Atlas Air Worldwide Reports Second-Quarter Earnings; Reaffirms Full-Year Outlook

01-Aug-2013

Adjusted Net Income of $20.4 Million, $0.79 per Share
• Reported Net Income of $20.1 Million, $0.78 per Share
• 1.52 Million Shares Repurchased during Six Months Ended June 30
• Reaffirms Adjusted EPS Outlook of $4.80

Atlas Air Worldwide Holdings, Inc. (Nasdaq: AAWW), a leading global provider of outsourced aircraft and aviation operating solutions, today announced second-quarter 2013 diluted earnings per share in line with expectations presented at the company's investor-analyst day on May 30 and reaffirmed its full-year adjusted diluted earnings per share outlook of approximately $4.80.

For the three months ended June 30, 2013, adjusted net income attributable to common stockholders totaled $20.4 million, or $0.79 per diluted share, compared with $31.2 million, or $1.18 per diluted share, for the three months ended June 30, 2012.

On a reported basis, second-quarter 2013 net income attributable to common stockholders totaled $20.1 million, or $0.78 per diluted share, compared with $30.9 million, or $1.16 per diluted share, in the second quarter of 2012.

Free cash flow increased to $64.6 million in the second quarter of 2013 from $54.2 million in the second quarter of 2012.

"Earnings in the second quarter of 2013 were driven by the strength of our ACMI operations, especially our new 747-8 freighters," said William J. Flynn, President and Chief Executive Officer.

"Our diversified business mix, with our expanding 767 service, growing CMI operations and ongoing continuous improvement initiatives, enabled us to perform well in a quarter that was challenged by lower AMC Charter demand and softer AMC and Commercial Charter rates.

"Reflecting our commitment to enhance shareholder value, we acquired an additional 2.3% of our outstanding common stock through our share repurchase program from May through July. Combined with the shares that we bought through the end of April, we have repurchased approximately 5.7% of our shares so far this year.

"In addition, we are executing a strategic plan that leverages our core competencies. In July, we acquired our second and third 777 freighters for our Dry Leasing business. Each of our 777s was acquired with a long-term customer lease in place with a leading operator in the airfreight industry. These investments enhance our position in an attractive aircraft type, and they generate predictable, long-term revenue and earnings streams."

Second-Quarter Results

Revenue, volume and profitability growth in our core ACMI business during the second quarter were driven by our new 747-8Fs, with five additional -8F aircraft in service compared with the second quarter of 2012, as well as the continued ramp up of CMI flying for Boeing and DHL Express.

Improved ACMI segment earnings during the period benefited from higher rates per block hour and lower maintenance expense for our 747-8Fs, partially offset by the redeployment of 747-400 aircraft to other business segments.

In AMC Charter, a reduction in cargo and passenger block hours, lower average cargo and passenger revenue per block hour, and a reduction in the number of one-way AMC missions led to a decline in segment contribution. Lower average passenger revenue per block hour during the period stemmed from a higher proportion of passenger flying on smaller-gauge 767 aircraft, which we added to supplement our wide-body 747-400 passenger service and enhance our share of military passenger business.

Segment results in Commercial Charter primarily related to a reduction in yields driven by soft second-quarter global charter-market conditions.

Results in the second quarter were also affected by a reduction in capitalized interest on 747-8F aircraft that entered service.

Income Taxes

Adjusted and reported earnings for the second quarter of 2013 included an effective income tax rate of 32.3%, reflecting the ongoing beneficial impact of lower taxes for certain foreign subsidiaries in our Dry Leasing business.

Half-Year Results

For the six months ended June 30, 2013, adjusted net income attributable to common stockholders totaled $26.3 million, or $1.01 per diluted share, compared with $44.9 million, or $1.69 per diluted share, for the six months ended June 30, 2012.

On a reported basis, first-half 2013 net income attributable to common stockholders totaled $40.1 million, or $1.54 per diluted share, compared with $43.7 million, or $1.65 per diluted share, in the first half of 2012.

Free cash flow in the first six months of 2013 increased to $107.0 million from $55.2 million in the first half of 2012.

Cash, Cash Equivalents and Short-Term Investments

At June 30, 2013, our cash, cash equivalents and short-term investments totaled $367.5 million, compared with $419.9 million at December 31, 2012.

The change in cash, cash equivalents and short-term investments reflected cash provided by operating and financing activities offset by cash used for investing activities.

Net cash used for investing activities in the first six months of 2013 primarily related to the purchase of two 747-8F aircraft as well as a 777-200LRF aircraft for our Dry Leasing business.

Net cash provided by financing activities primarily reflected proceeds from the issuance of debt in connection with the acquisitions of these aircraft. These proceeds were partially offset by payments on debt obligations and net payments under accelerated share repurchase ("ASR") programs.

Share Repurchases

In mid-May, we entered into an ASR with a financial institution for the repurchase of our common stock for an aggregate purchase price of a minimum of $35.0 million up to a maximum of $44.0 million. As of June 30, 2013, we received delivery of an initial 615,791 shares pursuant to the program. This ASR is expected to conclude no later than mid-October.

Through the first six months of 2013, we repurchased a total of 1,519,092 shares, or 5.7%, of our outstanding common stock.

Future repurchases may be made at our discretion, and the actual timing, form and amount will depend on company and market conditions.

Outlook

Looking to full-year 2013, we expect to generate significant earnings and cash flow led by our ACMI business, improving Commercial Charter contribution, and productivity improvements and operating efficiencies generated through our continuous improvement initiatives.

We expect market growth during 2013 to be seasonal and second-half weighted. We anticipate a strong peak season in 2013 driven by demand for new consumer electronics, especially in the gaming sector.

Based on our outlook for peak season and in line with our first-half performance, we continue to anticipate a sequential increase in our quarterly earnings throughout the year, with just under 80% of full-year adjusted EPS of approximately $4.80 occurring in the second half.

Full-year 2013 EPS guidance includes actual and expected repurchases of our outstanding stock during the year.

Similar to the first and second quarters, adjusted full-year earnings in 2013 will reflect strong growth in the company's ACMI business, driven by an increase in the number of 747-8F aircraft in ACMI service compared with 2012.

Block-hour volumes in 2013 are now expected to total approximately 170,000 hours, with ACMI segment flying representing approximately 74% of expected 2013 block hours, Commercial Charter about 15%, and AMC Charter about 11%. Passenger flying should account for more than 11,000 AMC Charter block hours in 2013, with cargo flying totaling more than 7,000 hours.

In addition, we now anticipate that maintenance expense will total approximately $162 million in 2013, about 63% of which was incurred in the first half of the year.

Mr. Flynn concluded: "We have performed well in an environment of continuing global uncertainty. We are well-positioned to serve our customers and the airfreight markets. We are ready to capitalize on market improvements. And we are executing a strategic plan that leverages our core competencies, provides a basis for returning capital to our investors through share repurchases, and will enable us to grow over the long term."

Refer to full documentation in attachments box, located at the top left, below the headline.

X