undiscounted future net cash flows. In such evaluation, the estimated future undiscounted cash flows generated by a particular asset group are compared with the book value of the asset group to determine if an impairment charge is necessary. The Company measures recoverability of assets to be held and used by comparing the carrying amount of an asset to future undiscounted net cash flows that it expects the asset to generate. When the Company determines that an asset is impaired, the Company recognizes that impairment amount, which is measured by the amount that the carrying value of the asset exceeds its fair value. The estimated fair values for these assets were determined using discounted future cash flows. The significant level 3 unobservable inputs used in the determination of the fair value of these assets were the estimated future
cash flows and the weighted average cost of capital ("WACC"). During the fourth quarter of 2018, the Company recorded
$15.5 million
in impairments of values of intangibles in the Oil & Gas segment (see note 18)
Our intangible assets by types consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Useful Lives
|
|
Gross Amount
|
|
Accumulated Amortization
|
|
Impairments of assets
|
|
Net Balance
|
|
Customer Relationship
|
15
|
|
11,622
|
|
|
(581
|
)
|
|
(11,041
|
)
|
|
—
|
|
|
Non-Compete Agreements
|
5
|
|
900
|
|
|
(135
|
)
|
|
(765
|
)
|
|
—
|
|
|
Tradenames
|
7
|
|
4,201
|
|
|
(450
|
)
|
|
(3,751
|
)
|
|
—
|
|
|
Total
|
|
|
16,723
|
|
|
(1,166
|
)
|
|
(15,557
|
)
|
|
—
|
|
Deferred Financing Costs
Costs incurred to obtain long-term debt financing are deferred and amortized ratably over the term of the related debt agreement.
Self-Insurance
The Company maintains a self-insurance program for a portion of its healthcare costs. Self-insurance costs are accrued based upon the aggregate of the liability for reported claims and the estimated liability for claims incurred but not reported. The Company’s insurance retention was
$250,000
per claim through
December 31, 2018
. As of
December 31, 2018
and
2017
, the Company had
$1.8 million
and
$1.3 million
, respectively, of accrued liabilities related to healthcare claims.
There is also a
$0.5 million
deductible per incident on our workers’ compensation program. We have accrued
$1.9 million
and
$2.9 million
for the years
2018
and
2017
, respectively, related to workers’ compensation claims.
The Company owns an offshore insurance company to realize savings in reinsurance costs on its insurance premiums. We paid
$0.3 million
and
$0.5 million
, respectively, to this captive company in
2018
and
2017
, which were eliminated in consolidation. The results of the captive are fully consolidated in the accompanying consolidated financial statements.
Revenue Recognition
In 2014, the Financial Accounting Standard Board ("the FASB") issued ASC 606, Revenue from Contracts with Customers (“ASC 606”), replacing the existing accounting standard and industry specific guidance for revenue recognition with a five-step model for recognizing and measuring revenue from contracts with customers. The underlying principle of the new standard is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. ASC 606 became effective on January 1, 2018 and we adopted it using the modified retrospective method applied to open contracts and only to the version of the contracts in effect as of January 1, 2018. Prior period amounts have not been adjusted and continue to be reflected in accordance with our historical accounting. There was no impact on the condensed consolidated financial statements and no cumulative effect adjustment was recognized.
In general, under ASC 606, we recognize revenue when a service or good is sold to a customer and there is a contract. At contract inception, we assess the goods and services promised in our contracts with customers and identify all performance obligations for each distinct promise that transfers a good or service (or bundle of goods or services) to the customer. To identify the performance obligations, we consider all goods or services promised in the contract, whether explicitly stated or implied based on customary business practices. Revenue is recognized when control of the identified distinct goods or services has been transferred to the customer, the transaction price has been determined and allocated to the performed performance obligations and we have determined that collection has occurred or is probable of occurring.
We measure revenue as the amount of consideration we expect to receive in exchange for the services provided. Taxes collected from customers and remitted to governmental authorities and revenues are reported on a net basis in the financial statements. Thus, we exclude taxes imposed on the customer and collected on behalf of governmental agencies to be remitted to these agencies from the transaction price in determining the revenue related to contracts with a customer.
Oil & Gas Revenue Recognition -
We provide helicopter services to oil and gas customers operating in the Gulf of Mexico and a number of foreign countries. Revenues are recognized when performance obligations are satisfied over time in accordance with contractual terms, in an amount that reflects the consideration the Company expects to be entitled to in exchange for services rendered.
Air Medical Revenue Recognition -
We provide helicopter services to hospitals and emergency service providers in several U.S. states, or to individual patients in the U.S. in which case we are paid by either a commercial insurance company, federal or state
agency, or the patient. Our Air Medical segment operates primarily under the independent provider model and, to a lesser extent, under the traditional provider model. Revenues related to the independent provider model services are recorded in the period in which we satisfy our performance obligations under contracts by providing our services to our customers based upon established billing rates net of contractual allowances under agreements with third party payors and net of uncompensated care allowances. These amounts are due from patients, third-party payors (including health insurers and government programs), and others and includes variable consideration for retroactive revenue adjustments due to settlement of audits, reviews, and investigations. Generally, we bill the patients and third-party payors several days after the services are performed. Revenues generated under the traditional provider model are recognized as performance obligations are satisfied over time in accordance with contractual terms, in an amount that reflects the consideration the Company expects to be entitled in exchange for services rendered.
Oil & Gas Performance Obligations -
A performance obligation arises under contracts with customers to render services and is the unit of account under ASC 606. Operating revenue from our Oil and Gas segment is derived mainly from fixed-term contracts with our customers, a substantial portion of which are competitively bid. A small portion of our Oil and Gas segment revenue is derived from providing services on an "ad-hoc" basis. Our fixed-term contracts typically have original terms of
one
to
seven
years (subject to provisions permitting early termination on relatively short notice by the customers), with payment in U.S. dollars. We account for services rendered separately if they are distinct and the services are separately identifiable from other items provided to a customer and if a customer can benefit from the services rendered on its own or with other resources that are readily available to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Within this contract type for helicopter services, we determined that each contract has a single distinct performance obligation. These services include a fixed monthly rate for a particular model of aircraft, and flight hour services, which represents the variable component of a typical contract with a customer. Rates for these services vary depending on the type of services provided and can be based on a per flight hour, per day, or per month basis. We also provide services to clients on an “ad hoc” basis, which usually entails a shorter contract notice period and duration. The charges for ad hoc services are based on an hourly rate or a daily or monthly fixed fee plus additional fees for each hour flown. The nature of our variable charges within our flight services contracts are not effective until a customer-initiated flight order and the actual hours flown are determined; therefore, the associated flight revenue generally cannot be reasonably and reliably estimated beforehand. A contract’s standalone selling prices are determined based upon the prices that we charge for our services rendered. The majority of our revenue is recognized as performance obligations satisfied over time, by measuring progress towards satisfying the contracted services in a manner that best depicts the transfer of services to the customer, which is generally represented by a period of
30
days or less. We typically invoice customers on a monthly basis with the term between invoicing and when the payment is due typically being between
30
and
60
days.
Air Medical Performance Obligations -
Performance obligations are determined based upon the nature of the services provided. Under the independent provider model, we measure the performance obligation from the moment the patient is loaded into the aircraft until it reaches its destination. Under this model, we have no fixed revenue stream and compete for transport referrals on a daily basis with other independent operators in the area. As an independent provider, we bill for our services on the basis of a flat rate plus a variable charge per patient-loaded mile, regardless of aircraft model, and are typically compensated by private insurance, Medicaid or Medicare, or directly by transported patients who self-pay. We recognize revenues for performance obligations satisfied at a point in time, which generally relate to patients receiving air medical services when: (1) services are provided; and (2) we do not believe the patient requires additional services. For the independent provider model, we determine the transaction price based upon gross charges for services provided reduced by contractual adjustments provided to third-party payors, discounts provided to uninsured patients in accordance with Company policy, and/or implicit price concessions provided to uninsured patients. We determine estimates of contractual adjustments and discounts based upon contractual agreements, our discount policy, and historical experience. We determine our estimate of implicit price concessions based upon our historical collection experience with these classes of patients using a portfolio approach as a practical expedient to account for patient contracts as collective groups, rather than individually. The financial statement effects of using this practical expedient are not materially different from an individual contract approach.
Under the traditional provider model, we contract directly with the customer to provide their transportation services. These contracts are typically awarded or renewed through competitive bidding and typically permit early termination by the customer on relatively short notice. As a traditional provider, we typically bill a fixed monthly rate for aircraft availability and an hourly rate for flight time. For each of these types of helicopter services, we have determined that each has a single distinct performance obligation. Traditional provider models services include fixed monthly rate for a particular model of aircraft, and flight hour services, which represents the variable component of a typical contract with a customer. Rates for these services vary depending on the type of services provided and can be based on a per flight hour, per day, or per month basis. The variable charges within such contracts are not effective until the customer initiates a flight order and the actual hours flown are determined; therefore, the associated revenue generally cannot be reasonably and reliably estimated beforehand. For the traditional provider model, we determine the transaction price based upon standard charges for goods and services provided.
Independent provider 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 private insurance, Medicaid, Medicare, and self-pay). The allowance percentages calculated are applied to the payor categories, and the necessary adjustments are made to the revenue allowance. Agreements with third-party payors typically provide for payments at amounts less than established charges.
We estimate contractual allowances and uncompensated care based on historical collection experience by payor category. The main payor categories are Medicaid, Medicare, private insurance, and self-pay. Changes in payor mix, reimbursement rates and uncompensated care rates are the factors most subject to sensitivity and variability in calculating our allowances. We compute a historical payment analysis of accounts by category. The allowance percentages calculated are applied to the payor categories, and the necessary adjustments are made to the revenue allowance. In our Air Medical Segment, the allowance for contractual discounts against outstanding accounts receivable was
$123.8 million
,
$117.8 million
, and
$111.9 million
as of
December 31, 2018
,
2017
, and
2016
, respectively, and the allowance for uncompensated care against outstanding accounts receivable was
$51.9 million
,
$52.5 million
, and
$46.3 million
as of
December 31, 2018
,
2017
, and
2016
, respectively. Included in the allowance for uncompensated care above is the value of services to patients who are unable to pay when it is determined that they qualify as charity care. The value of these services was
$7.2 million
,
$7.1 million
, and
$8.8 million
for the years ended
December 31, 2018
,
2017
, and
2016
, respectively. The estimated cost of providing charity services was
$1.7 million
,
$1.6 million
, and
$1.9 million
for the years ended
December 31, 2018
,
2017
, and
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 the Air Medical independent provider model’s total expenses divided by gross patient service revenue.
In determining the allowance estimates for our Air Medical segment’s billing, receivables and revenue, we utilize the prior twelve months’ payment history and current trends in payor behavior by each separate payor group, which we evaluate on a state by state basis. A percentage of amounts collected compared to the total invoice is determined from this process and applied to the current month’s billings and receivables. If a receivable related to the self-pay category is outstanding twelve months or greater, we record a reserve equal to
100%
of the receivable. Receivables related to other payor categories are scrutinized when they are outstanding for nine months or longer and additional allowances are recorded if warranted.
Provisions for contractual discounts and estimated uncompensated care that we applied to our Air Medical revenues (expressed as a percentage of total independent provider model billings) were as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2018
|
|
2017
|
|
2016
|
|
Provision for contractual discounts
|
|
67
|
%
|
|
66
|
%
|
|
67
|
%
|
|
Provision for uncompensated care
|
|
8
|
%
|
|
7
|
%
|
|
6
|
%
|
Amounts attributable to Medicaid, Medicare, private insurance, and self-pay as a percentage of net Air Medical independent provider model revenues were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2018
|
|
2017
|
|
2016
|
|
Insurance
|
|
71
|
%
|
|
72
|
%
|
|
72
|
%
|
|
Medicare
|
|
20
|
%
|
|
18
|
%
|
|
18
|
%
|
|
Medicaid
|
|
8
|
%
|
|
9
|
%
|
|
9
|
%
|
|
Self-Pay
|
|
1
|
%
|
|
1
|
%
|
|
1
|
%
|
As of December 31, 3018 and December 31, 2017, receivables related to our (i) Oil and Gas segment were
$74.1 million
and
$86.9 million
, (ii) Air Medical segment were
$90.2 million
and
$76.6 million
and (iii) Technical Services segment were
$4.1 million
and
$4.7 million
, respectively. Contract assets and contract liabilities were immaterial as of December 31, 2018. Our contracts typically include termination clauses that allow both parties to terminate existing contracts with a
30
to
180
day notice period.
We generally have a right to consideration in an amount that corresponds directly with the value to the customer of the entity's performance completed to date and may recognize revenue in the amount to which the entity has a right to invoice. We have elected to use the invoice practical expedient for revenue recognized when performance obligations are satisfied over time. In addition, payment for goods and services rendered is typically due in the subsequent month following satisfaction of our performance obligation.
Our Technical Services segment provides helicopter flight services and helicopter repair and overhaul services for existing flight operations customers that own their own aircraft. Under this segment, we periodically provide certain services to governmental customers, including our agreement to operate six aircraft for the National Science Foundation in Antarctica. Under this segment, we also offer certain software as a service to our Oil and Gas customers. Revenues are recognized when performance obligations are satisfied in accordance with contractual terms, in an amount that reflects the consideration we expect to be entitled to in exchange for services rendered. For these helicopter services, we determined that each has a single distinct performance obligation.
The following table presents the Company’s revenues by segment disaggregated by type (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
2018
|
|
2017
|
|
Service Revenue
|
|
|
|
|
Oil & Gas
|
$
|
380,238
|
|
|
$
|
298,398
|
|
|
Air Medical
|
257,132
|
|
|
257,273
|
|
|
Technical Services
|
37,053
|
|
|
23,874
|
|
|
Total Services
|
$
|
674,423
|
|
|
$
|
579,545
|
|
|
|
|
|
|
|
Air Medical Revenue
|
|
|
|
|
Traditional provider model
|
$
|
45,220
|
|
|
$
|
44,147
|
|
|
Independent provider model
|
211,912
|
|
|
213,126
|
|
|
Total Air Medicals Revenues
|
$
|
257,132
|
|
|
$
|
257,273
|
|
Under a contract that commenced on September 29, 2012, our Air Medical affiliate provided multiple products and services to a customer in the Middle East, including helicopter leasing, emergency medical helicopter flight services, aircraft maintenance, provision of spare parts and insurance coverage for the customer-owned aircraft, training services, and base construction. The initial contract expired in late September 2015 and was extended through September 30, 2016, when it lapsed. Each of the major deliverables mentioned above qualify as separate units of accounting under the accounting guidance for such arrangements. The selling price for each service was determined based upon third-party evidence and estimates.
Income Taxes
Income taxes are accounted for in accordance with the provisions of Accounting Standards Codification 740,
Income Taxes
. The Company provides for income taxes using the asset and liability method under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The deferred tax assets and liabilities measurement uses enacted tax rates that are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company recognizes the effect of any tax rate changes in income of the period that includes the enactment date.
In connection with recording deferred income tax assets and liabilities, the Company establishes valuation allowances when necessary to reduce deferred income tax assets to amounts that it believes are more likely than not to be realized. The Company evaluates its deferred tax assets quarterly to determine whether positive or negative adjustments to its valuation allowances are appropriate in light of changes in facts or circumstances, such as changes in tax law or interactions with taxing authorities. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized. Adjustments to the amount of our valuation allowances can materially impact our financial condition and results of operations.
The Tax Cuts and Jobs Act (the "Act") was enacted on December 22, 2017. The Act reduced the U.S. federal corporate tax rate from 35% to 21%. Following the enactment of Tax Reform Legislation in December 2017, the SEC staff issued Staff Accounting Bulletin 118 - "Income Tax Accounting Implications of the Tax Cuts and Jobs Act" (SAB 118), which provides for a measurement period of up to one year from the enactment date to complete accounting under GAAP for the tax effects of the legislation. In connection with the initial analysis of the Act, the Company remeasured its net deferred tax liability at December 31, 2017 and provisionally recognized a net benefit of
$49.2 million
in its consolidated statement of operations for the year ended December 31, 2017. In the fourth quarter of 2018, the Company finalized it accounting under the Act and recorded immaterial differences from the provisional amounts previously recorded.
The Act also includes provisions to tax a new class of income called Global Intangible Low-Taxed Income (“GILTI”). Under GAAP, the Company is allowed to make an accounting policy choice of either (i) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current period expense when incurred or (ii) factoring such amounts into the measurement of deferred taxes. The Company has evaluated each of the alternatives and has elected to account for GILTI as a current period expense. The Company does not have a GILTI inclusion in 2018; therefore,
no
tax expense with respect to GILTI has been recorded for the year ended December 31, 2018.
Earnings per Share
Basic earnings per share is computed by dividing earnings (loss) during the period by the weighted average number of voting and non-voting shares outstanding during each period. Diluted earnings per share is computed by dividing net income (loss) during the period by the weighted average number of shares of common stock that would have been outstanding assuming the issuance of potentially dilutive shares of common stock, as if such shares were outstanding during the reporting period, net of shares to be repurchased using the treasury stock method. Dilutive shares for this purpose assumes restricted stock unit awards have vested.
Concentration of Credit Risk
Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of trade accounts receivables. Approximately
10.7%
of our trade accounts receivables at
December 31, 2018
were owed by an overseas customer. For a variety of reasons, the Company believes it will be paid all or substantially all of the amounts due under these receivables. Accordingly, the Company does not believe that it had significant credit risk at
December 31, 2018
with respect to these overseas trade accounts receivable specifically or its aggregate trade accounts receivable generally.
PHI conducts a majority of its business with major and independent oil and gas exploration and production companies with operations in the Gulf of Mexico. The Company also provides services to major medical centers. The Company continually evaluates the financial strength of its customers, but generally does not require collateral to secure its customer receivables. The Company establishes an allowance for doubtful accounts based upon factors pertaining to the credit risk of specific customers, current market conditions, and other information. Amounts are charged off as uncollectible when collection efforts have been exhausted. The allowance for doubtful accounts was
$6.1 million
and
$7.2 million
at
December 31, 2018
and
2017
, respectively.
Trade receivables representing amounts due pursuant to air medical independent provider model services are carried net of an allowance for estimated contractual adjustments and uncompensated care on unsettled invoices. The Company monitors its collection experience by payor category within the Air Medical segment and updates its estimated collections to be realized as deemed necessary. In our Air Medical segments, the allowance for contractual discounts was
$123.8 million
,
$117.8 million
, and
$111.9 million
as of
December 31, 2018
,
2017
, and
2016
, respectively, and the allowance for uncompensated care was
$51.9 million
,
$52.5 million
, and
$46.3 million
as of
December 31, 2018
,
2017
, and
2016
, respectively.
The Company’s two largest oil and gas customers accounted for
24%
of consolidated operating revenues for the year ended
December 31, 2018
,
23%
for the year ended
December 31, 2017
, and
24%
for the year ended
December 31, 2016
. The Company also carried accounts receivable from these same customers totaling
20%
and
16%
of net trade receivables on
December 31, 2018
and
2017
, respectively. The customer base of our Air Medical and Technical Services operations has traditionally been less concentrated than the customer base of our Oil and Gas operations. Over the past three years, none of our current Air Medical or Technical Services customers accounted for more than
2%
of our consolidated operating revenues. One of our former Air Medical customers, however, did account for
5%
of our consolidated operating revenues for 2016. The Company also carried accounts receivable from its largest customer totaling
13.5%
and
10.0%
of net trade receivables on
December 31, 2018
and
2017
, respectively.
Substantially all of the Company’s cash is maintained in one financial institution in amounts that typically exceed federally insured limits. The Company has not experienced any losses in such accounts and based on current circumstances does not believe that it is exposed to significant credit risk.
Foreign Currency Translation
Our consolidated financial statements are reported in U.S. dollars. Our foreign subsidiaries maintain their records primarily in the currency of the country in which they operate. Assets and liabilities of foreign subsidiaries in non-highly inflationary economies are translated into U.S. dollars using rates of exchange at the balance sheet date. Translation adjustments are recorded in other comprehensive income (loss). Revenues and expenses are translated at rates of exchange in effect during the year. Transaction gains and losses are recorded in net earnings (loss).
Recently Adopted Accounting 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 December 31, 2017. Accordingly, we recorded income tax expense of
$0.9 million
in our consolidated statement of operations for the year ended December 31, 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.
On January 26, 2017, the FASB issued ASU No. 2017-04,
Intangibles - Goodwill and Other (Topic 350)
: Simplifying the Test for Goodwill Impairment (ASU 2017-04). ASU 2017-04 removes the requirement to compare the implied fair value of goodwill with the carrying amount as part of Step 2 of the goodwill impairment test. Under the new standard, the goodwill impairment loss will be measured as the excess of a reporting unit's carrying amount over its fair value, not exceeding the total amount of goodwill allocated to that reporting unit, which may increase the frequency of goodwill impairment charges if a future goodwill impairment test does not pass the Step 1 evaluation. ASU 2017-04 is effective prospectively for periods beginning on or after December 15, 2019, with early adoption permitted. The Company adopted ASU 2017-04 effective January 1, 2018. The Company performed its goodwill impairment test under the new standard in fourth quarter of 2018.
In November 2015, the FASB issued ASU 2015-17,
Balance Sheet Classification of Deferred Taxes
, which requires that deferred tax assets and liabilities be classified as noncurrent in a classified balance sheet. PHI, Inc. adopted this ASU in the fourth quarter of 2017 on a prospective basis. Beginning with the December 31, 2017 balances, all deferred taxes were classified as non-current. Periods prior to December 31, 2017 were not retrospectively adjusted.
In 2016, the FASB issued ASU No. 2016-18,
Statement of Cash Flows (Topic 230): Restricted Cash
(ASU 2016-18). ASU 2016-18 eliminates the need to reflect transfers between cash and restricted cash in operating, investing, and financing activities in the statements of cash flows. In addition, the net change in cash and cash equivalents during the period includes amounts generally described as restricted cash or restricted cash equivalents. The Company adopted ASU 2016-18 retrospectively effective January 1, 2018.
The following tables provide a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets that total to the amounts shown in the statements of cash flows for the Company at December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2018
|
|
2017
|
|
2016
|
|
Cash and Cash Equivalents
|
|
$
|
50,874
|
|
|
$
|
8,770
|
|
|
$
|
2,596
|
|
|
Restricted Cash
|
|
7,690
|
|
|
—
|
|
|
—
|
|
|
Total Cash, Cash Equivalents and Restricted Cash
|
|
$
|
58,564
|
|
|
$
|
8,770
|
|
|
$
|
2,596
|
|
New Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02
, Leases (Topic 842)
(ASC 842). ASC 842 replaces the existing guidance on leasing transactions in ASC 840 and requires lessees to recognize on the balance sheet a lease liability and a right-of-use asset for all leases. ASC 842 also changes the recognition, measurement, and presentation of expense associated with leases and provides clarification regarding the identification of certain components of contracts that would represent a lease. ASC 842 is effective for fiscal years beginning after December 15, 2018 and the Company adopted the new standard effective January 1, 2019.
The Company elected the transition methodology provided by ASU No. 2018-11,
Leases (Topic 842): Targeted Improvements
, whereby it applied the requirements of ASC 842 on a prospective basis as of the adoption date of January 1, 2019, without retrospectively adjusting prior periods. The Company elected the package of practical expedients provided by ASC 842 that allows prior determinations of whether existing contracts are, or contain, leases and the classification of existing leases to continue without reassessment. The Company made an accounting policy election to keep leases with an initial term of 12 months or less off of the balance sheet. The Company will recognize those lease payments in the consolidated statement of operations on a straight-line basis over the lease term.
The Company also made an accounting policy election to combined lease and non-lease components in the computations of lease obligations and right-of-use assets. During our evaluation of ASU 2016-02, we concluded that certain of our helicopter service contracts contain a lease component. Our typical helicopter service contracts qualify for a practical expedient, which is available to lessors under certain circumstances, to combine the lease and non-lease components and account
for the combined component in accordance with the accounting treatment for the predominant component. We have applied this practical expedient and will combine the lease and service components of our standard revenue contracts and continue to account for the combined component under Topic 606,
Revenue from Contracts with Customers
.
The Company completed the implementation of an information technology system to track and account for its leases and updated its accounting policies to support the accounting for leases under ASC 842. The Company completed its lease inventory and determined its most significant leases involve aircraft and facilities. In the first quarter 2019, the adoption of ASC 842 resulted in recording on the Company's consolidated balance sheet, lease liabilities of approximately
$172.9 million
and right-of-use assets of approximately
$172.1 million
with no material impact on the Company's consolidated statement of operations and consolidated cash flow statement. To the extent applicable, we may be required to comply with expanded disclosure requirements.
2. ACQUISITION OF BUSINESS
On December 29, 2017, we completed a series of transactions with HNZ Group, Inc. (“HNZ”) and 2075568 Alberta ULC, a company newly-formed by the former Chief Executive Officer of HNZ for purposes of purchasing the stock of HNZ (the “Canadian Purchaser”). On December 29, 2017, we provided term loans to the Canadian Purchaser in an aggregate principal amount of approximately CAD
$167.5 million
(equivalent to USD
$131.6 million
) substantially all of which was repaid the same date in exchange for receipt of HNZ’s offshore helicopter services business conducted in New Zealand, Australia, the Philippines and Papua New Guinea (the “HNZ Offshore Business”). The remaining balance of USD
$0.8 million
is expected to be repaid on or prior to December 31, 2019, or at such other time as mutually-agreed between the Canadian Purchaser and us.
We funded our term loans to the Canadian Purchaser on December 29, 2017 primarily with the proceeds of maturing or liquidated short-term investments.
In the fourth quarter of 2017, we recognized the assets that we acquired and the liabilities that we assumed in connection with the HNZ Offshore Business at their estimated acquisition date fair values. The company recorded approximately
$61 million
of goodwill which is included in our Oil & Gas segment. See Note 1 for information on goodwill and other intangible assets that we recorded in connection with the acquisition.
As of December 31, 2017, we had recognized approximately
$2.3 million
in cumulative merger-related transaction costs, including legal and advisory fees in the selling, general and administrative expenses section of the accompanying Consolidated Statements of Operations.
The fair value of the acquired assets and liabilities noted in the table may change during the provisional period, which may last up to twelve months subsequent to the acquisition date. The Company may obtain additional information to refine the valuation of the acquired assets and liabilities and adjust the recorded fair value. Adjustments recorded to the acquired assets and liabilities will be applied prospectively. The purchase price allocation for this transaction has been finalized. Our finalized purchase price allocation was adjusted by an immaterial amount that was recorded in the consolidated financial statements for the year ended December 31, 2018.
The following amounts represent the fair value of assets acquired and liabilities assumed in the merger.
|
|
|
|
|
|
|
|
|
Thousands of dollars
|
|
Cash
|
$
|
4,142
|
|
|
Accounts receivable
|
27,819
|
|
|
Inventories
|
3,096
|
|
|
Fixed assets
|
43,689
|
|
|
Intangible assets:
|
|
|
Noncompete agreements (weighted-average life of 5 years)
|
900
|
|
|
Customer relationships (weighted-average life of 15 years)
|
11,622
|
|
|
Tradenames (weighted-average life of 7 years)
|
4,201
|
|
|
Other assets
|
5,310
|
|
|
Accounts payable and accrued liabilities
|
(25,272
|
)
|
|
Deferred taxes
(1)
|
(5,270
|
)
|
|
Other liabilities
|
(750
|
)
|
|
Total identifiable net assets
|
69,487
|
|
|
Goodwill
(2)
|
61,299
|
|
|
Total consideration transferred
|
$
|
130,786
|
|
(1)
In connection with the acquisition accounting, PHI provided deferred taxes related to the estimated fair value adjustments for acquired intangible assets.
(2)
Goodwill is the excess of purchase price over fair market value of the net assets acquired under the acquisition method of accounting. The amount of goodwill that is deductible for income tax purposes is not significant. During the fourth quarter of 2018, we recorded an impairment charge which eliminated all of this goodwill.
We did not record earnings in December 2017 for the acquired business due to the immateriality of the earnings resulting after the acquisition for the last two days of 2017. ASC 805, Business Combinations, requires the disclosure of additional information including the revenue and earnings of the combined entity as though the business combination that occurred during the current year had occurred at the beginning of the prior annual reporting period (supplemental pro forma information). The Company has determined that disclosure of such information was impractical and is not provided as the financial records of the acquiree were not adequate to allow the preparation of supplemental pro forma information.
3. INVESTMENTS
We classify all of our short term investments as available-for-sale. We carry these at fair value and report unrealized gains and losses, net of taxes, in accumulated other comprehensive (loss) income, which is a separate component of shareholders’ equity in our consolidated balance sheets. These unrealized gains and losses are also reflected in our Condensed Consolidated Statement of Comprehensive Income and Condensed Consolidated Statement of Shareholders' Equity. We determined cost, gains, and losses using the specific identification method. In the years ended
December 31, 2018
,
2017
, and
2016
, we received proceeds from the sales of these securities of
$334.5 million
,
$862.9 million
, and
$316.5 million
, respectively. Gains and losses on these sales were negligible and all amounts reclassified from accumulated other comprehensive income were immaterial.
Investments consisted of the following as of
December 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost Basis
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
|
|
(Thousands of dollars)
|
|
Investments:
|
|
|
|
|
|
|
|
|
|
Money market mutual funds
|
|
$
|
26,308
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
26,308
|
|
|
Deferred compensation plan assets included in other assets
|
|
772
|
|
|
—
|
|
|
—
|
|
|
772
|
|
|
Total
|
|
$
|
27,080
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
27,080
|
|
Investments consisted of the following as of
December 31, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost Basis
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
|
|
(Thousands of dollars)
|
|
Investments:
|
|
|
|
|
|
|
|
|
|
Money market mutual funds
|
|
$
|
5,601
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,601
|
|
|
U.S. government agencies
|
|
7,501
|
|
|
—
|
|
|
(34
|
)
|
|
7,467
|
|
|
Corporate bonds and notes
|
|
63,880
|
|
|
—
|
|
|
(330
|
)
|
|
63,550
|
|
|
Subtotal
|
|
76,982
|
|
|
—
|
|
|
(364
|
)
|
|
76,618
|
|
|
Deferred compensation plan assets included in other assets
|
|
2,685
|
|
|
—
|
|
|
—
|
|
|
2,685
|
|
|
Total
|
|
$
|
79,667
|
|
|
$
|
—
|
|
|
$
|
(364
|
)
|
|
$
|
79,303
|
|
At December 31, 2018 and
December 31, 2017
, we classified
$19.8 million
and
$12.4 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.
The following table presents the cost and fair value of our debt investments based on maturities as of
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
|
|
Amortized
Costs
|
|
Fair
Value
|
|
Amortized
Costs
|
|
Fair
Value
|
|
|
|
(Thousands of dollars)
|
|
Due in one year or less
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
31,348
|
|
|
$
|
31,254
|
|
|
Due within two years
|
|
—
|
|
|
—
|
|
|
40,032
|
|
|
39,763
|
|
|
Total
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
71,380
|
|
|
$
|
71,017
|
|
The following table presents the average coupon rate percentage and the average days to maturity of our debt investments as of
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
|
|
Average
Coupon
Rate (%)
|
|
Average
Days To
Maturity
|
|
Average
Coupon
Rate (%)
|
|
Average
Days To
Maturity
|
|
U.S. government agencies
|
|
—
|
|
0
|
|
1.370
|
|
370
|
|
Corporate bonds and notes
|
|
—
|
|
0
|
|
1.766
|
|
392
|
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
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
|
|
Fair Value
|
|
Unrealized
Losses
|
|
Fair Value
|
|
Unrealized
Losses
|
|
|
|
(Thousands of dollars)
|
|
U.S. government agencies
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,472
|
|
|
$
|
(28
|
)
|
|
Corporate bonds and notes
|
|
—
|
|
|
—
|
|
|
44,069
|
|
|
(271
|
)
|
|
Total
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
49,541
|
|
|
$
|
(299
|
)
|
The following table presents the fair value and unrealized losses related to our investments that have been in a continuous unrealized loss position for twelve months or more as of
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
|
|
Fair Value
|
|
Unrealized
Losses
|
|
Fair Value
|
|
Unrealized
Losses
|
|
|
|
(Thousands of dollars)
|
|
U.S. government agencies
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,994
|
|
|
$
|
(6
|
)
|
|
Corporate bonds and notes
|
|
—
|
|
|
—
|
|
|
19,482
|
|
|
(59
|
)
|
|
Total
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
21,476
|
|
|
$
|
(65
|
)
|
From time to time over the periods covered in our financial statements included herein (an as illustrated in the forgoing tables), our investments have experience net unrealizable losses. We consider these declines in market value to be due to customary market fluctuations, and we typically do not plan to sell these investments prior to maturity. For these reasons, we do not considered any of our investments to be other than temporarily impaired at December 31, 2017. For additional information regarding our criteria for making these assessments, see Note 3 to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2017.
4. FAIR VALUE
Accounting guidance defines fair value as the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. This guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The hierarchy for inputs is categorized into three levels based on the reliability of inputs as follows:
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 tables summarize the valuation of our investments and financial instruments by the above pricing levels as of the valuation dates listed:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
|
|
Total
|
|
(Level 1)
|
|
(Level 2)
|
|
|
|
|
|
(Thousands of dollars)
|
|
Investments:
|
|
|
|
|
|
|
|
Money market mutual funds
|
|
$
|
26,308
|
|
|
$
|
26,308
|
|
|
$
|
—
|
|
|
Deferred compensation plan assets
|
|
772
|
|
|
772
|
|
|
|
|
|
Total
|
|
$
|
27,080
|
|
|
$
|
27,080
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
|
Total
|
|
(Level 1)
|
|
(Level 2)
|
|
|
|
|
|
(Thousands of dollars)
|
|
Investments:
|
|
|
|
|
|
|
|
Money market mutual funds
|
|
$
|
5,601
|
|
|
$
|
5,601
|
|
|
$
|
—
|
|
|
U.S. government agencies
|
|
7,467
|
|
|
—
|
|
|
7,467
|
|
|
Corporate bonds and notes
|
|
63,550
|
|
|
—
|
|
|
63,550
|
|
|
|
|
76,618
|
|
|
5,601
|
|
|
71,017
|
|
|
Deferred compensation plan assets
|
|
2,685
|
|
|
2,685
|
|
|
—
|
|
|
Total
|
|
$
|
79,303
|
|
|
$
|
8,286
|
|
|
$
|
71,017
|
|
We hold our short-term investments in an investment fund consisting of high quality money market instruments of governmental and private issuers, which is classified as a short-term investment. Level 1 inputs are quoted prices (unadjusted) for identical assets or liabilities in active markets. These items are traded with sufficient frequency and volume to provide pricing on an ongoing basis. The fair values of the investments in these funds are based on observable market prices, and therefore, have been categorized in Level 1 in the fair value hierarchy. Level 2 inputs reflect quoted prices for identical assets or liabilities that are not actively traded. These items may not be traded daily; examples include commercial paper, corporate bonds and U.S. government agencies debt. There have been no reclassifications of assets between Level 1 and Level 2 investments during the periods covered by the financial statements included in this report. We hold no Level 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, revolving credit facilities and related party term loan all had fair values approximating their carrying amounts at
December 31, 2018
and
2017
. We determine the estimated fair value of our 5.25% Senior Notes due 2019 using Level 2 inputs, including quoted market indications of similar publicly-traded debt. The fair value of our
5.25%
Senior Notes was
$344.2 million
at December 31, 2018.
5. PROPERTY AND EQUIPMENT
The following table summarizes the Company’s property and equipment at December 31 of the following years:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
|
|
(Thousands of dollars)
|
|
Flight equipment
|
|
$
|
1,227,341
|
|
|
$
|
1,225,205
|
|
|
Facility & improvements
|
|
67,784
|
|
|
64,316
|
|
|
Operating equipment
|
|
30,832
|
|
|
29,913
|
|
|
Data processing equipment
|
|
35,889
|
|
|
34,747
|
|
|
Vehicles
|
|
3,798
|
|
|
8,202
|
|
|
Medical equipment
|
|
8,710
|
|
|
8,354
|
|
|
Other
|
|
6,056
|
|
|
6,523
|
|
|
|
|
1,380,410
|
|
|
1,377,260
|
|
|
Less accumulated depreciation and amortization
|
|
(477,925
|
)
|
|
(430,495
|
)
|
|
Property and equipment, net
|
|
$
|
902,485
|
|
|
$
|
946,765
|
|
Depreciation expense related to property and equipment was
$56.8 million
in
2018
,
$50.6 million
in
2017
, and
$49.2 million
in
2016
. These amounts are reported as Direct expenses and Selling, general, and administrative expenses in our Consolidated Statements of Operations included elsewhere herein.
6. OTHER ASSETS
The following table summarizes the Company’s other assets at December 31 of the following years:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
|
|
(Thousands of dollars)
|
|
Deposits on future purchases of aircraft
|
|
$
|
501
|
|
|
$
|
501
|
|
|
Investment in Variable Interest Entities
|
|
519
|
|
|
330
|
|
|
Investments (Officers’ Deferred Compensation Plan)
|
|
772
|
|
|
2,685
|
|
|
Deferred Cost
|
|
2,721
|
|
|
—
|
|
|
Receivables / Deposits Long Term
|
|
12,187
|
|
|
4,875
|
|
|
Other
|
|
1,678
|
|
|
350
|
|
|
Total
|
|
$
|
18,378
|
|
|
$
|
8,741
|
|
7. ACCRUED AND OTHER CURRENT LIABILITIES
Accrued and other current liabilities as of December 31 consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
|
|
(Thousands of dollars)
|
|
Salaries & wages
|
|
$
|
9,130
|
|
|
$
|
6,240
|
|
|
Incentive compensation
|
|
5,226
|
|
|
8,991
|
|
|
Income taxes
|
|
895
|
|
|
930
|
|
|
Interest
|
|
7,774
|
|
|
8,108
|
|
|
Vacation payable
|
|
8,838
|
|
|
7,619
|
|
|
Group medical
|
|
1,755
|
|
|
1,344
|
|
|
Transportations tax
|
|
301
|
|
|
971
|
|
|
Operating lease
|
|
658
|
|
|
710
|
|
|
Workers compensation
|
|
846
|
|
|
959
|
|
|
Other
|
|
9,869
|
|
|
5,978
|
|
|
Total accrued liabilities
|
|
$
|
45,292
|
|
|
$
|
41,850
|
|
8. DEBT
Listed below is information regarding our indebtedness. All indebtedness owed under our Senior Notes as of
December 31, 2018
is classified as short-term debt on our balance sheet as of such date.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
December 31, 2017
|
|
|
|
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
|
|
|
$
|
260
|
|
|
$
|
500,000
|
|
|
$
|
1,506
|
|
|
Revolving Credit Facility due March 7, 2019 with a group of commercial banks, interest payable at variable rates.
|
|
—
|
|
|
—
|
|
|
117,500
|
|
|
—
|
|
|
Related Party Loan - Thirty Two L.L.C., interest payable quarterly at 6%, due September 28, 2020.
|
|
130,000
|
|
|
765
|
|
|
—
|
|
|
—
|
|
|
Total long-term debt.
|
|
$
|
630,000
|
|
|
$
|
1,025
|
|
|
$
|
617,500
|
|
|
$
|
1,506
|
|
Listed below is information on our future annual maturities of long-term debt (in thousands):
|
|
|
|
|
|
|
|
|
2019
|
|
$
|
500,000
|
|
|
2020
|
|
130,000
|
|
|
2021
|
|
—
|
|
|
2022
|
|
—
|
|
|
2023
|
|
—
|
|
|
Thereafter
|
|
—
|
|
|
Total
|
|
$
|
630,000
|
|
Senior Notes -
Subject to the automatic stay of the Bankruptcy Code, our
5.25%
Senior Notes (the “2019 Notes”) matured on March 15, 2019. These notes are unconditionally guaranteed on a senior basis by each of PHI, Inc.’s wholly-owned domestic subsidiaries. These notes and related guarantees are the general, unsecured obligations of PHI, Inc. and the guarantors. 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, 2018 at par plus accrued interest. 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.
Related Party Term Loan
- On September 28, 2018, we entered into a term loan agreement with Thirty Two L.L.C., which provided us with a term loan of
$130 million
maturing on September 28, 2020. This loan bears interest at an annual fixed rate of
6%
payable quarterly, with all principal due on maturity. Thirty Two L.L.C., an entity wholly-owned by our CEO and controlling shareholder, is a related party.
Contemporaneously with borrowing
$130.0 million
under the term loan, we applied approximately
$122.7 million
of the loan proceeds to repay principal and accrued interest under our senior secured revolving credit facility, which was terminated in connection with such repayment, and applied the remainder of the proceeds to cash collateralize certain outstanding letters of credit.
Obligations under the term loan are guaranteed by PHI Air Medical, L.L.C. and PHI Tech Services, Inc., both of which are wholly-owned by us. Our obligations and the guarantors’ obligations are secured by all of their respective inventory and accounts receivable located in the U.S., as well as certain spare parts.
The term loan agreement contains customary restrictive covenants that, subject to certain exceptions and limitations, limit or restrict our ability to, among other things, (i) purchase, retire or redeem any shares of our capital stock; (ii) incur indebtedness; (iii) mortgage or encumber our assets; (iv) make loans to, or guarantee the indebtedness of, any individual or entity; (v) effect a change of control of PHI; (vi) consolidate with or merge into any other corporation, or permit any other corporation to merge into us; (vii) sell or lease all or substantially all of our assets; or (viii) acquire all or a substantial part of the assets or capital stock of
another entity. The term loan agreement contains no financial covenants. The term loan agreement contains customary representations and warranties, affirmative covenants and events of default.
Letter of Credit -
At
December 31, 2018
, we had
$19.8 million
of outstanding letters of credit secured by a like amount of restricted cash and investments,
$12.1 million
of which secured certain domestic operations or insurance policies and
$7.7 million
of which guaranteed our performance under an international contract. At December 31, 2017, we had
$19.6 million
of outstanding letters of credit issued for the same purposes.
Other
-
PHI, Inc. has cash management arrangements with certain of its principal subsidiaries, in which substantial portions of the subsidiaries’ cash is regularly advanced to PHI, Inc. Although PHI, Inc. periodically repays these advances to fund the subsidiaries’ cash requirements throughout the year, at any given point in time PHI, Inc. may owe a substantial sum to its subsidiaries under these advances, which, in accordance with GAAP, are eliminated in consolidation and therefore not recognized on our consolidated balance sheets. For additional information, see Note 17.
Subsequent Event - New Term Loan Agreement -
On March 13, 2019, we entered into a Loan Agreement, dated the same date (the “Term Loan Agreement”), by and among the Company, as borrower, certain of our subsidiaries as guarantors party thereto, the lenders from time to time party thereto, and Blue Torch Finance, LLC, as administrative agent and collateral agent, for a first lien term loan of up to
$70 million
(the “Term Loan”). Immediately upon entering into the Term Loan Agreement, and prior to the filing of the Chapter 11 Cases, we borrowed
$70 million
thereunder, the net proceeds of which (after the payment of transaction expenses and fees thereunder) are expected to be used to fund the working capital and liquidity requirements of the Company during the pendency of the Chapter 11 Cases and thereafter. For additional information regarding our Chapter 11 Cases, see Notes 1 and 19.
The full principal amount of the Term Loan is due March 13, 2023. At our election, borrowings under the Term Loan will bear interest at either (x) the LIBOR Rate (as defined in the Term Loan Agreement) plus
6%
or (y) the Base Rate (as defined in the Term Loan Agreement) plus
5%
. The Term Loan is secured by a first lien on
91
aircraft registered and located in Antarctica, Australia, Canada, and the United States (which are currently deployed primarily in our oil and gas and technical services operations), the related spare parts for such aircraft, and certain other non-working capital assets, as well as a second lien on all working capital assets (second in priority to the liens granted under our above-described term loan agreement, dated as of September 28, 2018, with Thirty Two, L.L.C.). The Term Loan Agreement contains customary pre-payment requirements. In addition, we have paid a funding fee, which is subject to forgiveness based on certain future events.
The Term Loan Agreement contains certain customary negative covenants that, among other things, restrict, subject to certain exceptions, the Company’s and each guarantor’s incurrence of additional indebtedness or liens, mergers, dispositions of assets, investments, restricted payments, modifications to material agreements, sale and leasebacks, transactions with affiliates, fundamental changes, locations of certain aircraft and acquisitions of assets. In addition, the financial covenants under the Term Loan Agreement require us to maintain (a) minimum liquidity of the Company, the guarantors and their respective subsidiaries, as of the last day of any calendar month, of at least
$20 million
of unrestricted cash and cash equivalents (provided that at least
$10 million
of such cash and cash equivalents shall, as of any date of determination, be held solely by the Company and the guarantors); (b) a minimum fixed charge coverage ratio, as of the last day of the following test periods, commencing with the first full fiscal quarter following the effective date of the plan of reorganization in the Chapter 11 Cases, of at least (i)
0.0000
:1.00 for quarters ending on or prior to March 31, 2020, (ii)
0.1875
:1.00 for quarters ending from June 30, 2020 through September 30, 2020, (iii)
0.3750
:1.00 for quarters ending from December 31, 2020 through March 31, 2021, (iv)
0.9125
:1.00 for quarters ending from June 30, 2021 through September 30, 2021, and (v)
1.2000
:1.00 for quarters ending on December 31, 2021 and thereafter; (c) a secured leverage ratio, as of the last day of each of the following test periods, commencing with the first full fiscal quarter ending following the effective date of the plan of reorganization in the Chapter 11 Cases (as defined below), of no greater than (i)
4.50
:1.00 on or prior to September 30, 2020, (ii)
4.25
:1.00 from December 31, 2020 through September 30, 2021, (iii)
4.00
:1.00 from December 31, 2021 through December 30, 2022 and (iv)
3.75
:1.00 on December 31, 2022 and thereafter; and (d) a total appraisal ratio of the aircraft collateral (less dispositions permitted under the Term Loan Agreement) to borrowings outstanding under the Term Loan, as of the last day of any calendar month, of at least
4.00
:1.00. The Term Loan Agreement also contains customary affirmative covenants and customary representations and warranties.
The Term Loan Agreement specifies certain customary events of default, including, among others, failure to pay principal or interest on the Term Loan when due, the breach of representations or warranties in any material respect, non-performance of other covenants and obligations, judgments in excess of
$2.5 million
, the occurrence of certain ERISA events resulting in liability in excess of
$2.5 million
, impairments of more than
$2.5 million
of the collateral securing the Term Loan, and certain change of control events. The filings of the Chapter 11 Cases neither constitute an event of default nor accelerate payment of the Company’s indebtedness under the Term Loan Agreement.
Subsequent Events - Acceleration of Certain Debt Obligations -
The commencement of the Chapter 11 Cases constituted an event of default that accelerated the obligations under the indenture governing our
5.25%
Senior Notes due 2019 and our term loan agreement with Thirty Two, L.L.C. Any efforts to enforce payment of such financial obligations under such instruments and agreements are automatically stayed as a result of the filing of the Chapter 11 Cases and the holders’ rights of enforcement in respect of such financial obligations are subject to the applicable provisions of the Bankruptcy Code.
9. INCOME TAXES
For financial reporting purposes, (loss) earnings before income taxes includes the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2018
|
|
2017
|
|
2016
|
|
|
(Thousands of dollars)
|
|
United States
|
$
|
(95,590
|
)
|
|
$
|
(50,871
|
)
|
|
$
|
(25,604
|
)
|
|
Foreign
|
(71,870
|
)
|
|
(570
|
)
|
|
(1,546
|
)
|
|
Total
|
(167,460
|
)
|
|
(51,441
|
)
|
|
(27,149
|
)
|
The provision for income taxes for 2018, 2017, and 2016 consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2018
|
|
2017
|
|
2016
|
|
|
|
(Thousands of dollars)
|
|
U.S. Federal:
|
|
|
|
|
|
|
|
Current
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Deferred
|
|
(21,061
|
)
|
|
(57,637
|
)
|
|
(5,488
|
)
|
|
|
|
(21,061
|
)
|
|
(57,637
|
)
|
|
(5,488
|
)
|
|
|
|
|
|
|
|
|
|
U.S. State:
|
|
|
|
|
|
|
|
Current
|
|
$
|
392
|
|
|
$
|
199
|
|
|
$
|
427
|
|
|
Deferred
|
|
$
|
(2,058
|
)
|
|
$
|
(717
|
)
|
|
$
|
3,218
|
|
|
|
|
$
|
(1,666
|
)
|
|
$
|
(518
|
)
|
|
$
|
3,645
|
|
|
|
|
|
|
|
|
|
|
Foreign:
|
|
|
|
|
|
|
|
Current
|
|
$
|
2,371
|
|
|
$
|
108
|
|
|
$
|
1,374
|
|
|
Deferred
|
|
$
|
(5,590
|
)
|
|
(926
|
)
|
|
—
|
|
|
|
|
$
|
(3,219
|
)
|
|
$
|
(818
|
)
|
|
$
|
1,374
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
$
|
(25,946
|
)
|
|
$
|
(58,973
|
)
|
|
$
|
(469
|
)
|
Income tax expense as a percentage of pre-tax earnings varies from the effective Federal statutory rate of
21%
as a result of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31, 2018
|
|
Year Ended
December 31, 2017
|
|
Year Ended
December 31, 2016
|
|
|
|
(Thousands of dollars, except percentage amounts)
|
|
|
|
Amount
|
|
Tax
Rate %
|
|
Amount
|
|
Tax
Rate %
|
|
Amount
|
|
Tax
Rate %
|
|
Income taxes at statutory rate
|
|
$
|
(35,167
|
)
|
|
21.0
|
%
|
|
$
|
(18,004
|
)
|
|
35.0
|
%
|
|
$
|
(9,502
|
)
|
|
35.0
|
%
|
|
Increase (decrease) in taxes resulting from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance on foreign tax credits
|
|
229
|
|
|
-0.1
|
%
|
|
6,145
|
|
|
-12.0
|
%
|
|
8,991
|
|
|
-33.0
|
%
|
|
Valuation allowance on state net operating loss carryforwards
|
|
107
|
|
|
-0.1
|
%
|
|
868
|
|
|
-2.0
|
%
|
|
5,028
|
|
|
-19.0
|
%
|
|
Valuation Allowance - Other
|
|
88
|
|
|
-0.1
|
%
|
|
1,353
|
|
|
-3.0
|
%
|
|
—
|
|
|
—
|
%
|
|
Goodwill impairment
|
|
17,729
|
|
|
-10.6
|
%
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
|
Change in tax rate on deferred items
|
|
(1,163
|
)
|
|
0.7
|
%
|
|
—
|
|
|
—
|
%
|
|
(4,772
|
)
|
|
18.0
|
%
|
|
Tax reform – Impact of change in tax rate
|
|
—
|
|
|
—
|
%
|
|
(49,219
|
)
|
|
96.0
|
%
|
|
—
|
|
|
—
|
%
|
|
State income taxes, net of federal benefit
|
|
(1,774
|
)
|
|
1.1
|
%
|
|
(1,386
|
)
|
|
3.0
|
%
|
|
(1,384
|
)
|
|
5.0
|
%
|
|
Foreign income tax rate differential
|
|
(6,245
|
)
|
|
3.7
|
%
|
|
|
|
|
|
|
|
|
|
Other items – net
|
|
250
|
|
|
-0.1
|
%
|
|
1,270
|
|
|
-2.0
|
%
|
|
1,170
|
|
|
-4.0
|
%
|
|
Total
|
|
$
|
(25,946
|
)
|
|
15.5
|
%
|
|
$
|
(58,973
|
)
|
|
115.0
|
%
|
|
$
|
(469
|
)
|
|
2.0
|
%
|
On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was enacted which significantly reformed the U.S. Internal Revenue Code (the “Code”). The Act, among other things, reduced the federal corporate income tax rate from 35% to 21% effective January 1, 2018. The change in the federal tax rate required us under applicable accounting rules to remeasure our deferred tax assets and liabilities, and to recognize the impact of this remeasurement in the period of enactment of the rate change. As a result, we provisionally recognized a net benefit of
$49.2 million
in our consolidated statement of operations for the year ended December 31, 2017.
Pursuant to the Act, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118), which allowed us to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. As a result, we previously provided a provisional estimate of the effect of the Act in our consolidated financial statements. In the fourth quarter of 2018, we completed our analysis to determine the effect of the Act and recorded immaterial adjustments as of December 31, 2018.
In 2018 and 2016, the change in tax rate on deferred items is mainly related to increases or reductions in the estimated effective tax rate that will be present at the time the deferred tax assets and liabilities reverse for tax purposes. The decrease in 2018 is attributable to a change in composition of earnings in the various jurisdictions in which we operate. The decrease in 2016 is attributable to a decline in the apportionment percentages in the various jurisdictions in which we operate, primarily as a result of a change in law related to apportionment factor calculations in one jurisdiction and a change in the composition of earnings in the various jurisdictions in which we operate. In 2018 and 2016, the overall impact of state apportionment percentage changes was a tax benefit of
$1.2 million
and
$4.8 million
, respectively. In 2017, the impact of state apportionment changes are included within the overall provisional net benefit described above.
In fiscal year 2018, the Company recognized tax expense of
$17.7 million
related to the impairment of Goodwill discussed in Note 18.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The tax effects of significant items comprising our net deferred tax balance at December 31 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
|
|
(Thousands of dollars)
|
|
Deferred tax assets:
|
|
|
|
|
|
Deferred compensation
|
|
$
|
162
|
|
|
$
|
626
|
|
|
Foreign tax credits
|
|
18,826
|
|
|
19,453
|
|
|
Vacation and bonus accrual
|
|
2,170
|
|
|
3,936
|
|
|
Inventory valuation
|
|
6,686
|
|
|
4,954
|
|
|
Interest disallowance
|
|
5,497
|
|
|
—
|
|
|
Rental accrual
|
|
601
|
|
|
747
|
|
|
Hurricane relief credit
|
|
1,308
|
|
|
1,255
|
|
|
Stock-based compensation
|
|
2,118
|
|
|
988
|
|
|
Other
|
|
2,653
|
|
|
2,235
|
|
|
Net operating losses
|
|
95,307
|
|
|
82,044
|
|
|
Total deferred tax assets
|
|
135,328
|
|
|
116,238
|
|
|
Valuation allowance – state NOL carryforwards
|
|
(6,105
|
)
|
|
(5,998
|
)
|
|
Valuation allowance – tax credit carryforwards
|
|
(16,127
|
)
|
|
(16,537
|
)
|
|
Valuation allowance – foreign NOL carryforwards
|
|
(186
|
)
|
|
(98
|
)
|
|
Total deferred tax assets, net
|
|
112,910
|
|
|
93,605
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
Tax depreciation in excess of book depreciation
|
|
(165,193
|
)
|
|
(171,116
|
)
|
|
Other
|
|
(1,951
|
)
|
|
(5,185
|
)
|
|
Total deferred tax liabilities
|
|
(167,144
|
)
|
|
(176,301
|
)
|
|
Net deferred tax liabilities
|
|
$
|
(54,234
|
)
|
|
$
|
(82,696
|
)
|
|
Deferred tax assets – short-term
|
|
—
|
|
|
—
|
|
|
Deferred tax assets – long-term
|
|
4,944
|
|
|
3,309
|
|
|
Deferred tax liability – long-term
|
|
(59,178
|
)
|
|
(86,005
|
)
|
|
Net deferred tax liabilities
|
|
$
|
(54,234
|
)
|
|
$
|
(82,696
|
)
|
The Company has U.S. Federal net operating loss carryforwards (“NOLs”) of approximately
$352.4 million
that, if not used, will expire beginning in
2028
through
2038
. Additionally, for state income tax purposes, the Company has NOLs of approximately
$264.6 million
available to reduce future state taxable income. These NOLs expire in varying amounts through
2038
, the majority of which expire in
2024
through
2038
. The Company had a valuation allowance of
$6.1 million
as of
December 31, 2018
against certain net operating losses in
six
states which we have determined are more likely than not to be forfeited in future years. During
2018
, the Company recorded
$0.1 million
of valuation allowances on state NOLs.
The Company’s deferred income tax balance as of December 31, 2018 includes deferred tax balances related to foreign entities that were acquired by the Company pursuant to the purchase of the HNZ Group Inc.’s offshore business on December 29, 2017. As of December 31, 2018, the Company has
$3.6 million
of net deferred tax assets related to its acquired Australian operation and
$0.6 million
of net deferred tax liabilities related to its acquired New Zealand operation. The net deferred tax assets related to Australia is mainly comprised of net operating losses of approximately
$15.2 million
that, if not used, can be carried forward indefinitely.
The Company also has foreign tax credits of approximately
$18.8 million
and general business credits of approximately
$1.3 million
which expire at various dates through 2028. The estimated future U.S. taxable income, after utilization of the available net operating loss carryforwards, will limit the ability of the Company to utilize some of the foreign tax credit carryforwards during their carry forward period and it is not more likely than not that a portion of these credits will be utilized in future years. Therefore, the Company has a valuation allowance of
$16.1 million
on these credits,
$0.2 million
of which was recorded in
2018
.
The increase in the valuation allowance is attributable to a change in estimate where it has been determined that the tax credits will expire before being fully utilized.
The Company files income tax returns in the U.S. federal jurisdiction and in many U.S. state jurisdictions. The tax years 2015 to 2018 remain open to examination by the major taxing jurisdictions in which the Company is subject to tax.
Income taxes paid were approximately
$2.3 million
,
$1.2 million
, and
$2.6 million
for each of the years ended
December 31, 2018
,
2017
, and 2016, respectively.
At
December 31, 2018
, the Company had
no
unrecognized tax benefits. It is the Company’s practice to recognize interest and penalties related to income tax expense as part of non-operating expenses.
10. EARNINGS PER SHARE
The components of basic and diluted earnings per share for the years ended December 31, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
|
|
|
(in thousands)
|
|
Weighted average outstanding shares of common stock, basic
|
|
15,818
|
|
|
15,762
|
|
|
15,663
|
|
|
Dilutive effect of unvested restricted stock units
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Weighted average outstanding shares of common stock, diluted
|
|
15,818
|
|
|
15,762
|
|
|
15,663
|
|
For the years ended
December 31, 2018
and December 31, 2017, there were
no
unvested restricted stock units excluded from the weighted average outstanding shares of common stock, diluted. There were
24,468
shares of stock that were anti-dilutive to earnings for the year ended December 31, 2016.
11. EMPLOYEE BENEFIT PLANS
Deferred Compensation Plan
The Company maintains an Officer Deferred Compensation Plan that permits key officers to defer a portion of their compensation. The plan is nonqualified and we are not obligated to fund it. The Company has established a separate bookkeeping account for each participant, which is treated as if invested and reinvested from time to time in investments that the participant selects from a list of available investment choices. These accruals are periodically adjusted for gains and losses to reflect the performance of the hypothetical investments. Earnings and losses on the book reserve accounts accrue to the plan participants. Liabilities for the plan are included in other long-term liabilities, and the corresponding investment accounts funded by voluntary contributions are included in other assets. Aggregate amounts deferred under the plans were
$0.8 million
and
$2.7 million
for the years ended
December 31, 2018
and
2017
, respectively.
Incentive Compensation
The Company has
one
incentive compensation plan. The incentive compensation plan for non-executive employees allows the Company to pay up to
3.0%
of the employee's annual earnings upon achieving a specified earnings threshold. The Company also has an executive/senior management plan for certain corporate and business unit management employees. Under this plan, the bonus is a percentage of each participating employee’s base salary based upon the each segment’s achievement of the financial target established by the Board of Directors at three levels – a threshold level, a target level, and a stretch level, subject to a positive or negative adjustment for the Company’s safety performance. Pursuant to these plans, the Company incentive compensation expense for the years ended
December 31, 2018
,
2017
, and
2016
were
$5.7 million
,
$9.0 million
, and
$1.6 million
, respectively. We also have a Safety Incentive Plan related to Occupational Safety and Health Administration recordable incidents, for which we expensed and paid
$0.7 million
,
$0.6 million
, and
$0.9 million
for the years
2018
,
2017
, and
2016
, respectively.
401(k)
Plan
We sponsor a 401(k) Plan (“Plan”) for our employees. An employee is eligible to participate in the Plan immediately upon employment and receive a dollar matching contribution up to
6%
of his or her base compensation. The vesting for matching contributions is
25%
per year beginning at the end of the second year of employment. Employees are fully vested after completing
five
years of service to the Company. The matching contribution for the years ended
December 31, 2018
,
2017
, and
2016
were
$10.0 million
,
$9.5 million
, and
$10.1 million
, respectively.
12. STOCK-BASED COMPENSATION
Compensation expense for our stock-based plans was
$6.1 million
,
$4.4 million
, and
$(0.1) million
for
2018
,
2017
, and
2016
, respectively.
2012 Long-Term Incentive Plan
–
Under our Second Amended and Restated Long-Term Incentive Plan (“LTIP”), we are authorized to issue up to
3,500,000
shares of non-voting stock. As of
December 31, 2018
,
1,149,175
shares remained available for grant.
Time-vested restricted stock units granted under the LTIP generally have forfeiture restrictions that lapse
100%
after
three
years. Performance-based restricted stock units that have been granted under the LTIP, whose vesting is contingent upon meeting company-wide performance goals, have forfeiture restrictions that lapse, at the end of a three-year performance period if all performance and continued service conditions are met.
Non-Voting Time-Vested Restricted Stock Units
–
The following table summarizes the activity for non-voting time-vested restricted stock units granted to employees for the year ended
December 31, 2018
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share Units
|
|
Weighted
Average
Grant-Date
Fair Value
|
|
Remaining
Average
Contractual
Life (
in years)
|
|
Aggregate Value
(
in thousands)
|
|
Outstanding at January 1, 2018
|
|
534,711
|
|
|
$
|
12.80
|
|
|
2.26
|
|
$
|
6,844
|
|
|
Granted
|
|
366,055
|
|
|
12.55
|
|
|
|
|
|
|
Forfeited
|
|
(6,755
|
)
|
|
19.86
|
|
|
|
|
|
|
Vested and released to participants
|
|
(28,723
|
)
|
|
29.45
|
|
|
|
|
|
|
Outstanding at December 31, 2018
|
|
865,288
|
|
|
$
|
11.73
|
|
|
1.88
|
|
$
|
10,146
|
|
The weighted average grant-date fair value of time-vested restricted stock units granted during
2018
and
2017
was
$12.55
and
$11.42
per share, respectively. The total fair value of awards that vested in
2018
was
$0.3 million
. The total fair value of awards that vested in
2017
was
$1.5 million
. The total fair value of awards forfeited in
2018
was less than
$0.1 million
. The total fair value of awards forfeited in
2017
was
$0.4 million
. As of
December 31, 2018
, there was
$5.9 million
that is expected to be recognized over a weighted average period of
1.88
years.
The following table summarizes the activity for non-voting time-vested restricted stock units granted to non-employee directors for the year ended
December 31, 2018
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share Units
|
|
Weighted
Average
Grant-Date
Fair Value
|
|
Remaining
Average
Contractual
Life
(in years)
|
|
Aggregate Value
(in thousands)
|
|
Outstanding at January 1, 2018
|
|
19,680
|
|
|
$
|
14.94
|
|
|
2.71
|
|
$
|
292
|
|
|
Granted
|
|
15,225
|
|
|
8.77
|
|
|
|
|
|
|
Forfeited
|
|
—
|
|
|
—
|
|
|
|
|
|
|
Vested and released to participants
|
|
(4,452
|
)
|
|
21.42
|
|
|
|
|
|
|
Outstanding at December 31, 2018
|
|
30,453
|
|
|
$
|
10.99
|
|
|
2.19
|
|
$
|
335
|
|
Non-Voting Performance-Based Restricted Stock Units
–
The following table summarizes the activity for non-voting performance-based restricted stock units for the year ended
December 31, 2018
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share Units
|
|
Weighted
Average
Grant-Date
Fair Value
|
|
Remaining
Average
Contractual
Life (
in years)
|
|
Aggregate Value
(
in thousands)
|
|
Outstanding at January 1, 2018
|
|
818,150
|
|
|
$
|
18.60
|
|
|
1.20
|
|
$
|
15,218
|
|
|
Granted
|
|
448,012
|
|
|
12.54
|
|
|
|
|
|
|
Forfeited
|
|
(165,397
|
)
|
|
31.33
|
|
|
|
|
|
|
Vested and released to participants
|
|
—
|
|
|
—
|
|
|
|
|
|
|
Outstanding at December 31, 2018
|
|
1,100,765
|
|
|
$
|
13.23
|
|
|
1.99
|
|
$
|
14,564
|
|
The aggregate value of the awards in the above table reflects the impact of current expectations of achievement through the end of the performance cycle. The average grant-date fair value of performance based restricted stock units granted during
2018
was
$12.54
per share. The total fair value of awards that vested in
2018
was
$0
. Total fair value of awards forfeited in
2018
was
$2.1 million
. As of
December 31, 2018
, there was a total of
$4.9 million
of unrecognized compensation cost related to the non-vested performance-based restricted stock units.
Subsequent Event
–
On February 20, 2019 the PHI Compensation committee approved the vesting of the 2017 performance RSUs based on the company’s financial results and exceeding the pre-determined business performance metrics set in 2017 for the
two
year performance period (January 1, 2017 - December 31, 2018). The PHI compensation committee also agreed to settle these RSU award vesting in cash effective at the closing market price on February 20, 2019 which was
$2.21
. This represents a modification of these awards. The total amount paid was
$0.8 million
.
13. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases certain aircraft, facilities, and equipment used in its operations. The related lease agreements, which include both non-cancelable and month-to-month terms, generally provide for fixed monthly rentals and, for certain real estate leases, renewal options. The Company generally pays all insurance, taxes, and maintenance expenses associated with these aircraft leases and some of these leases contain renewal and purchase options at fair market values. Rental expense incurred under these leases consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
2018
|
|
Year Ended
December 31,
2017
|
|
Year Ended
December 31,
2016
|
|
|
|
(Thousands of dollars)
|
|
Aircraft
|
|
$
|
35,740
|
|
|
$
|
39,815
|
|
|
$
|
44,130
|
|
|
Other
|
|
11,718
|
|
|
9,504
|
|
|
9,451
|
|
|
Total
|
|
$
|
47,458
|
|
|
$
|
49,319
|
|
|
$
|
53,581
|
|
The following table presents the remaining aggregate lease commitments under operating leases having initial non-cancelable terms in excess of one year as of December 31, 2018. The table includes renewal periods on the principal operating facility lease.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aircraft
|
|
Other
|
|
Total
|
|
|
|
(Thousands of dollars)
|
|
2019
|
|
$
|
29,705
|
|
|
$
|
6,765
|
|
|
$
|
36,470
|
|
|
2020
|
|
27,406
|
|
|
5,403
|
|
|
32,809
|
|
|
2021
|
|
27,272
|
|
|
3,855
|
|
|
31,127
|
|
|
2022
|
|
26,758
|
|
|
2,018
|
|
|
28,776
|
|
|
2023
|
|
19,170
|
|
|
516
|
|
|
19,686
|
|
|
Thereafter
|
|
9,907
|
|
|
761
|
|
|
10,668
|
|
|
|
|
$
|
140,218
|
|
|
$
|
19,318
|
|
|
$
|
159,536
|
|
A majority of our aircraft operating leases contain financial covenants that are substantially similar to the financial covenants that were contained in our revolving credit facility at the time the leases were entered into. We have solicited and received amendments and waivers of certain covenants in some of these leases. We remain in active discussions with our aircraft lessors to resolve open issues and pursue any additional waivers or amendments that may be required, but cannot assure you that these efforts will be successful. Furthermore the aircraft operating leases may be impacted by our Chapter 11 Cases. For additional information regarding our Chapter 11 Cases see Notes 1 and 19.
Generally in the event of a default, the applicable lessor has the option of terminating the lease and requiring the return of the leased aircraft, with the repayment of any arrears of lease payments plus additional damages which may include the present value of all future lease payments and certain other amounts which could be material to our financial position.
Purchase Options
As of
December 31, 2018
, we had options to purchase aircraft under lease becoming exercisable in
2019
through 2020. The aggregate option purchase prices are,
$129.0 million
in 2019, and
$22.7 million
in 2020. Under current conditions, we believe that it is unlikely that we will exercise the
2019
purchase options. Whether we exercise the remaining options will depend upon several factors, including market conditions and our available cash at the respective exercise dates.
Guarantees
In the normal course of business with customers, vendors, and others, we provide guarantees, performance, and payment bonds pursuant to certain agreements. The aggregate amount of these guarantees and bonds at
December 31, 2018
was
$1.0 million
.
Environmental Matters
PHI has recorded an estimated liability of
$0.15 million
as of
December 31, 2018
for environmental response costs. Previously, PHI conducted environmental surveys of its former Lafayette Facility located at the Lafayette Regional Airport, which former facility PHI vacated in 2001, and determined that limited soil and groundwater contamination exist at
two
parcels of land at the former facility. An Assessment Report for both parcels was submitted in 2003 (and updated in 2006) to the Louisiana Department of Environmental Quality (LDEQ) and the Louisiana Department of Natural Resources (LDNR). Approvals for the Assessment Report were received from the LDEQ and LDNR in 2010 and 2011, respectively. Since that time, PHI has performed groundwater sampling of the required groundwater monitor well installations at both former PHI facility parcels and submitted these sampling reports to the LDEQ. Pursuant to an agreement with the LDEQ, PHI provided groundwater sample results semi-annually to the LDEQ for both former PHI facility parcels from 2005 to 2015. LDEQ approved a reduction in the sampling program from semi-annual to annual groundwater monitoring in 2015. Based on PHI’s working relationship and agreements with the LDEQ, and the results of ongoing former facility parcel monitoring, PHI believes that ultimate remediation costs for the subject parcels will not be material to PHI’s consolidated financial position, operations or cash flows.
Legal Matters
On September 25, 2017, we brought a suit in the U.S. District Court for the Western District of Louisiana against Office & Professional Employees International Union and Office & Professional Employees International Union, Local 108 (Civil Action No. 6:17 cv 01216), which collectively represent our domestic pilot workforce. In this suit, we sought declaratory relief and other remedies under federal law to confirm that we could increase the wages of most of our unionized pilots and provide enhanced benefits of employment without negotiating these proposed changes with the defendants. On February 20, 2018, we dismissed our suit without prejudice in connection with the defendants' withdrawal of their prior demand to negotiate these charges.
On March 14, 2019 (the “Petition Date”), the Company and its four principal U.S. subsidiaries listed on Exhibit 99.1 hereto (collectively, the “Debtors”) filed voluntary petitions (the “Chapter 11 Cases”) in the United States Bankruptcy Court for the Northern District of Texas (the “Bankruptcy Court”) seeking relief under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”). The Debtors have requested joint administration of their Chapter 11 Cases under the caption In re: PHI, Inc., et al., Case N0. 19-30923. The Debtors continue to operate their businesses and manage their properties as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. To ensure their ability to continue operating in the ordinary course of business, the Debtors have filed with the Bankruptcy Court motions seeking a variety of “first-day” relief, including authority to pay employee wages and benefits, honor customer programs, and pay utilities providers, insurance providers and other vendors and suppliers in the ordinary course for all goods and services provided after the Petition Date.
From time to time, we are involved in various legal actions incidental to our business, including actions relating to employee claims, actions relating to 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 these 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.
14. BUSINESS SEGMENTS AND GEOGRAPHIC AREAS
Under Accounting Standards Codification 280, “Segment Reporting,” we have determined that we have the following
three
reportable segments:
•
Oil and Gas
•
Air Medical
•
Technical Services.
A segment’s operating profit or loss is its operating revenues less its direct expenses and selling, general and administrative expenses. Each segment has a portion of selling, general and administrative expenses that is charged directly to the segment and a portion that is allocated. Direct charges represent the vast majority of segment selling, general and administrative expenses. Allocated selling, general and administrative expenses is based primarily on total segment costs as a percentage of total operating costs. In addition, a portion of our selling, general and administrative expenses are not allocated to any segment.
The Oil and Gas segment provides helicopter services to oil and gas customers operating in the Gulf of Mexico and a selected number of foreign countries. The Air Medical segment provides helicopter services to hospitals and emergency service providers in several U.S. states, and individuals, in which case the Company is paid by either a commercial insurance company, federal or state agency, or the patient. The Technical Services segment provides helicopter repair and overhaul services for existing flight operations customers that own their own aircraft. Under this segment, the Company periodically provides certain services to governmental customers, including the Company’s agreement to operate six aircraft for the National Science Foundation in Antarctica. Under this segment, we also offer certain software as a service to our Oil and Gas customers.
Air Medical operations are headquartered in Phoenix, Arizona, where the Company maintains significant separate facilities and administrative staff dedicated to this segment. Those costs are charged directly to the Air Medical segment, resulting in a disproportionate share of selling, general and administrative expenses compared to the Company’s other reportable segments.
The customers, individually or considered as a group under common ownership, which accounted for greater than 10% of accounts receivable or 10% of operating revenues during the periods reflected were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts Receivable
December 31,
|
|
Operating Revenues
Years Ended December 31,
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2016
|
|
Oil and Gas segment:
|
|
|
|
|
|
|
|
|
|
|
|
Customer A
|
|
15
|
%
|
|
11
|
%
|
|
17
|
%
|
|
14
|
%
|
|
14
|
%
|
|
Customer B
|
|
5
|
%
|
|
5
|
%
|
|
7
|
%
|
|
9
|
%
|
|
10
|
%
|
|
Air Medical & Technical Services segments:
|
|
|
|
|
|
|
|
|
|
|
|
Customer C
|
|
—
|
%
|
|
10
|
%
|
|
—
|
%
|
|
—
|
%
|
|
5
|
%
|
The following table shows information about the profit or loss and assets of each of the Company’s reportable segments for the years ended
December 31, 2018
,
2017
, and
2016
. The information contains certain allocations, including allocations of depreciation, rents, insurance, and overhead expenses that the Company deems reasonable and appropriate for the evaluation of its results of operations. The Company does not allocate gains on dispositions of property and equipment, other income, interest expense, income taxes, and corporate selling, general, and administrative expenses to its segments. Where applicable, the tables present the unallocated amounts to reconcile the totals to the Company’s consolidated financial statements. Corporate assets are principally cash, short-term investments, other assets, and certain property and equipment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2018
|
|
2017
|
|
2016
|
|
|
|
(Thousands of dollars)
|
|
Segment operating revenues
|
|
|
|
|
|
|
|
Oil and Gas
|
|
$
|
380,238
|
|
|
$
|
298,398
|
|
|
$
|
324,129
|
|
|
Air Medical
|
|
257,132
|
|
|
257,273
|
|
|
281,868
|
|
|
Technical Services
|
|
37,053
|
|
|
23,874
|
|
|
28,101
|
|
|
Total operating revenues
|
|
674,423
|
|
|
579,545
|
|
|
634,098
|
|
|
Segment direct expenses
|
|
|
|
|
|
|
|
Oil and Gas
(1)
|
|
371,930
|
|
|
321,272
|
|
|
344,640
|
|
|
Air Medical
|
|
230,840
|
|
|
208,987
|
|
|
227,877
|
|
|
Technical Services
|
|
28,849
|
|
|
16,825
|
|
|
19,882
|
|
|
Total segment direct expenses
|
|
631,619
|
|
|
547,084
|
|
|
592,399
|
|
|
Segment selling, general and administrative expenses
|
|
|
|
|
|
|
|
Oil and Gas
|
|
18,485
|
|
|
5,899
|
|
|
6,739
|
|
|
Air Medical
|
|
13,833
|
|
|
12,442
|
|
|
10,968
|
|
|
Technical Services
|
|
1,418
|
|
|
1,405
|
|
|
1,101
|
|
|
Total segment selling, general and administrative expenses
|
|
33,736
|
|
|
19,746
|
|
|
18,808
|
|
|
Total segment expenses
|
|
665,355
|
|
|
566,830
|
|
|
611,207
|
|
|
Net segment (loss) profit
|
|
|
|
|
|
|
|
Oil and Gas
|
|
(10,177
|
)
|
|
(28,773
|
)
|
|
(27,250
|
)
|
|
Air Medical
|
|
12,459
|
|
|
35,844
|
|
|
43,023
|
|
|
Technical Services
|
|
6,786
|
|
|
5,644
|
|
|
7,118
|
|
|
Total net segment profit
|
|
9,068
|
|
|
12,715
|
|
|
22,891
|
|
|
Impairments of assets
|
|
(109,024
|
)
|
|
(368
|
)
|
|
(407
|
)
|
|
Other, net
(2)
|
|
(574
|
)
|
|
2,466
|
|
|
6,621
|
|
|
Unallocated selling, general and administrative expenses
|
|
(32,949
|
)
|
|
(34,071
|
)
|
|
(25,610
|
)
|
|
Interest expense
|
|
(33,981
|
)
|
|
(32,183
|
)
|
|
(30,644
|
)
|
|
(Loss) earnings before income taxes
|
|
$
|
(167,460
|
)
|
|
$
|
(51,441
|
)
|
|
$
|
(27,149
|
)
|
|
|
|
|
(1)
|
Includes equity in gain/loss of unconsolidated affiliate.
|
|
|
|
|
(2)
|
Includes gain/loss on disposition of property and equipment and other income.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2018
|
|
2017
|
|
2016
|
|
|
|
(Thousands of dollars)
|
|
Expenditures for Long-Lived Assets
|
|
|
|
|
|
|
|
Oil and Gas
|
|
$
|
34,171
|
|
|
$
|
52,525
|
|
|
$
|
59,278
|
|
|
Air Medical
|
|
7,268
|
|
|
5,696
|
|
|
22,429
|
|
|
Corporate
|
|
1,469
|
|
|
257
|
|
|
1,164
|
|
|
Total
|
|
$
|
42,908
|
|
|
$
|
58,478
|
|
|
$
|
82,871
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of or for Year Ended December 31,
|
|
|
|
2018
|
|
2017
|
|
2016
|
|
|
|
(Thousands of dollars)
|
|
Depreciation and Amortization
|
|
|
|
|
|
|
|
Oil and Gas
|
|
$
|
47,723
|
|
|
$
|
39,655
|
|
|
$
|
40,170
|
|
|
Air Medical
|
|
22,606
|
|
|
20,413
|
|
|
19,716
|
|
|
Technical Services
|
|
499
|
|
|
581
|
|
|
564
|
|
|
Corporate
|
|
8,426
|
|
|
7,378
|
|
|
5,293
|
|
|
Total
|
|
79,254
|
|
|
68,027
|
|
|
65,743
|
|
|
Assets
|
|
|
|
|
|
|
|
Oil and Gas
|
|
$
|
594,331
|
|
|
$
|
722,734
|
|
|
|
|
Air Medical
|
|
387,701
|
|
|
372,646
|
|
|
|
|
Technical Services
|
|
5,515
|
|
|
5,979
|
|
|
|
|
Corporate
|
|
274,679
|
|
|
300,487
|
|
|
|
|
Total
|
|
1,262,226
|
|
|
1,401,846
|
|
|
|
The following table presents the Company’s revenues from external customers attributed to operations in the United States and foreign areas and long-lived assets in the United States and foreign areas.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of or for Year Ended December 31,
|
|
|
|
2018
|
|
2017
|
|
2016
|
|
|
|
(Thousands of dollars)
|
|
Operating Revenues:
|
|
|
|
|
|
|
|
United States
|
|
$
|
516,717
|
|
|
$
|
530,115
|
|
|
$
|
579,300
|
|
|
International
|
|
157,706
|
|
|
49,430
|
|
|
54,798
|
|
|
Total
|
|
$
|
674,423
|
|
|
$
|
579,545
|
|
|
$
|
634,098
|
|
|
Long-Lived Assets:
|
|
|
|
|
|
|
|
United States
|
|
$
|
552,350
|
|
|
$
|
601,530
|
|
|
|
|
International
|
|
350,135
|
|
|
345,235
|
|
|
|
|
Total
|
|
$
|
902,485
|
|
|
$
|
946,765
|
|
|
|
Certain of those foreign customers pay us less promptly and regularly than our domestic customers. To date, these payment delays and irregularities have not resulted in any material losses. Nonetheless, these payment delays and irregularities have, among other things, disrupted our cash flows and exposed us to greater risks of non-payment, and could in the future potentially have a material adverse effect upon our financial position, liquidity, business or results of operations.
15. QUARTERLY FINANCIAL DATA (UNAUDITED)
The condensed quarterly results of operations for the years ended
December 31, 2018
and
2017
(in thousands of dollars, except per share data) were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
March 31,
|
|
June 30,
|
|
September 30,
|
|
December 31,
|
|
|
|
2018
|
|
2018
|
|
2018
|
|
2018
|
|
|
|
(Thousands of dollars, except per share data)
|
|
Operating revenues, net
|
|
$
|
160,370
|
|
|
$
|
169,243
|
|
|
$
|
168,787
|
|
|
$
|
176,023
|
|
|
(Loss) gain on disposition of assets, net
|
|
879
|
|
|
(171
|
)
|
|
—
|
|
|
45
|
|
|
(Loss) earnings before income taxes
|
|
(21,473
|
)
|
|
(8,777
|
)
|
|
(14,062
|
)
|
|
(123,148
|
)
|
|
Net (loss) earnings
|
|
(16,983
|
)
|
|
(7,093
|
)
|
|
(11,531
|
)
|
|
(105,907
|
)
|
|
Net (loss) earnings per share
|
|
|
|
|
|
|
|
|
|
Basic
|
|
(1.07
|
)
|
|
(0.45
|
)
|
|
(0.73
|
)
|
|
(6.70
|
)
|
|
Diluted
|
|
(1.07
|
)
|
|
(0.45
|
)
|
|
(0.73
|
)
|
|
(6.70
|
)
|
|
|
|
Quarter Ended
|
|
|
|
March 31,
|
|
June 30,
|
|
September 30,
|
|
December 31,
|
|
|
|
2017
|
|
2017
|
|
2017
|
|
2017
|
|
|
|
(Thousands of dollars, except per share data)
|
|
Operating revenues, net
|
|
$
|
134,618
|
|
|
$
|
146,424
|
|
|
$
|
150,167
|
|
|
$
|
148,336
|
|
|
Gain (loss) on disposition of assets, net
|
|
—
|
|
|
7
|
|
|
4
|
|
|
287
|
|
|
Earnings before income taxes
|
|
(23,073
|
)
|
|
(3,150
|
)
|
|
(4,899
|
)
|
|
(20,319
|
)
|
|
Net earnings
|
|
(15,248
|
)
|
|
(3,273
|
)
|
|
(3,277
|
)
|
|
29,330
|
|
|
Net earnings per share
|
|
|
|
|
|
|
|
|
|
Basic
|
|
(0.97
|
)
|
|
(0.21
|
)
|
|
(0.21
|
)
|
|
1.87
|
|
|
Diluted
|
|
(0.97
|
)
|
|
(0.21
|
)
|
|
(0.21
|
)
|
|
1.87
|
|
16. INVESTMENT IN VARIABLE INTEREST ENTITY AND OTHER INVESTMENTS AND AFFILIATES
We account for our investment in certain international operations as variable interest entities, 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.
We account for our investment in PHI Century Limited ("PHIC") as a variable interest entity, which is defined as an entity that either (a) has insufficient equity to permit the entity to finance its operations without additional subordinated financial support or (b) has equity investors who lack the characteristics of a controlling financial interest. As of
December 31, 2018
, we had a
49%
investment in the common stock of PHIC, a Ghanaian entity. We acquired our
49%
interest on
May 26, 2011
, PHIC’s date of incorporation. The purpose of PHIC is to provide oil and gas flight services in Ghana and the West African region. For the year ended
December 31, 2018
we recorded a gain in equity of this unconsolidated affiliate of
$0.2 million
and in 2017 we recorded a loss of
$1.0 million
relative to our
49%
equity ownership. We had
$4.8 million
and
$4.0 million
of trade receivables from PHIC as of
December 31, 2018
and 2017, respectively. In 2018 we loaned PHIC
$0.4 million
for operating purposes. This loan balance is included in account receivable - other on our Condensed Consolidated Balance Sheet at
December 31, 2018
. Our investment in the common stock of PHIC is included in Other Assets on our Condensed Consolidated Balance Sheets and was
$0.5 million
for
December 31, 2018
and 2017.
17. CONDENSED CONSOLIDATING FINANCIAL INFORMATION – GUARANTOR SUBSIDIARIES
As discussed further in Note 8, on March 17, 2014, PHI, Inc. issued
$500.0 million
aggregate principal amount of
5.25%
Senior Notes due 2019 that are fully and unconditionally guaranteed on a joint and several, senior basis by all of PHI, Inc.’s domestic subsidiaries. PHI, Inc. directly or indirectly owns
100%
of all of its domestic subsidiaries.
The supplemental condensed financial information on the following pages sets forth, on a consolidated basis, the balance sheet, statement of operations, statement of comprehensive income, and statement of cash flows information for PHI, Inc. (“Parent Company”) the guarantor subsidiaries and the non-guarantor subsidiaries, each under separate headings. The eliminating entries eliminate investments in subsidiaries, intercompany balances, and intercompany revenues and expenses. The condensed consolidating financial statements have been prepared on the same basis as the consolidated financial statements of PHI, Inc. The equity method is followed by the Parent Company within the financial information presented below.
The transactions reflected in “Due to/from affiliates, net” in the following condensed consolidated statements of cash flows primarily consist of centralized cash management activities between PHI, Inc. and its subsidiaries, pursuant to which cash earned by the guarantor subsidiaries is regularly transferred to PHI, Inc. to be centrally managed. Because these balances are treated as short-term borrowings of the Parent Company, serve as a financing and cash management tool to meet our short-term operating needs, turn over quickly and are payable to the guarantor subsidiaries on demand, we present borrowings and repayments with our affiliates on a net basis within the condensed consolidating statement of cash flows. Net receivables from our affiliates are considered advances and net payables to our affiliates are considered borrowings, and both changes are presented as financing activities in the following condensed consolidating statements of cash flows.
Subsequent to the issuance of the Company's 2017 financial statements, the Company's management identified misstatements in the condensed consolidating balance sheet as of December 31, 2017, primarily related to consolidating eliminations for Non-Guarantor Subsidiaries. Investment in subsidiaries and others, other assets, and common stock and paid-in capital of the Parent Company and Non-Guarantor Subsidiaries, and the related Eliminations, have been restated to reflect the corrected amounts. The corrections increased investment in subsidiaries and others and decreased other assets in the Parent Company, increased other assets and common stock and paid-in capital in the Non-Guarantor Subsidiaries, and increased eliminations for investment in subsidiaries and others and common stock and paid-in capital by
$131.9 million
as compared to the previously reported amounts. These misstatements had
no
impact on our consolidated financial statements. The Company evaluated the materiality of these misstatements from quantitative and qualitative perspectives and concluded that they were immaterial to the prior period financial statements.
PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
(Thousands of dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
|
|
Parent
Company
Only (issuer)
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
39,091
|
|
|
$
|
1,259
|
|
|
$
|
10,524
|
|
|
$
|
—
|
|
|
$
|
50,874
|
|
|
Short-term investments
|
|
14,232
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,232
|
|
|
Accounts receivable – net
|
|
64,416
|
|
|
93,060
|
|
|
28,812
|
|
|
(3,823
|
)
|
|
182,465
|
|
|
Intercompany receivable
|
|
—
|
|
|
91,468
|
|
|
—
|
|
|
(91,468
|
)
|
|
—
|
|
|
Inventories of spare parts – net
|
|
43,933
|
|
|
9,577
|
|
|
3,188
|
|
|
—
|
|
|
56,698
|
|
|
Prepaid expenses
|
|
7,295
|
|
|
2,520
|
|
|
1,604
|
|
|
—
|
|
|
11,419
|
|
|
Deferred income taxes
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Income taxes receivable
|
|
394
|
|
|
556
|
|
|
—
|
|
|
—
|
|
|
950
|
|
|
Total current assets
|
|
169,361
|
|
|
198,440
|
|
|
44,128
|
|
|
(95,291
|
)
|
|
316,638
|
|
|
Investment in subsidiaries and others
|
|
471,790
|
|
|
—
|
|
|
—
|
|
|
(471,790
|
)
|
|
—
|
|
|
Property and equipment – net
|
|
576,763
|
|
|
287,375
|
|
|
38,347
|
|
|
—
|
|
|
902,485
|
|
|
Restricted cash and investments
|
|
19,781
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19,781
|
|
|
Other assets
|
|
17,179
|
|
|
1,199
|
|
|
—
|
|
|
—
|
|
|
$
|
18,378
|
|
|
Deferred income tax
|
|
—
|
|
|
—
|
|
|
4,944
|
|
|
—
|
|
|
4,944
|
|
|
Total assets
|
|
$
|
1,254,874
|
|
|
$
|
487,014
|
|
|
$
|
87,419
|
|
|
$
|
(567,081
|
)
|
|
$
|
1,262,226
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Senior Notes issued March 17, 2014
|
|
$
|
499,740
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
499,740
|
|
|
Accounts payable
|
|
$
|
44,089
|
|
|
$
|
4,587
|
|
|
$
|
5,452
|
|
|
$
|
(3,839
|
)
|
|
$
|
50,289
|
|
|
Accrued and other current liabilities
|
|
25,158
|
|
|
12,335
|
|
|
7,799
|
|
|
—
|
|
|
45,292
|
|
|
Intercompany payable
|
|
74,336
|
|
|
—
|
|
|
17,116
|
|
|
(91,452
|
)
|
|
—
|
|
|
Total current liabilities
|
|
643,323
|
|
|
16,922
|
|
|
30,367
|
|
|
(95,291
|
)
|
|
595,321
|
|
|
Long-term debt
|
|
129,235
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
129,235
|
|
|
Deferred income taxes and other long-term liabilities
|
|
4,934
|
|
|
58,752
|
|
|
551
|
|
|
—
|
|
|
64,237
|
|
|
Shareholders’ Equity:
|
|
|
|
|
|
|
|
|
|
|
|
Common stock and paid-in capital
|
|
315,898
|
|
|
77,951
|
|
|
132,650
|
|
|
(210,601
|
)
|
|
315,898
|
|
|
Accumulated other comprehensive loss
|
|
(3
|
)
|
|
—
|
|
|
(3,949
|
)
|
|
—
|
|
|
(3,952
|
)
|
|
Retained earnings
|
|
161,487
|
|
|
333,389
|
|
|
(72,200
|
)
|
|
(261,189
|
)
|
|
161,487
|
|
|
Total shareholders’ equity
|
|
477,382
|
|
|
411,340
|
|
|
56,501
|
|
|
(471,790
|
)
|
|
473,433
|
|
|
Total liabilities and shareholders’ equity
|
|
$
|
1,254,874
|
|
|
$
|
487,014
|
|
|
$
|
87,419
|
|
|
$
|
(567,081
|
)
|
|
$
|
1,262,226
|
|
PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
(Thousands of dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
|
Parent
Company
Only (issuer)
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
47
|
|
|
$
|
1,072
|
|
|
$
|
7,651
|
|
|
$
|
—
|
|
|
$
|
8,770
|
|
|
Short-term investments
|
|
64,237
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
64,237
|
|
|
Accounts receivable – net
|
|
90,077
|
|
|
74,886
|
|
|
38,020
|
|
|
(17,004
|
)
|
|
185,979
|
|
|
Intercompany receivable
|
|
—
|
|
|
126,366
|
|
|
—
|
|
|
(126,366
|
)
|
|
—
|
|
|
Inventories of spare parts – net
|
|
68,737
|
|
|
9,049
|
|
|
3,095
|
|
|
—
|
|
|
80,881
|
|
|
Prepaid expenses
|
|
8,348
|
|
|
1,898
|
|
|
1,229
|
|
|
—
|
|
|
11,475
|
|
|
Deferred income taxes
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Income taxes receivable
|
|
345
|
|
|
9
|
|
|
917
|
|
|
—
|
|
|
1,271
|
|
|
Total current assets
|
|
231,791
|
|
|
213,280
|
|
|
50,912
|
|
|
(143,370
|
)
|
|
352,613
|
|
|
Investment in subsidiaries
|
|
529,222
|
|
|
—
|
|
|
—
|
|
|
(529,222
|
)
|
|
—
|
|
|
Property and equipment – net
|
|
617,488
|
|
|
284,984
|
|
|
44,293
|
|
|
—
|
|
|
946,765
|
|
|
Restricted investments
|
|
12,382
|
|
|
—
|
|
|
14
|
|
|
—
|
|
|
12,396
|
|
|
Other assets
|
|
7,833
|
|
|
908
|
|
|
—
|
|
|
—
|
|
|
8,741
|
|
|
Deferred income tax
|
|
—
|
|
|
—
|
|
|
3,309
|
|
|
—
|
|
|
3,309
|
|
|
Goodwill
|
|
—
|
|
|
—
|
|
|
61,299
|
|
|
—
|
|
|
61,299
|
|
|
Intangible assets
|
|
—
|
|
|
—
|
|
|
16,723
|
|
|
—
|
|
|
16,723
|
|
|
Total assets
|
|
$
|
1,398,716
|
|
|
$
|
499,172
|
|
|
$
|
176,550
|
|
|
$
|
(672,592
|
)
|
|
$
|
1,401,846
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
28,130
|
|
|
$
|
4,636
|
|
|
$
|
21,425
|
|
|
$
|
(17,005
|
)
|
|
$
|
37,186
|
|
|
Accrued liabilities
|
|
23,147
|
|
|
10,577
|
|
|
8,126
|
|
|
—
|
|
|
41,850
|
|
|
Intercompany payable
|
|
113,387
|
|
|
—
|
|
|
12,978
|
|
|
(126,365
|
)
|
|
—
|
|
|
Total current liabilities
|
|
164,664
|
|
|
15,213
|
|
|
42,529
|
|
|
(143,370
|
)
|
|
79,036
|
|
|
Long-term debt
|
|
615,994
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
615,994
|
|
|
Deferred income taxes and other long-term liabilities
|
|
5,404
|
|
|
84,300
|
|
|
4,458
|
|
|
—
|
|
|
94,162
|
|
|
Shareholders’ Equity:
|
|
|
|
|
|
|
|
|
|
|
|
Common stock and paid-in capital
|
|
309,933
|
|
|
77,951
|
|
|
133,296
|
|
|
(211,247
|
)
|
|
309,933
|
|
|
Accumulated other comprehensive loss
|
|
(280
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(280
|
)
|
|
Retained earnings
|
|
303,001
|
|
|
321,708
|
|
|
(3,733
|
)
|
|
(317,975
|
)
|
|
303,001
|
|
|
Total shareholders’ equity
|
|
612,654
|
|
|
399,659
|
|
|
129,563
|
|
|
(529,222
|
)
|
|
612,654
|
|
|
Total liabilities and shareholders’ equity
|
|
$
|
1,398,716
|
|
|
$
|
499,172
|
|
|
$
|
176,550
|
|
|
$
|
(672,592
|
)
|
|
$
|
1,401,846
|
|
PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(Thousands of dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2018
|
|
|
|
Parent
Company
Only (issuer)
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
Operating revenues, net
|
|
$
|
329,268
|
|
|
$
|
263,679
|
|
|
$
|
109,882
|
|
|
$
|
(28,406
|
)
|
|
$
|
674,423
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Direct expenses
|
|
331,785
|
|
|
236,366
|
|
|
92,062
|
|
|
(28,406
|
)
|
|
631,807
|
|
|
Selling, general, and administrative expenses
|
|
40,715
|
|
|
13,834
|
|
|
12,154
|
|
|
(18
|
)
|
|
66,685
|
|
|
Total operating expenses
|
|
372,500
|
|
|
250,200
|
|
|
104,216
|
|
|
(28,424
|
)
|
|
698,492
|
|
|
Loss on disposition of assets, net
|
|
774
|
|
|
—
|
|
|
(21
|
)
|
|
—
|
|
|
753
|
|
|
Impairment of assets
|
|
31,824
|
|
|
—
|
|
|
77,200
|
|
|
—
|
|
|
109,024
|
|
|
Equity in loss of unconsolidated affiliate
|
|
(188
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(188
|
)
|
|
Operating (loss) income
|
|
(75,642
|
)
|
|
13,479
|
|
|
(71,513
|
)
|
|
18
|
|
|
(133,658
|
)
|
|
Equity in net earnings of consolidated subsidiaries
|
|
56,786
|
|
|
—
|
|
|
—
|
|
|
(56,786
|
)
|
|
—
|
|
|
Interest expense
|
|
33,964
|
|
|
13
|
|
|
4
|
|
|
—
|
|
|
33,981
|
|
|
Other income, net
|
|
(547
|
)
|
|
—
|
|
|
350
|
|
|
18
|
|
|
(179
|
)
|
|
|
|
90,203
|
|
|
13
|
|
|
354
|
|
|
(56,768
|
)
|
|
33,802
|
|
|
(Loss) earnings before income taxes
|
|
(165,845
|
)
|
|
13,466
|
|
|
(71,867
|
)
|
|
56,786
|
|
|
(167,460
|
)
|
|
Income tax (benefit) expense
|
|
(24,331
|
)
|
|
1,785
|
|
|
(3,400
|
)
|
|
—
|
|
|
(25,946
|
)
|
|
Net earnings (loss)
|
|
$
|
(141,514
|
)
|
|
$
|
11,681
|
|
|
$
|
(68,467
|
)
|
|
$
|
56,786
|
|
|
$
|
(141,514
|
)
|
|
|
|
For the year ended December 31, 2017
|
|
|
|
Parent
|
|
|
|
Non-
|
|
|
|
|
|
|
|
Company
|
|
Guarantor
|
|
Guarantor
|
|
|
|
|
|
|
|
Only (issuer)
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
Operating revenues, net
|
|
$
|
310,449
|
|
|
$
|
262,229
|
|
|
$
|
23,871
|
|
|
$
|
(17,004
|
)
|
|
$
|
579,545
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Direct expenses
|
|
326,152
|
|
|
212,691
|
|
|
24,860
|
|
|
(17,004
|
)
|
|
546,699
|
|
|
Selling, general, and administrative expenses
|
|
41,134
|
|
|
12,462
|
|
|
221
|
|
|
—
|
|
|
53,817
|
|
|
Total operating expenses
|
|
367,286
|
|
|
225,153
|
|
|
25,081
|
|
|
(17,004
|
)
|
|
600,516
|
|
|
Gain on disposition of assets, net
|
|
300
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
298
|
|
|
Impairment of assets
|
|
368
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
368
|
|
|
Equity in profit of unconsolidated affiliate
|
|
1,021
|
|
|
—
|
|
|
(636
|
)
|
|
—
|
|
|
385
|
|
|
Operating (loss) income
|
|
(58,526
|
)
|
|
37,078
|
|
|
(574
|
)
|
|
—
|
|
|
(22,022
|
)
|
|
Equity in net earnings of consolidated subsidiaries
|
|
(38,553
|
)
|
|
—
|
|
|
—
|
|
|
38,553
|
|
|
—
|
|
|
Interest expense
|
|
32,161
|
|
|
22
|
|
|
—
|
|
|
—
|
|
|
32,183
|
|
|
Other income, net
|
|
(2,757
|
)
|
|
(2
|
)
|
|
(5
|
)
|
|
—
|
|
|
(2,764
|
)
|
|
|
|
(9,149
|
)
|
|
20
|
|
|
(5
|
)
|
|
38,553
|
|
|
29,419
|
|
|
(Loss) earnings before income taxes
|
|
(49,377
|
)
|
|
37,058
|
|
|
(569
|
)
|
|
(38,553
|
)
|
|
(51,441
|
)
|
|
Income tax (benefit) expense
|
|
(56,909
|
)
|
|
(1,138
|
)
|
|
(926
|
)
|
|
—
|
|
|
(58,973
|
)
|
|
Net (loss) earnings
|
|
$
|
7,532
|
|
|
$
|
38,196
|
|
|
$
|
357
|
|
|
$
|
(38,553
|
)
|
|
$
|
7,532
|
|
PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(Thousands of dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2016
|
|
|
|
Parent
Company
Only (issuer)
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
Operating revenues, net
|
|
$
|
339,829
|
|
|
$
|
293,329
|
|
|
$
|
940
|
|
|
$
|
—
|
|
|
$
|
634,098
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Direct expenses
|
|
347,532
|
|
|
237,635
|
|
|
7,383
|
|
|
—
|
|
|
592,550
|
|
|
Selling, general, and administrative expenses
|
|
32,911
|
|
|
10,984
|
|
|
541
|
|
|
(18
|
)
|
|
44,418
|
|
|
Total operating expenses
|
|
380,443
|
|
|
248,619
|
|
|
7,924
|
|
|
(18
|
)
|
|
636,968
|
|
|
Loss on disposition of assets, net
|
|
(3,350
|
)
|
|
—
|
|
|
|
|
|
—
|
|
|
(3,350
|
)
|
|
Equity in loss of unconsolidated affiliate
|
|
(151
|
)
|
|
—
|
|
|
|
|
|
—
|
|
|
(151
|
)
|
|
Operating income
|
|
(37,520
|
)
|
|
44,710
|
|
|
(6,984
|
)
|
|
18
|
|
|
224
|
|
|
Equity in net earnings of consolidated subsidiaries
|
|
(22,182
|
)
|
|
—
|
|
|
—
|
|
|
22,182
|
|
|
—
|
|
|
Interest expense
|
|
30,585
|
|
|
46
|
|
|
13
|
|
|
—
|
|
|
30,644
|
|
|
Other income, net
|
|
(3,284
|
)
|
|
(5
|
)
|
|
—
|
|
|
18
|
|
|
(3,271
|
)
|
|
|
|
5,119
|
|
|
41
|
|
|
13
|
|
|
22,200
|
|
|
27,373
|
|
|
Earnings before income taxes
|
|
(42,639
|
)
|
|
44,669
|
|
|
(6,997
|
)
|
|
(22,182
|
)
|
|
(27,149
|
)
|
|
Income tax (benefit) expense
|
|
(15,959
|
)
|
|
15,490
|
|
|
—
|
|
|
—
|
|
|
(469
|
)
|
|
Net earnings
|
|
$
|
(26,680
|
)
|
|
$
|
29,179
|
|
|
$
|
(6,997
|
)
|
|
$
|
(22,182
|
)
|
|
$
|
(26,680
|
)
|
PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME
(Thousands of dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2018
|
|
|
|
Parent
Company
Only
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
Net (loss) earnings
|
|
$
|
(141,514
|
)
|
|
$
|
11,681
|
|
|
$
|
(68,467
|
)
|
|
$
|
56,786
|
|
|
$
|
(141,514
|
)
|
|
Unrealized gain on short-term investments
|
|
364
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
364
|
|
|
Changes in pension plan assets and benefit obligations
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
Tax effect
|
|
(85
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(85
|
)
|
|
Currency translation adjustment
|
|
—
|
|
|
—
|
|
|
(3,950
|
)
|
|
$
|
—
|
|
|
(3,950
|
)
|
|
Total comprehensive income
|
|
$
|
(141,236
|
)
|
|
$
|
11,681
|
|
|
$
|
(72,417
|
)
|
|
$
|
56,786
|
|
|
$
|
(145,186
|
)
|
|
|
|
For the year ended December 31, 2017
|
|
|
|
Parent
|
|
|
|
Non-
|
|
|
|
|
|
|
|
Company
|
|
Guarantor
|
|
Guarantor
|
|
|
|
|
|
|
|
Only
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
Net (loss) earnings
|
|
$
|
7,532
|
|
|
$
|
38,196
|
|
|
$
|
357
|
|
|
$
|
(38,553
|
)
|
|
$
|
7,532
|
|
|
Unrealized gain on short-term investments
|
|
310
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
310
|
|
|
Changes in pension plan assets and benefit obligations
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
Tax effect
|
|
(109
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(109
|
)
|
|
Total comprehensive (loss) income
|
|
$
|
7,730
|
|
|
$
|
38,196
|
|
|
$
|
357
|
|
|
$
|
(38,553
|
)
|
|
$
|
7,730
|
|
|
|
|
For the year ended December 31, 2016
|
|
|
|
Parent
|
|
|
|
Non-
|
|
|
|
|
|
|
|
Company
|
|
Guarantor
|
|
Guarantor
|
|
|
|
|
|
|
|
Only
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
Net earnings
|
|
$
|
(26,680
|
)
|
|
$
|
29,179
|
|
|
$
|
(6,997
|
)
|
|
$
|
(22,182
|
)
|
|
$
|
(26,680
|
)
|
|
Unrealized loss on short-term investments
|
|
241
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
241
|
|
|
Other unrealized gain
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Changes in pension plan assets and benefit obligations
|
|
(39
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(39
|
)
|
|
Tax effect
|
|
(113
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(113
|
)
|
|
Total comprehensive income
|
|
$
|
(26,591
|
)
|
|
$
|
29,179
|
|
|
$
|
(6,997
|
)
|
|
$
|
(22,182
|
)
|
|
$
|
(26,591
|
)
|
PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(Thousands of dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2018
|
|
|
|
Parent
Company
Only (issuer)
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
Net cash (used in) provided by operating activities
|
|
$
|
24,123
|
|
|
$
|
(16,952
|
)
|
|
$
|
10,477
|
|
|
$
|
—
|
|
|
$
|
17,648
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
(40,865
|
)
|
|
—
|
|
|
(2,311
|
)
|
|
—
|
|
|
(43,176
|
)
|
|
Proceeds from asset dispositions
|
|
14,245
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,245
|
|
|
Purchase of short-term investments
|
|
(284,481
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(284,481
|
)
|
|
Proceeds from sale of short-term investments
|
|
334,488
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
334,488
|
|
|
Loan to unconsolidated affiliate
|
|
(274
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(274
|
)
|
|
Net cash provided by (used in) investing activities
|
|
23,113
|
|
|
—
|
|
|
(2,311
|
)
|
|
—
|
|
|
20,802
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Debt issuance costs
|
|
(874
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(874
|
)
|
|
Repurchase of common stock
|
|
(106
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(106
|
)
|
|
Proceeds on line of credit
|
|
34,295
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
34,295
|
|
|
Payments on line of credit
|
|
(151,795
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(151,795
|
)
|
|
Proceeds from term loan
|
|
130,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
130,000
|
|
|
Due to/from affiliate, net
|
|
(12,022
|
)
|
|
17,139
|
|
|
(5,117
|
)
|
|
—
|
|
|
—
|
|
|
Net cash (used in) provided by financing activities
|
|
(502
|
)
|
|
17,139
|
|
|
(5,117
|
)
|
|
—
|
|
|
11,520
|
|
|
Effect of exchange rate changes on cash and cash equivalent
|
|
—
|
|
|
—
|
|
|
(176
|
)
|
|
—
|
|
|
(176
|
)
|
|
Increase (decrease) in cash, cash equivalents and restricted cash
|
|
46,734
|
|
|
187
|
|
|
2,873
|
|
|
—
|
|
|
49,794
|
|
|
Cash, cash equivalents and restricted cash at beginning of period
|
|
47
|
|
|
1,072
|
|
|
7,651
|
|
|
—
|
|
|
8,770
|
|
|
Cash, cash equivalents and restricted cash at end of period
|
|
$
|
46,781
|
|
|
$
|
1,259
|
|
|
$
|
10,524
|
|
|
$
|
—
|
|
|
$
|
58,564
|
|
(1) Net of the effect of business acquisitions.
PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(Thousands of dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2017
|
|
|
|
Parent
Company
Only (issuer)
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
|
|
|
|
Net cash (used in) by operating activities
|
|
$
|
(62,581
|
)
|
|
$
|
40,628
|
|
|
$
|
2,850
|
|
|
$
|
—
|
|
|
$
|
(19,103
|
)
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
(56,757
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(56,757
|
)
|
|
Proceeds from asset dispositions
|
|
1,296
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,296
|
|
|
Purchase of short-term investments
|
|
(637,980
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(637,980
|
)
|
|
Proceeds from sale of short-term investments
|
|
862,942
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
862,942
|
|
|
Payments of deposits on aircraft
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Loan to third party
|
|
(824
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(824
|
)
|
|
Business acquisitions net of cash acquired
|
|
(130,788
|
)
|
|
—
|
|
|
4,144
|
|
|
—
|
|
|
(126,644
|
)
|
|
Net cash used in investing activities
|
|
37,889
|
|
|
—
|
|
|
4,144
|
|
|
—
|
|
|
42,033
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of common stock
|
|
(256
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(256
|
)
|
|
Proceeds on line of credit
|
|
152,150
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
152,150
|
|
|
Payments on line of credit
|
|
(168,650
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(168,650
|
)
|
|
Due to/from affiliate, net
|
|
41,459
|
|
|
(41,656
|
)
|
|
197
|
|
|
—
|
|
|
—
|
|
|
Net cash provided by (used in) financing activities
|
|
24,703
|
|
|
(41,656
|
)
|
|
197
|
|
|
—
|
|
|
(16,756
|
)
|
|
Increase (decrease) in cash, cash equivalents and restricted cash
|
|
11
|
|
|
(1,028
|
)
|
|
7,191
|
|
|
—
|
|
|
6,174
|
|
|
Cash, cash equivalents and restricted cash at beginning of period
|
|
36
|
|
|
2,100
|
|
|
460
|
|
|
—
|
|
|
2,596
|
|
|
Cash, cash equivalents and restricted cash at end of period
|
|
$
|
47
|
|
|
$
|
1,072
|
|
|
$
|
7,651
|
|
|
$
|
—
|
|
|
$
|
8,770
|
|
PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(Thousands of dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2016
|
|
|
|
Parent
Company
Only (issuer)
|
|
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
Net cash provided by operating activities
|
|
$
|
(46,738
|
)
|
|
$
|
52,873
|
|
|
$
|
(6,699
|
)
|
|
$
|
—
|
|
|
$
|
(564
|
)
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
(81,484
|
)
|
|
—
|
|
|
(358
|
)
|
|
—
|
|
|
(81,842
|
)
|
|
Proceeds from asset dispositions
|
|
14,983
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,983
|
|
|
Purchase of short-term investments
|
|
(321,453
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(321,453
|
)
|
|
Proceeds from sale of short-term investments
|
|
316,543
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
316,543
|
|
|
Payments of deposits on aircraft
|
|
(2,249
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,249
|
)
|
|
Loan to unconsolidated affiliate
|
|
(1,200
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,200
|
)
|
|
Net cash used in investing activities
|
|
(74,860
|
)
|
|
—
|
|
|
(358
|
)
|
|
—
|
|
|
(75,218
|
)
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of common stock
|
|
(529
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(529
|
)
|
|
Proceeds on line of credit
|
|
264,700
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
264,700
|
|
|
Payments on line of credit
|
|
(188,200
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(188,200
|
)
|
|
Due to/from affiliate, net
|
|
45,617
|
|
|
(52,445
|
)
|
|
6,828
|
|
|
—
|
|
|
—
|
|
|
Net cash provided by (used in) financing activities
|
|
121,588
|
|
|
(52,445
|
)
|
|
6,828
|
|
|
—
|
|
|
75,971
|
|
|
Decrease in cash
|
|
(10
|
)
|
|
428
|
|
|
(229
|
)
|
|
—
|
|
|
189
|
|
|
Cash, beginning of year
|
|
46
|
|
|
1,672
|
|
|
689
|
|
|
—
|
|
|
2,407
|
|
|
Cash, end of year
|
|
$
|
36
|
|
|
$
|
2,100
|
|
|
$
|
460
|
|
|
$
|
—
|
|
|
$
|
2,596
|
|
18. ASSET IMPAIRMENT
The below table summarizes the combined fair value of the assets that incurred impairments during the years ended
December 31, 2018
,
2017
and
2016
, along with the amount of the impairment. The impairment charges were recorded in Impairment of assets in the consolidated statement of operations. See Note 1 for additional information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2018
|
|
2017
|
|
2016
|
|
Goodwill
|
|
$
|
61,643
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Intangible assets
|
|
15,557
|
|
|
—
|
|
|
—
|
|
|
Aircraft and related inventory
|
|
31,824
|
|
|
368
|
|
|
407
|
|
|
Total
|
|
$
|
109,024
|
|
|
$
|
368
|
|
|
$
|
407
|
|
Goodwill impairment
During the fourth quarter of 2018, the Company performed the impairment test of goodwill and recorded
$61.6 million
goodwill impairment relating to its Oil and Gas Segment. The Company determined that the fair value of its goodwill for the Oil and Gas segment was less than its carrying value and recorded a
$61.6 million
impairment charge. The reduction in value of goodwill in the Oil and Gas segment was primarily driven by further deterioration of market conditions and the Company’s forecast did not indicate a timely recovery sufficient to support the carrying values of the goodwill.
Intangible asset impairment
The impairment of assets during the fourth quarter of 2018 was comprised of
$15.5 million
related to customer relationship, Non-compete agreements and Tradenames from the HNZ offshore acquisition completed in December 2017.
Aircraft and related inventory impairment
During the fourth quarter of 2018, we recognized an impairment of
$23.2 million
related to a value of aircraft impairment primarily driven by the decline in demand for a specific medium model. The demand for this model continued to decline and the Company’s forecast did not indicate a timely recovery sufficient to support the carrying values of these assets. In connection with the evaluation of our current inventory levels and result of changes in expected future utilization for certain Medium aircraft. We also recorded charges of approximately
$8.6 million
to write-down of certain spare parts within inventories to its net realizable value. These charges were recorded as a direct reduction in the value of spare parts inventories to record them at net realizable value. This charge was recorded in Direct expenses on the Consolidated Statement of Operations.
19. SUBSEQUENT EVENTS
Chapter 11 Cases
On March 14, 2019 (the “Petition Date”), the Company and its principal U.S. subsidiaries listed in Exhibit 99.1 hereto (collectively, the “Debtors”) filed voluntary petitions (the “Chapter 11 Cases”) in the United States Bankruptcy Court for the Northern District of Texas (the “Bankruptcy Court”) seeking relief under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”). The Debtors have requested joint administration of their Chapter 11 Cases under the caption In re: PHI, Inc., et al., Case No. 19-30923. See Note 1, Summary of Significant Accounting Policies - Chapter 11 Cases.
New Term Loan Agreement
As discussed in Note 8, Debt on March 13, 2019, we entered into the Term Loan Agreement. The full principal amount of the Term Loan is due March 11, 2023.
Acceleration of Certain Debt Obligations
As discussed in Note 8, Debt, the commencement of the Chapter 11 Cases constituted an event of default that accelerated the obligations under certain of our debt instruments. Any efforts to enforce payment of such financial obligations under such debt instruments are automatically stayed as a result of the filing of the Chapter 11 Cases.
Notification of NASDAQ Delisting
On March 15, 2019, the Nasdaq Stock Market (“Nasdaq”) notified us that, as a result of the filing of the Chapter 11 Cases and in accordance with applicable rules, Nasdaq has determined to delist the Company’s common stock from Nasdaq. The Company is considering whether to appeal this determination.