(13)

BUSINESS SEGMENTS AND GEOGRAPHIC AREAS

PHI is primarily a provider of helicopter services, including helicopter maintenance and repair services. The Company has used a combination of factors to identify its reportable segments as required by Accounting Standards Codification 280, “Segment Reporting.” The overriding determination of the Company’s segments is based on how the chief operating decision-maker of the Company, the Chairman of the Board and Chief Executive Officer, evaluates the Company’s results of operations. The underlying factors include customer bases, types of service, operational management, physical locations, and underlying economic characteristics of the types of work the Company performs.

A segment’s operating profit 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.

The Oil and Gas segment provides helicopter services to oil and gas customers operating in the Gulf of Mexico and two foreign countries. The Air Medical segment provides helicopter services to hospitals and medical programs in several U.S. states, one foreign country, 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 flight 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						Operating Revenues
	December 31,						Years Ended December 31,
	2015			2014			2015			2014			2013
Oil and Gas segment:
Customer A		6	%		7	%		15	%		17	%		15	%
Customer B		9	%		12	%		11	%		13	%		13	%

Air Medical &
Technical Services segments:
Customer C		15	%		20	%		9	%		10	%		17	%

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, 2015, 2014, and 2013. 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 the 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,
	2015			2014			2013
	(Thousands of dollars)
Segment operating revenues
Oil and Gas	$	459,611		$	516,909		$	489,055
Air Medical		312,775			300,212			277,884
Technical Services		31,842			19,149			89,561

Total operating revenues		804,228			836,270			856,500

Segment direct expenses
Oil and Gas⁽¹⁾		411,757			411,679			393,251
Air Medical		246,487			243,573			231,880
Technical Services		29,112			14,851			88,221

Total segment direct expenses		687,356			670,103			713,352

Segment selling, general and administrative expenses
Oil and Gas		6,511			4,615			4,059
Air Medical⁽²⁾		10,455			9,801			8,875
Technical Services		805			157			1

Total segment selling, general and administrative expenses		17,771			14,573			12,935

Total segment expenses		705,127			684,676			726,287

Net segment profit
Oil and Gas		41,343			100,615			91,745
Air Medical		55,833			46,838			37,129
Technical Services		1,925			4,141			1,339

Total		99,101			151,594			130,213

Other, net ⁽³⁾		1,872			(10,539	)		15,569
Unallocated selling, general and administrative expenses		(28,651	)		(28,597	)		(26,207	)
Interest expense		(29,066	)		(29,510	)		(29,434	)
Loss on debt extinguishment		—			(29,833	)		—

Earnings before income taxes	$	43,256		$	53,115		$	90,141

(1)	Includes equity in loss of unconsolidated affiliate.

(2)	Includes interest expense $0.3 million for the year ended December 31, 2013.

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


	Year Ended December 31,
	2015		2014		2013
	(Thousands of dollars)
Expenditures for long-lived assets
Oil and Gas	$	32,501	$	119,235	$	62,934
Air Medical		22,685		37,317		37,728
Corporate		1,389		1,153		1,928

Total	$	56,575	$	157,705	$	102,590


	Year Ended December 31,
	2015		2014		2013
	(Thousands of dollars)
Depreciation and Amortization
Oil and Gas	$	42,709	$	29,635	$	26,653
Air Medical		18,177		13,067		11,395
Technical Services		518		493		172
Corporate		10,214		7,653		4,628

Total	$	71,618	$	50,848	$	42,848

Assets
Oil and Gas	$	704,472	$	726,008
Air Medical		329,484		336,510
Technical Services		7,345		7,842
Corporate		389,031		305,720

Total	$	1,430,332	$	1,376,080

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,
	2015		2014		2013
	(Thousands of dollars)
Operating revenues:
United States	$	722,339	$	747,063	$	699,298
International		81,889		89,207		157,202

Total	$	804,228	$	836,270	$	856,500

Long-Lived Assets:
United States	$	773,939	$	846,377
International		109,590		31,441

Total	$	883,529	$	877,818

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. For additional information on the risks of operating internationally, see our risk factor disclosures contained in Item 1A of this Form 10-K.