ABX Air Inc. (ATSG, Financial) filed Quarterly Report for the period ended 2009-03-31.
AIR TRANSPORT SERVICES GROUP INC. is a leading provider of air cargo transportation and related services to domestic and foreign air carriers and other companies that outsource their air cargo lift requirements. Through five principal subsidiaries including three airlines with separate and distinct U.S. FAA Part 121 Air Carrier Certificates ATSG also provides aircraft leasing aircraft maintenance services airport ground services fuel management specialized transportation management and air charter brokerage services. ATSG subsidiaries include ABX Air Inc. Air Transport International LLC Cargo Aircraft Management Inc. Capital Cargo International Airlines Inc. and LGSTX Services Inc. ABX Air Inc. has a market cap of $48.7 million; its shares were traded at around $0.77 with a P/E ratio of 6.4.
ACMI Services revenues, excluding reimbursed expenses, were $69.9 million for the first quarter of 2009, increasing $6.8 million, or 10.8% compared to the first quarter of 2008. Increased revenues were driven by a 7% increase in block hours compared to the corresponding 2008 period, reflecting the addition of two Boeing 757 aircraft and three Boeing 767 cargo aircraft into service since mid 2008. As a result, pre-tax earnings for the ACMI Services segment increased to $1.9 million for the first quarter of 2009 compared to $1.1 million for the corresponding 2008 period. Our 2009 results for ACMI Services were negatively impacted by start-up costs for a transatlantic scheduled service we commenced in January 2009. We sell this service to customers under block space agreements. ACMI Services results included revenues of $2.4 million from Boeing 767 freighter aircraft that ABX supplied during 2009 under a supplemental agreement with DHL.
Revenues from all other activities increased $2.5 million to $11.0 million in the first quarter of 2009 compared to the corresponding 2008 period. Increased revenues were primarily a result of an increase in aircraft parts sales and maintenance services when compared to 2008. Most of this increase was for the inter-company aircraft part sales and maintenance services within the ATSG companies. Pre-tax earnings from all other activities was $0.7 million in the first quarter of 2009 compared to $0.4 million in the corresponding 2008 period. Internal sales and earnings were eliminated from the consolidated results.
Capital spending levels are primarily a result of aircraft acquisitions and related freighter modification costs. Cash payments for capital expenditures were $10.0 million in the first quarter of 2009 compared to $34.8 million in the first quarter of 2008. Capital expenditures in the first quarter of 2009 included aircraft and cargo modification costs for three aircraft while capital expenditures in the first quarter of 2008 included aircraft and cargo modification costs for eight aircraft. We estimate the total level of capital spending for all of 2009 will be approximately $126 million compared to $112 million in 2008.
On March 16, 2009, ABX and DHL reached a binding agreement to amend the unsecured DHL promissory note. On May 8, 2009 the promissory note was formally amended. We agreed to pay DHL $15.0 million of the principal balance, while DHL agreed to extinguish an additional $46.3 million of principal balance. We expect to pay the $15 million from the proceeds of aircraft puts. Accordingly the Companys balance sheet as of March 31, 2009 reflects $15.0 million of the promissory note as a current liability. The due date for the remaining $31.0 million remains unchanged, August 2028. Until that time, the promissory note continues to bear interest at a rate of 5% per annum and DHL will continue to reimburse ABX the interest expense from the note at least through 2012. Interest on the promissory note is reimbursable under the ACMI agreement without mark-up and is paid semi-annually.
aircraft. If DHL does not exercise its lease option for an aircraft, ABX would pay DHL $2.5 million of the prepaid rent credit. At DHLs request, ABX would continue to operate the five Boeing 767 aircraft for DHL under the ACMI agreement after the aircraft have been transferred to DHL. As of March 31, 2009 the Companys balance sheet reflected approximately $50.2 million of debt obligations and $21.5 million of net book value related to these five aircraft. The MOU was extended and now becomes terminable by either party on or after May 15, 2009.
Read the The complete ReportATSG is in the portfolios of Mohnish Pabrai of Pabrai Mohnish, Irving Kahn of Kahn Brothers & Company Inc..
AIR TRANSPORT SERVICES GROUP INC. is a leading provider of air cargo transportation and related services to domestic and foreign air carriers and other companies that outsource their air cargo lift requirements. Through five principal subsidiaries including three airlines with separate and distinct U.S. FAA Part 121 Air Carrier Certificates ATSG also provides aircraft leasing aircraft maintenance services airport ground services fuel management specialized transportation management and air charter brokerage services. ATSG subsidiaries include ABX Air Inc. Air Transport International LLC Cargo Aircraft Management Inc. Capital Cargo International Airlines Inc. and LGSTX Services Inc. ABX Air Inc. has a market cap of $48.7 million; its shares were traded at around $0.77 with a P/E ratio of 6.4.
Highlight of Business Operations:
Our pre-tax earnings from the DHL segment increased by $8.7 million to $12.7 million for the first quarter of 2009 compared to the corresponding period of 2008. Our pre-tax earnings from the DHL segment includes approximately $5.6 million of mark-up above our cost for the first quarter of 2009 compared to approximately $3.9 million of mark-up above our costs for the corresponding period of 2008. The increase in revenues reflects amendments to our ACMI and Hub services agreement with DHL in November 2008. In November 2008, ABX and DHL amended the pricing provisions of the ACMI and Hub Services agreements (revenue amendments) which effectively fixed ABXs pre-tax earnings for the DHL agreements for the fourth quarter of 2008 and the first quarter of 2009. Prior to the revenue amendments, expense incurred under the commercial agreements were generally marked-up by 1.75% and included in revenues. Both agreements also allowed ABX to earn incremental revenues calculated on mark-ups above the 1.75% base mark-up (up to an additional 1.60% under the ACMI agreement and an additional 2.10% under the Hub Services agreement) from the achievement of certain cost-related and service goals specified in the two agreements. Under the November 2008 revenue amendments, annual goals were not set for 2009, nor was a quarterly cost goal. Instead, the agreed revenue for the first quarter of 2009 includes amounts to replace these incremental revenues. The Companys revenues for the first quarter of 2009 include reimbursement for all expenses incurred under the commercial agreements, as well as, all of the incremental revenues set by the November 2008 revenue amendments.ACMI Services revenues, excluding reimbursed expenses, were $69.9 million for the first quarter of 2009, increasing $6.8 million, or 10.8% compared to the first quarter of 2008. Increased revenues were driven by a 7% increase in block hours compared to the corresponding 2008 period, reflecting the addition of two Boeing 757 aircraft and three Boeing 767 cargo aircraft into service since mid 2008. As a result, pre-tax earnings for the ACMI Services segment increased to $1.9 million for the first quarter of 2009 compared to $1.1 million for the corresponding 2008 period. Our 2009 results for ACMI Services were negatively impacted by start-up costs for a transatlantic scheduled service we commenced in January 2009. We sell this service to customers under block space agreements. ACMI Services results included revenues of $2.4 million from Boeing 767 freighter aircraft that ABX supplied during 2009 under a supplemental agreement with DHL.
Revenues from all other activities increased $2.5 million to $11.0 million in the first quarter of 2009 compared to the corresponding 2008 period. Increased revenues were primarily a result of an increase in aircraft parts sales and maintenance services when compared to 2008. Most of this increase was for the inter-company aircraft part sales and maintenance services within the ATSG companies. Pre-tax earnings from all other activities was $0.7 million in the first quarter of 2009 compared to $0.4 million in the corresponding 2008 period. Internal sales and earnings were eliminated from the consolidated results.
Capital spending levels are primarily a result of aircraft acquisitions and related freighter modification costs. Cash payments for capital expenditures were $10.0 million in the first quarter of 2009 compared to $34.8 million in the first quarter of 2008. Capital expenditures in the first quarter of 2009 included aircraft and cargo modification costs for three aircraft while capital expenditures in the first quarter of 2008 included aircraft and cargo modification costs for eight aircraft. We estimate the total level of capital spending for all of 2009 will be approximately $126 million compared to $112 million in 2008.
On March 16, 2009, ABX and DHL reached a binding agreement to amend the unsecured DHL promissory note. On May 8, 2009 the promissory note was formally amended. We agreed to pay DHL $15.0 million of the principal balance, while DHL agreed to extinguish an additional $46.3 million of principal balance. We expect to pay the $15 million from the proceeds of aircraft puts. Accordingly the Companys balance sheet as of March 31, 2009 reflects $15.0 million of the promissory note as a current liability. The due date for the remaining $31.0 million remains unchanged, August 2028. Until that time, the promissory note continues to bear interest at a rate of 5% per annum and DHL will continue to reimburse ABX the interest expense from the note at least through 2012. Interest on the promissory note is reimbursable under the ACMI agreement without mark-up and is paid semi-annually.
aircraft. If DHL does not exercise its lease option for an aircraft, ABX would pay DHL $2.5 million of the prepaid rent credit. At DHLs request, ABX would continue to operate the five Boeing 767 aircraft for DHL under the ACMI agreement after the aircraft have been transferred to DHL. As of March 31, 2009 the Companys balance sheet reflected approximately $50.2 million of debt obligations and $21.5 million of net book value related to these five aircraft. The MOU was extended and now becomes terminable by either party on or after May 15, 2009.
Read the The complete ReportATSG is in the portfolios of Mohnish Pabrai of Pabrai Mohnish, Irving Kahn of Kahn Brothers & Company Inc..
