UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
☒ | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended SeptemberJune 30, 2018
or
☐ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from
toCommission file number: 0-9827
PHI, Inc.
(Exact name of registrant as specified in its charter)
Louisiana | 72-0395707 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
2001 SE Evangeline Thruway | |
Lafayette, Louisiana | 70508 |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code:
(337) 235-2452Indicate 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: ☒ No: ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes: ☒ No: ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer: | ☐ | Accelerated filer: | ☒ | Smaller reporting company: | ☒ | |||
Non-accelerated filer: | ☐ | Emerging Growth Company: | ☐ |
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 Rule 12b-2 of the Exchange
Securities registered pursuant to Section 12(b) of the Act: None
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class | Outstanding at August 1, 2019 | |
Voting Common Stock | 2,905,757 shares | |
Non-Voting Common Stock | 12,919,681 shares |
Index – Form 10-Q
Item 1. | ||
10 | ||
11 | ||
Item 2. | 41 | |
Item 3. | 53 | |
Item 4. | 54 | |
Item 1. | 55 | |
Item 1A. | 55 | |
Item 2. | 57 | |
Item 3. | 57 | |
Item 4. | 57 | |
Item 5. | 57 | |
Item 6. | 57 | |
58 |
Special Note Regarding Pending Bankruptcy Proceedings
On March 14, 2019, PHI, Inc. and its four principal U.S. subsidiaries (collectively, the “Debtors”) filed voluntary petitions (the “Chapter 11 Cases”) in the United States Bankruptcy Court for the Northern District of Texas (the “Bankruptcy Court”) seeking relief under Chapter 11 of Title 11 of the United States Bankruptcy Code (the “Bankruptcy Code”). On August 2, 2019, the Bankruptcy Court issued an order confirming the Debtors’ plan of reorganization. Subject to the conditions described herein, the Debtors currently plan to emerge from bankruptcy by the end of August 2019.
Special Note Regarding Forward-Looking Statements
All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q (the “Quarterly Report”) and other periodic reports filed by PHI, Inc. (the “Company,” “PHI,” “we” or “our”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and other written or oral statements made by it or on its behalf, are “forward-looking” statements, as defined by (and subject to the “safe harbor” protections under) the federal securities laws. When used herein, the words “anticipates,” “expects,” “believes,” “seeks,” “hopes,” “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 as of the date such statements are made about future 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 risk and uncertainties. Actual events and results may differ materially from those anticipated, estimated, projected or implied by us in those statements if one or more of these risks or uncertainties materialize, or if our underlying assumptions prove incorrect. All of our forward-looking statements are qualified in their entirety by reference to our discussion of certain important factors that could cause our actual results to differ materially from those anticipated, estimated, projected or implied by us in those forward-looking statements. Factors that could cause our results to differ materially from the expectations expressed in such forward-looking statements include but are not limited to the following:
our ability to continue as a going concern;consummate our plan or reorganization, either on the terms and schedule currently contemplated or at all;
our ability to pay, refinance or restructuredevelop and implement successful business strategies, including our substantial debt and operating lease commitments;ability to attain the goals stated in our plan of reorganization;
our ability to implement operational improvement efficiencies;
our ability to comply with the financial covenants contained in certain of our aircraft lease agreements orfinancing arrangements;
our ability to successfully negotiate amendments, waivers or other modifications with respect to our obligations under our various debt and lease instruments;
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;
illiquidity in the trading of our securities, including limitations caused by the delisting of our common stock from Nasdaq and the subsequent trading of our securities in the over-the-counter market;
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, 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;
the adverse impact of customers electing to terminate or reduce our services;
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;
the availability of adequate insurance;
adverse changes in the value of our aircraft or our ability to sell them in the secondary markets;
political, economic, payment, regulatory and other risks and uncertainties associated with our international operations, some of which are conducted in challenging business environments;
the effects of competition and changes in technology;
the special risks of our air medical operations, including collections risks and potential medical malpractice claims;
weather conditions and seasonal factors, including tropical storms;
our ability to timely realize the anticipated benefits of our December 29, 2017 acquisition of the HNZ Offshore Business (as defined below in Item 2 of Part I of this report);additional offshore operations;
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 timely collect our receivables in full;
• | 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; |
changes in fuel prices;
our ability to attract and retain key personnel and to avoid work stoppages or other labor problems;problems, which as indicated above may be impacted by the Chapter 11 Cases;
changes in our operating plans or strategies, whether based upon changes in our cash flows, cash requirements, financial performance, financial position, market conditions or otherwise;
environmental and litigation risks; and
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 (i) Item 1A of Part II or elsewhere in this report, (ii) Item 1A or elsewhere in our Annual Report on Form 10-K for the year ended December 31, 20172018 or (iii) other of our filings with the U.S. Securities and Exchange Commission ("SEC").
Additional factors or risks that we currently deem immaterial, that are not presently known to us, that arise in the future or that are not specific to us 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, which speak only as of the date made. PHI undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or developments, changed circumstances, 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.
PHI, INC. AND SUBSIDIARIES
(Thousands of dollars, except share data)
(Unaudited)
|
| June 30, 2019 |
|
| December 31, 2018 |
| ||
ASSETS |
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 21,882 |
|
| $ | 50,874 |
|
Short-term investments |
|
| 76,141 |
|
|
| 14,232 |
|
Accounts receivable – net |
|
|
|
|
|
|
|
|
Trade |
|
| 174,499 |
|
|
| 168,459 |
|
Other |
|
| 8,845 |
|
|
| 14,006 |
|
Inventories of spare parts – net |
|
| 54,242 |
|
|
| 56,698 |
|
Prepaid expenses |
|
| 13,072 |
|
|
| 11,419 |
|
Income taxes receivable |
|
| 509 |
|
|
| 950 |
|
Total current assets |
|
| 349,190 |
|
|
| 316,638 |
|
Property and equipment – net |
|
| 885,669 |
|
|
| 902,485 |
|
Right of use assets |
|
| 144,944 |
|
|
| — |
|
Restricted cash and investments |
|
| 19,739 |
|
|
| 19,781 |
|
Other assets |
|
| 20,937 |
|
|
| 18,378 |
|
Deferred income taxes |
|
| 5,137 |
|
|
| 4,944 |
|
Total assets |
| $ | 1,425,616 |
|
| $ | 1,262,226 |
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
Senior Notes issued March 17, 2014, net of debt issuance cost of $260 |
| $ | — |
|
| $ | 499,740 |
|
Accounts payable |
|
| 70,615 |
|
|
| 50,289 |
|
Accrued and other current liabilities |
|
| 38,483 |
|
|
| 45,292 |
|
Current portion of operating lease liabilities |
|
| 27,535 |
|
|
| — |
|
Current maturities of long term debt |
|
| 1,750 |
|
|
| — |
|
Total current liabilities |
|
| 138,383 |
|
|
| 595,321 |
|
Long-term debt: |
|
|
|
|
|
|
|
|
Term loan issued March 13, 2019, net of debt issuance costs of $5,254 |
|
| 62,996 |
|
|
| — |
|
Related party term loan issued September 28, 2018, net of debt issuance costs of $546 and $765, respectively |
|
| 129,454 |
|
|
| 129,235 |
|
Deferred income taxes |
|
| 51,964 |
|
|
| 59,178 |
|
Other long-term liabilities |
|
| 3,673 |
|
|
| 5,059 |
|
Long-term operating lease liabilities |
|
| 118,167 |
|
|
| — |
|
Total liabilities not subject to compromise |
|
| 504,637 |
|
|
| 788,793 |
|
Liabilities subject to compromise |
|
| 513,125 |
|
|
| — |
|
Total liabilities |
|
| 1,017,762 |
|
|
| 788,793 |
|
Commitments and contingencies (Note 11) |
|
|
|
|
|
|
|
|
Shareholders’ Equity: |
|
|
|
|
|
|
|
|
Voting common stock – par value of $0.10; 12,500,000 shares authorized, 2,905,757 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively |
|
| 291 |
|
|
| 291 |
|
Non-voting common stock – par value of $0.10; 37,500,000 shares authorized, 12,919,681 issued and outstanding at June 30, 2019 and December 31, 2018, respectively |
|
| 1,291 |
|
|
| 1,291 |
|
Additional paid-in capital |
|
| 316,143 |
|
|
| 314,316 |
|
Accumulated other comprehensive income (loss) |
|
| (4,040 | ) |
|
| (3,952 | ) |
Retained earnings |
|
| 94,169 |
|
|
| 161,487 |
|
Total shareholders’ equity |
|
| 407,854 |
|
|
| 473,433 |
|
Total liabilities and shareholders’ equity |
| $ | 1,425,616 |
|
| $ | 1,262,226 |
|
September 30, 2018 | December 31, 2017 | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash | $ | 16,453 | $ | 8,770 | ||||
Short-term investments | 30,509 | 64,237 | ||||||
Accounts receivable – net | ||||||||
Trade | 175,372 | 168,153 | ||||||
Other | 22,035 | 17,826 | ||||||
Inventories of spare parts – net | 74,352 | 80,881 | ||||||
Prepaid expenses | 13,201 | 11,475 | ||||||
Income taxes receivable | 649 | 1,271 | ||||||
Total current assets | 332,571 | 352,613 | ||||||
Property and equipment – net | 923,577 | 946,765 | ||||||
Restricted investments | 19,781 | 12,396 | ||||||
Other assets | 10,142 | 8,741 | ||||||
Deferred income taxes | 1,009 | 3,309 | ||||||
Goodwill | 61,299 | 61,299 | ||||||
Intangibles | 15,557 | 16,723 | ||||||
Total assets | $ | 1,363,936 | $ | 1,401,846 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current Liabilities: | ||||||||
Senior Notes issued March 17, 2014, net of debt issuance costs of $571 | 499,429 | — | ||||||
Accounts payable | 39,209 | 37,186 | ||||||
Accrued and other current liabilities | 39,557 | 41,850 | ||||||
Total current liabilities | 578,195 | 79,036 | ||||||
Long-term debt: | ||||||||
Revolving credit facility | — | 117,500 | ||||||
Senior Notes issued March 17, 2014, net of debt issuance costs of $1,506 | — | 498,494 | ||||||
Related Party Term Loan issued September 28, 2018, net of debt issuance costs of $874 | 129,126 | — | ||||||
Deferred income taxes | 74,062 | 86,005 | ||||||
Other long-term liabilities | 5,168 | 8,157 | ||||||
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 at September 30, 2018 and December 31, 2017, respectively | 291 | 291 | ||||||
Non-voting common stock – par value of $0.10; 37,500,000 shares authorized, 12,914,011 and 12,897,614 issued and outstanding at September 30, 2018 and December 31, 2017, respectively | 1,291 | 1,289 | ||||||
Additional paid-in capital | 312,503 | 308,353 | ||||||
Accumulated other comprehensive income (loss) | (4,094 | ) | (280 | ) | ||||
Retained earnings | 267,394 | 303,001 | ||||||
Total shareholders’ equity | 577,385 | 612,654 | ||||||
Total liabilities and shareholders’ equity | $ | 1,363,936 | $ | 1,401,846 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
(Thousands of dollars and shares, except per share data)
(Unaudited)
|
| Quarter Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||
Operating revenues, net |
| $ | 165,172 |
|
| $ | 169,243 |
|
| $ | 317,062 |
|
| $ | 329,607 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct expenses |
|
| 153,514 |
|
|
| 155,083 |
|
|
| 310,390 |
|
|
| 311,309 |
|
Selling, general and administrative expenses |
|
| 17,591 |
|
|
| 14,485 |
|
|
| 42,458 |
|
|
| 29,944 |
|
Total operating expenses |
|
| 171,105 |
|
|
| 169,568 |
|
|
| 352,848 |
|
|
| 341,253 |
|
(Gain) loss on disposal of assets |
|
| (95 | ) |
|
| (171 | ) |
|
| (44 | ) |
|
| 708 |
|
Equity in income of unconsolidated affiliate |
|
| (1,039 | ) |
|
| (81 | ) |
|
| (2,400 | ) |
|
| (45 | ) |
Operating loss |
|
| (4,799 | ) |
|
| (73 | ) |
|
| (33,342 | ) |
|
| (12,309 | ) |
Interest expense |
|
| 3,927 |
|
|
| 8,340 |
|
|
| 12,093 |
|
|
| 16,537 |
|
Reorganization items, net |
|
| 26,503 |
|
|
| — |
|
|
| 28,103 |
|
|
| — |
|
Other income, net |
|
| (333 | ) |
|
| 364 |
|
|
| (293 | ) |
|
| 1,404 |
|
|
|
| 30,097 |
|
|
| 8,704 |
|
|
| 39,903 |
|
|
| 17,941 |
|
Loss before income taxes |
|
| (34,896 | ) |
|
| (8,777 | ) |
|
| (73,245 | ) |
|
| (30,250 | ) |
Income tax (benefit) expense |
|
| (2,819 | ) |
|
| (1,684 | ) |
|
| (5,927 | ) |
|
| (6,175 | ) |
Net loss |
| $ | (32,077 | ) |
| $ | (7,093 | ) |
| $ | (67,318 | ) |
| $ | (24,075 | ) |
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
| 15,825 |
|
|
| 15,806 |
|
|
| 15,825 |
|
|
| 15,806 |
|
Diluted |
|
| 15,825 |
|
|
| 15,806 |
|
|
| 15,825 |
|
|
| 15,806 |
|
Net loss per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | (2.03 | ) |
| $ | (0.45 | ) |
| $ | (4.25 | ) |
| $ | (1.52 | ) |
Diluted |
| $ | (2.03 | ) |
| $ | (0.45 | ) |
| $ | (4.25 | ) |
| $ | (1.52 | ) |
Quarter Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Operating revenues, net | $ | 168,787 | $ | 150,167 | $ | 498,400 | $ | 431,209 | ||||||||
Expenses: | ||||||||||||||||
Direct expenses | 160,200 | 136,786 | 471,509 | 400,250 | ||||||||||||
Selling, general and administrative expenses | 16,255 | 11,401 | 46,199 | 38,691 | ||||||||||||
Total operating expenses | 176,455 | 148,187 | 517,708 | 438,941 | ||||||||||||
(Gain) loss on disposal of assets | — | (4 | ) | 708 | 3 | |||||||||||
Equity in (gain) loss of unconsolidated affiliates, net | (118 | ) | (438 | ) | (162 | ) | 1,556 | |||||||||
Operating (loss) income | (7,550 | ) | 2,422 | (19,854 | ) | (9,291 | ) | |||||||||
Interest expense | 8,357 | 8,027 | 24,894 | 24,305 | ||||||||||||
Other income – net | (1,845 | ) | (706 | ) | (436 | ) | (2,474 | ) | ||||||||
6,512 | 7,321 | 24,458 | 21,831 | |||||||||||||
Loss before income taxes | (14,062 | ) | (4,899 | ) | (44,312 | ) | (31,122 | ) | ||||||||
Income tax benefit | (2,531 | ) | (1,622 | ) | (8,705 | ) | (9,324 | ) | ||||||||
Net loss | $ | (11,531 | ) | $ | (3,277 | ) | $ | (35,607 | ) | $ | (21,798 | ) | ||||
Weighted average shares outstanding: | ||||||||||||||||
Basic | 15,816 | 15,799 | 15,811 | 15,750 | ||||||||||||
Diluted | 15,816 | 15,799 | 15,811 | 15,750 | ||||||||||||
Net loss per share: | ||||||||||||||||
Basic | $ | (0.73 | ) | $ | (0.21 | ) | $ | (2.25 | ) | $ | (1.38 | ) | ||||
Diluted | $ | (0.73 | ) | $ | (0.21 | ) | $ | (2.25 | ) | $ | (1.38 | ) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
(Thousands of dollars)
(Unaudited)
|
| Quarter Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||
Net loss |
| $ | (32,077 | ) |
| $ | (7,093 | ) |
| $ | (67,318 | ) |
| $ | (24,075 | ) |
Unrealized (loss) gain on short-term investments |
|
| — |
|
|
| (107 | ) |
|
| — |
|
|
| 363 |
|
Currency translation adjustments |
|
| (928 | ) |
|
| 160 |
|
|
| (121 | ) |
|
| 627 |
|
Changes in pension plan assets and benefit obligations |
|
| — |
|
|
| 7 |
|
|
| — |
|
|
| (1 | ) |
Tax effect of the above-listed adjustments |
|
| 25 |
|
|
| 100 |
|
|
| 33 |
|
|
| (85 | ) |
Total comprehensive loss |
| $ | (32,980 | ) |
| $ | (6,933 | ) |
| $ | (67,406 | ) |
| $ | (23,171 | ) |
Quarter Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net loss | $ | (11,531 | ) | $ | (3,277 | ) | $ | (35,607 | ) | $ | (21,798 | ) | ||||
Unrealized gain on short-term investments | — | 41 | 363 | 370 | ||||||||||||
Currency translation adjustments | (4,718 | ) | — | (4,091 | ) | — | ||||||||||
Changes in pension plan assets and benefit obligations | — | (24 | ) | (1 | ) | (2 | ) | |||||||||
Tax effect of the above-listed adjustments | — | (8 | ) | (85 | ) | (134 | ) | |||||||||
Total comprehensive loss | $ | (16,249 | ) | $ | (3,268 | ) | $ | (39,421 | ) | $ | (21,564 | ) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
(Thousands of dollars and shares)
(Unaudited)
|
| Voting Common Stock |
|
| Non-Voting Common Stock |
|
| Additional |
|
| Accumulated Other Com- |
|
|
|
|
|
|
|
|
| ||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Paid-in Capital |
|
| prehensive (Loss) Income |
|
| Retained Earnings |
|
| Shareholders' Equity |
| ||||||||
Balance at March 31, 2018 |
|
| 2,906 |
|
|
| 291 |
|
|
| 12,905 |
|
|
| 1,290 |
|
|
| 309,672 |
|
|
| 464 |
|
|
| 286,018 |
|
| $ | 597,735 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (7,092 | ) |
|
| (7,092 | ) |
Unrealized gain on short-term investments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (4 | ) |
|
| — |
|
|
| (4 | ) |
Changes in pension plan assets and benefit obligations |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4 |
|
|
| — |
|
|
| 4 |
|
Amortization of unearned stock-based compensation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 813 |
|
|
| — |
|
|
| — |
|
|
| 813 |
|
Cash payment of Performance Based stock units |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Currency translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 160 |
|
|
| — |
|
|
| 160 |
|
Issuance of non-voting common stock (upon vesting of restricted stock units) |
|
| — |
|
|
| — |
|
|
| (2 | ) |
|
| 1 |
|
|
| (2 | ) |
|
| — |
|
|
| — |
|
|
| (1 | ) |
Cancellation of restricted non-voting stock units for tax withholdings on vested shares |
|
| — |
|
|
| — |
|
|
| 3 |
|
|
| — |
|
|
| (50 | ) |
|
| — |
|
|
| — |
|
|
| (50 | ) |
Balance at June 30, 2018 |
|
| 2,906 |
|
| $ | 291 |
|
|
| 12,906 |
|
| $ | 1,291 |
|
| $ | 310,433 |
|
| $ | 624 |
|
| $ | 278,926 |
|
| $ | 591,565 |
|
|
| Voting Common Stock |
|
| Non-Voting Common Stock |
|
| Additional |
|
| Accumulated Other Com- |
|
|
|
|
|
|
|
|
| ||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Paid-in Capital |
|
| prehensive (Loss) Income |
|
| Retained Earnings |
|
| Shareholders' Equity |
| ||||||||
Balance at March 31, 2019 |
|
| 2,906 |
|
| $ | 291 |
|
|
| 12,919 |
|
| $ | 1,291 |
|
| $ | 314,818 |
|
| $ | (3,138 | ) |
| $ | 126,246 |
|
| $ | 439,508 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (32,077 | ) |
|
| (32,077 | ) |
Amortization of unearned stock-based compensation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,325 |
|
|
| — |
|
|
| — |
|
|
| 1,325 |
|
Cash payment of Performance Based stock units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
Currency translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (902 | ) |
|
| — |
|
|
| (902 | ) |
Balance at June 30, 2019 |
|
| 2,906 |
|
| $ | 291 |
|
|
| 12,919 |
|
| $ | 1,291 |
|
| $ | 316,143 |
|
| $ | (4,040 | ) |
| $ | 94,169 |
|
| $ | 407,854 |
|
Voting Common Stock | Non-Voting Common Stock | Additional Paid-in Capital | Accumulated Other Com-prehensive (Loss) Income | |||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Retained Earnings | Shareholders' Equity | |||||||||||||||||||||||||
Balance at December 31, 2016 | 2,906 | $ | 291 | 12,779 | $ | 1,278 | $ | 304,246 | $ | (478 | ) | $ | 294,441 | $ | 599,778 | |||||||||||||||
Net loss | — | — | — | — | — | — | (21,798 | ) | (21,798 | ) | ||||||||||||||||||||
Unrealized gain on short-term investments | — | — | — | — | — | 235 | — | 235 | ||||||||||||||||||||||
Changes in pension plan assets and benefit obligations | — | — | — | — | — | (1 | ) | — | (1 | ) | ||||||||||||||||||||
Amortization of unearned stock-based compensation | — | — | — | — | 3,074 | — | — | 3,074 | ||||||||||||||||||||||
Issuance of non-voting common stock (upon vesting of restricted stock units) | — | — | 136 | 13 | (10 | ) | — | — | 3 | |||||||||||||||||||||
Cancellation of restricted non-voting stock units for tax withholdings on vested shares | — | — | (22 | ) | (2 | ) | (256 | ) | — | — | (258 | ) | ||||||||||||||||||
Retirement of treasury stock | — | — | — | — | — | — | 1,028 | 1,028 | ||||||||||||||||||||||
Balance at September 30, 2017 | 2,906 | $ | 291 | 12,893 | $ | 1,289 | $ | 307,054 | $ | (244 | ) | $ | 273,671 | $ | 582,061 | |||||||||||||||
Voting Common Stock | Non-Voting Common Stock | Additional Paid-in Capital | Accumulated Other Com-prehensive (Loss) Income | |||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Retained Earnings | Shareholders' Equity | |||||||||||||||||||||||||
Balance at December 31, 2017 | 2,906 | $ | 291 | 12,897 | $ | 1,289 | $ | 308,353 | $ | (280 | ) | $ | 303,001 | $ | 612,654 | |||||||||||||||
Net loss | — | — | — | — | — | — | (35,607 | ) | (35,607 | ) | ||||||||||||||||||||
Unrealized gain on short-term investments | — | — | — | — | 278 | — | 278 | |||||||||||||||||||||||
Changes in pension plan assets and benefit obligations | — | — | — | — | — | (1 | ) | — | (1 | ) | ||||||||||||||||||||
Amortization of unearned stock-based compensation | — | — | — | — | 4,250 | — | — | 4,250 | ||||||||||||||||||||||
Currency translation adjustment | — | — | — | — | — | (4,091 | ) | — | (4,091 | ) | ||||||||||||||||||||
Issuance of non-voting common stock (upon vesting of restricted stock units) | — | — | 27 | 3 | — | — | — | 3 | ||||||||||||||||||||||
Cancellation of restricted non-voting stock units for tax withholdings on vested shares | — | — | (10 | ) | (1 | ) | (100 | ) | — | — | (101 | ) | ||||||||||||||||||
Balance at September 30, 2018 | 2,906 | $ | 291 | 12,914 | $ | 1,291 | $ | 312,503 | $ | (4,094 | ) | $ | 267,394 | $ | 577,385 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
PHI, INC. AND SUBSIDIARIES
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Thousands of dollars and shares)
(Unaudited)
|
| Voting Common Stock |
|
| Non-Voting Common Stock |
|
| Additional |
|
| Accumulated Other Com- |
|
|
|
|
|
|
|
|
| ||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Paid-in Capital |
|
| prehensive (Loss) Income |
|
| Retained Earnings |
|
| Shareholders' Equity |
| ||||||||
Balance at January 1, 2018 |
|
| 2,906 |
|
| $ | 291 |
|
|
| 12,897 |
|
| $ | 1,289 |
|
| $ | 308,353 |
|
| $ | (280 | ) |
| $ | 303,001 |
|
| $ | 612,654 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (24,075 | ) |
|
| (24,075 | ) |
Unrealized gain on short-term investments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 278 |
|
|
| — |
|
|
| 278 |
|
Changes in pension plan assets and benefit obligations |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1 | ) |
|
| — |
|
|
| (1 | ) |
Amortization of unearned stock-based compensation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,132 |
|
|
| — |
|
|
| — |
|
|
| 2,132 |
|
Currency translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 627 |
|
|
| — |
|
|
| 627 |
|
Issuance of non-voting common stock (upon vesting of restricted stock units) |
|
| — |
|
|
| — |
|
|
| 9 |
|
|
| 2 |
|
|
| (2 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Cancellation of restricted non-voting stock units for tax withholdings on vested shares |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (50 | ) |
|
| — |
|
|
| — |
|
|
| (50 | ) |
Balance at June 30, 2018 |
|
| 2,906 |
|
| $ | 291 |
|
|
| 12,906 |
|
| $ | 1,291 |
|
| $ | 310,433 |
|
| $ | 624 |
|
| $ | 278,926 |
|
| $ | 591,565 |
|
|
| Voting Common Stock |
|
| Non-Voting Common Stock |
|
| Additional |
|
| Accumulated Other Com- |
|
|
|
|
|
|
|
|
| ||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Paid-in Capital |
|
| prehensive (Loss) Income |
|
| Retained Earnings |
|
| Shareholders' Equity |
| ||||||||
Balance at January 1, 2019 |
|
| 2,906 |
|
| $ | 291 |
|
|
| 12,919 |
|
| $ | 1,291 |
|
| $ | 314,316 |
|
| $ | (3,952 | ) |
| $ | 161,487 |
|
| $ | 473,433 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (67,318 | ) |
|
| (67,318 | ) |
Amortization of unearned stock-based compensation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,640 |
|
|
| — |
|
|
| — |
|
|
| 2,640 |
|
Cash payment of Performance Based stock units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (813 | ) |
|
|
|
|
|
|
|
|
|
| (813 | ) |
Currency translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (88 | ) |
|
| — |
|
|
| (88 | ) |
Balance at June 30, 2019 |
|
| 2,906 |
|
| $ | 291 |
|
|
| 12,919 |
|
| $ | 1,291 |
|
| $ | 316,143 |
|
| $ | (4,040 | ) |
| $ | 94,169 |
|
| $ | 407,854 |
|
(DEBTOR-IN-POSSESSION)
(Thousands of dollars)
(Unaudited)
|
| Six Months Ended June 30, |
| |||||
|
| 2019 |
|
| 2018 |
| ||
Operating activities: |
|
|
|
|
|
|
|
|
Net loss |
| $ | (67,318 | ) |
| $ | (24,075 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 38,775 |
|
|
| 38,598 |
|
Deferred income taxes |
|
| (7,407 | ) |
|
| (7,446 | ) |
(Gain) loss on asset dispositions |
|
| (44 | ) |
|
| 708 |
|
Equity in (income) loss of unconsolidated affiliate, net |
|
| (2,400 | ) |
|
| (45 | ) |
Inventory valuation reserves |
|
| 1,416 |
|
|
| 3,308 |
|
Changes in operating assets and liabilities |
|
| 13,301 |
|
|
| (5,638 | ) |
Net cash (used in) provided by operating activities |
|
| (23,677 | ) |
|
| 5,410 |
|
Investing activities: |
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
| (8,970 | ) |
|
| (18,098 | ) |
Proceeds from asset dispositions |
|
| 1,235 |
|
|
| 1,453 |
|
Purchase of short-term investments |
|
| (183,421 | ) |
|
| (260,996 | ) |
Proceeds from sale of short-term investments |
|
| 121,512 |
|
|
| 264,918 |
|
Payment of deposit on aircraft |
|
| (50 | ) |
|
| — |
|
Refund of deposit on aircraft |
|
| 503 |
|
|
| — |
|
Loan to unconsolidated affiliate |
|
| — |
|
|
| (274 | ) |
Net cash used in investing activities |
|
| (69,191 | ) |
|
| (12,997 | ) |
Financing activities: |
|
|
|
|
|
|
|
|
Debt issuance cost |
|
| (5,668 | ) |
|
| — |
|
Proceeds from line of credit |
|
| — |
|
|
| 34,295 |
|
Payments on line of credit |
|
| — |
|
|
| (29,575 | ) |
Repurchase of common stock |
|
|
|
|
|
| (51 | ) |
Proceeds from Term Loan |
|
| 70,000 |
|
|
| — |
|
Net cash provided by financing activities |
|
| 64,332 |
|
|
| 4,669 |
|
Effect of exchange rate changes on cash |
|
| (483 | ) |
|
| — |
|
Decrease in cash, cash equivalents and restricted cash |
|
| (29,019 | ) |
|
| (2,918 | ) |
Cash, cash equivalents and restricted cash at the beginning of period |
|
| 58,564 |
|
|
| 8,770 |
|
Cash, cash equivalents and restricted cash at end of period |
| $ | 29,545 |
|
| $ | 5,852 |
|
Supplemental Disclosures Cash Flow Information |
|
|
|
|
|
|
|
|
Cash paid during the period for: |
|
|
|
|
|
|
|
|
Reorganization items, net |
| $ | 6,204 |
|
| $ | — |
|
Interest |
| $ | 3,599 |
|
| $ | 15,755 |
|
Income taxes |
| $ | 1,688 |
|
| $ | 813 |
|
Noncash investing activities: |
|
|
|
|
|
|
|
|
Other current liabilities and accrued payables related to purchase of property and equipment |
| $ | 96 |
|
| $ | 272 |
|
Nine Months Ended September 30, | ||||||||
2018 | 2017 | |||||||
Operating activities: | ||||||||
Net loss | $ | (35,607 | ) | $ | (21,798 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 59,541 | 50,593 | ||||||
Deferred income taxes | (9,734 | ) | (9,416 | ) | ||||
Loss (gain) on asset dispositions | 708 | 3 | ||||||
Equity in loss of unconsolidated affiliate, net | (162 | ) | 1,556 | |||||
Inventory valuation reserves | 1,234 | (3 | ) | |||||
Changes in operating assets and liabilities | (24,028 | ) | (22,803 | ) | ||||
Net cash used in operating activities | (8,048 | ) | (1,868 | ) | ||||
Investing activities: | ||||||||
Purchase of property and equipment | (22,761 | ) | (49,227 | ) | ||||
Proceeds from asset dispositions | 1,453 | 21 | ||||||
Purchase of short-term investments | (284,277 | ) | (268,525 | ) | ||||
Purchase of restricted investments | (7,705 | ) | — | |||||
Proceeds from sale of short-term investments | 318,007 | 354,250 | ||||||
Loan to unconsolidated affiliate | (274 | ) | — | |||||
Net cash provided by investing activities | 4,443 | 36,519 | ||||||
Financing activities: | ||||||||
Debt issuance cost | (874 | ) | — | |||||
Proceeds from line of credit | 34,295 | 99,150 | ||||||
Payments on line of credit | (151,795 | ) | (133,150 | ) | ||||
Proceeds from Term Loan | 130,000 | — | ||||||
Repurchase of common stock | (99 | ) | (256 | ) | ||||
Net cash provided by (used in) financing activities | 11,527 | (34,256 | ) | |||||
Effect of exchange rate changes on cash | (239 | ) | — | |||||
Increase in cash | 7,683 | 395 | ||||||
Cash, beginning of period | 8,770 | 2,596 | ||||||
Cash, end of period | $ | 16,453 | $ | 2,991 | ||||
Supplemental Disclosures Cash Flow Information | ||||||||
Cash paid during the period for: | ||||||||
Interest | $ | 30,825 | $ | 29,536 | ||||
Income taxes | $ | 1,304 | $ | 1,213 | ||||
Noncash investing activities: | ||||||||
Other current liabilities and accrued payables related to purchase of property and equipment | $ | 223 | $ | 21 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1. BASIS OF PRESENTATION
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 and the accompanying notes should be read in conjunction with the consolidated financial statements and the accompanying notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.
Our financial results, particularly as they relate to our Oil and Gas segment, are influenced by seasonal fluctuations as discussed in our Annual Report on Form 10-K for the year ended December 31, 2017.2018. 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.
Going Concern -
The financial statements accompanying this Quarterly Report have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”), which contemplates our continuation as a going concern.The accompanying interim Unaudited Condensed Consolidated Financial Statements have been prepared assuming that PHI will continue as a going concern and contemplates continuity of operations, realization of assets and satisfaction of liabilities and commitments in the normal course of business. Our ability to continue as a going concern is contingent upon our senior note indebtedness as current liabilities due within one yearability to successfully implement our plan of reorganization approved by the Bankruptcy Court on August 2, 2019, among other factors. The risks and other conditionsuncertainties surrounding our Chapter 11 proceedings raise substantial doubt aboutas to our ability to continue as a going concern.
Under the absolute priority scheme established by the Bankruptcy Code, unless our creditors agree otherwise, all of our pre-petition liabilities and post-petition liabilities must be satisfied in full before the holders of our existing common stock may receive any distribution or retain any property under a plan of reorganization. Although Note 2 describes the general terms of our confirmed plan of reorganization, the ultimate recovery to creditors and shareholders will not be fully determined unless and until we can fully implement such plan. The accompanying Unaudited Condensed Consolidated Financial Statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities or any other adjustments that might be necessary should the Company be unable to continue as a going concern or as a consequence of the filing of the Chapter 11 Cases. See Note 2 for additional information.
Supplemental Cash Flow Information - The following table sets forth the Company’s reconciliation of cash, cash equivalents and restricted cash reported within one yearthe Condensed Consolidated Statement of Cash Flows (in thousands):
|
| June 30, |
|
| December 31, |
|
| June 30, |
|
| December 31, |
| ||||
|
| 2019 |
|
| 2018 |
|
| 2018 |
|
| 2017 |
| ||||
Cash and Cash Equivalents |
| $ | 21,882 |
|
| $ | 50,874 |
|
| $ | 5,852 |
|
| $ | 8,770 |
|
Restricted Cash |
|
| 7,663 |
|
|
| 7,690 |
|
|
| — |
|
|
| — |
|
Total Cash, Cash Equivalents and Restricted Cash |
| $ | 29,545 |
|
| $ | 58,564 |
|
| $ | 5,852 |
|
| $ | 8,770 |
|
Recently adopted accounting principles
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (ASC 842). ASC 842 replaces the existing guidance on leasing transactions in ASC 840 and requires lessees to recognize on the balance sheet a lease liability and a right-of-use asset for all leases. ASC 842 also changes the recognition, measurement, and presentation of expense associated with leases and provides clarification regarding the identification of certain components of contracts that would represent a lease. The Company adopted the new standard effective January 1, 2019.
The Company elected the transition methodology provided by ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, whereby it applied the requirements of ASC 842 on a prospective basis as of the adoption date of January 1, 2019, without retrospectively adjusting prior periods. The Company elected to adopt the package of practical expedients provided by ASC 842 that allows prior determinations of whether existing contracts are, or contain, leases and the classification of existing leases to continue without reassessment. The Company elected to keep leases with an initial term of 12 months or less off of the balance sheet. The Company intends to recognize those lease payments in the consolidated statement of operations on a straight-line basis over the lease term. The Company also elected to combined lease and non-lease components in the computations of lease obligations and right-of-use assets. During our evaluation of ASU 2016-02, we concluded that certain of our helicopter service contracts contain a lease component. Our typical helicopter service contracts qualify for a practical expedient, which is available to lessors under certain circumstances, to combine the lease and non-lease components and account for the combined component in accordance with the accounting treatment for the predominant component. We have applied this practical expedient and intend to combine the lease and service components of our revenue contracts and continue to account for the combined component under Topic 606, Revenue from Contracts with Customers.
The Company completed the implementation of an information technology system to track and account for its leases and updated its accounting policies to support the accounting for leases under ASC 842. The Company completed its lease inventory and determined its most significant leases involve aircraft and facilities. For additional information, see Note 13.
2. BANKRUPTCY FILING
Initiation of Chapter 11 Proceedings
On March 14, 2019 (the "Petition Date"), PHI and four of its domestic subsidiaries (collectively, the "Debtors") filed voluntary petitions (the "Chapter 11 Cases") in the United States Bankruptcy Court for the Northern District of Texas (the "Bankruptcy Court") for relief under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code"). The Chapter 11 Cases are being jointly administered under the caption "In re PHI, Inc., et al., Case No. 19-30923."
Shortly following the Petition Date, the Bankruptcy Court entered certain orders facilitating the Debtors' operational transition into Chapter 11. These orders authorized the Debtors to, among other things, pay employee wages and benefits, and pay vendors and suppliers in the ordinary course for all goods and services provided after the Petition Date.
The Debtors are currently operating their businesses and managing their properties as "debtors in possession" in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. Certain subsidiaries of PHI (collectively, the "Non-Filing Entities") are not part of the Chapter 11 Cases. The Non-Filing Entities will continue to operate their businesses in the normal course and their results are included in our interim Unaudited Condensed Consolidated Financial Statements.
Significant Bankruptcy Court Actions
Development of Reorganization Plan. On April 1, 2019, the Debtors filed with the Bankruptcy Court their initial plan of reorganization under the Bankruptcy Code. Following such filing, the Debtors remained in discussions with various stakeholders in an attempt to obtain additional input about maximizing the value of the enterprise. Following mediation in late May 2019, on June 5, 2019, the Company entered into a settlement plan term sheet (the “Term Sheet”) with the Official Committee of Unsecured Creditors (the “UCC”) and certain other key stakeholders that resolved the UCC’s key objections and motions, subject to satisfaction of certain conditions contained within the Term Sheet.
Among other things, the Term Sheet provides that, upon our emergence from bankruptcy, our current secured lenders will be repaid and our current unsecured creditors will, subject to various exceptions and limitations, receive equity in a newly-reorganized parent company issuer. The Term Sheet further provides that, contingent upon the effectiveness of the Company’s plan of reorganization, Mr. Al A. Gonsoulin, who currently serves as the Company’s Chairman and Chief Executive Officer, will retire from all positions held with the Company and its subsidiaries, including as a member of the Board of Directors, effective upon the date of the Company’s emergence from the Chapter 11 Cases (the “Emergence Date”). The Term Sheet further provides that Mr. Lance F. Bospflug, who currently serves as President, Chief Operating Officer and a director of the Company, will be appointed to succeed Mr. Gonsoulin as Chief Executive Officer of the Company on the Emergence Date and will continue to serve as a member of the Board.
On June 13, 2019, the Debtors filed their second amended joint plan of organization and related disclosure statement, which, among other things, reflected restructuring terms agreed upon in the Term Sheet. On June 18, 2019, the Debtors entered into a term sheet reflecting a settlement with the Official Committee of Equity Security Holders. Subject to certain exceptions, this settlement contemplates issuing to our current equity holders three-year warrants entitling the holders to acquire under certain specified terms and conditions up to an aggregate of 5% of the reorganized parent’s equity interests issued and outstanding as of our emergence from bankruptcy, subject to dilution in connection with future equity issuances. On June 18, 2019, the Debtors filed their third amended joint plan of reorganization (the “Third Amended Plan”) and related disclosure statement (the “Disclosure Statement”). On June 19, 2019, the Bankruptcy Court approved the Disclosure Statement and authorized the Debtors to commence solicitation of approval of the Plan under the Bankruptcy Code.
Equity Commitment Agreement. In connection with the Chapter 11 Cases, on July 11, 2019, the Debtors entered into an Equity Commitment Agreement (the “Commitment Agreement”) with certain of the Company’s unsecured creditors (each a “Commitment Party” and collectively, the “Commitment Parties”). The Commitment Agreement is a component of the settlement plan agreed upon between the Company and certain creditors under the Term Sheet.
Subject to the terms and conditions of the Commitment Agreement, the Commitment Parties have agreed, in the aggregate, to provide up to $75 million cash (the “Equity Commitment”) in exchange for shares of common stock in the reorganized parent company. Under the Commitment Agreement, the shares would be issued at a discount of 25% to the value assigned to such shares in the Plan (as defined below). In addition, each of the Commitment Parties would be paid their pro rata share of an overall commitment fee of $15 million. The commitment fee would be paid on the Emergence Date in the form of additional shares of common stock of the reorganized parent company. Under the Commitment Agreement, the Company also agreed to enter into a registration rights agreement with certain Commitment Parties entitling such Commitment Parties under certain circumstances to request that the Company register their equity securities in the Company for sale under the rules of the U.S. Securities and Exchange Commission (the “SEC”).
The Commitment Agreement prohibits the Company from soliciting alternative financing or restructuring proposals, although the Company’s board of directors (the “Board”) can respond to an unsolicited alternative proposal if doing so would be required by its fiduciary duties.
The obligations of each Commitment Party to consummate the transactions contemplated by the Commitment Agreement are subject to specified conditions including, but not limited to, the Debtors’ compliance in all material respects with the terms of the Plan, the absence of a material adverse change in our business, our attainment of certain specified funding and liquidity thresholds, and the absence at the closing of any material breach of the representations, warranties and covenants made by the Debtors in the Commitment Agreement.
The Commitment Agreement may be terminated in a number of circumstances. We will be required to pay (i) a $3.75 million termination fee if we terminate the Commitment Agreement in connection with the Board’s exercise of its fiduciary duties and certain other conditions are met, including entering into an agreement to effect an alternative transaction within 12 months, or (ii) a higher termination fee if the Commitment Parties terminate the Commitment Agreement in certain other limited circumstances.
Term Loan Commitments. The Debtors have received binding commitments from lenders to fund on the Emergence Date the full amount of a $225 million first lien senior secured term loan that would mature in five years, subject to the satisfaction of certain conditions summarized herein. This term loan facility is a component of the reorganization plan agreed upon between the Debtors and certain of their creditors in the Term Sheet. The definitive documentation that is expected to govern this term loan facility has not yet been finalized or executed. Accordingly, we cannot assure you that the term loan facility will be completed as contemplated, or at all. For additional information, see Note 6.
Plan Supplementation. On June 23, 2019, the Debtors filed a supplement to their Third Amended Plan (the “Plan Supplement” and, collectively with the Third Amended Plan, the “Plan”) which included various documentation related to the Plan, including a partial list of the directors expected to be named to the new parent company and updated disclosure regarding our equity value. Prior to the hearing to confirm the Plan held on July 30, 2019, the Debtors filed additional documentation, including drafts of organizational documents of the new parent company and additional information about our post-emergence management incentive program.
Plan Confirmation. At a hearing held on July 30, 2019, the Bankruptcy Court confirmed the Plan, and on August 2, 2019, the Bankruptcy Court issued a written order to this effect. Implementation of the Plan is subject to the satisfaction or due waiver of several conditions, including without limitation (i) consummation of the debt and equity transactions contemplated by the Term Sheet and described herein, (ii) the payment in full of our secured lenders, (iii) certain minimum liquidity levels, (iv) the finalization of various documentation, (v) compliance with various regulatory requirements, (vi) the payment of various expenses and (vii) the implementation of the restructuring in a manner consistent with the Plan and certain stipulations contained therein.
Other. The description of our Chapter 11 Cases in this Note 2 and elsewhere in this report does not purport to be complete and is qualified in its entirety by reference to (i) our filings with the Bankruptcy Court, all of which are publicly available in the manner described elsewhere herein, and (ii) the exhibits to this report.
Executive Compensation Plans
In connection with the Chapter 11 Cases, the Compensation Committee of the Board of Directors of the Company has adopted on behalf of the Company a Key Employee Incentive Plan (the "KEIP") and a Key Employee Retention Plan ("KERP"). The KEIP is designed to incentivize seven of the Company's senior executives by providing a total potential cash award pool of approximately $4.2 million for performance at threshold levels, $5.6 million at plan target levels and $7.0 million for performance exceeding plan, target levels. Payouts under the KEIP are contingent upon emergence from Chapter 11, achievement of certain financial targets and achievement of certain safety metrics. The KERP is designed to enhance retention of up to 61 other non-insider employees and provides a total award pool of approximately $3.5 million cash. The Bankruptcy Court has approved both the KEIP and the KERP.
Financial Reporting in Reorganization
Effective on the Petition Date, the Company began to apply accounting standards applicable to reorganizations, which are applicable to companies under Chapter 11 bankruptcy protection. They require the financial statements for periods subsequent to the Petition Date to distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Expenses, realized gains and losses, and provisions for losses that are directly associated with reorganization proceedings must be reported separately as reorganization items, net in the Unaudited Condensed Consolidated Statements of Operations. In addition, the balance sheet must distinguish pre-petition liabilities subject to compromise ("LSTC") of the Debtors from pre-petition liabilities that are not subject to compromise, post-petition liabilities, and liabilities of non-Debtor entities in the accompanying this Quarterly ReportUnaudited Condensed Consolidated Balance Sheets. LSTC are filed.
Furthermore, the realization of assets and the satisfaction of liabilities are subject to uncertainty. While operating as debtors-in- possession, certain claims against the Debtors in existence before the filing of the petitions for relief under the federal bankruptcy laws are stayed while the Debtors continue business operations as debtors in possession. These claims are reflected in the unaudited Condensed Consolidated Balance Sheets at June 30, 2019 as LSTC. Additional LSTC may arise after the filing date resulting from rejection of executory contracts, including leases, and from the determination by the Bankruptcy Court (or agreed to by parties in interest) of allowed claims for contingencies and other disputed amounts. Claims secured against the Debtors' assets (secured claims) also are stayed, although the holders of such claims have the right to move the Bankruptcy Court for relief from the stay. The Company's secured claims are secured primarily by liens on certain of the Debtors’ receivables, inventory and spare parts and certain of their specified aircraft.
Liabilities Subject to Compromise
As a result of the commencement of the Chapter 11 Cases, the payment of pre-petition liabilities is generally subject to compromise pursuant to a plan of reorganization. Generally, actions to enforce or otherwise effect payment of pre-petition liabilities are stayed. Although payment of pre-petition claims generally is not permitted, the Bankruptcy Court granted the Debtors authority to pay certain pre-petition claims in designated categories and subject to certain terms and conditions. This relief generally was designed to preserve the value of the Debtors' business and assets. Among other things, the Bankruptcy Court authorized, but did not require, the Debtors to pay certain pre-petition claims relating to employee wages and benefits, taxes, and certain critical vendors.
Pre-petition liabilities that are subject to compromise are required to be reported at the amounts expected to be allowed by the Bankruptcy Court, even if they may be settled for different amounts. The amounts classified as LSTC may be subject to future adjustments depending on Bankruptcy Court actions, further developments with respect to disputed claims, the determination of secured status of certain claims, the determination as to the value of any collateral securing claims, proof of claims, or other events. See Note 7 - “Liabilities Subject to Compromise” for a specific discussion on balances subject to compromise.
Process for Implementation of Plan of Reorganization
Although the Plan provides that the Debtors will emerge from bankruptcy as a going concern, there can be no assurance at this time that the Debtors will be able to successfully consummate the Plan or any other alternative restructuring transaction that satisfies the conditions of the Bankruptcy Code and is confirmed by the Bankruptcy Court, or that the Plan will be implemented successfully. These conditions raise substantial doubt about the Company's ability to continue as a going concern.
Reorganization Items, Net
Reorganization items, net represent amounts incurred after the Petition Date as a direct result of the Chapter 11 Cases and are comprised of professional and other bankruptcy-related fees for the period from March 15, 2019 through June 30, 2019. See Note 19.
3. INVESTMENTS
We classify all of our short-term investments as available-for-sale. We carry these at fair value and report unrealized gains and losses, net of taxes, in Accumulated other comprehensive loss, 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.
Investments consisted of the following as of June 30, 2019:
|
| Cost Basis |
|
| Unrealized Gains |
|
| Unrealized Losses |
|
| Fair Value |
| ||||
|
| (Thousands of dollars) |
| |||||||||||||
Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market mutual funds |
| $ | 88,217 |
|
| $ | — |
|
| $ | — |
|
| $ | 88,217 |
|
Deferred compensation plan assets included in other assets |
|
| 889 |
|
|
| — |
|
|
| — |
|
|
| 889 |
|
Total |
| $ | 89,106 |
|
| $ | — |
|
| $ | — |
|
| $ | 89,106 |
|
Investments consisted of the following as of December 31, 2018:
|
| Cost Basis |
|
| Unrealized Gains |
|
| Unrealized Losses |
|
| Fair Value |
| ||||
|
| (Thousands of dollars) |
| |||||||||||||
Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market mutual funds |
| $ | 26,308 |
|
| $ | — |
|
| $ | — |
|
| $ | 26,308 |
|
Deferred compensation plan assets included in other assets |
|
| 772 |
|
|
| — |
|
|
| — |
|
|
| 772 |
|
Total |
| $ | 27,080 |
|
| $ | — |
|
| $ | — |
|
| $ | 27,080 |
|
At June 30, 2019 and December 31, 2018, we classified $12.1 million of our aggregate investments as long-term investments and recorded them in our Condensed Consolidated Balance Sheets as restricted cash and investments, as they are securing outstanding letters of credit with maturities beyond one year.
4. VALUATION ACCOUNTS
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 $6.3 million and $6.1 million at June 30, 2019, and December 31, 2018, respectively.
Revenues related to flights generated by our Air Medical segment are recorded net of contractual allowances under agreements with third party payors and estimated uncompensated care when the services are provided. The allowance for contractual discounts was $140.5 million and $123.8 million as of June 30, 2019 and December 31, 2018, respectively. The allowance for uncompensated care was $45.5 million and $51.9 million as of June 30, 2019 and December 31, 2018, respectively.
Recently Adopted 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 $1.6 million and $1.7 million for the quarters ended June 30, 2019 and 2018, respectively. The value of these services was $3.5 million and $3.3 million for the six months ended June 30, 2019 and 2018, respectively. The estimated cost of providing charity services was $0.3 million and $0.4 million for the quarters ended June 30, 2019 and 2018, respectively. The estimated cost of providing charity services was $0.8 million for the six months ended June 30, 2019 and 2018, respectively. The estimated costs of providing charity services are based on a calculation that applies a ratio of costs to the charges for uncompensated charity care. The ratio of costs to charges is based on our Air Medical segment’s total expenses divided by gross patient service revenue.
The allowance for contractual discounts and estimated uncompensated care (expressed as a percentage of gross segment accounts receivable) as of the dates listed below was as follows:
|
| June 30, 2019 |
|
| December 31, 2018 |
|
Allowance for Contractual Discounts |
| 55% |
|
| 51% |
|
Allowance for Uncompensated Care |
| 18% |
|
| 22% |
|
We have also established valuation reserves related to obsolete and slow-moving spare parts inventory. The inventory valuation reserves were $19.4 million and $17.9 million at June 30, 2019 and December 31, 2018, respectively.
5. FAIR VALUE MEASUREMENTS
Accounting Pronouncements 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.
Level 3: Unobservable inputs that are not corroborated by market data.
The following table summarizes the valuation of our investments and financial instruments by the above pricing levels as of the valuation dates listed:
|
| June 30, 2019 |
| |||||||||
|
| Total |
|
| (Level 1) |
|
| (Level 2) |
| |||
|
| (Thousands of dollars) |
| |||||||||
Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
Money market mutual funds |
| $ | 88,217 |
|
| $ | 88,217 |
|
| $ | — |
|
Deferred compensation plan assets |
|
| 889 |
|
|
| 889 |
|
|
| — |
|
Total |
| $ | 89,106 |
|
| $ | 89,106 |
|
| $ | — |
|
|
| December 31, 2018 |
| |||||||||
|
| Total |
|
| (Level 1) |
|
| (Level 2) |
| |||
|
| (Thousands of dollars) |
| |||||||||
Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
Money market mutual funds |
| $ | 26,308 |
|
| $ | 26,308 |
|
| $ | — |
|
Deferred compensation plan assets |
|
| 772 |
|
|
| 772 |
|
|
| — |
|
Total |
| $ | 27,080 |
|
| $ | 27,080 |
|
| $ | — |
|
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 investments in 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 2 or Level 3 investments.
Cash, accounts receivable, accounts payable and accrued liabilities, and term loan debt all had fair values approximating their carrying amounts at June 30, 2019 and December 31, 2018. We determine the estimated fair value of our 5.25% Senior Notes due 2019 (the "Senior Notes") using Level 2 inputs, including quoted market indications of similar publicly-traded debt. The fair value of our 5.25% Senior Notes due 2019, based on quoted market prices, was $245.0 million and $344.2 million at June 30, 2019 and December 31, 2018, respectively. We provide no assurances, however, that the ultimate recovery of the holders of these notes pursuant to the Chapter 11 Cases will correspond to these fair values as of these prior dates.
6. DEBT
Listed below is information regarding our indebtedness. All indebtedness owed under our Senior Notes as of June 30, 2019 is classified as subject to compromise, and as of December 31, 2018 was classified as short-term debt on our balance sheet. The Thirty-Two, LLC and Blue Torch term loans are classified as long-term debt as of June 30, 2019, except for the amount due within the next twelve months.
|
| June 30, 2019 |
|
| December 31, 2018 |
| ||||||||||
|
| Principal |
|
| Unamortized Debt Issuance Debt Cost |
|
| Principal |
|
| Unamortized Debt Issuance Debt Cost |
| ||||
Unsecured |
| (Thousands of dollars) |
| |||||||||||||
Senior Notes issued March 17, 2014, interest only payable semi-annually at 5.25%, matured March 15, 2019 |
| $ | 500,000 |
|
| $ | — |
|
| $ | 500,000 |
|
| $ | 260 |
|
Secured |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term Loan - Blue Torch Finance, LLC, interest payable quarterly at LIBOR plus 6%, maturing March 13, 2023 |
|
| 70,000 |
|
|
| 5,254 |
|
|
| — |
|
|
| — |
|
Related Party Term Loan - Thirty Two L.L.C., interest payable quarterly at 6%, due September 28, 2020 |
|
| 130,000 |
|
|
| 546 |
|
|
| 130,000 |
|
|
| 765 |
|
Total indebtedness |
|
| 700,000 |
|
|
| 5,800 |
|
|
| 630,000 |
|
|
| 1,025 |
|
Less: Current maturities |
|
| (1,750 | ) |
|
| — |
|
|
| (500,000 | ) |
|
| — |
|
|
| $ | 698,250 |
|
| $ | 5,800 |
|
| $ | 130,000 |
|
| $ | 1,025 |
|
Senior Notes - Subject to the automatic stay of the Bankruptcy Code, our 5.25% Senior Notes (the “Senior Notes”) matured on March 15, 2019. These notes are unconditionally guaranteed on a senior basis by each of PHI, Inc.’s wholly-owned domestic subsidiaries. These notes and related guarantees are the general, unsecured obligations of PHI, Inc. and the guarantors. For more information regarding the impact of our bankruptcy proceedings on the Senior Notes, see Note 2.
Blue Torch Loan Agreement - On March 13, 2019, we entered into a Loan Agreement, dated the same date (the “Blue Torch Agreement”), by and among the Company, as borrower, certain of our subsidiaries as guarantors party thereto, the lenders from time to time party thereto, and Blue Torch Finance, LLC, as administrative agent and collateral agent, for a first lien term loan of up to $70.0 million (the “Blue Torch Loan”). Immediately upon entering into the Blue Torch Agreement, and prior to the filing of the Chapter 11 Cases, we borrowed $70.0 million thereunder, the net proceeds of which (after the payment of transaction expenses and fees thereunder) we have used to continue to fund our working capital and liquidity requirements during the pendency of the Chapter 11 Cases. For additional information regarding our Chapter 11 Cases, see Notes 2 and 7 herein and Notes 1 and 19 to our filed 2018 10-K.
The remaining principal amount of the Blue Torch Loan is due March 13, 2023. At our election, borrowings under the Blue Torch Loan bear interest at either the LIBOR Rate (as defined in the Blue Torch Agreement) plus 6% or the Base Rate (as defined in the Blue Torch Agreement) plus 5%. The Blue Torch Loan is secured by a first lien on 91 aircraft registered and located in Australia, Canada, and the United States (which are currently deployed primarily in our oil and gas and technical services operations), the related spare parts for such aircraft, and certain other non-working capital assets, as well as a second lien on all working capital assets (second in priority to the liens granted under our below-described term loan agreement, dated as of September 28, 2018, with Thirty Two, L.L.C.). The Blue Torch Agreement contains customary pre-payment requirements. In addition, we paid on March 13, 2019 a funding fee, which is subject to forgiveness based on certain future events.
The Blue Torch Agreement contains certain customary negative covenants that, among other things, restrict, subject to certain exceptions, the Company’s and each guarantor’s incurrence of additional indebtedness or liens, mergers, dispositions of assets, investments, restricted payments, modifications to material agreements, sale and leasebacks, transactions with affiliates, fundamental changes, locations of certain aircraft and acquisitions of assets. In addition, the financial covenants under the Blue Torch Agreement require us to maintain certain specified minimum levels of liquidity, fixed charge coverage and appraised collateral values, and certain specified maximum levels of secured leverage, all of which are explained in greater detail of our prior SEC reports. The Blue Torch Agreement also contains customary affirmative covenants and customary representations and warranties. As of the date of the financial statements, included in this report, we believe we were in compliance with these covenants.
The Blue Torch Agreement specifies certain customary events of default, including, among others, certain change of control events. The filings of the Chapter 11 Cases neither constituted an event of default nor accelerated payment of the Company’s indebtedness under the Blue Torch Agreement. As noted in Note 2, we plan to repay the Blue Torch Loan in full upon emergence from bankruptcy, assuming we consummate our Plan on the terms confirmed by order of the Bankruptcy Court on August 2, 2019.
Related Party Term Loan - On September 28, 2018, we entered into a term loan agreement with Thirty Two L.L.C., which provided us with a term loan of $130.0 million maturing on September 28, 2020. This loan bears interest at an annual fixed rate of 6% payable quarterly, with all principal due on maturity. Thirty Two L.L.C., an entity wholly-owned by our current CEO and controlling shareholder, is a related party.
Obligations under the term loan are guaranteed by PHI Air Medical, L.L.C. and PHI Tech Services, Inc., both of which are wholly-owned by us. Our obligations and the guarantors’ obligations are secured primarily by all of their respective inventory, spare parts and accounts receivable located in the U.S.
The related party term loan agreement contains customary restrictive covenants that, subject to certain exceptions and limitations, limit or restrict our ability to, among other things, (i) purchase, retire or redeem any shares of our capital stock; (ii) incur indebtedness; (iii) mortgage or encumber our assets; (iv) make loans to, or guarantee the indebtedness of, any individual or entity; (v) effect a change of control of PHI; (vi) consolidate with or merge into any other corporation, or permit any other corporation to merge into us; (vii) sell or lease all or substantially all of our assets; or (viii) acquire all or a substantial part of the assets or capital stock of another entity. The term loan agreement contains no financial covenants. The term loan agreement contains customary representations and warranties, affirmative covenants and events of default. As noted in Note 2, we plan to repay all of the principal and a portion of the accrued and unpaid interest under the related party term loan in full upon emergence from bankruptcy, assuming we consummate our Plan on the terms confirmed by order of the Bankruptcy Court on August 2, 2019.
Letter of Credit - At June 30, 2019, we had $19.7 million of outstanding letters of credit secured by a like amount of restricted cash, $12.1 million of which secured certain domestic operations or insurance policies and $7.6 million of which guaranteed our performance under an international contract. At December 31, 2018, we had $19.8 million of outstanding letters of credit issued for the same purposes.
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 GAAP, are eliminated in consolidation and therefore not recognized on our consolidated balance sheets. For additional information, see Note 15.
Acceleration of Certain Debt Obligations - The commencement of the Chapter 11 Cases constituted an event of default that accelerated the obligations under the indenture governing our 5.25% Senior Notes due 2019 and our term loan agreement with Thirty Two, L.L.C. Any efforts to enforce payment of such financial obligations under such instruments and agreements are automatically stayed as a result of the Chapter 11 Cases and the holders’ rights of enforcement in respect of such financial obligations are subject to the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.
Subsequent Event
As described in greater detail in Note 2, we have received binding commitments from lenders to fund on the Emergence Date the full amount of a $225 million first lien senior secured term loan that would mature in five years (the “Exit Term Loan”), subject to the finalization, execution and delivery of definitive documentation and the satisfaction of various other conditions described below in this Note 6. The following description of the terms of the Exit Term Loan is only a summary, does not purport to be complete and is qualified in its entirety by reference to the form of term loan credit agreement that we filed with the SEC as an exhibit to our Current Report on Form 8-K dated July 22, 2019.
Borrower. All borrowings under the Exit Term Loan are expected to be incurred by a new parent holding company (the “Borrower”) to be formed under the Debtors’ plan of reorganization, which is expected to own directly or indirectly all of the outstanding equity interests of the Debtors upon their emergence from the bankruptcy proceedings.
Maturity. The Exit Term Loan would mature five years after the closing of the Exit Term Loan.
Guarantees and Security. The Borrower’s obligations under the Exit Term Loan are expected to be guaranteed, subject to certain exceptions, by all of its existing and future material domestic subsidiaries.
The Exit Term Loan is expected to be secured by a first-priority security interest on substantially all of assets of the Borrower and the guarantors party to the Exit Term Loan, excluding certain assets reserved to potentially collateralize a future asset-backed revolving credit facility.
Use of Proceeds. The borrowings under the Exit Term Loan would be used (i) to pay in full and discharge all of the Company’s indebtedness under debt agreements with Thirty Two, L.L.C. and Blue Torch Finance L.L.C., (ii) to pay various transaction expenses, and (iii) for general corporate purposes.
Interest Rates and Fees. Borrowings under the Exit Term Loan are expected to be subject to a 2.0% original issuance discount.
The Exit Term Loan will bear interest on the unpaid principal amount at a rate equal to, at our option, either:
a base rate determined by reference to the highest of (i) the prime rate in effect for such day as determined by Credit Suisse as its prime rate in effect at its principal office in New York City, (ii) the federal funds effective rate plus 0.5% and (iii) one-month LIBOR, adjusted for statutory reserve requirements, plus 1.0%, in each case, plus an applicable margin; or
A LIBOR rate determined by reference to the London interbank offered rate for U.S. dollars for the relevant interest period, adjusted for statutory reserve requirements, plus the applicable margin. The LIBOR rate will be subject to a 1.00% floor.
The applicable margin for borrowings under the Exit Term Loan would be 6.0% with respect to the base rate borrowings and 7.0% with respect to LIBOR borrowings.
We will pay customary fees and expenses in connection with obtaining funding commitments, including certain additional fees if the term loan is not funded by the end of August 30, 2019.
Prepayments. Amounts borrowed under the Exit Term Loan would amortize quarterly at an annual rate of 2.50% in the first and second years of the facility, 5.00% in the third year, and 7.50% thereafter, with the balance payable on the maturity date of the Exit Term Loan.
The Borrower would be required to prepay the Exit Term Loan, subject to exceptions and limitations, with:
100% of the net cash proceeds from any issuance or incurrence of indebtedness (other than indebtedness to be permitted by the Exit Term Loan);
The net cash proceeds of certain asset sales, subject to certain exceptions and limitations; and
The net cash proceeds from the sale of our Air Medical segment of the business.
Beginning with the fiscal year ending December 31, 2020, the Borrower will be required to prepay the Exit Term Loan in an amount equal to a certain percentage of its excess cash flow for each fiscal year, which percentage is based on the Borrower’s consolidated net total leverage ratio for the applicable fiscal year.
The Borrower may voluntarily prepay loans outstanding under the Exit Term Loan, in whole or in part, without premium or penalty (except as described below) in minimum amounts to be determined, at any time, subject to customary “breakage” costs with respect to LIBOR rate loans.
The Borrower would be required to pay a “prepayment premium” in connection with certain prepayments of the Exit Term Loan equal to a percentage of the principal amount so prepaid as follows:
during the first year following the closing date of the Exit Term Loan – the greater of (x) 1.0% of the principal amount prepaid and (y) the excess of: (i) the present value at such date of prepayment of (A) 2.0% of the principal amount so prepaid plus (B) the aggregate interest that would have accrued on such amount from the date of prepayment through the first anniversary of the closing of the Term Loan Facility, computed using a discount rate equal to the treasury rate plus 50 basis points discounted to the prepayment on a semi-annual basis, over (ii) the principal amount such loans;
during the second year following the closing date of the Exit Term Loan – 2.0%;
during the third year following the closing date of the Exit Term Loan – 1.0%; and
during the fourth year following the closing date of the Exit Term Loan and thereafter – 0%.
Covenants and Events of Default. The Exit Term Loan will contain customary restrictive covenants that, subject to certain exceptions and limitations, will limit or restrict the ability of the Borrower and its restricted subsidiaries (as defined in the Exit Term Loan) to, among other things, (i) purchase, retire or redeem any shares of their capital stock; (ii) incur indebtedness; (iii) mortgage or encumber their assets; (iv) make loans to, or guarantee the indebtedness of, any individual or entity; (v) effect a change of control; (vi) consolidate with or merge into any other corporation, or permit any other corporation to merge into the Borrower or the restricted subsidiaries; (vii) sell or lease all or substantially all of the assets of the Borrower or its restricted subsidiaries; or (viii) acquire all or a substantial part of the assets or capital stock of another entity. The Exit Term Loan will also contain a $20.0 million minimum liquidity financial covenant.
In addition, the Exit Term Loan will contain customary representations and warranties, affirmative covenants and events of default. Upon an event of default, the lenders (as defined in the Exit Term Loan) are entitled, subject to certain limitations, to declare the term loan, any other loans and all other obligations of the Borrower or its subsidiaries to the lenders immediately due and payable and to take all actions permitted to be taken by a secured creditor.
Conditions to Term Loan Facility. The obligations of the initial lenders to provide the Exit Term Loan is subject to certain conditions, including without limitation, the absence at the closing of any material breach of the representations, warranties and covenants made by the Borrower and its restricted subsidiaries.
7. LIABILITIES SUBJECT TO COMPROMISE
As a result of the filing of the Chapter 11 Cases on March 14, 2019, we have classified unsecured pre-petition liabilities that are expected to be impaired pursuant to the Plan as liabilities subject to compromise in our Condensed Consolidated Balance Sheet at June 30, 2019. Pre-petition liabilities that are subject to compromise are required to be reported at the amounts expected to be allowed, even if they may be settled for lesser amounts. If there was uncertainty at the time of determination about whether a secured claim was under-secured or would be impaired under the Plan, we reflected the entire amount of the claim as an outstanding liability. The amounts classified at June 30, 2019 as liabilities subject to compromise represent the Company’s estimate as of the filing date of this report of claims as of June 30, 2019 expected to be allowed under the Plan.
The Company’s obligations under the Senior Notes have been affected by the bankruptcy filing. As such, the outstanding balance of these Senior Notes and related accrued pre-petition interest have been classified as liabilities subject to compromise in the condensed consolidated balance sheet as of June 30, 2019.
Generally, actions to enforce or otherwise effect payment of pre-bankruptcy filing liabilities have been stayed during the pendency of the Chapter 11 Cases. Although payment of pre-petition claims is generally not permitted, the Bankruptcy Court approved the Debtors’ “first day” motions allowing, among other things, the Company to pay prepetition employee wages and benefits without interruption, maintain its insurance programs, utilize its current cash management system, and pay undisputed prepetition obligations owed to its vendors and trade creditors in the ordinary course of business. As a result of this approval, the Company continues to pay certain pre-petition claims in designated categories and subject to certain terms and conditions in the ordinary course of business, and we have not classified these liabilities as subject to compromise in the Condensed Consolidated Balance Sheet as of June 30, 2019. With respect to pre-petition claims, the Company notified all known claimants of the deadline to file a proof of claim with the Court.
The Company has been paying and intends to continue to pay post-petition claims in the ordinary course of business. The following table reflects pre-petition liabilities that are subject to compromise included in our Condensed Consolidated Balance Sheet as of June 30, 2019. See Note 6 - “Debt” for further information on our Senior Notes and related balances subject to compromise:
|
| June 30, 2019 |
| |
|
| (Thousands of dollars) |
| |
Senior Notes issued March 17, 2014, interest only payable semi-annually at 5.25%, matured March 15, 2019 |
| $ | 500,000 |
|
Accrued interest payable |
|
| 13,125 |
|
Total liabilities subject to compromise |
| $ | 513,125 |
|
The components of basic and diluted earnings per share for the quarter and six months ended June 30, 2019 and 2018 are as follows:
|
| Quarter Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||
|
| (Thousands of dollars) |
| |||||||||||||
Weighted average outstanding shares of common stock, basic |
|
| 15,825 |
|
|
| 15,806 |
|
|
| 15,825 |
|
|
| 15,806 |
|
Dilutive effect of unvested restricted stock units |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Weighted average outstanding shares of common stock, diluted (1) |
|
| 15,825 |
|
|
| 15,806 |
|
|
| 15,825 |
|
|
| 15,806 |
|
(1) For the quarter ended June 30, 2019 and 2018, 0 and 425,317 unvested restricted stock units were excluded from the weighted average outstanding shares of common stock, diluted, respectively, as they were anti-dilutive to earnings per share. For the six months ended June 30, 2019 and 2018, 0 and 14,258 unvested restricted stock units were excluded from the weighted average outstanding shares of common stock, diluted, respectively as they were anti-dilutive to earnings per share.
9. STOCK-BASED COMPENSATION
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 quarter and six months ended June 30, 2019 and 2018.
|
| Quarter Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||
|
| (Thousands of dollars) |
| |||||||||||||
Stock-based compensation expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time-based restricted stock units |
| $ | 845 |
|
| $ | 435 |
|
| $ | 1,685 |
|
| $ | 1,077 |
|
Performance-based restricted stock units |
|
| 480 |
|
|
| 378 |
|
|
| 955 |
|
|
| 1,055 |
|
Total stock-based compensation expense |
| $ | 1,325 |
|
| $ | 813 |
|
| $ | 2,640 |
|
| $ | 2,132 |
|
During the quarter and six months ended June 30, 2019, no time-based restricted units or performance units were awarded to managerial employees.
During the quarter and six months ended June 30, 2018, 321,831 time-based restricted units and 448,012 performance-based restricted units were awarded to managerial employees.
On February 20, 2019, the PHI Compensation Committee approved the vesting of the 2017 performance RSUs based on the Company’s financial results exceeding the pre-determined business performance metrics set in 2017 for the two year performance period (January 1, 2017 - December 31, 2018). The PHI Compensation Committee decided to settle these vested RSU awards in cash based upon the closing market price on February 20, 2019, the date of the committee's certification that the performance metrics were met ($2.21 per share). The total amount of cash paid was $0.8 million. On February 20, 2019, the Compensation Committee certified that the performance metrics for performance-based restricted stock units granted in 2016 had not been met, which resulted in the forfeiture of 667,238 of such RSUs.
10. ASSET DISPOSALS
During the first quarter of 2019, there were no sales or disposals of aircraft. During the second quarter of 2019, we disposed of two light aircraft previously utilized in the Technical Services segment. The contract was terminated and these aircraft no longer met our strategic needs. Cash proceeds totaled $1.2 million, resulting in a gain of $0.2 million on the disposal of these assets. This gain was offset partially by a net loss on other assets disposals.
During the first quarter of 2018, we disposed of one light aircraft previously utilized in the Air Medical segment and donated to a charitable organization one aircraft previously used in our Oil and Gas segment. During the second quarter of 2018, we disposed of one medium and one light aircraft previously utilized in the Oil & Gas segment. These aircraft no longer met our strategic needs. Cash proceeds totaled $1.5 million, resulting in a $0.7 million loss on the disposal of these assets.
11. COMMITMENTS AND CONTINGENCIES
Commitments – We currently have no aircraft purchase commitments.
Environmental Matters – We have recorded an estimated liability of $0.15 million as of June 30, 2019 for environmental response costs. Previously, we conducted environmental surveys of our former Lafayette Facility located at the Lafayette Regional Airport, which we vacated in 2001, and determined that limited soil and groundwater contamination exist at two parcels of land at the former facility. An Assessment Report for both parcels was submitted in 2003 (and updated in 2006) to the Louisiana Department of Environmental Quality ("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 that time, we have performed groundwater sampling of the required groundwater monitor well installations at both parcels and submitted these sampling reports to the LDEQ. Pursuant to an agreement with the LDEQ, we provided groundwater sample results semi-annually to the LDEQ for both parcels from 2005 to 2015. The LDEQ approved a reduction in the sampling program from semi-annual to annual groundwater monitoring in 2015. Based on our working relationship and agreements with the LDEQ, and the results of ongoing former facility parcel monitoring, we believe that ultimate remediation costs for the subject parcels will not be material to our consolidated financial position, 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, medical malpractice claims, 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 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.
Notwithstanding the foregoing, any litigation pending against us or any of the Debtors as of the Petition Date and any claims that could be asserted against us or an of the Debtors that arose prior to the Petition Date are automatically stayed as a result of the commencement of the Chapter 11 Cases pursuant to the section 362(2) of the Bankruptcy Code, subject to certain statutory exceptions. These matters will be subject to resolution in accordance with the Bankruptcy Code and applicable orders of the Bankruptcy Court.
12. REVENUE RECOGNITION
In 2014, the Financial Accounting Standard Board ("the FASB") issued ASC 606, Revenue from Contracts with Customers (“ASC 606”), replacing the existing accounting standard and industry specific guidance for revenue recognition with a five-step model for recognizing and measuring revenue from contracts with customers. The underlying principle of the new standard is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. ASC 606 became effective on January 1, 2018 and we adopted it using the modified retrospective method applied to open contracts and only to the version of the contracts in effect as of January 1, 2018. Prior period amounts have not been adjusted and continue to be reflected in accordance with our historical accounting. There was no impact on the condensed consolidated financial statements and no cumulative effect adjustment was recognized.
In general, under ASC 606, we recognize revenue when a service or good is sold to a customer and there is a contract.contract exists. At contract inception, we assess the goods and services promised in our contracts with customers and identify all performance obligations for each distinct promise that transfers a good or service (or bundle of goods or services) to the customer. To identify the performance obligations, we consider all goods or services promised in the contract, whether explicitly stated or implied based on customary business practices. Revenue is recognized when control of the identified distinct goods or services has been transferred to the customer, the transaction price has been determined and allocated to the performed performance obligations and we have determined that collection has occurred or is probable of occurring.
Taxes billed to receive in exchange for the services provided. Taxesand collected from customers and remitted to governmental authorities and revenues are reported as revenue on a net basis in the our financial statements. Thus, we exclude taxes imposed onbilled to the customer and collected on behalf of governmental agencies to be remitted to these agencies from the transaction price in determining the revenue related to contracts with a customer.
Oil & Gas Revenue Recognition -
We provide helicopter services to oil and gas customers operating in the Gulf of Mexico and a number of foreign countries. Revenues are recognized when performance obligations are satisfied over time in accordance with contractual terms, in an amount that reflects the consideration the Company expects to be entitled to in exchange for services rendered.Air Medical Revenue Recognition - We provide helicopter services to hospitals and emergency service providers in several U.S. states, or to individual patients in the U.S. in which case we are paid by either a commercial insurance company, federal or state agency, or the patient. Our Air Medical segment operates primarily under the independent provider model and, to a lesser extent, under the traditional provider model. Revenues related to the independent provider model services are recorded in the period in which we satisfy our performance obligations under contracts by providing our services to our customers based upon established billing rates net of contractual allowances under agreements with third party payors and net of uncompensated care allowances. These amounts are due from patients, third-party payors (including health insurers and government programs), and others and includes variable consideration for retroactive revenue adjustments due to settlement of audits, reviews, and investigations. Generally, we bill the patients and third-party payors several days after the services are performed. Revenues generated under the
Oil & Gas Performance Obligations - A performance obligation arises under contracts with customers to render services and is the unit of account under ASC 606. Operating revenue from our Oil and Gas segment is derived mainly from fixed-term contracts with our customers, a substantial portion of which are competitively bid. A small portion of our Oil and Gas segment revenue is derived from providing services on an "ad-hoc" basis. Our fixed-term contracts typically have original terms of one to seven years (subject to provisions permitting early termination on relatively short notice by the customers), with payment in U.S. dollars.. We account for services rendered separately if they are distinct and the services are separately identifiable from other items provided to a customer and if a customer can benefit from the services rendered on its own or with other resources that are readily available to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Within this contract type for helicopter services, we determined that each contract has a single distinct performance obligation. These services include a fixed monthly rate for a particular model of aircraft, and flight hour services, which represents the variable component of a typical contract with a customer. Rates for these services vary depending on the type of services provided and can be based on a per flight hour, per day, or per month basis. We also provide services to clients on an “ad hoc” basis, which usually entails a shorter contract notice period and duration. The charges for ad hoc services are based on an hourly rate or a daily or monthly fixed fee plus additional fees for each hour flown. The nature of our variable charges within our flight services contracts are not effective until a customer-initiated flight order and the actual hours flown are determined; therefore, the associated flight revenue generally cannot be reasonably and reliably estimated before hand. A contract’s standalone selling prices are determined based upon the prices that we charge for our services rendered. The majority of our revenue is recognized as performance obligations satisfied over time, by measuring progress towards satisfying the contracted services in a manner that best depicts the transfer of services to the customer, which is generally represented by a period of 30 days or less. We typically invoice customers on a monthly basis with the term between invoicing and when the payment is due typically being between 30 and 60 days.
Air Medical Performance Obligations -
Performance obligations are determined based upon the nature of the services provided. Under the independent provider model, we measure the performance obligation from the moment the patient is loaded into the aircraft until it reaches its destination. Under this 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. These contracts are typically awarded or renewed through competitive bidding and typically permit early termination by the customer on relatively short notice. As a traditional provider, we typically bill a fixed monthly rate for aircraft availability and an hourly rate for flight time. For each of these types of helicopter services, we have determined that each has a single distinct performance obligation. Traditional provider models services include fixed monthly rate for a particular model of aircraft, and flight hour services, which represents the variable component of a typical contract with a customer. Rates for these services vary depending on the type of services provided and can be based on a per flight hour, per day, or per month basis. The variable charges within such contracts are not effective until the customer initiates a flight order and the actual hours flown are determined; therefore, the associated revenue generally cannot be reasonably and reliably estimated beforehand. For the traditional provider model, we determine the transaction price based upon standard charges for goods and services provided.As an independent provider, we bill for our services on the basis of a flat rate plus a variable charge per patient-loaded mile, regardless of aircraft model, and are typically compensated by private insurance, Medicaid or Medicare, or directly by transported patients who self-pay. We recognize revenues for performance obligations satisfied at a point in time, which generally relate to patients receiving air medical services when: (1) services are provided; and (2) we do not believe the patient requires additional services. For the independent provider model, we determine the transaction price based upon gross charges for services provided reduced by contractual adjustments provided to third-party payors, discounts provided to uninsured patients in accordance with Company policy, and/or implicit price concessions provided to uninsured patients. We determine estimates of contractual adjustments and discounts based upon contractual agreements, our discount policy, and historical experience. We determine our estimate of implicit price concessions based upon our historical collection experience with these classes of patients using a portfolio approach as a practical expedient to account for patient contracts as collective groups, rather than individually. The financial statement effects of using this practical expedient are not materially different from an individual contract approach.
We estimate 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 ofcategory. The main payor categories are Medicaid, Medicare, private insurance, Medicaid, Medicare, and self-pay).self-pay. Changes in payor mix, reimbursement rates and uncompensated care rates are the factors most subject to sensitivity and variability in calculating our allowances. We compute a historical payment analysis of accounts by category. The allowance percentages calculated are applied to the payor categories, and the necessary adjustments are made to the revenue allowance. Agreements with third-party payors typically provideIn our Air Medical Segment, the allowance for payments at amounts less than established charges.
In determining the allowance estimates for our Air Medical segment’s billing, receivables and revenue, we utilize the prior twelve months’ payment history and current trends in payor behavior by each separate payor group, which we evaluate on a state by state basis. A percentage of amounts collected compared to the total invoice is determined from this process and applied to the current month’s billings and receivables. If a receivable related to the self-pay category is outstanding twelve months or greater, we record a reserve equal to 100% of the receivable. Receivables related to other payor categories are scrutinized when they are outstanding for nine months or longer and additional allowances are recorded if warranted.
As of June 30, 2019 and December 31, 2018, net receivables related to our (i) Oil and Gas segment were $103.1$86.2 million and $106.8$74.1 million, (ii) Air Medical segment were $91.8$95.8 million and $74.4$90.2 million and (iii) Technical Services segment were $2.5$1.3 million and $4.8$4.1 million, respectively. Contract assets and contract liabilities were immaterial as of September 30, 2018. Our contracts typically include termination clauses that allow both parties to terminate existing contracts with a 30 to 180 day notice period.
We generally have a right to consideration in an amount that corresponds directly with the value to the customer of the entity's performance completed to date and may recognize revenue in the amount to which the entity has a right to invoice. We have elected to use the invoice practical expedient for revenue recognized when performance obligations are satisfied over time. In addition, payment for goods and services rendered is typically due in the subsequent month following satisfaction of our performance obligation.
Our Technical Services segment - provides helicopter flight services and helicopter repair and overhaul services for existing flight operations customers that own their own aircraft. Under this segment, we periodically provide certain services to governmental customers, including our agreement to operate six aircraft for the National Science Foundation in Antarctica. Under this segment, we also offer certain software as a service to our Oil and Gas customers. Revenues are recognized when performance obligations are satisfied in accordance with contractual terms, in an amount that reflects the consideration we expect to be entitled to in exchange for services rendered. For these helicopter services, we determined that each has a single distinct performance obligation.
The following table presents the Company’s revenues by segment disaggregated by type (in thousands):
|
| For the Quarter Ended June 30, |
|
| For the Six Months Ended June 30, |
| ||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||
Service Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil & Gas |
| $ | 90,023 |
|
| $ | 97,068 |
|
| $ | 174,969 |
|
| $ | 192,702 |
|
Air Medical |
|
| 69,507 |
|
|
| 67,151 |
|
|
| 126,153 |
|
|
| 124,139 |
|
Technical Services |
|
| 5,642 |
|
|
| 5,024 |
|
|
| 15,940 |
|
|
| 12,766 |
|
Total Services |
| $ | 165,172 |
|
| $ | 169,243 |
|
| $ | 317,062 |
|
| $ | 329,607 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Air Medical Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional provider model |
| $ | 12,401 |
|
| $ | 12,085 |
|
| $ | 24,378 |
|
| $ | 23,956 |
|
Independent provider model |
|
| 57,106 |
|
|
| 55,066 |
|
|
| 101,775 |
|
|
| 100,183 |
|
Total Air Medical Revenues |
| $ | 69,507 |
|
| $ | 67,151 |
|
| $ | 126,153 |
|
| $ | 124,139 |
|
For the Quarter Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Service Revenue | |||||||||||||||
Oil & Gas | $ | 93,338 | $ | 75,700 | $ | 286,046 | $ | 222,098 | |||||||
Air Medical | 70,192 | 70,280 | 194,331 | 192,840 | |||||||||||
Technical Services | 5,257 | 4,187 | 18,023 | 16,271 | |||||||||||
Total Services | $ | 168,787 | $ | 150,167 | $ | 498,400 | $ | 431,209 | |||||||
Air Medical Revenue | |||||||||||||||
Traditional provider model | $ | 12,414 | $ | 11,816 | $ | 36,371 | $ | 35,427 | |||||||
Independent provider model | 57,778 | 58,464 | 157,960 | 157,413 | |||||||||||
Total Air Medicals Revenues | $ | 70,192 | $ | 70,280 | $ | 194,331 | $ | 192,840 |
On January 26, 2017, the FASB issued ASU No. 2017-04, 13. LEASESIntangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (ASU 2017-04). ASU 2017-04 removes the requirement to compare the implied fair value of goodwill with the carrying amount as part of Step 2 of the goodwill impairment test. Under the new standard, the goodwill impairment loss will be measured as the excess of a reporting unit's carrying amount over its fair value, not exceeding the total amount of goodwill allocated to that reporting unit, which may increase the frequency of goodwill impairment charges if a future goodwill impairment test does not pass the Step 1 evaluation. ASU 2017-04 is effective prospectively for periods beginning on or after December 15, 2019, with early adoption permitted. We
The Company adopted ASU 2017-04 effective January 1, 2018. We will perform goodwill impairment testing under the new2016-02 standard annually as of October 1st or when events or changes in circumstances indicate that a potential impairment exist.
Cost Basis | Unrealized Gains | Unrealized Losses | Fair Value | |||||||||||||
(Thousands of dollars) | ||||||||||||||||
Investments: | ||||||||||||||||
Money market mutual funds | $ | 50,290 | $ | — | $ | — | $ | 50,290 | ||||||||
Deferred compensation plan assets included in other assets | 852 | — | — | 852 | ||||||||||||
Total | $ | 51,142 | $ | — | $ | — | $ | 51,142 |
Cost Basis | Unrealized Gains | Unrealized Losses | Fair Value | |||||||||||||
(Thousands of dollars) | ||||||||||||||||
Investments: | ||||||||||||||||
Money market mutual funds | $ | 5,601 | $ | — | $ | — | $ | 5,601 | ||||||||
U.S. government agencies | 7,501 | — | (34 | ) | 7,467 | |||||||||||
Corporate bonds and notes | 63,880 | — | (330 | ) | 63,550 | |||||||||||
Subtotal | 76,982 | — | (364 | ) | 76,618 | |||||||||||
Deferred compensation plan assets included in other assets | 2,685 | — | — | 2,685 | ||||||||||||
Total | $ | 79,667 | $ | — | $ | (364 | ) | $ | 79,303 |
September 30, 2018 | December 31, 2017 | |||||||||||||||
Amortized Costs | Fair Value | Amortized Costs | Fair Value | |||||||||||||
(Thousands of dollars) | ||||||||||||||||
Due in one year or less | $ | — | $ | — | $ | 31,348 | $ | 31,254 | ||||||||
Due within two years | — | — | 40,032 | 39,763 | ||||||||||||
Total | $ | — | $ | — | $ | 71,380 | $ | 71,017 |
September 30, 2018 | December 31, 2017 | ||||||||
Average Coupon Rate (%) | Average Days To Maturity | Average Coupon Rate (%) | Average Days To Maturity | ||||||
U.S. Government agencies | — | 0 | 1.370 | 370 | |||||
Corporate bonds and notes | — | 0 | 1.766 | 392 |
September 30, 2018 | December 31, 2017 | |||||||||||||||
Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||
(Thousands of dollars) | ||||||||||||||||
U.S. Government agencies | $ | — | $ | — | $ | 5,472 | $ | (28 | ) | |||||||
Corporate bonds and notes | — | — | 44,069 | (271 | ) | |||||||||||
Total | $ | — | $ | — | $ | 49,541 | $ | (299 | ) |
September 30, 2018 | December 31, 2017 | |||||||||||||||
Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||
(Thousands of dollars) | ||||||||||||||||
U.S. Government agencies | $ | — | $ | — | $ | 1,994 | $ | (6 | ) | |||||||
Corporate bonds and notes | — | — | 19,482 | (59 | ) | |||||||||||
Total | $ | — | $ | — | $ | 21,476 | $ | (65 | ) |
September 30, 2018 | December 31, 2017 | |||
Allowance for Contractual Discounts | 48% | 53% | ||
Allowance for Uncompensated Care | 26% | 24% |
September 30, 2018 | ||||||||||||
Total | (Level 1) | (Level 2) | ||||||||||
(Thousands of dollars) | ||||||||||||
Investments: | ||||||||||||
Money market mutual funds | $ | 50,290 | $ | 50,290 | $ | — | ||||||
Deferred compensation plan assets | 852 | 852 | — | |||||||||
Total | $ | 51,142 | $ | 51,142 | $ | — | ||||||
December 31, 2017 | ||||||||||||
Total | (Level 1) | (Level 2) | ||||||||||
(Thousands of dollars) | ||||||||||||
Investments: | ||||||||||||
Money market mutual funds | $ | 5,601 | $ | 5,601 | $ | — | ||||||
U.S. government agencies | 7,467 | — | 7,467 | |||||||||
Corporate bonds and notes | 63,550 | — | 63,550 | |||||||||
76,618 | 5,601 | 71,017 | ||||||||||
Deferred compensation plan assets | 2,685 | 2,685 | — | |||||||||
Total | $ | 79,303 | $ | 8,286 | $ | 71,017 |
September 30, 2018 | December 31, 2017 | |||||||||||||||
Principal | Unamortized Debt Issuance Debt Cost | Principal | Unamortized Debt Issuance 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 | $ | 571 | $ | 500,000 | $ | 1,506 | ||||||||
Revolving Credit Facility due March 7, 2019 with a group of commercial banks, interest payable at variable rates | — | — | 117,500 | — | ||||||||||||
Related Party Term Loan - Thirty Two L.L.C., interest payable quarterly at 6%, due September 28, 2020 | $ | 130,000 | $ | 874 | $ | — | $ | — | ||||||||
Total indebtedness | $ | 630,000 | $ | 1,445 | $ | 617,500 | $ | 1,506 |
The Company elected to adopt the "package of practical expedients" under ASU No. 2018-11, which allows the Company to carry forward its historical assessments of whether existing agreements contain a lease, classification of existing lease agreements, and treatment of initial direct lease costs. The Company also elected to exclude short-term leases (those with terms of 12 months or less) from the balance sheet presentation and accounts for non-lease and lease components as a single lease component for all asset classes.
The adoption of ASU 2016-02 had the effects specified in Note 1.
Accounting Policy for Leases
The Company determines if an arrangement is a lease at inception. All of the Company’s leases are operating leases and are included in ROU assets, accounts payable and operating lease liabilities in the aggregate raise substantial doubt about our abilityCompany's Condensed Consolidated Balance Sheet at June 30, 2019.
ROU assets represent the Company’s right to continue as a going concern within one year after the date the accompanying financial statements were filed. For additional information about our prior and current refinancing plans, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources.”
Quarter Ended September 30, | Nine Months Ended September 30, | |||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||
(Thousands of dollars) | ||||||||||||
Weighted average outstanding shares of common stock, basic | 15,816 | 15,799 | 15,811 | 15,750 | ||||||||
Dilutive effect of unvested restricted stock units | — | — | — | — | ||||||||
Weighted average outstanding shares of common stock, diluted (1) | 15,816 | 15,799 | 15,811 | 15,750 |
Quarter Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(Thousands of dollars) | ||||||||||||||||
Stock-based compensation expense: | ||||||||||||||||
Time-based restricted stock units | $ | 1,085 | $ | 582 | $ | 2,162 | $ | 1,678 | ||||||||
Performance-based restricted stock units | 1,033 | 689 | 2,088 | 1,396 | ||||||||||||
Total stock-based compensation expense | $ | 2,118 | $ | 1,271 | $ | 4,250 | $ | 3,074 |
Overview
We lease certain aircraft, facilities, and equipment used in our operations. The related lease agreements, which include both non-cancelable and month-to-month terms, generally provide for fixed monthly rentals, and certain real estate leases also include renewal options. We generally pay all insurance, taxes, and maintenance expenses associated with these leases.
Total operating lease expense was $11.4 million and $12.1 million for the three months ended June 30, 2019 and 2018, respectively. For the three months ended June 30, 2019, a portion of the total operating lease expense relating to short-term leases was $1.6 million. The operating lease expense was $22.6 million and $23.8 million for the six months ended June 30, 2019 and 2018, respectively. For the six months ended June 30, 2019, a portion of the total operating lease expense relating to short-term was $3.0 million.
Operating leases at June 30, 2019 were as follows (in thousands):
|
| June 30, 2019 |
| |
|
| (Thousands of dollars) |
| |
Operating lease right-of-use-assets |
| $ | 144,944 |
|
Current portion of operating lease liabilities |
|
| 27,535 |
|
Operating lease liabilities |
|
| 118,167 |
|
Total operating lease liabilities |
| $ | 145,702 |
|
Cash paid for operating leases |
|
| 21,475 |
|
ROU assets obtained in exchange for lease obligations |
|
| 9,402 |
|
Weighted average remaining lease term |
| 5 years |
| |
Weighted average discount rate |
|
| 8.25 | % |
Maturities of operating lease liabilities at June 30, 2019 are as follows (in thousands):
|
| Operating |
| |
Six Months Ending June 30, |
| Leases |
| |
|
| Thousands of dollars |
| |
Remainder of 2019 |
| $ | 19,615 |
|
2020 |
|
| 37,140 |
|
2021 |
|
| 36,297 |
|
2022 |
|
| 34,254 |
|
2023 |
|
| 23,872 |
|
Thereafter |
|
| 33,975 |
|
Total lease payments |
|
| 185,153 |
|
Less imputed interest |
|
| (39,451 | ) |
Total |
| $ | 145,702 |
|
As of December 31, 2018, we had approximately $173.2future total rentals on our non-cancellable operating leases were $160 million in the aggregate, commitments under operating leaseswhich consisted of which approximately $11.0 million is payable through the fourth quarter of 2018. The total lease commitments include $154.1 million for aircraft and $19.1 million for facility lease commitments.
We are currently in the purchase options arising over the next year, unless opportunistic conditions arise.
Oil & Gas | Air Medical | Technical Services | Total | ||||||||||
Balance December 31, 2017 | $ | 61,299 | — | — | $ | 61,299 | |||||||
Activity | — | — | — | — | |||||||||
Balance September 30, 2018 | $ | 61,299 | — | — | $ | 61,299 |
Estimated Useful Lives | Gross Amount at December 31, 2017 | Accumulated Amortization | Net Balance at September 30, 2018 | ||||||||||
Customer Relationship | 15 | $ | 11,622 | $ | (581 | ) | $ | 11,041 | |||||
Non-Compete Agreements | 5 | 900 | (135 | ) | 765 | ||||||||
Trade Names | 7 | 4,201 | (450 | ) | 3,751 | ||||||||
Total | $ | 16,723 | $ | (1,166 | ) | $ | 15,557 |
14. SEGMENT INFORMATION
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.
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 selling, general and administrative expenses that is charged directly to the segment, and a small portion that is allocated. 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 costs as a percentage of total operating costs. A significant portion of our selling, general and administrative expenses are neither charged nor allocated to our segments.
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 and a number of foreign countries. Our customers include Shell Oil Company, BP America Production Company, ExxonMobil Production Company, and ConocoPhillips Company, with whom we have worked for 35 or more years, and ENI Petroleum, with whom we have worked for more than 20 years. AtOur fixed-term contracts typically have original terms of one year to seven years (subject to provisions permitting early termination upon relatively short notice by the customers), with payment in U.S. dollars. For the quarters ended SeptemberJune 30, 20182019 and 2017,2018, respectively, approximately 55% and 50%57% of our total operating revenues were generated by our Oil and Gas segment, with approximately 85% and 89%87% of these revenues from fixed-term customer contracts. For the ninesix months ended SeptemberJune 30, 20182019 and 2017,2018, respectively, approximately 57%55% and 51%58% of our total operating revenues were generated by our Oil and Gas segment, with approximately 87%85% and 90%87% of these revenues from fixed-term customer contracts. The remaining 13% and 10%15% 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 transportation services for hospitals and emergency service agencies throughout the U.S. As of SeptemberJune 30, 2018,2019, our Air Medical segment operated approximately 108111 aircraft in 18 states at 8081 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 or renewed through competitive bidding. For the quarters ended SeptemberJune 30, 20182019 and 2017,2018, approximately 42% and 47%40% of our total operating revenues were generated by our Air Medical segment, respectively.segment. For the ninesix months ended SeptemberJune 30, 2019 and 2018, approximately 40% and 2017, approximately 39% and 45%38% of our total operating revenues were generated by our Air Medical segment.
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 for the periods listed below:
|
| Quarter Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||
Provision for contractual discounts |
|
| 70 | % |
|
| 67 | % |
|
| 68 | % |
|
| 66 | % |
Provision for uncompensated care |
|
| 8 | % |
|
| 7 | % |
|
| 9 | % |
|
| 8 | % |
Quarter Ended September 30, | Nine Months Ended September 30, | |||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||
Provision for contractual discounts | 65 | % | 65 | % | 66 | % | 66 | % | ||||
Provision for uncompensated care | 10 | % | 6 | % | 8 | % | 7 | % |
These percentages are affected by various factors, including rate increases and changes in the number of transports by payor mix.
Net reimbursement per transport from commercial payors generally increases when a rate increase is implemented. Net reimbursement from certain commercial payors, as well as Medicare and Medicaid, generally does not increase proportionately with rate increases.
Net revenue attributable to Insurance, Medicare, Medicaid, and Self-Pay (expressed as a percentage of net Air Medical revenues) were as follows for the periods listed below:
|
| Quarter Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||
Insurance |
|
| 67 | % |
|
| 72 | % |
|
| 67 | % |
|
| 72 | % |
Medicare |
|
| 23 | % |
|
| 19 | % |
|
| 23 | % |
|
| 20 | % |
Medicaid |
|
| 9 | % |
|
| 8 | % |
|
| 8 | % |
|
| 8 | % |
Self-Pay |
|
| 1 | % |
|
| 1 | % |
|
| 2 | % |
|
| — | % |
Quarter Ended September 30, | Nine Months Ended September 30, | |||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||
Insurance | 70 | % | 73 | % | 71 | % | 72 | % | ||||
Medicare | 20 | % | 17 | % | 20 | % | 18 | % | ||||
Medicaid | 9 | % | 9 | % | 8 | % | 9 | % | ||||
Self-Pay | 1 | % | 1 | % | 1 | % | 1 | % |
We also have a limited number of contracts with hospitals under which we receive a fixed fee component for aircraft availability and a variable fee component for flight time. 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. Those contracts generated approximately 17%15% and 15%16% of the segment’s revenues for the quarters ended SeptemberJune 30, 2019 and 2018, and 2017, respectively. For the nine months ended September 30, 2018 and 2017, theseThose contracts generated approximately 17% and 18% of the segment's revenues.
We also derive a small portion of the segment’s revenues from providing services under our patient navigation business.
Technical Services Segment -
Our Technical Services segment provides helicopter repair and overhaul services for flight operations customers that own their aircraft. Costs associated with these services are primarily labor, and customers are generally billed at a percentage above our service costs.For each of the quarters ended SeptemberJune 30, 2019 and 2018, approximately and 2017, approximately 3% of our total operating revenues were generated by our Technical Services segment.segment, respectively. For each of the ninesix month periods ended SeptemberJune 30, 2019 and 2018, approximately 5% and 2017, approximately 4% of our total operating revenues were generated by our Technical Services segment.
Summarized financial information concerning our reportable operating segments for the quarters and ninesix months ended SeptemberJune 30, 20182019 and 20172018 is as follows:
|
| Quarter Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||
|
| (Thousands of dollars) |
|
| (Thousands of dollars) |
| ||||||||||
Segment operating revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas |
| $ | 90,023 |
|
| $ | 97,068 |
|
| $ | 174,969 |
|
| $ | 192,702 |
|
Air Medical |
|
| 69,507 |
|
|
| 67,151 |
|
|
| 126,153 |
|
|
| 124,139 |
|
Technical Services |
|
| 5,642 |
|
|
| 5,024 |
|
|
| 15,940 |
|
|
| 12,766 |
|
Total operating revenues, net |
|
| 165,172 |
|
|
| 169,243 |
|
|
| 317,062 |
|
|
| 329,607 |
|
Segment direct expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas (1) |
|
| 89,061 |
|
|
| 94,442 |
|
|
| 179,031 |
|
|
| 190,985 |
|
Air Medical |
|
| 59,310 |
|
|
| 56,776 |
|
|
| 116,391 |
|
|
| 110,608 |
|
Technical Services |
|
| 4,104 |
|
|
| 3,784 |
|
|
| 12,568 |
|
|
| 9,671 |
|
Total direct expenses |
|
| 152,475 |
|
|
| 155,002 |
|
|
| 307,990 |
|
|
| 311,264 |
|
Segment selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas |
|
| 4,672 |
|
|
| 4,400 |
|
|
| 9,432 |
|
|
| 9,321 |
|
Air Medical |
|
| 4,141 |
|
|
| 3,254 |
|
|
| 7,433 |
|
|
| 6,421 |
|
Technical Services |
|
| 152 |
|
|
| 340 |
|
|
| 300 |
|
|
| 710 |
|
Total selling, general and administrative expenses |
|
| 8,965 |
|
|
| 7,994 |
|
|
| 17,165 |
|
|
| 16,452 |
|
Total segment direct and selling, general and administrative expenses |
|
| 161,440 |
|
|
| 162,996 |
|
|
| 325,155 |
|
|
| 327,716 |
|
Net segment (loss) profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas |
|
| (3,710 | ) |
|
| (1,774 | ) |
|
| (13,494 | ) |
|
| (7,604 | ) |
Air Medical |
|
| 6,056 |
|
|
| 7,121 |
|
|
| 2,329 |
|
|
| 7,110 |
|
Technical Services |
|
| 1,386 |
|
|
| 900 |
|
|
| 3,072 |
|
|
| 2,385 |
|
Total net segment profit |
|
| 3,732 |
|
|
| 6,247 |
|
|
| (8,093 | ) |
|
| 1,891 |
|
Other, net (3) |
|
| 428 |
|
|
| (193 | ) |
|
| 337 |
|
|
| (2,112 | ) |
Unallocated selling, general and administrative costs (1) (4) |
|
| (8,626 | ) |
|
| (6,491 | ) |
|
| (25,293 | ) |
|
| (13,492 | ) |
Reorganization items, net |
|
| (26,503 | ) |
|
| — |
|
|
| (28,103 | ) |
|
| — |
|
Interest expense |
|
| (3,927 | ) |
|
| (8,340 | ) |
|
| (12,093 | ) |
|
| (16,537 | ) |
(Loss) earnings before income taxes |
| $ | (34,896 | ) |
| $ | (8,777 | ) |
| $ | (73,245 | ) |
| $ | (30,250 | ) |
Quarter Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(Thousands of dollars) | (Thousands of dollars) | |||||||||||||||
Segment operating revenues | ||||||||||||||||
Oil and Gas | $ | 93,338 | $ | 75,700 | $ | 286,046 | $ | 222,098 | ||||||||
Air Medical | 70,192 | 70,280 | 194,331 | 192,840 | ||||||||||||
Technical Services | 5,257 | 4,187 | 18,023 | 16,271 | ||||||||||||
Total operating revenues, net | 168,787 | 150,167 | 498,400 | 431,209 | ||||||||||||
Segment direct expenses (1) (2) | ||||||||||||||||
Oil and Gas (1) | 94,832 | 81,467 | 285,818 | 236,878 | ||||||||||||
Air Medical | 60,358 | 51,120 | 170,966 | 152,363 | ||||||||||||
Technical Services | 4,892 | 3,761 | 14,563 | 12,565 | ||||||||||||
Total direct expenses | 160,082 | 136,348 | 471,347 | 401,806 | ||||||||||||
Segment selling, general and administrative expenses | ||||||||||||||||
Oil and Gas | 4,321 | 1,148 | 13,642 | 4,501 | ||||||||||||
Air Medical | 3,666 | 3,136 | 10,087 | 9,280 | ||||||||||||
Technical Services | 356 | 338 | 1,066 | 1,032 | ||||||||||||
Total segment selling, general and administrative expenses | 8,343 | 4,622 | 24,795 | 14,813 | ||||||||||||
Total segment direct and selling, general and administrative expenses | 168,425 | 140,970 | 496,142 | 416,619 | ||||||||||||
Net segment (loss) profit | ||||||||||||||||
Oil and Gas | (5,815 | ) | (6,915 | ) | (13,414 | ) | (19,281 | ) | ||||||||
Air Medical | 6,168 | 16,024 | 13,278 | 31,197 | ||||||||||||
Technical Services | 9 | 88 | 2,394 | 2,674 | ||||||||||||
Total net segment profit | 362 | 9,197 | 2,258 | 14,590 | ||||||||||||
Other, net (3) | 1,845 | 710 | (272 | ) | 2,471 | |||||||||||
Unallocated selling, general and administrative costs (1) (4) | (7,912 | ) | (6,779 | ) | (21,404 | ) | (23,878 | ) | ||||||||
Interest expense | (8,357 | ) | (8,027 | ) | (24,894 | ) | (24,305 | ) | ||||||||
(Loss) earnings before income taxes | $ | (14,062 | ) | $ | (4,899 | ) | $ | (44,312 | ) | $ | (31,122 | ) |
(1) | |
Included in direct expenses and unallocated selling, general, and administrative costs are the depreciation and amortization expense amounts below: |
|
| Depreciation and Amortization Expense |
| |||||||||||||
|
| Quarter Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||
|
| (Thousands of dollars) |
| |||||||||||||
Segment Direct Expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas |
| $ | 11,618 |
|
| $ | 11,486 |
|
| $ | 22,896 |
|
| $ | 23,269 |
|
Air Medical |
|
| 5,485 |
|
|
| 6,091 |
|
|
| 10,771 |
|
|
| 11,715 |
|
Technical Services |
|
| 133 |
|
|
| 142 |
|
|
| 204 |
|
|
| 287 |
|
Total |
| $ | 17,236 |
|
| $ | 17,719 |
|
| $ | 33,871 |
|
| $ | 35,271 |
|
Unallocated SG&A |
| $ | 3,095 |
|
| $ | 1,412 |
|
| $ | 4,904 |
|
| $ | 3,327 |
|
Depreciation and Amortization Expense | ||||||||||||||||
Quarter Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(Thousands of dollars) | ||||||||||||||||
Segment Direct Expense: | ||||||||||||||||
Oil and Gas | $ | 13,175 | $ | 9,615 | $ | 36,444 | $ | 29,301 | ||||||||
Air Medical | 5,274 | 4,885 | 16,989 | 15,581 | ||||||||||||
Technical Services | 128 | 146 | 415 | 440 | ||||||||||||
Total | $ | 18,577 | $ | 14,646 | $ | 53,848 | $ | 45,322 | ||||||||
Unallocated SG&A | $ | 2,366 | $ | 1,936 | $ | 5,693 | $ | 5,271 |
(2) | |
Includes equity in (earnings) of unconsolidated affiliates, net. |
(3) | |
Consists of (gains) losses on disposition of property and equipment and other income. |
(4) | |
Represents corporate overhead expenses not allocable to segments. |
We account for our investment in PHI Century Limited ("PHIC") 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 SeptemberJune 30, 2018,2019, we had a 49% investment in the common stock of 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 quarter ended SeptemberJune 30, 2018,2019, we recorded gainincome in equity of this unconsolidated affiliate of $0.1$1.0 million compared to lossincome in equity of less than $0.1 million for the quarter ended SeptemberJune 30, 20172018 relative to our 49% equity ownership. For the ninesix months ended SeptemberJune 30, 20182019 and 2017,2018, we recorded a gainincome in equity of this unconsolidated affiliate of $2.4 million and less than $0.2$0.1 million, and a loss of $1.0 million relative to our 49% equity ownership, respectively. We had $4.4$4.1 million and $4.0$4.8 million of trade receivables from PHIC as of SeptemberJune 30, 20182019 and December 31, 2017,2018, respectively. During the nine months ended September 30,In 2018, we loaned PHIC $0.4 million for operating purposes. This loan balance is included in Accounts receivable - other on our Condensed Consolidated Balance Sheets at SeptemberJune 30, 2018.2019. Our investment in the common stock of PHIC is included in Other Assets on our Condensed Consolidated Balance Sheets and was $0.5$2.9 million at SeptemberJune 30, 20182019 and $0.3$0.5 million at December 31, 2017.
16. OTHER COMPREHENSIVE INCOME
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 5,6, on March 17, 2014, PHI, Inc. issued $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 PHI, Inc.’s 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”) the guarantor subsidiaries and the non-guarantor subsidiaries, each 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, 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. See "-Other" in Note 5.
CONDENSED CONSOLIDATING BALANCE SHEETS
(Thousands of dollars)
(Unaudited)
|
| June 30, 2019 |
| |||||||||||||||||
|
| Parent Company Only (issuer) |
|
| Guarantor Subsidiaries |
|
| Non-Guarantor Subsidiaries |
|
| Eliminations |
|
| Consolidated |
| |||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
| $ | 8,170 |
|
| $ | 2,223 |
|
| $ | 11,489 |
|
| $ | — |
|
| $ | 21,882 |
|
Short-term investments |
|
| 76,141 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 76,141 |
|
Accounts receivable – net |
|
| 64,467 |
|
|
| 101,381 |
|
|
| 23,676 |
|
|
| (6,180 | ) |
|
| 183,344 |
|
Intercompany receivable |
|
| — |
|
|
| 98,616 |
|
|
| 22,116 |
|
|
| (120,732 | ) |
|
| — |
|
Inventories of spare parts – net |
|
| 29,871 |
|
|
| 20,929 |
|
|
| 3,442 |
|
|
| — |
|
|
| 54,242 |
|
Prepaid expenses |
|
| 8,944 |
|
|
| 2,805 |
|
|
| 1,323 |
|
|
| — |
|
|
| 13,072 |
|
Income taxes receivable |
|
| 7 |
|
|
| 502 |
|
|
| — |
|
|
| — |
|
|
| 509 |
|
Total current assets |
|
| 187,600 |
|
|
| 226,456 |
|
|
| 62,046 |
|
|
| (126,912 | ) |
|
| 349,190 |
|
Investment in subsidiaries |
|
| 475,391 |
|
|
| — |
|
|
| — |
|
|
| (475,391 | ) |
|
| — |
|
Property and equipment – net |
|
| 562,880 |
|
|
| 283,231 |
|
|
| 39,558 |
|
|
| — |
|
|
| 885,669 |
|
Right of use assets |
|
| 116,918 |
|
|
| 11,652 |
|
|
| 16,374 |
|
|
| — |
|
|
| 144,944 |
|
Restricted cash and investments |
|
| 19,739 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 19,739 |
|
Other assets |
|
| 18,678 |
|
|
| 1,071 |
|
|
| 1,188 |
|
|
| — |
|
|
| 20,937 |
|
Deferred income tax |
|
| — |
|
|
| — |
|
|
| 5,137 |
|
|
| — |
|
|
| 5,137 |
|
Total assets |
| $ | 1,381,206 |
|
| $ | 522,410 |
|
| $ | 124,303 |
|
| $ | (602,303 | ) |
| $ | 1,425,616 |
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 64,526 |
|
| $ | 6,437 |
|
| $ | 5,832 |
|
| $ | (6,180 | ) |
| $ | 70,615 |
|
Accrued and other current liabilities |
|
| 19,667 |
|
|
| 13,500 |
|
|
| 5,316 |
|
|
| — |
|
|
| 38,483 |
|
Current portion of operating lease liabilities |
|
| 20,823 |
|
|
| 3,404 |
|
|
| 3,308 |
|
|
| — |
|
|
| 27,535 |
|
Current maturities of long-term debt |
|
| 1,750 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,750 |
|
Intercompany payable |
|
| 63,263 |
|
|
| 17,125 |
|
|
| 40,344 |
|
|
| (120,732 | ) |
|
| — |
|
Total current liabilities |
|
| 170,029 |
|
|
| 40,466 |
|
|
| 54,800 |
|
|
| (126,912 | ) |
|
| 138,383 |
|
Long-term Debt |
|
| 192,450 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 192,450 |
|
Deferred income taxes and other long-term liabilities |
|
| 93,711 |
|
|
| 67,234 |
|
|
| 12,859 |
|
|
| — |
|
|
| 173,804 |
|
Liabilities subject to compromise |
|
| 513,125 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 513,125 |
|
Shareholders’ Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock and paid-in capital |
|
| 317,725 |
|
|
| 77,951 |
|
|
| 132,426 |
|
|
| (210,377 | ) |
|
| 317,725 |
|
Accumulated other comprehensive loss |
|
| (3 | ) |
|
| — |
|
|
| (4,037 | ) |
|
| — |
|
|
| (4,040 | ) |
Retained earnings |
|
| 94,169 |
|
|
| 336,759 |
|
|
| (71,745 | ) |
|
| (265,014 | ) |
|
| 94,169 |
|
Total shareholders’ equity |
|
| 411,891 |
|
|
| 414,710 |
|
|
| 56,644 |
|
|
| (475,391 | ) |
|
| 407,854 |
|
Total liabilities and shareholders’ equity |
| $ | 1,381,206 |
|
| $ | 522,410 |
|
| $ | 124,303 |
|
| $ | (602,303 | ) |
| $ | 1,425,616 |
|
September 30, 2018 | ||||||||||||||||||||
Parent Company Only (issuer) | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
ASSETS | ||||||||||||||||||||
Current Assets: | ||||||||||||||||||||
Cash | $ | 9,905 | $ | 1,880 | $ | 4,668 | $ | — | $ | 16,453 | ||||||||||
Short-term investments | 30,509 | — | — | — | 30,509 | |||||||||||||||
Accounts receivable – net | 75,970 | 95,340 | 29,574 | (3,477 | ) | 197,407 | ||||||||||||||
Intercompany receivable | — | 92,338 | — | (92,338 | ) | — | ||||||||||||||
Inventories of spare parts – net | 60,914 | 10,646 | 2,792 | — | 74,352 | |||||||||||||||
Prepaid expenses | 9,364 | 2,640 | 1,197 | — | 13,201 | |||||||||||||||
Income taxes receivable | 139 | 510 | — | — | 649 | |||||||||||||||
Total current assets | 186,801 | 203,354 | 38,231 | (95,815 | ) | 332,571 | ||||||||||||||
Investment in subsidiaries | 415,980 | — | — | (415,980 | ) | — | ||||||||||||||
Property and equipment – net | 598,363 | 286,015 | 39,199 | — | 923,577 | |||||||||||||||
Restricted cash and investments | 19,781 | — | — | — | 19,781 | |||||||||||||||
Other assets | 140,265 | 1,042 | (131,165 | ) | — | 10,142 | ||||||||||||||
Deferred income tax | — | — | 1,009 | — | 1,009 | |||||||||||||||
Goodwill | — | — | 61,299 | — | 61,299 | |||||||||||||||
Intangible assets | — | — | 15,557 | — | 15,557 | |||||||||||||||
Total assets | $ | 1,361,190 | $ | 490,411 | $ | 24,130 | $ | (511,795 | ) | $ | 1,363,936 | |||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||
Current Liabilities: | ||||||||||||||||||||
Short-term debt | $ | 499,429 | $ | — | $ | — | $ | — | $ | 499,429 | ||||||||||
Accounts payable | 32,458 | 5,200 | 5,028 | (3,477 | ) | 39,209 | ||||||||||||||
Accrued and other current liabilities | 18,781 | 14,053 | 6,723 | — | 39,557 | |||||||||||||||
Intercompany payable | 81,384 | — | 10,954 | (92,338 | ) | — | ||||||||||||||
Total current liabilities | 632,052 | 19,253 | 22,705 | (95,815 | ) | 578,195 | ||||||||||||||
Long-term debt | 129,126 | — | — | — | 129,126 | |||||||||||||||
Deferred income taxes and other long-term liabilities | 18,536 | 57,439 | 3,255 | — | 79,230 | |||||||||||||||
Shareholders’ Equity: | ||||||||||||||||||||
Common stock and paid-in capital | 314,085 | 77,952 | 1,510 | (79,462 | ) | 314,085 | ||||||||||||||
Accumulated other comprehensive loss | (3 | ) | — | (4,091 | ) | — | (4,094 | ) | ||||||||||||
Retained earnings | 267,394 | 335,767 | 751 | (336,518 | ) | 267,394 | ||||||||||||||
Total shareholders’ equity | 581,476 | 413,719 | (1,830 | ) | (415,980 | ) | 577,385 | |||||||||||||
Total liabilities and shareholders’ equity | $ | 1,361,190 | $ | 490,411 | $ | 24,130 | $ | (511,795 | ) | $ | 1,363,936 |
CONDENSED CONSOLIDATING BALANCE SHEETS
(Thousands of dollars)
|
| December 31, 2018 |
| |||||||||||||||||
|
| Parent Company Only (issuer) |
|
| Guarantor Subsidiaries |
|
| Non-Guarantor Subsidiaries |
|
| Eliminations |
|
| Consolidated |
| |||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
| $ | 39,091 |
|
| $ | 1,259 |
|
| $ | 10,524 |
|
| $ | — |
|
| $ | 50,874 |
|
Short-term investments |
|
| 14,232 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 14,232 |
|
Accounts receivable – net |
|
| 64,416 |
|
|
| 93,060 |
|
|
| 28,812 |
|
|
| (3,823 | ) |
|
| 182,465 |
|
Intercompany receivable |
|
| — |
|
|
| 91,468 |
|
|
| — |
|
|
| (91,468 | ) |
|
| — |
|
Inventories of spare parts – net |
|
| 43,933 |
|
|
| 9,577 |
|
|
| 3,188 |
|
|
| — |
|
|
| 56,698 |
|
Prepaid expenses |
|
| 7,295 |
|
|
| 2,520 |
|
|
| 1,604 |
|
|
| — |
|
|
| 11,419 |
|
Income taxes receivable |
|
| 394 |
|
|
| 556 |
|
|
| — |
|
|
| — |
|
|
| 950 |
|
Total current assets |
|
| 169,361 |
|
|
| 198,440 |
|
|
| 44,128 |
|
|
| (95,291 | ) |
|
| 316,638 |
|
Investment in subsidiaries and others |
|
| 471,790 |
|
|
| — |
|
|
| — |
|
|
| (471,790 | ) |
|
| — |
|
Property and equipment – net |
|
| 576,763 |
|
|
| 287,375 |
|
|
| 38,347 |
|
|
| — |
|
|
| 902,485 |
|
Restricted investments |
|
| 19,781 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 19,781 |
|
Other assets |
|
| 17,179 |
|
|
| 1,199 |
|
|
| — |
|
|
| — |
|
|
| 18,378 |
|
Deferred income tax |
|
| — |
|
|
| — |
|
|
| 4,944 |
|
|
| — |
|
|
| 4,944 |
|
Total assets |
| $ | 1,254,874 |
|
| $ | 487,014 |
|
| $ | 87,419 |
|
| $ | (567,081 | ) |
| $ | 1,262,226 |
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Notes issued March 17, 2014 |
| $ | 499,740 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 499,740 |
|
Accounts payable |
|
| 44,089 |
|
|
| 4,587 |
|
|
| 5,452 |
|
|
| (3,839 | ) |
|
| 50,289 |
|
Accrued and other current liabilities |
|
| 25,158 |
|
|
| 12,335 |
|
|
| 7,799 |
|
|
| — |
|
|
| 45,292 |
|
Intercompany payable |
|
| 74,336 |
|
|
| — |
|
|
| 17,116 |
|
|
| (91,452 | ) |
|
| — |
|
Total current liabilities |
|
| 643,323 |
|
|
| 16,922 |
|
|
| 30,367 |
|
|
| (95,291 | ) |
|
| 595,321 |
|
Long-term debt |
|
| 129,235 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 129,235 |
|
Deferred income taxes and other long-term liabilities |
|
| 4,934 |
|
|
| 58,752 |
|
|
| 551 |
|
|
| — |
|
|
| 64,237 |
|
Shareholders’ Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock and paid-in capital |
|
| 315,898 |
|
|
| 77,951 |
|
|
| 132,650 |
|
|
| (210,601 | ) |
|
| 315,898 |
|
Accumulated other comprehensive loss |
|
| (3 | ) |
|
| — |
|
|
| (3,949 | ) |
|
| — |
|
|
| (3,952 | ) |
Retained earnings |
|
| 161,487 |
|
|
| 333,389 |
|
|
| (72,200 | ) |
|
| (261,189 | ) |
|
| 161,487 |
|
Total shareholders’ equity |
|
| 477,382 |
|
|
| 411,340 |
|
|
| 56,501 |
|
|
| (471,790 | ) |
|
| 473,433 |
|
Total liabilities and shareholders’ equity |
| $ | 1,254,874 |
|
| $ | 487,014 |
|
| $ | 87,419 |
|
| $ | (567,081 | ) |
| $ | 1,262,226 |
|
December 31, 2017 | ||||||||||||||||||||
Parent Company Only (issuer) | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
ASSETS | ||||||||||||||||||||
Current Assets: | ||||||||||||||||||||
Cash | $ | 47 | $ | 1,072 | $ | 7,651 | $ | — | $ | 8,770 | ||||||||||
Short-term investments | 64,237 | — | — | — | 64,237 | |||||||||||||||
Accounts receivable – net | 90,077 | 74,886 | 38,020 | (17,004 | ) | 185,979 | ||||||||||||||
Intercompany receivable | — | 126,366 | — | (126,366 | ) | — | ||||||||||||||
Inventories of spare parts – net | 68,737 | 9,049 | 3,095 | — | 80,881 | |||||||||||||||
Prepaid expenses | 8,348 | 1,898 | 1,229 | — | 11,475 | |||||||||||||||
Income taxes receivable | 345 | 9 | 917 | — | 1,271 | |||||||||||||||
Total current assets | 231,791 | 213,280 | 50,912 | (143,370 | ) | 352,613 | ||||||||||||||
Investment in subsidiaries and others | 397,301 | — | — | (397,301 | ) | — | ||||||||||||||
Property and equipment – net | 617,488 | 284,984 | 44,293 | — | 946,765 | |||||||||||||||
Restricted investments | 12,382 | — | 14 | — | 12,396 | |||||||||||||||
Other assets | 139,754 | 908 | (131,921 | ) | — | 8,741 | ||||||||||||||
Deferred income tax | — | — | 3,309 | — | 3,309 | |||||||||||||||
Goodwill | — | — | 61,299 | — | 61,299 | |||||||||||||||
Intangible assets | — | — | 16,723 | — | 16,723 | |||||||||||||||
Total assets | $ | 1,398,716 | $ | 499,172 | $ | 44,629 | $ | (540,671 | ) | $ | 1,401,846 | |||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||
Current Liabilities: | ||||||||||||||||||||
Accounts payable | $ | 28,130 | $ | 4,636 | $ | 21,425 | $ | (17,005 | ) | $ | 37,186 | |||||||||
Accrued and other current liabilities | 23,147 | 10,577 | 8,126 | — | 41,850 | |||||||||||||||
Intercompany payable | 113,387 | — | 12,978 | (126,365 | ) | — | ||||||||||||||
Total current liabilities | 164,664 | 15,213 | 42,529 | (143,370 | ) | 79,036 | ||||||||||||||
Long-term debt | 615,994 | — | — | — | 615,994 | |||||||||||||||
Deferred income taxes and other long-term liabilities | 5,404 | 84,300 | 4,458 | — | 94,162 | |||||||||||||||
Shareholders’ Equity: | ||||||||||||||||||||
Common stock and paid-in capital | 309,933 | 77,951 | 1,375 | (79,326 | ) | 309,933 | ||||||||||||||
Accumulated other comprehensive loss | (280 | ) | — | — | — | (280 | ) | |||||||||||||
Retained earnings | 303,001 | 321,708 | (3,733 | ) | (317,975 | ) | 303,001 | |||||||||||||
Total shareholders’ equity | 612,654 | 399,659 | (2,358 | ) | (397,301 | ) | 612,654 | |||||||||||||
Total liabilities and shareholders’ equity | $ | 1,398,716 | $ | 499,172 | $ | 44,629 | $ | (540,671 | ) | $ | 1,401,846 |
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(Thousands of dollars)
(Unaudited)
|
| For the Quarter Ended June 30, 2019 |
| |||||||||||||||||
|
| Parent Company Only (issuer) |
|
| Guarantor Subsidiaries |
|
| Non-Guarantor Subsidiaries |
|
| Eliminations |
|
| Consolidated |
| |||||
Operating revenues, net |
| $ | 75,707 |
|
| $ | 72,628 |
|
| $ | 24,912 |
|
| $ | (8,075 | ) |
| $ | 165,172 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct expenses |
|
| 76,288 |
|
|
| 61,915 |
|
|
| 23,386 |
|
|
| (8,075 | ) |
|
| 153,514 |
|
Selling, general and administrative expenses |
|
| 10,459 |
|
|
| 4,293 |
|
|
| 2,843 |
|
|
| (4 | ) |
|
| 17,591 |
|
Total operating expenses |
|
| 86,747 |
|
|
| 66,208 |
|
|
| 26,229 |
|
|
| (8,079 | ) |
|
| 171,105 |
|
Loss on disposal of assets, net |
|
| (102 | ) |
|
| 9 |
|
|
| (2 | ) |
|
| — |
|
|
| (95 | ) |
Equity in income of unconsolidated affiliates, net |
|
| (1,039 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,039 | ) |
Operating (loss) income |
|
| (9,899 | ) |
|
| 6,411 |
|
|
| (1,315 | ) |
|
| 4 |
|
|
| (4,799 | ) |
Equity in net income of consolidated subsidiaries |
|
| (4,952 | ) |
|
| — |
|
|
| — |
|
|
| 4,952 |
|
|
| — |
|
Interest expense |
|
| 3,908 |
|
|
| 19 |
|
|
| — |
|
|
| — |
|
|
| 3,927 |
|
Reorganization items, net |
|
| 26,503 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 26,503 |
|
Other income, net |
|
| (46 | ) |
|
| — |
|
|
| (291 | ) |
|
| 4 |
|
|
| (333 | ) |
|
|
| 25,413 |
|
|
| 19 |
|
|
| (291 | ) |
|
| 4,956 |
|
|
| 30,097 |
|
(Loss) earnings before income taxes |
|
| (35,312 | ) |
|
| 6,392 |
|
|
| (1,024 | ) |
|
| (4,952 | ) |
|
| (34,896 | ) |
Income tax (benefit) expense |
|
| (3,235 | ) |
|
| 792 |
|
|
| (376 | ) |
|
| — |
|
|
| (2,819 | ) |
Net (loss) earnings |
| $ | (32,077 | ) |
| $ | 5,600 |
|
| $ | (648 | ) |
| $ | (4,952 | ) |
| $ | (32,077 | ) |
For the Quarter Ended September 30, 2018 | ||||||||||||||||||||
Parent Company Only (issuer) | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Operating revenues, net | $ | 75,654 | $ | 72,396 | $ | 22,027 | $ | (1,290 | ) | $ | 168,787 | |||||||||
Expenses: | ||||||||||||||||||||
Direct expenses | 83,935 | 62,045 | 15,510 | (1,290 | ) | 160,200 | ||||||||||||||
Selling, general and administrative expenses | 9,987 | 3,666 | 2,606 | (4 | ) | 16,255 | ||||||||||||||
Total operating expenses | 93,922 | 65,711 | 18,116 | (1,294 | ) | 176,455 | ||||||||||||||
Gain on disposal of assets, net | — | — | — | — | — | |||||||||||||||
Equity in income of unconsolidated affiliates, net | (118 | ) | — | — | — | (118 | ) | |||||||||||||
Operating (loss) income | (18,150 | ) | 6,685 | 3,911 | 4 | (7,550 | ) | |||||||||||||
Equity in net income of consolidated subsidiaries | (10,381 | ) | — | — | 10,381 | — | ||||||||||||||
Interest expense | 8,356 | 1 | — | — | 8,357 | |||||||||||||||
Other income, net | (301 | ) | — | (1,548 | ) | 4 | (1,845 | ) | ||||||||||||
(2,326 | ) | 1 | (1,548 | ) | 10,385 | 6,512 | ||||||||||||||
(Loss) earnings before income taxes | (15,824 | ) | 6,684 | 5,459 | (10,381 | ) | (14,062 | ) | ||||||||||||
Income tax (benefit) expense | (4,293 | ) | — | 1,762 | — | (2,531 | ) | |||||||||||||
Net (loss) earnings | $ | (11,531 | ) | $ | 6,684 | $ | 3,697 | $ | (10,381 | ) | $ | (11,531 | ) |
PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(Thousands of dollars)
|
| For the Quarter Ended June 30, 2018 |
| |||||||||||||||||
|
| Parent Company Only (issuer) |
|
| Guarantor Subsidiaries |
|
| Non-Guarantor Subsidiaries |
|
| Eliminations |
|
| Consolidated |
| |||||
Operating revenues, net |
| $ | 79,857 |
|
| $ | 68,717 |
|
| $ | 51,404 |
|
| $ | (30,735 | ) |
| $ | 169,243 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct expenses |
|
| 78,955 |
|
|
| 58,263 |
|
|
| 48,658 |
|
|
| (30,793 | ) |
|
| 155,083 |
|
Selling, general and administrative expenses |
|
| 8,395 |
|
|
| 3,256 |
|
|
| 2,838 |
|
|
| (4 | ) |
|
| 14,485 |
|
Total operating expenses |
|
| 87,350 |
|
|
| 61,519 |
|
|
| 51,496 |
|
|
| (30,797 | ) |
|
| 169,568 |
|
Gain on disposal of assets, net |
|
| (150 | ) |
|
| — |
|
|
| (21 | ) |
|
| — |
|
|
| (171 | ) |
Equity in income of unconsolidated affiliates, net |
|
| (81 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (81 | ) |
Operating (loss) income |
|
| (7,262 | ) |
|
| 7,198 |
|
|
| (71 | ) |
|
| 62 |
|
|
| (73 | ) |
Equity in net income of consolidated subsidiaries |
|
| (6,064 | ) |
|
| — |
|
|
| — |
|
|
| 6,064 |
|
|
| — |
|
Interest expense |
|
| 8,337 |
|
|
| — |
|
|
| 542 |
|
|
| (539 | ) |
|
| 8,340 |
|
Other income, net |
|
| (365 | ) |
|
| — |
|
|
| 128 |
|
|
| 601 |
|
|
| 364 |
|
|
|
| 1,908 |
|
|
| — |
|
|
| 670 |
|
|
| 6,126 |
|
|
| 8,704 |
|
(Loss) earnings before income taxes |
|
| (9,170 | ) |
|
| 7,198 |
|
|
| (741 | ) |
|
| (6,064 | ) |
|
| (8,777 | ) |
Income tax (benefit) expense |
|
| (2,077 | ) |
|
| — |
|
|
| 393 |
|
|
| — |
|
|
| (1,684 | ) |
Net (loss) earnings |
| $ | (7,093 | ) |
| $ | 7,198 |
|
| $ | (1,134 | ) |
| $ | (6,064 | ) |
| $ | (7,093 | ) |
For the Quarter Ended September 30, 2017 | ||||||||||||||||||||
Parent Company Only (issuer) | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Operating revenues, net | $ | 79,644 | $ | 70,692 | $ | 7,784 | $ | (7,953 | ) | $ | 150,167 | |||||||||
Expenses: | ||||||||||||||||||||
Direct expenses | 83,727 | 51,247 | 9,765 | (7,953 | ) | 136,786 | ||||||||||||||
Selling, general and administrative expenses | 8,240 | 3,141 | 24 | (4 | ) | 11,401 | ||||||||||||||
Total operating expenses | 91,967 | 54,388 | 9,789 | (7,957 | ) | 148,187 | ||||||||||||||
Loss (gain) on disposal of assets, net | (4 | ) | — | — | — | (4 | ) | |||||||||||||
Equity in (income) loss of consolidated affiliate | 112 | — | (550 | ) | — | (438 | ) | |||||||||||||
Operating (loss) income | (12,431 | ) | 16,304 | (1,455 | ) | 4 | 2,422 | |||||||||||||
Equity in net income of consolidated subsidiaries | (14,850 | ) | — | — | 14,850 | — | ||||||||||||||
Interest expense | 8,027 | — | — | — | 8,027 | |||||||||||||||
Other income, net | (709 | ) | (1 | ) | — | 4 | (706 | ) | ||||||||||||
(7,532 | ) | (1 | ) | — | 14,854 | 7,321 | ||||||||||||||
(Loss) earnings before income taxes | (4,899 | ) | 16,305 | (1,455 | ) | (14,850 | ) | (4,899 | ) | |||||||||||
Income tax (benefit) expense | (1,622 | ) | — | — | — | (1,622 | ) | |||||||||||||
Net (loss) earnings | $ | (3,277 | ) | $ | 16,305 | $ | (1,455 | ) | $ | (14,850 | ) | $ | (3,277 | ) |
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(Thousands of dollars)
(Unaudited)
|
| For the Six Months Ended June 30, 2019 |
| |||||||||||||||||
|
| Parent Company Only (issuer) |
|
| Guarantor Subsidiaries |
|
| Non-Guarantor Subsidiaries |
|
| Eliminations |
|
| Consolidated |
| |||||
Operating revenues, net |
| $ | 149,740 |
|
| $ | 131,930 |
|
| $ | 49,251 |
|
| $ | (13,859 | ) |
| $ | 317,062 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct expenses |
|
| 160,793 |
|
|
| 120,941 |
|
|
| 42,515 |
|
|
| (13,859 | ) |
|
| 310,390 |
|
Selling, general and administrative expenses |
|
| 28,507 |
|
|
| 7,731 |
|
|
| 6,229 |
|
|
| (9 | ) |
|
| 42,458 |
|
Total operating expenses |
|
| 189,300 |
|
|
| 128,672 |
|
|
| 48,744 |
|
|
| (13,868 | ) |
|
| 352,848 |
|
Loss (gain) on disposal of assets, net |
|
| (51 | ) |
|
| 9 |
|
|
| (2 | ) |
|
| — |
|
|
| (44 | ) |
Equity in income of unconsolidated affiliates, net |
|
| (2,400 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,400 | ) |
Operating (loss) income |
|
| (37,109 | ) |
|
| 3,249 |
|
|
| 509 |
|
|
| 9 |
|
|
| (33,342 | ) |
Equity in net income of consolidated subsidiaries |
|
| (3,825 | ) |
|
| — |
|
|
| — |
|
|
| 3,825 |
|
|
| — |
|
Interest expense |
|
| 12,070 |
|
|
| 23 |
|
|
| — |
|
|
| — |
|
|
| 12,093 |
|
Regorganizations items, net |
|
| 28,103 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 28,103 |
|
Other income, net |
|
| (235 | ) |
|
| — |
|
|
| (67 | ) |
|
| 9 |
|
|
| (293 | ) |
|
|
| 36,113 |
|
|
| 23 |
|
|
| (67 | ) |
|
| 3,834 |
|
|
| 39,903 |
|
(Loss) earnings before income taxes |
|
| (73,222 | ) |
|
| 3,226 |
|
|
| 576 |
|
|
| (3,825 | ) |
|
| (73,245 | ) |
Income tax (benefit) expense |
|
| (5,904 | ) |
|
| (144 | ) |
|
| 121 |
|
|
| — |
|
|
| (5,927 | ) |
Net (loss) earnings |
| $ | (67,318 | ) |
| $ | 3,370 |
|
| $ | 455 |
|
| $ | (3,825 | ) |
| $ | (67,318 | ) |
For the Nine Months Ended September 30, 2018 | |||||||||||||||||||
Parent Company Only (issuer) | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Operating revenues, net | $ | 233,608 | $ | 199,823 | $ | 68,065 | $ | (3,096 | ) | $ | 498,400 | ||||||||
Expenses: | |||||||||||||||||||
Direct expenses | 246,888 | 175,673 | 52,045 | (3,097 | ) | 471,509 | |||||||||||||
Selling, general and administrative expenses | 27,129 | 10,089 | 8,994 | (13 | ) | 46,199 | |||||||||||||
Total operating expenses | 274,017 | 185,762 | 61,039 | (3,110 | ) | 517,708 | |||||||||||||
Loss (gain) on disposal of assets, net | 729 | — | (21 | ) | — | 708 | |||||||||||||
Equity in income of unconsolidated affiliates, net | (162 | ) | — | — | — | (162 | ) | ||||||||||||
Operating (loss) income | (40,976 | ) | 14,061 | 7,047 | 14 | (19,854 | ) | ||||||||||||
Equity in net income of consolidated subsidiaries | (18,542 | ) | — | — | 18,542 | — | |||||||||||||
Interest expense | 24,888 | 2 | 4 | — | 24,894 | ||||||||||||||
Other income, net | (359 | ) | — | (91 | ) | 14 | (436 | ) | |||||||||||
5,987 | 2 | (87 | ) | 18,556 | 24,458 | ||||||||||||||
(Loss) earnings before income taxes | (46,963 | ) | 14,059 | 7,134 | (18,542 | ) | (44,312 | ) | |||||||||||
Income tax (benefit) expense | (11,356 | ) | — | 2,651 | — | (8,705 | ) | ||||||||||||
Net (loss) earnings | $ | (35,607 | ) | $ | 14,059 | $ | 4,483 | $ | (18,542 | ) | $ | (35,607 | ) |
PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(Thousands of dollars)
|
| For the Six Months Ended June 30, 2018 |
| |||||||||||||||||
|
| Parent Company Only (issuer) |
|
| Guarantor Subsidiaries |
|
| Non-Guarantor Subsidiaries |
|
| Eliminations |
|
| Consolidated |
| |||||
Operating revenues, net |
| $ | 157,949 |
|
| $ | 127,426 |
|
| $ | 100,900 |
|
| $ | (56,668 | ) |
| $ | 329,607 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct expenses |
|
| 162,953 |
|
|
| 113,627 |
|
|
| 91,436 |
|
|
| (56,707 | ) |
|
| 311,309 |
|
Selling, general and administrative expenses |
|
| 17,143 |
|
|
| 6,423 |
|
|
| 6,388 |
|
|
| (10 | ) |
|
| 29,944 |
|
Total operating expenses |
|
| 180,096 |
|
|
| 120,050 |
|
|
| 97,824 |
|
|
| (56,717 | ) |
|
| 341,253 |
|
Loss (gain) on disposal of assets, net |
|
| 729 |
|
|
| — |
|
|
| (21 | ) |
|
| — |
|
|
| 708 |
|
Equity in income of unconsolidated affiliates, net |
|
| (45 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (45 | ) |
Operating (loss) income |
|
| (22,831 | ) |
|
| 7,376 |
|
|
| 3,097 |
|
|
| 49 |
|
|
| (12,309 | ) |
Equity in net income of consolidated subsidiaries |
|
| (8,163 | ) |
|
| — |
|
|
| — |
|
|
| 8,163 |
|
|
| — |
|
Interest expense |
|
| 16,533 |
|
|
| — |
|
|
| 1,085 |
|
|
| (1,081 | ) |
|
| 16,537 |
|
Other income, net |
|
| (63 | ) |
|
| — |
|
|
| 337 |
|
|
| 1,130 |
|
|
| 1,404 |
|
|
|
| 8,307 |
|
|
| — |
|
|
| 1,422 |
|
|
| 8,212 |
|
|
| 17,941 |
|
(Loss) earnings before income taxes |
|
| (31,138 | ) |
|
| 7,376 |
|
|
| 1,675 |
|
|
| (8,163 | ) |
|
| (30,250 | ) |
Income tax (benefit) expense |
|
| (7,063 | ) |
|
| — |
|
|
| 888 |
|
|
| — |
|
|
| (6,175 | ) |
Net (loss) earnings |
| $ | (24,075 | ) |
| $ | 7,376 |
|
| $ | 787 |
|
| $ | (8,163 | ) |
| $ | (24,075 | ) |
For the Nine Months Ended September 30, 2017 | |||||||||||||||||||
Parent Company Only (issuer) | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Operating revenues, net | $ | 228,973 | $ | 197,022 | $ | 15,987 | $ | (10,773 | ) | $ | 431,209 | ||||||||
Expenses: | |||||||||||||||||||
Direct expenses | 238,669 | 155,434 | 16,920 | (10,773 | ) | 400,250 | |||||||||||||
Selling, general and administrative expenses | 29,265 | 9,296 | 144 | (14 | ) | 38,691 | |||||||||||||
Total operating expenses | 267,934 | 164,730 | 17,064 | (10,787 | ) | 438,941 | |||||||||||||
Loss (gain) on disposal of assets, net | 4 | (1 | ) | — | — | 3 | |||||||||||||
Equity in loss of unconsolidated affiliate | 1,040 | — | 516 | — | 1,556 | ||||||||||||||
Operating (loss) income | (40,005 | ) | 32,293 | (1,593 | ) | 14 | (9,291 | ) | |||||||||||
Equity in net income of consolidated subsidiaries | (32,093 | ) | — | — | 32,093 | — | |||||||||||||
Interest expense | 24,283 | 22 | — | — | 24,305 | ||||||||||||||
Other income, net | (2,486 | ) | (2 | ) | — | 14 | (2,474 | ) | |||||||||||
(10,296 | ) | 20 | — | 32,107 | 21,831 | ||||||||||||||
(Loss) earnings before income taxes | (29,709 | ) | 32,273 | (1,593 | ) | (32,093 | ) | (31,122 | ) | ||||||||||
Income tax (benefit) expense | (7,911 | ) | (1,413 | ) | — | — | (9,324 | ) | |||||||||||
Net (loss) earnings | $ | (21,798 | ) | $ | 33,686 | $ | (1,593 | ) | $ | (32,093 | ) | $ | (21,798 | ) |
CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Thousands of dollars)
(Unaudited)
|
| For the Quarter Ended June 30, 2019 |
| |||||||||||||||||
|
| Parent Company Only (issuer) |
|
| Guarantor Subsidiaries |
|
| Non-Guarantor Subsidiaries |
|
| Eliminations |
|
| Consolidated |
| |||||
Net (loss) earnings |
| $ | (32,077 | ) |
| $ | 5,600 |
|
| $ | (648 | ) |
| $ | (4,952 | ) |
| $ | (32,077 | ) |
Currency translation adjustments |
|
| — |
|
|
| — |
|
|
| (928 | ) |
|
| — |
|
|
| (928 | ) |
Tax effect of the above-listed adjustments |
|
| — |
|
|
| — |
|
|
| 25 |
|
|
| — |
|
|
| 25 |
|
Total comprehensive (loss) income |
| $ | (32,077 | ) |
| $ | 5,600 |
|
| $ | (1,551 | ) |
| $ | (4,952 | ) |
| $ | (32,980 | ) |
For the Quarter Ended September 30, 2018 | ||||||||||||||||||||
Parent Company Only (issuer) | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Net (loss) earnings | $ | (11,531 | ) | $ | 6,684 | $ | 3,697 | $ | (10,381 | ) | $ | (11,531 | ) | |||||||
Unrealized gain on short-term investments | — | — | — | — | — | |||||||||||||||
Currency translation adjustments | — | — | (4,718 | ) | — | (4,718 | ) | |||||||||||||
Changes in pension plan asset and benefit obligation | — | — | — | — | — | |||||||||||||||
Tax effect of the above-listed adjustments | — | — | — | — | — | |||||||||||||||
Total comprehensive (loss) income | $ | (11,531 | ) | $ | 6,684 | $ | (1,021 | ) | $ | (10,381 | ) | $ | (16,249 | ) |
PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Thousands of dollars)
|
| For the Quarter Ended June 30, 2018 |
| |||||||||||||||||
|
| Parent Company Only (issuer) |
|
| Guarantor Subsidiaries |
|
| Non-Guarantor Subsidiaries |
|
| Eliminations |
|
| Consolidated |
| |||||
Net (loss) earnings |
| $ | (7,093 | ) |
| $ | 7,198 |
|
| $ | (1,134 | ) |
| $ | (6,064 | ) |
| $ | (7,093 | ) |
Unrealized gain on short-term investments |
|
| (107 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (107 | ) |
Currency translation adjustments |
|
| — |
|
|
| — |
|
|
| 160 |
|
|
| — |
|
|
| 160 |
|
Changes in pension plan asset and benefit obligation |
|
| 7 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7 |
|
Tax effect of the above-listed adjustments |
|
| 100 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 100 |
|
Total comprehensive (loss) income |
| $ | (7,093 | ) |
| $ | 7,198 |
|
| $ | (974 | ) |
| $ | (6,064 | ) |
| $ | (6,933 | ) |
For the Quarter Ended September 30, 2017 | ||||||||||||||||||||
Parent Company Only (issuer) | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Net (loss) earnings | $ | (3,277 | ) | $ | 16,305 | $ | (1,455 | ) | $ | (14,850 | ) | $ | (3,277 | ) | ||||||
Unrealized gain on short-term investments | 41 | — | — | — | 41 | |||||||||||||||
Changes in pension plan asset and benefit obligations | (24 | ) | — | — | — | (24 | ) | |||||||||||||
Tax effect of the above-listed adjustments | (8 | ) | — | — | — | (8 | ) | |||||||||||||
Total comprehensive (loss) income | $ | (3,268 | ) | $ | 16,305 | $ | (1,455 | ) | $ | (14,850 | ) | $ | (3,268 | ) |
CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Thousands of dollars)
(Unaudited)
|
| For the Six Months Ended June 30, 2019 |
| |||||||||||||||||
|
| Parent Company Only (issuer) |
|
| Guarantor Subsidiaries |
|
| Non-Guarantor Subsidiaries |
|
| Eliminations |
|
| Consolidated |
| |||||
Net (loss) earnings |
| $ | (67,318 | ) |
| $ | 3,370 |
|
| $ | 455 |
|
| $ | (3,825 | ) |
|
| (67,318 | ) |
Currency translation adjustment |
|
| — |
|
|
| — |
|
|
| (121 | ) |
|
| — |
|
|
| (121 | ) |
Tax effect of the above-listed adjustments |
|
| — |
|
|
| — |
|
|
| 33 |
|
|
| — |
|
|
| 33 |
|
Total comprehensive (loss) income |
| $ | (67,318 | ) |
| $ | 3,370 |
|
| $ | 367 |
|
| $ | (3,825 | ) |
| $ | (67,406 | ) |
For the Nine Months Ended September 30, 2018 | |||||||||||||||||||
Parent Company Only (issuer) | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Net (loss) earnings | $ | (35,607 | ) | $ | 14,059 | $ | 4,483 | $ | (18,542 | ) | (35,607 | ) | |||||||
Unrealized gain on short-term investments | 363 | — | — | — | 363 | ||||||||||||||
Currency translation adjustment | — | — | (4,091 | ) | — | (4,091 | ) | ||||||||||||
Changes in pension plan asset and benefit obligation | (1 | ) | — | — | — | (1 | ) | ||||||||||||
Tax effect of the above-listed adjustments | (85 | ) | — | — | — | (85 | ) | ||||||||||||
Total comprehensive (loss) income | $ | (35,330 | ) | $ | 14,059 | $ | 392 | $ | (18,542 | ) | $ | (39,421 | ) |
PHI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Thousands of dollars)
|
| For the Six Months Ended June 30, 2018 |
| |||||||||||||||||
|
| Parent Company Only (issuer) |
|
| Guarantor Subsidiaries |
|
| Non-Guarantor Subsidiaries |
|
| Eliminations |
|
| Consolidated |
| |||||
Net (loss) earnings |
| $ | (24,075 | ) |
| $ | 7,376 |
|
| $ | 787 |
|
| $ | (8,163 | ) |
|
| (24,075 | ) |
Unrealized gain on short-term investments |
|
| 363 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 363 |
|
Currency translation adjustment |
|
| — |
|
|
| — |
|
|
| 627 |
|
|
| — |
|
|
| 627 |
|
Changes in pension plan asset and benefit obligation |
|
| (1 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1 | ) |
Tax effect of the above-listed adjustments |
|
| (85 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (85 | ) |
Total comprehensive (loss) income |
| $ | (23,798 | ) |
| $ | 7,376 |
|
| $ | 1,414 |
|
| $ | (8,163 | ) |
| $ | (23,171 | ) |
For the Nine Months Ended September 30, 2017 | |||||||||||||||||||
Parent Company Only (issuer) | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Net (loss) earnings | $ | (21,798 | ) | $ | 33,686 | $ | (1,593 | ) | $ | (32,093 | ) | (21,798 | ) | ||||||
Unrealized gain on short-term investments | 370 | — | — | — | 370 | ||||||||||||||
Changes in pension plan asset and benefit obligations | (2 | ) | — | — | — | (2 | ) | ||||||||||||
Tax effect of the above-listed adjustments | (134 | ) | — | — | — | (134 | ) | ||||||||||||
Total comprehensive (loss) income | $ | (21,564 | ) | $ | 33,686 | $ | (1,593 | ) | $ | (32,093 | ) | $ | (21,564 | ) |
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(Thousands of dollars)
(Unaudited)
|
| For the Six Months Ended June 30, 2019 |
| |||||||||||||||||
|
| Parent Company Only (issuer) |
|
| Guarantor Subsidiaries |
|
| Non-Guarantor Subsidiaries |
|
| Eliminations |
|
| Consolidated |
| |||||
Net cash (used in) provided by operating activities |
| $ | (20,773 | ) |
| $ | (6,064 | ) |
| $ | 3,160 |
|
| $ | — |
|
| $ | (23,677 | ) |
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
Purchase of property and equipment |
|
| (5,956 | ) |
|
| — |
|
|
| (3,014 | ) |
|
| — |
|
|
| (8,970 | ) |
Proceeds from asset dispositions |
|
| 1,235 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,235 |
|
Purchase of short-term investments |
|
| (183,421 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (183,421 | ) |
Proceeds from sale of short-term investments |
|
| 121,512 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 121,512 |
|
Payment of deposit on aircraft |
|
| (50 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (50 | ) |
Refund of deposit on aircraft |
|
| 503 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 503 |
|
Loan to unconsolidated affiliate |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Net cash used in investing activities |
|
| (66,177 | ) |
|
| — |
|
|
| (3,014 | ) |
|
| — |
|
|
| (69,191 | ) |
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
Debt issuance costs |
|
| (5,668 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (5,668 | ) |
Proceeds from Term Loan |
|
| 70,000 |
|
|
| — |
|
|
| — |
|
|
|
|
|
|
| 70,000 |
|
Due to/from affiliate, net |
|
| (8,330 | ) |
|
| 7,028 |
|
|
| 1,302 |
|
|
| — |
|
|
| — |
|
Net cash provided by (used in) financing activities |
|
| 56,002 |
|
|
| 7,028 |
|
|
| 1,302 |
|
|
| — |
|
|
| 64,332 |
|
Effect of exchange rate changes on cash |
|
| — |
|
|
| — |
|
|
| (483 | ) |
|
| — |
|
|
| (483 | ) |
Increase (decrease) in cash |
|
| (30,948 | ) |
|
| 964 |
|
|
| 965 |
|
|
| — |
|
|
| (29,019 | ) |
Cash, cash equivalents and restricted cash at beginning of period |
|
| 46,781 |
|
|
| 1,259 |
|
|
| 10,524 |
|
|
| — |
|
|
| 58,564 |
|
Cash, cash equivalents and restricted cash at end of period |
| $ | 15,833 |
|
| $ | 2,223 |
|
| $ | 11,489 |
|
| $ | — |
|
| $ | 29,545 |
|
For the Nine Months Ended September 30, 2018 | ||||||||||||||||||||
Parent Company Only (issuer) | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Net cash (used in) provided by operating activities | $ | (25,451 | ) | $ | 6,439 | $ | 10,964 | $ | — | $ | (8,048 | ) | ||||||||
Investing activities: | ||||||||||||||||||||
Purchase of property and equipment | (20,580 | ) | — | (2,181 | ) | — | (22,761 | ) | ||||||||||||
Proceeds from asset dispositions | 1,453 | — | — | — | 1,453 | |||||||||||||||
Purchase of short-term investments | (284,277 | ) | — | — | — | (284,277 | ) | |||||||||||||
Purchase of restricted investments | (7,705 | ) | — | — | — | (7,705 | ) | |||||||||||||
Proceeds from sale of short-term investments | 318,007 | — | — | — | 318,007 | |||||||||||||||
Loan to unconsolidated affiliate | (274 | ) | — | — | — | (274 | ) | |||||||||||||
Net cash (used in) investing activities | 6,624 | — | (2,181 | ) | — | 4,443 | ||||||||||||||
Financing activities: | ||||||||||||||||||||
Debt issuance costs | (874 | ) | — | — | — | (874 | ) | |||||||||||||
Proceeds from line of credit | 34,295 | — | — | — | 34,295 | |||||||||||||||
Payments on line of credit | (151,795 | ) | — | — | — | (151,795 | ) | |||||||||||||
Proceeds from Term Loan | 130,000 | 130,000 | ||||||||||||||||||
Due to/from affiliate, net | 17,158 | (5,631 | ) | (11,527 | ) | — | — | |||||||||||||
Repurchase of common stock | (99 | ) | — | — | — | (99 | ) | |||||||||||||
Net cash provided by (used in) financing activities | 28,685 | (5,631 | ) | (11,527 | ) | — | 11,527 | |||||||||||||
Effect of exchange rate changes on cash | — | — | (239 | ) | — | (239 | ) | |||||||||||||
Increase (decrease) in cash | 9,858 | 808 | (2,983 | ) | — | 7,683 | ||||||||||||||
Cash, beginning of period | 47 | 1,072 | 7,651 | — | 8,770 | |||||||||||||||
Cash, end of period | $ | 9,905 | $ | 1,880 | $ | 4,668 | $ | — | $ | 16,453 |
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(Thousands of dollars)
(Unaudited)
|
| For the Six Months Ended June 30, 2018 |
| |||||||||||||||||
|
| Parent Company Only (issuer) |
|
| Guarantor Subsidiaries |
|
| Non-Guarantor Subsidiaries |
|
| Eliminations |
|
| Consolidated |
| |||||
Net cash (used in) provided by operating activities |
| $ | (506 | ) |
| $ | 3,306 |
|
| $ | 2,610 |
|
| $ | — |
|
| $ | 5,410 |
|
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
| (16,768 | ) |
|
| — |
|
|
| (1,330 | ) |
|
| — |
|
|
| (18,098 | ) |
Proceeds from asset dispositions |
|
| 1,453 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,453 |
|
Purchase of short-term investments |
|
| (260,996 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (260,996 | ) |
Proceeds from sale of short-term investments |
|
| 264,918 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 264,918 |
|
Loan to unconsolidated affiliate |
|
| (274 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (274 | ) |
Net cash used in investing activities |
|
| (11,667 | ) |
|
| — |
|
|
| (1,330 | ) |
|
| — |
|
|
| (12,997 | ) |
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from line of credit |
|
| 34,295 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 34,295 |
|
Payments on line of credit |
|
| (29,575 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (29,575 | ) |
Due to/from affiliate, net |
|
| 7,510 |
|
|
| (3,073 | ) |
|
| (4,437 | ) |
|
| — |
|
|
| — |
|
Repurchase of common stock |
|
| (51 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (51 | ) |
Net cash provided by (used in) financing activities |
|
| 12,179 |
|
|
| (3,073 | ) |
|
| (4,437 | ) |
|
| — |
|
|
| 4,669 |
|
Increase (decrease) in cash |
|
| 6 |
|
|
| 233 |
|
|
| (3,157 | ) |
|
| — |
|
|
| (2,918 | ) |
Cash, beginning of period |
|
| 47 |
|
|
| 1,072 |
|
|
| 7,651 |
|
|
| — |
|
|
| 8,770 |
|
Cash, end of period |
| $ | 53 |
|
| $ | 1,305 |
|
| $ | 4,494 |
|
| $ | — |
|
| $ | 5,852 |
|
For the Nine Months Ended September 30, 2017 | ||||||||||||||||||||
Parent Company Only (issuer) | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Net cash (used in) provided by operating activities | $ | (43,328 | ) | $ | 33,670 | $ | 7,790 | $ | — | $ | (1,868 | ) | ||||||||
Investing activities: | ||||||||||||||||||||
Purchase of property and equipment | (49,227 | ) | — | — | — | (49,227 | ) | |||||||||||||
Proceeds from asset dispositions | 21 | — | — | — | 21 | |||||||||||||||
Purchase of short-term investments | (268,525 | ) | — | — | (268,525 | ) | ||||||||||||||
Proceeds from sale of short-term investments | 354,250 | — | — | 354,250 | ||||||||||||||||
Payments of deposits on aircraft | — | — | — | — | ||||||||||||||||
Net cash provided by investing activities | 36,519 | — | — | — | 36,519 | |||||||||||||||
Financing activities: | ||||||||||||||||||||
Proceeds from line of credit | 99,150 | — | — | — | 99,150 | |||||||||||||||
Payments on line of credit | (133,150 | ) | — | — | — | (133,150 | ) | |||||||||||||
Repurchase of common stock | (256 | ) | — | — | — | (256 | ) | |||||||||||||
Due to/from affiliate, net | 41,079 | (34,699 | ) | (6,380 | ) | — | — | |||||||||||||
Net cash provided by (used in) financing activities | 6,823 | (34,699 | ) | (6,380 | ) | — | (34,256 | ) | ||||||||||||
Increase (decreased) in cash | 14 | (1,029 | ) | 1,410 | — | 395 | ||||||||||||||
Cash, beginning of period | 36 | 2,100 | 460 | — | 2,596 | |||||||||||||||
Cash, end of period | $ | 50 | $ | 1,071 | $ | 1,870 | $ | — | $ | 2,991 |
18. DEBTOR IN POSSESSION FINANCIAL INFORMATION
The financial statements below represent the condensed financial statements of the Debtors. The Debtors are PHI, Inc., PHI Air Medical, LLC, PHI Tech Services, Inc., PHI Helipass, LLC, and AM Equity Holdings, LLC. Intercompany transactions among the Debtors have been eliminated in the financial statements contained herein. Intercompany transactions among the Debtors and the non–debtor subsidiaries have not been eliminated in the Debtors’ financial statements.
CONDENSED COMBINED BALANCE SHEETS
(Thousands of dollars, except share data)
(Unaudited)
|
| June 30, 2019 |
| |
ASSETS |
|
|
|
|
Current Assets: |
|
|
|
|
Cash and cash equivalents |
| $ | 10,310 |
|
Short-term investments |
|
| 76,141 |
|
Accounts receivable – net |
|
|
|
|
Trade |
|
| 153,460 |
|
Other |
|
| 6,120 |
|
Inventories of spare parts – net |
|
| 50,800 |
|
Prepaid expenses |
|
| 11,749 |
|
Income taxes receivable |
|
| 509 |
|
Total current assets |
|
| 309,089 |
|
Property and equipment – net |
|
| 846,095 |
|
Right of use assets |
|
| 127,821 |
|
Restricted cash and investments |
|
| 19,739 |
|
Other assets |
|
| 150,536 |
|
Total assets |
| $ | 1,453,280 |
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
Current Liabilities: |
|
|
|
|
Accounts payable |
| $ | 66,187 |
|
Accrued and other current liabilities |
|
| 33,168 |
|
Current portion of operating lease liabilities |
|
| 24,125 |
|
Current maturities of long term debt |
|
| 1,750 |
|
Total current liabilities |
|
| 125,230 |
|
Long-term debt: |
|
|
|
|
Term loan issued March 13, 2019, net of debt issuance costs of $5,254 |
|
| 62,996 |
|
Related party term loan issued September 28, 2018, net of debt issuance costs of $546 |
|
| 129,454 |
|
Deferred income taxes |
|
| 52,135 |
|
Other long-term liabilities |
|
| 3,673 |
|
Long-term operating lease liabilities |
|
| 104,491 |
|
Total liabilities not subject to compromise |
|
| 477,979 |
|
Liabilities subject to compromise |
|
| 513,125 |
|
Total liabilities |
|
| 991,104 |
|
Shareholders’ Equity: |
|
|
|
|
Voting common stock – par value of $0.10; 12,500,000 shares authorized, 2,905,757 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively |
|
| 291 |
|
Non-voting common stock – par value of $0.10; 37,500,000 shares authorized, 12,919,681 issued and outstanding at June 30, 2019 and December 31, 2018, respectively |
|
| 1,290 |
|
Additional paid-in capital |
|
| 314,499 |
|
Accumulated other comprehensive income (loss) |
|
| (3 | ) |
Retained earnings |
|
| 146,099 |
|
Total shareholders’ equity |
|
| 462,176 |
|
Total liabilities and shareholders’ equity |
| $ | 1,453,280 |
|
CONDENSED COMBINED STATEMENTS OF OPERATIONS
(Thousands of dollars)
(Unaudited)
|
| Quarter |
|
| Six Months |
| ||
|
| Ended June 30, 2019 |
| |||||
Operating revenues, net |
| $ | 139,501 |
|
| $ | 266,164 |
|
Expenses: |
|
| — |
|
|
| — |
|
Direct expenses |
|
| 129,319 |
|
|
| 266,368 |
|
Selling, general and administrative expenses |
|
| 14,746 |
|
|
| 36,228 |
|
Total operating expenses |
|
| 144,065 |
|
|
| 302,596 |
|
Loss on disposal of assets |
|
| (93 | ) |
|
| (42 | ) |
Equity in (income) loss of unconsolidated affiliates, net |
|
| (1,039 | ) |
|
| (2,400 | ) |
Operating (loss) income |
|
| (3,432 | ) |
|
| (33,990 | ) |
Interest expense |
|
| 3,927 |
|
|
| 12,093 |
|
Reorganization items, net |
|
| 26,503 |
|
|
| 28,103 |
|
Other income – net |
|
| (42 | ) |
|
| (226 | ) |
|
|
| 30,388 |
|
|
| 39,970 |
|
Loss before income taxes |
|
| (33,820 | ) |
|
| (73,960 | ) |
Income tax benefit |
|
| (2,443 | ) |
|
| (6,048 | ) |
Net loss |
| $ | (31,377 | ) |
| $ | (67,912 | ) |
CONDENSED COMBINED STATEMENTS OF CASH FLOWS
(Thousands of dollars)
(Unaudited)
|
| Six Months Ended June 30, |
| |
|
| 2019 |
| |
Operating activities: |
|
|
|
|
Net loss |
|
| (67,912 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
Depreciation and amortization |
|
| 29,799 |
|
Deferred income taxes |
|
| (6,492 | ) |
Loss (gain) on asset dispositions |
|
| (42 | ) |
Equity in (income) loss of unconsolidated affiliate, net |
|
| (2,400 | ) |
Inventory valuation reserves |
|
| 1,110 |
|
Changes in operating assets and liabilities |
|
| 19,751 |
|
Net cash used in operating activities |
|
| (26,186 | ) |
Investing activities: |
|
|
|
|
Purchase of property and equipment |
|
| (7,817 | ) |
Proceeds from asset dispositions |
|
| 1,235 |
|
Purchase of short-term investments |
|
| (183,421 | ) |
Proceeds from sale of short-term investments |
|
| 121,512 |
|
Payment of deposit on aircraft |
|
| (50 | ) |
Refund of deposit on aircraft |
|
| 503 |
|
Net cash used in investing activities |
|
| (68,038 | ) |
Financing activities: |
|
|
|
|
Debt issuance cost |
|
| (5,668 | ) |
Proceeds from Term Loan |
|
| 70,000 |
|
Net cash provided by financing activities |
|
| 64,332 |
|
Decrease in cash, cash equivalents and restricted cash |
|
| (29,892 | ) |
Cash, cash equivalents and restricted cash at the beginning of period |
|
| 47,865 |
|
Cash, cash equivalents and restricted cash end of period |
| $ | 17,973 |
|
19. REORGANIZATION ITEMS
ASC 852 requires that transactions and events directly associated with our Chapter 11 reorganization be distinguished from the ongoing operations of the business. The Company refers to “Reorganization items” on its condensed consolidated statements of earnings (loss) to reflect the revenues, expenses, gains and losses that are the direct result of the reorganization of the business consist of professional fees of $1.6 million for the three months ended March 31, 2019 and $26.5 million for the three months ended June 30, 2019.
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OFOF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis should be read in conjunction with (i) the accompanying unaudited condensed consolidated financial statements and the notes thereto (the “Notes”) and (ii) our Annual Report on Form 10-K for the year ended December 31, 2017,2018, including the audited consolidated financial statements and notes thereto, management’s discussion and analysis, and the risk factor disclosures contained therein.
Overview
As described further in Note 12,14, we are primarily a provider of helicopter transport services and derive most of our revenue from providing these services to the energy and medical industries. Our consolidated results of operations are principally driven by the following factors:
We expect the pending Chapter 11 Cases will impact our business. Certain of our customers have advised us that they will not enter into additional contracts with us during the Chapter 11 Cases. We also are expending substantial amounts of cash on professional fees relating to the reorganization process. For information on additional impacts of the Chapter 11 Cases, see (i) the balance of this Item 2, (ii) Note 2 and (iii) Item 1A of Part II of this report.
The level of offshore oil and gas exploration and production activities in the areas in which we operate. Operating revenues from our Oil and Gas segment relate substantially to operations in the Gulf of Mexico and a couple of our other key offshore markets. Many of the helicopters we have purchased recently are larger aircraft intended to service deepwater activities and the margins we earn on these aircraft are generally higher than on smaller aircraft. During periods when the level of offshore activity increases, demand for our offshore flight services typically increases, directly affecting our revenue and profitability. Also, during periods when deepwater offshore activity increases, the demand for our medium and heavy aircraft usually increases, creating a positive impact on revenue and earnings. Conversely, a reduction in offshore oil and gas activities generally, or deepwater offshore activity particularly, typically negatively impacts our aircraft utilization, flight volumes, and overall demand for our aircraft, thereby creating a negative impact on our revenue and earnings.
Patient transports and flight volume in our Air Medical segment. In the independent provider programs under our Air Medical segment, our revenue is directly dependent upon the number and length of patient transports provided in a given period, which is impacted primarily by the number of bases operated by us, competitive factors and weather. The volume of flight utilization of our aircraft by our customers under our traditional provider Air Medical programs also has a direct impact on the amount of revenue earned in a given period, although to a lesser degree than under our independent provider programs. Independent provider programs generated approximately 80%, 81%80%, 81% and 74% of our Air Medical segment revenues for the ninesix months ended SeptemberJune 30, 2018,2019, and the years ended December 31, 2017, 2016 and 2015, respectively,2018, with the balance of our Air Medical segment revenue attributable to our traditional provider programs.
Payor mix and reimbursement rates in our Air Medical segment. Under our independent provider programs, our revenue recognition, net of allowances, during any particular period is dependent upon the rate at which our various types of customers reimburse us for our Air Medical services, which we refer to as our “payor mix.” Reimbursement rates vary among payor types and typically the reimbursement rate of commercial insurers is higher than Medicare, Medicaid, and self-pay reimbursement rates. Moreover, Medicare and Medicaid reimbursement rates have decreased in recent years and our receipt of payments from these programs is subject to various regulatory and appropriations risks discussed in our periodic reports filed with the SEC. Changes during any particular period in our payor mix, reimbursement rates, or uncompensated care rates will have a direct impact on our revenues.
Direct expenses. Our business is capital-intensive and highly competitive. Salaries and aircraft maintenance comprise a large portion of our operating expenses. Our aircraft must be maintained to a high standard of quality and undergo periodic and routine maintenance procedures. Higher utilization of our aircraft will result in more frequent maintenance, resulting in higher maintenance costs. In periods of low flight activity, we continue to maintain our aircraft, consequently reducing our margins. In addition, we are also dependent upon pilots, mechanics, and medical crew to operate our business. To attract and retain qualified personnel, we must maintain competitive wages, which places downward pressure on our margins.
As noted above, the performance of our oil and gas operations is largely dependent upon the level of offshore oil and gas activities,
Voluntary Reorganization under Chapter 11
On March 14, 2019, the Debtors filed voluntary petitions in the Bankruptcy Court seeking relief under the Bankruptcy Code. The Chapter 11 Cases are being jointly administered under the caption "In re PHI, Inc., et al., Case No. 19-30923." Documents filed on the docket of and other information related to the Chapter 11 Cases are available free of charge online at https://restructuring.primeclerk.com/PHI. Documents and other information available on such website are not part of this document and shall not be deemed incorporated by reference in this document. The Debtors are authorized to continue to operate their businesses and manage their properties as "debtors in possession" under the jurisdiction of the Bankruptcy Code and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. Certain subsidiaries of PHI (collectively, the "Non-Filing Entities") were not part of the Chapter 11 Cases. The Non-Filing Entities will continue to operate their businesses in the normal course and their results are included in our interim Unaudited Condensed Consolidated Financial Statements.
Subject to certain exceptions, under the Bankruptcy Code, the filing of the Chapter 11 Cases automatically enjoined, or stayed, the continuation of most judicial or administrative proceedings or filing of other actions against the Debtors or their property to recover, collect or secure a claim arising prior to the commencement date of the cases. Accordingly, except with respect to certain payments required to be made as adequate protection under the Bankruptcy Code and applicable Bankruptcy Court orders, any efforts to enforce payment obligations under the Company's pre-petition debt instruments are automatically stayed as a result of the filing of the Chapter 11 Cases and are subject to the applicable provisions of the Bankruptcy Code.
Our Plan has been confirmed, but has not yet been implemented. We plan to implement our Plan by the end of August 2019, but cannot assure you of this. Unless and until our Plan is implemented, the Company's operations and ability to develop and execute its business plan are subject to the risks and uncertainties associated with the Chapter 11 process. As a result of these risks and uncertainties, the amount and composition of the Company's assets, liabilities, officers and directors could be significantly different following the outcome of the Chapter 11 Cases. The description of the Company's operations, properties, liquidity, capital resources, capital structure, ownership or governance included in this or other of our periodic reports or in the Plan may not accurately reflect its operations, properties, liquidity, capital resources, capital structure, ownership or governance following resolution of the Chapter 11 Cases.
The accompanying interim Unaudited Condensed Consolidated Financial Statements have been prepared assuming that PHI will successfully emerge from bankruptcy and continue as a going concern and contemplates continuity of operations, realization of assets and satisfaction of liabilities and commitments in the normal course of business. Our ability to continue as a going concern is contingent upon our ability to successfully implement our Plan, among other factors. The risks and uncertainties surrounding our Chapter 11 proceedings raise substantial doubt as to our ability to continue as a going concern.
Furthermore, the realization of assets and the satisfaction of liabilities are subject to uncertainty. While operating as debtors-in-possession under Chapter 11, the Debtors may sell or otherwise dispose of or liquidate assets or settle liabilities, subject to the approval of the Bankruptcy Court or as otherwise permitted in the ordinary course of business and subject to restrictions of our term loan financing (see Note 6 of Notes to our Condensed Consolidated Financial Statements) and applicable orders of the Bankruptcy Court, for amounts other than those reflected in the accompanying Unaudited Condensed Consolidated Financial Statements. Any such actions occurring during the Chapter 11 Cases confirmed by the Bankruptcy Court could materially impact the amounts and classifications of assets and liabilities reported in PHIs' interim Unaudited Condensed Consolidated Financial Statements.
Under the absolute priority scheme established by the Bankruptcy Code, unless our creditors agree otherwise, all of our pre-petition liabilities and post-petition liabilities must be satisfied in full before the holders of our existing common stock may receive any distribution or retain any property under a plan of reorganization. For more information, see Note 2 to our Condensed Consolidated Financial Statements.
The following tables present operating revenues, expenses, and earnings, along with certain non-financial operational statistics, for the quarters ended SeptemberJune 30, 20182019 and 2017. 2018.
|
| Quarter Ended June 30, |
|
| Favorable (Unfavorable) |
| ||||||
|
| 2019 |
|
| 2018 |
|
|
|
|
| ||
|
| (Thousands of dollars, except flight hours, patient transports, and aircraft) |
| |||||||||
Segment operating revenues |
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas |
| $ | 90,023 |
|
| $ | 97,068 |
|
| $ | (7,045 | ) |
Air Medical |
|
| 69,507 |
|
|
| 67,151 |
|
|
| 2,356 |
|
Technical Services |
|
| 5,642 |
|
|
| 5,024 |
|
|
| 618 |
|
Total operating revenues, net |
|
| 165,172 |
|
|
| 169,243 |
|
|
| (4,071 | ) |
Segment direct expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas (1) |
|
| 89,061 |
|
|
| 94,442 |
|
|
| 5,381 |
|
Air Medical |
|
| 59,310 |
|
|
| 56,776 |
|
|
| (2,534 | ) |
Technical Services |
|
| 4,104 |
|
|
| 3,784 |
|
|
| (320 | ) |
Total direct expenses |
|
| 152,475 |
|
|
| 155,002 |
|
|
| 2,527 |
|
Segment selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas |
|
| 4,672 |
|
|
| 4,400 |
|
|
| (272 | ) |
Air Medical |
|
| 4,141 |
|
|
| 3,254 |
|
|
| (887 | ) |
Technical Services |
|
| 152 |
|
|
| 340 |
|
|
| 188 |
|
Total selling, general and administrative expenses |
|
| 8,965 |
|
|
| 7,994 |
|
|
| (971 | ) |
Total segment direct and selling, general and administrative expenses |
|
| 161,440 |
|
|
| 162,996 |
|
|
| 1,556 |
|
Net segment (loss) profit |
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas |
|
| (3,710 | ) |
|
| (1,774 | ) |
|
| (1,936 | ) |
Air Medical |
|
| 6,056 |
|
|
| 7,121 |
|
|
| (1,065 | ) |
Technical Services |
|
| 1,386 |
|
|
| 900 |
|
|
| 486 |
|
Total net segment profit (2) |
|
| 3,732 |
|
|
| 6,247 |
|
|
| (2,515 | ) |
Other, net (3) |
|
| 428 |
|
|
| (193 | ) |
|
| 621 |
|
Unallocated selling, general and administrative costs (4) |
|
| (8,626 | ) |
|
| (6,491 | ) |
|
| (2,135 | ) |
Reorganization items, net |
|
| (26,503 | ) |
|
| — |
|
|
| (26,503 | ) |
Interest expense |
|
| (3,927 | ) |
|
| (8,340 | ) |
|
| 4,413 |
|
(Loss) earnings before income taxes |
|
| (34,896 | ) |
|
| (8,777 | ) |
|
| (26,119 | ) |
Income tax (benefit) expense |
|
| (2,819 | ) |
|
| (1,684 | ) |
|
| 1,135 |
|
Net loss |
| $ | (32,077 | ) |
| $ | (7,093 | ) |
| $ | (24,984 | ) |
Flight hours: |
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas |
|
| 18,149 |
|
|
| 22,089 |
|
|
| (3,940 | ) |
Air Medical (5) |
|
| 10,716 |
|
|
| 9,992 |
|
|
| 724 |
|
Technical Services |
|
| 82 |
|
|
| 38 |
|
|
| 44 |
|
Total |
|
| 28,947 |
|
|
| 32,119 |
|
|
| (3,172 | ) |
Air Medical Transports (6) |
|
| 5,707 |
|
|
| 4,925 |
|
|
| 782 |
|
Quarter Ended September 30, | Favorable (Unfavorable) | |||||||||||
2018 | 2017 | |||||||||||
(Thousands of dollars, except flight hours, patient transports, and aircraft) | ||||||||||||
Segment operating revenues | ||||||||||||
Oil and Gas | $ | 93,338 | $ | 75,700 | $ | 17,638 | ||||||
Air Medical | 70,192 | 70,280 | (88 | ) | ||||||||
Technical Services | 5,257 | 4,187 | 1,070 | |||||||||
Total operating revenues, net | 168,787 | 150,167 | 18,620 | |||||||||
Segment direct expenses | ||||||||||||
Oil and Gas (1) | 94,832 | 81,467 | (13,365 | ) | ||||||||
Air Medical | 60,358 | 51,120 | (9,238 | ) | ||||||||
Technical Services | 4,892 | 3,761 | (1,131 | ) | ||||||||
Total direct expenses | 160,082 | 136,348 | (23,734 | ) | ||||||||
Segment selling, general and administrative expenses | ||||||||||||
Oil and Gas | 4,321 | 1,148 | (3,173 | ) | ||||||||
Air Medical | 3,666 | 3,136 | (530 | ) | ||||||||
Technical Services | 356 | 338 | (18 | ) | ||||||||
Total segment selling, general and administrative expenses | 8,343 | 4,622 | (3,721 | ) | ||||||||
Total segment direct and selling, general and administrative expenses | 168,425 | 140,970 | (27,455 | ) | ||||||||
Net segment (loss) profit | ||||||||||||
Oil and Gas | (5,815 | ) | (6,915 | ) | 1,100 | |||||||
Air Medical | 6,168 | 16,024 | (9,856 | ) | ||||||||
Technical Services | 9 | 88 | (79 | ) | ||||||||
Total net segment profit (2) | 362 | 9,197 | (8,835 | ) | ||||||||
Other, net (3) | 1,845 | 710 | 1,135 | |||||||||
Unallocated selling, general and administrative costs (4) | (7,912 | ) | (6,779 | ) | (1,133 | ) | ||||||
Interest expense | (8,357 | ) | (8,027 | ) | (330 | ) | ||||||
(Loss) earnings before income taxes | (14,062 | ) | (4,899 | ) | (9,163 | ) | ||||||
Income tax benefit | (2,531 | ) | (1,622 | ) | 909 | |||||||
Net loss | $ | (11,531 | ) | $ | (3,277 | ) | $ | (8,254 | ) | |||
Flight hours: | ||||||||||||
Oil and Gas | 20,540 | 21,178 | (638 | ) | ||||||||
Air Medical (5) | 10,277 | 9,743 | 534 | |||||||||
Technical Services | 83 | — | 83 | |||||||||
Total | 30,900 | 30,921 | (21 | ) | ||||||||
Air Medical Transports (6) | 5,311 | 5,162 | 149 |
(1) | Includes Equity in gain/loss of unconsolidated affiliate. |
(2) | Total net segment profit has not been prepared in accordance with |
|
| Quarter Ended June 30, |
| |||||
|
| 2019 |
|
| 2018 |
| ||
Total net segment profit |
| $ | 3,732 |
|
| $ | 6,247 |
|
Other, net |
|
| 428 |
|
|
| (193 | ) |
Unallocated selling, general and administrative costs |
|
| (8,626 | ) |
|
| (6,491 | ) |
Reorganization items, net |
|
| (26,503 | ) |
|
|
|
|
Interest expense |
|
| (3,927 | ) |
|
| (8,340 | ) |
(Loss) before income taxes |
| $ | (34,896 | ) |
| $ | (8,777 | ) |
Quarter Ended September 30, | ||||||||
2018 | 2017 | |||||||
Total net segment profit | $ | 362 | $ | 9,197 | ||||
Other, net | 1,845 | 710 | ||||||
Unallocated selling, general and administrative costs | (7,912 | ) | (6,779 | ) | ||||
Interest expense | (8,357 | ) | (8,027 | ) | ||||
(Loss) before income taxes | $ | (14,062 | ) | $ | (4,899 | ) |
(3) | Includes gains on disposition of property and equipment, asset impairments, and other income. |
(4) | Represents corporate overhead expenses not |
(5) | Flight hours include |
(6) | Represents individual patient transports for the period. |
The following tables present operating revenues, expenses, and earnings, along with certain non-financial operational statistics, for the ninesix months ended SeptemberJune 30, 20182019 and 2017. 2018.
|
| Six Months Ended June 30, |
|
| Favorable (Unfavorable) |
| ||||||
|
| 2019 |
|
| 2018 |
|
|
|
|
| ||
|
| (Thousands of dollars, except flight hours, patient transports, and aircraft) |
| |||||||||
Segment operating revenues |
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas |
| $ | 174,969 |
|
| $ | 192,702 |
|
| $ | (17,733 | ) |
Air Medical |
|
| 126,153 |
|
|
| 124,139 |
|
|
| 2,014 |
|
Technical Services |
|
| 15,940 |
|
|
| 12,766 |
|
|
| 3,174 |
|
Total operating revenues, net |
|
| 317,062 |
|
|
| 329,607 |
|
|
| (12,545 | ) |
Segment direct expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas (1) |
|
| 179,031 |
|
|
| 190,985 |
|
|
| 11,954 |
|
Air Medical |
|
| 116,391 |
|
|
| 110,608 |
|
|
| (5,783 | ) |
Technical Services |
|
| 12,568 |
|
|
| 9,671 |
|
|
| (2,897 | ) |
Total direct expenses |
|
| 307,990 |
|
|
| 311,264 |
|
|
| 3,274 |
|
Segment selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas |
|
| 9,432 |
|
|
| 9,321 |
|
|
| (111 | ) |
Air Medical |
|
| 7,433 |
|
|
| 6,421 |
|
|
| (1,012 | ) |
Technical Services |
|
| 300 |
|
|
| 710 |
|
|
| 410 |
|
Total selling, general and administrative expenses |
|
| 17,165 |
|
|
| 16,452 |
|
|
| (713 | ) |
Total segment direct and selling, general and administrative expenses |
|
| 325,155 |
|
|
| 327,716 |
|
|
| 2,561 |
|
Net segment (loss) profit |
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas |
|
| (13,494 | ) |
|
| (7,604 | ) |
|
| (5,890 | ) |
Air Medical |
|
| 2,329 |
|
|
| 7,110 |
|
|
| (4,781 | ) |
Technical Services |
|
| 3,072 |
|
|
| 2,385 |
|
|
| 687 |
|
Total net segment (loss) profit (2) |
|
| (8,093 | ) |
|
| 1,891 |
|
|
| (9,984 | ) |
Other, net (3) |
|
| 337 |
|
|
| (2,112 | ) |
|
| 2,449 |
|
Unallocated selling, general and administrative costs (4) |
|
| (25,293 | ) |
|
| (13,492 | ) |
|
| (11,801 | ) |
Reorganization items, net |
|
| (28,103 | ) |
|
| — |
|
|
| (28,103 | ) |
Interest expense |
|
| (12,093 | ) |
|
| (16,537 | ) |
|
| 4,444 |
|
(Loss) earnings before income taxes |
|
| (73,245 | ) |
|
| (30,250 | ) |
|
| (42,995 | ) |
Income tax benefit |
|
| (5,927 | ) |
|
| (6,175 | ) |
|
| (248 | ) |
Net loss |
| $ | (67,318 | ) |
| $ | (24,075 | ) |
| $ | (43,243 | ) |
Flight hours: |
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas |
|
| 33,779 |
|
|
| 42,978 |
|
|
| (9,199 | ) |
Air Medical (5) |
|
| 19,304 |
|
|
| 18,822 |
|
|
| 482 |
|
Technical Services |
|
| 463 |
|
|
| 479 |
|
|
| (16 | ) |
Total |
|
| 53,546 |
|
|
| 62,279 |
|
|
| (8,733 | ) |
Air Medical Transports (6) |
|
| 10,206 |
|
|
| 9,324 |
|
|
| 882 |
|
Aircraft operated at period end: (7) |
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas |
|
| 121 |
|
|
| 125 |
|
|
|
|
|
Air Medical |
|
| 111 |
|
|
| 109 |
|
|
|
|
|
Technical Services |
|
| 4 |
|
|
| 6 |
|
|
|
|
|
Total |
|
| 236 |
|
|
| 240 |
|
|
|
|
|
Nine Months Ended September 30, | Favorable (Unfavorable) | |||||||||||
2018 | 2017 | |||||||||||
(Thousands of dollars, except flight hours, patient transports, and aircraft) | ||||||||||||
Segment operating revenues | ||||||||||||
Oil and Gas | $ | 286,046 | $ | 222,098 | $ | 63,948 | ||||||
Air Medical | 194,331 | 192,840 | 1,491 | |||||||||
Technical Services | 18,023 | 16,271 | 1,752 | |||||||||
Total operating revenues, net | 498,400 | 431,209 | 67,191 | |||||||||
Segment direct expenses | ||||||||||||
Oil and Gas (1) | 285,818 | 236,878 | (48,940 | ) | ||||||||
Air Medical | 170,966 | 152,363 | (18,603 | ) | ||||||||
Technical Services | 14,563 | 12,565 | (1,998 | ) | ||||||||
Total direct expenses | 471,347 | 401,806 | (69,541 | ) | ||||||||
Segment selling, general and administrative expenses | ||||||||||||
Oil and Gas | 13,642 | 4,501 | (9,141 | ) | ||||||||
Air Medical | 10,087 | 9,280 | (807 | ) | ||||||||
Technical Services | 1,066 | 1,032 | (34 | ) | ||||||||
Total segment selling, general and administrative expenses | 24,795 | 14,813 | (9,982 | ) | ||||||||
Total segment direct and selling, general and administrative expenses | 496,142 | 416,619 | (79,523 | ) | ||||||||
Net segment (loss) profit | ||||||||||||
Oil and Gas | (13,414 | ) | (19,281 | ) | 5,867 | |||||||
Air Medical | 13,278 | 31,197 | (17,919 | ) | ||||||||
Technical Services | 2,394 | 2,674 | (280 | ) | ||||||||
Total net segment profit (2) | 2,258 | 14,590 | (12,332 | ) | ||||||||
Other, net (3) | (272 | ) | 2,471 | (2,743 | ) | |||||||
Unallocated selling, general and administrative costs (4) | (21,404 | ) | (23,878 | ) | 2,474 | |||||||
Interest expense | (24,894 | ) | (24,305 | ) | (589 | ) | ||||||
(Loss) earnings before income taxes | (44,312 | ) | (31,122 | ) | (13,190 | ) | ||||||
Income tax benefit | (8,705 | ) | (9,324 | ) | (619 | ) | ||||||
Net loss | $ | (35,607 | ) | $ | (21,798 | ) | $ | (13,809 | ) | |||
Flight hours: | ||||||||||||
Oil and Gas | 63,518 | 58,335 | 5,183 | |||||||||
Air Medical (5) | 29,100 | 27,787 | 1,313 | |||||||||
Technical Services | 562 | 511 | 51 | |||||||||
Total | 93,180 | 86,633 | 6,547 | |||||||||
Air Medical Transports (6) | 14,635 | 14,580 | 55 | |||||||||
Aircraft operated at period end: (7) | ||||||||||||
Oil and Gas (8) | 126 | 126 | ||||||||||
Air Medical (9) | 108 | 105 | ||||||||||
Technical Services | 6 | 6 | ||||||||||
Total | 240 | 237 |
(1) | Includes Equity in gain/loss of unconsolidated affiliate. |
(2) | Total net segment profit has not been prepared in accordance with |
|
| Six Months Ended June 30, |
| |||||
|
| 2019 |
|
| 2018 |
| ||
Total net segment (loss) profit |
| $ | (8,093 | ) |
| $ | 1,891 |
|
Other, net |
|
| 337 |
|
|
| (2,112 | ) |
Unallocated selling, general and administrative costs |
|
| (25,293 | ) |
|
| (13,492 | ) |
Reorganization items, net |
|
| (28,103 | ) |
|
|
|
|
Interest expense |
|
| (12,093 | ) |
|
| (16,537 | ) |
(Loss) before income taxes |
| $ | (73,245 | ) |
| $ | (30,250 | ) |
Nine Months Ended September 30, | ||||||||
2018 | 2017 | |||||||
Total net segment profit | $ | 2,258 | $ | 14,590 | ||||
Other, net | (272 | ) | 2,471 | |||||
Unallocated selling, general and administrative costs | (21,404 | ) | (23,878 | ) | ||||
Interest expense | (24,894 | ) | (24,305 | ) | ||||
(Loss) before income taxes | $ | (44,312 | ) | $ | (31,122 | ) |
(3) | Includes gains on disposition of property and equipment, asset impairments, and other income. |
(4) | Represents corporate overhead expenses not |
(5) | Flight hours include |
(6) | Represents individual patient transports for the period. |
(7) | Represents the total number of aircraft available for use, not all of which were deployed in service as of the date indicated. |
Operating Revenues - Operating revenues for the three months ended SeptemberJune 30, 20182019 were $168.8$165.2 million, compared to $150.2$169.3 million for the three months ended SeptemberJune 30, 2017, an increase2018, a decrease of $18.6$4.1 million. Oil and Gas segment operating revenues increased $17.6decreased $7.1 million for the three months ended SeptemberJune 30, 2018.2019. As discussed further below, this increasedecrease is attributable principally to revenue derived fromdecreases in both our recently-acquired HNZ Offshore BusinessInternational and secondarily from an increase in revenues from our legacy international Oil and Gas operations, partially offset by a decrease in revenues from our Gulf of Mexico operations. Air Medical segment operating revenues remained basically unchanged at $70.2 million for the three months ended September 30, 2018, and September 30, 2017.increased by $2.4 million. Technical Services segment operating revenues increased $1.1$0.6 million.
Total flight hours for the three months ended SeptemberJune 30, 20182019 were 30,90028,947 compared to 30,92132,119 for the three months ended SeptemberJune 30, 2017.2018. As explained in more detail below, Oil and Gas segment flight hours decreased 6383,940 hours. The increase of 1,900 flight hours in our international operations was more than offset by a decrease of 2,538 flight hours in the Gulf of Mexico operations. Air Medical segment flight hours increased 534724 hours for the three months ended SeptemberJune 30, 2018,2019, due to increasedan increase of 982 flight hours for both our independent provider programs and a decrease of 258 flight hours in our traditional provider programs. As discussed further below, individual patient transports in the Air Medical segment were 5,3115,707 for the three months ended SeptemberJune 30, 2018,2019, compared to transports of 5,1624,925 for the three months ended SeptemberJune 30, 2017.
Direct Expenses -
Direct operating expense wasSelling, General and Administrative Expenses -
Selling, general and administrative expenses wereLoss/Gain on Disposal of Assets, Net -
The gain on asset dispositions wasEquity in (Gain)(Income) Loss of Unconsolidated Affiliates -
Interest Expense - Interest expense was $3.9 million for the three months ended SeptemberJune 30, 2017. See Note 13. We had equity in income of our unconsolidated Australian affiliate of $0.62019 and $8.3 million for the three months ended June 30, 2018. The $4.4 million decrease is due a $6.6 million decrease in interest expense for our Senior notes that matured March 15, 2019 (attributable to classifying all accrued and unpaid interest as liabilities subject to compromise) and $1.5 million decrease in interest expense for our revolving credit facility that was refinanced September 30, 2017.28, 2018. These reductions were offset by a $2.0 million increase in interest for our term loan from Thirty-Two, LLC, and a $1.5 million increase in interest for our Blue Torch Loan. Other items increased $0.2 million, net.
Reorganization Expenses. As a result of our acquisitionfiling the Chapter 11 Cases in mid-March 2019, we incurred net reorganization expenses of $26.5 million during the HNZ Offshore Business in late 2017, this entity has been included in our consolidated operations for allquarter ended June 30, 2019, most of which related to the payment of professionals. We did not incur any such expenses during the quarter ended June 30, 2018.
Other Loss (Income) - Interest Expense -Interest expenseOther Income, net was $8.4$0.3 million for the three months ended SeptemberJune 30, 2018 and $8.0 million the three months ended September 30, 2017, reflecting higher rates payable on our revolving credit facility borrowings.
Income Tax Benefit
- Income tax benefit for the three months endedNet Loss - Net loss for the three months ended SeptemberJune 30, 20182019 was $11.5$32.1 million compared to net loss of $3.3$7.1 million for the three months ended SeptemberJune 30, 2017.2018. Loss before income taxes for the three months ended SeptemberJune 30, 20182019 was $14.1$34.9 million compared to loss before income taxes of $4.9$8.8 million for the same period in 2017.2018. Loss per diluted share was $0.73$2.03 for the current quarter compared to loss per diluted share of $0.21$0.45 for the prior year quarter. The $26.1 million increase in loss before
income taxes for the quarter ended June 30, 2019 is primarily attributable to $26.5 million of reorganization items related to our restructuring efforts, an increase in segment loss and a decrease in segment profit for our Oil and Gas Operations and Air Medical Operations, respectively, as discussed further below. These items were partially offset by a decrease in interest expense. We had $15.8 million weighted average diluted common shares outstanding for the three months ended June 30, 2019 and 2018, respectively.
Segment Discussion
Oil and Gas - Oil and Gas segment revenues were $90.0 million for the three months ended June 30, 2019, compared to $97.1 million for the three months ended June 30, 2018, a decrease of $7.1 million. Revenues from our Gulf of Mexico operations decreased $6.0 million, primarily due to fewer aircraft on contract. Revenues from our international operations decreased $1.1 million during the quarter ended June 30, 2019, primarily due to lower flight hours in Australia, New Zealand, Trinidad, Canada, Israel, and the cessation of a contract in Papua New Guinea. These decreases were partially offset by revenue increases in Ghana due to increased flight hours. Our Oil and Gas segment revenues are primarily driven by the amount of contracted aircraft flight hours and prevailing rates. 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 18,149 for the most recently completed quarter compared to 22,089 for the same quarter in the prior year, a decrease of 3,940 flight hours. This decrease is attributable to 2,983 fewer flight hours in our Gulf of Mexico operations and 957 fewer flight hours from our international operations.
The number of aircraft available for use in the segment was 121 at June 30, 2019, compared to 125 at June 30, 2018. During the quarter ended June 30, 2019, we transferred one medium aircraft to the Air Medical segment.
Direct expense in our Oil and Gas segment was $89.1 million for the three months ended June 30, 2019, compared to $94.4 million for the three months ended June 30, 2018, a decrease of $5.3 million. Employee compensation expense decreased $0.9 million, primarily due to a decrease in labor for aircraft maintenance. Equity in income of our Ghanaian affiliate increased $1.0 million due to increased flight hours attributable to increased drilling activity in the region. Aircraft rent expense decreased $0.9 million due to lease terminations, and fuel expense decreased $0.9 million due to lower flight hours. Spare parts, repairs, and warranty costs decreased $2.9 million due to lower flight hours. These decreases were partially offset by an increase in aircraft depreciation expense of $1.2 million. Other items increased $.1 million, net.
Selling, general and administrative segment expenses increased slightly at $4.7 million for the three months ended June 30, 2019 compared to $4.4 million for the three months ended June 30, 2018. The $0.3 million increase is due to the accrual of compensation expense under our KEIP (See Note 2 Bankruptcy Filing).
Oil and Gas segment loss was $3.7 million for the three months ended June 30, 2019, compared to a loss of $1.8 million for the three months ended June 30, 2018. The $1.9 million increase in segment loss is attributable to the $7.1 million decrease in segment revenues, partially offset by the $5.2 million decrease in aggregate segment expenses.
Air Medical - Air Medical segment revenues were $69.5 million for the three months ended June 30, 2019 compared to $67.1 million for the three months ended June 30, 2018, an increase of $2.4 million. Revenue from our independent provider model increased $2.1 million. Revenues from our traditional provider and other air medical segment operations increased $0.3 million. Revenue from operating bases opened [during or] after the second quarter of 2018 were $6.4 million, but this increase was partially offset by revenue decreases of $4.0 million from existing and closed bases. We experienced an increase in medicare and self-pay transports, compared to the prior year quarter. Patient transports were 5,707 for the three months ended June 30, 2019, compared to 4,925 for the same period in the prior year. Patient transports for new bases increased by 677 transports while transports for existing and closed bases increased by 105 transports, net.
The number of aircraft available for use in the segment was 111 at June 30, 2019 compared to 109 at June 30, 2018. During the quarter ended June 30, 2019, we added one medium aircraft transferred from the Oil & Gas segment.
Direct expense in our Air Medical segment was $59.3 million for the three months ended June 30, 2019, compared to $56.8 million for the three months ended June 30, 2018, an increase of $2.5 million. This increase is due primarily to $5.8 million in increased expenses related to new bases that were not operating for part or all of the quarter in the prior year. This increase in expense was partially offset by decreases in cost for existing bases of $3.3 million. Spare parts and repairs decreased $2.2 million, depreciation expense decreased $0.5 million, and fuel decreased $0.2 million. Other items for existing bases decreased $0.4 million, net.
Selling, general and administrative segment expenses were $4.1 million for the three months ended June 30, 2019, compared to $3.3 million for the three months ended June 30, 2018. The $0.8 million increase is due to $0.5 million related to
compensation expense under our KEIP and KERP (see Note 2 Bankruptcy Filing), $0.1 million related to other equity-based compensation expense, and $0.2 million for other payroll items, net.
Air Medical segment profit was $6.1 million for the three months ended June 30, 2019, compared to a segment profit of $7.1 million for the three months ended June 30, 2018. The $1.0 million decrease in profit is attributable to a decrease in profit from our independent provider model bases of $2.4 million, partially offset by an increase in profit from our traditional bases and other air medical programs, net.
Technical Services - Technical Services segment revenues were $5.6 million for the three months ended June 30, 2019, compared to $5.0 million for the three months ended June 30, 2018. The $0.6 million increase in revenue is due to an increase in revenue related to government work of $0.5 million, and an increase in revenue from Helipass of $0.1 million. Direct expenses increased to $4.1 million for the three months ended June 30, 2019, compared to $3.8 million for the same period in 2018. Technical Services segment earnings was $1.4 million for the three months ended June 30, 2019, compared to $0.9 million for the three months ended June 30, 2018, and is primarily attributable to the above-mentioned revenue increases.
For additional information on our segments, see Note 14.
Six Months Ended June 30, 2019 compared with Six Months Ended June 30, 2018
Combined Operations
Operating Revenues - Operating revenues for the six months ended June 30, 2019 were $317.1 million, compared to $329.6 million for the six months ended June 30, 2018, a decrease of $12.5 million. Oil and Gas segment operating revenues decreased $17.7 million for the six months ended June 30, 2019. As discussed further below, this increase is attributable to decreases in both our International and Gulf of Mexico operations. Air Medical segment operating revenues increased $2.0 million due principally to an increase in revenues from both our independent provider operations and traditional provider programs. Technical Services segment operating revenues increased $3.2 million.
Total flight hours for the six months ended June 30, 2019 were 53,546 compared to 62,279 for the six months ended June 30, 2018. As explained in more details below, Oil and Gas segment flight hours decreased 9,199 hours. Air Medical segment flight hours increased 482 hours for the six months ended June 30, 2019, due to increased flight hours for our independent provider program, partially offset by a decrease in fight hours for our traditional provider programs. As discussed further below, individual patient transports in the Air Medical segment were 10,206 for the six months ended June 30, 2019, compared to transports of 9,324 for the six months ended June 30, 2018.
Direct Expenses - Direct operating expense was $308.0 million for the six months ended June 30, 2019, compared to $311.2 million for the six months ended June 30, 2018, a decrease of $3.2 million. Spare parts, repairs, and warranty costs decreased $5.7 million. Equity in income of our Ghanaian affiliate increased $2.4 million. Fuel expense decreased $1.8 million due to lower flight hours, aircraft rent decreased $1.4 million, and aircraft insurance decreased $0.5 million. These decreases were partially offset by a $4.8 million increase in employee compensation costs, primarily due to staffing of new bases in our Air Medical segment and partially due to expenses under the KERP, see Note 2. Employee compensation expense represented approximately 47% and 45% of total direct expense for the six-month periods ended June 30, 2019 and 2018, respectively. Cost of goods sold increased $3.7 million due to government work in the Technical Services segment. Other items increased $0.1 million, net.
Selling, General and Administrative Expenses - Selling, general and administrative expenses were $42.5 million for the six months ended June 30, 2019, compared to $29.9 million for the six months ended June 30, 2018. The $12.6 million increase is primarily due to costs associated with our restructuring efforts. These items include a $3.9 million increase in compensation expense arising under our KEIP and KERP (see Note 2 Bankruptcy Filing), a $3.3 million increase in consulting fees, a $4.2 million increase in attorney fees, and a $1.8 million increase in severance pay due to a voluntary early retirement plan offered to certain of our employees. Other items decreased $0.6 million, net.
Loss/Gain on Disposal of Assets, Net - The gain on asset dispositions for the six months ended June 30, 2019 was less than $0.1 million. For the six months ended June 30, 2018, we recorded a loss on assets dispositions $0.7 million. See Note 10.
Equity in (Income) Loss of Unconsolidated Affiliate - Equity in the income of our unconsolidated affiliates attributable to our investment in a Ghanaian entity was $2.4 million for the six months ended June 30, 2019, comparted to less than $0.1 million for the six months ended June 30, 2018. The $2.4 million increase is primarily attributable to increased flight hours due to additional drilling activity in the region. See Note 15.
Interest Expense -Interest expense was $12.1 million for the six months ended June 30, 2019 compared to $16.5 million for the six months ended June 30, 2018. The $4.4 million decrease is due to a $7.7 million reduction in interest expense for our senior notes that matured March 15, 2019 (attributable to classifying all accrued and unpaid interest as liability subject to compromise) and a $2.7 million decrease in interest expense for our revolving credit facility that was refinanced September 28, 2018. These reductions were offset by a $3.9 million increase in interest for our term loan from Thirty-Two, LLC, and a $1.8 million increase in interest for our Blue Torch Loan. Other items increased $0.3 million, net.
Reorganization Expenses. As a result of filing the Chapter 11 Cases in mid-March 2019, we incurred net reorganization expenses of $28.1 million during the six months ended June 30, 2019, most of which related to the payment of professionals. We did not incur any such expenses during the six months ended June 30, 2018.
Other (Income) Loss - Other income, net was $0.3 million for the six months ended June 30, 2019 compared to other loss, net of $1.4 million for the same period in 2018. Exchange losses decreased $1.5 million and losses on sales of investments decreased $0.6 million. These increases to income were offset by a reduction in interest income of $0.4 million due to lower investment balances.
Income Tax benefit - Income tax benefit for the six months ended June 30, 2019 was $5.9 million compared to income tax benefit of $6.2 million for the six months ended June 30, 2019. Our $5.9 million income tax benefit for the six months ended June 30, 2019 is attributable to our loss before income taxes of $73.2 million. Our effective tax rate was 8.1% and 20.4% for the six months ended June 30, 2019 and June 30, 2018, respectively. The decrease in the effective rate for the six months ended June 30, 2019 as compared to the six months ended June 30, 2018 is primarily the result of non-deductible professional fees associated with the Chapter 11 Cases.
Net Loss - Net loss for the six months ended June 30, 2019 was $67.3 million compared to net loss of $24.1 million for the six months ended June 30, 2018. Loss before income taxes for the six months ended June 30, 2019 was $73.2 million compared to loss before income taxes of $30.3 million for the same period in 2018. Loss per diluted share was $4.25 for the six months ended June 30, 2019 compared to loss per diluted share of $1.52 for the prior year six months. The increase in loss before income taxes for the quartersix months ended SeptemberJune 30, 20182019 is primarily attributable principally to increased expensesthe reorganization items related to our restructuring efforts, an increase in our Oil & Gas segment loss and a decrease in our Air Medical Segment.segment profit, as discussed further below. We had 15.8 million weighted average diluted common shares outstanding for the quarterssix months ended SeptemberJune 30, 2019 and 2018, and 2017.respectively.
Segment Discussion
Oil and Gas -
Oil and Gas segment revenues wereOil and Gas segment flight hours were 20,54033,779 for the most recently completed quartercurrent six months compared to 21,17842,978 for the same quartersix months in the prior year, ayear. Of this decrease of 638 flight hours. This decrease is attributable to 2,538 fewer9,199 flight hours, in7,060 were attributable to our Gulf of Mexico operations which was partially offset by an increase of 1,108 flightand 2,139 hours were attributable to our recently-acquired HNZInternational operationsand an increase due to lower utilization of 792 flight hours inall of our legacy international operations.
The number of aircraft available for use in the segment was 126121 at SeptemberJune 30, 2018,2019, compared to 125 at June 30,December 31, 2018. We disposed ofterminated a lease on one heavy aircraft and transferred two light and one medium aircraft duringto the quarter. Transfers between segments account for the remainder.
Direct expense in our Oil and Gas segment was $94.8$179.0 million for the threesix months ended SeptemberJune 30, 2018,2019, compared to $81.5$191.0 million for the threesix months ended SeptemberJune 30, 2017, an increase2018, a decrease of $13.3$12.0 million. We experienced an increasea decreased in aircraftspare parts and repairs expense of $4.3 million, a decrease in fuel expenses of $1.9 million, and a decrease in warranty costscost of $2.3$1.5 million, all due to lower flight hours. Aircraft rent decreased $2.0 million due to increased flight hours for oura return of a heavy aircraft and the additiona newly negotiated lease rate. Equity in income of a new warranty program for our medium aircraft. Salaries and wagesGhanaian entity increased by $7.8 million, primarily due to our recent HNZ acquisition. Fuel expense increased $1.9 million, principally due to our expanded international operations. Aircraft depreciation increased $2.5 million, partly due to the aircraft acquired in the HNZ acquisition. Helicopter rent expense decreased $1.3 million, due to the termination of the heavy aircraft leases mentioned above.$2.4 million. Other items increased $0.1$0.2 million, net.
Selling, general and administrative segment expenses were $4.3$9.4 million for the threesix months ended SeptemberJune 30, 20182019 and $1.1$9.3 million for the threesix months ended SeptemberJune 30, 2017. The $3.22018. KEIP and KERP expense increased $0.4 million increase is mainly attributable to an increase(see Note 2 Bankruptcy), partially offset by a $0.2 million decrease in salaries and wages and other administrative costs due to our newly-acquired HNZ international operations.
Oil and Gas segment loss was $5.8$13.4 million for the threesix months ended SeptemberJune 30, 2018,2019, compared to a loss of $6.9$7.6 million for the threesix months ended SeptemberJune 30, 2017.2018. The $1.1$5.8 million decreaseincrease in segment loss is attributable to the $17.6a $17.7 million increasedecrease in segment revenues, partially offset by the $16.5 million increase$11.9 reduction in segment expenses.
Air Medical -
Air Medical segment revenues wereThe number of aircraft available for use in the segment was 108 at September 30, 2018 compared to 109111 at June 30, 2019 compared to 108 at December 31, 2018. During the quarter we added one customer owned light aircraft. TransfersThe three aircraft additions were transfers between segments account for the remainder.
Direct expense in our Air Medical segment was $60.4$116.4 million for the threesix months ended SeptemberJune 30, 2018,2019, compared to $51.1$110.6 million for the threesix months ended SeptemberJune 30, 2017,2018, an increase of $9.3$5.8 million. This increase is due primarily to $7.0 million in increased expenses related to new bases that were not operating in the prior year quarter. Employee compensation costs for the existing operations increased $2.8$5.0 million and contract medical labor increased $3.0 million, both due to increased labornewly opened bases. These increases were partially offset by a decrease of $1.9 million in aircraft maintenance costs. Other items decreased $0.5$0.3 million, net.
Selling, general and administrative segment expenses were $3.7$7.4 million for the threesix months ended SeptemberJune 30, 2018, compared
Air Medical segment profit was $6.2$2.3 million for the threesix months ended SeptemberJune 30, 2018,2019, compared to a segment profit of $16.0$7.1 million for the threesix months ended September 30, 2017. The $9.8 million decrease in profit is attributable to a decrease in profit from our independent provider model bases. Increased revenues of $5.9 million from new bases was more than offset by an increase in expenses of $7.3 million related to these bases. Revenues from existing bases decreased $6.6 million, while expenses from existing bases increased $1.9 million.
Technical Services -
Technical Services segment revenues wereFor additional information on our segments, see Note 12.
Liquidity and Capital Resources
General
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.needs, as well as the costs associated with our Chapter 11 Cases during their pendency. Our principal sources of liquidity historically have been net cash provided by our operations, and borrowings under a revolving credit facility, and proceeds fromor term loan facilities or periodic senior note offerings. We have also periodically funded
Historical Cash and Cash Flow Information
Cash and Short-Term Investments -
Our cash position wasOperating Activities - Net cash used in operating activities was $8.1$23.7 million for the ninesix months ended SeptemberJune 30, 2018,2019, compared to net cash usedprovided of $1.9$5.4 million for the same period in 2017, an increase2018, a decrease of $6.2$29.1 million. This increase is partly attributable to a $1.2 million increase in cash used relating to changes in operating assets and liabilities. TheAn increase in net loss of $13.8 million, adjusted for the non-cash items specified in our accompanying condensed consolidated statement of cash flows, accounted for $5.0a $48.0 million of the decrease in cash flowsflow from operating activities.
Investing Activities - Net cash used in investing activities was $4.4$69.2 million for the ninethree months ended SeptemberJune 30, 2018,2019, compared to cash provided byused in investing activities of $36.5$13.0 million for the same period in 2017.2018. Net salespurchases of short-term investments provided $26.0used $61.9 million of cash during the ninesix months ended SeptemberJune 30, 2018,2019, compared to $85.7$3.9 million provided by net sales in the comparable prior year period. Capital expenditures were $22.5$9.0 million for the ninesix months ended SeptemberJune 30, 2018,2019, compared to $49.2$18.1 million for the same period in 2017.2018. Gross proceeds from asset dispositions were $1.5$1.2 million during the ninesix months of 2018,2019, compared to proceeds of less than $0.1$1.5 million for the same period in 2017.2018.
Financing Activities -
Financing activities during theLiquidity - Our ability to maintain adequate liquidity throughout the nine monthsreorganization process and beyond depends upon several factors, including (i) the length and final outcome of 2017 included net payments of $34.0 million on our revolving credit facility and $0.3 million used to repurchase sharesthe reorganization process, (ii) the successful management of our non-voting common stockbusiness, and (iii) the appropriate management of our operating and capital expenses. Our anticipated liquidity requirements are highly sensitive to satisfy withholding tax obligationseach of employees.these factors. Upon emergence from bankruptcy, we currently expect to require additional financing to support future operations, and have commenced initial efforts to explore our alternatives.
For additional information on our cash flows, see our condensed consolidated statements of cash flows included in Item 1 of Part I of this report.
Debt Obligations
Senior Notes -
Blue Torch Loan. We borrowed $70.0 million from Blue Torch Finance, LLC shortly before the commencement of the Chapter 11 Cases (the “Blue Torch Loan”). For more information about the Blue Torch Loan, see Note 6.
Related Party Term Loan - We owe $130$130.0 million under a term loan provided by the financing affiliate of our current CEO and controlling shareholder.shareholder (the “Related Party Loan”). On September 28, 2018, we applied the proceeds from this term loanthe Related Party Loan principally to repay approximately $122.7 million of principal and accrued interest under our senior secured revolving credit facility. Obligations under the term loan are guaranteed by two of our principal subsidiaries, and the Company’s obligation under the term loan and the guarantors’ obligations under their guaranty agreement are secured by inventory spare parts and accounts receivable located in the United States.States, as well as certain spare parts. For additional information, see (i) Note 56 and (ii) our current reportreports on Form 8-K filed with the SEC on September 28, 2018.2018 and March 15, 2019.
Other -
AtFor additional information on our debt obligations and letters of credit, see Note 5.
Impact of Bankruptcy
Impact of Filing Chapter 11 Cases - The commencement of the Chapter 11 Cases constituted an event of default that accelerated the obligations under our Senior Notes and Related Party Loan. The related instruments and agreements provide that as a result of the commencement of the Chapter 11 Cases, the financial obligation thereunder, including any principal amount, together with accrued interest thereon, will be immediately due and payable. Any efforts to enforce payment of such financial obligations under such instruments and agreements were automatically stayed as result of the filing of the Chapter 11 Cases and the holders’ rights of enforcement of such financial obligations are subject to the applicable provisions of the Bankruptcy Code.
Impact of Implementing our Plan - As noted in Notes 2 and 6, we propose under the Plan to enter into the Exit Term Loan on the Emergence Date principally to refinance and discharge in full our obligations under the Blue Torch Loan and Related Party
Loan, subject to satifying all conditions to obtaining the Exit Term Loan and implementing our Plan. Our Plan further contemplates that our current unsecured creditors will, subject to various exceptions and limitations, receive equity in our newly-reorganized parent company issuer, which would result in lower post-emergence consolidated debt balances for us compared to our consolidated debt balances prior to the Chapter 11 Cases. See Notes 2 and 6. We are considering seeking an asset-backed revolving credit facility after the Emergence Date to provide us with greater financial flexibility. However, no definitive decision has been made to take this action, and no assurances can be provided that any such efforts would be successful.
Contractual Obligations
General -
The table below sets out our contractual obligations as of
|
|
|
|
|
| Payment Due by Year |
| |||||||||||||||||||||
|
| Total |
|
| 2019 |
|
| 2020 |
|
| 2021 |
|
| 2022 |
|
| 2023 |
|
| Beyond 2023 |
| |||||||
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|
|
|
|
| Thousands of dollars |
| |||||||||||||||||||||
Aircraft lease obligations |
| $ | 112,624 |
|
| $ | 10,835 |
|
| $ | 22,555 |
|
| $ | 24,488 |
|
| $ | 25,987 |
|
| $ | 19,213 |
|
| $ | 9,546 |
|
Other lease obligations |
|
| 33,079 |
|
|
| 3,102 |
|
|
| 4,916 |
|
|
| 4,454 |
|
|
| 3,327 |
|
|
| 1,866 |
|
|
| 15,414 |
|
Debt (1) |
|
| 700,000 |
|
|
| 500,000 |
|
|
| 130,000 |
|
|
| — |
|
|
| — |
|
|
| 70,000 |
|
|
| — |
|
Senior notes interest (1) |
|
| 13,125 |
|
|
| 13,125 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Thirty-Two, LLC Interest (2) |
|
| 2,500 |
|
|
| 2,500 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| $ | 861,328 |
|
| $ | 529,562 |
|
| $ | 157,471 |
|
| $ | 28,942 |
|
| $ | 29,314 |
|
| $ | 91,079 |
|
| $ | 24,960 |
|
Payment Due by Year | ||||||||||||||||||||||||||||
Total | 2018 (1) | 2019 | 2020 | 2021 | 2022 | Beyond 2022 | ||||||||||||||||||||||
Thousands of dollars | ||||||||||||||||||||||||||||
Aircraft lease obligations | $ | 154,114 | $ | 8,795 | $ | 32,264 | $ | 28,425 | $ | 28,290 | $ | 27,262 | $ | 29,077 | ||||||||||||||
Other lease obligations | 19,055 | 2,221 | 6,151 | 4,726 | 3,209 | 1,528 | 1,220 | |||||||||||||||||||||
Debt (2) | 630,000 | — | 500,000 | 130,000 | — | — | — | |||||||||||||||||||||
Senior notes interest (2) | 13,125 | 13,125 | — | — | — | — | ||||||||||||||||||||||
$ | 816,294 | $ | 11,016 | $ | 551,540 | $ | 163,151 | $ | 31,500 | $ | 28,790 | $ | 30,297 |
(1) |
“Debt” reflects the principal amount of debt due under our outstanding senior notes and our term |
(2) | Interest reflects the amount due per the mediation settlement agreement. |
The table above reflects only contractual obligations as of SeptemberJune 30, 20182019 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, (v) open purchase orders and (vi) other long-term liabilities, such as accruals for litigation or taxes, that are not contractual in nature.
Operating Lease Commitments -
AtFor other related information, see “Risk Factors” contained in Item 1A of Part II of this report.
Other -
For additional information on our contemplated capital expenditures, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Capital Expenditures” in Item 7 of our Annual Report on Form 10-K for the year ended December 31,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.
Prior to the retirement of our revolving credit facility on September 28, 2018, our earnings were subject to changes in short-term interest rates due to the variable interest rate payable under facility.
Our new term loan with Blue Torch, LLC. is subject to changes in short-term interest rates due the variable component of LIBOR. Based on the $118.2 millionprincipal amount weighted average loan balance of our variable-rate debt during the ninethree months ended SeptemberJune 30, 2018,2019, a 10% increase (0.4436%(0.2403%) in interest rates would have reduced our annual pre-tax earnings approximately $0.5$0.2 million, but would not have changed the fair market value of this debt.
Our $500.0 million principal amount of outstanding 5.25% Senior Notes duethat matured on March 15, 2019 bearaccrued 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 SeptemberJune 30, 2018,2019, the market value of the notes was approximately $490.6$245.0 million, based on quoted market prices. See Note 4.
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.
See Note 4 for additional information.
The Company’s management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the design and operation of our disclosure controls and procedures were effective as of such date to ensure that information required to be disclosed by us in the reports that we file or furnish under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and
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.
PART II – OTHEROTHER INFORMATION
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 (i) Item 1A. “Risk Factors”1A - "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 20172018 and (ii) the supplemental disclosure below, which is intendedbelow.
We may not be able to update portionsconsummate our Plan of Reorganization.
As noted elsewhere herein, on August 2, 2019, the Bankruptcy Court entered a confirmation order confirming the Debtors’ Third Amended Joint Plan of Reorganization filed with the Bankruptcy Court on June 18, 2019, as thereafter supplemented (collectively the “Plan”). The Plan contemplates a series of restructuring transactions, including without limitation borrowing additional funds principally to refinance existing debt, issuing additional equity securities, implementing a new holding company structure, settling bankruptcy claims in the manner contemplated under the Plan and making various regulatory filings in connection therewith. We expect to complete all these transactions and filings and to fully implement the Plan effective as of the disclosures contained therein underend of August 2019, at which time we would emerge from Chapter 11. However, implementation of the heading “Risk Factors - Risks RelatedPlan, as well as several of its component transactions, are subject to Our Liquidity and Capital Resources”:
Even if our Plan of September 30, 2018, our total senior indebtedness was $630 million, consisting of (i) $500.0 million of our 5.25% Senior Notes due March 15, 2019 and (ii) $130.0 million of borrowings under our two-year term loan with the financing affiliate of our controlling shareholder (in each case excluding debt issuance costs). We also had $19.8 million of letters of credit outstanding at September 30, 2018. As of September 30, 2018, we had approximately $173.2 million of aggregate lease commitments. For additional information on our indebtedness and commitments, please see Items 1 and 2 of Part I of this report.
Even if the Plan or another Chapter 11 plan of reorganization is consummated, we will continue to time. If we do so,be impacted by the effects of each of these factors could be intensified.
Furthermore, even if our debts are reduced or discharged through the Plan, we may need to raise additional funds through public or private debt or equity financing or other various means to fund our business after the completion of our Chapter 11 proceedings. Our access to additional financing is, and for the foreseeable future will likely continue to be, limited, if it is available at all. Therefore, adequate funds may not be available when needed or may not be available on favorable terms, if they are available at all.
Assuming we successfully emerge from bankruptcy, our post-emergence reported financial results may not be comparable to our historical reported results.
Assuming we successfully emerge from bankruptcy as anticipated, we have determined that we will be required to adopt fresh start accounting, which will require us to record at fair value our assets and liabilities as of the fresh start reporting date. In connection with this change, we currently plan to change our accounting principles relating to the depreciation of our aircraft and inventory valuation. Accordingly, as previously reported, we expect that our financial condition and results of operations following our anticipated emergence from bankruptcy will not be comparable to the financial condition and results of operations reflected in our historical financial statements. The lack of comparable historical financial information could adversely impact the marketability of our securities.
Our actual financial results after emergence from our Chapter 11 Cases may not be comparable to our projections filed with the Bankruptcy Court in the course of our Chapter 11 Cases.
We filed with the Bankruptcy Court and the SEC projected financial information to demonstrate to the Bankruptcy Court the feasibility of our Plan and our ability to continue operations following our emergence from the Chapter 11 Cases. Those projections (and similar projections furnished to individuals during the Chapter 11 Cases in connection with their proposed investment in us) were prepared solely for the purpose of the Chapter 11 Cases and have not been, and will not be, updated on an ongoing basis. At the time they were prepared, the projections reflected numerous assumptions concerning our anticipated future performance with respect to then prevailing and anticipated market and economic conditions that were and remain beyond our control and that may not materialize. Projections are inherently subject to substantial and numerous uncertainties and to a wide variety of significant business, economic and competitive risks, and the assumptions underlying the projections and valuation estimates may prove to be wrong in material respects. Actual results will likely vary significantly from those contemplated by the projections. For all of these reasons, investors should view our publicly-filed projections as speculative and should not rely on these projections.
The amount of publicly-available information concerning us may decrease substantially following our anticipated emergence from bankruptcy.
We expect to have fewer than 300 stockholders of record upon emergence from bankruptcy, and therefore will be eligible to terminate the registration of our common stock under the Exchange Act. Although no definitive decision has been made as to whether or when to take such action, we are currently contemplating filing documentation with the SEC after the Emergence Date that would voluntarily deregister our securities under Section 12(g) of the Exchange Act and suspend our reporting obligations under Section 15(d) of the Exchange Act. If we do so, our obligations to file periodic reports would be suspended or terminated. Although we could thereafter voluntarily elect to provide information to our security holders, we would not be legally obligated to do so. To the extent these actions limit the amount of publicly-available information concerning us and our securities, our ability to raise additional funds, the ability of our security holders to sell their securities, and the liquidity and trading prices of our securities could all be negatively impacted.
We expect to be subject to a different capital and governance structure following our anticipated emergence from bankruptcy.
Currently, all of our outstanding voting and non-voting common stock is issued by PHI, Inc., a Louisiana corporation. If the Plan is implemented on the terms contemplated on the date of this filing, a newly-organized Delaware corporation will issue a single class of common stock and two separate classes of warrants. As in the past, the organizational documents governing our equity securities will continue to include restrictions on the ability of non-U.S. citizens to exceed certain restrictions on their aggregate voting powers. These restrictions could limit the trading liquidity of our securities.
We expect to continue to be subject to the risk that future legislation or regulation could negatively impact our Air Medical operations.
As discussed in detail in our prior reports, in recent years legislators, regulators and consumer interest groups have focused on billing practices used in the air medical industry and have either implemented or proposed changes that have or could reduce the payments received by our Air Medical segment from federal reimbursement programs such as Medicare and Medicaid. Legislation currently pending in the U.S. Senate seeks to change how air ambulances bill for their services. Although we cannot predict at this point the ultimate impact of this or similar legislation, it is possible that these legislative initiatives could adversely impact our business.
We expect to continue to be subject to the risk of failing to comply with the covenants in our debt and lease instruments could adversely affectfuture financing arrangements.
If our business andPlan is implemented as anticipated, we expect to continue at emergence from bankruptcy to be subject to financing arrangements containing negative covenants that may materially restrict our operations. Similarly, we expect that our future financing arrangements will likely contain similar covenants. Our ability to operate as a going concern.
On February 20, 2019, the PHI Compensation Committee approved the vesting of the 2017 performance RSUs based on the Company’s financial results exceeding the pre-determined business performance metrics set in 2017 for the two year performance period (January 1, 2017 - December 31, 2018). As discussed in greater detail in Note 9, the PHI Compensation Committee decided to refinancing our former revolving credit facility on September 28, 2018, we were able to meetsettle these vested RSU awards in cash.
The commencement of the thresholds established by the financial covenants contained therein only by virtue of obtaining covenant amendments or waivers over the preceding 24 months. Similarly, we have maintained compliance with certain of our operating leases only through obtaining comparable covenant amendments or waivers over a similar period. As noted above under the heading “Management’sChapter 11 Cases, described in "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Contractual Obligations - Operating Lease Commitments,” we may not be in compliance with the financial covenants in a couple of our other operating leases, which may have triggered various remediesOperations-Overview-Voluntary reorganization under such leases. As described in greater detail in the above-referenced section of this report, in some cases certain breaches of these lease covenants or defaults under our term loan may createChapter 11" above, constituted an event of default that accelerated the obligations under the indenture governing our 5.25% Senior Notes due 2019, potentially resulting inand our term loan agreement with Thirty Two, L.L.C. Any efforts to enforce payment of such financial obligations were automatically stayed as a result of the acceleration of our obligation to pay principal, interest and potential penalties under such Notes (even though we may otherwise be in compliance with our obligations under those NotesChapter 11 Cases, and the associated indenture). Our term loan and manyholders' rights of our operating leases also include similar cross-default or cross-acceleration provisions. Thus, an event of default under any of our debt or lease instruments, including one that is technical in nature or otherwise not material, could result in the acceleration of significant payment obligations under other of our instruments. If our debt or lease obligationsenforcement are accelerated, we cannot assure you that we would be able to obtain enough cash to repay such accelerated payment obligations.
None.
None.
Total Number of | Average Price | |||
Period | Shares Purchased | Paid per Share | ||
July 1, 2018 - September 30, 2018 | 5,758 | $8.27 | ||
(a) | Exhibits |
10.1 | ||||
10.2 | ||||
10.3 | ||||
10.5 | ||||
31.1* | ||||
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 |
* Filed herewith
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.
PHI, Inc. | ||
August 9, 2019 | By: | |
/s/ Al A. Gonsoulin | ||
Al A. Gonsoulin | ||
Chairman and Chief Executive Officer | ||
August 9, | By: | /s/ Trudy P. McConnaughhay |
Trudy P. McConnaughhay | ||
Chief Financial Officer |
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