Era Group Inc. (NYSE: ERA)
- Full year 2013 net income of $18.7 million on operating revenues of $299.0 million compared to net income of $7.8 million on operating revenues of $272.9 million in 2012
- Fourth quarter net income of $1.8 million on operating revenues of $76.0 million compared to net income of $3.6 million on operating revenues of $70.9 million in the prior year quarter
- Adjusted EBITDA of $95.3 million in full year 2013 compared to $78.8 million in 2012
- Adjusted EBITDA of $20.0 million in fourth quarter 2013 compared to $21.2 million in the prior year quarter
- In the fourth quarter, higher revenues due to the EC225 heavy helicopters resuming operations, increased utilization and rates for single engine helicopters in the U.S. Gulf of Mexico and new search and rescue customers were offset by lower dry-leasing revenues, an increase in headcount and compensation expenses and losses on equity investments
- The increase in headcount, compensation expense and other administrative and general expenses is related to being an independent public company, which was not the case in the fourth quarter of 2012
- As of December 31, 2013, unfunded capital commitments totaled $341.7 million of which $98.7 million is payable during 2014
- Total long-term debt was $279.4 million as of December 31, 2013
- As of December 31, 2013, cash balances were $31.3 million and remaining availability under our revolving credit facility was $136.1 million
Era Group Inc. today reported net income for its fourth quarter ended December 31, 2013 of $1.8 million on operating revenues of $76.0 million compared to net income of $3.6 million on operating revenues of $70.9 million in the prior year quarter. The Company also reported net income for its fiscal year ended December 31, 2013 of $18.7 million on operating revenues of $299.0 million compared to net income of $7.8 million on operating revenues of $272.9 million in the prior fiscal year.
Operating income for the current quarter was $9.6 million compared to $9.7 million in the prior year quarter. Operating income for fiscal year 2013 was $46.2 million compared to $32.1 million in the prior fiscal year. Earnings before interest, taxes, depreciation and amortization (“EBITDA”) was $20.0 million in the current quarter compared to $20.7 million in the prior year quarter. EBITDA for fiscal year 2013 was $93.1 million compared to $67.3 million in the prior fiscal year. Fourth quarter and full year 2013 results included $0.5 million and $18.3 million in gains on asset dispositions, respectively, compared to $0.2 million and $3.6 million of gains in the fourth quarter and full year 2012.
Adjusted EBITDA for fiscal year 2013, which excludes a one-time charge of $2.0 million related to operating leases on certain helicopters configured for air medical services, was $95.3 million. Adjusted EBITDA for fiscal year 2012, which excludes an impairment charge of $5.9 million on our Brazilian joint venture, $2.9 million of expenses related to non-prosecution of our initial public offering, $2.0 million in SEACOR Management Fees, and $0.7 million in severance expense related to prior changes in executive management, was $78.8 million. The $16.4 million increase in Adjusted EBITDA in fiscal year 2013 is primarily due to the $14.7 million increase in gains on asset dispositions compared to fiscal year 2012.
“2013 was a record year for Era. Operating revenues and Adjusted EBITDA increased by 10% and 21%, respectively, over the prior fiscal year. This record financial performance was achieved despite the suspension of flight operations of the EC225 heavy helicopters for more than half the year, which represent almost 25% of our fleet value,” said Sten Gustafson, Chief Executive Officer of Era Group. “The significant gains recognized from asset dispositions during the year not only represent a continuation of our returns-focused strategy to deliver value for our shareholders but also further validate our strategy of owning our equipment. We have continued to deploy capital to selectively expand and upgrade our helicopter fleet as evidenced by our orders for new S92 and AW189 heavy helicopters and AW139 medium helicopters.”
“Operating revenues of $76.0 million were also a record for the fourth quarter, representing a 7% increase over the prior year quarter. Fourth quarter Adjusted EBITDA of $20.0 million represented a decrease of $1.2 million from the prior year quarter. Our policy of recognizing revenue from our Brazilian joint venture and our customer in India only when cash is remitted resulted in a $2.8 million negative impact to revenues and EBITDA in the fourth quarter of 2013 compared to the fourth quarter of 2012.”
Fourth Quarter Results
Operating revenues in the fourth quarter ended December 31, 2013 increased $5.1 million over the prior year quarter primarily due to the resumption of operations of the EC225 helicopters, increased utilization and higher rates for single engine helicopters in the U.S. Gulf of Mexico, and new search and rescue customers. These increases were partially offset by a decrease in dry-leasing revenues primarily due to lower cash receipts from our Brazilian joint venture and our customer in India and dry-leases that ended since the prior year quarter when the helicopters were sold or reassigned to our oil and gas operations. We collected cash receipts of $6.4 million from our Brazilian joint venture and our customer in India in the fourth quarter of 2013, which represents a $2.8 million decrease from the $9.2 million of cash collected in the prior year quarter.
Operating expenses were $2.9 million higher in the current quarter. Repairs and maintenance expenses were $1.6 million higher primarily due to the timing of repairs and an increase in power-by-hour expense as a result of an increase in flight hours and the resumption of the EC225 helicopter operations. Personnel costs increased $1.2 million primarily due to an increase in personnel to support the increased activity with oil and gas customers.
Administrative and general expenses were $3.0 million higher in the current quarter. Compensation and employee costs were $1.8 million higher primarily due to an increase in personnel, management bonus awards and share-based compensation related to incentive equity awards granted following our spin-off from SEACOR Holdings Inc. (“SEACOR”). Legal, professional and other expenses increased $0.6 million as a result of being an independent public company. Allowance for doubtful accounts increased $0.5 million due to collection issues related to a note with a customer that purchased parts in a previous year.
Depreciation expense was $11.1 million in the current quarter, a decrease of $0.3 million, primarily due to helicopters and related parts sold in 2013.
Losses from equity investments were $0.9 million in the current year quarter, which was $0.8 million lower than in the prior year quarter.
Sequential Quarter Results
Fourth quarter operating revenues decreased $5.0 million compared to the third quarter ended September 30, 2013, primarily due to the end of seasonal activities. Fourth quarter net income decreased $3.5 million. Operating income and Adjusted EBITDA for the fourth quarter decreased by $1.6 million and $5.4 million, respectively. In addition to the impact of seasonality factors, the decreases in net income, operating income and Adjusted EBITDA in the fourth quarter were also due to lower gains on asset dispositions and losses from equity investments.
Full Year Results
Operating revenues in 2013 increased $26.0 million compared to 2012 primarily due to higher utilization of medium helicopters related to an increase in oil and gas activities in the U.S. Gulf of Mexico and Alaska, the commencement of international oil and gas operations in 2013, and an increase in search and rescue activities. These increases were partially offset by a decrease in dry-leasing and air medical revenues.
Operating expenses were $19.4 million higher in 2013 compared to 2012. Repairs and maintenance expenses increased $12.9 million primarily due to the timing of repairs and the prior year benefit from vendor credits. Personnel costs increased $4.4 million primarily due to increased headcount to support the increase in oil and gas activities discussed above. In addition, lease expense was $1.5 million higher in the current year due to a one-time charge related to operating leases on certain air medical helicopters.
Administrative and general expenses increased $4.1 million in 2013 compared to 2012 primarily due to an increase in compensation and employee costs and expenses related to being an independent public company. Depreciation expense was $3.1 million higher in the current year primarily due to the addition of new and higher cost helicopters.
Gains on asset dispositions were $18.3 million in fiscal year 2013, a $14.7 million increase from the prior year.
Interest expense increased $7.4 million primarily due to the placement of the Company’s 7.75% Senior Notes in December 2012. Income tax expense increased $4.4 million due to higher income before taxes and equity earnings in the current year.
Earnings from equity investments were $0.9 million in the current year, an increase of $6.4 million compared to the prior year loss of $5.5 million, primarily due to the recognition of a loss of $0.6 million and an impairment charge of $5.9 million, net of tax, on our investment in our Brazilian joint venture in the first quarter of 2012.
During the quarter ended December 31, 2013, the Company’s capital expenditures were $61.9 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 helicopters in January 2014, and placed both of them into service in late February.
The Company’s unfunded capital commitments as of December 31, 2013 consisted primarily of orders for helicopters and totaled $341.7 million, of which $98.7 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 $164.4 million of its total commitments (inclusive of deposits paid on options not yet exercised) without further liability other than liquidated damages of $11.1 million in the aggregate.
Included in these capital commitments are agreements to purchase ten AW189 heavy helicopters, four S92 heavy helicopters, two AW139 medium helicopters, 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 helicopters are scheduled to be delivered in 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.
As of December 31, 2013, the Company had a cash balance of $31.3 million and remaining availability under its senior secured revolving credit facility of $136.1 million.
Brazilian Joint Venture
On February 15, 2014, definitive agreements were executed with respect to the transfer to a third party of the 50% economic interest and 80% voting interest held by the Company’s partner in Aeróleo Taxi Aero S/A (“Aeróleo”), its Brazilian joint venture. As consideration for the transfer of interests and the other terms and conditions of the transaction, Aeróleo will be required to make payment to affiliates of the transferring partner in the form of severance and partial repayment of shareholder loans that will likely require a capital infusion by the Company of approximately $2 million. The transaction remains subject to customary closing conditions, including receipt of required local regulatory approval, and is expected to close in the second half of 2014. On February 19, 2014, in connection with execution of the definitive agreements, the Company and its partner filed a joint motion to dismiss their ongoing arbitration.
As a result of the transaction, the Company may be required to consolidate the financial results of Aeróleo in its financial statements following the consummation of the transactions.
Management will conduct a conference call starting at 10:00 a.m. ET (9:00 a.m. CT) on Tuesday, March 18, 2014, to review the results for the fourth quarter and fiscal year ended December 31, 2013. The conference call can be accessed as follows:
All callers will need to reference the access code 12521582
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
A telephone replay will be available through March 31, 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.comshortly after the call and will be accessible for approximately 90 days.
About Era Group
Era Group is one of the largest helicopter operators in the world and the longest serving helicopter transport operator in the U.S. In addition to servicing its U.S. customers, Era Group also provides helicopters and related services to third-party helicopter operators and customers in other countries, including Brazil, Canada, India, Mexico, Norway, Spain, Sweden, the United Kingdom and Uruguay. Era Group’s helicopters are primarily used to transport personnel to, from and between offshore installations, drilling rigs and platforms.
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