| Reportable Segments |
Reportable Segments The Company reports segment information based on the “management” approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Company’s reportable segments. Prior to May 2, 2013, the Company’s reportable operating segments were Aerial services, which consisted of firefighting, timber harvesting, infrastructure construction, and crewing, and Manufacturing/MRO, which consisted of aftermarket support and maintenance, repair, and overhaul (“MRO”) services for the Aircrane and other aircraft and the remanufacture of Aircranes and related components. On May 2, 2013, the Company completed its acquisition of EHI. As a result of the acquisition, the Company established new reportable operating segments to assess performance by type of customer: Government and Commercial. The Government segment includes firefighting, defense and security, and transportation and other operating segments, as these lines of business are primarily contracted with government customers. The Commercial segment includes both logging and construction operating segments, as these lines of business are primarily contracted with commercial customers.
The Company deploys its fleet of aircraft to maximize fleet utilization. When making fleet resource allocation decisions, the Company’s chief operating decision maker (“CODM”) primarily considers aircraft type required, route economics, and the financial impact of the resource allocation decision on an individual customer basis. Because the fleet and related resources are used interchangeably between reportable operating segments, the Company does not generate for the CODM’s use an allocation of fleet and fleet support assets including aircraft, net, aircraft support parts, net, and property, plant, and equipment, net, across the reportable operating segments.
The Company’s CODM, management team and board of directors evaluate the performance of the Company’s operating segments based on net sales and gross profit. Gross profit for each segment includes net sales to third parties and related cost of sales directly attributable to the segment. Gross profit for each segment excludes costs shared by the segments but not allocated to the segments for the use of the CODM and excludes costs not directly attributable to the segments. Costs excluded from segment gross profit are primarily fixed or semi-fixed in nature and include salaries and benefits of pilots and field mechanics, depreciation and amortization costs related to aircraft, aircraft lease costs, aircraft insurance, and other similar type costs. The Company includes intercompany transfers between segments for management reporting purposes. Government. The Company’s Government revenue is derived primarily from contracts with various governments who use its services for firefighting, defense and security, and transportation and other government-related activities. Many of the Company’s contracts for Government services are multi-year and provide the majority of its current revenue backlog.
| | • | Firefighting. The Company generally charges a daily standby fee for the contract period with an additional rate for hours flown; some contracts include a minimum number of hours to be flown before the hourly rate is charged. The Company has both domestic and international contracts, which may be exclusive-use or call-when-needed in nature. Exclusive-use contracts denote that the Company is obligated to provide, and its customers are obligated to take and pay for, the use of the Company’s services. Call-when-needed contracts are contracts with pre-negotiated terms under which the Company may elect to provide services if requested. |
| | • | Defense and Security. The Company generally charges a daily standby fee for the contract period with an additional rate for hours flown; some contracts include a minimum number of hours to be flown before the hourly rate is charged. The Company has both domestic and international contracts, but the majority of its defense and security-related work is performed outside of the U.S. |
| | • | Transportation and Other Government-Related Activities. This line of business captures several types of government services including transportation of items for various government entities that are not defense or security related, crewing and CPH services for government customers, as well as other government-related services. Crewing services are typically for customers who have purchased an Aircrane but lack trained or certified operating personnel-related to the Aircrane. The Company offers pilots and field maintenance crews as part of its crewing services. For government customers who desire better predictability and stability in their aircraft operating costs, the Company offers CPH contracts in which it provides major components and rotable parts at a fixed cost per flight hour. |
Commercial. The Company’s Commercial revenue is derived primarily from timber harvesting, infrastructure construction, and manufacturing/ MRO.
| | • | Timber Harvesting. The Company generally operates on either an hourly rate structure or a per cubic meter of high grade timber delivered basis. The Company serves a variety of customers, primarily in North America. |
| | • | Infrastructure Construction. The Company’s infrastructure construction operations vary from short-term construction jobs (generally one to five days in duration) to longer-term jobs (several months or years in duration) within the oil and gas, construction, energy transmission, and energy generation industries. |
| | • | MRO, Component Part Sale, and Other. The Company has an ongoing revenue stream from customers who own or operate either Aircranes or the military version CH-54s, or other aircraft and require parts support for their helicopters. Further, the Company provides services to customers who own or operate Aircranes, CH-54s, or other aircraft and need their aircraft components repaired or overhauled by a certified facility. The Company is also pursuing aftermarket opportunities to manufacture and sell parts or provide maintenance, repair, or overhaul for other aircraft components. |
In the Company’s Central Point, Oregon facility it has the capability to remanufacture Aircranes on existing S-64 and CH-54 airframes for either resale or to induct into the Company’s fleet, and this remains a core business competency. Customers who identify a year-round or otherwise critical application for an Aircrane may find it advantageous to own an Aircrane rather than leasing the Company’s fleet services. The Company has sold ten Aircranes since 2002, including a sale-leaseback transaction executed in the second quarter of 2014, and subsequently re-purchased one of these Aircranes in 2012. While the Company continues to pursue Aircranes sales and will make sales strategically when opportunities arise, it does not rely on Aircrane sales as an essential part of its business planning.
The following table sets forth information about the Company’s operations by its two reportable segments. Amounts identified as ‘‘Corporate’’ are assets or expenses that are not directly attributable to a specific segment:
Revenue by Reportable Segment (in thousands):
| | | | | | | | | | | | |
| Year Ended
December 31, 2014 | | Year Ended
December 31, 2013 | | Year Ended
December 31, 2012 | Net revenues: | | | | | | Government | $ | 247,981 |
| | $ | 221,581 |
| | $ | 105,858 |
| Commercial | 98,628 |
| | 96,640 |
| | 74,966 |
| Total net revenues | $ | 346,609 |
| | $ | 318,221 |
| | $ | 180,824 |
|
Gross Profit by Reportable Segment (in thousands): | | | | | | | | | | | | |
| Year Ended
December 31, 2014 | | Year Ended
December 31, 2013 | | Year Ended
December 31, 2012 | Gross Profit: | | | | | | Government | $ | 161,809 |
| | $ | 146,149 |
| | $ | 64,636 |
| Commercial | 55,382 |
| | 53,541 |
| | 42,904 |
| Non-allocated costs(1) | (134,027 | ) | | (103,577 | ) | | (46,121 | ) | Total gross profit | $ | 83,164 |
| | $ | 96,113 |
| | $ | 61,419 |
|
| | (1) | Non-allocated costs include costs that are shared by both of the reporting segments but are not allocated to the operating segments for the use of the CODM and expenses that are not directly attributable to the operating segments. |
Assets by Reportable Segment (in thousands): | | | | | | | | |
| December 31, 2014 | | December 31, 2013 | Assets: | | | | Government | $ | 255,055 |
| | $ | 295,153 |
| Commercial | 17,957 |
| | 21,070 |
| Corporate(1) | 49,686 |
| | 51,756 |
| Fixed assets(2) | 382,823 |
| | 359,326 |
| Total assets | $ | 705,521 |
| | $ | 727,305 |
|
| | (1) | Corporate assets are comprised primarily of cash, prepaid and other current assets, and deferred tax assets |
| | (2) | Fixed assets are comprised of the aircraft fleet and fleet support assets including aircraft, net, aircraft support parts, net, and property, plant, and equipment, net. Property, plant, and equipment, net are primarily used to support the aircraft fleet, with minimal amounts allocated to the corporate function |
A reconciliation of the Company’s segment gross profit to operating income for the years ended December 31, 2014, 2013, and 2012 is as follows (in thousands): | | | | | | | | | | | | |
| Year Ended
December 31, 2014 | | Year Ended
December 31, 2013 | | Year Ended
December 31, 2012 | Reconciliation to operating income: | | | | | | Government gross profit | $ | 161,809 |
| | $ | 146,149 |
| | $ | 64,636 |
| Commercial gross profit | 55,382 |
| | 53,541 |
| | 42,904 |
| Non-allocated costs of revenue(1) | (134,027 | ) | | (103,577 | ) | | (46,121 | ) | Operating expenses, net(2) | (60,834 | ) | | (49,121 | ) | | (27,986 | ) | Total operating income | $ | 22,330 |
| | $ | 46,992 |
| | $ | 33,433 |
|
| | (1) | Non-allocated costs include costs that are shared by both of the reporting segments but are not allocated to the operating segments for the use of the CODM and expenses that are not directly attributable to the operating segments. |
| | (2) | Other corporate expenses include research and development, corporate sales and marketing expenses, stock-based compensation expense, certain tax expenses, various nonrecurring charges, and other separately managed general and administrative costs. |
| | | | | | | | | | | | |
| Year Ended
December 31, 2014 | | Year Ended
December 31, 2013 | | Year Ended
December 31, 2012 | Net revenues: | | | | | | North America | $ | 131,690 |
| | $ | 136,100 |
| | $ | 107,613 |
| Middle East | 77,760 |
| | 67,315 |
| | — |
| Europe | 26,924 |
| | 24,096 |
| | 37,362 |
| Asia | 26,036 |
| | 25,410 |
| | 11,262 |
| South America | 43,458 |
| | 24,809 |
| | 13,465 |
| Africa | 26,459 |
| | 20,598 |
| | — |
| Australia | 14,282 |
| | 19,893 |
| | 11,122 |
| Total net revenues | $ | 346,609 |
| | $ | 318,221 |
| | $ | 180,824 |
|
Revenues are attributed to geographic area based on the country where the services were performed; for the Manufacturing / MRO line of business within the Commercial reportable segment, revenues are attributed to geographic area based on the country in which the customer is located. |