Atlas Air Worldwide Holdings, Inc. (Atlas Air) (New York) today (November 1) announced double-digit earnings growth for the third quarter of 2012 and provided updated guidance for full-year earnings growth in excess of 13% on both a reported and adjusted basis.

For the three months ended September 30, 2012, net income attributable to common stockholders increased 20% to $33.9 million, or $1.27 per diluted share, compared with $28.2 million, or $1.07 per diluted share, for the three months ended September 30, 2011.

On an adjusted basis, third-quarter 2012 net income attributable to common stockholders rose 10% to $33.4 million, or $1.26 per diluted share, compared with $30.4 million, or $1.15 per share, in the third quarter of 2011.

Revenues in the third quarter of 2012 grew 13%, increasing to $409.3 million from $362.9 million in the third quarter of 2011.

“Our third-quarter results highlight the transformation and diversification of our business model and the essential elements of our growth story. We have built a resilient company that is delivering increasing earnings, improved margins and growing free cash flow in a challenging business environment,” said William J. Flynn, President and Chief Executive Officer.

“In an airfreight market that has underperformed expectations this year and in the face of a marked decline in military cargo demand, we are executing on our strategic growth plan that leverages our core competencies and underscores our ability to perform well in all economic conditions.

“We have aggressively managed and modernized our fleet, developed and grown our express network ACMI service, and are adding our new 747-8F aircraft. We’re also capitalizing on new organizational capabilities, such as our military passenger flying, CMI operations and 767 service, and we are driving additional operating efficiencies through our culture of continuous improvement.”

Third-Quarter Results

Revenue and profitability growth in our core, long-term ACMI business during the third quarter were driven by our new 747-8F aircraft, which began to enter service late in the fourth quarter of 2011. Volume growth was primarily due to the continued ramp up of CMI flying for Boeing and DHL Express. ACMI results 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. ACMI customers flew 5.2% above contractual minimums during the quarter.

In AMC Charter, volumes and profitability increased as strong growth in our military passenger service outweighed a 50% reduction in military cargo block-hour volumes. AMC Charter revenues reflected a reduction in cargo revenue and a 33% reduction in the average “pegged” fuel price paid by the U.S. military, partially offset by an increase in passenger flying. The impact to revenue from changes in the “pegged” fuel price is generally offset by a corresponding impact to fuel expense.

AMC Charter results also reflected an increase in premiums earned on flying additional, more efficient 747-400 cargo aircraft in the third quarter of 2012 compared with less efficient 747-200 aircraft in the third quarter of 2011, partially offset by a reduction in the number of one-way AMC missions.

In Commercial Charter, increased revenues and volumes reflected the deployment of 747-400 cargo aircraft in lieu of retired 747-200s, the deployment of an additional 747-400 cargo aircraft to support increased demand in South America, and 747-400 aircraft from ACMI during remarketing periods. Commercial Charter results were affected by a reduction in yields driven by softer charter-market conditions compared with the third quarter of 2011, and a reduction in return legs due to fewer one-way AMC Charter missions.

Earnings in the third quarter of 2012 also reflected a reduction in maintenance expense, primarily due to the retirement of 747-200 aircraft and lower maintenance expense for 747-400 aircraft, partially offset by an increase in volume-related maintenance expense across the fleet. Results in each segment were affected by increased crew costs, with AMC Charter and Commercial Charter incurring other volume-driven operating expenses and higher aircraft ownership costs related to the deployment of 747-400 aircraft in lieu of 747-200 aircraft. Results also included an effective income tax rate of 36.4%, reflecting the resolution of income tax examinations in Hong Kong during the quarter.

Adjusted results in the third quarter of 2012 exclude incremental costs related to the retirement of the company’s 747-200 fleet, costs incurred to refinance Ex-Im Bank-backed financing, and a gain on the disposal of a 747-200 engine. Adjusted results in the third quarter of 2011 exclude pre-operating expenses for the introduction of new aircraft types, including incremental costs incurred as a result of aircraft delivery delays, as well as a gain on the disposal of aircraft.

Nine-Month Results

For the nine months ended September 30, 2012, net income attributable to common stockholders increased 24% to $77.5 million, or $2.92 per diluted share, compared with $62.6 million, or $2.37 per diluted share, for the nine months ended September 30, 2011.

On an adjusted basis, net income attributable to common stockholders for the first nine months of 2012 rose 13% to $78.3 million, or $2.95 per diluted share, compared with $69.1 million, or $2.62 per diluted share, in the first nine months of 2011.

Revenues in the first nine months of 2012 totaled $1.19 billion, an increase of 18% from $1.01 billion in the first nine months of 2011.

Cash, Cash Equivalents and Short-Term Investments

At September 30, 2012, our cash, cash equivalents and short-term investments totaled $325.1 million, compared with $195.2 million at December 31, 2011.

We expect our cash, cash equivalents and short-term investments at December 31, 2012, to total approximately $440 million.

Similar to the first nine months of 2012, the change in cash, cash equivalents and short-term investments for the full-year of 2012 is expected to be primarily driven by an increase in cash provided by operating activities and financing activities, partly offset by an increase in cash used for investing activities.

Net cash used for investing activities in the first nine months of 2012 primarily related to the purchase of our fourth and fifth 747-8F cargo aircraft for our ACMI operations, a third 767-300ER passenger aircraft for our AMC Charter operations, and a 737-300 cargo aircraft for our Dry Leasing business.

Net cash provided by financing activities primarily reflected proceeds from the issuance of debt in connection with the delivery of our fourth and fifth 747-8Fs that were partially offset by payments on debt obligations and debt issuance costs. Both the proceeds from our issuance of debt and the payments on our debt obligations reflect the refinancing of a total of $284.7 million of floating-rate term loans with fixed-rate notes issued in the capital markets.

Outlook

“We continue to anticipate strong, double-digit earnings growth in 2012,” said Mr. Flynn. “However, given the relative underperformance of the airfreight market to date this year and the softer-than-expected peak season that is materializing, we now anticipate that reported and adjusted fully diluted earnings will increase approximately 13% compared with adjusted 2011 EPS, to more than $4.65 per share rather than over $5.10, as our block hours increase approximately 12%.”

Block-hour volumes should total approximately 153,000 hours in 2012, about 7,000 fewer hours than previously anticipated. ACMI flying should account for about 70% of expected 2012 block hours, with about 15% in AMC cargo and passenger charter and 15% in Commercial Charter. ACMI customers are expected to fly approximately 5% above contractual minimums in the fourth quarter and 3% to 5% above for the entire year. During ACMI remarketing periods, any available 747-400F aircraft will continue to fly in our charter businesses.

In line with anticipated 2012 flying levels, maintenance expense is expected to total approximately $26 million in the fourth quarter and approximately $163 million for the full year.

Multiple new high-tech product launches have begun and are expected to continue during the fourth quarter. These products, which are time-sensitive-to-market and generally shipped by airfreight, should have a positive impact on volumes and yields, particularly in trade lanes supported by our ACMI customers and our charter operations.

“Our business model is working as expected, and we are growing earnings and expanding margins despite the global economic slowdown,” Mr. Flynn noted.

“High-tech products, automotive and manufactured goods, pharmaceuticals, fresh foods and other perishables are moving, and airfreight remains vital. It is never a smooth, straight line, but airfreight will continue to grow from today’s near-record global tonnages.

“We are well-positioned to serve our customers, reflecting the global scale and scope of our operations and our decision to invest in modern, efficient aircraft. Our brand stands for excellence. We have a track record of executing on our commitments. And we are leveraging our deep understanding of the global markets as we continue to grow our business and deliver advantage and value to our customers and stockholders.”

Copyright Photo: Tony Storck. Boeing 767-3S1 ER N640GT (msn 25221) prepares to land at Baltimore/Washington International Thurgood Marshall Airport. The aircraft is assigned to passenger charters, especially military charters.

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