Erickson Air-Crane Beats on Q4 Earnings - Analyst Blog

Erickson Air-Crane Inc. EAC posted fourth quarter 2013 adjusted earnings of 10 cents per share as against a loss of 3 cents per share in the year-ago quarter. The reported figure beat the Zacks Consensus Estimate of 7 cents per share.

Including acquisition and integration costs as well as a loss on the sale of the EHI note, the company incurred a loss of 12 cents per share in the reported quarter compared with a loss of 10 cents per share in the fourth quarter 2012.

In 2013, Erickson reported earnings of $1.52 per share, down 2.6% from $1.56 per share in 2012.

Total Revenue

Erickson Air-Crane registered quarterly pro forma revenues of $92.9 million, up 9.0% from the year-ago level of $85.2 million. Revenues in the reported quarter also surpassed the Zacks Consensus Estimate of $90.0 million by 3.2%.

On a GAAP basis, the company reported quarterly revenues of $92.5 million, up 137.0% from $39.1 million in the fourth quarter 2012. Strong growth was led by contributions from infrastructure construction and firefighting as well as synergies from the Evergreen Helicopters acquisition. The acquisition aided the company with customer diversification, mission capabilities as well as geographical expansion.
 
In 2013, the company reported pro forma revenues of $395.2 million, up 4.2% from $379.2 million in 2012. On the GAAP basis, the company reported revenues of $318.2 million, up 76% year over year.

Segment Details

Government Segment: The Government segment comprises defense and security, firefighting, and transport and other government related activities. On a GAAP basis, segment sales in the reported quarter increased 280.0% to $67.2 million from $17.7 million in the fourth quarter 2012 due to the Evergreen acquisition and higher demand for firefighting, worth $3.4 million, in Australia and Turkey. This was partially offset by a decline in crewing revenues in Italy.

Commercial Segment: The Commercial segment includes timber harvesting, infrastructure construction, including oil and gas and MRO/Manufacturing. On a GAAP basis, quarterly segment sales increased 18.0% to $25.3 million from $21.4 million in the fourth quarter 2012 due to new business in the South American oil and gas market and U.S. construction, partially offset by a decrease in MRO activity.

Operational Highlights

On the cost front, total operating expenses were $14.0 million in the reported quarter, up a considerable 56.0% year over year. Cost of revenues also surged 142.7% to $69.3 million from $28.6 million in the fourth quarter of 2012.

Adjusted EBITDA was $19.0 million, up 177.0% from the year-ago quarter.

Pro forma operating income in the reported quarter increased 22.7% to $10.8 million from $8.8 million in the prior-year quarter. Operating income (including $1.6 million of acquisition, integration and related expenses) in the reported quarter was $9.2 million.

Financial Condition

Erickson ended 2013 with cash and cash equivalents of approximately $1.9 million, compared with $1.5 million at the end of 2012.

Long-term debt (excluding current portion) declined to $16.2 million at the end of 2013 from $26.7 million at 2012 end.

2014 Guidance

On a reported basis, Erickson expects revenues in the band of $385.0 million to $405.0 million for 2014. Adjusted EBITDA is expected between $100.0 million and $110.0 million. Earnings per share are projected in the range of 95 cents to $1.35 based on 13.8 million of expected shares outstanding.

Update on Acquisitions

In May 2013, Erickson acquired Evergreen Helicopters for $250 million as per the agreement with Evergreen International Aviation, Inc.

The acquisition provided Erickson with an incremental fleet of 64 aircraft comprising both helicopters and fixed-wing airplanes. This diverse fleet serves a wide range of customers which include passenger transport and airlift services for the U.S. military.

In 2013, the company also closed the acquisition of Air Amazonia from HRT Oil & Gas.

With Air Amazonia and Evergreen Helicopters, the combined business would operate a diverse fleet of 100 aircraft.

These acquisitions would bring in synergies and significant opportunities for incremental growth in the near as well as long term. Moreover, the combination of these businesses would diversify end markets, regions serviced, mission capabilities and aircraft types.

Zacks Rank

The company presently carries a Zacks Rank #3 (Hold).

Stocks worthy of consideration in the aerospace and defense sector are Huntington Ingalls Industries, Inc. HII, Wesco Aircraft Holdings, Inc. WAIR and Lockheed Martin Corporation LMT. While Huntington Ingalls and Wesco Aircraft hold a Zacks Rank #1 (Strong Buy), Lockheed Martin carries a Zacks Rank #2 (Buy).