atsg-20220804

0000894081-22-000184.txt : 20220805 0000894081-22-000184.hdr.sgml : 20220805 20220805082249 ACCESSION NUMBER: 0000894081-22-000184 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 20220804 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20220805 DATE AS OF CHANGE: 20220805 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Air Transport Services Group, Inc. CENTRAL INDEX KEY: 0000894081 STANDARD INDUSTRIAL CLASSIFICATION: AIR COURIER SERVICES [4513] IRS NUMBER: 261631624 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-50368 FILM NUMBER: 221138704 BUSINESS ADDRESS: STREET 1: 145 HUNTER DR CITY: WILMINGTON STATE: OH ZIP: 45177 BUSINESS PHONE: 937-382-5591 MAIL ADDRESS: STREET 1: 145 HUNTER DR CITY: WILMINGTON STATE: OH ZIP: 45177 FORMER COMPANY: FORMER CONFORMED NAME: ABX Holdings, Inc. DATE OF NAME CHANGE: 20080102 FORMER COMPANY: FORMER CONFORMED NAME: ABX AIR INC DATE OF NAME CHANGE: 19950728 8-K 1 atsg-20220804.htm 8-K atsg-20220804

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________

Form 8-K

_____________________

Current Report

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 4, 2022

_____________________

Air Transport Services Group, Inc.

(Exact name of registrant as specified in its charter)

_____________________

000-50368

26-1631624

(State or other jurisdiction
of incorporation)

Commission
File Number:

(IRS Employer
Identification No.)

145 Hunter Drive, Wilmington, OH 45177

(Address of principal executive offices, including zip code)

(937) 382-5591

(Registrant's telephone number, including area code)

_____________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:


☐			Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)


☐			Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)


☐			Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))


☐			Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). ☐

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $0.01 per share

ATSG

NASDAQ Stock Market LLC

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. ☐

Item 2.02 Results of Operations and Financial Condition.

On August 4, 2022, Air Transport Services Group, Inc. issued a press release relating to its results for the second quarter ended June 30, 2022. A copy of the press release is furnished herewith as Exhibit 99.1 and incorporated herein by reference.

The information in this Item 2.02 is "furnished" and not "filed" for purposes of Section 18 of the Securities and Exchange Act of 1934, or otherwise subject to the liabilities of that section.

Item 9.01 Financial Statements and Exhibits.


Exhibit No.			Description
99.1*			Press release issued by Air Transport Services Group, Inc. on Au gust 4 , 2022, relating to its results for the second quarter ended June 30 , 2022.
104			Cover Page Interactive Data File (embedded within the Inline XBRL document)

*filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


AIR TRANSPORT SERVICES GROUP, INC.

By:			/S/ W. JOSEPH PAYNE
			W. Joseph Payne
			Chief Legal Officer & Secretary

Date:			August 4, 2022

EX-99.1 2 a2022q2earningsrelease.htm EX-99.1 Document

ATSG Reports Strong Second Quarter 2022 Results

Delivers 24% Top-line Growth, Driven by Continued Strength in Freighter Leasing

Reaffirms 2022 Adjusted EBITDA Guidance

WILMINGTON, OH, August 4, 2022 - Air Transport Services Group, Inc. (Nasdaq: ATSG), the leading provider of medium wide-body aircraft leasing, contracted air transportation, and related services, today reported consolidated financial results for the second quarter and six months ended June 30, 2022.

ATSG's second quarter 2022 results, as compared with the second quarter 2021, include:

Second Quarter 2022 Results

•Revenues of $510 million, up 24%

•GAAP Earnings of $54 million, or $0.73 per share basic, down from $80 million, or $1.17. Second quarter 2021 results included $38 million pretax in government grants representing pandemic relief for ATSG’s passenger airline, $30 million in incremental pretax gains primarily related to warrant revaluations.

•Adjusted Earnings Per Share* of $0.59, versus $0.35 a year ago. Amounts exclude, among other items, government grant and warrant revaluation gains. Results for each year reflect additional shares for a change in GAAP presentation related to convertible notes

•Adjusted Pretax Earnings* of $67 million, up 80%

•Adjusted EBITDA* of $158 million, up 23%

•Operating Cash Flow of $125 million, versus $183 million for the year ago quarter ended June 30. Also, Adjusted Free Cash Flow* of $72 million, versus $123 million for the year ago quarter, reflecting higher customer receivables.

Rich Corrado, president and chief executive officer of ATSG, said, "Leasing converted midsize freighter aircraft and flying them in express-package networks remained a powerful and resilient driver of our strong cash flow in the second quarter. CAM, our aircraft lessor, again fueled our adjusted earnings momentum, with nine more Boeing 767 freighters leased to third-party customers than a year ago. Our cargo airlines continue to fly more hours, using both freighters that CAM owns plus others that customers have assigned to them. Inflation-driven increases in employee costs, contracted labor, crew travel and other costs are affecting our ACMI Services results and we are taking steps to mitigate the impact where we can."

* Adjusted Earnings Per Share, Adjusted Pretax Earnings, Adjusted EBITDA and Adjusted Free Cash Flow are non-GAAP financial measures and are defined and reconciled to GAAP measures at the end of this release.

Segment Results

CAM

•External leases of nine more Boeing 767s since June 2021 contributed to CAM’s 24 percent second-quarter revenue gain. CAM also realized more 2022 revenues from new pay-by-cycle engine support services with several lessees of its 767-200 freighters. Aircraft leasing and related revenues from external customers were up 21 percent.

•CAM’s second-quarter pretax earnings increased 76 percent to $39.6 million versus the prior-year quarter. Allocated interest decreased $3 million and depreciation increased $6 million.

•Eighty-nine CAM-owned 767 freighter aircraft were leased to external customers as of June 30, 2022. CAM expects to lease six more freighters in the second half, including four 767s and two Airbus A321-200s.

•CAM purchased five 767-300 and four A321-200 passenger aircraft during the first half for conversion to freighters. One CAM-owned 767-300 passenger aircraft was removed from service with Omni Air and scheduled for freighter conversion. Nineteen CAM-owned aircraft were in or awaiting conversion to freighters as of June 30, 2022, consisting of fourteen 767-300s and five A321s.

ACMI Services

•Second-quarter revenues increased 27 percent to $347 million. Block hours for ATSG's airlines reflected sharply higher passenger flying and the benefit of four more CAM-leased freighters in CMI service than a year ago, plus four more 767 freighters provided by customers for our airlines to operate.

•Second-quarter flight schedules were up from a year ago, particularly for passenger charter operations. Revenue block hours increased nine percent overall, including a 13 percent increase for passenger and combi flying and a 7 percent increase for cargo aircraft.

•Pretax segment earnings decreased $23 million to $22 million for the quarter. Prior-year results included $38 million from government grants awarded to offset pandemic effects on Omni Air’s passenger operations.

•Excluding the government grants, segment earnings more than tripled from a year ago.

•Second-quarter results were affected by additional costs for crew coverage and inflation-driven increases in operating costs, including crew travel, fuel costs for positioning aircraft, and labor costs, including contracted worker costs.

2022 Outlook

ATSG continues to project a record $640 million in Adjusted EBITDA for 2022, up nearly $100 million from 2021. Our 2022 Adjusted EBITDA forecast assumes:

•The addition of ten dry leases of converted freighters for the year, including eight 767-300s and two A321-200 aircraft.

•Seven more 767 freighters that our airlines will operate under CMI arrangements that the aircraft’s owners or lessees have assigned to our airlines.

•Mitigation of some inflation-driven cost increases in ACMI Services and rate increases for military passenger operations beginning in the fourth quarter.

•Full restoration of ATI’s global combi service to all remote U.S. military facilities it served before the pandemic, including a major route scheduled to resume in the fourth quarter.

ATSG has raised its capital spending projection for 2022 by $35 million to $625 million, including $205 million in sustaining capex and $420 million for growth. The increase in growth capex reflects payments in the second half of 2022 to acquire feedstock aircraft previously scheduled to be purchased in 2023. 2022 growth capex will be funded primarily by the strong Adjusted Free Cash Flow ATSG will generate this year.

CAM has completed the first four of its projected eight 767-300 leases this year. ATSG’s cargo airlines continue to add customers’ aircraft to its freighter fleet. Those aircraft, along with expanded peak flying, are expected to boost air delivery revenues and earnings in the second half of the year.

Corrado said that Omni Air’s revenues and flights for the U.S. military remain at high levels and ATSG’s passenger business is expected to deliver solid results in the second half.

“Despite persistent inflation, we expect to reach our financial targets for 2022, as demand for our express-package network assets and flight operations remains high. E-commerce shopping habits, now well ingrained and reinforced by often lower online prices, will continue to drive express-package delivery

networks that assure rapid, reliable delivery. That trend, in turn, will drive growth in ATSG’s cash flow through the current economic cycle and beyond," he said.

Corrado noted that ATSG expects to lease a record eighteen freighters in 2023, including fourteen 767s and four A321s.

“The majority of those orders are backed by customer deposits, and nearly all are from existing customers, giving us great confidence about growth in our core leasing returns over the next 18 months,” he said. “Beyond that, we have customer orders for twenty Airbus A330s we will start to acquire and convert next year, with deliveries beginning in 2024. Our existing lease portfolio and order book translate into a compelling growth story for ATSG in the coming years."

Non-GAAP Financial Measures

This release, including the attached tables, contains non-GAAP financial measures that management uses to evaluate historical results and project future results. Management believes that these non-GAAP measures assist in highlighting operational trends, facilitating period-over-period comparisons, and providing additional clarity about events and trends affecting core operating performance. Disclosing these non-GAAP measures provides insight to investors about additional metrics that management uses to evaluate past performance and prospects for future performance. Non-GAAP measures should not be considered in isolation or as a substitute for analysis of the Company's results as reported under GAAP.

The historical non-GAAP financial measures included in this release are reconciled to GAAP earnings in tables included later in this release. The Company does not provide a reconciliation of projected Adjusted EBITDA because it is unable to predict with reasonable accuracy the value of certain adjustments. Certain adjustments can be significantly impacted by the re-measurements of financial instruments including stock warrants issued to a customer. The Company’s earnings on a GAAP basis and the non-GAAP adjustments for gains and losses resulting from the re-measurement of stock warrants, will depend on the future prices of ATSG stock, interest rates, and other assumptions which are highly uncertain.

Conference Call

ATSG will host an investor conference call on Friday, August 5, 2022, at 10 a.m. Eastern time to review its financial results for the second quarter of 2022. Participants must register in advance to receive a number and PIN to connect by phone, using a link provided on our website, atsginc.com/investors. A separate link will offer access to a live, listen-only webcast of the call. The webcast will remain available for replay via the same site for 30 days.

About ATSG

ATSG is a leading provider of aircraft leasing and air cargo transportation and related services to domestic and foreign air carriers and other companies that outsource their air cargo lift requirements. ATSG, through its leasing and airline subsidiaries, is the world's largest owner and operator of converted Boeing 767 freighter aircraft. Through its principal subsidiaries, including three airlines with separate and distinct U.S. FAA Part 121 Air Carrier certificates, ATSG provides aircraft leasing, air cargo lift, passenger ACMI and charter services, aircraft maintenance services and airport ground services. ATSG's subsidiaries include ABX Air, Inc.; Airborne Global Solutions, Inc.; Airborne Maintenance and Engineering Services, Inc., including its subsidiary, Pemco World Air Services, Inc.; Air Transport International, Inc.; Cargo Aircraft Management, Inc.; and Omni Air International, LLC. For more information, please see www.atsginc.com.

Except for historical information contained herein, the matters discussed in this release contain forward-looking statements that involve risks and uncertainties. A number of important factors could cause Air Transport Services Group, Inc.'s ("ATSG's") actual results to differ materially from those indicated by such forward-looking statements. Such factors include, but are not limited to: (i) the extent to which changes in market conditions impact the number, timing, and scheduled routes of aircraft deployments to new and existing customers; (ii) the cost and timing with respect to which we are able to purchase and modify aircraft to a cargo configuration, which may be impacted by global supply chain disruptions; (iii) our operating airlines' ability to maintain on-time service and control costs; (iv) our ability to remain in compliance with key agreements with customers, lenders and government agencies; (v) persistent elevated rates of inflation and changes in general economic and/or industry-specific

conditions such as higher labor costs, increases in interest rates, an economic recession, and downturns in customer business cycles; (vi) the impact arising from COVID-19 outbreaks, including the emergence of COVID-19 variants; (vii) mark-to-market changes on certain financial instruments; and (viii) other factors that are contained from time to time in ATSG's filings with the U.S. Securities and Exchange Commission, including its annual report on Form 10-K and quarterly reports on Form 10-Q. Readers should carefully review this release and should not place undue reliance on ATSG's forward-looking statements. These forward-looking statements were based on information, plans and estimates as of the date of this release. Except as may be required by applicable law, ATSG undertakes no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

Contact:

Quint Turner, ATSG Inc. Chief Financial Officer

937-366-2303

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share data)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
REVENUES	$	509,668	$	409,872	$	995,528	$	785,960

OPERATING EXPENSES
Salaries, wages and benefits	162,797		141,524		324,559		283,540
Depreciation and amortization	81,372		75,633		163,443		146,684
Maintenance, materials and repairs	39,407		45,913		75,116		87,920
Fuel	73,102		36,592		133,460		67,034
Contracted ground and aviation services	20,153		18,794		38,484		33,597
Travel	28,480		18,501		52,679		36,905
Landing and ramp	4,085		3,026		8,663		6,135
Rent	7,068		5,726		13,731		11,594
Insurance	2,326		3,068		4,878		6,204
Other operating expenses	20,361		14,750		40,204		31,173
Government grants	—		(38,274)		—		(66,304)
	439,151		325,253		855,217		644,482

OPERATING INCOME	70,517		84,619		140,311		141,478
OTHER INCOME (EXPENSE)
Interest income	15		9		24		28
Non-service component of retiree benefit credits	5,388		4,456		10,776		8,913
Debt issuance costs	—		(6,505)		—		(6,505)
Net gain on financial instruments	6,011		35,703		8,707		45,175
Losses from non-consolidated affiliates	(3,220)		965		(4,623)		(218)
Interest expense	(9,461)		(15,021)		(20,860)		(29,543)
	(1,267)		19,607		(5,976)		17,850

EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	69,250		104,226		134,335		159,328
INCOME TAX EXPENSE	(15,040)		(24,357)		(30,329)		(37,169)

EARNINGS FROM CONTINUING OPERATIONS	54,210		79,869		104,006		122,159

EARNINGS FROM DISCONTINUED OPERATIONS, NET OF TAX	882		65		882		65
NET EARNINGS	$	55,092	$	79,934	$	104,888	$	122,224

EARNINGS PER SHARE - CONTINUING OPERATIONS
Basic	$	0.73	$	1.17	$	1.41	$	1.91
Diluted	$	0.61	$	0.74	$	1.18	$	1.23

WEIGHTED AVERAGE SHARES - CONTINUING OPERATIONS
Basic	73,980		68,206		73,934		63,851
Diluted	89,449		72,964		89,098		73,849

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)


	June 30,		December 31,
	2022		2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	47,151	$	69,496
Accounts receivable, net of allowance of $902 in 2022 and $742 in 2021	260,260		205,399
Inventory	54,005		49,204
Prepaid supplies and other	28,157		28,742
TOTAL CURRENT ASSETS	389,573		352,841

Property and equipment, net	2,270,656		2,129,934
Customer incentive	91,293		102,913
Goodwill and acquired intangibles	498,073		505,125
Operating lease assets	64,155		62,644
Other assets	145,800		113,878
TOTAL ASSETS	$	3,459,550	$	3,267,335

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	194,951	$	174,237
Accrued salaries, wages and benefits	62,538		56,652
Accrued expenses	11,423		14,950
Current portion of debt obligations	634		628
Current portion of lease obligations	20,497		18,783
Unearned revenue and grants	38,293		47,381
TOTAL CURRENT LIABILITIES	328,336		312,631
Long term debt	1,358,842		1,298,735
Stock warrant obligations	851		915
Post-retirement obligations	20,375		21,337
Long term lease obligations	44,305		44,387
Other liabilities	53,596		49,662
Deferred income taxes	241,752		217,291

STOCKHOLDERS’ EQUITY:
Preferred stock, 20,000,000 shares authorized, including 75,000 Series A Junior Participating Preferred Stock	—		—
Common stock, par value $0.01 per share; 150,000,000 shares authorized; 74,369,138 and 74,142,183 shares issued and outstanding in 2022 and 2021, respectively	744		741
Additional paid-in capital	1,037,139		1,074,286
Retained earnings	435,189		309,430
Accumulated other comprehensive loss	(61,579)		(62,080)
TOTAL STOCKHOLDERS’ EQUITY	1,411,493		1,322,377
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	3,459,550	$	3,267,335

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED SUMMARY OF CASH FLOWS

(In thousands)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021

OPERATING CASH FLOWS	$	124,541	$	182,744	$	250,209	$	307,191

INVESTING ACTIVITIES:
Aircraft acquisitions and freighter conversions	(133,378)		(115,402)		(205,293)		(200,104)
Planned aircraft maintenance, engine overhauls and other non-aircraft additions to property and equipment	(52,580)		(59,406)		(88,917)		(100,145)
Proceeds from property and equipment	78		680		154		724
Investments in businesses	(16,545)		(785)		(16,545)		(2,482)
TOTAL INVESTING CASH FLOWS	(202,425)		(174,913)		(310,601)		(302,007)

FINANCING ACTIVITIES:
Principal payments on debt	(205,210)		(1,601,854)		(295,310)		(1,725,919)
Proceeds from borrowings	410,000		1,290,600		450,000		1,430,600
Repurchase of senior unsecured notes	(115,204)		—		(115,204)		—
Proceeds from senior unsecured bond issuance	—		207,400		—		207,400
Payments for financing costs	—		(2,655)		—		(2,806)
Proceeds from issuance of warrants	—		131,967		—		131,967
Taxes paid for conversion of employee awards	(89)		(39)		(1,439)		(1,236)
TOTAL FINANCING CASH FLOWS	89,497		25,419		38,047		40,006

NET INCREASE (DECREASE) IN CASH	$	11,613	$	33,250	$	(22,345)	$	45,190

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	$	35,538	$	51,659	$	69,496	$	39,719
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	47,151	$	84,909	$	47,151	$	84,909

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

PRETAX EARNINGS AND ADJUSTED PRETAX EARNINGS SUMMARY

FROM CONTINUING OPERATIONS

NON-GAAP RECONCILIATION

(In thousands)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Revenues
CAM
Aircraft leasing and related revenues	$	114,703	$	93,624	$	226,638	$	181,853
Lease incentive amortization	(5,029)		(5,030)		(10,059)		(9,982)
Total CAM	109,674		88,594		216,579		171,871
ACMI Services	347,498		273,301		677,588		520,432
Other Activities	107,879		97,236		210,414		190,934
Total Revenues	565,051		459,131		1,104,581		883,237
Eliminate internal revenues	(55,383)		(49,259)		(109,053)		(97,277)
Customer Revenues	$	509,668	$	409,872	$	995,528	$	785,960

Pretax Earnings (Loss) from Continuing Operations
CAM, inclusive of interest expense	39,617		22,554		74,612		44,016
ACMI Services, inclusive of government grants and interest expense	21,837		44,762		44,002		66,021
Other Activities	191		3,161		1,742		3,550
Net, unallocated interest expense	(574)		(870)		(881)		(1,624)
Non-service components of retiree benefit credit	5,388		4,456		10,776		8,913
Debt issuance costs	—		(6,505)		—		(6,505)
Net gain on financial instruments	6,011		35,703		8,707		45,175
Loss from non-consolidated affiliates	(3,220)		965		(4,623)		(218)
Earnings from Continuing Operations before Income Taxes (GAAP)	$	69,250	$	104,226	$	134,335	$	159,328

Adjustments to Pretax Earnings
Add customer incentive amortization	5,822		5,798		11,620		11,497
Less government grants	—		(38,274)		—		(66,304)
Less non-service components of retiree benefit credit	(5,388)		(4,456)		(10,776)		(8,913)
Add debt issuance costs	—		6,505		—		6,505
Less net gain on financial instruments	(6,011)		(35,703)		(8,707)		(45,175)
Add loss from non-consolidated affiliates	3,220		(965)		4,623		218
Adjusted Pretax Earnings (non-GAAP)	$	66,893	$	37,131	$	131,095	$	57,156

Adjusted Pretax Earnings excludes certain items included in GAAP based pretax earnings (loss) from continuing operations because they are distinctly different in their predictability among periods or not closely related to our operations. Presenting this measure provides investors with a comparative metric of fundamental operations, while highlighting changes to certain items among periods.

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

ADJUSTED EARNINGS FROM CONTINUING OPERATIONS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION

NON-GAAP RECONCILIATION

(In thousands)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021

Earnings from Continuing Operations Before Income Taxes	$	69,250	$	104,226	$	134,335	$	159,328
Interest Income	(15)		(9)		(24)		(28)
Interest Expense	9,461		15,021		20,860		29,543
Depreciation and Amortization	81,372		75,633		163,443		146,684
EBITDA from Continuing Operations (non-GAAP)	$	160,068	$	194,871	$	318,614	$	335,527
Add customer incentive amortization	5,822		5,798		11,620		11,497
Less government grants	—		(38,274)		—		(66,304)
Add non-service components of retiree benefit credits	(5,388)		(4,456)		(10,776)		(8,913)
Less debt issuance costs	—		6,505		—		6,505
Less net gain on financial instruments	(6,011)		(35,703)		(8,707)		(45,175)
Add loss from non-consolidated affiliates	3,220		(965)		4,623		218

Adjusted EBITDA (non-GAAP)	$	157,711	$	127,776	$	315,374	$	233,355

Management uses Adjusted EBITDA to assess the performance of its operating results among periods. It is a metric that facilitates the comparison of financial results of underlying operations. Additionally, these non-GAAP adjustments are similar to the adjustments used by lenders in the Company’s senior secured credit facility to assess financial performance and determine the cost of borrowed funds. The adjustments also remove the non-service cost components of retiree benefit plans because they are not closely related to ongoing operating activities. The adjustments also excluded the recognition of government grants from adjusted earnings to improve comparability between periods. Management presents EBITDA from Continuing Operations, a commonly referenced metric, as a subtotal toward computing Adjusted EBITDA.

EBITDA from Continuing Operations is defined as Earnings (Loss) from Continuing Operations Before Income Taxes plus net interest expense, depreciation, and amortization expense. Adjusted EBITDA is defined as EBITDA from Continuing Operations less financial instrument revaluation gains or losses, non-service components of retiree benefit costs including pension plan settlements, amortization of warrant-based customer incentive costs recorded in revenue, recognition of government grants, charge off of debt issuance costs upon debt restructuring and costs from non-consolidated affiliates.

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

ADJUSTED FREE CASH FLOW

NON-GAAP RECONCILIATION

(In thousands)


	Three Months Ended				Six Months Ended				Twelve Months Ended
	June 30,				June 30,				June 30,
	2022		2021		2022		2021		2022

OPERATING CASH FLOWS (GAAP)	$	124,541	$	182,744	$	250,209	$	307,191	$	526,575
Sustaining capital expenditures	(52,580)		(59,406)		(88,917)		(100,145)		(171,876)

ADJUSTED FREE CASH FLOW (Non-GAAP)	$	71,961	$	123,338	$	161,292	$	207,046	$	354,699

Sustaining capital expenditures includes cash outflows for planned aircraft maintenance, engine overhauls, information systems and other non-aircraft additions to property and equipment. It does not include expenditures for aircraft acquisitions and related passenger-to-freighter conversion costs.

Cash receipts from government payroll support programs, which are included in operating cash flows, were $0 and $83.0 million for the six month periods ended June 30, 2022 and 2021, respectively. Cash receipts from government payroll support programs were $0 for the twelve months ended June 30, 2022.

Adjusted Free Cash Flow (non-GAAP) includes cash flow from operations net of expenditures for planned aircraft maintenance, engine overhauls and other non-aircraft additions to property and equipment. Management believes that adjusting GAAP operating cash flows is useful to evaluate the company's ability to generate cash for growth initiatives, debt service, cash returns for shareholders or other discretionary allocations of capital.

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

ADJUSTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS

NON-GAAP RECONCILIATION

(In thousands)


	Three Months Ended								Six Months Ended
	June 30, 2022				June 30, 2021				June 30, 2022				June 30, 2021
	$		$ Per Share		$		$ Per Share		$		$ Per Share		$		$ Per Share

Earnings from Continuing Operations - basic (GAAP)	$	54,210			$	79,869			$	104,006			$	122,159
Gain from warrant revaluation, net of tax1	(107)				(25,816)				(50)				(31,171)
Convertible notes interest charges, net of tax2	762				—				1,522				—
Earnings from Continuing Operations - diluted (GAAP)	54,865		0.61		54,053		0.74		105,478		1.18		90,988		1.23
Adjustments to remove the following, net of tax
Customer incentive amortization3	4,493		0.05		4,475		0.06		8,968		0.10		8,873		0.12
Government grants4	—		—		(29,539)		(0.40)		—		—		(51,172)		(0.69)
Non-service component of retiree benefits5	(4,158)		(0.05)		(3,439)		(0.05)		(8,316)		(0.09)		(6,879)		(0.09)
Derivative and warrant revaluation6	(4,533)		(0.05)		(1,738)		(0.05)		(6,671)		(0.07)		(3,694)		(0.15)
Loss from affiliates7	2,485		0.03		(745)		(0.01)		3,568		0.04		168		—
Debt issuance costs 8	—		—		5,020		0.07		—		—		5,020		0.07
Convertible debt interest charges (prior period), net of tax2	—		—		2,339		(0.01)		—		—		4,663		0.06
Adjusted Earnings from Continuing Operations (non-GAAP)	$	53,152	$	0.59	$	30,426	$	0.35	$	103,027	$	1.16	$	47,967	$	0.55

	Shares				Shares				Shares				Shares
Weighted Average Shares - diluted (GAAP)	89,449				72,964				89,098				73,849
Additional shares - warrants1	—				6,380				—				5,839
Additional shares - convertible notes2	—				8,111				—				8,111
Adjusted Shares (non-GAAP)	89,449				87,455				89,098				87,799

This presentation does not give effect to convertible note hedges the Company purchased having the same number of the Company's common shares, 8.1 million shares, and the same strike price of $31.90, that underlie the Convertible Notes. The convertible note hedges are expected to reduce the potential equity dilution with respect to the Company's common stock upon conversion of the Convertible Notes.

Adjusted Earnings from Continuing Operations and Adjusted Earnings Per Share from Continuing Operations are non-GAAP financial measures and should not be considered as alternatives to Earnings from Continuing Operations, Weighted Average Shares - diluted or Earnings Per Share from Continuing Operations or any other performance measure derived in accordance with GAAP. Adjusted Earnings and Adjusted Earnings Per Share from Continuing Operations should not be considered in isolation or as a substitute for analysis of the company's results as reported under GAAP.

1.Under U.S. GAAP, certain warrants are reflected as a liability and unrealized warrant gains are typically removed from diluted earnings per share (“EPS”) calculations, while unrealized warrant losses are not removed because they are dilutive to EPS. For all periods presented, additional shares assumes that Amazon net settled its remaining warrants during each period.

2.Application of accounting standard ASU No. 2020-06, "Accounting for Convertible Instruments and Contracts in an Entity's Own Equity" was adopted prospectively for EPS calculations on January 1, 2022 using the modified retrospective approach. The new GAAP requires convertible debt to be treated under the "if-convert method" for EPS. Periods prior to adoption include adjustments to reflect EPS as if the new standard had been applied historically for comparability purposes.

3.Removes the amortization of the warrant-based customer incentives which are recorded against revenue over the term of the related aircraft leases and customer contracts.

4.Removes the effects of government grants received under federal payroll support programs.

5.Removes the non-service component of post-retirement costs and credits.

6.Removes gains and losses from financial instruments, including derivative interest rate instruments and warrant revaluations.

7.Removes losses for the Company's non-consolidated affiliates.

8.Removes the charge off of debt issuance costs when the Company modified its debt structure.

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

AIRCRAFT FLEET


Aircraft Types
	June 30, 2021		December 31, 2021		June 30, 2022		December 31, 2022 Projected
	Freighter	Passenger	Freighter	Passenger	Freighter	Passenger	Freighter	Passenger

B767-200	32	3	33	3	33	3	32	3
B767-300	59	9	65	9	70	8	80	8
B777-200	—	3	—	3	—	3	—	3
B757 Combi	—	4	—	4	—	4	—	4
A321-200	—	—	—	—	—	—	2	—
Total Aircraft in Service	91	19	98	19	103	18	114	18

B767-300 in or awaiting cargo conversion	15	—	12	—	14	—	11	—
A321 in cargo conversion	—	—	1	—	5	—	8	—
B767-200 staging for lease	1	—	1	—	1	—	2	—
Total Aircraft	107	19	112	19	123	18	135	18

Aircraft in Service
	June 30,		December 31,		June 30,		December 31,
	2021		2021		2022		2022 Projected

Dry leased without CMI	34		35		37		43
Dry leased with CMI	46		50		52		52
Customer provided for CMI	3		6		7		13
ACMI/Charter1	27		26		25		24

1.ACMI/Charter includes four Boeing 767 passenger aircraft leased from external companies.

Cover Cover	Aug. 04, 2022
Cover [Abstract]
Amendment Flag	false
Document Type	8-K
Document Period End Date	Aug. 04, 2022
Entity Registrant Name	Air Transport Services Group, Inc.
Entity Incorporation, State or Country Code	DE
Entity File Number	000-50368
Entity Tax Identification Number	26-1631624
Entity Address, Address Line One	145 Hunter Drive
Entity Address, City or Town	Wilmington
Entity Address, State or Province	OH
Entity Address, Postal Zip Code	45177
City Area Code	937
Local Phone Number	382-5591
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, par value $0.01 per share
Trading Symbol	ATSG
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false
Entity Central Index Key	0000894081