Flexibility, Payload Key to Charter Mission
Friday, March 25, 2016 — Atlas Air, Inc., a unit of Atlas Air Worldwide Holdings, Inc. (Nasdaq: AAWW), provided essential cargo lift to help The Rolling Stones perform an historic concert in Havana, Cuba.
An Atlas Boeing 747-400 freighter carried 97 tons of staging and musical equipment from Mexico City to Havana, with a stop at Miami International Airport, on March 19. It was the first commercial charter operation of its kind by a U.S.-based carrier.
“With our global reach and flexible scale, our customers depend on Atlas Air for reliable service anywhere in the world,” said Michael Steen, Executive Vice President and Chief Commercial Officer, Atlas Air Worldwide. “As the first U.S. freighter operator chosen to operate into Cuba, we were delighted to support this one-of-a-kind event.”
The Rolling Stones will perform a free concert in Havana on March 25 — the first open-air performance in the country by a British rock band.
Including shipment by sea, the concert requires 61 containers with an estimated 500 tons of equipment, including everything needed to produce the outdoor show.
This type of mission is hardly new for Atlas Air. The company has flown equipment around the world to help keep some of the biggest names in music humming. Because of the unusual destination, there were special visa, permitting and operational challenges to work through in order to ensure a successful mission.
Concert producers and big-name acts rely on Atlas Air for scheduling flexibility and its fleet of Boeing 747-400 and Boeing 747-8 Freighters, which feature both nose-loading and side-door-loading options to accommodate outsized, unusual or sensitive cargo.
“Working with partners in the concert industry, we’re able to provide a full-scale solution to fly tons of equipment anywhere, from one-off missions for The Rolling Stones to global tours,” Steen said. “When there’s a lot at stake, our customers rely on Atlas Air for routine shipments or one-of-a-kind charters, like this one to Cuba, that require detailed planning and execution.”
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 services 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 may be accessed through the Company’s home page, www.atlasair.com.
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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Tuesday, January 19, 2016 — Atlas Air Worldwide Holdings, Inc. (Nasdaq: AAWW) today said that it has entered into a definitive agreement to acquire privately held Southern Air Holdings, Inc., a premier provider of intercontinental and domestic air cargo services, in an immediately accretive, all-cash, debt-free transaction valued at approximately $110 million. The transaction is subject to customary closing conditions and approval by the U.S. Department of Transportation, and is expected to close in the next few months.
Southern Air is the parent company of Worldwide Air Logistics Group and its two operating subsidiaries, Southern Air, Inc. and Florida West International Airways, Inc.
“We are very pleased to announce a strategically compelling, highly complementary and immediately accretive acquisition of Southern Air,” said William J. Flynn, President and Chief Executive Officer of Atlas Air Worldwide. “And we are eager to capitalize on the substantial opportunities that the transaction will provide, especially 777 and 737 aircraft operations.
“The result will be a more diversified and profitable company offering access to the widest range of modern, efficient aircraft, together with a broader mix of services and a greater scale and global footprint that will drive significant value for our customers and shareholders.”
“We very much look forward to joining the Atlas Air family of companies,” said Daniel J. McHugh, Chief Executive Officer of Southern Air Holdings. “We share the same commitment to providing superior customer service via our exceptional team of aviation professionals. And Southern Air will now have a strong and viable parent to enable us to continue to grow.”
Strategic and Financial Benefits of Transaction
• Enhanced Service Offerings and Customer Relationships: The transaction provides Atlas Air Worldwide immediate entry into 777 and 737 aircraft operating platforms, with potential for developing additional business with existing and new customers of both companies.
Southern Air’s main operating company currently flies five 777-200Fs and five 737-400Fs under flight services (CMI, or Crew, Maintenance and Insurance) agreements with DHL Express, the leading global brand in the logistics industry.
The platforms provided by these aircraft will augment Atlas Air Worldwide’s ability to offer customers the broadest array of aircraft and operating services for domestic, regional and international applications.
• Complementary Businesses: Atlas Air Worldwide and Southern Air have complementary operations, which will aid in providing seamless operations for customers. Further, the transaction will enhance Atlas Air Worldwide’s position as a leading global provider of outsourced aircraft and aviation operating services.
Southern Air’s highly professional, experienced workforce and its capabilities complement Atlas Air Worldwide’s 747 ACMI (Aircraft, Crew, Maintenance and Insurance) and Charter operations, its 747 and 767 CMI services, and its freighter-centric Dry Leasing portfolio of 777, 757 and 737 aircraft. Together, the companies will have a fleet of more than 75 aircraft.
• Increased Revenues: The combination with Southern Air is anticipated to add approximately $100 million to Atlas Air Worldwide’s annual revenues and provide a solid foundation for additional growth.
• Immediately Accretive to Earnings: The transaction is also expected to be immediately accretive to Atlas Air Worldwide’s adjusted earnings per share in 2016 with EBITDA and adjusted net income margins in line with Atlas Air Worldwide’s. The impact of this transaction will be included in Atlas Air Worldwide’s 2016 earnings framework, to be discussed during the company’s next earnings release on February 18, 2016.
• Transaction Funding: Reflecting the company’s balance sheet position, Atlas Air Worldwide intends to fund the acquisition of Southern Air using available cash on hand.
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 services 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 may be accessed through the Company’s home page, www.atlasair.com.
About Southern Air Holdings:
Southern Air Holdings is the parent company of Worldwide Air Logistics Group, Inc. Worldwide is a leading provider of domestic and international ACMI and CMI air cargo services through its separate operating subsidiaries, Southern Air, Inc., which operates Boeing 777 and 737-400 aircraft, and Florida West International Airways, Inc., which operates Boeing 767-300 aircraft. Worldwide offers customers highly reliable and efficient air cargo business platforms with a strong record of performance excellence and safety.
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; 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 Wordwide, 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.
* * *
Atlas Air Worldwide Holdings, Inc. (Nasdaq: AAWW) today announced adjusted net income attributable to common stockholders of $30.7 million, or $1.23 per diluted share, for the three months ended September 30, 2015, compared with $27.5 million, or $1.10 per diluted share, for the three months ended September 30, 2014.
On a reported basis, results reflected a net loss attributable to common stockholders of $12.8 million, or $0.51 per diluted share, in the third quarter of 2015 compared with net income attributable to common stockholders of $27.6 million, or $1.10 per diluted share, in the year-ago period. Reported results in the third quarter of 2015 were primarily due to a charge on the early extinguishment of debt following the refinancing of higher-cost debt with proceeds from lower-cost debt. In addition to reducing the company’s cost of debt, the refinancing delivers significant increases in cash flows, is immediately accretive to adjusted earnings per share, and unencumbers five of our 747-400F aircraft, which adds flexibility to our fleet.
Free cash flow of $82.5 million in the third quarter of 2015 compared favorably with $54.5 million in the third quarter of 2014.
“Both our third-quarter results and our outlook highlight the positive impact of the initiatives we have undertaken to enhance our business mix and our ability to leverage the scale and efficiencies in our operations,” said William J. Flynn, President and Chief Executive Officer.
“Earnings in ACMI during the quarter were complemented by a sharp improvement in Charter contribution and the underlying strength of our Dry Leasing business. Charter results were driven by an improvement in yields excluding fuel and higher aircraft utilization, both of which are a product of our diversified global network, quality of service, and capability to meet the needs of a wide variety of commercial customers.
“With a superior fleet and global network, we are prepared for a solid peak season and pick up in market yields as year-end airfreight demand and e-commerce growth unfold. We also anticipate a typical sequential increase in earnings in the fourth quarter. Consistent with our prior outlook, we expect adjusted fully diluted earnings per share of slightly over $1.50 in the period.”
Mr. Flynn added: “Reflecting our commitment to shareholder value, we acquired 1.7% of our outstanding common stock through our share repurchase program during the third quarter and have bought back more than 10% of our outstanding shares over the past three years. Our capital allocation strategy is dedicated to creating, enhancing and returning value to our shareholders, both through business growth and returns of capital.”
Adjusted earnings in the third quarter of 2015 excluded a loss of $1.77 per diluted share on the early extinguishment of debt and a gain on investments of $0.34 per diluted share, both in connection with the refinancing of higher-cost debt with lower-cost debt; a special charge of $0.20 per diluted share in connection with the early termination of high-rate operating leases for two engines; and net expenses of $0.12 per share related to other matters.
ACMI revenues and volumes during the third quarter benefited from an increase in the number of segment aircraft compared with the third quarter of 2014. Revenue growth during the quarter, however, was partially offset by a lower blended average rate per block hour reflecting the mix impact of increases in 747-400F and CMI flying. Lower segment contribution was primarily due to higher crew training costs associated with our fleet growth initiatives and higher maintenance expense. These were partially offset by a reduction in aircraft ownership costs following the refinancing of higher-cost debt related to several of our 747-400F aircraft.
In Charter, lower revenues were primarily driven by the impact of lower fuel prices partially offset by an improvement in yields excluding fuel. Lower volumes were primarily due to the redeployment of aircraft to ACMI service. Segment contribution benefited from the improvement in yields excluding fuel; higher aircraft utilization; 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 contribution reflected a reduction in the number of segment aircraft following the sale of a 737-800 passenger aircraft in the first quarter of 2015.
Reported results for the third quarter of 2015 included an effective income tax rate benefit of 49.3%, reflecting the favorable resolution of an IRS exam and our continued reinvestment of the net earnings of certain foreign subsidiaries outside of the U.S.
For the nine months ended September 30, 2015, adjusted net income attributable to common stockholders of $85.9 million, or $3.44 per diluted share, compared favorably with $54.6 million, or $2.17 per diluted share, for the nine months ended September 30, 2014.
On a reported basis, nine-month 2015 net income attributable to common stockholders totaled $44.9 million, or $1.80 per diluted share, compared with $65.1 million, or $2.59 per diluted share, in the first nine months of 2014.
Free cash flow totaled $231.3 million in the first nine months of 2015 compared with $150.6 million in the first nine months of 2014.
At September 30, 2015, our cash, cash equivalents, restricted cash and short-term investments totaled $389.6 million, compared with $330.7 million at December 31, 2014.
The change in position reflected net cash of $265.8 million provided by operating activities; net cash of $6.2 million used for investing activities; and net cash of $181.5 million used for financing activities, which included $334.5 million of debt payments.
Also during the third quarter, we repurchased 425,154 shares of our common stock for $20.0 million, or 1.7% of our outstanding common stock at June 30, 2015.
Future repurchases under our remaining $25.0 million authority may be made at our discretion, and the actual timing, form and amount will depend on company and market conditions.
During the third quarter of 2015, we used approximately $113 million of the net proceeds from our June 2015 issuance of $224.5 million of convertible senior notes at 2.25% to retire higher-rate Enhanced Equipment Trust Certificates (EETCs) related to five of our 747-400F aircraft. The EETCs had a weighted average cash coupon of 8.1%.
Subsequent to the close of the third quarter, we refinanced the loans for two of the original 747-8Fs delivered to us in 2011 and reduced the interest rate from 6.37% to 3.53%.
We are encouraged by our strong performance in the first nine months of 2015, expect significant growth in adjusted diluted earnings per share this year, and are confident about our business as we look to 2016.
We expect airfreight to grow at a reasonable rate in 2015 despite tougher year-over-year monthly industry data comparisons in recent months. We anticipate solid peak-season volumes and yields driven by end-of-the-year airfreight demand, supported by continued e-commerce growth. And we expect the demand we are seeing for our aircraft and services to continue next year.
As a result, we anticipate adjusted fully diluted earnings per share of slightly more than $1.50 in the fourth quarter, which excludes the cost of refinancing debt and noncash expenses and income.
For the full year, we continue to expect that block-hour volumes will increase approximately 10% compared with 2014, including the impact of the 747-8 freighter scheduled to be delivered to us this month. More than 70% of our total block hours should be in ACMI and the balance in Charter. Our outlook reflects our market leadership in ACMI, our strong presence in the global charter market, and military demand that has stabilized at higher levels compared with 2014.
In Dry Leasing, our portfolio is expected to include two 767 passenger aircraft being converted to freighter configuration. Following their conversion, which is expected to be completed during the fourth quarter of this year and the first quarter of 2016, the aircraft will be leased to DHL Express on a long-term basis. Similar to the dry leases, we expect to begin CMI flying of the two aircraft during the fourth quarter of 2015 and first quarter of 2016.
Given the flying levels that we anticipate, we continue to expect that aircraft maintenance expense in 2015 should total approximately $190 million. In addition, depreciation should be approximately $130 million. Core capital expenditures, excluding aircraft and engine purchases, are expected to total approximately $45 million, mainly for spare parts for our fleet. Expenditures for additional aircraft and engines, including our new 747-8F, should total approximately $225 million.
Mr. Flynn concluded: “We are looking forward to a strong finish to a strong year in 2015. We are confident about 2016. We are going into next year with a stronger fleet, stronger balance sheet, and a great portfolio of customers.”
Management will host a conference call to discuss Atlas Air Worldwide’s third-quarter 2015 financial and operating results at 11:00 a.m. Eastern Time on Thursday, November 5, 2015.
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 third-quarter call) or at the following Web address:
http://edge.media-server.com/m/p/p8bomaq9
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 November 12 by dialing (855) 859-2056 (domestic) and (404) 537-3406 (international) and using Access Code 63978999#.
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.
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 services that include ACMI service – in which customers receive an aircraft, crew, maintenance and insurance on a long-term basis; CMI service, for customers that provide their own 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: 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 2015 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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Atlas Air Worldwide Holdings, Inc. (Nasdaq: AAWW) today announced adjusted net income attributable to common stockholders of $29.4 million, or $1.17 per diluted share, for the three months ended June 30, 2015, compared with $15.9 million, or $0.63 per diluted share, for the three months ended June 30, 2014.
On a reported basis, net income attributable to common stockholders in the second quarter of 2015 totaled $28.4 million, or $1.13 per diluted share, compared with $29.6 million, or $1.17 per diluted share, in the year-ago quarter.
Free cash flow of $68.5 million in the second quarter of 2015 compared with $59.2 million in the second quarter of 2014.
“Earnings in the second quarter were driven by contribution and margin strength in ACMI, Charter and Dry Leasing,” said William J. Flynn, President and Chief Executive Officer.
“We are seeing good demand for our aircraft and services as we enter the second half of 2015, as many of our customers are outperforming the overall market. We are working closely with our customers to provide them with the most efficient aircraft and effective operating services for their needs.
“As we gather additional insight into second-half demand, yields and military requirements, we continue to look forward to a strong year and a significant increase in earnings compared with 2014.”
Responding to market demand and customer requirements, we are implementing several previously announced fleet initiatives that are incorporated in our framework outlook for the year: placing an additional 747-400 freighter in ACMI service with DHL Express at the start of the third quarter; acquiring a new 747-8 freighter scheduled to be delivered to us in November; returning an owned, unencumbered 747-400 converted freighter to active service to meet additional Charter demand; securing a short-term operating lease on a second 747-400 converted freighter in Charter with more favorable terms; and expanding our Titan Dry Leasing portfolio by acquiring and converting two 767 passenger aircraft into freighter configuration. The freighters will be leased to DHL on a long-term basis when they are delivered in the fourth quarter.
Mr. Flynn added: “Our approach to business growth remains disciplined, and we are managing our fleet accordingly. In addition, we are utilizing proceeds from our recent convertible note issuance to refinance higher cost debt, which will reduce aircraft ownership costs, increase fleet flexibility and enhance cash flows.
“Led by the strength of our brand and our global market leadership in outsourced aircraft assets and services, we are taking advantage of market opportunities and continuing to focus on longer-term business growth.”
Revenue and direct contribution in ACMI in the second quarter benefited from an increase in block hour volumes, driven by the start-up of four additional 767 CMI aircraft and an improvement in 747 cargo aircraft utilization. Segment contribution also benefited from lower heavy maintenance expense. These were partially offset by a reduction in revenue per block hour, which reflected the impact of payments received from a customer in 2014 in connection with the return of an aircraft as well as an increase in CMI flying in 2015.
In Charter, significantly higher segment revenues reflected an increase in commercial cargo demand and improvements in military passenger and cargo demand. In addition, segment contribution benefited from those higher flying levels and a reduction in heavy maintenance expense. The decrease in revenue per block hour was primarily driven by the impact of lower fuel prices.
In Dry Leasing, revenue and profitability grew as we realized revenue from maintenance payments related to the scheduled return of a 757-200 cargo aircraft in April. This aircraft was subsequently leased to DHL Express on a long-term basis during the quarter.
Reported earnings for the second quarter of 2015 included an effective income tax rate of 31.0%, which reflected our continued reinvestment of the net earnings of certain foreign subsidiaries outside of the U.S.
For the six months ended June 30, 2015, adjusted net income attributable to common stockholders totaled $55.2 million, or $2.20 per diluted share, compared with $27.1 million, or $1.07 per diluted share, for the six months ended June 30, 2014.
On a reported basis, first-half 2015 net income attributable to common stockholders totaled $57.6 million, or $2.29 per diluted share, compared with $37.5 million, or $1.49 per diluted share, in the first half of 2014.
Free cash flow totaled $148.8 million in the first six months of 2015 compared with $96.1 million in the first six months of 2014.
At June 30, 2015, our cash, cash equivalents, restricted cash and short-term investments totaled $554.9 million, compared with $330.7 million at December 31, 2014.
The change in position reflected net cash of $171.1 million provided by operating activities; net cash of $104.4 million provided by financing activities, which included $99.1 million of debt payments; and net cash of $59.4 million used for investing activities.
In June 2015, we issued $224.5 million of convertible senior notes due June 2022 with a cash coupon of 2.25%. We used a portion of the approximately $218 million of net proceeds from the offering in June to fund the $16.6 million net cost of convertible note hedges and warrants related to the notes. These transactions are intended to offset any actual dilution from the conversion of the notes and to effectively increase the overall conversion price from $74.05 to $95.01 per share.
During the third quarter of 2015, we expect to use approximately $113 million of the net proceeds to retire higher-rate Enhanced Equipment Trust Certificates (EETCs) related to five of our 747-400 freighter aircraft. The redemption amount gives effect to the company’s ownership interests in the EETCs being retired, which have an average cash coupon of 8.1%.
We expect to use the remaining net proceeds from the convertible note issuance for working capital and capital expenditures, repayment or refinancing of debt, and general corporate purposes.
We are encouraged by our strong first-half performance. We are seeing good demand for our aircraft and services this quarter and for the remainder of the year. And we continue to anticipate significant growth in adjusted diluted earnings per share in 2015.
On a sequential basis, we expect earnings per share in the third quarter of 2015 to be slightly better than our second-quarter 2015 adjusted earnings, followed by further earnings improvement in the fourth quarter.
Taking our first-half 2015 earnings strength into account, we continue to expect approximately 55% of our earnings to occur in the second half.
In addition, we anticipate that block-hour volumes this year will increase approximately 10% compared with 2014, including the impact of the 747-8 freighter scheduled to be delivered in November and 747-400BCF that we returned to service at the end of the second quarter. More than 70% of our total block hours should be in ACMI and the balance in Charter. Our ACMI outlook reflects expected growth in both 747 freighter operations as well as CMI flying. Our Charter outlook reflects our strong presence in the global charter market and military demand that is holding up well compared with 2014 levels.
In Dry Leasing, our portfolio is expected to include our recent acquisition and subsequent conversion of two 767 passenger aircraft to freighter configuration. Following their conversion, which should be completed during the fourth quarter of this year, the aircraft will be leased to DHL Express.
Given the flying levels that we anticipate, we continue to expect that aircraft maintenance expense in 2015 should total approximately $190 million. In addition, depreciation should be approximately $125 million. We also anticipate an effective income tax rate of approximately 30%. Core capital expenditures, excluding aircraft and engine purchases, are expected to total approximately $45 million, mainly for spare parts for our fleet. Expenditures for additional aircraft and engines should total approximately $240 million.
Management will host a conference call to discuss Atlas Air Worldwide’s second-quarter 2015 financial and operating results at 11:00 a.m. Eastern Time on Thursday, July 30, 2015.
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 second-quarter call) or at the following Web address:
http://edge.media-server.com/m/p/ix8yiry7
For those unable to listen to the live call, a replay will be archived on the above websites following the call. A replay will also be available through August 6 by dialing (855) 859-2056 (U.S. Toll Free) or (404) 537-3406 (from outside the U.S.) and using Access Code 79167828#.
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.
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 services that include ACMI service – in which customers receive an aircraft, crew, maintenance and insurance on a long-term basis; CMI service, for customers that provide their own 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 may 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: 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 2015 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.
* * *
Atlas Air Worldwide Holdings, Inc. (Nasdaq: AAWW) today announced adjusted net income attributable to common stockholders of $25.7 million, or $1.03 per diluted share, for the three months ended March 31, 2015, compared with $11.3 million, or $0.45 per diluted share, for the three months ended March 31, 2014. On a reported basis, net income attributable to common stockholders in the first quarter of 2015 totaled $29.2 million, or $1.17 per diluted share, compared with $7.9 million, or $0.32 per diluted share, in the year-ago quarter.
Free cash flow of $80.2 million in the first quarter compared with $36.9 million in the first quarter of 2014.
“We are off to a very good start in 2015 and look forward to a strong year,” said William J. Flynn, President and Chief Executive Officer. “As a result, we now expect our full-year results to increase significantly compared with 2014.
“Earnings in the first quarter reflected our diverse business mix, the ongoing demand for our industry-leading aircraft and aviation operating services, and the continuing, broad-based improvement of the global airfreight market. Results in the quarter were also driven by the scale and scope of our Charter segment, which was well-positioned to capitalize on demand for airfreight in the transpacific region and other trade lanes as well as better-than-expected military cargo and passenger demand.”
ACMI segment results benefited from an increase in block hours in the first quarter, driven by the start-up of three additional 767 CMI aircraft and improvements in ACMI aircraft utilization. These were offset by a reduction in revenue per block hour, reflecting the impact of higher revenue per block hour in 2014 resulting from customers that flew below their contractual minimums as well as an increase in CMI flying in 2015.
In Charter, significantly higher segment revenues and contribution reflected improvements in commercial and military air cargo and passenger demand, increased aircraft utilization, and a reduction in heavy-maintenance expense. Commercial air cargo demand during the quarter was enhanced by congestion issues at ports on the U.S. west coast.
In Dry Leasing, revenue and profitability grew as we realized revenue from maintenance payments related to the scheduled return of a 737-800 passenger aircraft in February 2015. Reported earnings for the first quarter of 2015 included an effective income tax rate of 19.4%, which reflected an income tax benefit of $4.0 million related to beneficial tax planning regarding the treatment of extraterritorial income from the leasing of certain of our aircraft. Reported results also included a pretax loss of $1.2 million on the disposal of aircraft and engine parts, partly offset by pretax adjustments of $0.6 million to special charges.
At March 31, 2015, our cash, cash equivalents, short-term investments and restricted cash totaled $374.7 million, compared with $330.7 million at December 31, 2014.
The change in position reflected cash provided by operating activities partially offset by cash used for investing and financing activities.
Net cash used for investing activities during the first quarter of 2015 primarily related to capital expenditures and purchase deposits and delivery payments for flight equipment, partially offset by proceeds from disposal of aircraft.
Net cash used for financing activities primarily reflected payments on debt obligations.
We anticipate significant growth in adjusted fully diluted earnings per share in 2015. As the commercial airfreight market has grown, our business initiatives and investments have positioned Atlas to be a prime beneficiary.
We are encouraged by our strong first-quarter performance, and we continue to have a favorable view about the prospects for the overall airfreight environment and the demand for our aircraft and services.
Industry forecasts indicate that global airfreight demand will grow approximately 4% to 5% in 2015, outpacing projected growth in global trade. In addition, we expect that our block-hour volumes this year will increase 5% to 10% compared with 2014, with more than 70% of the total in ACMI and the balance in Charter. At the same time, recent military demand is holding up well compared with 2014 levels.
We are seeing good airfreight demand in the second quarter of 2015. On a sequential basis, we expect earnings per share in the second quarter of 2015 to be slightly better than our first-quarter 2015 adjusted earnings.
We also anticipate sequential increases in our third- and fourth-quarter earnings per share. Visibility into second-half airfreight market demand and yields remains limited at this point, so we will update our expectations about the second half as the year progresses. Taking our current framework and expected first-half 2015 earnings strength into account, we expect approximately 55% of our earnings to occur in the second half.
Given the higher flying levels that we anticipate, we now expect that aircraft maintenance expense in 2015 should total approximately $190 million. In addition, depreciation should be approximately $125 million. We also anticipate an effective income tax rate of approximately 28% to 30%. Core capital expenditures, excluding aircraft and engine purchases, are expected to total approximately $40 to $45 million, mainly for spare parts for our fleet. Mr. Flynn added: “We are confident about the outlook for 2015, and we are well-prepared to leverage our competencies and market leadership this year and beyond.
“Our fleet is modern and efficient. We provide innovative, value-added services. We operate a diversified, resilient business model. Our financial structure is solid. And we are focused on seizing strategic opportunities, executing on initiatives, and shaping a powerful future.”
Management will host a conference call to discuss Atlas Air Worldwide’s first-quarter 2015 financial and operating results at 11:00 a.m. Eastern Time on Thursday, April 30, 2015. 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 first-quarter call) or at the following Web address: http://edge.media-server.com/m/p/d6kjfyqg For those unable to listen to the live call, a replay will be archived on the above websites following the call. A replay will also be available through May 6 by dialing (855) 859-2056 (U.S. Toll Free) or (404) 537-3406 (from outside the U.S.) and using Access Code 23719054#.
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.
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), Southern Air Holdings, Inc. (Southern Air) and Titan Aviation Holdings, Inc. (Titan), and is the majority shareholder of Polar Air Cargo Worldwide, Inc. (Polar). Atlas Air Worldwide’s companies operate the world’s largest fleet of Boeing 747 freighter aircraft and provide customers the broadest array of 747, 777, 767, 757 and 737 aircraft for domestic, regional, and international applications.
Atlas, Southern Air, Titan and Polar offer a range of outsourced aircraft and aviation operating services 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 may be accessed through the company’s home page, www.atlasair.com.
* * *
Atlas Air Worldwide Holdings, Inc. (Nasdaq: AAWW) today announced adjusted net income attributable to common stockholders of $38.8 million, or $1.55 per diluted share, for the three months ended December 31, 2014, compared with $41.8 million, or $1.66 per diluted share, for the three months ended December 31, 2013.
On a reported basis, fourth-quarter 2014 net income attributable to common stockholders totaled $41.6 million, or $1.66 per diluted share, compared with $30.0 million, or $1.19 per diluted share, in the fourth quarter of 2013.
Free cash flow of $97.2 million in the fourth quarter of 2014 compared with $92.0 million in the fourth quarter of 2013.
“2014 ended on a strong note, continuing the improvement we saw throughout the year, and 2015 is starting out well,” said William J. Flynn, President and Chief Executive Officer. “After the first significant peak-season in several years, airfreight activity in the first quarter so far continues to reflect the broad-based pickup in demand that began in 2014.
“Both operationally and financially, our fourth-quarter and full-year performance stemmed from the leadership and strength of our ACMI and Charter businesses, the growth of our Dry Leasing platform, and ongoing efforts to drive efficiency and productivity through our continuous improvement initiatives. In addition, average utilization of our operating fleet rose during the year as we capitalized on the improvement in market demand with our modern, efficient aircraft and innovative services.
“We performed a substantial amount of conditions-based heavy maintenance activity during the fourth quarter, primarily for engine overhauls on our 747-400 fleet. This positions us to continue to take advantage of market growth and business opportunities ahead.”
Profitability in our ACMI business during the fourth quarter reflected an increase in aircraft utilization driven by market demand. This was offset by an increase in heavy maintenance expense on our 747-400 aircraft and engines.
Improved Charter contribution during the quarter reflected an increase in cargo aircraft block-hour rates and utilization, driven by market demand and our decision to reduce cargo capacity at the end of 2013, and an increase in passenger block-hour volumes. These were partially offset by increases in heavy maintenance expense as well as crewmember travel and ground handling expenses from flying to higher cost locations.
In Dry Leasing, revenue and profitability grew following the acquisition of three 777 freighter aircraft in the first quarter of 2014, which raised our 777 fleet count to six. Each of these aircraft is leased to a customer on a long-term basis.
Reported results in the fourth-quarter included an income tax rate benefit of 7.0%, primarily due to an income tax benefit of $10.7 million related to beneficial tax planning regarding the treatment of extraterritorial income from the offshore leasing of certain of our aircraft. Reported results also included a pretax special charge of $5.5 million, primarily related to an aircraft held for sale.
Beginning with the fourth quarter of 2014, we have combined our commercial and military charter businesses in a single Charter segment as we now assess operating results at that level. Our decision recognizes the smaller size of our military business compared with the past and the increased interchangeability of our Charter aircraft between commercial and military customers.
For the twelve months ended December 31, 2014, adjusted net income attributable to common stockholders totaled $93.5 million, or $3.72 per diluted share, compared with $96.8 million, or $3.78 per diluted share, for the twelve months ended December 31, 2013.
On a reported basis, full-year 2014 net income attributable to common stockholders totaled $106.8 million, or $4.25 per diluted share, compared with $93.8 million, or $3.66 per diluted share, in 2013.
Reported earnings in 2014 included an effective income tax rate benefit of 14.2%, primarily due to an income tax benefit of $34.8 million related to beneficial tax planning regarding the tax treatment of extraterritorial income from the offshore leasing of certain of our aircraft. Our effective income tax rate also reflected the ongoing beneficial impact of lower taxes for certain foreign subsidiaries in our Dry Leasing business as well as the favorable change in our deferred foreign tax rates.
Free cash flow totaled $247.8 million in 2014 compared with $270.2 million in 2013.
At December 31, 2014, our cash, cash equivalents, short-term investments and restricted cash totaled $330.7 million, compared with $339.2 million at December 31, 2013.
The change in position reflected cash provided by operating and financing activities offset by cash used for investing activities.
Net cash used for investing activities during 2014 primarily related to the purchase of three 777 freighters for our Dry Leasing business.
Net cash provided by financing activities primarily reflected proceeds from the issuance of debt in connection with the acquisitions of these aircraft. Those proceeds were partially offset by payments on debt obligations and debt issuance costs.
We begin 2015 with a favorable view about the prospects for the overall airfreight environment and the demand for our aircraft and services. As a result, we look for moderate growth in adjusted fully diluted earnings per share this year.
Our current outlook reflects two primary considerations.
First, industry forecasts indicate that global airfreight demand will grow approximately 4% to 5% in 2015, outpacing projected growth in global trade. Similar to 2014, achieving growth at this level will require a continuation of positive global economic activity driven by healthy consumer and business confidence.
Second, while our operating results are expected to benefit from a reduction in maintenance expense in 2015 compared with 2014, we face a continued contraction in military demand as U.S. military activities overseas are scaled down.
We are seeing good airfreight demand in the first quarter of 2015 leading up to the start of the Lunar New Year holidays in Asia on February 19. We expect earnings per share in the first quarter, which is usually the lowest volume-generating and highest maintenance expense quarter of the year, to be in line with or better than our first-quarter 2014 adjusted EPS of $0.45.
At this point in the year, there is limited visibility into second-half airfreight market demand. Typically, the majority of our earnings are generated in the second half, and we will update our expectations as the year progresses. Should commercial airfreight continue to grow as anticipated in 2015, our business initiatives and investments have positioned Atlas to be one of the prime beneficiaries.
For the full year, we expect total block hours to be several percentage points higher than 2014, with approximately 75% in ACMI and the balance in Charter. ACMI block hours are anticipated to reflect additional 747-8 and 747-400 flying as well as an increase in CMI operations, driven primarily by the addition of four customer-owned 767 freighters to our fleet in the first quarter.
In March, we will place an additional 747-8 freighter into ACMI service for the benefit of DHL Express. This aircraft will initially replace an existing 747-400 operating for DHL today. The placement reflects the continuing growth of DHL’s transpacific operations. To effect this, one 747-8 freighter currently in ACMI service for Panalpina will transition promptly to DHL.
We will continue to operate a 747-8 freighter for Panalpina between Europe, the United States and points in Mexico on an ACMI basis. We have also entered into a long-term 747-400 charter agreement with Panalpina as it expands its unique network and extends its customer service. This new freighter service for Panalpina commences in March.
Results in our Dry Leasing segment will continue to be driven largely by the six 777 freighters that we acquired in 2013 and 2014, each with a long-term customer lease in place.
Aircraft maintenance expense in 2015 should total approximately $175 million, and depreciation is expected to total approximately $125 million. In addition, we anticipate an effective book income tax rate of approximately 28%. Core capital expenditures, excluding aircraft and engine purchases, are expected to total between $30 to $40 million, mainly for spare parts for our fleet.
Mr. Flynn added: “In addition to expected earnings growth this year, we continue to focus on the longer-term growth of our business. With a resilient business model, strong customer relationships and a superior fleet, we are well-positioned to capitalize on market improvements, to generate substantial earnings and cash flow, and to continue to enhance shareholder value.”
Management will host a conference call to discuss Atlas Air Worldwide’s fourth-quarter and full-year 2014 financial and operating results at 11:00 a.m. Eastern Time on Thursday, February 12, 2015.
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/dunzmhep
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 18 by dialing (855) 859-2056 (domestic) and (404) 537-3406 (international) and using Access Code 74290072#.
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.
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, for customers that provide their own aircraft; express network and scheduled air 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: 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 2015 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.
Atlas Air Worldwide Holdings, Inc. (Nasdaq: AAWW), a leading global provider of outsourced aircraft and aviation operating services, today announced adjusted net income attributable to common stockholders of $27.4 million, or $1.09 per diluted share, for the three months ended September 30, 2014, compared with $28.6 million, or $1.13 per diluted share, for the three months ended September 30, 2013.
On a reported basis, net income attributable to common stockholders in the third quarter of 2014 totaled $27.6 million, or $1.10 per diluted share, compared with $23.7 million, or $0.94 per diluted share, in the year-ago quarter.
“Both our third-quarter results and our recently announced placements of three additional ACMI aircraft and four more CMI aircraft illustrate the strength of our business and the demand for our industry-leading assets and services,” said William J. Flynn, President and Chief Executive Officer.
“With airfreight volumes continuing to improve and market yields beginning to pick up, we expect our diversified mix and new placements to drive sequential EPS growth in the fourth quarter. We anticipate adjusted fully diluted earnings per share of approximately $1.33 to $1.43 in the fourth quarter, and we are raising our full-year 2014 adjusted earnings outlook to approximately $3.50 to $3.60 per diluted share.”
Mr. Flynn added: “ACMI earnings in the third quarter were complemented by a profit in Commercial Charter, growth in our Dry Leasing business, and an improved contribution by our military charter operations. Earnings in Commercial Charter were driven by a sharp increase in block hours flown, reflecting the broad-based uptick in airfreight demand. In Dry Leasing, our results benefited from our addition of 777 freighters that generate predictable, long-term revenue and earnings streams. And in AMC Charter, we benefited from an enhanced share of available military flying requirements.
“Reflecting our commitment to shareholder value, we acquired 1.8% of our outstanding common stock through our share repurchase program during the third quarter. Our capital allocation strategy is dedicated to creating, enhancing and returning value to our shareholders, both through business growth and returns of capital.”
We recently placed three incremental Boeing 747 freighters, a 747-8F and two 747-400Fs, into ACMI service for the benefit of DHL Express, the world’s leading international express shipping company, and Etihad Cargo, the fast-growing freight division of Etihad Airways. The placements increase the number of our aircraft in ACMI to 22 from 19.
In addition, we recently announced the expansion of our 767 CMI service in North America for DHL Express. This expansion covers four incremental 767-200 freighter aircraft owned by DHL that we expect to begin flying during the first quarter of 2015.
Adjusted earnings in the third quarter of 2014 excluded a tax adjustment of $0.1 million, or $0.01 per diluted share, related to the company’s Global Supply Systems Limited subsidiary. Adjusted earnings in the third quarter of 2013 excluded an after-tax loss of $4.5 million, or $0.18 per diluted share, on the early extinguishment of debt, and a loss of $0.3 million, or $0.01 per diluted share, on the disposal of aircraft.
Profitability in our ACMI business during the third quarter reflected an increase in 747-8F revenue and an increase in CMI flying, offset by an increase in maintenance expense on our -8F aircraft and lower 747-400 flying by certain ACMI customers.
In Dry Leasing, revenue and profitability grew following the addition of three 777F aircraft in January 2014 and two in July 2013, which raised our 777F fleet count to six. Each of these aircraft are leased to customers on a long-term basis.
Results in AMC Charter benefited from an increase in block hours and aircraft utilization, partially offset by a decrease in revenue per block hour due to a reduction of the average “pegged” fuel price set by the AMC. Stronger than expected demand for cargo flying and incremental passenger flying as a result of former competitors exiting the AMC Charter market drove contribution growth in the third quarter.
Profitability in Commercial Charter primarily reflected an increase in volumes and improvement in aircraft utilization compared with the third quarter of 2013. Charter operations during the quarter benefited from the broad-based uptick in demand, partially offset by additional travel and ground handling expenses from flying to high-cost locations.
Reported earnings for the period included an effective income tax rate of 29.1%, reflecting the ongoing beneficial impact of lower taxes for certain foreign subsidiaries in our Dry Leasing business.
For the nine months ended September 30, 2014, adjusted net income attributable to common stockholders totaled $54.7 million, or $2.17 per diluted share, compared with $54.9 million, or $2.13 per diluted share, for the nine months ended September 30, 2013.
On a reported basis, nine-month 2014 net income attributable to common stockholders totaled $65.1 million, or $2.59 per diluted share, compared with $63.9 million, or $2.48 per diluted share, in the first nine months of 2013.
At September 30, 2014, our cash, cash equivalents, short-term investments and restricted cash totaled $287.7 million, compared with $339.2 million at December 31, 2013.
The change in position reflected cash provided by operating and financing activities offset by cash used for investing activities.
Net cash used for investing activities during the first nine months of 2014 primarily related to the purchase of three 777F aircraft for our Dry Leasing business.
Net cash provided by financing activities primarily reflected proceeds from the issuance of debt in connection with the acquisitions of these aircraft. Those proceeds were partially offset by payments on debt obligations and debt issuance costs.
During the third quarter, we repurchased 458,937 shares of our common stock for $15.0 million, or 1.8% of our outstanding common stock at June 30, 2014.
Future repurchases under our remaining $45.0 million authority may be made at our discretion, and the actual timing, form and amount will depend on company and market conditions.
We are encouraged by our performance in the first nine months of 2014 and the positive direction of market trends so far this year.
Airfreight volumes continue to improve, and recent industry reports suggest that airfreight demand will grow by several percentage points in 2014 – outpacing supply and driving the first real growth since 2010. We are seeing a general increase in demand across all regions, with the greatest growth in the transpacific market. An increase in online shopping and several new high-tech product launches during peak season also continue to favor airfreight.
As a result, we anticipate adjusted and reported fully diluted earnings per share of approximately $1.33 to $1.43 in the fourth quarter. We are also raising our full-year 2014 adjusted earnings outlook to approximately $3.50 to $3.60 per diluted share, and our reported earnings outlook to approximately $3.92 to $4.02.
For the full year, we expect to fly approximately 160,000 block hours, with more than 70% in ACMI, approximately 10% in AMC Charter, and the balance in Commercial Charter. Our Dry Leasing segment should show dramatic growth compared with 2013. While our share of military flying, mainly in passenger service, has increased due to our ability to capitalize on additional flying opportunities and a reduction in the number of carriers serving the market, we expect an overall decline in military demand in the fourth quarter of 2014 compared with 2013.
We also expect aircraft maintenance expense to total approximately $190 to $195 million in 2014, primarily due to performing several conditions-based engine overhauls for our 747-400 fleet during the fourth quarter. Depreciation this year is anticipated to total approximately $120 million, and core capital expenditures are expected to total about $30 to $35 million, mainly for spare parts for our expanded fleet.
We remain confident in the resilience of our business model, as well as our ability to adapt to the market and to leverage the scale and efficiencies in our operations. The business initiatives we have undertaken and the investments we have made have enabled the company to deliver meaningful earnings in any environment.
With a resilient business model, a superior fleet, strong customer relationships, and outstanding employees, we are well-positioned to capitalize on market improvements and to continue to focus on the long-term growth of our business.
Management will host a conference call to discuss Atlas Air Worldwide’s third-quarter 2014 financial and operating results at 11:00 a.m. Eastern Time on Thursday, November 6, 2014.
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 third-quarter call) or at the following Web address:
http://www.media-server.com/m/p/mfukjxmu
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 November 12 by dialing (855) 859-2056 (domestic) and (404) 537-3406 (international) and using Access Code 24791883#.
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.
Atlas Air Worldwide 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 services that include ACMI service – in which customers receive an aircraft, crew, maintenance and insurance on a long-term basis; CMI service, for customers that provide their own aircraft; express network and scheduled air cargo service; military cargo and passenger charters; commercial 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: 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 2014 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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Atlas Air Worldwide Holdings, Inc. (Nasdaq: AAWW), a leading global provider of outsourced aircraft and aviation operating services, today announced adjusted net income attributable to common stockholders of $15.9 million, or $0.63 per diluted share, for the three months ended June 30, 2014, compared with $20.4 million, or $0.79 per diluted share, for the three months ended June 30, 2013.
On a reported basis, net income attributable to common stockholders in the second quarter of 2014 totaled $29.6 million, or $1.17 per diluted share, compared with $20.1 million, or $0.78 per diluted share, in the year-ago quarter.
“We are off to a good start in 2014. Airfreight demand is improving, and we are encouraged about our full-year outlook,” said William J. Flynn, President and Chief Executive Officer. “As we continue to gather additional insight into second-half yields, demand and military requirements, we are maintaining our full-year earnings framework.”
Mr. Flynn added: “Atlas is an entrepreneurial company. Our second-quarter results illustrate the positive contributions being generated by the investments we’ve made and the initiatives we’ve undertaken. In the face of an uncertain airfreight market and an anticipated decline in military cargo demand, we have diversified our business mix and are driving business resilience.
“Results within our ACMI segment are benefiting from modern 747-8 freighters as well as an increase in flying for our CMI customers. In Dry Leasing, the investments we’ve made since early 2013 in attractive 777 freighters on long-term leases with strong customers are driving a significant increase in contribution from highly predictable revenue and earnings streams.
“In addition, the expansion of our 767 platform and our growth into military and commercial passenger charter operations are providing added strength, complementing the improvement in airfreight demand.
“Led by the strength of our brand, our global market leadership in outsourced aircraft assets and services, and our ability to work closely with our customers as they enhance their route networks and grow their businesses, we are well-positioned to take advantage of market opportunities and improvement – and to continue our focus on longer-term business growth.”
Adjusted earnings in the second quarter of 2014 exclude an income tax benefit of $24.0 million, or $0.95 per diluted share, due to beneficial tax planning related to the tax treatment of extraterritorial income. This was partly offset by a noncash loss of $9.4 million after tax, or $0.37 per diluted share, resulting from the trade-in of used spare engines for new engines under the company’s engine-acquisition program, as well as additional charges totaling $1.0 million after tax, or $0.04 per diluted share, which were primarily related to the company’s U.K. affiliate, Global Supply Systems Limited.
Adjusted earnings in the second quarter of 2013 exclude an after-tax loss of $0.6 million, or $0.02 per diluted share, on the early extinguishment of debt, partly offset by an after-tax gain of $0.3 million, or $0.01 per diluted share, on the disposal of aircraft.
Profitability in our ACMI business during the second quarter reflected an increase in 747-8F revenue and an increase in CMI flying, offset by higher maintenance expense for aircraft operating in this segment.
ACMI revenues benefited from an increase in our average rate per block hour driven by our 747-8Fs, but were impacted by a decline in block-hour volumes related to the return of three 8Fs from British Airways in April and early May. This decline was partially offset by the placement of two of the 8Fs with DHL Express in May, the start-up of ACMI 8F flying for BST Logistics in February 2014 and Etihad in May 2013, as well as the start-up of ACMI 747-400 flying for Astral Aviation in September 2013. Block-hour volumes during the second quarter also reflected an increase in CMI Dreamlifter flying for Boeing and the initiation of CMI 767-200 passenger aircraft service for MLW Air during the third quarter of 2013.
In Dry Leasing, revenue and profitability grew following the addition of three 777F aircraft in January 2014 and two in July 2013, which raised our 777F fleet count to six. Each of these aircraft are leased to customers on a long-term basis.
In AMC Charter, results benefited from an increase in the volume of passenger flying on higher-yielding 747-400 aircraft, partially offset by a decrease in demand for cargo flying. Segment results in Commercial Charter reflected a decrease in market rates and increases in maintenance and crewmember travel expense, partially offset by an increase in block-hour volumes.
Reported earnings for the period reflected an effective income tax rate benefit of 461.0%, driven by tax-planning efforts regarding a federal income tax benefit related to the treatment of extraterritorial income from the offshore leasing of certain of our aircraft.
For the six months ended June 30, 2014, adjusted net income attributable to common stockholders totaled $27.3 million, or $1.08 per diluted share, compared with $26.3 million, or $1.01 per diluted share, for the six months ended June 30, 2013.
On a reported basis, first-half 2014 net income attributable to common stockholders totaled $37.5 million, or $1.49 per diluted share, compared with $40.1 million, or $1.54 per diluted share, in the first half of 2013.
At June 30, 2014, our cash, cash equivalents, short-term investments and restricted cash totaled $299.2 million, compared with $339.2 million at December 31, 2013.
The change in position reflected cash provided by operating and financing activities offset by cash used for investing activities.
Net cash used for investing activities during the first half of 2014 primarily related to the purchase of three 777F aircraft for our Dry Leasing business.
Net cash provided by financing activities primarily reflected proceeds from the issuance of debt in connection with the acquisitions of these aircraft. Those proceeds were partially offset by payments on debt obligations and debt issuance costs.
We are encouraged by our performance in the first half of 2014 and the positive direction of market trends so far this year.
Airfreight volumes continue to improve, and recent forecasts suggest that airfreight demand may grow by several percentage points in 2014 – the first real growth after three essentially flat years. Airfreight yields continue to lag behind, however, and there is still limited visibility into peak-season yields, demand and second-half military requirements. As a result, we are maintaining our earnings outlook for the full year.
On a sequential basis, per-share earnings in the third quarter of this year should improve over our adjusted second-quarter results by an increment similar to the increase between our first- and second-quarter adjusted earnings.
For the full year, we expect total block hours to be comparable to 2013, with more than 70% in ACMI, approximately 10% in AMC Charter, and the balance in Commercial Charter. Our Dry Leasing segment should show dramatic growth compared with 2013. While our share of military flying, mainly in passenger service, has increased due to a reduction in the number of carriers serving the market and our ability to capitalize on additional flying opportunities, we continue to expect an overall decline in military demand, primarily in cargo, compared with 2013.
We also expect aircraft maintenance expense to total approximately $180 million in 2014, with depreciation of approximately $120 to $125 million. Core capital expenditures this year are expected to total approximately $45 to $50 million, mainly for spare parts for our expanded fleet.
We remain confident in the resilience of our business model, as well as our ability to adapt to the market and to leverage the scale and efficiencies in our operations. The business initiatives we have undertaken and the investments we have made have enabled the company to deliver meaningful earnings in any environment.
Should 2014 be the inflection point when growth returns to commercial airfreight and yields improve, our business initiatives and the investments we have made have positioned Atlas to be one of the prime beneficiaries.
Management will host a conference call to discuss Atlas Air Worldwide’s second-quarter 2014 financial and operating results at 11:00 a.m. Eastern Time on Thursday, July 31, 2014.
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 second-quarter call) or at the following Web address:
http://www.media-server.com/m/p/a4o8ndjm
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 August 6 by dialing (855) 859-2056 (domestic) and (404) 537-3406 (international) and using Access Code 70670671#.
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.
Atlas Air Worldwide is the parent company of Atlas Air, Inc. (Atlas) and Titan Aviation Leasing (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 services that include ACMI service – in which customers receive an aircraft, crew, maintenance and insurance on a long-term basis; CMI service, for customers that provide their own aircraft; express network and scheduled air cargo service; military cargo and passenger charters; commercial 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: 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 2014 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.
* * *
Atlas Air Worldwide Holdings, Inc. (Nasdaq: AAWW), a leading global provider of outsourced aircraft and aviation operating services, today announced adjusted net income attributable to common stockholders of $11.3 million, or $0.45 per diluted share, for the three months ended March 31, 2014, compared with $5.9 million, or $0.22 per diluted share, for the three months ended March 31, 2013.
On a reported basis, net income attributable to common stockholders in the first quarter of 2014 totaled $7.9 million, or $0.32 per diluted share, compared with $20.1 million, or $0.76 per diluted share, in the year-ago quarter.
Adjusted earnings in the first quarter of 2014 exclude a special charge of $3.4 million after tax, or $0.13 per diluted share, mainly related to the company’s U.K. affiliate, Global Supply Systems Limited. Adjusted earnings in the first quarter of 2013 exclude an income tax benefit of $14.2 million, or $0.54 per diluted share, related to the tax treatment of extraterritorial income.
“2014 is off to a good start, led by the initiatives we’ve undertaken to diversify our business mix, expand our aircraft and service offerings, develop new customers and position Atlas to take advantage of market opportunities,” said William J. Flynn, President and Chief Executive Officer.
“Within our ACMI segment, results benefited from an increase in the number of new 747-8 freighters in operation as well as an increase in flying for our CMI customers. In Dry Leasing, the investments we’ve made since early 2013 in attractive, modern 777 freighters on long-term leases with strong customers drove a significant increase in contribution from sources with highly predictable revenue and earnings streams.
“In addition, the expansion of our 767 aircraft service solutions and our growth into passenger charter operations supported the improvement in our results despite a seasonally soft contribution in Commercial Charter and the continued reduction in AMC Charter cargo volumes.
“Reflecting our global market leadership in outsourced aircraft assets and services, we have developed several new strategic customer relationships since the first quarter of 2013 that have enhanced the resilience of our business model.
“In ACMI, these include Astral Aviation, BST Logistics and Chapman Freeborn. We’ve also expanded with Etihad Airways, introduced new 767 cargo CMI service for DHL Express, and added VIP 767 passenger CMI service for MLW Air. And in Dry Leasing, we now provide 777Fs to Aerologic, Emirates Airlines and TNT Transport International.”
Separately, the company today announced the placement of two 747-8 freighters in ACMI service for DHL Express. The state-of-the-art aircraft will provide additional revenue cargo volume for DHL’s transpacific network growth. They replace two 747-400 freighters currently in service for DHL that will enter immediate revenue service for Atlas.
Increased revenues and profitability in our ACMI business during the first quarter were driven by our new 747-8Fs, with an average of 1.7 additional -8F aircraft in service compared with the first quarter of 2013; higher rates per block hour for our -8Fs; and the continued ramp up and expansion of our asset-light CMI service. These results were partly offset by the redeployment of 747-400 aircraft into Commercial Charter and an increase in maintenance expense.
In Dry Leasing, revenue and profitability grew following the acquisition of six 777F aircraft since March 2013. Each of our aircraft was acquired with a long-term customer lease already in place.
In AMC Charter, lower cargo demand led to a decline in segment revenues and contribution. Segment results in Commercial Charter reflected the seasonal nature of this business, the deployment of additional aircraft into the segment and an increase in flying to more expensive locations, partially offset by an increase in block-hour volumes.
Reported earnings for the first quarter of 2014 included an effective income tax rate of 38.7%, reflecting losses associated with Global Supply Systems Limited for which we have recognized a limited tax benefit. Reported earnings for the first quarter of 2013 reflected an effective income tax rate benefit of 97.4%, driven by a federal income tax benefit related to the treatment of extraterritorial income from the offshore leasing of certain of our aircraft.
At March 31, 2014, our cash, cash equivalents, short-term investments and restricted cash totaled $301.8 million, compared with $339.2 million at December 31, 2013.
The change in position reflected cash provided by operating and financing activities offset by cash used for investing activities.
Net cash used for investing activities during the first quarter of 2014 primarily related to the purchase of three 777F aircraft for our Dry Leasing business.
Net cash provided by financing activities primarily reflected proceeds from the issuance of debt in connection with the acquisitions of these aircraft. Those proceeds were partially offset by payments on debt obligations and debt issuance costs.
We are encouraged by our first-quarter performance and the positive direction of market trends so far in 2014, but we are maintaining our earnings outlook for the full year.
Airfreight volumes are improving, and recent forecasts suggest that airfreight demand will grow by a few percentage points in 2014 – the first real growth after three essentially flat years. Forecast airfreight yields continue to lag behind, however.
With still limited visibility into second-half airfreight market demand and yields, we continue to expect results in 2014 to approximate 2013, excluding an expected decline in our AMC Charter operations as we have previously discussed.
On a per share basis, earnings in the second quarter of this year should be similar to or slightly higher than our adjusted first-quarter earnings. As the majority of our earnings are typically generated in the second half of the year, we expect to update our expectations as the year progresses.
For the full year, we expect total block hours to be a few percentage points lower than 2013 block hours, with more than 70% in ACMI, less than 10% in AMC Charter, and the balance in Commercial Charter. Our Dry Leasing segment should show dramatic growth, with a contribution run rate in subsequent quarters that should be similar to the first quarter of 2014. Aircraft maintenance expense in 2014 should total approximately $175 to $180 million, and depreciation should be approximately $115 to $120 million. In addition, we anticipate an effective income tax rate of approximately 30%.
We remain confident in the resilience of our business model and our ability to leverage the scale and efficiencies in our operations. The business initiatives we have undertaken and the investments we have made have transformed the company to deliver meaningful earnings in any environment.
Should 2014 be the inflection point when growth returns to commercial airfreight and yields improve, our business initiatives and the investments we have made have positioned Atlas to be one of the prime beneficiaries.
Management will host a conference call to discuss Atlas Air Worldwide’s first-quarter 2014 financial and operating results at 11:00 a.m. Eastern Time on Thursday, May 1, 2014.
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 first-quarter call) or at the following Web address:
http://www.media-server.com/m/p/uf73d4zh
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 May 8 by dialing (855) 859-2056 (domestic) and (404) 537-3406 (international) and using Access Code 30376008#.
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.
Atlas Air Worldwide is the parent company of Atlas Air, Inc. (Atlas) and Titan Aviation Leasing (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 services that include ACMI service – in which customers receive an aircraft, crew, maintenance and insurance on a long-term basis; CMI service, for customers that provide their own aircraft; express network and scheduled air cargo service; military cargo and passenger charters; commercial 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: 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 2014 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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Atlas Air Worldwide Holdings, Inc. (Nasdaq: AAWW), a leading global provider of outsourced aircraft and aviation operating solutions, today announced adjusted net income attributable to common stockholders of $41.8 million, or $1.66 per diluted share, for the three months ended December 31, 2013, compared with $48.7 million, or $1.83 per diluted share, for the three months ended December 31, 2012.
On a reported basis, fourth-quarter 2013 net income attributable to common stockholders totaled $30.0 million, or $1.19 per diluted share, compared with $52.4 million, or $1.97 per diluted share, in the fourth quarter of 2012.
Free cash flow of $92.3 million in the fourth quarter of 2013 compared with $53.3 million in the fourth quarter of 2012.
“Earnings in the fourth quarter of 2013 were led by our ACMI operations, a strong contribution by our Commercial Charter segment, which reported a profit for the full year, and growth in our Dry Leasing business,” said William J. Flynn, President and Chief Executive Officer. “Results were also affected by a substantial reduction in AMC Charter volumes and segment contribution, reflecting lower demand levels than previously forecast by the military.
“Earnings in Commercial Charter were driven by a sharp increase in block hours flown by our aircraft as global-market peak-season volumes picked up in late October through December.
“Operating results during the quarter were supported by the investments we’ve made to strengthen and diversify our business mix, including our 747-8 freighters in ACMI; the addition of 777 freighters with predictable, long-term revenue and earnings streams in Dry Leasing; our expanding 767 service; growing CMI operations within ACMI; VIP and other passenger charters; and ongoing continuous improvement initiatives.”
Reported results for the period reflected our decision to reduce our operating fleet by two aircraft. In December, we permanently parked two 747-400BCFs that we had leased following delays in the delivery of our 747-8 freighters. As a consequence, our reported earnings included a special charge related to the termination of the operating leases for these BCFs.
Increased revenues, higher volumes and profitability in our ACMI business during the fourth quarter were driven by our new 747-8Fs, with an average of 1.7 additional -8F aircraft in service compared with the fourth quarter of 2012; higher rates per block hour for our -8Fs; and the continued ramp up and expansion of CMI service. ACMI customers also continued to fly above minimum contract levels. These results were offset by a lower average utilization for all aircraft in the segment and an increase in maintenance expense due to the timing of required initial airframe checks on our first three -8F aircraft.
In Dry Leasing, revenue and profitability grew following the acquisition of one 777-200LRF aircraft in March 2013 and two 777-200LRF aircraft in July 2013. Each aircraft was acquired with a long-term customer lease already in place.
In AMC Charter, a reduction in cargo and passenger block hours, as well as a reduced number of one-way AMC missions and a change in the proportion of those missions from outbound U.S. to inbound U.S., led to a significant decline in segment contribution. Lower average cargo and passenger revenue per block hour during the period stemmed from a reduction in the average pegged fuel price set by the U.S. military.
Profitability in Commercial Charter primarily reflected an increase in volumes and an improvement in aircraft utilization compared with the fourth quarter of 2012. Charter operations during the quarter benefited from the redeployment of 747-400 and 747-8F aircraft during ACMI marketing periods, higher rates on 747-8F aircraft, and passenger charters for sporting events, concert tours, VIP and other private charters. Market airfreight yields improved on a seasonal basis during the period, but remained under pressure overall.
Reported fourth-quarter results included a special charge of $18.6 million, primarily related to a lease termination charge for the two 747-400BCFs parked in December.
Reported earnings for the fourth quarter of 2013 also included an effective income tax rate of 30.7%, reflecting the ongoing beneficial impact of lower taxes for certain foreign subsidiaries in our Dry Leasing business.
For the twelve months ended December 31, 2013, adjusted net income attributable to common stockholders totaled $96.8 million, or $3.78 per diluted share, compared with $127.0 million, or $4.78 per diluted share, for the twelve months ended December 31, 2012.
On a reported basis, full-year 2013 net income attributable to common stockholders totaled $93.8 million, or $3.66 per diluted share, compared with $129.9 million, or $4.89 per diluted share, in 2012.
Reported earnings in 2013 included an effective income tax rate of 20.2%, mostly due to the tax treatment of extraterritorial income from the offshore leasing of certain of our aircraft. In addition, the effective rate reflected the net impact of the resolution of certain income tax liabilities.
Free cash flow in 2013 increased to $273.1 million from $208.5 million in 2012.
At December 31, 2013, our cash, cash equivalents, short-term investments and restricted cash totaled $339.2 million, compared with $419.9 million at December 31, 2012.
The change in position reflected cash provided by operating and financing activities offset by cash used for investing activities.
Net cash used for investing activities during 2013 primarily related to the purchase of two 747-8F aircraft as well as three 777-200LRF aircraft for our Dry Leasing business.
Net cash provided by financing activities primarily reflected proceeds from the issuance of debt in connection with the acquisitions of these aircraft. Those proceeds were partially offset by payments on debt obligations and debt issuance costs.
During the year ended December 31, 2013, we repurchased a total of 1,723,577 shares, or 6.5%, of our outstanding common stock at December 31, 2012.
Future repurchases under our remaining $60 million authority may be made at our discretion, with the actual timing, form and amount dependent on company and market conditions.
We enter 2014 confident about the resilience of our business model and our ability to leverage the scale and efficiencies in our operations. Reflecting the business initiatives we have undertaken and the investments we have made, we have transformed the company to deliver meaningful earnings in any environment.
Our current outlook reflects two primary considerations.
One, as U.S. military activities overseas are scaled down, the military’s demand for outsourced airlift, particularly cargo airfreight, also declines. Our most recent indication is that the decline will be steeper and faster than previously forecasted by the military. For 2014, we estimate that this decline will reduce earnings by approximately $0.70 per share from 2013 levels.
Two, global airfreight volumes have been essentially flat for the last three years. Atlas has remained healthy and profitable throughout this period by capitalizing on strategic initiatives to strengthen and diversify our business mix; generate operating efficiencies and continuous improvement gains; and enhance our portfolio of assets and services.
Should 2014 be the inflection point when growth returns to commercial airfreight, our business initiatives and the investments we have made have positioned Atlas to be one of the prime beneficiaries. If 2014 remains flat, we expect results to approximate 2013, excluding the $0.70 per share decline in AMC Charter.
At this point of the year, there is limited visibility into second-half airfreight market demand. We expect to be profitable in the first quarter, which is usually the lowest volume-generating and highest maintenance expense quarter of the year. Typically, the majority of our earnings are generated in the second half, and we will update our expectations as the year progresses.
For the full year, we expect total block hours to be several percentage points lower than 2013 block hours, with more than 70% in ACMI, less than 10% in AMC Charter, and the balance in Commercial Charter. Our Dry Leasing segment should show dramatic growth. Depreciation and heavy maintenance expense should each increase by about $10 million over 2013. As always, line maintenance will depend on block hours operated. In addition, we anticipate an effective book income tax rate of approximately 30%.
Mr. Flynn added: “As we have noted previously, airfreight remains a long-term growth industry despite current market challenges. We have transformed our business and expect to be profitable in any environment. We are well-positioned to capitalize on market improvements and to continue to focus on the long-term growth of our business. With a resilient business model, substantial operating leverage, strong customer relationships and a superior fleet, we continue to strengthen our competitive position and generate substantial free cash flow, which will enhance stockholder value.”
Management will host a conference call to discuss Atlas Air Worldwide’s fourth-quarter and full-year 2013 financial and operating results at 11:00 a.m. Eastern Time on Wednesday, February 12, 2014.
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://www.media-server.com/m/p/kkdeegog
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 19 by dialing (855) 859-2056 (domestic) and (404) 537-3406 (international) and using Access Code 50793956#.
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.
Atlas Air Worldwide is the parent company of Atlas Air, Inc. (Atlas) and Titan Aviation Leasing (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, for customers that provide their own aircraft; express network and scheduled air cargo service; military cargo and passenger charters; commercial 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: 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 2014 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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Conference Call/Webcast – 11:00 A.M. Eastern
Atlas Air Worldwide Holdings, Inc. (Nasdaq: AAWW), a leading global provider of outsourced aircraft and aviation operating solutions, will release results for the fourth quarter and full year ended December 31, 2013, prior to the opening of stock market trading on Wednesday, February 12.
William J. Flynn, Atlas Air Worldwide’s President and Chief Executive Officer, and Spencer Schwartz, Executive Vice President and Chief Financial Officer, will host a conference call to discuss the company’s results at 11:00 a.m. Eastern Time on February 12.
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://www.media-server.com/m/p/kkdeegog
For those unable to listen to the live call, a replay will be archived on the above websites following the call. A replay will also be available through February 19 by dialing (855) 859-2056 (U.S. Toll Free) or (404) 537-3406 (from outside the U.S.) and using Access Code 50793956#.
Slides complementing the remarks by Mr. Flynn and Mr. Schwartz will be available for downloading from Atlas Air Worldwide’s website prior to the call.
Atlas Air Worldwide is the parent company of Atlas Air, Inc. (Atlas) and Titan Aviation Leasing (Titan), and is the majority shareholder of Polar Air Cargo Worldwide, Inc. (Polar). Atlas Air Worldwide also maintains a 49% interest in Global Supply Systems Limited (GSS). 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, for customers that provide their own aircraft; express network and scheduled air cargo service; military cargo and passenger charters; commercial cargo and passenger charters; and dry leasing of aircraft and engines.
Atlas Air Worldwide’s press releases, SEC filings and other information may be accessed through the company’s home page, www.atlasair.com.
Atlas Air Worldwide Holdings, Inc. (Nasdaq: AAWW), a leading global provider of outsourced aircraft and aviation operating solutions, today announced adjusted net income attributable to common stockholders of $28.6 million, or $1.13 per diluted share, for the three months ended September 30, 2013, compared with $33.4 million, or $1.26 per diluted share, for the three months ended September 30, 2012.
On a reported basis, third-quarter 2013 net income attributable to common stockholders totaled $23.7 million, or $0.94 per diluted share, compared with $33.9 million, or $1.27 per diluted share, in the third quarter of 2012. Free cash flow of $73.8 million in the third quarter of 2013 compared with $98.9 million in the third quarter of 2012.
“Earnings in the third quarter of 2013 were below our expectations, reflecting market factors,” said William J. Flynn, President and Chief Executive Officer. “Demand in the commercial airfreight peak season through September was less than we anticipated. Airfreight yields remained under pressure, impacting our Commercial Charter segment. In addition, a decline in military demand led to a reduction in AMC volumes and fewer favorable one-way missions.
“Results during the quarter were supported by strength in our core ACMI operations and growth in our Dry Leasing business. Led by our new 747-8 freighters in ACMI, we saw increasing contributions during the quarter from investments to diversify our business mix, including the addition of 777 freighters with predictable, long-term revenue and earnings streams in Dry Leasing; our expanding 767 service; growing CMI operations within ACMI; and ongoing continuous improvement initiatives.
“Reflecting our commitment to enhance stockholder value, we acquired a further 3.1% of our outstanding common stock through our share repurchase program from May through August. Combined with the shares that we bought through the end of April, we have repurchased approximately 6.5% of our shares for $72 million this year. In addition, our board of directors has increased our existing authority to repurchase shares from $9 million to $60 million.”
Revenue, volume and profitability growth in our core ACMI business during the third quarter were driven by our new 747-8Fs, with an average of 3.3 additional -8F aircraft in service compared with the third quarter of 2012, and the continued ramp up and expansion of CMI service.
Improved ACMI segment earnings during the period benefited from higher rates per block hour and lower maintenance expense for our 747-8Fs, partially offset by the redeployment of 747-400 aircraft to other business segments.
In Dry Leasing, revenue and profitability grew following the acquisition of one 777-200LRF aircraft in March 2013 and two 777-200LRF aircraft in July 2013. Each aircraft was acquired with a long-term customer lease already in effect.
In AMC Charter, a reduction in cargo and passenger block hours, as well as a reduced number of one-way AMC missions and a change in the proportion of those missions from outbound U.S. to inbound U.S., led to a significant decline in segment contribution. Higher average cargo and passenger revenue per block hour during the period stemmed from an increase in the average pegged fuel price set by the U.S. military.
Segment results in Commercial Charter primarily related to a reduction in yields driven by soft third-quarter global charter-market conditions. Results also reflected a reduction in return legs due to the change in the number and direction of one-way AMC missions.
Results in the third quarter were also affected by a reduction in capitalized interest on 747-8F aircraft that entered service.
Reported earnings for the third quarter of 2013 included an effective income tax rate of 31.3%, reflecting both the ongoing beneficial impact of lower taxes for certain foreign subsidiaries in our Dry Leasing business and the net impact of the resolution of certain income tax liabilities.
For the nine months ended September 30, 2013, adjusted net income attributable to common stockholders totaled $54.9 million, or $2.13 per diluted share, compared with $78.3 million, or $2.95 per diluted share, for the nine months ended September 30, 2012.
On a reported basis, nine-month 2013 net income attributable to common stockholders totaled $63.9 million, or $2.48 per diluted share, compared with $77.5 million, or $2.92 per diluted share, in the first nine months of 2012.
Free cash flow in the first nine months of 2013 increased to $180.8 million from $154.1 million in the first nine months of 2012.
At September 30, 2013, our cash, cash equivalents, short-term investments and restricted cash totaled $298.4 million, compared with $419.9 million at December 31, 2012.
The change in position at September 30 reflected cash provided by operating and financing activities offset by cash used for investing activities.
Net cash used for investing activities in the first nine months of 2013 primarily related to the purchase of two 747-8F aircraft as well as three 777-200LRF aircraft for our Dry Leasing business.
Net cash provided by financing activities primarily reflected proceeds from the issuance of debt in connection with the acquisitions of these aircraft. Those proceeds were partially offset by payments on debt obligations and debt issuance costs.
Between mid-May and mid-August, we repurchased 820,276 shares of our common stock for $35.6 million. The shares were acquired pursuant to an accelerated share repurchase program with a financial institution that settled in August.
Through the nine months ended September 30, 2013, we repurchased a total of 1,723,577 shares, or 6.5%, of our outstanding common stock at December 31, 2012.
Future repurchases under our new $60 million authority may be made at our discretion, and the actual timing, form and amount will depend on company and market conditions.
Looking to full-year 2013, we expect fully diluted earnings per share to total between $3.40 and $3.80 on an adjusted basis and $3.75 and $4.15 on a reported basis.
Our current outlook reflects a much less robust commercial airfreight peak season than previously anticipated. While commercial airfreight volumes are strengthening, airfreight yields remain volatile. In addition, military cargo volumes have declined at a more rapid rate. Together, these factors affected our third-quarter results and have reduced anticipated profitability for the fourth quarter.
Partially offsetting these challenges are increasing contributions from investments to diversify the company’s business mix, led by new 747-8 freighters in the company’s core ACMI business; the addition of 777 freighters with predictable, long-term revenue and earnings streams in Dry Leasing; an expanding 767 service platform; entry into military and commercial charter passenger operations; and continuing growth in the company’s non-asset-intensive CMI operations. Also contributing are ongoing continuous improvement productivity and efficiency initiatives.
Mr. Flynn added: “Airfreight remains a long-term growth industry despite current market challenges. We are focused on the long-term growth of our business, and we are well-positioned to capitalize on market improvements. Our business model is solid and is complemented by substantial operating leverage, strong customer relationships and a superior fleet. We continue to strengthen our competitive position and generate substantial free cash flow, which will enhance stockholder value.”
Management will host a conference call to discuss Atlas Air Worldwide’s third-quarter financial and operating results at 11:00 a.m. Eastern Time on Thursday, November 7, 2013.
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 third-quarter call) or at the following Web address:
http://www.media-server.com/m/p/rq4h455p
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 November 14 by dialing (855) 859-2056 (domestic) and (404) 537-3406 (international) and using Access Code 88980639#.
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.
Atlas Air Worldwide is the parent company of Atlas Air, Inc. (Atlas) and Titan Aviation Leasing (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, for customers that provide their own aircraft; express network and scheduled air cargo service; military cargo and passenger charters; commercial 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: 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 2013 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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