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Erickson Air-Crane, Inc. (NASDAQ:EAC)

Q1 2013 Earnings Call

May 9, 2013 4:30 pm ET

Executives

Udo Rieder – President and Chief Executive Officer

Charles Ryan – Vice President and Chief Financial Officer

Analysts

Stephen E. Levenson – Stifel Nicolaus

Yair Reiner – Oppenheimer Securities

JB Groh – D.A. Davidson

Matthew Vittorioso – Barclays Capital, Inc.

Operator

Good day, ladies and gentlemen. Thank you for standing by and welcome to the Erickson Air-Crane Inc., First Quarter 2013 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode and the lines will be opened for your questions following the presentation. Please note that this conference is being recorded.

Now, I'd like to turn the conference over to [Allison Thompson] of ICR. Please go ahead, sir.

Unidentified Company Representative

Thank you, Tom. Good afternoon, everyone. Before we begin prepared remarks today, I'd just like to remind you of the company's Safe Harbor language. Information discussed during this conference call might be forward-looking in nature and is subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. To understand the factors that could cause results to differ materially from those in the forward-looking statements, please refer to our Annual Report on Form 10-K for the fiscal year ended December 31, 2012 and reports subsequently filed with the Securities and Exchange Commission.

In addition to financial results presented on a GAAP basis today, the company will also be discussing non-GAAP information that it believes is useful in evaluating the company's operating performance. Reconciliations of these non-GAAP measures to the closest GAAP equivalent can be found in the company's earnings press release that was released this afternoon and results also filed with the SEC under Form 8-K. A replay of this call can be accessed by dialing or to webcast on the company's website and replay instructions were included in the company's earnings press release this afternoon. Thank you for your attention to those items.

And I'd now like to turn the call over to Udo Rieder, President and Chief Executive Officer of Erickson Air-Crane. Udo

Udo Rieder

Okay. Thank you, Alison and thank you all for joining us today. We have a number of exciting developments to discuss, so let’s just begin with a few of the highlights. So first, we’re reporting a record first quarter performance as driven both by a very active fire season in Australia that I’m sure you’ve already heard about and then also the growth in our oil and gas business. Next on May 2nd, we announced the successful completion of the $400 million indenture with a rate of 8.25% and a new $100 million revolving credit facility.

And then finally and maybe most importantly here also on May 2nd, we closed our acquisition of Evergreen Helicopters. This is a truly transformative accretive acquisition, which doubles the size of the company, dramatically diversifies our business, gives us true global scale and it creates a wide range of new growth opportunities. So I can’t overstate how please we are to made such great progress in such a short period of time.

I’d like to talk about each of these topics, each of these three topics that is the quarter, the refinancing and the acquisition, and then I’ll turn it over to Chuck for deeper dive into the numbers and our outlook, as well as then take your questions.

So lets start with our first quarter performance. First quarter revenues were up 34% to $37 million and managed the strongest in our history very pleased about that. Australia had an extremely active fire season and this was at the main revenue driver in the quarter. We also so excellent growth in infrastructure construction driven primarily from our oil and gas initiative in South America. We’re pleased deploy at second Air-Crane into Peru to service a new customer Pacific Rubiales.

This is an exciting market and we’ve talked about over and over again, I have a lot opportunity and our success with the Air-Crane business in that market only reinforces our enthusiasm to apply this new multiplatform aircraft toward new opportunity that will follow the Evergreen acquisition.

Excluding acquisition costs we reported an adjusted first quarter net income of $0.1 million and an adjusted earning per share on $0.01 which is an excellent result for quarter which historically are lowest, and our first quarter adjusted EBITDA of $7 million a strong increase versus the prior years comparable level at $1.7 million. So we’re proud this operational performance and our success in reducing the seasonality of our business by continuing to sign these year-over-year year around profitable contracts.

I’m going to leave some to additional detail in the first quarter results for those (inaudible), but it’s sizing to say this is the great first quarter from operational perspective. We grew each of our major business, executed very well for our customers and we drew significant increases in profitability. I’m very proud of our organization for this performance especially our flight crews to continue to work tirelessly in the demanding and challenging operating conditions, to get the job done reliably and most importantly, safely. Our confidence in the ongoing strength of our Aircrane business led us to induct a 20th Aircrane into our fleet in early April, which will deploy to give us additional bandwidth for our flight testing program that I have told you about before, is this composite main rotor blade as well as other revenue pursuits.

Against this strong operational backdrop, we work hard to push our plant acquisitions forward, while both of these events occurred actually after the close of the quarter, we have now closed both our debt financings as well as the Evergreen acquisition.

So adding the Evergreen business to Erickson essentially doubles the size of our company. In 2012, Evergreen recorded, Evergreen did record a $201 million revenue number and it generated $51.2 million of EBITDA. So I should give us then a pro forma combined company total of $382 million of revenue and $107.5 million of EBITDA. I will also note here that Evergreen achieved this revenue total utilizing only about half of the fleet that we are acquiring. So additionally, there is a great opportunity used with additional capacity for future growth.

So Chuck will go through the financials, specifics of the transaction, but on a high level we paid $250 million including $185 million of cash and also 4 million preferred shares convertible one to one to common stock. This price enables the deal to be immediately accretive to our results. Beyond what will be a dramatic financial impact from this acquisition, it also provides us a number of powerful high level fundamental advantages.

First, a greatly diversified our business on several dimensions, by end market, by customer, geography, mission with respect to and with respect to the aircraft in the fleet. Importantly this acquisition gives us significantly access to the U.S. government business through a diversified portfolio of contract vehicles including those were subcontracting at times to larger plane contractors. Government related revenues are about 95% of Evergreen’s total mix.

So I would like to address some of the obvious questions about this portion of our revenues. First regarding sequestration, it’s important to understand that the majority of the work which is for logistic supports for oversea deployments it’s funded through the overseas contingency operation vehicle and is not subject to sequestration. Second approximately 65% of Evergreens total revenues are related to work that we do in Afghanistan.

We have good visibility on this work for the reminder of 2013 and we have growing expectation that the work remain brisk in 2014. I know that our business is not directly related to troop levels this include support for special operations which are likely to remain longer than most deployment and support for reconstruction work which also should persist for some years.

Further we believe that there is a strong global demand outside of Afghanistan for Evergreen capability across the range of other defense, logistics, commercial and humanitarian type of missions. Beyond adding the department of defense as a major customer in other positive aspect to the diversification inherent is that the Evergreen fleet of 63 aircraft consist of a range of platforms including 60 asset and a variety of helicopters that are both light as well as medium, this is important actually for several reasons, first, it enables us to conduct a wide range of missions as both cargo as well as personnel transport opening up a wide range of business opportunities for us. And then second, we believe that the experience we gain on this, to a variety of platforms will provide us growth opportunities in our MRO business.

So, over time we expect to utilize our extensive MRO capability not only to service our own fleet, but also to service, to use that expertise leveraged capabilities to third-party customers.

Geographically, this acquisition gives us great access to new regions, new customers and new end markets. I’ll also note that after the acquisition we’ll see huge opportunities in some key markets where we have little business today including China and India, some today’s most dynamic and fastest going economies. We’ll be working on initiatives to target opportunities in those markets as time goes on.

In planning our integration, we’ve clearly identified $10 million of annual synergies and we expect to realize some of those immediately and then others gradually over time here over the next eight quarters. We’ll be looking for incremental ways to drive profitability, increase total synergies over time and then also to create a very efficient organization.

And as you know, we’re still working on our acquisition of Air Amazonia in Brazil which we still expect to close during the second quarter. Well, I won’t reiterate all of the details about Air Amazonia and what that deal is today, as a reminder, we expected to bring us base solely on the contract that we give with HRT as part of the deal, annual revenues of $50 million at an EBITDA margin of approximately 25%.

We expect to serve HRT using only half of the fleet similar to Evergreen that requiring leaving us with the other half again for growth. We’ve announced that the deal is contemplated at a purchase price between $65 million and $75 million.

The cash portion of the Evergreen acquisition and the pending Air Amazonia transaction are funded by a recent $400 million 8.25% debt. We are pleased to have received the support from our new bondholders during this deal, and the ongoing support that we have from our shareholders, and we’re excited to be in a position to put this capital to work right away. We are moving very quickly and haven’t realized our new vision for Erickson as a global multi-platform aviation company.

We’ve made incredible strides along that path for the past few months and there is more to come at the same time, our core business continues to demonstrate great performance and we’ve an ongoing organic growth opportunity there. I think the quarters in the year ahead are going to continue to be very exciting time for us, and we are planning to demonstrate that we are just getting started.

So now I would like to turn it over to Chuck to talk about some of the detailed financial information, Chuck?

Charles Ryan

Thanks, Udo. Thanks everyone for joining us today. First, I’d like to walk through the first quarter results. Revenues for the quarter were up 33.8% rising to $36.9 million, again driven by a 93% increase in firefighting, a 61% increase in infrastructure construction, and a 6.6% increase in December partially offset by a 35% decline [recurring] which is driven by our transition and by contract with (inaudible) and a 31% decline in manufacturing in MRO driven by seven (inaudible) activity in Italy.

Gross margins for the quarter was 25.1% up 10.5 percentage points versus prior year. SG&A expenses for the quarter were $9.6 million, but they included $2.3 million of acquisition related expenses. So excluding these expenses we saw margin improvements of 73 basis points again driven by scale on the greater revenues and assets slightly by the increasing expenses related to becoming a public company. Excluding acquisition costs of $2.3 million, we reported our adjusted operating income of $1.9 million in the quarter compared to our year-ago first quarter operating loss of $1.7 million.

I’ll note that for our Air-Crane business, the first quarter is typically seasonal and seasonal work revenues and historically we reported a loss on operations while the fire season and a steady growth in oil and gas has helped to make the difference.

Adjusted EBITDA in the first quarter, which again is defined by new credit facility was $7 million and the same adjusted EBITDA determination our year-ago first quarter adjusted EBITDA was $1.7 million. Should you understand this change for the rest of the year ahead (inaudible) for the remaining 2012 quarters under the same adjusted EBITDA determination. Second quarter adjusted EBITDA was $10 million, third quarter of 2012 was $38.4 million and the fourth quarter of 2012 was $7.1 million.

To get our 2012full-year adjusted EBITDA from comparison purpose was $57.2 million total. Again seasonality of the change in determination of adjusted EBITDA is primarily add back of amortization of component overall costs in net income. So that in the first quarter of 2013 excluding acquisition expenses our adjusted net income fully diluted share was $0.1, including acquisition expense we reported a loss per share of $0.13. This is a strong performance given the seasonality in our business and we’re pleased with our results and the contributions of the entire team.

So now turning to our strategic financing that Udo had mentioned about the Evergreen transaction and getting into a little bit more detail. So on May 2, we closed on $400 million second priority senior secured notes facility that’s due in 2020 that carries interest of 8.25%, on May 2, also we closed on $100 million revolving line of credits, these lines are intended to be used for working capital and general corporate needs.

In addition to replacing our prior indebtedness, the notes of the primary funding vehicle for the cash portion of both the Evergreen acquisition and as contemplated the Air Amazonia deal, both of these deals are expected to be accretive, has been effectively associated cost of financing and the impact of the 4 million new shares issued this part in the purchase price for Evergreen.

So let’s talk about guidance, I’d like to provide you both full year pro forma guidance for revenues and adjusted EBITDA and fueled the year for the combined business that reflects only eight months contributions from Evergreen in both cases the EBITDA numbers I’ll provide exclude any impact from acquisition related expenses, including those that I mentioned in the first quarter and exclude any impact especially on purchase accounting or non-recurring restructuring. The guidance also excludes any contribution from the pending Air Amazonia transaction. Guidance does however include a preliminary estimate of the synergies, we expect to realize as the year progresses.

So for comparison purposes fiscal year 2012 on a same pro forma basis is $382 million in revenue and $107.5 million in adjusted EBITDA for the combined business, so for the full year of pro forma 2013, we expect revenues of $385 million to $395 million and adjusted EBITDA of $108 million to $116 million. For the year which includes only 8 months of Evergreen, we expect revenues of $325 million to $335 million and adjusted EBITDA of $93 million to $101 million. We are not planning to provide any specific quarterly guidance today. We’ll comment though that the Evergreen business is not seasonal. We normally have the smooth progression across all quarters.

And with regard to a contribution to standalone Erickson to the guidance we just provided clearly we had a strong first quarter which certainly bodes well for the year. So our outlook for gas continues to be good and our expectation of modest growth for the full-year has essentially not changed. Again, as a final comment I’ll note that the guidance provided does yet include any accretion of our planned or still spending Air Amazonia acquisition. Again once that closes, we’ll point to updated guidance to impact.

And so that concludes our prepared remarks and I thank you all of participating. And operator, I think we can entertain questions at this point.

Question-and-Answer Session

Operator

Thank you, sir. (Operator Instructions) We’ll take our first question from Stephen Levenson with Stifel Nicolaus.

Stephen E. Levenson – Stifel Nicolaus

Thanks. Good afternoon everybody. Can you hear me okay?

Udo Rieder

Yes.

Stephen E. Levenson – Stifel Nicolaus

Sorry thanks. Nice to see everything going the way you planned. Could you tell us just like in constructive balance sheet, are those 4 million preferred shares being put into shareholders equity at the $11.85 value originally discussed when the news came out?

Udo Rieder

Yes.

Stephen E. Levenson – Stifel Nicolaus

Okay, that’s good. Thank you. And can you tell us what the interest rate is on the subordinated notes issued as part of the purchase price.

Charles Ryan

Can you repeat that last part please?

Stephen E. Levenson – Stifel Nicolaus

The interest on the subordinated notes.

Charles Ryan

Yes. 6% annual interest.

Stephen E. Levenson – Stifel Nicolaus

Okay. It’s not a big deal compared to the restaurants, thanks. And can you give us a little bit more detail on the contract relating to Afghanistan. I understand it’s with a government contractor, is the government ultimately responsible for payment, or is the contractor responsible, contractor?

Udo Rieder

Yeah, that’s right, Steve. The contractor in this case is a floor, and so we are a subcontractor two floor. They have many other contracts in Afghanistan, so for the air portion that we do for them is one of those and yes, we do get paid directly from floor.

Stephen E. Levenson – Stifel Nicolaus

Okay, thanks. And is that a contract that gives the defined for this year pretty much and are there options years or was there a renegotiation required?

Udo Rieder

Yeah, this goes through June and similar to other government, all other governments by that contracts that we have seen is there typically annual when they get renewed. But there is no further renegotiation required. Although soon everything is going well, there will automatically be renewed.

Stephen E. Levenson – Stifel Nicolaus

Okay, thank you. And last obviously it was a great quarter for fire fighting in Australia unfortunately for the Australians. The revenue above the base announced for the contract, was that about $6 million or a little bit more, a little bit less?

Udo Rieder

We flew close to $500 Steve, so that’s about $6 million, that’s correct. Hey and just got a few original questions, I want to answer in a different way. The 1,185 on the preferred shares, obviously that’s what was issued at the time. We negotiated the transaction, but actually when we do fair value and purchase accounting, the fair value at the time of close, which is May 2, what would be reflecting on the balance sheet, is not clear for that point.

Stephen E. Levenson – Stifel Nicolaus

Okay. And then, do the purchase accounting adjustments create whatever goodwill or maybe not be?

Unidentified Company Representative

That’s right. Yeah, none of this includes purchase accounting to this point. That’s a bit determined.

Stephen E. Levenson – Stifel Nicolaus

Got it. Thank you very much.

Unidentified Company Representative

Okay.

Unidentified Company Representative

Thanks, Steve.

Operator

We’ll take our next question from Yair Reiner with Oppenheimer.

Yair Reiner – Oppenheimer Securities

Great. Thank you. So, you mentioned that you have 20 aircraft in the fleet today. I thought that actually in the year you had 18 and then one that was kind of undergoing overhaul. So I guess where is the extra aircraft coming from?

Udo Rieder

Yeah, so clarify, we today have 20 Aircranes in the fleet. One of those is undergoing overhaul down in Central Point as we speak and then month is completed it will be back in the active fleet. But the total fleet includes 20 Aircranes and then you’ll occasionally see numbers like 22 and that’s because there are two other smaller support aircraft that we have in our fleet, making a total of 22.

Yair Reiner – Oppenheimer Securities

I’m sorry. I’m still confused because exiting last year you had 18 Aircranes and then one undergoing overhaul. So, but still seems like you somehow have added another Aircrane.

Udo Rieder

No, exactly we have. We have. In April we completed aircraft 163 [current] number 163 and it joined the fleet at that point. So that just happened recently.

Yair Reiner – Oppenheimer Securities

Got it, okay. And then in terms of cash flow, I guess it was – saw some pressure this quarter as result of finishing that aircraft. Looking at what you need to do the aircraft if you’re taking off from Evergreen. You mentioned that those need a little bit of work. How should we think about free cash flow for the year and to what extent is that possibility you’re going to tap the revolver this year?

Udo Rieder

Yeah, so you are right. So there is some things that we are going to have to do with Evergreen that make a lot of sense for the business. Some of them are going to do with getting some of the Sydney’s aircraft into service, so make them revenue producing. Ore, start with ore, we turn in for the less ore – one in the three. Basically think about the combined businesses together on a pro forma basis, we look to generate about $40 million of free cash flow. That’s on a sustainable basis.

Now, ’13, we’re going to have some oneoffs. We’re going to have some oneoffs and some of this non-recurring, capital, we need is part of the transaction as far as what we finance. We’re wanting to have some inventory maybe want to put into the system and things like that. That may have some work, initial working capital, timing issues. So yes, we will be into the revolver, we’re actually into the revolver today. But as soon as we flesh through, catch up a little bit on the timing of the working capital, because we’ve been paying some dangerous that we promised to pay as part of the close.

And obviously we see that we’ll catch up to that over time. So 2013 with some of those oneoff, I think we’re going to be negative fee cash flow, kind of a range of maybe $10 million to $15 million that ballpark, but again on a sustained basis to business together to about $40 million free cash flow.

Yair Reiner – Oppenheimer Securities

Got it, then one more in that front. In terms of some of the leases that you are taking over, is there any obligation you have to – any liabilities in terms of fixing up some of that fleet before they can be put back to the less ores besides that?

Udo Rieder

Yeah we have, and again its (inaudible) I mean some of important shape have components that kind we moved and used in other service areas and things like that. So yes there are ongoing negotiations with the less ores, but most of its been negotiated and we got certain return of service type timing that we have to work that here to and that's basically always on a size wise, again I would say we are looking at maybe something around $25 million to address the entire fleet and make it a fleet to basically it's – adequate to the less ores, what we can negotiate the less ores and or putting things in the service that generate revenue.

Yair Reiner – Oppenheimer Securities

Got it. And then one more if I may on the Evergreen deal, there was add on at the end, where I think you’re putting another $13 million to work to buy another nine aircraft. I guess, you guys give us a little bit color on what was behind that decision and then what are your plans for those nine aircraft that you want to buy rather than lease.

Udo Rieder

Yeah so we did, we bought those nine aircraft to roughly $14 million, it was a lease actually the parent company, Evergreen is parent company (inaudible) ventures the aircraft doesn’t meet demand, so we sold gives us more control, to get out of the leases going forward and so then just being kind of a win-win for both companies. And so that’s going to eliminate about $3 million in lease cost annually going forward and that you don’t (inaudible) return on capital there.

Yair Reiner – Oppenheimer Securities

Great. Thank you very much.

Charles Ryan

Okay.

Udo Rieder

Okay. Thanks, Yair.

Operator

We’ll go next to JB Groh with D.A. Davidson.

JB Groh – D.A. Davidson

Good afternoon guys.

Charles Ryan

Hi, JB.

Udo Rieder

Hi, JB.

JB Groh – D.A. Davidson

Chuck, could you do me a favor, I don’t know – I didn’t see it in the release, but those growth rate numbers on a difference segments, if you could repeat those that’d be helpful. Is that going to be in the queue or is that – are you planning on not kind of disclosing those in the release anymore?

Charles Ryan

In segment information?

JB Groh – D.A. Davidson

Yeah, the firefighting timber infrastructure.

Charles Ryan

Yeah it’s in the queue. So Q is going to be released today.

JB Groh – D.A. Davidson

Okay.

Charles Ryan

But I can give it to you a quick again…

JB Groh – D.A. Davidson

Sure that would be great.

Charles Ryan

Yes. So what I said is, revenues were up roughly 34.4% on the quarter. Firefighting was up 93% quarter-over-quarter, construction was up 61%, timber was up 7%, and then crewing was down 35%, and then the kind of reconstruction on the contract we have in San Diego. We’ll convert it from a crewing contract to a fire contract in the future. And then, again, manufacturing MRO was down 31% and it’s just really a timing thing. Just really a timing thing. Last year in 2012, they were just a very active as far as flying their four claims that early on that we sold and this quarter, it was pretty quite.

JB Groh – D.A. Davidson

Got it. And how do you plan on the – where does the Evergreen stuff fall into its – is it going to be its own reported segment, or is it going to into the somehow cram into these buckets.

Charles Ryan

Well, we’re going to have a new way of reporting externally. We are still starting through that but more than likely it’s going to kind of a probably a 370 kind of thing where we’re looking every part of the DoD business which obviously mostly brand. Then we’ll probably have a segment called non-DoD, which is other government which will be obviously our fire and things like that. And then probably have a commercial segment which will include our commercial business and we may or may not separate MRO probably in this issue (inaudible) as part of commercial. So, I think that’s probably how we’re going to report for the future, but we’re still narrowing that down.

JB Groh – D.A. Davidson

And then maybe as you flipped EHI, I wondered for a little bit of time, has there been any pleasant surprises in terms of what you found or things that maybe were a little surprising on the negative front, where have you been surprise so far?

Unidentified Company Representative

Yeah, no, nothing on the negative front, I mean, we did a very extensive diligence and so, we went into this realizing and understanding everything. On the, I’ll say the sort of positive front here as we got closure and closure the, and then as we close our deal the overall enthusiasm by virtually all of the stakeholders was apparent and so we’re very pleased about that. I’d say some of the revenue opportunities with the combined company are getting even more exciting and so wouldn’t call it a surprise, but it’s definitely positive.

JB Groh – D.A. Davidson

Got you, okay. That’s it from me. Thanks, guys.

Unidentified Company Representative

Thanks, JB.

Operator

And we have a question from Matt Vittorioso with Barclays.

Matthew Vittorioso – Barclays Capital, Inc.

Yeah, good afternoon. Just wondering if you could talk about the opportunity this sort of new companies trade, but if you have half of both the fleets of EHI and eventually Air Amazonia being ideal. I mean are there major costs associated with having those claims sit there for a while and maybe just talk about the opportunity to get the other half of those fleets deployed and sort of quick manner. And if the opportunity is not there, are these claims that can be easily sold, the airplanes to sort of right size the fleet as you assess the opportunity?

Unidentified Company Representative

Yeah, it’s a good question. And so in our diligence, as Chuck mentioned earlier, we went through aircraft-by-aircraft understand what was needed in terms of investment to make all of the aircraft fleet, of the entire fleet mission ready. And we also have in that a little bit of inventory that’s required, so that if we deploy the aircraft, we can keep it operationally ready at the performance levels that our customers expect. As I am built into our financial model and our forecast and so we have again clear line of side of that.

From a prior standpoint, number one priority would be to take advantage of revenue opportunities for this fleet and generate revenue, generate profit. And just so you know this sort of general thinking behind that a fleet of aircraft and they a supplier of these kinds of operations that is able to offer the comprehensive and diversified fleet that we now have. That is large heavily list medium, cargo as well as personnel transport unlike aircraft is in demand. In fact there is not a customer that we have today that doesn’t already have requirements and already have in their fleet base essentially all three of these aircraft sizes. I mean whether it’s the U.S. force service or whether it’s Australia or South America or the government that all require this more comprehensive fleet and they typically desire fewer suppliers and operators to provide those because there is a lot of maintenance that’s associated with maintaining all of these operators. So that’s the top priority. We’re already talking with customers for example in South America about this new offering that we have and expectations are that we’ll take advantage of those beginning as soon as possible.

And then for the aircraft that we don’t see an immediate near-term opportunity for the answer is yes, we will either return them to the less source or we would sell them and obviously bring in the cash associated with that.

Matthew Vittorioso – Barclays Capital, Inc.

Great, that’s very helpful. And then just to clarify, I kind of missed an earlier question, where you’re saying that the 30% of your pro forma revenue that is Afghanistan, DoD Afghanistan. Is that all under that floor contract?

Unidentified Company Representative

No, not all it’s a diversified group of contracts, it’s all DoD.

Unidentified Company Representative

That’s right.

Matthew Vittorioso – Barclays Capital, Inc.

That there a couple maybe of major contract vehicles through which I know that you are the subcontractor (inaudible) is this through a lock cap or there are a couple other larger contract vehicles that we should be looking at that kind of track the progress and outlook for.

Unidentified Company Representative

Yeah, the floor is the biggest but also you’re exactly right, lock cap is one of those, its lock cap 4 as well as Transcom and then there is Mega as well and that’s an idea in Q-type contract.

Matthew Vittorioso – Barclays Capital, Inc.

Right. And so do have a relationship with four would you work with others sort of log, cat, four primes like (inaudible) I’m blinking on the other one. But do you have other relationships like that as well?

Unidentified Company Representative

Yeah in fact Tancore is the primary one that’s exactly right that we have in. And yeah, we have relationships and in fact, we’ve just recently met with them as well and then again floor and the same thing there, met with him personally as well.

Matthew Vittorioso – Barclays Capital, Inc.

Okay, great. That’s helpful, thank you.

Unidentified Company Representative

Okay.

Operator

And we have a follow-up question from JB Groh with D.A. Davidson.

JB Groh – D.A. Davidson & Co.

Yeah, Chuck. You mentioned you had $2.3 million in additional G&A from the transaction that lease 100,000 in terms of that just in some other bucket is that in selling and marketing or where is that rest of it show up?

Unidentified Company Representative

You mean the acquisition costs?

JB Groh - D.A. Davidson & Co.

Yes, is it all in G&A.

Unidentified Company Representative

Yes.

JB Groh – D.A. Davidson & Co.

Okay, thank you.

Unidentified Company Representative

Yeah.

Operator

And we have no further questions at this time. I would like to turn the call back over to management for any closing remarks.

Udo Rieder

Okay thank you. Thank you, operator. Thank you all for joining us and special welcome here also to our new bondholders who are also on the call. We are again very delighted with the way everything has turned down. We are as I started to mention earlier especially a delighted about so positive reinforcement that we are getting from virtually all of our stakeholders. And I don’t know how many times in that position like this really have the full support of virtually every employee not only at Evergreen in this case, but also Erickson, met with all of our employees immediately after the deal closed and received a very positive reception from the employees, but then going on into our other stack holders.

The customers are all very pleased and we had lots of interaction with them. The suppliers are very pleased and again a lots of interaction and then our new bond holders and then the continued support of the shareholders as I mentioned earlier. So it’s really very positive and we look forward to sharing much more good news going forward and we thank you again for joining us and your interest today.

Operator

And ladies and gentlemen, this does conclude today’s conference. We appreciate your participation.

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