UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period ended November 30, 2005

Commission File Number: 333-109667-04


EVERGREEN HOLDINGS, INC.
(Exact name of registrant as specified in its charter)

Oregon	91-1797880
(State or other jurisdiction of	(IRS Employer Identification No.)
incorporation or organization)

3850 Three Mile Lane, McMinnville, Oregon	97128-9496
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code: (503) 472-9361

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 12 preceding 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 ( )

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes ( ) No (X)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ( ) No (X)

As of January 17, 2006, there were 10,054,749 outstanding shares of no par value common stock of the registrant.

PAGE

PART I.

FINANCIAL INFORMATION

Item 1.	Financial Statements	3
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operation	37
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	66
Item 4.	Controls and Procedures	67

PART II.

OTHER INFORMATION

Item 1.	Legal Proceedings	68
Item 1A.	Risk Factors	69
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	77
Item 3.	Defaults Upon Senior Securities	77
Item 4.	Submission of Matters to a Vote of Security Holders	77
Item 5.	Other Information	77
Item 6.	Exhibits	78

SIGNATURES

EXHIBIT INDEX

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PART I - FINANCIAL INFORMATION


ITEM 1.	FINANCIAL STATEMENTS.

CONSOLIDATED BALANCE SHEETS
At November 30, 2005 and February 28, 2005
(in thousands, except share data)

					November 30, 2005
					(unaudited)		February 28, 2005


ASSETS
Current assets:
	Cash and cash equivalents			$	6,139	$	2,718
	Accounts receivable, less allowance of $1,555 and				79,280		62,355
		$1,661 for doubtful accounts
	Accounts receivable from affiliates, net				611		447
	Inventories				19,985		29,060
	Prepaid expenses and other				4,158		2,612
	Current portion of notes receivable from affiliates (includes				1,853		1,473
		interest receivable of $362 and $605)
	Deferred tax asset and income taxes receivable				4,595		4,294

		Total current assets			116,621		102,959

Property and equipment, net					556,769		543,562
Assets held for sale					5,885		6,831
Notes receivable from affiliates					12,092		14,093
Capitalized loan acquisition costs					8,474		11,015
Other assets					14,776		11,757
Goodwill					5,494		5,494

			Total assets	$	720,111	$	695,711

(continued on the next page)

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CONSOLIDATED BALANCE SHEETS — continued
At November 30, 2005 and February 28, 2005
(in thousands, except share data)

					November 30, 2005
					(unaudited)		February 28, 2005


LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable			$	80,621	$	72,834
	Accrued liabilities				24,637		24,975
	Accrued interest				1,567		8,032
	Payables to affiliates				1,234		3,267
	Current portion of long-term debt				13,763		14,245

		Total current liabilities			121,822		123,353

Long-term debt					268,992		292,860
Deferred rentals payable					78		80
Deferred tax liabilities					114,034		95,151

		Total liabilities			504,926		511,444


		Minority interest			1,706		655


Stockholders' equity:
	Common stock, no par value; 20,000,000 shares authorized;				7,568		7,568
		10,054,749 shares issued and outstanding
	Retained earnings				205,911		176,044

		Total stockholders' equity			213,479		183,612

			Total liabilities, minority interest, and stockholders' equity	$	720,111	$	695,711

See condensed notes to unaudited consolidated financial statements.

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CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands)


				For the Three Months						For the Nine Months
				Ended November 30,						Ended November 30,

				2005			2004			2005			2004

Operating revenues:
	Flight revenue		$	167,632		$	112,446		$	415,881		$	302,183
	Sales of aircraft, parts, and other property and equipment			3,368			1,853			13,060			6,439
	Sales of aircraft to affiliates			2,200			-			11,593			2,750
	Ground handling and logistics services revenue			29,290			27,061			88,882			81,558
	Support services and other revenue			18,564			13,246			48,263			33,477

		Total operating revenues		221,054			154,606			577,679			426,407


Operating expenses:
	Flight costs			25,028			19,766			68,040			55,749
	Fuel			65,393			35,647			148,414			89,998
	Maintenance			19,439			19,322			56,278			55,252
	Aircraft and equipment			15,048			12,657			41,276			36,986
	Cost of sales of aircraft, parts, and other property and equipment			2,441			993			6,815			2,377
	Cost of sales of aircraft to affiliates			2,200			-			11,593			2,750
	Cost of ground handling and logistics services			24,718			24,465			74,704			72,250
	Cost of support services and other support costs			22,495			16,122			57,392			37,454
	Selling, general, and administrative expense			17,102			15,409			52,299			47,510

		Total operating expenses		193,864			144,381			516,811			400,326

		Income from operations		27,190			10,225			60,868			26,081

Non-operating income (expense):
	Interest expense			(8,796	)		(9,086	)		(26,836	)		(26,832	)
	Other non-operating income (expense), net			176			21			17,209			(3,450	)

Income (loss) before minority interest and income taxes				18,570			1,160			51,241			(4,201	)

		Minority interest		(365	)		(325	)		(1,051	)		(948	)

Income (loss) before income taxes				18,205			835			50,190			(5,149	)

		Income tax (expense) benefit		(7,599	)		(737	)		(20,323	)		973

Net income (loss)			$	10,606		$	98		$	29,867		$	(4,176	)

See condensed notes to unaudited consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)


						For the Nine Months Ended November 30,

						2005			2004

Cash flows from operating activities:
	Net income (loss)				$	29,867		$	(4,176	)
	Adjustments to reconcile net income (loss) to
			net cash provided by operating activities:
		Depreciation and amortization				49,881			51,228
		Deferred income taxes				18,883			(974	)
		Gain on disposal of property and equipment				(1,246	)		(999	)
		Impairment charges on aircraft				-			1,321
		Deferred income and foreign currency exchange (gain) loss				(324	)		10
		Write-off of unamortized loan acquisition costs				-			3,464
		Minority interest				1,051			948
	Changes in operating assets and liabilities:
		Accounts receivable				(16,925	)		(11,645	)
		Receivables from affiliates				(544	)		61
		Inventories				9,075			(7,238	)
		Prepaid expenses and short-term notes receivable				(1,545	)		897
		Accounts payable and accrued liabilities				1,306			21,663
		Payables to affiliates				(2,032	)		923
		Income taxes payable				(301	)		(219	)

			Net cash provided by operating activities			87,146			55,264


Cash flows from investing activities:
	Purchases of property, equipment, and overhauls					(66,302	)		(48,808	)
	Proceeds from disposal of property and equipment					5,924			1,801
	Decrease in long-term portion of notes receivable from affiliates					2,001			1,621
	Other assets					(997	)		(3,039	)

			Net cash used in investing activities			(59,374	)		(48,425	)


Cash flows from financing activities:
	Proceeds from long-term debt					4,468			222,247
	Payments on long-term debt					(28,819	)		(225,495	)
	Payments on notes payable to affiliates					-			(912	)

			Net cash used in financing activities			(24,351	)		(4,160)

				Net increase in cash and cash equivalents		3,421			2,679

Cash and cash equivalents, beginning of period						2,718			4,071

Cash and cash equivalents, end of period					$	6,139		$	6,750

See condensed notes to unaudited consolidated financial statements.

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CONDENSED NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — OVERVIEW

Evergreen Holdings, Inc. ("Holdings") is the parent company of Evergreen International Aviation, Inc. ("Aviation"), a leading provider of integrated air cargo transportation and aviation support services. Holdings, Aviation, and their consolidated subsidiaries (collectively, "Company", "we", "us", or "our") provide global air cargo shipping, ground handling and logistics services, helicopter transportation services, small aircraft charters, and aircraft maintenance and repair services.

Business Segments

We conduct business in six major business segments through our wholly-owned subsidiaries:

	•	Evergreen International Airlines, Inc. ("Airlines") provides air cargo services for both international and domestic markets;

	•	Evergreen Aviation Ground Logistics Enterprise, Inc. ("EAGLE") provides full-service aviation ground handling and logistics services, including mail handling, aviation hub management, aircraft handling, cargo handling, ground system management, ground equipment maintenance, ground equipment sales and leasing, aircraft line maintenance, terminal services, aircraft de-icing and washing, check-in and ticketing, baggage acceptance and seat selection, and passenger cabin cleaning;

	•	Evergreen Helicopters, Inc. ("Helicopters") provides helicopter and small fixed-wing aircraft services throughout the world in connection with activities such as forest fire fighting, health services, aerial spraying, heavy lift construction, law enforcement, helicopter logging, petroleum support services, search and rescue, peacekeeping and relief support, helicopter skiing, and agriculture;

	•	Evergreen Air Center, Inc. ("the Air Center" or "Air Center"), an unlimited Class IV airframe repair station certified by the FAA, performs aircraft maintenance, repair and overhaul services, and aircraft storage services;

	•	Evergreen Aircraft Sales and Leasing Co. (“EASL”) selectively buys, sells, leases, and brokers commercial aircraft, helicopters, and aircraft spare parts; and

	•	Evergreen Agricultural Enterprises, Inc. (“Agriculture”) conducts farming operations, nursery and horticulture operations, and delivers nursery and processed agricultural products to wholesale and retail customers.

Selected financial results by business segment are found in "Note 2 - Selected Financial Results by Business Segment" below.

Vintage

Holdings also owns all of the outstanding common stock of Evergreen Vintage Aircraft, Inc. ("Vintage"). Vintage's assets consist primarily of i) the 120,000 square foot Evergreen Aviation Museum Building, which is located on approximately 29.7 acres of land near our headquarters in McMinnville, Oregon (the "Evergreen Museum Land"), and ii) approximately 132 acres of other real property located around the Evergreen Museum Land. In addition to show-casing Howard Hughes' Spruce Goose, the Evergreen Aviation Museum Building houses and displays a unique collection of vintage aircraft, most of which are owned by Vintage. Vintage leases the Evergreen Aviation Museum Building to The Captain Michael King Smith Evergreen Aviation Educational Institute, dba Evergreen Aviation Museum, an Oregon non-profit corporation.

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Trust Created February 28, 1986

Aviation also holds a beneficial interest in the Trust Created February 25, 1986 (the "Trust"). The Trust was created pursuant to the Trust Agreement, dated as of February 25, 1986, as amended and restated pursuant to the Amended and Restated Trust Agreement, dated as of August 31, 1987, as amended on August 31, 1988, and as amended and restated pursuant to the Second Amended and Restated Trust Agreement, dated as of September 29, 1995, as amended by the First Amendment thereto as of May 8, 2003, as amended by the Second Amendment thereto as of January 14, 2004, and as amended by the Third Amendment thereto as of May 10, 2004, among Evergreen International Aviation, Inc. (an assignee of Evergreen Holdings, Inc., as successor to 747, Inc. and King Christian, Inc.) and Mr. Delford M. Smith, as Beneficiaries, and Wilmington Trust Company, not in its individual capacity, but solely as Owner Trustee. The Trust assets consist primarily of one Boeing 747 aircraft (the "Trust Boeing 747") and three McDonnell Douglas DC-9 ("DC-9") aircraft. Aviation holds a 2/3 beneficial interest in the Trust Boeing 747 and all of the beneficial interest in the DC-9 aircraft. The Trust leases these aircraft to Airlines.

Controlling Shareholder and Related Parties

Mr. Delford M. Smith, our founder and the chairman of our board of directors, owns, either directly or indirectly, 75.1% of the outstanding shares of Holdings common stock, and has control, either directly or indirectly, over 85.1% of the outstanding shares of Holdings common stock. In addition, Mr. Smith owns or controls other entities, or does business under other trade names, including, but not limited to, the following:

	•	Ventures Acquisition Company LLC ("Ventures Acquisition Company");
	•	Ventures Holding, Inc. ("Ventures Holding");
	•	DMS Properties; and
	•	Greenpatch Farms.

From time to time, we engage in transactions with Mr. Smith and the entities owned by, or controlled by, Mr. Smith. See "Note 11 - Related Party Transactions" below.

BASIS FOR PRESENTATION

The interim consolidated financial statements included in this quarterly report have been prepared by Holdings and its subsidiaries, without audit, pursuant to the rules and regulations of the United States Securities and Exchange Commission ("SEC"). Certain information and note disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the SEC.

In the opinion of management, the interim consolidated financial statements included in this quarterly report contain all adjustments necessary to present fairly the financial position, results of operations, and cash flows of the Company for the periods indicated. Such adjustments, other than adjustments that have been separately disclosed, are of a normal recurring nature.

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Seasonality

Certain aspects of our business are seasonal in nature. Flight revenue generated from contracts with commercial airlines and freight forwarders has historically been higher from September through December of each year as the levels of flight activity increase with the build-up of inventories by retailers in anticipation of the holiday season. Revenues in our EAGLE segment also reflect similar seasonal fluctuations, predominantly as a result of increased volumes of mail and packages being processed by the United States Postal Service ("U.S. Postal Service") and United Parcel Service in the lead-up to the holiday season. In comparison, our Helicopters segment experiences higher revenues during the summer and fall months as a result of increased fire-fighting and hurricane relief activities, while our Agriculture segment generates higher revenues during the peak shipping periods for nursery products and Christmas trees.

Because certain aspects of our business are seasonal, the interim results presented in this report are not necessarily indicative of operating results for a full year. The interim consolidated financial statements included in this report should be read in conjunction with our consolidated financial statements and the accompanying notes that were included in our Annual Report on Form 10-K for the fiscal year ended February 28, 2005, which was filed with the SEC on June 14, 2005.

Hurricane Katrina and Hurricane Rita

Our Helicopters segment maintains facilities and aircraft in Louisiana and Texas. As of the date of this report, management has completed an initial analysis of potential property damage or disruption to business operations as a result of Hurricane Katrina and Hurricane Rita. Our facilities in Louisiana sustained some storm damage. However, the amount of damages is not considered to be material. Our facilities in Galveston, Texas sustained only immaterial damages. None of our aircraft were damaged as a result of the storms.

We temporarily suspended operations out of our Louisiana and Texas facilities while the storms passed over the areas. However, we resumed operations at the facilities within 24-36 hours without any material disruption in service or operations. Management does not believe that the hurricanes, or their effects upon the surrounding areas and economies, had a material negative impact upon our results of operations or financial condition.

Reclassifications

Certain amounts in the Company’s prior period's financial statements and notes have been reclassified to conform to the current period presentation. Previously reported net income (loss) or net cash flows were not affected by these reclassifications.

RECENT ACCOUNTING PRONOUNCEMENT

In December 2003, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest Entities - An Interpretation of ARB No. 51” (“FIN 46-R”). FIN 46-R addresses how a company should apply the provisions of Accounting Research Bulletin No. 51, “Consolidated Financial Statements,” to certain variable interest entities. In particular, FIN 46-R applies in those situations in which i) the company does not have a controlling financial interest in the variable interest entity or ii) the variable interest entity does not have sufficient equity at risk for the variable interest entity to finance its activities without additional subordinated financial support. In those situations, FIN 46-R requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the variable interest entities do not effectively disperse risks among the parties involved.

The Company adopted FIN 46-R as of March 1, 2005. In connection with the adoption of FIN 46-R, management completed an assessment of certain of its affiliated entities including, but not limited to, Ventures Acquisition Company, to determine if there were any variable interest entities that the Company was required to consolidate.

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As discussed in the section "Landsbanki Loan Agreement" in "Note 4 - Long-Term Debt Obligations" below, on July 11, 2005, Ventures Acquisition Company, as Borrower, and Holdings, as Guarantor, entered into a
$32.0 million loan agreement with Landsbanki Íslands hf., as Lender, for the purpose of financing Ventures Acquisition Company's purchase of two Boeing 747 aircraft (the "VAC Boeing 747 Aircraft"). As discussed in the section "Lease Transactions" in "Note 11 - Related Party Transactions" below, the VAC Boeing 747 Aircraft are leased by Ventures Acquisition Company to Airlines.

As a result of Holdings entering into the guarantee agreement, we re-evaluated our relationship with Ventures Acquisition Company in accordance with the reconsideration provisions of FIN 46-R. Based upon this evaluation, we determined that, as of November 30, 2005, the Company has a variable interest in Ventures Acquisition Company, a variable interest entity. However, we also determined that the Company is not the primary beneficiary of Ventures Acquisition Company and, accordingly, the Company does not include the results of operations and financial condition of Ventures Acquisition Company in the Company's consolidated financial statements.

Pursuant to the disclosure requirements of FIN 46-R for variable interest entities, where the Company is not the primary beneficiary, the Company is required to make certain disclosures regarding such variable interest entities. Ventures Acquisition Company is a limited liability company that is solely owned by Mr. Delford M. Smith, the Company's founder and the chairman of its board of directors. Ventures Acquisition Company is engaged in the business of purchasing aircraft and then leasing such aircraft to various subsidiaries of the Company. The Company's involvement with these rental activities began in approximately 1998. As of November 30, 2005, Ventures Acquisition Company reported unaudited total assets of approximately $86.2 million. Although the maximum exposure to loss as a result of the Company's involvement with Ventures Acquisition Company is $29.9 million as of November 30, 2005, the approximate loan to market value of the VAC Boeing 747 Aircraft in Ventures Acquisition Company is approximately 60.8%, based on an independent appraisal. The Company's recourse related to such exposure is limited to the amount of actual losses paid by the Company.

As a result of the VAC Boeing 747 Aircraft transaction, the Company also evaluated its accounting related to loan guarantees. In November 2002, FASB Interpretation No. 45 ("FIN 45"), Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of the Indebtedness of Others, which clarifies the requirements of SFAS No. 5, Accounting for Contingencies, relating to a guarantor's accounting for and disclosures of certain guarantees was issued. FIN 45 requires enhanced disclosures for certain guarantees. It also requires certain guarantees that are issued or modified after December 31, 2002, including third-party guarantees, to be initially recorded on the balance sheet at fair value. For guarantees issued on or before December 31, 2002, liabilities are recorded when and if payments become probable and estimable. As of November 30, 2005, the fair value of guarantees the Company issued was not material.

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NOTE 2 — SELECTED FINANCIAL RESULTS BY BUSINESS SEGMENT

The following charts present selected financial information of the Company, as further segregated by each of the major business segments.


Selected Financial Results by Business Segment - Unaudited
(in thousands)

				For the Three Months				For the Nine Months
				Ended November 30,				Ended November 30,

				2005		2004		2005		2004

Operating revenues: ⁽¹⁾
	Airlines		$	152,310	$	104,798	$	372,231	$	274,050
	EAGLE			29,301		27,064		89,085		81,579
	Helicopters			22,192		9,368		58,383		33,152
	Air Center			12,156		10,429		36,484		26,001
	EASL			3,584		1,437		17,035		7,316
	Agriculture			1,511		1,510		4,461		4,309

		Total	$	221,054	$	154,606	$	577,679	$	426,407


Intercompany revenues: ⁽²⁾
	Airlines		$	4,151	$	2,951	$	12,529	$	8,355
	EAGLE			1,068		619		2,288		1,409
	Helicopters			914		282		2,436		1,568
	Air Center			2,776		4,296		10,321		19,578
	EASL			575		5,446		3,136		6,426
	Agriculture			9		56		18		106

		Total	$	9,493	$	13,650	$	30,728	$	37,442


⁽¹⁾ During the three and nine months ended November 30, 2005 and 2004, revenue from the USAF Air Mobility Command accounted for approximately 42.8%, 46.2%, 45.8% and 49.4%, respectively, of our consolidated operating revenues and 62.2%, 72.8%, 67.6% and 76.9% of the total revenue in our Airlines segment. During the three and nine months ended November 30, 2005 and 2004, revenue from the U.S. Postal Service accounted for approximately 7.1%, 8.2%, 9.5% and 11.3%, respectively, of our consolidated operating revenues and 53.9%, 52.8%, 54.5% and 58.8% of the total revenue in our EAGLE segment.

⁽²⁾ Amounts are eliminated in consolidation

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Selected Financial Results by Business Segment - Unaudited

(in thousands)

For the Three Months

For the Nine Months

Ended November 30,

2005

2004

2005

2004


Operating expenses:
	Airlines		$	132,065	$	92,624	$	328,041	$	249,890
	EAGLE			27,671		26,859		83,342		79,712
	Helicopters			16,744		11,717		49,527		35,202
	Air Center			11,768		9,634		35,059		23,220
	EASL			3,200		1,472		15,260		7,283
	Agriculture			2,416		2,075		5,582		5,019

		Total	$	193,864	$	144,381	$	516,811	$	400,326


Income (loss) from operations:
	Airlines		$	20,245		$	12,174		$	44,190		$	24,160
	EAGLE			1,630			205			5,743			1,867
	Helicopters			5,448			(2,349	)		8,856			(2,050	)
	Air Center			388			795			1,425			2,781
	EASL			384			(35	)		1,775			33
	Agriculture			(905	)		(565	)		(1,121	)		(710	)

		Total	$	27,190		$	10,225		$	60,868		$	26,081


Interest expense:
	Airlines		$	8,752		$	9,048		$	26,509	$	26,550
	EAGLE			8			25			145		112
	Helicopters			15			10			103		79
	Air Center			(1	)		15			34		57
	EASL			-			(25	)		5		-
	Agriculture			22			13			40		34

		Total	$	8,796		$	9,086		$	26,836	$	26,832


Depreciation and amortization:
	Airlines		$	13,222	$	15,797	$	40,876	$	43,953
	EAGLE			564		607		1,728		1,829
	Helicopters			1,897		1,467		5,876		4,109
	Air Center			338		313		1,012		928
	EASL			23		8		56		38
	Agriculture			82		122		333		371

		Total	$	16,126	$	18,314	$	49,881	$	51,228

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Selected Capital Expenditures by Business Segment - Unaudited
(in thousands)

				For the Three Months				For the Nine Months
				Ended November 30,				Ended November 30,

				2005		2004		2005		2004

Capital expenditures:
	Airlines		$	15,472	$	16,711	$	50,538	$	38,869
	EAGLE			89		219		283		760
	Helicopters			3,160		3,098		10,817		8,333
	Air Center			1,147		197		1,923		425
	EASL			750		51		762		51
	Agriculture			926		185		1,979		370

		Total	$	21,544	$	20,461	$	66,302	$	48,808

Total Assets by Business Segment

(in thousands)

November 30, 2005

(unaudited)

February 28, 2005

Total assets:

Airlines

528,744

507,200

EAGLE

44,310

52,040

Helicopters

76,831

65,831

Air Center

29,236

23,314

EASL

12,976

20,854

Agriculture

28,014

26,472

Total

720,111

695,711

NOTE 3 – LIQUIDITY

Risk of Default on Debt Obligations

We finance a portion of our capital expenditures and operations through long-term debt obligations. In particular, Aviation has obtained long-term financing by means of i) the issuance of $215.0 million of 12% senior second secured notes (the "Indenture Notes") and ii) a $100.0 million three-year senior secured credit facility financing agreement (the "Secured Credit Facility"). In addition, we have various other long-term debt instruments which consist primarily of equipment purchase notes.

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Substantially all of our assets are pledged as collateral under our various debt agreements. Furthermore, the Indenture Notes and the Secured Credit Facility both contain cross-default provisions whereby certain events of default under one or more of the our debt obligations will result in an event of default under either, or both, the Indenture Notes and the Secured Credit Facility. See "Note 4 - Long-Term Debt Obligations" below. In the event that we are unable to cure such defaults or obtain waivers with respect to such defaults, we are at risk that our payment obligations under either, or both, the Indenture Notes and the Secured Credit Facility will be accelerated, thereby forcing us to either obtain alternative financing or seek legal protection from our creditors.

NOTE 4 — LONG-TERM DEBT OBLIGATIONS

Indenture Notes

The Indenture Notes were issued by Aviation on May 16, 2003, pursuant to an indenture agreement which was executed by Aviation, as issuer, by Holdings and substantially all of the subsidiaries of Aviation, as guarantors, and by Law Debenture Trust Company of New York, as successor trustee to J.P. Morgan Trust Company, N.A., as successor trustee to Bank One, N.A., as trustee.

The Indenture Notes are secured by a second priority lien, subject to certain permitted liens, on substantially all of the assets of Aviation and its domestic subsidiaries, excluding the assets of Agriculture and Vintage. The Indenture Notes are designated as senior second secured obligations. As a result, the Indenture Notes rank equally with all of Aviation’s existing senior, or unsubordinated, debt, and are senior to any of Aviation’s future senior subordinated or unsubordinated debt.

To the extent of assets securing both the Indenture Notes and the Secured Credit Facility (as defined in "Secured Credit Facility" below), the Indenture Notes are effectively second in priority to our indebtedness under the Secured Credit Facility. However, to the extent of the assets securing the Indenture Notes, the Indenture Notes are senior to our unsecured debt obligations. In addition, the Indenture Notes are fully and unconditionally guaranteed, both jointly and severally, by Holdings, substantially all of Aviation’s subsidiaries, and the Trust. The only subsidiaries and affiliated entities that are not obligated as guarantors under the Indenture Notes are Agriculture, Vintage, and the foreign subsidiaries of the Company.

The Indenture Notes bear interest at an annual fixed rate of 12%. Payments of interest are due semi-annually on May 15 and November 15 of each year.

On November 14, 2005, we made the semi-annual payment of accrued interest on the Indenture Notes in the amount of
$12.9 million. Payment of the accrued interest was funded from our operations.

The next semi-annual payment of accrued interest on the Indenture Notes, in the amount of $12.9 million, is due and payable on May 15, 2006. We intend to fund payment of the accrued interest from our operations.

Optional Redemption The Indenture Notes will mature on May 15, 2010, at which time the outstanding principal of the Indenture Notes, plus all accrued and unpaid interest, will become due. However, we may elect to redeem the Indenture Notes prior to the maturity date. The Indenture Notes are redeemable after the dates and at the prices (expressed in percentages of principal amount on the redemption date) as set forth below:

If redeemed during the 12-month period commencing:

Redemption Price

	May 15, 2007	106 %
	May 15, 2008	103 %
	May 15, 2009 and thereafter	100 %

In addition, at any time prior to May 15, 2006, we may redeem, on one or more occasions, up to 35% of the principal amount of the Indenture Notes with the net cash proceeds from sales of certain kinds of capital stock at a redemption price of 112%, plus accrued and unpaid interest at the redemption date.

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Repurchase of Notes Upon Certain Asset Sales or a Change in Control. If an Asset Sale or a Change in Control (as defined in the Indenture Notes) occurs, each holder of Indenture Notes will have the right to require us to repurchase all or part of the holder's Indenture Notes at the price set forth in the Indenture Notes.

Covenant Compliance. The Indenture Notes impose certain financial and non-financial covenant restrictions on Aviation and its restricted subsidiaries. Such covenant restrictions include, but are not limited to, restrictions on our ability to:

•		incur additional debt or create liens;
•		pay dividends or acquire shares of capital stock;
•		make payments on subordinated debt or make investments;
•		make distributions from restricted subsidiaries;
•		issue or sell capital stock of restricted subsidiaries;
•		issue guarantees;
•		sell or exchange assets, or make capital expenditures;
•		enter into transactions with shareholders and affiliates; and
•		effect mergers and other changes of control.

As of November 30, 2005, we were in compliance with these covenants.

If Aviation or any of its restricted subsidiaries violates any of these covenants and are unable to obtain waivers, we would be in default under the Indenture Notes and the debt could be accelerated.

Secured Credit Facility

On May 13, 2004, Aviation and certain of its subsidiaries entered into the Secured Credit Facility with Wells Fargo Foothill, Inc. and CapitalSource Finance LLC, as successor-in-interest to all of Ableco Finance LLC's interest in the Secured Credit Facility and as successor-in-interest to Wells Fargo Foothill, Inc.'s interest in the Term Loan (as defined herein), (collectively, “the Wells Fargo Lenders”). The Secured Credit Facility consists of two loans - a $50.0 million term loan (the "Term Loan") and a $50.0 million revolving loan (the "Revolving Loan"). The Secured Credit Facility is secured by substantially all of the assets of Aviation and its domestic subsidiaries, excluding the assets of Agriculture and Vintage.

Interest Rates. The Term Loan bears interest at an annual rate of either LIBOR plus 5.5% or prime plus 3.0%, and the Revolving Loan bears interest at an annual rate of either LIBOR plus 3.0% or prime plus 0.5%. So long as we are not in default under the Secured Credit Facility, we may elect at any time to have interest on all or a portion of the advances on the Revolving Loan or the Term Loan calculated under the applicable LIBOR interest rate option. LIBOR interest rate elections are available for LIBOR periods of 1, 2, 3, or 6 months. Interest on a LIBOR rate loan is payable on the last day of the LIBOR period (if the elected LIBOR period is less than three months) or on the last day of each three month interval (if the elected LIBOR period is six months). For any portion of the Term Loan or Revolving Loan which is not covered by a LIBOR interest rate election, monthly payments of accrued interest are due on the first day of each month.

Term Loan Advances. The $50.0 million Term Loan was fully funded at the closing of the Secured Credit Facility. No additional advances are permitted under the Term Loan at any time, and any principal amount of the Term Loan which is repaid or prepaid may not be reborrowed. We are required to make payments of principal on the Term Loan in monthly installments of $0.5 million. Payment of the monthly principal installments commenced on June 1, 2004 and will continue on the first day of each succeeding calendar month throughout the term of the Secured Credit Facility. Then, unless paid in full earlier, all outstanding principal and accrued and unpaid interest of the Term Loan will be due and payable in full when the Secured Credit Facility terminates in May 2007.

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Revolving Loan Advances. During the term of the Secured Credit Facility, we may receive advances of principal on the Revolving Loan at any time. However, the outstanding principal of the Revolving Loan may not at any time be greater than an amount which is determined by reference to certain eligible receivables and eligible inventory of the Company. See “Loan Balance and Availability” below. We may also make payments of principal on the Revolving Loan at any time. All outstanding principal and all accrued and unpaid interest of the Revolving Loan will be due and payable in full when the Secured Credit Facility terminates in May 2007.

Loan Balance and Availability. As of November 30, 2005, the outstanding principal balance of the Secured Credit Facility was $57.1 million. Taking into consideration the limitations on our ability to obtain additional advances of principal from the Revolving Loan (see “Revolving Loan Advances” above) and the Minimum Availability Requirement (see "Covenant Compliance" below), as of November 30, 2005, our availability under the Secured Credit Facility was
$23.5 million.

Covenant Compliance. We are subject to certain financial and non-financial covenants under the Secured Credit Facility. In addition to other requirements that are set forth in such covenants, we are required to maintain: i) either a qualified cash reserve balance or an undrawn availability on the Revolving Loan of not less than $5.0 million ("Minimum Availability Requirement"), ii) minimum thresholds with respect to certain consolidated and non-consolidated earnings before interest, taxes, depreciation and amortization (“EBITDA”), and iii) a minimum ratio with respect to fixed charge coverages.

The following are the required covenant thresholds under the Secured Credit Facility for the twelve-month period ended November 30, 2005:

Consolidated EBITDA Covenant — The covenant requires a consolidated EBITDA in a minimum amount of $100.0 million. As of November 30, 2005, we were in compliance with this covenant.

Airlines EBITDA Covenant — The covenant requires an EBITDA for Airlines in a minimum amount of $85.0 million. As of November 30, 2005, Airlines was in compliance with this covenant.

Fixed Charge Coverage Covenant — The covenant requires a fixed charge coverage in a minimum ratio of 1.05 to 1.00. As of November 30, 2005, we were in compliance with this covenant. For future periods, the fixed charge coverage covenant requires a minimum ratio of 1.10 to 1.00.

In addition, the amount of capital expenditures that may be made by us in any fiscal year is limited to $75.0 million, of which at least $10.0 million must be financed from sources other than the Secured Credit Facility. As of November 30, 2005, we were in compliance with the capital expenditures covenant.

If Aviation or any of its restricted subsidiaries violates these covenants and are unable to obtain waivers from the Wells Fargo Lenders, we would be in default under the Secured Credit Facility and the debt could be accelerated.

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Notice and Waiver of Specified Events of Default under Secured Credit Facility. On June 1, 2005, the Wells Fargo Lenders notified us that the Wells Fargo Lenders believed that we were in violation of certain covenants of the Secured Credit Facility (the "Specified Events of Default"), as follows:

	i)		occurrence of a default at the final maturity, on April 29, 2005, of the obligations under the FINOVA Note (defined below);

	ii)		failure to maintain insurance on the Collateral (as defined in the Secured Credit Facility);

	iii)		making an unpermitted investment toward the purchase of two Boeing 747 airplanes (the "VAC Boeing 747 Aircraft"); and

	iv)		unauthorized use of the proceeds from advances under the Secured Credit Facility to renovate the VAC Boeing 747 Aircraft.

The Wells Fargo Lenders further notified us that, as a result of the Specified Events of Default, the Wells Fargo Lenders had elected to charge the default rate of interest, which, as set forth in the Secured Credit Facility, is a per annum rate equal to 2 percentage points above the per annum rate otherwise applicable. The default rate of interest was charged from April 29, 2005, the date on which the Wells Fargo Lenders asserted that a default had occurred under the FINOVA Note, until June 14, 2005, the date on which the Wells Fargo Lenders, by execution of the Amendment Number Two (as defined below) waived the Specified Events of Default. At April 29, 2005, the per annum rates of interest on the Secured Credit Facility ranged from 6.09% to 8.75%.

Amendment Number Two to Secured Credit Facility. On June 14, 2005, we entered into an Amendment Number Two and Waiver to Loan and Security Agreement (the "Amendment Number Two") with the Wells Fargo Lenders whereby the Wells Fargo Lenders agreed to waive the Specified Events of Default, and both parties agreed to amend the Secured Credit Facility to allow the Company to maintain only all-risk ground insurance coverage for aircraft that the Company has grounded and taken out of service.

Amendment Number Three to Secured Credit Facility. On July 11, 2005, Ventures Acquisition Company purchased the VAC Boeing 747 Aircraft. See "Landsbanki Loan Agreement" below. On the same day, we entered into an Amendment Number Three and Consent (the "Amendment Number Three") with the Wells Fargo Lenders. Amendment Number Three amends the Secured Credit Facility to allow Airlines to i) lease the VAC Boeing 747 Aircraft from Ventures Acquisition Company (see "Lease Transactions" in "Note 11 - Related Party Transactions" below) and ii) reimburse Ventures Acquisition Company for certain out-of-pocket transaction costs incurred by Ventures Acquisition Company in connection with the purchase of the VAC Boeing 747 Aircraft. In exchange, Mr. Smith pledged to Wells Fargo Foothill, Inc., as administrative agent and for the benefit of the Wells Fargo Lenders, all of his rights, title, and interest in Ventures Acquisition Company (the "VAC Stock Pledge") as further security for repayment of the Secured Credit Facility. However, for purposes of the VAC Stock Pledge, the maximum amount of the Company's obligations under the Secured Credit Facility that was secured by the VAC Stock Pledge was limited to an amount not greater than $58.0 million minus the aggregate amount of all principal, interest and fees owed by Ventures Acquisition Company under the Landsbanki Loan Agreement.

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Amendment Number Four to Secured Credit Facility. On November 30, 2005, Aviation, its subsidiaries that are co-borrowers under the Secured Credit Facility, and the Trust, as co-guarantor, entered into Amendment Number Four to Loan and Security Agreement ("Amendment Number Four") with the Wells Fargo Lenders. The provisions of Amendment Number Four include, but are not limited to, the following amendments and modifications: i) the deletion and replacement of certain definitions utilized in the Secured Credit Facility; ii) the clarification of the business operations of Aviation and its subsidiaries; iii) the addition of certain disclosures and covenants of compliance regarding Section 1 of Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49049 (2001)) (the "USA Patriot Act"); iv) a modification of the Fixed Charge Coverage Ratio (as defined in the Secured Credit Facility) covenant compliance requirement; and v) Aviation agreed to cause the Trust to grant, for the benefit of the Wells Fargo Lenders, a security interest in all of the aircraft owned by the Trust. In addition, Amendment Number Four recognizes CapitalSource Finance LLC as the successor-in-interest to all of Ableco Finance LLC's interest in the Secured Credit Facility and as successor-in-interest to Wells Fargo Foothill, Inc.'s interest in the Term Loan.

Release of VAC Stock Pledge. In connection with the execution of Amendment Number Four, and pursuant to a letter dated December 2, 2005, Wells Fargo Foothill, Inc., in its capacity as administrative agent for the Wells Fargo Lenders, (i) terminated the VAC Stock Pledge, (ii) released and discharged Mr. Smith from all obligations under the VAC Stock Pledge, and (iii) released all liens that had been granted by Mr. Smith under the VAC Stock Pledge.

WCMA Loan Agreement

On August 12, 2003, EASL entered into Working Capital Management Account Loan Agreement No. 54F-07164
(the “WCMA Loan”) with Merrill Lynch Business Financial Services, Inc. (“Merrill Lynch”) for the purpose of obtaining an
$8.0 million reducing revolver credit facility. The WCMA Loan provides for a reducing revolver loan which is funded from a line of credit. EASL may repay the loan balance in whole or in part at any time without penalty, and may request a
re-borrowing of amounts repaid on a revolving basis. The WCMA Loan does not require monthly payments of principal. However, on the last business day of each calendar month, the maximum amount of the line of credit will be reduced by an amount equal to 1/60th of the loan amount. The WCMA Loan bears interest at the variable rate of LIBOR plus 3.0% and monthly payments of accrued interest are due and payable on the first business day of each calendar month. The WCMA Loan shall terminate on August 31, 2008, at which time all outstanding unpaid principal and all accrued and unpaid interest shall be due and payable in full. At November 30, 2005, the outstanding principal balance of the WCMA Loan was $4.5 million.

An amendment letter from Merrill Lynch, dated May 12, 2004, established certain financial covenants for the WCMA Loan that are consistent with the financial covenants contained in the Secured Credit Facility. The amendment letter established i) a schedule for fixed charge coverage ratios to be measured on a quarter-end basis, ii) a $75.0 million maximum limit on capital expenditures of which at least $10.0 million must be funded from sources other than the Secured Credit Facility, and iii) a minimum consolidated EBITDA that must be achieved by the Company on a quarter-end basis. Specifically, the amendment letter adjusted the fixed charge coverage ratios and minimum consolidated EBITDA requirements of the WCMA Loan to correspond with the fixed charge coverage ratios and consolidated EBITDA requirements of the Secured Credit Facility. See “Secured Credit Facility” above.

Covenant Compliance. As of November 30, 2005, we were in compliance with the covenants contained in the WCMA Loan. See “Secured Credit Facility” above.

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FINOVA Note

In May 1997, the Trust entered into a $30.0 million Secured Loan Agreement with FINOVA Capital Corporation
(the "FINOVA Note"), with interest at the annual rate of 10.44%. Monthly installments of principal and interest were payable through April 2005, at which time the FINOVA Note matured with a final payment of approximately $2.5 million in principal, plus accrued interest, due upon maturity. The FINOVA Note was secured by means of a first priority security interest granted to FINOVA in the Trust Boeing 747 and the three DC-9 aircraft owned by the Trust.

Effective April 29, 2005, the Trust and FINOVA executed a Third Amendment Agreement to amend and extend the FINOVA Note (the "Third Amendment"). The Third Amendment extended the maturity date of the FINOVA Note to September 29, 2005, with the annual rate of interest remaining at 10.44%. Monthly installments of principal and interest in the amount of $471,650 were scheduled through the extended maturity date, resulting in a full amortization of the remaining outstanding principal balance. In September 2005, the outstanding principal and accrued interest of the FINOVA Note was paid in full, and FINOVA's security interest in the aircraft has been released.

Intervest Note

On December 30, 2004, Vintage entered into a Construction Loan Agreement with Intervest-Mortgage Investment Company ("Intervest") whereby Intervest agreed to loan to Vintage a total of $9.0 million for the purpose of financing Vintage's construction of an IMAX theater on certain real property owned by Vintage (the "Evergreen Museum Land"). The Construction Loan Agreement is further evidenced by a Promissory Note from Vintage to Intervest in the principal sum of $9.0 million (the "Intervest Note"). At November 30, 2005, the outstanding principal balance of the Intervest Note was
$3.3 million.

The Intervest Note provides for an annual rate of interest equal to 1% in excess of the rate established for a Bank Prime Loan, as published in the Federal Reserve Statistical Release H.15 (the "Index"). The interest rate on all sums advanced under the Intervest Note shall be adjusted on the first day of each month following the date that the Bank Prime Loan rate changes in the Index, with such interest rate to be equal to 1% in excess of the week-ending average rate established for the Bank Prime Loan, as published in the Index. However, the interest rate shall never be less than 5.75% per annum. Accrued interest on the outstanding balance of sums advanced under the Intervest Note shall be due and payable on the first day of each month. In addition, following any default in the payment of interest under the Intervest Note, or any default under any of the other documents executed in connection with or to secure the Intervest Note (the "Loan Documents") and expiration of the applicable cure period, Intervest may elect to (i) declare the Intervest Note due and payable, and/or (ii) increase the rate of interest payable under the Intervest Note by three percent (3.00%) per annum.

The entire principal balance and any accrued, but unpaid, interest on the Intervest Note was originally scheduled to be due and payable on January 1, 2006. However, on November 22, 2005 and pursuant to the provisions of the Construction Loan Agreement, Vintage elected to extend the maturity date of the Intervest Note to July 1, 2006. Upon exercising its right to extend the maturity date, Vintage paid a loan extension fee to Intervest in the amount of $67,500. Vintage may, at any time, prepay the whole or any part of the Intervest Note without penalty.

Vintage's obligations under the Intervest Note and Construction Loan Agreement are secured by a security interest in i) the Evergreen Museum Land, the Evergreen Aviation Museum Building, and the tangible personal property owned by Vintage which is located on or in the Evergreen Museum Land and the Evergreen Aviation Museum Building, ii) a pledge of all rents arising out of the operation of the Evergreen Museum Land and the Evergreen Aviation Museum Building, and iii) the aircraft owned by Vintage. In addition, Mr. Smith has guaranteed payment of the amounts due under the Intervest Note and Construction Loan Agreement.

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The Construction Loan Agreement includes certain events of default, including: i) the filing of certain mechanics' liens against the Evergreen Museum Land, ii) failure to comply with the Construction Loan Agreement, the Intervest Note, the Loan Documents or any requirement of any governmental authority, iii) certain events of bankruptcy, iv) impairment of the security interest in the Evergreen Museum Land, and v) failure to construct the theater in accordance with written plans and specifications or within specified time periods.

Intervest has agreed, subject to certain conditions, to provide permanent financing for the theater following the completion of the theatre's construction.

Junior Lien Granted on Evergreen Museum Land

On November 30, 2005, Evergreen Aviation Museum entered into a Business Loan Agreement with Sterling Savings Bank ("Sterling Bank"), an affiliate of Intervest, whereby Sterling Bank agreed to loan Evergreen Aviation Museum $500,000 for the purpose of financing the construction of leasehold improvements to Evergreen Aviation Museum's gift shop, which is located in the Evergreen Aviation Museum Building. The Business Loan Agreement is further evidenced by a Promissory Note from the Museum to Sterling Bank in the principal sum of $500,000 (the "Sterling Note"). Funding of the Sterling Note occurred on December 1, 2005.

The Sterling Note provides for interest to accrue on the outstanding principal balance at an annual rate of 7.39%. Fifty-nine monthly installments of principal and interest, in the amount of $5,915 per installment, are due and payable on the 2nd day of each month, commencing on December 2, 2005, and a final installment of $301,174 will be due and payable on November 2, 2010.

Because Evergreen Aviation Museum leases the Evergreen Aviation Museum Building from Vintage, and to further induce Sterling Bank to enter into the Business Loan Agreement, Vintage agreed to grant to Sterling Bank, by means of a deed of trust, a security interest in the Evergreen Museum Land and all the buildings and improvements thereon, including the Evergreen Aviation Museum Building. Sterling Bank's security interest in the Evergreen Museum Land and the Evergreen Museum Building is subordinate to the lien held by Intervest (see "Intervest Note" above). However, in the event that Evergreen Aviation Museum defaults on its obligations under the Sterling Note, or if an event of default occurs under the deed of trust, Sterling Bank may exercise any or all of its remedies available under the deed of trust, including foreclosure and sale of the Evergreen Museum Land and the Evergreen Aviation Museum Building.

As further inducement for Sterling Bank to enter into the Business Loan Agreement, Mr. Smith has guaranteed payment of the amounts due under the Sterling Note and Business Loan Agreement.

Landsbanki Loan Agreement

On July 11, 2005, Holdings, as Guarantor, and Ventures Acquisition Company, as Borrower, entered into a $32.0 million Loan Agreement (the "Landsbanki Loan Agreement") with Landsbanki Íslands hf., as Lender, for the purpose of financing Ventures Acquisition Company's purchase of the VAC Boeing 747 Aircraft.

The Landsbanki Loan Agreement bears interest at an annual rate of LIBOR plus 2.3%. The applicable LIBOR rate is determined by reference to LIBOR periods of 30 days. Interest shall accrue daily and is payable monthly, with the applicable LIBOR rate being determined at the beginning of each monthly payment period. However, if an Event of Default (as defined in the Landsbanki Loan Agreement) has occurred and is continuing, then the Landsbanki Loan Agreement shall bear interest at a rate that is 2% per annum higher than the otherwise applicable rate. Monthly installments of principal and accrued interest in the amount of $680,000 per installment are due and payable on the 11th day of each month through the maturity date. The Landsbanki Loan Agreement will mature on July 11, 2010, at which time all outstanding principal and accrued, but unpaid, interest will be due and payable.

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The Landsbanki Loan Agreement contains certain restrictions on Holdings' ability to i) effect mergers and other changes of control and ii) enter into transactions with its affiliates. In addition, the Landsbanki Loan Agreement provides that, among other events, a default under either of the leases of the VAC Boeing 747 Aircraft (see "Lease Transactions" in "Note 11 - Related Party Transactions" below) shall constitute a default under the Landsbanki Loan Agreement. As of November 30, 2005, we are in compliance with these covenants and restrictions.

As Guarantor, Holdings has guaranteed all obligations of Ventures Acquisition Company under the Landsbanki Loan Agreement. Holdings' obligations as Guarantor under the Landsbanki Loan Agreement are absolute and unconditional.

As of November 30, 2005, the outstanding principal balance on the Landsbanki Loan Agreement was $29.9 million.

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NOTE 5 — PREPAID EXPENSES AND OTHER

Prepaid expenses and other at November 30, 2005 and February 28, 2005 consisted of the following:

			November 30, 2005
*(in thousands)*			(unaudited)		February 28, 2005


Prepaid expenses		$	3,819	$	2,442
Notes receivable - current portion			339		170

	Total	$	4,158	$	2,612

NOTE 6 — OTHER ASSETS

Other assets at November 30, 2005 and February 28, 2005 consisted of the following:

			November 30, 2005
*(in thousands)*			(unaudited)		February 28, 2005


Non-current agricultural assets		$	4,358	$	3,762
Deposits			9,289		5,933
Notes receivable			356		1,204
Finance fees, net of amortization			468		481
Other assets			305		377

	Total	$	14,776	$	11,757

NOTE 7 — SUPPORT SERVICES AND OTHER REVENUE

Support services and other revenue for the three months and nine months ended November 30, 2005 and November 30, 2004 consisted of the following:


			For the Three Months				For the Nine Months
			November 30,				November 30,

*(in thousands - unaudited)*			2005		2004		2005		2004

Systems logistics services - Airlines		$	3,980	$	252	$	6,012	$	653
Support services - Helicopters			1,315		997		3,244		2,372
Support services - Air Center			11,983		10,285		34,582		25,636
Sales of agricultural products			1,056		1,510		4,006		4,309
Support services - other			230		202		419		507

	Total	$	18,564	$	13,246	$	48,263	$	33,477

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NOTE 8 — COST OF SUPPORT SERVICES AND OTHER SUPPORT COSTS

Cost of support services and other revenue for the three months and nine months ended November 30, 2005 and November 30, 2004 consisted of the following:


			For the Three Months				For the Nine Months
			November 30,				November 30,

*(in thousands - unaudited)*			2005		2004		2005		2004

Cost of systems logistics services - Airlines		$	3,549	$	189	$	5,047	$	558
Landing fees/ground handling costs - Airlines			6,738		6,377		18,529		15,197
Cost of support services - Helicopters			593		160		1,857		475
Cost of support services - Air Center			9,869		7,489		27,928		17,347
Cost of sales of agricultural products			1,697		1,750		3,896		3,580
Cost of support services - other			49		157		135		297

	Total	$	22,495	$	16,122	$	57,392	$	37,454

NOTE 9 — OTHER NON-OPERATING INCOME (EXPENSE), NET

Other non-operating income (expense), net for the three months and nine months ended November 30, 2005 and November 30, 2004 consisted of the following:


			For the Three Months					For the Nine Months
			November 30,					November 30,

*(in thousands - unaudited)*			2005		2004			2005		2004

Gain on Asiana litigation		$	-	$	-		$	16,630	$	-
Foreign currency exchange gain (loss)			91		(20	)		322		(26	)
Write-off of unamortized loan acquisition costs			-		-			-		(3,463	)
Penalties and legal fees on loan prepayment			-		-			-		(330	)
Other non-operating income			85		41			257		369

	Total	$	176	$	21		$	17,209	$	(3,450	)

Gain on Asiana Litigation

On September 19, 2001, we filed proceedings in the United States District Court for the District of Oregon against Asiana Airlines ("Asiana") to recover amounts owed by Asiana to us pursuant to an air freight contract. See "Asiana Airlines" in "Note 12 - Contingencies and Commitments" below. On February 28, 2003, a jury returned a verdict in our favor and awarded breach of contract damages in the amount of $16.6 million. Asiana subsequently posted a $17.4 million bond with the District Court and appealed the judgment to the United States Ninth Circuit Court of Appeals.

On June 20, 2005, the Ninth Circuit Court affirmed the judgment of the District Court and issued a mandate returning the action to the District Court. Asiana did not further appeal the judgment and, on July 26, 2005, the District Court ordered disbursement to Evergreen of breach of contract damages in the amount of $16.6 million, interest in the amount of $491,000, and reimbursed costs of $38,000.

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The damages award of $16.6 million is reflected on our consolidated statement of operations within the line item "Other non-operating income (expense), net", the accrued interest award of $491,000 is included as a reduction to "Interest expense", and the award for reimbursed costs of $38,000 is included as a reduction to "Selling, general, and administrative expenses".

NOTE 10 — CASH FLOWS FROM INVESTING ACTIVITIES - OTHER ASSETS

During the nine months ended November 30, 2005 and 2004, "Cash flows from investing activities - other assets" were as follows:


			For the Nine Months Ended November 30,

*(in thousands - unaudited)*			2005			2004

Deposits on aircraft		$	(1,439	)	$	(854	)
Aircraft and parts held for sale			(4	)		(6	)
Non-current agricultural assets			(596	)		(4	)
Minority interest applied against note receivable from affiliate			-			(621	)
Payments received on notes receivable			848			101
Capitalized loan acquisition costs			(25	)		(3,464	)
Other			219			1,809

	Total	$	(997	)	$	(3,039	)

	•	Ventures Acquisition Company LLC ("Ventures Acquisition Company");
	•	Ventures Holding, Inc. ("Ventures Holding");
	•	DMS Properties; and
	•	Greenpatch Farms.

Transactions Under Mr. Smith's Employment Agreement

In March 2005, the board of directors of Holdings granted a $2.9 million bonus to Mr. Smith. Payment of the bonus was recorded by us as a part of selling, general, and administrative expenses. In accordance with the terms of the Employment Agreement, Mr. Smith utilized $2.0 million of the bonus to pay $1.4 million of principal and $0.6 million of accrued interest on obligations owed to us by Mr. Smith or his affiliates, and the remaining portion of the bonus was utilized to satisfy taxes payable by Mr. Smith or his affiliates as a result of the receipt of the bonus.

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Lease Transactions

We rent aircraft and buildings from entities that are owned by, or controlled by, Mr. Smith. During each of the three-month periods ended November 30, 2005 and November 30, 2004, we incurred rent expense for these leases in the amount of $5.0 million and $1.8 million, respectively. During the nine months ended November 30, 2005 and November 30, 2004, we incurred rent expense for these leases in the aggregate amounts of $10.4 million and $5.1 million, respectively.

In particular, Airlines leases two Boeing 747 aircraft (the "VAC Boeing 747 Aircraft") under a three-year lease from Ventures Acquisition Company, at a monthly lease rate of $345,000 per aircraft. These aircraft leases are subject and subordinate to the terms of the Landsbanki Loan Agreement (see "Landsbanki Loan Agreement" in "Note 4 - Long-Term Debt Obligations" above). In addition, Airlines' right to possession and use of the VAC Boeing 747 Aircraft is subject to the right of Landsbanki Íslands hf., as the secured lender, to repossess the VAC Boeing 747 Aircraft.

In addition, Aviation and Mr. Smith are co-beneficiaries of the Trust, which leases certain aircraft to Airlines. Specifically, Aviation and Mr. Smith share a beneficial interest in one of the assets of the Trust, the Trust Boeing 747 aircraft. Mr. Smith holds a one-third beneficial interest in the Trust Boeing 747, while Aviation holds the remaining two-thirds beneficial interest. Airlines leases the Trust Boeing 747 from the Trust.

During each of the three-month periods ended November 30, 2005 and November 30, 2004, $0.6 million of the rental income recognized by the Trust was attributable to Mr. Smith's one-third beneficial interest in the Trust Boeing 747 aircraft. During each of the nine-month periods ended November 30, 2005 and November 30, 2004, $1.9 million of the rental income recognized by the Trust was attributable to Mr. Smith's one-third beneficial interest in the Trust Boeing 747 aircraft.

Sale and Lease of Aircraft

During the current fiscal year, our EASL segment sold the following aircraft to Ventures Acquisition Company:


*(in millions)*
			Aggregate		Aggregate
Sale Date	Aircraft	Quantity	Sales Price		Cost of Sales

May 2005	Aerospatiale Model SA 330J helicopter	2	$	4.6	$	4.6
May 2005	Sikorsky Model CH-54 helicopter	1		2.1		2.1
August 2005	Learjet Model 35A aircraft	1		2.7		2.7
November 2005	Aerospatiale Model SA 330J helicopter	1		2.2		2.2

	Totals		$	11.6	$	11.6

Because EASL's cost of sales for each of the aircraft equaled the sales price, EASL did not recognize any profit from these sales.

Our Helicopters segment now leases these aircraft from Ventures Acquisition Company under three-year lease agreements.

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Notes Receivable from Affiliates

We also have a number of notes receivable from Mr. Smith, Ventures Holding, and Ventures Acquisition Company. The chart below summarizes the various notes receivable from Mr. Smith, Ventures Holdings, Inc., or Ventures Acquisition Company at November 30, 2005 and February 28, 2005:


				November 30, 2005
*(in thousands)*				(unaudited)		February 28, 2005

Notes receivable from Ventures Holdings			$	8,760	$	9,777
	(includes interest receivable of $228 and $380)
		due in annual installments of $1,134 through March 31, 2013,
		with an annual interest rate of 4%

Notes receivable from Ventures Acquisition Company				1,010		1,128
	(includes interest receivable of $26 and $33)
		due in annual installments of $146 through March 31, 2013,
		with an annual interest rate of 4%

Note receivable from Mr. Smith				4,175		4,661
	(includes interest receivable of $108 and $149)
		due in annual installments of $802 through March 31, 2013,
		with an annual interest rate of 4%

	Notes receivable from affiliates		$	13,945	$	15,566

Notes Receivable from Affiliates— In March 2005, we received $1.4 million of principal payments and $0.6 million of accrued interest payments with respect to notes receivable from affiliates. See "Transactions Under Mr. Smith's Employment Agreement" above. During the period from April 1, 2005 through November 30, 2005, the principal balances of our notes receivable from affiliates have increased by $0.4 million of accrued interest receivable.

Payables to Affiliates

As of November 30, 2005, we owed $1.2 million in accounts payable and accrued liabilities to affiliates. These payables consist primarily of a $854,000 accounts payable due from Vintage to Mr. Smith and a $380,000 charitable contribution pledge made by Aviation to Evergreen Aviation Museum.

Payable from Vintage to Mr. Smith.— During the nine months ended November 30, 2005, Mr. Smith made $854,000 of payments to third parties on behalf of Vintage. The payments made by Mr. Smith consisted primarily of: i) $163,000 of principal and interest paid on an outstanding debt owed by Vintage to a third party, and ii) $691,000 of expenses incurred by Vintage in the construction of the IMAX theatre.

Pledge Payable from Aviation to Evergreen Aviation Museum.— In November 2005, Aviation made a $780,000 charitable contribution pledge to the Evergreen Aviation Museum, of which $400,000 was paid in November 2005, resulting in a $380,000 pledge payable as of November 30, 2005. The charitable contribution expense was included on our consolidated statements of operations for the three and nine months ended November 30, 2005 in the line item "Selling, general, and administrative expense."

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NOTE 12 — CONTINGENCIES AND COMMITMENTS

LEGAL PROCEEDINGS

We are currently involved in a number of legal proceedings. While the results of these proceedings cannot be predicted with certainty, we believe, based on our examination of the subject matter of the proceedings, experience with similar proceedings, and discussion with legal counsel regarding possible outcomes, that the final outcome of such proceedings will not have a material adverse effect on our consolidated financial position, results of operations, or cash flows. As material developments related to pending litigation occur, we will reassess our potential liability and revise any estimates accordingly.

Banc of America

We are a defendant in Banc of America Securities LLC v. Evergreen International Aviation, Inc. et al., which was filed on May 22, 2003 in the Superior Court of the County of Mecklenburg in the State of North Carolina. Banc of America has alleged claims for breach of contract and quantum meruit, arising out of agreements in which Banc of America agreed to act as our financial agent in exchange for the payment of certain fees. The plaintiff has not yet specified an amount for damages.

We filed a motion to dismiss for lack of jurisdiction, but both the trial court and the North Carolina Court of Appeals have denied the motion. We are now pursuing trial in the North Carolina Business Court and are currently conducting discovery.

Asiana Airlines

On January 28, 2000, we entered into a contract with Asiana Airlines (“Asiana”) whereby we agreed to provide air freight services to Asiana in exchange for minimum payments to be made by Asiana throughout the term of the contract. The minimum payments were based on guaranteed block hour utilization and the contract was to continue through February 28, 2003. On August 28, 2001, Asiana notified us that Asiana would not make any further payments under the contract.

On September 19, 2001, we filed proceedings in the United States District Court for the District of Oregon against Asiana to recover amounts owed by Asiana to us pursuant to the contract. On February 28, 2003, a jury returned a verdict in our favor and awarded damages of $16.6 million. Asiana subsequently posted a bond with the court in the amount of $17.4 million and filed a motion for judgment as a matter of law. The district court denied the motion and Asiana appealed the judgment to the United States Ninth Circuit Court of Appeals.

On June 20, 2005, a three-judge panel of the United States Court of Appeals for the Ninth Circuit Court affirmed in all respects the judgment of the district court. In its decision, the Ninth Circuit rejected Asiana's arguments that the damage award should be reversed, holding that the District Court properly instructed the jury on the measure of Evergreen's damages and that Evergreen provided extensive evidence of its damages in accordance with Oregon law. On July 11, 2005 the Ninth Circuit Court issued a mandate returning the action to the District Court. Asiana did not appeal the judgment.

On July 26, 2005, the District Court ordered disbursement to Evergreen of breach of contract damages in the amount of $16.6 million, interest in the amount of $491,000, and reimbursed costs of $38,000. The funds were disbursed to Evergreen out of the bond posted by Asiana with the court.

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CONTINGENCIES

Claim for Losses under the Air Transportation Safety and System Stabilization Act

We may be asked to return all or a portion of the $7.2 million that we received in fiscal year 2002 for claims filed by us pursuant to the Air Transportation Safety and System Stabilization Act. As of November 30, 2005, we have not received any further correspondence and have not participated in any further negotiations regarding this matter. Currently, we do not anticipate that we will be required to return any of the $7.2 million. To the extent we need to actually pay any of these amounts, we believe that cash on hand and amounts expected to be available under our Secured Credit Facility will be sufficient to make such payments.

AIRCRAFT PURCHASE COMMITMENTS

As of November 30, 2005, we had entered into agreements to purchase the following aircraft:


*(in thousands)*
				Purchase		Deposit
	Aircraft	Quantity		Price		Paid

Bell 412EP Helicopter		1	$	7,116	$	633
Bell AB139 helicopter #1		1		7,950		150
Bell AB139 helicopters - #2, #3, & #4		3		25,400		450

Total			$	40,466	$	1,233

On December 19, 2005, Ventures Acquisition Company, an affiliate of the Company, purchased and took delivery of the Bell 412EP Helicopter. On the same day, Helicopters subsequently took possession of the aircraft under a three-year lease agreement with Ventures Acquisition Company.

Subject to finalization of financing or leasing arrangements, we expect to take delivery of the Bell AB139 helicopter #1 during fiscal year 2006, with the remaining three Bell AB139 helicopters to be delivered in fiscal year 2007. In addition, we anticipate that upon taking delivery, we will simultaneously sell and lease back the aircraft under operating lease agreements for lease terms not greater than three years.

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NOTE 13 —	SUPPLEMENTAL FINANCIAL INFORMATION FOR GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES

The Indenture Notes that were issued by Aviation are fully and unconditionally guaranteed, both jointly and severally, by Holdings, substantially all of Aviation’s subsidiaries (the “Guarantor Subsidiaries”), and the Trust (the “Non-Wholly Owned Guarantor Subsidiary”). The only subsidiaries and affiliated entities that are not obligated as guarantors under the Indenture Notes are Evergreen Agricultural Enterprises, Inc., Evergreen Vintage Aircraft Inc., and the foreign subsidiaries of the Company (collectively, the “Non-Guarantor Subsidiaries”).

The Company accounts for all investments in its subsidiaries utilizing the equity method of accounting. As a result, the net income and loss of each of the Company’s subsidiaries is reflected on the books of the Company as either an increase in, or reduction of, the Company’s equity in the earnings of each such subsidiary. For the purposes of reporting on a consolidated basis, eliminating entries are made by the Company at the holding company level in order to eliminate the balances of the Company’s investments in its subsidiaries against all intercompany balances and intercompany transactions.

The following supplemental consolidated financial statements separately present the results of operations for Evergreen Holdings, Inc., Evergreen International Aviation, Inc., the wholly-owned Guarantor Subsidiaries on a combined basis, the Non-Wholly Owned Guarantor Subsidiary, and the Non-Guarantor Subsidiaries on a combined basis, with consolidating adjustments and total consolidated amounts.


SUPPLEMENTAL CONSOLIDATED STATEMENT OF OPERATIONS - UNAUDITED
For the Three Months Ended November 30, 2005
(in thousands)


											Non-
									100%			Wholly
									Owned			Owned
			Holdings			Evergreen			Guarantor			Guarantor			Non						Consolidated
			(Parent)			(Issuer)			Subsidiaries			Subsidiary			Guarantors			Eliminations			Total

Operating revenues		$	-		$	3,750		$	222,244		$	2,841		$	1,712		$	(9,493	)	$	221,054

Operating expenses			-			-			179,468			93			1,800			(4,599	)		176,762
Selling, general, and administrative expenses			6			4,031			17,166			4			855			(4,960	)		17,102

Operating (loss) income			(6	)		(281	)		25,610			2,744			(943	)		66			27,190

Interest income (expense)			127			(2	)		(8,843	)		(4	)		(74	)		-			(8,796	)
Other non-operating income (expense), net			-			-			161			-			15			-			176

Income (loss) before minority interest,			121			(283	)		16,928			2,740			(1,002	)		66			18,570
	income taxes, and equity in
	subsidiary earnings

Equity in earnings of subsidiaries			10,485			11,040			-			-			-			(21,525	)		-

Income (loss) before minority interest			10,606			10,757			16,928			2,740			(1,002	)		(21,459	)		18,570
	and income taxes

Minority interest			-			(365	)		-			-			-			-			(365	)

Income (loss) before income taxes			10,606			10,392			16,928			2,740			(1,002	)		(21,459	)		18,205

Income tax (expense) benefit			-			79			(8,081	)		-			403			-			(7,599	)

	Net income (loss)	$	10,606		$	10,471		$	8,847		$	2,740		$	(599	)	$	(21,459	)	$	10,606

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SUPPLEMENTAL CONSOLIDATED STATEMENT OF OPERATIONS - UNAUDITED
For the Three Months Ended November 30, 2004
(in thousands)


											Non-
									100%			Wholly
									Owned			Owned
			Holdings			Evergreen			Guarantor			Guarantor			Non						Consolidated
			(Parent)			(Issuer)			Subsidiaries			Subsidiary			Guarantors			Eliminations			Total

Operating revenues		$	-		$	2,598		$	162,183		$	1,881		$	1,594		$	(13,650	)	$	154,606

Operating expenses			-			-			137,692			94			1,750			(10,564	)		128,972
Selling, general, and administrative expenses			34			3,111			14,903			-			447			(3,086	)		15,409

Operating (loss) income			(34	)		(513	)		9,588			1,787			(603	)		-			10,225

Interest income (expense)			139			(6	)		(9,023	)		(188	)		(8	)		-			(9,086	)
Other non-operating (expense) income, net			-			-			(14	)		-			35			-			21

Income (loss) before minority interest,			105			(519	)		551			1,599			(576	)		-			1,160
	income taxes, and equity in subsidiary earnings

Equity in earnings of subsidiaries			(7	)		1,397			-			-			-			(1,390	)		-

Income (loss) before minority interest			98			878			551			1,599			(576	)		(1,390	)		1,160
	and income taxes

Minority interest			-			(325	)		-			-			-			-			(325	)

Income (loss) before income taxes			98			553			551			1,599			(576	)		(1,390	)		835

Income tax (expense) benefit			-			(553	)		(349	)		-			181			(16	)		(737	)

	Net income (loss)	$	98		$	-		$	202		$	1,599		$	(395	)	$	(1,406	)	$	98

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SUPPLEMENTAL CONSOLIDATED STATEMENT OF OPERATIONS - UNAUDITED
For the Nine Months Ended November 30, 2005
(in thousands)


											Non-
									100%			Wholly
									Owned			Owned
			Holdings			Evergreen			Guarantor			Guarantor			Non						Consolidated
			(Parent)			(Issuer)			Subsidiaries			Subsidiary			Guarantors			Eliminations			Total

Operating revenues		$	-		$	11,250		$	585,632		$	6,562		$	4,963		$	(30,728	)	$	577,679

Operating expenses			-			-			476,430			280			3,999			(16,197	)		464,512
Selling, general, and administrative expenses			24			14,186			50,627			25			2,323			(14,886	)		52,299

Operating (loss) income			(24	)		(2,936	)		58,575			6,257			(1,359	)		355			60,868

Interest income (expense)			383			(6	)		(26,995	)		(104	)		(114	)		-			(26,836	)
Other non-operating income (expense), net			-			-			17,156			-			53			-			17,209

Income (loss) before minority interest,			359			(2,942	)		48,736			6,153			(1,420	)		355			51,241
	income taxes, and equity in
	subsidiary earnings

Equity in earnings of subsidiaries			29,508			32,302			-			-			-			(61,810	)		-

Income (loss) before minority interest			29,867			29,360			48,736			6,153			(1,420	)		(61,455	)		51,241
	and income taxes

Minority interest			-			(1,051	)		-			-			-			-			(1,051	)

Income (loss) before income taxes			29,867			28,309			48,736			6,153			(1,420	)		(61,455	)		50,190

Income tax benefit (expense)			-			1,031			(21,920	)		-			566			-			(20,323	)

	Net income (loss)	$	29,867		$	29,340		$	26,816		$	6,153		$	(854	)	$	(61,455	)	$	29,867

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SUPPLEMENTAL CONSOLIDATED STATEMENT OF OPERATIONS - UNAUDITED
For the Nine Months Ended November 30, 2004
(in thousands)


											Non-
									100%			Wholly
									Owned			Owned
			Holdings			Evergreen			Guarantor			Guarantor			Non						Consolidated
			(Parent)			(Issuer)			Subsidiaries			Subsidiary			Guarantors			Eliminations			Total

Operating revenues		$	-		$	7,794		$	445,970		$	5,642		$	4,443		$	(37,442	)	$	426,407

Operating expenses			-			-			376,194			280			3,580			(27,238	)		352,816
Selling, general, and administrative expenses			63			11,694			44,050			-			1,722			(10,019	)		47,510

Operating (loss) income			(63	)		(3,900	)		25,726			5,362			(859	)		(185	)		26,081

Interest income (expense)			422			(17	)		(26,653	)		(545	)		(39	)		-			(26,832	)
Other non-operating (expense) income, net			-			(3,794	)		(9	)		-			353			-			(3,450	)

Income (loss) before minority interest,			359			(7,711	)		(936	)		4,817			(545	)		(185	)		(4,201	)
	income taxes, and equity in subsidiary earnings

Equity in earnings of subsidiaries			(4,535	)		2,680			-			-			-			1,855			-

(Loss) income before minority interest			(4,176	)		(5,031	)		(936	)		4,817			(545	)		1,670			(4,201	)
	and income taxes

Minority interest			-			(948	)		-			-			-			-			(948	)

(Loss) income before income taxes			(4,176	)		(5,979	)		(936	)		4,817			(545	)		1,670			(5,149	)

Income tax (expense) benefit			-			1,692			(901	)		-			140			42			973

	Net (loss) income	$	(4,176	)	$	(4,287	)	$	(1,837	)	$	4,817		$	(405	)	$	1,712		$	(4,176	)

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SUPPLEMENTAL CONSOLIDATED BALANCE SHEET - UNAUDITED
At November 30, 2005
(in thousands)


									Non-
								100%		Wholly
								Owned		Owned
				Holdings		Evergreen		Guarantor		Guarantor		Non					Consolidated
				(Parent)		(Issuer)		Subsidiaries		Subsidiary		Guarantors		Eliminations			Total

ASSETS
	Current assets:
		Cash and cash equivalents	$	-	$	4,354	$	1,730	$	-	$	55	$	-		$	6,139
		Accounts receivable, net		-		8		77,896		639		737		-			79,280
		Receivables from affiliates		1,718		6,572		26		-		151		(6,003	)		2,464
		Other current assets		337		989		19,802		-		7,610		-			28,738

	Total current assets			2,055		11,923		99,454		639		8,553		(6,003	)		116,621

	Properties, net			1,025		3,906		492,833		11,452		49,006		(1,453	)		556,769
	Notes receivable from affiliates			11,233		-		225		-		634		-			12,092
	Investment in subsidiaries			230,059		285,753		-		-		-		(515,812	)		-
	Other assets including goodwill			-		10,411		19,634		-		4,584		-			34,629

Total assets			$	244,372	$	311,993	$	612,146	$	12,091	$	62,777	$	(523,268	)	$	720,111


LIABILITIES AND STOCKHOLDERS' EQUITY
	Current liabilities:
		Accounts payable	$	-		$	3,918		$	75,151		$	-	$	1,552	$	-		$	80,621
		Accrued liabilities		-			4,541			19,629			-		467		-			24,637
		Payables to affiliates		-			397			9			-		6,831		(6,003	)		1,234
		Accrued interest		-			1,536			29			-		2		-			1,567
		Current portion long-term debt		-			6,516			2,737			-		4,510		-			13,763

	Total current liabilities			-			16,908			97,555			-		13,362		(6,003	)		121,822

	Long-term debt			77,829			71,341			93,780			-		26,042		-			268,992
	Deferred rentals payable to affiliates			-			-			(6,316	)		6,394		-		-			78
	Deferred tax liabilities			(46,936	)		(1,335	)		160,513			-		1,791		1			114,034

	Total liabilities			30,893			86,914			345,532			6,394		41,195		(6,002	)		504,926

	Minority interest			-			1,706			-			-		-		-			1,706

	Stockholders' equity			213,479			223,373			266,614			5,697		21,582		(517,266	)		213,479

Total liabilities and stockholders' equity			$	244,372		$	311,993		$	612,146		$	12,091	$	62,777	$	(523,268	)	$	720,111

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SUPPLEMENTAL CONSOLIDATED BALANCE SHEET
At February 28, 2005
(in thousands)


									Non-
								100%		Wholly
								Owned		Owned
				Holdings		Evergreen		Guarantor		Guarantor		Non						Consolidated
				(Parent)		(Issuer)		Subsidiaries		Subsidiary		Guarantors			Eliminations			Total

ASSETS
	Current assets:
		Cash and cash equivalents	$	-	$	1,228	$	1,390	$	-	$	100		$	-		$	2,718
		Accounts receivable, net		-		9		60,861		639		846			-			62,355
		Receivables from affiliates		1,328		272		211		-		109			-			1,920
		Other current assets		252		732		27,348		-		7,634			-			35,966

	Total current assets			1,580		2,241		89,810		639		8,689			-			102,959

	Properties, net			1,729		3,306		488,089		11,732		40,514			(1,808	)		543,562
	Notes receivable from affiliates			13,127		3,110		245		-		(2,389	)		-			14,093
	Investment in subsidiaries			200,406		254,503		-		-		-			(454,909	)		-
	Other assets including goodwill			-		12,909		18,007		-		4,181			-			35,097

Total assets			$	216,842	$	276,069	$	596,151	$	12,371	$	50,995		$	(456,717	)	$	695,711


LIABILITIES AND STOCKHOLDERS' EQUITY
	Current liabilities:
		Accounts payable	$	-		$	5,327		$	66,484		$	-	$	1,021	$	2		$	72,834
		Accrued liabilities		-			4,790			19,827			-		358		-			24,975
		Payables to affiliates		-			-			2,815			-		452		-			3,267
		Accrued interest		-			7,961			28			29		14		-			8,032
		Current portion long-term debt		-			6,515			3,734			3,370		626					14,245

	Total current liabilities			-			24,593			92,888			3,399		2,471		2			123,353

	Long-term debt			78,640			57,320			133,169			-		23,731		-			292,860
	Deferred rentals payable to affiliates			-			-			(5,098	)		5,178		-		-			80
	Deferred tax liabilities			(45,410	)		(387	)		138,592			-		2,356		-			95,151

	Total liabilities			33,230			81,526			359,551			8,577		28,558		2			511,444

	Minority interest			-			655			-			-		-		-			655

	Stockholders' equity			183,612			193,888			236,600			3,794		22,437		(456,719	)		183,612

Total liabilities and stockholders' equity			$	216,842		$	276,069		$	596,151		$	12,371	$	50,995	$	(456,717	)	$	695,711

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SUPPLEMENTAL CONSOLIDATED STATEMENT OF CASH FLOWS - UNAUDITED
For the Nine Months Ended November 30, 2005
(in thousands)


											Non-
									100%			Wholly
									Owned			Owned
			Holdings			Evergreen			Guarantor			Guarantor			Non						Consolidated
			(Parent)			(Issuer)			Subsidiaries			Subsidiary			Guarantors			Eliminations			Total

Net cash provided by (used in)		$	(1,149	)	$	13,897		$	95,929		$	3,395		$	6,315		$	(31,241	)	$	87,146
	operating activities

Cash flows from investing activities:
	Purchases of property, equipment,		686			(911	)		(56,573	)		-			(9,504	)		-			(66,302	)
	and overhauls
	Proceeds from disposal of property		-			-			5,469			-			455			-			5,924
	and equipment
	Notes receivable from affiliates		-			1,894			20			-			87			-			2,001
	Other assets		-			(31,067	)		(661	)		-			(510	)		31,241			(997	)

Net cash provided by (used in)			686			(30,084	)		(51,745	)		-			(9,472	)		31,241			(59,374	)
	investing activities

Cash flows from financing activities:
	Proceeds from long-term debt		-			3,166			259			-			1,043			-			4,468
	Payments on long-term debt		-			(22,422	)		(2,942	)		(3,370	)		(85	)		-			(28,819	)
	Other financing sources		463			38,569			(41,161	)		(25	)		2,154			-			-

Net cash provided by (used in)			463			19,313			(43,844	)		(3,395	)		3,112			-			(24,351	)
	financing activities

Net increase in cash			-			3,126			340			-			(45	)		-			3,421

Cash and cash equivalents, beginning of period			-			1,228			1,390			-			100			-			2,718

	Cash and cash equivalents, end of period	$	-		$	4,354		$	1,730		$	-		$	55		$	-		$	6,139

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SUPPLEMENTAL CONSOLIDATED STATEMENT OF CASH FLOWS - UNAUDITED
For the Nine Months Ended November 30, 2004
(in thousands)


											Non-
									100%			Wholly
									Owned			Owned
			Holdings			Evergreen			Guarantor			Guarantor			Non						Consolidated
			(Parent)			(Issuer)			Subsidiaries			Subsidiary			Guarantors			Eliminations			Total

Net cash provided by (used in)		$	402		$	(9,162	)	$	62,802		$	3,318		$	(220	)	$	(1,876	)	$	55,264
	operating activities

Cash flows from investing activities:
	Purchases of property, equipment,		-			(98	)		(47,038	)		-			(1,672	)		-			(48,808	)
	and overhauls
	Proceeds from disposal of property		-			-			1,508			-			293			-			1,801
	and equipment
	Notes receivable from affiliates		-			905			29			602			85			-			1,621
	Other assets		-			(3,251	)		(1,383	)		2			(283	)		1,876			(3,039	)

Net cash (used in) provided by			-			(2,444	)		(46,884	)		604			(1,577	)		1,876			(48,425	)
	investing activities

Cash flows from financing activities:
	Proceeds from long-term debt		-			222,247			-			-			-			-			222,247
	Payments on long-term debt		-			(218,154	)		(4,022	)		(3,314	)		(5	)		-			(225,495	)
	Other financing sources		(402	)		11,621			(13,089	)		(608	)		1,566			-			(912	)

Net cash (used in) provided by			(402	)		15,714			(17,111	)		(3,922	)		1,561			-			(4,160	)
	financing activities

Net (decrease) increase in cash			-			4,108			(1,193	)		-			(236	)		-			2,679

Cash and cash equivalents, beginning of period			-			1,002			2,723			-			346			-			4,071

	Cash and cash equivalents, end of period	$	-		$	5,110		$	1,530		$	-		$	110		$	-		$	6,750

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ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains statements, which to the extent they are not recitations of historical fact, constitute "forward-looking statements" as defined in Section 21E of the Securities Exchange Act of 1934, as amended. Statements and assumptions with regard to future revenues, income and cash flows, program performance, the outcome of litigation, and planned dispositions of assets are examples of forward-looking statements. Wherever possible, we have identified these forward-looking statements by words such as "anticipates", "believes", "could", "may", "intends", "estimates", "expects", "projects", and similar phrases.

Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience or our present expectations. The risks and uncertainties to which our business is subject include, but are not limited to, those risks and uncertainties included under "Item 1A. Risk Factors" in Part II of this quarterly report. For further information regarding the risks and uncertainties associated with our business, please see the Company's other reports and filings with the SEC, including, but not limited to, our Annual Report on Form 10-K for the fiscal year ended February 28, 2005.

Readers of this Quarterly Report on Form 10-Q are cautioned not to place undue reliance on the forward-looking statements contained herein, which speak only as of the date hereof. We assume no obligation to publicly update or revise our forward-looking statements included in this report, whether as a result of new information future events or otherwise, except as required by law.

OVERVIEW

Evergreen Holdings, Inc. ("Holdings") is the holding company of Evergreen International Aviation, Inc. ("Aviation"), a leading provider of integrated air cargo transportation and aviation support services. Holdings, Aviation, and their consolidated subsidiaries (collectively, "Company", "we", "us", or "our") provide global air cargo shipping, ground handling and logistics services, helicopter transportation services, small aircraft charters, and aircraft maintenance and repair services. Our diverse fleet of commercial aircraft and helicopters gives us the capability and flexibility to provide a wide array of air cargo and transportation services to our customers.

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BUSINESS OVERVIEW

Business Segments

We conduct business in six major business segments through our wholly-owned subsidiaries:

	•	Evergreen International Airlines, Inc. ("Airlines") provides air cargo services for both international and domestic markets;

	•	Evergreen Aviation Ground Logistics Enterprise, Inc. ("EAGLE") provides full-service aviation ground handling and logistics services, including mail handling, aviation hub management, aircraft handling, cargo handling, ground system management, ground equipment maintenance, ground equipment sales and leasing, aircraft line maintenance, terminal services, aircraft de-icing and washing, check-in and ticketing, baggage acceptance and seat selection, and passenger cabin cleaning;

	•	Evergreen Helicopters, Inc. ("Helicopters") provides helicopter and small fixed-wing aircraft services throughout the world in connection with activities such as forest fire fighting, health services, aerial spraying, heavy lift construction, law enforcement, helicopter logging, petroleum support services, search and rescue, peacekeeping and relief support, helicopter skiing, and agriculture;

	•	Evergreen Air Center, Inc. ("the Air Center" or "Air Center"), an unlimited Class IV airframe repair station certified by the FAA, performs aircraft maintenance, repair and overhaul services, and aircraft storage services;

	•	Evergreen Aircraft Sales and Leasing Co. (“EASL”) selectively buys, sells, leases, and brokers commercial aircraft, helicopters, and aircraft spare parts; and

	•	Evergreen Agricultural Enterprises, Inc. (“Agriculture”) conducts farming operations, nursery and horticulture operations, and delivers nursery and processed agricultural products to wholesale and retail customers.

Selected financial results by business segment are found in "Note 2 - Business Segments" in Item 1 of this quarterly report.

Vintage

Holdings also owns all of the outstanding common stock of Evergreen Vintage Aircraft, Inc. ("Vintage"). Vintage's assets consist primarily of the 120,000 square foot Evergreen Aviation Museum Building, which is located on approximately 29.7 acres of land near our headquarters in McMinnville, Oregon (the "Evergreen Museum Land"), and approximately 132 acres of other real property located around the Evergreen Museum Land. In addition to show-casing Howard Hughes' Spruce Goose, the Evergreen Aviation Museum Building houses and displays a unique collection of vintage aircraft, most of which are owned by Vintage. Vintage leases the Evergreen Aviation Museum Building to The Captain Michael King Smith Evergreen Aviation Educational Institute, dba Evergreen Aviation Museum, an Oregon non-profit corporation.

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Trust Created February 25, 1986

Aviation also holds a beneficial interest in the Trust Created February 25, 1986 ("Trust"). The Trust was created pursuant to the Trust Agreement, dated as of February 25, 1986, as amended and restated pursuant to the Amended and Restated Trust Agreement, dated as of August 31, 1987, as amended on August 31, 1988, and as amended and restated pursuant to the Second Amended and Restated Trust Agreement, dated as of September 29, 1995, as amended by the First Amendment thereto as of May 8, 2003, as amended by the Second Amendment thereto as of January 14, 2004, and as amended by the Third Amendment thereto as of May 10, 2004, among Evergreen International Aviation, Inc. (an assignee of Evergreen Holdings, Inc., as successor to 747, Inc. and King Christian, Inc.) and Mr. Delford M. Smith, as Beneficiaries, and Wilmington Trust Company, not in its individual capacity, but solely as Owner Trustee. The Trust assets consist primarily of one Boeing 747 aircraft (the "Trust Boeing 747") and three DC-9 aircraft. Aviation holds a 2/3 beneficial interest in the Trust Boeing 747 and all of the beneficial interest in the DC-9 aircraft. The Trust leases these aircraft to Airlines.

Controlling Shareholder and Related Parties

	•	Ventures Acquisition Company LLC ("Ventures Acquisition Company");
	•	Ventures Holding, Inc. ("Ventures Holding");
	•	DMS Properties; and
	•	Greenpatch Farms.

From time to time, we engage in transactions with Mr. Smith and the entities owned by, or controlled by, Mr. Smith. See "Note 11 - Related Party Transactions" in Item 1 of this quarterly report.

Hurricane Katrina and Hurricane Rita

Available Information

General information about us can be found at www.evergreenaviation.com. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports are available free of charge on our website at www.evergreenaviation.com/invr.html as soon as reasonably practicable after such reports are filed with, or furnished to, the SEC. Information on our website is not incorporated into this Form 10-Q or our other securities filings, and is not a part of such filings.

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RECENT ACCOUNTING PRONOUNCEMENT

As discussed in the section "Landsbanki Loan Agreement" in "Note 4 - Long-Term Debt Obligations" below, on July 11, 2005, Ventures Acquisition Company, as Borrower, and Holdings, as Guarantor, entered into a $32.0 million loan agreement with Landsbanki Íslands hf., as Lender, for the purpose of financing Ventures Acquisition Company's purchase of two Boeing 747 aircraft (the "VAC Boeing 747 Aircraft"). As discussed in the section "Lease Transactions" in "Note 11 - Related Party Transactions" below, the VAC Boeing 747 Aircraft are leased by Ventures Acquisition Company to Airlines.

Pursuant to the disclosure requirements of FIN 46-R for variable interest entities, where the Company is not the primary beneficiary, the Company is required to make certain disclosures regarding such variable interest entities. Ventures Acquisition Company is a limited liability company that is solely owned by Mr. Delford M. Smith, the Company's founder and the chairman of its board of directors. Ventures Acquisition Company is engaged in the business of purchasing aircraft and then leasing such aircraft to various subsidiaries of the Company. The Company's involvement with these rental activities began in approximately 1998. As of November 30, 2005, Ventures Acquisition Company reported unaudited total assets of approximately $86.2 million. Although the maximum exposure to loss as a result of the Company's involvement with Ventures Acquisition Company is $29.9 million as of November 30, 2005, the approximate loan to market value of those aircraft in Ventures Acquisition Company is only approximately 60.8%, based on an independent appraisal. The Company's recourse related to such exposure is limited to the amount of actual losses paid by the Company.

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RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED NOVEMBER 30, 2005
AS COMPARED TO THE THREE MONTHS ENDED NOVEMBER 30, 2004

The following table sets forth the results of operations with respect to our consolidated reportable segments for the three months ended November 30, 2005 and November 30, 2004.


				Three Months Ended November 30,

*(in millions - UNAUDITED)*				2005			2004			Change

Operating revenues:
	Flight revenue		$	167.6		$	112.4		$	55.2
	Sales of aircraft, parts and other property and equipment			3.3			1.9			1.4
	Sales of aircraft to affiliates			2.2			-			2.2
	Ground handling and logistics services revenue			29.3			27.1			2.2
	Support services and other revenue			18.6			13.2			5.4

		Total operating revenues		221.0			154.6			66.4


Operating expenses:
	Flight costs			25.0			19.8			5.2
	Fuel			65.4			35.6			29.8
	Maintenance			19.4			19.3			0.1
	Aircraft and equipment			15.1			12.7			2.4
	Cost of sales of aircraft, parts, and other property and equipment			2.4			1.0			1.4
	Cost of sales of aircraft to affiliates			2.2			-			2.2
	Cost of ground handling and logistics services			24.7			24.5			0.2
	Cost of support services and other support costs			22.5			16.1			6.4
	Selling, general, and administrative expenses			17.1			15.4			1.7

		Total operating expenses		193.8			144.4			49.4

		Income from operations		27.2			10.2			17.0

Non-operating income (expense):
	Interest expense			(8.8	)		(9.1	)		0.3
	Other non-operating income, net			0.2			-			0.2

Income before minority interest and income taxes				18.6			1.1			17.5

	Minority interest			(0.4	)		(0.3	)		(0.1	)

Income before income taxes				18.2			0.8			17.4

	Income tax expense			(7.6	)		(0.7	)		(6.9	)

		Net income	$	10.6		$	0.1		$	10.5

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Operating Revenue

Total operating revenues for the three months ended November 30, 2005 were $221.0 million, which was a $66.4 million, or 42.9%, increase from total operating revenues of $154.6 million for the three months ended November 30, 2004.

Flight Revenue — Flight revenue accounted for $167.6 million, or approximately 75.8%, of our total operating revenue during the three months ended November 30, 2005. Compared to the three months ended November 30, 2004, we experienced a $55.2 million, or 49.1%, increase in our flight revenue.

• Airlines — During the three months ended November 30, 2005, Airlines generated $146.8 million of flight revenue, as compared to $104.1 million during the three months ended November 30, 2004, resulting in a $42.7 million increase. The increase was attributable to increased revenues from both USAF Air Mobility Command contracts and commercial flight activity.

USAF Air Mobility Command Contracts — Flight revenue earned by Airlines under USAF Air Mobility Command contracts increased by $23.9 million during the three months ended November 30, 2005, as compared to the three months ended November 30, 2004. Approximately $6.0 million of the increase is attributable to increased flight activity during the current fiscal year. The remaining $17.9 million increase is primarily attributable to increases in contract rates for pegged fuel price adjustments. The increased revenues from fuel price adjustments are offset by increased costs in our fuel expense. See "Fuel - Airlines" below.

Commercial Contracts — During the three months ended November 30, 2005, flight revenue from our commercial customers increased by $18.8 million, as compared to the three months ended November 30, 2004. Approximately $9.1 million of the increase was attributable to increased flight activity in our Boeing 747 fleet for commercial flights out of Asia, while the remaining $9.7 million increase was attributable to higher contract rates. The increase in contract rates was attributable to i) higher negotiated rates on new and renewing contracts and ii) increases in contract rates for pegged fuel price adjustments. The increased revenues from fuel price adjustments are offset by increased costs in our fuel expense. See "Fuel - Airlines" below.

• Helicopters — During the three months ended November 30, 2005, Helicopters generated $20.8 million of flight revenue, as compared to $8.3 million during the three months ended November 30, 2004, resulting in a $12.5 million increase in revenue. Of the increase, $7.8 million was attributable to revenue from hurricane relief operations. New service contracts with the United Nations and additional long-term contracts with the United States Navy also increased revenue by $3.4 million. The remaining increase of $1.3 million was attributable to an increase in contracts for heavy construction and air-lift services.

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Sales of Aircraft, Parts, and Other Property and Equipment — Revenue from sales of aircraft, parts, and other property and equipment was $3.3 million during the three months ended November 30, 2005, as compared to $1.9 million during the three months ended November 30, 2004, resulting in a $1.4 million, or 73.7%, increase in sales revenue.

	• Airlines —Sales revenue in our Airlines segment increased by $1.2 million, primarily due to the sale of four Pratt & Whitney Model JT8D engines during the three months ended November 30, 2005.

	• EASL —Sales revenue in our EASL segment decreased by approximately $0.3 million, primarily due to a lower volume of aircraft part-out sales during the three months ended November 30, 2005.

	• Agriculture —A $0.5 million increase in sales of other assets in our Agriculture segment was primarily due to the sale of a parcel of land during the three months ended November 30, 2005, as compared to the three months ended November 30, 2004.

Sales of Aircraft to Affiliates —Revenue from sales of aircraft to affiliates was $2.2 million during the three months ended November 30, 2005, as compared to $0 in sales during the three months ended November 30, 2004. During the three months ended November 30, 2005, EASL sold a Aerospatiale Model SA330J helicopter (the "Aerospatiale Aircraft") to Ventures Acquisition Company for $2.2 million, with a corresponding cost of sales of $2.2 million. Thus, EASL did not recognize any profit from the sale. See "Operating Expenses - Cost of Sales of Aircraft to Affiliates" below. Ventures Acquisition Company leases the Aerospatiale Aircraft to our Helicopters segment under a three-year lease agreement.

Ground Handling and Logistics Services Revenue — Our EAGLE segment generated $29.3 million of revenue from ground handling and logistics services during the three months ended November 30, 2005, as compared $27.1 million of revenue during the three months ended November 30, 2004, resulting in a $2.2 million, or 8.1%, increase in revenue.

	United States Postal Service. Approximately $2.0 million of the increase is attributable to an increase in volume of services provided by EAGLE under its shared network contract with the U.S. Postal Service.

	Commercial Customers. An increase in volume of services provided by EAGLE to its domestic and international commercial customers accounted for the remaining $0.2 million increase in revenue.

Support Services and Other Revenue — Support services and other revenue was $18.6 million during the three months ended November 30, 2005, as compared to $13.2 million during the three months ended November 30, 2004, resulting in a
$5.4 million, or 40.9%, increase in revenue.

	• Air Center — An increase in the level of heavy aircraft maintenance and line maintenance services provided by the Air Center to third parties resulted in a $1.7 million increase in support services revenue.

	• Airlines —An increase in the volume of air and ground transportation logistics services provided to third parties by a division of our Airlines segment resulted in a $3.6 million increase in support services revenue.

	• Other —Revenue from support services provided to third parties by our Helicopters and EASL segments increased by approximately $0.6 million. However, decreased sales of nursery plants (particularly in areas affected by Hurricanes Katrina and Rita) resulted in a $0.5 million reduction of revenue in our Agriculture segment.

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Operating Expenses

Total operating expenses during the three months ended November 30, 2005 were $193.4 million, which was a
$49.0 million, or 33.9%, increase from $144.4 million of expense during the three months ended November 30, 2004.

Flight Costs — Flight costs were $25.0 million during the three months ended November 30, 2005, as compared to
$19.8 million of expense during the three months ended November 30, 2004, resulting in a $5.2 million, or 26.3% increase in expense.

• Airlines — Flight costs for Airlines increased by $4.0 million, primarily as a result of (i) a $1.7 million increase in commissions paid on USAF Air Mobility Command contracts and (ii) a $2.3 million increase in crew costs and overfly charges that resulted from an increase in the number of crews required to operate the two VAC Boeing 747 Aircraft that were added to Airlines' fleet. See "Lease Transactions" in "Note 11 - Related Party Transactions" in Item 1 of this quarterly report.

• Helicopters — Flight costs for Helicopters increased by $1.2 million, primarily due to the additional flight crew costs, training costs, and travel expenses associated with an increase in the number of helicopter contracts for the current fiscal year, as compared to the prior fiscal year.

Fuel — Fuel expense was $65.4 million during the three months ended November 30, 2005, as compared to
$35.6 million of expense during the three months ended November 30, 2004, resulting in a $29.8 million, or 83.7%, increase in fuel expense.

• Airlines — Airlines' fuel expense increased by $29.1 million. Approximately $25.3 million of the increase in fuel expense was attributable to sharply rising prices for aviation fuel within the commercial flight sector. An additional $3.8 million increase in fuel expense was attributable to an increase in the number of block hours flown by our aircraft under USAF Air Mobility Command and commercial contracts.

• Helicopters — A $0.7 million increase in Helicopters' fuel expense was primarily attributable to the increase in helicopter flight hours which resulted from corresponding increases in helicopter services contracts for the current fiscal year, as compared to the prior fiscal year.

Maintenance — Aircraft maintenance expense was $19.4 million during the three months ended November 30, 2005, as compared to $19.3 million of expense during the three months ended November 30, 2004, resulting in a $0.1 million, or 0.5%, increase in expense.

• Airlines — Maintenance expenses for our Airlines segment decreased by approximately $0.8 million. The decrease was primarily attributable to i) $2.5 million of expense incurred in the prior fiscal year in connection with the return of two leased DC-9 aircraft and ii) a $0.6 million decrease in maintenance expense due to decreased DC-9 aircraft flight activity during the current fiscal year. These decreases were partially offset by an approximate $2.3 million increase in maintenance expense for our Boeing 747 fleet due to increased utilization during the current fiscal year.

• Helicopters — Maintenance expense for Helicopters' aircraft increased by approximately $0.9 million. The increase in maintenance was primarily attributable to the increased flight activity which resulted from corresponding increases in helicopter services contracts for the current fiscal year, as compared to the prior fiscal year.

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Aircraft and Equipment Expense — Aircraft and equipment expense was $15.1 million during the three months ended November 30, 2005, as compared to $12.7 million of expense during the three months ended November 30, 2004, resulting in a $2.4 million, or 18.9%, increase in expense.

• Airlines — Aircraft and equipment expense for our Airlines segment increased by $0.4 million during the three months ended November 30, 2005, as compared to the three months ended November 30, 2004. The increase in expense was primarily attributable to: i) a $2.1 million increase in rental expense due to the new aircraft leases for the two VAC Boeing 747 Aircraft (see "Lease Transactions" in "Note 11 - Related Party Transactions" in Item 1 of this quarterly report), as partially offset by a decrease in leased engine expense, and ii) a $0.2 million increase in depreciation expense. These increases in expense were partially offset by i) a $1.2 million decrease in rental expense due to the return of two leased DC-9 aircraft in the prior fiscal year and ii) a $0.7 million decrease in expense that was attributable to impairment charges recognized in the prior fiscal year in connection with the return of the two leased DC-9 aircraft.

• Helicopters — A $2.0 million increase in aircraft and equipment expense for our Helicopters segment was primarily attributable to an increase in helicopter lease expenses. During the current fiscal year, Helicopters has increased the number of aircraft in its leased aircraft fleet in order to service its long-term commercial contracts. Most of these aircraft are being leased for three-year terms.

Cost of Sales of Aircraft, Parts, and Other Property and Equipment — Cost of sales of aircraft, parts, and other property and equipment was $2.4 million during the three months ended November 30, 2005, as compared to $1.0 million of expense during the three months ended November 30, 2004, resulting in a $1.4 million, or 140.0%, increase in cost of sales.

	• Airlines — Approximately $1.8 million of the increase in cost of sales was attributable to the sales of four Pratt & Whitney Model JT8D engines by our Airlines segment. See "Operating Revenue - Sales of Aircraft, Parts, and Other Property and Equipment" above.

	• EASL — EASL's cost of sales decreased by approximately $0.5 million, primarily due to a lower volume of aircraft part-out sales during the current fiscal year.

	• Agriculture — Agriculture's cost of sales of assets increased by $0.1 million due to increased sales of land during the three months ended November 30, 2005.

Cost of Sales of Aircraft to Affiliates — During the three months ended November 30, 2005, EASL sold an Aerospatiale Model SA330J helicopter to Ventures Acquisition Company for $2.2 million, with a corresponding cost of sales of $2.2 million. Thus, EASL did not recognize any profit from the sale of the aircraft. See "Operating Revenue - Sales of Aircraft to Affiliates" above. During the three months ended November 30, 2004, we did not have any sales of aircraft to affiliates.

Cost of Ground Handling and Logistics Services — Cost of ground handling and logistics services was $24.7 million during the three months ended November 30, 2005, as compared to $24.5 million of expense during the three months ended November 30, 2004, resulting in a $0.2 million, or 0.8%, increase in expense. The increase was primarily attributable to increases in labor and equipment expense due to an increased volume of services provided by EAGLE to its customers.

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Cost of Support Services and Other Support Costs — Cost of support services and other revenue was $22.5 million during the three months ended November 30, 2005, as compared to $16.1 million of expense during the three months ended November 30, 2004, resulting in a $6.4 million, or 39.8%, increase in support costs. Support costs increased in the following areas:

	• Airlines — approximately $0.3 million of the increase was attributable to increased landing fees and ground handling expenses, while an additional $3.3 million was attributable to increased costs associated with the increased volume of air and ground transportation logistics services provided to third parties by a division of our Airlines segment;

	• Air Center — approximately $2.4 million of the increase was attributable to increased support costs for providing heavy aircraft maintenance and line maintenance services; and

	• Helicopters — approximately $0.4 million of the increase was attributable to support costs for the provision of non-flight helicopter support services.

Selling, General, and Administrative — Total selling, general, and administrative expense during the three months ended November 30, 2005 was $17.1 million, as compared to $15.4 million of expense during the three months ended November 30, 2004, resulting in a $1.7 million, or 11.0% increase in expense. The increase was primarily attributable to increases in payroll, travel, legal and consulting services, and supplies.

Interest Expense

Interest expense during the three months ended November 30, 2005 was $8.8 million, which was a $0.3 million, or 3.3%, decrease from $9.1 million of interest expense during the three months ended November 30, 2004. A decrease in interest expense due to reductions of our outstanding debt balances was partially offset by an increase in interest expense due to higher interest rates being charged by our lenders.

	Decrease in Expense. Reductions of our outstanding debt balances during the current fiscal year resulted in a $0.9 million decrease in interest expense during the three months ended November 30, 2005, as compared to the three months ended November 30, 2004.

	Increase in Expense. Higher interest rates charged by our lenders resulted in an approximate $0.6 million increase in interest expense during the three months ended November 30, 2005, as compared to the three months ended November 30, 2004.

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Other Non-Operating Expense and Income

During the three months ended November 30, 2005, we recognized $0.2 million of other non-operating income, which was a $0.2 million increase in income from $0 of other non-operating income during the three months ended November 30, 2004. The increase was primarily attributable to foreign currency exchange gains recognized in the current fiscal year.

Income Tax Expense

Our income tax expense for the three months ended November 30, 2005 was $7.6 million, as compared to an income tax expense of $0.7 million for the three months ended November 30, 2004, resulting in a $6.9 million increase in expense. The increase in income tax expense was attributable to a $17.4 million increase in pre-tax income for the three months ended November 30, 2005, as compared to the three months ended November 30, 2004. The income tax expense for the three months ended November 30, 2005, and the income tax expense for the three months ended November 30, 2004 were both computed at the statutory rate of 34.0% for federal tax and a blended rate of approximately 4.13% for state taxes.

The following table sets forth the calculation of our income tax benefit (expense) for the three months ended November 30, 2005 and November 30, 2004:


		Three Months Ended
		November 30,

*(in thousands)*		2005			2004

Income before income taxes	$	18,205		$	835

Combined federal and state tax rates		38.13	%		38.13	%

"Expected" income tax expense		(6,942	)		(318	)

Other adjustments		(657	)		(419	)

Income tax expense	$	(7,599	)	$	(737	)

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RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED NOVEMBER 30, 2005
AS COMPARED TO THE NINE MONTHS ENDED NOVEMBER 30, 2004

The following table sets forth the results of operations with respect to our consolidated reportable segments for the nine months ended November 30, 2005 and November 30, 2004.


				Nine Months Ended November 30,

*(in millions - UNAUDITED)*				2005			2004			Change

Operating revenues:
	Flight revenue		$	415.9		$	302.1		$	113.8
	Sales of aircraft, parts and other property and equipment			13.0			6.5			6.5
	Sales of aircraft to affiliates			11.6			2.7			8.9
	Ground handling and logistics services revenue			88.9			81.6			7.3
	Support services and other revenue			48.3			33.5			14.8

		Total operating revenues		577.7			426.4			151.3


Operating expenses:
	Flight costs			68.0			55.7			12.3
	Fuel			148.4			90.0			58.4
	Maintenance			56.3			55.3			1.0
	Aircraft and equipment			41.3			37.0			4.3
	Cost of sales of aircraft, parts, and other property and equipment			6.8			2.4			4.4
	Cost of sales of aircraft to affiliates			11.6			2.7			8.9
	Cost of ground handling and logistics services			74.7			72.2			2.5
	Cost of support services and other support costs			57.4			37.5			19.9
	Selling, general, and administrative expenses			52.3			47.5			4.8

		Total operating expenses		516.8			400.3			116.5

		Income from operations		60.9			26.1			34.8

Non-operating income (expense):
	Interest expense			(26.8	)		(26.8	)		-
	Other non-operating income (expense), net			17.2			(3.5	)		20.7

Income (loss) before minority interest and income taxes				51.3			(4.2	)		55.5

	Minority interest			(1.1	)		(0.9	)		(0.2	)

Income (loss) before income taxes				50.2			(5.1	)		55.3

	Income tax (expense) benefit			(20.3	)		0.9			(21.2	)

		Net income (loss)	$	29.9		$	(4.2	)	$	34.1

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Operating Revenue

Total operating revenues for the nine months ended November 30, 2005 were $577.7 million, which was a
$151.3 million, or 35.5%, increase from total operating revenues of $426.4 million for the nine months ended November 30, 2004.

Flight Revenue — Flight revenue accounted for $415.9 million, or approximately 72.0%, of our total operating revenue during the nine months ended November 30, 2005. Compared to the nine months ended November 30, 2004, we experienced a $113.8 million, or 37.7%, increase in our flight revenue.

• Airlines — During the nine months ended November 30, 2005, Airlines generated $364.0 million of flight revenue, as compared to $271.8 million during the nine months ended November 30, 2004, resulting in a $92.2 million increase. The increase was attributable to increased revenues from both USAF Air Mobility Command contracts and commercial flight activity.

USAF Air Mobility Command Contracts — Flight revenue earned by Airlines under USAF Air Mobility Command contracts increased by $55.9 million during the nine months ended November 30, 2005, as compared to the nine months ended November 30, 2004. Approximately $22.3 million of the increase was due to increased utilization of commercial aircraft by the USAF Air Mobility for movements of cargo into Iraq and other military locations. The remaining $33.6 million increase is primarily attributable to an increase in contract rates for pegged fuel price adjustments. The increased revenues from fuel price adjustments are offset by increased costs in our fuel expense. See "Fuel - Airlines" below.

Commercial Contracts — During the three months ended November 30, 2005, flight revenue from our commercial customers increased by $36.3 million as compared to the nine months ended November 30, 2004. Approximately $13.8 million of the increase was attributable to increased flight activity in our Boeing 747 fleet for commercial flights out of Asia, while the remaining $22.5 million increase was attributable to higher contract rates. The increase in contract rates was attributable to both higher negotiated rates on new and renewing contracts, and increases in contract rates for pegged fuel price adjustments. The increased revenues from fuel price adjustments are offset by increased costs in our fuel expense. See "Fuel - Airlines" below.

• Helicopters — During the nine months ended November 30, 2005, Helicopters generated $51.9 million of flight revenue, as compared to $30.3 million during the nine months ended November 30, 2004, resulting in a $21.6 million increase in revenue. Of the increase, $12.0 million was attributable to new service contracts with the United Nations and additional long-term contracts with the United States Navy. Revenue from hurricane relief operations accounted for a $7.8 million increase in flight revenue. The remaining increase of $1.8 million was attributable to an increase in contracts for heavy construction and air-lift services.

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Sales of Aircraft, Parts, and Other Property and Equipment — Revenue from sales of aircraft, parts, and other property and equipment was $13.0 million during the nine months ended November 30, 2005, as compared to $6.5 million during the nine months ended November 30, 2004, resulting in a $6.5 million, or 100.0%, increase in sales revenue.

	• Airlines —Revenue from sales of engines and aircraft parts increased by approximately $1.0 million, primarily due to the sale of four Pratt & Whitney Model JT8D engines during the three months ended November 30, 2005.

	• Helicopters — Approximately $2.8 million of the increase in sales revenue was attributable to various aircraft sales (which included a Lockheed Model C130E fixed-wing aircraft and a Bell Model 206L-III rotor-wing aircraft) to third party purchasers during the nine months ended November 30, 2005.

	• Air Center — Approximately $1.5 million of the increase in sales revenue was attributable to increased sales of aircraft hulls, engines, and engine parts in our Air Center segment.

	• EASL —An approximate $0.7 million increase in sales revenue was primarily attributable to an overall increase in aircraft part-out sales during the current fiscal year.

	• Agriculture —A $0.5 million increase in sales of other assets in our Agriculture segment was primarily due to the sale of a parcel of land during the nine months ended November 30, 2005, as compared to the nine months ended November 30, 2004.

Sales of Aircraft to Affiliates — Revenue from sales of aircraft to affiliates was $11.6 million during the nine months ended November 30, 2005, as compared to $2.7 million during the nine months ended November 30, 2004, resulting in an $8.9 million, or 329.6%, increase in sales revenue. The $8.9 million increase in sales revenue was attributable to the following sales by our EASL segment to Ventures Acquisition Company during the nine months ended November 30, 2005:

	•	sales of three Aerospatiale Model SA 330J rotor-wing aircraft (the "Puma Aircraft") for an aggregate sales of $6.8 million; and

	•	the sale of a Sikorsky CH-54 rotor-wing aircraft (the "Sikorsky CH-54 Aircraft") for an aggregate sales price of $2.1 million.

In addition, during each of the nine-month periods ended November 30, 2005 and November 30, 2004, EASL sold a Learjet Model 35A aircraft to Ventures Acquisition Company for $2.7 million per aircraft.

Because the sales prices of the Puma Aircraft, the Sikorsky CH-54 Aircraft, and the Learjet aircraft were the same as EASL's inventory costs for the aircraft, EASL did not recognize any profit from these sales. See "Note 11 - Related Party Transactions - Sale and Lease of Aircraft" under Item 1 in Part I of this quarterly report.

Ventures Acquisition Company leases all of these aircraft to our Helicopters segment under three-year lease agreements. See "Note 11 - Related Party Transactions - Sale and Lease of Aircraft" under Item 1 in Part I of this quarterly report.

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Ground Handling and Logistics Services Revenue — Our EAGLE segment generated $88.9 million of revenue from ground handling and logistics services during the nine months ended November 30, 2005, as compared $81.6 million during the nine months ended November 30, 2004, resulting in a $7.3 million, or 9.0%, increase in revenue.

	Commercial Customers. An increase in volume of services provided by EAGLE to its domestic and international commercial customers accounted for the $8.3 million increase in EAGLE's revenues from commercial contracts. Approximately $8.0 million of that increase was attributable to an expansion in the volume of ground handling and logistics services provided by EAGLE to British Airways.

	United States Postal Service. EAGLE's revenue from contracts with the U.S. Postal Service decreased by approximately $1.0 million. The decrease was primarily attributable to a $2.3 million reduction in volume of services provided under the U.S. Postal Service's Hub and Spoke Program ("HASP"), as partially offset by a $1.3 million increase in volume of ground handling services provided at the U.S. Postal Service's air terminal locations.

Support Services and Other Revenue — Support services and other revenue was $48.3 million during the nine months ended November 30, 2005, as compared to $33.4 million during the nine months ended November 30, 2004, resulting in a
$14.8 million, or 44.2%, increase in revenue.

	• Air Center — An increase in the level of heavy aircraft maintenance, line maintenance services, and aircraft storage services provided by the Air Center to third parties resulted in a $8.9 million increase in support services revenue.

	• Airlines —An increase in the volume of air and ground transportation logistics services provided to third parties by a division of our Airlines segment resulted in a $5.3 million increase in support services revenue.

	• Helicopters —An increase in the volume of non-flight helicopter support services provided to third parties by our Helicopters segment resulted in a $0.9 million increase in support services revenue.

	• Agriculture —A $0.5 million decrease in revenue from sales of nursery plants was partially offset by an approximate $0.2 million increase in revenue from sales of wheat, straw, and grass seed.

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Operating Expenses

Total operating expenses during the nine months ended November 30, 2005 were $516.4 million, which was a $116.1 million, or 29.0%, increase from $400.3 million of expense during the nine months ended November 30, 2004.

Flight Costs — Flight costs were $68.0 million during the nine months ended November 30, 2005, as compared to $55.7 million of expense during the nine months ended November 30, 2004, resulting in a $12.3 million, or 22.1% increase in expense.

• Airlines — Flight costs for Airlines increased by $9.3 million, primarily as a result of increased commissions paid on USAF Air Mobility Command and commercial contracts.

	Increases in Expense. The increased flight activity for USAF Air Mobility Command and commercial contracts resulted in a $6.4 million increase in the amount of commissions that Airlines paid on those contracts. Also, with the increased flight activity, crew costs and overfly charges increased by approximately $3.9 million.

	Decreases in Expense. The completion of a DHL air freight services contract during the prior fiscal year resulted in current fiscal year reductions in DC-9 crew costs by approximately $1.0 million.

• Helicopters — Flight costs for Helicopters increased by $3.0 million, primarily due to the additional flight crew costs, training costs, and travel expenses associated with an increase in the number of helicopter contracts for the current fiscal year, as compared to the prior fiscal year.

Fuel — Fuel expense was $148.4 million during the nine months ended November 30, 2005, as compared to $90.0 million of expense during the nine months ended November 30, 2004, resulting in a $58.4 million, or 64.9%, increase in fuel expense.

• Airlines — Airlines' fuel expense increased by $58.6 million. Approximately $47.6 million of the increase in fuel expense was attributable to sharply rising prices for aviation fuel within the commercial flight sector. Another
$11.0 million increase in fuel expense was attributable to an increase in the number of block hours flown by our aircraft for USAF Air Mobility Command and commercial contracts.

• Helicopters —Helicopters' fuel expense decreased by approximately $0.2 million. The decrease was primarily attributable to i) our customers assuming direct responsibility for the purchase of aviation fuel and ii) the classification of the cost of certain fuel sales by Helicopters to the line item "Cost of support services and other costs."

Maintenance — Aircraft maintenance expense was $56.3 million during the nine months ended November 30, 2005, as compared to $55.3 million of expense during the nine months ended November 30, 2004, resulting in a $1.0 million, or 1.8%, increase in expense.

• Airlines — Maintenance expenses for our Airlines segment decreased by approximately $1.3 million. The decrease was primarily attributable to i) $2.5 million of expense incurred in the prior fiscal year in connection with the return of two leased DC-9 aircraft and ii) a $2.2 million decrease in maintenance expense due to decreased DC-9 aircraft flight activity during the current fiscal year. These decreases were partially offset by an approximate $3.4 million increase in maintenance expense for our Boeing 747 fleet due to increased utilization during the current fiscal year.

• Helicopters — Maintenance expense for Helicopters' aircraft increased by approximately $2.3 million. The increase in maintenance was primarily attributable the increased flight activity which resulted from corresponding increases in helicopter services contracts for the current fiscal year, as compared to the prior fiscal year.

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Aircraft and Equipment Expense — Aircraft and equipment expense was $41.3 million during the nine months ended November 30, 2005, as compared to $37.0 million of expense during the nine months ended November 30, 2004, resulting in a $4.3 million, or 11.6%, increase in expense.

• Airlines — Aircraft and equipment expense for our Airlines segment decreased by $1.0 million during the nine months ended November 30, 2005, as compared to the nine months ended November 30, 2004.

	Decreases in Expense. The following factors contributed to the decrease in maintenance expense for our Airlines' segment: i) a $0.5 million reduction in aircraft insurance costs, ii) a $2.4 million reduction in engine rental expense as we began utilizing owned engines instead of leased engines, iii) a $1.1 million reduction in aircraft lease expense attributable to the expiration of a DC-9 aircraft lease. In addition, approximately $1.3 million of the reduction in current fiscal year expense was attributable to DC-9 aircraft impairment charges that we recognized in the prior fiscal year.

	Increases in Expense. These reductions were partially offset by i) a $3.7 million increase in aircraft lease expense that was primarily attributable to the addition of the VAC Boeing 747 Aircraft to our leased aircraft fleet (see "Lease Transactions" in "Note 11 - Related Party Transactions" in Item 1 of this quarterly report) and ii) a $0.6 million increase in depreciation expense.

• Helicopters — A $5.3 million increase in aircraft and equipment expense for our Helicopters segment was primarily attributable to an increase in helicopter lease expenses. During the current fiscal year, Helicopters has increased the number of aircraft in its leased aircraft fleet in order to service its long-term commercial contracts. Most of these aircraft are being leased for three-year terms.

Cost of Sales of Aircraft, Parts, and Other Property and Equipment — Cost of sales of aircraft, parts, and other property and equipment was $6.8 million during the nine months ended November 30, 2005, as compared to $2.4 million of expense during the nine months ended November 30, 2004, resulting in a $4.4 million, or 183.3%, increase in cost of sales.

	• Airlines — Cost of sales in our Airlines segment increased by approximately $1.9 million, primarily due to sales of four Pratt & Whitney JT8D engines during the current fiscal year. See "Operating Revenue - Sales of Aircraft, Parts, and Other Property and Equipment" above.

	• Helicopters — Cost of sales in our Helicopters segment increased by approximately $1.7 million due to current fiscal year sales of aircraft and parts, which included a Lockheed Model C130E fixed-wing aircraft and a Bell Model 206L-III rotor-wing aircraft.

	• Air Center — The Air Center's cost of sales increased by approximately $1.1 million due to increased sales volume of materials and parts to third parties.

	• EASL — EASL's cost of sales decreased by approximately $0.4 million, primarily due to lower volume of aircraft part-out sales during the current fiscal year.

	• Agriculture — Agriculture's cost of sales of assets increased by $0.1 million due to increased sales of land during the current fiscal year.

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Cost of Sales of Aircraft to Affiliates — Cost of sales of aircraft to affiliates was $11.6 million during the nine months ended November 30, 2005, as compared to $2.7 million during the nine months ended November 30, 2004, resulting in an $8.9 million, or 329.6%, increase in cost of sales.

The $8.9 million increase in cost of sales was attributable to the sales of the Puma Aircraft and the Sikorsky CH-54 Aircraft by our EASL segment to Ventures Acquisition Company during the current fiscal year. See "Operating Revenue - Sales of Aircraft, Parts, and Other Property and Equipment" above. In addition, during each of the nine-month periods ended November 30, 2005 and November 30, 2004, EASL sold a Learjet Model 35A aircraft to Ventures Acquisition Company for $2.7 million per aircraft.

Because the sales prices of the Puma Aircraft, the Sikorsky CH-54 Aircraft, and the Learjet aircraft were the same as EASL's inventory costs for these aircraft, EASL did not recognize any profit from these sales.

Ventures Acquisition Company leases these aircraft to Helicopters under three-year lease agreements. See "Note 11 - Related Party Transactions - Sale and Lease of Aircraft" under Item 1 of this quarterly report.

Cost of Ground Handling and Logistics Services — Cost of ground handling and logistics services was $74.7 million during the nine months ended November 30, 2005, as compared to $72.2 million of expense during the nine months ended November 30, 2004, resulting in a $2.5 million, or 3.5%, increase in expense. The increase was primarily attributable to a $1.6 million increase in labor expense and a $0.9 million increase in equipment expense attributable to expansion of services provided by EAGLE to British Airways and other commercial customers.

Cost of Support Services and Other Support Costs — Cost of support services and other revenue was $57.4 million during the nine months ended November 30, 2005, as compared to $37.5 million of expense during the nine months ended November 30, 2004, resulting in a $19.9 million, or 53.1%, increase in support costs. Cost of support services increased in the following areas:

	• Airlines — approximately $3.3 million of the increase was attributable to increased landing fees and ground handling expenses, while an additional $4.4 million was attributable to increased costs associated with the increased volume of air and ground transportation logistics services provided to third parties by a division of our Airlines segment;

	• Air Center — approximately $10.5 million of the increase was attributable to increased support costs for providing heavy aircraft maintenance, line maintenance, and aircraft storage services at the Air Center;

	• Helicopters — approximately $1.4 million of the increase was attributable to support costs for the provision of helicopter support services; and

	• Agriculture — approximately $0.2 million of the increase was attributable to increased cost of sales for wheat, straw, and grass seed sales, while approximately $0.1 million was due to an increase in crop losses.

Selling, General, and Administrative — Total selling, general, and administrative expense during the nine months ended November 30, 2005 was $52.3 million, as compared to $47.5 million of expense during the nine months ended November 30, 2004, resulting in a $4.8 million, or 10.1% increase in expense. The increase was primarily attributable to increases in payroll, travel, legal and consulting services, and supplies.

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Interest Expense

Interest expense during each of the nine months ended November 30, 2005 and November 30, 2004 was $26.8 million. During the nine months ended November 30, 2005, as compared to the nine months ended November 30, 2004, higher interest rates charged by our lenders resulted in an increase in interest expense, while reductions in our outstanding debt balances and the receipt of interest income on litigation proceeds decreased our interest expense.

	Increase in Expense. Higher interest rates charged by our lenders resulted in a $1.6 million increase in interest expense during the nine months ended November 30, 2005, as compared to the nine months ended November 30, 2004.

	Decreases in Expense. Reductions of our outstanding debt balances during the current fiscal year resulted in a $1.1 million decrease in interest expense during the nine months ended November 30, 2005, as compared to the nine months ended November 30, 2004. In addition, during the nine months ended November 30, 2005, our interest expense was reduced by $0.5 million of interest income that we received on breach of contract damages that were awarded to us in the Asiana litigation. See "Gain on Asiana Litigation" in "Note 9 - Other Non-Operating Income (Expense), Net" and "Asiana Airlines" in "Note 12 - Contingencies and Commitments" in Item 1 of this quarterly report.

Other Non-Operating Expense and Income

During the nine months ended November 30, 2005, we recognized $17.2 million of other non-operating income, which was a $20.7 million increase in income from $3.5 million of other non-operating expense during the nine months ended November 30, 2004.

Approximately $16.6 million of the increase in non-operating income is attributable to the breach of contract damages which were awarded to us in the Asiana litigation. See "Gain on Asiana Litigation" in "Note 9 - Other Non-Operating Income (Expense), Net" and "Asiana Airlines" in "Note 12 - Contingencies and Commitments" in Item 1 of this quarterly report. An additional $0.3 million of increase in non-operating income was primarily attributable to foreign currency exchange gains recognized in the current fiscal year. In addition, non-operating expenses decreased during the current fiscal year by approximately $3.8 million, primarily due to the loan prepayment penalties, legal fees, and the write-off of unamortized loan acquisition costs which we incurred in the prior fiscal year in conjunction with the full repayment and termination of our previous revolving line of credit.

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Income Tax Expense

Our income tax expense for the nine months ended November 30, 2005 was $20.3 million, as compared to an income tax benefit of $0.9 million for the nine months ended November 30, 2004, resulting in a $21.2 million increase in expense. The increase in income tax expense was attributable to a $55.3 million increase in pre-tax income for the nine months ended November 30, 2005, as compared to the nine months ended November 30, 2004. The income tax expense for the nine months ended November 30, 2005, and the income tax benefit for the nine months ended November 30, 2004 were both computed at the statutory rate of 34.0% for federal tax and a blended rate of approximately 4.13% for state taxes.

The following table sets forth the calculation of our income tax benefit (expense) for the nine months ended November 30, 2005 and November 30, 2004:


		Nine Months Ended
		November 30,

*(in thousands)*		2005			2004

Income (loss) before income taxes	$	50,190		$	(5,149	)

Combined federal and state tax rates		38.13	%		38.13	%

"Expected" income tax (expense) benefit		(19,137	)		1,963

Other adjustments		(1,186	)		(990	)

Income tax (expense) benefit	$	(20,323	)	$	973

LIQUIDITY

At November 30, 2005, we had cash and cash equivalents of $6.1 million, as compared to cash and cash equivalents of
$2.7 million at February 28, 2005.

Cash Flows from Operating Activities

During the nine months ended November 30, 2005, we generated $87.1 million of cash from our operating activities, as compared to $55.3 million of cash generated from operating activities during the nine months ended November 30, 2004.

During the Nine Months Ended November 30, 2005 —Net income of $29.9 million, non-cash depreciation and amortization expenses of $49.9 million, an $18.9 million increase in deferred income taxes, a $9.1 million decrease in inventories, and a $1.3 million increase in accounts payable accounted for most of our positive cash flow from operating activities during the nine months ended November 30, 2005. Of the $29.9 million of positive cash from net income, $16.6 million came from the breach of contract damages that were awarded to us in the Asiana litigation, and an additional $0.5 million came from the interest on that award. See "Gain on Asiana Litigation" in "Note 9 - Other Non-Operating Income (Expense), Net" and "Asiana Airlines" in "Note 12 - Contingencies and Commitments" in Item 1 of this quarterly report.

Negative cash flows such as i) a $16.9 million increase in outstanding accounts receivable balances, ii) an approximate $1.5 million increase in prepaid assets, iii) a $2.0 million decrease in payables to affiliates, and iv) an approximate $0.5 million increase in receivables from affiliates, reduced the positive cash flow from operations to a net cash flow of $87.1 million.

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During the Nine Months Ended November 30, 2004 —In comparison, during the nine months ended November 30, 2004, non-cash depreciation and amortization expenses of $51.2 million, a $22.6 million increase in accounts payable and accrued liabilities, and a $3.5 million write-off of unamortized loan acquisition costs accounted for most of our positive cash flow from operating activities. Non-cash impairment charges on aircraft, a decrease in prepaid expenses, and payments received on accounts receivable from affiliates also increased cash flow by approximately $3.2 million.

The positive cash flow from operating activities was partially reduced primarily as a result of i) our $4.2 million net loss for the nine months ended November 30, 2004, ii) an $11.6 million increase in outstanding accounts receivable balances, iii) a $7.2 million increase in inventories, and iii) a $1.2 million increase in deferred income taxes and income taxes payable.

Cash Flows from Investing Activities

During the nine months ended November 30, 2005, we used $59.4 million of cash for investing activities, as compared to a use of $48.4 million of cash during the nine months ended November 30, 2004.

During the Nine Months Ended November 30, 2005 — Purchases of aircraft parts and airframes, scheduled overhauls of engines, and upgrades and enhancements for our aircraft resulted in a $66.3 million use of cash for capital expenditures. An increase in deposits on equipment purchases and equipment leases also accounted for an additional $1.0 million use of cash. These uses of cash were partially offset by i) $5.9 million of cash received from the disposal of property and equipment and ii) $2.0 million of cash received as payments on notes receivable from affiliates.

As of the date of this report, we have agreements to purchase four helicopters. The total commitment for the purchase of these aircraft is $33.3 million, of which $0.6 million in deposits have already been paid. We expect to finance the purchase of these aircraft primarily through third-party or affiliate financing. See "Table of Contractual Obligations" below.

During the Nine Months Ended November 30, 2004 — Purchases of aircraft parts and airframes, scheduled overhauls of engines, and upgrades and enhancements for our aircraft resulted in a $48.8 million use of cash for capital expenditures. We also used approximately $3.0 million of cash for payment of capitalized loan acquisition costs and other non-fixed assets.

These uses of cash were slightly offset by i) $1.6 million of payments received on notes receivable from affiliates and ii) $1.8 million of cash received from the disposal of property and equipment during the nine months ended November 30, 2004.

Cash Flows from Financing Activities

During the nine months ended November 30, 2005, we used $24.3 million of cash in financing activities, as compared to $4.2 million of cash that was provided from financing activities during the nine months ended November 30, 2004.

During the Nine Months Ended November 30, 2005 —During the nine months ended November 30, 2005, we received approximately $4.5 million of cash proceeds from long-term financing, and used approximately $22.2 million of cash for payments on our Secured Credit Facility and $6.6 million of cash for payments on various equipment purchase notes. Of the $22.2 million of cash used for payments on our Secured Credit Facility, approximately $17.1 million was funded from the $17.2 million award for damages, interest and costs that we received in July 2005 from the Asiana judgment. See "Gain on Asiana Litigation" in "Note 9 - Other Non-Operating Income (Expense), Net" and "Asiana Airlines" in "Note 12 - Contingencies and Commitments" in Item 1 of this quarterly report.

During the Nine Months Ended November 30, 2004 —In comparison, during the nine months ended November 30, 2004, we received approximately $222.2 million of cash proceeds from long-term financing, and used approximately $225.5 million of cash for payments on previously existing long-term debt obligations. In addition, we also made cash payments of approximately $0.9 million on various other long-term instruments, which consist primarily of equipment purchase notes.

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CAPITAL RESOURCES

At November 30, 2005, our total long-term debt balance was $282.7 million, which was a $24.4 million decrease from our long-term debt balance of $307.1 million at February 28, 2005. At November 30, 2005, our long-term debt was comprised of a $215.0 million outstanding balance on the Indenture Notes, a $57.1 million outstanding balance on the Secured Credit Facility, a $3.3 million outstanding balance on a construction loan, and outstanding balances of approximately $7.3 million on various equipment purchase notes.

Indenture Notes

The Indenture Notes were issued by Aviation on May 16, 2003, pursuant to an Indenture agreement which was executed by Aviation, as issuer, by Holdings and substantially all of the subsidiaries of Aviation, as guarantors, and by Law Debenture Trust Company of New York, as successor trustee to J.P. Morgan Trust Company, N.A., as successor trustee to Bank One, N.A., as trustee. The Indenture Notes are 12% senior second secured notes and were issued for their face value of $215.0 million.

The Indenture Notes are secured by a second priority lien, subject to certain permitted liens, on substantially all of the assets of Aviation and its domestic subsidiaries, excluding the assets of Agriculture and Evergreen Vintage Aircraft, Inc. ("Vintage"), a wholly-owned subsidiary of Holdings. The Indenture Notes are designated as senior second secured obligations. As a result, the Indenture Notes rank equally with all of Aviation’s existing senior, or unsubordinated, debt, and are senior to any of Aviation’s future senior subordinated or unsubordinated debt.

To the extent of assets securing both the Indenture Notes and the Secured Credit Facility (see "Secured Credit Facility" below), the Indenture Notes are effectively second in priority to our indebtedness under the Secured Credit Facility. However, to the extent of the assets securing the Indenture Notes, the Indenture Notes are senior to our unsecured debt obligations. In addition, the Indenture Notes are fully and unconditionally guaranteed, both jointly and severally, by Holdings, substantially all of Aviation’s subsidiaries, and the Trust. The only subsidiaries and affiliated entities that are not obligated as guarantors under the Indenture Notes are Agriculture, Vintage, and the foreign subsidiaries of the Company.

Interest Rate. The Indenture Notes bear interest at an annual fixed rate of 12%. Payments of interest are due semi-annually on May 15th and November 15th of each year. On November 14, 2005, we made the semi-annual payment of accrued interest on the Indenture Notes in the amount of $12.9 million. We funded payment of the accrued interest from our operations. The next semi-annual payment of accrued interest on the Indenture Notes, in the amount of $12.9 million, is due and payable on May 15, 2006. We intend to fund payment of the accrued interest from our operations.

Optional Redemption. The Indenture Notes will mature on May 15, 2010, at which time the outstanding principal of the Indenture Notes, plus all accrued and unpaid interest, will become due. However, we may elect to redeem the Indenture Notes prior to the maturity date. The Indenture Notes are redeemable after the dates and at the prices (expressed in percentages of principal amount on the redemption date) as set forth below:

If redeemed during the 12-month period commencing:

Redemption Price

	May 15, 2007	106 %
	May 15, 2008	103 %
	May 15, 2009 and thereafter	100 %

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Repurchase of Notes Upon Certain Asset Sales or a Change in Control. If an Asset Sale or a Change of Control (as defined in the Indenture Notes) occurs, each holder of Indenture Notes will have the right to require us to repurchase all or part of the holder's Indenture Notes at a price set forth in the Indenture Notes.

•		incur additional debt or create liens;
•		pay dividends or acquire shares of capital stock;
•		make payments on subordinated debt or make investments;
•		make distributions from restricted subsidiaries;
•		issue or sell capital stock of restricted subsidiaries;
•		issue guarantees;
•		sell or exchange assets, or make capital expenditures;
•		enter into transactions with shareholders and affiliates; and
•		effect mergers and other changes of control.

As of November 30, 2005, we were in compliance with these covenants.

If Aviation or any of its restricted subsidiaries violates any of these covenants and are unable to obtain waivers, we would be in default under the Indenture Notes and the debt could be accelerated.

Secured Credit Facility

On May 13, 2004, we entered into the Secured Credit Facility with Wells Fargo Foothill, Inc. and CapitalSource Finance LLC, as successor-in-interest to all of Ableco Finance LLC's interest in the Secured Credit Facility and as successor-in-interest to Wells Fargo Foothill, Inc.'s interest in the Term Loan (as defined herein), (collectively, “the Wells Fargo Lenders”). The Secured Credit Facility is a three-year senior secured credit facility that consists of two loans – a $50.0 million term loan (the "Term Loan") and a $50.0 million revolving loan (the "Revolving Loan"). The Secured Credit Facility is collateralized by substantially all of the assets of Aviation and its domestic subsidiaries, excluding the assets of Agriculture and Vintage.

The Secured Credit Facility terminates in May 2007, at which time all outstanding amounts of principal, accrued and unpaid interest, and any other fees and expenses owed under the Secured Credit Facility will be due and payable in full.

Interest Rates.The Term Loan bears interest at an annual rate of either LIBOR plus 5.5% or prime plus 3.0%, and the Revolving Loan bears interest at an annual rate of either LIBOR plus 3.0% or prime plus 0.5%. So long as we are not in default under the Secured Credit Facility, we may elect at any time to have interest on all or a portion of the advances on the Revolving Loan or the Term Loan calculated under the applicable LIBOR interest rate option. LIBOR interest rate elections are available for LIBOR periods of 1, 2, 3, or 6 months. Interest on a LIBOR rate loan is payable on the last day of the LIBOR period (if the elected LIBOR period is less than three months) or on the last day of each three month interval (if the elected LIBOR period is six months). For any portion of the Term Loan or Revolving Loan which is not covered by a LIBOR interest rate election, monthly payments of accrued interest are due on the first day of each month.

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Loan Balance and Availability. As of November 30, 2005, the outstanding principal balance of the Secured Credit Facility was $57.1 million. Taking into consideration the limitations on our ability to obtain additional advances of principal from the Revolving Loan (see “Revolving Loan Advances” above) and the Minimum Availability Requirement (see "Covenant Compliance" below), as of November 30, 2005, our availability under the Secured Credit Facility was $23.5 million.

Covenant Compliance. We are subject to certain financial and non-financial covenants under the Secured Credit Facility. In addition to other requirements that are set forth in such covenants, we are required to maintain: i) either a qualified cash reserve balance or an undrawn availability on the Revolving Loan of not less than $5.0 million (the "Minimum Availability Requirement"), ii) minimum thresholds with respect to certain consolidated and non-consolidated EBITDA, and iii) a minimum ratio with respect to fixed charge coverages.

The following are the required covenant thresholds under the Secured Credit Facility for the twelve-month period ending November 30, 2005:

Consolidated EBITDA Covenant — The covenant requires a consolidated EBITDA in a minimum amount of $100.0 million. As of November 30, 2005, we were in compliance with this covenant.

Airlines EBITDA Covenant — The covenant requires an EBITDA for Airlines in a minimum amount of $85.0 million. As of November 30, 2005, we were in compliance with this covenant.

In addition, the amount of capital expenditures that we may make in any fiscal year is limited to $75.0 million, of which at least $10.0 million must be financed from sources other than the Secured Credit Facility. As of November 30, 2005, we were in compliance with the capital expenditures covenant.

If Aviation or any of its restricted subsidiaries violates any of these covenants and are unable to obtain waivers from the Wells Fargo Lenders, we would be in default under the Secured Credit Facility and the debt could be accelerated.

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	i)		occurrence of a default at the final maturity, on April 29, 2005, of the obligations under the FINOVA Note (defined below);

	ii)		failure to maintain insurance on the Collateral (as defined in the Secured Credit Facility);

	iii)		making an unpermitted investment toward the purchase of two Boeing 747 airplanes (the "VAC Boeing 747 Aircraft"); and

	iv)		unauthorized use of the proceeds from advances under the Secured Credit Facility to renovate the VAC Boeing 747 Aircraft.

Amendment Number Three to Secured Credit Facility. On July 11, 2005, Ventures Acquisition Company purchased the VAC Boeing 747 Aircraft. See "Landsbanki Loan Agreement" below. On the same day, we entered into an Amendment Number Three and Consent (the "Amendment Number Three") with the Wells Fargo Lenders. Amendment Number Three amends the Secured Credit Facility to allow Airlines to i) lease the VAC Boeing 747 Aircraft from Ventures Acquisition Company and ii) reimburse Ventures Acquisition Company for certain out-of-pocket transaction costs incurred by Ventures Acquisition Company in connection with the purchase of the VAC Boeing 747 Aircraft. In exchange, Mr. Smith pledged to Wells Fargo Foothill, Inc., as administrative agent and for the benefit of the Wells Fargo Lenders, all of his rights, title, and interest in Ventures Acquisition Company (the "VAC Stock Pledge") as further security for repayment of the Secured Credit Facility. However, for purposes of the VAC Stock Pledge, the maximum amount of the Company's obligations under the Secured Credit Facility that is secured by the VAC Stock Pledge is limited to an amount not greater than $58 million minus the aggregate amount of all principal, interest and fees owed by Ventures Acquisition Company under the Landsbanki Loan Agreement.

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WCMA Loan Agreement

On August 12, 2003, EASL entered into Working Capital Management Account Loan Agreement No. 54F-07164 (the “WCMA Loan”) with Merrill Lynch Business Financial Services, Inc. (“Merrill Lynch”) for the purpose of obtaining a
$8.0 million reducing revolver credit facility. The WCMA Loan provides for a reducing revolver loan which is funded from a line of credit. EASL may repay the loan balance in whole or in part at any time without penalty, and may request a re-borrowing of amounts repaid on a revolving basis. The WCMA Loan does not require monthly payments of principal. However, on the last business day of each calendar month, the maximum amount of the line of credit will be reduced by an amount equal to 1/60th of the loan amount. The WCMA Loan bears interest at the variable rate of LIBOR plus 3.00% and monthly payments of accrued interest are due and payable on the first business day of each calendar month. The WCMA Loan shall terminate on August 31, 2008, at which time all outstanding unpaid principal and all accrued and unpaid interest shall be due and payable in full. At November 30, 2005, the outstanding principal balance of the WCMA Loan was $4.5 million.

An amendment letter from Merrill Lynch, dated May 12, 2004, established certain financial covenants for the WCMA Loan that are consistent with the financial covenants contained in the Secured Credit Facility. The amendment letter established i) a schedule for fixed charge coverage ratios, to be measured on a quarter-end basis, ii) a $75.0 million maximum limit on capital expenditures, of which, at least $10.0 million must be funded from sources other than the Secured Credit Facility, and iii) a minimum EBITDA consolidated that must be achieved by the Company on a quarter-end basis. Specifically, the amendment letter adjusted the fixed charge coverage ratios and minimum consolidated EBITDA requirements of the WCMA Loan to correspond with the fixed charge coverage ratios and consolidated EBITDA requirements of the Secured Credit Facility. See “Capital Resources – Secured Credit Facility” above.

Covenant Compliance. As of November 30, 2005, we were in compliance with the covenants of the WCMA Loan. See "Capital Resources – Secured Credit Facility" above.

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FINOVA Note

In May 1997, the Trust entered into a $30.0 million Secured Loan Agreement with FINOVA Capital Corporation (the "FINOVA Note"), with interest at the annual rate of 10.44%. Monthly installments of principal and interest were payable through April 2005, at which time the FINOVA Note matured with a final payment of approximately $2.5 million in principal, plus accrued interest, due upon maturity. The FINOVA Note was secured by means of a first priority security interest granted to FINOVA in the Trust Boeing 747 aircraft and the three DC-9 aircraft owned by the Trust.

Effective April 29, 2005, the Trust and FINOVA executed a Third Amendment Agreement to amend and extend the FINOVA Note (the "Third Amendment"). The Third Amendment extended the maturity date of the FINOVA Note to September 29, 2005, with the annual rate of interest remaining at 10.44%. Monthly installments of principal and interest in the amount of $471,650 were scheduled through the extended maturity date, resulting in a full amortization of the remaining outstanding principal balance. As of September 30, 2005, outstanding principal and accrued interest of the FINOVA Note has been paid in full, and FINOVA's security interest in the aircraft has been released.

Intervest Note

On December 30, 2004, Vintage entered into a Construction Loan Agreement with Intervest-Mortgage Investment Company ("Intervest") whereby Intervest agreed to loan to Vintage a sum total of $9.0 million for the purpose of financing Vintage's construction of an IMAX theater on the Evergreen Museum Land. The Construction Loan Agreement is further evidenced by a Promissory Note from Vintage to Intervest in the principal sum of $9.0 million (the "Intervest Note"). At November 30, 2005, the outstanding principal balance of the Intervest Note was $3.3 million.

The Intervest Note provides for an annual rate of interest equal to 1.00% in excess of the rate established for a Bank Prime Loan, as published in the Federal Reserve Statistical Release H.15 (the "Index"). The interest rate on all sums advanced under the Intervest Note shall be adjusted on the first day of each month following the date that the Bank Prime Loan rate changes in the Index, with such interest rate to be equal to 1.00% in excess of the week-ending average rate established for the Bank Prime Loan, as published in the Index. However, the interest rate shall never be less than 5.75% per annum. Accrued interest on the outstanding balance of sums advanced under the Intervest Note shall be due and payable on the first day of each month. In addition, following any default in the payment of interest under the Intervest Note, or any default under any of the other documents executed in connection with or to secure the Intervest Note (the "Loan Documents") and expiration of the applicable cure period, Intervest may elect to (i) declare the Intervest Note due and payable, and/or (ii) increase the rate of interest payable under the Intervest Note by three percent (3.00%) per annum.

Intervest has agreed, subject to certain conditions, to provide permanent financing for the theater following the completion of the theatre's construction.

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Junior Lien Granted on Evergreen Museum Land

As further inducement for Sterling Bank to enter into the Business Loan Agreement, Mr. Smith has guaranteed payment of the amounts due under the Sterling Note and Business Loan Agreement.

Landsbanki Loan Agreement

The Landsbanki Loan Agreement contains certain restrictions on Holdings' ability to i) effect mergers and other changes of control and ii) enter into transactions with its affiliates. In addition, the Landsbanki Loan Agreement provides that, among other events, a default under either of the leases of the VAC Boeing 747 Aircraft (see "Lease Transactions" in "Note 11 - Related Party Transactions" in Item 1 of this quarterly report) shall constitute a default under the Landsbanki Loan Agreement. As of November 30, 2005, we were in compliance with these covenants and restrictions.

At November 30, 2005, the outstanding principal balance on the Landsbanki Loan Agreement was $29.9 million.

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Risk of Default on Debt Obligations

Substantially all of our assets are pledged as collateral under the Company’s various debt agreements. Furthermore, the Indenture Notes and the Secured Credit Facility both contain cross-default provisions whereby an event of default under one or more debt obligations of either Aviation or its restricted subsidiaries would also result in an event of default under either, or both, the Indenture Notes and the Secured Credit Facility. In the event that we are unable to cure such defaults or obtain waivers with respect to such defaults, we are at risk that our payment obligations under either, or both, the Indenture Notes and the Secured Credit Facility will be accelerated, thereby forcing us to either obtain alternative financing or seek legal protection from our creditors.

Table of Contractual Obligations

The following table summarizes our contractual obligations as of November 30, 2005:


Contractual Obligations
(in millions)

	Payments Due by End of Fiscal Year

		2006		2007		2008		2009		2010	After 2010			Total

Long-term debt obligations	$	6.9	$	8.9	$	50.7	$	1.0	$	215.1	$	0.1	$	282.7
including current maturities
and capital leases
Operating lease obligations ⁽¹⁾		9.4		32.9		18.9		8.6		5.5		5.9		81.2
Purchase obligations ⁽²⁾		6.9		24.1		8.2		-		-		-		39.2
Other obligations ⁽³⁾		0.8		3.0		3.0		3.0		3.0		5.2		18.0

Totals	$	24.0	$	68.9	$	80.8	$	12.6	$	223.6	$	11.2	$	421.1

⁽¹⁾		Total operating lease obligations of $81.2 million include $31.4 million of lease obligations to entities owned by, or controlled by Mr. Smith, the Company's controlling shareholder.

⁽²⁾		Purchase obligations consist of purchase prices of $7.1 million for one Bell 412EP helicopter and $33.3 million for four Bell AB139 helicopters, less deposits paid of $1.2 million. See "Aircraft Purchase Commitments" in "Note 12 - Contingencies and Commitments" in Item 1 of this quarterly report.

		On December 19, 2005, Ventures Acquisition Company, an affiliate of the Company, purchased and took delivery of the Bell 412EP Helicopter. On the same day, Helicopters subsequently took possession of the aircraft under a three-year lease agreement with Ventures Acquisition Company.

		Subject to finalization of financing or leasing arrangements, we expect to take delivery of one of the Bell AB139 helicopters during fiscal year 2006, with the remaining three Bell AB139 helicopters to be delivered in fiscal year 2007. In addition, we anticipate that upon taking delivery, we will simultaneously sell and lease back the aircraft under operating lease agreements for lease terms not greater than three years.

⁽³⁾		Other obligations consist primarily of the annual salary and bonus to be paid to Mr. Smith pursuant to the Delford M. Smith Employment Agreement.

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ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Interest Rate Risk

As of November 30, 2005, we had fixed rate debt of $217.4 million and variable rate debt of $65.3 million. Based on the outstanding balances at November 30, 2005, each 1% increase or decrease in the interest rate of our variable rate debt would increase or decrease our annual interest expense by approximately $0.6 million. A 1% increase in interest rates would decrease the fair market value of our Indenture Notes by approximately $2.2 million. We have not entered into any obligations for trading purposes.

Foreign Currency Exchange Rate Risks

Although some of our revenues are derived from foreign customers, substantially all of our revenues and expenses are denominated in U.S. dollars. We maintain minimal balances in foreign bank accounts to facilitate payments of expenses.

Commodity Price Risks

We are exposed to commodity price risk with respect to the purchase of aviation fuel. However, fluctuations in the price of fuel have not had a significant impact on our results of operations in recent years because, in general, the fuel price adjustment clauses in our customer contracts limit our exposure to increases in fuel prices. We do not enter into, or purchase any fuel under, long-term fuel contracts, nor do we enter into futures or swap contracts.

We are not exposed to any other commodity price risk.

Equity Price Risks

We are not exposed to any equity price risks.

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ITEM 4.	CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company's management, with the participation of the Company's principal executive officer and principal financial officer, has evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on such evaluation, the Company's principal executive officer and principal financial officer have concluded that, as of the end of such period, the Company's disclosure controls and procedures are effective in recording, processing, summarizing, and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act, and are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including the Company's principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

As a result of the Company's need to restate its financial statements for the fiscal year ended February 29, 2004, the Company retained a certified public accounting firm (the "Internal Audit Consultants") to provide certain internal audit services to the Company. The Internal Audit Consultants interfaced with the registered independent public accounting firm during both the audit of the Company's financial statements for the fiscal year ended February 28, 2005 and the period covered by this report, and have performed analyses of major accounts included in the Company's financial statements. Although the Company was not able to file its Annual Report on Form 10-K for the fiscal year ended February 28, 2005 on the original due date, the Company believes that initiating the internal audit function has improved the Company's effectiveness in recording, processing, summarizing, and reporting financial information. In addition, the Company believes that the internal audit function, and the account analyses performed at, and for, both the fiscal year ended February 28, 2005 and the period covered by this report, will positively affect the Company's internal control over financial reporting, and will enhance the Company's ability to meet its future reporting requirements in a timely manner.

Changes in Internal Control Over Financial Reporting

Other than as described above, there have not been any changes in the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended November 30, 2005 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II. OTHER INFORMATION


ITEM 1.	LEGAL PROCEEDINGS

The Company is currently involved in certain legal proceedings as discussed below.

Banc of America

We filed a motion to dismiss for lack of jurisdiction, but a ruling was issued on April 19, 2005 by the North Carolina Court of Appeals denying our motion. We are currently pursuing trial in the North Carolina Business Court and discovery is in the early stages.

Asiana Airlines

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ITEM 1A.	RISK FACTORS

RISK FACTORS

Risk Factors Relating to the Company

Our financing agreements include financial covenants that impose substantial restrictions on our financial and business operations, and include financial tests that we must meet in order to continue to borrow under such agreements.

The terms of our debt instruments restrict our ability to, among other things:

•		incur additional debt or create liens;
•		pay dividends or acquire shares of capital stock;
•		make payments on subordinated debt or make investments;
•		make distributions from restricted subsidiaries;
•		issue or sell capital stock of restricted subsidiaries;
•		issue guarantees;
•		sell or exchange assets, or make capital expenditures;
•		enter into transactions with shareholders and affiliates; and
•		effect mergers and other changes of control.

Our senior secured credit facility also contains covenants that require us to meet certain financial tests in order to continue to borrow under that facility. If we do not comply with these covenants, our outstanding obligations under these credit facilities could be accelerated and become immediately due and payable. Any such acceleration of these obligations would have a material adverse effect on our results of operations and financial condition.

Our access to additional financing on acceptable terms is limited.

The terms of our existing financing agreements restrict our ability to incur additional indebtedness except for i) refinancing of certain existing debt agreements and permitted operating leases and ii) certain purchase money indebtedness. These restrictions reduce our flexibility in planning for, or responding to, changing business and economic conditions.

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	*Volatility of aircraft values may affect our ability to obtain financing secured by our aircraft.*

We have historically relied upon the market value of our aircraft as a source of additional capital. However, the market values for used aircraft are volatile and can be negatively affected by excess availability due to factors such as the worsening financial condition of existing airlines. As a result, the value of aircraft reflected on our balance sheet does not necessarily reflect the fair market value or appraised value of these aircraft. Accordingly, if we sell our aircraft or obtain financing secured by our aircraft, we cannot be assured that our aircraft would receive a favorable valuation at such time. A valuation of our aircraft that is less than the amount reflected on our balance sheet could have a material adverse effect on our ability to obtain additional capital.

Our fixed-wing aircraft fleet consists primarily of older aircraft which require more maintenance and repair than newer aircraft, exposing us to the potential risks of higher maintenance costs and loss of revenues during extended periods of maintenance and overhaul.

Our fleet of fixed-wing aircraft consists of ten owned Boeing 747 aircraft, five owned DC-9 aircraft, and two leased Boeing 747 aircraft. As of November 30, 2005, the average age of our owned and leased aircraft is approximately 32 years. The age of our aircraft increases the likelihood that in the future we will need significant capital resources to repair or replace our aircraft. The age of our aircraft also increases the risk that we may be unable to fulfill our contractual obligations due to decreased utilization of the aircraft.

Older aircraft tend to have higher maintenance and operational costs than newer aircraft for a number of reasons. Under FAA regulations, older aircraft components, which otherwise would be repairable, must be replaced after a specified number of flight hours or take-off/landing cycles. In addition, older aircraft may need to be refitted with newer technology. Also, our older aircraft tend to be less fuel-efficient than newer aircraft, causing our operating costs to be comparatively higher than for airlines with newer aircraft.

The incurrence of substantial unexpected maintenance expenses for our aircraft, or the incurrence of significant capital expenditures to replace an aircraft, could have a material adverse effect on our results of operations and financial condition.

We depend upon our Boeing 747 aircraft to generate the majority of our flight revenue.

In the event that one or more of our Boeing 747 aircraft are out of service for an extended period of time, we may have difficulty in fulfilling our obligations under our existing contracts. In order to mitigate a loss of aircraft capacity, we may have to lease or purchase replacement aircraft or, if necessary, convert an aircraft from passenger to freighter configuration. Because we do not carry business interruption insurance, the loss of revenue resulting from reduced aircraft capacity could have a materially adverse effect on our results of operations and financial condition.

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	*A significant portion of our operations is dependent on the price and availability of aircraft fuel.*

Our operating results are significantly impacted by fluctuations in the price or availability of aircraft fuel. During fiscal years 2005, 2004, and 2003, fuel costs comprised approximately 22.5%, 19.1%, and 20.3%, respectively, of our total operating expenses. During the nine months ended November 30, 2005, fuel costs have represented 28.8% of our operating expenses, and fuel prices have been exceptionally volatile. The cost and availability of fuel are subject to worldwide economic and political factors and events, most of which are beyond our control. The price we pay for fuel varies directly with market conditions. We have no guaranteed long-term sources of supply and we do not regularly enter into hedging arrangements. Even if we were to enter into futures contracts or other hedging arrangements, there can be no assurance that we will be able to control our fuel costs. Also, our older aircraft tend to be less fuel-efficient than newer aircraft, causing our fuel costs to be comparatively higher than for airlines with newer aircraft.

Although many of our customer contracts contain fuel adjustment clauses which allow us to increase the contract price in relation to increases in fuel prices, our ability to pass on increased fuel costs may be limited by then-existing economic and competitive conditions. If fuel costs continue to increase, our customers may reduce the volume and frequency of cargo shipments or find less costly alternatives for cargo delivery, such as land and sea carriers. In addition, any significant disruption of oil imports could negatively effect the availability of aviation fuel. Continued periods of high fuel costs or significant disruptions in the supply of aircraft fuel could have a material adverse affect on our results of operations and financial condition.

We are highly leveraged and have substantial liquidity needs in order to service our debt obligations, and we cannot be assured that we will be able to meet those needs from operating cash flows or additional financing.

As of November 30, 2005, we had $282.7 million of outstanding debt. Our operating cash flow continues to face pressure from high fuel prices, highly competitive contract pricing, slow collection of receivables and servicing of our long-term debt. A substantial portion of our operating cash flow goes toward the payment of principal and interest on our indebtedness, thereby reducing the funds available for other purposes.

Our ability to sustain sufficient operating cash flow is directly related to our ability to maintain operating revenues and promptly collect accounts receivable. Historically, our ability to collect accounts receivable has fluctuated due to various issues such as amendments and changes to existing contracts, interpretations of existing contracts, and the commencement of operations under new agreements. If we cannot maintain a consistent program for collecting accounts receivable in a timely manner, our operating cash flow will significantly deteriorate.

We have historically had violations of certain of our debt covenants.

From time to time, we have been in default under our debt agreements. As a result of this and other matters, our audited financial statements have been subject to "going concern" qualifications by our certifying accountants in fiscal years 2003 and 2004. A going concern comment indicates that our auditors are not certain that we will be able to pay our obligations as they come due.

Because of the various cross-default provisions that are contained in our long-term debt obligations, a failure by us to comply with the covenants of our long-term debt obligations could result in an acceleration of substantially all of our outstanding debt obligations. Due to our historical difficulty in meeting our debt covenants, we may not be able to comply with these covenants in the future or, in instances of non-compliance, that we will be able to obtain waivers of, or amendments to, these covenants. If we do not comply with these covenants or obtain waivers of or amendments to these covenants, the holders of the notes and the lenders under our long-term debt obligations may be able to declare a default and accelerate the indebtedness. If acceleration of our long-term debt obligations were to occur, we cannot be assured that we would be able to obtain alternative financing or that our assets would be sufficient to repay in full our obligations under our debt instruments.

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	*Many of the arrangements with our customers are not long-term contracts. As a result, our revenue streams may be unpredictable.*

We generate a large portion of our revenues from contractual arrangements which either i) have a term of one year or less, ii) are ad hoc arrangements, or iii) are "on call when needed" contracts. Furthermore, the portion of our revenues that we generate from USAF Air Mobility Command is not fixed by contract and is solely dependent on then-existing military requirements.

With respect to any contractual arrangement that we now have or that we later enter into, there is a risk that our customers may terminate or reduce the level of services requested thereunder. In the past, several of our larger contracts have not been renewed due to reasons unrelated to our performance, such as the financial position of our customers or a decision by our customers to move the services in-house. In addition, some of our contractual arrangements are not in writing, which may allow our customers to cancel the contracts on short notice. Accordingly, we cannot be assured that we will be able to generate future revenues at the same levels as in the past.

A significant portion of our revenue stream is dependent upon our continued ability to provide airfreight services to the USAF Air Mobility Command.

In fiscal years 2005, 2004 and 2003, the USAF Air Mobility Command was our principal customer, accounting for approximately 48.7%, 57.4%, and 48.2%, respectively, of our consolidated operating revenues and 75.6%, 87.8%, and 73.9%, respectively, of total revenue in our Airlines segment. During the nine-month period ended November 30, 2005, revenue from the USAF Air Mobility Command accounted for 46.2% of our consolidated operating revenues and 72.8% of the total revenue in our Airlines segment. A significant decline in demand by the USAF Air Mobility Command for our airfreight services, or restrictions on our ability to fly into politically unstable regions or areas in which military operations are being conducted, could have a materially adverse effect on our income from operations.

During January and February of fiscal year 2004, our flight revenues and income from operations were adversely affected by a decrease in USAF Air Mobility Command business. This decrease in business was caused by a decision by the USAF Air Mobility Command to shift away from the use of commercial aircraft in favor of organic military transport aircraft for movements of cargo directly into Iraq. In addition, the FAA continues to prohibit U.S. commercial aircraft from operating in Iraq. We may experience another decline in our flight revenues if the USAF Air Mobility Command decreases its demand for our services.

We expect that business from the USAF Air Mobility Command will continue to be the primary source of our revenue for the foreseeable future. However, our revenues from the USAF Air Mobility Command are derived from one-year contracts that the customer is not obligated to renew. In addition, the customer can terminate or modify its contract with us for convenience if we fail to perform or if we fail to pass bi-annual inspections. Any such termination could expose us to liability and hinder our ability to compete for future contracts. Even if USAF Air Mobility Command continues to award business to us, we cannot be assured that we will continue to generate the same level of revenues we currently derive from USAF Air Mobility Command business. If our USAF Air Mobility Command business declines significantly, it would have a material adverse effect on our results of operations and financial condition.

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	*We are also dependent upon continued business with the U.S. Postal Service.*

In fiscal years 2005, 2004, and 2003, the U.S. Postal Service accounted for approximately 10.8%, 12.5%, and 18.3%, respectively, of our consolidated operating revenues. During the nine-month period ended November 30, 2005, revenue from the U.S. Postal Service accounted for approximately 8.2% of our consolidated operating revenues. Most of these revenues are derived from ground handling services provided by EAGLE for the U.S. Postal Service at various locations throughout the United States.

EAGLE's U.S. Postal Service account consists of five separate contracts which range in original duration from one to five years. The largest contract expires in 2006, and may be extended for up to three successive one-year extensions at the sole option of the U.S. Postal Service. We cannot be assured that any of these agreements will remain in effect for their scheduled terms or that they will be renewed upon expiration. Any termination or non-renewal of our U.S. Postal Service contracts, or any significant decline in our revenues from such contracts, could have a material adverse effect on our results of operations and financial condition.

As a U.S. government contractor, we are subject to a number of procurement and other rules and regulations.

In order to do business with U.S. government agencies, we must comply with, and are affected by, many laws and regulations governing the formation, administration, and performance of U.S. government contracts. These laws and regulations, among other things:

	•	require, in some cases, certification and disclosure of all cost and pricing data in connection with contract negotiations;
	•	define allowable costs and otherwise limit our right to reimbursement under certain cost-based U.S. government contracts; and
	•	restrict the use and dissemination of information classified for national security purposes and the exportation of certain products and technical data.

These laws and regulations affect how we do business with our customers and, in some instances, impose added costs on our business. A violation of these laws and regulations could result in the imposition of fines and penalties or the termination of our contracts. In addition, the violation of certain other generally applicable laws and regulations could result in our suspension or termination as a government contractor.

A significant portion of our airfreight revenue is generated from operations in volatile overseas markets that are sensitive to changes in U.S. foreign relations, foreign governments, and foreign economies.

The commercial air freight industry is highly sensitive to changes in economic and political conditions which affect not only foreign demand for air freight services, but also U.S. demand for foreign products. Any negative change in the economic or political climates of the overseas markets in which we operate could increase our security costs, increase our insurance costs, or reduce our utilization rates. Changes in any of the following areas of risk that could disrupt or adversely affect our operations in overseas markets are:

	•	potential adverse changes in diplomatic relations between foreign countries and the United States;
	•	instability of foreign governments and risks of insurrections;
	•	terrorism and foreign hostility directed at U.S. companies;
	•	U.S. government policies which restrict the conduct of business by U.S. citizens in certain foreign countries; and
	•	policies by foreign governments which restrict the ownership or conduct of business by non-nationals.

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Volatility in international currency markets may adversely affect overseas demand for our services. Any significant devaluation in such foreign currencies relative to the U.S. dollar could adversely impact our customers' demand for our services or their ability to pay us.

We provide services to numerous foreign customers that experience significant fluctuations in their business cycles as a result of unstable economic conditions within their countries. Downturns in the businesses of our foreign customers could adversely impact their demand for our services. Conversely, a significant decline in the value of the U.S. dollar against foreign currencies could adversely affect domestic demand for some of the foreign-sourced products we currently transport.

We operate in dangerous locations and carry hazardous cargo, which increases the risk of harm to our property and personnel.

Many of our missions are conducted under dangerous conditions that could result in damage to our aircraft, or death or injury to our personnel. These conditions include:

	•	geopolitical instability in areas through which our flight routes pass, including areas where the United States is conducting military activities;
	•	transportation of sensitive military cargo including ordnance, ammunition, and other volatile materials;
	•	casualties incidental to services we provide in support of U.S. military activities, particularly in or near countries located in the Middle East; and
	•	the threat of terrorist attacks.

Our ability to provide accurate and timely financial statements is subject to the risks posed by any weaknesses in our financial reporting controls which might occur in the future.

From time to time, our auditors have noted "reportable conditions" and "material weaknesses" with respect to our internal controls over financial reporting. Reportable conditions involve significant deficiencies in the design or operation of a company's financial reporting controls that could adversely affect the company's ability to record, process, summarize and report financial data. In fiscal year 2004, our auditors noted material weaknesses relating to our failure to ensure that i) all transactions were recorded properly and ii) all accounts were reconciled on a consistent and timely basis.

In May 2004, the Company's principal executive officer and principal financial officer, with the assistance of our then certifying accountants, analyzed the facts and circumstances surrounding the quantity and magnitude of the adjusting journal entries within certain subsidiaries at year end. After reviewing the adjustments and restatement entries and performing an evaluation of the internal controls within our reporting entities we concluded that, as of the end of such period, the Company's controls and procedures required further enhancements to ensure that those disclosure controls and procedures were effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act. The enhancements proposed by management to the Company's internal controls included i) the establishment of policies and procedures regarding capitalization and amortization of balances, ii) the establishment of policies and procedures for recording and processing transactions, and iii) the establishment of standards to review journal entries, account balances and financial statements.

To assist the Company in implementing these required enhancements, the Company hired a certified public accounting firm to provide certain internal audit services to the Company. These internal auditors interfaced with our certifying accountants during both the audit of the Company's financial statements for the fiscal year ended February 28, 2005 and the period covered by this report, and have performed analyses of major accounts included in the Company's financial statements. Although the Company was not able to file its Annual Report on Form 10-K for the fiscal year ended February 28, 2005 on the original due date, the Company believes that initiating the internal audit function has improved the Company's effectiveness in recording, processing, summarizing and reporting financial information.

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We believe that the enhancements implemented by the internal audit function have positively affected both our internal control over financial reporting and our ability to provide accurate and timely financial statements. However, if we fail to properly monitor and enforce these enhancements, or if we fail to make further enhancements as such further enhancements may become necessary, our internal controls over financial reporting may deteriorate, and we may not be able to provide accurate and timely financial statements. As accurate, timely financial statements are required both under the Exchange Act and under our debt arrangements, such a failure could have a material adverse impact on our results of operations and financial condition.

Our operating results could be adversely affected by the loss of certain key personnel.

We are dependent on the experience and knowledge of certain executive officers. The primary executive leadership of the Company comes from Mr. Delford M. Smith, our founder and chairman of the board of directors, who is currently 75 years old. In addition to providing the Company with executive leadership, Mr. Smith and certain entities owned or controlled by Mr. Smith provide significant financing to the Company and serve as guarantors for most of the Company's debt. In the event of Mr. Smith's departure from the Company, we may be forced to restructure a significant portion of our financing agreements on terms which could be significantly less favorable than those currently existing.

Extensive industry experience and knowledge of our operations is also held by key members of our senior management. The loss of Mr. Smith, or a substantial turnover or loss of our other senior managers, could have a material adverse effect on our results of operations and financial condition.

All of the outstanding shares of Holdings common stock are controlled by two shareholders.

Mr. Delford M. Smith, our founder and the chairman of the board of directors, has control over, either directly or indirectly, approximately 85.1% of the outstanding shares of Holdings common stock. A trust controlled by, and for the benefit of, Mr. Delford M. Smith owns 75.1% of the outstanding shares and 10.0% is held by Mr. Delford M. Smith, as trustee, for the benefit of Mr. Mark C. Smith. Approximately 11.9% of the outstanding shares are held by Wells Fargo Bank, N.A., as trustee, for the benefit of Mr. Mark C. Smith, the son of Mr. Delford M. Smith, and the remaining 3.0% is owned by Mr. Mark C. Smith. Due to this stock ownership and subject to certain limitations imposed by our debt instruments, Mr. Delford M. Smith is able to control, subject to limitations imposed by our debt instruments, the corporate affairs of Holdings and Aviation, such as the election of directors, changes in corporate structure, mergers or sales of substantially all corporate assets, and approval of certain related party transactions.

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Risk Factors Relating to the Air Transportation Services Industry

The air transportation services industry is highly competitive.

The air transportation services industry is highly competitive, fragmented, and capital intensive. Successful competition in the industry depends on price, quality, safety, and reliability of service. Greater financial resources, newer aircraft, larger facilities, or lower cost structures provide air carriers with financial and operating advantages over their competitors. The ability of certain air carriers to circumvent or renegotiate their contracts during bankruptcy or through non-bankruptcy work-outs may enhance their ability to compete with us.

The air transportation services industry is also characterized by substantial price competition and volatility of demand due to changes in economic conditions. Due to excess capacity within the industry, the pricing structures of the market participants have dramatically changed, and such changes are expected to continue. During periods of slack demand, the various competitors within the industry utilize more efficient pricing in order to generate cash flow and maintain market share. In addition, some of our airline customers, particularly our customers for whom we perform ground handling and logistics services, may decide during periods of economic downturns to reduce their operating expense by establishing "in-house" operations. Our inability to effectively compete within the air transportation services industry would have a materially adverse effect upon our results of operations and financial condition.

The air transportation services industry is subject to extensive government regulation which could increase our operating costs and restrict our ability to conduct our business.

The air transportation services industry is subject to extensive regulation, both domestically and abroad. The enactment of government regulation often results in increased operating costs or reduced revenues. From time to time, the FAA issues directives and other regulations relating to the maintenance and operation of aircraft that require significant expenditures. We expect to continue incurring expenses to comply with the FAA's regulations.

Pursuant to the provisions of the Aviation and Transportation Security Act, the TSA has implemented security measures that negatively affect operations and costs of the air transportation industry. Adoption by TSA of stricter requirements for the screening of cargo could have a materially adverse impact on our ability to efficiently process cargo, resulting in increased costs. In addition, foreign governments have instituted, and may continue to institute, additional security measures at airports within their own countries, either out of concern for internal security or in response to measures imposed by the United States. Our compliance with any additional security measures imposed by the TSA is expected to result in additional operating costs, some of which may be material.

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Many aspects of the air transportation services industry are subject to increasingly stringent laws protecting the environment. Future developments in the area of environmental regulation by the United States and foreign countries could adversely affect operations and increase operating costs in the air transportation services industry. For example, potential future actions that may be taken to limit the emission of greenhouse gases by the aviation sector could significantly impact to the air transportation services industry. Any such developments could have a materially adverse effect upon our results of operations and financial condition.

Insurance coverage and insurance premium costs continue to be volatile since the September 11 terrorist attacks.

As a result of the September 11 terrorist attacks, the amount of insurance coverage available to commercial air carriers for claims resulting from acts of terrorism, war, or similar events has fluctuated significantly. At the same time, the cost for such coverage, and for aviation insurance in general, has also fluctuated. Future terrorist attacks involving aircraft, or the threat of such attacks, as well as other factors, could result in further volatility in the cost of aviation insurance, and could further reduce the availability of such coverage.

We cannot be assured that: i) we will be able to maintain our existing coverage on terms favorable to us; ii) the premiums for such coverage will not increase substantially; or iii) we will not bear substantial losses and lost revenues from accidents. If our liability from an incident exceeds the amount of our insurance coverage, we would be required to pay any such excess liability from our own assets. In addition, substantial claims resulting from an accident in excess of related insurance coverage or a significant increase in our current insurance expense could have a materially adverse effect on our results of operations and financial condition.


ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.


ITEM 3.	DEFAULTS UPON SENIOR SECURITIES

None.


ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.


ITEM 5.	OTHER INFORMATION

None.

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ITEM 6.	EXHIBITS

A list of exhibits that are filed as part of, or incorporated by reference into this Quarterly Report on Form 10-Q are set forth below.

Exhibit No.		Description of Document


10.1	*	Amendment Number Four to Loan and Security Agreement dated November 30, 2005, by and between the lenders identified on the signature pages thereof (the "Lenders"), Wells Fargo Foothill, Inc., as the arranger and administrative agent for the Lenders, and Evergreen International Aviation, Inc. and each of its Subsidiaries that are signatories thereto, as Borrowers.

31.1	*	Certification of President pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	*	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	*	Certification of President and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

	*	Filed herewith.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the 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 HOLDINGS, INC. (Registrant)



Date: January 17, 2006	/s/ Timothy G. Wahlberg Timothy G. Wahlberg Director and President (principal executive officer)


Date: January 17, 2006	/s/ John A. Irwin John A. Irwin Chief Financial Officer and Treasurer (principal financial officer and principal accounting officer)

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EXHIBIT INDEX

Exhibit No.		Description of Document


10.1	*	Amendment Number Four to Loan and Security Agreement dated November 30, 2005, by and between the lenders identified on the signature pages thereof (the "Lenders"), Wells Fargo Foothill, Inc., as the arranger and administrative agent for the Lenders, and Evergreen International Aviation, Inc. and each of its Subsidiaries that are signatories thereto, as Borrowers.

31.1	*	Certification of President pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	*	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	*	Certification of President and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

	*	Filed herewith.

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Risk of Default on Debt Obligations

NOTE 4 — LONG-TERM DEBT OBLIGATIONS

Indenture Notes

Secured Credit Facility

Gain on Asiana Litigation

NOTE 11 — RELATED PARTY TRANSACTIONS

Transactions Under Mr. Smith's Employment Agreement

Lease Transactions

Sale and Lease of Aircraft

Notes Receivable from Affiliates

Payables to Affiliates

LEGAL PROCEEDINGS

Banc of America

Asiana Airlines

CONTINGENCIES

Claim for Losses under the Air Transportation Safety and System Stabilization Act

AIRCRAFT PURCHASE COMMITMENTS

Operating Revenue

Operating Expenses

Interest Expense

Other Non-Operating Expense and Income

Income Tax Expense

Operating Revenue

Operating Expenses

Interest Expense

Other Non-Operating Expense and Income

Income Tax Expense

LIQUIDITY

CAPITAL RESOURCES

Indenture Notes

Secured Credit Facility

WCMA Loan Agreement

Risk of Default on Debt Obligations

Banc of America

Asiana Airlines

SIGNATURES

EXHIBIT INDEX

EVERGREEN HOLDINGS INC 10-Q