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, 2016              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)
713-369-4700
(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  ý
 
Non-accelerated filer  ¨
(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 April 29, 2016 was 20,879,283. 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 2.
 
 
 
 
 
Item 6.


1

Table of Contents

PART I—FINANCIAL INFORMATION

ITEM 1.
FINANCIAL STATEMENTS
ERA GROUP INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except share amounts)
 
March 31,
2016
 
December 31,
 2015(1)
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
30,803

 
$
14,370

Receivables:
 
 
 
Trade, net of allowance for doubtful accounts of $2,089 and $2,103 in 2016 and 2015, respectively
36,980

 
48,639

Tax receivables
6,068

 
6,085

Other
3,707

 
3,305

Inventories, net
27,744

 
27,994

Prepaid expenses
3,274

 
1,963

Other current assets
191

 
191

Total current assets
108,767

 
102,547

Property and equipment
1,171,271

 
1,175,909

Accumulated depreciation
(325,363
)
 
(316,693
)
Property and equipment, net
845,908

 
859,216

Equity investments and advances
28,795

 
28,898

Intangible assets
1,153

 
1,158

Other assets
12,850

 
12,532

Total assets
$
997,473

 
$
1,004,351

LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST
 AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable and accrued expenses
$
10,119

 
$
12,000

Accrued wages and benefits
6,244

 
9,012

Accrued interest
3,491

 
562

Accrued other taxes
1,905

 
2,520

Accrued contingencies
2,851

 
2,410

Current portion of long-term debt
2,291

 
3,278

Other current liabilities
1,775

 
2,300

Total current liabilities
28,676

 
32,082

Long-term debt
263,590

 
263,698

Deferred income taxes
229,083

 
229,848

Other liabilities
2,855

 
2,616

Total liabilities
524,204

 
528,244

Commitments and contingencies (see Note 8)

 

Redeemable noncontrolling interest
4,672

 
4,804

Equity:
 
 
 
Common stock, $0.01 par value, 60,000,000 shares authorized; 20,879,783 and 20,495,694 outstanding in 2016 and 2015, respectively, exclusive of treasury shares
211

 
207

Additional paid-in capital
434,460

 
433,175

Retained earnings
36,684

 
40,502

Treasury shares, at cost, 171,114 and 154,549 shares in 2016 and 2015, respectively
(2,850
)
 
(2,673
)
Accumulated other comprehensive income, net of tax
92

 
92

Total equity
468,597

 
471,303

Total liabilities, redeemable noncontrolling interest and stockholders’ equity
$
997,473

 
$
1,004,351

____________________
(1)
Adjusted for the adoption of Accounting Standards Update (“ASU”) 2015-03 whereby $2,740 of debt issuance costs previously included in other assets is now included in long-term debt.


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

2

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ERA GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except share and per share amounts)
 
Three Months Ended 
 March 31,
 
2016
 
2015
Operating revenues
$
62,582

 
$
67,415

Costs and expenses:
 
 
 
Operating
44,307

 
43,605

Administrative and general
9,227

 
9,743

Depreciation and amortization
12,766

 
11,602

Total costs and expenses
66,300

 
64,950

Gains on asset dispositions, net
2,913

 
3,388

Operating income (loss)
(805
)
 
5,853

Other income (expense):
 
 
 
Interest income
301

 
251

Interest expense
(4,748
)
 
(3,545
)
Derivative losses, net

 
(12
)
Foreign currency gains (losses), net
281

 
(2,960
)
Gain on debt extinguishment

 
264

Other, net
(17
)
 

Total other income (expense)
(4,183
)
 
(6,002
)
Loss before income taxes and equity earnings
(4,988
)
 
(149
)
Income tax benefit
(1,014
)
 
(55
)
Loss before equity earnings
(3,974
)
 
(94
)
Equity earnings (losses), net of tax
24

 
(145
)
Net loss
(3,950
)
 
(239
)
Net loss attributable to non-controlling interest in subsidiary
132

 
197

Net loss attributable to Era Group Inc.
$
(3,818
)
 
$
(42
)
 
 
 
 
Loss per common share, basic and diluted
$
(0.19
)
 
$

 
 
 
 
Weighted average common shares outstanding, basic and diluted
20,219,937

 
20,195,955




















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

3

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ERA GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited, in thousands)
 
 
Three Months Ended 
 March 31,
 
 
2016
 
2015
Net loss
 
$
(3,950
)
 
$
(239
)
Other comprehensive income (loss):
 
 
 
 
Foreign currency translation adjustments
 

 
(3
)
Income tax benefit
 

 
1

Total other comprehensive income (loss)
 

 
(2
)
Comprehensive loss
 
(3,950
)
 
(241
)
Comprehensive loss attributable to non-controlling interest in subsidiary
 
132

 
197

Comprehensive loss attributable to Era Group Inc.
 
$
(3,818
)
 
$
(44
)








































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

4

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ERA GROUP INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(unaudited, in thousands)
 
 
Common
Stock
 
Additional
Paid-In
Capital
 
Retained Earnings
 
Treasury
Shares
 
Accumulated
Other
Comprehensive
Income
 
Total
Equity
December 31, 2015
 
$
207

 
$
433,175

 
$
40,502

 
$
(2,673
)
 
$
92

 
$
471,303

Issuance of common stock:
 
 
 
 
 
 
 
 
 
 
 

Restricted stock grants
 
3

 
(3
)
 

 

 

 

Employee Stock Purchase Plan
 
1

 
476

 

 

 

 
477

Tax deficit from share award plans
 

 
(216
)
 

 

 

 
(216
)
Share award amortization
 

 
1,012

 

 

 

 
1,012

Cancellation of restricted stock
 

 
16

 

 
(16
)
 

 

Purchase of treasury shares
 

 

 

 
(161
)
 

 
(161
)
Net loss(1)
 

 

 
(3,818
)
 

 

 
(3,818
)
March 31, 2016
 
$
211

 
$
434,460

 
$
36,684

 
$
(2,850
)
 
$
92

 
$
468,597


(1)
Excludes net loss of $132 attributable to redeemable noncontrolling interests in subsidiary.






































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

5

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ERA GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
 
Three Months Ended 
 March 31,
 
2016
 
2015
Cash flows from operating activities:
 
 
 
Net loss
$
(3,950
)
 
$
(239
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depreciation and amortization
12,766

 
11,602

Share-based compensation
1,012

 
618

Gains on asset dispositions, net
(2,913
)
 
(3,388
)
Debt discount amortization
25

 
65

Amortization of deferred financing costs
195

 
258

Derivative losses, net

 
12

Foreign currency losses (gains), net
(585
)
 
3,265

Cash settlements on derivative transactions, net

 
(93
)
Gain on debt extinguishment, net

 
(264
)
Deferred income tax benefit
(1,348
)
 
(52
)
Equity losses (earnings), net of tax
(24
)
 
145

Changes in operating assets and liabilities:
 
 
 
Decrease (increase) in receivables
11,636

 
(6,584
)
Increase in prepaid expenses and other assets
(1,573
)
 
(29
)
Increase (decrease) in accounts payable, accrued expenses and other liabilities
(448
)
 
1,472

Net cash provided by operating activities
14,793

 
6,788

Cash flows from investing activities:
 
 
 
Purchases of property and equipment
(2,145
)
 
(8,866
)
Proceeds from disposition of property and equipment
3,980

 
5,379

Cash settlements on forward contracts, net

 
(1,103
)
Return of helicopter deposits
544

 

Principal payments on notes due from equity investees
177

 
169

Principal payments on third party notes receivable
46

 
25

Escrow deposits on like-kind exchanges, net

 
(2,800
)
Net cash provided by (used in) investing activities
2,602

 
(7,196
)
Cash flows from financing activities:
 
 
 
Proceeds from Revolving Credit Facility
7,000

 
20,000

Payments on long-term debt
(8,651
)
 
(15,697
)
Extinguishment of long-term debt

 
(9,297
)
Proceeds from share award plans
477

 
612

Purchase of treasury shares
(161
)
 

Net cash used in financing activities
(1,335
)
 
(4,382
)
Effects of exchange rate changes on cash and cash equivalents
373

 
(2,386
)
Net increase (decrease) in cash and cash equivalents
16,433

 
(7,176
)
Cash and cash equivalents, beginning of period
14,370

 
40,867

Cash and cash equivalents, end of period
$
30,803


$
33,691

Supplemental cash flow information:
 
 
 
Cash paid for interest
$
1,129

 
$
1,079

Cash paid for income taxes
$
5

 
$
5










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

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, 2016 and 2015 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, 2016, its results of operations for the three months ended March 31, 2016 and 2015, its comprehensive income for the three months ended March 31, 2016 and 2015, its changes in equity for the three months ended March 31, 2016, and its cash flows for the three months ended March 31, 2016 and 2015. 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 (“GAAP”) in the United States (“U.S.”) 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 Amendment No. 1 to the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2015.
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. without its subsidiaries.
Certain of the Company’s operations are subject to seasonal factors. Operations in the U.S. Gulf of Mexico are often at their highest levels from April to September, as daylight hours increase, and are at their lowest levels from November to February, as daylight hours decrease. The Company’s Alaskan operations also see an increase during May to September, as its firefighting and flightseeing operations occur during this time and daylight hours are significantly longer.
Basis of Consolidation. The consolidated financial statements include the accounts of Era Group Inc., its wholly and majority-owned subsidiaries and entities that meet the criteria of Variable Interest Entities (“VIEs”) of which the Company is the primary beneficiary. All significant inter-company accounts and transactions are eliminated in consolidation. Aeróleo Taxi Aereo S/A (“Aeróleo”) is a VIE of which the Company is the primary beneficiary.
Reclassifications. Certain amounts reported for prior years in the consolidated financial statements have been reclassified to conform with the current year's presentation.
Revenue Recognition. The Company recognizes revenues when they are realized or realizable and earned. Revenues are 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. Revenues that do not meet these criteria are deferred until the criteria are met. The unrecognized revenues and related activity during the three months ended March 31, 2015 were as follows (in thousands): 
 
Three Months Ended 
 March 31, 2015
Balance at beginning of period
$
31,047

Revenues deferred during the period
7,829

Revenues recognized during the period
(6,210
)
Balance at end of period
$
32,666

The deferred revenues noted above originated from Aeróleo, which became a consolidated entity on October 1, 2015. Future collections of these deferred amounts will be recorded as a settlement of an intercompany receivable and eliminated in consolidation.
Receivables. Customers are primarily major integrated and independent exploration and production companies, national oil companies, hospitals, international helicopter operators and the U.S. government. Customers are typically granted credit on a short-term basis, and related credit risks are considered minimal. The Company routinely reviews its receivables and makes provisions for probable doubtful accounts; however, those provisions are estimates and actual results could differ from those estimates and those differences may be material. Receivables are deemed uncollectible and removed from receivables and the allowance for doubtful accounts when collection efforts have been exhausted.

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New Accounting Standards. In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09 - Revenue From Contracts With Customers, which will base revenue recognition on the contract between a vendor and customer and will require reporting entities to allocate the transaction price to various performance obligations in a contract and recognize revenues when those performance obligations are satisfied. In March 2016, the FASB issued ASU 2016-08 - Revenue from Contracts With Customers, and in April 2016, the FASB issued ASU 2016-10 - Revenue from Contracts With Customers, both of which provide guidance on the application of certain principles in ASU 2014-09. Each of ASU 2014-09, 2016-08 and 2016-10 will be effective for annual reporting periods beginning after December 15, 2017 and any interim periods within that period. Early adoption is permitted for annual reporting periods beginning after December 15, 2016 and any interim periods within that period. The Company is currently evaluating the potential impact and the method of the adoption of each of ASU 2014-09, ASU 2016-08 and ASU 2016-10 on its consolidated financial statements.
In August 2014, the FASB issued ASU 2014-15 - Presentation of Financial Statements - Going Concern, which modifies existing guidance on when and how to disclose going-concern uncertainties in the financial statements and requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within a year of the date the financial statements are issued. ASU 2014-15 is effective for annual and interim periods beginning after December 15, 2016, and early adoption is permitted. The Company has not adopted ASU 2014-15 and believes such adoption will not have a material impact on its consolidated financial statements.
In February 2015, the FASB issued ASU 2015-02 - Consolidation, which amends the guidance for evaluating whether certain entities should be consolidated, particularly for general partner and limited partner relationships and VIEs that have fee arrangements or related party relationships with a reporting entity. The Company adopted ASU 2015-02 effective January 1, 2016, and such adoption did not have an impact on its consolidated financial statements.
In April 2015, the FASB issued ASU 2015-03 - Interest - Imputation of Interest, which requires debt issuance costs related to a recognized debt liability to be presented on the balance sheet as a direct reduction of the carrying amount of that liability. The recognition and measurement guidance for debt issuance costs is not affected by this ASU. In September 2015, the FASB issued ASU 2015-15 - Interest - Imputation of Interest, which amends ASU 2015-03 to allow issuers to continue to recognize debt issuance costs related to line-of-credit arrangements as an asset and amortize that asset over the term of the credit agreement. The Company adopted ASU 2015-03 and ASU 2015-15 effective on January 1, 2016. As of March 31, 2016 and December 31, 2015, the Company had debt issuance costs of $2.7 million, exclusive of debt issuance costs associated with its amended and restated senior secured revolving credit facility (the “Revolving Credit Facility”). The adoption of ASU 2015-03 and ASU 2015-15 reduced other assets and long-term debt by this amount for both condensed consolidated balance sheets presented.
In July 2015, the FASB issued ASU 2015-11 - Inventory, which is intended to simplify the way reporting entities account for inventory by requiring it to be valued at the lower of cost and net realizable value unless that entity uses the last-in, first-out or the retail inventory valuation method. ASU 2015-11 is effective for annual reporting periods beginning after December 15, 2016 and any interim periods within that period, and early adoption is permitted as of the beginning of an interim or annual reporting period. The Company has not adopted ASU 2015-11 and believes adoption will not have a material impact on its consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02 - Leases, which amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU 2016-02 will be effective for annual reporting periods beginning after December 15, 2018, and early adoption is permitted. ASU 2016-02 requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The Company has not adopted ASU 2016-02 and believes such adoption will not have a material impact on its consolidated financial statements.
In March 2016, the FASB issued ASU 2016-07 - Investments - Equity Method and Joint Ventures, which eliminates the requirement to retroactively apply the equity method of accounting for an investment when an increase in the level of ownership or degree of influence causes the investment to qualify for equity method treatment and instead requires the entity to add the cost (if any) of acquiring the additional ownership or degree of influence to the current basis of the investment and apply equity method accounting as of the date the investment qualifies for such treatment. ASU 2016-07 is effective for annual reporting periods beginning after December 15, 2016, and early adoption is permitted as of the beginning of an interim or annual reporting period. The Company has not adopted ASU 2016-07 and believes adoption will not have a material impact on its consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09 - Compensation - Stock Compensation, which simplifies several aspects of accounting for share-based payment transactions including income tax consequences, classification of awards as equity or liabilities and classification on the statement of cash flows. ASU 2016-09 will be effective for annual reporting periods beginning after December 15, 2016, and any interim periods within that period. Early adoption is permitted as of the beginning of an interim or annual period provided that all adjustments are applied as of the beginning of the annual period in which the statement is adopted.

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The Company has not adopted ASU 2016-09 and believes such adoption will not have a material impact on its consolidated financial statements.
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 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.
As of March 31, 2016 and December 31, 2015, the Company did not have any assets or liabilities that are measured at fair value on a recurring basis.
The estimated fair values of the Company’s other financial assets and liabilities as of March 31, 2016 and December 31, 2015 were as follows (in thousands): 
 
Carrying
Amount
 
Level 1
 
Level 2
 
Level 3
March 31, 2016
 
 
 
 
 
 
 
LIABILITIES
 
 
 
 
 
 
 
Long-term debt, including current portion
$
265,881

 
$

 
$
243,555

 
$

 
 
 
 
 
 
 
 
December 31, 2015
 
 
 
 
 
 
 
LIABILITIES
 
 
 
 
 
 
 
Long-term debt, including current portion
$
266,976

 
$

 
$
243,817

 
$

The carrying values of cash and cash equivalents, receivables, notes receivable from other business ventures and accounts payable approximate fair value. The fair value of the Company’s long-term debt was estimated using discounted cash flow analyses 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 that matured in December 2015 and called for the Company to pay fixed interest rates of 1.29% and 1.76% on an aggregate notional value equal to the principal balance on the underlying promissory notes and receive a variable interest rate based on LIBOR on these notional values. The general purpose of these interest rate swap agreements was to provide protection against increases in interest rates and higher interest costs for the Company. The interest rate swaps were not renewed upon maturity. The Company recognized gains of $0.1 million for the three months ended March 31, 2015, which are included in derivative losses, net on the condensed consolidated statements of operations. The Company had no interest rate swap agreements in place as of March 31, 2016 or December 31, 2015.
From time to time, the Company enters into forward exchange option contracts to hedge against foreign currency payment commitments and anticipated transaction exposures. All derivatives are recognized as assets or liabilities and marked to fair value each period. The Company does not use financial instruments for trading or speculative purposes. None of the Company’s derivative instruments contain credit-risk-related contingent features, and counterparties to the derivative contracts are high credit quality financial institutions.
The Company entered into forward contracts during the second quarter of 2014 to mitigate its exposure to exchange rate fluctuations on euro-denominated aircraft purchase commitments. The Company did not designate these contracts as hedges for accounting purposes. The Company recorded a loss of $0.3 million on these derivative instruments during the three months ended March 31, 2015. This loss is recorded in foreign currency gains (losses), net in the condensed consolidated statements of operations. The Company had no open forward contracts as of March 31, 2016 or December 31, 2015.
4.
ESCROW DEPOSITS
From time to time, the Company enters into Qualified Exchange Accommodation Agreements with third parties to meet the like-kind exchange requirements of Section 1031 of the Internal Revenue Code (“IRC”) and the provisions of Revenue Procedure 2000-37. In accordance with these provisions, the Company is permitted to deposit proceeds from the sale of assets into escrow accounts for the purpose of acquiring other assets and qualifying for the temporary deferral of realized taxable gains. Consequently, the Company establishes escrow accounts with financial institutions for the deposit of funds received on sales of equipment, which are designated for replacement property within a specified period of time. As of March 31, 2016 and December 31, 2015, the Company had no deposits in like-kind exchange escrow accounts.
During the three months ended March 31, 2015, the Company sold one EC135 light twin helicopter for cash proceeds of $2.8 million, net of fees. The sale transaction was treated as a tax-free like-kind exchange for tax purposes under Section 1031 of the IRC whereby proceeds are held by a qualified intermediary until qualified assets are delivered. The Company was unable to purchase a qualifying asset prior to the expiration of the 180-day period subsequent to the closing date of the sale. As a result, the proceeds of $2.8 million were returned to the Company during the third quarter of 2015, and the sale was treated as a taxable event.
5.
ACQUISITIONS AND DISPOSITIONS
Capital Expenditures. During the three months ended March 31, 2016, capital expenditures were $2.1 million and consisted primarily of spare helicopter parts, equipment and building improvements. The Company had no capitalized interest during the three months ended March 31, 2016 and $1.7 million of capitalized interest during the three months ended March 31, 2015. As of March 31, 2016 and December 31, 2015, construction in progress, which is a component of property and equipment, included capitalized interest of $4.3 million and $4.7 million, respectively. A summary of changes to our operating helicopter fleet is as follows:
Equipment Additions - The Company had no helicopter acquisitions during the three months ended March 31, 2016 or 2015.
Equipment Dispositions - During the three months ended March 31, 2016, the Company sold or otherwise disposed of property and equipment for proceeds of $4.0 million and recognized gains of $2.9 million. During the three months ended March 31, 2015, the Company sold or otherwise disposed of property and equipment for proceeds of $5.4 million and recognized gains of $2.2 million. Additionally, a dry-leasing customer exercised a purchase option for three helicopters from which the Company recognized a gain of $1.2 million and an investment in sales-type lease of $2.3 million. As of March 31, 2016, the investment in sales-type leases was $1.2 million.
6.
VARIABLE INTEREST ENTITIES
Aeróleo. In certain jurisdictions, local statutory requirements limit the amount of foreign ownership in aviation companies. To satisfy Brazilian ownership requirements, the Company acquired a 50% economic and 20% voting interest in Aeróleo in 2011. As a result of liquidity issues experienced by Aeróleo, it is unable to adequately finance its activities without additional financial support, making it a VIE. On October 1, 2015, the Company’s partner in Aeróleo transfered its 50% economic and 80% voting interest in Aeróleo to a third party. Following this transaction, the Company has the ability to direct the activities that most significantly affect Aeróleo’s financial performance, making the Company the primary beneficiary.
The condensed consolidated balance sheets at March 31, 2016 and December 31, 2015 include assets of Aeróleo totaling $15.1 million and $17.9 million, respectively. In addition, the condensed consolidated balance sheets at March 31, 2016 and December 31, 2015 include liabilities of $13.6 million and $15.9 million, respectively. The table below represents the assets of Aeróleo which have restrictions on the ability to be distributed to the Company and the liabilities of Aeróleo for which creditors do not have recourse to the Company at March 31, 2016 and December 31, 2015 (in thousands):
 
 
March 31,
2016
 
December 31,
2015
Receivables - other
 
$
473

 
$
161

Other assets
 
4,250

 
3,367

Accounts payable and accrued expenses
 
883

 
1,709

Accrued wages and benefits
 
1,649

 
2,108

Accrued other taxes
 
714

 
1,701

Accrued contingencies
 
2,851

 
2,410

Other current liabilities
 
57

 
450

Other liabilities
 
1,264

 
729


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The condensed consolidated statements of operations for the three months ended March 31, 2016 include operating revenues of $7.6 million and net loss of $0.7 million as a result of the consolidation of Aeróleo, including the effects of intercompany eliminations. The table below represents the Company’s pro forma results of operations for the three months ended March 31, 2015 assuming the consolidation of Aeróleo began on January 1, 2015 (in thousands):
 
Historical Results
 
Pro Forma Adjustments
 
Pro Forma Results
Operating revenues
$
67,415

 
$
11,325

 
$
78,740

Net loss attributable to Era Group Inc.
(42
)
 
(1,623
)
 
(1,665
)
7.
INCOME TAXES
During the three months ended March 31, 2016 and 2015, the Company recorded income tax benefit of $1.0 million and $0.1 million, respectively, resulting in effective tax rates of 20.3% and 36.9%, respectively.
During the three months ended March 31, 2016, there were no new uncertain tax positions identified.
Amounts accrued for interest and penalties associated with unrecognized income tax benefits are included in other expense on the condensed consolidated statements of operations. As of March 31, 2016, the gross amount of liability for accrued interest and penalties related to unrecognized tax benefits was $0.1 million.
8.
LONG-TERM DEBT
The Company’s borrowings as of March 31, 2016 and December 31, 2015 were as follows (in thousands):
 
 
March 31, 2016
 
December 31, 2015
7.750% Senior Notes (excluding unamortized discount)
 
$
149,828

 
$
149,828

Senior secured revolving credit facility
 
90,000

 
90,000

Promissory notes
 
24,414

 
24,968

Other
 
8,916

 
9,509

 
 
273,158

 
274,305

Less: portion due within one year
 
(2,291
)
 
(3,278
)
Less: debt discount, net
 
(4,564
)
 
(4,589
)
Less: unamortized debt issuance costs
 
(2,713
)
 
(2,740
)
Total long-term debt
 
$
263,590

 
$
263,698

7.750% Senior Notes. On December 7, 2012, Era Group 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 June 15 and December 15 of each year. During the three months ended March 31, 2015, the Company repurchased $9.9 million of the 7.750% Senior Notes and recognized a gain on extinguishment of $0.3 million. The Company did not repurchase any debt during the three months ended March 31, 2016.
Amended and Restated Senior Secured Revolving Credit Facility. On March 31, 2014, Era Group entered into the Revolving Credit Facility that matures in March 2019. The Revolving Credit Facility provides Era Group with the ability to borrow up to $300.0 million, with a sub-limit of up to $50.0 million for letters of credit. Subject to the satisfaction of certain conditions precedent and the agreement by the lenders, the Revolving Credit Facility includes an “accordion” feature which, if exercised, will increase total commitments by up to $100.0 million. Era Group’s availability under the Revolving Credit Facility may be limited by the terms of the 7.750% Senior Notes.
Borrowings under the Revolving Credit Facility bear interest at a rate per annum equal to, at Era Group’s election, either a base rate or LIBOR, each as defined, plus an applicable margin. The applicable margin is based on the Company’s ratio of funded debt to EBITDA, as defined, and ranges from 75 to 200 basis points on the base rate margin and 175 to 300 basis points on the LIBOR margin. The applicable margin as of March 31, 2016 was 100 basis points on the base rate margin and 200 basis points on the LIBOR margin. In addition, the Company is required to pay a quarterly commitment fee based on the average unfunded portion of the committed amount at a rate based on the Company’s ratio of funded debt to EBITDA, as defined, that ranges from 37.5 to 50 basis points. As of March 31, 2016, the commitment fee was 37.5 basis points.

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The obligations under the Revolving Credit Facility are secured by a portion of the Company’s helicopter fleet and the Company’s other tangible and intangible assets and are guaranteed by Era Group’s wholly owned U.S. subsidiaries. The Revolving Credit Facility contains various restrictive covenants including interest coverage, funded debt to EBITDA, and fair market value of mortgaged helicopters plus accounts receivable and inventory to funded debt, as well as other customary covenants including certain restrictions on the Company’s ability to enter into certain transactions, including those that could result in the incurrence of additional indebtedness and liens, the making of loans, guarantees or investments, sales of assets, payments of dividends or repurchases of capital stock, and entering into transactions with affiliates.
As of March 31, 2016, Era Group had $90.0 million of outstanding borrowings under the Revolving Credit Facility, and the remaining availability was $208.9 million, net of issued letters of credit of $1.1 million. In connection with the amendment of the Revolving Credit Facility in 2014, Era Group incurred debt issuance costs of $2.4 million. Such costs are included in other assets on the condensed consolidated balance sheets and are amortized to interest expense in the condensed consolidated statements of operations over the life of the Revolving Credit Facility.
Aeróleo Debt. During the three months ended March 31, 2016, the Company prepaid a $1.0 million loan due to a third party in Brazil.
Promissory Notes. During the three months ended March 31, 2016, the Company made scheduled payments on other long-term debt of $0.6 million.
9.
COMMITMENTS AND CONTINGENCIES
Fleet. The Company’s unfunded capital commitments as of March 31, 2016 consisted primarily of agreements to purchase helicopters and totaled $156.1 million, of which $40.1 million is payable during the remainder of 2016 with the balance payable through 2018. The Company also had $1.5 million of deposits paid on options not yet exercised. The Company may terminate $129.4 million of its total commitments (inclusive of deposits paid on options not yet exercised) without further liability other than aggregate liquidated damages of $3.2 million.
Included in these commitments are orders to purchase seven AW189 heavy helicopters, two S92 heavy helicopters and five AW169 light twin helicopters. The AW189 and S92 helicopters are scheduled to be delivered in 2016 through 2018. Delivery dates for the AW169 helicopters have yet to be determined. In addition, the Company had outstanding options to purchase up to an additional ten AW189 helicopters and two S92 helicopters. If these options are exercised, the helicopters would be scheduled for delivery beginning in 2017 through 2018.
Brazilian Tax Disputes. Aeróleo, the Company’s Brazilian joint venture subsidiary, is disputing assessments of approximately $6.4 million in taxes, penalties and interest levied by the municipal authorities of Rio de Janeiro (for the period between 2000 to 2005) and Macae (for the period between 2001 to 2006) (collectively, the “Municipal Assessments”). Aeróleo believes that, based on its interpretation of tax legislation supported by clarifying guidance provided by the Supreme Court with respect to the issue in a 2006 ruling, it is in compliance with all applicable tax legislation, has paid all applicable taxes, penalties and interest and plans to defend these claims vigorously at the administrative levels in each jurisdiction. In the event the Municipal Assessments are upheld at the last administrative level, it may be necessary for Aeróleo to deposit the amounts at issue as security to pursue further appeals. Aeróleo has received a final, unfavorable ruling with respect to a similar assessment levied by the Rio de Janeiro State Treasury for the periods between 1994 to 1998 (the “1998 Assessments”). The 1998 Assessments were upheld without taking into consideration the benefit of the clarifying guidance issued by the Supreme Court following the assertion of the claims. The Company currently anticipates that the final resolution of the 1998 Assessments, including any administrative fine or penalty, would not have a material effect on its financial position or results of operations. At March 31, 2016, it is not possible to determine the outcome of the Municipal Assessments, but the Company does not expect that it would have a material effect on its business, financial position or results of operations. In addition, it is not possible to reasonably estimate the likelihood or potential amount of assessments that may be issued for any subsequent periods.
Aeróleo is also disputing challenges raised by the Brazilian tax authorities with respect to certain tax credits applied by Aeróleo between 1995 to 2009. The tax authorities are seeking $1.9 million in additional taxes, interest and penalties. Aeróleo believes that, based on its interpretation of tax legislation, it is in compliance with all applicable tax legislation and plans to defend this claim vigorously. At March 31, 2016, it is not possible to determine the outcome of this matter, but the Company does not expect that it would have a material effect on its business, financial position or results of operations.
Aeróleo is disputing responsibility for $3.5 million of employer social security contributions required to have been remitted by one of its customers relating to the period from 1995 to 1998. Although Aeróleo may be deemed co-responsible for such remittances under the local regulatory regime, the customer’s payments to Aeróleo against presented invoices were made net of the specific remittances required to have been made by the customer and at issue in the claim. As such, we plan to defend this claim vigorously. At March 31, 2016, it is not possible to determine the outcome of this matter, but the Company does not expect that it would have a material effect on its business, financial position or results of operations.

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In October 2015, Aeróleo received written notices of the assessment of $1.8 million in penalties by the State of Rio de Janeiro in respect of Aeróleo’s alleged failure to submit accurate documentation and to fully comply with filing requirements with respect to certain value-added taxes. Although Aeróleo’s review of the allegations remains ongoing, it has determined that the proposed penalties were calculated based on amounts containing a typographical error. Upon correction of the typographical error, Aeróleo expects a significant reduction in the amount of the proposed penalties. At March 31, 2016, it is not possible to determine the outcome of this matter.
Aeróleo is also disputing claims from the Brazilian tax authorities with respect to federal customs taxes levied upon the helicopters leased by Aeróleo and imported into Brazil under a temporary regime and subject to re-export. In order to dispute such assessments and pursue its available legal remedies within the judicial system, Aeróleo deposited the amounts at issue into an escrow account that serves as security and with the presiding judge in the matter controlling the release of such funds. Aeróleo believes that, based on its interpretation of tax legislation and well established aviation industry practice, it is not required to pay such taxes and plans to defend this claim vigorously. At March 31, 2016, it is not possible to determine the outcome of this matter, but the Company does not expect that it would have a material effect on its business, financial position or results of operations.
As it relates to the specific cases referred to above, the Company currently anticipates that any administrative fine or penalty ultimately would not have a material effect on its financial position or results of operations. Aeróleo has deposited $5.8 million into escrow accounts controlled by the court with respect to certain of the cases described above and has fully reserved such amounts subject to final determination and the judicial release of such escrow deposits. These estimated liabilities are based on the Company’s assessment of the nature of these matters, their progress toward resolution, the advice of legal counsel and outside experts as well as management’s intentions and experience.
Other. In the normal course of its business, the Company becomes involved in various litigation matters including, among other things, claims by third parties for alleged property damages and personal injuries. Management uses 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 related to such exposure could occur, but the Company does not expect such changes in estimated costs would have a material effect on its consolidated financial position, results of operations or cash flows.
In April 2014, the Company entered into a settlement agreement with Airbus Helicopters (formerly Eurocopter), a division of Airbus Group (formerly European Aeronautic Defense and Space Company), with respect to the extended suspension of operations of H225 heavy helicopters in 2012 and 2013. The settlement agreement provides for certain service and product credit discounts, including credits that will be available to the Company for a period of four years from the date of the agreement to be applied against support services available from Airbus Helicopters covering spare parts, repair and overhaul, service bulletins, technical assistance or other services. The Company expects to be able to apply such service credits over the next quarter, and such credits will result in a reduction in operating expenses in the periods utilized.  During the three months ended March 31, 2016 and 2015, the Company utilized credits in the amount of $1.2 million and $1.3 million, respectively.
10.
EARNINGS (LOSS) PER COMMON SHARE
Basic earnings 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 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 and/or treasury method. Dilutive securities for this purpose assume all common shares have been issued pursuant to the exercise of outstanding stock options.

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Table of Contents

Computations of basic and diluted earnings per common share of the Company for the three months ended March 31, 2016 and 2015 were as follows (in thousands, except share and per share data):
 
 
Three Months Ended 
 March 31,
 
 
2016
 
2015
Net loss attributable to Era Group Inc.
 
$
(3,818
)
 
$
(42
)
Shares:
 
 
 
 
Weighted average common shares outstanding - basic
 
20,219,937

 
20,195,955

Net effect of dilutive stock options and restricted stock awards based on the treasury stock method(1)
 

 

Weighted average common shares outstanding - diluted
 
20,219,937

 
20,195,955

 
 
 
 
 
Loss per common share, basic and diluted
 
$
(0.19
)
 
$

____________________
(1)
Excludes weighted average common shares of 347,242 and 114,955 for the three months ended March 31, 2016 and 2015, respectively, for certain share awards as the effect of their inclusion would have been antidilutive.
11.
RELATED PARTY TRANSACTIONS
The Company terminated its Amended and Restated Transition Services Agreement (“TSA”) with SEACOR Holdings Inc. (“SEACOR”) effective June 30, 2015. The Company incurred no costs under the TSA during the three months ended March 31, 2016 and $0.4 million of costs during the three months ended March 31, 2015. Such costs are classified as administrative and general expenses in the condensed consolidated statements of operations. As of March 31, 2016 and December 31, 2015, the Company had a payable due to SEACOR of $0.1 million and less than $0.1 million, respectively.
The Company purchased products from its Dart Holding Company Ltd. (“Dart”) joint venture totaling $0.5 million and $0.6 million during the three months ended March 31, 2016 and 2015, respectively. The Company also has a note receivable from Dart which had a balance of $3.5 million and $3.6 million as of March 31, 2016 and December 31, 2015, respectively.
During each of the three months ended March 31, 2016 and 2015, the Company incurred $0.2 million for simulator fees and services from its Era Training Center, LLC (“ETC”) joint venture and provided helicopter, management and other services to ETC totaling $0.1 million and $0.2 million, respectively. The Company also has a note receivable from ETC which had a balance of $4.3 million and $4.4 million as of March 31, 2016 and December 31, 2015, respectively.
12.
SHARE-BASED COMPENSATION
Restricted Stock Awards. The number of shares and weighted average grant price of restricted stock awards during the three months ended March 31, 2016 were as follows:
 
Number of Shares
 
Weighted Average Grant Price
Non-vested as of December 31, 2015
311,372

 
$
22.58

Restricted stock awards granted:
 
 
 
Non-employee directors
40,663

 
$
10.59

Employees
299,250

 
$
10.59

Vested
(128,111
)
 
$
22.44

Forfeited
(1,620
)
 
$
25.15

Non-vested as of March 31, 2016
521,554

 
$
14.79

The total fair value of shares vested during the three months ended March 31, 2016 and 2015 was $2.9 million and $1.6 million, respectively.
Stock Options. The Company did not grant any stock options during the three months ended March 31, 2016.
Employee Stock Purchase Plan (“ESPP”). During the three months ended March 31, 2016, the Company issued 60,740 shares under the ESPP. As of March 31, 2016, 119,900 shares remain available for issuance under the ESPP.

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Table of Contents

Total share-based compensation expense, which includes stock options, restricted stock and the ESPP, was $1.0 million and $0.6 million for the three months ended March 31, 2016 and 2015, respectively.
13.
GUARANTORS OF SECURITIES
On December 7, 2012, Era Group issued the 7.750% Senior Notes. Era Group’s payment obligations under the 7.750% Senior Notes are jointly and severally guaranteed by all of its existing 100% owned U.S. subsidiaries that guarantee the Revolving Credit Facility and any future U.S. subsidiaries that guarantee the Revolving Credit Facility or other material indebtedness Era Group may incur in the future (the “Guarantors”). All the Guarantors currently guarantee the Revolving Credit Facility, and the guarantees of the Guarantors are full and unconditional and joint and several.
As a result of the agreement by these subsidiaries to guarantee the 7.750% Senior Notes, the Company is presenting the following condensed consolidating balance sheets and statements of operations, comprehensive income and cash flows for Era Group (“Parent”), the Guarantors and the Company’s other subsidiaries (“Non-guarantors”). These statements should be read in conjunction with the unaudited condensed consolidated financial statements of the Company. The supplemental condensed consolidating financial information has been prepared pursuant to the rules and regulations for condensed financial information and does not include all disclosures included in annual financial statements.

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Table of Contents


Supplemental Condensed Consolidating Balance Sheet as of March 31, 2016
 
Parent
 
Guarantors
 
Non-guarantors
 
Eliminations
 
Consolidated
 
(in thousands, except share data)
ASSETS
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
26,719

 
$
2,900

 
$
1,184

 
$

 
$
30,803

Receivables:
 
 
 
 
 
 
 
 
 
Trade, net of allowance for doubtful accounts of $2,089
39

 
30,546

 
6,395

 

 
36,980

Tax receivable
6,000

 
68

 

 

 
6,068

Other

 
3,135

 
572

 

 
3,707

Inventories, net

 
25,151

 
2,593

 

 
27,744

Prepaid expenses
692

 
2,503

 
79

 

 
3,274

Other current assets
190

 
1

 

 

 
191

Total current assets
33,640

 
64,304

 
10,823

 

 
108,767

Property and equipment

 
1,154,749

 
16,522

 

 
1,171,271

Accumulated depreciation

 
(324,482
)
 
(881
)
 

 
(325,363
)
Property and equipment, net

 
830,267

 
15,641

 

 
845,908

Equity investments and advances

 
28,795

 

 

 
28,795

Investments in consolidated subsidiaries
172,605

 

 

 
(172,605
)
 

Deferred taxes
5,360

 

 

 
(5,360
)
 

Intangible assets

 

 
1,153

 

 
1,153

Intercompany receivables
494,579

 

 

 
(494,579
)
 

Other assets
1,994

 
6,605

 
4,251

 

 
12,850

Total assets
$
708,178

 
$
929,971

 
$
31,868

 
$
(672,544
)
 
$
997,473

LIABILITIES, REDEEMABLE NONCONTROLLING INTREST AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable and accrued expenses
$
579

 
$
8,338

 
$
1,202

 
$

 
$
10,119

Accrued wages and benefits

 
4,574

 
1,670

 

 
6,244

Accrued interest
3,491

 

 

 

 
3,491

Accrued other taxes
59

 
1,132

 
714

 

 
1,905

Accrued contingencies

 

 
2,851

 

 
2,851

Current portion of long-term debt

 
1,524

 
767

 

 
2,291

Other current liabilities
360

 
1,354

 
61

 

 
1,775

Total current liabilities
4,489

 
16,922

 
7,265

 

 
28,676

Long-term debt
235,185

 
22,890

 
5,515

 

 
263,590

Deferred income taxes

 
233,765

 
678

 
(5,360
)
 
229,083

Intercompany payables

 
476,236

 
18,343

 
(494,579
)
 

Other liabilities

 
1,590

 
1,265

 

 
2,855

Total liabilities
239,674

 
751,403

 
33,066

 
(499,939
)
 
524,204

Redeemable noncontrolling interest

 
4

 
4,668

 

 
4,672

Equity:
 
 
 
 
 
 
 
 
 
Common stock, $0.01 par value, 60,000,000 shares authorized; 20,879,783 outstanding, exclusive of treasury shares
211

 

 

 

 
211

Additional paid-in capital
434,460

 
95,543

 
9,325

 
(104,868
)
 
434,460

Retained earnings
36,683

 
82,929

 
(15,191
)
 
(67,737
)
 
36,684

Treasury shares, at cost, 171,114 shares
(2,850
)
 

 

 

 
(2,850
)
Accumulated other comprehensive income, net of tax

 
92

 

 

 
92

Total equity
468,504

 
178,564

 
(5,866
)
 
(172,605
)
 
468,597

Total liabilities, redeemable noncontrolling interest and stockholders’ equity
$
708,178

 
$
929,971

 
$
31,868

 
$
(672,544
)
 
$
997,473


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Table of Contents

Supplemental Condensed Consolidating Balance Sheet as of December 31, 2015
 
Parent
 
Guarantors
 
Non-guarantors
 
Eliminations
 
Consolidated
 
(in thousands, except share data)
ASSETS
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
7,565

 
$
3,334

 
$
3,471

 
$

 
$
14,370

Receivables:
 
 
 
 
 
 
 
 
 
Trade, net of allowance for doubtful accounts of $2,103
39

 
40,345

 
8,255

 

 
48,639

Tax receivables
6,013

 
72

 

 

 
6,085

Other

 
3,089

 
216

 

 
3,305

Inventories, net

 
25,557

 
2,437

 

 
27,994

Prepaid expenses
458

 
1,411

 
94

 

 
1,963

Other current assets
190

 
1

 

 

 
191

Total current assets
14,265

 
73,809

 
14,473

 

 
102,547

Property and equipment

 
1,159,441

 
16,468

 

 
1,175,909

Accumulated depreciation

 
(316,090
)
 
(603
)
 

 
(316,693
)
Net property and equipment

 
843,351

 
15,865

 

 
859,216

Equity investments and advances

 
28,898

 

 

 
28,898

Investments in consolidated subsidiaries
172,335

 

 

 
(172,335
)
 

Intangible assets

 

 
1,158

 

 
1,158

Deferred income taxes
3,823

 

 

 
(3,823
)
 

Intercompany receivables
515,255

 

 

 
(515,255
)
 

Other assets
2,166

 
6,999

 
3,367

 

 
12,532

Total assets
$
707,844

 
$
953,057

 
$
34,863

 
$
(691,413
)
 
$
1,004,351

LIABILITIES, REDEEMABLE NONCONTROLLING INTREST AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable and accrued expenses
$
386

 
$
9,635

 
$
1,979

 
$

 
$
12,000

Accrued wages and benefits

 
6,875

 
2,137

 

 
9,012

Accrued interest
549

 
13

 

 

 
562

Current portion of long-term debt

 
1,663

 
1,615

 

 
3,278

Accrued other taxes
30

 
789

 
1,701

 

 
2,520

Accrued contingencies

 

 
2,410

 

 
2,410

Other current liabilities
534

 
1,311

 
455

 

 
2,300

Total current liabilities
1,499

 
20,286

 
10,297

 

 
32,082

Long-term debt
235,134

 
23,305

 
5,259

 

 
263,698

Deferred income taxes

 
232,994

 
677

 
(3,823
)
 
229,848

Intercompany payables

 
501,512

 
13,743

 
(515,255
)
 

Other liabilities

 
1,887

 
729

 

 
2,616

Total liabilities
236,633

 
779,984

 
30,705

 
(519,078
)
 
528,244

Redeemable noncontrolling interest

 
4

 
4,800

 

 
4,804

Equity:
 
 
 
 
 
 
 
 
 
Common stock, $0.01 par value, 60,000,000 shares authorized; 20,495,694 outstanding, exclusive of treasury shares
207

 

 

 

 
207

Additional paid-in capital
433,175

 
95,543

 
9,325

 
(104,868
)
 
433,175

Intercompany receivables

 

 

 

 

Retained earnings
40,502

 
77,434

 
(9,967
)
 
(67,467
)
 
40,502

Treasury shares, at cost, 154,549 shares
(2,673
)
 

 

 

 
(2,673
)
Accumulated other comprehensive income, net of tax

 
92

 

 

 
92

Total equity
471,211

 
173,069

 
(642
)
 
(172,335
)
 
471,303

Total liabilities, redeemable noncontrolling interest and stockholders’ equity
$
707,844

 
$
953,057

 
$
34,863

 
$
(691,413
)
 
$
1,004,351



16

Table of Contents


Supplemental Condensed Consolidating Statements of Operations for the Three Months Ended March 31, 2016
 
Parent
 
Guarantors
 
Non-guarantors
 
Eliminations
 
Consolidated
 
(in thousands)
Operating revenues
$

 
$
48,487

 
$
14,095

 
$

 
$
62,582

Costs and expenses:
 
 
 
 
 
 
 
 
 
Operating

 
26,010

 
18,297

 

 
44,307

Administrative and general
1,048

 
7,084

 
1,095

 

 
9,227

Depreciation

 
12,486

 
280

 

 
12,766

Total costs and expenses
1,048

 
45,580

 
19,672

 

 
66,300

Gains on asset dispositions, net

 
2,913

 

 

 
2,913

Operating income (loss)
(1,048
)
 
5,820

 
(5,577
)
 

 
(805
)
Other income (expense):
 
 
 
 
 
 
 
 
 
Interest income
4

 
123

 
174

 

 
301

Interest expense
(4,343
)
 
(148
)
 
(257
)
 

 
(4,748
)
Foreign currency gains (losses), net
69

 
(109
)
 
321

 

 
281

Other, net

 

 
(17
)
 

 
(17
)
Total other income (expense)
(4,270
)
 
(134
)
 
221

 

 
(4,183
)
Income (loss) before income taxes and equity earnings
(5,318
)
 
5,686

 
(5,356
)
 

 
(4,988
)
Income tax expense (benefit)
(1,229
)
 
215

 

 

 
(1,014
)
Income (loss) before equity earnings
(4,089
)
 
5,471

 
(5,356
)
 

 
(3,974
)
Equity earnings, net of tax

 
24

 

 

 
24

Equity in earnings (losses) of subsidiaries
271

 

 

 
(271
)
 

Net income (loss)
(3,818
)
 
5,495

 
(5,356
)
 
(271
)
 
(3,950
)
Net loss attributable to non-controlling interest in subsidiary

 

 
132

 

 
132

Net income (loss) attributable to Era Group Inc.
$
(3,818
)
 
$
5,495

 
$
(5,224
)
 
$
(271
)
 
$
(3,818
)

17

Table of Contents

Supplemental Condensed Consolidating Statements of Operations for the Three Months Ended March 31, 2015
 
Parent
 
Guarantors
 
Non-guarantors
 
Eliminations
 
Consolidated
 
(in thousands)
Operating revenues
$

 
$
67,415

 
$

 
$

 
$
67,415

Costs and expenses:
 
 
 
 
 
 
 
 
 
Operating

 
43,517

 
88

 

 
43,605

Administrative and general
1,374

 
8,369

 

 

 
9,743

Depreciation

 
11,456

 
146

 

 
11,602

Total costs and expenses
1,374

 
63,342

 
234

 

 
64,950

Gains on asset dispositions, net

 
3,388

 

 

 
3,388

Operating income
(1,374
)
 
7,461

 
(234
)
 

 
5,853

Other income (expense):
 
 
 
 
 
 
 
 
 
Interest income
5

 
245

 
1

 

 
251

Interest expense
(3,352
)
 
(193
)
 

 

 
(3,545
)
Derivative losses, net

 
(12
)
 

 

 
(12
)
Foreign currency gains (losses), net
542

 
(3,502
)
 

 

 
(2,960
)
Gain on debt extinguishment
264

 

 

 

 
264

Total other income (expense)
(2,541
)
 
(3,462
)
 
1

 

 
(6,002
)
Income (loss) before income taxes and equity earnings
(3,915
)
 
3,999

 
(233
)
 

 
(149
)
Income tax expense (benefit)
(1,482
)
 
1,427

 

 

 
(55
)
Income (loss) before equity earnings
(2,433
)
 
2,572

 
(233
)
 

 
(94
)
Equity losses, net of tax

 
(145
)
 

 

 
(145
)
Equity in earnings (losses) of subsidiaries
2,391

 

 

 
(2,391
)
 

Net income (loss)
(42
)
 
2,427

 
(233
)
 
(2,391
)
 
(239
)
Net loss attributable to non-controlling interest in subsidiary

 
197

 

 

 
197

Net income (loss) attributable to Era Group Inc.
$
(42
)
 
$
2,624

 
$
(233
)
 
$
(2,391
)
 
$
(42
)

18

Table of Contents


Supplemental Condensed Consolidating Statements of Comprehensive Income for the Three Months Ended March 31, 2016
 
Parent
 
Guarantors
 
Non-guarantors
 
Eliminations
 
Consolidated
 
(in thousands)
Net income (loss)
$
(3,818
)
 
$
5,495

 
$
(5,356
)
 
$
(271
)
 
$
(3,950
)
Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments

 

 

 

 

Total other comprehensive income (loss)

 

 

 

 

Comprehensive income (loss)
(3,818
)
 
5,495

 
(5,356
)
 
(271
)
 
(3,950
)
Comprehensive loss attributable to non-controlling interest in subsidiary

 

 
132

 

 
132

Comprehensive income (loss) attributable to Era Group Inc.
$
(3,818
)
 
$
5,495

 
$
(5,224
)
 
$
(271
)
 
$
(3,818
)

Supplemental Condensed Consolidating Statements of Comprehensive Income for the Three Months Ended March 31, 2015
 
Parent
 
Guarantors
 
Non-guarantors
 
Eliminations
 
Consolidated
 
(in thousands)
Net income (loss)
$
(42
)
 
$
2,427

 
$
(233
)
 
$
(2,391
)
 
$
(239
)
Other comprehensive loss:
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments

 
(3
)
 

 

 
(3
)
Income tax benefit

 
1

 

 

 
1

Total other comprehensive loss

 
(2
)
 

 

 
(2
)
Comprehensive income (loss)
(42
)
 
2,425

 
(233
)
 
(2,391
)
 
(241
)
Comprehensive income attributable to non-controlling interest in subsidiary

 
197

 

 

 
197

Comprehensive income (loss) attributable to Era Group Inc.
$
(42
)
 
$
2,622

 
$
(233
)
 
$
(2,391
)
 
$
(44
)

19

Table of Contents


Supplemental Condensed Consolidating Statements of Cash Flows for the Three Months Ended March 31, 2016
 
Parent
 
Guarantors
 
Non-guarantors
 
Eliminations
 
Consolidated
 
(in thousands)
Net cash provided by (used in) operating activities
$
19,154

 
$
(3,220
)
 
$
(1,491
)
 
$
350

 
$
14,793

Cash flows from investing activities:
 
 
 
 
 
 
 
 
 
Purchases of property and equipment

 
(2,090
)
 
(55
)
 

 
(2,145
)
Proceeds from disposition of property and equipment

 
3,980

 

 

 
3,980

Return of helicopter deposit

 
544

 

 

 
544

Principal payments on notes due from equity investees

 
177