- Strategic Execution, Strong Customer Demand Drive Results and Outlook
- 1Q18 Reported Income Rose to $9.6 Million
- 1Q18 Adjusted Income Grew to $23.8 Million
- Low- to Mid-30% Earnings Growth Now Expected in 2018
Atlas Air Worldwide Holdings, Inc. have announced strong increases in revenue, earnings and adjusted EBITDA for the first quarter of 2018, and an upwardly revised outlook for full-year 2018 growth in revenue, adjusted earnings and adjusted EBITDA.
“Our volumes and revenue grew by more than 20% in the first quarter, and our reported income, adjusted income and adjusted EBITDA rose even more sharply,” said President and Chief Executive Officer William J. Flynn.
“The strategic initiatives that we have put in place over many years have transformed our company. Our focus on express, e-commerce and fast-growing global markets has broadened our customer base and fleet. We are growing across all of our fleet types. We are operating in a strong airfreight environment and growing global economy.
“Our recent placement of a second 747-400 ACMI freighter with DHL Global Forwarding (DGF), the world’s largest airfreight forwarding company, underscores how well-positioned we are to capitalize on market dynamics to serve our customers. This second aircraft for DGF adds further controlled capacity on growing trade lanes where it expects demand volumes to continue to exceed capacity.
“With the demand we are seeing for our aircraft and services, we now expect our revenue to exceed $2.5 billion in 2018. We project adjusted EBITDA to increase to more than $500 million. And we anticipate our full-year adjusted net income will grow by a low- to mid-30% level compared with 2017, up from our prior outlook of mid-20% growth.”
First-Quarter Results
Volumes in the first quarter of 2018 increased 21% to 66,495 block hours, with revenue growing 24% to $590.0 million.
Reported income from continuing operations, net of taxes, during the period totaled $9.6 million, or $0.37 per diluted share, compared with $0.04 million, or $0.00 per diluted share, in the first quarter of 2017. Reported results for the latest quarter included an unrealized loss on outstanding warrants of $7.7 million compared with an unrealized loss on outstanding warrants of $5.2 million in the year-ago period.
On an adjusted basis, income from continuing operations, net of taxes, in the first quarter of 2018 increased $15.5 million to $23.8 million, or $0.86 per diluted share, from adjusted income of $8.3 million, or $0.31 per diluted share, in the year-ago quarter. Adjusted EBITDA increased $29.9 million to $93.8 million.
Increased ACMI segment revenue and contribution in the first quarter of 2018 were primarily driven by significant growth in block-hour volumes and a higher average rate per block hour, partially offset by higher heavy maintenance expense and amortization of deferred maintenance costs. Block hours grew 28% during the period, reflecting increased 767 flying for Amazon, the start-up of 747-400 flying for several new customers, and the redeployment of 747-8F aircraft from the Charter segment to ACMI. The increase in the average rate during the quarter primarily reflected the impact of new 747-400F and 747-8F flying.
Higher Charter segment contribution during the period was primarily driven by an increase in yields and higher aircraft utilization, partially offset by the redeployment of 747-8 aircraft to the ACMI segment. Higher average rates during the quarter primarily reflected an increase in yields, higher fuel prices, and the impact of Charter capacity purchased from ACMI customers that had no associated Charter block hours.
In Dry Leasing, higher segment contribution primarily reflected the placement of additional 767-300 converted freighter aircraft and the placement of a 777-200 freighter in February 2018.
Reported earnings in the first quarter of 2018 also included an effective income tax rate of 28.3%, due mainly to nondeductible changes in the value of outstanding warrants. On an adjusted basis, our results reflected an effective income tax rate of 16.1%.
Cash and Short-Term Investments
At March 31, 2018, our cash and cash equivalents, short-term investments and restricted cash totaled $147.5 million, compared with $305.5 million at December 31, 2017.
The change in position resulted from cash used for investing activities, partially offset by cash provided by operating and financing activities.
Net cash used for investing activities during the first quarter of 2018 primarily related to capital expenditures and payments for flight equipment and modifications, including the acquisition of 777-200 aircraft, 767-300 aircraft to be converted to freighter configuration, spare engines and GEnx engine performance upgrade kits.
Net cash provided by financing activities during the period primarily reflected proceeds from our revolving credit facility, partially offset by payments on debt obligations.
Increasing 2018 Outlook
We are increasing our outlook for 2018 to reflect our strong first-quarter results and our expectation for significant volume, revenue, and earnings growth.
With solid demand from our customers for our aircraft and services, and with the essential building blocks our strategic initiatives have set in place, we see opportunities to grow with existing customers and to add new ones.
Globally, economic activity is expanding. The airfreight market is strong, and airfreight tonnage continues to grow from record levels.
As a result, we see volumes rising approximately 19% to around 300,000 block hours in 2018, with about 75% of our hours in ACMI and the balance in Charter.
For the full year, we expect our revenue to exceed $2.5 billion, our adjusted EBITDA to increase to more than $500 million, and our adjusted net income to grow by a low- to mid-30% level compared with 2017.
We also expect our full-year 2018 adjusted income tax rate to be approximately 16%.
For the second quarter, we expect adjusted EBITDA to exceed $100 million, and adjusted net income to increase 30% to 35% compared with first-quarter 2018 adjusted net income of $23.8 million.
Aircraft maintenance expense in 2018 is expected to total approximately $320 million, mainly reflecting an increase in daily line maintenance due to the anticipated growth in block hours. Depreciation and amortization is expected to total approximately $220 million. In addition, core capital expenditures, which exclude aircraft and engine purchases, are expected to total approximately $100 to $110 million, mainly for parts and components for our fleet.
We provide guidance on an adjusted basis because we are unable to predict, with reasonable certainty, the effects of outstanding warrants and other items that could be material to our reported results.
Conference Call
Management will host a conference call to discuss Atlas Air Worldwide’s first-quarter 2018 financial and operating results at 11:00 a.m. Eastern Time on Thursday, May 3, 2018.
About Non-GAAP Financial Measures
To supplement our financial statements presented in accordance with U.S. GAAP, we present certain non-GAAP financial measures to assist in the evaluation of our business performance. These non-GAAP measures include Adjusted EBITDA; Adjusted income from continuing operations, net of taxes; Adjusted Diluted EPS from continuing operations, net of taxes; Adjusted effective tax rate; and Free Cash Flow, which exclude certain noncash income and expenses, and items impacting year-over-year comparisons of our results. These non-GAAP measures may not be comparable to similarly titled measures used by other companies and should not be considered in isolation or as a substitute for Income from continuing operations, net of taxes; Diluted EPS from continuing operations, net of taxes; Effective tax rate; and Net Cash Provided by Operating Activities, which are the most directly comparable measures of performance prepared in accordance with U.S. GAAP.
Our management uses these non-GAAP financial measures in assessing the performance of the company’s ongoing operations and in planning and forecasting future periods. We believe that these adjusted measures, when considered together with the corresponding U.S. GAAP financial measures and the reconciliations to those measures, provide meaningful supplemental information to assist investors and analysts in understanding our financial results and assessing our prospects for future performance. For example:
Adjusted EBITDA; Adjusted income from continuing operations, net of taxes; and Adjusted Diluted EPS from continuing operations, net of taxes, provide a more comparable basis to analyze operating results and earnings and are measures commonly used by shareholders to measure our performance. In addition, management’s incentive compensation is determined, in part, by using Adjusted EBITDA and Adjusted income from continuing operations, net of taxes.
Adjusted effective tax rate provides improved insight into the tax effects of our ongoing business operations.
Free Cash Flow helps investors assess our ability, over the long term, to create value for our shareholders as it represents cash available to execute our capital allocation strategy.
