UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14C INFORMATION

 

INFORMATION STATEMENT PURSUANT TO SECTION 14(c) OF THE SECURITIES

EXCHANGE ACT OF 1934 (Amendment No.     )

 

Check the appropriate box:

 

þ  Preliminary Information Statement

o  Confidential, for Use of the Commission Only (as permitted by Rule 14c-5(d)(2))

o  Definitive Information Statement

 

PHI, Inc.

(Name of Registrant as Specified In Its Charter)

 

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PHI, Inc.

2001 SE Evangeline Thruway

Lafayette, Louisiana 70508

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held on May 6, 2008

 

 

To the Holders of Voting Common Stock of PHI, Inc.:

 

The 2008 Annual Meeting of Stockholders of PHI, Inc. (“PHI”) will be held at Lafayette Hilton & Towers (Cedar Room), 1521 West Pinhook Road, Lafayette, Louisiana, on Tuesday, May 6, 2008, at 8:00 a.m., local time, to:

 

1. Elect directors.

 

2. Ratify the appointment of Deloitte & Touche as PHI’s independent registered public accounting firm for the fiscal year ending December 31, 2008.

 

3. Approve an amendment to Article III(A) of the Articles of Incorporation to increase the number of authorized shares of non-voting common stock from 12.5 million to 25 million shares.

 

4. Transact such other business as may properly be brought before the meeting or any adjournments thereof.

 

Holders of record of PHI’s voting common stock at the close of business on April 11, 2008 are entitled to notice of and to vote at the meeting.

 

WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.

 

By Order of the Board of Directors

 

Michael J. McCann

Secretary

 

Lafayette, Louisiana

April 16, 2008

PHI, Inc.

2001 SE Evangeline Thruway

Lafayette, Louisiana 70508

 

INFORMATION STATEMENT

FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD

 

May 6, 2008

 

This Information Statement is furnished to holders of voting common stock (“Voting Stock”) of PHI, Inc. (“PHI” or “the Company”) at the direction of its Board of Directors (the “Board”) in connection with the Annual Meeting of Stockholders of PHI (the “Meeting”) to be held on May 6, 2008, at the time and place set forth in the accompanying notice and at any adjournments thereof.

 

Holders of record of Voting Stock at the close of business on April 11, 2008 are entitled to notice of and to vote at the Meeting. On that date, PHI had outstanding 2,852,616 shares of Voting Stock, each of which is entitled to one vote, and 12,438,992 shares of non-voting common stock, none of which are entitled to vote.

 

WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.

 

This Information Statement is first being mailed to stockholders on or about April 16, 2008. The cost of preparing and mailing the statement will be borne by PHI. Banks, brokerage houses and other nominees or fiduciaries will be requested to forward the material to their principals, and PHI will, upon request, reimburse them for their expenses in so doing.

 

ELECTION OF DIRECTORS

 

Our Amended and Restated By-Laws (the “By-laws”) establish the number of directors constituting the Board, and to be elected at the Meeting at six. Al A. Gonsoulin, our Chairman of the Board and Chief Executive Officer, holds more than a majority of PHI’s outstanding Voting Stock, and his vote alone is sufficient to decide all matters to be voted on at the Meeting. Mr. Gonsoulin has informed PHI that he intends to vote all of his shares for (i) the election of the six persons identified below who have been nominated to serve on our Board; (ii) ratifying the appointment of Deloitte & Touche as our independent registered public accounting firm for the fiscal year ending December 31, 2008; and (iii) the amendment to our articles of incorporation increasing the authorized number of shares of non-voting common stock. As a result, the outcome of those votes is assured, no matter how the other holders of voting stock vote their shares. In the unanticipated event that one or more nominees cannot be a candidate at the Meeting, or is unwilling to serve, the By-laws provide that the number of authorized directors will be reduced automatically by the number of such nominees unless the Board by a majority vote of the entire Board selects an additional nominee.

 

Nomination of Directors

 

The Board does not have a nominating committee or other committee performing similar functions. The Marketplace Rules of the NASDAQ Stock Market (“NASDAQ “) provide that a “controlled company” is exempt from having its director nominees selected by a nominating committee. A controlled company is defined, in part, as a company of which more than 50% of the voting power is held by an individual. As Mr. Gonsoulin owns over 50% of the Company’s voting common stock, PHI is a “controlled company” within the definition of the NASDAQ Marketplace Rules, and the Board believes that it is appropriate for PHI not to have a nominating committee. The full Board does, however, approve all nominees, and a stockholder who wishes for the Board to consider an individual as a director nominee should communicate that desire in writing to the Chairman of the Board at the Company’s address. Similarly, a stockholder who wishes to communicate with the Board on any other subject should direct such communication to the Secretary of the Company at the Company’s address. The Secretary will be responsible for disseminating all such communications to the Board, or to a specific member of the Board, as appropriate, depending on the facts described in such communication.

In addition to suggesting candidates to the Board, stockholders may nominate candidates directly by following the Board nomination procedure set forth in the By-laws. Under this procedure, a stockholder wishing to make a nomination must provide written notice to the Company’s Secretary containing all information about the proposed nominee required by Regulation 14A under the Securities Exchange Act of 1934, including his or her name, age, business and residence address, principal occupation or employment, class and number of shares beneficially owned and entitled to vote at the meeting, and such nominee’s written consent to be named in the proxy statement as a nominee and to serve as a director if elected. Also, the stockholder must include his or her own name, address, and class and number of shares beneficially owned and entitled to vote at the meeting. Upon receipt of a stockholder’s nomination, our Secretary will appoint two independent inspectors to determine whether these procedures were satisfied. To be timely, a stockholder’s notice must be addressed to the Secretary, and delivered to us, or mailed and received by us not less than 45 nor more than 90 days before the meeting. If we provide less than 55 days notice of the meeting, that deadline is extended until the close of business on the 10th day following the date notice was given.

 

Our Board identifies potential nominees for director, other than current directors standing for re-election, through business and other contacts. Our Board does not have a formal policy with regard to the consideration of director candidates nominated by our other stockholders. Our Board primarily considers a nominee’s business experience, career positions held and particular areas of expertise. There is no difference in the manner in which the Board evaluates nominees for director based on whether the nominee is recommended by a stockholder or by a member of our Board.

 

Information about Directors

 

The following table sets forth certain information as of April 2, 2008, with respect to each candidate nominated by the Board, and our executive officers. All director nominees were recommended by our Chairman of the Board. Unless otherwise indicated, each person has been engaged in the principal occupation shown for the past five years. Our Board has determined, using criteria established by NASDAQ and the Securities and Exchange Commission (the “SEC”), that each director nominee other than Messrs. Bospflug and Gonsoulin is independent.

 

 

 

 

 

 

 

Meetings of the Board

 

During the year ended December 31, 2007, the Board held four meetings. Each incumbent director attended at least 75% of the aggregate number of Board and Committee meetings of which he was a member.

 

The Board does not have a policy regarding Board member attendance at the annual stockholders meeting, but such meeting is normally held in conjunction with a regularly scheduled Board meeting in order to make attendance at both convenient. All Board members attended the 2007 annual meeting.

 

Board Committees

 

Our Board has an Audit Committee, whose current members are Messrs. Breault, Luigs, Matzke and Murphy (Chairman). This committee, which held six meetings during 2007, is responsible for performing the responsibilities described in the Audit Committee Charter. Our Audit Committee charter is attached as Exhibit A to this Information Statement.

 

Because PHI is a “controlled company” within the definition of the NASDAQ Marketplace Rules, it is not required to have a compensation committee. Nevertheless, our Board has a Compensation Committee, whose current members are Messrs. Breault (Chairman), Luigs, Matzke, and Murphy. This committee met four times during 2007. The Compensation Committee charter was included as an appendix to the 2007 Information Statement.

 

For the reasons discussed above under the caption “Nomination of Directors,” the Board does not have a nominating committee.

Director Compensation

 

During 2007, each director other than Mr. Gonsoulin received an annual retainer of $50,000. Additionally, each such director received a meeting fee of $3,000 for each Board or Committee meeting attended in person and $1,000 for each meeting attended by telephone. Committee chairs received an additional $1,000 per meeting. Director compensation is determined by reviewing compensation levels at similar size companies.

 

The table below summarizes the compensation paid by the Company to non-employee directors for the fiscal year ended December 31, 2007.

 

 

 

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Securities Exchange Act of 1934 requires our directors, executive officers and 10% of stockholders to file with the SEC reports of ownership and changes in ownership of our equity securities. Based solely on a review of copies of such forms, or written representations that no filings were required, we believe that all reports were filed on a timely basis during fiscal 2007.

 

STOCK OWNERSHIP

 

Stock Ownership of Directors and Executive Officers

 

The following table sets forth certain information concerning the beneficial ownership of each class of outstanding PHI common stock as of April 2, 2008 held by (a) each director and nominee for director of PHI, (b) each executive officer identified below under “Named Executive Officers” and (c) all directors and executive officers of PHI as a group, determined in accordance with Rule 13d-3 of the SEC. Unless otherwise indicated, the securities shown are held with sole voting and investment power, and are not pledged.

 

 

 

 

 

Stock Ownership of Certain Beneficial Owners

 

The following table shows the number of shares of PHI voting and non-voting common stock beneficially owned as of April 2, 2008 by persons known by us to beneficially own more than 5% of the outstanding shares of PHI’s voting or non-voting common stock, determined in accordance with Rule 13d-3 of the SEC. The information in the table is based on a review of such holders’ filings of Schedules 13D and 13G and Form 13F with the SEC. Each person listed below has sole voting and investment power with respect to the shares beneficially owned unless otherwise stated.

 

 

 

 

 

EXECUTIVE COMPENSATION

 

Compensation Discussion and Analysis

 

Compensation Philosophy and Objectives

 

The objective of our executive compensation policy is to:

 

 

These objectives strive to reward the achievement of goals tailored to the executive’s area of responsibility and recognizes individual leadership.

 

Compensation for our executive officers includes base salary, an annual incentive bonus opportunity, and a deferred compensation plan. The executives also participate in benefit plans generally available to our other salaried employees, including our 401(k) plan and health, dental, and life insurance.

 

Process

 

The executive compensation program is administered by the Compensation Committee of the Board in accordance with the Compensation Committee’s charter.

 

The Compensation Committee has retained FreeGulliver, LLC (“FreeGulliver”) as an independent compensation consultant regarding executive compensation matters. As an advisor, FreeGulliver is retained directly by the Compensation Committee. All assignments given to FreeGulliver are made by the Compensation Committee, and the Compensation Committee has the ability to terminate FreeGulliver’s services at any time.

 

The Compensation Committee retained FreeGulliver to provide the following compensation consulting services on an ongoing basis:

 

 

The Compensation Committee relies on Watson Wyatt surveys and peer group data for competitive compensation analysis, which is compiled for the Compensation Committee by FreeGulliver. The consultants at FreeGulliver provide a comparison of our executive compensation with a peer group made up of four companies in related industries, and a larger survey of service companies with similar revenues, number of employees or geographical location. The comparison also considers the scope and nature of managerial responsibility and reporting relationships. In the fourth quarter of each year, the Compensation Committee reviews the comparison data and recommends salary rates for the upcoming year. Based on this data, the Compensation Committee established its 2007 target salary levels at approximately the 60th percentile of companies in these peer groups in accordance with recommendations provided by FreeGulliver.

 

The Compensation Committee believes that its selected salary target level is consistent with our philosophy of providing compensation that is competitive with companies that could attract our executives. The Compensation Committee also established annual incentive bonus target opportunities, discussed below, as a percentage of base salary.

 

The Compensation Committee reviews and approves all compensation targets and payments for our executive officers. Except with respect to his own compensation, the CEO may make adjustments to the compensation based on an individual’s performance and contributions to the Company’s performance, subject to reporting any such adjustments to the Compensation Committee. The compensation of the CEO is determined by the Compensation Committee.

 

Elements of Executive Compensation

 

Our executive total compensation is a mix of base salary, annual incentive compensation, and employee benefits. It is the objective of this mix of components to instill in our executives the importance of achieving our business goals and thereby increase stockholder value.

 

Salary.  The salary is fixed and is based generally upon the level of responsibility of each executive officer and the individual’s prior performance, and is generally targeted at the 60th percentile of base pay for peer executives at comparable companies. Base salary also provides the foundation upon which incentive opportunities are established. Base salaries are approved by the Committee and after review of the studies referred to above and

the recommendation of FreeGulliver. The increase from 2006 to 2007 was determined by reference to market data from both the Watson Wyatt and peer group in order to maintain base salary at the 60th percentile level.

 

Annual Incentive Compensation.  The Committee approved a Senior Management Bonus Plan (the “Annual Incentive Plan” or “AIP”) in calendar year 2004, in which the Company’s executive officers participate. As implemented by the Committee, the annual incentive opportunities are based on the position and scope of responsibilities of the executive. This is used to provide a targeted percentage of base salary that may be awarded in the form of an incentive bonus at three levels — a threshold, a business plan, and a stretch level — based upon achieving financial targets. In 2007, the potential award for the CEO ranged from 0% if “threshold” goals were not met, to 40% for meeting “threshold” objectives, to 70% for meeting “business plan” objectives and 100% for meeting the “stretch” objectives. The range for our other executive officers was 0% if “threshold” goals were not met, 25% for “threshold” objectives, 45% for “business plan” objectives, and 65% for “stretch” objectives.

 

With respect to senior management other than the CEO, the CEO can modify the award based upon accomplishment of certain Company financial goals as well as departmental goals and a subjective evaluation of the individual’s contributions to the Company, subject to reporting such adjustments to the Committee.

 

With respect to fiscal 2007, the threshold performance target was not met. Nevertheless, the Committee decided to award bonuses to the CEO and other executive officers (along with other senior management members that participate in the plan) at the threshold performance level (i.e. 40% of salary for the CEO and 25% of salary for the other executive officers). In addition, all other eligible employees received a bonus under the Employee Incentive Bonus Plan at the threshold performance level. In reaching this decision, the Committee primarily considered the overall financial performance of the Company, the fact that no incentive compensation had been paid to senior management with respect to fiscal 2006 and the effort contributed by senior management during the last two fiscal years. The Committee concluded that these bonuses were appropriate to reward and retain senior management. The CEO did not make any adjustments to the 2007 bonus amounts for the other executive officers.

 

The AIP provides that one-half of any bonus amount is paid to the executive on or about the end of the first calendar quarter of the calendar year following the year with respect to which the award is determined, with the other half paid equally over the next three years at the anniversary dates of the first payment, assuming the executive’s employment continues; provided that the executive will receive these amounts if he dies, retires or becomes disabled.

 

Supplemental Executive Retirement Plan and Officers Deferred Compensation Plan.  In 2004, the Board terminated the Supplemental Executive Retirement Plan (“SERP”), subject to compliance with any vested rights, and PHI offered participants a substitute benefit in the Officers Deferred Compensation Plan (the “ODP”) based on the present value of the participants’ interest in the SERP. Beginning in January 2006, the aggregate SERP benefit of $2.2 million was transferred to the participants’ ODP accounts and such transfer was completed by June 2006. Of this total, the amounts related to Messrs. Gonsoulin, McCann, Rovinelli, and Sorenson were $0, $262,000, $216,000, and $194,000, respectively.

 

Certain highly compensated executives have been approved by the Compensation Committee to participate in the ODP, which allows the executive to tax-defer up to 25% of base salary and up to 100% of any bonuses and save those amounts for retirement. The Company does not contribute to the ODP, and it is an unfunded, nonqualified deferred compensation plan within the meaning of Sections 2.01(2), 3.01(a)(3) and 401(a)(1) of ERISA. It is maintained, interpreted and administered in accordance with Code Section 409A and applicable regulations and rulings. A separate account is established for each participant’s deferred compensation and is deemed invested in securities chosen by each participant from a list of available investment choices. Accounts are periodically adjusted for gains or losses to reflect the investment performance of the eligible securities and any payments made to a participant under the ODP.

Except as otherwise provided in the ODP, the value of a participant’s account is distributed at a designated future date, or at termination of employment or retirement, in either a single lump sum payment or in annual installments (not to exceed twenty (20) installments), as designated by the participant.

 

In 2006, the Company transferred assets equal to the value of the participants’ accounts and the substitute benefit from the SERP to a Rabbi Trust established pursuant to the ODP. All new executive deferrals are funded into the Rabbi Trust as they are deferred.

 

Equity Compensation.  The Company has not issued any stock, options or other stock-based compensation to employees since 2001 and has no current plans to do so.

 

Benefits.  All executives are eligible for the same insurance and welfare benefits (e.g., Medical Insurance, Dental Insurance, 401(k), Long-term Disability, Life and AD&D Insurance, AFLAC, etc.) as other employees in the Company, except that a newly hired executive is credited with having completed five years of Company service at his/her hire date for the purposes of calculating the amount of vacation days credited each year.

 

COMPENSATION COMMITTEE REPORT

 

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis for the year ended December 31, 2007 with management. Based on such reviews and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Information Statement on Schedule 14C.

 

Submitted by the Compensation Committee:

 

 

Summary Compensation Table for Fiscal 2007

 

The table below summarizes the total compensation paid to or earned by each of our executive officers for the fiscal year ended December 31, 2007. We currently have four executive officers. We have not entered into employment agreements with any of our executive officers.

 

 

 

 

 

Grants of Plan-Based Awards in Fiscal 2007

 

 

 

 

Outstanding Equity Awards at December 31, 2007

 

The following table contains information with respect to the Named Executive Officers concerning unexercised options held as of December 31, 2007. All options held are exercisable.

 

 

Option Exercises and Stock Vested

 

The following table sets forth certain information about option exercises during fiscal 2007 for the Named Executive Officers.

 

 

Nonqualified Deferred Compensation

 

The following table describes the contributions, earnings and balance at the end of fiscal year 2007 for each of the Named Executive Officers under our Officer Deferred Compensation Plan. For additional information regarding our Officer Deferred Compensation Plan, see the heading “Supplemental Executive Retirement Plan and Officers Deferred Compensation Plan” above.

 

 

 

 

The table below shows the investment choices available under the ODP and their annual rate of return for the calendar year 2007, as reported by the plan investment advisor.

 

 

Equity Compensation Plan Information

 

The following table provides information about our common stock that may be issued under equity compensation plans as of December 31, 2007:

 

 

 

 

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

 

The Compensation Committee consists of Arthur J. Breault, Jr., C. Russell Luigs, Richard H. Matzke and Thomas H. Murphy. No member of the Compensation Committee has ever been an officer or employee of PHI or any of our subsidiaries. In 2007, none of our executive officers served as a director or member of the compensation committee of another entity, where an executive officer served as a member of our Board or Compensation Committee.

 

Certain Transactions

 

Our Code of Ethics and Business Conduct Policy requires our directors and executive officers to avoid any situation that would create a conflict of interest unless approved in accordance with the Company’s Conflict of Interest Policy. Our Code of Ethics and Business Conduct Policy is available on our website at www.phihelico.com.

 

We lease a facility from Mr. Al A. Gonsoulin, our Chairman and CEO, where we perform maintenance work for a customer. The lease rate is $4,725 per month. The building was leased for a one-year term with four one-year options. This transaction was reviewed and approved by our audit committee, which is our procedure for any transaction between our Company and an executive officer or director.

 

REPORT OF THE AUDIT COMMITTEE

 

The Audit Committee of PHI’s Board of Directors is composed of four outside directors. It operates under a charter that was revised in early 2005. The Board has made a determination that all members of the Audit Committee satisfy the requirements of the SEC and NASDAQ as to independence and are financially sophisticated within the meaning of the NASDAQ rules. The Board has also determined that it is not clear whether any member of the Audit Committee is an “audit committee financial expert” within the meaning of SEC rules, but the Board does not believe the presence of an audit committee financial expert is necessary in view of the overall financial sophistication of Committee members. This is a report of the Committee’s activities during 2007.

 

The Audit Committee reviewed in detail and discussed with management and the independent auditors, among other things, (i) all unaudited quarterly financial statements and all quarterly reports filed with the SEC on Form 10-Q; (ii) the annual audited financial statements and the annual report filed with the SEC on Form 10-K; (iii) management’s quarterly and annual certifications regarding internal control over financial reporting and the independent auditors’ audit of internal control over financial reporting, and (v) the matters required to be discussed with the independent auditors by statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1 AU section 380). The Committee also received the written disclosures and the letter from the independent auditors required by Independence Standards Board Standard No. 1 (Independent Standards Board Standard No. 1, Independence Discussions with Audit Committees), and has discussed with the independent auditors their independence.

 

Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the 2007 fiscal year for filing with the SEC.

 

In accordance with the rules of the SEC, the foregoing information is not deemed to be “soliciting material,” or “filed” with the SEC or subject to its Regulation 14C, other than as provided in such rules, or to be subject to the liabilities of section 18 of the Securities Exchange Act of 1934, except to the extent that the Company specifically requests that the information be treated as soliciting material or specifically incorporates it by reference into a document filed under the Securities Act of 1933 or the Securities Exchange Act of 1934.

 

By the members of the Audit Committee:

 

Thomas H. Murphy, Chairman
Arthur J. Breault, Jr.
C. Russell Luigs
Richard H. Matzke

 

RELATIONSHIP WITH REGISTERED INDEPENDENT
PUBLIC ACCOUNTANTS

 

General

 

Our consolidated financial statements for 2006 and 2007 were audited by the firm of Deloitte & Touche, LLP, which was engaged for that purpose by the Audit Committee. Representatives of Deloitte & Touche, LLP, are not expected to be present at the Meeting.

 

The Audit Committee has selected Deloitte & Touche, LLP as PHI’s independent registered public accounting firm for the fiscal year ending December 31, 2008, subject to ratification by PHI’s stockholders at the Meeting.

 

Fees

 

The following is a summary of the fees billed to PHI and its subsidiaries by Deloitte & Touche, LLP for professional services rendered.

 

 

Audit fees include the aggregate fees billed for professional services rendered for the audit of the Company’s annual financial statements and review of financial statements included in the Company’s Form 10-Q, fees for services that normally would be provided in connection with statutory and regulatory filings or engagements and services that generally only the independent accountant reasonably can provide. Audit related fees include employee benefit plan audits, due diligence and accounting consultations. Tax fees include assistance in the preparation of federal and state tax returns and related advice regarding tax compliance.

 

Policy on Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors

 

All audit and permissible non-audit services provided by the independent auditors are pre-approved by PHI’s Audit Committee. These services may include audit services, audit-related services and other services. Pre-approval is generally provided for up to one year, and any pre-approval is detailed as to the particular service or category of service and is generally subject to a specific budget. The independent auditors and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent auditors in accordance with this pre-approval, and the fees for the services performed to date. The Audit Committee may also pre-approve particular services on a case-by-case basis.

 

PROPOSAL TO AMEND ARTICLE III(A) OF THE COMPANY’S
ARTICLES OF INCORPORATION TO INCREASE
THE NUMBER OF AUTHORIZED SHARES OF NON-VOTING COMMON STOCK

 

General

 

The Company is currently authorized to issue 12.5 million shares of voting common stock, par value $.10 per share (“voting common stock”), 12.5 million shares of non-voting common stock, par value $.10 per share (“non-voting common stock”) and 10 million shares of preferred stock, no par value per share (“preferred stock”). As of April 2, 2008, the Company had 12,438,992 shares of non-voting common stock issued and outstanding and 22,750 shares reserved for issuance upon exercise of stock options granted prior to 2002, leaving 38,258 shares of non-voting common stock available for issuance in the future.

 

The board of directors proposes to amend Article III(A) of the Company’s Articles of Incorporation to increase the number of authorized shares of non-voting common stock by 12.5 million shares to 25 million shares. The affirmative vote of the holders of a majority of the total voting power of the Company is required to approve the proposal.

 

The text of the proposed Articles of Amendment to the Company’s Articles of Incorporation is set forth in Appendix A to this information statement.

 

Purposes and Effects of the Proposed Amendment

 

The board of directors has no current plans to issue any additional shares of non-voting common stock (other than shares reserved for issuance under outstanding stock options). The board of directors believes that the adoption of this proposal will enable the Company promptly and appropriately to respond to business opportunities, such as opportunities to finance acquisitions with non-voting common stock, to raise additional equity capital or to declare stock splits and stock dividends. Given the number of shares currently available for issuance, the Company may not be able to effect these business opportunities without first obtaining stockholder approval for an increase in the authorized number of shares of non-voting common stock. The cost, prior notice requirements and delay involved in obtaining stockholder approval at the time that corporate action may become necessary, could eliminate the opportunity to effect the action or reduce the expected benefits

 

The additional shares of non-voting common stock proposed to be authorized, together with existing authorized and unissued shares, generally will be available for issuance without any requirement for further stockholder approval, unless stockholder action is required by applicable law or by the rules of The NASDAQ Global Market or of any stock exchange on which the Company’s securities may be listed. Although the board of directors will authorize the issuance of additional shares only when it considers doing so to be in the best interest of stockholders, the issuance of additional shares of non-voting common stock may, among other things, have a dilutive effect on earnings per share of the voting and non-voting common stock. The Company’s stockholders do not have any preemptive rights to subscribe for additional shares of non-voting common stock that may be issued.

 

The board of directors unanimously recommends that stockholders vote FOR the proposal to amend the Company’s Articles of Incorporation to increase the number of authorized shares of non-voting common stock by 12.5 million shares to 25 million shares.

 

OTHER MATTERS

 

Quorum and Voting

 

The presence, in person or by proxy, of a majority of the Company’s total voting power is necessary to constitute a quorum. Stockholders voting or abstaining from voting by proxy on any issue will be counted as present for purposes of constituting a quorum. If a quorum is present, the election of directors will be determined by plurality vote. The proposal to amend the Company’s articles of incorporation to increase the number of authorized shares of non-voting common stock will require the approval of the holders of a majority of the Company’s total

voting power. The proposal to ratify the appointment of our independent registered public accounting firm will require approval of holders of a majority of the Company’s total voting power.

 

The Board does not know of any matters to be presented at the Meeting other than those described herein.

 

Stockholder Proposals

 

Eligible stockholders who desire to present a proposal qualified for inclusion in the proxy or information materials relating to the 2009 annual meeting of stockholders must forward such proposal to the Company’s Secretary at the address set forth on the first page of this Information Statement in time to arrive at PHI before February 15, 2009.

 

The Company’s by-laws state that for any business to be properly brought before the annual meeting, notice of the proposal must be received by the Company no later than the close of business on the 60th day nor earlier than the close of business on the 90th day before the first anniversary of the preceding year’s annual meeting. In regard to the 2009 annual meeting, this provision will require notice between February 5, 2009 and March 7, 2009. If, however, the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the stockholders to be timely must be so delivered not earlier than the close of business on the 90th day before such annual meeting and not later than the close of business on the later of the 60th day before such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made by the Company.

 

This notice must set forth (a) a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholders and the beneficial owner, if any, on whose behalf the proposal is made; and (b) as to the stockholders giving the notice and the beneficial owner, if any, on whose behalf the proposal is made (i) the name and address of such stockholders, as they appear on the Company’s books, and of such beneficial owner and (ii) the class and number of shares of the Company which are owned beneficially and of record by such stockholders and such beneficial owner.

 

By Order of the Board of Directors

 

Michael J. McCann

Secretary

 

Lafayette, Louisiana

April 16, 2008

 

APPENDIX A

 

ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
PHI, INC.

 

PHI, Inc., a Louisiana corporation (the “Corporation”), acting through the undersigned officer, does hereby certify that:

 

FIRST:  On May 6, 2008, at the annual meeting of stockholders at which            of the 12.5 million shares of voting common stock, par value $.10 per share, of the Corporation (“Voting Common Stock”), having one vote per share, were present or represented at the meeting, the holders of a majority of the total voting power of the Corporation, by a vote of            shares of Voting Common Stock for,            shares against and            shares abstaining, adopted a resolution to amend the Articles of Incorporation of the Corporation to increase the number of authorized shares of Non-Voting Common Stock from 12.5 million to 25 million shares.

 

SECOND:  Article III(A) of the Articles of Incorporation is amended to read in its entirety as follows:

 

A. The Corporation is authorized to issue 12,500,000 shares of voting common stock, par value $.10 per share (the “Voting Common Stock”), 25,000,000 shares of non-voting common stock, par value $.10 per share (the “Non-Voting Common Stock”), and 10,000,000 shares of preferred stock, no par value per share (the “Preferred Stock”).

 

These Articles of Amendment are dated May   , 2008.

 

PHI, INC.

 

Michael J. McCann, Secretary

 

EXHIBIT A

 

PHI, INC.
Charter of the Audit Committee

(as amended on March 8, 2005)

 

 

A. The Audit Committee of PHI, Inc. (the “Company”) shall be comprised of at least three directors who shall (i) be independent within the meaning of applicable rules of the NASDAQ and the Securities and Exchange Commission and (ii) otherwise meet the requirements for membership on the Audit Committee as set forth in such rules.

 

 

A. The primary purpose of the Audit Committee is to (a) assist the Board of Directors in fulfilling its oversight of (i) the integrity of the Company’s financial statements, (ii) the Company’s compliance with legal and regulatory requirements, (iii) the Company’s independent auditors’ qualifications and independence, (iv) the performance of the Company’s internal audit function and internal auditors and (v) the accounting, financial reporting and internal controls processes of the Company; and (b) prepare any reports required to be included in the Company’s annual information statement and as otherwise required.

 

B. The function of the Audit Committee is oversight. The management of the Company is responsible for the preparation, presentation and integrity of the Company’s financial statements and for the effectiveness of internal control over financial reporting. Management and the internal auditing department are responsible for maintaining appropriate accounting and financial reporting principles and policies and internal controls and procedures that provide for compliance with applicable accounting standards, laws and regulations. The independent auditors are responsible for planning and carrying out a proper audit of the Company’s annual financial statements, reviews of the Company’s quarterly financial statements prior to the filing of each quarterly report on Form 10-Q, annually attesting to and reporting on management’s assessment of the effectiveness of internal control over financial reporting, and other procedures. In fulfilling their responsibilities hereunder, it is recognized that members of the Audit Committee are not full-time employees of the Company and are not, and do not represent themselves to be, performing the functions of auditors or accountants. As such, it is not the duty or responsibility of the Audit Committee or its members to conduct “field work” or other types of auditing or accounting reviews or procedures or to set auditor independence standards.

 

C. The independent auditors shall submit to the Audit Committee annually a formal statement (the “Auditors’ Statement”) describing: (1) the auditors’ internal quality-control procedures; (2) any material issues raised by the most recent internal quality-control review or peer review of the auditors, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the auditors, and any steps taken to deal with any such issues; and (3) all relationships between the independent auditors and the Company, consistent with Independence Standards Board No. 1.

 

D. The independent auditors shall submit to the Audit Committee annually a formal statement of the fees billed in each of the last two fiscal years for each of the following categories of services rendered by the independent auditors: (1) the audit of the Company’s annual financial statements and the reviews of the financial statements included in the Company’s Quarterly Reports on Form 10-Q or services that are normally provided by the independent auditors in connection with statutory and regulatory filings; (2) services not included in clause (1) that are reasonably related to the performance of the audit or review of the Company’s financial statements, quantified in the aggregate and by each type of service; (3) tax compliance, tax advice and tax planning services, quantified in the aggregate and by each type of service; and (4) all other products and services rendered by the independent auditors, quantified in the aggregate and by each type of service.

III. Committee Duties and Responsibilities

 

To carry out its purposes, the Audit Committee shall have the following duties and responsibilities:

 

A. with respect to the independent auditors:

 

1. to be directly responsible for the appointment, compensation, retention and oversight of the work of the independent auditors, who shall report directly to the Audit Committee;

 

2. to resolve any disagreements with management regarding financial reporting;

 

3. to actively engage in a dialogue with the independent auditors with respect to any disclosed relationships or services that may affect the objectivity and independence of the auditors and to take, or recommend that the full Board take, appropriate action to oversee the independence of the outside auditors;

 

4. to be directly responsible for the appointment, compensation, retention and oversight of the work of any other registered public accounting firm engaged for the purpose of preparing or issuing an audit report or to perform audit, review or attestation services, which firm shall also report directly to the Audit Committee;

 

5. to pre-approve, and to adopt appropriate procedures to pre-approve, all audit and non-audit services to be provided by the independent auditors;

 

6. to ensure that the independent auditors prepare and deliver annually an Auditors’ Statement, and to discuss with the independent auditors any relationships or services disclosed in this Statement that may impact the quality of audit services or the objectivity and independence of the Company’s independent auditors;

 

7. to hold timely discussions with the independent auditors regarding all critical accounting policies and practices used, all alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, the ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditors;

 

8. to obtain and discuss any material written communications between the independent auditors and management, such as any letter describing significant deficiencies or material weaknesses in internal controls, any “management” letter or any schedule of unadjusted differences;

 

9. to discuss with management the timing and process for implementing the rotation of the lead audit partner and any other active audit engagement team partner; and

 

10. to obtain from the independent auditors assurance that the audit was conducted in a manner consistent with Section 10A of the Exchange Act, which sets forth certain procedures to be followed in any audit of financial statements required under the Exchange Act.

 

B. with respect to the internal auditing department, to review the appointment and replacement of the director of the internal auditing department, who shall report directly to the Audit Committee but shall also be given managerial responsibility and oversight by the Chief Financial Officer of the Company, and to review the activities and scope of work of the internal audit department at least annually;

 

C. with respect to accounting principles and policies, financial reporting and internal control over financial reporting:

 

1. to consider any reports or communications (and management’s and/or the internal audit department’s responses thereto) submitted to the Audit Committee by the independent auditors required by or referred to in SAS 61, as it may be modified or supplemented, or other professional standards;

 

2. to meet with management, the independent auditors and, if appropriate, the director of the internal auditing department:

 

i. to discuss the scope of the annual audit;

ii. to discuss the annual audited financial statements and quarterly financial statements, including the Company’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations and all Section 302 and 906 certifications required by the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”);”

 

iii. to discuss any significant matters arising from any audit, including any audit problems or difficulties, whether raised by management, the internal auditing department or the independent auditors, relating to the Company’s financial statements;

 

iv. to discuss any difficulties the independent auditors encountered in the course of the audit, including any restrictions on their activities or access to requested information and any significant disagreements with management;

 

v. to discuss any “management” or “internal control” letter issued, or proposed to be issued, by the independent auditors to the Company;

 

vi. to review management reporting on internal controls and the independent auditors’ attestation as required by Section 404 of Sarbanes-Oxley; and

 

vii. to discuss, as appropriate: (a) any major issues regarding accounting principles and financial statement presentations, including any significant changes in the Company’s selection or application of accounting principles, and major issues as to the adequacy of the Company’s internal controls and any special audit steps adopted in light of material control deficiencies; (b) analyses prepared by management and/or the independent auditors setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative GAAP methods on the financial statements; and (c) the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of the Company;

 

3. to inquire of the Company’s chief executive officer and chief financial officer as to the existence of any significant deficiencies or material weaknesses in the design or operation of internal control over financial reporting that are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information, and as to the existence of any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting;

 

4. to discuss guidelines and policies governing the process by which senior management of the Company and the relevant departments of the Company assess and manage the Company’s exposure to risk, and to discuss the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures;

 

5. to discuss with the Company’s management and outside counsel any significant legal, compliance or regulatory matters that may have a material effect on the financial statements or the Company’s business, financial statements or compliance policies, including material notices to or inquiries received from governmental agencies;

 

6. to discuss and review the type and presentation of information to be included in earnings press releases;

 

7. to review and discuss any reports concerning material violations submitted to it by Company attorneys or outside counsel pursuant to the SEC attorney professional responsibility rules (17 C.F.R. Part 205) or otherwise; and

 

8. to review and approve all related party transactions of the Company, defined as those transactions required to be disclosed under Item 404 of Regulation S-K;

D. with respect to reporting and recommendations:

 

1. to prepare any report or other disclosures, including any recommendation of the Audit Committee, required by the rules of the SEC to be included in the Company’s annual proxy statement;

 

2. to review and reassess the adequacy of this Charter at least annually and recommend any changes to the full Board of Directors; and

 

3. to report its activities to the full Board of Directors on a regular basis and to make such recommendations with respect to the above and other matters as the Audit Committee may deem necessary or appropriate.

 

 

The Audit Committee shall designate one member of the Audit Committee as its chairperson. The Audit Committee shall meet once every fiscal quarter, or more frequently if circumstances dictate; should meet separately at least quarterly with management, the director of the internal auditing department and the independent auditors to discuss any matters that the Audit Committee or any of these persons or firms believe should be discussed privately; and should meet without management present at least once a year. The Audit Committee may request any officer or employee of the Company or the Company’s outside counsel or independent auditors to attend a meeting of the Audit Committee or to meet with any members of, or consultants to, the Audit Committee.

 

 

The Audit Committee may, in its discretion, delegate all or a portion of its duties and responsibilities to a subcommittee of the Audit Committee. The Audit Committee may, in its discretion, delegate to one or more of its members the authority to pre-approve any audit or non-audit services to be performed by the independent auditors, provided that any such approvals are presented to the Audit Committee at its next scheduled meeting.

 

 

A. The Audit Committee shall have the resources and authority appropriate to discharge its duties and responsibilities, including the authority to select, retain, terminate, and approve the fees and other retention terms of special or independent counsel, accountants or other experts and advisors, as it deems necessary or appropriate, without seeking approval of the Board or management.

 

B. The Company shall provide for appropriate funding, as determined by the Audit Committee, in its capacity as a committee of the Board, for payment of:

 

1. compensation to the independent auditors and any other public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company;

 

2. compensation of any advisers employed by the Audit Committee; and

 

3. ordinary administrative expenses of the Audit Committee that are necessary or appropriate in carrying out its duties.