Erickson Reports Fourth Quarter and Full Year 2015 Financial Results

Full-year revenue of $298 million and Adjusted EBITDA of $59 million, approximating revised guidance
Achieved $10 million of cost savings in 2015 compared to 2014
Free cash flow of $(5) million for 2015, a $38 million improvement compared to 2014

PORTLAND, Ore., March 03, 2016 -- Erickson Inc. (NASDAQ:EAC) (“Erickson,” the “Company,” “we,” “us” and “our”), a leading global provider of aviation services, today announced fourth quarter and full year 2015 financial results.

“2015 was a challenging year for Erickson as several of our end markets were contracting and under duress. This resulted in disappointing revenue and income results. We finished 2015 approximately in line with our revised guidance on revenue and Adjusted EBITDA. We have largely completed our transformation plan and delivered cost savings and cash flow improvements. We continue to pivot the business to longer-term contracts to reduce the impact of seasonality, and improve the stability of our cash flows. Our ongoing attention to fleet rationalization is in direct correlation to addressing market needs and improving asset utilization,” said Jeff Roberts, President and CEO.

Fourth Quarter 2015 Highlights

MRO revenue growth of 57%, excluding aircraft sales
Contract extension with Repsol Peru in South America for the exclusive use of one Aircrane
Contract extension with NATO and Hellenic Fire Dept. for the exclusive use of three Aircranes for two years

Full Year 2015 Highlights

92% MRO revenue growth compared to 2014, excluding aircraft sales
Achieved $10 million of cost savings in 2015 compared to 2014
Free cash flow of $(5) million for 2015, a $38 million improvement compared to 2014

Recent Highlights

New contract award to provide various fixed wing aerial transport services for the Department of Defense in Africa
Annual heli-logging contract extensions with Helifor and Western Forest Products for the exclusive use of an Aircrane for each contract
New contract award to refurbish two, super heavy lift MH-53E Sea Dragons for the United States Navy
New contract win with Sterlite Grid to place high voltage powerlines in the Pir Panjel mountain range in India

Fourth Quarter Results
Erickson recorded net revenue of $60.9 million for the fourth quarter of 2015, compared to net revenue of $73.2 million for the fourth quarter of 2014. Fourth quarter 2015 loss from operations was $15.5 million, a decrease of $19.6 million compared to income from operations of $4.1 million for the same period in 2014. Fourth quarter 2015 income from operations included asset impairments of $8.1 million. Fourth quarter 2015 Adjusted EBITDA was $8.5 million compared to $14.2 million for the same period in 2014.

Full Year Results
Net revenue for the year ended December 31, 2015, was $297.5 million compared to net revenue of $346.6 million for the full year 2014. Full year 2015 loss from operations was $54.8 million compared to income from operations of $22.3 million for the same period in 2014. Full year 2015 income from operations included goodwill and asset impairments of $65.1 million. Full year 2015 Adjusted EBITDA was $58.7 million compared to $83.8 million for the same period in 2014.

Closing Comments
Jeff Roberts concluded, “We are beginning to see improvement in the pipeline and backlog, and are cautiously optimistic for the second half of 2016. However, we expect that challenging market conditions will persist for the first half of 2016. While we have seen improvements in our cost base and cash flow, there is still additional work to be done. We believe that our efforts to reconstitute our aerial assets and build on our existing strength in MRO capabilities will best prepare us to respond to market demand.”

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

Conference Call

Jeff Roberts, the Company’s President and Chief Executive Officer, and Eric Struik, the Company’s Chief Financial Officer, will host a conference call at 11:00 a.m. ET on Thursday, March 3, 2016 to discuss the results, followed by a question and answer session for the investment community. To access the call, dial toll-free 1-888-503-8169 or 1-719-325-2244 (international).

To listen to a telephonic replay of the conference call, dial toll-free 1-877-870-5176 or 1-858-384-5517 (international) and enter pass code 4311704. The replay will be available beginning at 8:00 p.m. ET on March 3, 2016 and will last through 11:59 p.m. ET on March 17, 2016.

About Erickson

Erickson is a leading global provider of aviation services specializing in government services, manufacturing and MRO, and commercial services such as firefighting, energy construction, timber harvesting, HVAC & specialty, and oil and gas. As of December 31, 2015, Erickson’s fleet consisted of 74 rotary-wing (light, medium, and heavy) and fixed-wing aircraft, including 20 heavy-lift S-64 Aircranes. Founded in 1971, Erickson is headquartered in Portland, Oregon, USA, and maintains operations in North America, South America, Europe, the Middle East, Africa, Asia Pacific, and Australia. For more information, please visit our Web site at http://www.ericksoninc.com

Cautionary Note Regarding Forward-Looking Statements
Except for historical information, all of the statements, expectations and assumptions contained in this news release, including statements, expectations and assumptions about Company growth and prospects for its business units, are forward-looking statements that involve a number of risks and uncertainties. Although Erickson attempts to be accurate in making these forward-looking statements, it is possible that future circumstances might differ from the assumptions on which such statements are based. In addition, other important factors which could cause actual results to differ materially include the following: reliance on economic conditions and trends in the aerial services and MRO sectors; success in sales growth; loss or non-renewal of large contracts; reductions or delays in customer orders; competition; reliance on a small number of large customers; the impact of government spending, including reduced Department of Defense spending in Afghanistan; our substantial indebtedness; our failure to obtain any required financing on favorable terms; compliance with debt obligations and covenants; risks associated with and dependence on collaborative relationships; weather and seasonal fluctuations that impact aerial services activities; our ability to keep pace with changes in technology; significant changes in demand for the fleet of aircraft we offer; hazards associated with our aerial operations, which may be uninsured; our safety record; risks associated with international operations, including doing business in developing countries and politically or economically volatile areas; the impact of product liability and product warranties; the impact of environmental and other regulations, including the FAA and similar international regulatory bodies; our ability to accurately forecast financial guidance; the ability to attract and retain qualified personnel; fluctuations in the price of fuel; the impact of changes in the value of foreign currencies; other risk factors set forth from time to time in the SEC filings for Erickson, copies of which are available free of charge upon request from the Erickson investor relations department. Erickson assumes no obligation to update forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors affecting forward-looking information, except to the extent required by law.


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

	As of December 31,
	2015			2014
ASSETS
Current assets:
Cash and cash equivalents	$	2,129		$	5,097
Restricted cash	373			567
Accounts receivable, net	40,520			44,350
Prepaid expenses and other current assets	5,233			9,457
Total current assets	48,255			59,471
Aircraft, net	186,132			225,395
Aircraft support parts, net	139,609			137,593
Assets held for sale	12,348			—
Property, plant and equipment, net	25,553			23,461
Other assets	10,261			12,006
Other intangible assets, net	15,787			20,053
Goodwill, net	163,708			215,241
Total assets	$	601,653		$	693,220
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	13,660		$	19,844
Current portion of long-term debt	8,205			2,438
Accrued and other current liabilities	17,828			19,349
Total current liabilities	39,693			41,631
Credit facility	96,165			87,062
Long-term debt, less current portion	364,782			360,359
Other liabilities	11,720			23,155
Total liabilities	512,360			512,207
Equity:
Erickson Incorporated shareholders’ equity:
Common stock; $0.0001 par value; 110,000,000 shares authorized; 13,895,421 and 13,823,818 issued and outstanding at December 31, 2015 and 2014, respectively	1			1
Additional paid-in capital	181,259			181,018
Retained earnings	(84,901		)	1,812
Accumulated other comprehensive loss, net of tax	(7,789		)	(2,544		)
Total Erickson Incorporated shareholders’ equity	88,570			180,287
Noncontrolling interests’ equity	723			726
Total equity	89,293			181,013
Total liabilities and equity	$	601,653		$	693,220


ERICKSON INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)

	Three Months Ended December 31,						Years Ended December 31,
	2015			2014			2015			2014
Revenues, net:
Commercial Aviation Services	$	31,888		$	33,019		$	160,885		$	177,261
Global Defense and Security	21,013			34,591			105,158			154,057
Manufacturing and MRO	8,005			5,592			31,477			15,291
Total revenues	60,906			73,202			297,520			346,609
Cost of revenues:
Commercial Aviation Services	28,383			33,726			129,018			129,978
Global Defense and Security	20,625			23,701			97,035			124,574
Manufacturing and MRO	6,773			3,287			24,192			11,163
Total cost of revenues	55,781			60,714			250,245			265,715
Gross profit (loss):
Commercial Aviation Services	3,505			(707		)	31,867			47,283
Global Defense and Security	388			10,890			8,123			29,483
Manufacturing and MRO	1,232			2,305			7,285			4,128
Total gross profit	5,125			12,488			47,275			80,894
Operating expenses:
General and administrative	10,809			6,206			28,891			26,606
Research and development	789			943			2,675			3,782
Selling and marketing	906			1,283			5,449			6,904
Impairment of goodwill	—			—			49,823			21,272
Impairment of other assets	8,093			—			15,236			—
Total operating expenses	20,597			8,432			102,074			58,564
Operating income (loss)	(15,472		)	4,056			(54,799		)	22,330
Interest expense, net	(9,194		)	(8,934		)	(37,073		)	(35,800		)
Other income (expense), net	3,449			1,000			517			(1,193		)
Net loss before income taxes and noncontrolling interests	(21,217		)	(3,878		)	(91,355		)	(14,663		)
Income tax benefit	(4,556		)	(1,393		)	(4,723		)	(4,432		)
Net loss	(16,661		)	(2,485		)	(86,632		)	(10,231		)
Less: Net (income) loss related to noncontrolling interests	(35		)	34			(81		)	(61		)
Net loss attributable to Erickson Incorporated	$	(16,696	)	$	(2,451	)	$	(86,713	)	$	(10,292	)
Loss per share—Basic and Diluted	$	(1.21	)	$	(0.18	)	$	(6.27	)	$	(0.75	)
Weighted average shares outstanding—Basic and Diluted	13,843,902			13,810,587			13,833,552			13,800,494


ERICKSON INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

	Three Months Ended December 31,						Years Ended December 31,
	2015			2014			2015			2014
Cash flows from operating activities:
Net loss	$	(16,661	)	$	(2,485	)	$	(86,632	)	$	(10,231	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	11,430			7,805			42,314			34,903
Impairment of goodwill	—			—			49,823			21,272
Impairment of other assets	8,093			—			15,236			—
Deferred income taxes	(46		)	483			(2,943		)	(7,790		)
Amortization of debt issuance costs	723			606			2,660			2,433
Non-cash interest expense	243			98			886			324
Stock-based compensation	83			245			294			861
Other non-cash (income) expense, net	4,129			(1,974		)	3,855			(2,535		)
Changes in operating assets and liabilities:
Accounts receivable	14,610			21,244			3,003			19,719
Prepaid expenses and other current assets	343			848			4,003			(5,110		)
Aircraft support parts, net	11,222			(3,602		)	3,384			(17,240		)
Aircraft held for sale	400			—			2,400			—
Other assets	(2,536		)	1,370			(278		)	5,602
Accounts payable	(6,569		)	(2,695		)	(5,707		)	(8,856		)
Accrued and other current liabilities	(11,730		)	(17,183		)	1,151			(20,023		)
Other liabilities	(14,805		)	463			(12,281		)	655
Net cash provided by (used in) operating activities	(1,071		)	5,223			21,168			13,984
Cash flows from investing activities:
Purchases of aircraft and property, plant and equipment	(5,497		)	(4,100		)	(26,126		)	(56,807		)
Proceeds from sale-leaseback of aircraft	—			—			5,078			24,660
Restricted cash	(31		)	(119		)	104			2,222
Increase in other assets	—			(126		)	—			(126		)
Dividends paid to non-controlling interest	—			4			—			(69		)
Net cash used in investing activities	(5,528		)	(4,341		)	(20,944		)	(30,120		)
Cash flows from financing activities:
Proceeds from shareholders, net	—			—			—			414
Credit facility payments	(39,787		)	(57,847		)	(180,231		)	(206,686		)
Credit facility borrowings	50,400			60,946			188,890			227,939
Long-term debt payments, including capital lease payments	(2,906		)	—			(6,895		)	—
Other long-term (payments) borrowings	(36		)	(35		)	(156		)	409
Debt issuance costs	(77		)	(32		)	(224		)	(371		)
Shares withheld for payment of taxes	(10		)	(45		)	(53		)	(211		)
Net cash provided by financing activities	7,584			2,987			1,331			21,494
Effect of foreign currency exchange rates on cash and cash equivalents	(554		)	(1,331		)	(4,523		)	(2,142		)
Net change in cash and cash equivalents	431			2,538			(2,968		)	3,216
Cash and cash equivalents at beginning of period	1,698			2,559			5,097			1,881
Cash and cash equivalents at end of period	$	2,129		$	5,097		$	2,129		$	5,097


ERICKSON INCORPORATED AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES
(In thousands, except share and per share data)
(Unaudited)

The following tables reconcile the non-GAAP financial measures appearing in this press release to the most directly comparable GAAP measures:

	Three Months Ended December 31,						Years Ended December 31,
	2015			2014			2015			2014
EBITDA, Adjusted EBITDA and Adjusted EBITDAR Reconciliation:
Net loss attributable to Erickson Incorporated	$	(16,696	)	$	(2,451	)	$	(86,713	)	$	(10,292	)
Interest expense, net	9,194			8,934			37,073			35,800
Tax benefit	(4,556		)	(1,393		)	(4,723		)	(4,432		)
Depreciation and amortization	11,430			7,805			42,314			34,903
Amortization of debt issuance costs	723			606			2,660			2,433
EBITDA	95			13,501			(9,389		)	58,412
Impairment of goodwill	—			—			49,823			21,272
Impairment of other assets	8,093			—			15,236			—
Restructuring costs	96			401			2,545			1,482
Unrealized foreign currency exchange losses	172			113			467			387
Stock-based compensation	83			245			294			861
Gain on early extinguishment of debt	(653		)	—			(806		)	—
Acquisition and integration related expenses	134			30			195			1,687
Other non-cash items, net	460			(95		)	338			(348		)
Adjusted EBITDA	8,480			14,195			58,703			83,753
Aircraft lease expenses	3,899			4,924			16,997			20,198
Adjusted EBITDAR	$	12,379		$	19,119		$	75,700		$	103,951

Free Cash Flow:
Net cash provided by (used in) operating activities	$	(1,071	)	$	5,223		$	21,168		$	13,984
Add: Purchases of aircraft and property, plant and equipment	(5,497		)	(4,100		)	(26,126		)	(56,807		)
Free cash flow	$	(6,568	)	$	1,123		$	(4,958	)	$	(42,823	)

Erickson Contact
Bobby Lambrix - Media Requests
(216) 372-6277, [email protected]

Zachary Cotner - Investor Relations
(503) 505-5804, [email protected]

Erickson Reports Fourth Quarter and Full Year 2015 Financial Results

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