Good day, and welcome to the Era Group Reports Fourth Quarter and Full Year 2017 Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Tomas Johnston, Acting General Counsel. Please go ahead, sir.

Thank you, Stephanie and good morning, everyone. Welcome to Era's fiscal year and fourth quarter 2017 earnings call. I'm here today with our President and CEO, Chris Bradshaw; our SVP and CFO, Jennifer Whalen; our SVP, Operations and Fleet Management, Stuart Stavley; our SVP Commercial, Paul White; our Corporate Controller, Tricia Shroeder; and our FP&A Manager, Seema Parikh. You may access our recent earnings press release and presentation slides on our website, erahelicopters.com. Let me remind everyone that during the call, management may make forward-looking statements that are subject to risk and uncertainties that are described in more detail on slide three. I'll now turn the call over to our President and CEO. Chris?

Thank you, Tomas, and welcome to the call, everyone. As always, I will begin our prepared remarks with a note on safety, which is Era's most important core value and our highest operational priority. We are pleased to report that 2017 was Era's best safety performance year on record. We achieved our goal of zero air accidents. In regard to workplace injuries, we had one OSHA recordable incident, resulting in a world-class total recordable injury rate of 0.17. Thus far in 2018, we have zero air accidents and zero workplace injuries. I want to commend our entire team for their hard work and dedication in achieving the safety performance. Understanding that our safety record must be earned and knew each and every day, we remain focused on continues improvement in 2018. Next, I want to provide a brief update on our helicopter fleet. In January, we made the financial progress payment and took delivery of our 4th S92 helicopter. This delivery concluded our firm capital commitments for new aircraft. In late February, Era sold our flightseeing assets in Alaska, which consisted of eight single engine helicopters, two operating facilities and related property and equipment for $10 million. We were presented with the compelling value offer, and we believe Era shareholders will benefit from alternative deployment of this capital. On behalf of the entire management team, I want to thank the Era team members, who successfully operated our flightseeing tours in Alaska, on a safe, efficient and reliable basis. We believe the new owners will continue that strong tradition and be good stewards of the assets. Turning now to an update on Era’s capital structure, we are pleased by the support received from our bank group to secure the extension of our revolving credit facility until March 2021. This amendment helps…

Thank you, Chris. I’ll start with a couple of significant items during the quarter related to tax. As I am sure you are aware, during Q4 2017, there were significant changes to the U.S. tax code by way of the recent legislation. The effect as it relates to our financial statements was a non-cash deferred tax benefit of approximately $70 million, due to the changes in the tax rate from 35% to 21%. Additionally, on a go forward basis, net operating losses will be carried forward indefinitely with limitations on annual uses and bonus depreciation will be 100% on qualified assets until the end of 2022. In the past we have performed like-kind exchange transactions with respective sales and purchases of helicopters, with the new legislation these have been eliminated for personal property. There are also limitations on the use of interest expense deductions going forward. The second item I wanted to discuss was PERT. As previously discussed in our Q3 2017 10-Q, in late October 2017 our subsidiary in Brazil entered into a new tax program to settle certain income and non-income tax liabilities for installment payments of 24% and the balance settled with the utilization of net operating losses. This resulted in a $2 million increase in operating expense in Q4 2017, offset by a $3.5 million income tax benefit for a net income statement benefit of $1.5 million. Turning to the financial highlights for Q4, net income attributable to the company was $61.7 million or a $2.89 per diluted shares on operating revenues of $57.5 million, compared to a net loss of $81.4 million or $3.91 per diluted share on operating revenues of $61.4 million in Q3 of 2017. Revenues were $3.9 million lower versus Q3 of 2017, primarily due to the end of fight scene season,…

Thank you, Jennifer. In regards to market conditions, activity levels in the offshore oil and gas industry remained depressed compared to historical levels. They're continues to be in excess of supply helicopters globally and competition in the industry is fierce. Against that backdrop we have observed an increase in customer activity, which began in the third quarter of 2017 and continued into the fourth quarter. Our recent revenue results help to quantify this momentum. Q3 2017 oil and gas revenues represented a 15% sequential quarter improvement over Q2. Given the seasonality of our business, we believe it is helpful to look at Q4 revenues on a year-over-year basis. Our Q4 oil and gas revenues increased 10% over Q4 2016 levels. Visibility in our industry remains limited and pursuant to our long-standing disclosure policy, we do not provide financial guidance. However, we have observed and can share that this momentum in oil and gas customer activity has continued into the New Year. Oil and gas customer activity levels through the first two months of the year were significantly higher in 2018 compared to last year. This is primarily attributable to new customer projects that have commenced in the U.S. Gulf of Mexico. Although we also benefited from a short-term project in in Suriname [ph] I want to reiterate that we are not out of the proverbial woods yet. But we are encouraged by the recent increase in the oil and gas customer activity and we'll continue to try to capitalize on these market opportunities as they present themselves. In conclusion, I want to note that ERA is celebrating our 70th Anniversary in 2018. We are proud of our rich legacy as the longest serving helicopter transport operator in the United States and our current status as one of the largest helicopter operators in the world. We celebrate Carl Brady, who founded the company in Alaska in 1948 and was a true pioneer in the creation of the commercial helicopter industry. Over the last 70 years ERA has operated a vast array of helicopter models across a diverse set of end markets and mission profiles in almost every region of the world. I want to thank all of the ERA team members both past and present for their contributions in making ERA one of the global leaders in our industry. With that, let's open the line for questions. Stephanie?

Thank you. [Operator Instructions] We'll go first to Bill Mastoris with Baird & Company.

Thank you very much. Chris, I wondered if you could give us a little bit of additional color on some of these contracts. Are these short-term contracts or are they a combination of short and long-term contracts, or are they short-term contracts, which would become long-term contracts? And then where is most of this activity taking place? Is it the deepwater, ultra deepwater, and would that be part of the motivation for or maybe taking that additional S-92 and maybe even exercising some options?

Yes, good morning, Bill. We have seen some contribution from long term production oriented contracts including some that have not yet commenced, but have been awarded. However, most of the activity, the primary contribution is from short term contracts, which is exactly what we would expect at this point in the cycle. You don't start out with a greenfield and go directly to a production platform normally what we would expect and what we have in fact seen is that activity starts with shooting seismic, collecting that data then supporting short-term drilling projects. If those are successful more exploratory wells will be drilled and then you move into the development and eventually a production phase. So it's very much within expectation that we would expect the contract at this point of the cycle to be short-term in nature. What's really encouraging is really the volume or the cadence of the number of short-term projects that have commenced. And it's -- as that volume increases that's the type of activity that will eventually lead to more sustained utilization of the aircraft. In terms of where it's happening, for us, we're almost entirely deepwater. We do have a number of wide aircraft in the Gulf of Mexico that are supporting our contract with the Bureau of Safety Environmental Enforcement. But other than that, most of our aircraft are servicing deepwater markets. So that's where we are seeing the improvement in activity for us.

Okay, that's very helpful. And I'm just kind of wondering how much excess capacity you believe is still out there in the industry? Certainly there has been a lot of returns to lessors. And there is a lot of aircraft, which are grounded and because of the part out component of that may never get back into the air. So I'm just kind of wondering when do you think that excess supply begins to become a little bit more in balance with demand. And I know that that's tough, but any color that you have there would be greatly appreciated.

Sure, in terms of excess capacity, I can't speak qualitatively about this. It's important that we break the market down into the different asset classes, heavy, medium and then light aircraft. On the heavy side is where there is more of an excess blood of supply today. And where I think it will take longer to work through the amount of excess capacity that exists today. The story gets a little better when you get down into the new generation medium aircraft. And I think it's important to look at the ones that are really competitive for new work. So there are number of old models that might be included in the total fleet count, but those models really not competitive for new projects that are coming out today. You're primarily talking about the AW-139 in the medium category to a lesser extent the 7A6 [ph]. The story is a little better there compared to the heavy aircraft. I think there will be a quicker recovery in the amount of excess capacity amongst 139s as market conditions continue to improve. In terms of the grounded aircraft I think that plays into the commentary, which I was referencing about some of the legacy model. Some on the heavy side, but more so on the medium side aircraft that may never find their way back into the utilized market at least for offshore oil and gas.

Okay. And then finally, Chris to the extent that you can discuss it, and I know that negotiations and litigation could be very sensitive. Where are you in your discussions with Airbus on the H225? I mean, is there kind of a range has been established right now that going to be reasonable maybe based upon what happened with Bristow. I'm just wondering where are we in that process?

Sure. I appreciate the question and obviously understand why it's asked. Because this is an important and material matter to the company. Pursuant to the advice that we've received from our legal counsel we're not commenting on the status or progress of the 225 litigation. I would say from a fundamental standpoint, we do believe that we have been damaged significant by the H225 situation and we expect to be compensated for those damages. It's always been and remains our preference to settle that commercially. But outside of a viable solution there, we are actively pursuing our next best alternative, which is the legal case. On that front, we're encouraged by the amendment of the recent credit facility, which provides for an add back of any expenses related to 225, ongoing 225 litigation ensuring that we have the flexibility to continue a full throttle pursuit trying to realize value for our shareholders from the significant investment that was made in those assets.

Okay, great. And then finally, any additional cost cuts that you see maybe on the operating side, or right now do you feel as though, you have an infrastructure that’s establish for the current level of activity?

We’ve done a lot of work throughout the downturn to continuously and on a dynamic basis adjust our costs structure for what we foresee the level actually being. That required some very difficult decisions early on in the cycle in terms of headcount reductions and as is when necessary we've made other reductions. We've also worked a lot with our vendors and have secured better terms on some agreements with OEM's both the helicopter OEMs as well as some of the subcontracting vendors. And those efforts have continued, I think we'll continue to see some benefit come through our cost structure and that will remain a focus for us. I would note that that Q4 profitability was depressed somewhat because of some factors, which are not expected to occur. For example, we spend about $800,000 in the quarter to prepare new aircraft for contracts that haven't yet started. We also continue to have some timing of repair, contribution from things such as engine overhaul, which were particularly have in October, but then settle down. But in terms of the overall cost structure, we do think at a high level the company is appropriately sized now for the level of the activity we seen.

Okay. Thank you very much, Chris for all that color. Really do appreciate it.

Thanks, Bill.

We’ll go next to Adam Ritzer, Pressprich.

Hi, thanks for taking my call. Just a quick couple of follow-ups on the 225 issue. Is there an approach that you guys are talking versus the approach that Bristow took, they got a settlement you guys are still working through that. Is there any significant differences you could point to?

I think for each company, they have a different set of facts and circumstances. Some people own their aircraft, some lease them, some have the ability to bring a suite in the U.S. where one of only two parties who have their ability because we bought our aircraft to the U.S. It's a significant difference in your prospects filling in the U.S. versus filling in Europe against Airbus. Some also have large order books for other Airbus aircraft that could come into play for commercial leverage. In our case we're fortunate that we don't have an order book, committed order book for new aircraft. We do have the ability to file in the U.S. So I think it's a matter of different companies have different facts and circumstances and we need to pursue the best alternative to realize value. And we prefer that via commercial settlement, but absent the via alternative there, we're going to pursue -- continue pursue our next step alternative which is the case.

Got it, that's very helpful. Also in terms of the EC225s -- I know you guys took $117 million write-off. Is there any 225 value left in your fair market value of helicopters currently?

Yes, it's approximately $38 million that remains.

Okay. So not much. I also noticed that Total took out a contract for two 225 with a Brazilian operator. Is there potential for other guys to get back in the market and use 225s down in Brazil?

Ultimately I think time will tell, it's our view that this is really a one-off situation. Total obviously is a large French company. And I think they are dealing with an operator there who was willing to put the aircraft back in service. In our case and I think is the case for the majority of the Western operators, helicopter operators, we don't believe that there is a detail safety case that exist today that would justify a return to service for those aircraft. So we don't have any plan to put that back in operations. I would also note that Petrobras in their recent tenders that they have issued for offshore helicopters in Brazil did not include the 225s as eligible aircraft.

Okay. I was going to ask you that, great. The recent delivery you took of the S92 is that -- do you have a contract for that?

So that delivery is contractual commitment that we were obligated, which was signed back in 2013. So we had been successful and working with Sikorsky they are the long-term partner of ours to differ some of these deliveries. This was the last scheduled one that we have committed to for the contract. So we paid the $2.8 million in January took delivery of the aircraft and it will become part of our actively marketed fleet and we'll seek to put it to work either on short-term ad-hoc work or potentially a contract at some point.

Got it. And what about the 189s? I think there is a couple left in 2018 and one more in 2019. Are you planning on taking those or what's your thoughts on what to do with those?

So now that we've made the final payment in January and the taken the fourth S92. The rest of our order book can be canceled in its entirety without further damages other than forfeiture of previously paid deposits of approximately $2 million. So we're not obligated to spend any additional capital on new aircraft from this point forward. We do have some flexibility that's been built into the order book. So we have the option if new market opportunities present themselves to take some additional aircraft. It's the orders that you've referenced we also have options for 10 additional 189s. That will all be dependent upon market conditions. If we had to make a decision today if all of them were expiring today, it's unlikely that we would take any additional aircraft based upon current customer opportunities. However, we do have some time left on these options, and we value the flexibility that it provides us to capitalize on growth opportunities should they present themselves.

Got it. In terms of your cash flow for last year, do you currently pay any cash taxes? And is there any maintenance CapEx that you guys do not expense?

We have not been a cash tax player in the U.S. historically and we don't have the expectations of becoming one in the near-term. In terms of capital expenditures, anything related to maintenance of our aircraft is fully expensed. We don't capitalize those items, that includes major overhaul. We expense all of maintenance related items. Now if there is a conversion or an upgrade of an aircraft, that changes the nature of the aircraft, that is something that we would capitalize on that instance. But any regular maintenance of the aircraft including major overhaul is gets expensed.

Got it. So basically your free cash is your EBITDA minus interest expense and then any additional call it growth CapEx on top of that, right?

That's right. And it's instances where we have asset sales such as the $10 million that was monetized in February that would offset some of the new helicopter spend as well.

Got it. And my last question -- sorry to ask so many questions. In terms you mentioned a couple of things about the current Tax Act. Is there anything that you think is significantly good or significantly bad for you guys within all those changes?

Hi, this is Jennifer. Generally speaking it's good. The rate dropped of 35% to 21% on a go-forward basis that’s a real benefit. We also took -- we had a large deferred tax liability which we got to reduce by downsizing the rates. The bonus depreciation the 100% of bonus depreciation is also a positive for us. It can offset any profits that we have. The couple of items that are -- and the net operating loss is the fact that they're indefinite now, there is with some limitations is also good. The two items I spoke about earlier the like-kind exchanges that allowed us to differ gains into the future, which have been eliminated for personal property. However, as we have this 100% bonus depreciation which more than offset that. And the only other one is this interest deduction limitation. It's limited to some adjustable taxable income going forward. So we can be limited on being able to take that deduction.

Got it. Okay, thank you very much for taking the questions.

Thanks, Adam.

We'll go next to Cameron Schnier with Evercore.

Hey, good morning, Chris.

Hey, good morning.

Most of my questions have already been answered. But I was wondering if you could just tell us what OpEx and G&A were for FY2017?

So we have -- we don't break out our expenses by line of service. We do provide a revenue disclosure for lines of service. But we've taken the approach that we don't have business segments since these aircraft are mobile and we can move them around from one line of service to the next. So we don't breakout expenses and profitability by line of service. What I can say is, we are very pleased with the valuation that we received for the assets that we sold on the flightseeing side. Raising the $10 million was in our view a very compelling value and we will put that capital to better work elsewhere. Looking at the flightseeing business, given the reduction in our footprint in the last -- over the last few years at the oil and gas market has contracted so much, it had become more and more difficult to efficiently operate a seasonal flightseeing business on a profitable basis. So, we’re happy to have the $10 million, I think the impact on recurring cash flows will not be material given those profitability challenges that I referenced for the business.

Okay. So just safe to assume that the margins were lower than the total company margins.

In recent years that’s certainly been correct.

Okay, thanks. I’ll get back in the queue.

Thanks.

The next to Christopher Hagedorn with Redwood Capital.

Hey guys, I just had a quick question on operating expenses, I think Chris you alluded to that you had a bit higher expenses to get aircraft ready for service, some maintenance overhaul. Can you just gives us a sense like what -- how we should think about, I guess, the operating expense line, I think what gone from 40 a quarter to like 45-ish I guess. Any color would be helpful.

Sure. We don’t -- our long standing disclosure policy, we don’t provide looking guidance. We did discuss there was a $0.8 million in Q4 related to getting these helicopters ready. There is also the $2 million for PERT, which is a non-recurring item, non-cash, non-recurring item for the most part. So, there was some additional items in there that weren’t necessarily routine.

Got it, I guess I am just looking -- I mean, if I look at adjusted EBITDA, which is guess is prior to asset sales around $4 million versus I guess or like in the quarter. And in 2016 it was around $10 million, $11 million. I am just trying to figure out like, okay, so you talked about the $800,000 aircraft readiness, I think there was $1.5 million professional services. I mean maybe can you just maybe a little more detailed in terms of specific items that this quarter were what you would consider exceptional. I understand the PERT, I think that’s part of it that’s being adjusted out, but like if there were other items as well.

Yes, if you are looking at adjusted EBITDA excluding gains from asset sales, the PERT item is already adjusted out. The -- some factors that are impacting profitability are: First, you have the $2 million that we disclosed in the non-routine professional services fees related to that ongoing litigation. So as long as that case is active, it will continue to be a drag on profitability, but as we have already discussed on the call, we think that’s in the best interest of shareholders to pursue value for that significant investment that was made in those aircraft. So that’s about $2 million of noise in the G&A line affecting adjusted EBITDA. And then after you adjust for PERT, if OpEx in Q4 was 77% of revenues, if you pull out PERT it’s 73.5%, if you pull out the $800,000 that Jennifer referenced for -- to prepare new helicopters -- our helicopters for new customer contracts, it takes the OpEx as a percentage of revenues to about 72%. And then we also should note that there were some additional R&M items just timing of repairs in Q4, which can sometimes be lumpy. So, some of that heavy engine overall expense did carryover into October. So I think it’s more consistent with Q3 in terms of percentage of revenues, but still again with some noise in there for the factors that we just discussed.

Got it. And last thing, can you quantify that timing of repair line item?

Yes, so, I think it depends on which comparison you want to make, on a year-over-year basis the timing of repairs increased our repair and maintenance expense by about $3.6 million. And by way of background there, in our helicopter fleet, we maintain helicopters in two principle ways. There are some models that we have on power by the hour or PBH agreements with the OEM WHERE WE are paying a fixed rate per hour flown. And so there is more consistency and the expenses for the R&M for those models. For other models we find it more efficient to maintain them on a time and costs to prepare basis. In those instances there will be some lumpiness just from quarter-to-quarter depending upon what items become due for service, whether it’s a flight hour interval or calendar interval. So that’s why you do see some variability in the R&M line driven by the timing of those repairs.

Understood, it’s very helpful. Thank you very much.

Thank you.

[Operator Instruction] We’ll take our next question from Bill Mastoris with Baird and Company.

Chris a quick follow-up to your comment that you made a little bit earlier about the activity levels in deepwater and ultra deepwater. And fully acknowledging that the S92 you just took delivery does not have a contract and I am wondering though if you needed additional lift for deepwater, ultra deepwater would you then consider maybe some used aircraft as maybe a less expensive alternative, would that be in the future plans instead of maybe purchasing new aircraft?

Yes, if you are talking about heavy helicopters in particular, the world does not need more heavy helicopters for oil and gas operations today. So for incremental needs that might arise there we would definitely look at the secondary market for a pre-owned aircraft also at leasing aircraft from some of the leasing companies if that make sense. So I think we are likely to look at those two options as potentially efficient ways to bring our new capacity until there is a more fundamental change in the supply demand mix on the heavy aircrafts line.

Okay, thanks that’s it for me.

Thanks, Bill.

We have no further questions at this time, I would like to turn it back over to our speaker to any additional or closing remarks.

Thank you, Stephanie, and thanks to everyone who joined, we look forward to speak you again next quarter. Be safe.