ERICKSON INC. - 10-K filing on 2016-03-10

Reportable Segments

12 Months Ended

Dec. 31, 2015

REPORTABLE SEGMENTS

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 revenues and gross profit. Gross profit for each segment includes net sales to third parties and related cost of sales directly attributable to the segment. The Company includes intercompany transfers between segments for management reporting purposes.

In March 2015, a new President and Chief Executive Officer was appointed to the Company by the Board of Directors. As a result, the new chief operating decision maker (“CDOM”) reorganized the reportable segments, effective January 1, 2015, based on a combination of factors consisting of the type of customer and type of services provided. Such reportable segments consist of the following:

Commercial Aviation Services segment revenues is derived from firefighting, timber harvesting, infrastructure construction, oil and gas services, and other commercial services.

Global Defense and Security segment revenues is derived primarily from contracts with the U.S. Department of Defense, international governments. other government organizations, and third parties that contract with such governmental agencies and organizations, who use its services for defense and security, and transportation and other government-related activities.

Manufacturing and MRO segment revenues is derived from manufacturing and maintenance, repair and overhaul services for certain aircraft, as well as aircraft sales.

Prior to January 1, 2015, the Company’s reportable segments were the Government segment, which consisted of firefighting, defense and security, and transportation and other services contracted with government customers, and the Commercial segment, which consisted of logging and construction services contracted with commercial customers. The reportable segment information presented in this note for 2014 and 2013 has been restated as applicable to conform with the 2015 presentation.

Information about the Company’s revenues and gross profit by its three reportable segments, as well as a reconciliation of the Company’s reportable segment gross profit to operating income (loss) is as follows (in thousands):



	Years Ended December 31,
	2015			2014		2013
Revenues:
Commercial Aviation Services	$	160,885		$	177,261	$	179,955
Global Defense and Security	105,158			154,057		125,558
Manufacturing and MRO	31,477			15,291		12,708
Total revenues	$	297,520		$	346,609	$	318,221
Gross profit:
Commercial Aviation Services	$	31,867		$	47,283	$	56,964
Global Defense and Security	8,123			29,483		33,198
Manufacturing and MRO	7,285			4,128		4,028
Total gross profit	47,275			80,894		94,190
Less: operating expenses	102,074			58,564		47,198
Operating income (loss)	$	(54,799	)	$	22,330	$	46,992

Concentration of Revenues

Customers that accounted for at least 10% of the Company’s net revenues were as follows:



		Years Ended December 31,
	Segment	2015		2014		2013
Customer D	Global Defense and Security	17.6	%	17.4	%	14.8	%
Customer E	Commercial Aviation Services	15.8		13.0		14.7
		33.4	%	30.4	%	29.5	%

Revenues by Geographic Location (in thousands):

Revenues are attributed to geographic area based on the country where the services were performed, with Manufacturing and MRO segment revenues attributed to a geographic area based on the country in which the customer is located and were as follows:



	Years Ended December 31,
	2015		2014		2013
Revenues:
North America	$	132,420	$	131,690	$	136,100
Middle East	57,468		77,760		67,315
Europe	34,863		26,924		24,096
Africa	28,390		26,459		20,598
Asia	17,154		26,036		25,410
South America	14,380		43,458		24,809
Australia	12,845		14,282		19,893
Total revenues	$	297,520	$	346,609	$	318,221

Assets by Reportable Segment (in thousands):



	As of December 31,
	2015		2014
Assets:
Commercial Aviation Services	$	41,857	$	56,456
Global Defense and Security	173,882		232,775
Manufacturing and MRO	25,623		16,207
Corporate⁽¹⁾	3,917		1,332
Aircraft held for sale	12,348		—
Fixed assets⁽²⁾	344,026		386,450
Total assets	$	601,653	$	693,220

(1)

Comprised primarily of cash, prepaid expenses and other current assets, and deferred tax assets. Amount presented for 2014 has been restated for the reclassification of debt issuance costs of $11.4 million from other noncurrent assets to credit facility and long-term debt and noncurrent deferred tax liability of $0.9 million from other liabilities to noncurrent deferred tax asset on the Company’s consolidated balance sheet.


(2)	Comprised of the aircraft fleet and fleet support assets including: aircraft, net; certain aircraft support parts, net; and property, plant, and equipment, net, which are primarily used to support the aircraft fleet, with minimal amounts allocated to the corporate function.

The Company deploys aircraft worldwide to provide aviation services around the globe, and at any given date, aircraft can be in transit from one location to another. Accordingly, due to the nature of our operations it is impractical to provide assets by geographic location.