Monday, 9 August 2021

ATSG Reports Second Quarter 2021 Results

Air Transport Services Group,  the leading provider of medium wide-body aircraft leasing, contracted air transportation, and related services, today reported consolidated financial results for the quarter ended June 30, 2021.

ATSG's second-quarter 2021 results, as compared with the second quarter of 2020 include:

Customer revenues increased $32.1 million, or 8 percent, to $409.9 million.
Second-quarter aircraft leasing and ground services revenues increased substantially from a year ago, while airline services revenues decreased, largely due to a surge in pandemic-related charter operations last year. Aircraft leasing and related revenues from external customers for the quarter increased $16.7 million from seventeen more leases of Boeing 767 freighters since June 2020, including five in the second quarter this year.
GAAP Earnings from Continuing Operations were $79.9 million, or $1.17 per share basic, versus a loss of $105.2 million, or $1.78 per share basic, for the same period last year.
The re-measurements of financial instrument values, including warrants to purchase ATSG shares, increased ATSG's second-quarter after-tax earnings by $27.6 million in 2021 and reduced them by $107.6 million in 2020. Warrant effects in this year's quarter stemmed primarily from a decrease in the traded value of ATSG shares. Government grants intended to mitigate pandemic effects on ATSG's passenger airline operations added $29.5 million to ATSG's second-quarter 2021 net income, compared with $7.6 million a year ago. Results for the second quarter also included $5.0 million in after-tax debt restructuring costs in 2021, and a $30.2 million after-tax impairment charge in 2020, primarily for four Boeing 757 freighters retired from service.
Adjusted Earnings from Continuing Operations (non-GAAP) were $28.1 million, versus $32.5 million a year ago. Adjusted Earnings Per Share (non-GAAP) were $0.35 diluted, down $0.09.
Adjusted Earnings from Continuing Operations and Adjusted EPS exclude the above-mentioned GAAP items and other elements from GAAP results that differ distinctly in predictability among periods or are not closely related to operations. Adjusted EPS for both periods are based on share counts that reflect Amazon's May 2021 exercise of a portion of its ATSG warrants.
Adjusted EBITDA from Continuing Operations (non-GAAP) increased $2.2 million to $127.8 million vs the prior-year quarter and by $22.2 million vs the first quarter of 2021.
ATSG’s airlines, even excluding the benefit of pandemic relief grants, generated positive cash returns for the quarter, as strong growth in e-commerce-driven cargo operations offset reductions in passenger flying and increased operating expenses as a result of the pandemic.
Adjusted Earnings per Share, Adjusted Earnings from Continuing Operations and Adjusted EBITDA from Continuing Operations are non-GAAP financial measures and are defined in the non-GAAP reconciliation tables at the end of this release.

Rich Corrado, president and chief executive officer of ATSG, said, "As we had forecast, ATSG's revenue, earnings and Adjusted EBITDA improved significantly from first-quarter levels as our airline businesses achieved their performance targets, and leasing of our Boeing 767 freighters remained on a record pace. We have delivered seven of the eleven additional Boeing 767s we will lease to, and fly for Amazon this year during the first half, and accelerated our plans to offer Airbus A321-200 converted freighters to our lease customers. While our ongoing Boeing 757 combi and passenger flying assignments have not yet fully recovered from the pandemic, we are optimistic about continued steady improvement on those fronts, and about meeting or outperforming the overall results we have projected for 2021."

Financial Highlights

Adjusted EBITDA from Continuing Operations increased 21 percent, or $22.2 million, sequentially from the first quarter, and ended the first half of 2021 at $233.4 million, which represents 44 percent of ATSG's target of at least $525 million in Adjusted EBITDA for calendar 2021.

Capital spending for the first half of 2021 was $300.2 million, up $34.4 million. First-half spending included $200.1 million for the acquisition and modification of passenger aircraft for freighter conversion, as ATSG expands its fleet for new orders from customers. Spending for required heavy maintenance and for other equipment, including aircraft engines and components, was $100.1 million for the first half of 2021.

ATSG completed a follow-on issuance of $200 million in seven-year unsecured notes bearing a 4.75 percent coupon rate and an equivalent yield of 3.96 percent, and amended its Senior Credit Facility to pay off its term debt and increase access to revolver credit.

Amazon completed the conversion of 14.9 million warrants for the purchase of ATSG common shares under both cashless and cash exercises. Amazon paid ATSG $132 million for the purchase of 13.6 million ATSG shares. As a result of the cash and cashless exercise of its ATSG warrants, Amazon now owns 14.4 million shares, or 19.5 percent, of ATSG’s outstanding common shares. Amazon still holds warrants for the purchase of an additional 21.8 million ATSG shares under other agreements. ATSG's per-share adjusted earnings for prior periods are adjusted for the increase in shares outstanding.

Significant Developments:

CAM's second quarter revenues, net of warrant-related lease incentives, increased 18 percent versus the prior year. Revenues increased primarily from seventeen more leases of 767 freighters to customers. Revenues from CAM's external customers increased 33 percent for the quarter.

Segment pretax earnings for the quarter were $22.6 million, up 15 percent from 2020's second quarter. Depreciation expense increased $8.0 million and interest expense allocated to CAM was flat versus the prior-year period.

As of June 30, 2021:
ATSG’s total in-service fleet comprised 110 Boeing aircraft, sixteen more than a year ago. Ninety one were cargo aircraft, four were combis, and fifteen were passenger aircraft.

The in-service fleet included seven aircraft not owned by CAM: four passenger 767s leased to Omni Air, and three 767 freighters provided by Amazon for Air Transport International to operate in Amazon's air network.

Eighty CAM-owned Boeing 767 freighter aircraft were leased to external customers, seventeen more than a year ago and seven more than at December 31, 2020.

CAM owned fifteen 767 aircraft that were in or awaiting conversion to freighters, up from eight at the start of the year. CAM has purchased twelve passenger 767s during the first half for freighter modification, all for lease deployment in 2021 or 2022. One CAM-owned 767-200 freighter was being prepared for re-lease.

CAM continues to expect that it will lease sixteen or more 767-300 freighters to external customers during 2021 with nine in the second half, and at least ten more in 2022. Customers continue to place orders to lease additional 767s from CAM for delivery as late as 2025.

Segment Results

Cargo Aircraft Management (CAM)

CAM

 

Second Quarter

 

First Half

($ in thousands)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Aircraft leasing and related revenues

 

93,624

 

 

79,345

 

 

181,853

 

 

157,954

 

Lease incentive amortization

 

(5,030

)

 

(4,475

)

 

(9,982

)

 

(8,921

)

Total CAM revenues

 

88,594

 

 

74,870

 

 

171,871

 

 

149,033

 

Depreciation expense

 

50,012

 

 

42,024

 

 

97,007

 

 

85,071

 

Allocated interest expense

 

9,669

 

 

9,707

 

 

18,895

 

 

19,962

 

Segment earnings, pretax

 

22,554

 

 

19,640

 

 

44,016

 

 

35,460

 



ACMI Services

ACMI Services

 

Second Quarter

 

First Half

 

($ in thousands)

 

2021

 

2020

 

2021

 

2020

 

Revenues

 

273,301

 

287,604

 

520,432

 

571,769

 

Allocated interest expense

 

4,473

 

5,645

 

8,996

 

10,946

 

Segment earnings, inclusive of government grants, pretax

 

44,762

 

29,505

 

66,021

 

47,883

 


Other Activities

Other

 

Second Quarter

 

First Half

($ in thousands)

 

2021

2020

 

2021

2020

 

Total Revenues

 

$

97,236

 

$

77,056

 

 

$

190,934

 

$

157,092

 

 

Revenues from external customers

 

69,901

 

40,240

 

 

138,062

 

98,620

 

 

Pretax Earnings (Loss)

 

3,161

 

(2,244

)

 

3,550

 

(2,191

)

 

-

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share data)

 

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

2021

 

 

2020

 

 

2021

 

 

2020

 

REVENUES

$

409,872

 

 

$

377,794

 

 

$

785,960

 

 

$

767,071

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

Salaries, wages and benefits

141,524

 

 

119,503

 

 

283,540

 

 

245,034

 

Depreciation and amortization

75,633

 

 

68,291

 

 

146,684

 

 

137,633

 

Maintenance, materials and repairs

45,913

 

 

43,704

 

 

87,920

 

 

85,381

 

Fuel

36,592

 

 

36,787

 

 

67,034

 

 

80,586

 

Contracted ground and aviation services

18,794

 

 

13,546

 

 

33,597

 

 

27,895

 

Travel

18,501

 

 

17,315

 

 

36,905

 

 

38,972

 

Landing and ramp

3,026

 

 

2,772

 

 

6,135

 

 

5,517

 

Rent

5,726

 

 

5,198

 

 

11,594

 

 

8,684

 

Insurance

3,068

 

 

2,508

 

 

6,204

 

 

4,176

 

Other operating expenses

14,750

 

 

15,738

 

 

31,173

 

 

30,954

 

Government grants

(38,274

)

 

(9,821

)

 

(66,304

)

 

(9,821

)

Impairment of aircraft and related assets

 

 

39,075

 

 

 

 

39,075

 

 

325,253

 

 

354,616

 

 

644,482

 

 

694,086

 

 

 

 

 

 

 

 

 

OPERATING INCOME

84,619

 

 

23,178

 

 

141,478

 

 

72,985

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

Interest income

9

 

 

12

 

 

28

 

 

124

 

Non-service component of retiree benefit credits (costs)

4,456

 

 

2,898

 

 

8,913

 

 

5,796

 

Debt issuance costs

(6,505

)

 

 

 

(6,505

)

 

 

Net gain (loss) on financial instruments

35,703

 

 

(109,723

)

 

45,175

 

 

(2,679

)

Gain (loss) from non-consolidated affiliates

965

 

 

(6,513

)

 

(218

)

 

(9,277

)

Interest expense

(15,021

)

 

(16,045

)

 

(29,543

)

 

(32,368

)

 

19,607

 

 

(129,371

)

 

17,850

 

 

(38,404

)

 

 

 

 

 

 

 

 

EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

104,226

 

 

(106,193

)

 

159,328

 

 

34,581

 

INCOME TAX EXPENSE

(24,357

)

 

1,031

 

 

(37,169

)

 

(6,010

)

 

 

 

 

 

 

 

 

EARNINGS (LOSS) FROM CONTINUING OPERATIONS

79,869

 

 

(105,162

)

 

122,159

 

 

28,571

 

 

 

 

 

 

 

 

 

EARNINGS FROM DISCONTINUED OPERATIONS, NET OF TAX

65

 

 

236

 

 

65

 

 

4,008

 

NET EARNINGS (LOSS)

$

79,934

 

 

$

(104,926

)

 

$

122,224

 

 

$

32,579

 

 

 

 

 

 

 

 

 

EARNINGS PER SHARE - CONTINUING OPERATIONS

 

 

 

 

 

 

 

Basic

$

1.17

 

 

$

(1.78

)

 

$

1.91

 

 

$

0.48

 

Diluted

$

0.74

 

 

$

(1.78

)

 

$

1.23

 

 

$

0.14

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES - CONTINUING OPERATIONS

 

 

 

 

 

 

 

Basic

68,206

 

 

59,130

 

 

63,851

 

 

59,085

 

Diluted

72,964

 

 

59,130

 

 

73,849

 

 

68,104

 

 

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

 

 

June 30,

 

December 31,

 

2021

 

 

2020

 

ASSETS

 

 

 

CURRENT ASSETS:

 

 

 

Cash and cash equivalents

$

84,909

 

 

$

39,719

 

Accounts receivable, net of allowance of $890 in 2021 and $997 in 2020

176,146

 

 

153,511

 

Inventory

44,501

 

 

40,410

 

Prepaid supplies and other

27,931

 

 

39,096

 

TOTAL CURRENT ASSETS

333,487

 

 

272,736

 

 

 

 

 

Property and equipment, net

2,097,256

 

 

1,939,776

 

Customer incentive

114,510

 

 

126,007

 

Goodwill and acquired intangibles

511,001

 

 

516,290

 

Operating lease assets

63,925

 

 

68,824

 

Other assets

90,675

 

 

78,112

 

TOTAL ASSETS

$

3,210,854

 

 

$

3,001,745

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

CURRENT LIABILITIES:

 

 

 

Accounts payable

$

172,286

 

 

$

141,425

 

Accrued salaries, wages and benefits

58,888

 

 

56,506

 

Accrued expenses

18,213

 

 

19,005

 

Current portion of debt obligations

622

 

 

13,746

 

Current portion of lease obligations

16,889

 

 

17,784

 

Unearned revenue and grants

68,970

 

 

53,522

 

TOTAL CURRENT LIABILITIES

335,868

 

 

301,988

 

Long term debt

1,398,470

 

 

1,465,331

 

Stock warrant obligations

63,085

 

 

103,474

 

Post-retirement obligations

25,626

 

 

35,099

 

Long term lease obligations

47,192

 

 

51,128

 

Other liabilities

47,183

 

 

47,963

 

Deferred income taxes

178,703

 

 

141,265

 

 

 

 

 

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; 150,000,000 shares authorized; 74,202,815 and 59,560,036 shares issued and outstanding in 2021 and 2020, respectively

742

 

 

596

 

Additional paid-in capital

989,611

 

 

855,547

 

Retained earnings

200,234

 

 

78,010

 

Accumulated other comprehensive loss

(75,860

)

 

(78,656

)

TOTAL STOCKHOLDERS’ EQUITY

1,114,727

 

 

855,497

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

3,210,854

 

 

$

3,001,745

 

 

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

PRETAX EARNINGS AND ADJUSTED PRETAX EARNINGS SUMMARY FROM CONTINUING OPERATIONS

NON-GAAP RECONCILIATION

(In thousands)

 

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

2021

 

2020

 

2021

 

2020

Revenues

 

 

 

 

 

 

 

CAM

 

 

 

 

 

 

 

Aircraft leasing and related revenues

$

93,624

 

 

$

79,345

 

 

$

181,853

 

 

$

157,954

 

 

Lease incentive amortization

(5,030

)

 

(4,475

)

 

(9,982

)

 

(8,921

)

 

Total CAM

88,594

 

 

74,870

 

 

171,871

 

 

149,033

 

 

ACMI Services

273,301

 

 

287,604

 

 

520,432

 

 

571,769

 

 

Other Activities

97,236

 

 

77,056

 

 

190,934

 

 

157,092

 

 

Total Revenues

459,131

 

 

439,530

 

 

883,237

 

 

877,894

 

 

Eliminate internal revenues

(49,259

)

 

(61,736

)

 

(97,277

)

 

(110,823

)

 

Customer Revenues

$

409,872

 

 

$

377,794

 

 

$

785,960

 

 

$

767,071

 

 

 

 

 

 

 

 

 

 

Pretax Earnings (Loss) from Continuing Operations

 

 

 

 

 

 

CAM, inclusive of interest expense

22,554

 

 

19,640

 

 

44,016

 

 

35,460

 

 

ACMI Services, inclusive of government grants and interest expense

44,762

 

 

29,505

 

 

66,021

 

 

47,883

 

 

Other Activities

3,161

 

 

(2,244

)

 

3,550

 

 

(2,191

)

 

Net, unallocated interest expense

(870

)

 

(681

)

 

(1,624

)

 

(1,336

)

 

Impairment of aircraft and related assets

 

 

(39,075

)

 

 

 

(39,075

)

 

Non-service components of retiree benefit credit (costs)

4,456

 

 

2,898

 

 

8,913

 

 

5,796

 

 

Debt issuance costs

(6,505

)

 

 

 

(6,505

)

 

 

 

Net gain on financial instruments

35,703

 

 

(109,723

)

 

45,175

 

 

(2,679

)

 

Loss from non-consolidated affiliates

965

 

 

(6,513

)

 

(218

)

 

(9,277

)

 

Earnings (Loss) from Continuing Operations before Income Taxes (GAAP)

$

104,226

 

 

$

(106,193

)

 

$

159,328

 

 

$

34,581

 

 

 

 

 

 

 

 

 

 

Adjustments to Pretax Earnings

 

 

 

 

 

 

Add customer incentive amortization

5,798

 

 

4,896

 

 

11,497

 

 

9,753

 

 

Less government grants

(38,274

)

 

(9,821

)

 

(66,304

)

 

(9,821

)

 

Add impairment of aircraft and related assets

 

 

39,075

 

 

 

 

39,075

 

 

Add non-service components of retiree benefit (credits) costs

(4,456

)

 

(2,898

)

 

(8,913

)

 

(5,796

)

 

Add debt issuance costs

6,505

 

 

 

 

6,505

 

 

 

 

Less net gain on financial instruments

(35,703

)

 

109,723

 

 

(45,175

)

 

2,679

 

 

Add loss from non-consolidated affiliates

(965

)

 

6,513

 

 

218

 

 

9,277

 

 

Adjusted Pretax Earnings (non-GAAP)

$

37,131

 

 

$

41,295

 

 

$

57,156

 

 

$

79,748

 

 

 

Adjusted Pretax Earnings excludes certain items included in GAAP based pretax earnings (loss) from continuing operations because they are distinctly different in their predictability among periods or not closely related to our operations. Presenting this measure provides investors with a comparative metric of fundamental operations, while highlighting changes to certain items among periods. Adjusted Pretax Earnings 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

ADJUSTED EARNINGS FROM CONTINUING OPERATIONS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION

NON-GAAP RECONCILIATION

(In thousands)

 

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

Earnings (Loss) from Continuing Operations Before Income Taxes

$

104,226

 

 

$

(106,193

)

 

$

159,328

 

 

$

34,581

 

Interest Income

(9

)

 

(12

)

 

(28

)

 

(124

)

Interest Expense

15,021

 

 

16,045

 

 

29,543

 

 

32,368

 

Depreciation and Amortization

75,633

 

 

68,291

 

 

146,684

 

 

137,633

 

EBITDA from Continuing Operations (non-GAAP)

$

194,871

 

 

$

(21,869

)

 

$

335,527

 

 

$

204,458

 

Add customer incentive amortization

5,798

 

 

4,896

 

 

11,497

 

 

9,753

 

Less government grants

(38,274

)

 

(9,821

)

 

(66,304

)

 

(9,821

)

Add impairment of aircraft and related assets

 

 

39,075

 

 

 

 

39,075

 

Add non-service components of retiree benefit (credits) costs

(4,456

)

 

(2,898

)

 

(8,913

)

 

(5,796

)

Less debt issuance costs

6,505

 

 

 

 

6,505

 

 

 

Less net gain on financial instruments

(35,703

)

 

109,723

 

 

(45,175

)

 

2,679

 

Add loss from non-consolidated affiliates

(965

)

 

6,513

 

 

218

 

 

9,277

 

 

 

 

 

 

 

 

 

Adjusted EBITDA (non-GAAP)

$

127,776

 

 

$

125,619

 

 

$

233,355

 

 

$

249,625

 

 
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