(17)

CONDENSED CONSOLIDATING FINANCIAL INFORMATION – GUARANTOR SUBSIDIARIES

Our 5.25% Senior Notes are fully and unconditionally guaranteed on a joint and several, senior basis by all of our domestic subsidiaries. All of our domestic subsidiaries are 100% owned.

The following supplemental condensed financial information 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 Only”) and the guarantor subsidiaries. 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 these condensed consolidating financials.

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, are large, 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.

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEETS

(Thousands of dollars)


	December 31, 2015
	Parent
	Company			Guarantor
	Only (issuer)			Subsidiaries ⁽¹⁾			Eliminations			Consolidated
ASSETS
Current Assets:
Cash	$	46		$	2,361		$	—		$	2,407
Short-term investments		284,523			—			—			284,523
Accounts receivable – net		70,336			74,442			—			144,778
Intercompany receivable		—			90,943			(90,943	)		—
Inventories of spare parts – net		60,060			9,431			—			69,491
Prepaid expenses		7,162			1,789			—			8,951
Deferred income taxes		10,379			—			—			10,379
Income taxes receivable		1,002			(241	)		—			761

Total current assets		433,508			178,725			(90,943	)		521,290

Investment in subsidiaries		330,848			—			(330,848	)		—
Property and equipment, net		632,759			250,770			—			883,529
Restricted investments		15,336			—			—			15,336
Other assets		9,974			203			—			10,177

Total assets	$	1,422,425		$	429,698		$	(421,791	)	$	1,430,332

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	25,512		$	5,861		$	—		$	31,373
Accrued liabilities		29,138			15,621			—			44,759
Intercompany payable		90,943			—			(90,943	)		—

Total current liabilities		145,593			21,482			(90,943	)		76,132

Long-term debt		557,500			—			—			557,500
Deferred income taxes and other long-term liabilities		92,334			77,368			—			169,702
Shareholders’ Equity:
Common stock and paid-in capital		306,444			79,061			(79,061	)		306,444
Accumulated other comprehensive loss		(567	)		—			—			(567	)
Retained earnings		321,121			251,787			(251,787	)		321,121

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

Total liabilities and shareholders’ equity	$	1,422,425		$	429,698		$	(421,791	)	$	1,430,332

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


	December 31, 2014
	Parent
	Company			Guarantor
	Only (issuer)			Subsidiaries ⁽¹⁾		Eliminations			Consolidated
ASSETS
Current Assets:
Cash	$	51		$	6,219	$	—		$	6,270
Short-term investments		185,244			—		—			185,244
Accounts receivable – net		98,001			82,760		—			180,761
Intercompany receivable		—			95,399		(95,399	)		—
Inventories of spare parts – net		65,341			8,452		—			73,793
Prepaid expenses		7,610			1,704		—			9,314
Deferred income taxes		9,915			—		—			9,915
Income taxes receivable		1,068			159		—			1,227

Total current assets		367,230			194,693		(95,399	)		466,524

Investment in subsidiaries and others		358,080			—		(358,080	)		—
Property and equipment, net		638,437			239,381		—			877,818
Restricted investments		15,485			—		—			15,485
Other assets		16,055			198		—			16,253

Total assets	$	1,395,287		$	434,272	$	(453,479	)	$	1,376,080

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	22,578		$	5,122	$	—		$	27,700
Accrued and other current liabilities		34,477			18,335		—			52,812
Intercompany payable		95,270			—		(95,270	)		—

Total current liabilities		152,325			23,457		(95,270	)		80,512

Long-term debt		543,000			—		—			543,000
Deferred income taxes and other long-term liabilities		102,894			52,606		—			155,500
Shareholders’ Equity:
Common stock and paid-in capital		303,082			137,647		(137,647	)		303,082
Accumulated other comprehensive loss		(211	)		—		—			(211	)
Retained earnings		294,197			220,562		(220,562	)		294,197

Total shareholders’ equity		597,068			358,209		(358,209	)		597,068

Total liabilities and shareholders’ equity	$	1,395,287		$	434,272	$	(453,479	)	$	1,376,080

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

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(Thousands of dollars)


	For the year ended December 31, 2015
	Parent
	Company			Guarantor
	Only (issuer)			Subsidiaries ⁽¹⁾			Eliminations			Consolidated
Operating revenues, net	$	476,969		$	327,259		$	—		$	804,228

Expenses:
Direct expenses		426,239			260,829			(18	)		687,050
Selling, general, and administrative expenses		35,694			10,728			—			46,422

Total operating expenses		461,933			271,557			(18	)		733,472

Loss on disposition of assets, net		339			—			—			339
Equity in loss of unconsolidated affiliate		306			—			—			306

Operating income		14,391			55,702			18			70,111
Equity in net earnings of consolidated subsidiaries		(31,225	)		—			31,225			—
Interest expense		28,946			120			—			29,066
Other income, net		(2,222	)		(7	)		18			(2,211	)

		(4,501	)		113			31,243			26,855

Earnings before income taxes		18,992			55,589			(31,225	)		43,256
Income tax expense		(8,032	)		24,364			—			16,332

Net earnings	$	26,924		$	31,225		$	(31,225	)	$	26,924

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


	For the year ended December 31, 2014
	Parent
	Company			Guarantor
	Only (issuer)			Subsidiaries ⁽¹⁾			Eliminations			Consolidated
Operating revenues, net	$	504,180		$	332,090		$	—		$	836,270

Expenses:
Direct expenses		411,398			258,627			(18	)		670,007
Selling, general, and administrative expenses		32,985			10,186			—			43,171

Total operating expenses		444,383			268,813			(18	)		713,178

Loss on disposition of assets, net		848			—			—			848
Impairment of assets		10,508			—			—			10,508
Equity in loss of unconsolidated affiliate		96			—			—			96

Operating income		48,345			63,277			18			111,640

Equity in net earnings of consolidated subsidiaries		(38,740	)		—			38,740			—
Interest expense		29,510			—			—			29,510
Loss on debt extinguishment		29,833			—			—			29,833
Other (income) expense, net		(819	)		(17	)		18			(818	)

		19,784			(17	)		38,758			58,525

Earnings before income taxes		28,561			63,294			(38,740	)		53,115
Income tax (benefit) expense		(4,127	)		24,554			—			20,427

Net earnings	$	32,688		$	38,740		$	(38,740	)	$	32,688


	For the year ended December 31, 2013
	Parent
	Company			Guarantor
	Only (issuer)			Subsidiaries ⁽¹⁾			Eliminations			Consolidated
Operating revenues, net	$	564,445		$	292,055		$	—		$	856,500

Expenses:
Direct expenses		468,321			244,769			—			713,090
Selling, general, and administrative expenses		29,885			8,935			—			38,820
Management fees		(11,682	)		11,682			—			—

Total operating expenses		486,524			265,386			—			751,910

(Gain) on disposition of assets, net		(16,585	)		(19	)		—			(16,604	)
Impairment of assets		1,227			421			—			1,648
Equity in loss of unconsolidated affiliate		262			—			—			262

Operating income		93,017			26,267			—			119,284
Equity in net earnings of consolidated subsidiaries		(15,567	)		—			15,567			—
Interest expense		29,434			322			—			29,756
Other income, net		(613	)		—			—			(613	)

		13,254			322			15,567			29,143

Earnings before income taxes		79,763			25,945			(15,567	)		90,141
Income tax expense		20,807			10,378			—			31,185

Net earnings	$	58,956		$	15,567		$	(15,567	)	$	58,956

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

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME

(Thousands of dollars)


	For the year ended December 31, 2015
	Parent
	Company			Guarantor
	Only			Subsidiaries ⁽¹⁾		Eliminations			Consolidated
Net earnings	$	26,924		$	31,225	$	(31,225	)	$	26,924

Unrealized gain (loss) on short-term investments		(641	)		—		—			(641	)

Other unrealized gain (loss)		24			—		—			24

Changes in pension plan assets and benefit obligations		7			—		—			7

Tax impact		254			—		—			254

	$	26,568		$	31,225	$	(31,225	)	$	26,568


	For the year ended December 31, 2014
	Parent
	Company			Guarantor
	Only			Subsidiaries ⁽¹⁾		Eliminations			Consolidated
Net earnings	$	32,688		$	38,740	$	(38,740	)	$	32,688

Unrealized gain (loss) on short-term investments		(285	)		—		—			(285	)

Other unrealized gain (loss)		(24	)		—		—			(24	)

Changes in pension plan assets and benefit obligations		17			—		—			17

Tax impact		105			—		—			105

	$	32,501		$	38,740	$	(38,740	)	$	32,501


	For the year ended December 31, 2013
	Parent
	Company			Guarantor
	Only			Subsidiaries ⁽¹⁾		Eliminations			Consolidated
Net earnings	$	58,956		$	15,567	$	(15,567	)	$	58,956

Unrealized gain (loss) on short-term investments		44			—		—			44

Changes in pension plan assets and benefit obligations		(2	)		—		—			(2	)

Tax impact		(15	)		—		—			(15	)

	$	58,983		$	15,567	$	(15,567	)	$	58,983

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

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(Thousands of dollars)


	For the year ended December 31, 2015
	Parent
	Company			Guarantor
	Only (issuer)			Subsidiaries ⁽¹⁾			Eliminations		Consolidated
Net cash provided by operating activities	$	60,241		$	73,677		$	—	$	133,918

Investing activities:
Purchase of property and equipment		(57,123	)		—			—		(57,123	)
Proceeds from asset dispositions		5,236			—			—		5,236
Purchase of short-term investments		(608,649	)		—			—		(608,649	)
Proceeds from sale of short-term investments		505,966			—			—		505,966
Payments of deposits on aircraft		(1,273	)		—			—		(1,273	)
Refunds on deposits on aircraft		6,010			—			—		6,010

Net cash used in investing activities		(149,833	)		—			—		(149,833	)

Financing activities:
Repurchase of common stock		(2,448	)							(2,448	)
Proceeds on line of credit		232,660			—			—		232,660
Payments on line of credit		(218,160	)		—			—		(218,160	)
Due to/from affiliate, net		77,535			(77,535	)		—		—

Net cash provided by financing activities		89,587			(77,535	)		—		12,052

Decrease in cash		(5	)		(3,858	)		—		(3,863	)
Cash, beginning of year		51			6,219			—		6,270

Cash, end of year	$	46		$	2,361		$	—	$	2,407

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


	For the year ended December 31, 2014
	Parent
	Company			Guarantor
	Only (issuer)			Subsidiaries ⁽¹⁾			Eliminations		Consolidated
Net cash provided by operating activities	$	51,476		$	68,043		$	—	$	119,519

Investing activities:
Purchase of property and equipment		(157,690	)		—			—		(157,690	)
Proceeds from asset dispositions		10,266			—			—		10,266
Purchase of short-term investments		(465,094	)		—			—		(465,094	)
Proceeds from sale of short-term investments		363,110			—			—		363,110
Refund of deposits on aircraft		11,506			—			—		11,506
Payments of deposits on aircraft		(6,948	)		—			—		(6,948	)
Loan to unconsolidated affiliate		(200	)		—			—		(200	)

Net cash used in investing activities		(245,050	)		—			—		(245,050	)

Financing activities:
Proceeds from issuance of Senior Notes due 2019		500,000			—			—		500,000
Repayment of Senior Notes due 2018		(300,000	)		—			—		(300,000	)
Premium and cost to retire debt early		(26,749	)		—			—		(26,749	)
Debt issuance costs		(6,232	)		—			—		(6,232	)
Proceeds from line of credit		264,253			—			—		264,253
Payments on line of credit		(300,253	)		—			—		(300,253	)
Repurchase of common stock		(152	)		—			—		(152	)
Due to/from affiliate, net		62,706			(62,706	)		—		—

Net cash provided by financing activities		193,573			(62,706	)		—		130,867

(Decrease) increase in cash		(1	)		5,337			—		5,336
Cash, beginning of year		52			882			—		934

Cash, end of year	$	51		$	6,219		$	—	$	6,270

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


	For the year ended December 31, 2013
	Parent
	Company			Guarantor
	Only (issuer)			Subsidiaries^(1) (2)			Eliminations		Consolidated
Net cash provided by operating activities	$	82,660		$	22,436		$	—	$	105,096

Investing activities:
Purchase of property and equipment		(102,726	)		—			—		(102,726	)
Proceeds from asset dispositions		42,197			—			—		42,197
Purchase of short-term investments		(375,503	)		—			—		(375,503	)
Proceeds from sale of short-term investments		338,970			—			—		338,970
Payments of deposits on aircraft		(9,318	)		—			—		(9,318	)
Refunds on deposits on aircraft		8,161			—			—		8,161

Net cash used in investing activities		(98,219	)		—			—		(98,219	)

Financing activities:
Repurchase of common stock		(1,037	)							(1,037	)
Proceeds on line of credit		164,771			—			—		164,771
Payments on line of credit		(172,526	)		—			—		(172,526	)
Due to/from affiliate, net		23,851			(23,851	)		—		—

Net cash provided by financing activities		15,059			(23,851	)		—		(8,792	)

Decrease in cash		(500	)		(1,415	)		—		(1,915	)
Cash, beginning of year		552			2,297			—		2,849

Cash, end of year	$	52		$	882		$	—	$	934

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

(2)	Cash flows between the Parent Company and guarantor subsidiaries related to the Company’s centralized cash management activities in 2013 have been adjusted to show the effects on net cash provided by operating and financing activities.