{"id":168,"date":"2011-01-05T18:42:45","date_gmt":"2011-01-05T18:42:45","guid":{"rendered":"http:\/\/www.department99.com\/bobamter\/?page_id=168"},"modified":"2014-08-25T20:40:55","modified_gmt":"2014-08-25T20:40:55","slug":"case-study-erickson-air-crane-co","status":"publish","type":"page","link":"https:\/\/bobamter.com\/?page_id=168","title":{"rendered":"Case Study: Erickson Air-Crane Co."},"content":{"rendered":"<h2><em>Erickson Air-Crane Co., <\/em><\/h2>\n<h2><em>Central Point, Oregon<\/em><\/h2>\n<p><em><br \/>\n<\/em><\/p>\n<p><strong>Situation:<\/strong><\/p>\n<p>An LvA Enterprises and JP Morgan Partners leveraged buy-out, Erickson Air-Crane was an $85 million in sales helicopter company with four product lines:<\/p>\n<p style=\"padding-left: 30px;\">A helicopter lift and service company functioning in the logging, fire fighting and construction industries.<\/p>\n<p style=\"padding-left: 30px;\">A manufacturer of helicopter components and attachments.<\/p>\n<p style=\"padding-left: 30px;\">A builder of Sikorsky Skycrane helicopters from hulks into fully functioning helicopters for use internally and for sale to external users.<\/p>\n<p style=\"padding-left: 30px;\">A helicopter and fixed wing aircraft repair and service facility.<\/p>\n<p style=\"text-align: left;\"><em>Retained to evaluate the company and determine how to improve it.<\/em><\/p>\n<p><strong>Problems:<\/strong><\/p>\n<p>Due to sizable economic declines in its markets, Erickson\u2019s sales had declined 15% in 1997 and were expected to drop 40% in 1998.<\/p>\n<p style=\"padding-left: 30px; text-align: left;\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 &#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;12 months&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;.<\/p>\n<p style=\"padding-left: 30px; text-align: left;\"><span style=\"text-decoration: underline;\">Financial Results (000$) \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 1997 Actual\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 1998 Estimate<\/span><\/p>\n<p>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Net Sales\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 $84,935\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 $51,057<\/p>\n<p style=\"padding-left: 60px;\">Gross Profit\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 18,007\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0 6,627<\/p>\n<p style=\"padding-left: 60px;\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 % of Sales\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0 21.2%\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0 13.0%<\/p>\n<p style=\"padding-left: 60px;\">Operating Profit (Loss)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0 4,899\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0 (6,809)<\/p>\n<p style=\"padding-left: 60px;\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 % of Sales\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0 5.8%\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0 (13.3%)<\/p>\n<p style=\"padding-left: 60px;\">EBITDA\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0 \u00a0\u00a0 12,194\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 nil<\/p>\n<p style=\"padding-left: 60px;\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 % of Sales\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0 14.4%\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 &#8212;<\/p>\n<p style=\"padding-left: 60px;\">Net Loss\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0 (6,718)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 (19,317)<\/p>\n<p style=\"padding-left: 60px;\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 % of Sales\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0 (7.9%)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0 (37.8%)<\/p>\n<p style=\"padding-left: 60px;\">Inventories\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 48,670\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 49,379<\/p>\n<p style=\"padding-left: 60px;\">\u00a0\u00a0\u00a0\u00a0 % of Sales (Goal: 16% &#8211; 19%)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0 57.3%\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0 96.7%<\/p>\n<p style=\"padding-left: 60px;\">Accounts Payable\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0 2,398\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0 2,314<\/p>\n<p style=\"padding-left: 60px;\">\u00a0\u00a0\u00a0\u00a0 % of Sales (Goal: not less than 7%)\u00a0 \u00a0 2.8%\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0 4.5%<\/p>\n<p>To some extent Erickson suffered from bad luck because virtually every market collapsed simultaneously. However, a major cause of the financial distress was management\u2019s failure to recognize the declines in its markets and to make the appropriate operational changes.<\/p>\n<p>Logging was Erickson\u2019s largest product line accounting for almost 90% of sales in 1997.\u00a0 It was also the best managed and most effective operation.\u00a0 Sales had dropped over 70% since 1995.<\/p>\n<p>Fire fighting was the second largest business in which sales had increased almost 1,000% since 1995.\u00a0 But the fire fighting business is cyclical accounting for 2% to 32% of sales.<\/p>\n<p><strong>Operational causes of Erickson\u2019s distress:<\/strong><\/p>\n<p style=\"padding-left: 30px;\">\u00bb The performance of six top managers.<\/p>\n<p style=\"padding-left: 30px;\">\u00bb Hostile working relationships among several key managers resulting in an absence of teamwork and cross-functional communication. For many employees Erickson is a penal colony.<\/p>\n<p style=\"padding-left: 30px;\">\u00bb No strategic focus.\u00a0 The company is going in too many directions at once. Need 6, well thought out, priorities.<\/p>\n<p style=\"padding-left: 30px;\">\u00bb Many costly mistakes resulted from a rush to judgment without proper due diligence. Critically in need of a marketing plan.<\/p>\n<p style=\"padding-left: 30px;\">\u00bb No fiscal discipline and control resulting in a high cost operation. No cost system.\u00a0 A bureaucratic, slow and costly work order system.<\/p>\n<p style=\"padding-left: 30px;\">\u00bb No sense of urgency.\u00a0 The attitude is business as usual, no changes are needed.<\/p>\n<p><strong>Conclusions &amp; Recommendations:<\/strong><\/p>\n<p style=\"padding-left: 30px;\">Hire a Chief Executive Officer with helicopter service business experience.\u00a0 Replace other top management with internal personnel.\u00a0 Do not replace with external candidates as Erickson is a uniquely complicated and technical business in which helicopter experience is important.<\/p>\n<p style=\"padding-left: 30px;\">To some extent Erickson\u2019s recovery is hampered by the absence of a critical mass of cost to effect an easy reduction in operating costs.\u00a0 Also hampering its recovery are external market factors which are out of its control.<\/p>\n<p style=\"padding-left: 30px;\">Develop a focused strategic plan.<\/p>\n<p style=\"padding-left: 30px;\">Install systems and fiscal discipline.<\/p>\n<p style=\"padding-left: 30px;\">Harvest cash and reduce overhead while patiently waiting for the logging markets to improve.<\/p>\n<p style=\"padding-left: 30px;\">Erickson has good owners.\u00a0 They are operationally knowledgeable and constructive.\u00a0 They are quite skilled in negotiating with the banks and bondholders to obtain the cash flow and time needed to turnaround the company.<\/p>\n<a href=\"http:\/\/twitter.com\/share\" class=\"twitter-share-button\" data-url=\"https:\/\/bobamter.com\/?page_id=168\" data-text=\"Case Study: Erickson Air-Crane Co.\" data-count=\"horizontal\">Tweet<\/a>","protected":false},"excerpt":{"rendered":"<p>Erickson Air-Crane Co., Central Point, Oregon Situation: An LvA Enterprises and JP Morgan Partners leveraged buy-out, Erickson Air-Crane was an $85 million in sales helicopter company with four product lines: A helicopter lift and service company functioning in the logging, fire fighting and construction industries. A manufacturer of helicopter components and attachments. A builder of [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"open","ping_status":"open","template":"page_full.php","meta":{"footnotes":""},"class_list":["post-168","page","type-page","status-publish","hentry"],"_links":{"self":[{"href":"https:\/\/bobamter.com\/index.php?rest_route=\/wp\/v2\/pages\/168","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bobamter.com\/index.php?rest_route=\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/bobamter.com\/index.php?rest_route=\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/bobamter.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/bobamter.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=168"}],"version-history":[{"count":9,"href":"https:\/\/bobamter.com\/index.php?rest_route=\/wp\/v2\/pages\/168\/revisions"}],"predecessor-version":[{"id":1414,"href":"https:\/\/bobamter.com\/index.php?rest_route=\/wp\/v2\/pages\/168\/revisions\/1414"}],"wp:attachment":[{"href":"https:\/\/bobamter.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=168"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}