Atlas Air Worldwide Reports Second-Quarter 2014 Results

  Atlas Air Worldwide Reports Second-Quarter 2014 Results    *Adjusted Net Income of $15.9 Million, $0.63 per Share   *Reported Net Income of $29.6 Million, $1.17 per Share   *Maintaining Full-Year Earnings Outlook  Business Wire  PURCHASE, N.Y. -- July 31, 2014  Atlas Air Worldwide Holdings, Inc. (Nasdaq:AAWW), a leading global provider of outsourced aircraft and aviation operating services, today announced adjusted net income attributable to common stockholders of $15.9 million, or $0.63 per diluted share, for the three months ended June 30, 2014, compared with $20.4 million, or $0.79 per diluted share, for the three months ended June 30, 2013.  On a reported basis, net income attributable to common stockholders in the second quarter of 2014 totaled $29.6 million, or $1.17 per diluted share, compared with $20.1 million, or $0.78 per diluted share, in the year-ago quarter.  “We are off to a good start in 2014. Airfreight demand is improving, and we are encouraged about our full-year outlook,” said William J. Flynn, President and Chief Executive Officer. “As we continue to gather additional insight into second-half yields, demand and military requirements, we are maintaining our full-year earnings framework.”  Mr. Flynn added: “Atlas is an entrepreneurial company. Our second-quarter results illustrate the positive contributions being generated by the investments we’ve made and the initiatives we’ve undertaken. In the face of an uncertain airfreight market and an anticipated decline in military cargo demand, we have diversified our business mix and are driving business resilience.  “Results within our ACMI segment are benefiting from modern 747-8 freighters as well as an increase in flying for our CMI customers. In Dry Leasing, the investments we’ve made since early 2013 in attractive 777 freighters on long-term leases with strong customers are driving a significant increase in contribution from highly predictable revenue and earnings streams.  “In addition, the expansion of our 767 platform and our growth into military and commercial passenger charter operations are providing added strength, complementing the improvement in airfreight demand.  “Led by the strength of our brand, our global market leadership in outsourced aircraft assets and services, and our ability to work closely with our customers as they enhance their route networks and grow their businesses, we are well-positioned to take advantage of market opportunities and improvement – and to continue our focus on longer-term business growth.”  Adjusted earnings in the second quarter of 2014 exclude an income tax benefit of $24.0 million, or $0.95 per diluted share, due to beneficial tax planning related to the tax treatment of extraterritorial income. This was partly offset by a noncash loss of $9.4 million after tax, or $0.37 per diluted share, resulting from the trade-in of used spare engines for new engines under the company’s engine-acquisition program, as well as additional charges totaling $1.0 million after tax, or $0.04 per diluted share, which were primarily related to the company’s U.K. affiliate, Global Supply Systems Limited.  Adjusted earnings in the second quarter of 2013 exclude an after-tax loss of $0.6 million, or $0.02 per diluted share, on the early extinguishment of debt, partly offset by an after-tax gain of $0.3 million, or $0.01 per diluted share, on the disposal of aircraft.  Second-Quarter Results  Profitability in our ACMI business during the second quarter reflected an increase in 747-8F revenue and an increase in CMI flying, offset by higher maintenance expense for aircraft operating in this segment.  ACMI revenues benefited from an increase in our average rate per block hour driven by our 747-8Fs, but were impacted by a decline in block-hour volumes related to the return of three 8Fs from British Airways in April and early May. This decline was partially offset by the placement of two of the 8Fs with DHL Express in May, the start-up of ACMI 8F flying for BST Logistics in February 2014 and Etihad in May 2013, as well as the start-up of ACMI 747-400 flying for Astral Aviation in September 2013. Block-hour volumes during the second quarter also reflected an increase in CMI Dreamlifter flying for Boeing and the initiation of CMI 767-200 passenger aircraft service for MLW Air during the third quarter of 2013.  In Dry Leasing, revenue and profitability grew following the addition of three 777F aircraft in January 2014 and two in July 2013, which raised our 777F fleet count to six. Each of these aircraft are leased to customers on a long-term basis.  In AMC Charter, results benefited from an increase in the volume of passenger flying on higher-yielding 747-400 aircraft, partially offset by a decrease in demand for cargo flying. Segment results in Commercial Charter reflected a decrease in market rates and increases in maintenance and crewmember travel expense, partially offset by an increase in block-hour volumes.  Reported earnings for the period reflected an effective income tax rate benefit of 461.0%, driven by tax-planning efforts regarding a federal income tax benefit related to the treatment of extraterritorial income from the offshore leasing of certain of our aircraft.  Half-Year Results  For the six months ended June 30, 2014, adjusted net income attributable to common stockholders totaled $27.3 million, or $1.08 per diluted share, compared with $26.3 million, or $1.01 per diluted share, for the six months ended June 30, 2013.  On a reported basis, first-half 2014 net income attributable to common stockholders totaled $37.5 million, or $1.49 per diluted share, compared with $40.1 million, or $1.54 per diluted share, in the first half of 2013.  Cash and Short-Term Investments  At June 30, 2014, our cash, cash equivalents, short-term investments and restricted cash totaled $299.2 million, compared with $339.2 million at December 31, 2013.  The change in position reflected cash provided by operating and financing activities offset by cash used for investing activities.  Net cash used for investing activities during the first half of 2014 primarily related to the purchase of three 777F aircraft for our Dry Leasing business.  Net cash provided by financing activities primarily reflected proceeds from the issuance of debt in connection with the acquisitions of these aircraft. Those proceeds were partially offset by payments on debt obligations and debt issuance costs.  Outlook  We are encouraged by our performance in the first half of 2014 and the positive direction of market trends so far this year.  Airfreight volumes continue to improve, and recent forecasts suggest that airfreight demand may grow by several percentage points in 2014 – the first real growth after three essentially flat years. Airfreight yields continue to lag behind, however, and there is still limited visibility into peak-season yields, demand and second-half military requirements. As a result, we are maintaining our earnings outlook for the full year.  On a sequential basis, per-share earnings in the third quarter of this year should improve over our adjusted second-quarter results by an increment similar to the increase between our first- and second-quarter adjusted earnings.  For the full year, we expect total block hours to be comparable to 2013, with more than 70% in ACMI, approximately 10% in AMC Charter, and the balance in Commercial Charter. Our Dry Leasing segment should show dramatic growth compared with 2013. While our share of military flying, mainly in passenger service, has increased due to a reduction in the number of carriers serving the market and our ability to capitalize on additional flying opportunities, we continue to expect an overall decline in military demand, primarily in cargo, compared with 2013.  We also expect aircraft maintenance expense to total approximately $180 million in 2014, with depreciation of approximately $120 to $125 million. Core capital expenditures this year are expected to total approximately $45 to $50 million, mainly for spare parts for our expanded fleet.  We remain confident in the resilience of our business model, as well as our ability to adapt to the market and to leverage the scale and efficiencies in our operations. The business initiatives we have undertaken and the investments we have made have enabled the company to deliver meaningful earnings in any environment.  Should 2014 be the inflection point when growth returns to commercial airfreight and yields improve, our business initiatives and the investments we have made have positioned Atlas to be one of the prime beneficiaries.  Conference Call  Management will host a conference call to discuss Atlas Air Worldwide’s second-quarter 2014 financial and operating results at 11:00 a.m. Eastern Time on Thursday, July 31, 2014.  Interested parties are invited to listen to the call live over the Internet at www.atlasair.com (click on “Investor Information”, click on “Presentations” and on the link to the second-quarter call) or at the following Web address:  http://www.media-server.com/m/p/a4o8ndjm  For those unable to listen to the live call, a replay will be available on the above Web sites following the call. A replay will also be available through August 6 by dialing (855) 859-2056 (domestic) and (404) 537-3406 (international) and using Access Code 70670671#.  About Non-GAAP Financial Measures  To supplement our financial statements presented in accordance with U.S. GAAP, we present certain non-GAAP financial measures to assist in the evaluation of our business performance. These non-GAAP measures include EBITDAR, as adjusted; EBITDA, as adjusted; Direct Contribution; Adjusted Net Income  Attributable to Common Stockholders; Adjusted Diluted EPS; and Free Cash Flow, which exclude certain items. These non-GAAP measures may not be comparable to similarly titled measures used by other companies and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with U.S. GAAP.  Our management uses these non-GAAP financial measures in assessing the performance of the Company’s ongoing operations and in planning and forecasting future periods. We believe that these adjusted measures provide meaningful information to assist investors and analysts in understanding our financial results and assessing our prospects for future performance.  About Atlas Air Worldwide:  Atlas Air Worldwide is the parent company of Atlas Air, Inc. (Atlas) and Titan Aviation Leasing (Titan), and is the majority shareholder of Polar Air Cargo Worldwide, Inc. (Polar). Through Atlas and Polar, Atlas Air Worldwide operates the world’s largest fleet of Boeing 747 freighter aircraft.  Atlas, Titan and Polar offer a range of outsourced aircraft and aviation operating services that include ACMI service – in which customers receive an aircraft, crew, maintenance and insurance on a long-term basis; CMI service, for customers that provide their own aircraft; express network and scheduled air cargo service; military cargo and passenger charters; commercial cargo and passenger charters; and dry leasing of aircraft and engines.  Atlas Air Worldwide’s press releases, SEC filings and other information can be accessed through the Company’s home page, www.atlasair.com.  This release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect Atlas Air Worldwide’s current views with respect to certain current and future events and financial performance. Such forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors relating to the operations and business environments of Atlas Air Worldwide and its subsidiaries (collectively, the “companies”) that may cause the actual results of the companies to be materially different from any future results, express or implied, in such forward-looking statements.  Factors that could cause actual results to differ materially from these forward-looking statements include, but are not limited to, the following: the ability of the companies to operate pursuant to the terms of their financing facilities; the ability of the companies to obtain and maintain normal terms with vendors and service providers; the companies’ ability to maintain contracts that are critical to their operations; the ability of the companies to fund and execute their business plan; the ability of the companies to attract, motivate and/or retain key executives and associates; the ability of the companies to attract and retain customers; the continued availability of our wide-body aircraft; demand for cargo services in the markets in which the companies operate; economic conditions; the effects of any hostilities or act of war (in the Middle East or elsewhere) or any terrorist attack; labor costs and relations; financing costs; the cost and availability of war risk insurance; our ability to maintain adequate internal controls over financial reporting; aviation fuel costs; security-related costs; competitive pressures on pricing (especially from lower-cost competitors); volatility in the international currency markets; weather conditions; government legislation and regulation; consumer perceptions of the companies’ products and services; anticipated and future litigation; and other risks and uncertainties set forth from time to time in Atlas Air Worldwide’s reports to the United States Securities and Exchange Commission.  For additional information, we refer you to the risk factors set forth under the heading “Risk Factors” in the most recent Annual Report on Form 10-K and subsequent reports on Form 10-Q filed by Atlas Air Worldwide with the Securities and Exchange Commission. Other factors and assumptions not identified above may also affect the forward-looking statements, and these other factors and assumptions may also cause actual results to differ materially from those discussed.  Except as stated in this release, Atlas Air Worldwide is not providing guidance or estimates regarding its anticipated business and financial performance for 2014 or thereafter.  Atlas Air Worldwide assumes no obligation to update such statements contained in this release to reflect actual results, changes in assumptions or changes in other factors affecting such estimates other than as required by law.   Atlas Air Worldwide Holdings, Inc.  Consolidated Statements of Operations  (in thousands, except per share data)  (Unaudited)                     For the Three Months Ended    For the Six Months Ended                        June 30,      June 30,        June 30,      June 30,                        2014            2013            2014            2013                                                                           Operating Revenue ACMI                   $ 186,720       $ 181,957       $ 384,861       $ 363,127 AMC Charter              91,281          94,135          154,155         192,172 Commercial               133,953         117,783         248,452         208,883 Charter Dry Leasing              25,524          6,223           50,200          9,970 Other                   3,691         3,475         6,864         6,757    Total Operating              $ 441,169      $ 403,573      $ 844,532      $ 780,909  Revenue                                                                           Operating Expenses Aircraft fuel            103,842         102,743         185,586         196,101 Salaries, wages and                77,948          72,518          150,803         145,049 benefits Maintenance, materials and            50,386          43,477          109,432         101,846 repairs Aircraft rent            34,826          39,854          70,236          78,348 Depreciation and                      30,381          20,371          58,536          38,179 amortization Navigation fees, landing            30,906          18,744          58,032          34,370 fees and other rent Passenger and ground                   21,859          17,300          41,230          34,072 handling services Travel                   18,774          13,771          36,056          28,950 Special charge           1,449           -               9,477           - Loss/(gain) on disposal of              14,679          (399    )       14,679          (422    ) aircraft Other                   29,462        26,733        55,678        53,358   Total Operating               414,512       355,112       789,745       709,851  Expenses Operating               26,657        48,461        54,787        71,058   Income                                                                           Non-operating Expenses (Income) Interest                 (4,719  )       (4,978  )       (9,446  )       (10,154 ) income Interest                 26,365          20,677          52,817          39,117 expense Capitalized              (67     )       (292    )       (379    )       (1,694  ) interest Loss on early extinguishment           -               994             -               994 of debt Other expense           (88     )      1,104         64            1,656    (income), net Total Non-operating            21,491          17,505          43,056          29,919 Expenses (Income) Income before            5,166           30,956          11,731          41,139 income taxes Income tax expense                 (23,815 )      9,993         (21,276 )      73       (benefit)                                                                           Net Income               28,981          20,963          33,007          41,066 Less: Net income (loss) attributable to noncontrolling          (612    )      903           (4,530  )      928      interests Net Income Attributable to Common              $ 29,593       $ 20,060       $ 37,537       $ 40,138   Stockholders                                                                           Earnings per share: Basic                  $ 1.17         $ 0.78         $ 1.49         $ 1.54     Diluted                $ 1.17         $ 0.78         $ 1.49         $ 1.54                                                                               Weighted average shares: Basic                   25,241        25,691        25,169        26,009   Diluted                 25,279        25,716        25,215        26,076      Atlas Air Worldwide Holdings, Inc.  Consolidated Balance Sheets  (in thousands, except share data)  (Unaudited)                                         June 30, 2014   December 31, 2013 Assets Current Assets Cash and cash equivalents                  $ 276,404         $   321,816 Short-term investments                       9,592               10,904 Restricted Cash                              13,215              6,491 Accounts receivable, net of allowance of $1,618 and $1,402,              162,860             132,159 respectively Prepaid maintenance                          10,411              31,620 Deferred taxes                               28,977              54,001 Prepaid expenses and other current          30,131            36,962      assets Total current assets                         531,590             593,953 Property and Equipment Flight equipment                             3,474,759           2,969,379 Ground equipment                             49,246              46,951 Less: accumulated depreciation               (304,257  )         (256,685   ) Purchase deposits for flight                5,665             69,320      equipment Property and equipment, net                  3,225,413           2,828,965 Other Assets Long-term investments and accrued            129,092             130,267 interest Deposits and other assets                    142,012             131,216 Intangible assets, net                      71,957            33,858      Total Assets                               $ 4,100,064      $   3,718,259                                                                     Liabilities and Equity Current Liabilities Accounts payable                           $ 46,094          $   65,367 Accrued liabilities                          233,079             194,292 Current portion of long-term                193,819           157,486     debt^1,2 Total current liabilities                    472,992             417,145 Other Liabilities Long-term debt^1,2                           1,876,961           1,539,139 Deferred taxes                               328,707             371,655 Other liabilities                           65,853            68,195      Total other liabilities                      2,271,521           1,978,989 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; 50,000,000 shares authorized; 28,547,138 and 28,200,213 shares issued, 25,256,124 and 25,038,629, shares outstanding (net of treasury stock), as of June 30, 2014 and December 31,               285                 282 2013, respectively Additional paid-in-capital                   565,310             561,481 Treasury stock, at cost; 3,291,014           (130,203  )         (125,826   ) and 3,161,584 shares, respectively Accumulated other comprehensive              (9,891    )         (10,677    ) loss Retained earnings                           930,050           892,513     Total stockholders’ equity                   1,355,551           1,317,773 Noncontrolling interest                     ―                  4,352       Total equity                                1,355,551         1,322,125   Total Liabilities and Equity               $ 4,100,064      $   3,718,259     ^1 Balance sheet debt at June 30, 2014 totaled $2,070.8 million, including the impact of $38.7 million of unamortized discount.  ^2 The face value of our debt at June 30, 2014 totaled $2,109.5 million, compared with $1,738.0 million on December 31, 2013.   Atlas Air Worldwide Holdings, Inc.  Consolidated Statements of Cash Flows  (in thousands)  (Unaudited)                                             For the Six Months Ended                                                June 30, 2014   June 30, 2013                                                                               Operating Activities: Net Income Attributable to Common              $  37,537         $  40,138 Stockholders Net income (loss) attributable to                (4,530   )       928       noncontrolling interests Net Income                                        33,007            41,066 Adjustments to reconcile Net Income to net cash provided by operating activities: Depreciation and amortization                     67,195            45,374 Accretion of debt securities discount             (4,081   )        (4,591   ) Provision for allowance for doubtful              232               17 accounts Special charge                                    7,171             - Loss on early extinguishment of debt              -                 994 Loss (gain) on disposal of aircraft               14,679            (422     ) Deferred taxes                                    (21,498  )        (548     ) Stock-based compensation expense                  5,805             7,866 Changes in: Accounts receivable                               (23,248  )        11,844 Prepaid expenses and other current                27,613            9,478 assets Deposits and other assets                         (4,603   )        481 Accounts payable and accrued                     4,854           15,072    liabilities Net cash provided by operating                    107,126           126,631 activities Investing Activities: Capital expenditures                              (10,653  )        (19,491  ) Purchase deposits and delivery                    (494,072 )        (342,584 ) payments for flight equipment Changes in restricted cash                        (6,724   )        - Proceeds from short-term investments              2,060             4,422 Proceeds from insurance                           -                 9,109 Proceeds from disposal of aircraft               -               2,100     Net cash used for investing activities            (509,389 )        (346,444 ) Financing Activities: Proceeds from debt issuance                       572,552           510,808 Refund of accelerated share repurchase            -                 13,510 Maintenance reserves received                     8,757             1,546 Prepayment of accelerated share                   -                 (29,510  ) repurchase Purchase of treasury stock                        (4,377   )        (73,253  ) Excess tax benefit from stock-based               (1,973   )        465 compensation expense Payment of debt issuance costs                    (17,087  )        (13,096  ) Payments of debt                                 (201,021 )       (244,645 ) Net cash provided by financing                    356,851           165,825 activities Net increase (decrease) in cash and               (45,412  )        (53,988  ) cash equivalents Cash and cash equivalents at the                 321,816         409,763   beginning of period Cash and cash equivalents at the end           $  276,404       $  355,775   of period                                                                               Non-cash Investing and Financing Activities Acquisition of flight and ground equipment included in Accounts payable and                                            $  29,087          -          accrued liabilities Disposition of aircraft included in            $  7,000           -         Accounts receivable    Atlas Air Worldwide Holdings, Inc.  Direct Contribution  (in thousands)  (Unaudited)                      For the Three Months Ended        For the Six Months Ended                        June 30,        June 30,           June 30,        June 30,                        2014               2013               2014               2013 Operating Revenue: ACMI                   $ 186,720          $ 181,957          $ 384,861          $ 363,127 AMC Charter              91,281             94,135             154,155            192,172 Commercial               133,953            117,783            248,452            208,883 Charter Dry Leasing              25,524             6,223              50,200             9,970 Other                   3,691            3,475            6,864            6,757    Total Operating              $ 441,169         $ 403,573         $ 844,532         $ 780,909  Revenue Direct Contribution: ACMI                   $ 44,128           $ 55,063           $ 89,326           $ 95,007 AMC Charter              15,620             12,658             25,088             25,395 Commercial               (6,056  )          (2,480  )          (18,301 )          (11,164 ) Charter Dry Leasing             8,738            2,437            16,909           3,613    Total Direct           $ 62,430          $ 67,678          $ 113,022         $ 112,851  Contribution                                                                                    Add back (subtract): Unallocated income and               (41,136 )          (36,127 )          (77,135 )          (71,140 ) expenses, net Loss on early extinguishment           -                  (994    )          -                  (994    ) of debt Special charge           (1,449  )          -                  (9,477  )          - Loss (gain) on disposal of             (14,679 )         399              (14,679 )         422      aircraft Income before           5,166            30,956           11,731           41,139   Income Taxes                                                                                    Add back (subtract): Interest                 (4,719  )          (4,978  )          (9,446  )          (10,154 ) income Interest                 26,365             20,677             52,817             39,117 expense Capitalized              (67     )          (292    )          (379    )          (1,694  ) interest Loss on early extinguishment           -                  994                -                  994 of debt Other expense           (88     )         1,104            64               1,656    (income), net Operating              $ 26,657          $ 48,461          $ 54,787          $ 71,058   Income   Atlas Air Worldwide uses an economic performance metric, Direct Contribution, to show the profitability of each of its segments after allocation of direct ownership costs. Atlas Air Worldwide currently has the following reportable segments: ACMI, AMC Charter, Commercial Charter, and Dry Leasing. Each segment has different operating and economic characteristics, which are separately reviewed by senior management.  Direct Contribution consists of income (loss) before taxes, excluding special charges, nonrecurring items, gains on the sale of aircraft, and unallocated fixed costs.  Direct costs include crew costs, maintenance costs, fuel, ground operations, sales costs, aircraft rent, interest expense related to aircraft debt and aircraft depreciation.  Unallocated income and expenses include corporate overhead, non-aircraft depreciation, interest income, foreign exchange gains and losses, other revenue and other non-operating costs, including one-time items.   Atlas Air Worldwide Holdings, Inc.  Reconciliation to Non-GAAP Measures  (in thousands, except per share data)  (Unaudited)                         For the Three Months Ended                              June 30,        June 30,       Percent                               2014                2013              Change                                                                      Net Income Attributable to             $ 29,593            $ 20,060            47.5   % Common Stockholders After-tax impact from: ETI tax benefit               (24,013  )          - Loss (gain) on disposal of                   9,389               (254     ) aircraft Special charge^1              658                 - Accrual for legal             300                 - matters Loss on early extinguishment of            -                 633               debt^2 Adjusted Net Income Attributable to              15,927            20,439           (22.1  %) Common Stockholders                                                                      Diluted EPS                 $ 1.17              $ 0.78              50.0   % After-tax impact from: ETI tax benefit               (0.95    )          - Loss (gain) on disposal of                   0.37                (0.01    ) aircraft Special charge^1              0.03                - Accrual for legal             0.01                - matters Loss on early extinguishment of            -                 0.02              debt^2 Adjusted Diluted             0.63              0.79             (20.3  %) EPS                                                                                                  For the Six Months Ended                              June 30,           June 30,          Percent                               2014                2013              Change                                                                      Net Income Attributable to             $ 37,537            $ 40,138            (6.5   %) Common Stockholders After-tax impact from: ETI tax benefit               (24,013  )          (14,160  ) Loss (gain) on disposal of                   9,389               (269     ) aircraft Special charge^1              4,041               - Accrual for legal             300                 - matters Loss on early extinguishment of            -                 633               debt^2 Adjusted Net Income Attributable to             $ 27,254           $ 26,342           3.5    % Common Stockholders                                                                      Diluted EPS                 $ 1.49              $ 1.54              (3.2   %) After-tax impact from: ETI tax benefit               (0.95    )          (0.54    ) Loss (gain) on disposal of                   0.37                (0.01    ) aircraft Special charge^1              0.16                - Accrual for legal             0.01                - matters Loss on early extinguishment of            -                 0.02              debt^2 Adjusted Diluted            $ 1.08             $ 1.01             6.9    % EPS   ^1 Included in Special charge in 2014 were GSS employee termination benefits, a GSS loan reserve and an adjustment to lease termination costs for two 747-400BCFs.  ^2 Loss on early extinguishment of debt was related to the financing of 747-8F aircraft.   Atlas Air Worldwide Holdings, Inc.  Reconciliation to Non-GAAP Measures  (in thousands, except per share data)  (Unaudited)                                          For the Three Months Ended                                              June 30, 2014     June 30, 2013                                               Net Cash Provided by Operating                  $  61,682      $ 72,242 Activities Less: Capital expenditures                               6,558         8,943 Capitalized interest                              67            292 Free Cash Flow^1                                $  55,057      $ 63,007                                                                                                                                                                                  For the Six Months Ended                                              June 30, 2014       June 30, 2013                                                                   Net Cash Provided by Operating                  $  107,126     $ 126,631 Activities Less: Capital expenditures                               10,653        19,491 Capitalized interest                              379           1,694 Free Cash Flow^1                                $  96,094      $ 105,446   ^1 Free Cash Flow = Cash Flows from Operations 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,        June 30,           June 30,      June 30,                        2014               2013               2014             2013                                         Income before          $ 5,166            $ 30,956           $ 11,731         $ 41,139 income taxes Loss (gain) on disposal of              14,679             (399    )          14,679           (422    ) aircraft Special                  1,449              -                  9,477            - charge^1 Accrual for              469                -                  469              - legal matters Loss on early extinguishment          -                994              -               994      of debt^2                                                                                  Adjusted                 21,763             31,551             36,356           41,711 pretax income                                                                                  Interest (income)                 21,579             15,407             42,992           27,269 expense, net Other non-operating           (88     )         1,104            64              1,656    expenses (income)                                                                                  Adjusted operating                43,254             48,062             79,412           70,636 income                                                                                  Depreciation and                     30,381           20,371           58,536          38,179   amortization                                                                                  EBITDA, as               73,635             68,433             137,948          108,815 adjusted^3                                                                                  Aircraft rent           34,826           39,854           70,236          78,348                                                                                    EBITDAR, as            $ 108,461         $ 108,287         $ 208,184        $ 187,163  adjusted^4   ^1 Included in Special charge in 2014 were GSS employee termination benefits, a GSS loan reserve and an adjustment to lease termination costs for two 747-400BCFs.  ^2 Loss on early extinguishment of debt was related to the financing of 747-8F aircraft.  ^3 Adjusted EBITDA: Earnings before interest, taxes, depreciation, amortization, special charge, and loss (gain) on disposal of aircraft, as applicable.  ^4 Adjusted EBITDAR: Earnings before interest, taxes, depreciation, amortization, aircraft rent expense, special charge, loss on early extinguishment of debt, and loss (gain) on disposal of aircraft, as applicable.   Atlas Air Worldwide Holdings, Inc.  Operating Statistics and Traffic Results  (Unaudited)                   For the Three Months Ended               For the Six Months Ended                        June 30,                Increase/        June 30,                Increase/                        2014       2013         (Decrease)       2014       2013         (Decrease)                                                                                              Block Hours ACMI                   27,652       28,372       (720    )        55,675       56,461       (786     ) AMC Charter Cargo                  1,167        1,891        (724    )        1,601        3,765        (2,164   ) Passenger              3,165        2,675        490              5,699        5,235        464 Commercial             6,727        6,331        396              12,373       11,050       1,323 Charter Nonrevenue             299          245          54              535          435          100       Total Block            39,010       39,514       (504    )        75,883       76,946       (1,063   ) Hours                                                                                              Revenue Per Block Hour ACMI                 $ 6,752      $ 6,413      $ 339            $ 6,913      $ 6,431      $ 482 AMC Charter            21,071       20,617       455              21,117       21,352       (235     ) Cargo                  23,043       22,615       428              22,608       22,973       (365     ) Passenger              20,344       19,204       1,140            20,698       20,187       511 Commercial             19,913       18,604       1,309            20,080       18,903       1,177 Charter                                                                                              Average Utilization (block hours per day) ACMI^1                 9.4          10.7         (1.3    )        9.4          10.5         (1.1     ) AMC Charter Cargo                  8.5          7.4          1.1              8.0          7.2          0.8 Passenger              7.7          6.4          1.3              7.0          6.7          0.3 Commercial             8.5          7.5          1.0             8.0          7.4          0.6       Charter All Operating              9.1          9.5          (0.4    )        8.9          9.4          (0.5     ) Aircraft^1,2                                                                                              Fuel AMC Average fuel cost per             $ 3.35       $ 3.63       $ (0.28   )      $ 3.34       $ 3.63       $ (0.29    ) gallon Fuel gallons consumed               10,470       11,105       (635    )        17,303       22,523       (5,220   ) (000s) Commercial Charter Average fuel cost per             $ 3.11       $ 3.03       $ 0.08           $ 3.15       $ 3.15       $ - gallon Fuel gallons consumed               22,090       20,628       1,462            40,556       36,254       4,302 (000s)   ^1 ACMI and All Operating Aircraft averages in the second quarter and first six months of 2014 reflect the impact of increases in the number of CMI aircraft and amount of CMI flying compared with the same periods of 2013.  ^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                 For the Six                         Months Ended                      Months Ended                     June 30,           Increase/      June 30,          Increase/                     2014   2013      (Decrease)     2014   2013     (Decrease) Segment Operating Fleet  (average aircraft  equivalents during the  period) ACMI^1 747-8F              8.3      8.2       0.1            8.5      7.6      0.9 Cargo 747-400             11.7     11.4      0.3            12.1     12.3     (0.2    ) Cargo 747-400             3.3      1.6       1.7            3.2      1.6      1.6 Dreamlifter 767-300             2.0      2.0       -              2.0      1.7      0.3 Cargo 767-200             5.0      5.0       -              5.0      5.0      - Cargo 747-400             1.0      1.0       -              1.0      1.0      - Passenger 767-300             -        -         -              -        0.4      (0.4    ) Passenger 767-200             1.0      -         1.0           1.0      -        1.0      Passenger Total               32.3     29.2      3.1            32.8     29.6     3.2 AMC Charter 747-400             1.5      2.8       (1.3    )      1.1      2.9      (1.8    ) Cargo 747-400             1.8      1.8       -              1.8      1.8      - Passenger 767-300             2.7      2.8       (0.1    )      2.7      2.5      0.2      Passenger Total               6.0      7.4       (1.4    )      5.6      7.2      (1.6    ) Commercial Charter 747-8F              0.6      0.3       0.3            0.4      0.1      0.3 Cargo 747-400             7.7      8.6       (0.9    )      7.7      7.9      (0.2    ) Cargo 747-400             0.2      0.2       -              0.2      0.2      - Passenger 767-300             0.2      0.2       -             0.2      0.1      0.1      Passenger Total               8.7      9.3       (0.6    )      8.5      8.3      0.2 Dry Leasing 777-200             6.0      1.0       5.0            5.9      0.6      5.3 Cargo 757-200             1.0      1.0       -              1.0      1.0      - Cargo 737-300             1.0      1.0       -              1.0      1.0      - Cargo 737-800             2.0      2.0       -             2.0      2.0      -        Passenger Total               10.0     5.0       5.0           9.9      4.6      5.3      Total Operating           57.0     50.9      6.1           56.8     49.7     7.1      Aircraft                                                                                                                                                   Out of              1.0      1.0       -              1.0      0.7      0.3 Service^2   ^1 ACMI average fleet excludes spare aircraft provided by CMI customers.  ^2 Out-of-service aircraft were temporarily parked during the period and are completely unencumbered.  Contact:  For Atlas Air Worldwide Holdings, Inc. Investors Dan Loh, 914-701-8200 or Media Bonnie Rodney, 914-701-8580  
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