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Erickson Reports Second Quarter 2016 Financial Results

  • Second quarter Revenue of $50.8 million, down $16.2 million compared to second quarter 2015.
  • Second quarter adjusted EBITDA of $0.8 million, down $9.6 million compared to second quarter 2015.
  • Impairments related to goodwill and held for sale aircraft totaling $10.6 million.

PORTLAND, Ore., Aug. 15, 2016 (GLOBE NEWSWIRE) -- Erickson Incorporated (NASDAQ:EAC) (“Erickson,” the “Company,” “we,” “us” and “our”), a leading global provider of aviation services, today announced second quarter 2016 financial results.

“Our second quarter results were unsatisfactory. We were unable to secure material business wins in a timely manner and we were unable to reduce our costs fast enough to align with the level of revenue generation. Our backlog and pipeline did not convert to revenue quickly enough, which resulted in heightened focus on managing cash and liquidity. In light of these circumstances, we are making further reductions in general and administrative and support costs, and deferring non-critical capital expenditures into future periods, which are aimed at improving our liquidity position. These measures will provide the time needed for our cost and revenue initiatives to mature. In addition, we are making good progress with our advisory firm to address our immediate liquidity needs, as well as options with respect to our longer term capital structure and strategic alternatives”, said Jeff Roberts, President and CEO.

Recent Highlights

  • On-demand fixed wing 5 year contract for $13.0 million with Special Operations Command Africa, transporting personnel and equipment in the North and Western regions of Africa.
  • Completed sale of two aircraft in the second quarter for a total of $0.7 million. Eleven aircraft remain in held for sale category as of the end of the second quarter.
  • Six-month extension worth $29.0 million of our current Fluor contract in the Global Defense and Security.
  • Two-year contract extension worth $24.0 million partnering with Kestrel Aviation in Australia for six S-64E aircranes providing helicopter firefighting services.
  • Five-year contract award worth an estimated $24.3 million to provide timber harvesting aerial services to Asiatic Heli-Logging SDN BHD and Hormat Jadi SDN BHD in Sabah, Malaysia, beginning September 2016.

Second Quarter Results
Erickson recorded net revenue of $50.8 million for the second quarter of 2016, compared to net revenue of $67.0 million for the second quarter of 2015. Second quarter 2016 loss from operations was $29.3 million, which included asset impairments of $6.1 million, a goodwill impairment of $4.5 million, and an acceleration of lease payments on idle leased aircraft for $7.8 million, compared with operating income of $0.2 million for the same period in 2015. These impairment charges were driven by triggering events that occurred during the quarter, including but not limited to lower than expected financial performance, and a major competitor that filed for Chapter 11 bankruptcy protection. Second quarter 2016 Adjusted EBITDA was $0.8 million compared to Adjusted EBITDA of $10.3 million for the same period in 2015.

Commercial Aviation Services revenues decreased $13.3 million, to $21.0 million in the second quarter of 2016 from $34.3 million in the second quarter of 2015, with decreases of $5.9 million due to the loss of the United States Forestry Service firefighting contract, $5.8 million related to the oil and gas industry, and $3.2 million as a result of construction projects in Asia for the second quarter of 2015 that did not occur in the second quarter of 2016. Partially offsetting these decreases was an increase in firefighting activity in Greece.

Global Defense and Security revenues decreased $7.0 million to $21.4 million for the second quarter of 2016 from $28.4 million in the second quarter of 2015, with $5.0 million related to the ending of U.S. Department of Defense contracts in Afghanistan and Hawaii and $2.0 million related to a reduction in scope of aerial services transporting passengers and cargo in Afghanistan.

Manufacturing and MRO revenues increased by $4.2 million to $8.5 million compared to $4.3 million for the second quarter of 2015. This increase was driven primarily by aircraft refurbishment activity for the U.S. government, additional Aircrane component overhaul activity, and increased fire tank manufacturing for external fixed-wing customers.

Closing Comments
Commenting on the Company’s results, Roberts added “We are disappointed with our performance in the first half of 2016. In spite of these challenges, I am pleased that our team maintains a strong safety record. This remains our highest priority. I am also pleased with the recent contract extensions and awards as they reinforce our value proposition, unique capabilities and customer satisfaction. We will continue our restructuring activities to address our operations in all areas driving efficiencies and effectiveness and ultimately delivering profitability. As a result, we expect the second half of 2016 to reflect an incremental improvement compared to the first half of 2016. We will continue to build on our strength in our Manufacturing and MRO segment, the momentum in Global Defense and Security, and select Commercial end markets.”

Use of Non-GAAP Financial Measures
In addition to the financial measures prepared in accordance with generally accepted accounting principles (GAAP), this press release contains certain non-GAAP financial measures, including EBITDA, Adjusted EBITDA, Adjusted EBITDAR, and free cash flows. While non-GAAP financial measures are not superior to or a substitute for the comparable GAAP measures, Erickson believes certain non-GAAP information is useful to investors for historical comparison purposes and because it provides additional information on the performance of the Company’s business. Erickson management also uses these non-GAAP financial measures to assess the Company’s financial and operating performance and to compare that performance against results from prior periods and the performance of Erickson’s competitors. Erickson management also uses this information in its financial and operating decision-making.

Conference Call
Jeff Roberts, the Company’s President and Chief Executive Officer, and David Lancelot, the Company’s Chief Financial Officer, will host a conference call at 4:30 p.m. ET on Monday, August 15, 2016 to discuss the results, followed by a question and answer session for the investment community. To access the call, dial toll-free 1-888-427-9411 or 1-719-457-2645 (international).

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 4056680. The replay will be available beginning at 7:30 p.m. ET on August 15, 2016 and will last through 11:59 p.m. ET on August 29, 2016.

About Erickson
Erickson is a leading global provider of aviation services specializing in government services, manufacturing and MRO, and commercial services such as firefighting, energy construction, timber harvesting, HVAC & specialty, and oil and gas. As of June 30, 2016, Erickson’s fleet consisted of 69 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 our Web site at http://www.ericksoninc.com

Cautionary Note Regarding Forward-Looking Statements
Except for historical information, all of the statements, expectations and assumptions contained in this news release, including statements, expectations and assumptions about Company growth and prospects for its business units, are forward-looking statements that involve a number of risks and uncertainties. Although Erickson attempts to be accurate in making these forward-looking statements, it is possible that future circumstances might differ from the assumptions on which such statements are based. In addition, other important factors which could cause actual results to differ materially include the following: reliance on economic conditions and trends in the aerial services and MRO sectors; success in sales growth; loss or non-renewal of large contracts; reductions or delays in customer orders; competition; reliance on a small number of large customers; the impact of government spending, including reduced Department of Defense spending in Afghanistan; our substantial indebtedness and working capital deficit; our failure to obtain any required financing on favorable terms; compliance with debt obligations and covenants; risks associated with and dependence on collaborative relationships; weather and seasonal fluctuations that impact aerial services activities; our ability to keep pace with changes in technology; significant changes in demand for the fleet of aircraft we offer; hazards associated with our aerial operations, which may be uninsured; our safety record; risks associated with international operations, including doing business in developing countries and politically or economically volatile areas; the impact of product liability and product warranties; the impact of environmental and other regulations, including the FAA and similar international regulatory bodies; the ability to attract and retain qualified personnel; fluctuations in the price of fuel; the impact of changes in the value of foreign currencies; other risk factors set forth from time to time in the SEC filings for Erickson, copies of which are available free of charge upon request from the Erickson investor relations department. 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 law.

ERICKSON INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)
June 30, December 31,
2016 2015
ASSETS
Current assets:
Cash and cash equivalents$3,283 $2,129
Restricted cash222 373
Accounts receivable, net41,861 40,520
Prepaid expenses and other current assets6,204 5,233
Total current assets51,570 48,255
Aircraft, net144,989 155,917
Aircraft parts, net173,655 169,824
Aircraft held for sale6,200 12,348
Property, plant and equipment, net23,590 25,553
Other assets9,291 10,261
Other intangible assets, net14,714 15,787
Goodwill, net159,770 163,708
Total assets$583,779 $601,653
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable$28,225 $13,660
Current portion of long-term debt8,421 8,205
Accrued expenses and other current liabilities22,360 17,828
Total current liabilities59,006 39,693
Credit facility119,523 96,165
Long-term debt, less current portion361,357 364,782
Other liabilities17,949 11,720
Total liabilities557,835 512,360
Equity:
Erickson Incorporated:
Common stock; $0.0001 par value; 110,000,000 shares authorized; 13,895,421 issued and outstanding as of June 30, 2016 and December 31, 20151 1
Additional paid-in capital181,396 181,259
Accumulated deficit(149,883) (84,901)
Accumulated other comprehensive loss, net of tax(6,543) (7,789)
Total Erickson Incorporated shareholders’ equity24,971 88,570
Noncontrolling interests’ equity973 723
Total equity25,944 89,293
Total liabilities and equity$583,779 $601,653


ERICKSON INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2016 2015 2016 2015
Revenues, net:
Commercial Aviation Services$20,991 $34,319 $40,937 $60,572
Global Defense and Security21,371 28,391 40,440 61,266
Manufacturing and MRO8,476 4,309 14,290 9,143
Total revenues50,838 67,019 95,667 130,981
Cost of revenues:
Commercial Aviation Services26,438 30,633 50,742 61,573
Global Defense and Security20,620 26,274 40,648 54,787
Manufacturing and MRO5,110 2,194 9,681 5,716
Total cost of revenues52,168 59,101 101,071 122,076
Gross (loss) profit:
Commercial Aviation Services(5,447) 3,686 (9,805) (1,001)
Global Defense and Security751 2,117 (208) 6,479
Manufacturing and MRO3,366 2,115 4,609 3,427
Total gross (loss) profit(1,330) 7,918 (5,404) 8,905
Operating expenses:
General and administrative6,161 5,847 12,653 12,398
Research and development699 583 1,330 1,461
Selling and marketing2,646 1,330 4,528 3,085
Loss on idle aircraft7,815 7,815
Impairment of goodwill4,523 4,523 49,823
Impairment of other assets6,127 6,127 7,143
Total operating expenses27,971 7,760 36,976 73,910
Operating (loss) income(29,301) 158 (42,380) (65,005)
Interest expense, net(9,475) (9,375) (18,722) (18,587)
Other expense, net(28) (331) (1,039) (1,656)
Net loss before income tax (benefit) expense(38,804) (9,548) (62,141) (85,248)
Income tax (benefit) expense(92) 691 2,578 74
Net loss(38,712) (10,239) (64,719) (85,322)
Less: Net (income) loss related to noncontrolling interests(286) 118 (263) 231
Net loss attributable to Erickson Incorporated$(38,998) $(10,121) $(64,982) $(85,091)
Net loss per share attributable to Erickson Incorporated shareholders—basic and diluted$(2.81) $(0.73) $(4.68) $(6.15)
Weighted average shares outstanding—basic and diluted13,895,421 13,831,127 13,895,421 13,827,493


ERICKSON INCORPORATED AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES
(In thousands, except share and per share data)
(Unaudited)
The following tables reconcile the non-GAAP financial measures appearing in this press release to the most directly comparable GAAP measures:
Three Months Ended June 30, Six Months Ended June 30,
2016 2015 2016 2015
EBITDA, Adjusted EBITDA and Adjusted EBITDAR Reconciliation:
Net loss attributable to Erickson Incorporated$(38,998) $(10,121) $(64,982) $(85,091)
Interest expense, net9,475 9,375 18,722 18,587
Tax (benefit) expense(92) 691 2,578 74
Depreciation and amortization9,503 9,898 19,088 18,716
Amortization of debt issuance costs586 630 1,238 1,254
EBITDA(19,526) 10,473 (23,356) (46,460)
Loss on idle aircraft7,815 7,815
Impairment of goodwill4,523 4,523 49,823
Impairment of other assets6,127 6,127 7,143
One time write-offs1,148 1,148
Restructuring costs842 54 914 1,598
Unrealized foreign currency exchange (gain) loss, net(104) (57) 313 379
Insurance related to aircraft held for sale118 233
Stock-based compensation43 (48) 137 97
Interest expense related to tax contingencies36 71
Acquisition and integration related expenses3 58
Other(238) (76) (251) (70)
Adjusted EBITDA787 10,346 (2,268) 12,510
Aircraft lease expenses4,073 4,122 7,977 8,639
Adjusted EBITDAR$4,860 $14,468 $5,709 $21,149
Free Cash Flow:
Net cash used in operating activities $(19,309) $(15,090)
Add: Purchases of aircraft and property, plant and equipment (6,085) (11,839)
Free cash flow $(25,394) $(26,929)


Contact Zachary Cotner - Investor Relations (503) 505-5804, zcotner@ericksoninc.com

Source:Erickson, Incorporated