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EX-23.1 - EX-23.1 - ERA GROUP INC.d213533dex231.htm
EX-10.1 - EX-10.1 - ERA GROUP INC.d213533dex101.htm

As filed with the Securities and Exchange Commission on September 14 , 2011

Registration No. 333-175942

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 1

to

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

ERA GROUP INC.

(Exact name of registrant as specified in its charter)

 

Delaware   4522   72-1455213

(State or Other Jurisdiction of

Incorporation or Organization)

  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification No.)

 

 

600 Airport Service Road

Lake Charles, Louisiana 70605

(337) 478-6131

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

Paul L. Robinson, Esq.

General Counsel

2200 Eller Drive

P.O. Box 13038

Fort Lauderdale, Florida 33316

(954) 523-2200

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)

 

 

Copies to:

 

Alexander D. Lynch, Esq.

David Zeltner, Esq.
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
(212) 310-8000 (Phone)

(212) 310-8007 (Fax)

 

Allan D. Reiss, Esq.

E. Ramey Layne, Esq.

Vinson & Elkins L.L.P.

666 Fifth Avenue

New York, New York, 10103

(212) 237-0000 (Phone)

(212) 237-0100 (Fax)

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”), check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

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 the definitions of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ¨     Accelerated filer  ¨     Non-accelerated filer  x     Smaller reporting company  ¨

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

Subject to Completion,

Preliminary Prospectus dated September 14 2011

PROSPECTUS

            Shares

LOGO

Era Group Inc.

Class A Common Stock

 

 

This is the initial public offering of the Class A common stock of Era Group Inc. We are offering shares of the Class A common stock. Prior to this offering, there has been no public market for the shares of Class A common stock. We currently estimate that the initial public offering price will be between $             and $             per share. We intend to apply to list the shares on the New York Stock Exchange (“NYSE”) under the symbol “ERA.”

SEACOR Holdings Inc., or SEACOR, currently owns 100% of our outstanding common stock, and following consummation of this offering, SEACOR will continue to be our controlling stockholder. Following consummation of this offering, we will have two classes of authorized common stock: Class A common stock, which we are offering hereby, and Class B common stock. SEACOR will not own any shares of our Class A common stock and will own all of the issued and outstanding shares of our Class B common stock, representing approximately     % of our total outstanding shares of common stock, without giving effect to any exercise of the underwriters’ option to purchase additional shares, as described below. The rights of the holders of Class A and Class B common stock are substantially identical, except with respect to voting and conversion. Specifically, the holders of Class B common stock shall be entitled to eight votes per share and the holders of Class A common stock shall be entitled to one vote per share. Accordingly, SEACOR will hold approximately     % of the combined voting power of our outstanding common stock upon completion of this offering. In addition, the shares of Class B common stock are automatically convertible into shares of Class A common stock upon specified events or, prior to a tax-fee spin-off, at the option of the holders of Class B common stock. The shares of Class A common stock are not convertible into any other shares of our capital stock.

Investing in our Class A common stock involves risks that are described in the “Risk Factors” section beginning on page 13 of this prospectus.

 

 

 

     Per Share      Total  

Initial public offering price

   $                    $                

Underwriting discount

   $         $     

Proceeds, before expenses, to us

   $         $     

We have granted the underwriters a 30-day option to purchase up to an additional shares of Class A common stock from us at the initial public offering price, less the underwriting discount, if the underwriters sell more than             shares of Class A common stock in this offering.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

 

The underwriters expect to deliver the shares on or about                     , 2011.

 

 

Goldman, Sachs & Co.

J.P. Morgan

Deutsche Bank Securities

 

 

Prospectus dated                     , 2011


TABLE OF CONTENTS

 

     Page  

PROSPECTUS SUMMARY

     1   

RISK FACTORS

     13   

FORWARD-LOOKING STATEMENTS

     34   

USE OF PROCEEDS

     36   

DIVIDEND POLICY

     37   

CAPITALIZATION

     38   

DILUTION

     39   

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

     41   

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     44   

INDUSTRY AND MARKET DATA

     63   

BUSINESS

     66   

MANAGEMENT

     79   

COMPENSATION DISCUSSION AND ANALYSIS

     87   

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     105   

PRINCIPAL STOCKHOLDERS

     110   

DESCRIPTION OF CAPITAL STOCK

     111   

SHARES ELIGIBLE FOR FUTURE SALE

     115   

MATERIAL U.S. FEDERAL TAX CONSIDERATIONS TO NON-U.S. HOLDERS

     117   

UNDERWRITING

     120   

LEGAL MATTERS

     124   

EXPERTS

     124   

WHERE YOU CAN FIND ADDITIONAL INFORMATION

     124   

INDEX TO FINANCIAL STATEMENTS

     F-1   

 

 

You should rely only on the information contained in this prospectus. We have not and the underwriters have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not and the underwriters are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is only accurate as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.

Era and its respective logos are our trademarks. Solely for convenience, we refer to our trademarks in this prospectus without the ™ and ® symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights to our trademarks. Other service marks, trademarks and trade names referred to in this prospectus are the property of their respective owners. As indicated in this prospectus, we have included market data and industry forecasts that were obtained from industry publications and other sources.

 

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PROSPECTUS SUMMARY

Era Group Inc. (“Era”), a Delaware corporation and the registrant, is currently a wholly-owned subsidiary of SEACOR Holdings Inc. (“SEACOR”), a Delaware corporation. Prior to this offering, our business was referred to by SEACOR as its Aviation Services business segment. Following the closing of the offering, SEACOR will continue to be our majority stockholder. The consolidated financial statements and consolidated financial data included in this prospectus are the financial statements and financial data of Era. Unless the context requires otherwise, references in this prospectus to “Era,” “we,” “us,” “our company” or similar terms refer to Era Group Inc. and its subsidiaries.

This summary highlights selected information described more fully elsewhere in this prospectus. This summary does not contain all the information you should consider before investing in our common stock. You should read the entire prospectus, including the financial statements and related notes, before making an investment decision with respect to our Class A common stock. You should pay special attention to the “Risk Factors” section of this prospectus for a discussion of factors you should consider before investing in our Class A common stock.

Our Company

We are one of the largest helicopter operators in the world and the longest serving helicopter transport operator in the United States, which is our primary area of operations. In 2010, approximately 48% and 12% of our operating revenues were earned in the U.S. Gulf of Mexico and Alaska, respectively. We also provide helicopters and related services to third-party helicopter operators in other countries. In addition to our U.S. customers, we currently have customers in Brazil, Canada, Mexico, the United Kingdom, Sweden, Spain, Indonesia and India. As of June 30, 2011, our fleet consisted of 177 helicopters, most of which were used to transport personnel to and from, and between, offshore installations, drilling rigs and platforms. In addition, as of June 30, 2011, we have placed orders for 16 new helicopters, most of which we expect to be delivered in 2011 and 2012. The primary users of our transport services are major integrated and independent oil and gas companies and U.S. government agencies. In 2010, approximately 73% of our operating revenues were derived from helicopter services provided to clients primarily involved in oil and gas activities. In addition to serving the oil and gas industry, we provide air medical services, firefighting support, flightseeing tours in Alaska and emergency search and rescue services. Although our operations historically have primarily served the U.S. offshore oil and gas industry, in recent years we have made efforts to reduce our dependence on this market and take advantage of the mobility and versatility of our helicopters to expand into other geographic regions and to serve other industries.

We believe a key factor in optimizing results of operations is to maintain a versatile, modern fleet. We believe our borrowing capacity under a new revolving credit facility that we expect to enter into immediately prior to this offering and our strong relationships with original equipment manufacturers (“OEMs”) will position us well to add new helicopters to our fleet and upgrade existing helicopters, thereby maintaining an asset base suitable for use within our own operations and for contract-leasing to other operators. We also leverage our strong relationships with OEMs to support growth in other services, such as selling specialty equipment and accessories for helicopters, and training.

We own and operate three classes of helicopters:

 

   

Heavy helicopters, which have twin engines and a typical passenger capacity of 19 to 22, are primarily used in support of the deepwater offshore oil and gas industry, frequently in harsh environments or in areas with long distances from shore, such as those in the North Sea and Australia. Heavy helicopters are also used to support search and rescue operations.

 

 

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Medium helicopters, which mostly have twin engines and a typical passenger capacity of 12 to 15, are primarily used to support the offshore oil and gas industry, search and rescue and air medical services, firefighting activities and corporate uses.

 

   

Light helicopters, which may have single or twin engines and a typical passenger capacity of 4 to 9, are used to support a wide range of activities, including shallow water oil and gas exploration, development and production, the mining industry, power line and pipeline surveying, air medical services, tourism and corporate uses.

As of June 30, 2011, we owned or operated a total of 177 helicopters, consisting of seven heavy helicopters, 65 medium helicopters, 61 single engine light helicopters and 44 twin engine light helicopters. As of June 30, 2011, we had on order two heavy helicopters and 14 medium helicopters with options to purchase up to an additional 15 medium helicopters under our existing supply agreements.

The safety of our passengers and the maintenance of a safe working environment for our employees is our number one operational priority. Our customers subject our operations to regular audits and evaluate us based on our safety record and operational fitness and we believe our attention to safety is a critical element in obtaining and retaining customers.

We believe we have an excellent safety record and a strong safety culture throughout our organization. We have implemented a safety program that includes, among many other features, (i) transition and recurrent training using flight training devices, (ii) a Federal Aviation Administration (“FAA”) approved flight operational quality assurance program and (iii) health and usage monitoring systems, otherwise known as HUMS, which automatically monitor and report on vibrations and other anomalies on key components of certain helicopters in our fleet.

We are a subsidiary of SEACOR, a NYSE-listed company that is in the business of owning, operating, investing in, and marketing equipment, primarily in the offshore oil and gas, industrial aviation and marine transportation industries. Following completion of this offering, SEACOR will not own any shares of our Class A common stock and will own all of the issued and outstanding shares of our Class B common stock. Our amended and restated certificate of incorporation provides for a dual-class structure of our common stock. The shares of our Class A common stock, the class of stock we are selling in this offering, have one vote per share. The shares of our Class B common stock have eight votes per share. The Class A common stock is the only class of stock that will be publicly traded. Following consummation of this offering, SEACOR will own all of the issued and outstanding shares of our Class B common stock, and will hold approximately     % of the combined voting power of all of our issued and outstanding capital stock. In addition, SEACOR will continue to provide us with essential support functions, including payroll processing, information systems support, benefit plan management, cash disbursement support, cash receipt processing and treasury management pursuant to the terms of a transition services agreement, which is filed as an exhibit to the Registration Statement of which this prospectus forms a part. SEACOR also will provide us with certain corporate services pursuant to the transition services agreement, and we have negotiated an initial quarterly charge of $500,000 for these corporate services. The transition services agreement will continue until the earlier of when the provision of all services has been terminated at either our or SEACOR’s option or upon an event of default. See “Certain Relationships and Related Party Transactions—Agreements with SEACOR—Transition Services Agreement.”

The Helicopter Services Industry

Helicopters are used for the transportation of personnel, light equipment and supplies for a wide variety of industries, including offshore oil and gas, tourism, construction, forestry, mining, recreation and travel. In addition, they provide mission-critical services to law enforcement, search and rescue, firefighting and medical services organizations. The helicopter industry is capital intensive. According to Flightglobal, an online provider

 

 

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of aerospace news and data (“Flightglobal”), in recent years, manufacturers delivered approximately 200 medium and 50 heavy helicopters per year, split between civilian and military customers, and orders for such helicopters are typically placed one to three years prior to the expected delivery. The helicopter industry is highly regulated and government-issued licenses and operating certificates must be obtained in order to operate aircraft within a specific country. The oil and gas industry is serviced by three global operators, including us, with fleets in excess of 150 helicopters and at least 15 regional operators with fleets of less than 50 helicopters, according to PFC Energy, Inc., a strategic advisor in the global energy industry (“PFC Energy”). As the offshore oil and gas industry has expanded, according to PFC Energy, demand for helicopters has increased because helicopters tend to be the primary form of transport for rig and platform crews and personnel providing special services during drilling operations. According to PFC Energy, as offshore drilling and production moves further offshore and to deep waters, it is expected that the industry will require additional helicopters to transport personnel and equipment to drilling platforms that are larger and more complex. We do not believe, based on our industry experience, that our oil and gas industry customers will begin maintaining their own helicopter service operations because current industry trends primarily suggest that oil and gas companies are ceasing to operate their own fleets in favor of dedicated helicopter operators. However, the offshore oil and gas industry has historically been cyclical and is affected by prevailing oil and gas price levels, general economic conditions, and changes in governmental programs, permitting and spending, including the imposition of moratoriums on offshore deepwater drilling operations. The use of helicopters has also expanded into many other industries where the urgency and/or difficulty of access justify the costs. See “Industry and Market Data.”

Competitive Strengths

We believe the following are our key competitive strengths:

Blended contract-leasing and operating business model—We believe, based on our industry experience and understanding of the business models of our competitors, the combination of operating helicopters and contract-leasing helicopters to other operators is a distinctive business model in the helicopter services industry. We believe our operating business in the United States provides us a critical competitive benefit when offering helicopters to operators outside the United States. Our U.S. operations serve as a support center for clients outside of the United States and a market backstop when contracts end. Our contract-leasing activities, which accounted for approximately 24% of our revenues in 2010, enable us to reach new geographical markets, create diverse uses for our helicopters and help maintain higher utilization than would otherwise be feasible. In addition, we can penetrate these markets without the cost associated with setting up a full service, proprietary operation. Unlike financial leasing entities, we can work with clients that need aircraft for relatively short-term contracts. We also offer operational support, training, maintenance and access to our inventory of spare parts. We believe this blended business model allows for a more efficient deployment of our capital resources.

Our diverse and modern fleet—We have one of the largest U.S.-based helicopter fleets and one of the largest fleets of helicopters operating on a global basis. As of June 30, 2011, our fleet consisted of 177 helicopters, of which 126 were located in the United States and 51 in international markets. As of June 30, 2011, we had 16 new helicopters on order and options for up to an additional 15 helicopters. We believe our size allows us to purchase helicopters and spare parts on attractive terms. We have funded our investment in new helicopters, in part, through the sale of older aircraft and by using cash generated from operations and funds invested by our parent, SEACOR.

High quality workforce—We have a highly skilled workforce of pilots and mechanics. Our pilots average over 6,800 hours of flight experience and a significant number of them are qualified to operate more than one type of helicopter. Our mechanics average over 16 years of experience and receive ongoing training from both helicopter manufacturers and our in-house team of professional instructors.

 

 

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Long-term customer relationships—We have strong, longstanding relationships with many of our key oil and gas industry customers and international clients. Our customers include major oil and gas companies such as Anadarko Petroleum Corporation, ExxonMobil Corporation and Shell Pipeline Company. We believe that our level of service, our technologically advanced fleet and our focus on safety have helped us establish and maintain our long-term customer relationships. As a result of our long-term customer relationships, we believe that these customers look to us first as they grow and expand their helicopter services needs.

Strong, experienced leadership team—Our executive management team has a broad range of domestic and international experience in the aviation industry. We believe this team has a proven track record of managing assets through market cycles and identifying, acquiring and integrating assets while maintaining efficient operations. Our management team has also been successful in maintaining strong relationships with our customers.

Relationship with SEACOR—Our relationship with SEACOR provides us with the opportunity to cross-market our aviation services to SEACOR’s customers that require aviation support for their offshore oil and gas activities as well as opportunities to employ helicopters in support of emergency responses, such as the 2010 earthquake in Haiti. In addition, SEACOR provides us, and following consummation of this offering will continue to provide us, with a number of essential support functions, including payroll processing, information systems support, benefit plan management, cash disbursement support, cash receipt processing and treasury management. SEACOR charges us for these services generally based on volume processed or units supported. In addition, SEACOR provides us with certain corporate services including executive oversight, risk management, legal, accounting and tax, for which it charges us a quarterly fee.

Ability to maintain liquidity—We believe that maintaining significant liquidity will enable us to take advantage of opportunities as they arise. We intend to enter into a $             million revolving credit facility immediately prior to this offering under which we expect to have availability of $             million after giving effect to the repayment of the advances we have received from SEACOR as described in “Recapitalization.” We expect that our new revolving credit facility will provide us with sufficient liquidity following this offering, and that we will no longer require advances from SEACOR. We believe that the liquidity that we maintain through cash flow from operations and borrowings under our new revolving facility will provide us with the financial flexibility to expand our fleet and pursue opportunities to grow our business and also provides a hedge against any future adverse market conditions.

Strategy

Our goal is to be a leading, cost effective global provider of helicopter transport and related services. The following are our key business strategies:

Expand into new and growing geographic markets—We believe there are significant opportunities in offshore oil and gas markets outside of the United States, and we continually seek to access these growth markets. Currently, our most significant effort to grow our business internationally is in Brazil. We recently acquired an interest in a local company servicing the Brazilian offshore oil and gas industry and to which we contract-lease helicopters and provide support services. We also have working relationships with operators in India, Argentina, China, Indonesia, Mexico and other foreign locations. We believe, based on our industry experience and understanding of the market and the competitive landscape, that several of these markets are underserved by larger multinational helicopter operators and as a result provide us with significant opportunities for growth.

Further develop contract-leasing opportunities—We believe contract-leasing helps to provide stable cash flow and access to emerging, international oil and gas markets in Australia, India, Southeast Asia and West

 

 

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Africa. We believe customers look to us for helicopter contract-leasing because they know we have a modern, efficient fleet, with a selection of helicopter models to meet their needs. We intend to continue to develop and grow our participation in international markets, where the fundamentals for helicopter demand are favorable, particularly to service offshore deepwater installations and new areas of exploration. We believe that the market for contract-leasing will continue to grow as smaller operators in developing areas prefer the limited financial commitments of contracting equipment over purchasing, which has become increasingly difficult for them given the reduction in capital being made available from financial institutions to these smaller operators. Under certain circumstances, we may elect to set up our own operations or acquire operating certificates if we believe there is sufficient opportunity in a market to warrant the cost and effort of us offering and overseeing a full service operation.

Continue selectively to expand and upgrade our versatile fleet—We regularly review our asset portfolio. We do this by assessing market conditions and changes in our customers’ demand for different helicopter models. As offshore oil and gas drilling and production move to deeper water in most parts of the world, we believe more medium and heavy helicopters, and new technology may be required in the future. We continually assess our fleet and adjust helicopters orders accordingly, ordering new equipment as demand dictates. See “Business—Equipment and Services.” We lease out, buy and sell equipment in the ordinary course of our business. We intend to continue to pursue opportunities to realize value from our fleet’s versatility by shifting assets between markets when circumstances warrant.

Pursue strategic acquisitions and joint ventures—Over the last few years, in addition to expanding and diversifying our fleet, we have grown our business and entered new markets through acquisitions and joint ventures. Since 2004, we have completed two business acquisitions and entered into several joint ventures and partnering arrangements. We regularly seek to identify potential acquisitions and joint venture opportunities. We believe that we have a successful track record of completing and integrating acquisitions, and structuring joint ventures.

Diversify sources of earnings—We seek to develop additional sources of earnings and expand beyond our traditional helicopter transport services in the oil and gas industry. Our Dart Holding Company Ltd. joint venture engineers and manufactures after-market helicopter parts and accessories for sale to helicopter manufacturers and operators, and distributes parts and accessories on behalf of other manufacturers. Our Era Training Center LLC (“Era Training Center”) joint venture provides instruction, flight simulator and other training to our employees, pilots working for other helicopter operators, including our competitors, and government agencies.

We will continue to build upon the expertise, relationships and buying power in our operating businesses to develop other business opportunities and sources of revenue.

Risks Associated with Our Business

Our business is subject to numerous risks, as discussed more fully in the section entitled “Risk Factors” beginning on page 13 of this prospectus, which you should read in its entirety. In particular:

 

   

Demand for many of our services is impacted by the level of activity in the offshore oil and gas exploration, development and production industry.

 

   

Demand for using helicopters is cyclical, not just due to cycles in the oil and gas business but also due to fluctuation in government programs and spending, as well as overall economic conditions.

 

   

We are highly dependent upon the level of activity in the U.S. Gulf of Mexico and Alaska, which are mature exploration and production regions.

 

 

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The helicopter industry is subject to intense competition.

 

   

Difficult economic and financial conditions could have a material adverse effect on us.

 

   

Failure to maintain an acceptable safety record may have an adverse impact on our ability to obtain and retain customers.

 

   

We rely on relatively few customers for a significant share of our revenues, the loss of any of which could adversely affect our business and results of operations.

 

   

Consolidation of our customer base could adversely affect demand for our services and reduce our revenues.

 

   

Operational risks including, but not limited to, adverse weather conditions, seasonality, and accidents could adversely impact our operations and in some instances, expose us to liability.

 

   

We face control and oversight risks associated with our international operations.

 

   

Tax and other legal compliance risks, including anti-corruption statutes, the violation of which may adversely affect our business and operations.

 

   

As long as we are owned by SEACOR, our ability to influence the outcome of matters requiring stockholder approval will be limited.

Relationship with SEACOR

We were acquired by SEACOR in 2004, and prior to this offering, conducted our business as SEACOR’s Aviation Services business segment. Our relationship with SEACOR provides us with the opportunity to cross-market our aviation services to SEACOR’s customers that require aviation support for their offshore oil and gas activities as well as opportunities to employ helicopters in support of emergency responses, such as the 2010 earthquake in Haiti. In addition, SEACOR provides us with a number of essential support functions, including payroll processing, information systems support, benefit plan management, cash disbursement support, cash receipt processing and treasury management. SEACOR charges us for these services based on volume processed or units processed. In addition, SEACOR provides us with certain corporate services including executive oversight, risk management, legal, audit and tax, for which it charges us a quarterly fee. For a description of these agreements and other agreements we intend to enter into with SEACOR, see “Certain Relationships and Related Party Transactions—Agreements with SEACOR.” Following consummation of this offering, we also may incur direct fees for any additional services that we ask SEACOR to provide. We will be billed for these additional services based on hourly rates to be negotiated between us and SEACOR that will depend on the nature of the services to be provided. We may incur other corporate and operational costs to replace some of the services previously provided by SEACOR, which may be in addition to or higher than the cost previously allocated by SEACOR.

We currently participate in a cash management program whereby certain of our operating and capital expenditures are funded through advances from SEACOR and certain cash collections are forwarded to SEACOR. As a consequence of this arrangement, we have historically maintained minor balances in cash on hand. As of June 30, 2011, our cash on hand was $1.7 million. Immediately prior to this offering, we intend to enter into a $             million revolving credit facility, and we expect to have $             million available after funding working capital needs and after the repayment of SEACOR advances as described in “—Recapitalization” below.

Immediately following the completion of this offering, without giving effect to any exercise of the underwriters’ option to purchase additional shares, SEACOR will not own any shares of our Class A common

 

 

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stock and will own all of our Class B common stock, representing approximately     % of our total outstanding shares of common stock and approximately     % of the combined voting power of our outstanding common stock.

Recapitalization

As of                     , 2011, SEACOR had made aggregate advances to us of $             million. Additional advances made by SEACOR to us subsequent to that date are not expected to exceed $             million. In connection with this offering, SEACOR intends to contribute $             million of its aggregate advances as additional capital to us. We expect to use the net proceeds of this offering together with borrowings under our new revolving credit facility to repay to SEACOR the then remaining balance of these advances. For a description of the new revolving credit facility, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”

Recent Developments

Brazilian Joint Venture. On July 1, 2011, we acquired a 50% economic interest and 20% voting interest in Aeróleo Táxi Aéreo S/A (“Aeróleo”), a Brazilian entity that provides helicopter transport services to the Brazilian offshore oil and gas industry, for $4.8 million in cash. We also loaned Aeróleo $6.0 million at an interest rate of 6% per annum. The note requires monthly interest payments and matures in June 2013. Also on July 1, 2011, we, and our partner, contributed $4.8 million each to Era do Brazil LLC, a 50/50 joint venture. Era do Brazil LLC then immediately acquired a helicopter, subject to a lease to Aeróleo, from us for $11.5 million ($9.5 million in cash and a $2.0 million note payable). The note payable bears an interest rate of 7.0% per annum, requires 60 monthly principal and interest payments, and is secured by the aircraft and the Aeróleo lease.

Aircraft Purchases. As of June 30, 2011, we had placed orders for 16 new helicopters, consisting of two Eurocopter EC225 heavy helicopters, nine AgustaWestland AW139 medium helicopters and five AgustaWestland AW169 medium helicopters. One of the EC225s is scheduled to be delivered in 2011 and one in 2012. One of the AW139s was delivered in August 2011, five are scheduled to be delivered later in 2011 and three in 2012. Delivery dates for the AW169s have yet to be determined. In addition, we had outstanding options to purchase up to an additional 15 AW139 medium helicopters. If these options are exercised, the helicopters will be delivered beginning in 2012 through 2015. On August 10, 2011, we entered into a commitment to purchase three Eurocopter EC135 helicopters, one of which was delivered in August 2011 and the remaining two are scheduled to be delivered later in 2011. We expect to finance these acquisition costs through a combination of cash on hand, cash provided by operation activities and borrowings under our revolving credit facility.

Dart Joint Venture. On July 31, 2011, we and Eagle Copters LTD (“Eagle Copters”) contributed our ownership in Dart Helicopter Services, Inc. (formerly Dart Helicopter Services, LLC) to a newly formed Canadian entity, Dart Holding Company Ltd. (“Dart”), in which we each own a 50% interest. Eagle Copters also contributed to Dart its ownership in Dart Aerospace, Ltd. Dart is an international sales and manufacturing organization focused on after-market helicopter parts and accessories, with operations in both the United States and Canada.

Our Executive Offices

Our principal executive offices are located at 600 Airport Service Road, Lake Charles, Louisiana 70605, and our telephone number is (337) 478-6131. We have a website at www.erahelicopters.com. The information that appears on our website is not part of, and is not incorporated into, this prospectus.

 

 

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The Offering

 

Class A common stock offered by us

            shares.

Common stock to be outstanding following consummation of this offering:

 

Class A common stock

            shares.

 

Class B common stock

            shares.

 

Voting rights:

 

Class A common stock

Holders of Class A common stock are entitled to one vote for each share held, representing in the aggregate approximately     % of the combined voting power of our outstanding common stock after giving effect to this offering.

 

Class B common stock

Holders of Class B common stock are entitled to eight votes for each share held, representing in the aggregate approximately     % of the combined voting power of our outstanding common stock after giving effect to this offering.

 

Shares subject to the underwriters’ option to purchase additional shares of Class A common stock

We have granted the underwriters a 30-day option to purchase up to an additional             shares of Class A common stock from us at the initial public offering price less the underwriting discount if the underwriters sell more than shares of Class A common stock in this offering.

 

Use of proceeds

We estimate that the net proceeds to us from this offering, after deducting underwriting discounts and estimated offering expenses, will be approximately $             million, assuming the shares are offered at $             (the midpoint of the price range set forth on the cover of this prospectus). We expect to use the net proceeds of this offering to repay a portion of advances we have received from SEACOR. See “Recapitalization” and “Use of Proceeds.”

 

Dividend policy

We do not anticipate paying any dividends on our common stock in the foreseeable future. See “Dividend Policy.”

 

Risk factors

Investing in our Class A common stock involves a high degree of risk. See “Risk Factors” beginning on page 13 of this prospectus for a discussion of factors you should carefully consider before investing in our Class A common stock.

 

Proposed NYSE symbol

“ERA”

 

 

8


The number of shares of Class A common stock and Class B common stock outstanding following consummation of this offering includes the             to             stock split of our outstanding shares of Class B common stock that were issued in exchange for our no par value common stock; and excludes:

 

   

            shares of Class A common stock issuable upon exercise of stock options to be issued in connection with this offering;

 

   

            shares of Class A common stock issuable upon settlement of restricted stock units to be issued in connection with this offering; and

 

   

            shares of our Class A common stock reserved for future grants under our compensation plans.

Unless otherwise indicated, the information in this prospectus assumes the following:

 

   

no exercise of the underwriters’ option to purchase up to             additional shares of Class A common stock from us; and

 

   

an initial public offering price of $             per share, the midpoint of the price range set forth on the cover of this prospectus.

 

 

9


Summary Historical Consolidated Financial and Other Data

The following tables set forth the summary historical and adjusted consolidated financial data for the periods indicated. We derived the summary consolidated financial data presented below as of December 31, 2010 and 2009 and for the years ended December 31, 2010, 2009 and 2008 from our audited consolidated financial statements included elsewhere in this prospectus. The historical consolidated financial data as of June 30, 2011 and for the six months ended June 30, 2011 and 2010 have been derived from our unaudited interim consolidated financial statements included elsewhere in this prospectus. The unaudited financial statements include all adjustments, consisting of normal recurring accruals, which we consider necessary for a fair presentation of the financial position and the results of operations for these periods. Operating results for the six months ended June 30, 2011 are not necessarily indicative of the results that may be expected for subsequent periods.

Our historical results are not necessarily indicative of future operating results. You should read the information set forth below in conjunction with “Selected Historical Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the related notes included elsewhere in this prospectus.

 

    Historical  
    Six Months Ended
June 30,
    Years Ended
December 31,
 
        2011             2010         2010     2009     2008  
    (in thousands, except share data)  

Statement of Operations Data:

         

Operating Revenues

  $ 124,648      $ 112,708      $ 235,366      $ 235,667      $ 248,627   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Costs and Expenses:

         

Operating

    75,922        72,567        147,233        147,955        181,490   

Administrative and general

    13,249        11,482        25,798        21,396        20,130   

Depreciation

    24,309        21,175        43,351        37,358        36,411   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    113,480        105,224        216,382        206,709        238,031   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gains on Asset Dispositions and Impairments, Net

    8,366        469        764        316        4,883   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating Income

    19,534        7,953        19,748        29,274        15,479   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other Income (Expense):

         

Interest income

    100        44        109        52        217   

Interest expense

    (579     (19     (94     (13     (5

Interest expense on advances from SEACOR

    (12,299     (10,729     (21,437     (20,328     (12,963

SEACOR management fees

    (5,186     (2,128     (4,550     (5,481     (5,681

Derivative gains (losses), net

    (501     (62     (118     266        274   

Foreign currency gains (losses), net

    691        (1,596     (1,511     1,439        271   

Other, net

                  50               38   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    (17,774     (14,490     (27,551     (24,065     (17,849
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (Loss) Before Income Tax Expense (Benefit) and Equity in Earnings (Losses) of 50% or Less Owned Companies

    1,760        (6,537     (7,803     5,209        (2,370
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income Tax Expense (Benefit):

         

Current

        (46,315     (29,409     (16,460

Deferred

        42,014        32,292        16,116   
     

 

 

   

 

 

   

 

 

 
    653        (2,340     (4,301     2,883        (344
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (Loss) Before Equity in Earnings (Losses) of 50% or Less Owned Companies

    1,107        (4,197     (3,502     2,326        (2,026

Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax

    955        (717     (137     (487     (461
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Income (Loss)

  $ 2,062      $ (4,914   $ (3,639   $ 1,839      $ (2,487
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

 

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    Historical  
    Six Months Ended
June 30,
    Years Ended
December 31,
 
        2011             2010         2010     2009     2008  
    (in thousands, except share data)  

Earnings (Loss) Per Common Share:

         

Basic Earnings (Loss) Per Common Share

  $ 2,062.00      $ (4,914.00   $ (3,639.00   $ 1,839.00      $ (2,487.00
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted Average Common Shares Outstanding

    1,000        1,000        1,000        1,000        1,000   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Pro Forma Income (Loss) Loss Per Common Share (unaudited) (1):

         

Basic Earnings (Loss) Per Common Share

         
 

 

 

     

 

 

     

Weighted Average Common Shares Outstanding

         
 

 

 

     

 

 

     

Other Financial Data:

         

EBITDA (2)

  $ 39,802      $ 24,625      $ 56,833      $ 62,369      $ 46,331   

 

     As of June 30, 2011      As of December 31,  
     Actual      Pro Forma
as Adjusted (3)
     2010      2009  
     (in thousands)  

Balance Sheet Data:

           

Current Assets:

           

Cash and cash equivalents

   $ 1,740       $                    $ 3,698       $ 7,309   

Receivables

     50,743            41,157         40,211   

Inventories

     24,788            23,153         19,355   

Prepaid expenses

     2,939            2,077         1,944   

Deferred income taxes

     1,672            1,672         221   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total current assets

     81,882            71,757         69,040   
  

 

 

    

 

 

    

 

 

    

 

 

 

Property and Equipment, Net

     629,619            612,078         523,195   

Investments, at Equity, and Advances to 50% or Less Owned Companies

     35,341            27,912         26,712   

Goodwill

     352            352         352   

Other Assets

     9,960            6,925         7,857   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 757,154       $         $ 719,024       $ 627,156   
  

 

 

    

 

 

    

 

 

    

 

 

 

Current Liabilities

     31,221            29,172         20,408   

Advances from SEACOR

     461,002            355,952         347,564   

Deferred Income Taxes

     127,751            127,799         84,397   

Long-Term Debt

     34,492            35,885           

Deferred Gains and Other Liabilities

     6,585            6,623         7,291   

Total Stockholder Equity

     96,103            163,593         167,496   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 757,154       $         $ 719,024       $ 627,156   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

The pro forma basic earnings (loss) per common share for the year ended December 31, 2010 and the six months ended June 30, 2011 have been computed to give effect, at the beginning of each of those periods, to the Company’s recapitalization and its initial public offering. Net income (loss) as reported was adjusted, net of tax, to reduce interest expense by $             million and $             million for the year ended December 31, 2010 and the six months ended June 30, 2011, respectively, for interest charges associated with the $             million in aggregate advances from SEACOR that will be contributed to the Company and that will be repaid to SEACOR with the net proceeds from the Company’s initial public offering. In addition, net income (loss) as reported was adjusted, net of tax, to reduce SEACOR management fees by $             million and $             million for the year ended December 31, 2010 and the six months ended

 

 

11


  June 30, 2011, respectively, to align with charges that will be billed post initial public offering in accordance with the transition services agreement between the Company and SEACOR. The weighted average common shares outstanding for the year ended December 31, 2010 and the six months ended June 30, 2011 have been computed as the total of the Company’s Class A and Class B common stock outstanding upon the consummation of the initial public offering.
(2) We present Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”) in this prospectus to provide investors with a supplemental measure of our operating performance. Interest, in this case, includes interest income, interest expense and interest expense on advances from SEACOR. EBITDA is not a recognized term under generally accepted accounting principles in the United States (“GAAP”). Accordingly, it should not be used as an indicator of, or an alternative to, net income as a measure of operating performance. In addition, EBITDA is not intended to be a measure of free cash flow available for management’s discretionary use, as it does not consider certain cash requirements, such as debt service requirements. Our presentation of EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Because the definition of EBITDA (or similar measures) may vary among companies and industries, it may not be comparable to other similarly titled measures used by other companies.

Management uses EBITDA as a performance metric for internal monitoring and planning purposes, including the presentation of our annual operating budget and quarterly operating reviews, and to facilitate analysis of investment decisions. In addition, the EBITDA performance metric allows us to evaluate profitability and make performance trend comparisons between us and our competitors. Further, we believe EBITDA is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry.

The following table provides a reconciliation of Net Income (Loss), the most directly comparable GAAP measure, to EBITDA for the historical periods presented:

 

     Six Months Ended June 30,     Years Ended December 31,  
         2011             2010             2010             2009             2008      
     (in thousands)  

Net Income (Loss)

   $ 2,062      $ (4,914   $ (3,639   $ 1,839      $ (2,487

Depreciation

     24,309        21,175        43,351        37,358        36,411   

Interest Income

     (100     (44     (109     (52     (217

Interest Expense

     579        19        94        13        5   

Interest Expense on Advances from SEACOR

     12,299        10,729        21,437        20,328        12,963   

Income Tax Expense (Benefit)

     653        (2,340     (4,301     2,883        (344
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

   $ 39,802      $ 24,625      $ 56,833      $ 62,369      $ 46,331   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(3) We present certain items on a pro forma as adjusted basis to give effect to (a) the capital contribution by SEACOR of $             million of advances we have received from SEACOR, (b) costs incurred in connection with our new $             million revolving credit facility, (c) the sale of shares of our Class A common stock in this offering at an assumed initial public offering price of $             per share (the midpoint of the price range set forth on the cover of this prospectus) after deducting underwriting discounts and commissions and estimated offering expenses payable by us, and the application of the net proceeds from this offering to repay a portion of advances we have received from SEACOR, as described under “Use of Proceeds,” and (d) the borrowing of $             million under our new revolving credit facility to fund working capital needs and repay our remaining advances from SEACOR outstanding as of June 30, 2011. The pro forma as adjusted amounts do not give effect to the additional advances from SEACOR that we have received since June 30, 2011, which are not expected to exceed $             million, or additional borrowings under our new revolving credit facility that will be used to repay such advances.

 

 

12


RISK FACTORS

An investment in our Class A common stock involves a high degree of risk. You should carefully consider the following risks, as well as the other information contained in this prospectus, before making an investment in our company. If any of the following risks actually occur, our business, results of operations or financial condition may be adversely affected. In such an event, the trading price of our Class A common stock could decline and you could lose part or all of your investment.

Risks Related to Our Business and Industry

Demand for many of our services is impacted by the level of activity in the offshore oil and gas exploration, development and production industry.

In 2010, approximately 73% of our operating revenues were generated by the provision of helicopter services to companies engaged in offshore oil and gas exploration, development and production activities, primarily in the U.S. Gulf of Mexico and Alaska. Demand for our services and our results of operations are significantly impacted by levels of activity in that region. These levels of activity have historically been volatile. This volatility is likely to continue in future periods. The level of offshore oil and natural gas exploration, development and production activity is not only likely to be volatile, but it is also subject to factors beyond our control, including:

 

   

general economic conditions;

 

   

prevailing oil and natural gas prices and expectations about future prices and price volatility;

 

   

assessments of offshore drilling prospects compared with land-based opportunities;

 

   

the cost of exploring for, producing and delivering oil and natural gas offshore;

 

   

worldwide demand for energy, petroleum products and chemical products;

 

   

availability and rate of discovery of new oil and natural gas reserves in offshore areas;

 

   

federal, state, local and international political conditions, and policies including cabotage, local content, exploration and development of oil and gas reserves;

 

   

technological advancements affecting exploration, development, energy production and consumption;

 

   

weather conditions;

 

   

environmental regulation;

 

   

regulation of drilling activities and the availability of drilling permits and concessions; and

 

   

the ability of oil and natural gas companies to generate or otherwise obtain funds for offshore oil and gas exploration, development and production.

We are in a cyclical business.

Our industry has historically been cyclical and is affected by the volatility of oil and gas price levels, fluctuations in government programs and spending and general economic conditions. Changes in commodity prices can have a significant effect on demand for our services, and periods of low activity intensify price competition in the industry and often result in our helicopters being idle for long periods of time. A prolonged significant downturn in oil and natural gas prices, or increased regulation containing onerous compliance requirements, are likely to cause a substantial decline in expenditures for exploration, development and production activity, which would result in a decline in demand and lower rates for our services. Similarly, the government agencies with which we do business could face budget cuts or limit spending, which would also result in a decline in demand and lower rates for our services. These changes could adversely affect our business, financial condition and results of operations.

 

13


We are highly dependent upon the level of activity in the U.S. Gulf of Mexico and Alaska, which are mature exploration and production regions.

In 2010, our operating revenues were derived from helicopter services provided to clients primarily involved in oil and gas activities in the U.S. Gulf of Mexico and Alaska, representing approximately 48% and 12%, respectively, of operating revenues. The U.S. Gulf of Mexico and Alaska are mature exploration and production regions that have undergone substantial seismic survey and exploration activity for many years. Because a large number of oil and gas properties in these regions have already been drilled, additional prospects of sufficient size and quality could be more difficult to identify. We believe that the production from these mature oil and gas properties is declining and that the future production may decline to the point that such properties are no longer economically viable to operate, in which case, our services with respect to such properties will no longer be needed. Oil and gas companies may not identify sufficient additional drilling sites to replace those that become depleted. If activity in oil and gas exploration, development and production in either the U.S. Gulf of Mexico or Alaska materially declines, our business, financial condition and results of operations could be materially and adversely affected. We cannot predict the levels of activity in these areas.

The helicopter industry is subject to intense competition.

The helicopter industry is highly competitive. In the United States, we face competition for business in the oil and gas industry from three major operators, Bristow Group Inc. (“Bristow”), PHI, Inc. and Rotorcraft Leasing Company LLC. We also face potential competition from customers that establish their own flight departments and smaller operators that can, with access to capital, expand their fleets and operate more sophisticated and costly equipment. In providing air medical transport services, we face competition from Air Methods Corporation and PHI, Inc. and many other operators. In our international markets, we face competition from local operators in countries where foreign regulations may require that contracts be awarded to local companies owned by nationals. We also face competition from operators that may have better recognized reputations in some of those markets. In addition, we compete with other providers of medical air transport, search and rescue, firefighting and flightseeing services, as well as leasing companies in various markets.

Chartering of helicopters usually involves an aggressive bidding process or intense negotiations. To qualify for work in most instances, an operator must have an acceptable safety record, demonstrated reliability, and the requisite equipment for the job, as well as sufficient resources to provide coverage when primary equipment comes out of service for maintenance. Companies that can satisfy these criteria and meet these needs are invited to bid for work. Customers typically make their final choice based on the best price available for the aircraft that is needed in the time frame that is mandated by their need. If we were unable to satisfy the criteria to participate in bids, we would be unable to compete effectively and our business, financial condition and results of operations would be materially and adversely affected.

Following this offering, we no longer expect to receive funds from SEACOR, which could adversely affect our ability to maintain our fleet and compete effectively in our markets.

We currently participate in a cash management program whereby certain of our operating and capital expenditures, including funds for our investments in new helicopters, are funded through advances from SEACOR. Following this offering, we do not expect to receive additional advances from SEACOR and will depend on cash generated from our own operations or from equity or debt offerings and our new revolving credit facility, to fund our investments in our fleet, purchase new helicopters, fund our operations or joint ventures and make acquisitions or investments. If we are unable to generate sufficient cash from operations or obtain adequate financing on commercially reasonable terms, on a timely basis or at all, our ability to invest in our business or fund our business strategy may be limited and may materially and adversely affect our ability to compete effectively in our markets.

Difficult economic and financial conditions could have a material adverse effect on us.

The financial results of our business are both directly and indirectly dependent upon economic conditions throughout the world, which in turn can be impacted by conditions in the global financial markets. These factors

 

14


are outside our control and changes in circumstances are difficult to predict. Uncertainty about global economic conditions may lead businesses to postpone spending in response to tighter credit and reductions in income or asset values, which may lead many lenders and institutional investors to reduce, and in some cases, cease to provide funding to borrowers. Weak economic activity may lead government customers to cut back on services. Factors such as interest rates, availability of credit, inflation rates, economic uncertainty, changes in laws (including laws relating to taxation), trade barriers, commodity prices, currency exchange rates and controls, and national and international political circumstances (including wars, terrorist acts or security operations) could have a material adverse effect on our business and investments, which could reduce our revenues, profitability and value of our assets. These factors (including the failure of lenders participating in our new revolving credit facility to fulfill their commitments and obligations) may also adversely affect our liquidity and our financial condition, and the business, liquidity and financial condition of our customers. Adverse liquidity conditions for our customers could negatively impact their capital investment activity. In addition, periods of poor economic conditions could increase our ongoing exposure to credit risks on our accounts receivable balances. We have procedures that are designed to monitor and limit exposure to credit risk on our receivables; however, there can be no assurance that such procedures will effectively limit our credit risk and avoid losses. This could have a material adverse effect on our business, financial condition and results of operations.

For example, a slowdown in economic activity could reduce worldwide demand for energy and result in an extended period of lower oil and natural gas prices. Demand for our services depends on oil and natural gas industry activity and expenditure levels that are directly affected by trends in oil and natural gas prices. A reduction in oil and natural gas prices could depress the activity levels of oil and gas companies, which in turn would reduce demand for our services. Perceptions of longer-term lower oil and natural gas prices by oil and gas companies can similarly further reduce or defer major expenditures given the long-term nature of many large-scale development projects. Lower levels of activity can result in a corresponding decline in the demand for our services, which could have a material adverse effect on our revenue and profitability. Unstable economic conditions or turmoil in financial markets may also increase the volatility of our stock price.

Failure to maintain an acceptable safety record may have an adverse impact on our ability to obtain and retain customers.

Our customers consider safety and reliability a primary concern in selecting a helicopter service provider. We must maintain a record of safety and reliability that is acceptable to, and in certain instances is contractually required by, our customers. In an effort to maintain an appropriate standard, we incur considerable costs to maintain the quality of (i) our safety program, (ii) our training programs and (iii) our fleet of helicopters. For example, we have implemented a safety program that includes, among many other features, (i) transition and recurrent training using flight training devices, (ii) an FAA approved flight operational quality assurance program and (iii) health and usage monitoring systems, otherwise known as HUMS, which automatically monitor and report on vibrations and other anomalies on key components of certain helicopters in our fleet. We cannot assure you that our safety program or our other efforts will provide an adequate level of safety or an acceptable safety record. If we are unable to maintain an acceptable safety record, we may not be able to retain existing customers or attract new customers, which could have a material adverse effect on our business, financial condition and results of operations.

We rely on relatively few customers for a significant share of our revenues, the loss of any of which could adversely affect our business, financial condition and results of operations.

We derive a significant portion of revenues from a limited number of oil and gas exploration, development and production companies and government agencies. Specifically, services provided to Anadarko Petroleum Corporation, U.S. government agencies, primarily the Bureau of Ocean Energy Management, Regulation and Enforcement (“BOEMRE”), and Aeróleo accounted for 11%, 11% and 10% of our revenues, respectively, for the year ended December 31, 2010. The portion of our revenues attributable to any single customer may change over time, depending on the level of activity by any such customer, our ability to meet the customer’s needs and other

 

15


factors, many of which are beyond our control. In addition, most of our contracts with our customers can be cancelled on relatively short notice and do not commit our customers to acquire specific amounts of services. The loss of business from any of our significant customers could have a material adverse effect on our business, financial condition and results of operations.

Our customers include U.S. government agencies that are dependent on budget appropriations, which may fluctuate and, as a result, limit their ability to use our services.

U.S. government agencies, primarily BOEMRE, are among our key customers and accounted for approximately 11% of our revenues for the year ended December 31, 2010. Government agencies receive funding through budget appropriations, which are determined through the political process, and as a result, funding for the agencies with which we do business may fluctuate. Recently, there has been increased Congressional scrutiny of discretionary program spending by the U.S. government in light of concerns over the size of the National debt. In August 2011, Congress reached an agreement to raise the U.S. debt ceiling in order to avoid financial default of the U.S. government. This agreement requires the elimination of more than $2 trillion in federal spending over the next decade. Although the details of these spending cuts remain unclear, lawmakers have discussed the need to cut or impose caps on discretionary spending in coming years, which could mean budget cuts to federal agencies to which we provide services. If any of these agencies, particularly BOEMRE, experience reductions in their budgets or if they change their spending priorities, their ability or willingness to spend on helicopter operations may decline, and they may substantially reduce or cease using our services, which could have a material adverse effect on our business, financial condition and results of operations.

Consolidation of our customer base could adversely affect demand for our services and reduce our revenues.

Many of our customers are major integrated oil and gas companies or independent oil and gas exploration, development and production companies. In recent years, these companies have undergone substantial consolidation, and additional consolidation is possible. Consolidation results in fewer companies to charter or contract for our services, and in the event one of our customers combines with a company that is using the services of one of our competitors, the combined company could decide to use the services of that competitor or another provider. Also, merger activity among both major and independent oil and natural gas companies affects exploration, development and production activity as the consolidated companies initially put projects on hold while integrating operations. Consolidation may also result in an exploration and development budget for a combined company that is lower than the total budget of both companies before consolidation. Reductions in budgets could adversely affect demand for our services and our results of operations.

The implementation by our customers of cost-saving measures could reduce the demand for our services.

Oil and gas companies are continually seeking to implement measures aimed at cost savings. These measures can include efforts to improve efficiencies and reduce costs by reducing headcount or finding less expensive means for moving personnel offshore. Reducing headcount, changing rotations for personnel working offshore, therefore requiring fewer trips to and from installations, or using marine transport, are some, but not all of the possible initiatives that could result in reduced demand for our helicopter transport services. In addition, customers could establish their own helicopter operations or devise other transportation alternatives. The continued implementation of these kinds of measures could reduce the demand for helicopter services provided by independent operators like us, and could have a material adverse effect on our business, financial condition and results of operations.

Operational risks including, but not limited to, equipment failure and negligence could adversely impact our results of operations and in some instances, expose us to liability.

The operation of helicopters is subject to various risks, including catastrophic disasters, crashes, adverse weather conditions, mechanical failures and collisions, which may result in loss of life, personal injury and/or

 

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damage to property and equipment. Our helicopters have been involved in accidents in the past, some of which included loss of life, personal injury and property damage. Certain models of helicopters that we operate have also experienced incidents while operated by third parties. We, or third parties operating our helicopters, may experience accidents in the future. These risks could endanger the safety of both our own and our customers’ personnel, equipment, cargo and other property, as well as the environment. If any of these events were to occur with equipment that we operate or contract-lease to third parties, we could be held liable for the resulting damages, and also experience loss of revenues, termination of charter contracts, higher insurance rates, and damage to our reputation and customer relationships. If other operators experience incidents with helicopter models that we also operate or contract-lease, obligating us to take such helicopters out of service until the cause of the incidents is rectified, we would lose revenue and might lose customers. In addition, safety issues experienced by a particular model of helicopter could result in customers refusing to use a particular helicopter model or a regulatory body grounding that particular helicopter model. The value of the helicopter model might also be permanently reduced in the market if the model were to be considered less desirable for future service.

Weather and seasonality can impact our results of operations.

A significant portion of our revenues is dependent on actual flight hours. Prolonged periods of adverse weather and storms can adversely impact our operations and flight hours. The fall and winter months generally have more days of adverse weather conditions than the other months of the year, with poor visibility, high winds, and heavy precipitation in some areas. While some of our helicopters are equipped to fly at night, we generally do not do so. Operations servicing offshore oil and gas transport of passengers, and also other non-emergency operations, are generally conducted during daylight hours. During winter months there are fewer daylight hours, particularly in Alaska. Flight hours, and therefore revenues, tend to decline in the winter. In addition, oil and gas exploration activity in Alaska decreases during the winter months due to the harsh weather conditions. Our operations in the U.S. Gulf of Mexico may also be adversely affected by weather. Tropical storm season runs from June through November. Tropical storms and hurricanes limit our ability to operate our helicopters in the proximity of a storm, reduce oil and gas exploration, development and production activity, add expenses to secure equipment and facilities and require us to move assets out of the path of a storm. Despite our efforts to plan for storms and secure our equipment, we may suffer damage to our helicopters or our facilities, thereby reducing our ability to provide our services. In addition, these factors also result in seasonal impacts on our business and results of operations.

Our operations depend on facilities we use throughout the world. These facilities are subject to physical and other risks that could disrupt production.

Our facilities could be damaged or our operations could be disrupted by a natural disaster, labor strike, war, political unrest, terrorist activity or a pandemic. We operate numerous bases in and along the U.S. Gulf of Mexico and we are particularly exposed to risk of loss or damage from hurricanes in that region. In addition, our operations in Alaska (including our fixed based operation (“FBO”) business at Ted Stevens Anchorage International Airport) are at risk from earthquake activity. In particular, we have fuel tanks at our FBO facility with approximately 200,000 gallons of fuel storage capacity, all of which could be substantially damaged or compromised due to an earthquake. Although we have obtained property damage insurance, a major catastrophe such as a hurricane, earthquake or other natural disaster at any of our sites, or significant labor strikes, work stoppages, political unrest, war or terrorist activities in any of the areas where we conduct operations, could result in a prolonged interruption or stoppage of our business or material sub-parts of it. Any disruption resulting from these events could cause the loss of sales and customers. Our insurance may not adequately compensate us for any of these events.

A shortfall in availability of raw materials, components, parts and subsystems required for the repair and maintenance of our helicopters could adversely affect us, as would cost increases imposed by suppliers if they cannot be passed on to customers or if our equipment has been committed to contracts without coverage for escalating expenses.

In connection with the required routine repairs and maintenance that we perform or are performed by others on our helicopters, we rely on seven key vendors (Agusta Aerospace Corporation, Sikorsky Aircraft Corporation,

 

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American Eurocopter Corp., Bell Helicopter Textron Inc., Pratt and Whitney Canada, Turbomea USA, Inc. and Honeywell International), for the supply and overhaul of components on our helicopters. Those vendors have historically been the manufacturers of these components and parts, and their factories tend to work at or near full capacity supporting the helicopter production lines for new equipment. This leaves little capacity for the production of parts requirements for maintenance of our helicopters. The tight production schedules, as well as new regulatory requirements, the availability of raw materials or commodities, or the need to upgrade parts or product recalls can add to backlogs, resulting in key parts being in limited supply or available on an allocation basis. To the extent that these suppliers also supply parts for helicopters used by the U.S. military, parts delivery for our helicopters may be delayed during periods in which there are high levels of military operations. Any shortages could have an adverse impact on our ability to repair and maintain our helicopters. Our inability to perform timely repair and maintenance could result in our helicopters being underutilized, which could have an adverse impact on our results of operations. Furthermore, our operations in remote locations, where delivery of these components and parts could take a significant period of time, may also impact our ability to repair and maintain our helicopters. Although every effort is made to mitigate such impact, this may pose a risk to our results of operations. In addition, supplier cost increases for critical helicopter components and parts can also adversely impact our results of operations. Cost increases are passed through to our customers through rate increases where possible, including as a component of contract escalation charges. However, as certain of our contracts are long-term in nature and may not have escalation or escalation may be tied to an index, which may not increase as rapidly as the cost of parts, we may see our margins erode. As many of our helicopters are manufactured by two European based companies the cost of spare parts could be impacted by changes in currency exchange rates.

Consolidation in the helicopter parts industry could affect the service and operation of our helicopters.

We rely on a limited number of helicopter parts suppliers and distributors to provide spare parts for our helicopters. A reduction in the number of helicopter parts suppliers could interrupt or delay the supply of helicopter components, adversely affecting our ability to meet service commitments to our customers and could cause us to lose opportunities with existing and new customers. We might not be able to qualify or identify alternative suppliers in a timely fashion, or at all. Consolidations involving suppliers could further reduce the number of alternative suppliers for us and increase the cost of components. An increase in our cost of components could make us less competitive, result in lower margins and adversely affect our business, financial condition and results of operations.

Our future growth may be impacted by our ability to expand into markets outside of the U.S. Gulf of Mexico and Alaska.

Our future growth will depend on our ability to expand into markets outside of the United States. Expansion of our business depends on our ability to operate in these other regions.

Expansion of our business outside of the U.S. Gulf of Mexico and Alaska may be adversely affected by:

 

   

local regulations restricting foreign ownership of helicopter operators;

 

   

requirements to award contracts to local operators; and

 

   

the number and location of new drilling concessions granted by foreign governments.

We cannot predict the restrictions or requirements that may be imposed in the countries in which we operate or wish to operate. If we are unable to continue to operate or obtain and retain contracts in markets outside of the U.S. Gulf of Mexico and Alaska, our future business, financial condition and results of operations may be adversely affected, and our operations outside of the U.S. Gulf of Mexico and Alaska may not grow.

 

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Our operations in the U.S. Gulf of Mexico were adversely impacted by the Deepwater Horizon drilling rig incident and resulting oil spill, and may be adversely impacted by proposed legislation and resulting litigation in response to that incident.

On April 22, 2010, the Deepwater Horizon, a semi-submersible deepwater drilling rig operating in the U.S. Gulf of Mexico, sank after an apparent blowout and fire resulting in a significant flow of hydrocarbons from the BP Macondo well. On May 28, 2010, the U.S. Department of Interior imposed a six-month moratorium on offshore deepwater drilling operations, the enforcement of which was preliminarily enjoined, and on July 12, 2010, the U.S. Department of Interior imposed another similar moratorium, which was set to expire November 30, 2010. As a result, deepwater drilling operations in the U.S. Gulf of Mexico were suspended and a number of drilling rigs moved to other markets. On October 12, 2010, the U.S. Department of Interior lifted the moratorium on deepwater drilling. However, the U.S. Department of Interior has issued only a small number of permits related to the drilling of new exploratory wells in the deepwater of the U.S. Gulf of Mexico following the lifting of the moratorium. It is not possible to estimate whether or when drilling operations in the U.S. Gulf of Mexico will return to activity levels comparable to those of years prior to the incident and the resulting moratorium, due to uncertainties surrounding the timing of the issuance of drilling permits, new regulations related to drilling operations, litigation associated with the issuance of permits and the availability of rigs suitable for drilling prospects in this region.

In addition, our operations in the U.S. Gulf of Mexico, which, along with those of certain of our customers, may be adversely impacted by, among other factors:

 

   

the additional safety and certification requirements for drilling activities required for the approval of development and production activities and the delayed approval of applications to drill in both deep and shallow-water areas;

 

   

the suspension, stoppage or termination by customers of existing contracts and the demand by customers for new or renewed contracts in the U.S. Gulf of Mexico and other affected regions;

 

   

unplanned customer suspensions, cancellations, rate reductions, non-renewals of commitments to charter aviation equipment or failures to finalize commitments to charter aviation equipment;

 

   

new or additional government regulations and laws concerning drilling operations in the U.S. Gulf of Mexico and other regions;

 

   

the cost or availability of relevant insurance coverage; and

 

   

adverse weather conditions and natural disasters including, but not limited to, hurricanes and tropical storms.

Any one or a combination of these factors could reduce revenues, increase operating costs and have a material adverse effect on our business, financial condition and results of operations.

Increased fuel costs may have a material adverse effect on our business, financial condition and results of operations.

Fuel is essential to the operation of our helicopters and to our ability to carry out our transport services and is a key component of our operating expenses. The high cost of fuel can increase the cost of operating our helicopters. Any increased fuel costs may negatively impact our net sales, margins, operating expenses and results of operations. Although we have been able to pass along a significant portion of increased fuel costs to our customers in the past, we cannot assure you that we can do so again if another prolonged period of high fuel costs occurs. In recent months, fuel costs have increased, and remained higher than historical levels, as a result of, among other things, political turmoil in the Middle East and North Africa. If fuel costs continue to increase in the future or remain at relatively high levels, we may experience difficulties in passing all or a portion of these costs along to our customers, which may have a material adverse effect on our business, financial condition and results of operations.

 

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Our contracts generally can be terminated or downsized by our customers without penalty.

Many of our operating contracts and charter arrangements in the U.S. Gulf of Mexico and Alaska contain provisions permitting early termination by the customer for any reason, generally without penalty, and with limited notice requirements. This is also true for a number of our international contracts. In addition, many of our contracts permit our customers to decrease the number of helicopters under contract with a corresponding decrease in the fixed monthly payments without penalty. As a result, you should not place undue reliance on our customer contracts or the terms of those contracts. The termination of contracts by our significant customers or the decrease in their usage of our helicopter services could have a material adverse effect on our business, financial condition and results of operations.

We may not be able to obtain work on acceptable terms covering some of our new helicopters, and some of our new helicopters may replace existing helicopters already under contract, which could adversely affect the utilization of our existing fleet.

As of June 30, 2011, we had placed orders for 16 new helicopters, 11 of which are scheduled to be delivered through 2012. Delivery dates for the remaining five helicopters have yet to be determined. Many of our new helicopters may not be covered by customer contracts when they are placed into service, and we cannot assure you as to when we will be able to utilize these new helicopters or on what terms. To the extent our helicopters are covered by a customer contract, many of these contracts are short-term, requiring us to seek renewals frequently. We also expect that some of our customers may request new helicopters in lieu of our existing helicopters, which could adversely affect the utilization of our existing fleet.

In order to grow our business, we may require additional capital in the future, which may not be available to us.

Our business is capital intensive, and to the extent we do not generate sufficient cash from operations, we will need to raise additional funds through public or private debt or equity financings to execute our growth strategy. Adequate sources of capital funding may not be available when needed, or may not be available on favorable terms. If we raise additional funds by issuing equity or certain types of convertible debt securities, dilution to the holdings of our existing stockholders may result. If we raise additional debt financing, we will incur additional interest expense and the terms of such debt may be at less favorable rates than existing debt and could require the pledge of assets as security or financial and/or operating covenants that affect our ability to conduct our business. If funding is insufficient at any time in the future, we may be unable to acquire additional helicopters, take advantage of business opportunities or respond to competitive pressures, any of which could harm our business, financial condition and results of operations.

Our dependence on a small number of helicopter manufacturers poses a significant risk to our business and prospects, including our ability to execute our growth strategy.

Although our fleet includes equipment from all four of the major helicopter manufacturers, our current fleet expansion and replacement needs rely on contracts with two manufacturers. If any of the manufacturers with whom we contract face production delays due to, for example, natural disasters, labor strikes or unavailability of skilled labor, we may experience a significant delay in the delivery of previously ordered helicopters. During these periods, we may not be able to obtain additional helicopters with acceptable pricing, delivery dates or other terms. Delivery delays or our inability to obtain acceptable helicopters would adversely affect our revenue and profitability and could jeopardize our ability to meet the demands of our customers and execute our growth strategy. In addition, lack of availability of new helicopters resulting from a backlog in orders could result in an increase in prices for certain types of used helicopters. Furthermore, regulatory authorities may require us to temporarily or permanently remove certain helicopter models from service following certain incidents such as crashes or accidents.

 

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Our dependence on a small number of vendors of spare parts poses a significant risk to our business and prospects, including our ability to maintain our existing fleet.

We rely on a few key vendors for the supply and overhaul of components fitted to our aircraft. To the extent that these suppliers also supply parts for aircraft used by the U.S. military, parts delivery for our aircraft may be delayed during periods in which there are high levels of military operations. In addition, to the extent that certain parts are subject to recalls, are the potential cause of an accident or are otherwise determined to be unsafe, delivery of replacement parts for our aircraft may be delayed while demand by the industry as a whole is satisfied. Such conditions can result in backlogs in manufacturing schedules and some parts being in limited supply from time to time, which could have an adverse impact upon our ability to maintain and repair our aircraft. Our inability to perform timely maintenance and repairs may result in our aircraft being underutilized, which could have an adverse impact on our operating results.

Adverse results of legal proceedings could have a material adverse effect on us.

We are subject to, and may in the future be subject to, a variety of legal proceedings and claims that arise out of the ordinary conduct of our business. Results of legal proceedings cannot be predicted with certainty. Irrespective of their merits, legal proceedings may be both lengthy and disruptive to our operations and may cause significant expenditure and diversion of management attention. We may be faced with significant monetary damages or injunctive relief against us that could have a material adverse effect on a portion of our business operations or a material adverse effect on our financial condition and results of operations.

We may undertake one or more significant corporate transactions that may not achieve their intended results, may adversely affect our financial condition and our results of operations or result in unforeseeable risks to our business.

We continuously evaluate the acquisition of operating businesses and assets and may in the future undertake one or more significant transactions. Any such transaction could be material to our business and could take any number of forms, including mergers, joint ventures, investments in new lines of business and the purchase of equity interests. The consideration for such transactions may include, among other things, cash, common stock or equity interests in us or our subsidiaries, or a contribution of equipment to obtain equity interests, and in conjunction with a transaction we might incur additional indebtedness. We also routinely evaluate the benefits of disposing certain of our assets. Such dispositions could take the form of asset sales, mergers or sales of equity interests.

These transactions may present significant risks such as insufficient revenue to offset liabilities assumed, potential loss of significant revenues and income streams, increased or unexpected expenses, inadequate return of capital, regulatory or compliance issues, the triggering of certain covenants in our debt instruments (including accelerated repayment) and unidentified issues not discovered in due diligence. In addition, such transactions could distract management from current operations. As a result of the risks inherent in such transactions, we cannot guarantee that any such transaction will ultimately result in the realization of its anticipated benefits or that it will not have a material adverse impact on our business, financial condition or results of operations. If we were to complete such an acquisition, disposition, investment or other strategic transaction, we may require additional debt or equity financing that could result in a significant increase in our amount of debt or the number of outstanding shares of our common stock.

We are subject to risks associated with our international operations.

We operate and contract-lease helicopters in international markets. During the year ended December 31, 2010, approximately 24% of our operating revenues resulted from our international operations. We expect to increase our international operations in the future. Our international operations are subject to a number of risks, including:

 

   

political conditions and events, including embargoes;

 

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restrictive actions by U.S. and foreign governments, including in Brazil, India, Indonesia, Sweden and Spain, that could limit our ability to provide services in those countries;

 

   

the imposition of withholding or other taxes on foreign income, tariffs or restrictions on foreign trade and investment;

 

   

adverse tax consequences;

 

   

limitations on repatriation of earnings or currency exchange controls and import/export quotas;

 

   

nationalization, expropriation, asset seizure, blockades and blacklisting;

 

   

limitations in the availability, amount or terms, of insurance coverage;

 

   

loss of contract rights and inability to adequately enforce contracts;

 

   

political instability, war and civil disturbances or other risks that may limit or disrupt markets, such as terrorist attacks, piracy and kidnapping;

 

   

fluctuations in currency exchange rates, hard currency shortages and controls on currency exchange that affect demand for our services and our profitability;

 

   

potential noncompliance with a wide variety of laws and regulations, such as the U.S. Foreign Corrupt Practices Act of 1977 (the “FCPA”), and similar non-U.S. laws and regulations, including the U.K. Bribery Act 2010 (the “UKBA”);

 

   

labor strikes;

 

   

changes in general economic and political conditions;

 

   

adverse changes in foreign laws or regulatory requirements, including those with respect to flight operations and environmental protections; and

 

   

difficulty in staffing and managing widespread operations.

If we are unable to adequately address these risks, we could lose our ability to operate in certain international markets and our business, financial condition and results of operations could be materially and adversely affected.

There are risks associated with our debt structure.

Our ability to meet our debt service obligations is dependent upon our results of operations, which are subject to general economic conditions, industry cycles, seasonality and other factors, some of which may be beyond our control. We intend to enter into a $             million revolving credit facility immediately prior to this offering, and we expect this new revolving credit facility to contain certain customary restrictive covenants. Following this offering, we expect to have $             million of indebtedness outstanding. Our debt levels and the terms of our indebtedness may limit our liquidity and our ability to obtain additional financing and pursue acquisitions and joint ventures or purchase new helicopters. Tight credit conditions could limit our ability to secure additional financing, if required, due to difficulties accessing the capital markets.

Our global operations are subject to certain foreign currency, interest rate, fixed-income, equity and commodity price risks.

We are exposed to currency fluctuations and exchange rate risks. We purchase some of our helicopters and helicopter parts from foreign manufacturers and maintain operations in foreign countries, which results in portions of our revenues and expenses being denominated in foreign currencies. We attempt to minimize our exposure to currency exchange risk by contracting the majority of our services in U.S. dollars. As a result, a strong U.S. dollar may increase the local cost of our services that are provided under the U.S. dollar denominated contracts, which may reduce demand for our services in foreign countries. Some of these risks may be hedged,

 

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but fluctuations could impact our financial condition and our results of operations. Our financial condition and our results of operations may also be affected by the cost of hedging activities that we undertake to protect against currency exchange risk. We operate in countries with foreign exchange controls, including Brazil and India. These controls may limit our ability to repatriate funds from our unconsolidated foreign affiliates or otherwise convert local currencies into U.S. dollars. These limitations could adversely affect our ability to access cash from these operations and our liquidity.

We are subject to governmental regulation that limits foreign ownership of aircraft companies.

We are subject to governmental regulation that limits foreign ownership of aircraft companies. Failure to comply with regulations and requirements for citizen ownership in the various markets in which we operate and may operate in the future, may subject our helicopters to deregistration or impoundment. If required levels of citizen ownership are not met or maintained, joint ventures in which we have significant investments also could be prohibited from operating within these countries. Deregistration of our helicopters or helicopters operated by our joint venture partners for any reason, including foreign ownership in excess of permitted levels, would have a material adverse effect on our ability to conduct operations within these markets. We cannot assure you that there will be no changes in aviation laws, regulations, required levels of citizen ownership, or administrative requirements or the interpretations thereof, that could restrict or prohibit our ability to operate in certain regions. Any such restriction or prohibition on our ability to operate may have a material adverse effect on our business, financial condition, and results of operations.

We limit foreign ownership of our company, which could reduce the price of our common stock and cause owners of our common stock who are not U.S. persons to lose their voting rights.

Our amended and restated certificate of incorporation provides that persons or entities that are not “citizens of the United States” (as defined in the Federal Aviation Act of 1958) shall not collectively own or control more than 24.9% of the voting power of our outstanding capital stock (the “Permitted Foreign Ownership Percentage”) and that, if at any time persons that are not citizens of the United States nevertheless collectively own or control more than the Permitted Foreign Ownership Percentage, the voting rights of our outstanding voting capital stock in excess of the Permitted Foreign Ownership Percentage owned by stockholders who are not citizens of the United States shall automatically be reduced. These voting rights will be reduced pro rata among the holders of voting shares who are not citizens of the United States to equal to the Permitted Foreign Ownership Percentage based on the number of votes to which the underlying voting securities are entitled. Shares held by persons who are not citizens of the United States may lose their associated voting rights and be redeemed as a result of these provisions. These restrictions may also have a material adverse impact on the liquidity or market value of our common stock because holders may be unable to transfer our common stock to persons who are not citizens of the United States.

If we do not restrict the amount of foreign ownership of our common stock, we may fail to remain a U.S. citizen, might lose our status as a U.S. air carrier and be prohibited from operating helicopters in the United States, which would adversely impact our business, financial condition and results of operations.

Since we hold the status of a U.S. air carrier under the regulations of both the United States Department of Transportation (“DOT”) and the FAA and we engage in the operating and contract-leasing of helicopters in the United States, we are subject to regulations pursuant to Title 49 of the Transportation Code (“Transportation Code”) and other statutes (“Aviation Acts”). The Transportation Code requires that Certificates to engage in air transportation be held only by citizens of the United States as that term is defined in the relevant section of the Transportation Code. That section requires: (i) that our president and two-thirds of our Board of Directors and other managing officers be U.S. citizens; (ii) that at least 75% of our outstanding voting stock be owned by U.S. citizens; and (iii) that we must be under the actual control of U.S. citizens. Further, our helicopters operating in the United States must generally be registered in the United States. In order to register such helicopters under the Aviation Acts, we must be owned or controlled by U.S. citizens. Although our amended and restated certificate

 

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of incorporation and bylaws contain provisions intended to ensure compliance with the provisions of the Aviation Acts, a failure to maintain compliance would result in loss of our air carrier status and thereby adversely affect our business, financial condition and results of operations and we would be prohibited from both operating as an aircraft carrier and operating helicopters in the United States during any period in which we did not comply with these regulations.

The Outer Continental Shelf Lands Act, as amended, provides the federal government with broad discretion in regulating the leasing of offshore resources for the production of oil and gas.

We currently derive a significant portion of our revenues from helicopter services we provide in the U.S. Gulf of Mexico for the purposes of offshore oil and gas exploration, development and production. As such, we are subject to the U.S. government’s exercise of authority under the provisions of the Outer Continental Shelf Lands Act that restrict the availability of offshore oil and gas leases by requiring lease conditions such as the implementation of safety and environmental protections, the preparation of spill contingency plans and air quality standards for certain pollutants, the violations of which could result in potential court injunctions curtailing operations and lease cancellations and by requiring that all pipelines operating on or across the outer continental shelf provide open and nondiscriminatory access to shippers. These provisions could adversely impact exploration and production activity in these regions. If activity in oil and gas exploration, development and production in these regions declines, our business, financial condition and results of operations could be materially and adversely affected.

Helicopter operations involve risks that may result in death or injury to personnel, damage to equipment and loss of operating revenues. These risks may not be covered by our insurance or our insurance may be inadequate to protect us from the liabilities that could arise.

The operation of helicopters inherently involves a degree of risk. Hazards include adverse weather conditions, collisions, fire and mechanical failures, which may result in death or injury to personnel, damage to equipment, loss of operating revenues, contamination of cargo, pollution and other environmental damages and increased costs. We also are exposed to liabilities including aviation malfunctions and crashes, FAA and foreign aviation regulation compliance, including grounding certain aircraft, and environmental compliance. We also may be adversely affected by accidents involving aircraft that we do not own or operate, particularly if they involve the same model of aircraft as in our fleet. Under those circumstances, our aircraft may be grounded or otherwise unavailable for use pending the resolution of recalls or required maintenance.

We carry insurance, including hull and liability, liability and war risk, general liability, workers’ compensation, and other insurance customary in the industry in which we operate. We also conduct training and safety programs to promote a safe working environment and minimize hazards. Our insurance coverage is subject to deductibles and maximum coverage amounts. Our insurance policies are also subject to compliance with certain conditions, the failure of which could lead to a denial of coverage as to a particular claim or the voiding of a particular insurance policy. The amount of insurance coverage we are able to maintain may be inadequate to cover all potential liabilities or the total amount of insured claims and liabilities. We cannot assure you that our existing insurance coverage can be renewed at commercially reasonable rates nor is it possible to obtain insurance to protect against all of our operations risks and liabilities. Any material liability not covered by insurance or for which third-party indemnification is not available, would have a material adverse effect on our financial condition, results of operations and/or cash flows.

We are subject to tax and other legal compliance risks, including anti-corruption statutes, the violation of which may adversely affect our business and operations.

As a global business, we are subject to complex laws and regulations in the United States and other countries in which we operate. Changes in laws or regulations and related interpretations and other guidance could result in higher expenses and payments. Uncertainty relating to such laws or regulations may also affect how we conduct our operations and structure our investments and could limit our ability to enforce our rights.

 

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In order to compete effectively in certain foreign jurisdictions, we seek to establish joint ventures with local operators or strategic partners. We are subject to a variety of tax and legal compliance risks. These risks include, among other things, possible liability relating to taxes and compliance with U.S. and foreign export laws, competition laws and regulations, including the FCPA and the UKBA. The FCPA generally prohibits U.S. companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or maintaining business. The UKBA has similar provisions. We could be charged with wrongdoing for any of these matters as a result of our actions or the actions of our agents, local partners or joint ventures, even though these parties may not be subject to such statutes. If convicted or found liable of tax or other legal infractions, or if we have been determined to be in violation of the FCPA, we could be subject to significant fines, penalties, repayments, other damages (in certain cases, treble damages), or suspension or debarment from government contracts, which could have a material adverse effect on our business, financial condition and results of operations. We are also subject to laws in the United States and outside of the United States regulating competition.

Independently, failure of us or one of our joint ventures or strategic partners to comply with applicable export and trade practice laws could result in civil or criminal penalties and suspension or termination of export privileges.

Negative publicity may adversely impact us.

Media coverage and public statements that insinuate improper actions by us or relate to accidents or other issues involving the safety of our helicopters or operations, regardless of their factual accuracy or truthfulness, may result in negative publicity, litigation or governmental investigations by regulators. Addressing negative publicity and any resulting litigation or investigations may distract management, increase costs and divert resources. Negative publicity may have an adverse impact on our reputation, our customer relationships and the morale of our employees, which could adversely affect our business, financial condition and results of operations.

Our inability to attract and retain qualified personnel could have an adverse effect on our business.

Attracting and retaining qualified pilots, mechanics and other highly skilled personnel is an important factor in our future success. Our inability to attract and retain qualified personnel could have an adverse effect on our business and our growth strategy. Many of our customers require pilots with very high levels of flight experience. In addition, the maintenance of our helicopters requires mechanics that are trained and experienced in servicing particular makes and models of helicopters. The market for these highly skilled personnel is competitive and we cannot be certain that we will be successful in attracting and retaining qualified personnel in the future. In addition, if we enter into new markets or obtain additional customer contracts or the demand for our services increases, we may be required to hire additional pilots, mechanics and other flight-related personnel, which we may not be able to do on a timely or cost-effective basis.

If our employees were to unionize, our operating costs could increase.

Our employees are not currently represented by a collective bargaining agreement. However, we have no assurances that our employees will not unionize in the future. This could increase our operating costs, force us to alter our operating methods and/or have a material adverse effect on our results of operations.

Environmental regulations and liabilities, including new or developing regulations, may increase our costs of operations and adversely affect us.

Liabilities associated with environmental matters could have a material adverse effect on our business, financial condition and results of operations. Our operations are subject to U.S. federal, state and local and foreign environmental laws and regulations that impose limitations on the discharge of pollutants into the environment and establish standards for the treatment, storage, recycling and disposal of toxic and hazardous

 

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wastes. The nature of the business of operating and maintaining helicopters requires that we use, store, and dispose of materials that are subject to environmental regulation. In addition, our customers in the oil and gas exploration, development and production industry are affected by environmental laws and regulations that restrict their activities and may result in reduced demand for our services. Environmental laws and regulations change frequently, which makes it difficult to predict their cost or impact on our results of operations. We could also be exposed to strict, joint and several liability for cleanup costs, natural resource damages and other damages as a result of our conduct that was lawful at the time it occurred or the conduct of, or conditions caused by, prior operators or third parties.

Any failure by us to comply with any environmental laws and regulations may result in administrative, civil or criminal sanctions, revocation or denial of permits or other authorizations, imposition of limitations on our operations, and site investigatory, remedial or other corrective actions.

In recent years, governments have increasingly focused on climate change, carbon emissions, and energy use. Regulations that curb the use of energy, or require using renewable fuels or renewable sources of energy—such as wind or solar power—could result in a reduction in demand for hydrocarbon-based fuels such as oil and natural gas. In addition, governments could pass laws, regulations or taxes that increase the cost of fuel, thereby impacting both demand for our services and also our cost of operations. Such initiatives could have a material adverse effect on our business, financial condition and results of operations.

Our FBO in Alaska is subject to extensive government regulation and other cost-related risks that could disrupt operations.

Our FBO in Alaska is subject to oversight by the Ted Stevens Anchorage International Airport, is dependent upon that airport being “open for business” and is subject to federal regulatory requirements by the FAA, the Transportation Security Administration (the “TSA”) and other agencies. If the FAA, TSA or other agencies were to impose significant operating restrictions or increase insurance obligations such that insurance could not be obtained or purchased for a reasonable cost, or if any federal regulatory requirement were to require significant expenditure, the market for services from our FBO could be significantly impaired or entirely eliminated. In addition, the biggest revenue producing activity at our FBO, fuel sales to transient customers, could be adversely impacted by increases in fuel prices, the ability of our competitors to undercut our pricing, restrictions on private air travel and/or taxes on fuel or aircraft, any of which could make private air travel prohibitively expensive. Should the FBO’s operations be restricted or shut down, whether due to regulatory issues, the weather, a natural disaster, terrorist activity, or any other reason, our operations could be adversely impacted.

Risks Related to Our Relationship with SEACOR

Following consummation of this offering, we will continue to be dependent on SEACOR to provide us with many key services for our business.

Historically, our business has been conducted as a segment of SEACOR, and many key services required by us for the operation of our business are currently provided by SEACOR and its subsidiaries, including services related to internal controls and external financial reporting. Upon consummation of this offering, we will enter into agreements with SEACOR related to the separation of our business operations from SEACOR, including a transition services agreement and a tax sharing agreement. Under the terms of the transition services agreement, SEACOR will provide us with many key services, including services related to internal controls and financial reporting. We expect these services to be provided for varying durations. Other agreements, such as the tax sharing agreement, also govern the relationship with SEACOR and provide for the allocation of liabilities and obligations attributable or related to periods or events prior to this offering. We negotiated these agreements with SEACOR in the context of a parent-subsidiary relationship. Although SEACOR will be contractually obligated to provide us with services during the terms of the agreements, we cannot assure you that these services will be performed as efficiently or proficiently after the expiration of those agreements, or that we will be able to replace these services in a timely manner or on comparable terms. They also contain provisions that may be more

 

26


favorable than terms and provisions we might have obtained in arm’s-length negotiations with unaffiliated third parties. When SEACOR ceases to provide services pursuant to those agreements, our costs of procuring those services from third parties may increase. In addition, we may not be able to replace these services or enter into appropriate third-party agreements on terms and conditions, including cost, comparable to those under the transition services agreement. Although we intend to replace some of the services that will be provided by SEACOR under the transition services agreement, we may encounter difficulties replacing certain services or be unable to negotiate pricing or other terms as favorable as those we currently have in effect. To the extent that we may require additional support from SEACOR not addressed in the transition services agreement, we intend to negotiate the terms of receiving such corporate support in future agreements. See “Certain Relationships and Related Person Transactions—Relationship with SEACOR” and “Certain Relationships and Related Person Transactions—Agreements with SEACOR.”

We may not be able to resolve favorably conflicts of interest that arise in the future between SEACOR and us with respect to our past and ongoing relationships.

We may have potential business conflicts of interest with SEACOR regarding our past and ongoing relationships, and, because of SEACOR’s controlling ownership interest in us, the resolution of these conflicts may not be favorable to us.

While none currently exist, conflicts of interest may arise between SEACOR and us in a number of areas relating to our past and ongoing relationships, including:

 

   

labor, tax, employee benefit, indemnification and other similar matters;

 

   

intellectual property matters;

 

   

employee recruiting and retention;

 

   

sales or distributions by SEACOR of all or any portion of its ownership interest in us, which could be to one of our competitors;

 

   

business combinations involving us; and

 

   

business opportunities that may be attractive to both SEACOR and us.

We may not be able to resolve any potential conflicts, and, even if we do so, the resolution may be less favorable to us than if we were dealing with an unaffiliated party and could have a material effect on our business, financial condition and results of operation. In addition, the agreements that we will enter into with SEACOR may be amended upon agreement between the parties. Although we are controlled by SEACOR, we may not have the leverage to negotiate amendments to these agreements, if required, on terms as favorable to us as those we would negotiate with an unaffiliated third party.

As long as we are controlled by SEACOR, our ability to influence the outcome of matters requiring stockholder approval will be limited.

Following consummation of this offering, SEACOR will own all of the issued and outstanding shares of our Class B common stock. The rights of the holders of our Class A common stock and our Class B common stock are substantially identical, except with respect to voting and conversion. The holders of our Class B common stock are entitled to eight votes per share and are convertible into shares of our Class A common stock. The holders of our Class A common stock are entitled to one vote per share and are not convertible. Accordingly, SEACOR will hold approximately     % of the combined voting power of our outstanding common stock upon completion of this offering (     % if the underwriters exercise their option to purchase additional shares of Class A common stock).

 

27


As long as SEACOR has voting control of our company, SEACOR will have the ability to take many stockholder actions, including the election or removal of directors, irrespective of the vote of, and without prior notice to, any other stockholder. As a result, SEACOR will have the ability to influence or control all matters affecting us, including:

 

   

the composition of our Board of Directors and, through our Board of Directors, decision-making with respect to our business direction and policies, including the appointment and removal of our officers;

 

   

amendments to our amended and restated certificate of incorporation;

 

   

any determinations with respect to acquisitions of businesses, mergers, or other business combinations;

 

   

our acquisition or disposition of assets;

 

   

our capital structure;

 

   

changes to the agreements relating to our separation from SEACOR;

 

   

our payment or non-payment of dividends on our common stock; and

 

   

determinations with respect to our tax returns.

SEACOR’s interests may not be the same as, or may conflict with, the interests of our other stockholders. As a result, actions that SEACOR takes with respect to us, as our controlling stockholder, may not be favorable to our other stockholders. In addition, this voting control may discourage transactions involving a change of control of our company, including transactions in which you, as a holder of our Class A common stock, might otherwise receive a premium for your shares over the then-current market price. Furthermore, after the expiration of the 180-day lock-up period described in “Underwriting”, SEACOR generally has the right at any time to spin-off or split-off our common stock that it owns or to sell a controlling interest in us to a third party, in either case without your approval and without providing for a purchase of your shares. See “Shares Eligible for Future Sale.” SEACOR has advised us that it has not made a decision whether to effect any such transaction.

Some of our directors are executive officers of SEACOR and own common stock and other equity instruments of SEACOR, which could cause conflicts of interests.

Our five current directors are executive officers of SEACOR and our two director nominees currently are directors of SEACOR. Our current directors, our director nominees and a number of our officers own a substantial amount of SEACOR common stock along with other equity instruments, the value of which is related to the value of common stock of SEACOR. The direct and indirect interests of our directors and officers in common stock of SEACOR and the presence of executive officers of SEACOR on our board of directors could create, or appear to create, conflicts of interest with respect to matters involving both us and SEACOR that could have different implications for SEACOR than they do for us. As a result, we may be precluded from pursuing certain opportunities on which we would otherwise act, including growth opportunities.

Under certain circumstances we could be liable for payments to SEACOR related to income taxes owed by SEACOR.

Following consummation of this offering, we will cease to be a member of SEACOR’s consolidated group for U.S. federal income tax purposes. However, pursuant to the terms of the tax sharing agreement between us and SEACOR, we may be required to make payments to SEACOR in respect of taxes owed by SEACOR for periods prior to this offering. For example, if the amounts of our net operating losses for taxable periods ending on or before the completion of this offering are reduced by the Internal Revenue Service as a result of an audit, we would be required to pay SEACOR an amount equal to 35% of such reduction. For a more detailed description of our tax sharing agreement, see “Certain Relationships and Related Party Transactions—Tax Sharing Agreement.” Even if we are not responsible for tax liabilities of SEACOR under the tax sharing agreement, we nonetheless could be liable under applicable tax law for such liabilities if SEACOR were to fail to pay them.

 

28


We are a “controlled company” within the meaning of the NYSE rules and will qualify for, and intend to rely on, exemptions from certain corporate governance requirements. As a result, you will not have the same protections afforded to stockholders of companies that are subject to such requirements.

Following consummation of this offering, SEACOR will continue to control a majority of the voting power of our outstanding common stock. See “Certain Relationships and Related Person Transactions—Relationship with SEACOR.” As a result, we are a “controlled company” within the meaning of the NYSE corporate governance standards. Under these rules, a “controlled company” may elect to not comply with certain corporate governance requirements, including:

 

   

the requirement that a majority of the Board of Directors consist of independent directors;

 

   

the requirement that we have a Nominating and Corporate Governance Committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities;

 

   

the requirement that we have a Compensation Committee that is comprised entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and

 

   

the requirement for an annual performance evaluation of the Nominating and Corporate Governance and Compensation Committees.

Following consummation of this offering, we intend to utilize these exemptions. As a result, we will not have a majority of independent directors, our Nominating and Corporate Governance Committee, and Compensation Committee will not consist entirely of independent directors and such committees will not be subject to annual performance evaluations. Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE.

Our historical financial information may not be representative of the results we would have achieved as a stand-alone public company and may not be a reliable indicator of our future results.

The historical financial information that we have included in this prospectus may not necessarily reflect what our financial position, results of operations or cash flows would have been had we been an independent entity during the periods presented or those that we will achieve in the future. The costs and expenses reflected in our historical financial information include an allocation for certain corporate functions historically provided by SEACOR, that may be different from the comparable expenses that we would have incurred had we operated as a stand-alone company. Our historical financial information does not reflect changes that will occur in our cost structure, financing and operations as a result of our transition to becoming a stand-alone public company, including changes in our employee base, potential increased costs associated with reduced economies of scale and increased costs associated with SEC reporting and NYSE requirements. Therefore, our historical financial information may not necessarily be indicative of what our financial position, results of operations or cash flows will be in the future.

Risks Related to Our Common Stock and this Offering

Our stock price may fluctuate significantly, and you may not be able to resell your shares at or above the initial public offering price.

The trading price of our Class A common stock may be volatile and subject to wide price fluctuations in response to various factors, including:

 

   

market conditions in the broader stock market;

 

   

actual or anticipated fluctuations in our quarterly financial condition and results of operations;

 

   

introduction of new equipment or services by us or our competitors;

 

   

issuance of new or changed securities analysts’ reports or recommendations;

 

29


   

sales, or anticipated sales, of large blocks of our stock;

 

   

additions or departures of key personnel;

 

   

regulatory or political developments;

 

   

litigation and governmental investigations; and

 

   

changing economic conditions.

These and other factors may cause the market price and demand for our Class A common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of Class A common stock and may otherwise negatively affect the liquidity of our Class A common stock. In addition, in the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the company that issued the stock. If any of our stockholders were to bring a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management from our business.

Your percentage of ownership in us may be diluted in the future.

As with any publicly traded company, your percentage ownership in us may be diluted in the future because of equity issuances for acquisitions, capital market transactions or otherwise, including equity awards that we expect will be granted to our directors, officers and employees.

There is no existing market for our Class A common stock, and we do not know if one will develop to provide you with adequate liquidity.

Prior to this offering, there has been no public market for shares of our Class A common stock. We cannot predict the extent to which investor interest in our company will lead to the development of a trading market on the NYSE or how liquid that market may become. If an active trading market does not develop or is not sustained, you may have difficulty selling any of our Class A common stock that you purchase at an attractive price or at all. The initial public offering price of shares of our Class A common stock will be determined by negotiation between us and the underwriters and may not be indicative of prices that will prevail following the completion of this offering. The market price of shares of our Class A common stock may decline below the initial public offering price, and you may not be able to resell your shares of our Class A common stock at or above the initial offering price.

If securities or industry analysts do not publish research or reports about our business, if they adversely change their recommendations regarding our stock or if our results of operations do not meet their expectations, our stock price and trading volume could decline.

The trading market for our Class A common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. Moreover, if one or more of the analysts who cover us downgrade recommendations regarding our stock, or if our results of operations do not meet their expectations, our stock price could decline and such decline could be material.

Sales of substantial amounts of our Class A common stock in the public markets, or the perception that such sales might occur, as well as the conversion right of our Class B common stock, could reduce the price of our Class A common stock and may dilute your voting power and your ownership interest in us.

If SEACOR sells substantial amounts of our Class A common stock in the public market following consummation of this offering, the market price of our Class A common stock could decrease significantly. SEACOR, as the sole holder of Class B common stock, has certain conversion rights with respect to converting

 

30


its shares of Class B common stock into Class A common stock at its discretion or upon the sale, transfer or other disposition of such Class B common stock. See “Description of Capital Stock—Conversion of our Capital Stock.” The perception in the public market that SEACOR might sell shares of Class A common stock could also depress our market price. Upon the consummation of this offering, we will have             shares of Class A common stock outstanding. Our directors, executive officers and SEACOR, and its directors and executive officers, will be subject to the lock-up agreements described in “Underwriting” and are subject to the Rule 144 holding period requirements described in “Shares Eligible for Future Sale.” After these lock-up agreements have expired and holding periods have elapsed,             additional shares of our Class A common stock will be eligible for sale in the public market. The market price of shares of our Class A common stock may drop significantly when the restrictions on resale by our existing stockholders lapse. A decline in the price of shares of our Class A common stock might impede our ability to raise capital through the issuance of additional shares of our Class A common stock or other equity securities.

You will experience immediate and substantial book value dilution following consummation of this offering.

The initial public offering price of our Class A common stock will be substantially higher than the pro forma net tangible book value per share of the outstanding Class A common stock immediately after the offering. Based on an assumed initial public offering price of $             per share (the midpoint of the price range set forth on the cover of this prospectus) and our net tangible book value on a pro forma basis as of June 30, 2011, if you purchase our Class A common stock in this offering, you will suffer immediate dilution in net tangible book value per share of approximately $             per share. See “Dilution.”

As a result of becoming a public company, we will be obligated to develop and maintain proper and effective internal control over financial reporting and will be subject to other requirements that will be burdensome and costly. We may not timely complete our analysis of our internal control over financial reporting, or these internal controls may be determined to be ineffective, which could adversely affect investor confidence in our company and, as a result, the value of our Class A common stock.

We have historically operated our business as a segment of a public company. Following consummation of this offering, we will be required to file with the SEC annual and quarterly information and other reports that are specified in Section 13 of the Securities Exchange Act of 1934, as amended, or the Exchange Act. We will also be required to ensure that we have the ability to prepare financial statements that are fully compliant with all SEC reporting requirements on a timely basis. In addition, we will become subject to other reporting and corporate governance requirements, including the requirements of the NYSE, and certain provisions of the Sarbanes-Oxley Act of 2002 and the regulations promulgated thereunder, which will impose significant compliance obligations upon us. As a public company, we will be required to:

 

   

prepare and distribute periodic public reports and other stockholder communications in compliance with our obligations under the federal securities laws and NYSE rules;

 

   

create or expand the roles and duties of our Board of Directors and committees of the Board of Directors;

 

   

institute more comprehensive financial reporting and disclosure compliance functions;

 

   

supplement our internal accounting and auditing function, including hiring additional staff with expertise in accounting and financial reporting for a public company;

 

   

enhance and formalize closing procedures at the end of our accounting periods;

 

   

enhance our internal audit function;

 

   

enhance our investor relations function;

 

   

establish new internal policies, including those relating to disclosure controls and procedures; and

 

   

involve and retain to a greater degree outside counsel and accountants in the activities listed above.

 

31


These changes will require a significant commitment of additional resources. We may not be successful in implementing these requirements and implementing them could adversely affect our business or results of operations. In addition, if we fail to implement the requirements with respect to our internal accounting and audit functions, our ability to report our results of operations on a timely and accurate basis could be impaired.

Our internal control over financial reporting may not fully meet the standards for an independent public company required by Section 404 of the Sarbanes-Oxley Act (“Section 404”), and failure to achieve and maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on us.

Our internal controls were developed when we were a subsidiary of SEACOR. As such, they may not fully meet the standards for an independent public company that are required by Section 404. We will have to meet such standards in the course of preparing our 2012 financial statements. We do not currently have comprehensive documentation of our internal controls, nor do we document or test our compliance with these controls on a periodic basis in accordance with Section 404. Furthermore, we have not tested our internal controls in accordance with Section 404 and, due to our lack of documentation, such a test would not be possible to perform at this time. Our compliance with Section 404 is expected to be first reported in connection with the filing of our Annual Report on Form 10-K for the fiscal year ending December 31, 2012.

We are currently in the early stages of addressing our internal control procedures to satisfy the requirements of Section 404, which requires an annual management assessment of the effectiveness of our internal control over financial reporting. We will incur additional costs in order to improve our internal control over financial reporting and comply with Section 404, including increased auditing and legal fees and costs associated with hiring additional accounting and administrative staff. If, as a public company, we are not able to implement the requirements of Section 404 in a timely manner or with adequate compliance, our independent registered public accounting firm may not be able to attest to the effectiveness of our internal control over financial reporting. If we are unable to implement and maintain adequate internal control over financial reporting, we may be unable to report our financial information on a timely basis, may suffer adverse regulatory consequences or violations of applicable stock exchange listing rules and may breach the covenants under our credit facilities. There could also be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements.

Provisions in our amended and restated certificate of incorporation and bylaws and Delaware law may discourage, delay or prevent a change of control of our company or changes in our management and, therefore, may depress the trading price of our Class A common stock.

Our amended and restated certificate of incorporation and bylaws include certain provisions that could have the effect of discouraging, delaying or preventing a change of control of our company or changes in our management, including, among other things:

 

   

restrictions on the ability of our stockholders to fill a vacancy on the Board of Directors;

 

   

our ability to issue preferred stock with terms that the Board of Directors may determine, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;

 

   

the absence of cumulative voting in the election of directors which may limit the ability of minority stockholders to elect directors; and

 

   

advance notice requirements for stockholder proposals and nominations, which may discourage or deter a potential acquirer from soliciting proxies to elect a particular slate of directors or otherwise attempting to obtain control of us.

These provisions in our amended and restated certificate of incorporation and bylaws may discourage, delay or prevent a transaction involving a change in control of our company that is in the best interest of our minority

 

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stockholders. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our Class A common stock if they are viewed as discouraging future takeover attempts.

We do not expect to pay dividends.

We currently intend to retain our future earnings, if any, for the foreseeable future, to repay indebtedness and to fund the development and growth of our business. We do not intend to pay any dividends to holders of our common stock. As a result, capital appreciation in the price of our Class A common stock, if any, will be your only source of gain or income on an investment in our Class A common stock.

 

33


FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact included in this prospectus are forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “should,” “can have,” “likely” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events.

The forward-looking statements contained in this prospectus are based on assumptions that we have made in light of our industry experience and on our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. As you read and consider this prospectus, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (some of which are beyond our control) and assumptions. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual financial results and cause them to differ materially from those anticipated in the forward-looking statements. We believe these factors include, but are not limited to, those described under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Should one or more of these risks or uncertainties materialize, or should any of these assumptions prove incorrect, our actual results may vary in material respects from those projected in these forward-looking statements. We believe these factors include the following risks, among others:

 

   

Demand for many of our services is impacted by the level of activity in the offshore oil and gas exploration, development and production industry.

 

   

Demand for using helicopters is cyclical, not just due to cycles in the oil and gas business but also due to fluctuation in government programs and spending, as well as overall economic conditions.

 

   

We are highly dependent upon the level of activity in the U.S. Gulf of Mexico and Alaska, which are mature exploration and production regions.

 

   

Difficult economic and financial conditions could have a material adverse effect on us.

 

   

Failure to maintain an acceptable safety record may have an adverse impact on our ability to obtain and retain customers.

 

   

We rely on relatively few customers for a significant share of our revenues, the loss of any of which could adversely affect our business and results of operations.

 

   

Consolidation of our customer base could adversely affect demand for our services and reduce our revenues.

 

   

The implementation by our customers of cost-saving measures could reduce the demand for our services.

 

   

Operational risks including, but not limited to, equipment failure and negligence could adversely affect our results of operations and in some instances expose us to liability.

 

   

Weather and seasonality can impact our results of operations.

 

   

A shortfall in availability of components and parts required for repair and maintenance of our helicopters could adversely affect us, as would cost increases imposed by suppliers if they cannot be passed on to customers or if our equipment has been committed to contracts without coverage for escalating expenses.

 

34


   

Our operations in the U.S. Gulf of Mexico were adversely impacted by the Deepwater Horizon drilling rig incident and resulting oil spill and may be adversely impacted by proposed legislation and resulting litigation in response to that incident.

 

   

Increased fuel costs may have a material adverse effect on our business, financial condition or results of operations.

 

   

We may not be able to obtain work on acceptable terms covering some of our new helicopters, and some of our new helicopters may replace existing helicopters already under contract, which could adversely affect the utilization of our existing fleet.

 

   

If we do not restrict the amount of foreign ownership of our common stock, we could be prohibited from operating helicopters in the United States, which would adversely impact our business, our financial condition and results of operations.

 

   

The Outer Continental Shelf Lands Act, as amended, provides the federal government with broad discretion in regulating the leasing of offshore resources for the production of oil and gas.

 

   

Helicopter operations involve risks that may not be covered by our insurance or our insurance may be inadequate to protect us from the liabilities that could arise.

 

   

If our employees were to unionize, our operating costs could increase.

Any forward-looking statement made by us in this prospectus speaks only as of the date on which we make it. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

This prospectus also contains market data related to our business and industry. This market data includes projections that are based on a number of assumptions, which we believe to be correct and reliable. If these assumptions turn out to be incorrect, actual results may differ from the projections based on these assumptions. As a result, our markets may not grow at the rates projected by these data, or at all. The failure of these markets to grow at these projected rates may have a material adverse effect on our business, financial condition, results of operations and the market price of our Class A common stock.

 

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USE OF PROCEEDS

We estimate that the net proceeds to us from our sale of             shares of Class A common stock in this offering will be $            , after deducting underwriting discounts and commissions and estimated expenses payable by us in connection with this offering. This assumes a public offering price of $             per share, which is the midpoint of the price range set forth on the cover of this prospectus. We expect to use the net proceeds of this offering to repay a portion of advances we have received from SEACOR. As of June 30, 2011, SEACOR has made aggregate advances to us of $461.0 million. Interest on these advances is settled quarterly and is charged at SEACOR’s weighted average borrowing rate, which was 6.1% for the six months ended June 30, 2011. Additional advances made by SEACOR to us subsequent to that date are not expected to exceed $             million.

A $1.00 increase (decrease) in the assumed initial public offering price of $             per share would increase (decrease) the net proceeds to us from this offering by $             million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated expenses payable by us.

 

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DIVIDEND POLICY

Era previously has not paid any cash dividends. We intend to retain all available funds and any future earnings to reduce debt and fund the development and growth of our business.

Any future determination to pay dividends will be at the discretion of our Board of Directors and will take into account:

 

   

restrictions in our new revolving credit facility;

 

   

general economic and business conditions;

 

   

our financial condition and results of operations;

 

   

our capital requirements and the capital requirements of our subsidiaries;

 

   

the ability of our operating subsidiaries to pay dividends and make distributions to us; and

 

   

such other factors as our Board of Directors may deem relevant.

 

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and our capitalization as of June 30, 2011 on a pro forma as adjusted basis to give effect to (a) the capital contribution by SEACOR of $             million of advances we have received from SEACOR, (b) costs incurred in connection with our new $             million revolving credit facility, (c) the sale of             shares of our Class A common stock in this offering at an assumed initial public offering price of $             per share (the midpoint of the price range set forth on the cover of this prospectus) after deducting underwriting discounts and commissions and estimated offering expenses payable by us, and the application of the net proceeds from this offering to repay a portion of advances we have received from SEACOR, as described under “Use of Proceeds,” and (d) the borrowing of $             million under our new revolving credit facility to fund working capital needs and repay our remaining advances from SEACOR outstanding as of June 30, 2011. The pro forma as adjusted amounts do not give effect to the additional advances from SEACOR that we have received since June 30, 2011, which are not expected to exceed $             million, or additional borrowings under our new revolving credit facility that will be used to repay such advances.

This table should be read in conjunction with “Use of Proceeds,” “Selected Historical Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the related notes thereto included elsewhere in this prospectus.

 

         Actual         Pro Forma
As Adjusted
 
     (in thousands, except share data)  

Cash and Cash Equivalents

   $ 1,740 (1)    $                
  

 

 

   

 

 

 

Debt:

    

Current portion of long-term debt

   $ 2,690      $     

Long-term debt, less current portion

     34,492     

Advances from SEACOR

     461,002     
  

 

 

   

 

 

 

Total debt

     498,184     
  

 

 

   

 

 

 

Stockholder Equity:

    

Common stock, no par value, 3,000 shares authorized; 1,000 shares issued; none authorized or issued on a pro forma as adjusted basis

     1     

Preferred stock, $0.01 par value, 10,000,000 shares authorized; none issued

         

Class A common stock, $0.01 par value, 60,000,000 shares authorized;             shares issued on a pro forma as adjusted basis

         

Class B common stock, $0.01 par value, 60,000,000 shares authorized;             shares issued on a pro forma as adjusted basis

         

Additional paid-in capital

     107,761     

Accumulated deficit

     (11,858  

Accumulated other comprehensive income (loss)

     199     
  

 

 

   

 

 

 

Total stockholder equity

     96,103     
  

 

 

   

 

 

 

Total capitalization

   $ 594,287      $     
  

 

 

   

 

 

 

 

(1) We currently participate in a cash management program whereby certain of our operating and capital expenditures are funded through advances from SEACOR and certain cash collections are forwarded to SEACOR. As a consequence of this arrangement, we have historically maintained minor balances in cash on hand. Immediately prior to this offering, we intend to enter into a $             million revolving credit facility, and we expect to have $             million available after funding working capital needs and after the repayment of SEACOR advances as described in “Certain Relationships and Related Party Transactions—Recapitalization.”

 

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DILUTION

If you invest in our Class A common stock in this offering, your ownership interest will be diluted to the extent of the difference between the initial public offering price per share and the pro forma as adjusted net tangible book value per share of Class A common stock upon the completion of this offering.

Dilution results from the fact that the per share offering price of the Class A common stock is substantially in excess of the book value per share attributable to the existing stockholder for the presently outstanding stock. Our net tangible book value per share represents our total tangible assets less total liabilities, divided by the total number of shares of Class A common stock and Class B common stock outstanding. As of June 30, 2011, our net tangible book value was approximately $             million, or $             per share.

After giving effect to (i) the capital contribution by SEACOR of $             million of advances we have received from SEACOR, (ii) costs incurred in connection with our new $             million revolving credit facility, (iii) the sale of             shares of our Class A common stock in this offering at an assumed initial public offering price of $             per share (the midpoint of the price range set forth on the cover of this prospectus) after deducting underwriting discounts and commissions and estimated offering expenses payable by us, and the application of the net proceeds from this offering to repay a portion of advances we have received from SEACOR, as described under “Use of Proceeds,” and (iv) the borrowing of $             million under our new revolving credit facility to fund working capital needs and repay our remaining advances from SEACOR outstanding as of June 30, 2011, our pro forma as adjusted net tangible book value as of June 30, 2011 would have been approximately $            , or $             per share. Pro forma net tangible book value per share as of June 30, 2011 does not give effect to the additional advances from SEACOR that we have received since June 30, 2011, which are not expected to exceed $             million, or additional borrowing under our new revolving credit facility that will be used to repay such advances.

This represents an immediate increase in pro forma net tangible book value of $             per share to our existing stockholder and an immediate dilution of $         per share to new investors purchasing shares of common stock in this offering at the initial public offering price.

The following table illustrates this substantial and immediate dilution to new investors on a per share basis:

 

Assumed initial public offering price per share

      $                

Pro forma net tangible book value per share as of June 30, 2011

   $                   

Increase in pro forma net tangible book value per share attributable to the sale of shares in this offering

     
  

 

 

    

Pro forma as adjusted net tangible book value per share following consummation of this offering

     
     

 

 

 

Dilution per share to new investors

      $     
     

 

 

 

A $1.00 increase (decrease) in the assumed initial public offering price of $             per share (the midpoint of the price range set forth on the cover of this prospectus) would increase (decrease) our pro forma net tangible book value after this offering by $             million and increase (decrease) the dilution to new investors by $             per share, assuming the number of shares offered by us, as set forth on the cover page of this prospectus remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 

39


The following table summarizes, as of June 30, 2011, the total number of shares of our Class A common stock and Class B common stock we issued, the total consideration we received and the average price per share paid to us by our existing stockholder and to be paid by new investors purchasing shares of our Class A common stock in this offering. The table assumes an initial public offering price of $             per share (the midpoint of the price range set forth on the cover of this prospectus) and deducts underwriting discounts and commissions and estimated offering expenses payable by us, and the application of the net proceeds from this offering to repay a portion of advances we have received from SEACOR, as described under “Use of Proceeds” and the to             stock split of our outstanding shares of Class B common stock that were issued in exchange for our no par value common stock:

 

     Shares Purchased      Total Consideration      Average
Price Per
Share
      Number    Percent      Amount    Percent     
          %      $    %      $

Existing stockholder (1)

              

New investors

              
  

 

  

 

 

    

 

  

 

 

    

Total

        100            100      
  

 

  

 

 

    

 

  

 

 

    

 

(1) Does not reflect the shares of our Class B common stock issued in exchange for our no par value common stock or SEACOR’s $             million capital contribution to us.

A $1.00 increase (decrease) in the assumed initial public offering price of $             per share (the midpoint of the price range set forth on the cover of this prospectus) would increase (decrease) the total consideration paid by new investors by $             and the total consideration paid by all stockholders by $            .

In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of such securities could result in further dilution to our stockholders.

 

40


SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

The following tables set forth the selected historical and adjusted consolidated financial data for the periods indicated. We derived the summary consolidated financial data presented below as of December 31, 2010 and 2009 and for the years ended December 31, 2010, 2009 and 2008 from our audited consolidated financial statements included elsewhere in this prospectus. The selected historical consolidated financial data as of December 31, 2008, 2007 and 2006 and for the years ended December 31, 2007 and 2006 have been derived from our audited consolidated financial statements not included in this prospectus. The selected historical consolidated financial data as of June 30, 2011 and for the six months ended June 30, 2011 and 2010 have been derived from our unaudited interim consolidated financial statements included elsewhere in this prospectus. The unaudited financial statements include all adjustments, consisting of normal recurring accruals, which we consider necessary for a fair presentation of the financial position and the results of operations for these periods. Operating results for the six months ended June 30, 2011 are not necessarily indicative of the results that may be expected for subsequent periods.

Our historical results are not necessarily indicative of future operating results. You should read the information set forth below in conjunction with “Selected Historical Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the consolidated financial statements and the related notes included elsewhere in this prospectus.

 

    Six Months Ended
June 30,
    Years Ended December 31,  
        2011             2010         2010     2009     2008     2007     2006  
    (in thousands, except share data)  

Statement of Operations Data:

             

Operating Revenues

  $ 124,648      $ 112,708      $ 235,366      $ 235,667      $ 248,627      $ 215,039      $ 156,014   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Costs and Expenses:

             

Operating

    75,922        72,567        147,233        147,955        181,490        157,241        123,326   

Administrative and general

    13,249        11,482        25,798        21,396        20,130        18,865        12,891   

Depreciation

    24,309        21,175        43,351        37,358        36,411        27,527        19,987   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    113,480        105,224        216,382        206,709        238,031        203,633        156,204   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gains on Asset Dispositions and Impairments, Net

    8,366        469        764        316        4,883        8,063        11,057   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating Income

    19,534        7,953        19,748        29,274        15,479        19,469        10,867   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other Income (Expense):

             

Interest income

    100        44        109        52        217        626        305   

Interest expense

    (579     (19     (94     (13     (5     (1       

Interest expense on advances from SEACOR

    (12,299     (10,729     (21,437     (20,328     (12,963     (14,438     (15,771

SEACOR management fees

    (5,186     (2,128     (4,550     (5,481     (5,681     (4,008     (4,181

Derivative gains (losses), net

    (501     (62     (118     266        274        (2,695     (1,396

Foreign currency gains (losses), net

    691        (1,596     (1,511     1,439        271        44        (49

Other, net

                  50               38        613        652   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    (17,744     (14,490     (27,551     (24,065     (17,849     (19,859     (20,440
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (Loss) Before Income Tax Expense (Benefit) and Equity in Earnings (Losses) of 50% or Less Owned Companies

    1,760        (6,537     (7,803     5,209        (2,370     (390     (9,573
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income Tax Expense (Benefit):

             

Current

        (46,315     (29,409     (16,460     (9,082     (12,080

Deferred

        42,014        32,292        16,116        9,049        8,686   
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    653        (2,340     (4,301     2,883        (344     (33     (3,394
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

41


    Six Months Ended
June 30,
    Years Ended December 31,  
        2011             2010         2010     2009     2008     2007     2006  
    (in thousands, except share data)  

Income (Loss) Before Equity in Earnings (Losses) of 50% or Less Owned Companies

    1,107        (4,197     (3,502     2,326        (2,026     (357     (6,179

Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax

    955        (717     (137     (487     (461     (8     38   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Income (Loss)

  $ 2,062      $ (4,914   $ (3,639   $ 1,839      $ (2,487   $ (365   $ (6,141
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (Loss) Per Common Share:

             

Basic Earnings (Loss) Per Common Share

  $ 2,602.00      $ (4,914.00   $ (3,639.00   $ 1,839.00      $ (2,487.00   $ (365.00   $ (6,141.00
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted Average Common Shares Outstanding

    1,000        1,000        1,000        1,000        1,000        1,000        1,000   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other financial data:

             

EBITDA (1)

  $ 39,802      $ 24,625      $ 56,833      $ 62,369      $ 46,331      $ 40,942      $ 25,918   

 

     As of June 30,
2011
     As of December 31,  
        2010      2009      2008      2007      2006  
     (in thousands)  

Balance Sheet Data:

                 

Current Assets:

                 

Cash and cash equivalents

   $ 1,740       $ 3,698       $ 7,309       $ 6,201       $ 1,530       $ 863   

Receivables

     50,743         41,157         40,211         40,894         41,258         38,980   

Inventories

     24,788         23,153         19,355         18,943         18,722         16,675   

Prepaid expenses

     2,939         2,077         1,944         2,039         1,513         941   

Deferred income taxes

     1,672         1,672         221         408         784         47   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total current assets

     81,882         71,757         69,040         68,485         63,807         57,506   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Property and Equipment, Net

     629,619         612,078         523,195         495,410         332,710         260,686   

Escrow Deposits on Like-Kind Exchanges

                                     10,105         7,929   

Investments, at Equity, and Advances to 50% or Less Owned Companies

     35,341         27,912         26,712         27,415         6,015         3,162   

Goodwill

     352         352         352         352         352         352   

Other Assets

     9,960         6,925         7,857         1,234         4,805         232   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 757,154       $ 719,024       $ 627,156       $ 592,896       $ 417,794       $ 329,867   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Current Liabilities

     31,221         29,172         20,408         30,215         39,957         26,461   

Advances from SEACOR

     461,002         355,952         347,564         338,178         170,949         281,360   

Deferred Income Taxes

     127,751         127,799         84,397         51,788         36,512         26,591   

Long-Term Debt

     34,492         35,885                                   

Deferred Gains and Other Liabilities

     6,585         6,623         7,291         7,446         2,097         1,094   

Total Stockholder Equity (Deficit)

     96,103         163,593         167,496         165,269         168,279         (5,639
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 757,154       $ 719,024       $ 627,156       $ 592,896       $ 417,794       $ 329,867   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

We present Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”) in this prospectus to provide investors with a supplemental measure of our operating performance. Interest, in this case, includes interest income, interest expense and interest expense on advances from SEACOR. EBITDA is not a recognized term under generally accepted accounting principles in the United States (“GAAP”). Accordingly, it should not be used as an indicator of, or an alternative to, net income as a measure of operating performance. In addition, EBITDA is not intended to be a measure of free cash flow available for management’s discretionary use, as it does not consider certain cash requirements, such as debt service requirements. Our presentation of EBITDA has limitations as an analytical tool, and you should not consider

 

42


  it in isolation, or as a substitute for analysis of our results as reported under GAAP. Because the definition of EBITDA (or similar measures) may vary among companies and industries, it may not be comparable to other similarly titled measures used by other companies.

Management uses EBITDA as a performance metric for internal monitoring and planning purposes, including the presentation of our annual operating budget and quarterly operating reviews, and to facilitate analysis of investment decisions. In addition, the EBITDA performance metric allows us to evaluate profitability and make performance trend comparisons between us and our competitors. Further, we believe EBITDA is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry.

The following table provides a reconciliation of Net Income (Loss), the most directly comparable GAAP measure, to EBITDA for the historical periods presented:

 

    Six Months Ended
June 30,
    Years Ended December 31,  
        2011             2010         2010     2009     2008     2007     2006  
    (in thousands)  

Net Income (Loss)

  $ 2,062      $ (4,914   $ (3,639   $ 1,839      $ (2,487   $ (365   $ (6,141

Depreciation

    24,309        21,175        43,351        37,358        36,411        27,527        19,987   

Interest Income

    (100     (44     (109     (52     (217     (626     (305

Interest Expense

    579        19        94        13        5        1          

Interest Expense on Advances from SEACOR

    12,299        10,729        21,437        20,328        12,963        14,438        15,771   

Income Tax Expense (Benefit)

    653        (2,340     (4,301     2,883        (344     (33     (3,394
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

  $ 39,802      $ 24,625      $ 56,833      $ 62,369      $ 46,331      $ 40,942      $ 25,918   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

43


MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

The following discussion and analysis of the financial condition and results of operations should be read together with “Selected Historical Consolidated Financial Data” and our consolidated financial statements and the related notes included elsewhere in this prospectus. This discussion contains forward-looking statements, based on current expectations and related to future events and our future financial performance, that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Risk Factors” and elsewhere in this prospectus.

Overview

We are one of the largest helicopter operators in the world and the longest serving helicopter transport operator in the United States, which is our primary area of operations. In 2010, approximately 48% and 12% of our operating revenues were earned in the U.S. gulf of Mexico and Alaska, respectively. We also provide helicopters and related services to third-party helicopter operators in other countries. In addition to our U.S. customers, we currently have customers in Brazil, Canada, Mexico, the United Kingdom, Sweden, Spain, Indonesia and India. As of June 30, 2011, our fleet consisted of 177 helicopters, most of which were used to transport personnel to and from, and between offshore installations, drilling rigs and platforms. In addition, as of June 30, 2011, we have placed orders for 16 new helicopters, most of which we expect to be delivered in 2011 and 2012. The primary users of our transport services are major integrated and independent oil and gas companies and U.S. government agencies. In 2010, approximately 73% of our operating revenues were derived from helicopter services provided to clients primarily involved in oil and gas activities. In addition to serving the oil and gas industry, we provide air medical services, firefighting support, flightseeing tours in Alaska and emergency search and rescue services. Although our operations historically have primarily served the U.S. offshore oil and gas industry, in recent years we have made efforts to reduce our dependence on this market and take advantage of the mobility and versatility of our helicopters to expand into other geographic regions and to serve other industries.

Demand for new, sophisticated equipment continues to grow particularly in response to the requirements of an offshore oil and gas industry, which has become more focused on deepwater activities. To service these new areas of exploration, aircraft must have greater payloads and range. Aircraft supporting air medical and search and rescue operations, and other public uses also require new technology and safety improvements. According to PFC Energy, approximately 28% of the global helicopter fleet is more than 25 years old. Replacement is hampered by the following factors: (i) there are only four major original equipment manufacturers (“OEMs”) that have a full range of service models; (ii) lead times for delivery of new equipment can be as long as three years; (iii) prevailing economic conditions have, until recently, not been favorable for raising capital to finance new equipment; and (iv) many smaller operators are still unable to raise capital.

We currently participate in a cash management program whereby certain of our operating and capital expenditures are funded through advances from SEACOR and certain cash collections are forwarded to SEACOR. As a consequence of this arrangement, we have historically maintained minor balances in cash on hand. As of June 30, 2011, our cash on hand was $1.7 million. Immediately prior to this offering, we intend to enter into a $             million revolving credit facility, and we expect to have $             million available after funding working capital needs and after the repayment of SEACOR advances as described in “Certain Relationships and Related Party Transactions—Recapitalization.” We believe our borrowing capacity under our new revolving credit facility and our strong relationships with OEMs will position us well to add new helicopters to our fleet and upgrade existing helicopters, thereby maintaining an asset base suitable for use within our own operations and for contract-leasing to other operators. We also leverage our strong relationships with OEMs to support growth in other services, such as selling specialty equipment and accessories for helicopters, and training.

 

44


Offshore Oil and Gas Support

The offshore oil and gas market is highly cyclical with demand linked to the price of oil and gas, which tends to fluctuate depending on many factors, including global economic activity and levels of inventory. In addition to the price of oil and gas, the availability of acreage and local tax incentives or disincentives and requirements for maintaining interests in leases affect activity levels in the oil and gas industry. Price levels for oil and gas by themselves can cause additional fluctuations by inducing changes in consumer behavior. During the year ended December 31, 2010, the market for our assets in the U.S. Gulf of Mexico was disrupted by events related to the sinking of the Deepwater Horizon drilling rig. After the Deepwater Horizon incident, the U.S. Department of Interior imposed a moratorium on offshore deepwater drilling operations, which caused a dramatic decrease in demand for helicopters supporting oil and gas activities in the region. Although the moratorium has been lifted, the process of issuing permits to drill remains slow, which continues to have a negative impact on demand for helicopter services in the U.S. Gulf of Mexico.

We believe the slowdown will not significantly impact our future results in the U.S. Gulf of Mexico because our activities are mainly focused on longer-term production, maintenance and inspection work rather than on short-term exploration and development projects. For the last five years we have provided transportation services to government inspectors at BOEMRE of offshore drilling rigs. We were recently awarded a renewal for this contract that will begin in February 2012 upon the expiration of our existing contract and continue through 2016. The number of helicopters supporting this new contract increased from 17 to 33 helicopters.

Prior to the Deepwater Horizon incident, we began to deploy helicopters in international markets, frequently under contract-lease arrangements to third parties. The majority of these helicopters are supporting oil and gas activities in regions of rapidly expanding activity, such as Brazil, India and Indonesia. We also have equipment working in the North Sea and Mexico. In many cases the helicopters are contracted to local helicopter operators, which often prefer to lease aircraft rather than purchase them. Contract-leasing affords us the opportunity to access new markets without heavy initial infrastructure investment and generally without ongoing operating risk. As of June 30, 2011, we had 51 helicopters located in foreign jurisdictions compared with 15 helicopters as of December 31, 2006.

Brazil, which is among the most important markets for offshore oil and gas activity, currently represents our fastest growing international market. We believe the Brazilian market will require significant additions to the medium and heavy helicopter fleet currently operating there as the country continues to accelerate its production efforts. We recently committed to further participate in this market by acquiring an ownership interest in Aeróleo, a Brazilian helicopter operator, to which we also provide management expertise, supply of spare parts, logistical aid and maintenance support.

As of June 30, 2011, we had three Eurocopter EC225 heavy helicopters and six AgustaWestland AW139 medium helicopters contract-leased to Aeróleo, which provides helicopter transportation services to Petroleo Brasiliero S.A. and OGX Petroleo e Gas Participacoes under multi-year contracts and also markets services to international companies that are acquiring acreage in Brazil. Oil production in Brazil is growing and, according to recent press reports, is projected to reach over five million barrels a day by 2020, which, by today’s figures, would make it the world’s fourth largest oil producer.

Other Activities and Services

In the United States, consistent with our diversification strategy, we deploy a number of helicopters in support of other industries and activities. In 2010, approximately 27% of our operating revenues were generated by these other activities and services. In 2007, we entered the air medical services market through the acquisition of the flight operations of Keystone Helicopter Corporation. We now supply helicopters, pilots and mechanics to hospitals and manage helicopters on their behalf. We are also developing a search and rescue service in the U.S. Gulf of Mexico on a subscription basis. We currently have two AgustaWestland AW139 helicopters configured for this service and several subscribers.

 

45


Alaska is also an important and diverse market for us. In addition to supporting oil company activities in the Cook Inlet and along the North Slope, we operate an FBO at Ted Stevens Anchorage International Airport, provide summer flightseeing tours and support inland firefighting and mining operations.

We have also developed services to the helicopter industry that we believe complement our core activities and which we market in conjunction with our contract-leasing. We hold a 50% interest in Dart, an international sales and manufacturing organization focused on after-market helicopter parts and accessories. We hold a 50% interest in Era Training Center that provides instruction, flight simulator and other training to our employees, pilots working for third parties, other helicopter companies, including our competitors, and government agencies. We are also developing a helicopter training center in Brazil where we have been appointed by AgustaWestland to conduct training for its customers in South America.

Internationally we hold a 51% interest in Lake Palma, S.L. (“Lake Palma”), a joint venture that leases helicopters to FAASA Aviacioa, S.A., a Spain-based firefighting operator (“FAASA”). We are also focused on developing our presence in the India and Indonesia helicopter markets, which we believe represent growth opportunities, primarily in the civil aviation sector.

Fleet Developments and Capital Commitments

In recent years, we have continued to focus on the modernization of our fleet and, when possible, standardization of equipment. Our customers require modern aircraft that offer enhanced safety features and greater performance. Increasingly, customers flying offshore tend to prefer twin-engine aircraft to single-engine aircraft due to the additional safety afforded from two engines. In response to this demand, we have transformed our fleet significantly: since the beginning of 2005 we have added 104 helicopters, disposed of 67 helicopters and reduced the average age of our owned fleet from 17 years to 13 years. As of June 30, 2011, we have capital commitments of $186.6 million primarily consisting of two EC225 heavy helicopters from Eurocopter and nine AW139 medium helicopters and five AW169 medium helicopters from AgustaWestland. Of these commitments, approximately $48.2 million, including deposits already paid, may be terminated without further liability. In addition, we have options to acquire 15 more AgustaWestland AW139 medium helicopters with deliveries scheduled through the fourth quarter of 2015.

Corporate History

In 1948, Carl F. Brady brought a Bell 47A helicopter to Alaska, establishing what is now the longest serving helicopter company in the United States. Mr. Brady’s company, Economy Helicopters, assisted federal surveyors in mapping the State of Alaska. By 1958, following various mergers and acquisitions, the company became Era Helicopters, Inc. focusing on supporting the growing oil and gas industry operations in Alaska. It was then acquired by Rowan Companies Inc. in 1967, thereby providing additional capital for fleet expansion. In subsequent years it continued to grow and broaden its scope of operations, acquiring a fixed wing division in Alaska in 1978 and establishing a Lake Charles, Louisiana base of operations for the U.S. Gulf of Mexico that same year.

In 2004, SEACOR, which had previously entered the helicopter business via an acquisition of Tex-Air Helicopters Inc., acquired us. Soon after the acquisition, SEACOR sold the fixed wing division and focused on helicopter services. Since the acquisition, we have invested over $800 million in helicopters and other property and equipment and have grown from owning and/or operating 127 helicopters at the beginning of 2005 to 177 helicopters as of June 30, 2011. Following the consummation of this offering, SEACOR will not own any shares of our Class A common stock and will own all of the issued and outstanding shares of our Class B common stock.

Critical Accounting Policies and Estimates

Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the

 

46


reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Such estimates include those related to deferred revenues, allowance for doubtful accounts, useful lives of property and equipment, impairments, income tax provisions and certain accrued liabilities. Actual results could differ from those estimates and those differences may be material.

Revenue Recognition. We recognize revenue when it is realized or realizable and earned. Revenue is realized or realizable and earned when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price to the buyer is fixed or determinable, and collectability is reasonably assured. Revenue that does not meet these criteria is deferred until the criteria are met.

We charter our helicopters primarily through master service agreements, subscription agreements, day-to-day charter arrangements and contract-leases. Master service agreements and subscription agreements require incremental payments above a fixed monthly fee based on flight hours flown, have fixed terms ranging from one month to five years, and generally are cancelable upon a 30-day notice. Day-to-day charter arrangements call for either a combination of a daily fixed monthly fee plus a charge based on hours flown or an hourly rate. Services provided under contract-leases can range from “dry,” providing only the equipment, to “wet,” providing equipment, logistical and maintenance support, insurance and personnel. Fixed monthly fee revenues are recognized ratably over the contract term. Usage or hourly based revenues are recognized as hours are flown.

Our air medical activities are provided under contracts with hospitals that typically include either a fixed monthly and hourly rate structure, similar to oil and gas, or a fee per completed flight. Fixed monthly revenues are recognized ratably over the month while per hour or per flight based revenues are recognized as hours are flown or flights are completed. Most contracts with hospitals are longer term, but offer either party the ability to terminate with less than six months notice. We operate some air medical contracts pursuant to which we collect a fee per flight, either from a hospital or an insurance company.

With respect to flightseeing activities, we allocate block space to cruise lines and sell seats directly to customers with revenues recognized as the services are performed. Our FBO sells fuel on an ad-hoc basis and those sales are recognized at the time of fuel delivery. Training revenues are charged at a set rate per training course and include instructors, training materials and flight or flight simulator time, as applicable. Training revenues are recognized as services are provided.

Trade Receivables. Customers are primarily major integrated and independent exploration and production companies, hospitals, international helicopter operators and the U.S. government. Customers are typically granted credit on a short-term basis and related credit risks are considered minimal. We routinely review our trade receivables and make provisions for doubtful accounts based on existing customer and economic conditions; however, those provisions are estimates and actual results could differ from those estimates and those differences may be material. Trade receivables are deemed uncollectible and removed from accounts receivable and the allowance for doubtful accounts when collection efforts have been exhausted.

Derivative Instruments. We account for derivatives through the use of a fair value concept whereby all of our derivative positions are stated at fair value in the accompanying consolidated balance sheets. All of our derivatives have been designated as fair value hedges. Realized and unrealized gains and losses on derivatives designated as fair value hedges are recognized as a corresponding increase or decrease in the fair value of the underlying hedged item to the extent they are effective, with any ineffective portion reported in the accompanying consolidated statements of operations as derivative gains (losses), net.

Inventories. Inventories, which consist primarily of spare parts and fuel, are stated at the lower of cost (using the average cost method) or market. We record write-downs, as needed, to adjust the carrying amount of inventories to the lower of cost or market.

 

47


Property and Equipment. Equipment, stated at cost, is depreciated using the straight-line method over the estimated useful life of the asset to an estimated salvage value. With respect to helicopters, the estimated useful life is typically based upon a newly built asset being placed into service and represents the point at which it is typically not justifiable for us to continue to operate the asset in the same or similar manner. From time to time, we may acquire older assets that have already exceeded our useful life policy, in which case we depreciate such assets based on our best estimate of remaining useful life.

As of December 31, 2010, the estimated useful life (in years) of our categories of new property and equipment was as follows:

 

Helicopters (estimated salvage value at 30% of cost)

     12   

Machinery, equipment and spares

     5-7   

Buildings and leasehold improvements

     10-30   

Furniture, fixtures, vehicles and other

     3-5   

Equipment maintenance and repair costs and the costs of routine overhauls and inspections performed on helicopters engines and major components are charged to operating expense as incurred. Expenditures that extend the useful life or improve the marketing and commercial characteristics of equipment as well as major renewals or improvements to other properties are capitalized.

We engage a number of third-party vendors to maintain the engines and certain components on some of our helicopter models under programs known as “power-by-hour” maintenance contracts. These programs require us to pay for the maintenance service ratably over the contract period, typically based on actual flight hours. Power-by-hour providers generally bill monthly based on hours flown in the prior month, the costs being expensed as incurred. In the event we place a helicopter in a program after a maintenance period has begun, it may be necessary to pay an initial buy-in charge based on hours flown since the previous maintenance event. This buy-in charge is normally recorded as a prepaid expense and amortized as an operating expense over the remaining power-by-hour contract period. If a helicopter is sold or otherwise removed from a program before the scheduled maintenance work is carried out, we may be able to recover part of our payments to the power-by-hour provider, in which case we record a reduction to operating expense when we receive the refund.

Certain interest costs incurred during the construction of equipment are capitalized as part of the assets’ carrying values and are amortized over such assets’ estimated useful lives.

Impairment of Long-Lived Assets. We perform an impairment analysis on long-lived assets used in operations when indicators of impairment are present. Our helicopters are evaluated for impairment on an aggregate fleet basis. If the carrying value of the assets is not recoverable, as determined by the estimated undiscounted cash flows, the carrying value of the assets is reduced to fair value. Generally, fair value is determined using valuation techniques, such as expected discounted cash flows or appraisals, as appropriate. Assets removed from service are recorded at the lower of fair value or the carrying amount and are no longer depreciated.

Impairment of 50% or Less Owned Companies. We perform regular reviews of each investee’s financial condition, the business outlook for its products and services, and its present and projected results and cash flows. When an investee has experienced consistent declines in financial performance or difficulties in raising capital to continue operations, and when we expect the decline to be other-than-temporary, the investment is written down to fair value. Actual results may vary from estimates due to the uncertainties regarding the projected financial performance of investees, the severity and expected duration of declines in value and the available liquidity in the capital markets to support the continuing operations of the investees in which we have investments.

Goodwill. Goodwill is recorded when the purchase price paid for an acquisition exceeds the fair value of net identified tangible and intangible assets acquired. We perform an annual impairment test of goodwill and conduct periodic impairment tests when indicators of impairment develop between annual impairment tests. Our impairment review process compares the fair value of the acquired entity to its carrying value, including

 

48


goodwill. To determine its fair value, we use a discounted future cash flow approach that uses estimates for revenues, costs, and appropriate discount rates, among others. These estimates are reviewed each time we test goodwill for impairment and are typically developed as part of our routine business planning and forecasting process.

Income Taxes. Our results are included in the consolidated U.S. federal income tax return of SEACOR. SEACOR’s policy for allocation of U.S. federal income taxes requires its subsidiaries to compute their provision for U.S. federal income taxes on a separate company basis and settle with SEACOR. Net operating loss benefits are settled with SEACOR on a current basis and are used in the consolidated U.S. federal income tax return to offset taxable profits of other affiliates. For all periods presented, the total provision for income taxes included in the consolidated statements of operations would remain as currently reported if we were not eligible to be included in the consolidated U.S. federal income tax return of SEACOR. Deferred income tax assets and liabilities have been provided in recognition of the income tax effect attributable to the book and tax basis differences of assets and liabilities reported in the accompanying consolidated financial statements. Deferred tax assets or liabilities are provided using the enacted tax rates expected to apply to taxable income in the periods in which they are expected to be settled or realized. Interest and penalties relating to uncertain tax positions are recognized in interest expense and administrative and general, respectively, in the accompanying consolidated statements of operations. We record a valuation allowance to reduce our deferred tax assets if it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Components of Revenues and Expenses

We derive our revenues from operating and contract-leasing our equipment and our profits depend on our cost of capital, the acquisition costs of assets, our operating costs, our contract policy and our reputation. The key determinants of our operating results and cash flows are the type of helicopters operated, the fixed monthly fees charged, the rates per hour flown and the number of hours flown. Operating margins for helicopters that we operate are sensitive to changes in both rates per hour flown and the number of hours flown.

Operating revenues recorded under U.S. Gulf of Mexico are primarily generated from offshore oil and gas related activities but also include subscriptions for search and rescue services. Similarly, operating revenues recorded under Alaska are primarily generated from offshore oil and gas related activities but also include revenues from operations supporting firefighting and mining activities. In both the U.S. Gulf of Mexico and Alaska, operating revenues are typically earned through a combination of fixed monthly fees plus an incremental charge based on flight hours flown.

Operating revenues recorded under contract-leasing are generated from contract-leases to third- party operators or joint venture partners, where we are not responsible for the operation of the helicopters. For the majority of these contract-leases, we also provide crew training, management expertise, and logistical and maintenance support. Contract-leases typically call for a fixed monthly fee only, but may also include an additional charge based on flight hours flown. In recent years the majority of our contract-leasing revenues have been generated by helicopters deployed internationally.

Operating revenues recorded under air medical services include revenues from patient transfers and management services to hospitals. Operating revenues are earned through either a fixed monthly fee plus an incremental charge for flight hours flown or through a fee per completed flight.

Operating revenues recorded under Flightseeing are generated on a per passenger basis.

The aggregate cost of our operations depends primarily on the size and asset mix of the fleet. Our operating costs and expenses are grouped into the following categories:

 

   

personnel (includes wages, benefits, payroll taxes, savings plans, subsistence and travel);

 

49


   

repairs and maintenance (primarily routine activities as well as helicopter refurbishments and engine and major component overhauls that are performed in accordance with planned maintenance programs);

 

   

insurance (the cost of hull and liability insurance premiums and loss deductibles);

 

   

fuel;

 

   

leased-in equipment (includes the cost of leasing helicopters and equipment); and

 

   

other (primarily base expenses, property, sales and use taxes, communication costs, freight expenses, and other).

We engage a number of third-party vendors to maintain the engines and certain components on some of our helicopter models under programs known as “power-by-hour” maintenance contracts. These programs require us to pay for the maintenance service ratably over the contract period, typically based on actual flight hours. Power-by-hour providers generally bill monthly based on hours flown in the prior month, the costs being expensed as incurred. In the event we place a helicopter in a program after a maintenance period has begun, it may be necessary to pay an initial buy-in charge based on hours flown since the previous maintenance event. This buy-in charge is normally recorded as a prepaid expense and amortized as an operating expense over the remaining power-by-hour contract period. If a helicopter is sold or otherwise removed from a program before the scheduled maintenance work is carried out, we may be able to recover part of our payments to the power-by-hour provider, in which case we record a reduction to operating expense when we receive the refund.

Our policy of expensing all repair costs as incurred, may result in operating expenses varying substantially when compared with a prior year or prior quarter if a disproportionate number of refurbishments or overhauls are undertaken. This variation can be exacerbated by the timing of entering or exiting third-party power-by-hour programs.

For helicopters that we contract-lease to third parties under arrangements whereby the customer assumes operational responsibility, we often provide maintenance and parts support but generally we incur no other material operating costs. In most instances our contract-leases require clients to procure adequate insurance but we purchase contingent hull and liability coverage to mitigate the risk of a client’s coverage failing to respond. In some instances we provide crews and other services to support our contract-lease customers.

We currently participate in a cash management program whereby certain of our operating and capital expenditures are funded through advances we have received from SEACOR and certain cash collections of ours are forwarded to SEACOR. We incur interest on the outstanding advances, which is reported as interest expense on advances from SEACOR in our consolidated statements of operations. Interest is calculated and settled on a quarterly basis using interest rates set at the discretion of SEACOR. Following consummation of this offering, we will no longer participate in this cash management program.

SEACOR provides certain administrative support services to us under a shared services arrangement, including payroll processing, information systems support, benefit plan management, cash disbursement support, cash receipt processing and treasury management. We are charged for our share of actual costs incurred, generally based on volume processed or units supported. Following consummation of this offering, SEACOR will continue to provide these administrative support services under a transition services agreement generally based on the same criteria outlined above.

SEACOR incurs costs in providing its operating segments with certain corporate services including executive oversight, risk management, legal, accounting and tax, and charges quarterly management fees to its operating segments in order to cover such costs. Total management fees charged by SEACOR to its operating segments include actual corporate costs incurred plus a mark-up and are generally allocated within the consolidated group using income-based performance metrics reported by an operating segment in relation to SEACOR’s other operating segments. The costs we incurred for management fees from SEACOR are reported as SEACOR management fees in our consolidated statements of operations. Following consummation of this

 

50


offering, SEACOR will continue to provide these corporate services under a transition services agreement with a fixed initial quarterly charge of $500,000 for these corporate services. The aggregate cost of what we pay SEACOR and what we will incur ourselves upon consummation of this offering for these services may differ from what we have historically paid as SEACOR management fees.

Upon completion of this offering, we expect to incur additional compensation-related expenses in connection with options to purchase shares of our Class A common stock and awards of restricted stock units held by certain of our executive officers and directors. For additional information on these options to purchase our Class A common stock, see “Management—Director Compensation” and “Compensation Discussion and Analysis—Compensation of the Chief Executive Officer (the Principal Executive Officer), the Chief Financial Officer and the Chief Operating Officer.”

Results of Operations

 

     Six Months Ended June 30,     Change
’11/’10
 
     2011     2010     6 Mos  
     $’000     %     $’000     %     %  

Operating Revenues:

          

United States

     87,865        70        86,523        77     

Foreign

     36,783        30        26,185        23     
  

 

 

   

 

 

   

 

 

   

 

 

   
     124,648        100        112,708        100        11   
  

 

 

   

 

 

   

 

 

   

 

 

   

Costs and Expenses:

          

Operating

          

Personnel

     29,998        24        28,386        25     

Repairs and maintenance

     22,389        18        22,720        20     

Insurance and loss reserves

     4,144        3        4,430        4     

Fuel and supplies

     10,847        9        8,769        8     

Leased-in equipment

     925        1        936        1     

Other

     7,619        6        7,326        6     
  

 

 

   

 

 

   

 

 

   

 

 

   
     75,922        61        72,567        64     

Administrative and general

     13,249        11        11,482        10     

Depreciation and amortization

     24,309        19        21,175        19     
  

 

 

   

 

 

   

 

 

   

 

 

   
     113,480        91        105,224        93     
  

 

 

   

 

 

   

 

 

   

 

 

   

Gains on Asset Dispositions and Impairments, Net

     8,366        7        469            
  

 

 

   

 

 

   

 

 

   

 

 

   

Operating Income

     19,534        16        7,953        7        146   
  

 

 

   

 

 

   

 

 

   

 

 

   

Other Income (Expense):

          

Interest income

     100               44            

Interest expense

     (579            (19         

Interest expense on advances from SEACOR

     (12,299     (10     (10,729     (10  

SEACOR management fees

     (5,186     (4     (2,128     (2  

Derivative losses, net

     (501            (62         

Foreign currency gains (losses), net

     691               (1,596     (1  

Other, net

                              
  

 

 

   

 

 

   

 

 

   

 

 

   
     (17,774     (14     (14,490     (13  
  

 

 

   

 

 

   

 

 

   

 

 

   

Income (Loss) Before Income Tax Expense (Benefit) and Equity in Earnings (Losses) of 50% or Less Owned Companies

     1,760        2        (6,537     (6     127   
  

 

 

   

 

 

   

 

 

   

 

 

   

Income Tax Expense (Benefit)

     653        1        (2,340     (2  
  

 

 

   

 

 

   

 

 

   

 

 

   

Income (Loss) Before Equity in Earnings (Losses) of 50% or Less Owned Companies

     1,107        1        (4,197     (4     126   
  

 

 

   

 

 

   

 

 

   

 

 

   

Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax

     955        1        (717     (1  
  

 

 

   

 

 

   

 

 

   

 

 

   

Net Income (Loss)

     2,062        2        (4,194     (5     142   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

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Operating Revenues by Service Line. The following table sets forth, for the periods indicated, the amount of operating revenues by service line.

 

     Six Months Ended June 30,      Change
’11/’10
 
     2011      2010      6 Mos  
     $’000     %      $’000     %      %  

Operating Revenues:

            

U.S. Gulf of Mexico, primarily from oil and gas services

     57,223        46         56,029        50         2   

Alaska, primarily from oil and gas services

     11,418        9         12,643        11         (10

Contract-leasing

     36,784        30         26,673        24         38   

Air Medical Services

     11,494        9         10,529        9         9   

Flightseeing

     2,747        2         2,305        2         19   

FBO

     5,201        4         4,724        4         10   

Eliminations

     (219             (195             (12
  

 

 

   

 

 

    

 

 

   

 

 

    
     124,648        100         112,708        100         11   
  

 

 

   

 

 

    

 

 

   

 

 

    

Selected Operating Data. The following table sets forth, for the periods indicated, flight hours flown as a relative measure of activity for each of our lines of service.

 

     Six Months Ended June 30,      Change
’11/’10
 
     2011      2010      6 Mos  
     Hours      %      Hours      %      %  

U.S. Gulf of Mexico, primarily from oil and gas services

     16,285         53         17,952         61         (9

Alaska, primarily from oil and gas services

     2,019         7         1,824         6         11   

Contract-leasing

     7,731         25         4,884         17         58   

Air Medical Services

     3,345         11         3,952         13         (15

Flightseeing

     1,178         4         952         3         24   
  

 

 

    

 

 

    

 

 

    

 

 

    
     30,558         100         29,564         100         3   
  

 

 

    

 

 

    

 

 

    

 

 

    

Six Months ended June 30, 2011 compared with the Six Months ended June 30, 2010

Operating Revenues. Operating revenues increased by $11.9 million for the six months ended June 30, 2011 over the comparable period in 2010 primarily due to increases in operating revenues from contract-leasing activities. Operating revenues in the U.S. Gulf of Mexico were $1.2 million higher primarily due to an additional $3.4 million for search and rescue activities which commenced in the third quarter of 2010 partially offset by a $2.7 million reduction of revenues for activity in support of the Deepwater Horizon oil spill response. Operating revenues from Alaska were $1.2 million lower primarily due to a reduced number of helicopters on contract with a major oil and gas customer due to the completion of certain drilling activity in the fourth quarter of 2010. Operating revenues from contract-leasing activities were $10.1 million higher primarily due to a $7.2 million increase as additional helicopters were placed on long-term contract-leases in foreign jurisdictions and a $2.8 million positive impact of a full six months of activity on maintenance support contracts for helicopters operating in Brazil, which began at various times in the first half of 2010. Operating revenues from air medical services were $0.9 million higher due to the placement of additional aircraft on a new contract. Operating revenues from flightseeing were $0.4 million higher due to increased tourist activity and the FBO generated an additional $0.5 million primarily due to higher fuel prices.

Costs and Expenses. Costs and expenses increased by $8.3 million for the six months ended June 30, 2011 over the comparable period in 2010. Personnel expenses were $1.6 million higher primarily due to pilot pay scale adjustments implemented in June 2010. Repair and maintenance expenses were $0.3 million lower primarily due

 

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to a $3.2 million decrease driven by the timing of helicopter repairs partially offset by a $2.9 million increase for additional helicopters placed in power-by-hour maintenance programs. Insurance and loss reserves were $0.3 million lower primarily due to a $0.6 million “good experience” premium adjustment in the first quarter partially offset by an increase of $0.3 million due to the addition of new aircraft to the fleet. Fuel expenses were $2.1 million higher primarily due to higher prices. Other operating expenses were $0.3 million higher primarily due to costs of $1.3 million for medical support personnel assigned to search and rescue helicopters based in the U.S. Gulf of Mexico and a $0.9 million increase in parts expense related to an increase in parts sold to customers. These increases were partially offset by the first quarter receipt of insurance proceeds of $1.9 million related to hurricane damages sustained in 2005. Administrative and general expenses were $1.8 million higher primarily due to higher wage and benefit costs. Depreciation and amortization expenses were $3.1 million higher primarily due to the placement of additional helicopters into service.

Gains on Asset Dispositions and Impairments, Net. During the six months ended June 30, 2011, we sold equipment for proceeds of $9.7 million and recognized current and previously deferred gains on dispositions and impairments of $8.4 million.

Interest expense. Interest expense was $0.6 million higher in the six months ended June 30, 2011 compared with the comparable period in 2010. During the fourth quarter of 2010 we entered into two promissory notes to purchase two helicopters for an aggregate amount of $38.7 million. The notes call for the payment of interest based on the London Interbank Offered Rate (“LIBOR”) plus a 260 basis point margin.

Interest expense on advances from SEACOR. Interest expense on advances from SEACOR was $1.6 million higher in the six months ended June 30, 2011 compared with the comparable period in 2010 due to higher intercompany advances.

SEACOR management fees. SEACOR management fees represent various corporate costs incurred by SEACOR, which are in turn charged to all of its operating segments. These fees are allocated using income-based performance metrics of us in relation to SEACOR’s other operating segments. SEACOR management fees for the six months ended June 30, 2011 was $5.2 million compared with $2.1 million for the comparable period in 2010.

Derivative gains (losses), net. Derivative losses in the six months ended June 30, 2011 were due to changes in the market value of the interest rate swap agreements. Derivative losses in the six months ended June 30, 2010 were the result of losses relating to the ineffective portion of forward currency exchange contracts.

Foreign currency gains (losses), net. Foreign currency gains in the six months ended June 30, 2011 were primarily due to the weakening of the U.S. dollar against the Euro underlying certain cash balances. Foreign currency losses in the six months ended June 30, 2010 were primarily due to higher accumulated Euro cash balances.

 

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Results of Operations

 

     Years Ended December 31,     Percent Change  
     2010     2009     2008     ’10/’09     ’09/’08  
     Amount     Percent     Amount     Percent     Amount     Percent     Percent     Percent  
     $’000     %     $’000     %     $’000     %     %     %  

Operating Revenues:

                

United States

     178,656        76        201,344        85        223,193        90       

Foreign

     56,710        24        34,323        15        25,434        10       
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     
     235,366        100        235,667        100        248,627        100               (5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Costs and Expenses:

                

Operating:

                

Personnel

     58,786        25        63,176        27        71,980        29       

Repairs and maintenance

     43,941        19        40,511        18        42,033        17       

Insurance and loss reserves

     9,114        4        9,867        4        9,071        4       

Fuel and supplies

     17,454        7        19,234        8        37,761        15       

Leased-in equipment

     1,910        1        2,525        1        2,749        1       

Other

     16,028        7        12,642        5        17,896        7       
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     
     147,233        63        147,955        63        181,490        73       

Administrative and general

     25,798        11        21,396        9        20,130        8       

Depreciation

     43,351        18        37,358        16        36,411        15       
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     
     216,382        92        206,709        88        238,031        96       
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Gains on Asset Dispositions and Impairments, net

     764               316               4,883        2       
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Operating Income

     19,748        8        29,274        12        15,479        6        (33     89   

Other Income (Expense):

                

Interest income

     109               52               217              

Interest expense

     (94            (13            (5           

Interest expense on advances from SEACOR

     (21,437     (9     (20,328     (9     (12,963     (5    

SEACOR management fees

     (4,550     (2     (5,481     (2     (5,681     (2    

Derivative gains (losses), net

     (118            266               274              

Foreign currency gains (losses), net

     (1,511            1,439        1        271              

Other, net

     50                             38              
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     
     (27,551     (11     (24,065     (10     (17,849     (7    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Income (Loss) Before Income Tax Expense (Benefit) and Equity in Losses of 50% or Less Owned Companies

     (7,803     (3     5,209        2        (2,370     (1     (250     320   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Income Tax Expense (Benefit):

                

Current

     (46,315     (19     (29,409     (13     (16,460     (6    

Deferred

     42,014        18        32,292        14        16,116        (6    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     
     (4,301     (1     2,883        1        (344           
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Income (Loss) Before Equity in Losses of 50% or Less Owned Companies

     (3,502     (2     2,326        1        (2,026     (1     (251     215   

Equity in Losses of 50% or Less Owned Companies

     (137            (487            (461           
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Net Income (Loss)

     (3,639     (2     1,839        1        (2,487     (1     (298     174   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

54


Operating Revenues by Service Line. The following table sets forth, for the years indicated, the amount of operating revenues by service line.

 

     Years Ended December 31,      Percent Change  
     2010      2009     2008      ’10/’09     ’09/’08  
     Amount     Percent      Amount     Percent     Amount     Percent      Percent     Percent  
     $’000     %      $’000     %     $’000     %      %     %  

Operating Revenues:

                  

U.S. Gulf of Mexico, primarily from oil and gas activities

     112,458        48         121,335        51        134,665        53         (7     (10

Alaska, primarily from oil and gas activities

     28,188        12         25,183        11        19,716        8         12        28   

Contract-leasing

     57,538        24         35,441        15        26,892        11         62        32   

Air Medical Services

     22,208        9         37,244        16        40,229        16         (40     (7

Flightseeing

     6,437        3         6,957        3        8,755        4         (7     (21

FBO

     8,912        4         10,729        5        19,568        8         (17     (45

Eliminations

     (375             (1,222     (1     (1,198             69        (2
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

      
     235,366        100         235,667        100        248,627        100                (5
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

      

Selected Operating Data. The following table sets forth, for the years indicated, flight hours flown as a relative measure of activity for each of our lines of service.

 

     Years Ended December 31,      Percent Change  
     2010      2009      2008      ’10/’09     ’09/’08  
     Hours      %      Hours      %      Hours      %      %     %  

U.S. Gulf of Mexico, primarily from oil and gas activities

     34,574         55         39,291         60         44,851         60         (12     (12

Alaska, primarily from oil and gas activities

     4,585         7         4,687         7         4,853         7         (2     (3

Contract-leasing

     12,467         20         6,825         10         4,602         6         83        48   

Air Medical Services

     8,257         13         11,849         18         15,551         21         (30     (24

Flightseeing

     2,778         5         3,103         5         4,345         6         (10     (29
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

      
     62,661         100         65,755         100         74,202         100         (5     (11
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

      

Year Ended December 31, 2010 compared with Year Ended December 31, 2009

Operating Revenues. Operating revenues were $0.3 million lower for the year ended December 31, 2010 compared with the year ended December 31, 2009. Operating revenues in the U.S. Gulf of Mexico were $8.9 million lower primarily due to a $11.6 million decrease driven by a reduction in the number of helicopters operating in the region and lower flight hours supporting oil and gas activities following the Deepwater Horizon incident. These reductions were partially offset by revenues of $2.7 million generated by equipment contracted to the U.S. Coast Guard in support of oil spill response efforts. Operating revenues from contract-leasing activities increased by $22.1 million as additional helicopters were placed on international contract-leases, primarily in Brazil. As of December 31, 2010, 39 helicopters were dedicated to the contract-leasing market compared with 35 as of December 31, 2009. Operating revenues from air medical services decreased by $15.0 million due to the non-renewal of several contracts upon their conclusion. Operating revenues in Alaska were $3.0 million higher primarily due to an increase in the number of helicopters on contract in support of oil and gas activities. Operating revenues for the FBO were $1.8 million lower primarily due to the loss of a significant customer during 2009.

Costs and Expenses. Costs and expenses were $9.7 million higher for the year ended December 31, 2010 compared with the year ended December 31, 2009. Personnel costs were $4.4 million lower primarily due to a

 

55


$4.2 million reduction in wage and benefit costs for air medical services in line with reduced activity and $1.9 million in lower crew subsistence costs in the U.S. Gulf of Mexico. These decreases were partially offset by $1.7 million in higher wage and benefit costs in Alaska in support of additional helicopters on contract. Repairs and maintenance costs were $3.4 million higher primarily due to a $5.8 million increase in power-by-hour expense as additional helicopters were placed in power-by-hour maintenance contracts and a $1.7 million increase due to the timing of major repairs, partially offset by a $4.1 million reduction in maintenance spending in air medical services as a result of fewer contracts. Fuel expense decreased by $1.8 million primarily due to a reduction in FBO fuel sales. Other operating expenses were $3.4 million higher primarily due to the receipt of $5.7 million in insurance reimbursements in 2009 for expenses incurred following Hurricanes Gustav and Ike in 2008. This was partially offset by a $2.3 million reduction in costs attributable to a firefighting contract completed in 2009. Administrative and general expenses were $4.4 million higher primarily due to $2.1 million in higher wage and benefit costs and the 2009 reversal of a $1.5 million provision for doubtful accounts following its collection. Depreciation expense was $6.0 million higher due to the continued modernization of the fleet through the addition of new and higher cost equipment.

Interest expense on advances from SEACOR. Interest expense on advances from SEACOR was $1.1 million higher in 2010 due to both higher intercompany advances as well as higher average interest rates charged on the advances.

SEACOR management fees. SEACOR management fees represent various corporate costs incurred by SEACOR, which are in turn charged to all of its operating segments. These fees are allocated using income-based performance metrics of the Company in relation to SEACOR’s other operating segments. SEACOR management fees for the year ended December 31, 2010 were $4.6 million compared with $5.5 million for the year ended December 31, 2009. The reduction was primarily due to a lower proportion of SEACOR’s corporate costs being charged to us based on our results in comparison with SEACOR’s other operating segments.

Derivative gains (losses), net. Derivative losses in 2010 were the result of losses relating to the ineffective portion of forward currency exchange contracts. Derivative gains in 2009 were the result of gains relating to the ineffective portion of forward currency exchange contracts.

Foreign currency gains (losses), net. Foreign currency losses, net in 2010 were primarily due to a strengthening of the U.S. dollar against the Euro underlying certain cash balances. Foreign currency gains, net in 2009 were primarily due to the weakening of the U.S. dollar against the Euro underlying certain cash balances.

Income Tax Expense (Benefit). During the year ended December 31, 2010, our effective income tax rate was 55.1% primarily due to the recognition of income tax benefits of $1.1 million on adjustments to deferred tax liabilities resulting from changes in state tax apportionment factors and $0.3 million relating to participation in share award programs sponsored by SEACOR. During the year ended December 31, 2009, our effective income tax rate was 55.4% primarily due to the recognition of income tax expenses of $0.5 million as a result of allocated non-deductible SEACOR management fees and $0.2 million on adjustments to deferred tax liabilities resulting from changes in state tax apportionment factors. Subsequent to this offering, we expect that the charges under the transition services agreement between us and SEACOR will be fully deductible for income tax purposes. For more information regarding the transition services agreement, see “Certain Relationships and Related Party Transactions—Transition Services Agreement.”

Year Ended December 31, 2009 compared with Year Ended December 31, 2008

Operating Revenues. Operating revenues were $13.0 million lower for the year ended December 31, 2009 compared with the year ended December 31, 2008. Operating revenues were $13.3 million lower in the U.S. Gulf of Mexico primarily due to a slowdown in offshore oil and gas activity that began in late 2008 following a sharp reduction in oil and gas prices and a reduction in hurricane related activity. Operating revenues in Alaska increased by $5.5 million due to additional contract revenues generated from oil and gas support activities.

 

56


Operating revenues from contract-leasing activities increased by $8.5 million, primarily in international regions. As of December 31, 2009, 35 helicopters were dedicated to the contract-leasing market compared with 24 as of December 31, 2008. Operating revenues from air medical services decreased by $3.0 million primarily due to contract terminations. Operating revenues from FBO decreased by $8.8 million primarily due to the loss of a significant customer. Operating revenues from flightseeing decreased by $1.8 million primarily due to a decline in tourism in Alaska in 2009.

Costs and Expenses. Costs and expenses were $31.3 million lower for the year ended December 31, 2009 compared with the year ended December 31, 2008. Personnel costs were $8.8 million lower primarily due to a reduction in workforce both in the U.S. Gulf of Mexico and air medical services of $5.1 million and $4.0 million, respectively, in line with the slowdown in activity as discussed above. These reductions were partially offset by increased personnel costs in Alaska of $1.3 million in support of additional contracts for oil and gas activity. Repairs and maintenance costs were $1.5 million lower primarily due to the timing of repairs. Fuel and supplies expenses decreased by $18.5 million primarily due to an $8.4 million decrease in connection with the reduction in flight hours in the U.S. Gulf of Mexico and a $7.8 million decrease due to lower activity levels at the FBO following the loss of a significant customer. Other operating expenses were lower in 2009 due to the receipt of insurance reimbursements in 2009 for expenses incurred following Hurricanes Gustav and Ike in 2008.

Interest income. Interest income was lower in 2009 compared with 2008 due to interest earned on escrow deposits in 2008 relating to a like-kind exchange program and interest on a past due receivable balance that was ultimately satisfied in full.

Interest expense on advances from SEACOR. Interest expense on advances from SEACOR was higher in 2009 due to both higher intercompany advances as well as higher average interest rates charged on the advances.

SEACOR management fees. SEACOR management fees represent various corporate costs incurred by SEACOR, which are in turn charged to all of its operating segments. These fees are allocated using income-based performance metrics of us in relation to SEACOR’s other operating segments. SEACOR management fees for the years ended December 31, 2009 and December 31, 2008 were essentially flat at $5.5 million and $5.7 million, respectively.

Foreign currency gains (losses), net. Foreign currency gains, net in 2009 were primarily due to the weakening of the U.S. dollar against the Euro underlying certain cash balances. Foreign currency gains, net in 2008 were primarily due to the weakening of the U.S. dollar against the Euro underlying certain intercompany balances.

Income Tax Expense (Benefit). During the year ended December 31, 2009, our effective income tax rate was 55.4% primarily due to the recognition of income tax expenses of $0.5 million as a result of allocated non-deductible SEACOR management fees and $0.2 million on adjustments to deferred tax liabilities resulting from changes in state tax apportionment factors. During the year ended December 31, 2008, our effective income tax rate was 14.5% primarily due to the recognition of income tax expenses of $0.3 million as a result of allocated non-deductible SEACOR management fees and $0.3 million on adjustments to deferred tax liabilities resulting from changes in state tax apportionment factors. Subsequent to this offering, we expect that the charges under the transition services agreement between us and SEACOR will be fully deductible for income tax purposes. For more information regarding the transition services agreement, see “Certain Relationships and Related Party Transactions—Transition Services Agreement.”

 

57


Liquidity and Capital Resources

Overview

Our ongoing liquidity requirements arise primarily from working capital needs, meeting our capital commitments and the repayment of debt obligations. In addition, we may use our liquidity to fund acquisitions or to make other investments. Sources of liquidity are cash balances and cash flows from operations and, from time to time, we may secure additional liquidity through the issuance of debt or borrowings under a credit facility. Historically, SEACOR has advanced substantial amounts of capital to us to fund our expenditures. We have participated historically in a cash management program whereby certain of our operating and capital expenditures are funded through advances from SEACOR and certain cash collections are forwarded to SEACOR. As a consequence of this arrangement, we have historically maintained minor balances. As of June 30, 2011, advances from SEACOR were $461.0 million. Interest on these advances is settled quarterly and varies based on SEACOR’s weighted average borrowing rate (6.1% for the six months ended June 30, 2011). In connection with this offering, SEACOR intends to contribute $             million of its aggregate advances as additional capital to us. We expect to use the net proceeds of the offering together with borrowings under our new $             revolving credit facility to repay to SEACOR the then remaining balance of these advances. We anticipate $             million of availability under the revolver after borrowings for the repayment of the remaining advances from SEACOR and after borrowings of $             million for working capital needs. We do not expect SEACOR to continue to advance us any capital following consummation of this offering.

Our unfunded capital commitments as of August 31, 2011 consisted primarily of helicopters. These commitments totaled $177.6 million, of which $82.1 million is payable during the remainder of 2011 and $50.2 million is payable in 2012. Delivery dates on the remaining commitments have yet to be determined. We expect to finance the remaining acquisition costs through a combination of cash on hand, cash provided by operating activities and borrowings under our new revolving credit facility.

Cash Flows

Summary of Cash Flows

 

     Six Months
Ended June 30,
    Years Ended December 31,  
     2011     2010     2010     2009     2008  
     (in thousands)  

Cash provided by or (used in):

          

Operating Activities

   $ 10,152      $ 11,489      $ 83,743      $ 57,234      $ 43,259   

Investing Activities

     (46,835     (62,494     (132,549     (64,116     (205,817

Financing Activities

     33,834        51,384        46,963        9,386        167,229   

Effect of Exchange Rate Changes on Cash and Cash Equivalents

     891        (131     (1,768     (1,396       
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Increase (Decrease) in Cash and Cash Equivalents

   $ (1,958   $ 248      $ (3,611   $ 1,108      $ 4,671   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

58


Cash Flows from Operating Activities

Cash flows provided by operating activities decreased by $1.3 million during the six months ended June 30, 2011 compared with the six months ended June 30, 2010. Cash flows provided by operating activities increased by $26.5 million during the year ended December 31, 2010 compared with the year ended December 31, 2009. Cash flows provided by operating activities increased by $14.0 million during the year ended December 31, 2009 compared with the year ended December 31, 2008. The components of cash flows provided by operating activities during the six months ended June 30, 2011 and 2010 and the years ended December 31, 2010, 2009 and 2008 were as follows:

 

     Six Months
Ended June 30,
    Years Ended December 31,  
     2011     2010     2010     2009     2008  
     (in thousands)  

Operating income before depreciation and gains on asset dispositions and impairments, net

   $ 35,477      $ 28,659      $ 62,335      $ 66,316      $ 47,007   

Changes in operating assets and liabilities before interest and income taxes

     (7,085     (4,197     327        (11,893     (1,301

Dividends received from 50% or less owned companies

     162                        </