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Share Name | Share Symbol | Market | Type |
---|---|---|---|
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 | |
---|---|---|---|---|---|---|---|---|---|---|
0.35 | 2.20% | 16.25 | 15.92 | 16.49 | 16.35 | 15.75 | 16.16 | 300,343 | 01:00:00 |
Demand for medium-size cargo aircraft remains strong
2023 Outlook revised to reflect macro effects on ATSG airlines
Air Transport Services Group, Inc. (Nasdaq: ATSG), the leading provider of medium wide-body aircraft leasing, contracted air transportation, and related services, today reported consolidated financial results for the quarter ended March 31, 2023. Those results, as compared with the same quarter in 2022 were as follows:
First Quarter 2023 Results
Rich Corrado, president and chief executive officer of ATSG, said, "These results, while disappointing, do reflect the operating headwinds we talked about in February, including lower 2023 results at our airlines. The first quarter Adjusted EBITDA reflected lower than expected passenger airline revenues, and the continued impact of inflation at our airlines. Our aircraft leasing business, CAM, has seen no reduction in demand for its desirable leased freighters, and continues to invest with the expectation of delivering attractive returns for the midsize freighter aircraft we expect to lease during the rest of 2023 and into 2024."
*Adjusted EPS (Earnings per Share), Adjusted Pretax Earnings, Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) and Adjusted Free Cash Flow are non-GAAP financial measures and are defined and reconciled to GAAP measures at the end of this release.
Segment Results
Cargo Aircraft Management (CAM)
ACMI Services
2023 Outlook
ATSG now expects its Adjusted EBITDA for 2023 to be in a range of $610 million to $620 million, and full year Adjusted EPS in a range of $1.55 to $1.70, based on lower ACMI Services passenger flying than was projected and inflationary effects associated with ACMI airline operations since initial 2023 guidance in February. CAM is projected to deliver results consistent with February guidance.
The Adjusted EBITDA and Adjusted EPS forecasts for 2023 continue to assume:
ATSG continues to project 2023 capital spending of $850 million, including $260 million in sustaining capex and $590 million for growth.
Corrado said that demand for ATSG’s freighter aircraft remains very strong, including its Boeing 767s, the narrow-body A321s, and the Airbus A330 freighters the company will begin to deploy next year. CAM is expected to generate more than $70 million in 2024 revenues from freighters it expects to lease this year.
“Our customers remain eager to lease the freighter aircraft we intend to deliver,” he said. “The persistent growth in online commerce throughout the world, and the need to replace older, less efficient aircraft types, means that midsize freighters will remain essential to global economic growth."
Corrado added that "If future market conditions were to affect projected returns on our fleet investments, we have the flexibility to significantly reduce our planned growth investments in 2024 and beyond, in favor of other options, such as debt reduction and additional share repurchases. Our decisions about capital allocation will always be driven by what creates the most value for shareholders.”
Non-GAAP Financial Measures
This release, including the attached non-GAAP Reconciliation tables, contains financial measures that are not calculated and presented in accordance with generally accepted accounting principles in the United States ("non-GAAP financial measures"). Management uses these non-GAAP financial measures to evaluate historical results and project future results. Management believes that these non-GAAP financial measures assist in highlighting operational trends, facilitating period-over-period comparisons, and providing additional clarity about events and trends affecting core operating performance. Disclosing these non-GAAP financial measures provides insight to investors about additional metrics that management uses to evaluate past performance and prospects for future performance. Non-GAAP measures should not be considered in isolation or as a substitute for analysis of the Company's results as reported under GAAP and may be calculated differently by other companies.
The historical non-GAAP financial measures included in this release are reconciled to the most directly comparable financial measure calculated and presented in accordance with GAAP in the non-GAAP Reconciliation tables included later in this release. The Company does not provide a reconciliation of projected Adjusted EBITDA or Adjusted EPS because it is unable to predict with reasonable accuracy the value of certain adjustments. Certain adjustments can be significantly impacted by the re-measurements of financial instruments including stock warrants issued to a customer. The Company’s earnings on a GAAP basis, including its earnings per share on a GAAP basis, and the non-GAAP adjustments for gains and losses resulting from the re-measurement of stock warrants, will depend on the future prices of ATSG stock, interest rates, and other assumptions which are highly uncertain.
Conference Call
ATSG will host an investor conference call on Friday, May 5, 2023, at 10 a.m. Eastern Time to review its financial results for the first quarter of 2023, and its outlook for remainder of the year. Live call participants must register via this link that is also available at ATSG’s website, www.atsginc.com under “Investors” and “Presentations.” Once registered, call participants will receive dial-in numbers and a unique Personal Identification Number (PIN) that must be entered to join the live call. Listen-only access to live and replay versions of the call, including slides, will be available via a webcast link at the same ATSG website location. Slides that accompany management’s discussion of fourth-quarter results also may be downloaded there shortly before the start of the call at 10 a.m.
Annual Meeting of Stockholders
ATSG's 2023 Annual Meeting of Stockholders will be held virtually on May 24, 2023, at 11 a.m. Eastern Time. Stockholders of record as of March 27, 2023, may participate by phone or online at www.virtualshareholdermeeting.com/ATSG2023 to consider and vote on, among other items, the election of directors to the Board, ratification of the selection of auditors for 2023, and an advisory vote on executive compensation. ATSG's 2023 Proxy Statement, its 2022 Annual Report, and its 2022 Sustainability Report issued in April are also on the Company's website, www.atsginc.com, and include important information you should consider before casting your vote.
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 three airlines with separate and distinct U.S. FAA Part 121 Air Carrier certificates, ATSG provides aircraft leasing, air cargo lift, passenger ACMI and charter services, aircraft maintenance services and airport ground services. ATSG's subsidiaries include ABX Air, Inc.; Airborne Global Solutions, Inc.; Airborne Maintenance and Engineering Services, Inc., including its subsidiary, Pemco World Air Services, Inc.; Air Transport International, Inc.; Cargo Aircraft Management, Inc.; and Omni Air International, LLC. 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. A number of important factors could cause Air Transport Services Group, Inc.'s ("ATSG's") actual results to differ materially from those indicated by such forward-looking statements. These factors include, but are not limited to: (i) unplanned changes in the market demand for our assets and services, including the loss of customers or a reduction in the level of services we perform for customers; (ii) our operating airlines' ability to maintain on-time service and control costs; (iii) the cost and timing with respect to which we are able to purchase and modify aircraft to a cargo configuration; (iv) fluctuations in ATSG's traded share price and in interest rates, which may result in mark-to-market charges on certain financial instruments; (v) the number, timing, and scheduled routes of our aircraft deployments to customers; (vi) our ability to remain in compliance with key agreements with customers, lenders and government agencies; (vii) the impact of current supply chain constraints both within and outside the United States, which may be more severe or persist longer than we currently expect; (viii) the impact of a competitive labor market, which could restrict our ability to fill key positions; (ix) changes in general economic and/or industry-specific conditions, including inflation; and (x) the impact of geographical events or health epidemics such as the COVID-19 pandemic. Other factors that could cause ATSG’s actual results to differ materially from those indicated by such forward-looking statements 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. Except as may be required by applicable law, 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 SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(In thousands, except per share data)
Three Months Ended
March 31,
2023
2022
REVENUES
$
501,095
$
485,860
OPERATING EXPENSES
Salaries, wages and benefits
176,715
161,762
Depreciation and amortization
84,728
82,071
Maintenance, materials and repairs
43,833
35,709
Fuel
66,755
60,358
Contracted ground and aviation services
17,788
18,331
Travel
29,553
24,199
Landing and ramp
4,124
4,578
Rent
8,112
6,663
Insurance
2,548
2,552
Other operating expenses
19,516
19,843
453,672
416,066
OPERATING INCOME
47,423
69,794
OTHER INCOME (EXPENSE)
Interest income
215
9
Non-service component of retiree benefit credits
(3,218
)
5,388
Net (loss) gain on financial instruments
(1,740
)
2,696
Gain (loss) from non-consolidated affiliates
(406
)
(1,403
)
Interest expense
(15,705
)
(11,399
)
(20,854
)
(4,709
)
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
26,569
65,085
INCOME TAX EXPENSE
(6,428
)
(15,289
)
EARNINGS FROM CONTINUING OPERATIONS
20,141
49,796
NET EARNINGS
$
20,141
$
49,796
EARNINGS PER SHARE - CONTINUING OPERATIONS
Basic
$
0.28
$
0.67
Diluted
$
0.25
$
0.57
WEIGHTED AVERAGE SHARES - CONTINUING OPERATIONS
Basic
71,802
73,888
Diluted
83,057
88,744
AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share data)
March 31, 2023
December 31, 2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$
89,602
$
27,134
Accounts receivable, net of allowance of $1,053 in 2023 and $939 in 2022
227,122
301,622
Inventory
57,727
57,764
Prepaid supplies and other
33,555
31,956
TOTAL CURRENT ASSETS
408,006
418,476
Property and equipment, net
2,553,674
2,402,408
Customer incentive
73,828
79,650
Goodwill and acquired intangibles
490,088
492,642
Operating lease assets
66,329
74,070
Other assets
110,354
122,647
TOTAL ASSETS
$
3,702,279
$
3,589,893
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable
$
218,218
$
192,992
Accrued salaries, wages and benefits
60,272
56,498
Accrued expenses
11,371
12,466
Current portion of debt obligations
642
639
Current portion of lease obligations
22,524
23,316
Unearned revenue
33,784
21,546
TOTAL CURRENT LIABILITIES
346,811
307,457
Long term debt
1,544,454
1,464,285
Stock obligations
1,509
695
Post-retirement obligations
33,702
35,334
Long term lease obligations
44,727
51,575
Other liabilities
56,020
62,861
Deferred income taxes
260,989
255,180
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; 150,000,000 shares authorized; 71,451,610 and 72,327,758 shares issued and outstanding in 2023 and 2022, respectively
715
723
Additional paid-in capital
964,026
986,303
Retained earnings
549,023
528,882
Accumulated other comprehensive loss
(99,697
)
(103,402
)
TOTAL STOCKHOLDERS’ EQUITY
1,414,067
1,412,506
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$
3,702,279
$
3,589,893
AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED SUMMARY OF CASH FLOWS (UNAUDITED)
(In thousands)
Three Months Ended
March 31,
2023
2022
OPERATING CASH FLOWS
$
216,378
$
125,668
INVESTING ACTIVITIES:
Aircraft acquisitions and freighter conversions
(164,608
)
(71,915
)
Planned aircraft maintenance, engine overhauls and other non-aircraft additions to property and equipment
(54,193
)
(36,337
)
Proceeds from sales of property and equipment
9,860
76
Acquisitions and investments in businesses
(800
)
—
TOTAL INVESTING CASH FLOWS
(209,741
)
(108,176
)
FINANCING ACTIVITIES:
Principal payments on debt
(25,214
)
(90,100
)
Proceeds from borrowings
105,000
40,000
Payments for financing costs
(484
)
—
Purchase of common stock
(21,918
)
—
Taxes paid for conversion of employee awards
(1,553
)
(1,350
)
TOTAL FINANCING CASH FLOWS
55,831
(51,450
)
NET INCREASE (DECREASE) IN CASH
$
62,468
$
(33,958
)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
$
27,134
$
69,496
CASH AND CASH EQUIVALENTS AT END OF PERIOD
$
89,602
$
35,538
AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES
PRETAX EARNINGS FROM CONTINUING OPERATIONS AND ADJUSTED PRETAX EARNINGS SUMMARY
NON-GAAP RECONCILIATION
(In thousands)
Three Months Ended
March 31,
2023
2022
Revenues
CAM
Aircraft leasing and related revenues
$
117,074
$
111,935
Lease incentive amortization
(5,030
)
(5,030
)
Total CAM
112,044
106,905
ACMI Services
334,127
330,090
Other Activities
110,588
102,535
Total Revenues
556,759
539,530
Eliminate internal revenues
(55,664
)
(53,670
)
Customer Revenues
$
501,095
$
485,860
Pretax Earnings (Loss) from Continuing Operations
CAM, inclusive of interest expense
34,200
34,995
ACMI Services, interest expense
(2,411
)
22,165
Other Activities
654
1,551
Net, unallocated interest expense
(510
)
(307
)
Non-service components of retiree benefit credit
(3,218
)
5,388
Net gain (loss) on financial instruments
(1,740
)
2,696
Loss from non-consolidated affiliates
(406
)
(1,403
)
Earnings from Continuing Operations before Income Taxes (GAAP)
$
26,569
$
65,085
Adjustments to Pretax Earnings from Continuing Operations
Add customer incentive amortization
5,822
5,798
Add loss from non-consolidated affiliates
406
1,403
Less net (gain) loss on financial instruments
1,740
(2,696
)
Less non-service components of retiree benefit credit
3,218
(5,388
)
Add net charges for hangar foam incident
41
—
Adjusted Pretax Earnings (non-GAAP)
$
37,796
$
64,202
Adjusted Pretax Earnings excludes certain items included in GAAP-based pretax Earnings (Loss) from Continuing Operations before Income Taxes because these items 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 Pretax Earnings 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 SUBSIDIARIES
ADJUSTED EARNINGS FROM CONTINUING OPERATIONS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION
NON-GAAP RECONCILIATION
(In thousands)
Three Months Ended
March 31,
2023
2022
Earnings (Loss) from Continuing Operations Before Income Taxes
$
26,569
$
65,085
Interest Income
(215
)
(9
)
Interest Expense
15,705
11,399
Depreciation and Amortization
84,728
82,071
EBITDA from Continuing Operations (non-GAAP)
$
126,787
$
158,546
Add customer incentive amortization
5,822
5,798
Add start-up loss from non-consolidated affiliates
406
1,403
Less net (gain) loss on financial instruments
1,740
(2,696
)
Add non-service components of retiree benefit credits
3,218
(5,388
)
Add net charges for hangar foam incident
41
—
Adjusted EBITDA (non-GAAP)
$
138,014
$
157,663
Management 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 secured credit facility to assess financial performance and determine the cost of borrowed funds. The adjustments also remove the non-service cost components of retiree benefit plans because they are not closely related to ongoing operating activities. To improve comparability between periods, the adjustments also exclude from EBITDA from Continuing Operations charges related to the discharge of a fire suppression system in the Company's aircraft hangar, net of related insurance recoveries. 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 revaluation gains or losses, non-service components of retiree benefit costs including pension plan settlements, amortization of warrant-based customer incentive costs recorded in revenue, costs from non-consolidated affiliates and charges related to the discharge of a fire suppression system, net of insurance recoveries.
AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES
ADJUSTED FREE CASH FLOW
NON-GAAP RECONCILIATION
(In thousands)
Three Months Ended
Trailing 12
Months
Ended
March 31,
March 31,
2023
2022
2023
OPERATING CASH FLOWS (GAAP)
$
216,378
$
125,668
$
562,830
Sustaining capital expenditures
(54,193
)
(36,337
)
(204,692
)
ADJUSTED FREE CASH FLOW (non-GAAP)
$
162,185
$
89,331
$
358,138
Sustaining capital expenditures includes cash outflows for planned aircraft maintenance, engine overhauls, information systems and other non-aircraft additions to property and equipment. It does not include expenditures for aircraft acquisitions and related passenger-to-freighter conversion costs.
Adjusted Free Cash Flow (non-GAAP) includes cash flow from operations net of expenditures for planned aircraft maintenance, engine overhauls and other non-aircraft additions to property and equipment. Management believes that adjusting GAAP operating cash flows is useful for investors to evaluate the company's ability to generate adjusted free cash flow for growth initiatives, debt service, cash returns for shareholders or other discretionary allocations of capital.
AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES ADJUSTED EARNINGS AND ADJUSTED EARNINGS PER SHARE NON-GAAP RECONCILIATION (In thousands)
Management presents Adjusted Earnings and Adjusted Earnings Per Share, both non-GAAP measures, to provide additional information regarding earnings per share without the volatility otherwise caused by the items below among periods.
Three Months Ended
March 31, 2023
March 31, 2022
$
$ Per
Share
$
$ Per
Share
Earnings from Continuing Operations - basic (GAAP)
$
20,141
$
49,796
Gain from warrant revaluation, net tax1
(108
)
—
Convertible notes interest charges, net of tax2
776
760
Earnings from Continuing Operations - diluted (GAAP)
20,809
$
0.25
50,556
$
0.57
Adjustments, net of tax
Customer incentive amortization3
4,546
0.06
4,475
0.05
Non-service component of retiree benefits4
2,513
0.03
(4,158
)
(0.05
)
Financial instrument revaluations5
1,466
0.02
(2,081
)
(0.02
)
Loss from affiliates6
317
—
1,083
0.01
Hangar foam incident7
32
—
—
—
Adjusted Earnings and Adjusted Earnings Per Share (non-GAAP)
$
29,683
$
0.36
$
49,875
$
0.56
Shares
Shares
Weighted Average Shares - diluted
83,057
88,744
Additional shares - warrants 1
—
—
Adjusted Shares (non-GAAP)
83,057
88,744
This presentation does not give effect to convertible note hedges the Company purchased having the same number of the Company's common shares, 8.1 million shares, and the same strike price of $31.90, that underlie the Convertible Notes. The convertible note hedges are expected to reduce the potential equity dilution with respect to the Company's common stock upon conversion of the Convertible Notes.
Adjusted Earnings and Adjusted Earnings Per Share 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 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 SUBSIDIARIES
AIRCRAFT FLEET
Aircraft Types
March 31, 2022
December 31, 2022
March 31, 2023
December 31, 2023
Projected
Freighter
Passenger
Freighter
Passenger
Freighter
Passenger
Freighter
Passenger
B767-200
33
3
32
3
31
3
24
3
B767-300
67
9
78
8
80
8
94
8
B777-200
—
3
—
3
—
3
—
3
B757 Combi
—
4
—
4
—
4
—
4
A321-200
—
—
—
—
—
—
6
—
Total Aircraft in Service
100
19
110
18
111
18
124
18
B767-300 in or awaiting cargo conversion
12
—
15
—
18
—
14
—
A321 in cargo conversion
3
—
7
—
9
—
5
—
A330 in cargo conversion
—
—
—
—
—
—
3
—
B767-200 staging for lease
1
—
—
—
—
—
1
—
Total Aircraft
116
19
132
18
138
18
147
18
Aircraft in Service Deployments
March 31,
December 31,
March 31,
December 31,
2022
2022
2023
2023 Projected
Dry leased without CMI
36
39
40
55
Dry leased with CMI
50
52
52
47
Customer provided for CMI
7
13
13
16
ACMI/Charter1
26
24
24
24
View source version on businesswire.com: https://www.businesswire.com/news/home/20230504006032/en/
Quint Turner, ATSG Inc. Chief Financial Officer 937-366-2303
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