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, 2017              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,” “smaller reporting company” and “emerging growth 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
¨
 
Emerging growth company
ý
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
ý
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 28, 2017 was 21,270,272. 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
(in thousands, except share amounts)
 
March 31,
2017
 
December 31,
2016
 
(Unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents (including $1,340 and $1,448 from VIEs in 2017 and 2016, respectively)
$
26,339

 
$
26,950

Receivables:
 
 
 
Trade, net of allowance for doubtful accounts of $1,295 and $1,219 in 2017 and 2016, respectively (including $7,495 and $5,989 from VIEs in 2017 and 2016, respectively)
34,840

 
32,470

Tax receivables (including $3,154 and $3,448 from VIEs in 2017 and 2016, respectively)
3,166

 
3,461

Other (including $827 and $1,019 from VIEs in 2017 and 2016, respectively)
2,396

 
2,716

Inventories, net (including $18 and $46 from VIEs in 2017 and 2016, respectively)
25,232

 
25,417

Prepaid expenses (including $55 and $158 from VIEs in 2017 and 2016, respectively)
2,535

 
1,579

Escrow deposits
3,779

 
3,777

Total current assets
98,287

 
96,370

Property and equipment (including $941 and $844 from VIEs in 2017 and 2016, respectively)
1,154,835

 
1,154,028

Accumulated depreciation (including $146 and $98 from VIEs in 2017 and 2016, respectively)
(343,659
)
 
(332,219
)
Property and equipment, net
811,176

 
821,809

Equity investments and advances
29,727

 
29,266

Intangible assets
1,133

 
1,137

Other assets (including $64 and $48 from VIEs in 2017 and 2016, respectively)
6,096

 
6,591

Total assets
$
946,419

 
$
955,173

LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST
 AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable and accrued expenses (including $2,165 and $1,788 from VIEs in 2017 and 2016, respectively)
$
9,032

 
$
8,876

Accrued wages and benefits (including $1,639 and $2,009 from VIEs in 2017 and 2016, respectively)
6,881

 
8,507

Accrued interest
3,365

 
529

Accrued income taxes
689

 
666

Accrued other taxes (including $631 and $773 from VIEs in 2017 and 2016, respectively)
1,447

 
1,447

Accrued contingencies (including $1,189 and $1,237 from VIEs in 2017 and 2016, respectively)
1,189

 
1,237

Current portion of long-term debt (including $675 and $615 from VIEs in 2017 and 2016, respectively)
2,199

 
2,139

Other current liabilities (including $9 and $8 from VIEs in 2017 and 2016, respectively)
2,846

 
2,222

Total current liabilities
27,648

 
25,623

Long-term debt (including $2,853 and $2,767 from VIEs in 2017 and 2016, respectively)
225,946

 
230,139

Deferred income taxes
223,442

 
225,472

Other liabilities
924

 
1,301

Total liabilities
477,960

 
482,535

Commitments and contingencies (see Note 8)

 

Redeemable noncontrolling interest
4,054

 
4,221

Equity:
 
 
 
Common stock, $0.01 par value, 60,000,000 shares authorized; 21,270,272 and 20,936,636 outstanding in 2017 and 2016, respectively, exclusive of treasury shares
215

 
211

Additional paid-in capital
440,164

 
438,489

Retained earnings
26,904

 
32,524

Treasury shares, at cost, 179,730 and 175,350 shares in 2017 and 2016, respectively
(2,968
)
 
(2,899
)
Accumulated other comprehensive income, net of tax
90

 
92

Total equity
464,405

 
468,417

Total liabilities, redeemable noncontrolling interest and stockholders’ equity
$
946,419

 
$
955,173



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

2

Table of Contents

ERA GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except share and per share amounts)
 
Three Months Ended 
 March 31,
 
2017
 
2016
Operating revenues
$
54,527

 
$
62,582

Costs and expenses:
 
 
 
Operating
37,757

 
44,307

Administrative and general
10,381

 
9,227

Depreciation and amortization
11,554

 
12,766

Total costs and expenses
59,692

 
66,300

Gains on asset dispositions, net
109

 
2,913

Operating loss
(5,056
)
 
(805
)
Other income (expense):
 
 
 
Interest income
250

 
301

Interest expense
(3,589
)
 
(4,748
)
Foreign currency gains, net
28

 
281

Other, net
12

 
(17
)
Total other income (expense)
(3,299
)
 
(4,183
)
Loss before income taxes and equity earnings
(8,355
)
 
(4,988
)
Income tax benefit
(2,103
)
 
(1,014
)
Loss before equity earnings
(6,252
)
 
(3,974
)
Equity earnings, net of tax
465

 
24

Net loss
(5,787
)
 
(3,950
)
Net loss attributable to noncontrolling interest in subsidiary
167

 
132

Net loss attributable to Era Group Inc.
$
(5,620
)
 
$
(3,818
)
 
 
 
 
Loss per common share, basic and diluted
$
(0.27
)
 
$
(0.19
)
 
 
 
 
Weighted average common shares outstanding, basic and diluted
20,509,463

 
20,219,937























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,
 
 
2017
 
2016
Net loss
 
$
(5,787
)
 
$
(3,950
)
Other comprehensive loss:
 
 
 
 
Foreign currency translation adjustments
 
(2
)
 

Income tax benefit
 

 

Total other comprehensive loss
 
(2
)
 

Comprehensive loss
 
(5,789
)
 
(3,950
)
Comprehensive loss attributable to noncontrolling interest in subsidiary
 
167

 
132

Comprehensive loss attributable to Era Group Inc.
 
$
(5,622
)
 
$
(3,818
)








































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 REDEEMABLE NONCONTROLLING INTEREST AND EQUITY
(unaudited, in thousands)
 
 
 
 
 
Era Group Inc. Stockholders’ Equity
 
 
Redeemable Noncontrolling Interest
 
 
Common
Stock
 
Additional
Paid-In
Capital
 
Retained Earnings
 
Treasury
Shares
 
Accumulated
Other
Comprehensive
Income
 
Total
Equity
December 31, 2016
 
$
4,221

 
 
$
211

 
$
438,489

 
$
32,524

 
$
(2,899
)
 
$
92

 
$
468,417

Issuance of common stock:
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Restricted stock grants
 

 
 
3

 
(3
)
 

 

 

 

Employee Stock Purchase Plan
 

 
 
1

 
462

 

 

 

 
463

Share award amortization
 

 
 

 
1,198

 

 

 

 
1,198

Cancellation of restricted stock
 

 
 

 
18

 

 
(18
)
 

 

Purchase of treasury shares
 

 
 

 

 

 
(51
)
 

 
(51
)
Net loss
 

 
 

 

 
(5,787
)
 

 

 
(5,787
)
Net loss attributable to redeemable noncontrolling interest
 
(167
)
 
 

 

 
167

 

 

 
167

Currency translation adjustments, net of tax
 
 
 
 

 

 

 

 
(2
)
 
(2
)
March 31, 2017
 
$
4,054


 
$
215

 
$
440,164

 
$
26,904

 
$
(2,968
)
 
$
90

 
$
464,405

































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

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ERA GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
 
Three Months Ended 
 March 31,
 
2017
 
2016
Cash flows from operating activities:
 
 
 
Net loss
$
(5,787
)
 
$
(3,950
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depreciation and amortization
11,554

 
12,766

Share-based compensation
1,198

 
1,012

Bad debt expense, net
38

 

Gains on asset dispositions, net
(109
)
 
(2,913
)
Debt discount amortization
57

 
25

Amortization of deferred financing costs
282

 
195

Foreign currency gains, net
(76
)
 
(585
)
Deferred income tax benefit
(2,099
)
 
(1,348
)
Equity earnings, net of tax
(465
)
 
(24
)
Changes in operating assets and liabilities:
 
 
 
Decrease (increase) in receivables
(1,700
)
 
11,636

Decrease in prepaid expenses and other assets
(537
)
 
(1,573
)
Increase (decrease) in accounts payable, accrued expenses and other liabilities
1,897

 
(448
)
Net cash provided by operating activities
4,253

 
14,793

Cash flows from investing activities:
 
 
 
Purchases of property and equipment
(1,005
)
 
(2,145
)
Proceeds from disposition of property and equipment
126

 
3,980

Return of helicopter deposits

 
544

Investments in and advances to equity investees
(114
)
 

Principal payments on notes due from equity investees
185

 
177

Principal payments on third party notes receivable
56

 
46

Net cash provided by (used in) investing activities
(752
)
 
2,602

Cash flows from financing activities:
 
 
 
Proceeds from Revolving Credit Facility
2,000

 
7,000

Payments on long-term debt
(6,581
)
 
(8,651
)
Proceeds from share award plans
463

 
477

Purchase of treasury shares
(51
)
 
(161
)
Net cash used in financing activities
(4,169
)
 
(1,335
)
Effects of exchange rate changes on cash and cash equivalents
57

 
373

Net increase (decrease) in cash and cash equivalents
(611
)
 
16,433

Cash and cash equivalents, beginning of period
26,950

 
14,370

Cash and cash equivalents, end of period
$
26,339


$
30,803

Supplemental cash flow information:
 
 
 
Cash paid for interest, net of capitalized interest of $432 and $0 in 2017 and 2016, respectively
$
413

 
$
1,129

Cash paid for income taxes

 
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. 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 to “Era Group” refers to Era Group Inc. without its subsidiaries. The condensed consolidated financial information for the three months ended March 31, 2017 and 2016 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, 2017, its results of operations for the three months ended March 31, 2017 and 2016, its comprehensive income for the three months ended March 31, 2017 and 2016, its changes in equity for the three months ended March 31, 2017, and its cash flows for the three months ended March 31, 2017 and 2016. 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 the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.
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.
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 Company did not defer any revenue during the three months ended March 31, 2017.
Receivables. Customers are primarily international, independent and major integrated oil and gas exploration, development and production 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.
New Accounting Standards. In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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, in April 2016, the FASB issued ASU 2016-10 - Revenue from Contracts With Customers, in May 2016, the FASB issued ASU 2016-12 - Revenue from Contracts With Customers, and in December 2016, the FASB issued ASU 2016-20 - Technical Corrections and Improvements to Topic 606, Revenue from Contracts With Customers, all of which provide guidance on the application of certain principles in ASU 2014-09. Each of ASU 2014-09, 2016-08, 2016-10 and 2016-12 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 intends to adopt each of ASU 2014-09, ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2016-20 in 2018 using the modified retrospective application and is currently evaluating its customer contracts to determine the potential impact of such adoption on its consolidated financial statements.
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 or 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

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period. The Company adopted ASU 2015-11 effective January 1, 2017, and such adoption did 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 is still evaluating the potential impact of the adoption of ASU 2016-02 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. The Company adopted ASU 2016-07 effective January 1, 2017 and such adoption did not have an 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 on the statement of cash flows and treatment of forfeitures. The main differences between current GAAP and ASU 2016-09 are (i) tax consequences from changes in fair value of equity awards between the grant date and vesting date will be charged to income tax expense and reported in the operating section of the statement of cash flows in the period in which the award vests and (ii) entities will have the option to estimate award forfeitures as previously prescribed under GAAP or record forfeitures as an adjustment to expense as they occur. The Company adopted ASU 2016-09 effective January 1, 2017 and has elected to record forfeitures of equity awards as an adjustment to expense as they occur and in the period in which they occur. Such adoption and election did not have a material impact on the Company’s consolidated financial statements.
In August 2016, the FASB issued ASU 2016-15 - Classification of Certain Cash Receipts and Cash Payments, which is intended to reduce diversity in reporting certain transactions on the statement of cash flows by clarifying current GAAP where it may be unclear or does not include adequate explanation. ASU 2016-15 will be effective for annual reporting periods beginning after December 15, 2017 including interim periods within that period. Early adoption is permitted as of the beginning of an interim or annual period provided that all amendments included in ASU 2016-15 are adopted in the same period and applied as of the beginning of the annual period in which the statement is adopted. The Company has not adopted ASU 2016-15 and believes such adoption will not have a material impact on its consolidated financial statements.
In October 2016, the FASB issued ASU 2016-16 - Income Taxes, which requires entities to recognize income tax consequences of intra-entity transfers of assets, other than inventory, when the transfer occurs rather than when the asset is sold to a third party as is the case under current GAAP. ASU 2016-16 will be effective for annual reporting periods beginning after December 15, 2017 including interim periods within that period. Early adoption is permitted as of the beginning of an annual reporting period for which neither interim nor annual financial statements have been made available. The Company has not adopted ASU 2016-16 and believes such adoption will not have a material impact on its consolidated financial statements.
In January 2017, the FASB issued ASU 2017-01 - Business Combinations: Clarifying the Definition of a Business, which narrows the reach of the definition of a business to exclude transactions that are more akin to asset acquisitions or dispositions. ASU 2017-01 will be effective for annual reporting periods beginning after December 15, 2017, including interim periods within that period. Early adoption is permitted provided that any transactions affected by the adoption have not been previously disclosed under current GAAP. The Company adopted ASU 2017-01 effective January 1, 2017, and such adoption did 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.

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As of March 31, 2017 and December 31, 2016, 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, 2017 and December 31, 2016 were as follows (in thousands): 
 
Carrying
Amount
 
Level 1
 
Level 2
 
Level 3
March 31, 2017
 
 
 
 
 
 
 
LIABILITIES
 
 
 
 
 
 
 
Long-term debt, including current portion
$
228,145

 
$

 
$
224,975

 
$

 
 
 
 
 
 
 
 
December 31, 2016
 
 
 
 
 
 
 
LIABILITIES
 
 
 
 
 
 
 
Long-term debt, including current portion
$
232,278

 
$

 
$
221,808

 
$

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.
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, 2017 and December 31, 2016, the Company had $3.8 million deposited in a like-kind exchange escrow account. The Company has identified a qualifying asset and intends to use the funds to complete a like-kind exchange transaction in the second quarter of 2017.
4.
ACQUISITIONS AND DISPOSITIONS
Capital Expenditures. During the three months ended March 31, 2017, capital expenditures were $1.0 million and consisted primarily of spare helicopter parts and capitalized interest. In connection with the deferral of helicopter deliveries, the Company ceased capitalizing interest on helicopter deposits in the fourth quarter of 2015. The Company resumed capitalizing interest in the fourth quarter of 2016. During the three months ended March 31, 2017 and 2016, the Company capitalized interest of $0.4 million and $0, respectively. As of March 31, 2017 and December 31, 2016, construction in progress, which is a component of property and equipment, included capitalized interest of $4.9 million and $4.5 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, 2017 or 2016. The Company took delivery of two AW189 heavy helicopters during the fourth quarter of 2016, but these helicopters were not placed in service as of March 31, 2017. The Company places helicopters in service once completion work has been finalized and the helicopters are ready for use.
Equipment Dispositions - During the three months ended March 31, 2017, the Company sold or otherwise disposed of property and equipment for proceeds of $0.1 million and recognized gains of $0.1 million. 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.
5.
VARIABLE INTEREST ENTITIES
Aeróleo. 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 from the Company, making it a VIE. The Company has the ability to direct the activities that most significantly affect Aeróleo’s financial performance, making the Company the primary beneficiary. As a result, the Company consolidates Aeróleo’s financial results.

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The Company’s condensed consolidated balance sheets at March 31, 2017 and December 31, 2016 include assets of Aeróleo totaling $13.7 million and $12.9 million, respectively. The distribution of these assets to Era Group and its subsidiaries other than Aeróleo is subject to restrictions. The Company’s condensed consolidated balance sheets at March 31, 2017 and December 31, 2016 each include liabilities of Aeróleo of $9.2 million. The creditors for such liabilities do not have recourse to Era Group or its subsidiaries other than Aeróleo.
The Company’s condensed consolidated statements of operations for the three months ended March 31, 2017 and 2016 include operating revenues of $10.2 million and $7.6 million, respectively, and net income of $0.9 million and net loss of $0.7 million, respectively, as a result of the consolidation of Aeróleo, including the effects of intercompany eliminations.
6.
INCOME TAXES
During the three months ended March 31, 2017 and 2016, the Company recorded income tax benefit of $2.1 million and $1.0 million, respectively, resulting in effective tax rates of 25.2% and 20.3%, respectively. The increase in effective tax rates is primarily due to the recognition of tax benefits associated with the Company’s foreign affiliates.
During the three months ended March 31, 2017 and 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, 2017 and December 31, 2016, the gross amount of liability for accrued interest and penalties related to unrecognized tax benefits was $0.2 million.
7.
LONG-TERM DEBT
The Company’s borrowings as of March 31, 2017 and December 31, 2016 were as follows (in thousands):
 
 
March 31, 2017
 
December 31, 2016
7.750% Senior Notes (excluding unamortized discount)
 
$
144,828

 
$
144,828

Senior secured revolving credit facility
 
61,000

 
65,000

Promissory notes
 
22,751

 
23,166

Other
 
3,528

 
3,382

 
 
232,107

 
236,376

Less: portion due within one year
 
(2,199
)
 
(2,139
)
Less: debt discount, net
 
(1,646
)
 
(1,703
)
Less: unamortized debt issuance costs
 
(2,316
)
 
(2,395
)
Total long-term debt
 
$
225,946

 
$
230,139

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.
Revolving Credit Facility. On March 31, 2014, Era Group entered into the amended and restated senior secured revolving credit facility (the “Revolving Credit Facility”), and on October 27, 2016, the Company entered into the Consent and Amendment No. 3 to the Revolving Credit Facility. The Revolving Credit Facility provides Era Group with the ability to borrow up to $200.0 million, with a sub-limit of up to $50.0 million for letters of credit, and matures in March 2019. 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 in the Revolving Credit Facility, plus an applicable margin. The applicable margin is based on the Company’s ratio of funded debt to EBITDA, as defined in the Revolving Credit Facility, 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, 2017 was 125 basis points on the base rate margin and 225 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, 2017, the commitment fee was 50 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 an interest coverage ratio, a senior secured leverage ratio and an asset coverage ratio, each as defined in the Revolving Credit Facility, 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, 2017, Era Group had $61.0 million of outstanding borrowings under the Revolving Credit Facility and issued letters of credit of $1.3 million. In connection with the amendment of the Revolving Credit Facility in 2014, Era Group incurred debt issuance costs of $2.4 million. In connection with Amendment No. 3 to the Revolving Credit Facility entered into in 2016, which reduced the total commitment amount to $200.0 million, the Company wrote off previously incurred debt issuance costs of $0.5 million and incurred additional debt issuance costs of $0.9 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, 2017 and 2016, the Company settled certain tax disputes in Brazil totaling $0.2 million and $2.0 million, respectively. Such amounts are included in other debt in the table above and bear interest at a rate equal to the overnight rate as published by the Central Bank of Brazil. Also during the three months ended March 31, 2016, the Company prepaid a $1.0 million loan to a third party in Brazil.
Promissory Notes. During the three months ended March 31, 2017 and 2016, the Company made scheduled payments on other long-term debt of $0.4 million and $0.6 million, respectively.
8.
COMMITMENTS AND CONTINGENCIES
Fleet. The Company’s unfunded capital commitments as of March 31, 2017 consisted primarily of agreements to purchase helicopters and totaled $117.0 million, of which $16.2 million is expected to become payable during the remainder of 2017 with the balance payable through 2019. The Company also had $1.3 million of deposits paid on options not yet exercised. The Company may terminate $103.5 million of its total commitments (inclusive of deposits paid on options not yet exercised) without further liability other than aggregate liquidated damages of $2.5 million.
Included in these commitments are orders to purchase five AW189 heavy helicopters, two S92 heavy helicopters and five AW169 light twin helicopters. The AW189 and S92 helicopters are scheduled to be delivered in 2017 through 2019. Delivery dates for the AW169 helicopters have yet to be determined. In addition, the Company had outstanding options to purchase up to ten additional AW189 helicopters. If these options are exercised, the helicopters would be scheduled for delivery beginning in 2019 through 2020.
Brazilian Tax Disputes. The Company is disputing assessments of approximately $7.4 million in unaccrued taxes, penalties and interest levied by the municipal authorities of Rio de Janeiro (for the period between 2000 to 2005) and Macaé (for the period between 2001 to 2006) (collectively, the “Municipal Assessments”). The Company believes that, based on its interpretation of tax legislation supported by clarifying guidance provided by the Supreme Court of Brazil 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 the Company to deposit the amounts at issue as security to pursue further appeals. In 2015, the Company 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 final adjudication of the 1998 Assessments requires payment of amounts that are within the established accruals, will be paid in multiple installments over time and are not expected to have a material effect on the Company’s financial position or results of operations. At March 31, 2017, it is not possible to determine the outcomes of the Municipal Assessments, but the Company does not expect that the outcomes would have a material adverse 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.
The Company 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 $2.4 million in additional taxes, interest and penalties. The Company 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, 2017, it is not possible to determine the outcome of this matter, but the Company does not expect that the outcome would have a material adverse effect on its business, financial position or results of operations.

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The Company is disputing responsibility for $2.9 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 the Company may be deemed co-responsible for such remittances under the local regulatory regime, the customer’s payments to the Company 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, the Company plans to defend this claim vigorously. At March 31, 2017, it is not possible to determine the outcome of this matter, but the Company does not expect that the outcome would have a material adverse effect on its business, financial position or results of operations.
The Company is disputing certain penalties that are being assessed by the State of Rio de Janeiro in respect of the Company’s alleged failure to submit accurate documentation and to fully comply with filing requirements with respect to certain value-added taxes.  The Company elected to make payment of $0.2 million in installments over time to satisfy a portion of these penalties.  Upon confirming with the asserting authority that the originally proposed penalties of $1.6 million with respect to the balance of the assessments were calculated based on amounts containing a typographical error, the aggregate penalties that remain in dispute total $0.4 million. At March 31, 2017, it is not possible to determine the outcome of this matter, but the Company does not expect that the outcome would have a material adverse effect on its business, financial position or results of operations.
The Company is disputing the imposition of $0.9 million in fines levied by the Brazilian customs authorities. These fines relate to the Company’s alleged failure to comply with certain deadlines under the temporary regime pursuant to which it imports helicopters into Brazil. In order to dispute such fines and pursue its legal remedies within the judicial system, the Company deposited certain amounts at issue as security into an escrow account with the presiding judge in the matters who controls the release of such funds pending the outcome. The Company believes its documentation evidences its timely compliance with the relevant deadlines. As such, the Company plans to defend these claims vigorously. At March 31, 2017, it is not possible to determine the outcome of these matters, but the Company does not expect that the outcome would have a material adverse effect on its business, financial position or results of operations.
The Company is disputing fines of $0.3 million sought by taxing authorities in Brazil following the final adjudication to disallow certain tax credits applied by the Company to offset certain social tax liabilities.  The fine is calculated as 50% of the incremental tax liability resulting from the disallowance of the tax credits and has been applied without taking into account the circumstances relating to the disallowance of such tax credits.  The constitutionality of such fines is under review by the Supreme Court in Brazil.  There are a number of cases in which taxpayers have received favorable rulings due to the unconstitutionality of the law.  As such, the Company plans to defend this claim vigorously.  At March 31, 2017, it is not possible to determine the outcome, but the Company does not expect that it would have a material adverse impact on its business, financial position or results of operations. 
The Company is disputing contingent fees of $0.5 million sought by its former tax consultant that have been calculated based on unrealized tax savings attributed to the consultant’s suggested tax strategies. The Company contends that fees are due only upon realized tax savings. At March 31, 2017, it is not possible to determine the outcome of these matters, but the Company does not expect that the outcome would have a material adverse effect on its business, financial position or results of operations.
In the normal course of business, the Company may become involved in various employment-related litigation matters.   At March 31, 2017, it is not possible to determine the outcome of several claims wherein claimants are seeking judgments that are, in the aggregate, $0.1 million above the Company’s established accruals.  The Company does not expect that the outcome with respect to such claims would have a material adverse effect on its business, financial position or results of operations.
The Company is also disputing claims from the Brazilian tax authorities with respect to federal customs taxes levied upon the helicopters leased by the Company 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, the Company deposited the amounts at issue as security into an escrow account that serves as security and with the presiding judge in the matters controlling the release of such funds. The Company 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 these claims vigorously. At March 31, 2017, it is not possible to determine the outcome of this matter, but the Company does not expect that the outcome would have a material adverse 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. The Company has deposited $8.9 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

12

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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 provided for certain service and product credit discounts available to the Company to be applied against support services available from Airbus Helicopters covering spare parts, repair and overhaul, service bulletins, technical assistance or other services. During the three months ended March 31, 2017 and 2016, the Company utilized credits in the amount of $0 and $1.2 million, respectively. As of March 31, 2017, the Company has utilized all credits available under the agreement.
9.
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.
Computations of basic and diluted earnings per common share of the Company for the three months ended March 31, 2017 and 2016 were as follows (in thousands, except share and per share data):
 
 
Three Months Ended 
 March 31,
 
 
2017
 
2016
Net income (loss) attributable to Era Group Inc.
 
$
(5,620
)
 
$
(3,818
)
Net income attributable to participating securities
 

 

Net income (loss) attributable to fully vested common stock
 
$
(5,620
)
 
$
(3,818
)
Shares:
 
 
 
 
Weighted average common shares outstanding - basic
 
20,509,463

 
20,219,937

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

 

Weighted average common shares outstanding - diluted
 
20,509,463

 
20,219,937

Loss per common share, basic and diluted
 
$
(0.27
)
 
$
(0.19
)
____________________
(1)
Excludes weighted average common shares of 284,546 and 347,242 for the three months ended March 31, 2017 and 2016, respectively, for certain share awards as the effect of their inclusion would have been antidilutive.
10.
RELATED PARTY TRANSACTIONS
The Company leases office space from SEACOR Holdings Inc. (“SEACOR”), and during each of the three months ended March 31, 2017 and 2016, the Company incurred $0.1 million in rent and utilities, which is included in administrative and general expense in the condensed consolidated statements of operations. As of both March 31, 2017 and December 31, 2016, the Company had a payable due to SEACOR of less than $0.1 million.
The Company purchased products from its Dart Holding Company Ltd. (“Dart”) joint venture totaling $0.1 million and $0.5 million during the three months ended March 31, 2017 and 2016, respectively. The Company also has a note receivable from Dart which had balances of $3.1 million and $3.2 million as of March 31, 2017 and December 31, 2016, respectively.
During each of the three months ended March 31, 2017 and 2016, the Company incurred fees of $0.2 million for simulator services from its Era Training Center, LLC (“ETC”) joint venture and provided helicopter, management and other services to ETC of $0.1 million. The Company also has a note receivable from ETC which had a balance of $4.0 million as of both March 31, 2017 and December 31, 2016.

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Table of Contents

11.
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, 2017 were as follows:
 
Number of Shares
 
Weighted Average Grant Price
Non-vested as of December 31, 2016
503,407

 
$
14.60

Restricted stock awards granted:
 
 
 
Non-employee directors
30,853

 
$
11.67

Employees
232,000

 
$
11.67

Vested
(277,002
)
 
$
14.72

Forfeited
(1,362
)
 
$
14.12

Non-vested as of March 31, 2017
487,896

 
$
12.95

The total fair value of shares vested during the three months ended March 31, 2017 and 2016 was $4.1 million and $2.9 million, respectively.
Stock Options. The Company did not grant any stock options during the three months ended March 31, 2017.
Employee Stock Purchase Plan (“ESPP”). During the three months ended March 31, 2017, the Company issued 75,162 shares under the ESPP. On September 15, 2016, the ESPP was amended to, among other things, increase the number of shares reserved for issuance under the ESPP. As of March 31, 2017, 386,650 shares remain available for issuance under the ESPP.
Total share-based compensation expense, which includes stock options, restricted stock and the ESPP, was $1.2 million and $1.0 million for the three months ended March 31, 2017 and 2016, respectively.
12.
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, 2017
 
Parent
 
Guarantors
 
Non-guarantors
 
Eliminations
 
Consolidated
 
(in thousands, except share data)
ASSETS
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
24,835

 
$

 
$
1,504

 
$

 
$
26,339

Receivables:
 
 
 
 
 
 
 
 
 
Trade, net of allowance for doubtful accounts of $1,295
39

 
27,094

 
7,707

 

 
34,840

Tax receivable
9

 
3

 
3,154

 

 
3,166

Other

 
1,523

 
873

 

 
2,396

Inventories, net

 
24,898

 
334

 

 
25,232

Prepaid expenses
667

 
1,732

 
136

 

 
2,535

Escrow deposits

 
3,779

 

 

 
3,779

Total current assets
25,550

 
59,029

 
13,708

 

 
98,287

Property and equipment

 
1,138,773

 
16,062

 

 
1,154,835

Accumulated depreciation

 
(341,925
)
 
(1,734
)
 

 
(343,659
)
Property and equipment, net

 
796,848

 
14,328

 

 
811,176

Equity investments and advances

 
29,727

 

 

 
29,727

Investments in consolidated subsidiaries
172,394

 

 

 
(172,394
)
 

Intangible assets

 

 
1,133

 

 
1,133

Deferred taxes
14,137

 

 

 
(14,137
)
 

Intercompany receivables
457,486

 

 

 
(457,486
)
 

Other assets
1,617

 
4,414

 
65

 

 
6,096

Total assets
$
671,184

 
$
890,018

 
$
29,234

 
$
(644,017
)
 
$
946,419

LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable and accrued expenses
$
616

 
$
5,717

 
$
2,699

 
$

 
$
9,032

Accrued wages and benefits

 
5,197

 
1,684

 

 
6,881

Accrued interest
3,365

 

 

 

 
3,365

Accrued income taxes

 
656

 
33

 

 
689

Accrued other taxes
66

 
749

 
632

 

 
1,447

Accrued contingencies

 

 
1,189

 

 
1,189

Current portion of long-term debt

 
1,524

 
675

 

 
2,199

Other current liabilities
956

 
1,544

 
346

 

 
2,846

Total current liabilities
5,003

 
15,387

 
7,258

 

 
27,648

Long-term debt
201,866

 
21,227

 
2,853

 

 
225,946

Deferred income taxes

 
237,118

 
461

 
(14,137
)
 
223,442

Intercompany payables

 
418,914

 
38,572

 
(457,486
)
 

Other liabilities

 
924

 

 

 
924

Total liabilities
206,869

 
693,570

 
49,144

 
(471,623
)
 
477,960

Redeemable noncontrolling interest

 
4

 
4,050

 

 
4,054

Equity:
 
 
 
 
 
 
 
 
 
Common stock, $0.01 par value, 60,000,000 shares authorized; 21,270,272 outstanding, exclusive of treasury shares
215

 

 

 

 
215

Additional paid-in capital
440,164

 
100,306

 
4,562

 
(104,868
)
 
440,164

Retained earnings
26,904

 
96,048

 
(28,522
)
 
(67,526
)
 
26,904

Treasury shares, at cost, 179,730 shares
(2,968
)
 

 

 

 
(2,968
)
Accumulated other comprehensive income, net of tax

 
90

 

 

 
90

Total equity
464,315

 
196,444

 
(23,960
)
 
(172,394
)
 
464,405

Total liabilities, redeemable noncontrolling interest and stockholders’ equity
$
671,184

 
$
890,018

 
$
29,234

 
$
(644,017
)
 
$
946,419


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Table of Contents

Supplemental Condensed Consolidating Balance Sheet as of December 31, 2016
 
Parent
 
Guarantors
 
Non-guarantors
 
Eliminations
 
Consolidated
 
(in thousands, except share data)
ASSETS
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
25,474

 
$

 
$
1,476

 
$

 
$
26,950

Receivables:
 
 
 
 
 
 
 
 
 
Trade, net of allowance for doubtful accounts of $1,219
39

 
26,118

 
6,313

 

 
32,470

Tax receivables
9

 
4

 
3,448

 

 
3,461

Other

 
1,658

 
1,058

 

 
2,716

Inventories, net

 
25,156

 
261

 

 
25,417

Prepaid expenses
359

 
976

 
244

 

 
1,579

Escrow deposits

 
3,777

 

 

 
3,777

Total current assets
25,881

 
57,689

 
12,800

 

 
96,370

Property and equipment

 
1,138,020

 
16,008

 

 
1,154,028

Accumulated depreciation

 
(330,735
)
 
(1,484
)
 

 
(332,219
)
Net property and equipment

 
807,285

 
14,524

 

 
821,809

Equity investments and advances

 
29,266

 

 

 
29,266

Investments in consolidated subsidiaries
174,830

 

 

 
(174,830
)
 

Intangible assets

 

 
1,137

 

 
1,137

Deferred income taxes
12,262

 

 

 
(12,262
)
 

Intercompany receivables
460,623

 

 

 
(460,623
)
 

Other assets
1,820

 
4,723

 
48

 

 
6,591

Total assets
$
675,416

 
$
898,963

 
$
28,509

 
$
(647,715
)
 
$
955,173

LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable and accrued expenses
$
322

 
$
6,273

 
$
2,281

 
$

 
$
8,876

Accrued wages and benefits

 
6,446

 
2,061

 

 
8,507

Accrued interest
529

 

 

 

 
529

Accrued income taxes

 
653

 
13

 

 
666

Current portion of long-term debt

 
1,524

 
615

 

 
2,139

Accrued other taxes
29

 
645

 
773

 

 
1,447

Accrued contingencies

 

 
1,237

 

 
1,237

Other current liabilities
481

 
1,525

 
216

 

 
2,222

Total current liabilities
1,361

 
17,066

 
7,196

 

 
25,623

Long-term debt
205,730

 
21,642

 
2,767

 

 
230,139

Deferred income taxes

 
237,067

 
667

 
(12,262
)
 
225,472

Intercompany payables

 
426,410

 
34,213

 
(460,623
)
 

Other liabilities

 
1,301

 

 

 
1,301

Total liabilities
207,091

 
703,486

 
44,843

 
(472,885
)
 
482,535

Redeemable noncontrolling interest

 
4

 
4,217

 

 
4,221

Equity:
 
 
 
 
 
 
 
 
 
Common stock, $0.01 par value, 60,000,000 shares authorized; 20,936,636 shares outstanding, exclusive of treasury shares
211

 

 

 

 
211

Additional paid-in capital
438,489

 
100,306

 
4,562

 
(104,868
)
 
438,489

Retained earnings
32,524

 
95,075

 
(25,113
)
 
(69,962
)
 
32,524

Treasury shares, at cost, 154,549 shares
(2,899
)
 

 

 

 
(2,899
)
Accumulated other comprehensive income, net of tax

 
92

 

 

 
92

Total equity
468,325

 
195,473

 
(20,551
)
 
(174,830
)
 
468,417

Total liabilities, redeemable noncontrolling interest and stockholders’ equity
$
675,416

 
$
898,963

 
$
28,509

 
$
(647,715
)
 
$
955,173



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Table of Contents


Supplemental Condensed Consolidating Statements of Operations for the Three Months Ended March 31, 2017
 
Parent
 
Guarantors
 
Non-guarantors
 
Eliminations
 
Consolidated
 
(in thousands)
Operating revenues
$

 
$
48,033

 
$
15,400

 
$
(8,906
)
 
$
54,527

Costs and expenses:
 
 
 
 
 
 
 
 
 
Operating

 
29,113

 
17,550

 
(8,906
)
 
37,757

Administrative and general
1,865

 
7,038

 
1,478

 

 
10,381

Depreciation

 
11,320

 
234

 

 
11,554

Total costs and expenses
1,865

 
47,471

 
19,262

 
(8,906
)
 
59,692

Gains on asset dispositions, net

 
109

 

 

 
109

Operating income (loss)
(1,865
)
 
671

 
(3,862
)
 

 
(5,056
)
Other income (expense):
 
 
 
 
 
 
 
 
 
Interest income
21

 
111

 
118

 

 
250

Interest expense
(3,241
)
 
(298
)
 
(50
)
 

 
(3,589
)
Foreign currency gains (losses), net
25

 
8

 
(5
)
 

 
28

Other, net

 

 
12

 

 
12

Total other income (expense)
(3,195
)
 
(179
)
 
75

 

 
(3,299
)
Income (loss) before income taxes and equity earnings
(5,060
)
 
492

 
(3,787
)
 

 
(8,355
)
Income tax expense (benefit)
(1,876
)
 
(16
)
 
(211
)
 

 
(2,103
)
Income (loss) before equity earnings
(3,184
)
 
508

 
(3,576
)
 

 
(6,252
)
Equity earnings, net of tax

 
465

 

 

 
465

Equity in earnings (losses) of subsidiaries
(2,436
)
 

 

 
2,436

 

Net income (loss)
(5,620
)
 
973

 
(3,576
)
 
2,436

 
(5,787
)
Net loss attributable to noncontrolling interest in subsidiary

 

 
167

 

 
167

Net income (loss) attributable to Era Group Inc.
$
(5,620
)
 
$
973

 
$
(3,409
)
 
$
2,436

 
$
(5,620
)

17

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
(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 losses, 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 noncontrolling interest in subsidiary

 

 
132

 

 
132

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

 
$
(5,224
)
 
$
(271
)
 
$
(3,818
)

18

Table of Contents


Supplemental Condensed Consolidating Statements of Comprehensive Income for the Three Months Ended March 31, 2017
 
Parent
 
Guarantors
 
Non-guarantors
 
Eliminations
 
Consolidated
 
(in thousands)
Net income (loss)
$
(5,620
)
 
$
973

 
$
(3,576
)
 
$
2,436

 
$
(5,787
)
Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments

 
(2
)
 

 

 
(2
)
Income tax benefit

 

 

 

 

Total other comprehensive income (loss)

 
(2
)
 

 

 
(2
)
Comprehensive income (loss)
(5,620
)
 
971

 
(3,576
)
 
2,436

 
(5,789
)
Comprehensive loss attributable to noncontrolling interest in subsidiary

 

 
167

 

 
167

Comprehensive income (loss) attributable to Era Group Inc.
$
(5,620
)
 
$
971

 
$
(3,409
)
 
$
2,436

 
$
(5,622
)

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 loss:
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments

 

 

 

 

Income tax benefit

 

 

 

 

Total other comprehensive loss

 

 

 

 

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

 
(5,356
)
 
(271
)
 
(3,950
)
Comprehensive income attributable to noncontrolling interest in subsidiary

 

 
132

 

 
132

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

 
$
(5,224
)
 
$
(271
)
 
$
(3,818
)

19

Table of Contents


Supplemental Condensed Consolidating Statements of Cash Flows for the Three Months Ended March 31, 2017
 
Parent
 
Guarantors
 
Non-guarantors
 
Eliminations
 
Consolidated
 
(in thousands)
Net cash provided by (used in) operating activities
$
(639
)
 
$
4,718

 
$
174

 
$

 
$
4,253

Cash flows from investing activities:
 
 
 
 
 
 
 
 
 
Purchases of property and equipment

 
(971
)
 
(34
)
 

 
(1,005
)
Proceeds from disposition of property and equipment

 
126

 

 

 
126

Investments in and advances to equity method investees

 
(114
)
 

 

 
(114
)
Principal payments on notes due from equity investees

 
185

 

 

 
185

Principal payments on third party notes receivable

 
56

 

 

 
56

Net cash provided by (used in) investing activities

 
(718
)
 
(34
)
 

 
(752
)
Cash flows from financing activities:
 
 
 
 
 
 
 
 
 
Payments on long-term debt

 
(415
)