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 June 30, 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 August 4, 2017 was 21,279,467. 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)
 
June 30,
2017
 
December 31,
2016
 
(Unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents (including $1,430 and $1,448 from VIEs in 2017 and 2016, respectively)
$
28,878

 
$
26,950

Receivables:
 
 
 
Trade, net of allowance for doubtful accounts of $1,249 and $1,219 in 2017 and 2016, respectively (including $4,788 and $5,989 from VIEs in 2017 and 2016, respectively)
32,824

 
32,470

Tax receivables (including $2,984 and $3,448 from VIEs in 2017 and 2016, respectively)
3,000

 
3,461

Other (including $881 and $1,019 from VIEs in 2017 and 2016, respectively)
3,172

 
2,716

Inventories, net (including $22 and $46 from VIEs in 2017 and 2016, respectively)
24,296

 
25,417

Prepaid expenses (including $95 and $158 from VIEs in 2017 and 2016, respectively)
2,518

 
1,579

Escrow deposits

 
3,777

Total current assets
94,688

 
96,370

Property and equipment (including $952 and $844 from VIEs in 2017 and 2016, respectively)
1,164,048

 
1,154,028

Accumulated depreciation (including $198 and $98 from VIEs in 2017 and 2016, respectively)
(353,830
)
 
(332,219
)
Property and equipment, net
810,218

 
821,809

Equity investments and advances
29,852

 
29,266

Intangible assets
1,129

 
1,137

Other assets (including $61 and $48 from VIEs in 2017 and 2016, respectively)
5,593

 
6,591

Total assets
$
941,480

 
$
955,173

LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST
 AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable and accrued expenses (including $1,976 and $1,788 from VIEs in 2017 and 2016, respectively)
$
12,884

 
$
8,876

Accrued wages and benefits (including $1,754 and $2,009 from VIEs in 2017 and 2016, respectively)
8,708

 
8,507

Accrued interest
527

 
529

Accrued income taxes
291

 
666

Accrued other taxes (including $505 and $773 from VIEs in 2017 and 2016, respectively)
1,145

 
1,447

Accrued contingencies (including $1,334 and $1,237 from VIEs in 2017 and 2016, respectively)
1,334

 
1,237

Current portion of long-term debt (including $638 and $615 from VIEs in 2017 and 2016, respectively)
2,161

 
2,139

Other current liabilities (including $8 from VIEs in 2017 and 2016)
2,590

 
2,222

Total current liabilities
29,640

 
25,623

Long-term debt (including $2,538 and $2,767 from VIEs in 2017 and 2016, respectively)
221,354

 
230,139

Deferred income taxes
222,724

 
225,472

Other liabilities
944

 
1,301

Total liabilities
474,662

 
482,535

Commitments and contingencies (see Note 8)

 

Redeemable noncontrolling interest
3,769

 
4,221

Equity:
 
 
 
Common stock, $0.01 par value, 60,000,000 shares authorized; 21,279,467 and 20,936,636 outstanding in 2017 and 2016, respectively, exclusive of treasury shares
215

 
211

Additional paid-in capital
441,595

 
438,489

Retained earnings
24,117

 
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
463,049

 
468,417

Total liabilities, redeemable noncontrolling interest and stockholders’ equity
$
941,480

 
$
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 
 June 30,
 
Six Months Ended 
 June 30,
 
2017
 
2016
 
2017
 
2016
Operating revenues
$
57,878

 
$
63,351

 
$
112,405

 
$
125,933

Costs and expenses:
 
 
 
 
 
 
 
Operating
41,335

 
47,396

 
79,092

 
91,703

Administrative and general
9,902

 
8,140

 
20,283

 
17,367

Depreciation and amortization
11,978

 
12,691

 
23,532

 
25,457

Total costs and expenses
63,215

 
68,227

 
122,907

 
134,527

Gains on asset dispositions, net
5,061

 
1,367

 
5,170

 
4,280

Operating loss
(276
)
 
(3,509
)
 
(5,332
)
 
(4,314
)
Other income (expense):
 
 
 
 
 
 
 
Interest income
185

 
403

 
435

 
704

Interest expense
(3,934
)
 
(4,130
)
 
(7,523
)
 
(8,878
)
Foreign currency gains (losses), net
(136
)
 
329

 
(108
)
 
610

Gain on debt extinguishment

 
518

 

 
518

Other, net
(8
)
 
46

 
4

 
29

Total other income (expense)
(3,893
)
 
(2,834
)
 
(7,192
)
 
(7,017
)
Loss before income taxes and equity earnings
(4,169
)
 
(6,343
)
 
(12,524
)
 
(11,331
)
Income tax benefit
(726
)
 
(1,232
)
 
(2,829
)
 
(2,246
)
Loss before equity earnings
(3,443
)
 
(5,111
)
 
(9,695
)
 
(9,085
)
Equity earnings, net of tax
371

 
601

 
836

 
625

Net loss
(3,072
)
 
(4,510
)
 
(8,859
)
 
(8,460
)
Net loss attributable to noncontrolling interest in subsidiary
285

 
6,448

 
452

 
6,580

Net income (loss) attributable to Era Group Inc.
$
(2,787
)
 
$
1,938

 
$
(8,407
)
 
$
(1,880
)
 
 
 
 
 
 
 
 
Income (loss) per common share:
 
 
 
 
 
 
 
Basic
$
(0.13
)
 
$
0.09

 
$
(0.41
)
 
$
(0.09
)
Diluted
$
(0.13
)
 
$
0.09

 
$
(0.41
)
 
$
(0.09
)
 
 
 
 
 
 
 
 
Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic
20,789,537

 
20,361,533

 
20,650,274

 
20,290,735

Diluted
20,789,537

 
20,364,382

 
20,650,274

 
20,290,735

















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

3

Table of Contents

ERA GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited, in thousands)
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
 
2017
 
2016
 
2017
 
2016
Net loss
 
$
(3,072
)
 
$
(4,510
)
 
$
(8,859
)
 
$
(8,460
)
Other comprehensive loss:
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
 

 

 
(2
)
 

Income tax benefit
 

 

 

 

Total other comprehensive loss
 

 

 
(2
)
 

Comprehensive loss
 
(3,072
)
 
(4,510
)
 
(8,861
)
 
(8,460
)
Comprehensive loss attributable to noncontrolling interest in subsidiary
 
285

 
6,448

 
452

 
6,580

Comprehensive income (loss) attributable to Era Group Inc.
 
$
(2,787
)
 
$
1,938

 
$
(8,409
)
 
$
(1,880
)







































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
 

 
 

 
2,629

 

 

 

 
2,629

Cancellation of restricted stock
 

 
 

 
18

 

 
(18
)
 

 

Purchase of treasury shares
 

 
 

 

 

 
(51
)
 

 
(51
)
Net loss
 

 
 

 

 
(8,859
)
 

 

 
(8,859
)
Net loss attributable to redeemable noncontrolling interest
 
(452
)
 
 

 

 
452

 

 

 
452

Currency translation adjustments, net of tax
 
 
 
 

 

 

 

 
(2
)
 
(2
)
June 30, 2017
 
$
3,769


 
$
215

 
$
441,595

 
$
24,117

 
$
(2,968
)
 
$
90

 
$
463,049

































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)
 
Six Months Ended 
 June 30,
 
2017
 
2016
Cash flows from operating activities:
 
 
 
Net loss
$
(8,859
)
 
$
(8,460
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depreciation and amortization
23,532

 
25,457

Share-based compensation
2,629

 
2,261

Bad debt expense, net
44

 
123

Gains on asset dispositions, net
(5,170
)
 
(4,280
)
Debt discount amortization
115

 
79

Amortization of deferred financing costs
565

 
439

Foreign currency losses (gains), net
58

 
(912
)
Gain on debt extinguishment, net

 
(518
)
Deferred income tax benefit
(2,747
)
 
(2,492
)
Equity earnings, net of tax
(836
)
 
(625
)
Changes in operating assets and liabilities:
 
 
 
Decrease (increase) in receivables
(302
)
 
11,833

Decrease (increase) in prepaid expenses and other assets
681

 
(993
)
Increase in accounts payable, accrued expenses and other liabilities
3,664

 
6,649

Net cash provided by operating activities
13,374

 
28,561

Cash flows from investing activities:
 
 
 
Purchases of property and equipment
(12,524
)
 
(5,106
)
Proceeds from disposition of property and equipment
5,689

 
5,910

Return of helicopter deposits

 
544

Investments in and advances to equity investees
(126
)
 

Principal payments on notes due from equity investees
375

 
357

Principal payments on third party notes receivable
94

 
136

Escrow deposits on like-kind exchanges, net
3,777

 

Net cash provided by (used in) investing activities
(2,715
)
 
1,841

Cash flows from financing activities:
 
 
 
Proceeds from Revolving Credit Facility
9,000

 
7,000

Payments on long-term debt
(18,162
)
 
(9,093
)
Extinguishment of long-term debt

 
(4,331
)
Proceeds from share award plans
463

 
477

Purchase of treasury shares
(51
)
 
(161
)
Net cash used in financing activities
(8,750
)
 
(6,108
)
Effects of exchange rate changes on cash and cash equivalents
19

 
496

Net increase in cash and cash equivalents
1,928

 
24,790

Cash and cash equivalents, beginning of period
26,950

 
14,370

Cash and cash equivalents, end of period
$
28,878


$
39,160

Supplemental cash flow information:
 
 
 
Cash paid for interest, net of capitalized interest of $451 and $0 in 2017 and 2016, respectively
$
6,844

 
$
7,894

Cash paid for income taxes
173

 
5

Supplemental disclosure of non-cash financing activities:
 
 
 
Notes payable contributed to subsidiary

 
6,349









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 and six months ended June 30, 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 June 30, 2017, its results of operations for the three and six months ended June 30, 2017 and 2016, its comprehensive income for the three and six months ended June 30, 2017 and 2016, its changes in equity for the six months ended June 30, 2017, and its cash flows for the six months ended June 30, 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 six months ended June 30, 2017 and 2016.
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.
In May 2017, the FASB issued ASU 2017-09 - Compensation - Stock Compensation: Scope of Modification Accounting, which is designed to reduce diversity in practice and complexity when accounting for changes in the terms of a share-based payment award. ASU 2017-09 will be effective for annual reporting periods beginning after December 15, 2017, including interim periods within that period, and early adoption is permitted for any interim period for which financial statements have not yet been issued. The Company has not adopted ASU 2017-09 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.

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As of June 30, 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 June 30, 2017 and December 31, 2016 were as follows (in thousands): 
 
Carrying
Amount
 
Level 1
 
Level 2
 
Level 3
June 30, 2017
 
 
 
 
 
 
 
LIABILITIES
 
 
 
 
 
 
 
Long-term debt, including current portion
$
223,515

 
$

 
$
212,389

 
$

 
 
 
 
 
 
 
 
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 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 December 31, 2016, the Company had $3.8 million deposited in a like-kind exchange escrow account. During the second quarter of 2017, the Company used $2.8 million of the balance to make a final payment on a S92 heavy helicopter which completed the like-kind exchange transaction, and the remaining $1.0 million was returned to the Company.
4.
ACQUISITIONS AND DISPOSITIONS
Capital Expenditures. During the six months ended June 30, 2017, capital expenditures were $12.5 million and consisted primarily of helicopter acquisitions, deposits on future helicopter deliveries, 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 on deposits for certain helicopters in the fourth quarter of 2016. During the three months ended June 30, 2017 and 2016, the Company capitalized interest of less than $0.1 million and $0, respectively. During the six months ended June 30, 2017 and 2016, the Company capitalized interest of $0.5 million and $0, respectively. As of June 30, 2017 and December 31, 2016, construction in progress, which is a component of property and equipment, included capitalized interest of $1.8 million and $4.5 million, respectively. A summary of changes to our operating helicopter fleet is as follows:
Equipment Additions - During the six months ended June 30, 2017, the Company placed two AW189 heavy helicopters and one S92 heavy helicopter into service. The Company had no helicopter acquisitions during the six months ended June 30, 2016. The Company places helicopters in service once completion work has been finalized and the helicopters are ready for use.
Equipment Dispositions - During the six months ended June 30, 2017, the Company sold or otherwise disposed of two helicopters and other property and equipment for proceeds of $5.7 million and recognized gains of $5.2 million. During the six months ended June 30, 2016, the Company sold or otherwise disposed of property and equipment for proceeds of $5.9 million and recognized gains of $4.3 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 June 30, 2017 and December 31, 2016 include assets of Aeróleo totaling $11.0 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 June 30, 2017 and December 31, 2016 include liabilities of Aeróleo of $8.8 million and $9.2 million, respectively. 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 June 30, 2017 and 2016 include operating revenues of $7.0 million and $6.5 million, respectively, and net loss of $2.6 million and $1.4 million, respectively, as a result of the consolidation of Aeróleo, including the effects of intercompany eliminations. The Company’s condensed consolidated statements of operations for the six months ended June 30, 2017 and 2016 include operating revenues of $17.2 million and $14.0 million, respectively, and net loss of $1.6 million and $2.1 million, respectively, as a result of the consolidation of Aeróleo, including the effects of intercompany eliminations.
6.
INCOME TAXES
During the three months ended June 30, 2017 and 2016, the Company recorded income tax benefit of $0.7 million and $1.2 million, respectively, resulting in effective tax rates of 17.4% and 19.4%, respectively. The decrease in effective tax rates is primarily due to not recognizing certain tax benefits associated with the Company’s foreign affiliates. During the six months ended June 30, 2017 and 2016, the Company recorded income tax benefit of $2.8 million and $2.2 million, respectively, resulting in effective tax rates of 22.6% and 19.8%, respectively. The increase in effective tax rates is primarily due to the release of deferred state tax liabilities related to jurisdictions in which the Company’s air medical contracts ended.
During the six months ended June 30, 2017 and 2016, there were no new uncertain tax positions identified. The Company’s 2015 federal income tax return is currently under examination by the Internal Revenue Service.
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 June 30, 2017 and December 31, 2016, the gross amount of liability for accrued interest and penalties related to unrecognized tax benefits was $0.3 million.
7.
LONG-TERM DEBT
The Company’s borrowings as of June 30, 2017 and December 31, 2016 were as follows (in thousands):
 
 
June 30, 2017
 
December 31, 2016
7.750% Senior Notes (excluding unamortized discount)
 
$
144,828

 
$
144,828

Senior secured revolving credit facility
 
57,000

 
65,000

Promissory notes
 
22,334

 
23,166

Other
 
3,175

 
3,382

 
 
227,337

 
236,376

Less: portion due within one year
 
(2,161
)
 
(2,139
)
Less: debt discount, net
 
(1,588
)
 
(1,703
)
Less: unamortized debt issuance costs
 
(2,234
)
 
(2,395
)
Total long-term debt
 
$
221,354

 
$
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 15th and December 15th of each year.
Revolving Credit Facility. On March 31, 2014, Era Group entered into the amended and restated senior secured revolving credit facility (the “Amended and Restated Revolving Credit Facility”), and on October 27, 2016, the Company entered into the Consent and Amendment No. 3 to the Amended and Restated Revolving Credit Facility (the “Amendment No. 3” and the Amended and Restated Revolving Credit Facility, as amended, is referred to herein as 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

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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 June 30, 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 in the Revolving Credit Facility, that ranges from 37.5 to 50 basis points. As of June 30, 2017, the commitment fee was 50 basis points.
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 June 30, 2017, Era Group had $57.0 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 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 six months ended June 30, 2017 and 2016, the Company settled certain tax disputes in Brazil totaling $0.2 million and $2.5 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. During the six months ended June 30, 2016, the Company prepaid a $1.0 million loan to a third party in Brazil.
Promissory Notes. During the six months ended June 30, 2017 and 2016, the Company made scheduled payments on other long-term debt of $0.8 million and $1.0 million, respectively.
8.
COMMITMENTS AND CONTINGENCIES
Fleet. The Company’s unfunded capital commitments as of June 30, 2017 consisted primarily of agreements to purchase helicopters and totaled $114.8 million, of which $7.2 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 $110.6 million of its total commitments (inclusive of deposits paid on options not yet exercised) without further liability other than aggregate liquidated damages of $2.6 million.
Included in these commitments are orders to purchase five AW189 heavy helicopters, one S92 heavy helicopter and five AW169 light twin helicopters. The AW189 and S92 helicopters are scheduled to be delivered in 2018 and 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 $7.2 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 June 30, 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.

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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 $2.3 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 June 30, 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 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 June 30, 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 June 30, 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 June 30, 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 June 30, 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 June 30, 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 June 30, 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 June 30, 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 $9.3 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

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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 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 six months ended June 30, 2016, the Company utilized credits in the amount of $1.7 million. As of September 30, 2016, the Company had 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 and six months ended June 30, 2017 and 2016 were as follows (in thousands, except share and per share data):
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
 
2017
 
2016
 
2017
 
2016
Net income (loss) attributable to Era Group Inc.
 
$
(2,787
)
 
$
1,938

 
$
(8,407
)
 
$
(1,880
)
Net income attributable to participating securities
 

 
48

 

 

Net income (loss) attributable to fully vested common stock
 
$
(2,787
)
 
$
1,890

 
$
(8,407
)
 
$
(1,880
)
Shares:
 
 
 
 
 
 
 
 
Weighted average common shares outstanding - basic
 
20,789,537

 
20,361,533

 
20,650,274

 
20,290,735

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

 
2,849

 

 

Weighted average common shares outstanding - diluted
 
20,789,537

 
20,364,382

 
20,650,274

 
20,290,735

Income (loss) per common share:
 
 
 
 
 
 
 
 
Basic
 
$
(0.13
)
 
$
0.09

 
$
(0.41
)
 
$
(0.09
)
Diluted
 
$
(0.13
)
 
$
0.09

 
$
(0.41
)
 
$
(0.09
)
____________________
(1)
Excludes weighted average common shares of 275,851 and 283,764 for the three months ended June 30, 2017 and 2016, respectively, and 280,199 and 292,840 for the six months ended June 30, 2017 and 2016, respectively, for certain share awards as the effect of their inclusion would have been antidilutive.

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10.
RELATED PARTY TRANSACTIONS
The Company leases office space from SEACOR Holdings Inc. (“SEACOR”). During each of the three months ended June 30, 2017 and 2016, the Company incurred $0.1 million in rent and utilities, and during each of the six months ended June 30, 2017 and 2016, the Company incurred $0.2 million in rent and utilities. Such costs are included in administrative and general expense in the condensed consolidated statements of operations. As of both June 30, 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 $0.2 million and $0.6 million during the three months ended June 30, 2017 and 2016, respectively. The Company purchased products from Dart totaling $0.3 million and $1.1 million during the six months ended June 30, 2017 and 2016, respectively. The Company also has a note receivable from Dart which had balances of $3.0 million and $3.2 million as of June 30, 2017 and December 31, 2016, respectively.
During the three months ended June 30, 2017 and 2016, the Company incurred fees of $0.1 million and $0.2 million, respectively, for simulator services from its Era Training Center, LLC (“ETC”) joint venture, and during each of the three months ended June 30, 2017 and 2016, the Company provided helicopter, management and other services to ETC of less than $0.1 million. During the six months ended June 30, 2017 and 2016, the Company incurred fees of $0.4 million and $0.3 million, respectively, for simulator services from ETC, and the Company provided helicopter, management and other services to ETC of $0.1 million and $0.2 million, respectively. The Company also has a note receivable from ETC which had a balance of $3.9 million and $4.0 million as of June 30, 2017 and December 31, 2016, respectively.
During the six months ended June 30, 2016, the Company and its partner in Aeróleo each contributed notes payable to them by Aeróleo as a contribution of additional capital into Aeróleo. In connection with the contributions, the Company recorded $6.3 million to net loss attributable to noncontrolling interest in subsidiary on the condensed consolidated statements of operations, representing the carrying value of the note contributed by its partner in Aeróleo.
11.
SHARE-BASED COMPENSATION
Restricted Stock Awards. The number of shares and weighted average grant price of restricted stock awards during the six months ended June 30, 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
241,195

 
$
11.55

Vested
(322,420
)
 
$
14.42

Forfeited
(1,362
)
 
$
14.12

Non-vested as of June 30, 2017
451,673

 
$
12.90

The total fair value of shares vested during the six months ended June 30, 2017 and 2016, determined using the closing price on the grant date, was $4.6 million and $3.0 million, respectively.
Stock Options. The Company did not grant any stock options during the six months ended June 30, 2017.
Employee Stock Purchase Plan (“ESPP”). During the six months ended June 30, 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 June 30, 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 $2.6 million and $2.3 million for the six months ended June 30, 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.

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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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Supplemental Condensed Consolidating Balance Sheet as of June 30, 2017
 
Parent
 
Guarantors
 
Non-guarantors
 
Eliminations
 
Consolidated
 
(in thousands, except share data)
ASSETS
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
27,441

 
$

 
$
1,437

 
$

 
$
28,878

Receivables:
 
 
 
 
 
 
 
 
 
Trade, net of allowance for doubtful accounts of $1,249

 
27,553

 
5,271

 

 
32,824

Tax receivable
9

 
7

 
2,984

 

 
3,000

Other

 
2,213

 
959

 

 
3,172

Inventories, net

 
24,019

 
277

 

 
24,296

Prepaid expenses
516

 
1,809

 
193

 

 
2,518

Escrow deposits

 

 

 

 

Total current assets
27,966

 
55,601

 
11,121

 

 
94,688

Property and equipment

 
1,147,968

 
16,080

 

 
1,164,048

Accumulated depreciation

 
(351,829
)
 
(2,001
)
 

 
(353,830
)
Property and equipment, net

 
796,139

 
14,079

 

 
810,218

Equity investments and advances

 
29,852

 

 

 
29,852

Investments in consolidated subsidiaries
172,974

 

 

 
(172,974
)
 

Intangible assets

 

 
1,129

 

 
1,129

Deferred taxes
15,445

 

 

 
(15,445
)
 

Intercompany receivables
444,558

 

 

 
(444,558
)
 

Other assets
1,415

 
4,116

 
62

 

 
5,593

Total assets
$
662,358

 
$
885,708

 
$
26,391

 
$
(632,977
)
 
$
941,480

LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable and accrued expenses
$
174

 
$
10,347

 
$
2,363

 
$

 
$
12,884

Accrued wages and benefits

 
6,905

 
1,803

 

 
8,708

Accrued interest
527

 

 

 

 
527

Accrued income taxes

 
259

 
32

 

 
291

Accrued other taxes
9

 
631

 
505

 

 
1,145

Accrued contingencies

 

 
1,334

 

 
1,334

Current portion of long-term debt

 
1,523

 
638

 

 
2,161

Other current liabilities
684

 
1,492

 
414

 

 
2,590

Total current liabilities
1,394

 
21,157

 
7,089

 

 
29,640

Long-term debt
198,005

 
20,811

 
2,538

 

 
221,354

Deferred income taxes

 
237,289

 
880

 
(15,445
)
 
222,724

Intercompany payables

 
404,139

 
40,419

 
(444,558
)
 

Other liabilities

 
944

 

 

 
944

Total liabilities
199,399

 
684,340

 
50,926

 
(460,003
)
 
474,662

Redeemable noncontrolling interest

 
4

 
3,765

 

 
3,769

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
441,595

 
100,306

 
4,562

 
(104,868
)
 
441,595

Retained earnings
24,117

 
100,968

 
(32,862
)
 
(68,106
)
 
24,117

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

 

 

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

 
90

 

 

 
90

Total equity
462,959

 
201,364

 
(28,300
)
 
(172,974
)
 
463,049

Total liabilities, redeemable noncontrolling interest and stockholders’ equity
$
662,358

 
$
885,708

 
$
26,391

 
$
(632,977
)
 
$
941,480


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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, 175,350 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



17

Table of Contents

Supplemental Condensed Consolidating Statements of Operations for the Three Months Ended June 30, 2017
 
Parent
 
Guarantors
 
Non-guarantors
 
Eliminations
 
Consolidated
 
(in thousands)
Operating revenues
$

 
$
51,598

 
$
14,003

 
$
(7,723
)
 
$
57,878

Costs and expenses:
 
 
 
 
 
 
 
 
 
Operating

 
33,178

 
15,880

 
(7,723
)
 
41,335

Administrative and general
1,110

 
7,304

 
1,488

 

 
9,902

Depreciation

 
11,727

 
251

 

 
11,978

Total costs and expenses
1,110

 
52,209

 
17,619

 
(7,723
)
 
63,215

Gains on asset dispositions, net

 
5,061

 

 

 
5,061

Operating income (loss)
(1,110
)
 
4,450

 
(3,616
)
 

 
(276
)
Other income (expense):
 
 
 
 
 
 
 
 
 
Interest income
28

 
107

 
50

 

 
185

Interest expense
(3,721
)
 
(159
)
 
(54
)
 

 
(3,934
)
Foreign currency gains (losses), net
129

 
160

 
(425
)
 

 
(136
)
Other, net

 
1

 
(9
)
 

 
(8
)
Total other income (expense)
(3,564
)
 
109

 
(438
)
 

 
(3,893
)
Income (loss) before income taxes and equity earnings
(4,674
)
 
4,559

 
(4,054
)
 

 
(4,169
)
Income tax expense (benefit)
(1,307
)
 
10

 
571

 

 
(726
)
Income (loss) before equity earnings
(3,367
)
 
4,549

 
(4,625
)
 

 
(3,443
)
Equity earnings, net of tax

 
371

 

 

 
371

Equity in earnings (losses) of subsidiaries
580

 

 

 
(580
)
 

Net income (loss)
(2,787
)
 
4,920

 
(4,625
)
 
(580
)
 
(3,072
)
Net loss attributable to noncontrolling interest in subsidiary

 

 
285

 

 
285

Net income (loss) attributable to Era Group Inc.
$
(2,787
)
 
$
4,920

 
$
(4,340
)
 
$
(580
)
 
$
(2,787
)

18

Table of Contents

Supplemental Condensed Consolidating Statements of Operations for the Three Months Ended June 30, 2016
 
Parent
 
Guarantors
 
Non-guarantors
 
Eliminations
 
Consolidated
 
(in thousands)
Operating revenues
$

 
$
57,392

 
$
17,788

 
$
(11,829
)
 
$
63,351

Costs and expenses:
 
 
 
 
 
 
 
 
 
Operating

 
38,760

 
20,465

 
(11,829
)
 
47,396

Administrative and general
871

 
6,875

 
394

 

 
8,140

Depreciation

 
12,414

 
277

 

 
12,691

Total costs and expenses
871

 
58,049

 
21,136

 
(11,829
)
 
68,227

Gains on asset dispositions, net

 
1,367

 

 

 
1,367

Operating income
(871
)
 
710

 
(3,348
)
 

 
(3,509
)
Other income (expense):
 
 
 
 
 
 
 
 
 
Interest income
9

 
119

 
275

 

 
403

Interest expense
(3,841
)
 
(136
)
 
(153
)
 

 
(4,130
)
Foreign currency gains (losses), net
(52
)
 
(110
)
 
491

 

 
329

Gain on debt extinguishment
518

 

 

 

 
518

Other, net

 
1

 
45

 

 
46

Total other income (expense)
(3,366
)
 
(126
)
 
658

 

 
(2,834
)
Income (loss) before income taxes and equity earnings
(4,237
)
 
584

 
(2,690
)
 

 
(6,343
)
Income tax benefit
(490
)
 
(742
)
 

 

 
(1,232
)
Income (loss) before equity earnings
(3,747
)
 
1,326

 
(2,690
)
 

 
(5,111
)
Equity losses, net of tax

 
601

 

 

 
601

Equity in earnings (losses) of subsidiaries
5,685

 

 

 
(5,685
)
 

Net income (loss)
1,938

 
1,927

 
(2,690
)
 
(5,685
)
 
(4,510
)
Net loss attributable to noncontrolling interest in subsidiary

 
6,349

 
99

 

 
6,448

Net income (loss) attributable to Era Group Inc.
$
1,938

 
$
8,276

 
$
(2,591
)
 
$
(5,685
)
 
$
1,938



19

Table of Contents

Supplemental Condensed Consolidating Statements of Operations for the Six Months Ended June 30, 2017
 
Parent
 
Guarantors
 
Non-guarantors
 
Eliminations
 
Consolidated
 
(in thousands)
Operating revenues
$

<