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AIR TRANS SVCS GROUPINC COM Reports Operating Results (10-Q)

November 03, 2010 | About:

10qk

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AIR TRANS SVCS GROUPINC COM (ATSG) filed Quarterly Report for the period ended 2010-09-30.

Air Trans Svcs Groupinc Com has a market cap of $465.7 million; its shares were traded at around $7.25 with a P/E ratio of 15.6 and P/S ratio of 0.5. Air Trans Svcs Groupinc Com had an annual average earning growth of 14.1% over the past 5 years.ATSG is in the portfolios of Mohnish Pabrai of Pabrai Mohnish, Jim Simons of Renaissance Technologies LLC, Bruce Kovner of Caxton Associates, George Soros of Soros Fund Management LLC.

Highlight of Business Operations:

Pre-tax segment earnings from CAM were $12.0 million and $28.3 million for the third quarter and first nine months of 2010, respectively, compared to $6.1 million and $16.7 million for the corresponding periods of 2009. The increase in pre-tax earnings reflects sixteen additional aircraft that CAM has placed in service since September 30, 2009. CAMs results reflect an allocation of overhead expenses and interest expense based on the Companys external interest rates and the carrying value of its operating assets. CAMs interest expense was $2.3 million and $7.2 million for the third quarter and first nine months of 2010, respectively, compared to $2.3 million and $7.9 million for the corresponding periods of 2009.

ACMI Services revenues were $142.7 million and $428.2 million during the third quarter and first nine months of 2010, respectively, declining $17.6 million and $106.6 million for the corresponding periods in 2009. Revenues generated from DHLs U.S. network declined $33.2 million and $155.7 million compared to the third quarter and first nine months of 2009, when those revenues included the reimbursement of employee severance and retention benefits, the reimbursement of aircraft depreciation expense and compensation for a larger U.S. network capacity from DHL. Under a severance and retention agreement (S&R agreement) which was terminated on March 31, 2010, DHL was obligated to reimburse ABX for the cost of employee severance, retention, productivity bonuses and vacation benefits paid in accordance with the agreement. The reduction in revenues includes a reduction in the reimbursement of severance and retention benefits since 2009 when ABX experienced significant employee terminations. The decline in DHL revenues was partially offset by increased block hours flown for customers in Europe, Asia Pacific and the Caribbean. Block hours increased 6% and 8% to 23,108 hours and 67,268 hours during the third quarter and first nine months of 2010 compared to 2009. ACMI Services revenues also included additional crews that ABX added during the third quarter of 2010 to prepare for additional customer aircraft operations scheduled to begin in October of 2010. ACMI Services results included revenues of $2.3 million and $10.4 million from bridging aircraft that ABX supplied to DHL during the third quarter and first nine months of 2010, respectively, compared to $3.8 million and $8.2 million for aircraft supplied to DHL under short-term supplemental agreements during the corresponding periods in 2009.

The pre-tax earnings from all other activities were $3.1 million and $5.6 million for the third quarter and first nine months of 2010, respectively, compared to $0.1 million and $2.9 million for the corresponding periods of 2009. The increase in pre-tax earnings of $3.0 million for the third quarter of 2010 reflects increased revenues from aircraft maintenance and modification services, gains from the reduction to employee postretirement obligations and lower overhead costs compared to the third quarter of 2009. Pre-tax earnings for the first nine months of 2010 increased by $2.7 million compared to the corresponding 2009 period, which included additional gains from the sale of spare aircraft and engines which were not as significant in 2010.

Pre-tax results from discontinued DHL operations were a $0.4 million loss and a $0.1 million loss during the third quarter and first nine months of 2010, respectively, compared to earnings of $1.4 million and $8.0 million for the corresponding periods of 2009. The declines reflect the discontinuance of sorting operations for DHL in the third quarter of 2009. Pre-tax earnings from the discontinued DHL operations for the third quarter and first nine months of 2009 were $1.4 million and $5.4 million, respectively, from contractual cost mark-ups. Pre-tax earnings for the first quarter of 2009 included $2.6 million for the reimbursement from DHL of employee vacation benefits that ABX paid to terminated employees under the S&R agreement. During 2010, ABX has provided certain transitional services to DHL which are expected to cease before the end of 2010. Pre-tax earnings from the discontinued DHL operations for the first nine months of 2010 included $0.6 million from the reimbursement from DHL of employee vacation benefits. The costs of discontinued operations for the first nine months of 2010 also included pension expenses for former employees that supported the sorting operations and medical costs in excess of initially estimated accruals for former employees under severance benefit plans or COBRA.

Consolidated net earnings from continuing operations increased $8.5 million and $10.2 million for the third quarter and first nine months of 2010, respectively, compared to the corresponding periods of 2009. Improved earnings were driven by CAM Leasing. CAM Leasings pre-tax earnings increased by $5.9 million and $11.6 million during the third quarter and first nine months of 2010, respectively, compared to the corresponding 2009 periods, reflecting the lease of thirteen additional Boeing 767 aircraft to external lessees since September 2009, including eleven aircraft leases initiated with DHL since March 2010. Pre-tax earnings from ACMI Services improved by $2.4 million for the third quarter of 2010 and declined by $0.4 million for the first nine months of 2010, respectively, compared to the corresponding periods of 2009. The increased ACMI Services results for the third quarter were a result of additional block hours and the improvement of ABXs transatlantic operation for TNT Airways S.A. which was restructured as a conventional ACMI agreement in early 2010. The decline in ACMI Services for the first nine months of 2010 compared to 2009, reflects the shift of revenues to CAM for DHL aircraft leases starting April 1, 2010, higher aircraft maintenance expenses and a reduction of $1.0 million in earnings for the first quarter of 2010 from the S&R agreement, offset by the improved profitability of the transatlantic operations.

Capital spending levels are primarily a result of aircraft modification costs for Boeing 767 aircraft. Cash payments for capital expenditures were $90.7 million in the first nine months of 2010 compared to $49.9 million in the first nine months of 2009. Capital expenditures in 2010 included acquisition and cargo modification costs for eight aircraft compared to six aircraft during the first nine months of 2009. Our capital expenditures for 2010 included $65.2 million for aircraft modifications and acquisitions, $22.0 million for required heavy maintenance and $3.5 million for other equipment costs. We estimate the total level of capital spending for all of 2010 will be approximately $114 million compared to $101 million in 2009. Our estimated 2010 capital spending has been increased from $102 million projected in our 2009 Form 10-K to reflect the Companys acquisition and partial freighter conversion of three Boeing 767-300 aircraft. Actual capital spending for any future period will be impacted by progress in the aircraft modification process.

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