10-Q


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549  
_________________________
FORM 10-Q
_________________________
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2016
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________.
Commission File Number 001-35482
_________________________
ERICKSON INCORPORATED
(Exact name of registrant as specified in its charter)
  _________________________
Delaware
 
93-1307561
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
5550 SW Macadam Avenue, Suite 200, Portland, Oregon
 
97239
(Address of principal executive offices)
 
(Zip Code)
(503) 505-5800
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: 
Title of each class
 
Name of each exchange on which registered
Common Stock, $0.0001 par value
 
The NASDAQ Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: N/A
(Title of each class) 
 _________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. 
 
Large accelerated filer
 
¨
  
Accelerated filer
 
¨

 
Non-accelerated filer
 
ý  (Do not check if a smaller reporting company)
  
Smaller reporting company
 
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý
On April 29, 2016, 13,895,421 shares of common stock, par value $0.0001, were outstanding.

1
Table of Contents

ERICKSON INCORPORATED
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2016

TABLE OF CONTENTS
 
 
 
Page
 
 
 
 
 
 
 
 
 
 


2
Table of Contents

PART I—FINANCIAL INFORMATION
 
Item 1.    Financial Statements.

ERICKSON INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)


March 31,
2016
 
December 31,
2015
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
3,291

 
$
2,129

Restricted cash
228

 
373

Accounts receivable, net
34,983

 
40,520

Prepaid expenses and other current assets
3,784

 
5,233

Total current assets
42,286

 
48,255

Aircraft, net
185,746

 
186,132

Aircraft parts, net
140,068

 
139,609

Aircraft held for sale
10,465

 
12,348

Property, plant and equipment, net
25,163

 
25,553

Other assets
9,320

 
10,261

Other intangible assets, net
15,250

 
15,787

Goodwill, net
164,111

 
163,708

Total assets
$
592,409

 
$
601,653

LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
13,742

 
$
13,660

Current portion of long-term debt
8,294

 
8,205

Accrued expenses and other current liabilities
25,720

 
17,828

Total current liabilities
47,756

 
39,693

Credit facility
105,064

 
96,165

Long-term debt, less current portion
362,088

 
364,782

Other liabilities
13,327

 
11,720

Total liabilities
528,235

 
512,360

Equity:
 
 
 
Erickson Incorporated shareholders’ equity:
 
 
 
Common stock; $0.0001 par value; 110,000,000 shares authorized; 13,895,421 issued and outstanding as of March 31, 2016 and December 31, 2015
1

 
1

Additional paid-in capital
181,353

 
181,259

Accumulated deficit
(110,885
)
 
(84,901
)
Accumulated other comprehensive loss, net of tax
(7,012
)
 
(7,789
)
Total Erickson Incorporated shareholders’ equity
63,457

 
88,570

Noncontrolling interests’ equity
717

 
723

Total equity
64,174

 
89,293

Total liabilities and equity
$
592,409

 
$
601,653


The accompanying notes are an integral part of these consolidated financial statements

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Table of Contents

ERICKSON INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)(Unaudited) 
 
Three Months Ended March 31,

2016
 
2015
Revenues, net
$
46,829

 
$
66,162

Cost of revenues
50,903

 
64,788

Gross profit (loss)
(4,074
)
 
1,374

Operating expenses:
 
 
 
General and administrative
6,492

 
6,938

Research and development
631

 
878

Selling and marketing
1,882

 
1,755

Impairment of goodwill
—

 
49,823

Impairment of other assets
—

 
7,143

Total operating expenses
9,005

 
66,537

Operating loss
(13,079
)
 
(65,163
)
Interest expense, net
(9,247
)
 
(9,212
)
Other expense, net
(1,011
)
 
(1,325
)
Net loss before income tax expense (benefit)
(23,337
)
 
(75,700
)
Income tax expense (benefit)
2,670

 
(617
)
Net loss
(26,007
)
 
(75,083
)
Less: Net loss related to noncontrolling interests
23

 
113

Net loss attributable to Erickson Incorporated
$
(25,984
)
 
$
(74,970
)
Net loss per share attributable to Erickson Incorporated common shareholders—Basic and Diluted
$
(1.87
)
 
$
(5.42
)
Weighted average shares outstanding—Basic and Diluted
13,895,421

 
13,823,818


The accompanying notes are an integral part of these consolidated financial statements

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Table of Contents

ERICKSON INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)

 
Three Months Ended March 31,
 
2016
 
2015
Net loss
$
(26,007
)
 
$
(75,083
)
Other comprehensive income (loss)—Foreign currency translation adjustment
794

 
(2,591
)
Comprehensive loss
(25,213
)
 
(77,674
)
Less: Comprehensive loss attributable to noncontrolling interests
6

 
236

Comprehensive loss attributable to Erickson Incorporated
$
(25,207
)
 
$
(77,438
)

The accompanying notes are an integral part of these consolidated financial statements

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Table of Contents

ERICKSON INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
Three Months Ended March 31,

2016
 
2015
Cash flows from operating activities:
 
 
 
Net loss
$
(26,007
)
 
$
(75,083
)
Adjustments to reconcile loss to net cash used in operating activities:
 
 
 
Depreciation and amortization
9,585

 
8,818

Impairment of goodwill
—

 
49,823

Impairment of other assets
—

 
7,143

Deferred income taxes
2,166

 
(1,418
)
Amortization of debt issuance costs
602

 
624

Amortization of debt discount
149

 
177

Stock-based compensation
94

 
145

Other non-cash (income) expense, net
(10
)
 
6

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
5,751

 
(8,059
)
Prepaid expenses and other current assets
1,463

 
39

Aircraft parts, net
(3,871
)
 
(1,320
)
Aircraft held for sale
2,012

 
—

Other assets
963

 
2,390

Accounts payable
41

 
(2,205
)
Accrued and other current liabilities
7,387

 
12,323

Other liabilities
(466
)
 
(144
)
Net cash used in operating activities
(141
)
 
(6,741
)
Cash flows from investing activities:
 
 
 
Purchases of aircraft and property, plant and equipment
(4,774
)
 
(5,674
)
Restricted cash
155

 
(51
)
Net cash used in investing activities
(4,619
)
 
(5,725
)
Cash flows from financing activities:
 
 
 
Credit facility payments
(22,355
)
 
(34,211
)
Credit facility borrowings
31,071

 
48,797

Long-term debt principal payments, including capital lease payments
(3,169
)
 
(2,140
)
Other long-term borrowings
—

 
(48
)
Debt issuance costs
—

 
(70
)
Net cash provided by financing activities
5,547

 
12,328

Effect of foreign currency exchange rates on cash and cash equivalents
375

 
(2,085
)
Net increase (decrease) in cash and cash equivalents
1,162

 
(2,223
)
Cash and cash equivalents at beginning of period
2,129

 
5,097

Cash and cash equivalents at end of period
$
3,291

 
$
2,874

Supplemental disclosure of cash flow information:
 
 
 
Cash paid for interest
$
2,056

 
$
1,594

Cash paid for income taxes, net
232

 
768

Supplemental disclosure of non-cash investing and financing activities:
 
 
 
Note payable incurred for the purchase of aircraft parts
—

 
9,356


The accompanying notes are an integral part of these consolidated financial statements

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Table of Contents

ERICKSON INCORPORATED AND SUBSIDIARIES
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 own, 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 certain aircraft, as well as aircraft sales.

As of March 31, 2016, the Company has a diverse fleet of 74 aircraft consisting of: 20 heavy lift helicopters, known as “Aircranes”; 47 rotor-wing aircraft; and 7 fixed-wing aircraft. The Company’s fleet includes 13 aircraft held for sale and operations that span the globe with a presence on six continents and 32 aircraft deployed outside of North America as of March 31, 2016.

As a global provider of aviation services, a significant portion of our revenues are generated outside of North America and represented 69% and 75% of revenues for the three months ended March 31, 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 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 three months ended March 31, 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 months ended March 31, 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.

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.


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Table of Contents

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) identify the contract with the customer; ii) identify the performance obligations in the contract; iii) determine the transaction price; iv) allocate the transaction price to the performance obligations, and v) recognize 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 is intended to improve financial reporting about leasing transactions. ASU 2016-02 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, of 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.

NOTE 2—BALANCE SHEET COMPONENTS

Accounts receivable, net consisted of the following (in thousands):
 
March 31, 2016
 
December 31, 2015
Trade accounts receivable
$
30,031

 
$
35,039

Other receivables
3,272

 
4,244

Costs in excess of billings
2,238

 
1,704

 
35,541

 
40,987

Less: allowance for doubtful accounts
(558
)
 
(467
)

$
34,983

 
$
40,520


Activity in the allowance for doubtful accounts was as follows (in thousands):
 
Three Months Ended March 31,
 
2016
 
2015
Balance as of beginning of period
$
467

 
$
739

Provisions
201

 
38

Amounts written-off, net of recoveries
(110
)
 
(589
)
Balance as of end of period
$
558

 
$
188



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Table of Contents

The Company had bad debt expense of $0.2 million for the three months ended March 31, 2016, with zero for the three months ended March 31, 2015.

The following is a summary of customers that accounted for at least 10% of trade account receivable balance as of March 31, 2016 or December 31, 2015:
 
Segment
 
March 31, 2016
 
December 31, 2015
Customer A
Global Defense and Security
 
14.4
%
 
11.9
%
Customer B
Commercial Aviation Services
 
10.8

 
—

Customer C
Global Defense and Security
 
8.3

 
14.0

Customer D
Global Defense and Security
 
5.6

 
11.2

 
 
 
39.1
%
 
37.1
%

Aircraft, Net and Property, Plant and Equipment, Net consist of the following (in thousands):
 
March 31, 2016
 
December 31, 2015
Aircraft:
 
 
 
Aircraft
$
131,884

 
$
132,530

Aircraft under capital lease
3,866

 
3,866

Construction-in-progress
10,815

 
10,056

 
146,565

 
146,452

Less: accumulated depreciation and amortization
(44,152
)
 
(41,401
)
Add: deferred overhauls, net
83,333

 
81,081

Aircraft, net
$
185,746

 
$
186,132

Property, plant and equipment:
 
 
 
Land and land improvements
$
308

 
$
308

Buildings
5,393

 
5,219

Vehicles and equipment
34,522

 
34,115

Assets under capital lease—hangar and vehicles
5,440

 
5,440

Construction-in-progress
4,733

 
4,323

 
50,396

 
49,405

Less: accumulated depreciation and amortization
(25,233
)
 
(23,852
)
Property, plant and equipment, net
$
25,163

 
$
25,553


Depreciation and amortization expense consisted of the following (in thousands):
 
Three Months Ended March 31,
 
2016
 
2015
Depreciation expense
$
4,252

 
$
4,733

Amortization expense:
 
 
 
Deferred overhauls
4,696

 
3,445

Assets under capital lease
100

 
—

Total amortization expense
4,796

 
3,445

Total depreciation and amortization expense
$
9,048

 
$
8,178


Aircraft Parts, Net consisted of the following (in thousands):

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Table of Contents

 
March 31, 2016
 
December 31, 2015
Finished parts
$
133,522

 
$
134,410

Work-in-process
11,481

 
10,405

Less: excess and obsolete reserve
(4,935
)
 
(5,206
)

$
140,068

 
$
139,609


Activity for the excess and obsolete reserve was as follows (in thousands):
 
Three Months Ended March 31,
 
2016
 
2015
Balance as of beginning of period
$
5,206

 
$
5,640

Provision for excess and obsolete aircraft parts
193

 
114

Write-off of excess and obsolete aircraft parts
(464
)
 
(204
)
Balance as of end of period
$
4,935

 
$
5,550


Aircraft Held for Sale activity during the first quarter of 2016 consisted of the following (in thousands):
Balance as of January 1, 2015
$
12,348

Book value of aircraft sold
(2,000
)
Fluctuations due to foreign currency translation adjustments
117

Balance as of March 31, 2016
$
10,465


Other Intangible Assets, Net consisted of the following (in thousands):
 
Reportable Segment
 
Useful Life
(in years)
 
March 31,
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
 
 
 
 
(8,755
)
 
(8,218
)

 
 
 
 
$
15,250

 
$
15,787


During the three months ended March 31, 2016 and 2015, amortization expense for intangible assets was $0.5 million and $0.6 million, respectively, and was recorded in cost of revenues. As of March 31, 2016, future estimated amortization expense is as follows (in thousands):
Nine months ending December 31:
 
2016
$
1,607

Year ending December 31:
 
2017
2,144

2018
2,144

2019
2,144

2020
2,144

Thereafter
2,862

 
$
13,045



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Goodwill, Net

The changes in the carrying amount of goodwill for the three months ended March 31, 2016 are 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:
 
 
 
 
 
 
 
Fluctuations due to foreign currency translation adjustments
—

 
403

 
—

 
403

Balance as of March 31, 2016:
 
 
 
 
 
 
 
Goodwill, gross
207,128

 
22,536

 
5,542

 
235,206

Accumulated impairment losses
(71,095
)
 
—

 
—

 
(71,095
)
Goodwill, net
$
136,033

 
$
22,536

 
$
5,542

 
$
164,111


Credit Facility
 
Our $140.0 million revolving credit facility (“Credit Facility”) consisted of the following (in thousands):


March 31, 2016
 
December 31, 2015
Borrowings outstanding under Credit Facility
$
106,712

 
$
97,997

Less: deferred debt issuance costs
(1,648
)
 
(1,832
)
 
$
105,064

 
$
96,165


The Credit Facility is primarily used for general corporate purposes and expires May 2, 2018. The interest rate is 225-450 basis points over the London Interbank Offered Rate or prime base rate depending on the Company’s senior leverage ratio at the time of borrowing and was a weighted average of 5.2% as of March 31, 2016.

The Company 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.

The Credit Facility contains certain covenants, of which the Company was in compliance with as of March 31, 2016.

As of March 31, 2016, the Company had $1.7 million of outstanding standby letters of credit under the Credit Facility, with a maximum borrowing availability of $14.1 million.

Effective April 29, 2016, the Credit Facility was amended to include, but not limited to, a requirement that a certain level of borrowing capacity be maintained, known as “Excess Availability.” For the period from April 29, 2016 through May 29, 2016, the required Excess Availability is $10 million; for May 30, 2016 through July 15, 2016, $15 million; for July 16, 2016 through September 29, 2016, $17.5 million; and for September 30, 2016 through December 31, 2016, $20 million. Additionally, 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.

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Table of Contents


Long-term Debt
 
Long-term debt consisted of the following (in thousands):

 
March 31, 2016
 
December 31, 2015
Senior notes payable
$
355,000

 
$
355,000

Subordinated notes payable
10,628

 
11,478

Capital lease obligations
8,134

 
8,417

Other notes payable
4,215

 
6,254

Total long-term debt before unamortized debt discounts and deferred debt issuance costs
377,977

 
381,149

Unamortized debt discounts
(621
)
 
(770
)
Deferred debt issuance costs
(6,974
)
 
(7,392
)
Total long-term debt
370,382

 
372,987

Less: current portion of long-term debt
(8,294
)
 
(8,205
)
Long-term debt, less current portion
$
362,088

 
$
364,782


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 March 31, 2016, the carrying amount of the Company’s long-term debt was $370.4 million and its estimated aggregate fair value was $243.1 million, consisting of $220.7 million and $22.4 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 March 31, 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 March 31, 2016 and December 31, 2015, the fair value of such foreign currency forward contracts was $0.8 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 consists of goodwill.


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NOTE 4—EQUITY

The activity in equity during the three months ended March 31, 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
—

 
—

 
94

 
—

 
—

 
 
—

Net loss
—

 
—

 
—

 
(25,984
)
 
—

 
 
(23
)
Other comprehensive income—Foreign currency translation adjustment
—

 
—

 
—

 
—

 
777

 
 
17

Balance at March 31, 2016
13,895,421

 
$
1

 
$
181,353

 
$
(110,885
)
 
$
(7,012
)
 
 
$
717

 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2014
13,823,818

 
$
1

 
$
181,018

 
$
1,812

 
$
(2,544
)
 
 
$
726

Stock-based compensation
—

 
—

 
145

 
—

 
—

 
 
—

Net loss
—

 
—

 
—

 
(74,970
)
 
—

 
 
(113
)
Other comprehensive loss—Foreign currency translation adjustment
—

 
—

 
—

 
—

 
(2,468
)
 
 
(123
)
Balance at March 31, 2015
13,823,818

 
$
1

 
$
181,163

 
$
(73,158
)
 
$
(5,012
)
 
 
$
490


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 is derived from firefighting, timber harvesting, infrastructure construction, oil and gas services, and other commercial services.

Global Defense and Security segment revenues is 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 its services for defense and security, and transportation and other government-related activities.

Manufacturing and MRO segment revenues is 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):

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Three Months Ended March 31,
 
2016
 
2015
Revenues, net:
 
 
 
Commercial Aviation Services
$
19,946

 
$
26,253

Global Defense and Security
19,069

 
32,875

Manufacturing and MRO
7,814

 
7,034

Total net revenues
$
46,829

 
$
66,162

Gross profit (loss):
 
 
 
Commercial Aviation Services
$
(4,358
)
 
$
(4,687
)
Global Defense and Security
(959
)
 
4,362

Manufacturing and MRO
1,243

 
1,699

Total gross profit (loss)
(4,074
)
 
1,374

Less: operating expenses
9,005

 
66,537

Operating loss
$
(13,079
)
 
$
(65,163
)

Customers that accounted for at least 10% of the Company’s net revenues for the three months ended March 31, 2016 or 2015:
 
 
 
Three Months Ended March 31,
 
Segment
 
2016
 
2015
Customer C
Global Defense and Security
 
21.7
%
 
20.5
%
Customer D
Commercial Aviation Services
 
15.5

 
12.8

Customer E
Global Defense and Security
 
15.0

 
10.3

 
 
 
52.2
%
 
43.6
%

Revenues, net by geographic area was as follows (in thousands):
 
Three Months Ended March 31,

2016
 
2015
Revenues, net:
 
 
 
North America
$
14,745

 
$
16,857

Middle East
10,162

 
16,557

Australia
7,282

 
8,450

Africa
7,043

 
6,793

South America
3,835

 
11,037

Asia
2,352

 
5,615

Europe
1,410

 
853

 
$
46,829

 
$
66,162


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.


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Table of Contents

Assets by reportable segment was as follows (in thousands):

March 31, 2016
 
December 31, 2015
Assets:
 
 
 
Global Defense and Security
$
168,406

 
$
173,882

Commercial Aviation Services
41,220

 
41,857

Manufacturing and MRO
17,323

 
25,623

Corporate(1)
4,019

 
3,917

Aircraft held for sale
10,465

 
12,348

Fixed Assets(2)
350,976

 
344,026

 
$
592,409

 
$
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 months ended March 31, 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 for these two periods, shares of 165,000 and 20,357, respectively, related to stock-based awards were excluded from the computation of diluted loss per common share as their effect would have been anti-dilutive.

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. Evergreen Helicopters, Inc. (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. 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. Evergreen Helicopters, Inc. (“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

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Table of Contents

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. 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.

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 Taxi Aero Corporation (“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 March 31, 2016, the Company’s consolidated balance sheet includes EuAC and Costa Do Sol assets of $3.3 million and liabilities of $1.4 million, and EuAC and Costa Do Sol assets of $3.1 million and liabilities of $1.3 million as of December 31, 2015.


16
Table of Contents

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”). The following presents the condensed consolidating financial information for:
 
•
Erickson Incorporated (the ‘‘Parent Company’’), the issuer of the guaranteed obligations;

•
Guarantor subsidiaries, on a combined basis, as specified in the indenture related to the Company’s obligations under the 2020 Senior Notes;

•
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 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.


17
Table of Contents

 
Condensed Consolidating Balance Sheet 
 March 31, 2016

Parent
 Company
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Consolidating
Entries and
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
1,038

 
$
22

 
$
2,231

 
$
—

 
$
3,291

Restricted cash
—

 
—

 
228

 
—

 
228

Accounts receivable, net
14,127

 
12,314

 
8,504

 
38

 
34,983

Prepaid expenses and other current assets
2,708

 
670

 
406

 
—

 
3,784

Total current assets
17,873

 
13,006

 
11,369

 
38

 
42,286

Aircraft, net
124,990

 
60,223

 
533

 
—

 
185,746

Aircraft parts, net
112,105

 
27,571

 
437

 
(45
)
 
140,068

Aircraft held for sale
3,880

 
5,316

 
1,269

 
—

 
10,465

Property, plant and equipment, net
19,988

 
4,579

 
596

 
—

 
25,163

Other assets
311,903

 
7,233

 
655

 
(310,471
)
 
9,320

Other intangible assets, net
2,205

 
13,045

 
—

 
—

 
15,250

Goodwill, net
—

 
160,533

 
4,340

 
(762
)
 
164,111

Total assets
$
592,944

 
$
291,506

 
$
19,199

 
$
(311,240
)
 
$
592,409

Liabilities and equity (deficit)
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable
$
6,192

 
$
6,237

 
$
1,313

 
$
—

 
$
13,742

Current portion of long-term debt
7,363

 
931

 
—

 
—

 
8,294

Accrued expenses and other current liabilities
23,677

 
692

 
1,351

 
—

 
25,720

Total current liabilities
37,232

 
7,860

 
2,664

 
—

 
47,756

Credit facility
105,064

 
—

 
—

 
—

 
105,064

Long-term debt, less current portion
360,127

 
1,961

 
—

 
—

 
362,088

Other liabilities
(20,024
)
 
15,949

 
17,402

 
—

 
13,327

Total liabilities
482,399

 
25,770

 
20,066

 
—

 
528,235

Equity (deficit):
 
 
 
 
 
 
 
 
 
Erickson Incorporated shareholders’ equity (deficit):
 
 
 
 
 
 
 
 
 
Common stock
1

 
—

 
7,053

 
(7,053
)
 
1

Additional paid-in capital
181,353

 
297,994

 
33

 
(298,027
)
 
181,353

Accumulated deficit
(66,008
)
 
(32,258
)
 
(7,152
)
 
(5,467
)
 
(110,885
)
Accumulated other comprehensive loss
(4,801
)
 
—

 
(1,434
)
 
(777
)
 
(7,012
)
Total Erickson Incorporated shareholders’ equity (deficit)
110,545

 
265,736

 
(1,500
)
 
(311,324
)
 
63,457

Noncontrolling interests
—

 
—

 
633

 
84

 
717

Total equity (deficit)
110,545

 
265,736

 
(867
)
 
(311,240
)
 
64,174

Total liabilities and equity (deficit)
$
592,944

 
$
291,506

 
$
19,199

 
$
(311,240
)
 
$
592,409


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Table of Contents

 
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
125,095

 
60,501

 
536

 
—

 
186,132

Aircraft parts, net
111,735

 
27,631

 
288

 
(45
)
 
139,609

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


19
Table of Contents

 
Condensed Consolidating Statement of Operations 
 Three Months March 31, 2016

Parent 
Company
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Consolidating
Entries and
Eliminations
 
Consolidated
Revenues, net
$
21,926

 
$
21,589

 
$
9,233

 
$
(5,919
)
 
$
46,829

Cost of revenues
32,480

 
15,969

 
8,362

 
(5,908
)
 
50,903

Gross profit (loss)
(10,554
)
 
5,620

 
871

 
(11
)
 
(4,074
)
Operating expenses:
 
 
 
 
 
 
 
 
 
General and administrative
5,843

 
210

 
439

 
—

 
6,492

Research and development
631

 
—

 
—

 
—

 
631

Selling and marketing
1,824

 
37

 
32

 
(11
)
 
1,882

Total operating expenses
8,298

 
247

 
471

 
(11
)
 
9,005

Operating income (loss)
(18,852
)
 
5,373

 
400

 
—

 
(13,079
)
Interest expense, net
(9,156
)
 
(91
)
 
—

 
—

 
(9,247
)
Other income (expense), net
(986
)
 
4

 
(29
)
 
—

 
(1,011
)
Net income (loss) before income taxes
(28,994
)
 
5,286

 
371

 
—

 
(23,337
)
Income tax expense (benefit)
2,693

 
—

 
(23
)
 
—

 
2,670

Net income (loss)
(31,687
)
 
5,286

 
394

 
—

 
(26,007
)
Less: Net loss related to noncontrolling interests
—

 
—

 
—

 
23

 
23

Net income (loss) attributable to Erickson Incorporated
$
(31,687
)
 
$
5,286

 
$
394

 
$
23

 
$
(25,984
)

 
Condensed Consolidating Statement of Operations 
 Three Months March 31, 2015

Parent Company
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Consolidating
Entries and
Eliminations
 
Consolidated
Revenues, net
$
24,329

 
$
37,544

 
$
12,892

 
$
(8,603
)
 
$
66,162

Cost of revenues
25,197

 
34,642

 
13,517

 
(8,568
)
 
64,788

Gross profit (loss)
(868
)
 
2,902

 
(625
)
 
(35
)
 
1,374

Operating expenses:
 
 
 
 
 
 
 
 
 
General and administrative
6,038

 
202

 
698

 
—

 
6,938

Research and development
878

 
—

 
—

 
—

 
878

Selling and marketing
1,707

 
50

 
33

 
(35
)
 
1,755

Impairment of goodwill
—

 
49,823

 
—

 
—

 
49,823

Impairment of other assets
3,441

 
2,749

 
953

 
—

 
7,143

Total operating expenses
12,064

 
52,824

 
1,684

 
(35
)
 
66,537

Operating loss
(12,932
)
 
(49,922
)
 
(2,309
)
 
—

 
(65,163
)
Interest expense, net
(9,030
)
 
(76
)
 
(106
)
 
—

 
(9,212
)
Other income (expense), net
(1,743
)
 
19

 
405

 
(6
)
 
(1,325
)
Net loss before income taxes
(23,705
)
 
(49,979
)
 
(2,010
)
 
(6
)
 
(75,700
)
Income tax benefit
(542
)
 
—

 
(75
)
 
—

 
(617
)
Net loss
(23,163
)
 
(49,979
)
 
(1,935
)
 
(6
)
 
(75,083
)
Less: Net loss related to noncontrolling interests
—

 
—

 
—

 
113

 
113

Net loss attributable to Erickson Incorporated
$
(23,163
)
 
$
(49,979
)
 
$
(1,935
)
 
$
107

 
$
(74,970
)

20
Table of Contents

 
Condensed Consolidating Statement of Cash Flows 
 Three Months March 31, 2016

Parent
 Company
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Consolidating
Entries and
Eliminations
 
Consolidated
Cash flows from operating activities:
 
 
 
 
 
 
 
 
 
Net income (loss)
$
(31,687
)
 
$
5,286

 
$
394

 
$
—

 
$
(26,007
)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
 
 
 
 
 
 
 
 
 
Depreciation and amortization
4,640

 
4,913

 
32

 
—

 
9,585

Amortization of debt issuance costs
602

 
—

 
—

 
—

 
602

Amortization of debt discount
149

 
—

 
—

 
—

 
149

Stock-based compensation
94

 
—

 
—

 
—

 
94

Deferred income taxes
2,335

 
—

 
(169
)
 
—

 
2,166

Other non-cash income, net
—

 
—

 
(10
)
 
—

 
(10
)
Changes in operating assets and liabilities:
 
 
 
 
 
 
 
 
 
Accounts receivable
3,926

 
3,573

 
(1,748
)
 
—

 
5,751

Prepaid expenses and other current assets
1,189

 
358

 
(84
)
 
—

 
1,463

Aircraft parts, net
(4,219
)
 
462

 
(114
)
 
—

 
(3,871
)
Other assets
(106
)
 
1,077

 
(8
)
 
—

 
963

Aircraft held for sale
2,000

 
—

 
12

 
—

 
2,012

Accounts payable
14

 
(33
)
 
60

 
—

 
41

Accrued and other current liabilities
16,767

 
(10,932
)
 
1,552

 
—

 
7,387

Other long-term liabilities
(401
)
 
(63
)
 
(2
)
 
—

 
(466
)
Net cash provided by (used in)operating activities
(4,697
)
 
4,641

 
(85
)
 
—

 
(141
)
Cash flows from investing activities:
 
 
 
 
 
 
 
 
 
Purchases of aircraft and property, plant and equipment
(297
)
 
(4,473
)
 
(4
)
 
—

 
(4,774
)
Restricted cash
—

 
—

 
155

 
—

 
155

Net cash provided by (used in) investing activities
(297
)
 
(4,473
)
 
151

 
—

 
(4,619
)
Cash flows from financing activities:
 
 
 
 
 
 
 
 
 
Credit Facility payments
(22,355
)
 
—

 
—

 
—

 
(22,355
)
Credit Facility borrowings
31,071

 
—

 
—

 
—

 
31,071

Long-term debt principal payments, including capital lease payments
(2,952
)
 
(217
)
 
—

 
—

 
(3,169
)
Net cash provided by (used in) financing activities
5,764

 
(217
)
 
—

 
—

 
5,547

Effect of foreign currency exchange rates on cash and cash equivalents
255

 
—

 
120

 
—

 
375

Net increase (decrease) in cash and cash equivalents
1,025

 
(49
)
 
186

 
—

 
1,162

Cash and cash equivalents at beginning of period
13

 
71

 
2,045

 
—

 
2,129

Cash and cash equivalents at end of period
$
1,038

 
$
22

 
$
2,231

 
$
—

 
$
3,291


21
Table of Contents

 
Condensed Consolidating Statement of Cash Flows 
 Three Months March 31, 2015

Parent
Company
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Consolidating
Entries and
Eliminations
 
Consolidated
Cash flows from operating activities:
 
 
 
 
 
 
 
 
 
Net loss
$
(23,163
)
 
$
(49,979
)
 
$
(1,935
)
 
$
(6
)
 
$
(75,083
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
 
 
 
 
 
 
Depreciation and amortization
5,272

 
3,328

 
218

 
—

 
8,818

Impairment of goodwill