Monday, March 24, 2014

Key customer for Erickson Air-Crane depends on Afghanistan contracts

Portland's Erickson Air-Crane has a lot riding on the U.S. military.

Erickson filed its annual 10-K statement earlier this month and it illustrates some of the effects of the company's $250 million acquisition last year of Evergreen Helicopters, the rotary-wing unit of the ailing McMinnville-based aviation services company. (Evergreen filed for dissolution at the end of last year. Its bankruptcy case is continuing in Delaware.)

Evergreen was a military subcontractor, supplying aviation services in war zones such as Afghanistan, Iraq and elsewhere. According to Erickson's 10-K, its largest customer in 2013 was Fluor Corp., which provided 14.8 percent of Erickson's 2013 net revenue. A footnote explains that Fluor, a diversified contractor that supports U.S. military bases overseas, was an Evergreen Helicopters customer in previous years.

Erickson's total net revenue last year was $318.2 million, which means Fluor accounted for about $47.1 million. That goes a way toward explaining why Erickson's revenue jumped more than 75 percent from 2012.

Erickson does a lot of work for a lot of different customers. The business of fighting wildfires, for example, is a core competency for the company and one that it supplemented by last year's purchase of Air Amazonia, a Brazilian firm spun off by an energy conglomerate. Adding the Brazilian fleet and contracts will help reduce the seasonality of Erickson's revenues, the company said.

But as the "Risk Factors" section of the 10-K notes, revenues can lift or plunge rather suddenly if a key customer hiccups. As for Fluor, notes the filing, "in light of anticipated troop withdrawals in Afghanistan, there is a heightened risk of a decline in our future revenue attributable to our contract with Fluor."

A few other tidbits from the 10-K:

  • The acquisitions of Evergreen Helicopters and Air Amazonia expanded Erickson's headcount dramatically. Before the purchases, Erickson had about 700 workers, most of them in Oregon. Now it employs about 1,200 people, including 500 in Oregon. (The company's largest plant is in Central Point.) 
  • The company has taken on significant debt to finance its acquisitions and expansions. Total borrowings at the end of last year were a little more than $440 million.
  • Erickson's biggest stockholder is ZM Equity and associated entities, which control "a majority of our outstanding common stock." (ZM does business as Centre Lane Partners.)

Erickson's profitability dipped in 2013, but the company remains solidly in the black, with net income last year of $9.9 million on net revenues of $318.2 million.

Erickson's shares have bounced around over the last year. They were trading Monday in the $18-$19 range, down considerably from the $29-plus heights reached last spring in the wake of the Evergreen Helicopters deal. But shareholders have picked the shares up from the $14 range where they traded late last summer.

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