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

  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
 
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