Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 ________________________________________
FORM 10-Q
________________________________________ 
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2013              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 1-35701
Era Group Inc.
(Exact Name of Registrant as Specified in Its Charter)
________________________________________ 
Delaware
 
72-1455213
(State or Other Jurisdiction of
Incorporation or Organization)
 
(IRS Employer
Identification No.)
 
 
818 Town & Country Blvd., Suite 200
 
 
Houston, Texas
 
77024
(Address of Principal Executive Offices)
 
(Zip Code)
281-606-4900
(Registrant’s Telephone Number, Including Area Code)

________________________________________ 
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  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  ý     No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer  ¨
 
Accelerated filer  ¨
 
Non-accelerated filer  x
(Do not check if a smaller
reporting company)
 
Smaller reporting company  ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ¨    No  ý
The total number of shares of common stock, par value $0.01 per share, outstanding as of May 1, 2013 was 20,124,975. The Registrant has no other class of common stock outstanding.


Table of Contents

ERA GROUP INC.
Table of Contents
 
Part I.
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
 
Item 3.
 
 
 
 
Item 4.
 
 
 
Part II.
 
 
 
 
Item 1A.
 
 
 
 
 
Item 6.


1

Table of Contents

PART I—FINANCIAL INFORMATION

ITEM 1.
FINANCIAL STATEMENTS
ERA GROUP INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
 
March 31,
2013
 
December 31,
2012
 
(Unaudited)
 
 
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
25,032

 
$
11,505

Receivables:
 
 
 
Trade, net of allowance for doubtful accounts of $2,817 and $2,668 in 2013 and 2012, respectively
40,761

 
48,527

Other
16,416

 
3,742

Due from SEACOR

 
971

Inventories
26,696

 
26,650

Deferred income taxes
3,642

 
3,642

Prepaid expenses and other
2,715

 
1,803

Total current assets
115,262

 
96,840

Property and Equipment
1,021,453

 
1,030,276

Accumulated depreciation
(246,498
)
 
(242,471
)
Net property and equipment
774,955

 
787,805

Investments, at Equity, and Advances to 50% or Less Owned Companies
34,705

 
34,696

Goodwill
352

 
352

Other Assets
17,830

 
17,871

Total Assets
$
943,104

 
$
937,564

LIABILITIES AND EQUITY
 
 
 
Current Liabilities:
 
 
 
Accounts payable and accrued expenses
$
13,126

 
$
15,703

Accrued wages and benefits
7,662

 
4,576

Accrued interest
5,213

 
1,401

Current portion of long-term debt
2,787

 
2,787

Due to SEACOR
270

 

Other current liabilities
4,309

 
5,232

Total current liabilities
33,367

 
29,699

Long-Term Debt
276,307

 
276,948

Deferred Income Taxes
203,343

 
203,536

Deferred Gains and Other Liabilities
8,164

 
7,864

Total liabilities
521,181

 
518,047

Series A Preferred Stock, at redemption value; $0.01 par value, 10,000,000 shares authorized; 1,400,000 shares issued in 2012

 
144,232

Equity:
 
 
 
Era Group Inc. stockholders’ equity:
 
 
 
Common stock, $0.01 par value, 60,000,000 shares authorized; 20,123,639 issued in 2013; none issued in 2012
201

 

Class B common stock, $0.01 par value, 60,000,000 shares authorized; none issued in 2013; 24,500,000 issued in 2012

 
245

Additional paid-in capital
419,036

 
278,838

Retained earnings (accumulated deficit)
2,669

 
(4,025
)
Accumulated other comprehensive income (loss), net of tax
(85
)
 
20

 
421,821

 
275,078

Noncontrolling interest in subsidiary
102

 
207

Total equity
421,923

 
275,285

Total Liabilities and Stockholders Equity
$
943,104

 
$
937,564

The accompanying notes are an integral part of these condensed consolidated financial statements
and should be read in conjunction herewith.

2

Table of Contents

ERA GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
 
 
Three Months Ended March 31,
 
 
2013
 
2012
 
 
(Unaudited)
Operating Revenues
 
$
67,727

 
$
61,052

Costs and Expenses:
 
 
 
 
Operating
 
43,116

 
39,676

Administrative and general
 
9,134

 
9,677

Depreciation
 
11,661

 
9,630

 
 
63,911

 
58,983

Gains on Asset Dispositions, Net
 
10,801

 
1,765

Operating Income
 
14,617

 
3,834

Other Income (Expense):
 
 
 
 
Interest income
 
147

 
332

Interest expense
 
(4,732
)
 
(1,968
)
SEACOR management fees
 
(168
)
 
(500
)
Derivative losses, net
 
(3
)
 
(124
)
Foreign currency gains (losses), net
 
(259
)
 
917

Other, net
 
3

 
30

 
 
(5,012
)
 
(1,313
)
Income Before Income Tax Expense and Equity in Earnings (Losses) of 50% or Less Owned Companies
 
9,605

 
2,521

Income Tax Expense
 
3,578

 
734

Income Before Equity in Earnings (Losses) of 50% or Less Owned Companies
 
6,027

 
1,787

Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax
 
562

 
(6,420
)
Net Income (Loss)
 
6,589

 
(4,633
)
Net Loss attributable to Noncontrolling Interest in Subsidiary
 
105

 

Net Income (Loss) attributable to Era Group Inc.
 
6,694

 
(4,633
)
Accretion of redemption value on Series A Preferred Stock
 
721

 
2,100

Net Income (Loss) attributable to Common Shares
 
$
5,973

 
$
(6,733
)
 
 
 
 
 
Earnings (Loss) Per Common Share:
 
 
 
 
Basic and Diluted Earnings (Loss) Per Common Share
 
$
0.28

 
$
(0.27
)
Weighted Average Common Shares Outstanding
 
21,454,396

 
24,500,000

 
 
 
 
 









The accompanying notes are an integral part of these condensed consolidated financial statements
and should be read in conjunction herewith.

3

Table of Contents

ERA GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
 
 
Three Months Ended March 31,
 
 
2013
 
2012
 
 
(Unaudited)
Net Income (Loss)
 
$
6,589

 
$
(4,633
)
Other Comprehensive Income (Loss):
 
 
 
 
Foreign currency translation adjustments
 
(162
)
 
980

Income tax benefit (expense)
 
57

 
(343
)
 
 
(105
)
 
637

Comprehensive Income (Loss)
 
6,484

 
(3,996
)
Comprehensive Loss attributable to Noncontrolling Interest in Subsidiary
 
105

 

Comprehensive Income (Loss) attributable to Era Group Inc.
 
$
6,589

 
$
(3,996
)






















The accompanying notes are an integral part of these condensed consolidated financial statements
and should be read in conjunction herewith.

4

Table of Contents

ERA GROUP INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(in thousands, unaudited)
 
 
 
 
 
Era Group Inc. Stockholders’ Equity
 
Non-
controlling
Interest In
Subsidiary
 
Total
Equity
 
 
Series A Convertible Preferred Stock
 
 
Class B Common
Stock
 
Common
Stock
 
Additional
Paid-In
Capital
 
Retained Earnings (Accumulated Deficit)
 
Accumulated
Other
Comprehensive
Income (Loss)
 
December 31, 2012
 
$
144,232

 
 
$
245

 
$

 
$
278,838

 
$
(4,025
)
 
$
20

 
$
207

 
$
275,285

Accretion of redemption value on Series A preferred stock
 
721

 
 

 

 
(721
)
 

 

 

 
(721
)
Preferred stock dividend
 
(4,953
)
 
 

 

 

 

 

 

 

Recapitalization of Era Group by SEACOR
 
(140,000
)
 
 
(245
)
 
199

 
140,046

 

 

 

 
140,000

Issuance of Era Group stock options in settlement of SEACOR stock options
 

 
 

 

 
706

 

 

 

 
706

Issuance of common stock:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Restricted stock grants
 

 
 

 
2

 
(2
)
 

 

 

 

Proceeds and tax benefits from share award plans
 

 
 

 

 
89

 

 

 

 
89

Share award amortization
 

 
 

 

 
80

 

 

 

 
80

Net income (loss)
 

 
 

 

 

 
6,694

 

 
(105
)
 
6,589

Currency translation adjustments, net of tax
 

 
 

 

 

 

 
(105
)
 

 
(105
)
March 31, 2013
 
$

 
 
$

 
$
201

 
$
419,036

 
$
2,669

 
$
(85
)
 
$
102

 
$
421,923
































The accompanying notes are an integral part of these consolidated financial statements
and should be read in conjunction herewith.

5

Table of Contents

ERA GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
Three Months Ended March 31,
 
2013
 
2012
 
(Unaudited)
Net Cash Provided by (Used in) Operating Activities
$
17,877

 
$
(39,712
)
Cash Flows from Investing Activities:
 
 
 
Purchases of property and equipment
(19,445
)
 
(54,272
)
Proceeds from disposition of property and equipment
19,099

 
2,935

Cash settlements on derivative transactions, net

 
(98
)
Principal payments on notes due from equity investees
535

 
439

Principal payments on third party notes receivable, net
347

 
346

Net cash provided by (used in) investing activities
536

 
(50,650
)
Cash Flows from Financing Activities:
 
 
 
Payments on long-term debt
(15,697
)
 
(697
)
Proceeds from issuance of long-term debt
15,000

 
38,000

Dividends paid on Series A preferred stock
(4,953
)
 

Proceeds and tax benefits from share award plans
89

 

Proceeds from SEACOR on the settlement of stock options
706

 

Net cash provided by (used in) financing activities
(4,855
)
 
37,303

Effects of Exchange Rate Changes on Cash and Cash Equivalents
(31
)
 
810

Net Increase (Decrease) in Cash and Cash Equivalents
13,527

 
(52,249
)
Cash and Cash Equivalents, Beginning of Period
11,505

 
79,122

Cash and Cash Equivalents, End of Period
$
25,032


$
26,873




























The accompanying notes are an integral part of these condensed consolidated financial statements
and should be read in conjunction herewith.

6

Table of Contents

ERA GROUP INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
 
1.
BASIS OF PRESENTATION AND ACCOUNTING POLICY
The condensed consolidated financial statements include the accounts of Era Group Inc. and its consolidated subsidiaries (collectively referred to as the “Company”). The condensed consolidated financial information for the three months ended March 31, 2013 and 2012 has been prepared by the Company and has not been audited by its independent registered public accounting firm. In the opinion of management, all adjustments (consisting of normal recurring adjustments) have been made to fairly present the Company’s financial position as of March 31, 2013, its results of operations for the three months ended March 31, 2013 and 2012, its comprehensive income (loss) for the three months ended March 31, 2013 and 2012, its changes in equity for the three months ended March 31, 2013, and its cash flows for the three months ended March 31, 2013 and 2012. Results of operations for the interim periods presented are not necessarily indicative of operating results for the full year or any future periods.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.
Unless the context otherwise indicates, any reference in this Quarterly Report on Form 10-Q to the “Company” refers to Era Group Inc. and its consolidated subsidiaries and any reference in this Quarterly Report on Form 10-Q to “Era Group” refers to Era Group Inc.
Prior to January 31, 2013, the Company was wholly owned by SEACOR Holdings Inc. (along with its other majority-owned subsidiaries being collectively referred to as “SEACOR”) and represented SEACOR’s aviation services business segment. On January 31, 2013, SEACOR recapitalized the Company through the exchange of all of its Class B common stock and $140.0 million of its Series A preferred stock for 19,883,583 shares of newly-issued Era Group common stock, par value $0.01 per share (the “Recapitalization”).  Following the Recapitalization, the Company had only one class of common stock issued and outstanding, and no preferred stock outstanding. On January 31, 2013, SEACOR then completed a spin-off by means of a dividend to SEACOR’s stockholders of all of the Company’s issued and outstanding common stock (the “Spin-off”). The Company filed a Registration Statement on Form 10 with the Securities and Exchange Commission (“SEC”) that was declared effective on January 15, 2013. Prior to the Spin-off, SEACOR and the Company entered into a distribution agreement and several other agreements that govern their post-Spin-off relationship. Era Group is now an independent company with its common stock listed on the New York Stock Exchange under the symbol “ERA.”     
In connection with the Spin-off, the Company entered into an Amended and Restated Transition Services Agreement with SEACOR. Under the terms of the Amended and Restated Transition Services Agreement, SEACOR continues to provide the Company with certain support services, for up to two years from the effective date of the Spin-off, including payroll processing, information systems support, benefit plan management, cash disbursement support, cash receipt processing and treasury management.
Revenue Recognition. The Company recognizes revenue when it is realized or realizable and earned. Revenue is realized or realizable and earned when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price to the buyer is fixed or determinable, and collectability is reasonably assured. Revenue that does not meet these criteria is deferred until the criteria are met. Deferred revenues for the three months ended March 31 were as follows (in thousands): 
 
2013
 
2012
Balance at beginning of period
$
8,953

 
$
123

Revenues deferred during the period
8,932

 
2,955

Revenues recognized during the period
(5,152
)
 
(114
)
Balance at end of period
$
12,733

 
$
2,964

As of March 31, 2013, deferred revenues included $10.1 million related to contract-lease revenues for certain helicopters leased by the Company to Aeróleo Taxi Aero S/A (“Aeróleo”), its Brazilian joint venture. The deferral originated from difficulties experienced by Aeróleo following Petróleo Brasileiro S.A.’s (“Petrobras Brazil”) cancellation of certain contract awards for a number of AW139 helicopters under contract-lease from the Company, and the deferral continues as a result of Petrobras Brazil's efforts to suspend and/or underpay contracts for three EC225 helicopters under contract-lease from the Company. The Company will recognize revenues as cash is received or earlier should future collectability become reasonably assured. All costs and expenses related to these contract-leases were recognized as incurred.

7

Table of Contents

As of March 31, 2013, deferred revenues also included $2.6 million related to contract-lease revenues for certain helicopters leased by the Company to a customer in India. The deferral resulted from the customer having its operating certificate revoked for a period of time and therefore being unable to operate. The certificate has since been reinstated but uncertainty still remains regarding the collectability of the contract-lease revenues due to the customer's short-term liquidity issues. The Company will recognize revenues as cash is received or earlier should future collectability become reasonably assured. All costs and expenses related to these contract-leases were recognized as incurred.
Reclassifications. Certain reclassifications of prior period information have been made to conform to the presentation of the current period information. These reclassifications had no effect on net income as previously reported.
2.
FAIR VALUE MEASUREMENTS
The fair value of an asset or liability is the price that would be received to sell an asset or transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company utilizes a fair value hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value and defines three levels of inputs that may be used to measure fair value. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, quoted prices in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, or inputs derived from observable market data. Level 3 inputs are unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities.
The Company’s financial assets and liabilities as of March 31, 2013 that are measured at fair value on a recurring basis were as follows (in thousands):
 
Level 1
 
Level 2
 
Level 3
LIABILITIES
 
 
 
 
 
Derivative instruments (included in other current liabilities)
$

 
$
910

 
$

The estimated fair values of the Company’s other financial assets and liabilities as of March 31, 2013 were as follows (in thousands): 
 
 
 
Estimated Fair Value
 
Carrying
Amount
 
Level 1
 
Level 2
 
Level 3
ASSETS
 
 
 
 
 
 
 
Cash and cash equivalents
$
25,032

 
$
25,032

 
$

 
$

Notes receivable from other business ventures (included in other
  receivables and other assets)
872

 
872

 

 

LIABILITIES
 
 
 
 
 
 
 
Long-term debt, including current portion
279,094

 

 
292,840

 

The carrying values of cash, cash equivalents and notes receivable from other business ventures approximate fair value. The fair value of the Company’s long-term debt was estimated using discounted cash flow analysis based on estimated current rates for similar types of arrangements. Considerable judgment was required in developing certain of the estimates of fair value and accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange.
3.
DERIVATIVE INSTRUMENTS
In 2011, the Company entered into two interest rate swap agreements maturing in 2014 and 2015 that call for the Company to pay fixed interest rates of 1.67% and 1.83% on an aggregate notional value of $31.8 million and receive a variable interest rate based on the London Interbank Offered Rate (“LIBOR”) on these notional values. The general purpose of these interest rate swap agreements is to provide protection against increases in interest rates, which might lead to higher interest costs for the Company. The fair value of these derivative instruments at March 31, 2013 was a liability of $0.9 million. The Company recognized losses of less than $0.1 million and $0.1 million on these derivative instruments for the three months ended March 31, 2013 and 2012, respectively.

8

Table of Contents

4.
EQUIPMENT ACQUISITIONS AND DISPOSITIONS
During the three months ended March 31, 2013, capital expenditures were $19.4 million and consisted primarily of a helicopter acquisition and deposits on future helicopter deliveries. The Company records helicopter acquisitions in Property and Equipment and places helicopters in service once all completion work has been finalized and the helicopters are ready for use. A summary of changes to our operating helicopter fleet during the three months ended March 31, 2013 is as follows:
Equipment Additions. During the three months ended March 31, 2013, the Company placed two medium helicopters in service, which were acquired in the prior year.
Equipment Dispositions. During the three months ended March 31, 2013, the Company sold or otherwise disposed of property and equipment for cash proceeds of $19.1 million and receivables of $13.9 million, resulting in gains of $10.7 million. In addition, the Company recognized previously deferred gains of $0.1 million. Major equipment dispositions for the three months ended March 31, 2013 were as follows:
Light helicopters - twin engine (1)
 
2

Medium helicopters
 
3

Heavy helicopters
 
1

 
 
6

During the three months ended March 31, 2013, the Company recognized a $5.4 million gain on the sale of an Eurocopter EC225 helicopter. The helicopter was previously on contract-lease to a customer and was damaged in an incident in May 2012, and it was subsequently sold to that customer in March 2013 for cash proceeds of $13.1 million and a note receivable of $11.5 million.
During the three months ended March 31, 2013, the Company recognized $2.1 million in insurance proceeds on a Sikorsky S76A helicopter involved in an incident in March 2013, resulting in a gain of $1.2 million.
________________________
(1)    Includes two light-twin helicopters that had previously been removed from service.
5.
INVESTMENTS, AT EQUITY, AND ADVANCES TO 50% OR LESS OWNED COMPANIES
Combined Condensed Financials. Summarized financial information for Dart Holding Company Ltd., in which the Company has a 50% ownership interest, for the three months ended March 31 was as follows (in thousands):
 
 
2013
 
2012
Operating Revenues
 
$
10,776

 
$
11,582

Costs and Expenses:
 
 
 
 
Operating and administrative
 
7,759

 
8,551

Depreciation
 
1,298

 
1,349

 
 
9,057

 
9,900

Operating Income
 
$
1,719

 
$
1,682

Net Income (Loss)
 
$
1,175

 
$
(312
)
6.
INCOME TAXES
During the three months ended March 31, 2013 and 2012, the Company's effective tax rate was 37.3% and 29.1%, respectively. The Company's effective tax rate for the three months ended March 31, 2013 included items related to state taxes. The Company's effective tax rate for the three months ended March 31, 2012 included permanent differences related to share-based payments.

9

Table of Contents

7.
LONG-TERM DEBT
The Company’s borrowings as of the periods indicated were as follows (in thousands):
 
 
March 31, 2013
 
December 31, 2012
7.750% Senior Notes (excluding unamortized discount of $3.3 million)
 
$
200,000

 
$
200,000

Senior Secured Revolving Credit Facility
 
50,000

 
50,000

Promissory Notes
 
32,401

 
33,098

 
 
282,401

 
283,098

Less: Portion due with one year
 
(2,787
)
 
(2,787
)
Less: Debt discount, net
 
(3,307
)
 
(3,363
)
Total Long-Term Debt
 
$
276,307

 
$
276,948

7.750% Senior Notes. On December 7, 2012, the Company issued $200.0 million aggregate principal amount of its 7.750% senior unsecured notes due December 15, 2022 (the “7.750% Senior Notes”) and received net proceeds of $191.9 million. Interest on the 7.750% Senior Notes is payable semi-annually in arrears on each June 15 and December 15 of each year, beginning on June 15, 2013.
Senior Secured Revolving Credit Facility. As of March 31, 2013, the Company had $50.0 million of outstanding borrowings under its senior secured revolving credit facility (“Revolving Credit Facility”). As of March 31, 2013, the remaining availability under this facility was $149.3 million, net of issued letters of credit of $0.7 million. During the three months ended March 31, 2013, the Company had borrowings of $15.0 million and made repayments of $15.0 million.
Promissory Notes. During the three months ended March 31, 2013, the Company made scheduled payments on other long-term debt of $0.7 million.
8.
COMMITMENTS AND CONTINGENCIES
The Company’s unfunded capital commitments as of March 31, 2013 consisted primarily of agreements to purchase helicopters and totaled $131.1 million, including one AW139 medium helicopter, five AW189 heavy helicopters and five AW169 light twin helicopters. The AW139 is scheduled to be delivered in May 2013. The AW189 heavy helicopters are scheduled to be delivered in 2014 and 2015. Delivery dates for the AW169 light twin helicopters have yet to be determined. Of these commitments, $13.4 million is payable during the remainder of 2013 with the balance payable through 2016, and $124.3 million may be terminated without further liability other than liquidated damages of $3.3 million in the aggregate. In addition, we had outstanding options to purchase up to an additional eight AW139 medium helicopters and five AW189 heavy helicopters. If these options were exercised, the helicopters would be delivered beginning in 2014 through 2016.
In the normal course of its business, the Company becomes involved in various other litigation matters including, among other things, claims by third parties for alleged property damages and personal injuries. Management has used estimates in determining the Company's potential exposure to these matters and has recorded reserves in its financial statements related thereto where appropriate. It is possible that a change in the Company's estimates of that exposure could occur, but the Company does not expect such changes in estimated costs would have a material effect on the Company's consolidated financial position or its results of operations.
9.
SERIES A PREFERRED STOCK
On January 31, 2013, as part of the Recapitalization, SEACOR exchanged its 1,400,000 shares of Series A preferred stock, which represented all of the Company's Series A preferred stock then outstanding, for shares of newly-issued Era Group common stock. During the three months ended March 31, 2013, the Company paid outstanding accrued dividends of $5.0 million to SEACOR (See Note 1).

10

Table of Contents

10.
EARNINGS PER COMMON SHARE
Basic earnings (loss) per common share of the Company are computed based on the weighted average number of common shares issued and outstanding during the relevant periods. Diluted earnings (loss) per common share of the Company are computed based on the weighted average number of common shares issued and outstanding plus the effect of potentially dilutive securities through the application of the if-converted method. Dilutive securities for this purpose assumes all common shares have been issued and outstanding during the relevant periods pursuant to the conversion of all outstanding Series A preferred stock, restricted stock grants have vested and common shares have been issued pursuant to the exercise of outstanding stock options.
Computations of basic and diluted earnings per common share of the Company for the three months ended March 31, were as follows (in thousands, except share data):
2013
 
Net Income (Loss) Attributable to Common Shares
 
Average O/S Shares
 
Per Share
Basic Weighted Average Common Shares Outstanding
 
$
5,973

 
21,454,396

 
$
0.28

Effect of Dilutive Securities:
 
 
 
 
 
 
Series A Preferred Stock (1)
 

 

 
 
Options and Restricted Stock (2)
 

 

 
 
Diluted Weighted Average Common Shares Outstanding
 
$
5,973

 
21,454,396

 
$
0.28

 
 
 
 
 
 
 
2012
 
 
 
 
 
 
Basic Weighted Average Common Shares Outstanding
 
$
(6,733
)
 
24,500,000

 
$
(0.27
)
Effect of Dilutive Securities:
 
 
 
 
 
 
Series A Preferred Stock (3)
 

 

 
 
Diluted Weighted Average Common Shares Outstanding
 
$
(6,733
)
 
24,500,000

 
$
(0.27
)
____________________
(1) Excludes 2,009,659 weighted average common shares issuable upon the conversion of Series A preferred stock as the effect of their inclusion in the computation would have been antidilutive.
(2) Excludes 47,208 weighted average common shares issuable upon certain share awards as the effect of their inclusion in the computation would have been antidilutive.    
(3) Excludes 6,125,000 weighted average common shares issuable upon the conversion of Series A preferred stock as the effect of their inclusion in the computation would have been antidilutive.    
11.
RELATED PARTY TRANSACTIONS
Prior to the Spin-off, as part of a consolidated group, certain costs and expenses of the Company were borne by SEACOR and charged to the Company. These costs and expenses are included in both operating expenses and administrative and general expenses in the accompanying consolidated statements of operations. The Company entered into various agreements with SEACOR in connection with the separation, including an Amended and Restated Transition Services Agreement, Distribution Agreement, Tax Matters Agreement, Employee Matters Agreement and the Series B Preferred Stock Exchange Agreement. These costs are summarized as follows for the three months ended March 31 (in thousands):
 
 
2013
 
2012
Payroll costs for SEACOR personnel assigned to the Company and participation in
  SEACOR employee benefit plans, defined contribution plan and share award plans
 
$
5

 
$
1,973

Shared services allocation for administrative support
 
299

 
564

Shared services under the Amended and Restated Transition Services Agreement
 
562

 

 
 
$
866

 
$
2,537

During the three months ended March 31, 2013, the Company also paid outstanding accrued dividends of $5.0 million on the Series A preferred stock to SEACOR.

11

Table of Contents

12.
SHARE-BASED COMPENSATION
Transactions in connection with the Company’s share-based compensation plans during the three months ended March 31, 2013 were as follows:
Director stock awards granted and outstanding
45,510

Restricted stock awards granted and outstanding
188,200

Stock option activities:
 
Outstanding as of December 31, 2012

Converted stock options
169,058

Granted
185,000

Exercised
(6,346
)
Forfeited

Expired

Outstanding as of March 31, 2013
347,712

Effective January 14, 2013, the Company adopted the Era Group Inc. 2012 Incentive Plan (“2012 Plan”) under which a maximum of 4,000,000 shares of common stock, par value $0.01 per share, are reserved. Awards granted under the 2012 Plan may be in the form of stock options, stock appreciation rights, shares of restricted stock, other stock-based awards (payable in cash or common stock) or performance awards, or any combination thereof, and may be made to outside directors, employees or consultants. As of March 31, 2013, 3,412,232 shares remained available for grant under the 2012 Plan.
Total stock-based compensation expense, which includes stock options and restricted stock, totaled $0.3 million for the three months ended March 31, 2013. A portion of the restricted stock awards are performance based. The Company has assessed the probability of meeting the criteria and has recorded the appropriate expense.
During the three months ended March 31, 2013, the Company awarded 233,710 shares of restricted stock at an average grant date fair value of $20.48 per share, granted 185,000 stock options and converted 37,900 options to purchase SEACOR common stock held by Era Group employees and directors prior to the Spin-off into 169,058 options to purchase Era Group common stock. The fair value used for the converted stock options was evaluated before and after the Spin-off and there was no change. The following table shows the assumptions used to compute the stock-based compensation expense for stock options granted during the three months ended March 31, 2013:
Risk free interest rate
 
0.79
%
Expected life (years)

 
5

Volatility

 
50
%
Dividend yield

 
%
Weighted average exercise price of options granted

 
$18.28 per option

Weighted average grant-date fair value of options granted

 
$7.58 per option

13.
SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION
On December 7, 2012, the Company issued $200.0 million aggregate principal amount of its 7.750% senior unsecured notes due December 15, 2022 (the “7.750% Senior Notes”). The Company’s payment obligations under the 7.750% Senior Notes are jointly and severally guaranteed by all of the Company’s existing wholly-owned U.S. subsidiaries that guarantee the Revolving Credit Facility and its future U.S. subsidiaries that guarantee the Revolving Credit Facility or other material indebtedness the Company may incur in the future (the “Guarantors”). All the Guarantors currently guarantee the Revolving Credit Facility. The guarantees of the Guarantors are full and unconditional.
As a result of the guarantee arrangements, the Company is presenting the following condensed consolidating balance sheets, statements of operations, comprehensive income and cash flows for Era Group Inc. (“Parent Company Only”), for the Guarantors and for our other subsidiaries (“Non-Guarantor Subsidiaries”).

12

Table of Contents

Supplemental Condensed Consolidating Balance Sheet as of March 31, 2013
 
 
Parent Company Only
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
 
 
(in thousands)
ASSETS
 
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
8,497

 
$
15,355

 
$
1,180

 
$

 
$
25,032

Receivables:
 
 
 
 
 
 
 
 
 
 
Trade, net of allowance for doubtful accounts of $2,817
 

 
40,436

 
325

 

 
40,761

Other
 
363

 
16,416

 

 
(363
)
 
16,416

Intercompany receivables
 
555,136

 

 

 
(555,136
)
 

Inventories, net
 

 
26,696

 

 

 
26,696

Deferred income taxes
 
5,467

 

 

 
(1,825
)
 
3,642

Prepaid expenses and other
 
38

 
2,677

 

 

 
2,715

Total current assets
 
569,501

 
101,580

 
1,505

 
(557,324
)
 
115,262

Property and Equipment:
 
 
 
 
 
 
 
 
 
 
Helicopters
 

 
883,402

 
11,500

 

 
894,902

Construction in progress
 

 
16,793

 

 

 
16,793

Machinery, equipment and spares
 

 
71,967

 

 

 
71,967

Buildings and leasehold improvements
 

 
25,585

 

 

 
25,585

Furniture, fixtures, vehicles and other
 

 
12,206

 

 

 
12,206

 
 

 
1,009,953

 
11,500

 

 
1,021,453

Accumulated depreciation
 

 
(245,290
)
 
(1,208
)
 

 
(246,498
)
 
 

 
764,663

 
10,292

 

 
774,955

Investments, at Equity, and Advances to 50% or Less Owned Companies
 

 
34,705

 

 

 
34,705

Investments, at Equity in Consolidated Subsidiaries
 
100,206

 
9,572

 

 
(109,778
)
 

Goodwill
 

 
352

 

 

 
352

Other Assets
 
6,028

 
11,802

 

 

 
17,830

Total Assets
 
$
675,735

 
$
922,674

 
$
11,797

 
$
(667,102
)
 
$
943,104

LIABILITIES AND EQUITY
 
 
 
 
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
 
 
 
 
 
Accounts payable and accrued expenses
 
$
1,759

 
$
11,222

 
$
145

 
$

 
$
13,126

Accrued wages and benefits
 

 
7,662

 

 

 
7,662

Accrued interest
 
5,192

 
21

 

 

 
5,213

Intercompany payables
 

 
545,852

 
11,125

 
(556,977
)
 

Due to SEACOR, net
 
270

 

 

 

 
270

Current portion of long-term debt
 

 
2,787

 

 

 
2,787

Other current liabilities
 

 
4,347

 
325

 
(363
)
 
4,309

Total current liabilities
 
7,221

 
571,891

 
11,595

 
(557,340
)
 
33,367

Long-Term Debt
 
246,693

 
29,614

 

 

 
276,307

Deferred Income Taxes
 

 
205,761

 

 
(2,418
)
 
203,343

Deferred Gains and Other Liabilities
 

 
6,601

 

 
1,563

 
8,164

Total liabilities
 
253,914

 
813,867

 
11,595

 
(558,195
)
 
521,181

 
 
 
 
 
 
 
 
 
 
 
Equity:
 
 
 
 
 
 
 
 
 
 
Era Group Inc. stockholders' equity:
 
 
 
 
 
 
 
 
 
 
Common stock, $0.01 par value, 60,000,000 shares authorized; 20,123,639 issued in 2013; none issued in 2012
 
201

 

 

 

 
201

Additional paid-in capital
 
419,036

 
109,707

 
496

 
(110,203
)
 
419,036

Retained earnings (accumulated deficit)
 
2,669

 
(1,002
)
 
(294
)
 
1,296

 
2,669

Accumulated other comprehensive loss, net of tax
 
(85
)
 

 

 

 
(85
)
 
 
421,821

 
108,705

 
202

 
(108,907
)
 
421,821

Noncontrolling interest in subsidiary
 

 
102

 

 

 
102

Total equity
 
421,821

 
108,807

 
202

 
(108,907
)
 
421,923

Total Liabilities and Stockholders Equity
 
$
675,735

 
$
922,674

 
$
11,797

 
$
(667,102
)
 
$
943,104



13

Table of Contents

Supplemental Condensed Consolidating Balance Sheet as of December 31, 2012
 
 
Parent Company Only
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
 
 
(in thousands)
ASSETS
 
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
2,258

 
$
8,558

 
$
689

 
$

 
$
11,505

Receivables:
 
 
 
 
 
 
 
 
 
 
Trade, net of allowance for doubtful accounts of $2,668
 

 
48,217

 
310

 

 
48,527

Other
 

 
3,742

 

 

 
3,742

Due from SEACOR and affiliates
 
561,298

 

 

 
(560,327
)
 
971

Inventories, net
 

 
26,650

 

 

 
26,650

Deferred income taxes
 
4,625

 

 

 
(983
)
 
3,642

Prepaid expenses and other
 

 
1,803

 

 

 
1,803

Total current assets
 
568,181

 
88,970

 
999

 
(561,310
)
 
96,840

Property and Equipment:
 
 
 
 
 
 
 
 
 
 
Helicopters
 

 
886,111

 
11,500

 

 
897,611

Construction in progress
 

 
22,644

 

 

 
22,644

Machinery, equipment and spares
 

 
72,161

 

 

 
72,161

Buildings and leasehold improvements
 

 
25,451

 

 

 
25,451

Furniture, fixtures, vehicles and other
 

 
12,409

 

 

 
12,409

 
 

 
1,018,776

 
11,500

 

 
1,030,276

Accumulated depreciation
 

 
(241,436
)
 
(1,035
)
 

 
(242,471
)
 
 

 
777,340

 
10,465

 

 
787,805

Investments, at Equity, and Advances to 50% or Less Owned Companies
 

 
34,696

 

 

 
34,696

Investments, at Equity in Consolidated Subsidiaries
 
100,101

 
9,782

 

 
(109,883
)
 

Goodwill
 

 
352

 

 

 
352

Other Assets
 
5,958

 
24,374

 

 
(12,461
)
 
17,871

Total Assets
 
$
674,240

 
$
935,514

 
$
11,464

 
$
(683,654
)
 
$
937,564

LIABILITIES AND EQUITY
 
 
 
 
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
 
 
 
 
 
Accounts payable and accrued expenses
 
$

 
$
15,618

 
$
85

 
$

 
$
15,703

Accrued wages and benefits
 

 
4,576

 

 

 
4,576

Accrued interest
 
1,357

 
44

 

 

 
1,401

Intercompany payables
 
5,491

 
560,323

 
10,965

 
(576,779
)
 

Current portion of long-term debt
 

 
2,787

 

 

 
2,787

Other current liabilities
 
1,445

 
3,787

 

 

 
5,232

Total current liabilities
 
8,293

 
587,135

 
11,050

 
(576,779
)
 
29,699

Long-Term Debt
 
246,637

 
30,311

 

 

 
276,948

Deferred Income Taxes
 

 
204,520

 

 
(984
)
 
203,536

Deferred Gains and Other Liabilities
 

 
7,864

 

 

 
7,864

Total liabilities
 
254,930

 
829,830

 
11,050

 
(577,763
)
 
518,047

Preferred Stock, $0.01 par value, 10,000,000 shares authorized:
 
 
 
 
 
 
 
 
 
 
Series A Preferred Stock, at redemption value; 1,400,000 shares issued
 
144,232

 

 

 

 
144,232

Equity:
 
 
 
 
 
 
 
 
 
 
Era Group Inc. stockholders' equity:
 
 
 
 
 
 
 
 
 
 
Class A common stock, $0.01 par value, 60,000,000 shares authorized; none issued
 

 

 

 

 

Class B common stock, $0.01 par value, 60,000,000 shares authorized; 24,500,000 issued
 
245

 

 

 

 
245

Additional paid-in capital
 
278,838

 
109,674

 
496

 
(110,170
)
 
278,838

Retained earnings (accumulated deficit)
 
(4,025
)
 
(4,217
)
 
(82
)
 
4,299

 
(4,025
)
Accumulated other comprehensive income (loss), net of tax
 
20

 
20

 

 
(20
)
 
20

 
 
275,078

 
105,477

 
414

 
(105,891
)
 
275,078

Noncontrolling interest in subsidiary
 

 
207

 

 

 
207

Total equity
 
275,078

 
105,684

 
414

 
(105,891
)
 
275,285

Total Liabilities and Stockholders’ Equity
 
$
674,240

 
$
935,514

 
$
11,464

 
$
(683,654
)
 
$
937,564



14

Table of Contents

Supplemental Condensed Consolidating Statement of Operations for the Three Months Ended March 31, 2013
 
 
Parent Company Only
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
 
 
(in thousands)
Operating Revenues
 
$

 
$
67,372

 
$
355

 
$

 
$
67,727

Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
Operating
 

 
42,882

 
234

 

 
43,116

Administrative and general
 
1,296

 
7,838

 

 

 
9,134

Depreciation
 

 
11,489

 
172

 

 
11,661

 
 
1,296

 
62,209

 
406

 

 
63,911

Gains on Asset Dispositions and Impairments, Net
 

 
10,801

 

 

 
10,801

Operating Income (Loss)
 
(1,296
)
 
15,964

 
(51
)
 

 
14,617

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
Interest income
 
16

 
130

 
1

 

 
147

Interest expense
 
(4,473
)
 
(259
)
 

 

 
(4,732
)
Intercompany interest
 
8,398

 
(8,238
)
 
(160
)
 

 

SEACOR management fees
 
(168
)
 

 

 

 
(168
)
Derivative losses, net
 

 
(3
)
 

 

 
(3
)
Foreign currency losses, net
 
(1
)
 
(258
)
 

 

 
(259
)
Other, net
 

 
3

 

 

 
3

 
 
3,772

 
(8,625
)
 
(159
)
 

 
(5,012
)
Income (Loss) Before Income Tax Expense (Benefit) and Equity in Earnings of 50% or Less Owned Companies and Subsidiaries
 
2,476

 
7,339

 
(210
)
 

 
9,605

Income Tax Expense (Benefit)
 
(488
)
 
4,066

 

 

 
3,578

Income (Loss) Before Equity in Earnings of 50% or Less Owned Companies and Subsidiaries
 
2,964

 
3,273

 
(210
)
 

 
6,027

Equity in Earnings of 50% or Less Owned Companies, Net of Tax
 

 
562

 

 

 
562

Equity in Earnings (Losses) of Subsidiaries
 
3,625

 

 

 
(3,625
)
 

Net Income (Loss)
 
6,589

 
3,835

 
(210
)
 
(3,625
)
 
6,589

Net Loss attributable to Noncontrolling Interest in Subsidiary
 

 
105

 

 

 
105

Net Income (Loss) attributable to Era Group Inc.
 
6,589

 
3,940

 
(210
)
 
(3,625
)
 
6,694

Accretion of redemption value on Series A Preferred Stock
 
721

 

 

 

 
721

Net Income (Loss) attributable to Common Shares
 
$
5,868

 
$
3,940

 
$
(210
)
 
$
(3,625
)
 
$
5,973



15

Table of Contents

Supplemental Condensed Consolidating Statement of Operations for the Three Months Ended March 31, 2012
 
 
Parent Company Only
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
 
 
(in thousands)
Operating Revenues
 
$

 
$
61,052

 
$

 
$

 
$
61,052

Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
Operating
 

 
39,676

 

 

 
39,676

Administrative and general
 
2,618

 
7,058

 
1

 

 
9,677

Depreciation
 

 
9,630

 

 

 
9,630

 
 
2,618

 
56,364

 
1

 

 
58,983

Gains on Asset Dispositions and Impairments, Net
 

 
1,765

 

 

 
1,765

Operating Income (Loss)
 
(2,618
)
 
6,453

 
(1
)
 

 
3,834

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
Interest income
 
34

 
298

 

 

 
332

Interest expense
 
(1,672
)
 
(296
)
 

 

 
(1,968
)
Intercompany interest
 
3,734

 
(3,734
)
 

 

 

SEACOR management fees
 
(500
)
 

 

 

 
(500
)
Derivative losses, net
 

 
(124
)
 

 

 
(124
)
Foreign currency gains, net
 

 
917

 

 

 
917

Other, net
 

 
30

 

 

 
30

 
 
1,596

 
(2,909
)
 

 

 
(1,313
)
Income (Loss) Before Income Tax Expense (Benefit) and Equity in Earnings (Losses) of 50% or Less Owned Companies and Subsidiaries
 
(1,022
)
 
3,544

 
(1
)
 

 
2,521

Income Tax Expense (Benefit)
 
(356
)
 
1,090

 

 

 
734

Income (Loss) Before Equity in Earnings (Losses) of 50% or Less Owned Companies and Subsidiaries
 
(666
)
 
2,454

 
(1
)
 

 
1,787

Equity in Losses of 50% or Less Owned Companies, Net of Tax
 

 
(6,420
)
 

 

 
(6,420
)
Equity in Earnings (Losses) of Subsidiaries
 
(3,967
)
 

 

 
3,967

 

Net Loss attributable to Era Group Inc.
 
(4,633
)
 
(3,966
)
 
(1
)
 
3,967

 
(4,633
)
Accretion of redemption value on Series A Preferred Stock
 
2,100

 

 

 

 
2,100

Net Loss attributable to Common Shares
 
$
(6,733
)
 
$
(3,966
)
 
$
(1
)
 
$
3,967

 
$
(6,733
)


16

Table of Contents

Supplemental Statement of Comprehensive Income (Loss) for the Three Months Ended March 31, 2013
 
 
Parent Company Only
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
 
 
(in thousands)
Net Income
 
$
6,589