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Based in Portland, Oregon, Erickson Air-Crane (proposed EAC) scheduled a $76 million IPO with a market capitalization of $150 million at a price range mid-point of $14 for Wednesday, April 4, 2012. EAC originally was scheduled for the week of February 6, 2012 and was postponed. Manager and Joint Managers are Stifel Nicolaus; Oppenheimer; Lazard Capital. See the full IPO Calendar here.

This EAC IPO report is based on a reading and analysis of the company's S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.

SUMMARY
EAC provides heavy lift helicopters and services for governments for fire fighting purposes. Revenue for 2011 was up 30% to $153 million from $118 million.

However, 2011 backlog is down 29% from 2010, and EAC is writing off $8.6 million in receivables, $2.8 million from Greece and $5.8 million from the US Forestry service.

CONCLUSION
In this global economy it's not good for a company to be totally dependent, either directly or indirectly, on government revenues.

With backlog down and with $8.6 million in expected or actual accounts receivable write-offs, EAC's outlook is not favorable. Therefore we would pass on the EAC IPO.

BUSINESS
EAC provides heavy lift helicopters for governments for fire fighting purposes.

BACKLOG - down 29% in 2012 versus 2011

2012 backlog: $213mm
EAC targeted long-term contract opportunities and had a total backlog of $212.8 million as of February 29, 2012, of which $128.0 million was from signed contracts and $84.8 million was from anticipated exercises of customer extension options (including $54.3 million from multi-year annual customer extension options).

2011 backlog: $299mm
EAC's total backlog of $298.9 million as of February 28, 2011, of which $176.4 million was from signed contracts and $122.5 million was from anticipated exercises of customer extension options (including $22.6 million from multi-year annual customer extension options)

NOT IN COVENANT COMPLIANCE
EAC was not in compliance with certain financial covenants under its Credit Agreement as of December 31, 2010 and March 31, 2011, and subsequent amendments to the Credit Agreement waived such non-compliance.

CUSTOMER CONCENTRATION
EAC depends on a small number of large customers for a significant portion of revenues.

In particular, for the years ended December 31, 2010 and 2011, 24.4% and 27.2% of revenues, respectively, were attributable to a contract with the U.S. Forest Service, 13.8% and 15.9% of revenues, respectively, were attributable to a contract with the Italian Ministry of Civil Protection, 11.0% and 8.4% of revenues, respectively, were attributable to services provided to the (Greece) Hellenic Fire Brigade, and 12.3% and 7.0% of revenues, respectively, were attributable to EAC's contract with Samling Global.

RECENT DEVELOPMENTS
Greece
The (Greece) Hellenic Fire Brigade didn't renew its contract for 2012 and there is $5.8 million in receivables that are very questionable. IPOdesktop believes those receivables will be written off.

U.S. Forest Service Claim
On February 1, 2012 the Civilian Board of Contract Appeals issued its final decision with respect to EAC's claim against the U.S. Forest Service for recovery of $2.8 million related to costs incurred in 2008 under contracts with the U.S. Forest Service that EAC was not able to mitigate as a result of a stop work order. The Civilian Board denied EAC claim in full. Accordingly, as of December 31, 2011, EAC reduced the receivable to zero.

SEASONAL
EAC's Aerial Services operations are seasonal and tend to peak in June through October and tend to be at a low point in January through April. As a result of this seasonality, EAC has historically generated higher revenue in the third quarter as compared to other quarters, and received the majority of its cash in the second half of the calendar year.

COMPETITORS
EAC competes with several other heavy-lift helicopter operators in one or more of its markets. EAC believes its fleet of 17 owned and operating Aircranes is the largest commercial fleet of helicopters in the world capable of carrying loads of up to 25,000 pounds.

Primary competitors in the commercial heavy-lift market include Columbia Helicopters and Siller Brothers.

USE OF PROCEEDS
EAC expects to net $65 million from its IPO, with the proceeds allocated to pay debt.

Source: IPO Preview: Erickson Air-Crane