SOURCE: Era Group Inc.

Era Group Inc.

May 06, 2014 17:10 ET

Era Group Inc. Reports First Quarter 2014 Results

HOUSTON, TX--(Marketwired - May 6, 2014) - Era Group Inc. (NYSE: ERA)

  • Q1 2014 revenues increased 17% compared to Q1 2013 due to strong results from our U.S. Gulf of Mexico operations

  • Operating income and EBITDA increased by 88% and 21%, respectively, excluding the impact of gains on asset dispositions, which outpaced revenue growth due to margin expansion

Era Group Inc. (NYSE: ERA) today reported net income for its first quarter ended March 31, 2014 of $4.4 million on operating revenues of $79.4 million compared to net income of $6.7 million on operating revenues of $67.7 million in the prior year first quarter. The decline in net income is due to a $7.9 million decrease in gains on asset dispositions compared to the prior year quarter.

Operating income for the current quarter was $10.1 million compared to $14.6 million in the prior year quarter. Earnings before interest, taxes, depreciation and amortization ("EBITDA") was $21.8 million in the current quarter compared to $26.4 million in the prior year quarter. The current quarter results included $2.9 million in gains on asset dispositions compared to $10.8 million of gains in the first quarter of 2013.

"Operating revenues increased 17% to set a new record for the first quarter thanks to strong performance from our U.S. Gulf of Mexico operations," said Sten Gustafson, Chief Executive Officer of Era Group Inc. "Our customers continue to be very active in the deepwater Gulf of Mexico, adding new drilling rigs for exploration activities and transitioning successful drilling projects into their longer-term development and production phases."

"EBITDA excluding gains on asset dispositions outpaced revenue growth, increasing 21% over the prior year quarter as we benefited from margin expansion."

First Quarter Results

Operating revenues in the first quarter ended March 31, 2014 increased $11.7 million over the prior year quarter primarily due to strong results from our U.S. Gulf of Mexico operations related to an increase in fleet count, higher rates and the resumption of operations of the EC225 heavy helicopters. These increases were partially offset by a decrease in dry-leasing revenues due to fewer helicopters on dry-leases compared to the prior year quarter and a decrease in revenues in Alaska as the prior year quarter benefited from short-term work related to a drillship running aground.

Operating expenses were $6.5 million higher in the current quarter. Repairs and maintenance expenses were $4.2 million higher primarily due to the timing of repairs and an increase in power-by-hour expense related to the resumption of the EC225 helicopter operations. Personnel costs increased $1.0 million due to higher headcount related to increased activity and pay scale and benefit adjustments related to a competitive labor market. Fuel expense increased due to the EC225 helicopters returning to service and increased fuel sales at the FBO, and other expenses increased due to placing a third search and rescue ("SAR") helicopter in service.

Administrative and general expenses were $2.2 million higher in the current quarter. Compensation and employee costs were $1.8 million higher primarily due to an increase in personnel, annual pay adjustments and share-based compensation related to changes in senior management and annual incentive equity awards. Professional services fees increased $0.3 million due to audit and tax advisory fees.

Depreciation expense decreased $0.4 million primarily due to helicopters and related equipment sold since the prior year quarter.

Gains on asset dispositions were $7.9 million less than in the prior year quarter. During the current quarter, we sold two helicopters for a gain of $2.9 million. In the prior year quarter, we sold or otherwise disposed of six helicopters and related equipment for a gain of $10.8 million.

Interest expense decreased $1.0 million primarily due to increased capitalized interest related to additional deposits on helicopter orders.

Income tax expense decreased $1.1 million due to lower pre-tax income in the current year quarter resulting from the decrease in gains on asset dispositions.

Sequential Quarter Results

First quarter 2014 operating revenues increased $3.4 million compared to the fourth quarter of 2013, primarily due to strong results from our U.S. Gulf of Mexico operations partially offset by lower revenues from dry-leasing activities and from oil and gas operations in Alaska. First quarter net income increased $2.7 million. Operating income and EBITDA for the first quarter increased by $0.5 million and $1.8 million, respectively. The improvements in operating income and EBITDA were due to a $2.4 million increase in gains on asset dispositions compared to the fourth quarter of 2013. In addition to the increased gains on asset dispositions, net income also benefited from a $0.6 million decrease in interest expense, a $0.5 million decrease in income tax expense, and a $1.4 million increase in earnings from equity investments.

Equipment Acquisitions

During the quarter ended March 31, 2014, the Company's capital expenditures were $18.8 million, which consisted primarily of deposits on future helicopter deliveries. The Company records helicopter acquisitions in property and equipment and places helicopters in service once all completion work has been finalized and the helicopters are ready for use. The Company accepted delivery of two new AW139 medium helicopters in January 2014, and placed both of them into service in late February. In addition, the Company accepted delivery of one new AW139 helicopter in March 2014, which will be placed into service in the second quarter of 2014.

Capital Commitments

The Company's unfunded capital commitments as of March 31, 2014 consisted primarily of orders for helicopters and totaled $326.3 million, of which $83.4 million is payable during 2014 with the balance payable through 2017. The Company also had $2.3 million of deposits paid on options not yet exercised. The Company may terminate $147.4 million of its total commitments (inclusive of deposits paid on options not yet exercised) without further liability other than liquidated damages of $9.7 million in the aggregate. 

Included in these capital commitments are agreements to purchase ten AW189 heavy helicopters, four S92 heavy helicopters, one AW139 medium helicopter, and five AW169 light twin helicopters. The AW189 helicopters are scheduled to be delivered beginning in late 2014 through 2017. The S92 helicopters are scheduled to be delivered in 2016 and 2017. The AW139 helicopter is scheduled to be delivered in mid-year 2014. Delivery dates for the AW169 helicopters have yet to be determined. In addition, we had outstanding options to purchase up to an additional ten AW189 helicopters, five S92 helicopters and four AW139 helicopters. If these options are exercised, the helicopters would be scheduled for delivery beginning in 2015 through 2018.

Liquidity Update

As of March 31, 2014, the Company had $25.3 million in cash balances and escrow deposits and remaining availability under its senior secured revolving credit facility of $244.3 million.

EC225 Settlement

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 the EC225 heavy helicopters in 2012 and 2013. The settlement agreement provides for certain service and product credit discounts, including credits that will be available to the Company for a period of four years to be applied against support services available from Airbus Helicopters covering spare parts, repair and overhaul, service bulletins, technical assistance or any other services available from Airbus Helicopters. The Company expects to be able to apply such service credits over the following six to ten quarters and such application will impact the Company's statements of operations as a reduction in operating expenses if and as the credits are utilized.

Conference Call

Management will conduct a conference call starting at 10:00 a.m. ET (9:00 a.m. CT) on Wednesday, May 7, 2014, to review the results for the first quarter ended March 31, 2014. The conference call can be accessed as follows:

All callers will need to reference the access code 34597766

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 May 21, 2014 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, India, 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 Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements concerning management's expectations, strategic objectives, business prospects, anticipated 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 Company's dependence on, and the cyclical nature of, the offshore oil and gas industry; the Company's dependence on oil and gas exploration and development activity in the areas where the Company operates; fluctuations in worldwide prices of and demand for oil and natural gas; the ability to successfully expand into other geographic and helicopter service markets; the impact of increased U.S. and foreign government regulation and legislation, including potential government implemented moratoriums on drilling activities; inherent risks in operating helicopters; the failure to maintain an acceptable safety record; the grounding of all or a portion of our fleet for extended periods of time or indefinitely; reduction or cancellation of services for government agencies; reliance on a small number of helicopter manufacturers and suppliers; political instability, governmental action, war, acts of terrorism and changes in the economic condition in any foreign country where the Company does business, which may result in expropriation, nationalization, confiscation or deprivation of our assets or result in claims of a force majeure situation; declines in the global economy and financial markets; foreign currency exposure and exchange controls; credit risk exposure; the ongoing need to replace aging helicopters; the Company's reliance on the secondary used helicopter market to dispose of older helicopters; the Company's reliance on a small number of customers; allocation of risk between the Company and its customers; liability, legal fees and costs in connection with providing emergency response services; risks associated with the Company's debt structure; operational and financial difficulties of the Company's joint ventures and partners; conflict with the other owners of the Company's non-wholly owned subsidiaries and other equity investees; adverse results of legal proceedings; adverse weather conditions and seasonality; adequacy of insurance coverage; the attraction and retention of qualified personnel; restrictions on the amount of foreign ownership of the Company's common stock; 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; 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 the Company's businesses, particularly those mentioned under "Risk Factors" in Era Group's Annual Report on Form 10-K for the year ended December 31, 2013, in Era Group's subsequent Quarterly Reports on Form 10-Q and in Era Group's periodic reporting on Form 8-K (if any), which are incorporated by reference.

For additional information concerning Era Group, contact Christopher Bradshaw at (281) 606-4871 or visit Era Group's website at www.eragroupinc.com.

   
ERA GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts, unaudited)
 
   
  Three Months Ended March 31,  
  2014     2013  
Operating Revenues $ 79,443     $ 67,727  
Costs and Expenses:              
  Operating   49,640       43,116  
  Administrative and general   11,334       9,134  
  Depreciation   11,287       11,661  
    72,261       63,911  
Gains on Asset Dispositions, Net   2,891       10,801  
Operating Income   10,073       14,617  
Other Income (Expense):              
  Interest income   145       147  
  Interest expense   (3,753 )     (4,732 )
  SEACOR management fees   --       (168 )
  Derivative losses, net   (30 )     (3 )
  Foreign currency losses, net   (57 )     (259 )
  Other, net   --       3  
    (3,695 )     (5,012 )
Income Before Income Tax Expense and Equity In Earnings (Losses) of 50% or Less Owned Companies   6,378       9,605  
Income Tax Expense   2,503       3,578  
Income Before Equity in Earnings (Losses) of 50% or Less Owned Companies   3,875       6,027  
Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax   499       562  
Net Income   4,374       6,589  
Net Loss Attributable to Noncontrolling Interest in Subsidiary   71       105  
Net Income Attributable to Era Group Inc.   4,445       6,694  
Accretion of Redemption Value on Series A Preferred Stock   --       721  
Net Income Attributable to Common Shares $ 4,445     $ 5,973  
               
Basic Earnings Per Common Share $ 0.22     $ 0.28  
Diluted Earnings Per Common Share $ 0.22     $ 0.28  
               
EBITDA $ 21,772     $ 26,413  
Adjusted EBITDA $ 21,772     $ 26,581  
Adjusted EBITDA Excluding Gains $ 18,881     $ 15,780  
               
               
               
ERA GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts, unaudited)
 
   
    Three Months Ended  
    Mar. 31,
2014
    Dec. 31,
2013
    Sep. 30,
2013
    Jun. 30,
2013
    Mar. 31,
2013
 
Operating Revenues   $ 79,443     $ 75,998     $ 80,997     $ 74,237     $ 67,727  
Costs and Expenses:                                        
  Operating     49,640       45,213       51,338       46,945       43,116  
  Administrative and general     11,334       10,562       9,683       9,545       9,134  
  Depreciation     11,287       11,129       11,340       11,431       11,661  
      72,261       66,904       72,361       67,921       63,911  
Gains on Asset Dispositions, Net     2,891       464       2,560       4,476       10,801  
Operating Income     10,073       9,558       11,196       10,792       14,617  
Other Income (Expense):                                        
  Interest income     145       139       155       150       147  
  Interest expense     (3,753 )     (4,311 )     (4,394 )     (4,613 )     (4,732 )
  SEACOR management fees     --       --       --       --       (168 )
  Derivative (losses) gains, net     (30 )     (26 )     (96 )     21       (3 )
  Foreign currency gains (losses), net     (57 )     233       409       315       (259 )
  Other, net     --       --       7       9       3  
      (3,695 )     (3,965 )     (3,919 )     (4,118 )     (5,012 )
Income Before Income Tax Expense and Equity In Earnings (Losses) of 50% or Less Owned Companies     6,378       5,593       7,277       6,674       9,605  
Income Tax Expense     2,503       3,036       2,715       2,398       3,578  
Income Before Equity in Earnings (Losses) of 50% or Less Owned Companies     3,875       2,557       4,562       4,276       6,027  
Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax     499       (880 )     526       674       562  
Net Income     4,374       1,677       5,088       4,950       6,589  
Net Loss Attributable to Noncontrolling Interest in Subsidiary     71       75       116       105       105  
Net Income Attributable to Era Group Inc.     4,445       1,752       5,204       5,055       6,694  
Accretion of Redemption Value on Series A Preferred Stock     --       --       --       --       721  
Net Income Attributable to Common Shares   $ 4,445     $ 1,752     $ 5,204     $ 5,055     $ 5,973  
                                         
Basic Earnings Per Common Share   $ 0.22     $ 0.09     $ 0.26     $ 0.25     $ 0.28  
Diluted Earnings Per Common Share   $ 0.22     $ 0.09     $ 0.25     $ 0.25     $ 0.28  
                                         
EBITDA   $ 21,772     $ 20,014     $ 23,382     $ 23,242     $ 26,413  
Adjusted EBITDA   $ 21,772     $ 20,014     $ 25,427     $ 23,242     $ 26,581  
Adjusted EBITDA Excluding Gains   $ 18,881     $ 19,550     $ 22,867     $ 18,766     $ 15,780  
   
   
   
ERA GROUP INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, unaudited)
 
   
  Mar. 31, 2014     Dec. 31, 2013     Sep. 30, 2013     Jun. 30, 2013     Mar. 31, 2013  
ASSETS                                      
Current Assets:                                      
  Cash and cash equivalents $ 22,290     $ 31,335     $ 22,517     $ 27,345     $ 25,032  
  Receivables:                                      
    Trade, net of allowance for doubtful accounts   47,780       38,137       48,435       40,645       41,044  
    Other   4,824       4,374       2,961       14,607       16,133  
  Inventories, net   26,780       26,853       26,692       26,223       26,696  
  Prepaid expenses and other   3,292       2,167       1,278       2,854       2,715  
  Deferred income taxes   2,138       2,347       3,642       3,642       3,642  
  Escrow deposits   3,048       --       9,900       16,010       --  
    Total current assets   110,152       105.213       115,425       131,326       115,262  
Property and Equipment   1,084,199       1,066,958       1,014,907       1,012,661       1,021,453  
    Accumulated depreciation   (273,754 )     (263,306 )     (255,299 )     (251,613 )     (246,498 )
    Net property and equipment   810,445       803.652       759,608       761,048       774,955  
Investments, at Equity, and Advances to 50% or Less Owned Companies   35,433       34,986       36,113       35,529       34,705  
Goodwill   352       352       352       352       352  
Other Assets   16,074       14,380       16,071       17,300       17,830  
Total Assets $ 972,456     $ 958,583     $ 927,569     $ 945,555     $ 943,104  
                                       
LIABILITIES AND STOCKHOLDERS' EQUITY                                      
Current Liabilities:                                      
  Accounts payable and accrued expenses $ 13,639     $ 13,293     $ 16,796     $ 15,796     $ 13,396  
  Accrued wages and benefits   9,583       8,792       8,937       6,976       7,662  
  Accrued interest   4,624       772       4,625       770       5,213  
  Accrued income taxes   781       613       --       --       --  
  Derivatives   529       621       --       --       --  
  Current portion of long-term debt   2,787       2,787       2,787       2,787       2,787  
  Other current liabilities   4,171       3,267       6,894       5,253       4,309  
    Total current liabilities   36,114       30.145       40,039       31,582       33,367  
Deferred Income Taxes   211,479       209,574       208,483       204,487       203,343  
Long-Term Debt   278,755       279,391       240,029       275,667       276,307  
Deferred Gains and Other Liabilities   3,476       3,412       5,343       5,947       8,164  
    Total liabilities   529,824       522,522       493,894       517,683       521,181  
Equity:                                      
  Era Group Inc. Stockholders' Equity:                                      
    Common stock   203       202       202       202       201  
    Additional paid-in capital   423,728       421,310       420,650       420,056       419,036  
    Retained earnings   19,125       14,680       12,928       7,724       2,669  
    Treasury shares, at cost   (334 )     (113 )     (94 )     (63 )     --  
    Accumulated other comprehensive income (loss), net of tax   175       176       108       (44 )     (85 )
    442,897       436,255       433,794       427,875       421,821  
  Noncontrolling interest in subsidiary   (265 )     (194 )     (119 )     (3 )     102  
    Total equity   442,632       436,061       433,675       427,872       421,923  
Total Liabilities and Stockholders' Equity $ 972,456     $ 958,583     $ 927,569     $ 945,555     $ 943,104  
                                       

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 and interest expense), 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. Neither EBITDA nor Adjusted EBITDA 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 and Adjusted EBITDA 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 and Adjusted EBITDA (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, the most directly comparable GAAP measure, to EBITDA and Adjusted EBITDA.

           
        Three Months Ended  
  Mar. 31, 2014     Dec. 31, 2013     Sep. 30, 2013     Jun. 30, 2013     Mar. 31, 2013  
        (in thousands)  
Net Income $ 4,374     $ 1,677     $ 5,088     $ 4,950     $ 6,589  
  Depreciation   11,287       11,129       11,340       11,431       11,661  
  Interest Income   (145 )     (139 )     (155 )     (150 )     (147 )
  Interest Expense   3,753       4,311       4,394       4,613       4,732  
  Income Tax Expense   2,503       3,036       2,715       2,398       3,578  
EBITDA $ 21,772     $ 20,014     $ 23,382     $ 23,242     $ 26,413  
  SEACOR Management Fees   --       --       --       --       168  
  Special Items (1)   --       --       2,045       --       --  
Adjusted EBITDA $ 21,772     $ 20,014     $ 25,427     $ 23,242     $ 26,581  
  Gains on Asset Dispositions, Net ("Gains")   (2,891 )     (464 )     (2,560 )     (4,476 )     (10,801 )
Adjusted EBITDA Excluding Gains $ 18,881     $ 19,550     $ 22,867     $ 18,766     $ 15,780  

(1) Special items include the following:

  • A one-time charge of $2.0 million related to operating leases on certain helicopters configured for air medical services for the three months ended September 30, 2013.
 
ERA GROUP INC.
FLEET COUNTS
(1)
(unaudited)
 
    Mar. 31, 2014 (2)   Dec. 31, 2013   Sep. 30, 2013   Jun. 30, 2013   Mar. 31, 2013
Heavy:                    
  EC225   9   9   9   9   9
                     
Medium:                    
  AW139   37   35   36   35   35
  B212   10   11   11   11   11
  B412   6   6   6   6   6
  S76 A/A++   2   3   3   6   6
  S76 C+/C++   6   6   6   7   9
    61   61   62   65   67
                     
Light--twin engine:                    
  A109   9   9   9   9   9
  BK-117   3   3   6   6   6
  EC135   20   20   20   20   20
  EC145   4   4   4   3   3
    36   36   39   38   38
                     
Light--single engine:                    
  A119   24   24   24   24   24
  AS350   35   35   35   35   35
    59   59   59   59   59
Total Helicopters   165   165   169   171   173

____________________
(1) Includes all owned, joint ventured, leased-in and managed helicopters.
(2) Excludes on AW139 helicopter that was fully paid for and delivered in March 2014 but not yet operational as of March 31, 2014.

Contact Information

  • Contact:
    Christopher Bradshaw
    (281) 606-4871