Erickson Incorporated (NASDAQ:EAC) (“Erickson,” the “Company,” “we,” “us” and “our”), a leading global provider of aviation services, today announced fourth quarter and full year 2014 financial results and guidance for fiscal 2015.
Udo Rieder, Chief Executive Officer of Erickson, commented, “The recently completed business reorganization provides for an increased focus on our end markets and additional investment in business development. The reorganization enables us to better leverage our competitive strengths and enhance our leadership position. This completes the integration of the transformative acquisitions we made over the past 18 months. We expect to capture opportunities and improve our financial results. We remain sharply focused on driving value for our customers, partners and shareholders.”
Fourth Quarter and Recent Highlights
- Fourth quarter revenues declined to $73.2 million as compared to $92.5 million in the prior year period, primarily driven by the previously anticipated reduction in the defense and security market.
- Operating expenses reduced by $4.9 million as compared to the prior year period, driven by cost-saving and integration synergy initiatives undertaken earlier in 2014.
- Fourth quarter operating income was $4.1 million as compared to $9.2 million in the prior year period.
- Fourth quarter Adjusted EBITDA was $14.2 million as compared to $19.0 million in the fourth quarter of last year; Adjusted EBITDA margin held relatively stable at 19.4% compared to 20.6% in the prior year period.
- The Company generated $5.2 million of operating cash flow and $1.1 million of free cash flow(1) during the fourth quarter.
- As of January 1, 2015, the Company reorganized into four business units aligned by end market: Government Aviation Services, Commercial Aviation Services, Oil & Gas Aviation Services and Manufacturing/MRO. This reorganization enables operational streamlining, enhanced competitiveness and accountability throughout the organization.
- In January 2015, the Company entered into a new, two-year agreement with PetroRio (formerly HRT), the Company’s first near-shore platform support contract.
- In February 2015, the Company entered into an exclusive MRO relationship with Bell Helicopter, a division of Textron, Inc. (NYSE:TXT), to provide parts and maintenance support of approximately 50 aircraft in the globally deployed fleet of Bell 214 ST and 214 B helicopters.
Full Year Highlights
- Full year revenue increased 8.9% to $346.6 million, driven primarily by acquisitions. Pro forma revenues for 2013 were $395.2 million.
- Full year Adjusted EBITDA decreased 7.8% to $83.8 million, a margin of 24.2%, as compared to $90.9 million, a margin of 28.6%, in 2013. Pro forma Adjusted EBITDA for 2013 was $106.3 million, a margin of 26.8%.
Fourth Quarter Results
Consolidated revenues for the quarter ended December 31, 2014 were $73.2 million as compared to $92.5 million in the prior year. This reflects a decrease in the Company's Government segment to $52.4 million as compared to $67.2 million in the prior year's period. This performance was, as expected, primarily driven by lower defense activity.
Revenues from the Company’s Commercial segment were $20.8 million as compared to $25.3 million in the prior year’s fourth quarter; higher MRO revenues and aircraft sales were offset by the conclusion of the initial PetroRio (formerly HRT/Rosneft) contract, as well as lower spot construction and the Company's strategic exit from Malaysia compared to the prior year.
Fourth quarter 2014 operating income decreased to $4.1 million as compared to the prior year level of $9.2 million; adjusted operating income, which excludes acquisition and integration expenses, and restructuring costs, was $4.5 million, as compared to $10.8 million in the prior year's period.
Net loss in the fourth quarter of 2014 was $2.5 million, or $0.18 per diluted share, compared to net loss of $1.7 million, or $0.12 per diluted share, in the prior year period; adjusted net loss was $2.2 million, or $0.16 per diluted share, as compared to adjusted net income of $1.3 million, or $0.10 per diluted share in the prior year.
Fourth quarter Adjusted EBITDA was $14.2 million as compared to $19.0 million in the prior year period. Adjusted EBITDAR was $19.1 million in the fourth quarter of 2014 as compared to $24.4 million in the prior year’s fourth quarter.
As of December 31, 2014, the Company had $5.1 million in cash on its balance sheet and $89.3 million drawn on its revolving credit facility. Long-term debt, including the current portion, as of December 31, 2014 was $371.9 million.
Full Year Results
Consolidated full year revenue increased by 8.9% to $346.6 million on increased revenue contribution from acquisitions. Pro forma revenues were $395.2 million in 2013. Government segment revenues for the year were $248.0 million and Commercial segment revenues for the year were $98.6 million.
Net loss attributable to common shareholders for 2014 was $10.3 million, or $0.75 per diluted share, compared to net income of $9.7 million, or $0.82 per diluted share, in the prior year. Adjusted full year net income in 2014 was $4.4 million, or $0.32 per diluted share as compared to $18.0 million or $1.52 per diluted share in 2013.
Full year Adjusted EBITDA decreased 7.8% to $83.8 million as compared to $90.9 million in 2013. Adjusted EBITDA margin for the year was 24.2% as compared to 28.6% in the prior year. Pro forma Adjusted EBITDA was $106.3 million, a margin of 26.8%, in 2013.
2015 Guidance
The full year guidance provided below is operational and adjusted to exclude any acquisition, reorganization or other nonoperational expenses.
For the full year ending December 31, 2015, the Company expects the following: a soft defense environment and growth in new oil and gas customers, significant growth in MRO/Manufacturing, and a steady year-over-year performance in other commercial markets. Also incorporated into the Company’s guidance are estimates of cost savings from prior initiatives and the recently announced reorganization. Based upon these and other assumptions, the Company anticipates full year 2015 revenues in the range of $330 million to $350 million, Adjusted EBITDA in the range $80 million to $90 million and Adjusted EBITDAR in the range of $100 million to $110 million. The Company also noted that it expects to generate positive free cash flow(1) on a full year basis in 2015.
(1) We define free cash flow as operating cash flow adjusted for net purchases of aircraft, property, plant and equipment.
About Erickson Incorporated
Erickson is a leading global provider of aviation services specializing in oil and gas, government services, legacy aircraft MRO and manufacturing, and commercial services such as firefighting, HVAC, power line, specialty, construction, and timber harvesting. Erickson operates a fleet of approximately 80 rotary-wing (light, medium, and heavy) and fixed-wing aircraft, including 20 heavy-lift S-64 Aircranes. Founded in 1971, Erickson is headquartered in Portland, Oregon, USA, and maintains operations in North America, South America, Europe, the Middle East, Africa, Asia Pacific, and Australia. For more information, please visit www.ericksonaviation.com.
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements that are subject to substantial risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. You can identify forward-looking statements by words such as “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “plan,” “expect,” “predict,” “potential,” or the negative of these terms or other comparable terminology. These forward-looking statements are based on management’s current expectations but they involve a number of risks and uncertainties. Actual results and the timing of events could differ materially from those anticipated in the forward-looking statements as a result of risks and uncertainties, which include: that we do not realize the benefits from the Evergreen Helicopters and Air Amazonia acquisitions on a timely basis or at all; our ability to integrate these businesses successfully or in a timely and cost-efficient manner; our ability to successfully expand these businesses, enter new markets and manage international expansion; that we do not have extensive operating history in the aerial services segments, in the geographic areas, or with the types of aircraft historically operated by Evergreen Helicopters and Air Amazonia; that the anticipated reduction in troops in Afghanistan in the near-term may adversely affect us; that we operate in certain dangerous and war-affected areas, which may result in hazards to our fleet and personnel; the hazards associated with our helicopter operations, which involve significant risks and which may result in hazards that may not be covered by our insurance or may increase the cost of our insurance; our safety record; our substantial indebtedness; that we and our subsidiaries may still incur significant additional indebtedness; our failure to obtain any required financing on favorable terms; compliance with debt obligations, which could adversely affect our financial condition and impair our ability to grow and operate our business; cancellations, reductions or delays in customer orders; our ability to collect on customer receivables; weather and seasonal fluctuations that impact aerial services activities; competition; reliance on a small number of large customers; the impact of short-term contracts; the availability and size of our fleet; the impact of government spending; the impact of product liability and product warranties; the ability to attract and retain qualified personnel; the impact of environmental and other regulations, including FAA regulations and similar international regulations; our ability to accurately forecast financial guidance; our ability to convert backlog into revenues and appropriately plan expenses; worldwide economic conditions (including conditions in Greece, Italy and the other geographic areas in which we operate); our reliance on a small number of manufacturers; the necessity to provide components or services to owners and operators of aircraft; our ability to effectively manage our growth; our ability to keep pace with changes in technology; our ability to adequately protect our intellectual property; our ability to successfully enter new markets and manage international expansion; our ability to expand and market manufacturing and maintenance, repair and overhaul services; the potential unionization of our employees; the fluctuation in the price of fuel; the impact of changes in the value of foreign currencies; and the risks of doing business in developing countries and politically or economically volatile areas; as well as other risks and uncertainties more fully described under the heading “Risk Factors” in our most recently filed Annual Report on Form 10-K, or Quarterly Report on Form 10-Q for the period ended September 30, 2014, as well as the other reports we file with the SEC from time to time.
You should not place undue reliance on any forward-looking statements. Erickson assumes no obligation to update forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors affecting forward-looking information, except to the extent required by applicable laws.
Conference Call
The Company will hold a conference call to discuss its earnings results for the fourth quarter and the year ended December 31, 2014 on February 25, 2015 at 4:30 p.m. Eastern Time with prepared remarks by Udo Rieder, the Company’s President and Chief Executive Officer, and Eric Struik, the Company’s Chief Financial Officer, to be followed by a question and answer session for the investment community. A live webcast of the call can be accessed at investors.ericksonaviation.com. To access the call, dial toll-free 1-888-500-6950 or 1-719-325-2393 (international). The pass code is 3805801.
To listen to a telephonic replay of the conference call, dial toll-free 1-877-870-5176 or 1-858-384-5517 (international) and enter pass code 3805801. The replay will be available beginning at 7:30 p.m. ET on Wednesday, February 25, 2015 and will last through 11:59 p.m. ET March 4, 2015.
This conference call will also be broadcast live over the Internet and can be accessed by all interested parties by clicking onhttp://investors.ericksonaviation.com/. Please access the link at least fifteen minutes prior to the start of the call to register, download, and install any necessary audio software. For those unable to participate during the live broadcast, a replay will be available shortly after the call by accessing the same link.
ERICKSON INCORPORATED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) (Unaudited) | |||||||||||
December 31, 2014 | December 31, 2013 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 5,097 | $ | 1,881 | |||||||
| Restricted cash | 567 | 2,883 | |||||||||
Accounts receivable, net of allowances for doubtful accounts of $739 and $991 in 2014 and 2013, respectively | 44,350 | 65,987 | |||||||||
| Prepaid expenses and other current assets | 8,780 | 3,360 | |||||||||
| Income tax receivable | 677 | 135 | |||||||||
| Deferred tax assets | 1,230 | 3,715 | |||||||||
| Total current assets | 60,701 | 77,961 | |||||||||
| Aircraft support parts, net | 137,593 | 126,696 | |||||||||
| Aircraft, net | 128,221 | 127,179 | |||||||||
| Property, plant and equipment, net | 120,635 | 109,382 | |||||||||
| Goodwill | 215,241 | 234,978 | |||||||||
| Other intangible assets, net | 20,053 | 22,484 | |||||||||
| Other non-current assets | 23,077 | 28,625 | |||||||||
| Total assets | $ | 705,521 | $ | 727,305 | |||||||
| Liabilities and stockholders’ equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 19,844 | $ | 29,035 | |||||||
| Current portion of long-term debt | 4,144 | — | |||||||||
| Accrued and other current liabilities | 19,034 | 41,233 | |||||||||
| Income tax payable | 315 | 621 | |||||||||
| Deferred tax liabilities | 884 | — | |||||||||
| Total current liabilities | 44,221 | 70,889 | |||||||||
| Long-term debt | 12,751 | 16,160 | |||||||||
| Long-term revolving credit facilities | 89,339 | 68,086 | |||||||||
| Long-term notes payable | 355,000 | 355,000 | |||||||||
| Other long-term liabilities | 13,181 | 1,819 | |||||||||
| Uncertain tax positions | 6,313 | 5,669 | |||||||||
| Deferred tax liabilities | 3,703 | 16,775 | |||||||||
| Total liabilities | 524,508 | 534,398 | |||||||||
| Stockholders’ equity: | |||||||||||
Common stock; $0.0001 par value; 110,000,000 shares authorized; 13,823,818 and 13,787,914 issued and outstanding at December 31, 2014 and December 31, 2013, respectively | 1 | 1 | |||||||||
| Additional paid-in capital | 181,018 | 179,954 | |||||||||
| Retained earnings | 1,812 | 12,104 | |||||||||
| Accumulated other comprehensive loss, net of tax | (2,544 | ) | (42 | ) | |||||||
| Total stockholders’ equity attributable to Erickson Incorporated | 180,287 | 192,017 | |||||||||
| Noncontrolling interest | 726 | 890 | |||||||||
| Total stockholders’ equity | 181,013 | 192,907 | |||||||||
| Total liabilities and stockholders’ equity | $ | 705,521 | $ | 727,305 | |||||||
ERICKSON INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands, except share and per share data) (Unaudited) | |||||||||||||||||||||
| Three Months | Three Months | ||||||||||||||||||||
| Ended | Ended | Year Ended | Year Ended | ||||||||||||||||||
| December 31, | December 31, | December 31, | December 31, | ||||||||||||||||||
| 2014 | 2013 | 2014 | 2013 | ||||||||||||||||||
| Net revenues: | $ | 73,202 | $ | 92,465 | $ | 346,609 | $ | 318,221 | |||||||||||||
| Cost of revenues | 60,025 | 69,301 | 263,445 | 222,108 | |||||||||||||||||
| Gross profit | 13,177 | 23,164 | 83,164 | 96,113 | |||||||||||||||||
| Operating expenses: | |||||||||||||||||||||
| General and administrative | 6,095 | 10,880 | 26,494 | 37,366 | |||||||||||||||||
| Research and development | 943 | 884 | 3,782 | 4,000 | |||||||||||||||||
| Selling and marketing | 2,083 | 2,247 | 9,286 | 7,755 | |||||||||||||||||
| Impairment of goodwill | — | — | 21,272 | — | |||||||||||||||||
| Total operating expenses | 9,121 | 14,011 | 60,834 | 49,121 | |||||||||||||||||
| Operating income | 4,056 | 9,153 | 22,330 | 46,992 | |||||||||||||||||
| Other income (expense): | |||||||||||||||||||||
| Interest expense, net | (8,934 | ) | (8,658 | ) | (35,800 | ) | (25,175 | ) | |||||||||||||
| Other income (expense), net | 1,000 | (3,214 | ) | (1,193 | ) | (5,831 | ) | ||||||||||||||
| Total other income (expense) | (7,934 | ) | (11,872 | ) | (36,993 | ) | (31,006 | ) | |||||||||||||
Net income (loss) before income taxes and noncontrolling interest | (3,878 | ) | (2,719 | ) | (14,663 | ) | 15,986 | ||||||||||||||
| Income tax expense (benefit) | (1,393 | ) | (889 | ) | (4,432 | ) | 6,120 | ||||||||||||||
| Net income (loss) | (2,485 | ) | (1,830 | ) | (10,231 | ) | 9,866 | ||||||||||||||
| Less: Net (income) loss related to noncontrolling interest | 34 | 130 | (61 | ) | (209 | ) | |||||||||||||||
Net income (loss) attributable to Erickson Incorporated and common stockholders | $ | (2,451 | ) | $ | (1,700 | ) | $ | (10,292 | ) | $ | 9,657 | ||||||||||
| Net income (loss) | $ | (2,485 | ) | $ | (1,830 | ) | $ | (10,231 | ) | $ | 9,866 | ||||||||||
| Other comprehensive income (loss): | |||||||||||||||||||||
| Foreign currency translation adjustment | (1,469 | ) | (649 | ) | (2,658 | ) | (107 | ) | |||||||||||||
| Comprehensive income (loss) | (3,954 | ) | (2,479 | ) | (12,889 | ) | 9,759 | ||||||||||||||
Comprehensive (income) loss attributable to noncontrolling interest | 81 | 160 | 95 | (215 | ) | ||||||||||||||||
Comprehensive income (loss) attributable to Erickson Incorporated | $ | (3,873 | ) | $ | (2,319 | ) | $ | (12,794 | ) | $ | 9,544 | ||||||||||
Net income (loss) per share attributable to common stockholders | |||||||||||||||||||||
| Basic | $ | (0.18 | ) | $ | (0.12 | ) | $ | (0.75 | ) | $ | 0.86 | ||||||||||
| Diluted | $ | (0.18 | ) | $ | (0.12 | ) | $ | (0.75 | ) | $ | 0.82 | ||||||||||
| Weighted average shares outstanding | |||||||||||||||||||||
| Basic | 13,810,587 | 13,786,308 | 13,800,494 | 11,221,005 | |||||||||||||||||
| Diluted | 13,810,587 | 13,786,308 | 13,800,494 | 11,834,506 | |||||||||||||||||
ERICKSON INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited) | |||||||||||||||||||
Three Months | Three Months | ||||||||||||||||||
| Ended | Ended | Year Ended | Year Ended | ||||||||||||||||
December 31, | December 31, | December 31, | December 31, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||||
| Cash flows from operating activities: | |||||||||||||||||||
| Net income (loss) | $ | (2,485 | ) | $ | (1,830 | ) | $ | (10,231 | ) | $ | 9,866 | ||||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||||||||||||||
| Depreciation and amortization | 7,805 | 7,889 | 34,903 | 33,328 | |||||||||||||||
| Impairment of goodwill | — | — | 21,272 | — | |||||||||||||||
| Deferred income taxes | 483 | 549 | (7,790 | ) | 5,214 | ||||||||||||||
| Non-cash income from satisfaction of return to service liabilities | (1,869 | ) | — | (1,869 | ) | — | |||||||||||||
| Non-cash interest expense on debt | 98 | 101 | 324 | 1,877 | |||||||||||||||
| Non-cash interest on tax contingencies | — | (872 | ) | — | — | ||||||||||||||
| Non-cash interest income on loans | — | (41 | ) | — | (140 | ) | |||||||||||||
Write-off of debt issuance costs related to the early extinguishment of debt | — | — | — | 215 | |||||||||||||||
| Stock-based compensation | 245 | 127 | 861 | 792 | |||||||||||||||
| Amortization of debt issuance costs | 606 | 681 | 2,433 | 2,067 | |||||||||||||||
| Loss (gain) on sale of equipment | (105 | ) | 40 | (358 | ) | (1 | ) | ||||||||||||
| Gain on involuntary conversion | — | — | (308 | ) | — | ||||||||||||||
| Loss on sale of term loan note receivable | — | 3,441 | — | 3,441 | |||||||||||||||
| Changes in operating assets and liabilities: | |||||||||||||||||||
| Accounts receivable | 21,244 | 5,491 | 19,719 | (20,991 | ) | ||||||||||||||
| Prepaid expenses and other current assets | 1,363 | 2,445 | (5,544 | ) | 427 | ||||||||||||||
| Income tax receivable | (515 | ) | 1,476 | 434 | 915 | ||||||||||||||
| Aircraft support parts, net | (3,602 | ) | (8,808 | ) | (17,240 | ) | (32,001 | ) | |||||||||||
| Other non-current assets | 1,370 | 1,172 | 5,602 | (3,131 | ) | ||||||||||||||
| Accounts payable | (2,695 | ) | 1,238 | (8,856 | ) | (19,502 | ) | ||||||||||||
| Accrued and other current liabilities | (16,602 | ) | (9,090 | ) | (20,652 | ) | (6,350 | ) | |||||||||||
| Income tax payable | (581 | ) | (1,560 | ) | 629 | (304 | ) | ||||||||||||
| Other long-term liabilities | 463 | (1,410 | ) | 655 | (514 | ) | |||||||||||||
| Net cash provided by (used in) operating activities | 5,223 | 1,039 | 13,984 | (24,792 | ) | ||||||||||||||
| Cash flows from investing activities: | |||||||||||||||||||
| Acquisition of businesses, net of cash acquired | — | 5,000 | — | (226,868 | ) | ||||||||||||||
| Purchases of aircraft and property, plant and equipment, net | (4,100 | ) | (23,738 | ) | (56,807 | ) | (56,104 | ) | |||||||||||
| Proceeds from sale-leaseback of aircraft | — | — | 24,660 | — | |||||||||||||||
| Restricted cash | (119 | ) | 16 | 2,222 | 958 | ||||||||||||||
| Purchase of intangible assets | — | (5 | ) | — | (2,205 | ) | |||||||||||||
| Proceeds from sale of term loan note receivable | — | 1,660 | — | 1,660 | |||||||||||||||
| Increase in other assets | (126 | ) | — | (126 | ) | (35 | ) | ||||||||||||
| Dividends paid to non-controlling interest | 4 | — | (69 | ) | (341 | ) | |||||||||||||
| Net cash used in investing activities | (4,341 | ) | (17,067 | ) | (30,120 | ) | (282,935 | ) | |||||||||||
| Cash flows from financing activities: | |||||||||||||||||||
| Proceeds from shareholders, net | — | — | 414 | — | |||||||||||||||
| Repayments of subordinated notes | — | — | — | (27,572 | ) | ||||||||||||||
| Repayments of credit facilities | (57,847 | ) | (35,416 | ) | (206,686 | ) | (250,215 | ) | |||||||||||
| Borrowings from credit facilities | 60,946 | 48,990 | 227,939 | 246,377 | |||||||||||||||
| Borrowing of notes | — | — | — | 400,000 | |||||||||||||||
| Repayment of notes | — | — | — | (45,000 | ) | ||||||||||||||
| Other long-term borrowings | (35 | ) | — | 409 | — | ||||||||||||||
| Debt issuance costs | (32 | ) | (319 | ) | (371 | ) | (14,986 | ) | |||||||||||
| Shares withheld for payment of taxes | (45 | ) | (19 | ) | (211 | ) | (716 | ) | |||||||||||
| Net cash provided by financing activities | 2,987 | 13,236 | 21,494 | 307,888 | |||||||||||||||
Effect of foreign currency exchange rates on cash and cash equivalents | (1,331 | ) | (629 | ) | (2,142 | ) | 252 | ||||||||||||
| Net increase (decrease) in cash and cash equivalents | 2,538 | (3,421 | ) | 3,216 | 413 | ||||||||||||||
| Cash and cash equivalents at beginning of period | 2,559 | 5,302 | 1,881 | 1,468 | |||||||||||||||
| Cash and cash equivalents at end of period | $ | 5,097 | $ | 1,881 | $ | 5,097 | $ | 1,881 | |||||||||||
| Supplemental disclosure of cash flow information: | |||||||||||||||||||
| Cash paid for interest | $ | 16,140 | $ | 15,998 | $ | 35,693 | $ | 27,818 | |||||||||||
| Cash paid for income taxes, net | $ | 1,476 | $ | 506 | $ | 3,925 | $ | 1,477 | |||||||||||
The following tables provide additional detail on the revenues and revenue flight hours for the components of the two reportable segments:
Three Months | Three Months | |||||||||||||||||||||||||
Ended | Ended | Year Ended | Year Ended | |||||||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||||||||||||||
| (Dollars in thousands) | 2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||||
| Government revenues: | ||||||||||||||||||||||||||
| Firefighting | $ | 17,125 | $ | 17,824 | $ | 89,379 | $ | 86,266 | ||||||||||||||||||
| Defense and security | 34,245 | 47,696 | 152,422 | 124,491 | ||||||||||||||||||||||
| Transport and other government-related services | 1,024 | 1,691 | 6,180 | 10,824 | ||||||||||||||||||||||
| Total Government revenues | $ | 52,394 | $ | 67,211 | $ | 247,981 | $ | 221,581 | ||||||||||||||||||
Three Months | Three Months | |||||||||||||||||||||||||
| Ended | Ended | Year Ended | Year Ended | |||||||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||||||||||||||
| (Dollars in thousands) | 2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||||
| Commercial revenues: | ||||||||||||||||||||||||||
| Timber harvesting | $ | 3,761 | $ | 7,714 | $ | 22,384 | $ | 34,631 | ||||||||||||||||||
| Infrastructure construction | 11,455 | 14,960 | 60,953 | 49,301 | ||||||||||||||||||||||
| Manufacturing / MRO | 4,817 | 2,580 | 12,271 | 12,708 | ||||||||||||||||||||||
| Aircraft sales | 775 | — | 3,020 | — | ||||||||||||||||||||||
| Total Commercial revenues | $ | 20,808 | $ | 25,254 | $ | 98,628 | $ | 96,640 | ||||||||||||||||||
Three Months | Three Months | |||||||||||||||||||||||||
| Ended | Ended | Year Ended | Year Ended | |||||||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||||
| Government revenue flight hours: | ||||||||||||||||||||||||||
| Firefighting | 180 | 272 | 3,094 | 3,521 | ||||||||||||||||||||||
| Defense and security | 2,424 | 4,610 | 12,918 | 13,208 | ||||||||||||||||||||||
| Transport and other government-related services | 76 | 43 | 319 | 495 | ||||||||||||||||||||||
| Total Government flight hours | 2,680 | 4,925 | 16,331 | 17,224 | ||||||||||||||||||||||
Three Months | Three Months | |||||||||||||||||||||||||
| Ended | Ended | Year Ended | Year Ended | |||||||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||||
| Commercial revenue flight hours: | ||||||||||||||||||||||||||
| Timber harvesting | 602 | 1,143 | 3,631 | 4,967 | ||||||||||||||||||||||
| Infrastructure construction | 804 | 581 | 3,242 | 2,875 | ||||||||||||||||||||||
| Total Commercial flight hours | 1,406 | 1,724 | 6,873 | 7,842 | ||||||||||||||||||||||
Use of Non-GAAP Financial Measures
The Company uses adjusted EBITDA (“Adjusted EBITDA”) in managing our business. We define EBITDA as net income (loss) before interest expense, net, provision for (benefit from) income taxes, and depreciation and amortization. Adjusted EBITDA means, with respect to any fiscal period, our EBITDA, adjusted for, without duplication, the sum of the following amounts for such period to the extent included in determining consolidated net earnings (or loss) for such period: (i) extraordinary gains, (ii) non-cash items increasing consolidated net earnings (or loss) for such period, excluding any items representing the impact of purchase accounting or the reversal of any accrual of, or cash reserve for, anticipated changes in any period, (iii) non-cash extraordinary losses, (iv) any other non-cash charges reducing consolidated net earnings for such period, excluding any such charge that represents an accrual or reserve for a cash expenditure for a future period or amortization of a prepaid cash expense that was paid in a prior period, (v) to the extent not capitalized, (A) non-recurring expenses, fees, costs and charges incurred and funded prior to, on or within 9 months after the closing date in connection with the ABL Revolver and the Evergreen Helicopters acquisition; and (B) expenses incurred and funded prior to, on, or within 2 years of the closing date in connection with the termination of the lease for the location that is the chief executive office of Evergreen Helicopters as of the closing date; and (vi) transaction related expenditures incurred and funded prior to, on or within 9 months of the date of consummation of (A) the Air Amazonia acquisition, (B) any permitted acquisition under the ABL Revolver, or (C) any investment that is permitted pursuant to the ABL Revolver, in the case of each of (A), (B), and (C), that arise out of cash charges related to deferred stock compensation, management bonuses, strategic market reviews, restructuring, retention bonuses, consolidation, severance or discontinuance of any portion of operations, termination of the lease for the headquarters of Evergreen Helicopters, employees or management of the target of such permitted acquisition, accrued vacation payments and working notices payments and other non-cash accounting adjustments. We have further adjusted EBITDA for continued acquisition and integration costs beyond the 9 months defined by our Revolving Credit Facility agreement and the restructuring costs associated with exiting the Malaysian timber harvesting market and right-sizing of our business in Brazil.
The Company also uses Adjusted EBITDAR in managing our business. Adjusted EBITDAR is determined by adding aircraft lease expense to Adjusted EBITDA. We present Adjusted EBITDAR because we believe this provides us with a more comparable measure for managing our business.
The Company also uses adjusted net income (loss), adjusted operating income (loss), and adjusted net income (loss) per share, in managing our business. We define adjusted operating income (loss) as operating income (loss) attributable to the Company, adjusted to exclude the effect of acquisition, impairment, restructuring, integration and related expenses. We define adjusted net income (loss) as net income (loss) attributable to the Company, adjusted to exclude the effect of acquisition and integration related expenses and related tax effects. We define adjusted net income (loss) per share in the same manner, divided by the same number of shares of common stock used in calculating GAAP net income (loss) per share. The presentation of these non-GAAP financial measures is not meant to be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP, and should not be considered measures of the Company’s liquidity. The non-GAAP financial measures are provided as additional information to help both management and investors compare business trends among different reporting periods on a consistent and more meaningful basis and enhance investors’ overall understanding of the Company’s current financial performance and prospects for the future.
The following tables reconcile the non-GAAP financial measures appearing in this press release to the most directly comparable GAAP measures:
| Three Months | Three Months | |||||||||||||||||||||
| Ended | Ended | Year Ended | Year Ended | |||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||||||||||
| (Dollars in thousands) | 2014 | 2013 | 2014 | 2013 | ||||||||||||||||||
EBITDA, Adjusted EBITDA and Adjusted EBITDAR Reconciliation: | ||||||||||||||||||||||
| Net income (loss) attributable to Erickson Incorporated | $ | (2,451 | ) | $ | (1,700 | ) | $ | (10,292 | ) | $ | 9,657 | |||||||||||
| Interest expense, net | 8,934 | 8,658 | 35,800 | 25,175 | ||||||||||||||||||
| Tax expense (benefit) | (1,393 | ) | (889 | ) | (4,432 | ) | 6,120 | |||||||||||||||
| Depreciation and amortization | 7,805 | 7,889 | 34,903 | 33,328 | ||||||||||||||||||
| Amortization of debt issuance costs | 606 | 681 | 2,433 | 2,067 | ||||||||||||||||||
| EBITDA | $ | 13,501 | $ | 14,639 | $ | 58,412 | $ | 76,347 | ||||||||||||||
| Acquisition and integration related expenses | 30 | 1,628 | 1,687 | 10,383 | ||||||||||||||||||
Non-cash unrealized mark-to-market foreign exchange (gains) losses | 113 | (10 | ) | 387 | (309 | ) | ||||||||||||||||
| Non-cash charges from awards to employees of equity interests | 245 | 127 | 861 | 792 | ||||||||||||||||||
| Loss on early extinguishment of debt | — | — | — | 215 | ||||||||||||||||||
| Interest expense (income) related to tax contingencies | 10 | (858 | ) | 10 | 13 | |||||||||||||||||
| Non-cash goodwill impairment loss | — | — | 21,272 | — | ||||||||||||||||||
| Restructuring costs | 401 | — | 1,482 | — | ||||||||||||||||||
| Loss (gain) on sale of equipment | (105 | ) | 40 | (358 | ) | (1 | ) | |||||||||||||||
| Loss on sale of EIA note | — | 3,441 | — | 3,441 | ||||||||||||||||||
| Adjusted EBITDA | $ | 14,195 | $ | 19,007 | $ | 83,753 | $ | 90,881 | ||||||||||||||
| Aircraft lease expenses | 4,924 | 5,378 | 20,198 | 14,005 | ||||||||||||||||||
| Adjusted EBITDAR | $ | 19,119 | $ | 24,385 | $ | 103,951 | $ | 104,886 | ||||||||||||||
| Three Months | Three Months | ||||||||||||||||||||
| Ended | Ended | Year Ended | Year Ended | ||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | ||||||||||||||||||
| (Dollars in thousands) | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||
Operating Income and Adjusted Operating Income Reconciliation | |||||||||||||||||||||
| Operating income | $ | 4,056 | $ | 9,153 | $ | 22,330 | $ | 46,992 | |||||||||||||
| Acquisition and integration related expenses | 30 | 1,628 | 1,687 | 10,383 | |||||||||||||||||
| Non-cash goodwill impairment loss | — | — | 21,272 | — | |||||||||||||||||
| Restructuring costs | 401 | — | 1,214 | — | |||||||||||||||||
| Adjusted operating income | 4,487 | 10,781 | 46,503 | 57,375 | |||||||||||||||||
| Net Income and Adjusted Net Income Reconciliation | |||||||||||||||||||||
| Net income (loss) attributable to Erickson Incorporated | $ | (2,451 | ) | $ | (1,700 | ) | $ | (10,292 | ) | $ | 9,657 | ||||||||||
| Acquisition and integration related expenses | 30 | 1,628 | 1,687 | 10,383 | |||||||||||||||||
| Loss on sale of EIA note | — | 3,441 | — | 3,441 | |||||||||||||||||
| Non-cash goodwill impairment loss | — | — | 21,272 | — | |||||||||||||||||
| Restructuring costs | 401 | — | 1,482 | — | |||||||||||||||||
Tax effect of acquisition and integration related expenses, loss on sale of note, goodwill impairment, and restructuring costs (assumed 40% rate) | (172 | ) | (2,027 | ) | (9,776 | ) | (5,529 | ) | |||||||||||||
Net impact of acquisition and integration related expenses, loss on sale of note, goodwill impairment, and restructuring costs on net income | 259 | 3,042 | 14,665 | 8,295 | |||||||||||||||||
Adjusted net income (loss) attributable to Erickson Incorporated | $ | (2,192 | ) | $ | 1,342 | $ | 4,373 | $ | 17,952 | ||||||||||||
Net Income (Loss) Per Share Attributable To Common Stockholders and Adjusted Net Income (Loss) Per Share Attributable to Common Stockholder Reconciliation | |||||||||||||||||||||
| Net income (loss) attributable to common stockholders | $ | (2,451 | ) | $ | (1,700 | ) | $ | (10,292 | ) | $ | 9,657 | ||||||||||
Adjusted net income (loss) attributable to Erickson Incorporated | $ | (2,192 | ) | $ | 1,342 | $ | 4,373 | $ | 17,952 | ||||||||||||
| Weighted average shares outstanding | |||||||||||||||||||||
| Basic | 13,810,587 | 13,786,308 | 13,800,494 | 11,221,005 | |||||||||||||||||
| Diluted | 13,810,587 | 13,846,180 | 13,819,804 | 11,834,506 | |||||||||||||||||
Adjusted net income (loss) per share attributable to Erickson Incorporated | |||||||||||||||||||||
| Basic | $ | (0.16 | ) | $ | 0.10 | $ | 0.32 | $ | 1.60 | ||||||||||||
| Diluted | $ | (0.16 | ) | $ | 0.10 | $ | 0.32 | $ | 1.52 | ||||||||||||
Contacts:
ICR, Inc.
James Palczynski, 203-247-2095
jp@icrinc.com
