Second quarter results down for Era

New CFO arriving at Era

Era Group financial revenue is down for the second quarter of 2016 in comparison to the same period in 2015.

Net income for the company at $1.9 million, which equates to $0.09 per diluted share, for its second quarter ending June 30, 2016 this is down from $11.3 million, or $0.55 per diluted share, for the second quarter of 2015 (“prior year quarter”) on. Operating revenues for the period were at $63.4 million compared to operating revenues of $70.7 million for the same period in 2015.

During the current quarter, gave back notes to its Brazilian joint venture, Aeróleo Taxi Aero S/A (Aeróleo) to provide additional capital. As a result of this, they reduced total debt by $6.3 million of notes that were given by Aeróleo and instead recorded a $6.3 million loss attributable to noncontrolling interest in a subsidiary. This increased net income attributable to the Company by the same amount. Net loss would have been $4.4 million, or $0.21 per diluted share, in the current quarter excluding the impact of this transaction.

Earnings before interest, taxes, depreciation and amortization (EBITDA) was $10.7 million compared to $33.2 million in the prior year second quarter. Whilst adjusted EBITDA to exclude gains on asset dispositions and special items was $8.8 million in the current quarter compared to $20.5 million in the prior year quarter. Gains on asset dispositions were $1.4 million in the current quarter compared to a loss of $0.2 million in the prior year quarter. Special items consisted of a pre-tax gain on debt extinguishment of $0.5 million in the current quarter and a pre-tax gain of $12.9 million on the sale of the Company’s fixed base operations (“FBO”) business in Alaska in the prior year quarter.

“Industry conditions remain very challenging, and the second quarter represented our lowest level of Adjusted EBITDA in the last several years,” said Chris Bradshaw, President and Chief Executive Officer of Era Group Inc. “Despite the difficult market environment, Era generated $14 million of cash flow from operating activities in the quarter, and with our strong balance sheet and ample liquidity position, we remain well positioned to withstand the pressures of a prolonged industry downturn.”

Second Quarter Results

Operating revenues in the current quarter were $7.4 million lower than the prior year quarter primarily due to lower utilization and lower average rates in our U.S. oil and gas operations, the end of certain dry-leasing contracts and the sale of our FBO in Alaska in May 2015. These decreases were partially offset by the consolidation of Aeróleo and the start of a new contract in Suriname.

Operating expenses were $7.6 million higher in the current quarter primarily due to the consolidation of Aeróleo and increased repairs and maintenance expenses, partially offset by decreased personnel expenses and non-income taxes in the U.S.

Administrative and general expenses were $2.6 million lower in the current quarter primarily due to reduced headcount and compensation expense in the U.S., the collection of a previously reserved receivable and reduced professional services expenses, partially offset by the consolidation of Aeróleo.

Depreciation and amortization expense was $1.3 million higher in the current quarter due to the addition of new helicopters, a base expansion project and investments in additional information technology infrastructure.

Gains on asset dispositions were $1.6 million higher in the current quarter. We sold or otherwise disposed of two helicopters and related equipment in the current quarter for proceeds of $1.9 million resulting in gains of $1.4 million. In the prior year quarter, we sold five helicopters and related equipment for proceeds of $3.0 million resulting in book losses of $0.2 million.

Interest expense was $1.2 million higher in the current quarter primarily due to the cessation of capitalized interest on helicopter deposits, partially offset by savings resulting from the cumulative repurchases of a portion of our 7.750% senior unsecured notes (the “7.750% Senior Notes”).

Gain on debt extinguishment was $0.5 million in the current quarter due to the repurchase of a portion of our 7.750% Senior Notes.

Equity earnings were $0.6 million in the current quarter compared to a loss of $0.2 million in the prior year quarter primarily due to improved earnings from our Dart Holding Company Ltd. (“Dart”) joint venture.

Sequential Quarter Results

Operating revenues in the current quarter were $0.8 million higher compared to the quarter ended March 31, 2016 (“preceding quarter”) primarily due to the start of seasonal activities in Alaska, a new contract in Suriname and increased revenues in Brazil and Colombia, partially offset by decreased revenues in the U.S. Gulf of Mexico and the bankruptcy of a dry-leasing customer.

Operating expenses were $3.1 million higher in the current quarter primarily due to the start of seasonal activities in Alaska, increased fuel expenses in Brazil and reduced vendor credits. In addition, nonrecurring expenses in the current quarter included $0.4 million of severance costs related to headcount reductions in Brazil and the U.S. and $0.5 million of workers’ compensation expense related to an accident in Alaska.

Administrative and general expenses were $1.1 million lower in the current quarter primarily due to the collection of a previously reserved receivable and lower personnel costs.

EBITDA was $1.6 million lower compared to the preceding quarter. EBITDA adjusted to exclude gains on asset dispositions and special items was $0.5 million lower. Gains on asset dispositions were $1.5 million lower compared to the preceding quarter. Special items in the current quarter consisted of the gain on debt extinguishment noted above, and there were no special items in the preceding quarter.

Equity earnings were $0.6 million higher in the current quarter primarily due to improved earnings at our Dart joint venture.

Six Months Results

The Company reported a net loss of $1.9 million, or $0.09 per diluted share, for the six months ended June 30, 2016 (“current six months”) on operating revenues of $125.9 million compared to net income of $11.3 million, or $0.55 per diluted share, for the six months ended June 30, 2015 (“prior year period”) on operating revenues of $138.2 million.

EBITDA was $22.9 million in the current six months compared to $47.8 million in the prior year period. EBITDA adjusted to exclude gains on asset dispositions and special items was $18.1 million in the current six months compared to $31.5 million in the prior year period. Gains on asset dispositions were $4.3 million in the current six months compared to $3.1 million in the prior year period. Special items in the current six months consisted of a gain on debt extinguishment of $0.5 million. Special items in the prior year period consisted of a gain on the sale of the FBO of $12.9 million and gains on debt extinguishment of $0.3 million.

Operating revenues in the current six months were $12.2 million lower than the prior year period primarily due to lower utilization and lower average rates in our U.S. oil and gas operations, the end of certain dry-leasing contracts and the sale of the FBO, partially offset by the consolidation of Aeróleo and the start of a new contract in Suriname.

Operating expenses were $8.3 million higher in the current six months primarily due to the consolidation of Aeróleo and increased repairs and maintenance expenses, partially offset by reductions in operating expenses in the U.S. due to reduced activity, lower headcount and other cost control measures.

Administrative and general expenses were $3.2 million lower in the current six months primarily due to reduced headcount and compensation expenses in the U.S., the collection of a previously reserved receivable and the end of the Amended and Restated Transition Services Agreement with SEACOR Holdings Inc., partially offset by the consolidation of Aeróleo.

Depreciation and amortization expense was $2.5 million higher in the current six months due to the addition of new helicopters, a base expansion project and investments in additional information technology infrastructure.

Interest expense was $2.5 million higher in the current six months due to the cessation of capitalized interest on helicopter deposits, partially offset by savings resulting from the cumulative repurchases of a portion of our 7.750% Senior Notes.

Foreign exchange gains were $0.6 million in the current six months primarily due to the strengthening of the Brazilian real resulting in gains on our real-denominated balances. Foreign exchange losses were $2.4 million in the prior year period primarily due to the settlement of forward currency contracts and the weakening of the euro resulting in losses on our euro-denominated balances.

Equity earnings were $0.6 million in the current six months compared to a loss of $0.3 million in the prior year period primarily due to improved earnings from our Dart joint venture.

Fleet Update

We continue to experience excess capacity in our medium and heavy helicopters. Excess helicopters include our helicopters other than those under customer contracts, undergoing maintenance, dedicated for charter activity or models subject to operational suspension. We are focused on maximizing the utilization of our fleet and reducing the excess capacity in our medium and heavy helicopters through fleet management initiatives, participation in competitive bids and the pursuit of other opportunities. In addition, we may sell certain helicopters on an opportunistic basis consistent with our long-standing strategy.

Due to an accident in April 2016 involving an Airbus Helicopters EC225LP (also known as a H225) model helicopter operated by another helicopter company, the civilian fleet of H225 and AS332 L2 model helicopters remains on operational suspension. We own nine H225 helicopters, including five that are currently located in the U.S., three that are currently located in Brazil and one that is currently located in Norway. As of June 30, 2016, the net book value of our H225 helicopters and related inventory of parts and equipment was $164.5 million. During this suspension of H225 operations, we expect to utilize other heavy and medium helicopters to service our operations. Although we do not expect the near-term impact of the suspension to be material to our financial condition or results of operations, it is too early to estimate the full extent or duration of the H225 suspension, the market receptivity of the H225 helicopter for future oil and gas operations and the potential impact on residual values of these helicopters.

Capital Commitments

We had unfunded capital commitments of $152.7 million as of June 30, 2016, of which $39.4 million is payable during the remainder of 2016 with the balance payable through 2018. We may terminate $125.8 million of our total commitments (inclusive of deposits paid on options not yet exercised) without further liability other than aggregate liquidated damages of $3.0 million. The noncancellable portion of our commitments payable during the remainder of 2016 is $13.4 million.

Included in these capital commitments are agreements to purchase seven AW189 heavy helicopters, two S92 heavy helicopters and five AW169 light twin helicopters. The AW189 and S92 helicopters are scheduled to be delivered beginning in 2016 through 2018. 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 and one S92 helicopter. If these options are exercised, the helicopters would be scheduled for delivery beginning in 2017 through 2018.

Capital Allocation and Liquidity

As of June 30, 2016, we had $39.2 million of cash and, based on operating results through June 30, 2016, $170.4 million of remaining availability under our senior secured revolving credit facility (the “Facility”) for total liquidity of $209.6 million. As of June 30, 2016, our funded debt-to-EBITDA and interest coverage ratios, as defined in the Facility, were 3.0x and 5.7x, respectively. A description of these metrics is included in the financial tables in this release.