Atlas Air Worldwide Reports Double-Digit Earnings Increase, Updates 2012 EPS Expectation

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Atlas Air Worldwide Reports Double-Digit Earnings Increase, Updates 2012 EPS Expectation

  • 3Q12 Reported Net Income Up 20% to $33.9 Million, $1.27 per Share
  • 3Q12 Adjusted Net Income Up 10% to $33.4 Million, $1.26 per Share
  • Adjusted and Reported 2012 EPS Expected to Exceed $4.65, 13% Growth from 2011 Adjusted EPS

PURCHASE, N.Y.--(BUSINESS WIRE)-- Atlas Air Worldwide Holdings, Inc. (NAS: AAWW) , a leading global provider of outsourced aircraft and aviation operating services, today announced double-digit earnings growth for the third quarter of 2012 and provided updated guidance for full-year earnings growth in excess of 13% on both a reported and adjusted basis.

For the three months ended September 30, 2012, net income attributable to common stockholders increased 20% to $33.9 million, or $1.27 per diluted share, compared with $28.2 million, or $1.07 per diluted share, for the three months ended September 30, 2011.


On an adjusted basis, third-quarter 2012 net income attributable to common stockholders rose 10% to $33.4 million, or $1.26 per diluted share, compared with $30.4 million, or $1.15 per share, in the third quarter of 2011.

Revenues in the third quarter of 2012 grew 13%, increasing to $409.3 million from $362.9 million in the third quarter of 2011.

"Our third-quarter results highlight the transformation and diversification of our business model and the essential elements of our growth story. We have built a resilient company that is delivering increasing earnings, improved margins and growing free cash flow in a challenging business environment," said William J. Flynn, President and Chief Executive Officer.

"In an airfreight market that has underperformed expectations this year and in the face of a marked decline in military cargo demand, we are executing on our strategic growth plan that leverages our core competencies and underscores our ability to perform well in all economic conditions.

"We have aggressively managed and modernized our fleet, developed and grown our express network ACMI service, and are adding our new 747-8F aircraft. We're also capitalizing on new organizational capabilities, such as our military passenger flying, CMI operations and 767 service, and we are driving additional operating efficiencies through our culture of continuous improvement."

Third-Quarter Results

Revenue and profitability growth in our core, long-term ACMI business during the third quarter were driven by our new 747-8F aircraft, which began to enter service late in the fourth quarter of 2011. Volume growth was primarily due to the continued ramp up of CMI flying for Boeing and DHL Express. ACMI results 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. ACMI customers flew 5.2% above contractual minimums during the quarter.

In AMC Charter, volumes and profitability increased as strong growth in our military passenger service outweighed a 50% reduction in military cargo block-hour volumes. AMC Charter revenues reflected a reduction in cargo revenue and a 33% reduction in the average "pegged" fuel price paid by the U.S. military, partially offset by an increase in passenger flying. The impact to revenue from changes in the "pegged" fuel price is generally offset by a corresponding impact to fuel expense.

AMC Charter results also reflected an increase in premiums earned on flying additional, more efficient 747-400 cargo aircraft in the third quarter of 2012 compared with less efficient 747-200 aircraft in the third quarter of 2011, partially offset by a reduction in the number of one-way AMC missions.

In Commercial Charter, increased revenues and volumes reflected the deployment of 747-400 cargo aircraft in lieu of retired 747-200s, the deployment of an additional 747-400 cargo aircraft to support increased demand in South America, and 747-400 aircraft from ACMI during remarketing periods. Commercial Charter results were affected by a reduction in yields driven by softer charter-market conditions compared with the third quarter of 2011, and a reduction in return legs due to fewer one-way AMC Charter missions.

Earnings in the third quarter of 2012 also reflected a reduction in maintenance expense, primarily due to the retirement of 747-200 aircraft and lower maintenance expense for 747-400 aircraft, partially offset by an increase in volume-related maintenance expense across the fleet. Results in each segment were affected by increased crew costs, with AMC Charter and Commercial Charter incurring other volume-driven operating expenses and higher aircraft ownership costs related to the deployment of 747-400 aircraft in lieu of 747-200 aircraft. Results also included an effective income tax rate of 36.4%, reflecting the resolution of income tax examinations in Hong Kong during the quarter.

Adjusted results in the third quarter of 2012 exclude incremental costs related to the retirement of the company's 747-200 fleet, costs incurred to refinance Ex-Im Bank-backed financing, and a gain on the disposal of a 747-200 engine. Adjusted results in the third quarter of 2011 exclude pre-operating expenses for the introduction of new aircraft types, including incremental costs incurred as a result of aircraft delivery delays, as well as a gain on the disposal of aircraft.

Nine-Month Results

For the nine months ended September 30, 2012, net income attributable to common stockholders increased 24% to $77.5 million, or $2.92 per diluted share, compared with $62.6 million, or $2.37 per diluted share, for the nine months ended September 30, 2011.

On an adjusted basis, net income attributable to common stockholders for the first nine months of 2012 rose 13% to $78.3 million, or $2.95 per diluted share, compared with $69.1 million, or $2.62 per diluted share, in the first nine months of 2011.

Revenues in the first nine months of 2012 totaled $1.19 billion, an increase of 18% from $1.01 billion in the first nine months of 2011.

Cash, Cash Equivalents and Short-Term Investments

At September 30, 2012, our cash, cash equivalents and short-term investments totaled $325.1 million, compared with $195.2 million at December 31, 2011.

We expect our cash, cash equivalents and short-term investments at December 31, 2012, to total approximately $440 million.

Similar to the first nine months of 2012, the change in cash, cash equivalents and short-term investments for the full-year of 2012 is expected to be primarily driven by an increase in cash provided by operating activities and financing activities, partly offset by an increase in cash used for investing activities.

Net cash used for investing activities in the first nine months of 2012 primarily related to the purchase of our fourth and fifth 747-8F cargo aircraft for our ACMI operations, a third 767-300ER passenger aircraft for our AMC Charter operations, and a 737-300 cargo aircraft for our Dry Leasing business.

Net cash provided by financing activities primarily reflected proceeds from the issuance of debt in connection with the delivery of our fourth and fifth 747-8Fs that were partially offset by payments on debt obligations and debt issuance costs. Both the proceeds from our issuance of debt and the payments on our debt obligations reflect the refinancing of a total of $284.7 million of floating-rate term loans with fixed-rate notes issued in the capital markets.

Outlook

"We continue to anticipate strong, double-digit earnings growth in 2012," said Mr. Flynn. "However, given the relative underperformance of the airfreight market to date this year and the softer-than-expected peak season that is materializing, we now anticipate that reported and adjusted fully diluted earnings will increase approximately 13% compared with adjusted 2011 EPS, to more than $4.65 per share rather than over $5.10, as our block hours increase approximately 12%."

Block-hour volumes should total approximately 153,000 hours in 2012, about 7,000 fewer hours than previously anticipated. ACMI flying should account for about 70% of expected 2012 block hours, with about 15% in AMC cargo and passenger charter and 15% in Commercial Charter. ACMI customers are expected to fly approximately 5% above contractual minimums in the fourth quarter and 3% to 5% above for the entire year. During ACMI remarketing periods, any available 747-400F aircraft will continue to fly in our charter businesses.

In line with anticipated 2012 flying levels, maintenance expense is expected to total approximately $26 million in the fourth quarter and approximately $163 million for the full year.

Multiple new high-tech product launches have begun and are expected to continue during the fourth quarter. These products, which are time-sensitive-to-market and generally shipped by airfreight, should have a positive impact on volumes and yields, particularly in trade lanes supported by our ACMI customers and our charter operations.

"Our business model is working as expected, and we are growing earnings and expanding margins despite the global economic slowdown," Mr. Flynn noted.

"High-tech products, automotive and manufactured goods, pharmaceuticals, fresh foods and other perishables are moving, and airfreight remains vital. It is never a smooth, straight line, but airfreight will continue to grow from today's near-record global tonnages.

"We are well-positioned to serve our customers, reflecting the global scale and scope of our operations and our decision to invest in modern, efficient aircraft. Our brand stands for excellence. We have a track record of executing on our commitments. And we are leveraging our deep understanding of the global markets as we continue to grow our business and deliver advantage and value to our customers and stockholders."

Conference Call

Management will host a conference call to discuss Atlas Air Worldwide's third-quarter 2012 financial and operating results at 11:00 a.m. Eastern Time on Thursday, November 1, 2012.

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/oj8y3irz.

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 8 by dialing (855) 859-2056 (domestic) and (404) 537-3406 (international) and using Access Code 51193776#.

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 IncomeAttributable to Common Stockholders; and Adjusted Diluted EPS, 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 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 2012 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.
Consolidated Statements of Operations

(in thousands, except per share data)

(Unaudited)

  
For the Three Months EndedFor the Nine Months Ended
September 30, 2012 September 30, 2011September 30, 2012 September 30, 2011
 
Operating Revenue
ACMI$177,722$163,406$492,846$469,883
AMC charter117,377122,581376,685316,230
Commercial charter108,07870,353305,852206,956
Dry leasing3,0573,0658,8646,742
Other 3,017  3,471  9,013  10,246 
Total Operating Revenue$409,251 $362,876 $1,193,260 $1,010,057 
 
Operating Expenses
Aircraft fuel99,080103,663311,414278,188
Salaries, wages and benefits71,38661,911215,640185,173
Aircraft rent44,13341,055126,309120,976
Maintenance, materials and repairs40,52447,770136,875144,699
Passenger and ground handling services18,7117,83650,10021,338
Depreciation and amortization16,6129,96444,79227,069
Navigation, landing fees and other rent15,15312,81344,09036,756
Travel14,74611,28442,18930,328
Gain on disposal of aircraft(1,058)(163)(2,417)(464)
Other 27,699  23,243  85,306  68,383 
Total Operating Expenses 346,986  319,376  1,054,298  912,446 
Operating Income 62,265  43,500  138,962  97,611 
 
Non-operating Expenses / (Income)
Interest income(4,833)(5,004)(14,629)(15,200)
Interest expense

17,004

9,80146,59830,009
Capitalized interest(4,052)(6,982)(16,356)(18,584)
Loss on early extinguishment of debt143-285-
Other (income) expense, net (331) (121) 454  (485)
Total Non-operating Income7,931(2,306)16,352(4,260)
Income before income taxes54,33445,806122,610101,871
Income tax expense 19,759  17,464  45,899  38,595 
 
Net Income34,57528,34276,71163,276

Less: Net income attributable to noncontrolling interests

 717  136  (834) 706 

Net Income Attributable to Common Stockholders

$33,858 $28,206 $77,545 $62,570 
 
Earnings per share:
Basic$1.28 $1.07 $2.94 $2.39 
Diluted$1.27 $1.07 $2.92 $2.37 
 
Weighted average shares:
Basic 26,443  26,291  26,410  26,201 
Diluted 26,580  26,452  26,527  26,416 
 
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Atlas Air Worldwide Holdings, Inc.
Consolidated Balance Sheets

(in thousands, except share data)

(Unaudited)

  
September 30, 2012December 31, 2011
Assets