Air Transport Services Group Inc (ATSG) Share Price

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ATSG to be Acquired by Stonepeak for $3.1 Billion
November 04 2024 - 8:30AM
Business Wire

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ATSG Shareholders to Receive $22.50 Per Share in Cash

Air Transport Services Group, Inc. (NASDAQ:ATSG), a global leader in medium widebody freighter aircraft leasing, air transport operations, and support services, today announced that it has entered into a definitive agreement to be acquired by Stonepeak, a leading alternative investment firm specializing in infrastructure and real assets, in an all-cash transaction with an enterprise valuation of approximately $3.1 billion.

Under the terms of the definitive agreement, which was unanimously approved by ATSG’s Board of Directors, holders of ATSG’s common shares will receive $22.50 per share in cash. The purchase price represents a premium of approximately 29.3% over ATSG’s closing share price on November 1, 2024, the last full trading day prior to this announcement, and a 45.5% premium over ATSG’s volume-weighted average price (VWAP) over the prior ninety trading days. Upon completion of the transaction, ATSG's shares will no longer trade on NASDAQ, and ATSG will become a private company.

Joe Hete, Executive Chairman of ATSG’s Board of Directors, said, “The agreement with Stonepeak will deliver immediate and certain cash value to ATSG’s shareholders at a substantial premium to recent market prices. With a history dating back to 1980, we are excited to reach this important milestone in our journey. Since going public in 2003, ATSG has diversified and expanded its portfolio of companies and services, becoming a global leader in midsize freighter leasing and flying, as well as a leading supplemental provider of passenger transport for the U.S. Department of Defense and other agencies. Following the Board’s careful evaluation of the transaction, we are confident it is the best path forward and maximizes value for ATSG’s shareholders, while also benefiting our employees, customers, partners, communities and other stakeholders.”

“This transaction reflects the tremendous value of our fleet of in-demand midsize freighter and passenger aircraft, and the strength of our talented teams across ATSG’s businesses,” said Mike Berger, Chief Executive Officer of ATSG. “In Stonepeak, we have found a partner that recognizes the power of our Lease+Plus strategy to provide comprehensive aircraft leasing and operating solutions to our customers. With Stonepeak’s investment and extensive expertise in transportation and logistics and asset leasing, ATSG will be well positioned to further expand its global presence in the air cargo leasing market and enhance its service offerings to customers. We would like to thank our employees for helping us achieve this significant milestone and for their continued dedication as we prepare to enter this new chapter as a private company.”

“ATSG plays a fundamental role in enabling the growth of e-commerce globally in a world that continues to shift away from brick-and-mortar shopping,” said James Wyper, Senior Managing Director and Head of Transportation & Logistics at Stonepeak. “ATSG’s deep relationships with some of the world’s largest e-commerce companies and integrators, combined with the scale and capacity of their fleet and relentless focus on safety and on-time performance, gives us confidence in the Company’s trajectory as a sector leader.”

Graham Brown, Managing Director at Stonepeak, added, “We look forward to supporting the team at ATSG to help take the business to the next level as a private company, and are excited about this addition to our North American infrastructure investment strategy.”

Approvals and Timing

The transaction is expected to close in the first half of 2025, subject to customary closing conditions, including approval of ATSG’s shareholders and receipt of regulatory approvals. The transaction has fully committed equity financing from funds affiliated with Stonepeak and fully committed debt financing. The transaction is not subject to a financing condition.

The definitive agreement includes a “go-shop” period. Under the terms of the merger agreement, ATSG may solicit proposals from third parties for a period of 35 days continuing through December 8, 2024, and in certain cases for a period of 50 days continuing through December 23, 2024. In addition, ATSG may, at any time prior to receipt of shareholder approval, subject to the provisions of the merger agreement, respond to unsolicited proposals that constitute or would reasonably be expected to result in a superior proposal. ATSG will have the right to terminate the merger agreement with Stonepeak to enter into a superior proposal subject to the terms and conditions of the merger agreement, including payment of a customary termination fee. There can be no assurance that the solicitation process will result in a superior proposal or that any other transaction will be approved or completed. ATSG does not intend to disclose developments with respect to this solicitation process unless and until its Board of Directors determines such disclosure is appropriate or otherwise required.

Third Quarter 2024 Results

As previously announced, ATSG will release its financial results for the third quarter of 2024 prior to market opening on the morning of November 8, 2024 and file its 10-Q after market close on that same day. ATSG’s results and filing will be accessible via the ATSG corporate website at https://www.atsginc.com/investors. In light of the transaction with Stonepeak, ATSG has cancelled the earnings conference call previously scheduled for November 8, 2024. ATSG does not plan to hold earnings conference calls during the pendency of the transaction.

Advisors

Goldman Sachs & Co. LLC is acting as exclusive financial advisor to ATSG. Davis Polk & Wardwell LLP and Vorys, Sater, Seymour & Pease LLP are acting as legal counsel to ATSG.

Evercore is acting as financial advisor to Stonepeak. Simpson Thacher & Bartlett LLP and Hogan Lovells US LLP are acting as legal counsel to Stonepeak.

About Air Transport Services Group

Air Transport Services Group (ATSG) is a premier provider of aircraft leasing and cargo and passenger air transportation solutions for both domestic and international air carriers, as well as companies seeking outsourced airlift services. ATSG is the global leader in freighter aircraft leasing with a fleet that includes Boeing 767, Airbus A321, and soon, Airbus A330 converted freighters. ATSG's unique Lease+Plus aircraft leasing opportunity draws upon a diverse portfolio of subsidiaries including three airlines holding separate and distinct U.S. FAA Part 121 Air Carrier certificates to provide air cargo lift, and passenger ACMI and charter services. Complementary services from ATSG's other subsidiaries allow the integration of aircraft maintenance, airport ground services, and material handling equipment engineering and service. ATSG subsidiaries comprise 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.; LGSTX Services, Inc.; and Omni Air International, LLC. For further details, please visit www.atsginc.com.

About Stonepeak

Stonepeak is a leading alternative investment firm specializing in infrastructure and real assets with approximately $70 billion of assets under management. Through its investment in defensive, hard-asset businesses globally, Stonepeak aims to create value for its investors and portfolio companies, with a focus on downside protection and strong risk-adjusted returns. Stonepeak, as sponsor of private equity and credit investment vehicles, provides capital, operational support, and committed partnership to grow investments in its target sectors, which include communications, energy and energy transition, transport and logistics, and real estate. Stonepeak is headquartered in New York with offices in Houston, London, Hong Kong, Seoul, Singapore, Sydney, Tokyo, and Abu Dhabi. For more information, please visit www.stonepeak.com.

Cautionary Statement Regarding Forward-Looking Statements

This communication contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”). Except for historical information contained in this communication, the matters discussed herein contain forward-looking statements that involve risks and uncertainties. Such statements are provided under the “safe harbor” protection of the Act. Forward-looking statements include, but are not limited to, statements regarding anticipated operating results, prospects and aircraft in service, technological developments, economic trends, expected transactions and similar matters. The words “may,” “believe,” “expect,” “anticipate,” “target,” “goal,” “project,” “estimate,” “guidance,” “forecast,” “outlook,” “will,” “continue,” “likely,” “should,” “hope,” “seek,” “plan,” “intend” and variations of such words and similar expressions identify forward-looking statements. Similarly, descriptions of the Company’s objectives, strategies, plans, goals or targets are also forward-looking statements. Forward-looking statements are susceptible to a number of risks, uncertainties and other factors. While the Company believes that the assumptions underlying its forward-looking statements are reasonable, investors are cautioned that any of the assumptions could prove to be inaccurate and, accordingly, the Company’s actual results and experiences could differ materially from the anticipated results or other expectations expressed in its forward-looking statements.

Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements regarding the transactions contemplated by the Agreement and Plan of Merger, by and among the Company, Stonepeak Nile Parent LLC and Stonepeak Nile MergerCo Inc. (the “Transaction”), including the expected time period to consummate the Transaction, the anticipated benefits (including synergies) of the Transaction and integration and transition plans, opportunities, anticipated future performance, expected share buyback programs and expected dividends. All such forward-looking statements are based upon current plans, estimates, expectations and ambitions that are subject to risks, uncertainties and assumptions, many of which are beyond the control of Air Transport Services Group, Inc. (the “Company”), that could cause actual results to differ materially from those expressed in such forward-looking statements. Key factors that could cause actual results to differ materially include, but are not limited to, the expected timing and likelihood of completion of the Transaction, including the timing, receipt and terms and conditions of any required governmental and regulatory approvals of the Transaction; the occurrence of any event, change or other circumstances that could give rise to the termination of the definitive agreement; the possibility that the Company’s stockholders may not approve the Transaction; the risk that the anticipated tax treatment of the Transaction is not obtained; the risk that the parties may not be able to satisfy the conditions to the Transaction in a timely manner or at all; risks related to disruption of management time from ongoing business operations due to the Transaction; the risk that any announcements relating to the Transaction could have adverse effects on the market price of the Company’s common stock; the risk that the Transaction and its announcement could have an adverse effect on the parties’ business relationships and business generally, including the ability of the Company to retain customers and retain and hire key personnel and maintain relationships with their suppliers and customers, and on their operating results and businesses generally; the risk of unforeseen or unknown liabilities; customer, shareholder, regulatory and other stakeholder approvals and support; the risk of unexpected future capital expenditures; the risk of potential litigation relating to the Transaction that could be instituted against the Company or its directors and/or officers; the risk associated with third party contracts containing material consent, anti-assignment, transfer or other provisions that may be related to the Transaction which are not waived or otherwise satisfactorily resolved; the risk of rating agency actions and the Company’s ability to access short- and long-term debt markets on a timely and affordable basis; the risk of various events that could disrupt operations, including severe weather, such as droughts, floods, avalanches and earthquakes, cybersecurity attacks, security threats and governmental response to them, and technological changes; the risks of labor disputes, changes in labor costs and labor difficulties; and the risks resulting from other effects of industry, market, economic, legal or legislative, political or regulatory conditions outside of the Company’s control. All such factors are difficult to predict and are beyond our control, including those detailed in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2023 (and which is available at https://www.sec.gov/ix?doc=/Archives/edgar/data/894081/000089408124000016/atsg-20231231.htm), quarterly reports on Form 10-Q and other documents subsequently filed by the Company with the Securities Exchange Commission (“SEC”) and that are available on the Company’s website at https://www.atsginc.com/investors/reports-and-filings/sec-filings and at https://www.sec.gov/edgar/browse/?CIK=894081&owner=exclude. The Company’s forward-looking statements are based on assumptions that the Company believes to be reasonable but that may not prove to be accurate. Other unpredictable or factors not discussed in this communication could also have material adverse effects on forward-looking statements. The Company does not assume an obligation to update any forward-looking statements, except as required by applicable law. These forward-looking statements speak only as of the date hereof.

Additional Information and Where to Find It

In connection with the Transaction, the Company will file with the SEC a proxy statement on Schedule 14A (the “Proxy Statement”). The definitive version of the Proxy Statement will be sent to the stockholders of the Company seeking their approval of the Transaction and other related matters.

INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE PROXY STATEMENT ON SCHEDULE 14A WHEN IT BECOMES AVAILABLE, AS WELL AS ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE TRANSACTION OR INCORPORATED BY REFERENCE THEREIN AND ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION REGARDING THE COMPANY, THE TRANSACTION AND RELATED MATTERS.

Investors and security holders may obtain free copies of these documents, including the Proxy Statement, and other documents filed with the SEC by the Company through the website maintained by the SEC at https://www.sec.gov/edgar/browse/?CIK=894081&owner=exclude. Copies of documents filed with the SEC by the Company will be made available free of charge by accessing the Company’s website at https://atsginc.com/investors or by contacting the Company via email by sending a message to investor.relations@atsginc.com.

Participants in the Solicitation

The Company and its directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of the Company in connection with the Transaction under the rules of the SEC. Information about the interests of the directors and executive officers of the Company and other persons who may be deemed to be participants in the solicitation of stockholders of the Company in connection with the Transaction and a description of their direct and indirect interests, by security holdings or otherwise, will be included in the Proxy Statement related to the Transaction, which will be filed with the SEC. Information about the directors and executive officers of the Company and their ownership of the Company common stock is also set forth in the Company’s definitive proxy statement in connection with its 2024 Annual Meeting of Stockholders, as filed with the SEC on April 11, 2024 (and which is available at https://www.sec.gov/ix?doc=/Archives/edgar/data/894081/000114036124019362/ny20017081x1_def14a.htm) and in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (and which is available at https://www.sec.gov/ix?doc=/Archives/edgar/data/894081/000089408124000016/atsg-20231231.htm). Information about the directors and executive officers of the Company, their ownership of the Company common stock, and the Company’s transactions with related persons is set forth in the sections entitled “Directors, Executive Officers and Corporate Governance,” “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters,” and “Certain Relationships and Related Stockholder Matters” included in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2023, which was filed with the SEC on February 29, 2024 (and which is available at https://www.sec.gov/ix?doc=/Archives/edgar/data/894081/000089408124000016/atsg-20231231.htm), and in the sections entitled “Corporate Governance and Board Matters,” and “Stock Ownership of Management,” included in the Company’s definitive proxy statement in connection with its 2024 Annual Meeting of Stockholders, as filed with the SEC on April 11, 2024 (and which is available at https://www.sec.gov/ix?doc=/Archives/edgar/data/894081/000089408124000016/atsg-20231231.htm). Additional information regarding the interests of such participants in the solicitation of proxies in respect of the Transaction will be included in the Proxy Statement and other relevant materials to be filed with the SEC when they become available These documents can be obtained free of charge from the SEC’s website at www.sec.gov.

No Offer or Solicitation

This communication is not intended to and shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities or the solicitation of any vote of approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.



View source version on businesswire.com: https://www.businesswire.com/news/home/20241104103481/en/

ATSG
Quint O. Turner, Chief Financial Officer
Air Transport Services Group, Inc.
(937) 366-2303

Michael Freitag / Mahmoud Siddig / Rachel Goldman
Joele Frank, Wilkinson Brimmer Katcher
(212) 355-4449

Stonepeak
Kate Beers / Maya Brounstein
Corporate Communications
corporatecomms@stonepeak.com
(212) 907-5100

ATSG Reports Second Quarter 2024 Results

Source: Business Wire
Raises 2024 Adjusted EBITDA Outlook
Generates Strong Free Cash Flow
Leases Four Boeing 767 Freighters to Customers since June 30

Air Transport Services Group, Inc. (Nasdaq: ATSG), the leading provider of medium wide-body freighter aircraft leasing, contracted air transportation, and related services, today reported consolidated financial results for the second quarter ended June 30, 2024. Those results, as compared with the same period in 2023, were as follows:

Second Quarter Results

Revenues of $488 million, versus $529 million
GAAP Earnings per Share (diluted) from Continuing Operations of $0.11, versus $0.49
GAAP Pretax Earnings from Continuing Operations of $10.7 million, versus $49.7 million
Adjusted Pretax* Earnings of $17.3 million, versus $57.9 million
Adjusted EPS* of $0.19, versus $0.57
Adjusted EBITDA* of $130.4 million, versus $157.1 million
Free Cash Flow was $91.8 million, versus negative $1.3 million
Mike Berger, chief executive officer of ATSG, said, "Our second quarter results were affected by fewer block hours by our airlines and the scheduled return of Boeing 767-200 freighters since a year ago. We beat our internal expectations for the quarter, however, and are positioned for further improvement in the second half of the year, particularly in the fourth quarter. We're encouraged by the free cash flow we're generating and have again raised our full year guidance for Adjusted EBITDA. We have leased four aircraft to customers since the end of June and are encouraged by the momentum we're seeing in the global markets we serve. We remain proud of the service levels we deliver every day and are particularly pleased that we met commitments to our customer Amazon during this year's Prime Week."

* Adjusted EPS (Earnings per Share), Adjusted Pretax Earnings, Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), Free Cash Flow, and Adjusted Free Cash Flow are non-GAAP financial measures used in this release, which are defined and reconciled to the most directly comparable financial measures calculated and presented in accordance with GAAP at the end of this release.

Segment Results

Cargo Aircraft Management (CAM)

Aircraft leasing and related revenues decreased 7% for the second quarter, including the benefit of revenues from fourteen additional freighter leases, including eleven additional 767-300s and three Airbus A321-200s since the end of June 2023. These lease revenues were more than offset by the scheduled returns of nine 767-200 freighters and four 767-300 freighters over that same period. Revenue reductions associated with the 767-200 fleet include the effect of fewer cycles operated by lessees under our 767-200 engine power program.
CAM’s second quarter pretax earnings decreased $16 million, or 51%, to $15 million versus the prior-year quarter. The biggest driver of the year-over-year decrease was the previously mentioned reduction in 767-200 freighter lease and engine power program revenues. Segment interest expense increased by $4 million and depreciation increased by $9 million versus the prior-year quarter.
CAM leased three 767s and sold five others to external customers in the second quarter. Six 767-200 freighters were returned by external customers upon lease expiration. At the end of the second quarter, eighty-seven CAM-owned freighter aircraft were leased to external customers, one more than a year ago.
Twenty-three CAM-owned aircraft were in or awaiting conversion to freighters at the end of the second quarter, six fewer than at the end of the prior-year quarter. This included twelve 767s, six A321s, and five A330s. Two of the A330s are expected to complete conversion and be leased to an external customer in the fourth quarter 2024.
ACMI Services

Pretax loss was $7 million in the second quarter, versus earnings of $24 million in the second quarter of 2023. Revenue block hours for ATSG's airlines decreased 10% versus the prior-year quarter. Cargo block hours decreased 11% for the second quarter, reflecting the removal of certain 767-200 freighter aircraft from service and less international flying versus the prior year. Passenger block hours decreased 4% in the quarter. In addition to the reduced flying hours and reduced revenues, ACMI Services experienced increased expenses for crew training, maintenance, travel and ground service rates. Of the decrease in pretax earnings, $3 million was attributable to an increase in non-cash amortization for Amazon warrants.
2024 Outlook

Taking into account the four aircraft leases that commenced since the end of June, ATSG expects Adjusted EBITDA of approximately $526 million in 2024. That is an increase, concentrated in the fourth quarter, of $10 million from the outlook provided in May 2024. This forecast excludes any contribution from additional aircraft leases not currently under contractual commitment. The Company continues to see the potential for additional Adjusted EBITDA from new lease commitments for available aircraft and opportunities for additional flying.

ATSG expects capital spending for 2024 to be $390 million, down from the $410 million estimated in May 2024, and down $400 million from 2023 actual spending. ATSG's total projected capital spend includes growth capital of $225 million. ATSG expects third quarter Adjusted EBITDA to be similar to the second quarter as ramp-up costs for adding ten Amazon supplied 767 freighters continue, but higher in the fourth quarter when the last few enter service and other peak-season operations occur.

Berger added, “We are on track to achieve our improved 2024 outlook. We expect contracted pricing increases and seasonal charter opportunities in the fourth quarter, which should drive improved sequential results in our ACMI Services segment. This expected improvement, combined with momentum in our core leasing business, positions us well to drive earnings growth in 2025. We are ahead of our target for positive free cash flow for the year, with $107 million generated in the first half and an expectation to add to that total in the second half."

Non-GAAP Financial Measures
This release, including the attached tables, contains financial measures that are calculated and presented in accordance with Generally Accepted Accounting Principles ("GAAP") in the United States, and financial measures that are not calculated and presented in accordance with GAAP ("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 financial 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, as permitted by Item 10(e)(1)(i)(B) of Regulation S-K, because it is unable to predict with reasonable accuracy the value of certain adjustments and as a result, the comparable GAAP measures are unavailable without unreasonable efforts. For example, 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, among other things, the future prices of ATSG stock, interest rates, and other assumptions which are highly uncertain. As a result, the Company believes such reconciliations of forward-looking information would imply a degree of precision and certainty that could be confusing to investors.

Conference Call
ATSG will host an investor conference call on Friday, August 9, 2024, at 10 a.m. Eastern Time to review its results for the second quarter of 2024, and its outlook for the remainder of the year. Live call participants must register via this link, which 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 first-quarter results may be downloaded from there starting 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.

Cautionary Note Regarding Forward-Looking Statements

Throughout this release, Air Transport Services Group, Inc. (“ATSG") makes “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, as amended (the “Act”). Except for historical information contained herein, the matters discussed in this release contain forward-looking statements that involve inherent risks and uncertainties. Such statements are provided under the “safe harbor” protection of the Act. Forward-looking statements include, but are not limited to, statements regarding anticipated operating results, prospects and aircraft in service, technological developments, economic trends, expected transactions and similar matters. The words “may,” “believe,” “expect,” “anticipate,” “target,” “goal,” “project,” “estimate,” “guidance,” “forecast,” “outlook,” “will,” “continue,” “likely,” “should,” “hope,” “seek,” “plan,” “intend” and variations of such words and similar expressions identify forward-looking statements. Similarly, descriptions of ATSG’s objectives, strategies, plans, goals or targets are also forward-looking statements. Forward-looking statements are susceptible to a number of risks, uncertainties and other factors. While ATSG believes that the assumptions underlying its forward-looking statements are reasonable, investors are cautioned that any of the assumptions could prove to be inaccurate and, accordingly, ATSG’s actual results and experiences could differ materially from the anticipated results or other expectations expressed in its forward-looking statements. A number of important factors could cause ATSG's actual results to differ materially from those indicated by such forward-looking statements. These factors include, but are not limited to: (i) changes in the market demand for ATSG's assets and services, including the loss of customers or a reduction in the level of services it performs for customers; (ii) its operating airlines' ability to maintain on-time service and control costs; (iii) the cost and timing with respect to which it is 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 its aircraft deployments to customers; (vi) ATSG's ability to remain in compliance with key agreements with customers, lenders and government agencies; (vii) the impact of current supply chain constraints, which may be more severe or persist longer than it currently expects; (viii) the impact of the current competitive labor market; (ix) changes in general economic and/or industry-specific conditions, including inflation and regulatory changes; and (x) the impact of geopolitical tensions or conflicts and human health crises, and other factors that could cause ATSG’s actual results to differ materially from those indicated by such forward-looking statements, which are discussed in “Risk Factors” in Item 1A of ATSG's 2023 Form 10-K and may be contained from time to time in its other filings with the U.S. Securities and Exchange Commission, including its annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Readers should carefully review this release and should not place undue reliance on ATSG's forward-looking statements. These forward-looking statements were based only on information, plans and estimates as of the date of this release. New risks and uncertainties arise from time to time, and factors that ATSG currently deems immaterial may become material, and it is impossible for ATSG to predict these events or how they may affect it. 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. ATSG does not endorse any projections regarding future performance that may be made by third parties.

ATSG Expands Operations in the Amazon Air Network

Source: Business Wire
Air Transport Services Group, Inc. (Nasdaq: ATSG), a leading provider of medium wide-body cargo aircraft leasing, air cargo transportation and related services, today announced an agreement to operate ten additional Boeing 767 freighters for Amazon.com Services LLC in the Amazon Air network by the end of 2024. The operating agreement through which ATSG’s airlines operate those aircraft will be extended to May 2029, with extension rights for five additional years.

“We’re pleased to further expand our leading role in the Amazon Air network that we started in 2016,” said Joe Hete, Chairman and CEO of ATSG. “Our operating capabilities will continue to support Amazon’s customer-centric commitments for years to come.”

Key features of the new and amended agreements include:

ATSG airlines to operate the initial ten Boeing 767-300 freighters provided by Amazon beginning in Summer 2024, with the potential to add up to ten more aircraft.
Operating agreement extended to May 2029, with the option to extend for an additional five years.
ATSG has also agreed to extend the exercise period for vested warrants for 21.8 million shares it previously issued to Amazon, amend the vesting conditions and extend the exercise period for unvested existing warrants for 2.9 million shares, and issued new warrants for up to 2.9 million additional shares to Amazon.

“These additional aircraft will allow us to leverage our existing infrastructure and capabilities for expanded operating revenues. This expanded and extended operating agreement is a testament to the dependability of our employees and the reliability we bring to the Amazon Air network,” Hete said. “Our mission is to continue to provide Amazon with exceptional service while creating value for all of our shareholders.”

Additional information about these agreements is provided in a Form 8-K that ATSG expects to file with the U.S. Securities & Exchange Commission.

About Air Transport Services Group

Air Transport Services Group (ATSG), a premier provider of aircraft leasing and air cargo transportation solutions for both domestic and international air carriers, as well as companies seeking outsourced air cargo services. ATSG is the global leader in freighter leasing with a fleet that includes Boeing 767, Airbus A321, and Airbus A330 aircraft. A diverse portfolio of subsidiaries encompasses the Lease+Plus aircraft leasing opportunity including three airlines holding separate and distinct U.S. FAA Part 121 Air Carrier certificates to provide air cargo lift, passenger ACMI and charter services: aircraft maintenance, airport ground services and material handling equipment engineering and service. ATSG subsidiaries comprise ABX Air, Inc.; Airborne Global Solutions, Inc.; Airborne Maintenance and Engineering Services, Inc.; Air Transport International, Inc.; Cargo Aircraft Management, Inc.; and Omni Air International, LLC. For further details, please visit our website at www.atsginc.com.


View source version on businesswire.com: https://www.businesswire.com/news/home/20240506472390/en/

Quint O. Turner, Chief Financial Officer
Air Transport Services Group, Inc.
937-366-2303

ATSG Reports First Quarter 2024 Results

Source: Business Wire
Raises 2024 Financial Outlook

Expands and Extends Flying Agreement with Amazon

Air Transport Services Group, Inc. (Nasdaq: ATSG), the leading provider of medium wide-body freighter aircraft leasing, contracted air transportation, and related services, today reported consolidated financial results for the first quarter ended March 31, 2024. Those results, as compared with the same period in 2023, were as follows:

First Quarter Results

Revenues $486 million, down 3%
GAAP Earnings per Share (diluted) from Continuing Operations $0.13, down $0.12
GAAP Pretax Earnings from Continuing Operations $12.4 million, down $14.1 million
Adjusted Pretax* Earnings $15.2 million, down $22.6 million
Adjusted EPS* $0.16, down $0.20
Adjusted EBITDA* $127.3 million, down 8%
Earlier today, ATSG announced agreements to operate ten additional Boeing 767 freighters for Amazon.com Services LLC by the end of 2024, and to extend their commercial flying agreement to May 2029, with mutual extension rights for five additional years. The agreement includes the award to Amazon of an additional 2.9 million warrants to purchase ATSG common shares and changes to the terms of existing warrants already held by Amazon, as described in the Form 8-K we will file.

Joe Hete, chairman and chief executive officer of ATSG, said, "I am proud of the focus and execution of the entire ATSG team as we continue to navigate a challenging market. The changes to our Amazon arrangement announced earlier today are a testament to the high quality of service we provide to our customer. Our priorities remain safe operations, customer satisfaction, cost control, and disciplined capital allocation. We completed the conversion and delivery of four 767-300 freighters to customers in the quarter. Additionally, we have customer interest in other aircraft we have available for lease. We are focused on generating positive cash flow in 2024 and are off to a strong start in the first quarter, having generated $15 million in Free Cash Flow*."

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

Segment Results

Cargo Aircraft Management (CAM)

Aircraft leasing and related revenues decreased 7% for the first quarter, reflecting the benefit of revenues from fifteen additional freighter leases, including twelve additional 767-300s and three Airbus A321-200s since the end of March 2023. These leases were more than offset by the returns of twelve 767-200 freighters and four 767-300 freighters over that same period. Revenue reductions associated with the 767-200 fleet include the effect of fewer cycles operated by lessees under our 767-200 engine power program. Excluding the revenues from that program, segment revenues would have been flat versus the prior-year quarter.
CAM’s first quarter pretax earnings decreased $21 million, or 61%, to $13 million versus the prior-year quarter. The biggest driver of the year-over-year decrease was the previously mentioned reduction in 767-200 freighter lease and engine power program revenues. Segment interest expense and depreciation both increased by $5 million versus the prior-year quarter.
CAM deployed four newly converted 767-300 freighters to external lessees during the quarter. Three 767-200 freighters and one 767-300 freighter were returned upon lease expiration, with the 767-300 and one of the 767-200s subsequently leased to ABX Air. At the end of the first quarter, ninety CAM-owned freighter aircraft were leased to external customers, two fewer than a year ago.
Twenty-four CAM-owned aircraft were in or awaiting conversion to freighters at the end of the first quarter, three fewer than at the end of the prior-year quarter. This included thirteen 767s, six A321s, and five A330s.
ACMI Services

Pretax loss was $3 million in the first quarter, versus a loss of $2 million in the first quarter of 2023. For the quarter, interest expense increased by $0.5 million.
Revenue block hours for ATSG's airlines decreased 3% versus the prior-year quarter. The decrease included three fewer aircraft in service than a year ago. Cargo block hours decreased 3% for the first quarter, driven by a mix of routes that included more domestic and less international flying than a year ago. Passenger block hours were flat in the quarter, as more charter flying hours for Omni Air International offset fewer flying hours for the military versus the prior-year quarter.
2024 Outlook

Taking into account the flying opportunities from ten more Amazon 767 freighters, ATSG expects Adjusted EBITDA of approximately $516 million in 2024, an increase of $10 million from the outlook provided in February 2024. This forecast excludes any contribution from additional aircraft leases or flying opportunities not currently under contractual commitment. This projection assumes the startup of all ten Amazon-provided 767-300s prior to December 1, 2024, and costs associated with bringing them into service and adding over 50 additional pilots at ABX Air. The Company continues to see the potential for additional Adjusted EBITDA from new lease commitments for available aircraft and opportunities for additional flying.

Capital spending expectations for 2024 remain unchanged at $410 million, down $380 million from 2023. ATSG's total projected capital spend includes growth capital of $245 million.

The projection for Adjusted EPS remains unchanged at 55 cents to 80 cents diluted for 2024, assuming a stable share count at current levels.

Hete concluded, “We have made significant progress toward achieving positive free cash flow in 2024. The expansion of our flying agreement with Amazon should only help reach that goal. Our amended agreement also provides opportunity for a combination of up to ten lease extensions and/or additional assigned aircraft, beyond the initial ten we will bring into service this year. Furthermore, CAM is well-positioned to lease additional freighters to other customers with minimal incremental capital investment as market demand improves. We look forward to further cash flow improvement next year, with increased Adjusted EBITDA and even lower capex."

Non-GAAP Financial Measures

This release, including the attached tables reconciling results to Generally Accepted Accounting Principles ("GAAP") in the United States, contains financial measures that are not calculated and presented in accordance with GAAP ("non-GAAP financial measures"), as further described in such tables. 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 financial 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, as permitted by Item 10(e)(1)(i)(B) of Regulation S-K, because it is unable to predict with reasonable accuracy the value of certain adjustments and as a result, the comparable GAAP measures are unavailable without unreasonable efforts. For example, 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, among other things, the future prices of ATSG stock, interest rates, and other assumptions which are highly uncertain. As a result, the Company believes such reconciliations of forward-looking information would imply a degree of precision and certainty that could be confusing to investors.

Conference Call

ATSG will host an investor conference call on Tuesday, May 7, 2024, at 10 a.m. Eastern Time to review its results for the first quarter of 2024, and its outlook for the remainder of the year. Live call participants must register via this link, which 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 first-quarter results may be downloaded from there starting 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.

Cautionary Note on Forward-Looking Statements

Throughout this release, Air Transport Services Group, Inc. (“ATSG") makes “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, as amended (the “Act”). Except for historical information contained herein, the matters discussed in this release contain forward-looking statements that involve inherent risks and uncertainties. Such statements are provided under the “safe harbor” protection of the Act. Forward-looking statements include, but are not limited to, statements regarding anticipated operating results, prospects and levels of assets under management, technological developments, economic trends, expected transactions and similar matters. The words “may,” “believe,” “expect,” “anticipate,” “target,” “goal,” “project,” “estimate,” “guidance,” “forecast,” “outlook,” “will,” “continue,” “likely,” “should,” “hope,” “seek,” “plan,” “intend” and variations of such words and similar expressions identify forward-looking statements. Similarly, descriptions of ATSG’s objectives, strategies, plans, goals or targets are also forward-looking statements. Forward-looking statements are susceptible to a number of risks, uncertainties and other factors. While ATSG believes that the assumptions underlying its forward-looking statements are reasonable, investors are cautioned that any of the assumptions could prove to be inaccurate and, accordingly, ATSG’s actual results and experiences could differ materially from the anticipated results or other expectations expressed in its forward-looking statements. A number of important factors could cause 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 the current competitive labor market, which could restrict our ability to fill key positions; (ix) changes in general economic and/or industry-specific conditions, including inflation and regulatory changes; and (x) other uncontrollable factors such as geopolitical tensions or conflicts and human health crises. Other factors that could cause ATSG’s actual results to differ materially from those indicated by such forward-looking statements are discussed in “Risk Factors” in Item 1A of ATSG's Form 10-K and are contained from time to time in its other filings with the U.S. Securities and Exchange Commission, including its annual reports 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. New risks and uncertainties arise from time to time, and factors that ATSG currently deems immaterial may become material, and it is impossible for ATSG to predict these events or how they may affect it. These forward-looking statements were based only 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. ATSG does not endorse any projections regarding future performance that may be made by third parties.

ATSG Delivers Additional Boeing 767 Freighter to DHL

Source: Business Wire
Air Transport Services Group, Inc. (NASDAQ: ATSG) today announced that it has commenced a new lease agreement with DHL Network Operations (USA), Inc. under which ATSG’s Cargo Aircraft Management (CAM) has leased a 767-300 freighter aircraft to DHL to operate within DHL’s global network.

“As one of our longest leasing relationships, we take pride in identifying opportunities to enhance capacity within the DHL network,” said Paul Chase, chief commercial officer of ATSG. “The Boeing 767 remains unrivaled in the medium-widebody freighter market, serving as the backbone for lessees by offering payload capacity and range capabilities to optimize express delivery operations.”

The agreement will increase the total CAM-leased 767 fleet at DHL to fourteen.

“Leasing customers recognize our Lease+Plus strategy as an opportunity to increase capacity and meet market demand,” stated Chase. “No other company in the world can compete with our bundle of services for midsize freighters, including leasing, air express operations, heavy maintenance, freighter conversions, and logistics services.”

About Air Transport Services Group, Inc.

Air Transport Services Group (ATSG) is a premier provider of aircraft leasing and air cargo transportation solutions for both domestic and international air carriers, as well as companies seeking outsourced air cargo services. ATSG is the global leader in freighter leasing with a fleet that includes Boeing 767, Airbus A321, and Airbus A330 converted freighters. A diverse portfolio of subsidiaries encompasses the Lease+Plus aircraft leasing opportunity, including three airlines holding separate and distinct U.S. FAA Part 121 Air Carrier certificates to provide air cargo lift, passenger ACMI and charter services: aircraft maintenance, airport ground services and material handling equipment engineering and services. ATSG subsidiaries comprise ABX Air, Inc.; Airborne Global Solutions, Inc.; Airborne Maintenance and Engineering Services, Inc.; Air Transport International, Inc.; Cargo Aircraft Management, Inc.; and Omni Air International, LLC. For further details, please visit www.atsginc.com.


View source version on businesswire.com: https://www.businesswire.com/news/home/20240318125370/en/

Quint O. Turner, Chief Financial Officer
Air Transport Services Group, Inc.
937-366-2303

My Freighter Leases Third 767 from ATSG

Source: Business Wire
Air Transport Services Group, Inc. (NASDAQ: ATSG) announced today that it has delivered a newly converted Boeing 767-300 freighter to My Freighter Cargo Airlines of Tashkent, Uzbekistan.

This delivery marks ATSG’s fourth newly converted Boeing 767-300 dry-lease delivery this year, as outlined in its fourth quarter investor release on February 26, 2024.

ATSG's subsidiary, Airborne Global Leasing, executed this delivery in alignment with ATSG's Lease+Plus strategy, which provides freighter capacity and associated aviation services to meet demand within established and emerging global freight markets.

“Our expanding relationship with My Freighter exemplifies the tangible value of our Lease+Plus strategy,” said Paul Chase, chief commercial officer of ATSG. “The Boeing 767-300 continues to be the freighter of choice among e-commerce integrators and express carriers as it provides the operational flexibility and efficiency to build those networks.”

ATSG continues to focus on global market opportunities in Central and Southeast Asia to enhance its global leasing network. ATSG's freighter offering, including the Airbus A321 and A330 freighters, is poised to meet increased capacity growth demands in these growing global markets.

About Air Transport Services Group, Inc.

Air Transport Services Group (ATSG) is a premier provider of aircraft leasing and air cargo transportation solutions for both domestic and international air carriers, as well as companies seeking outsourced air cargo services. ATSG is the global leader in freighter leasing with a fleet that includes Boeing 767, Airbus A321, and Airbus A330 converted freighters. A diverse portfolio of subsidiaries encompasses the Lease+Plus aircraft leasing opportunity, including three airlines holding separate and distinct U.S. FAA Part 121 Air Carrier certificates to provide air cargo lift, passenger ACMI and charter services: aircraft maintenance, airport ground services and material handling equipment engineering and service. ATSG subsidiaries comprise ABX Air, Inc.; Airborne Global Solutions, Inc.; Airborne Maintenance and Engineering Services, Inc.; Air Transport International, Inc.; Cargo Aircraft Management, Inc. and its Irish subsidiary Airborne Global Leasing, Inc.; and Omni Air International, LLC. For further details, please visit www.atsginc.com.


View source version on businesswire.com: https://www.businesswire.com/news/home/20240325361307/en/

Quint O. Turner, Chief Financial Officer
Air Transport Services Group, Inc.
937-366-2303

ATSG Reports Fourth Quarter and Full-Year 2023 Results

Source: Business Wire
Projects sharply lower 2024 capital expenditures, improving cash flow

Air Transport Services Group, Inc. (Nasdaq: ATSG), the leading provider of medium wide-body freighter aircraft leasing, contracted air transportation, and related services, today reported consolidated financial results for the quarter and year ended December 31, 2023. Those results, as compared with the same periods in 2022, were as follows:

Fourth Quarter Results

Revenues $517 million, down 3%
GAAP Loss per Share (basic) from Continuing Operations $0.24, down $0.82
GAAP Pretax Loss from Continuing Operations $15.6 million, including $24.4 million non-cash settlement expense associated with the partial termination of a pension plan
Adjusted Pretax* Earnings $19.8 million, down 69%
Adjusted EPS* $0.18, down $0.35
Adjusted EBITDA* $129.9 million, down 20%
Full Year 2023 Results

Revenues $2.1 billion, up 1%
GAAP EPS (basic) from Continuing Operations $0.87, down $1.80
GAAP Pretax Earnings from Continuing Operations $84.2 million, including $24.4 million non-cash pension settlement expense
Adjusted Pretax Earnings* $146.7 million, down 44%
Adjusted EPS* $1.46, down $0.82 or 36%
Adjusted EBITDA* $562 million, down 12%
GAAP Operating Cash Flows $654 million, up 39% and Adjusted Free Cash Flow* $435 million, up 52%
Joe Hete, chairman and chief executive officer of ATSG, said, "As expected, the fourth quarter saw lower demand in our leasing segment and reduced demand in our passenger airline operations. Flying for the U.S. military decreased throughout the quarter, and fewer leased Boeing 767-200 freighters in service continued to affect results at our leasing segment. Despite challenges in the second half of 2023, we converted and leased thirteen aircraft, including our first three Airbus A321-200 freighters. We have substantially reduced our capital spending plans, and now expect to generate positive cash flow in 2024."

2023 Operating Highlights

Ten more dry leases of newly converted Boeing 767-300 freighters, plus dry leases of three newly converted A321-200 freighters. One of those newly converted 767-300 freighters is operated by an ATSG cargo airline under a Crew, Maintenance and Insurance (CMI) agreement.
Three more customer-provided 767-300 freighters were subleased to and operated by an ATSG cargo airline during 2023, for a total of sixteen such aircraft in the fleet at the end of the year.
2023 Financial Highlights

Revenue of $2.1 billion in 2023, an increase of $25 million from 2022, due primarily to a full year of contributions from six new leases of 767-300s made in 2022, as well as partial-year contributions from 2023 leases of the ten newly converted 767-300 freighters and three newly converted A321-200 freighters.
$562 million in Adjusted EBITDA for 2023, down $79 million. Weaker performance in our airline operations and lower leasing segment results attributable to the 767-200 freighter fleet more than offset the benefits of newly converted 767-300 freighter leases. The decline in Adjusted EBITDA from the 767-200 freighter aircraft leases and related engines was approximately $33 million.
Growth investments of $574 million. These investments supported leased freighter deployments in 2023, and those we aim to deploy in 2024 and 2025.
Repurchases of 7.4 million ATSG common shares in 2023. Shares repurchased since October 2022 represent 13% of the 74 million shares outstanding at the beginning of 2022.
Secured $400 million of additional debt capital via a new six-year convertible bond offering; proceeds were used primarily to retire other existing debt and repurchase shares.
* 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 the most directly comparable financial measures calculated and presented in accordance with GAAP at the end of this release.

Segment Results

Cargo Aircraft Management (CAM)

Aircraft leasing and related revenues increased 15% for the fourth quarter and 5% for the year, reflecting the 2023 benefit of a full year of revenues from six 767-300 freighters leased during 2022, plus partial-year revenues from ten additional 767-300s and three A321-200s leased in 2023. CAM's revenues versus the prior year were negatively impacted by fewer 767-200s in service.
CAM’s fourth-quarter pretax earnings decreased $11 million, or 34%, to $21 million versus the prior-year quarter, and decreased by $34 million, or 23% to $109 million for the full year. More than 90% of the year-over-year reduction in CAM's pretax earnings stemmed from lower 767-200 freighter and engine lease results. For the fourth quarter and full year, interest expense increased by $6 million and $17 million, respectively. For the full year, depreciation increased by $12 million.
At the end of 2023, ninety CAM-owned freighter aircraft were leased to external customers, one fewer than a year ago. Ten 767-200 freighters were removed from service during the year. Five 767-200s and three 767-300s were sold during the year.
Twenty-three CAM-owned aircraft were in or awaiting conversion to freighters at the end of 2023, one more than at the end of 2022. This included fourteen 767s, six A321s, and three A330s. Four CAM-owned freighter aircraft were staging for future lease.
ACMI Services

Pretax losses were $2 million in the fourth quarter, versus gains of $26 million in 2022. Full-year pretax earnings were $32 million for 2023 and $95 million in 2022. The reductions stemmed from fewer block hours flown for the U.S. military, and lower overall margins on our cargo revenues. For the quarter and the full year, interest expense increased by $2 million and $7.5 million, respectively.
Revenue block hours for ATSG's airlines decreased 4% for the fourth quarter and 1% for 2023 over 2022. The decrease for 2023 included one fewer aircraft in service than a year ago. Cargo block hours decreased 2% for the fourth quarter and were flat for the year. Passenger block hours were down 12% for the quarter and down 4% for the year, driven primarily by the conflicts in the Middle East.
2024 Outlook
ATSG expects Adjusted EBITDA of approximately $506 million in 2024, down $56 million from 2023. Those forecasts exclude any contribution from additional aircraft leases or flying opportunities not currently under contractual commitment, which could generate additional Adjusted EBITDA above $506 million. Capital spending in 2024 is projected at $410 million, down $380 million from 2023.

Key factors in our 2024 Adjusted EBITDA forecast are:

$55 million decline in earnings related to our 767-200 freighters versus 2023, due to fewer leased freighters and lower engine utilization.
Four additional external dry leases of 767-300 freighters, two of which have already been delivered.
Three 767-300 freighters returned upon lease expiration, including two late in the second half.
Lower block hours at our airline operations.
The factors outlined below could, if achieved, yield $30 million more Adjusted EBITDA than our projection:

New lease commitments for available aircraft.
Opportunities for additional ACMI flying.
The projection for Adjusted EPS is 55 cents to 80 cents diluted for 2024. The estimate reflects higher depreciation, interest expense, and income taxes. That range matches the range implied by our base $506 million and the potential upside we provided. It also assumes a stable share count at current levels.

ATSG's total projected capital spend of $410 million for 2024 includes growth capital of $245 million, versus $574 million in 2023, and reflects fewer aircraft conversions and feedstock purchases. The expected $50 million reduction in sustaining capital expenditures to $165 million is driven by fewer expected engine overhauls.

Hete continued, “Our reduced spending outlook for 2024 greatly improves our cash generation expectations this year, even with lower expected earnings, leading to our goal of positive free cash flow for the year. Our growth investments have positioned us to deploy more freighters rapidly as market conditions improve. Our outlook for 2025 is for continued improvement in our cash flow based on an increase in Adjusted EBITDA and an even lower capex spend."

ATSG’s financial statements on Form 10-K are expected to be filed by February 29, 2024, and will be made available on the company’s website (www.atsginc.com).

Non-GAAP Financial Measures
This release, including the attached tables reconciling results to Generally Accepted Accounting Principles ("GAAP") in the United States, contains financial measures that are not calculated and presented in accordance with GAAP ("non-GAAP financial measures"), as further described in such tables. 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 financial 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, as permitted by Item 10(e)(1)(i)(B) of Regulation S-K, because it is unable to predict with reasonable accuracy the value of certain adjustments and as a result, the comparable GAAP measures are unavailable without unreasonable efforts. For example, 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, among other things, the future prices of ATSG stock, interest rates, and other assumptions which are highly uncertain. As a result, the Company believes such reconciliations of forward-looking information would imply a degree of precision and certainty that could be confusing to investors.

Conference Call
ATSG will host an investor conference call on Tuesday, February 27, 2023, at 10 a.m. Eastern Time to review its financial results for fourth quarter and full year 2023, and its outlook for 2024. Live call participants must register via this link, which 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 fourth-quarter results may be downloaded from there starting 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.

Cautionary Note on Forward-Looking Statements

Throughout this release, Air Transport Services Group, Inc. (“ATSG") makes “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, as amended (the “Act”). Except for historical information contained herein, the matters discussed in this release contain forward-looking statements that involve inherent risks and uncertainties. Such statements are provided under the “safe harbor” protection of the Act. Forward-looking statements include, but are not limited to, statements regarding anticipated operating results, prospects and levels of assets under management, technological developments, economic trends, expected transactions and similar matters. The words “may,” “believe,” “expect,” “anticipate,” “target,” “goal,” “project,” “estimate,” “guidance,” “forecast,” “outlook,” “will,” “continue,” “likely,” “should,” “hope,” “seek,” “plan,” “intend” and variations of such words and similar expressions identify forward-looking statements. Similarly, descriptions of ATSG’s objectives, strategies, plans, goals or targets are also forward-looking statements. Forward-looking statements are susceptible to a number of risks, uncertainties and other factors. While ATSG believes that the assumptions underlying its forward-looking statements are reasonable, investors are cautioned that any of the assumptions could prove to be inaccurate and, accordingly, ATSG’s actual results and experiences could differ materially from the anticipated results or other expectations expressed in its forward-looking statements. A number of important factors could cause 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 the current competitive labor market, which could restrict our ability to fill key positions; (ix) changes in general economic and/or industry-specific conditions, including inflation and regulatory changes; and (x) other uncontrollable factors such as geopolitical tensions or conflicts and human health crises. Other factors that could cause ATSG’s actual results to differ materially from those indicated by such forward-looking statements are discussed in “Risk Factors” in Item 1A of ATSG's Form 10-K and are contained from time to time in its other filings with the U.S. Securities and Exchange Commission, including its annual reports 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. New risks and uncertainties arise from time to time, and factors that ATSG currently deems immaterial may become material, and it is impossible for ATSG to predict these events or how they may affect it. These forward-looking statements were based only 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. ATSG does not endorse any projections regarding future performance that may be made by third parties.

ATSG Reports Third Quarter 2023 Results

Source: Business Wire
– Deployed seven newly-converted freighters, including our first two A321-200s, in the quarter

– 2023 Outlook revised to reflect current operating environment

Air Transport Services Group, Inc. (Nasdaq: ATSG), the leading provider of medium wide-body aircraft leasing, contracted air transportation, and related services, today reported consolidated financial results for the third quarter ended September 30, 2023. Those results, as compared with the same quarter in 2022, were as follows:

Third Quarter 2023 Results

Revenues of $523 million, up 1%
GAAP EPS (basic) from Continuing Operations of $0.26, down $0.42
Adjusted EPS* from Continuing Operations of $0.32, versus $0.60
Pretax Earnings from Continuing Operations of $24 million, down from $65 million.
Adjusted Pretax* Earnings of $31 million, down from $67 million
Adjusted EBITDA* of $137 million, down from $163 million
9.4 million shares repurchased since September 2022, including 5.4 million shares in the third quarter
Joe Hete, Chief Executive Officer of ATSG, said, “The third quarter started out on track with our expectations, carrying solid second-quarter momentum from our passenger airline operations into the summer. We leased seven newly converted freighters in July and early August, including five 767-300s and our first two A321-200s. However, both macro and operational pressures throughout the latter part of the quarter materially affected our results. Particularly in September, our passenger airline operations experienced service related issues that drove significant unplanned travel and flight crew costs. In our CAM leasing operations, we realized lower revenues from 767-200 aircraft sales and associated engine power than forecasted during the quarter.”

* Adjusted EPS (Earnings per Share), Adjusted Pretax Earnings, Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) and Adjusted Free Cash Flow, each of which is from Continuing Operations, 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 in the third quarter were down 1% compared with the prior year quarter, due to eleven fewer leased 767-200 aircraft and lower power-by-cycle ("PBC") engine revenue associated with 767-200s, partially offset by higher average lease rates, as nine more 767-300s and two initial A321-200s have been deployed since September 2022.
Pre-tax earnings decreased 37% to $23 million versus the prior year quarter. Earnings were impacted by the scheduled return of eleven 767-200s since September 2022, including two in the third quarter this year, as well as reduced PBC revenue from fewer 767-200s in service, and fewer cycles flown by those still in service. Higher aircraft sales in the prior-year period also negatively impacted the segment earnings comparison. Interest expense versus the prior year period increased $5 million, and depreciation was up $2 million due to new deployments replacing mostly depreciated assets.
CAM deployed five Boeing 767-300 and two Airbus A321-200 leased freighters to external customers during the quarter. Eleven leased freighters have been deployed since September 2022, including nine 767-300s and two A321-200s. For the full year 2023, CAM now expects to deploy 16 newly converted leased freighter aircraft, including 12 767-300s and four A321-200s. Six of the 16 are due to be deployed in the fourth quarter.
Twenty aircraft are currently in or awaiting conversion to freighters. That total includes seven A321 aircraft and 13 767-300s. One 767-200 is currently staging for lease. The Company is scheduled to purchase three Airbus A330 feedstock aircraft in the fourth quarter for planned freighter conversion and deployment in 2024.
ACMI Services

Pre-tax earnings were $12 million in the third quarter, down 51% versus the prior-year quarter. The reduction stemmed from unfavorable revenue mix impacts in both cargo and passenger operations, inflation, and service challenges in our passenger operations, which impacted travel and payroll costs in September.
Revenue block hours for ATSG's cargo airlines were down 4% for the third quarter while operating one fewer Boeing 767 freighter compared with the prior-year period. Cargo block hours were affected by fewer longer-haul international routes as compared to the prior-year period.
Passenger block hours, including combi flying, increased 14% versus this quarter last year. 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, which had been temporarily paused due to the COVID-19 pandemic. Excluding combi hours, passenger block hours increased 9%.
2023 Outlook

In mid-October, certain airlines that lease aircraft from CAM to serve international routes expressed that they are experiencing weaker customer demand, impacting their recent financial performance and outlook. We expect this to disrupt future leasing revenues from those customers.

ATSG expects the conflict in Israel to affect Omni's customer requirements in the near-term. In addition, the Company expects fewer 767-200 aircraft sales and lower engine revenues versus our plan for this year. ATSG's domestic air express operations, in support of the e-commerce networks of DHL and Amazon, are on track with earlier expectations.

ATSG is updating its full-year 2023 guidance as follows:



Current

Prior

Adjusted EBITDA

$560 - $580 million

$610 - $620 million

Adjusted EPS

$1.50 - $1.70

$1.85 - $2.00

For 2023, ATSG is still projecting $785 million in total capex spend, including $545 for growth and $240 million in sustaining capex. However, ATSG now expects to further reduce its 2024 capex plan to $505 million, down $100 million in growth capex from the plan communicated at the September Investor Day event. This reduction takes into account fewer conversions and feedstock purchases due to softening demand. ATSG expects to provide updated 2024 Adjusted EBITDA guidance in February 2024, which we expect will reflect the aforementioned demand concerns and reduced 2024 capex.

Hete concluded, “We've demonstrated our flexibility to pull back on growth capital investments when conditions warrant, and accordingly, we expect meaningful capital expenditure declines in both 2024 and 2025 as we continue to optimize our capital allocation strategy. The reduction in our capex requirements for 2024 will accelerate our realization of positive free cash flow versus the timetable we communicated in September.”

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 Tuesday, November 7, 2023, at 10 a.m. Eastern Time to review its financial results for the third 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.

Cautionary Note on Forward-Looking Statements

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.

Global Crossing Airlines Announces Agreement to Lease an A321 Freighter from ATSG

Source: GlobeNewswire Inc.

Global Crossing Airlines Group, Inc. (JET: NEO; JET.B: NEO; JETMF: OTCQB) (the “Company” or “GlobalX”) is pleased to announce that is has reached agreement to lease an additional A321 freighter for delivery in October 2023 from Cargo Aircraft Management (CAM), a subsidiary of Air Transport Services Group, Inc. (Nasdaq: ATSG).
“We are pleased to be able to lease our first A321 freighter from CAM, a worldwide leader in cargo aircraft conversions and leasing, and we greatly appreciate ATSG’s support of our team and our business plan. Our A321F fleet has performed extremely well - with better fuel burn, and load and unload times for both main deck and lower belly of less than 45 minutes. The A321F takes 50% more volume than its narrowbody competitor and is quickly shaping up to be the 757 freighter replacement aircraft. Along with our customers, we are extremely pleased with the A321F performance and we will continue to grow our fleet of A321 freighters along with the increasing demand for the aircraft,” said Ed Wegel, Chair and CEO of GlobalX.

“ATSG is excited to partner with GlobalX as they continue their transformational growth,” stated Paul Chase, chief commercial officer for ATSG. “We continue to seek partnerships that expand our global leasing footprint with companies that focus on the customer by providing world class service and reliability.”

About Air Transport Services Group

ATSG is a leading provider of aircraft leasing and cargo and passenger air transportation and related services to domestic and foreign air carriers and other companies that outsource their cargo and passenger airlift 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.

About Global Crossing Airlines

GlobalX is a US 121 domestic flag and supplemental Airline flying the Airbus A320 family aircraft and the Airbus A321 freighter. With over 600 aviation professionals, GlobalX flies as a passenger and cargo ACMI and charter airline serving the US, Caribbean, European and Latin American markets. For more information, please visit www.globalxair.com.

For more information, please contact:

Ryan Goepel, Chief Financial Officer
Email: ryan.goepel@globalxair.com
Tel: 786.751.8503

Cautionary Note Regarding Forward-Looking Information

This news release contains certain “forward looking statements” and “forward-looking information”, as defined under applicable United States and Canadian securities laws, concerning anticipated developments and events that may occur in the future. Forward-looking statements contained in this news release include, but are not limited to, statements with respect to the Company’s aircraft fleet size, the destinations that the Company intends to service, the delivery and entry into service timelines for future aircraft, the performance metrics of the A321F and increasing demand for the A321F.

In certain cases, forward-looking statements can be identified by the use of words such as "plans", "expects" "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved" suggesting future outcomes, or other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. Forward-looking statements contained in this news release is based on certain factors and assumptions regarding, among other things, the receipt of financing to continue airline operations, the accuracy, reliability and success of GlobalX’s business model; GlobalX’s ability to accurately forecast demand; GlobalX will be able to successfully conclude definitive agreements for transactions subject to LOI; the timely receipt of governmental approvals; the success of airline operations of GlobalX; GlobalX’s ability to successfully enter new geographic markets; the legislative and regulatory environments of the jurisdictions where GlobalX will carry on business or have operations; the Company has or will have sufficient aircraft to provide the service; the impact of competition and the competitive response to GlobalX’s business strategy; the future price of fuel, and the availability of aircraft. While the Company considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.

Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include risks related to, the ability to obtain financing at acceptable terms, the impact of general economic conditions, risks related to supply chain and labor disruptions, failure to retain or obtain sufficient aircraft, domestic and international airline industry conditions, failure to conclude definitive agreements for transactions subject to LOI, the effects of increased competition from our market competitors and new market entrants, passenger demand being less than anticipated, the impact of the global uncertainty created by COVID-19, future relations with shareholders, volatility of fuel prices, increases in operating costs, terrorism, pandemics, natural disasters, currency fluctuations, interest rates, risks specific to the airline industry, risks associated with doing business in foreign countries, the ability of management to implement GlobalX’s operational strategy, the ability to attract qualified management and staff, labor disputes, regulatory risks, including risks relating to the acquisition of the necessary licenses and permits; risks related to significant disruption in, or breach in security of GlobalX’s information technology systems and resultant interruptions in service and any related impact on its reputation; and the additional risks identified in the "Risk Factors" section of the Company's reports and filings with applicable Canadian securities regulators and the U.S. Securities and Exchange Commission. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those described in the forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. Accordingly, readers should not place undue reliance on forward-looking statements. The forward-looking statements are made as of the date of this news release. Except as required by applicable securities laws, the Company does not undertake any obligation to publicly update any forward-looking statements. If GlobalX does update one or more forward-looking statements, no inference should be made that it will make additional updates with respect to those or other forward-looking statements.



Primary Logo

ATSG Completes Record Month of Freighter Deployments

Source: Business Wire
Global Leasing Demand for Converted Midsize Cargo Aircraft Remains Strong

Air Transport Services Group, Inc. (Nasdaq: ATSG), the leading provider of medium wide-body aircraft leasing, contracted air transportation, and related services, announced today that its leasing subsidiary Cargo Aircraft Management (CAM) has delivered a record six converted freighters under lease in one month to customers around the globe, bringing ATSG’s total deliveries this year to nine.

Converted freighter deliveries by the company in the past month, each of which are under lease for a term of seven years, include:

Two Airbus A321-200 delivered to Raya Airways of Malaysia, which also currently operates three Boeing 767-200 aircraft leased from CAM.
A Boeing 767-300 leased to Cargojet Airways of Mississauga, Canada, bringing the total number of their CAM-leased Boeing 767 freighters to four.
A Boeing 767-300 leased to new customer Georgian Airlines LLC of Tbilisi, Georgia.
A Boeing 767-300 leased to Amerijet International Airlines of Miami, Florida. CAM now leases a total of ten Boeing 767-300 freighters to Amerijet.
A Boeing 767-300 leased to SkyTaxi of Wroclaw, Poland. SkyTaxi also leases two Boeing 767-200 freighters from CAM.
"We delivered six aircraft to operators in five countries in one month, demonstrating the success of our globalization strategy," said Paul Chase, chief commercial officer of ATSG. "The global demand for our medium-widebody converted freighter aircraft has remained strong due to the continued expansion of global express and e-commerce markets. We are meeting this demand by continuing to deliver 767 converted freighters while also introducing A321 and A330 freighters to the market in 2023 and 2024 respectively."

About Air Transport Services Group

ATSG is a leading provider of aircraft leasing and cargo and passenger air transportation and related services to domestic and foreign air carriers and other companies that outsource their cargo and passenger airlift 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.


View source version on businesswire.com: https://www.businesswire.com/news/home/20230814686617/en/

Paul Chase, Chief Commercial Officer
Air Transport Services Group, Inc.
937-366-2303

Air Transport Services Group, Inc. Prices $350 Million Convertible Senior Notes Offering

Source: Business Wire
Air Transport Services Group, Inc. (NASDAQ: ATSG) today announced the pricing of its offering of $350,000,000 aggregate principal amount of 3.875% convertible senior notes due 2029 (the “notes”) in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The issuance and sale of the notes are scheduled to settle on August 14, 2023, subject to customary closing conditions. ATSG also granted the initial purchasers of the notes a 30-day option to purchase up to an additional $50,000,000 principal amount of notes.

The notes will be senior, unsecured obligations of ATSG and will accrue interest at a rate of 3.875% per annum, payable semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2024. The notes will mature on August 15, 2029, unless earlier repurchased, redeemed or converted. Before February 15, 2029, noteholders will have the right to convert their notes only upon the occurrence of certain events. From and after February 15, 2029, noteholders may convert their notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date. ATSG will settle conversions in cash and, if applicable, shares of its common stock. The initial conversion rate is 31.2864 shares of common stock per $1,000 principal amount of notes, which represents an initial conversion price of approximately $31.96 per share of common stock. The initial conversion price represents a premium of approximately 42.5% over the last reported sale price of $22.43 per share of ATSG’s common stock on August 9, 2023. The conversion rate and conversion price will be subject to adjustment upon the occurrence of certain events.

The notes will be redeemable, in whole or in part (subject to certain limitations), for cash at ATSG’s option at any time, and from time to time, on or after August 15, 2026 and on or before the 50th scheduled trading day immediately before the maturity date, but only if the last reported sale price per share of ATSG’s common stock exceeds 130% of the conversion price for a specified period of time. The redemption price will be equal to the principal amount of the notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

If a “fundamental change” (as defined in the indenture for the notes) occurs, then noteholders may require ATSG to repurchase their notes for cash. The repurchase price will be equal to the principal amount of the notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the applicable repurchase date.

ATSG estimates that the net proceeds from the offering will be approximately $340.1 million (or approximately $388.8 million if the initial purchasers fully exercise their option to purchase additional notes), after deducting the initial purchasers’ discounts and commissions and estimated offering expenses. ATSG expects to use approximately $118.5 million of the net proceeds to repurchase approximately 5.4 million shares of its common stock concurrently with the offering in privately negotiated transactions effected through one of the initial purchasers of the notes or its affiliate, as ATSG’s agent, and to repurchase shares of its common stock from Amazon.com, Inc. under an existing agreement. ATSG expects to use approximately $203.2 million of the net proceeds to repurchase approximately $204.5 million aggregate principal amount of its outstanding 1.125% Convertible Senior Notes due 2024 (the “2024 Notes”) concurrently with the offering in privately negotiated transactions effected through one of the initial purchasers of the notes or its affiliate, as ATSG’s agent. ATSG intends to use the remainder of the net proceeds from the offering to repay a portion of the outstanding borrowings under its revolving credit facility and for general corporate purposes. Holders of the 2024 Notes that are repurchased in the concurrent repurchases described above may purchase shares of ATSG’s common stock in the open market to unwind any hedge positions they may have with respect to the 2024 Notes. These activities may affect the trading price of ATSG common stock and, if conducted concurrently with this offering, may result in a higher initial conversion price for the notes ATSG is offering. The concurrent repurchases of shares of ATSG’s common stock described above may result in the common stock trading at prices that are higher than would be the case in the absence of these repurchases, which may result in a higher initial conversion price for the notes. The repurchase of common stock in connection with the offering will not reduce availability under ATSG’s stock repurchase program authorized on November 29, 2022.

In connection with issuing the 2024 Notes, ATSG entered into convertible note hedge transactions (the “existing convertible note hedge transactions”) and warrant transactions (the “existing warrant transactions,” and, together with the existing convertible note hedge transactions, the “existing call spread transactions”) with certain financial institutions (the “existing option counterparties”). In connection with ATSG’s intended repurchase of the 2024 Notes, ATSG expects to enter into agreements with the existing option counterparties to terminate a portion of such existing call spread transactions, in each case, in a notional amount corresponding to the amount of such 2024 Notes repurchased. In connection with any termination of any of the existing call spread transactions and the related unwinding of the existing hedge position of the existing option counterparties with respect to such transactions, such existing option counterparties and/or their respective affiliates may sell shares of ATSG’s common stock in the open market or in secondary market transactions, and/or enter into or unwind various derivative transactions with respect to ATSG’s common stock. This hedge unwind activity could decrease (or reduce the size of any increase in) the market price of ATSG common stock at that time and it could decrease (or reduce the size of any increase in) the market value of the notes. In connection with the unwind of the existing call spread transactions, ATSG may make or receive payments in amounts that depend on the market value of ATSG common stock at the pricing of the notes.

The offer and sale of the notes and any shares of common stock issuable upon conversion of the notes have not been, and will not be, registered under the Securities Act or any other securities laws, and the notes and any such shares cannot be offered or sold except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and any other applicable securities laws. This press release does not constitute an offer to sell, or the solicitation of an offer to buy, the notes or any shares of common stock issuable upon conversion of the notes, nor will there be any sale of the notes or any such shares, in any state or other jurisdiction in which such offer, sale or solicitation would be unlawful.

About ATSG

ATSG is a leading provider of aircraft leasing and cargo and passenger air transportation and related services to domestic and foreign air carriers and other companies that outsource their cargo and passenger airlift 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.

Forward-Looking Statements

This press release includes forward-looking statements, including statements regarding the completion of the offering and the expected amount and intended use of the net proceeds. Forward-looking statements represent ATSG’s current expectations regarding future events and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those implied by the forward-looking statements. Among those risks and uncertainties are market conditions, the satisfaction of the closing conditions related to the offering and risks relating to ATSG’s business, including those described in periodic reports that ATSG files from time to time with the SEC. ATSG may not consummate the offering described in this press release and, if the offering is consummated, cannot provide any assurances regarding its ability to effectively apply the net proceeds as described above. The forward-looking statements included in this press release speak only as of the date of this press release, and ATSG does not undertake to update the statements included in this press release for subsequent developments, except as may be required by law.


View source version on businesswire.com: https://www.businesswire.com/news/home/20230810952944/en/

Quint O. Turner, Chief Financial Officer
Air Transport Services Group, Inc.
937-366-2303

ATSG Reports Second Quarter 2023 Results

Source: Business Wire
– 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.

ATSG Reports First Quarter 2023 Results

Source: Business Wire
Demand for medium-size cargo aircraft remains strong

2023 Outlook revised to reflect macro effects on ATSG airlines

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 quarter ended March 31, 2023. Those results, as compared with the same quarter in 2022 were as follows:

First Quarter 2023 Results

Revenues $501 million, up 3%
GAAP EPS (basic) from Continuing Operations $0.28, down $0.39
GAAP Pretax Earnings from Continuing Operations of $27 million, versus $65 million
Adjusted Pretax* Earnings $38 million, down from $64 million
Adjusted EPS* $0.36, versus $0.56
Adjusted EBITDA* $138 million, down $20 million
Rich Corrado, president and chief executive officer of ATSG, said, "These results, while disappointing, do reflect the operating headwinds we talked about in February, including lower 2023 results at our airlines. The first quarter Adjusted EBITDA reflected lower than expected passenger airline revenues, and the continued impact of inflation at our airlines. Our aircraft leasing business, CAM, has seen no reduction in demand for its desirable leased freighters, and continues to invest with the expectation of delivering attractive returns for the midsize freighter aircraft we expect to lease during the rest of 2023 and into 2024."

*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 first quarter were up 8% compared to the first quarter of 2022, primarily reflecting the benefit of eight newly converted Boeing 767-300 freighters leased since the beginning of the first quarter of 2022, offset by lower revenues from engine pooling arrangements for customers leasing 767-200 freighters.
CAM’s first-quarter pretax earnings decreased 2% to $34 million versus the prior-year quarter. Those earnings were impacted by $2.3 million more interest expense allocated to CAM, driven by more aircraft assets, including feedstock in or awaiting freighter modification.
CAM deployed two 767-300 freighters to an external customer during the quarter. One 767-200 freighter was returned upon lease expiration. Ninety-two CAM-owned 767 freighter aircraft were leased to external customers at the end of the quarter, six more than a year ago.
CAM intends to deploy eighteen more freighters in 2023, including twelve 767s and six A321s. Twenty-seven CAM-owned aircraft were in or awaiting conversion to freighters, twelve more than a year ago. That quarter-end total includes nine A321 aircraft and eighteen 767s.
ACMI Services

Pretax earnings were a loss of $2 million in the first quarter, versus earnings of $22 million in the first quarter of 2022. Nearly all the decrease compared to the prior year is attributable to our ACMI and charter airline, Omni Air. Segment results overall were affected by inflation, including increases in line maintenance personnel and flight crew travel and training costs.
Revenue block hours for ATSG's airlines were essentially flat for the first quarter compared to the prior-year period despite operating six more aircraft in 2023. Cargo block hours increased 4%. 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 flown by Omni Air decreased by 25%. The prior year quarter included passenger hours flown for additional routes to Europe.
2023 Outlook

ATSG now expects its Adjusted EBITDA for 2023 to be in a range of $610 million to $620 million, and full year Adjusted EPS in a range of $1.55 to $1.70, based on lower ACMI Services passenger flying than was projected and inflationary effects associated with ACMI airline operations since initial 2023 guidance in February. CAM is projected to deliver results consistent with February guidance.

The Adjusted EBITDA and Adjusted EPS forecasts for 2023 continue to assume:

ACMI Services pretax results will be slightly positive in the first half, and improving in the second half.
Dry leases this year for up to six Airbus A321-200 freighters currently awaiting approval by the foreign regulatory agencies, and fourteen newly converted 767-300s. CAM's results will also be affected by the re-lease or sale of five Boeing 767-200 freighters currently leased to Amazon.
ATSG continues to project 2023 capital spending of $850 million, including $260 million in sustaining capex and $590 million for growth.

Corrado said that demand for ATSG’s freighter aircraft remains very strong, including its Boeing 767s, the narrow-body A321s, and the Airbus A330 freighters the company will begin to deploy next year. CAM is expected to generate more than $70 million in 2024 revenues from freighters it expects to lease this year.

“Our customers remain eager to lease the freighter aircraft we intend to deliver,” he said. “The persistent growth in online commerce throughout the world, and the need to replace older, less efficient aircraft types, means that midsize freighters will remain essential to global economic growth."

Corrado added that "If future market conditions were to affect projected returns on our fleet investments, we have the flexibility to significantly reduce our planned growth investments in 2024 and beyond, in favor of other options, such as debt reduction and additional share repurchases. Our decisions about capital allocation will always be driven by what creates the most value 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, May 5, 2023, at 10 a.m. Eastern Time to review its financial results for the first 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 fourth-quarter results also may be downloaded there shortly before the start of the call at 10 a.m.

Annual Meeting of Stockholders

ATSG's 2023 Annual Meeting of Stockholders will be held virtually on May 24, 2023, at 11 a.m. Eastern Time. Stockholders of record as of March 27, 2023, may participate by phone or online at www.virtualshareholdermeeting.com/ATSG2023 to consider and vote on, among other items, the election of directors to the Board, ratification of the selection of auditors for 2023, and an advisory vote on executive compensation. ATSG's 2023 Proxy Statement, its 2022 Annual Report, and its 2022 Sustainability Report issued in April are also on the Company's website, www.atsginc.com, and include important information you should consider before casting your vote.

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; (ix) changes in general economic and/or industry-specific conditions, including inflation; and (x) the impact of geographical events or health epidemics such as the COVID-19 pandemic. 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.

ATSG REPORTS STRONG SECOND QUARTER 2022 RESULTS

https://www.atsginc.com/investors/news-and-events/ir-press-releases/atsg-reports-strong-second-quarter-2022-results

ATSG Reports Record 2022 Revenues

Source: Business Wire
Projects record freighter deliveries in 2023 and 2024

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 quarter and year ended December 31, 2022.

Fourth Quarter Results

Revenues $533 million, up 11%
GAAP EPS (basic) from Continuing Operations $0.58, down $0.02 on GAAP Pretax Earnings from Continuing Operations $61.2 million, up 1%
Adjusted Pretax* Earnings $65 million, up 16%
Adjusted EPS* $0.53, up $0.03
Adjusted EBITDA* $163 million, up 5%
Full Year 2022 Results

Revenues $2.0 billion, up 18%
GAAP EPS (basic) from Continuing Operations $2.67, down $0.66 on GAAP Pretax Earnings from Continuing Operations $260 million, down 14%
Adjusted Pretax Earnings* $263 million, up 51%
Adjusted EPS* $2.28, up $0.67 or 42%
Adjusted EBITDA* $641 million, up $100 million or 18%
Operating Cash Flows $472 million and Adjusted Free Cash Flow* $285 million
Rich Corrado, president and chief executive officer of ATSG, said, "In 2022, our revenues and Adjusted EBITDA each grew 18%, with revenues reaching a record $2 billion, and Adjusted EBITDA increasing $100 million to $641 million. Our Adjusted Pretax Earnings also grew sharply, excluding 2021 benefits from pandemic related government grants for our passenger airline. At the same time, we invested nearly $600 million in our businesses which will allow us to take advantage of the continued attractive leasing market for midsize freighter aircraft. I expect those investments and the outstanding performance of our employees to drive even more robust growth and earnings in the years to come."

2022 Operating Highlights

Six more dry leases of Boeing 767-300 freighters, plus one re-lease and four lease extensions of Boeing 767-200s. Two of the six newly converted 767-300 freighters leased last year are also being operated by ATSG’s airlines under Crew, Maintenance and Insurance (CMI) agreements.
Seven more customer-provided 767 freighters were subleased to and operated by ATSG’s cargo airlines during 2022, totaling thirteen such aircraft in the fleet at the end of the year.
Feedstock aircraft secured for the twenty freighters ATSG expects to lease in 2023.
Completed a strong schedule of passenger airline missions for government customers, including the resumption of a full schedule of combi service worldwide for the Department of Defense.
Executed a six-year extension and expansion of ATSG’s longstanding commercial relationship with DHL. The number of 767s our airline operates for DHL has more than doubled since the beginning of 2021.
2022 Financial Highlights

Record revenue of $2.0 billion in 2022, an increase of $311 million from 2021, due primarily to a full year of contributions from 2021’s fifteen new leases of 767-300s and seven more aircraft in CMI service.
$641 million in Adjusted EBITDA for 2022, up $100 million. Adjusted EBITDA for 2021 excluded $112 million in proceeds from federal grant awards to ATSG’s passenger airline, Omni Air, under U.S. government programs created to support jobs among passenger carriers during severe cutbacks in passenger flying during the pandemic.
Growth investments of $413 million. These investments supported current and projected 20 or more freighter lease deployments in each of 2023 and 2024.
Repurchases of 2 million ATSG common shares. ATSG’s Board of Directors approved a new $150 million share repurchase authorization in November 2022. Shares repurchased in 2022, all in the fourth quarter, represented nearly 3% of the 74 million shares outstanding at the beginning of 2022.
* 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 were up 3% for the fourth quarter and 17% for the year, reflecting the 2022 benefit of a full year of revenues from fifteen Boeing 767-300 freighters leased during 2021, plus partial-year revenues from six other 767-300s leased in 2022.
CAM’s fourth-quarter pretax earnings decreased 7% to $31 million versus the prior-year quarter, but increased 35% for the year. Fourth quarter 2021 earnings benefited from the sale of aircraft assets.
Ninety-one CAM-owned 767 freighter aircraft were leased to external customers, six more than a year ago.
Twenty-two CAM-owned aircraft were in or awaiting conversion to freighters, nine more than a year ago.
ACMI Services

Pretax earnings were $26 million in the fourth quarter, versus $34 million in 2021. Full-year pretax earnings were $95 million for 2022 and $159 million in 2021. Results in 2021 included a $15 million contribution from federal pandemic-related grants for ATSG’s cargo airline in the fourth quarter, and $112 million for the year. Excluding grant contributions, ACMI Services pretax earnings increased 33% for the quarter and more than doubled for the year.
Revenue block hours for ATSG's airlines increased 1% for the fourth quarter and 8% for 2022 over 2021. The increase for 2022 included the benefit of seven more aircraft in service than a year ago. Cargo block hours increased 2% for the fourth quarter and 9% for the year. Passenger block hours were down 2% for the quarter and up 4% for the year.
2023 Outlook

ATSG expects its Adjusted EBITDA for 2023 to increase to a range of $650 million to $660 million. ATSG expects 2023 full year Adjusted EPS to decline to a range of $1.85 to $2.00, based on 2023 projections for higher interest expense and inflationary effects, as well as reduced ACMI Services operations.

The Adjusted EBITDA and Adjusted EPS forecasts for 2023 assume:

Fewer operating block hours for ATSG airlines in 2023 versus 2022 for both our cargo and passenger operations.
Workforce retention and training effects, principally at our airlines and in maintenance services.
Dry leases of fourteen Boeing 767-300s, and six Airbus A321-200 freighters currently awaiting approval by the foreign regulatory agencies, which is anticipated by mid-year.
Leases for eight Boeing 767-200s are due to expire between May and September 2023. CAM expects to remove from service three of the eight due to airframe cycle limitations, and utilize their engines to support other 767-200 lease customers. The remaining five aircraft will be sold or re-leased.
A full year of contributions from seven 767-300 freighter aircraft that customers own or lease from other companies, and have assigned to our cargo airlines to operate during 2022, and the partial year contributions of three more 767-300 freighter aircraft to be added in 2023.
Corrado said that ATSG’s aircraft leasing operations, including its engine maintenance services, are expected to generate substantially more Adjusted EBITDA over the next five years. But reductions in ACMI Services segment's operations in 2023 will limit its growth this year.

"Growth in e-commerce, particularly outside the U.S., is driving the growth of air express networks around the world. That trend, and replacement of older cargo aircraft postponed during the pandemic, are compelling drivers for growth in our leasing demand," Corrado said.

2023 will be an investment year for ATSG. Capital spending for the year is projected to be $850 million, including $260 million in sustaining capex and $590 million for growth. In 2023, CAM will begin the passenger-to-freighter conversion of the first two of its A330-300s for lease delivery in 2024. CAM expects to convert and lease thirty such aircraft by 2028, two-thirds of which are already backed by customer commitments. CAM will also begin conversion of a projected sixteen 767-300 freighters it expects to lease in 2024. We already have customer commitments for virtually all of those freighters.

“We plan to deliver 20 newly converted aircraft during 2023 and more in 2024, as customer lease deployments are expanded to include the Airbus A330," Corrado said. "These deliveries are projected to significantly grow Adjusted EBITDA in 2024 and 2025, and solidify our position as the world's largest lessor of main deck freighters. Our employees are prepared to execute on our plans and exciting opportunities to generate long-term attractive 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, February 24, 2023, at 10 a.m. Eastern Time to review its financial results for the fourth quarter of 2022, and its outlook for 2023. Live call participants must register via this link, which 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 fourth-quarter results 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; (ix) changes in general economic and/or industry-specific conditions; and (x) factors relating to the COVID-19 pandemic, including that the pandemic may (a) continue for a longer period, or its effect on commercial and military passenger flying may be more substantial than we currently expect; (b) cause disruptions to our workforce and staffing capability, including through our compliance with COVID-19 vaccination and testing requirements; (c) cause disruptions in our ability to access airports and maintenance facilities; and (d) adversely impact our customers' creditworthiness or the ability of our vendors and third-party service providers to maintain customary service levels. 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



Year Ended



December 31,



December 31,





2022







2021







2022







2021



REVENUES

$

533,025





$

482,367





$

2,045,469





$

1,734,282



















OPERATING EXPENSES















Salaries, wages and benefits



172,424







159,666







666,950







591,280



Depreciation and amortization



84,338







84,013







331,064







308,448



Maintenance, materials and repairs



45,465







41,693







162,122







173,364



Fuel



73,432







56,390







275,512







173,600



Contracted ground and aviation services



20,264







20,507







77,026







75,724



Travel



29,445







24,768







111,989







86,601



Landing and ramp



3,710







4,082







16,583







14,244



Rent



8,323







6,294







30,437







23,695



Insurance



2,442







3,206







9,666







12,588



Other operating expenses



20,669







16,801







78,637







65,179



Government grants



—







(15,047

)





—







(111,673

)





460,512







402,373







1,759,986







1,413,050



















OPERATING INCOME



72,513







79,994







285,483







321,232



OTHER INCOME (EXPENSE)















Interest income



335







3







415







39



Non-service component of retiree benefit credits



4,635







4,457







20,046







17,827



Debt issuance costs



—







—







—







(6,505

)

Net gain (loss) on financial instruments



(380

)





(7,818

)





9,022







29,979



Losses from non-consolidated affiliates



(2,030

)





(1,212

)





(7,607

)





(2,577

)

Interest expense



(13,834

)





(14,788

)





(46,861

)





(58,790

)





(11,274

)





(19,358

)





(24,985

)





(20,027

)

















EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES



61,239







60,636







260,498







301,205



INCOME TAX EXPENSE



(18,995

)





(16,178

)





(64,060

)





(72,225

)

















EARNINGS FROM CONTINUING OPERATIONS



42,244







44,458







196,438







228,980



















EARNINGS FROM DISCONTINUED OPERATIONS, NET OF TAX



407







66







2,143







2,440



NET EARNINGS

$

42,651





$

44,524





$

198,581





$

231,420



















EARNINGS PER SHARE - CONTINUING OPERATIONS















Basic

$

0.58





$

0.60





$

2.67





$

3.33



Diluted

$

0.50





$

0.57





$

2.26





$

2.80



















WEIGHTED AVERAGE SHARES - CONTINUING OPERATIONS















Basic



72,590







73,826







73,611







68,853



Diluted1



86,380







77,366







88,324







76,216




1 Due to adopting accounting standard ASU No. 2020-06, "Accounting for Convertible Instruments and Contracts in an Entity's Own Equity" on January 1, 2022 using the modified retrospective method, 8,111 shares were added to the diluted weighted average shares for 2022 under the "if-convert method" for the Company's convertible note.

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In thousands, except share data)




December 31,
2022



December 31,
2021

ASSETS







CURRENT ASSETS:







Cash and cash equivalents

$

27,134





$

69,496



Accounts receivable, net of allowance of $939 in 2022 and $742 in 2021



301,622







205,399



Inventory



57,764







49,204



Prepaid supplies and other



31,956







28,742



TOTAL CURRENT ASSETS



418,476







352,841











Property and equipment, net



2,402,408







2,129,934



Customer incentive



79,650







102,913



Goodwill and acquired intangibles



492,642







505,125



Operating lease assets



74,070







62,644



Other assets



122,647







113,878



TOTAL ASSETS

$

3,589,893





$

3,267,335











LIABILITIES AND STOCKHOLDERS’ EQUITY







CURRENT LIABILITIES:







Accounts payable

$

192,992





$

174,237



Accrued salaries, wages and benefits



56,498







56,652



Accrued expenses



12,466







14,950



Current portion of debt obligations



639







628



Current portion of lease obligations



23,316







18,783



Unearned revenue and grants



21,546







47,381



TOTAL CURRENT LIABILITIES



307,457







312,631



Long term debt



1,464,285







1,298,735



Stock warrant obligations



695







915



Post-retirement obligations



35,334







21,337



Long term lease obligations



51,575







44,387



Other liabilities



62,861







49,662



Deferred income taxes



255,180







217,291











STOCKHOLDERS’ EQUITY:







Preferred stock, 20,000,000 shares authorized, including 75,000 Series A Junior Participating Preferred Stock



—







—



Common stock, par value $0.01 per share; 150,000,000 shares authorized; 72,327,758 and 74,142,183 shares issued and outstanding in 2022 and 2021, respectively



723







741



Additional paid-in capital



986,303







1,074,286



Retained earnings



528,882







309,430



Accumulated other comprehensive loss



(103,402

)





(62,080

)

TOTAL STOCKHOLDERS’ EQUITY



1,412,506







1,322,377



TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

3,589,893





$

3,267,335



AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED SUMMARY OF CASH FLOWS (UNAUDITED)

(In thousands)




Three Months Ended



Year Ended



December 31,



December 31,





2022







2021







2022







2021



















OPERATING CASH FLOWS

$

74,050





$

154,319





$

472,120





$

583,557



















INVESTING ACTIVITIES:















Aircraft acquisitions and freighter conversions



(109,636

)





(43,078

)





(412,595

)





(321,644

)

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



(41,437

)





(33,544

)





(186,836

)





(183,104

)

Proceeds from property and equipment



12,154







15,903







15,913







19,427



Acquisitions and investments in businesses



(312

)





—







(16,545

)





(2,155

)

TOTAL INVESTING CASH FLOWS



(139,231

)





(60,719

)





(600,063

)





(487,476

)

















FINANCING ACTIVITIES:















Principal payments on debt



(20,103

)





(142,293

)





(365,628

)





(1,900,311

)

Proceeds from borrowings



115,000







70,000







625,000







1,500,600



Proceeds from bond issuance



—







—







—







207,400



Payments for financing costs



(1,803

)





—







(1,803

)





(3,099

)

Proceeds from issuance of warrants



—







—







—







131,967



Bond Repurchase



—







—







(115,204

)





—



Purchase of common stock



(53,868

)





—







(53,868

)





—



Taxes paid for conversion of employee awards



(1,397

)





(1,619

)





(2,916

)





(2,861

)

TOTAL FINANCING CASH FLOWS



37,829







(73,912

)





85,581







(66,304

)

















NET INCREASE (DECREASE) IN CASH

$

(27,352

)



$

19,688





$

(42,362

)



$

29,777



















CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

$

54,486





$

49,808





$

69,496





$

39,719



CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

27,134





$

69,496





$

27,134





$

69,496



















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



Year Ended



December 31,



December 31,





2022







2021







2022







2021



Revenues















CAM















Aircraft leasing and related revenues

$

113,640





$

110,514





$

454,804





$

390,327



Lease incentive amortization



(5,029

)





(5,029

)





(20,118

)





(20,040

)

Total CAM



108,611







105,485







434,686







370,287



ACMI Services



369,385







333,790







1,404,348







1,185,128



Other Activities



111,489







94,345







430,326







375,571



Total Revenues



589,485







533,620







2,269,360







1,930,986



Eliminate internal revenues



(56,460

)





(51,253

)





(223,891

)





(196,704

)

Customer Revenues

$

533,025





$

482,367





$

2,045,469





$

1,734,282



















Pretax Earnings (Loss) from Continuing Operations













CAM, inclusive of interest expense



31,421







33,643







143,008







106,161



ACMI Services, inclusive of government grants and interest expense



25,931







34,487







95,198







158,733



Other Activities



2,019







(2,391

)





2,579







112



Net, unallocated interest expense



(357

)





(530

)





(1,748

)





(2,525

)

Non-service components of retiree benefit credit



4,635







4,457







20,046







17,827



Debt issuance costs



—







—







—







(6,505

)

Net gain (loss) on financial instruments



(380

)





(7,818

)





9,022







29,979



Loss from non-consolidated affiliates



(2,030

)





(1,212

)





(7,607

)





(2,577

)

Earnings from Continuing Operations before Income Taxes (GAAP)

$

61,239





$

60,636





$

260,498





$

301,205



















Adjustments to Pretax Earnings from Continuing Operations













Add customer incentive amortization



5,821







5,799







23,263







23,094



Add loss from non-consolidated affiliates



2,030







1,212







7,607







2,577



Less net (gain) loss on financial instruments



380







7,818







(9,022

)





(29,979

)

Less non-service components of retiree benefit credit



(4,635

)





(4,457

)





(20,046

)





(17,827

)

Less government grants



—







(15,047

)





—







(111,673

)

Add debt issuance costs



—







—







—







6,505



Add net charges for hangar foam incident



18







—







978







—



Adjusted Pretax Earnings (non-GAAP)

$

64,853





$

55,961





$

263,278





$

173,902



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



Year Ended



December 31,



December 31,





2022







2021







2022







2021



















Earnings (Loss) from Continuing Operations Before Income Taxes

$

61,239





$

60,636





$

260,498





$

301,205



Interest Income



(335

)





(3

)





(415

)





(39

)

Interest Expense



13,834







14,788







46,861







58,790



Depreciation and Amortization



84,338







84,013







331,064







308,448



EBITDA from Continuing Operations (non-GAAP)

$

159,076





$

159,434





$

638,008





$

668,404



Add customer incentive amortization



5,821







5,799







23,263







23,094



Add start-up loss from non-consolidated affiliates



2,030







1,212







7,607







2,577



Less net (gain) loss on financial instruments



380







7,818







(9,022

)





(29,979

)

Add non-service components of retiree benefit credits



(4,635

)





(4,457

)





(20,046

)





(17,827

)

Less government grants



—







(15,047

)





—







(111,673

)

Less debt issuance costs



—







—







—







6,505



Add net charges for hangar foam incident



18







—







978







—



















Adjusted EBITDA (non-GAAP)

$

162,690





$

154,759





$

640,788





$

541,101



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 the recognition of government grants and 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, recognition of government grants, impairment of aircraft and related assets, charge off of debt issuance costs upon debt restructuring, 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



Year Ended



December 31,



December 31,





2022







2021







2022







2021



















OPERATING CASH FLOWS (GAAP)

$

74,050





$

154,319





$

472,120





$

583,557



Sustaining capital expenditures



(41,437

)





(33,544

)





(186,836

)





(183,104

)

















ADJUSTED FREE CASH FLOW (non-GAAP)

$

32,613





$

120,775





$

285,284





$

400,453



















Sustaining capital expenditures includes cash outflows for planned aircraft maintenance, engine overhauls, information systems and other non-aircraft additions to property and equipment. It does not include expenditures for aircraft acquisitions and related passenger-to-freighter conversion costs.

Cash receipts from government payroll support programs, which are included in operating cash flows, were $0 and $83.0 million for the years ended December 31, 2022 and 2021, respectively.

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



Year Ended



December 31, 2022



December 31, 2021



December 31, 2022



December 31, 2021



$



$ Per
Share



$



$ Per
Share



$



$ Per
Share



$



$ Per
Share

































Earnings from Continuing Operations - basic (GAAP)

$

42,244









$

44,458









$

196,438









$

228,980







Gain from warrant revaluation, net tax1



(15

)









—











(170

)









(15,564

)





Convertible notes interest charges, net of tax 2



766











—











3,051











—







Earnings (Loss) from Continuing Operations - diluted (GAAP)



42,995





$

0.50







44,458





$

0.57







199,319





$

2.26







213,416





$

2.80



Adjustments, net of tax































Customer incentive amortization3



4,492







0.05







4,475







0.06







17,953







0.20







17,823







0.23



Effects of government grants4



—







—







(11,613

)





(0.15

)





—







—







(86,187

)





(1.13

)

Non-service component of retiree benefits5



(3,577

)





(0.04

)





(3,440

)





(0.04

)





(15,470

)





(0.18

)





(13,759

)





(0.18

)

Debt issuance costs6



—







—







—







—







—







—







5,020







0.07



Derivative and warrant revaluation7



309







—







6,034







0.07







(6,793

)





(0.08

)





(7,573

)





(0.16

)

Loss from affiliates8



1,567







0.02







935







0.01







5,871







0.07







1,988







0.03



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



—







—







2,372







(0.02

)





—







—







9,390







(0.05

)

Hangar foam incident9



14







—







—







—







755







0.01







—







—



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

$

45,800





$

0.53





$

43,221





$

0.50





$

201,635





$

2.28





$

140,118





$

1.61





































Shares







Shares







Shares







Shares





Weighted Average Shares - diluted



86,380











77,366











88,324











76,216







Additional shares - warrants 1



—











1,635











—











2,680







Additional shares - convertible notes 2



—











8,111











—











8,111







Adjusted Shares (non-GAAP)



86,380











87,112











88,324











87,007







































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" was adopted prospectively for EPS calculations on January 1, 2022 using the modified retrospective approach. The updated GAAP requires convertible debt to be treated under the "if-convert method" for EPS. Periods prior to adoption include adjustments to reflect EPS as if the new standard had been applied historically for comparability purposes.

3.
Removes the amortization of the warrant-based customer incentives which are recorded against revenue over the term of the related aircraft leases and customer contracts.

4.
Removes the effects of government grants received under federal payroll support programs.

5.
Removes the non-service component of post-retirement costs and credits.

6.
Removes the charge off of debt issuance costs when the Company modified its debt structure.

7.
Removes gains and losses from financial instruments, including derivative interest rate instruments and warrant revaluations.

8.
Removes losses for the Company's non-consolidated affiliates.

9.
Removes charges 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





























December 31, 2021



December 31, 2022



December 31, 2023
Projected





Freighter



Passenger



Freighter



Passenger



Freighter



Passenger



























B767-200



33



3



32



3



24



3

B767-300



65



9



78



8



94



8

B777-200



—



3



—



3



—



3

B757-200



—



—



—



—



—



—

B757 Combi



—



4



—



4



—



4

A321-200



—



—



—



—



6



—

Total Aircraft in Service



98



19



110



18



124



18



























B767-300 in or awaiting cargo conversion



12



—



15



—



13



—

A321 in cargo conversion



1



—



7



—



5



—

A330 in cargo conversion



—



—



—



—



3



—

B767-200 staging for lease



1



—



—



—



2



—

Total Aircraft



112



19



132



18



147



18



























Aircraft in Service Deployments





























December 31,



December 31,



December 31,





2021



2022



2023 Projected



























Dry leased without CMI



35



39



55

Dry leased with CMI



50



52



47

Customer provided for CMI



6



13



16

ACMI/Charter1



26



24



24

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




View source version on businesswire.com: https://www.businesswire.com/news/home/20230223005991/en/

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

AIR TRANSPORT SERVICES GROUP, INC.
FORM 10-Q
(Quarterly Report)
Filed 11/09/22 for the Period Ending 09/30/22

https://www.otcmarkets.com/filing/conv_pdf?id=16186325&guid=bSl-kqOqQls2dth