Thursday, February 18, 2016 — Atlas Air Worldwide Holdings, Inc. (Nasdaq: AAWW) today announced adjusted net income attributable to common stockholders of $39.4 million, or $1.59 per diluted share, for the three months ended December 31, 2015, compared with $38.9 million, or $1.55 per diluted share, for the three months ended December 31, 2014.
For the twelve months ended December 31, 2015, our adjusted net income attributable to common stockholders increased to $125.3 million, or $5.01 per diluted share, from $93.4 million, or $3.72 per diluted share, for the twelve months ended December 31, 2014.
Our free cash flow totaled $95.6 million in the fourth quarter of 2015, compared with $97.2 million in the fourth quarter of 2014. For the full year, our free cash flow improved to $326.8 million from $247.8 million in 2014.
“2015 was a great year. We grew earnings substantially, outperforming the airfreight market and delivering adjusted EPS of $5.01, and we positioned Atlas for earnings growth in 2016,” said William J. Flynn, President and Chief Executive Officer.
“We also took actions to strengthen our fleet. We added a tenth 747-8 freighter, increased our CMI operations by four 767s, returned a 747-400BCF to our growing global Charter business, and expanded our Dry Leasing portfolio to include two 767 aircraft that we will also operate on a CMI basis.
“In addition, we refinanced higher-cost debt on two 747-8s and five 747-400 freighters, enabling us to reduce our cost of debt, increase cash flows, enhance adjusted earnings per share, unencumber these 747-400s, and add flexibility to our fleet.
“We will see a full year of benefits from each of these actions in 2016, which position us to surpass 2015 adjusted earnings that included approximately $0.55 to $0.60 per share in the first half driven by the incremental demand we captured related to port congestion on the U.S. West Coast.
“We also expect to benefit from our acquisition of Southern Air Holdings, a premier provider of intercontinental and domestic CMI services, which we expect to close in the next few months.
“The Southern Air transaction, which will be immediately accretive, is strategically compelling and highly complementary. It provides Atlas immediate entry into 777 and 737 aircraft operating platforms, with potential for developing additional business with existing and new customers of both companies. The result will be a more diversified and profitable company offering access to the widest range of modern, efficient aircraft.”
On a reported basis, fourth-quarter 2015 net loss attributable to common stockholders totaled $37.6 million, or $1.53 per diluted share, compared with net income attributable to common stockholders of $41.6 million, or $1.66 per diluted share, in the fourth quarter of 2014. Reported results in the fourth quarter of 2015 were primarily due to charges associated with a previously disclosed litigation settlement.
On a reported basis, full-year 2015 net income attributable to common stockholders totaled $7.3 million, or $0.29 per diluted share, primarily due to charges associated with a previously disclosed litigation settlement. Reported results in 2015 compared with net income attributable to common stockholders of $106.8 million, or $4.25 per diluted share, in 2014.
Fourth-Quarter Results
Fourth-quarter earnings reflected solid peak-season volumes and yields, supported by continued e-commerce growth. In addition, they were driven by our diverse business mix and the ongoing demand for our market-leading aircraft and aviation operating services. We performed a higher-than-expected amount of conditions-based heavy maintenance activity during the quarter, mainly for engine overhauls on 747-400 aircraft. This positions us to continue to take advantage of business opportunities ahead.
ACMI revenues and block-hour volumes during the quarter benefited from an increase in the number of aircraft compared with the fourth quarter of 2014, including four additional 767s operating for DHL in CMI service. Revenue and volume growth during the quarter was partially offset by a lower blended average rate per block hour reflecting the mix impact of increases in CMI flying. As anticipated, segment contribution reflected the impact of transitional crew-training costs associated with our fleet growth initiatives. These were partially offset by a reduction in heavy maintenance expense and lower aircraft ownership costs following the refinancing in 2015 of higher-cost debt related to several of our 747-8F and 747-400F aircraft.
In Charter, lower revenues were primarily driven by the impact of lower fuel prices. Higher block-hour volumes were primarily due to an increase in passenger flying during the quarter. Segment contribution benefited from an improvement in yields excluding fuel; an increase in passenger flying; a reduction in heavy maintenance expense; and a reduction in aircraft ownership costs following the refinancing of higher-cost debt related to our 747-400F aircraft.
Dry Leasing revenue and segment contribution were comparable with results in the fourth quarter of 2014.
Reported results for the fourth quarter of 2015 included an effective income tax rate benefit of 45.9%, reflecting our continued reinvestment of the net earnings of certain foreign subsidiaries outside of the U.S. as well as changes in state taxes.
Cash and Short-Term Investments
At December 31, 2015, our cash, cash equivalents, short-term investments and restricted cash totaled $444.0 million, compared with $330.7 million at December 31, 2014.
The change in position reflected net cash of $372.9 million provided by operating activities; net cash of $165.0 million used for investing activities; and net cash of $80.5 million used for financing activities, which included $568.9 million of debt payments.
Net cash used for investing activities during 2015 primarily related to the purchase of a 747-8F aircraft, two 767-300 passenger aircraft and related freighter conversion costs, and spare engines.
Net cash used for financing activities primarily reflected payments on debt obligations, as we refinanced higher-cost debt with proceeds from lower-cost debt, and for share repurchases, partially offset by proceeds from debt issuance.
Outlook
We begin 2016 with a favorable view about the demand from our customers for our aircraft and services.
We believe the demand we are currently seeing, as well as the benefits we expect from our 2015 fleet initiatives and debt refinancings, provides a foundation for earnings growth this year. In addition, our acquisition of Southern Air is expected to increase our adjusted earnings to low- to mid-single-digit percentage growth over 2015.
Given the inherent seasonality of airfreight demand, we expect the majority of our earnings in 2016 to be generated in the second half. Unlike 2015, which benefited from increased first-half demand driven by U.S. West Coast port congestion, we anticipate that results in 2016 will be more reflective of historical patterns, with approximately 75% of our adjusted EPS occurring in the second half.
In addition, we expect earnings per share in the first quarter of 2016, which is usually the lowest volume-generating and highest maintenance-expense quarter of the year, to be approximately 25% of our first-quarter 2015 adjusted EPS of $1.03. We estimate that about $0.50 of our first-quarter 2015 adjusted EPS related to the port congestion, with another approximately $0.20 from revenue recognized on the return of aircraft.
For the full year, we expect total block hours including the Southern Air transaction to increase more than 20% compared with 2015, with about 75% in ACMI and the balance in Charter. Total block hours in 2016 are also anticipated to reflect additional flying by our tenth 747-8 freighter, which we will operate in Charter until its placement in ACMI, as well as an increase in CMI activity. CMI will be driven by a full year of flying by four 767 aircraft added to our fleet during 2015 and the addition of two other 767 freighters in early 2016.
Results in our Dry Leasing segment will benefit from the addition of two converted 767 freighters to our portfolio, which we will also operate on a CMI basis as noted above.
Including Southern Air, aircraft maintenance expense in 2016 should total approximately $205 million, and depreciation is expected to total approximately $145 million. In addition, we anticipate an effective book income tax rate of approximately 30%. Core capital expenditures, excluding aircraft and engine purchases, are expected to total $50 to $60 million, mainly for spare parts for our fleet.
Conference Call
Management will host a conference call to discuss Atlas Air Worldwide’s fourth-quarter and full-year 2015 financial and operating results at 11:00 a.m. Eastern Time on Thursday, February 18, 2016.
Interested parties are invited to listen to the call live over the Internet at www.atlasair.com (click on “Investor Information”, click on “Presentations” and on the link to the fourth-quarter call) or at the following Web address:
http://edge.media-server.com/m/p/5eo2esjd
For those unable to listen to the live call, a replay will be available on the above Web sites following the call. A replay will also be available through February 25 by dialing (855) 859-2056 (domestic) and (404) 537-3406 (international) and using Access Code 41301559#.
About Non-GAAP Financial Measures
To supplement our financial statements presented in accordance with U.S. GAAP, we present certain non-GAAP financial measures to assist in the evaluation of our business performance. These non-GAAP measures include EBITDAR, as adjusted; EBITDA, as adjusted; Direct Contribution; Adjusted Net Income Attributable to Common Stockholders; Adjusted Diluted EPS; and Free Cash Flow, which exclude certain items. These non-GAAP measures may not be comparable to similarly titled measures used by other companies and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with U.S. GAAP.
Our management uses these non-GAAP financial measures in assessing the performance of the Company’s ongoing operations and in planning and forecasting future periods. We believe that these adjusted measures provide meaningful information to assist investors and analysts in understanding our financial results and assessing our prospects for future performance.
About Atlas Air Worldwide:
Atlas Air Worldwide is a leading global provider of outsourced aircraft and aviation operating services. It is the parent company of Atlas Air, Inc. (Atlas) and Titan Aviation Holdings, Inc. (Titan), and is the majority shareholder of Polar Air Cargo Worldwide, Inc. (Polar). Through Atlas and Polar, Atlas Air Worldwide operates the world’s largest fleet of Boeing 747 freighter aircraft.
Atlas, Titan and Polar offer a range of outsourced aircraft and aviation operating solutions that include ACMI service – in which customers receive an aircraft, crew, maintenance and insurance on a long-term basis; CMI service – in which customers receive crew, maintenance and insurance but not an aircraft; express network and airport-to-airport cargo service; cargo and passenger charters; and dry leasing of aircraft and engines.
Atlas Air Worldwide’s press releases, SEC filings and other information can be accessed through the Company’s home page, www.atlasair.com.
This release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect Atlas Air Worldwide’s current views with respect to certain current and future events and financial performance. Such forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors relating to the operations and business environments of Atlas Air Worldwide and its subsidiaries (collectively, the “companies”) that may cause the actual results of the companies to be materially different from any future results, express or implied, in such forward-looking statements.
Factors that could cause actual results to differ materially from these forward-looking statements include, but are not limited to, the following: costs associated with the acquisition of Southern Air Holdings; failure to achieve expected synergies, accretion and other anticipated benefits of the transaction or to successfully integrate the Southern Air Holdings business; adverse reactions to the acquisition by employees, key customers, including DHL Express, suppliers or competitors of either Atlas Air Worldwide, Southern Air Holdings, or their subsidiaries; our ability to effectively operate the 777 platform or grow the business of Southern Air Holdings; the ability of the companies to operate pursuant to the terms of their financing facilities; the ability of the companies to obtain and maintain normal terms with vendors and service providers; the companies’ ability to maintain contracts that are critical to their operations; the ability of the companies to fund and execute their business plan; the ability of the companies to attract, motivate and/or retain key executives and associates; the ability of the companies to attract and retain customers; the continued availability of our wide-body aircraft; demand for cargo services in the markets in which the companies operate; economic conditions; the effects of any hostilities or act of war (in the Middle East or elsewhere) or any terrorist attack; labor costs and relations; financing costs; the cost and availability of war risk insurance; our ability to maintain adequate internal controls over financial reporting; aviation fuel costs; security-related costs; competitive pressures on pricing (especially from lower-cost competitors); volatility in the international currency markets; weather conditions; government legislation and regulation; consumer perceptions of the companies’ products and services; anticipated and future litigation; and other risks and uncertainties set forth from time to time in Atlas Air Worldwide’s reports to the United States Securities and Exchange Commission.
For additional information, we refer you to the risk factors set forth under the heading “Risk Factors” in the most recent Annual Report on Form 10-K and subsequent reports on Form 10-Q filed by Atlas Air Worldwide with the Securities and Exchange Commission. Other factors and assumptions not identified above may also affect the forward-looking statements, and these other factors and assumptions may also cause actual results to differ materially from those discussed.
Except as stated in this release, Atlas Air Worldwide is not providing guidance or estimates regarding its anticipated business and financial performance for 2016 or thereafter.
Atlas Air Worldwide assumes no obligation to update such statements contained in this release to reflect actual results, changes in assumptions or changes in other factors affecting such estimates other than as required by law.
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