ATSG Growth Continues As Midsize Freighter Leasing Expands
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):
- Revenues increased $77 million, or 43 percent, to $253.2 million. Excluding revenues from
reimbursable airline expenses, revenues increased $60 million, or 37 percent. ATSG's airline services operations, and maintenance
and logistics businesses, recorded double-digit revenue increases.
- GAAP Earnings from Continuing Operations were a loss of $53.9 million or $0.91 per share
diluted and included charges totaling $67.8 million for the warrants granted last year in connection with operating and lease
agreements with Amazon Fulfillment Services, Inc. The value of the warrants increased sharply during the quarter in conjunction
with a 36 percent increase in the traded price of ATSG stock since March 31, 2017, resulting in a significant mark-to-market loss
for the quarter. Earnings from Continuing Operations were a positive $11.5 million, or $0.12 per share diluted a year
earlier.
- Adjusted Earnings from Continuing Operations, which exclude non-cash warrant-related items,
were $13.9 million, up 64 percent. Adjusted Earnings Per Share from Continuing Operations were $0.21, up eight cents per share.
These Adjusted Earnings and other adjusted amounts referenced below are non-GAAP financial measures, and are reconciled to
comparable GAAP results in tables in this release. Adjustments include both dollar-amount and share count items.
- GAAP Pre-tax Earnings from Continuing Operations were a negative $48.4 million, versus a
positive $18.8 million a year ago. Adjusted Pre-tax Earnings, which exclude warrant effects along with additional non-cash items,
increased 39 percent to $22.7 million.
- Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization, as defined
and adjusted in a table later in this release) increased 23 percent to $64.2 million.
- Capital expenditures in the first half of 2017 were $144.3 million, versus $125.1 million in
the first half of 2016.
- Share repurchases were $11.2 million for the first half. This includes 380,637 shares ATSG
repurchased in June as part of an underwritten secondary offering by an affiliate of Red Mountain Capital Partners.
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 |
|
|
$ |
35,739 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant Developments:
- CAM's revenues increased $2.1 million to $49.5 million from the second quarter last year, and
included $3.3 million of non-cash amortization associated with the warrant-related Amazon lease incentive. Excluding this lease
incentive, CAM’s revenues increased nine percent. CAM was leasing forty-five 767s to external customers as of June 30, 2017, ten
more than a year earlier.
- Pre-tax earnings were $12.8 million for the quarter, down $3.4 million. Principal effects were the
warrant-related lease incentive, increased depreciation, and higher pre-deployment expenses.
- At June 30, 2017, CAM owned 64 Boeing cargo aircraft, all of which were in service, including
fifty-six 767s. Eight other aircraft were awaiting or undergoing modification from passenger to freighter configuration at the
end of the quarter, including six 767s and two 737s. In addition to the six 767s in mod, CAM expects to close on purchases of
seven additional 767s in the last half of 2017. CAM currently has no 767 purchase commitments in 2018.
- In July, CAM announced long-term dry lease commitments for three 767-300 freighters with Northern
Aviation Services, for deployments beginning with the first in October and two during the first quarter of 2018. Some may
replace 767 freighters that ATSG's airlines operate for Northern on an ACMI basis.
- Production delays at CAM's freighter modification contractor this year will defer two 767s expected
to be deployed in the second half of 2017 into 2018.
ACMI Services
ACMI Services |
|
Second Quarter |
|
Six Months |
($ 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:
- Airline services revenues increased 14 percent to $111.9 million and the segment recorded a pre-tax
profit of $0.1 million in the second quarter. The improvement reflects continued growth of CMI operations for Amazon, and reduced
pension expense compared with the second quarter last year.
- Costs for pilot training and premium pay for pilots who accept additional flying assignments declined
from the first quarter, and heavy maintenance expense was lower than projected for the second quarter.
- Second-quarter block hours increased 29 percent from the year-earlier period. ACMI Services revenues
are dependent in part on hours flown as determined by customer network designs, which can change as additional aircraft come on
line and networks evolve. Average per-aircraft utilization rates began to decline in late May this year as CMI customers
reconfigured their air networks.
Other Activities
Other Activities |
|
Second Quarter |
|
Six Months |
($ in thousands) |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Revenues |
|
$ |
116,508 |
|
|
$ |
57,253 |
|
|
$ |
205,714 |
|
|
$ |
112,264 |
Pre-Tax Earnings |
|
6,539 |
|
|
4,130 |
|
|
11,322 |
|
|
7,998 |
|
|
|
|
|
|
|
|
|
|
|
|
Significant Developments:
- Total revenues from all other activities in the second quarter more than doubled from a year ago to
$116.5 million. External customer revenues increased $43.3 million, to $76.3 million. External maintenance revenues and those
from parcel handling and logistical support services increased substantially during the quarter. PEMCO, acquired in December
2016, accounted for $21.1 million of external revenues during quarter.
- Second-quarter pre-tax earnings of $6.5 million increased 58 percent, reflecting improved results
from heavy maintenance and logistics services.
- As announced this morning, ATSG completed a joint-venture agreement with Precision Aircraft
Solutions, LLC, to develop a passenger-to-freighter conversion program for Airbus A321-200 aircraft. The venture anticipates
approval of a supplemental type certificate in 2019.
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:
- Seven additional freighters will be dry leased in the second half, including five 767s and two 737s.
Production delays to complete aircraft cargo modifications have deferred delivery of two 767s from the second half to 2018,
reducing Adjusted EBITDA from continuing operations by $2.0 to $2.5 million in the second half.
- A new contract for engine overhauls on General Electric-powered 767-300 aircraft with Delta TechOps
will result in $3.0 to $4.0 million in additional maintenance expense for the second half of 2017, with a corresponding decrease
in Adjusted EBITDA. The payments to Delta are now recorded as maintenance expense as engine cycles occur, and will yield cash
flow savings compared with the prior arrangement. Previously, overhaul events for these engines were capitalized and
depreciated.
- Recent changes by CMI customers to their air networks, which have reduced average utilization and
associated variable revenue compared with previous run-rates.
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 SUBSIDIARIES
CONDENSED 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 |
|
|
65,910 |
|
Revenues 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 SUBSIDIARIES
CONDENSED 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 |
|
|
$ |
1,259,330 |
|
|
|
|
|
|
|
|
|
|
AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES
PRE-TAX EARNINGS AND ADJUSTED PRE-TAX EARNINGS SUMMARY
FROM CONTINUING OPERATIONS
NON-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 |
|
|
$ |
32,450 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-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 SUBSIDIARIES
ADJUSTED EARNINGS FROM CONTINUING OPERATIONS
BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION
NON-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 |
|
|
$ |
103,387 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 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 SUBSIDIARIES
ADJUSTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS
NON-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 |
|
|
$ |
0.26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management 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 SUBSIDIARIES
CARGO 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 |
|
|
ATSG Inc.
Quint O. Turner, 937-382-5591
Chief Financial Officer
View source version on businesswire.com: http://www.businesswire.com/news/home/20170807005989/en/