13. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

As discussed further in Note 5, on March 17, 2014, PHI, Inc. issued $500 million of 5.25% Senior Notes due 2019 that are fully and unconditionally guaranteed on a joint and several, senior basis by all of our 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 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 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, 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)

(Unaudited)


	March 31, 2016
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾			Eliminations			Consolidated
ASSETS
Current Assets:
Cash	$	123		$	6,413		$	—		$	6,536
Short-term investments		286,139			—			—			286,139
Accounts receivable – net		69,795			81,593			—			151,388
Intercompany receivable		—			50,649			(50,649	)		—
Inventories of spare parts – net		60,998			9,183			—			70,181
Prepaid expenses		6,191			2,636			—			8,827
Deferred income taxes		10,379			—			—			10,379
Income taxes receivable		985			(242	)		—			743

Total current assets		434,610			150,232			(50,649	)		534,193
Investment in subsidiaries		336,033			—			(336,033	)		—
Property and equipment – net		627,168			281,246			—			908,414
Restricted investments		15,336			—			—			15,336
Other assets		5,078			1,252			—			6,330

Total assets	$	1,418,225		$	432,730		$	(386,682	)	$	1,464,273

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	55,561		$	6,059		$	—		$	61,620
Accrued and other current liabilities		18,594			9,460			—			28,054
Intercompany payable		50,649			—			(50,649	)		—

Total current liabilities		124,804			15,519			(50,649	)		89,674
Long-term debt:
Revolving credit facility		87,700			—			—			87,700
Senior Notes dated March 17, 2014, net of debt issuance costs of $3,687		496,313			—			—			496,313
Deferred income taxes and other long-term liabilities		89,871			81,178			—			171,049
Shareholders’ Equity:
Common stock and paid-in capital		307,438			79,191			(79,191	)		307,438
Accumulated other comprehensive loss		(90	)		—			—			(90	)
Retained earnings		312,189			256,842			(256,842	)		312,189

Total shareholders’ equity		619,537			336,033			(336,033	)		619,537

Total liabilities and shareholders’ equity	$	1,418,225		$	432,730		$	(386,682	)	$	1,464,273

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

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEETS

(Thousands of dollars)


	December 31, 2015
	Parent Company Only (issuer)			Guarantor 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		5,040			203			—			5,243

Total assets	$	1,417,491		$	429,698		$	(421,791	)	$	1,425,398

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:
Revolving credit facility		57,500			—			—			57,500
Senior Notes dated March 17, 2014, net of debt issuance costs of $4,934		495,066			—			—			495,066
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	$	1,417,491		$	429,698		$	(421,791	)	$	1,425,398

(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)

(Unaudited)


	For the quarter ended March 31, 2016
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾			Eliminations			Consolidated
Operating revenues, net	$	91,869		$	72,147		$	—		$	164,016
Expenses:
Direct expenses		92,037			60,517			—			152,554
Selling, general and administrative Expenses		9,044			2,802			(173	)		11,673

Total operating expenses		101,081			63,319			(173	)		164,227
Loss on disposal of assets, net		359			—			—			359

Operating income		(9,571	)		8,828			173			(570	)
Equity in net income of consolidated subsidiaries		(5,054	)		—			5,054			—
Interest expense		7,513			20			—			7,533
Other income, net		(786	)		(2	)		173			(615	)

		1,673			18			5,227			6,918

(Loss) earnings before income taxes		(11,244	)		8,810			(5,054	)		(7,488	)
Income tax (benefit) expense		(2,312	)		3,756			—			1,444

Net (loss) earnings	$	(8,932	)	$	5,054		$	(5,054	)	$	(8,932	)


	For the quarter ended March 31, 2015
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾			Eliminations			Consolidated
Operating revenues, net	$	128,658		$	75,539		$	—		$	204,197
Expenses:
Direct expenses		106,481			62,730			(4	)		169,207
Selling, general and administrative expenses		8,508			2,729			—			11,237

Total operating expenses		114,989			65,459			(4	)		180,444
Gain on disposal of assets, net		(7	)		—			—			(7	)
Equity in loss of unconsolidated affiliate		68			—			—			68

Operating income		13,608			10,080			4			23,692
Equity in net income of consolidated subsidiaries		(6,131	)		—			6,131			—
Interest expense		7,170			—			—			7,170
Other income, net		(462	)		(4	)		4			(462	)

		577			(4	)		6,135			6,708

Earnings before income taxes		13,031			10,084			(6,131	)		16,984
Income tax expense		2,668			3,953			—			6,621

Net earnings	$	10,363		$	6,131		$	(6,131	)	$	10,363

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

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Thousands of dollars)

(Unaudited)


	For the quarter ended March 31, 2016
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾		Eliminations			Consolidated
Net loss	$	(8,932	)	$	5,054	$	(5,054	)	$	(8,932	)
Unrealized gain on short-term investments		807			—		—			807
Changes in pension plan asset and benefit obligations		1			—		—			1
Tax effect of preceding gains, losses or changes		(332	)		—		—			(332	)

	$	(8,456	)	$	5,054	$	(5,054	)	$	(8,456	)


	For the quarter ended March 31, 2015
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾		Eliminations			Consolidated
Net earnings	$	10,363		$	6,131	$	(6,131	)	$	10,363
Unrealized gain on short-term investments		139			—		—			139
Other unrealized gain		24			—		—			24
Tax effect of preceding gains, losses or changes		(55	)		—		—			(55	)

	$	10,471		$	6,131	$	(6,131	)	$	10,471

PHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(Thousands of dollars)

(Unaudited)


	For the three months ended March 31, 2016
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾			Eliminations		Consolidated
Net cash used in operating activities	$	(13,795	)	$	(2,548	)	$	—	$	(16,343	)
Investing activities:
Purchase of property and equipment		(8,519	)		—			—		(8,519	)
Proceeds from asset dispositions		850			—			—		850
Purchase of short-term investments		(77,677	)		—			—		(77,677	)
Proceeds from sale of short-term investments		76,184			—			—		76,184
Payments of deposits on aircraft		(66	)		—			—		(66	)

Net cash used in investing activities		(9,228	)		—			—		(9,228	)

Financing activities:
Proceeds from line of credit		83,500			—			—		83,500
Payments on line of credit		(53,300	)		—			—		(53,300	)
Repurchase of common stock		(500	)		—			—		(500	)
Due to/from affiliate, net		(6,600	)		6,600			—		—

Net cash provided by financing activities		23,100			6,600			—		29,700

Increase in cash		77			4,052			—		4,129
Cash, beginning of period		46			2,361			—		2,407

Cash, end of period	$	123		$	6,413		$	—	$	6,536


	For the three months ended March 31, 2015
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾			Eliminations		Consolidated
Net cash provided by operating activities	$	4,637		$	25,281		$	—	$	29,918
Investing activities:
Purchase of property and equipment		(22,115	)		—			—		(22,115	)
Purchase of short-term investments		(190,243	)		—			—		(190,243	)
Proceeds from sale of short-term investments		185,426			—			—		185,426
Payments of deposits on aircraft		(66	)		—			—		(66	)

Net cash used in investing activities		(26,998	)		—			—		(26,998	)

Financing activities:
Proceeds from line of credit		77,740			—			—		77,740
Payments on line of credit		(81,100	)		—			—		(81,100	)
Repurchase of common stock		(2,207	)							(2,207	)
Due to/from affiliate, net		27,928			(27,928	)		—		—

Net cash provided by (used in) financing activities		22,361			(27,928	)		—		(5,567	)

Decrease in cash		—			(2,647	)		—		(2,647	)
Cash, beginning of period		51			6,219			—		6,270

Cash, end of period	$	51		$	3,572		$	—	$	3,623

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