November 07, 2011 at 16:36 PM EST
PHI, Inc. Announces Results for the Third Quarter Ended September 30, 2011

PHI, Inc. (The Nasdaq Global Market: PHII (voting) PHIIK (non-voting)) today reported financial results for the quarter ended September 30, 2011.

Oil and Gas segment revenues were $96.6 million for the quarter ended September 30, 2011, compared to $89.8 million for the quarter ended September 30, 2010, an increase of $6.8 million. Flight hours were 29,901 for the current quarter compared to 30,119 for the same quarter in the prior year. The increase in revenue is primarily due to increased heavy aircraft flight hours and revenues. Also contributing to the revenue increase was increased medium aircraft ad hoc flights in the month of September for hurricane evacuations in the Gulf of Mexico.

Air Medical segment revenues were $46.9 million for the quarter ended September 30, 2011, compared to $44.3 million for the quarter ended September 30, 2010, and increase of $2.6 million. The increase was primarily due to increased revenue of $2.5 million related to hospital based contracts. Revenues for the independent provider programs increased $0.1 million. Total patient transports were 4,881 for the quarter ended September 30, 2011, compared to 5,149 for the quarter ended September 30, 2010, a decrease of 268 transports.

Technical Services revenues were $2.1 million for the quarter ended September 30, 2011, compared to $1.6 million for the quarter ended September 30, 2010.

Consolidated operating revenues for the quarter ended September 30, 2011 were $145.6 million, compared to $135.7 million for the quarter ended September 30, 2010, an increase of $9.9 million. Flight hours for the quarter ended September 30, 2011 were 39,223 compared to 39,192 for the quarter ended September 30, 2010.

Net income for the quarter ended September 30, 2011 was $3.6 million, or $0.23 per diluted share, compared to a net loss of $2.4 million for the quarter ended September 30, 2010, or $0.16 per diluted share. Pre-tax earnings were $6.0 million for the quarter ended September 30, 2011, compared to a pre-tax loss of $1.4 million for the same period in 2010. Interest expense increased $2.8 million from $4.2 million in the third quarter of 2010 to $7.0 million in the third quarter of 2011, due to the issuance of the 8.625% Senior Notes. Included in the quarter ended September 30, 2010 was a pre-tax charge of $9.5 million related to the early redemption of our 7.125% Senior Notes and a $1.5 million charge to tax expense, primarily related to an increase in our valuation allowance for foreign tax credits.

Year to date operating revenues for September 30, 2011 were $401.2 million, compared to $396.9 million for the nine months ended September 30, 2010, an increase of $4.3 million. Oil and Gas operating revenues decreased $5.2 million for the nine months ended September 30, 2011, related primarily to decreased medium aircraft flight hours and revenues resulting mainly from the continuing impact on our business of the Deepwater Horizon incident. Operating revenues in the Air Medical segment increased $8.6 million primarily due to increased revenues for hospital based contracts of $5.6 million due to increased flight hours for those contracts. There was also an increase in revenues of $3.0 million in the independent provider programs primarily due to an improved payor mix and rate increases implemented in the prior year.

Flight hours for the nine months ended September 30, 2011 were 110,395 compared to 114,061 for the nine months ended September 30, 2010. Oil and Gas segment’s flight hours decreased 4,146 hours due to a decrease in deepwater drilling activity in the Gulf of Mexico. Air Medical segment flight hours increased 432 hours for the nine months ended September 30, 2011, due to increased flight activity in hospital based contracts. Individual patient transports in the Air Medical segment were 13,441 for the nine months ended September 30, 2011, compared to transports of 14,124 for the nine months ended September 30, 2010, a decrease of 683 transports.

Net earnings for the nine months ended September 30, 2011 was $1.6 million, or $0.11 per diluted share, compared to net earnings of $8.6 million for the nine months ended September 30, 2010, or $0.56 per diluted share. Pre-tax earnings were $2.7 million for the nine months ended September 30, 2011, compared to pre-tax earnings of $17.0 million for the same period in 2010. The decrease in earnings is due primarily to a decrease in Oil and Gas segment profit of $14.2 million. In addition, the decrease is due to an increase in unallocated selling, general and administrative expense of $4.7 million. Interest expense was $20.8 million for the first nine months of 2011, compared to $12.4 million for the first nine months of 2010, an increase of $8.4 million due to the issuance of the 8.625% Senior Notes. Earnings for the nine months ended September 30, 2010 included a credit of $4.3 million in direct expense related to termination of a manufacturer’s warranty program on certain aircraft, and a $9.5 million pre-tax charge related to the early redemption of our 7.125% Senior Notes and a $1.5 million charge to tax expense, primarily related to an increase in our valuation allowance for foreign tax credits.

PHI provides helicopter transportation and related services to a broad range of customers including the oil and gas industry, air medical industry and also provides third-party maintenance services to select customers. PHI Voting Common Stock and Non-Voting Common Stock are traded on The Nasdaq Global Market (symbols PHII and PHIIK).

PHI, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Thousands of dollars and shares, except per share data)

Quarter EndedNine Months Ended
September 30,September 30,
2011201020112010
Operating revenues, net $ 145,576 $ 135,669 $ 401,192 $ 396,875

Gain (loss) on dispositions of assets, net

(638 ) 98 (415 ) 221
Other, principally interest income 50 22 686 58
144,988 135,789 401,463 397,154
Expenses:
Direct expenses 123,622 115,812 352,271 336,120

Selling, general and administrative expenses

8,400 7,688 25,679 22,091
Interest expense 6,997 4,208 20,790 12,387
Loss on debt restructuring -- 9,521 -- 9,521
139,019 137,229 398,740 380,119
Earnings (loss) before income taxes 5,969 (1,440 ) 2,723 17,035
Income tax expense 2,387 1,003 1,089 8,393
Net earnings (loss) $ 3,582 $ (2,443 ) $ 1,634 $ 8,642

Weighted average shares outstanding:

Basic 15,312 15,312 15,312 15,312
Diluted 15,474 15,312 15,474 15,312
Net earnings (loss) per share:
Basic $ 0.23 $ (0.16 ) $ 0.11 $ 0.56
Diluted $ 0.23 $ (0.16 ) $ 0.11 $ 0.56

Summarized financial information concerning the Company’s reportable operating segments for the quarters and nine months ended September 30, 2011 and 2010 is as follows:

Quarter EndedNine Months Ended
September 30,September 30,
2011201020112010
(Thousands of dollars) (Thousands of dollars)
Segment operating revenues
Oil and Gas $ 96,611 $ 89,797 $ 264,292 $ 269,471
Air Medical 46,894 44,254 129,490 120,924
Technical Services 2,071 1,618 7,410 6,480
Total operating revenues 145,576 135,669 401,192 396,875
Segment direct expenses
Oil and Gas 82,196 75,679 231,573 221,777
Air Medical 39,673 38,689 115,093 108,700
Technical Services 1,753 1,444 5,605 5,643
Total direct expenses 123,622 115,812 352,271 336,120
Segment selling, general and administrative expenses
Oil and Gas 905 814 2,670 3,410
Air Medical 1,109 954 2,896 3,253
Technical Services 8 5 27 19
Total selling, general and administrative expenses 2,022 1,773 5,593 6,682
Total direct and selling, general and administrative expenses 125,644 117,585 357,864 342,802
Net segment profit
Oil and Gas 13,510 13,304 30,049 44,284
Air Medical 6,112 4,611 11,501 8,971
Technical Services 310 169 1,778 818
Total 19,932 18,084 43,328 54,073
Other, net (588 ) 120 271 279
Unallocated selling, general and administrative costs (6,378 ) (5,915 ) (20,086 ) (15,409 )
Interest expense (6,997 ) (4,208 ) (20,790 ) (12,387 )
Loss on debt restructuring -- (9,521 ) -- (9,521 )
Earnings before income taxes $ 5,969 $ (1,440 ) $ 2,723 $ 17,035

Operating Statistics

The following tables present certain non-financial operational statistics for the quarters and nine months ended September 30, 2011 and 2010:

Quarter EndedNine Months Ended
September 30,September 30,
2011201020112010
Flight hours:
Oil and Gas 29,901 30,119 84,151 88,297
Air Medical 9,322 9,044 25,682 25,250
Technical Services -- 29 562 514
Total 39,223 39,192 110,395 114,061
Air Medical Transports 4,881 5,149 13,441 14,124
September 30,
20112010
Aircraft operated at period end:
Oil and Gas 164 159
Air Medical 88 87
Technical Services 5 5
Total 257 251

Contacts:

PHI, Inc.
Michael J. McCann
Chief Financial Officer
337-235-2452
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