10-Aug-2015 Source: Era Group
Era Group Inc. (NYSE: ERA) today reported net income of $11.3 million, or $0.55 per diluted share, for its second quarter ended June 30, 2015 (“current quarter”) on operating revenues of $70.7 million compared to net income for the quarter ended June 30, 2014 (“prior year quarter”) of $5.2 million, or $0.26 per diluted share, on operating revenues of $86.6 million. Excluding a pre-tax gain of $12.9 million on the sale of the Company’s fixed base operations (“FBO”) business in Alaska and a one-time net deferred tax expense of $1.0 million in connection with the Sicher acquisition discussed below, current quarter net income would have been $4.1 million, or $0.20 per diluted share.
Earnings before interest, taxes, depreciation and amortization (“EBITDA”) was $33.2 million in the current quarter compared to $23.1 million in the prior year quarter. EBITDA adjusted to exclude gains or losses on asset dispositions and special items was $20.5 million in the current quarter compared to $22.4 million in the prior year quarter. The Company sold five single engine helicopters for losses of $0.2 million in the current quarter compared to gains of $3.1 million in the prior year quarter. Special items in the current quarter consisted of the $12.9 million pre-tax gain on the sale of the Company’s FBO business in Alaska. Special items in the prior year quarter consisted of a $2.5 million pre-tax impairment charge related to a probable loss of a note receivable.
“We are pleased to announce strong profitability in the second quarter despite the challenging industry environment,” said Chris Bradshaw, President, Chief Executive Officer and Chief Financial Officer of Era Group Inc. “Although operating revenues declined $15.8 million compared to the prior year quarter, EBITDA adjusted to exclude gains on asset sales and special items declined only $1.9 million due to effective cost controls and improved efficiency. I want to thank the entire Era team for their contributions in achieving this 3% margin improvement despite an 18% decline in revenues. As further evidence of the success of these efforts, EBITDA adjusted to exclude gains on asset sales, special items and the effects of foreign currency fluctuations increased by 43% on a sequential quarter basis.”
“We are also pleased to announce entry into the Colombian market via the acquisition of Sicher Helicopters SAS. While Colombia has historically been an onshore oil and gas market, the acquisition of Sicher’s air operator certificate and existing operations should allow us to capitalize on the growing demand for new generation helicopters, operated with the highest safety standards, to support the international oil and gas companies who are exploring and developing Colombia’s promising offshore blocks.”
Second Quarter Results
Operating revenues in the current quarter were $15.8 million lower than the prior year quarter primarily due to lower utilization of our medium helicopters and the sale of our FBO business in Alaska.
Operating expenses were $14.9 million lower in the current quarter primarily due to decreased repairs and maintenance expenses, fuel expenses and personnel costs.
Administrative and general expenses were $0.7 million higher primarily due to increased professional service fees.
Gains on asset dispositions were $3.4 million lower in the current quarter. In the current quarter, we sold five single engine helicopters for proceeds of $3.0 million and recognized losses of $0.2 million. During the prior year quarter, we sold one medium helicopter for total proceeds of $3.4 million resulting in gains of $3.1 million.
We sold our FBO business in Alaska during the current quarter for cash proceeds of $14.3 million and a pre-tax gain of $12.9 million.
Equity earnings were $0.7 million lower in the current quarter primarily due to the absence of earnings from Lake Palma S.A. (“Lake Palma”), which was sold in July 2014, and losses from our Dart Holding Company Ltd. (“Dart”) joint venture.
Six Months Results
The Company reported net income of $11.3 million, or $0.55 per diluted share, for the six months ended June 30, 2015 (“current six months”) on operating revenues of $138.2 million compared to net income for the six months ended June 30, 2014 (“prior six months”) of $9.7 million, or $0.48 per diluted share, on operating revenues of $166.0 million. In addition to the gains on asset dispositions and special items noted below, the current six months also included $2.4 million of foreign currency losses primarily due to the strengthening of the U.S. dollar resulting in losses on our euro denominated cash balances.
EBITDA was $47.8 million in the current six months compared to $44.8 million in the prior six months. EBITDA adjusted to exclude gains on asset dispositions and special items was $31.5 million in the current six months compared to $41.3 million in the prior six months. Special items in the current six months consisted of the $12.9 million pre-tax gain on the sale of our FBO business in Alaska and a $0.3 million gain on the repurchase of a portion of our 7.750% senior unsecured notes. Special items in the prior six months consisted of a $2.5 million pre-tax impairment charge related to a probable loss of a note receivable.
Operating revenues in the current six months were $27.9 million lower than in the prior six months primarily due to lower utilization of our medium helicopters and the sale of our FBO business in Alaska. Operating expenses were $20.9 million lower primarily due to decreased repairs and maintenance expenses, fuel expenses and personnel costs. Administrative and general expenses were $0.9 million lower primarily due to reduced headcount in the current six months and accelerated stock amortization expense related to changes in senior management in the prior six months. Equity earnings were $1.4 million lower primarily due to the absence of earnings from Lake Palma and losses from Dart.
Sequential Quarter Results
Operating revenues in the current quarter were $3.3 million higher compared to the quarter ended March 31, 2015 (“preceding quarter”) primarily due to the seasonal increase of activities in Alaska, partially offset by the sale of the FBO.
Operating expenses were $3.8 million lower compared to the preceding quarter primarily due to decreases in personnel, repairs and maintenance, parts cost of sales, and fuel expenses.
Administrative and general expenses were $1.0 million higher compared to the preceding quarter primarily due to increased professional service fees and compensation expenses.
Gains on asset dispositions were $3.6 million lower compared to the preceding quarter.
Foreign currency gains positively impacted sequential quarter results by $3.5 million, primarily due to the weakening of the U.S. dollar versus the euro in the current quarter.
EBITDA was $18.6 million higher compared to the preceding quarter. EBITDA adjusted to exclude gains or losses on asset dispositions and special items was $9.6 million higher compared to the preceding quarter.
Net income was $11.4 million higher compared to the preceding quarter. Excluding the $12.9 million pre-tax gain on the sale of the FBO and the one-time net deferred tax expense of $1.0 million in connection with the Sicher acquisition discussed below, net income would have been $4.2 million higher compared to the preceding quarter.
In April 2015, the Company acquired a 75% interest in Hauser Investments Limited which owns 100% of Sicher Helicopters SAS (“Sicher”). Sicher, headquartered in Bogota, is one of the leading helicopter operators in Colombia with a strong presence in the existing onshore oil and gas market. The purchase price included the contribution of an AW139 medium helicopter and $3.2 million in cash. In addition to a Colombian air operator certificate and a hangar facility, the acquired assets include three BO-105 light twin helicopters and one AS350 single engine helicopter. In connection with the acquisition, the transfer of the AW139 helicopter was treated as a sale for U.S. income tax purposes. Accordingly, the Company recognized a one-time income tax expense of $1.0 million, which has been recorded as a deferred tax liability as the Company plans to qualify the sale for like-kind exchange treatment under the Internal Revenue Code.
On May 1, 2015, the Company sold its FBO business at Ted Stevens Anchorage International Airport to Piedmont Hawthorne Aviation, LLC. Pursuant to the agreement, Piedmont Hawthorne Aviation, LLC acquired 100% of Era Group’s wholly-owned subsidiary, Era FBO LLC, for cash proceeds of $14.3 million.
Houma Super Base Grand Opening
On June 25, 2015, the Company celebrated the grand opening of its 35-acre super base in Houma, Louisiana, which is now the premier helicopter operating facility in the Gulf Coast region. Designed with safety as the top operational priority, the new Houma facility features enhanced storm protection, state-of-the-art fire suppression systems, reduced flyaway limitations and an airport infrastructure equipped to provide increased reliability of flight operations in adverse weather conditions. The implementation of automated check-in kiosks, enhanced baggage transfer capabilities, robust security screening equipment and additional customer service functions will streamline passenger processing. The new, larger passenger terminal features a variety of amenities including real-time flight status screens, big screen televisions, guest wi-fi access, comfortable seating and expanded food and beverage selections. The new, larger maintenance hangar is fully climate controlled and features advanced crane systems. Era’s new super base in Houma will house more than 30 aircraft and facilitate approximately 15,000 passengers per month traveling to and from offshore oil and gas installations in the U.S. Gulf of Mexico.
During the current quarter, the Company’s capital expenditures were $30.8 million, which consisted primarily of deposit payments for S92 heavy helicopters and our base expansion project in Houma, Louisiana.
The excess capacity in our medium helicopter fleet remains greater than in recent periods. Excess helicopters include our helicopters other than those under customer contracts, undergoing maintenance or dedicated for charter activity. We are participating in several competitive bids to place some or all of the excess medium helicopters on contract. We have recently been awarded a number of new contracts in the U.S. Gulf of Mexico and Brazil. Some of those contracts have already begun, but most of them are not scheduled to begin until the second half of 2015 or early 2016. If we are not successful in securing sufficient new projects, our financial results will be negatively impacted. In addition, we may sell certain helicopters on an opportunistic basis consistent with our stated strategy.
The Company’s unfunded capital commitments as of June 30, 2015 consisted primarily of orders for helicopters and totaled $175.0 million, of which $66.4 million is payable during 2015 with the balance payable through 2017. The Company also had $1.7 million of deposits paid on options not yet exercised. The Company may terminate $106.7 million of its total commitments (inclusive of deposits paid on options not yet exercised) without further liability other than aggregate liquidated damages of $2.5 million.
Included in these capital commitments are agreements to purchase nine AW189 heavy helicopters, four S92 heavy helicopters and five AW169 light twin helicopters. The AW189 helicopters are scheduled to be delivered beginning in 2015 through 2017. The S92 helicopters are scheduled to be delivered in 2015 through 2017. Delivery dates for the AW169 helicopters have yet to be determined. In addition, the Company had outstanding options to purchase up to an additional ten AW189 helicopters and four S92 helicopters. If these options are exercised, the helicopters would be scheduled for delivery beginning in 2016 through 2018.
As of June 30, 2015, the Company had $17.0 million in cash balances and remaining availability under its senior secured revolving credit facility of $219.1 million. The Company also had $6.8 million of escrow deposits.
Management will conduct a conference call starting at 10:00 a.m. ET (9:00 a.m. CT) on Wednesday, August 5, 2015, to review the results for the second quarter ended June 30, 2015. The conference call can be accessed as follows:
All callers will need to reference the access code 5317676
Within the U.S.: Operator Assisted Toll-Free Dial-In Number: (888) 218-8176
Outside the U.S.: Operator Assisted International Dial-In Number: (913) 312-0979
A telephone replay will be available through August 19, 2015 and may be accessed by calling (888) 203-1112 for domestic callers or (719) 457-0820 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, Colombia, India, Norway, Spain, and the United Kingdom. Era Group’s helicopters are primarily used to transport personnel to, from and between offshore installations, drilling rigs and platforms.
Financial statements can be seen here