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Atlas Air Second Quarter Earnings

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Atlas Air Second Quarter Earnings

Old 1st Aug 2001, 02:43
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Red face Atlas Air Second Quarter Earnings

Tuesday July 31, 9:17 am Eastern Time
Press Release
Atlas Air Worldwide Holdings Reports Second Quarter Earnings
PURCHASE, N.Y.--(BUSINESS WIRE)--July 31, 2001--Atlas Air Worldwide Holdings, Inc. (NYSE:CGO - news), the holding company for Atlas Air, Inc., today reported second quarter earnings of $0.3 million, or $.01 per diluted share, excluding certain restructuring, impairment and account reserve charges.

Including such items, the Company recorded a loss of $49.0 million, or $1.28 per diluted share. Net income for the comparable second quarter 2000 was $19.0 million, or $0.53 per diluted share. The restructuring, impairment and account reserve charges, amounting to $49.3 million after tax, were largely non-cash items.

"Atlas Air's second quarter financial performance, while consistent with our expectations, reflects the very difficult air freight environment the industry currently faces,'' said Richard Shuyler, Chief Executive Officer. "Nevertheless, Atlas was able to show a small profit, despite the sharp decline in demand from existing long-term customers which has resulted in several under-utilized or idle aircraft.''

Total operating revenues declined to $149.0 million, a year over year decrease of 22%. This resulted from a 23% decrease in block hours, as customers flew at significantly reduced levels that reflected the economic downturn being experienced both domestically and internationally. While production was down, however, unit revenues improved by 1%, reflecting the greater mix of 747-400 aircraft flying by the Atlas fleet.

On a year over year basis, operating expenses in the quarter increased by $87.5 million, reflecting the restructuring, impairment and account reserve charge of $78.2 million ($49.3 million net of tax) and higher rental expenses reflecting leases entered into during 2000. Excluding such charges, operating expenses decreased by $3.9 million, or 3%.

Earnings before interest, taxes, depreciation and aircraft rentals (EBITDAR), a measure of pre-leverage cash flow, excluding the charges, totaled $57.8 million compared to $100.7 million in the previous year. This represented an EBITDAR margin of 39%.

For the first six months of 2001, total operating revenues decreased by 8% to $329.3 million from the first half of 2000, on an 11% decline in block hours. The year-to-date net loss of $50.6 million includes a $22.8 million pre-tax profit sharing settlement expense, a $78.2 million pre-tax restructuring, impairment and account reserve charge, a $2.0 million pre-tax charge for Fair Value Adjustments of SFAS 133 derivatives, and $1.6 million after tax SFAS 133 cumulative effect. Excluding these items, net income for the first half was $15.9 million, or $.41 per diluted share, versus $31.0 million for the first half of 2000.

"This was a difficult quarter for Atlas Air,'' said Shuyler. "However, as the severity of the current economic downdraft began to evidence itself, we acted quickly to take the necessary, but painful, steps to deal with these circumstances -- measures that will greatly benefit the company going forward. As previously announced, we have reduced capacity, undertaken crewmember and staff reductions and implemented significant cost efficiency programs, which we estimate will result in annualized savings of approximately $50 million once fully implemented.''

"At the same time, our strong financial position, as evidenced by our cash and investment balances of over $400 million, allows us to take advantage of opportunities arising from this difficult market. Our announced agreement to acquire Polar Air is just such an example. For a relatively modest purchase price, we will gain access to Japan and other important route authorities, acquire a debt free company and obtain access to additional B747-400 aircraft at particularly attractive ownership rates.''

"As importantly, we remain focused on maintaining the high service and reliability standards we have always provided to our customers, while identifying and offering new services and products to complement our core ACMI business. We have already taken significant strides in that regard, through innovative concepts such as our fractional ACMI program, and are also proceeding with plans for other new product offering initiatives.''

Shuyler added, "While the air cargo market outlook for the remainder of this year is still unclear, Atlas is well-positioned to emerge strongly and more profitably when market conditions finally do improve. Near term, we expect third quarter block hour production and financial results to track those of the second quarter. As our cost reductions take hold, however, we expect to see significantly-improved earnings results for the fourth quarter, and beyond.''

Significant events during the second quarter of 2001:

Announced cost reduction initiatives expected to result in annual savings of approximately $50 million.
Entered into an agreement with an affiliate of GE Capital Aviation Services, Inc. (GECAS), a wholly owned subsidiary of the General Electric Company (NYSE:GE - news), to acquire Polar Air Cargo for a stated purchase price of $84 million. Agreements to monetize assets and arrangements to place surplus aircraft, restructure leases and financing commitments of GECAS are expected to reduce the effective net cost of the acquisition by $25 million to $30 million.
Appointed Douglas A. Carty Senior Vice President and Chief Financial Officer, and promoted Fred deLeeuw, previously Vice President of Corporate Finance, to Senior Vice President of Strategic Planning.
Elected Richard A. Galbraith and Ronald B. Woodard to the Board of Directors.
Became the General Sales Agent (GSA) to U.S. federal agencies for Russian carrier Volga-Dnepr Airlines, for Volga-Dnepr's An-124-100 services.
Atlas Air Worldwide Holdings, Inc. (NYSE:CGO - news) is the holding company of Atlas Air, Inc., a United States certificated air carrier that operates a fleet of Boeing 747 freighters under ACMI contracts. These contracts include the provision by Atlas Air of the Aircraft, Crew, Maintenance and Insurance for some of the world's leading international carriers.

To the extent that any of the statements contained herein relating to the Company's expectations, assumptions and other Company matters are forward-looking, they are made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on current expectations that involve a number of uncertainties and risks that could cause actual results to differ materially from those projected in the forward-looking statements, including, but not limited to, risks associated with: worldwide business and economic conditions; product demand and the rate of growth in the air cargo industry; the impact of competitors and competitive aircraft and aircraft financing availability; the ability to attract and retain new and existing customers; normalized aircraft operating costs and reliability; management of growth; the continued productivity of its workforce; dependence on key personnel; and regulatory matters. For additional information regarding these and other risk factors, reference is made to the Company's Annual Report on Form 10-K for the year ended December 31, 2000 and the Quarterly Report on Form 10-Q for the period ended March 31, 2001.

Atlas Air Worldwide Holdings, Inc.
($ Millions, except per share and block hour data)

Second Quarter, Ended June 30
2001 Pro-Forma
(a) 2001 Actual 2000 Actual
-------------- ----------- -----------

Operating Revenues $149.0 $149.0 $191.8
Operating Income (Loss) 6.3 (71.9) 58.4
Pre-Tax Income (Loss) (9.4) (87.6) 30.7
------- ------ ------

Net Income (Loss) $0.3 ($49.0) $19.0
======= ====== ======

Diluted Earnings per Share $0.01 ($1.28) $0.53
Diluted Weighted Average
Shares Outstanding
(000's) 38,286 38,286 36,021
Total Block Hours 25,432 25,432 33,140

(a) Pro-Forma results for Quarter ended June 30, 2001 exclude
operating expense of $78.2 million pre-tax, or $49.3 million
after-tax, for Restructuring, Impairment and Loss Allowance

Six Months, Ended June 30
2001 Pro-Forma
(b) 2001 Actual 2000 Actual
-------------- ----------- -----------

Operating Revenues $329.3 $329.3 $358.2
Operating Income (Loss) 44.5 (56.5) 101.6
Pre-Tax Income (Loss) 13.9 (89.2) 50.1
------- ------ ------

Income (Loss) before
Cumulative Effect of
a Change in
Accounting Principle $15.9 ($49.0) $31.0
Cumulative Effect of a
Change in Accounting
Principle: SFAS 133 -- (1.6) --
------- ------ ------

Net Income (Loss) $15.9 ($50.6) $31.0
======= ====== ======

Diluted Earnings per Share:
Before Cumulative Effect
of a Change in
Accounting Principle $0.41 ($1.28) $0.88
Change in Accounting
Principle -- ($0.04) --
------- ------ ------
Net Income $0.41 ($1.32) $0.88

Diluted Weighted Average
Shares Outstanding
(000's) 38,361 38,361 35,315
Total Block Hours 55,208 55,208 62,333

(b) Pro-Forma results for First Half 2001, ended June 30, 2001
exclude $2.0 million pre-tax charge for Fair Value Adjustments
of SFAS 133 derivatives, $22.8 million pre-tax Profit Sharing
Settlement Expense, $1.6 million after-tax Cumulative Effect
of a Change in Accounting Principle for SFAS 133, and second
quarter $78.2 million pre-tax operating expense for
Restructuring, Impairment and Loss Allowance Charge.

Atlas Air Worldwide Holdings, Inc.
Douglas Carty
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Old 1st Aug 2001, 12:51
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Interesting to work out their return on equity.....much as I hate to say it, this sort of result makes the guvnors case for flying low capital L1011s look better, if not good.....
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