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 RegulationsS-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, anon-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated ~~filer” and~~filer,” “smaller reporting company” and “emerging growth company” in Rule12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-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.


							March 31,			December 31,
	March 31, 2016			December 31, 2015			2017			2016
ASSETS
Current Assets:
Cash	$	6,536		$	2,407		$	3,680		$	2,596
Short-term investments		286,139			284,523			276,818			289,806
Accounts receivable – net
Trade		142,738			138,309			117,386			128,662
Other		8,650			6,469			8,884			9,603
Inventories of spare parts – net		70,181			69,491			73,033			70,402
Prepaid expenses		8,827			8,951			10,330			9,259
Deferred income taxes		10,379			10,379			10,798			10,798
Income taxes receivable		743			761			323			540

Total current assets		534,193			521,290			501,252			521,666

Property and equipment – net		908,414			883,529			896,565			903,977
Restricted investments		15,336			15,336
Restricted cash and investments								13,038			13,038
Other assets		6,330			5,243			8,873			9,759

Total assets	$	1,464,273		$	1,425,398		$	1,419,728		$	1,448,440

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	61,620		$	31,373		$	22,054		$	28,704
Accrued and other current liabilities		28,054			44,759			27,500			28,346

Total current liabilities		89,674			76,132			49,554			57,050

Long-term debt:
Revolving credit facility		87,700			57,500			135,500			134,000
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 $2,441 and $2,753, respectively								497,559			497,247

Deferred income taxes		154,904			153,645			142,870			151,713
Other long-term liabilities		16,145			16,057			8,131			8,652

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, 12,797,442 and 12,779,646 issued and outstanding at March 31, 2017 and December 31, 2016, respectively								1,279			1,278
Additional paid-in capital		305,869			304,884			304,698			304,246
Accumulated other comprehensive loss		(90	)		(567	)		(375	)		(478	)
Retained earnings		312,189			321,121			280,221			294,441

Total shareholders’ equity		619,537			626,998			586,114			599,778

Total liabilities and shareholders’ equity	$	1,464,273		$	1,425,398		$	1,419,728		$	1,448,440

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


	Quarter Ended March 31,						Quarter Ended March 31,
	2016			2015			2017			2016
Operating revenues, net	$	164,016		$	204,197		$	134,618		$	164,016

Expenses:
Direct expenses		152,554			169,207			136,513			152,554
Selling, general and administrative expenses		11,673			11,237			13,044			11,673

Total operating expenses		164,227			180,444			149,557			164,227
Loss (gain) on disposal of assets		359			(7	)

Loss on disposal of assets								—			359
Equity in loss (income) of unconsolidated affiliate		—			68			1,003			—

Operating (loss) income		(570	)		23,692
Operating loss								(15,942	)		(570	)

Interest expense		7,533			7,170			8,195			7,533
Other income – net		(615	)		(462	)		(1,064	)		(615	)

		6,918			6,708			7,131			6,918

(Loss) earnings before income taxes		(7,488	)		16,984
Income tax expense		1,444			6,621
Loss before income taxes								(23,073	)		(7,488	)
Income tax (benefit) expense								(7,825	)		1,444

Net (loss) earnings	$	(8,932	)	$	10,363
Net loss							$	(15,248	)	$	(8,932	)

Weighted average shares outstanding:
Basic		15,600			15,579			15,689			15,600
Diluted		15,600			15,662			15,689			15,600
Net (loss) earnings per share:

Net loss per share:
Basic	$	(0.57	)	$	0.67		$	(0.97	)	$	(0.57	)
Diluted	$	(0.57	)	$	0.66		$	(0.97	)	$	(0.57	)

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


	Quarter Ended March 31,						Quarter Ended March 31,
	2016			2015			2017			2016
Net (loss) earnings	$	(8,932	)	$	10,363
Net loss							$	(15,248	)	$	(8,932	)
Unrealized gain on short-term investments		807			139			162			807
Other unrealized gain		—			24
Changes in pension plan assets and benefit obligations		1			—			(1	)		1
Tax effect of the above-listed adjustments		(332	)		(55	)		(58	)		(332	)

Total comprehensive (loss) income	$	(8,456	)	$	10,471
Total comprehensive loss							$	(15,145	)	$	(8,456	)

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


																										Voting								Non-Voting								Additional				Accumulated								Total
	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				Other Comprehensive				Retained				ShareHolders’
	Shares		Amount		Shares			Amount										Shares							Amount				Shares				Amount				Capital				(Loss)Income				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	)			—				—				—				—				—				—				(8,932	)			(8,932	)
Unrealized gain on short-term investments		—		—		—			—			—				476				—			476				—				—				—				—				—				476				—				476
Changes in pension plan assets and benefit obligations		—		—		—			—			—				1				—			1				—				—				—				—				—				1				—				1
Amortization of unearned stock-based compensation		—		—		—			—			1,485				—				—			1,485				—				—				—				—				1,485				—				—				1,485
Issuance of non-voting common stock (upon vesting of restricted stock units)		—		—		121			12			—				—				—			12				—				—				121				12				—				—				—				12
Cancellation of restricted non-voting stock units for tax withholdings on vested shares		—		—		(27	)		(3	)		(500	)			—				—			(503	)			—				—				(27	)			(3	)			(500	)			—				—				(503	)
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				2,906			$	291				12,771			$	1,278			$	305,869			$	(90	)		$	312,189			$	619,537


																										Voting								Non-Voting								Additional				Accumulated								Total
																										Common Stock								Common Stock								Paid-in				Other Comprehensive				Retained				ShareHolders’
																										Shares				Amount				Shares				Amount				Capital				(Loss)Income				Earnings				Equity
Balance at December 31, 2016																											2,906			$	291				12,779			$	1,278			$	304,246			$	(478	)		$	294,441			$	599,778

Net loss																											—				—				—				—				—				—				(15,248	)			(15,248	)
Unrealized gain on short-term investments																											—				—				—				—				—				104				—				104
Changes in pension plan assets and benefit obligations																											—				—				—				—				—				(1	)			—				(1	)
Amortization of unearned stock-based compensation																											—				—				—				—				552				—				—				552
Issuance ofnon-voting common stock (upon vesting of restricted stock units)																											—				—				27				2				—				—				—				2
Cancellation of restrictednon-voting stock units for tax withholdings on vested shares																											—				—				(9	)			(1	)			(100	)			—				—				(101	)
Cumulative effect adjustment of unrecognized tax benefits																											—				—				—				—				—				—				1,028				1,028

Balance at March 31, 2017																											2,906			$	291				12,797			$	1,279			$	304,698			$	(375	)		$	280,221			$	586,114

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


							Quarter Ended
	Three Months Ended March 31,						March 31,
	2016			2015			2017			2016
Operating activities:
Net (loss) earnings	$	(8,932	)	$	10,363
Adjustments to reconcile net earnings to net cash provided by operating activities:
Net loss							$	(15,248	)	$	(8,932	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		16,973			18,151			16,845			16,973
Deferred income taxes		955			6,279			(7,883	)		955
Loss (gain) on asset dispositions		359			(7	)
Loss on asset dispositions								—			359
Equity in loss of unconsolidated affiliate		—			68			1,003			—
Inventory valuation reserves		2,435			562			(1,293	)		2,435
Changes in operating assets and liabilities		(28,133	)		(5,498	)		(1,677	)		(28,133	)

Net cash (used in) provided by operating activities		(16,343	)		29,918
Net cash used in operating activities								(8,253	)		(16,343	)

Investing activities:
Purchase of property and equipment		(8,519	)		(22,115	)		(4,789	)		(8,519	)
Proceeds from asset dispositions		850			—			—			850
Purchase of short-term investments		(77,677	)		(190,243	)		(54,867	)		(77,677	)
Proceeds from sale of short-term investments		76,184			185,426			67,659			76,184
Payment of deposits on aircraft		(66	)		(66	)		(66	)		(66	)

Net cash used in investing activities		(9,228	)		(26,998	)
Net cash provided by (used in) investing activities								7,937			(9,228	)

Financing activities:
Proceeds from line of credit		83,500			77,740			37,300			83,500
Payments on line of credit		(53,300	)		(81,100	)		(35,800	)		(53,300	)
Repurchase of common stock		(500	)		(2,207	)		(100	)		(500	)

Net cash provided by financing activities		29,700			(5,567	)		1,400			29,700

Increase (decrease) in cash		4,129			(2,647	)
Increase in cash								1,084			4,129
Cash, beginning of period		2,407			6,270			2,596			2,407

Cash, end of period	$	6,536		$	3,623		$	3,680		$	6,536

Supplemental Disclosures Cash Flow Information
Cash paid during the period for:
Interest	$	13,691		$	13,453		$	14,114		$	13,691

Income taxes	$	—		$	3,061		$	—		$	—

Noncash investing activities:
Other current liabilities and accrued payables related to purchase of property and equipment	$	29,302		$	28,994		$	348		$	29,302

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 Form10-K for the year ended December 31, ~~2015~~2016 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 Form10-K for the year ended December 31, ~~2015.~~2016. 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.

Recently Adopted Accounting Pronouncements -Effective January 1, 2017, we adopted ASU2016-09,Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The new standard requires that excess tax benefits and deficiencies resulting from stock-based compensation awards vesting and exercises be recognized in the income statement. Previously, these amounts were recognized in additionalpaid-in capital. As a result, during the first quarter of 2017 we recorded a cumulative-effect adjustment of $1.0 million increasing retained earnings and decreasing deferred tax liability on our balance sheet dated March 31, 2017. Accordingly, we recorded income tax expense of $0.5 million in our consolidated statement of income for the three months ended March 31, 2017, in recognition of excess tax deficiencies related to equity compensation. Under this new standard, the corresponding cash flows are now reflected in cash provided by operating activities instead of financing activities, as was previously required.

ASU2016-09 also allows an employer with a statutory income tax withholding obligation to withhold shares with a fair value up to the amount of tax owed using the maximum statutory tax rate in the employee’s applicable jurisdiction. We have elected to continue to withhold the minimum statutory withholding obligation for outstanding awards. We have also elected to continue to estimate equity award forfeitures expected to occur to determine the amount of compensation cost to be recognized in each period

New Accounting 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.~~customers. Entities can transition to the standard either retrospectively or as a cumulative effect adjustment as of the date of adoption. The standard ~~originally~~is effective for ~~public entities for annual and interim periods~~us beginning ~~after December 15, 2016, has been deferred for annual and interim periods beginning after December 15, 2017. Early~~January 1, 2018, with early adoption ~~will be~~ permitted as of January 1, 2017. Revenues from our Oil and Gas segment and Air Medical segment hospital contracts are primarily comprised of a fixed monthly fee for a particular model of aircraft, plus a variable component based on flight time. Under the ~~original effective date. The~~independent provider programs of our Air Medical segment, our revenues are based on a flat rate plus a variable charge per patient-loaded mile, and are recorded net of contractual allowances. We also generate revenue on a cost-plus basis in our Technical Services segment. We are continuing to assess the effects of this standard on each revenue stream of our business and the overall effect on our financial position, results of operations and cash flows ~~are~~and have not yet ~~known.~~

~~In August 2014, the FASB issued ASU 2014-15~~~~Presentation~~selected a method 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.adoption. 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~~intend to adopt ~~this ASU no later than~~the standard beginning January 1, 2018, with early adoption permitted, and the guidance may be applied either prospectively or retrospectively. We do not expect this ASU to have a material impact on our consolidated financial statements.2018.

In February 2016, the FASB issued ASU2016-02,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~~plan to adopt this standard no later than January 1, 2019. We are currently evaluating the effects of this standard, and expect the adoption of this standard will result in a material change to our consolidated assets and liabilities based on our lease portfolio as of December 31, 2016.

In October 2016, the FASB issued ASU2016-16,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.

In January 2017, the FASB issued ASU2017-01,Business Combinations (Topic 805): Clarifying the Definition of a Business. ASU2017-01 clarifies the definition of a business and requires that an entity apply certain criteria in order to determine when a set of assets and activities qualifies as a business. The adoption of this standard is expected to result in fewer acquisitions of properties qualifying as acquisitions of businesses and, accordingly, acquisition costs for those acquisitions that do not qualify as businesses will be capitalized rather than expensed. This standard is effective for fiscal years beginning after December ~~31, 2018, with early~~15, 2017, and interim periods within those fiscal years, and should be applied on a prospective basis. Early adoption is permitted. The effects of this standard on our financial position, results of operations, and cash flows are not yet known.

In ~~March 2016,~~January 2017, the FASB issued ASU ~~2016-09,~~2017-04,~~Compensation – Stock Compensation~~Intangibles-Goodwill and Other (Topic ~~718); Improvements to Employee Share-Based Payment Accounting.~~350): Simplifying the Test for Goodwill Impairment ~~The~~. ASU ~~includes multiple provisions intended to simplify various aspects~~2017-04 simplifies the currenttwo-step goodwill impairment test by eliminating Step 2 of the ~~accounting~~test. The new standard requires aone-step impairment test in which an entity compares the fair value of a reporting unit with its carrying amount and recognizes an impairment charge for ~~share-based payments. The ASU~~the amount by which the carrying amount exceeds the reporting unit’s fair value, if any. This standard is effective for ~~public companies in annual periods~~fiscal years beginning after December 15, ~~2016,~~2019, and interim periods within those ~~years. The effects of~~fiscal years, and should be applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We do not expect this ~~standard~~ASU to have a material impact on our consolidated financial ~~position, results of operations, and cash flows are not yet known.~~statements.

We classify all of our short-term investments asavailable-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.


												Unrealized		Unrealized			Fair
	Cost Basis		Unrealized Gains		Unrealized Losses			Fair Value		Cost Basis		Gains		Losses			Value
	(Thousands of dollars)									(Thousands of dollars)
Investments:
Money market mutual funds	$	17,877	$	—	$	—		$	17,877	$	10,597	$	—	$	—		$	10,597
Commercial paper		5,994		1		—			5,995		27,935		—		(26	)		27,909
U.S. Government agencies		27,301		7		(6	)		27,302		15,305		—		(20	)		15,285
Corporate bonds and notes		250,399		94		(192	)		250,301		236,525		4		(479	)		236,050

Subtotal		301,571		102		(198	)		301,475		290,362		4		(525	)		289,841
Deferred compensation plan assets included in other assets		2,334		—		—			2,334		2,500		—		—			2,500

Total	$	303,905	$	102	$	(198	)	$	303,809	$	292,862	$	4	$	(525	)	$	292,341


													Unrealized		Unrealized			Fair
	Cost Basis			Unrealized Gains		Unrealized Losses			Fair Value		Cost Basis		Gains		Losses			Value
	(Thousands of dollars)										(Thousands of dollars)
Investments:
Money market mutual funds	$	18,181		$	—	$	—		$	18,181	$	18,118	$	—	$	—		$	18,118
Commercial paper		5,986			—		(5	)		5,981		27,906		—		(39	)		27,867
U.S. Government agencies		11,499	��		—		(30	)		11,469
U.S. government agencies												13,295		—		(32	)		13,263
Corporate bonds and notes		265,069			—		(841	)		264,228		244,202		2		(622	)		243,582

Subtotal		300,735			—		(876	)		299,859		303,521		2		(693	)		302,830
Deferred compensation plan assets included in other assets		2,294			—		—			2,294		2,394		—		—			2,394

Total	$	303,029		$	—	$	(876	)	$	302,153	$	305,915	$	2	$	(693	)	$	305,224

At March 31, ~~2016~~2017 and December 31, ~~2015,~~2016, we classified ~~$15.3~~$13.0 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:


									March 31, 2017				December 31, 2016
	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	$	200,195	$	199,906	$	184,587	$	184,334
Due within two years		135,104		135,082		130,110		129,466		79,570		79,338		100,816		100,378

Total	$	283,694	$	283,598	$	282,554	$	281,678	$	279,765	$	279,244	$	285,403	$	284,712

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


	March 31, 2017				December 31, 2016
	Average		Average		Average		Average
	Coupon		Days To		Coupon		Days To
	Rate (%)		Maturity		Rate (%)		Maturity
Commercial paper		1.035		140		1.001		184
U.S. Government agencies		1.056		355		0.970		400
Corporate bonds and notes		1.731		287		1.745		318

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:


											March 31, 2017					December 31, 2016
	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	)	$	27,909	$	(26	)	$	27,867	$	(39	)
U.S. Government agencies		11,996		(6	)		8,969		(30	)		14,285		(20	)		13,263		(32	)
Corporate bonds and notes		134,298		(150	)		232,347		(793	)		207,512		(460	)		210,836		(602	)

Total	$	146,294	$	(156	)	$	247,297	$	(828	)	$	249,706	$	(506	)	$	251,966	$	(673	)

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:


											March 31, 2017					December 31, 2016
	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	)	$	20,116	$	(19	)	$	24,196	$	(20	)

Total	$	47,783	$	(42	)	$	28,866	$	(48	)	$	20,116	$	(19	)	$	24,196	$	(20	)

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, ~~2016~~2017 or December 31, ~~2015.~~2016. 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, ~~2016.~~2017. For additional information regarding our criteria for making these assessments, see Note 2 to the financial statements included in our Annual Report on Form10-K for the year ended December 31, ~~2015.~~2016.

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~~$6.1 million at March 31, ~~2016,~~2017, and ~~$5.2~~$6.0 million at December 31, ~~2015, respectively.~~2016.

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~~$107.6 million and ~~$103.6~~$111.9 million as of March 31, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively. The allowance for uncompensated care was ~~$30.7~~$48.0 million and ~~$41.9~~$46.3 million as of March 31, ~~2016~~2017 and December 31, ~~2015,~~2016, 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 million~~ for the quarters ended March 31, ~~2016~~2017 and ~~2015, respectively.~~2016. The estimated cost of providing charity services was $0.6 million for ~~each of~~ the quarters ended March 31, ~~2016~~2017 and ~~2015.~~2016. 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			March 31, 2017			December 31, 2016
Allowance for Contractual Discounts		63	%		56	%		56	%		56	%
Allowance for Uncompensated Care		15	%		23	%		25	%		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 in our Form10-K for year ended December 2016, 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~~$17.7 million and ~~$15.4~~$17.3 million at March 31, ~~2016~~2017 and December 31, ~~2015,~~2016, 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, 2017
			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							$	10,597	$	10,597	$	—
Commercial paper								27,909		—		27,909
U.S. Government agencies								15,285		—		15,285
Corporate bonds and notes		264,228		—		264,228		236,050		—		236,050

								289,841		10,597		279,244
		299,859		18,181		281,678
Deferred compensation plan assets		2,294		2,294		—		2,500		2,500		—

Total	$	302,153	$	20,475	$	281,678	$	292,341	$	13,097	$	279,244


									December 31, 2016
							Total		(Level 1)		(Level 2)
									(Thousands of dollars)
Investments:
Money market mutual funds							$	18,118	$	18,118	$	—
Commercial paper								27,867		—		27,867
U.S. government agencies								13,263		—		13,263
Corporate bonds and notes								243,582		—		243,582

								302,830		18,118		284,712

Deferred compensation plan assets								2,394		2,394		—

Total							$	305,224	$	20,512	$	284,712

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 commercial paper, 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, ~~2016~~2017 and December 31, ~~2015.~~2016. 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~~$473.8 million and ~~$403.1~~$474.4 million at March 31, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively.

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

~~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 million and $4.0 million as of March 31, 2016 and December 31, 2015, respectively, and reduced the carrying value of long-term debt by the same amounts.


	March 31, 2017				December 31, 2016
			Unamortized				Unamortized
			Debt				Debt
			Issuance				Issuance
	Principal		Debt Cost		Principal		Debt Cost
	(Thousands of dollars)
Senior Notes issued March 17, 2014, interest only payable semi-annually at 5.25%, maturing March 15, 2019	$	500,000	$	2,441	$	500,000	$	2,753

Revolving Credit Facility due October 1, 2018 with a group of commercial banks, interest payable at variable rates		135,500		—		134,000		—

Total long-term debt	$	635,500	$	2,441	$	634,000	$	2,753

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 –We have an amended and restated revolving credit facility (our “credit facility”) that matures on October 1, ~~2017.~~2018. 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 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~~our credit facility). As of March 31, ~~2016,~~2017, we believe we were in compliance with these covenants.

Cash paid to fund interest expense was $14.1 million for the quarter ended March 31, 2017 and $13.7 million for the quarter ended March 31, ~~2016 and $13.5 million for the quarter ended March 31, 2015.~~2016.

~~Other –~~Letter of Credit Facility -We maintain a separate letter of credit facility that had ~~$15.3~~$13.0 million in letters of credit outstanding at March 31, ~~2016~~2017 and December 31, ~~2015.~~2016. We have letters of credit securing our workers compensation policies, ~~and~~ a traditional provider ~~contract.~~contract, and a bond relating to foreign operations.

We also have outstanding a letter of credit for $7.6 million issued under our $150.0 million credit facility that reduces the amount we can borrow under that facility. The letter of credit was issued to guaranty our performance under an international contract that was awarded in late 2016.

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 ended March 31, 2017 and 2016 are as follows:


					Quarter Ended
	Quarter Ended March				March 31,
	2016		2015		2017		2016
	(Thousands of dollars)				(Thousands of dollars)
Weighted average outstanding shares of common stock, basic		15,600		15,579		15,689		15,600
Dilutive effect of unvested restricted stock units		—		83		—		—

Weighted average outstanding shares of common stock, diluted		15,600		15,662		15,689		15,600

⁽¹⁾	For the three months ended March 31, 2017, 58,119 unvested restricted stock units were excluded from the weighted average outstanding shares of common stock, diluted, as they were anti-dilutive to earnings per share.

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 months and~~ quarters ended March 31, ~~2016~~2017 and ~~2015.~~2016.


					Quarter Ended
					March 31,
	Quarter Ended March 31,				2017		2016
	2016		2015		(Thousands of dollars)
Stock-based compensation expense:		(Thousands of dollars)
Time-based restricted stock units	$	619	$	637	$	553	$	619
Performance-based restricted stock units		871		1,082		—		871

Total stock-based compensation expense	$	1,490	$	1,719	$	553	$	1,490

During the quarter ended March 31, 2017, we awarded 366,399 performance-based restricted stock units and 29,351 time-based restricted stock units, respectively, to managerial employees. During the quarter ended March 31, 2016, we awarded 303,061 performance-based restricted stock units to managerial employees. ~~During the quarter ended March 31, 2015, we awarded 18,930 time-based and 151,566 performance-based restricted stock units to managerial employees, respectively.~~

There were no sales or disposals of aircraft during the first quarter of 2017. During the first quarter of 2016, we sold one light aircraft previously utilized in the Oil and Gas segment. Cash proceeds totaled $0.9 million, resulting in a loss on the sale of this asset of $0.4 million. This aircraft no longer met our strategic needs. ~~There were no sales or disposals of aircraft during the first quarter of 2015, but we did have minor sales and disposals of various ancillary equipment.~~

Commitments – In ~~2014,~~the fourth quarter of 2016, we ~~exercised an option~~entered into a contract to purchase ~~six additional heavy~~two medium aircraft for ~~delivery~~use in ~~2015~~our Oil and ~~2016. In 2015, we executed an amendment~~Gas segment. We expect to ~~terminate the purchase of four of the heavy aircraft for delivery in 2016. We took delivery of one aircraft in 2015 and~~take delivery of the ~~final~~ aircraft in ~~January 2016.~~the second quarter of 2017. The total remaining purchase commitment is $17.9 million.

Total aircraft deposits of ~~$2.6~~$4.9 million were included in Other ~~assets~~Assets as of March 31, ~~2016.~~2017. This amount represents deposits ~~paid by us as required under~~for aircraft purchase ~~contracts.~~contracts and deposits on future lease buyout options. In the event the buyout options are not exercised, the deposits will be applied as lease payments.

As of March 31, ~~2016,~~2017, we had options to purchase ~~various~~ aircraft ~~that we currently operate~~ under ~~lease agreements with the aircraft owners. These options will become~~leases becoming exercisable ~~at various dates~~ in ~~2016~~2017 through ~~2019.~~2021. The aggregate option purchase prices are ~~$67.8 million in 2016, $55.7~~$37.1 million in 2017, $127.0 million in 2018, ~~$150.4~~$129.0 million in 2019, and $22.7 million in 2020. ~~Whether~~Subsequent to March 31, 2017, we purchased one heavy aircraft from a lessor for $17.0 million. Under current conditions, we believe it is unlikely that we will exercise ~~these~~the remaining 2017 purchase options, ~~will depend upon several factors, including market~~unless opportunistic conditions ~~and our available cash at the respective exercise dates.~~arise.

Environmental Matters – ~~We have~~PHI has recorded an ~~aggregate~~ estimated ~~probable~~ liability of ~~$0.2~~$0.15 million as of March 31, ~~2016~~2017 for environmental response costs. ~~We have~~Previously, PHI conducted environmental surveys of ~~our~~its former Lafayette ~~facility~~Facility located at the Lafayette Regional Airport, which weformer facility PHI vacated in 2001, and ~~have~~has determined that limited soil and groundwater contamination ~~exists~~exist at two parcels of land at the former facility. ~~We submitted an assessment report~~An Assessment

Report for both ~~sites~~parcels was submitted in 2003 (and updated it in ~~2006, and received approvals of our remediation plan from~~2006) to the Louisiana Department of Environmental Quality ~~(“LDEQ”)~~(LDEQ) and the Louisiana Department of Natural Resources (LDNR). Approvals for the Assessment Report were received from the LDEQ and LDNR in 2010 and 2011, respectively. Since ~~such~~that time, ~~we have installed~~PHI has performed groundwater ~~monitoring wells~~sampling of the required groundwater monitor well installations at both former PHI facility parcels and submitted these ~~sites and furnished periodic~~sampling reports ~~on contamination levels~~ to the LDEQ. Pursuant to ~~our~~an agreement with the LDEQ, ~~we are providing samples twice a year~~PHI provided groundwater sample results semi-annually to the LDEQ for both ~~sites and plan~~former PHI facility parcels from 2005 to ~~remove underground storage tanks under one of the sites later this year. In response to our request,~~2015. LDEQ ~~has~~ approved ~~annual sampling from 2015 to 2019, followed by reevaluation of~~a reduction in the sampling ~~frequency.~~program from semi-annual to annual groundwater monitoring in 2015. Based ~~upon our~~on PHI’s working relationship and agreements with the LDEQ, and the results of ~~our~~ ongoing ~~site~~former facility parcel monitoring, ~~we believe, based on current circumstances,~~PHI believes that ~~our~~ ultimate remediation costs for ~~these sites~~the subject parcels will not be material to ~~our~~PHI’s 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 bothnon-cancelable andmonth-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, ~~2016,~~2017, we had approximately ~~$281.4~~$219.6 million in aggregate commitments under operating leases of which approximately ~~$38.6~~$34.7 million is payable through December 31, ~~2016.~~2017. The total lease commitments include ~~$266.5~~$205.0 million for aircraft and ~~$14.9~~$14.6 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~~A segment’s operating profit or loss 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. Direct charges represent the vast majority of segment selling, general and administrative expenses. Allocated selling, general and administrative expenses are based primarily on total segment ~~direct expenses~~costs as a percentage of total ~~direct expenses. Unallocated overhead consists primarily of corporate selling, general and administrative expenses that we do not allocate to the reportable segments.~~

In January 2016, we offered a Voluntary Employee Retirement Package (“VERP”) to all pilots who had attained age 64. Fifteen employees accepted this VERP, resulting in severance costs of $1.6 million recorded in the first quarter of 2016. At March 31, 2016, $0.8 million of severance costs from these offerings remained unpaid.

During the quarter ended March 31, 2016, we also offered a voluntary furlough program to our Oil and Gas pilots whereby pilots who elect to participate in the program will receive severance pay and may continue medical coverage at their current employee-paid premiums. Twenty-six pilots accepted the offer with a total severance cost of $0.4 million. Under the terms of the furlough agreement, we must, no later than twelve months from the date of furlough offer each furloughed employee a right to return to work.operating costs.

Oil and Gas Segment. Our Oil and Gas segment, headquartered in Lafayette, Louisiana, provides helicopter services primarily for the major integrated and independent oil and gas production companies transporting personnel or equipment to offshore platforms in the Gulf of Mexico. Our customers include Shell Oil Company, BP America Production Company, ExxonMobil Production Company, and ConocoPhillips Company, with whom we have worked for 30 or more years, and ENI Petroleum, with whom we have worked for more than 15 years. At March 31, ~~2016,~~2017, we ~~operated 154~~had available for use 131 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~~payments based on the amount of flight time. ~~A small portion of our Oil and Gas segment revenue is derived from providing services on an “ad hoc” basis.~~ Operating costs for ~~our~~the Oil and Gas segment are primarily aircraft ~~operations~~operation costs, including costs for pilots and maintenance personnel. ~~Total fuel cost is included in direct expense and any reimbursement of~~We typically operate under fixed-term contracts with our customers, a substantial portion of ~~these costs above a contracted per-gallon amount is included~~which are competitively bid. Our fixed-term contracts have terms of one to seven years (subject to provisions permitting early termination by the customers), with payment in ~~revenue.~~U.S. dollars. For the quarters ended March 31, 2017 and 2016, respectively, approximately 53% and ~~2015, approximately~~ 54% ~~and 59%~~ of our total operating revenues were generated by our Oil and Gas ~~segment.~~segment, with approximately 90% and 93% of these revenues from fixed-term customer contracts. The remaining 10% and 7% of these revenues were attributable to work in the spot market and ad hoc flights for contracted customers.

Air Medical Segment.The operations of our Air Medical segment are headquartered in Phoenix, Arizona, where we maintain significant separate facilities and administrative staff dedicated to this segment.

We provide Air Medical ~~segment. At such date, we operated approximately 100 aircraft domestically, providing air medical~~ transportation services for hospitals and emergency service agencies ~~in 19 states at 70 separate locations. We also provide air medical transportation services for a~~

~~customer overseas. For our overseas program, we have deployed five aircraft at four locations, with four aircraft generating revenues as~~throughout the U.S. As of March 31, ~~2016.~~ 2017, we operated approximately 104 aircraft in 18 states at 72 separate locations.

Our Air Medical segment operates primarily under the independent provider model and, to a lesser extent, under the traditional provider model. Under the independent provider model, we have no fixed revenue stream and compete for transport referrals on a daily basis with other independent operators in the area. Under the traditional provider model, we contract directly with the customer to provide their transportation services, with the contracts typically awarded through competitive bidding. For the quarters ended March 31, 2017 and 2016, approximately 41% and ~~2015, approximately~~ 43% ~~and 35%~~ of our total operating revenues were generated by our Air Medical ~~segment.~~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 whoself-pay. As further described in Note 3, revenues are recorded net of contractual allowances under agreements with third party payors and estimated uncompensated care at the time the services are provided. Contractual allowances and uncompensated care are estimated based on historical collection experience by payor category (consisting mainly of insurance, Medicaid, Medicare, andself-pay). Estimates regarding the payor mix and changes in reimbursement rates are the factors most subject to sensitivity and variability in calculating our allowances. We compute a historical payment analysis of accounts fully closed, by category.

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


							Revenue
	Revenue						Quarter Ended
	Quarter Ended March 31,						March 31,
	2016			2015			2017			2016
Gross Air Medical segment billings		100	%		100	%		100	%		100	%
Provision for contractual discounts		71	%		74	%		70	%		71	%
Provision for uncompensated care		3	%		0	%		4	%		3	%

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, andSelf-Pay (expressed as a percentage of net Air Medical revenues) were as follows:


							Quarter Ended
	Quarter Ended March 31,						March 31,
	2016			2015			2017			2016
Insurance		66	%		75	%		70	%		66	%
Medicare		19	%		17	%		20	%		19	%
Medicaid		15	%		8	%		10	%		15	%
Self-Pay		0	%		0	%		0	%		0	%

We also have a limited number of contracts with hospitals under which we receive a fixed ~~monthly rate~~fee component for aircraft availability and ~~an hourly rate~~a variable fee component for flight time. ~~Those~~Most of our contracts with hospitals contain provisions permitting early termination by the hospital, typically with 180 days’ notice for any reason and generally with penalty. Several of these contracts are issued or renewed based on competitive bidding. These contracts generated approximately ~~31%~~19% and ~~42%~~31% of the segment’s revenues for the quarters ended March 31, 2017 and 2016, ~~and 2015,~~ respectively.

Technical Services Segment.Our Technical Services segment provides ~~maintenance~~helicopter repair and ~~repairs~~overhaul services for ~~our existing~~flight operations customers that own their aircraft. ~~These~~Costs associated with these services are primarily labor, and customers are generally ~~labor intensive with higher operating margins as compared~~billed at a percentage above our service costs. We also periodically provide flight services to ~~other segments. Depending on when we commence and complete special projects for~~governmental customers ~~our~~

~~results for~~under this segment, ~~can vary significantly from period~~including our agreement to ~~period, although these variances typically have a limited impact on our consolidated operating results. The Technical Services segment also conducts flight operations~~operate six aircraft for the National Science Foundation in Antarctica, ~~which are~~ typically ~~conducted~~ in the first and fourth quarters each year. Also included in this segment is our proprietary Helipass operations, which provides software as a service to certain of our Oil and Gas customers for the purpose of passengercheck-in and compliance verification.

For the three month periods ended March 31, 2017 and 2016, approximately 6% and ~~2015, approximately~~ 3% ~~and 6%~~, respectively, of our total operating revenues were generated by our Technical Services segment.

Summarized financial information concerning our reportable operating segments for the quarters ended March 31, ~~2016~~2017 and ~~2015~~2016 is as follows:


							Quarter Ended
	Quarter Ended March 31,						March 31,
	2016			2015			2017			2016
	(Thousands of dollars)						(Thousands of dollars)
Segment operating revenues
Oil and Gas	$	88,437		$	120,396		$	71,731		$	88,437
Air Medical		70,060			72,385			55,338			70,060
Technical Services		5,519			11,416			7,549			5,519

Total operating revenues		164,016			204,197			134,618			164,016

Segment direct expenses⁽¹⁾
Oil and Gas⁽²⁾		91,916			100,331			81,728			91,916
Air Medical		57,044			60,039			50,842			57,044
Technical Services		3,594			8,905			4,946			3,594

Total segment direct expenses		152,554			169,275			137,516			152,554

Segment selling, general and administrative expenses
Oil and Gas		1,528			1,159			1,720			1,528
Air Medical		2,595			2,629			2,881			2,595
Technical Services		224			114			338			224

Total selling, general and administrative expenses		4,347			3,902			4,939			4,347

Total direct and selling, general and administrative expenses		156,901			173,177			142,455			156,901

Net segment (loss) profit
Oil and Gas		(5,007	)		18,906			(11,717	)		(5,007	)
Air Medical		10,421			9,717			1,615			10,421
Technical Services		1,701			2,397			2,265			1,701

Total net segment profit		7,115			31,020
Total net segment (loss) profit								(7,837	)		7,115

Other, net⁽³⁾		256			469			1,064			256
Unallocated selling, general and administrative costs⁽¹⁾		(7,326	)		(7,335	)		(8,105	)		(7,326	)
Interest expense		(7,533	)		(7,170	)		(8,195	)		(7,533	)

(Loss) earnings before income taxes	$	(7,488	)	$	16,984
Loss before income taxes							$	(23,073	)	$	(7,488	)


					Depreciation and Amortization Expense
					Quarter Ended
	Depreciation and Amortization Expense				March 31,
	Quarter Ended March 31,				2017		2016
	2016		2015		(Thousands of dollars)
Segment Direct Expense:
Oil and Gas	$	9,918	$	11,280	$	9,862	$	9,918
Air Medical		4,256		4,097		5,477		4,256
Technical Services		128		128		146		128

Total	$	14,302	$	15,505	$	15,485	$	14,302

Unallocated SG&A	$	2,671	$	2,646	$	1,360	$	2,671

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, ~~2016,~~2017, 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, ~~2016 and 2015,~~2017, we recorded a loss in equity of unconsolidated affiliate of ~~$0 million and $0.1~~$1.0 million relative to our 49% equity ~~ownership, respectively.~~ownership. We had ~~$1.5~~$3.3 million of trade receivables as of March 31, ~~2016~~2017 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$0.3 million and $0.2 million at March 31, ~~2016~~2017 and December 31, ~~2015.~~2016, 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 aggregate principal amount 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.


	March 31, 2016												March 31, 2017
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾			Eliminations			Consolidated			Parent Company Only (issuer)			Guarantor Subsidiaries⁽¹⁾			Eliminations			Consolidated
ASSETS
Current Assets:
Cash	$	123		$	6,413		$	—		$	6,536		$	51		$	3,629		$	—		$	3,680
Short-term investments		286,139			—			—			286,139			276,818			—			—			276,818
Accounts receivable – net		69,795			81,593			—			151,388			65,044			61,226			—			126,270
Intercompany receivable		—			50,649			(50,649	)		—			—			69,862			(69,862	)		—
Inventories of spare parts – net		60,998			9,183			—			70,181			64,698			8,335			—			73,033
Prepaid expenses		6,191			2,636			—			8,827			8,144			2,186			—			10,330
Deferred income taxes		10,379			—			—			10,379			10,798			—			—			10,798
Income taxes receivable		985			(242	)		—			743			341			(18	)		—			323

Total current assets		434,610			150,232			(50,649	)		534,193			425,894			145,220			(69,862	)		501,252

Investment in subsidiaries		336,033			—			(336,033	)		—			361,420			—			(361,420	)		—
Property and equipment – net		627,168			281,246			—			908,414			581,990			314,575			—			896,565
Restricted investments		15,336			—			—			15,336
Restricted cash and investments														13,023			15			—			13,038
Other assets		5,078			1,252			—			6,330			7,819			1,054			—			8,873

Total assets	$	1,418,225		$	432,730		$	(386,682	)	$	1,464,273		$	1,390,146		$	460,864		$	(431,282	)	$	1,419,728

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	55,561		$	6,059		$	—		$	61,620		$	18,007		$	4,047		$	—		$	22,054
Accrued and other current liabilities		18,594			9,460			—			28,054			18,034			9,466			—			27,500
Intercompany payable		50,649			—			(50,649	)		—			69,862			—			(69,862	)		—

Total current liabilities		124,804			15,519			(50,649	)		89,674			105,903			13,513			(69,862	)		49,554
Long-term debt:
Revolving credit facility		87,700			—			—			87,700
Senior Notes dated March 17, 2014, net of debt issuance costs of $3,687		496,313			—			—			496,313

Long-term debt														633,059			—			—			633,059
Deferred income taxes and other long-term liabilities		89,871			81,178			—			171,049			65,070			85,931			—			151,001
Shareholders’ Equity:
Common stock and paid-in capital		307,438			79,191			(79,191	)		307,438			306,268			79,326			(79,326	)		306,268
Accumulated other comprehensive loss		(90	)		—			—			(90	)		(375	)		—			—			(375	)
Retained earnings		312,189			256,842			(256,842	)		312,189			280,221			282,094			(282,094	)		280,221

Total shareholders’ equity		619,537			336,033			(336,033	)		619,537			586,114			361,420			(361,062	)		586,114

Total liabilities and shareholders’ equity	$	1,418,225		$	432,730		$	(386,682	)	$	1,464,273		$	1,390,146		$	460,864		$	(431,282	)	$	1,419,728


	December 31, 2015												December 31, 2016
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾			Eliminations			Consolidated			Parent Company Only (issuer)			Guarantor Subsidiaries⁽¹⁾			Eliminations			Consolidated
ASSETS
Current Assets:
Cash	$	46		$	2,361		$	—		$	2,407		$	36		$	2,560		$	—		$	2,596
Short-term investments		284,523			—			—			284,523			289,806			—			—			289,806
Accounts receivable – net		70,336			74,442			—			144,778			71,458			66,807			—			138,265
Intercompany receivable		—			90,943			(90,943	)		—			—			57,904			(57,904	)		—
Inventories of spare parts – net		60,060			9,431			—			69,491			61,834			8,568			—			70,402
Prepaid expenses		7,162			1,789			—			8,951			6,990			2,269			—			9,259
Deferred income taxes		10,379			—			—			10,379			10,798			—			—			10,798
Income taxes receivable		1,002			(241	)		—			761			558			(18	)		—			540

Total current assets		433,508			178,725			(90,943	)		521,290			441,480			138,090			(57,904	)		521,666
Investment in subsidiaries		330,848			—			(330,848	)		—
Property and equipment, net		632,759			250,770			—			883,529

Investment in subsidiaries and others														353,160			—			(353,160	)		—
Property and equipment – net														589,104			314,873			—			903,977
Restricted investments		15,336			—			—			15,336			13,023			15			—			13,038
Other assets		5,040			203			—			5,243			8,660			1,099			—			9,759

Total assets	$	1,417,491		$	429,698		$	(421,791	)	$	1,425,398		$	1,405,427		$	454,077		$	(411,064	)	$	1,448,440

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	25,512		$	5,861		$	—		$	31,373		$	22,744		$	5,960		$	—		$	28,704
Accrued liabilities		29,138			15,621			—			44,759
Accrued and other current liabilities														18,725			9,621			—			28,346
Intercompany payable		90,943			—			(90,943	)		—			57,904			—			(57,904	)		—

Total current liabilities		145,593			21,482			(90,943	)		76,132			99,373			15,581			(57,904	)		57,050
Long-term debt:
Revolving credit facility		57,500			—			—			57,500
Senior Notes dated March 17, 2014, net of debt issuance costs of $4,934		495,066			—			—			495,066

Long-term debt														631,247			—			—			631,247
Deferred income taxes and other long-term liabilities		92,334			77,368			—			169,702			75,029			85,336			—			160,365
Shareholders’ Equity:
Common stock and paid-in capital		306,444			79,061			(79,061	)		306,444			305,815			79,191			(79,191	)		305,815
Accumulated other comprehensive loss		(567	)		—			—			(567	)		(478	)		—			—			(478	)
Retained earnings		321,121			251,787			(251,787	)		321,121			294,441			273,969			(273,969	)		294,441

Total shareholders’ equity		626,998			330,848			(330,848	)		626,998			599,778			353,160			(353,160	)		599,778

Total liabilities and shareholders’ equity	$	1,417,491		$	429,698		$	(421,791	)	$	1,425,398		$	1,405,427		$	454,077		$	(411,064	)	$	1,448,440


	For the quarter ended March 31, 2015												For the quarter ended March 31, 2017
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾			Eliminations			Consolidated			Parent Company Only (issuer)			Guarantor Subsidiaries⁽¹⁾			Eliminations			Consolidated
Operating revenues, net	$	128,658		$	75,539		$	—		$	204,197		$	74,284		$	60,334		$	—		$	134,618

Expenses:
Direct expenses		106,481			62,730			(4	)		169,207			82,344			54,169			—			136,513
Selling, general and administrative expenses		8,508			2,729			—			11,237			10,108			2,940			(4	)		13,044

Total operating expenses		114,989			65,459			(4	)		180,444			92,452			57,109			(4	)		149,557
Gain on disposal of assets, net		(7	)		—			—			(7	)

Equity in loss of unconsolidated affiliate		68			—			—			68			1,003			—			—			1,003

Operating income		13,608			10,080			4			23,692
Operating (loss) income														(19,171	)		3,225			4			(15,942	)

Equity in net income of consolidated subsidiaries		(6,131	)		—			6,131			—			(2,631	)		—			2,631			—
Interest expense		7,170			—			—			7,170			8,174			21			—			8,195
Other income, net		(462	)		(4	)		4			(462	)		(1,067	)		(1	)		4			(1,064	)

		577			(4	)		6,135			6,708			4,476			20			2,635			7,131

Earnings before income taxes		13,031			10,084			(6,131	)		16,984
Income tax expense		2,668			3,953			—			6,621
(Loss) earnings before income taxes														(23,647	)		3,205			(2,631	)		(23,073	)
Income tax (benefit) expense														(8,399	)		574			—			(7,825	)

Net earnings	$	10,363		$	6,131		$	(6,131	)	$	10,363
Net (loss) earnings													$	(15,248	)	$	2,631		$	(2,631	)	$	(15,248	)


													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 (loss) 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 quarter ended March 31, 2015											For the quarter ended March 31, 2017
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾		Eliminations			Consolidated			Parent Company Only (issuer)			Guarantor Subsidiaries⁽¹⁾		Eliminations			Consolidated
Net earnings	$	10,363		$	6,131	$	(6,131	)	$	10,363
Net (loss) earnings												$	(15,248	)	$	2,631	$	(2,631	)	$	(15,248	)
Unrealized gain on short-term investments		139			—		—			139			162			—		—			162
Other unrealized gain		24			—		—			24
Changes in pension plan asset and benefit obligation													(1	)		—		—			(1	)
Tax effect of preceding gains, losses or changes		(55	)		—		—			(55	)		(58	)		—		—			(58	)

Total Comprehensive (loss) income												$	(15,145	)	$	2,631	$	(2,631	)	$	(15,145	)

	$	10,471		$	6,131	$	(6,131	)	$	10,471
												For the quarter ended March 31, 2016
												Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾		Eliminations			Consolidated
Net (loss) earnings												$	(8,932	)	$	5,054	$	(5,054	)	$	(8,932	)
Unrealized gain on short-term investments													807			—		—			807
Changes in pension plan asset and benefit obligations													1			—		—			1
Tax effect of preceding gains, losses or changes													(332	)		—		—			(332	)

Total Comprehensive (loss) income												$	(8,456	)	$	5,054	$	(5,054	)	$	(8,456	)


	For the three months ended March 31, 2015											For the three months ended March 31, 2017
	Parent Company Only (issuer)			Guarantor Subsidiaries ⁽¹⁾			Eliminations		Consolidated			Parent Company Only (issuer)			Guarantor Subsidiaries⁽¹⁾			Eliminations		Consolidated
Net cash provided by operating activities	$	4,637		$	25,281		$	—	$	29,918
Net cash (used in) provided by operating activities												$	(19,332	)	$	11,079		$	—	$	(8,253	)

Investing activities:
Purchase of property and equipment		(22,115	)		—			—		(22,115	)		(4,738	)		(51	)		—		(4,789	)
Purchase of short-term investments													(54,867	)		—			—		(54,867	)
Proceeds from sale of short-term investments													67,659			—			—		67,659
Payments of deposits on aircraft													(66	)		—			—		(66	)

Net cash provided by (used in) investing activities													7,988			(51	)		—		7,937

Financing activities:
Proceeds from line of credit													37,300			—			—		37,300
Payments on line of credit													(35,800	)		—			—		(35,800	)
Repurchase of common stock													(100	)							(100	)
Due to/from affiliate, net													9,959			(9,959	)		—		—

Net cash provided by (used in) financing activities													11,359			(9,959	)		—		1,400

Increase in cash													15			1,069			—		1,084
Cash, beginning of period													36			2,560			—		2,596

Cash, end of period												$	51		$	3,629		$	—	$	3,680


												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		(190,243	)		—			—		(190,243	)		(77,677	)		—			—		(77,677	)
Proceeds from sale of short-term investments		185,426			—			—		185,426			76,184			—			—		76,184
Payments of deposits on aircraft		(66	)		—			—		(66	)		(66	)		—			—		(66	)

Net cash used in investing activities		(26,998	)		—			—		(26,998	)		(9,228	)		—			—		(9,228	)

Financing activities:
Proceeds from line of credit		77,740			—			—		77,740			83,500			—			—		83,500
Payments on line of credit		(81,100	)		—			—		(81,100	)		(53,300	)		—			—		(53,300	)
Repurchase of common stock		(2,207	)							(2,207	)		(500	)		—			—		(500	)
Due to/from affiliate, net		27,928			(27,928	)		—		—			(6,600	)		6,600			—		—

Net cash provided by (used in) financing activities		22,361			(27,928	)		—		(5,567	)
Net cash provided by financing activities													23,100			6,600			—		29,700

Decrease in cash		—			(2,647	)		—		(2,647	)
Increase in cash													77			4,052			—		4,129
Cash, beginning of period		51			6,219			—		6,270			46			2,361			—		2,407

Cash, end of period	$	51		$	3,572		$	—	$	3,623		$	123		$	6,413		$	—	$	6,536

Item 2.

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

This discussion and analysis should be read in conjunction with (i) the accompanying unaudited condensed consolidated financial statements and the notes thereto (the “Notes”) and (ii) our Annual Report on Form10-K for the year ended December 31, ~~2015,~~2016, 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 Form10-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 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 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 Form10-K for the year ended December 31, ~~2015.~~2016. Sincemid-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,~~havere-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 in the energy industry,~~weak market conditions, we

currently expect further reductions in the operating revenues and net profit of our Oil and Gas segment in ~~2016 compared to amounts previously reported.~~2017. 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”~~Cash Flow – Liquidity” below.

~~We have extended through late June 2016~~For several years our Air Medical affiliate received substantive benefits under its three-year service contract ~~that we entered into on~~with a Middle East customer dated September 29, ~~2012~~2012. Pursuant to ~~provide air medical flight~~contact extensions, our Air Medical affiliate continued providing services ~~and related support services to a customer in~~at reduced levels for another year through September 30, 2016, when the ~~Middle East. Under the extension, the number of aircraft operated and scope of our services and responsibilities have been reduced, which has caused~~contract expired. Consequently, since September 30, 2016, our overseas air medical revenues and operating costs ~~to decline~~have declined significantly as 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.For additional information, see Note 3.

The following tables present operating revenue, expenses, and earnings, along with certainnon-financial operational statistics, for the quarter ended March 31, ~~2016~~2017 and ~~2015.~~2016.


										Quarter Ended						Favorable
	Quarter Ended March 31,						Favorable (Unfavorable)			March 31,						(Unfavorable)
	2016			2015						2017			2016
	(Thousands of dollars, except flight hours, patient transports, and aircraft)									(Thousands of dollars, except flight hours, patient transports, and aircraft)
Segment operating revenues
Oil and Gas	$	88,437		$	120,396		$	(31,959	)	$	71,731		$	88,437		$	(16,706	)
Air Medical		70,060			72,385			(2,325	)		55,338			70,060			(14,722	)
Technical Services		5,519			11,416			(5,897	)		7,549			5,519			2,030

Total operating revenues		164,016			204,197			(40,181	)		134,618			164,016			(29,398	)

Segment direct expenses
Oil and Gas⁽¹⁾		91,916			100,331			8,415			81,728			91,916			10,188
Air Medical		57,044			60,039			2,995			50,842			57,044			6,202
Technical Services		3,594			8,905			5,311			4,946			3,594			(1,352	)

Total segment direct expenses		152,554			169,275			16,721			137,516			152,554			15,038

Segment selling, general and administrative expenses
Oil and Gas		1,528			1,159			(369	)		1,720			1,528			(192	)
Air Medical		2,595			2,629			34			2,881			2,595			(286	)
Technical Services		224			114			(110	)		338			224			(114	)

Total segment selling, general and administrative expenses		4,347			3,902			(445	)		4,939			4,347			(592	)

Total segment expenses		156,901			173,177			16,276			142,455			156,901			14,446

Net segment (loss) profit
Oil and Gas		(5,007	)		18,906			(23,913	)		(11,717	)		(5,007	)		(6,710	)
Air Medical		10,421			9,717			704			1,615			10,421			(8,806	)
Technical Services		1,701			2,397			(696	)		2,265			1,701			564

Total net segment profit		7,115			31,020			(23,905	)
Other, net⁽²⁾		256			469			(213	)
Total net segment (loss) profit⁽²⁾											(7,837	)		7,115			(14,952	)

Other, net⁽³⁾											1,064			256			808
Unallocated selling, general and administrative costs		(7,326	)		(7,335	)		9			(8,105	)		(7,326	)		(779	)
Interest expense		(7,533	)		(7,170	)		(363	)		(8,195	)		(7,533	)		(662	)

(Loss) earnings before income taxes		(7,488	)		16,984			(24,472	)
Income tax expense		1,444			6,621			5,777
Loss before income taxes											(23,073	)		(7,488	)		(15,585	)
Income tax (benefit) expense											(7,825	)		1,444			9,269

Net (loss) earnings	$	(8,932	)	$	10,363		$	(19,295	)
Net loss										$	(15,248	)	$	(8,932	)	$	(6,316	)

Flight hours:
Oil and Gas		20,737			25,136			(4,399	)		17,474			20,737			(3,263	)
Air Medical⁽³⁾		8,688			7,836			852
Air Medical⁽⁴⁾											8,392			8,688			(296	)
Technical Services		523			477			46			511			523			(12	)

Total		29,948			33,449			(3,501	)		26,377			29,948			(3,571	)

Air Medical Transports⁽⁴⁾		4,503			3,945			558
Air Medical Transports⁽⁵⁾											4,297			4,503			(206	)

Aircraft operated at period end:⁽⁵⁾
Oil and Gas⁽⁶⁾		154			168
Aircraft operated at period end:⁽⁶⁾
Oil and Gas											131			154
Air Medical⁽⁷⁾		105			100						104			105
Technical Services		6			6						6			6

Total		265			274						241			265

(2)

Total net segment (loss) profit has not been prepared in accordance with generally accepted accounting principles (“GAAP”). Management believes thisnon-GAAP financial measure provides meaningful supplemental information regarding our results of operations. A description of the adjustments to and reconciliations of total net segment profit to the most comparable GAAP financial measure is as follows:

Quarter Ended March 31, ~~2016~~2017 compared with Quarter Ended March 31, ~~2015~~2016

Operating Revenues –- Operating revenues for the three months ended March 31, ~~2016~~2017 were ~~$164.0~~$134.6 million, compared to ~~$204.2~~$164.0 million for the three months ended March 31, ~~2015,~~2016, a decrease of ~~$40.2~~$29.4 million. Oil and Gas segment operating revenues decreased ~~$32.0~~$16.7 million for the ~~quarter~~three months ended March 31, ~~2016,~~2017, 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~~$14.7 million due principally to decreased ~~revenues attributable to our~~ traditional provider ~~programs~~program revenues resulting from ~~reduced~~the termination of our overseas ~~operations.~~operations in late 2016 and decreased independent provider program revenues. Technical Services segment operating revenues increased $2.0 million due primarily to an increase in technical services provided to a third party customer.

Total flight hours for the ~~quarter~~three months ended March 31, ~~2016~~2017 were ~~29,948~~26,377 compared to ~~33,449~~29,948 for the ~~quarter~~three months ended March 31, ~~2015.~~2016. Oil and Gas segment flight hours decreased ~~4,399~~3,263 hours, due to decreases in flight hours for all model types. Air Medical segment flight hours ~~increased 852~~decreased 296 hours from the ~~quarter~~three months ended March 31, ~~2015,~~2017, due to ~~increased~~decreased flight hours in our traditional provider and independent provider operations. ~~Individual~~As discussed further below, individual patient transports in the Air Medical segment were ~~4,503~~4,297 for the ~~quarter~~three months ended March 31, ~~2016,~~2017, compared to transports of ~~3,945~~4,503 for the ~~quarter~~three months ended March 31, ~~2015.~~2016.

Direct Expenses – Direct operating expense was $136.5 million for the three months ended March 31, 2017, compared to $152.6 million for the three months ended March 31, 2016, ~~compared to $169.3 million for the three months ended March 31, 2015,~~ a decrease of ~~$16.7~~$16.1 million, or ~~10%~~11%. Employee compensation expense decreased ~~$5.3~~$9.0 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%~~46% and ~~46%~~48% of total direct expense for the quarters ended March 31, ~~2016~~2017 and ~~2015,~~2016, respectively. We also experienced decreases in aircraft ~~fuel~~warranty costs of ~~$1.8~~$1.2 million and aircraft insurance of ~~$1.0 million, and aircraft warranty costs of $1.0~~$0.3 million (which expenses represent ~~3%, 1%~~7%, and 7%1% of total direct expense, respectively) as a result of the reduction in flight hours. ~~Costs~~Aircraft parts expense decreased $1.7 million, aircraft maintenance decreased $1.5 million, and component repair expense decreased $1.4 million. Other decreases included aircraft rent expense of $1.2 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 $2.1 million. Training costs increased $1.0 million. Other direct costs ~~decreased $2.1~~increased $0.7 million on a net basis.

Selling, General and Administrative Expenses – Selling, general and administrative expenses were $13.0 million for the three months ended March 31, 2017, compared to $11.7 million for the three months ended March 31, ~~2016, compared to $11.2 million for the three months ended March 31, 2015.~~2016. The ~~$0.5~~$1.3 million increase was primarily attributable to ~~increased~~severance costs related to a reduction in force at our Lafayette headquarters facility in March, 2017 and $0.6 million of legal and consulting fees ~~incurred~~related to a special project. Partially offsetting this increase are decreases in ~~the current year.~~equity-based compensation of $0.8 million.

~~(Loss)~~ Loss/Gain on Disposal of Assets, net – ~~Loss~~There were no gains or losses on asset dispositions ~~was $0.4 million~~ for the three months ended March 31, ~~2016, compared to a gain of less than $0.1 million for~~2017. For the three months ended March 31, ~~2015. This decrease was primarily due to~~2016, we recorded a loss of $0.4 million resulting from the sale ~~or disposition~~ of one light ~~aircraft that no longer met our strategic needs.~~aircraft. See Note 8.

Equity in Loss of Unconsolidated Affiliate – Equity in the loss of our unconsolidated affiliate attributable to ourmid-2011 investment in a Ghanaian entity was $1.0 million for the three months ended March 31, 2017, compared to $0 million for the three months ended March 31, 2016, ~~compared to a loss of less than $0.1~~resulting from increased expenses.

Interest Expense – Interest expense was $8.2 million for the three months ended March 31, ~~2015, reflecting reduced demand for offshore flight services due to lower oil~~2017 and ~~gas exploration activities. See Note 11.~~

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

Other Income, net – Other income was ~~$0.6~~$1.1 million for the three months ended March 31, ~~2016~~2017 compared to ~~$0.5~~$0.6 million for the same period in ~~2015,~~2016, and represents primarily interest income. The ~~$0.1~~$0.4 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 months ended March 31, ~~2016~~2017 was ~~$1.4~~$7.8 million compared to income tax expense of ~~$6.6~~$1.4 million for the three months ended March 31, ~~2015.~~2016. Our $7.8 million income tax benefit for the three months ended March 31, 2017 is attributable to our net loss from operations of $23.1 million. The $1.4 million income tax expense recorded in the three months ended March 31, 2016 is ~~comprised~~attributable to the negative impact of a valuation allowance on certain state tax benefits related to net ~~operating~~operation loss carryforwards of $4.1 million, which was partially offset by a $2.7 million tax benefit on our loss before income taxes. The valuation allowance recorded was solely attributable to a change in the Louisiana tax law which limits our ability to fully realize the tax benefit of our existing net operating loss carryforwards in this state. Absent the valuation allowance, ourOur effective tax rate was ~~36.2%~~34.0% and ~~39%~~36.2% for the three months ended March 31, ~~2016~~2017 and March 31, ~~2015,~~2016, respectively. ~~The higher rate for the three months ended March 31, 2015 reflects the impact of recording during that quarter a one-time increase in the valuation allowance on our foreign tax credits.~~

Net Loss– Net loss for the three months ended March 31, ~~2016~~2017 was ~~$8.9~~$15.2 million compared to net ~~earnings~~loss of ~~$10.4~~$8.9 million for the three months ended March 31, ~~2015.~~2016. Loss before income taxes for the three months ended March 31, ~~2016~~2017 was ~~$7.5~~$23.1 million compared to ~~earnings~~loss before income ~~tax~~taxes of ~~$17.0~~$7.5 million for the same period in ~~2015.~~2016. Losses per diluted share were ~~$0.31~~$0.97 for the current quarter compared to ~~earnings~~losses per diluted share of ~~$0.66~~$0.57 for the prior year quarter. The ~~decrease~~increase in ~~earnings~~loss before taxes for the quarter ended March 31, ~~2016~~2017 is ~~principally~~ attributable to the decreased profits in ~~our~~the Oil and Gas and ~~Technical Services segments, partially offset by a small increase in the profits from our~~ Air Medical ~~segment.~~segments, each of which are discussed further below. We had 15.7 million and 15.6 million weighted average diluted common shares outstanding during the ~~three months~~quarter ended March 31, 2017 and 2016, ~~and 2015.~~respectively.

Oil and Gas – Oil and Gas segment revenues were $71.7 million for the three months ended March 31, 2017, compared to $88.4 million for the three months ended March 31, 2016, ~~compared to $120.4 million for the three months ended March 31, 2015,~~ a decrease of ~~$32.0~~$16.7 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~~17,474 for the most recent quarter compared to ~~25,136~~20,737 for the same quarter in the prior year, a decrease of ~~4,399~~3,263 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~~commodity prices.

The number of aircraft ~~deployed~~available for use in the segment was 131 at March 31, 2017, compared to 154 at March 31, ~~2016, compared to 168 at March 31, 2015. We added one new heavy aircraft to our Oil and Gas segment since March 31, 2015.~~2016. We have sold or disposed of eleven light and seven ~~light~~medium aircraft in the Oil and Gas segment since March 31, ~~2015. Changes in customer-owned aircraft and transfers~~2016. Transfers between segments account for the remainder.

Direct expense in our Oil and Gas segment was $81.7 million for the three months ended March 31, 2017, compared to $91.9 million for the three months ended March 31, 2016, ~~compared to $100.3 million for the three months ended March 31, 2015,~~ a decrease of ~~$8.4~~$10.2 million. Employee compensation expense decreased ~~$4.1~~$6.3 million due to a reduction in employees 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~~warranty costs of ~~$2.0~~$1.2 million, and aircraft ~~warranty costs~~insurance of ~~$1.1~~$0.2 million, each due to the reduction in flight hours. Other decreases included aircraft rent expense of $0.9 million, aircraft parts expense of $2.0 million, and property taxes of $0.4 million. Other items ~~decreased $1.2 million on a~~increased, net ~~basis.~~$0.8 million.

Selling, general and administrative segment expenses were $1.7 million for the three months ended March 31, 2017 and $1.5 million for the three months ended March 31, ~~2016~~2016. The $0.2 million increase is primarily attributable to increased legal fees.

Oil and ~~$1.2~~Gas segment loss was $11.7 million for the three months ended March 31, ~~2015. The $0.3 million increase is primarily attributable~~2017, compared to ~~increased legal fees~~a loss of ~~$0.2 million, and increased bad debt expense of $0.2 million. Other items decreased net $0.1 million.~~

~~Oil and Gas segment loss was~~ $5.0 million for the ~~quarter~~three months ended March 31, ~~2016, compared to segment profit of $18.9 million for the quarter ended March 31, 2015.~~2016. The ~~decrease~~increase in segment ~~profit~~loss 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 $55.3 million for the three months ended March 31, 2017, compared to $70.1 million for the three months ended March 31, ~~2016, compared~~2016. This decrease of $14.7 million is primarily attributable to ~~$72.4 million~~decreased traditional provider program revenues resulting from the termination of our overseas operations (as discussed further below). We also experienced decreased revenues from our independent provider programs primarily resulting from decreased patient transports due principally to adverse weather conditions in our operating markets. Patient transports were 4,297 for the three months ended March 31, 2015. This decrease of $2.3 million is primarily attributable to decreased revenues from our traditional provider programs resulting from the reduction in our overseas operations. These decreases were partially offset by higher revenues from our independent provider programs driven by, among other things, an increase in operating bases. Patient transports were 4,503 for the three months ended March 31, 2016,2017, compared to ~~3,945~~4,503 for the same period in the prior year.

The number of aircraft available for use in the segment at March 31, ~~2016~~2017 was ~~105~~104 compared to ~~100~~105 at March 31, ~~2015.~~2016. Since March 31, ~~2015,~~2016, we added ~~seven~~two light aircraft to our Air Medical ~~segment.~~segment, which were offset by our sale or disposition of four medium aircraft in the Air Medical segment since such date. Changes in customer-owned aircraft and transfers between segments account for the remainder.

Direct expense in our Air Medical segment was $50.8 million for the three months ended March 31, 2017, compared to $57.0 million for the three months ended March 31, 2016, ~~compared to $60.0 million for the three months ended March 31, 2015,~~ a decrease of ~~$3.0~~$6.2 million. ~~We incurred decreases in employee~~Employee compensation costs ~~of $1.8~~decreased $2.4 million due to a reduction in ~~pilot compensation.~~personnel primarily relating to the termination of our Middle East operations. Component repair costs also decreased ~~$1.5~~$1.0 million as a result of a reduction in scheduled maintenance for certain aircraft. Cost of goods sold ~~also~~ decreased ~~$1.3~~$3.3 million related to certain items that ~~are~~were previously billed on a cost plus basis onunder our former Middle East ~~project.~~contract. Other items increased, net ~~$1.6~~$0.5 million.

Selling, general and administrative segment expenses were $2.9 million for the three months ended March 31, 2017, compared to $2.6 million for the three months ended March 31, ~~2016,~~2016. The $0.3 million increase is primarily due to increased promotional and rent expense, as well as employee compensation costs.

Air Medical segment profit was $1.6 million for the three months ended March 31, ~~2015.~~

~~Air Medical segment profit was $10.4 million for the quarter ended March 31, 2016,~~2017, compared to a segment profit of ~~$9.7~~$10.4 million for the ~~quarter~~three months ended March 31, ~~2015.~~2016. The ~~$0.7~~$8.8 million ~~increase~~decrease in profit is attributable to the decreased operating ~~expenses~~revenues described ~~above.~~above, partially offset by decreased expenses.

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. Pursuant to contract extensions, our Air Medical affiliate continued providing services at reduced levels for another year through September 30, 2016, when the contract expired. Consequently, since September 30, 2016, the overseas revenues and operating results of our Air Medical segment have declined significantly as compared to prior periods. For additional information, see Note 3.

Technical Services – Technical Services segment revenues were $7.5 million for the three months ended March 31, 2017, compared to $5.5 million for the three months ended March 31, ~~2016,~~2016. The increase in revenue is due primarily to an increase of technical services provided to a third party customer whose service requirements typically vary from period to period. Direct expenses increased $1.4 million compared to ~~$11.4~~the prior year three months, principally due to the increased operations. Technical Services segment earnings was $2.3 million for the three months ended March 31, 2015. The decrease in revenue is due primarily to a decrease of technical services provided to a third party customer. The current projects with this customer were near completion in the first quarter of 2016, after which additional projects are expected to begin and continue through 2016. Direct expenses decreased $5.3 million2017, compared to ~~the prior year quarter, principally due to reduced operations. Technical Services~~ segment ~~earnings were~~profit of $1.7 million for the three months ended March 31, ~~2016, compared to segment profit of $2.4 million for the three months ended March 31, 2015.~~2016.

Our ongoing liquidity requirements arise primarily from the purchase or leasing of aircraft, the maintenance and refurbishment of aircraft, the opening of new aircraft bases, the expansion or 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~~$3.7 million at March 31, ~~2016,~~2017, compared to ~~$2.4~~$2.6 million at December 31, ~~2015.~~2016. Short-term investments were ~~$286.1~~$276.8 million at March 31, ~~2016,~~2017, compared to ~~$284.5~~$289.8 million at December 31, ~~2015.~~2016. We also had ~~$15.3~~$13.0 million in restricted investments at March 31, ~~2016~~2017 and December 31, ~~2015~~2016, 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~~March 31, ~~2015,~~2017, 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~~liquidity.

Despite our ~~financial covenants under our credit facility.~~year over year cumulative losses and negative operating cash flows, we expect to be able to fund operations beyond next year due to having significant short-term investments, and we have no debt coming due within one year.

Operating activities –- Net cash used in operating activities was ~~$16.3~~$8.3 million for the three months ended March 31, ~~2016,~~2017, compared to net cash ~~provided~~used of ~~$29.9~~$16.3 million for the same period in ~~2015,~~2016, a decrease of ~~$46.2~~$8.0 million. ~~Net cash provided by operating activities (excluding changes in operating assets and liabilities) contributed $11.8~~Cash receipts from customers were down $16.7 million ~~of cash flow in the first~~when compared to same quarter of ~~2016, compared to $35.4 million in~~ the ~~first quarter of 2015, a decrease of $23.6 million,~~prior year, primarily due to a $16.7 million decrease in our Oil and Gas segment revenues, related to the downturn in the industry. Although our Air Medical segment revenue decreased ~~profitability of our oil and gas segment. Net changes in operating assets and liabilities in first quarter of 2016 used cash of $28.1~~$14.7 million compared to ~~a net use of~~prior year, cash ~~of $5.5~~receipts decreased by only $3.7 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 2016 related to our Middle East contract,~~ due to timing of payments. ~~Other increases~~The decrease in revenue is primarily related to the ~~use~~termination of the Middle East contract in late 2016. The decrease in cash receipts was offset by a $21.0 million decrease in cash required for ~~2016 were~~payroll. This decrease is due to ~~an increase~~having one less payroll period in ~~our aircraft parts inventory~~2017 due to the timing of ~~$3.4 million for~~ourbi-weekly payroll system, 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, a reduction in payments for retirement packages, and reduction in staff 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~~provided by investing activities was ~~$9.2~~$7.9 million for the three months ended March 31, ~~2016,~~2017, compared to ~~$27.0~~cash used of $9.2 million for the same period in ~~2015. Purchases and~~2016. Net sales of short-term investments ~~used $1.5~~provided $12.8 million of cash during the three months ended March 31, ~~2016~~2017, compared to ~~$4.8~~$1.5 million used in the comparable prior year period. ~~Gross proceeds from asset dispositions in the first quarter of 2016 were $0.9 million.~~ There were no gross proceeds from asset dispositions during the three months of 2017, compared to $0.9 million for the same period in ~~the first quarter of 2015.~~2016. Capital expenditures were ~~$8.5~~$4.8 million for the three months ended March 31, ~~2016,~~2017, compared to ~~$22.1~~$8.5 million for the same period in ~~2015.~~2016. Capital expenditures for aircraft and aircraft improvements accounted for ~~$8.0~~$3.4 million and ~~$20.8~~$8.0 million of these totals for the three months ended 2017 and 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 2017, we did not add any aircraft to the fleet. During the same period of 2016, we took delivery of one heavy aircraft that we intend to finance with an operating lease in the second quarter. During the same period in 2015, we exercised a purchase option on one heavy aircraft and took delivery of another heavy aircraft as tofor which ~~we executed an operating lease~~payment was funded in the second quarter of ~~2015.~~2016.

Financing activities – Financing activities during the three months of 2017 included net borrowings of $1.5 million on our revolving credit facility and $0.1 million used to repurchase shares of ournon-voting common stock to satisfy withholding tax obligations of employees. Financing activities during the first quarter of 2016 included net borrowings of $30.2 million on our revolving credit facility and $0.5 million used to repurchase shares of ournon-voting common stock to satisfy withholding tax obligations of employees.

~~Financing activities for the first quarter of 2015 included net payments of $3.4 million~~For additional information on our ~~revolving credit facility and $2.2 million used related to the purchase~~cash flows, see our condensed consolidated statements of ~~shares~~cash flows included in Item 1 of ~~our non-voting common stock to satisfy withholding tax obligations~~Part I of ~~employees.~~this report.

As of March 31, ~~2016,~~2017, we owed $635.5 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~~$135.5 million borrowed under our revolving credit facility.

Revolving Credit Facility – We have an amended and restated revolving credit facility (our “credit facility”) that matures on October 1, ~~2017.~~2018. Under our credit 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 credit facility), at our option. Our credit facility includes usual and customary covenants and events of default for credit facilities of its type. Our ability to borrow under the credit facility is conditioned upon our continued compliance with such covenants, including, among others, (i) covenants that restrict our ability to engage in certain asset sales, mergers or other fundamental changes, to incur liens or to engage in certain other transactions or activities and (ii) financial covenants that stipulate that PHI will maintain a consolidated working capital ratio of at least 2 to 1, a 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~~our credit facility).

At March 31, ~~2016,~~2017, we had ~~$87.7~~$135.5 million in borrowings under our credit facility. At the same date in ~~2015,~~2016, we had ~~$39.6~~$87.7 million in borrowings under our credit facility. We also have outstanding a letter of credit for $7.6 million issued under our $150.0 million credit facility that reduces the amount we can borrow under that facility. This letter of credit was issued to guaranty the performance under an international contract awarded in late 2016.

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, ~~2016.~~2017.

The table below sets out our contractual obligations as of March 31, ~~2016,~~2017, related to our aircraft purchase commitments, aircraft and other 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.~~sheets included in this report. 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, ~~2016.~~2017. As of March 31, ~~2016,~~2017, we leased 2520 aircraft included in the lease obligations below.


			Payment Due by Year														Payment Due by Year
	Total		2016⁽¹⁾		2017		2018		2019		2020		Beyond 2020														Beyond
			(Thousands of dollars)												Total		2017⁽¹⁾		2018		2019		2020		2021		2021
																	(Thousands of dollars)
Aircraft purchase obligations															$	17,876	$	17,876	$	—	$	—	$	—	$	—	$	—
Aircraft lease obligations	$	266,477	$	34,266	$	42,699	$	39,018	$	32,365	$	28,526	$	89,603		205,028		29,952		36,879		30,226		26,387		26,253		55,331
Other lease obligations		14,891		4,295		3,435		2,680		2,148		1,557		776		14,649		4,769		3,850		2,897		2,045		1,063		25
Long-term debt⁽²⁾		587,700		—		87,700		—		500,000		—		—		635,500		—		135,500		500,000		—		—		—
Senior notes interest⁽²⁾		78,750		13,125		26,250		26,250		13,125		—		—		52,500		13,125		26,250		13,125		—		—		—

	$	947,818	$	51,686	$	160,084	$	67,948	$	547,638	$	30,083	$	90,379	$	925,553	$	65,722	$	202,479	$	546,248	$	28,432	$	27,316	$	55,356

The table above reflects only contractual obligations as of March 31, ~~2016~~2017 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.~~orders and (vi) other long-term liabilities, such as accruals for litigation or taxes, that are not contractual in nature.

As of March 31, ~~2016,~~2017, we had options to purchase ~~various~~ aircraft ~~that we currently operate~~ under ~~lease agreements with the aircraft owners. These options will become~~leases becoming exercisable ~~at various dates between 2016 and 2020.~~in 2017 through 2021. The aggregate option purchase prices are ~~$67.8 million in 2016, $55.7~~$37.1 million in 2017, $127.0 million in 2018, ~~$150.4~~$129.0 million in 2019, and $22.7 million in 2020. ~~Whether~~Subsequent to March 31, 2017, 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~~purchased one heavy ~~aircraft. The~~ aircraft from a lessor for $17.0 million. Under current conditions, we believe it is unlikely that we will ~~be finally delivered in May 2016 when completion services are finished. We are currently pursuing financing with an operating lease.~~exercise the remaining 2017 purchase options, unless opportunistic conditions arise.

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 Form10-K for the year ended December 31, ~~2015.~~2016.

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~~$135.3 million weighted average loan balance during the three months ended March 31, ~~2016,~~2017, a 10% increase ~~(0.245%~~(0.3061%) in interest rates would have reduced our annualpre-tax earnings approximately ~~$0.1~~$0.4 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, ~~2016,~~2017, the market value of the notes was approximately ~~$457.5~~$473.8 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 Rule13a-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 Form10-K for the year ended December 31, ~~2015.~~2016.

During the first quarter of ~~2016,~~2017, we withheld from employees and canceled ~~26,660~~7,016 shares of ournon-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.


Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased		Average Price Paid per Share
March 1, 2016 – March 31, 2016		26,660	$	18.77
March 1, 2017 – March 31, 2017						7,016	$	14.27

At PHI’s annual meeting of shareholders on May ~~5, 2016,~~4, 2017, 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,~~12, 2017 (the “Information Statement”), was elected in its entirety, with ~~2,043,662~~2,060,905 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~~2017 was approved with ~~2,043,662~~2,060,905 votes in favor, and zero votes against or abstaining. The amendment of our articles of incorporation described in our Information Statement was approved with 2,060,905 votes in favor, and zero votes against or abstaining. The amendment and restatement of the PHI, Inc. Long-Term Incentive Plan described in our Information Statement was approved with 2,060,905 votes in favor, and zero votes against or abstaining.


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

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

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

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

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



		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.


Large accelerated filer:	¨☐	Accelerated filer: ☒	xSmaller reporting company:	☐

Non-accelerated filer:	¨☐ (Do not check if a smaller reporting company)		~~Smaller reporting company:~~Emerging Growth Company:	¨☐


Class		Outstanding at April ~~29, 2016~~28, 2017
Voting Common Stock		2,905,757 shares
Non-Voting Common Stock		~~12,771,550~~12,797,442 shares


			Part I – Financial Information

Item 1.	Financial Statements – Unaudited
	Condensed Consolidated Balance Sheets – March 31, ~~2016~~2017 and December 31, ~~2015~~2016	3
	Condensed Consolidated Statements of Operations – ~~Three Months~~Quarter ended March 31, ~~2016~~2017 and ~~2015~~2016	4
	Condensed Consolidated Statements of Comprehensive Income – ~~Three Months~~Quarter ended March 31, ~~2016~~2017 and ~~2015~~2016	5
	Condensed Consolidated Statements of Shareholders’ Equity – ~~Three Months~~Quarter ended March 31, ~~2016~~2017 and ~~2015~~2016	6
	Condensed Consolidated Statements of Cash Flows – ~~Three Months~~Quarter ended March 31, ~~2016~~2017 and ~~2015~~2016	7
	Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2425

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3334

Item 4.	Controls and Procedures	3335

Part II – Other Information

	~~Part II – Other Information~~

Item 1.	Legal Proceedings	3436

Item 1A.	Risk Factors	3436

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3436

Item 3.	Defaults Upon Senior Securities	3436

Item 4.	Mine Safety Disclosures	3436

Item 5.	Other Information	3436

Item 6.	Exhibits	3537

	Signatures	3739


	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


~~(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).~~Company.

		(ii)	Amended and RestatedBy-laws of the Company (incorporated by reference to Exhibit 3(ii) to PHI’s Report on Form10-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 Form10-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 Form8-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 Form10-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 Form10-Q for the quarterly period ended September 30, 2015, filed November 6, 2015).

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. (incorporated by reference to Exhibit 4.5 to PHI’s Report on Form10-Q for the quarterly period ended September 30, 2016, filed November 7, 2016).

~~4.5~~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 Form8-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 Form8-K filed on March 6, 2014).

	10.1†	Second Amended and Restated PHI Inc. Long-Term Incentive Plan (incorporated by reference to Appendix BA to PHI’s Information Statement on Schedule 14C filed April ~~13, 2015)~~12, 2017).


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

Balance at March 31, 2015		2,906	$	291		12,674		$	1,267		$	301,170		$	(135	)	$	(102	)	$	304,560	$	607,051


	PHI, Inc.

May 9, ~~2016~~2017	By:	/s/ Al A. Gonsoulin
		Al A. Gonsoulin
		Chairman and Chief Executive Officer

May 9, ~~2016~~2017	By:	/s/ Trudy P. McConnaughhay
		Trudy P. McConnaughhay
		Chief Financial Officer