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ATSG Reports Record Third Quarter 2021 Results

Increases Adjusted EBITDA Guidance; Strong Midsize Freighter Demand Continues

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 September 30, 2021.

ATSG's third quarter 2021 results, as compared with the third quarter of 2020 include:

  • Record customer revenues $466.0 million, up $61.8 million, or 15 percent
  • GAAP EPS (basic) from Continuing Operations $0.85, vs. loss of $0.10, on pretax earnings of $81.2 million
  • Adjusted EPS* $0.60, up $0.19 or 46 percent
  • Record Adjusted EBITDA* $153.0 million, up $27.5 million or 22 percent

2021 Adjusted EBITDA Outlook increased to at least $535 million

3Q Financial Highlights

  • Aircraft leasing and related revenues from external customers increased $19.7 million, or 38 percent, from thirteen more leases of Boeing 767 freighters than at the end of the third quarter of 2020.
  • Cash flows from operating activities were $429.2 million for the first nine months of 2021. ATSG continues to generate strong cash flows from its combined businesses while expanding its aircraft fleet and reducing its debt obligations.
  • Nine-months 2021 capital spending was $428.1 million, up 9 percent.
  • Adjusted free cash flow* totaled $279.7 million for the first nine months of 2021 after deducting sustaining capital expenditures (primarily airframe and engine maintenance expenditures). Of that amount, ATSG spent $278.6 million to grow its fleet through the purchase of passenger aircraft and their conversion into freighters.
  • Adjusted EPS of $0.60 excludes, among other items:
    • $0.06 gain from re-measurements of financial instrument values in 2021, including warrants to purchase ATSG shares, vs. $0.73 in the prior-year quarter.
    • Government grants of $0.30, compared with $0.28 a year ago. The grants are intended to mitigate pandemic effects on ATSG's passenger airline operations.

* Adjusted Earnings per Share, Adjusted EBITDA and Adjusted Free Cash Flow are non-GAAP financial measures and are defined and reconciled to GAAP measures at the end of this release

Rich Corrado, president and chief executive officer of ATSG, said, "The revenue growth we achieved in the third quarter added to the accelerating pace we saw in the second, as our aircraft leasing and airline businesses delivered sharply improved results versus a year ago. We continue to book and complete orders for freighter leases, and purchase more feedstock aircraft to meet strong lease demand over the next several years. While the pandemic continues to affect our commercial passenger and combi operations, we are proud that our passenger airline Omni Air was able to play a significant role in transporting Afghanistan evacuees during the quarter.”

3Q Operating Highlights

Aircraft Leasing

  • CAM’s third-quarter pretax earnings increased 44 percent to $28.5 million versus the prior year quarter.
  • In-service fleet comprised 112 Boeing aircraft, eleven more than a year ago. Eight are leased-in or provided by customers.
  • Eighty-two CAM-owned Boeing 767 freighter aircraft were leased to external customers, thirteen more than a year ago.
  • Sixteen CAM-owned aircraft were in or awaiting conversion to freighters, seven more than a year ago. The total includes fifteen Boeing 767s and one Airbus A321 passenger aircraft acquired during the quarter.

ACMI Services and Other

  • ACMI Services third-quarter pretax earnings increased 44 percent to $58.2 million. Excluding the benefit of government grants, ACMI Services pretax earnings increased 50 percent.
  • Revenue block hours for ATSG's airlines increased 9 percent from the previous quarter and 17 percent from the third quarter of 2020.
    • Block hours for total passenger and combi operations were up 8 percent over the third quarter of 2020, primarily due to Afghanistan evacuation missions for the U.S. government.
    • Block hours for air cargo operations, principally for express-network customers, increased 20 percent over the third quarter of 2020.
  • Other activities third-quarter pretax earnings were a loss of $1.0 million vs. a $0.7 million loss for the third quarter of the previous year.

Outlook

ATSG now expects its full-year Adjusted EBITDA for 2021 to be at least $535 million, a $10 million increase from prior guidance.

The forecast assumes:

  • new leases for fifteen 767-300 and re-leases of four 767-200 freighter aircraft. One freighter previously scheduled for 2021 will now be delivered next year, due to supply chain disruptions on some parts required for freighter conversion.
  • continuing growth in express-network flying in 2021, with fourteen additional 767 freighters operated by ATSG's airlines. By the end of the year, ATSG's airlines expect to operate forty-six 767 freighters for Amazon, thirteen more than at the end of 2020.
  • continued pandemic effects on demand for ATSG’s passenger and combi aircraft services through 2021.

Corrado noted that demand for express-package air transport is expected to be at record levels throughout the peak holiday season, in part due to logistics network constraints. “We are trying to assist customers with additional ACMI and charter services where possible, and expect all of our available aircraft to be deployed," he said. "We expect our passenger and combi operations to have results similar to those achieved in the fourth quarter of 2020, absent any unforeseen additional assignments.”

Strong global demand for midsize freighters, like ATSG’s 767s, continues. ATSG expects that its 2021 capital spending will be approximately $530 million, $20 million lower than previous guidance. Approximately $195 million will be for sustaining capital expenditures and $335 million for growth investments, including purchases and conversion costs for Boeing 767 and Airbus A321 aircraft.

“Looking beyond 2021,” Corrado added, "ATSG's business model perfectly positions us to enable the growth in e-commerce expedited shipping, continue to expand our 767 freighter lease deployments, and add new freighter lease options for customers, including the Airbus A321 and A330 platforms. ATSG's complementary service options, including engine and airframe maintenance support, flight services and logistics, make its value proposition unique and compelling to its customers. Our confidence is based on a growing lease order book, access to seventy conversion slots beyond this year, and our track record of achieving our goals. That includes a new agreement with Boeing for at least four more 767 conversion slots, with the first aircraft to be inducted in the third quarter next year. We look forward to allocating the strong cash flows our business produces to increase shareholder value."

Non-GAAP Financial Measures

This release, including the attached tables, contains non-GAAP financial measures that management uses to evaluate historical results and project future results. Management believes that these non-GAAP measures assist in highlighting operational trends, facilitating period-over-period comparisons, and providing additional clarity about events and trends affecting core operating performance. Disclosing these non-GAAP measures provides insight to investors about additional metrics that management uses to evaluate past performance and prospects for future performance. Non-GAAP measures should not be considered in isolation or as a substitute for analysis of the Company's results as reported under GAAP.

The historical non-GAAP financial measures included in this release are reconciled to GAAP earnings in tables included later in this release. The Company does not provide a reconciliation of projected Adjusted EBITDA because it is unable to predict with reasonable accuracy the value of certain adjustments. Certain adjustments can be significantly impacted by the re-measurements of financial instruments including stock warrants issued to a customer. The Company’s earnings on a GAAP basis and the non-GAAP adjustments for gains and losses resulting from the re-measurement of stock warrants, will depend on the future prices of ATSG stock, interest rates, and other assumptions which are highly uncertain.

Conference Call

ATSG will host an investor conference call on November 5, 2021, at 10 a.m. Eastern time to review its financial results for the third quarter of 2021. Participants should dial (800) 708-4540 and international participants should dial (847) 619-6397 ten minutes before the scheduled start of the call and ask for conference passcode 50246249. The call will also be webcast live (in listen-only mode) via a link at www.atsginc.com using the same passcode. The conference call also will be available on webcast replay via www.atsginc.com for 30 days.

About ATSG

ATSG is a leading provider of aircraft leasing and air cargo transportation and related services to domestic and foreign air carriers and other companies that outsource their air cargo lift requirements. ATSG, through its leasing and airline subsidiaries, is the world's largest owner and operator of converted Boeing 767 freighter aircraft. Through its principal subsidiaries, including three airlines with separate and distinct U.S. FAA Part 121 Air Carrier certificates, ATSG provides aircraft leasing, air cargo lift, passenger ACMI and charter services, aircraft maintenance services and airport ground services. ATSG's subsidiaries include ABX Air, Inc.; Airborne Global Solutions, Inc.; Airborne Maintenance and Engineering Services, Inc., including its subsidiary, Pemco World Air Services, Inc.; Air Transport International, Inc.; Cargo Aircraft Management, Inc.; and Omni Air International, LLC. For more information, please see www.atsginc.com.

Except for historical information contained herein, the matters discussed in this release contain forward-looking statements that involve risks and uncertainties. A number of important factors could cause Air Transport Services Group, Inc.'s ("ATSG's") actual results to differ materially from those indicated by such forward-looking statements. These factors include, but are not limited to the following, which relate to the current COVID-19 pandemic. The pandemic may (i) continue for a longer period, or its effect on commercial and military passenger flying may be more substantial than we currently expect; (ii) cause disruptions to our workforce and staffing capability, including through our compliance with federally mandated COVID-19 vaccination and testing requirements; (iii) cause disruptions in our ability to access airports and maintenance facilities; and (iv) 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 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 Unites 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) other factors that are contained from time to time in ATSG's filings with the U.S. Securities and Exchange Commission, including its annual report on Form 10-K and quarterly reports on Form 10-Q. Readers should carefully review this release and should not place undue reliance on ATSG's forward-looking statements. These forward-looking statements were based on information, plans and estimates as of the date of this release. Except as may be required by applicable law, ATSG undertakes no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share data)

 

 

Three Months Ended

Nine Months Ended

 

September 30,

September 30,

 

2021

 

2020

 

2021

 

2020

REVENUES

$

465,955

 

 

$

404,146

 

 

$

1,251,915

 

 

$

1,171,217

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

Salaries, wages and benefits

148,074

 

 

128,608

 

 

431,614

 

 

373,642

 

Depreciation and amortization

77,751

 

 

67,974

 

 

224,435

 

 

205,607

 

Maintenance, materials and repairs

43,751

 

 

48,767

 

 

131,671

 

 

134,148

 

Fuel

50,176

 

 

36,202

 

 

117,210

 

 

116,788

 

Contracted ground and aviation services

21,620

 

 

19,840

 

 

55,217

 

 

47,735

 

Travel

24,928

 

 

20,254

 

 

61,833

 

 

59,226

 

Landing and ramp

4,027

 

 

3,378

 

 

10,162

 

 

8,895

 

Rent

5,807

 

 

5,137

 

 

17,401

 

 

13,821

 

Insurance

3,178

 

 

3,119

 

 

9,382

 

 

7,295

 

Other operating expenses

17,205

 

 

18,623

 

 

48,378

 

 

49,577

 

Government grants

(30,322

)

 

(21,726

)

 

(96,626

)

 

(31,547

)

Impairment of aircraft and related assets

 

 

 

 

 

 

39,075

 

 

366,195

 

 

330,176

 

 

1,010,677

 

 

1,024,262

 

 

 

 

 

 

OPERATING INCOME

99,760

 

 

73,970

 

 

241,238

 

 

146,955

 

OTHER INCOME (EXPENSE)

 

 

 

 

Interest income

8

 

 

93

 

 

36

 

 

217

 

Non-service component of retiree benefit credits

4,457

 

 

2,897

 

 

13,370

 

 

8,693

 

Debt issuance costs

 

 

 

 

(6,505

)

 

 

Net gain (loss) on financial instruments

(7,378

)

 

(53,393

)

 

37,797

 

 

(56,072

)

Losses from non-consolidated affiliates

(1,147

)

 

(2,485

)

 

(1,365

)

 

(11,762

)

Interest expense

(14,459

)

 

(15,440

)

 

(44,002

)

 

(47,808

)

 

(18,519

)

 

(68,328

)

 

(669

)

 

(106,732

)

 

 

 

 

 

EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

81,241

 

 

5,642

 

 

240,569

 

 

40,223

 

INCOME TAX EXPENSE

(18,878

)

 

(11,387

)

 

(56,047

)

 

(17,397

)

 

 

 

 

 

EARNINGS (LOSS) FROM CONTINUING OPERATIONS

62,363

 

 

(5,745

)

 

184,522

 

 

22,826

 

 

 

 

 

 

EARNINGS FROM DISCONTINUED OPERATIONS, NET OF TAX

2,309

 

 

154

 

 

2,374

 

 

4,162

 

NET EARNINGS (LOSS)

$

64,672

 

 

$

(5,591

)

 

$

186,896

 

 

$

26,988

 

 

 

 

 

 

EARNINGS (LOSS) PER SHARE - CONTINUING OPERATIONS

 

 

 

 

Basic

$

0.85

 

 

$

(0.10

)

 

$

2.75

 

 

$

0.39

 

Diluted

$

0.81

 

 

$

(0.10

)

 

$

2.14

 

 

$

0.38

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES - CONTINUING OPERATIONS

 

 

 

 

Basic

73,721

 

 

59,146

 

 

67,177

 

 

59,106

 

Diluted

76,743

 

 

59,146

 

 

75,277

 

 

59,863

 

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

 
 

 

September 30,

 

December 31,

 

2021

 

2020

ASSETS

 

 

 

CURRENT ASSETS:

 

 

 

Cash and cash equivalents

$

49,808

 

 

$

39,719

 

Accounts receivable, net of allowance of $731 in 2021 and $997 in 2020

191,746

 

 

153,511

 

Inventory

50,827

 

 

40,410

 

Prepaid supplies and other

20,008

 

 

39,096

 

TOTAL CURRENT ASSETS

312,389

 

 

272,736

 

 

 

 

 

Property and equipment, net

2,136,213

 

 

1,939,776

 

Customer incentive

108,712

 

 

126,007

 

Goodwill and acquired intangibles

508,357

 

 

516,290

 

Operating lease assets

61,351

 

 

68,824

 

Other assets

95,152

 

 

78,112

 

TOTAL ASSETS

$

3,222,174

 

 

$

3,001,745

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

CURRENT LIABILITIES:

 

 

 

Accounts payable

$

151,064

 

 

$

141,425

 

Accrued salaries, wages and benefits

58,342

 

 

56,506

 

Accrued expenses

16,117

 

 

19,005

 

Current portion of debt obligations

625

 

 

13,746

 

Current portion of lease obligations

17,292

 

 

17,784

 

Unearned revenue and grants

42,404

 

 

53,522

 

TOTAL CURRENT LIABILITIES

285,844

 

 

301,988

 

Long term debt

1,368,569

 

 

1,465,331

 

Stock warrant obligations

72,667

 

 

103,474

 

Post-retirement obligations

22,379

 

 

35,099

 

Long term lease obligations

44,461

 

 

51,128

 

Other liabilities

47,890

 

 

47,963

 

Deferred income taxes

197,528

 

 

141,265

 

 

 

 

 

STOCKHOLDERS’ EQUITY:

 

 

 

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

 

 

 

Common stock, par value $0.01 per share; 150,000,000 shares authorized; 74,199,254 and 59,560,036 shares issued and outstanding in 2021 and 2020, respectively

742

 

 

596

 

Additional paid-in capital

991,650

 

 

855,547

 

Retained earnings

264,906

 

 

78,010

 

Accumulated other comprehensive loss

(74,462)

 

 

(78,656)

 

TOTAL STOCKHOLDERS’ EQUITY

1,182,836

 

 

855,497

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

3,222,174

 

 

$

3,001,745

 

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED SUMMARY OF CASH FLOWS

(In thousands)

 
 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

OPERATING CASH FLOWS

$

122,047

 

 

 

$

174,288

 

 

 

$

429,238

 

 

 

$

423,284

 

 

 

 

 

 

 

 

 

 

INVESTING ACTIVITIES:

 

 

 

 

 

 

 

Aircraft acquisitions and freighter conversions

(78,462

)

 

 

(85,147

)

 

 

(278,566

)

 

 

(273,352

)

 

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

(49,415

)

 

 

(43,266

)

 

 

(149,560

)

 

 

(120,943

)

 

Proceeds from property and equipment

2,800

 

 

 

130

 

 

 

3,524

 

 

 

9,210

 

 

Acquisitions and investments in businesses

327

 

 

 

(3,497

)

 

 

(2,155

)

 

 

(9,053

)

 

TOTAL INVESTING CASH FLOWS

(124,750

)

 

 

(131,780

)

 

 

(426,757

)

 

 

(394,138

)

 

 

 

 

 

 

 

 

 

FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Principal payments on debt

(32,099

)

 

 

(41,683

)

 

 

(1,758,018

)

 

 

(584,923

)

 

Proceeds from borrowings

 

 

 

 

 

 

1,430,600

 

 

 

80,000

 

 

Proceeds from bond issuance

 

 

 

 

 

 

207,400

 

 

 

500,000

 

 

Payments for financing costs

(293

)

 

 

 

 

 

(3,099

)

 

 

(7,507

)

 

Proceeds from issuance of warrants

 

 

 

 

 

 

131,967

 

 

 

 

 

Taxes paid for conversion of employee awards

(6

)

 

 

 

 

 

(1,242

)

 

 

(1,839

)

 

TOTAL FINANCING CASH FLOWS

(32,398

)

 

 

(41,683

)

 

 

7,608

 

 

 

(14,269

)

 

 

 

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH

$

(35,101

)

 

 

$

825

 

 

 

$

10,089

 

 

 

$

14,877

 

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

$

84,909

 

 

 

$

60,253

 

 

 

$

39,719

 

 

 

$

46,201

 

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

49,808

 

 

 

$

61,078

 

 

 

$

49,808

 

 

 

$

61,078

 

 

 

 

 

 

 

 

 

 

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

PRETAX EARNINGS AND ADJUSTED PRETAX EARNINGS SUMMARY

FROM CONTINUING OPERATIONS

NON-GAAP RECONCILIATION

(In thousands)

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2021

 

2020

 

2021

 

2020

Revenues

 

 

 

 

 

 

 

CAM

 

 

 

 

 

 

 

Aircraft leasing and related revenues

$

97,960

 

 

 

$

80,976

 

 

 

$

279,813

 

 

 

$

238,930

 

 

Lease incentive amortization

(5,029

)

 

 

(4,708

)

 

 

(15,011

)

 

 

(13,629

)

 

Total CAM

92,931

 

 

 

76,268

 

 

 

264,802

 

 

 

225,301

 

 

ACMI Services

330,906

 

 

 

300,189

 

 

 

851,338

 

 

 

871,958

 

 

Other Activities

90,292

 

 

 

82,281

 

 

 

281,226

 

 

 

239,373

 

 

Total Revenues

514,129

 

 

 

458,738

 

 

 

1,397,366

 

 

 

1,336,632

 

 

Eliminate internal revenues

(48,174

)

 

 

(54,592

)

 

 

(145,451

)

 

 

(165,415

)

 

Customer Revenues

$

465,955

 

 

 

$

404,146

 

 

 

$

1,251,915

 

 

 

$

1,171,217

 

 

 

 

 

 

 

 

 

 

Pretax Earnings (Loss) from Continuing Operations

 

 

 

 

 

 

CAM, inclusive of interest expense

28,502

 

 

 

19,781

 

 

 

72,518

 

 

 

55,241

 

 

ACMI Services, inclusive of government grants and interest expense

58,225

 

 

 

40,363

 

 

 

124,246

 

 

 

88,246

 

 

Other Activities

(1,047

)

 

 

(724

)

 

 

2,503

 

 

 

(2,915

)

 

Net, unallocated interest expense

(371

)

 

 

(797

)

 

 

(1,995

)

 

 

(2,133

)

 

Impairment of aircraft and related assets

 

 

 

 

 

 

 

 

 

(39,075

)

 

Non-service components of retiree benefit credit

4,457

 

 

 

2,897

 

 

 

13,370

 

 

 

8,693

 

 

Debt issuance costs

 

 

 

 

 

 

(6,505

)

 

 

 

 

Net gain on financial instruments

(7,378

)

 

 

(53,393

)

 

 

37,797

 

 

 

(56,072

)

 

Loss from non-consolidated affiliates

(1,147

)

 

 

(2,485

)

 

 

(1,365

)

 

 

(11,762

)

 

Earnings (Loss) from Continuing Operations before Income Taxes (GAAP)

$

81,241

 

 

 

$

5,642

 

 

 

$

240,569

 

 

 

$

40,223

 

 

 

 

 

 

 

 

 

 

Adjustments to Pretax Earnings

 

 

 

 

 

 

Add customer incentive amortization

5,798

 

 

 

5,291

 

 

 

17,295

 

 

 

15,044

 

 

Less government grants

(30,322

)

 

 

(21,726

)

 

 

(96,626

)

 

 

(31,547

)

 

Add impairment of aircraft and related assets

 

 

 

 

 

 

 

 

 

39,075

 

 

Add non-service components of retiree benefit credit

(4,457

)

 

 

(2,897

)

 

 

(13,370

)

 

 

(8,693

)

 

Add debt issuance costs

 

 

 

 

 

 

6,505

 

 

 

 

 

Less net (gain) loss on financial instruments

7,378

 

 

 

53,393

 

 

 

(37,797

)

 

 

56,072

 

 

Add loss from non-consolidated affiliates

1,147

 

 

 

2,485

 

 

 

1,365

 

 

 

11,762

 

 

Adjusted Pretax Earnings (non-GAAP)

$

60,785

 

 

 

$

42,188

 

 

 

$

117,941

 

 

 

$

121,936

 

 

Adjusted Pretax Earnings excludes certain items included in GAAP based pretax earnings (loss) from continuing operations because they are distinctly different in their predictability among periods or not closely related to our operations. Presenting this measure provides investors with a comparative metric of fundamental operations, while highlighting changes to certain items among periods. 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

 

Nine Months Ended

 

September 30,

 

September 30,

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

Earnings (Loss) from Continuing Operations Before Income Taxes

$

81,241

 

 

 

$

5,642

 

 

 

$

240,569

 

 

 

$

40,223

 

 

Interest Income

(8

)

 

 

(93

)

 

 

(36

)

 

 

(217

)

 

Interest Expense

14,459

 

 

 

15,440

 

 

 

44,002

 

 

 

47,808

 

 

Depreciation and Amortization

77,751

 

 

 

67,974

 

 

 

224,435

 

 

 

205,607

 

 

EBITDA from Continuing Operations (non-GAAP)

$

173,443

 

 

 

$

88,963

 

 

 

$

508,970

 

 

 

$

293,421

 

 

Add customer incentive amortization

5,798

 

 

 

5,291

 

 

 

17,295

 

 

 

15,044

 

 

Less government grants

(30,322

)

 

 

(21,726

)

 

 

(96,626

)

 

 

(31,547

)

 

Add impairment of aircraft and related assets

 

 

 

 

 

 

 

 

 

39,075

 

 

Add non-service components of retiree benefit credits

(4,457

)

 

 

(2,897

)

 

 

(13,370

)

 

 

(8,693

)

 

Less debt issuance costs

 

 

 

 

 

 

6,505

 

 

 

 

 

Less net (gain) loss on financial instruments

7,378

 

 

 

53,393

 

 

 

(37,797

)

 

 

56,072

 

 

Add loss from non-consolidated affiliates

1,147

 

 

 

2,485

 

 

 

1,365

 

 

 

11,762

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA (non-GAAP)

$

152,987

 

 

 

$

125,509

 

 

 

$

386,342

 

 

 

$

375,134

 

 

Management uses Adjusted EBITDA to assess the performance of its operating results among periods. It is a metric that facilitates the comparison of financial results of underlying operations. Additionally, these non-GAAP adjustments are similar to the adjustments used by lenders in the Company’s senior secured credit facility to assess financial performance and determine the cost of borrowed funds. The adjustments also remove the non-service cost components of retiree benefit plans because they are not closely related to ongoing operating activities. The adjustments also excluded the recognition of government grants from adjusted earnings to improve comparability between periods. Management presents EBITDA from Continuing Operations, a commonly referenced metric, as a subtotal toward computing Adjusted EBITDA.

EBITDA from Continuing Operations is defined as Earnings (Loss) from Continuing Operations Before Income Taxes plus net interest expense, depreciation, and amortization expense. Adjusted EBITDA is defined as EBITDA from Continuing Operations less financial instrument revaluation gains or losses, non-service components of retiree benefit costs including pension plan settlements, amortization of warrant-based customer incentive costs recorded in revenue, recognition of government grants, impairment of aircraft and related assets, charge off of debt issuance costs upon debt restructuring and costs from non-consolidated affiliates.

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

ADJUSTED FREE CASH FLOW

NON-GAAP RECONCILIATION

(In thousands)

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

OPERATING CASH FLOWS (GAAP)

$

122,047

 

 

 

$

174,288

 

 

 

$

429,238

 

 

 

$

423,284

 

 

Sustaining capital expenditures

(49,415

)

 

 

(43,266

)

 

 

(149,560

)

 

 

(120,943

)

 

 

 

 

 

 

 

 

 

ADJUSTED FREE CASH FLOW (Non-GAAP)

$

72,632

 

 

 

$

131,022

 

 

 

$

279,678

 

 

 

$

302,341

 

 

 

 

 

 

 

 

 

 

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.

For the three and nine months ended September 30, 2021 cash receipts from government payroll support programs decreased $37.7 million and increased $7.3 million, respectively, compared to the corresponding 2020 periods.

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 PER SHARE FROM CONTINUING OPERATIONS

NON-GAAP RECONCILIATION

(In thousands)

Management presents Adjusted Earnings and Adjusted Earnings Per Share from Continuing Operations, both non-GAAP measures, to provide additional information regarding earnings per share without the volatility otherwise caused by the items below. Management uses Adjusted Earnings and Adjusted Earnings Per Share from Continuing Operations to compare the performance of its operating results among periods.

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

2021

 

September 30,

2020

 

September 30,

2021

 

September 30,

2020

 

 

$

 

$ Per

Share

 

$

 

$ Per

Share

 

$

 

$ Per

Share

 

$

 

$ Per

Share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

62,363

 

 

 

 

$

(5,745

)

 

 

 

$

184,522

 

 

 

 

$

22,826

 

 

 

Gain from warrant revaluation, net tax1

 

 

 

 

 

 

 

 

 

(23,776

)

 

 

 

 

 

 

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

 

62,363

 

 

$

0.81

 

 

(5,745

)

 

$

(0.10

)

 

160,746

 

 

$

2.14

 

 

22,826

 

 

$

0.38

 

Adjustments, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer incentive amortization2

 

4,475

 

 

0.06

 

 

4,083

 

 

0.07

 

 

13,348

 

 

0.18

 

 

11,610

 

 

0.19

 

Remove effects of government grants3

 

(23,402

)

 

(0.30

)

 

(16,767

)

 

(0.28

)

 

(74,574

)

 

(0.99

)

 

(24,347

)

 

(0.41

)

Remove effects of aircraft impairments4

 

 

 

 

 

 

 

 

 

 

 

 

 

30,157

 

 

0.50

 

Non-service component of retiree benefits5

 

(3,440

)

 

(0.04

)

 

(2,236

)

 

(0.04

)

 

(10,319

)

 

(0.14

)

 

(6,710

)

 

(0.11

)

Debt issuance costs6

 

 

 

 

 

 

 

 

 

5,020

 

 

0.07

 

 

 

 

 

Derivative and warrant revaluation7

 

5,694

 

 

0.06

 

 

50,516

 

 

0.73

 

 

(5,395

)

 

(0.13

)

 

50,088

 

 

0.52

 

Loss from affiliates8

 

885

 

 

0.01

 

 

1,918

 

 

0.03

 

 

1,053

 

 

0.01

 

 

9,929

 

 

0.17

 

Adjusted Earnings from Continuing Operations (non-GAAP)

 

$

46,575

 

 

$

0.60

 

 

$

31,769

 

 

$

0.41

 

 

$

89,879

 

 

$

1.14

 

 

$

93,553

 

 

$

1.24

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

 

Shares

 

 

 

Shares

 

 

 

Shares

 

 

Weighted Average Shares - diluted

 

76,743

 

 

 

 

59,146

 

 

 

 

75,277

 

 

 

 

59,863

 

 

 

Additional weighted average shares1

 

1,343

 

 

 

 

18,611

 

 

 

 

3,583

 

 

 

 

15,589

 

 

 

Adjusted Shares (non-GAAP)

 

78,086

 

 

 

 

77,757

 

 

 

 

78,860

 

 

 

 

75,452

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Earnings from Continuing Operations and Adjusted Earnings Per Share from Continuing Operations are non-GAAP financial measures and should not be considered as alternatives to Earnings from Continuing Operations, Weighted Average Shares - diluted or Earnings Per Share from Continuing Operations or any other performance measure derived in accordance with GAAP. Adjusted Earnings and Adjusted Earnings Per Share from Continuing Operations should not be considered in isolation or as a substitute for analysis of the company's results as reported under GAAP.

  1. Under U.S. GAAP, certain warrants are reflected as a liability and unrealized warrant gains are typically removed from diluted earnings per share (“EPS”) calculations, while unrealized warrant losses are not removed because they are dilutive to EPS. As a result, the Company’s EPS, as calculated under U.S. GAAP, can vary significantly among periods due to unrealized mark-to-market losses created by an increased trading value for the Company's shares. The adjustment removes the unrealized gains for grants of stock warrants issued to Amazon as a lease incentive. For all periods presented, additional weighted shares includes 14.4 million shares as if Amazon's publicly announced warrant conversion plan was completed plus additional weighted shares assuming that Amazon net settled its remaining warrants during each period.
  2. 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.
  3. Removes the effects of government grants received under federal payroll support programs.
  4. Removes the effects of impairment charges for aircraft valuations and related assets.
  5. Removes the non-service component of post-retirement costs and credits.
  6. Removes the charge off of debt issuance costs when the Company restructured its debt.
  7. Removes gains and losses from derivative interest rate instruments and warrant revaluations.
  8. Removes losses for the Company's non-consolidated affiliates.

     

 

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

AIRCRAFT FLEET

 
 

Aircraft Types

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2020

 

December 31, 2020

 

September 30, 2021

 

December 31, 2021

Projected

 

 

Freighter

 

Passenger

 

Freighter

 

Passenger

 

Freighter

 

Passenger

 

Freighter

 

Passenger

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

B767-200

 

32

 

3

 

33

 

3

 

32

 

3

 

34

 

3

B767-300

 

49

 

9

 

52

 

10

 

61

 

9

 

65

 

9

B777-200

 

 

3

 

 

3

 

 

3

 

 

3

B757-200

 

1

 

 

1

 

 

 

 

 

B757 Combi

 

 

4

 

 

4

 

 

4

 

 

4

Total Aircraft in Service

 

82

 

19

 

86

 

20

 

93

 

19

 

99

 

19

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

B767-300 in or awaiting cargo conversion

 

9

 

 

8

 

 

15

 

 

14

 

A321 in cargo conversion

 

 

 

 

 

1

 

 

1

 

B767-200 staging for lease

 

2

 

 

 

 

2

 

 

1

 

Total Aircraft

 

93

 

19

 

94

 

20

 

111

 

19

 

115

 

19

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aircraft in Service Deployments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

December 31,

 

September 30,

 

December 31,

 

 

2020

 

2020

 

2021

 

2021 Projected

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dry leased without CMI

 

30

 

33

 

35

 

36

Dry leased with CMI

 

39

 

40

 

47

 

50

Customer provided for CMI

 

2

 

2

 

4

 

6

ACMI/Charter1

 

30

 

31

 

26

 

26

  1. ACMI/Charter includes three Boeing 767 passenger aircraft for September 30, 2020 and four Boeing 767 passenger aircraft leased from external companies since November of 2020.

 

Contacts

Quint Turner, ATSG Inc. Chief Financial Officer

937-366-2303

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