ATSG
$23.88
Air Transport
($.45)
(1.85%)
Earnings Details
2nd Quarter June 2022
Thursday, August 4, 2022 4:15:00 PM
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Summary

Air Transport (ATSG) Recent Earnings

Air Transport (ATSG) reported 2nd Quarter June 2022 earnings of $0.59 per share on revenue of $509.7 million. The consensus earnings estimate was $0.51 per share on revenue of $487.2 million. Revenue grew 24.3% on a year-over-year basis.

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
$0.59
Earnings Whisper
-
Consensus Estimate
$0.51
Reported Revenue
$509.7 Mil
Revenue Estimate
$487.2 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

ATSG Reports Strong Second Quarter 2022 Results

Delivers 24% Top-line Growth, Driven by Continued Strength in Freighter Leasing

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 second quarter and six months ended June 30, 2022.

ATSG's second quarter 2022 results, as compared with the second quarter 2021, include:

Second Quarter 2022 Results

  • Revenues of $510 million, up 24%
  • GAAP Earnings of $54 million, or $0.73 per share basic, down from $80 million, or $1.17. Second quarter 2021 results included $38 million pretax in government grants representing pandemic relief for ATSG’s passenger airline, $30 million in incremental pretax gains primarily related to warrant revaluations.
  • Adjusted Earnings Per Share* of $0.59, versus $0.35 a year ago. Amounts exclude, among other items, government grant 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 80%
  • Adjusted EBITDA* of $158 million, up 23%
  • Operating Cash Flow of $125 million, versus $183 million for the year ago quarter ended June 30. Also, Adjusted Free Cash Flow* of $72 million, versus $123 million for the year ago quarter, reflecting higher customer receivables.

Rich Corrado, president and chief executive officer of ATSG, said, "Leasing converted midsize freighter aircraft and flying them in express-package networks remained a powerful and resilient driver of our strong cash flow in the second quarter. CAM, our aircraft lessor, again fueled our adjusted earnings momentum, with nine more Boeing 767 freighters leased to third-party customers than a year ago. Our cargo airlines continue to fly more hours, using both freighters that CAM owns plus others that customers have assigned to them. Inflation-driven increases in employee costs, contracted labor, crew travel and other costs are affecting our ACMI Services results and we are taking steps to mitigate the impact where we can."

* 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

CAM

  • External leases of nine more Boeing 767s since June 2021 contributed to CAM’s 24 percent second-quarter revenue gain. CAM also realized more 2022 revenues from new pay-by-cycle engine support services with several lessees of its 767-200 freighters. Aircraft leasing and related revenues from external customers were up 21 percent.
  • CAM’s second-quarter pretax earnings increased 76 percent to $39.6 million versus the prior-year quarter. Allocated interest decreased $3 million and depreciation increased $6 million.
  • Eighty-nine CAM-owned 767 freighter aircraft were leased to external customers as of June 30, 2022. CAM expects to lease six more freighters in the second half, including four 767s and two Airbus A321-200s.
  • CAM purchased five 767-300 and four A321-200 passenger aircraft during the first half for conversion to freighters. One CAM-owned 767-300 passenger aircraft was removed from service with Omni Air and scheduled for freighter conversion. Nineteen CAM-owned aircraft were in or awaiting conversion to freighters as of June 30, 2022, consisting of fourteen 767-300s and five A321s.

ACMI Services

  • Second-quarter revenues increased 27 percent to $347 million. Block hours for ATSG's airlines reflected sharply higher passenger flying and the benefit of four more CAM-leased freighters in CMI service than a year ago, plus four more 767 freighters provided by customers for our airlines to operate.
  • Second-quarter flight schedules were up from a year ago, particularly for passenger charter operations. Revenue block hours increased nine percent overall, including a 13 percent increase for passenger and combi flying and a 7 percent increase for cargo aircraft.
  • Pretax segment earnings decreased $23 million to $22 million for the quarter. Prior-year results included $38 million from government grants awarded to offset pandemic effects on Omni Air’s passenger operations.
  • Excluding the government grants, segment earnings more than tripled from a year ago.
  • Second-quarter results were affected by additional costs for crew coverage and inflation-driven increases in operating costs, including crew travel, fuel costs for positioning aircraft, and labor costs, including contracted worker costs.

2022 Outlook

ATSG continues to project a record $640 million in Adjusted EBITDA for 2022, up nearly $100 million from 2021. Our 2022 Adjusted EBITDA forecast assumes:

  • The addition of ten dry leases of converted freighters for the year, including eight 767-300s and two A321-200 aircraft.
  • Seven more 767 freighters that our airlines will operate under CMI arrangements that the aircraft’s owners or lessees have assigned to our airlines.
  • Mitigation of some inflation-driven cost increases in ACMI Services and rate increases for military passenger operations beginning in the fourth quarter.
  • Full restoration of ATI’s global combi service to all remote U.S. military facilities it served before the pandemic, including a major route scheduled to resume in the fourth quarter.

ATSG has raised its capital spending projection for 2022 by $35 million to $625 million, including $205 million in sustaining capex and $420 million for growth. The increase in growth capex reflects payments in the second half of 2022 to acquire feedstock aircraft previously scheduled to be purchased in 2023. 2022 growth capex will be funded primarily by the strong Adjusted Free Cash Flow ATSG will generate this year.

CAM has completed the first four of its projected eight 767-300 leases this year. ATSG’s cargo airlines continue to add customers’ aircraft to its freighter fleet. Those aircraft, along with expanded peak flying, are expected to boost air delivery revenues and earnings in the second half of the year.

Corrado said that Omni Air’s revenues and flights for the U.S. military remain at high levels and ATSG’s passenger business is expected to deliver solid results in the second half.

“Despite persistent inflation, we expect to reach our financial targets for 2022, as demand for our express-package network assets and flight operations remains high. E-commerce shopping habits, now well ingrained and reinforced by often lower online prices, will continue to drive express-package delivery networks that assure rapid, reliable delivery. That trend, in turn, will drive growth in ATSG’s cash flow through the current economic cycle and beyond," he said.

Corrado noted that ATSG expects to lease a record eighteen freighters in 2023, including fourteen 767s and four A321s.

“The majority of those orders are backed by customer deposits, and nearly all are from existing customers, giving us great confidence about growth in our core leasing returns over the next 18 months,” he said. “Beyond that, we have customer orders for twenty Airbus A330s we will start to acquire and convert next year, with deliveries beginning in 2024. Our existing lease portfolio and order book translate into a compelling growth story for ATSG in the coming years."

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, August 5, 2022, at 10 a.m. Eastern time to review its financial results for the second 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

 

Six Months Ended

 

June 30,

 

June 30,

 

2022

 

2021

 

2022

 

2021

REVENUES

$

509,668

 

 

$

409,872

 

 

$

995,528

 

 

$

785,960

 

  

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

Salaries, wages and benefits

 

162,797

 

 

 

141,524

 

 

 

324,559

 

 

 

283,540

 

Depreciation and amortization

 

81,372

 

 

 

75,633

 

 

 

163,443

 

 

 

146,684

 

Maintenance, materials and repairs

 

39,407

 

 

 

45,913

 

 

 

75,116

 

 

 

87,920

 

Fuel

 

73,102

 

 

 

36,592

 

 

 

133,460

 

 

 

67,034

 

Contracted ground and aviation services

 

20,153

 

 

 

18,794

 

 

 

38,484

 

 

 

33,597

 

Travel

 

28,480

 

 

 

18,501

 

 

 

52,679

 

 

 

36,905

 

Landing and ramp

 

4,085

 

 

 

3,026

 

 

 

8,663

 

 

 

6,135

 

Rent

 

7,068

 

 

 

5,726

 

 

 

13,731

 

 

 

11,594

 

Insurance

 

2,326

 

 

 

3,068

 

 

 

4,878

 

 

 

6,204

 

Other operating expenses

 

20,361

 

 

 

14,750

 

 

 

40,204

 

 

 

31,173

 

Government grants

 

 

 

 

(38,274

)

 

 

 

 

 

(66,304

)

 

 

439,151

 

 

 

325,253

 

 

 

855,217

 

 

 

644,482

 

  

 

 

 

 

 

 

 

OPERATING INCOME

 

70,517

 

 

 

84,619

 

 

 

140,311

 

 

 

141,478

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

Interest income

 

15

 

 

 

9

 

 

 

24

 

 

 

28

 

Non-service component of retiree benefit credits

 

5,388

 

 

 

4,456

 

 

 

10,776

 

 

 

8,913

 

Debt issuance costs

 

 

 

 

(6,505

)

 

 

 

 

 

(6,505

)

Net gain on financial instruments

 

6,011

 

 

 

35,703

 

 

 

8,707

 

 

 

45,175

 

Losses from non-consolidated affiliates

 

(3,220

)

 

 

965

 

 

 

(4,623

)

 

 

(218

)

Interest expense

 

(9,461

)

 

 

(15,021

)

 

 

(20,860

)

 

 

(29,543

)

 

 

(1,267

)

 

 

19,607

 

 

 

(5,976

)

 

 

17,850

 

  

 

 

 

 

 

 

 

EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

 

69,250

 

 

 

104,226

 

 

 

134,335

 

 

 

159,328

 

INCOME TAX EXPENSE

 

(15,040

)

 

 

(24,357

)

 

 

(30,329

)

 

 

(37,169

)

  

 

 

 

 

 

 

 

EARNINGS FROM CONTINUING OPERATIONS

 

54,210

 

 

 

79,869

 

 

 

104,006

 

 

 

122,159

 

 

 

 

 

 

 

 

 

EARNINGS FROM DISCONTINUED OPERATIONS, NET OF TAX

 

882

 

 

 

65

 

 

 

882

 

 

 

65

 

NET EARNINGS

$

55,092

 

 

$

79,934

 

 

$

104,888

 

 

$

122,224

 

  

 

 

 

 

 

 

 

EARNINGS PER SHARE - CONTINUING OPERATIONS

 

 

 

 

 

 

 

Basic

$

0.73

 

 

$

1.17

 

 

$

1.41

 

 

$

1.91

 

Diluted

$

0.61

 

 

$

0.74

 

 

$

1.18

 

 

$

1.23

 

  

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES - CONTINUING OPERATIONS

 

 

 

 

 

 

 

Basic

 

73,980

 

 

 

68,206

 

 

 

73,934

 

 

 

63,851

 

Diluted

 

89,449

 

 

 

72,964

 

 

 

89,098

 

 

 

73,849

 

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

  

 

June 30,

 

December 31,

 

2022

 

2021

ASSETS

 

 

 

CURRENT ASSETS:

 

 

 

Cash and cash equivalents

$

47,151

 

 

$

69,496

 

Accounts receivable, net of allowance of $902 in 2022 and $742 in 2021

 

260,260

 

 

 

205,399

 

Inventory

 

54,005

 

 

 

49,204

 

Prepaid supplies and other

 

28,157

 

 

 

28,742

 

TOTAL CURRENT ASSETS

 

389,573

 

 

 

352,841

 

  

 

 

 

Property and equipment, net

 

2,270,656

 

 

 

2,129,934

 

Customer incentive

 

91,293

 

 

 

102,913

 

Goodwill and acquired intangibles

 

498,073

 

 

 

505,125

 

Operating lease assets

 

64,155

 

 

 

62,644

 

Other assets

 

145,800

 

 

 

113,878

 

TOTAL ASSETS

$

3,459,550

 

 

$

3,267,335

 

  

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

CURRENT LIABILITIES:

 

 

 

Accounts payable

$

194,951

 

 

$

174,237

 

Accrued salaries, wages and benefits

 

62,538

 

 

 

56,652

 

Accrued expenses

 

11,423

 

 

 

14,950

 

Current portion of debt obligations

 

634

 

 

 

628

 

Current portion of lease obligations

 

20,497

 

 

 

18,783

 

Unearned revenue and grants

 

38,293

 

 

 

47,381

 

TOTAL CURRENT LIABILITIES

 

328,336

 

 

 

312,631

 

Long term debt

 

1,358,842

 

 

 

1,298,735

 

Stock warrant obligations

 

851

 

 

 

915

 

Post-retirement obligations

 

20,375

 

 

 

21,337

 

Long term lease obligations

 

44,305

 

 

 

44,387

 

Other liabilities

 

53,596

 

 

 

49,662

 

Deferred income taxes

 

241,752

 

 

 

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; 74,369,138 and 74,142,183 shares issued and outstanding in 2022 and 2021, respectively

 

744

 

 

 

741

 

Additional paid-in capital

 

1,037,139

 

 

 

1,074,286

 

Retained earnings

 

435,189

 

 

 

309,430

 

Accumulated other comprehensive loss

 

(61,579

)

 

 

(62,080

)

TOTAL STOCKHOLDERS’ EQUITY

 

1,411,493

 

 

 

1,322,377

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

3,459,550

 

 

$

3,267,335

 

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED SUMMARY OF CASH FLOWS

(In thousands)

  

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

2022

 

2021

 

2022

 

2021

  

 

 

 

 

 

 

 

OPERATING CASH FLOWS

$

124,541

 

 

$

182,744

 

 

$

250,209

 

 

$

307,191

 

  

 

 

 

 

 

 

 

INVESTING ACTIVITIES:

 

 

 

 

 

 

 

Aircraft acquisitions and freighter conversions

 

(133,378

)

 

 

(115,402

)

 

 

(205,293

)

 

 

(200,104

)

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

 

(52,580

)

 

 

(59,406

)

 

 

(88,917

)

 

 

(100,145

)

Proceeds from property and equipment

 

78

 

 

 

680

 

 

 

154

 

 

 

724

 

Investments in businesses

 

(16,545

)

 

 

(785

)

 

 

(16,545

)

 

 

(2,482

)

TOTAL INVESTING CASH FLOWS

 

(202,425

)

 

 

(174,913

)

 

 

(310,601

)

 

 

(302,007

)

  

 

 

 

 

 

 

 

FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Principal payments on debt

 

(205,210

)

 

 

(1,601,854

)

 

 

(295,310

)

 

 

(1,725,919

)

Proceeds from borrowings

 

410,000

 

 

 

1,290,600

 

 

 

450,000

 

 

 

1,430,600

 

Repurchase of senior unsecured notes

 

(115,204

)

 

 

 

 

 

(115,204

)

 

 

 

Proceeds from senior unsecured bond issuance

 

 

 

 

207,400

 

 

 

 

 

 

207,400

 

Payments for financing costs

 

 

 

 

(2,655

)

 

 

 

 

 

(2,806

)

Proceeds from issuance of warrants

 

 

 

 

131,967

 

 

 

 

 

 

131,967

 

Taxes paid for conversion of employee awards

 

(89

)

 

 

(39

)

 

 

(1,439

)

 

 

(1,236

)

TOTAL FINANCING CASH FLOWS

 

89,497

 

 

 

25,419

 

 

 

38,047

 

 

 

40,006

 

  

 

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH

$

11,613

 

 

$

33,250

 

 

$

(22,345

)

 

$

45,190

 

  

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

$

35,538

 

 

$

51,659

 

 

$

69,496

 

 

$

39,719

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

47,151

 

 

$

84,909

 

 

$

47,151

 

 

$

84,909

 

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,

 

2022

 

2021

 

2022

 

2021

Revenues

 

 

 

 

 

 

 

CAM

 

 

 

 

 

 

 

Aircraft leasing and related revenues

$

114,703

 

 

$

93,624

 

 

$

226,638

 

 

$

181,853

 

Lease incentive amortization

 

(5,029

)

 

 

(5,030

)

 

 

(10,059

)

 

 

(9,982

)

Total CAM

 

109,674

 

 

 

88,594

 

 

 

216,579

 

 

 

171,871

 

ACMI Services

 

347,498

 

 

 

273,301

 

 

 

677,588

 

 

 

520,432

 

Other Activities

 

107,879

 

 

 

97,236

 

 

 

210,414

 

 

 

190,934

 

Total Revenues

 

565,051

 

 

 

459,131

 

 

 

1,104,581

 

 

 

883,237

 

Eliminate internal revenues

 

(55,383

)

 

 

(49,259

)

 

 

(109,053

)

 

 

(97,277

)

Customer Revenues

$

509,668

 

 

$

409,872

 

 

$

995,528

 

 

$

785,960

 

  

 

 

 

 

 

 

 

Pretax Earnings (Loss) from Continuing Operations

 

 

 

 

 

 

CAM, inclusive of interest expense

 

39,617

 

 

 

22,554

 

 

 

74,612

 

 

 

44,016

 

ACMI Services, inclusive of government grants and interest expense

 

21,837

 

 

 

44,762

 

 

 

44,002

 

 

 

66,021

 

Other Activities

 

191

 

 

 

3,161

 

 

 

1,742

 

 

 

3,550

 

Net, unallocated interest expense

 

(574

)

 

 

(870

)

 

 

(881

)

 

 

(1,624

)

Non-service components of retiree benefit credit

 

5,388

 

 

 

4,456

 

 

 

10,776

 

 

 

8,913

 

Debt issuance costs

 

 

 

 

(6,505

)

 

 

 

 

 

(6,505

)

Net gain on financial instruments

 

6,011

 

 

 

35,703

 

 

 

8,707

 

 

 

45,175

 

Loss from non-consolidated affiliates

 

(3,220

)

 

 

965

 

 

 

(4,623

)

 

 

(218

)

Earnings from Continuing Operations before Income Taxes (GAAP)

$

69,250

 

 

$

104,226

 

 

$

134,335

 

 

$

159,328

 

  

 

 

 

 

 

 

 

Adjustments to Pretax Earnings

 

 

 

 

 

 

Add customer incentive amortization

 

5,822

 

 

 

5,798

 

 

 

11,620

 

 

 

11,497

 

Less government grants

 

 

 

 

(38,274

)

 

 

 

 

 

(66,304

)

Less non-service components of retiree benefit credit

 

(5,388

)

 

 

(4,456

)

 

 

(10,776

)

 

 

(8,913

)

Add debt issuance costs

 

 

 

 

6,505

 

 

 

 

 

 

6,505

 

Less net gain on financial instruments

 

(6,011

)

 

 

(35,703

)

 

 

(8,707

)

 

 

(45,175

)

Add loss from non-consolidated affiliates

 

3,220

 

 

 

(965

)

 

 

4,623

 

 

 

218

 

Adjusted Pretax Earnings (non-GAAP)

$

66,893

 

 

$

37,131

 

 

$

131,095

 

 

$

57,156

 

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

 

Six Months Ended

 

June 30,

 

June 30,

 

2022

 

2021

 

2022

 

2021

  

 

 

 

 

 

 

 

Earnings from Continuing Operations Before Income Taxes

$

69,250

 

 

$

104,226

 

 

$

134,335

 

 

$

159,328

 

Interest Income

 

(15

)

 

 

(9

)

 

 

(24

)

 

 

(28

)

Interest Expense

 

9,461

 

 

 

15,021

 

 

 

20,860

 

 

 

29,543

 

Depreciation and Amortization

 

81,372

 

 

 

75,633

 

 

 

163,443

 

 

 

146,684

 

EBITDA from Continuing Operations (non-GAAP)

$

160,068

 

 

$

194,871

 

 

$

318,614

 

 

$

335,527

 

Add customer incentive amortization

 

5,822

 

 

 

5,798

 

 

 

11,620

 

 

 

11,497

 

Less government grants

 

 

 

 

(38,274

)

 

 

 

 

 

(66,304

)

Add non-service components of retiree benefit credits

 

(5,388

)

 

 

(4,456

)

 

 

(10,776

)

 

 

(8,913

)

Less debt issuance costs

 

 

 

 

6,505

 

 

 

 

 

 

6,505

 

Less net gain on financial instruments

 

(6,011

)

 

 

(35,703

)

 

 

(8,707

)

 

 

(45,175

)

Add loss from non-consolidated affiliates

 

3,220

 

 

 

(965

)

 

 

4,623

 

 

 

218

 

  

 

 

 

 

 

 

 

Adjusted EBITDA (non-GAAP)

$

157,711

 

 

$

127,776

 

 

$

315,374

 

 

$

233,355

 

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. The adjustments also excluded the recognition of government grants from adjusted earnings to improve comparability between periods. 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

 

Six Months Ended

 

Twelve Months Ended

 

June 30,

 

June 30,

 

June 30,

 

2022

 

2021

 

2022

 

2021

 

2022

  

 

 

 

 

 

 

 

 

 

OPERATING CASH FLOWS (GAAP)

$

124,541

 

 

$

182,744

 

 

$

250,209

 

 

$

307,191

 

 

$

526,575

 

Sustaining capital expenditures

 

(52,580

)

 

 

(59,406

)

 

 

(88,917

)

 

 

(100,145

)

 

 

(171,876

)

  

 

 

 

 

 

 

 

 

 

ADJUSTED FREE CASH FLOW (Non-GAAP)

$

71,961

 

 

$

123,338

 

 

$

161,292

 

 

$

207,046

 

 

$

354,699

 

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

 

Six Months Ended

 

June 30, 2022

 

June 30, 2021

 

June 30, 2022

 

June 30, 2021

 

$

$ Per
Share

 

$

 

$ Per
Share

 

$

 

$ Per
Share

 

$

 

$ Per
Share

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings from Continuing Operations - basic (GAAP)

$

54,210

 

 

 

$

79,869

 

 

 

 

$

104,006

 

 

 

 

$

122,159

 

 

 

Gain from warrant revaluation, net of tax1

 

(107

)

 

 

 

(25,816

)

 

 

 

 

(50

)

 

 

 

 

(31,171

)

 

 

Convertible notes interest charges, net of tax2

 

762

 

 

 

 

 

 

 

 

 

1,522

 

 

 

 

 

 

 

 

Earnings from Continuing Operations - diluted (GAAP)

 

54,865

 

 

0.61

 

 

 

54,053

 

 

 

0.74

 

 

 

105,478

 

 

 

1.18

 

 

 

90,988

 

 

 

1.23

 

Adjustments to remove the following, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer incentive amortization3

 

4,493

 

 

0.05

 

 

 

4,475

 

 

 

0.06

 

 

 

8,968

 

 

 

0.10

 

 

 

8,873

 

 

 

0.12

 

Government grants4

 

 

 

 

 

 

(29,539

)

 

 

(0.40

)

 

 

 

 

 

 

 

 

(51,172

)

 

 

(0.69

)

Non-service component of retiree benefits5

 

(4,158

)

 

(0.05

)

 

 

(3,439

)

 

 

(0.05

)

 

 

(8,316

)

 

 

(0.09

)

 

 

(6,879

)

 

 

(0.09

)

Derivative and warrant revaluation6

 

(4,533

)

 

(0.05

)

 

 

(1,738

)

 

 

(0.05

)

 

 

(6,671

)

 

 

(0.07

)

 

 

(3,694

)

 

 

(0.15

)

Loss from affiliates7

 

2,485

 

 

0.03

 

 

 

(745

)

 

 

(0.01

)

 

 

3,568

 

 

 

0.04

 

 

 

168

 

 

 

 

Debt issuance costs 8

 

 

 

 

 

 

5,020

 

 

 

0.07

 

 

 

 

 

 

 

 

 

5,020

 

 

 

0.07

 

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

 

 

 

 

 

 

2,339

 

 

 

(0.01

)

 

 

 

 

 

 

 

 

4,663

 

 

 

0.06

 

Adjusted Earnings from Continuing Operations (non-GAAP)

$

53,152

 

$

0.59

 

 

$

30,426

 

 

$

0.35

 

 

$

103,027

 

 

$

1.16

 

 

$

47,967

 

 

$

0.55

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Shares

 

 

 

Shares

 

 

 

Shares

 

 

Weighted Average Shares - diluted (GAAP)

 

89,449

 

 

 

 

72,964

 

 

 

 

 

89,098

 

 

 

 

 

73,849

 

 

 

Additional shares - warrants1

 

 

 

 

 

6,380

 

 

 

 

 

 

 

 

 

 

5,839

 

 

 

Additional shares - convertible notes2

 

 

 

 

 

8,111

 

 

 

 

 

 

 

 

 

 

8,111

 

 

 

Adjusted Shares (non-GAAP)

 

89,449

 

 

 

 

87,455

 

 

 

 

 

89,098

 

 

 

 

 

87,799

 

 

 

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 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.

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

AIRCRAFT FLEET

  

Aircraft Types

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2021

 

December 31, 2021

 

June 30, 2022

 

December 31, 2022
Projected

 

 

Freighter

 

Passenger

 

Freighter

 

Passenger

 

Freighter

 

Passenger

 

Freighter

 

Passenger

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

B767-200

 

32

 

3

 

33

 

3

 

33

 

3

 

32

 

3

B767-300

 

59

 

9

 

65

 

9

 

70

 

8

 

80

 

8

B777-200

 

 

3

 

 

3

 

 

3

 

 

3

B757 Combi

 

 

4

 

 

4

 

 

4

 

 

4

A321-200

 

 

 

 

 

 

 

2

 

Total Aircraft in Service

 

91

 

19

 

98

 

19

 

103

 

18

 

114

 

18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

B767-300 in or awaiting cargo conversion

 

15

 

 

12

 

 

14

 

 

11

 

A321 in cargo conversion

 

 

 

1

 

 

5

 

 

8

 

B767-200 staging for lease

 

1

 

 

1

 

 

1

 

 

2

 

Total Aircraft

 

107

 

19

 

112

 

19

 

123

 

18

 

135

 

18

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aircraft in Service

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30,

 

December 31,

 

June 30,

 

December 31,

 

 

2021

 

2021

 

2022

 

2022 Projected

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dry leased without CMI

 

34

 

35

 

37

 

43

Dry leased with CMI

 

46

 

50

 

52

 

52

Customer provided for CMI

 

3

 

6

 

7

 

13

ACMI/Charter1

 

27

 

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.