8-K/A

0001193125-13-252455.txt : 20130610 0001193125-13-252455.hdr.sgml : 20130610 20130610080056 ACCESSION NUMBER: 0001193125-13-252455 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20130502 ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20130610 DATE AS OF CHANGE: 20130610 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Erickson Air-Crane Inc. CENTRAL INDEX KEY: 0001490165 STANDARD INDUSTRIAL CLASSIFICATION: AIRCRAFT & PARTS [3720] IRS NUMBER: 931307561 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-35482 FILM NUMBER: 13902123 BUSINESS ADDRESS: STREET 1: C/O ERICKSON AIR-CRANE INCORPORATED STREET 2: 5550 SW MACADAM AVENUE, SUITE 200 CITY: PORTLAND STATE: OR ZIP: 97239 BUSINESS PHONE: 503-505-5800 MAIL ADDRESS: STREET 1: C/O ERICKSON AIR-CRANE INCORPORATED STREET 2: 5550 SW MACADAM AVENUE, SUITE 200 CITY: PORTLAND STATE: OR ZIP: 97239 FORMER COMPANY: FORMER CONFORMED NAME: Erickson Air-Crane Inc DATE OF NAME CHANGE: 20100422 8-K/A 1 d545977d8ka.htm 8-K/A 8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

(Amendment No. 1)

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

May 2, 2013

Date of Report (Date of earliest event reported)

Erickson Air-Crane Incorporated

(Exact name of registrant as specified in its charter)

Delaware

001-35482

93-1307561

(State or other jurisdiction

of incorporation)

(Commission
File Number)

(IRS Employer
Identification No.)

5550 SW Macadam Avenue, Suite 200

Portland, Oregon 97239

(Address of principal executive offices, including Zip Code)

Registrant’s telephone number, including area code: (503) 505-5800

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

In this report, unless otherwise indicated or the context otherwise requires, references to “we,” “us,” “our,” the “Company” and “Erickson” refer to Erickson Air-Crane Incorporated and its subsidiaries on a consolidated basis.

Explanatory Note

This Amendment No. 1 amends the Current Report on Form 8-K filed on May 8, 2013 (the “Original Form 8-K”), to provide the financial statement information referred to in parts (a) and (b) of Item 9.01 below relating to our recently completed acquisition from Evergreen International Aviation, Inc. of 100% of the outstanding share capital of Evergreen Helicopters, Inc. (“Evergreen” and such transaction, the “Evergreen Acquisition”). Except as otherwise noted, this Amendment No. 1 does not modify or update the Original Form 8-K or the disclosures set forth therein or otherwise reflect events occurring after the filing thereof.

Item 9.01

Financial Statements and Exhibits.

(a) Financial Statements of Business Acquired

The audited consolidated financial statements of Evergreen as of December 31, 2012, February 29, 2012 and February 28, 2011 and for the years ended December 31, 2012, February 29, 2012, February 28, 2011 and February 28, 2010, together with the notes thereto and the auditors’ reports thereon, are attached hereto as Exhibit 99.1 and incorporated herein by reference.

The unaudited consolidated financial statements of Evergreen as of March 31, 2013 and for the three months ended March 31, 2013 and 2012, together with the notes thereto, are attached hereto as Exhibit 99.2 and incorporated herein by reference.

(b) Pro Forma Financial Information

The unaudited pro forma condensed combined financial information and explanatory notes, as required by this Item 9.01(b) relating to the Evergreen Acquisition, are attached hereto as Exhibit 99.3 and incorporated herein by reference.

Exhibits


Exhibit No.		Description

23.1		Consent of Crowe Horwath LLP.

23.2		Consent of GHP Horwath, P.C.

99.1		Evergreen Helicopters, Inc. and subsidiaries – audited consolidated financial statements as of December 31, 2012, February 29, 2012 and February 28, 2011 and for the years ended December 31, 2012, February 29, 2012, February 28, 2011 and February 28, 2010.

99.2		Evergreen Helicopters, Inc. and subsidiaries – unaudited consolidated financial statements as of March 31, 2013 and for the three months ended March 31, 2013 and 2012.

99.3		Unaudited pro forma condensed combined financial information relating to the Evergreen Acquisition as of December 31, 2012 and March 31, 2013, and for the year ended December 31, 2012 and for the three months ended March 31, 2013.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


	Erickson Air-Crane Incorporated

Dated: June 10, 2013	By:	/s/ Edward Rizzuti
		Edward Rizzuti
		Vice President, General Counsel and Corporate Secretary

EXHIBIT INDEX


Exhibit No.		Description

23.1		Consent of Crowe Horwath LLP.

23.2		Consent of GHP Horwath, P.C.

99.1		Evergreen Helicopters, Inc. and subsidiaries – audited consolidated financial statements as of December 31, 2012, February 29, 2012 and February 28, 2011 and for the years ended December 31, 2012, February 29, 2012, February 28, 2011 and February 28, 2010.

99.2		Evergreen Helicopters, Inc. and subsidiaries – unaudited consolidated financial statements as of March 31, 2013 and for the three months ended March 31, 2013 and 2012.

99.3		Unaudited pro forma condensed combined financial information relating to the Evergreen Acquisition as of December 31, 2012 and March 31, 2013, and for the year ended December 31, 2012 and for the three months ended March 31, 2013.

EX-23.1 2 d545977dex231.htm EX-23.1 EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in Registration Statement No. 333-180778 on Form S-8 of Erickson Air-Crane Incorporated of our report dated March 22, 2013 relating to the consolidated financial statements of Evergreen Helicopters, Inc. and Subsidiaries, which includes an emphasis paragraph regarding substantial doubt about the company’s ability to continue as a going concern, for the year ended December 31, 2012, appearing in this current report on Form 8-K/A.

Crowe Horwath LLP

Indianapolis, Indiana

June 10, 2013

EX-23.2 3 d545977dex232.htm EX-23.2 EX-23.2

Exhibit 23.2

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in a Registration Statement on Form S-8 (File No. 333-180778) of Erickson Air-Crane Incorporated of our report dated March 22, 2013, on the consolidated financial statements of Evergreen Helicopters, Inc. and subsidiaries (EHI), which expresses an unqualified opinion and includes an emphasis of matter paragraph describing uncertainty as to the ultimate outcome and the impact of continuing defaults on debt obligations of EHI and debt obligations guaranteed by EHI, which report appears in this Form 8-K/A.

/s/ GHP HORWATH, P.C.

Denver, Colorado

June 10, 2013

EX-99.1 4 d545977dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

INDEPENDENT AUDITORS’ REPORT

Board of Directors and Stockholder

Evergreen International Aviation, Inc.

McMinnville, Oregon

Report on the Financial Statements

We have audited the accompanying consolidated financial statements of Evergreen Helicopters, Inc. and Subsidiaries, which comprise the consolidated balance sheet as of December 31, 2012, and the related consolidated statements of income, stockholder’s equity, and cash flows for the year then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Evergreen Helicopters, Inc. and Subsidiaries as of December 31, 2012, and the results of their operations and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

F-1

Emphasis of Matter Regarding Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company is in default on its debt, has negative working capital, and in addition, is a guarantor of certain of its Parent’s and a Stockholder Affiliate’s debt that is also in default at December 31, 2012. The default on the Company’s and its Parent’s debt and the resulting liquidity concerns raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter.

Crowe Horwath LLP

Indianapolis, Indiana

March 22, 2013

F-2

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

December 31, 2012

(amounts in thousands)


ASSETS
Current assets:
Cash and cash equivalents	$	148
Accounts receivable, net		24,213
Inventories		601
Prepaid expenses and other assets		7,570
Deferred tax assets		907
Assets held for sale		2,864

Total current assets		36,303

Property and Equipment
Aircraft, aircraft engines and rotable parts		86,917
Deferred overhauls		43,626
Buildings and improvements		22,390
Construction in progress		10,170
Machinery and equipment		8,748

		171,851
Accumulated depreciation of long-lived assets		(58,917	)
Accumulated amortization of deferred overhauls		(20,728	)

Net property and equipment		92,206

Refundable deposits		12,753
Restricted investments		1,056
Other assets		3,049

Total assets	$	145,367

LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities:
Accounts payable	$	34,611
Accrued expenses and other		4,147
Debt		11,647

Total current liabilities		50,405

Other liabilities		3,872
Liability for uncertain tax positions in foreign jurisdiction		17,353
Deferred tax liabilities		1,250

Total liabilities		72,880

Commitments and contingencies (Notes 7 and 8)		—

Stockholder’s equity:
Common stock, no par value, 500 shares authorized, issued and outstanding;		—
Net investment of Parent		72,487

Total stockholder’s equity		72,487

Total liabilities and stockholder’s equity	$	145,367

The accompanying notes are an integral part of the consolidated financial statements.

F-3

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME

Year ended December 31, 2012

(amounts in thousands)


Revenues from flight and support services	$	201,232
Cost of flight and support services		145,332

Gross profit		55,900
Selling, general and administrative expense		21,297
Loss on disposal of leased aircraft		2,384

		23,681

Income from operations		32,219
Non-operating income (expense):
Interest expense		(1,579	)
Amortization of deferred finance costs		(255	)
Other income		291

Total other expense		(1,543	)
Income before income tax expense		30,676
Income tax expense		(13,025	)

Net income	$	17,651

The accompanying notes are an integral part of the consolidated financial statements.

F-4

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDER’S EQUITY

Year ended December 31, 2012

(amounts in thousands, except share data)


	Common Stock				Net Investment of Parent			Total Stockholder’s Equity
	Shares		Amount		Net Investment of Parent			Total Stockholder’s Equity
Balance, January 1, 2012		500	$	—	$	109,989		$	109,989
Contributed capital (Note 10)		—		—		1,576			1,576
Net transfer to Parent		—		—		(56,729	)		(56,729	)
Net income		—		—		17,651			17,651

Balance, December 31, 2012		500	$	—	$	72,487		$	72,487

The accompanying notes are an integral part of the consolidated financial statements.

F-5

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

Year ended December 31, 2012

(amounts in thousands)


Cash flows from operating activities:
Net income	$	17,651
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		10,328
Amortization of deferred overhauls		6,136
Amortization of net gain on sale leaseback transactions		(156	)
Amortization of deferred finance costs		255
Deferred income taxes		1,912
Liability for uncertain tax positions in foreign jurisdiction		3,871
Loss on disposal of leased aircraft		2,384
Contribution from stockholder affiliate for free rent		1,576
Changes in operating assets and liabilities:
Accounts receivable		2,575
Inventories		(85	)
Prepaid expenses, refundable deposits and other		489
Accounts payable, accrued and other liabilities		23,642

Net cash provided by operating activities		70,578
Cash flows from investing activities:
Purchases of property and equipment and overhauls		(22,772	)
Proceeds from disposal of property and equipment		8,949

Net cash used in investing activities		(13,823	)
Cash flows from financing activities:
Payments on debt		(1,956	)
Proceeds from earn-out from sale of subsidiary		2,000
Net transfers to Parent		(56,729	)

Net cash used in financing activities		(56,685	)
Net change in cash and cash equivalents		70
Cash and cash equivalents, beginning of period		78

Cash and cash equivalents, end of period	$	148

Supplemental information on cash flow information:
Cash paid for:
Interest	$	1,584

The accompanying notes are an integral part of the consolidated financial statements.

F-6

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2012

(amounts in thousands)

NOTE 1—DESCRIPTION OF THE BUSINESS

Evergreen Helicopters, Inc. (“Helicopters” or the “Company”) provides helicopter and small fixed-wing aircraft services throughout the world in connection with activities such as forest fire fighting, health services, aerial spraying, heavy lift construction, law enforcement, helicopter logging, petroleum support services, search and rescue, peacekeeping and relief support, helicopter skiing, and agriculture.

Helicopters own 100% of the following subsidiaries:

•

Evergreen Helicopters of Alaska, Inc.

•

Evergreen Equity, Inc.

•

Evergreen Helicopters International, Inc.

Controlling Stockholder and Related Parties: Helicopters is wholly-owned by Evergreen International Aviation, Inc., which is wholly-owned by Evergreen Holdings, Inc. (“Holdings”). Holdings’ founder and chairman of the board of directors is the majority stockholder of Holdings. In addition, the Company engages in transactions with the majority stockholder and other entities owned by, or controlled by the majority stockholder. Collectively, these entities are referred to as “Stockholder Affiliates” (Note 10).

The Company also engages in transactions with the Company’s Parent and the Parent’s subsidiaries (Note 10):

•

Evergreen International Aviation, Inc.

•

Evergreen International Airlines, Inc.

•

Evergreen Aviation Ground Logistics Enterprise, Inc.

•

Evergreen Trade, Inc.

•

Evergreen Agriculture Enterprise, Inc.

•

Evergreen Defense and Security Services, Inc.

•

Evergreen Maintenance Center, Inc.

These entities listed above are collectively referred to as the “Parent.”

Management Plans and Liquidity Assessment: At the direction of the Parent, the Company has provided funds during the year ended December 31, 2012, as reflected in net transfers to Parent in the accompanying consolidated statement of cash flows. These net transfers account for a significant portion of the Company’s cash used during the year ended December 31, 2012. In addition, the Company, as well as other affiliates, are co-guarantors of the Parent’s first and second lien credit agreements and as of December 31, 2012, Parent is in default under both the financial and non-financial covenants with these agreements due to the Parent’s lack of liquidity to make scheduled payments. At December 31, 2012, the balance of the first and second lien agreements total approximately $300,000. The Company, Parent and majority stockholder also guarantee the debt of a Stockholder Affiliate to 1^st Source Bank. On March 13,

F-7

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2012

(amounts in thousands)

2013, 1^st Source Bank filed a complaint with the United States District Court of Oregon for replevin of collateral and enforcement of promissory notes and guarantees with a claim of approximately $10,100. In addition, the Company has a negative working capital of $14,102 and is in default with its mortgage and other term loans totaling approximately $11,600 at December 31, 2012.

As reflected in the accompanying consolidated financial statements, the Company had net income of $17,651 for the year ended December 31, 2012. In addition, the Company’s cash flows provided by operating activities were approximately $70,578 for the year ended December 31, 2012. However, the default on the Company’s, its Parent’s and Stockholder Affiliate’s debt and the resulting liquidity concerns raise substantial doubt about the Company’s ability to continue as a going concern.

On March 18, 2013, the Parent and the Company entered into a Stock Purchase Agreement with Erickson Air-Crane Incorporated (EAC), a publicly-traded company, in which EAC is to acquire all of the common stock of the Company for a combination of cash, promissory notes and preferred shares of EAC. Closing of this transaction is expected to occur during the second calendar quarter of 2013; however, the closing is subject to various terms and conditions, and there can be no assurance that all such terms and conditions will be satisfied.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation: The Company’s consolidated financial statements include the accounts of Helicopters and its wholly-owned domestic and foreign subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The operations of the Company’s foreign subsidiaries are not significant.

Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the amounts reported in the Company’s financial statements and accompanying notes. The Company considers its critical accounting policies involving more significant judgments and estimates to be those related to revenue recognition, deferred income taxes, useful lives and residual values of property, plant and equipment, and valuation of long-lived assets. Actual results could differ from those estimates.

Revenue Recognition: Helicopters generates flight revenue under service contracts that range in term from less than one year to five years. Helicopters typically charges by the number of hours flown, with a minimum number of hours per day, plus a monthly availability fee. Helicopters frequently modifies its general pricing structure in order to more closely match the characteristics of the mission. The various types of pricing methods utilized by Helicopters includes pricing by weight for transport of goods, pricing by acre for aerial spraying, and pricing by number of pickups for construction work. Flight revenue is recognized when services are performed and monthly for fixed availability fees over the term of the agreement.

Certain contracts provide for mobilization fees, which represent recovery of the costs incurred in deploying aircraft to a customer. Mobilization fees, and related direct and incremental mobilization costs, are deferred and amortized over the term of the contract.

F-8

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2012

(amounts in thousands)

Cash and Cash Equivalents: The Company classifies as cash and cash equivalents those short-term, highly liquid investments which are readily convertible into cash and have a maturity of three months or less when purchased.

Restricted Investments: The Company maintains restricted investments in certificate of deposit accounts at December 31, 2012, supporting letters of credit required for aircraft leases with contractual lease terms through 2019 that are held by the Company’s Parent. These investments are classified as held to maturity and are stated at cost which approximates market with an average term to maturity of less than one year (November 2013). The Company plans to extend the maturity date of the certificate of deposit accounts at maturity given the contractual collateral requirements under the letters of credit. As such, these restricted investments have been reflected as non-current on the consolidated balance sheet at December 31, 2012.

Accounts Receivable, Net: Accounts receivable, net consists of amounts billed to customers, net of an allowance for uncollectible accounts for losses that may result from the inability of its customers to make required payments or from contract disputes. The Company also periodically records an allowance for the general collectability of all other receivables based upon factors such as the aging of receivables and historical collection experience. The December 31, 2012 accounts receivable balance of $24,213 is reported net of an allowance for doubtful accounts of approximately $100. Interest is not normally charged on receivables.

Inventories: The Company’s inventories consist primarily of aircraft rotable parts, expendable parts, supplies for aircraft maintenance, and aviation fuel (collectively, “aircraft parts inventories”).

Aircraft parts inventories are carried at the lower of average cost or net realizable value. Aircraft parts inventories that are utilized for aircraft maintenance/fuel are charged to operations when used. All other inventories are charged to operations when sold.

Refundable Deposits: The Company maintains deposits with vendors in conjunction with aircraft lease agreements and other commitments.

Assets Held for Sale: The Company classifies aircraft parts and other assets as held for sale and ceases the amortization of the assets when there is a plan for disposal of the assets and those assets meet the held for sale criteria in accordance with accounting principles generally accepted in the United States of America. The Company records aircraft parts and other assets held for sale at the lower of cost or net realizable value.

Property and Equipment: Property and equipment is recorded at cost. The Company depreciates its property and equipment down to estimated residual values utilizing the straight-line method of depreciation over the estimated useful lives of the assets. The estimated useful lives for its primary property and equipment classes are as follows:

•

Aircraft, aircraft engines, and rotable assets 5 to 20 years

•

Machinery and equipment 3 to 7 years

•

Buildings and improvements 10 to 40 years

F-9

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2012

(amounts in thousands)

When the Company sells or otherwise disposes of property or equipment, the remaining carrying amount is charged to income.

The Company capitalizes all costs of major renewals, modifications, and overhauls of its aircraft. The Company amortizes the costs of such major overhaul components as follows:

Small Fixed-Wing Aircraft and Helicopters: The cost of major overhaul components is not amortized separately, but depreciated as a part of the cost of the aircraft. The cost of subsequent major overhauls are capitalized and amortized over the estimated operating hours, generally a period of five years or less.

Rotable Assets: The cost of rotable asset overhauls is segregated and amortized separately from the aircraft. The Company capitalizes the costs of rotable asset overhauls for its small fixed-wing aircraft and helicopters and then amortizes these costs over the estimated useful lives of the overhauls, generally a period of five years or less. The cost of repairing rotable assets is expensed as incurred.

Amortization of overhauls and depreciation of property and equipment for the year ended December 31, 2012 was approximately $6,136 and $10,328, respectively.

Impairment of Long-Lived Assets: The Company annually, or as required, evaluates the recoverability of its long-lived assets, primarily aircraft and other property and equipment. The Company evaluates recoverability when events and circumstances indicate that the net carrying value of its long-lived assets may not be recoverable.

The Company recognizes an impairment loss when the sum of the undiscounted cash flows estimated to be generated by its long-lived assets is less than the assets’ net carrying value. Based on its analyses, at December 31, 2012, there was no asset impairment required.

Leased Aircraft—Overhauls and Lease Return Condition Costs: The Company accounts for the overhaul and lease return condition costs of its leased aircraft in accordance with the applicable lease agreements. Generally, the Company capitalizes the costs of the required major maintenance and inspection of engines and airframes for its leased aircraft. The Company then amortizes such capitalized costs over the lesser of (i) the number of years until the next scheduled overhaul, generally a period of five years or less, or (ii) the termination of the lease. Maintenance and repairs for engines and airframe components under power-by-the-hour contracts are expensed as the aircraft are operated based upon actual hours or cycles flown and based upon the contractual terms of the agreements.

Income Tax and Uncertain Tax Positions: The Company operates as a C Corporation for income tax purposes and is included with Parent in the consolidated federal income tax returns filed by Holdings, which reports and files on a February fiscal year end. The Company has computed total tax expense and deferred taxes using a separate return method. Accordingly, deferred income tax assets and liabilities are computed based upon differences between the financial statements and tax bases of assets and liabilities that result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.

F-10

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2012

(amounts in thousands)

The Company records net deferred tax assets to the extent a determination is made that these assets will more likely than not be realized. In making such determination, all available positive and negative evidence is considered, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. In the event a determination is made that the Company would be unable to realize its deferred income tax assets in the future in excess of their net recorded amount, an adjustment would be made to the valuation allowance, which would reduce the provision for income taxes.

If there is no formal tax-sharing agreement or the tax-sharing agreement is inconsistent with the method of allocating income tax to the subsidiary, the evaluation of the need for a valuation allowance should be consistent with the tax allocation method used. The Company does not have a formal tax-sharing agreement with Parent. Accordingly, valuation allowance considerations were consistent with the separate return method for allocation of taxes. The Company has evaluated the need for valuation allowance on a separate return basis and determined that a valuation allowance is not necessary based on the reversal of timing differences related to deferred tax liabilities.

The Company follows guidance issued by the Financial Accounting Standards Board (FASB) with respect to accounting for uncertainty in income taxes. A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded at the subsidiary level related to this position. During the period, the Company recorded taxes, interest and penalties of $3,871 of unrecognized tax benefits (UTB) related to non-filing in a foreign jurisdiction. In addition, the Company has recorded the benefits of the foreign tax credit and federal benefits of the UTB interest (Note 5). In the event the foreign tax is paid and the uncertain tax liability reduced, the realization of the related benefits recorded in deferred tax assets would need to be reassessed.

The Company is subject to U.S. federal income tax, as well as various state income taxes. The Company is no longer subject to US Federal tax examinations for years before February 28, 2009, and State jurisdictions that remain subject to examination range from February 28, 2009 to December 31, 2012. The Company does not expect the total amount of unrecognized tax benefits to significantly change in the next 12 months. The Company recognizes interest and/or penalties related to income tax matters in income tax expense. The Company has accrued $2,183 for interest and penalties for the year ended December 31, 2012 relating to uncertain tax positions (See Note 5).

F-11

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2012

(amounts in thousands)

Loss Contingencies: Loss contingencies are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated.

Major Customers: Revenue generated under various contracts with agencies of the U.S. government accounted for approximately 48% of the Company’s total revenues as of December 31, 2012. Revenue as subcontractor for government contractors is 43% of the Company’s total revenue. Amounts receivable from these agencies were approximately $23,656 at December 31, 2012. Of these governmental contracts, one governmental agency accounted for 28% and one subcontractor arrangement accounted for 33% of the Company’s total revenues as of December 31, 2012 with accounts receivable of 27% and 37% respectively.

Foreign Currency Transactions: The Company has certain vendor payable transactions denominated in foreign currencies. Foreign currency transaction gains and losses (transactions denominated in a currency other than local currency) are generally included in other income (expense). For the year ended December 31, 2012, the Company recognized $20 of losses on foreign currency.

Concentration of Credit Risk: Financial instruments that potentially subject the Company to credit risk are primarily cash and cash equivalents and accounts receivable. The Company’s cash and cash equivalent deposits at December 31, 2012, were primarily with two financial institutions. The Company grants credit to customers throughout the world. Its primary customer base consists of various agencies of the United States government and large global government service providers. The credit strength of this customer base is derived from its geographical diversity and from its long history of payment on services provided. The Company evaluates each customer’s credit worthiness on a case-by-case basis.

Subsequent Events: The Company has performed an analysis of the activities and transactions subsequent to the fiscal year end to determine the need for any adjustments to or disclosure within the consolidated financial statements for the year December 31, 2012. Management has performed their analysis through March 22, 2013, the date the financial statements were available to be issued.

As further disclosed in Notes 1, 8 and 10, on March 13, 2013, 1^st Source Bank filed a complaint with the United States District Court of Oregon for replevin of collateral and enforcement of promissory notes and guarantees with a claim of approximately $10,100. The Company, Parent and majority stockholder guarantee the 1^st Source Bank debt.

NOTE 3—SALE OF SUBSIDIARY

On September 27, 2010, the Company sold substantially all of the assets of its subsidiary Evergreen Unmanned Systems, Inc. (“EUS”) to an unrelated party. The agreement provided for additional payments of up to $4,000 pursuant to an earn-out provision to be measured at February 29, 2012 and February 28, 2011. Certain of the defined earnings targets were determined to be met at December 31, 2011. Therefore, the Company was entitled to additional payments of $2,000, which were received in April 2012.

F-12

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2012

(amounts in thousands)

NOTE 4—DEBT

Mortgage Loan: The Company has entered into a 10-year term mortgage ($8,800 balloon in June 2019) with a bank, collateralized by the Company’s corporate headquarters and aircraft hangar in McMinnville, Oregon. At December 31, 2012, the outstanding balance was $10,934. Interest is variable and determined at the five year treasury plus 2.75% (minimum 5.25%) and shall adjust in June 2014. The effective interest rate on this mortgage was 5.25% as of December 31, 2012. Principal and interest payments of $70 are due monthly.

Other Term Loans: The Company has entered into various term loans, one of which is collateralized by a specific aircraft, and which matures at various dates through 2014. At December 31, 2012, the Company had an outstanding balance of $700 and requires monthly interest and principal payments of $21. Interest rates under these term loans are fixed at rates ranging up to 10.3%.

The Company is in default with the above loans due to lack of liquidity resulting in the Company not meeting scheduled payments. As such, the outstanding balance at December 31, 2012 has been reflected as a current liability. At the discretion of the lenders, the Company is subject to default interest rates.

Stockholder Affiliate Guarantee: The Company leases certain aircraft from a Stockholder Affiliate as further discussed in Notes 7 and 10. The Company, Parent, and majority stockholder guarantee the Stockholder Affiliate’s debt related to these specific aircraft. In addition, the Company’s leased aircraft serve as collateral for the Stockholder Affiliate debt. The Company has determined that the fair value of its guarantee is immaterial considering the fair value of the leased aircraft exceeds the associated outstanding debt obligations.

During February of 2013, the Stockholder Affiliate defaulted on installment payments to 1^st Source Bank as further discussed in Notes 1, 2, 8 and 10. On March 13, 2013, 1^st Source Bank filed a complaint with the United States District Court of Oregon for replevin of collateral and enforcement of promissory notes and guarantees with a claim of approximately $10,100.

Parent Company Debt: The Company is a guarantor on a term and line of credit First Lien Agreement and a term Second Lien Credit Agreement held by the Parent. This debt has not been reflected in the Company’s consolidated financial statements since the debt was not used to purchase the Company and the Company’s cash flow from operations and financial position does not necessitate borrowings under the agreements. The Company’s assets also serve as collateral for the Parent’s loans.

As of December 31, 2012, Parent was in default under both the financial and non-financial covenants of these agreements. All Helicopters owned assets serve as collateral under the First Lien and Second Lien Credit Agreements. The balances of the First Lien and Second Lien loans were $174,779 and $119,157 at December 31, 2012, respectively.

Refer to Note 1, Management’s Plan and Liquidity Assessment for further discussions.

F-13

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2012

(amounts in thousands)

NOTE 5—INCOME TAXES

The Company has computed current and deferred taxes using a separate return method. The operations of the Company are included with Parent in the consolidated federal income tax returns filed by Holdings, which reports and files on a February fiscal year end. The Company is included in the consolidated tax return filing with Holdings; however, the Company has computed current and deferred taxes using a separate company approach. As a result of cash not being settled between subsidiary and Parent for the current taxes due on a separate return method, the current payable has been settled through the Net Investment of Parent as shown in the tabular Note 10 disclosure.

The components of the income tax expense as of December 31, 2012 are as follows:


Current:
Federal	$	6,654
State		588
Unpaid foreign, interest and penalties		3,871

		11,113

Deferred:
Federal		1,689
State		223

		1,912

Total	$	13,025

The following table presents the tax effects of the temporary differences that gave rise to the deferred tax assets and deferred tax liabilities at December 31, 2012:


Deferred tax assets
Accrued liabilities	$	858
Prepaid items		12
Foreign tax credit indirect benefit of UTB		10,491
Federal indirect benefit of UTB interest		1,483
Accounts Receivable		37

Total deferred tax assets ($907 current and $11,974 noncurrent)		12,881

Deferred tax liabilities
Property and equipment		(13,247	)
Goodwill and other		23

Total deferred tax liabilities ($0 current and $13,224 noncurrent)		(13,224	)

Net deferred tax liabilities	$	(343	)

F-14

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2012

(amounts in thousands)

The reconciliation between the effective tax rate and the federal statutory rate on net income is as follows:


Income tax expense computed at statutory rate	$	10,735	35.00	%
State income taxes, net of federal effect		605	1.97	%
Unrecognized tax benefits, net of corresponding benefit		1,567	5.11	%
Other, primarily permanent differences		118	0.38	%

Income tax expense	$	13,025	42.46	%

The following table presents the Company’s unrecognized tax benefits at December 31, 2012;


Balance at beginning of period	$	13,482
Gross increases based on current year positions		1,688
Gross decreases in tax positions		—
Interest and penalties		2,183

Balance at end of period	$	17,353

NOTE 6—EMPLOYEE BENEFIT PLAN

The Company has a defined contribution plan (“the Plan”) covering all full-time employees of the Company who have been credited with one year of service, are at least 21 years of age, are not covered by a collective bargaining agreement and are not a temporary employee. Under the Plan, the Company makes a basic contribution equal to 4% of the annual compensation of each participant who has completed the minimum required hours of service during the Plan year (“Basic Contributions”). In addition, the Company matches, on a 50% matching basis, each participant’s contribution which is not in excess of 8% of the participant’s base compensation (“Matching Contributions”). The Company may also make additional discretionary contributions at the option of the Board of Directors.

Plan participants direct the investment of both their contributions and the Company’s contributions into various investment options offered by the Plan. Participant contributions into the Plan vest immediately. Company contributions into the plan start to vest when the participant has completed two years of service with the Company, at which time the participant will be 20% vested. Thereafter, additional vesting occurs at a rate of 20% per year until the participant is fully vested.

The Company made contributions of approximately $300 for the year ended December 31, 2012. The Company did not make any discretionary contributions during year.

F-15

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2012

(amounts in thousands)

NOTE 7—COMMITMENTS

Operating Leases: The Company leases aircraft, land, buildings and equipment under cancelable and non-cancelable operating leases with certain of these leases guaranteed by Parent. The Company also leases aircraft from entities that are owned by or controlled by the majority stockholder as further discussed in Note 10. Rental commitments under non-cancelable operating leases having an original term of one year or more at December 31, 2012, are as follows:


	Stockholder Affiliates		Others		Total
2013	$	3,170	$	24,455	$	27,625
2014		3,170		24,384		27,554
2015		2,732		22,101		24,833
2016		1,854		13,812		15,666
2017		—		9,492		9,492
Thereafter		—		10,709		10,709

Total	$	10,926	$	104,953	$	115,879

The Company maintains several leases on a month-to-month basis. Total rent expense for the year ended December 31, 2012 approximated $36,079, including Stockholder Affiliates rent expense of approximately $10,061.

During 2012, the Company entered into a restructuring agreement with an aircraft lessor effective October, 1 2012. As part of this agreement, the lessor agreed to defer the lease payments from October 2012 through January 2013 and apply the payments to the end of the lease. As of December 31, 2012, Helicopters recorded a deferred lease liability of approximately $1,200. In addition, as part of this agreement, the Company pledged refundable deposits of approximately $3,500 to an affiliate related to their leases with lessor.

Advance Payments: The Company makes advanced payments for overhauls of aircraft engines. As of December 31, 2012, the Company paid approximately $708 of non-refundable deposits to various vendors for engine overhauls. The Company reflected these deposits as non-current in other assets on the consolidated balance sheet at December 31, 2012.

NOTE 8—LEGAL PROCEEDINGS & CONTINGENCIES

1^st Source Bank: The Company leases certain aircraft from a Stockholder Affiliate as further discussed in Notes 7 and 10. The majority stockholder, Parent and Company guarantee the Stockholder Affiliate’s debt related to these specific aircraft. During February of 2013, the Stockholder Affiliate defaulted on installment payments to 1^st Source Bank. On March 13, 2013, 1^st Source Bank filed a complaint with the United States District Court of Oregon for replevin of collateral and enforcement of promissory notes and guarantees with a claim of approximately $10,100. See Note 1, Management Plans and Liquidity Assessment, and Note 2, Subsequent Events, and Notes 4 and 10 for further discussions.

Priority 1 Air Rescue Services: In November 2012, Priority 1 brought breach of contract claims against Helicopters related to two subcontracts between Priority 1 and Helicopters. The suit alleges that Helicopters failed to pay invoices for work in the amount of approximately $704. It also claims additional amounts for consequential damages and interest resulting in a total claim of approximately $2,044. Helicopters responded to the complaint in December 2012 and denied the allegations. Management, after consultation with counsel, has determined the range of loss to be between $475 and the total claim amount. The Company has recorded in accounts payable $475 at December 31, 2012.

F-16

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2012

(amounts in thousands)

Fortis Lease Deutschland GmbH: In 2011, a third party, Cypress Financial Corporation, purchased two helicopters from Fortis on Helicopters’ behalf and subsequently leased them to the Company. Fortis is demanding payment of approximately 817 euro (approximately $1,078) in damages for the amount of valued-added-tax (VAT) levied on the purchase price of the helicopters plus interest. Management is currently working with Cypress and Fortis to resolve the matter and believes the transaction should be exempt from VAT. Legal counsel estimates a range of potential loss between 880 euro (approximately $1,162) and approximately 1,000 euro (approximately $1,320) prior to any refund of the VAT. Management does not believe there is any direct financial impact relating to this case and has not accrued for any potential loss. However, no assurance may be given regarding the ultimate ability of Helicopters to receive the VAT refund until foreign tax authorities approve and remit the proceeds.

Agusta Westland: On July 17, 2012, Agusta Westland delivered a notice to the Company demanding immediate payment for alleged amounts owed for aircraft parts and technical assistance provided since 2006. Helicopters is in the process of reconciling the amount owed with Agusta and is currently negotiating a payment plan for past due amounts. The total amount recorded in accounts payable at December 31, 2012 is approximately $2,221, which is the amount Helicopters believes to be currently owed.

DivLend Equipment Leasing: On December 7, 2012, DivLend filed a lawsuit for $14,513 against Helicopters and the Parent for failure to make timely payments on helicopter leases and alleged defaults under certain Parent guaranty agreements. At December 31, 2012, the Company believed it was up to date on payments through November 2012, and therefore, has recorded in accounts payable the December 2012 payments of $253. Helicopters believes this is the only portion of the suit it is liable for and intends to vigorously defend this case.

State of Arizona—Superfund: Helicopters, among others, is a defendant in an environmental investigation relating to two separate Superfund clean-up sites in Arizona. Management is currently monitoring the case as it is in preliminary stages and plans to engage outside counsel with area expertise if the case develops further. The outcome of the lawsuit is unknown, but Helicopters intends to contest the case vigorously. However, no assurance may be given regarding the ultimate outcome of these claims.

Other Matters: Helicopters is involved in various claims and legal proceedings of a nature considered normal to its business. While it is not feasible to predict or determine the financial outcome of each proceeding, management does not believe that the proceedings will result in a material adverse effect on the Company’s financial position, results of operations, or liquidity.

F-17

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2012

(amounts in thousands)

NOTE 9—FAIR VALUE MEASUREMENTS

The following three levels of input may be used to measure fair value:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include items where the determination of fair value requires significant management judgment or estimation.

The carrying amounts of the Company’s cash, restricted investments, accounts receivable and accounts payable approximate fair value because of the short-term maturities of these instruments. The carrying amount of the Company’s variable rate debt approximates fair value because variable interest rates closely correlate to changes in market conditions, including default interest rates. The Company’s fixed-rate debt balances as of December 31, 2012 were approximately $700 representing other term loans (Note 4). The Company believes that the fair value of the fixed-rate debt approximates its carrying value.

NOTE 10—RELATED PARTY TRANSACTIONS

Transactions with the Parent: The consolidated financial statements include certain revenue transactions and expense allocations from the Parent. Helicopters recognizes revenue for the Parent’s use of two aircraft for company travel. Flight revenue is recognized for actual flight hours, and support services revenue is recognized for additional amounts incurred. The Company also sold aircraft parts to the Parent throughout the year.

Expenses are allocated based on the Company’s number of employees for certain functions provided by the Parent, including, but not limited to, general corporate expenses related to finance, legal, information technology, human resources, and employee benefits. Additionally, expenses related to administrative functions and overhead are incurred by Holdings on behalf of Helicopters. The amount incurred for these services was $737 for the year ended December 31, 2012 and are included in administrative and operational expenses in the below table. These expenses have been allocated on the basis of headcount or by other measures.

These allocations may not, however, reflect the expense the Company would have incurred as an independent business for the period presented. Actual costs that may have been incurred if the Company had been operating on a stand-alone basis would depend on a number of factors, including the chosen organization structure, the functions outsourced or performed by employees, and strategic decisions made in areas such as information technology and infrastructure.

F-18

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2012

(amounts in thousands)

The Company is also a guarantor on a term and line of credit First Lien Agreement and term Second Lien Credit Agreement held by the Parent. As of December 31, 2012, Parent was in default under both the financial and non-financial covenants of these agreements. This debt has not been reflected in the Company’s consolidated financial statements as further discussed in Note 4. In addition, the Parent guarantees certain Company non-related party lease payment arrangements (Note 7).

Transactions with Stockholder Affiliates: Helicopters leases several aircraft from Stockholder Affiliates. The Company received free rent in January and February of 2012 on all its aircraft leases, including month-to-month leases, from a Stockholder Affiliate. The Company reflected this free rent as contributed capital as the contractual lease obligations for this period were forgiven.

The Company has determined that its guarantee of the Stockholder Affiliate’s debt associated with its leased assets constitutes a variable interest. Accordingly, the Stockholder Affiliate is a variable interest entity (VIE). However, the Company does not have the ability to direct the activities of the Stockholder Affiliate, and therefore, the Company is not the primary beneficiary of the Stockholder Affiliate. Accordingly, the Company has not included the Stockholder Affiliate’s results of operations and financial condition in the Company’ consolidated financial statements. Further, the Company is restricted on transferring any assets or providing any other subordinated financial support to its Stockholder Affiliates under the First and Second Lien Agreements (Note 4). The Company has determined that its maximum exposure relative to the VIE is as follows:


Guarantee of 1^st Source Bank debt on leased assets	$	10,100
Accounts receivable		234
Prepaid expenses and other assets		178
Refundable deposits		3,456

	$	13,968

Subsequent to December 31, 2012, as discussed in Notes 1, 2, 4, and 8, this same Stockholder Affiliate is in default on installment payments to 1^st Source Bank of approximately $10,100, which the Company guarantees. In addition, it is uncertain if the Company’s accounts receivable, refundable deposits and prepaid and other assets at December 31, 2012 will be collectible or realized.

Parent Investment in the Company: It is not meaningful to show additional paid-in capital or retained earnings for the Company. The net assets are represented by the net investment of Parent, which comprises total share of capital and retained earnings of Helicopters.

All significant intercompany transactions between the Parent and Helicopters have been included in these consolidated financial statements and are considered to be effectively settled for cash at the time the transaction is recorded. The total net effect of the settlement of these intercompany transactions is reflected in the consolidated statement of cash flows as a financing activity and in the consolidated statement of stockholder’s equity.

F-19

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2012

(amounts in thousands)


	Parent			Stockholder Affiliates
As of:
Short-term:
Accounts receivable	$	—		$	234
Prepaid expenses and other assets		—			178
Refundable deposits		—			3,456
Accounts payable		—			(663	)

For the year ended:
Revenues from flight and support services		(5,696	)		—
Health and medical insurance and benefits		3,813			—
Employee benefit contributions		1,504			—
Workers’ compensation and Defense Base Act insurance premiums		1,045			—
Aircraft insurance premiums		7,390			—
Purchases and commissions		1,751			—
Administrative and operational expenses		7,633			—
Current income taxes payable, excluding UTB		7,242			—
Lease and rental payments		—			10,061

Total		24,682			10,061
Net cash transferred		(81,411	)		—

Net transfer to Parent	$	(56,729	)

Contributed capital for free rent periods				$	1,576

F-20

INDEPENDENT AUDITORS’ REPORT

Board of Directors and Stockholder

Evergreen Helicopters, Inc.

McMinnville, Oregon

We have audited the accompanying consolidated balance sheets of Evergreen Helicopters, Inc. and subsidiaries (the “Company”) as of February 29, 2012 and February 28, 2011, and the related consolidated statements of operations, stockholder’s equity and cash flows for each of the years ended February 29, 2012, February 28, 2011 and February 28, 2010. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of February 29, 2012 and February 28, 2011, and the results of its operations and its cash flows for each of the years ended February 29, 2012, February 28, 2011 and February 28, 2010, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Notes 1 and 4 to the consolidated financial statements, the Company, and other affiliates, are guarantors of certain debt obligations of the parent company and a stockholder affiliate. Subsequent to February 29, 2012, the parent company and a stockholder affiliate defaulted on the terms and covenants of debt guaranteed by the Company. The Company is also in default on certain of its debt obligations. The ultimate outcome, and the impact of continuing defaults, on these obligations and the Company’s financial position, is uncertain.

/s/ GHP HORWATH, P.C.

March 22, 2013

F-21

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

February 29, 2012 and February 28, 2011

(amounts in thousands)


	2012			2011
ASSETS
Current assets:
Cash and cash equivalents	$	174		$	127
Accounts receivable, net		27,321			17,284
Inventories		519			566
Prepaid expenses and other assets		7,387			8,761
Refundable deposits		2,807			6,425
Deferred tax assets		1,455			2,498

Total current assets		39,663			35,661

Property and equipment:
Aircraft, aircraft engines and rotable parts		85,597			86,675
Deferred overhauls		40,469			34,909
Buildings and improvements		23,380			26,989
Machinery and equipment		8,206			7,458
Construction in progress		4,779			7,068

		162,431			163,099
Accumulated depreciation of long-lived assets		(53,916	)		(48,868	)
Accumulated amortization of deferred overhauls		(16,414	)		(13,865	)

Net property and equipment		92,101			100,366

Deposits		16,529			13,221
Assets held for sale		3,226			—
Restricted investments		1,054			—
Other assets		116			713

		20,925			13,934

Total assets	$	152,689		$	149,961

LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities:
Accounts payable	$	20,974		$	16,221
Accrued expenses and other		4,941			2,350
Current portion of long-term debt		594			2,036

Total current liabilities		26,509			20,607

Other liabilities		1,402			3,324
Liability for uncertain tax positions in foreign jurisdiction		14,125			10,831
Deferred tax liabilities		3,902			6,023
Long-term debt, net of current maturities		11,541			13,427

		30,970			33,605

Total liabilities		57,479			54,212

Commitments and contingencies

Stockholder’s equity:
Common stock, no par value, 500 shares authorized, issued and outstanding		—			—
Net investment of Parent		95,210			95,749

Total stockholder’s equity		95,210			95,749

Total liabilities and stockholder’s equity	$	152,689		$	149,961

The accompanying notes are an integral part of the consolidated financial statements.

F-22

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Years ended February 29, 2012, February 28, 2011 and February 28, 2010

(amounts in thousands)


	2012			2011			2010
Revenues from flight and support services	$	169,515		$	118,462		$	123,377
Cost of flight and support services		(118,824	)		(84,652	)		(104,696	)

Gross profit		50,691			33,810			18,681

Operating expenses:
Selling, general and administrative expense		25,838			21,594			21,375
Impairment charges		3,023			397			10,664

		28,861			21,991			32,039

Income (loss) from operations		21,830			11,819			(13,358	)

Non-operating income (expense):
Interest expense		(1,166	)		(1,779	)		(2,539	)
Other, net		(1,667	)		7,072			(173	)

		(2,833	)		5,293			(2,712	)

Income (loss) before income taxes		18,997			17,112			(16,070	)
Income tax (expense) benefit		(8,165	)		(7,510	)		4,815

Income (loss) from continuing operations		10,832			9,602			(11,255	)

Discontinued operations:
Income from discontinued operations, net of tax		—			415			444
Gain on disposal of discontinued operations, net of tax		1,261			7,422			—

Income from discontinued operations		1,261			7,837			444

Net income (loss)	$	12,093		$	17,439		$	(10,811	)

The accompanying notes are an integral part of the consolidated financial statements.

F-23

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY

Years ended February 29, 2012, February 28, 2011 and February 28, 2010

(amounts in thousands, except share data)


	Common stock				Net investment			Total stockholder’s
	Shares		Amount		of Parent			equity
Balances at March 1, 2009		500	$	—	$	93,069		$	93,069
Net transfer to Parent						(2,672	)		(2,672	)
Net loss						(10,811	)		(10,811	)

Balances at February 28, 2010		500		—		79,586			79,586
Net transfer to Parent						(1,276	)		(1,276	)
Net income						17,439			17,439

Balances at February 28, 2011		500		—		95,749			95,749
Net transfer to Parent						(14,208	)		(14,208	)
Contributed capital						1,576			1,576
Net income						12,093			12,093

Balances at February 29, 2012		500	$	—	$	95,210		$	95,210

The accompanying notes are an integral part of the consolidated financial statements.

F-24

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended February 29, 2012, February 28, 2011 and February 28, 2010

(amounts in thousands)


	2012			2011			2010
Cash flows from operating activities:
Net income (loss)	$	12,093		$	17,439		$	(10,811	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		15,444			13,351			14,756
Provision for losses on accounts receivable		788			842			427
Impairment charges		3,023			397			10,664
Loss (gain) on sale of property and equipment		4,919			(1,969	)		(10,931	)
Contribution from stockholder affiliate for free rent		1,576			—			—
Gain on disposal of discontinued operations		(1,261	)		(7,422	)		—
Deferred income taxes		(339	)		(3,053	)		(2,739	)
Liability for uncertain tax positions in foreign jurisdiction		3,294			2,875			3,403
Gain on legal settlements		—			(6,000	)		—
Changes in operating assets and liabilities:
Accounts receivable		(11,209	)		(362	)		(5,955	)
Inventory		47			152			870
Prepaid expenses, deposits and other		3,022			(13,229	)		(3,786	)
Accounts payable, accrued and other liabilities		5,422			(857	)		2,041

Net cash provided by (used in) operating activities		36,819			2,164			(2,061	)

Cash flows from investing activities:
Purchases of property, equipment and overhauls		(29,638	)		(19,212	)		(18,922	)
Proceeds from disposal of property and equipment		8,402			3,317			23,555
Proceeds from legal settlement		—			6,000			—
Proceeds from sale of discontinued operations, net of transaction costs		2,000			12,384			—

Net cash (used in) provided by investing activities		(19,236	)		2,489			4,633

Cash flows from financing activities:
Proceeds from long-term debt		—			—			3,425
Payments on long-term debt		(3,328	)		(3,358	)		(3,650	)
Net transfers to Parent		(14,208	)		(1,276	)		(2,672	)

Net cash used in financing activities		(17,536	)		(4,634	)		(2,897	)

Net increase (decrease) in cash and cash equivalents		47			19			(325	)
Cash and cash equivalents, beginning of year		127			108			433

Cash and cash equivalents, end of year	$	174		$	127		$	108

Supplemental disclosures of cash flow information:
Cash paid during the year for interest	$	1,166		$	1,779		$	2,442

The accompanying notes are an integral part of the consolidated financial statements.

F-25

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 29, 2012, February 28, 2011, and February 28, 2010

(in thousands)

NOTE 1.

DESCRIPTION OF THE BUSINESS

Helicopters owns 100% of the following subsidiaries:

•

Evergreen Helicopters of Alaska, Inc.

•

Evergreen Equity, Inc.

•

Evergreen Helicopters International, Inc.

The Company also engages in transactions with the Company’s Parent and the Parent’s subsidiaries (Note 11):

•

Evergreen International Aviation, Inc.

•

Evergreen International Airlines, Inc.

•

Evergreen Aviation Ground Logistics Enterprise, Inc.

•

Evergreen Trade, Inc.

•

Evergreen Agriculture Enterprise, Inc.

•

Evergreen Defense and Security Services, Inc.

•

Evergreen Maintenance Center, Inc.; through the date of disposal (May 27, 2011)

The entities listed above are collectively referred to as the “Parent”.

Management’s Plans and Liquidity Assessment: At the direction of the Parent, the Company has provided funds to the Parent for fiscal years 2010 through 2012, as reflected in net transfers to Parent in the accompanying consolidated statements of cash flows (Note 11). These net transfers account for a significant portion of the Company’s cash used during the periods. In addition, the Company, as well as other affiliates, are co-guarantors of the Parent’s first and second lien credit agreements, and as of December 31, 2012, the Parent is in default under both the financial and non-financial covenants with these agreements due to the Parent’s lack of liquidity to make scheduled payments. At December 31, 2012, the balance of the first and second lien agreements total approximately $300,000. The Company, Parent and majority stockholder also guarantee the debt of a Stockholder Affiliate to a bank. On March 13, 2013, this

F-26

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

February 29, 2012, February 28, 2011, and February 28, 2010

(in thousands)

bank filed a complaint with the United States District Court of Oregon for replevin of collateral and enforcement of promissory notes and guarantees with a claim of approximately $10,100. In addition, the Company is in default on its mortgage and other term loans at December 31, 2012 (Note 4).

On March 18, 2013, the Parent and the Company entered into a Stock Purchase Agreement with Erickson Air-Crane Incorporated (EAC), a publicly-traded company in which EAC is to acquire all of the common stock of the Company for a combination of cash, promissory notes and preferred shares of EAC. Closing of this transaction is expected to occur during the second calendar quarter of 2013; however, the closing is subject to various terms and conditions, and there can be no assurance that all such terms and conditions will be satisfied. Should this transaction not be completed, there is uncertainty as to the ultimate outcome of continuing defaults on both the Parent and Company debt obligations, and the Company will need to seek other restructuring and financing options, if any. The lenders’ rights and remedies provide for foreclosure on security for these debt obligations in default, as defined, and the ultimate impact to the Company could be severe.

NOTE 2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation: The Company’s consolidated financial statements include the accounts of Helicopters and its wholly-owned domestic and foreign subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The operations of the Company’s foreign subsidiary are not significant.

Use of estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the Company’s financial statements and accompanying notes. The Company considers its critical accounting policies involving more significant judgments and estimates to be those related to revenue recognition, deferred income taxes, useful lives and residual values of property and equipment, and valuation of long-lived assets. Actual results could differ from those estimates.

Revenue Recognition: Helicopters generates flight revenue under service contracts that generally range in term from less than one year to five years. Helicopters typically charges by the number of hours flown, with a minimum number of hours per day, plus a monthly availability fee. Helicopters frequently modifies its general pricing structure in order to more closely match the characteristics of the mission. The various types of pricing methods utilized by Helicopters includes pricing by weight for transport of goods, pricing by acre for aerial spraying, and pricing by number of pickups for construction work. Flight revenue is recognized when services are performed and monthly for fixed availability fees over the term of the agreement.

F-27

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

February 29, 2012, February 28, 2011, and February 28, 2010

(in thousands)

Restricted Investments: The Company maintains restricted investments in certificate of deposit accounts at February 29, 2012, supporting letters of credit required for aircraft leases held by the Company’s Parent through 2019. These investments are classified as held to maturity and are stated at cost, which approximates market with an average term to maturity of less than one year (March 2012). The Company extended the maturity date of the certificate of deposit accounts at maturity given the contractual collateral requirements under the letters of credit. As such, these restricted investments have been reflected as non-current on the consolidated balance sheet at February 29, 2012.

Accounts Receivable, net: Accounts receivable, net, consists of amounts billed to customers, net of an allowance for uncollectible accounts for losses that may result from the inability of its customers to make required payments or from contract disputes. The Company also periodically records an allowance for the general collectability of all other receivables based upon factors such as the aging of receivables and historical collection experience. At February 29, 2012 and February 28, 2011, the allowance for doubtful accounts receivable was $700 and $1,500, respectively. Interest is not normally charged on receivables.

Deposits: The Company maintains deposits with vendors in conjunction with aircraft lease agreements and other commitments. The Company also periodically makes deposits on aircraft purchase commitments which may be non-refundable.

Property and Equipment: Property and equipment is recorded at cost. The Company depreciates property and equipment down to estimated residual values utilizing the straight-line method of depreciation over the estimated useful lives of the assets. The estimated useful lives for primary property and equipment classes are as follows:


• Aircraft, aircraft engines, and rotable assets		5 to 20 years
• Machinery and equipment		3 to 7 years
• Buildings and improvements		10 to 40 years

F-28

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

February 29, 2012, February 28, 2011, and February 28, 2010

(in thousands)

When the Company sells or otherwise disposes of property or equipment, the remaining carrying amount is charged to income.

The Company capitalizes all costs of major renewals, modifications, and overhauls of its aircraft. The Company amortizes the costs of such major overhaul components as follows:

Small fixed-wing aircraft and helicopters: The cost of major overhaul components is not separately amortized, but depreciated as a part of the cost of the aircraft. The cost of subsequent major overhauls are capitalized and amortized over the estimated operating hours, generally a period of five years or less.

Rotable assets: The cost of rotable asset overhauls is segregated and amortized separately from the aircraft. The Company capitalizes the costs of rotable asset overhauls for its small fixed-wing aircraft and helicopters and then amortizes these costs over the estimated useful lives of the overhauls, generally a period of five years or less. The cost of repairing rotable assets is expensed as incurred.

Amortization of overhauls and depreciation of property and equipment for fiscal years 2012, 2011 and 2010, was approximately $15,400, $13,400 and $14,800, respectively.

Impairment of Long-Lived Assets: The Company annually, or as required, evaluates the recoverability of long-lived assets, primarily aircraft and other property and equipment. The Company evaluates recoverability when events and circumstances indicate that the net carrying value of long-lived assets may not be recoverable. The Company recognizes an impairment loss when the sum of the undiscounted cash flows estimated to be generated by long-lived assets is less than the assets’ net carrying value.

During fiscal years 2012, 2011 and 2010, the Company recorded impairment charges of $3,023, $397 and $10,664, respectively. The fiscal year 2012 impairment charge represented the write down of property and equipment related to an airbase the Company was developing in the Caribbean. Management made a decision to impair these assets based on the results of an assessment as to the future economic viability of these assets, which indicated that future cash flows from these assets were not sufficient to recover their net carrying value. The 2011 and 2010 impairment charges were related to helicopter aircraft. The aircraft were evaluated for impairment based on decreased utilization over the previous year. During the assessment, management considered (i) the operating results for each of the aircraft, (ii) current trends and future prospects, and (iii) the effects of obsolescence, customer demand, competition, and other economic factors. Based upon the assessment, management determined that the expected cash flows from these assets were not sufficient to recover the net carrying value of the assets, and therefore these assets were impaired. The Company reduced the net carrying value of these assets to reflect the fair values of the assets, which was determined primarily through cash flow models.

Leased Aircraft—Overhauls and Lease Return Condition Costs: The Company accounts for overhaul and lease return condition costs of leased aircraft in accordance with applicable lease agreements. Generally, the Company capitalizes the costs of the required major maintenance and inspection of engines and airframes for leased aircraft. The Company then amortizes such

F-29

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

February 29, 2012, February 28, 2011, and February 28, 2010

(in thousands)

capitalized costs over the lesser of (i) the number of years until the next scheduled overhaul, generally a period of five years or less, or (ii) the termination of the lease. Maintenance and repairs for engines and airframe components under power-by-the-hour contracts are expensed as the aircraft are operated based upon actual hours or cycles flown and based upon the contractual terms of the agreements.

Income Tax and Uncertain Tax Positions (UTP): The Company operates as a C Corporation for income tax purposes and is included with Parent in the consolidated federal income tax returns filed by Holdings, which reports and files on a February fiscal year end. The Company has computed total tax expense (benefit) and deferred taxes using a separate return method. Accordingly, deferred income tax assets and liabilities are computed based upon differences between the financial statements and tax bases of assets and liabilities that result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.

F-30

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

February 29, 2012, February 28, 2011, and February 28, 2010

(in thousands)

For tax positions not meeting the “more likely than not” test, no tax benefit is recorded at the subsidiary level related to this position. During fiscal years 2012, 2011 and 2010, the Company recorded taxes, interest and penalties of $3,294, $2,875 and $3,403 of unrecognized tax benefits (UTB) related to non-filing in a foreign jurisdiction. In addition, the Company has recorded the benefits of the foreign tax credit and federal benefits of the UTB interest (Note 6). In the event foreign tax is paid and the uncertain tax liability reduced, the realization of the related benefits recorded in deferred tax assets would need to be reassessed.

The Company is subject to U.S. federal income tax, as well as various state income taxes. The Company is no longer subject to US Federal tax examinations for years before February 28, 2009, and State jurisdictions that remain subject to examination range from February 28, 2009 to February 29, 2012. The Company does not expect the total amount of unrecognized tax benefits to significantly change in the next 12 months. The Company recognizes interest and/or penalties related to income tax matters in income tax expense. The Company has accrued $1,833, $1,535 and $1,305 for interest and penalties for fiscal years 2012, 2011 and 2010, respectively, relating to uncertain tax positions. (See Note 6).

Loss Contingencies: Loss contingencies are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated.

Major Customers: Revenues generated under various contracts with agencies of the U.S. government accounted for approximately 61%, 66% and 44% of the Company’s total revenues for fiscal years 2012, 2011 and 2010, respectively. Revenue generated as a subcontractor for government contractors accounted for 29%, 18% and 21% of the Company’s total revenue for fiscal years 2012, 2011 and 2010, respectively. Amounts receivable from these agencies were approximately $27,105 and $17,837 at February 29, 2012 and February 28, 2011, respectively.

Of these governmental contracts, one governmental agency accounted for 35%, 33% and 11% of total revenue for fiscal years 2012, 2011 and 2010, respectively. The same government agency accounted for 34% and 52% of accounts receivable as of February 29, 2012 and February 28, 2011, respectively. Another governmental agency accounted for 16%, 19% and 15% of total revenue for fiscal years 2012, 2011 and 2010, respectively. The same agency accounted for 11% and 24% of accounts receivable as of February 29, 2012 and February 28, 2011, respectively.

Additionally, one subcontractor arrangement accounted for 18% of total revenue for fiscal year 2012, and represented 34% of the accounts receivable balance at February 29, 2012, and another subcontractor arrangement accounted for 11%, 15% and 21% of total revenue for fiscal years 2012, 2011 and 2010, respectively. This same customer accounted for 12% of accounts receivable at February 29, 2012.

Concentration of Credit Risk: Financial instruments that potentially subject the Company to credit risk are primarily cash and cash equivalents and accounts receivable. The Company’s

F-31

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

February 29, 2012, February 28, 2011, and February 28, 2010

(in thousands)

cash and cash equivalent deposits at February 29, 2012 and February 28, 2011, were primarily with two financial institutions. The Company grants credit to customers throughout the world. Its primary customer base consists of various agencies of the United States government and large global government service providers. The credit strength of this customer base is derived from its geographical diversity and from its long history of payment on services provided. The Company evaluates each customer’s credit worthiness on a caseby-case basis.

Subsequent Events: The Company has performed an analysis of the activities and transactions subsequent to the fiscal year end to determine the need for any adjustments to or disclosure within the accompanying consolidated financial statements. Management has performed their analysis through March 22, 2013, the date the consolidated financial statements were available to be issued.

As further disclosed in Notes 1, 9 and 11, on March 13, 2013, 1^st Source Bank filed a complaint with the United States District Court of Oregon for replevin of collateral and enforcement of promissory notes and guarantees with a claim of approximately $10,100. The Company, Parent and majority stockholder guarantee the 1^st Source Bank debt.

NOTE 3.

DISCONTINUED OPERATIONS

In fiscal year 2011, management implemented a plan to dispose of the Company’s 100%-owned subsidiary, Evergreen Unmanned Systems, Inc. (“EUS”). Under applicable accounting standards, this subsidiary met the definition of a component of an entity to be presented as discontinued operations, net of income tax, in the Company’s consolidated statements of operations. All prior periods have been reclassified to present this subsidiary as discontinued operations. Financial information in the consolidated financial statements and notes to the financial statements has also been revised to reflect the results of continuing operations for all periods presented.

On September 27, 2010, the Company sold substantially all of the assets of (“EUS”) to a third-party buyer. EUS operated unmanned (drone) aircraft, concentrated on commercial unmanned aerial surveillance with both maritime and land-based operations. The sale price was $13,400 cash, which was received at closing, and which was used to reduce the amounts outstanding under the Parent First and Second Lien Credit Agreements. In addition to the cash received at closing, the sales agreement also provided for additional payments pursuant to an earn-out provision. The terms of the earn-out provided for additional payments up to $4,000 through fiscal year 2012, subject to the achievement of certain defined earnings targets. Certain of these targets were met in 2012, and the Company was entitled to additional payments of $2,000. This amount (which was received in April 2012) is accrued at February 29, 2012, and is included in gain on disposal of discontinued operations for fiscal year 2012.

In fiscal year 2011, a gain of approximately $7,400 was realized on the sale, net of expenses and fees of approximately $1,000 and an income tax provision of approximately $3,600. For fiscal year 2012, a gain of approximately $1,200 was recorded as a result of the contingent earn out provision, net of an income tax provision of $739.

F-32

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

February 29, 2012, February 28, 2011, and February 28, 2010

(in thousands)

The operating results from EUS’ discontinued operations for fiscal year 2010 and from March 1, 2010 through September 27, 2010 (the date of the sale), are as follows:


	March 1, 2010 through September 27, 2010			March 1, 2009 through February 28, 2010
Support services and other revenue	$	3,967		$	4,960
Operating expenses		(3,280	)		(4,208	)

Loss before income taxes		687			752
Income tax expense		(272	)		(308	)

Income from EUS	$	415		$	444

NOTE 4.

DEBT

Mortgage Loan: The Company has entered into a 10-year term mortgage ($8,800 balloon in June 2019) with a bank, collateralized by the Company’s corporate headquarters and aircraft hangar in McMinnville, Oregon. At February 29, 2012 and February 28, 2011, the outstanding balance was $11,200 and $11,400, respectively. Interest is variable and determined at the five-year treasury rate plus 2.75% (minimum 5.25%) and shall adjust in June 2014. The effective interest rate on this mortgage was 5.25% as of February 29, 2012. Principal and interest payments of $70 are due monthly.

Other Term Loans: The Company has entered into various term loans, some of which are collateralized by a specific aircraft, and which mature through 2014. At February 29, 2012 and February 28, 2011, the outstanding balances were $900 and $3,900, respectively. Interest rates under these term loans are fixed at rates ranging up to 10.3%.

Subsequent to February 29, 2012, the Company defaulted on making scheduled payments on the above mortgage and other term loans due to lack of liquidity. At the discretion of the lenders, the Company is subject to default interest rates.

Stockholder Affiliate Guarantee: The Company leases certain aircraft from a Stockholder Affiliate as further discussed in Notes 8 and 11. The Company, Parent, and majority stockholder guarantee the Stockholder Affiliate’s debt related to these specific aircraft. In addition, the Company’s leased aircraft serve as collateral for the Stockholder Affiliate debt. The Company has determined that the fair value of its guarantee is immaterial considering the fair value of the leased aircraft exceeds the associated outstanding debt obligations.

During February of 2013, the Stockholder Affiliate defaulted on installment payments to 1^st Source Bank as further discussed in Notes 1, 2, 9 and 11. On March 13, 2013, 1^st Source Bank filed a complaint with the United States District Court of Oregon for replevin of collateral and enforcement of promissory notes and guarantees with a claim of approximately $10,100.

F-33

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

February 29, 2012, February 28, 2011, and February 28, 2010

(in thousands)

Parent Company Debt: The Company is a co-guarantor on a $370,000 credit facility with third-party lenders, consisting of a term and line-of-credit First Lien Agreement and a term Second Lien Credit Agreement held by the Parent, of which the First Lien was scheduled to mature June 2015, and the Second Lien was scheduled to mature September 2015. This debt has not been reflected in the Company’s consolidated financial statements since the debt was not used to purchase the Company, and the Company’s cash flows from operations and financial position does not necessitate borrowings under the agreements. The Company’s assets also serve as collateral for the Parent’s loans.

At December 31, 2012, the Parent is in default under both the financial and non-financial covenants of these agreements. All Helicopters owned assets serve as collateral under the First Lien and Second Lien Credit Agreements. The balances of the First Lien and Second Lien loans were $189,250 and $114,209, respectively, at February 29, 2012 ($174,779 and $119,157, respectively, at December 31, 2012).

Refer to Note 1, Management’s Plans and Liquidity Assessment for further discussion.

Annual maturities of debt for years ending after February 29, 2012, are as follows:


Fiscal year ending	Amount
2013	$	594
2014		581
2015		555
2016		426
2017		332
Thereafter		9,647

Total	$	12,135

NOTE 5.

NON-OPERATING INCOME (EXPENSE)


	2012			2011		2010
Foreign currency exchange (loss) gain	$	(24	)	$	2	$	(271	)
Gain on legal settlement		—			6,000		—
Gain on insurance settlement		962			1,061		—
Loss on asset disposals		(2,630	)		—		—
Interest income and other		25			9		98

	$	(1,667	)	$	7,072	$	(173	)

During fiscal year 2011, the Company was awarded $6,000 in a settlement of existing litigation, for which the Company recorded a receivable at February 28, 2011, and recognized a gain of $6,000. This amount was fully collected in fiscal year 2012.

F-34

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

February 29, 2012, February 28, 2011, and February 28, 2010

(in thousands)

NOTE 6.

INCOME TAXES

The components of income tax (expense) benefit for continuing operations are as follows for fiscal years 2012, 2011 and 2010:


	2012			2011			2010
Current:
Federal	$	(4,760	)	$	(6,993	)	$	5,041
State		(450	)		(695	)		438
Unpaid foreign, interest and penalties		(3,294	)		(2,875	)		(3,403	)

		(8,504	)		(10,563	)		2,076

Deferred:
Federal		309			2,758			2,536
State		30			295			203

		339			3,053			2,739

	$	(8,165	)	$	(7,510	)	$	4,815

The current income tax payable to Holdings at February 29, 2012 and February 28, 2011, (included within net transfer to Parent) was $5,210 and $7,688. The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities at February 29, 2012 and February 28, 2011, are presented below:


	2012			2011
Current deferred tax assets (liabilities):
Accounts receivable	$	255		$	546
Prepaid items		(409	)		(143	)
Accrued liabilities		1,609			2,095

		1,455			2,498

Non-current deferred tax assets (liabilities):
Property and equipment		(13,956	)		(14,452	)
Foreign tax credit indirect benefit of UTB		9,085			7,624
Federal indirect benefit of UTB interest		969			805

		(3,902	)		(6,023	)

	$	(2,447	)	$	(3,525	)

F-35

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

February 29, 2012, February 28, 2011, and February 28, 2010

(in thousands)

The reconciliation between the effective tax rate and the federal statutory rate applicable to continuing operations is as follows:


	2012			2011			2010
Income tax expense (benefit), statutory rate	$	35	%	$	35	%	$	(35	%)
State income taxes, net of federal effect		2	%		2	%		(2	%)
Unrecognized tax benefits, net of corresponding benefit		6	%		6	%		7	%
Other, including permanent differences		—			1	%		—

Income tax expense (benefit), effective rate	$	43	%	$	44	%	$	(30	%)

The following table presents the Company’s unrecognized tax benefits (liability for uncertain tax positions) as of and for the fiscal years ended 2012, 2011 and 2010:


	2012		2011		2010
Balance at beginning of period	$	10,831	$	7,956	$	4,553
Gross increases based on current year positions		1,461		1,340		2,098
Gross decreases in tax positions		—		—		—
Interest and penalties		1,833		1,535		1,305

Balance at end of period	$	14,125	$	10,831	$	7,956

NOTE 7.

EMPLOYEE BENEFIT PLAN

For fiscal years 2012, 2011 and 2010, the Company contributed $800, $900 and $900, respectively.

F-36

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

February 29, 2012, February 28, 2011, and February 28, 2010

(in thousands)

NOTE 8.

COMMITMENTS

Operating leases: The Company leases aircraft, land, buildings and equipment under cancelable and non-cancelable operating leases with certain of these leases guaranteed by Parent. The Company also leases aircraft from entities that are owned by or controlled by the majority stockholder as further discussed in Note 11. Rental commitments under non-cancelable operating leases having an original term of one year or more at February 29, 2012, are as follows:


Fiscal year ending	Stockholder Affiliates		Others		Total
2013	$	1,448	$	24,700	$	26,148
2014		1,448		24,554		26,002
2015		1,448		24,493		25,941
2016		681		20,727		21,408
2017		55		12,918		12,973
Thereafter		—		19,667		19,667

	$	5,080	$	127,059	$	132,139

The Company maintains several leases on a month-to-month basis. Total rent expense for the fiscal years 2012, 2011, and 2010 was $29,200, $21,500 and $25,000, respectively, including Stockholder Affiliates rent expense of $7,500, $9,700, and $11,900, respectively.

Subsequent to February 29, 2012, the Company entered into a restructuring agreement with an aircraft lessor effective October 1, 2012. As part of this agreement, the lessor agreed to defer the lease payments from October 2012 through January 2013 and apply the payments to the end of the lease. In addition, as part of this agreement, the Company pledged refundable deposits of approximately $3,500 to an affiliate related to their leases with the lessor.

Aircraft purchase agreements: As of February 29, 2012, the Company entered into an agreement to purchase a Puma aircraft for $1,027, which the Company took delivery of in fiscal year 2013. As of February 29, 2012, the Company had paid a $1,000 deposit towards the purchase of this aircraft.

NOTE 9.

LEGAL PROCEEDINGS & CONTINGENCIES

1^st Source Bank: The Company leases certain aircraft from a Stockholder Affiliate as further discussed in Notes 8 and 11. The majority stockholder, Parent and Company guarantee the Stockholder Affiliate’s debt related to these specific aircraft. During February 2013, the Stockholder Affiliate defaulted on installment payments to 1^st Source Bank. On March 13, 2013, 1^st Source Bank filed a complaint with the United States District Court of Oregon for replevin of collateral and enforcement of promissory notes and guarantees with a claim of approximately $10,100. See Note 1, Management Plans and Liquidity Assessment, Note 2, Subsequent Events, and Notes 4 and 11 for further discussions.

Priority 1 Air Rescue Services (“Priority 1”): In November 2012, Priority 1 brought breach of contract claims against Helicopters related to two subcontracts between Priority 1 and Helicopters. The suit alleges that Helicopters failed to pay invoices for work in the amount of

F-37

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

February 29, 2012, February 28, 2011, and February 28, 2010

(in thousands)

approximately $704. It also claims additional amounts for consequential damages and interest resulting in a total claim of approximately $2,044. Helicopters responded to the complaint in December 2012 and denied the allegations. Management, after consultation with legal counsel, has determined the range of loss to be between $475 and the total claim amount.

Fortis Lease Deutschland GmbH (“Fortis”): In 2011, a third party, Cypress Financial Corporation, purchased two helicopters from Fortis on Helicopters’ behalf and subsequently leased them to the Company. Fortis is demanding payment of approximately 817 euro (approximately $1,078) in damages for the amount of value added tax (VAT) levied on the purchase price of the helicopters plus interest. Management is currently working with Cypress and Fortis to resolve the matter and believes the transaction should be exempt from VAT. Management estimates, based on consultations with legal counsel, a range of potential loss between zero and approximately 1,000 euro (approximately $1,320) prior to any refund of the VAT. Management does not believe there is any direct financial impact relating to this case and has not accrued for any potential loss. However, no assurance may be given regarding the ultimate ability of Helicopters to receive the VAT refund until foreign tax authorities approve and remit the proceeds.

Agusta Westland: In July 2012, Agusta Westland delivered a notice to the Company demanding immediate payment for alleged amounts owed for aircraft parts and technical assistance provided since 2006. Helicopters is in the process of reconciling the amount owed with Agusta and is currently negotiating a payment plan for past due amounts. Helicopters has accrued the amount it believes to be owed at February 29, 2012.

DivLend Equipment Leasing LLC (“DivLend”): On December 7, 2012, DivLend filed a lawsuit for $14,513 against Helicopters and the Parent for failure to make timely payments on helicopter leases and alleged defaults under certain Parent guaranty agreements. At December 31, 2012, the Company believed it was up to date on payments through November 2012. The Company believes this is the only portion of the suit it is liable for and intends to vigorously defend this case.

F-38

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

February 29, 2012, February 28, 2011, and February 28, 2010

(in thousands)

NOTE 10.

FAIR VALUE MEASUREMENTS

The following three levels of input may be used to measure fair value:


Level 1:		Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2:		Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3:		Unobservable inputs that are supported by little of no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include items where the determination of fair value requires significant management judgment or estimation.

The carrying amounts of the Company’s cash, restricted investments, accounts receivable and accounts payable approximate fair value because of the short-term maturities of these instruments. The carrying amount of the Company’s variable rate long-term debt approximates fair value because variable interest rates closely correlate to changes in market conditions. The Company’s fixed-rate debt balances as of February 29, 2012 and February 28, 2011, were $12,100 and $15,500, respectively. The Company believes that the fair value of the fixed-rate debt approximates its carrying value.

Assets and liabilities measured at fair value on a nonrecurring basis (presented below by level of input) include measuring impairment when required for long-lived assets. For the Company, long-lived assets measured at fair value on a nonrecurring basis include fixed assets.


	February 29, 2012
	Fair Value Measurement Using
	Level 1		Level 2		Level 3
Cash and cash equivalents	$	174	$	—	$	—
Restricted investments		—		1,054		—

	$	174	$	1,054	$	—


	February 28, 2011
	Fair Value Measurement Using						Total Impairment
	Level 1		Level 2		Level 3		Losses
Cash and cash equivalents	$	127	$	—	$	—
Rotary wing aircraft(a)		—		—		58,800	$	397

	$	127	$	—	$	58,800

(a)	In 2011, certain rotary wing aircraft with a carrying value of $59,200 were written down to their estimated fair value of $58,800. These assets are measured at fair value on a nonrecurring basis.

F-39

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

February 29, 2012, February 28, 2011, and February 28, 2010

(in thousands)

NOTE 11.

RELATED PARTY TRANSACTIONS

Expenses are allocated based on the Company’s number of employees for certain functions provided by the Parent, including, but not limited to, general corporate expenses related to finance, legal, information technology, human resources, and employee benefits. Additionally, expenses related to administrative functions and overhead are incurred by Holdings on behalf of Helicopters. The amount incurred for these services was $900, $500, and $500 for fiscal years 2012, 2011 and 2010, respectively, and are included in administrative and operational expenses in the table below. These expenses have been allocated on the basis of headcount or by other measures.

Transactions with Stockholder Affiliates: Helicopters leases several aircraft from Stockholder Affiliates. The Company received free rent in January and February of 2012 on all its aircraft leases, including month-to-month leases, with Stockholder Affiliates. The Company has reflected this free rent as contributed capital, as the contractual lease obligations for this period were forgiven.

F-40

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

February 29, 2012, February 28, 2011, and February 28, 2010

(in thousands)

The Company has determined that its guarantee of the Stockholder Affiliate’s debt associated with its leased assets constitutes a variable interest. Accordingly, the Stockholder Affiliate is a variable interest entity (VIE). However, the Company does not have the ability to direct the activities of the Stockholder Affiliate, and therefore, the Company is not the primary beneficiary of the Stockholder Affiliate. Accordingly, the Company has not included the Stockholder Affiliate’s results of operations and financial position in the Company’s consolidated financial statements. Further, the Company is restricted on transferring any assets or providing any other subordinated financial support to its Stockholder Affiliate under the First and Second Lien Agreements (Note 4). The Company has determined that as of February 29, 2012, its maximum exposure relative to the VIE is as follows:


Guarantee of 1^st Source Bank debt on leased assets	$	14,330
Accounts receivable		1,615
Refundable deposits		3,456

	$	19,401

Subsequent to February 29, 2012, as discussed in Notes 1, 2, 4, and 9, this same Stockholder Affiliate is in default on installment payments to 1^st Source Bank of approximately $10,100 (balance as of the date of default in February 2013), which the Company guarantees. In addition, it is uncertain if the Company’s accounts receivable, refundable deposits and other assets will be fully collectible or realized.

Parent Investment in the Company: Management believes it is not meaningful to show additional paid-in capital or retained earnings for the Company. The net assets are represented by the net investment of Parent, which comprises total share of capital and retained earnings of Helicopters.

F-41

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

February 29, 2012, February 28, 2011, and February 28, 2010

(in thousands)

All significant intercompany transactions between the Parent and Helicopters have been included in these consolidated financial statements and are considered to be effectively settled for cash at the time the transaction is recorded. The total net effect of the settlement of these intercompany transactions is reflected in the consolidated statements of cash flows as a financing activity and in the consolidated statements of stockholder’s equity.


	2012
	Parent			Stockholder Affiliates
As of:
Current:
Accounts receivable	$			$	1,615
Deposits					2,369
Non-current:
Deposits					1,087
For the year ended:
Revenues from flight and support services	$	(3,267	)	$	—
Administrative and operational expenses and benefits		28,339			—
Lease and rental payments		—			7,500

Total		25,072		$	7,500

Net cash transferred		(39,280	)

Net transfer to Parent	$	(14,208	)

Contributed capital for free rent periods				$	1,576


	2011
	Parent			Stockholder Affiliates
As of:
Current:
Accounts receivable	$	—		$	102
Deposits		—			3,145
Accounts payable		—			(24	)
For the year ended:
Revenues from flight and support services	$	(3,300	)	$	—
Administrative and operational expenses and benefits		17,179
Lease and rental payments					9,700

Total		13,879		$	9,700

Net cash transferred		(15,155	)

Net transfer to Parent	$	(1,276	)

F-42

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

February 29, 2012, February 28, 2011, and February 28, 2010

(in thousands)


	2010
	Parent			Stockholder Affiliates
For the year ended:
Revenues from flight and support services	$	(1,974	)
Administrative and operational expenses and benefits		20,735
Lease and rental payments				$	11,900

Total		18,761		$	11,900

Net cash transferred		(21,433	)

Net transfer to Parent	$	(2,672	)

F-43

EX-99.2 5 d545977dex992.htm EX-99.2 EX-99.2

Exhibit 99.2

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(amounts in thousands)

(Unaudited)


	March 31, 2013			December 31, 2012
ASSETS
Current assets:
Cash and cash equivalents	$	151		$	148
Accounts receivable (net of allowance for doubtful accounts of $200 as of March 31, 2013 and $100 as of December 31, 2012, respectively)		23,690			24,213
Inventories		482			601
Prepaid expenses and other assets		4,927			7,570
Deferred tax assets		907			907
Assets held for sale		265			2,864

Total current assets		30,422			36,303
Property and Equipment
Aircraft, aircraft engines and rotable parts		95,379			86,917
Deferred overhauls		41,669			43,626
Buildings and improvements		22,317			22,390
Construction in progress		13,172			10,170
Machinery and equipment		8,748			8,748

		181,285			171,851
Accumulated depreciation of long-lived assets		(64,461	)		(58,917	)
Accumulated amortization of deferred overhauls		(19,504	)		(20,728	)

Net property and equipment		97,320			92,206
Refundable deposits		7,969			12,753
Restricted investments		—			1,056
Other assets		2,881			3,049

Total assets		138,592		$	145,367

LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities:
Accounts payable	$	43,128		$	34,611
Accrued expenses and other		5,367			4,147
Debt		11,497			11,647

Total current liabilities		59,992			50,405
Other liabilities		1,122			3,872
Liability for uncertain tax positions in foreign jurisdiction		18,372			17,353
Deferred tax liabilities		106			1,250

Total liabilities		79,592			72,880
Commitments and contingencies (Notes 6 and 7)
Stockholder’s equity:
Common stock, no par value, 500 shares authorized, issued and outstanding;		—			—
Net investment of Parent		59,000			72,487

Total stockholder’s equity		59,000			72,487

Total liabilities and stockholder’s equity	$	138,592		$	145,367

The accompanying notes are an integral part of the consolidated financial statements.

F-1

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF NET INCOME

(amounts in thousands)

(Unaudited)


	Three months Ended March 31, 2013			Three months Ended March 31, 2012
Revenues from flight and support services	$	45,214		$	47,620
Cost of flight and support services		34,380			35,927

Gross profit		10,834			11,693
Selling, general and administrative expense		4,700			6,340
Loss on disposal of leased aircraft		—			1,598

		4,700			7,938

Income from operations		6,134			3,755
Non-operating income (expense):
Interest expense		(956	)		(242	)
Amortization of deferred finance costs		(20	)		(170	)
Other income (expense)		(2	)		298

Total other expense		(978	)		(114	)
Income before income tax expense		5,156			3,641
Income tax expense		(2,222	)		(1,647	)

Net income	$	2,934		$	1,994

The accompanying notes are an integral part of the consolidated financial statements.

F-2

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY

(amounts in thousands, except share data)

(Unaudited)


	Common Stock				Net Investment of Parent			Total Stockholder’s Equity
	Shares		Amount		Net Investment of Parent			Total Stockholder’s Equity
Balance, January 1, 2013		500	$	—	$	72,487		$	72,487
Net transfer to Parent		—		—		(16,421	)		(16,421	)
Net income		—		—		2,934			2,934

Balance, March 31, 2013		500	$	—	$	59,000		$	59,000

The accompanying notes are an integral part of the consolidated financial statements.

F-3

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

(Unaudited)


	Three months Ended March 31, 2013			Three months Ended March 31, 2012
Cash flows from operating activities:
Net income	$	2,934		$	1,994
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		4,319			3,965
Deferred income taxes		(1,144	)		6,217
Liability for uncertain tax positions in foreign jurisdiction		1,019			286
Loss on disposal of leased aircraft		—			1,598
Contribution from stockholder affiliate for free rent		—			1,576
Changes in operating assets and liabilities:
Accounts receivable		523			1,629
Inventories		119			(5	)
Prepaid expenses, refundable deposits and other		8,652			116
Accounts payable, accrued and other liabilities		6,986			6,130

Net cash provided by operating activities		23,408			23,506
Cash flows from investing activities:
Purchases of property and equipment and overhauls		(6,834	)		(5,464	)
Proceeds from disposal of property and equipment		—			6,037

Net cash used in investing activities		(6,834	)		573
Cash flows from financing activities:
Payments on debt		(150	)		(1,530	)
Net transfers to Parent		(16,421	)		(22,445	)

Net cash used in financing activities		(16,571	)		(23,975	)
Net change in cash and cash equivalents		3			104
Cash and cash equivalents, beginning of period		148			78

Cash and cash equivalents, end of period	$	151		$	182

The accompanying notes are an integral part of the consolidated financial statements.

F-4

EVERGREEN HELICOPTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1—DESCRIPTION OF THE BUSINESS

Helicopters own 100% of the following subsidiaries:

•

Evergreen Helicopters of Alaska, Inc.

•

Evergreen Equity, Inc., and

•

Evergreen Helicopters International, Inc.

The Company also engages in transactions with the Company’s Parent and the Parent’s subsidiaries (refer to Note 9):

•

Evergreen International Aviation, Inc.

•

Evergreen International Airlines, Inc.

•

Evergreen Aviation Ground Logistics Enterprise, Inc.

•

Evergreen Trade, Inc.

•

Evergreen Agriculture Enterprise, Inc.

•

Evergreen Defense and Security Services, Inc.

•

Evergreen Maintenance Center, Inc.

These entities are collectively referred to as the “Parent.”

Management Plans and Liquidity Assessment: At the direction of the Parent, the Company provided funds during the three months ended March 31, 2013 and 2012, as reflected in net transfers to Parent in the accompanying consolidated statements of cash flows. These net transfers account for a significant portion of the Company’s cash used during the three months ended March 31, 2013 and 2012. In addition, the Company, as well as other affiliates, are co-guarantors of the Parent’s first and second lien credit agreements, and at March 31, 2013 and December 31, 2012, Parent is in default under both the financial and non-financial covenants provided in these agreements due to the Parent’s lack of liquidity to make the scheduled payments. At March 31, 2013 and December 31, 2012, the balance of the first and second lien agreements total approximately $306 and $300, respectively. The Company, Parent and majority stockholder also guarantee the debt of a Stockholder Affiliate to 1^st Source Bank. On March 13, 2013, 1^st Source Bank filed a complaint with the United States District Court of Oregon for replevin of collateral and enforcement of promissory notes and guarantees with a claim of approximately $10,100. In addition, the Company has a negative working capital of $29,570 and $14,102 at March 31, 2013 and December 31, 2012, respectively, and is in default on its mortgage and other term loans totaling $11,497 and $11,647 March 31, 2013 and December 31, 2012, respectively.

The default on the Company’s, its Parent’s and Stockholder Affiliate’s debt and the resulting liquidity was resolved with the execution of the Stock Purchase Agreement described in Note 10, Subsequent Events.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation: The Company’s consolidated financial statements include the accounts of Evergreen Helicopters, Inc. and its wholly-owned domestic and foreign subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The operations of the Company’s foreign subsidiaries are not significant.

Basis of Presentation: The accompanying unaudited consolidated financial statements include the accounts and transactions of all majority owned subsidiaries and variable interest entities in which the Company is the primary beneficiary. In presenting these unaudited consolidated financial statements, management makes estimates and assumptions that affect reported amounts of assets and liabilities and related disclosures, disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting periods. Estimates, by their nature, are based on judgments and available information at a point in time. As such, actual results could differ from those estimates. In management’s opinion, the unaudited consolidated financial statements contain all normal recurring adjustments necessary for a fair presentation of interim results reported. The results of operations reported for interim periods are not necessarily indicative of the results of operations for the entire year or any subsequent interim period.

F-5

Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the Company’s financial statements and accompanying notes. The Company considers its critical accounting policies to be those related to revenue recognition, deferred income taxes, useful lives and residual values of property, plant and equipment, and valuation of long-lived assets.

Revenue Recognition: The Company earns flight revenue under service contracts that range in term from less than one year to five years. The Company typically charges by the number of hours flown, with a minimum number of hours per day, plus a monthly availability fee. The Company frequently modifies its general pricing structure in order to more closely match the characteristics of the mission. The various types of pricing methods utilized by The Company includes pricing by weight for transport of goods, pricing by acre for aerial spraying, and pricing by number of pickups for construction work. Flight revenue is recognized when services are performed and monthly for fixed availability fees over the term of the agreement.

Cash and Cash Equivalents: The Company classifies short-term, highly liquid investments which are readily convertible into cash and have a maturity of three months or less when purchased as cash and cash equivalents.

Restricted Investments: The Company maintains restricted investments in certificate of deposit accounts, supporting letters of credit required for aircraft leases with contractual lease terms through 2019 that are held by the Company’s Parent. These investments are classified as held to maturity and are stated at cost which approximates market, with an average term to maturity of less than one year (November 2013). The Company plans to extend the maturity date of the certificate of deposit accounts at maturity given the contractual collateral requirements under the letters of credit. As such, restricted investments are classified as non-current on the consolidated balance sheets.

Accounts Receivable, Net: Accounts receivable consists of amounts billed to customers, net of an allowance for uncollectible accounts, for losses that may result from inability of its customers to make required payments or from contract disputes. The Company also periodically records an allowance for the collectability of all other receivables based upon factors such as the aging of receivables and historical collection experience.

Aircraft parts inventories are carried at the lower of average cost or net realizable value. Aircraft parts inventories that are utilized for aircraft maintenance are charged to operations when used. All other inventories are charged to operations when sold.

Refundable Deposits: The Company maintains deposits with vendors in conjunction with aircraft lease agreements and other commitments.

Property and Equipment: Property and equipment is recorded at cost. The Company depreciates its property and equipment utilizing the straight-line method of depreciation over the estimated useful lives of the assets. The estimated useful lives for the primary property and equipment classes are as follows:

•

Aircraft, aircraft engines, and rotable assets - 5 to 20 years

•

Machinery and equipment - 3 to 7 years

•

Buildings and improvements - 10 to 40 years

The Company capitalizes all costs of major renewals, modifications, and overhauls of its aircraft. The Company amortizes the costs of such major overhaul components as follows:

Small Fixed-Wing Aircraft and Helicopters: The cost of major overhaul components is depreciated as a part of the cost of the aircraft. The cost of subsequent major overhauls is capitalized and amortized over the estimated operating hours.

F-6

Rotable Assets: The cost of rotable asset overhauls is amortized separately from the aircraft. The Company capitalizes the costs of rotable asset overhauls for its small fixed-wing aircraft and helicopters and amortizes these costs over the estimated useful lives of the overhauls, generally over five years or less. The cost of repairing rotable assets is expensed as incurred.

Impairment of Long-Lived Assets: The Company evaluates the recoverability of its long-lived assets on an annual basis. The Company also evaluates recoverability when events and circumstances indicate that the net carrying value of its long-lived assets may not be recoverable.

Leased Aircraft—Overhauls and Lease Return Condition Costs: The Company accounts for the overhaul and lease return condition costs of its leased aircraft in accordance with the applicable lease agreements. Generally, the Company capitalizes the costs of the required major maintenance and inspection of engines and airframes. The Company amortizes the capitalized costs over the lesser of (i) the number of years until the next scheduled overhaul, or (ii) the termination of the lease. Maintenance and repairs for engines and airframe components under power-by-the-hour contracts are expensed as the aircraft are operated based upon actual hours or cycles flown and based upon the contractual terms of the agreements.

Income Tax and Uncertain Tax Positions: The Company operates as a C Corporation for income tax purposes and is included with Parent in the consolidated federal income tax returns filed by Holdings, which reports and files on a February fiscal year end. The Company calculated the total tax expense and deferred taxes using a separate return method. Accordingly, deferred income tax assets and liabilities are calculated based upon differences between the financial statements and tax bases of assets and liabilities that result in taxable or deductible amounts in the future periods based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.

The Company records net deferred tax assets to the extent a determination is made that these assets will more likely than not be realized. In making such determination, all available positive and negative evidence is considered, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. In the event a determination is made that the Company would be unable to realize its deferred income tax assets in the future in excess of its net recorded amount, an adjustment would be made to the valuation allowance, which would reduce the provision for income taxes.

The manner in which the entity determines whether a valuation allowance is needed depends on the tax-sharing agreement among the members of the group filing the consolidated tax return. If the tax-sharing agreement is based on the tax expense or benefit the subsidiary would pay or receive if it filed a separate tax return, the evaluation of the need for a valuation allowance would be the same as if the subsidiary filed a separate tax return (assuming that the Parent has the ability to honor its obligation under the tax-sharing agreement). If there is no formal tax-sharing agreement or the tax-sharing agreement is inconsistent with the method of allocating income tax to the subsidiary, the evaluation of the need for a valuation allowance should be consistent with the tax allocation method used.

The Company does not have a formal tax-sharing agreement with Parent. Accordingly, valuation allowance considerations were consistent with the separate return method for allocation of taxes. The Company evaluated the need for valuation allowance on a separate return basis and determined that a valuation allowance is not necessary based on the reversal of timing differences related to deferred tax liabilities.

During the three months ended March 31, 2013 and 2012, the Company recorded taxes, interest and penalties of $1.0 million and $286, respectively, of unrecognized tax benefits (UTB) related to non-filing in a foreign jurisdiction. In addition, the Company has recorded the benefits of the foreign tax credit and federal benefits of the UTB interest. In the event the foreign tax is paid and the uncertain tax liability reduced, the realization of the related benefits recorded in deferred tax assets would need to be reassessed.

The Company is subject to U.S. federal income tax, as well as various state income taxes. The Company is no longer subject to US Federal tax examinations for years before 2009, and State jurisdictions that remain subject to examination range from 2009 to 2012. The Company recognizes interest and penalties related to income tax matters in income tax expense. The Company recorded $1.0 million for additional tax, interest and penalties for the three months ended March 31, 2013 relating to uncertain tax positions.

F-7

Loss Contingencies: Loss contingencies are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated.

Major Customers: Revenue generated under various contracts with agencies of the U.S. government accounted for approximately 53% and 46% of the Company’s total revenues as of March 31, 2013 and 2012, respectively. Revenues as subcontractor for government contractors were 42% and 48% of the Company’s total revenue in the respective periods. Of these governmental contracts, three governmental agencies accounted for 38%, and one governmental agency accounted for 21% of the Company’s total revenues as of March 31, 2013 and 2012, respectively. Two subcontractor arrangements accounted for 42% and 34% of the Company’s total revenues as of March 31, 2013 and 2012, respectively.

Concentration of Credit Risk: Financial instruments that may potentially subject the Company to credit risk consist of primarily cash and cash equivalents and accounts receivable. The majority of Company’s cash and cash equivalents were with two financial institutions.

The Company primary customer base consists of various agencies of the United States government and large global government service providers. The credit strength of the Company’s customer base is derived from the customers geographical diversity and from Company’s long history of receipt of payments for services provided. The Company evaluates each customer’s credit worthiness on a case-by-case basis.

NOTE 3—DEBT

Mortgage Loan: The Company entered into a 10-year term mortgage (with a $8,800 balloon due in June 2019) with a bank, collateralized by the Company’s corporate headquarters and aircraft hangar in McMinnville, Oregon. At March 31, 2013 and December 31, 2012 the outstanding balances were $10,863 and $10,934. Interest is variable and determined at the five year treasury rate plus 2.75%, with a minimum of 5.25%. The effective interest rate on this mortgage at December 31, 2012 was 5.25%. Under the loan, principal and interest payments of $70 were due monthly. Subsequent to March 31, 2013, the Company’s headquarter building and aircraft hangar was transferred to, and the mortgage was assumed by, the Parent.

Other Term Loans: The Company has various term loans one of which was collateralized by a specific aircraft and which will mature at various dates through 2014. The existing loans require monthly interest and principal payments of $6. Interest rates under these term loans are fixed at rates ranging up to 10.3%. Subsequent to March 31, 2013, the aircraft was transferred to, and the related loan was assumed by, the Parent.

At March 31, 2013 and December 31, 2012, the Company was in default of the existing loans due to the Company’s inability to meet the scheduled payments. As the result, the outstanding balances at March 31, 2013 and December 31, 2012 were reflected as a current liability in the consolidated balance sheets. At the discretion of the lenders, the Company is subject to default interest rates.

Stockholder Affiliate Guarantee: As further discussed in Notes 6 and 9, the Company leases certain aircraft from a Stockholder Affiliate. The Company, Parent, and majority stockholder guarantee the Stockholder Affiliate’s debt related to these aircraft. In addition, the Company’s leased aircraft serve as collateral for the Stockholder Affiliate debt. The Company has determined that the fair value of its guarantee is immaterial considering the fair value of the leased aircraft exceeds the associated outstanding debt obligations.

As further discussed in Notes 1, 2, 7 and 9, in February of 2013 the Stockholder Affiliate defaulted on installment payments to 1^st Source Bank. On March 13, 2013, 1^st Source Bank filed a complaint with the United States District Court of Oregon for replevin of collateral and enforcement of promissory notes and guarantees with a claim of approximately $10,100.

F-8

Parent Company Debt: The Company is a guarantor on a term and line of credit First Lien Agreement and a term Second Lien Credit Agreement held by the Parent. This debt is not reflected in the Company’s consolidated balance sheets given that the Company’s cash flow from operations and financial position did not necessitate borrowings under the agreements. The Company’s assets serve as collateral for the Parent’s loans.

At March 31, 2012, Parent was in default under both the financial and non-financial covenants provided in the agreements. All of the assets owned by the Company serve as collateral under the First Lien and Second Lien Credit Agreements. The balances of the First Lien loan at March 31, 2013 and December 31, 2012 were $181 and $175, respectively. The balances of the Second Lien loan at March 31, 2013 and December 31, 2012 were $125 and $119, respectively. Also refer to Note 10, Subsequent Events.

NOTE 4—INCOME TAXES

The Company’s effective income tax rate for the three months ended March 31, 2013 and 2012 was 43.10% and 45.23% respectively. The Company’s effective income tax rate is affected by recurring items, such as tax rates in foreign jurisdictions and the relative amount of income it earns in those jurisdictions. It is also affected by discrete items that may occur in any given period.

The Company recognizes deferred tax assets if realization of such assets is more likely than not. The Company believes, based on factors including, but not limited to, the ability to generate future taxable income from reversing taxable temporary differences and forecasts of financial and taxable income or loss by jurisdiction, that at March 31, 2013 it is more likely than not that the Company will realize all of its deferred tax assets, including its net operating loss carry forwards. The Company’s utilization of net operating loss carry forwards may be subject to annual limitations due to ownership change provisions of Internal Revenue Code Section 382.

At March 31, 2013, there has been an increase of $1,019 to the Company’s uncertain tax position disclosure as provided at December 31, 2012. It is the Company’s policy to recognize interest and penalties related to uncertain tax positions in income tax expense.

NOTE 5—EMPLOYEE BENEFIT PLAN

The Company has a defined contribution plan (“the Plan”) covering all full-time employees of the Company who have been credited with one year of service, are at least 21 years of age, are not covered by a collective bargaining agreement, and are not a temporary employee. Under the Plan, the Company makes a basic contribution equal to 4% of the annual compensation of each participant who has completed the minimum required hours of service during the Plan year (“Basic Contributions”). In addition, the Company matches, on a 50% matching basis, each participant’s contribution which is not in excess of 8% of the participant’s base compensation (“Matching Contributions”). The Company may also make additional discretionary contributions at the option of the Board of Directors.

The Company made contributions of approximately zero and $141 for the three months ended March 31, 2013 and 2012, respectively.

NOTE 6—COMMITMENTS

Operating Leases: The Company leases aircraft, land, buildings and equipment under cancelable and non-cancelable operating leases, with certain of these leases guaranteed by Parent. The Company also leases aircraft from entities that are owned by or controlled by the majority stockholder.

The Company maintains several leases on a month-to-month basis. Total rent expenses for the three months ended March 31, 2013 and 2012 were $8,420 and $9,492, respectively.

During 2012, the Company entered into a restructuring agreement with an aircraft lessor effective October, 1 2012. As part of this agreement, the lessor agreed to defer the lease payments from October 2012 through January 2013 and apply the payments to the end of the lease. At March 31, 2013 and December 31, 2012, the Company recorded a deferred lease liability of approximately $1,600 and $1,200, respectively. In addition, as part of this agreement, the Company pledged refundable deposits of approximately $3,500 to an affiliate related to their leases with lessor.

F-9

NOTE 7—LEGAL PROCEEDINGS & CONTINGENCIES

1^st Source Bank: As further discussed in Notes 6 and 9, the Company leases certain aircraft from a Stockholder Affiliate. The majority stockholder, Parent and Company guarantee the Stockholder Affiliate’s debt related to these specific aircraft. In February of 2013, the Stockholder Affiliate defaulted on installment payments to 1^st Source Bank. On March 13, 2013, 1^st Source Bank filed a complaint with the United States District Court of Oregon for replevin of collateral and enforcement of promissory notes and guarantees with a claim of approximately $10,100. In May of 2013, in conjunction with the sale of the Company further described in Note 10, Subsequent Events, the case was settled and dismissed.

Priority 1 Air Rescue Services: In November 2012, Priority 1 brought breach of contract claims against the Company which related to two subcontracts between Priority 1 and the Company. The suit alleges that the Company failed to pay invoices for work in the amount of approximately $704. It also claims additional amounts for consequential damages and interest resulting in a total claim of approximately $2,044. The Company responded to the complaint in December 2012 and denied the allegations. Management, after consultation with counsel, determined the range of loss to be between $475 and the total claim amount; the amount was recorded in accounts payable at December 31, 2012 and remained unpaid at March 31, 2013.

Fortis Lease Deutschland GmbH: In 2011, a third party, Cypress Financial Corporation, purchased two helicopters from Fortis on Helicopters’ behalf and subsequently leased them to the Company. Fortis is demanding payment of approximately 817 euro in damages for the amount of valued-added-tax (VAT) levied on the purchase price of the helicopters plus interest. Management is currently working with Cypress and Fortis to resolve the matter and believes the transaction should be exempt from VAT. Legal counsel estimates a range of potential loss between approximately 880 euro and 1,000 euro prior to any refund of the VAT. Management does not believe there is any direct financial impact relating to this case and has not accrued for the potential loss. However, uncertainty regarding the Company’s ability to receive the VAT refund will remain until foreign tax authorities approve and remit the proceeds.

Agusta Westland: On July 17, 2012, Agusta Westland delivered a notice to the Company demanding immediate payment for the amounts owed for aircraft parts and technical assistance provided since 2006. The Company recorded the amount, it believed was due, of $2,221 in accounts payable at December 31, 2012. In May of 2013, the Company made a payment of this amount to Agusta Westland.

DivLend Equipment Leasing: On December 7, 2012, DivLend filed a lawsuit for $14,513 against the Company and the Parent for failure to make timely payments on helicopter leases and the alleged defaults under certain Parent guaranty agreements. At December 31, 2012, the Company believed it was up to date on payments through November 2012, and therefore, has recorded in accounts payable the December 2012 payments of $253. The Company believes this to be the only portion due and intends to vigorously defend the case. In May of 2013, in conjunction with the sale of the Company further described in Note 10, Subsequent Events, the case was settled and dismissed.

State of Arizona—Superfund: The Company, among others, is a defendant in an environmental investigation relating to two separate Superfund clean-up sites in Arizona. Management is monitoring the case as it is in preliminary stages and plans to engage outside counsel with area expertise if the case develops further. The outcome of the lawsuit is unknown, but the Company intends to contest the case vigorously. However, no assurance may be given regarding the ultimate outcome of the claim.

Other Matters: The Company is involved in various claims and legal proceedings considered normal to its business. While it is not feasible to predict or determine the financial outcome of each proceeding, management does not believe that the proceedings will result in a material adverse effect on the Company’s financial position, results of operations, or liquidity.

NOTE 8—FAIR VALUE MEASUREMENTS

The following three levels of input may be used to measure fair value:

Level 1: Level 1 – Unadjusted quoted prices in active markets for identical assets and liabilities.

Level 2: Directly and indirectly observable market data.

Level 3: Significant unobservable inputs

The carrying amounts of the Company’s cash, restricted investments, accounts receivable and accounts payable approximate fair value because of the short-term maturities of these instruments. The carrying amount of the Company’s variable rate debt approximates fair value because variable interest rates closely correlate to changes in market conditions, including default interest rates. The Company believes that the fair value of its fixed-rate debt approximates its carrying value.

F-10

NOTE 9—RELATED PARTY TRANSACTIONS

Transactions with the Parent: The consolidated financial statements include certain revenue transactions and expense allocations from the Parent. The Company recognizes revenue for the Parent’s use of two aircraft for the its travel. Flight revenue is recognized based on the actual flight hours. Support services revenue is recognized based on additional amounts incurred.

Expenses are allocated based on the Company’s number of employees for certain functions provided by the Parent, including, but not limited to, general corporate expenses related to finance, legal, information technology, human resources, and employee benefits. Additionally, expenses related to administrative functions and overhead are incurred by Holdings on behalf of the Company. The amounts incurred for these services were $200 for the three months ended March 31, 2013, and $184 for the three months ended March 31, 2012, and are included in administrative and operational expenses.

These allocations may not reflect the expense the Company would have incurred as an independent business for the periods presented. Actual costs that may have been incurred if the Company had been operating on a stand-alone basis would depend on a number of factors, including the chosen organization structure, the functions outsourced or performed by employees, and strategic decisions made in areas such as information technology and infrastructure.

The Company is a guarantor on a term and line of credit First Lien Agreement and term Second Lien Credit Agreement held by the Parent. At March 31, 2013 and December 31, 2012 the Parent was in default under both the financial and non-financial covenants of these agreements. In addition, the Parent guarantees certain Company non-related party lease payment arrangements (Note 6).

Transactions with Stockholder Affiliates: The Company leases several aircraft from Stockholder Affiliates. The Company received free rent in January and February of 2012 (none during the three months ended March 31, 2013) on all its aircraft leases, including month-to-month leases, from a Stockholder Affiliate. The Company reflected the free rent as contributed capital in the periods received.

The Company determined that its guarantee of the Stockholder Affiliate’s debt associated with its leased assets constitutes a variable interest. Accordingly, the Stockholder Affiliate is deemed to be a variable interest entity (VIE). The Company however does not have the ability to direct the activities of the Stockholder Affiliate, and therefore is not the primary beneficiary of the Stockholder Affiliate. As the result, the Company did not include the Stockholder Affiliate’s results of operations and financial condition in the Company’ consolidated financial statements. Further, the Company is restricted on transferring any assets or providing any other subordinated financial support to its Stockholder Affiliates under the First and Second Lien Agreements (Note 3). The Company determined that its maximum exposure relative to the VIE is as follows:


	March 31, 2013		December 31, 2012
Guarantee of 1^st Source Bank debt on leased assets	$	10,100	$	10,100
Accounts receivable		—		234
Prepaid expenses and other assets		272		178
Refundable deposits		2,956		3,456

	$	13,328	$	13,968

As discussed in Notes 1, 2, 3, and 7, subsequent to December 31, 2012 this same Stockholder Affiliate was in default on installment payments to 1^st Source Bank of approximately $10,100, which the Company guarantees. In addition, it is uncertain if the Company’s accounts receivable, refundable deposits and prepaid and other assets at March 31, 2013 and December 31, 2012 will be collectible or realized.

F-11

All significant intercompany transactions between the Parent and the Company have been included in the consolidated financial statements and are considered to be effectively settled for cash at the time the transaction is recorded. The total net effect of the settlement of these intercompany transactions is reflected in the consolidated statements of cash flows as a financing activity and in the consolidated statements of stockholder’s equity.

As of March 31, 2013, parent investment in the Company consisted of the following:


	Parent			Stockholder Affiliates
Short-term:
Prepaid expenses and other assets	$	—		$	272
Refundable deposits		—			2,956
Accounts payable					(1,739	)
For the quarter ended:
Transfer of deposits		3,480			—
Transfer of short-term investments		1,056			—
Revenues from flight and support services		(422	)		—
Health and medical insurance and benefits		1,304			—
Workers’ compensation and Defense Base Act insurance premiums		301			—
Aircraft insurance premiums		1,754			—
Purchases and commissions		1,981			—
Administrative and operational expenses		2,238			—
Current income taxes payable, excluding UTB		1,927			—
Lease and rental payments		—			803

Total		13,619			803
Net amounts transferred		(30,040	)

Net transfer to Parent	$	(16,421	)

As of December 31, 2012, parent investment in the Company consisted of the following:


	Parent			Stockholder Affiliates
Short-term:
Accounts receivable	$	—		$	234
Prepaid expenses and other assets		—			178
Refundable deposits		—			3,456
Accounts payable		—			(663	)
For the three months ended March 31, 2012:
Revenues from flight and support services		(803	)		—
Health and medical insurance and benefits		1,470			—
Workers’ compensation and Defense Base Act insurance premiums		406			—
Aircraft insurance premiums		1,085			—
Purchases and commissions		672			—
Administrative and operational expenses		3,000			—
Current income taxes payable, excluding UTB		1,361			—
Lease and rental payments		—			10,061

Total		7,191			10,061
Net amounts transferred		(29,636	)		—

Net transfer to Parent	$	(22,445	)

Contributed capital for free rent periods				$	1,576

F-12

NOTE 10—SUBSEQUENT EVENTS

On March 18, 2013, the Parent and the Company entered into a Stock Purchase Agreement (the “SPA”) with Erickson Air-Crane Incorporated (“EAC”), a publicly-traded company, in which EAC agreed to acquire all of the common stock of the Company for a combination of cash, promissory notes and preferred shares of EAC. Pursuant to the SPA dated March 18, 2013, as amended on May 1, 2013 by the First Amendment to SPA, by and among the Company, EIA, EAC, and Mr. Delford M. Smith, EAC purchased from EIA 100% of the outstanding share capital of the Company for $250.0 million, consisting of $185,000 in cash, $17,500 in EAC’s subordinated notes, and 4,008,439 shares of the Company’s Mandatorily Convertible Cumulative Participating Preferred Stock, Series A valued at $47.5 million based on an agreed upon value of $11.85 per share. On May 2, 2013, the acquisition was completed.

In May 2013, the Company transferred its headquarter building and aircraft hangar (the “property”) to, and the associated mortgage was assumed by, the Parent. This transfer was not part of the pending sale of the Company to Erickson Aircrane Incorporated. In conjunction with its evaluation of future plans for the property, the management of the Parent performed an appraisal of the property.

The Company reviewed the appraisal and concluded that the property was impaired given that the fair market value of $7.2 million provided in the appraisal was lower than the carrying amount of the property of $15.4 million.

F-13

EX-99.3 6 d545977dex993.htm EX-99.3 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.

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).

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)

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)

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:

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

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

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.

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.

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.

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.

(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.

(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.

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)

(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.

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.

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)

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)

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)

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:

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

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

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

2.	PURCHASE PRICE AND FINANCING CONSIDERATIONS

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

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.

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 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 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.

(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).

(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.

(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.

Reconciliation of Non-GAAP Financial Measures


	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)

(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.