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| 8-K - 8-K - Air Transport Services Group, Inc. | a2013q3form8kcover-earning.htm |
Air Transport Services Group Announces Third-Quarter Results
Sequential Improvements Extend Progress Toward 2013 Adjusted EBITDA Goal
WILMINGTON, OH, November 6, 2013 - Air Transport Services Group, Inc. (Nasdaq: ATSG), a leading provider of aircraft leasing, and air cargo transportation and related services, today reported consolidated financial results for the quarter ended September 30, 2013.
For the third quarter of 2013, compared with the third quarter of 2012:
▪ | Revenues decreased 8.4 percent to $140.9 million. Revenues increased 1.4 percent from the second quarter of 2013. |
▪ | Net earnings from continuing operations decreased 32.5 percent to $7.8 million, or $0.12 per fully diluted share, but were up 12.8 percent from this year's second quarter. The Company is not a significant payer of federal income taxes and does not expect to be until 2016. |
▪ | Adjusted EBITDA decreased 7.7 percent from a year ago to $40.0 million. The sequential increase from the second quarter was $4.1 million, or 11.3 percent. This non-GAAP financial measure is defined and reconciled to comparable GAAP results in a table at the end of this release. |
Joe Hete, President and Chief Executive Officer of ATSG, said, "Our third quarter results reflect progress versus the second quarter in restoring the growth and profitability of our ACMI Services segment, and keep us on pace toward our Adjusted EBITDA goal for the year. Our cargo airline Air Transport International (ATI) captured more revenue and improved its pre-tax results compared with the second quarter, while adding two more Boeing 757 combi aircraft to its fleet. Curtailment of U.S. Federal Aviation Administration operations during the government shutdown in October did delay progress on our combi fleet upgrade, but we are now back on track, and garnering the operating benefits of our 757 combis."
Nine-month 2013 revenues decreased 6.6 percent to $423.1 million compared with the same 2012 period. Pre-tax earnings for the nine months decreased 22.4 percent to $37.2 million. Adjusted EBITDA, which excludes gains or losses on derivative instruments, decreased 6.1 percent to $113.3 million from a year ago.
Segment Results
CAM (Aircraft Leasing)
CAM | Third Quarter Nine Months | ||||||||||||||
($ in thousands) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Revenues | $ | 40,089 | $ | 39,155 | $ | 118,420 | $ | 115,073 | |||||||
Pre-Tax Earnings | 15,893 | 17,334 | 49,980 | 50,819 | |||||||||||
Significant Developments:
▪ | Higher revenues for the quarter stem from more modern Boeing 767 and 757 aircraft in service, replacing older legacy aircraft removed from service since the same quarter a year ago. |
▪ | Reductions in pre-tax earnings reflect fewer aircraft in service than a year ago, and also higher |
depreciation on aircraft added since the third quarter of 2012.
▪ | On September 30, 2013, ATSG owned 50 aircraft in serviceable condition - 20 leased to external customers and 30 leased to ATSG affiliate airlines. A table reflecting aircraft in service is included at the end of this release. |
◦ | The in-service fleet consisted of forty-one Boeing 767 freighters, four Boeing 757 freighters, two DC-8 combis (combined passenger and main-deck cargo aircraft) and three 757 combis. |
◦ | Two 757 combi aircraft entered service during the third quarter - one in July and another in September. |
▪ | Two Boeing 767-300s were completing passenger-to-freighter conversion as of September 30, 2013. |
▪ | A fourth 757 combi is expected to enter service late this year or early in 2014. The two remaining DC-8 combis will be retired by year-end. |
ACMI Services
ACMI Services | Third Quarter Nine Months | ||||||||||||||
($ in thousands) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Revenues | |||||||||||||||
Airline services | $ | 93,116 | $ | 102,072 | $ | 276,193 | $ | 299,434 | |||||||
Reimbursables | 16,313 | 20,454 | 51,156 | 57,676 | |||||||||||
Total ACMI Services Revenues | 109,429 | 122,526 | 327,349 | 357,110 | |||||||||||
Pre-Tax Loss | (7,113 | ) | (1,746 | ) | (21,610 | ) | (11,543 | ) | |||||||
Significant Developments:
▪ | Third-quarter airline services revenues decreased $9.0 million primarily as a result of reduced international ACMI operations, compared with the third quarter last year. Pre-tax results, while improved versus second quarter, were down versus a year ago, due primarily to lower revenues, and higher costs associated with slower than expected regulatory approvals and combi transition. |
◦ | ATI’s third-quarter operating loss, while larger than a year ago, improved 31 percent from the second quarter of 2013, and sequential improvements continued to be realized into the fourth quarter. ATI served the U.S. Military during most of the third quarter with two DC-8 and two 757 combi aircraft. Operating expenses were reduced from the second quarter, but still elevated due to continued DC-8 combi operations. A third 757 combi entered service in September. |
▪ | Block hours decreased 14 percent during the third quarter compared to the prior-year period, but increased 2 percent from the second quarter. The decrease versus a year ago stemmed primarily from fewer long-haul international ACMI operations at ABX Air and ATI. The improvement versus second quarter was driven by a 12 percent increase in combi hours for the U.S. Military. |
Other Activities
Other Activities | Third Quarter Nine Months | ||||||||||||||
($ in thousands) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Revenues | $ | 30,037 | $ | 26,773 | $ | 83,242 | $ | 81,876 | |||||||
Pre-Tax Earnings | 4,400 | 3,373 | 9,188 | 8,602 | |||||||||||
▪ | Revenue and earnings improvement reflects good growth in aircraft maintenance operations, along with continued solid results from our management of U.S. Postal Service sorting facilities, compared with a year ago. |
Outlook
ATSG reiterates its guidance for 2013 Adjusted EBITDA to be within a range of $155 to $160 million.
Hete said, "The curtailment of operations of the U.S. Federal Aviation Administration due to the government shutdown delayed final approval of ETOPS certification for our 757 combis from mid-September until earlier this week. However, with contributions from our seasonal fourth-quarter ad-hoc ACMI and charter operations, we still expect to achieve our 2013 Adjusted EBITDA goal.
“We also are beginning to see positive shifts in various air cargo networks that are creating new opportunities for us to deploy our aircraft assets and expertise. In addition to these new potential opportunities, with the regulatory and transition delays largely behind us, improving free cash flow due to minimal capital expenditure commitments, and expected positive pension developments, we will have the flexibility to opportunistically deploy capital at optimal, risk-adjusted returns heading into 2014.”
Conference Call
ATSG will host a conference call on Thursday, November 7, 2013, at 10:00 a.m. Eastern time to review its financial results for the third 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 35929294. 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, November 7, 2013, beginning at 2:00 p.m. and continuing through noon on Thursday, November 14, 2013, at (888) 843-7419 (international callers 630-652-3042); use pass code 35929294#. 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 757 aircraft, the timing associated with the deployment of aircraft to customers, achievement of the benefits we anticipated from the merger of two of our airline businesses, our operating airlines' ability to maintain on-time service and control costs, 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.
Contact:
Quint O. Turner, ATSG Inc. Chief Financial Officer
937-382-5591
AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
REVENUES | $ | 140,877 | $ | 153,826 | $ | 423,060 | $ | 452,886 | |||||||
OPERATING EXPENSES | |||||||||||||||
Salaries, wages and benefits | 41,498 | 44,153 | 126,771 | 135,827 | |||||||||||
Fuel | 11,356 | 12,038 | 38,157 | 39,962 | |||||||||||
Maintenance, materials and repairs | 24,644 | 26,751 | 71,783 | 75,135 | |||||||||||
Depreciation and amortization | 23,392 | 21,057 | 66,077 | 62,871 | |||||||||||
Rent | 6,958 | 6,745 | 20,528 | 18,719 | |||||||||||
Travel | 4,409 | 5,618 | 13,908 | 17,162 | |||||||||||
Landing and ramp | 2,227 | 3,877 | 8,264 | 11,823 | |||||||||||
Insurance | 1,559 | 1,944 | 4,466 | 5,780 | |||||||||||
Other operating expenses | 8,224 | 9,348 | 25,914 | 27,908 | |||||||||||
124,267 | 131,531 | 375,868 | 395,187 | ||||||||||||
OPERATING INCOME | 16,610 | 22,295 | 47,192 | 57,699 | |||||||||||
OTHER INCOME (EXPENSE) | |||||||||||||||
Interest income | 17 | 38 | 56 | 104 | |||||||||||
Interest expense | (3,814 | ) | (3,668 | ) | (10,500 | ) | (10,886 | ) | |||||||
Net gain (loss) on derivative instruments | (317 | ) | 294 | 425 | 956 | ||||||||||
(4,114 | ) | (3,336 | ) | (10,019 | ) | (9,826 | ) | ||||||||
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | 12,496 | 18,959 | 37,173 | 47,873 | |||||||||||
INCOME TAX EXPENSE | (4,697 | ) | (7,403 | ) | (13,958 | ) | (18,436 | ) | |||||||
EARNINGS FROM CONTINUING OPERATIONS | 7,799 | 11,556 | 23,215 | 29,437 | |||||||||||
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX | — | (186 | ) | (2 | ) | (576 | ) | ||||||||
NET EARNINGS | $ | 7,799 | $ | 11,370 | $ | 23,213 | $ | 28,861 | |||||||
EARNINGS PER SHARE - Basic | |||||||||||||||
Continuing operations | $ | 0.12 | $ | 0.18 | $ | 0.36 | $ | 0.46 | |||||||
Discontinued operations | — | — | — | (0.01 | ) | ||||||||||
NET EARNINGS PER SHARE | $ | 0.12 | $ | 0.18 | $ | 0.36 | $ | 0.45 | |||||||
EARNINGS PER SHARE - Diluted | |||||||||||||||
Continuing operations | $ | 0.12 | $ | 0.18 | $ | 0.36 | $ | 0.46 | |||||||
Discontinued operations | — | — | — | (0.01 | ) | ||||||||||
NET EARNINGS PER SHARE | $ | 0.12 | $ | 0.18 | $ | 0.36 | $ | 0.45 | |||||||
WEIGHTED AVERAGE SHARES | |||||||||||||||
Basic | 64,052 | 63,456 | 63,972 | 63,439 | |||||||||||
Diluted | 65,036 | 64,667 | 64,807 | 64,478 | |||||||||||
AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
September 30, | December 31, | ||||||
2013 | 2012 | ||||||
ASSETS | |||||||
CURRENT ASSETS: | |||||||
Cash and cash equivalents | $ | 16,864 | $ | 15,442 | |||
Accounts receivable, net of allowance of $543 in 2013 and $749 in 2012 | 45,680 | 47,858 | |||||
Inventory | 8,952 | 9,430 | |||||
Prepaid supplies and other | 11,075 | 8,855 | |||||
Deferred income taxes | 19,154 | 19,154 | |||||
Aircraft and engines held for sale | 2,491 | 3,360 | |||||
TOTAL CURRENT ASSETS | 104,216 | 104,099 | |||||
Property and equipment, net | 848,550 | 818,924 | |||||
Other assets | 21,427 | 20,462 | |||||
Intangibles | 4,958 | 5,146 | |||||
Goodwill | 86,980 | 86,980 | |||||
TOTAL ASSETS | $ | 1,066,131 | $ | 1,035,611 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
CURRENT LIABILITIES: | |||||||
Accounts payable | $ | 32,988 | $ | 36,521 | |||
Accrued salaries, wages and benefits | 22,936 | 22,917 | |||||
Accrued expenses | 8,258 | 8,502 | |||||
Current portion of debt obligations | 23,572 | 21,265 | |||||
Unearned revenue | 9,771 | 10,311 | |||||
TOTAL CURRENT LIABILITIES | 97,525 | 99,516 | |||||
Long term debt obligations | 368,331 | 343,216 | |||||
Post-retirement liabilities | 149,326 | 185,097 | |||||
Other liabilities | 61,592 | 62,104 | |||||
Deferred income taxes | 62,066 | 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; 64,672,632 and 64,130,056 shares issued and outstanding in 2013 and 2012, respectively | 647 | 641 | |||||
Additional paid-in capital | 524,554 | 523,087 | |||||
Accumulated deficit | (83,972 | ) | (107,185 | ) | |||
Accumulated other comprehensive loss | (113,938 | ) | (117,287 | ) | |||
TOTAL STOCKHOLDERS’ EQUITY | 327,291 | 299,256 | |||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 1,066,131 | $ | 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 | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Revenues | |||||||||||||||
CAM | $ | 40,089 | $ | 39,155 | $ | 118,420 | $ | 115,073 | |||||||
ACMI Services | |||||||||||||||
Airline services | 93,116 | 102,072 | 276,193 | 299,434 | |||||||||||
Reimbursables | 16,313 | 20,454 | 51,156 | 57,676 | |||||||||||
Total ACMI Services | 109,429 | 122,526 | 327,349 | 357,110 | |||||||||||
Other Activities | 30,037 | 26,773 | 83,242 | 81,876 | |||||||||||
Total Revenues | 179,555 | 188,454 | 529,011 | 554,059 | |||||||||||
Eliminate internal revenues | (38,678 | ) | (34,628 | ) | (105,951 | ) | (101,173 | ) | |||||||
Customer Revenues | $ | 140,877 | $ | 153,826 | $ | 423,060 | $ | 452,886 | |||||||
Pre-tax Earnings (Loss) from Continuing Operations | |||||||||||||||
CAM, inclusive of interest expense | 15,893 | 17,334 | 49,980 | 50,819 | |||||||||||
ACMI Services | (7,113 | ) | (1,746 | ) | (21,610 | ) | (11,543 | ) | |||||||
Other Activities | 4,400 | 3,373 | 9,188 | 8,602 | |||||||||||
Net, unallocated interest expense | (367 | ) | (296 | ) | (810 | ) | (961 | ) | |||||||
Net gain (loss) on derivative instruments | (317 | ) | 294 | 425 | 956 | ||||||||||
Total Pre-tax Earnings | $ | 12,496 | $ | 18,959 | $ | 37,173 | $ | 47,873 | |||||||
Adjustments to Pre-tax Earnings | |||||||||||||||
Less net gain (loss) on derivative instruments | 317 | (294 | ) | (425 | ) | (956 | ) | ||||||||
Adjusted Pre-tax Earnings | $ | 12,813 | $ | 18,665 | $ | 36,748 | $ | 46,917 | |||||||
Adjusted Pre-tax Earnings is defined as Earnings from Continuing Operations Before Income Taxes less derivative gains and losses. Management uses Adjusted Pre-tax Earnings from Continuing Operations to assess the performance of its operating results among periods. Adjusted Pre-tax earnings from Continuing Operations is a non-GAAP financial measure and should not be considered an alternative to Earnings from Continuing Operations Before Income Taxes or any other performance measure derived in accordance with GAAP.
AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES
UNAUDITED ADJUSTED EARNINGS FROM CONTINUING OPERATIONS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION
NON-GAAP RECONCILIATION
(In thousands)
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Earnings from Continuing Operations Before Income Taxes | $ | 12,496 | $ | 18,959 | $ | 37,173 | $ | 47,873 | |||||||
Interest Income | (17 | ) | (38 | ) | (56 | ) | (104 | ) | |||||||
Interest Expense | 3,814 | 3,668 | 10,500 | 10,886 | |||||||||||
Depreciation and Amortization | 23,392 | 21,057 | 66,077 | 62,871 | |||||||||||
EBITDA from Continuing Operations | $ | 39,685 | $ | 43,646 | $ | 113,694 | $ | 121,526 | |||||||
Less net gain (loss) on derivative instruments | 317 | (294 | ) | (425 | ) | (956 | ) | ||||||||
Adjusted EBITDA from Continuing Operations | $ | 40,002 | $ | 43,352 | $ | 113,269 | $ | 120,570 | |||||||
EBITDA and Adjusted EBITDA from Continuing Operations are non-GAAP financial measures and should not be considered as alternatives to Earnings from Continuing Operations Before Income Taxes or any other performance measure derived in accordance with GAAP.
EBITDA from Continuing Operations is defined as Earnings from Continuing Operations Before Income Taxes plus net interest expense, depreciation, and amortization expense. Adjusted EBITDA from Continuing Operations is defined as EBITDA from Continuing Operations less derivative gains and losses.
Management uses EBITDA from Continuing Operations as an indicator of the cash-generating performance of the operations of the Company. Management uses Adjusted EBITDA and Adjusted Pre-tax Earnings from Continuing Operations to assess the performance of its operating results among periods. EBITDA and Adjusted EBITDA from Continuing Operations, and Adjusted Pre-tax Earnings should not be considered in isolation or as a substitute for analysis of the Company's results as reported under GAAP, or as an alternative measure of liquidity.
AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES
IN-SERVICE AIRCRAFT FLEET
Aircraft Types | ||||||||||||||||||
December 31, | September 30, | December 31, | ||||||||||||||||
2012 | 2013 | 2013 Projected | ||||||||||||||||
Operating | Operating | Operating | ||||||||||||||||
Total | Owned | Lease | Total | Owned | Lease | Total | Owned | Lease | ||||||||||
B767-200 | 40 | 36 | 4 | 40 | 36 | 4 | 40 | 36 | 4 | |||||||||
B767-300 | 7 | 5 | 2 | 7 | 5 | 2 | 9 | 7 | 2 | |||||||||
B757-200 | 3 | 3 | — | 4 | 4 | — | 4 | 4 | — | |||||||||
B757 Combi | — | — | — | 3 | 3 | — | 4 | 4 | — | |||||||||
DC-8 Combi | 4 | 4 | — | 2 | 2 | — | — | — | — | |||||||||
Total Aircraft In-Service | 54 | 48 | 6 | 56 | 50 | 6 | 57 | 51 | 6 | |||||||||
Owned Aircraft In Serviceable Condition | ||||||||||||||||||
December 31, | September 30, | December 31, | ||||||||||||||||
2012 | 2013 | 2013 Projected | ||||||||||||||||
ATSG airlines | 28 | 30 | 30-31 | |||||||||||||||
External customers | 20 | 20 | 20-21 | |||||||||||||||
48 | 50 | |||||||||||||||||