Atlas Air Worldwide Reports Second-Quarter Earnings; Reaffirms Full-Year Outlook

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Atlas Air Worldwide Reports Second-Quarter Earnings; Reaffirms Full-Year Outlook

  • Adjusted Net Income of $20.4 Million, $0.79 per Share
  • Reported Net Income of $20.1 Million, $0.78 per Share
  • 1.52 Million Shares Repurchased during Six Months Ended June 30
  • Reaffirms Adjusted EPS Outlook of $4.80

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 second-quarter 2013 diluted earnings per share in line with expectations presented at the company's investor-analyst day on May 30 and reaffirmed its full-year adjusted diluted earnings per share outlook of approximately $4.80.

For the three months ended June 30, 2013, adjusted net income attributable to common stockholders totaled $20.4 million, or $0.79 per diluted share, compared with $31.2 million, or $1.18 per diluted share, for the three months ended June 30, 2012.


On a reported basis, second-quarter 2013 net income attributable to common stockholders totaled $20.1 million, or $0.78 per diluted share, compared with $30.9 million, or $1.16 per diluted share, in the second quarter of 2012.

Free cash flow increased to $64.6 million in the second quarter of 2013 from $54.2 million in the second quarter of 2012.

"Earnings in the second quarter of 2013 were driven by the strength of our ACMI operations, especially our new 747-8 freighters," said William J. Flynn, President and Chief Executive Officer.

"Our diversified business mix, with our expanding 767 service, growing CMI operations, and ongoing continuous improvement initiatives, enabled us to perform well in a quarter that was challenged by lower AMC Charter demand and softer AMC and Commercial Charter rates.

"Reflecting our commitment to enhance shareholder value, we acquired an additional 2.3% of our outstanding common stock through our share repurchase program from May through July. Combined with the shares that we bought through the end of April, we have repurchased approximately 5.7% of our shares so far this year.

"In addition, we are executing a strategic plan that leverages our core competencies. In July, we acquired our second and third 777 freighters for our Dry Leasing business. Each of our 777s was acquired with a long-term customer lease in place with a leading operator in the airfreight industry. These investments enhance our position in an attractive aircraft type, and they generate predictable, long-term revenue and earnings streams."

Second-Quarter Results

Revenue, volume and profitability growth in our core ACMI business during the second quarter were driven by our new 747-8Fs, with five additional -8F aircraft in service compared with the second 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 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, a reduction in cargo and passenger block hours, lower average cargo and passenger revenue per block hour, and a reduction in the number of one-way AMC missions led to a decline in segment contribution. Lower average passenger revenue per block hour during the period stemmed from a higher proportion of passenger flying on smaller-gauge 767 aircraft, which we added to supplement our wide-body 747-400 passenger service and enhance our share of military passenger business.

Segment results in Commercial Charter primarily related to a reduction in yields driven by soft second-quarter global charter-market conditions.

Results in the second quarter were also affected by a reduction in capitalized interest on 747-8F aircraft that entered service.

Income Taxes

Adjusted and reported earnings for the second quarter of 2013 included an effective income tax rate of 32.3%, reflecting the ongoing beneficial impact of lower taxes for certain foreign subsidiaries in our Dry Leasing business.

Half-Year Results

For the six months ended June 30, 2013, adjusted net income attributable to common stockholders totaled $26.3 million, or $1.01 per diluted share, compared with $44.9 million, or $1.69 per diluted share, for the six months ended June 30, 2012.

On a reported basis, first-half 2013 net income attributable to common stockholders totaled $40.1 million, or $1.54 per diluted share, compared with $43.7 million, or $1.65 per diluted share, in the first half of 2012.

Free cash flow in the first six months of 2013 increased to $107.0 million from $55.2 million in the first half of 2012.

Cash, Cash Equivalents and Short-Term Investments

At June 30, 2013, our cash, cash equivalents and short-term investments totaled $367.5 million, compared with $419.9 million at December 31, 2012.

The change in cash, cash equivalents and short-term investments reflected cash provided by operating and financing activities offset by cash used for investing activities.

Net cash used for investing activities in the first six months of 2013 primarily related to the purchase of two 747-8F aircraft as well as 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 net payments under accelerated share repurchase ("ASR") programs.

Share Repurchases

In mid-May, we entered into an ASR with a financial institution for the repurchase of our common stock for an aggregate purchase price of a minimum of $35.0 million up to a maximum of $44.0 million. As of June 30, 2013, we received delivery of an initial 615,791 shares pursuant to the program. This ASR is expected to conclude no later than mid-October.

Through the first six months of 2013, we repurchased a total of 1,519,092 shares, or 5.7%, of our outstanding common stock.

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

Outlook

Looking to full-year 2013, we expect to generate significant earnings and cash flow led by our ACMI business, improving Commercial Charter contribution and productivity improvements and operating efficiencies generated through our continuous improvement initiatives.

We expect market growth during 2013 to be seasonal and second-half weighted. We anticipate a strong peak season in 2013 driven by demand for new consumer electronics, especially in the gaming sector.

Based on our outlook for peak season and in line with our first-half performance, we continue to anticipate a sequential increase in our quarterly earnings throughout the year, with just under 80% of full-year adjusted EPS of approximately $4.80 occurring in the second half.

Full-year 2013 EPS guidance includes actual and expected repurchases of our outstanding stock during the year.

Similar to the first and second quarters, adjusted full-year earnings in 2013 will reflect strong growth in the company's ACMI business, driven by an increase in the number of 747-8F aircraft in ACMI service compared with 2012.

Block-hour volumes in 2013 are now expected to total approximately 170,000 hours, with ACMI segment flying representing approximately 74% of expected 2013 block hours, Commercial Charter about 15%, and AMC Charter about 11%. Passenger flying should account for more than 11,000 AMC Charter block hours in 2013, with cargo flying totaling more than 7,000 hours.

In addition, we now anticipate that maintenance expense will total approximately $162 million in 2013, about 63% of which was incurred in the first half of the year.

Mr. Flynn concluded: "We have performed well in an environment of continuing global uncertainty. We are well-positioned to serve our customers and the airfreight markets. 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 second-quarter financial and operating results at 11:00 a.m. Eastern Time on Thursday, August 1, 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 second-quarter call) or at the following Web address:

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

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 8 by dialing (855) 859-2056 (domestic) and (404) 537-3406 (international) and using Access Code 13663972#.

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 For the Six Months Ended
June 30, 2013 June 30, 2012June 30, 2013 June 30, 2012
 
Operating Revenue
ACMI$181,957$160,421$363,127$315,124
AMC Charter94,135138,014192,172259,308
Commercial Charter117,783120,827208,883197,774
Dry Leasing6,2232,8629,9705,807
Other 3,475  2,581  6,757  5,996 
Total Operating Revenue$403,573 $424,705 $780,909 $784,009 
 
Operating Expenses
Aircraft fuel102,743117,571196,101212,334
Salaries, wages and benefits72,51873,378145,049144,254
Maintenance, materials and repairs43,47743,371101,84696,351
Aircraft rent42,24742,75882,25582,176
Depreciation and amortization20,37113,87738,17928,180
Passenger and ground handling services17,30018,61834,07231,389
Navigation fees, landing fees and other rent16,35115,88230,46328,937
Travel13,77114,82328,95027,443
Gain on disposal of aircraft(399)(1,163)(422)(1,359)
Other 26,733  29,472  53,358  57,607 
Total Operating Expenses 355,112  368,587  709,851  707,312 
Operating Income 48,461  56,118  71,058  76,697 
 
Non-operating Expenses (Income)
Interest income(4,978)(4,887)(10,154)(9,796)
Interest expense20,67715,63139,11729,594
Capitalized interest(292)(5,952)(1,694)(12,304)
Loss on early extinguishment of debt994142994142
Other expense (income), net 1,104  1,082  1,656  785 
Total Non-operating Expenses (Income)17,5056,01629,9198,421
Income before income taxes30,95650,10241,13968,276
Income tax expense (benefit) 9,993  18,906  73  26,140 
Net Income20,96331,19641,06642,136

Less: Net income (loss) attributable to noncontrolling interests

 903  344  928  (1,551)

Net Income Attributable to Common Stockholders

$20,060 $30,852 $40,138 $43,687 
 
Earnings per share:
Basic$0.78 $1.17 $1.54 $1.66 
Diluted$0.78 $1.16 $1.54 $1.65 
 
Weighted average shares:
Basic 25,691  26,428  26,009  26,394 
Diluted 25,716  26,511  26,076  26,500 
 

Atlas Air Worldwide Holdings, Inc.

Consolidated Balance Sheets

(in thousands, except share data)

(Unaudited)

 
 June 30, 2013 December 31, 2012
Assets
Current Assets
Cash and cash equivalents$355,775$409,763
Short-term investments11,72910,119
Accounts receivable, net of allowance of $2,006 and $3,172, respectively113,271127,704
Prepaid maintenance20,24822,293
Deferred taxes35,08326,390
Prepaid expenses and other current assets 38,339  36,726 
Total current assets574,445632,995
Property and Equipment
Flight equipment2,682,5772,209,782
Ground equipment43,95439,230
Less: accumulated depreciation(217,534)(185,419)
Purchase deposits for flight equipment 19,817  147,946 
Property and equipment, net2,528,8142,211,539
Other Assets
Long-term investments and accrued interest130,150140,498
Deposits and other assets139,795132,120
Intangible assets, net 33,230  35,533 
Total Assets$3,406,434 $3,152,685 
 
Liabilities and Equity
Current Liabilities
Accounts payable$35,891$20,789
Accrued liabilities151,923152,467
Current portion of long-term debt1,2 242,417  154,760 
Total current liabilities430,231328,016
Other Liabilities
Long-term debt1,21,330,3451,149,282
Deferred taxes270,133265,384
Other liabilities 126,840  121,899 
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