v2.4.0.8
Acquisition of Subsidiaries
 12 Months Ended
Dec. 31, 2013
Business Combinations [Abstract]  
Acquisition of Subsidiaries
(2)       Acquisition of Subsidiaries
 
Blue Hawaiian Helicopters
 
On December 13, 2013, via a newly formed subsidiary Blue Hawaiian Holdings, LLC, the Company acquired 100% of the membership interests of Helicopter Consultants of Maui, LLC (doing business as Blue Hawaiian Helicopters) and certain of its affiliates (collectively, BHH) for a cash purchase price of $66.8 million, subject to final determination of working capital, as defined in the merger agreement, as of the closing date. As of December 31, 2013, the Company had recorded a liability of $2,282,000 for the estimated increase to the purchase price for the change in working capital. The former owners of BHH hold a 10% ownership interest in Blue Hawaiian Holdings, LLC, which the Company can redeem at any time for a price based on BHH’s current operating results. The purchase price was financed primarily through borrowings under our Amended and Restated Revolving Credit, Term Loan and Security Agreement with a commercial bank group.
 
BHH provides helicopter tours on five of the Hawaiian Islands using a fleet of 24 helicopters, and its acquisition expands the Company’s tourism operations into a new market. Assets acquired consist primarily of $33.4 million in aircraft, $24.5 million in non-amortizable intangible assets, and $6.0 million in goodwill, with the remaining value allocated to working capital accounts and other fixed assets. The goodwill is expected to be deductible for income tax purposes. No debt was assumed in the acquisition. The fair value of the non-controlling interest was determined using a discounted cash flow analysis applied to projected operating results for BHH. The Company is still evaluating the aircraft spare parts inventory, verifying open repair orders with aircraft parts vendors and other liabilities relating to pre-acquisition events, and refining its calculation of identifiable intangible assets. Therefore, the allocation of the purchase price is still subject to adjustment.
 
Revenue of $2,766,000 and income of $478,000 before income taxes, interest expense on acquisition financing, and allocation of corporate office expenses generated by BHH’s operations from December 13 through December 31, 2013, have been included with those of the Company in the consolidated statements of comprehensive income.
 
American Jets, Inc.
 
In July 2013, the Company acquired all of the outstanding common stock of American Jets, Inc., and all of the assets of an affiliated entity (collectively, AJI) for a purchase price of approximately $1.7 million. AJI provides long-range fixed wing medical transportation services based out of Florida. Assets acquired consisted primarily of $1.4 million in goodwill, none of which is expected to be deductible for income tax purposes. AJI’s outstanding debt was paid off as part of the purchase price. The Company is still verifying open repair orders and other liabilities relating to pre-acquisition events, and, therefore, the allocation of the purchase price is still subject to adjustment.
 
Sundance Helicopters, Inc.
 
On December 31, 2012, the Company acquired all of the outstanding common stock of Sundance Helicopters, Inc. and all of the aircraft owned by two affiliated entities (collectively, Sundance) for a purchase price of approximately $46.3 million, subject to final determination of certain working capital adjustments, as defined in the agreement, as of the acquisition date. In addition, the purchase agreement also provided for an additional amount to be paid to the sellers if certain aircraft maintenance expense targets are achieved. In 2013, the Company revised its estimate of the increase to the purchase price for both of these adjustments to $843,000, compared to $906,000 estimated as of December 31, 2012. The liability was paid to the sellers during the fourth quarter of 2013, and no further amounts are due the sellers. The purchase price was financed primarily through borrowings under the Company’s Amended and Restated Revolving Credit, Term Loan and Security Agreement.
 
Sundance is a helicopter tour operator, primarily focusing on Grand Canyon tours, but also provides helicopter services to support firefighting, news gathering, and other missions. The acquisition is expected to provide a platform for the Company to expand into adjacent aviation industries and opened the Tourism operating segment for the Company. No results of operations for Sundance were included in the Company’s consolidated statement of comprehensive income for the year ended December 31, 2012, because the acquisition was effective following the close of business on December 31, 2012.
 
The allocation of the purchase price was as follows (amounts in thousands):
 
   
Allocation at
December 31, 2012
    
Adjustments
    
Revised
Allocation
  
                   
Aircraft
   $ 34,420       --       34,420  
Amortizable intangible assets
     5,735       (593 )     5,142  
Goodwill
     3,509       665       4,174  
Other equipment
     901       --       901  
Deferred tax asset
     1,286       450       1,736  
Working capital accounts, net
     1,379       (585 )     794  
Purchase price
   $ 47,230       (63 )     47,167  
 
The Company does not expect adjustments to the allocation of the purchase price in future periods.
 
OF Air Holdings Corporation
 
On August 1, 2011, the Company acquired 100% of the outstanding common stock of OF Air Holdings Corporation and its subsidiaries, including Omniflight Helicopters, Inc. (together, Omniflight), for a cash purchase price of $201.9 million, subject to final determination of working capital, as defined in the merger agreement, as of the closing date. As of December 31, 2011, the Company had recorded a liability of $3,119,000 for the estimated increase to the purchase price for the change in working capital. Based upon final agreed upon adjustments to the working capital measurement, the Company paid the sellers $3,176,000 during the first quarter of 2012, and no further amounts are due the sellers. The purchase price was financed primarily through a term loan under the Company’s Amended and Restated Revolving Credit, Term Loan and Security Agreement.
 
The allocation of the purchase price was as follows (amounts in thousands):
 
   
Allocation at
December 31, 2011
    
Adjustments
    
Revised Allocation
  
Assets purchased:
                  
Receivables
   $ 28,622       --       28,622  
Aircraft
     33,500       --       33,500  
Goodwill
     89,116       1,403       90,519  
Amortizable intangible assets
     63,100       --       63,100  
Aircraft under capital leases
     29,405       --       29,405  
Equipment and other property
     5,986       --       5,986  
Spare parts inventories
     4,525       --       4,525  
Other
     14,521       (42 )     14,479  
Total assets
     268,775       1,361       270,136  
                         
Capital lease obligations assumed
     (38,034 )     --       (38,034 )
Net deferred tax liabilities
     (5,961 )     (1,888 )     (7,849 )
Other liabilities assumed
     (19,765 )     584       (19,181 )
Total liabilities assumed
     (63,760 )     (1,304 )     (65,064 )
Purchase price
   $ 205,015       57       205,072  
 
Adjustments to the purchase price allocation during 2012 included the working capital adjustment to the purchase price, as described above, and revised estimates of liabilities related to aircraft repair costs based upon verification of open repair orders with aircraft parts vendors. Following the end of the measurement period, which extends for a maximum of one year following the acquisition date, no further adjustments are made to the purchase price allocation except to correct an error. In the fourth quarter of 2012, the Company identified an error in the calculation of certain net operating loss carryforwards for state income tax purposes relating to pre-acquisition periods. The adjustments in the above table include an increase of $1,663,000 to goodwill and deferred tax liabilities to correct this error. The Company does not expect further adjustments to the purchase price allocation.
 
Revenue of $61,494,000 and income of $13,368,000 before income taxes, interest expense on acquisition financing, and allocation of corporate office expenses generated by Omniflight’s operations from August 1 through December 31, 2011, have been included with those of the Company in the consolidated statements of comprehensive income. The unaudited pro forma revenue, net income, and income per common share for the year ended December 31, 2011, assuming the acquisition occurred as of January 1, 2010, are as follows (amounts in thousands, except per share amounts):
 
   
2011
  
   
(unaudited)
  
         
Revenue
   $ 766,422  
Net income
   $ 54,284  
Basic income per common share
   $ 1.43  
Diluted income per common share
   $ 1.41