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Segment Information | 3 Months Ended
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Mar. 31, 2016
Segment Reporting [Abstract] |
Segment Information | 10. SEGMENT INFORMATION PHI is primarily a provider of helicopter transport services, including helicopter maintenance and repair services. We report our financial results through the three reportable segments further described below. Each segment’s operating profit is its operating revenues less its direct expenses and selling, general and administrative expenses. Each segment has a portion of our total selling, general and administrative expenses that is charged directly to the segment and a small portion that is allocated to that segment. Allocated selling, general and administrative expenses are based primarily on total segment direct expenses as a percentage of total direct expenses. Unallocated overhead consists primarily of corporate selling, general and administrative expenses that we do not allocate to the reportable segments. In January 2016, we offered a Voluntary Employee Retirement Package (“VERP”) to all pilots who had attained age 64. Fifteen employees accepted this VERP, resulting in severance costs of $1.6 million recorded in the first quarter of 2016. At March 31, 2016, $0.8 million of severance costs from these offerings remained unpaid. During the quarter ended March 31, 2016, we also offered a voluntary furlough program to our Oil and Gas pilots whereby pilots who elect to participate in the program will receive severance pay and may continue medical coverage at their current employee-paid premiums. Twenty-six pilots accepted the offer with a total severance cost of $0.4 million. Under the terms of the furlough agreement, we must, no later than twelve months from the date of furlough offer each furloughed employee a right to return to work. Oil and Gas Segment. Our Oil and Gas segment, headquartered in Lafayette, Louisiana, provides helicopter services primarily for the major integrated and independent oil and gas production companies transporting personnel or equipment to offshore platforms in the Gulf of Mexico. Our customers include Shell Oil Company, BP America Production Company, ExxonMobil Production Company, and ConocoPhillips Company, with whom we have worked for 30 or more years, and ENI Petroleum, with whom we have worked for more than 15 years. At March 31, 2016, we operated 154 aircraft in this segment. Operating revenue from our Oil and Gas segment is derived mainly from contracts that include a fixed monthly rate for a particular model of aircraft, plus a variable rate for flight time. A small portion of our Oil and Gas segment revenue is derived from providing services on an “ad hoc” basis. Operating costs for our Oil and Gas segment are primarily aircraft operations costs, including costs for pilots and maintenance personnel. Total fuel cost is included in direct expense and any reimbursement of a portion of these costs above a contracted per-gallon amount is included in revenue. For the quarters ended March 31, 2016 and 2015, approximately 54% and 59% of our total operating revenues were generated by our Oil and Gas segment. Air Medical Segment. The operations of our Air Medical segment are headquartered in Phoenix, Arizona, where we maintain significant separate facilities and administrative staff dedicated to this segment. As of March 31, 2016, 105 aircraft were assigned to our Air Medical segment. At such date, we operated approximately 100 aircraft domestically, providing air medical transportation services for hospitals and emergency service agencies in 19 states at 70 separate locations. We also provide air medical transportation services for a customer overseas. For our overseas program, we have deployed five aircraft at four locations, with four aircraft generating revenues as of March 31, 2016. Our Air Medical segment operates primarily under the independent provider model and, to a lesser extent, under the traditional provider model. Under the independent provider model, we have no fixed revenue stream and compete for transport referrals on a daily basis with other independent operators in the area. Under the traditional provider model, we contract directly with the customer to provide their transportation services, with the contracts typically awarded through competitive bidding. For the quarters ended March 31, 2016 and 2015, approximately 43% and 35% of our total operating revenues were generated by our Air Medical segment. 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. As further described in Note 3, 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 insurance, Medicaid, Medicare, and self-pay). Estimates regarding the payor mix and changes in reimbursement rates are the factors most subject to sensitivity and variability in calculating our allowances. We compute a historical payment analysis of accounts fully closed, by category. Provisions for contractual discounts and estimated uncompensated care for our Air Medical segment (expressed as a percentage of gross segment billings) were as follows:
|  | Revenue |
|  | Quarter Ended March 31, |
|  | 2016 |  |  | 2015 |
Gross Air Medical segment billings |  |  | 100 | % |  |  | 100 | %
Provision for contractual discounts |  |  | 71 | % |  |  | 74 | %
Provision for uncompensated care |  |  | 3 | % |  |  | 0 | %
These percentages are affected by various factors, including rate increases and changes in the number of transports by payor mix. Net reimbursement per transport from commercial payors generally increases when a rate increase is implemented. Net reimbursement from certain commercial payors, as well as Medicare and Medicaid, generally does not increase proportionately with rate increases. Net revenue attributable to Insurance, Medicare, Medicaid, and Self-Pay (expressed as a percentage of net Air Medical revenues) were as follows:
|  | Quarter Ended March 31, |
|  | 2016 |  |  | 2015 |
Insurance |  |  | 66 | % |  |  | 75 | %
Medicare |  |  | 19 | % |  |  | 17 | %
Medicaid |  |  | 15 | % |  |  | 8 | %
Self-Pay |  |  | 0 | % |  |  | 0 | %
We also have a limited number of contracts with hospitals under which we receive a fixed monthly rate for aircraft availability and an hourly rate for flight time. Those contracts generated approximately 31% and 42% of the segment’s revenues for the quarters ended March 31, 2016 and 2015, respectively. Technical Services Segment. Our Technical Services segment provides maintenance and repairs for our existing customers that own their aircraft. These services are generally labor intensive with higher operating margins as compared to other segments. Depending on when we commence and complete special projects for customers, our results for this segment can vary significantly from period to period, although these variances typically have a limited impact on our consolidated operating results. The Technical Services segment also conducts flight operations for the National Science Foundation in Antarctica, which are typically conducted in the first and fourth quarters each year. For the three month periods ended March 31, 2016 and 2015, approximately 3% and 6%, respectively, of our total operating revenues were generated by our Technical Services segment. Summarized financial information concerning our reportable operating segments for the quarters ended March 31, 2016 and 2015 is as follows:
|  | Quarter Ended March 31, |
|  | 2016 |  |  | 2015 |
|  | (Thousands of dollars) |
Segment operating revenues |  |  |  |  |  |  |  |
Oil and Gas |  | $ | 88,437 |  |  | $ | 120,396 |
Air Medical |  |  | 70,060 |  |  |  | 72,385 |
Technical Services |  |  | 5,519 |  |  |  | 11,416 |
Total operating revenues |  |  | 164,016 |  |  |  | 204,197 |
Segment direct expenses (1) |  |  |  |  |  |  |  |
Oil and Gas (2) |  |  | 91,916 |  |  |  | 100,331 |
Air Medical |  |  | 57,044 |  |  |  | 60,039 |
Technical Services |  |  | 3,594 |  |  |  | 8,905 |
Total segment direct expenses |  |  | 152,554 |  |  |  | 169,275 |
Segment selling, general and administrative expenses |  |  |  |  |  |  |  |
Oil and Gas |  |  | 1,528 |  |  |  | 1,159 |
Air Medical |  |  | 2,595 |  |  |  | 2,629 |
Technical Services |  |  | 224 |  |  |  | 114 |
Total selling, general and administrative expenses |  |  | 4,347 |  |  |  | 3,902 |
Total direct and selling, general and administrative expenses |  |  | 156,901 |  |  |  | 173,177 |
Net segment (loss) profit |  |  |  |  |  |  |  |
Oil and Gas |  |  | (5,007 | ) |  |  | 18,906 |
Air Medical |  |  | 10,421 |  |  |  | 9,717 |
Technical Services |  |  | 1,701 |  |  |  | 2,397 |
Total net segment profit |  |  | 7,115 |  |  |  | 31,020 |
Other, net (3) |  |  | 256 |  |  |  | 469 |
Unallocated selling, general and administrative costs (1) |  |  | (7,326 | ) |  |  | (7,335 | )
Interest expense |  |  | (7,533 | ) |  |  | (7,170 | )
(Loss) earnings before income taxes |  | $ | (7,488 | ) |  | $ | 16,984 |
(1) | Included in segment direct expenses and unallocated selling, general, and administrative costs are the depreciation and amortization expense amounts below:
|  | Depreciation and Amortization Expense |
|  | Quarter Ended March 31, |
|  | 2016 |  |  | 2015 |
Segment Direct Expense: |  |  |  |  |  |  |  |
Oil and Gas |  | $ | 9,918 |  |  | $ | 11,280 |
Air Medical |  |  | 4,256 |  |  |  | 4,097 |
Technical Services |  |  | 128 |  |  |  | 128 |
Total |  | $ | 14,302 |  |  | $ | 15,505 |
Unallocated SG&A |  | $ | 2,671 |  |  | $ | 2,646 |
(2) | Includes Equity in loss of unconsolidated affiliate.
(3) | Consists of gains on disposition of property and equipment and other income.

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 34 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8981-108599 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 41 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e9038-108599 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 33 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8971-108599 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 12 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8595-108599 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8380-108599 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8933-108599 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 26 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8844-108599 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 35 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8984-108599 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 40 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e9031-108599 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 42 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e9054-108599 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8538-108599 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 29 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8864-108599 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 31 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8924-108599 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8906-108599 + Details
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