– Projects Record 2023 Freighter Lease Deployments With Lower Full Year Capital Expenditure Requirements

– Increases 2023 Adjusted EPS Guidance

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 ended June 30, 2023. Those results, as compared with the same quarter in 2022 were as follows:

Second Quarter 2023 Results

  • Revenues of $529 million, up 4%
  • GAAP EPS (basic) from Continuing Operations of $0.54, down $0.19
  • Adjusted EPS* from Continuing Operations of $0.57, versus $0.59 diluted
  • Pretax Earnings of $50 million, down from $69 million.
  • Adjusted Pretax* Earnings of $58 million, down from $67 million
  • Adjusted EBITDA* of $157 million, comparable to prior year
  • 3.9 million shares repurchased since October 2022, including 950,000 shares in the second quarter

Rich Corrado, President and CEO of ATSG, said, “Our results in the second quarter reflect a rebound from the first quarter in our passenger airline operations, including both improved revenues and cost efficiencies, and the benefit of 13 more Boeing 767-300 freighters in service at June 30 this year versus a year ago. Adjusted EBITDA was in-line with the prior year period, despite continuing inflationary effects on our operations versus the second quarter of 2022. We remain confident in executing our plan to lease nineteen newly converted freighters in 2023, including nine leased to date. We continue to expect attractive returns on what we now project will be $785 million in 2023 capital spending, down $65 million compared with prior guidance.”

* Adjusted EPS (Earnings per Share), Adjusted Pretax Earnings, Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) and Adjusted Free Cash Flow are non-GAAP financial measures and are defined and reconciled to GAAP measures at the end of this release.

Segment Results

Cargo Aircraft Management (CAM)

  • Aircraft leasing and related revenues from external customers in the second quarter were up 4% compared with the prior year quarter, driven by higher average lease rates as more 767-300s have been deployed, offset in part by fewer leased 767-200 aircraft.
  • Pre-tax earnings decreased 22% to $31 million versus the prior year quarter. Earnings were impacted by the scheduled return of ten 767-200s since June 2022, including seven in the second quarter this year. Interest expense versus the prior year period increased $5 million, and depreciation was up $2 million, also impacting pre-tax earnings.
  • CAM deployed one 767-300 leased freighter to an external customer during the quarter. Six more leased freighters have been deployed since June 30, 2023, including four more 767-300s, and two A321-200s.
  • Twenty-three aircraft are currently in or awaiting conversion to freighters. That total includes seven A321 aircraft and sixteen 767-300s.

ACMI Services

  • Pre-tax earnings were $24 million in the second quarter, up 10% versus the prior year quarter, driven by improved performance of passenger operations, including both military and commercial flying, and greater operating efficiencies.
  • Revenue block hours for ATSG's cargo airlines were up 1% for the second quarter while operating a net three more 767 freighters compared with the prior-year period. Cargo block hours were affected by the loss of certain long-haul ACMI flying between the U.S. and Europe versus 2022.
  • Hours flown by the four Boeing 757 combination freighter-passenger aircraft were up significantly due to the resumption of a Pacific route in late 2022.
  • Passenger block hours, including combi flying, decreased 2%. The prior-year quarter included passenger hours flown for additional routes to Europe.

2023 Outlook

ATSG continues to expect Adjusted EBITDA for 2023 to be in a range of $610 million to $620 million, and now expects full year Adjusted EPS in a range of $1.65 to $1.80, ten cents higher than prior guidance, based on second-half leased freighter deployment projections and stronger ACMI Services performance.

"A solid July for both freighter leasing and passenger flying has positioned us to achieve our second-half 2023 goals, with sequential improvement each quarter," Corrado said.

ATSG has decreased its capital spending projection for 2023 by $65 million to $785 million, including $240 million in sustaining capex and $545 million for growth. The decrease in growth capex principally reflects two fewer A321 aircraft purchases this year for conversion in 2024. Lower sustaining capex reflects fewer than planned overhauls of engines for Boeing 767-200 freighters.

Corrado noted that the fundamental driver of midsize freighter leasing - rapid fulfillment of e-commerce purchases via air express networks - will persist over the long term.

“Global e-commerce growth projections remain strong, and our owned fleet and conversion pipeline stand ready to meet future demand, further supported by the need to replace aging, less fuel-efficient aircraft over the next decade," he said. "Our freighters, including Boeing 767s, Airbus A321s, and Airbus A330s, remain the most efficient and reliable solutions for these markets.”

Corrado finished by saying, “Capital investments in 2024 are now expected to be lower than 2023 levels. That gives us the option to pursue other capital allocation alternatives that may yield even better returns for shareholders.”

Non-GAAP Financial Measures

This release, including the attached non-GAAP reconciliation tables, contains financial measures that are not calculated and presented in accordance with generally accepted accounting principles in the United States ("non-GAAP financial measures"). Management uses these non-GAAP financial measures to evaluate historical results and project future results. Management believes that these non-GAAP financial 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 financial 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 and may be calculated differently by other companies.

The historical non-GAAP financial measures included in this release are reconciled to the most directly comparable financial measure calculated and presented in accordance with GAAP in the non-GAAP Reconciliation tables included later in this release. The Company does not provide a reconciliation of projected Adjusted EBITDA or Adjusted EPS 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, including its earnings per share 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 4, 2023, at 10 a.m. Eastern Time to review its financial results for the second quarter of 2023, and its outlook for remainder of the year. Live call participants must register via this link that is also available at ATSG’s website, www.atsginc.com under “Investors” and “Presentations.” Once registered, call participants will receive dial-in numbers and a unique Personal Identification Number (PIN) that must be entered to join the live call. Listen-only access to live and replay versions of the call, including slides, will be available via a webcast link at the same ATSG website location. Slides that accompany management’s discussion of its quarterly results also may be downloaded there shortly before the start of the call at 10 a.m.

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. These factors include, but are not limited to: (i) unplanned changes in the market demand for our assets and services, including the loss of customers or a reduction in the level of services we perform for customers; (ii) our operating airlines' ability to maintain on-time service and control costs; (iii) the cost and timing with respect to which we are able to purchase and modify aircraft to a cargo configuration; (iv) fluctuations in ATSG's traded share price and in interest rates, which may result in mark-to-market charges on certain financial instruments; (v) the number, timing, and scheduled routes of our aircraft deployments to customers; (vi) our ability to remain in compliance with key agreements with customers, lenders and government agencies; (vii) the impact of current supply chain constraints both within and outside the United States, which may be more severe or persist longer than we currently expect; (viii) the impact of a competitive labor market, which could restrict our ability to fill key positions; and (ix) changes in general economic and/or industry-specific conditions, including inflation. Other factors that could cause ATSG’s actual results to differ materially from those indicated by such forward-looking statements 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 (UNAUDITED)

(In thousands, except per share data)

 

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

REVENUES

$

529,339

 

$

509,668

 

$

1,030,434

 

$

995,528

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

Salaries, wages and benefits

 

170,458

 

 

162,797

 

 

347,173

 

 

324,559

Depreciation and amortization

 

82,691

 

 

81,372

 

 

167,419

 

 

163,443

Maintenance, materials and repairs

 

50,436

 

 

39,407

 

 

94,269

 

 

75,116

Fuel

 

67,271

 

 

73,102

 

 

134,026

 

 

133,460

Contracted ground and aviation services

 

19,682

 

 

20,153

 

 

37,470

 

 

38,484

Travel

 

31,222

 

 

28,480

 

 

60,775

 

 

52,679

Landing and ramp

 

4,744

 

 

4,085

 

 

8,868

 

 

8,663

Rent

 

8,274

 

 

7,068

 

 

16,386

 

 

13,731

Insurance

 

2,684

 

 

2,326

 

 

5,232

 

 

4,878

Other operating expenses

 

22,136

 

 

20,361

 

 

41,652

 

 

40,204

 

 

459,598

 

 

439,151

 

 

913,270

 

 

855,217

 

 

 

 

 

 

 

 

OPERATING INCOME

 

69,741

 

 

70,517

 

 

117,164

 

 

140,311

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

Interest income

 

180

 

 

15

 

 

395

 

 

24

Non-service component of retiree benefit credits

 

(3,218)

 

 

5,388

 

 

(6,436)

 

 

10,776

Net gain on financial instruments

 

1,818

 

 

6,011

 

 

78

 

 

8,707

Loss from non-consolidated affiliates

 

(2,107)

 

 

(3,220)

 

 

(2,513)

 

 

(4,623)

Interest expense

 

(16,672)

 

 

(9,461)

 

 

(32,377)

 

 

(20,860)

 

 

(19,999)

 

 

(1,267)

 

 

(40,853)

 

 

(5,976)

 

 

 

 

 

 

 

 

EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

 

49,742

 

 

69,250

 

 

76,311

 

 

134,335

INCOME TAX EXPENSE

 

(11,720)

 

 

(15,040)

 

 

(18,148)

 

 

(30,329)

 

 

 

 

 

 

 

 

EARNINGS FROM CONTINUING OPERATIONS

 

38,022

 

 

54,210

 

 

58,163

 

 

104,006

 

 

 

 

 

 

 

 

EARNINGS FROM DISCONTINUED OPERATIONS, NET OF TAX

 

 

 

882

 

 

 

 

882

NET EARNINGS

$

38,022

 

$

55,092

 

$

58,163

 

$

104,888

 

 

 

 

 

 

 

 

EARNINGS PER SHARE - CONTINUING OPERATIONS

 

 

 

 

 

 

 

Basic

$

0.54

 

$

0.73

 

$

0.82

 

$

1.41

Diluted

$

0.49

 

$

0.61

 

$

0.73

 

$

1.18

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES - CONTINUING OPERATIONS

 

 

 

 

 

 

 

Basic

 

70,722

 

 

73,980

 

 

71,259

 

 

73,934

Diluted

 

79,515

 

 

89,449

 

 

81,276

 

 

89,098

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In thousands, except share data)

 

June 30, 2023

 

December 31, 2022

ASSETS

 

 

 

CURRENT ASSETS:

 

 

 

Cash and cash equivalents

$

43,150

 

$

27,134

Accounts receivable, net of allowance of $1,186 in 2023 and $939 in 2022

 

218,312

 

 

301,622

Inventory

 

57,648

 

 

57,764

Prepaid supplies and other

 

32,387

 

 

31,956

TOTAL CURRENT ASSETS

 

351,497

 

 

418,476

 

 

 

 

Property and equipment, net

 

2,678,980

 

 

2,402,408

Customer incentive

 

69,109

 

 

79,650

Goodwill and acquired intangibles

 

487,534

 

 

492,642

Operating lease assets

 

60,808

 

 

74,070

Other assets

 

104,637

 

 

122,647

TOTAL ASSETS

$

3,752,565

 

$

3,589,893

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

CURRENT LIABILITIES:

 

 

 

Accounts payable

$

269,805

 

$

192,992

Accrued salaries, wages and benefits

 

51,509

 

 

56,498

Accrued expenses

 

11,061

 

 

12,466

Current portion of debt obligations

 

645

 

 

639

Current portion of lease obligations

 

21,771

 

 

23,316

Unearned revenue

 

38,654

 

 

21,546

TOTAL CURRENT LIABILITIES

 

393,445

 

 

307,457

Long term debt

 

1,514,737

 

 

1,464,285

Stock obligations

 

1,762

 

 

695

Post-retirement obligations

 

32,612

 

 

35,334

Long term lease obligations

 

40,032

 

 

51,575

Other liabilities

 

54,565

 

 

62,861

Deferred income taxes

 

272,208

 

 

255,180

 

 

 

 

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; 70,761,243 and 72,327,758 shares issued and outstanding in 2023 and 2022, respectively

 

708

 

 

723

Additional paid-in capital

 

951,463

 

 

986,303

Retained earnings

 

587,045

 

 

528,882

Accumulated other comprehensive loss

 

(96,012)

 

 

(103,402)

TOTAL STOCKHOLDERS’ EQUITY

 

1,443,204

 

 

1,412,506

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

3,752,565

 

$

3,589,893

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED SUMMARY OF CASH FLOWS (UNAUDITED)

(In thousands)

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

OPERATING CASH FLOWS

$

192,198

 

$

124,541

 

$

408,576

 

$

250,209

 

 

 

 

 

 

 

 

INVESTING ACTIVITIES:

 

 

 

 

 

 

 

Aircraft acquisitions and freighter conversions

 

(138,556)

 

 

(133,378)

 

 

(303,164)

 

 

(205,293)

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

 

(55,568)

 

 

(52,580)

 

 

(109,761)

 

 

(88,917)

Proceeds from sales of property and equipment

 

585

 

 

78

 

 

10,445

 

 

154

Acquisitions and investments in businesses

 

 

 

(16,545)

 

 

(800)

 

 

(16,545)

TOTAL INVESTING CASH FLOWS

 

(193,539)

 

 

(202,425)

 

 

(403,280)

 

 

(310,601)

 

 

 

 

 

 

 

 

FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Principal payments on debt

 

(65,103)

 

 

(205,210)

 

 

(90,317)

 

 

(295,310)

Proceeds from borrowings

 

35,000

 

 

410,000

 

 

140,000

 

 

450,000

Payments for financing costs

 

(27)

 

 

 

 

(511)

 

 

Bond Repurchase

 

 

 

(115,204)

 

 

 

 

(115,204)

Purchase of common stock

 

(14,956)

 

 

 

 

(36,874)

 

 

Taxes paid for conversion of employee awards

 

(25)

 

 

(89)

 

 

(1,578)

 

 

(1,439)

TOTAL FINANCING CASH FLOWS

 

(45,111)

 

 

89,497

 

 

10,720

 

 

38,047

 

 

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH

$

(46,452)

 

$

11,613

 

$

16,016

 

$

(22,345)

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

$

89,602

 

$

35,538

 

$

27,134

 

$

69,496

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

43,150

 

$

47,151

 

$

43,150

 

$

47,151

 

 

 

 

 

 

 

 

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

PRETAX EARNINGS FROM CONTINUING OPERATIONS AND ADJUSTED PRETAX EARNINGS SUMMARY

NON-GAAP RECONCILIATION

(In thousands)

 

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

Revenues

 

 

 

 

 

 

 

CAM

 

 

 

 

 

 

 

Aircraft leasing and related revenues

$

115,281

 

$

114,703

 

$

232,355

 

$

226,638

Lease incentive amortization

 

(3,903)

 

 

(5,029)

 

 

(8,933)

 

 

(10,059)

Total CAM

 

111,378

 

 

109,674

 

 

223,422

 

 

216,579

ACMI Services

 

366,187

 

 

347,498

 

 

700,314

 

 

677,588

Other Activities

 

110,789

 

 

107,879

 

 

221,377

 

 

210,414

Total Revenues

 

588,354

 

 

565,051

 

 

1,145,113

 

 

1,104,581

Eliminate internal revenues

 

(59,015)

 

 

(55,383)

 

 

(114,679)

 

 

(109,053)

Customer Revenues

$

529,339

 

$

509,668

 

$

1,030,434

 

$

995,528

 

 

 

 

 

 

 

 

Pretax Earnings (Loss) from Continuing Operations

 

 

 

 

 

 

 

CAM, inclusive of interest expense

 

31,020

 

 

39,617

 

 

65,220

 

 

74,612

ACMI Services, interest expense

 

24,054

 

 

21,837

 

 

21,643

 

 

44,002

Other Activities

 

(1,299)

 

 

191

 

 

(645)

 

 

1,742

Net, unallocated interest expense

 

(526)

 

 

(574)

 

 

(1,036)

 

 

(881)

Non-service components of retiree benefit credit

 

(3,218)

 

 

5,388

 

 

(6,436)

 

 

10,776

Net gain on financial instruments

 

1,818

 

 

6,011

 

 

78

 

 

8,707

Loss from non-consolidated affiliates

 

(2,107)

 

 

(3,220)

 

 

(2,513)

 

 

(4,623)

Earnings from Continuing Operations before Income Taxes (GAAP)

$

49,742

 

$

69,250

 

$

76,311

 

$

134,335

 

 

 

 

 

 

 

 

Adjustments to Pretax Earnings from Continuing Operations

 

 

 

 

 

 

 

Add customer incentive amortization

 

4,719

 

 

5,822

 

 

10,541

 

 

11,620

Add loss from non-consolidated affiliates

 

2,107

 

 

3,220

 

 

2,513

 

 

4,623

Less net gain on financial instruments

 

(1,818)

 

 

(6,011)

 

 

(78)

 

 

(8,707)

Less non-service components of retiree benefit credit

 

3,218

 

 

(5,388)

 

 

6,436

 

 

(10,776)

Add net charges for hangar foam incident

 

(28)

 

 

 

 

13

 

 

Adjusted Pretax Earnings (non-GAAP)

$

57,940

 

$

66,893

 

$

95,736

 

$

131,095

Adjusted Pretax Earnings excludes certain items included in GAAP-based pretax Earnings (Loss) from Continuing Operations before Income Taxes because these items 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. Adjusted Pretax Earnings should not be considered an alternative to Earnings from Continuing Operations Before Income Taxes or any other performance measure derived in accordance with GAAP.

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,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

Earnings (Loss) from Continuing Operations Before Income Taxes

$

49,742

 

$

69,250

 

$

76,311

 

$

134,335

Interest Income

 

(180)

 

 

(15)

 

 

(395)

 

 

(24)

Interest Expense

 

16,672

 

 

9,461

 

 

32,377

 

 

20,860

Depreciation and Amortization

 

82,691

 

 

81,372

 

 

167,419

 

 

163,443

EBITDA from Continuing Operations (non-GAAP)

$

148,925

 

$

160,068

 

$

275,712

 

$

318,614

Add customer incentive amortization

 

4,719

 

 

5,822

 

 

10,541

 

 

11,620

Add start-up loss from non-consolidated affiliates

 

2,107

 

 

3,220

 

 

2,513

 

 

4,623

Less net gain on financial instruments

 

(1,818)

 

 

(6,011)

 

 

(78)

 

 

(8,707)

Add non-service components of retiree benefit credits

 

3,218

 

 

(5,388)

 

 

6,436

 

 

(10,776)

Add net charges for hangar foam incident

 

(28)

 

 

 

 

13

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA (non-GAAP)

$

157,123

 

$

157,711

 

$

295,137

 

$

315,374

Management uses Adjusted EBITDA to assess the performance of its operating results among periods. It is a metric that facilitates the comparison of financial results of underlying operations. Additionally, these non-GAAP adjustments are similar to the adjustments used by lenders in the Company’s senior secured credit facility to assess financial performance and determine the cost of borrowed funds. The adjustments also remove the non-service cost components of retiree benefit plans because they are not closely related to ongoing operating activities. To improve comparability between periods, the adjustments also exclude from EBITDA from Continuing Operations charges related to the discharge of a fire suppression system in the Company's aircraft hangar, net of related insurance recoveries. 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, costs from non-consolidated affiliates and charges related to the discharge of a fire suppression system, net of insurance recoveries.

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

ADJUSTED FREE CASH FLOW

NON-GAAP RECONCILIATION

(In thousands)

 

 

Three Months Ended

 

Six Months Ended

 

Trailing 12 Months Ended

 

June 30,

 

June 30,

 

June 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2023

 

 

 

 

 

 

 

 

 

 

OPERATING CASH FLOWS (GAAP)

$

192,198

 

$

124,541

 

$

408,576

 

$

250,209

 

$

630,487

Sustaining capital expenditures

 

(55,568)

 

 

(52,580)

 

 

(109,761)

 

 

(88,917)

 

 

(207,680)

 

 

 

 

 

 

 

 

 

 

ADJUSTED FREE CASH FLOW (non-GAAP)

$

136,630

 

$

71,961

 

$

298,815

 

$

161,292

 

$

422,807

 

 

 

 

 

 

 

 

 

 

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.

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

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

ADJUSTED EARNINGS AND ADJUSTED EARNINGS PER SHARE

NON-GAAP RECONCILIATION

(In thousands)

Management presents Adjusted Earnings and Adjusted Earnings Per Share, both non-GAAP measures, to provide additional information regarding earnings per share without the volatility otherwise caused by the items below among periods.

 

 

Three Months Ended

 

Six Months Ended

 

June 30, 2023

 

June 30, 2022

 

June 30, 2023

 

June 30, 2022

 

$

 

$ Per Share

 

$

 

$ Per Share

 

$

 

$ Per Share

 

$

 

$ Per Share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings from Continuing Operations - basic (GAAP)

$

38,022

 

 

 

$

54,210

 

 

 

$

58,163

 

 

 

$

104,006

 

 

Gain from warrant revaluation, net tax1

 

 

 

 

 

(107)

 

 

 

 

(148)

 

 

 

 

(50)

 

 

Convertible notes interest charges, net of tax 2

 

780

 

 

 

 

762

 

 

 

 

1,556

 

 

 

 

1,522

 

 

Earnings from Continuing Operations - diluted (GAAP)

 

38,802

 

$

0.49

 

 

54,865

 

$

0.61

 

 

59,571

 

$

0.73

 

 

105,478

 

$

1.18

Adjustments, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer incentive amortization3

 

3,665

 

 

0.05

 

 

4,493

 

 

0.05

 

 

8,211

 

 

0.11

 

 

8,968

 

 

0.10

Non-service component of retiree benefits4

 

2,499

 

 

0.03

 

 

(4,158)

 

 

(0.05)

 

 

5,012

 

 

0.06

 

 

(8,316)

 

 

(0.09)

Financial instrument revaluations5

 

(1,411)

 

 

(0.02)

 

 

(4,533)

 

 

(0.05)

 

 

95

 

 

 

 

(6,671)

 

 

(0.07)

Loss from affiliates6

 

1,636

 

 

0.02

 

 

2,485

 

 

0.03

 

 

1,953

 

 

0.02

 

 

3,568

 

 

0.04

Hangar foam incident7

 

(22)

 

 

 

 

 

 

 

 

10

 

 

 

 

 

 

Adjusted Earnings and Adjusted Earnings Per Share (non-GAAP)

$

45,169

 

$

0.57

 

$

53,152

 

$

0.59

 

$

74,852

 

$

0.92

 

$

103,027

 

$

1.16

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

 

Shares

 

 

 

Shares

 

 

 

Shares

 

 

Weighted Average Shares - diluted

 

79,515

 

 

 

 

89,449

 

 

 

 

81,276

 

 

 

 

89,098

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 and Adjusted Earnings Per Share 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 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" requires convertible debt to be treated under the "if-convert method" for EPS.

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 non-service component of post-retirement costs and credits.

5. Removes gains and losses from period end financial instruments revaluations, including derivative interest rate instruments, customer warrant and sale option.

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

7. Removes charges and gains related to the discharge of a fire suppression system in the Company's aircraft hangar, net of related insurance recoveries.

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

AIRCRAFT FLEET

 

Aircraft Types

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2022

 

December 31, 2022

 

June 30, 2023

 

December 31, 2023 Projected

 

 

Freighter

 

Passenger

 

Freighter

 

Passenger

 

Freighter

 

Passenger

 

Freighter

 

Passenger

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

B767-200

 

33

 

3

 

32

 

3

 

24

 

3

 

21

 

3

B767-300

 

70

 

8

 

78

 

8

 

83

 

8

 

93

 

8

B777-200

 

 

3

 

 

3

 

 

3

 

 

3

B757 Combi

 

 

4

 

 

4

 

 

4

 

 

4

A321-200

 

 

 

 

 

 

 

5

 

Total Aircraft in Service

 

103

 

18

 

110

 

18

 

107

 

18

 

119

 

18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In or awaiting cargo conversion

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

B767-300

 

14

 

 

15

 

 

20

 

 

12

 

A321

 

5

 

 

7

 

 

9

 

 

4

 

A330

 

 

 

 

 

 

 

3

 

B767 staging for lease

 

1

 

 

 

 

2

 

 

2

 

Total Aircraft

 

123

 

18

 

132

 

18

 

138

 

18

 

140

 

18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aircraft in Service Deployments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30

 

December 31,

 

June 30

 

December 31,

 

 

2022

 

2022

 

2023

 

2023 Projected

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dry leased without CMI

 

37

 

39

 

38

 

49

Dry leased with CMI

 

52

 

52

 

48

 

47

Customer provided for CMI

 

7

 

13

 

15

 

16

ACMI/Charter1

 

25

 

24

 

24

 

25

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

 

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

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