Air Transport Services (US:ATSG)2020-11-04 22:04Financial Performance - Consolidated net losses from continuing operations were $5.7 million for Q3 2020, compared to net earnings of $105.1 million for Q3 2019 [81]. - Total revenues from continuing operations for the three months ending September 30, 2020, were $458.7 million, an increase of 6.3% compared to $431.0 million for the same period in 2019 [90]. - Adjusted pre-tax earnings from continuing operations were $42.2 million for Q3 2020, an increase of $13.7 million compared to Q3 2019 [88]. - Adjusted pre-tax earnings from continuing operations for the three months ending September 30, 2020, were $42.2 million, up 48.3% from $28.5 million in the same period of 2019 [90]. - The company reported a pre-tax loss of $53.4 million for Q3 2020 due to the re-measurement of financial instruments related to warrants granted to Amazon [81]. - The effective tax rate from continuing operations for the three and nine month periods ended September 30, 2020, was 202% and 43%, respectively, affected by warrant re-measurements and other adjustments [106]. Revenue Sources - Revenues from Amazon.com Services, LLC comprised approximately 29% of consolidated revenues for the nine months ending September 30, 2020, up from 21% in the same period of 2019 [77]. - The U.S. Department of Defense accounted for 33% of consolidated revenues during the nine months ending September 30, 2020, down from 36% in 2019 [80]. - External customer revenues from continuing operations increased by $38.1 million, or 10%, to $404.1 million for Q3 2020 compared to Q3 2019 [88]. - Revenues from external customers in the CAM segment totaled $51.4 million for the three months ending September 30, 2020, compared to $42.0 million for the same period in 2019, reflecting a growth of 22.4% [96]. - ACMI Services revenues increased by $28.0 million and $86.9 million during the three and nine month periods ended September 30, 2020, respectively, totaling $300.2 million and $872.0 million compared to the same periods in 2019 [98]. Operational Changes - The Company recognized $21.7 million in government grants from the CARES Act during Q3 2020 [86]. - The Company has leased 14 Boeing 767 cargo aircraft to DHL, which accounted for 12% of consolidated revenues in the first nine months of 2020 [80]. - The Company executed leases with Amazon for nine of the ten Boeing 767-300 aircraft, with the last delivery in Q4 2020 [77]. - The company added eleven Boeing 767-300 aircraft to its lease portfolio since October 1, 2019, contributing to revenue growth [96]. - As of September 30, 2020, CAM had 69 aircraft under lease to external customers, an increase from 58 aircraft in the same period of 2019 [96]. - CAM expects to complete the conversion of three passenger aircraft and one remaining purchased freighter aircraft during the fourth quarter of 2020 [97]. Expenses and Costs - Salaries, wages, and benefits expense increased by $17.9 million and $65.7 million during the three and nine month periods ended September 30, 2020, respectively, driven by a 20% increase in total headcount [104]. - Depreciation and amortization expense increased by $3.8 million and $15.6 million during the three and nine month periods ended September 30, 2020, reflecting incremental depreciation for new aircraft and upgrades [104]. - Fuel expense decreased by $5.0 million during the third quarter of 2020 but increased by $6.5 million for the first nine months of 2020 compared to the same periods in 2019 [104]. Cash Flow and Financing - Net cash generated from operating activities increased by $116.1 million to $423.3 million in the first nine months of 2020 compared to $307.1 million in 2019 [109]. - Capital expenditures for the first nine months of 2020 totaled $394.3 million, including $273.4 million for the acquisition of eight Boeing 767-300 aircraft [109]. - The company expects total capital expenditures for 2020 to reach $485 million, primarily related to aircraft purchases and freighter modifications [110]. - As of September 30, 2020, the company had $61.1 million in cash balances and a revolving credit facility with $445.7 million of unused capacity [112]. - The company issued $500 million in senior unsecured notes with an interest rate of 4.750%, maturing on February 1, 2028 [109]. - The company drew $80.0 million from its revolving credit facility in the first nine months of 2020, compared to $70.0 million in the same period of 2019 [109]. - The company anticipates financing future capital expenditures through current cash balances, operating cash flows, and the Senior Credit Agreement [110]. Risks and Challenges - The company anticipates potential supply chain disruptions affecting aircraft conversions due to the coronavirus pandemic, which may impact future operating results [97]. - The company is required to maintain collateral coverage equal to 115% of the outstanding balances of its term loan and revolving credit facility [112]. - The company is subject to covenants under its Senior Credit Agreement, including limitations on additional indebtedness and maintaining a minimum collateral coverage [112].