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Erickson Inc. – ‘8-K/A’ for 5/2/13 – EX-99.3

On:  Monday, 6/10/13, at 8:00am ET   ·   For:  5/2/13   ·   Accession #:  1193125-13-252455   ·   File #:  1-35482

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 6/10/13  Erickson Inc.                     8-K/A:9     5/02/13    6:1.4M                                   RR Donnelley/FA

Amendment to Current Report   —   Form 8-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 8-K/A       Amendment to Current Report                         HTML     24K 
 2: EX-23.1     Consent of Experts or Counsel                       HTML      6K 
 3: EX-23.2     Consent of Experts or Counsel                       HTML      6K 
 4: EX-99.1     Miscellaneous Exhibit                               HTML    435K 
 5: EX-99.2     Miscellaneous Exhibit                               HTML    157K 
 6: EX-99.3     Miscellaneous Exhibit                               HTML    505K 


EX-99.3   —   Miscellaneous Exhibit


This exhibit is an HTML Document rendered as filed.  [ Alternative Formats ]



  EX-99.3  

Exhibit 99.3

UNAUDITED CONDENSED PRO FORMA COMBINED FINANCIAL INFORMATION

The following unaudited condensed combined pro forma financial information combines the historical consolidated statement of comprehensive income and consolidated balance sheet of Erickson Air-Crane Incorporated (the “Company”) and the historical consolidated statement of income and consolidated balance sheet of Evergreen Helicopters, Inc. (“EHI”), and gives effect to the debt offering, the promissory notes, the preferred stock and the new ABL Revolver, which transactions occurred in connection with the Company’s acquisition of EHI and are collectively refereed to as the “acquisition.” These historical financial statements were prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The unaudited condensed combined pro forma financial information gives effect to the acquisition as if it had occurred on December 31, 2012 for the purposes of the unaudited condensed combined pro forma balance sheet at December 31, 2012 and at January 1, 2012 for the purposes of the unaudited condensed combined pro forma statement of comprehensive income for the year ended December 31, 2012. The unaudited condensed combined pro forma financial information has been prepared based upon currently available information and using the assumptions described in the notes thereto.

The unaudited condensed combined pro forma financial information below should be read in conjunction with the notes thereto and the historical audited consolidated financial statements and related notes as of December 31, 2012 included in the Company’s annual report on Form 10-K filed with the SEC on March 8, 2013. This unaudited condensed combined pro forma financial information is presented for informational purposes only and is not intended to be indicative of the financial position or results of operations of the combined company that would have actually occurred had the acquisition been effective during the periods presented or of the future financial position or future results of operations of the combined company. The unaudited condensed combined pro forma financial information as of December 31, 2012 and for the year then ended presented herein may have been different had the Company and EHI actually been combined as of that date or during those periods. The historical consolidated financial data has been adjusted to give effect to pro forma events that are (i) directly attributable to the acquisition of EHI, (ii) factually supportable, and (iii) with respect to the statement of comprehensive income, expected to have a continuing impact on the combined results. Additionally, pro forma adjustments are based on management’s estimates or third-party valuations of the fair value and useful lives of the assets acquired and liabilities assumed and have been prepared to illustrate the allocation of the purchase price to the acquired assets and liabilities in preparing the unaudited condensed combined pro forma financial information. The unaudited condensed combined pro forma financial information does not reflect non-recurring charges related to integration activities or exit costs that may be incurred by the Company or EHI in connection with the acquisition.

 

1


Erickson Air-Crane Incorporated

Unaudited Condensed Combined Pro Forma Balance Sheet

December 31, 2012

 

     Historical      Pro Forma  
     Erickson Air-Crane      Evergreen (1)      Acquisition             
(Dollars in thousands)    Incorporated      Helicopters, Inc.      Adjustments     Notes    Combined  

Assets

             

Current Assets

             

Cash and cash equivalents

   $ 1,468       $ 148       $ 400,000      A    $ 36,782   
           (185,000   A-1   
           (12,971   A-2   
           (97,876   A-3   
           (13,604   A-4   
           (6,808   A-5   
           (2,616   A-6   
           (45,959   A-7   

Restricted cash

     3,781         —           45,959      A-7      49,740   

Accounts receivable net of allowance for doubtful accounts

     24,446         24,213         —             48,659   

Inventory

     —           601         (601   B      —     

Prepaid expenses and other

     1,426         7,570         872      A-6      9,509   
           547      A-8   
           (906   C   

Income tax receivable

     1,048         —           —             1,048   

Deferred tax assets

     8,208         907         (907   D      8,208   

Assets held for sale

     —           2,864         (2,864   E      —     
  

 

 

    

 

 

    

 

 

      

 

 

 

Total current assets

     40,377         36,303         77,266           153,946   
  

 

 

    

 

 

    

 

 

      

 

 

 

Aircraft support parts, net

     133,281         —           601      B      114,585   
           17,941      F   
           (3,358   G   
           (36,256   H   
           2,376      I   

Aircraft, net

     66,673         —           12,971      A-2      156,138   
           (4,028   A-2   
           (5,888   C   
           54,917      F   
           36,256      H   
           (4,763   J   

Property, plant, and equipment, net

     14,435         92,206         (15,347   C      18,735   
           (72,858   F   
           299      I   

Goodwill

     —           —           (8,943   A-2      238,317   
           550      A-3   
           (872   A-6   
           (72,487   A-10   
           296,379      A-10   
           33,337      C   
           (343   D   
           2,864      E   
           3,358      G   
           (2,675   I   
           4,763      J   
           (11,647   K   
           (6,030   L   
           (19,300   M   
           (400   N   
           19,763      O   

Long-term customer relationships, net

     —           —           19,300      M      19,300   

Other intangible assets, net

     —           —           400      N      400   

Investment in EHI

     —           —           185,000      A-1      —     
           15,900      A-1   
           12,971      A-2   
           6,808      A-5   
           2,616      A-6   
           (4,960   A-8   
           78,044      A-9   
           (296,379   P   

Other noncurrent assets

     2,057         16,858         (550   A-3      22,686   
           11,104      A-4   
           4,413      A-8   
           (11,196   C   
  

 

 

    

 

 

    

 

 

      

 

 

 

Total assets

   $ 256,823       $ 145,367       $ 321,917         $ 724,107   
  

 

 

    

 

 

    

 

 

      

 

 

 

 

(1) The accounting treatment and classification of certain spare parts from EHI’s historical financial statements have been adjusted to conform to the Company’s accounting treatment and classification. Such accounting treatment and classification adjustments are detailed in pro forma adjustments (B), (F), (G), and (R). The classification of certain overhaul components from the Company’s historical financial statements have been adjusted to conform to EHI’s classification. Such reclassification is detailed in pro forma adjustment (H). The accounting classification of interest and penalties associated with uncertain tax positions from EHI’s historical financial statements have been adjusted to conform to the Company’s accounting classification. Such reclassification is detailed in pro forma adjustment (D).

 

2


Erickson Air-Crane Incorporated

Unaudited Condensed Combined Pro Forma Balance Sheet—(Continued)

December 31, 2012

 

     Historical      Pro Forma  
     Erickson Air-Crane      Evergreen (1)      Acquisition             
(Dollars in thousands)    Incorporated      Helicopters, Inc.      Adjustments     Notes    Combined  

Liabilities and stockholders’ equity

             

Current liabilities

             

Accounts payable

   $ 8,746       $ 34,611       $ —           $ 43,357   

Current portion of long-term debt

     71,202         11,647         (71,202   A-3      —     
           (11,647   K   

Accrued and other current liabilities

     19,662         4,147         (2,158   L      21,651   

Deferred aircraft maintenance

     —           —           19,763      O      19,763   

Income taxes payable

     6,275         —           —             6,275   
  

 

 

    

 

 

    

 

 

      

 

 

 

Total current liabilities

     105,885         50,405         (65,244        91,046   
  

 

 

    

 

 

    

 

 

      

 

 

 

Long-term debt, less current portion

     26,674         —           400,000      A      415,900   
           15,900      A, A-1   
           (26,674   A-3   

Other long-term liabilities

     1,415         3,872         (3,872   L      1,415   

Deferred tax liabilities

     17,481         1,250         (1,250   D      17,481   

Liability for uncertain tax positions

     —           17,353         —             17,353   
  

 

 

    

 

 

    

 

 

      

 

 

 

Total liabilities

     151,455         72,880         318,860           543,195   

Stockholder’s equity (deficit):

             

Common Stock

     1         —           —             1   

Additional paid-in capital

     101,833         72,487         78,044      A, A-9      179,877   
           (72,487   A-10   
           296,379      A-10   
           (296,379   P   

Retained earnings (accumulated deficit)

     2,447         —           (2,500   A-4      (53

Accumulated other comprehensive income (loss)

     71         —           —             71   
  

 

 

    

 

 

    

 

 

      

 

 

 

Total stockholders’ equity (deficit) attributable to the Company and EHI

     104,352         72,487         3,057           179,896   

Noncontrolling interest

     1,016         —           —             1,016   
  

 

 

    

 

 

    

 

 

      

 

 

 

Total stockholders’ equity (deficit)

     105,368         72,487         3,057           180,912   
  

 

 

    

 

 

    

 

 

      

 

 

 

Total liabilities and stockholders’ equity (defit)

   $ 256,823       $ 145,367       $ 321,917         $ 724,107   
  

 

 

    

 

 

    

 

 

      

 

 

 

 

(1) The accounting treatment and classification of certain spare parts from EHI’s historical financial statements have been adjusted to conform to the Company’s accounting treatment and classification. Such accounting treatment and classification adjustments are detailed in pro forma adjustments (B), (F), (G), and (R). The classification of certain overhaul components from the Company’s historical financial statements have been adjusted to conform to EHI’s classification. Such reclassification is detailed in pro forma adjustment (H). The accounting classification of interest and penalties associated with uncertain tax positions from EHI’s historical financial statements have been adjusted to conform to the Company’s accounting classification. Such reclassification is detailed in pro forma adjustment (D).

 

3


Erickson Air-Crane Incorporated

Unaudited Condensed Combined Pro Forma Statement of Comprehensive Income

Year Ended December 31, 2012

 

     Historical     Pro Forma  
     Erickson Air-Crane     Evergreen (1)     Acquisition             
(Dollars in thousands, except share and per share data)    Incorporated     Helicopters, Inc.     Adjustments     Notes    Combined  

Net revenues:

           

Aerial Services

   $ 161,405      $ 201,232      $ (2,786   Q    $ 359,851   

Manufacturing / MRO

     19,419        —          —             19,419   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total net revenues

     180,824        201,232        (2,786        379,270   

Cost of revenues:

           

Aerial Services

     109,623        145,332        672      A-2      245,760   
         (1,887   C   
         3,358      G   
         2,413      M   
         (3,125   Q   
         (4,529   R   
         (10,048   S   
         6,963      T   
         (3,012   U   

Manufacturing / MRO

     9,782        —          —             9,782   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total cost of revenues

     119,405        145,332        (9,195        255,542   
  

 

 

   

 

 

   

 

 

      

 

 

 

Gross profit

     61,419        55,900        6,409           123,728   

Operating expenses:

           

General and administrative

     17,232        21,297        872      A-6      39,374   
         (27   V   

Research and development

     4,683        —          —             4,683   

Selling and marketing

     6,071        —          400      N      6,471   

Loss on disposal of leased aircraft

     —          2,384        —             2,384   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total operating expenses

     27,986        23,681        1,245           52,912   
  

 

 

   

 

 

   

 

 

      

 

 

 

Operating income (loss)

     33,433        32,219        5,164           70,816   

Other income (expense):

           

Interest income

     —          —          546      A-8      546   

Interest expense

     (6,990     (1,579     6,897      A-3      (36,785
         (1,761   D   
         1,579      K   
         (34,931   W   

Amortization of debt issuance costs

     (1,174     (255     1,174      A-3      (1,841
         (1,586   A-4   

Gain (loss) on disposal of equipment

     (5     —          —             (5

Unrealized foreign exchange gain (loss)

     (322     —          —             (322

Realized foreign exchange gain (loss)

     788        —          —             788   

Other income (expense), net

     119        291        (422   D      (12
  

 

 

   

 

 

   

 

 

      

 

 

 

Total other income (expense)

     (7,584     (1,543     (28,504        (37,631

Income (loss) before noncontrolling interest and income taxes

     25,849        30,676        (23,340        33,185   

Income tax expense (benefit)

     10,213        13,025        2,183      D      12,300   
         (13,121   D   
  

 

 

   

 

 

   

 

 

      

 

 

 

Net income (loss)

     15,636        17,651        (12,402        20,885   

Less: Net (income) loss related to noncontrolling interest

     (406     —          —             (406
  

 

 

   

 

 

   

 

 

      

 

 

 

Net income (loss) attributable to the Company and EHI

     15,230        17,651        (12,402        20,479   

Dividends on Preferred Stock

     2,795        —          —             2,795   
  

 

 

   

 

 

   

 

 

      

 

 

 

Net income (loss) attributable to common stockholders

   $ 12,435      $ 17,651      $ (12,402      $ 17,684   
  

 

 

   

 

 

   

 

 

      

 

 

 

Net income (loss) per share attributable to common stockholders

           

Basic

   $ 1.78             $ 1.61   
  

 

 

          

 

 

 

Diluted

   $ 1.78             $ 1.61   
  

 

 

          

 

 

 

Weighted average shares outstanding

           

Basic

     6,981,027          4,008,439      A-9      10,989,466   
  

 

 

     

 

 

      

 

 

 

Diluted

     6,981,027          4,008,439      A-9      10,989,466   
  

 

 

     

 

 

      

 

 

 

 

(1) The accounting treatment and classification of certain spare parts from EHI’s historical financial statements have been adjusted to conform to the Company’s accounting treatment and classification. Such accounting treatment and classification adjustments are detailed in pro forma adjustments (B), (F), (G), and (R). The classification of certain overhaul components from the Company’s historical financial statements have been adjusted to conform to EHI’s classification. Such reclassification is detailed in pro forma adjustment (H). The accounting classification of interest and penalties associated with uncertain tax positions from EHI’s historical financial statements have been adjusted to conform to the Company’s accounting classification. Such reclassification is detailed in pro forma adjustment (D).

 

4


Notes to Unaudited Condensed Combined Pro Forma Financial Information

1. BASIS OF PRESENTATION

The unaudited condensed combined pro forma financial information gives effect to the acquisition as if it had occurred on December 31, 2012 for the purposes of the unaudited condensed combined pro forma balance sheet at December 31, 2012 and at January 1, 2012 for the purposes of the unaudited condensed combined pro forma statement of comprehensive income for the year ended December 31, 2012. The unaudited condensed combined pro forma financial information has been prepared by the Company’s management and is based on the Company’s historical consolidated financial statements and EHI’s historical consolidated financial statements. Certain amounts from EHI’s historical consolidated financial statements have been reclassified to conform to the Company’s presentation and certain amounts from the Company’s historical consolidated financial statements have been reclassified to conform to EHI’s presentation.

This unaudited condensed combined pro forma financial information is prepared in conformity with GAAP. The unaudited condensed combined pro forma balance sheet as of December 31, 2012, and the unaudited condensed combined pro forma statement of comprehensive income for the year ended December 31, 2012, have been prepared using the following information:

 

  a. Audited historical consolidated financial statements of the Company for the year ended December 31, 2012;

 

  b. Audited historical consolidated financial statements of EHI for the year ended December 31, 2012; and

 

  c. Such other supplementary information as considered necessary to reflect the acquisition in the unaudited pro forma consolidated financial information

The pro forma adjustments reflecting the acquisition of EHI under the purchase method of accounting are based on certain estimates and assumptions. The fair values of EHI’s assets and liabilities have been valued based on management’s estimates and third-party valuations. The Company’s management believes that its assumptions provide a reasonable basis for presenting all of the significant effects of the acquisition of EHI and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma combined financial information.

The unaudited condensed combined pro forma financial information does not include the anticipated financial benefits from such items as expense efficiencies or revenue enhancements arising from the acquisition nor does the unaudited condensed combined pro forma financial information include anticipated expenses from restructuring and integration costs to be incurred by the Company.

The unaudited condensed combined pro forma financial information is not intended to reflect the results of operations or the financial position that would have resulted had the acquisition been effected on the dates indicated and if the companies had been managed as one entity. The unaudited condensed combined pro forma financial information should be read in conjunction with the historical consolidated financial statements in the Company’s annual report on Form 10-K filed with the SEC on March 8, 2013.

2. PURCHASE PRICE AND FINANCING CONSIDERATIONS

On May 2, 2013, the Company purchased from Evergreen International Aviation (“EIA”) all of the issued and outstanding capital stock of EHI for an aggregate purchase price of: (i) $185.0 million in cash; (ii) 4,008,439 shares of preferred stock of the Company, valued at $47.5 million based on an agreed value of $11.85 per share; and (iii) $17.5 million aggregate principal amount promissory notes issued by the Company.

The fair value of the preferred stock issued as part of the consideration transferred was measured on the acquisition date at the then-current fair value and resulted in a per share equity component different from the $11.85 per share agreed upon value of preferred stock of the Company. The Company issued 4,008,439 shares of preferred stock, valued at $78.0 million, or $19.47 per share on the acquisition date.

 

5


The fair value of the promissory notes was estimated at $15.9 million, assuming a market level borrowing rate.

In connection with the acquisition of EHI, EHI purchased nine aircraft from an affiliated entity of EIA for an aggregate purchase price of $13.0 million, all of which was paid by the Company on the acquisition date.

In connection with the acquisition of EHI, consideration transferred includes a term note receivable for the estimated working capital shortfall. EIA issued a term loan note with principal value of $6.15 million to the Company to fund the working capital shortfall. The term loan note fair value of $5.0 million assumes a market level borrowing rate.

In connection with the acquisition of EHI, the Company prepaid $6.8 million to a lessor, an affiliated entity of EIA and EHI, on the acquisition date for the remaining future lease obligations on three aircraft and returned the aircraft to the lessor on the acquisition date. As the transaction was entered into primarily for the benefit of the affiliated entity of EIA and EHI, the Company included the transaction as consideration transferred.

In connection with the acquisition of EHI, the Company paid $2.6 million on the acquisition date for prepayment of the three-year lease term on the McMinnville headquarters. The Company intends to occupy the McMinnville headquarters for one year. EIA refused the Company’s request for a shorter term lease during the negotiation of the sale of EHI. As a result, the Company does not expect to receive any future benefit for the rent prepayment beyond the first year. Therefore, the Company included the prepayment of the lease in consideration transferred.

The acquisition-date fair value of the consideration transferred totaled $296.4 million, which consisted of the following:

 

Cash

   $  185,000   

Preferred stock

     78,044   

Promissory notes

     15,900   

Consideration for nine aircraft purchased from an affiliated entity of EIA

     12,971   

Term loan note receivable

     (4,960

Prepayment of aircraft lease expense to an affiliated entity of EIA

     6,808   

Prepayment of McMinnville headquarters lease

     2,616   
  

 

 

 

Total consideration transferred

   $ 296,379   
  

 

 

 

Allocation of EHI consideration transferred (a) (in thousands):

 

Total consideration transferred

   $  296,379   
  

 

 

 

Book value of EHI at December 31, 2012

     72,487   

Pro Forma and Fair Value Adjustments, identifiable net assets acquired at December 31, 2012

     (14,425
  

 

 

 

Fair value of net assets acquired

     58,062   
  

 

 

 

Excess of consideration transferred over fair value of net assets acquired (goodwill)

   $ 238,317   
  

 

 

 

 

(a) The consideration transferred is allocated to balance sheet assets acquired and liabilities assumed based on their estimated fair value. The fair value adjustments to the EHI historical consolidated balance sheet in connection with the acquisition are described below in Note 3.

 

6


3. PRO FORMA ADJUSTMENTS

 

(A) Record the $400.0 million of notes issued and sold, the $15.9 million fair value of the $17.5 million of promissory notes, and the fair value of the preferred stock issuance on the unaudited condensed combined pro forma balance sheet as of December 31, 2012. The net proceeds from the notes and preferred stock have been used towards the following pro forma adjustments:

 

  (1) Record certain components of the aggregate purchase price, including $185.0 million of cash and the fair value of $15.9 million promissory notes, with a principal value of $17.5 million assuming a market level borrowing rate, on the unaudited condensed combined pro forma balance sheet as of December 31, 2012.

 

  (2) Record the aircraft purchase price of approximately $13.0 million, all of which was paid by the Company on the acquisition date, on the unaudited condensed combined pro forma balance sheet as of December 31, 2012.

Record an adjustment to aircraft, net of $13.0 million, on the unaudited condensed combined pro forma balance sheet as of December 31, 2012 for the purchase of the aircraft. Remove approximately $4.0 million, net of leasehold improvements that were included in EHI’s audited historical consolidated financial statements for these aircraft. The unaudited condensed combined pro forma statement of comprehensive income reflects depreciation and amortization expense for the year ended December 31, 2012 of $0.7 million for these acquired aircraft. Depreciation expense and amortization expense was calculated in conformance with the Company’s policy as disclosed in the Company’s most recent annual report on Form 10-K. See pro forma adjustment (U) for the exclusion of EHI’s lease expense of $3.0 million and pro forma adjustment (S) for the exclusion of leasehold improvement amortization that was included in EHI’s audited historical financial statements for these aircraft.

 

  (3) Exclude the Company’s pre-acquisition revolver and term debt of $71.2 million, promissory notes of $26.7 million, and capitalized debt issuance costs of $0.6 million from the unaudited condensed combined pro forma balance sheet as of December 31, 2012 due to the refinancing of the pre-acquisition debt with proceeds of the $400 million notes issued and sold. Exclude the Company’s pre-acquisition debt related interest expense of $6.9 million and amortization expense of $1.2 million related to pre-acquisition debt issuance costs for the year ended December 31, 2012 on the unaudited condensed combined pro forma statement of comprehensive income.

 

  (4) Total acquisition transaction costs and debt issuance costs were $13.6 million. Record $11.1 million of debt issuance costs to other noncurrent assets and $2.5 million of non-recurring acquisition transaction costs to retained earnings on the unaudited condensed combined pro forma balance sheet as of December 31, 2012. Do not record the acquisition transaction costs to the unaudited condensed combined pro forma statement of comprehensive income, as these costs are not expected to have a continuing impact on the Company. Record amortization of debt issuance costs related to the new debt financing of $1.6 million on the unaudited condensed combined pro forma statement of comprehensive income for the year ending December 31, 2012.

 

  (5) Record $6.8 million related to the Company’s payment, on the acquisition date, to an affiliated entity of EIA and EHI for the remaining lease expense on three aircraft on the unaudited condensed combined pro forma balance sheet as of December 31, 2012. As the transaction was entered into primarily for the benefit of the affiliated entity of EIA and EHI, the Company included the transaction as consideration transferred.

 

  (6) Record $2.6 million total prepayment for the three year lease term on the McMinnville headquarters, with $0.9 million to prepaid expenses and other and $1.7 million to goodwill, on the unaudited condensed combined pro forma balance sheet as of December 31, 2012.

 

7


Record net rental expense for the McMinnville headquarters retained by EIA of $0.9 million on the unaudited condensed combined pro forma statement of comprehensive income for the year ended December 31, 2012.

 

  (7) The $81.1 million of remaining cash proceeds from the notes is determined by deducting from the total term note issuance amount of $400.0 million, the cash consideration of $185.0 million, the payment for purchased aircraft of $13.0 million, the refinancing of pre-acquisition debt of $97.9 million, the transaction expenses of $13.6 million, the prepaid lease expense of $6.8 million, and the prepayment amount of $2.6 million for the McMinnville headquarters as discussed in pro forma adjustments (A-1) through (A-6), respectively. Of this $81.1 million total, record $46.0 million to current restricted cash as the funds will remain in escrow related to the pending Air Amazonia acquisition transaction on the unaudited condensed combined pro forma balance sheet as of December 31, 2012.

 

  (8) Record a term note of $5.0 million to prepaid and other current assets and other non-current assets of $0.5 million and $4.4 million, respectively on the unaudited condensed combined pro forma balance sheet as of December 31, 2012, for the estimated working capital shortfall. EIA issued a term note with principal value of $6.15 million to the Company to fund the anticipated working capital shortfall and the term note value reflects the fair value measurement of the term loan note assuming a market level borrowing rate. Record interest income on the term note of $0.5 million, including the amortization of any discount or premium, on the unaudited condensed combined pro forma statement of comprehensive income for the year ended December 31, 2012.

 

  (9) The 4,008,439 shares of a new class of mandatorily convertible preferred stock of the Company were considered converted to common stock on the acquisition date and were valued at $78.0 million based on $19.47 per share, calculated using the closing market price of the Company’s common shares on the closing date of the acquisition. Record $78.0 million to additional paid in capital on the unaudited condensed combined pro forma balance sheet as of December 31, 2012. Record the acquisition issued shares of 4,008,439 on the unaudited condensed combined pro forma statement of comprehensive income for the year ended December 31, 2012.

 

  (10) Record the investment in EHI of $296.4 million on the unaudited condensed combined pro forma balance sheet for the purchase transactions as of December 31, 2012, by excluding the $72.5 million book value of EHI at December 31, 2012 and recording the consideration of $296.4 million.

 

(B) Record reclassification of $0.6 million from EHI inventory to aircraft support parts, net, in conformance with the Company’s presentation on the unaudited condensed combined pro forma balance sheet as of December 31, 2012.

 

(C) Exclude a total of $33.3 million in assets comprised of $0.9 million in prepaid expense and other, $5.9 million in aircraft, net, $15.3 million in property, plant, and equipment, net, and $11.2 million in other noncurrent assets from the unaudited condensed combined pro forma balance sheet as of December 31, 2012 for assets not acquired in the acquisition. The unaudited condensed combined pro forma statement of comprehensive income excludes depreciation and amortization expense for the year ended December 31, 2012 of $1.9 million related to EHI’s assets not acquired as part of the acquisition.

 

(D) Due to the Company’s tax election under Internal Revenue Code Section 338, exclude $0.9 million of deferred tax assets and $1.3 million of deferred tax liabilities from the unaudited condensed combined pro forma balance sheet as of December 31, 2012.

The effective tax rate for the Company and EHI combined is 37.07%. Record a $13.1 million income tax benefit in order to adjust income tax expense for the combined entity to the combined effective tax rate on the unaudited condensed combined pro forma statement of comprehensive income for the year ended December 31, 2012.

Reclassify EHI’s interest expense and penalties for uncertain tax positions of $1.8 million and $0.4 million to interest expense and other income (expense), net respectively on the unaudited condensed combined pro forma statement of comprehensive income for the year ended December 31, 2012 to conform to the Company’s presentation.

 

(E) Exclude $2.9 million in assets held for sale from the unaudited condensed combined pro forma balance sheet as of December 31, 2012, including an exclusion of $2.6 million for assets that were not acquired in the acquisition and an exclusion of $0.3 million for assets acquired in the acquisition and recorded at fair value in pro forma adjustment (J).

 

(F) Reclassify $72.9 million of EHI’s property, plant, and equipment, net with $17.9 million to aircraft support parts, net, and $54.9 million to aircraft, net on the unaudited condensed combined pro forma balance sheet as of December 31, 2012 to conform to the Company’s presentation.

 

8


(G) Record adjustment to aircraft support parts, net, of $3.4 million on the unaudited condensed combined pro forma balance sheet as of December 31, 2012, for repair parts that would have been consumed under the Company’s policy of directly expensing certain parts. EHI’s policy was to capitalize and depreciate such parts by aircraft. Record on the unaudited condensed combined pro forma statement of comprehensive income cost of goods sold expense for the year ended December 31, 2012 of $3.4 million related to those aircraft support parts considered directly expensed.

 

(H) Reclassify the Company’s overhaul parts from aircraft support parts, net to aircraft, net of $36.3 million to conform to EHI’s presentation on the unaudited condensed combined pro forma balance sheet as of December 31, 2012.

 

(I) Record fair-value adjustments to aircraft support parts, net of $2.4 million, and to property, plant, and equipment, net of $0.3 million on the unaudited condensed combined pro forma balance sheet as of December 31, 2012 relating to assets acquired and not discussed in other pro forma adjustments.

 

(J) Record fair-value adjustments to aircraft, net of $4.8 million on the unaudited condensed combined pro forma balance sheet as of December 31, 2012 relating to the aircraft assets used in EHI’s operations. Entry excludes the fair-value adjustment recorded for the aircraft purchase discussed in pro forma adjustment (A-2). The adjustment to the unaudited condensed combined pro forma statement of comprehensive income for depreciation and amortization expense for the year ended December 31, 2012 is recorded as part of the pro forma adjustment (T).

 

(K) Exclude EHI’s short-term debt of $11.6 million on the unaudited condensed combined pro forma balance sheet as of December 31, 2012 that is related to an EHI owned facility, which was not assumed in the acquisition. The unaudited condensed combined pro forma statement of comprehensive income excludes related short-term debt interest expense for the year ended December 31, 2012 of $1.6 million.

 

(L) Exclude $2.2 million of accrued and other current liabilities and $3.9 million of other long-term liabilities on the unaudited condensed combined pro forma balance sheet as of December 31, 2012 for liabilities not assumed in the acquisition.

 

(M) Record identified intangible assets for customer relationships of $19.3 million to long-term customer relationships, net on the unaudited condensed combined pro forma balance sheet as of December 31, 2012. Record amortization of customer relationships of $2.4 million to cost of revenues on the unaudited condensed combined pro forma statement of comprehensive income for the year ended December 31, 2012.

 

(N) Record identified intangible assets for tradename of $0.4 million to other intangibles, net on the unaudited condensed combined pro forma balance sheet as of December 31, 2012. Record amortization of tradename of $0.4 million to selling and marketing on the unaudited condensed combined pro forma statement of comprehensive income for the year ended December 31, 2012

 

(O) Record a liability for the assumed leased-fleet’s return-to-service obligations of $19.8 million to deferred aircraft maintenance on the unaudited condensed combined pro forma balance sheet as of December 31, 2012. Because the liability relates to assets that were not in service for the year ended December 31, 2012, there is no recorded amortization for returning the fleet to service on the unaudited condensed combined pro forma statement of comprehensive income for the year ended December 31, 2012.

 

(P) Eliminate upon combination the Company’s investment in EHI and the equity of EHI for $296.4 million on the unaudited condensed combined pro forma balance sheet as of December 31, 2012 as discussed in pro forma adjustments (A-1) through
(A-10).

 

(Q) Record elimination of sales between the Company and EHI of $0.1 million for the unaudited condensed combined pro forma statement of comprehensive income for the year ended December 31, 2012. Record elimination of net revenues and cost of revenues of $2.7 million and $3.1 million, respectively, generated from aircraft not acquired in the acquisition for the year ended December 31, 2012.

 

9


(R) To conform to the Company’s policy of expensing certain parts, exclude from the unaudited condensed combined pro forma statement of comprehensive income the depreciation expense in cost of goods sold for the year ended December 31, 2012 of $4.5 million related to parts previously capitalized by EHI in aircraft support parts, net. See pro forma adjustment (G) for the balance sheet adjustment to aircraft support parts.

 

(S) Exclude EHI depreciation and amortization expense of $10.0 million for all assets, excluding those assets discussed in pro forma adjustment (R), acquired by the Company on the unaudited condensed combined pro forma statements of comprehensive income for the year ended December 31, 2012. See pro forma adjustment (R) for the exclusion of EHI’s depreciation and amortization expense of $4.5 million. In total, pro forma adjustments (R) and (S) exclude EHI depreciation and amortization expense of approximately $14.6 million for all assets acquired by the Company on the unaudited condensed combined pro forma statement of comprehensive income for the year ended December 31, 2012.

 

(T) Record depreciation and amortization expense, calculated in conformance with the Company’s policy as disclosed in the Company’s most recent annual report on Form 10-K, of $7.0 million for all assets, excluding those discussed in pro forma adjustment (A-2), acquired by the Company on the unaudited condensed combined pro forma statement of comprehensive income for the year ended December 31, 2012. See pro forma adjustment (A-2) for the recording of depreciation and amortization expense of $0.7 million for the nine aircraft acquired by the Company. In total, pro forma adjustments (A-2) and (T) record depreciation and amortization expense of $7.6 million for all assets acquired by the Company on the unaudited condensed combined pro forma statement of comprehensive income for the year ended December 31, 2012.

 

(U) Exclude $3.0 million from the unaudited condensed combined pro forma statement of comprehensive income for EHI’s lease expense for the year ended December 31, 2012 for the nine aircraft the Company purchased from an affiliated entity of EIA as discussed in pro forma adjustment (A-2).

 

(V) Eliminate the acquisition costs incurred by the Company and EHI of approximately $27,000 from the unaudited condensed combined pro forma statement of comprehensive income for the year ended December 31, 2012.

 

(W) Record $34.9 million of interest expense, including the amortization of any discount or premium, on the unaudited condensed combined pro forma statement of comprehensive income for the year ended December 31, 2012, resulting from the $400.0 million of notes, $15.9 million in promissory notes, and approximately $100.0 million of available funds under a revolving line of credit. Assume the net proceeds from the issuance of the notes are used as outlined in pro forma adjustments (A-1) through (A-10) and the revolving undrawn line of credit is unused in its entirety for the year ended December 31, 2012.

 

10


Reconciliation of Non-GAAP Financial Measures

The Company is providing a reconciliation of Net Income to EBITDA, to Adjusted EBITDA and to pro forma combined Adjusted EBITDA. These financial measures are not prepared in accordance with GAAP. Since not all companies use identical calculations, the Company’s presentation of EBITDA, Adjusted EBITDA and pro forma combined Adjusted EBITDA may not be comparable to similarly titled measures of other companies.

The Company uses EBITDA and Adjusted EBITDA to monitor its overall business performance. The Company defines EBITDA as net income (loss) before interest expense, net, provision for (benefit from) income taxes, depreciation and amortization, and non-cash charges relating to financings. The Company includes the amortization of overhaul costs as an add-back to EBITDA. The Company believes that such adjustments to arrive at EBITDA are common industry practice amongst its peers and believes this provides a more comparable measure for managing its business.

Adjusted EBITDA means, as defined by the Company’s ABL Revolver agreement, with respect to any fiscal period, the Company’s EBITDA, adjusted for, without duplication, the sum of the following amounts for such period to the extent included in determining consolidated net earnings (or loss) for such period: (i) extraordinary gains, (ii) non-cash items increasing consolidated net earnings for such period, excluding any items representing the impact of purchase accounting or the reversal of any accrual of, or cash reserve for, anticipated changes in any period, (iii) non-cash extraordinary losses, (iv) any other non-cash charges reducing consolidated net earnings for such period, excluding any such charge that represents an accrual or reserve for a cash expenditure for a future period or amortization of a prepaid cash expense that was paid in a prior period, (v) to the extent not capitalized, (A) non-recurring expenses, fees, costs and charges incurred and funded prior to, on or within 9 months after the closing date in connection with the ABL Revolver and the EHI Acquisition; and (B) expenses incurred and funded prior to, on, or within 2 years of the closing date in connection with the termination of the lease for the location that is the chief executive office of EHI as of the closing date; and (vi) transaction related expenditures incurred and funded prior to, on or within 9 months of the date of consummation of (A) the pending Air Amazonia acquisition, (B) any permitted acquisition under the ABL Revolver, or (C) any investment that is permitted pursuant to the ABL Revolver, in the case of each of (A), (B), and (C), that arise out of cash charges related to deferred stock compensation, management bonuses, strategic market reviews, restructuring, retention bonuses, consolidation, severance or discontinuance of any portion of operations, termination of the lease for the headquarters of EHI, employees or management of the target of such permitted acquisition, accrued vacation payments and working notices payments and other non-cash accounting adjustments.

 

     Historical     Pro Forma  
(dollars in thousands)    Erickson  Air-Crane
Incorporated
    Evergreen
Helicopters, Inc.
    Acquisition
Adjustments
    Notes (1)   Combined  

EBITDA and Adjusted EBITDA Reconciliation

          

Net income (loss) attributable to the Company and EHI

   $ 15,230      $ 17,651        (872   A-6     20,479   
         (422   D  
         (3,358   G  
         (2,786   Q  
         3,125      Q  
         3,012      U  
         27      V  
         (11,128   (2)  

Interest expense, net

     6,990        1,579        (6,897   A-3     36,239   
         (546   A-8  
         1,761      D  
         (1,579   K  
         34,931      W  

Tax expense (benefit)

     10,213        13,025        (10,938   D     12,300   

Depreciation (5)

     21,710        16,464        672      A-2     29,345   
         (1,887   C  
         (4,529   R  
         (10,048   S  
         6,963      T  

Amortization of intangible assets

     —          —          2,413      M     2,813   
         400      N  

Amortization of debt issuance costs

     1,174        255        (1,174   A-3     1,841   
         1,586      A-4  

Amortization of sale/lease back (gains) losses

     —          (156 ) (3)          (156
  

 

 

   

 

 

   

 

 

     

 

 

 

EBITDA

   $ 55,317      $ 48,818      $ (1,274     $ 102,861   
  

 

 

   

 

 

   

 

 

     

 

 

 

(Gain) loss on asset disposals

     —          2,384        —            2,384   

Non-cash charges from awards to employees of equity interests

     2,118        —          —            2,118   

Non-cash unrealized mark-to-market foreign exchange gains (losses)

     322        —          —            322   

Acquisition related expenses

     242        —          (27   V     215   

Other noncash (gains) losses

     (795 ) (4)      —          —            (795
  

 

 

   

 

 

   

 

 

     

 

 

 

Adjusted EBITDA

   $ 57,204      $ 51,202      $ (1,301     $ 107,105   
  

 

 

   

 

 

   

 

 

     

 

 

 

 

(1) The accounting treatment and classification of certain spare parts from EHI’s historical financial statements have been adjusted to conform to the Company’s accounting treatment and classification. Such accounting treatment and classification adjustments are detailed in pro forma adjustments (B), (F), (G), and (R). The classification of certain overhaul components from the Company’s historical financial statements have been adjusted to conform to EHI’s classification. Such reclassification is detailed in pro forma adjustment (H). The accounting classification of interest and penalties associated with uncertain tax positions from EHI’s historical financial statements have been adjusted to conform to the Company’s accounting classification. Such reclassification is detailed in pro forma adjustment (D).
(2) Includes the effects of pro forma adjustments for interest expense, net, tax expense (benefit), depreciation, amortization of intangible assets, and amortization of debt issuance costs as detailed in the respective pro forma adjustments below this amount.
(3) The amortization of sale/lease back (gains) losses of $0.2 million was presented in EHI’s historical financial statement in Aerial services revenues.
(4) Includes $0.8 million for the removal of a Canadian Revenue Authority related reserve that had been included as an add-back for the fourth quarter of 2010.
(5) Includes amortization of aircraft component overhauls of $12.7 million and $6.1 million on the Company’s and EHI’s historical financial statements, respectively.

 

11


UNAUDITED CONDENSED PRO FORMA COMBINED FINANCIAL INFORMATION

The following unaudited condensed combined pro forma financial information combines the historical consolidated statement of comprehensive income and consolidated balance sheet of Erickson Air-Crane Incorporated (the “Company”), and the historical consolidated statement of comprehensive income and consolidated balance sheet of Evergreen Helicopters, Inc. (“EHI”), and gives effect to the debt offering, the promissory notes, the preferred stock and the new ABL Revolver, which transactions occurred in connection with the Company’s acquisition of EHI and are collectively referred to as the “acquisition.” These historical financial statements were prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The unaudited condensed combined pro forma financial information gives effect to the acquisition as if it had occurred on March 31, 2013 for the purposes of the unaudited condensed combined pro forma balance sheet at March 31, 2013 and at January 1, 2013 for the purposes of the unaudited condensed combined pro forma statement of comprehensive income for the three months ended March 31, 2013. The unaudited condensed combined pro forma financial information has been prepared based upon currently available information and using the assumptions described in the notes thereto.

The unaudited condensed combined pro forma financial information below should be read in conjunction with the notes thereto and the historical audited consolidated financial statements and related notes as of December 31, 2012 included in the Company’s annual report on Form 10-K filed with the SEC on March 8, 2013 and the Company’s most recent quarterly report on Form 10-Q filed with the SEC on May 9, 2013. This unaudited condensed combined pro forma financial information is presented for informational purposes only and is not intended to be indicative of the financial position or results of operations of the combined company that would have actually occurred had the acquisition been effective during the periods presented or of the future financial position or future results of operations of the combined company. The unaudited condensed combined pro forma financial information as of March 31, 2013 and for the year then ended presented herein may have been different had the Company and EHI actually been combined as of that date or during those periods. The historical consolidated financial data has been adjusted to give effect to pro forma events that are (i) directly attributable to the acquisition of EHI, (ii) factually supportable, and (iii) with respect to the statement of comprehensive income, expected to have a continuing impact on the combined results. Additionally, pro forma adjustments are based on management’s estimates or third-party valuations of the fair value and useful lives of the assets acquired and liabilities assumed and have been prepared to illustrate the allocation of the purchase price to the acquired assets and liabilities in preparing the unaudited condensed combined pro forma financial information. The unaudited condensed combined pro forma financial information does not reflect non-recurring charges related to integration activities or exit costs that may be incurred by the Company or EHI in connection with the acquisition.

 

12


Erickson Air-Crane Incorporated

Unaudited Condensed Combined Pro Forma Balance Sheet

March 31, 2013

 

     Historical      Pro Forma  
(Dollars in thousands)    Erickson Air-Crane
Incorporated
     Evergreen (1)
Helicopters, Inc.
     Acquisition
Adjustments
    Notes    Combined  

Assets

             

Current Assets

             

Cash and cash equivalents

   $ 1,323       $ 151         $400,000      A    $ 26,662   
           (185,000   A-1   
           (12,971   A-2   
           (107,854   A-3   
           (13,604   A-4   
           (6,808   A-5   
           (2,616   A-6   
           (45,959   A-7   

Restricted cash

     3,705         —           45,959      A-7      49,664   

Accounts receivable net of allowance for doubtful accounts

     30,414         23,690         —             54,104   

Inventory

     —           482         (482   B      —     

Prepaid expenses and other

     3,260         4,927         872      A-6      8,890   
           547      A-8   
           (716   C   

Income tax receivable

     912         —           —             912   

Deferred tax assets

     11,112         907         (907   D      11,112   

Assets held for sale

     —           265         (265   E      —     
  

 

 

    

 

 

    

 

 

      

 

 

 

Total current assets

     50,726         30,422         70,196           151,344   
  

 

 

    

 

 

    

 

 

      

 

 

 

Aircraft support parts, net

     137,815         —           482      B      121,115   
           16,713      F   
           (918   G   
           (36,700   H   
           3,723      I   

Aircraft, net

     66,759         —           12,971      A-2      159,489   
           (3,818   A-2   
           (3,197   C   
           55,043      F   
           36,700      H   
           (4,969   J   

Property, plant, and equipment, net

     14,604         97,320         (22,888   C      18,903   
           (71,756   F   
           1,623      I   

Goodwill

     —           —           (9,153   A-2      246,976   
           350      A-3   
           (872   A-6   
           (59,000   A-10   
           296,379      A-10   
           34,444      C   
           801      D   
           265      E   
           918      G   
           (5,346   I   
           4,969      J   
           (11,497   K   
           (5,345   L   
           (19,300   M   
           (400   N   
           19,763      O   

Long-term customer relationships, net

     —           —           19,300      M      19,300   

Other intangible assets, net

     —           —           400      N      400   

Investment in EHI

     —           —           185,000      A-1      —     
           15,900      A-1   
           12,971      A-2   
           6,808      A-5   
           2,616      A-6   
           (4,960   A-8   
           78,044      A-9   
           (296,379   P   

Other noncurrent assets

     1,768         10,850         (350   A-3      20,142   
           11,104      A-4   
           4,413      A-8   
           (7,643   C   
  

 

 

    

 

 

    

 

 

      

 

 

 

Total assets

   $ 271,672       $ 138,592       $ 327,405         $ 737,669   
  

 

 

    

 

 

    

 

 

      

 

 

 

 

(1) The accounting treatment and classification of certain spare parts from EHI’s historical financial statements have been adjusted to conform to the Company’s accounting treatment and classification. Such accounting treatment and classification adjustments are detailed in pro forma adjustments (B), (F), (G), and (R). The classification of certain overhaul components from the Company’s historical financial statements have been adjusted to conform to EHI’s classification. Such reclassification is detailed in pro forma adjustment (H). The accounting classification of interest and penalties associated with uncertain tax positions from EHI’s historical financial statements have been adjusted to conform to the Company’s accounting classification. Such reclassification is detailed in pro forma adjustment (D).

 

13


Erickson Air-Crane Incorporated

Unaudited Condensed Combined Pro Forma Balance Sheet—(Continued)

March 31, 2013

 

     Historical      Pro Forma  
(Dollars in thousands)    Erickson Air-Crane
Incorporated
    Evergreen (1)
Helicopters, Inc.
     Acquisition
Adjustments
    Notes    Combined  

Liabilities and stockholders’ equity

            

Current liabilities

            

Accounts payable

   $ 8,346      $ 43,128       $ —           $ 51,474   

Current portion of long-term debt

     —          11,497         (11,497   K      —     

Accrued and other current liabilities

     24,130        5,367         (4,223   L      25,274   

Deferred aircraft maintenance

     —          —           19,763      O      19,763   

Income taxes payable

     6,651        —           —             6,651   
  

 

 

   

 

 

    

 

 

      

 

 

 

Total current liabilities

     39,127        59,992         4,043           103,162   
  

 

 

   

 

 

    

 

 

      

 

 

 

Long-term debt, less current portion

     107,854        —           400,000      A      415,900   
          15,900      A, A-1   
          (107,854   A-3   

Other long-term liabilities

     1,415        1,122         (1,122   L      1,415   

Deferred tax liabilities

     18,852        106         (106   D      18,852   

Liability for uncertain tax positions

     —          18,372         —             18,372   
  

 

 

   

 

 

    

 

 

      

 

 

 

Total liabilities

     167,248        79,592         310,951           557,701   

Stockholder’s equity (deficit):

            

Common Stock

     1        —           —             1   

Additional paid-in capital

     102,013        59,000         78,044      A, A-9      180,057   
          (59,000   A-10   
          296,379      A-10   
          (296,379   P   

Retained earnings (accumulated deficit)

     1,231        —           (2,500   A-4      (1,269

Accumulated other comprehensive income (loss)

     (17     —           —             (17
  

 

 

   

 

 

    

 

 

      

 

 

 

Total stockholders’ equity (deficit) attributable to the Company and EHI

     103,228        59,000         16,544           178,772   

Noncontrolling interest

     1,196        —           —             1,196   
  

 

 

   

 

 

    

 

 

      

 

 

 

Total stockholders’ equity (deficit)

     104,424        59,000         16,544           179,968   
  

 

 

   

 

 

    

 

 

      

 

 

 

Total liabilities and stockholders’ equity

   $ 271,672      $ 138,592       $ 327,405         $ 737,669   
  

 

 

   

 

 

    

 

 

      

 

 

 

 

(1) The accounting treatment and classification of certain spare parts from EHI’s historical financial statements have been adjusted to conform to the Company’s accounting treatment and classification. Such accounting treatment and classification adjustments are detailed in pro forma adjustments (B), (F), (G), and (R). The classification of certain overhaul components from the Company’s historical financial statements have been adjusted to conform to EHI’s classification. Such reclassification is detailed in pro forma adjustment (H). The accounting classification of interest and penalties associated with uncertain tax positions from EHI’s historical financial statements have been adjusted to conform to the Company’s accounting classification. Such reclassification is detailed in pro forma adjustment (D).

 

14


Erickson Air-Crane Incorporated

Unaudited Condensed Combined Pro Forma Statement of Comprehensive Income

Three Months Ended March 31, 2013

 

     Historical     Pro Forma  
(Dollars in thousands, except share and per share data)    Erickson Air-Crane
Incorporated
    Evergreen (1)
Helicopters, Inc.
    Acquisition
Adjustments
    Notes    Combined  

Net revenues:

           

Aerial Services

   $ 35,219      $ 45,214      $ (486   Q    $ 79,947   

Manufacturing / MRO

     1,721        —          —             1,721   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total net revenues

     36,940        45,214        (486        81,668   

Cost of revenues:

           

Aerial Services

     26,355        34,380        265      A-2      58,685   
         (438   C   
         918      G   
         536      M   
         (498   Q   
         (1,112   R   
         (2,770   S   
         1,840      T   
         (791   U   

Manufacturing / MRO

     1,311        —          —             1,311   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total cost of revenues

     27,666        34,380        (2,050        59,996   
  

 

 

   

 

 

   

 

 

      

 

 

 

Gross profit

     9,274        10,834        1,564           21,672   

Operating expenses:

           

General and administrative

     6,311        4,700        218      A-6      8,912   
         (2,317   V   

Research and development

     913        —          —             913   

Selling and marketing

     2,390        —          200      N      2,590   

Loss on disposal of leased aircraft

     —          —          —             —     
  

 

 

   

 

 

   

 

 

      

 

 

 

Total operating expenses

     9,614        4,700        (1,899        12,415   
  

 

 

   

 

 

   

 

 

      

 

 

 

Operating income (loss)

     (340     6,134        3,463           9,257   

Other income (expense):

           

Interest income

     —          —          133      A-8      133   

Interest expense

     (1,357     (956     1,351      A-3      (10,662
         (2,139   D   
         956      K   
         (8,517   W   

Amortization of debt issuance costs

     (322     (20     322      A-3      (407
         (387   A-4   

Unrealized foreign exchange gain (loss)

     206        —          —             206   

Realized foreign exchange gain (loss)

     (37     —          —             (37

Other income (expense), net

     (281     (2     (99   D      (382
  

 

 

   

 

 

   

 

 

      

 

 

 

Total other income (expense)

     (1,791     (978     (8,380        (11,149

Income (loss) before noncontrolling interest and income taxes

     (2,131     5,156        (4,917        (1,892

Income tax expense (benefit)

     (1,136     2,222        2,238      D      (748
         (4,072   D   
  

 

 

   

 

 

   

 

 

      

 

 

 

Net income (loss)

     (995     2,934        (3,083        (1,144

Less: Net (income) loss related to noncontrolling interest

     (221     —          —             (221
  

 

 

   

 

 

   

 

 

      

 

 

 

Net income (loss) attributable to the Company and EHI

     (1,216     2,934        (3,083        (1,365
  

 

 

   

 

 

   

 

 

      

 

 

 

Net income (loss) attributable to common stockholders

   $ (1,216   $ 2,934      $ (3,083        $ (1,365)   
  

 

 

   

 

 

   

 

 

      

 

 

 

Net income (loss) per share attributable to common stockholders

           

Basic

   $ (0.13            $ (0.10)   
  

 

 

          

 

 

 

Diluted

   $ (0.13            $ (0.10)   
  

 

 

          

 

 

 

Weighted average shares outstanding

           

Basic

     9,727,127          4,008,439      A-9      13,735,566   
  

 

 

     

 

 

      

 

 

 

Diluted

     9,727,127          4,008,439      A-9      13,735,566   
  

 

 

     

 

 

      

 

 

 

 

  (1) The accounting treatment and classification of certain spare parts from EHI’s historical financial statements have been adjusted to conform to the Company’s accounting treatment and classification. Such accounting treatment and classification adjustments are detailed in pro forma adjustments (B), (F), (G), and (R). The classification of certain overhaul components from the Company’s historical financial statements have been adjusted to conform to EHI’s classification. Such reclassification is detailed in pro forma adjustment (H). The accounting classification of interest and penalties associated with uncertain tax positions from EHI’s historical financial statements have been adjusted to conform to the Company’s accounting classification. Such reclassification is detailed in pro forma adjustment (D).

 

15


Notes to Unaudited Condensed Combined Pro Forma Financial Information

 

1. BASIS OF PRESENTATION

The unaudited condensed combined pro forma financial information gives effect to the acquisition as if it had occurred on March 31, 2013 for the purposes of the unaudited condensed combined pro forma balance sheet at March 31, 2013 and at January 1, 2013 for the purposes of the unaudited condensed combined pro forma statement of comprehensive income for the three months ended March 31, 2013. The unaudited condensed combined pro forma financial information has been prepared by the Company’s management and is based on the Company’s historical consolidated financial statements and EHI’s historical consolidated financial statements. Certain amounts from EHI’s historical consolidated financial statements have been reclassified to conform to the Company’s presentation and certain amounts from the Company’s historical consolidated financial statements have been reclassified to conform to EHI’s presentation.

This unaudited condensed combined pro forma financial information is prepared in conformity with GAAP. The unaudited condensed combined pro forma balance sheet as of March 31, 2013, and the unaudited condensed combined pro forma statement of comprehensive income for the three months ended March 31, 2013, have been prepared using the following information:

 

  a. Unaudited historical consolidated financial statements of the Company for the three months ended March 31, 2013;

 

  b. Unaudited historical consolidated financial statements of EHI for the three months ended March 31, 2013; and

 

  c. Such other supplementary information as considered necessary to reflect the acquisition in the unaudited pro forma consolidated financial information

The pro forma adjustments reflecting the acquisition of EHI under the purchase method of accounting are based on certain estimates and assumptions. The fair values of EHI’s assets and liabilities have been valued based on management’s estimates and third-party valuations. The Company’s management believes that its assumptions provide a reasonable basis for presenting all of the significant effects of the acquisition of EHI and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma combined financial information.

The unaudited condensed combined pro forma financial information does not include the anticipated financial benefits from such items as expense efficiencies or revenue enhancements arising from the acquisition nor does the unaudited condensed combined pro forma financial information include anticipated expenses from restructuring and integration costs to be incurred by the Company.

The unaudited condensed combined pro forma financial information is not intended to reflect the results of operations or the financial position that would have resulted had the acquisition been effected on the dates indicated and if the companies had been managed as one entity. The unaudited condensed combined pro forma financial information should be read in conjunction with the historical consolidated financial statements in the Company’s annual report on Form 10-K filed with the SEC on March 8, 2013 and the Company’s most recent quarterly report Form 10-Q filed with the SEC on May 9, 2013.

 

2. PURCHASE PRICE AND FINANCING CONSIDERATIONS

On May 2, 2013, the Company purchased from Evergreen International Aviation (“EIA”) all of the issued and outstanding capital stock of EHI for an aggregate purchase price of: (i) $185.0 million in cash; (ii) 4,008,439 shares of preferred stock of the Company, valued at $47.5 million based on an agreed value of $11.85 per share; and (iii) $17.5 million aggregate principal amount promissory notes issued by the Company.

The fair value of the preferred stock issued as part of the consideration transferred was measured on the acquisition date at the then-current fair value and resulted in a per share equity component different from the $11.85 per share agreed upon value of preferred stock of the Company. The Company issued 4,008,439 shares of preferred stock, valued at $78.0 million, or $19.47 per share on the acquisition date.

 

16


The fair value of the promissory notes was estimated at $15.9 million, assuming a market level borrowing rate.

In connection with the acquisition of EHI, EHI purchased nine aircraft from an affiliated entity of EIA for an aggregate purchase price of $13.0 million, all of which was paid by the Company on the acquisition date.

In connection with the acquisition of EHI, consideration transferred includes a term note receivable for the estimated working capital shortfall. EIA issued a term loan note with principal value of $6.15 million to the Company to fund the working capital shortfall. The term loan note fair value of $5.0 million assumes a market level borrowing rate.

In connection with the acquisition of EHI, the Company prepaid $6.8 million to a lessor, an affiliated entity of EIA and EHI, on the acquisition date for the remaining future lease obligations on three aircraft and returned the aircraft to the lessor on the acquisition date. As the transaction was entered into primarily for the benefit of the affiliated entity of EIA and EHI, the Company included the transaction as consideration transferred.

In connection with the acquisition of EHI, the Company paid $2.6 million on the acquisition date for prepayment of the three-year lease term on the McMinnville headquarters. The Company intends to occupy the McMinnville headquarters for one year. EIA refused the Company’s request for a shorter term lease during the negotiation of the sale of EHI. As a result, the Company does not expect to receive any future benefit for the rent prepayment beyond the first year. Therefore, the Company included the prepayment of the lease in consideration transferred.

The acquisition-date fair value of the consideration transferred totaled $296.4 million, which consisted of the following:

 

Cash

   $ 185,000   

Preferred stock

     78,044   

Promissory notes

     15,900   

Consideration for nine aircraft purchased from an affiliated entity of EIA

     12,971   

Term loan note receivable

     (4,960

Prepayment of aircraft lease expense to an affiliated entity of EIA

     6,808   

Prepayment of McMinnville headquarters lease

     2,616   
  

 

 

 

Total consideration transferred

   $ 296,379   
  

 

 

 

Allocation of EHI consideration transferred (a) (in thousands):

 

Total consideration transferred

   $ 296,379   
  

 

 

 

Book value of EHI at March 31, 2013

     59,000   

Pro Forma and Fair Value Adjustments, identifiable net assets acquired at March 31, 2013

     (9,597
  

 

 

 

Fair value of net assets acquired

     49,403   
  

 

 

 

Excess of consideration transferred over fair value of assets acquired (goodwill)

   $
246,976
  
  

 

 

 

 

(a) The consideration transferred is allocated to balance sheet assets acquired and liabilities assumed based on their estimated fair value. The fair value adjustments to the EHI historical consolidated balance sheet in connection with the acquisition are described below in Note 3.

 

17


3. PRO FORMA ADJUSTMENTS

 

(A) Record the $400.0 million of notes issued and sold, the $15.9 million fair value of the $17.5 million of promissory notes, and the fair value of the preferred stock issuance on the unaudited condensed combined pro forma balance sheet as of March 31, 2013. The net proceeds from the notes and preferred stock have been used towards the following pro forma adjustments:

 

  (1) Record certain components of the aggregate purchase price, including of $185.0 million of cash and the fair value of $15.9 million promissory notes, with a principal value of $17.5 million assuming a market level borrowing rate, on the unaudited condensed combined pro forma balance sheet as of March 31, 2013.

 

  (2) Record the aircraft purchase price of approximately $13.0 million, all of which was paid by the Company on the acquisition date, on the unaudited condensed combined pro forma balance sheet as of March 31, 2013.

Record an adjustment to aircraft, net of $13.0 million, on the unaudited condensed combined pro forma balance sheet as of March 31, 2013 for the purchase of the aircraft. Remove approximately $3.8 million, net of leasehold improvements that were included in EHI’s unaudited historical consolidated financial statements for these aircraft. The unaudited condensed combined pro forma statement of comprehensive income reflects depreciation and amortization expense for the three months ended March 31, 2013 of $0.3 million for these acquired aircraft. Depreciation expense and amortization expense was calculated in conformance with the Company’s policy as disclosed in the Company’s most recent 10-K filing. See pro forma adjustment (U) for the exclusion of EHI’s lease expense of $0.8 million and pro forma adjustment (S) for the exclusion of leasehold improvement amortization that was included in EHI’s unaudited historical financial statements for these aircraft.

 

  (3) Exclude the Company’s pre-acquisition revolver and term debt of $80.6 million, promissory notes of $27.3 million, and capitalized debt issuance costs of $0.4 million from the unaudited condensed combined pro forma balance sheet as of March 31, 2013 due to the refinancing of the pre-acquisition debt with proceeds of the $400.0 million notes issued and sold. Exclude the Company’s pre-acquisition debt related interest expense of $1.4 million and amortization expense of $0.3 million related to pre-acquisition debt issuance costs for the three months ended March 31, 2013 on the unaudited condensed combined pro forma statement of comprehensive income.

 

  (4) Total acquisition transaction costs and debt issuance costs were $13.6 million. Record $11.1 million of debt issuance costs to other noncurrent assets and $2.5 million of non-recurring acquisition transaction costs to retained earnings on the unaudited condensed combined pro forma balance sheet as of March 31, 2013. Do not record the acquisition transaction costs to the unaudited condensed combined pro forma statement of comprehensive income, as these costs are not expected to have a continuing impact on the Company. Record amortization of debt issuance costs related to the new debt financing of $0.4 million on the unaudited condensed combined pro forma statement of comprehensive income for the three months ending March 31, 2013.

 

  (5) Record $6.8 million related to the Company’s payment, on the acquisition date, to an affiliated entity of EIA and EHI for the remaining lease expense on three aircraft on the unaudited condensed combined pro forma balance sheet as of March 31, 2013. As the transaction was entered into primarily for the benefit of the affiliated entity of EIA and EHI, the Company included the transaction as consideration transferred.

 

  (6) Record $2.6 million total prepayment for the three year lease term on the McMinnville headquarters, with $0.9 million to prepaid expenses and other and $1.7 million to goodwill, on the unaudited condensed combined pro forma balance sheet as of March 31, 2013.

Record net rental expense for the McMinnville headquarters retained by EIA of $0.2 million on the unaudited condensed combined pro forma statement of comprehensive income for the three months ended March 31, 2013.

 

18


  (7) The $71.1 million of remaining cash proceeds from the notes is determined by deducting from the total term note issuance amount of $400.0 million, the cash consideration of $185.0 million, the payment for purchased aircraft of $13.0 million, the refinancing of pre-acquisition debt of $107.9 million, the transaction expenses of $13.6 million, the prepaid lease expense of $6.8 million, and the prepayment amount of $2.6 million for the McMinnville headquarters as discussed in pro forma adjustments (A-1) through (A-6), respectively. Of this $71.1 million total, record $46.0 million to current restricted cash as the funds will remain in escrow related to the pending Air Amazonia acquisition transaction on the unaudited condensed combined pro forma balance sheet as of December 31, 2012.

 

  (8) Record a term note of $5.0 million to prepaid and other current assets and other non-current assets of $0.5 million and $4.4 million, respectively on the unaudited condensed combined pro forma balance sheet as of March 31, 2013, for the estimated working capital shortfall. EIA issued a term note with principal value of $6.15 million to the Company to fund the anticipated working capital shortfall and the term note value reflects the fair value measurement of the term loan note assuming a market level borrowing rate. Record interest income on the term note of $0.1 million, including the amortization of any discount or premium, on the unaudited condensed combined pro forma statement of comprehensive income for the three months ended March 31, 2013.

 

  (9) The 4,008,439 shares of a new class of mandatorily convertible preferred stock of the Company were considered converted to common stock on the acquisition date and were valued at $78.0 million based on $19.47 per share, calculated using the closing market price of the Company’s common shares on the closing date of the acquisition. Record $78.0 million to additional paid in capital on the unaudited condensed combined pro forma balance sheet as of March 31, 2013. Record the acquisition issued shares of 4,008,439 on the unaudited condensed combined pro forma statement of comprehensive income for the three months ended March 31, 2013.

 

  (10) Record the investment in EHI of $296.4 million on the unaudited condensed combined pro forma balance sheet for the purchase transactions as of March 31, 2013, by excluding the $59.0 million book value of EHI at March 31, 2013 and recording the consideration of $296.4 million.

 

(B) Record reclassification of $0.5 million from EHI inventory to aircraft support parts, net, in conformance with the Company’s presentation on the unaudited condensed combined pro forma balance sheet as of March 31, 2013.

 

(C) Exclude a total of $34.4 million in assets comprised of $0.7 million in prepaid expense and other, $3.2 million in aircraft, net, $22.9 million in property, plant, and equipment, net, and $7.6 million in other noncurrent assets from the unaudited condensed combined pro forma balance sheet as of March 31, 2013 for assets not acquired in the acquisition. The unaudited condensed combined pro forma statement of comprehensive income excludes depreciation and amortization expense for the three months ended March 31, 2013 of $0.4 million related to EHI’s assets not acquired as part of the acquisition.

 

(D) Due to the Company’s tax election under Internal Revenue Code Section 338, exclude $0.9 million of deferred tax assets and $0.1 million of deferred tax liabilities from the unaudited condensed combined pro forma balance sheet as of March 31, 2013.

The effective tax rate for the Company and EHI combined is 39.56%. Record a $4.1 million income tax benefit in order to adjust income tax expense for the combined entity to the combined effective tax rate on the unaudited condensed combined pro forma statement of comprehensive income for the three months ended March 31, 2013.

Reclassify EHI’s interest expense and penalties for uncertain tax positions of $2.1 million and $0.1 million to interest expense and other income (expense), net respectively on the unaudited condensed combined pro forma statement of comprehensive income for the three months ended March 31, 2013 to conform to the Company’s presentation.

 

(E) Exclude $0.3 million in assets held for sale from the unaudited condensed combined pro forma balance sheet as of March 31, 2013, for assets acquired in the acquisition and recorded at fair value in pro forma adjustment (J).

 

19


(F) Reclassify $71.8 million of EHI’s property, plant, and equipment, net with $16.7 million to aircraft support parts, net, and $55.0 million to aircraft, net on the unaudited condensed combined pro forma balance sheet as of March 31, 2013 to conform to the Company’s presentation.

 

(G) Record adjustment to aircraft support parts, net, of $0.9 million on the unaudited condensed combined pro forma balance sheet as of March 31, 2013, for repair parts that would have been consumed under the Company’s policy of directly expensing certain parts. EHI’s policy was to capitalize and depreciate such parts by aircraft. Record on the unaudited condensed combined pro forma statement of comprehensive income cost of goods sold expense for the three months ended March 31, 2013 of $0.9 million related to those aircraft support parts considered directly expensed.

 

(H) Reclassify the Company’s overhaul parts from aircraft support parts, net to aircraft, net of $36.7 million to conform to EHI’s presentation on the unaudited condensed combined pro forma balance sheet as of March 31, 2013.

 

(I) Record fair-value adjustments to aircraft support parts, net of $3.7 million, and to property, plant, and equipment, net of $1.6 million on the unaudited condensed combined pro forma balance sheet as of March 31, 2013 relating to assets acquired and not discussed in other pro forma adjustments.

 

(J) Record fair-value adjustments to aircraft, net of $5.0 million on the unaudited condensed combined pro forma balance sheet as of March 31, 2013 relating to the aircraft assets used in EHI’s operations. Entry excludes the fair-value adjustment recorded for the aircraft purchase discussed in pro forma adjustment (A-2). The adjustment to the unaudited condensed combined pro forma statement of comprehensive income for depreciation and amortization expense for the three months ended March 31, 2013 is recorded as part of the pro forma adjustment (T).

 

(K) Exclude EHI’s short-term debt of $11.5 million on the unaudited condensed combined pro forma balance sheet as of March 31, 2013 that is related to an EHI owned facility, which was not assumed in the acquisition. The unaudited condensed combined pro forma statement of comprehensive income excludes related short-term debt interest expense for the three months ended March 31, 2013 of $1.0 million.

 

(L) Exclude $4.2 million of accrued and other current liabilities and $1.1 million of other long-term liabilities on the unaudited condensed combined pro forma balance sheet as of March 31, 2013 for liabilities not assumed in the acquisition.

 

(M) Record identified intangible assets for customer relationships of $19.3 million to long-term customer relationships, net on the unaudited condensed combined pro forma balance sheet as of December 31, 2012. Record amortization of customer relationships of $0.5 million to cost of revenues on the unaudited condensed combined pro forma statement of comprehensive income for the year ended December 31, 2012.

 

(N) Record identified intangible assets for tradename of $0.4 million to other intangibles, net on the unaudited condensed combined pro forma balance sheet as of December 31, 2012. Record amortization of tradename of $0.2 million to selling and marketing on the unaudited condensed combined pro forma statement of comprehensive income for the year ended December 31, 2012.

 

(O) Record a liability for the assumed leased-fleet’s return-to-service obligations of $19.8 million to deferred aircraft maintenance on the unaudited condensed combined pro forma balance sheet as of March 31, 2013. Because the liability relates to assets that were not in service for the three months ended March 31, 2013, there is no recorded amortization for returning the fleet to service on the unaudited condensed combined pro forma statement of comprehensive income for the three months ended March 31, 2013.

 

(P) Eliminate upon combination the Company’s investment in EHI and the equity of EHI for $296.4 million on the unaudited condensed combined pro forma balance sheet as of March 31, 2013 as discussed in pro forma adjustments (A-1) through (A-10).

 

(Q) Record elimination of net revenues and cost of revenues of $0.5 million and $0.5 million, respectively, generated from aircraft not acquired in the acquisition on the unaudited condensed combined pro forma statement of comprehensive income for the three months ended March 31, 2013.

 

(R) To conform to the Company’s policy of expensing certain parts, exclude from the unaudited condensed combined pro forma statement of comprehensive income the depreciation expense in cost of goods sold for the three months ended March 31, 2013 of $1.1 million related to parts previously capitalized by EHI in aircraft support parts, net. See pro forma adjustment (G) for the balance sheet adjustment to aircraft support parts.

 

20


(S) Exclude EHI depreciation and amortization expense of $2.8 million for all assets, excluding those assets discussed in pro forma adjustment (R), acquired by the Company on the unaudited condensed combined pro forma statements of comprehensive income for the three months ended March 31, 2013. See pro forma adjustment (R) for the exclusion of EHI’s depreciation and amortization expense of $1.1 million. In total, pro forma adjustments (R) and (S) exclude EHI depreciation and amortization expense of approximately $3.9 million for all assets acquired by the Company on the unaudited condensed combined pro forma statement of comprehensive income for the three months ended March 31, 2013.

 

(T) Record depreciation and amortization expense, calculated in conformance with the Company’s policy as disclosed in the Company’s most recent annual report on Form 10-K, of $1.8 million for all assets, excluding those discussed in pro forma adjustment (A-2), acquired by the Company on the unaudited condensed combined pro forma statement of comprehensive income for the three months ended March 31, 2013. See pro forma adjustment (A-2) for the recording of depreciation and amortization expense of $0.3 million for the nine aircraft acquired by the Company. In total, pro forma adjustments (A-2) and (T) record depreciation and amortization expense of $2.1 million for all assets acquired by the Company on the unaudited condensed combined pro forma statement of comprehensive income for the three months ended March 31, 2013.

 

(U) Exclude $0.8 million from the unaudited condensed combined pro forma statement of comprehensive income for EHI’s lease expense for the three months ended March 31, 2013 for the nine aircraft the Company purchased from an affiliated entity of EIA as discussed in pro forma adjustment (A-2).

 

(V) Eliminate the acquisition costs incurred by the Company and EHI of approximately $2.3 million from the unaudited condensed combined pro forma statement of comprehensive income for the three months ended March 31, 2013.

 

(W) Record $8.5 million of interest expense, including the amortization of any discount or premium, on the unaudited condensed combined pro forma statement of comprehensive income for the three months ended March 31, 2013, resulting from the $400.0 million of notes, $15.9 million in promissory notes, and approximately $100.0 million of available funds under a revolving line of credit. Assume the net proceeds from the issuance of the notes are used as outlined in pro forma adjustments (A-1) through (A-10) and the revolving undrawn line of credit is unused in its entirety for the three months ended March 31, 2013.

 

21


Reconciliation of Non-GAAP Financial Measures

The Company is providing a reconciliation of Net Income to EBITDA, to Adjusted EBITDA and to pro forma combined Adjusted EBITDA. These financial measures are not prepared in accordance with GAAP. Since not all companies use identical calculations, the Company’s presentation of EBITDA, Adjusted EBITDA and pro forma combined Adjusted EBITDA may not be comparable to similarly titled measures of other companies.

The Company uses EBITDA and Adjusted EBITDA to monitor its overall business performance. The Company defines EBITDA as net income (loss) before interest expense, net, provision for (benefit from) income taxes, depreciation and amortization, and non-cash charges relating to financings. The Company includes the amortization of overhaul costs as an add-back to EBITDA. The Company believes that such adjustments to arrive at EBITDA are common industry practice amongst its peers and believes this provides a more comparable measure for managing its business.

Adjusted EBITDA means, as defined by the Company’s ABL Revolver agreement, with respect to any fiscal period, the Company’s EBITDA, adjusted for, without duplication, the sum of the following amounts for such period to the extent included in determining consolidated net earnings (or loss) for such period: (i) extraordinary gains, (ii) non-cash items increasing consolidated net earnings for such period, excluding any items representing the impact of purchase accounting or the reversal of any accrual of, or cash reserve for, anticipated changes in any period, (iii) non-cash extraordinary losses, (iv) any other non-cash charges reducing consolidated net earnings for such period, excluding any such charge that represents an accrual or reserve for a cash expenditure for a future period or amortization of a prepaid cash expense that was paid in a prior period, (v) to the extent not capitalized, (A) non-recurring expenses, fees, costs and charges incurred and funded prior to, on or within 9 months after the closing date in connection with the ABL Revolver and the EHI Acquisition; and (B) expenses incurred and funded prior to, on, or within 2 years of the closing date in connection with the termination of the lease for the location that is the chief executive office of EHI as of the closing date; and (vi) transaction related expenditures incurred and funded prior to, on or within 9 months of the date of consummation of (A) the pending Air Amazonia acquisition, (B) any permitted acquisition under the ABL Revolver, or (C) any investment that is permitted pursuant to the ABL Revolver, in the case of each of (A), (B), and (C), that arise out of cash charges related to deferred stock compensation, management bonuses, strategic market reviews, restructuring, retention bonuses, consolidation, severance or discontinuance of any portion of operations, termination of the lease for the headquarters of EHI, employees or management of the target of such permitted acquisition, accrued vacation payments and working notices payments and other non-cash accounting adjustments.

 

     Historical     Pro Forma  
(dollars in thousands)    Erickson Air-Crane
Incorporated
    Evergreen
Helicopters, Inc.
    Acquisition
Adjustments
    Notes (1)   Combined  

EBITDA and Adjusted EBITDA Reconciliation

          

Net income (loss) attributable to the Company and EHI

   $ (1,216   $ 2,934        (218   A-6     (1,365
         (99   D  
         (918   G  
         (486   Q  
         498      Q  
         791      U  
         2,317      V  
         (4,968   (2)  

Interest expense, net

     1,357        956        (1,351   A-3     10,529   
         (133   A-8  
         2,139      D  
         (956   K  
         8,517      W  

Tax expense (benefit)

     (1,136     2,222        (1,834   D     (748

Depreciation (4)

     5,400        4,319        265      A-2     7,504   
         (438   C  
         (1,112   R  
         (2,770   S  
         1,840      T  

Amortization of intangible assets

     —          —          536      M     736   
         200      N  

Amortization of debt issuance costs

     322        (20     (322   A-3     367   
         387      A-4  

Amortization of sale/lease back (gains) losses

     —          (22 ) (3)      —            (22
  

 

 

   

 

 

   

 

 

     

 

 

 

EBITDA

   $ 4,727      $ 10,389      $ 1,885        $ 17,001   
  

 

 

   

 

 

   

 

 

     

 

 

 

(Gain) loss on asset disposals

     —          —          —            —     

Non-cash charges from awards to employees of equity interests

     180        —          —            180   

Non-cash unrealized mark-to-market foreign exchange gains (losses)

     (206     —          —            (206

Acquisition related expenses

     2,263        324        (2,317   V     270   

Other noncash (gains) losses

     —            —            —     
  

 

 

   

 

 

   

 

 

     

 

 

 

Adjusted EBITDA

   $ 6,964      $ 10,713      $ (432     $ 17,245   
  

 

 

   

 

 

   

 

 

     

 

 

 

 

(1) The accounting treatment and classification of certain spare parts from EHI’s historical financial statements have been adjusted to conform to the Company’s accounting treatment and classification. Such accounting treatment and classification adjustments are detailed in pro forma adjustments (B), (F), (G), and (R). The classification of certain overhaul components from the Company’s historical financial statements have been adjusted to conform to EHI’s classification. Such reclassification is detailed in pro forma adjustment (H). The accounting classification of interest and penalties associated with uncertain tax positions from EHI’s historical financial statements have been adjusted to conform to the Company’s accounting classification. Such reclassification is detailed in pro forma adjustment (D).
(2) Includes the effects of pro forma adjustments for interest expense, net, tax expense (benefit), depreciation and amortization of debt issuance costs as detailed in the respective pro forma adjustments below this amount.
(3) The amortization of sale/lease back (gains) losses of $22,000 was presented in EHI’s historical financial statement in Aerial services revenues.
(4) Includes amortization of aircraft component overhauls of $2.7 million and $1.7 million on the Company’s and EHI’s historical financial statements, respectively.

 

22


Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘8-K/A’ Filing    Date    Other Filings
Filed on:6/10/13S-3
5/9/1310-Q,  8-K
For Period End:5/2/134,  8-K,  8-K/A
3/31/1310-Q
3/8/1310-K
1/1/13
12/31/1210-K
1/1/12
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