NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1
—BASIS OF PRESENTATION
Nature of Business
Erickson Incorporated (“EI”) and its subsidiaries and affiliated companies (collectively referred to as “Erickson” or “the Company”) is a global provider of aviation services. We operate, maintain and manufacture utility aircraft to transport and place people and cargo around the world for commercial and governmental entities, with
three
distinct reportable segments consisting of Commercial Aviation Services, Global Defense and Security, and Manufacturing and Maintenance, Repair and Overhaul (“MRO”). Through our Commercial Aviation Services and Global Defense and Security segments, we provide aerial services that include critical supply and logistics for firefighting, timber harvesting, infrastructure construction, deployed military forces, humanitarian relief, and crewing. Through our Manufacturing and MRO segment, we provide manufacturing and maintenance, repair and overhaul services for our own fleet and third parties.
The Company’s fleet consisted of the following as of
June 30, 2016
:
|
|
|
|
Type:
|
|
Heavy lift helicopters, known as ‘Aircranes’
|
20
|
|
Rotor-wing aircraft:
|
|
Light lift helicopters
|
9
|
|
Medium lift helicopters
|
33
|
|
Fixed-wing aircraft
|
7
|
|
|
69
|
|
As of
June 30, 2016
, the Company’s aircraft fleet includes
4
idle aircraft and
11
aircraft that are held for sale.
The Company’s operations span the globe with a presence on
six
continents and
26
aircraft deployed outside of North America as of
June 30, 2016
. As a global provider of aviation services, a significant portion of its revenues are generated outside of North America and represented
61%
and
63%
of revenues for the
three months ended June 30, 2016
and
2015
, respectively.
Condensed Consolidated Financial Statements
These condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in financial statements prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such regulations, although Erickson believes that the disclosures provided are adequate to make the interim information presented not misleading.
To conform with 2016 presentation, the Company made the following reclassifications to the 2015 condensed consolidated financial statements:
|
|
•
|
Reclassified deferred overhauls not installed on an aircraft in the amount of
$30.2 million
from aircraft, net to aircraft parts, net as of December 31, 2015;
|
|
|
•
|
Reclassified aircraft sales of
$2.3 million
from revenues, with cost of revenues of
$2.5 million
, to a loss on sale of aircraft of
$0.2 million
, which is included in general and administrative expense on the statement of operations for the three months ended June 30, 2015;
|
|
|
•
|
Reclassified aircraft sales of
$4.5 million
from revenues, with costs of revenues of
$4.3 million
, to a gain on sale of aircraft of
$0.2 million
, which is included in general and administrative expense on the statement of operations for the six months ended June 30, 2015.
|
In addition, the Company presented the note payable incurred during the first quarter of 2015 for the purchase of aircraft parts in the supplemental disclosure of non-cash investing and financing activities section of the statement of cash flows for the
six months ended June 30, 2015
. Such presentation is to conform with the classification of the note payable as long-term debt on the condensed consolidated balance sheets.
The financial information included herein for the three and
six
month periods ended
June 30, 2016
and
2015
is unaudited; however, such information reflects all adjustments, consisting of normal recurring adjustments, that are, in the opinion of management, necessary for a fair presentation of the condensed consolidated financial position, condensed consolidated results of operations, and condensed consolidated cash flows of the Company for these interim periods. Certain costs are estimated for the full year and allocated to interim periods based on estimates of operating time expired, benefit received, or activity associated with the interim period; accordingly, such costs may not be reflective of amounts to be recognized for a full year. Due to seasonal fluctuations in revenues, interim financial results do not necessarily represent those to be expected for the year. The financial information as of
December 31, 2015
is derived from the Company’s audited consolidated financial statements and notes thereto for the year ended
December 31, 2015
, included in Item 8 of Erickson’s Annual Report on Form 10-K, filed with the SEC on March 10, 2016, which should be read in conjunction with such condensed consolidated financial statements.
Liquidity Matters
These condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. As a result of recurring losses, negative cash flow from operations and limited borrowing capacity under our existing revolving credit facility, we are experiencing constraints on our liquidity and, as of June 30, 2016, have negative working capital. The Company has retained an investment bank and a legal firm both of whom specialize in restructuring, and are evaluating various options with regard to its capital structure and other strategic alternatives. While management expects to successfully address the Company’s cost and liquidity challenges, there is risk that such efforts may not yield desired outcomes, which could have a significant adverse effect on its operations. As of June 30, 2016, the Company has
$3.3 million
of available liquidity. Absent a refinancing of the revolver and any other successful liquidity initiatives, there is a high probability that the company will not be able to fund the
$14.6 million
interest payment on the senior notes, due November 1, 2016. For additional information concerning liquidity matters, see Credit Facility and Long-term Debt sections in Note 2.
Use of Estimates
The preparation of condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of gain or loss contingencies, as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results experienced by the Company could differ materially from those estimates.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-9,
Revenue from Contracts with Customers (Topic 606)
(“ASU 2014-09”), which creates a new Topic 606 and supersedes the revenue requirements in Topic 605,
Revenue Recognition
, and most industry-specific guidance throughout the Industry Topics of the Codification. ASU 2014-09 provides a five-step analysis of transactions to determine when and how revenue is recognized that consists of: i) identifying the contract with the customer; ii) identifying the performance obligations in the contract; iii) determining the transaction price; iv) allocating the transaction price to the performance obligations, and v) recognizing revenue when or as each performance obligation is satisfied. Companies can transition to the requirements of this ASU either retrospectively or as a cumulative-effect adjustment as of the date of adoption, which was originally January 1, 2017 for the Company. Early adoption is not permitted. In August 2015, ASU 2015-14,
Revenue from Contracts with Customers (Topic 606)
was issued which defers by one year the effective date of ASU 2014-09. The effective date for the Company is January 1, 2018 for the adoption of the requirements of ASU 2014-09. The Company is in the process of evaluating the effect that the adoption of ASU 2014-09 will have on its consolidated financial position, consolidated results of operations, and consolidated statement of cash flows.
In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842)
(“ASU 2016-02”), which will require organizations that lease assets, lessees, to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. A lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. The provisions of ASU 2016-02 are effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, or January 1, 2019 for the Company. Early adoption is permitted. The Company has not yet determined the effect of the adoption of ASU 2016-02 will have on its consolidated financial position, consolidated results of operations, and consolidated statement of cash flows.
In March 2016, the FASB issued ASU 2016-09,
Compensation—Stock Compensation (Topic 718)
(“ASU 2016-09”), which is intended to simplify several aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. For public entities, the provisions of ASU 2016-09 are effective for annual periods beginning after December 15, 2016, and interim
periods within those annual periods, or January 1, 2017 for the Company. Early adoption is permitted. The transition to the requirements of this ASU will be either i) modified retrospective transition method by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted, ii) retrospective application or iii) prospective application depending on the nature of amendment. The Company has not yet determined the effect of the adoption of ASU 2016-09 will have on its consolidated financial position, consolidated results of operations, and consolidated statement of cash flows.
In August 2014, the FASB issued ASU 2014-15,
Presentation of Financial Statements—Going Concern (Subtopic 205-40)
(“ASU 2014-15”), a new standard that requires management to evaluate whether there are conditions or events that raise substantial doubt about an entity’s ability to continue as a going concern and to provide disclosures when certain criteria are met. The provisions of ASU 2014-15 are effective for public entities for fiscal periods beginning after December 15, 2016, or January 1, 2017 for the Company, and interim periods therein. Early adoption is permitted. The adoption of ASU 2014-15 is not expected to have an impact on the Company’s consolidated financial position, consolidated results of operations, or consolidated statement of cash flows, although there may be additional disclosures made pursuant to the requirements of this ASU.
NOTE 2
—BALANCE SHEET COMPONENTS
Accounts receivable, net
consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
December 31, 2015
|
Trade accounts receivable
|
$
|
39,603
|
|
|
$
|
35,039
|
|
Other receivables
|
3,612
|
|
|
4,244
|
|
Costs in excess of billings
|
—
|
|
|
1,704
|
|
|
43,215
|
|
|
40,987
|
|
Less: allowance for doubtful accounts
|
(1,354
|
)
|
|
(467
|
)
|
|
$
|
41,861
|
|
|
$
|
40,520
|
|
Activity in the allowance for doubtful accounts was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
2016
|
|
2015
|
Balance as of beginning of period
|
$
|
467
|
|
|
$
|
739
|
|
Provisions
|
1,022
|
|
|
—
|
|
Amounts written-off, net of recoveries
|
(135
|
)
|
|
(548
|
)
|
Balance as of end of period
|
$
|
1,354
|
|
|
$
|
191
|
|
The Company had bad debt expense of
$0.8 million
and
$1.0 million
for the three and six month periods ended
June 30, 2016
, respectively, with
zero
for the three and six month periods ended
June 30, 2015
, respectively.
The following is a summary of customers that accounted for at least
10%
of trade account receivable balance as of
June 30, 2016
or
December 31, 2015
:
|
|
|
|
|
|
|
|
|
|
Segment
|
|
June 30, 2016
|
|
December 31, 2015
|
Customer A
|
Global Defense and Security
|
|
16.8
|
%
|
|
11.9
|
%
|
Customer B
|
Global Defense and Security
|
|
10.1
|
|
|
14.0
|
|
Customer C
|
Manufacturing and MRO
|
|
2.3
|
|
|
11.2
|
|
|
|
|
29.2
|
%
|
|
37.1
|
%
|
Aircraft, Net
and
Property, Plant and Equipment, Net
consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
December 31, 2015
|
Aircraft:
|
|
|
|
Aircraft
|
$
|
129,381
|
|
|
$
|
132,530
|
|
Aircraft under capital lease
|
3,866
|
|
|
3,866
|
|
Construction-in-progress
|
10,711
|
|
|
10,056
|
|
|
143,958
|
|
|
146,452
|
|
Less: accumulated depreciation and amortization
|
(45,486
|
)
|
|
(41,401
|
)
|
Add: deferred overhauls, net
|
46,517
|
|
|
50,866
|
|
Aircraft, net
|
$
|
144,989
|
|
|
$
|
155,917
|
|
Property, plant and equipment:
|
|
|
|
Land and land improvements
|
$
|
192
|
|
|
$
|
308
|
|
Buildings
|
5,725
|
|
|
5,219
|
|
Vehicles and equipment
|
35,461
|
|
|
34,115
|
|
Assets under capital lease—hangar and vehicles
|
5,440
|
|
|
5,440
|
|
Construction-in-progress
|
3,376
|
|
|
4,323
|
|
|
50,194
|
|
|
49,405
|
|
Less: accumulated depreciation and amortization
|
(26,604
|
)
|
|
(23,852
|
)
|
Property, plant and equipment, net
|
$
|
23,590
|
|
|
$
|
25,553
|
|
We have aircraft under operating lease arrangements. The Company has continued efforts to rationalize its aircraft fleet, and has identified
four
aircraft that the Company has ceased to use in operations, known as ‘idle aircraft.’ As of June 30, 2016, the Company has recorded the remaining lease liability related to these leased idle aircraft, which is classified as a loss on idle aircraft in the condensed consolidated statement of operations for the three and six month periods ended June 30, 2016.
Depreciation and amortization expense consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Depreciation expense
|
$
|
4,280
|
|
|
$
|
4,427
|
|
|
$
|
8,532
|
|
|
$
|
9,160
|
|
Amortization expense:
|
|
|
|
|
|
|
|
Deferred overhauls
|
4,586
|
|
|
4,807
|
|
|
9,282
|
|
|
8,252
|
|
Assets under capital lease
|
100
|
|
|
1
|
|
|
200
|
|
|
1
|
|
Total amortization expense
|
4,686
|
|
|
4,808
|
|
|
9,482
|
|
|
8,253
|
|
Total depreciation and amortization expense
|
$
|
8,966
|
|
|
$
|
9,235
|
|
|
$
|
18,014
|
|
|
$
|
17,413
|
|
Aircraft Parts, Net
consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
December 31, 2015
|
Finished parts
|
$
|
133,394
|
|
|
$
|
134,410
|
|
Deferred overhauls
|
35,707
|
|
|
30,215
|
|
Work-in-process
|
11,576
|
|
|
10,405
|
|
Less: excess and obsolete reserve
|
(7,022
|
)
|
|
(5,206
|
)
|
|
$
|
173,655
|
|
|
$
|
169,824
|
|
Activity for the excess and obsolete reserve was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
2016
|
|
2015
|
Balance as of beginning of period
|
$
|
5,206
|
|
|
$
|
5,640
|
|
Provision for excess and obsolete aircraft parts
|
3,249
|
|
|
164
|
|
Write-off of excess and obsolete aircraft parts
|
(1,433
|
)
|
|
(204
|
)
|
Balance as of end of period
|
$
|
7,022
|
|
|
$
|
5,600
|
|
For 2016, the provision for excess and obsolete aircraft parts includes
$1.4 million
for aircraft parts related to aircraft that have been classified as held for sale, which is included in the impairment of other assets on the condensed consolidated statements of operations for the three and six month periods ended June 30, 2016.
Aircraft Held for Sale
activity was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
2016
|
|
2015
|
Balance as of beginning of period
|
$
|
12,348
|
|
|
$
|
—
|
|
Aircraft classified as held for sale
|
3,832
|
|
|
15,514
|
|
Aircraft reclassified from held for sale
|
(2,653
|
)
|
|
—
|
|
Impairment charge on aircraft held for sale
|
(3,381
|
)
|
|
(7,143
|
)
|
Book value of aircraft sold
|
(4,179
|
)
|
|
—
|
|
Fluctuations due to foreign currency translation adjustments
|
233
|
|
|
65
|
|
Balance as of end of period
|
$
|
6,200
|
|
|
$
|
8,436
|
|
During the second quarter of 2016, the Company recorded impairment charges totaling
$3.4 million
related to the write down of the carrying amount of certain aircraft held for sale to their estimated fair value less the costs to sell. These charges are included in impairment of other assets in the consolidated statements of operations for the three and six month periods ended June 30, 2016. Of the
17
aircraft in held for sale at the end of 2015,
11
of those aircraft were still held for sale at the end of the second quarter, and were further impaired due to ongoing declines in market values. One of our major competitors filed for Chapter 11 reorganization in the second quarter, which was a contributing factor to the decline in market values in our industry. The fair value of aircraft held for sale is considered a level 2 measurement in the fair value hierarchy as the measurement is based on the recent sales and listed prices in the active markets for similar aircraft.
Other Intangible Assets, Net
consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reportable Segment
|
|
Useful Life
(in years)
|
|
June 30,
2016
|
|
December 31,
2015
|
Customer Relationships
|
Global Defense and Security
|
|
9
|
|
$
|
19,300
|
|
|
$
|
19,300
|
|
Customer Relationships
|
Commercial Aviation Services
|
|
2
|
|
2,500
|
|
|
2,500
|
|
Type Certificate for Aircrane engines
|
Manufacturing and MRO
|
|
Indefinite
|
|
2,205
|
|
|
2,205
|
|
|
|
|
|
|
24,005
|
|
|
24,005
|
|
Less: accumulated amortization
|
|
|
|
|
(9,291
|
)
|
|
(8,218
|
)
|
|
|
|
|
|
$
|
14,714
|
|
|
$
|
15,787
|
|
Amortization expense for intangible assets is recorded in cost of revenues and was
$0.5 million
and
$0.7 million
for the second quarter of 2016 and 2015, respectively, and
$1.1 million
and
$1.3 million
for the first half of 2016 and 2015, respectively. As of
June 30, 2016
, future estimated amortization expense is as follows (in thousands):
|
|
|
|
|
Six months ending December 31:
|
|
2016
|
$
|
1,071
|
|
Year ending December 31:
|
|
2017
|
2,144
|
|
2018
|
2,144
|
|
2019
|
2,144
|
|
2020
|
2,144
|
|
Thereafter
|
2,862
|
|
|
$
|
12,509
|
|
Goodwill, Net
The changes in the carrying amount of goodwill for the
six months ended June 30, 2016
were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global Defense and Security
|
|
Commercial Aviation Services
|
|
Manufacturing and MRO
|
|
Total
|
Balance as of January 1, 2016:
|
|
|
|
|
|
|
|
Goodwill, gross
|
$
|
207,128
|
|
|
$
|
22,133
|
|
|
$
|
5,542
|
|
|
$
|
234,803
|
|
Accumulated impairment losses
|
(71,095
|
)
|
|
—
|
|
|
—
|
|
|
(71,095
|
)
|
Goodwill, net
|
136,033
|
|
|
22,133
|
|
|
5,542
|
|
|
163,708
|
|
Activity during 2016:
|
|
|
|
|
|
|
|
Impairment losses
|
—
|
|
|
(4,523
|
)
|
|
—
|
|
|
(4,523
|
)
|
Fluctuations due to foreign currency translation adjustments
|
—
|
|
|
585
|
|
|
—
|
|
|
585
|
|
Balance as of June 30, 2016:
|
|
|
|
|
|
|
|
Goodwill, gross
|
207,128
|
|
|
22,718
|
|
|
5,542
|
|
|
235,388
|
|
Accumulated impairment losses
|
(71,095
|
)
|
|
(4,523
|
)
|
|
—
|
|
|
(75,618
|
)
|
Goodwill, net
|
$
|
136,033
|
|
|
$
|
18,195
|
|
|
$
|
5,542
|
|
|
$
|
159,770
|
|
During the second quarter of 2016, the Company performed the annual goodwill impairment test for the Global Defense and Security, Commercial Aviation Services, and Manufacturing and MRO reporting units. The Company assessed qualitative factors to determine whether it is more likely than not that the fair value of the reporting units are less than their respective carrying amounts. In the second quarter of 2016, several triggering events prompted the Company to perform step one of the goodwill impairment test for the Global Defense and Security reporting unit. The triggering events included declines in industry and market conditions, a sustained decrease in the Company’s share price, a decline in the Company’s overall financial performance, and a change in a senior management position. The Company’s last Step 1 analysis was performed as of the fourth quarter of 2015 for all three reporting units. The step one analysis for the Commercial Aviation Services and Manufacturing and MRO reporting units was not re-performed in the second quarter of 2016 given that no significant events or changes in internal forecasts have occurred that would result in a significantly different result. Only the Global Defense and Security reporting unit Step 1 analysis was performed, in light of the majority of the Company’s goodwill being associated with this reporting unit, and the asset impairments recorded in the second quarter of 2016. The outcome of the analysis revealed that the fair value of the Global Defense and Security reporting unit exceeded its carrying amount, and as a result, no goodwill impairment charge was recorded for that reporting unit in the second quarter of 2016.
During June 2016, the Company entered into an agreement to sell its wholly-owned Brazilian subsidiary. The subsidiary was originally purchased in September 2013, and while various integration efforts were attempted, the benefits of the acquired goodwill were never realized by the Commercial Aviation Services reporting unit. As a result, the carrying amount of the acquired goodwill is included in the carrying amount of the business to be disposed of, and reduces the amount of goodwill reported for the Commercial Aviation Services reporting unit. Accordingly, a goodwill impairment charge was recorded during the second quarter of 2016.
Credit Facility
The Company has a
$140.0 million
revolving credit facility (“Credit Facility”), which consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
December 31, 2015
|
Borrowings outstanding under Credit Facility
|
$
|
121,330
|
|
|
$
|
97,997
|
|
Less: deferred debt issuance costs
|
(1,807
|
)
|
|
(1,832
|
)
|
|
$
|
119,523
|
|
|
$
|
96,165
|
|
The Credit Facility is primarily used for general corporate purposes and matures May 2, 2018. EI and each of the Company’s current and future, direct and indirect, material subsidiaries guarantee the indebtedness under the Credit Facility on a senior-secured first-lien basis. The Credit Facility includes mandatory prepayment requirements for certain types of transactions, including, but not limited to, requiring prepayment from proceeds that the Company receives as a result of certain asset sales, subject to re-investment provisions on terms to be determined, and proceeds from extraordinary receipts.
During 2016, the Company entered into numerous amendments to the Credit Facility. As a result, the terms of the Credit Facility contain, among other things, a requirement that a certain level of borrowing capacity be maintained, known as “Excess Availability,” which is as follows:
|
|
•
|
$10.0 million
for the period from
July 25, 2016 through August 15, 2016
;
|
|
|
•
|
$12.0 million
for the period from
August 16, 2016 through August 22, 2016
;
|
|
|
•
|
$13.5 million
for the period from
August 23, 2016 through August 29, 2016
;
|
|
|
•
|
$17.5 million
for the period from
August 30, 2016 through October 2, 2016
; and
|
|
|
•
|
$20.0 million
for the period from
October 3, 2016 through December 31, 2016
.
|
In addition, the fixed charge financial covenant period commencement date was delayed to any period on or after January 1, 2017 on which Excess Availability is less than
$20 million
as of such date and the interest rate was set at 550 basis points, or
5.5%
, over the prime base rate or 650 basis points, or
6.5%
over the London Interbank Offered Rate, as applicable, resulting in an increase of 200 basis points, or
2%
, over the highest chargeable rates prior to any amendments entered into during 2016.
The Company entered into an amendment fee letter with the lenders under the Credit Facility in July 2016, which formalizes a requirement that the Company agrees to seek a refinancing of its Credit Facility in its entirety (the “Refinancing”) and requires the Company to meet short term progress milestones related to the Refinancing. In the event the Company is unable to refinance the Credit Facility in its entirety, and otherwise satisfy in full in cash all outstanding amounts and other obligations under the Credit Facility, the Company will be responsible to pay the following incentive fees:
|
|
•
|
$3.5 million
if the Refinancing has not occurred on or before August 29, 2016;
|
|
|
•
|
An additional
$1.5 million
if the Refinancing has not occurred on or before September 12, 2016; and
|
|
|
•
|
An additional
$500,000
each two weeks thereafter if the Refinancing has not occurred on or before September 26, 2016 and each second Monday thereafter, as applicable.
|
The interest rate under the Credit Facility was a weighted average of
5.3%
as of
June 30, 2016
and
5.2%
as of December 31, 2015. As of
June 30, 2016
, the Company had
$2.4 million
of outstanding standby letters of credit under the Credit Facility, with a maximum borrowing availability of
$6.2 million
.
Long-term Debt
Long-term debt consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
December 31, 2015
|
Senior notes payable
|
$
|
355,000
|
|
|
$
|
355,000
|
|
Subordinated notes payable
|
9,778
|
|
|
11,478
|
|
Capital lease obligations
|
7,853
|
|
|
8,417
|
|
Other notes payable
|
4,179
|
|
|
6,254
|
|
Total long-term debt before unamortized debt discounts and deferred debt issuance costs
|
376,810
|
|
|
381,149
|
|
Unamortized debt discounts
|
(493
|
)
|
|
(770
|
)
|
Deferred debt issuance costs
|
(6,539
|
)
|
|
(7,392
|
)
|
Total long-term debt
|
369,778
|
|
|
372,987
|
|
Less: current portion of long-term debt
|
(8,421
|
)
|
|
(8,205
|
)
|
Long-term debt, less current portion
|
$
|
361,357
|
|
|
$
|
364,782
|
|
ZM EAC LLC beneficially owns approximately
33.6%
of the Company’s outstanding capital stock. Q&U Investments LLC is the managing member of entities that beneficially own approximately
20.9%
of the Company’s outstanding capital stock. Quinn Morgan, the managing member of ZM EAC and Q&U Investments, is a member of the Company’s Board of Directors. During May 2016, entities affiliated with ZM EAC and Q&U Investments acquired
$1.2 million
of the subordinated notes payable from third parties.
The senior notes payable have semi-annual interest payments due May 1 and November 1, with the next interest payment of
$14.6 million
due November 1, 2016.
NOTE 3
—FAIR VALUE MEASUREMENTS
The Company’s cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities are carried at cost, which approximates fair value due to their short-term maturities. The carrying value of borrowings under the Credit Facility approximate fair value due to the variable rate nature of the indebtedness.
Long-term debt is recorded at amortized cost in EI’s condensed consolidated balance sheets. The fair value of the Company’s senior notes is classified as a Level 1 fair value measurement and is estimated based on the quoted market prices for such instruments. The fair value of all other long-term notes is classified as Level 3 fair value measurement and is estimated based on the terms of the individual loans and the Company’s creditworthiness. These significant unobservable inputs to the Level 3 fair value measurement include the interest rate and the term of the loan. The estimated fair value of the Company’s other long-term notes, excluding the senior notes, approximates their carrying value.
As of
June 30, 2016
, the carrying amount of the Company’s long-term debt was
$369.8 million
and its estimated aggregate fair value was
$240.9 million
, consisting of
$219.6 million
and
$21.3 million
classified as Level 1 and Level 3, respectively, in the fair value hierarchy. As of
December 31, 2015
, the carrying amount of the Company’s long-term debt was
$373.0 million
and its estimated aggregate fair value was
$256.9 million
, consisting of
$231.5 million
and
$25.4 million
classified as Level 1 and Level 3, respectively, in the fair value hierarchy.
As of
June 30, 2016
, Erickson was a party to
thirteen
foreign currency forward contracts which will settle at various dates through
December 2016
, and had
six
foreign currency forward contracts as of
December 31, 2015
. The fair value of foreign currency contracts is considered a level 2 measurement in the fair value hierarchy as the measurement is based on observable rates or measurements to determine fair value and include rates, spreads, amounts and value dates for such contracts. As of
June 30, 2016
and
December 31, 2015
, the fair value of such foreign currency forward contracts was
$0.5 million
and
$0.2 million
, respectively, which is included in Accrued expenses and other current liabilities on the condensed consolidated balance sheets.
The Level 3 assets measured at fair value on a nonrecurring basis consisted of goodwill.
NOTE 4
—EQUITY
The activity in equity during the
six months ended June 30, 2016
and
2015
was as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Additional Paid-in Capital
|
|
Retained Earnings (Accumulated Deficit)
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
|
Noncontrolling Interests
|
|
Shares
|
|
Amount
|
|
|
|
|
|
Balance at December 31, 2015
|
13,895,421
|
|
|
$
|
1
|
|
|
$
|
181,259
|
|
|
$
|
(84,901
|
)
|
|
$
|
(7,789
|
)
|
|
|
$
|
723
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
137
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(64,982
|
)
|
|
—
|
|
|
|
263
|
|
Other comprehensive income(loss)—Foreign currency translation adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,246
|
|
|
|
(13
|
)
|
Balance at June 30, 2016
|
13,895,421
|
|
|
$
|
1
|
|
|
$
|
181,396
|
|
|
$
|
(149,883
|
)
|
|
$
|
(6,543
|
)
|
|
|
$
|
973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2014
|
13,823,818
|
|
|
$
|
1
|
|
|
$
|
181,018
|
|
|
$
|
1,812
|
|
|
$
|
(2,544
|
)
|
|
|
$
|
726
|
|
Issuance of shares upon vesting of restricted stock units
|
16,213
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
97
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
Shares withheld for payment of taxes
|
(6,857
|
)
|
|
—
|
|
|
(32
|
)
|
|
—
|
|
|
—
|
|
|
|
—
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(85,091
|
)
|
|
—
|
|
|
|
(231
|
)
|
Other comprehensive loss—Foreign currency translation adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,000
|
)
|
|
|
(89
|
)
|
Balance at June 30, 2015
|
13,833,174
|
|
|
$
|
1
|
|
|
$
|
181,083
|
|
|
$
|
(83,279
|
)
|
|
$
|
(4,544
|
)
|
|
|
$
|
406
|
|
NOTE 5
—REPORTABLE SEGMENTS
The Company reports segment information based on the “management” approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Company’s reportable segments. The Company’s operations by its
three
reportable segments are as follows:
Commercial Aviation Services
segment revenues are derived from firefighting, timber harvesting, infrastructure construction, oil and gas services, and other commercial services.
Global Defense and Security
segment revenues are derived primarily from contracts with the United States Department of Defense, international governments, and other government organizations, and third parties that contract with such governmental agencies and organizations, who use the Company’s services for defense and security, and transportation and other government-related activities.
Manufacturing and MRO
segment revenues are derived from manufacturing and maintenance, repair, and overhaul services for certain aircraft, as well as aircraft sales.
Information about the Company’s revenues and gross profit by its three reportable segments, as well as a reconciliation of the Company’s reportable segment gross profit to operating loss, is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 Security
|
21,371
|
|
|
28,391
|
|
|
40,440
|
|
|
61,266
|
|
Manufacturing and MRO
|
8,476
|
|
|
4,309
|
|
|
14,290
|
|
|
9,143
|
|
Total net revenues
|
$
|
50,838
|
|
|
$
|
67,019
|
|
|
$
|
95,667
|
|
|
$
|
130,981
|
|
Gross (loss) profit:
|
|
|
|
|
|
|
|
Commercial Aviation Services
|
$
|
(5,447
|
)
|
|
$
|
3,686
|
|
|
(9,805
|
)
|
|
(1,001
|
)
|
Global Defense and Security
|
751
|
|
|
2,117
|
|
|
(208
|
)
|
|
6,479
|
|
Manufacturing and MRO
|
3,366
|
|
|
2,115
|
|
|
4,609
|
|
|
3,427
|
|
Total gross (loss) profit
|
(1,330
|
)
|
|
7,918
|
|
|
(5,404
|
)
|
|
8,905
|
|
Less: operating expenses
|
27,971
|
|
|
7,760
|
|
|
36,976
|
|
|
73,910
|
|
Operating (loss) income
|
$
|
(29,301
|
)
|
|
$
|
158
|
|
|
$
|
(42,380
|
)
|
|
$
|
(65,005
|
)
|
Customers that accounted for at least
10%
of the Company’s net revenues were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
Segment
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Customer B
|
Global Defense and Security
|
|
22.1
|
%
|
|
15.4
|
%
|
|
22.3
|
%
|
|
21.3
|
%
|
Customer A
|
Global Defense and Security
|
|
16.6
|
|
|
9.0
|
|
|
16.2
|
|
|
10.5
|
|
|
|
|
38.7
|
%
|
|
24.4
|
%
|
|
38.5
|
%
|
|
31.8
|
%
|
Revenues, net by geographic area were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Revenues, net:
|
|
|
|
|
|
|
|
North America
|
$
|
19,917
|
|
|
$
|
24,898
|
|
|
$
|
32,661
|
|
|
$
|
39,555
|
|
Middle East
|
11,213
|
|
|
16,568
|
|
|
21,375
|
|
|
33,125
|
|
Africa
|
8,416
|
|
|
6,979
|
|
|
15,459
|
|
|
13,772
|
|
Europe
|
4,606
|
|
|
3,051
|
|
|
6,017
|
|
|
3,904
|
|
South America
|
3,188
|
|
|
10,066
|
|
|
7,023
|
|
|
21,103
|
|
Asia
|
3,464
|
|
|
5,379
|
|
|
5,816
|
|
|
10,994
|
|
Australia
|
34
|
|
|
78
|
|
|
7,316
|
|
|
8,528
|
|
|
$
|
50,838
|
|
|
$
|
67,019
|
|
|
$
|
95,667
|
|
|
$
|
130,981
|
|
For each operating segment, revenues are attributed to geographic area based on the country where the services were performed; for the Manufacturing and MRO reportable segment, revenues are attributed to geographic area based on the country in which the customer is located.
Assets by reportable segment was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
December 31, 2015
|
Assets:
|
|
|
|
Global Defense and Security
|
$
|
169,483
|
|
|
$
|
173,882
|
|
Commercial Aviation Services
|
41,191
|
|
|
41,857
|
|
Manufacturing and MRO
|
19,378
|
|
|
25,623
|
|
Corporate
(1)
|
5,292
|
|
|
3,917
|
|
Aircraft held for sale
|
6,200
|
|
|
12,348
|
|
Fixed Assets
(2)
|
342,235
|
|
|
344,026
|
|
|
$
|
583,779
|
|
|
$
|
601,653
|
|
|
|
(1)
|
Comprised primarily of cash, prepaid expenses and other current assets, and deferred tax assets.
|
|
|
(2)
|
Comprised of the aircraft fleet and fleet support assets including: aircraft, net; aircraft parts, net; and property, plant, and equipment, net, which are primarily used to support the aircraft fleet, with minimal amounts allocated to the corporate function.
|
NOTE 6
—LOSS PER SHARE
Basic loss per share is computed using the weighted average number of common shares outstanding during the period. Diluted loss per share is computed using the weighted average number of common shares outstanding and the effect of dilutive potential common shares outstanding during the period. Potential common shares consist of stock-based awards such as stock options.
For the
three and six
month periods ended
June 30, 2016
and
2015
, the net loss attributable to Erickson Incorporated common shareholders is the same for both basic and diluted loss per share computations. Due to the Company’s net loss position, shares of
313,500
were excluded from the computation of diluted loss per common share for the
three and six
month periods ended
June 30, 2016
as their effect would have been anti-dilutive, with
20,500
excluded for the
three and six
month periods ended
June 30, 2015
.
NOTE 7
—COMMITMENTS AND CONTINGENCIES
The Company is subject to ongoing litigation and claims as part of its normal business operations and makes a provision for a liability when it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated. The Company recognizes expenses for legal costs in connection with defending a loss contingency as those costs are incurred.
Arizona Environmental Matter
In August 2012, Erickson Helicopters, Inc. (formerly “Evergreen Helicopters, Inc.” and Erickson’s wholly-owned subsidiary, ‘‘EHI’’) received a request for information from the State of Arizona and has been served various petitions regarding the Broadway-Pantano Site in Tucson, Arizona, which is comprised of
two
landfills at which the State of Arizona has been conducting soil and groundwater investigations and cleanups related to site contamination. According to these documents, the State has identified approximately
101
parties that are potentially responsible for the contamination. It is possible that the State or other liable parties may assert that EHI is liable for the alleged contamination at the site. At this time, the Company is not able to determine the likelihood of any outcome in this matter, nor is it able to estimate the amount or range of loss or the impact on its financial condition in the event of an unfavorable outcome.
World Fuel Claim
In December 2013, World Fuel, a former fuel supplier of Evergreen International Aviation (‘‘EIA’’) and Evergreen Airlines (‘‘EA’’), filed suit in the Circuit Court of Yamhill County, Oregon (“Circuit Court”) against EIA, EA and other named parties claiming approximately
$9 million
of accounts payable, not including claimed accrued interest, due and owing to World Fuel for fuel purchases made by EIA and EA. EHI was a named party in the lawsuit since it was alleged that EHI signed a joint and several guaranty of payment in favor of World Fuel in 2012. In April 2014, the Company filed an answer, which included certain counterclaims against World Fuel and certain cross claims against Mr. Delford Smith. In January 2016, the Company agreed to accept an Offer of Judgment from the Estate of Mr. Delford Smith in connection with the Estate’s admission to certain factual issues in the lawsuit. In March 2016, World Fuel initiated the process to dismiss the suit filed in the Circuit Court in order to re-file the suit in the United States District Court for the District of Oregon. At this time, the Company is not able to determine the likelihood of any outcome in this matter, nor is it able to estimate the amount or range of loss or the impact on its financial condition in the event of an unfavorable outcome.
Stockholder Action
In August 2013, a stockholder class and derivative action was filed in the Court of Chancery for the State of Delaware against the Company, members of our board of directors, EAC Acquisition Corp., and entities associated with ZM Equity Partners, LLC and certain of their affiliates. The plaintiff asserted claims for breach of fiduciary duty and unjust enrichment in connection with the acquisition of Evergreen Helicopters, Inc. and requested an award of unspecified monetary damages, disgorgement and restitution, certain other equitable relief, and an award of plaintiff’s costs and disbursements, including legal fees. In June 2016, the parties entered into a Stipulation and Agreement of Compromise, Settlement and Release (the “Stipulation”). The Stipulation was entered into for the sole purpose of resolving contested claims and disputes, as well as
avoiding the costs, risk and uncertainties inherent in litigation. The Stipulation does not contain any finding of fault or admission of wrongdoing or liability on the part of the Company or any of the individual defendants in the litigation.
The terms of the Stipulation (a) include the creation of a settlement fund in the amount of
$18.5 million
, a portion of which will be distributed to plaintiff’s counsel for attorneys’ fees and expenses, with
80%
of the remaining funds to be distributed to the Class Members pursuant to the Plan of Allocation and
20%
of the remaining funds to be distributed to the Company, and (b) require the Company to amend certain provisions of its Certificate of Incorporation with respect to certain change or control and related party transactions. In addition, under the terms of the Stipulation, the plaintiff and each stockholder of the Company shall be deemed to have released the defendants from any and all claims, including unknown claims, relating to the matters asserted or that could have been asserted in the litigation.
The portion of the settlement fund to be paid by the Company is expected to be covered by the Company’s existing directors and officers insurance policy and therefore, the Company does not expect any material impact on the Company’s financial condition. The Stipulation is subject to and conditioned upon final approval by the Court, after public notice of the proposed settlement.
NOTE 8
—VARIABLE INTEREST ENTITIES
The Company has determined that it is the primary beneficiary of
two
variable interest entities (“VIEs”), EuAC and Costa Do Sol Taxi Aero Corporation (“Costa Do Sol”). An entity is generally considered a VIE that is subject to consolidation if the total equity investment at risk is not sufficient for the entity to finance its activities without additional subordinated financial support; or as a group, the holders of the equity investment at risk lack any one of the following characteristics: (a) the power, through voting rights or similar rights, to direct the activities that most significantly impact the entity’s economic performance; (b) the obligation to absorb expected losses of the entity; or (c) the right to receive the expected residual returns of the entity.
|
|
•
|
EuAC
. This entity is
49%
owned by EI;
49%
owned by Grupo Inaer (“Inaer”); and
2%
owned by Fiduciaria Centro Nord (“FCN”). EI provided FCN with the financial means to purchase and transfer the shares of EuAC, in exchange for the patrimonial and administrative rights derived from the shares. These rights include the right to decide whether and how to vote in shareholders’ meetings and the right to decide whether, when and to whom the shares should be transferred and endorsed.
|
|
|
•
|
Costa Do Sol
. Air Amazonia, the Company’s Brazilian subsidiary, entered into a purchase agreement in 2014 to acquire
100%
of the preferred non-voting stock and
20%
of the common voting stock of Costa Do Sol and an employee of Air Amazonia, a Brazilian national, entered into a purchase agreement at the same time to acquire
80%
of the common voting stock of Costa Do Sol. In connection with the purchase agreements, the selling shareholders of Costa Do Sol executed a power-of-attorney authorizing Air Amazonia to transact business on behalf of Costa, at which time, Air Amazonia began to manage the operations of Costa Do Sol. Although the purchase transaction is pending approval by the National Civil Aviation Agency of Brazil, Air Amazonia has the authority to operate and transact business on behalf of Cost Do Sol through the power-of-attorney.
|
Determining whether EI is the primary beneficiary of a VIE is complex, subjective and requires the use of judgments and assumptions. Significant judgments and assumptions made by the Company in determining that it is the primary beneficiary of EuAC and Costa Do Sol include the following: i) the Company has the experience to own and operate aviation services-type entities and has the ability to make decisions and has control over the VIEs’ most significant activities, ii) the Company bears the exposure to the expected losses of the VIE if they occur; and iii) the Company has the right to receive the expected residual returns of the entity if they occur. As such, as of
June 30, 2016
, the Company’s consolidated balance sheet includes EuAC and Costa Do Sol assets of
$0.9 million
and liabilities of
$1.0 million
, and EuAC and Costa Do Sol assets of
$3.1 million
and liabilities of
$1.3 million
as of
December 31, 2015
.
NOTE 9
—CONSOLIDATING FINANCIAL INFORMATION
Certain of the Company’s subsidiaries have guaranteed its obligations under the
$355.0 million
outstanding principal amount of
8.25%
notes due
2020
(the “2020 Senior Notes”). In lieu of providing separate audited financial statements for each guarantor subsidiary, the Company has included the following condensed consolidating financial information in accordance with Rule 3-10 of SEC Regulation S-X for:
|
|
•
|
Erickson Incorporated (the ‘‘Parent Company’’), the issuer of the guaranteed obligations;
|
|
|
•
|
Subsidiaries of EI that guarantee the Company’s obligations under the 2020 Senior Notes, referred to as “Guarantor Subsidiaries;”
|
|
|
•
|
Non-guarantor subsidiaries, on a combined basis;
|
|
|
•
|
Consolidating entries and eliminations representing adjustments to (a) eliminate intercompany transactions between or among the Parent Company, the guarantor subsidiaries and the non-guarantor subsidiaries, (b) eliminate the investments in the Company’s subsidiaries, and (c) record consolidating entries; and
|
|
|
•
|
Erickson Incorporated and its subsidiaries on a consolidated basis.
|
Each guarantor subsidiary was
100%
owned by the Parent Company as of the date of each condensed consolidating balance sheet presented. The 2020 Senior Notes are fully and unconditionally guaranteed on a joint and several liability basis by each guarantor subsidiary. Each entity in the consolidating financial information follows the same accounting policies as described in the consolidated financial statements, except for the use by the Parent Company and guarantor subsidiaries of the equity method of accounting to reflect ownership interests in subsidiaries which are eliminated upon consolidation. Changes in intercompany receivables and payables related to operations, such as intercompany sales or service charges, are included in cash flows from operating activities. All amounts presented are in thousands.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Balance Sheet
June 30, 2016
|
|
Parent
Company
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating
Entries and
Eliminations
|
|
Consolidated
|
Assets
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
797
|
|
|
$
|
102
|
|
|
$
|
2,384
|
|
|
$
|
—
|
|
|
$
|
3,283
|
|
Restricted cash
|
—
|
|
|
—
|
|
|
222
|
|
|
—
|
|
|
222
|
|
Accounts receivable, net
|
17,680
|
|
|
14,354
|
|
|
9,789
|
|
|
38
|
|
|
41,861
|
|
Prepaid expenses and other current assets
|
4,615
|
|
|
837
|
|
|
752
|
|
|
—
|
|
|
6,204
|
|
Total current assets
|
23,092
|
|
|
15,293
|
|
|
13,147
|
|
|
38
|
|
|
51,570
|
|
Aircraft, net
|
105,503
|
|
|
38,598
|
|
|
888
|
|
|
—
|
|
|
144,989
|
|
Aircraft parts, net
|
126,616
|
|
|
46,897
|
|
|
187
|
|
|
(45
|
)
|
|
173,655
|
|
Aircraft held for sale
|
1,500
|
|
|
4,700
|
|
|
—
|
|
|
—
|
|
|
6,200
|
|
Property, plant and equipment, net
|
18,709
|
|
|
4,326
|
|
|
555
|
|
|
—
|
|
|
23,590
|
|
Other assets
|
311,813
|
|
|
7,329
|
|
|
619
|
|
|
(310,470
|
)
|
|
9,291
|
|
Other intangible assets, net
|
2,205
|
|
|
12,509
|
|
|
—
|
|
|
—
|
|
|
14,714
|
|
Goodwill, net
|
—
|
|
|
160,532
|
|
|
—
|
|
|
(762
|
)
|
|
159,770
|
|
Total assets
|
$
|
589,438
|
|
|
$
|
290,184
|
|
|
$
|
15,396
|
|
|
$
|
(311,239
|
)
|
|
$
|
583,779
|
|
Liabilities and equity (deficit)
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
$
|
12,413
|
|
|
$
|
13,983
|
|
|
$
|
1,829
|
|
|
$
|
—
|
|
|
$
|
28,225
|
|
Current portion of long-term debt
|
7,451
|
|
|
970
|
|
|
—
|
|
|
—
|
|
|
8,421
|
|
Accrued expenses and other current liabilities
|
16,473
|
|
|
3,872
|
|
|
2,015
|
|
|
—
|
|
|
22,360
|
|
Total current liabilities
|
36,337
|
|
|
18,825
|
|
|
3,844
|
|
|
—
|
|
|
59,006
|
|
Credit facility
|
119,523
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
119,523
|
|
Long-term debt, less current portion
|
359,660
|
|
|
1,697
|
|
|
—
|
|
|
—
|
|
|
361,357
|
|
Other liabilities
|
(8,811
|
)
|
|
10,070
|
|
|
16,690
|
|
|
—
|
|
|
17,949
|
|
Total liabilities
|
506,709
|
|
|
30,592
|
|
|
20,534
|
|
|
—
|
|
|
557,835
|
|
Equity (deficit):
|
|
|
|
|
|
|
|
|
|
Erickson Incorporated shareholders’ equity (deficit):
|
|
|
|
|
|
|
|
|
|
Common stock
|
1
|
|
|
—
|
|
|
7,053
|
|
|
(7,053
|
)
|
|
1
|
|
Additional paid-in capital
|
181,396
|
|
|
297,994
|
|
|
5,785
|
|
|
(303,779
|
)
|
|
181,396
|
|
Accumulated deficit
|
(94,453
|
)
|
|
(38,402
|
)
|
|
(17,028
|
)
|
|
—
|
|
|
(149,883
|
)
|
Accumulated other comprehensive loss
|
(4,215
|
)
|
|
—
|
|
|
(1,581
|
)
|
|
(747
|
)
|
|
(6,543
|
)
|
Total Erickson Incorporated shareholders’ equity (deficit)
|
82,729
|
|
|
259,592
|
|
|
(5,771
|
)
|
|
(311,579
|
)
|
|
24,971
|
|
Noncontrolling interests
|
—
|
|
|
—
|
|
|
633
|
|
|
340
|
|
|
973
|
|
Total equity (deficit)
|
82,729
|
|
|
259,592
|
|
|
(5,138
|
)
|
|
(311,239
|
)
|
|
25,944
|
|
Total liabilities and equity (deficit)
|
$
|
589,438
|
|
|
$
|
290,184
|
|
|
$
|
15,396
|
|
|
$
|
(311,239
|
)
|
|
$
|
583,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Balance Sheet
December 31, 2015
|
|
Parent
Company
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating
Entries and
Eliminations
|
|
Consolidated
|
Assets
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
13
|
|
|
$
|
71
|
|
|
$
|
2,045
|
|
|
$
|
—
|
|
|
$
|
2,129
|
|
Restricted cash
|
—
|
|
|
—
|
|
|
373
|
|
|
—
|
|
|
373
|
|
Accounts receivable, net
|
18,053
|
|
|
15,887
|
|
|
6,542
|
|
|
38
|
|
|
40,520
|
|
Prepaid expenses and other current assets
|
3,637
|
|
|
1,028
|
|
|
568
|
|
|
—
|
|
|
5,233
|
|
Total current assets
|
21,703
|
|
|
16,986
|
|
|
9,528
|
|
|
38
|
|
|
48,255
|
|
Aircraft, net
|
108,792
|
|
|
46,589
|
|
|
536
|
|
|
—
|
|
|
155,917
|
|
Aircraft parts, net
|
128,038
|
|
|
41,543
|
|
|
288
|
|
|
(45
|
)
|
|
169,824
|
|
Aircraft held for sale
|
5,880
|
|
|
5,316
|
|
|
1,152
|
|
|
—
|
|
|
12,348
|
|
Property, plant and equipment, net
|
20,367
|
|
|
4,606
|
|
|
580
|
|
|
—
|
|
|
25,553
|
|
Other assets
|
311,798
|
|
|
8,309
|
|
|
624
|
|
|
(310,470
|
)
|
|
10,261
|
|
Other intangible assets, net
|
2,205
|
|
|
13,582
|
|
|
—
|
|
|
—
|
|
|
15,787
|
|
Goodwill, net
|
—
|
|
|
160,533
|
|
|
3,937
|
|
|
(762
|
)
|
|
163,708
|
|
Total assets
|
$
|
598,783
|
|
|
$
|
297,464
|
|
|
$
|
16,645
|
|
|
$
|
(311,239
|
)
|
|
$
|
601,653
|
|
Liabilities and equity (deficit)
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
$
|
6,165
|
|
|
$
|
6,270
|
|
|
$
|
1,225
|
|
|
$
|
—
|
|
|
$
|
13,660
|
|
Current portion of long-term debt
|
7,292
|
|
|
913
|
|
|
—
|
|
|
—
|
|
|
8,205
|
|
Accrued expenses and other current liabilities
|
15,524
|
|
|
1,588
|
|
|
716
|
|
|
—
|
|
|
17,828
|
|
Total current liabilities
|
28,981
|
|
|
8,771
|
|
|
1,941
|
|
|
—
|
|
|
39,693
|
|
Credit facility
|
96,165
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
96,165
|
|
Long-term debt, less current portion
|
362,585
|
|
|
2,197
|
|
|
—
|
|
|
—
|
|
|
364,782
|
|
Other long-term liabilities
|
(30,830
|
)
|
|
26,046
|
|
|
16,504
|
|
|
—
|
|
|
11,720
|
|
Total liabilities
|
456,901
|
|
|
37,014
|
|
|
18,445
|
|
|
—
|
|
|
512,360
|
|
Equity (deficit):
|
|
|
|
|
|
|
|
|
|
Erickson Incorporated shareholders’ equity (deficit):
|
|
|
|
|
|
|
|
|
|
Common stock
|
1
|
|
|
—
|
|
|
7,052
|
|
|
(7,052
|
)
|
|
1
|
|
Additional paid-in capital
|
181,259
|
|
|
297,994
|
|
|
33
|
|
|
(298,027
|
)
|
|
181,259
|
|
Accumulated deficit
|
(34,322
|
)
|
|
(37,544
|
)
|
|
(7,545
|
)
|
|
(5,490
|
)
|
|
(84,901
|
)
|
Accumulated other comprehensive loss
|
(5,056
|
)
|
|
—
|
|
|
(1,974
|
)
|
|
(759
|
)
|
|
(7,789
|
)
|
Total Erickson Incorporated shareholders’ equity (deficit)
|
141,882
|
|
|
260,450
|
|
|
(2,434
|
)
|
|
(311,328
|
)
|
|
88,570
|
|
Noncontrolling interests
|
—
|
|
|
—
|
|
|
634
|
|
|
89
|
|
|
723
|
|
Total equity (deficit)
|
141,882
|
|
|
260,450
|
|
|
(1,800
|
)
|
|
(311,239
|
)
|
|
89,293
|
|
Total liabilities and equity (deficit)
|
$
|
598,783
|
|
|
$
|
297,464
|
|
|
$
|
16,645
|
|
|
$
|
(311,239
|
)
|
|
$
|
601,653
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Operations
Three Months June 30, 2016
|
|
Parent
Company
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating
Entries and
Eliminations
|
|
Consolidated
|
Revenues, net
|
$
|
23,847
|
|
|
$
|
23,634
|
|
|
$
|
11,838
|
|
|
$
|
(8,481
|
)
|
|
$
|
50,838
|
|
Cost of revenues
|
31,549
|
|
|
17,261
|
|
|
11,669
|
|
|
(8,311
|
)
|
|
52,168
|
|
Gross (loss) profit
|
(7,702
|
)
|
|
6,373
|
|
|
169
|
|
|
(170
|
)
|
|
(1,330
|
)
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
General and administrative
|
6,257
|
|
|
(192
|
)
|
|
96
|
|
|
—
|
|
|
6,161
|
|
Research and development
|
699
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
699
|
|
Selling and marketing
|
2,606
|
|
|
176
|
|
|
34
|
|
|
(170
|
)
|
|
2,646
|
|
Loss on idle aircraft
|
—
|
|
|
7,815
|
|
|
—
|
|
|
—
|
|
|
7,815
|
|
Impairment of goodwill
|
—
|
|
|
—
|
|
|
4,523
|
|
|
—
|
|
|
4,523
|
|
Impairment of other assets
|
1,480
|
|
|
4,647
|
|
|
—
|
|
|
—
|
|
|
6,127
|
|
Total operating expenses
|
11,042
|
|
|
12,446
|
|
|
4,653
|
|
|
(170
|
)
|
|
27,971
|
|
Operating loss
|
(18,744
|
)
|
|
(6,073
|
)
|
|
(4,484
|
)
|
|
—
|
|
|
(29,301
|
)
|
Interest expense, net
|
(9,302
|
)
|
|
(84
|
)
|
|
(89
|
)
|
|
—
|
|
|
(9,475
|
)
|
Other (expense) income, net
|
(717
|
)
|
|
7
|
|
|
682
|
|
|
—
|
|
|
(28
|
)
|
Net loss before income taxes
|
(28,763
|
)
|
|
(6,150
|
)
|
|
(3,891
|
)
|
|
—
|
|
|
(38,804
|
)
|
Income tax (benefit) expense
|
(320
|
)
|
|
—
|
|
|
228
|
|
|
—
|
|
|
(92
|
)
|
Net loss
|
(28,443
|
)
|
|
(6,150
|
)
|
|
(4,119
|
)
|
|
—
|
|
|
(38,712
|
)
|
Less: net income related to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(286
|
)
|
|
(286
|
)
|
Net loss attributable to Erickson Incorporated
|
$
|
(28,443
|
)
|
|
$
|
(6,150
|
)
|
|
$
|
(4,119
|
)
|
|
$
|
(286
|
)
|
|
$
|
(38,998
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Operations
Three Months June 30, 2015
|
|
Parent Company
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating
Entries and
Eliminations
|
|
Consolidated
|
Revenues, net
|
$
|
29,495
|
|
|
$
|
32,133
|
|
|
$
|
13,285
|
|
|
$
|
(7,894
|
)
|
|
$
|
67,019
|
|
Cost of revenues
|
23,264
|
|
|
31,687
|
|
|
11,999
|
|
|
(7,849
|
)
|
|
59,101
|
|
Gross profit
|
6,231
|
|
|
446
|
|
|
1,286
|
|
|
(45
|
)
|
|
7,918
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
General and administrative
|
4,742
|
|
|
337
|
|
|
768
|
|
|
—
|
|
|
5,847
|
|
Research and development
|
583
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
583
|
|
Selling and marketing
|
1,338
|
|
|
4
|
|
|
33
|
|
|
(45
|
)
|
|
1,330
|
|
Total operating expenses
|
6,663
|
|
|
341
|
|
|
801
|
|
|
(45
|
)
|
|
7,760
|
|
Operating (loss) income
|
(432
|
)
|
|
105
|
|
|
485
|
|
|
—
|
|
|
158
|
|
Interest expense, net
|
(9,172
|
)
|
|
(109
|
)
|
|
(94
|
)
|
|
—
|
|
|
(9,375
|
)
|
Other (expense) income, net
|
(367
|
)
|
|
143
|
|
|
(109
|
)
|
|
2
|
|
|
(331
|
)
|
Net (loss) income before income taxes
|
(9,971
|
)
|
|
139
|
|
|
282
|
|
|
2
|
|
|
(9,548
|
)
|
Income tax expense
|
342
|
|
|
—
|
|
|
349
|
|
|
—
|
|
|
691
|
|
Net (loss) income
|
(10,313
|
)
|
|
139
|
|
|
(67
|
)
|
|
2
|
|
|
(10,239
|
)
|
Less: net loss related to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
118
|
|
|
118
|
|
Net (loss) income attributable to Erickson Incorporated
|
$
|
(10,313
|
)
|
|
$
|
139
|
|
|
$
|
(67
|
)
|
|
$
|
120
|
|
|
$
|
(10,121
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Operations
Six Months Ended June 30, 2016
|
|
Parent
Company
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating
Entries and
Eliminations
|
|
Consolidated
|
Revenues, net
|
$
|
43,773
|
|
|
$
|
45,223
|
|
|
$
|
21,071
|
|
|
$
|
(14,400
|
)
|
|
$
|
95,667
|
|
Cost of revenues
|
62,029
|
|
|
33,230
|
|
|
20,031
|
|
|
(14,219
|
)
|
|
101,071
|
|
Gross (loss) profit
|
(18,256
|
)
|
|
11,993
|
|
|
1,040
|
|
|
(181
|
)
|
|
(5,404
|
)
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
General and administrative
|
12,100
|
|
|
18
|
|
|
535
|
|
|
—
|
|
|
12,653
|
|
Research and development
|
1,330
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,330
|
|
Selling and marketing
|
4,430
|
|
|
213
|
|
|
66
|
|
|
(181
|
)
|
|
4,528
|
|
Loss on idle aircraft
|
—
|
|
|
7,815
|
|
|
—
|
|
|
—
|
|
|
7,815
|
|
Impairment of goodwill
|
—
|
|
|
—
|
|
|
4,523
|
|
|
—
|
|
|
4,523
|
|
Impairment of other assets
|
1,480
|
|
|
4,647
|
|
|
—
|
|
|
—
|
|
|
6,127
|
|
Total operating expenses
|
19,340
|
|
|
12,693
|
|
|
5,124
|
|
|
(181
|
)
|
|
36,976
|
|
Operating loss
|
(37,596
|
)
|
|
(700
|
)
|
|
(4,084
|
)
|
|
—
|
|
|
(42,380
|
)
|
Interest expense, net
|
(18,458
|
)
|
|
(175
|
)
|
|
(89
|
)
|
|
—
|
|
|
(18,722
|
)
|
Other (expense) income, net
|
(1,703
|
)
|
|
11
|
|
|
653
|
|
|
—
|
|
|
(1,039
|
)
|
Net loss before income taxes
|
(57,757
|
)
|
|
(864
|
)
|
|
(3,520
|
)
|
|
—
|
|
|
(62,141
|
)
|
Income tax expense
|
2,373
|
|
|
—
|
|
|
205
|
|
|
—
|
|
|
2,578
|
|
Net loss
|
(60,130
|
)
|
|
(864
|
)
|
|
(3,725
|
)
|
|
—
|
|
|
(64,719
|
)
|
Less: net income related to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(263
|
)
|
|
(263
|
)
|
Net loss attributable to Erickson Incorporated
|
$
|
(60,130
|
)
|
|
$
|
(864
|
)
|
|
$
|
(3,725
|
)
|
|
$
|
(263
|
)
|
|
$
|
(64,982
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Operations
Six Months Ended June 30, 2015
|
|
Parent
Company
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating
Entries and
Eliminations
|
|
Consolidated
|
Revenues, net
|
53,823
|
|
|
67,477
|
|
|
26,177
|
|
|
(16,496
|
)
|
|
$
|
130,981
|
|
Cost of revenues
|
48,461
|
|
|
64,516
|
|
|
25,516
|
|
|
(16,417
|
)
|
|
122,076
|
|
Gross profit
|
5,362
|
|
|
2,961
|
|
|
661
|
|
|
(79
|
)
|
|
8,905
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
General and administrative
|
10,779
|
|
|
151
|
|
|
1,468
|
|
|
—
|
|
|
12,398
|
|
Research and development
|
1,461
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,461
|
|
Selling and marketing
|
3,045
|
|
|
54
|
|
|
65
|
|
|
(79
|
)
|
|
3,085
|
|
Impairment of goodwill
|
—
|
|
|
49,823
|
|
|
—
|
|
|
—
|
|
|
49,823
|
|
Impairment of other assets
|
3,441
|
|
|
2,749
|
|
|
953
|
|
|
—
|
|
|
7,143
|
|
Total operating expenses
|
18,726
|
|
|
52,777
|
|
|
2,486
|
|
|
(79
|
)
|
|
73,910
|
|
Operating loss
|
(13,364
|
)
|
|
(49,816
|
)
|
|
(1,825
|
)
|
|
—
|
|
|
(65,005
|
)
|
Interest expense, net
|
(18,201
|
)
|
|
(186
|
)
|
|
(200
|
)
|
|
—
|
|
|
(18,587
|
)
|
Other (expense) income, net
|
(2,110
|
)
|
|
162
|
|
|
296
|
|
|
(4
|
)
|
|
(1,656
|
)
|
Net loss before income taxes
|
(33,675
|
)
|
|
(49,840
|
)
|
|
(1,729
|
)
|
|
(4
|
)
|
|
(85,248
|
)
|
Income tax (benefit) expense
|
(199
|
)
|
|
—
|
|
|
273
|
|
|
—
|
|
|
74
|
|
Net loss
|
(33,476
|
)
|
|
(49,840
|
)
|
|
(2,002
|
)
|
|
(4
|
)
|
|
(85,322
|
)
|
Less: net loss related to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
231
|
|
|
231
|
|
Net loss attributable to Erickson Incorporated
|
$
|
(33,476
|
)
|
|
$
|
(49,840
|
)
|
|
$
|
(2,002
|
)
|
|
$
|
227
|
|
|
$
|
(85,091
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Cash Flows
Six Months Ended June 30, 2016
|
|
Parent
Company
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating
Entries and
Eliminations
|
|
Consolidated
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(60,130
|
)
|
|
$
|
(864
|
)
|
|
$
|
(3,725
|
)
|
|
$
|
—
|
|
|
$
|
(64,719
|
)
|
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
9,894
|
|
|
9,134
|
|
|
60
|
|
|
—
|
|
|
19,088
|
|
Impairment of goodwill
|
—
|
|
|
—
|
|
|
4,523
|
|
|
—
|
|
|
4,523
|
|
Impairment of other assets
|
1,480
|
|
|
4,647
|
|
|
—
|
|
|
—
|
|
|
6,127
|
|
Amortization of debt issuance costs
|
1,238
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,238
|
|
Amortization of debt discount
|
277
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
277
|
|
Stock-based compensation
|
137
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
137
|
|
Deferred income taxes
|
1,461
|
|
|
—
|
|
|
336
|
|
|
—
|
|
|
1,797
|
|
Loss (gain) on sales of aircraft and other property and equipment
|
231
|
|
|
933
|
|
|
(9
|
)
|
|
—
|
|
|
1,155
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
373
|
|
|
1,533
|
|
|
(3,017
|
)
|
|
—
|
|
|
(1,111
|
)
|
Prepaid expenses and other current assets
|
(696
|
)
|
|
192
|
|
|
(599
|
)
|
|
—
|
|
|
(1,103
|
)
|
Aircraft parts, net
|
(1,119
|
)
|
|
(2,906
|
)
|
|
166
|
|
|
—
|
|
|
(3,859
|
)
|
Other assets
|
(14
|
)
|
|
981
|
|
|
16
|
|
|
—
|
|
|
983
|
|
Aircraft held for sale
|
(1,359
|
)
|
|
(1,741
|
)
|
|
(583
|
)
|
|
—
|
|
|
(3,683
|
)
|
Accounts payable
|
6,408
|
|
|
7,713
|
|
|
540
|
|
|
—
|
|
|
14,661
|
|
Accrued expenses and other current liabilities
|
18,624
|
|
|
(17,239
|
)
|
|
1,970
|
|
|
—
|
|
|
3,355
|
|
Other long-term liabilities
|
(1,724
|
)
|
|
3,553
|
|
|
(4
|
)
|
|
—
|
|
|
1,825
|
|
Net cash (used in) provided by operating activities
|
(24,919
|
)
|
|
5,936
|
|
|
(326
|
)
|
|
—
|
|
|
(19,309
|
)
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Purchases of aircraft and property, plant and equipment
|
(615
|
)
|
|
(5,464
|
)
|
|
(6
|
)
|
|
—
|
|
|
(6,085
|
)
|
Proceeds from sales of aircraft and other property and equipment
|
6,401
|
|
|
—
|
|
|
467
|
|
|
—
|
|
|
6,868
|
|
Restricted cash
|
—
|
|
|
—
|
|
|
155
|
|
|
—
|
|
|
155
|
|
Net cash provided by (used in) investing activities
|
5,786
|
|
|
(5,464
|
)
|
|
616
|
|
|
—
|
|
|
938
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Credit facility payments
|
(56,643
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(56,643
|
)
|
Credit facility borrowings
|
79,891
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
79,891
|
|
Long-term debt principal payments, including capital lease payments
|
(3,896
|
)
|
|
(441
|
)
|
|
—
|
|
|
—
|
|
|
(4,337
|
)
|
Debt issuance costs
|
(276
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(276
|
)
|
Net cash provided by (used in) financing activities
|
19,076
|
|
|
(441
|
)
|
|
—
|
|
|
—
|
|
|
18,635
|
|
Effect of foreign currency exchange rates on cash and cash equivalents
|
841
|
|
|
—
|
|
|
49
|
|
|
—
|
|
|
890
|
|
Net increase in cash and cash equivalents
|
784
|
|
|
31
|
|
|
339
|
|
|
—
|
|
|
1,154
|
|
Cash and cash equivalents at beginning of period
|
13
|
|
|
71
|
|
|
2,045
|
|
|
—
|
|
|
2,129
|
|
Cash and cash equivalents at end of period
|
$
|
797
|
|
|
$
|
102
|
|
|
$
|
2,384
|
|
|
$
|
—
|
|
|
$
|
3,283
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Cash Flows
Six Months Ended June 30, 2015
|
|
Parent
Company
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating
Entries and
Eliminations
|
|
Consolidated
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(33,476
|
)
|
|
$
|
(49,840
|
)
|
|
$
|
(2,002
|
)
|
|
$
|
(4
|
)
|
|
$
|
(85,322
|
)
|
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
10,898
|
|
|
7,399
|
|
|
419
|
|
|
—
|
|
|
18,716
|
|
Impairment of goodwill
|
—
|
|
|
49,823
|
|
|
—
|
|
|
—
|
|
|
49,823
|
|
Impairment of other assets
|
3,441
|
|
|
2,749
|
|
|
953
|
|
|
—
|
|
|
7,143
|
|
Amortization of debt issuance costs
|
1,254
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,254
|
|
Amortization of debt discount
|
406
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
406
|
|
Stock-based compensation
|
97
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
97
|
|
Deferred income taxes
|
(1,627
|
)
|
|
—
|
|
|
(60
|
)
|
|
—
|
|
|
(1,687
|
)
|
(Gain) loss on sales of aircraft and other property and equipment
|
(91
|
)
|
|
(204
|
)
|
|
24
|
|
|
—
|
|
|
(271
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
(2,984
|
)
|
|
2,537
|
|
|
(4,029
|
)
|
|
4
|
|
|
(4,472
|
)
|
Prepaid expenses and other current assets
|
433
|
|
|
(141
|
)
|
|
(104
|
)
|
|
22
|
|
|
210
|
|
Aircraft parts, net
|
977
|
|
|
512
|
|
|
(758
|
)
|
|
—
|
|
|
731
|
|
Other assets
|
500
|
|
|
(1,964
|
)
|
|
(151
|
)
|
|
—
|
|
|
(1,615
|
)
|
Accounts payable
|
1,034
|
|
|
(287
|
)
|
|
(722
|
)
|
|
—
|
|
|
25
|
|
Accrued expenses and other current liabilities
|
9,097
|
|
|
(12,856
|
)
|
|
3,515
|
|
|
(22
|
)
|
|
(266
|
)
|
Other liabilities
|
263
|
|
|
(125
|
)
|
|
—
|
|
|
—
|
|
|
138
|
|
Net cash (used in) provided by operating activities
|
(9,778
|
)
|
|
(2,397
|
)
|
|
(2,915
|
)
|
|
—
|
|
|
(15,090
|
)
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Purchases of aircraft and property, plant and equipment
|
(9,770
|
)
|
|
(1,997
|
)
|
|
(72
|
)
|
|
—
|
|
|
(11,839
|
)
|
Proceeds from sale of aircraft
|
—
|
|
|
4,500
|
|
|
—
|
|
|
—
|
|
|
4,500
|
|
Restricted cash
|
—
|
|
|
—
|
|
|
124
|
|
|
—
|
|
|
124
|
|
Net cash (used in) provided by investing activities
|
(9,770
|
)
|
|
2,503
|
|
|
52
|
|
|
—
|
|
|
(7,215
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Credit facility payments
|
(73,182
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(73,182
|
)
|
Credit facility borrowings
|
97,553
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
97,553
|
|
Long-term debt principal payments, including capital lease payments
|
(3,001
|
)
|
|
(339
|
)
|
|
—
|
|
|
—
|
|
|
(3,340
|
)
|
Other long-term borrowings
|
(84
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(84
|
)
|
Debt issuance costs
|
(137
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(137
|
)
|
Shares withheld for payment of taxes
|
(32
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(32
|
)
|
Net cash provided by (used in) financing activities
|
21,117
|
|
|
(339
|
)
|
|
—
|
|
|
—
|
|
|
20,778
|
|
Effect of foreign currency exchange rates on cash and cash equivalents
|
(1,560
|
)
|
|
—
|
|
|
(244
|
)
|
|
—
|
|
|
(1,804
|
)
|
Net increase (decrease) in cash and cash equivalents
|
9
|
|
|
(233
|
)
|
|
(3,107
|
)
|
|
—
|
|
|
(3,331
|
)
|
Cash and cash equivalents at beginning of period
|
7
|
|
|
274
|
|
|
4,816
|
|
|
—
|
|
|
5,097
|
|
Cash and cash equivalents at end of period
|
$
|
16
|
|
|
$
|
41
|
|
|
$
|
1,709
|
|
|
$
|
—
|
|
|
$
|
1,766
|
|
NOTE 10
—SUBSEQUENT EVENT
In August 2016, we initiated a restructuring plan designed to right-size the Company’s staffing to meet current revenue levels. We are implementing a reduction-in-force of a combination of employees and contractors totaling approximately
135
, which is expected to be completed by September 30, 2016. The terminated employees will be granted termination benefits, which will be expensed and paid in the third quarter on the date of employee communication. The total cost of these termination benefits is expected to range between
$0.5 million
and
$1.0 million
.