Company Quick10K Filing
Era Group
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 21 $183
10-Q 2019-11-05 Quarter: 2019-09-30
10-Q 2019-07-30 Quarter: 2019-06-30
10-Q 2019-05-07 Quarter: 2019-03-31
10-K 2019-03-08 Annual: 2018-12-31
10-Q 2018-11-06 Quarter: 2018-09-30
10-Q 2018-08-07 Quarter: 2018-06-30
10-Q 2018-05-01 Quarter: 2018-03-31
10-K 2018-03-09 Annual: 2017-12-31
10-Q 2017-11-09 Quarter: 2017-09-30
10-Q 2017-08-08 Quarter: 2017-06-30
10-Q 2017-05-02 Quarter: 2017-03-31
10-K 2017-03-09 Annual: 2016-12-31
10-Q 2016-11-01 Quarter: 2016-09-30
10-Q 2016-08-03 Quarter: 2016-06-30
10-Q 2016-05-04 Quarter: 2016-03-31
10-K 2016-02-26 Annual: 2015-12-31
10-Q 2015-11-05 Quarter: 2015-09-30
10-Q 2015-08-05 Quarter: 2015-06-30
10-Q 2015-05-06 Quarter: 2015-03-31
10-K 2015-03-11 Annual: 2014-12-31
10-Q 2014-11-05 Quarter: 2014-09-30
10-Q 2014-08-08 Quarter: 2014-06-30
10-Q 2014-05-06 Quarter: 2014-03-31
10-K 2014-03-21 Annual: 2013-12-31
10-Q 2013-11-13 Quarter: 2013-09-30
10-Q 2013-08-13 Quarter: 2013-06-30
10-Q 2013-05-15 Quarter: 2013-03-31
10-K 2013-02-28 Annual: 2012-12-31
8-K 2020-01-23 Enter Agreement, Earnings, Exhibits
8-K 2019-11-05 Earnings, Regulation FD, Exhibits
8-K 2019-10-11 Shareholder Vote
8-K 2019-09-04 Regulation FD, Exhibits
8-K 2019-07-30 Earnings, Regulation FD, Exhibits
8-K 2019-06-06 Shareholder Vote
8-K 2019-05-07 Earnings, Regulation FD, Exhibits
8-K 2019-04-24 Regulation FD
8-K 2019-03-07 Earnings, Regulation FD, Exhibits
8-K 2018-11-06 Earnings, Regulation FD, Exhibits
8-K 2018-09-04 Regulation FD, Exhibits
8-K 2018-08-07 Earnings, Regulation FD, Exhibits
8-K 2018-07-03 Enter Agreement
8-K 2018-06-18 Accountant, Exhibits
8-K 2018-06-07 Shareholder Vote
8-K 2018-05-01 Earnings, Regulation FD, Exhibits
8-K 2018-04-25 Regulation FD
8-K 2018-03-08 Earnings, Regulation FD, Exhibits
8-K 2018-02-21 Officers
8-K 2018-01-31 Amend Bylaw
8-K 2018-01-31 Amend Bylaw, Other Events
ERA 2019-09-30
Part I-Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part Ii-Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 era-q32019xex311.htm
EX-31.2 era-q32019xex312.htm
EX-32.1 era-q32019xex321.htm
EX-32.2 era-q32019xex322.htm

Era Group Earnings 2019-09-30

ERA 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
ERA 183 765 303 213 0 24 86 258 0% 3.0 3%
BRS 75 2,732 1,862 1,408 0 -362 -119 -147 0% 1.2 -13%
MKGI 34 11 2 0 0 4 4 33 21% 8.5 35%
PHII 20 1,453 1,018 662 0 -184 -72 690 0% -9.6 -13%
GMTA
SPCE
DSSI
VRRM
YTRA 12,552 10,173 0 0 0 0 -0 0%
DSKE 1,503 1,072 1,792 0 -34 120 650 0% 5.4 -2%

10-Q 1 q3201910-q.htm 10-Q Document

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 September 30, 2019              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.)
 
 
 
945 Bunker Hill, Suite 650

 
 
Houston, Texas
 
77024
(Address of Principal Executive Offices)
 
(Zip Code)
713-369-4700
(Registrant’s Telephone Number, Including Area Code)
________________________________________ 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.01 per share
ERA
NYSE
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 every Interactive Data File required to be submitted 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 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
¨

 
Smaller reporting company
¨
 
Emerging growth company
¨

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. ¨
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 October 31, 2019 was 21,288,619. The Registrant has no other class of common stock outstanding.



ERA GROUP INC.
Table of Contents
 
Part I.
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
 
Item 3.
 
 
 
 
Item 4.
 
 
 
Part II.
 
 
 
 
Item 1.
 
 
 
 
 
Item 1A.
 
 
 
 
 
Item 2.
 
 
 
 
 
Item 3.
 
 
 
 
 
Item 4.
 
 
 
 
 
Item 5.
 
 
 
 
 
Item 6.


1


PART I—FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
ERA GROUP INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
 
September 30,
2019
 
December 31,
2018
 
(unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents (including $1,843 and $1,745 from VIEs(1) in 2019 and 2018, respectively)
$
107,736

 
$
50,753

Receivables:
 
 
 
Trade, operating, net of allowance for doubtful accounts of $176 and $261 in 2019 and 2018, respectively (including $6,177 and $5,565 from VIEs in 2019 and 2018, respectively)
31,312

 
33,306

Trade, dry-leasing
5,864

 
3,803

Tax receivables (including $2,705 and $3,187 from VIEs in 2019 and 2018, respectively)
2,705

 
3,187

Other (including $21 and $340 from VIEs in 2019 and 2018, respectively)
11,567

 
2,343

Inventories, net (including $42 and $40 from VIEs in 2019 and 2018, respectively)
20,826

 
20,673

Prepaid expenses (including $72 and $10 from VIEs in 2019 and 2018, respectively)
2,851

 
1,807

Total current assets
182,861

 
115,872

Property and equipment (including $1,468 and $1,375 from VIEs in 2019 and 2018, respectively)
901,580

 
917,161

Accumulated depreciation (including $584 and $485 from VIEs in 2019 and 2018, respectively)
(334,730
)
 
(317,967
)
Property and equipment, net
566,850

 
599,194

Operating lease right-of-use (including $1,812 from VIEs in 2019)
9,907

 

Equity investments and advances

 
27,112

Intangible assets
1,094

 
1,107

Other assets (including $403 and $96 from VIEs in 2019 and 2018, respectively)
6,363

 
21,578

Total assets
$
767,075

 
$
764,863

LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST
 AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable and accrued expenses (including $1,433 and $1,522 from VIEs in 2019 and 2018, respectively)
$
11,940

 
$
13,161

Accrued wages and benefits (including $1,654 and $1,429 from VIEs in 2019 and 2018, respectively)
8,960

 
9,267

Accrued interest
3,321

 
569

Accrued income taxes
2,945

 
973

Accrued other taxes (including $270 and $500 from VIEs in 2019 and 2018, respectively)
1,986

 
1,268

Accrued contingencies (including $548 and $630 from VIEs in 2019 and 2018, respectively)
548

 
630

Current portion of long-term debt (including $182 and $395 from VIEs in 2019 and 2018, respectively)
1,845

 
2,058

Other current liabilities (including $378 and $0 from VIEs in 2019 and 2018, respectively)
2,851

 
878

Total current liabilities
34,396

 
28,804

Long-term debt
158,731

 
160,217

Deferred income taxes
105,440

 
108,357

Operating lease liabilities (including $1,434 from VIEs in 2019)
8,166

 

Other liabilities
850

 
747

Total liabilities
307,583

 
298,125

Commitments and contingencies (see Note 8)

 

Redeemable noncontrolling interest
2,945

 
3,302

Equity:
 
 
 
Common stock, $0.01 par value, 60,000,000 shares authorized; 21,288,619 and 21,765,404 outstanding in 2019 and 2018, respectively, exclusive of treasury shares
224

 
219

Additional paid-in capital
451,103

 
447,298

Retained earnings
15,372

 
18,285

Treasury shares, at cost; 1,149,820 and 156,737 shares in 2019 and 2018, respectively
(10,152
)
 
(2,476
)
Accumulated other comprehensive income, net of tax

 
110

Total equity
456,547

 
463,436

Total liabilities, redeemable noncontrolling interest and stockholders’ equity
$
767,075

 
$
764,863

(1) Refer to footnote 5 for more detail on variable interest entities (“VIE”) 
The accompanying notes are an integral part of these condensed consolidated financial statements.

2


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 
 September 30,
 
2019
 
2018
 
2019
 
2018
Revenues:

 
 
 
 
 
 
 
Operating revenues
$
54,659

 
$
51,894

 
$
153,569

 
$
161,116

Dry-leasing revenues
4,250

 
2,716

 
12,113

 
8,544

Total revenues
58,909

 
54,610

 
165,682

 
169,660

Costs and expenses:
 
 
 
 
 
 
 
Operating
39,522

 
36,513

 
115,038

 
114,505

Administrative and general
9,142

 
8,837

 
26,912

 
35,714

Depreciation and amortization
9,312

 
9,541

 
28,282

 
30,011

Total costs and expenses
57,976

 
54,891

 
170,232

 
180,230

Gains (losses) on asset dispositions, net
754

 
(148
)
 
562

 
2,269

Litigation settlement proceeds

 
42,000

 

 
42,000

Operating income (loss)
1,687

 
41,571

 
(3,988
)
 
33,699

Other income (expense):
 
 
 
 
 
 
 
Interest income
956

 
732

 
2,642

 
1,224

Interest expense
(3,464
)
 
(3,549
)
 
(10,357
)
 
(11,646
)
Loss on sale of investments

 

 
(569
)
 

Foreign currency losses, net
(718
)
 
(94
)
 
(574
)
 
(1,095
)
Gains (losses) on debt extinguishment

 

 
(13
)
 
175

Other, net
(5
)
 
15

 
(25
)
 
21

Total other income (expense)
(3,231
)
 
(2,896
)
 
(8,896
)
 
(11,321
)
Income (loss) before income taxes and equity earnings
(1,544
)
 
38,675

 
(12,884
)
 
22,378

Income tax expense
515

 
7,861

 
321

 
4,549

Income (loss) before equity earnings
(2,059
)
 
30,814

 
(13,205
)
 
17,829

Equity earnings, net of tax

 
465

 
9,935

 
1,577

Net income (loss)
(2,059
)
 
31,279

 
(3,270
)
 
19,406

Net loss attributable to noncontrolling interest in subsidiary
149

 
10

 
357

 
310

Net income (loss) attributable to Era Group Inc.
$
(1,910
)
 
$
31,289

 
$
(2,913
)
 
$
19,716

 
 
 
 
 
 
 
 
Income (loss) per common share, basic and diluted
$
(0.09
)
 
$
1.44

 
$
(0.14
)
 
$
0.91

 
 
 
 
 
 
 
 
Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic
20,625,408

 
21,215,576

 
21,129,722

 
21,139,212

Diluted
20,629,328

 
21,239,189

 
21,131,029

 
21,156,466









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

3


ERA GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited, in thousands)
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
 
2019
 
2018
 
2019
 
2018
Net income (loss)
 
$
(2,059
)
 
$
31,279

 
$
(3,270
)
 
$
19,406

Other comprehensive loss:
 
 
 
 
 
 
 
 
Foreign currency translation adjustments, net
 

 

 
(110
)
 
(5
)
Total other comprehensive loss
 

 

 
(110
)
 
(5
)
Comprehensive income (loss)
 
(2,059
)
 
31,279

 
(3,380
)
 
19,401

Comprehensive loss attributable to noncontrolling interest in subsidiary
 
149

 
10

 
357

 
310

Comprehensive income (loss) attributable to Era Group Inc.
 
$
(1,910
)
 
$
31,289

 
$
(3,023
)
 
$
19,711








































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

4


ERA GROUP INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN REDEEMABLE NONCONTROLLING INTEREST AND EQUITY
(unaudited, in thousands)

Three Months Ended September 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Era Group Inc. Stockholders’ Equity
 
 
Redeemable Noncontrolling Interest
 
 
Common
Stock
 
Additional
Paid-In
Capital
 
Retained Earnings
 
Treasury
Shares
 
Accumulated
Other
Comprehensive
Income
 
Total
Equity
June 30, 2019
 
$
3,094

 
 
$
224

 
$
449,687

 
$
17,282

 
$
(8,531
)
 
$

 
$
458,662

Issuance of common stock:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Employee Stock Purchase Plan
 

 
 

 
487

 

 

 

 
487

Share award amortization
 

 
 

 
929

 

 

 

 
929

Purchase of treasury shares
 

 
 

 

 

 
(1,621
)
 

 
(1,621
)
Net loss
 

 
 

 

 
(2,059
)
 

 

 
(2,059
)
Net loss attributable to redeemable noncontrolling interest
 
(149
)
 
 

 

 
149

 

 

 
149

September 30, 2019
 
$
2,945

 
 
$
224

 
$
451,103

 
$
15,372

 
$
(10,152
)
 
$

 
$
456,547




Three Months Ended September 30, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Era Group Inc. Stockholders’ Equity
 
 
Redeemable Noncontrolling Interest
 
 
Common
Stock
 
Additional
Paid-In
Capital
 
Retained Earnings
 
Treasury
Shares
 
Accumulated
Other
Comprehensive
Income
 
Total
Equity
June 30, 2018
 
$
3,466

 
 
$
219

 
$
445,885

 
$
(7,210
)
 
$
(2,951
)
 
$
105

 
$
436,048

Issuance of common stock:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Employee Stock Purchase Plan
 

 
 

 
409

 

 

 

 
409

Share award amortization
 

 
 

 
719

 

 

 

 
719

Net income
 

 
 

 

 
31,279

 

 

 
31,279

Net loss attributable to redeemable noncontrolling interest
 
(10
)
 
 

 

 
10

 

 

 
10

Currency translation adjustments, net of tax
 

 
 

 

 

 

 
5

 
5

September 30, 2018
 
$
3,456

 
 
$
219

 
$
447,013

 
$
24,079

 
$
(2,951
)
 
$
110

 
$
468,470






5


Nine Months Ended September 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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, 2018
 
$
3,302

 
 
$
219

 
$
447,298

 
$
18,285

 
$
(2,476
)
 
$
110

 
$
463,436

Issuance of common stock:
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Restricted stock grants
 

 
 
4

 
(4
)
 

 

 

 

Employee Stock Purchase Plan
 

 
 
1

 
1,076

 

 

 

 
1,077

Share award amortization
 

 
 

 
2,733

 

 

 

 
2,733

Purchase of treasury shares
 

 
 

 

 

 
(7,676
)
 

 
(7,676
)
Net loss
 

 
 

 

 
(3,270
)
 

 

 
(3,270
)
Net loss attributable to redeemable noncontrolling interest
 
(357
)
 
 

 

 
357

 

 

 
357

Currency translation adjustments, net of tax
 

 
 

 

 

 

 
(110
)
 
(110
)
September 30, 2019
 
$
2,945


 
$
224

 
$
451,103

 
$
15,372

 
$
(10,152
)
 
$

 
$
456,547



Nine Months Ended September 30, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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, 2017
 
$
3,766

 
 
$
215

 
$
443,944

 
$
4,363

 
$
(2,951
)
 
$
110

 
$
445,681

Issuance of common stock:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restricted stock grants
 

 
 
3

 
(3
)
 

 

 

 

Employee Stock Purchase Plan
 

 
 
1

 
892

 

 

 

 
893

Share award amortization
 

 
 

 
2,180

 

 

 

 
2,180

Net income
 

 
 

 

 
19,406

 

 

 
19,406

Net loss attributable to redeemable noncontrolling interest
 
(310
)
 
 

 

 
310

 

 

 
310

September 30, 2018
 
$
3,456

 
 
$
219

 
$
447,013

 
$
24,079

 
$
(2,951
)
 
$
110

 
$
468,470
















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

6


ERA GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
 
Nine Months Ended 
 September 30,
 
2019
 
2018
Cash flows from operating activities:
 
 
 
Net income (loss)
$
(3,270
)
 
$
19,406

Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depreciation and amortization
28,282

 
30,011

Share-based compensation
2,733

 
2,180

Bad debt expense, net
41

 

Interest income
(227
)
 
(614
)
Non-cash penalty and interest expenses

 
607

Gains on asset dispositions, net
(562
)
 
(2,269
)
Debt discount amortization
203

 
188

Amortization of deferred financing costs
722

 
1,173

Loss on sale of investments
569

 

Foreign currency losses, net
592

 
1,097

Losses (gains) on debt extinguishment, net
13

 
(175
)
Deferred income tax (benefit) expense
(2,887
)
 
1,541

Equity earnings, net of tax
(9,935
)
 
(1,577
)
Changes in operating assets and liabilities:
 
 
 
Decrease (increase) in receivables
176

 
(2,390
)
(Increase) decrease in prepaid expenses and other assets
(726
)
 
393

Increase in accounts payable, accrued expenses and other liabilities
4,121

 
781

Net cash provided by operating activities
19,845

 
50,352

Cash flows from investing activities:
 
 
 
Purchases of property and equipment
(5,168
)
 
(7,686
)
Proceeds from disposition of property and equipment
9,252

 
29,520

Purchase of investments
(5,000
)
 

Proceeds from sale of investments
4,430

 

Dividends received from equity investees

 
1,000

Proceeds from sale of equity investees, net
34,712

 

Principal payments on notes due from equity investees
2,334

 
401

Principal payments on third party notes receivable
5,340

 
620

Net cash provided by investing activities
45,900

 
23,855

Cash flows from financing activities:
 
 
 
Long-term debt issuance costs

 
(1,295
)
Payments on long-term debt
(1,458
)
 
(42,562
)
Extinguishment of long-term debt
(740
)
 

Proceeds from share award plans
1,077

 
893

Purchase of treasury shares
(7,676
)
 

Net cash used in financing activities
(8,797
)
 
(42,964
)
Effects of exchange rate changes on cash and cash equivalents
35

 
(445
)
Net increase in cash, cash equivalents and restricted cash
56,983

 
30,798

Cash, cash equivalents and restricted cash, beginning of period
50,753

 
16,833

Cash, cash equivalents and restricted cash, end of period
$
107,736


$
47,631

Supplemental cash flow information:
 
 
 
Cash paid for interest
$
6,690

 
$
7,867

Interest capitalized during the period

 
97

Interest, net of amounts capitalized
$
6,690

 
$
7,770

Cash paid for income taxes
$
1,255

 
63





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

7


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 nine months ended September 30, 2019 and 2018 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 September 30, 2019, its results of operations for the three and nine months ended September 30, 2019 and 2018, its comprehensive income for the three and nine months ended September 30, 2019 and 2018, its changes in equity for the three and nine months ended September 30, 2019, and 2018, and its cash flows for the nine months ended September 30, 2019 and 2018. 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, 2018.
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 December through February, as daylight hours decrease.
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 VIEs of which the Company is the primary beneficiary. Aeróleo Taxi Aereo S/A (“Aeróleo”) is a VIE of which the Company is the primary beneficiary. All significant inter-company accounts and transactions are eliminated in consolidation.
Reclassification. Certain amounts reported for prior periods in the consolidated financial statements have been reclassified to conform with the current period’s presentation.
Supplemental Cash Flow Information. The following table sets forth the Company’s reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Statement of Cash Flows (in thousands):
 
September 30, 2019
 
December 31, 2018
 
September 30, 2018
 
December 31, 2017
Cash and cash equivalents
$
107,736

 
$
50,753

 
$
47,631

 
$
13,583

Restricted cash (1)

 

 

 
3,250

Total cash, cash equivalents and restricted cash shown in the Consolidated Statement of Cash Flows
$
107,736

 
$
50,753

 
$
47,631

 
$
16,833

(1) Restricted cash represents amounts deposited in escrow accounts at the end of each period. Escrow deposits are shown as a separate line item in the consolidated balance sheet.
Revenue Recognition. The Company recognizes revenues for flight services and emergency response services with the passing of each day as the Company has the right to consideration from its customers in an amount that corresponds directly with the value to the Company’s customer of the performance completed to date. Therefore, the Company has elected to exercise the right to invoice practical expedient in its adoption of ASC 606. The right to invoice represents a method for recognizing revenue over time using the output measure of “value to the customer” which is an objective measure of an entity’s performance in a contract. The Company typically invoices its customers on a monthly basis for revenues earned during the prior month with payment terms of 30 days. The Company’s customer arrangements do not contain any significant financing component for its customers.
Trade Receivables. Customers are primarily international, independent and major integrated exploration, development and production companies, third party 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 trade receivables and makes provisions for probable doubtful accounts; however, those provisions are estimates. Actual results could differ from those estimates, and those differences may be material.

8


Leases. The Company determines if an arrangement is a lease at inception or during modification or renewal of an existing lease. Operating leases are maintained for a number of fixed assets including land, hangars, buildings, fuel tanks and tower sites. The right-of-use assets associated with these leases are reflected under long-term assets; the current portion of the long-term payables are reflected under other current liabilities; and the payables on lease agreements past one year are recorded as long-term liabilities on the Company’s consolidated balance sheets. For those contracts with terms of twelve months or less, the lease expense is recognized on a straight-line basis over the lease term and recorded in operating expenses on the consolidated statement of operations.  As most of the Company’s leases do not provide an implicit rate, the incremental borrowing rate based on the information available at commencement date is used to determine the present value of future payments. Most of the Company’s lease agreements allow the option of renewal or extension, which are considered a part of the lease term. When it is reasonably certain that a lease will be extended, this is incorporated into the calculations.
New Accounting Standards - Adopted. In February 2016, the Financial Accounting Standards Board (“ FASB”) issued ASU No. 2016-02, “Leases” (ASU No. 2016-02), which establishes comprehensive accounting and financial reporting requirements for leasing arrangements.  This ASU supersedes the existing requirements in FASB ASC Topic 840, “Leases,” and requires lessees to recognize substantially all lease assets and lease liabilities on the balance sheet.  The provisions of ASU No. 2016-02 also modify the definition of a lease and outline requirements for recognition, measurement, presentation and disclosure of leasing arrangements by both lessees and lessors.  This ASU is effective for interim and annual periods beginning after December 15, 2018, and early adoption of the standard is permitted.  In July 2018, the ASU No. 2016-02 was further amended by the provisions of ASU No. 2018-11, “Targeted Improvements” to Topic 842 whereby the FASB decided to provide an alternate transition method by allowing entities to initially apply the new leases standard at the adoption date (such as January 1, 2019, for calendar year-end public business entities) and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption consistent with preparers’ requests. The Company adopted ASU No. 2016-02, as amended, effective January 1, 2019, using the current-period adjustment method and has recognized a cumulative-effect adjustment to the opening balance of retained earnings in that period. The Company has elected an optional practical expedient to retain its current classification of leases, and as a result, the initial impact of adopting this new standard has not been material to its consolidated financial statements. The cumulative effect of the adoption on retained earrings is less than $0.1 million. Additionally, the Company elected not to bifurcate and separately account for non lease components contained in a single contract. See note 4 - Leases for additional information related to the Company’s operating leases.
In August 2018, the FASB issued ASU No. 2018-15, “Intangibles-Goodwill and Other-Internal-Use Software” (Subtopic 350-40), providing guidance addressing a customer's accounting for implementation costs incurred in a cloud computing arrangement (“CCA”) that is considered a service contract. Under the new guidance, implementation costs for a CCA are evaluated for capitalization using the same approach as implementation costs associated with internal-use software and should be expensed over the term of the hosting arrangement, which includes any reasonably certain renewal periods. The new guidance is effective for fiscal years beginning after December 15, 2019 for calendar year-end public business entities. Early adoption is permitted, including adoption in any interim period. The Company will not take possession of implemented software and will rely on vendors to host the software, thus determining the cloud computing arrangements are service contracts. The Company adopted ASU No. 2016-13, effective January 1, 2019, and has appropriately accounted for the implementation costs of the cloud computing arrangements entered into in the first half of 2019. The adoption of ASU-2018-15 did not have a material impact on the Company’s consolidated financial statements.
New Accounting Standards - Not Yet Adopted. In June 2016, the FASB issued ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments” (ASU No. 2016-13), which sets forth the current expected credit loss model, a new forward-looking impairment model for certain financial instruments based on expected losses rather than incurred losses.  The ASU is effective for interim and annual periods beginning after December 15, 2019, and early adoption of the standard is permitted.  Entities are required to adopt ASU No. 2016-13 using a modified retrospective approach, subject to certain limited exceptions.  The Company is currently evaluating the potential impact of the adoption of this ASU on its consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurements” (ASU No. 2018-13, update to topic ASC-820), providing guidance for the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period, and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. For certain unobservable inputs, an entity may disclose other quantitative information (such as the median or arithmetic average) in lieu of the weighted average if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements. ASU No. 2018-13 will be effective for interim and annual periods beginning after December 15, 2019. The Company has not adopted ASU No. 2018-13 and believes such adoption will not have a material impact on its consolidated financial statements.

9


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.
As of September 30, 2019 and December 31, 2018, 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 September 30, 2019 and December 31, 2018 were as follows (in thousands): 
 
Carrying
Amount
 
Level 1
 
Level 2
 
Level 3
September 30, 2019
 
 
 
 
 
 
 
LIABILITIES
 
 
 
 
 
 
 
Long-term debt, including current portion
$
160,576

 
$

 
$
168,920

 
$

 
 
 
 
 
 
 
 
December 31, 2018
 
 
 
 
 
 
 
LIABILITIES
 
 
 
 
 
 
 
Long-term debt, including current portion
$
162,275

 
$

 
$
159,367

 
$

The carrying values of cash and cash equivalents, receivables and accounts payable approximate fair value. The fair value of the Company’s long-term debt was estimated using discounted cash flow analysis 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.
Investments. During the first quarter of 2019, the Company purchased $5.0 million of corporate securities. This investment was recorded on the balance sheet under other current assets as its stated maturity date was within a year. During the three months ended June 30, 2019, the Company sold these corporate securities for cash proceeds of $4.4 million resulting in a net loss of $0.6 million.
3.
ACQUISITIONS AND DISPOSITIONS
Capital Expenditures. During the nine months ended September 30, 2019, capital expenditures were $5.2 million and consisted primarily of spare helicopter parts and leasehold improvements. During the nine months ended September 30, 2019, the Company did not capitalize any interest. During the nine months ended September 30, 2018, the Company capitalized interest of $0.1 million. As of September 30, 2019 and December 31, 2018, construction in progress, which is a component of property and equipment, included capitalized interest of $0.7 million. A summary of changes to the Company’s operating helicopter fleet is as follows:
Equipment Additions - During the nine months ended September 30, 2019, the Company did not place any helicopters into service. During the nine months ended September 30, 2018, the Company placed one S92 heavy helicopter into service. The Company places helicopters in service once completion work has been finalized and the helicopters are ready for use.
Equipment Dispositions - During the nine months ended September 30, 2019, the Company sold or otherwise disposed of three helicopters, two hangar facilities, and related property and equipment for cash proceeds of $9.3 million. During the nine months ended September 30, 2018, the Company sold or otherwise disposed of twenty helicopters, two operating facilities, and related property and equipment for cash proceeds of $29.5 million and receivables of $14.3 million.

10


4.
LEASES
The Company leases land, hangars, buildings, fuel tanks and tower sites under operating lease agreements. The Company determines if an arrangement is a lease at inception, and many of these leases offer an option for renewal or extension. The adoption of ASC 842 allows the Company to retain its current classification of leases, and the optional practical expedience rule has allowed the use of the current-period adjustment method to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the current period rather than the restatement of prior year lease amounts. The majority of the bases from which the Company operates are leased, with current remaining terms between one and sixty years. The lease expense on those contracts with initial terms of twelve months or less are recognized on a straight-line basis over the lease term and are not recorded on the balance sheet. The Company does not currently maintain any finance leases and has only operating lease agreements.
The Company’s maturity analysis of lease payments under operating leases that had a remaining term in excess of one year as of December 31, 2018 was as follows (in thousands):
 
 
Minimum Payments
2019
 
$
1,573

2020
 
1,530

2021
 
987

2022
 
562

2023
 
495

Years subsequent to 2023
 
7,952

Total future minimum lease payments
 
$
13,099

The Company’s maturity analysis of lease payments under operating leases that have a remaining term in excess of one year as of September 30, 2019 was as follows (in thousands):
 
 
Minimum Payments
2019
 
$
547

2020
 
2,369

2021
 
1,758

2022
 
1,334

2023
 
1,298

Years subsequent to 2023
 
9,358

Total future minimum lease payments
 
16,664

Less: imputed interest
 
6,676

Present value of lease liabilities
 
$
9,988

During the three and nine months ended September 30, 2019, the Company recognized $1.3 million and $2.9 million of operating lease expense, respectively. Included in these amounts was $0.7 million and $1.2 million for contracts with remaining terms of less than one year for the three and nine months ended September 30, 2019, respectively.
Reported balances:
 
 
Other current liabilities
 
$
1,822

Long-term lease liabilities
 
8,166

Total operating lease liabilities
 
$
9,988

As of September 30, 2019, other information related to these leases was as follows:
Weighted average remaining lease term
 
15 years

Weighted average discount rate
 
6.09
%
Cash paid for amounts included in the measurement of lease liabilities during the nine months ended September 30, 2019 (in thousands)
 
$ 1,570


11



The Company generates revenues as a lessor from its dry-leasing line of service that require a fixed monthly fee for the customer’s right to use the helicopter and, where applicable, additional charges as compensation for any support the Company may provide to the customer. Revenues from dry-leasing contracts are shown on the face of the statement of operations.
In 2018, the Company disposed of six H225 heavy helicopters through sales-type leases. During the three and nine months ended September 30, 2019, the Company recognized interest income on these leases of $0.4 million and $1.4 million, respectively. During the three months ended September 30, 2019, the Company completed the final sale of two of these helicopters and received cash proceeds of $5.0 million. As of September 30, 2019, the Company had remaining receivables of $13.6 million, of which $9.8 million is due within a year and the remaining balance of $3.8 million is due within two years.
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.
The Company’s condensed consolidated balance sheets at September 30, 2019 and December 31, 2018 include assets of Aeróleo totaling $14.2 million and $11.9 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 September 30, 2019 and December 31, 2018 include liabilities of Aeróleo of $5.9 million and $4.5 million, respectively. The creditors for such liabilities do not have recourse to Era Group or its subsidiaries other than Aeróleo.
In the fourth quarter of 2019, the Company exercised its contractual call option to purchase the remaining 50% economic interest and 20% voting interest from the Company’s partner in Aeróleo. The amount paid to effect this purchase was not material.
6.
INCOME TAXES
During the three months ended September 30, 2019 and 2018, the Company recorded an income tax expense of $0.5 million and $7.9 million, respectively, resulting in an effective tax rate of (33.4)% and 20.3%, respectively.
During the nine months ended September 30, 2019 and 2018, the Company recorded an income tax expense of $0.3 million and $4.5 million, respectively, resulting in an effective tax rate of (2.5)% and 20.3%, respectively.
The effective tax rate for 2019 is impacted by the gain on the sale of the Company’s Dart Holding Company Ltd. (“Dart”) joint venture. The Company recorded pre-tax losses for the three months ended September 30, 2019, but, due to the sale of Dart, the Company recorded an income tax expense for the period.
During the nine months ended September 30, 2019 and 2018, there were no new uncertain tax positions identified. The Company’s 2015 federal income tax return examination has concluded with no adjustments.
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 September 30, 2019 and December 31, 2018, the gross amount of liability for accrued interest and penalties related to unrecognized tax benefits was $0.1 million.

12


7.
LONG-TERM DEBT
The Company’s borrowings as of September 30, 2019 and December 31, 2018 were as follows (in thousands):
 
 
September 30, 2019
 
December 31, 2018
7.750% Senior Notes (excluding unamortized discount)
 
$
144,088

 
$
144,828

Senior secured revolving credit facility
 

 

Promissory notes
 
18,732

 
19,980

Other
 
182

 
395

Total principal balance on borrowings
 
163,002

 
165,203

Portion due within one year
 
(1,845
)
 
(2,058
)
Unamortized debt issuance costs
 
(1,419
)
 
(1,712
)
Unamortized discount, net
 
(1,007
)
 
(1,216
)
Long-term debt
 
$
158,731

 
$
160,217

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.
In June 2019, the Company repurchased $0.7 million of the 7.750% Senior Notes at par for total cash of $0.7 million, including accrued interest of less than $0.1 million, and recognized a loss on debt extinguishment of less than $0.1 million.
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”). On March 7, 2018, Era Group entered into a Consent and Amendment No. 4 to the Amended and Restated Senior Secured Revolving Credit Facility Agreement (the “Amendment No. 4” and the Amended and Restated Revolving Credit Facility, as amended by Amendment No. 4, is referred to herein as the “Revolving Credit Facility”) that, among other things, (a) reduced the aggregate principal amount of revolving loan commitments from $200.0 million to $125.0 million, (b) extended the agreement’s maturity until March 31, 2021, (c) revised the definition of EBITDA to permit an add-back for certain litigation expenses related to the H225 helicopters, and (d) adjusted the maintenance covenant requirements to maintain an interest coverage ratio of not less than 1.75:1.00 and a senior secured leverage ratio of not more than 3.25:1.00.
The Revolving Credit Facility provides Era Group with the ability to borrow up to $125.0 million, with a sub-limit of up to $50.0 million for letters of credit, and matures in March 2021. 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 $50.0 million.
Borrowings under the Revolving Credit Facility bear interest at a rate per annum equal to, at Era Group’s election, either a base rate or LIBOR, each as defined in the Revolving Credit Facility, plus an applicable margin. The applicable margin is based on the Company’s ratio of funded debt to EBITDA, as defined in the Revolving Credit Facility, and ranges from 1.25% to 2.50% on the base rate margin and 2.25% to 3.50% on the LIBOR margin. The applicable margin as of September 30, 2019 was 2.25% on the base rate margin and 3.25% on the LIBOR margin. In addition, the Company is required to pay a quarterly commitment fee based on the 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 0.375% to 0.500%. As of September 30, 2019, the commitment fee was 0.500%.
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 September 30, 2019, Era Group had no outstanding borrowings under the Revolving Credit Facility and issued letters of credit of $0.7 million. In connection with Amendment No. 4 entered into in 2018, the Company wrote off previously incurred debt issuance costs of $0.4 million and incurred additional debt issuance costs of $1.3 million. Such costs are included

13


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 nine months ended September 30, 2019, the Company did not enter into any new debt arrangements in Brazil.
During 2017, the Company settled certain tax disputes in Brazil under the Tax Regularization Settlement Special Program (known as Programa Especial de Regularização Tributária or “PERT”) and has agreed to make installment payments on the amounts due to the applicable taxing authorities. The installments are payable in Brazilian reals and bear interest at a rate equal to the overnight rate as published by the Central Bank of Brazil. Such amounts are included in other debt in the table above. During the nine months ended September 30, 2019, the Company made scheduled payments of $0.2 million.
Promissory Notes. During each of the nine months ended September 30, 2019 and 2018, the Company made scheduled payments on other long-term debt of $1.2 million.
8.
COMMITMENTS AND CONTINGENCIES
Fleet. The Company’s unfunded capital commitments as of September 30, 2019 consisted primarily of agreements to purchase helicopters and totaled $78.2 million, which is payable beginning in 2020 through 2021. The Company also had $1.3 million of deposits paid on options not yet exercised. All of the Company’s capital commitments (inclusive of deposits paid on options not yet exercised) may be terminated without further liability other than aggregate liquidated damages of $2.1 million.
Included in these commitments are orders to purchase three AW189 heavy helicopters and five AW169 light twin helicopters. The AW189 helicopters are scheduled to be delivered in 2020 and 2021. 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 in 2021 and 2022.
Brazilian Tax Disputes. In connection with its ownership of Aeróleo and its operations in Brazil, the Company has several ongoing legal disputes related to the local, municipal and federal taxation requirements in Brazil, including assessments associated with the import and re-export of its helicopters in Brazil. The legal disputes are related to: (i) municipal tax assessments arising under the authorities in Rio de Janeiro (for the period between 2000 and 2005) and Macaé (for the period between 2001 to 2006) (collectively, the “Municipal Tax Disputes”); (ii) social security contributions that one of its customers was required to remit from 1995 to 1998; (iii) penalties assessed due to its alleged failure to comply with certain deadlines related to the helicopters the Company imports and exports in and out of Brazil; and (iv) fines sought by taxing authorities in Brazil related to its use of certain tax credits used to offset certain social tax liabilities (collectively, the “Tax Disputes”).
The aggregate amount at issue for the Tax Disputes is $13.3 million. The Municipal Tax Disputes are the largest contributor to the total amount being sought from Aeróleo, with approximately $9.9 million at issue.
In addition to the foregoing Tax Disputes (and unrelated thereto), Aeróleo is engaged in two additional civil litigation matters relating to: (i) a dispute with its former tax consultant who has alleged that $0.5 million is due and payable as a contingency fee related to execution of certain tax strategies; and (ii) a fatal accident that occurred in 1983 that was previously settled with the plaintiffs’ in the U.S. (the “Civil Disputes”). With respect to the fatal accident, the plaintiffs are seeking to collect additional amounts in Brazil despite the previous settlement agreed upon by the parties in the U.S.
The Company continues to evaluate and assess various legal strategies for each of the Tax Disputes and the Civil Disputes. As is customary for certain legal matters in Brazil, Aeróleo has already deposited amounts as security into an escrow account to pursue further legal appeals in several of the Tax Disputes and the Civil Disputes. As of September 30, 2019, the Company has deposited $5.1 million into escrow accounts controlled by the court with respect to the Tax Disputes and the Civil Disputes, and the Company has fully reserved such amounts subject to final determination and the judicial release of such escrow deposits. These estimates are based on its 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. Aeróleo plans to defend the cases vigorously. As of September 30, 2019, it is not possible to determine the outcome of the Tax Disputes or the Civil Disputes, but the Company does not expect that an outcome would have a material adverse effect on its business, financial position or results of operations.
General Litigation and Disputes
In the normal course of business, the Company is involved in various litigation matters including, among other things, claims by third parties for alleged property damages and personal injuries. In addition, from time to time, the Company is involved in tax and other disputes with various government agencies. Management has used estimates in determining the Company’s potential exposure to these matters and has recorded reserves in its financial statements related thereto as appropriate. It is possible that a change in its estimates related to these exposures could occur, but the Company does not expect such changes in estimated costs would have a material effect on its business, consolidated financial position or results of operations.

14


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 and outstanding during the relevant periods pursuant to the exercise of outstanding stock options.
Computations of basic and diluted earnings per common share of the Company for the three and nine months ended September 30, 2019 and 2018 were as follows (in thousands, except share and per share data):
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
 
2019
 
2018
 
2019
 
2018
Net income (loss) attributable to Era Group Inc.
 
$
(1,910
)
 
$
31,289

 
$
(2,913
)
 
$
19,716

Less: Net income attributable to participating securities
 

 
714

 

 
425

Net income (loss) attributable to fully vested common stock
 
$
(1,910
)
 
$
30,575

 
$
(2,913
)
 
$
19,291

 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
20,625,408

 
21,215,576

 
21,129,722

 
21,139,212

Diluted(1)

 
20,629,328

 
21,239,189

 
21,131,029

 
21,156,466

 
 
 
 
 
 
 
 
 
Income (loss) per common share, basic and diluted
 
$
(0.09
)
 
$
1.44

 
$
(0.14
)
 
$
0.91

____________________
(1)
Excludes weighted average common shares of 207,532 and 224,769 for the three months ended September 30, 2019 and 2018, respectively, and 204,919 and 223,921 for the nine months ended September 30, 2019 and 2018, respectively, for certain share awards as the effect of their inclusion would have been antidilutive.

Share Repurchases. On August 14, 2014, the Company’s Board of Directors approved a share repurchase program authorizing up to $25.0 million of share repurchases. The share repurchase program has no expiration date and may be suspended or discontinued at any time without notice.
During the three months ended September 30, 2019, Era Group repurchased 188,553 shares of common stock in open market transactions for gross consideration of $1.6 million, which is an average cost per share of $8.45. During the nine months ended September 30, 2019, Era Group repurchased 988,721 shares of common stock in open market transactions for gross consideration of $7.6 million, which is an average cost per share of $7.72. As of September 30, 2019, $15.3 million remained of the $25.0 million share repurchase program.

15


10.
REVENUES
The Company derives its revenues primarily from oil and gas flight services, emergency response services and leasing activities. Dry-leasing revenues are recognized in accordance with ASC 842. Revenue is recognized when control of the promised goods or services is transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.
The following table presents the Company’s operating revenues disaggregated by geographical region in which services are provided:
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2019
 
2018
 
2019
 
2018
Operating revenues:
 
 
 
 
 
 
 
U.S.
$
38,027

 
$
38,229

 
$
107,016

 
$
117,673

International
16,632

 
13,665

 
46,553

 
43,443

Total operating revenues
$
54,659

 
$
51,894

 
$
153,569

 
$
161,116

The following table presents the Company’s total revenues earned by service line:
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2019
 
2018
 
2019
 
2018
Revenues:
 
 
 
 
 
 
 
Oil and gas flight services:
 
 
 
 
 
 
 
U.S.
$
36,226

 
$
35,473

 
$
101,850

 
$
109,778

International
14,740

 
13,665

 
42,855

 
43,443

Total oil and gas
50,966

 
49,138

 
144,705

 
153,221

Emergency response services
3,693

 
2,756

 
8,864

 
7,895

Total operating revenues
$
54,659

 
$
51,894

 
$
153,569

 
$
161,116

Dry-leasing revenues:
 
 
 
 
 
 
 
U.S.
610

 
1,142

 
2,055

 
2,984

International
3,640

 
1,574

 
10,058

 
5,560

Total revenues
$
58,909

 
$
54,610

 
$
165,682

 
$
169,660

The Company determines revenue recognition by applying the following steps:
1.
Identify the contract with a customer;
2.
Identify the performance obligations in the contract;
3.
Determine the transaction price;
4.
Allocate the transaction price to the performance obligations; and
5.
Recognize revenue as the performance obligations are satisfied.
The Company earns the majority of its revenue through master service agreements or subscription agreements, which typically include a fixed monthly or daily fee, incremental fees based on hours flown and fees for ancillary items such as fuel, security, charter services, etc. The Company’s arrangements to serve its customers represent a promise to stand ready to provide services at the customer’s discretion.
The Company recognizes revenue for flight services and emergency response services with the passing of each day as the Company has the right to consideration from its customers in an amount that corresponds directly with the value to the customer of performance completed to date. The Company typically invoices customers on a monthly basis for revenues earned during the prior month, with payment terms of 30 days. The Company’s customer arrangements do not contain any significant financing component for customers. Amounts for taxes collected from customers and remitted to governmental authorities are reported on a net basis.

16


11.
RELATED PARTY TRANSACTIONS
The Company purchased products and services from its Dart joint venture totaling $0.6 million during the three months ended March 31, 2019. The Company purchased products and services from Dart totaling $0.4 million and $1.7 million during the three and nine months ended September 30, 2018, respectively. The Company also had a note receivable from Dart, which had a balance of $2.3 million as of December 31, 2018. The note was paid in full during the first quarter of 2019. Purchases from Dart are included in operating expenses on the consolidated statements of income, and the note receivable was included in equity investments and advances on the consolidated balance sheets.
During the nine months ended September 30, 2019, the Company in conjunction with its 50% joint venture partner entered into an agreement to sell Dart. The transaction closed on April 1, 2019, for gross proceeds of $38.0 million, including payment of the note receivable in March 2019, and net gains of $10.9 million.
During each of the three and nine months ended September 30, 2018, the Company incurred fees of less than $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 and nine months ended September 30, 2018, the Company provided helicopter, management and other services to ETC of approximately $0.1 million. Revenues from ETC were recorded in operating revenues, and expenses incurred were recorded in operating expenses on the consolidated statements of operations. ETC was dissolved in the third quarter of 2018.
12.
SHARE-BASED COMPENSATION
Restricted Stock Awards. The number of shares and weighted average grant price of restricted stock awards during the nine months ended September 30, 2019 were as follows:
 
Number of Shares
 
Weighted Average Grant Price
Non-vested as of December 31, 2018
513,766

 
$
10.28

Restricted stock awards granted:
 
 
 
Non-employee directors
34,488

 
$
10.35

Employees
361,056

 
$
10.35

Vested
(270,997
)
 
$
10.36

Forfeited

 
$

Non-vested as of September 30, 2019
638,313

 
$
10.29

The total fair value of shares vested during each of the nine months ended September 30, 2019 and 2018, determined using the closing price on the grant date, was $2.8 million.
Stock Options. The Company did not grant any stock options during the nine months ended September 30, 2019.
Employee Stock Purchase Plan (“ESPP”). During the nine months ended September 30, 2019, the Company issued 120,754 shares under the ESPP. As of September 30, 2019, 101,624 shares remain available for issuance under the ESPP.
Total share-based compensation expense, which includes stock options, restricted stock and the ESPP, was $2.7 million and $2.2 million for the nine months ended September 30, 2019 and 2018, respectively.
13.
GUARANTORS OF SECURITIES
Era Group’s payment obligations under the 7.750% Senior Notes are jointly and severally guaranteed by all of its existing 100% owned U.S. subsidiaries that guarantee the Revolving Credit Facility and any future U.S. subsidiaries that guarantee the Revolving Credit Facility or other material indebtedness Era Group may incur in the future (the “Guarantors”). All the Guarantors currently guarantee the Revolving Credit Facility, and the guarantees of the Guarantors are full and unconditional and joint and several.
As a result of the agreement by the Guarantors to guarantee the 7.750% Senior Notes, the Company presents 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 accompanying consolidated financial statements and notes of the Company.

17


Supplemental Condensed Consolidating Balance Sheet as of September 30, 2019
 
Parent
 
Guarantors
 
Non-guarantors
 
Eliminations
 
Consolidated
 
(in thousands, except share data)
ASSETS
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
105,639

 
$

 
$
2,097

 
$

 
$
107,736

Receivables:
 
 
 
 
 
 
 
 
 
Trade, operating, net of allowance for doubtful accounts of $176

 
24,779

 
6,533

 

 
31,312

Trade, dry-leasing

 
5,864

 

 

 
5,864

Tax receivable

 
10

 
2,695

 

 
2,705

Other

 
11,305

 
262

 

 
11,567

Inventories, net

 
20,784

 
42

 

 
20,826

Prepaid expenses
565

 
2,046

 
240

 

 
2,851

Total current assets
106,204

 
64,788

 
11,869

 

 
182,861

Property and equipment

 
884,816

 
16,764

 

 
901,580

Accumulated depreciation

 
(330,543
)
 
(4,187
)
 

 
(334,730
)
Property and equipment, net

 
554,273

 
12,577

 

 
566,850

Operating lease right-of-use

 
8,095

 
1,812

 

 
9,907

Investments in consolidated subsidiaries
183,226

 

 

 
(183,226
)
 

Intangible assets

 

 
1,094

 

 
1,094

Deferred income taxes
12,774

 

 

 
(12,774
)
 

Intercompany receivables
294,405

 

 
47

 
(294,452
)
 

Other assets
815

 
5,145

 
403

 

 
6,363

Total assets
$
597,424

 
$
632,301

 
$
27,802

 
$
(490,452
)
 
$
767,075

LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable and accrued expenses
$
134

 
$
10,247

 
$
1,559

 
$

 
$
11,940

Accrued wages and benefits
32

 
7,216

 
1,712

 

 
8,960

Accrued interest
3,261

 
60

 

 

 
3,321

Accrued income taxes
2,922

 
10

 
13

 

 
2,945

Accrued other taxes

 
1,693

 
293

 

 
1,986

Accrued contingencies

 

 
548

 

 
548

Current portion of long-term debt

 
1,663

 
182

 

 
1,845

Other current liabilities
885

 
1,585

 
381

 

 
2,851

Total current liabilities
7,234

 
22,474

 
4,688

 

 
34,396

Long-term debt
133,662

 
25,069

 

 

 
158,731

Deferred income taxes

 
116,968

 
1,246

 
(12,774
)
 
105,440

Intercompany payables

 
231,203

 
63,271

 
(294,474
)
 

Operating lease liabilities

 
6,731

 
1,435

 

 
8,166

Other liabilities

 
850

 

 

 
850

Total liabilities
140,896

 
403,295

 
70,640

 
(307,248
)
 
307,583

Redeemable noncontrolling interest

 
3

 
2,942

 

 
2,945

Equity: