Air Transport Services Group's First-Quarter Net Up 28 Percent

Air Transport Services Group's First-Quarter Net Up 28 Percent

WILMINGTON, Ohio--(BUSINESS WIRE)-- Air Transport Services Group, Inc. (NAS: ATSG) , a leading provider of aircraft leasing and air cargo transportation and related services, today reported consolidated financial results for the quarter ended March 31, 2013.

"We made a major investment in our combi business with the U.S. military, placed more of our Boeing 767 and 757 freighters with DHL, and completed the merger of two of our airlines during the first quarter," said Joe Hete, President and Chief Executive Officer of ATSG. "The results were significant increases in our net income and in our Adjusted EBITDA, compared with the year-earlier quarter. Our baseline business remains solid, and we are moving quickly to capture the rest of the $5 to $6 million in merger synergies we projected a few months ago."


For the first quarter of 2013, compared with first quarter 2012:

  • Revenues were $143.3 million, a decrease of 1.5%.

  • Total operating expenses were $126.9 million, down 3.7%, including a $3.8 million reduction in salaries, wages and benefits expense due in large part to reductions in airline related costs prior to the merger of Air Transport International and Capital Cargo International Airlines in March 2013.

  • Pre-tax income was $13.6 million, an increase of 26.5%.

  • Net earnings from continuing operations increased 27.6% to $8.5 million, or $0.13 per fully diluted share. Net earnings include a non-cash federal income tax provision. The company does not expect to pay significant federal income taxes until 2015.

  • First-quarter Adjusted EBITDAwas $37.3 million, a 9.5% increase from $34.1 million in the same period of the prior year. This non-GAAP financial measure is defined and reconciled to comparable GAAP results in a table at the end of this release.

  • Capital expenditures totaled $59.4 million for the quarter, including the purchase of two 757-200 combi aircraft.

Segment Results

CAM (Aircraft Leasing)

CAM

First Quarter

($ in thousands)

2013

2012

% Chg.

Revenues

$

38,969

$

37,851

3.0

Pre-Tax Earnings

16,873

16,818

0.3

Fleet Developments:

  • On March 31, 2013, ATSG owned 47 aircraft in serviceable condition - 20 leased to external customers and 27 leased to ATSG affiliate airlines.

    • The in-service fleet consisted of forty-one 767 freighters, three 757 freighters and three DC-8 combis. A table reflecting aircraft in service is included at the end of this release.

  • On March 31, 2012, CAM owned 51 in-service aircraft, including thirty-nine 767s, three 757s, six DC-8s (two freighters, four combis) and three 727 freighters. All of the 727 and DC-8 freighters, one DC-8 combi and one 767 passenger aircraft have since been removed from service.

  • Three other aircraft - two 767-300s and one 757-200 - were undergoing passenger-to-freighter conversion as of March 31, 2013.

  • Four 757-200 combi aircraft, including one modified in 2012, one purchased in December 2012 and two purchased in January 2013, are completing certification requirements. They will enter service for the U.S. military as replacements for the three remaining DC-8 combis starting later this quarter.

ACMI Services

ACMI Services

First Quarter

($ in thousands)

2013

2012

% Chg.

Revenues

Airline services

$

94,892

$

96,342

(1.5)

Reimbursables

18,159

16,853

7.7

Total ACMI Services Revenues

113,051

113,195

(0.1)

Pre-Tax Loss

(5,404

)

(8,215

)

34.2

Significant Developments:

  • Signed agreements with DHL in January for four additional freighters, including one 757 and three 767s, to replace the 727 freighters the company operated in DHL's U.S. domestic network.

  • Extended agreements for three 767s operating in DHL's network in the Mideast.

  • Airline-related headcount in the first quarter decreased approximately 26% compared with the beginning of 2012, principally as a result of combining ATI and CCIA operations prior to their merger in March.

  • Four 767 freighters leased from CAM were underutilized during the quarter.

Other Activities

Other Activities

First Quarter

($ in thousands)

2013

2012

% Chg.

Revenues

$

26,254

$

28,421

(7.6

)

Pre-Tax Earnings

2,181

2,001

9.0

  • Improved first quarter pre-tax earnings were driven by greater efficiencies and higher volumes at the U.S. Postal Service facilities we operate.

Outlook

For 2013, Adjusted EBITDA from continuing operations is expected to be in the range of $175 to $180 million, reflecting the deployment of ATSG's current fleet and related ACMI services and other activities. Capital expenditures for 2013, including two 757-200 combis purchased in January, are currently projected at $110 million, of which approximately $20 million is maintenance-related. Any remaining free cash flow will be invested opportunistically in new aircraft at acceptable returns, or will be used to retire debt or return capital to shareholders to the extent permissible in the context of the company's credit agreements.

Commenting on the outlook for the rest of the year, Hete stated, "While the air cargo marketplace continues to be challenged, the unique characteristics of our fleet, the quality of our customers, our operating efficiencies and the long-term nature of our leases differentiate our business model. We expect to continue to grow our Adjusted EBITDA returns in 2013 as we replace our DC-8 combis with 757 combis, and deploy two newly converted 767-300s and one 757-200. Even under current conditions, our business remains strong."

Conference Call

ATSG will host a conference call on Thursday, May 9, 2013, at 10:00 a.m. Eastern time to review its financial results for the first quarter of 2013. Participants should dial 888-895-5479 and international participants should dial 847-619-6250 ten minutes before the scheduled start of the call and ask for conference pass code 34725954. The call will also be webcast live (listen-only mode) via www.atsginc.com and www.earnings.com for individual investors, and via www.streetevents.com for institutional investors.

A replay of the conference call will be available by phone on Thursday, May 9, 2013, beginning at 2:00 p.m. and continuing through noon on Thursday, May 16, 2013, at 888-843-7419 (international callers 630-652-3042); use pass code 34725954#. The webcast replay will remain available via www.atsginc.com and www.earnings.com for 30 days.

About ATSG

ATSG is a leading provider of aircraft leasing and air cargo transportation and related services to domestic and foreign air carriers and other companies that outsource their air cargo lift requirements. ATSG, through its leasing and airline subsidiaries, is the world's largest owner and operator of converted Boeing 767 freighter aircraft. Through its principal subsidiaries, including two airlines with separate and distinct U.S. FAA Part 121 Air Carrier certificates, ATSG provides aircraft leasing, air cargo lift, aircraft maintenance services and airport ground services. ATSG's subsidiaries include ABX Air, Inc.; Airborne Global Solutions, Inc.; Air Transport International, Inc.; Cargo Aircraft Management, Inc.; and Airborne Maintenance and Engineering Services, Inc. For more information, please see www.atsginc.com.

Except for historical information contained herein, the matters discussed in this release contain forward-looking statements that involve risks and uncertainties. There are a number of important factors that could cause Air Transport Services Group's ("ATSG's") actual results to differ materially from those indicated by such forward-looking statements. These factors include, but are not limited to, changes in market demand for our assets and services, the costs and timing associated with the modification and certification testing of Boeing 767 and Boeing 757 aircraft, the timing associated with the deployment of aircraft among customers, and other factors that are contained from time to time in ATSG's filings with the U.S. Securities and Exchange Commission, including its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Readers should carefully review this release and should not place undue reliance on ATSG's forward-looking statements. These forward-looking statements were based on information, plans and estimates as of the date of this release. ATSG undertakes no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)

Three Months Ended

March 31,

2013

2012

REVENUES

$

143,279

$

145,506

OPERATING EXPENSES

Salaries, wages and benefits

43,309

47,104

Fuel

14,361

13,840

Maintenance, materials and repairs

22,134

23,114

Depreciation and amortization

20,920

20,300

Rent

6,779

5,730

Travel

4,727

5,978

Landing and ramp

4,065

4,066

Insurance

1,511

2,010

Other operating expenses

9,060

9,562

126,866

131,704

OPERATING INCOME

16,413

13,802

OTHER INCOME (EXPENSE)

Interest income

21

28

Interest expense

(3,132

)

(3,547

)

Unrealized gain on derivative instruments

290

460

(2,821

)

(3,059

)

EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

13,592

10,743

INCOME TAX EXPENSE

(5,091

)

(4,081

)

EARNINGS FROM CONTINUING OPERATIONS

8,501

6,662

LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX

(1

)

(230

)

NET EARNINGS

$

8,500

$

6,432

EARNINGS PER SHARE - Basic

Continuing operations

$

0.13

$

0.11

Discontinued operations

(0.01

)

NET EARNINGS PER SHARE

$

0.13

$

0.10

EARNINGS PER SHARE - Diluted

Continuing operations

$

0.13

$

0.10

Discontinued operations

NET EARNINGS PER SHARE

$

0.13

$

0.10

WEIGHTED AVERAGE SHARES

Basic

63,810

63,431

Diluted

64,524

64,374

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

March 31,

December 31,

2013

2012

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

35,142

$

15,442

Accounts receivable, net of allowance of $702 in 2013 and $749 in 2012

43,153

47,858

Inventory

9,446

9,430

Prepaid supplies and other

7,306

8,855

Deferred income taxes

19,154

19,154

Aircraft and engines held for sale

2,952

3,360

TOTAL CURRENT ASSETS

117,153

104,099

Property and equipment, net

860,144

818,924

Other assets

19,794

20,462

Intangibles

5,083

5,146

Goodwill

86,980

86,980

TOTAL ASSETS

$

1,089,154

$

1,035,611

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Accounts payable

$

35,752

$

36,521

Accrued salaries, wages and benefits

21,524

22,917

Accrued expenses

9,183

8,502

Current portion of debt obligations

23,282

21,265

Unearned revenue

10,580

10,311

TOTAL CURRENT LIABILITIES

100,321

99,516

Long term debt obligations

386,791

343,216

Post-retirement liabilities

179,487

185,097

Other liabilities

61,634

62,104

Deferred income taxes

52,062

46,422

STOCKHOLDERS' EQUITY:

Preferred stock, 20,000,000 shares authorized, including 75,000 Series A Junior Participating Preferred Stock

Common stock, par value $0.01 per share; 75,000,000 shares authorized; 64,585,208 and 64,130,056 shares issued and outstanding in 2013 and 2012, respectively

646

641

Additional paid-in capital

523,069

523,087

Accumulated deficit

(98,685

)

(107,185

)

Accumulated other comprehensive loss

(116,171

)

(117,287

)

TOTAL STOCKHOLDERS' EQUITY

308,859

299,256

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

1,089,154

$

1,035,611

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES
PRE-TAX EARNINGS AND ADJUSTED PRE-TAX EARNINGS SUMMARY
FROM CONTINUING OPERATIONS
NON-GAAP RECONCILIATION
(In thousands)

Three Months Ended

March 31,

2013

2012

Revenues

CAM Leasing

$

38,969

$

37,851

ACMI Services

Airline services

94,892

96,342

Reimbursables

18,159

16,853

Total ACMI Services

113,051

113,195

Other Activities

26,254

28,421

Total Revenues

178,274

179,467

Eliminate internal revenues

(34,995

)

(33,961

)

Customer Revenues

$

143,279

$

145,506

Pre-tax Earnings (Loss) from Continuing Operations

CAM, inclusive of interest expense

16,873

16,818

ACMI Services

(5,404

)

(8,215

)

Other Activities

2,181

2,001

Net, unallocated interest expense

(348

)

(321

)

Net gain on derivative instruments