# UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

# FORM 10-Q

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

|For the quarterly period ended November 30, 2004
|------------------------------------------------

|OR
|--

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

|For the transition period from _______ to ________
|--------------------------------------------------

Commission File Number: 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)

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

NONE(Former name, former address and former fiscal year,if changed since last report)

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 the number of shares of outstanding of each of the issuers classes of common stock, as of the latest practicable date:

|CLASS                      | OUTSTANDING AS OF JANUARY 18, 2005
|-------------------------- | ----------------------------------
|Common stock, no par value | 10,054,749 shares                 

1

---



# EVERGREEN HOLDINGS, INC.

QUARTERLY REPORT ON FORM 10-QFOR THE QUARTER ENDED NOVEMBER 30, 2004

# TABLE OF CONTENTS

|PAGE
|----

|PART I. | FINANCIAL INFORMATION | 
|------- | --------------------- | 

| | Item 1. | Financial Statements | 3
| | ------- | -------------------- | -

| | Consolidated Balance Sheets | 3
| | --------------------------- | -

| | Consolidated Statements of Operations (Unaudited) | 5
| | ------------------------------------------------- | -

| | Consolidated Statements of Cash Flows (Unaudited) | 6
| | ------------------------------------------------- | -

| | Condensed Notes to Unaudited Consolidated Financial Statements | 7
| | -------------------------------------------------------------- | -

| | Item 2. | Managements Discussion and Analysis of Financial Condition | 33
| | ------- | ----------------------------------------------------------- | --

| | and Results of Operations | 
| | ------------------------- | 

| | Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 57
| | ------- | ---------------------------------------------------------- | --

| | Item 4. | Controls and Procedures | 58
| | ------- | ----------------------- | --

|PART II. | OTHER INFORMATION | 
|-------- | ----------------- | 

| | Item 1. | Legal Proceedings | 62
| | ------- | ----------------- | --

| | Item 6. | Exhibits | 64
| | ------- | -------- | --

|SIGNATURES | 65
|---------- | --

|EXHIBIT INDEX | 66
|------------- | --

2



---

# PART I. - FINANCIAL INFORMATION

# ITEM 1.    FINANCIAL STATEMENTS.

EVERGREEN HOLDINGS, INC.CONSOLIDATED BALANCE SHEETS(in thousands, except share data)

|                                   | November 30,                                      |         |             
|---------------------------------- | ------------------------------------------------- | ------- | ------------
|                                   | 2004                                              |         | February 29,
|                                   | (unaudited)                                       |         | 2004        
|                                   |                                                   |         |             
|                                   |                                                   |         |             
|ASSETS                             |                                                  
|Current assets:                    |                                                  
|                                   | Cash and cash equivalents                         | $       | 6,750       
|                                   | Accounts receivable, less allowance of $1,426 and |         |             
|                                   | $2,029 for doubtful accounts                      |         |             
|                                   | Trade                                             | 47,106  |             
|                                   | Other                                             | 3,912   |             
|                                   | Accounts receivable from affiliates, net          | 664     |             
|                                   | Inventories                                       | 22,289  |             
|                                   | Prepaid expenses and other                        | 6,068   |             
|                                   | Current portion notes receivable from affiliates  | 1,474   |             
|                                   | Income taxes receivable                           | 802     |             
|                                   | Deferred tax asset                                | 11,964  |             
|                                   |                                                   |         |             
|                                   | Total current assets                              | 101,029 |             
|                                  
|Property and equipment, net        | 542,672                                           |         |             
|Assets held for sale               | 6,766                                             |         |             
|Notes receivable from affiliates   | 13,942                                            |         |             
|Capitalized loan acquisition costs | 11,599                                            |         |             
|Other assets                       | 12,088                                            |         |             
|Goodwill                           | 5,494                                             |         |             
|                                   |                                                   |         |             
|                                   | Total assets                                      | $       | 693,590     
|                                   |                                                   |         |             

(continued on the next page)

3



---

EVERGREEN HOLDINGS, INC.CONSOLIDATED BALANCE SHEETS(in thousands, except share data)

|                                                  | November 30,                                                   |         |             
|------------------------------------------------- | -------------------------------------------------------------- | ------- | ------------
|                                                  | 2004                                                           |         | February 29,
|                                                  | (unaudited)                                                    |         | 2004        
|                                                  |                                                                |         |             
|                                                  |                                                                |         |             
|LIABILITIES AND STOCKHOLDERS' EQUITY              |                                                               
|Current liabilities:                             
|                                                  | Accounts payable                                               | $       | 67,070      
|                                                  | Accrued liabilities                                            | 24,951  |             
|                                                  | Accrued interest                                               | 1,337   |             
|                                                  | Affiliate trade and notes payable                              | 3,168   |             
|                                                  | Current portion of long-term debt                              | 16,052  |             
|                                                  |                                                                |         |             
|                                                  | Total current liabilities                                      | 112,578 |             
|                                                 
|Long-term debt                                    | 292,146                                                        |         |             
|Deferred rentals and other payables to affiliates | 85                                                             |         |             
|Deferred tax liabilities                          | 103,690                                                        |         |             
|                                                  |                                                                |         |             
|                                                  | Total liabilities                                              | 508,499 |             
|                                                  |                                                                |         |             
|                                                  | Minority interest                                              | 327     |             
|                                                  |                                                                |         |             
|                                                 
|Stockholders' equity:                            
|                                                  | Common stock, no par value; 20,000,000 shares authorized       | 7,568   |             
|                                                  | 10,054,749 shares issued and outstanding                      
|                                                  | Retained earnings                                              | 177,196 |             
|                                                  |                                                                |         |             
|                                                  | Total stockholders' equity                                     | 184,764 |             
|                                                  |                                                                |         |             
|                                                  | Total liabilities, minority interest, and stockholders' equity | $       | 693,590     
|                                                  |                                                                |         |             

The accompanying condensed notes to unaudited consolidated financial statements are an integral part of these statements.

4



---

EVERGREEN HOLDINGS, INC.CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)(in thousands)

|                   |                                            |         |                     |  |         |        |      |         |         |  |         |         |  | 
|------------------ | ------------------------------------------ | ------- | ------------------- |  | ------- | ------ | ---- | ------- | ------- |  | ------- | ------- |  | 
|                   | For the Three Months                       |         | For the Nine Months
|                   | Ended November 30,                         |         | Ended November 30, 
|                   |                                            |         |                    
|                   | 2004                                       |         | 2003                |  | 2004    |        | 2003
|                   |                                            |         |                     |  |         |        |     
|Operating revenue: |                                           
|                   | Flight revenue                             | $       | 112,446             |  | $       | 97,542 |      | $       | 302,183 |  | $       | 304,430 | 
|                   | Sales of aircraft, parts, and other assets | 1,853   |                     |  | 3,351   |        |      | 9,189   |         |  | 11,390  |        
|                   | Ground logistics services revenue          | 27,061  |                     |  | 24,213  |        |      | 81,558  |         |  | 74,450  |        
|                   | Support services and other revenue         | 13,246  |                     |  | 9,055   |        |      | 33,477  |         |  | 29,032  |        
|                   |                                            |         |                     |  |         |        |     
|                   | Total operating revenue                    | 154,606 |                     |  | 134,161 |        |      | 426,407 |         |  | 419,302 |        

|                    |                                               |         |  |  |         |  |  |         |  |  |         |  |  | 
|------------------- | --------------------------------------------- | ------- |  |  | ------- |  |  | ------- |  |  | ------- |  |  | 
|Operating expenses:
|                    | Flight costs                                  | 19,766  |  |  | 18,617  |  |  | 55,749  |  |  | 58,556  | 
|                    | Fuel                                          | 35,647  |  |  | 25,099  |  |  | 89,998  |  |  | 76,283  | 
|                    | Maintenance                                   | 19,322  |  |  | 18,490  |  |  | 55,252  |  |  | 52,238  | 
|                    | Aircraft and equipment                        | 12,657  |  |  | 12,855  |  |  | 36,986  |  |  | 37,810  | 
|                    | Cost of sales of aircraft, parts and other    |        
|                    | property and equipment                        | 993     |  |  | 1,434   |  |  | 5,127   |  |  | 8,290   | 
|                    | Cost of ground logistic services              | 24,465  |  |  | 22,454  |  |  | 72,250  |  |  | 66,660  | 
|                    | Support services and other                    | 16,122  |  |  | 10,203  |  |  | 37,454  |  |  | 28,746  | 
|                    | Selling, general, and administrative expenses | 15,409  |  |  | 14,960  |  |  | 47,510  |  |  | 52,980  | 
|                    |                                               |         |  |  |         |  | 
|                    | Total operating expenses                      | 144,381 |  |  | 124,112 |  |  | 400,326 |  |  | 381,563 | 
|                    |                                               |         |  |  |         |  | 
|                    | Income from operations                        | 10,225  |  |  | 10,049  |  |  | 26,081  |  |  | 37,739  | 

|                                                        |                                           |        |   |       |        |   |        |         |   |        |         |   |  | 
|------------------------------------------------------- | ----------------------------------------- | ------ | - | ----- | ------ | - | ------ | ------- | - | ------ | ------- | - |  | 
|Other (expense) income:                                
|                                                        | Interest expense                          | (9,086 | ) |       | (8,796 | ) |        | (26,832 | ) |        | (27,268 | )
|                                                        | Other non-operating income (expense), net | 21     |   |       | (63    | ) |        | (3,450  | ) |        | 4,258   |  
|                                                        |                                           |        |   |       |        |   |       
|Income (loss) before minority interest and income taxes | 1,160                                     |        |   | 1,190 |        |   | (4,201 | )       |   | 14,729 |        

|                                  |                              |      |   |     |      |   |        |        |   |        |        |   |  | 
|--------------------------------- | ---------------------------- | ---- | - | --- | ---- | - | ------ | ------ | - | ------ | ------ | - |  | 
|                                  | Minority interest            | (325 | ) |     | (284 | ) |        | (948   | ) |        | (780   | )
|                                  |                              |      |   |     |      |   |       
|Income (loss) before income taxes | 835                          |      |   | 906 |      |   | (5,149 | )      |   | 13,949 |       
|                                 
|                                  | Income tax (expense) benefit | (737 | ) |     | (453 | ) |        | 973    |   |        | (5,597 | )
|                                  |                              |      |   |     |      |   |       
|Net income (loss)                 | $                            | 98   |   | $   | 453  |   | $      | (4,176 | ) | $      | 8,352  |  
|                                  |                              |      |   |     |      |   |       

The accompanying condensed notes to unaudited consolidated financial statements are an integral part of these statements.

5



---

EVERGREEN HOLDINGS, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)(in thousands)

|                                                    | For the Nine Months Ended November 30,
|--------------------------------------------------- | --------------------------------------
|                                                    | 2004                                  
|Cash flows from operating activities:               |                                       
|Net (loss) income                                   | $                                     
|Adjustments to reconcile net (loss) income to      
|net cash provided by operating activities:         
|Depreciation and amortization                       | 48,622                                
|Deferred income taxes                               | (974                                  
|Gain on sale of property and equipment              | (999                                  
|Deferred income and currency exchange loss (gain)   | 10                                    
|Impairment charges on aircraft                      | 1,321                                 
|Non-cash amortization of loan acquisition costs     | 2,606                                 
|Write-off of unamortized loan acquisition costs     | 3,464                                 
|Minority interest                                   | 948                                   
|Changes in operating assets and liabilities:       
|Accounts receivable and receivables from affiliates | (11,584                               
|Inventories                                         | (7,238                                
|Prepaid expenses and short-term notes receivable    | 897                                   
|Accounts payable and accrued liabilities            | 22,586                                
|Income taxes payable                                | (219                                  
|                                                    |                                       
|Net cash provided by operating activities           | 55,264                                

|                                                            |         |   |  |         |   |  | 
|----------------------------------------------------------- | ------- | - |  | ------- | - |  | 
|Cash flows from investing activities:                      
|Purchases of property, equipment and overhauls              | (48,808 | ) |  | (45,560 | )
|Proceeds from disposal of property and equipment            | 1,801   |   |  | 9,589   |  
|Long-term notes receivable from affiliates and other assets | (1,418  | ) |  | (4,865  | )
|                                                            |         |   | 
|Net cash used in investing activities                       | (48,425 | ) |  | (40,836 | )

|                                                           |          |       |  |          |   |     | 
|---------------------------------------------------------- | -------- | ----- |  | -------- | - | --- | 
|Cash flows from financing activities:                     
|Proceeds from long-term debt                               | 222,247  |       |  | 283,825  |  
|Payments on long-term debt and notes payable to affiliates | (225,495 | )     |  | (126,654 | )
|Change in operating loans and short-term debt              | -        |       |  | (149,722 | )
|Change in affiliate notes payable and deferred charges     | (912     | )     |  | (15,098  | )
|                                                           |          |       | 
|Net cash used in financing activities                      | (4,160   | )     |  | (7,649   | )
|                                                           |          |       | 
|Net increase (decrease) in cash and cash equivalents       | 2,679    |       |  | (4,931   | )
|                                                          
|Cash and cash equivalents, beginning of period             | 4,071    |       |  | 5,638    |  
|                                                           |          |       | 
|Cash and cash equivalents, end of period                   | $        | 6,750 |  |          | $ | 707 | 
|                                                           |          |       | 

The accompanying condensed notes to unaudited consolidated financial statements are an integral part of these statements.

6



---

EVERGREEN HOLDINGS, INC.CONDENSED NOTES TOUNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

# NOTE 1  BASIS FOR PRESENTATION

The interim consolidated financial statements included in this report have been prepared by Evergreen Holdings, Inc. 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.

As used in these condensed notes to unaudited consolidated financial statements:

- the term "Holdings" refers to Evergreen Holdings, Inc.;
- the terms "Evergreen" and "Aviation" refer to Evergreen International Aviation, Inc.; and
- the terms "Company," "we," "us," and similar terms refer to Evergreen International Aviation, Inc. and its consolidated subsidiaries, collectively.

In the opinion of management, the interim consolidated financial statements included in this 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.

The Company conducts business in six major business segments through its wholly-owned subsidiaries:

- Evergreen International Airlines, Inc. ("Airlines");
- Evergreen Aviation Ground Logistics Enterprises, Inc. ("EAGLE");
- Evergreen Helicopters, Inc. ("Helicopters");
- Evergreen Air Center, Inc. ("Air Center");
- Evergreen Aircraft Sales & Leasing Co. (EASL); and
- Evergreen Agricultural Enterprises, Inc. (Agriculture).

The Companys business is seasonal, and accordingly, 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 the Companys consolidated financial statements and the accompanying notes that were included in the Companys Annual Report on Form 10-K/A for the year ended February 29, 2004, which was filed with the SEC on September 30, 2004.

# Reclassifications

Certain amounts in the Companys prior years financial statements and notes have been reclassified to conform to the current year presentation. Previously reported net income or net cash flows were not affected by these reclassifications.

7



---

EVERGREEN HOLDINGS, INC.CONDENSED NOTES TOUNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

# RECENT ACCOUNTING PRONOUNCEMENTS

FASB Interpretation No. 46-R

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 will apply 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 is required to adopt
FIN 46-R as of the period ending May 31, 2005. Although management has not completed a final assessment of the impact of FIN 46-R on
the Company, preliminary assessments have indicated that the Company may be the primary beneficiary of certain related party variable
interest entities including, but not limited to, Ventures Holding, Inc., and Ventures Acquisition Company LLC. The Company leases
certain assets consisting primarily of buildings and aircraft from these entities. Upon the Companys adoption of FIN 46-R,
managements assessment may indicate that the financial statements of these entities should be included in the Companys
financial statements in the period of adoption and beyond. Such inclusion is not expected to have a material impact on the
Companys consolidated financial statements.

EITF No. 4-10

FASB Statement No. 131, Disclosures about Segments of an Enterprise and Related Information (SFAS No. 131), requires that a public company
 separately report the financial and descriptive information about its reportable operating segments. Paragraph 17 of SFAS No. 131 sets forth the aggregation criteria used to determine whether an operating segment that does not
otherwise meet the quantitative thresholds to be a reportable segment may be aggregated in accordance with paragraph 19 of SFAS No.
131.  EITF Issue 4-10 "Determining Whether to Aggregate Operating Segments That Do Not Meet the Quantitative Thresholds" ("EITF
4-10"), addresses the criteria for aggregating operating segments.

The Company currently reports
its financial and operating results according to the Companys six primary business segments. The financial and operating results
for at least one of those primary business segments is comprised of one or more smaller business segments that have been aggregated
with a larger business segment. Based upon the Companys analysis of its current operations, the Company believes that such
aggregations meet the criteria for aggregation under EITF 4-10 and paragraph 17 of SFAS No. 131. The Company will continue to monitor
any changes in the nature and operations of each of its business segments and modify the Companys method of aggregation as
appropriate in order to remain in compliance with EITF 4-10 and SFAS No. 131.

8



---

EVERGREEN HOLDINGS, INC.CONDENSED NOTES TOUNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

# NOTE 2  BUSINESS SEGMENTS

The Company conducts business
through its six major business segments:

- Airlines provides air cargo services for both international and domestic markets;
- 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;
- 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;
- Air Center, an unlimited Class IV airframe repair station certified by the FAA, performs aircraft maintenance, repair and overhaul services, and aircraft storage services;
- EASL selectively buys, sells, leases, and brokers commercial aircraft, helicopters, and aircraft spare parts; and
- Agriculture  the Company operates a nursery and farming enterprise through Evergreen Agricultural Enterprises, Inc. which delivers nursery and agricultural products to wholesale and retail customers.

9



---

EVERGREEN HOLDINGS, INC.CONDENSED NOTES TOUNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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
|----------------------------------------------------------
|
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|Operating revenues:                                       
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          

|                                             |             |       |        |  |       |        |  |        |        |  |        |        |  | 
|-------------------------------------------- | ----------- | ----- | ------ |  | ----- | ------ |  | ------ | ------ |  | ------ | ------ |  | 
|Intercompany revenues: (1)                  
|                                             | Airlines    | $     | 2,951  |  | $     | 2,623  |  | $      | 8,355  |  | $      | 9,196  | 
|                                             | EAGLE       | 619   |        |  | 465   |        |  | 1,409  |        |  | 1,657  |       
|                                             | Air Center  | 4,296 |        |  | 9,112 |        |  | 19,578 |        |  | 24,645 |       
|                                             | Helicopters | 282   |        |  | 456   |        |  | 1,568  |        |  | 1,165  |       
|                                             | EASL        | 5,446 |        |  | 960   |        |  | 6,426  |        |  | 3,006  |       
|                                             | Agriculture | 56    |        |  | 169   |        |  | 106    |        |  | 207    |       
|                                             |             |       |        |  |       |        |  |       
|                                             | Total       | $     | 13,650 |  | $     | 13,785 |  | $      | 37,442 |  | $      | 39,876 | 
|                                             |             |       |        |  |       |        |  |       
|(1)  Amounts are eliminated in consolidation

(continued on next page)

10



---

EVERGREEN HOLDINGS, INC.CONDENSED NOTES TOUNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

|Selected Financial Results by Business Segment - Unaudited
|----------------------------------------------------------
|
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|Operating expenses:                                       
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          

|                               |             |        |        |  |        |        |  |        |        |  |        |        |  | 
|------------------------------ | ----------- | ------ | ------ |  | ------ | ------ |  | ------ | ------ |  | ------ | ------ |  | 
|Income (loss) from operations:
|                               | Airlines    | $      | 12,174 |  | $      | 11,221 |  | $      | 24,160 |  | $      | 34,510 | 
|                               | EAGLE       | 205    |        |  | 133    |        |  | 1,867  |        |  | 298    |       
|                               | Air Center  | 795    |        |  | 1,292  |        |  | 2,781  |        |  | 4,420  |       
|                               | Helicopters | (2,349 | )      |  | (1,718 | )      |  | (2,050 | )      |  | 869    |       
|                               | EASL        | (35    | )      |  | (136   | )      |  | 33     |        |  | (905   | )     
|                               | Agriculture | (565   | )      |  | (743   | )      |  | (710   | )      |  | (1,453 | )     
|                               |             |        |        |  |        |        |  |       
|                               | Total       | $      | 10,225 |  | $      | 10,049 |  | $      | 26,081 |  | $      | 37,739 | 
|                               |             |        |        |  |        |        |  |       

|                                |             |     |       |  |    |       |  |     |        |  |     |        |  | 
|------------------------------- | ----------- | --- | ----- |  | -- | ----- |  | --- | ------ |  | --- | ------ |  | 
|Interest expense (income), net:
|                                | Airlines    | $   | 9,048 |  | $  | 8,714 |  | $   | 26,550 |  | $   | 27,006 | 
|                                | EAGLE       | 25  |       |  | 72 |       |  | 112 |        |  | 270 |       
|                                | Air Center  | 15  |       |  | 2  |       |  | 57  |        |  | (47 | )     
|                                | Helicopters | 10  |       |  | 3  |       |  | 79  |        |  | 20  |       
|                                | EASL        | (25 | )     |  | -  |       |  | -   |        |  | -   |       
|                                | Agriculture | 13  |       |  | 5  |       |  | 34  |        |  | 19  |       
|                                |             |     |       |  |    |       |  |    
|                                | Total       | $   | 9,086 |  | $  | 8,796 |  | $   | 26,832 |  | $   | 27,268 | 
|                                |             |     |       |  |    |       |  |    

(continued on next page)

11



---

EVERGREEN HOLDINGS, INC.CONDENSED NOTES TOUNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

|Selected Financial Results by Business Segment - Unaudited
|----------------------------------------------------------
|
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|Depreciation and amortization                             
|of property and equipment                                 
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          

|                      |             |       |        |  |     |        |  |       |        |  |        |        |  | 
|--------------------- | ----------- | ----- | ------ |  | --- | ------ |  | ----- | ------ |  | ------ | ------ |  | 
|Capital expenditures:
|                      | Airlines    | $     | 16,711 |  | $   | 8,167  |  | $     | 38,869 |  | $      | 31,099 | 
|                      | EAGLE       | 219   |        |  | 588 |        |  | 760   |        |  | 1,392  |       
|                      | Air Center  | 197   |        |  | 887 |        |  | 425   |        |  | 1,753  |       
|                      | Helicopters | 3,098 |        |  | 745 |        |  | 8,333 |        |  | 11,187 |       
|                      | EASL        | 51    |        |  | -   |        |  | 51    |        |  | -      |       
|                      | Agriculture | 185   |        |  | 61  |        |  | 370   |        |  | 129    |       
|                      |             |       |        |  |     |        |  |      
|                      | Total       | $     | 20,461 |  | $   | 10,448 |  | $     | 48,808 |  | $      | 45,560 | 
|                      |             |       |        |  |     |        |  |      

(continued on next page)

12



---

EVERGREEN HOLDINGS, INC.CONDENSED NOTES TOUNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

|Total Assets by Business Segment
|--------------------------------
|(in thousands)                  
|                                
|                                
|                                
|                                
|                                
|                                
|                                
|                                
|                                
|                                
|                                
|                                
|                                
|                                
|                                
|                                

# NOTE 3  IMPAIRMENT OF ASSETS

Airlines and DHL were parties
to an air freight services contract under which Airlines provided air freight services to various DHL
locations along the west coast of the United States. Airlines substantially utilized its DC-9 aircraft fleet in performing the air
freight services under the DHL contract.

The DHL contract expired by its
own terms in August 2004, resulting in a substantial decrease in Airline's utilization of its DC-9
aircraft fleet.  As a result of the decreased utilization, Airlines performed an assessment on each of the DC-9 aircraft in order to
determine whether any impairment in asset value needed to be recorded on Airlines books in accordance with Statement of
Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets ("SFAS No. 144").

During the assessment, Airlines
 evaluated the amount of the future undiscounted net cash flow that was expected to be derived from
each of the DC-9 aircraft. Management considered i) the impact of the completion of the DHL contract on the operating results for
each of the DC-9 aircraft, ii) current trends and future prospects, and iii) the effects of obsolescence, customer demand,
competition and other economic factors. The future undiscounted net cash flow of each DC-9 aircraft was then compared to the net
carrying value of that aircraft on Airlines' books.

Based upon these analyses, Airlines
determined that one owned DC-9 aircraft (the "Impaired DC-9") was impaired because the future
undiscounted net cash flow for the aircraft was less than its net carrying value.  Airlines obtained a third party appraisal of
the fair value for the Impaired DC-9 and computed an impairment on the aircraft equal to the difference between the appraised fair
value and the net carrying value.  Based upon this analysis, Airlines determined that the amount of impairment on the Impaired
DC-9 was $0.6 million. Accordingly, during the three months ended August 31, 2004, Airlines reduced the net carrying value of
the Impaired DC-9 by $0.6 million and recorded an impairment expense in the amount of $0.6 million.

13



---

EVERGREEN HOLDINGS, INC.CONDENSED NOTES TOUNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

During the three months ended November 30, 2004, Airlines recorded an impairment expense of $0.7 million on certain previously
capitalized modifications to a second DC-9 aircraft that had been utilized by Airlines for the DHL contract.  For further information
regarding the impairment, see "Note 4 - Expiration of Aircraft Lease" below.

The $0.6 million impairment expense for the Impaired DC-9, which was recorded during the three months ended August 31, 2004, and the
$0.7 million impairment expense which was recorded during the three months ended November 30, 2004, are both included within the line
item of "Aircraft and equipment" on the Company's consolidated statement of operations.

# NOTE 4  EXPIRATION OF AIRCRAFT LEASE

An aircraft lease for a DC-9 aircraft
between Airlines and Ventures Acquisition Company LLC, an affiliated entity that is wholly-owned by Mr. Delford M.
Smith, the controlling shareholder of the Company, (the "Lease Agreement") was scheduled to expire in January
2005.  During the three months ended November 30, 2004, and in connection with the scheduled expiration of the Lease Agreement,
Airlines incurred $2.5 million of maintenance expense pursuant to the return conditions of the Lease Agreement.  Then, as part of a
settlement for the expiration of the Lease Agreement, the Company agreed to purchase the aircraft for $0.5 million.

Upon agreeing to purchase the
DC-9 aircraft, and in accordance with SFAS No. 144, Airlines performed an impairment analysis on
certain previously capitalized modifications to the aircraft (the "Upgrades").  As a result of the
impairment analysis, during the three months ended November 30, 2004, Airlines recorded a $0.7 million impairment charge on the
Upgrades.

# NOTE 5  LIQUIDITY AND MANAGEMENT'S PLANS

# Risk of Default on Debt Obligations

The Company finances a portion
 of its 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, the Company has various other long-term debt instruments which consist primarily of equipment purchase notes.

Substantially all of the
Companys 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 certain events of default under one or more of the
Companys debt obligations will result in an event of default under either, or both, the Indenture Notes and the Secured Credit
Facility. In the event that the Company is unable to cure such defaults or obtain waivers with respect to such defaults, the Company
is at risk that the Companys payment obligations under either, or both, the Indenture Notes and the Secured Credit Facility
will be accelerated, thereby forcing the Company to either obtain alternative financing or seek legal protection from its creditors.

14



---

EVERGREEN HOLDINGS, INC.CONDENSED NOTES TOUNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The Company has taken measures
 to facilitate its ability to remain in compliance with its various debt covenants. In particular, the Company has focused on
reducing its selling, general, and administrative expenses by controlling its legal and professional fees and managing payroll
 expenses in certain of the Companys subsidiaries. In addition, the Company has significantly reduced its property insurance
 expense and non-essential maintenance expenses. As a result, the Company was in compliance of its debt covenants as of November
 30, 2004. See Note 6  Long-Term Debt Obligations below.

# NOTE 6  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 Bank One, National Association, 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. 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. 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 Created February 25, 1986 (the Trust), an affiliated entity in which Aviation holds an approximate two-thirds beneficial interest. 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.

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. The next payment
of accrued interest in the amount of $12.9 million will be due and payable on May 15, 2005. Payment of the accrued interest will be
 funded from the Companys operations.

The Indenture Notes will mature
 on May 15, 2010, at which time the $215.0 million face value of the Indenture Notes, plus all accrued and unpaid interest, will
become due. However, the Company 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 %

Further information regarding
the financial covenants contained in the Indenture Notes is discussed in Note 7 below.

15



---

EVERGREEN HOLDINGS, INC.CONDENSED NOTES TOUNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

# 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 Ableco Finance LLC
(collectively, the Wells Fargo Lenders). The Secured Credit Facility consists of two loans - a $50.0 million term
loan and a $50.0 million 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.

At the closing of the Secured
Credit Facility, approximately $83.0 million of the loan was funded. The Company utilized $80.8 million of the funds to fully repay
 and terminate certain revolving credit obligations owed by Aviation to PNC Bank, N.A. (PNC Bank), while the remaining
 $2.2 million of loan proceeds was used to pay for part of the legal fees and other transaction costs incurred by the Company in
connection with the closing of the Secured Credit Facility. The Company incurred a total of $2.4 million of legal and professional
fees in connection with the closing of the Secured Credit Facility. The Company capitalized those legal and professional fees as
loan acquisition costs and is amortizing the loan acquisition costs over the term of the Secured Credit Facility.

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 the Company is not in default under the Secured Credit
 Facility, the Company 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. The Company
is 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.

Revolving Loan Advances.
 During the term of the Secured Credit Facility, the Company 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. The Company 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.

16



---

EVERGREEN HOLDINGS, INC.CONDENSED NOTES TOUNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Loan Balance and
Availability. As of November 30, 2004, the outstanding balance of the Secured Credit Facility was $77.9 million. Taking into
consideration the limitations on the Companys ability to obtain additional advances of principal from the revolving loan
(see Revolving Loan Advances above), as of November 30, 2004, the Companys availability under the Secured Credit
Facility was $9.8 million.

Covenant Compliance.
The Company is subject to certain financial and non-financial covenants under the Secured Credit Facility. In particular, the Company
 must maintain: i) either a qualified cash reserve balance or an undrawn availability on the revolving loan of not less than
$5.0 million, 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 nine-month period ended November 30, 2004:

|Consolidated EBITDA Covenant  The covenant requires a consolidated
EBITDA in a minimum amount of $67.0 million. As of November 30, 2004, the Company was in compliance with this covenant.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Airlines EBITDA Covenant  The covenant requires an EBITDA for
 Airlines in a minimum amount of $55.0 million. As of November 30, 2004, the Company was in compliance with this covenant.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Fixed Charge Coverage Covenant  The covenant requires a
 fixed charge coverage in a minimum ratio of 1.00 to 1.00. As of November 30, 2004, the Company was in compliance with this covenant.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition, the amount of
capital expenditures that may be made by the Company 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, 2004, the Company was 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, the Company would be
 in default under the Secured Credit Facility and the debt could be accelerated.

# Prior Loan Acquisition Costs

In connection with the full
repayment and termination of the revolving credit obligations owed by Aviation to PNC Bank, the Company incurred $0.3 million of
expense for pre-payment penalties and legal fees, and recognized a write-off of unamortized loan acquisition costs
in the amount of $3.5 million in May 2004. The write-off of unamortized loan acquisition costs is included on the Companys
consolidated statement of operations as part of Other non-operating expense.

17



---

EVERGREEN HOLDINGS, INC.CONDENSED NOTES TOUNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Amendment to 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. (MLBFS) 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 3.00%
 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.

On May 12, 2004, EASL and MLBFS executed an amendment letter to the WCMA Loan. The amendment letter establishes certain financial covenants for the WCMA Loan that are consistent with the financial covenants contained in the Indenture Notes and Secured Credit Facility. The amendment letter establishes i) a schedule for fixed charge coverage ratios to be measured on a quarter-end basis, ii) a $75 million maximum limit on capital expenditures of which at least $10 million must be funded by indebtedness, 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, 2004, the Company was in compliance with the covenants contained in the WCMA Loan. See Secured Credit
 Facility above.

18



---

EVERGREEN HOLDINGS, INC.CONDENSED NOTES TOUNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

# NOTE 7  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 Affiliate). 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 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 Affiliate, and the
Non-Guarantor Subsidiaries on a combined basis, with consolidating adjustments and total consolidated amounts.

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.

19



---

EVERGREEN HOLDINGS, INC.CONDENSED NOTES TOUNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

|SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS - UNAUDITED
|--------------------------------------------------------------
|
|
|                                                              
|                                                              
|                                                              
|                                                              
|                                                              
|                                                              
|                                                              
|                                                              
|Operating revenues                                            
|Operating expenses                                            
|Selling, general, and administrative expenses                 
|                                                              
|Operating (loss) income                                       
|                                                              
|Interest income (expense)                                     
|Other (expense) income, net                                   
|                                                              
|Income (loss) before minority interest,                       
|                                                              
|                                                              
|                                                              
|Equity in earnings of subsidiaries                            
|                                                              
|Income (loss) before minority interest                        
|                                                              
|                                                              
|Minority interest                                             
|                                                              
|Income (loss) before income taxes                             
|                                                              
|Income tax (expense) benefit                                  
|                                                              
|                                                              
|                                                              

20



---

EVERGREEN HOLDINGS, INC.CONDENSED NOTES TOUNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

|SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS - UNAUDITED
|--------------------------------------------------------------
|
|
|                                                              
|                                                              
|                                                              
|                                                              
|                                                              
|                                                              
|                                                              
|                                                              
|Operating revenues                                            
|Operating expenses                                            
|Selling, general, and administrative expenses                 
|                                                              
|Operating income (loss)                                       
|                                                              
|Interest expense                                              
|Other (expense) income, net                                   
|                                                              
|Income (loss) before minority interest,                       
|                                                              
|                                                              
|Equity in earnings of subsidiaries                            
|                                                              
|Income (loss) before minority interest                        
|                                                              
|                                                              
|Minority interest                                             
|                                                              
|Income (loss) before income taxes                             
|                                                              
|Income tax (expense) benefit                                  
|                                                              
|                                                              
|                                                              

21



---

EVERGREEN HOLDINGS, INC.CONDENSED NOTES TOUNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

|SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS - UNAUDITED
|--------------------------------------------------------------
|
|
|                                                              
|                                                              
|                                                              
|                                                              
|                                                              
|                                                              
|                                                              
|                                                              
|Operating revenues                                            
|Operating expenses                                            
|Selling, general, and administrative expenses                 
|                                                              
|Operating (loss) income                                       
|                                                              
|Interest income (expense)                                     
|Other (expense) income, net                                   
|                                                              
|Income (loss) before minority interest,                       
|                                                              
|                                                              
|Equity in earnings of subsidiaries                            
|                                                              
|(Loss) income before minority interest                        
|                                                              
|                                                              
|Minority interest                                             
|                                                              
|(Loss) income before income taxes                             
|                                                              
|Income tax benefit (expense)                                  
|                                                              
|                                                              
|                                                              

22



---

EVERGREEN HOLDINGS, INC.CONDENSED NOTES TOUNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

|SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS - UNAUDITED
|--------------------------------------------------------------
|
|
|                                                              
|                                                              
|                                                              
|                                                              
|                                                              
|                                                              
|                                                              
|                                                              
|Operating revenues                                            
|Operating expenses                                            
|Selling, general, and administrative expenses                 
|                                                              
|Operating income (loss)                                       
|                                                              
|Interest expense                                              
|Other income (expense), net                                   
|                                                              
|Income (loss) before minority interest,                       
|                                                              
|                                                              
|Equity in earnings of subsidiaries                            
|                                                              
|Income (loss) before minority interest                        
|                                                              
|                                                              
|Minority interest                                             
|                                                              
|Income (loss) before income taxes                             
|                                                              
|Income tax benefit (expense)                                  
|                                                              
|                                                              
|                                                              

23



---

EVERGREEN HOLDINGS, INC.CONDENSED NOTES TOUNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

|SUPPLEMENTAL CONSOLIDATING BALANCE SHEET - UNAUDITED
|----------------------------------------------------
|
|
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|ASSETS                                              
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|Total assets                                        
|                                                    



|                                           |                                                   |         |   |   |         |       |   |         |        |   |        |   |   |        |     |   |          |   |   |         |        |  | 
|------------------------------------------ | ------------------------------------------------- | ------- | - | - | ------- | ----- | - | ------- | ------ | - | ------ | - | - | ------ | --- | - | -------- | - | - | ------- | ------ |  | 
|LIABILITIES AND STOCKHOLDERS' EQUITY       |                                                  
|                                           | Current liabilities:                             
|                                           | Accounts payable                                  | $       | - |   | $       | 5,487 |   | $       | 61,034 |   | $      | - |   | $      | 548 |   | $        | 1 |   | $       | 67,070 | 
|                                           | Accrued liabilities and payables to affiliates    | 25      |   |   | 4,218   |       |   | 23,440  |        |   | -      |   |   | 436    |     |   | -        |   |   | 28,119  |       
|                                           | Accrued interest                                  | -       |   |   | 1,208   |       |   | 30      |        |   | 95     |   |   | 4      |     |   | -        |   |   | 1,337   |       
|                                           | Current portion long-term debt                    | -       |   |   | 6,665   |       |   | 4,077   |        |   | 4,643  |   |   | 667    |     |   | -        |   |   | 16,052  |       
|                                           |                                                   |         |   |   |         |       |   |         |        |   |        |   |  
|                                           | Total current liabilities                         | 25      |   |   | 17,578  |       |   | 88,581  |        |   | 4,738  |   |   | 1,655  |     |   | 1        |   |   | 112,578 |       
|                                          
|                                           | Long-term debt                                    | 71,838  |   |   | 74,505  |       |   | 119,804 |        |   | -      |   |   | 25,999 |     |   | -        |   |   | 292,146 |       
|                                           | Deferred rentals and other payables to affiliates | -       |   |   | -       |       |   | (5,448  | )      |   | 5,533  |   |   | -      |     |   | -        |   |   | 85      |       
|                                           | Deferred tax liabilities                          | (40,032 | ) |   | (2,038  | )     |   | 143,455 |        |   | -      |   |   | 2,348  |     |   | (43      | ) |   | 103,690 |       
|                                           |                                                   |         |   |   |         |       |   |         |        |   |        |   |  
|                                           | Total liabilities                                 | 31,831  |   |   | 90,045  |       |   | 346,392 |        |   | 10,271 |   |   | 30,002 |     |   | (42      | ) |   | 508,499 |       
|                                          
|                                           | Minority interest                                 | -       |   |   | 327     |       |   | -       |        |   | -      |   |   | -      |     |   | -        |   |   | 327     |       
|                                          
|                                           | Stockholders' equity                              | 184,764 |   |   | 195,260 |       |   | 237,577 |        |   | 2,194  |   |   | 22,715 |     |   | (457,746 | ) |   | 184,764 |       
|                                           |                                                   |         |   |   |         |       |   |         |        |   |        |   |  
|Total liabilities and stockholders' equity | $                                                 | 216,595 |   | $ | 285,632 |       | $ | 583,969 |        | $ | 12,465 |   | $ | 52,717 |     | $ | (457,788 | ) | $ | 693,590 |       
|                                           |                                                   |         |   |   |         |       |   |         |        |   |        |   |  

24



---

EVERGREEN HOLDINGS, INC.CONDENSED NOTES TOUNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

|SUPPLEMENTAL CONSOLIDATING BALANCE SHEET - UNAUDITED
|----------------------------------------------------
|
|
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|ASSETS                                              
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|Total assets                                        
|                                                    



|                                           |                                                   |         |   |   |         |       |   |         |        |   |        |   |   |        |     |   |          |   |   |         |        |  | 
|------------------------------------------ | ------------------------------------------------- | ------- | - | - | ------- | ----- | - | ------- | ------ | - | ------ | - | - | ------ | --- | - | -------- | - | - | ------- | ------ |  | 
|LIABILITIES AND STOCKHOLDERS' EQUITY       |                                                  
|                                           | Current liabilities:                             
|                                           | Accounts payable                                  | $       | - |   | $       | 6,682 |   | $       | 35,734 |   | $      | - |   | $      | 788 |   | $        | - |   | $       | 43,204 | 
|                                           | Accrued liabilities and payables to affiliates    | -       |   |   | 5,366   |       |   | 15,137  |        |   | -      |   |   | 94     |     |   | -        |   |   | 20,597  |       
|                                           | Accrued interest                                  | -       |   |   | 7,727   |       |   | (1      | )      |   | -      |   |   | 9      |     |   | -        |   |   | 7,735   |       
|                                           | Income taxes payable                              | -       |   |   | 64      |       |   | 2,218   |        |   | -      |   |   | 95     |     |   | -        |   |   | 2,377   |       
|                                           | Current portion long-term debt                    | -       |   |   | 66      |       |   | 5,652   |        |   | 5,059  |   |   | 803    |     |   | -        |   |   | 11,580  |       
|                                           |                                                   |         |   |   |         |       |   |         |        |   |        |   |  
|                                           | Total current liabilities                         | -       |   |   | 19,905  |       |   | 58,740  |        |   | 5,059  |   |   | 1,789  |     |   | -        |   |   | 85,493  |       
|                                          
|                                           | Long-term debt                                    | 74,076  |   |   | 64,422  |       |   | 132,946 |        |   | 2,898  |   |   | 25,595 |     |   | -        |   |   | 299,937 |       
|                                           | Deferred rentals and other payables to affiliates | -       |   |   | -       |       |   | (4,698  | )      |   | 4,799  |   |   | -      |     |   | -        |   |   | 101     |       
|                                           | Deferred tax liabilities                          | (41,362 | ) |   | 1,760   |       |   | 142,554 |        |   | -      |   |   | 1,712  |     |   | -        |   |   | 104,664 |       
|                                           |                                                   |         |   |   |         |       |   |         |        |   |        |   |  
|                                           | Total liabilities                                 | 32,714  |   |   | 86,087  |       |   | 329,542 |        |   | 12,756 |   |   | 29,096 |     |   | -        |   |   | 490,195 |       
|                                          
|                                           | Stockholders' equity                              | 188,940 |   |   | 180,306 |       |   | 237,149 |        |   | 590    |   |   | 23,250 |     |   | (441,295 | ) |   | 188,940 |       
|                                           |                                                   |         |   |   |         |       |   |         |        |   |        |   |  
|Total liabilities and stockholders' equity | $                                                 | 221,654 |   | $ | 266,393 |       | $ | 566,691 |        | $ | 13,346 |   | $ | 52,346 |     | $ | (441,295 | ) | $ | 679,135 |       
|                                           |                                                   |         |   |   |         |       |   |         |        |   |        |   |  

25



---

EVERGREEN HOLDINGS, INC.CONDENSED NOTES TOUNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

|SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS - UNAUDITED
|--------------------------------------------------------------
|
|
|                                                              
|                                                              
|                                                              
|                                                              
|                                                              
|                                                              
|                                                              
|                                                              
|Net cash provided by (used in) operating activities           
|                                                              
|Cash flows from investing activities:                         
|                                                              
|                                                              
|                                                              
|                                                              
|Net cash (used in) provided by investing activities           
|                                                              
|Cash flows from financing activities:                         
|                                                              
|                                                              
|                                                              
|                                                              
|Net cash (used in) provided by financing activities           
|                                                              
|Net increase (decrease) in cash                               
|                                                              
|Cash, beginning of period                                     
|                                                              
|                                                              
|                                                              

26



---

EVERGREEN HOLDINGS, INC.CONDENSED NOTES TOUNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

|SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS - UNAUDITED
|--------------------------------------------------------------
|
|
|                                                              
|                                                              
|                                                              
|                                                              
|                                                              
|                                                              
|                                                              
|                                                              
|Net cash provided by (used in) operating activities           
|                                                              
|Cash flows from investing activities:                         
|                                                              
|                                                              
|                                                              
|                                                              
|Net cash (used in) provided by investing activities           
|                                                              
|Cash flows from financing activities:                         
|                                                              
|                                                              
|                                                              
|                                                              
|Net cash provided by (used in) financing activities           
|                                                              
|Net (decrease) increase in cash                               
|                                                              
|Cash, beginning of period                                     
|                                                              
|                                                              
|                                                              

27



---

EVERGREEN HOLDINGS, INC.CONDENSED NOTES TOUNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

# NOTE 8  RELATED PARTY TRANSACTIONS

# Sale of Aircraft

In August 2004, EASL sold a Lear 35 jet to Ventures Acquisition Company LLC for $2.7 million.  EASL had purchased the Lear 35 jet in
June 2004 for $ 2.7 million.  Because EASL sold the Lear 35 jet at EASL's cost for the aircraft, EASL did not recognize a gain or a
loss on the sale.

# Lease Transactions

The Company rents aircraft and
buildings from entities that are owned or controlled by Mr. Smith. During the three months ended November 30, 2004 and November 30, 2003,
the Company incurred rent expense for these leases in the aggregate amounts of $1.7 million and $1.9 million, respectively. During
the nine months ended November 30, 2004 and November 30, 2003, the Company incurred rent expense for these leases in the aggregate
amounts of $5.1 million and $6.0 million, respectively.

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, a Boeing 747 aircraft. Mr. Smith holds a one-third beneficial interest in the
 Boeing 747, while Aviation holds the remaining two-thirds beneficial interest. Airlines leases the Boeing 747 from the Trust.

In each of the periods for the three months ended November 30, 2004 and November 30, 2003, Airlines incurred aircraft lease expense
on the Boeing 747 in the amount of $1.5 million.  Of these amounts in each three-month period, $0.5 million was attributable to Mr.
Smith's one-third beneficial interest in the aircraft.  In each of the periods for the nine months ended November 30, 2004 and
November 30, 2003, aircraft rent expense incurred by the Airlines on the Boeing 747 was $4.4 million.  Of these amounts in each
nine-month period, $1.4 million was attributable to Mr. Smith's one-third beneficial interest in the aircraft.

Expiration of Aircraft Lease

During the three months ended
November 30, 2004, Airlines and Ventures Acquisition Company LLC negotiated a settlement in connection
with the scheduled expiration of an aircraft lease agreement.  For further information, see "Note 4 - Expiration of Aircraft Lease" above.

28



---

EVERGREEN HOLDINGS, INC.CONDENSED NOTES TOUNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

# Notes Receivable from Affiliates and Notes Payable to Affiliates

The Company also has a number of notes receivable from, and notes payable to, Mr. Smith, Ventures Holdings, Inc., and Ventures Acquisition Company LLC (entities that are controlled by Mr. Smith). The chart below summarizes the Companys various notes receivable from, and notes payable to, Mr. Smith, Ventures Holdings, Inc., or Ventures Acquisition Company LLC at November 30, 2004 and February 29, 2004:

|                                                       |                                                                                  |       |              |       |        |        | 
|------------------------------------------------------ | -------------------------------------------------------------------------------- | ----- | ------------ | ----- | ------ | ------ | 
|                                                       | (in thousands)                                                                  
|                                                       |                                                                                 
|                                                       | November 30,                                                                     |       | February 29,
|                                                       | 2004                                                                             |       | 2004        
|                                                       |                                                                                  |       |             
|Notes receivable from Ventures Holdings, Inc.          | $                                                                                | 9,683 |              | $     | 10,672 |       
|                                                       | (an entity controlled by Mr. Smith) due in annual installments                   |      
|                                                       | of $1,134 thousand, beginning March 31, 2004, with an annual interest rate of 4% |      
|                                                      
|Notes receivable from Ventures Acquisition Company LLC |                                                                                  | 1,117 |              | 1,233 |       
|                                                       | (an entity controlled by Mr. Smith) due in annual installments                   |      
|                                                       | of $146 thousand, beginning March 31, 2004, with an annual interest rate of 4%   |      
|                                                      
|Note receivable from Mr. Smith                         |                                                                                  | 4,616 |              | 5,095 |       
|                                                       | due in ten annual installments of $802 thousand,                                 |      
|                                                       | beginning March 31, 2004, with an annual interest rate of 4%                     |      
|                                                      
|Notes receivable from Mr. Smith                        |                                                                                  | -     |              | 602   |       
|                                                       | due in annual installments to be equal to the earnings distributed               |      
|                                                       | on aircraft N471, with an annual interest rate of 8%                             |      
|                                                      
|Note payable to Ventures Acquisition Company LLC       |                                                                                  | -     |              |       | (739   | )     
|                                                       | (an entity controlled by Mr. Smith) due in monthly installments                  |      
|                                                       | of $108 thousand, with an annual interest rate of 6%                             |      
|                                                       |                                                                                  |       |             
|                                                       | Net notes receivable from affiliates                                             | $     | 15,416       |       | $      | 16,863 | 
|                                                       |                                                                                  |       |             

Notes Receivable from
Affiliates During the nine months ended November 30, 2004, the Company
received $2.6 million of principal payments on notes receivable from affiliates. During the same time period, the
principal balances of the Company's notes receivable from affiliates increased by $0.4 million of accrued interest
receivable.

Notes Payable to Affiliates During the nine months ended November 30, 2004, the Company made $0.7 million of principal payments on notes payable to affiliates.

29



---

EVERGREEN HOLDINGS, INC.CONDENSED NOTES TOUNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

# Bonus Compensation Paid to Mr. Smith

On March 26, 2004, the board of directors granted a $2.9 million bonus to Mr. Smith, in accordance with the terms of Mr. Smiths employment agreement with the Company. Payment of the bonus was recorded by the Company as a part of selling, general, and administrative expenses.

Mr. Smith utilized $2.1 million of the bonus to pay to
the Company $1.4 million of principal and $0.7 million of accrued interest on obligations owed to the Company by Mr. Smith or other
 entities affiliated with Mr. Smith.

# NOTE 9  EMPLOYEE BENEFIT PLAN

Effective March 1, 2002, the
 Company established the Evergreen Savings and Retirement Plan (the Plan). The Plan is a defined contribution plan covering
all full-time employees of the Company who have been credited with one year of service, are age 21 or older, are not covered by a
collective bargaining agreement, and are not a temporary employee. Under the Plan, the Company matches 50% of the first 8% of base
compensation that a participant contributes to the Plan.

The Company also makes an annual
 basic contribution in an amount equal to 4% of the annual compensation of each participant who has completed the minimum required
hours of service during the Plan year, net of plan forfeitures (the 4% Contribution). In November 2004, the Company made a 4% Contribution in the
 amount of $2.7 million.

# NOTE 10  CONTINGENCIES

The Company is currently
involved in a number of legal proceedings, as disclosed in the Companys Annual Report on Form 10-K/A and as discussed below.
 As of the date of this report, there have been no material developments in these proceedings. While the results of these proceedings
cannot be predicted with certainty, the Company believes, based on its 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 the Companys consolidated financial position, results of operations, or
cash flows. As material developments related to pending litigation occur, the Company will reassess the Companys potential
liability and revise any estimates accordingly.

30



---

EVERGREEN HOLDINGS, INC.CONDENSED NOTES TOUNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

# Banc of America

The Company is 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 Meeklenburg for 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 the Companys financial
agent in exchange for the payment of certain fees. The plaintiff has not yet specified an amount for damages. The Company filed a
motion to dismiss for lack of jurisdiction, but on November 10, 2003, the court denied the motion. Subsequently, the Company filed
an appeal on the denial of the motion to dismiss. On September 22, 2004, the parties held oral argument on the appeal before the
North Carolina Court of Appeals. A ruling on the appeal is anticipated on or before January 17, 2005.

# Asiana Airlines

On January 28, 2000, the Company
and Asiana Airlines (Asiana) entered into a contract whereby the Company 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
the Company that Asiana would not make any further payments under the contract.

On September 19, 2001, the
Company filed proceedings in the United States District Court for the District of Oregon against Asiana to recover amounts owed by
Asiana to the Company pursuant to the contract. On February 28, 2003, a jury returned a verdict in favor of the Company and on
April 28, 2003, the court entered a judgment for damages in the amount of $16.6 million in favor of the Company. Asiana
 subsequently filed an appeal of the judgment with the Ninth Circuit Court of Appeals, and the parties have filed opening and
answering briefs with the court. Oral argument on the appeal has not yet been scheduled.

# Rural Service Improvement Act of 2002

On August 19, 2002, the
Company instituted proceedings against the United States of America in the United States District Court for the District of Alaska
for a declaration that the Rural Service Improvement Act of 2002 (the Rural Service Act) is unconstitutional. The Rural
 Service Act disqualifies the Company from receiving equitable tender of Alaska non-priority bypass mail unless the Company meets
certain passenger carriage requirements that are economically impractical. The Company subsequently consolidated its claims with a
 prior lawsuit that had been filed by Alaska Central Express, Inc., which asserted similar claims.

The U.S. government filed a
 motion for summary judgment. On September 29, 2003, the federal district court granted the U.S. governments motion and
dismissed the claim with prejudice. The Company has appealed the federal district courts decision to the Ninth Circuit Court
of Appeals. The Company filed its opening brief on February 13, 2004, and the U.S. governments response brief was filed on
April 30, 2004. Oral argument on the appeal has not yet been scheduled.

31



---

EVERGREEN HOLDINGS, INC.CONDENSED NOTES TOUNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

# Tridair Repair and Manufacturing

On February 11, 2003, Tridair
Repair and Manufacturing, Inc. (Tridair) filed a complaint against the Company in the United States District Court for
 the Central District of California (the California Court) alleging fraud and breach of contract. The allegations
 relate to an aircraft salvage contract under which the Company agreed to perform aircraft salvage services for Tridair in return
 for payments to be made by Tridair to the Company. Tridair subsequently transferred its litigation rights to Diversified Aero
Asset Management, Inc. (Diversified), which had previously filed a complaint against the Air Center for similar claims.
Diversified amended its complaint in order to seek $10.6 million in damages for fraud and breach of contract.

On April 2, 2003, the Company filed
a motion to dismiss for lack of jurisdiction, or in the alternative, to transfer the case to the federal district court in Arizona.
As a result, the matter in the California Court was dismissed and the matter was transferred to the United States District of Arizona.
On August 30, 2004, the Company filed a motion for summary judgment, and a hearing on the motion was held on
October 4, 2004.  On October 20, 2004 the Court entered an order dismissing Diversified's punitive damages claim, but denying all
other aspects of the Company's motion for summary judgment.

Jury trial was originally scheduled
for November 30, 2004.  However, the trial was subsequently continued until February 1, 2005 by
stipulation between the parties.

# Pinal County, State of Arizona

The Company currently leases
real property from Pinal County, State of Arizona (Pinal County) for the Air Centers facilities in Marana, Arizona.
 On July 22, 2003, Pinal County notified the Company that Pinal County would attempt to terminate the lease. Pinal County has
alleged that, pursuant to the lease agreement, Air Center was required to perform certain maintenance on the leased property, and
that the Air Center had not performed such maintenance.

The Company subsequently filed an
action in the United States District Court for the District of Arizona requesting a
declaratory judgment in the Company's favor.  Specifically, the Company requested a declaration that the Company was not in breach of
the lease agreement and that Pinal County was not entitled to terminate the lease agreement.  In addition, the Company also requested
that the court enjoin Pinal County from i) terminating the lease agreement and ii) taking any action to evict the Company.  Due to
ongoing negotiations between the Company, Pinal County and the Federal Aviation Administration, the summons and complaint for the
declaratory action were never served on Pinal County.  Subsequently, the Company instructed local counsel to file a motion dismissing
the case and, as of November 4, 2004, the case has been dismissed.

32



---

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

# CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

In accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, we note that certain statements in this Quarterly Report on Form 10-Q and elsewhere are forward-looking and provide other than historical information. The words believe, estimate, anticipate, project, intend, expect, plan, forecast, and similar expressions are intended to identify forward-looking statements. Such forward-looking statements are not guarantees of future performance and are subject to certain risks and uncertainties that could cause actual events and results to differ materially from those discussed herein. Because such forward-looking statements are necessarily dependent on assumptions, data, or methods that may be incorrect or imprecise, and may not be realized, the statements
contained in this Quarterly Report on Form 10-Q or elsewhere should not be relied upon as predictions of future events.

Our Annual Report on Form 10-K/A for the fiscal year ended February 29, 2004, which was filed with the SEC on September 30, 2004, identifies important risks that could cause actual results to differ materially from assertions made by us in forward-looking statements. Such risks include, but are not limited to, our future compliance with the terms of our debt agreements, general conditions in the aviation industry, our ability to adequately maintain the economic viability of our fleet, the effect of government laws and regulations, the risks related to our operations in dangerous locations, and fluctuations in the cost of fuel. These are only some of the risks that may affect the forward-looking statements contained in this Quarterly Report on Form 10-Q. For further information regarding 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/A for the year ended February 29, 2004.

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.

33



---

# OVERVIEW

Evergreen Holdings, Inc. (Holdings) is the parent company of Evergreen International Aviation, Inc. (Evergreen or Aviation) and its subsidiaries. Evergreen is a leading provider of worldwide air freight transportation, ground handling and logistics services, helicopter services, small aircraft sales and leasing, aircraft parts sales, and aircraft maintenance and repair services. Evergreen provides services to a broad base of customers, including the United States Air Force Air Mobility Command (AMC), the United States Postal Service (U.S. Postal Service), freight forwarders, domestic and foreign airlines, industrial manufacturers, and other government agencies. For the military fiscal year beginning October 1, 2005, Evergreen is the largest commercial provider of Boeing 747 wide-body air cargo services to the U.S. military based on entitlement.

The Company conducts business through its six major business segments through its wholly-owned subsidiaries:

- Evergreen International Airlines, Inc. ("Airlines");
- Evergreen Aviation Ground Logistics Enterprises, Inc. ("EAGLE");
- Evergreen Helicopters, Inc. ("Helicopters");
- Evergreen Air Center, Inc. ("Air Center");
- Evergreen Aircraft Sales & Leasing Co. (EASL); and
- Evergreen Agricultural Enterprises, Inc. (Agriculture).

As used herein, the terms 
Company, we, us, and similar terms collectively refer to Evergreen International Aviation, Inc. and its
consolidated subsidiaries.

General information about us
can be found at www.evergreenaviation.com/corp.html. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, and
current reports on Form 8-K, as well as any amendments to those reports, are available free of charge through our website as soon as
reasonably practicable after we file such reports with, or furnish them to, the SEC. No information on our website is incorporated
by reference into this Quarterly Report on Form 10-Q.

34



---

CONSOLIDATED RESULTS OF OPERATIONS
Results of Operations for the Three Months Ended November 30, 2004 and November 30, 2003

The following table sets forth the results of operations with respect to our consolidated reportable segments for the three months ended November 30, 2004 and November 30, 2003:

# RESULTS OF OPERATIONSUnaudited(in thousands)

|                                                 |                                              |         |                     |         |          |        |   |       |        |  |      |   | 
|------------------------------------------------ | -------------------------------------------- | ------- | ------------------- | ------- | -------- | ------ | - | ----- | ------ |  | ---- | - | 
|                                                 | For the Three Months                         |         | 2004 v. 2003       
|                                                 | ended November 30,                           |         | Increase (decrease)
|                                                 |                                              |         |                    
|                                                 | 2004                                         |         | 2003                |         | Increase |        | % |      
|                                                 |                                              |         |                     |         |          |        |  
|Operating revenue:                               |                                             
|                                                 | Flight revenue                               | $       | 112,446             |         | $        | 97,542 |   | $     | 14,904 |  | 15.3 | %
|                                                 | Sales of aircraft, parts, and other assets   | 1,853   |                     | 3,351   |          | (1,498 | ) | (44.7 | )     
|                                                 | Ground logistics services revenue            | 27,061  |                     | 24,213  |          | 2,848  |   | 11.8  |       
|                                                 | Support services and other revenue           | 13,246  |                     | 9,055   |          | 4,191  |   | 46.3  |       
|                                                 |                                              |         |                     |         |          |       
|                                                 | Total operating revenue                      | 154,606 |                     | 134,161 |          | 20,445 |   |      
|                                                
|Operating expenses:                             
|                                                 | Flight costs                                 | 19,766  |                     | 18,617  |          | 1,149  |   | 6.2   |       
|                                                 | Fuel                                         | 35,647  |                     | 25,099  |          | 10,548 |   | 42.0  |       
|                                                 | Maintenance                                  | 19,322  |                     | 18,490  |          | 832    |   | 4.5   |       
|                                                 | Aircraft and equipment                       | 12,657  |                     | 12,855  |          | (198   | ) | (1.5  | )     
|                                                 | Cost of sales of aircraft, parts, and other 
|                                                 | property and equipment                       | 993     |                     | 1,434   |          | (441   | ) | (30.8 | )     
|                                                 | Cost of ground logistics services            | 24,465  |                     | 22,454  |          | 2,011  |   | 9.0   |       
|                                                 | Cost of support services and other           | 16,122  |                     | 10,203  |          | 5,919  |   | 58.0  |       
|                                                 | Selling, general, and administrative expense | 15,409  |                     | 14,960  |          | 449    |   | 3.0   |       
|                                                 |                                              |         |                     |         |          |       
|                                                 | Total operating expenses                     | 144,381 |                     | 124,112 |          | 20,269 |   |      
|                                                 |                                              |         |                     |         |          |       
|                                                
|                                                 | Income from operations                       | 10,225  |                     | 10,049  |          | 176    |   |      
|                                                 |                                              |         |                     |         |          |       
|                                                
|Other (expense) income                          
|                                                 | Interest expense                             | (9,086  | )                   | (8,796  | )        | (290   | ) | (3.3  | )     
|                                                 | Other non-operating income, net              | 21      |                     | (63     | )        | 84     |   | 133.3 |       
|                                                 |                                              |         |                     |         |          |       
|Income before minority interest and income taxes | 1,160                                        |         | 1,190               |         | (30      | )      |  
|                                                
|                                                 | Minority interest                            | (325    | )                   | (284    | )        | (41    | ) | (14.4 | )     
|                                                 |                                              |         |                     |         |          |       
|Income before income taxes                       | 835                                          |         | 906                 |         | (71      | )      |  
|                                                
|                                                 | Income tax expense                           | (737    | )                   | (453    | )        | (284   | ) | (62.7 | )%    
|                                                 |                                              |         |                     |         |          |       
|Net income                                       | $                                            | 98      |                     | $       | 453      |        | $ | (355  | )      | 
|                                                 |                                              |         |                     |         |          |       

35



---

Operating Revenue

Total operating revenue for the
three months ended November 30, 2004 was $154.6 million, which was a $20.4 million, or 15.2%, increase from total operating revenues of $134.2 million for
the same period in 2003.

Flight Revenue
 Flight revenue from the operations of Airlines and Helicopters accounted for $112.4 million, or approximately 70.4%, of our total
operating revenue for the three months ended November 30, 2004. Compared to the same three-month period in 2003, we experienced a $14.9
million increase in our flight revenue.

| |         Airlines  During the three-month period ended November 30, 2004, Airlines earned $104.1 million of flight revenue, as compared to
$89.7 million during the three months ended November 30, 2003. As a result, flight revenue earned by Airlines during the three months
ended November 30, 2004 increased $14.4 million from the same three-month period in 2003. The increase in Airlines flight
revenue was primarily attributable to i) greater utilization of our Boeing 747 fleet for commercial air cargo flights out of Asia and ii)
increases in contract prices due to pass-throughs of fuel price escalations.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | AMC Contracts 
Flight revenue earned under AMC contracts decreased $7.5 million for the three months ended November 30, 2004, as compared to the
same three-month period in 2003.  A shift in utilization of our Boeing 747 fleet capacity from AMC contracts to commercial air cargo
flights out of Asia accounted for a $15.2 million decline in revenue from AMC contracts.  However, we recognized a $7.7 million
increase in flight revenue as a result of the better utilization and positioning of our aircraft on one-way flights.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Commercial Contracts  During the three-month period ended November 30, 2004, flight revenue from our commercial customers increased by $21.9 million as
compared to the same three-month period in 2003.  Revenue earned from our Boeing 747 commercial flights increased $24.0 million,
while revenue earned from our DC-9 commercial flights decreased by $2.1 million.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Boeing 747 Fleet Commercial Contract Revenue 
Increased utilization of our Boeing 747 fleet for commercial air cargo flights out of Asia resulted in a $24.0 million increase in flight
revenues.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | DC-9 Fleet Commercial Contract Revenue 
The completion of a U.S. Postal Service contract and the completion of the DHL air freight services contract (see "Aircraft and Equipment Expense - Airlines" below)
resulted in a $2.1 million decrease in revenue from our DC-9 commercial flights.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

36



---

The following table compares the number of block hours flown by our aircraft during the three months ended November 30, 2004 to the number of block hours flown during the same three-month period in 2003.

Block Hour ComparisonFor the Three Months Ended November 30, 2004 and November 30, 2003

|                 |                        |       |              |       |            |        |   | 
|---------------- | ---------------------- | ----- | ------------ | ----- | ---------- | ------ | - | 
|                 | Increase              
|                 | November 30,           |       | November 30, |       | (decrease)
|                 | 2004                   |       | 2003         |       | from 2003 
|                 |                        |       |              |       |           
|Boeing 747 Hours
|                 | AMC contracts          | 5,394 |              | 6,698 |            | (1,304 | )
|                 | Other All-In contracts | 2,056 |              | 536   |            | 1,520  |  
|                 |                        |       |              |       |           
|                 | Total Boeing 747 hours | 7,450 |              | 7,234 |            | 216    |  
|                
|DC-9 Block Hours
|                 | All-In contracts       | -     |              | 93    |            | (93    | )
|                 | ACMI contracts         | -     |              | 843   |            | (843   | )
|                 |                        |       |              |       |           
|                 | Total DC-9 hours       | -     |              | 936   |            | (936   | )
|                 |                        |       |              |       |           
|                 | Total block hours      | 7,450 |              | 8,170 |            | (720   | )
|                 |                        |       |              |       |           

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |         
Helicopters  During the three months ended November 30, 2004, Helicopters earned $8.3 million of flight revenue, as
compared to $7.8 million for
the same three-month period in 2003, resulting in a $0.5 million increase in revenues. Flight revenue from heavy lift and fire
suppression contracts decreased by $1.7 million. However, revenue from charters increased by $2.1 million and revenue from our
Texas-based flight operations increased by $0.1 million.

Sales of Aircraft, Parts,
and Other Assets  Revenue from sales of aircraft, parts, and other assets was $1.9 million for the three months ended November 30, 2004, as compared to
$3.4 million for the three months ended November 30, 2003, resulting in a $1.5 million decrease in revenue. The decrease in revenue
was primarily attributable to a decline in sales of aircraft parts and other assets due to decreased demand.

During the three months ended November 30, 2004, EASL sold two Bell 214ST helicopters to a third party for $5.0 million.  EASL's cost
for the helicopters was also $5.0 million, thus EASL did not recognized any profit from the sale. Furthermore, because the third
party immediately leased the helicopters back to Helicopters, both the $5.0 million sale and the $5.0 million cost of sales were
eliminated through the Company's consolidation process for financial reporting purposes.

37



---

Ground Logistics Services
Revenue  EAGLE earned $27.1 million of revenue from ground logistics services during the three months ended November 30, 2004, as compared to
$24.2 million for the three months ended November 30, 2003, resulting in a $2.9 million increase in revenue

We expanded the volume of ground
 logistics services to British Airways, which resulted in a $1.6 million increase in
revenue.  We also increased the volume of ground logistics services provided to our other domestic and foreign commercial
customers, resulting in a $1.3 million increase in revenue.

Support Services and Other
Revenue  Support services and other revenue was $13.2 million for the three months ended November 30, 2004, as compared $9.1 million for the
three months ended November 30, 2003, resulting in a $4.1 million increase in revenue. Of the $4.1 million increase, $3.6 million is
attributable to an increase in the level of aircraft maintenance services provided by the Air Center to third parties.  An additional
increase of approximately $1.3 million is attributable to an increased volume of fuel sales and other aircraft support services
provided to third parties.

The increases in aircraft support services revenue were partially offset by a $0.8 million decrease in Agriculture revenue.  The
decrease in Agriculture revenue was partially attributable to a decrease in revenue from sales of hazelnuts during the three months ended
November 30, 2004 as compared to the three months ended November 30, 2003.  During the prior fiscal year, Agriculture purchased and then
resold the hazelnut crop of Greenpatch Farms, an entity which is wholly owned by Mr. Smith, the controlling shareholder of the
Company. This resale of the Greenpatch Farms hazelnut crop generated sales revenue for Agriculture during the three months ended
November 30, 2003.  However, during the current fiscal year, Agriculture did not purchase the hazelnut crop, but instead merely
served as the broker for the sale of the crop by Greenpatch Farms.  Thus, Agriculture did not record revenue for sales of the
Greenpatch Farms hazelnut crop during the three months ended November 30, 2004.

The decrease in Agriculture's revenue was also partially attributable to decreased sales of processed agricultural products due to a
change in marketing strategy.

# Operating Expenses

Total operating expenses for the
three months ended November 30, 2004 were $144.4 million, which was a $20.3 million, or 16.4%,
increase from $124.1 million for the same three-month period in 2003.

Flight Costs 
Flight costs were $19.7  million for the three months ended  November 30, 2004,  as compared to $18.6  million for the three
months ended November 30, 2003, resulting in an increase of $1.1 million.

| |          Airlines
 A $0.1 million increase in flight costs for Airlines was primarily driven by the increased travel costs that resulted from an increase in the
number of commercial air cargo flights flown by us from Asia, as partially offset by reductions in both European overflys and a decrease in
flight costs due to the completion of the DHL air freight services contract.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

38



---

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The increase in the number of our commercial air cargo flights from Asia resulted in a corresponding $0.9 million increase in travel and
payroll expenses for flight crews.  However, a decrease in the number of flights that we flew to and through Europe reduced our
flight costs by $0.4 million.  In addition, we recognized a $0.4 million reduction in flight costs due to the completion of the DHL
air freight services contract.  See also "Aircraft and Equipment Expense - Airlines" below.

Fuel Expense 
Fuel expense was $35.6 million for the three months ended November 30, 2004, as compared to $25.1 million for the three months ended
November 30, 2003, resulting in a $10.5 million increase in fuel expense.

| |         
Airlines  Fuel expense for Airlines increased by $10.7 million. Industry-wide rising prices for aviation fuel accounted for
$9.8 million of the increase in fuel expense. In addition, fuel consumption increased by $0.9 million due to an increase in the
number of block hours flown by Airlines' Boeing 747 aircraft.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |         
Helicopters  Helicopters experienced a $0.2 million decrease for helicopter fuel costs. The decrease in fuel costs was primarily attributable to a
decrease in the volume of helicopter fuel sold by us to third parties, as partially off-set by industry-wide increases in aviation
fuel prices.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Maintenance Expense
 Our expense for aircraft maintenance was $19.3 million for the three months ended November 30, 2004, as compared to $18.5 million for
the three months ended November 30, 2003, resulting in an increase of $0.8 million.

| |         
Airlines   Maintenance expense for aircraft increased by $1.7 million, primarily as a result of $2.5 million of maintenance expense incurred in
connection with the scheduled expiration of a lease for a DC-9 aircraft. For
further information on the leased DC-9 aircraft and the scheduled
expiration of the aircraft lease, see "Note 4 - Expiration of Aircraft Lease" in Part I, Item I of this Quarterly Report.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Partially offsetting the $2.5 million increase, amortization expense for capitalized engine overhaul costs declined $0.5 million and
amortization expense for capitalized airframe maintenance costs decreased by $0.3 million as we continue to use more leased engines.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |         
Helicopters The $0.9 million increase for helicopter maintenance expense is primarily attributable to additional start-up
and configuration costs that were incurred in order to prepare our fleet for current year contracts.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Aircraft and Equipment Expense   Aircraft and equipment expense was $12.7 million for the three months ended November
30, 2004, as compared to $12.9 million for the
three months ended November 30, 2003, resulting in a decrease of $0.2 million of expense.

| |         
Airlines   Aircraft and equipment expense for Airlines decreased by $0.7 million for the three months ended November 30,
2004, as compared to the three months ended November 30, 2003.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

39



---

| |                                                                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Airlines was able to reduce its aircraft costs by $1.4 million
as a result of i) a $0.9 million reduction in engine rental expense due to lower lease rates,
ii) a $0.2 million reduction in aircraft insurance costs, and iii) a $0.3 reduction in depreciation of DC-9 aircraft components.

| | However, during the three months ended November 30, 2004, Airlines' aircraft and equipment expense increased by $0.7 million due to
the impairment expense of a DC-9 aircraft that had been utilized in the DHL air freight services contract.  For further information
on the impairment expense, see "Note 3 - Impairment of Assets " in Part I, Item 1 of this Quarterly Report.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |         
Helicopters  Aircraft and equipment expense for Helicopters during the three months ended November 30, 2004 was $2.9 million, as compared to $2.4
million for the three months ended November 30, 2003, resulting in an increase of $0.5 million.  The $0.5 million increase is
primarily attributable to increased aircraft rental and insurance costs due to an increase in the number of our leased helicopters.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Cost of Sales of Aircraft,
Parts, and Other Property  Cost of sales of aircraft, parts, and other property and equipment was $1.0 million for the three months ended November 30, 2004, as
compared to $1.4 million for the three months ended November 30, 2003, resulting in a $0.4 million decrease in cost of sales. The
$0.4 million decrease in cost of sales was primarily driven by lower inventory costs on sales of aircraft parts.

During the three months ended November 30, 2004, EASL sold two Bell 214ST helicopters to a third party for $5.0 million. EASL's cost
for the helicopters was also $5.0 million, thus EASL did not recognized any profit from the sale. Furthermore, because the third
party immediately leased the helicopters back to Helicopters, both the $5.0 million sale and the $5.0 million cost of sales were
eliminated through the Company's consolidation process for financial reporting purposes.

Cost of Ground Logistics
Services  Cost of ground logistics services was $24.5 million for the three months ended November 30, 2004, as compared to $22.5 million for
the three months ended November 30, 2003, resulting in a $2.0 million increase in expense.

Labor expenses increased by $1.9 million primarily as a result of the expansion of ground logistics services provided by us to
British Airways.  Expenses for equipment and supplies also increased by $1.5 million due to expansion of services for British Airways
and other new and existing customers.

During the three months ended
November 30, 2004, EAGLE began recording its allocated share of corporate expenses from Holdings as
part of EAGLE's selling, general and administrative expenses.  Previously, the allocation of corporate expenses had been recorded as
part of cost of ground logistics services.  This reclassification of allocated corporate expenses from cost of ground logistics
services to selling, general and administrative services resulted in a $1.4 decrease in the cost of ground logistics services during
the three months ended November 30, 2004 as compared to the same three month period in 2003.

Other Support Costs
 Other support costs were approximately $16.2 million for the three months ended November 30, 2004, as compared to $10.2 million for the same
three-month period in 2003, resulting in an increase of $6.0 million in support costs.  Of the increase, $3.7 million was
attributable to an increase in support costs at the Air Center, $2.4 million was attributable to increased landing fees and ground
handling expenses for Airlines, and $0.6 million was attributable to a reclassification by EASL of certain selling, general and
administrative expenses as other support costs.

40



---

The increases in other support costs were partially offset by a $0.7 million decrease in Agriculture's cost of goods sold.  The
decrease in Agriculture's cost of goods sold was partially attributable to a decrease in sales of hazelnuts during the three months
ended November 30, 2004 as compared to the three months ended November 30, 2003.  During the prior fiscal year, Agriculture purchased and
then re-sold the hazelnut crop of Greenpatch Farms, an entity which is wholly owned by Mr. Smith, the controlling shareholder of the
Company. This resale of the Greenpatch Farms hazelnut crop generated cost of goods sold for Agriculture during the three months ended
November 30, 2003.  However, during the current fiscal year, Agriculture did not purchase the hazelnut crop, but instead merely
served as the broker for the sale of the crop by Greenpatch Farms.  Thus, because Agriculture did not purchase and resell the
Greenpatch Farms hazelnut crop during the current fiscal year, Agriculture did not record any corresponding cost of goods sold.

The decrease in Agriculture's
revenue was also partially attributable to
decreased sales of processed agricultural products due to a change in marketing strategy.

Selling, General, and
Administrative  Total selling, general, and administrative expense for the three months ended November 30, 2004 was $15.4 million, as compared to
$15.0 million for the three months ended November 30, 2003, resulting in a $0.4 million increase in expense.

Of the increase, $1.4 million was attributable to a reclassification by EAGLE of allocated corporate expenses from cost of ground
logistics services to selling, general and administrative services (see "Cost of Ground Logistics Services" above). The increase that
is attributable to the EAGLE reclassification was partially offset by i) a $0.6 million reclassification by EASL of
certain selling, general and administrative expenses as other support costs and ii) a $0.4 million reduction of payroll expenses,
professional fees, and travel expenses.

# Interest Expense

Interest expense for the three
 months ended November 30, 2004 was $9.1 million, as compared to interest expense of $8.8 million for the three months ended November
30, 2003. The $0.3 million increase in interest expense is primarily attributable to higher debt balances and increases in interest rates being
 charged by the Companys lenders.

# Income Tax Expense

Our income tax expense for the
 three months ended November 30, 2004 was $0.7 million, as compared to an income tax expense of $0.5
million for the three months ended November 30, 2003.  The increase in income
tax expense was due primarily to a change in the Company's effective tax rate for the three months ended November 30, 2004, as
compared to the same period in 2003.  The
effective tax rate, on an annualized basis for the three months ended November 30, 2004 and November 30, 2003 was 78.8% and 50.0%,
respectively. The change in the effective tax rate is primarily due to the effect of permanent differences in proportion to the
applicable taxable income for the periods presented.

41



---

Results of Operations for the Nine Months Ended November 30, 2004 and November 30, 2003

The following table sets forth the results of operations with respect to our consolidated reportable segments for the nine months ended November 30, 2004 and November 30, 2003:

# RESULTS OF OPERATIONSUnaudited(in thousands)

|                                                        |                                              |         |                     |         |          |         |   |         |        |   |      |    | 
|------------------------------------------------------- | -------------------------------------------- | ------- | ------------------- | ------- | -------- | ------- | - | ------- | ------ | - | ---- | -- | 
|                                                        | For the Nine Months                          |         | 2004 v. 2003       
|                                                        | ended November 30,                           |         | Increase (decrease)
|                                                        |                                              |         |                    
|                                                        | 2004                                         |         | 2003                |         | Increase |         | % |        
|                                                        |                                              |         |                     |         |          |         |  
|Operating revenue:                                      |                                             
|                                                        | Flight revenue                               | $       | 302,183             |         | $        | 304,430 |   | $       | (2,247 | ) | (0.7 | )%
|                                                        | Sales of aircraft, parts, and other assets   | 9,189   |                     | 11,390  |          | (2,201  | ) | (19.3   | )     
|                                                        | Ground logistics services revenue            | 81,558  |                     | 74,450  |          | 7,108   |   | 9.5     |       
|                                                        | Support services and other revenue           | 33,477  |                     | 29,032  |          | 4,445   |   | 15.3    |       
|                                                        |                                              |         |                     |         |          |        
|                                                        | Total operating revenue                      | 426,407 |                     | 419,302 |          | 7,105   |   |         |       
|                                                       
|Operating expenses:                                    
|                                                        | Flight costs                                 | 55,749  |                     | 58,556  |          | (2,807  | ) | (4.8    | )     
|                                                        | Fuel                                         | 89,998  |                     | 76,283  |          | 13,715  |   | 18.0    |       
|                                                        | Maintenance                                  | 55,252  |                     | 52,238  |          | 3,014   |   | 5.8     |       
|                                                        | Aircraft and equipment                       | 36,986  |                     | 37,810  |          | (824    | ) | (2.2    | )     
|                                                        | Cost of sales of aircraft, parts, and other  | 5,127   |                     | 8,290   |          | (3,163  | ) | (38.2   | )     
|                                                        | property and equipment                      
|                                                        | Cost of ground logistics services            | 72,250  |                     | 66,660  |          | 5,590   |   | 8.4     |       
|                                                        | Cost of support services and other           | 37,454  |                     | 28,746  |          | 8,708   |   | 30.3    |       
|                                                        | Selling, general, and administrative expense | 47,510  |                     | 52,980  |          | (5,470  | ) | (10.3   | )     
|                                                        |                                              |         |                     |         |          |        
|                                                        | Total operating expenses                     | 400,326 |                     | 381,563 |          | 18,763  |   |        
|                                                        |                                              |         |                     |         |          |        
|                                                       
|                                                        | Income from operations                       | 26,081  |                     | 37,739  |          | (11,658 | ) |        
|                                                        |                                              |         |                     |         |          |        
|                                                       
|Other (expense) income                                 
|                                                        | Interest expense                             | (26,832 | )                   | (27,268 | )        | 436     |   | 1.6     |       
|                                                        | Other non-operating (expense) income, net    | (3,450  | )                   | 4,258   |          | (7,708  | ) | (181.0  | )     
|                                                        |                                              |         |                     |         |          |        
|(Loss) income before minority interest and income taxes | (4,201                                       | )       | 14,729              |         | (18,930  | )       |  
|                                                       
|                                                        | Minority interest                            | (948    | )                   | (780    | )        | (168    | ) | (21.5   | )     
|                                                        |                                              |         |                     |         |          |        
|(Loss) income before income taxes                       | (5,149                                       | )       | 13,949              |         | (19,098  | )       |  
|                                                       
|                                                        | Income tax benefit (expense)                 | 973     |                     | (5,597  | )        | 6,570   |   | 117.4   | %     
|                                                        |                                              |         |                     |         |          |        
|Net (loss) income                                       | $                                            | (4,176  | )                   | $       | 8,352    |         | $ | (12,528 | )      |  
|                                                        |                                              |         |                     |         |          |        

42



---

# Operating Revenue

Total operating revenue for the
nine months ended November 30, 2004 was $426.4 million, which was a $7.1 million, or 1.7%, increase from total
operating revenues of $419.3 million for the same period in 2003.

Flight Revenue 
Flight revenue from the operations of Airlines and Helicopters accounted for $302.2 million, or approximately 70.1%, of our total
operating revenue for the nine months ended November 30, 2004.  Compared to the same nine-month period in 2003, we experienced a $2.2
million decrease in our flight revenue.

| |         
Airlines  During the nine-month period ended November 30, 2004, Airlines earned $271.8 million of flight revenue, as compared
to $274.1 million during the nine months ended November 30, 2003, resulting in a decrease of $2.3 million decrease.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | AMC Contracts  Flight revenue earned under
AMC contracts decreased $34.7 million for the nine months ended November 30, 2004 as compared to the same
nine-month period in 2003.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | A decision by the U.S. Air Force Air Mobility Command to shift away from the use of commercial aircraft in favor of using organic
military transport aircraft for movements of cargo directly into Iraq accounted for $12.3 million of the decline in revenue from our
AMC contracts. A reduction in aircraft availability due to periodic maintenance and enhancement modifications accounted for an additional
$19.4 million reduction in revenue. Also, a shift in the utilization of our Boeing 747 fleet capacity from AMC contracts to
commercial air cargo flights out of Asia accounted for a $15.2 million decline in revenue from AMC contracts.  In addition, $0.2
million of the decrease in flight revenue was due to a reduction in negotiated rates on AMC contracts.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Partially offsetting these
decreases, we recognized a $12.4 million increase in flight revenue due to i) better utilization and positioning of our aircraft
on one-way flights and ii) increases in contract prices due to pass-throughs of fuel price escalations.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Commercial Contracts  During the nine-month period ended November 30, 2004, flight revenue from our commercial customers increased by $32.4 million as
compared to the same nine-month period in 2003.  Revenue earned from our Boeing 747 commercial flights increased $38.8 million, while
revenue earned from our DC-9 commercial flights decreased by $6.4 million.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Boeing 747 Fleet Commercial Contract Revenue 
Increased utilization of our Boeing 747 fleet for commercial flights out of Asia resulted in an $42.4 million increase in flight
revenue.  However, the completion of a Finnair contract prior to the beginning of the current fiscal year resulted in a $3.6 million
decrease in revenue during the nine months ended November 30, 2004 as compared to the same nine-month period in 2003.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

43



---

| |                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | DC-9 Fleet Commercial Contract Revenue 
The completion of a U.S. Postal Service contract and the completion of the DHL contract (see "Aircraft and Equipment Expense -
Airlines" below) resulted in a $6.4 million decrease in revenue from our DC-9 commercial flights.

The following table compares the
number of block hours flown by our aircraft during the nine months ended November 30, 2004 to the number of block hours flown during
the same nine-month period in 2003.

Block Hour ComparisonFor the Nine Months Ended November 30, 2004 and November 30, 2003

|                 |                                             |        |              |        |            |        |   | 
|---------------- | ------------------------------------------- | ------ | ------------ | ------ | ---------- | ------ | - | 
|                 | Increase                                   
|                 | November 30,                                |        | November 30, |        | (decrease)
|                 | 2004                                        |        | 2003         |        | from 2003 
|                 |                                             |        |              |        |           
|Boeing 747 Hours
|                 | AMC contracts                               | 17,005 |              | 21,019 |            | (4,014 | )
|                 | Other All-In contracts                      | 4,037  |              | 1,475  |            | 2,562  |  
|                 |                                             |        |              |        |           
|                 | Total Boeing 747 hours for All-In contracts | 21,042 |              | 22,494 |            | (1,452 | )
|                
|                 | ACMI contracts                              | 146    |              | 9      |            | 137    |  
|                 |                                             |        |              |        |           
|                 | Total Boeing 747 hours                      | 21,188 |              | 22,503 |            | (1,315 | )
|                 |                                             |        |              |        |           
|                
|DC-9 Block Hours
|                 | All-In contracts                            | -      |              | 1,150  |            | (1,150 | )
|                 | ACMI contracts                              | 1,512  |              | 2,516  |            | (1,004 | )
|                 |                                             |        |              |        |           
|                 | Total DC-9 hours                            | 1,512  |              | 3,666  |            | (2,154 | )
|                 |                                             |        |              |        |           
|                 | Total block hours                           | 22,700 |              | 26,169 |            | (3,469 | )
|                 |                                             |        |              |        |           
|                

| |         
Helicopters  During the nine months ended November 30, 2004, Helicopters earned $30.4 million of flight revenue, as compared
to $30.3 million for the same nine-month period in 2003, resulting in a $0.1 million increase in revenue.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Flight revenue from charters increased by $1.5 million and
revenue from medical evacuation contracts increased by $0.1 million.  However, revenue from heavy lift and fire suppression contracts
 decreased by $0.8 million and revenue from our Texas-based flight operations decreased by $0.1 million.  In addition, the completion
of the NASA shuttle disaster recovery contract prior to the beginning of the
current fiscal year resulted in a $0.6 million decrease of revenue.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

44



---

Sales of Aircraft, Parts,
 and Other Assets  Revenue from sales of aircraft, parts, and other assets was $9.2 million for the nine months ended November 30, 2004 as compared to
$11.4 million for the nine months ended November 30, 2003, resulting in a $2.2 million decrease in revenue.  During the nine months
ended November 30, 2004, EASL sold a Lear 35 jet to Ventures Acquisition Company LLC, an affiliate of the Company, for $2.7 million.
Comparing the sale of the Lear 35 jet during the nine months ended November 30, 2004 to the sale of a Gulfstream II aircraft
for $3.5 million during the same nine-month period in 2003, we recognized a $1.2 million increase in revenue from sales of aircraft.
However, the increase in revenue attributable to aircraft sales was offset by a $3.4 million decrease in revenue due to decreased
demand for aircraft part and other assets.

During the nine months ended November 30, 2004, EASL sold two Bell 214ST helicopters to a third party for $5.0 million. EASL's cost
for the helicopters was also $5.0 million, thus EASL did not recognized any profit from the sale. Furthermore, because the third
party immediately leased the helicopters back to Helicopters, both the $5.0 million sale and the $5.0 million cost of sales were
eliminated through the Company's consolidation process for financial reporting purposes.

Ground Logistics Services
Revenue  EAGLE earned $81.6 million of revenue from ground logistics services during the nine months ended November 30,
2004, as compared $74.5 million during the nine months ended November 30, 2003, resulting in a $7.1 million increase in revenue.

We expanded the volume of ground logistics services provided to British Airways, which resulted in a $1.6 million increase in
revenue.  We also increased the volume of ground logistics services provided to our other domestic and foreign commercial
customers, resulting in a $1.4 million increase in revenue.

In addition, we recognized a $4.0 million increase in revenues from our U.S. Postal Service contract.  Of the increase, $1.4 million
is attributable to an increase in the volume of ground handling services provided by us under the U.S. Postal Services contract.  The
remaining $2.6 million increase is attributable to an increase in the applicable labor rates for our SNET contracts with the U.S.
Postal Service.  The increase in labor rates was retroactive, effective as of August 27, 2003.  As a result, during the nine months
ended November 30, 2004, we recorded an accrual of contract revenue in the amount of $2.6 million and an
accrual of payroll expenses in the amount of $2.6 million (see "Operating Expenses - Cost of Ground Logistics Services" below).

Support Services and Other
Revenue  Support services and other revenue was $33.4 million for the nine months ended November 30, 2004, as compared $29.0 million for the
nine months ended November 30, 2003, resulting in a $4.4 million increase in revenue.  Of the $4.4 million increase, $2.9 million is
attributable to an increase in the level of aircraft maintenance services provided by the Air Center to third parties.  An additional
increase of approximately $2.6 million is attributable to an increased volume of other aircraft support services provided to third
parties.

45



---

The increases in aircraft support services revenue were partially offset by a $1.1 million decrease in Agriculture revenue. The
decrease in Agriculture revenue was primarily attributable to a decrease in revenue from sales of hazelnuts during the nine months
ended November 30, 2004 as compared to the nine months ended November 30, 2003.  During the prior fiscal year, Agriculture purchased and
then re-sold the hazelnut crop of Greenpatch Farms, an entity which is wholly owned by Mr. Smith, the controlling shareholder of the
Company. This resale of the Greenpatch Farms hazelnut crop generated sales revenue for Agriculture during the nine months ended
November 30, 2003.  However, during the current fiscal year, Agriculture did not purchase the hazelnut crop, but instead merely
served as the broker for the sale of the crop by Greenpatch Farms.  Thus, Agriculture did not record revenue for sales of the
Greenpatch Farms hazelnut crop during the nine months ended November 30, 2004.

The decrease in Agriculture's revenue was also partially attributable to i) a decrease in grass seed sales due to a lower
crop yield and ii) decreased sales of processed agricultural products due to a change in marketing strategy.

# Operating Expenses

Total operating expenses for the
nine months ended November 30, 2004 were $400.3 million, which was a $18.7 million, or 4.9%,
increase from $381.6 million for the same nine-month period in 2003.

Flight Costs 
Flight costs were $55.7 million for the nine months ended November 30, 2004, as compared to $58.6 million for the nine months ended
November 30, 2003, resulting in a decrease of $2.9 million.

| |         
Airlines  A $3.8 million reduction in flight costs for Airlines was driven by reductions in European overflys, reduced AMC commissions, lower
payroll costs, and reduced travel costs.  Reductions in our crew staffing levels due to reductions in the number of flights and block
hours flown by our aircraft resulted in a $1.2 million reduction in payroll costs and travel expenses.  A decrease in the number of
flights that we flew to and through Europe reduced our flight costs by $1.8 million, and a reduction of flights under the AMC
contract resulted in a $0.1 million reduction in AMC commissions expense.  In addition, we recognized a $0.7 million reduction in
flight costs due to the completion of a DHL air freight services contract.  See also "Aircraft and Equipment Expense - Airlines"
below.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |         
Helicopters  Additional flight crew costs and travel expenses associated with the increase in the number of contracts for helicopter charters
resulted in a $0.9 million increase in flight costs for the nine months ended November 30, 2004, as compared to the same nine-month
period in 2003.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

46



---

Fuel Expense 
Fuel expense was $90.0 million for the nine months ended November 30, 2004, as compared to $76.3 million for the nine months ended
November 30, 2003, resulting in a $13.7 million increase in fuel expense.

| |         
Airlines  Airlines' fuel expense increased by $12.7 million.  Rising prices for aviation fuel accounted for a $17.4 million increase in fuel
expense.  The pegged contract fuel rate on our AMC contracts increased from approximately $0.95 per gallon to approximately $1.00 per
gallon.  However, an
increase in our commercial flight activity, where aviation fuel prices are considerably higher, substantially drove the increase in
Airlines' fuel expense.  This increase in fuel expense was partially offset by a $4.7 million reduction in fuel consumption due to a
reduction in the number of block hours flown by Airlines' aircraft.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |         
Helicopters  Helicopters experienced a $1.0 million increase for helicopter fuel costs. The increase in fuel costs was primarily attributable to
i) industry-wide increases in aviation fuel prices and (ii) an increase in the volume of helicopter fuel sold by us to third parties.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Maintenance Expense
  Expense for aircraft maintenance was $55.2 million for the nine months ended November 30, 2004, as compared to $52.2 million for the
nine months ended November 30, 2003, resulting in an increase of $3.0 million in expense.

| |         Airlines
  Maintenance expense for Airlines' aircraft increased by $1.2 million. Our amortization expense for capitalized airframe maintenance
costs increased by $3.6 million due to increased amortization of aircraft maintenance check costs.  Maintenance expense also
increased as a result of $2.5 million of maintenance expense incurred in connection with the scheduled expiration of a lease for a DC-9
aircraft. For further information on the leased DC-9 aircraft and the scheduled expiration of the aircraft lease, see "Note 4 - Expiration of
Aircraft Lease" in Part I, Item I of this Quarterly Report.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Offsetting the increases in maintenance expense, amortization expense for capitalized engine overhaul costs declined $3.3 million due
to our continued use of leased engines. In addition, our expense for purchases of aircraft component parts, aircraft repairs, and
other expenses declined by approximately $1.6 million.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |         
Helicopters  An increase of $1.8 million for helicopter maintenance expense was attributable to i) $1.4 million of additional start-up and
configuration costs that were incurred in order to prepare our fleet for current year contracts and ii) a $0.4 million increase in
the amortization of previously capitalized overhaul costs.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Aircraft and Equipment
Expense  Aircraft and equipment expense was $37.0 million for the nine months ended November 30, 2004, as compared to $37.8 million for the
nine months ended November 30, 2003, resulting in a decrease of $0.8 million of expense.

| |         
Airlines  Aircraft and equipment expense for Airlines decreased by $1.6 million during the nine months ended November 30, 2004, as compared to
the nine months ended November 30, 2003.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

47



---

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Airlines was able to reduce its aircraft costs by $2.9 million
as a result of i) a $1.9 million reduction in engine rental expense due to lower lease rates, ii) a $0.5 million reduction in aircraft
insurance costs, and iii) a $0.5 million reduction in the depreciation of DC-9 aircraft components.  However, that $1.5 million
reduction in aircraft costs was partially offset by $1.3 million of impairment charges to the net carrying value of two DC-9
aircraft. For further information on the impairment expense, see "Note 3 - Impairment of Assets " in Part I, Item 1 of this Quarterly
Report.

| |         
Helicopters  The $0.8 million  increase in aircraft and equipment expense for  Helicopters  was primarily  attributable  to a $1.0 million
increase in helicopter lease expenses, as partially offset by a $0.2 million decrease in depreciation expense.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Cost of Sales of Aircraft,
Parts, and Other Property  Cost of sales of aircraft, parts, and other property and equipment was $5.1 million for the nine months ended November 30, 2004, as
compared to $8.3 million for the nine months ended November 30, 2003, resulting in a $3.2 million decrease in cost of sales.  Of the
$3.2 million decrease, $2.0 million is attributable to the difference between i) the $2.7 million cost of sales on a Lear 35 jet sold
to Ventures Acquisition Company LLC during the nine months ended November 30, 2004 and ii) the $4.7 million cost of sales on the sale
of a Gulfstream II aircraft sold during the same nine-month period in 2003. The remaining $1.1 million decrease in cost of sales was
primarily driven by lower inventory costs on sales of aircraft parts and other assets.

During the three months ended November 30, 2004, EASL sold two Bell 214ST helicopters to a third party for $5.0 million. EASL's cost
for the helicopters was also $5.0 million, thus EASL did not recognized any profit from the sale. Furthermore, because the third
party immediately leased the helicopters back to Helicopters, both the $5.0 million sale and the $5.0 million cost of sales were
eliminated through the Company's consolidation process for financial reporting purposes.

Cost of Ground Logistics
Services  Cost of ground logistics services was $72.3 million for the nine months ended November 30, 2004, as compared to $66.7 million for the
nine months ended November 30, 2003, resulting in a $5.6 million increase.

Payroll expenses increased by
$4.9 million as a result of i) an $1.9 million increase in labor expense due to the expansion of the
ground logistics services provided by us to British Airways, ii) a $0.4 million charge for prior years' workmans compensation
expense, and iii) a $2.6 million accrual of payroll expense.  The accrual of payroll expense resulted
from a notification from the U.S. Department of Labor regarding an increase in the applicable labor rates for our SNET contracts with
the U.S. Postal Service.  See "Operating Revenue - Ground Logistics Services Revenue" above. The increase in labor rates was
retroactive, effective as of August 27, 2003.

Expenses for equipment and supplies
 also increased by $2.1 million due to expansion of services for new customers.

During the three months ended
November 30, 2004, EAGLE began recording its allocated share of corporate expenses from Holdings as
part of EAGLE's selling, general and administrative expenses.  Previously, the allocation of corporate expenses had been recorded as
part of cost of ground logistics services.  This reclassification of allocated corporate expenses from cost of ground logistics
services to selling, general and administrative services resulted in a $1.4 decrease in the cost of ground logistics services during
the three months ended November 30, 2004 as compared to the same three month period in 2003.

48



---

Other Support Costs
 Other support costs were $37.5 million for the nine months ended November 30, 2004, as compared to $28.7 million for the same
nine-month period in 2003, resulting in an increase of $8.8 million in support costs.  Of the increase, $5.1 million was attributable
to increased support costs at the Air Center, $4.2 million was attributable to increased landing fees and ground handling expenses
for Airlines, approximately $0.6 million was attributable to a reclassification by EASL of certain selling, general and
administrative expenses as other support costs, and approximately $0.7 million was attributable to increases in other support costs.

The increases in other support
costs were partially offset by a $1.8 million decrease in Agriculture's cost of goods sold.  The
decrease in Agriculture's cost of goods sold was partially attributable to a decrease in sales of hazelnuts during the nine months
ended November 30, 2004 as compared to the nine months ended November 30, 2003.  During the prior fiscal year, Agriculture purchased and
then re-sold the hazelnut crop of Greenpatch Farms, an entity which is wholly owned by Mr. Smith, the controlling shareholder of the
Company. This resale of the Greenpatch Farms hazelnut crop generated cost of goods sold for Agriculture during the nine months ended
November 30, 2003.  However, during the current fiscal year, Agriculture did not purchase the hazelnut crop, but instead merely
served as the broker for the sale of the crop by Greenpatch Farms.  Thus, because Agriculture did not purchase and resell the
Greenpatch Farms hazelnut crop during the current fiscal year, Agriculture did not record any corresponding cost of goods sold.

The decrease in Agriculture's
cost of goods sold was also partially attributable to i) lower grass seed sales and ii) decreased sales
of processed agricultural products due to a change in marketing strategy.

Selling, General, and
Administrative  Total selling, general, and administrative expense for the nine months ended November 30, 2004 was $47.5 million, as compared to
$53.0 million for the nine months ended November 30, 2003, resulting in a $5.5 million decrease in expense.

Of the decrease, $2.1 million was primarily attributable to the increased amount of professional fees and travel expenses that we
incurred in May 2003 in conjunction with the restructuring of our long-term debt and issuance of the Indenture Notes. Approximately
$0.6 million of the decrease is attributable to a reclassification by EASL of certain selling, general and administrative expenses as other
support costs. Current year reductions in payroll costs, professional fees, and travel expenses accounted for another $2.2 million
of the decrease in expense.

In addition, $2.0 million of the decrease is attributable to an increase in the bad debt allowance for EAGLE during the nine months
ended November 30, 2003.  Based upon our analyses of the liquidity of EAGLE's accounts receivable, we have not recognized any similar
increase in EAGLE's bad debt allowance for the nine months ended November 30, 2004.

The decreases in selling, general and administrative expense were partially off-set by a $1.4 million increase attributable to a
reclassification by EAGLE of allocated corporate expenses from cost of ground logistics services to selling, general and
administrative services (see "Cost of Ground Logistics Services" above).

49



---

# Interest Expense

Interest expense for the nine
months ended November 30, 2004 was $26.8 million, which was a $0.5 million decrease from $27.3 million
for the same nine-month period in 2003.  The $0.5 million reduction in interest expense was primarily attributable to
interest charges that were incurred by us during the nine months ended November 30, 2003 in connection with the restructuring of our
long-term debt and issuance of the Indenture Notes in May 2003, as partially offset by increased interest expense due to higher debt
balances and increases in interest rates being charged by the Company's lenders.

# Other Non-Operating Expense and Income

During the nine months ended November 30, 2004, we incurred $3.5 million of non-operating expense that was primarily attributable to loan prepayment penalties and a write-off of unamortized loan acquisition costs. The write-off of unamortized loan acquisition costs occurred in May 2004 in conjunction with the full repayment and termination of our revolving line of credit with PNC Bank, N.A. (PNC Bank). In comparison, during the nine months ended November 30, 2003, we generated $4.3 million of non-operating income primarily as a result of a $4.1 million gain on insurance settlement proceeds, which was used to repair damaged aircraft.

# Income Tax Expense

Our income tax benefit for the
 nine  months  ended  November  30, 2004 was $1.0  million,  as compared to an income tax expense of $5.6
million for the nine months ended  November 30,  2003.  The decrease in income
tax expense was due primarily to a pre-tax loss of $5.1
million for the nine months ended  November 30, 2004, as compared to pre-tax income of $14.0 million for the same period in 2003.  The
effective  tax rate, on an annualized basis for the nine months ended November 30, 2004 and November 30, 2003, was 18.9% and 40.1%,
respectively. The change in the effective tax rate is primarily due to the effect of permanent differences in proportion to the
applicable taxable income for the periods presented.

# LIQUIDITY

At November 30, 2004, we had cash and cash equivalents of $6.7 million, as compared to cash and cash equivalents of $4.1 million at
February 29, 2004.

Cash Flows from Operating Activities

We generated $11.7 million more cash from operating activities during the nine months ended November 30, 2004 than during the same
nine-month period in 2003.  During the nine months ended November 30, 2004, we generated $55.3 million of cash in our operating
activities, as compared to generating cash of $43.6 million from operating activities during the same period in 2003.

In addition to recognizing a loss of $4.2 million for the nine months ended November 30, 2004, our cash flow from operations was also reduced by
a $11.6 million increase in outstanding accounts receivable from our customers.  Increases in inventories utilized $7.2 million of
cash and a decrease in deferred income taxes and taxes payable used $1.0 million of cash.  Our cash flow from operations also
declined due to a $1.0 million increase in gains on sales of property and equipment, without a corresponding increase in cash flow.

50



---

However, during the same nine-month period, other operating activities provided approximately $80.3 million of cash. Non-cash
depreciation and amortization expenses of $51.2 million, and a $22.6 million increase in accounts payable balances accounted for a
fportion of the cash flow. Also, in connection with the full repayment and termination of our line of credit with PNC Bank, we
recognized a $3.5 million non-cash write-off of unamortized loan acquisition costs that were associated with that line of credit.
Payments on accounts receivable from affiliates, decreases in prepaid expense accounts, and non-cash impairment charges for two DC-9
aircraft accounted for the remaining $3.0 million of the cash flow.

Cash Flows from Investing Activities

During the nine months ended November 30, 2004, we used $48.4 million of cash for investing activities, as compared to a $40.8
million use of cash during the same nine month period in 2003.

Capital expenditures
 During the nine months ended November 30, 2004, we used $48.8 million of cash for capital expenditures of property, equipment, and
overhauls, as compared to $45.6 million during the nine months ended November 30, 2003. The $3.2 million increase in capital
expenditures was primarily attributable to increases in i) purchases of aircraft parts and airframes, ii) scheduled overhauls of
engines, and iii) purchases of upgrades and enhancements for our aircraft.  Total capital expenditures for the fiscal year ended
February 28, 2005 are expected to be between $60.0 million and $65.0 million.

Disposal of assets 
During the nine months ended November 30, 2004, we received $1.8 million in cash proceeds from the disposal of assets,
primarily from the sale of aircraft. During the same nine-month period in 2003, we received $9.6 million in cash proceeds from
disposal of assets and insurance settlements on damaged aircraft.

Notes receivable and
other assets  During the nine months ended November 30, 2004, increases in capitalized loan acquisition costs and other assets resulted in a $1.4
million use of cash.  In May 2004, we paid $2.4 million of legal and professional fees in connection with the closing of the Secured
Credit Facility. We capitalized the legal and professional fees as loan acquisition costs and we are amortizing the costs over the
term of the Secured Credit Facility. We also used $0.5 million of cash in payment of deposits. However, we generated $1.5 million
of cash as a result of decreases in other assets.

Cash Flows from Financing Activities

During the nine months ended November 30, 2004, we used $4.2 million of cash in financing activities.  In comparison, we used $7.6
million of cash in financing activities during the nine months ended November 30, 2003.

Proceeds from
long-term debt  During the nine months ended November 30, 2004, the Company received approximately $222.2 million of cash proceeds from long-term
debt financing.

From March 1, 2004 to May 13,
2004, we received $106.5 million of cash advances on our revolving line of credit with PNC Bank. On May 13, 2004, we closed on the
Secured Credit Facility and received a cash advance of $83.0 million. We utilized the majority of this cash advance to fully repay
and terminate our revolving line of credit with PNC Bank. We also received cash advances of $32.7 million from the Secured Credit
Facility.

51



---

Further details of the
Secured Credit Facility are found in Capital Resources  Secured Credit Facility below.

Payments on long-term
debt  During the nine months ended November 30, 2004, we used $225.5 million of cash for payments on our long-term debt obligations.

From March 1, 2004 to May 13,
2004, we made payments of $99.3 million on the outstanding principal balance of our revolving line of credit with PNC Bank. On May
13, 2004, we utilized $80.8 million of the cash advance from the Secured Credit Facility to fully repay and terminate all obligations
that we owed to PNC Bank under the revolving line of credit.

As of November 30, 2004, we made payments of $38.1 million on the outstanding balance owed by us under the Secured Credit Facility.

We also made payments of $7.3
million on various other long-term debt instruments, which consist primarily of equipment purchase notes.

# CAPITAL RESOURCES

At November 30, 2004, our total
long-term debt balance was $308.2 million, which was a $3.3 million decrease from our long-term debt balance of $311.5 million at
February 29, 2004. Our long-term debt is comprised of a $215.0 million outstanding balance on the Indenture Notes, a $77.9 million
outstanding balance on the Secured Credit Facility, and outstanding balances of $15.3 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 Bank One, National Association, 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. 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. 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 Evergreen Agricultural
 Enterprises, Inc., Evergreen Vintage Aircraft Inc., 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. The next payment of
 accrued interest in the amount of $12.9 million will be due and payable on May 15, 2005. Payment of the accrued interest will be
funded from the Companys operations.

52



---

The Indenture Notes will
mature on May 15, 2010, at which time the $215.0 million face value of the Indenture Notes, plus all accrued and unpaid interest,
will become due. However, the Company 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 %

On November 15, 2004, the Company
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 the Companys 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, 2005. Payment of the
accrued interest will be funded from the Companys operations.

# Secured Credit Facility

On May 13, 2004, the Company
entered into the Secured Credit Facility with 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 and a $50.0 million 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.

At the closing of the Secured
Credit Facility, approximately $83.0 million of the loan was funded. The Company utilized $80.8 million of the funds to fully repay
 and terminate the revolving credit obligations owed by Aviation to PNC Bank, while the remaining $2.2 million of the proceeds was
used to pay for part of the legal fees and other transaction costs incurred by the Company in connection with the closing of the
 Secured Credit Facility. The Company incurred a total of $2.4 million of legal and professional fees in connection with the closing
of the Secured Credit Facility. The Company capitalized those legal and professional fees as loan acquisition costs and will amortize
 the costs over the term of the Secured Credit Facility.

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 the Company is not in default under the Secured Credit
 Facility, the Company 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.

53



---

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. The
 Company is 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.

Revolving Loan Advances.
 During the term of the Secured Credit Facility, the Company 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. The Company
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, 2004, the outstanding balance of the Secured Credit Facility was $77.9 million. Taking into
consideration the limitations on the Companys ability to obtain additional advances of principal from the revolving loan
(see Revolving Loan Advances above), as of November 30, 2004, the Companys availability under the Secured Credit
 Facility was $9.8 million.

Covenant Compliance.
The Company is subject to certain financial and non-financial covenants under the Secured Credit Facility. In particular, the Company
must maintain: i) either a qualified cash reserve balance or an undrawn availability on the revolving loan of not less than $5.0 million,
 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 nine-month period ending November 30, 2004:

|Consolidated EBITDA Covenant  The covenant requires a consolidated
 EBITDA in a minimum amount of $67.0 million. As of November 30, 2004, the Company was in compliance with this covenant.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Airlines EBITDA Covenant  The covenant requires an EBITDA for
 Airlines in a minimum amount of $55.0 million. As of November 30, 2004, the Company was in compliance with this covenant.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Fixed Charge Coverage Covenant  The covenant
requires a fixed charge coverage in a minimum ratio of 1.00 to 1.00. As of November 30, 2004, the Company was in compliance with
this covenant.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

54



---

In addition, the amount of
capital expenditures that may be made by the Company 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. If Aviation or any of its restricted subsidiaries violates
 these covenants and are unable to obtain waivers from the Wells Fargo Lenders, the Company would be in default under the Secured
Credit Facility and the debt could be accelerated. As of November 30, 2004, the Company was in compliance with the capital expenditures
 covenant.

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.

# Amendment to WCMA Loan Agreement to EASL

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. (MLBFS) 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.

On May 12, 2004, EASL and MLBFS
executed an amendment letter to the WCMA Loan. The amendment letter establishes certain financial covenants for the WCMA Loan that
 are consistent with the financial covenants contained in the Indenture Notes and Secured Credit Facility. The amendment letter
establishes i) a schedule for fixed charge coverage ratios, to be measured on a quarter-end basis, ii) a $75 million maximum limit
on capital expenditures, of which, at least $10 million must be funded by indebtedness, 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 Secured Credit Facility above.

Covenant Compliance.
 As of November 30, 2004, the Company was in compliance with the covenants of the WCMA Loan. See "Secured Credit Facility" above.

55



---

# Risk of Default on Debt Obligations

Substantially all of the assets
of the Company 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 the Company is unable to cure such defaults or obtain waivers with respect to such defaults,
 the Company is at risk that the Companys payment obligations under either, or both, the Indenture Notes and the Secured Credit
Facility will be accelerated, thereby forcing the Company to either obtain alternative financing or seek legal protection from its
creditors.

# Going Concern Qualification

In their audit report
 on the Companys consolidated financial statements for the fiscal year ended February 29, 2004, PricewaterhouseCoopers LLP ("PwC"), the Companys former
independent registered public accounting firm, included an explanatory paragraph which noted
 that the Company has historically had violations of certain of its debt covenants. Because of the various cross-default provisions
 that are contained in the Companys long-term debt obligations, a failure by the Company to comply with the covenants of the
 Companys long-term debt obligations could result in an acceleration of all the Companys outstanding debt obligations.
 Due to the Companys historical difficulty in meeting its debt covenants, there is substantial doubt as to the Companys
ability to continue as a going concern.

The Company has taken measures
 to facilitate its ability to remain in compliance with its various debt covenants. In particular, the Company has focused on reducing
 its selling, general, and administrative expenses by controlling its legal and professional fees and managing payroll expenses in certain of the Companys subsidiaries. In addition, the Company has significantly reduced its property insurance expense and non-essential maintenance expenses. As a result, the Company was in compliance of its debt covenants as of November 30, 2004. See Capital Resources, Secured Credit Facility, Covenant Compliance above.

The Companys financial
statements included in this Quarterly Report on Form 10-Q have been prepared under the assumption that the Company will continue as
 a going concern. The financial statements do not include any adjustments that might result if the Company were forced to discontinue
 operations.

56



---

# Contractual Obligations

Our long-term contractual
 obligations are comprised primarily of amounts owed by us under the Indenture Notes and the Secured Credit Facility. In addition,
approximately 13.0% of our projected long-term contractual obligations are payments that will be due under various equipment and
facility leases. The following table summarizes our contractual cash obligations as of November 30, 2004:

|             |               |           |   |            |   |             |   |             |    |       |      
|------------ | ------------- | --------- | - | ---------- | - | ----------- | - | ----------- | -- | ----- | -----
|             | (in millions)
|             |              
|Thru         |               | Long-term |   | Current    |   | Lease       |   | Other       |   
|February 28, |               | Debt      |   | Maturities |   | Obligations | * | Obligations | ** |       | Total
|             |               |           |   |            |   |             |   |             |    |      
|2005         | $             | -         | $ | 4.8        | $ | 6.4         | $ | 0.8         |    | $     | 12.0 
|2006         |               | 2.4       |   | 11.2       |   | 16.6        |   | 3.0         |    | 33.2 
|2007         |               | 72.0      |   | -          |   | 8.0         |   | 3.0         |    | 83.0 
|2008         |               | 1.7       |   | -          |   | 4.9         |   | 3.0         |    | 9.6  
|2009         |               | 0.9       |   | -          |   | 3.9         |   | 3.0         |    | 7.8  
|Thereafter   |               | 215.2     |   | -          |   | 8.3         |   | -           |    | 223.5
|             |               |           |   |            |   |             |   |             |   
|Total        | $             | 292.2     | $ | 16.0       | $ | 48.1        | $ | 12.8        |    | $     | 369.1
|             |               |           |   |            |   |             |   |             |   

|*  |  | Total operating lease obligations of $48.1 million include $8.6
million of lease obligations to entities owned by, or controlled by Mr. Smith, the Company's controlling shareholder.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|** |  | Other obligations consist primarily of the annual bonus to be
paid to Mr. Smith.                                                                                                     

# Employee Benefit Plan

Effective March 1, 2002,
we established the Evergreen Savings and Retirement Plan (the Plan). The Plan is a defined contribution plan covering all
our full-time employees who have been credited with one year of service, are age 21 or older, are not covered by a collective
bargaining agreement, and are not a temporary employee. Under the Plan, we match 50% of the first 8% of base compensation that a
participant contributes to the Plan. We also make an annual basic contribution in an amount equal to 4% of the annual compensation
of each participant who has completed the minimum required hours of service during the Plan year, net of plan forfeitures (the 4% Contribution).
In November 2004, we made a 4% Contribution in the amount of $2.7 million.

# ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Risks Associated with
Fluctuations in Interest Rates At November 30, 2004, we had fixed rate debt of $222.8 million with a weighted
 average fixed interest rate of 11.89%. We also had variable rate debt of $85.4 million with a weighted average variable interest rate
of 6.05%. Based upon our outstanding debt balances as of November 30, 2004, a 1% increase in interest rates on our variable rate debt
would increase our annual interest expense by approximately $1.0 million.

57



---

Risks Associated with
Fluctuations in Foreign Currency Exchange Rates Although some of our revenues are derived from foreign customers,
 all revenues and substantially all expenses are denominated in U.S. dollars. We maintain only minimal balances in foreign bank
accounts in order to facilitate payment of expenses.

Risks Associated with
Fluctuations in Commodity Prices We are exposed to commodity price risks 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 because,
in general, our contracts with customers limit our exposure to increases in fuel prices.

ITEM 4.   CONTROLS AND PROCEDURES.

# Disclosure Controls and Procedures

The Company's management, with participation of the Company's principal executive officer and principal financial officer, have
performed an evaluation of the Company's disclosure controls and procedures, (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended ("Exchange Act")) to ensure that information required to be disclosed by the Company in
the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time
periods specified by the SEC's rules and forms.

Based on that evaluation, the Company's principal executive officer and principal financial officer have concluded that, as of
November 30, 2004, the Company's disclosure controls and procedures were not 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 recorded, processed, summarized, and
reported within the time periods specified by the SEC's rules and forms. At this time, management has determined that the Company's
current system of disclosure controls and procedures may not be sufficient i) to ensure that data errors, control problems, or acts
of fraud are detected and ii) to confirm that appropriate corrective action, including process improvements, is undertaken in a timely
manner.

Deficiencies in the Companys Controls and Procedures

In connection with its audit of the Companys financial statements for the fiscal year ended February 29, 2004, PwC delivered to the Companys disclosure committee a letter identifying deficiencies that PwC considered to be material weaknesses in the effectiveness of the Companys internal disclosure controls pursuant to standards established by the American Institute of Certified Public Accountants. A material weakness is a reportable condition in which the design or operation of one or more of the specific internal control components has a defect or defects that could have a material adverse effect on the Companys ability to record, process, summarize and report financial data in the financial statements in a timely manner. The material weaknesses identified by PwC include the following weaknesses in certain divisions of the Company:

| |  | Failure to reconcile certain general ledger accounts on a timely and regular basis and lack of management review of certain reconciliations.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Inconsistent application of accounting policies, including capitalization policies and procedures for determining unrecorded liabilities.   
| 

58



---

|  | 
|- | 
| | 
| 
| | 

Subsequent to the issuance of the Companys fiscal year 2004 consolidated financial statements, the Companys management determined that certain accounting errors had occurred during the Companys year-end closing process, the correction of which necessitated a restatement of the Companys consolidated financial statements for the fiscal year ending February 29, 2004. Based upon the results of managements investigation of the accounting errors, the Companys principal executive officer and principal financial officer concluded that the accounting errors resulted from material weaknesses in the Companys disclosure controls and procedures as of February 29, 2004, particularly in the areas of account reconciliation and management review of journal entries. Detailed validation work was performed by the Companys internal personnel in order to substantiate the
financial information contained in the Companys consolidated financial statements and related disclosures that are contained in the Companys Annual Report on Form 10-K/A, which was filed with the SEC on September 30, 2004. Analyses were also performed in order to compare the reasonableness of current year amounts to prior year amounts.

Management's Response and Plan for Improvement

Management responded to the recommendations contained in the letter to the Disclosure Committee by developing a plan to implement the
following controls and procedural enhancements which are designed to improve the Company 's system of disclosure controls:

| |  | Capitalization and amortization of asset balances - i) regular detailed analyses of fixed assets and accumulated depreciation
accounts should be performed by preparing detailed account reconciliations, and ii) on a timely basis, account reconciliations and
other significant transactions should be reviewed by an appropriate member of management;                      
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Recording and processing transactions - transactions must be supported by i) appropriate transaction documentation and ii)
appropriate documentation of review by management;                                                                                                                                                                                                   
| 
| |  | Reconciliation of accounts - detailed reconciliations of subsidiary accounts to the general ledger must be performed on a regular
basis, and quarterly accounting review procedures must be enhanced by requiring an appropriate member of
management to perform an independent review of material general ledger accounts and reserves;                                        
| 
| |  | Management review of journal entries, account balances and financial statements - all material journal entries must be reviewed and
approved by an appropriate member of management;                                                                                                                                                                                            
| 
| |  | Internal audit function - an internal audit function should conduct audit procedures and test internal controls in order to ensure
that the Company's policies and procedures for transactional recording, transactional review, segregation of duties, and review of
significant transactions at the appropriate level of management are both effective and being followed; and

| 
|-
|

59



---

Status of Management's Plan for Improvement

As of November 30, 2004, the Company has made the following progress in the implementation of its plan for improvement:

| |  | Capitalization and amortization of asset balances - management
is implementing policies and controls for regularly i) performing
detailed analyses of fixed assets and accumulated depreciation accounts and ii) preparing detailed account reconciliations.  In
addition, detailed analyses, account reconciliations, and significant transactions are being independently reviewed in a timely manner by
an appropriate member of management;                                                                                                                                                                                        
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Recording and processing transactions - controls are being implemented which require  transactions to be supported by i) appropriate
transaction documentation and ii) documentation that the transaction has been reviewed and approved by an appropriate member of
management;                                                                                                                                                                                                                                                                                                                                                       
| 
| |  | Reconciliation of accounts - policies and controls are being
implemented which require  regular reconciliations of subsidiary
accounts to the general ledger, with timely review by an appropriate member of management.  Procedures regarding the quarterly
accounting review are being enhanced by requiring independent reviews of account reconciliations, material general ledger accounts,
and reserves;                                                                                                                                                                                                                         
| 
| |  | Management review of journal entries, account balances and
financial statements - controls and procedures are being implemented which
require that all material journal entries are reviewed and approved by an appropriate member of management;                                                                                                                                                                                                                                                                                                                                                                                      
| 
| |  | Internal audit function - the Company has engaged a registered public accounting firm, which   is not affiliated with the Company's
independent registered public accounting firm, to perform the internal audit function (the "Internal Auditor").  The Internal Auditor
has conducted, and will continue to
conduct, internal audit procedures and tests of internal controls to ensure that the Company's controls and procedures for
transactional recording, transactional review, segregation of duties, and review of significant transactions at the appropriate level
of management are both effective and being followed; and
| 
| |  | Competent personnel - the Company has made, and will continue to make, appropriate staffing enhancements in order to provide
sufficient resources to accomplish the Company's objectives of recording, processing, summarizing and reporting, on a timely basis,
the financial information of the Company.                                                                                                                                                                                                                                                                                                                             

Management believes that the
disclosure controls and procedures which have been, and are continuing to be, implemented are addressing the identified
deficiencies in the Company's system of disclosure controls.  Management will, on an ongoing basis, further monitor and assess the
implementation of its plan to improve the effectiveness of the Company's disclosure controls and procedures, and will take action as
appropriate.

60



---

# Internal Control Over Financial Reporting

Except 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 to which this report relates that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.

61



---

# PART II.    OTHER INFORMATION

# ITEM 1   LEGAL PROCEEDINGS.

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

# Banc of America

The Company is 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 Meeklenburg 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 the Companys financial agent in
exchange for the payment of certain fees. The plaintiff has not yet specified an amount for damages. The Company filed a motion to
dismiss for lack of jurisdiction, but on November 10, 2003, the court denied the motion. Subsequently, the Company filed an appeal
on the denial of the motion to dismiss. On September 22, 2004, the parties held oral argument on the appeal before the North Carolina
 Court of Appeals. A ruling on the appeal is anticipated on or before January 17, 2005.

# Asiana Airlines

On January 28, 2000, the
Company and Asiana Airlines (Asiana) entered into a contract whereby the Company 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 the Company that Asiana would not make any further payments under the contract.

On September 19, 2001, the
Company filed proceedings in the United States District Court for the District of Oregon against Asiana to recover amounts owed by
Asiana to the Company pursuant to the contract. On February 28, 2003, a jury returned a verdict in favor of the Company and on April
28, 2003, the court entered a judgment for damages in the amount of $16.6 million in favor of the Company. Asiana subsequently filed
an appeal of the judgment with the Ninth Circuit Court of Appeals, and the parties have filed opening and answering briefs with the
 court. Oral argument on the appeal has not yet been scheduled.

# Rural Service Improvement Act of 2002

On August 19, 2002, the Company
instituted proceedings against the United States of America in the United States District Court for the District of Alaska for a
declaration that the Rural Service Improvement Act of 2002 (the Rural Service Act) is unconstitutional. The Rural
Service Act disqualifies the Company from receiving equitable tender of Alaska non-priority bypass mail unless the Company meets
certain passenger carriage requirements that are economically impractical. The Company subsequently consolidated its claims with a
prior lawsuit that had been filed by Alaska Central Express, Inc., which asserted similar claims.

62



---

The U.S. government filed a
motion for summary judgment. On September 29, 2003, the federal district court granted the U.S. governments motion and
dismissed the claim with prejudice. The Company has appealed the federal district courts decision to the Ninth Circuit Court
of Appeals. The Company filed its opening brief on February 13, 2004, and the U.S. governments response brief was filed on
April 30, 2004. Oral argument on the appeal has not yet been scheduled.

# Tridair Repair and Manufacturing

On February 11, 2003, Tridair
Repair and Manufacturing, Inc. (Tridair) filed a complaint against the Company in the United States District Court for
the Central District of California (the California Court) alleging fraud and breach of contract. The allegations relate
 to an aircraft salvage contract under which the Company agreed to perform aircraft salvage services for Tridair in return for
 payments to be made by Tridair to the Company. Tridair subsequently transferred its litigation rights to Diversified Aero Asset
Management, Inc. (Diversified), which had previously filed a complaint against the Air Center for similar claims.
Diversified amended its complaint in order to seek $10.6 million in damages for fraud and breach of contract.

On April 2, 2003, the Company filed
a motion to dismiss for lack of jurisdiction, or in the alternative, to transfer the case to the federal district court in Arizona.
As a result, the matter in the California Court was dismissed and the matter was transferred to the United States District of Arizona.
On August 30, 2004, the Company filed a motion for summary judgment, and a hearing on the motion was held on
October 4, 2004.  On October 20, 2004 the Court entered an order dismissing Diversified's punitive damages claim, but denying all
other aspects of the Company's motion for summary judgment.

Jury trial was originally
scheduled for November 30, 2004.  However, the trial was subsequently continued until February 1, 2005 by
stipulation between the parties.

# Pinal County, State of Arizona

The Company currently leases
real property from Pinal County, State of Arizona (Pinal County) for the Air Centers facilities in Marana, Arizona.
 On July 22, 2003, Pinal County notified the Company that Pinal County would attempt to terminate the lease. Pinal County has
alleged that, pursuant to the lease agreement, Air Center was required to perform certain maintenance on the leased property, and
that the Air Center had not performed such maintenance.

The Company subsequently filed an
action in the United States District Court for the District of Arizona requesting a
declaratory judgment in the Company's favor.  Specifically, the Company requested a declaration that the Company was not in breach of
the lease agreement and that Pinal County was not entitled to terminate the lease agreement.  In addition, the Company also requested
that the court enjoin Pinal County from i) terminating the lease agreement and ii) taking any action to evict the Company.  Due to
ongoing negotiations between the Company, Pinal County and the Federal Aviation Administration, the summons and complaint for the
declaratory action were never served on Pinal County.  Subsequently, the Company instructed local counsel to file a motion dismissing
the case and, as of November 4, 2004, the case has been dismissed.

63



---

Except as otherwise discussed herein above, there have been no other material developments in existing legal proceedings, nor any material new legal proceedings instituted by, or against, the Company. While the results of these proceedings cannot be predicted with certainty, the Company believes, based on its 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 the Companys consolidated financial position, results of operations, or cash flows. As material developments related to pending litigation occur, the Company will reassess the Companys potential liability and revise any estimates accordingly.

# ITEM 6.     EXHIBITS.

(a)      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
|----------- |  | -----------------------
|           

| | 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.                              

64



---

# SIGNATURES

Pursuant to the requirements 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 18, 2005 | /s/ Timothy G. WahlbergTimothy G. WahlbergPresident
|----------------------- | ---------------------------------------------------

|Date:  January 18, 2005 | /s/ John A. IrwinJohn A. IrwinChief Financial Officer
|----------------------- | -----------------------------------------------------

65



---

# EXHIBIT INDEX

|Exhibit No. |  | Description of Document
|----------- |  | -----------------------
|           

| | 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.                              

66