Annual report pursuant to Section 13 and 15(d)

VARIABLE INTEREST ENTITIES AND EQUITY INVESTMENTS AND ADVANCES

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VARIABLE INTEREST ENTITIES AND EQUITY INVESTMENTS AND ADVANCES
12 Months Ended
Dec. 31, 2017
Equity Method Investments and Joint Ventures [Abstract]  
VARIABLE INTEREST ENTITIES AND EQUITY INVESTMENTS AND ADVANCES
VARIABLE INTEREST ENTITIES AND EQUITY INVESTMENTS AND ADVANCES
Equity investments and advances as of December 31, 2017 and 2016 were as follows (in thousands):
 
 
Ownership
 
2017
 
2016
Dart
 
50%
 
$
26,128

 
$
24,782

Era Training Center
 
50%
 
3,928

 
4,484

 
 
 
 
$
30,056

 
$
29,266


The Company owns a 50% interest in Aeróleo, which is a VIE. Pursuant to a new shareholders’ agreement entered into on October 1, 2015 (see Note 4), the Company is the primary beneficiary, and Aeróleo is now a consolidated entity. The Company also owned a 50% interest in Era do Brazil, a VIE, prior to October 1, 2015. As the primary beneficiary, the Company has been consolidating this entity since September 30, 2012. On October 1, 2015, the Company acquired the remaining 50% interest, and Era do Brazil is now a wholly-owned subsidiary.
As of December 31, 2017 and 2016, cumulative undistributed net earnings of equity investees included in the Company’s consolidated retained earnings were $2.9 million and $1.1 million, respectively.
VIEs
Aeróleo. On July 1, 2011, the Company acquired a 50% economic interest and a 20% voting interest in Aeróleo, a Brazilian entity that provides helicopter transport services to the Brazilian offshore oil and gas industry, for $4.8 million in cash. The Company and its partner also each loaned Aeróleo $6.0 million at an interest rate of 6.0% per annum. On October 1, 2015, the Company’s partner completed a transfer of its 50% economic and 80% voting interest in Aeróleo to a third party. In connection with the transfer, the Company entered into a shareholders’ agreement with its new partner that requires supermajority shareholder and/or board approval with respect to specified, significant actions, and a put/call option arrangement which gives the Company the right to purchase at any time, and the new partner the right to put to the Company after two years, the new partner’s interest in Aeróleo.
Aeróleo is unable to adequately finance its activities without additional financial support, making it a VIE. Prior to October 1, 2015, the Company determined it was not the primary beneficiary as its 20% voting interest did not allow it to direct the activities that most significantly affect Aeróleo’s economic performance. As a result of the new shareholders’ agreement following the partner’s transfer of interests, the Company determined that it now has control over the activities that most significantly affect Aeróleo’s economic performance and is the VIE’s primary beneficiary. Accordingly, Aeróleo’s results are consolidated in the Company’s financial statements beginning on October 1, 2015.
For the year ended December 31, 2015, the Company recognized $21.4 million of operating revenues from Aeróleo, and $42.1 million was outstanding as of September 30, 2015 (See Note 1).
The Company’s consolidated balance sheets at December 31, 2017 and 2016, include assets of Aeróleo totaling $11.5 million and $12.9 million, respectively. The distribution of these assets to Era Group and its subsidiaries other than Aeróleo is subject to restrictions. In addition, the Company’s consolidated balance sheets include liabilities of Aeróleo of $7.6 million and $9.2 million, respectively. The creditors for such liabilities do not have recourse to Era Group or its subsidiaries other than Aeróleo.
Era do Brazil. On July 1, 2011, the Company and its partner each contributed $4.8 million in cash to Era do Brazil, a 50-50 joint venture. Era do Brazil was a highly leveraged entity with all its outstanding debt due to the Company, which made it a VIE.  As the primary beneficiary, the Company consolidated Era do Brazil in its financial statements effective September 30, 2012. In connection with the Aeróleo transaction on October 1, 2015, the Company acquired, for nominal consideration, the remaining 50% ownership interest in Era do Brazil making it a wholly-owned subsidiary.
Combined Condensed Financial Statements
Summarized financial information for the Company’s equity investments and advances in Dart as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015 was as follows (in thousands):
 
 
2017
 
2016
 
 
Current assets
 
$
29,336

 
$
28,442

 
 
Non-current assets
 
29,899

 
29,475

 
 
Current liabilities
 
6,671

 
6,737

 
 
Non-current liabilities
 
6,096

 
8,315

 
 
 
 
2017
 
2016
 
2015
Operating revenues
 
$
42,891

 
$
40,930

 
$
33,190

Costs and expenses:
 
 
 
 
 
 
Operating and administrative
 
35,983

 
32,878

 
32,869

Depreciation and amortization
 
1,603

 
3,161

 
4,224

Total costs and expenses
 
37,586

 
36,039

 
37,093

Operating income
 
$
5,305

 
$
4,891

 
$
(3,903
)
Net income
 
$
3,603

 
$
2,657

 
$
(3,150
)
Summarized financial information for the Company’s equity investments and advances in all other investees as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015 was as follows (in thousands):
 
 
2017
 
2016
 
 
Current assets
 
$
257

 
$
535

 
 
Non-current assets
 
4,138

 
4,641

 
 
Current liabilities
 
654

 
653

 
 
Non-current liabilities
 
3,298

 
3,652

 
 
 
 
2017
 
2016
 
2015
Operating revenues
 
$
581

 
$
694

 
$
622

Costs and expenses:
 
 
 
 
 
 
Operating and administrative
 
367

 
338

 
685

Depreciation and amortization
 
503

 
519

 
740

Total costs and expenses
 
870

 
857

 
1,425

Operating income
 
$
(289
)
 
$
(163
)
 
$
(803
)
Net income (loss)
 
$
(527
)
 
$
(409
)
 
$
(1,064
)

Joint Ventures
Dart. Era DHS LLC, a wholly owned subsidiary of the Company, acquired 49% of the capital stock of Dart Helicopter Services LLC (“Dart Helicopters”), a sales, marketing and parts manufacturing organization based in North America that engineers and manufactures after-market parts and equipment for sale to helicopter manufacturers and operators. During 2009, the Company provided a $0.3 million loan to Dart Helicopters with a maturity of June 2012 at an annual interest rate of 5.0%, which was payable quarterly with principal due at maturity. On February 28, 2011, the Company made an additional investment of $5.0 million in Dart Helicopters, and on July 31, 2011, contributed its ownership in Dart Helicopters to Dart in exchange for a 50% economic and voting interest in Dart and a note receivable of $5.1 million. The note receivable had a balance of $2.8 million at December 31, 2017 and bears interest at a rate of 4.0% per annum, requires quarterly principal and interest payments and matures on July 31, 2023. During the years ended December 31, 2017, 2016 and 2015, the Company purchased $2.0 million, $1.9 million and $2.1 million, respectively, of products and services from Dart.
Era Training Center. Era Training Center LLC (“Era Training Center”) operates flight training devices and provides training services to the Company and third-party customers. During the years ended December 31, 2017, 2016 and 2015, the Company provided helicopter, management and other services to the joint venture totaling $0.2 million, $0.2 million and $0.4 million, respectively, and incurred $0.5 million, $0.6 million and $0.5 million, respectively, for simulator fees. Era Training Center has a $3.7 million note with the Company secured by two flight training devices which bears interest at 6.0% per annum and requires quarterly payments of $0.1 million until January 2026.