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Segment Information | 9 Months Ended
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Sep. 30, 2017
Segment Reporting [Abstract] |
Segment Information | 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. A segment’s operating profit or loss is its operating revenues less its direct expenses and selling, general and administrative expenses. A portion of our total selling, general and administrative expenses is charged directly to each segment, and a small portion is allocated to that segment. Direct charges represent the vast majority of segment selling, general and administrative expenses. Allocated selling, general and administrative expenses are based primarily on total segment costs as a percentage of total operating costs. 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 September 30, 2017, we had available for use 126 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 payments based on the amount of 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 the Oil and Gas segment are primarily aircraft operation 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 amount is included in revenue. We typically operate under fixed-term contracts with our customers, a substantial portion of which are competitively bid. Our fixed-term contracts have terms of one to seven years (subject to provisions permitting early termination by the customers), with payment in U.S. dollars. For the quarters September 30, 2017 and 2016, respectively, approximately 50% and 49% of our total operating revenues were generated by our Oil and Gas segment, with approximately 89% and 92% of these revenues from fixed-term customer contracts. For the nine months ended September 30, 2017 and 2016, respectively, approximately 51% of our total operating revenues were generated by our Oil and Gas segment, with approximately 90% and 92% of these revenues from fixed-term customer contracts. The remaining 10% and 8% of these revenues were attributable to work in the spot market and ad hoc flights for contracted customers. 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. We provide Air Medical transportation services for hospitals and emergency service agencies throughout the U.S. As of September 30, 2017, our Air Medical segment operated approximately 105 aircraft in 18 states at 72 separate locations. 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 or renewed through competitive bidding. For the quarter ended September 30, 2017 and 2016, approximately 47% and 47% of our total operating revenues were generated by our Air Medical segment, respectively. For the nine months ended September 30, 2017 and 2016, approximately 45% 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:
|  | Quarter Ended September 30, |  | Nine Months Ended September 30,
|  | 2017 |  | 2016 |  | 2017 |  | 2016
Provision for contractual discounts |  | 65 | % |  | 65 | % |  | 66 | % |  | 67 | %
Provision for uncompensated care |  | 6 | % |  | 9 | % |  | 7 | % |  | 6 | %
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 September 30, |  | Nine Months Ended September 30,
|  | 2017 |  | 2016 |  | 2017 |  | 2016
Insurance |  | 73 | % |  | 75 | % |  | 72 | % |  | 72 | %
Medicare |  | 17 | % |  | 17 | % |  | 18 | % |  | 18 | %
Medicaid |  | 9 | % |  | 8 | % |  | 9 | % |  | 9 | %
Self-Pay |  | 1 | % |  | — | % |  | 1 | % |  | 1 | %
We also have a limited number of contracts with hospitals under which we receive a fixed fee component for aircraft availability and a variable fee component for flight time. Most of our contracts with hospitals contain provisions permitting early termination by the hospital, typically with 180 days’ notice for any reason and generally with penalty. Those contracts generated approximately 15% and 27% of the segment’s revenues for the quarters ended September 30, 2017 and 2016, respectively. For the nine months ended September 30, 2017 and 2016, these contracts generated approximately 17% and 29% of the segment's revenues, respectively. Technical Services Segment - Our Technical Services segment provides helicopter repair and overhaul services for flight operations customers that own their aircraft. Costs associated with these services are primarily labor, and customers are generally billed at a percentage above our service costs. We also periodically provide flight services to governmental customers under this segment, including our agreement to operate six aircraft for the National Science Foundation in Antarctica, typically in the first and fourth quarters each year. Also included in this segment are our proprietary Helipass operations, which provide software as a service to certain of our Oil and Gas customers for the purpose of passenger check-in and compliance verification. For the quarter ended September 30, 2017 and 2016, approximately 3% and 4%, respectively, of our total operating revenues were generated by our Technical Services segment. For the nine months ended September 30, 2017 and 2016, approximately 4%, respectively, of our total operating revenues were generated by our Technical Services segment. Summarized financial information concerning our reportable operating segments for the three and nine months ended September 30, 2017 and 2016 is as follows:
|  | Quarter Ended September 30, |  | Nine Months Ended September 30,
|  | 2017 |  | 2016 |  | 2017 |  | 2016
|  | (Thousands of dollars)
Segment operating revenues, net |  |  |  |  |  |  |  |
Oil and Gas |  | $ | 75,700 |  |  | $ | 77,551 |  |  | $ | 222,098 |  |  | $ | 249,173 |
Air Medical |  | 70,280 |  |  | 74,482 |  |  | 192,840 |  |  | 220,089 |
Technical Services |  | 4,187 |  |  | 6,060 |  |  | 16,271 |  |  | 19,983 |
Total operating revenues, net |  | 150,167 |  |  | 158,093 |  |  | 431,209 |  |  | 489,245 |
Segment direct expenses (1) |  |  |  |  |  |  |  |
Oil and Gas (2) |  | 81,467 |  |  | 82,832 |  |  | 236,878 |  |  | 262,148 |
Air Medical |  | 51,120 |  |  | 56,562 |  |  | 152,363 |  |  | 172,603 |
Technical Services |  | 3,761 |  |  | 5,742 |  |  | 12,565 |  |  | 15,432 |
Total segment direct expenses |  | 136,348 |  |  | 145,136 |  |  | 401,806 |  |  | 450,183 |
Segment selling, general and administrative expenses |  |  |  |  |  |  |  |
Oil and Gas |  | 1,148 |  |  | 1,705 |  |  | 4,501 |  |  | 4,838 |
Air Medical |  | 3,136 |  |  | 3,056 |  |  | 9,280 |  |  | 8,293 |
Technical Services |  | 338 |  |  | 266 |  |  | 1,032 |  |  | 763 |
Total segment selling, general and administrative expenses |  | 4,622 |  |  | 5,027 |  |  | 14,813 |  |  | 13,894 |
Total segment expenses |  | 140,970 |  |  | 150,163 |  |  | 416,619 |  |  | 464,077 |
Net segment (loss) profit |  |  |  |  |  |  |  |
Oil and Gas |  | (6,915 | ) |  | (6,986 | ) |  | (19,281 | ) |  | (17,813 | )
Air Medical |  | 16,024 |  |  | 14,864 |  |  | 31,197 |  |  | 39,193 |
Technical Services |  | 88 |  |  | 52 |  |  | 2,674 |  |  | 3,788 |
Total net segment profit |  | 9,197 |  |  | 7,930 |  |  | 14,590 |  |  | 25,168 |
Other, net (3) |  | 710 |  |  | 377 |  |  | 2,471 |  |  | 5,425 |
Unallocated selling, general and administrative costs (1) |  | (6,779 | ) |  | (8,354 | ) |  | (23,878 | ) |  | (22,938 | )
Interest expense |  | (8,027 | ) |  | (7,719 | ) |  | (24,305 | ) |  | (22,792 | )
(Loss) earnings before income taxes |  | $ | (4,899 | ) |  | $ | (7,766 | ) |  | $ | (31,122 | ) |  | $ | (15,137 | )
(1) | Included in direct expenses and unallocated selling, general, and administrative costs are the depreciation and amortization expense amounts below:
|  | Depreciation and Amortization Expense
|  | Quarter Ended September 30, |  | Nine Months Ended September 30,
|  | 2017 |  | 2016 |  | 2017 |  | 2016
|  | (Thousands of dollars)
Segment Direct Expense: |  |  |  |  |  |  |  |
Oil and Gas |  | $ | 9,615 |  |  | $ | 10,616 |  |  | $ | 29,301 |  |  | $ | 30,558 |
Air Medical |  | 4,885 |  |  | 5,267 |  |  | 15,581 |  |  | 14,654 |
Technical Services |  | 146 |  |  | 141 |  |  | 440 |  |  | 426 |
Total |  | $ | 14,646 |  |  | $ | 16,024 |  |  | $ | 45,322 |  |  | $ | 45,638 |
Unallocated SG&A |  | $ | 1,936 |  |  | $ | 2,269 |  |  | $ | 5,271 |  |  | $ | 7,416 |
(2) | Includes Equity in (earnings) of unconsolidated affiliates, net.
(3) | Consists of (gains) losses 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 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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