PETROLEUM HELICOPTERS INC - 10-Q Quarterly Report

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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10-Q

[X] Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the quarterly period ended: March 31, 2003

OR

[] Transition Report Pursuant To Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the transition period from to

Commission file number 0-9827

PETROLEUM HELICOPTERS, INC.
(Exact name of registrant as specified in its charter)

LOUISIANA 72-0395707
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

2001 SE EVANGELINE THRUWAY
LAFAYETTE, LOUISIANA 70508
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

Registrant's telephone number, including area code: (337) 235-2452

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes [X] No [ ]

Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act). Yes [X] No [ ]

APPLICABLE ONLY TO CORPORATE ISSUERS:

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 April 30, 2003
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Voting Common Stock 2,851,866 shares
Non-Voting Common Stock 2,525,722 shares

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PETROLEUM HELICOPTERS, INC.

INDEX - FORM 10-Q

Part I - Financial Information

Item 1. Financial Statements - Unaudited
Consolidated Balance Sheets - March 31, 2003 and
December 31, 2002 ................................................ 3
Consolidated Statements of Operations - Three Months
Ended March 31, 2003 and 2002 ................................... 4
Consolidated Statements of Cash Flows - Three Months
Ended March 31, 2003 and 2002 .................................... 5
Notes to Consolidated Financial Statements .......................... 6

Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ................................. 15

Item 3. Quantitative and Qualitative Disclosures about
Market Risk ......................................................... 19

Item 4. Controls and Procedures.................................................. 19

Part II - Other Information

Item 1. Legal Proceedings ....................................................... 20

Item 6. Exhibits and Reports on Form 8-K ........................................ 20

Signatures .............................................................. 21

Certifications .......................................................... 22

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)
(UNAUDITED)

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

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PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

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

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PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS OF DOLLARS)
(UNAUDITED)

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. GENERAL

The accompanying unaudited condensed consolidated financial statements include
the accounts of Petroleum Helicopters, Inc. and subsidiaries ("PHI" or the
"Company"). In the opinion of management, these financial statements reflect all
adjustments, consisting of only normal, recurring adjustments, necessary to
present fairly the financial results for the interim periods presented. These
condensed consolidated financial statements should be read in conjunction with
the financial statements contained in the Company's Annual Report on Form 10-K
for the year ended December 31, 2002 and the accompanying notes and Management's
Discussion and Analysis of Financial Condition and Results of Operations.

The Company's financial results, particularly as they relate to the Company's
domestic oil and gas operations, are influenced by seasonal fluctuations as
discussed in the Company's Annual Report on Form 10-K for the year ended
December 31, 2002. Therefore, the results of operations for interim periods are
not necessarily indicative of the operating results that may be expected for a
full fiscal year.

Reclassifications

Certain reclassifications have been made in the prior period financial
statements in order to conform to the classifications adopted for reporting in
2003. Such reclassifications include an adjustment to increase operating
revenues and direct expenses by $1.3 million for the three months ended March
31, 2002. This reclassification did not affect earnings before income taxes, net
earnings or earnings per share.

2. SEGMENT INFORMATION

The Company has identified four principal segments: Domestic Oil and Gas,
International, Aeromedical, and Technical Services. The Domestic Oil and Gas
segment primarily provides helicopter services to oil and gas customers
operating in the Gulf of Mexico. The International segment, which primarily
consists of operations off the West Coast of Africa, provides helicopter
services in various foreign countries to oil and gas customers. The Aeromedical
segment provides helicopter services to hospitals and medical programs in
several U.S. states. The Company's Air Evac subsidiary is included in the
Aeromedical segment. The Technical Services segment provides helicopter repair
and overhaul services, primarily to certain military aircraft, flight operations
customers, and original equipment manufacturers.

Effective July 1, 2002, the Company no longer allocates interest expense to its
segments when evaluating operating performance. All results prior to July 1,
2002 have been restated to remove interest expense from the segment operating
results.

Segment operating income is operating revenues less direct expenses and selling,
general, and administrative costs allocated to the operating segment.
Unallocated overhead consists primarily of corporate selling, general, and
administrative costs that the Company does not allocate to the operating
segments.

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Summarized financial information concerning the Company's reportable operating
segments for the quarters ended March 31, 2003 and 2002 is as follows (in
thousands):

(1) Includes gains on disposition of property and equipment and other
income.

3. COMMITMENTS AND CONTINGENCIES

Environmental Matters - The Company has an aggregate estimated liability of $1.5
million as of March 31, 2003 for environmental remediation costs that are
probable and estimable. The Company has conducted environmental surveys of the
Lafayette facility, which it vacated in 2001, and has determined that
contamination exists at that facility. To date, borings have been installed to
determine the type and extent of contamination. Preliminary results indicate
limited soil and groundwater impacts. Once the extent and type of contamination
are fully defined, a risk evaluation in accordance with the Louisiana Risk
Evaluation/Corrective Action Plan ("RECAP") standard will be submitted and
evaluated by Louisiana Department of Environmental Quality ("LDEQ"). At that
point, LDEQ will establish what cleanup standards must be met at the site. When
the process is complete, the Company will be in a position to develop the
appropriate remediation plan and the resulting cost of remediation. However, the
Company has not recorded any estimated liability for remediation of
contamination and, based on preliminary surveys and ongoing monitoring, the
Company believes the ultimate remediation costs for the Lafayette facility will
not be material.

Legal Matters - The Company is named as a defendant in various legal actions
that have arisen in the ordinary course of its business and have not been
finally adjudicated. The amount, if any, of ultimate liability with respect to
such matters cannot be determined. In the opinion of management, the amount of
the ultimate liability with respect to these actions will not have a material
adverse effect on the Company's consolidated financial statements.

Long-Term Debt - On April 23, 2002, the Company issued Notes of $200 million
that have an interest rate of 9 3/8% payable semi-annually on May 1 and November
1 of each year, beginning November 1, 2002, and mature in May 2009. The Notes
contain certain covenants, including limitations on

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indebtedness, liens, dividends, repurchases of capital stock and other payments
affecting restricted subsidiaries, issuance and sales of restricted subsidiary
stock, dispositions of proceeds of asset sales, and mergers and consolidations
or sales of assets. As of March 31, 2003, the Company was in compliance with
covenants.

Also on April 23, 2002, the Company entered into a new credit agreement with a
commercial bank for a $50 million revolving credit and letter of credit
facility. The credit agreement permits both prime rate based borrowings and
London Interbank offer rate ("LIBOR") rate borrowings plus a spread. The spread
for LIBOR borrowings ranges from 2.0% to 3.0%. Any amounts outstanding under the
revolving credit facility are due July 31, 2004. The Company may also obtain
letters of credit issued under the credit facility up to $5.0 million with a
0.125% fee payable on the amount of letters of credit issued. As of March 31,
2003 and December 31, 2002, the Company had no borrowings and a $0.6 million
letter of credit outstanding under the revolving credit facility.

The Company is subject to certain financial covenants under the credit
agreement. These covenants include maintaining certain levels of working capital
and shareholders' equity and contain other provisions including a restriction on
purchases of the Company's stock. The credit agreement also limits the creation,
incurrence, or assumption of Funded Debt (as defined, which includes long-term
debt) and the acquisition of investments in unconsolidated subsidiaries. As of
March 31, 2003, the Company was in compliance with the covenants.

Operating Leases - The Company leases four aircraft and certain facilities and
equipment used in its operations. The related lease agreements, which include
both non-cancelable and month-to-month terms, generally provide for fixed
monthly rentals and, for certain real estate leases, renewal options. At March
31, 2003, the Company had approximately $21.0 million in aggregate lease
commitments under operating leases of which approximately $1.7 million is
payable during the next twelve months.

Purchase Commitments - At March 31, 2003 and December 31, 2002, the Company had
commitments of $4.6 million and $7.9 million, respectively, for the upgrade of
certain aircraft and the purchase of other equipment. The upgrades are to be
performed in 2003.

4. ACCUMULATED OTHER COMPREHENSIVE INCOME

Following is a summary of the Company's comprehensive income (loss) for the
quarters ended March 31, 2003 and 2002 (in thousands):

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5. VALUATION ACCOUNTS

The Company establishes an allowance for doubtful accounts based upon factors
surrounding the credit risk of specific customers, current market conditions,
and other information. The allowance for doubtful accounts was $0.2 million at
March 31, 2003 and December 31, 2002.

The Company also establishes valuation reserves related to obsolescent and
excess inventory. The inventory valuation reserves were $5.2 million and $4.8
million at March 31, 2003 and December 31, 2002, respectively.

6. PROPERTY AND EQUIPMENT

Effective January 1, 2003, the Company changed the estimated residual value of
certain aircraft (77 aircraft of the total fleet) from 30% to 40%. The Company
believes the revised amounts reflect their historical experience and more
appropriately matches costs over the estimated useful lives and salvage values
of these assets. The effect of this change for the quarter ended March 31, 2003,
was a reduction in depreciation expense of $0.2 million ($0.1 million after tax
or $0.02 per diluted share).

7. EMPLOYEE INCENTIVE COMPENSATION

In 2002, the Company implemented an incentive compensation plan for
non-executive and non-represented employees. Under the plan, the Company expects
that it will pay incentive compensation of up to 7% of earnings before tax, net
of the incentive compensation. The Company also established an incentive
compensation plan for the executive employees which approximate 3% of earnings
before tax net of the incentive compensation. The Company recorded $0.85 million
of incentive compensation expense for the quarter ended March 31, 2003,
representing the expense for the employee and executive plans.

8. NEW ACCOUNTING PRONOUNCEMENTS

SFAS No. 143, Accounting for Asset Retirement Obligations, requires the
recording of liabilities for all legal obligations associated with the
retirement of long-lived assets that result from the normal operation of those
assets. These liabilities are required to be recorded at their fair values
(which are likely to be the present values of the estimated future cash flows)
in the period in which they are incurred. SFAS No. 143 requires the associated
asset retirement costs to be capitalized as part of the carrying amount of the
long-lived asset. The asset retirement obligation will be accreted each year
through a charge to expense. The amounts added to the carrying amounts of the
assets will be depreciated over the useful lives of the assets. The Company
implemented SFAS No. 143 on January 1, 2003, and determined that this statement
did not have a material impact on its consolidated financial position or results
of operations.

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
SFAS No. 145 eliminates SFAS No. 4 and as a result, gains and losses from
extinguishments of debt should be classified as extraordinary items only if they
meet the criteria in APB Opinion No. 30. SFAS No. 145 amends SFAS No. 13,
"Accounting for Leases," to eliminate an inconsistency between the required
accounting for sale-leaseback transactions and the required accounting for
certain lease modifications that have economic effects that are similar to
sale-leaseback transactions. SFAS No. 145 also updates and amends existing
authoritative pronouncements to make various technical corrections, clarify
meanings, or describe their applicability under changed conditions. The Company
implemented SFAS No. 145 on January 1, 2003, and determined that this statement
did not have a material impact on its consolidated financial statements.

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In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities," which is effective for fiscal periods after
December 31, 2002. SFAS No. 146 requires companies to recognize costs associated
with restructurings, discontinued operations, plant closings, or other exit or
disposal activities, when incurred rather than at the date a plan is committed
to. The Company will implement the provisions of this statement on a prospective
basis for exit or disposal activities that are initiated after December 31,
2002.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" ("FIN 45"). FIN 45 elaborates on the disclosures to be
made by a guarantor about its obligations under certain guarantees. It also
clarifies that a guarantor is required to recognize, at the inception of a
guarantee, a liability for the fair value of the obligation undertaken in
issuing the guarantee. As required, the Company adopted the disclosure
requirements of FIN 45 as of December 31, 2002. The Company has adopted the
initial recognition and measurement provisions for guarantees issued or modified
after December 31, 2002. On January 1, 2003, the Company adopted the initial
recognition and measurement provisions on a prospective basis for guarantees
issued or modified after December 31, 2002 and it did not have a material impact
on the Company's consolidated financial position or results of operations.

In January 2003, FASB issued Interpretation No. 46, "Consolidation of Variable
Interest Entities" (FIN 46"). FIN 46 requires that companies that control
another entity through interest other than voting interests should consolidate
the controlled entity. FIN 46 applies to variable interest entities created
after January 31, 2003, and to variable interest entities in which an enterprise
obtains an interest in after that date. The Company implemented FIN 46 and it
did not have a material impact on its consolidated financial position or results
of operations.

9. CONDENSED CONSOLIDATED FINANCIAL INFORMATION

On April 23, 2002, the Company issued Notes of $200 million that are fully and
unconditionally guaranteed on a senior basis, jointly and severally, by all of
the Company's existing operating subsidiaries ("Guarantor Subsidiaries").

The following supplemental condensed financial information sets forth, on a
consolidating basis, the balance sheet, statement of operations, and statement
of cash flows information for Petroleum Helicopters, Inc. ("Parent Company
Only") and the Guarantor Subsidiaries. The principal eliminating entries
eliminate investments in subsidiaries, intercompany balances, and intercompany
revenues and expenses.

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PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
(THOUSANDS OF DOLLARS)

11

PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
(THOUSANDS OF DOLLARS)

12

PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(THOUSANDS OF DOLLARS)

13

PETROLEUM HELICOPTERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(THOUSANDS OF DOLLARS)

14

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

This Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") should be read in conjunction with the accompanying
unaudited condensed consolidated financial statements and the notes thereto as
well as the Company's Annual Report on Form 10-K for the year ended December 31,
2002 and MD&A contained therein.

FORWARD-LOOKING STATEMENTS

All statements other than statements of historical fact contained in this Form
10-Q, other periodic reports filed by the Company under the Securities Exchange
Act of 1934, and other written or oral statements made by it or on its behalf,
are forward-looking statements. When used herein, the words "anticipates",
"expects", "believes", "goals", "intends", "plans", or "projects" and similar
expressions are intended to identify forward-looking statements. It is important
to note that forward-looking statements are based on a number of assumptions
about future events and are subject to various risks, uncertainties, and other
factors that may cause the Company's actual results to differ materially from
the views, beliefs, and estimates expressed or implied in such forward-looking
statements. Although the Company believes that the assumptions reflected in
forward-looking statements are reasonable, no assurance can be given that such
assumptions will prove correct. Factors that could cause the Company's results
to differ materially from the results discussed in such forward-looking
statements include but are not limited to the following: flight variances from
expectations, volatility of oil and gas prices, weather effects, the substantial
capital expenditures and commitments required to acquire aircraft, environmental
risks, competition, government regulation, unionization, operating hazards,
risks related to international operations, the ability to obtain insurance, and
the ability of the Company to implement its business strategy. All
forward-looking statements in this document are expressly qualified in their
entirety by the cautionary statements in this paragraph. PHI undertakes no
obligation to update publicly any forward-looking statements, whether as a
result of new information, future events, or otherwise.

OVERVIEW

Operating revenues decreased $3.6 million for the quarter ended March 31, 2003
compared to the quarter ended March 31, 2002, primarily as a result of decreases
in revenues from the Technical Services segment ($2.2 million) due to completion
of a project for the upgrade and refurbishment of a customer's aircraft
completed in the second quarter of 2002, and also a net decrease in operating
revenues in the Aeromedical ($0.9 million) and International ($0.4 million)
segments due to a decrease in flight hour activity. The decrease in operating
revenues in the Aeromedical segment was due to the termination of certain
contracts substantially offset by rate increases on remaining Aeromedical
contracts. Although flight hours decreased 13% in the Domestic Oil and Gas
segment, this decrease in activity was offset by increases in rates. The
decrease in flight activity in the Domestic Oil and Gas segment was primarily
due to unfavorable weather conditions as compared to the prior year quarter.

Direct expenses decreased $4.8 million due to a decrease in Technical Services
costs ($2.5 million) due to completion of a project for the upgrade and
refurbishment of a customer's aircraft completed in the second quarter of 2002,
a decrease in aircraft rent ($3.7 million) due to the purchase of leased
aircraft, a decrease in labor cost ($1.6 million) due in part to severance
charges recorded in the prior year, but also due to a decrease in headcount.
These amounts were offset by an increase in depreciation expense ($2.0 million)
due to the purchase of leased aircraft in the second quarter of 2002, and an
increase in maintenance costs ($1.6 million) due primarily to parts usage and
outside repairs of components. There was also a decrease in other items, net
($0.6 million).

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Selling, general and administrative expenses increased $0.2 million due to
severance and relocation costs incurred in the quarter.

Interest expense increased $3.7 million for the quarter due to interest on the
Notes issuance on April 23, 2002, as described in Note 3 of the Notes to
Condensed Consolidated Financial Statements.

OPERATIONS STATISTICS

The following tables present certain non-financial operational statistics for
the quarters ended March 31, 2003 and 2002:

QUARTER ENDED MARCH 31, 2003 COMPARED WITH QUARTER ENDED MARCH 31, 2002

COMBINED OPERATIONS

REVENUES -- Operating revenues were $64.6 million for the quarter ended March
31, 2003, as compared to $68.2 million for the quarter ended March 31, 2002, a
decrease of $3.6 million. The decrease was due to a decrease in Technical
Services revenues ($2.2 million), and also a net decrease in operating revenues
in the Aeromedical ($0.9 million) and International ($0.4 million) segments due
to a decrease in flight hour activity. The decrease in operating revenues in the
Aeromedical segment was due to the termination of certain contracts
substantially offset by rate increases on remaining Aeromedical contracts.
Although flight hours decreased 13% in the Domestic Oil and Gas segment, this
decrease in activity was offset by increases in rates. The decrease in flight
activity in the Domestic Oil and Gas segment was primarily due to unfavorable
weather conditions as compared to the prior year quarter.

OTHER INCOME AND LOSSES -- Gain (loss) on equipment dispositions increased $0.4
million for the quarter ended March 31, 2003 as compared to the quarter ended
March 31, 2002. The increase was due to insurance proceeds on an aircraft.

DIRECT EXPENSES -- Direct expenses decreased $4.8 million due to a decrease in
Technical Services costs ($2.5 million), a decrease in aircraft rent ($3.7
million) due to the purchase of leased aircraft, and a decrease in labor cost
($1.6 million). The decrease in labor cost is due in part to severance charges
recorded in the prior period, as well as a decrease in headcount. These amounts
were offset in part by an increase in depreciation expense ($2.0 million) due to
the purchase of leased aircraft in the second quarter of 2002 and an increase in
spare parts used and outside repairs ($1.6 million). There was also a decrease
in other items, net ($0.6 million).

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SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES -- Selling, general, and
administrative expenses for the quarter ended March 31, 2003, were $4.9 million,
as compared to $4.7 million for the quarter ended March 31, 2002. The increase
is due to relocation and severance costs incurred in the Aeromedical segment
($0.2 million).

INTEREST EXPENSE -- Interest expense for the quarter ended March 31, 2003
increased to $5.0 million from $1.3 million in the same period of 2002. The
increase in interest expense is related to the Notes sold on April 23, 2002.

INCOME TAXES -- Income tax expense for the quarter ended March 31, 2003 was $0.5
million, compared to $1.3 million for the quarter ended March 31, 2002. The
effective tax-rate was 40% for both periods.

EARNINGS -- The Company's net earnings for the quarter were $0.7 million,
compared to $2.0 million in the same period in the prior year. Earnings before
tax for the quarter were $1.2 million compared to $3.4 million in the same
period of the prior year. Earnings per diluted share for the quarter were $0.13
as compared to $0.38 per diluted share for the same quarter prior year.

SEGMENT DISCUSSION

Domestic Oil and Gas -- Domestic Oil & Gas segment revenues were $43.2 million
for the quarter ended March 31, 2003, compared to $43.3 million for the quarter
ended March 31, 2002. There was a decrease in flight activity substantially
offset by an increase in rates to customers implemented in part in January 2003.
Flight hours were 27,530 for the quarter compared to 31,501 for the prior year
quarter, a decrease of 13%. The decrease in flight activity was primarily due to
unfavorable weather conditions in the current year compared to the same period
prior year.

Direct expenses decreased ($0.2 million) for the quarter ended March 31, 2003 as
compared to the same quarter prior year. There was a decrease in aircraft rent
due to the purchase of the leased aircraft ($3.2 million), and a decrease in
human resource costs ($0.1 million). These amounts were offset in part by an
increase in depreciation expense due to the purchase of leased aircraft ($2.0
million), and an increase in maintenance costs, which primarily relates to
aircraft parts and components ($1.0 million).

The Domestic Oil & Gas segment operating income increased $0.2 million due to
the decrease in direct expenses ($0.2 million).

International -- International segment revenues were $5.8 million for the
quarter ended March 31, 2003, compared to $6.2 million for the quarter ended
March 31, 2002. The decrease was due to recognition in 2002 of amounts recovered
for a receivable previously reserved as uncollectible ($0.8 million). Although
there was a decrease in flight hour activity, that decrease and the recovery of
the receivable in the prior year quarter were offset in part by an increase in
rates in the current period. The number of aircraft in the segment was 18 at
March 31, 2003 and 21 at March 31, 2002. Flight hours were 4,240 for the quarter
ended March 31, 2003 as compared to 4,926 for the quarter ended March 31, 2002.

Direct expenses increased ($0.1 million) for the quarter ended March 31, 2003 as
compared to the quarter ended March 31, 2002 due to an increase in outside
repairs on certain components, offset in part by a decrease in human resource
costs.

The International segment had operating income of $0.1 million for the quarter,
compared to operating income of $0.6 million for the same quarter in the prior
year. The recovery of a receivable mentioned above in the prior year, and the
outside repair costs incurred in the current year account for the change in
operating income.

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Aeromedical -- Aeromedical segment revenues were $10.8 million for the quarter
ended March 31, 2003, compared to $11.7 million for the quarter ended March 31,
2002, a decrease of $0.9 million. The decrease was due to the termination of
certain aeromedical contracts, offset to a significant extent by an increase in
rates on retained aeromedical contracts. Flight hours for the quarter were 2,360
compared to 4,724 for the same period in the prior year on retained aeromedical
contracts. Aircraft in the segment were 29 for March 31, 2003 compared to 39 at
March 31, 2002.

Direct expenses decreased ($1.9 million) in the Aeromedical segment for the
quarter ended March 31, 2003 as compared to the same quarter prior year. There
was a decrease in human resource cost due to a reduction in personnel ($1.4
million) due to the termination of certain aeromedical contracts, and a decrease
in aircraft rent due to the purchase of the leased aircraft ($0.5 million).

The Aeromedical segment operating income was $2.6 million for the quarter,
compared to $1.6 million for the same period in 2002. The increase in operating
income is attributable to a reduction in direct expense caused by the
termination of certain Aeromedical contracts as discussed above.

Technical Services -- Technical Services segment revenues for the quarter ended
March 31, 2003 were $4.8 million compared to $7.0 million for the same period
prior year, a decrease of $2.2 million. The decrease in Technical Services
revenues is due to completion of a project for the upgrade and refurbishment of
a customer's aircraft completed in the second quarter of 2002.

There was a decrease in direct expense of $2.6 million in the Technical Services
segment due to completion of a project for the upgrade and refurbishment of a
customer's aircraft completed in the second quarter of 2002.

The Technical Services segment had operating income of $1.3 million for the
quarter ended March 31, 2003, compared to $0.9 million for the quarter ended
March 31, 2002.

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash position on March 31, 2003 was $22.2 million compared to
$17.7 million at December 31, 2002. Working capital was $73.3 million at March
31, 2003 compared to $72.8 million at December 31, 2002. Net cash of $10.3
million provided by operating activities during 2003 funded debt service
requirements and capital expenditures.

On April 23, 2002, the Company issued $200 million of senior unsecured notes
("Notes"). The Notes carry an interest rate of 9 3/8% payable semi-annually on
May 1 and November 1 of each year, beginning November 1, 2002, and mature in May
2009. The Notes contain certain covenants, including limitations on
indebtedness, liens, dividends, repurchases of capital stock and other payments
affecting restricted subsidiaries, issuance and sales of restricted subsidiary
stock, dispositions of proceeds of asset sales and mergers and consolidations or
sales of assets.

Also, on April 23, 2002, the Company executed a new credit agreement with a
commercial bank for a $50 million revolving credit facility. At March 31, 2003,
the Company had no borrowings and a $0.6 million letter of credit outstanding
under the revolving credit facility.

Capital expenditures in the first quarter of 2003 totaled $7.1 million which
primarily represents the upgrade of certain aircraft and the capitalized
refurbishment of other aircraft.

On May 1, 2003, the Company paid interest amounts due on the Notes of $9.4
million.

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The Company believes that cash flow from operations will be sufficient to fund
required interest payments on the Notes and capital expenditures for the next
twelve months.

ENVIRONMENTAL MATTERS

The Company has an aggregate estimated liability of $1.5 million as of March 31,
2003, for environmental remediation costs that are probable and estimable. The
Company has conducted environmental surveys of its Lafayette facility, which it
vacated in 2001, and has determined that contamination exists at that facility.
To date, borings have been installed to determine the type and extent of
contamination. Preliminary results indicate limited soil and groundwater
impacts. Once the extent and type of contamination are fully defined, a risk
evaluation in accordance with regulatory standards will be submitted and
evaluated by the appropriate agency. At that point, the regulatory agency will
establish what cleanup standards must be met at the site. When the process is
complete, the Company will be in a position to develop the appropriate
remediation plan and the resulting cost of remediation. The Company has not
recorded any estimated liability for remediation at the site, but based on
preliminary surveys and ongoing monitoring, the Company believes the ultimate
remediation costs for the Lafayette facility will not be material.

NEW ACCOUNTING PRONOUNCEMENTS

For a discussion of new accounting pronouncements applicable to the Company, see
Note 8 to the Financial Statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

On April 23, 2002, the Company issued Notes of $200 million that have an
interest rate of 9 3/8% payable semi-annually on May 1 and November 1 of each
year, beginning November 1, 2002, and mature in May 2009. The market value of
the Notes will vary as changes occur to general market interest rates, the
remaining maturity of the Notes, and the Company's credit worthiness. At March
31, 2003, the market value of the Notes was $215.0 million.

ITEM 4. CONTROLS AND PROCEDURES

The Company's Chief Executive Officer and Chief Financial Officer have evaluated
the effectiveness of the Company's disclosure controls and procedures (as is
defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of
1934 (the "Exchange Act")) as of a date within 90 days before the filing date of
this quarterly report (the "Evaluation Date"). Based on such evaluation, such
officers have concluded that, as of the Evaluation Date, the Company's
disclosure controls and procedures are effective in alerting them on a timely
basis to material information relating to the Company (including its
consolidated subsidiaries) required to be included in the Company's periodic
filings under the Exchange Act.

Since the Evaluation Date, there have not been any significant changes in the
Company's internal controls or in other factors that could significantly affect
such controls.

19

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is named as a defendant in various legal actions that have arisen in
the ordinary course of its business and have not been finally adjudicated. The
amount, if any, of ultimate liability with respect to such matters cannot be
determined. In the opinion of management, the amount of the ultimate liability
with respect to these actions will not have a material adverse effect on the
Company's consolidated financial statements.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

3.1 (i) Articles of Incorporation of the Company (incorporated by
reference to Exhibit No. 3.1 (i) to PHI's Report on Form 10-Q
for the quarterly period ended October 31, 1994).

(ii) By-laws of the Company as amended (incorporated by reference
to Exhibit No. 3.1 (ii) to PHI's Report on Form 10-Q for the
quarterly period ended March 31, 2002).

10.1 Indenture dated April 23, 2002 among Petroleum Helicopters, Inc.,
the Subsidiary Guarantors named therein and The Bank of New York,
as Trustee (incorporated by reference to Exhibit 4.1 to PHI's
Registration Statement on Form S-4, filed on April 30, 2002, File
Nos. 333-87288 through 333-87288-08).

10.2 Form of 9 3/8% Senior Note (incorporated by reference to Exhibit
4.1 to PHI's Registration Statement on Form S-4, filed on April
30, 2002, File Nos. 333-87288 through 333-87288-08).

10.3 Loan Agreement dated as of April 23, 2002 by and among Petroleum
Helicopters, Inc., Air Evac Services, Inc., Evangeline Airmotive,
Inc., and International Helicopter Transport, Inc. and Whitney
National Bank (incorporated by reference to Exhibit 10.3 to PHI's
Report on Form 10-Q for the quarterly period ended June 30, 2002).

99.1 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 by Lance F. Bospflug, Chief Executive Officer.

99.2 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 by Michael J. McCann, Chief Financial Officer.

(b) Reports on Form 8-K

Press release dated March 31, 2003 announcing earnings for 2002.

20

SIGNATURES

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.

Petroleum Helicopters, Inc.

May 13, 2003 By: /s/ Lance F. Bospflug
-----------------------------------
Lance F. Bospflug
President and Chief Executive Officer

May 13, 2003 By: /s/ Michael J. McCann
-----------------------------------
Michael J. McCann
Chief Financial Officer and Treasurer

21

CERTIFICATIONS

I, Lance F. Bospflug, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Petroleum
Helicopters, Inc.

2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:

a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):

a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.

Date: May 13, 2003

By: /s/ Lance F. Bospflug
-----------------------------------
Lance F. Bospflug
President and Chief Executive Officer

22

I, Michael J. McCann, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Petroleum
Helicopters, Inc.

2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:

a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):

a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.

Date: May 13, 2003

By: /s/ Michael J. McCann
--------------------------------
Michael J. McCann
Chief Financial Officer and Treasurer

23

EXHIBIT INDEX

(b) Reports on Form 8-K

Press release dated March 31, 2003 announcing earnings for 2002.