Second-Quarter Adjusted EBITDA from
Continuing Operations up 13 Percent to $51 Million
Air Transport Services Group, Inc. (Nasdaq: ATSG), the leading
provider of medium wide-body freighter aircraft leasing, air cargo
transportation and related services, today reported consolidated
financial results for the quarter ended June 30, 2015.
For the second quarter of 2015, compared with the second quarter
of 2014 except as noted:
- Pre-tax earnings from continuing
operations increased 17 percent to $17.2 million, including a 35
percent increase in Cargo Aircraft Management's pre-tax earnings,
driven by eight additional freighters leased to external
customers.
- Net earnings from continuing operations
increased 14 percent to $10.6 million, or 16 cents per diluted
share. Operating loss carryforwards for U.S. federal income tax
purposes offset much of the company’s federal tax liabilities. ATSG
does not expect to pay significant federal income taxes until 2017
at the earliest.
- Consolidated revenues were
approximately flat at $148.4 million. Excluding revenues from
reimbursed expenses, revenues increased 3 percent. Revenues from
cargo aircraft leasing were up 12 percent.
- Adjusted EBITDA (Earnings Before
Interest, Taxes, Depreciation and Amortization) increased 13
percent to $51.2 million, and increased 16 percent to $97.7 million
year to date. Adjusted EBITDA is a non-GAAP financial measure,
defined and reconciled to comparable GAAP results in a table at the
end of this release.
Joe Hete, President and Chief Executive Officer of ATSG, said,
“Our record first-half Adjusted EBITDA stems from a combination of
improved airline operations and continued growth in aircraft
leasing, leading us closer to full deployment of our available
aircraft and reflects strong appetites from current and new
customers for more of our highly efficient Boeing 767 freighters
and related services."
The second quarter marked the commencement of a new four-year
commercial agreement governing air network services that ATSG
provides to DHL. It began with fifteen dry leases for Boeing 767
freighters dedicated to DHL through March 2019, currently operating
in its U.S. network. DHL added a sixteenth dry lease, a 767-300
freighter delivered in June, and we expect to place two additional
767-300s, both under eight-year lease terms, during the fourth
quarter of 2015. Accordingly, ATSG has purchased two more
passenger-configured 767-300s for freighter conversion to meet
DHL's requirement.
Segment Results
Cargo Aircraft Management (CAM)
CAM Second Quarter Six
Months ($ in thousands)
2015
2014 2015 2014
Revenues $ 45,632 $ 40,590 $ 88,486 $ 81,225 Pre-Tax Earnings
$ 14,441 $ 10,667 $
28,879 $ 25,107
Significant Developments:
- The increase in CAM’s second-quarter
revenue was driven by eight additional dry-leased 767 freighters to
external customers, which increased to 29 as of June 30, 2015 from
21 at June 30, 2014, and from 24 at March 31, 2015.
- The 35 percent increase in pre-tax
earnings for the quarter reflects the increased number of
dry-leased aircraft, along with increased depreciation costs.
- At June 30, 2015, CAM owned 54 Boeing
cargo aircraft in serviceable condition, three more than a year
ago. CAM has purchased two additional 767-300 aircraft, one in June
and one in July, which will be converted to freighters and
dry-leased during the fourth quarter.
ACMI Services
ACMI Services Second Quarter
Six Months ($ in thousands)
2015
2014 2015
2014 Revenues Airline services $ 97,897 $ 100,288 $ 195,592
$ 199,805 Reimbursables $ 5,995 $ 11,016 $ 13,768 $ 20,095
Total ACMI Services Revenues $ 103,892 $ 111,304 $ 209,360 $
219,900 Pre-Tax Earnings (Loss) $ 1,126
$ 309 $ (1,445 ) $ (6,737 )
Significant Developments:
- Quarterly results for the segment
improved on a year-over-year and sequential quarter basis. Results
benefited from a full quarter of 767 ACMI service for Raya Airways
of Malaysia, which began in February. West Coast operations for
Aloha Airlines, which began in the third quarter of 2014, also
contributed to improved year-over-year results.
- The quarter also benefited from fewer
heavy maintenance checks for our Boeing 767-200 freighters than a
year ago, and from net insurance recoveries of just over $2
million. During the third quarter of 2015, the cost of unreimbursed
expensed heavy maintenance checks for 767-200s is expected to be
higher than in the second quarter.
- Our airlines leased from CAM and
operated on an ACMI basis fifteen Boeing 767 freighters as of June
30, 2015, five fewer than at March 31, 2015 and three fewer than on
June 30, 2014, reflecting increasing allocations of our fleet to
dry lease opportunities based upon strong customer demand.
Other Activities
Other Activities Second Quarter
Six Months ($ in thousands)
2015
2014 2015
2014 Revenues $ 32,179 $ 36,493 $ 67,785 $ 63,301 Pre-Tax
Earnings $ 1,840 $ 4,108
$ 4,916 $ 7,125
Significant Developments:
- External customer revenues from all
other activities in the second quarter were $20 million, down
slightly compared to second quarter 2014. The earnings comparison
reflects timing variances in revenue recognition for maintenance
services for outside customers, offset in part by increased
revenues for management of sorting centers for the USPS.
Outlook
As a result of strong first-half performance and a positive
outlook for the rest of 2015, ATSG now projects that its baseline
Adjusted EBITDA from Continuing Operations for 2015 will be in a
range of $190-195 million.
Hete noted that, "In 2015, we are achieving growing returns from
the significant investments we have made in our fleet and
operations, as customers are stepping up to make major commitments
to our assets and operating capabilities. For example, Delta Air
Lines recently selected AMES, our maintenance MRO, to provide
airframe maintenance services for its fleet of more than eighty
Boeing 717 aircraft at AMES's expanded hangar facilities in
Wilmington. This new five-year arrangement is expected to be
finalized and start in the fourth quarter this year. We are pleased
that Delta, our long-term engine maintenance partner, has entrusted
us with airframe maintenance support for this portion of their
fleet.
"We also have other multi-year commitments in the works with
customers that we expect to announce and launch later this year, in
addition to the two 767-300s we plan to deliver to DHL in the
fourth quarter. At the same time, we will also incur some
transition effects in the third quarter as we prepare our aircraft
for long-duration dry-lease arrangements. But with continued strong
industry demand and continued share repurchases, our shareholders
can expect even greater long-term returns under our differentiated
business model," Hete said.
Conference Call
ATSG will host a conference call on Thursday, August 6, 2015, at
10 a.m. Eastern time to review its financial results for the second
quarter of 2015. Participants should dial (888) 895-5479 and
international participants should dial (847) 619-6250 ten minutes
before the scheduled start of the call and ask for conference pass
code 40193425.
The call will also be webcast live (listen-only mode) via a link
at www.atsginc.com.
A replay of the conference call will be available by phone on
Thursday, August 6, 2015, beginning at 2 p.m. and continuing
through August 13, 2015, at (888) 843-7419 (international callers
(630) 652-3042); use pass code 40193425#. 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. 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,
the number and timing of deployments of our aircraft, our operating
airlines' ability to maintain on-time service and control and
reduce costs, 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, 2015 2014
2015 2014 REVENUES $ 148,353 $ 149,618 $
295,378 $ 293,211 OPERATING EXPENSES Salaries, wages and
benefits 42,036 40,895 85,715 83,960 Depreciation and amortization
31,400 27,142 60,393 52,121 Maintenance, materials and repairs
23,993 23,168 46,686 48,047 Fuel 12,275 14,014 23,053 26,274 Rent
2,447 6,924 6,654 14,234 Travel 4,342 4,419 8,765 8,992 Landing and
ramp 2,166 2,576 4,874 5,314 Insurance 546 1,573 1,804 2,778 Other
operating expenses 9,354 10,790 20,111 19,538
128,559 131,501 258,055 261,258
OPERATING INCOME 19,794 18,117 37,323 31,953 OTHER INCOME (EXPENSE)
Interest income 24 24 46 43 Interest expense (2,839 ) (3,481 )
(5,904 ) (7,304 ) Net gain (loss) on derivative instruments 264
31 251 330 (2,551 ) (3,426 ) (5,607 )
(6,931 ) EARNINGS FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 17,243 14,691 31,716 25,022 INCOME
TAX EXPENSE (6,673 ) (5,393 ) (12,251 ) (9,202 )
EARNINGS FROM CONTINUING OPERATIONS 10,570 9,298
19,465 15,820 EARNINGS FROM DISCONTINUED OPERATIONS, NET OF
TAX 214 211 428 422 NET EARNINGS $
10,784 $ 9,509 $ 19,893 $ 16,242
EARNINGS PER SHARE - Basic Continuing operations $ 0.16 $ 0.14 $
0.30 $ 0.25 Discontinued operations 0.01 0.01 0.01
— NET EARNINGS PER SHARE $ 0.17 $ 0.15
$ 0.31 $ 0.25 EARNINGS PER SHARE - Diluted
Continuing operations $ 0.16 $ 0.14 $ 0.30 $ 0.24 Discontinued
operations — 0.01 — 0.01 NET EARNINGS
PER SHARE $ 0.16 $ 0.15 $ 0.30 $ 0.25
WEIGHTED AVERAGE SHARES Basic 64,541 64,285
64,498 64,217 Diluted 65,471 65,207
65,404 65,174
AIR TRANSPORT SERVICES GROUP, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(In thousands,
except share data)
June 30, December 31, 2015
2014 ASSETS CURRENT ASSETS: Cash and cash equivalents
$ 22,182 $ 30,560 Accounts receivable, net of allowance of $315 in
2015 and $812 in 2014 36,663 43,513 Inventory 10,709 10,665 Prepaid
supplies and other 10,583 12,613 Deferred income taxes 19,770
19,770 TOTAL CURRENT ASSETS 99,907 117,121
Property and equipment, net 859,482 847,268 Other assets 26,904
28,230 Goodwill and acquired intangibles 38,870 39,010
TOTAL ASSETS $ 1,025,163
$ 1,031,629 LIABILITIES AND
STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable $
39,316 $ 40,608 Accrued salaries, wages and benefits 20,485 25,633
Accrued expenses 8,022 8,201 Current portion of debt obligations
24,672 24,344 Unearned revenue 12,812 12,914 TOTAL
CURRENT LIABILITIES 105,307 111,700 Long term debt 290,781
319,750 Post-retirement obligations 86,102 92,050 Other liabilities
59,266 57,647 Deferred income taxes 115,985 102,993
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;
75,000,000 shares authorized; 64,987,351 and 64,854,950 shares
issued and outstanding in 2015 and 2014, respectively 650 649
Additional paid-in capital 525,104 526,669 Accumulated deficit
(77,060 ) (96,953 ) Accumulated other comprehensive loss (80,972 )
(82,876 ) TOTAL STOCKHOLDERS’ EQUITY 367,722 347,489
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $
1,025,163 $ 1,031,629
AIR 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, 2015 2014
2015 2014 Revenues CAM $ 45,632
$ 40,590 $ 88,486 $ 81,225
ACMI Services Airline services
97,897 100,288 195,592 199,805 Reimbursables 5,995 11,016
13,768 20,095
Total ACMI Services
103,892 111,304 209,360 219,900
Other Activities 32,179
36,493 67,785 63,301
Total
Revenues 181,703 188,387 365,631 364,426 Eliminate internal
revenues (33,350 ) (38,769 ) (70,253 ) (71,215 )
Customer
Revenues $ 148,353 $ 149,618
$ 295,378 $ 293,211
Pre-tax Earnings from Continuing Operations
CAM, inclusive of interest expense 14,441 10,667 28,879
25,107
ACMI Services 1,126 309 (1,445 ) (6,737 )
Other
Activities 1,840 4,108 4,916 7,125
Net, unallocated interest
expense (428 ) (424 ) (885 ) (803 )
Net gain on derivative
instruments 264 31 251 330
Total
Pre-tax Earnings $ 17,243 $ 14,691
$ 31,716 $ 25,022 Adjustments
to Pre-tax Earnings Less net gain on derivative instruments
(264 ) (31 ) (251 ) (330 )
Adjusted Pre-tax Earnings
$ 16,979 $ 14,660
$ 31,465 $ 24,692
Adjusted Pre-tax Earnings is defined as Earnings from Continuing
Operations Before Income Taxes less derivative gains. Management
uses Adjusted Pre-tax Earnings from Continuing Operations to assess
the performance of its operating results among periods. Adjusted
Pre-tax earnings from Continuing Operations 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.
Reimbursable revenues shown above include revenues related to
fuel, landing fees, navigation fees, aircraft rent and certain
other operating costs that are directly reimbursed to the airlines
by their customers. Effective April 1, 2015, the costs of engine
and airframe maintenance for all CAM-owned aircraft operated for
DHL are the responsibility of the airlines, including Boeing
767-200 maintenance costs previously reimbursed directly by DHL.
For all periods presented above, airline service revenues include
compensation for maintenance provided by the airlines on aircraft
operated for DHL. Reimbursables revenues declined for the three and
six month periods ending June 30, 2015 compared to the
corresponding periods of 2014 due to lower fuel prices and the
return of four DHL-owned Boeing 767-200 aircraft.
AIR TRANSPORT SERVICES GROUP, INC. AND
SUBSIDIARIESUNAUDITED ADJUSTED EARNINGS FROM CONTINUING
OPERATIONS BEFORE INTEREST, TAXES, DEPRECIATION AND
AMORTIZATIONNON-GAAP RECONCILIATION(In thousands)
Three Months Ended Six Months Ended
June 30, June 30, 2015
2014 2015 2014 Earnings from
Continuing Operations Before Income Taxes $ 17,243 $ 14,691 $
31,716 $ 25,022 Interest Income (24 ) (24 ) (46 ) (43 ) Interest
Expense 2,839 3,481 5,904 7,304 Depreciation and Amortization
31,400 27,142 60,393 52,121
EBITDA
from Continuing Operations $ 51,458 $ 45,290 $ 97,967 $ 84,404
Less net gain on derivative instruments (264 ) (31 ) (251 ) (330 )
Adjusted EBITDA from Continuing
Operations $ 51,194 $ 45,259 $ 97,716 $
84,074
EBITDA and Adjusted 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.
EBITDA from Continuing Operations is defined as Earnings from
Continuing Operations Before Income Taxes plus net interest
expense, depreciation, and amortization expense. Adjusted EBITDA
from Continuing Operations is defined as EBITDA from Continuing
Operations less derivative gains.
Management uses EBITDA from Continuing Operations as an
indicator of the cash-generating performance of the operations of
the Company. Management uses Adjusted EBITDA from Continuing
Operations to assess the performance of its operating results among
periods. EBITDA and Adjusted 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
SUBSIDIARIESIN-SERVICE CARGO AIRCRAFT FLEET
Aircraft Types December 31,
June 30, December 31, 2014 2015
2015 Projected Operating
Operating Operating Total Owned Lease Total Owned
Lease Total Owned Lease B767-200 38 36 2 36 36 — 36 36 — B767-300
10 9 1 10 10 — 12 12 — B757-200 4 4 — 5 4 1 5 4 1 B757 Combi 4 4 —
4 4 — 4 4 —
Total Aircraft 56 53 3
55 54 1 57 56 1
Owned Aircraft In Serviceable Condition December 31,
June 30, December 31, 2014 2015 2015
Projected Dry leased without CMI 11 13 15-16 Dry leased
with CMI 13 16 17-18 ACMI/Charter 28 23 22-24 Staging/Unassigned 1
2
— 53 54
Note: Cargo Aircraft Management (CAM) has acquired two
Boeing 767-300 aircraft in passenger configuration (one in June,
one in July) that will undergo conversion to freighter aircraft
this year. Those aircraft are not reflected in the June totals
above.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150805006573/en/
ATSG Inc.Quint O. Turner, Chief Financial Officer,
937-382-5591
Air Transport Services (NASDAQ:ATSG)
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