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Atlas Air Worldwide Holdings, Inc. (AAWW) (Nasdaq: AAWW), a
leading provider of global air cargo services, today announced record
quarterly earnings from continuing operations, highlighting a year of
transition and achievement with the Company repositioned for margin
improvement and earnings growth.
For the quarter ended December 31, 2006, AAWW reported record
quarterly net income of $45.7 million, or $2.16 per diluted share, on
revenues of $416.7 million. Operating income of $81.8 million and
pretax income of $74.0 million included a nonrecurring gain of $1.0
million on the disposal of aircraft.
For the full year ended December 31, 2006, AAWW posted net income
of $59.8 million, or $2.83 per diluted share, on revenues of $1.476
billion. Operating income totaled $152.3 million, including a
nonrecurring gain of $10.0 million on the disposal of aircraft. In
addition, pretax income of $93.8 million reflected both the gain on
disposal of aircraft and a one-time, non-cash expense of $12.5 million
associated with the early retirement of outstanding debt.
"The Company is positioned for an exciting future, with a winning
strategy that is designed to meet the growing needs of our customers
and to further stockholder value," said William J. Flynn, President
and Chief Executive Officer of AAWW.
"We actively manage our assets, and we have aggressively resized
our fleet and cost structure to maximize returns on our asset
portfolio. Our proactive focus on the quality of our business achieved
improvements in operating earnings and margins in the fourth quarter
that offset declines in total revenues and block-hour volumes. In
addition, the mid-year prepayment of high-cost debt has reduced
interest expense and improved our strategic and operating flexibility
through the elimination of restrictive loan covenants.
"We are also delivering on our Continuous Improvement initiatives,
which focus on strategic procurement and operational efficiencies to
reduce our cost base and enhance performance, reliability, and quality
levels across our entire operation."
Continuous Improvement initiatives accounted for more than $22
million in savings in 2006 relative to AAWW's 2005 cost base,
including nearly $14 million in the second half of 2006. Primary
sources of savings have been maintenance, both through improved
internal processes and lower pricing through competitive bids on
external airframe checks; fuel, where efficiency initiatives have
reduced consumption; improved parts management, which is helping to
minimize loan/borrow costs; and strategic procurement processes
relating to all other outside services.
AAWW anticipates that it will achieve the majority of the $100
million of Continuous Improvement benefits it has targeted during
2007, with the balance in 2008. The Company also continues to identify
and expects to achieve additional cost-savings opportunities.
Mr. Flynn added, "Our order for 12 leading-edge, next-generation
Boeing 747-8 freighter aircraft, with rights to acquire up to an
additional 14, enjoys launch-order pricing status. These aircraft will
provide a significant value proposition for our customers. In
addition, our landmark, strategic partnership with DHL will
significantly enhance the value of our scheduled-service business. We
look forward to closing our transaction with DHL as soon as we obtain
the remaining necessary regulatory approvals.
"We are also focused on evaluating potential organic and strategic
growth opportunities that build on our capability and expertise as a
flexible services provider of aircraft and operating solutions to the
airfreight industry.
"The market is strong for ACMI, where we are the world's
technology leader and where demand for long-haul, intercontinental,
wide-body freighters has outpaced the core increase in demand for air
cargo capacity. We see significant growth opportunities across the
spectrum of our ACMI services, including new customers in new markets,
new fleet types, and subsets of our aircraft and operating solutions."
Mr. Flynn concluded: "We will continue to be an innovator in the
airfreight market, and we will continue to evaluate an array of
opportunities to grow earnings. We are a high-quality,
flexible-services provider in a growing sector of the global
transportation and logistics market. That combination is attractive to
strategic partners, such as DHL, and will continue to form a basis for
growth opportunities going forward. Our team is focused on executing
our strategy and delivering on our plan. AAWW is positioned for an
exciting and dynamic future."
Conference Call
Management will host a conference call to discuss AAWW's
fourth-quarter and full-year 2006 financial and operating results at
11:00 A.M. Eastern Time on Thursday, March 8, 2007.
Interested parties are invited to listen to the call live over the
Internet at www.atlasair.com or www.earnings.com.
For those unable to listen to the live call, a replay will be
available on the above Web sites for 90 days following the call. A
replay will also be available through March 15 by dialing (800)
405-2236 (domestic) and (303) 590-3000 (international) and using Pass
Code 11085611#.
4Q06 Performance Factors Versus 4Q05
Record earnings in the fourth quarter of 2006 benefited from
sharply lower operating expenses compared with the fourth quarter of
2005. The improvement in operating costs more than offset a decline in
AMC flying and associated revenues, due in part to an overall
reduction in the U.S. military's heavy-lift requirements. Revenues
were also impacted by a reduction in aggregate block hours and lower
unit revenues in AAWW's non-ACMI business segments.
Total operating expenses in the fourth quarter of 2006 declined by
$74.9 million, or 18.3%, while operating revenues were $54.2 million,
or 11.5%, lower than the previous year's fourth quarter.
Operating revenues in the fourth quarter of 2006 reflected a 19.5%
reduction in average operating aircraft (31.4 versus 39.0) and a 9.3%
reduction in total block-hour flying activity (35,551 block hours
versus 39,193).
ACMI's performance in the fourth quarter of 2006 benefited from an
increase in pre-Christmas, peak-flying activity, as well as a higher
proportion of more profitable 747-400 aircraft employed in the segment
compared with 747-200 Classics.
Improved average block-hour rates in the ACMI segment during the
quarter ($6,308 versus $5,964) reflected the increase in peak-flying
activity and the higher proportion of 747-400 aircraft, as well as the
impact of contractual rate increases and increased rates on recent
lease renewals. In contrast, a 9.9% decline in ACMI block hours
(17,827 versus 19,781) largely reflected a reduction of 747-200
flying.
Twelve aircraft (10 Boeing 747-400s and two Boeing 747-200s) were
directly supporting the Company's long-term ACMI operations at
December 31, 2006, compared with 17 aircraft (10 Boeing 747-400s and
seven Boeing 747-200s) at December 31, 2005.
Performance in the Scheduled Service segment during the quarter
benefited from a reduction in fuel costs and an improvement in unit
revenues with respect to capacity the Company reallocated to North
Atlantic and South American markets in response to demand in those
regions, offset in part by an increase in the relative proportion of
roundtrip operations to Asia.
Scheduled Service traffic (as measured by revenue ton miles, or
RTMs) increased 13.8%, and capacity (as measured by available ton
miles, or ATMs) increased 16.6%, largely reflecting the impact of a
labor disruption that ended in early October 2005, as well as an
increase in weekly frequencies to China (12 versus 9), Europe and
South America. Load factor, meanwhile, declined compared with the
year-ago period (64.8% versus 66.3%), principally reflecting the
increased proportion of roundtrip operations to Asia.
Unit revenues (RATM) in the Scheduled Service segment decreased
5.4% ($0.279 versus $0.295) during the quarter, while yield decreased
3.1% ($0.431 versus $0.445). The reductions largely reflect the impact
of the increase in the relative proportion of roundtrip operations to
Asia and lower fuel-surcharge rates, partially offset by increases in
RATM in the North Atlantic and South American markets.
AMC Charter activity declined 22.9% (5,682 block hours versus
7,374) during the quarter due to an overall reduction in the U.S.
military's heavy-lift requirements, as well as an increase in the
relative capacity of competing teams. Block-hour rates ($17,093 versus
$17,882) were affected by both a relative and absolute decrease in the
number of one-way AMC missions.
Due to a reallocation of capacity to more profitable opportunities
in other segments during the period, Commercial Charter block-hour
volumes decreased (1,346 versus 2,662), accompanied a by decrease in
block-hour rates ($16,745 versus $20,252). The segment benefited from
lower fuel costs during the quarter, but also experienced an increase
in the amount of roundtrip activity versus higher-yielding, one-way
activity.
4Q06 Operating Expenses Versus 4Q05
AAWW's operating expenses in the fourth quarter of 2006 were $74.9
million, or 18.3%, lower than the comparable 2005 period.
Significantly lower maintenance and fuel expenditures, combined with
lower labor, travel, landing fees and other expenses, were offset in
part by higher depreciation and an increase in ground handling and
airport fees.
Maintenance expense during the quarter declined $33.9 million, or
55.4%, compared with the same quarter in 2005. Maintenance expense
benefited from the positive impact of Continuous Improvement savings
initiatives, the impact of reduced block-hour activity, a decrease in
heavy airframe maintenance events (one 747-200 C Check versus three
747-200 C Checks, one 747-200 D Check, and one 747-400 D Check in the
fourth quarter of 2005), and a reduction in the number of engine
overhauls (6 versus 19).
Aircraft fuel expense decreased 20.6%, or $30.1 million, versus
the fourth quarter of 2005, reflecting both lower fuel prices in the
Scheduled Service and Commercial Charter businesses ($1.93 per gallon
versus $2.29) and an 11.9% decline in total fuel consumption (57.0
million gallons versus 64.7 million gallons). The decline in fuel
consumption, which reflected an 8.7% reduction in non-ACMI block
hours, also benefited from initiatives that resulted in a 3.5%
improvement in fuel-burn efficiency (3,215 gallons per block hour
versus 3,330 gallons per block hour).
Labor expenses were $3.9 million, or 5.7%, lower than in the
year-ago fourth quarter, in line with lower block hours.
Travel expenses in the fourth quarter declined 18.9%, or $3.0
million, due both to Continuous Improvement initiatives that resulted
in more efficient crew scheduling as well as a reduction in crew
travel related to the decline in total block-hour activity.
Landing fees declined 13.1%, or $2.7 million, mainly due to a
reduction in AMC and Commercial Charter block hours, partly offset by
an increase in Scheduled Service activity.
Other operating expenses decreased $6.0 million, or 19.0%, versus
the fourth quarter of 2005, primarily due to a $2.5 million decrease
in consulting fees related to the redesign of internal controls that
occurred in 2005, a $1.7 million decrease in other taxes, and other
miscellaneous improvements, offset in part by a $1.2 million increase
in freight and other expenses.
Depreciation and amortization increased $3.5 million, or 41.5%,
primarily due to the disposal of engine blades and other rotable parts
that were beyond economic repair.
Ground handling and airport fees increased $2.7 million, or 14.6%,
mainly as a result of the increase in Scheduled Service business
activity.
Net Interest Expense
Net interest expense decreased $8.3 million, or 50.8%, compared
with the fourth quarter of 2005, primarily reflecting a lower level of
outstanding debt, including the prepayment of $140.8 million of debt
during the third quarter of 2006.
Cash and Cash Equivalents
At December 31, 2006, AAWW's cash and cash equivalents totaled
$231.8 million compared with $172.8 million at September 30, 2006 and
$305.9 million at year-end 2005.
Outstanding Debt
At December 31, 2006, AAWW's balance sheet debt and capital lease
obligations totaled $418.6 million, including current maturities of
$19.8 million but excluding $82.9 million of unamortized discount
related to fair market value adjustments recorded against its debt as
a result of the application of fresh-start accounting.
The face value of AAWW's on-balance sheet debt and capital lease
obligations at December 31, 2006 totaled $501.5 million compared with
$689.9 million on December 31, 2005.
Non-GAAP Financial Measures
With respect to non-GAAP measures frequently used by AAWW's
management to analyze its results, EBITDAR, as adjusted (defined as
"earnings before interest, taxes, depreciation, amortization, aircraft
rent expense, gains on the disposal of assets, and post-emergence
costs and related professional fees, as applicable"), increased to
$131.6 million in the fourth quarter of 2006 from $108.8 million in
the fourth quarter of 2005. For the full year, EBITDAR totaled $338.2
million compared with $386.4 million in 2005.
In addition, EBITDA, as adjusted (defined as "earnings before
interest, taxes, depreciation, amortization, gains on the disposal of
assets, and post-emergence costs and related professional fees, as
applicable"), rose to $92.8 million in the latest reporting period
versus $69.9 million in the fourth quarter of 2005. EBITDA for the
full year was $185.0 million, compared with $235.5 million for the
previous year.
About Non-GAAP Financial Measures
To supplement AAWW's financial statements presented in accordance
with GAAP, AAWW presents certain non-GAAP financial measures to assist
in the evaluation of the performance of its business. These non-GAAP
measures include EBITDAR, as adjusted, and EBITDA, as adjusted, each
excluding post-emergence costs and related professional fees.
AAWW's management uses these non-GAAP financial measures in
assessing the performance of the Company's ongoing operations and
liquidity and in planning and forecasting future periods.
About Atlas Air Worldwide Holdings, Inc.:
AAWW is the parent company of Atlas Air, Inc. (Atlas) and Polar
Air Cargo, Inc. (Polar), which together operate the world's largest
fleet of Boeing 747 freighter aircraft.
AAWW, through its principal subsidiaries Atlas and Polar, offers
scheduled air cargo service, cargo charters, military charters, and
ACMI aircraft leasing in which customers receive a dedicated aircraft,
crew, maintenance and insurance on a long-term lease basis.
AAWW'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 AAWW'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 AAWW 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 continued ability to
remedy weaknesses in our 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; pending and future litigation; and other risks
and uncertainties set forth from time to time in AAWW'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 Quarterly Report on Form
10-Q filed by AAWW with the Securities and Exchange Commission on
November 9, 2006. Other factors and assumptions not identified above
are also involved in the preparation of forward-looking statements,
and the failure of such other factors and assumptions to be realized
may also cause actual results to differ materially from those
discussed.
AAWW 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.
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*T
Atlas Air Worldwide Holdings, Inc.
Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
For the Three For the Twelve Months
Months Ended Ended
------------------- -----------------------
December December December December
31, 2006 31, 2005 31, 2006 31, 2005
--------- --------- -----------------------
Operating Revenues
ACMI $112,447 $117,981 $ 407,046 $ 466,018
Scheduled service 171,066 155,153 610,783 555,814
AMC charter 97,122 131,853 326,773 440,642
Commercial charter 22,539 53,917 82,808 107,840
Other revenue 13,514 11,963 48,920 47,583
--------- --------- -----------------------
$416,688 $470,867 $1,476,330 $1,617,897
--------- --------- -----------------------
Operating Expenses
Aircraft fuel 115,666 145,734 454,675 432,367
Salaries, wages and
benefits 64,823 68,762 243,724 244,509
Maintenance, materials and
repairs 27,287 61,192 144,132 233,614
Aircraft rent 38,770 38,898 153,259 150,879
Ground handling and
airport fees 20,877 18,210 75,088 71,735
Landing fees and other
rent 17,903 20,609 68,174 80,054
Depreciation and
amortization 12,021 8,498 42,341 46,336
Gains on disposal of
aircraft (1,003) (353) (10,038) (7,820)
Travel 12,853 15,841 49,910 60,089
Post-emergence costs and
related
professional fees 37 718 353 3,706
Other 25,694 31,710 102,412 109,128
--------- --------- -----------------------
Total operating expenses 334,928 409,819 1,324,030 1,424,597
--------- --------- -----------------------
Operating income 81,760 61,048 152,300 193,300
--------- --------- -----------------------
Non-operating Expenses
Interest income (2,859) (2,694) (12,780) (6,828)
Interest expense 11,594 19,080 60,298 74,512
Capitalized interest (726) (123) (726) (123)
Loss on extinguishment of
debt - - 12,518 -
Other (income) expense,
net (298) 34 (811) 1,976
--------- --------- -----------------------
Total non-operating
expenses 7,711 16,297 58,499 69,537
--------- --------- -----------------------
Income before income taxes 74,049 44,751 93,801 123,763
Income tax expense 28,347 17,282 34,020 49,902
--------- --------- -----------------------
Net income $ 45,702 $ 27,469 $ 59,781 $ 73,861
========= ========= =======================
Income per share:
Basic $ 2.19 $ 1.36 $ 2.89 $ 3.64
========= ========= =======================
Diluted $ 2.16 $ 1.32 $ 2.83 $ 3.56
========= ========= =======================
Weighted average shares:
Basic 20,847 20,390 20,672 20,280
========= ========= =======================
Diluted 21,158 20,821 21,100 20,738
========= ========= =======================
*T
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*T
Atlas Air Worldwide Holdings, Inc.
Reconciliation to Non-GAAP Measures
(in thousands)
(Unaudited)
For the For the For the For the
Three Three Twelve Twelve
Months Months Months Months
Ended Ended Ended Ended
December December December December
31, 2006 31, 2005 31, 2006 31, 2005
--------- --------- --------- ---------
Income before income taxes $ 74,049 $ 44,751 $ 93,801 $123,763
Post-emergence costs and
related professional fees 37 718 353 3,706
Gains on disposal of aircraft (1,003) (353) (10,038) (7,820)
--------- --------- --------- ---------
Pretax income before gains on
disposal of aircraft and post-
emergence costs and related
professional fees 73,083 45,116 84,116 119,649
Interest expense, net 8,009 16,263 46,792 67,561
Loss on extinguishment of debt - - 12,518 -
Other non-operating (income)
expense (298) 34 (811) 1,976
--------- --------- --------- ---------
Operating income before non-
operating expenses, gains on
disposal of aircraft, and
post-emergence costs and
related professional fees 80,794 61,413 142,615 189,186
Depreciation and amortization 12,021 8,498 42,341 46,336
--------- --------- --------- ---------
EBITDA, as adjusted* 92,815 69,911 184,956 235,522
Aircraft rent 38,770 38,898 153,259 150,879
--------- --------- --------- ---------
EBITDAR, as adjusted* $131,585 $108,809 $338,215 $386,401
========= ========= ========= =========
*T
* EBITDA, as adjusted: Earnings before interest, taxes,
depreciation, amortization, gains on the disposal of assets, and
post-emergence costs and related professional fees, as applicable.
* EBITDAR, as adjusted: Earnings before interest, taxes,
depreciation, amortization, aircraft rent expense, gains on the
disposal of assets, and post-emergence costs and related professional
fees, as applicable.
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*T
Atlas Air Worldwide Holdings, Inc.
Operating Statistics and Traffic Results
(Unaudited)
For the Three For the Twelve
Months Ended Months Ended
December 31, December 31,
---------------- Percent -------------------- Percent
2006 2005 Change 2006 2005 Change
------------------------------- -------- -------------------- --------
Fleet: (average
during the
period)
Operating
aircraft
count (1) 31.4 39.0 (19.5%) 35.1 39.0 (10.0%)
Block Hours
ACMI 17,827 19,781 (9.9%) 67,666 83,682 (19.1%)
Scheduled
service 10,526 9,185 14.6% 39,446 37,175 6.1%
AMC charter 5,682 7,374 (22.9%) 19,954 29,306 (31.9%)
Commercial
charter 1,346 2,662 (49.4%) 5,450 6,257 (12.9%)
All other 170 191 (11.0%) 745 839 (11.2%)
---------------- -------- -------------------- --------
Total Block
Hours 35,551 39,193 (9.3%) 133,261 157,259 (15.3%)
================ ======== ==================== ========
Revenue Per
Block Hour
ACMI $6,308 $5,964 5.8% $6,016 $5,569 8.0%
AMC charter $17,093 $17,882 (4.4%) $16,376 $15,036 8.9%
Commercial
charter $16,745 $20,252 (17.3%) $15,194 $17,235 (11.8%)
Scheduled
Service
Traffic
RTM's (000's)397,274 348,962 13.8% 1,475,353 1,414,865 4.3%
ATM's (000's)613,221 526,074 16.6% 2,322,024 2,155,127 7.7%
Load Factor 64.8% 66.3% -1.5 pts 63.5% 65.7% -2.2 pts
RATM (2) $0.279 $0.295 (5.4%) $0.263 $0.258 1.9%
RTM Yield (3) $0.431 $0.445 (3.1%) $0.414 $0.393 5.3%
Fuel
Scheduled
Service and
Commercial
Charter:
Average fuel
cost per
gallon $1.93 $2.29 (15.7%) $2.07 $1.86 11.3%
Fuel gallons
consumed
(000's) 38,737 40,521 (4.4%) 149,674 147,518 1.5%
AMC Charter:
Average fuel
cost per
gallon $2.25 $2.20 2.3% $2.21 $1.59 39.0%
Fuel gallons
consumed
(000's) 18,247 24,130 (24.4%) 65,134 99,101 (34.3%)
(1) Operating Fleet excludes the following aircraft count that were
dry leased or out of service:
Dry leased 5.0 3.0 66.7% 3.4 3.0 13.3%
Out of
service 2.2 -- -- 2.0 0.4 400.0%
(2) RATM represents scheduled service revenue dollars per available
ton mile.
(3) RTM Yield represents scheduled service revenue dollars per revenue
ton mile.
*T
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