Atlas Air Worldwide Holdings, Inc. has announced record fourth quarter and full-year 2017 revenue, record fourth-quarter earnings and robust full-year earnings growth, and a continued strong outlook in 2018.
“2017 was an exciting year for Atlas and we expect that to continue in 2018,” 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 Asian markets has broadened our customer base and fleet. As a result, we were well-positioned to capitalize on market dynamics and deliver fourth-quarter and full-year volumes, revenues, EBITDA and net income that grew sharply compared to the prior-year.
“In addition, our fourth quarter and full-year results benefited from the passage of the U.S. Tax Cuts and Jobs Act in late December, which generated a significant gain related to the revaluation of our net deferred tax liabilities.
“We expect the new tax legislation to have a positive impact on economic activity and corporate growth. On passage of the law, we were pleased to provide a one-time bonus of $1,000 to our global personnel in recognition of their hard work and commitment to the company’s growth.”
Turning to 2018 and beyond, Mr. Flynn stated: “We are operating in a strong airfreight environment, underpinned by global economic growth.
“We see tremendous opportunity for continued growth in the express and e-commerce markets, fueled by a bourgeoning middle class with higher levels of disposable income. Further globalization will require expansive and time-definite air networks to facilitate the international flow of goods.
“From a regional perspective, we believe Asia is key. It is an important geography to global trade, the source of 40% of global airfreight demand, and the main contributor to the expanding global middle class.
“In addition to the demand we are seeing for our aircraft and services, we are capitalizing on the quality, scale and scope of our operations to drive our revenues and earnings to greater levels. As a result, we expect our adjusted net income to grow by a mid-twenty-percent level in 2018 compared with 2017, including the benefit of a lower corporate income tax rate.
“By comparison, even without any benefit from tax reform, we would have expected our 2018 adjusted net income to grow by a teens percentage.”
Volumes in the fourth quarter of 2017 increased 18% to 71,563 block hours, with revenue growing 19% to a record $628.0 million.
Reported income from continuing operations, net of taxes, during the period totaled $209.5 million, or $6.71 per diluted share, compared with $28.7 million, or $1.12 per diluted share, in the fourth quarter of 2016. Reported results for the latest quarter included a $130.0 million benefit related to the revaluation of our deferred tax liabilities as well as an unrealized gain on outstanding warrants of $23.7 million. Results in the year-ago period included an unrealized loss of $27.9 million on outstanding warrants.
On an adjusted basis, income from continuing operations, net of taxes, in the fourth quarter of 2017 increased 13% to a record $66.6 million, or $2.43 per diluted share, from adjusted income of $59.0 million, or $2.24 per diluted share, in the year-ago quarter. EBITDA, as adjusted, increased 14% to $162.7 million.
Record ACMI segment revenues and contribution in the fourth quarter of 2017 were primarily driven by significant growth in block-hour volumes, partially offset by higher line maintenance and labor-related operational disruptions. Block-hour growth during the period reflected 747-400 flying for several new customers, 747-8 flying for Cathay Pacific Cargo, additional seasonal flying for express operators, and the ramp-up of 767-300 operations for Amazon. Five new 767-300s were placed in service for Amazon during the quarter, raising the current number to 12, in line with our expectations when we began ramping up this new service in 2016 and in line with our expectations for a total of 20 aircraft by the end of 2018.
Above Copyright Photo: Prime Air (Atlas Air) Boeing 767-36N ER (F) N1093A (msn 30111) ONT (Michael B. Ing). Image: 937468.
Prime Air-Atlas Air aircraft slide show:
Higher Charter segment contribution during the period was primarily driven by an increase in commercial yields, partially offset by higher maintenance costs, the redeployment of 747-8 and 747-400 aircraft to the ACMI segment, and labor-related operational disruptions. Higher average rates during the quarter primarily reflected the impact of strong commercial yields.
In Dry Leasing, higher segment contribution primarily reflected a reduction in interest expense due to the scheduled repayment of debt related to dry leased 777 aircraft and the placement of additional 767-300 converted aircraft.
Reported earnings in the fourth quarter of 2017 also included an effective income tax benefit rate of 95.7%, due mainly to the revaluation of our deferred tax liabilities as a result of the Tax Cuts and Jobs Act. On an adjusted basis, our results reflected an effective income tax rate of 31.4%.
Volumes in 2017 increased 20% to 252,802 block hours, with revenue growing 17% to a record $2.16 billion.
For the twelve months ended December 31, 2017, our continuing operations generated income of $224.3 million, or $8.68 per diluted share, which included the $130.0 million benefit related to the revaluation of our deferred tax liabilities, partially offset by an unrealized loss on financial instruments of $12.5 million related to outstanding warrants. For the twelve months ended December 31, 2016, our income from continuing operations totaled $42.6 million, or $1.70 per diluted share, including the negative impacts of transaction-related expenses and warrant accounting totaling $25.0 million.
On an adjusted basis, income from continuing operations in 2017 increased 17% to $133.7 million, or $4.93 per diluted share, compared with $114.3 million, or $4.50 per diluted share, in 2016. EBITDA, as adjusted, rose 12% to $428.6 million.
Reported earnings in 2017 also included an effective income tax benefit rate of 56.5%, due mainly to the revaluation of our deferred tax liabilities as a result of the Tax Cuts and Jobs Act. On an adjusted basis, our results reflected an effective income tax rate of 28.4%.
Cash and Short-Term Investments
At December 31, 2017, our cash, cash equivalents, short-term investments and restricted cash totaled $305.5 million, compared with $142.6 million at December 31, 2016.
The change in position resulted from cash provided by operating and financing activities, partially offset by cash used for investing activities.
Net cash provided by financing activities during 2017 primarily reflected proceeds from our issuance of convertible notes and our financings of 767-300 aircraft, partially offset by payments on debt obligations. During the fourth quarter of 2017, we completed the financings of six additional 767-300 aircraft, which generated cash of $145.8 million.
Net cash used for investing activities during 2017 primarily related to capital expenditures and payments for flight equipment and modifications, including the acquisition of 767-300 aircraft to be converted to freighter configuration, spare engines and GEnx engine performance upgrade kits.
We expect to report strong earnings growth in 2018.
We begin 2018 with solid demand from our customers for our aircraft and services. With the essential building blocks we 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 expect significant growth in our volumes, revenue and adjusted EBITDA in 2018. We see volumes rising to around 300,000 block hours, revenue growing to approximately $2.5 billion, and adjusted EBITDA of about $500 million.
We anticipate that our full-year 2018 adjusted net income will grow by a mid-twenty-percent level compared with 2017, including the benefit of tax reform. Without tax reform, we would have expected our adjusted net income to grow by a teens percentage this year. We expect our full-year 2018 adjusted income tax rate to be approximately 17%.
Given the inherent seasonality of airfreight demand, we anticipate that results in 2018 will reflect historical patterns, with more than 70% of our adjusted net income occurring in the second half. In addition, we expect adjusted EBITDA of approximately $90 million in the first quarter of 2018, and adjusted net income to be approximately double adjusted net income of $8.3 million in the first quarter of 2017.
For the full year, we anticipate total block hours will increase approximately 19% compared with 2017, with about 75% of our hours in ACMI and the balance in Charter. To meet the anticipated increase in ACMI and Charter demand, we have entered into operating leases for six Boeing 747-400 freighter aircraft. Two of these aircraft entered service in the third quarter and fourth quarter of 2017; four will enter service throughout 2018.
Aircraft maintenance expense in 2018 is expected to total approximately $315 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.
Top Copyright Photo: Atlas Air Boeing 747-47UF N415MC (msn 32837) ANC (Michael B. Ing). Image: 925067.
Atlas Air aircraft slide show: