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ATSG Transformation Yields Strong Results

Dépèche transmise le 3 mars 2011 par Business Wire

WILMINGTON, Ohio--(BUSINESS WIRE)--Air Transport Services Group, Inc. (NASDAQ:ATSG) today reported financial results for its fourth quarter and year ended December 31, 2010:

Net earnings from continuing operations of $11.9 million, or $0.19 per share diluted, up 4 percent from the third quarter of 2010 and 15 percent from the fourth quarter of 2009.
Pre-tax earnings from continuing operations totaled $20.0 million in the fourth quarter of 2010, up 20 percent from the third quarter of 2010 and 13 percent from the fourth quarter of 2009. Full year pre-tax earnings from continuing operations increased by 40 percent to $63.3 million as compared to $45.4 million in 2009. Pre-tax earnings from continuing operations in 2010 and 2009 included amounts for managing the restructuring of DHL’s domestic network operations of $12.2 million in the fourth quarter and $16.7 million for the year in 2009, and nothing in the fourth quarter and $3.5 million for the year in 2010.
EBITDA (Earnings Before Interest, Taxes, Depreciation & Amortization) from continuing operations were $46.4 million in the fourth quarter, up 6 percent from the third quarter of 2010 and up 3 percent from the fourth quarter of 2009. For all of 2010, EBITDA was $169.3 million, up 9 percent from 2009.
Excluding the effect of the DHL network restructuring on EBITDA and pre-tax earnings (both from continuing operations), 2010 Adjusted EBITDA from continuing operations increased by 41 percent and 19 percent compared to the fourth quarter and full year 2009, respectively. Similarly, pre-tax earnings from continuing operations, excluding those restructuring amounts, improved versus 2009 results by 267 percent and 109 percent for the fourth quarter and full year, respectively. (EBITDA, Adjusted EBITDA, and Adjusted Pre-Tax Earnings, all from continuing operations, are non-GAAP measures of financial performance. A reconciliation of these measures to ATSG’s GAAP Earnings from Continuing Operations Before Income Taxes is at the end of this release.)
Revenues from continuing operations were $178.6 million, down $71.9 million from fourth quarter of 2009. The fourth quarter of 2009 revenues included $72.5 million related to DHL’s U.S. restructuring plan. Fourth quarter 2010 revenues increased by 6 percent from the third quarter of 2010.
Cash flow provided by operating activities in 2010 was $112.3 million, up 9 percent from 2009. That cash flow was primarily reinvested in growth-related aircraft acquisition and conversion programs which totaled $74.8 million, and used for debt payments totaling $70.2 million, creating additional capacity for future capital investments.

“Over the last nine months of 2010, since completing the transformation of our Company, our adjusted pre-tax earnings and EBITDA, excluding the settlements of severance and retention amounts related to the restructuring of DHL’s operations, have grown by 145 percent and 27 percent, respectively, over the same period of the prior year,” President and CEO Joe Hete said. “That increased performance, with forward cash flow visibility from long-term leases, was our goal as we restructured ATSG to focus on the placement of our aircraft around the globe, either on a dry or ACMI wet lease basis. Our lease-based model is the foundation of our investment and asset allocation decisions, while our ability to also offer aircraft operating and maintenance solutions provides our customers unparalleled flexibility to achieve their goals. This unique value proposition gives me confidence that the talented group of people and businesses we have assembled will continue to attract customers seeking customized solutions for their medium wide-body air cargo needs. With nine additional 767 freighter aircraft entering revenue service during 2011, including three larger payload and longer range 767-300s, it is our intention to further strengthen our leadership position in the medium wide-body space.”

Segment Results

CAM Leasing

CAM’s pre-tax earnings were $13.3 million for the fourth quarter of 2010, more than double the year-earlier levels and up 11 percent from the third quarter of 2010.

CAM had 60 aircraft under lease at the end of 2010, 16 of which were in service with external lessees and the remainder leased to ATSG’s airline subsidiaries. Since the beginning of 2011, CAM has agreed to dry-lease one additional Boeing 767-200 to a third-party customer, and is negotiating leases or ACMI agreements for others to be deployed later this year.

Nine Boeing 767s, including three 767-300s, are expected to complete modification and enter service on either a dry lease or ACMI basis by January 2012.

ACMI Services

Fourth quarter pre-tax segment earnings were $6.0 million, up 73 percent from $3.4 million in the third quarter 2010 and down from $13.1 million for the same period a year ago. The fourth quarter 2009 segment pre-tax earnings of $13.1 million included $12.2 million of earnings related to ABX Air’s Severance and Retention Agreement (“S&R Agreement”) with DHL. Earnings results were driven by earnings associated with new services added in the fourth quarter as well as seasonal support for certain customers. ABX Air initiated new Boeing 767 services during the quarter, including transatlantic air operations for DHL as well as service between Japan and China.

Other Activities

Pre-tax earnings for the fourth quarter were $2.4 million, down from $3.1 million in the third quarter 2010, but up more than four times the prior year fourth quarter, which included $1.0 million in additional overhead expense. The decrease as compared to the third quarter is due to the timing of the completion of maintenance services on customer aircraft. Results for 2010 also included gains from amortized reductions in ABX Air’s employee post–retirement obligations.

Outlook

New Agreements for ATSG Services

Since the beginning of 2011, ATSG businesses have completed agreements for the following:

A 59-month dry lease of one Boeing 767-200 freighter by CAM to RIO Linhas Aéreas, S.A., of Brazil for delivery this summer. CAM and RIO are in discussions for the lease of a second 767-200 in the fall. The completed lease represents CAM’s 20^th external lease commitment for one of its 39 owned 767 freighters.
In February, ABX Air began to operate a fourth DHL-owned Boeing 767-200 freighter on a CMI basis in DHL’s U.S. network. These are separate from the 13 767s that CAM owns and will dry lease to DHL, and ABX Air will operate under the CMI. Eleven of the 13 have been delivered and are operating under dry leases. Two others are operating in DHL’s network under supplemental agreements with ABX Air.

“Our primary goal for 2011 is the deployment of the nine Boeing 767 freighters which will enter service by year end. This will bring the total of our 767 freighters in revenue service to 39, with a balance of customer placements between either long-term dry leases or shorter-term ACMI and CMI arrangements,” Hete said. “Our ability to place and keep all of our freighters in revenue service will depend on completion of freighter modifications, the speed with which our customers can integrate those newly converted aircraft into their networks, and our ability to extend or replace as necessary customer agreements that could expire during the year. We also will continue to opportunistically acquire more passenger aircraft we can convert and profitably deploy into freighter service, including 767 medium wide-body and 757 narrow-body aircraft, either on a leased or ACMI basis. As the year unfolds, I expect that we will further penetrate air-cargo growth markets around the world, and realize greater gains from operating and technical support services to customers in many of those same markets.”

Conference Call

ATSG will host a conference call to review its financial results for the fourth quarter of 2010 on Friday March 4, 2011, at 10:00 a.m. Eastern time. Participants should dial 888-680-0893 and international participants should dial 617-213-4859 ten minutes before the scheduled start of the call and ask for conference pass-code 76924093. 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 on March 4, 2011, beginning at 1:00 p.m. and continuing through Friday, March 11, 2011, at 888-286-8010 (international callers 617-801-6888); use pass-code 32714707. The webcast replay will remain available via www.atsginc.com or www.earnings.com for 30 days. The Company will file its Form 10-K with the Securities and Exchange Commission after the close of the market on Tuesday, March 8, 2011.

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 largest owner and operator of converted Boeing 767 freighter aircraft in the World. Through its principal subsidiaries, including three airlines with separate and distinct U.S. FAA Part 121 Air Carrier certificates, ATSG provides aircraft leasing, air cargo lift, aircraft maintenance services, airport ground services, fuel management, specialized transportation management, and air charter brokerage services. ATSG’s subsidiaries include ABX Air, Inc.; Airborne Global Solutions, Inc.; Air Transport International, LLC; Cargo Aircraft Management, Inc.; Capital Cargo International Airlines, 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 cost and timing associated with the modification of Boeing 767 and Boeing 757 aircraft, the availability and costs to acquire used passenger aircraft for freighter conversion, ABX Air’s ability to maintain on-time service and control costs under its new operating agreement with DHL, 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						Year Ended
	December 31,						December 31,
	2010			2009			2010			2009

REVENUES	$	178,601		$	250,510		$	667,382		$	823,483

OPERATING EXPENSES
Salaries, wages and benefits		47,158			123,084			176,988			380,276
Fuel		35,573			33,682			133,776			109,242
Depreciation and amortization		22,284			21,610			87,594			83,964
Maintenance, materials and repairs		21,788			18,108			79,143			66,621
Landing and ramp		5,952			6,446			23,782			29,236
Travel		6,326			5,873			22,709			21,761
Rent		3,082			3,901			15,339			10,926
Insurance		2,049			2,612			9,171			10,918
Other operating expenses		10,248			11,783			37,204			38,749
		154,460			227,099			585,706			751,693

INTEREST EXPENSE		(4,251	)		(5,833	)		(18,675	)		(26,881	)
INTEREST INCOME		75			68			316			449
EARNINGS FROM CONTINUING		19,965			17,646			63,317			45,358
OPERATIONS BEFORE INCOME TAXES

INCOME TAX EXPENSE		(8,114	)		(7,334	)		(23,413	)		(17,156	)

EARNINGS FROM CONTINUING		11,851			10,312			39,904			28,202
OPERATIONS

EARNINGS (LOSS) FROM DISCONTINUED		(12	)		1,196			(70	)		6,247
OPERATIONS, NET OF TAX

NET EARNINGS	$	11,839		$	11,508		$	39,834		$	34,449

EARNINGS PER SHARE - Basic
Continuing operations	$	0.19		$	0.16		$	0.64		$	0.45
Discontinued operations		-			0.02			(0.01	)		0.10
NET EARNINGS PER SHARE	$	0.19		$	0.18		$	0.63		$	0.55

EARNINGS PER SHARE - Diluted
Continuing operations	$	0.19		$	0.16		$	0.62		$	0.44
Discontinued operations		-			0.02			-			0.10
NET EARNINGS PER SHARE	$	0.19		$	0.18		$	0.62		$	0.54

WEIGHTED AVERAGE SHARES
Basic		62,814			62,686			62,807			62,674
Diluted		63,809			63,573			64,009			63,279

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data)

	December 31,			December 31,
	2010			2009
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	46,543		$	83,229
Accounts receivable, net of allowance of $1,090 in 2010 and $1,288 in 2009		40,876			87,708
Inventory		7,205			5,226
Prepaid supplies and other		10,132			7,093
Deferred income taxes		12,879			31,597
Aircraft and engines held for sale		-			30,634
TOTAL CURRENT ASSETS		117,635			245,487

Property and equipment, net		658,756			636,089
Other assets		25,227			21,307
Intangibles		9,259			10,113
Goodwill		89,777			89,777
TOTAL ASSETS	$	900,654		$	1,002,773

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	40,558		$	38,174
Accrued salaries, wages and benefits		23,639			44,077
Accrued severance and retention		506			18,959
Accrued expenses		12,144			16,429
Current portion of debt obligations		36,591			51,737
Unearned revenue		10,794			15,340
TOTAL CURRENT LIABILITIES		124,232			184,716

Long-term obligations		265,937			325,690
Post-retirement liabilities		116,614			152,297
Other liabilities		52,048			44,044
Deferred income taxes		39,746			50,044

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; 63,652,228 and 63,416,564 shares issued and outstanding in 2010 and 2009, respectively		637			634
Additional paid-in capital		518,925			502,822
Accumulated deficit		(171,251	)		(211,085	)
Accumulated other comprehensive loss		(46,234	)		(46,389	)
TOTAL STOCKHOLDERS' EQUITY		302,077			245,982
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	900,654		$	1,002,773

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES PRE-TAX EARNINGS SUMMARY FROM CONTINUING OPERATIONS (In thousands)

		Three Months Ended December 31,						Year Ended December 31,
		2010			2009			2010			2009
Revenues:
	CAM Leasing		30,199			16,970			101,375			60,685
	ACMI Services
	Airline services		109,805			135,464			432,082			556,152
	Other Reimburseable		41,363			26,053			143,330			91,306
	S&R activities		-			72,453			4,000			121,366
	Total ACMI Services		151,168			233,970			579,412			768,824
	Other Activities		24,472			22,085			87,660			64,914
Total Revenues			205,839			273,025			768,447			894,423
	Eliminate internal revenues		(27,238	)		(22,515	)		(101,065	)		(70,940	)
Customer Revenues		$	178,601		$	250,510		$	667,382		$	823,483


Pre-tax Earnings from Continuing Operations:
	CAM, inclusive of interest expense		13,304			6,079			41,586			22,775
	ACMI Services
	Airline services		5,970			904			17,339			11,665
	S&R activities		-			12,210			3,549			16,727
	Total ACMI Services		5,970			13,114			20,888			28,392
	Other Activities		2,417			578			8,017			3,518
	Net, unallocated interest expense		(1,726	)		(2,125	)		(7,174	)		(9,327	)
Total Pre-tax Earnings		$	19,965		$	17,646		$	63,317		$	45,358

Under the S&R Agreement, DHL compensated and reimbursed ABX for its management and costs associated with the DHL network restructuring in 2008 through March 2010. Other Reimbursable revenues include certain operating costs that are reimbursed to the airlines by their customers. Such costs include fuel used, landing fees and certain aircraft maintenance expenses.