PHI, Inc. Announces Results for the Third Quarter Ended September 30, 2012

PHI, Inc. (The Nasdaq Global Market: PHII (voting) PHIIK (non-voting)) today reported financial results for the quarter ended September 30, 2012.

Oil and Gas segment revenues were $115.0 million for the three months ended September 30, 2012, compared to $96.6 million for the three months ended September 30, 2011, an increase of $18.4 million. Flight hours were 31,608 for the current quarter compared to 29,901 for the same quarter in the prior year. The increase in revenue is primarily due to increased medium and heavy aircraft flight hours and revenues, due to an increase in deepwater drilling activity compared to the same period in 2011 when there was no significant deepwater drilling activity due to the Deepwater Horizon incident.

Our Oil and Gas segment profit was $19.4 million for the quarter ended September 30, 2012, compared to $13.5 million for the quarter ended September 30, 2011. Operating margins (segment profit divided by operating revenues) were 17% for the three months ended September 30, 2012, compared to 14% for the three months ended September 30, 2011. The increase in segment profit of $5.9 million was primarily due to increased revenues of $18.4 million, partially offset by increased direct expenses of $12.4 million. The Oil and Gas segment revenues are primarily driven by contracted aircraft and flight hours. Costs are primarily fixed, and are driven by the number of aircraft, and a portion is variable which is driven by flight hours.

Air Medical segment revenues were $54.0 million for the three months ended September 30, 2012, compared to $46.9 million for the three months ended September 30, 2011, an increase of $7.1 million. The increase was primarily due to increased revenue of $6.0 million in the independent provider programs related to improved payor mix, rate increases implemented in 2011 and 2012, and increased patient transports. Operating revenues related to hospital based contracts increased $1.1 million due primarily to revenue recorded in the quarter related to mobilization of aircraft for the SRCA project. Total patient transports were 4,986 for the three months ended September 30, 2012, compared to 4,881 for the three months ended September 30, 2011.

Our Air Medical segment’s profit was $7.0 million for the quarter ended September 30, 2012, compared to $6.1 million for the quarter ended September 30, 2011. Operating margins were 13% for the three months ended September 30, 2012, and the three months ended September 30, 2011. The improvement in segment profit was primarily due to an increase in transports, increase in rates in 2011 and 2012, closure of unprofitable bases, and cost reductions. Earnings for the three months ended September 30, 2012 also included a net loss before tax of $2.8 million for the SRCA project due to operational delays in startup of the project. We expect the SRCA project to generate slightly positive earnings for 2012 due to revenue operations increasing throughout the fourth quarter for aircraft and contracted ground resources.

Technical Services revenues were $1.9 million for the three months ended September 30, 2012, compared to $2.1 million for the three months ended September 30, 2011. Direct expenses in our Technical Services segment were $1.8 million for the three months ended September 30, 2012, and for the three months ended September 30, 2011. Our Technical Services segment’s profit was $0.1 million for the three months ended September 30, 2012, compared to $0.3 million for the three months ended September 30, 2011.

Oil and Gas segment revenues were $312.3 million for the nine months ended September 30, 2012, compared to $264.3 million for the nine months ended September 30, 2011, an increase of $48.0 million. Flight hours were 88,155 for the nine months ended September 30, 2012, compared to 84,151 for the same period in 2011. The increase in Oil and Gas revenues was related primarily to increased medium and heavy aircraft flight hours and revenue due to increased deepwater drilling activity in the Gulf of Mexico. In 2011, there was no significant deepwater drilling activity following the Macondo incident in 2010.

Our Oil and Gas segment profit was $45.7 million for the nine months ended September 30, 2012, compared to $30.0 million for the nine months ended September 30, 2011. The $15.7 million increase was due to the increase in revenues of $48.0 million, partially offset by an increase in direct expenses of $32.2 million. Operating margins were 15% for the nine months ended September 30, 2012, compared to 11% for the nine months ended September 30, 2011. The increase in segment profit and margin is primarily due to increased medium and heavy aircraft revenue attributable to increased deepwater drilling activity in the Gulf of Mexico, as discussed above.

Air Medical segment revenues were $150.6 million for the nine months ended September 30, 2012, compared to $129.5 million for the nine months ended September 30, 2011, an increase of $21.1 million or 17%. Revenues in the independent provider programs increased $17.7 million, primarily due to increased patient transports, improvement in the payor mix, and rate increases implemented in the prior and current years. Revenues related to hospital based contracts increased $3.3 million, including revenue of $1.5 million recorded in the nine month period related to aircraft mobilization for the SRCA project. Patient transports were 13,954 for the nine months ended September 30, 2012, compared to 13,441 for the nine months ended September 30, 2011, an increase of 513 transports. Flight hours were 26,329 for the nine months ended September 30, 2012, compared to 25,682 for the nine months ended September 30, 2011.

Our Air Medical segment profit was $20.2 million for the nine months ended September 30, 2012, compared to $11.5 million for the nine months ended September 30, 2011. Operating margins were 13% and 9% for the nine months ended September 30, 2012 and 2011, respectively. The increase in segment profit was primarily due to an increase in transports, increase in rates in 2011 and 2012, closure of unprofitable bases, and cost reductions. Earnings for the nine months ended September 30, 2012 also included a net loss before tax of $3.7 million for the SRCA project due only to operational delays in startup of the project.

Technical Services revenues were $6.6 million for the nine months ended September 30, 2012, compared to $7.4 million for the nine months ended September 30, 2011. Direct expenses in our Technical Services segment were $5.4 million for the nine months ended September 30, 2012, compared to $5.6 million for the nine months ended September 30, 2011. Our Technical Services segment’s profit was $1.2 million for the nine months ended September 30, 2012, compared to $1.8 million for the nine months ended September 30, 2011. Operating margins were 19% for the nine months ended September 30, 2012, compared to 24% for the nine months ended September 30, 2011.

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)
(Unaudited)

Summarized financial information concerning our reportable operating segments for the quarters and nine months ended September 30, 2012 and 2011 is as follows:

Quarter EndedNine Months Ended
September 30,September 30,
2012201120122011
(Thousands of dollars) (Thousands of dollars)
Segment operating revenues
Oil and Gas $ 114,949 $ 96,611 $ 312,322 $ 264,292
Air Medical 54,004 46,894 150,557 129,490
Technical Services 1,904 2,071 6,583 7,410
Total operating revenues 170,857 145,576 469,462 401,192
Segment direct expenses
Oil and Gas 94,563 82,196 263,829 231,573
Air Medical 45,308 39,673 125,311 115,093
Technical Services 1,835 1,753 5,356 5,605
Total direct expenses 141,706 123,622 394,496 352,271
Segment selling, general and administrative expenses
Oil and Gas 1,002 905 2,810 2,670
Air Medical 1,698 1,109 5,073 2,896
Technical Services -- 8 1 27
Total selling, general and administrative expenses 2,700 2,022 7,884 5,593
Total direct and selling, general and administrative expenses 144,406 125,644 402,380 357,864
Net segment profit
Oil and Gas 19,384 13,510 45,683 30,049
Air Medical 6,998 6,112 20,173 11,501
Technical Services 69 310 1,226 1,778
Total 26,451 19,932 67,082 43,328
Other, net (439 ) (588 ) 614 271
Unallocated selling, general and administrative costs (7,084 ) (6,378 ) (20,408 ) (20,086 )
Interest expense (7,488 ) (6,997 ) (22,128 ) (20,790 )
Earnings before income taxes $ 11,440 $ 5,969 $ 25,160 $ 2,723

The following tables present certain non-financial operational statistics for the quarters and nine months ended September 30, 2012 and 2011:

Quarter EndedNine Months Ended
September 30,September 30,
2012201120122011
Operating revenues, net $ 170,857 $ 145,576 $ 469,462 $ 401,192
Expenses:
Direct expenses 141,706 123,622 394,496 352,271

Selling, general and administrative expenses

9,784 8,400 28,292 25,679
Loss on disposal of assets, net 701 638 11 415
152,191 132,660 422,799 378,365
Operating income 18,666 12,916 46,663 22,827
Interest expense 7,488 6,997 22,128 20,790
Other (income) expense, net (262 ) (50 ) (625 ) (686 )
7,226 6,947 21,503 20,104
Earnings before income taxes 11,440 5,969 25,160 2,723
Income tax expense 5,056 2,387 10,544 1,089
Net earnings $ 6,384 $ 3,582 $ 14,616 $ 1,634

Weighted average shares outstanding:

Basic 15,312 15,312 15,312 15,312
Diluted 15,522 15,474 15,481 15,474
Net earnings per share:
Basic $ 0.42 $ 0.23 $ 0.96 $ 0.11
Diluted $ 0.41 $ 0.23 $ 0.94 $ 0.11

Contacts:

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