Edgar Filing: ATLAS AIR WORLDWIDE HOLDINGS INC

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Accelerated filer

Non-accelerated filer

☐ (Do not check if a smaller reporting company)

Smaller reporting company

Emerging growth company

aaww-10q_20170630.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2017

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-16545

Atlas Air Worldwide Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware		13-4146982
(State or other jurisdiction of incorporation)		(IRS Employer Identification No.)

2000 Westchester Avenue, Purchase, New York		10577
(Address of principal executive offices)		(Zip Code)

(914) 701-8000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 28, 2017, there were 25,265,748 shares of the registrant’s Common Stock outstanding.

TABLE OF CONTENTS

		Page

Part I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets as of June 30, 2017 and December 31, 2016 (unaudited)	3

	Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2017 and 2016 (unaudited)	4

	Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2017 and 2016 (unaudited)	5

	Consolidated Statements of Cash Flows for the Six Months ended June 30, 2017 and 2016 (unaudited)	6

	Consolidated Statements of Stockholders’ Equity as of and for the Six Months ended June 30, 2017 and 2016 (unaudited)	7

	Notes to Unaudited Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34

Item 4.	Controls and Procedures	34

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	35

Item 1A.	Risk Factors	35

Item 6.	Exhibits	35

	Signatures	36

	Exhibit Index	37

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Atlas Air Worldwide Holdings, Inc.

Consolidated Balance Sheets

(in thousands, except share data)

(Unaudited)

	June 30, 2017			December 31, 2016
Assets
Current Assets
Cash and cash equivalents	$	271,655		$	123,890
Short-term investments		7,920			4,313
Restricted cash		11,092			14,360
Accounts receivable, net of allowance of $965 and $997, respectively		165,013			166,486
Prepaid maintenance		1,899			4,418
Prepaid expenses and other current assets		52,927			44,603
Total current assets		510,506			358,070
Property and Equipment
Flight equipment		4,156,460			3,886,714
Ground equipment		72,167			68,688
Less: accumulated depreciation		(636,189	)		(568,946	)
Flight equipment modifications in progress		223,489			154,226
Property and equipment, net		3,815,927			3,540,682
Other Assets
Long-term investments and accrued interest		23,008			27,951
Deferred costs and other assets		232,748			204,647
Intangible assets, net and goodwill		111,104			116,029
Total Assets	$	4,693,293		$	4,247,379

Liabilities and Equity
Current Liabilities
Accounts payable	$	80,882		$	59,543
Accrued liabilities		406,440			320,887
Current portion of long-term debt and capital lease		196,136			184,748
Total current liabilities		683,458			565,178
Other Liabilities
Long-term debt and capital lease		1,949,983			1,666,663
Deferred taxes		307,962			298,165
Financial instruments and other liabilities		158,588			200,035
Total other liabilities		2,416,533			2,164,863
Commitments and contingencies
Equity
Stockholders’ Equity
Preferred stock, $1 par value; 10,000,000 shares authorized; no shares issued		-			-
Common stock, $0.01 par value; 100,000,000 shares authorized; 30,063,328 and 29,633,605 shares issued, 25,265,748 and 25,017,242 shares outstanding (net of treasury stock), as of June 30, 2017 and December 31, 2016, respectively		301			296
Additional paid-in-capital		703,987			657,082
Treasury stock, at cost; 4,797,580 and 4,616,363 shares, respectively		(192,755	)		(183,119	)
Accumulated other comprehensive loss		(4,491	)		(4,993	)
Retained earnings		1,086,260			1,048,072
Total stockholders’ equity		1,593,302			1,517,338
Total Liabilities and Equity	$	4,693,293		$	4,247,379

See accompanying Notes to Unaudited Consolidated Financial Statements

Atlas Air Worldwide Holdings, Inc.

Consolidated Statements of Operations

(in thousands, except per share data)

(Unaudited)

	For the Three Months Ended						For the Six Months Ended
	June 30, 2017			June 30, 2016			June 30, 2017			June 30, 2016

Operating Revenue	$	517,366		$	443,272		$	992,761		$	861,887

Operating Expenses
Salaries, wages and benefits		111,488			101,542			215,575			195,387
Aircraft fuel		83,486			61,353			165,918			124,573
Maintenance, materials and repairs		64,769			55,435			137,585			112,459
Depreciation and amortization		40,986			37,208			78,880			72,213
Aircraft rent		33,792			36,723			69,865			73,760
Travel		34,891			32,010			67,249			62,333
Passenger and ground handling services		23,573			22,019			48,696			42,898
Navigation fees, landing fees and other rent		25,255			18,777			43,790			40,751
Gain on disposal of aircraft		(93	)		-			(147	)		-
Special charge		-			-			-			6,631
Transaction-related expenses		1,396			16,788			2,312			17,581
Other		39,345			40,593			80,523			72,420
Total Operating Expenses		458,888			422,448			910,246			821,006

Operating Income		58,478			20,824			82,515			40,881

Non-operating Expenses (Income)
Interest income		(1,342	)		(1,405	)		(2,598	)		(3,009	)
Interest expense		24,670			20,938			46,194			42,240
Capitalized interest		(1,931	)		(690	)		(3,711	)		(1,047	)
Loss on early extinguishment of debt		-			-			-			132
Unrealized gain on financial instruments		(13,763	)		(26,475	)		(8,550	)		(26,475	)
Other expense (income)		1,061			48			809			(192	)
Total Non-operating Expenses (Income)		8,695			(7,584	)		32,144			11,649

Income from continuing operations before income taxes		49,783			28,408			50,371			29,232
Income tax expense		10,739			7,489			11,292			7,842

Income from continuing operations, net of taxes		39,044			20,919			39,079			21,390

Loss from discontinued operations, net of taxes		(105	)		(345	)		(891	)		(345	)

Net Income	$	38,939		$	20,574		$	38,188		$	21,045

Earnings (loss) per share from continuing operations:
Basic	$	1.55		$	0.84		$	1.55		$	0.86

Diluted	$	0.92		$	(0.26	)	$	1.13		$	(0.24	)

Loss per share from discontinued operations:
Basic	$	(0.00	)	$	(0.01	)	$	(0.04	)	$	(0.01	)

Diluted	$	(0.00	)	$	(0.01	)	$	(0.03	)	$	(0.01	)

Earnings (loss) per share:
Basic	$	1.54		$	0.83		$	1.51		$	0.85

Diluted	$	0.92		$	(0.28	)	$	1.09		$	(0.26	)

Weighted average shares:
Basic		25,257			24,812			25,210			24,761

Diluted		26,791			25,225			26,823			25,036

See accompanying Notes to Unaudited Consolidated Financial Statements

Atlas Air Worldwide Holdings, Inc.

Consolidated Statements of Comprehensive Income

(in thousands)

(Unaudited)

	For the Three Months Ended						For the Six Months Ended
	June 30, 2017			June 30, 2016			June 30, 2017			June 30, 2016

Net Income	$	38,939		$	20,574			38,188			21,045
Other comprehensive income:
Interest rate derivatives:
Reclassification to interest expense		402			441			820			895
Income tax expense		(156	)		(171	)		(318	)		(347	)
Other comprehensive income		246			270			502			548
Comprehensive Income	$	39,185		$	20,844			38,690			21,593

See accompanying Notes to Unaudited Consolidated Financial Statements

Atlas Air Worldwide Holdings, Inc.

Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

	For the Six Months Ended
	June 30, 2017			June 30, 2016

Operating Activities:
Income from continuing operations, net of taxes	$	39,079		$	21,390
Less: Loss from discontinued operations, net of taxes		(891	)		(345	)
Net Income		38,188			21,045

Adjustments to reconcile Net Income to net cash provided by operating activities:
Depreciation and amortization		90,842			81,818
Accretion of debt securities discount		(604	)		(650	)
Provision for allowance for doubtful accounts		134			321
Special charge, net of cash payments		-			6,631
Loss on early extinguishment of debt		-			132
Unrealized gain on financial instruments		(8,550	)		(26,475	)
Gain on disposal of aircraft		(147	)		-
Deferred taxes		11,000			7,667
Stock-based compensation expense		10,579			10,961
Changes in:
Accounts receivable		(5,204	)		39,354
Prepaid expenses, current assets and other assets		(36,067	)		(15,382	)
Accounts payable and accrued liabilities		12,636			(78,178	)
Net cash provided by operating activities		112,807			47,244
Investing Activities:
Capital expenditures		(45,237	)		(27,239	)
Payments for flight equipment and modifications		(226,812	)		(186,213	)
Acquisition of business, net of cash acquired		-			(107,498	)
Proceeds from investments		1,941			7,512
Proceeds from disposal of aircraft		147			-
Net cash used for investing activities		(269,961	)		(313,438	)
Financing Activities:
Proceeds from debt issuance		435,325			84,790
Proceeds from revolving credit facility		150,000			-
Payment of revolving credit facility		(150,000	)		-
Customer maintenance reserves and deposits received		18,062			7,187
Customer maintenance reserves paid		(6,384	)		-
Proceeds from sale of convertible note warrants		38,148			-
Payments for convertible note hedges		(70,140	)		-
Purchase of treasury stock		(9,636	)		(4,255	)
Excess tax benefit from stock-based compensation expense		-			168
Payment of debt issuance costs		(10,323	)		(1,074	)
Payments of debt		(93,401	)		(91,208	)
Net cash provided by (used for) financing activities		301,651			(4,392	)
Net increase (decrease) in cash, cash equivalents and restricted cash		144,497			(270,586	)
Cash, cash equivalents and restricted cash at the beginning of period		138,250			438,931
Cash, cash equivalents and restricted cash at the end of period	$	282,747		$	168,345

Noncash Investing and Financing Activities:

Acquisition of flight equipment included in Accounts payable and accrued liabilities	$	75,668		$	15,448
Acquisition of flight equipment under capital lease	$	32,380		$	-

See accompanying Notes to Unaudited Consolidated Financial Statements

Atlas Air Worldwide Holdings, Inc.

Consolidated Statements of Stockholders’ Equity

(in thousands, except share data)

(Unaudited)

									Accumulated
						Additional			Other					Total
	Common		Treasury			Paid-In			Comprehensive			Retained		Stockholders'
	Stock		Stock			Capital			Loss			Earnings		Equity
Balance at December 31, 2016	$	296	$	(183,119	)	$	657,082		$	(4,993	)	$	1,048,072	$	1,517,338
Net Income		-		-			-			-			38,188		38,188
Other comprehensive income		-		-			-			502			-		502
Stock-based compensation		-		-			10,579			-			-		10,579
Purchase of 181,217 shares of treasury stock		-		(9,636	)		-			-			-		(9,636	)
Issuance of 429,723 shares of restricted stock		5		-			(5	)		-			-		-
Equity component of convertible note, net of tax		-		-			43,248			-			-		43,248
Purchase of convertible note hedges, net of tax		-		-			(45,065	)		-			-		(45,065	)
Issuance of convertible note warrants		-		-			38,148			-			-		38,148
Balance at June 30, 2017	$	301	$	(192,755	)	$	703,987		$	(4,491	)	$	1,086,260	$	1,593,302

								Accumulated
						Additional		Other					Total
	Common		Treasury			Paid-In		Comprehensive			Retained		Stockholders'
	Stock		Stock			Capital		Loss			Earnings		Equity
Balance at December 31, 2015	$	290	$	(171,844	)	$	625,244	$	(6,063	)	$	1,006,556	$	1,454,183
Net Income		-		-			-		-			21,045		21,045
Other comprehensive income		-		-			-