Despite attracting several new significant contracts in recent months, Erickson continues to struggle in a challenging market while under a crippling debt load and while trading in a market that is pummeling its stock price to penny value. On August 15 the company reported a second-quarter operating loss of $29.3 million on operating revenue of just $50.8 million, a $17 million revenue decline from the same period a year ago.

In late July, the company filed a new Form 8-K with the U.S. Securities and Exchange Commission that suggests it has entered into new interim financing agreements to keep it afloat and agreed to pay substantial penalties—that could amount to more than $6 million—if its $140 million revolving credit facility is not refinanced soon. Erickson’s current lenders view its revolving credit simply as too high risk to continue to carry. Overall at the end of the first quarter, the company was pinned under $362 million in long-term debt, much of it related to its $250 million 2013 acquisition of then failing Evergreen Helicopters. Erickson has not been profitable since.

The Evergreen deal was sold to the market as a growth opportunity; Evergreen had substantial lift contracts with the U.S. Department of Defense in support of operations in Afghanistan and Iraq and also had an offshore energy business. However, shortly after the acquisition, those opportunities largely vaporized in the face of the U.S. troop draw down in the region and the collapse in the price of oil. At least one group of disaffected Erickson shareholders never bought the synergy and opportunities justification for the deal. They sued in 2013 for $250 million, claiming that the package had been orchestrated by Quinn Morgan, then chairman of Erickson and also the principal of its controlling shareholder, investment firm ZM Private Equity, as a way for the latter to recapture $62 million in prior debt it was owed by Evergreen. The plaintiffs alleged “ZM defendants violated their fiduciary duties by using Erickson for their own personal benefit to the detriment of Erickson’s minority stockholders.” The suit settled in June for $18.5 million. The settlement was widely seen as a necessary precursor to any sale of the company. Morgan is no longer chairman of Erickson, but he continues to sit on the company’s board of directors.  

Meanwhile, in late July, Erickson revealed that it had received two letters of listings qualifications from the Nasdaq stock exchange, warning the company that it was out of compliance for trading on the exchange—namely that its shares had to have a value of more than $1 for the last 30 consecutive days and the company had to have a market value of publicly traded shares of more than $5 million. If Erickson does not satisfy those requirements by January 23 next year, the Nasdaq could delist it.

Erickson reported a first-quarter loss of $26 million on a net revenue plunge of nearly $20 million in May, hired a new chief financial officer in June and engaged Imperial Capital the next day to “explore strategic alternatives for the company.” Earlier this summer, Erickson CEO Jeff Roberts told the Portland Oregonian, “We’re sick, but we’re not terminal.” But he did make it clear that financial deleveraging is essential to the company’s future.

Exactly how that happens remains to be seen. Despite the settlement with shareholders and enlisting Imperial’s help, a buyer has not emerged, and the 8-K filing hints that Erickson is finding long-term debt refinancing difficult. Roberts and his management team have cut operating losses and brought in new business, landing contracts in recent months from customers in Africa, Australia, Canada and India as well as from the U.S. Navy and NASA.

Erickson CEO Jeff Roberts said the latest quarterly results mean there is more pain in store at the company. “Our second-quarter results were unsatisfactory. We were unable to secure material business wins in a timely manner and we were unable to reduce our costs fast enough to align with the level of revenue generation. Our backlog and pipeline did not convert to revenue quickly enough, which resulted in heightened focus on managing cash and liquidity. In light of these circumstances, we are making further reductions in general and administrative and support costs, and deferring non-critical capital expenditures into future periods, which are aimed at improving our liquidity position. These measures will provide the time needed for our cost and revenue initiatives to mature. In addition, we are making good progress with our advisory firm to address our immediate liquidity needs, as well as options with respect to our longer-term capital structure and strategic alternatives,” he said.