Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes: x No: ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes: x No: ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes: ¨ No: x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


	June 30, 2015			December 31, 2014			March 31, 2016			December 31, 2015
ASSETS
Current Assets:
Cash	$	3,659		$	6,270		$	6,536		$	2,407
Short-term investments		217,071			185,244			286,139			284,523
Accounts receivable – net
Trade		170,693			178,833			142,738			138,309
Other		1,830			1,928			8,650			6,469
Inventories of spare parts – net		70,320			73,793			70,181			69,491
Prepaid expenses		11,836			9,314			8,827			8,951
Deferred income taxes		9,915			9,915			10,379			10,379
Income taxes receivable		1,227			1,227			743			761

Total current assets		486,551			466,524			534,193			521,290

Property and equipment – net		911,112			877,818			908,414			883,529
Restricted investments		15,336			15,485			15,336			15,336
Other assets		14,852			16,253			6,330			5,243

Total assets	$	1,427,851		$	1,376,080		$	1,464,273		$	1,425,398

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	63,134		$	27,700		$	61,620		$	31,373
Accrued and other current liabilities		48,550			52,812			28,054			44,759

Total current liabilities		111,684			80,512			89,674			76,132

Long-term debt		535,500			543,000
Long-term debt:
Revolving credit facility								87,700			57,500
Senior Notes dated March 17, 2014, net of debt issuance costs of $3,687 and $4,934, respectively								496,313			495,066
Deferred income taxes		150,588			140,532			154,904			153,645
Other long-term liabilities		15,159			14,968			16,145			16,057

Commitments and contingencies (Note 9)

Shareholders’ Equity:
Voting common stock – par value of $0.10; 12,500,000 shares authorized, 2,905,757 shares issued and outstanding		291			291			291			291
Non-voting common stock – par value of $0.10; 25,000,000 shares authorized, 12,676,673 and 12,576,916 issued and outstanding at June 30, 2015 and December 31, 2014, respectively		1,268			1,258
Non-voting common stock – par value of $0.10; 25,000,000 shares authorized, 12,771,550 and 12,685,725 issued and outstanding at March 31, 2016 and December 31, 2015, respectively								1,278			1,269
Additional paid-in capital		302,796			301,533			305,869			304,884
Treasury stock, at cost – 8,018 shares		(252	)		—
Accumulated other comprehensive loss		(197	)		(211	)		(90	)		(567	)
Retained earnings		311,014			294,197			312,189			321,121

Total shareholders’ equity		614,920			597,068			619,537			626,998

Total liabilities and shareholders’ equity	$	1,427,851		$	1,376,080		$	1,464,273		$	1,425,398

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


	Quarter Ended June 30,						Six Months Ended June 30,						Quarter Ended March 31,
	2015			2014			2015			2014			2016			2015
Operating revenues, net	$	198,547		$	212,145		$	402,744		$	409,216		$	164,016		$	204,197

Expenses:
Direct expenses		168,828			170,357			338,035			329,010			152,554			169,207
Selling, general and administrative expenses		12,047			11,660			23,284			20,988			11,673			11,237

Total operating expenses		180,875			182,017			361,319			349,998			164,227			180,444
Loss (gain) on disposal of assets														359			(7	)
Equity in loss (income) of unconsolidated affiliate														—			68

(Gain) loss on disposal of assets		(66	)		242			(73	)		1,315
Equity in loss of unconsolidated affiliate		106			65			174			106

Operating income		17,632			29,821			41,324			57,797

Operating (loss) income														(570	)		23,692
Interest expense		7,155			7,673			14,325			15,037			7,533			7,170
Loss on debt extinguishment		—			617			—			29,833
Other income, net		(567	)		(169	)		(1,029	)		(260	)
Other income – net														(615	)		(462	)

		6,588			8,121			13,296			44,610			6,918			6,708

Earnings before income taxes		11,044			21,700			28,028			13,187
(Loss) earnings before income taxes														(7,488	)		16,984
Income tax expense		4,590			8,332			11,211			5,140			1,444			6,621

Net earnings	$	6,454		$	13,368		$	16,817		$	8,047
Net (loss) earnings													$	(8,932	)	$	10,363

Weighted average shares outstanding:
Basic		15,574			15,482			15,574			15,482			15,600			15,579
Diluted		15,690			15,696			15,679			15,595			15,600			15,662

Net earnings per share:
Net (loss) earnings per share:
Basic	$	0.41		$	0.86		$	1.08		$	0.52		$	(0.57	)	$	0.67
Diluted	$	0.41		$	0.85		$	1.07		$	0.52		$	(0.57	)	$	0.66

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


	Voting				Non-Voting					Additional			Accumulated Other Com-					Total Share-			Voting Common Stock				Non-Voting Common Stock						Additional Paid-in Capital				Treasury Stock				Accumulated Other Comprehensive Income (Loss)				Retained Earnings			Total Share- Holders’ Equity
	Common Stock				Common Stock					Paid-in			prehensive			Retained		Holders’			Shares		Amount		Shares			Amount							Treasury Stock								Retained Earnings			Total Share- Holders’ Equity
	Shares		Amount		Shares			Amount		Capital			Income (Loss)			Earnings		Equity
Balance at December 31, 2013		2,906	$	291		12,568		$	1,257	$	296,932		$	(24	)	$	261,509	$	559,965

Balance at December 31, 2014																						2,906	$	291		12,576		$	1,258		Additional Paid-in Capital			$	301,533			$	—			$	(211	)	$	294,197			$	597,068
Net earnings		—		—		—			—		—			—			8,047		8,047			—		—		—			—			—				—				—				10,363			10,363
Unrealized gain on short-term investments		—		—		—			—		—			24			—		24			—		—		—			—			—				—				85				—			85
Changes in pension plan assets and benefit obligation		—		—		—			—		—			6			—		6
Amortization of unearnedstock-based compensation		—		—		—			—		1,729			—			—		1,729			—		—		—			—			1,719				—				—				—			1,719
Issuance of non-voting common stock (upon vesting of restricted stock units)		—		—		11			1		—			—			—		1			—		—		164			16			—				—				—				—			16
Cancellation of restricted non-voting stock units for tax withholdings on vested shares		—		—		(4	)		—		(176	)		—			—		(176	)		—		—		(66	)		(7	)		(2,082	)			—				—				—			(2,089	)
Purchase of treasury stock																						—		—		—			—			—				(135	)			—				—			(135	)
Other																						—		—		—			—			—				—				24				—			24

Balance at June 30, 2014		2,906	$	291		12,575		$	1,258	$	298,845		$	6		$	269,556	$	569,596
Balance at March 31, 2015																						2,906	$	291		12,674		$	1,267		$	301,170			$	(135	)		$	(102	)		$	304,560		$	607,051

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


	Six Months Ended June 30,						Three Months Ended March 31,
	2015			2014			2016			2015
Operating activities:
Net earnings	$	16,817		$	8,047
Net (loss) earnings							$	(8,932	)	$	10,363
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		36,511			23,819			16,973			18,151
Deferred income taxes		10,063			2,597			955			6,279
(Gain) loss on asset dispositions		(73	)		1,315
Loss (gain) on asset dispositions								359			(7	)
Equity in loss of unconsolidated affiliate		174			106			—			68
Loss on debt extinguishment		—			29,833
Inventory valuation reserves		(254	)		—			2,435			562
Changes in operating assets and liabilities		6,070			(20,421	)		(28,133	)		(5,498	)

Net cash provided by operating activities		69,308			45,296
Net cash (used in) provided by operating activities								(16,343	)		29,918

Investing activities:
Purchase of property and equipment		(29,502	)		(66,887	)		(8,519	)		(22,115	)
Proceeds from asset dispositions		567			7,170			850			—
Purchase of short-term investments		(290,469	)		(233,606	)		(77,677	)		(190,243	)
Proceeds from sale of short-term investments		257,454			182,336			76,184			185,426
Refund on deposits on aircraft		—			6,473
Payments of deposits on aircraft		(131	)		(6,837	)
Other		—			(200	)
Payment of deposits on aircraft								(66	)		(66	)

Net cash used in investing activities		(62,081	)		(111,551	)		(9,228	)		(26,998	)

Financing activities:
Proceeds from issuance of Senior Notes due 2019		—			500,000
Premium and costs to retire debt early		—			(26,749	)
Repayment of Senior Notes due 2018		—			(300,000	)
Debt issuance costs		—			(6,137	)
Proceeds from line of credit		119,740			95,500			83,500			77,740
Payments on line of credit		(127,240	)		(174,500	)		(53,300	)		(81,100	)
Repurchase of common stock		(2,338	)		(176	)		(500	)		(2,207	)

Net cash (used in) provided by financing activities		(9,838	)		87,938
Net cash provided by financing activities								29,700			(5,567	)

(Decrease) increase in cash		(2,611	)		21,683
Increase (decrease) in cash								4,129			(2,647	)
Cash, beginning of period		6,270			934			2,407			6,270

Cash, end of period	$	3,659		$	22,617		$	6,536		$	3,623

Supplemental Disclosures Cash Flow Information
Cash paid during the period for:
Interest	$	13,696		$	11,749		$	13,691		$	13,453

Income taxes	$	3,061		$	9,731		$	—		$	3,061

Noncash investing activities:
Other current liabilities and accrued payables related to purchase of property and equipment	$	27,757		$	94		$	29,302		$	28,994

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

The accompanying unaudited condensed consolidated financial statements include the accounts of PHI, Inc. and its subsidiaries (“PHI” or the “Company” or “we” or “our”). In the opinion of management, these condensed consolidated financial statements reflect all adjustments, consisting of only normal, recurring adjustments, necessary to present fairly the financial results for the interim periods presented. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2014~~2015 and the accompanying notes.

~~The Company’s~~Our financial results, particularly as they relate to ~~the Company’s~~our Oil and Gas segment, are influenced by seasonal fluctuations as discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2014.~~2015. For this and other reasons, the results of operations for interim periods are not necessarily indicative of the operating results that may be expected for a full fiscal year.

New Accounting ~~Policies -~~Pronouncements –In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ~~No.~~ 2014-09,Revenue from Contracts with Customers, which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most current revenue recognition guidance. The standard, isoriginally effective for public entities for annual and interim periods beginning after December 15, ~~2016. However, the FASB~~2016, has ~~decided to defer the effective date of this new revenue standard to reporting~~been deferred for annual and interim periods beginning after December ~~31,~~15, 2017. Early adoption will be permitted as of the original effective date. The effects of this standard on our financial position, results of operations and cash flows are not yet known.

In ~~April 2015,~~August 2014, the FASB issued ASU ~~No. 2015-03,~~2014-15~~Simplifying the~~ Presentation of ~~Debt Issuance Costs.~~ ~~This ASU requires that debt issuance costs related~~Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to ~~a recognized debt liability be presented on the balance sheet~~Continue as a ~~direct deduction from~~Going Concern. ASU 2014-15 requires management to assess the ~~carrying amount of the debt liability, similar~~entity’s ability to ~~debt discounts. This pronouncement~~continue as a going concern and to provide related disclosures in certain circumstances. ASU 2014-15 is effective for ~~fiscal years,~~annual and interim periods beginning after December 15, ~~2015. We currently recognize debt issuance costs on our balance sheet in Other assets. The balance at June 30, 2015 was $4.6 million.~~2016. We do not believe ~~adoption~~that the impact of the implementation of this new guidance on our consolidated financial statements and disclosures will be significant.

In November 2015, the FASB issued ASU 2015-17,Balance Sheet Classification of Deferred Taxes, which amends existing guidance on income taxes to require the classification of all deferred tax assets and liabilities as non-current on the balance sheet. We are required to adopt this ASU no later than January 1, 2018, with early adoption permitted, and the guidance may be applied either prospectively or retrospectively. We do not expect this ASU to have a ~~significant~~material impact on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02,Leases, which replaces the existing guidance on leasing transactions in ASC 840 to require recognition of the assets and liabilities for the rights and obligations created by those leases on the balance sheet. We are required to adopt this ASU for fiscal years after December 31, 2018, with early adoption permitted. The effects of this standard on our financial position, results of operations, and cash flows are not yet known.

In March 2016, the FASB issued ASU 2016-09,Compensation – Stock Compensation (Topic 718); Improvements to Employee Share-Based Payment Accounting. The ASU includes multiple provisions intended to simplify various aspects of the accounting for share-based payments. The ASU is effective for public companies in annual periods beginning after December 15, 2016, and interim periods within those years. The effects of this standard on our financial position, results of operations, and cash flows are not yet known.

We classify all of our short-term investments as available-for-sale. We carry these at fair value and report unrealized gains and losses, net of taxes, in Accumulated other comprehensive loss (income), which is a separate component of shareholders’ equity in our Condensed Consolidated Balance Sheets. These unrealized gains and losses are also reflected in our Condensed Consolidated Statements of Comprehensive Income and Condensed Consolidated Statements of Shareholders’ Equity. ~~Cost,~~We determine cost, gains, and losses ~~are determined~~ using the specific identification method.


	Cost Basis		Unrealized Gains		Unrealized Losses			Fair Value
	(Thousands of dollars)
Investments:
Money market mutual funds	$	17,877	$	—	$	—		$	17,877
Commercial paper		5,994		1		—			5,995
U.S. Government agencies		27,301		7		(6	)		27,302
Corporate bonds and notes		250,399		94		(192	)		250,301

Subtotal		301,571		102		(198	)		301,475
Deferred compensation plan assets included in other assets		2,334		—		—			2,334

Total	$	303,905	$	102	$	(198	)	$	303,809


	Cost Basis		Unrealized Gains		Unrealized Losses			Fair Value		Cost Basis			Unrealized Gains		Unrealized Losses			Fair Value
	(Thousands of dollars)									(Thousands of dollars)
Investments:
Money market mutual funds	$	68,612	$	—	$	—		$	68,612	$	18,181		$	—	$	—		$	18,181
Municipal bonds and notes		1,500		2		—			1,502
Commercial paper											5,986			—		(5	)		5,981
U.S. Government agencies											11,499	��		—		(30	)		11,469
Corporate bonds and notes		130,864		19		(268	)		130,615		265,069			—		(841	)		264,228

Subtotal		200,976		21		(268	)		200,729		300,735			—		(876	)		299,859

Deferred compensation plan assets included in other assets		2,386		—		—			2,386		2,294			—		—			2,294

Total	$	203,362	$	21	$	(268	)	$	203,115	$	303,029		$	—	$	(876	)	$	302,153

At ~~June 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, we classified $15.3 million ~~and $15.5 million, respectively,~~ of our aggregate investments as long-term investments and recorded them in our Condensed Consolidated Balance Sheets as Restricted investments, as they are securing outstanding letters of credit with maturities beyond one year.

The following table presents the cost and fair value of our debt investments based on maturities as of:


	June 30, 2015				December 31, 2014				March 31, 2016				December 31, 2015
	Amortized Costs		Fair Value		Amortized Costs		Fair Value		Amortized Costs		Fair Value		Amortized Costs		Fair Value
	(Thousands of dollars)								(Thousands of dollars)
Due in one year or less	$	96,198	$	96,152	$	70,180	$	70,169	$	148,590	$	148,516	$	152,444	$	152,212
Due within two years		101,066		100,848		62,184		61,948		135,104		135,082		130,110		129,466

Total	$	197,264	$	197,000	$	132,364	$	132,117	$	283,694	$	283,598	$	282,554	$	281,678

The following table presents the average coupon rate percentage and the average days to maturity of our debt investments as of:


	June 30, 2015				December 31, 2014				March 31, 2016				December 31, 2015
	Average Coupon Rate (%)		Average Days To Maturity		Average Coupon Rate (%)		Average Days To Maturity		Average Coupon Rate (%)		Average Days To Maturity		Average Coupon Rate (%)		Average Days To Maturity
Commercial paper										0.553		63		0.553		154
U.S. Government agencies		0.823		631		—		—		0.985		602		0.865		599
Municipal bonds and notes		—		—		0.528		134
Corporate bonds and notes		1.802		353		1.828		348		1.727		328		1.757		331

The following table presents the fair value and unrealized losses related to our investments that have been in a continuous unrealized loss position for less than twelve months as ~~of June 30,~~of:


	March 31, 2016					December 31, 2015
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Thousands of dollars)
Commercial paper	$	0	$	0		$	5,981	$	(5	)
U.S. Government agencies		11,996		(6	)		8,969		(30	)
Corporate bonds and notes		134,298		(150	)		232,347		(793	)

Total	$	146,294	$	(156	)	$	247,297	$	(828	)

The following table presents the fair value and unrealized losses related to our investments that have been in a continuous unrealized loss position for more than twelve months as ~~of June 30,~~of:


	2015					2014				March 31, 2016					December 31, 2015
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Thousands of dollars)									(Thousands of dollars)
Corporate bonds and notes	$	9,241	$	(7	)	$	—	$	—	$	47,783	$	(42	)	$	28,866	$	(48	)

Total	$	9,241	$	(7	)	$	—	$	—	$	47,783	$	(42	)	$	28,866	$	(48	)

From time to time over the periods covered in our financial statements included herein (and as illustrated in the foregoing tables), our investments have experienced net unrealized losses. We consider these declines in market value to be due to market conditions, and we do not plan to sell these investments prior to maturity. For these reasons, we do not consider any of our investments to be other than temporarily impaired at ~~June 30, 2015~~March 31, 2016 or December 31, ~~2014.~~2015. We have also determined that we did not have any other-than-temporary impairments relating to credit losses on debt securities for the three months ended ~~June 30, 2015.~~March 31, 2016. For additional information regarding our criteria for making these assessments, see Note 2 to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2014.~~2015.

We establish the amount of our allowance for doubtful accounts based upon factors relating to the credit risk of specific customers, current market conditions, and other information. Our allowance for doubtful accounts was approximately ~~$1.7~~$5.4 million at ~~June 30, 2015,~~March 31, 2016, and ~~$1.4~~$5.2 million at December 31, ~~2014,~~2015, respectively.

Revenues related to flights generated by our Air Medical segment are recorded net of contractual allowances under agreements with third party payors and estimated uncompensated care when the services are provided. The allowance for contractual discounts was ~~$110.3~~$129.8 million and ~~$96.6~~$103.6 million as of ~~June 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, respectively. The allowance for uncompensated care was ~~$35.2~~$30.7 million and $41.9 million as of ~~June 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, respectively.

Included in the allowance for uncompensated care listed above is the value of services to patients who are unable to pay when it is determined that they qualify for charity care. The value of these services was ~~$2.3~~$2.5 million and ~~$2.4~~$2.7 million for the quarters ended ~~June 30,~~March 31, 2016 and 2015, ~~and 2014,~~ respectively. The estimated cost of providing charity services was ~~$0.5~~$0.6 million ~~and $0.7 million~~ for each of the quarters ended ~~June 30, 2015~~March 31, 2016 and 2014, respectively. The value of these services was $4.9 million and $4.8 million for the six months ended June 30, 2015 and 2014, respectively. The estimated cost of providing charity services was $1.1 million and $1.3 million for the six months ended June 30, 2015 and 2014, respectively.2015. The estimated costs of providing charity services are based on a calculation that applies a ratio of costs to the charges for uncompensated charity care. The ratio of costs to charges is based on our Air Medical segment’s total expenses divided by gross patient service revenue.

The allowance for contractual discounts and estimated uncompensated care (expressed as a percentage of gross segment accounts receivable) was as follows:


	As of						As of
	June 30, 2015			December 31, 2014			March 31, 2016			December 31, 2015
Allowance for Contractual Discounts		58	%		53	%		63	%		56	%
Allowance for Uncompensated Care		19	%		23	%		15	%		23	%

~~Our~~Under a three-year contract that commenced on September 29, 2012, our Air Medical affiliate provided multiple services to a customer in the Middle East, ~~requires us to provide multiple services,~~ including helicopter leasing, ~~flight services for helicopter~~ emergency medical ~~service operations,~~helicopter flight services, aircraft maintenance, provision of spare parts, insurance coverage for the customer-owned aircraft, training services, and base construction. ~~All~~The initial contract expired in late September 2015 and has been extended through late June 2016 on terms and conditions that have reduced the number of aircraft operated by us and the scope of our services ~~are delivered~~ and earned monthly over a three-year contractual period which began on September 29, 2012. The customer may terminate the contract prior to the end of the contract term by giving ninety days advance notice and paying an early termination fee of $13.5 million.responsibilities. Each of the major services mentioned above qualify as separate units of accounting under the accounting guidance for such arrangements. The selling price for each specific service was determined based upon third-party evidence and estimates.

We have also established valuation reserves related to obsolete and slow-moving spare parts inventory. The inventory valuation reserves were ~~$14.3~~$16.8 million and ~~$13.5~~$15.4 million at ~~June 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, respectively.

Accounting standards require that assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

The following table summarizes the valuation of our investments and financial instruments by the above pricing levels as of the valuation dates listed:


			June 30, 2015						March 31, 2016
	Total		(Level 1)		(Level 2)		Total		(Level 1)		(Level 2)
			(Thousands of dollars)						(Thousands of dollars)
Investments:
Money market mutual funds	$	35,407	$	35,407	$	—	$	17,877	$	17,877	$	—
Commercial paper								5,995		—		5,995
U.S. Government agencies		11,507		—		11,507		27,302		—		27,302
Corporate bonds and notes		185,493		—		185,493		250,301		—		250,301

		232,407		35,407		197,000		301,475		17,877		283,598
Deferred compensation plan assets		2,478		2,478		—		2,334		2,334		—

Total	$	234,885	$	37,885	$	197,000	$	303,809	$	20,211	$	283,598


			December 31, 2014
	Total		(Level 1)		(Level 2)
			(Thousands of dollars)
Investments:
Money market mutual funds	$	68,612	$	68,612	$	—
Municipal bonds and notes		1,502		—		1,502
Corporate bonds and notes		130,615		—		130,615

		200,729		68,612		132,117
Deferred compensation plan assets		2,386		2,386		—

Total	$	203,115	$	70,998	$	132,117


			December 31, 2015
	Total		(Level 1)		(Level 2)
Investments:
Money Market Mutual Funds	$	18,181	$	18,181	$	—
Commercial Paper		5,981		—		5,981
U.S. Government Agencies		11,469		—		11,469
Corporate bonds and notes		264,228		—		264,228

		299,859		18,181		281,678
Deferred compensation plan assets		2,294		2,294		—

Total	$	302,153	$	20,475	$	281,678

We hold our short-term investments in an investment fund consisting of high quality money market instruments of governmental and private issuers, which is classified as a short-term investment. Level 1 inputs are quoted prices (unadjusted) for identical assets or liabilities in active markets. These items are traded with sufficient frequency and volume to provide pricing on an ongoing basis. The fair values of the shares of these funds are based on observable market prices, and therefore, have been categorized in Level 1 in the fair value hierarchy. Level 2 inputs reflect quoted prices for identical assets or liabilities that are not actively traded. These items may not be traded daily; examples include corporate bonds and U.S. government agencies debt. There have been no reclassifications of assets between Level 1 and Level 2 investments during the periods covered by the financial statements included in this report. We hold no Level 3 investments. Investments ~~included in other~~reflected on our balance sheets as Other assets, which relate to our liability under the Officers’ Deferred Compensation Plan, consist mainly of multiple investment funds that are highly liquid and diversified.

Cash, accounts receivable, accounts payable and accrued liabilities, and our revolving credit facility debt all had fair values approximating their carrying amounts at ~~June 30, 2015~~March 31, 2016 and December 31, ~~2014.~~2015. Our determination of the estimated fair value of our Senior Notes and our revolving credit facility debt is derived using Level 2 inputs, including quoted market indications of similar publicly-traded debt. The fair value of our Senior Notes, based on quoted market prices, was ~~$465.0~~$457.5 million and ~~$425.6~~$403.1 million at ~~June 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, respectively.

The components of long-term debt as of the dates indicated below were as follows:

~~Senior Notes~~~~- During~~In April 2015, the ~~quarter ended March 31, 2014, we~~FASB issued ~~$500 million~~ASU No. 2015-03,Simplifying the Presentation of ~~5.25% Senior Notes due March 2019. Proceeds were approximately $494 million, net~~Debt Issuance Costs, which changes the presentation of ~~fees and expenses, and~~debt issuance costs in the financial statements. These costs are now presented as a portion of these proceeds were used to retire on March 17, 2014 $292.6 million of our $300 million previously outstanding 8.625% Senior Notes pursuant to a tender offer, at a total cost of $329.4 million includingdirect deduction from the ~~tender premium and accrued interest.~~debt liability, rather than as an asset. We ~~redeemed~~adopted the ~~remaining $7.4 million of 8.625% Senior Notes on April 16, 2014, at a redemption price of 108.3% of the face amount plus accrued interest.~~new standard effective January 1, 2016. As a result, ~~of our repurchase of 8.625% Senior Notes in March 2014,~~ we ~~recorded a pretax charge of $29.2 million~~reclassified unamortized debt issuances cost in the ~~quarter ended~~amount of $3.7 million and $4.0 million as of March 31, ~~2014, which consisted~~2016 and December 31, 2015, respectively, and reduced the carrying value of ~~a $26.1 million tender premium and $3.1 million of unamortized issuance costs. We recorded a pre-tax charge of $0.6 million in~~long-term debt by the second quarter of 2014 associated with our redemption on April 16, 2014 of the remaining 8.625% Senior Notes not previously tendered. Our repurchase of 8.625% Senior Notes in March 2014 and April 2014 resulted in deferred tax benefits of $11.6 million.same amounts.

Our 5.25% Senior Notes (the “2019 Notes”) will mature on March 15, 2019, are unconditionally guaranteed on a senior basis by the each of PHI’s domestic subsidiaries, and are the general, unsecured obligations of PHI and the guarantors. Interest is payablesemi-annually on March 15 and September 15 of each ~~year, beginning September 15, 2014.~~year. PHI has the option to redeem some or all of the 2019 Notes at any time on or after March 15, 2016 at specified redemption prices. Prior to that time, PHI has the option to redeem some or all of the 2019 Notes pursuant to certain “make-whole” provisions or to redeem a portion of the 2019 Notes with the net proceeds of certain specified equity offerings. The indenture governing the 2019 Notes (the “2019 Indenture”) contains, among other things, certain restrictive covenants, including limitations on incurring indebtedness, creating liens, selling assets and entering into certain transactions with affiliates. The covenants also limit PHI’s ability to, among other things, pay cash dividends on common stock, repurchase or redeem common or preferred equity, prepay subordinated debt and make certain investments. Upon the occurrence of a “Change in Control Repurchase Event” (as defined in the 2019 Indenture), PHI will be required, unless it has previously elected to redeem the 2019 Notes as described above, to make an offer to purchase the 2019 Notes for a cash price equal to 101% of their principal amount.

Revolving Credit Facility – We have an amended and restated revolving credit facility that matures on October 1, ~~2016.~~2017. Under this facility, we can borrow up to $150 million at floating interest rates based on either the London Interbank Offered Rate plus 225 basis points or the prime rate (each as defined in our amended and restated revolving credit facility), at our option. Our revolving credit facility includes usual and customary covenants and events of default for credit facilities of its type. Our ability to borrow under the credit facility is conditioned upon our continued compliance with such covenants, including, among others, (i) covenants that restrict our ability to engage in certain asset sales, mergers or other fundamental changes, to incur liens or to engage in certain other transactions or activities and (ii) financial covenants that stipulate that PHI will maintain a consolidated working capital ratio of at least 2 to 1, a funded debt to consolidated net worth ratio not greater than 1.5 to 1, a fixed charge coverage ratio of at least 1.1 to 1, and consolidated net worth of at least $450 million (with all such terms or amounts as defined in or determined under the amended and restated revolving credit facility).

Cash paid to fund interest expense was $13.7 million for the quarter ended March 31, 2016 and $13.5 million for the quarter ended March 31, 2015.

Other -–We maintain a separate letter of credit facility that had $15.3 million ~~and $15.5 million~~ in letters of credit outstanding at ~~June 30, 2015~~March 31, 2016 and December 31, ~~2014, respectively.~~2015. We have letters of credit securing our workers compensation policies and a traditional provider contract.

Cash paid to fund interest expense was $0.3 million for the quarter ended June 30, 2015 and $0.5 million for the quarter ended June 30, 2014. Cash paid to fund interest expense was $13.7 million for the six months ended June 30, 2015 and $11.7 million for the six months ended June 30, 2014. Included in the 2014 interest expense was $10.7 million of accrued interest expense paid for the 8.625% Senior Notes that we purchased on March 17, 2014 and April 16, 2014 in the transactions described above.6. EARNINGS PER SHARE

The components of basic and diluted earnings per share ~~for the quarter and six months ended June 30, 2015 and 2014~~ are as follows:


	Quarter Ended June 30,				Six Months Ended June 30,				Quarter Ended March
	2015		2014		2015		2014		2016		2015
	(Thousands of dollars)								(Thousands of dollars)
Weighted average outstanding shares of common stock, basic		15,574		15,482		15,574		15,482		15,600		15,579
Dilutive effect of unvested restricted stock units		116		214		105		113		—		83

Weighted average outstanding shares of common stock, diluted		15,690		15,696		15,679		15,595		15,600		15,662

We recognize the cost of employee compensation received in the form of equity instruments based on the grant date fair value of those awards. The table below sets forth the total amount of stock-based compensation expense for the ~~six~~three months and quarters ended ~~June 30, 2015~~March 31, 2016 and ~~2014.~~2015.


	Quarter Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014		Quarter Ended March 31,
	(Thousands of dollars)								2016		2015
Stock-based compensation expense:										(Thousands of dollars)
Time-based restricted units	$	571	$	322	$	1,208	$	450
Performance-based restricted units		1,069		720		2,151		1,281
Time-based restricted stock units									$	619	$	637
Performance-based restricted stock units										871		1,082

Total stock-based compensation expense	$	1,640	$	1,042	$	3,359	$	1,731	$	1,490	$	1,719

During the quarter ended March 31, 2016, we awarded 303,061 performance-based restricted stock units to managerial employees. During the quarter ended March 31, 2015, we awarded 18,930 time-based and ~~six months ended June 30, 2015, 1,118 and 20,048 time-based~~151,566 performance-based restricted stock units ~~were awarded~~ to managerial employees, respectively.

~~During the six months ended June 30, 2015, 151,566 performance-based restricted units were awarded to managerial employees.~~8. ASSET DISPOSALS

During the first quarter of 2016, we sold one light aircraft previously utilized in the Oil and ~~six months ended June 30, 2014, 116,303 and 136,667 time-based restricted units were awarded to managerial employees, respectively. During~~Gas segment. Cash proceeds totaled $0.9 million, resulting in a loss on the ~~quarter and six months ended June 30, 2014, 115,806 performance based restricted units were awarded to managerial employees.~~

sale of this asset of $0.4 million. This aircraft no longer met our strategic needs. There were no sales or disposals of aircraft during the ~~second~~first quarter of 2015, but we did ~~transact~~have minor sales and disposals of ~~certain~~various ancillary equipment.

During the second quarter of 2014, we sold or disposed of two light and one medium aircraft previously utilized in our Air Medical segment and one fixed wing aircraft previously utilized for corporate purposes. Cash proceeds totaled $4.2 million, resulting in a loss on the sale of these assets of $0.2 million. These aircraft no longer met our strategic needs.9. COMMITMENTS AND CONTINGENCIES

Commitments – In 2014, we exercised ~~our~~an option to purchase six additional ~~new~~ heavy ~~helicopters~~aircraft for ~~our Oil and Gas segment with deliveries scheduled~~delivery in 2015 and 2016. ~~During~~In 2015, we executed an amendment to terminate the ~~first quarter~~purchase of ~~2015, we~~four of the heavy aircraft for delivery in 2016. We took delivery of one ~~of these heavy~~ aircraft ~~to be paid for~~ in ~~the third quarter of~~ 2015 and ~~during the fourth quarter of 2015 we expect to purchase a second of these heavy aircraft. In July 2015, we executed a contract amendment to cancel the purchase~~delivery of the ~~remaining four~~final aircraft ~~under the contract.~~in January 2016.

Total aircraft deposits of ~~$7.4~~$2.6 million were included in Other assets as of ~~June 30, 2015.~~March 31, 2016. This amount represents deposits paid by us as required under aircraft purchase contracts.

~~On January 2, 2015, we purchased one heavy aircraft off lease pursuant to a purchase option in the lease contract for an aggregate purchase price of $17.7 million.~~

As of ~~June 30, 2015,~~March 31, 2016, we had options to purchase various aircraft that we currently operate under lease agreements with the aircraft owners. These options will become exercisable at various dates in 2016 through 2019. The aggregate option purchase prices are $67.8 million in 2016, $55.7 million in 2017, $127.0 million in 2018, ~~and~~ $150.4 million in ~~2019.~~2019 and $22.7 million in 2020. Whether we exercise these options will depend upon several factors, including market conditions and our available cash at the respective exercise dates.

Environmental Matters – We have recorded an aggregate estimated probable liability of $0.2 million as of ~~June 30, 2015~~March 31, 2016 for environmental response costs. We have conducted environmental surveys of our former Lafayette facility located at the Lafayette Regional Airport, which we vacated in 2001, and have determined that limited soil and groundwater contamination exists at two parcels of land at the former facility. We submitted an assessment report for both sites in 2003, updated it in 2006, and received approvals of our remediation plan from the Louisiana Department of Environmental Quality (“LDEQ”) and Louisiana Department of Natural Resources in 2010 and 2011, respectively. Since such time, we have installed groundwater monitoring wells at these sites and furnished periodic reports on contamination levels to the LDEQ. Pursuant to our agreement with the LDEQ, we are ~~currently~~ providing samples twice a year for both ~~sites.~~sites and plan to remove underground storage tanks under one of the sites later this year. In response to our request, LDEQ has approved annual sampling from 2015 to 2019, followed by reevaluation of the sampling frequency. Based upon our working relationship and agreements with the LDEQ and the results of our ongoing site monitoring, we believe, based on current circumstances, that our ultimate remediation costs for these sites will not be material to our consolidated financial position, results of operations, or cash flows.

Legal Matters – WeFrom time to time, we are ~~named as a defendant~~involved in various legal actions incidental to our business, including actions relating to employee claims, actions relating to medical malpractice claims, various tax issues, grievance

hearings before labor regulatory agencies, and miscellaneous third party tort actions. The outcome of these proceedings is not predictable. However, based on current circumstances, we do not believe that ~~have arisen in~~ the ~~ordinary course~~ultimate resolution of ~~business and have not been finally adjudicated. In the opinion of management,~~these proceedings, after considering available defenses and any insurance coverage or indemnification rights, ~~the amount of the liability with respect to these actions~~ will ~~not~~ have a material adverse effect on ~~the~~ our ~~consolidated~~ financial position, results of operations or cash flows.

Operating Leases – We lease certain aircraft, facilities, and equipment used in our operations. The related lease agreements, which include both non-cancelable and month-to-month terms, generally provide for fixed monthly rentals, and certain real estate leases also include renewal options. We generally pay all insurance, taxes, and maintenance expenses associated with these leases. All aircraft leases contain purchase options exercisable by us at certain dates in the lease agreements.

At ~~June 30, 2015,~~March 31, 2016, we had approximately ~~$295.1~~$281.4 million in aggregate commitments under operating leases of which approximately ~~$25.8~~$38.6 million is payable through December 31, ~~2015.~~2016. The total lease commitments include ~~$279.4~~$266.5 million for aircraft and ~~$15.7~~$14.9 million for facility lease commitments.

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 ~~Co.,~~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 ~~June 30, 2015,~~March 31, 2016, we operated ~~167~~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 ~~June 30,~~March 31, 2016 and 2015, approximately 54% and ~~2014, approximately 57% and 60%~~59% of our total operating revenues were generated by our Oil and Gas segment. ~~Our Oil and Gas segment generated approximately 58% and 62% of our total operating revenue for the six months ended June 30, 2015 and 2014, respectively.~~

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 ~~June 30, 2015, 100~~March 31, 2016, 105 aircraft were assigned to our Air Medical segment. At such date, we operated approximately 91100 aircraft domestically, providing air medical transportation services for hospitals and emergency service agencies in 1819 states at 70 separate locations. We also provide air medical transportation services for a

customer overseas. For ~~this~~our overseas program, we have deployed ~~nine~~five aircraft at ~~five~~four locations, with ~~eight~~four aircraft generating revenues as of ~~June 30, 2015.~~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 ~~June 30,~~March 31, 2016 and 2015, approximately 43% and ~~2014, approximately 41% and 37%~~35% of our total operating revenues were generated by our Air Medical segment. ~~For the six months ended June 30, 2015 and 2014, approximately 38% and 36% of our total operating revenues were generated by our Air Medical segment, respectively.~~

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 ~~the~~ transported ~~patient.~~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, andself-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												Revenue
	Quarter Ended June 30,						Six Months Ended June 30,						Quarter Ended March 31,
	2015			2014			2015			2014			2016			2015
Gross Air Medical segment billings														100	%		100	%
Provision for contractual discounts		65	%		70	%		66	%		69	%		71	%		74	%
Provision for uncompensated care		7	%		4	%		7	%		4	%		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 June 30,						Six Months Ended June 30,						Quarter Ended March 31,
	2015			2014			2015			2014			2016			2015
Insurance		74	%		74	%		73	%		73	%		66	%		75	%
Medicare		17	%		18	%		17	%		19	%		19	%		17	%
Medicaid		7	%		7	%		8	%		7	%		15	%		8	%
Self-Pay		2	%		1	%		2	%		1	%		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 ~~36%~~31% and ~~39%~~42% of the segment’s revenues for the quarters ended ~~June 30,~~March 31, 2016 and 2015, ~~and 2014,~~ respectively. ~~For the six months ended June 30, 2015 and 2014, these contracts generated approximately 39% and 40% of the segment’s revenues.~~

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 ~~both of~~ the three month periods ended ~~June 30,~~March 31, 2016 and 2015, approximately 3% and ~~2014, approximately 2%, respectively, of our total operating revenues were generated by our Technical Services segment. For the six month periods ended June 30, 2015 and 2014, approximately 4% and 2%~~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 ~~six months ended June 30,~~ 2015 ~~and 2014~~ is as follows:


	Quarter Ended June 30,						Six Months Ended June 30,						Quarter Ended March 31,
	2015			2014			2015			2014			2016			2015
	(Thousands of dollars)						(Thousands of dollars)						(Thousands of dollars)
Segment operating revenues
Oil and Gas	$	112,839		$	128,044		$	233,235		$	254,019		$	88,437		$	120,396
Air Medical		81,642			79,427			154,027			147,379			70,060			72,385
Technical Services		4,066			4,674			15,482			7,818			5,519			11,416

Total operating revenues, net		198,547			212,145			402,744			409,216
Total operating revenues														164,016			204,197

Segment direct expenses⁽¹⁾
Oil and Gas⁽²⁾		100,262			103,450			200,593			200,824			91,916			100,331
Air Medical		63,576			62,726			123,615			122,105			57,044			60,039
Technical Services		5,096			4,246			14,001			6,187			3,594			8,905

Total direct expenses		168,934			170,422			338,209			329,116

Total segment direct expenses														152,554			169,275
Segment selling, general and administrative expenses
Oil and Gas		1,275			1,489			2,434			2,523			1,528			1,159
Air Medical		2,527			2,936			5,156			5,089			2,595			2,629
Technical Services		208			1			322			3			224			114

Total segment selling, general and administrative expenses		4,010			4,426			7,912			7,615
Total selling, general and administrative expenses														4,347			3,902

Total segment expenses		172,944			174,848			346,121			336,731
Total direct and selling, general and administrative expenses														156,901			173,177

Net segment profit (loss)
Net segment (loss) profit
Oil and Gas		11,302			23,105			30,208			50,672			(5,007	)		18,906
Air Medical		15,539			13,765			25,256			20,185			10,421			9,717
Technical Services		(1,238	)		427			1,159			1,628			1,701			2,397

Total		25,603			37,297			56,623			72,485

Total net segment profit														7,115			31,020
Other, net⁽³⁾		633			(73	)		1,102			(1,055	)		256			469
Unallocated selling, general and administrative costs⁽¹⁾		(8,037	)		(7,234	)		(15,372	)		(13,373	)		(7,326	)		(7,335	)
Interest expense		(7,155	)		(7,673	)		(14,325	)		(15,037	)		(7,533	)		(7,170	)
Loss on debt extinguishment		—			(617	)		—			(29,833	)

Earnings before income taxes	$	11,044		$	21,700		$	28,028		$	13,187
(Loss) earnings before income taxes													$	(7,488	)	$	16,984


	Depreciation and Amortization Expense								Depreciation and Amortization Expense
	Quarter Ended June 30,				Six Months Ended June 30,				Quarter Ended March 31,
	2015		2014		2015		2014		2016		2015
Segment Direct Expense:
Oil and Gas	$	10,323	$	7,384	$	21,603	$	14,237	$	9,918	$	11,280
Air Medical		4,750		3,232		8,848		6,308		4,256		4,097
Technical Services		132		88		260		175		128		128

Total	$	15,205	$	10,704	$	30,711	$	20,720	$	14,302	$	15,505

Unallocated SG&A	$	3,155	$	1,752	$	5,801	$	3,099	$	2,671	$	2,646

We account for our investment in our West African operations as a variable interest entity, which is defined as an entity that either (a) has insufficient equity to permit the entity to finance its operations without additional subordinated financial support or (b) has equity investors who lack the characteristics of a controlling financial interest. As of ~~June 30, 2015,~~March 31, 2016, we had a 49% investment in the common stock of PHI Century Limited (“PHIC”), a Ghanaian entity. We acquired our 49% interest on May 26, 2011, PHIC’s date of incorporation. The purpose of PHIC is to provide oil and gas flight services in Ghana and the West African region. For ~~each of~~ the quarters ended ~~June 30,~~March 31, 2016 and 2015, ~~and 2014,~~ we recorded a loss in equity of unconsolidated affiliate of ~~$0.1 million, relative to our 49% equity ownership. For the six months ended June 30, 2015 and 2014, we recorded a loss in equity of unconsolidated affiliate of $0.2~~$0 million and $0.1 million relative to our 49% equity ownership, respectively. ~~In addition, we~~We had ~~$2.8~~$1.5 million of trade receivables ~~and $1.1 million of accrued liabilities~~ as of ~~June 30, 2015~~March 31, 2016 from PHIC. ~~We had $2.8 million of trade receivables and a $0.9 million of accrued liabilities as of~~At December 31, ~~2014. The~~2015, we recorded an allowance for bad debts against this trade ~~receivables are included in Accounts~~ receivable ~~- trade on our Condensed Consolidated Balance Sheets. The accrued liabilities are included in Accrued and other current liabilities on our Condensed Consolidated Balance Sheets.~~of $1.5 million, as we do not anticipate that we will be able to recover them. Our investment in the common stock of PHIC is included in Other assets on our Condensed Consolidated Balance Sheets and was ~~$-0-~~$0 million at ~~June 30, 2015~~March 31, 2016 and December 31, ~~2014.~~2015.

Amounts reclassified from Accumulated other comprehensive income are not material and, therefore, not presented separately in the Condensed Consolidated Statements of Comprehensive Income.

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 ~~following~~ 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.


	June 30, 2015											March 31, 2016
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾		Eliminations			Consolidated			Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾			Eliminations			Consolidated
ASSETS
Current Assets:
Cash	$	48		$	3,611	$	—		$	3,659		$	123		$	6,413		$	—		$	6,536
Short-term investments		217,071			—		—			217,071			286,139			—			—			286,139
Accounts receivable – net		86,298			86,225		—			172,523			69,795			81,593			—			151,388
Intercompany receivable		—			93,863		(93,863	)		—			—			50,649			(50,649	)		—
Inventories of spare parts – net		61,404			8,916		—			70,320			60,998			9,183			—			70,181
Prepaid expenses		8,837			2,999		—			11,836			6,191			2,636			—			8,827
Deferred income taxes		9,915			—		—			9,915			10,379			—			—			10,379
Income taxes receivable		1,068			159		—			1,227			985			(242	)		—			743

Total current assets		384,641			195,773		(93,863	)		486,551			434,610			150,232			(50,649	)		534,193
Investment in subsidiaries		348,123			—		(348,123	)		—			336,033			—			(336,033	)		—
Property and equipment – net		676,478			234,634		—			911,112			627,168			281,246			—			908,414
Restricted investments		15,336			—		—			15,336			15,336			—			—			15,336
Other assets		14,648			204		—			14,852			5,078			1,252			—			6,330

Total assets	$	1,439,226		$	430,611	$	(441,986	)	$	1,427,851		$	1,418,225		$	432,730		$	(386,682	)	$	1,464,273

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	58,387		$	4,747	$	—		$	63,134		$	55,561		$	6,059		$	—		$	61,620
Accrued and other current liabilities		34,024			14,526		—			48,550			18,594			9,460			—			28,054
Intercompany payable		93,863			—		(93,863	)		—			50,649			—			(50,649	)		—

Total current liabilities		186,274			19,273		(93,863	)		111,684			124,804			15,519			(50,649	)		89,674

Long-term debt		535,500			—		—			535,500
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		102,532			63,215		—			165,747			89,871			81,178			—			171,049
Shareholders’ Equity:
Common stock and paid-in capital		304,103			112,199		(112,199	)		304,103			307,438			79,191			(79,191	)		307,438
Accumulated other comprehensive loss		(197	)		—		—			(197	)		(90	)		—			—			(90	)
Retained earnings		311,014			235,924		(235,924	)		311,014			312,189			256,842			(256,842	)		312,189

Total shareholders’ equity		614,920			348,123		(348,123	)		614,920			619,537			336,033			(336,033	)		619,537

Total liabilities and shareholders’ equity	$	1,439,226		$	430,611	$	(441,986	)	$	1,427,851		$	1,418,225		$	432,730		$	(386,682	)	$	1,464,273


	December 31, 2014											December 31, 2015
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾		Eliminations			Consolidated			Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾			Eliminations			Consolidated
ASSETS
Current Assets:
Cash	$	51		$	6,219	$	—		$	6,270		$	46		$	2,361		$	—		$	2,407
Short-term investments		185,244			—		—			185,244			284,523			—			—			284,523
Accounts receivable – net		98,001			82,760		—			180,761			70,336			74,442			—			144,778
Intercompany receivable		—			95,399		(95,399	)		—			—			90,943			(90,943	)		—
Inventories of spare parts – net		65,341			8,452		—			73,793			60,060			9,431			—			69,491
Prepaid expenses		7,610			1,704		—			9,314			7,162			1,789			—			8,951
Deferred income taxes		9,915			—		—			9,915			10,379			—			—			10,379
Income taxes receivable		1,068			159		—			1,227			1,002			(241	)		—			761

Total current assets		367,230			194,693		(95,399	)		466,524			433,508			178,725			(90,943	)		521,290

Investment in subsidiaries and others		358,080			—		(358,080	)		—
Investment in subsidiaries													330,848			—			(330,848	)		—
Property and equipment, net		638,437			239,381		—			877,818			632,759			250,770			—			883,529
Restricted investments		15,485			—		—			15,485			15,336			—			—			15,336
Other assets		16,055			198		—			16,253			5,040			203			—			5,243

Total assets	$	1,395,287		$	434,272	$	(453,479	)	$	1,376,080		$	1,417,491		$	429,698		$	(421,791	)	$	1,425,398

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	22,578		$	5,122	$	—		$	27,700		$	25,512		$	5,861		$	—		$	31,373
Accrued and other current liabilities		34,477			18,335		—			52,812
Accrued liabilities													29,138			15,621			—			44,759
Intercompany payable		95,270			—		(95,270	)		—			90,943			—			(90,943	)		—

Total current liabilities		152,325			23,457		(95,270	)		80,512			145,593			21,482			(90,943	)		76,132

Long-term debt		543,000			—		—			543,000
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		102,894			52,606		—			155,500			92,334			77,368			—			169,702
Shareholders’ Equity:
Common stock and paid-in capital		303,082			137,647		(137,647	)		303,082			306,444			79,061			(79,061	)		306,444
Accumulated other comprehensive loss		(211	)		—		—			(211	)		(567	)		—			—			(567	)
Retained earnings		294,197			220,562		(220,562	)		294,197			321,121			251,787			(251,787	)		321,121

Total shareholders’ equity		597,068			358,209		(358,209	)		597,068			626,998			330,848			(330,848	)		626,998

Total liabilities and shareholders’ equity	$	1,395,287		$	434,272	$	(453,479	)	$	1,376,080		$	1,417,491		$	429,698		$	(421,791	)	$	1,425,398


	For the six months ended June 30, 2015											For the three months ended March 31, 2016
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾			Eliminations		Consolidated			Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾			Eliminations		Consolidated
Net cash provided by operating activities	$	46,696		$	22,612		$	—	$	69,308

Net cash used in operating activities												$	(13,795	)	$	(2,548	)	$	—	$	(16,343	)
Investing activities:
Purchase of property and equipment		(29,502	)		—			—		(29,502	)		(8,519	)		—			—		(8,519	)
Proceeds from asset dispositions		567			—			—		567			850			—			—		850
Purchase of short-term investments		(290,469	)		—			—		(290,469	)		(77,677	)		—			—		(77,677	)
Proceeds from sale of short-term investments		257,454			—			—		257,454			76,184			—			—		76,184
Payments of deposits on aircraft		(131	)		—			—		(131	)		(66	)		—			—		(66	)

Net cash used in investing activities		(62,081	)		—			—		(62,081	)		(9,228	)		—			—		(9,228	)

Financing activities:
Proceeds from line of credit		119,740			—			—		119,740			83,500			—			—		83,500
Payments on line of credit		(127,240	)		—			—		(127,240	)		(53,300	)		—			—		(53,300	)
Repurchase of common stock for payroll tax withholding requirements		(2,338	)		—			—		(2,338	)
Repurchase of common stock													(500	)		—			—		(500	)
Due to/from affiliate, net		25,220			(25,220	)		—		—			(6,600	)		6,600			—		—

Net cash provided by financing activities		15,382			(25,220	)		—		(9,838	)		23,100			6,600			—		29,700

Decrease in cash		(3	)		(2,608	)		—		(2,611	)
Increase in cash													77			4,052			—		4,129
Cash, beginning of period		51			6,219			—		6,270			46			2,361			—		2,407

Cash, end of period	$	48		$	3,611		$	—	$	3,659		$	123		$	6,413		$	—	$	6,536

Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion and analysis should be read in conjunction with (i) the accompanying unaudited condensed consolidated financial statements and the notes thereto (the “Notes”) and (ii) our Annual Report on Form 10-K for the year ended December 31, ~~2014,~~2015, including the audited consolidated financial statements and notes thereto, management’s discussion and analysis, and the risk factor disclosures contained therein.

All statements other than statements of historical fact contained in this Form 10-Q and other periodic reports filed by PHI, Inc. (“PHI” or the “Company” or “we” or “our”) under the Securities Exchange Act of 1934, and other written or oral statements made by it or on its behalf, are ~~forward-looking statements.~~“forward-looking statements”, as defined by (and subject to the “safe harbor” protections under) the federal securities laws. When used herein, the words “anticipates,” “expects,” “believes,” “goals,” “intends,” “plans,” “projects” and similar words and expressions are intended to identify forward-looking statements.Forward-looking statements are based on a number of judgments and assumptions about future developments and events, many of which are beyond our control. These forward-looking statements, and the assumptions on which they are based, (i) are not guarantees of future events, (ii) are inherently speculative and (iii) are subject to significant risks, uncertainties, and other factors that may cause ~~the Company’s~~our actual results to differ materially from the expectations, beliefs, and estimates expressed or implied in such forward-looking statements. Although the Company believes that the assumptions underlying the forward-looking statements are reasonable, no assurance can be given that such assumptions will prove correct or even approximately correct. Factors that could cause ~~the Company’s~~our results to differ materially from the expectations expressed or implied in such forward-looking statements include but are not limited to the following: ~~any~~ reduction in demand for our services due to volatility of oil and gas prices and the level of exploration and production activity in the Gulf of Mexico generally, which depends on several factors outside of our control; our dependence on a small number of customers for a significant amount of our revenue and our significant credit exposure within the oil and gas industry; any failure to maintain our strong safety record; our ability to secure favorable customer contracts or otherwise remain able to profitably deploy our existing fleet of aircraft; our ability to receive timely delivery of ordered aircraft and parts from ~~our~~a limited number of suppliers, and the availability of working capital, loans or lease financing to acquire such ~~aircraft;~~assets; the availability of adequate insurance; adverse changes in the value of our aircraft or our ability to sell them in the secondary markets; weather conditions and seasonal factors, including ~~reduced daylight hours,~~ tropical storms and hurricanes; ~~unexpected variances~~the effects of competition and changes in ~~flight hours;~~technology; the adverse impact of customers ~~terminating~~electing to terminate or ~~reducing~~reduce our services; the impact of current or future governmental regulations, ~~on us or our customers,~~ including but not limited to the impact of new and pending regulation of healthcare, ~~legislation~~aviation safety and ~~regulations and regulations issued or actions taken by the Federal Aviation Administration;~~export controls; the special risks of our air medical operations, including collections risks and potential medical malpractice claims; political, economic, payment, regulatory and other risks and uncertainties associated with our international operations; our substantial indebtedness and operating lease commitments; the hazards associated with operating ~~hazards;~~in an inherently risky business, including the possibility that regulators could ground our aircraft for extended periods of time or indefinitely; our ability to develop and implement successful business strategies; changes in fuel prices; the risk of work stoppages and other labor problems; changes in our future cash requirements; environmental and litigation risks; ~~and~~the effects of more general factors, such as changes in interest rates, operating costs, tax rates, or general economic ~~conditions~~or geopolitical conditions; and ~~adverse market events. For a more detailed description of~~other risks ~~see~~referenced in this and other annual, quarterly or current reports filed by us with the ~~“Risk Factors” section in Item 1A~~SEC. All of our Annual Report on Form 10-K for the year ended December 31, 2014, as updated by our subsequently filed quarterly reports on Form 10-Q (“SEC Filings”). Investors are cautioned that many of the assumptions on which ourabove-described forward-looking statements are ~~based~~expressly qualified in their entirety by the cautionary statements in this paragraph and the Risk Factors disclosures in our SEC filings. Additional factors or risks that we currently deem immaterial, that are ~~likely~~not presently known to ~~change after such~~us or that arise in the future could also cause our actual results to differ materially from our expected results. Given these uncertainties, investors are cautioned not to unduly rely upon our forward-looking statements. PHI undertakes no obligation to update publicly any forward-looking statements, ~~are made, including, for example, the market prices~~whether as a result of ~~oil and gas, which we cannot control~~new information, future events, or ~~anticipate.~~otherwise. Further, we may make changes to our business strategies and plans (including our capital spending plans) at any time and without notice, based on any changes in the above-listed factors, our assumptions or otherwise, any of which could ~~substantially~~or will affect our results. For all these reasons, actual events and results may differ materially from those anticipated, estimated, projected, or implied by us in our forward-looking statements. All of our above-described forward-looking statements are expressly qualified in their entirety by the cautionary statements in this paragraph and the Risk Factors disclosures in our SEC Filings. PHI undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

As described further in Note 10, we are primarily a provider of helicopter services and derive most of our revenue from providing helicopter transport services to the ~~oil and gas industry~~energy and medical ~~industry.~~industries. Our consolidated results of operations are principally driven by the following factors:

As noted above, the performance of our oil and gas operations is largely dependent upon the level of offshore oil and gas activities, which in turn is based largely on volatile commodity prices. See “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2014.~~2015. Since mid-2014, prevailing oil prices have been substantially lower than prices for several years ~~prior thereto.~~before then. Consequently, several of our oil and gas customers have curtailed their exploration or production levels, lowered their capital expenditures, reduced their staffs or requested arrangements with vendors designed to reduce their operating costs, including flight sharing ~~arrangements.~~arrangements and alternative platform staffing rotations. As explained further below, these changes have negatively impacted our oil and gas operations since the first quarter of 2015. ~~Based on communications~~Over the past several months, an increasing number of our offshore customers have requested reductions in the number of aircraft under contract, pricing concessions or both, which has further reduced our aircraft utilization rates and intensified pricing pressures. We believe that we may receive additional such requests in the future. Although we can neither control nor predict with ~~our oil and gas customers, we expect~~any reasonable degree of certainty the length or ultimate severity of the current downturn in the ~~oil~~energy industry, we

currently expect further reductions in the operating revenues and ~~gas industry will result~~net profit of our Oil and Gas segment in ~~lower demand for~~2016 compared to amounts previously reported. These reductions could be quite substantial. For information on the impact of the market downturn on our ~~oil~~liquidity, see “– Liquidity and ~~gas~~Capital Resources – Long Term Debt” below.

We have extended through late June 2016 our three-year contract that we entered into on September 29, 2012 to provide air medical flight services and ~~lower utilization~~related support services to a customer in the Middle East. Under the extension, the number of ~~all types~~aircraft operated and scope of our ~~oil~~services and ~~gas aircraft during the last half of 2015 as~~responsibilities have been reduced, which has caused our overseas air medical revenues and operating costs to decline significantly compared to prior periods. We are currently negotiating with this customer a five-year replacement contract. Although we expect the ~~last half of 2014. The ultimate impact of the current industry downturn on our oil~~replacement contract to be completed and ~~gas operations will depend upon its length~~to receive all requisite corporate and ~~several other factors, most of which remain outside of our control.~~governmental approvals by mid-2016, we cannot provide any assurances to this effect.

The following tables present operating revenue, expenses, and earnings, along with certain non-financial operational statistics, for the quarter ended March 31, 2016 and ~~six months ended June 30, 2015 and 2014.~~2015.


	Quarter Ended June 30,						Favorable (Unfavorable)			Quarter Ended March 31,						Favorable (Unfavorable)
	2015			2014						2016			2015
	(Thousands of dollars, except flight hours, patient transports, and aircraft)									(Thousands of dollars, except flight hours, patient transports, and aircraft)
Segment operating revenues
Oil and Gas	$	112,839		$	128,044		$	(15,205	)	$	88,437		$	120,396		$	(31,959	)
Air Medical		81,642			79,427			2,215			70,060			72,385			(2,325	)
Technical Services		4,066			4,674			(608	)		5,519			11,416			(5,897	)

Total operating revenues		198,547			212,145			(13,598	)		164,016			204,197			(40,181	)

Segment direct expenses
Oil and Gas⁽¹⁾		100,262			103,450			3,188			91,916			100,331			8,415
Air Medical		63,576			62,726			(850	)		57,044			60,039			2,995
Technical Services		5,096			4,246			(850	)		3,594			8,905			5,311

Total segment direct expenses		168,934			170,422			1,488			152,554			169,275			16,721

Segment selling, general and administrative expenses
Oil and Gas		1,275			1,489			214			1,528			1,159			(369	)
Air Medical		2,527			2,936			409			2,595			2,629			34
Technical Services		208			1			(207	)		224			114			(110	)

Total segment selling, general and administrative expenses		4,010			4,426			416			4,347			3,902			(445	)

Total segment expenses		172,944			174,848			1,904			156,901			173,177			16,276

Net segment profit
Net segment (loss) profit
Oil and Gas		11,302			23,105			(11,803	)		(5,007	)		18,906			(23,913	)
Air Medical		15,539			13,765			1,774			10,421			9,717			704
Technical Services		(1,238	)		427			(1,665	)		1,701			2,397			(696	)

Total net segment profit		25,603			37,297			(11,694	)		7,115			31,020			(23,905	)

Other, net⁽²⁾		633			(73	)		706			256			469			(213	)
Unallocated selling, general and administrative costs		(8,037	)		(7,234	)		(803	)		(7,326	)		(7,335	)		9
Interest expense		(7,155	)		(7,673	)		518			(7,533	)		(7,170	)		(363	)
Loss on debt extinguishment		—			(617	)		617

Earnings before income taxes		11,044			21,700			(10,656	)
(Loss) earnings before income taxes											(7,488	)		16,984			(24,472	)
Income tax expense		4,590			8,332			3,742			1,444			6,621			5,777

Net earnings	$	6,454		$	13,368		$	(6,914	)
Net (loss) earnings										$	(8,932	)	$	10,363		$	(19,295	)

Flight hours:
Oil and Gas		25,743			30,675			(4,932	)		20,737			25,136			(4,399	)
Air Medical⁽³⁾		8,984			9,186			(202	)		8,688			7,836			852
Technical Services		2			23			(21	)		523			477			46

Total		34,729			39,884			(5,155	)		29,948			33,449			(3,501	)

Air Medical Transports⁽⁴⁾		4,757			4,748			9			4,503			3,945			558

Aircraft operated at period end:⁽⁵⁾
Oil and Gas⁽⁶⁾											154			168
Air Medical⁽⁷⁾											105			100
Technical Services											6			6

Total											265			274

Six Months Ended
June 30, Favorable
(Unfavorable)
2015 2014

(Thousands of dollars, except flight hours,
patient transports, and aircraft)

Segment operating revenues

Oil and Gas
$ 233,235    $ 254,019    $ (20,784 )
Air Medical
154,027    147,379    6,648
Technical Services
15,482    7,818    7,664

Total operating revenues
402,744    409,216    (6,472 )
Segment direct expenses

Oil and Gas⁽¹⁾
200,593    200,824    231
Air Medical
123,615    122,105    (1,510 )
Technical Services
14,001    6,187    (7,814 )

Total segment direct expenses
338,209    329,116    (9,093 )
Segment selling, general and administrative expenses

Oil and Gas
2,434    2,523    89
Air Medical
5,156    5,089    (67 )
Technical Services
322    3    (319 )

Total segment selling, general and administrative expenses
7,912    7,615    (297 )

Total segment expenses
346,121    336,731    (9,390 )

Net segment profit

Oil and Gas
30,208    50,672    (20,464 )
Air Medical
25,256    20,185    5,071
Technical Services
1,159    1,628    (469 )

Total net segment profit
56,623    72,485    (15,862 )
Other, net⁽²⁾
1,102    (1,055 ) 2,157
Unallocated selling, general and administrative costs
(15,372 ) (13,373 ) (1,999 )
Interest expense
(14,325 ) (15,037 ) 712
Loss on debt extinguishment
—      (29,833 ) 29,833

Earnings before income taxes
28,028    13,187    14,841
Income tax expense
11,211    5,140    (6,071 )

Net earnings
$ 16,817    $ 8,047    $ 8,770

Flight hours:

Oil and Gas
50,879    56,063    (5,184 )
Air Medical⁽³⁾
16,820    17,336    (516 )
Technical Services
479    465    14

Total
68,178    73,864    (5,686 )

Air Medical Transports⁽⁴⁾
8,702    8,853    (151 )

Aircraft operated at period end:

Oil and Gas⁽⁵⁾
167    170
Air Medical⁽⁶⁾
100    99
Technical Services
6    6

Total^{(5) (6)}
273    275

Quarter Ended ~~June 30, 2015~~March 31, 2016 compared with Quarter Ended ~~June 30, 2014~~March 31, 2015

Operating Revenues -– Operating revenues for the three months ended ~~June 30, 2015~~March 31, 2016 were ~~$198.5~~$164.0 million, compared to ~~$212.1~~$204.2 million for the three months ended ~~June 30, 2014,~~March 31, 2015, a decrease of ~~$13.6~~$40.2 million. Oil and Gas segment operating revenues decreased ~~$15.2~~$32.0 million for the quarter ended ~~June 30, 2015,~~March 31, 2016, related primarily to decreased aircraft flight revenues for all model types resulting predominately from fewer aircraft on contract and decreased flight hours. Operating revenues in our Air Medical segment ~~increased $2.2~~decreased $2.3 million due principally to ~~increased~~decreased revenues attributable to our ~~independent~~traditional provider programs ~~driven by rate increases over the past year and an improvement in our payor mix.~~resulting from reduced overseas operations.

Total flight hours for the quarter ended ~~June 30, 2015~~March 31, 2016 were ~~34,729~~29,948 compared to ~~39,884~~33,449 for the quarter ended ~~June 30, 2014.~~March 31, 2015. Oil and Gas segment flight hours decreased ~~4,932~~4,399 hours, due to decreases in flight hours for all model types. Air Medical segment flight hours ~~decreased 202~~increased 852 hours from the quarter ended ~~June 30, 2014,~~March 31, 2015, due to ~~decreased~~increased flight hours in our ~~traditional~~independent provider operations. Individual patient transports in the Air Medical segment were ~~4,757~~4,503 for the quarter ended ~~June 30, 2015,~~March 31, 2016, compared to transports of ~~4,748~~3,945 for the quarter ended ~~June 30, 2014.~~March 31, 2015.

Direct Expenses – Direct operating expense was ~~$168.9~~$152.6 million for the three months ended ~~June 30, 2015,~~March 31, 2016, compared to ~~$170.4~~$169.3 million for the three months ended ~~June 30, 2014,~~March 31, 2015, a decrease of ~~$1.5~~$16.7 million, or 1%10%. Employee compensation expense ~~increased $2.0~~decreased $5.3 million due to a ~~headcount increase~~reduction in employees in our Oil and Gas segment resulting from implementation of ~~approximately 1% compared to~~voluntary early retirement programs (“VERPs”) in the ~~prior year, coupled with compensation rate increases.~~third and fourth quarters of 2015 and the first quarter of 2016. Employee compensation expense represented approximately ~~46%~~48% and ~~45%~~46% of total direct expense for the quarters ended ~~June 30,~~March 31, 2016 and 2015, ~~and 2014,~~ respectively. ~~In addition, we~~We also experienced increases of $0.7 million in aircraft rent expense (representing 7% of quarterly total direct expense), increases of $0.8 million in aircraft depreciation (representing 6% of quarterly total direct expense), and increases of $3.2 million in component repair costs due to scheduled maintenance and additional aircraft added to the fleet (representing 6% of quarterly direct expense). Aircraft insurance decreased $1.1 million due to a favorable loss experience and a softening market (representing 1% of quarterly total direct expense). Other decreases ~~include $4.7 million~~ in aircraft fuel ~~due to lower per unit fuel prices~~of $1.8 million, aircraft insurance of $1.0 million, and ~~reduced flight hours (representing 4%~~aircraft warranty costs of ~~quarterly~~$1.0 million (which expenses represent 3%, 1%, and 7% of total direct ~~expense), $1.2~~expense, respectively) as a result of the reduction in flight hours. Costs of goods sold decreased $5.5 million, ~~in aircraft spare parts (representing 4% of quarterly total direct expense), and $0.5 million in aircraft warranty expense (representing 7% of quarterly total direct expense).~~primarily related to reduced services provided to an external customer by our Technical Services segment. Other direct costs decreased ~~$0.7 million.~~$2.1 million on a net basis.

Selling, General, and Administrative Expenses – Selling, general and administrative expenses were ~~$12.0 million for the three months ended June 30, 2015, compared to~~ $11.7 million for the three months ended ~~June 30, 2014.~~March 31, 2016, compared to $11.2 million for the three months ended March 31, 2015. The ~~$0.3~~$0.5 million increase was primarily attributable to increased ~~employee compensation expense due to additional personnel, compensation increases and non-cash equity compensation.~~legal fees incurred in the current year.

(Loss) Gain ~~(Loss)~~ on Disposal of Assets, net – ~~Gain~~Loss on asset dispositions was $0.4 million for the three months ended March 31, 2016, compared to a gain of less than $0.1 million for the three months ended ~~June 30, 2015, compared to a loss of $0.2 million for the three months ended June 30, 2014.~~March 31, 2015. This ~~increase~~decrease was primarily due to the ~~second quarter 2014 loss on the~~ sale or disposition of ~~two~~one light ~~one medium, and one fixed wing~~ aircraft that no longer met our strategic needs. See Note 8.

Equity in Loss of Unconsolidated Affiliate – Equity in the loss of our unconsolidated affiliate attributable to our mid-2011 investment in a Ghanaian entity was ~~$0.1~~$0 million for the three months ended ~~June 30, 2015, and~~March 31, 2016, compared to a loss of less than $0.1 million for the three months ended ~~June 30, 2014.~~March 31, 2015, reflecting reduced demand for offshore flight services due to lower oil and gas exploration activities. See Note 11.

Interest Expense – Interest expense was $7.5 million for the three months ended March 31, 2016 and $7.2 million for the three months ended ~~June 30,~~March 31, 2015, ~~and $7.7 million for the three months ended June 30, 2014. Our interest expense in the second quarter of 2014 was higher~~principally due to ~~non-recurring interest charges associated with late foreign tax payments.~~

~~Loss on Debt Extinguishment~~ ~~– In the first quarter of 2014, we recorded a pre-tax charge of $29.2 million due to the early retirement of substantially all of our previously~~higher average outstanding 8.625% Senior Notes pursuant to a tender offer that settled on March 17, 2014. This charge consisted of a $26.1 million tender premium and $3.1 million of unamortized issuance costs. We recorded a pre-tax charge of $0.6 million in the second quarter of 2014 associated with our redemption on April 16, 2014 of the remaining 8.625% Senior Notes not previously tendered. For more information, see Note 5.debt balances.

Other ~~income,~~Income, net – Other income was $0.6 million for the three months ended ~~June 30, 2015~~March 31, 2016 compared to ~~$0.2~~$0.5 million for the same period in ~~2014,~~2015, and represents primarily interest income. The ~~$0.4~~$0.1 million increase is primarily attributable to an increase in the amount and rate of return of our short-term investments.

Income Taxes – Income tax expense for the three months ended ~~June 30, 2015~~March 31, 2016 was ~~$4.6~~$1.4 million compared to income tax expense of ~~$8.3~~$6.6 million for the three months ended ~~June 30, 2014. Our~~March 31, 2015. The $1.4 million income tax expense recorded in the three months ended March 31, 2016 is comprised of a valuation allowance on certain state tax benefits related to net operating loss carryforwards of $4.1 million, which was partially offset by a $2.7 million tax benefit on our loss before income taxes. The valuation allowance recorded was solely attributable to a change in the Louisiana tax law which limits our ability to fully realize the tax benefit of our existing net operating loss carryforwards in this state. Absent the valuation allowance, our effective tax rate was ~~42%~~36.2% and ~~38.4%~~39% for the three months ended ~~June 30,~~March 31, 2016 and March 31, 2015, ~~and June 30, 2014,~~ respectively. The ~~decrease in income tax expense in~~higher rate for the ~~second~~three months ended March 31, 2015 reflects the impact of recording during that quarter ~~of 2015 is attributable to our reduction in earnings before tax, principally as~~ a ~~result of lower profits in our Oil and Gas segment. The increase in the effective tax rate is attributable to an~~one-time increase in the valuation allowance on our foreign tax credits.

Net ~~Earnings~~Loss – Net ~~earnings~~loss for the three months ended ~~June 30, 2015 were $6.5~~March 31, 2016 was $8.9 million compared to net earnings of ~~$13.4~~$10.4 million for the three months ended ~~June 30, 2014. Earnings~~March 31, 2015. Loss before income taxes for the three months ended ~~June 30, 2015~~March 31, 2016 was ~~$11.0~~$7.5 million compared to earnings before income tax of ~~$21.7~~$17.0 million for the same period in ~~2014. Earnings~~2015. Losses per diluted share were ~~$0.41~~$0.31 for the current quarter compared to earnings per diluted share of ~~$0.85~~$0.66 for the prior year quarter. The decrease in earnings before taxes for the quarter ended ~~June 30, 2015~~March 31, 2016 is principally attributable to the decreased profits in our Oil and Gas and Technical Services segments, partially offset by ~~increased~~a small increase in the profits infrom our Air Medical segment. We had ~~15.7~~15.6 million weighted average diluted common shares outstanding during the three months ended ~~June 30, 2015~~March 31, 2016 and ~~2014.~~2015.

Oil and Gas – Oil and Gas segment revenues were ~~$112.8~~$88.4 million for the three months ended ~~June 30, 2015,~~March 31, 2016, compared to ~~$128.0~~$120.4 million for the three months ended ~~June 30, 2014,~~March 31, 2015, a decrease of ~~$15.2~~$32.0 million. Our Oil and Gas segment revenues are primarily driven by contracted aircraft and flight hours. Costs are primarily fixed based on the number of aircraft operated, with a variable portion that is driven by flight hours.

Oil and Gas segment flight hours were ~~25,743~~20,737 for the most recent quarter compared to ~~30,675~~25,136 for the same quarter in the prior year, a decrease of ~~4,932~~4,399 flight hours. The decline in flight hours is attributable to lower flight hours and fewer aircraft on contract for all model types due to ~~lower~~reduced oil and gas exploration and production activities in response to lower prevailing oil prices. ~~During the second quarter of 2015, we had fewer light and medium aircraft on contract and experienced decreased flight hours for our medium and heavy aircraft.~~

The number of aircraft deployed in the segment was ~~167~~154 at ~~June 30, 2015,~~March 31, 2016, compared to ~~170~~168 at ~~June 30, 2014.~~March 31, 2015. We added ~~six~~one new heavy aircraft to our Oil and Gas segment since ~~June 30, 2014, consisting of five heavy and one light aircraft.~~March 31, 2015. We have sold or disposed of ~~ten~~seven light aircraft in the Oil and Gas segment since ~~June 30, 2014.~~March 31, 2015. Changes in customer-owned aircraft and transfers between segments account for the remainder.

Direct expense in our Oil and Gas segment was $91.9 million for the three months ended March 31, 2016, compared to $100.3 million for the three months ended ~~June 30,~~March 31, 2015, ~~compared to $103.5 million for the three months ended June 30, 2014,~~ a decrease of ~~$3.2~~$8.4 million. ~~Aircraft fuel~~Employee compensation expense decreased $4.1 million due to a reduction in employees resulting from implementation of our VERPs. During the ~~volume~~first quarter of ~~fuel consumed and lower fuel rates.~~2016, we recorded $1.6 million of severance costs related to these programs. See Note 10. There were also decreases in aircraft ~~parts expense~~fuel of ~~$1.7~~$2.0 million and aircraft warranty costs of $0.5 million. These decreases were partially offset by increases in aircraft depreciation of $0.8 million, increases in component repair expense of $0.7 million, and increases in aircraft rent expense of $0.7$1.1 million due to ~~additional leased aircraft added to~~ the ~~fleet.~~reduction in flight hours. Other items decreased $1.2 million on a net ~~$0.9 million.~~basis.

Selling, general, and, administrative segment expenses were ~~$1.3 million for the three months ended June 30, 2015 and~~ $1.5 million for the three months ended ~~June 30, 2014.~~March 31, 2016 and $1.2 million for the three months ended March 31, 2015. The ~~$0.2~~$0.3 million ~~decrease~~increase is primarily attributable to increased legal fees of $0.2 million, and increased bad debt expense of $0.2 million. Other items decreased ~~employee compensation expense, due to severance paid in the prior year.~~net $0.1 million.

Oil and Gas segment ~~profit~~loss was ~~$11.3~~$5.0 million for the quarter ended ~~June 30, 2015,~~March 31, 2016, compared to segment profit of ~~$23.1~~$18.9 million for the quarter ended ~~June 30, 2014.~~March 31, 2015. The decrease in segment profit was due to decreased revenues, which were only partially offset by decreased expenses attributable to the above-described factors.

Air Medical – Air Medical segment revenues were ~~$81.6~~$70.1 million for the three months ended ~~June 30, 2015,~~March 31, 2016, compared to ~~$79.4~~$72.4 million for the three months ended ~~June 30, 2014, an increase~~March 31, 2015. This decrease of ~~$2.2~~$2.3 million ~~as a result of increased~~is primarily attributable to decreased revenues from our traditional provider programs resulting from the reduction in our overseas operations. These decreases were partially offset by higher revenues from our independent provider programs driven by, ~~rate increases implemented over the past year and~~among other things, an ~~improvement~~increase in ~~our payor mix.~~operating bases. Patient transports were ~~4,757~~4,503 for the three months ended ~~June 30, 2015,~~March 31, 2016, compared to ~~4,748~~3,945 for the same period in the prior year.

The number of aircraft in the segment at ~~June 30, 2015~~March 31, 2016 was ~~100~~105 compared to 99100 at ~~June 30, 2014.~~March 31, 2015. Since ~~June 30, 2014,~~March 31, 2015, we added ~~two medium~~seven light aircraft to our Air Medical segment. Changes in customer-owned aircraft and transfers between segments account for the remainder.

Direct expense in our Air Medical segment was ~~$63.6~~$57.0 million for the three months ended ~~June 30, 2015,~~March 31, 2016, compared to ~~$62.7~~$60.0 million for the three months ended ~~June 30, 2014, an increase~~March 31, 2015, a decrease of ~~$0.9~~$3.0 million. We incurred ~~increases~~decreases in employee compensation costs of ~~$2.6~~$1.8 million due to ~~additional personnel and compensation rate increases.~~a reduction in pilot compensation. Component repair costs also ~~increased $2.5~~decreased $1.5 million as a result of a reduction in scheduled maintenance for certain ~~light~~ aircraft. ~~These increases were partially offset by a decrease in cost~~Cost of goods sold ~~of $3.2~~also decreased $1.3 million ~~and a decrease in aircraft fuel expense of $0.6 million. The decrease in cost of goods sold is~~ related to certain items that are billed on a cost plus basis on our Middle East project. Other items ~~decreased,~~increased, net ~~$0.4~~$1.6 million.

Selling, general and administrative segment expenses were ~~$2.5~~$2.6 million for the three months ended ~~June 30, 2015, compared to $2.9 million for~~March 31, 2016, as well as the three months ended ~~June 30, 2014. The $0.4 million decrease was primarily due to a decrease in outside services of $0.3 million and a decrease in travel costs of $0.1 million.~~March 31, 2015.

Air Medical segment profit was ~~$15.5~~$10.4 million for the quarter ended ~~June 30, 2015,~~March 31, 2016, compared to a segment profit of ~~$13.8~~$9.7 million for the quarter ended ~~June 30, 2014.~~March 31, 2015. The $0.7 million increase in profit is ~~primarily~~ attributable to the ~~increased revenues~~decreased operating expenses described ~~above, partially offset by increased operating expenses.~~above.

Technical Services – Technical Services revenues were ~~$4.1~~$5.5 million for the three months ended ~~June 30, 2015,~~March 31, 2016, compared to ~~$4.7~~$11.4 million for the three months ended ~~June 30, 2014.~~March 31, 2015. The decrease in revenue is due primarily to a decrease of technical services provided to a third party customer. The current projects with this customer ~~are expected to be completed~~were near completion in the ~~third~~first quarter of ~~2015,~~2016, after which additional projects are expected to begin and continue through 2016. Direct expenses decreased $5.3 million compared to the prior year quarter, principally due to reduced operations. Technical Services segment ~~loss was $1.2~~earnings were $1.7 million for the three months ended ~~June 30, 2015,~~March 31, 2016, compared to segment profit of ~~$0.4~~$2.4 million for the three months ended ~~June 30, 2014. Direct expenses increased $0.9 million compared to the prior year quarter.~~

~~Six Months Ended June 30, 2015 compared with Six Months Ended June 30, 2014~~

~~Operating Revenues~~ - Operating revenues for the six months ended June 30, 2015 were $402.7 million, compared to $409.2 million for the six months ended June 30, 2014, a decrease of $6.5 million. Oil and Gas segment operating revenues decreased $20.8 million for the six months ended June 30, 2015, related primarily to decreased aircraft flight revenues for all model types resulting predominately from less aircraft on contract and decreased flight hours for these aircraft. Operating revenues in our Air Medical segment increased $6.6 million due principally to increased revenues attributable to our independent provider programs, driven principally by an improvement in payor mix and rate increases over the past year. Technical Services operating revenues increased $7.7 million due to services provided to a third party customer under projects discussed further below.

Total flight hours for the six months ended June 30, 2015 were 68,178 compared to 73,840 for the six months ended June 30, 2014. Oil and Gas segment flight hours decreased 5,184 hours, due principally to decreases in light and medium aircraft flight hours, partially offset by an increase in heavy aircraft flight hours. Air Medical segment flight hours decreased 516 hours from the six months ended June 30, 2014, due to decreased flight hours in our independent provider programs. Individual patient transports in the Air Medical segment were 8,702 for the six months ended June 30, 2015, compared to 8,853 transports for the six months ended June 30, 2014.

~~Direct Expenses~~ – Direct operating expense was $338.2 million for the six months ended June 30, 2015, compared to $329.1 million for the six months ended June 30, 2014, an increase of $9.1 million, or 3%. Employee compensation expense increased $3.2 million due to a headcount increase of approximately 1% compared to the prior year, coupled with compensation rate increases. Employee compensation expense represented approximately 46% of total direct expense for the six months ended June 30, 2015 and 2014. In addition, we experienced increases

of $0.7 million in aircraft rent expense (representing 7% of total direct expense), increases of $2.0 million in aircraft depreciation (representing 6% of total direct expense), and increases of $2.2 million in aircraft warranty expense due to additional aircraft added to the fleet and vendor rate increases (representing 7% of direct expense). We also experienced increases in component repair costs of $5.4 million (representing 6% of total direct expense), primarily due to scheduled maintenance performed in the current year. Fuel expense decreased $8.4 million (representing 4% of total direct expense) due to lower per unit fuel costs and the reduction in flight hours. Costs of goods sold increased $3.6 million, primarily related to expanded services provided to an external customer by our Technical Services segment. Other direct costs items increased $0.4 million, net.

~~Selling, General, and Administrative Expenses~~ – Selling, general and administrative expenses were $23.3 million for the six months ended June 30, 2015, compared to $21.0 million for the six months ended June 30, 2014. The $2.3 million increase was primarily attributable to increased employee compensation expense.

~~Gain (loss) on disposal of assets, net~~ – Gain on asset dispositions was $0.1 million for the six months ended June 30, 2015, compared to a loss of $1.3 million for the six months ended June 30, 2014. In the first half of 2014, we sold two light, one medium, and one fixed wing aircraft that no longer met our strategic needs. See Note 8.

~~Equity in loss of unconsolidated affiliate~~ – Equity in the loss of our unconsolidated affiliate attributable to our mid-2011 investment in a Ghanaian entity was $0.2 million and $0.1 million for the six months ended June 30, 2015 and 2014, respectively. See Note 11.

~~Interest Expense~~ – Interest expense was $14.3 million for the six months ended June 30, 2015, compared to $15.0 for the six months ended June 30, 2014, principally due to lower outstanding debt balances and lower average interest rates. Our interest expense in the first half of 2014 was higher due to non-recurring interest charges associated with late foreign tax payments.

~~Loss on Debt Extinguishment~~ – In the first quarter of 2014, we recorded a pre-tax charge of $29.2 million due to the early retirement of substantially all of our previously outstanding 8.625% Senior Notes pursuant to a tender offer that settled on March 17, 2014. This charge consists of a $26.1 million tender premium and $3.1 million of unamortized issuance costs. We recorded a pre-tax charge of $0.6 million in the second quarter of 2014 associated with our redemption on April 16, 2014 of the remaining 8.625% Senior Notes not previously tendered. For more information, see Note 5.

~~Other income, net~~ ~~– Other income was $1.0 million for the six months ended June 30, 2015 compared to $0.3 million for the same period in 2014 and represents primarily interest income.~~

~~Income Taxes~~ – Income tax expense for the six months ended June 30, 2015 was $11.2 million compared to income tax expense of $5.1 million for the six months ended June 30, 2014. Our effective tax rate was 40% and 39% for the six months ended June 30, 2015 and June 30, 2014, respectively. The increase in income tax expense is primarily attributable to lower earnings before tax for the six months ended June 30, 2014 as a result of extinguishment charges related to the above-described redemption of our 8.625% Senior Notes, compared to the six months ended June 30,31, 2015.

~~Net Earnings~~ – Net earnings for the six months ended June 30, 2015 was $16.8 million compared to net earnings of $8.0 million for the six months ended June 30, 2014. Earnings before income taxes for the six months ended June 30, 2015 was $28.0 million compared to earnings before income tax of $13.2 million for the same period in 2014. Earnings per diluted share was $1.07 for the current six months compared to earnings per diluted share of $0.52 for the prior year six months. The favorable variance is attributable to the pre-tax charge of $29.2 million related to the early retirement of our 8.625% Senior Notes recorded in the first half of last year. We had 15.7 million and 15.6 million weighted average diluted common shares outstanding during the six months ended June 30, 2015 and 2014, respectively.

~~Oil and Gas~~ – Oil and Gas segment revenues were $233.2 million for the six months ended June 30, 2015, compared to $254.0 million for the six months ended June 30, 2014, a decrease of $20.8 million. Our Oil and Gas segment revenues are primarily driven by contracted aircraft and flight hours. Costs are primarily fixed based on the number of aircraft operated, with a variable portion that is driven by flight hours.

Oil and Gas segment flight hours were 50,879 for the current six months compared to 56,063 for the same six months in the prior year, a decrease of 5,184 flight hours. The decline in flight hours is attributable to lower flight hours for our light and medium aircraft, partially offset by increased flight hours for our heavy aircraft. The decrease in revenue is primarily due to decreased revenues for all model types, primarily attributable to less aircraft on contract and decreased light and medium aircraft flight hours for these aircraft in the Gulf of Mexico.

The number of aircraft deployed in the segment was 167 at June 30, 2015, compared to 170 at June 30, 2014. We added six new aircraft to our Oil and Gas segment since June 30, 2014, consisting of five heavy and one light aircraft. We have sold or disposed of ten light aircraft in the Oil and Gas segment since June 30, 2014. Changes in customer-owned aircraft and transfers between segments account for the remainder.

Direct expense in our Oil and Gas segment was $200.6 million for the six months ended June 30, 2015, compared to $200.8 million for the six months ended June 30, 2014, a decrease of $0.2 million. Employee compensation expenses increased $1.2 million due to increases in personnel and compensation rate increases. There were increases in aircraft rent expense of $0.8 million, aircraft depreciation of $2.0 million, aircraft warranty costs of $1.2 million, and component repair costs of $1.2 million, due to the additional heavy aircraft added to the fleet. Aircraft fuel costs decreased $7.3 million due to a reduction in the volume of fuel consumed and lower fuel rates. Other items increased $0.7 million, net.

Selling, general and administrative segment expenses were $2.4 million for the six months ended June 30, 2015 and $2.5 million for the six months ended June 30, 2014. The decrease was primarily due to decreased business travel expense.

Oil and Gas segment profit was $30.2 million for the six months ended June 30, 2015, compared to segment profit of $50.7 million for the six months ended June 30, 2014. The decrease in segment profit was due to the decreased revenues detailed above.

~~Air Medical~~ – Air Medical segment revenues were $154.0 million for the six months ended June 30, 2015, compared to $147.4 million for the six months ended June 30, 2014, an increase of $6.6 million. Operating revenues in our independent provider programs increased $6.6 million primarily due to improved payor mix and rate increases implemented over the past year. Patient transports were 8,702 for the six months ended June 30, 2015, compared to 8,853 for the same period in the prior year. Operating revenues in our traditional provider programs increased $0.4 million due to the expansion of our overseas operations. Other segment revenue decreased $0.4 million.

The number of aircraft in the segment at June 30, 2015 was 100 compared to 99 at June 30, 2014. Since June 30, 2014, we added two medium aircraft to our Air Medical segment. Changes in customer-owned aircraft and transfers between segments account for the remainder.

Direct expense in our Air Medical segment was $123.6 million for the six months ended June 30, 2015, compared to $122.1 million for the six months ended June 30, 2014, an increase of $1.5 million. Employee compensation expenses increased $2.1 million due to increases in personnel and compensation rate increases. There were also increases in spare parts and component repair costs of $0.7 million and $4.2 million, respectively, due to additional aircraft added to the fleet and scheduled maintenance for certain model types. We also experienced increases in warranty costs of $0.9 million. In 2014, we terminated the manufacturer’s warranty program for certain aircraft, which resulted in a $0.9 million credit to aircraft warranty expense in the first quarter of 2014. There was a decrease in cost of goods sold of $3.0 million due to certain costs attributable to our international operations which we bill on a cost plus basis. We also experienced decreases in aircraft insurance of $0.8 million due to a favorable loss experience, fuel costs of $1.1 million due to lower per unit fuel costs and reduced flight hours, and property taxes of $0.5 million. Other direct expense items decreased by a net of $1.0 million.

Selling, general and administrative segment expenses were $5.2 million for the six months ended June 30, 2015, compared to $5.1 million for the six months ended June 30, 2014. The $0.1 million increase was primarily due to an increase of $0.5 million in employee compensation expense, due to additional personnel and compensation rate increases, offset by decreases in promotional expenses of $0.1 million and outside service expenses of $0.3 million.

Air Medical segment profit was $25.3 million for the six months ended June 30, 2015, compared to a segment profit of $20.2 million for the six months ended June 30, 2014. The increase in profit is primarily attributable to the increased revenues described above, partially offset by the increased aircraft operating expenses described above.

~~Technical Services~~ – Technical Services revenues were $15.5 million for the six months ended June 30, 2015, compared to $7.8 million for the six months ended June 30, 2014. Direct expense increased $7.8 million compared to the prior year six months. The increase in revenue is due primarily to an increase of technical services provided to a third party customer. The current projects for this customer are expected to be completed in the third quarter of 2015, after which additional projects are expected to begin and continue through 2016. Technical Services segment profit was $1.2 million for the six months ended June 30, 2015, compared to $1.6 million for the six months ended June 30, 2014.

Our ongoing liquidity requirements arise primarily from the purchase or leasing of aircraft, the maintenance and refurbishment of aircraft, improvement of facilities, the acquisition of equipment and inventory, and other working capital needs. Our principal sources of liquidity historically have been net cash provided by our operations, borrowings under our revolving credit facility, and proceeds from periodic senior note offerings. To the extent we do not use cash, short-term investments or borrowings to finance our aircraft acquisitions, we frequently enter into operating leases to fund these acquisitions.

Liquidity-– Our cash position was ~~$3.7~~$6.5 million at ~~June 30, 2015,~~March 31, 2016, compared to ~~$6.3~~$2.4 million at December 31, ~~2014.~~2015. Short-term investments were ~~$217.1~~$286.1 million at ~~June 30, 2015,~~March 31, 2016, compared to ~~$185.2~~$284.5 million at December 31, ~~2014.~~2015. We also had $15.3 million ~~and $15.5 million~~ in restricted investments at ~~June 30, 2015~~March 31, 2016 and December 31, ~~2014, respectively,~~2015 securing outstanding letters of credit.

As noted in greater detail above, the current downturn in the oil and gas industry has negatively impacted our offshore operations since the first quarter of 2015, and we expect further reductions in the operating revenues and net profit of our Oil and Gas segment in 2016. Through December 31, 2015, these negative variances did not materially impact our liquidity or the cash flows reported in our consolidated cash flows statements, as described in further detail below. Nonetheless, if the current oil and gas downturn persists, we expect that it will ultimately have a negative impact on our consolidated operating cash flow, liquidity, and compliance with our financial covenants under our credit facility.

Operating activities- – Net cash used in operating activities was $16.3 million for the three months ended March 31, 2016, compared to net cash provided of $29.9 million for the same period in 2015, a decrease of $46.2 million. Net cash provided by operating activities ~~was $69.3~~(excluding changes in operating assets and liabilities) contributed $11.8 million ~~for~~of cash flow in the ~~six months ended June 30, 2015,~~first quarter of 2016, compared to ~~$45.3~~$35.4 million ~~for~~in the ~~same period~~first quarter of 2015, a decrease of $23.6 million, primarily due to the decreased profitability of our oil and gas segment. Net changes in ~~2014, an increase~~operating assets and liabilities in first quarter of ~~$24.0 million.~~2016 used cash of $28.1 million, compared to a net use of cash of $5.5 million in first quarter of 2015. The ~~$24.0~~$22.6 million increase in net use of cash ~~flow from operations is~~was primarily due to ~~a favorable variance~~$32.7 million less cash collected in ~~changes in working capital during the~~ first ~~half~~quarter of ~~2015. We had a $5.5 million increase in cash flow compared~~2016 related to ~~prior year~~our Middle East contract, due to timing of payments. Other increases in the use of cash for 2016 were due to an increase in our aircraft parts inventory of $3.4 million for a certain model type and payments related to ~~aircraft insurance and training~~a VERP of $4.7 million. Finally, items offsetting the use of cash in 2016 compared to 2015 were a decrease of $9.1 million in bonuses paid, and a ~~$6.6~~$9.1 million increase due to timing of tax payments related to our Air Medical contract in the Middle East. Our cash flow from our Air Medical independent provider customers provided an increase of $8.7 million, and lastly, we had a reduction of $2.7 milliondecrease in payments ~~for warranty cost due~~made to ~~changes in coverage.~~major suppliers.

Investing activities- – Net cash used in investing activities was ~~$62.1~~$9.2 million for the ~~six~~three months ended ~~June 30, 2015,~~March 31, 2016, compared to ~~$111.6~~$27.0 million for the same period in ~~2014.~~2015. Purchases and sales of short-term investments used ~~$33.0~~$1.5 million of cash during the ~~six~~three months ended ~~June 30, 2015~~March 31, 2016 compared to ~~$51.3~~$4.8 million in the comparable prior year period. This decrease in purchases of short-term investments is principally due to our purchase of $71.0 million of short-term investments in the first half of 2014 with the net proceeds from our March 2014 senior note issuance (net of debt repayments). Gross proceeds from asset dispositions in the first ~~half~~quarter of ~~2015~~2016 were ~~$0.6~~$0.9 million. There were no gross proceeds from asset dispositions in the first quarter of 2015. Capital expenditures were $8.5 million for the three months ended March 31, 2016, compared to ~~$7.1~~$22.1 million for the same period in ~~2014. Capital expenditures were $29.5 million for the six months ended June 30, 2015, compared to $66.9 million for the same period in 2014.~~2015. Capital expenditures for aircraft and aircraft improvements accounted for ~~$26.5~~$8.0 million and ~~$63.8~~$20.8 million of these totals for the ~~six~~three months ended ~~2015~~2016 and ~~2014,~~2015, respectively, which reflects a ~~substantial~~ decrease in the number of aircraft purchased by us in the first ~~half~~three months of ~~2015~~2016 as compared to the same period in ~~2014.~~2015. During the first quarter of 2016, we took delivery of one heavy aircraft that we intend to finance with an operating lease in the second quarter. During the same period in 2015, we ~~(i)~~ exercised a purchase option on one heavy aircraft and ~~(ii)~~ took delivery of another heavy aircraft as to ~~be paid for~~which we executed an operating lease in the ~~third~~second quarter of 2015.

Financing activities – Financing activities during the first ~~half~~quarter of ~~2015~~2016 included net ~~payments~~borrowings of ~~$7.5~~$30.2 million on our revolving credit facility and ~~$2.3~~$0.5 million used to repurchase shares of our non-voting common stock to satisfy withholding tax obligations of employees.

Financing activities during the first half of 2014 included the issuance of $500 million of 5.25% Senior Notes due 2019 on March 17, 2014, as further described below. Net proceeds of $494.9 million from this issuance were used to repurchase $292.6 million of our $300 million of previously outstanding 8.625% Senior Notes due 2018 pursuant to a tender offer that also settled on March 17, 2014. Our total cost to repurchase those notes was $29.2 million, including the tender premium of $26.1 million and $3.2 million of unamortized issuance costs. We had net payments of $79.0 million on the revolving credit facility duringfor the first quarter of ~~2014.~~

~~Other~~ ~~– Our cash taxes paid during the period ended June 30,~~ 2015 ~~were substantially lower than~~included net payments of $3.4 million on our ~~cash taxes for the comparable prior six-month period in 2014 due~~revolving credit facility and $2.2 million used related to the ~~timing~~purchase of ~~foreign taxes paid.~~shares of our non-voting common stock to satisfy withholding tax obligations of employees.

As of ~~June 30, 2015,~~March 31, 2016, our total long-term debt was ~~$535.5~~$587.7 million, consisting of our $500 million of 5.25% Senior Notes due 2019 and ~~$35.5~~$87.7 million borrowed under our revolving credit facility.

~~5.25% Senior Notes due 2019~~ – On March 17, 2014, we issued $500 million of 5.25% Senior Notes due March 15, 2019. Proceeds were approximately $494.9 million, net of fees and expenses, and were used to retire $292.6 million of our $300 million of previously outstanding 8.625% Senior Notes pursuant to a tender offer, at a total cost of $329.4 million including the tender premium and accrued interest. We redeemed the remaining $7.4 million of 8.625% Senior Notes on April 16, 2014, at a redemption price of 108.3% of the face amount plus accrued interest.

After the repurchase and redemption of all $300 million of our previously outstanding 8.625% Senior Notes as described above, we had remaining net proceeds of approximately $156 million. We used $91.9 million of the proceeds to pay off all of our revolving credit facility balance then outstanding. We used the remaining proceeds for general corporate purposes, including the exercise of purchase options for aircraft previously leased and the purchase of new aircraft.

~~For additional information about the terms of our 5.25% Senior Notes issued on March 17, 2014, see Note 5.~~

Revolving Credit Facility – We have an amended and restated revolving credit facility (our “credit facility”) that matures on October 1, ~~2016.~~2017. Under our credit facility, we can borrow up to $150 million at floating interest rates based on either the London Interbank Offered Rate plus 225 basis points or the prime rate (each as defined in our credit facility), at our option. Our credit facility includes usual and customary covenants and events of default for credit facilities of its type. Our ability to borrow under the credit facility is conditioned upon our continued compliance with such covenants, including, among others, (i) covenants that restrict our ability to engage in certain asset sales, mergers or other fundamental changes, to incur liens or to engage in certain other transactions or activities and (ii) financial covenants that stipulate that PHI will maintain a consolidated working capital ratio of at least 2 to 1, a funded debt to consolidated net worth ratio not greater than 1.5 to 1, a fixed charge coverage ratio of at least 1.1 to 1, and consolidated net worth of at least $450 million (with all such terms or amounts as defined in or determined under the credit facility).

At ~~June 30, 2015,~~March 31, 2016, we had ~~$35.5~~$87.7 million in borrowings under our credit facility. At the same date in ~~2014,~~2015, we had no$39.6 million in borrowings under our credit facility.

Other – We maintain a separate letter of credit facility described in Note 5 that had $15.3 million of letters of credit outstanding at ~~June 30, 2015.~~March 31, 2016.

The table below sets out our contractual obligations as of ~~June 30, 2015,~~March 31, 2016, related to our operating lease obligations, aircraft purchase commitments, revolving credit facility, and 5.25% Senior Notes due 2019. ~~We have presented the information below as if those cancellations were effective at June 30, 2015.~~ Our obligations under the operating leases are not recorded as liabilities on our balance sheet. Each contractual obligation included in the table contains various terms, conditions, and covenants that, if violated, accelerate the payment of that obligation under certain specified circumstances. We believe we were in compliance with the covenants applicable to these contractual obligations as of ~~June 30, 2015.~~March 31, 2016. As of ~~June 30, 2015,~~March 31, 2016, we leased 2425 aircraft included in the lease obligations below.

The table above reflects only contractual obligations as of ~~June 30, 2015~~March 31, 2016 and excludes, among other things, (i) commitments made thereafter, (ii) options to purchase assets, including those described in the next paragraph, (iii) contingent liabilities, (iv) capital expenditures that we plan, but are not committed, to make and (v) open purchase orders.

As of ~~June 30, 2015,~~March 31, 2016, we had options to purchase various aircraft that we currently operate under lease agreements with the aircraft owners. These options will become exercisable at various dates inbetween 2016 ~~through 2019.~~and 2020. The aggregate option purchase prices are $67.8 million in 2016, $55.7 million in 2017, $127.0 million in 2018, ~~and~~ $150.4 million in ~~2019.~~2019, and $22.7 million in 2020. Whether we exercise these options will depend upon several factors, including market conditions and our available cash at the respective exercise ~~dates..~~dates.

On January ~~2, 2015,~~15, 2016, we ~~purchased~~took initial delivery of one heavy aircraft. The aircraft ~~off lease pursuant to a purchase option~~will be finally delivered in ~~the lease contract for~~May 2016 when completion services are finished. We are currently pursuing financing with an ~~aggregate purchase price of $17.7 million.~~operating lease.

We intend to fund the above contractual obligations and purchase options through a combination of cash on hand, cash flow from operations, borrowings under our credit facility, ~~and~~refinancing transactions or sale-leaseback transactions.

For additional information on our contemplated capital expenditures, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Capital Expenditures” in Item 7 of our Annual Report on Form 10-K for the year ended December 31, ~~2014.~~2015.

We have not paid dividends on either class of our common stock since 1999 and do not expect to pay dividends in the foreseeable future.

Market risk is the risk of changes in the value of financial instruments, or in future net income or cash flows, in response to changing market conditions.

Our earnings are subject to changes in short-term interest rates due to the variable interest rate payable under our credit facility debt. Based on the ~~$32.2~~$39.8 million weighted average loan balance during the ~~six~~three months ended ~~June 30, 2015,~~March 31, 2016, a 10% increase ~~(0.243%~~(0.245%) in interest rates would have reduced our annual pre-tax earnings approximately $0.1 million, but would not have changed the fair market value of this debt.

Our $500 million of outstanding 5.25% Senior Notes due 2019 bear interest at a fixed rate of 5.25% and therefore changes in market interest rates do not affect our interest payment obligations on the notes. The fair market value of our 5.25% Senior Notes will vary as changes occur to general market interest rates, the remaining maturity of the notes, and our creditworthiness. At ~~June 30, 2015,~~March 31, 2016, the market value of the notes was approximately ~~$465.0~~$457.5 million, based on quoted market prices.

The interest and other payments we earn and recognize on our investments in money market funds, U.S. Government agencies debt, commercial paper, and corporate bonds and notes are subject to the risk of declines in general market interest rates.

The Company’s management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the design and operation of our disclosure controls and procedures were effective as of such date to ensure that information required to be disclosed by us in the reports that we file or furnish under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, including to ensure that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There have been no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

The effectiveness of our or any system of disclosure controls and procedures is subject to certain limitations, including the exercise of judgment in designing, implementing and evaluating the controls and procedures, the assumptions used in identifying the likelihood of future events and the inability to eliminate misconduct completely. As a result, we cannot assure you that our disclosure controls and procedures will detect all errors or fraud.

For information regarding legal proceedings, see “Legal Matters” in Note 9 to our financial statements included in this report, incorporated herein by reference.

For information regarding certain risks relating to our operations, any of which could negatively affect our business, financial condition, operating results or prospects, see Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, ~~2014.~~2015.

During the ~~second~~first quarter of ~~2015~~2016, we ~~(i)~~ withheld from employees and canceled ~~460~~26,660 shares of our non-voting common stock in connection with the vesting of their stock-based awards to satisfy the related minimum tax withholding ~~obligations and (ii) repurchased as treasury shares 3,581 shares of our non-voting common stock under our recently-implemented voluntary employee stock repurchase plan.~~obligation. The following table provides additional information about these transactions.

At PHI’s annual meeting of shareholders on May 5, 2016, for which proxies were not solicited, the board of directors that was nominated, as described in the Company’s Information Statement filed April 13, 2016, was elected in its entirety, with 2,043,662 votes in favor of each director, and zero votes withheld or abstaining. The ratification of the appointment of Deloitte & Touche as PHI’s independent registered public accounting firm for the fiscal year ending December 31, 2016 was approved with 2,043,662 votes in favor, and zero votes against or abstaining.



		101.INS*		XBRL Instance Document

		101.SCH*		XBRL Taxonomy Extension Schema

		101.CAL*		XBRL Taxonomy Extension Calculation Linkbase

		101.DEF*		XBRL Taxonomy Extension Definition Linkbase

		101.LAB*		XBRL Taxonomy Extension Label Linkbase

		101.PRE*		XBRL Taxonomy Extension Presentation Linkbase

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Louisiana		72-0395707
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


	Part I – Financial Information

Item 1.	Financial Statements – Unaudited
	Condensed Consolidated Balance Sheets – ~~June 30, 2015~~March 31, 2016 and December 31, ~~2014~~2015	3
	Condensed Consolidated Statements of Operations – ~~Quarter and Six~~Three Months ended ~~June 30,~~March 31, 2016 and 2015 ~~and 2014~~	4
	Condensed Consolidated Statements of Comprehensive Income – ~~Quarter and Six~~Three Months ended ~~June 30,~~March 31, 2016 and 2015 ~~and 2014~~	5
	Condensed Consolidated Statements of Shareholders’ Equity – ~~Six~~Three Months ended ~~June 30,~~March 31, 2016 and 2015 ~~and 2014~~	6
	Condensed Consolidated Statements of Cash Flows – ~~Six~~Three Months ended ~~June 30,~~March 31, 2016 and 2015 ~~and 2014~~	7
	Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2724

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3933

Item 4.	Controls and Procedures	3933

~~Part II – Other Information~~

	Part II – Other Information

Item 1.	Legal Proceedings	4034

Item 1A.	Risk Factors	4034

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4034

Item 3.	Defaults Upon Senior Securities	4034

Item 4.	Mine Safety Disclosures	4034

Item 5.	Other Information	4034

Item 6.	Exhibits	4135

	Signatures	4237


	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	)


			Payment Due by Year
	Total		2015⁽¹⁾		2016⁽²⁾		2017		2018		2019		Beyond 2019
			(Thousands of dollars)
Aircraft purchase commitments⁽³⁾	$	55,296	$	55,296	$	—	$	—	$	—	$	—	$	—
Aircraft lease obligations		279,376		22,685		42,885		40,595		36,914		30,262		106,035
Other lease obligations		15,737		3,070		4,055		2,916		2,199		1,341		2,156
Long-term debt⁽⁴⁾		535,500		—		35,500		—		—		500,000		—
Senior notes interest⁽⁴⁾		105,000		13,125		26,250		26,250		26,250		13,125		—

	$	990,909	$	94,176	$	108,690	$	69,761	$	65,363	$	544,728	$	108,191


Class		Outstanding at ~~August 3, 2015~~April 29, 2016
Voting Common Stock		2,905,757 shares
Non-Voting Common Stock		~~12,676,673~~12,771,550 shares


																	Accumulated					Total
	Voting				Non-Voting						Additional						Other Com-					Share-
	Common Stock				Common Stock						Paid-in			Treasury			prehensive			Retained		Holders’
	Shares		Amount		Shares			Amount			Capital			Stock			Income (Loss)			Earnings		Equity
Balance at December 31, 2014		2,906	$	291		12,576		$	1,258		$	301,533		$	—		$	(211	)	$	294,197	$	597,068

Net earnings		—		—		—			—			—			—			—			16,817		16,817
Unrealized loss onshort-term investments		—		—		—			—			—			—			(10	)		—		(10	)
Amortization of unearnedstock-based compensation		—		—		—			—			3,359			—			—			—		3,359
Issuance of non-voting common stock (upon vesting of restricted stock units)		—		—		166			17			—			—			—			—		17
Cancellation of restrictednon-voting stock units for tax withholdings on vested shares		—		—		(66	)		(7	)		(2,096	)		—			—			—		(2,103	)
Purchase of treasury stock		—		—		—			—			—			(252	)		—			—		(252	)
Other		—		—		—			—			—			—			24			—		24

Balance at June 30, 2015		2,906	$	291		12,676		$	1,268		$	302,796		$	(252	)	$	(197	)	$	311,014	$	614,920


	Voting Common Stock				Non-Voting Common Stock						Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total Share- Holders’ Equity
	Shares		Amount		Shares			Amount			Additional Paid-in Capital						Retained Earnings			Total Share- Holders’ Equity
Balance at December 31, 2015		2,906	$	291		12,685		$	1,269		$	304,884		$	(567	)	$	321,121		$	626,998
Net loss		—		—		—			—			—			—			(8,932	)		(8,932	)
Unrealized gain on short-term investments		—		—		—			—			—			476			—			476
Changes in pension plan assets and benefit obligations		—		—		—			—			—			1			—			1
Amortization of unearned stock-based compensation		—		—		—			—			1,485			—			—			1,485
Issuance of non-voting common stock (upon vesting of restricted stock units)		—		—		121			12			—			—			—			12
Cancellation of restricted non-voting stock units for tax withholdings on vested shares		—		—		(27	)		(3	)		(500	)		—			—			(503	)
Retirement of Treasury Stock		—		—		(8	)		—			—			—			—			—

Balance at March 31, 2016		2,906	$	291		12,771		$	1,278		$	305,869		$	(90	)	$	312,189		$	619,537


	March 31, 2016				December 31, 2015
	Principal		Unamortized Debt Issuance Debt Cost		Principal		Unamortized Debt Issuance Debt Cost
	(Thousands of dollars)
Senior Notes dated March 17, 2014, interest only payable semi-annually at 5.25%, maturing March 15, 2019	$	500,000	$	3,687	$	500,000	$	3,999
Revolving Credit Facility due October 1, 2017 with a group of commercial banks, interest payable at variable rates		87,700		—		57,500		—

Total long-term debt	$	587,700	$	3,687	$	557,500	$	3,999


	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


	For the quarter ended June 30, 2015
	Parent Company Only			Guarantor Subsidiaries ⁽¹⁾			Eliminations			Consolidated
Operating revenues, net	$	115,040		$	83,507		$	—		$	198,547

Expenses:
Direct expenses		103,483			65,349			(4	)		168,828
Selling, general and administrative expenses		9,471			2,576			—			12,047

Total operating expenses		112,954			67,925			(4	)		180,875

Gain on disposal of assets, net		(66	)		—			—			(66	)
Equity in loss of unconsolidated affiliate		106			—			—			106

Operating income		2,046			15,582			4			17,632

Equity in net income of consolidated subsidiaries		(9,230	)		—			9,230			—
Interest expense		7,155			—			—			7,155
Other income, net		(571	)		—			4			(567	)

		(2,646	)		—			9,234			6,588

Earnings before income taxes		4,692			15,582			(9,230	)		11,044
Income tax (benefit) expense		(1,762	)		6,352			—			4,590

Net earnings	$	6,454		$	9,230		$	(9,230	)	$	6,454


	For the quarter ended June 30, 2014
	Parent Company Only			Guarantor Subsidiaries ⁽¹⁾			Eliminations			Consolidated
Operating revenues, net	$	122,392		$	89,753		$	—		$	212,145

Expenses:
Direct expenses		102,915			67,442			—			170,357
Selling, general and administrative expenses		8,629			3,031			—			11,660
Management fees		(3,590	)		3,590			—			—

Total operating expenses		107,954			74,063			—			182,017

Loss (gain) on disposal of assets, net		1,199			(957	)		—			242
Equity in loss of unconsolidated affiliate		65			—			—			65

Operating income		13,174			16,647			—			29,821

Equity in net income of consolidated subsidiaries		(10,111	)		—			10,111			—
Interest expense		7,673			—			—			7,673
Loss on debt extinguishment		617			—			—			617
Other income, net		(169	)		—			—			(169	)

		(1,990	)		—			10,111			8,121

Earnings before income taxes		15,164			16,647			(10,111	)		21,700
Income tax expense		1,796			6,536			—			8,332

Net earnings	$	13,368		$	10,111		$	(10,111	)	$	13,368


	For the quarter ended June 30, 2015
	Parent Company Only			Guarantor Subsidiaries⁽¹⁾		Eliminations			Consolidated
Net earnings	$	6,454		$	9,230	$	(9,230	)	$	6,454
Unrealized loss on short-term investments		(158	)		—		—			(158	)
Tax effect		63			—		—			63

Total Comprehensive Income	$	6,359		$	9,230	$	(9,230	)	$	6,359


	For the quarter ended June 30, 2014
	Parent Company Only			Guarantor Subsidiaries ⁽¹⁾		Eliminations			Consolidated
Net earnings	$	13,368		$	10,111	$	(10,111	)	$	13,368
Unrealized loss on short-term investments		25			—		—			25
Changes in pension plan assets and benefit obligations		11			—		—			11
Tax effect		(14	)		—		—			(14	)

Total Comprehensive Income	$	13,390		$	10,111	$	(10,111	)	$	13,390


	For the six months ended June 30, 2014
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾⁽²⁾		Eliminations		Consolidated
Net cash provided by operating activities	$	29,159		$	16,137	$	—	$	45,296

Investing activities:
Purchase of property and equipment		(66,887	)		—		—		(66,887	)
Proceeds from asset dispositions		7,170			—		—		7,170
Purchase of short-term investments		(233,606	)		—		—		(233,606	)
Proceeds from sale of short-term investments		182,336			—		—		182,336
Refund of deposits on aircraft		6,473			—		—		6,473
Payments of deposits on aircraft		(6,837	)		—		—		(6,837	)
Loan to unconsolidated affiliate		(200	)		—		—		(200	)

Net cash used in investing activities		(111,551	)		—		—		(111,551	)

Financing activities:
Proceeds from issuance of Senior Notes due 2019		500,000			—		—		500,000
Premium and costs to retire debt early		(26,749	)		—		—		(26,749	)
Repayment of Senior Notes due 2018		(300,000	)		—		—		(300,000	)
Debt issuance costs		(6,137	)		—		—		(6,137	)
Proceeds from line of credit		95,500			—		—		95,500
Payments on line of credit		(174,500	)		—		—		(174,500	)
Repurchase of common stock for payroll tax withholding requirements		(176	)		—		—		(176	)
Due to/from affiliate, net		(3,224	)		3,224		—		—

Net cash provided by financing activities		84,714			3,224		—		87,938

Increase in cash		2,322			19,361		—		21,683
Cash, beginning of period		52			882		—		934

Cash, end of period	$	2,374		$	20,243	$	—	$	22,617


			Payment Due by Year
	Total		2016⁽¹⁾		2017		2018		2019		2020		Beyond 2020
			(Thousands of dollars)
Aircraft lease obligations	$	266,477	$	34,266	$	42,699	$	39,018	$	32,365	$	28,526	$	89,603
Other lease obligations		14,891		4,295		3,435		2,680		2,148		1,557		776
Long-term debt⁽²⁾		587,700		—		87,700		—		500,000		—		—
Senior notes interest⁽²⁾		78,750		13,125		26,250		26,250		13,125		—		—

	$	947,818	$	51,686	$	160,084	$	67,948	$	547,638	$	30,083	$	90,379


	Total Number of Shares Purchased		Average Price Paid per Share
Period
April 1, 2015 – April 30, 2015		2,139	$	32.60
May 1, 2015 – May 31, 2015		1,902	$	31.93

Total		4,041	$	32.29


(a)	Exhibits

	3.1	(i)	Amended and Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to PHI’s Report on Form 10-Q for the quarterly period ended March 31, 2015, filed on May 7, 2015).

		(ii)	Amended and Restated By-laws of the Company (incorporated by reference to Exhibit 3(ii) to PHI’s Report on Form ~~8-K~~10-Q for the quarterly period ended September 30, 2015, filed ~~March 5, 2013)~~November 6, 2015).

	4.1	Second Amended and Restated Loan Agreement dated as of September 18, 2013, by and among PHI, Inc., PHI Air Medical, L.L.C, successor to Air Evac Services, Inc., PHI Tech Services, Inc. (formerly Evangeline Airmotive, Inc.), International Helicopter Transport, Inc. and Whitney National Bank (incorporated by reference to Exhibit 4.1 to PHI’s Report on Form 10-Q for the quarterly period ended September 30, 2013, filed on November 8, 2013).

	4.2	First Amendment to Second Amended and Restated Loan Agreement, dated as of March 5, 2014, by and among PHI, Inc., PHI Air Medical, L.L.C., PHI Tech Services, Inc., International Helicopter Transport, Inc. and Whitney National Bank (incorporated by reference to Exhibit 4.1 to PHI’s Report on Form 8-K filed March 6, 2014).

	4.3	Second Amendment to Second Amended and Restated Loan Agreement, dated as of September 26, 2014, by and among PHI, Inc., PHI Air Medical, L.L.C., PHI Tech Services, Inc., International Helicopter Transport, Inc. and Whitney National Bank (incorporated by reference to Exhibit 4.3 to PHI’s Report on Form 10-Q for the quarterly period ended September 30, 2014, filed November 7, 2014).

	4.4†	Third Amendment to Second Amended and Restated Loan Agreement, dated as of September 25, 2015, by and among PHI, Inc., PHI Air Medical, L.L.C., PHI Tech Services, Inc., International Helicopter Transport, Inc. and Whitney National Bank (incorporated by reference to Exhibit 4.4 to PHI’s Report on Form 10-Q for the quarterly period ended September 30, 2015, filed November 6, 2015).

	4.5	Indenture, dated as of March 17, 2014, by and among PHI, Inc., the subsidiary guarantors and U.S. Bank National Association, relating to the issuance by PHI, Inc. of its 5.25% Senior Notes due 2019 (incorporated by reference to Exhibit 4.2 to PHI’s Report on Form 8-K filed March 17, 2014).

~~4.5~~	4.6	Form of 5.25% Senior Note due 2019 (incorporated by reference to Exhibit 4.2 to PHI’s Report on Form 8-K filed on March 6, 2014).

~~4.6~~				Registration Rights Agreement, dated as of March 17, 2014, by and among PHI, Inc., the subsidiary guarantors and UBS Securities, LLC (incorporated by reference to Exhibit 10.1 to PHI’s Report on Form 8-K filed March 17, 2014).

~~10.1~~10.1†	Amended and Restated PHI Inc. Long-Term Incentive Plan (incorporated by reference to Appendix B to PHI’s Information Statement on Schedule 14C filed April 13, 2015).

	10.2†	Form of Indemnity Agreement between the Company and each of its directors, as adopted on November 5, 2015 (incorporated by reference to Exhibit 10.2 to PHI’s Report on Form 10-Q for the quarterly period ended September 30, 2015, filed November 6, 2015).

	31.1*	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Al A. Gonsoulin, Chairman and Chief Executive Officer.

	31.2*	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Trudy P. McConnaughhay, Chief Financial Officer.

	32.1*	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Al A. Gonsoulin, Chairman and Chief Executive Officer.

	32.2*	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Trudy P. McConnaughhay, Chief Financial Officer.


	PHI, Inc.

~~August 7, 2015~~May 9, 2016	By:	/s/ Al A. Gonsoulin
		Al A. Gonsoulin
		Chairman and Chief Executive Officer

~~August 7, 2015~~May 9, 2016	By:	/s/ Trudy P. McConnaughhay
		Trudy P. McConnaughhay
			Chief Financial Officer

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