Era Group Inc. Reports QUARTER RESULTS Houston, Texas

The following excerpt is from the company's SEC filing.

November 9, 2017

FOR IMMEDIATE RELEASE —

Era Group Inc. (NYSE: ERA) (the “Company”) today reported a net

attributable to the Company of

$81.4 million

per diluted share, for its

quarter ended

September 30, 2017

current quarter

”) on operating revenues of

$61.4 million

compared to net

$2.8 million

per diluted share, for the quarter ended

June 30, 2017

preceding quarter

$57.9 million

. As further described in the “H225 Update” section of this press release, the Company recorded non-cash impairment charges of approximately

$117 million

in the current quarter primarily related to its H225 helicopters, capital parts and related inventory. Excluding the impact of non-cash impairment charges, net loss attributable to the Company would have been

$6.2 million

per diluted share.

Earnings before interest, taxes, depreciation and amortization (“EBITDA”) was negative

$110.5 million

compared to positive

$11.9 million

. EBITDA adjusted to exclude gains on asset dispositions and special items was positive

$6.7 million

compared to

$7.5 million

. Losses on asset dispositions were

$0.1 million

compared to gains of

$5.1 million

. Special items in the

consisted of the

$117.0 million

non-cash impairment charges primarily related to the Company’s H225 helicopters. Special items in the

$0.6 million

of severance-related expenses due to changes in senior management.

“We experienced an increase in oil and gas customer activity in the third quarter, as evidenced by the 15% sequential quarter improvement in operating revenues in our oil and gas service line,” said Chris Bradshaw, President and Chief Executive Officer of Era Group Inc. “Profitability in the third quarter was adversely impacted by $0.6 million of expenses to prepare helicopters for new customer contracts, $1.0 million of expenses due to the correction of immaterial accounting errors related to prior periods, $1.9 million of non-routine professional services fees, and a high volume of engine overhaul expense ($2.8 million higher than the trailing four quarter average). Despite this elevated level of expenses, Era continued to generate positive operating cash flow for the 22

consecutive quarter.”

Sequential Quarter Results

Operating revenues in the

$3.5 million

compared to the

primarily due to higher utilization in our oil and gas operations. These increases were partially offset by the absence of the benefit from lease return charges recognized in the

Operating expenses were

$2.7 million

primarily due to increased repairs and maintenance costs related to the timing of repairs, as well as increased fuel and personnel expenses resulting from increased activity.

Administrative and general expenses were

primarily due to an increase in professional services fees and the correction of immaterial accounting errors, partially offset by a decrease in compensation costs due to the recognition of severance expenses in the

In the

, we sold or otherwise disposed of a hangar in Alaska, two helicopters and related equipment resulting in gains of

. There were no significant asset dispositions in the

Income tax benefit was

$44.5 million

primarily due to the impairment of our H225 helicopters in the

Net income attributable to noncontrolling interest in subsidiary was

$0.2 million

compared to a net loss of

$0.3 million

. The increase was due to an increase in income in Colombia resulting from a new short-term contract and higher utilization.

Calendar Quarter Results

$3.6 million

compared to the quarter ended

September 30, 2016

prior year quarter

”) primarily due to lower utilization of light helicopters in our U.S. oil and gas operations, fewer

search and rescue (“SAR”) subscribers and the end of air medical contracts

. These decreases were partially offset by increased utilization of heavy and medium helicopters in our U.S. oil and gas operations.

primarily due to increased repairs and maintenance expenses in the

due to the timing of repairs and the recognition of credits in the

following the removal of our H225 helicopters from power-by-the-hour maintenance programs. This increase was partially offset by decreases in personnel, fuel and other operating expenses.

$1.4 million

primarily due to increased professional services fees and the correction of immaterial accounting errors, partially offset by lower compensation costs.

Depreciation expense was

$0.4 million

primarily due to certain assets becoming fully depreciated and asset dispositions subsequent to the

, partially offset by new heavy helicopters placed in service in the current year.

$45.2 million

compared to an income tax expense of

. The income tax benefit was primarily due to the impairment of our H225 helicopters in the

attributable to the Company was

. EBITDA was

$125.8 million

$8.9 million

in the current quarter. Losses on asset dispositions were

Capital Commitments

We had unfunded capital commitments of

$118.6 million

as of

, of which

$7.4 million

is payable during the remainder of

with the balance payable through

. We may terminate

$114.3 million

of our total commitments (inclusive of deposits paid on options not yet exercised) without further liability other than aggregate liquidated damages of

$2.6 million

. The noncancellable portion of our commitments payable during the remainder of

is $2.8 million.

Included in these capital commitments are agreements to purchase

AW189 heavy helicopters,

S92 heavy helicopter and

AW169 light twin helicopters. The AW189 and S92 helicopters are scheduled to be delivered in

. Delivery dates for the AW169 helicopters have yet to be determined. In addition, we had outstanding options to purchase up to

additional AW189 helicopters. If these options are exercised, the helicopters would be scheduled for delivery beginning in

Liquidity

As of

$26.9 million

in cash balances and

$124.6 million

of remaining availability under the senior secured revolving credit facility (the “Facility”) for total liquidity of

$151.5 million

. As of

, our senior secured leverage ratio, as defined in the Facility, was

x compared to the current covenant requirement of not more than

x, and our interest coverage ratio was

x compared to the current covenant requirement of not less than

x. The non-cash impairment charges primarily related to our H225 helicopters, discussed elsewhere in this press release, do not impact these covenant calculations under the Facility.

Due to an accident in April 2016 involving an Airbus Helicopters H225 model helicopter (also known as an EC225LP) operated by another helicopter company, the majority of the offshore oil and gas fleet of H225 and AS332 L2 model helicopters remains on operational suspension. In February and April 2017, the Accident Investigation Board Norway (“AIBN”) published additional preliminary reports that updated and expanded findings from the investigation into the accident. The AIBN’s investigation remains ongoing. In July 2017, the civil aviation authorities in each of Norway and the United Kingdom published directives that set forth the requirements with respect to the return to service of these helicopter models. Prior to a return to service, an operator must comply with an EASA directive issued on June 23, 2017 that requires the replacement of, and prescribes reduced service limits and inspections with respect to, identified parts and the installation of, and prescribes maintenance protocols with respect to, a new EASA-approved full flow magnetic plug device to support the inspection of the main gearbox oil system particle detection. In addition, an operator must develop a return to service plan for the applicable helicopter model that must be approved by the relevant regulatory authority. Such a plan would need to include a detailed safety case, outlining specific maintenance processes, tooling and training requirements.

Since the accident, we believe that H225 helicopters have only returned to service in offshore oil and gas missions in a few countries in Asia. During the current quarter, we noted certain events that led us to come to the belief that there will not be a broad-based return to service of the H225 and AS332 L2 helicopter models in the offshore oil and gas industry. Therefore, during the

, we determined that our H225 helicopters are no longer interchangeable with the remainder of our fleet and should be evaluated for impairment. We performed an impairment analysis on the H225 helicopters, capital parts and related inventory and determined that the carrying value exceeded the fair value. We recorded a non-cash impairment charge of approximately

to record the assets at their respective fair values.

On November 21, 2016, we filed a lawsuit in the District Court of Dallas County, Texas against Airbus Helicopters, Inc. and Airbus Helicopters S.A.S. alleging breaches of various contracts between us, fraudulent inducement and unjust enrichment in connection with the sale by Airbus of H225 model helicopters to us. We seek compensation for our monetary damages in an amount to be determined. We cannot predict the ultimate outcome of the litigation, and we may spend significant resources pursuing our legal remedies against Airbus.

Conference Call

Management will conduct a conference call starting at 10:00 a.m. ET (9:00 a.m. CT) on Friday,

November 10, 2017

, to review the results for the

. The conference call can be accessed as follows:

All callers will need to reference the access code 1119678.

Within the U.S.:

Operator Assisted Toll-Free Dial-In Number: (877) 548-7914

Outside the U.S.:

Operator Assisted International Dial-In Number: (719) 325-4904

Replay

A telephone replay will be available through November 24, 2017 by utilizing the above numbers and access code. An audio replay will also be available on the Company’s website at www.erahelicopters.com shortly after the call and will be accessible through November 24, 2017. The accompanying investor presentation will be available on November 9, 2017 on Era’s website at www.erahelicopters.com

For additional information concerning Era Group, contact Jennifer Whalen at (713) 369-4636 or visit Era Group’s website at www.erahelicopters.com.

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 provides helicopters and related services to customers and third-party helicopter operators in other countries, including Argentina, Brazil, Colombia, the Dominican Republic, India and Suriname. Era Group’s helicopters are primarily used to transport personnel to, from and between offshore oil and gas production platforms, drilling rigs and other installations. In addition, Era Group’s helicopters are used to perform emergency air medical, search and rescue, firefighting, utility, VIP transport and flightseeing services. Era Group also provides a variety of operating lease solutions and technical fleet support to third party operators as well as offering unmanned aerial solutions.

Forward-Looking Statements Disclosure

Certain statements discussed in this release as well as in other reports, materials and oral statements that the Company releases from time to time to the public include "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 and volatile nature of, offshore oil and gas exploration, development and production activity, and the impact of general economic conditions and fluctuations in worldwide prices of and demand for oil and natural gas on such activity levels; the Company’s reliance on a small number of customers and the reduction of its customer base resulting from bankruptcies or consolidation; risks that the Company’s customers reduce or cancel contracted services or tender processes; cost savings initiatives implemented by the Company’s customers; risks inherent in operating helicopters; the Company’s ability to maintain an acceptable safety record; the impact of increased United States (“U.S.”) and foreign government regulation and legislation, including potential government implemented moratoriums on drilling activities; the impact of a grounding of all or a portion of the Company’s fleet for extended periods of time or indefinitely on the Company’s business, including its operations and ability to service customers, results of operations or financial condition and/or the market value of the affected helicopter(s); the Company’s ability to successfully expand into other geographic and aviation service markets; risks associated with 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 the Company’s assets or result in claims of a force majeure situation; the impact of declines in the global economy and financial markets; the impact of fluctuations in foreign currency exchange rates on the Company’s asset values and cost to purchase helicopters, spare parts and related services; risks related to investing in new lines of service without realizing the expected benefits; risks of engaging in competitive processes or expending significant resources for strategic opportunities, with no guaranty of recoupment; the Company’s reliance on a small number of helicopter manufacturers and suppliers; the Company’s ongoing need to replace aging helicopters; the Company’s reliance on the secondary helicopter market to dispose of older helicopters; the Company’s reliance on information technology; the impact of allocation of risk between the Company and its customers; the liability, legal fees and costs in connection with providing emergency response services; adverse weather conditions and seasonality; risks associated with the Company’s debt structure; the Company’s counterparty

credit risk exposure; the impact of operational and financial difficulties of the Company’s joint ventures and partners and the risks associated with identifying and securing joint venture partners when needed; conflict with the other owners of the Company’s non-wholly owned subsidiaries and other equity investees; adverse results of legal proceedings, including the risks related to the Company’s ability to recover damages from the manufacturer of the H225 model helicopter; the incurrence of significant costs in connection with the Company’s pursuit of legal remedies, including those against the manufacturer of the H225 model helicopter; the Company’s ability to obtain insurance coverage and the adequacy and availability of such coverage; the Company’s ability to remediate the material weaknesses it has identified in its internal controls over financial reporting described in its Quarterly Report on Form 10-Q for the quarterly period ended

and in its Annual Report on Form 10-K for the year ended

December 31, 2016

; the possibility of labor problems; the attraction and retention of qualified personnel; restrictions on the amount of foreign ownership of the Company’s common stock; 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

, 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.

ERA GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except share and per share amounts)

Three Months Ended 

 September 30,

Nine Months Ended 

61,385

65,006

173,790

190,939

Costs and expenses:

43,987

40,371

123,079

132,074

10,928

31,211

26,871

Depreciation and amortization

12,103

12,519

35,635

37,976

Total costs and expenses

67,018

62,394

189,925

196,921

Gains (losses) on asset dispositions, net

Loss on impairment

(117,018

Operating income (loss)

(122,773

(128,105

(1,948

Other income (expense):

Interest income

Interest expense

(4,097

(4,003

(11,620

(12,881

Foreign currency gains (losses), net

Gain on debt extinguishment

Other, net

Total other income (expense)

(3,912

(3,536

(11,104

(10,553

Loss before income taxes and equity earnings

(126,685

(1,170

(139,209

(12,501

Income tax expense (benefit)

(45,237

(48,066

(2,177

Loss before equity earnings

(81,448

(1,239

(91,143

(10,324

Equity earnings, net of tax

Net loss

(81,215

(90,074

(9,262

Net loss (income) attributable to noncontrolling interest in subsidiary

Net loss attributable to Era Group Inc.

(89,855

(2,440

Loss per common share, basic and diluted:

Weighted average common shares outstanding, basic and diluted:

20,844,376

20,384,348

20,715,686

20,322,167

(110,458

15,323

(91,526

38,248

Adjusted EBITDA

26,107

37,730

Adjusted EBITDA excluding gains

15,569

21,059

33,696

Sep 30,

Jun 30,

Mar 31,

Dec 31,

57,878

54,527

56,289

41,335

37,757

37,789

10,381

11,978

11,554

11,339

63,215

59,692

58,463

(5,056

(1,421

(3,934

(3,589

(4,444

(3,893

(3,299

(5,437

(4,169

(8,355

(6,858

(2,103

(1,180

(3,443

(6,252

(5,678

(3,072

(5,787

(5,648

(2,787

(5,620

(5,538

20,789,537

20,509,463

20,433,155

11,929

12,544

OPERATING REVENUES BY LINE OF SERVICE

(unaudited, in thousands)

Oil and gas:

36,578

32,081

30,341

31,709

35,961

16,764

14,284

17,167

14,881

17,306

Total oil and gas

53,342

46,365

47,508

46,590

53,267

Dry-leasing

Emergency Response Services

Flightseeing

FLIGHT HOURS BY LINE OF SERVICE

(unaudited)

10,633

10,482

12,687

____________________

Primarily oil and gas services, but also includes revenues and flight hours from utility services, such as firefighting, and VIP transport.

Includes revenues and flight hours from SAR and air medical services.

Does not include hours flown by helicopters in our dry-leasing line of service.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

ASSETS

Current assets:

Cash and cash equivalents

26,896

28,878

26,339

26,950

32,144

Receivables:

Trade, net of allowance for doubtful accounts

38,608

32,824

34,840

32,470

34,300

Tax receivables

Inventories, net

21,985

24,296

25,232

25,417

26,615

Prepaid expenses

Escrow deposits

Total current assets

95,225

94,688

98,287

96,370

101,538

Property and equipment

983,798

1,164,048

1,154,835

1,154,028

1,175,131

Accumulated depreciation

(299,294

(353,830

(343,659

(332,219

(347,113

Net property and equipment

684,504

810,218

811,176

821,809

828,018

Equity investments and advances

29,894

29,852

29,727

29,266

29,595

Intangible assets

Other assets

11,177

Total assets

815,770

941,480

946,419

955,173

971,469

LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable and accrued expenses

15,326

12,884

Accrued wages and benefits

Accrued interest

Accrued income taxes

Accrued other taxes

Accrued contingencies

Current portion of long-term debt

Other current liabilities

Total current liabilities

35,022

29,640

27,648

25,623

29,985

Long-term debt

215,025

221,354

225,946

230,139

232,655

Deferred income taxes

177,704

222,724

223,442

225,472

227,417

Deferred gains and other liabilities

Total liabilities

428,820

474,662

477,960

482,535

494,337

Redeemable noncontrolling interest

Equity:

Era Group Inc. stockholders’ equity:

Common stock

Additional paid-in capital

442,948

441,595

440,164

438,489

437,291

Retained earnings

(57,331

24,117

26,904

32,524

38,062

Treasury shares, at cost

(2,974

(2,968

(2,899

(2,855

Accumulated other comprehensive income, net of tax

Total equity

382,948

463,049

464,405

468,417

472,801

Total liabilities, redeemable noncontrolling interest and stockholders’ equity

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 certain items noted in the reconciliation below 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. Each of these non-GAAP measures has limitations and therefore should not be used in isolation or as a substitute for the amounts reported in accordance with GAAP.

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

117,633

Losses (gains) on asset dispositions, net

(5,061

(5,048

(4,034

Special items include the following:

In the three months ended September 30, 2017, non-cash impairment charges of

primarily related to the impairment of the Company’s H225 model helicopters;

In the three months ended June 30, 2017, $0.6 million of severance-related expenses due to changes in senior management; and

In the nine months ended September 30, 2016, a gain of $0.5 million on the extinguishment of debt related to the repurchase of a portion of our 7.750% Senior Notes.

The Facility requires that the Company maintain certain financial ratios on a rolling four-quarter basis. The interest coverage ratio is a trailing four-quarter quotient of (i) EBITDA (as defined in the Facility) less dividends and distributions divided by (ii) interest expense. The interest coverage ratio is not a measure of operating performance or liquidity defined by GAAP and may not be comparable to similarly titled measures presented by other companies. The senior secured leverage ratio is calculated by dividing (i) the sum of secured debt for borrowed money, capital lease obligations and guaranties of obligations of non-consolidated entities by (ii) EBITDA (as defined in the Facility). The senior secured leverage ratio is not a measure of operating performance or liquidity defined by GAAP and may not be comparable to similarly titled measures presented by other companies. EBITDA is calculated under the Facility differently than as presented elsewhere in this release.

FLEET COUNTS

Heavy:

Medium:

S76 C+/C++

Light—twin engine:

Light—single engine:

Total Helicopters

Includes all owned, joint ventured, leased-in and managed helicopters and excludes helicopters fully paid for and delivered but not yet placed in service as of the applicable dates.

The above information was disclosed in a filing to the SEC. To see the filing, click here.

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