<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition period from________________ to_______________
Commission File Number 33-56532
----------------
EVERGREEN INTERNATIONAL AVIATION, INC.
------------------------------------------------
(Exact name of registrant as specified in its charter)
Oregon 93-0729079
- -------------------------- --------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3850 Three Mile Lane
McMinnville, Oregon 97128
-----------------------------------
(Address of principal executive offices)
(503) 472-9361
----------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
The number of shares outstanding of Registrant's Common Stock at October 18,
1996 was 5,580,110.
1
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TABLE OF CONTENTS
PAGE(S)
-------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - At the last day of
February 1996 and the last day of August 1996 3-4
Consolidated Statements of Earnings - For the three
months and the six months ended August 31, 1995 and 5
1996
Consolidated Statements of Cash Flows - For the six
months ended August 31, 1995 and 1996 6-7
Notes to Consolidated Financial Statements 8-12
Item 2. Management's Discussion and Analysis Results of
Operations and of Financial Condition 13-22
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 3. Defaults upon Senior Securities
Item 6. Exhibits and Reports on Form 8-K 23-24
2
<PAGE>
PART I-FINANCIAL INFORMATION
ITEM 1-FINANCIAL STATEMENTS
EVERGREEN INTERNATIONAL AVIATION, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
FEBRUARY 29, AUGUST 31,
ASSETS 1996 1996
------ ------------ ----------
(Unaudited)
CURRENT ASSETS:
Cash $ 7,559 $ 3,880
Accounts receivable, less allowance for
doubtful accounts of $3,754 and $1,766
Trade 35,687 32,544
Other 3,982 5,998
Inventories 3,306 4,857
Prepaid expenses and other assets
(Prepaid rents to an affiliated company of
$350 at August 31, 1996) 2,268 5,020
Receivables from affiliated companies 6,186 9,285
Deferred income tax asset 3,173 3,173
-------- --------
Total current assets 62,161 64,757
-------- --------
PROPERTY AND EQUIPMENT:
Flight equipment 661,738 660,303
Other property and equipment 94,232 95,488
-------- --------
755,970 755,791
Less accumulated depreciation 243,799 254,659
-------- --------
512,171 501,132
-------- --------
OTHER ASSETS (Notes receivable from
affiliated companies of $1,036 and $1,275;
Investment in an affiliated company of
$2,960 and $4,983) 43,155 35,936
-------- --------
TOTAL ASSETS $617,487 $601,825
-------- --------
-------- --------
See accompanying notes to consolidated financial statements.
3
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EVERGREEN INTERNATIONAL AVIATION, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
(In thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY FEBRUARY 29, AUGUST 31,
1996 1996
------------ -----------
(Unaudited)
CURRENT LIABILITIES:
Short-term notes payable (Short-term
note payable to an affiliated company
of $500 at August 31, 1996) $1,826 $1,471
Accounts payable (Accounts payable to
affiliated companies of $15,213, and
$14,117) 48,789 44,103
Accrued liabilities 19,188 17,531
Accrued interest (Interest due to affiliated
companies of $23 at February 29, 1996) 54,864 67,064
Income tax payable 2,217 945
Current portion of long-term debt (Notes
payable to affiliated companies of
$542 and $59) 4,840 12,402
Long-term debt in default (Note 2) 231,390 174,225
Senior notes in default 125,000 125,000
-------- --------
Total current liabilities 488,114 442,741
LONG-TERM DEBT, less current portion 6,664 36,622
Deferred rentals payable to affiliated
companies and deferred income 4,217 6,155
DEFERRED INCOME TAXES 35,862 32,733
-------- --------
Total liabilities 534,857 518,251
-------- --------
COMMITMENTS AND CONTINGENCIES (Note 2)
STOCKHOLDERS' EQUITY:
Common stock, no par value; 6,000,000
shares authorized; 5,580,110 shares
issued and outstanding 21,004 21,004
Retained earnings 61,626 62,570
-------- --------
Total stockholders' equity 82,630 83,574
-------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $617,487 $601,825
-------- --------
-------- --------
See accompanying notes to consolidated financial statements.
4
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EVERGREEN INTERNATIONAL AVIATION, INC.
AND SUBSIDIARIES
Consolidated Statement of Income
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
AUGUST 31, AUGUST 31,
------------------------ -------------------------
1995 1996 1995 1996
--------- -------- ---------- ---------
<S> <C> <C> <C> <C>
OPERATING REVENUE:
Flight $ 57,855 $ 65,181 $ 117,284 $120,782
Aircraft leasing 6,311 2,933 13,649 7,156
Sales of aircraft, parts and other property and equipment 4,414 10,984 43,659 14,356
Support services (Revenues from affiliated companies of
$44, $22, $73 and $46) 14,162 14,899 30,360 28,681
--------- -------- ---------- ---------
OPERATING REVENUE 82,742 93,997 204,952 170,975
--------- -------- ---------- ---------
OPERATING EXPENSES:
Flight costs 9,461 9,648 19,060 16,984
Fuel 9,182 11,544 19,750 20,400
Maintenance (Expenses from an affiliated company of $263
and $645 during the three months and six months ended
August 31, 1996) 16,564 12,376 32,773 25,117
Aircraft and equipment (Rentals to affiliated companies of
$5,709, $4,567, $11,429 and $9,444) 15,332 13,344 29,532 26,349
Cost of sales and write-downs of aircraft, parts and other
property and equipment 2,927 8,925 24,018 11,177
Selling, general and administrative 10,201 9,114 19,695 19,004
Other (Expenses to affiliated companies of $243, $263, $486
and $506) 15,779 13,074 33,794 25,419
--------- -------- ---------- ---------
OPERATING EXPENSES 79,446 78,025 178,622 144,450
--------- -------- ---------- ---------
INCOME FROM OPERATIONS 3,296 15,972 26,330 26,525
NON OPERATING (INCOME) EXPENSES:
Interest expense (Interest income from an affiliate of $221,
$215, $383 and $400) 15,086 11,782 27,645 23,765
Foreign currency exchange loss (gain) (874) 17 355 117
Sale of route authority and other income (71,690) (36) (71,690) (36)
--------- -------- ---------- ---------
INCOME BEFORE TAXES 60,774 4,209 70,020 2,679
INCOME TAX EXPENSE 23,025 1,583 26,523 987
--------- -------- ---------- ---------
NET INCOME $ 37,749 $ 2,626 $ 43,497 $ 1,692
--------- -------- ---------- ---------
--------- -------- ---------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
5
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EVERGREEN INTERNATIONAL AVIATION, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
SIX MONTHS ENDED
AUGUST 31,
----------------------
1995 1996
--------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 43,497 $ 1,692
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 14,615 14,424
Amortization 21,392 14,362
Increase (decrease) in deferred income taxes 20,665 (3,129)
Provision for loss on accounts receivable - 500
Gain on sale of property, equipment and
route authority (87,141) (4,718)
Gain on forgiveness of debt (616) -
Deferred rentals payable to affiliates and
deferred income - 1,938
Changes in current assets and liabilities:
Accounts receivable 2,952 667
Inventories, prepaid expenses, and
receivables from affiliated companies (2,250) (6,489)
Accounts payable and accrued liabilities 7,030 8,387
-------- --------
Net cash provided by operating
activities 20,144 27,634
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, equipment and overhauls (22,538) (20,195)
Proceeds from disposition of property, equipment
and route authority 107,197 5,553
Notes receivable, deposits and other assets (3,319) 3,647
-------- --------
Net cash provided by (used in)
investing activities 81,340 (10,995)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from operating loans and short-term debt 186,488 151,784
Payments on long-term debt (51,188) (24,272)
Payments on operating loans and short-term debt (216,755) (147,830)
-------- --------
Net cash used in financing activities (81,455) (20,318)
-------- --------
Net increase (decrease) in cash 20,029 (3,679)
CASH, AT BEGINNING OF PERIOD 584 7,559
-------- --------
CASH, AT END OF PERIOD $ 20,613 $ 3,880
-------- --------
-------- --------
See accompanying notes to consolidated financial statements.
6
<PAGE>
EVERGREEN INTERNATIONAL AVIATION, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows, (Continued)
(Unaudited)
(In thousands)
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Six Months Ended August 31, 1996:
A Guarantor Subsidiary capitalized $318 of accrued and unpaid interest into
long-term debt.
A Guarantor Subsidiary purchased $4,130 in engine and airframe overhauls
and rotable parts under trade financing agreements which are included
in accounts payable at August 31, 1996.
A Guarantor Subsidiary sold assets in exchange for $1,850 in trade credit
against vendor payables.
A Guarantor Subsidiary sold an aircraft for $6,500 in exchange for credit
against accounts payable of $5,764 and a note receivable of $736.
Six Months Ended August 31, 1995:
A Guarantor Subsidiary sold $1,700 in assets in exchange for $400 in
payable offsets and $1,300 in future credit against component repairs
and overhauls.
A Guarantor Subsidiary sold assets in exchange for $2,262 in accounts
payable offsets.
A Guarantor Subsidiary purchased $2,565 in overhauls and assets under
vendor financing arrangements which are included in accounts payable
at August 31, 1995.
A Guarantor Subsidiary received $616 in debt forgiveness in connection with
a long-term debt refinancing arrangement.
See accompanying notes to consolidated financial statements.
7
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(1) CONSOLIDATED INTERIM FINANCIAL STATEMENTS
The consolidated interim financial statements included in this report
have been prepared by the Company and are unaudited. In the opinion of the
Company, all adjustments necessary for a fair presentation are reflected in
the interim financial statements. Such adjustments are of a normal and
recurring nature. This financial data should be read in conjunction with
the audited financial statements and notes thereto included in the
Company's Form 10-K for the fiscal year ended February 29, 1996. Results
for the interim period presented are not necessarily indicative of results
for the entire year.
The Company's 13 1/2% senior notes due 1999 to 2002 (the "Senior
Notes") are jointly and severally guaranteed on a senior subordinated basis
by Evergreen International Airlines, Inc., Evergreen Helicopters, Inc. and
Evergreen Air Center, Inc. (the "Guarantor Subsidiaries"), each of which is
a wholly owned-subsidiary of the Company.
(2) LONG-TERM DEBT AND SENIOR NOTES
In February 1994, the Company withheld payments to certain creditors
of the Guarantor Subsidiaries and holders of the Company's Senior Notes and
commenced negotiations to restructure these agreements. Through August 31,
1996, the Company has restructured its obligations with B747 creditors by
reducing current amounts due through the extension of maturity dates and/or
deferral or reduction of periodic payments. The Company is continuing
negotiations with the holders of the Senior Notes and other lenders in an
effort to complete the formal restructuring of such affected obligations.
8
<PAGE>
As a result of the failure to meet debt service payment requirements
on its Senior Notes, the Company continues to be in violation of covenants
and non-payment provisions of its Senior Notes, and is in violation of
cross default and financial and other covenant provisions of certain other
financing agreements, primarily of the Guarantor Subsidiaries. These
violations would permit effected creditors to, among other things,
accelerate the due date of their debt. In April 1996, a holder of the
Senior Notes filed suit against the Company for payment of principal and
interest. In August 1996, the trustee under the indenture governing the
Senior Notes intervened on behalf of all holders of the Senior Notes.
Partial summary judgment has been granted to the plaintiffs with respect to
a portion of the claims by and on behalf of all holders of the Senior Notes
(see "Part II. Other Information: Item 1. Legal Proceedings"). No other
creditors have taken action to seek remedies under their respective
agreements.
The aggregate principal outstanding of long-term debt and Senior Notes
in default and classified as a current liability because of such defaults
in the accompanying consolidated balance sheets at August 31, 1996 was
$299,225. At August 31, 1996, accrued and unpaid interest related to the
Senior Notes was $62,633. The aggregate outstanding principal amount of
Guarantor Subsidiaries' debt in default classified as a current liability
in their condensed and combined consolidated balance sheet at August 31,
1996 was $134,340 (see Note 4).
(3) ASSETS PURCHASED FROM AN AFFILIATE
During the first six months of fiscal 1997, a Guarantor Subsidiary
purchased aircraft related assets from an affiliate. The difference
between the price paid and the carrying value at the affiliate of the
assets purchased was $748 and is recorded as a reduction to retained
earnings at August 31, 1996.
9
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(4) FINANCIAL INFORMATION OF GUARANTOR SUBSIDIARIES
The Senior Notes are guaranteed by Evergreen International Airlines,
Inc., Evergreen Helicopters, Inc. and Evergreen Air Center, Inc. (the
Guarantor Subsidiaries), each of which is a wholly-owned subsidiary of the
Company.
The following presents comparative combined and condensed financial
information for the Guarantor Subsidiaries at February 29, 1996 and August
31, 1996 and for the three and six month periods ended August 31, 1995 and
1996:
FEBRUARY 29, AUGUST 31,
1996 1996
------------ ------------
Current assets $46,294 $39,605
Property and equipment 475,420 465,493
Other assets 35,415 28,219
-------- --------
Total assets $557,129 $533,317
-------- --------
-------- --------
Current liabilities:
Notes payable $1,826 $2,571
Accounts payable and accrued liabilities 64,056 59,593
Current portion of long-term debt 2,970 8,815
Long-term debt in default 192,673 134,340
-------- --------
Total current liabilities 261,525 205,319
-------- --------
Noncurrent liabilities 45,612 76,331
Intercompany payables 215,018 217,553
-------- --------
Total noncurrent liabilities 260,630 293,884
-------- --------
Stockholder's equity 34,974 34,114
-------- --------
Total liabilities and
stockholder's equity $557,129 $533,317
-------- --------
-------- --------
10
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(4) FINANCIAL INFORMATION OF GUARANTOR SUBSIDIARIES (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED AUGUST 31, ENDED AUGUST 31,
---------------- -----------------
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating revenues:
Flight $57,855 $65,181 $117,284 $120,782
Aircraft leasing 6,311 2,933 13,649 7,156
Sales of aircraft, parts and other
property and equipment 4,217 10,995 43,456 13,972
Support services 5,924 5,758 13,858 9,743
-------- -------- -------- --------
Total operating revenues 74,307 84,867 188,247 151,653
-------- -------- -------- --------
Operating expenses:
Flight costs 9,461 9,648 19,060 16,984
Fuel 8,996 11,162 19,347 19,618
Maintenance 16,293 12,102 32,263 24,490
Aircraft and equipment 15,332 13,344 29,532 26,349
Cost of sales and write-downs of aircraft,
parts and other property and equipment 2,841 8,805 23,906 10,920
Selling, general and administrative 7,762 6,388 15,181 13,317
Other 12,051 9,209 26,745 16,681
-------- -------- -------- --------
Total operating expenses 72,736 70,658 166,034 128,359
-------- -------- -------- --------
Income from operations 1,571 14,209 22,213 23,294
Nonoperating (income) expenses:
Interest expense 12,994 11,653 26,592 23,518
Sale of route authority and other (71,258) (19) (70,645) 81
-------- -------- -------- --------
Income (loss) before taxes 59,835 2,575 66,266 (305)
Income tax expense (benefit) 22,241 979 24,669 (115)
-------- -------- -------- --------
Net income (loss) $37,594 $1,596 $41,597 ($190)
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
11
<PAGE>
(4) FINANCIAL INFORMATION OF GUARANTOR SUBSIDIARIES (CONTINUED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
AUGUST 31,
-----------------------
1995 1996
-------- --------
<S> <C> <C>
Net cash provided by operating activities $15,481 $32,847
-------- --------
Cash flows from investing activities:
Purchases of property, equipment and overhauls (22,644) (18,998)
Proceeds from disposition of property, equipment and
route authority 106,994 5,169
Other (1,805) 3,685
-------- --------
Net cash provided by (used in) investing activities 82,545 (10,144)
-------- --------
Cash flows from financing activities:
Proceeds from operating loans and debt 8,496 1,800
Payments on operating loans and debt (86,606) (30,618)
-------- --------
Net cash used in financing activities (78,110) (28,818)
-------- --------
Net increase (decrease) in cash 19,916 (6,115)
Cash, at beginning of period (33) 6,616
-------- --------
Cash, at end of period $19,883 $501
-------- --------
-------- --------
</TABLE>
12
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Management's Discussion and Analysis of Results of Operations and Financial
Condition, presented below, relates to the operations of the Company as
reflected in its consolidated financial statements. Emphasis in this discussion
is placed upon contract flight operations, and sales of aircraft, components and
parts, as such activities generate the major portion of the Company's total
consolidated revenues. Support services primarily includes ground handling and
maintenance services provided by the Company's other operating subsidiaries.
Certain statements in this Form 10-Q contain "forward looking" information
(as defined in Section 27A of the Securities Act of 1933, as amended) that
involves risks and uncertainties, including, but not limited to, the Company's
ability to restructure certain of its long-term debt, including the Senior
Notes, markets for air freight services, operating losses, competition from
other carriers, dependence upon material contracts, volatility of aircraft
values, dependence on subsidiaries, compliance with Federal Aviation
Administration ("FAA") requirements, risks of international business, the
effects of economic conditions, and other risks detailed in the Company's
Securities and Exchange Commission filings. Any forward looking statements
should be considered in light of these factors.
GENERAL
The Company's largest operating subsidiary, Evergreen International
Airlines, Inc. ("EIA"), is a contract carrier that primarily charges customers
based on a block hour basis rather than a per seat or per pound basis as do
scheduled passenger carriers or overnight express carriers. A "block hour" is
defined as the elapsed time computed from the moment the aircraft moves to the
time it comes to rest at its destination. Fluctuations in flight revenues are
not necessarily indicative of a true change in operating activities because of
shifts in the mix between "all-in" services and wet leases or ACMI services from
year-to-year. For all-in charters, EIA is responsible for the full range of
operating expenses, including fuel, and receives a correspondingly higher price
per block hour flown. For wet leases and contract charters, EIA typically
provides only aircraft, crew, maintenance and insurance ("ACMI"). The customer
is responsible for all other operating expenses, such as fuel, ground handling
and crew accommodations. As a result, wet lease and other ACMI contract
charters typically have lower block hour revenue rates. For this reason, it is
important to analyze the type of block hours flown in connection with changes in
actual revenues earned. EIA, as a matter of policy, includes fuel cost
adjustment mechanisms in certain all-in charters, including U.S. military
charters, thus minimizing the risk of fuel price volatility to EIA. In
addition, the Company also provides common carriage services and "dry" leases
certain of its aircraft.
13
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COMPARISON OF THE THREE MONTHS ENDED AUGUST 31, 1996 TO THE THREE MONTHS ENDED
AUGUST 31, 1995
OPERATING REVENUES. Total operating revenue during the three months ended
August 31, 1996 increased by $11.3 million, or 13.6%, when compared to the three
month fiscal period ended August 31, 1995.
Flight revenues increased by $7.3 million when comparing the three months
ended August 31, 1996 with the corresponding period of the prior year. A
majority of the improvement is attributable to a $4.4 million increase in flight
revenues by EHI which re-entered the heavy-lift logging market during fiscal
1997 and experienced a record season with respect to aerial firefighting
activity. EIA flight revenue also increased from the prior year, primarily due
to United States Air Force Air Mobility Command ("AMC") contract activity and
new contract activity in South America and Australasia. Partially offsetting
these increases was the discontinuation of United States-China common carriage
and B747 passenger service activities in August 1995. Fiscal 1997 second
quarter flight revenue was also negatively impacted by the removal from service
of three GATX/Airlog converted B747-100F aircraft in January 1996 in accordance
with an FAA airworthiness directive (see "Liquidity and Capital Resources").
Block hour totals during the second quarter of fiscal 1997 increased by 102
hours when compared to block hour totals recorded during the same period of
fiscal 1996. The block hour increase is due primarily to B747 AMC activity and
start-up services in South America and Australasia. The following table
details block hour totals by aircraft type for the fiscal quarters ended August
31, 1995 and 1996:
---------------------------------------------------------
BLOCK HOURS: THREE MONTHS ENDED AUGUST 31,
-----------------------------
AIRCRAFT TYPE 1995 1996 NET CHANGE
---------------------------------------------------------
B747 5,579 6,492 913
DC8 613 0 (613)
DC9 2,062 1,864 (198)
---------------------------------------------------------
Totals 8,254 8,356 102
---------------------------------------------------------
The composition of flight revenue during the second quarter of fiscal 1997,
when compared to the corresponding prior year period, indicates an increase in
ACMI block hours relative to all-in hours. The primary reason for the decline
in all-in hours is the discontinuance of United States-China common carriage
activity resulting from the sale of EIA's U.S.-China all cargo operating
authority in August 1995. All-in and ACMI B747 activity increased by 423 hours
and 490 hours, respectively, when comparing second quarter fiscal 1997 block
hour totals with those recorded during the second quarter of fiscal 1996. In
aggregate, the Company operated 5,093 all-in hours (60.9%) and 3,263 ACMI hours
(39.1%) during the three months ended August 31, 1996, compared to 5,481 all-in
hours (66.4%) and 2,773 ACMI hours (33.6%) operated during the same period of
the prior fiscal year.
Aircraft leasing revenue declined by $3.4 million during the second quarter
of fiscal 1997, primarily due to a greater number of B747 aircraft on dry lease
during the fiscal 1996 period. The Company employed four B747 aircraft under
dry leases during the second quarter of fiscal 1996, compared to two B747
aircraft during the second quarter of fiscal 1997. One B747 remains on dry
lease and is scheduled to be returned to the Company in December 1996. Aircraft
leasing revenues include maintenance reserves for scheduled engine and airframe
overhauls and inspections.
Revenues from the sale of aircraft, parts and other property and equipment
increased by $6.6 million when comparing the three months ended August 31, 1996
and 1995. The increase is primarily attributable to the sale of a DC8-62
aircraft in August 1996.
14
<PAGE>
Support services, which is comprised non-flight activities such as
Evergreen Aviation Ground Logistics Enterprises, Inc. ("EAGLE") and Evergreen
Air Center, Inc. ("EAC') ground handling and maintenance service revenue,
increased by $.7 million during the three months ended August 31, 1996 when
compared to the three months ended August 31, 1995, primarily due to increased
EAGLE United States Postal Service ("USPS") and domestic station activities. In
August 1996, EAGLE began support of the daytime USPS Hub and Spoke Program
("HASP") in conjunction with the its existing T-Net contract at Indianapolis,
Indiana. With the expansion of the T-Net program, recent base openings and the
start-up of new contracts, the Company anticipates growth in EAGLE revenues
during the second six months of fiscal 1997.
OPERATING EXPENSES. Categories of operating expense include flight costs,
fuel, maintenance, aircraft and equipment, cost of sales of aircraft, parts and
other property and equipment, selling, general and administrative, and other.
Operating expenses, exclusive of cost of sales of aircraft, parts and other
property and equipment, declined by $7.4 million, or 9.7%. Total operating
expenses, inclusive of costs of sales of aircraft, parts and other property and
equipment, declined by $1.4 million when comparing the second quarter of fiscal
1997 to the second quarter of fiscal 1996. Flight costs remained relatively
constant, with reductions in EIA flight operating expenses offset by increased
EHI flight operating costs for recently re-established heli-logging and
aerial firefighting activities during the three months ended August 31, 1996
when compared to the prior year's second quarter expenses. Fuel costs
increased by $2.4 million during the second quarter of fiscal 1997 when
compared to the same period of the prior year primarily due to an overall
increase in average fuel prices and heli-logging and aerial firefighting
operations by EHI. Maintenance costs declined by $4.2 million during the
second quarter of fiscal 1997 when compared to the corresponding period of
the previous year, due primarily to reduced overhaul amortization expense and
line maintenance expense resulting from the removal from service of the three
GATX/Airlog converted B747-100F aircraft in January 1996. Aircraft and
equipment costs, which represent primarily aircraft rentals and depreciation,
declined by $2.0 million during the three months ended August 31, 1996 when
compared to the corresponding period of fiscal 1996 primarily due to
renegotiated lease arrangements with affiliated companies for rotor-wing,
B747 and DC9 aircraft. Cost of sales of aircraft, parts and other property
and equipment increased by $6.0 million during the second quarter of fiscal
1997 when compared to fiscal 1996 second quarter totals, primarily due to the
sale of a DC8-62 aircraft in August 1996. Selling, general and
administrative costs declined by $1.1 million, while other costs declined by
$2.7 million during the second quarter of fiscal year 1997 when compared to
the corresponding period of fiscal 1996, primarily due to a decline in sales
and non-domestic station related overhead due to the sale of the China route
authority in August 1995.
NON-OPERATING (INCOME) EXPENSES. During the second quarter of fiscal 1997,
non-operating expenses totaled $11.8 million compared to non-operating income of
$57.5 million recognized during the corresponding period of fiscal 1996. The
primary reason for the change was the sale of EIA's China route authority for
$67.5 million and $3.5 million in income related to the final settlement of an
administrative claim against bankrupt Pan American Airways which both occurred
during the fiscal 1996 quarter. Despite increased penalty interest on the
Senior Notes of approximately $.7 million, interest expense declined by
approximately $3.3 million due to a reduction in interest bearing liabilities,
primarily long-term debt, during fiscal 1996 and 1997.
15
<PAGE>
NET INCOME. During the second quarter ended August 31, 1996, net income
totaled $2.6 million, compared to $37.7 million in net income generated during
the second quarter of fiscal 1996. The primary reason for the decline in income
when comparing the two fiscal periods, is the sale of EIA's China route
authority in August 1995 which generated $67.5 million in before tax income.
Operating performance improved despite the removal from service of three
GATX/Airlog converted B747 aircraft in January 1996, primarily due to
improved aircraft utilization by EIA and heli-logging and aerial firefighting
activity by EHI during the second quarter of fiscal 1997.
16
<PAGE>
COMPARISON OF THE SIX MONTHS ENDED AUGUST 31, 1996 TO THE SIX MONTHS ENDED
AUGUST 31, 1995
OPERATING REVENUES. Total operating revenue during the six months ended
August 31, 1996 declined by $34.0 million, or 16.6%, when compared to the six
months ended August 31, 1995.
Flight revenues increased by $3.5 million when compared to the
corresponding period of the prior year. The increase is primarily attributed to
heli-logging and aerial firefighting activities by EHI during the first six
months of fiscal 1997. In aggregate, EHI flight revenue increased by
approximately $5.5 million compared to the first six months of fiscal 1996.
These increases were partially offset by depressed EIA flight revenue due to the
removal from service of three GATX/Airlog converted B747-100F aircraft in
January 1996 (see "Liquidity and Capital Resources").
During the first six months of fiscal 1997, block hours operated by EIA
decreased by 1,588 hours when compared to block hour totals recorded during the
first six months of the prior year. The block hour decline is due primarily to
the removal from service of one DC8 aircraft and three GATX/Airlog converted
B747 aircraft in fiscal 1996. The following table details block hour totals
by aircraft type for the six months ended August 31, 1995 and 1996:
----------------------------------------------------------
BLOCK HOURS: SIX MONTHS ENDED AUGUST 31,
---------------------------
AIRCRAFT TYPE 1995 1996 NET CHANGE
----------------------------------------------------------
B747 12,722 12,273 (449)
DC8 927 0 (927)
DC9 3,934 3,722 (212)
----------------------------------------------------------
Totals 17,583 15,995 (1,588)
----------------------------------------------------------
The composition of flight revenue during the six months ended August 31,
1996, when compared to the corresponding prior year period, indicates an
increase in ACMI block hours relative to all-in hours. The primary reason for
the decline in all-in hours is the discontinuance of United States-China common
carriage activity resulting from the sale of EIA's U.S.-China all cargo
operating authority in August 1995 which employed B747 and DC8 aircraft. All-in
DC8 and B747 activity declined by 402 hours and 927 hours, respectively, when
comparing six month fiscal 1997 block hour totals with those recorded during the
corresponding period of the prior year. In aggregate, the Company operated
9,614 all-in hours (60.1%) and 6,381 ACMI hours (39.9%) during the six months
ended August 31, 1996, compared to 11,125 all-in hours (63.3%) and 6,458 ACMI
hours (36.7%) operated during the same period of fiscal 1996.
Aircraft leasing revenue declined by $6.5 million during the first six
months of fiscal 1997 when compared to the corresponding period of the prior
year, primarily due to the return of two B747 aircraft from lease in June 1995
and March 1996. During the first six months of fiscal 1997 the Company employed
two B747 aircraft under dry leases compared to four B747 aircraft during the
first six months of fiscal 1996. The Company anticipates the return to service
of the remaining B747 aircraft under lease in February 1997. Aircraft leasing
revenues include maintenance reserves for scheduled engine and airframe
overhauls and inspections.
Revenues from the sale of aircraft, parts and other property and equipment
declined by $29.3 million during the first six months of fiscal 1997 compared to
the corresponding period of fiscal 1996. The decline is primarily attributable
to the sale of two DC8 aircraft in March 1995 for a total of $38.0 million.
Sales of aircraft during the six months ended August 31, 1996 includes the sale
of a DC8-62 aircraft and certain rotor-wing aircraft.
17
<PAGE>
Support services revenue during the six months ended August 31, 1996
declined by approximately $1.7 million when compared to the prior year
corresponding period, primarily due to a large third party aircraft modification
contract performed by EAC during fiscal 1996.
OPERATING EXPENSES. Operating expenses, exclusive of cost of sales of
aircraft, parts and other property and equipment declined by $21.3 million, or
13.8%. Total operating expenses, inclusive of cost of sales of aircraft, parts
and other property and equipment declined by $34.2 million when comparing the
six months ended August 31, 1996 to the corresponding period of the prior year.
Flight costs declined by $2.1 million during the six months ended August 31,
1996 when compared to prior year six month totals, primarily due to a
reduction in flight and cabin crew costs and passenger catering resulting
from the removal from service of three GATX/Airlog converted B747 aircraft in
January 1996 and the conversion of the Company's remaining passenger aircraft
to freighter configuration in August 1995. Fuel costs increased by $.7
million when comparing the first six months of fiscal 1997 and 1996,
primarily due to an overall increase in average fuel prices and EHI
heli-logging and aerial firefighting activity during the second quarter of
fiscal 1997. Maintenance costs declined by $7.7 million during the six
months ended August 31, 1996 when compared to the corresponding period of the
previous year, due primarily to reduced overhaul amortization expense and
line maintenance expense resulting from the removal from service of three
GATX/Airlog converted B747 aircraft in January 1996. Aircraft and equipment
costs, which represent primarily aircraft rentals and depreciation, declined
by $3.2 million during the six months ended August 31, 1996 when compared to
the corresponding period of fiscal 1996 primarily due to renegotiated lease
arrangements with affiliated companies for GATX/Airlog converted B747 and DC9
aircraft. Cost of sales of aircraft, parts and other property and equipment
declined by $12.8 million during the six month fiscal 1997 period when
compared to fiscal 1996 six month totals, primarily reflecting the book value
of two DC8 aircraft sold in March 1995. Selling, general and administrative
costs remained relatively constant while other costs declined by $8.4 million
during the first six months of fiscal year 1997 when compared to the
corresponding period of fiscal 1996, primarily due to a decline in third
party maintenance services at EAC and a reduction in aircraft and cargo
ground handling resulting from the decline in all-in flight activity.
NON-OPERATING (INCOME) EXPENSES. During the first six months of fiscal
1997, non-operating expenses totaled $23.8 million compared to non-operating
income of $43.7 million recognized during the corresponding period of fiscal
1996. This change is primarily attributable to the sale of EIA's China route
authority in August 1995 which generated $67.5 million in before-tax income.
Despite an increase in penalty interest of approximately $1.6 million,
interest expense declined by $3.9 million due to a reduction in interest
bearing liabilities, primarily long-term debt, during fiscal 1996 and 1997.
Fiscal 1996 results also include $3.5 million in income related to the final
settlement of an administrative claim against bankrupt Pan American Airways.
NET INCOME. During the six months ended August 31, 1996, net income
totaled $1.7 million, compared to $43.5 million in net income generated during
the first six months of fiscal 1996. The primary reason for the decline in net
income when comparing the two fiscal periods, is the sale of EIA's China route
authority in August 1995 and the sale of two DC8 aircraft in March 1995.
Together, these transactions generated before-tax income during fiscal 1996
of approximately $85.5 million. Also contributing to the decline was the
removal from service of three GATX/Airlog converted B747-100F aircraft in
January 1996 which adversely impacted earnings. These revenue declines were
partially offset by reductions in amortization and line maintenance expense,
and a reduction in interest expense during the first six months of fiscal
1997.
18
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal internal sources of liquidity are cash flow from
operating activities and proceeds from the sales of assets. During the six
months ended August 31, 1996 cash flow generated from operating activities
totaled $27.6 million. The Company continued its efforts to partially satisfy
obligations through barter and trade arrangements and negotiate favorable credit
terms with certain of its trade and overhaul vendors, which reduced operating
and maintenance cash requirements during the period by approximately $11.7
million.
Historically, the Company has been successful in supplementing cash from
operations by generating additional liquidity through refinancing of aircraft
and aircraft related assets. Unlike many air carriers, the Company owns most
of its operating equipment, and has relied upon the use of term debt, rather
than leasing, to finance its equipment acquisitions. However, due to the
current status of the Company's debt defaults and restructuring efforts, no
assurance can be given that the Company will be able to obtain new financing on
commercially reasonable terms.
Operating capital is supplemented by a lending facility which commenced in
January 1992 wherein EIA, EHI, and EAGLE borrow jointly under an operating
loan agreement which expires on October 22, 1996, subject to automatic
extensions for consecutive 60 day periods until April 1997, unless the
Company is notified to the contrary prior to the expiration date. There can
be no assurance that the lender will continue to extend the expiration date.
This operating loan facility is collateralized by substantially all of the
Company's assets with the exception of aircraft, engines and real property.
The maximum credit under the agreement is $45.0 million, subject to inventory
and accounts receivable levels, advance rate formulas, and other
requirements. Actual availability at August 31, 1996 was $38.5 million, of
which $37.2 million was outstanding. The loans under the facility bear
interest at prime plus 2.25% per annum.
At August 31, 1996, the Company had consolidated long-term debt of $348.2
million, including the $125 million in Senior Notes and $37.2 million
outstanding under its operating loan. In addition, accrued and unpaid
interest on the Senior Notes at August 31, 1996 was $62.6 million, including
$10.8 million in penalty interest. Long-term debt in default at August 31,
1996 totaled $299.2 million, which includes $125.0 million in Senior Notes,
$34.7 million in GATX/Airlog converted B747 debt being restructured, and
$139.5 million in long-term debt carried as a current liability due solely to
technical debt covenant violations (e.g. cross defaults). The Company will
be able to normalize the presentation of its long-term debt as restructurings
of the various agreements are completed.
The Senior Notes are primary obligations of the Company and are jointly and
severally guaranteed on a senior subordinated basis by the Guarantor
Subsidiaries. The rights of the holders of the Senior Notes under the
subsidiary guarantees are severally subordinated to all existing and future
Senior Indebtedness ,as defined in the indenture under which the Senior Notes
were issued (the "Indenture"), of the Guarantor Subsidiaries. Such Senior
Indebtedness of EIA, EHI and EAC was $170.8 million, $5.7 million and $.1
million, respectively, as of August 31, 1996, substantially all of which is
collateralized by the assets of such Guarantor Subsidiaries. Total indebtedness
of the Company and Guarantor Subsidiaries with rights senior to the holders of
the Senior Notes, as of August 31, 1996 totaled $216.9 million.
19
<PAGE>
Certain debt instruments to which EIA, EHI and EAC (the Guarantor
Subsidiaries) are parties include limitations concerning the ability of the
Guarantor Subsidiaries to pay dividends, make loans and advances or make other
distributions. In each case, however, these restrictions are subject to the
terms of the Indenture which, subject to certain exceptions, prohibits the
Company and any of its subsidiaries from permitting to exist any consensual
encumbrance, restriction or limitation on the ability of any Company subsidiary
to pay dividends, or make other distributions or loans and advances to the
Company. These provisions in the Indenture do not permit the existence of any
restriction on the ability of Company subsidiaries to pay dividends or make
loans or advances in an amount sufficient to make payments of principal and
interest and other mandatory payments on the Senior Notes other than at such
time as such subsidiary is prohibited from making payments in respect of its
guarantee of the Senior Notes.
In February 1994, the Company withheld principal and interest payments on
certain of its long-term debt obligations and Senior Notes. The long-term
debt effected was primarily collateralized by GATX/Airlog converted B747
aircraft. In addition, the Company withheld payments due to affiliated
companies for leased aircraft and equipment. None of the affected GATX/Airlog
converted B747 collateralized creditors have exercised the remedies available
to them under their respective agreements. No principal or interest payments
have been made to the holders of the Senior Notes since August 1993. In
April 1996, a holder of the Senior Notes notified the Company it had
accelerated the principal and accrued and unpaid interest on the Senior
Notes. On April 25, 1996, the holder filed suit against the Company for
payment of principal and interest. On May 28, 1996, the holder moved for
partial summary judgment on the interest portion of its claim of
approximately $12.1 million. In August 1996, the trustee under the Indenture
intervened on behalf of all holders of the Senior Notes. Partial summary
judgment has been granted to the plaintiffs with respect to a portion of the
claims by and on behalf of the holders of the Senior Notes (see "Part II:
Item 1. Legal Proceedings"). The Company is continuing its efforts to reach
a consensual resolution with all of the holders of the Senior Notes. No
assurances can be given that the Company will be able to successfully
renegotiate the remainder of its long-term debt or the Senior Notes.
If the Company is unable to successfully restructure the balance of its
GATX/Airlog converted B747 and Senior Note agreements, the holder of any
obligation remaining in default could exercise remedies available to such
holder, including, in many cases, acceleration of the entire principal amount
of the obligation. Under such circumstances, the Company would be unlikely
to have the liquidity to pay the associated obligation, and could face the
loss of use of any asset collateralizing the obligation or of other assets
attached to satisfy a judgment. Under such circumstances, or other
circumstances, including the non-extension of the maturity date of its
operating loan facility, where actions by its creditors could impair the
Company's continuing ability to operate and serve its customers, the Company
may have to consider various alternatives including such things as the sale
of part or all of certain operating subsidiaries and equipment or other
assets, further collateralization, or ultimately, the Company may choose to
seek protection from its creditors under applicable laws.
20
<PAGE>
EIA is required to perform certain maintenance inspections and structural
upgrades and modifications to designated GATX/Airlog converted B747 and DC9
aircraft. All of EIA's GATX/Airlog converted B747 aircraft are subject to
Section 41 modification SUPERSCRIPT 1: five aircraft have completed the
modification; during fiscal 1997 two aircraft are scheduled for completion,
one of which is partially completed, and the remaining five aircraft will be
scheduled thereafter, as required. The Company anticipates the cost to be
approximately $1.1 million per aircraft. In addition, the FAA will require
all aircraft flown in the United States to comply with Stage III noise
regulations on a phased-in basis through 1999. The Company has five
McDonnell Douglas DC9 aircraft remaining to phase-in through 1999 and
anticipates that compliance will cost approximately $1.6 million per
aircraft. EIA's GATX/Airlog converted B747 aircraft can currently be operated
under Stage III guidelines, however, certain aircraft must be operated at
reduced operating weights in order to comply with Stage III requirements.
Modifications are available for EIA's four GATX/Airlog converted B747-200
aircraft to eliminate any reduction in operating weights at an estimated cost
of $.8 million to $1.5 million per aircraft. The Company will continue to
evaluate and determine the most advantageous alternative for Stage III
compliance for the remainder of its fleet.
In addition, an FAA directive, which went into effect January 30, 1996,
requires structural enhancements to three of EIA's GATX/Airlog converted
B747-100 aircraft. If the directive is not complied with, the aircraft will
be subject to substantial weight limitations. The Company anticipates that
the cost of these enhancements will be borne by the original holder of the
supplemental type certificate ("STC") under which the aircraft were
originally modified to freighter configuration. The required structural
enhancements for two of these aircraft have been partially completed and the
Company is waiting for design by the STC holder and approval from the FAA
regarding engineering conformity for final completion. It is anticipated
that two of these aircraft will remain out of service through the end of
fiscal 1997, while the third aircraft is expected back in service during the
Company's fourth quarter.
In fiscal 1996, the Company entered into an agreement to purchase five Bell
407 helicopters at a rate of one per year until fiscal 2000. The Company
estimates the cost per aircraft to be $1.4 million and anticipates the
acquisition of the first aircraft during the fourth quarter of fiscal 1997.
Under the terms of the agreement the Company may elect to trade assets to
satisfy a portion of the purchase price.
In February 1996, the Company entered into an agreement to settle proposed
income tax adjustments related to Internal Revenue Service ("IRS") audits for
the fiscal years 1987 through 1989. The agreement resulted in a federal tax
adjustment of approximately $3.0 million with interest of approximately $3.5
million. All amounts owing have been satisfied. No other years are currently
under audit.
In May 1996, a jury awarded $1.25 million to a plaintiff in a wrongful
termination suit. In October 1996, while on appeal by the Company, a
settlement agreement was entered into for an agreed upon sum which is subject to
a confidentiality provision. (see "Part II. Other Information: Item 1.Legal
Proceedings").
__________________
(1) Mandated by the FAA in 1990, this modification consists of
frame replacement within Section 41 of the aircraft fuselage and must be
completed prior to 20,000 total aircraft cycles.
21
<PAGE>
The Company believes that its expertise in asset management and its
knowledge of the aviation industry will permit it to continue to supplement
operations with its barter, trade, sale and lease activities. The Company also
may selectively sell a part or all of certain operating subsidiaries and other
equipment and assets to assist in providing the liquidity necessary to meet its
current obligations. The Company is currently pursuing the sale or
recapitalization of its various subsidiaries. No assurances can be given that
any such efforts, or the Company's ability to restructure certain of its
long-term and Senior Note instruments, will enable the Company to generate
adequate cash flows to meet its debt service and capital requirements and fund
continuing operations.
22
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
a) On April 25, 1996, Cargill Financial Services Corporation ("Cargill") filed
an action in the United States District Court for the District of Oregon
against the Company and certain of its subsidiaries. Cargill sought
amounts claimed to be due and owing to Cargill as a then-holder of
approximately $55 million in principal amount of the Company's Senior
Notes. On May 28, 1996, Cargill moved for partial summary judgment on the
portion of its claims that sought recovery of unpaid interest and interest
on that unpaid interest as provided in the Senior Notes. On July 22, 1996,
Magistrate Judge John Jelderks issued a Findings and Recommendation that
Cargill be granted partial summary judgment on such claims. On September
6, 1996, U.S. District Judge Ancer Haggerty adopted Judge Jelderks'
Findings and Recommendation. On August 16, 1996, the District Court
allowed the Trustee under the Indenture to intervene in the action to
assert claims for unpaid principal and interest on all the Senior Notes.
On August 22, 1996, the Trustee filed a motion for partial summary judgment
on the portion of its claimsseeking recovery of interest on the Senior Notes
and interest on thatinterest. On October 7, 1996, Magistrate Judge Jelderks
issued a Findingsand Recommendation that the Trustee's motion for partial
summary judgment be granted. The Trustee's Amended Complaint, filed October
9, 1996, seeks payment of all outstanding principal and accrued and unpaid
interest on the Senior Notes (other than unaccelerated interest payments
payable to Cargill), together with default interest thereon. The Trustee
has informed the District Court that it will file, on October 22, 1996, a
motion requesting summary judgment on its remaining claims for principal
due under the Senior Notes. If this third motion for summary judgment is
granted, the District Court could enter a final judgment in the action
soon after the entry of the summary judgment order. If this motion is
denied, the action will proceed.
b) In 1992 former EIA employee Andy Anderson filed a complaint in the Circuit
Court of Multnomah County alleging that he was wrongfully and
constructively discharged from his employment with the Company. After an
intervening appeal and two amendments to the complaint, the case proceeded
to trial on May 6, 1996. On May 15th the jury returned a verdict in favor
of the plaintiff in the sum of $1,250,000, including $800,000 in punitive
damages. While on appeal by the Company, this judgment was settled for an
agreed upon sum which is subject to a confidentiality provision.
23
<PAGE>
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
Since February 1994, the Company has failed to make semi-annual
interest payments on the Company's $125 million 13 1/2% Senior Notes due
August 15, 2002 (totaling approximately $51.8 million at August 31, 1996)
and is therefore in default with respect to its payment obligations as well
as certain financial and other covenants under the Senior Notes. In August
1996, all outstanding principal and accrued interest on the Senior Notes
was accelerated by the Trustee. At August 31, 1996, $125 million and $62.6
million in interest (including $10.8 million in penalty interest) were
outstanding under the Senior Notes.
ITEM 6. EXHIBITS AND REPORTS OF FORM 8-K
(a) Exhibits filed with this Form 10-Q
3.1 Articles of Incorporation of Evergreen International Aviation,
Inc., as amended to date
3.2 Bylaws of Evergreen International Aviation, Inc., as amended to
date
3.3 Articles of Incorporation of Evergreen International Airlines,
Inc., as amended to date
3.4 Restated Bylaws of Evergreen International Airlines, Inc., as
amended to date
3.5 Articles of Incorporation of Evergreen Helicopters, Inc. as
amended to date
3.6 Bylaws of Evergreen Helicopters, Inc., as amended to date
3.7 Articles of Incorporation of Evergreen Air Center, Inc., as
amended to date
3.8 Bylaws of Evergreen Air Center, Inc., as amended to date
*-Incorporated by reference from exhibit filing to the Company's
Registration Statement on Form S-4 (file no. 33-56532), filed with the
Commission on April 28, 1993.
(b) Reports on Form 8-K
The Company filed a report on Form 8-K on September 5, 1996 concerning
intervention of the Trustee in a lawsuit on behalf of all holders of the
Company's Senior Notes.
24
<PAGE>
SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
EVERGREEN INTERNATIONAL AVIATION, INC.
Date: October 18, 1996 /s/ Timothy G. Wahlberg
---------------------- ----------------------------------
Timothy G. Wahlberg
President
Date: October 18, 1996 /s/ D. Michael Clark
--------------------- -----------------------------------
D. Michael Clark
Chief Financial Officer
25
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> AUG-31-1996
<CASH> 3,880
<SECURITIES> 0
<RECEIVABLES> 32,544
<ALLOWANCES> 1,766
<INVENTORY> 4,857
<CURRENT-ASSETS> 64,757
<PP&E> 755,791
<DEPRECIATION> 254,659
<TOTAL-ASSETS> 601,825
<CURRENT-LIABILITIES> 442,741<F1>
<BONDS> 36,622
0
0
<COMMON> 21,004
<OTHER-SE> 62,570
<TOTAL-LIABILITY-AND-EQUITY> 601,825
<SALES> 93,997
<TOTAL-REVENUES> 93,997
<CGS> 78,025
<TOTAL-COSTS> 28,025
<OTHER-EXPENSES> (19)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,782
<INCOME-PRETAX> 4,209
<INCOME-TAX> 1,583
<INCOME-CONTINUING> 2,626
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,626
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Current liabilities include a total of $299 of term debt, classified
long-term secured debt in default, due to technical defaults ($139) or in
the process of being restructured ($35), and Senior Notes in default ($125).
</FN>
</TABLE>
