Air Transport Services Group, Inc. the leading provider of medium wide-body aircraft leasing, contracted air transportation, and related services, today reported consolidated financial results for the quarter and year ended December 31, 2022.
Fourth Quarter Results
Full Year 2022 Results
Rich Corrado, president and chief executive officer of ATSG, said, "In 2022, our revenues and Adjusted EBITDA each grew 18%, with revenues reaching a record $2 billion, and Adjusted EBITDA increasing $100 million to $641 million. Our Adjusted Pretax Earnings also grew sharply, excluding 2021 benefits from pandemic related government grants for our passenger airline. At the same time, we invested nearly $600 million in our businesses which will allow us to take advantage of the continued attractive leasing market for midsize freighter aircraft. I expect those investments and the outstanding performance of our employees to drive even more robust growth and earnings in the years to come."
2022 Operating Highlights
2022 Financial Highlights
Segment Results
Cargo Aircraft Management (CAM)
ACMI Services
2023 Outlook
ATSG expects its Adjusted EBITDA for 2023 to increase to a range of $650 million to $660 million. ATSG expects 2023 full year Adjusted EPS to decline to a range of $1.85 to $2.00, based on 2023 projections for higher interest expense and inflationary effects, as well as reduced ACMI Services operations.
The Adjusted EBITDA and Adjusted EPS forecasts for 2023 assume:
Corrado said that ATSG’s aircraft leasing operations, including its engine maintenance services, are expected to generate substantially more Adjusted EBITDA over the next five years. But reductions in ACMI Services segment's operations in 2023 will limit its growth this year.
"Growth in e-commerce, particularly outside the U.S., is driving the growth of air express networks around the world. That trend, and replacement of older cargo aircraft postponed during the pandemic, are compelling drivers for growth in our leasing demand," Corrado said.
2023 will be an investment year for ATSG. Capital spending for the year is projected to be $850 million, including $260 million in sustaining capex and $590 million for growth. In 2023, CAM will begin the passenger-to-freighter conversion of the first two of its A330-300s for lease delivery in 2024. CAM expects to convert and lease thirty such aircraft by 2028, two-thirds of which are already backed by customer commitments. CAM will also begin conversion of a projected sixteen 767-300 freighters it expects to lease in 2024. We already have customer commitments for virtually all of those freighters.
“We plan to deliver 20 newly converted aircraft during 2023 and more in 2024, as customer lease deployments are expanded to include the Airbus A330," Corrado said. "These deliveries are projected to significantly grow Adjusted EBITDA in 2024 and 2025, and solidify our position as the world's largest lessor of main deck freighters. Our employees are prepared to execute on our plans and exciting opportunities to generate long-term attractive returns for shareholders."
ATSG is a leading provider of aircraft leasing and air cargo transportation and related services to domestic and foreign air carriers and other companies that outsource their air cargo lift requirements. ATSG, through its leasing and airline subsidiaries, is the world's largest owner and operator of converted Boeing 767 freighter aircraft. Through its principal subsidiaries, including three airlines with separate and distinct U.S. FAA Part 121 Air Carrier certificates, ATSG provides aircraft leasing, air cargo lift, passenger ACMI and charter services, aircraft maintenance services and airport ground services. ATSG's subsidiaries include ABX Air, Inc.; Airborne Global Solutions, Inc.; Airborne Maintenance and Engineering Services, Inc., including its subsidiary, Pemco World Air Services, Inc.; Air Transport International, Inc.; Cargo Aircraft Management, Inc.; and Omni Air International, LLC.
AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) (In thousands, except per share data) | |||||||||||||||
| Three Months Ended |
| Year Ended | ||||||||||||
| December 31, |
| December 31, | ||||||||||||
|
| 2022 |
|
|
| 2021 |
|
|
| 2022 |
|
|
| 2021 |
|
REVENUES | $ | 533,025 |
|
| $ | 482,367 |
|
| $ | 2,045,469 |
|
| $ | 1,734,282 |
|
|
|
|
|
|
|
|
| ||||||||
OPERATING EXPENSES |
|
|
|
|
|
|
| ||||||||
Salaries, wages and benefits |
| 172,424 |
|
|
| 159,666 |
|
|
| 666,950 |
|
|
| 591,280 |
|
Depreciation and amortization |
| 84,338 |
|
|
| 84,013 |
|
|
| 331,064 |
|
|
| 308,448 |
|
Maintenance, materials and repairs |
| 45,465 |
|
|
| 41,693 |
|
|
| 162,122 |
|
|
| 173,364 |
|
Fuel |
| 73,432 |
|
|
| 56,390 |
|
|
| 275,512 |
|
|
| 173,600 |
|
Contracted ground and aviation services |
| 20,264 |
|
|
| 20,507 |
|
|
| 77,026 |
|
|
| 75,724 |
|
Travel |
| 29,445 |
|
|
| 24,768 |
|
|
| 111,989 |
|
|
| 86,601 |
|
Landing and ramp |
| 3,710 |
|
|
| 4,082 |
|
|
| 16,583 |
|
|
| 14,244 |
|
Rent |
| 8,323 |
|
|
| 6,294 |
|
|
| 30,437 |
|
|
| 23,695 |
|
Insurance |
| 2,442 |
|
|
| 3,206 |
|
|
| 9,666 |
|
|
| 12,588 |
|
Other operating expenses |
| 20,669 |
|
|
| 16,801 |
|
|
| 78,637 |
|
|
| 65,179 |
|
Government grants |
| — |
|
|
| (15,047 | ) |
|
| — |
|
|
| (111,673 | ) |
|
| 460,512 |
|
|
| 402,373 |
|
|
| 1,759,986 |
|
|
| 1,413,050 |
|
|
|
|
|
|
|
|
| ||||||||
OPERATING INCOME |
| 72,513 |
|
|
| 79,994 |
|
|
| 285,483 |
|
|
| 321,232 |
|
OTHER INCOME (EXPENSE) |
|
|
|
|
|
|
| ||||||||
Interest income |
| 335 |
|
|
| 3 |
|
|
| 415 |
|
|
| 39 |
|
Non-service component of retiree benefit credits |
| 4,635 |
|
|
| 4,457 |
|
|
| 20,046 |
|
|
| 17,827 |
|
Debt issuance costs |
| — |
|
|
| — |
|
|
| — |
|
|
| (6,505 | ) |
Net gain (loss) on financial instruments |
| (380 | ) |
|
| (7,818 | ) |
|
| 9,022 |
|
|
| 29,979 |
|
Losses from non-consolidated affiliates |
| (2,030 | ) |
|
| (1,212 | ) |
|
| (7,607 | ) |
|
| (2,577 | ) |
Interest expense |
| (13,834 | ) |
|
| (14,788 | ) |
|
| (46,861 | ) |
|
| (58,790 | ) |
|
| (11,274 | ) |
|
| (19,358 | ) |
|
| (24,985 | ) |
|
| (20,027 | ) |
|
|
|
|
|
|
|
| ||||||||
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES |
| 61,239 |
|
|
| 60,636 |
|
|
| 260,498 |
|
|
| 301,205 |
|
INCOME TAX EXPENSE |
| (18,995 | ) |
|
| (16,178 | ) |
|
| (64,060 | ) |
|
| (72,225 | ) |
|
|
|
|
|
|
|
| ||||||||
EARNINGS FROM CONTINUING OPERATIONS |
| 42,244 |
|
|
| 44,458 |
|
|
| 196,438 |
|
|
| 228,980 |
|
|
|
|
|
|
|
|
| ||||||||
EARNINGS FROM DISCONTINUED OPERATIONS, NET OF TAX |
| 407 |
|
|
| 66 |
|
|
| 2,143 |
|
|
| 2,440 |
|
NET EARNINGS | $ | 42,651 |
|
| $ | 44,524 |
|
| $ | 198,581 |
|
| $ | 231,420 |
|
|
|
|
|
|
|
|
| ||||||||
EARNINGS PER SHARE - CONTINUING OPERATIONS |
|
|
|
|
|
|
| ||||||||
Basic | $ | 0.58 |
|
| $ | 0.60 |
|
| $ | 2.67 |
|
| $ | 3.33 |
|
Diluted | $ | 0.50 |
|
| $ | 0.57 |
|
| $ | 2.26 |
|
| $ | 2.80 |
|
|
|
|
|
|
|
|
| ||||||||
WEIGHTED AVERAGE SHARES - CONTINUING OPERATIONS |
|
|
|
|
|
|
| ||||||||
Basic |
| 72,590 |
|
|
| 73,826 |
|
|
| 73,611 |
|
|
| 68,853 |
|
Diluted1 |
| 86,380 |
|
|
| 77,366 |
|
|
| 88,324 |
|
|
| 76,216 |
|
1 Due to adopting accounting standard ASU No. 2020-06, "Accounting for Convertible Instruments and Contracts in an Entity's Own Equity" on January 1, 2022 using the modified retrospective method, 8,111 shares were added to the diluted weighted average shares for 2022 under the "if-convert method" for the Company's convertible note. |
AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands, except share data) | |||||||
| December 31, |
| December 31, | ||||
ASSETS |
|
|
| ||||
CURRENT ASSETS: |
|
|
| ||||
Cash and cash equivalents | $ | 27,134 |
|
| $ | 69,496 |
|
Accounts receivable, net of allowance of $939 in 2022 and $742 in 2021 |
| 301,622 |
|
|
| 205,399 |
|
Inventory |
| 57,764 |
|
|
| 49,204 |
|
Prepaid supplies and other |
| 31,956 |
|
|
| 28,742 |
|
TOTAL CURRENT ASSETS |
| 418,476 |
|
|
| 352,841 |
|
|
|
|
| ||||
Property and equipment, net |
| 2,402,408 |
|
|
| 2,129,934 |
|
Customer incentive |
| 79,650 |
|
|
| 102,913 |
|
Goodwill and acquired intangibles |
| 492,642 |
|
|
| 505,125 |
|
Operating lease assets |
| 74,070 |
|
|
| 62,644 |
|
Other assets |
| 122,647 |
|
|
| 113,878 |
|
TOTAL ASSETS | $ | 3,589,893 |
|
| $ | 3,267,335 |
|
|
|
|
| ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
| ||||
CURRENT LIABILITIES: |
|
|
| ||||
Accounts payable | $ | 192,992 |
|
| $ | 174,237 |
|
Accrued salaries, wages and benefits |
| 56,498 |
|
|
| 56,652 |
|
Accrued expenses |
| 12,466 |
|
|
| 14,950 |
|
Current portion of debt obligations |
| 639 |
|
|
| 628 |
|
Current portion of lease obligations |
| 23,316 |
|
|
| 18,783 |
|
Unearned revenue and grants |
| 21,546 |
|
|
| 47,381 |
|
TOTAL CURRENT LIABILITIES |
| 307,457 |
|
|
| 312,631 |
|
Long term debt |
| 1,464,285 |
|
|
| 1,298,735 |
|
Stock warrant obligations |
| 695 |
|
|
| 915 |
|
Post-retirement obligations |
| 35,334 |
|
|
| 21,337 |
|
Long term lease obligations |
| 51,575 |
|
|
| 44,387 |
|
Other liabilities |
| 62,861 |
|
|
| 49,662 |
|
Deferred income taxes |
| 255,180 |
|
|
| 217,291 |
|
|
|
|
| ||||
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; 72,327,758 and 74,142,183 shares issued and outstanding in 2022 and 2021, respectively |
| 723 |
|
|
| 741 |
|
Additional paid-in capital |
| 986,303 |
|
|
| 1,074,286 |
|
Retained earnings |
| 528,882 |
|
|
| 309,430 |
|
Accumulated other comprehensive loss |
| (103,402 | ) |
|
| (62,080 | ) |
TOTAL STOCKHOLDERS’ EQUITY |
| 1,412,506 |
|
|
| 1,322,377 |
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 3,589,893 |
|
| $ | 3,267,335 |
|
AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED SUMMARY OF CASH FLOWS (UNAUDITED) (In thousands) | |||||||||||||||
| Three Months Ended |
| Year Ended | ||||||||||||
| December 31, |
| December 31, | ||||||||||||
|
| 2022 |
|
|
| 2021 |
|
|
| 2022 |
|
|
| 2021 |
|
|
|
|
|
|
|
|
| ||||||||
OPERATING CASH FLOWS | $ | 74,050 |
|
| $ | 154,319 |
|
| $ | 472,120 |
|
| $ | 583,557 |
|
|
|
|
|
|
|
|
| ||||||||
INVESTING ACTIVITIES: |
|
|
|
|
|
|
| ||||||||
Aircraft acquisitions and freighter conversions |
| (109,636 | ) |
|
| (43,078 | ) |
|
| (412,595 | ) |
|
| (321,644 | ) |
Planned aircraft maintenance, engine overhauls and other non-aircraft additions to property and equipment |
| (41,437 | ) |
|
| (33,544 | ) |
|
| (186,836 | ) |
|
| (183,104 | ) |
Proceeds from property and equipment |
| 12,154 |
|
|
| 15,903 |
|
|
| 15,913 |
|
|
| 19,427 |
|
Acquisitions and investments in businesses |
| (312 | ) |
|
| — |
|
|
| (16,545 | ) |
|
| (2,155 | ) |
TOTAL INVESTING CASH FLOWS |
| (139,231 | ) |
|
| (60,719 | ) |
|
| (600,063 | ) |
|
| (487,476 | ) |
|
|
|
|
|
|
|
| ||||||||
FINANCING ACTIVITIES: |
|
|
|
|
|
|
| ||||||||
Principal payments on debt |
| (20,103 | ) |
|
| (142,293 | ) |
|
| (365,628 | ) |
|
| (1,900,311 | ) |
Proceeds from borrowings |
| 115,000 |
|
|
| 70,000 |
|
|
| 625,000 |
|
|
| 1,500,600 |
|
Proceeds from bond issuance |
| — |
|
|
| — |
|
|
| — |
|
|
| 207,400 |
|
Payments for financing costs |
| (1,803 | ) |
|
| — |
|
|
| (1,803 | ) |
|
| (3,099 | ) |
Proceeds from issuance of warrants |
| — |
|
|
| — |
|
|
| — |
|
|
| 131,967 |
|
Bond Repurchase |
| — |
|
|
| — |
|
|
| (115,204 | ) |
|
| — |
|
Purchase of common stock |
| (53,868 | ) |
|
| — |
|
|
| (53,868 | ) |
|
| — |
|
Taxes paid for conversion of employee awards |
| (1,397 | ) |
|
| (1,619 | ) |
|
| (2,916 | ) |
|
| (2,861 | ) |
TOTAL FINANCING CASH FLOWS |
| 37,829 |
|
|
| (73,912 | ) |
|
| 85,581 |
|
|
| (66,304 | ) |
|
|
|
|
|
|
|
| ||||||||
NET INCREASE (DECREASE) IN CASH | $ | (27,352 | ) |
| $ | 19,688 |
|
| $ | (42,362 | ) |
| $ | 29,777 |
|
|
|
|
|
|
|
|
| ||||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | $ | 54,486 |
|
| $ | 49,808 |
|
| $ | 69,496 |
|
| $ | 39,719 |
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 27,134 |
|
| $ | 69,496 |
|
| $ | 27,134 |
|
| $ | 69,496 |
|
|
|
|
|
|
|
|
|
AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES PRETAX EARNINGS FROM CONTINUING OPERATIONS AND ADJUSTED PRETAX EARNINGS SUMMARY NON-GAAP RECONCILIATION (In thousands) | |||||||||||||||
| Three Months Ended |
| Year Ended | ||||||||||||
| December 31, |
| December 31, | ||||||||||||
|
| 2022 |
|
|
| 2021 |
|
|
| 2022 |
|
|
| 2021 |
|
Revenues |
|
|
|
|
|
|
| ||||||||
CAM |
|
|
|
|
|
|
| ||||||||
Aircraft leasing and related revenues | $ | 113,640 |
|
| $ | 110,514 |
|
| $ | 454,804 |
|
| $ | 390,327 |
|
Lease incentive amortization |
| (5,029 | ) |
|
| (5,029 | ) |
|
| (20,118 | ) |
|
| (20,040 | ) |
Total CAM |
| 108,611 |
|
|
| 105,485 |
|
|
| 434,686 |
|
|
| 370,287 |
|
ACMI Services |
| 369,385 |
|
|
| 333,790 |
|
|
| 1,404,348 |
|
|
| 1,185,128 |
|
Other Activities |
| 111,489 |
|
|
| 94,345 |
|
|
| 430,326 |
|
|
| 375,571 |
|
Total Revenues |
| 589,485 |
|
|
| 533,620 |
|
|
| 2,269,360 |
|
|
| 1,930,986 |
|
Eliminate internal revenues |
| (56,460 | ) |
|
| (51,253 | ) |
|
| (223,891 | ) |
|
| (196,704 | ) |
Customer Revenues | $ | 533,025 |
|
| $ | 482,367 |
|
| $ | 2,045,469 |
|
| $ | 1,734,282 |
|
|
|
|
|
|
|
|
| ||||||||
Pretax Earnings (Loss) from Continuing Operations |
|
|
|
|
|
| |||||||||
CAM, inclusive of interest expense |
| 31,421 |
|
|
| 33,643 |
|
|
| 143,008 |
|
|
| 106,161 |
|
ACMI Services, inclusive of government grants and interest expense |
| 25,931 |
|
|
| 34,487 |
|
|
| 95,198 |
|
|
| 158,733 |
|
Other Activities |
| 2,019 |
|
|
| (2,391 | ) |
|
| 2,579 |
|
|
| 112 |
|
Net, unallocated interest expense |
| (357 | ) |
|
| (530 | ) |
|
| (1,748 | ) |
|
| (2,525 | ) |
Non-service components of retiree benefit credit |
| 4,635 |
|
|
| 4,457 |
|
|
| 20,046 |
|
|
| 17,827 |
|
Debt issuance costs |
| — |
|
|
| — |
|
|
| — |
|
|
| (6,505 | ) |
Net gain (loss) on financial instruments |
| (380 | ) |
|
| (7,818 | ) |
|
| 9,022 |
|
|
| 29,979 |
|
Loss from non-consolidated affiliates |
| (2,030 | ) |
|
| (1,212 | ) |
|
| (7,607 | ) |
|
| (2,577 | ) |
Earnings from Continuing Operations before Income Taxes (GAAP) | $ | 61,239 |
|
| $ | 60,636 |
|
| $ | 260,498 |
|
| $ | 301,205 |
|
|
|
|
|
|
|
|
| ||||||||
Adjustments to Pretax Earnings from Continuing Operations |
|
|
|
|
|
| |||||||||
Add customer incentive amortization |
| 5,821 |
|
|
| 5,799 |
|
|
| 23,263 |
|
|
| 23,094 |
|
Add loss from non-consolidated affiliates |
| 2,030 |
|
|
| 1,212 |
|
|
| 7,607 |
|
|
| 2,577 |
|
Less net (gain) loss on financial instruments |
| 380 |
|
|
| 7,818 |
|
|
| (9,022 | ) |
|
| (29,979 | ) |
Less non-service components of retiree benefit credit |
| (4,635 | ) |
|
| (4,457 | ) |
|
| (20,046 | ) |
|
| (17,827 | ) |
Less government grants |
| — |
|
|
| (15,047 | ) |
|
| — |
|
|
| (111,673 | ) |
Add debt issuance costs |
| — |
|
|
| — |
|
|
| — |
|
|
| 6,505 |
|
Add net charges for hangar foam incident |
| 18 |
|
|
| — |
|
|
| 978 |
|
|
| — |
|
Adjusted Pretax Earnings (non-GAAP) | $ | 64,853 |
|
| $ | 55,961 |
|
| $ | 263,278 |
|
| $ | 173,902 |
|
Adjusted Pretax Earnings excludes certain items included in GAAP-based pretax Earnings (Loss) from Continuing Operations before Income Taxes because these items 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 |
| Year Ended | ||||||||||||
| December 31, |
| December 31, | ||||||||||||
|
| 2022 |
|
|
| 2021 |
|
|
| 2022 |
|
|
| 2021 |
|
|
|
|
|
|
|
|
| ||||||||
Earnings (Loss) from Continuing Operations Before Income Taxes | $ | 61,239 |
|
| $ | 60,636 |
|
| $ | 260,498 |
|
| $ | 301,205 |
|
Interest Income |
| (335 | ) |
|
| (3 | ) |
|
| (415 | ) |
|
| (39 | ) |
Interest Expense |
| 13,834 |
|
|
| 14,788 |
|
|
| 46,861 |
|
|
| 58,790 |
|
Depreciation and Amortization |
| 84,338 |
|
|
| 84,013 |
|
|
| 331,064 |
|
|
| 308,448 |
|
EBITDA from Continuing Operations (non-GAAP) | $ | 159,076 |
|
| $ | 159,434 |
|
| $ | 638,008 |
|
| $ | 668,404 |
|
Add customer incentive amortization |
| 5,821 |
|
|
| 5,799 |
|
|
| 23,263 |
|
|
| 23,094 |
|
Add start-up loss from non-consolidated affiliates |
| 2,030 |
|
|
| 1,212 |
|
|
| 7,607 |
|
|
| 2,577 |
|
Less net (gain) loss on financial instruments |
| 380 |
|
|
| 7,818 |
|
|
| (9,022 | ) |
|
| (29,979 | ) |
Add non-service components of retiree benefit credits |
| (4,635 | ) |
|
| (4,457 | ) |
|
| (20,046 | ) |
|
| (17,827 | ) |
Less government grants |
| — |
|
|
| (15,047 | ) |
|
| — |
|
|
| (111,673 | ) |
Less debt issuance costs |
| — |
|
|
| — |
|
|
| — |
|
|
| 6,505 |
|
Add net charges for hangar foam incident |
| 18 |
|
|
| — |
|
|
| 978 |
|
|
| — |
|
|
|
|
|
|
|
|
| ||||||||
Adjusted EBITDA (non-GAAP) | $ | 162,690 |
|
| $ | 154,759 |
|
| $ | 640,788 |
|
| $ | 541,101 |
|
Management uses Adjusted EBITDA to assess the performance of its operating results among periods. It is a metric that facilitates the comparison of financial results of underlying operations. Additionally, these non-GAAP adjustments are similar to the adjustments used by lenders in the Company’s senior secured credit facility to assess financial performance and determine the cost of borrowed funds. The adjustments also remove the non-service cost components of retiree benefit plans because they are not closely related to ongoing operating activities. To improve comparability between periods, the adjustments also exclude from EBITDA from Continuing Operations the recognition of government grants and charges related to the discharge of a fire suppression system in the Company's aircraft hangar, net of related insurance recoveries. Management presents EBITDA from Continuing Operations, a commonly referenced metric, as a subtotal toward computing Adjusted EBITDA.
EBITDA from Continuing Operations is defined as Earnings (Loss) from Continuing Operations Before Income Taxes plus net interest expense, depreciation, and amortization expense. Adjusted EBITDA is defined as EBITDA from Continuing Operations less financial instrument revaluation gains or losses, non-service components of retiree benefit costs including pension plan settlements, amortization of warrant-based customer incentive costs recorded in revenue, recognition of government grants, impairment of aircraft and related assets, charge off of debt issuance costs upon debt restructuring, costs from non-consolidated affiliates and charges related to the discharge of a fire suppression system, net of insurance recoveries.
AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES ADJUSTED FREE CASH FLOW NON-GAAP RECONCILIATION (In thousands) | |||||||||||||||
| Three Months Ended |
| Year Ended | ||||||||||||
| December 31, |
| December 31, | ||||||||||||
|
| 2022 |
|
|
| 2021 |
|
|
| 2022 |
|
|
| 2021 |
|
|
|
|
|
|
|
|
| ||||||||
OPERATING CASH FLOWS (GAAP) | $ | 74,050 |
|
| $ | 154,319 |
|
| $ | 472,120 |
|
| $ | 583,557 |
|
Sustaining capital expenditures |
| (41,437 | ) |
|
| (33,544 | ) |
|
| (186,836 | ) |
|
| (183,104 | ) |
|
|
|
|
|
|
|
| ||||||||
ADJUSTED FREE CASH FLOW (non-GAAP) | $ | 32,613 |
|
| $ | 120,775 |
|
| $ | 285,284 |
|
| $ | 400,453 |
|
|
|
|
|
|
|
|
|
Sustaining capital expenditures includes cash outflows for planned aircraft maintenance, engine overhauls, information systems and other non-aircraft additions to property and equipment. It does not include expenditures for aircraft acquisitions and related passenger-to-freighter conversion costs.
Cash receipts from government payroll support programs, which are included in operating cash flows, were $0 and $83.0 million for the years ended December 31, 2022 and 2021, respectively.
Adjusted Free Cash Flow (non-GAAP) includes cash flow from operations net of expenditures for planned aircraft maintenance, engine overhauls and other non-aircraft additions to property and equipment. Management believes that adjusting GAAP operating cash flows is useful for investors to evaluate the company's ability to generate adjusted free cash flow for growth initiatives, debt service, cash returns for shareholders or other discretionary allocations of capital.
AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES ADJUSTED EARNINGS AND ADJUSTED EARNINGS PER SHARE NON-GAAP RECONCILIATION (In thousands) | |||||||||||||||||||||||||||||||
Management presents Adjusted Earnings and Adjusted Earnings Per Share, both non-GAAP measures, to provide additional information regarding earnings per share without the volatility otherwise caused by the items below among periods. | |||||||||||||||||||||||||||||||
| Three Months Ended |
| Year Ended | ||||||||||||||||||||||||||||
| December 31, 2022 |
| December 31, 2021 |
| December 31, 2022 |
| December 31, 2021 | ||||||||||||||||||||||||
| $ |
| $ Per |
| $ |
| $ Per |
| $ |
| $ Per |
| $ |
| $ Per | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Earnings from Continuing Operations - basic (GAAP) | $ | 42,244 |
|
|
|
| $ | 44,458 |
|
|
|
| $ | 196,438 |
|
|
|
| $ | 228,980 |
|
|
| ||||||||
Gain from warrant revaluation, net tax1 |
| (15 | ) |
|
|
|
| — |
|
|
|
|
| (170 | ) |
|
|
|
| (15,564 | ) |
|
| ||||||||
Convertible notes interest charges, net of tax 2 |
| 766 |
|
|
|
|
| — |
|
|
|
|
| 3,051 |
|
|
|
|
| — |
|
|
| ||||||||
Earnings (Loss) from Continuing Operations - diluted (GAAP) |
| 42,995 |
|
| $ | 0.50 |
|
|
| 44,458 |
|
| $ | 0.57 |
|
|
| 199,319 |
|
| $ | 2.26 |
|
|
| 213,416 |
|
| $ | 2.80 |
|
Adjustments, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Customer incentive amortization3 |
| 4,492 |
|
|
| 0.05 |
|
|
| 4,475 |
|
|
| 0.06 |
|
|
| 17,953 |
|
|
| 0.20 |
|
|
| 17,823 |
|
|
| 0.23 |
|
Effects of government grants4 |
| — |
|
|
| — |
|
|
| (11,613 | ) |
|
| (0.15 | ) |
|
| — |
|
|
| — |
|
|
| (86,187 | ) |
|
| (1.13 | ) |
Non-service component of retiree benefits5 |
| (3,577 | ) |
|
| (0.04 | ) |
|
| (3,440 | ) |
|
| (0.04 | ) |
|
| (15,470 | ) |
|
| (0.18 | ) |
|
| (13,759 | ) |
|
| (0.18 | ) |
Debt issuance costs6 |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5,020 |
|
|
| 0.07 |
|
Derivative and warrant revaluation7 |
| 309 |
|
|
| — |
|
|
| 6,034 |
|
|
| 0.07 |
|
|
| (6,793 | ) |
|
| (0.08 | ) |
|
| (7,573 | ) |
|
| (0.16 | ) |
Loss from affiliates8 |
| 1,567 |
|
|
| 0.02 |
|
|
| 935 |
|
|
| 0.01 |
|
|
| 5,871 |
|
|
| 0.07 |
|
|
| 1,988 |
|
|
| 0.03 |
|
Convertible debt interest charges (prior period), net of tax2 |
| — |
|
|
| — |
|
|
| 2,372 |
|
|
| (0.02 | ) |
|
| — |
|
|
| — |
|
|
| 9,390 |
|
|
| (0.05 | ) |
Hangar foam incident9 |
| 14 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 755 |
|
|
| 0.01 |
|
|
| — |
|
|
| — |
|
Adjusted Earnings and Adjusted Earnings Per Share (non-GAAP) | $ | 45,800 |
|
| $ | 0.53 |
|
| $ | 43,221 |
|
| $ | 0.50 |
|
| $ | 201,635 |
|
| $ | 2.28 |
|
| $ | 140,118 |
|
| $ | 1.61 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
| Shares |
|
|
| Shares |
|
|
| Shares |
|
|
| Shares |
|
| ||||||||||||||||
Weighted Average Shares - diluted |
| 86,380 |
|
|
|
|
| 77,366 |
|
|
|
|
| 88,324 |
|
|
|
|
| 76,216 |
|
|
| ||||||||
Additional shares - warrants 1 |
| — |
|
|
|
|
| 1,635 |
|
|
|
|
| — |
|
|
|
|
| 2,680 |
|
|
| ||||||||
Additional shares - convertible notes 2 |
| — |
|
|
|
|
| 8,111 |
|
|
|
|
| — |
|
|
|
|
| 8,111 |
|
|
| ||||||||
Adjusted Shares (non-GAAP) |
| 86,380 |
|
|
|
|
| 87,112 |
|
|
|
|
| 88,324 |
|
|
|
|
| 87,007 |
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
This presentation does not give effect to convertible note hedges the Company purchased having the same number of the Company's common shares, 8.1 million shares, and the same strike price of $31.90, that underlie the Convertible Notes. The convertible note hedges are expected to reduce the potential equity dilution with respect to the Company's common stock upon conversion of the Convertible Notes.
Adjusted Earnings and Adjusted Earnings Per Share should not be considered as alternatives to Earnings from Continuing Operations, Weighted Average Shares - diluted or Earnings Per Share from Continuing Operations or any other performance measure derived in accordance with GAAP. Adjusted Earnings and Adjusted Earnings Per Share should not be considered in isolation or as a substitute for analysis of the company's results as reported under GAAP. |
1. | Under U.S. GAAP, certain warrants are reflected as a liability and unrealized warrant gains are typically removed from diluted earnings per share (“EPS”) calculations, while unrealized warrant losses are not removed because they are dilutive to EPS. For all periods presented, additional shares assumes that Amazon net settled its remaining warrants during each period. | |
2. | Application of accounting standard ASU No. 2020-06, "Accounting for Convertible Instruments and Contracts in an Entity's Own Equity" was adopted prospectively for EPS calculations on January 1, 2022 using the modified retrospective approach. The updated GAAP requires convertible debt to be treated under the "if-convert method" for EPS. Periods prior to adoption include adjustments to reflect EPS as if the new standard had been applied historically for comparability purposes. | |
3. | Removes the amortization of the warrant-based customer incentives which are recorded against revenue over the term of the related aircraft leases and customer contracts. | |
4. | Removes the effects of government grants received under federal payroll support programs. | |
5. | Removes the non-service component of post-retirement costs and credits. | |
6. | Removes the charge off of debt issuance costs when the Company modified its debt structure. | |
7. | Removes gains and losses from financial instruments, including derivative interest rate instruments and warrant revaluations. | |
8. | Removes losses for the Company's non-consolidated affiliates. | |
9. | Removes charges related to the discharge of a fire suppression system in the Company's aircraft hangar, net of related insurance recoveries. |
AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES AIRCRAFT FLEET | ||||||||||||
Aircraft Types |
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2021 |
| December 31, 2022 |
| December 31, 2023 | ||||||
|
| Freighter |
| Passenger |
| Freighter |
| Passenger |
| Freighter |
| Passenger |
|
|
|
|
|
|
|
|
|
|
|
|
|
B767-200 |
| 33 |
| 3 |
| 32 |
| 3 |
| 24 |
| 3 |
B767-300 |
| 65 |
| 9 |
| 78 |
| 8 |
| 94 |
| 8 |
B777-200 |
| — |
| 3 |
| — |
| 3 |
| — |
| 3 |
B757-200 |
| — |
| — |
| — |
| — |
| — |
| — |
B757 Combi |
| — |
| 4 |
| — |
| 4 |
| — |
| 4 |
A321-200 |
| — |
| — |
| — |
| — |
| 6 |
| — |
Total Aircraft in Service |
| 98 |
| 19 |
| 110 |
| 18 |
| 124 |
| 18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
B767-300 in or awaiting cargo conversion |
| 12 |
| — |
| 15 |
| — |
| 13 |
| — |
A321 in cargo conversion |
| 1 |
| — |
| 7 |
| — |
| 5 |
| — |
A330 in cargo conversion |
| — |
| — |
| — |
| — |
| 3 |
| — |
B767-200 staging for lease |
| 1 |
| — |
| — |
| — |
| 2 |
| — |
Total Aircraft |
| 112 |
| 19 |
| 132 |
| 18 |
| 147 |
| 18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Aircraft in Service Deployments |
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, |
| December 31, |
| December 31, | ||||||
|
| 2021 |
| 2022 |
| 2023 Projected | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Dry leased without CMI |
| 35 |
| 39 |
| 55 | ||||||
Dry leased with CMI |
| 50 |
| 52 |
| 47 | ||||||
Customer provided for CMI |
| 6 |
| 13 |
| 16 | ||||||
ACMI/Charter1 |
| 26 |
| 24 |
| 24 |
1. | ACMI/Charter includes four Boeing 767 passenger aircraft leased from external companies. |