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.


							September 30,			December 31,
	March 31, 2016			December 31, 2015			2016			2015
ASSETS
Current Assets:
Cash	$	6,536		$	2,407		$	2,639		$	2,407
Short-term investments		286,139			284,523			289,520			284,523
Accounts receivable – net
Trade		142,738			138,309			131,295			138,309
Other		8,650			6,469			11,180			6,469
Inventories of spare parts – net		70,181			69,491			69,409			69,491
Prepaid expenses		8,827			8,951			6,976			8,951
Deferred income taxes		10,379			10,379			10,379			10,379
Income taxes receivable		743			761			863			761

Total current assets		534,193			521,290			522,261			521,290
Property and equipment – net		908,414			883,529			916,560			883,529
Restricted investments		15,336			15,336
Restricted cash and investments								13,038			15,336
Other assets		6,330			5,243			7,334			6,178

Total assets	$	1,464,273		$	1,425,398		$	1,459,193		$	1,426,333

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	61,620		$	31,373		$	20,843		$	31,373
Accrued and other current liabilities		28,054			44,759			32,178			44,759

Total current liabilities		89,674			76,132			53,021			76,132
Long-term debt:
Revolving credit facility		87,700			57,500			132,400			57,500
Senior Notes dated March 17, 2014, net of debt issuance costs of $3,687 and $4,934, respectively		496,313			495,066
Senior Notes issued March 17, 2014, net of debt issuance costs of $3,064 and $3,999, respectively								496,936			496,001
Deferred income taxes		154,904			153,645			147,058			153,645
Other long-term liabilities		16,145			16,057			8,291			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, 12,771,550 and 12,685,725 issued and outstanding at March 31, 2016 and December 31, 2015, respectively		1,278			1,269
Non-voting common stock – par value of $0.10; 25,000,000 shares authorized, 12,777,358 and 12,685,725 issued and outstanding at September 30, 2016 and December 31, 2015, respectively								1,278			1,269
Additional paid-in capital		305,869			304,884			308,690			304,884
Accumulated other comprehensive loss		(90	)		(567	)		(271	)		(567	)
Retained earnings		312,189			321,121			311,499			321,121

Total shareholders’ equity		619,537			626,998			621,487			626,998

Total liabilities and shareholders’ equity	$	1,464,273		$	1,425,398		$	1,459,193		$	1,426,333

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


							Quarter Ended						Nine Months Ended
	Quarter Ended March 31,						September 30,						September 30,
	2016			2015			2016			2015			2016			2015
Operating revenues, net	$	164,016		$	204,197		$	158,093		$	214,733		$	489,245		$	617,477
Expenses:
Direct expenses		152,554			169,207			144,938			182,064			449,909			520,099
Selling, general and administrative expenses		11,673			11,237			13,381			11,575			36,832			34,859

Total operating expenses		164,227			180,444			158,319			193,639			486,741			554,958
Loss (gain) on disposal of assets		359			(7	)		85			(165	)		(3,854	)		(238	)
Equity in loss (income) of unconsolidated affiliate		—			68
Equity in loss of unconsolidated affiliate								198			75			274			249

Operating (loss) income		(570	)		23,692			(509	)		21,184			6,084			62,508
Interest expense		7,533			7,170			7,719			7,366			22,792			21,691
Other income – net		(615	)		(462	)
Other income, net								(462	)		(472	)		(1,571	)		(1,501	)

		6,918			6,708			7,257			6,894			21,221			20,190

(Loss) earnings before income taxes		(7,488	)		16,984			(7,766	)		14,290			(15,137	)		42,318
Income tax expense		1,444			6,621
Income tax (benefit) expense								(2,799	)		6,621			(5,515	)		17,832

Net (loss) earnings	$	(8,932	)	$	10,363		$	(4,967	)	$	7,669		$	(9,622	)	$	24,486

Weighted average shares outstanding:
Basic		15,600			15,579			15,683			15,587			15,655			15,558
Diluted		15,600			15,662			15,683			15,652			15,655			15,640
Net (loss) earnings per share:
Basic	$	(0.57	)	$	0.67		$	(0.32	)	$	0.49		$	(0.61	)	$	1.57
Diluted	$	(0.57	)	$	0.66		$	(0.32	)	$	0.49		$	(0.61	)	$	1.57

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


							Quarter Ended						Nine Months Ended
	Quarter Ended March 31,						September 30,						September 30,
	2016			2015			2016			2015			2016			2015
Net (loss) earnings	$	(8,932	)	$	10,363		$	(4,967	)	$	7,669		$	(9,622	)	$	24,486
Unrealized gain on short-term investments		807			139
Unrealized (loss) gain on short-term investments								(494	)		12			523			(7	)
Other unrealized gain		—			24			—			—			—			24
Changes in pension plan assets and benefit obligations		1			—			1			4			3			4
Tax effect of the above-listed adjustments		(332	)		(55	)
Tax effect of adjustments								178			(6	)		(229	)		3

Total comprehensive (loss) income	$	(8,456	)	$	10,471		$	(5,282	)	$	7,679		$	(9,325	)	$	24,510

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


																																																						Accumulated								Total
																														Voting								Non-Voting								Additional								Other Com-								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				Treasury				prehensive				Retained				Holders’
	Shares		Amount		Shares			Amount							Treasury Stock							Shares							Amount				Shares				Amount				Capital				Stock				Income (Loss)				Earnings				Equity
Balance at December 31, 2014		2,906	$	291		12,576		$	1,258		Additional Paid-in Capital			$	301,533			$	—			$	Retained Earnings	(211	)	Total Share- Holders’ Equity	$	294,197			$	597,068				2,906			$	291				12,576			$	1,258			$	301,533			$	—			$	(211	)		$	294,197	$	597,068
Net earnings		—		—		—			—			—				—				—				10,363			10,363				—				—				—				—				—				—				—				24,486				24,486
Unrealized gain on short-term investments		—		—		—			—			—				—				85				—			85
Amortization of unearned stock-based compensation		—		—		—			—			1,719				—				—				—			1,719
Unrealized loss on short-term investments																															—				—				—				—				—				—				(3	)			—				(3	)
Changes in pension plan assets and benefit obligations																															—				—				—				—				—				—				2				—				2
Amortization of unearned stock- based compensation																															—				—				—				—				5,059				—				—				—				5,059
Issuance of non-voting common stock (upon vesting of restricted stock units)		—		—		164			16			—				—				—				—			16				—				—				177				18				—				—				—				—				18
Cancellation of restricted non-voting stock units for tax withholdings on vested shares		—		—		(66	)		(7	)		(2,082	)			—				—				—			(2,089	)
Cancellation of restricted non- voting stock units for tax withholdings on vested shares																															—				—				(69	)			(7	)			(2,200	)			—				—				—				(2,207	)
Purchase of treasury stock		—		—		—			—			—				(135	)			—				—			(135	)			—				—				—				—				—				(252	)			—				—				(252	)
Other		—		—		—			—			—				—				24				—			24				—				—				—				—				—				—				24				—				24

Balance at March 31, 2015		2,906	$	291		12,674		$	1,267		$	301,170			$	(135	)		$	(102	)		$	304,560		$	607,051
Balance at September 30, 2015																															2,906			$	291				12,684			$	1,269			$	304,392			$	(252	)		$	(188	)		$	318,683			$	624,195


																																														Accumulated								Total
																										Voting								Non-Voting								Additional				Other Com-								Share-
	Voting Common Stock				Non-Voting Common Stock						Additional Paid-in Capital				Accumulated Other Comprehensive Income (Loss)				Retained Earnings			Total Share- Holders’ Equity				Common Stock								Common Stock								Paid-in				prehensive				Retained				Holders’
	Shares		Amount		Shares			Amount										Shares							Amount				Shares				Amount				Capital				Income (Loss)				Earnings				Equity
Balance at December 31, 2015		2,906	$	291		12,685		$	1,269		Additional Paid-in Capital			$	304,884			$	Retained Earnings	(567	)	Total Share- Holders’ Equity	$	321,121			$	626,998				2,906			$	291				12,685			$	1,269			$	304,884			$	(567	)		$	321,121	$	626,998
Net loss		—		—		—			—			—				—				(8,932	)		(8,932	)			—				—				—				—				—				—				(9,622	)			(9,622	)
Unrealized gain on short-term investments		—		—		—			—			—				476				—			476				—				—				—				—				—				294				—				294
Changes in pension plan assets and benefit obligations		—		—		—			—			—				1				—			1				—				—				—				—				—				2				—				2
Amortization of unearned stock-based compensation		—		—		—			—			1,485				—				—			1,485				—				—				—				—				4,334				—				—				4,334
Issuance of non-voting common stock (upon vesting of restricted stock units)		—		—		121			12			—				—				—			12				—				—				128				12				—				—				—				12
Cancellation of restricted non-voting stock units for tax withholdings on vested shares		—		—		(27	)		(3	)		(500	)			—				—			(503	)			—				—				(28	)			(3	)			(528	)			—				—				(531	)
Retirement of Treasury Stock		—		—		(8	)		—			—				—				—			—
Retirement of treasury stock																											—				—				(8	)			—				—				—				—				—

Balance at March 31, 2016		2,906	$	291		12,771		$	1,278		$	305,869			$	(90	)		$	312,189		$	619,537
Balance at September 30, 2016																											2,906			$	291				12,777			$	1,278			$	308,690			$	(271	)		$	311,499			$	621,487

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


							Nine Months Ended
	Three Months Ended March 31,						September 30,
	2016			2015			2016			2015
Operating activities:
Net (loss) earnings	$	(8,932	)	$	10,363		$	(9,622	)	$	24,486
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		16,973			18,151			53,054			54,312
Deferred income taxes		955			6,279			(6,775	)		15,983
Loss (gain) on asset dispositions		359			(7	)
Gain on asset dispositions								(3,854	)		(238	)
Equity in loss of unconsolidated affiliate		—			68			274			249
Inventory valuation reserves		2,435			562			3,766			1,576
Changes in operating assets and liabilities		(28,133	)		(5,498	)		(43,991	)		11,787

Net cash (used in) provided by operating activities		(16,343	)		29,918			(7,148	)		108,155

Investing activities:
Purchase of property and equipment		(8,519	)		(22,115	)		(74,950	)		(48,244	)
Proceeds from asset dispositions		850			—			13,233			3,469
Purchase of short-term investments		(77,677	)		(190,243	)		(263,204	)		(560,148	)
Proceeds from sale of short-term investments		76,184			185,426			259,322			458,468
Refund of deposits on aircraft								—			6,010
Payment of deposits on aircraft		(66	)		(66	)		(197	)		(1,207	)
Loan to unconsolidated affiliate								(1,200	)		—

Net cash used in investing activities		(9,228	)		(26,998	)		(66,996	)		(141,652	)

Financing activities:
Proceeds from line of credit		83,500			77,740			213,900			206,660
Payments on line of credit		(53,300	)		(81,100	)		(139,000	)		(171,440	)
Repurchase of common stock		(500	)		(2,207	)		(524	)		(2,441	)

Net cash provided by financing activities		29,700			(5,567	)		74,376			32,779

Increase (decrease) in cash		4,129			(2,647	)		232			(718	)
Cash, beginning of period		2,407			6,270			2,407			6,270

Cash, end of period	$	6,536		$	3,623		$	2,639		$	5,552

Supplemental Disclosures Cash Flow Information
Cash paid during the period for:
Interest	$	13,691		$	13,453		$	28,258		$	27,161

Income taxes	$	—		$	3,061		$	2,856		$	3,061

Noncash investing activities:
Other current liabilities and accrued payables related to purchase of property and equipment	$	29,302		$	28,994		$	3,717		$	45

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, 2015 and the accompanying notes.

Our financial results, particularly as they relate to 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, 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 ~~Pronouncements –~~Pronouncements—In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 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, originally~~In mid-2015 the FASB deferred the effective ~~for public entities for annual and interim periods beginning after December 15, 2016, has been deferred for~~date of ASU 2014-09 by one year until annual and interim periods beginning after December 15, 2017. Early adoption will be permitted as of January 1, 2017; however we have not yet determined if we will adopt this ASU prior to the ~~original~~ effective date. The effects of this standard on our financial position, results of operations and cash flows are not yet known.

In August 2014, the FASB issued ASU 2014-15Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. ASU 2014-15 requires management to assess the entity’s ability to continue as a going concern and to provide related disclosures in certain circumstances. ASU 2014-15 is effective for annual ~~and interim~~ periods beginning after December 15, ~~2016.~~2016, and annual and interim periods thereafter. Early adoption is permitted. We do not believe 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,~~2015-17 is effective for annual periods beginning after December 15, 2016, with early adoption permitted, and the guidance may be applied either prospectively or retrospectively. We do not expect this ASU to have a 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.

In October 2016, the FASB issued ASU 2016-16,Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory, which will require an entity to recognize the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. The ASU is effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. 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)~~gain (loss), 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. We determine cost, gains, and losses using the specific identification method.


	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	$	17,877	$	—	$	—		$	17,877	$	17,608	$	—	$	—		$	17,608
Commercial paper		5,994		1		—			5,995		32,820		—		(75	)		32,745
U.S. Government agencies		27,301		7		(6	)		27,302		16,296		5		(3	)		16,298
Corporate bonds and notes		250,399		94		(192	)		250,301		236,215		33		(355	)		235,893

Subtotal		301,571		102		(198	)		301,475		302,939		38		(433	)		302,544
Deferred compensation plan assets included in other assets		2,334		—		—			2,334		2,392		—		—			2,392

Total	$	303,905	$	102	$	(198	)	$	303,809	$	305,331	$	38	$	(433	)	$	304,936


	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	$	18,181		$	—	$	—		$	18,181	$	18,181	$	—	$	—		$	18,181
Commercial paper		5,986			—		(5	)		5,981		5,986		—		(5	)		5,981
U.S. Government agencies		11,499	��		—		(30	)		11,469		11,499		—		(30	)		11,469
Corporate bonds and notes		265,069			—		(841	)		264,228		265,069		—		(841	)		264,228

Subtotal		300,735			—		(876	)		299,859		300,735		—		(876	)		299,859
Deferred compensation plan assets included in other assets		2,294			—		—			2,294		2,294		—		—			2,294

Total	$	303,029		$	—	$	(876	)	$	302,153	$	303,029	$	—	$	(876	)	$	302,153

At ~~March 31,~~September 30, 2016 and December 31, 2015, we classified $13.0 million and $15.3 million 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.~~year and a bond relating to foreign operations.

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


									September 30, 2016				December 31, 2015
	March 31, 2016				December 31, 2015				Amortized		Fair		Amortized		Fair
	Amortized Costs		Fair Value		Amortized Costs		Fair Value		Costs		Value		Costs		Value
	(Thousands of dollars)								(Thousands of dollars)
Due in one year or less	$	148,590	$	148,516	$	152,444	$	152,212	$	171,336	$	171,152	$	152,444	$	152,212
Due within two years		135,104		135,082		130,110		129,466		113,995		113,784		130,110		129,466

Total	$	283,694	$	283,598	$	282,554	$	281,678	$	285,331	$	284,936	$	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:


	September 30, 2016				December 31, 2015
	Average		Average		Average		Average
	Coupon		Days To		Coupon		Days To
	Rate (%)		Maturity		Rate (%)		Maturity
Commercial paper		0.978		253		0.553		154
U.S. Government agencies		0.979		512		0.865		599
Corporate bonds and notes		1.643		330		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:


											September 30, 2016					December 31, 2015
	March 31, 2016					December 31, 2015							Unrealized					Unrealized
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Losses			Fair Value		Losses
	(Thousands of dollars)										(Thousands of dollars)
Commercial paper	$	0	$	0		$	5,981	$	(5	)	$	31,753	$	(75	)	$	5,981	$	(5	)
U.S. Government agencies		11,996		(6	)		8,969		(30	)		7,001		(2	)		8,969		(30	)
Corporate bonds and notes		134,298		(150	)		232,347		(793	)		169,833		(320	)		232,347		(793	)

Total	$	146,294	$	(156	)	$	247,297	$	(828	)	$	208,587	$	(397	)	$	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:


											September 30, 2016					December 31, 2015
	March 31, 2016					December 31, 2015							Unrealized					Unrealized
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Losses			Fair Value		Losses
	(Thousands of dollars)										(Thousands of dollars)
Corporate bonds and notes	$	47,783	$	(42	)	$	28,866	$	(48	)	$	34,002	$	(36	)	$	28,866	$	(48	)

Total	$	47,783	$	(42	)	$	28,866	$	(48	)	$	34,002	$	(36	)	$	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 customary market ~~conditions,~~fluctuations, 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 ~~March 31,~~September 30, 2016 or December 31, 2015. We have also determined that we did not have any ~~other-than-temporary~~other than temporary impairments relating to credit losses on debt securities for the ~~three months~~quarter ended ~~March 31,~~September 30, 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, 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 $5.4 million at ~~March 31,~~September 30, 2016, and $5.2 million at December 31, ~~2015, respectively.~~2015.

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 ~~$129.8~~$119.7 million and $103.6 million as of ~~March 31,~~September 30, 2016 and December 31, 2015, respectively. The allowance for uncompensated care was ~~$30.7~~$35.6 million and $41.9 million as of ~~March 31,~~September 30, 2016 and December 31, 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 ~~$2.5 million and $2.7~~$2.2 million for the quarters ended ~~March 31,~~September 30, 2016 and 2015, respectively. The value of these services was $6.9 million and $7.0 million for the nine months ended September 30, 2016 and 2015, respectively. The estimated cost of providing charity services was ~~$0.6~~$0.5 million and $0.4 million for ~~each of~~ the quarters ended ~~March 31,~~September 30, 2016 and ~~2015.~~2015, respectively. The estimated cost of providing charity services was $1.8 million and $1.5 million for the nine months ended September 30, 2016 and 2015, respectively. 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
	March 31, 2016			December 31, 2015			September 30, 2016			December 31, 2015
Allowance for Contractual Discounts		63	%		56	%		60	%		56	%
Allowance for Uncompensated Care		15	%		23	%		18	%		23	%

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, including helicopter leasing, emergency medical helicopter flight services, aircraft maintenance, provision of spare parts, insurance coverage for the customer-owned aircraft, training services, and base construction. 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 and responsibilities. Each of the major services mentioned above ~~qualify~~qualified 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. As discussed in greater detail elsewhere herein, this contract, after being extended one year, lapsed on September 30, 2016.

We have also established valuation reserves related to obsolete and slow-moving spare parts inventory. The inventory valuation reserves were ~~$16.8~~$17.1 million and $15.4 million at ~~March 31,~~September 30, 2016 and December 31, 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:


			March 31, 2016						September 30, 2016
	Total		(Level 1)		(Level 2)		Total		(Level 1)		(Level 2)
			(Thousands of dollars)						(Thousands of dollars)
Investments:
Money market mutual funds	$	17,877	$	17,877	$	—	$	17,608	$	17,608	$	—
Commercial paper		5,995		—		5,995		32,745		—		32,745
U.S. Government agencies		27,302		—		27,302		16,298		—		16,298
Corporate bonds and notes		250,301		—		250,301		235,893		—		235,893

		301,475		17,877		283,598		302,544		17,608		284,936
Deferred compensation plan assets		2,334		2,334		—		2,392		2,392		—

Total	$	303,809	$	20,211	$	283,598	$	304,936	$	20,000	$	284,936


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

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

Total	$	302,153	$	20,475	$	281,678	$	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 reflected on our balance sheets as Other assets, which ~~relate~~we hold to ~~our liability~~fund liabilities under ~~the~~our 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 ~~March 31,~~September 30, 2016 and December 31, 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 ~~$457.5~~$485.6 million and $403.1 million at ~~March 31,~~September 30, 2016 and December 31, 2015, respectively.

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


	March 31, 2016				December 31, 2015				September 30, 2016				December 31, 2015
	Principal		Unamortized Debt Issuance Debt Cost		Principal		Unamortized Debt Issuance Debt Cost		Principal		Unamortized Debt Issuance Debt Cost		Principal		Unamortized Debt Issuance Debt Cost
	(Thousands of dollars)								(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
Senior Notes issued March 17, 2014, interest only payable semi-annually at 5.25%, maturing March 15, 2019									$	500,000	$	3,064	$	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		—		132,400		—		57,500		—

Total long-term debt	$	587,700	$	3,687	$	557,500	$	3,999	$	632,400	$	3,064	$	557,500	$	3,999

In April 2015, the FASB issued ASU No. 2015-03,Simplifying the Presentation of Debt Issuance Costs, which changes the presentation of debt issuance costs in the financial statements. These costs are now presented as a direct deduction from the debt liability, rather than as an asset. We adopted the new standard effective January 1, 2016. As a result, we reclassified unamortized debt issuances cost in the amount of ~~$3.7~~$3.1 million and $4.0 million as of ~~March 31,~~September 30, 2016 and December 31, 2015, respectively, and reduced the carrying value of long-term debt by the 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 wholly-owned domestic subsidiaries, and are the general, unsecured obligations of PHI and the guarantors. Interest is payable semi-annually on March 15 and September 15 of each 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 –~~Facility– ~~We have an~~On September 30, 2016, we amended ~~and restated~~our revolving credit facility ~~that matures on~~to, among other things, (a) extend the maturity date to October 1, ~~2017.~~2018, and (b) modify the fixed charge coverage ratio such that it shall only be tested when the total of our Short Term Investments are less than $150.0 million at the end of any fiscal quarter. Under this facility, we can borrow up to ~~$150~~$150.0 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 if our short term investments fall below $150.0 million, and consolidated net worth of at least ~~$450~~$450.0 million (with all such terms or amounts as defined in or determined under the amended and restated revolving credit facility). As of ~~March 31,~~September 30, 2016, we believe we were in compliance with these covenants.

Cash paid to fund interest expense was ~~$13.7~~$13.9 million for the quarter ended ~~March 31,~~September 30, 2016 and $13.5 million for the quarter ended ~~March 31,~~September 30, 2015. Cash paid to fund interest expense was $28.3 million for the nine months ended September 30, 2016 and $27.2 million for the nine months ended September 30, 2015.

~~Other –~~Letter of Credit Facility—We maintain a separate letter of credit facility that had $13.0 million and $15.3 million in letters of credit outstanding at ~~March 31,~~September 30, 2016 and December 31, ~~2015.~~2015, respectively. We have letters of credit securing our workers compensation policies and a traditional provider contract.

Other—PHI, Inc. has cash management arrangements with certain of its principal subsidiaries, in which substantial portions of the subsidiaries’ cash is regularly advanced to PHI, Inc. Although PHI, Inc. periodically repays these advances to fund the subsidiaries’ cash requirements throughout the year, at any given point in time PHI, Inc. may owe a substantial sum to its subsidiaries under these advances, which, in accordance with generally accepted accounting principles, are eliminated in consolidation and therefore not recognized on our consolidated balance sheets. For additional information, see Note 13.

The components of basic and diluted earnings per share for the quarter and nine months ended September 30, 2016 and 2015 are as follows:


	Quarter Ended March				Quarter Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015		2016		2015
	(Thousands of dollars)				(Thousands of dollars)
Weighted average outstanding shares of common stock, basic		15,600		15,579		15,683		15,587		15,655		15,558
Dilutive effect of unvested restricted stock units		—		83		—		65		—		82

Weighted average outstanding shares of common stock, diluted(1)		15,600		15,662		15,683		15,652		15,655		15,640

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 ~~three~~nine months and quarters ended ~~March 31,~~September 30, 2016 and 2015.


					Quarter Ended September 30,				Nine Months Ended September 30,
	Quarter Ended March 31,				2016		2015		2016		2015
	2016		2015		(Thousands of dollars)
Stock-based compensation expense:		(Thousands of dollars)
Time-based restricted stock units	$	619	$	637	$	631	$	619	$	1,847	$	1,827
Performance-based restricted stock units		871		1,082		823		1,081		2,502		3,232

Total stock-based compensation expense	$	1,490	$	1,719	$	1,454	$	1,700	$	4,349	$	5,059

During the quarter and nine months ended ~~March 31,~~September 30, 2016, we10,992 and 25,280 time-based restricted stock units were awarded ~~303,061~~to managerial employees, respectively.

During the quarter and nine months ended September 30, 2016, 2,318 and 310,481 performance-based restricted stock units were awarded to managerial ~~employees.~~ employees, respectively.

During the quarter and nine months ended ~~March 31,~~September 30, 2015, we13,545 and 33,593 time-based restricted stock units were awarded ~~18,930 time-based~~to managerial employees, respectively.

During the quarter and ~~151,566~~nine months ended September 30, 2015, 765 and 152,331 performance-based restricted stock units were awarded to managerial employees, respectively.

During the ~~first~~third quarter of 2016, we sold ~~one~~four light aircraft utilized in the Oil and Gas segment. Cash proceeds totaled $2.2 million, resulting in a loss of $0.1 million on the sale of these assets. These aircraft no longer met our strategic needs. In the first two quarters of 2016, we sold five light and three medium aircraft and related parts inventory utilized in the Oil and Gas segment. Cash proceeds totaled $11.0 million, resulting in a gain on the sale of these assets of $3.9 million. These aircraft no longer met our strategic needs.

During the third quarter of 2015, we sold or disposed of six light aircraft previously utilized in the Oil and Gas segment. Cash proceeds totaled ~~$0.9~~$2.3 million, resulting in a ~~loss~~gain on the sale of ~~this asset~~these assets of ~~$0.4~~$0.2 million. ~~This~~These aircraft no longer met our strategic needs. ~~There were no sales or disposals of aircraft during the first quarter of 2015, but we did have minor sales and disposals of various ancillary equipment.~~

Commitments– In 2014, we exercised an option to purchase six additional heavy aircraft for delivery in 2015 and 2016. In 2015, we executed an amendment to terminate the purchase of four of the heavy aircraft for delivery in 2016. We took delivery of one aircraft in 2015 and delivery of the final aircraft in January 2016.

Total aircraft deposits of ~~$2.6~~$2.8 million were included in Other assets as of ~~March 31,~~September 30, 2016. This amount represents deposits paid by us ~~as required~~ under aircraft leases which will be applied either to the future purchase ~~contracts.~~of the aircraft or the final lease payments depending upon whether or not we elect to purchase the aircraft when that option under the lease becomes available to us.

As of ~~March 31,~~September 30, 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.~~2020. The aggregate option purchase prices are ~~$67.8~~$50.3 million in 2016, $55.7 million in 2017, $127.0 million in 2018, $150.4 million in 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; however, we currently do not anticipate exercising the buyout options during 2016. During the quarter ended September 30, 2016, we declined the early buyout option on one aircraft.

During the third quarter of 2016, we purchased one heavy aircraft previously leased by us for $26.7 million. This aircraft purchase was made available for sale by the lessor prior to its early buy out option date and is not one of the above-mentioned aircraft available for purchase in 2016. We intend to use this aircraft in our international operations.

Subsequent to September 30, 2016, we entered into a contract to purchase two medium aircraft for use in our Oil and Gas segment. We expect to take delivery of the aircraft in the first quarter of 2017. The total purchase commitment is $19.9 million.

Environmental Matters –We have recorded an aggregate estimated probable liability of $0.2 million as of ~~March 31,~~September 30, 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 providing samples ~~twice a year~~annually for both 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.sites. 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 –From time to time, we are 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 the ultimate resolution of ~~these~~our presently pending proceedings, after considering available defenses and any insurance coverage or indemnification rights, will have a material adverse effect on our 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 ~~March 31,~~September 30, 2016, we had approximately ~~$281.4~~$239.0 million in aggregate commitments under operating leases of which approximately ~~$38.6~~$12.0 million is payable through December 31, 2016. The total lease commitments include ~~$266.5~~$226.2 million for aircraft and ~~$14.9~~$12.8 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,~~September 30, 2016, ~~$0.8 million of~~the severance costs from these offerings ~~remained unpaid.~~had been paid.

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 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 ~~March 31,~~September 30, 2016, we ~~operated 154~~had available for use 139 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 ~~March 31,~~September 30, 2016 and 2015, respectively, approximately ~~54%~~49% and ~~59%~~56% of our total operating revenues were generated by our Oil and Gas segment. Our Oil and Gas segment generated approximately 51% and 57% of our total operating revenue for the nine months ended September 30, 2016 and 2015, 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 ~~March 31,~~September 30, 2016, ~~105~~104 aircraft were ~~assigned to~~available for use by our Air Medical segment. At such date, we operated approximately ~~100~~97 aircraft domestically, providing air medical transportation services for hospitals and emergency service agencies in 1918 states at 7072 separate locations. WeThrough September 30, 2016, we also ~~provide~~provided air medical transportation services for a

customer overseas. For our overseas program, we ~~have~~ deployed ~~five~~eight customer-owned aircraft at ~~four~~three locations, with four aircraft generating revenues ~~as of March 31,~~during the quarter and nine months ended September 30, 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 ~~March 31,~~September 30, 2016 and 2015, approximately ~~43%~~47% and ~~35%~~40% of our total operating revenues were generated by our Air Medical ~~segment.~~segment, respectively. For the nine months ended September 30, 2016 and 2015, approximately 45% and 37% 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 transported patients who self-pay. As further described in Note 3, revenues are recorded net of contractual allowances under agreements with third party payors and estimated uncompensated care at the time the services are provided. Contractual allowances and uncompensated care are estimated based on historical collection experience by payor category (consisting mainly of insurance, Medicaid, Medicare, and self-pay). Estimates regarding the payor mix and changes in reimbursement rates are the factors most subject to sensitivity and variability in calculating our allowances. We compute a historical payment analysis of accounts fully closed, by category.

Provisions for contractual discounts and estimated uncompensated care for our Air Medical segment (expressed as a percentage of gross segment billings) were as follows:


	Revenue						Revenue
	Quarter Ended March 31,						Quarter Ended						Nine Months Ended
	2016			2015			September 30,						September 30,
Gross Air Medical segment billings		100	%		100	%
							2016			2015			2016			2015
Provision for contractual discounts		71	%		74	%		65	%		63	%		67	%		65	%
Provision for uncompensated care		3	%		0	%		9	%		11	%		6	%		9	%

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						Nine Months Ended
	Quarter Ended March 31,						September 30,						September 30,
	2016			2015			2016			2015			2016			2015
Insurance		66	%		75	%		75	%		74	%		72	%		74	%
Medicare		19	%		17	%		17	%		17	%		18	%		17	%
Medicaid		15	%		8	%		8	%		8	%		9	%		8	%
Self-Pay		0	%		0	%		0	%		1	%		1	%		1	%

We also have ~~a limited number of~~several traditional provider 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 ~~31%~~27% and ~~42%~~34% of the segment’s revenues for the quarters ended ~~March 31,~~September 30, 2016 and 2015, respectively. For the nine months ended September 30, 2016 and 2015, these contracts generated approximately 29% and 37% of the segment’s revenues, respectively.

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. Also included in this segment are the results of our proprietary Helipass operations, which provides software as a service to certain of our Oil and Gas customers for the purpose of passenger check-in and compliance verification.

~~For the three month periods ended March 31, 2016 and 2015, approximately 3% and 6%, respectively,~~Approximately 4% of our total operating revenues were generated by our Technical Services ~~segment.~~segment during each of the three and nine-month periods ended September 30, 2016 and 2015.

Summarized financial information concerning our reportable operating segments for the quarters and nine months ended ~~March 31,~~September 30, 2016 and 2015 is as follows:


	Quarter Ended March 31,						Quarter Ended						Nine Months Ended
	2016			2015			September 30,						September 30,
	(Thousands of dollars)						2016			2015			2016			2015
Segment operating revenues
							(Thousands of dollars)						(Thousands of dollars)
Segment operating revenues, net
Oil and Gas	$	88,437		$	120,396		$	77,551		$	121,190		$	249,173		$	354,425
Air Medical		70,060			72,385			74,482			85,516			220,089			239,543
Technical Services		5,519			11,416			6,060			8,027			19,983			23,509

Total operating revenues		164,016			204,197
Total operating revenues, net								158,093			214,733			489,245			617,477

Segment direct expenses⁽¹⁾
Oil and Gas⁽²⁾		91,916			100,331			82,832			109,500			262,148			310,093
Air Medical		57,044			60,039			56,562			65,474			172,603			189,089
Technical Services		3,594			8,905			5,742			7,165			15,432			21,166

Total segment direct expenses		152,554			169,275
Total direct expenses								145,136			182,139			450,183			520,348

Segment selling, general and administrative expenses
Oil and Gas		1,528			1,159			1,705			1,397			4,838			3,831
Air Medical		2,595			2,629			3,056			2,302			8,293			7,458
Technical Services		224			114			266			230			763			552

Total selling, general and administrative expenses		4,347			3,902
Total segment selling, general and administrative expenses								5,027			3,929			13,894			11,841

Total direct and selling, general and administrative expenses		156,901			173,177
Total segment expenses								150,163			186,068			464,077			532,189

Net segment (loss) profit
Oil and Gas		(5,007	)		18,906			(6,986	)		10,293			(17,813	)		40,501
Air Medical		10,421			9,717			14,864			17,740			39,193			42,996
Technical Services		1,701			2,397			52			632			3,788			1,791

Total net segment profit		7,115			31,020
Total								7,930			28,665			25,168			85,288

Other, net⁽³⁾		256			469			377			637			5,425			1,739
Unallocated selling, general and administrative costs⁽¹⁾		(7,326	)		(7,335	)		(8,354	)		(7,646	)		(22,938	)		(23,018	)
Interest expense		(7,533	)		(7,170	)		(7,719	)		(7,366	)		(22,792	)		(21,691	)

(Loss) earnings before income taxes	$	(7,488	)	$	16,984		$	(7,766	)	$	14,290		$	(15,137	)	$	42,318


					Depreciation and Amortization Expense
	Depreciation and Amortization Expense				Quarter Ended				Nine Months Ended
	Quarter Ended March 31,				September 30,				September 30,
	2016		2015		2016		2015		2016		2015
Segment Direct Expense:
Oil and Gas	$	9,918	$	11,280	$	10,616	$	11,194	$	30,558	$	32,797
Air Medical		4,256		4,097		5,267		4,100		14,654		12,948
Technical Services		128		128		141		130		426		390

Total	$	14,302	$	15,505	$	16,024	$	15,424	$	45,638	$	46,135

Unallocated SG&A	$	2,671	$	2,646	$	2,269	$	2,376	$	7,416	$	8,177

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 ~~March 31,~~September 30, 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 the ~~quarters~~quarter ended ~~March 31,~~September 30, 2016, ~~and 2015,~~ we recorded a loss in equity of unconsolidated affiliate of $0$0.2 million, ~~and~~compared to a loss of $0.1 million for the quarter ended September 30, 2015, relative to our 49% equity ~~ownership, respectively.~~ownership. For the nine months ended September 30, 2016, we recorded a loss in equity of unconsolidated affiliate of $0.3 million, compared to a loss of $0.2 million for the nine months ended September 30, 2015, relative to our 49% equity ownership. We had ~~$1.5 million~~$0 of trade receivables as of ~~March 31,~~September 30, 2016 from PHIC. At December 31, 2015, we recorded an allowance for bad debts against this trade receivable 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 $0.9 million and $0 ~~million~~ at ~~March 31,~~September 30, 2016 and December 31, ~~2015.~~2015, respectively.

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~~$500.0 million of 5.25% Senior Notes due 2019 that are fully and unconditionally guaranteed on a joint and several, senior basis by all of our domestic subsidiaries. PHI, Inc. directly or indirectly owns 100% of all of its domestic subsidiaries.

The supplemental condensed financial information on the following pages sets forth, on a consolidated basis, the balance sheet, statement of operations, statement of comprehensive income, and statement of cash flows information for PHI, Inc. (“Parent ~~Company Only”~~Company”) and the guarantor ~~subsidiaries.~~subsidiaries under separate headings. 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.


													September 30, 2016
													Parent
	March 31, 2016												Company			Guarantor
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾			Eliminations			Consolidated			Only (issuer)			Subsidiaries ⁽¹⁾			Eliminations			Consolidated
ASSETS
Current Assets:
Cash	$	123		$	6,413		$	—		$	6,536		$	36		$	2,603		$	—		$	2,639
Short-term investments		286,139			—			—			286,139			289,520			—			—			289,520
Accounts receivable – net		69,795			81,593			—			151,388			64,564			77,911			—			142,475
Intercompany receivable		—			50,649			(50,649	)		—			—			41,796			(41,796	)		—
Inventories of spare parts – net		60,998			9,183			—			70,181			60,416			8,993			—			69,409
Prepaid expenses		6,191			2,636			—			8,827			4,412			2,564			—			6,976
Deferred income taxes		10,379			—			—			10,379			10,379			—			—			10,379
Income taxes receivable		985			(242	)		—			743			950			(87	)		—			863

Total current assets		434,610			150,232			(50,649	)		534,193			430,277			133,780			(41,796	)		522,261
Investment in subsidiaries		336,033			—			(336,033	)		—			351,440			—			(351,440	)		—
Property and equipment – net		627,168			281,246			—			908,414			602,296			314,264			—			916,560
Restricted investments		15,336			—			—			15,336
Restricted cash and investments														13,023			15			—			13,038
Other assets		5,078			1,252			—			6,330			6,181			1,153			—			7,334

Total assets	$	1,418,225		$	432,730		$	(386,682	)	$	1,464,273		$	1,403,217		$	449,212		$	(393,236	)	$	1,459,193

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	55,561		$	6,059		$	—		$	61,620		$	17,232		$	3,611		$	—		$	20,843
Accrued and other current liabilities		18,594			9,460			—			28,054			21,894			10,284			—			32,178
Intercompany payable		50,649			—			(50,649	)		—			41,796			—			(41,796	)		—

Total current liabilities		124,804			15,519			(50,649	)		89,674			80,922			13,895			(41,796	)		53,021
Long-term debt:
Revolving credit facility		87,700			—			—			87,700			132,400			—			—			132,400
Senior Notes dated March 17, 2014, net of debt issuance costs of $3,687		496,313			—			—			496,313
Senior Notes dated March 17, 2014, net of debt issuance costs of $3,064														496,936			—			—			496,936
Deferred income taxes and other long-term liabilities		89,871			81,178			—			171,049			71,472			83,877			—			155,349
Shareholders’ Equity:
Common stock and paid-in capital		307,438			79,191			(79,191	)		307,438			310,259			79,191			(79,191	)		310,259
Accumulated other comprehensive loss		(90	)		—			—			(90	)
Accumulated other comprehensive income														(271	)		—			—			(271	)
Retained earnings		312,189			256,842			(256,842	)		312,189			311,499			272,249			(272,249	)		311,499

Total shareholders’ equity		619,537			336,033			(336,033	)		619,537			621,487			351,440			(351,440	)		621,487

Total liabilities and shareholders’ equity	$	1,418,225		$	432,730		$	(386,682	)	$	1,464,273		$	1,403,217		$	449,212		$	(393,236	)	$	1,459,193


													December 31, 2015
													Parent
	December 31, 2015												Company			Guarantor
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾			Eliminations			Consolidated			Only (issuer)			Subsidiaries ⁽¹⁾			Eliminations			Consolidated
ASSETS
Current Assets:
Cash	$	46		$	2,361		$	—		$	2,407		$	46		$	2,361		$	—		$	2,407
Short-term investments		284,523			—			—			284,523			284,523			—			—			284,523
Accounts receivable – net		70,336			74,442			—			144,778			70,336			74,442			—			144,778
Intercompany receivable		—			90,943			(90,943	)		—			—			90,943			(90,943	)		—
Inventories of spare parts – net		60,060			9,431			—			69,491			60,060			9,431			—			69,491
Prepaid expenses		7,162			1,789			—			8,951			7,162			1,789			—			8,951
Deferred income taxes		10,379			—			—			10,379			10,379			—			—			10,379
Income taxes receivable		1,002			(241	)		—			761			1,002			(241	)		—			761

Total current assets		433,508			178,725			(90,943	)		521,290			433,508			178,725			(90,943	)		521,290
Investment in subsidiaries		330,848			—			(330,848	)		—			330,848			—			(330,848	)		—
Property and equipment, net		632,759			250,770			—			883,529
Property and equipment – net														632,759			250,770			—			883,529
Restricted investments		15,336			—			—			15,336			15,336			—			—			15,336
Other assets		5,040			203			—			5,243			5,975			203			—			6,178

Total assets	$	1,417,491		$	429,698		$	(421,791	)	$	1,425,398		$	1,418,426		$	429,698		$	(421,791	)	$	1,426,333

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	25,512		$	5,861		$	—		$	31,373		$	25,512		$	5,861		$	—		$	31,373
Accrued liabilities		29,138			15,621			—			44,759			29,138			15,621			—			44,759
Intercompany payable		90,943			—			(90,943	)		—			90,943			—			(90,943	)		—

Total current liabilities		145,593			21,482			(90,943	)		76,132			145,593			21,482			(90,943	)		76,132
Long-term debt:
Revolving credit facility		57,500			—			—			57,500			57,500			—			—			57,500
Senior Notes dated March 17, 2014, net of debt issuance costs of $4,934		495,066			—			—			495,066
Senior Notes dated March 17, 2014, net of debt issuance costs of $3,999														496,001			—			—			496,001
Deferred income taxes and other long-term liabilities		92,334			77,368			—			169,702			92,334			77,368			—			169,702
Shareholders’ Equity:
Common stock and paid-in capital		306,444			79,061			(79,061	)		306,444			306,444			79,061			(79,061	)		306,444
Accumulated other comprehensive loss		(567	)		—			—			(567	)		(567	)		—			—			(567	)
Retained earnings		321,121			251,787			(251,787	)		321,121			321,121			251,787			(251,787	)		321,121

Total shareholders’ equity		626,998			330,848			(330,848	)		626,998			626,998			330,848			(330,848	)		626,998

Total liabilities and shareholders’ equity	$	1,417,491		$	429,698		$	(421,791	)	$	1,425,398		$	1,418,426		$	429,698		$	(421,791	)	$	1,426,333


													For the quarter ended September 30, 2016
													Parent
													Company			Guarantor
													Only (issuer)			Subsidiaries ⁽¹⁾			Eliminations			Consolidated
Operating revenues, net													$	79,532		$	78,561		$	—		$	158,093
Expenses:
Direct expenses														83,188			61,750			—			144,938
Selling, general and administrative expenses														10,639			3,092			(350	)		13,381

Total operating expenses														93,827			64,842			(350	)		158,319
Loss on disposal of assets, net														85			—			—			85
Equity in loss of unconsolidated affiliate														198			—			—			198

Operating income														(14,578	)		13,719			350			(509	)
Equity in net income of consolidated subsidiaries														(8,372	)		—			8,372			—
Interest expense														7,716			3			—			7,719
Other income, net														(812	)		—			350			(462	)

														(1,468	)		3			8,722			7,257

(Loss) earnings before income taxes														(13,110	)		13,716			(8,372	)		(7,766	)
Income tax (benefit) expense														(8,143	)		5,344			—			(2,799	)

Net (loss) earnings													$	(4,967	)	$	8,372		$	(8,372	)	$	(4,967	)


													For the quarter ended September 30, 2015
													Parent
	For the quarter ended March 31, 2015												Company			Guarantor
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾			Eliminations			Consolidated			Only (issuer)			Subsidiaries⁽¹⁾			Eliminations			Consolidated
Operating revenues, net	$	128,658		$	75,539		$	—		$	204,197		$	124,505		$	90,228		$	—		$	214,733
Expenses:
Direct expenses		106,481			62,730			(4	)		169,207			111,876			70,192			(4	)		182,064
Selling, general and administrative expenses		8,508			2,729			—			11,237			9,219			2,356			—			11,575

Total operating expenses		114,989			65,459			(4	)		180,444			121,095			72,548			(4	)		193,639
Gain on disposal of assets, net		(7	)		—			—			(7	)		(165	)		—			—			(165	)
Equity in loss of unconsolidated affiliate		68			—			—			68			75			—			—			75

Operating income		13,608			10,080			4			23,692			3,500			17,680			4			21,184
Equity in net income of consolidated subsidiaries		(6,131	)		—			6,131			—			(10,682	)		—			10,682			—
Interest expense		7,170			—			—			7,170			7,274			92			—			7,366
Other income, net		(462	)		(4	)		4			(462	)		(474	)		(2	)		4			(472	)

		577			(4	)		6,135			6,708			(3,882	)		90			10,686			6,894

Earnings before income taxes		13,031			10,084			(6,131	)		16,984			7,382			17,590			(10,682	)		14,290
Income tax expense		2,668			3,953			—			6,621
Income tax (benefit) expense														(287	)		6,908			—			6,621

Net earnings	$	10,363		$	6,131		$	(6,131	)	$	10,363		$	7,669		$	10,682		$	(10,682	)	$	7,669

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, 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”~~“we,” “us” 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”,~~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 our actual results to differ materially from the expectations, beliefs, and estimates expressed or implied in such forward-looking statements. Factors that could cause our results to differ materially from the expectations expressed or implied in such forward-looking statements include but are not limited to the following: ~~reduction~~changes in demand for our services due to volatility of oil and gas prices and the level of domestic and overseas 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 and retain 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 a limited number of suppliers, and the availability of working capital, loans or lease financing to acquire such 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 tropical storms and hurricanes; the effects of competition and changes in technology; the adverse impact of customers electing to terminate or reduce our services; the impact of current or future governmental regulations, including but not limited to the impact of new and pending regulation of healthcare, aviation safety and 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 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; the effects of more general factors, such as changes in interest rates, operating costs, tax rates, or general economic or geopolitical conditions; and other risks referenced in this and other annual, quarterly or current reports filed by us with the SEC. 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. Additional factors or risks that we currently deem immaterial, that are not presently known to 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, whether as a result of new information, future events, or 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 or will affect our results.

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 energy and medical 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, 2015. Since mid-2014, prevailing oil prices have been substantially lower than prices for several years 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 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. Over the ~~past~~course of the downturn, several ~~months, an increasing number~~ of our offshore customers have requested reductions in the ~~number~~volume or pricing of ~~aircraft under contract, pricing concessions~~our flight services or ~~both,~~have re-bid existing contracts, all of which has further reduced our aircraft utilization rates and intensified pricing pressures. We believe that we may receive additional such requests in the ~~future.~~future, notwithstanding a recent stabilization in commodity

prices. Although we can neither control nor predict with any reasonable degree of certainty the length or ~~ultimate severity~~impact of ~~the~~ current ~~downturn~~weak market in ~~the energy industry,~~conditions, we

currently expect further reductions in the operating revenues and net profit of our Oil and Gas segment in ~~2016~~future periods compared to amounts previously reported. These reductions could be quite substantial. For information on the impact of the market downturn on our liquidity, see “–“- Liquidity and Capital Resources – ~~Long Term Debt”~~Historical Cash and Cash Flow Information – Liquidity” below.

~~We have extended through late June 2016 our three-year contract that we entered into on September 29, 2012~~For a discussion of recent developments expected to ~~provide air medical flight services and related support services to a customer in~~impact the ~~Middle East. Under the extension, the number of aircraft operated and scope~~future performance of our services and 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 replacement contract to be completed and to receive all requisite corporate and governmental approvals by mid-2016, we cannot provide any assurances to this effect.Air Medical segment, see “- Other Matters” below.

The following ~~tables present~~table presents operating ~~revenue,~~revenues, expenses, and earnings, along with certain non-financial operational statistics, for the quarter ended ~~March 31,~~September 30, 2016 and 2015.


	Quarter Ended March 31,						Favorable (Unfavorable)			Quarter Ended						Favorable
	2016			2015						September 30,						(Unfavorable)
	(Thousands of dollars, except flight hours, patient transports, and aircraft)									2016			2015
Segment operating revenues
										(Thousands of dollars, except flight hours, patient transports, and aircraft)
Segment operating revenues, net
Oil and Gas	$	88,437		$	120,396		$	(31,959	)	$	77,551		$	121,190		$	(43,639	)
Air Medical		70,060			72,385			(2,325	)		74,482			85,516			(11,034	)
Technical Services		5,519			11,416			(5,897	)		6,060			8,027			(1,967	)

Total operating revenues		164,016			204,197			(40,181	)
Total operating revenues, net											158,093			214,733			(56,640	)
Segment direct expenses
Oil and Gas⁽¹⁾		91,916			100,331			8,415			82,832			109,500			26,668
Air Medical		57,044			60,039			2,995			56,562			65,474			8,912
Technical Services		3,594			8,905			5,311			5,742			7,165			1,423

Total segment direct expenses		152,554			169,275			16,721			145,136			182,139			37,003
Segment selling, general and administrative expenses
Oil and Gas		1,528			1,159			(369	)		1,705			1,397			(308	)
Air Medical		2,595			2,629			34			3,056			2,302			(754	)
Technical Services		224			114			(110	)		266			230			(36	)

Total segment selling, general and administrative expenses		4,347			3,902			(445	)		5,027			3,929			(1,098	)

Total segment expenses		156,901			173,177			16,276			150,163			186,068			35,905

Net segment (loss) profit
Oil and Gas		(5,007	)		18,906			(23,913	)		(6,986	)		10,293			(17,279	)
Air Medical		10,421			9,717			704			14,864			17,740			(2,876	)
Technical Services		1,701			2,397			(696	)		52			632			(580	)

Total net segment profit		7,115			31,020			(23,905	)
Other, net⁽²⁾		256			469			(213	)
Unallocated selling, general and administrative costs		(7,326	)		(7,335	)		9
Total net segment profit⁽²⁾											7,930			28,665			(20,735	)
Other, net⁽³⁾											377			637			(260	)
Unallocated selling, general and administrative costs⁽⁴⁾											(8,354	)		(7,646	)		(708	)
Interest expense		(7,533	)		(7,170	)		(363	)		(7,719	)		(7,366	)		(353	)

(Loss) earnings before income taxes		(7,488	)		16,984			(24,472	)		(7,766	)		14,290			(22,056	)
Income tax expense		1,444			6,621			5,777
Income tax (benefit) expense											(2,799	)		6,621			9,420

Net (loss) earnings	$	(8,932	)	$	10,363		$	(19,295	)	$	(4,967	)	$	7,669		$	(12,636	)

Flight hours:
Oil and Gas		20,737			25,136			(4,399	)		19,583			25,985			(6,402	)
Air Medical⁽³⁾		8,688			7,836			852
Air Medical⁽⁵⁾											9,681			10,261			(580	)
Technical Services		523			477			46			14			50			(36	)

Total		29,948			33,449			(3,501	)		29,278			36,296			(7,018	)

Air Medical Transports⁽⁴⁾		4,503			3,945			558
Air Medical Transports⁽⁶⁾											5,156			5,440			(284	)

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

Total		265			274

The following table presents operating revenues, expenses, and earnings, along with certain non-financial operational statistics, for the nine months ended September 30, 2016 and 2015.

(1)	Includes Equity in loss of ~~2015.~~unconsolidated affiliate.

(2)

Total net segment profit has not been prepared in accordance with GAAP. Management believes this non-GAAP financial measure provides meaningful supplemental information regarding our results of operations. A description of the adjustments to and reconciliation of total net segment profit to the most comparable GAAP financial measure is as follows:

Quarter Ended ~~March 31,~~September 30, 2016 compared with Quarter Ended ~~March 31,~~September 30, 2015

Operating Revenues – —Operating revenues for the ~~three months~~quarter ended ~~March 31,~~September 30, 2016 were ~~$164.0~~$158.1 million, compared to ~~$204.2~~$214.7 million for the ~~three months~~quarter ended ~~March 31,~~September 30, 2015, a decrease of ~~$40.2~~$56.6 million. Oil and Gas segment operating revenues decreased ~~$32.0~~$43.6 million for the quarter ended ~~March 31,~~September 30, 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 operating revenues decreased ~~$2.3~~$11.0 million due principally to decreased ~~revenues attributable to our~~ traditional provider ~~programs~~program revenues resulting from reduced overseas operations. Technical Services segment operating revenues decreased $2.0 million due primarily to a decrease in technical services provided to a third party customer.

Total flight hours for the quarter ended ~~March 31,~~September 30, 2016 were ~~29,948~~29,278 compared to ~~33,449~~36,296 for the quarter ended ~~March 31,~~September 30, 2015. Oil and Gas segment flight hours decreased ~~4,399~~6,402 hours, due to decreases in flight hours for all model types. Air Medical segment flight hours ~~increased 852~~decreased 580 hours from the quarter ended ~~March 31,~~September 30, 2015, due to ~~increased~~decreased flight hours in our traditional provider and independent provider operations. Individual patient transports in the Air Medical segment were ~~4,503~~5,156 for the quarter ended ~~March 31,~~September 30, 2016, compared to transports of ~~3,945~~5,440 for the quarter ended ~~March 31,~~September 30, 2015.

Direct Expenses – Direct operating expense was ~~$152.6~~$145.1 million for the ~~three months~~quarter ended ~~March 31,~~September 30, 2016, compared to ~~$169.3~~$182.1 million for the ~~three months~~quarter ended ~~March 31,~~September 30, 2015, a decrease of ~~$16.7~~$37.0 million, or ~~10%~~20%. Employee compensation expense decreased ~~$5.3~~$18.1 million primarily due to a reduction in employees in our Oil and Gas segment resulting from implementation of voluntary early retirement programs (“VERPs”) in the ~~third and fourth quarters~~second half of 2015 and the first quarter of ~~2016.~~2016, and a reduction in the number of employees in our Air Medical segment’s Middle East operations. Employee compensation expense represented approximately ~~48% and~~ 46% of total direct expense for the quarters ended ~~March 31,~~September 30, 2016 and ~~2015, respectively.~~2015. We also experienced decreases in aircraft fuel of ~~$1.8~~$2.8 million, aircraft insurance of ~~$1.0~~$0.9 million, and aircraft warranty costs of ~~$1.0~~$2.5 million (which expenses represent 3%, 1%, and 7%6% of total direct expense, respectively) as a result of the reduction in flight hours. ~~Costs~~Aircraft parts expense decreased $0.5 million and component repair expense decreased $4.0 million. Other decreases included contract services expense of $2.8 million, pilot training expense of $1.0 million, travel expenses of $0.6 million, and cost of goods sold ~~decreased $5.5 million, primarily related to reduced services provided to an external customer by our Technical Services segment.~~of $3.2 million. Other direct costs ~~decreased $2.1~~increased $0.6 million on a net basis.

Selling, General and Administrative Expenses – Selling, general and administrative expenses were ~~$11.7~~$13.4 million for the ~~three months~~quarter ended ~~March 31,~~September 30, 2016, compared to ~~$11.2~~$11.6 million for the ~~three months~~quarter ended ~~March 31,~~September 30, 2015. The ~~$0.5~~$1.8 million increase was primarily attributable to costs associated with the final lease settlement for two aircraft returned to the lessor, increased ~~legal~~ fees ~~incurred~~for contract services in ~~the current year.~~our Oil and Gas segment, and higher promotional and rent expense in our Air Medical segment.

~~(Loss)~~ Loss/Gain on Disposal of Assets, net – Loss on asset dispositions was ~~$0.4~~$0.1 million for the ~~three months~~quarter ended ~~March 31,~~September 30, 2016, compared to a gain of ~~less than $0.1~~$0.2 million for the ~~three months~~quarter ended ~~March 31,~~September 30, 2015. This decrease was primarily due to the sale or disposition of ~~one~~four light 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$0.2 million for the ~~three months~~quarter ended ~~March 31,~~September 30, 2016, compared to ~~a loss of less than~~ $0.1 million for the ~~three months~~quarter ended ~~March 31,~~September 30, 2015, ~~reflecting reduced demand for offshore flight services due~~resulting from increases expenses related to ~~lower oil and gas exploration activities.~~increased production activity in the region. See Note 11.

Interest Expense – Interest expense was ~~$7.5~~$7.7 million for the ~~three months~~quarter ended ~~March 31,~~September 30, 2016 and ~~$7.2~~$7.4 million for the ~~three months~~quarter ended ~~March 31,~~September 30, 2015, principally due to higher average outstanding debt balances.

Other Income, net – Other income was ~~$0.6~~$0.5 million for the ~~three months~~quarters ended ~~March 31,~~September 30, 2016 and September 30, 2015, and represents primarily interest income.

Income Taxes – Income tax benefit for the quarter ended September 30, 2016 was $2.8 million compared to ~~$0.5~~income tax expense of $6.6 million for the quarter ended September 30, 2015. Our $2.8 million income tax benefit for the quarter ended September 30, 2016 is attributable to our net loss from operations of $7.8 million. Our effective tax rate was 36% and 46% for the quarter ended September 30, 2016 and September 30, 2015, respectively. The higher rate for the quarter ended September 30, 2015 reflects the impact of recording during that quarter a one-time increase in the valuation allowance on our foreign tax credits.

Net (Loss) Earnings– Net loss for the quarter ended September 30, 2016 was $5.0 million compared to net earnings of $7.7 million for the quarter ended September 30, 2015. Loss before income taxes for the quarter ended September 30, 2016 was $7.8 million compared to earnings before income tax of $14.3 million for the same period in 2015. Losses per diluted share were $0.32 for the third quarter of 2016 compared to earnings per diluted share of $0.49 for the prior year quarter. The decrease in earnings before taxes for the quarter ended September 30, 2016 is attributable to the decreased profits in all segments. We had 15.7 and 15.6 million weighted average diluted common shares outstanding during the quarter ended September 30, 2016 and 2015, respectively.

Oil and Gas– Oil and Gas segment revenues were $77.6 million for the quarter ended September 30, 2016, compared to $121.2 million for the quarter ended September 30, 2015, a decrease of $43.6 million. Our Oil and Gas segment revenues are primarily driven by the amount of 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 19,583 for the most recent quarter compared to 25,985 for the same quarter in the prior year, a decrease of 6,402 flight hours. The decline in revenues and flight hours is attributable to fewer aircraft on contract and lower utilization rates for all model types due to reduced oil and gas exploration and production activities in response to lower prevailing oil prices.

The number of aircraft available for use in the segment was 139 at September 30, 2016, compared to 161 at September 30, 2015. We added one new heavy aircraft to our Oil and Gas segment since September 30, 2015. We have sold or disposed of ten light and eight medium aircraft in the Oil and Gas segment since September 30, 2015. Changes in customer-owned aircraft and transfers between segments account for the remainder.

Direct expense in our Oil and Gas segment was $82.8 million for the quarter ended September 30, 2016, compared to $109.5 million for the quarter ended September 30, 2015, a decrease of $26.7 million. Employee compensation expense decreased $14.2 million due to a reduction in employees resulting from implementation of our VERPs. See Note 10. There were also decreases in aircraft fuel expenses of $2.5 million, aircraft warranty costs of $2.4 million, and aircraft insurance of $0.7 million, each due to the reduction in flight hours. Other decreases included contract services expense of $2.5 million, pilot training expense of $0.8 million, travel expense of $0.4 million, and property taxes of $1.1 million. Other items decreased $2.1 million on a net basis.

Selling, general and administrative segment expenses were $1.7 million for the quarter ended September 30, 2016 and $1.4 million for the quarter ended September 30, 2015. The $0.3 million increase is primarily attributable to increased fees for contract services of $0.3 million.

Oil and Gas segment loss was $7.0 million for the quarter ended September 30, 2016, compared to segment profit of $10.3 million for the quarter ended September 30, 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 $74.5 million for the quarter ended September 30, 2016, compared to $85.5 million for the quarter ended September 30, 2015. This decrease of $11.0 million is primarily attributable to decreased traditional provider program revenues resulting from the reduction in the scope of our overseas operations (as discussed further below under “- Other Matters”). We also experienced decreased revenues from our independent provider programs primarily resulting from decreased patient transports. Patient transports were 5,156 for the quarter ended September 30, 2016, compared to 5,440 for the same period in the prior year.

The number of aircraft available for use in the segment at September 30, 2016 was 104 compared to 106 at September 30, 2015. Since September 30, 2015, we added three light aircraft to our Air Medical segment. We have sold or disposed of one light and two medium aircraft in the Air Medical segment since September 30, 2015. Transfers between segments account for the remainder.

Direct expense in our Air Medical segment was $56.6 million for the quarter ended September 30, 2016, compared to $65.5 million for the quarter ended September 30, 2015, a decrease of $8.9 million. Employee compensation costs decreased $3.7 million due to a reduction in personnel primarily relating to our Middle East project. Component repair costs also decreased $3.3 million as a result of a reduction in scheduled maintenance for certain aircraft. Cost of goods sold decreased $2.0 million related to certain items that were billed on a cost plus basis on our Middle East project. Other items increased, net $0.1 million.

Selling, general and administrative segment expenses were $3.1 million for the quarter ended September 30, 2016, compared to $2.3 million for the quarter ended September 30, 2015. The $0.8 million increase is primarily due to increased promotional and rent expense.

Air Medical segment profit was $14.9 million for the quarter ended September 30, 2016, compared to a segment profit of $17.7 million for the quarter ended September 30, 2015. The $2.8 million decrease in profit is attributable to the decreased operating revenues described above, partially offset by decreased expenses.

Technical Services– Technical Services segment revenues were $6.1 million for the quarter ended September 30, 2016, compared to $8.0 million for the quarter ended September 30, 2015. The decrease in revenue is due primarily to a decrease of technical services provided to a third party customer whose service requirements typically vary from period to period. We currently have one ongoing project for this customer, which is expected to be completed in the fourth quarter of 2016. At this time, we have no future projects booked for this customer Direct expenses decreased $1.4 million compared to the prior year quarter, principally due to the decreased operations. Technical Services segment earnings was less than $0.1 million for the quarter ended September 30, 2016, compared to segment profit of $0.6 million for the quarter ended September 30, 2015.

Nine Months Ended September 30, 2016 compared with Nine Months Ended September 30, 2015

Operating Revenues—Operating revenues for the nine months ended September 30, 2016 were $489.2 million, compared to $617.5 million for the nine months ended September 30, 2015, a decrease of $128.3 million. Oil and Gas segment operating revenues decreased $105.3 million for the nine months ended September 30, 2016, related primarily to decreased aircraft flight revenues for all model types resulting predominately from fewer aircraft on contract and decreased flight hours for these aircraft. Air Medical segment operating revenues decreased $19.5 million due principally to decreased traditional provider program revenues resulting from reduced overseas operations. This decrease was partially offset by increased revenues attributable to our independent provider programs, driven principally by increased transports. Technical Services segment operating revenues decreased $3.5 million due to fewer services provided to a third party customer under projects discussed further below.

Total flight hours for the nine months ended September 30, 2016 were 89,478 compared to 104,474 for the nine months ended September 30, 2015. Oil and Gas segment flight hours decreased 15,821 hours, due to decreases in flight hours for all model types. Air Medical segment flight hours increased 808 hours from the nine months ended September 30, 2015, due to increased flight hours in our independent provider programs. Individual patient transports in the Air Medical segment were 14,482 for the nine months ended September 30, 2016, compared to 14,142 transports for the nine months ended September 30, 2015.

Direct Expenses – Direct operating expense was $450.2 million for the nine months ended September 30, 2016, compared to $520.3 million for the nine months ended September 30, 2015, a decrease of $70.2 million, or 13.5%. Employee compensation expense decreased $33.7 million due to a reduction in employees in our Oil and Gas segment resulting from implementation of voluntary early retirement programs (“VERPs”) in the second half of 2015 and the first quarter of 2016. Employee compensation expense represented approximately 46% of total direct expense for the nine months ended September 30, 2016 and 2015. In addition, we experienced decreases in aircraft fuel expenses of $6.7 million, aircraft warranty costs of $5.7 million, aircraft insurance of $2.5 million, component repair costs of $4.5 million, and aircraft parts costs of $1.8 million (representing 3%, 7%, 1%, 6% and 4% of total direct expense, respectively), as a result of the reduction in flight hours. Other decreases include contract services expense of $5.6 million, pilot training expense of $2.6 million, travel expenses of $1.0 million, and property taxes of $1.4 million. Costs of goods sold decreased $7.1 million, due to decreased services provided to an external customer by our Technical Services segment, and a decrease in certain items that are billed on a cost plus basis in our Air Medical segment. Other direct costs items increased $2.5 million, net.

Selling, General and Administrative Expenses – Selling, general and administrative expenses were $36.8 million for the nine months ended September 30, 2016, compared to $34.9 million for the nine months ended September 30, 2015. The $1.9 million increase was primarily attributable to costs associated with the final lease settlement for two aircraft returned to the lessor, increased fees for contract services in our Oil and Gas segment, and higher promotional and rent expense in our Air Medical segment.

Gain on Disposal of Assets, net – Gain on asset dispositions was $3.9 million for the nine months ended September 30, 2016, compared to a gain of $0.2 million for the nine months ended September 30, 2015. During the nine months of 2016, we sold nine light and three medium aircraft, along with spare parts inventory, 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 $0.3 million and $0.2 million for the nine months ended September 30, 2016 and 2015, respectively. See Note 11.

Interest Expense – Interest expense was $22.8 million for the nine months ended September 30, 2016, compared to $21.7 million for the nine months ended September 30, 2015, principally due to higher average outstanding debt balances.

Other Income, net – Other income was $1.6 million for the nine months ended September 30, 2016 compared to $1.5 million for the nine months ended September 30, 2015 and represents primarily interest income. The $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~~benefit for the ~~three~~nine months ended ~~March 31,~~September 30, 2016 was ~~$1.4~~$5.5 million compared to income tax expense of ~~$6.6~~$17.8 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2015. Our effective tax rate was 36% and 41% for the nine months ended September 30, 2016 and September 30, 2015, respectively. The ~~$1.4~~$5.5 million income tax ~~expense~~benefit recorded in the ~~three~~nine months ended ~~March 31,~~September 30, 2016 is comprised of a $4.2 million tax benefit related to the impact of a change in Louisiana tax law which amends the manner in which profits are apportioned to the state of Louisiana for income tax reporting purposes, and a $5.4 million tax benefit on our loss before income taxes, which were partially offset by recording 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.~~million. 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 36.2% and 39% for the three months ended March 31, 2016 and March 31, 2015, respectively.~~ The higher rate for the ~~three~~nine months ended ~~March 31,~~September 30, 2015 reflects the impact of recording during that ~~quarter~~period a one-time increase in the valuation allowance on our foreign tax credits.

Net ~~Loss~~(Loss) Earnings – Net loss for the ~~three~~nine months ended ~~March 31,~~September 30, 2016 was ~~$8.9~~$9.6 million compared to net earnings of ~~$10.4~~$24.5 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2015. Loss before income taxes for the ~~three~~nine months ended ~~March 31,~~September 30, 2016 was ~~$7.5~~$15.1 million compared to earnings before income tax of ~~$17.0~~$42.3 million for the same period in 2015. ~~Losses~~Loss per diluted share ~~were $0.31~~was $0.61 for the ~~current quarter~~nine months ended September 30, 2016 compared to earnings per diluted share of ~~$0.66~~$1.57 for the prior year ~~quarter.~~nine months. The decrease in earnings before taxes for the ~~quarter~~nine months ended ~~March 31,~~September 30, 2016 is principally attributable to the decreased profits in our Oil and Gas and ~~Technical Services~~Air Medical segments, partially offset by a small increase in the profits from our ~~Air Medical~~Technical Services segment. We had ~~15.6~~15.7 and 15.5 million weighted average diluted common shares outstanding during the ~~three~~nine months ended ~~March 31,~~September 30, 2016 and ~~2015.~~2015, respectively.

Oil and Gas– Oil and Gas segment revenues were ~~$88.4~~$249.2 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2016, compared to ~~$120.4~~$354.4 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2015, a decrease of ~~$32.0~~$105.2 million. Our Oil and Gas segment revenues are primarily driven by the amount of 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 ~~20,737~~61,043 for the ~~most recent quarter~~past nine months compared to ~~25,136~~76,864 for the same ~~quarter~~nine months in the prior year, a decrease of ~~4,399~~15,821 flight hours. The decline in revenues and flight hours is attributable to ~~lower flight hours and~~ fewer aircraft on contract and lower utilization rates for all model types due to reduced oil and gas exploration and production activities in response to lower prevailing oil prices.

The number of aircraft ~~deployed~~available for use in the segment was ~~154~~139 at ~~March 31,~~September 30, 2016, compared to ~~168~~161 at ~~March 31,~~September 30, 2015. We added one new heavy aircraft to our Oil and Gas segment since ~~March 31,~~September 30, 2015. We have sold or disposed of ~~seven~~ten light and eight medium aircraft in the Oil and Gas segment since ~~March 31,~~September 30, 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~~$262.1 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2016, compared to ~~$100.3 million~~$310.1 for the ~~three~~nine months ended ~~March 31,~~September 30, 2015, a decrease of ~~$8.4~~$48.0 million. Employee compensation ~~expense~~expenses decreased ~~$4.1~~$25.1 million due to a reduction in employees primarily resulting from implementation of our VERPs. ~~During the first quarter of 2016, we recorded $1.6 million of severance costs related to these programs.~~ See Note 10. There were ~~also~~ decreases in aircraft fuel expenses of ~~$2.0~~$6.6 million, ~~and~~aircraft insurance of $1.8 million, aircraft warranty costs of ~~$1.1~~$5.7 million, and aircraft parts costs of $1.8 million, each due to the reduction in flight hours. Other decreases included contract services expense of $4.7 million and pilot training expense of $2.4 million. Other items ~~decreased $1.2~~increased $0.1 million, ~~on a net basis.~~net.

Selling, general and administrative segment expenses were ~~$1.5~~$4.8 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2016 and ~~$1.2~~$3.8 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2015. The ~~$0.3~~$1.0 million increase iswas primarily ~~attributable~~due to increased legal fees ~~of $0.2 million,~~ and ~~increased~~ bad debt ~~expense of $0.2 million. Other items decreased net $0.1 million.~~expense.

Oil and Gas segment loss was ~~$5.0~~$17.8 million for the ~~quarter~~nine months ended ~~March 31,~~September 30, 2016, compared to segment profit of ~~$18.9~~$40.5 million for the ~~quarter~~nine months ended ~~March 31,~~September 30, 2015. The decrease in segment profit was due to the decreased revenues detailed above, which were only partially offset by decreased ~~expenses attributable to the above-described factors.~~expenses.

Air Medical– Air Medical segment revenues were ~~$70.1~~$220.1 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2016, compared to ~~$72.4~~$239.5 million for the ~~three~~nine months ended ~~March 31, 2015. This~~September 30, 2015, a decrease of ~~$2.3 million is primarily attributable to decreased~~$19.4 million. Operating revenues ~~from~~in our traditional provider programs ~~resulting from the~~decreased $24.8 million due to a reduction in the scope of our overseas ~~operations. These decreases were partially offset by higher~~operations (as discussed further below under “- Other Matters”). Operating revenues ~~from~~in our independent provider programs ~~driven by, among other things,~~increased $2.9 million primarily due to an increase in ~~operating bases.~~patient transports. Patient transports were ~~4,503~~14,482 for the ~~three~~nine months ended ~~March 31,~~September 30, 2016, compared to ~~3,945~~14,142 for the same period in the prior year. Other segment revenue increased $2.5 million.

The number of aircraft available for use in the segment at ~~March 31,~~September 30, 2016 was ~~105~~104 compared to ~~100~~106 at ~~March 31,~~September 30, 2015. Since ~~March 31,~~September 30, 2015, we added ~~seven~~three light aircraft to our Air Medical segment. ~~Changes~~We have sold or disposed of one light and five medium aircraft in ~~customer-owned aircraft and transfers between segments account for~~ the ~~remainder.~~Air Medical segment since September 30, 2015.

Direct expense in our Air Medical segment was ~~$57.0~~$172.6 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2016, compared to ~~$60.0~~$189.1 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2015, a decrease of ~~$3.0~~$16.5 million. ~~We incurred decreases in employee~~Employee compensation ~~costs of $1.8~~expenses decreased $8.3 million due to a reduction in ~~pilot compensation. Component~~personnel. There were also decreases in spare parts and component repair costs ~~also decreased $1.5~~of $0.1 million asand $6.3 million, respectively, due to a ~~result of a reduction~~decrease in scheduled maintenance for certain ~~aircraft.~~model types. Cost of goods sold ~~also~~ decreased ~~$1.3~~$4.0 million ~~related~~due to a decrease in certain items that ~~are~~were billed to our Middle East customer on a cost plus ~~basis on our Middle East project.~~basis. Aircraft depreciation increased $1.3 million due to an increase in the number of owned aircraft. Other direct expense items increased by a net ~~$1.6~~of $0.9 million.

Selling, general and administrative ~~segment~~ expenses were ~~$2.6~~$8.3 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2016, ~~as well as~~compared to $7.5 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2015. The $0.8 million increase is primarily attributable to increased expenses for contract services.

Air Medical segment profit was ~~$10.4~~$39.2 million for the ~~quarter~~nine months ended ~~March 31,~~September 30, 2016, compared to a segment profit of ~~$9.7~~$43.0 million for the ~~quarter~~nine months ended ~~March 31,~~September 30, 2015. The ~~$0.7 million increase~~decrease in profit is primarily attributable to the decreased revenues described above, which were only partially offset by the decreased aircraft operating expenses described above.

Technical Services– Technical Services segment revenues were ~~$5.5~~$20.0 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2016, compared to ~~$11.4~~$23.5 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2015. Direct expense decreased $5.8 million compared to the prior year nine-month period. 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 ~~were near completion in the first quarter of 2016, after which additional projects are expected~~whose service requirements typically vary from period to ~~begin and continue through 2016. Direct expenses decreased $5.3 million compared to the prior year quarter, principally due to reduced operations.~~period. Technical Services segment ~~earnings were $1.7~~profit was $3.8 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2016, compared to ~~segment profit of $2.4~~$1.8 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2015.

For several years our Air Medical affiliate received substantial benefits under its three-year service contract with a Middle East customer dated September 29, 2012. Following the expiration of the initial agreement with this customer in late September 2015, we extended the service relationship three times for three-, six- and three-month periods, respectively, on terms that caused our overseas air medical revenues and operating costs to decline significantly compared to prior periods. Our service relationship with this customer reached its contractual end date on September 30, 2016, which will place a commensurate reduction on our Air Medical segment revenues and profit in future periods. We believe that we have remained in good standing with this customer and are in discussions regarding future work. Even if we are ultimately successful in obtaining additional work from this customer, we currently do not expect the arrangement to be effective until 2017.

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~~sale-leaseback transactions to fund these acquisitions.

Liquidity–- Our cash position was ~~$6.5~~$2.6 million at ~~March 31,~~September 30, 2016, compared to $2.4 million at December 31, 2015. Short-term investments were ~~$286.1~~$289.5 million at ~~March 31,~~September 30, 2016, compared to $284.5 million at December 31, 2015. We also had $13.0 million and $15.3 million in restricted investments at ~~March 31,~~September 30, 2016 and December 31, 2015, respectively, securing outstanding letters of ~~credit.~~credit and a bond for foreign operations.

As noted in greater detail above, ~~the~~ current ~~downturn~~weakness 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.~~future periods. Through ~~December 31, 2015,~~September 30, 2016, these negative variances did not materially impact our ~~liquidity or the cash flows~~financial position reported in our consolidated ~~cash flows statements,~~balance sheets, as described in further detail below. Nonetheless, if the current ~~oil and gas downturn~~weakness of the energy industry 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.~~liquidity.

Operating activities – —Net cash used in operating activities was ~~$16.3~~$7.1 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2016, compared to net cash provided of ~~$29.9~~$108.2 million for the same period in 2015, a decrease of ~~$46.2~~$115.3 million. Net cash provided by operating activities (excluding changes in operating assets and liabilities) contributed $11.8 million of cash flow in the first quarter of 2016, compared to $35.4 million in the first quarter of 2015, a decrease of $23.6Cash receipts from customers were down $152.7 million, primarily due to a $105.2 million decrease in our Oil and Gas segment revenues, related to the ~~decreased profitability of our oil and gas segment. Net changes~~downturn in ~~operating assets and liabilities~~the industry. We had a $57.3 million decrease in first quarter of 2016 used cash of $28.1 million, compared to a net use of cash of $5.5 million in first quarter of 2015. The $22.6 million increase in net use of cash was primarily due to $32.7 million less cash collected in first quarter of 2016collections related to our Middle East contract due in part to timing of ~~payments. Other increases~~payments and in ~~the use of~~part to a decrease in revenue. This was offset by a $14.3 million decrease in cash required for ~~2016 were~~net payroll, primarily due to ~~an increase in our aircraft parts inventory of $3.4 million for~~ a ~~certain model type and payments related to 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~~reduction in bonuses paid and staffing levels. The remaining offset was due to a ~~$9.1 million~~ decrease in payments ~~made~~ to ~~major suppliers.~~vendors due to the decreased scope of our operations.

Investing activities – —Net cash used in investing activities was ~~$9.2~~$67.0 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2016, compared to ~~$27.0~~$141.6 million for the same period in 2015. ~~Purchases and sales~~Net purchases of short-term investments used ~~$1.5~~$3.9 million of cash during the ~~three~~nine months ended ~~March 31,~~September 30, 2016, compared to ~~$4.8~~$101.7 million in the comparable prior year period. Gross proceeds from asset dispositions induring the ~~first quarter~~nine months of 2016 were ~~$0.9 million. There were no gross proceeds from asset dispositions~~$13.2 million, compared to $3.5 million for the same period in ~~the first quarter of~~ 2015. Capital expenditures were ~~$8.5~~$75.0 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2016, compared to ~~$22.1~~$48.2 million for the same period in 2015. Capital expenditures for aircraft and aircraft improvements accounted for ~~$8.0~~$72.4 million and ~~$20.8~~$45.5 million of these totals for the ~~three~~nine months ended 2016 and 2015, ~~respectively, which reflects a decrease in the number of aircraft purchased by us in the first three months of 2016 as compared to the same period in 2015.~~respectively. During the first quarter of 2016, we took delivery of one heavy aircraft that we ~~intend to finance with an operating lease~~purchased in the second quarter with borrowings under our revolving credit line. During the third quarter of 2016, we purchased a heavy aircraft pursuant to a lease purchase option, purchased one light aircraft, and took delivery of one light aircraft to be purchased in the fourth quarter. During the ~~same period in~~first nine months of 2015, we (i) exercised a purchase option on one heavy aircraft, ~~and~~(ii) took delivery of another heavy aircraft ~~as to which~~that we ~~executed an operating lease~~paid for in the ~~second~~third quarter of ~~2015.~~2015, and then completed a sale/leaseback following the purchase, and (iii) purchased six light aircraft.

Financing activities– Financing activities during the ~~first quarter~~nine months of 2016 included net borrowings of ~~$30.2~~$74.9 million on our revolving credit facility and $0.5 million used to repurchase shares of our non-voting common stock to satisfy withholding tax obligations of employees.

Financing activities ~~for~~during the first ~~quarter~~nine months of 2015 included net ~~payments~~borrowings of ~~$3.4~~$35.2 million on our revolving credit facility and ~~$2.2~~$2.5 million used ~~related~~ to ~~the purchase of~~repurchase shares of our non-voting common stock to satisfy withholding tax obligations of employees.

As of ~~March 31,~~September 30, 2016, we owed $632.4 million under our total long-term debt, ~~was $587.7 million,~~ consisting of ~~our $500~~$500.0 million principal amount of 5.25% Senior Notes due 2019 (excluding debt issuance costs) and ~~$87.7~~$132.4 million borrowed under our revolving credit facility.

Revolving Credit Facility– ~~We have an~~On September 30, 2016, we amended ~~and restated~~our revolving credit facility ~~(our “credit facility”) that matures on~~to, among other things, (a) extend the maturity date to October 1, ~~2017.~~2018 and (b) modify the fixed charge coverage ratio such that it will only be tested when the total of our short term investments are less than $150.0 million at the end of any fiscal quarter. Under ~~our credit~~this facility, we can borrow up to ~~$150~~$150.0 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 net 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 if our short-term investments fall below $150.0 million, and consolidated net worth of at least ~~$450~~$450.0 million (with all such terms or amounts as defined in or determined under the amended and restated revolving credit facility).

At ~~March 31,~~September 30, 2016, we had ~~$87.7~~$132.4 million in borrowings under our credit facility. At the same date in 2015, we had ~~$39.6~~$78.2 million in borrowings under our credit facility.

Other– We maintain a separate letter of credit facility described in Note 5 that had ~~$15.3~~$13.0 million of letters of credit outstanding at ~~March 31,~~September 30, 2016.

The table below sets out our contractual obligations as of ~~March 31,~~September 30, 2016, related to our operating lease obligations, ~~aircraft purchase commitments,~~ revolving credit facility, and 5.25% Senior Notes due 2019. 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 ~~March 31,~~September 30, 2016. As of ~~March 31,~~September 30, 2016, we leased 25 aircraft included in the lease obligations below.


																	Payment Due by Year
			Payment Due by Year																								Beyond
	Total		2016⁽¹⁾		2017		2018		2019		2020		Beyond 2020		Total		2016⁽¹⁾		2017		2018		2019		2020		2020
			(Thousands of dollars)														(Thousands of dollars)
Aircraft lease obligations	$	266,477	$	34,266	$	42,699	$	39,018	$	32,365	$	28,526	$	89,603	$	226,242	$	10,607	$	40,560	$	36,879	$	30,226	$	26,387	$	81,583
Other lease obligations		14,891		4,295		3,435		2,680		2,148		1,557		776		12,842		1,396		3,917		2,863		2,288		1,595		783
Long-term debt⁽²⁾		587,700		—		87,700		—		500,000		—		—		632,400		—		—		132,400		500,000		—		—
Senior notes interest⁽²⁾		78,750		13,125		26,250		26,250		13,125		—		—		65,625		—		26,250		26,250		13,125		—		—

	$	947,818	$	51,686	$	160,084	$	67,948	$	547,638	$	30,083	$	90,379	$	937,109	$	12,003	$	70,727	$	198,392	$	545,639	$	27,982	$	82,366

The table above reflects only contractual obligations as of ~~March 31,~~September 30, 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 ~~March 31,~~September 30, 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 ~~between 2016 and~~through 2020. The aggregate option purchase prices are ~~$67.8~~$50.3 million in 2016, $55.7 million in 2017, $127.0 million in 2018, $150.4 million in 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.

On January 15, 2016, we took initial delivery of one heavy aircraft. ~~The~~We funded the payment for this aircraft ~~will be finally delivered~~with borrowing from our credit facility in ~~May 2016 when completion services are finished. We are currently pursuing financing with an operating lease.~~June 2016.

We intend to fund the ~~above~~above-described contractual obligations and any exercised purchase options through a combination of cash on hand, cash flow from operations, borrowings under our credit facility, 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, 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 ~~$39.8~~$88.3 million weighted average loan balance during the ~~three~~nine months ended ~~March 31,~~September 30, 2016, a 10% increase ~~(0.245%~~(0.272%) in interest rates would have reduced our annual pre-tax earnings approximately ~~$0.1~~$0.2 million, but would not have changed the fair market value of this debt.

Our ~~$500~~$500.0 million principal amount 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 ~~March 31,~~September 30, 2016, the market value of the notes was approximately ~~$457.5~~$485.6 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, 2015.

During the ~~first~~third quarter of 2016, we withheld from employees and canceled ~~26,660~~1,031 shares of our non-voting common stock in connection with the vesting of their stock-based awards to satisfy the related minimum tax withholding obligation. The following table provides additional information about these transactions.


					Total Number of		Average Price
Period	Total Number of Shares Purchased		Average Price Paid per Share		Shares Purchased		Paid per Share
March 1, 2016 – March 31, 2016		26,660	$	18.77
August 1, 2016 – August 31, 2016						1,031	$	19.22

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.None.


		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.



		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.


2001 SE Evangeline Thruway
Lafayette, Louisiana		70508
(Address of principal executive offices)		(Zip Code)


	Part I – Financial Information

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

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2428

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3342

Item 4.	Controls and Procedures	3343

	Part II – Other Information

Item 1.	Legal Proceedings	3444

Item 1A.	Risk Factors	3444

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3444

Item 3.	Defaults Upon Senior Securities	3444

Item 4.	Mine Safety Disclosures	3444

Item 5.	Other Information	3444

Item 6.	Exhibits	3545

	Signatures	3747


(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 10-Q for the quarterly period ended September 30, 2015, filed 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†~~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~~4.5*	Fourth Amendment to Second Amended and Restated Loan Agreement, dated as of September 30, 2016, by and among PHI, Inc., PHI Air Medical, L.L.C., PHI Tech Services, Inc., International Helicopter Transport, Inc. and Whitney National Bank.

	4.6	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).

	~~4.6~~4.7	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).

	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).


	PHI, Inc.		~~PHI, Inc.~~

~~May 9,~~November 7, 2016		By:	/s/ Al A. Gonsoulin

	Al A. Gonsoulin

	Chairman and Chief Executive Officer

~~May 9,~~November 7, 2016		By:	/s/ Trudy P. McConnaughhay

	Trudy P. McConnaughhay

	Chief Financial Officer


Class		Outstanding at ~~April 29,~~October 31, 2016
Voting Common Stock		2,905,757 shares
Non-Voting Common Stock		~~12,771,550~~12,777,358 shares


	March 31, 2016				December 31, 2015
	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		0.985		602		0.865		599
Corporate bonds and notes		1.727		328		1.757		331


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

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

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

		1,673			18			5,227			6,918

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

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


	For the nine months ended September 30, 2016
	Parent
	Company			Guarantor
	Only (issuer)			Subsidiaries ⁽¹⁾			Eliminations			Consolidated
Operating revenues, net	$	260,766		$	228,479		$	—		$	489,245
Expenses:
Direct expenses		264,761			185,148			—			449,909
Selling, general and administrative expenses		28,914			8,766			(848	)		36,832

Total operating expenses		293,675			193,914			(848	)		486,741
Gain on disposal of assets, net		(3,854	)		—			—			(3,854	)
Equity in loss of unconsolidated affiliate		274			—			—			274

Operating income		(29,329	)		34,565			848			6,084
Equity in net income of consolidated subsidiaries		(20,462	)		—			20,462			—
Interest expense		22,762			30			—			22,792
Other income, net		(2,415	)		(4	)		848			(1,571	)

		(115	)		26			21,310			21,221

(Loss) earnings before income taxes		(29,214	)		34,539			(20,462	)		(15,137	)
Income tax (benefit) expense		(19,592	)		14,077			—			(5,515	)

Net (loss) earnings	$	(9,622	)	$	20,462		$	(20,462	)	$	(9,622	)


	For the nine months ended September 30, 2015
	Parent
	Company			Guarantor
	Only (issuer)			Subsidiaries⁽¹⁾			Eliminations			Consolidated
Operating revenues, net	$	368,202		$	249,275		$	—		$	617,477
Expenses:
Direct expenses		321,841			198,271			(13	)		520,099
Selling, general and administrative expenses		27,198			7,661			—			34,859

Total operating expenses		349,039			205,932			(13	)		554,958
Gain on disposal of assets, net		(238	)		—			—			(238	)
Equity in loss of unconsolidated affiliate		249			—			—			249

Operating income		19,152			43,343			13			62,508
Equity in net income of consolidated subsidiaries		(26,044	)		—			26,044			—
Interest expense		21,599			92			—			21,691
Other income, net		(1,508	)		(6	)		13			(1,501	)

		(5,953	)		86			26,057			20,190

Earnings before income taxes		25,105			43,257			(26,044	)		42,318
Income tax expense		619			17,213			—			17,832

Net earnings	$	24,486		$	26,044		$	(26,044	)	$	24,486


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

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

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

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

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

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


	For the nine months ended September 30, 2016
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾			Eliminations		Consolidated
Net cash (used in) provided by operating activities	$	(32,467	)	$	25,319		$	—	$	(7,148	)
Investing activities:
Purchase of property and equipment		(74,647	)		(303	)		—		(74,950	)
Proceeds from asset dispositions		13,233			—			—		13,233
Purchase of short-term investments		(263,204	)		—			—		(263,204	)
Proceeds from sale of short-term investments		259,322			—			—		259,322
Payments of deposits on aircraft		(197	)		—			—		(197	)
Loan to unconsolidated affiliate		(1,200	)		—			—		(1,200	)

Net cash used in investing activities		(66,693	)		(303	)		—		(66,996	)

Financing activities:
Proceeds from line of credit		213,900			—			—		213,900
Payments on line of credit		(139,000	)		—			—		(139,000	)
Repurchase of common stock		(524	)		—			—		(524	)
Due to/from affiliate, net		24,774			(24,774	)		—		—

Net cash provided by (used in) financing activities		99,150			(24,774	)		—		74,376

(Decrease) increase in cash		(10	)		242			—		232
Cash, beginning of period		46			2,361			—		2,407

Cash, end of period	$	36		$	2,603		$	—	$	2,639

Large accelerated filer:

Accelerated filer:

Non-accelerated filer:

¨☐ (Do not check if a smaller reporting company)

Smaller reporting company: