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Share Name | Share Symbol | Market | Type |
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Air Transport Services Group Inc | NASDAQ:ATSG | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
-0.11 | -0.83% | 13.08 | 12.85 | 13.49 | 13.45 | 12.79 | 13.39 | 502,841 | 21:59:40 |
CAM to deploy 20th B767 freighter for Amazon; Northern Aviation Services commits to three B767 leases
Air Transport Services Group, Inc. (Nasdaq: ATSG), the leading provider of medium wide-body aircraft leasing, air cargo transportation and related services, today reported consolidated financial results for the quarter ended June 30, 2017.
Compared with amounts for the second quarter of 2016 (except as noted):
Joe Hete, President and Chief Executive Officer of ATSG, said, “In addition to the outstanding financial results we are reporting today, I’m pleased to say that we are scheduled to deliver the twentieth leased Boeing 767 freighter to Amazon later this week, 17 months after we formalized our relationship in March 2016. Our total leased-aircraft portfolio has grown by eight 767s as of June 30, compared to the same date a year ago. Excluding the two 767-300s required to complete Amazon's twenty-aircraft order, our current purchase and conversion commitments will yield twelve additional 767-300s extending through the first half of next year. We currently have signed leases or are finalizing others for nine of the twelve aircraft. The remaining three aircraft are under discussion with multiple parties."
ATSG's results for the first half of 2017 included a revenue increase of 39 percent to $491.1 million, and GAAP Earnings from Continuing Operations of negative $44.1 million, or a $0.75 loss per share. First-half Adjusted Earnings From Continuing Operations were $25.1 million, up 48 percent from a year ago. On a per-share adjusted basis, ATSG earned $0.38 per share, up from $0.26 in the first half of 2016.
Segment Results
Cargo Aircraft Management (CAM)
CAM Second Quarter Six Months ($ in thousands) 2017 2016 2017 2016 Aircraft leasing and related revenues $ 52,813 $ 48,373 $ 103,382 $ 100,099 Lease incentive amortization (3,283 ) (934 ) (5,874 ) (934 ) Total CAM revenues $ 49,530 $ 47,439 $ 97,508 $ 99,165 Pre-Tax Earnings $ 12,795 $ 16,229 $ 26,125 $ 35,739Significant Developments:
ACMI Services
ACMI Services Second Quarter Six Months ($ in thousands) 2017 2016 2017 2016 Revenues Airline services $ 111,851 $ 98,187 $ 219,917 $ 199,840 Reimbursables 32,648 15,958 69,531 29,261 Total ACMI Services Revenues 144,499 114,145 289,448 229,101 Pre-Tax Earnings (Loss) 87 (7,130 ) (3,618 ) (17,486 )Significant Developments:
Other Activities
Other Activities Second Quarter Six Months ($ in thousands) 2017 2016 2017 2016 Revenues $ 116,508 $ 57,253 $ 205,714 $ 112,264 Pre-Tax Earnings 6,539 4,130 11,322 7,998Significant Developments:
Outlook
ATSG expects that its Adjusted EBITDA from Continuing Operations for 2017 will be approximately $260 million, including a projected 28 percent increase in the second half compared with the prior-year period.
Principal factors affecting our 2017 second-half guidance include:
ATSG projects 2017 capital expenditures of approximately $335 million, mostly for purchase and freighter modification of passenger aircraft. The reduction in guidance for capex of $20 million compared to the $355 million projection provided in May is due to production delays in the passenger-to-freighter conversion lines for Boeing 767 aircraft, and lower maintenance capex associated with the new Delta engine contract.
"Following a great first half, our outlook for the last six months of 2017 remains positive as we complete the Amazon deployments and lease more freighters to other customers," Hete said. "Our operational flexibility and broad service offerings keep us well positioned to support customers' long-term and peak shipping season requirements."
Conference Call
ATSG will host a conference call on August 8, 2017, at 10 a.m. Eastern time to review its financial results for the second quarter of 2017. Participants should dial (888) 771-4371 and international participants should dial (847) 585-4405 ten minutes before the scheduled start of the call and ask for conference pass code 45367629. The call will also be webcast live (listen-only mode) via www.atsginc.com.
A replay of the conference call will be available by phone on August 8, 2017, beginning at 2 p.m. and continuing through August 15, 2017, at (888) 843-7419 (international callers (630) 652-3042); use pass code 45367629#. The webcast replay will remain available via www.atsginc.com for 30 days.
About ATSG
ATSG is a leading provider of aircraft leasing and air cargo transportation and related services to domestic and foreign air carriers and other companies that outsource their air cargo lift requirements. ATSG, through its leasing and airline subsidiaries, is the world's largest owner and operator of converted Boeing 767 freighter aircraft. Through its principal subsidiaries, including two airlines with separate and distinct U.S. FAA Part 121 Air Carrier certificates, ATSG provides aircraft leasing, air cargo lift, aircraft maintenance services and airport ground services. ATSG's subsidiaries include ABX Air, Inc.; Airborne Global Solutions, Inc.; Air Transport International, Inc.; Cargo Aircraft Management, Inc.; and Airborne Maintenance and Engineering Services, Inc. including its division, PEMCO World Air Services, Inc. For more information, please see www.atsginc.com.
Except for historical information contained herein, the matters discussed in this release contain forward-looking statements that involve risks and uncertainties. There are a number of important factors that could cause Air Transport Services Group's (ATSG's) actual results to differ materially from those indicated by such forward-looking statements. These factors include, but are not limited to, changes in market demand for our assets and services; our operating airlines' ability to maintain on-time service and control costs; the cost and timing with respect to which we are able to purchase and modify aircraft to a cargo configuration; the number, timing and scheduled routes of our aircraft deployments to customers; and other factors that are contained from time to time in ATSG's filings with the U.S. Securities and Exchange Commission, including its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Readers should carefully review this release and should not place undue reliance on ATSG's forward-looking statements. These forward-looking statements were based on information, plans and estimates as of the date of this release. ATSG undertakes no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.
AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF EARNINGS(In thousands, except per share data)
Three Months Ended Six Months Ended June 30, June 30, 2017 2016 2017 2016 REVENUES $ 253,211 $ 176,549 $ 491,128 $ 353,934 OPERATING EXPENSES Salaries, wages and benefits 66,010 53,647 138,673 106,066 Depreciation and amortization 37,781 33,132 74,223 65,666 Maintenance, materials and repairs 37,588 30,345 67,870 60,772 Fuel 32,258 17,168 67,099 33,799 Contracted ground and aviation services 32,151 8,931 52,838 19,799 Travel 6,820 4,678 14,186 9,486 Landing and ramp 4,357 2,652 9,656 6,303 Rent 3,753 2,579 7,039 5,206 Insurance 955 1,087 2,217 2,236 Other operating expenses 8,590 6,529 16,626 13,449 230,263 160,748 450,427 322,782 OPERATING INCOME 22,948 15,801 40,701 31,152 OTHER INCOME (EXPENSE) Interest income 16 37 48 61 Interest expense (3,759 ) (2,633 ) (7,307 ) (5,332 ) Net gain (loss) on financial instruments (67,649 ) 5,558 (65,780 ) 5,030 (71,392 ) 2,962 (73,039 ) (241 ) EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (48,444 ) 18,763 (32,338 ) 30,911 INCOME TAX EXPENSE (5,474 ) (7,235 ) (11,784 ) (11,212 ) EARNINGS (LOSS) FROM CONTINUING OPERATIONS (53,918 ) 11,528 (44,122 ) 19,699 EARNINGS FROM DISCONTINUED OPERATIONS, NET OF TAX 192 47 384 94 NET EARNINGS (LOSS) $ (53,726 ) $ 11,575 $ (43,738 ) $ 19,793 EARNINGS (LOSS) PER SHARE - CONTINUING OPERATIONS Basic $ (0.91 ) $ 0.18 $ (0.75 ) $ 0.31 Diluted* $ (0.91 ) $ 0.12 $ (0.75 ) $ 0.25 WEIGHTED AVERAGE SHARES - CONTINUING OPERATIONS Basic 59,035 63,267 59,084 63,452 Diluted 59,035 66,763 59,084 65,910Revenues and operating expenses include the activities of PEMCO World Air Services, Inc., a wholly owned subsidiary, for periods since its acquisition by ATSG on December 30, 2016. Certain historical expenses have been reclassified to conform to the presentation above.
* For additional information about the calculation of diluted earnings per share, see accompanying schedule.
AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(In thousands, except share data)
June 30, December 31, 2017 2016 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 63,020 $ 16,358 Accounts receivable, net of allowance of $1,380 in 2017 and $1,264 in 2016 75,303 77,247 Inventory 16,412 19,925 Prepaid supplies and other 23,918 19,123 TOTAL CURRENT ASSETS 178,653 132,653 Property and equipment, net 1,074,239 1,000,992 Other assets 86,526 80,099 Goodwill and acquired intangibles 45,455 45,586 TOTAL ASSETS $ 1,384,873 $ 1,259,330 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable $ 77,945 $ 60,704 Accrued salaries, wages and benefits 30,963 37,044 Accrued expenses 9,902 10,324 Current portion of debt obligations 20,133 29,306 Unearned revenue 22,480 18,407 TOTAL CURRENT LIABILITIES 161,423 155,785 Long term debt 508,152 429,415 Post-retirement obligations 71,866 77,713 Other liabilities 50,143 52,542 Stock warrants 177,850 89,441 Deferred income taxes 135,506 122,532 STOCKHOLDERS’ EQUITY: Preferred stock, 20,000,000 shares authorized, including 75,000 Series A Junior Participating Preferred Stock — — Common stock, par value $0.01 per share; 85,000,000 shares authorized; 59,123,112 and 59,461,291 shares issued and outstanding in 2017 and 2016, respectively 591 595 Additional paid-in capital 432,510 443,416 Accumulated deficit (75,981 ) (32,243 ) Accumulated other comprehensive loss (77,187 ) (79,866 ) TOTAL STOCKHOLDERS’ EQUITY 279,933 331,902 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 1,384,873 $ 1,259,330AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIESPRE-TAX EARNINGS AND ADJUSTED PRE-TAX EARNINGS SUMMARYFROM CONTINUING OPERATIONSNON-GAAP RECONCILIATION(In thousands)
Three Months Ended Six Months Ended June 30, June 30, 2017 2016 2017 2016 Revenues CAM Aircraft leasing and related revenues $ 52,813 $ 48,373 $ 103,382 $ 100,099 Lease incentive amortization (3,283 ) (934 ) (5,874 ) (934 ) Total CAM 49,530 47,439 97,508 99,165 ACMI Services Airline services 111,851 98,187 219,917 199,840 Reimbursables 32,648 15,958 69,531 29,261 Total ACMI Services 144,499 114,145 289,448 229,101 Other Activities 116,508 57,253 205,714 112,264 Total Revenues 310,537 218,837 592,670 440,530 Eliminate internal revenues (57,326 ) (42,288 ) (101,542 ) (86,596 ) Customer Revenues $ 253,211 $ 176,549 $ 491,128 $ 353,934 Pre-tax Earnings (Loss) from Continuing Operations CAM, inclusive of interest expense 12,795 16,229 26,125 35,739 ACMI Services 87 (7,130 ) (3,618 ) (17,486 ) Other Activities 6,539 4,130 11,322 7,998 Net, unallocated interest expense (216 ) (24 ) (387 ) (370 ) Net gain (loss) on financial instruments (67,649 ) 5,558 (65,780 ) 5,030 Total Earnings (Loss) from Continuing Operations before Income Taxes $ (48,444 ) $ 18,763 $ (32,338 ) $ 30,911 Adjustments to Pre-tax Earnings Add non-service components of retiree benefit costs, net 177 2,203 354 4,406 Add debt issuance charge from non-consolidating affiliate — — — 1,229 Add lease incentive amortization 3,283 934 5,874 934 Add (subtract) net loss (gain) on financial instruments 67,649 (5,558 ) 65,780 (5,030 ) Adjusted Pre-tax Earnings $ 22,665 $ 16,342 $ 39,670 $ 32,450Non-GAAP financial measures: This report contains non-GAAP financial measures that management uses to evaluate the Company’s historical results. Management believes that these non-GAAP measures assist in highlighting operational trends, facilitate period-over-period comparisons and provide additional clarity about events and trends impacting core operating performance. Disclosing these non-GAAP measures provides insight to investors about additional metrics that the Company’s management uses to evaluate past performance and prospects for future performance
Adjusted Pre-tax Earnings excludes certain items included in GAAP based pre-tax earnings (loss) from continuing operations because they are distinctly different in their predictability among periods or not closely related to our operations. Presenting this measure provides investors with a comparative metric of fundamental operations while highlighting changes to certain items among periods. Adjusted Pre-tax Earnings is defined as Earnings (Loss) from Continuing Operations Before Income Taxes less financial instrument gains or losses, non-service components of retiree benefit costs, lease incentive amortization and the write-off of debt issuance costs from a non-consolidating affiliate.
Adjusted Pre-tax Earnings is a non-GAAP financial measure and should not be considered an alternative to Earnings from Continuing Operations Before Income Taxes or any other performance measure derived in accordance with GAAP.
AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIESADJUSTED EARNINGS FROM CONTINUING OPERATIONSBEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATIONNON-GAAP RECONCILIATION(In thousands)
Three Months Ended Six Months Ended June 30, June 30, 2017 2016 2017 2016 Earnings (Loss) from Continuing Operations Before Income Taxes $ (48,444 ) $ 18,763 $ (32,338 ) $ 30,911 Interest Income (16 ) (37 ) (48 ) (61 ) Interest Expense 3,759 2,633 7,307 5,332 Depreciation and Amortization 37,781 33,132 74,223 65,666 EBITDA from Continuing Operations $ (6,920 ) $ 54,491 $ 49,144 $ 101,848 Add non-service components of retiree benefit costs, net 177 2,203 354 4,406 Add debt issuance charge from non-consolidating affiliate — — — 1,229 Add lease incentive amortization 3,283 934 5,874 934 Add (subtract) net loss (gain) on financial instruments 67,649 (5,558 ) 65,780 (5,030 ) Adjusted EBITDA $ 64,189 $ 52,070 $ 121,152 $ 103,387Management uses Adjusted EBITDA to assess the performance of its operating results among periods. It is a metric that facilitates the comparison of financial results of underlying operations. Additionally, these non-GAAP adjustments are similar to the adjustments used by lenders in the Company’s Senior Credit Agreement to assess financial performance and determine cost of borrowed funds. The adjustments also exclude the non-service cost components of retiree benefit plans because they are not closely related to on-going operating activities. Management presents EBITDA from Continuing Operations, a commonly referenced metric, as a subtotal toward computing Adjusted EBITDA.
EBITDA from Continuing Operations is defined as Earnings (Loss) from Continuing Operations Before Income Taxes plus net interest expense, depreciation, and amortization expense. Adjusted EBITDA is defined as EBITDA from Continuing Operations less financial instrument gains or losses, non-service components of retiree benefit costs, amortization of lease incentive costs recorded in revenue and the write-off of debt issuance costs from a non-consolidating affiliate.
Adjusted EBITDA and EBITDA from Continuing Operations are non-GAAP financial measures and should not be considered as alternatives to Earnings from Continuing Operations Before Income Taxes or any other performance measure derived in accordance with GAAP. Adjusted EBITDA and EBITDA from Continuing Operations should not be considered in isolation or as a substitute for analysis of the Company's results as reported under GAAP, or as an alternative measure of liquidity.
AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIESADJUSTED EARNINGS PER SHARE FROM CONTINUING OPERATIONSNON-GAAP RECONCILIATION(In thousands)
The Company's financial results as reported under GAAP, include the effects of stock warrants granted to a customer as a lease incentive. The value of the stock warrants is recorded as a customer lease incentive asset and is amortized against revenue over the term of the related aircraft leases. The stock warrant obligation is reflected as a liability and revalued to fair value at the end of each reporting period. The stock warrant liability was revalued as of June 30, 2017, with the change in fair value recorded to earnings. Adjusted Earnings from Continuing Operations and Adjusted Earnings per Share from Continuing Operations, non-GAAP measures presented below, reflect the Company's results after removing the lease incentive amortization and the warrant revaluation effects during the periods presented.
Three Months Ended Six Months Ended June 30, June 30, 2017 2016 2017 2016 Earnings (loss) from Continuing Operations - basic (GAAP) $ (53,918 ) $ 11,528 $ (44,122 ) $ 19,699 Gain from warrant revaluation, net of tax — (3,664 ) — (3,405 ) Earnings (loss) from Continuing Operations - diluted (GAAP) (53,918 ) 7,864 (44,122 ) 16,294 Loss from warrant revaluation, net of tax 63,396 — 61,857 — Lease incentive amortization, net of tax 4,378 595 7,340 595 Adjusted Earnings from Continuing Operations (non-GAAP) $ 13,856 $ 8,459 $ 25,075 $ 16,889 Weighted Average Shares - diluted (GAAP) 59,035 66,763 59,084 65,910 Additional weighted average shares 8,474 — 7,152 — Adjusted Shares (non-GAAP) 67,509 66,763 66,236 65,910 Earnings (loss) per Share from Continuing Operations - diluted (GAAP) $ (0.91 ) $ 0.12 $ (0.75 ) $ 0.25 Effect of warrant revaluation, net of tax 1.05 — 1.01 — Effect of lease incentive amortization, net of tax 0.07 0.01 0.12 0.01 Adjusted Earnings per Share from Continuing Operations (non-GAAP) $ 0.21 $ 0.13 $ 0.38 $ 0.26Management presents Adjusted Earnings per Share from Continuing Operations to remove the effects in the income statement of a large grant of stock warrants, including their related adjustment to fair value which is recorded at the end of each quarter. Under U.S. GAAP, these warrants are reflected as a liability and unrealized warrant gains are typically removed from diluted earnings per share (“EPS”) calculations while unrealized warrant losses are not removed because they are dilutive to EPS. As a result, the Company’s EPS, as calculated under U.S. GAAP, can vary significantly among periods due to unrealized mark-to-market losses which are not directly related to the Company's operating performance. Accordingly, the non-GAAP calculation of EPS provides additional information to investors regarding the earnings per share without the volatility otherwise caused by the stock warrants.
Adjusted Earnings per Share from Continuing Operations equals Adjusted Earnings from Continuing Operations divided by Adjusted Shares. Adjusted Shares include warrants which correspond to the revaluation adjustment that were not already included in weighted average shares used for GAAP. Adjusted Earnings from Continuing Operations is defined as Earnings from Continuing Operations excluding the amortization of the lease incentive asset, net of taxes, and excluding the warrant revaluation loss or gain, net of taxes. Management uses Adjusted Earnings from Continuing Operations and Adjusted Earnings per Share from Continuing Operations to compare the performance of its operating results among periods.
Adjusted Earnings from Continuing Operations, Adjusted Shares and Adjusted Earnings per Share from Continuing Operations are non-GAAP financial measures and should not be considered as alternatives to Earnings from Continuing Operations, Weighted Average Shares - diluted or Earnings per Share from Continuing Operations or any other performance measure derived in accordance with GAAP. Adjusted Earnings and Adjusted Earnings per Share from Continuing Operations should not be considered in isolation or as a substitute for analysis of the company's results as reported under GAAP.
AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIESCARGO AIRCRAFT FLEET
Aircraft Types December 31, June 30, December 31, 2016 2017 2017 Projected Operating Operating Operating Total Owned Lease Total Owned Lease Total Owned Lease B767-200 36 36 — 36 36 — 36 36 — B767-300 16 16 — 20 20 — 25 25 — B757-200 4 4 — 4 4 — 4 4 — B757 Combi 4 4 — 4 4 — 4 4 — B737-400 — — — — — — 2 2 — Total Aircraft 60 60 — 64 64 — 71 71 — Owned Aircraft In Serviceable Condition December 31, June 30, December 31, 2016 2017 2017 Projected Dry leased without CMI 13 15 20 Dry leased with CMI 28 30 32 ACMI/Charter 18 19 19 Staging/Unassigned 1 — — 60 64 71 Owned Aircraft In or Awaiting Cargo Conversion December 31, June 30, December 31, 2016 2017 2017 Projected B767-300 7 6 8 B737-400 — 2 — Total Aircraft 7 8 8
View source version on businesswire.com: http://www.businesswire.com/news/home/20170807005989/en/
ATSG Inc.Quint O. Turner, 937-382-5591Chief Financial Officer
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