“Unsatisfactory” financial results for Erickson in Second Quarter
Erickson have released their second quarter financial results for 2016 with revenue down $16.2 million compared to the second quarter of 2015 at $50.8 million.
Commercial Aviation Services revenues also decreased, from $13.3 million to $21 million, down from $34.3 million in 2015. They saw decreases of $5.9 million due to the loss of the United States Forestry Service firefighting contract. As well as losses of $5.8 million related to climate of the oil and gas industry, and $3.2 million as a result of construction projects in Asia that did not take place in the second quarter of 2016. Partially offsetting the decreases was an increase in firefighting activity in Greece.
Global Defense and Security revenues also decreased by $7 million to $21.4 million for the second quarter of 2016 from $28.4 million in the second quarter of 2015. The operator saw the loss of $5 million due to losing the contract for the U.S. Department of Defense in Afghanistan and Hawaii and $2 million related to a reduction in aerial services transporting passengers and cargo in Afghanistan.
“Our second quarter results were unsatisfactory. We were unable to secure material business wins in a timely manner and we were unable to reduce our costs fast enough to align with the level of revenue generation” said Jeff Roberts, President and CEO.
Adjusted EBITDA was also down at $0.8 million, which is a $9.6 million decrease compared to the $10.3 million for the same period in 2015. Second quarter 2016 loss from operations was at $29.3 million, which included asset impairments of $6.1 million, a goodwill impairment of $4.5 million, and an acceleration of lease payments on idle leased aircraft for $7.8 million, compared with operating income of $0.2 million for the same period in 2015.
Impairments related to goodwill and held for sale aircraft totaled $10.6 million. These impairment charges were driven by events during the quarter, including the lower than expected financial performance, and a major competitor filing for bankruptcy protection. Eleven aircraft remain held for sale at the end of the second quarter.
Roberts added “In light of these circumstances, we are making further reductions in general and administrative and support costs, and deferring non-critical capital expenditures into future periods, which are aimed at improving our liquidity position. These measures will provide the time needed for our cost and revenue initiatives to mature. In addition, we are making good progress with our advisory firm to address our immediate liquidity needs, as well as options with respect to our longer term capital structure and strategic alternatives”
The company are still trying to see the positives by counterbalancing the report with their recent highlights, including their strong safety record. Manufacturing and MRO revenues did increase, at $4.2 million to $8.5 million compared to $4.3 million for the second quarter of 2015. This increase was driven primarily by aircraft refurbishment activity for the U.S. government, additional Aircrane component overhaul activity, and increased fire tank manufacturing for external fixed-wing customers.
The operator also refer to winning an on-demand fixed wing 5 year contract for $13.0 million with Special Operations Command Africa, to transport personnel and equipment in the North and Western regions of Africa; Completing the sale of two aircraft in the second quarter for a total of $0.7 million; Winning a five-year contract worth an estimated $24.3 million to provide timber harvesting aerial services to Asiatic Heli-Logging SDN BHD and Hormat Jadi SDN BHD in Malaysia, starting September 2016. As well as this Erickson also won two extensions of exisiting contracts – a six-month extension worth $29.0 million for their current Fluor contract in Global Defense and Security and a two-year contract extension worth $24.0 million partnering with Kestrel Aviation in Australia for six S-64E aircranes providing helicopter firefighting services.
Roberts finsihed with “In spite of these challenges, I am pleased that our team maintains a strong safety record. This remains our highest priority. I am also pleased with the recent contract extensions and awards as they reinforce our value proposition, unique capabilities and customer satisfaction. We will continue our restructuring activities to address our operations in all areas driving efficiencies and effectiveness and ultimately delivering profitability. As a result, we expect the second half of 2016 to reflect an incremental improvement compared to the first half of 2016. We will continue to build on our strength in our Manufacturing and MRO segment, the momentum in Global Defense and Security, and select Commercial end markets.”