ATSG
$28.41
Air Transport
$.16
.57%
Earnings Details
3rd Quarter September 2022
Thursday, November 03, 2022 4:11:00 PM
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Summary

Air Transport Beats

Air Transport (ATSG) reported 3rd Quarter September 2022 earnings of $0.60 per share on revenue of $516.9 million. The consensus earnings estimate was $0.53 per share on revenue of $492.6 million. The Earnings Whisper number was $0.55 per share. Revenue grew 10.9% on a year-over-year basis.

The company said it continues to expect Adjusted EBITDA to meet or exceed $640.0 million for the year ending December 31, 2022.

Air Transport Services Group Inc, through its subsidiaries, provides airline operations, aircraft leases, aircraft maintenance and other support services mainly to the air cargo transportation and package delivery industries.

Results
Reported Earnings
$0.60
Earnings Whisper
$0.55
Consensus Estimate
$0.53
Reported Revenue
$516.9 Mil
Revenue Estimate
$492.6 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

ATSG Reports Strong Third Quarter 2022 Results

Versus 3Q2021:

  • Delivers 11% Top-line Growth
  • Seven More Boeing 767 Freighter Leases
  • Reaffirms 2022 Adjusted EBITDA Guidance

WILMINGTON, Ohio--(BUSINESS WIRE)--Air Transport Services Group, Inc. (Nasdaq: ATSG), the leading provider of medium wide-body aircraft leasing, contracted air transportation, and related services, today reported consolidated financial results for the third quarter and nine months ended September 30, 2022. ATSG's third quarter 2022 results, as compared with the third quarter 2021, include:

Third Quarter 2022 Results

  • Revenues of $517 million, up $51 million or 11% from a year ago.
  • GAAP Earnings of $50 million, or $0.68 per share, down $12 million. Third quarter 2021 GAAP results included $30 million pretax in government grants representing pandemic relief for ATSG’s passenger airline, and $7 million in incremental pretax losses on financial instruments, primarily related to warrant revaluations.
  • Adjusted Earnings Per Share* of $0.60 increased three cents per share. In addition to adjustments for government grants and warrant revaluation gains, results for each year reflect additional shares for a change in GAAP presentation related to convertible notes.
  • Adjusted Pretax Earnings* of $67 million, up $7 million.
  • Adjusted EBITDA* of $163 million, up $10 million.
  • Operating Cash Flow of $148 million, versus $122 million for the year ago quarter. Also, Adjusted Free Cash Flow* of $91 million, versus $73 million for the year-ago quarter, as sustaining capital expenditures, primarily for aircraft maintenance, increased $7 million.

Rich Corrado, president and chief executive officer of ATSG, said, "Our teams continued to achieve or exceed our growth and performance goals during the third quarter, as our emphasis on long-term lease and commercial arrangements with customers continues to dampen the effect of macroeconomic factors on our results. We will complete delivery of eight Boeing 767-300 freighter leases this year while adding seven more customer-provided freighters that we fly on their behalf. Freighter leases continue to fuel our earnings momentum, driving pretax earnings for our leasing subsidiary up 30 percent in the third quarter. Operating hours for our airlines continue to grow, and we’re expecting another busy peak season."

* Adjusted Earnings Per Share, Adjusted Pretax Earnings, Adjusted EBITDA and Adjusted Free Cash Flow are non-GAAP financial measures and are defined and reconciled to GAAP measures at the end of this release.

Segment Results

Cargo Aircraft Management (CAM)

  • External leases of seven more Boeing 767s since September 2021 contributed to CAM’s 18 percent third-quarter revenue gain and 30 percent increase in pre-tax profits from a year ago. Also contributing to CAM's improved results were engine leasing and pay-by-cycle engine support services.
  • Eighty-nine CAM-owned 767 freighter aircraft were leased to external customers as of September 30, 2022. Five of eight newly converted 767-300 freighters CAM expects to lease in 2022 were delivered in the first nine months of the year.
  • Twenty-one CAM-owned aircraft were in or awaiting conversion to freighters as of September 30, 2022, consisting of fourteen 767-300s and seven A321s. That included six 767-300 and six A321-200 passenger aircraft purchased for conversion to freighters during the first nine months of 2022.

ACMI Services

  • Third-quarter revenues from ATSG’s three airline subsidiaries increased 8 percent to $357 million compared to the year ago quarter.
  • Revenue block hours increased 3 percent for the third quarter, including an 8 percent increase for cargo operations and a 14 percent decrease for passenger and combi flying. Our airlines operated ten more freighter aircraft under CMI arrangements. Passenger airline operations in support of the U.S. government were exceptionally high in the third quarter of 2021 as Omni Air supported the evacuation of military and civilian personnel from Afghanistan.
  • Pretax segment earnings were $25 million for the quarter, down from the prior-year period but up sequentially from the second quarter of this year. Third-quarter 2021 results included $30 million in earnings from government grants awarded to offset pandemic effects on Omni Air’s passenger operations. Third-quarter results continued to be affected by increased travel and training expenses for flight crews and contracted line maintenance technician costs.

2022 Outlook

ATSG expects its Adjusted EBITDA for 2022 to meet or exceed $640 million, up nearly $100 million from 2021. The 2022 Adjusted EBITDA forecast assumes for the fourth quarter:

  • Delivery of the last three of eight dry leases of 767-300 newly converted freighters CAM will complete this year.
  • Addition of the last three of seven customer-provided 767 freighters that our airlines will operate under CMI arrangements.
  • Achieving projected levels of peak-season flying.

ATSG expects its capital spending for 2022 will be $625 million, including $195 million in sustaining capex and $430 million for growth. Growth capex will be funded primarily by the strong Adjusted Free Cash Flow ATSG is generating this year.

“We are on schedule to meet our targets, as demand for our express-package network assets and flight operations remains strong. We are ready to operate under expanded peak holiday-season flight schedules for our CMI customers, supporting fulfillment of higher e-commerce shopping spurred by special early-season promotions. We anticipate growth in ATSG’s cash flow through the current economic cycle and beyond," he said.

Corrado noted that ATSG expects to lease more than 20 freighters in 2023, including fourteen 767-300s and at least six A321-200s. By year-end 2022, CAM will own or hold rights to acquire all of the 767s and A321s it requires for lease deliveries in 2023. Those orders are backed by customer deposits or are from existing lease customers.

In 2024, CAM expects a similar pace of 767 and A321 lease deliveries, plus the first of twenty-nine Airbus A330-300 freighters it will purchase, convert and lease.

“We expect the Boeing 767-300 and the Airbus A330-300 to be the aircraft of choice for regional express air cargo networks for years to come,” Corrado said. “CAM has secured a sizeable portion of the conversion capacity for both aircraft types emerging from current sources through the middle of this decade. Customers have already placed orders for more than 20 of the 29 A330 freighters we expect to lease through 2027. All of those customers are based outside of North America, which will further diversify our revenue streams and expand our presence abroad.”

Share Repurchases

In August, ATSG noted that restrictions on its ability to repurchase shares under CARES Act provisions would expire at the end of September. ATSG resumed share repurchases during October 2022, acquiring 1.6 million, or approximately 2 percent of its issued and outstanding shares in open-market and private transactions.

Corrado said, "ATSG’s Board of Directors continues to believe that share repurchases, as one component of a carefully considered capital allocation program, are in the best interest of all shareholders of ATSG. ATSG will continue to buy back shares when both market conditions and our assessment of other capital allocation alternatives indicates that they represent the best use of our capital, consistent with our goal to maximize shareholder returns over the long term."

Non-GAAP Financial Measures

This release, including the attached tables, contains non-GAAP financial measures that management uses to evaluate historical results and project future results. Management believes that these non-GAAP measures assist in highlighting operational trends, facilitating period-over-period comparisons, and providing additional clarity about events and trends affecting core operating performance. Disclosing these non-GAAP measures provides insight to investors about additional metrics that management uses to evaluate past performance and prospects for future performance. Non-GAAP measures should not be considered in isolation or as a substitute for analysis of the Company's results as reported under GAAP.

The historical non-GAAP financial measures included in this release are reconciled to GAAP earnings in tables included later in this release. The Company does not provide a reconciliation of projected Adjusted EBITDA because it is unable to predict with reasonable accuracy the value of certain adjustments. Certain adjustments can be significantly impacted by the re-measurements of financial instruments including stock warrants issued to a customer. The Company’s earnings on a GAAP basis and the non-GAAP adjustments for gains and losses resulting from the re-measurement of stock warrants, will depend on the future prices of ATSG stock, interest rates, and other assumptions which are highly uncertain.

Conference Call

ATSG will host an investor conference call on Friday, November 4, 2022, at 10 a.m. Eastern time to review its financial results for the third quarter of 2022. Participants must register in advance to receive a number and PIN to connect by phone, using a link provided on our website, atsginc.com/investors. A separate link will offer access to a live, listen-only webcast of the call. The webcast will remain available for replay via the same site 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, 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. 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. A number of important factors could cause Air Transport Services Group, Inc.'s ("ATSG's") actual results to differ materially from those indicated by such forward-looking statements. Such factors include, but are not limited to: (i) the extent to which changes in market conditions impact the number, timing, and scheduled routes of aircraft deployments to new and existing customers; (ii) the cost and timing with respect to which we are able to purchase and modify aircraft to a cargo configuration, which may be impacted by global supply chain disruptions; (iii) our operating airlines' ability to maintain on-time service and control costs; (iv) our ability to remain in compliance with key agreements with customers, lenders and government agencies; (v) persistent elevated rates of inflation and changes in general economic and/or industry-specific conditions such as higher labor costs, increases in interest rates, an economic recession, and downturns in customer business cycles; (vi) the impact arising from COVID-19 outbreaks, including the emergence of COVID-19 variants; (vii) mark-to-market changes on certain financial instruments; and (viii) 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. Except as may be required by applicable law, 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,

 

2022

 

2021

 

2022

 

2021

REVENUES

$

516,916

 

 

$

465,955

 

 

$

1,512,444

 

 

$

1,251,915

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

Salaries, wages and benefits

 

169,967

 

 

 

148,074

 

 

 

494,526

 

 

 

431,614

 

Depreciation and amortization

 

83,283

 

 

 

77,751

 

 

 

246,726

 

 

 

224,435

 

Maintenance, materials and repairs

 

41,541

 

 

 

43,751

 

 

 

116,657

 

 

 

131,671

 

Fuel

 

68,620

 

 

 

50,176

 

 

 

202,080

 

 

 

117,210

 

Contracted ground and aviation services

 

18,278

 

 

 

21,620

 

 

 

56,762

 

 

 

55,217

 

Travel

 

29,865

 

 

 

24,928

 

 

 

82,544

 

 

 

61,833

 

Landing and ramp

 

4,210

 

 

 

4,027

 

 

 

12,873

 

 

 

10,162

 

Rent

 

8,383

 

 

 

5,807

 

 

 

22,114

 

 

 

17,401

 

Insurance

 

2,346

 

 

 

3,178

 

 

 

7,224

 

 

 

9,382

 

Other operating expenses

 

17,764

 

 

 

17,205

 

 

 

57,968

 

 

 

48,378

 

Government grants

 

 

 

 

(30,322

)

 

 

 

 

 

(96,626

)

 

 

444,257

 

 

 

366,195

 

 

 

1,299,474

 

 

 

1,010,677

 

 

 

 

 

 

 

 

 

OPERATING INCOME

 

72,659

 

 

 

99,760

 

 

 

212,970

 

 

 

241,238

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

Interest income

 

56

 

 

 

8

 

 

 

80

 

 

 

36

 

Non-service component of retiree benefit credits

 

4,635

 

 

 

4,457

 

 

 

15,411

 

 

 

13,370

 

Debt issuance costs

 

 

 

 

 

 

 

 

 

 

(6,505

)

Net gain (loss) on financial instruments

 

695

 

 

 

(7,378

)

 

 

9,402

 

 

 

37,797

 

Losses from non-consolidated affiliates

 

(954

)

 

 

(1,147

)

 

 

(5,577

)

 

 

(1,365

)

Interest expense

 

(12,167

)

 

 

(14,459

)

 

 

(33,027

)

 

 

(44,002

)

 

 

(7,735

)

 

 

(18,519

)

 

 

(13,711

)

 

 

(669

)

 

 

 

 

 

 

 

 

EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

 

64,924

 

 

 

81,241

 

 

 

199,259

 

 

 

240,569

 

INCOME TAX EXPENSE

 

(14,736

)

 

 

(18,878

)

 

 

(45,065

)

 

 

(56,047

)

 

 

 

 

 

 

 

 

EARNINGS FROM CONTINUING OPERATIONS

 

50,188

 

 

 

62,363

 

 

 

154,194

 

 

 

184,522

 

 

 

 

 

 

 

 

 

EARNINGS FROM DISCONTINUED OPERATIONS, NET OF TAX

 

854

 

 

 

2,309

 

 

 

1,736

 

 

 

2,374

 

NET EARNINGS

$

51,042

 

 

$

64,672

 

 

$

155,930

 

 

$

186,896

 

 

 

 

 

 

 

 

 

EARNINGS PER SHARE - CONTINUING OPERATIONS

 

 

 

 

 

 

 

Basic

$

0.68

 

 

$

0.85

 

 

$

2.08

 

 

$

2.75

 

Diluted

$

0.57

 

 

$

0.81

 

 

$

1.76

 

 

$

2.14

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES - CONTINUING OPERATIONS

 

 

 

 

 

 

 

Basic

 

73,998

 

 

 

73,721

 

 

 

73,956

 

 

 

67,177

 

Diluted

 

88,746

 

 

 

76,743

 

 

 

88,980

 

 

 

75,277

 

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

 

 

September 30,

 

December 31,

 

2022

 

2021

ASSETS

 

 

 

CURRENT ASSETS:

 

 

 

Cash and cash equivalents

$

54,486

 

 

$

69,496

 

Accounts receivable, net of allowance of $989 in 2022 and $742 in 2021

 

250,548

 

 

 

205,399

 

Inventory

 

55,322

 

 

 

49,204

 

Prepaid supplies and other

 

28,281

 

 

 

28,742

 

TOTAL CURRENT ASSETS

 

388,637

 

 

 

352,841

 

 

 

 

 

Property and equipment, net

 

2,339,278

 

 

 

2,129,934

 

Customer incentive

 

85,472

 

 

 

102,913

 

Goodwill and acquired intangibles

 

495,195

 

 

 

505,125

 

Operating lease assets

 

61,742

 

 

 

62,644

 

Other assets

 

154,841

 

 

 

113,878

 

TOTAL ASSETS

$

3,525,165

 

 

$

3,267,335

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

CURRENT LIABILITIES:

 

 

 

Accounts payable

$

186,460

 

 

$

174,237

 

Accrued salaries, wages and benefits

 

60,170

 

 

 

56,652

 

Accrued expenses

 

12,910

 

 

 

14,950

 

Current portion of debt obligations

 

637

 

 

 

628

 

Current portion of lease obligations

 

21,879

 

 

 

18,783

 

Unearned revenue and grants

 

37,289

 

 

 

47,381

 

TOTAL CURRENT LIABILITIES

 

319,345

 

 

 

312,631

 

Long term debt

 

1,369,006

 

 

 

1,298,735

 

Stock warrant obligations

 

715

 

 

 

915

 

Post-retirement obligations

 

20,140

 

 

 

21,337

 

Long term lease obligations

 

40,581

 

 

 

44,387

 

Other liabilities

 

56,810

 

 

 

49,662

 

Deferred income taxes

 

253,036

 

 

 

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; 74,366,636 and 74,142,183 shares issued and outstanding in 2022 and 2021, respectively

 

744

 

 

 

741

 

Additional paid-in capital

 

1,039,354

 

 

 

1,074,286

 

Retained earnings

 

486,231

 

 

 

309,430

 

Accumulated other comprehensive loss

 

(60,797

)

 

 

(62,080

)

TOTAL STOCKHOLDERS’ EQUITY

 

1,465,532

 

 

 

1,322,377

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

3,525,165

 

 

$

3,267,335

 

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED SUMMARY OF CASH FLOWS

(In thousands)

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2022

 

2021

 

2022

 

2021

 

 

 

 

 

 

 

 

OPERATING CASH FLOWS

$

147,861

 

 

$

122,047

 

 

$

398,070

 

 

$

429,238

 

 

 

 

 

 

 

 

 

INVESTING ACTIVITIES:

 

 

 

 

 

 

 

Aircraft acquisitions and freighter conversions

 

(97,666

)

 

 

(78,462

)

 

 

(302,959

)

 

 

(278,566

)

Planned aircraft maintenance, engine overhauls and other non-aircraft additions to property and equipment

 

(56,482

)

 

 

(49,415

)

 

 

(145,399

)

 

 

(149,560

)

Proceeds from property and equipment

 

3,605

 

 

 

2,800

 

 

 

3,759

 

 

 

3,524

 

Investments in businesses

 

312

 

 

 

327

 

 

 

(16,233

)

 

 

(2,155

)

TOTAL INVESTING CASH FLOWS

 

(150,231

)

 

 

(124,750

)

 

 

(460,832

)

 

 

(426,757

)

 

 

 

 

 

 

 

 

FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Principal payments on debt

 

(50,215

)

 

 

(32,099

)

 

 

(345,525

)

 

 

(1,758,018

)

Proceeds from borrowings

 

60,000

 

 

 

 

 

 

510,000

 

 

 

1,430,600

 

Repurchase of senior unsecured notes

 

 

 

 

 

 

 

(115,204

)

 

 

 

Proceeds from senior unsecured bond issuance

 

 

 

 

 

 

 

 

 

 

207,400

 

Payments for financing costs

 

 

 

 

(293

)

 

 

 

 

 

(3,099

)

Proceeds from issuance of warrants

 

 

 

 

 

 

 

 

 

 

131,967

 

Taxes paid for conversion of employee awards

 

(80

)

 

 

(6

)

 

 

(1,519

)

 

 

(1,242

)

TOTAL FINANCING CASH FLOWS

 

9,705

 

 

 

(32,398

)

 

 

47,752

 

 

 

7,608

 

 

 

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH

$

7,335

 

 

$

(35,101

)

 

$

(15,010

)

 

$

10,089

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

$

47,151

 

 

$

84,909

 

 

$

69,496

 

 

$

39,719

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

54,486

 

 

$

49,808

 

 

$

54,486

 

 

$

49,808

 

 

 

 

 

 

 

 

 

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

 

Nine Months Ended

 

September 30,

 

September 30,

 

2022

 

2021

 

2022

 

2021

Revenues

 

 

 

 

 

 

 

CAM

 

 

 

 

 

 

 

Aircraft leasing and related revenues

$

114,526

 

 

$

97,960

 

 

$

341,164

 

 

$

279,813

 

Lease incentive amortization

 

(5,030

)

 

 

(5,029

)

 

 

(15,089

)

 

 

(15,011

)

Total CAM

 

109,496

 

 

 

92,931

 

 

 

326,075

 

 

 

264,802

 

ACMI Services

 

357,375

 

 

 

330,906

 

 

 

1,034,963

 

 

 

851,338

 

Other Activities

 

108,423

 

 

 

90,292

 

 

 

318,837

 

 

 

281,226

 

Total Revenues

 

575,294

 

 

 

514,129

 

 

 

1,679,875

 

 

 

1,397,366

 

Eliminate internal revenues

 

(58,378

)

 

 

(48,174

)

 

 

(167,431

)

 

 

(145,451

)

Customer Revenues

$

516,916

 

 

$

465,955

 

 

$

1,512,444

 

 

$

1,251,915

 

 

 

 

 

 

 

 

 

Pretax Earnings (Loss) from Continuing Operations

 

 

 

 

 

 

CAM, inclusive of interest expense

 

36,975

 

 

 

28,502

 

 

 

111,587

 

 

 

72,518

 

ACMI Services, inclusive of government grants and interest expense

 

25,265

 

 

 

58,225

 

 

 

69,267

 

 

 

124,246

 

Other Activities

 

(1,182

)

 

 

(1,047

)

 

 

560

 

 

 

2,503

 

Net, unallocated interest expense

 

(510

)

 

 

(371

)

 

 

(1,391

)

 

 

(1,995

)

Non-service components of retiree benefit credit

 

4,635

 

 

 

4,457

 

 

 

15,411

 

 

 

13,370

 

Debt issuance costs

 

 

 

 

 

 

 

 

 

 

(6,505

)

Net gain (loss) on financial instruments

 

695

 

 

 

(7,378

)

 

 

9,402

 

 

 

37,797

 

Loss from non-consolidated affiliates

 

(954

)

 

 

(1,147

)

 

 

(5,577

)

 

 

(1,365

)

Earnings from Continuing Operations before Income Taxes (GAAP)

$

64,924

 

 

$

81,241

 

 

$

199,259

 

 

$

240,569

 

 

 

 

 

 

 

 

 

Adjustments to Pretax Earnings

 

 

 

 

 

 

Add customer incentive amortization

 

5,822

 

 

 

5,798

 

 

 

17,442

 

 

 

17,295

 

Less government grants

 

 

 

 

(30,322

)

 

 

 

 

 

(96,626

)

Less non-service components of retiree benefit credit

 

(4,635

)

 

 

(4,457

)

 

 

(15,411

)

 

 

(13,370

)

Add debt issuance costs

 

 

 

 

 

 

 

 

 

 

6,505

 

Less net (gain) loss on financial instruments

 

(695

)

 

 

7,378

 

 

 

(9,402

)

 

 

(37,797

)

Add loss from non-consolidated affiliates

 

954

 

 

 

1,147

 

 

 

5,577

 

 

 

1,365

 

Add net charges for hangar foam incident

 

960

 

 

 

 

 

 

960

 

 

 

 

Adjusted Pretax Earnings (non-GAAP)

$

67,330

 

 

$

60,785

 

 

$

198,425

 

 

$

117,941

 

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.

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

 

Nine Months Ended

 

September 30,

 

September 30,

 

2022

 

2021

 

2022

 

2021

 

 

 

 

 

 

 

 

Earnings from Continuing Operations Before Income Taxes

$

64,924

 

 

$

81,241

 

 

$

199,259

 

 

$

240,569

 

Interest Income

 

(56

)

 

 

(8

)

 

 

(80

)

 

 

(36

)

Interest Expense

 

12,167

 

 

 

14,459

 

 

 

33,027

 

 

 

44,002

 

Depreciation and Amortization

 

83,283

 

 

 

77,751

 

 

 

246,726

 

 

 

224,435

 

EBITDA from Continuing Operations (non-GAAP)

$

160,318

 

 

$

173,443

 

 

$

478,932

 

 

$

508,970

 

Add customer incentive amortization

 

5,822

 

 

 

5,798

 

 

 

17,442

 

 

 

17,295

 

Less government grants

 

 

 

 

(30,322

)

 

 

 

 

 

(96,626

)

Add non-service components of retiree benefit credits

 

(4,635

)

 

 

(4,457

)

 

 

(15,411

)

 

 

(13,370

)

Less debt issuance costs

 

 

 

 

 

 

 

 

 

 

6,505

 

Less net (gain) loss on financial instruments

 

(695

)

 

 

7,378

 

 

 

(9,402

)

 

 

(37,797

)

Add loss from non-consolidated affiliates

 

954

 

 

 

1,147

 

 

 

5,577

 

 

 

1,365

 

Add net charges for hangar foam incident

 

960

 

 

 

 

 

 

960

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA (non-GAAP)

$

162,724

 

 

$

152,987

 

 

$

478,098

 

 

$

386,342

 

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, adjustments from earnings also remove the recognition of government grants and charges, net of related insurance recoveries, resulting from the inadvertent discharge of a fire suppression system at one of the Company's maintenance hangars in August of 2022. 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, charge off of debt issuance costs upon debt restructuring and costs from non-consolidated affiliates.

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

ADJUSTED FREE CASH FLOW

NON-GAAP RECONCILIATION

(In thousands)

 

 

Three Months Ended

 

Nine Months Ended

 

Twelve Months Ended

 

September 30,

 

September 30,

 

September 30,

 

2022

 

2021

 

2022

 

2021

 

2022

 

 

 

 

 

 

 

 

 

 

OPERATING CASH FLOWS (GAAP)

$

147,861

 

 

$

122,047

 

 

$

398,070

 

 

$

429,238

 

 

$

552,389

 

Sustaining capital expenditures

 

(56,482

)

 

 

(49,415

)

 

 

(145,399

)

 

 

(149,560

)

 

 

(178,943

)

 

 

 

 

 

 

 

 

 

 

ADJUSTED FREE CASH FLOW (Non-GAAP)

$

91,379

 

 

$

72,632

 

 

$

252,671

 

 

$

279,678

 

 

$

373,446

 

 

 

 

 

 

 

 

 

 

 

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 nine month periods ended September 30, 2022 and 2021, respectively. Cash receipts from government payroll support programs were $0 for the twelve months ended September 30, 2022.

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 to evaluate the company's ability to generate cash for growth initiatives, debt service, cash returns for shareholders or other discretionary allocations of capital.

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

ADJUSTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS

NON-GAAP RECONCILIATION

(In thousands)

 

Three Months Ended

 

Nine Months Ended

 

September 30,
2022

 

September 30,
2021

 

September 30,
2022

 

September 30,
2021

 

$

$ Per
Share

 

$

 

$ Per
Share

 

$

 

$ Per
Share

 

$

 

$ Per
Share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings from Continuing Operations - basic (GAAP)

$

50,188

 

 

 

$

62,363

 

 

 

 

$

154,194

 

 

 

 

$

184,522

 

 

 

Gain from warrant revaluation, net of tax1

 

(105

)

 

 

 

 

 

 

 

 

(155

)

 

 

 

 

(23,776

)

 

 

Convertible notes interest charges, net of tax2

 

763

 

 

 

 

 

 

 

 

 

2,285

 

 

 

 

 

 

 

 

Earnings from Continuing Operations - diluted (GAAP)

 

50,846

 

$

0.57

 

 

 

62,363

 

 

$

0.81

 

 

 

156,324

 

 

$

1.76

 

 

 

160,746

 

 

$

2.14

 

Adjustments to remove the following, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer incentive amortization3

 

4,493

 

$

0.05

 

 

 

4,475

 

 

$

0.06

 

 

 

13,461

 

 

$

0.15

 

 

 

13,348

 

 

$

0.18

 

Government grants4

 

 

$

 

 

 

(23,402

)

 

$

(0.30

)

 

 

 

 

$

 

 

 

(74,574

)

 

$

(0.99

)

Non-service component of retiree benefits5

 

(3,577

)

$

(0.04

)

 

 

(3,440

)

 

$

(0.04

)

 

 

(11,893

)

 

$

(0.14

)

 

 

(10,319

)

 

$

(0.14

)

Derivative and warrant revaluation6

 

(431

)

$

 

 

 

5,694

 

 

$

0.06

 

 

 

(7,102

)

 

$

(0.08

)

 

 

(5,395

)

 

$

(0.13

)

Loss from affiliates7

 

736

 

$

0.01

 

 

 

885

 

 

$

0.01

 

 

 

4,304

 

 

$

0.05

 

 

 

1,053

 

 

$

0.01

 

Debt issuance costs 8

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

5,020

 

 

$

0.07

 

Convertible debt interest charges (prior period), net of tax2

 

 

$

 

 

 

2,355

 

 

$

(0.03

)

 

 

 

 

$

 

 

 

7,018

 

 

$

(0.03

)

Hangar foam incident 9

 

741

 

$

0.01

 

 

 

 

 

$

 

 

 

741

 

 

$

0.01

 

 

 

 

 

$

 

Adjusted Earnings from Continuing Operations (non-GAAP)

$

52,808

 

$

0.60

 

 

$

48,930

 

 

$

0.57

 

 

$

155,835

 

 

$

1.75

 

 

$

96,897

 

 

$

1.11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Shares

 

 

 

Shares

 

 

 

Shares

 

 

Weighted Average Shares - diluted (GAAP)

 

88,746

 

 

 

 

76,743

 

 

 

 

 

88,980

 

 

 

 

 

75,277

 

 

 

Additional shares - warrants1

 

 

 

 

 

1,343

 

 

 

 

 

 

 

 

 

 

3,583

 

 

 

Additional shares - convertible notes2

 

 

 

 

 

8,111

 

 

 

 

 

 

 

 

 

 

8,111

 

 

 

Adjusted Shares (non-GAAP)

 

88,746

 

 

 

 

86,197

 

 

 

 

 

88,980

 

 

 

 

 

86,971

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

This presentation does not give effect to convertible note hedges the Company purchased having the same number of the Company's common shares, 8.111 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 from Continuing Operations and Adjusted Earnings Per Share from Continuing Operations are non-GAAP financial measures and 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 from Continuing Operations 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 new 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 gains and losses from financial instruments, including derivative interest rate instruments and warrant revaluations.

7.

Removes losses for the Company's non-consolidated affiliates.

8.

Removes the charge off of debt issuance costs when the Company modified its debt structure.

9.

Removes charges related to the inadvertent 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2021

 

December 31, 2021

 

September 30, 2022

 

December 31, 2022
Projected

 

 

Freighter

 

Passenger

 

Freighter

 

Passenger

 

Freighter

 

Passenger

 

Freighter

 

Passenger

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

B767-200

 

32

 

3

 

33

 

3

 

32

 

3

 

32

 

3

B767-300

 

61

 

9

 

65

 

9

 

74

 

8

 

80

 

8

B777-200

 

 

3

 

 

3

 

 

3

 

 

3

B757 Combi

 

 

4

 

 

4

 

 

4

 

 

4

A321-200

 

 

 

 

 

 

 

 

Total Aircraft in Service

 

93

 

19

 

98

 

19

 

106

 

18

 

112

 

18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

B767-300 in or awaiting cargo conversion

 

15

 

 

12

 

 

14

 

 

15

 

A321 in or awaiting cargo conversion

 

1

 

 

1

 

 

7

 

 

9

 

A330 awaiting cargo conversion

 

 

 

 

 

 

 

1

 

B767-200 staging for lease

 

2

 

 

1

 

 

2

 

 

2

 

Total Aircraft

 

111

 

19

 

112

 

19

 

129

 

18

 

139

 

18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aircraft in Service

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

December 31,

 

September 30,

 

December 31,

 

 

2021

 

2021

 

2022

 

2022 Projected

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dry leased without CMI

 

35

 

35

 

37

 

41

Dry leased with CMI

 

47

 

50

 

52

 

52

Customer provided for CMI

 

4

 

6

 

10

 

13

ACMI/Charter1

 

26

 

26

 

25

 

24

1.

ACMI/Charter includes four Boeing 767 passenger aircraft leased from external companies.

 

Quint Turner, ATSG Inc. Chief Financial Officer
937-366-2303

Source: Air Transport Services Group, Inc.