ATSG Revenues, Earnings Up Sharply in 2017

CAM to Purchase More Boeing 767s for Freighter Conversion and Deployment

WILMINGTON, Ohio--()--Air Transport Services Group, Inc. (Nasdaq: ATSG), the leading provider of medium wide-body aircraft leasing, air cargo transportation and related services, today reported consolidated financial results for the quarter ended December 31, 2017.

“Our outlook for 2018 is very positive”

4Q Revenues increased $101.3 million, or 46 percent, to $323.0 million

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Revenues for all of 2017 rose 39 percent to $1.1 billion

ATSG's leasing, airlines, maintenance and logistics businesses all recorded double-digit revenue increases before eliminations for the fourth quarter.
 

4Q GAAP Earnings from Continuing Operations were $94.1 million, $1.60 per share basic

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2017 GAAP Earnings were $21.7 million, $0.37 per share basic

 

4Q Adjusted Earnings increased 73 percent to $20.7 million, $0.30 per share diluted

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2017 Adjusted Earnings were $61.1 million, or $0.90 per share diluted, up 63 percent

Adjusted Earnings from Continuing Operations exclude, among other items, a $59.9 million benefit from the effects of the 2017 Tax Cuts and Jobs Act on ATSG’s net deferred tax liabilities at the end of 2017, and $14.9 million in net gains from warrants issued to Amazon.com Service, Inc. Adjusted Earnings and other adjusted amounts referenced below are non-GAAP financial measures, and are reconciled to GAAP results in a table later in this release.
 

4Q Adjusted EBITDA increased 43 percent to $80.8 million

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2017 Adjusted EBITDA up 27 percent to $267.9 million

Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), is defined and adjusted in a table later in this release.
 

2017 Capital expenditures were $296.9 million, up 12 percent

ATSG’s 2017 capex spend was lower than earlier projected. Two 767 feedstock aircraft will be purchased in the first quarter of 2018 instead of 2017.

Joe Hete, President and Chief Executive Officer of ATSG, said, “Our 2017 results reflect substantial gains in the operational effectiveness and expanded flight schedules of our airlines during peak season, strong contributions from our other businesses, and growth in our leased freighter fleet, including external leases covering fifty of our sixty-one Boeing 767s. We also assured our access to low-cost capital with a $120 million increase in our credit facility and a $259 million offering of convertible senior notes. With our attractive asset mix expanding into the narrow-body sector, strong cash-flow generation, and lower federal tax rates, we are well positioned for continued growth in the future.”

Business Developments

CAM to Acquire Additional 767s for Freighter Conversion

ATSG's Cargo Aircraft Management subsidiary has secured purchase commitments for three more 767-300 aircraft this year for freighter conversion. These are in addition to the eight already slated for conversion and deployment during 2018. Based on ATSG's rights to conversion slots, it expects to complete modification of two of the three additional 767s by year-end 2018.

“We continue to see robust global demand for our expanding fleet of 767 freighters, and are confident we will have customers waiting for these as they emerge from our pipeline,” Hete said. "Eighty-seven percent of our 767 fleet will be under multi-year dry leases by the end of 2018. We expect strong returns from these fleet investments, thanks to our experience in acquiring, converting, and deploying midsize freighters, our unique array of support services, and e-commerce trends driving worldwide investments in regional express networks.”

ATSG Board Increases Share Repurchase Authorization

Directors of ATSG recently approved the expansion of ATSG’s authorized share repurchase program from $100 million to $150 million. At the end of 2017, ATSG’s cumulative share repurchases under the program were $85.1 million, including $11.2 million repurchased in 2017.

Segment Results

Cargo Aircraft Management (CAM)

 
CAM   Fourth Quarter   Year
($ in thousands) 2017   2016 2017   2016
Aircraft leasing and related revenues $ 57,813 $ 51,721 $ 223,546 $ 199,598
Lease incentive amortization (4,226 ) (2,140 ) (13,986 ) (4,506 )
Total CAM revenues $ 53,587   $ 49,581   $ 209,560   $ 195,092  
Pre-Tax Earnings   $ 15,940     $ 16,759     $ 61,510     $ 68,608  

Significant Developments:

  • CAM's fourth quarter revenues increased $4.0 million, or 8 percent, to $53.6 million. Those revenues were reduced by $4.2 million of non-cash amortization of warrant-related Amazon lease incentives, approximately twice as much as during the year-earlier quarter. CAM’s full-year 2017 revenues increased 7 percent, and 12 percent excluding warrant-related lease incentives.
  • CAM was leasing fifty 767s to external customers as of Dec. 31, 2017, nine more than a year earlier, and one 737-400 freighter. Three 767s and one 737 were deployed during the fourth quarter. CAM’s pre-tax earnings declined for the fourth quarter and full year 2017 from year-ago levels. Higher earnings from additional leased aircraft in service were offset by an increase in warrant-related lease incentives, higher interest expense that included non-cash amortization related to ATSG's September 2017 convertible offering, and increased depreciation from its larger fleet.
  • CAM expects to deliver ten 767s and one 737 to lease customers by the end of 2018. The first of the 767s was delivered to Northern Aviation Services in January under a multi-year lease commitment. One other 767 and the remaining 737 in modification are expected to be delivered to customers before the end of the first quarter of 2018.

ACMI Services

 
ACMI Services     Fourth Quarter   Year
($ in thousands) 2017   2016 2017   2016
Revenues
Airline services $ 127,152 $ 105,011 $ 459,272 $ 410,598
Reimbursables 51,198   30,045   155,469   82,261  
Total ACMI Services Revenues 178,350 135,056 614,741 492,859
 
Pre-Tax Earnings (Loss)     11,317     (4,953 )   2,476     (32,125 )

Significant Developments:

  • Airline services revenues increased 21 percent to $127.2 million in the fourth quarter and 12 percent to $459.3 million for the year. Pre-tax earnings improved substantially to $11.3 million for the quarter and $2.5 million for the year, versus losses in the related 2016 periods.
  • Principal factors contributing to the profitability gains were increased revenues from additional CMI customer flying, lower scheduled airframe maintenance expense, reductions in premium pilot pay and training from year-ago levels, and improved efficiency and on-time service performance. 2017 pre-tax earnings included a $5.3 million charge for transferring ATSG's employee pension obligations via a third-party annuity contract.
  • ATSG’s airlines were operating five more CAM-owned aircraft at the end of 2017 vs. 2016. Billable block hours increased 26 percent for the fourth quarter and 22 percent for 2017.
  • In February 2018, ATI reached a tentative agreement with the union representing its pilot group for amendments to their collective bargaining agreement that would extend the agreement for four years. The tentative agreement is subject to ratification by the pilots, the voting for which is to be held by the end of March.

Ground Services/Other Activities

ATSG created Ground Services, a new reportable segment effective for the fourth quarter, that includes the results of its operations providing gateway services, postal center management services, and maintenance of ground and material handling equipment. The results of ATSG’s remaining activities previously included under Other Activities, including its aircraft maintenance services and conversion services businesses, and corporate expenses, are reflected below under Other.

             
Ground Services   Fourth Quarter   Year
($ in thousands) 2017   2016 2017   2016
Revenues $ 72,085 $ 44,463 $ 206,631 $ 116,796
Pre-Tax Earnings   2,118   1,754   9,369   10,603

Significant Developments:

  • Total revenues from all ground services in the fourth quarter were $72.1 million, up 62 percent. External customer revenues increased by 63 percent versus the fourth quarter of last year to $71.5 million, and by 78 percent to $204.2 million for the year. Material handling services provided at gateways for Amazon were the single largest contributor to revenue growth in Ground Services.
  • Earnings decreased $1.2 million for the year, principally reflecting the termination of hub services for Amazon in Wilmington in May 2017.
               
Other       Fourth Quarter   Year
($ in thousands) 2017   2016 2017   2016
Revenues $ 61,567 $ 40,484 $ 227,205 $ 145,743
Pre-Tax Earnings       (371 )   1,782   4,355   6,020

Significant Developments:

  • Total revenues from other activities in the fourth quarter were $61.6 million. External customer revenues from other activities increased $25.7 million to $36.8 million for the fourth quarter and increased $65.3 million to $108.9 million for the year. Pemco, acquired in December 2016, accounted for $79.5 million of the group’s revenues of $227.2 million during 2017.
  • The fourth-quarter pre-tax loss of $371 thousand compared with a profit of $1.8 million a year ago. Additional earnings from expanded aircraft maintenance and modification services were offset by reduced aviation fuel sales, higher administrative expenses and ATSG’s share of losses from its minority investment in a European airline.

Outlook

ATSG expects that its Adjusted EBITDA from Continuing Operations for 2018 will be approximately $310 million, or a 16 percent increase from 2017, as ten 767-300 freighters enter service during the year. One 737-400 freighter will enter service in March.

"Our outlook for 2018 is very positive," Hete said. "We have firm customer commitments for all six of the 767 freighters we expect to deploy in the first half, and strong interest from customers for the others. We expect that as e-commerce retailers come to rely even more on air express networks to satisfy their customers’ need for speed, demand for the unique blend of aircraft assets and services that ATSG provides will remain strong."

ATSG projects 2018 capital expenditures of $300 million, roughly equivalent to what was spent in 2017, principally for purchases of additional 767 aircraft and related freighter modification costs.

ATSG will also continue to invest in the design and certification of new narrow-body freighter variants of the Next Gen Boeing 737-700, and via a joint venture, the Airbus 321-200. The first converted A321 is targeted to be re-delivered to its launch customer in 2019.

ATSG's loss carryforwards, along with accelerated tax depreciation associated with our capital investments will be used to offset and reduce future federal income tax liabilities. ATSG does not expect to pay significant federal income taxes until 2023 or later. The Company estimates its effective tax rate for 2018, excluding the effects of the stock warrant re-measurement, related incentive amortization, and the benefit of the stock compensation, will decline to approximately 24 percent due to the lower federal corporate tax rates.

Revenue Recognition

Beginning in 2018, revenues related to the cost of aircraft fuel, certain contracted aviation services and airport related expenses that are directly reimbursed to ATSG and controlled by the customer will be reported net of the corresponding expenses. ACMI Services revenues included $155.5 million of such revenues in 2017. Similarly, revenues from contracts that ATSG arranges for cargo handling and related services will also be reported net of the corresponding expenses. The Ground Services segment included $134.0 million of such revenues in 2017.

Segment Reporting

For the fourth quarter of 2017, ATSG reported its results in three reportable segments - Cargo Aircraft Management (CAM), ACMI Services, and Ground Services, plus Other businesses. As a result of the effects of the revenue recognition changes described above, and other factors, the company’s reportable segments will change again in 2018. First-quarter 2018 results will be reported in three segments, CAM, ACMI Services, and MRO Services, the latter consisting primarily of results of the company’s aircraft maintenance and conversion businesses. Businesses that were included in the Ground Services segment in the fourth quarter of 2018 will be reported as Other Activities in 2018.

Conference Call

ATSG will host a conference call on February 28, 2018, at 10 a.m. Eastern time to review its financial results for the fourth quarter and full year 2017. 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 pass code 46504139. The call will also be webcast live (listen-only mode) via www.atsginc.com.

A replay of the conference call will be available by phone on February 28, 2018, beginning at 2 p.m. and continuing through March 7, 2018, at (888) 843-7419 (international callers (630) 652-3042); use pass code 46504139#. The webcast replay will remain available 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 two airlines with separate and distinct U.S. FAA Part 121 Air Carrier certificates, ATSG provides aircraft leasing, air cargo lift, aircraft maintenance services and airport ground services. ATSG's subsidiaries include ABX Air, Inc.; Airborne Global Solutions, Inc.; Air Transport International, Inc.; Cargo Aircraft Management, Inc.; and Airborne Maintenance and Engineering Services, Inc. including its division, Pemco World Air Services, Inc. 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. There are a number of important factors that could cause Air Transport Services Group's (ATSG's) actual results to differ materially from those indicated by such forward-looking statements. These factors include, but are not limited to, changes in market demand for our assets and services; our operating airlines' ability to maintain on-time service and control costs; the cost and timing with respect to which we are able to purchase and modify aircraft to a cargo configuration; fluctuations in ATSG's traded share price, which may result in mark-to-market charges on certain financial instruments; the number, timing and scheduled routes of our aircraft deployments to customers; and 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. 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 Year Ended
December 31, December 31,
2017   2016 2017   2016
REVENUES $ 322,971 $ 221,675 $ 1,068,200 $ 768,870
 
OPERATING EXPENSES
Salaries, wages and benefits 76,832 66,196 282,211 231,667
Depreciation and amortization 42,728 35,891 154,556 135,496
Maintenance, materials and repairs 40,605 28,155 141,575 119,123
Fuel 48,445 28,963 149,579 87,134
Contracted ground and aviation services 53,809 24,827 147,092 57,491
Travel 6,847 5,122 27,390 20,048
Landing and ramp 7,933 3,932 22,271 13,455
Rent 3,538 3,110 13,629 11,625
Insurance 1,369 1,121 4,820 4,456
Other operating expenses 7,194   6,218   31,782   24,627  
289,300 203,535 974,905 705,122
       
OPERATING INCOME 33,671 18,140 93,295 63,748
OTHER INCOME (EXPENSE)
Net loss on financial instruments 20,424 (14,664 ) (79,789 ) (18,107 )
Interest expense (5,365 ) (3,089 ) (17,023 ) (11,318 )
Loss from non-consolidated affiliate (2,190 ) (3,135 )
Interest income 31   33   116   131  
12,900 (17,720 ) (99,831 ) (29,294 )
       
EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 46,571 420 (6,536 ) 34,454
INCOME TAX EXPENSE 47,520 (1,175 ) 28,276 (13,394 )
       
EARNINGS (LOSS) FROM CONTINUING OPERATIONS 94,091 (755 ) 21,740 21,060
 
EARNINGS (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX 1,026   2,287   (3,245 ) 2,428  
NET EARNINGS (LOSS) $ 95,117   $ 1,532   $ 18,495   $ 23,488  
 
EARNINGS (LOSS) PER SHARE - CONTINUING OPERATIONS
Basic $ 1.60 $ (0.01 ) $ 0.37 $ 0.34
Diluted* $ 1.11 $ (0.01 ) $ 0.36 $ 0.33
 
WEIGHTED AVERAGE SHARES - CONTINUING OPERATIONS
Basic 58,733   59,083   58,907   61,330  
Diluted 68,987   59,083   59,686   62,994  

Revenues and operating expenses include the activities of PEMCO World Air Services, Inc., a wholly owned subsidiary, for periods since its acquisition by ATSG on December 30, 2016. Certain historical expenses have been reclassified to conform to the presentation above.

*For additional information about the calculation of diluted earnings per share, see accompanying schedule.

   
AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

 
December 31, December 31,
2017 2016
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 32,699 $ 16,358
Accounts receivable, net of allowance of $2,445 in 2017 and $1,264 in 2016 109,114 77,247
Inventory 22,169 19,925
Prepaid supplies and other 20,521   19,123  
TOTAL CURRENT ASSETS 184,503 132,653
 
Property and equipment, net 1,159,962 1,000,992
Lease incentive 80,684 54,730
Goodwill and acquired intangibles 44,577 45,586
Convertible note hedges 53,683
Other assets 25,435   25,369  
TOTAL ASSETS $ 1,548,844   $ 1,259,330  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable $ 99,728 $ 60,704
Accrued salaries, wages and benefits 40,127 37,044
Accrued expenses 10,455 10,324
Current portion of debt obligations 18,512 29,306
Unearned revenue 15,850   18,407  
TOTAL CURRENT LIABILITIES 184,672 155,785
 
Long term debt 497,246 429,415
Convertible note obligations 54,359
Stock warrant obligations 211,136 89,441
Post-retirement obligations 61,355 77,713
Other liabilities 45,353 52,542
Deferred income taxes 99,444 122,532
 
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; 85,000,000 shares authorized; 59,057,195 and 59,461,291 shares issued and outstanding in 2017 and 2016, respectively 591 595
Additional paid-in capital 471,456 443,416
Accumulated deficit (13,748 ) (32,243 )
Accumulated other comprehensive loss (63,020 ) (79,866 )
TOTAL STOCKHOLDERS’ EQUITY 395,279   331,902  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 1,548,844   $ 1,259,330  
 
   

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

PRE-TAX EARNINGS AND ADJUSTED PRE-TAX EARNINGS SUMMARY
FROM CONTINUING OPERATIONS
NON-GAAP RECONCILIATION
(In thousands)
 
Three Months Ended Year Ended
December 31, December 31,
2017   2016 2017   2016
Revenues
CAM
Aircraft leasing and related revenues $ 57,813 $ 51,721 $ 223,546 $ 199,598
Lease incentive amortization (4,226 ) (2,140 ) (13,986 ) (4,506 )
Total CAM 53,587 49,581 209,560 195,092
ACMI Services
Airline services 127,152 105,011 459,272 410,598
Reimbursables 51,198   30,045   155,469   82,261  
Total ACMI Services 178,350 135,056 614,741 492,859
Other Activities
Ground services 72,085 44,463 206,631 116,796
Other 61,567   40,484   227,205   145,743  
Total Other Activities 133,652   84,947   433,836   262,539  
Total Revenues 365,589 269,584 1,258,137 950,490
Eliminate internal revenues (42,618 ) (47,909 ) (189,937 ) (181,620 )
Customer Revenues $ 322,971   $ 221,675   $ 1,068,200   $ 768,870  
 
Pre-tax Earnings (Loss) from Continuing Operations
CAM, inclusive of interest expense 15,940 16,759 61,510 68,608
ACMI Services 11,317 (4,953 ) 2,476 (32,125 )
Other Activities
Ground services 2,118 1,754 9,369 10,603
Other (371 ) 1,782 4,355 6,020
Net, unallocated interest expense (667 ) (258 ) (1,322 ) (545 )
Net gain (loss) on financial instruments 20,424 (14,664 ) (79,789 ) (18,107 )
Non-consolidated affiliate (2,190 )   (3,135 )  
Total Earnings (Loss) from Continuing Operations before Income Taxes $ 46,571 $ 420 $ (6,536 ) $ 34,454
 
Adjustments to Pre-tax Earnings
Add non-service components of retiree benefit costs, net 222 206 6,105 6,815
Add loss from non-consolidated affiliates 2,190 3,135 1,229
Add lease incentive amortization 4,226 2,140 13,986 4,506
Add net loss on financial instruments (20,424 ) 14,664   79,789   18,107  
Adjusted Pre-tax Earnings $ 32,785   $ 17,430   $ 96,479   $ 65,111  
 

Non-GAAP financial measures: This report contains non-GAAP financial measures that management uses to evaluate the Company’s historical results. Management believes that these non-GAAP measures assist in highlighting operational trends, facilitate period-over-period comparisons and provide additional clarity about events and trends impacting core operating performance. Disclosing these non-GAAP measures provides insight to investors about additional metrics that the Company’s management uses to evaluate past performance and prospects for future performance.

Adjusted Pre-tax Earnings excludes certain items included in GAAP based pre-tax 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 Pre-tax 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,
2017   2016 2017   2016
 
Earnings (Loss) from Continuing Operations Before Income Taxes $ 46,571 $ 420 $ (6,536 ) $ 34,454
Interest Income (31 ) (33 ) (116 ) (131 )
Interest Expense 5,365 3,089 17,023 11,318
Depreciation and Amortization 42,728   35,891   154,556   135,496  
EBITDA from Continuing Operations $ 94,633 $ 39,367 $ 164,927 $ 181,137
Add non-service components of retiree benefit costs, net 222 206 6,105 6,815
Add losses for non-consolidated affiliates 2,190 3,135 1,229
Add lease incentive amortization 4,226 2,140 13,986 4,506
Add net loss on financial instruments (20,424 ) 14,664 79,789 18,107
       
Adjusted EBITDA $ 80,847   $ 56,377   $ 267,942   $ 211,794  
 

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 Credit Agreement to assess financial performance and determine the cost of borrowed funds. The adjustments also exclude the non-service cost components of retiree benefit plans because they are not closely related to on-going operating activities. 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 lease incentive costs recorded in revenue and costs from non-consolidated affiliates.

Adjusted EBITDA and EBITDA from Continuing Operations are non-GAAP financial measures and should not be considered as alternatives to Earnings from Continuing Operations Before Income Taxes or any other performance measure derived in accordance with GAAP. Adjusted EBITDA and EBITDA from Continuing Operations should not be considered in isolation or as a substitute for analysis of the Company's results as reported under GAAP, or as an alternative measure of liquidity.

   

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, non-GAAP calculations, 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 Year Ended
December 31,   December 31, December 31,   December 31,
2017 2016 2017 2016
  $ Per   $ Per   $ Per   $ Per
$ Share $ Share $ Share $ Share
 
Earnings (loss) from Continuing Operations - basic (GAAP) $ 94,091 $ (755 ) $ 21,740 $ 21,060
Gain from warrant revaluation, net tax (17,551 )      
Earnings (loss) from Continuing Operations - diluted (GAAP) 76,540 $ 1.11 (755 ) $ (0.01 ) 21,740 $ 0.36 21,060 $ 0.33
Adjustments, net of tax
Loss from warrant revaluation 1 10,817 0.17 77,464 1.18 13,049 0.20
Lease incentive amortization 2 2,692 0.04 1,917 0.03 16,400 0.27 3,424 0.05
Pension settlement charge 3 3,400 0.06
Loss from joint venture 4 1,395 0.02 1,997 0.03
Effect of 2017 tax law 5 (59,944 ) (0.87 )     (59,944 ) (1.00 )  
Adjusted Earnings from Continuing Operations (non-GAAP) $ 20,683   $ 0.30   $ 11,979   $ 0.19   $ 61,057   $ 0.90   $ 37,533   $ 0.58
 
Shares Shares Shares Shares
Weighted Average Shares - diluted (GAAP) 68,987 59,083 59,686 62,994
Additional weighted average shares 1   5,255   7,838   1,940  
Adjusted Shares (non-GAAP) 68,987   64,338   67,524   64,934  

Adjusted Earnings from Continuing Operations, Adjusted Shares 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.   Removes the unrealized losses for a large grant of stock warrants granted to a customer as a lease incentive and adds the effect of the warrants to the weighted average number of shares. Under U.S. GAAP, these 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.
2. Removes the amortization of the customer lease incentive which is recorded against revenue over the term of the related aircraft leases.
3. Removes the pension charge to settle certain retirement obligations of former employees through the purchase of a third party group annuity contract during the third quarter of 2017.
4. Removes losses for the Company's share of development costs for a new joint venture accounted for under the equity method.
5. Removes the effects of U.S. federal tax rate changes on deferred tax assets and deferred tax liabilities due to the enactment of the Tax Cuts and Jobs Act.
 
 
AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

CARGO AIRCRAFT FLEET

 
Owned Aircraft Types
  December 31,   December 31,   December 31,
2016 2017 2018 Projected
 
B767-200 36 36 36
B767-300 16 25 35
B757-200 4 4 4
B757 Combi 4 4 4
B737-400 1 2
Total Aircraft in Service 60 70 81
 
B767-300 in or awaiting cargo conversion 7 6 1
B737-400 in or awaiting cargo conversion 1
Total Aircraft 67 77 82
 
Aircraft in Service Deployments
December 31, December 31, December 31,
2016 2017 2018 Projected
 
Dry leased without CMI 13 18 32
Dry leased with CMI 28 33 32
ACMI/Charter 18 19 17
Staging/Unassigned 1
 

Contacts

ATSG Inc.
Quint O. Turner, Chief Financial Officer, 937-382-5591

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