Air Transport Services Group's First-Quarter Net Up 28 Percent Business Wire WILMINGTON, Ohio -- May 08, 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 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 EBITDA ^ was $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 13,592 10,743 TAXES 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 43,153 47,858 in 2013 and $749 in 2012 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 646 641 64,130,056 shares issued and outstanding in 2013 and 2012, respectively 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 290 460 Total Pre-tax Earnings $ 13,592 $ 10,743 Adjustments to Pre-tax Earnings Less Net Gain on derivative instruments (290 ) (460 ) Adjusted Pre-tax Earnings $ 13,302 $ 10,283 Adjusted Pre-tax Earnings is defined as Earnings from Continuing Operations Before Income Taxes less derivative gains. 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 March 31, 2013 2012 Earnings from Continuing Operations Before Income $ 13,592 $ 10,743 Taxes Interest Income (21 ) (28 ) Interest Expense 3,132 3,547 Depreciation and Amortization 20,920 20,300 EBITDA from Continuing $ 37,623 $ 34,562 Operations Less Net Gain on derivative (290 ) (460 ) instruments Adjusted EBITDA from $ 37,333 $ 34,102 Continuing Operations 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. 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, March 31, 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 — 3 3 — 4 4 — B757 Combi — — — — — — 4 4 — DC-8 Combi 4 4 — 3 3 — — — — Total Aircraft 54 48 6 53 47 6 57 51 6 In-Service Owned Aircraft In Serviceable Condition December 31, March 31, December 31, 2012 2013 2013 Projected ATSG 28 27 30-32 airlines External 20 20 19-21 customers 48 47 Contact: ATSG Inc. Quint O. Turner, Chief Financial Officer, 937-382-5591
Air Transport Services Group's First-Quarter Net Up 28 Percent
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