Market Overview

Atlas Air Worldwide Reports Strong Second-Quarter Growth, Increases Full-Year 2018 Outlook

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  • Market Strength, Increased Customer Demand, Core Business Drive Record Volumes and Revenue  
  • Reported Results Impacted by Warrant Accounting
  • Adjusted Income and Adjusted EBITDA Increase Sharply
  • 45% to 50% Adjusted Earnings Growth Now Expected in 2018

PURCHASE, N.Y., Aug. 02, 2018 (GLOBE NEWSWIRE) -- Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW) today announced strong second-quarter 2018 business growth and raised its outlook for full-year 2018, driven by market strength and increased customer demand.

"Our volumes and revenue grew to new records in the second quarter, and while reported results were impacted by warrant accounting, our adjusted income and adjusted EBITDA were sharply higher," said President and Chief Executive Officer William J. Flynn.

"We expect to continue to build on our strong performance in the second half of 2018. Airfreight demand is solid and the global economy is growing. As a result of our strategic initiatives to grow and diversify our fleet, expand our customer base and enhance our business mix, we are meeting the growing needs of our customers, driving our results and extending our leadership in global aviation outsourcing.

"For the full year, we now expect our revenue to exceed $2.6 billion. We project adjusted EBITDA to increase to more than $520 million. And we anticipate our full-year adjusted net income will grow by 45% to 50% compared with 2017, up from our prior outlook of 35% to 40% growth."

Second-Quarter Results

Volumes in the second quarter of 2018 increased 19% to a record 72,660 block hours, with revenue growing 29% to a record $666.1 million.

A reported loss from continuing operations, net of taxes, of $21.1 million, or $0.83 per diluted share, during the period compared with reported income of $39.0 million, or $0.92 per diluted share, in the second quarter of 2017. Reported results in the second quarter of 2018 included an unrealized loss on outstanding warrants of $50.0 million compared with an unrealized gain on outstanding warrants of $13.8 million in the year-ago period, as well as a special charge of $9.4 million related to engines held for sale. 

On an adjusted basis, income from continuing operations, net of taxes, in the second quarter of 2018 increased $20.6 million to $49.7 million, or $1.75 per diluted share, from $29.1 million, or $1.09 per diluted share, in the year-ago quarter. Adjusted EBITDA increased $23.1 million over the year-ago period to $125.5 million.

Reported and adjusted results for the second quarter included an after-tax benefit of $6.8 million related to a refund of aircraft rent paid in previous years. Reported and adjusted results for the period also included an after-tax benefit of $3.1 million mainly related to the timing of non-heavy maintenance expense initially expected to occur in the second quarter that is now anticipated to take place in the third quarter.  

ACMI segment contribution in the second quarter of 2018 was relatively unchanged from the prior-year period, as a significant increase in block-hour volumes and a higher average rate per block hour were offset by higher heavy maintenance expense and amortization of deferred maintenance costs. Block hours grew 19% during the period, reflecting increased 767 flying for Amazon, the start-up of 747-400 flying for several new customers, and the redeployment of 747-8F aircraft from the Charter segment to ACMI. The increase in the average rate during the quarter primarily reflected the impact of increased 747-8F and 747-400F flying for new customers. 

Higher Charter segment contribution during the period was primarily driven by increases in military cargo and passenger demand, an increase in commercial cargo volumes, and higher aircraft utilization, partially offset by the redeployment of 747-8 aircraft to the ACMI segment. Higher average rates during the quarter primarily reflected higher fuel prices and the impact of Charter capacity purchased from ACMI customers that had no associated Charter block hours. 

In Dry Leasing, higher segment contribution primarily reflected the placement of additional 767-300 converted freighter aircraft throughout the second half of 2017 and first half of 2018, as well as the placement of a 777-200 freighter in early 2018.

Higher unallocated income and expenses, net during the quarter primarily reflected an increase in unallocated interest expense, fleet growth initiatives, and amortization of a customer incentive asset.

Reported earnings in the second quarter of 2018 also included an effective income tax rate of 159.6%, due mainly to nondeductible changes in the value of outstanding warrants. On an adjusted basis, our results reflected an effective income tax rate of 16.2%.

Cash and Short-Term Investments

At June 30, 2018, our cash and cash equivalents, short-term investments and restricted cash totaled $245.4 million, compared with $305.5 million at December 31, 2017.

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

Net cash used for investing activities during the first half of 2018 primarily related to capital expenditures and payments for flight equipment and modifications, including the acquisition of 777-200 aircraft, 767-300 aircraft to be converted to freighter configuration, spare engines and GEnx engine performance upgrade kits.

Net cash provided by financing activities during the period primarily reflected proceeds from our financings of 777-200 and 767-300 aircraft, partially offset by payments on debt obligations. 

Half-Year Results

Reported results for the six months ended June 30, 2018 reflected a loss from continuing operations, net of taxes, of $11.5 million, or $0.45 per diluted share, primarily due to an unrealized loss on financial instruments of $57.8 million related to outstanding warrants and a special charge of $9.4 million related to engines held for sale. Results for the first half compared with income from continuing operations of $39.1 million, or $1.13 per diluted share, which included an unrealized gain on financial instruments of $8.6 million, for the six months ended June 30, 2017.

On an adjusted basis, first-half 2018 income from continuing operations, net of taxes, totaled $73.5 million, or $2.62 per diluted share, compared with $37.4 million, or $1.39 per diluted share, in the first half of 2017. 

Reported and adjusted results for the first half of 2018 also included $9.8 million of after-tax benefits related to the refund of aircraft rent and $3.1 million related to the timing of non-heavy maintenance expense discussed earlier. 

Raising 2018 Outlook

We are raising our outlook for 2018 to reflect our strong first-half results and our continued expectation of significant volume, revenue, and earnings growth.

Globally, economic activity is expanding. The airfreight market is solid, and airfreight tonnage continues to grow from record levels.

As a result, we see volumes rising approximately 19% to around 300,000 block hours in 2018, with about 75% of the hours in ACMI and the balance in Charter.

For the full year, we expect our revenue to exceed $2.6 billion, our adjusted EBITDA to increase to more than $520 million, and our adjusted net income to grow by 45% to 50% compared with 2017.

Aircraft maintenance expense in 2018 is expected to total approximately $330 million, mainly reflecting an increase in daily line maintenance due to the anticipated growth in block hours. Depreciation and amortization is expected to total approximately $220 million. In addition, core capital expenditures, which exclude aircraft and engine purchases, are expected to total approximately $105 to $115 million, mainly for parts and components for our fleet.

We also expect our full-year 2018 adjusted effective income tax rate to be approximately 15%. 

For the third quarter of 2018, we expect adjusted EBITDA to exceed $120 million, and adjusted net income to increase by an upper-30% to lower-40% level compared with third-quarter 2017 adjusted net income of $29.7 million.  

During the third quarter, we expect our Titan dry-leasing subsidiary to renew its participation in an aircraft-leasing incentive program in Singapore. As a result, we expect to record a deferred income tax benefit of approximately $8.2 million in the third quarter and to benefit from a reduced income tax rate going forward.

Also in the third quarter, we anticipate a ratification bonus related to an interim agreement to enhance the terms and conditions of employment of our Southern Air, Inc. pilots. The agreement is subject to ratification by the Southern Air pilots in a process that we expect to be completed by mid-August.  

We provide guidance on an adjusted basis because we are unable to predict, with reasonable certainty, the effects of outstanding warrants and other items that could be material to our reported results.

Conference Call

Management will host a conference call to discuss Atlas Air Worldwide's second-quarter 2018 financial and operating results at 11:00 a.m. Eastern Time on Thursday, August 2, 2018.

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 second-quarter call) or at the following Web address:

https://edge.media-server.com/m6/p/emxsgrj5

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 August 9 by dialing (855) 859-2056 (U.S. Toll Free) or (404) 537-3406 (from outside the U.S.) and using Access Code 2709038#.

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 Adjusted EBITDA; Adjusted income from continuing operations, net of taxes; Adjusted Diluted EPS from continuing operations, net of taxes; Adjusted effective tax rate; and Free Cash Flow, which exclude certain noncash income and expenses, and items impacting year-over-year comparisons of our results. 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 Income (loss) from continuing operations, net of taxes; Diluted EPS from continuing operations, net of taxes; Effective tax rate; and Net Cash Provided by Operating Activities, which are the most directly comparable 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, when considered together with the corresponding U.S. GAAP financial measures and the reconciliations to those measures, provide meaningful supplemental information to assist investors and analysts in understanding our financial results and assessing our prospects for future performance. For example:

  • Adjusted EBITDA; Adjusted income from continuing operations, net of taxes; and Adjusted Diluted EPS from continuing operations, net of taxes, provide a more comparable basis to analyze operating results and earnings and are measures commonly used by shareholders to measure our performance. In addition, management's incentive compensation is determined, in part, by using Adjusted EBITDA and Adjusted income from continuing operations, net of taxes.
     
  • Adjusted effective tax rate provides improved insight into the tax effects of our ongoing business operations.
     
  • Free Cash Flow helps investors assess our ability, over the long term, to create value for our shareholders as it represents cash available to execute our capital allocation strategy.

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., Southern Air Holdings, Inc. and Titan Aviation Holdings, Inc., and is the majority shareholder of Polar Air Cargo Worldwide, Inc. Our companies operate the world's largest fleet of 747 freighter aircraft and provide customers a broad array of Boeing 747, 777, 767, 757 and 737 aircraft for domestic, regional and international cargo and passenger operations.

Atlas Air Worldwide's press releases, SEC filings and other information may 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. Those statements are based on management's beliefs, plans, expectations and assumptions, and on information currently available to management. Generally, the words "will," "may," "should," "expect," "anticipate," "intend," "plan," "continue," "believe," "seek," "project," "estimate," and similar expressions used in this release that do not relate to historical facts are intended to identify forward-looking statements.

Such forward-looking statements speak only as of the date of this release. They 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: our ability to effectively operate the network service contemplated by our agreements with Amazon, including the cost and timing of securing any aircraft necessary to fulfill our agreements; the risk that the anticipated benefits of our agreements with Amazon will not be realized when expected, or at all; the possibility that Amazon may terminate its agreements with the companies; 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, pilots 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; failure or disruption of our information technology systems; labor costs and relations, work stoppages and service slowdowns; the outcome of pending negotiations with our pilots' union; 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; changes to our provisional estimates of the impact of the U.S. Tax Cuts and Jobs Act of 2017; 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 2018 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 and expressly disclaims any obligation to revise or update publically any forward-looking statement to reflect future events or circumstances.

 
Atlas Air Worldwide Holdings, Inc.
Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
 
     For the Three Months
Ended

    For the Six Months
Ended
 
    June 30, 2018
    June 30, 2017
    June 30, 2018
    June 30, 2017
 
                                 
Operating Revenue   $ 666,145     $ 517,366     $ 1,256,159     $ 992,761  
                                 
Operating Expenses                                
Salaries, wages and benefits     129,176       111,488       254,258       215,575  
Aircraft fuel     129,706       83,486       226,009       165,918  
Maintenance, materials and repairs     88,236       64,769       173,115       137,585  
Depreciation and amortization     50,834       40,986       100,464       78,880  
Travel     42,358       34,891       82,205       67,249  
Aircraft rent     40,281       33,792       79,805       69,865  
Navigation fees, landing fees and other rent     37,698       25,255       73,295       43,790  
Passenger and ground handling services     30,202       23,573       58,264       48,696  
Gain on disposal of aircraft     -       (93 )     -       (147 )
Special charge     9,374       -       9,374       -  
Transaction-related expenses     240       1,396       510       2,312  
Other     47,094       39,345       97,345       80,523  
Total Operating Expenses     605,199       458,888       1,154,644       910,246  
                                 
Operating Income     60,946       58,478       101,515       82,515  
                                 
Non-operating Expenses (Income)                                
Interest income     (1,388 )     (1,342 )     (3,112 )     (2,598 )
Interest expense     29,182       24,670       56,524       46,194  
Capitalized interest     (1,465 )     (1,931 )     (3,215 )     (3,711 )
Unrealized loss (gain) on financial instruments     50,031       (13,763 )     57,771       (8,550 )
Other expense (income)     (7,277 )     1,061       (11,752 )     809  
Total Non-operating Expenses (Income)     69,083       8,695       96,216       32,144  
Income (loss) from continuing operations before income taxes     (8,137 )     49,783       5,299       50,371  
Income tax expense     12,986       10,739       16,794       11,292  
                                 
Income (loss) from continuing operations, net of taxes     (21,123 )     39,044       (11,495 )     39,079  
Loss from discontinued operations, net of taxes     (27 )     (105 )     (43 )     (891 )
                                 
Net Income (Loss)   $ (21,150 )   $ 38,939     $ (11,538 )   $ 38,188  
Earnings (loss) per share from continuing operations:                                
Basic   $ (0.83 )   $ 1.55     $ (0.45 )   $ 1.55  
Diluted   $ (0.83 )   $ 0.92     $ (0.45 )   $ 1.13  
Loss per share from discontinued operations:                                
Basic   $ (0.00 )   $ (0.00 )   $ (0.00 )   $ (0.04 )
Diluted   $ (0.00 )   $ (0.00 )   $ (0.00 )   $ (0.03 )
Earnings (loss) per share:                                
Basic   $ (0.83 )   $ 1.54     $ (0.45 )   $ 1.51  
Diluted   $ (0.83 )   $ 0.92     $ (0.45 )   $ 1.09  
Weighted average shares:                                
Basic     25,565       25,257       25,501       25,210  
Diluted     25,565       26,791       25,501       26,823  
 


 
Atlas Air Worldwide Holdings, Inc.
Consolidated Balance Sheets
(in thousands, except share data)
(Unaudited)
 
     June 30, 2018     December 31, 2017  
Assets                
Current Assets                
Cash and cash equivalents   $ 216,762     $ 280,809  
Short-term investments     17,518       13,604  
Restricted cash     11,167       11,055  
Accounts receivable, net of allowance of $2,609 and $1,494, respectively     221,392       194,478  
Prepaid maintenance     28,016       13,346  
Prepaid expenses and other current assets     70,336       74,294  
Total current assets     565,191       587,586  
Property and Equipment                
Flight equipment     4,812,047       4,447,097  
Ground equipment     75,362       70,951  
Less:  accumulated depreciation     (775,605 )     (701,249 )
Flight equipment modifications in progress     289,751       186,302  
Property and equipment, net     4,401,555       4,003,101  
Other Assets                
Long-term investments and accrued interest     6,570       15,371  
Deferred costs and other assets     272,977       242,919  
Intangible assets, net and goodwill     102,050       106,485  
Total Assets   $ 5,348,343     $ 4,955,462  
                 
Liabilities and Equity                
Current Liabilities                
Accounts payable   $ 84,353     $ 65,740  
Accrued liabilities     457,395       454,843  
Current portion of long-term debt and capital lease     245,322       218,013  
Total current liabilities     787,070       738,596  
Other Liabilities                
Long-term debt and capital lease     2,256,166       2,008,986  
Deferred taxes     229,263       214,694  
Financial instruments and other liabilities     299,771       203,330  
Total other liabilities     2,785,200       2,427,010  
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; 100,000,000 shares authorized; 30,560,237 and 30,104,648 shares issued, 25,575,041 and 25,292,454 shares outstanding (net of treasury stock), as of June 30, 2018 and December 31, 2017, respectively     306       301  
Additional paid-in-capital     726,357       715,735  
Treasury stock, at cost; 4,985,196 and 4,812,194 shares, respectively     (204,051 )     (193,732 )
Accumulated other comprehensive loss     (4,390 )     (3,993 )
Retained earnings     1,257,851       1,271,545  
Total stockholders' equity     1,776,073       1,789,856  
Total Liabilities and Equity   $ 5,348,343     $ 4,955,462  

1  Balance sheet debt at June 30, 2018 totaled $2,501.5 million, including the impact of $93.5 million of unamortized discount and debt issuance costs of $49.1 million.
The face value of our debt at June 30, 2018 totaled $2,644.1 million, compared with $2,378.8 million on December 31, 2017.

 
Atlas Air Worldwide Holdings, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
 
     For the Six Months Ended  
    June 30, 2018     June 30, 2017  
                 
Operating Activities:                
Income (loss) from continuing operations, net of taxes   $ (11,495 )   $ 39,079  
Less: Loss from discontinued operations, net of taxes     (43 )     (891 )
Net Income (Loss)     (11,538 )     38,188  
                 
Adjustments to reconcile Net Income (Loss) to net cash provided by operating activities:                
Depreciation and amortization     121,606       90,842  
Accretion of debt securities discount     (512 )     (604 )
Provision for allowance for doubtful accounts     1,179       134  
Special charge, net of cash payments     9,374       -  
Unrealized loss (gain) on financial instruments     57,771       (8,550 )
Gain on disposal of aircraft     -       (147 )
Deferred taxes     16,561       11,000  
Stock-based compensation     10,627       10,579  
Changes in:                
Accounts receivable     (27,699 )     (5,204 )
Prepaid expenses, current assets and other assets     (10,815 )     (36,067 )
Accounts payable and accrued liabilities     9,357       12,636  
Net cash provided by operating activities     175,911       112,807  
Investing Activities:                
Capital expenditures     (54,791 )     (45,237 )
Payments for flight equipment and modifications     (448,388 )     (226,812 )
Proceeds from investments     5,399       1,941  
Proceeds from disposal of aircraft     -       147  
Net cash used for investing activities     (497,780 )     (269,961 )
Financing Activities:                
Proceeds from debt issuance     305,059       435,325  
Payment of debt issuance costs     (4,781 )     (10,323 )
Payments of debt     (115,194 )     (93,401 )
Proceeds from revolving credit facility     135,000       150,000  
Payment of revolving credit facility     (60,000     (150,000 )
Customer maintenance reserves and deposits received     8,169       18,062  
Customer maintenance reserves paid     -       (6,384 )
Proceeds from sale of convertible note warrants     -       38,148  
Payments for convertible note hedges     -       (70,140 )
Purchase of treasury stock     (10,319     (9,636 )
Net cash provided by financing activities     257,934       301,651  
Net increase (decrease) in cash, cash equivalents and restricted cash     (63,935 )     144,497  
Cash, cash equivalents and restricted cash at the beginning of period     291,864       138,250  
Cash, cash equivalents and restricted cash at the end of period   $ 227,929     $ 282,747  
                 
Noncash Investing and Financing Activities:                
                 
Acquisition of flight equipment included in Accounts payable and accrued liabilities   $ 66,944     $ 75,668  
Acquisition of flight equipment under capital lease   $ -     $ 32,380  


 
Atlas Air Worldwide Holdings, Inc.
Direct Contribution
(in thousands)
(Unaudited)
 
    For the Three Months Ended     For the Six Months Ended  
    June 30, 2018     June 30, 20171     June 30, 2018     June 30, 20171  
Operating Revenue:                                
ACMI   $ 277,795     $ 229,179     $ 544,175     $ 429,873  
Charter     346,778       255,820       631,975       499,718  
Dry Leasing     39,958       28,560       76,350       55,317  
Customer incentive asset amortization     (3,290 )     (898 )     (5,886 )     (1,343 )
Other     4,904       4,705       9,545       9,196  
Total Operating Revenue   $ 666,145     $ 517,366     $ 1,256,159     $ 992,761  
                                 
Direct Contribution:                                
ACMI   $ 52,707     $ 53,093     $ 93,579     $ 88,673  
Charter     51,090       36,567       85,368       53,400  
Dry Leasing     12,191       9,661       23,550       19,384  
Total Direct Contribution for Reportable Segments     115,988       99,321       202,497       161,457  
                                 
Unallocated income and expenses, net     (64,480 )     (61,998 )     (129,543 )     (117,471 )
Unrealized loss on financial instruments     (50,031 )     13,763       (57,771 )     8,550  
Special charge     (9,374 )     -       (9,374 )     -  
Transaction-related expenses     (240 )     (1,396 )     (510 )     (2,312 )
Gain on disposal of aircraft     -       93       -       147  
Income (loss) from continuing operations before income taxes     (8,137 )     49,783       5,299       50,371  
                                 
Add back (subtract):                                
Interest income     (1,388 )     (1,342 )     (3,112 )     (2,598 )
Interest expense     29,182       24,670       56,524       46,194  
Capitalized interest     (1,465 )     (1,931 )     (3,215 )     (3,711 )
Unrealized loss (gain) on financial instruments     50,031       (13,763 )     57,771       (8,550 )
Other expense (income)     (7,277 )     1,061       (11,752 )     809  
Operating Income   $ 60,946     $ 58,478     $ 101,515     $ 82,515  
 

1  The direct contribution amounts for the ACMI and Charter segments and the unallocated income and expenses, net above have been revised to reflect immaterial adjustments. The Company does not believe the impact to the previously issued consolidated financial statements was material.

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 commercial and economic characteristics, which are separately reviewed by our chief operating decision maker.

Direct Contribution consists of income (loss) from continuing operations before taxes, excluding special charges, transaction-related expenses, nonrecurring items, losses (gains) on the disposal of aircraft, losses on early extinguishment of debt, unrealized losses (gains) on financial instruments, gains on investments, and unallocated income and expenses, net.

Direct operating and ownership costs include crew costs, maintenance, fuel, ground operations, sales costs, aircraft rent, interest expense on the portion of debt used for financing aircraft, interest income on debt securities, and aircraft depreciation.

Unallocated income and expenses, net include corporate overhead, nonaircraft depreciation, noncash expenses and income, interest expense on the portion of debt used for general corporate purposes, interest income on nondebt securities, capitalized interest, foreign exchange gains and losses, other revenue and other nonoperating costs.  

 
Atlas Air Worldwide Holdings, Inc.
Reconciliation to Non-GAAP Measures
(in thousands, except per share data)
(Unaudited)
 
      For the Three Months Ended  
      June 30, 2018       June 30, 2017     Percent Change  
                             
Income from continuing operations, net of taxes     $ (21,123 )     $ 39,044       NM  
Impact from:                            
Gain on disposal of aircraft       -         (93 )        
Special charge1       9,374         -          
Costs associated with transactions2       240         1,396          
Accrual for legal matters and professional fees       345         263          
Noncash expenses and income, net3       7,455         3,651          
Unrealized loss (gain) on financial instruments       50,031         (13,763 )        
Income tax effect of reconciling items       3,403         (1,383 )        
Adjusted income from continuing operations, net of taxes     $ 49,725       $ 29,115       70.8 %
                             
Weighted average diluted shares outstanding       25,565         26,791          
Add: dilutive warrant4       2,264         -          
dilutive convertible notes       450         -          
effect of convertible note hedges5       (450 )       -          
dilutive restricted stock       572         -          
Adjusted weighted average diluted shares outstanding       28,401         26,791          
                             
Adjusted Diluted EPS from continuing operations, net of taxes     $ 1.75       $ 1.09       60.6 %
                             
      For the Six Months Ended  
      June 30, 2018       June 30, 2017     Percent Change  
                             
Income from continuing operations, net of taxes     $ (11,495 )     $ 39,079       NM  
Impact from:                            
Gain on disposal of aircraft       -         (147 )        
Special charge1       9,374         -          
Costs associated with transactions2       510         2,311          
Accrual for legal matters and professional fees       563         337          
Noncash expenses and income, net3       14,130         6,063          
Unrealized loss (gain) on financial instruments       57,771         (8,550 )        
Income tax effect of reconciling items       2,656         (1,704 )        
Adjusted income from continuing operations, net of taxes     $ 73,509       $ 37,389       96.6 %
                             
Weighted average diluted shares outstanding       25,501         26,823          
Add: dilutive warrant4       1,958         -          
dilutive convertible notes       225         -          
effect of convertible note hedges5       (225 )       -          
dilutive restricted stock       547         -          
Adjusted weighted average diluted shares outstanding       28,006         26,823          
                             
Adjusted Diluted EPS from continuing operations, net of taxes     $ 2.62       $ 1.39       88.5 %
 

1   Special charge in 2018 primarily represented a loss on engines held for sale.

2   Costs associated with our acquisition of Southern Air.

3   Noncash expenses and income, net in 2018 and 2017 primarily related to amortization of debt discount on the convertible notes and amortization of the customer incentive asset related to the outstanding warrants.

4   Dilutive warrants represent potentially dilutive common shares related to the outstanding warrants. These shares were excluded from Diluted EPS from continuing operations, net of taxes prepared in accordance with GAAP when they would have been antidilutive.

5   Impact of the economic benefit from the convertible notes hedges in offsetting dilution from the convertible notes.

 
Atlas Air Worldwide Holdings, Inc.
Reconciliation to Non-GAAP Measures
(in thousands, except per share data)
(Unaudited)
         
      For the
Three Months Ended
 
      September 30, 2017      
               
Income (loss) from continuing operations, net of taxes     $ (24,195 )    
Impact from:              
Loss on disposal of aircraft       211      
Costs associated with transactions       1,355      
Accrual for legal matters and professional fees       1,264      
Noncash expenses and income, net       5,474      
Charges associated with refinancing debt       167      
Unrealized loss on financial instruments       44,775      
Income tax effect of reconciling items       643      
Adjusted income from continuing operations, net of taxes     $ 29,694      


      For the 
Twelve Months Ended
   
      December 31, 2017    
             
Income from continuing operations, net of taxes     $ 224,338    
Impact from:            
U.S. Tax Cuts and Jobs Act bonus       3,684    
Loss (gain) on disposal of aircraft       (31 )  
Special charge       106    
Costs associated with transactions       4,772    
Accrual for legal matters and professional fees       4,129    
Noncash expenses and income, net       17,934    
Charges associated with refinancing debt       167    
Unrealized loss on financial instruments       12,533    
Income tax effect of reconciling items       (3,962 )  
Income tax effect of U.S. Tax Cuts and Jobs Act       (129,977 )  
Adjusted income from continuing operations, net of taxes     $ 133,693    


 
Atlas Air Worldwide Holdings, Inc.
Reconciliation to Non-GAAP Measures
(in thousands, except per share data)
(Unaudited)
 
    For the Three Months Ended  
    June 30, 2018     June 30, 2017  
                 
Net Cash Provided by Operating Activities   $ 106,786     $ 94,153  
Less:                
  Capital expenditures     28,700       23,564  
  Capitalized interest     1,465       1,931  
Free Cash Flow1   $ 76,621     $ 68,658  
                 
                 
                 
    For the Six Months Ended  
    June 30, 2018     June 30, 2017  
                 
Net Cash Provided by Operating Activities   $ 175,911     $ 112,807  
Less:                
  Capital expenditures     54,791       45,237  
  Capitalized interest     3,215       3,711  
Free Cash Flow1   $ 117,905     $ 63,859  

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     For the Six Months Ended  
    June 30, 2018     June 30, 2017     June 30, 2018     June 30, 2017  
                                 
Income (loss) from continuing operations, net of taxes   $ (21,123 )   $ 39,044     $ (11,495 )   $ 39,079  
Income tax expense     12,986       10,739       16,794       11,292  
Income from continuing operations before income taxes     (8,137 )     49,783       5,299       50,371  
Noncash expenses and income, net1     7,455       3,651       14,130       6,063  
Gain on disposal of aircraft     -       (93 )     -       (147 )
Special charge2     9,374       -       9,374       -  
Costs associated with transactions3     240       1,396       510       2,311  
Accrual for legal matters and professional fees     345       263       563       337  
Unrealized loss (gain) on financial instruments     50,031       (13,763 )     57,771       (8,550 )
                                 
Adjusted pretax income     59,308       41,237       87,647       50,385  
                                 
Interest expense, net4     22,637       19,117       42,899       36,234  
Other non-operating expenses (income)     (7,277 )     1,061       (11,752 )     809  
                                 
Adjusted operating income     74,668       61,415       118,794       87,428  
                                 
Depreciation and amortization     50,834       40,986       100,464       78,880  
                                 
EBITDA, as adjusted5   $ 125,502     $ 102,401     $ 219,258     $ 166,308  
                                 
Income tax expense   $ 12,986     $ 10,739     $ 16,794     $ 11,292  
Income tax effect of reconciling items6     3,403       (1,383 )     2,656       (1,704 )
Adjusted income tax expense     9,583       12,122       14,138       12,996  
Adjusted pretax income   $ 59,308     $ 41,237     $ 87,647     $ 50,385  
Adjusted effective tax rate     16.2 %     29.4 %     16.1 %     25.8 %
 

1   Reflects impact of noncash expenses and income related to convertible notes, debt and investments, and amortization of customer incentive related to outstanding warrants.

2  Special charge in 2018 primarily represented a loss on engines held for sale.

3  Costs associated with our acquisition of Southern Air.

4   Reflects impact of noncash expenses and income related to convertible notes, debt and investments.

5   Adjusted EBITDA: Earnings before interest, taxes, depreciation, amortization, noncash interest expenses and income, net, gain on disposal of aircraft, special charge, transaction-related expenses, accrual for legal matters and professional fees, charges associated with refinancing debt, and unrealized loss (gain) on financial instruments, as applicable.

6   See Non-GAAP reconciliation of Adjusted income from continuing operations, net of taxes.

 
Atlas Air Worldwide Holdings, Inc.
Operating Statistics and Traffic Results
(Unaudited)
 
    For the Three Months Ended     Increase/     For the Six Months Ended     Increase/  
    June 30, 2018     June 30, 2017     (Decrease)     June 30, 2018     June 30, 2017     (Decrease)  
                                                 
Block Hours                                                
ACMI     53,230       44,819       8,411       103,092       83,735       19,357    
Charter     18,981       15,899       3,082       35,041       31,684       3,357    
Cargo     13,887       11,288       2,599       25,278       22,228       3,050    
Passenger     5,094       4,611       483       9,763       9,456       307    
Other     449       570       (121 )     1,022       985       37    
Total Block Hours     72,660       61,288       11,372       139,155       116,404       22,751    
                                                 
Revenue Per Block Hour                                                
ACMI   $ 5,219     $ 5,113     $ 106     $ 5,279     $ 5,134     $ 145    
Charter   $ 18,270     $ 16,090     $ 2,180     $ 18,035     $ 15,772     $ 2,263    
Cargo   $ 18,436     $ 16,119     $ 2,317     $ 18,262     $ 15,710     $ 2,552    
Passenger   $ 17,815     $ 16,020     $ 1,795     $ 17,448     $ 15,918     $ 1,531    
                                                 
Average Utilization (block hours per day)                                                
ACMI1     8.7       9.1       (0.4 )     8.5       8.9       (0.4  
Charter                                                
Cargo     10.8       10.3       0.5       10.3       9.4       0.9    
Passenger     9.3       7.6       1.7       9.0       7.7       1.3    
All Operating Aircraft1,2     9.1       9.3       (0.2 )     8.9       9.0       (0.1 )  
                                                 
Fuel                                                
Charter                                                
Average fuel cost per gallon   $ 2.42     $ 1.85     $ 0.57     $ 2.30     $ 1.86     $ 0.44    
Fuel gallons consumed (000s)     53,508       45,229       8,279       98,458       89,156       9,302    
                                                   

1 ACMI and All Operating Aircraft averages in the second quarter and first six months of 2018 reflect the impact of increases in the number of CMI aircraft and amount of CMI flying compared with the same periods of 2017.

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/     For the Six Months
Ended
    Increase/  
    June 30, 2018     June 30, 2017     (Decrease)     June 30, 2018     June 30, 2017     (Decrease)  
                                                 
Segment Operating Fleet (average aircraft equivalents during the period)                                                
ACMI1                                                
747-8F Cargo     9.0       7.6       1.4       9.0       7.3       1.7  
747-400 Cargo     16.2       14.1       2.1       16.0       13.4       2.6  
747-400 Dreamlifter     3.1       3.2       (0.1 )     3.1       3.1       -  
777-200 Cargo     5.0       5.0       -       5.0       5.0       -  
767-300 Cargo     19.3       8.2       11.1       18.3       7.0       11.3  
767-200 Cargo     9.0       9.0       -       9.0       9.0       -  
737-400 Cargo     5.0       5.0       -       5.0       5.0       -  
747-400 Passenger     -       1.0       (1.0 )     0.5       1.0       (0.5 )
767-200 Passenger     1.0       1.0       -       1.0       1.0       -  
Total     67.6       54.1       13.5       66.9       51.8       15.1  
Charter                                                
747-8F Cargo     1.0       2.3       (1.3 )     1.0       2.6       (1.6 )
747-400 Cargo     12.6       9.7       2.9       12.2       10.4       1.8  
767-300 Cargo     0.5       -       0.5       0.4       -       0.4  
747-400 Passenger     2.0       2.0       -       2.0       2.0       -  
767-300 Passenger     4.0       4.7       (0.7 )     4.0       4.8       (0.8 )
Total     20.1       18.7       1.4       19.6       19.8       (0.2 )
Dry Leasing                                                
777-200 Cargo     7.0       6.0       1.0       6.7       6.0       0.7  
767-300 Cargo     15.6       5.8       9.8       14.8       4.7       10.1  
757-200 Cargo     1.0       1.0       -       1.0       1.0       -  
737-300 Cargo     1.0       1.0       -       1.0       1.0       -  
737-800 Passenger     1.0       1.0       -       1.0       1.0       -  
Total     25.6       14.8       10.8       24.5       13.7       10.8  
Less: Aircraft Dry Leased to CMI customers     (16.6 )     (5.8 )     (10.8 )     (15.5 )     (4.7 )     (10.8 )
Total Operating Average Aircraft Equivalents     96.7       81.8       14.9       95.5       80.6       14.9  
                                                 
Out of Service2   -     -     -     -     -     -  
                                     

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

2 Out of service aircraft temporarily parked during the period.

Contacts: 
Dan Loh (Investors) – (914) 701-8200
Beth Roach (Media) –  (914) 701-6576

 

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