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Atlas Air Worldwide Reports First-Quarter 2015 Results

  • Adjusted Net Income of $25.7 Million, $1.03 per Share
  • Reported Net Income of $29.2 Million, $1.17 per Share
  • Significantly Increasing Full-Year Earnings Framework

PURCHASE, N.Y., April 30, 2015 (GLOBE NEWSWIRE) -- Atlas Air Worldwide Holdings, Inc. (Nasdaq:AAWW) today announced adjusted net income attributable to common stockholders of $25.7 million, or $1.03 per diluted share, for the three months ended March 31, 2015, compared with $11.3 million, or $0.45 per diluted share, for the three months ended March 31, 2014.

On a reported basis, net income attributable to common stockholders in the first quarter of 2015 totaled $29.2 million, or $1.17 per diluted share, compared with $7.9 million, or $0.32 per diluted share, in the year-ago quarter.

Free cash flow of $80.2 million in the first quarter compared with $36.9 million in the first quarter of 2014.

"We are off to a very good start in 2015 and look forward to a strong year," said William J. Flynn, President and Chief Executive Officer. "As a result, we now expect our full-year results to increase significantly compared with 2014.

"Earnings in the first quarter reflected our diverse business mix, the ongoing demand for our industry-leading aircraft and aviation operating services, and the continuing, broad-based improvement of the global airfreight market. Results in the quarter were also driven by the scale and scope of our Charter segment, which was well-positioned to capitalize on demand for airfreight in the transpacific region and other trade lanes as well as better-than-expected military cargo and passenger demand."

First-Quarter Results

ACMI segment results benefited from an increase in block hours in the first quarter, driven by the start-up of three additional 767 CMI aircraft and improvements in ACMI aircraft utilization. These were offset by a reduction in revenue per block hour, reflecting the impact of higher revenue per block hour in 2014 resulting from customers that flew below their contractual minimums as well as an increase in CMI flying in 2015.

In Charter, significantly higher segment revenues and contribution reflected improvements in commercial and military air cargo and passenger demand, increased aircraft utilization, and a reduction in heavy-maintenance expense. Commercial air cargo demand during the quarter was enhanced by congestion issues at ports on the U.S. west coast.

In Dry Leasing, revenue and profitability grew as we realized revenue from maintenance payments related to the scheduled return of a 737-800 passenger aircraft in February 2015.

Reported earnings for the first quarter of 2015 included an effective income tax rate of 19.4%, which reflected an income tax benefit of $4.0 million related to beneficial tax planning regarding the treatment of extraterritorial income from the leasing of certain of our aircraft.

Reported results also included a pretax loss of $1.2 million on the disposal of aircraft and engine parts, partly offset by pretax adjustments of $0.6 million to special charges.

Cash and Short-Term Investments

At March 31, 2015, our cash, cash equivalents, short-term investments and restricted cash totaled $374.7 million, compared with $330.7 million at December 31, 2014.

The change in position reflected cash provided by operating activities partially offset by cash used for investing and financing activities.

Net cash used for investing activities during the first quarter of 2015 primarily related to capital expenditures and purchase deposits and delivery payments for flight equipment, partially offset by proceeds from disposal of aircraft.

Net cash used for financing activities primarily reflected payments on debt obligations.

Outlook

We anticipate significant growth in adjusted fully diluted earnings per share in 2015.

As the commercial airfreight market has grown, our business initiatives and investments have positioned Atlas to be a prime beneficiary.

We are encouraged by our strong first-quarter performance, and we continue to have a favorable view about the prospects for the overall airfreight environment and the demand for our aircraft and services.

Industry forecasts indicate that global airfreight demand will grow approximately 4% to 5% in 2015, outpacing projected growth in global trade. In addition, we expect that our block-hour volumes this year will increase 5% to 10% compared with 2014, with more than 70% of the total in ACMI and the balance in Charter. At the same time, recent military demand is holding up well compared with 2014 levels.

We are seeing good airfreight demand in the second quarter of 2015. On a sequential basis, we expect earnings per share in the second quarter of 2015 to be slightly better than our first-quarter 2015 adjusted earnings.

We also anticipate sequential increases in our third- and fourth-quarter earnings per share. Visibility into second-half airfreight market demand and yields remains limited at this point, so we will update our expectations about the second half as the year progresses.

Taking our current framework and expected first-half 2015 earnings strength into account, we expect approximately 55% of our earnings to occur in the second half.

Given the higher flying levels that we anticipate, we now expect that aircraft maintenance expense in 2015 should total approximately $190 million. In addition, depreciation should be approximately $125 million. We also anticipate an effective income tax rate of approximately 28% to 30%. Core capital expenditures, excluding aircraft and engine purchases, are expected to total approximately $40 to $45 million, mainly for spare parts for our fleet.

Mr. Flynn added: "We are confident about the outlook for 2015, and we are well-prepared to leverage our competencies and market leadership this year and beyond.

"Our fleet is modern and efficient. We provide innovative, value-added services. We operate a diversified, resilient business model. Our financial structure is solid. And we are focused on seizing strategic opportunities, executing on initiatives, and shaping a powerful future."

Conference Call

Management will host a conference call to discuss Atlas Air Worldwide's first-quarter 2015 financial and operating results at 11:00 a.m. Eastern Time on Thursday, April 30, 2015.

Interested parties are invited to listen to the call live over the Internet at www.atlasair.com (click on "Investor Information," click on "Presentations" and on the link to the first-quarter call) or at the following Web address:

http://edge.media-server.com/m/p/d6kjfyqg

For those unable to listen to the live call, a replay will be archived on the above websites following the call. A replay will also be available through May 6 by dialing (855) 859-2056 (U.S. Toll Free) or (404) 537-3406 (from outside the U.S.) and using Access Code 23719054#.

About Non-GAAP Financial Measures

To supplement our financial statements presented in accordance with U.S. GAAP, we present certain non-GAAP financial measures to assist in the evaluation of our business performance. These non-GAAP measures include EBITDAR, as adjusted; EBITDA, as adjusted; Direct Contribution; Adjusted Net Income Attributable to Common Stockholders; Adjusted Diluted EPS; and Free Cash Flow, which exclude certain items. These non-GAAP measures may not be comparable to similarly titled measures used by other companies and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with U.S. GAAP.

Our management uses these non-GAAP financial measures in assessing the performance of the Company's ongoing operations and in planning and forecasting future periods. We believe that these adjusted measures provide meaningful information to assist investors and analysts in understanding our financial results and assessing our prospects for future performance.

About Atlas Air Worldwide:

Atlas Air Worldwide is a leading global provider of outsourced aircraft and aviation operating services. It is the parent company of Atlas Air, Inc. (Atlas) and Titan Aviation Holdings, Inc. (Titan), and is the majority shareholder of Polar Air Cargo Worldwide, Inc. (Polar). Through Atlas and Polar, Atlas Air Worldwide operates the world's largest fleet of Boeing 747 freighter aircraft.

Atlas, Titan and Polar offer a range of outsourced aircraft and aviation operating solutions that include ACMI service – in which customers receive an aircraft, crew, maintenance and insurance on a long-term basis; CMI service, for customers that provide their own aircraft; express network and scheduled air cargo service; cargo and passenger charters; and dry leasing of aircraft and engines.

Atlas Air Worldwide's press releases, SEC filings and other information can be accessed through the Company's home page, www.atlasair.com.

This release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect Atlas Air Worldwide's current views with respect to certain current and future events and financial performance. Such forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors relating to the operations and business environments of Atlas Air Worldwide and its subsidiaries (collectively, the "companies") that may cause the actual results of the companies to be materially different from any future results, express or implied, in such forward-looking statements.

Factors that could cause actual results to differ materially from these forward-looking statements include, but are not limited to, the following: the ability of the companies to operate pursuant to the terms of their financing facilities; the ability of the companies to obtain and maintain normal terms with vendors and service providers; the companies' ability to maintain contracts that are critical to their operations; the ability of the companies to fund and execute their business plan; the ability of the companies to attract, motivate and/or retain key executives and associates; the ability of the companies to attract and retain customers; the continued availability of our wide-body aircraft; demand for cargo services in the markets in which the companies operate; economic conditions; the effects of any hostilities or act of war (in the Middle East or elsewhere) or any terrorist attack; labor costs and relations; financing costs; the cost and availability of war risk insurance; our ability to maintain adequate internal controls over financial reporting; aviation fuel costs; security-related costs; competitive pressures on pricing (especially from lower-cost competitors); volatility in the international currency markets; weather conditions; government legislation and regulation; consumer perceptions of the companies' products and services; anticipated and future litigation; and other risks and uncertainties set forth from time to time in Atlas Air Worldwide's reports to the United States Securities and Exchange Commission.

For additional information, we refer you to the risk factors set forth under the heading "Risk Factors" in the most recent Annual Report on Form 10-K and subsequent reports on Form 10-Q filed by Atlas Air Worldwide with the Securities and Exchange Commission. Other factors and assumptions not identified above may also affect the forward-looking statements, and these other factors and assumptions may also cause actual results to differ materially from those discussed.

Except as stated in this release, Atlas Air Worldwide is not providing guidance or estimates regarding its anticipated business and financial performance for 2015 or thereafter.

Atlas Air Worldwide assumes no obligation to update such statements contained in this release to reflect actual results, changes in assumptions or changes in other factors affecting such estimates other than as required by law.

Atlas Air Worldwide Holdings, Inc.
Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
For the Three Months Ended
March 31, 2015 March 31, 2014
Operating Revenue
ACMI $ 189,047 $ 198,141
Charter 220,138 177,373
Dry Leasing 31,919 24,676
Other 3,741 3,173
Total Operating Revenue $ 444,845 $ 403,363
Operating Expenses
Salaries, wages and benefits 88,773 72,855
Aircraft fuel 78,115 81,744
Maintenance, materials and repairs 58,832 59,046
Aircraft rent 34,261 35,410
Depreciation and amortization 32,030 28,155
Navigation fees, landing fees and other rent 23,503 27,126
Travel 20,813 17,282
Passenger and ground handling services 19,963 19,371
Loss on disposal of aircraft 1,209
Special charge (568) 8,029
Other 30,944 26,215
Total Operating Expenses 387,875 375,233
Operating Income 56,970 28,130
Non-operating Expenses / (Income)
Interest income (4,488) (4,727)
Interest expense 24,548 26,452
Capitalized interest (26) (312)
Other expense, net 675 152
Total Non-operating Expense 20,709 21,565
Income before income taxes 36,261 6,565
Income tax expense 7,029 2,539
Net Income 29,232 4,026
Less: Net income (loss) attributable to noncontrolling interests (3,918)
Net Income Attributable to Common Stockholders $ 29,232 $ 7,944
Earnings per share:
Basic $ 1.18 $ 0.32
Diluted $ 1.17 $ 0.32
Weighted average shares:
Basic 24,876 25,096
Diluted 25,070 25,151
Atlas Air Worldwide Holdings, Inc.
Consolidated Balance Sheets
(in thousands, except share data)
(Unaudited)
March 31, 2015 December 31, 2014
Assets
Current Assets
Cash and cash equivalents $ 336,406 $ 298,601
Short-term investments 23,287 17,802
Restricted cash 15,028 14,281
Accounts receivable, net of allowance of $1,168 and $1,658, respectively 149,360 162,092
Prepaid maintenance 26,339 20,806
Deferred taxes 40,923 40,923
Prepaid expenses and other current assets 32,546 51,599
Total current assets 623,889 606,104
Property and Equipment
Flight equipment 3,472,230 3,448,791
Ground equipment 52,976 51,418
Less: accumulated depreciation (373,442) (348,036)
Purchase deposits for flight equipment 17,541 20,054
Property and equipment, net 3,169,305 3,172,227
Other Assets
Long-term investments and accrued interest 114,863 120,478
Deposits and other assets 72,561 80,258
Intangible assets, net 65,157 67,410
Total Assets $ 4,045,775 $ 4,046,477
Liabilities and Equity
Current Liabilities
Accounts payable $ 39,737 $ 42,864
Accrued liabilities 264,705 251,594
Current portion of long-term debt 180,661 181,202
Total current liabilities 485,103 475,660
Other Liabilities
Long-term debt 1,690,184 1,736,739
Deferred taxes 357,934 350,868
Other liabilities 65,927 65,415
Total other liabilities 2,114,045 2,153,022
Commitments and contingencies
Equity
Stockholders' Equity
Preferred stock, $1 par value; 10,000,000 shares authorized; no shares issued
Common stock, $0.01 par value; 50,000,000 shares authorized; 28,887,466 and 28,561,160 shares issued, 25,002,862 and 24,807,718, shares outstanding (net of treasury stock), as of March 31, 2015 and December 31, 2014, respectively 289 286
Additional paid-in-capital 578,504 573,133
Treasury stock, at cost: 3,884,604 and 3,753,442 shares, respectively (151,440) (145,322)
Accumulated other comprehensive loss (9,228) (9,572)
Retained earnings 1,028,502 999,270
Total equity 1,446,627 1,417,795
Total Liabilities and Equity $ 4,045,775 $ 4,046,477
Atlas Air Worldwide Holdings, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
For the Three Months Ended
March 31, 2015 March 31, 2014
Operating Activities:
Net Income $ 29,232 $ 4,026
Adjustments to reconcile Net Income to net cash provided by operating activities:
Depreciation and amortization 36,375 32,401
Accretion of debt securities discount (1,902) (2,073)
Provision for allowance for doubtful accounts (174) 83
Special charge, net of cash payments (568) 8,029
Loss on disposal of aircraft 1,209
Deferred taxes 7,029 2,554
Stock-based compensation expense 5,285 1,907
Changes in:
Accounts receivable 11,088 (14,585)
Prepaid expenses and other current assets (10,272) 7,050
Deposits and other assets 9,323 6,724
Accounts payable and accrued liabilities 4,023 (4,848)
Net cash provided by operating activities 90,648 41,268
Investing Activities:
Capital expenditures (10,385) (4,095)
Purchase deposits and delivery payments for flight equipment (14,925) (478,739)
Changes in restricted cash (747) (6,046)
Proceeds from short-term investments 1,202 783
Proceeds from disposal of aircraft 24,345
Net cash used for investing activities (510) (488,097)
Financing Activities:
Proceeds from debt issuance 572,552
Customer maintenance reserves received 4,129 4,176
Proceeds from stock option exercises 52
Purchase of treasury stock (6,118) (2,420)
Excess tax benefit from stock-based compensation expense 449 (982)
Payment of debt issuance costs (16,974)
Payments of debt (50,845) (151,687)
Net cash provided by (used for) financing activities (52,333) 404,665
Net increase (decrease) in cash and cash equivalents 37,805 (42,164)
Cash and cash equivalents at the beginning of period 298,601 321,816
Cash and cash equivalents at the end of period $ 336,406 $ 279,652
Non-cash Investing and Financing Activities:
Acquisition of flight and ground equipment included in accounts payable and accrued liabilities $ ― $ 41,581
Atlas Air Worldwide Holdings, Inc.
Direct Contribution
(in thousands)
(Unaudited)
For the Three Months Ended
March 31, 2015 March 31, 2014
Operating Revenue:
ACMI $ 189,047 $ 198,141
Charter 220,138 177,373
Dry Leasing 31,919 24,676
Other 3,741 3,173
Total Operating Revenue $ 444,845 $ 403,363
Direct Contribution:
ACMI $ 39,847 $ 45,564
Charter 30,419 (4,117)
Dry Leasing 15,525 8,171
Total Direct Contribution for Reportable Segments 85,791 49,618
Add back (subtract):
Unallocated income and expenses1 (48,889) (35,024)
Special charge 568 (8,029)
Loss on sale of aircraft (1,209)
Income before Income Taxes 36,261 6,565
Add back (subtract):
Interest income (4,488) (4,727)
Interest expense 24,548 26,452
Capitalized interest (26) (312)
Other (income) expense, net 675 152
Operating Income $ 56,970 $ 28,130

Atlas Air Worldwide uses an economic performance metric, Direct Contribution, to show the profitability of each of its segments after allocation of direct ownership costs. Atlas Air Worldwide currently has the following reportable segments: ACMI, Charter, and Dry Leasing. Each segment has different operating and economic characteristics, which are separately reviewed by senior management.

Direct Contribution consists of income (loss) before taxes, excluding special charges, nonrecurring items, gains on the sale of aircraft, and unallocated fixed costs.

Direct costs include crew costs, maintenance costs, fuel, ground operations, sales costs, aircraft rent, interest expense related to aircraft debt and aircraft depreciation.

Unallocated income and expenses include corporate overhead, non-aircraft depreciation, interest income, foreign exchange gains and losses, other revenue and other non-operating costs, including one-time items.

1 During the first quarter of 2015, we changed the methodology for allocating certain unallocated expenses to our segments. Prior period information has been adjusted to consistently reflect this change.

Atlas Air Worldwide Holdings, Inc.
Reconciliation to Non-GAAP Measures
(in thousands, except per share data)
(Unaudited)
For the Three Months Ended
March 31, 2015 March 31, 2014 Percent Change
Net Income Attributable to Common Stockholders $ 29,232 $ 7,944 268.0%
After-tax impact from:
ETI tax benefit (4,008)
Special charge1 (411) 3,382
Loss on disposal of aircraft 884
Adjusted Net Income Attributable to Common Stockholders $ 25,697 $ 11,326 126.9%
Diluted EPS $ 1.17 $ 0.32 265.6%
After-tax impact from:
ETI tax benefit (0.16)
Special charge1 (0.02) 0.13
Loss on disposal of aircraft 0.04
Adjusted Diluted EPS $ 1.03 $ 0.45 128.9%

1 Included in Special charge in 2014 were employee termination benefits, a loan reserve and tax adjustments related to GSS, and an adjustment to lease termination costs for two 747-400BCFs.

Atlas Air Worldwide Holdings, Inc.
Reconciliation to Non-GAAP Measures
(in thousands, except per share data)
(Unaudited)
For the Three Months Ended
March 31, 2015 March 31, 2014
Net Cash Provided by Operating Activities $ 90,648 $ 41,268
Less:
Capital expenditures 10,385 4,095
Capitalized interest 26 312
Free Cash Flow1 $ 80,237 $ 36,861

1 Free Cash Flow = Cash Flows from Operations minus Base Capital Expenditures and Capitalized Interest.

Base Capital Expenditures excludes purchases of aircraft.

Atlas Air Worldwide Holdings, Inc.
Reconciliation to Non-GAAP Measures
(in thousands)
(Unaudited)
For the Three Months Ended
March 31, 2015 March 31, 2014
Income before income taxes $ 36,261 $ 6,565
Special charge1 (568) 8,029
Loss on disposal of aircraft 1,209
Adjusted pretax income 36,902 14,594
Interest expense, net 20,034 21,413
Other non-operating expenses 675 152
Adjusted operating income 57,611 36,159
Depreciation and amortization 32,030 28,155
EBITDA, as adjusted2 89,641 64,314
Aircraft rent 34,261 35,410
EBITDAR, as adjusted3 $ 123,902 $ 99,724

1 Included in Special charge in 2014 were employee termination benefits, a loan reserve and tax adjustments related to GSS, and an adjustment to lease termination costs for two 747-400BCFs.

2 Adjusted EBITDA: Earnings before interest, taxes, depreciation, amortization, special charge, and loss on disposal of aircraft, as applicable.

3 Adjusted EBITDAR: Earnings before interest, taxes, depreciation, amortization, aircraft rent expense, special charge, and loss on disposal of aircraft, as applicable.

Atlas Air Worldwide Holdings, Inc.
Operating Statistics and Traffic Results
(Unaudited)
For the Three Months Ended Increase/
March 31, 2015 March 31, 2014 (Decrease)
Block Hours
ACMI 29,460 28,023 1,437
Charter
Cargo 8,268 5,899 2,369
Passenger 3,221 2,715 506
Other 331 236 95
Total Block Hours 41,280 36,873 4,407
Revenue Per Block Hour
ACMI $ 6,417 $ 7,071 $ (654)
Charter $ 19,161 $ 20,591 $ (1,430)
Cargo $ 19,258 $ 20,293 $ (1,035)
Passenger $ 18,912 $ 21,239 $ (2,327)
Average Utilization (block hours per day)
ACMI1 9.5 9.4 0.1
Charter
Cargo 10.0 7.7 2.3
Passenger 7.2 6.0 1.2
All Operating Aircraft1,2 9.5 8.8 0.7
Fuel
Charter
Average fuel cost per gallon $ 2.34 $ 3.23 $ (0.89)
Fuel gallons consumed (000s) 33,312 25,299 8,013

1 ACMI and All Operating Aircraft averages in the first quarter of 2015 reflect the impact of increases in the number of CMI aircraft and amount of CMI flying compared with the first quarter of 2014.

2 Average of All Operating Aircraft excludes Dry Leasing aircraft, which do not contribute to block-hour volumes.

Atlas Air Worldwide Holdings, Inc.
Operating Statistics and Traffic Results
(Unaudited)
For the Three Months Ended Increase/
March 31, 2015 March 31, 2014 (Decrease)

Segment Operating Fleet (average aircraft equivalents during the period)
ACMI1
747-8F Cargo 8.6 8.7 (0.1)
747-400 Cargo 12.2 12.5 (0.3)
747-400 Dreamlifter 3.1 3.1
767-300 Cargo 2.0 2.0
767-200 Cargo 6.4 5.0 1.4
747-400 Passenger 1.0 1.0
767-200 Passenger 1.0 1.0
Total 34.3 33.3 1.0
Charter
747-8F Cargo 0.3 0.2 0.1
747-400 Cargo 8.9 8.3 0.6
747-400 Passenger 2.0 2.0
767-300 Passenger 3.0 3.0
Total 14.2 13.5 0.7
Dry Leasing
777-200 Cargo 6.0 5.8 0.2
757-200 Cargo 1.0 1.0
737-300 Cargo 1.0 1.0
737-800 Passenger 1.6 2.0 (0.4)
Total 9.6 9.8 (0.2)
Total Operating Aircraft 58.1 56.6 1.5
Out of Service2 1.0 1.0

1 ACMI average fleet excludes spare aircraft provided by CMI customers.

2 Out-of-service aircraft were temporarily parked during the period and are completely unencumbered. Permanently parked aircraft, all of which are also completely unencumbered, are not included in the operating statistics above.

CONTACT: Dan Loh (Investors) - (914) 701-8200 Bonnie Rodney (Media) - (914) 701-8580Source:Atlas Air Worldwide Holdings, Inc.