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Air Transport Services Group, Inc. (NASDAQ:ATSG) today reported sharply improved third quarter financial results after excluding non-cash impairment charges. Highlights of the quarter compared to the prior year period included:
Pre-tax losses from continuing operations were $6.7 million while net losses from continuing operations totaled $4.8 million, or $0.08 per share diluted. Third-quarter 2011 earnings included $27.1 million in impairment charges related to reductions in business with DB Schenker that began in September, and $1.9 million in unrealized losses on derivative instruments related to the company's new credit facilities adopted in May.
Excluding impairment and derivative charges, pre-tax and net earnings from continuing operations increased by 34 percent and 22 percent, respectively, versus the third quarter 2010 results. Adjusted pre-tax earnings were $22.4 million excluding the impairment and derivative charges, up from $16.7 million in the third quarter of 2010, principally because of increased earnings from ATSG's freighter leasing business. Net earnings from continuing operations excluding those charges and their related tax effects were $13.9 million, up from $11.4 million in the third quarter of 2010. Net interest expense under the new credit agreement reached in May 2011 decreased $1.3 million for the third quarter compared to a year ago. Pre-tax losses for the quarter generated an income tax benefit of $1.8 million.
Third-quarter EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), adjusted for non-cash impairment and derivative losses, totaled $48.3 million, up 10 percent from $44.0 million in the third quarter of 2010 . Adjusted EBITDA is a non-GAAP measure of financial performance. The definition and reconciliation of ATSG's third-quarter Adjusted EBITDA to GAAP net income is provided at the end of this release.
Revenues increased 17 percent to $195.5 million, including customer-reimbursed costs, with increases evident from each of the company's reported segments and other business units. Excluding reimbursements, ATSG's revenues increased 19 percent to $151.4 million.
“Our business model, which emphasizes balanced, market-sensitive assignments of converted freighter aircraft between long-term dry leases and shorter-term wet lease or ACMI agreements, continues to generate strong cash flows even in uncertain economic conditions,” Joe Hete, President and CEO of ATSG, said. “During the third quarter, our operating and cash flow returns remained strong despite the previously announced decision by our customer, DB Schenker, to phase out its dedicated air cargo network in favor of an outsourcing relationship with DHL. We are responding to those changes by reducing our costs, removing DC-8 and 727 freighter aircraft from service, and offering DHL access to additional 767 and 757 aircraft to meet their requirements related to their outsourcing relationship with DB Schenker.”