Atlas Air Worldwide Reports First-Quarter Earnings

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Atlas Air Worldwide Reports First-Quarter Earnings

  • Adjusted Net Income of $5.9 Million, $0.22 per Share
  • Tax Planning Drives Reported Net Income of $20.1 Million, $0.76 per Share
  • $36.5 Million of Stock Buybacks, 903,301 Shares Repurchased
  • 2013 Earnings Outlook Affirmed; Adjusted EPS Guidance Raised to $4.80 from $4.65 to Reflect Repurchase Activity

PURCHASE, N.Y.--(BUSINESS WIRE)-- Atlas Air Worldwide Holdings, Inc. (NAS: AAWW) , a leading global provider of outsourced aircraft and aviation operating solutions, today announced adjusted net income attributable to common stockholders of $5.9 million, or $0.22 per diluted share for the first quarter of 2013 compared with adjusted earnings of $13.6 million, or $0.51 per diluted share, for the first quarter of 2012.


On a reported basis, net income attributable to common stockholders in the first quarter totaled $20.1 million, or $0.76 per diluted share, compared with $12.8 million, or $0.48 per diluted share in the year-ago quarter.

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 from the offshore leasing of certain aircraft. Adjusted earnings in the first quarter of 2012 exclude fleet retirement costs of $0.9 million, or $0.03 per diluted share.

First-quarter revenue grew 5% to $377.3 million, with operating income increasing 10% to $22.6 million and operating margin expanding slightly. Free cash flow for the period totaled $42.4 million compared with $1.0 million in the first quarter of 2012.

"Our first-quarter results and initiatives demonstrate the benefits of a modern, efficient fleet, diversified business mix and solid balance sheet in a challenging business environment," said William J. Flynn, President and Chief Executive Officer.

"Operating income during the quarter reflected the strength of our ACMI operations, especially our new 747-8 freighters. It also gained from new organizational capabilities and the evolution of our business, such as our expanding 767 service and growing CMI operations. We also realized operating efficiencies through our continuous improvement initiatives.

"Capitalizing on our financial strength, we acquired an immediately profitable 777 freighter under long-term customer lease for our Dry Leasing business. We also implemented an immediately accretive share repurchase program that acquired 3.4% of our outstanding stock for a total of $36.5 million through late April.

"Earnings in the first quarter were in line with our expectations and our outlook for the year. As a result, we are affirming previous guidance for 2013 but we are raising our expected adjusted earnings per share to $4.80 from $4.65 to reflect our actual and anticipated share repurchases."

First-Quarter Results

Revenue, volume and profitability growth in our core ACMI business during the first quarter were driven by our new 747-8Fs, with four additional -8F aircraft in service compared with the first quarter of 2012, as well as the continued ramp up of CMI flying for Boeing and DHL Express.

Improved ACMI segment earnings during the period also 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 AMC Charter, strong growth in passenger service volumes partially offset a 41% reduction in cargo block hours, a reduction in the number of one-way AMC missions, and lower average cargo revenue per block hour, which led to a decline in segment contribution. Lower average passenger revenue per block hour during the period stemmed from an increase in flying on smaller-gauge 767 aircraft added to supplement our wide-body 747-400 passenger service and enhance our share of military passenger business.

Segment results in Commercial Charter reflected the seasonal nature of this business and were primarily related to a reduction in yields driven by soft first-quarter global charter-market conditions.

Results in the first quarter were also affected by higher non-operating expenses, primarily due to a reduction in capitalized interest on 747-8F aircraft that entered service.

Income Taxes

Reported earnings for the first quarter of 2013 included an effective income tax rate benefit of 97.4%, reflecting a federal income tax benefit of $14.2 million related to the tax treatment of extraterritorial income from the offshore leasing of certain of our aircraft.

Cash, Cash Equivalents and Short-Term Investments

At March 31, 2013, our cash, cash equivalents and short-term investments totaled $343.9 million, compared with $419.9 million at December 31, 2012.

The change in cash, cash equivalents and short-term investments was primarily driven by an increase in cash provided by operating and financing activities, offset by cash used for investing activities.

Net cash used for investing activities in the first quarter of 2013 primarily related to the purchase of a 747-8F aircraft for our ACMI operations and a 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. These proceeds were partially offset by payments on debt obligations and a prepayment under an accelerated share repurchase program agreement ("ASR").

Share Repurchase Activity

Between mid-February and late April 2013, we repurchased 903,301 shares of our common stock for $36.5 million at an average cost of $40.40 per share. The shares were acquired pursuant to an ASR with an investment bank that settled on April 25, 2013.

We acquired 427,168 of these shares during the period ended March 31, 2013, which added $0.01 per diluted share to our adjusted and reported earnings for the first quarter.

Future repurchases may be made at our discretion, and the actual timing, form and amount will depend on company and market conditions.

Outlook

We expect to generate strong earnings and cash flow in 2013. Led by ACMI, each of our business segments is expected to be profitable for the year.

Incorporating our share repurchase activity, we anticipate that our adjusted fully diluted earnings per share this year will total approximately $4.80, an increase from prior guidance of approximately $4.65. Including the extraterritorial income tax benefit of $0.54 per share, our reported fully diluted earnings per share in 2013 should be approximately $5.34.

Both adjusted and reported full-year 2013 EPS guidance assume the repurchase of $50.0 million of our outstanding stock during the year.

Our expectation for full year 2013 operating performance is unchanged from the outlook we issued last quarter. We now expect to fly fewer block hours in our Commercial Charter segment in 2013 than we previously forecast. We also expect lower operating expenses as a result of continuous improvement initiatives that drive productivity improvements and operating efficiencies. These initiatives target all aspects of our business, including engine overhauls, procurement efforts, passenger catering, ground travel, and crew scheduling.

Similar to the first quarter, adjusted and reported full-year earnings in 2013 will reflect strong growth from the company's 747-8Fs in ACMI, driven by an increase in the number of -8F aircraft in ACMI service compared with 2012, including the incremental placement with Etihad Airways we announced today.

Market growth during 2013 should be seasonal and second-half weighted. We continue to anticipate a sequential increase in our quarterly earnings throughout the year, with approximately 75% of adjusted earnings per share and 66% of reported earnings per share occurring in the second half.

Based on our revised view, block-hour volumes in 2013 are now expected to total approximately 175,000 hours. ACMI segment flying should account for about 135,000, or 77%, of expected 2013 block hours, with about 22,000, or 13%, in Commercial Charter and 18,000, or 10%, in AMC Charter. Passenger charter flying should account for more than 10,000 AMC Charter block hours in 2013.

Based on anticipated deliveries of 747-8Fs in our outstanding order, the average number of -8Fs in service in 2013 should increase to more than eight from 4.3 in 2012.

In addition, we now anticipate that maintenance expense will total approximately $172 million in 2013, about 60% of which should be incurred in the first half of the year.

Mr. Flynn concluded: "In an environment of continuing global uncertainty, we are well-positioned to serve our customers and the airfreight markets. We have performed well. We are ready to capitalize on market improvements. And we are executing a strategic plan that leverages our core competencies, provides a basis for returning capital to our investors through share repurchases, and will enable us to grow over the long term."

Conference Call

Management will host a conference call to discuss Atlas Air Worldwide's first-quarter 2013 financial and operating results at 11:00 a.m. Eastern Time on Thursday, May 2, 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 first-quarter call) or at the following Web address:

http://www.media-server.com/m/p/irs4fn9o

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 9 by dialing (855) 859-2056 (domestic) and (404) 537-3406 (international) and using Access Code 41686785#.

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; 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 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.

 

Atlas Air Worldwide Holdings, Inc.

Consolidated Statements of Operations

(in thousands, except per share data)


(Unaudited)

 
    For the Three Months Ended
March 31, 2013  March 31, 2012
 
Operating Revenue
ACMI$181,170$154,703
AMC Charter98,037121,294
Commercial Charter91,10076,947
Dry Leasing3,7472,945
Other 3,282  3,415 
Total Operating Revenue$377,336 $359,304 
 
Operating Expenses
Aircraft fuel93,35894,763
Salaries, wages and benefits72,53170,876
Maintenance, materials and repairs58,36952,980
Aircraft rent40,00839,418
Depreciation and amortization17,80814,303
Passenger and ground handling services16,77212,771
Travel15,17912,620
Navigation fees, landing fees and other rent14,11213,055
Gain on disposal of aircraft(23)(196)
Other 26,625  28,135 
Total Operating Expenses 354,739  338,725 
 
Operating Income 22,597  20,579 
 
Non-operating Expenses / (Income)
Interest income(5,176)(4,909)
Interest expense18,44013,963
Capitalized interest(1,402)(6,352)
Other (income) expense, net 552  (297)
Total Non-operating Expense (Income) 12,414  2,405 
 
Income before income taxes10,18318,174
Income tax expense (9,920) 7,234 
 
Net Income20,10310,940
Less: Net loss attributable
to noncontrolling interests 25  (1,895)
Net Income Attributable
to Common Stockholders$20,078 $12,835 
 
Earnings per share:
Basic$0.76 $0.49 
 
Diluted$0.76 $0.48 
 
Weighted average shares:
Basic 26,330  26,360 
 
Diluted 26,439  26,488 
 
 

Atlas Air Worldwide Holdings, Inc.

Consolidated Balance Sheets

(in thousands, except share data)


(Unaudited)

 
    March 31, 2013  December 31, 2012
Assets
Current Assets
Cash and cash equivalents$330,311$409,763
Short-term investments13,63810,119
Accounts receivable, net of allowance of $4,009 and $3,172, respectively145,137127,704
Prepaid maintenance21,89622,293
Deferred taxes27,99626,390
Prepaid expenses and other current assets 35,597  36,726 
Total current assets574,575632,995
Property and Equipment
Flight equipment2,506,6992,209,782
Ground equipment42,85239,230
Less: accumulated depreciation(201,150)(185,419)
Purchase deposits for flight equipment 71,814  147,946 
Property and equipment, net2,420,2152,211,539
Other Assets
Long-term investments and accrued interest131,181140,498
Deposits and other assets130,025132,120
Intangible assets, net 34,375  35,533 
Total Assets$3,290,371 $3,152,685 
 
Liabilities and Equity
Current Liabilities
Accounts payable$25,937$20,789
Accrued liabilities167,010152,467
Current portion of long-term debt1,2 230,124  154,760 
Total current liabilities423,071328,016
Other Liabilities
Long-term debt1,21,229,4161,149,282
Deferred taxes253,199265,384
Other liabilities 126,309  121,899 
Total other liabilities1,608,924 Read Full Story

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