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ATSG Reports Results For Third Quarter 2012

Hete noted that some of ATSG's customers are delaying commitments, which will impact the fourth quarter. In addition, he said that certain international customers have faced unexpected regulatory hurdles unrelated to market conditions, leading to new-service delays.

"Deployment of our modified freighter aircraft are occurring later than we had anticipated, due to both delays in the modification process and longer transition periods for aircraft returned from customers,” he said. “Given that there are meaningful fixed costs associated with each aircraft in service, having revenue lag for even one month can have a near-term negative impact on EBITDA and earnings.”

Hete concluded that while those delays will negatively affect this year's Adjusted EBITDA and earnings, they do not affect the intrinsic earnings power of ATSG's business model and its strong cash flow generation characteristics when deployments are completed.

“With reduced growth capital expenditure commitments for 2013, and the benefit of our significant investment in our fleet becoming more evident, we expect to reap substantial earnings, EBITDA, and free cash flow gains in 2013."

Conference Call

ATSG will host a conference call on Friday, November 9, 2012, at 10:00 a.m. Eastern time to review its financial results for the third quarter of 2012. Participants should dial 888-895-5479 and international participants should dial 847-619-6250 ten minutes before the scheduled start of the call and ask for conference pass code 33635520. 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 by phone on November 9, 2012, beginning at 2:00 p.m. and continuing through Friday, November 16, 2012, at 888-843-7419 (international callers 630-652-3042); use pass code 33635520#. The webcast replay will remain available via www.atsginc.com and www.earnings.com for 30 days.

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 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, aircraft maintenance services and airport ground 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 costs and timing associated with the modification and deployment of Boeing 767 and Boeing 757 aircraft, the timing associated with the redeployment of aircraft among customers, ATSG's effectiveness in restructuring its airline operations affected by DB Schenker's restructuring of its U.S. air cargo operations, 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   Nine Months Ended
September 30, September 30,
2012   2011 2012   2011
REVENUES $ 153,826 $ 195,480 $ 452,886 $ 563,668
 
OPERATING EXPENSES
Salaries, wages and benefits 44,153 48,872 135,827 140,546
Fuel 12,038 41,829 39,962 130,145
Maintenance, materials and repairs 26,751 23,740 75,135 67,426
Depreciation and amortization 21,057 22,616 62,871 68,865
Landing, ramp, rent and insurance 12,566 14,283 36,322 42,538
Travel 5,618 7,575 17,162 20,803
Other operating expenses 9,348 10,931 27,908 29,481
Impairment of aircraft, goodwill and acquired intangibles   27,144     27,144  
131,531 196,990 395,187 526,948
       
OPERATING INCOME (LOSS) 22,295 (1,510 ) 57,699 36,720
OTHER INCOME (EXPENSE)
Interest income 38 29 104 128
Interest expense (3,668 ) (3,304 ) (10,886 ) (10,944 )
Unrealized gain/(loss) on derivative instruments 294 (1,881 ) 956 (5,437 )
Write off of unamortized debt issuance costs       (2,886 )
(3,336 ) (5,156 ) (9,826 ) (19,139 )
       
EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 18,959 (6,666 ) 47,873 17,581
INCOME TAX EXPENSE (7,403 ) 1,840 (18,436 ) (7,246 )
       
EARNINGS (LOSS) FROM CONTINUING OPERATIONS 11,556 (4,826 ) 29,437 10,335
 
EARNINGS (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX (186 ) 24   (576 ) (74 )
NET EARNINGS (LOSS) $ 11,370   $ (4,802 ) $ 28,861   $ 10,261  
 
EARNINGS (LOSS) PER SHARE - Basic
Continuing operations $ 0.18   $ (0.08 ) $ 0.46   $ 0.16  
Discontinued operations     (0.01 )  
NET EARNINGS (LOSS) PER SHARE $ 0.18   $ (0.08 ) $ 0.45   $ 0.16  
 
EARNINGS (LOSS) PER SHARE - Diluted
Continuing operations $ 0.18   $ (0.08 ) $ 0.46   $ 0.16  
Discontinued operations     (0.01 )  
NET EARNINGS (LOSS) PER SHARE $ 0.18   $ (0.08 ) $ 0.45   $ 0.16  
 
WEIGHTED AVERAGE SHARES
Basic 63,456   63,334   63,439   63,267  
Diluted 64,667   63,334   64,478   64,078  
 
 

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

 
    September 30,     December 31,
2012 2011
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 28,213 $ 30,503
Accounts receivable, net of allowance of $677 in 2012 and $434 in 2011 41,043 42,278
Inventory 9,440 8,906
Prepaid supplies and other 9,716 9,785
Deferred income taxes 17,418 31,548
Aircraft and engines held for sale 4,400   9,831  
TOTAL CURRENT ASSETS 110,230 132,851
 
Property and equipment, net 802,291 748,913
Other assets 20,351 18,579
Intangibles 5,653 6,396
Goodwill 86,980   86,980  
TOTAL ASSETS $ 1,025,505   $ 993,719  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable $ 48,018 $ 48,360
Accrued salaries, wages and benefits 23,673 23,226
Accrued expenses 9,026 10,291
Current portion of debt obligations 19,251 13,223
Unearned revenue 10,636   12,487  
TOTAL CURRENT LIABILITIES 110,604 107,587
 
Long term debt obligations 338,604 333,681
Post-retirement liabilities 160,873 185,562
Other liabilities 63,781 54,212
Deferred income taxes 47,610 42,530
 
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; 64,174,283 and 64,015,789 shares issued and outstanding in 2012 and 2011, respectively 642 640
Additional paid-in capital 523,035 520,613
Accumulated deficit (119,198 ) (148,059 )
Accumulated other comprehensive loss (100,446 ) (103,047 )
TOTAL STOCKHOLDERS’ EQUITY 304,033   270,147  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 1,025,505   $ 993,719  
 
 

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

PRE-TAX EARNINGS AND ADJUSTED PRE-TAX EARNINGS SUMMARY

FROM CONTINUING OPERATIONS

NON-GAAP RECONCILIATION

(In thousands)

 
 

Three Months Ended

    Nine Months Ended
September 30, September 30,
2012   2011 2012   2011
Revenues
CAM Leasing $ 39,155 $ 37,045 $ 115,073 $ 101,935
ACMI Services
Airline services 102,863 118,936 300,466 336,436
Reimbursables 20,454   44,100   57,676   138,014  
Total ACMI Services 123,317 163,036 358,142 474,450
Other Activities 26,773   26,335   81,876   77,242  
Total Revenues 189,245 226,416 555,091 653,627
Eliminate internal revenues (35,419 ) (30,936 ) (102,205 ) (89,959 )
Customer Revenues $ 153,826   $ 195,480   $ 452,886   $ 563,668  
 
Pre-tax Earnings (Loss) from Continuing Operations
CAM, inclusive of interest expense 17,334 16,156 50,819 43,256
ACMI Services (1,746 ) 2,758 (11,543 ) 4,808
Asset impairments (27,144 ) (27,144 )
Other Activities 3,373 3,672 8,602 7,001
Net, unallocated interest expense (296 ) (227 ) (961 ) (2,017 )
Net gain (loss) on derivative instruments 294 (1,881 ) 956 (5,437 )
Write off of unamortized debt issuance costs       (2,886 )
Total Pre-tax Earnings (Loss) $ 18,959 $ (6,666 ) $ 47,873 $ 17,581
 
Adjustments to Pre-tax Earnings (Loss)
Add Asset impairment charges 27,144 27,144
Less Net (Gain) Loss on derivative instruments (294 ) 1,881 (956 ) 5,437
Add Write-off of unamortized debt issuance costs       2,886  
Adjusted Pre-tax Earnings $ 18,665   $ 22,359   $ 46,917   $ 53,048  
 

Notes: During the first half of 2011, the Company refinanced its long-term debt, recorded charges to write-off unamortized debt origination costs associated with terminated credit agreements and recognized losses for certain interest rate swaps which had been designated as hedges of the previous debt. 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. The decline in reimbursable revenues during 2012 compared to 2011 reflects the discontinuation of D.B. Schenker's air network in the fourth quarter of 2011.

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