Atlas Air Worldwide Reports Second-Quarter 2019 Results

  • Reported Net Income of $86.9 million, $1.61 per Share
  • Reported Results Reflect Favorable Completion of
  • Tax Examination and Impact of Warrant Accounting
  • Reported, Adjusted Results Impacted by Tariffs and Trade Tensions
  • Adjusted EBITDA of $86.4 Million
  • Adjusted Net Income of $4.5 million, $0.17 per Share
  • Updating Full-Year Outlook

PURCHASE, N.Y., August 1, 2019 – Atlas Air Worldwide Holdings, Inc. (Nasdaq: AAWW) today announced second-quarter 2019 income from continuing operations, net of taxes, of $86.9 million, or $1.61 per diluted share, compared with a reported loss of $21.1 million, or $0.83 per diluted share, in the second quarter of 2018.

Reported results in the second quarter of 2019 included $59.8 million of tax benefits related to the favorable completion of an Internal Revenue Service examination of the company’s 2015 income tax return and an unrealized gain on outstanding warrants of $42.3 million. Reported results for the second quarter of 2018 included an unrealized loss on outstanding warrants of $50.0 million.

On an adjusted basis, EBITDA totaled $86.4 million in the second quarter this year compared with $125.5 million in the year-ago second quarter. Adjusted income from continuing operations, net of taxes, in the second quarter of 2019 totaled $4.5 million, or $0.17 per diluted share, compared with $49.7 million, or $1.75 per diluted share, in the year-ago quarter.

“Revenue and earnings in the second quarter were below our expectations, as air cargo volumes and yields were affected in the near term by the widely reported impact of tariffs and trade tensions,” said Chief Executive Officer William J. Flynn. “In addition, our results during the period were impacted by labor-related service disruptions.

“With manufacturers and shippers taking a wait-and-see approach regarding tariffs and trade issues during the course of the quarter, we experienced a softening in anticipated commercial cargo block hours and yields in our Charter segment. On the military side of Charter, our cargo hours were in line with our expectations for the quarter and were up from the first quarter of this year as we anticipated they would be, but passenger demand for the military was less than expected.”

Mr. Flynn added: “Although these factors are near-term headwinds for our industry, we are well-positioned and managing through them, and are maintaining our focus on our longer-term strategies and growth drivers.

“Our actions include ongoing continuous improvement initiatives designed to increase productivity, enhance efficiency, and grow the business. Additionally, we remain committed to negotiating a competitive collective bargaining agreement for our pilots. Our recent bargaining sessions have made progress, and we look forward to the upcoming scheduled sessions to continue that progress toward an agreement that all parties want.”

He continued: “Based on current conditions, we now anticipate that our full-year adjusted net income will total approximately 80% of our 2018 adjusted net income.* Despite the present trade tensions and the resulting impacts on global airfreight, we have the right building blocks for the future, including our world-class employees; the modern, efficient, diversified aircraft and services that customers want; our focus on express, e-commerce and fast-growing markets; the scale and scope of our enterprise; and our leadership position in global aviation outsourcing.”

Second-Quarter Results

Revenue in the second-quarter of 2019 was relatively in line with revenue in the second quarter of 2018. Higher volumes during the period reflected an increase in ACMI flying that was partially offset by a decrease in Charter flying.

Higher ACMI segment revenue during the period reflected an increase in 767 and 737 flying, the start-up of 747-400 flying for new customers, and incremental 777 flying, partially offset by a decrease in the average rate per block hour primarily related to the growth in smaller-gauge 767 and 737 CMI flying.

ACMI segment contribution decreased during the quarter as increased levels of flying were more than offset by higher crew costs, including enhanced wages and work rules resulting from our interim agreement with pilots at Southern Air; additional heavy maintenance expense; and increased amortization of deferred maintenance costs. In addition, segment contribution was impacted by start-up costs for customer-growth initiatives as well as labor-related service disruptions.

Lower Charter segment revenue during the period was primarily driven by lower levels of flying and a decrease in average rate per block hour. Block-hour volumes primarily reflected a year-over-year decline in cargo and passenger demand from the military, and lower cargo demand from commercial customers reflecting the impact of tariffs and global trade tensions. The decrease in average rate primarily reflected lower commercial cargo yields (excluding fuel), partially offset by an increase in rates for the military.

Lower Charter segment contribution was driven by the decrease in commercial cargo yields and volumes related to the impact of tariffs and global trade tensions; a decrease in military cargo and passenger flying; and additional heavy maintenance expense. Results were also affected by labor-related service disruptions.

In Dry Leasing, higher segment revenue during the quarter primarily reflected the placement of additional 767-300 converted freighter aircraft throughout 2018, as well as the placement of one 777-200 freighter in July 2018, partially offset by the scheduled return of a 777-200 freighter in March 2019 that is awaiting placement with a customer. Lower segment contribution was primarily due to the scheduled return of that 777-200 freighter in March 2019, partially offset by the placement of additional aircraft.

Higher unallocated income and expenses, net, during the quarter primarily reflected the recognition in the second quarter of 2018 of a refund of aircraft rent paid in previous years; fleet growth initiatives; and increased amortization of a customer incentive asset.

Reported earnings in the second quarter of 2019 also included an income tax benefit due mainly to the favorable completion of an IRS examination of our 2015 income tax return and, to a lesser extent, nontaxable changes in the fair value of outstanding warrants. On an adjusted basis, our results reflected an income tax benefit primarily related to the favorable completion of the IRS examination.

Cash and Short-Term Investments

At June 30, 2019, our cash and cash equivalents, short-term investments and restricted cash totaled $127.9 million, compared with $248.4 million at December 31, 2018.

The change in position resulted from cash used for investing and financing activities, partially offset by cash provided by operating activities.

Net cash used for investing activities during the first half of 2019 primarily related to capital expenditures and payments for flight equipment and modifications, including 767-300 aircraft and related freighter conversion costs, spare engines and GEnx engine performance upgrade kits.

Net cash used for financing activities during the period primarily reflected payments on debt obligations.

Half-Year Results

Reported results for the six months ended June 30, 2019 reflected income from continuing operations, net of taxes, of $57.2 million, or $2.21 per diluted share, which included $59.8 million of tax benefits related to the favorable completion of an IRS examination of our 2015 income tax return. Results for the first half compared with a loss from continuing operations, net of taxes, of $11.5 million, or $0.45 per diluted share, for the six months ended June 30, 2018 that was primarily due to an unrealized loss on financial instruments of $57.8 million.

On an adjusted basis, EBITDA totaled $204.0 million in the first half of 2019 compared with $219.3 million in the first half of 2018. First-half 2019 adjusted income from continuing operations, net of taxes, totaled $31.8 million, or $1.16 per diluted share, compared with $73.5 million, or $2.62 per diluted share, in the first half of 2018.

Updating Our 2019 Outlook*

Reflecting our first-half results and our current market expectations for the balance of the year, we expect to fly approximately 330,000 block hours in 2019, with about 75% of the hours in ACMI and the balance in Charter.

We also anticipate revenue of approximately $2.9 billion, adjusted EBITDA of approximately $520 million, and adjusted net income of approximately 80% of our 2018 adjusted net income of $204.3 million.

Aircraft maintenance expense in 2019 is expected to total about $395 million, with depreciation and amortization totaling about $260 million. Core capital expenditures, which exclude aircraft and engine purchases, are projected to total approximately $135 to $145 million, mainly for parts and components for our fleet.

Due to the favorable completion of our IRS tax examination for 2015, we estimate our full-year 2019 adjusted effective income tax rate will be approximately 16%.

For the third quarter of 2019, we expect to fly approximately 85,000 block hours (about 75% in ACMI), with revenue of more than $700 million and adjusted EBITDA of about $125 million. We also expect that our third-quarter adjusted net income will represent a mid- to upper-teen percentage of our full-year adjusted net income.

We provide guidance on an adjusted basis because we are unable to predict, with reasonable certainty, the effects of outstanding warrants and other items that could be material to our reported results.*

Conference Call

Management will host a conference call to discuss Atlas Air Worldwide’s second-quarter 2019 financial and operating results at 11:00 a.m. Eastern Time on Thursday, August 1, 2019.

Interested parties may listen to the call live over the Internet at www.atlasairworldwide.com (click on “Investors,” click on “Presentations” and on the link to the second-quarter call) or at the following Web address:

https://edge.media-server.com/mmc/p/6doge49v

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 9 by dialing (855) 859-2056 (U.S. Toll Free) or (404) 537-3406 (from outside the U.S.) and using Access Code 6458834#.

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 Adjusted EBITDA; Adjusted income from continuing operations, net of taxes; Adjusted Diluted EPS from continuing operations, net of taxes; Adjusted effective tax rate; and Free Cash Flow, which exclude certain noncash income and expenses, and items impacting year-over-year comparisons of our results. 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 Income (loss) from continuing operations, net of taxes; Diluted EPS from continuing operations, net of taxes; Effective tax rate; and Net Cash Provided by Operating Activities, which are the most directly comparable 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, when considered together with the corresponding U.S. GAAP financial measures and the reconciliations to those measures, provide meaningful supplemental information to assist investors and analysts in understanding our financial results and assessing our prospects for future performance. For example:

  • Adjusted EBITDA; Adjusted income from continuing operations, net of taxes; and Adjusted Diluted EPS from continuing operations, net of taxes, provide a more comparable basis to analyze operating results and earnings and are measures commonly used by shareholders to measure our performance. In addition, management’s incentive compensation is determined, in part, by using Adjusted EBITDA and Adjusted income from continuing operations, net of taxes.
  • Adjusted effective tax rate provides improved insight into the tax effects of our ongoing business operations.
  • Free Cash Flow helps investors assess our ability, over the long term, to create value for our shareholders as it represents cash available to execute our capital allocation strategy.

*We provide guidance on an adjusted basis and are unable to provide forward-looking guidance on a U.S. GAAP basis or a reconciliation to the most directly comparable U.S. GAAP measures because we are unable to predict with reasonable certainty the ultimate outcome of certain significant items. The principal item is the impact on our results of our outstanding warrants, which are highly dependent on the change in our stock price during the period reported. These items are uncertain, depend on various factors, and could have a material impact on our U.S. GAAP results.

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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., Southern Air Holdings, Inc. and Titan Aviation Holdings, Inc., and is the majority shareholder of Polar Air Cargo Worldwide, Inc. Our companies operate the world’s largest fleet of 747 freighter aircraft and provide customers the broadest array of Boeing 747, 777, 767, 757 and 737 aircraft for domestic, regional and international cargo and passenger operations.

Atlas Air Worldwide’s press releases, SEC filings and other information may be accessed through the company’s home page, www.atlasairworldwide.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. Those statements are based on management’s beliefs, plans, expectations and assumptions, and on information currently available to management. Generally, the words “will,” “may,” “should,” “expect,” “anticipate,” “intend,” “plan,” “continue,” “believe,” “seek,” “project,” “estimate,” and similar expressions used in this release that do not relate to historical facts are intended to identify forward-looking statements.Such forward-looking statements speak only as of the date of this release. They 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: our ability to effectively operate the network service contemplated by our agreements with Amazon; our ability to coordinate with Amazon to accept newly converted aircraft; the risk that the anticipated benefits of our agreements with Amazon will not be realized when expected, or at all; the possibility that Amazon may terminate its agreements with the companies; 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, pilots 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; changes in U.S. and foreign government trade policies; economic conditions; the effects of any hostilities or act of war (in the Middle East or elsewhere) or any terrorist attack; significant data breach or disruption of our information technology systems; labor costs and relations, work stoppages and service slowdowns; the outcome of pending negotiations with our pilots’ union; financing costs; the cost and availability of war risk insurance; 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; additional regulatory guidance or changes in interpretations and assumptions with respect to the impact of the U.S. Tax Cuts and Jobs Act of 2017; 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 2019 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 and expressly disclaims any obligation to revise or update publically any forward-looking statement to reflect future events or circumstances.

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New State-of-the-Art Global Operations Center to Create Additional Jobs

PURCHASE, N.Y., July 25, 2019 – Atlas Air Worldwide Holdings, Inc. (Nasdaq: AAWW) today announced it will expand its operations in northern Kentucky to accommodate its growing workforce in the area.

Atlas’ plans include a commitment to a long-term lease in a new facility in Erlanger, Kentucky, near the Cincinnati/Northern Kentucky International Airport (CVG) to support its growing global operations. The new center in Erlanger is expected to open in 2021.

“Atlas is a premier leader and employer in the air cargo industry, and I am delighted the company will deepen its commitment to Kentucky and grow its operations within this critical North American logistics hub,” said Kentucky Governor Matt Bevin. “We are honored to support Atlas’ growth on a global scale and appreciate that Atlas recognizes what we know in the Commonwealth: Kentucky is an ideal partner for dynamic, growing companies.”

Atlas currently employs 318 professionals, including 182 Kentuckians, at its facilities in northern Kentucky, which includes its Southern Air subsidiary. Employees from the company’s Florence location will relocate to the new site in Erlanger once it is complete.

Atlas expects to create nearly 600 additional jobs in Kentucky in the next 10 years. Globally, the company employs more than 3,000 aviation professionals.

“Kentucky has established itself as a leading global logistics center, and we are thrilled to expand our operations in this thriving area,” said William J. Flynn, Chief Executive Officer of Atlas Air Worldwide. “Our new operations center in Erlanger will enable us to continue to deliver high-quality services to our customers and support their growing global networks. We look forward to the development of a modern, state-of-the-art facility that will foster a great sense of pride with our existing and future employees.”

Atlas Air Worldwide maintains its headquarters in Purchase, N.Y., and maintains a training center in Miami, Florida, in addition to operations in key logistics centers around the world to support its global network.

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., Southern Air Holdings, Inc. and Titan Aviation Holdings, Inc., and is the majority shareholder of Polar Air Cargo Worldwide, Inc. Our companies operate the world’s largest fleet of 747 freighter aircraft and provide customers the broadest array of Boeing 747, 777, 767, 757 and 737 aircraft for domestic, regional and international cargo and passenger operations.

Atlas Air Worldwide’s press releases, SEC filings and other information may be accessed through the company’s home page, www.atlasairworldwide.com.

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Conference Call/Webcast – 11:00 A.M. Eastern

PURCHASE, N.Y., July 10, 2019 – Atlas Air Worldwide Holdings, Inc. (Nasdaq: AAWW)  will release results for the second quarter ended June 30, 2019, prior to the opening of stock market trading on Thursday, August 1.

William J. Flynn, Atlas Air Worldwide’s Chief Executive Officer, John Dietrich, President and Chief Operating 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 August 1.

Interested parties may listen to the call live over the Internet at www.atlasairworldwide.com (click on “Investors,” click on “Presentations” and on the link to the second-quarter call) or at the following Web address:

https://edge.media-server.com/mmc/p/6doge49v

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 9 by dialing (855) 859-2056 (U.S. Toll Free) or (404) 537-3406 (from outside the U.S.) and using Access Code 6458834#.

Slides complementing the company’s presentation will be available for downloading from Atlas Air Worldwide’s website prior to the call.

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., Southern Air Holdings, Inc. and Titan Aviation Holdings, Inc., and is the majority shareholder of Polar Air Cargo Worldwide, Inc. Our companies operate the world’s largest fleet of 747 freighter aircraft and provide customers the broadest array of Boeing 747, 777, 767, 757 and 737 aircraft for domestic, regional and international cargo and passenger operations.

Atlas Air Worldwide’s press releases, SEC filings and other information may be accessed through the company’s home page, www.atlasairworldwide.com.

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Unanimous Appellate Court Decision Upholds Preliminary Injunction

Against International Brotherhood of Teamsters 

PURCHASE, N.Y., July 8, 2019 – Atlas Air, Inc. and Polar Air Cargo Worldwide, Inc. (collectively, “Atlas” or the “Company”), subsidiaries of Atlas Air Worldwide Holdings, Inc. (Nasdaq: AAWW), today said that the U.S. Court of Appeals for the District of Columbia has affirmed a federal district court ruling that ordered the International Brotherhood of Teamsters, the International Brotherhood of Teamsters, Airline Division, and Local Union No. 1224 (collectively, the “IBT”) to stop an intentional and illegal work slowdown by Atlas pilots in violation of the Railway Labor Act (“RLA”). The unanimous ruling from a three-judge panel blocks the union from continuing to engage in improper activities such as excessive sick calls on short notice or refusing to work overtime.

In denying the IBT’s appeal, the Court of Appeals also affirmed the District Court’s decision that the IBT must maintain the status quo under the RLA and must continue to take affirmative action to prevent and to refrain from any form of interference with the Company’s operations.

“We are very satisfied with this unanimous ruling from a three-judge panel, which affirms and sustains the preliminary injunction that was entered into 2017,” said William J. Flynn, Chief Executive Officer of Atlas Air Worldwide.

“It is unfortunate that we were compelled to take this extraordinary step of seeking the underlying injunction, but we needed to do so to protect the best interests of our customers, our employees and our Company. Together with our pilots, we remain focused on continuing to provide our customers the high level of service they have come to expect.

“We value the hard work and dedication of our pilots, and look forward to continuing negotiations for a joint collective bargaining agreement in connection with our merger of Atlas Air and Southern Air. We are committed to negotiating an updated agreement that reflects the current market and the significant role our pilots play in the success of our Company.”

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., Southern Air Holdings, Inc. and Titan Aviation Holdings, Inc., and is the majority shareholder of Polar Air Cargo Worldwide, Inc. Our companies operate the world’s largest fleet of 747 freighter aircraft and provide customers the broadest array of Boeing 747, 777, 767, 757 and 737 aircraft for domestic, regional and international cargo and passenger operations.

Atlas Air Worldwide’s press releases, SEC filings and other information may be accessed through the company’s home page, www.atlasairworldwide.com.

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