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Atlas Air Worldwide Holdings, Inc.$22.53($.02)(.09%)

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 Atlas Air Worldwide Reports Second-Quarter 2019 Results
   Thursday, August 01, 2019 8:00:00 AM ET
  • Reported Net Income of $86.9 million, $1.61 per Share
  • Reported Results Reflect Favorable Completion of Tax Examination and Impact of Warrant Accounting
  • Reported, Adjusted Results Impacted by Tariffs and Trade Tensions
  • Adjusted EBITDA of $86.4 Million
  • Adjusted Net Income of $4.5 million, $0.17 per Share
  • Updating Full-Year Outlook

PURCHASE, N.Y., Aug. 01, 2019 (GLOBE NEWSWIRE) -- Atlas Air Worldwide Holdings, Inc. (Nasdaq: AAWW) today announced second-quarter 2019 income from continuing operations, net of taxes, of $86.9 million, or $1.61 per diluted share, compared with a reported loss of $21.1 million, or $0.83 per diluted share, in the second quarter of 2018.

Reported results in the second quarter of 2019 included $59.8 million of tax benefits related to the favorable completion of an Internal Revenue Service examination of the company’s 2015 income tax return and an unrealized gain on outstanding warrants of $42.3 million. Reported results for the second quarter of 2018 included an unrealized loss on outstanding warrants of $50.0 million

On an adjusted basis, EBITDA totaled $86.4 million in the second quarter this year compared with $125.5 million in the year-ago second quarter. Adjusted income from continuing operations, net of taxes, in the second quarter of 2019 totaled $4.5 million, or $0.17 per diluted share, compared with $49.7 million, or $1.75 per diluted share, in the year-ago quarter.

“Revenue and earnings in the second quarter were below our expectations, as air cargo volumes and yields were affected in the near term by the widely reported impact of tariffs and trade tensions,” said Chief Executive Officer William J. Flynn. “In addition, our results during the period were impacted by labor-related service disruptions.

“With manufacturers and shippers taking a wait-and-see approach regarding tariffs and trade issues during the course of the quarter, we experienced a softening in anticipated commercial cargo block hours and yields in our Charter segment. On the military side of Charter, our cargo hours were in line with our expectations for the quarter and were up from the first quarter of this year as we anticipated they would be, but passenger demand for the military was less than expected.”    

Mr. Flynn added: “Although these factors are near-term headwinds for our industry, we are well-positioned and managing through them, and are maintaining our focus on our longer-term strategies and growth drivers.

“Our actions include ongoing continuous improvement initiatives designed to increase productivity, enhance efficiency, and grow the business. Additionally, we remain committed to negotiating a competitive collective bargaining agreement for our pilots. Our recent bargaining sessions have made progress, and we look forward to the upcoming scheduled sessions to continue that progress toward an agreement that all parties want.”

He continued: “Based on current conditions, we now anticipate that our full-year adjusted net income will total approximately 80% of our 2018 adjusted net income.* Despite the present trade tensions and the resulting impacts on global airfreight, we have the right building blocks for the future, including our world-class employees; the modern, efficient, diversified aircraft and services that customers want; our focus on express, e-commerce and fast-growing markets; the scale and scope of our enterprise; and our leadership position in global aviation outsourcing.”

Second-Quarter Results

Revenue in the second-quarter of 2019 was relatively in line with revenue in the second quarter of 2018. Higher volumes during the period reflected an increase in ACMI flying that was partially offset by a decrease in Charter flying.  

Higher ACMI segment revenue during the period reflected an increase in 767 and 737 flying, the start-up of 747-400 flying for new customers, and incremental 777 flying, partially offset by a decrease in the average rate per block hour primarily related to the growth in smaller-gauge 767 and 737 CMI flying.

ACMI segment contribution decreased during the quarter as increased levels of flying were more than offset by higher crew costs, including enhanced wages and work rules resulting from our interim agreement with pilots at Southern Air; additional heavy maintenance expense; and increased amortization of deferred maintenance costs. In addition, segment contribution was impacted by start-up costs for customer-growth initiatives as well as labor-related service disruptions.

Lower Charter segment revenue during the period was primarily driven by lower levels of flying and a decrease in average rate per block hour. Block-hour volumes primarily reflected a year-over-year decline in cargo and passenger demand from the military, and lower cargo demand from commercial customers reflecting the impact of tariffs and global trade tensions. The decrease in average rate primarily reflected lower commercial cargo yields (excluding fuel), partially offset by an increase in rates for the military.

Lower Charter segment contribution was driven by the decrease in commercial cargo yields and volumes related to the impact of tariffs and global trade tensions; a decrease in military cargo and passenger flying; and additional heavy maintenance expense. Results were also affected by labor-related service disruptions.

In Dry Leasing, higher segment revenue during the quarter primarily reflected the placement of additional 767-300 converted freighter aircraft throughout 2018, as well as the placement of one 777-200 freighter in July 2018, partially offset by the scheduled return of a 777-200 freighter in March 2019 that is awaiting placement with a customer. Lower segment contribution was primarily due to the scheduled return of that 777-200 freighter in March 2019, partially offset by the placement of additional aircraft.

Higher unallocated income and expenses, net, during the quarter primarily reflected the recognition in the second quarter of 2018 of a refund of aircraft rent paid in previous years; fleet growth initiatives; and increased amortization of a customer incentive asset.

Reported earnings in the second quarter of 2019 also included an income tax benefit due mainly to the favorable completion of an IRS examination of our 2015 income tax return and, to a lesser extent, nontaxable changes in the fair value of outstanding warrants. On an adjusted basis, our results reflected an income tax benefit primarily related to the favorable completion of the IRS examination.

Cash and Short-Term Investments

At June 30, 2019, our cash and cash equivalents, short-term investments and restricted cash totaled $127.9 million, compared with $248.4 million at December 31, 2018.

The change in position resulted from cash used for investing and financing activities, partially offset by cash provided by operating activities.

Net cash used for investing activities during the first half of 2019 primarily related to capital expenditures and payments for flight equipment and modifications, including 767-300 aircraft and related freighter conversion costs, spare engines and GEnx engine performance upgrade kits.

Net cash used for financing activities during the period primarily reflected payments on debt obligations.

Half-Year Results

Reported results for the six months ended June 30, 2019 reflected income from continuing operations, net of taxes, of $57.2 million, or $2.21 per diluted share, which included $59.8 million of tax benefits related to the favorable completion of an IRS examination of our 2015 income tax return. Results for the first half compared with a loss from continuing operations, net of taxes, of $11.5 million, or $0.45 per diluted share, for the six months ended June 30, 2018 that was primarily due to an unrealized loss on financial instruments of $57.8 million.

On an adjusted basis, EBITDA totaled $204.0 million in the first half of 2019 compared with $219.3 million in the first half of 2018. First-half 2019 adjusted income from continuing operations, net of taxes, totaled $31.8 million, or $1.16 per diluted share, compared with $73.5 million, or $2.62 per diluted share, in the first half of 2018.

Updating Our 2019 Outlook*

Reflecting our first-half results and our current market expectations for the balance of the year, we expect to fly approximately 330,000 block hours in 2019, with about 75% of the hours in ACMI and the balance in Charter.

We also anticipate revenue of approximately $2.9 billion, adjusted EBITDA of approximately $520 million, and adjusted net income of approximately 80% of our 2018 adjusted net income of $204.3 million.

Aircraft maintenance expense in 2019 is expected to total about $395 million, with depreciation and amortization totaling about $260 million. Core capital expenditures, which exclude aircraft and engine purchases, are projected to total approximately $135 to $145 million, mainly for parts and components for our fleet.

Due to the favorable completion of our IRS tax examination for 2015, we estimate our full-year 2019 adjusted effective income tax rate will be approximately 16%. 

For the third quarter of 2019, we expect to fly approximately 85,000 block hours (about 75% in ACMI), with revenue of more than $700 million and adjusted EBITDA of about $125 million. We also expect that our third-quarter adjusted net income will represent a mid- to upper-teen percentage of our full-year adjusted net income.  

We provide guidance on an adjusted basis because we are unable to predict, with reasonable certainty, the effects of outstanding warrants and other items that could be material to our reported results.*

Conference Call

Management will host a conference call to discuss Atlas Air Worldwide’s second-quarter 2019 financial and operating results at 11:00 a.m. Eastern Time on Thursday, August 1, 2019.

Interested parties may listen to the call live over the Internet at www.atlasairworldwide.com (click on “Investors,” click on “Presentations” and on the link to the second-quarter call) or at the following Web address:



https://edge.media-server.com/mmc/p/6doge49v

For those unable to listen to the live call, a replay will be archived on the above websites following the call. A replay will also be available through August 9 by dialing (855) 859-2056 (U.S. Toll Free) or (404) 537-3406 (from outside the U.S.) and using Access Code 6458834#.

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 Adjusted EBITDA; Adjusted income from continuing operations, net of taxes; Adjusted Diluted EPS from continuing operations, net of taxes; Adjusted effective tax rate; and Free Cash Flow, which exclude certain noncash income and expenses, and items impacting year-over-year comparisons of our results. 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 Income (loss) from continuing operations, net of taxes; Diluted EPS from continuing operations, net of taxes; Effective tax rate; and Net Cash Provided by Operating Activities, which are the most directly comparable 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, when considered together with the corresponding U.S. GAAP financial measures and the reconciliations to those measures, provide meaningful supplemental information to assist investors and analysts in understanding our financial results and assessing our prospects for future performance. For example:

  • Adjusted EBITDA; Adjusted income from continuing operations, net of taxes; and Adjusted Diluted EPS from continuing operations, net of taxes, provide a more comparable basis to analyze operating results and earnings and are measures commonly used by shareholders to measure our performance. In addition, management’s incentive compensation is determined, in part, by using Adjusted EBITDA and Adjusted income from continuing operations, net of taxes.
     
  • Adjusted effective tax rate provides improved insight into the tax effects of our ongoing business operations.
     
  • Free Cash Flow helps investors assess our ability, over the long term, to create value for our shareholders as it represents cash available to execute our capital allocation strategy.

*We provide guidance on an adjusted basis and are unable to provide forward-looking guidance on a U.S. GAAP basis or a reconciliation to the most directly comparable U.S. GAAP measures because we are unable to predict with reasonable certainty the ultimate outcome of certain significant items. The principal item is the impact on our results of our outstanding warrants, which are highly dependent on the change in our stock price during the period reported. These items are uncertain, depend on various factors, and could have a material impact on our U.S. GAAP results.

About Atlas Air Worldwide:

Atlas Air Worldwide is a leading global provider of outsourced aircraft and aviation operating services. It is the parent company of Atlas Air, Inc., Southern Air Holdings, Inc. and Titan Aviation Holdings, Inc., and is the majority shareholder of Polar Air Cargo Worldwide, Inc. Our companies operate the world’s largest fleet of 747 freighter aircraft and provide customers the broadest array of Boeing 747, 777, 767, 757 and 737 aircraft for domestic, regional and international cargo and passenger operations.

Atlas Air Worldwide’s press releases, SEC filings and other information may be accessed through the company’s home page, www.atlasairworldwide.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. Those statements are based on management’s beliefs, plans, expectations and assumptions, and on information currently available to management. Generally, the words “will,” “may,” “should,” “expect,” “anticipate,” “intend,” “plan,” “continue,” “believe,” “seek,” “project,” “estimate,” and similar expressions used in this release that do not relate to historical facts are intended to identify forward-looking statements.

Such forward-looking statements speak only as of the date of this release. They 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: our ability to effectively operate the network service contemplated by our agreements with Amazon; our ability to coordinate with Amazon to accept newly converted aircraft; the risk that the anticipated benefits of our agreements with Amazon will not be realized when expected, or at all; the possibility that Amazon may terminate its agreements with the companies; 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, pilots 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; changes in U.S. and foreign government trade policies; economic conditions; the effects of any hostilities or act of war (in the Middle East or elsewhere) or any terrorist attack; significant data breach or disruption of our information technology systems; labor costs and relations, work stoppages and service slowdowns; the outcome of pending negotiations with our pilots’ union; financing costs; the cost and availability of war risk insurance; 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; additional regulatory guidance or changes in interpretations and assumptions with respect to the impact of the U.S. Tax Cuts and Jobs Act of 2017; 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 2019 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 and expressly disclaims any obligation to revise or update publically any forward-looking statement to reflect future events or circumstances.

 
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, 2019  June 30, 2018  June 30, 2019  June 30, 2018 
                 
Operating Revenue $663,918  $666,145  $1,343,601  $1,256,159 
                 
Operating Expenses                
Salaries, wages and benefits  141,450   129,176   286,924   254,258 
Aircraft fuel  122,158   129,706   228,479   226,009 
Maintenance, materials and repairs  113,471   88,236   217,091   173,115 
Depreciation and amortization  63,689   50,834   128,170   100,464 
Travel  46,374   42,358   91,403   82,205 
Aircraft rent  40,335   40,281   82,223   79,805 
Navigation fees, landing fees and other rent  37,982   37,698   78,198   73,295 
Passenger and ground handling services  30,525   30,202   62,685   58,264 
Special charge  3,269   9,374   3,269   9,374 
Transaction-related expenses  734   240   3,261   510 
Other  54,961   47,094   106,054   97,345 
Total Operating Expenses  654,948   605,199   1,287,757   1,154,644 
                 
Operating Income  8,970   60,946   55,844   101,515 
                 
Non-operating Expenses (Income)                
Interest income  (1,278)  (1,388)  (3,322)  (3,112)
Interest expense  30,045   29,182   60,398   56,524 
Capitalized interest  (627)  (1,465)  (1,090)  (3,215)
Loss on early extinguishment of debt  -   -   245   - 
Unrealized (gain) loss on financial instruments  (42,300)  50,031   4,275   57,771 
Other (income) expense, net  945   (7,277)  (2,030)  (11,752)
Total Non-operating Expenses (Income)  (13,215)  69,083   58,476   96,216 
Income (loss) from continuing operations before income taxes  22,185   (8,137)  (2,632)  5,299 
Income tax (benefit) expense  (64,683)  12,986   (59,790)  16,794 
                 
Income (loss) from continuing operations, net of taxes  86,868   (21,123)  57,158   (11,495)
Loss from discontinued operations, net of taxes  -   (27)  -   (43)
                 
Net Income (Loss) $86,868  $(21,150) $57,158  $(11,538)
Earnings (loss) per share from continuing operations:                
Basic $3.36  $(0.83) $2.22  $(0.45)
Diluted $1.61  $(0.83) $2.21  $(0.45)
Loss per share from discontinued operations:                
Basic $-  $(0.00) $-  $(0.00)
Diluted $-  $(0.00) $-  $(0.00)
Earnings (loss) per share:                
Basic $3.36  $(0.83) $2.22  $(0.45)
Diluted $1.61  $(0.83) $2.21  $(0.45)
Weighted average shares:                
Basic  25,851   25,565   25,794   25,501 
Diluted  26,953   25,565   25,921   25,501 
                 


 
Atlas Air Worldwide Holdings, Inc.
Consolidated Balance Sheets
(in thousands, except share data)
(Unaudited)
       
  June 30, 2019  December 31, 2018 
Assets        
Current Assets        
Cash and cash equivalents $110,665  $221,501 
Short-term investments  7,153   15,624 
Restricted cash  10,093   11,240 
Accounts receivable, net of allowance of $1,633 and $1,563, respectively  265,489   269,320 
Prepaid expenses and other current assets  81,900   112,146 
Total current assets  475,300   629,831 
Property and Equipment        
Flight equipment  5,252,971   5,213,734 
Ground equipment  83,250   75,939 
Less:  accumulated depreciation  (954,100)  (860,354)
Flight equipment modifications in progress  128,166   32,916 
Property and equipment, net  4,510,287   4,462,235 
Other Assets        
Operating lease right-of-use assets  538,631   - 
Deferred costs and other assets  377,962   345,037 
Intangible assets, net and goodwill  83,162   97,689 
Total Assets $5,985,342  $5,534,792 
         
Liabilities and Equity        
Current Liabilities        
Accounts payable $66,441  $87,229 
Accrued liabilities  485,436   465,669 
Current portion of long-term debt and finance lease  268,686   264,835 
Current portion of long-term operating leases  146,091   - 
Total current liabilities  966,654   817,733 
Other Liabilities        
Long-term debt and finance lease  2,125,228   2,205,005 
Long-term operating leases  445,821   - 
Deferred taxes  195,608   256,970 
Financial instruments and other liabilities  124,922   187,120 
Total other liabilities  2,891,579   2,649,095 
Commitments and contingencies        
Equity        
Stockholders’ Equity        
Preferred stock, $1 par value; 10,000,000 shares authorized; no shares issued  -   - 
Common stock, $0.01 par value; 100,000,000 shares authorized;
  31,026,500 and 30,582,571 shares issued, 25,854,140 and 25,590,293
  shares outstanding (net of treasury stock), as of June 30, 2019
  and December 31, 2018, respectively
  310   306 
Additional paid-in-capital  746,725   736,035 
Treasury stock, at cost; 5,172,360 and 4,992,278 shares, respectively  (213,728)  (204,501)
Accumulated other comprehensive loss  (3,312)  (3,832)
Retained earnings  1,597,114   1,539,956 
Total stockholders’ equity  2,127,109   2,067,964 
Total Liabilities and Equity $5,985,342  $5,534,792 
         

1  Balance sheet debt at June 30, 2019 totaled $2,393.9 million, including the impact of $77.1 million of unamortized discount and debt issuance costs of $40.3 million, compared with $2,469.8 million, including the impact of $85.5 million of unamortized discount and debt issuance costs of $46.0 million at December 31, 2018.
The face value of our debt at June 30, 2019 totaled $2,511.3 million, compared with $2,601.3 million on December 31, 2018.

 
Atlas Air Worldwide Holdings, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
    
  For the Six Months Ended 
  June 30, 2019  June 30, 2018 
         
Operating Activities:        
Income (loss) from continuing operations, net of taxes $57,158  $(11,495)
Less: Loss from discontinued operations, net of taxes  -   (43)
Net Income (Loss)  57,158   (11,538)
         
Adjustments to reconcile Net Income (Loss) to net cash provided by operating activities:        
Depreciation and amortization  157,820   121,606 
Accretion of debt securities discount  208   (512)
Provision for allowance for doubtful accounts  4   1,179 
Loss on early extinguishment of debt  245   - 
Special charge, net of cash payments  3,269   9,374 
Unrealized loss on financial instruments  4,275   57,771 
Deferred taxes  (60,122)  16,561 
Stock-based compensation  10,025   10,627 
Changes in:        
Accounts receivable  26   (27,699)
Prepaid expenses, current assets and other assets  (23,835)  (10,815)
Accounts payable and accrued liabilities  (40,076)  9,357 
Net cash provided by operating activities  108,997   175,911 
Investing Activities:        
Capital expenditures  (76,754)  (54,791)
Payments for flight equipment and modifications  (99,161)  (448,388)
Proceeds from insurance  38,133   - 
Proceeds from investments  9,313   5,399 
Net cash used for investing activities  (128,469)  (497,780)
Financing Activities:        
Proceeds from debt issuance  19,723   305,059 
Payment of debt issuance costs  (955)  (4,781)
Payments of debt and finance lease obligations  (160,091)  (115,194)
Proceeds from revolving credit facility  50,000   135,000 
Payment of revolving credit facility  -   (60,000)
Customer maintenance reserves and deposits received  8,039   8,169 
Purchase of treasury stock  (9,227)  (10,319)
Net cash provided by (used for) financing activities  (92,511)  257,934 
Net decrease in cash, cash equivalents and restricted cash  (111,983)  (63,935)
Cash, cash equivalents and restricted cash at the beginning of period  232,741   291,864 
Cash, cash equivalents and restricted cash at the end of period $120,758  $227,929 
         
Noncash Investing and Financing Activities:        
         
Acquisition of flight equipment included in Accounts payable and accrued liabilities $51,996  $66,944 
         


 
Atlas Air Worldwide Holdings, Inc.
Direct Contribution

(in thousands)
(Unaudited)
       
  For the Three Months Ended  For the Six Months Ended 
  June 30, 2019  June 30, 2018  June 30, 2019  June 30, 2018 
Operating Revenue:                
ACMI $307,278  $277,795  $613,845  $544,175 
Charter  315,679   346,778   620,793   631,975 
Dry Leasing  43,535   39,958   113,481   76,350 
Customer incentive asset amortization  (6,936)  (3,290)  (13,222)  (5,886)
Other  4,362   4,904   8,704   9,545 
Total Operating Revenue $663,918  $666,145  $1,343,601  $1,256,159 
                 
Direct Contribution:                
ACMI $40,640  $52,707  $80,647  $93,579 
Charter  14,084   51,090   43,217   85,368 
Dry Leasing  11,091   12,191   46,618   23,550 
Total Direct Contribution for Reportable Segments  65,815   115,988   170,482   202,497 
                 
Unallocated income and expenses, net  (81,927)  (64,480)  (162,064)  (129,543)
Loss on early extinguishment of debt  -    -  (245)  - 
Unrealized gain (loss) on financial instruments  42,300   (50,031)  (4,275)  (57,771)
Special charge  (3,269)  (9,374)  (3,269)  (9,374)
Transaction-related expenses  (734)  (240)  (3,261)  (510)
Income (loss) from continuing operations before income taxes  22,185   (8,137)  (2,632)  5,299 
                 
Add back (subtract):                
Interest income  (1,278)  (1,388)  (3,322)  (3,112)
Interest expense  30,045   29,182   60,398   56,524 
Capitalized interest  (627)  (1,465)  (1,090)  (3,215)
Loss on early extinguishment of debt  -   -   245   - 
Unrealized (gain) loss on financial instruments  (42,300)  50,031   4,275   57,771 
Other expense (income), net  945   (7,277)  (2,030)  (11,752)
Operating Income $8,970  $60,946  $55,844  $101,515 
                 

Atlas Air Worldwide uses an economic performance metric, Direct Contribution, to show the profitability of each of its segments after allocation of direct operating and ownership costs. Atlas Air Worldwide currently has the following reportable segments: ACMI, Charter, and Dry Leasing. Each segment has different commercial and economic characteristics, which are separately reviewed by our chief operating decision maker.

Direct Contribution consists of income (loss) from continuing operations before income taxes, excluding loss on early extinguishment of debt, unrealized gain (loss) on financial instruments, special charge, transaction-related expenses, and unallocated income and expenses, net.

Direct operating and ownership costs include crew costs, maintenance, fuel, ground operations, sales costs, aircraft rent, interest expense on the portion of debt used for financing aircraft, interest income on debt securities, and aircraft depreciation.

Unallocated income and expenses, net include corporate overhead, nonaircraft depreciation, noncash expenses and income, interest expense on the portion of debt used for general corporate purposes, interest income on nondebt securities, capitalized interest, foreign exchange gains and losses, other revenue and other nonoperating costs.

 
Atlas Air Worldwide Holdings, Inc.
Reconciliation to Non-GAAP Measures
(in thousands, except per share data)
(Unaudited)
    
  For the Three Months Ended 
  June 30, 2019  June 30, 2018  Percent
Change
 
             
Income (loss) from continuing operations, net of taxes $86,868  $(21,123)  NM 
Impact from:            
Special charge  3,269   9,374     
Costs associated with transactions1  734   240     
Leadership transition costs  541   -     
Certain contract start-up costs2  1,694   -     
Accrual for legal matters and professional fees  121   345     
Noncash expenses and income, net3  11,515   7,455     
Unrealized (gain) loss on financial instruments  (42,300)  50,031     
Income tax effect of reconciling items  (3,652)  3,403     
Special tax item4  (54,272)  -     
Adjusted income from continuing operations, net of taxes $4,518  $49,725   (90.9)%
             
Weighted average diluted shares outstanding  26,953   25,565     
Add: dilutive warrant5  -   2,264     
dilutive convertible notes  -   450     
effect of convertible note hedges6  -   (450)    
dilutive restricted stock  -   572     
Adjusted weighted average diluted shares outstanding  26,953   28,401     
             
Adjusted Diluted EPS from continuing operations, net of taxes $0.17  $1.75   (90.3)%
             
  For the Six Months Ended 
  June 30, 2019  June 30, 2018  Percent
Change
 
             
Income (loss) from continuing operations, net of taxes $57,158  $(11,495)  NM 
Impact from:            
Special charge  3,269   9,374     
Costs associated with transactions1  3,261   510     
Leadership transition costs  541   -     
Certain contract start-up costs2  2,063   -     
Accrual for legal matters and professional fees  162   563     
Noncash expenses and income, net3  22,269   14,130     
Loss on early extinguishment of debt  245   -     
Unrealized loss on financial instruments  4,275   57,771     
Net insurance recovery  (3,449)  -     
Income tax effect of reconciling items  (3,681)  2,656     
Special tax item4  (54,272)  -     
Adjusted income from continuing operations, net of taxes $31,841  $73,509   (56.7)%
             
Weighted average diluted shares outstanding  25,921   25,501     
Add: dilutive warrant5  1,516   1,958     
dilutive convertible notes  -   225     
effect of convertible note hedges6  -   (225)    
dilutive restricted stock  -   547     
Adjusted weighted average diluted shares outstanding  27,437   28,006     
             
Adjusted Diluted EPS from continuing operations, net of taxes $1.16  $2.62   (55.7)%
             

1   Costs associated with transactions in 2019 primarily related to a customer transaction with warrants and other costs associated with our acquisition of Southern Air. Costs associated with transactions in 2018 primarily related to costs associated with our acquisition of Southern Air.
2  Certain contract start-up costs represent unique training-aircraft costs required for a new customer contract.
3   Noncash expenses and income, net in 2019 and 2018 primarily related to amortization of debt discount on the convertible notes and amortization of the customer incentive asset related to the outstanding warrants.
4   Special tax item represents income tax benefits from the completion of a 2015 IRS examination that are not related to ongoing operations.
5   Dilutive warrants represent potentially dilutive common shares related to the outstanding warrants. These shares were excluded from Diluted EPS from continuing operations, net of taxes prepared in accordance with GAAP when they would have been antidilutive.
6   Economic benefit from the convertible notes hedges in offsetting dilution from the convertible notes.

 
Atlas Air Worldwide Holdings, Inc.
Reconciliation to Non-GAAP Measures
(in thousands, except per share data)
(Unaudited)
    
  For the Three Months Ended 
  June 30, 2019  June 30, 2018 
         
Net Cash Provided by Operating Activities $55,228  $106,786 
Less:        
Capital expenditures  46,170   28,700 
Capitalized interest  627   1,465 
Free Cash Flow1 $8,431  $76,621 
         
         
         
  For the Six Months Ended 
  June 30, 2019  June 30, 2018 
         
Net Cash Provided by Operating Activities $108,997  $175,911 
Less:        
Capital expenditures  76,754   54,791 
Capitalized interest  1,090   3,215 
Free Cash Flow1 $31,153  $117,905 
         

Free Cash Flow = Net Cash Provided by Operating Activities minus Base Capital Expenditures and Capitalized Interest.

Base Capital Expenditures excludes purchases of aircraft.

 
Atlas Air Worldwide Holdings, Inc.
Reconciliation to Non-GAAP Measures
(in thousands)
(Unaudited)
       
  For the Three Months Ended  For the Six Months Ended 
  June 30, 2019  June 30, 2018  June 30, 2019  June 30, 2018 
                 
Income (loss) from continuing operations, net of taxes $86,868  $(21,123) $57,158  $(11,495)
Income tax (benefit) expense  (64,683)  12,986   (59,790)  16,794 
Income (loss) from continuing operations before income taxes  22,185   (8,137)  (2,632)  5,299 
Special charge  3,269   9,374   3,269   9,374 
Costs associated with transactions1  734   240   3,261   510 
Leadership transition costs  541   -   541   - 
Certain contract start-up costs2  1,694   -   2,063   - 
Accrual for legal matters and professional fees  121   345   162   563 
Noncash expenses and income, net3  11,515   7,455   22,269   14,130 
Loss on early extinguishment of debt  -   -   245   - 
Net insurance recovery  -   -   (3,449)  - 
Unrealized (gain) loss on financial instruments  (42,300)  50,031   4,275   57,771 
                 
Adjusted pretax income  (2,241)  59,308   30,004   87,647 
                 
Interest expense, net4  24,034   22,637   47,885   42,899 
Other non-operating expenses (income)  945   (7,277)  (2,030)  (11,752)
                 
Adjusted operating income  22,738   74,668   75,859   118,794 
                 
Depreciation and amortization  63,689   50,834   128,170   100,464 
                 
Adjusted EBITDA5 $86,427  $125,502  $204,029  $219,258 
                 
Income tax expense (benefit) $(64,683) $12,986  $(59,790) $16,794 
Income tax effect of reconciling items6  (3,652)  3,403   (3,681)  2,656 
Special tax item7  (54,272)  -   (54,272)  - 
Adjusted income tax expense (benefit)  (6,759)  9,583   (1,837)  14,138 
Adjusted pretax income $(2,241) $59,308  $30,004  $87,647 
Adjusted effective tax expense (benefit) rate  (301.6)%  16.2%  (6.1)%  16.1%
                 

1  Costs associated with transactions in 2019 primarily related to a customer transaction with warrants and other costs associated with our acquisition of Southern Air. Costs associated with transactions in 2018 primarily related to costs associated with our acquisition of Southern Air.
2   Certain contract start-up costs represent unique training-aircraft costs required for a new customer contract.
3  Noncash expenses and income, net, in 2019 and 2018 primarily related to amortization of debt discount on convertible notes and amortization of the customer incentive asset related to outstanding warrants.
4   Reflects impact of noncash expenses and income related to convertible notes, debt and investments.
5   Adjusted EBITDA: Earnings before interest, taxes, depreciation, amortization, special charge, costs associated with transactions, leadership transition costs, certain contract start-up costs, accrual for legal matters and professional fees, noncash expenses and income, net, loss on early extinguishment of debt, net insurance recovery, and unrealized (gain) loss on financial instruments, as applicable.
6   See Non-GAAP reconciliation of Adjusted income from continuing operations, net of taxes.
7   Special tax item represents income tax benefits from the completion of a 2015 IRS examination that are not related to ongoing operations.

 
Atlas Air Worldwide Holdings, Inc.
Operating Statistics and Traffic Results

(Unaudited)
             
  For the Three Months Ended  Increase/  For the Six Months Ended  Increase/ 
  June 30, 2019  June 30, 2018  (Decrease)  June 30, 2019  June 30, 2018  (Decrease) 
                         
Block Hours                        
ACMI  61,942   53,230   8,712   121,722   103,092   18,630 
Charter  17,661   18,981   (1,320)  34,321   35,041   (720)
Cargo  12,888   13,887   (999)  24,367   25,278   (911)
Passenger  4,773   5,094   (321)  9,954   9,763   191 
Other  679   449   230   1,299   1,022   277 
Total Block Hours  80,282   72,660   7,622   157,342   139,155   18,187 
                         
Revenue Per Block Hour                        
ACMI $4,961  $5,219  $(258) $5,043  $5,279  $(236)
Charter $17,874  $18,270  $(396) $18,088  $18,035  $53 
Cargo $17,473  $18,436  $(963) $17,710  $18,262  $(552)
Passenger $18,957  $17,815  $1,142  $19,012  $17,448  $1,564 
                         
Average Utilization (block hours per day)                        
ACMI1  8.7   8.7   -   8.7   8.5   0.2 
Charter                        
Cargo  8.4   10.8   (2.4)  8.2   10.3   (2.1)
Passenger  5.9   9.3   (3.4)  6.2   9.0   (2.8)
All Operating Aircraft1,2  8.5   9.1   (0.6)  8.4   8.9   (0.5)
                         
Fuel                        
Charter                        
Average fuel cost per gallon $2.37  $2.42  $(0.05) $2.30  $2.30  $- 
Fuel gallons consumed (000s)  51,596   53,508   (1,912)  99,468   98,458   1,010 
                         

1 ACMI and All Operating Aircraft averages in the second quarter and first six months of 2019 reflect the impact of increases in the number of CMI aircraft and amount of CMI flying compared with the same periods of 2018.
2 Average of All Operating Aircraft excludes Dry Leasing aircraft, which do not contribute to block-hour volumes.

 
Atlas Air Worldwide Holdings, Inc.
Operating Statistics and Traffic Results
(Unaudited)
             
  For the Three Months Ended  Increase/  For the Six Months Ended  Increase/ 
  June 30, 2019  June 30, 2018  (Decrease)  June 30, 2019  June 30, 2018  (Decrease) 
                         
Segment Operating Fleet (average aircraft equivalents during the period)                        
ACMI1                        
747-8F Cargo  8.2   9.0   (0.8)  8.6   9.0   (0.4)
747-400 Cargo  18.4   16.2   2.2   18.0   16.0   2.0 
747-400 Dreamlifter  3.6   3.1   0.5   3.6   3.1   0.5 
777-200 Cargo  6.4   5.0   1.4   6.2   5.0   1.2 
767-300 Cargo  25.0   19.3   5.7   25.3   18.3   7.0 
767-200 Cargo  9.0   9.0   -   9.0   9.0   - 
737-800 Cargo  1.8   -   1.8   0.9   -   0.9 
737-400 Cargo  5.0   5.0   -   5.0   5.0   - 
747-400 Passenger  -   -   -   -   0.5   (0.5)
767-200 Passenger  1.0   1.0   -   1.0   1.0   - 
Total  78.4   67.6   10.8   77.6   66.9   10.7 
Charter                        
747-8F Cargo  1.6   1.0   0.6   1.3   1.0   0.3 
747-400 Cargo  15.2   12.6   2.6   15.1   12.2   2.9 
767-300 Cargo  -   0.5   (0.5)  -   0.4   (0.4)
747-400 Passenger  4.0   2.0   2.0   4.0   2.0   2.0 
767-300 Passenger  4.9   4.0   0.9   4.9   4.0   0.9 
Total  25.7   20.1   5.6   25.3   19.6   5.7 
Dry Leasing1                        
777-200 Cargo  7.0   7.0   -   7.5   6.7   0.8 
767-300 Cargo  21.0   15.6   5.4   21.3   14.8   6.5 
757-200 Cargo  1.0   1.0   -   1.0   1.0   - 
737-300 Cargo  1.0   1.0   -   1.0   1.0   - 
737-800 Passenger  1.0   1.0   -   1.0   1.0   - 
Total  31.0   25.6   5.4   31.8   24.5   7.3 
Less: Aircraft Dry Leased to CMI Customers  (23.0)  (16.6)  (6.4)  (23.3)  (15.5)  (7.8)
Total Operating Average Aircraft Equivalents  112.1   96.7   15.4   111.4   95.5   15.9 
                         

1  ACMI average fleet excludes spare aircraft provided by CMI customers and Dry Leasing average fleet excludes aircraft awaiting placement.

Contacts:

Dan Loh (Investors) – (914) 701-8200
Debbie Coffey (Media) –  (914) 701-8951

 

 

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Source: Atlas Air Worldwide Holdings


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