Era Group Inc. Reports Second Quarter 2013 Results

Marketwired

HOUSTON, TX--(Marketwired - Aug 13, 2013) - Era Group Inc. (NYSE: ERA) today reported net income for its second quarter ended June 30, 2013 of $5.1 million on operating revenues of $74.2 million compared to net income of $3.6 million on operating revenues of $63.0 million in the prior year period.

Operating income for the current quarter was $10.8 million compared to operating income of $7.4 million in the prior year period. Earnings before interest, taxes, depreciation and amortization, adjusted to exclude SEACOR management fees and certain other items ("Adjusted EBITDA"), was $23.2 million for the current quarter compared to $18.5 million for the prior year period. Second quarter results for the current year included $4.5 million in gains on asset dispositions compared with $1.1 million in gains in the second quarter of 2012. 

The $11.3 million increase in operating revenues related to $8.7 million of additional revenues from oil and gas activities primarily due to a greater number of medium helicopters being placed in service as a result of increased deepwater activity in the U.S. Gulf of Mexico; the resumption of services with a customer in Alaska that had been temporarily suspended in the prior year period; and a new international contract that commenced in January 2013. In addition, contract-leasing revenues increased $3.7 million, primarily due to the recognition of previously deferred revenues related to two of our customers in Brazil and India. Operating revenues from flightseeing and our fixed base operation in Alaska experienced increases of $0.2 million and $0.4 million, respectively, primarily the result of better weather conditions which led to an increase in flying activity. These increases were partially offset by a $1.7 million reduction in operating revenues from air medical services due to the conclusion of three long-term hospital contracts in effect during the prior year period.

Operating expenses were $7.9 million higher reflecting primarily an increase in repairs and maintenance costs as a result of the timing of repairs in 2013 and the absence of the benefit from vendor credits recognized in the same period in the prior year.

Administrative and general expenses were $2.4 million higher primarily due to an increase in costs associated with being an independent public company and an increase in compensation and employee costs, primarily the result of share-based compensation related to incentive equity awards granted following our spin-off from SEACOR Holdings Inc. ("SEACOR").

Depreciation expense was $11.4 million in the second quarter of 2013, an increase of $1.0 million compared to the prior year period, primarily due to fleet additions.

Gains on asset dispositions were $4.5 million in the second quarter of 2013. These amounts included a gain of $4.3 million on the sale of two S76C++ helicopters to a customer who had previously been contract-leasing them and gains of $0.2 million on the sale of other equipment in the normal course of business.

Sequential Quarter Results

Second quarter operating revenues increased $6.5 million compared to the first quarter ended March 31, 2013. Second quarter net income decreased $1.6 million compared to the first quarter. Operating income and Adjusted EBITDA for the second quarter decreased by $3.8 million and $3.3 million, respectively. The decreases in net income, operating income and Adjusted EBITDA were primarily due to a $6.3 million reduction in gains recognized on asset dispositions between the respective periods in 2013.

Six Month Results

The Company reported net income for the six months ended June 30, 2013 of $11.7 million on operating revenues of $142.0 million compared to a net loss of $1.0 million on operating revenues of $124.0 million in the same period a year ago. Operating income and Adjusted EBITDA for the current six months were $25.4 million and $49.8 million, respectively, compared to operating income of $11.2 million and Adjusted EBITDA of $34.8 million in the same period a year ago. Repairs and maintenance expenses increased $10.1 million primarily due to the timing of repairs in 2013 and the absence of the benefit from vendor credits recognized in the same period a year ago. Results for the six months ended June 30, 2013 included $15.3 million in gains on asset dispositions compared with $2.8 million in gains in the same period a year ago. Earnings from equity investments were $1.2 million in the six months ended June 30, 2013, an increase of $6.9 million compared to the prior year period loss of $5.7 million, primarily due to the recognition of a loss of $0.6 million and an impairment charge of $5.9 million, net of tax, on our investment in our Brazilian joint venture in the first quarter of 2012.

EC225 Helicopters

In 2012, there were ditchings of EC225 helicopters that led major global operators to suspend EC225 helicopter operations. Eurocopter, a division of European Aeronautic Defense and Space Company and manufacturer of the EC225 helicopters, through an internal investigation identified the root cause of the service failures and implemented engineering solutions, prevention and detection measures to remedy the matters that led to the suspension. On July 10, 2013, the European Aviation Safety Agency approved these measures, and the United Kingdom Civil Aviation Authority lifted operational restrictions. The Civil Aviation Authority of Norway followed suit on July 19, 2013. These measures and related regulatory approvals are expected to allow the full return to service of the EC225 helicopters on a worldwide basis. Two of the Company's EC225 helicopters in the U.S. Gulf of Mexico have now returned to service, and we plan to resume operations of the two other EC225 helicopters in the U.S. Gulf of Mexico by the end of August.

Equipment Acquisitions

During the quarter ended June 30, 2013, the Company's capital expenditures were $11.2 million, which consisted primarily of a helicopter acquisition. The Company records helicopter acquisitions in property and equipment and places helicopters in service once all completion work has been finalized and the helicopters are ready for use. The Company did not place additional helicopters in service during the current quarter. As of June 30, 2013, the Company had one AW139 medium helicopter that was delivered in May 2013 but not placed in service until July.

Capital Commitments

The Company's unfunded capital commitments as of June 30, 2013 consisted primarily of orders for helicopters and totaled $205.6 million, of which $10.6 million is payable during the remainder of 2013 with the balance payable through 2017. The Company also had $1.1 million of deposits paid on options not yet exercised. The Company may terminate $174.6 million of its total commitments (inclusive of deposits paid on options not yet exercised) without further liability other than liquidated damages of $11.8 million in the aggregate. 

Included in these capital commitments are agreements to purchase ten AW189 heavy helicopters and five AW169 light twin helicopters. The AW189 heavy helicopters are scheduled to be delivered in 2014 through 2017. Delivery dates for the AW169 light twin helicopters have yet to be determined. In addition, we had outstanding options to purchase up to an additional eight AW139 medium helicopters and ten AW189 heavy helicopters.

Subsequent to June 30, 2013, the Company exercised three of the AW139 options. Two of the AW139 helicopters are scheduled to be delivered by year-end 2013, and one is scheduled for delivery in mid-2014. Upon exercise of these options, the unfunded capital commitments for these three helicopters were $35.9 million.

Liquidity Update

As of June 30, 2013, the Company had a cash balance of $27.3 million, escrow deposits of $16.0 million and remaining availability under its senior secured revolving credit facility of $149.3 million. The escrow deposits related to the sale of two S76C++ medium helicopters, which closed in May 2013 and were treated as tax-free like-kind exchanges under Section 1031 for tax purposes with the proceeds held by a qualified intermediary. Qualified properties were not identified to complete the like-kind exchanges under Section 1031 prior to expiration of the 45-day period subsequent to the closing date. As a result, the $16.0 million was released to our general cash balance in July. Also in July, we repaid $15.0 million outstanding under our revolving credit facility resulting in a drawn balance of $35.0 million and available capacity of $164.3 million at July 31, 2013.

Conference Call

Management will conduct a conference call starting at 10:00 a.m. ET (9:00 a.m. CT) on Wednesday, August 14, 2013, to review the results for the second quarter ended June 30, 2013. The conference call can be accessed as follows:

All callers will need to reference the access code 27759381.

Within the U.S.:
Operator Assisted Toll-Free Dial-In Number: (866) 607-0535 

Outside the U.S.:
Operator Assisted International Dial-In Number: (832) 445-1827 

Replay
A telephone replay will be available through August 31, 2013 and may be accessed by calling (855) 859-2056 for domestic callers or (404) 537-3406 for international callers. An audio replay will also be available on the Company's website at www.eragroupinc.com shortly after the call and will be accessible for approximately 90 days.

About Era Group

Era Group is one of the largest helicopter operators in the world and the longest serving helicopter transport operator in the U.S. In addition to servicing its U.S. customers, Era Group also provides helicopters and related services to third-party helicopter operators and customers in other countries, including Brazil, Canada, India, Mexico, Norway, Spain, Sweden, the United Kingdom and Uruguay. Era Group's helicopters are primarily used to transport personnel to, from and between offshore installations, drilling rigs and platforms.

This release includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements concerning management's expectations, strategic objectives, business prospects, anticipated economic performance and financial condition and other similar matters involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of results to differ materially from any future results, performance or achievements discussed or implied by such forward-looking statements. Such risks, uncertainties and other important factors include, among others the effect of the Spin-off, including the ability of the Company to recognize the expected benefits from the Spin-off and the Company's dependence on SEACOR's performance under various agreements; decreased demand and loss of revenues resulting from developments that may adversely impact the offshore oil and gas industry, including the issuance of new safety and environmental guidelines or regulations that could increase the costs of exploration and production, reduce the area of operations and result in permitting delays, U.S. government implemented moratoriums directing operators to cease certain drilling activities and any extension of such moratoriums that may result in unplanned customer suspensions, cancellations, rate reductions or non-renewals of aviation equipment contracts or failures to finalize commitments to contract aviation equipment; safety issues experienced by a particular helicopter model that could result in customers refusing to use that helicopter model or a regulatory body grounding that helicopter model, which could also permanently devalue that helicopter model; the cyclical nature of the oil and gas industry; increased U.S. and foreign government legislation and regulation, including environmental and aviation laws and regulations, and the Company's compliance therewith and the costs thereof; dependence on the activity in the U.S. Gulf of Mexico and Alaska and the Company's ability to expand into other markets; liability, legal fees and costs in connection with providing emergency response services, including involvement in response to the oil spill that resulted from the sinking of the Deepwater Horizon in April 2010; decreased demand for the Company's services as a result of declines in the global economy; declines in valuations in the global financial markets and a lack of liquidity in the credit sectors, including, interest rate fluctuations, availability of credit, inflation rates, change in laws, trade barriers, commodity prices and currency exchange fluctuations; activity in foreign countries and changes in foreign political, military and economic conditions; the failure to maintain an acceptable safety record; the dependence on small number of customers; consolidation of the Company's customer base; industry fleet capacity; restrictions imposed by the U.S. federal aviation laws and regulations on the amount of foreign ownership of the Company's common stock; operational risks; risks associated with our debt structure; operational and financial difficulties of our joint ventures and partners; effects of adverse weather conditions and seasonality; adequacy of insurance coverage; the attraction and retention of qualified personnel; and various other matters and factors, many of which are beyond the Company's control. In addition, these statements constitute Era Group's cautionary statements under the Private Securities Litigation Reform Act of 1995. It is not possible to predict or identify all such factors. Consequently, the foregoing should not be considered a complete discussion of all potential risks or uncertainties. The words "estimate," "project," "intend," "believe," "plan" and similar expressions are intended to identify forward-looking statements. Forward-looking statements speak only as of the date of the document in which they are made. Era Group disclaims any obligation or undertaking to provide any updates or revisions to any forward-looking statement to reflect any change in Era Group's expectations or any change in events, conditions or circumstances on which the forward-looking statement is based. The forward-looking statements in this release should be evaluated together with the many uncertainties that affect Era Group's businesses, particularly those mentioned under "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2012, in our Quarterly Report on Form 10-Q for the period ended March 31, 2013 and in our periodic reporting on From 8-K (if any), which are incorporated by reference.

   
ERA GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts, unaudited)
 
   
    Three Months Ended June 30,     Six Months Ended June 30,  
    2013     2012     2013     2012  
Operating Revenues   $ 74,237     $ 62,985     $ 141,964     $ 124,037  
Costs and Expenses:                                
  Operating     46,945       39,002       90,061       78,678  
  Administrative and general     9,545       7,195       18,679       16,872  
  Depreciation     11,431       10,464       23,092       20,094  
      67,921       56,661       131,832       115,644  
Gains on Asset Dispositions, Net     4,476       1,077       15,277       2,842  
Operating Income     10,792       7,401       25,409       11,235  
Other Income (Expense):                                
  Interest income     150       249       297       581  
  Interest expense     (4,613 )     (2,380 )     (9,345 )     (4,348 )
  SEACOR management fees     -       (500 )     (168 )     (1,000 )
  Derivative gains (losses), net     21       (180 )     18       (304 )
  Foreign currency gains (losses), net     315       (12 )     56       905  
  Other, net     9       -       12       30  
      (4,118 )     (2,823 )     (9,130 )     (4,136 )
Income Before Income Tax Expense and Equity In Earnings (Losses) of 50% or Less Owned Companies     6,674       4,578       16,279       7,099  
Income Tax Expense     2,398       1,686       5,976       2,420  
Income Before Equity in Earnings (Losses) of 50% or Less Owned Companies     4,276       2,892       10,303       4,679  
Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax     674       757       1,236       (5,663 )
Net Income (Loss)     4,950       3,649       11,539       (984 )
Net Loss Attributable to Noncontrolling Interest in Subsidiary     105       -       210       -  
Net Income (Loss) Attributable to Era Group Inc.     5,055       3,649       11,749       (984 )
Accretion of Redemption Value on Series A Preferred Stock     -       2,135       721       4,235  
Net Income (Loss) Attributable to Common Shares   $ 5,055     $ 1,514     $ 11,028     $ (5,219 )
                                 
Basic and Diluted Earnings (Loss) Per Common Share   $ 0.25     $ 0.06     $ 0.53     $ (0.21 )
EBITDA   $ 23,242     $ 17,930     $ 49,655     $ 25,297  
Adjusted EBITDA   $ 23,242     $ 18,512     $ 49,823     $ 34,815  
Adjusted EBITDAR   $ 24,161     $ 19,430     $ 51,890     $ 36,772  
                                 
   
ERA GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts, unaudited)
 
   
    Three Months Ended  
    Jun. 30, 2013     Mar. 31, 2013     Dec. 31, 2012     Sep. 30, 2012     Jun. 30, 2012  
Operating Revenues   $ 74,237     $ 67,727     $ 70,895     $ 77,989     $ 62,985  
Costs and Expenses:                                        
  Operating     46,945       43,116       42,282       46,235       39,002  
  Administrative and general     9,545       9,134       7,575       10,338       7,195  
  Depreciation     11,431       11,661       11,471       10,937       10,464  
      67,921       63,911       61,328       67,510       56,661  
Gains on Asset Dispositions, Net     4,476       10,801       157       613       1,077  
Operating Income     10,792       14,617       9,724       11,092       7,401  
Other Income (Expense):                                        
  Interest income     150       147       145       184       249  
  Interest expense     (4,613 )     (4,732 )     (3,757 )     (2,543 )     (2,380 )
  SEACOR management fees     -       (168 )     (500 )     (500 )     (500 )
  Derivative gains (losses), net     21       (3 )     2       (188 )     (180 )
  Foreign currency gains (losses), net     315       (259 )     87       (272 )     (12 )
  Other, net     9       3       -       -       -  
      (4,118 )     (5,012 )     (4,023 )     (3,319 )     (2,823 )
Income Before Income Tax Expense and Equity In Earnings (Losses) of 50% or Less Owned Companies     6,674       9,605       5,701       7,773       4,578  
Income Tax Expense     2,398       3,578       2,086       2,792       1,686  
Income Before Equity in Earnings (Losses) of 50% or Less Owned Companies     4,276       6,027       3,615       4,981       2,892  
Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax     674       562       (84 )     219       757  
Net Income     4,950       6,589       3,531       5,200       3,649  
Net Loss Attributable to Noncontrolling Interest in Subsidiary     105       105       40       -       -  
Net Income Attributable to Era Group Inc.     5,055       6,694       3,571       5,200       3,649  
Accretion of Redemption Value on Series A Preferred Stock     -       721       2,135       2,099       2,135  
Net Income Attributable to Common Shares   $ 5,055     $ 5,973     $ 1,436     $ 3,101     $ 1,514  
                                         
Basic and Diluted Earnings (Loss) Per Common Share   $ 0.25     $ 0.28     $ 0.06     $ 0.13     $ 0.06  
EBITDA   $ 23,242     $ 26,413     $ 20,700     $ 21,288     $ 17,930  
Adjusted EBITDA   $ 23,242     $ 26,581     $ 21,200     $ 22,822     $ 18,512  
Adjusted EBITDAR   $ 24,161     $ 27,729     $ 22,297     $ 23,792     $ 19,430  
                                         
   
ERA GROUP INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, unaudited)
 
   
    Jun. 30, 2013   Mar. 31, 2013   Dec. 31, 2012   Sep. 30, 2012   Jun. 30, 2012  
ASSETS                      
Current Assets:                                
  Cash and cash equivalents   $ 27,345   $ 25,032   $ 11,505   $ 9,232   $ 9,121  
  Receivables:                                
    Trade, net of allowance for doubtful accounts     40,362     40,761     48,527     55,753     43,233  
    Other     14,890     16,416     4,713     6,491     9,752  
  Inventories, net     26,223     26,696     26,650     26,590     26,496  
  Prepaid expenses and other     2,854     2,715     1,803     1,443     2,843  
  Deferred income taxes     3,642     3,642     3,642     51,979     40,977  
  Escrow deposits     16,010     -     -     -     -  
    Total current assets     131,326     115,262     96,840     151,488     132,422  
Property and Equipment     1,012,661     1,021,453     1,030,276     1,008,804     993,244  
    Accumulated depreciation     (251,613 )   (246,498 )   (242,471 )   (231,098 )   (219,360 )
    Net property and equipment     761,048     774,955     787,805     777,706     773,884  
Investments, at Equity, and Advances to 50% or Less Owned Companies     35,529     34,705     34,696     35,755     41,882  
Goodwill     352     352     352     352     352  
Other Assets     17,300     17,830     17,871     15,480     14,684  
Total Assets   $ 945,555   $ 943,104   $ 937,564   $ 980,781   $ 963,224  
                                 
LIABILITIES AND EQUITY                                
Current Liabilities:                                
  Accounts payable and accrued expenses   $ 15,585   $ 13,126   $ 15,703   $ 20,084   $ 16,976  
  Accrued wages and benefits     6,976     7,662     4,576     6,810     5,488  
  Accrued interest     770     5,213     1,401     416     459  
  Due to SEACOR     211     270     -     3,275     3,767  
  Current portion of long-term debt     2,787     2,787     2,787     2,787     2,787  
  Other current liabilities     5,253     4,309     5,232     4,215     5,354  
    Total current liabilities     31,582     33,367     29,699     37,587     34,831  
Deferred Income Taxes     204,487     203,343     203,536     198,068     184,105  
Long-Term Debt     275,667     276,307     276,948     221,008     291,704  
Deferred Gains and Other Liabilities     5,947     8,164     7,864     8,226     7,764  
    Total liabilities     517,683     521,181     518,047     464,889     518,404  
Preferred Stock:                                
  Series A Preferred Stock     -     -     144,232     142,097     144,445  
  Series B Preferred Stock     -     -     -     100,000     30,000  
    Total preferred stock     -     -     144,232     242,097     174,445  
Equity:                                
  Era Group Inc. Stockholders' Equity:                                
    Common stock     202     201     -     -     -  
    Class B common stock     -     -     245     245     245  
    Additional paid-in capital     420,056     419,036     278,838     280,973     283,072  
    Retained earnings (accumulated deficit)     7,724     2,669     (4,025 )   (7,596 )   (12,795 )
    Treasury shares, at cost     (63 )   -     -     -     -  
    Accumulated other comprehensive income (loss), net of tax     (44 )   (85 )   20     (74 )   (147 )
      427,875     421,821     275,078     273,548     270,375  
  Noncontrolling interest in subsidiary     (3 )   102     207     247     -  
    Total equity     427,872     421,923     275,285     273,795     270,375  
Total Liabilities and Stockholders' Equity   $ 945,555   $ 943,104   $ 937,564   $ 980,781   $ 963,224  
                                 

Our management uses EBITDA and Adjusted EBITDA to assess the performance and operating results of our business. EBITDA is defined as Earnings before Interest (includes interest income, interest expense and interest expense on advances from SEACOR), Taxes, Depreciation and Amortization. Adjusted EBITDA is defined as EBITDA further adjusted for SEACOR Management Fees and certain other items that occur during the reported period. We include EBITDA and Adjusted EBITDA to provide investors with a supplemental measure of our operating performance. We also present Adjusted EBITDAR, which is defined as Adjusted EBITDA further adjusted for rent expense (included as components of operating expense and general and administrative) because we believe that research analysts and investment bankers use this metric to assess our and others in our peer group's performance. Neither EBITDA, Adjusted EBITDA nor Adjusted EBITDAR is a recognized term under generally accepted accounting principles in the U.S. ("GAAP"). Accordingly, they should not be used as an indicator of, or an alternative to, net income as a measure of operating performance. In addition, EBITDA, Adjusted EBITDA and Adjusted EBITDAR are not intended to be measures of free cash flow available for management's discretionary use, as they do not consider certain cash requirements, such as debt service requirements. Because the definitions of EBITDA, Adjusted EBITDA and Adjusted EBITDAR (or similar measures) may vary among companies and industries, they may not be comparable to other similarly titled measures used by other companies.

The following table provides a reconciliation of Net Income (Loss), the most directly comparable GAAP measure, to EBITDA, Adjusted EBITDA and Adjusted EBITDAR.

           
    Three Months Ended   Six Months Ended
June 30,
 
    Jun. 30, 2013   Mar. 31, 2013   Dec. 31, 2012   Sep. 30, 2012   Jun. 30, 2012   2013   2012  
    (in thousands)  
Net Income (Loss)   $ 4,950   $ 6,589   $ 3,531   $ 5,200   $ 3,649   $ 11,539   $ (984 )
  Depreciation     11,431     11,661     11,471     10,937     10,464     23,092     20,094  
  Interest Income     (150 )   (147 )   (145 )   (184 )   (249 )   (297 )   (581 )
  Interest Expense     4,613     4,732     3,757     2,543     2,380     9,345     4,348  
  Income Tax Expense     2,398     3,578     2,086     2,792     1,686     5,976     2,420  
EBITDA     23,242     26,413     20,700     21,288     17,930     49,655     25,297  
  SEACOR Management Fees     -     168     500     500     500     168     1,000  
  Special Items (1)     -     -     -     1,034     82     -     8,518  
Adjusted EBITDA     23,242     26,581     21,200     22,822     18,512     49,823     34,815  
  Rent     919     1,148     1,097     970     918     2,067     1,957  
Adjusted EBITDAR   $ 24,161   $ 27,729   $ 22,297   $ 23,792   $ 19,430   $ 51,890   $ 36,772  
                                             

(1) Special items include the following:

  • Severance expense of $0.7 million for the three months ended September 30, 2012, due to prior changes in executive management;
  • Expenses incurred in connection with our abandoned initial public offering of $0.1 million for the three months ended June 30, 2012, $0.3 million for the three months ended September 30, 2012 and $2.6 million for the six months ended June 30, 2012; and
  • An impairment charge of $5.9 million, net of tax, for the six months ended June 30, 2012, on our investment in Aeróleo Taxi Aéreo S/A.
 
ERA GROUP INC.
FLEET COUNTS
(unaudited)
 
    Jun. 30, 2013   Mar. 31, 2013   Dec. 31, 2012   Sep. 30, 2012   Jun. 30, 2012
Heavy:                    
  EC225   9   9   10   10   9
                     
Medium:                    
  AW139   35   35   33   32   30
  B212   11   11   13   13   13
  B412   6   6   6   6   6
  S76 A/A++   6   6   7   8   9
  S76 C/C+/C++   7   9   10   10   10
    65   67   69   69   68
                     
Light - twin engine:                    
  A109   9   9   9   9   9
  BO-105   -   -   -   -   2
  BK-117   6   6   6   8   9
  EC135   20   20   19   19   18
  EC145   3   3   3   5   6
    38   38   37   41   44
                     
Light - single engine:                    
  A119   24   24   24   24   24
  AS350   35   35   35   35   35
    59   59   59   59   59
                     
Total Helicopters   171   173   175   179   180
                     
Contact:
For additional information concerning Era Group, contact
Christopher Bradshaw
(281) 606-4871
www.eragroupinc.com
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