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As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 8/04/22 Atlas Air Worldwide Holdings Inc. 10-Q 6/30/22 79:12M Donnelley … Solutions/FA |
Document/Exhibit Description Pages Size
1: 10-Q Quarterly Report HTML 4.30M
2: EX-31.1 Certification -- §302 - SOA'02 HTML 28K
3: EX-31.2 Certification -- §302 - SOA'02 HTML 28K
4: EX-32.1 Certification -- §906 - SOA'02 HTML 25K
10: R1 Document and Entity Information HTML 77K
11: R2 Consolidated Balance Sheets (Unaudited) HTML 141K
12: R3 Consolidated Balance Sheets (Parenthetical) HTML 44K
(Unaudited)
13: R4 Consolidated Statements of Operations (Unaudited) HTML 124K
14: R5 Consolidated Statements of Comprehensive Income HTML 54K
(Unaudited)
15: R6 Consolidated Statements of Cash Flows (Unaudited) HTML 116K
16: R7 Consolidated Statements of Stockholders' Equity HTML 91K
(Unaudited)
17: R8 Consolidated Statements of Stockholders' Equity HTML 39K
(Parentheticals) (Unaudited)
18: R9 Basis of Presentation HTML 31K
19: R10 Summary of Significant Accounting Policies HTML 57K
20: R11 Related Parties HTML 139K
21: R12 Amazon HTML 57K
22: R13 Supplemental Financial Information HTML 95K
23: R14 Special Charge and Assets Held For Sale HTML 30K
24: R15 Debt HTML 110K
25: R16 Income Taxes HTML 31K
26: R17 Financial Instruments HTML 166K
27: R18 Segment Reporting HTML 346K
28: R19 Labor and Legal Proceedings HTML 38K
29: R20 Stock Repurchases HTML 31K
30: R21 Earnings Per Share HTML 150K
31: R22 Accumulated Other Comprehensive Income HTML 94K
32: R23 Subsequent Event HTML 33K
33: R24 Summary of Significant Accounting Policies HTML 63K
(Policies)
34: R25 Summary of Significant Accounting Policies HTML 37K
(Tables)
35: R26 Related Parties (Tables) HTML 126K
36: R27 Amazon (Tables) HTML 34K
37: R28 Supplemental Financial Information (Tables) HTML 97K
38: R29 Debt (Tables) HTML 80K
39: R30 Financial Instruments (Tables) HTML 160K
40: R31 Segment Reporting (Tables) HTML 338K
41: R32 Earnings Per Share (Tables) HTML 144K
42: R33 Accumulated Other Comprehensive Income (Tables) HTML 93K
43: R34 Basis of Presentation - Additional Information HTML 28K
(Details)
44: R35 Summary of Significant Accounting Policies - HTML 80K
Additional Information (Details)
45: R36 Summary of Significant Accounting Policies - HTML 30K
Schedule of Deferred Maintenance (Details)
46: R37 Related Parties - Polar - Additional Information HTML 36K
(Details)
47: R38 Related Parties - Summary of Transactions with HTML 46K
Related Party (Details)
48: R39 Related Parties - Dry Leasing Joint Venture - HTML 31K
Additional Information (Details)
49: R40 Related Parties - Parts Joint Venture - Additional HTML 36K
Information (Details)
50: R41 Amazon - Additional Information (Details) HTML 85K
51: R42 Amazon - Summary of Customer Incentive Asset HTML 29K
within Deferred Costs and Other Assets (Details)
52: R43 Supplemental Financial Information - Additional HTML 25K
Information (Details)
53: R44 Supplemental Financial Information - Summary of HTML 30K
Allowance for Expected Credit Losses (Details)
54: R45 Supplemental Financial Information - Schedule of HTML 39K
Accrued Liabilities (Details)
55: R46 Supplemental Financial Information - Summary of HTML 31K
Changes in Deferred Revenue (Details)
56: R47 Supplemental Financial Information - HTML 32K
Reconciliation of Cash, Cash Equivalents and
Restricted Cash (Details)
57: R48 Special Charge and Assets Held For Sale - HTML 39K
Additional Information (Details)
58: R49 Debt - Term Loans - Additional Information HTML 33K
(Details)
59: R50 Debt - Convertible Notes - Additional Information HTML 63K
(Details)
60: R51 Debt - Schedule of Convertible Notes (Details) HTML 35K
61: R52 Debt - Summary of Interest Expense Recognized HTML 38K
(Details)
62: R53 Debt - Revolving Credit Facility - Additional HTML 34K
Information (Details)
63: R54 Debt - Other Debt - Additional Information HTML 37K
(Details)
64: R55 Income Taxes - Additional Information (Details) HTML 25K
65: R56 Financial Instruments - Summary of Carrying Value, HTML 56K
Estimated Fair Value and Classification of
Financial Instruments (Details)
66: R57 Segment Reporting - Additional Information HTML 39K
(Details)
67: R58 Segment Reporting - Operating Revenue and Direct HTML 83K
Contribution For Our Reportable Business Segments
(Details)
68: R59 Segment Reporting - Schedule of Disaggregated HTML 44K
Airline Operations Segment Revenue by Customer and
Service Type (Details)
69: R60 Stock Repurchases - Additional Information - HTML 41K
(Details)
70: R61 Labor and Legal Proceedings - Additional HTML 38K
Information (Details)
71: R62 Earnings Per Share - Calculations of Basic and HTML 75K
Diluted EPS (Details)
72: R63 Earnings Per Share - Additional Information HTML 32K
(Details)
73: R64 Accumulated Other Comprehensive Income - HTML 47K
Components of Accumulated Other Comprehensive
Income (Details)
74: R65 Subsequent Event - Additional Information HTML 32K
(Details)
77: XML IDEA XML File -- Filing Summary XML 146K
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| 10-Q |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM i 10-Q
i ☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended i June 30, i 2022 /
OR
i ☐ |
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: i 001-16545
i Atlas Air Worldwide Holdings, Inc.
(Exact name of registrant as specified in its charter)
i Delaware |
|
i 13-4146982 |
(State or other jurisdiction of incorporation) |
|
(IRS Employer Identification No.) |
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i 2000 Westchester Avenue, i Purchase, i i New York / |
|
i 10577 |
(Address of principal executive offices) |
|
(Zip Code) |
( i 914) i 701-8000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
|
Trading Symbol(s) |
|
Name of each exchange on which registered |
i Common Stock, $0.01 Par Value |
|
i AAWW |
|
i The NASDAQ Global Select Market |
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. i Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). i 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.
i Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company i ☐ Emerging growth company i ☐
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 i ☒
As of July 30, 2022, there were i 28,321,763 shares of the registrant’s Common Stock outstanding.
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Page |
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3 |
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Item 1. |
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3 |
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Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021 (unaudited) |
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3 |
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4 |
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Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2022 and 2021 (unaudited) |
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5 |
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Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021 (unaudited) |
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6 |
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7 |
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8 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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20 |
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Item 3. |
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33 |
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Item 4. |
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33 |
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34 |
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Item 1. |
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34 |
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Item 1A. |
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34 |
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Item 2. |
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36 |
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Item 6. |
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36 |
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37 |
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38 |
|
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Atlas Air Worldwide Holdings, Inc.
Consolidated Balance Sheets
(in thousands, except share data)
(Unaudited)
|
|
|
|
|
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||
|
|
|
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|
||||
Assets |
|
|
|
|
|
|
||
Current Assets |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
i 606,567 |
|
|
$ |
i 910,965 |
|
Restricted cash |
|
|
i 10,361 |
|
|
|
i 10,052 |
|
Accounts receivable, net of allowance of $ i 3,929 and $ i 4,003, respectively |
|
|
i 279,033 |
|
|
|
i 305,905 |
|
Prepaid expenses, assets held for sale and other current assets |
|
|
i 97,057 |
|
|
|
i 99,100 |
|
Total current assets |
|
|
i 993,018 |
|
|
|
i 1,326,022 |
|
Property and Equipment |
|
|
|
|
|
|
||
Flight equipment |
|
|
i 5,752,365 |
|
|
|
i 5,449,100 |
|
Ground equipment |
|
|
i 107,302 |
|
|
|
i 101,824 |
|
Less: accumulated depreciation |
|
|
( i 1,415,347 |
) |
|
|
( i 1,319,636 |
) |
Flight equipment purchase deposits and modifications in progress |
|
|
i 365,920 |
|
|
|
i 352,422 |
|
Property and equipment, net |
|
|
i 4,810,240 |
|
|
|
i 4,583,710 |
|
Other Assets |
|
|
|
|
|
|
||
Operating lease right-of-use assets |
|
|
i 122,993 |
|
|
|
i 138,744 |
|
Deferred costs and other assets |
|
|
i 310,976 |
|
|
|
i 329,971 |
|
Intangible assets, net and goodwill |
|
|
i 61,781 |
|
|
|
i 64,796 |
|
Total Assets |
|
$ |
i 6,299,008 |
|
|
$ |
i 6,443,243 |
|
|
|
|
|
|
|
|
||
Liabilities and Equity |
|
|
|
|
|
|
||
Current Liabilities |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
i 83,771 |
|
|
$ |
i 82,885 |
|
Accrued liabilities |
|
|
i 654,498 |
|
|
|
i 641,978 |
|
Current portion of long-term debt and finance leases |
|
|
i 355,595 |
|
|
|
i 639,811 |
|
Current portion of long-term operating leases |
|
|
i 55,138 |
|
|
|
i 55,383 |
|
Total current liabilities |
|
|
i 1,149,002 |
|
|
|
i 1,420,057 |
|
Other Liabilities |
|
|
|
|
|
|
||
Long-term debt and finance leases |
|
|
i 1,720,082 |
|
|
|
i 1,655,075 |
|
Long-term operating leases |
|
|
i 138,704 |
|
|
|
i 166,022 |
|
Deferred taxes |
|
|
i 397,890 |
|
|
|
i 354,798 |
|
Financial instruments and other liabilities |
|
|
i 28,764 |
|
|
|
i 37,954 |
|
Total other liabilities |
|
|
i 2,285,440 |
|
|
|
i 2,213,849 |
|
Commitments and contingencies |
|
|
|
|
|
|
||
Equity |
|
|
|
|
|
|
||
Stockholders’ Equity |
|
|
|
|
|
|
||
Preferred stock, $ i i 1 / par value; i i 10,000,000 / shares authorized; i i no / shares issued |
|
|
i - |
|
|
|
i - |
|
Common stock, $ i i 0.01 / par
value; i i 100,000,000 / shares authorized; |
|
|
i 352 |
|
|
|
i 347 |
|
Additional paid-in capital |
|
|
i 863,014 |
|
|
|
i 934,516 |
|
Treasury stock, at cost; i 6,907,140 and i 5,492,158 shares, respectively |
|
|
( i 337,635 |
) |
|
|
( i 225,461 |
) |
Accumulated other comprehensive income (loss) |
|
|
i 75 |
|
|
|
( i 511 |
) |
Retained earnings |
|
|
i 2,338,760 |
|
|
|
i 2,100,446 |
|
Total stockholders’ equity |
|
|
i 2,864,566 |
|
|
|
i 2,809,337 |
|
Total Liabilities and Equity |
|
$ |
i 6,299,008 |
|
|
$ |
i 6,443,243 |
|
See accompanying Notes to Unaudited Consolidated Financial Statements
3
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 |
|
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||||
Operating Revenue |
|
$ |
i 1,179,971 |
|
|
$ |
i 990,432 |
|
|
$ |
i 2,217,127 |
|
|
$ |
i 1,851,732 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Aircraft fuel |
|
|
i 385,882 |
|
|
|
i 214,269 |
|
|
|
i 630,219 |
|
|
|
i 377,820 |
|
Salaries, wages and benefits |
|
|
i 285,906 |
|
|
|
i 208,366 |
|
|
|
i 583,925 |
|
|
|
i 410,980 |
|
Maintenance, materials and repairs |
|
|
i 108,055 |
|
|
|
i 132,547 |
|
|
|
i 226,954 |
|
|
|
i 253,680 |
|
Depreciation and amortization |
|
|
i 74,358 |
|
|
|
i 66,661 |
|
|
|
i 146,560 |
|
|
|
i 134,450 |
|
Travel |
|
|
i 52,719 |
|
|
|
i 39,947 |
|
|
|
i 95,487 |
|
|
|
i 77,619 |
|
Navigation fees, landing fees and other rent |
|
|
i 39,091 |
|
|
|
i 47,409 |
|
|
|
i 78,445 |
|
|
|
i 92,296 |
|
Passenger and ground handling services |
|
|
i 34,747 |
|
|
|
i 41,504 |
|
|
|
i 69,683 |
|
|
|
i 81,569 |
|
Aircraft rent |
|
|
i 12,613 |
|
|
|
i 17,687 |
|
|
|
i 25,608 |
|
|
|
i 38,443 |
|
Loss (gain) on disposal of flight equipment |
|
|
i 19 |
|
|
|
i - |
|
|
|
( i 6,221 |
) |
|
|
i 16 |
|
Special charge |
|
|
i - |
|
|
|
i - |
|
|
|
i 2,633 |
|
|
|
i - |
|
Transaction-related expenses |
|
|
i - |
|
|
|
i 117 |
|
|
|
i - |
|
|
|
i 318 |
|
Other |
|
|
i 54,435 |
|
|
|
i 61,848 |
|
|
|
i 110,292 |
|
|
|
i 120,260 |
|
Total Operating Expenses |
|
|
i 1,047,825 |
|
|
|
i 830,355 |
|
|
|
i 1,963,585 |
|
|
|
i 1,587,451 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating Income |
|
|
i 132,146 |
|
|
|
i 160,077 |
|
|
|
i 253,542 |
|
|
|
i 264,281 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Non-operating Expenses (Income) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
|
( i 873 |
) |
|
|
( i 189 |
) |
|
|
( i 1,113 |
) |
|
|
( i 400 |
) |
Interest expense |
|
|
i 19,924 |
|
|
|
i 26,992 |
|
|
|
i 40,347 |
|
|
|
i 54,172 |
|
Capitalized interest |
|
|
( i 3,339 |
) |
|
|
( i 1,850 |
) |
|
|
( i 7,103 |
) |
|
|
( i 3,121 |
) |
Loss on early extinguishment of debt |
|
|
i 689 |
|
|
|
i - |
|
|
|
i 689 |
|
|
|
i - |
|
Unrealized loss on financial instruments |
|
|
i - |
|
|
|
i - |
|
|
|
i - |
|
|
|
i 113 |
|
Other (income) expense, net |
|
|
i 837 |
|
|
|
( i 4,854 |
) |
|
|
i 219 |
|
|
|
( i 44,310 |
) |
Total Non-operating Expenses (Income) |
|
|
i 17,238 |
|
|
|
i 20,099 |
|
|
|
i 33,039 |
|
|
|
i 6,454 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income before income taxes |
|
|
i 114,908 |
|
|
|
i 139,978 |
|
|
|
i 220,503 |
|
|
|
i 257,827 |
|
Income tax expense |
|
|
i 26,650 |
|
|
|
i 32,868 |
|
|
|
i 50,734 |
|
|
|
i 60,784 |
|
Net Income |
|
$ |
i 88,258 |
|
|
$ |
i 107,110 |
|
|
$ |
i 169,769 |
|
|
$ |
i 197,043 |
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
i 3.12 |
|
|
$ |
i 3.69 |
|
|
$ |
i 5.95 |
|
|
$ |
i 6.85 |
|
Diluted |
|
$ |
i 2.65 |
|
|
$ |
i 3.53 |
|
|
$ |
i 5.03 |
|
|
$ |
i 6.59 |
|
Weighted average shares: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
i 28,243 |
|
|
|
i 29,011 |
|
|
|
i 28,547 |
|
|
|
i 28,752 |
|
Diluted |
|
|
i 33,679 |
|
|
|
i 30,319 |
|
|
|
i 34,184 |
|
|
|
i 29,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
See accompanying Notes to Unaudited Consolidated Financial Statements
4
Atlas Air Worldwide Holdings, Inc.
Consolidated Statements of Comprehensive Income
(in thousands)
(Unaudited)
|
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
||||||||||
|
|
|
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|
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|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net Income |
|
$ |
i 88,258 |
|
|
$ |
i 107,110 |
|
|
$ |
i 169,769 |
|
|
$ |
i 197,043 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Reclassification to loss on early extinguishment of debt |
|
|
i 639 |
|
|
|
i - |
|
|
|
i 639 |
|
|
|
i - |
|
Reclassification to interest expense |
|
|
i 17 |
|
|
|
i 256 |
|
|
|
i 122 |
|
|
|
i 524 |
|
Income tax benefit |
|
|
( i 148 |
) |
|
|
( i 60 |
) |
|
|
( i 175 |
) |
|
|
( i 124 |
) |
Other comprehensive income |
|
|
i 508 |
|
|
|
i 196 |
|
|
|
i 586 |
|
|
|
i 400 |
|
Comprehensive Income |
|
$ |
i 88,766 |
|
|
$ |
i 107,306 |
|
|
$ |
i 170,355 |
|
|
$ |
i 197,443 |
|
See accompanying Notes to Unaudited Consolidated Financial Statements
5
Atlas Air Worldwide Holdings, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
|
|
For the Six Months Ended |
|||||||
|
|
|
|
|
|
||||
Operating Activities: |
|
|
|
|
|
|
|
||
Net Income |
|
$ |
i 169,769 |
|
|
$ |
i 197,043 |
|
|
|
|
|
|
|
|
|
|
||
Adjustments to reconcile Net Income to net cash provided by operating activities: |
|
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
i 172,449 |
|
|
|
i 172,216 |
|
|
Reversal of expected credit losses |
|
|
( i 6 |
) |
|
|
( i 381 |
) |
|
Loss on early extinguishment of debt |
|
|
i 689 |
|
|
|
i - |
|
|
Special charge |
|
|
i 2,633 |
|
|
|
i - |
|
|
Unrealized loss on financial instruments |
|
|
i - |
|
|
|
i 113 |
|
|
Loss (gain) on disposal of flight equipment |
|
|
( i 6,221 |
) |
|
|
i 16 |
|
|
Deferred taxes |
|
|
i 49,981 |
|
|
|
i 60,086 |
|
|
Stock-based compensation |
|
|
i 5,656 |
|
|
|
i 7,466 |
|
|
Changes in: |
|
|
|
|
|
|
|
||
Accounts receivable |
|
|
i 28,676 |
|
|
|
( i 24,730 |
) |
|
Prepaid expenses, current assets and other assets |
|
|
( i 15,806 |
) |
|
|
( i 12,452 |
) |
|
Accounts payable, accrued liabilities and other liabilities |
|
|
i 18,168 |
|
|
|
( i 56,271 |
) |
|
Net cash provided by operating activities |
|
|
i 425,988 |
|
|
|
i 343,106 |
|
|
Investing Activities: |
|
|
|
|
|
|
|
||
Capital expenditures |
|
|
( i 54,193 |
) |
|
|
( i 43,359 |
) |
|
Purchase deposits and payments for flight equipment and modifications |
|
|
( i 329,774 |
) |
|
|
( i 224,922 |
) |
|
Investment in joint ventures |
|
|
( i 5,288 |
) |
|
|
( i 1,636 |
) |
|
Proceeds from disposal of flight equipment |
|
|
i 13,500 |
|
|
|
i 1,850 |
|
|
Net cash used for investing activities |
|
|
( i 375,755 |
) |
|
|
( i 268,067 |
) |
|
Financing Activities: |
|
|
|
|
|
|
|
||
Proceeds from debt issuance |
|
|
i 230,000 |
|
|
|
i 23,948 |
|
|
Payment of debt issuance costs |
|
|
( i 2,176 |
) |
|
|
( i 1,257 |
) |
|
Payments of debt and finance lease obligations |
|
|
( i 478,940 |
) |
|
|
( i 171,223 |
) |
|
Purchase of treasury stock |
|
|
( i 100,000 |
) |
|
|
i - |
|
|
Customer maintenance reserves and deposits received |
|
|
i 8,859 |
|
|
|
i 9,029 |
|
|
Customer maintenance reserves paid |
|
|
i - |
|
|
|
( i 23,932 |
) |
|
Treasury shares withheld for payment of taxes |
|
|
( i 12,065 |
) |
|
|
( i 7,432 |
) |
|
Net cash used for financing activities |
|
|
( i 354,322 |
) |
|
|
( i 170,867 |
) |
|
Net decrease in cash, cash equivalents and restricted cash |
|
|
( i 304,089 |
) |
|
|
( i 95,828 |
) |
|
Cash, cash equivalents and restricted cash at the beginning of period |
|
|
i 921,017 |
|
|
|
i 856,281 |
|
|
Cash, cash equivalents and restricted cash at the end of period |
|
$ |
i 616,928 |
|
|
$ |
i 760,453 |
|
|
|
|
|
|
|
|
|
|
||
Noncash Investing and Financing Activities: |
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
||
Acquisition of property and equipment included in Accounts payable and accrued liabilities |
|
$ |
i - |
|
|
$ |
i 7,928 |
|
|
Acquisition of property and equipment acquired under operating leases |
|
$ |
i 488 |
|
|
$ |
i 8,875 |
|
|
Acquisition of flight equipment under finance leases |
|
$ |
i 3,154 |
|
|
$ |
i 121,313 |
|
|
Issuance of shares related to settlement of warrant liability |
|
$ |
i - |
|
|
$ |
i 31,582 |
|
|
Issuance of shares related to settlement of convertible notes |
|
$ |
i 7,901 |
|
|
$ |
i - |
|
|
|
|
|
|
|
|
|
|
||
See accompanying Notes to Unaudited Consolidated Financial Statements
6
Atlas Air Worldwide Holdings, Inc.
Consolidated Statements of Stockholders’ Equity
(in thousands, except share data)
(Unaudited)
|
As of and for the Three Months Ended June 30, 2022 |
|
|||||||||||||||||||||
|
|
|
|
|
|
|
Additional |
|
|
Accumulated |
|
|
|
|
|
Total |
|
||||||
|
Common |
|
|
Treasury |
|
|
Paid-In |
|
|
Other Comprehensive |
|
|
Retained |
|
|
Stockholders' |
|
||||||
|
Stock |
|
|
Stock |
|
|
Capital |
|
|
Income (Loss) |
|
|
Earnings |
|
|
Equity |
|
||||||
Balance at March 31, 2022 |
$ |
i 351 |
|
|
$ |
( i 317,480 |
) |
|
$ |
i 828,391 |
|
|
$ |
( i 433 |
) |
|
$ |
i 2,250,502 |
|
|
$ |
i 2,761,331 |
|
Net Income |
|
i - |
|
|
|
i - |
|
|
|
i - |
|
|
|
i - |
|
|
|
i 88,258 |
|
|
|
i 88,258 |
|
Other comprehensive income |
|
i - |
|
|
|
i - |
|
|
|
i - |
|
|
|
i 508 |
|
|
|
i - |
|
|
|
i 508 |
|
Stock-based compensation |
|
i - |
|
|
|
i - |
|
|
|
i 3,461 |
|
|
|
i - |
|
|
|
i - |
|
|
|
i 3,461 |
|
Issuance of i 138,509 shares related to settlement of |
|
i 1 |
|
|
|
- |
|
|
|
i 7,900 |
|
|
|
- |
|
|
|
- |
|
|
|
i 7,901 |
|
Receipt of i 25,957 shares related to settlement of |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Issuance of warrants |
|
- |
|
|
|
- |
|
|
|
i 3,228 |
|
|
|
- |
|
|
|
- |
|
|
|
i 3,228 |
|
Purchase of i 172,887 shares of treasury stock |
|
i - |
|
|
|
( i 20,144 |
) |
|
|
i 20,034 |
|
|
|
i - |
|
|
|
i - |
|
|
|
( i 110 |
) |
Treasury shares of i 152 withheld for payment of taxes |
|
i - |
|
|
|
( i 11 |
) |
|
|
i - |
|
|
|
i - |
|
|
|
i - |
|
|
|
( i 11 |
) |
Issuance of i 18,056 shares of restricted stock |
|
i - |
|
|
|
i - |
|
|
|
i - |
|
|
|
i - |
|
|
|
i - |
|
|
|
i - |
|
Balance at June 30, 2022 |
$ |
i 352 |
|
|
$ |
( i 337,635 |
) |
|
$ |
i 863,014 |
|
|
$ |
i 75 |
|
|
$ |
i 2,338,760 |
|
|
$ |
i 2,864,566 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
As of and for the Three Months Ended June 30, 2021 |
|
|||||||||||||||||||||
|
|
|
|
|
|
|
Additional |
|
|
Accumulated |
|
|
|
|
|
Total |
|
||||||
|
Common |
|
|
Treasury |
|
|
Paid-In |
|
|
Other Comprehensive |
|
|
Retained |
|
|
Stockholders' |
|
||||||
|
Stock |
|
|
Stock |
|
|
Capital |
|
|
Income (Loss) |
|
|
Earnings |
|
|
Equity |
|
||||||
Balance at March 31, 2021 |
$ |
i 345 |
|
|
$ |
( i 225,239 |
) |
|
$ |
i 912,728 |
|
|
$ |
( i 1,700 |
) |
|
$ |
i 1,697,062 |
|
|
$ |
i 2,383,196 |
|
Net Income |
|
i - |
|
|
|
i - |
|
|
|
i - |
|
|
|
i - |
|
|
|
i 107,110 |
|
|
|
i 107,110 |
|
Other comprehensive income |
|
i - |
|
|
|
i - |
|
|
|
i - |
|
|
|
i 196 |
|
|
|
i - |
|
|
|
i 196 |
|
Stock-based compensation |
|
i - |
|
|
|
i - |
|
|
|
i 3,406 |
|
|
|
i - |
|
|
|
i - |
|
|
|
i 3,406 |
|
Issuance of warrants |
|
i - |
|
|
|
i - |
|
|
|
i 3,228 |
|
|
|
i - |
|
|
|
i - |
|
|
|
i 3,228 |
|
Treasury shares of i 1,267 withheld for payment of taxes |
|
i - |
|
|
|
( i 82 |
) |
|
|
i - |
|
|
|
i - |
|
|
|
i - |
|
|
|
( i 82 |
) |
Issuance of i 19,332 shares of restricted stock |
|
i - |
|
|
|
i - |
|
|
|
i - |
|
|
|
i - |
|
|
|
i - |
|
|
|
i - |
|
Balance at June 30, 2021 |
$ |
i 345 |
|
|
$ |
( i 225,321 |
) |
|
$ |
i 919,362 |
|
|
$ |
( i 1,504 |
) |
|
$ |
i 1,804,172 |
|
|
$ |
i 2,497,054 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
As of and for the Six Months Ended June 30, 2022 |
|
|||||||||||||||||||||
|
|
|
|
|
|
|
Additional |
|
|
Accumulated |
|
|
|
|
|
Total |
|
||||||
|
Common |
|
|
Treasury |
|
|
Paid-In |
|
|
Other Comprehensive |
|
|
Retained |
|
|
Stockholders' |
|
||||||
|
Stock |
|
|
Stock |
|
|
Capital |
|
|
Income (Loss) |
|
|
Earnings |
|
|
Equity |
|
||||||
Balance at December 31, 2021 |
$ |
i 347 |
|
|
$ |
( i 225,461 |
) |
|
$ |
i 934,516 |
|
|
$ |
( i 511 |
) |
|
$ |
i 2,100,446 |
|
|
$ |
i 2,809,337 |
|
Net Income |
|
i - |
|
|
|
i - |
|
|
|
i - |
|
|
|
i - |
|
|
|
i 169,769 |
|
|
|
i 169,769 |
|
Other comprehensive income |
|
i - |
|
|
|
i - |
|
|
|
i - |
|
|
|
i 586 |
|
|
|
i - |
|
|
|
i 586 |
|
Cumulative effect of change in accounting |
|
i - |
|
|
|
i - |
|
|
|
( i 92,586 |
) |
|
|
i - |
|
|
|
i 68,545 |
|
|
|
( i 24,041 |
) |
Stock-based compensation |
|
i - |
|
|
|
i - |
|
|
|
i 5,656 |
|
|
|
i - |
|
|
|
i - |
|
|
|
i 5,656 |
|
Issuance of i 138,509 shares related to settlement of |
|
i 1 |
|
|
|
i - |
|
|
|
i 7,900 |
|
|
|
i - |
|
|
|
i - |
|
|
|
i 7,901 |
|
Receipt of i 25,957 shares related to settlement of |
|
i - |
|
|
|
i - |
|
|
|
i - |
|
|
|
i - |
|
|
|
i - |
|
|
|
i - |
|
Issuance of warrants |
|
i - |
|
|
|
i - |
|
|
|
i 7,532 |
|
|
|
i - |
|
|
|
i - |
|
|
|
i 7,532 |
|
Purchase of i 1,234,144 shares of treasury stock |
|
i - |
|
|
|
( i 100,109 |
) |
|
|
i - |
|
|
|
i - |
|
|
|
i - |
|
|
|
( i 100,109 |
) |
Treasury shares of i 154,881 withheld for payment |
|
i - |
|
|
|
( i 12,065 |
) |
|
|
i - |
|
|
|
i - |
|
|
|
i - |
|
|
|
( i 12,065 |
) |
Issuance of i 381,606 shares of restricted stock |
|
i 4 |
|
|
|
i - |
|
|
|
( i 4 |
) |
|
|
i - |
|
|
|
i - |
|
|
|
i - |
|
Balance at June 30, 2022 |
$ |
i 352 |
|
|
$ |
( i 337,635 |
) |
|
$ |
i 863,014 |
|
|
$ |
i 75 |
|
|
$ |
i 2,338,760 |
|
|
$ |
i 2,864,566 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
As of and for the Six Months Ended June 30, 2021 |
|
|||||||||||||||||||||
|
|
|
|
|
|
|
Additional |
|
|
Accumulated |
|
|
|
|
|
Total |
|
||||||
|
Common |
|
|
Treasury |
|
|
Paid-In |
|
|
Other Comprehensive |
|
|
Retained |
|
|
Stockholders' |
|
||||||
|
Stock |
|
|
Stock |
|
|
Capital |
|
|
Income (Loss) |
|
|
Earnings |
|
|
Equity |
|
||||||
Balance at December 31, 2020 |
$ |
i 329 |
|
|
$ |
( i 217,889 |
) |
|
$ |
i 873,874 |
|
|
$ |
( i 1,904 |
) |
|
$ |
i 1,607,129 |
|
|
$ |
i 2,261,539 |
|
Net Income |
|
i - |
|
|
|
i - |
|
|
|
i - |
|
|
|
i - |
|
|
|
i 197,043 |
|
|
|
i 197,043 |
|
Other comprehensive income |
|
i - |
|
|
|
i - |
|
|
|
i - |
|
|
|
i 400 |
|
|
|
i - |
|
|
|
i 400 |
|
Stock-based compensation |
|
i - |
|
|
|
i - |
|
|
|
i 7,466 |
|
|
|
i - |
|
|
|
i - |
|
|
|
i 7,466 |
|
Issuance of warrants |
|
i - |
|
|
|
i - |
|
|
|
i 6,456 |
|
|
|
i - |
|
|
|
i - |
|
|
|
i 6,456 |
|
Treasury shares of i 130,134 withheld for payment of taxes |
|
i - |
|
|
|
( i 7,432 |
) |
|
|
i - |
|
|
|
i - |
|
|
|
i - |
|
|
|
( i 7,432 |
) |
Issuance of i 1,280,450 shares related to settlement of warrants |
|
i 13 |
|
|
|
i - |
|
|
|
i 31,569 |
|
|
|
i - |
|
|
|
i - |
|
|
|
i 31,582 |
|
Issuance of i 357,087 shares of restricted stock |
|
i 3 |
|
|
|
i - |
|
|
|
( i 3 |
) |
|
|
i - |
|
|
|
i - |
|
|
|
i - |
|
Balance at June 30, 2021 |
$ |
i 345 |
|
|
$ |
( i 225,321 |
) |
|
$ |
i 919,362 |
|
|
$ |
( i 1,504 |
) |
|
$ |
i 1,804,172 |
|
|
$ |
i 2,497,054 |
|
See accompanying Notes to Unaudited Consolidated Financial Statements
7
Atlas Air Worldwide Holdings, Inc.
Notes to Unaudited Consolidated Financial Statements
1. Basis of Presentation
Our consolidated financial statements include the accounts of the holding company, Atlas Air Worldwide Holdings, Inc. (“AAWW”), and its consolidated subsidiaries. AAWW is the parent company of our principal operating subsidiary, Atlas Air, Inc. (“Atlas”), and several subsidiaries related to our dry leasing services (collectively referred to as “Titan”). AAWW also has a i 51% equity interest and i 75% voting interest in Polar Air Cargo Worldwide, Inc. (“Polar”). We record our share of Polar’s results under the equity method of accounting. Polar is a variable interest entity that we do not consolidate because we are not the primary beneficiary and we generally do not have any financial exposure to fund debt obligations or operating losses of Polar (see Note 3 for further discussion).
The terms “we,” “us,” “our,” and the “Company” mean AAWW and all entities included in its consolidated financial statements.
We provide outsourced aircraft and aviation operating services throughout the world, serving Africa, Asia, Australia, Europe, the Middle East, North America and South America through: (i) contractual service arrangements, including those through which we provide aircraft to customers and value-added services, including crew, maintenance and insurance (“ACMI”), crew, maintenance and insurance, but not the aircraft (“CMI”) and cargo and passenger charter services (“Charter”); and (ii) dry leasing aircraft and engines (“Dry Leasing” or “Dry Lease”).
The accompanying unaudited consolidated financial statements and related notes (the “Financial Statements”) have been prepared in accordance with the U.S. Securities and Exchange Commission (the “SEC”) requirements for quarterly reports on Form 10-Q, and consequently exclude certain disclosures normally included in audited consolidated financial statements prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Intercompany accounts and transactions have been eliminated. The Financial Statements should be read in conjunction with the audited consolidated financial statements and the notes included in the AAWW Annual Report on Form 10-K for the year ended December 31, 2021, which includes additional disclosures and a summary of our significant accounting policies. The December 31, 2021 balance sheet data was derived from that Annual Report. In our opinion, these Financial Statements include all adjustments, consisting of normal recurring items, considered necessary by management to fairly state the Company’s results of operations, financial position, and cash flows.
Our quarterly results are subject to seasonal and other fluctuations, including fluctuations resulting from the global COVID-19 pandemic and the operating results for any quarter are therefore not necessarily indicative of results that may be otherwise expected for the entire year.
Except for per share data, all dollar amounts are in thousands unless otherwise noted.
/2. Summary of Significant Accounting Policies
Heavy Maintenance
Except as described in the paragraph below, we account for heavy maintenance costs for airframes and engines using the direct expense method. Under this method, heavy maintenance costs are charged to expense upon induction, based on our best estimate of the costs after considering multiple factors, including historical costs, experience and information provided by third-party maintenance providers. These estimates may be subsequently adjusted for changes and the final determination of actual costs incurred. As of June 30, 2022 and December 31, 2021, Accrued heavy maintenance was $ i 72.3 million and $ i 79.6 million, respectively.
We account for heavy maintenance costs for airframes and engines used in our Dry Leasing segment and engines used on our 747-8F and 777-200 aircraft using the deferral method. Under this method, we defer the expense recognition of scheduled heavy maintenance events, which are amortized over the shorter of the estimated period until the next scheduled heavy maintenance event is required or remaining lease term. Amortization of deferred maintenance expense included in Depreciation and amortization was $ i 12.2 million and $ i 23.3 million for the three and six months ended June 30, 2022, respectively. Amortization of deferred maintenance expense included in Depreciation and amortization was $ i 12.3 million and $ i 24.3 million for the three and six months ended June 30, 2021, respectively.
/8
Deferred maintenance included within Deferred costs and other assets is as follows:
Balance as of December 31, 2021 |
|
$ |
i 180,675 |
|
Deferred maintenance costs |
|
|
i 14,236 |
|
Special charge (1) |
|
|
( i 1,628 |
) |
Amortization of deferred maintenance |
|
|
( i 23,325 |
) |
Balance as of June 30, 2022 |
|
$ |
i 169,958 |
|
(1) See Note 6 for further discussion.
/
Property and Equipment
Committed capital expenditures are expected to be $ i 501.8 million for the remainder of 2022 and $ i 359.7 million in 2023. These expenditures include delivery payments for our January 2021 agreement to purchase i four 747-8F aircraft from The Boeing Company (“Boeing”), the first of these aircraft was delivered during the second quarter of 2022 and the remaining three are expected to be delivered throughout 2022. These amounts also include pre-delivery and delivery payments for our December 2021 agreement to purchase i four new 777-200LRF aircraft from Boeing, the first of these aircraft is expected to be delivered late in the fourth quarter of 2022 and the remaining three throughout 2023. In addition, the amounts include other agreements to acquire spare engines.
/Payroll Support Program under the CARES Act
In May 2020, i two subsidiaries of the Company, Atlas and Southern Air, Inc. (“Southern Air”, and together with Atlas, the “PSP Recipients”) entered into an agreement with the U.S. Treasury (the "PSP Agreement") with respect to payroll support funding available to cargo carriers under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). AAWW also entered into a Warrant Agreement (the “Warrant Agreement”) with the U.S. Treasury, and AAWW issued a senior unsecured promissory note to the U.S. Treasury (the “Promissory Note”), with the PSP Recipients as guarantor.
In connection with the payroll support funding received in 2020 under the PSP Agreement, we issued warrants to the U.S. Treasury to acquire up to i 625,452 shares of our common stock. The warrants will expire in i 2025 on the fifth anniversary of the issue date of each warrant. As of June 30, 2022, i no portion of the warrants have been exercised.
We initially recognized deferred grant income within Accrued liabilities for the difference between the payroll support funding received in 2020 under the PSP Agreement and the amounts recorded for the Promissory Note and the Warrant Agreement. All grant income has been subsequently recognized within Other (income) expense, net in the consolidated statement of operations on a pro-rata basis over the periods that the qualifying employee wages, salaries and benefits were paid. During the six months ended June 30, 2021, we recognized the remaining $ i 40.9 million of deferred grant income within Other (income) expense, net in the consolidated statement of operations.
/
Recent Accounting Pronouncement Adopted in 2022
In August 2020, the Financial Accounting Standards Board amended its accounting guidance for certain financial instruments with characteristics of liabilities and equity, including convertible debt instruments. For convertible debt with a cash conversion feature, the amended guidance removes the accounting model to separately account for the liability and equity components, which resulted in the amortization of a debt discount to interest expense. Under this amended guidance, such convertible debt is accounted for as a single debt instrument with no amortization of a debt discount, unless certain other conditions are met. The amended guidance also requires the use of the if-converted method when calculating the dilutive impact of convertible debt on earnings per share. Effective January 1, 2022, we adopted the amended guidance using the modified retrospective approach, under which the guidance was applied only to the most current period presented. On January 1, 2022, we recorded an increase of $ i 31.0 million to the carrying value of our convertible notes, a reduction of $ i 6.9 million to deferred tax liabilities, a reduction of $ i 92.6 million to Additional paid-in capital and an increase of $ i 68.5 million to Retained earnings for the cumulative effect of adoption.
/3. Related Parties
Polar
AAWW has a i 51% equity interest and i 75% voting interest in Polar. DHL Network Operations (USA), Inc. (“DHL”), a subsidiary of Deutsche Post AG, holds a i 49% equity interest and a i 25% voting interest in Polar. Polar is a variable interest entity that we do not consolidate because we are not the primary beneficiary as the risks associated with the direct costs of operation are with DHL. Under a 20-year blocked space agreement, which began in 2008, Polar provides air cargo capacity to DHL. Atlas has several agreements with Polar to provide ACMI, CMI, Dry Leasing, administrative, sales and ground support services to one another. We do not have any financial exposure to fund debt obligations or operating losses of Polar, except for any liquidated damages that we could incur under these agreements.
9
The following table summarizes our transactions and balances with Polar:
In addition to the amounts in the table above, Atlas recognized revenue from flying on behalf of Polar of $ i 33.3 million and $ i 74.0 million for the three and six months ended June 30, 2022, respectively. Atlas recognized revenue from flying on behalf of Polar of $ i 69.0 million and $ i 123.1 million for the three and six months ended June 30, 2021, respectively.
|
For the Three Months Ended |
|
|
For the Six Months Ended |
||||||||||||
Revenue and Expenses: |
|
|
|
|
|
|
|
|
||||||||
Revenue from Polar |
$ |
i 85,426 |
|
|
$ |
i 75,661 |
|
|
$ |
i 166,945 |
|
|
$ |
i 152,917 |
|
|
Ground handling and airport fees to Polar |
|
i 930 |
|
|
|
i 938 |
|
|
|
i 2,017 |
|
|
|
i 1,820 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Accounts receivable/payable as of: |
|
|
|
|
|
|
|
|
|
|
||||||
Receivables from Polar |
$ |
i 20,747 |
|
|
$ |
i 22,311 |
|
|
|
|
|
|
|
|
||
Payables to Polar |
|
i 410 |
|
|
|
i 3,082 |
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Aggregate Carrying Value of Polar |
|
|
|
|
|
|
|
|
|
|
||||||
Aggregate Carrying Value of Polar |
$ |
i 4,870 |
|
|
$ |
i 4,870 |
|
|
|
|
|
|
|
|
||
Dry Leasing Joint Venture
We hold a i 10% interest in a joint venture with an unrelated third party, which we entered into in December 2019, to develop a diversified freighter aircraft dry leasing portfolio. Through Titan, we provide aircraft and lease management services to the joint venture for fees based upon aircraft assets under management, among other things. Our investment in the joint venture is accounted for under the equity method of accounting. Under the joint venture, we have a commitment to provide up to $ i 40.0 million of capital contributions before December 2022, of which $ i 11.5 million has been contributed as of June 30, 2022. Our maximum exposure to losses from the entity is limited to our investment.
The following table summarizes our transactions and balances with our dry leasing joint venture:
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
||||||||||
Revenue and Expenses: |
|
|
|
|
|
|
|
||||||||
Revenue from dry leasing joint venture |
$ |
i 596 |
|
|
$ |
i 68 |
|
|
$ |
i 934 |
|
|
$ |
i 135 |
|
Aircraft rent to dry leasing joint venture |
|
i 2,250 |
|
|
|
i 2,250 |
|
|
|
i 4,500 |
|
|
|
i 4,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Aggregate Carrying Value of |
|
|
|
|
|
|
|
|
|
||||||
Aggregate Carrying Value of |
$ |
i 10,642 |
|
|
$ |
i 8,448 |
|
|
|
|
|
|
|
||
Parts Joint Venture
We hold a i i 50 / % interest in a joint venture with an unrelated third party to purchase rotable parts and provide repair services for those parts, primarily for 747-8F aircraft. The joint venture is a variable interest entity and we have not consolidated the joint venture because we are not the primary beneficiary as we do not exercise financial control. Our investment in the joint venture is accounted for under the equity method of accounting and was $ i 20.4 million as of June 30, 2022 and $ i 19.2 million as of December 31, 2021. Our maximum exposure to losses from the entity is limited to our investment, which is composed primarily of rotable inventory parts. The joint venture does not have any third-party debt obligations. We had Accounts receivable from the joint venture of $ i 0.1 million as of June 30, 2022 and $ i 0.3 million as of December 31, 2021. We had Accounts payable to the joint venture of $ i 0.9 million as of June 30, 2022 and $ i 1.2 million as of December 31, 2021.
/4. Amazon
In May 2016, we entered into certain agreements with Amazon.com, Inc. and its subsidiary, Amazon Fulfillment Services, Inc., (collectively “Amazon”), which involve, among other things, CMI operation of up to 20 Boeing 767-300 freighter aircraft for Amazon by Atlas, as well as Dry Leasing by Titan. i The Dry Leases have a term of i ten years from the commencement of each agreement, while the CMI operations are for i seven years from the commencement of each agreement (with an option for Amazon to extend the term to i ten years). / As of June 30, 2022, 19 767-300 freighters were in Dry Lease service, of which 17 were operating in CMI service.
10
In conjunction with the agreements entered into in May 2016, we granted Amazon a warrant providing the right to acquire i up to 20% of our outstanding common shares, as of the date of the agreements, after giving effect to the issuance of shares pursuant to the warrants, at an exercise price of $ i 37.34 per share, as adjusted (“Warrant A”). All i 7.5 million shares, as adjusted, vested in full and have been exercised.
The agreements entered into in May 2016 also provided incentives for future growth of the relationship with Amazon. In that regard, we granted Amazon a warrant to acquire i up to an additional i 10% of our outstanding common shares, as of the date of the agreements / , after giving effect to the issuance of shares pursuant to the warrants, for an exercise price of $ i 37.34 per share, as adjusted (“Warrant B”). This warrant to purchase i 3.77 million shares, as adjusted, will vest in increments of i 37,660 shares, as adjusted, each time Amazon has paid $ i 4.2 million of revenue to us, up to a total of $ i 420.0 million, for incremental business beyond the original 20 767-300 freighters. As of June 30, 2022, i 1,280,440 shares, as adjusted, of Warrant B have vested, of which i 715,540 shares remain unexercised. Warrant B will expire if not exercised in accordance with its terms by i May 4, 2023.
In March 2019, we amended the agreements entered into in 2016 with Amazon, pursuant to which we began providing CMI services using Boeing 737-800 freighter aircraft provided by Amazon. i The 737-800 CMI operations are for a term of i seven years from the commencement of each agreement (with an option for Amazon to extend the term to i ten years). / As of June 30, 2022, eight 737-800 freighter aircraft were operating in CMI service.
In connection with the amended agreements, we granted Amazon a warrant to acquire i up to an additional i 9.9% of our outstanding common shares, as of the date of the agreements / , after giving effect to the issuance of shares pursuant to the warrant, for an exercise price of $ i 52.67 per share, as adjusted (“Warrant C”). Only if Warrant B vests in full, this warrant to purchase i 6.66 million shares, as adjusted, would vest in increments of i 45,623 shares, as adjusted, each time Amazon has paid $ i 6.9 million of revenue to us, up to a total of $ i 1.0 billion, for incremental business beyond Warrant A and Warrant B. As of June 30, 2022, i no portion of Warrant C has vested. Warrant C will expire if not exercised in accordance with its terms by i March 27, 2026. Further, in the event that Warrant B does not vest in full on or prior to its May 4, 2023 expiration, then Warrant C will no longer be exercisable by Amazon as of that date.
While Amazon would be entitled to vote the shares it owns up to i 14.9% of our outstanding common shares, in its discretion, it would be required to vote any shares it owns in excess of i 14.9% of our outstanding common shares in accordance with the recommendation of our board of directors.
We amortized $ i 9.9 million and $ i 19.9 million of the customer incentive asset as a reduction of Operating Revenue for the three and six months ended June 30, 2022, respectively. We amortized $ i 11.4 million and $ i 21.9 million of the customer incentive asset as a reduction of Operating Revenue for the three and six months ended June 30, 2021, respectively.
Customer incentive asset included within Deferred costs and other assets is as follows:
Balance as of December 31, 2021 |
|
$ |
i 96,177 |
|
Initial value for estimate of vested or expected to vest warrants |
|
|
i 7,532 |
|
Amortization of customer incentive asset |
|
|
( i 19,915 |
) |
Balance as of June 30, 2022 |
|
$ |
i 83,794 |
|
5. Supplemental Financial Information
Accounts Receivable
Accounts receivable, net of allowance for expected credit losses related to customer contracts, excluding Dry Leasing contracts, was $ i 221.1 million as of June 30, 2022 and $ i 248.4 million as of December 31, 2021.
Allowance for expected credit losses, included within Accounts receivable, is as follows:
Balance as of December 31, 2021 |
|
$ |
i 4,003 |
|
Reversal of expected credit losses |
|
|
( i 6 |
) |
Amounts written off and other items |
|
|
( i 68 |
) |
Balance as of June 30, 2022 |
|
$ |
i 3,929 |
|
11
/
Accrued Liabilities
Accrued liabilities consisted of the following as of:
|
|
|
|
|
||||
Salaries, wages and benefits |
|
$ |
i 172,854 |
|
|
$ |
i 211,801 |
|
Maintenance |
|
|
i 127,881 |
|
|
|
i 135,133 |
|
Customer maintenance reserves |
|
|
i 96,307 |
|
|
|
i 87,565 |
|
Aircraft fuel |
|
|
i 73,846 |
|
|
|
i 40,855 |
|
Deferred revenue |
|
|
i 66,864 |
|
|
|
i 58,616 |
|
Other |
|
|
i 116,746 |
|
|
|
i 108,008 |
|
Accrued liabilities |
|
$ |
i 654,498 |
|
|
$ |
i 641,978 |
|
Revenue Contract Liability
Deferred revenue for customer contracts, excluding Dry Leasing contracts, represents amounts collected from, or invoiced to, customers in advance of revenue recognition. The balance of Deferred revenue will increase or decrease based on the timing of invoices and recognition of revenue.
Significant changes in Deferred Revenue liability balances during the six months ended June 30, 2022 were as follows:
Balance as of December 31, 2021 |
|
$ |
i 52,647 |
|
Revenue recognized |
|
|
( i 224,199 |
) |
Amounts collected or invoiced |
|
|
i 227,535 |
|
Balance as of June 30, 2022 |
|
$ |
i 55,983 |
|
Supplemental Cash Flow Information
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total shown in the consolidated statements of cash flows:
|
|
|
|
|
||||
Cash and cash equivalents |
|
$ |
i 606,567 |
|
|
$ |
i 910,965 |
|
Restricted cash |
|
|
i 10,361 |
|
|
|
i 10,052 |
|
Total Cash, cash equivalents and restricted cash shown in |
|
$ |
i 616,928 |
|
|
$ |
i 921,017 |
|
6. Special Charge and Assets Held For Sale
Special Charge
During the six months ended June 30, 2022, we recorded a $ i 2.6 million charge related to i two CF60-80 engines Dry Leased to a customer.
Assets Held For Sale
As of December 31, 2021, we had i six spare CF6-80 engines with a carrying value of $ i 5.5 million classified as held for sale within Prepaid expense, assets held for sale and other current assets in the consolidated balance sheets. During the six months ended June 30, 2022, we received proceeds of $ i 11.7 million and recognized a net gain of $ i 6.2 million from the completion of the sale of the six spare CF6-80 engines within Loss (gain) on disposal of flight equipment in the consolidated statement of operations.
/7. Debt
Term Loans
In May 2022, we borrowed $ i 140.0 million for the delivery of one 747-8F aircraft under a i twelve-year term loan due in i May 2034. The term loan is secured by a mortgage against one 747-8F aircraft and has a fixed interest rate of i 4.17% with principal and interest payable quarterly. The term loan is subject to customary fees, covenants and events of default.
Convertible Notes
In June 2015, we issued $ i 224.5 million aggregate principal amount of convertible senior notes with i 2.25% coupon (the “2015 Convertible Notes”) in an underwritten public offering. We used the majority of the net proceeds to refinance debt related to 747-400
12
freighter aircraft with an average coupon of i 8.1%. In connection with the offering of the 2015 Convertible Notes, we purchased convertible note hedges whereby we had the right to receive a certain number of shares of our common stock at a fixed price per share. In addition, we sold warrants to the option counterparties whereby the holders of the warrants have the option to purchase a certain number of shares of our common stock at a fixed price per share.
On June 1, 2022, the 2015 Convertible Notes reached maturity and were settled in full. In the aggregate, we paid $ i 210.4 million and issued i 138,509 shares of common stock to those holders that elected to convert their outstanding notes and we paid $ i 6.2 million to holders that did not elect to convert their outstanding notes. In connection with the settlement of the 2015 Convertible Notes, we exercised our rights under the convertible note hedge transactions with the counterparties on June 1, 2022 and received i 25,957 shares of our common stock.
In May 2017, we issued $ i 289.0 million aggregate principal amount of convertible senior notes that mature on i June 1, 2024 with a i 1.88% coupon (the “2017 Convertible Notes”) in an underwritten public offering. We used the majority of the net proceeds to repay our then outstanding revolving credit facility. The 2017 Convertible Notes are senior unsecured obligations and accrue interest payable semiannually on June 1 and December 1 of each year. The 2017 Convertible Notes are due on their maturity date, unless earlier converted or repurchased pursuant to their respective terms.
In connection with the offering of the 2017 Convertible Notes, we purchased convertible note hedges whereby we have the right to receive a certain number of shares of our common stock at a fixed price per share. In addition, we sold warrants to the option counterparties whereby the holders of the warrants have the option to purchase a certain number of shares of our common stock at a fixed price per share.
Taken together, the purchase of the convertible note hedges and the sale of warrants are intended to offset economic dilution from the conversion of the 2017 Convertible Notes when the stock price is below the exercise price of the respective warrants and to effectively increase the overall conversion price from $ i 61.08 to $ i 92.20 per share for the 2017 Convertible Notes.
On or after September 1, 2023 until the close of business on the second scheduled trading day immediately preceding the maturity date, a holder may convert all or a portion of its 2017 Convertible Notes. Upon conversion, the 2017 Convertible Notes will be settled, at our election, in cash, shares of our common stock, or a combination of cash and shares of our common stock. Prior to September 1, 2023, a holder may also convert under certain circumstances, including if the price of our common stock is greater than or equal to i 130% of the conversion price for at least i 20 trading days during the i 30 consecutive trading days ending on the last trading day of the quarter. Our current intent and policy is to settle conversions with a combination of cash and shares of common stock.
The price of our common stock was greater than or equal to i 130% of the conversion price of the 2017 Convertible Notes for at least i 20 trading days during the i 30 consecutive trading days ending on the last trading day of the quarter ended March 31, 2022. Therefore, our 2017 Convertible Notes were convertible at the holders’ option only through June 30, 2022. We received conversion notices on our 2017 Convertible Notes for an immaterial amount, none of which were settled, during the three months ended June 30, 2022.
Through December 31, 2021, we separately accounted for the liability and equity components of convertible notes based on their relative values. Debt issuance costs related to the issuance of convertible notes were also previously allocated to the liability and equity components based on their relative values. With the adoption of the amended accounting guidance for convertible notes on January 1, 2022 (see Note 2 for further discussion), amounts, including debt issuance costs, that were previously classified within equity were reclassified to the liability component, net of any remaining unamortized amounts. Debt issuance costs are amortized to interest expense using the effective interest method over the term of each convertible notes.
The 2017 Convertible Notes consisted of the following as of June 30, 2022:
|
|
2017 Convertible Notes |
|
|
|
Remaining life in months |
|
|
i 23 |
|
|
Gross proceeds |
|
$ |
i 289,000 |
|
|
Less: debt issuance cost, net of amortization |
|
|
( i 2,034 |
) |
|
Net carrying amount |
|
$ |
i 286,966 |
|
|
The following table presents the amount of interest expense recognized related to the convertible notes:
|
|
For the Three Months Ended |
|
|
|
For the Six Months Ended |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
Contractual interest coupon |
|
$ |
i 2,196 |
|
|
$ |
i 2,618 |
|
|
|
$ |
i 4,814 |
|
|
$ |
i 5,236 |
|
Amortization of debt discount |
|
|
i - |
|
|
|
i 4,745 |
|
|
|
|
i - |
|
|
|
i 9,416 |
|
Amortization of debt issuance costs |
|
|
i 427 |
|
|
|
i 406 |
|
|
|
|
i 936 |
|
|
|
i 808 |
|
Total interest expense recognized |
|
$ |
i 2,623 |
|
|
$ |
i 7,769 |
|
|
|
$ |
i 5,750 |
|
|
$ |
i 15,460 |
|
13
/
Revolving Credit Facility
In December 2021, we amended and extended our previous i three-year $ i 200.0 million secured revolving credit facility into a new i four-year $ i 250.0 million secured revolving credit facility (the “Revolver”) for general corporate purposes. As of June 30, 2022, there were i no amounts outstanding and we had $ i 250.0 million of unused availability, based on the collateral borrowing base.
Other Debt
In April 2022, we refinanced a term loan secured by a 747-8F aircraft and received proceeds of $ i 90.0 million from a financing with an i 84-month term for this aircraft at a blended fixed rate of i 3.86%, with principal and interest payable quarterly. We used $ i 45.7 million of the proceeds to repay a term loan in full and recognized a $ i 0.7 million loss on early extinguishment of debt. In connection with entry into this financing, we paid usual and customary commitment and other fees. While the financing involved a sale and leaseback of the aircraft, it did not qualify as a sale for accounting purposes.
/8. Income Taxes
The effective income tax rates were i 23.2% and i 23.0% for the three and six months ended June 30, 2022, respectively. The effective income tax rates were i 23.5% and i 23.6% for the three and six months ended June 30, 2021, respectively. These rates differed from the U.S. statutory rate primarily due to state income taxes and certain expenses that are not deductible for tax purposes. For interim accounting purposes, we recognize income taxes using an estimated annual effective tax rate.
/9. Financial Instruments
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). Inputs used to measure fair value are classified in the following hierarchy:
Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2 Other inputs that are observable directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, or inactive quoted prices for identical assets or liabilities in inactive markets;
Level 3 Unobservable inputs reflecting assumptions about the inputs used in pricing the asset or liability.
We endeavor to utilize the best available information to measure fair value.
The carrying value of Cash and cash equivalents, and Restricted cash is based on cost, which approximates fair value.
Term loans and notes consist of term loans, notes guaranteed by the Export-Import Bank of the United States, a promissory note issued to the U.S. Treasury and other financings. The fair values of these debt instruments and the Revolver are based on a discounted cash flow analysis using current borrowing rates for instruments with similar terms.
The fair value of our convertible notes is based on unadjusted quoted market prices for these securities.
The following table summarizes the carrying value, estimated fair value and classification of our financial instruments as of:
|
|
|
||||||||||||||
|
|
Carrying Value |
|
Fair Value |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
|||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents |
|
$ |
i 606,567 |
|
$ |
i 606,567 |
|
$ |
i 606,567 |
|
$ |
- |
|
$ |
- |
|
Restricted cash |
|
|
i 10,361 |
|
|
i 10,361 |
|
|
i 10,361 |
|
|
- |
|
|
- |
|
|
|
$ |
i 616,928 |
|
$ |
i 616,928 |
|
$ |
i 616,928 |
|
$ |
- |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|||||
Term loans and notes |
|
$ |
i 1,678,463 |
|
$ |
i 1,597,294 |
|
$ |
- |
|
$ |
- |
|
$ |
i 1,597,294 |
|
Convertible notes (1) |
|
|
i 286,966 |
|
|
i 333,795 |
|
|
i 333,795 |
|
|
- |
|
|
- |
|
|
|
$ |
i 1,965,429 |
|
$ |
i 1,931,089 |
|
$ |
i 333,795 |
|
$ |
- |
|
$ |
i 1,597,294 |
|
14
|
|
|
||||||||||||||
|
|
Carrying Value |
|
Fair Value |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
|||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents |
|
$ |
i 910,965 |
|
$ |
i 910,965 |
|
$ |
i 910,965 |
|
$ |
- |
|
$ |
- |
|
Restricted cash |
|
|
i 10,052 |
|
|
i 10,052 |
|
|
i 10,052 |
|
|
- |
|
|
- |
|
|
|
$ |
i 921,017 |
|
$ |
i 921,017 |
|
$ |
i 921,017 |
|
$ |
- |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|||||
Term loans and notes |
|
$ |
i 1,638,311 |
|
$ |
i 1,690,675 |
|
$ |
- |
|
$ |
- |
|
$ |
i 1,690,675 |
|
Convertible notes (2) |
|
|
i 479,573 |
|
|
i 758,424 |
|
|
i 758,424 |
|
|
- |
|
|
- |
|
|
|
$ |
i 2,117,884 |
|
$ |
i 2,449,099 |
|
$ |
i 758,424 |
|
$ |
- |
|
$ |
i 1,690,675 |
|
(1) Carrying value is net of debt issuance costs (see Note 7).
(2) Carrying value is net of debt discounts and debt issuance costs (see Note 7).
/
10. Segment Reporting
We have the following i i two / operating and reportable segments: Airline Operations and Dry Leasing, both of which are directly or indirectly engaged in the business of air transportation services but have different commercial and economic characteristics. Each operating segment is separately reviewed by our chief operating decision maker to assess operating results and make resource allocation decisions. We do not aggregate our operating segments and, therefore, our operating segments are our reportable segments.
We use an economic performance metric called Direct Contribution, which shows the profitability of each segment. Direct Contribution includes Income before income taxes and excludes the following: Special charges, Transaction-related expenses, nonrecurring items, Loss (gain) on disposal of flight equipment, Losses on early extinguishment of debt, Unrealized loss on financial instruments and Unallocated income and expenses, net. Direct operating and ownership costs include crew costs, maintenance, fuel, ground operations, sales costs, aircraft rent, interest expense on the portion of debt used for financing aircraft, interest income on debt securities and aircraft depreciation. Unallocated income and expenses, net include corporate overhead, nonaircraft depreciation, noncash expenses and income, interest expense on the portion of debt used for general corporate purposes, interest income on nondebt securities, capitalized interest, foreign exchange gains and losses, other revenue, other non-operating costs and CARES Act grant income.
The following table sets forth Operating Revenue and Direct Contribution for our reportable segments reconciled to Operating Income and Income before income taxes:
|
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
Operating Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Airline Operations |
|
$ |
i 1,142,731 |
|
|
$ |
i 955,861 |
|
|
$ |
i 2,138,086 |
|
|
$ |
i 1,782,101 |
|
|
Dry Leasing |
|
|
i 41,314 |
|
|
|
i 40,404 |
|
|
|
i 87,484 |
|
|
|
i 80,768 |
|
|
Customer incentive asset amortization |
|
|
( i 9,864 |
) |
|
|
( i 11,443 |
) |
|
|
( i 19,915 |
) |
|
|
( i 21,924 |
) |
|
Other |
|
|
i 5,790 |
|
|
|
i 5,610 |
|
|
|
i 11,472 |
|
|
|
i 10,787 |
|
|
Total Operating Revenue |
|
$ |
i 1,179,971 |
|
|
$ |
i 990,432 |
|
|
$ |
i 2,217,127 |
|
|
$ |
i 1,851,732 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Direct Contribution: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Airline Operations |
|
$ |
i 196,331 |
|
|
$ |
i 231,793 |
|
|
$ |
i 382,150 |
|
|
$ |
i 400,943 |
|
|
Dry Leasing |
|
|
i 12,646 |
|
|
|
i 10,766 |
|
|
|
i 29,555 |
|
|
|
i 21,329 |
|
|
Total Direct Contribution for Reportable Segments |
|
|
i 208,977 |
|
|
|
i 242,559 |
|
|
|
i 411,705 |
|
|
|
i 422,272 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Unallocated income and (expenses), net |
|
|
( i 93,361 |
) |
|
|
( i 102,464 |
) |
|
|
( i 194,101 |
) |
|
|
( i 163,998 |
) |
|
Loss on early extinguishment of debt |
|
|
( i 689 |
) |
|
|
i - |
|
|
|
( i 689 |
) |
|
|
i - |
|
|
Unrealized loss on financial instruments |
|
|
i - |
|
|
|
i - |
|
|
|
i - |
|
|
|
( i 113 |
) |
|
Special charge |
|
|
i - |
|
|
|
i - |
|
|
|
( i 2,633 |
) |
|
|
i - |
|
|
Transaction-related expenses |
|
|
i - |
|
|
|
( i 117 |
) |
|
|
i - |
|
|
|
( i 318 |
) |
|
Gain (loss) on disposal of flight equipment |
|
|
( i 19 |
) |
|
|
i - |
|
|
|
i 6,221 |
|
|
|
( i 16 |
) |
|
Income before income taxes |
|
|
i 114,908 |
|
|
|
i 139,978 |
|
|
|
i 220,503 |
|
|
|
i 257,827 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Add back (subtract): |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
|
( i 873 |
) |
|
|
( i 189 |
) |
|
|
( i 1,113 |
) |
|
|
( i 400 |
) |
|
Interest expense |
|
|
i 19,924 |
|
|
|
i 26,992 |
|
|
|
i 40,347 |
|
|
|
i 54,172 |
|
|
Capitalized interest |
|
|
( i 3,339 |
) |
|
|
( i 1,850 |
) |
|
|
( i 7,103 |
) |
|
|
( i 3,121 |
) |
|
Loss on early extinguishment of debt |
|
|
i 689 |
|
|
|
i - |
|
|
|
i 689 |
|
|
|
i - |
|
|
Unrealized loss on financial instruments |
|
|
i - |
|
|
|
i - |
|
|
|
i - |
|
|
|
i 113 |
|
|
Other (income) expense, net |
|
|
i 837 |
|
|
|
( i 4,854 |
) |
|
|
i 219 |
|
|
|
( i 44,310 |
) |
|
Operating Income |
|
$ |
i 132,146 |
|
|
$ |
i 160,077 |
|
|
$ |
i 253,542 |
|
|
$ |
i 264,281 |
|
|
15
/
The following table disaggregates our Airline Operations segment revenue by customer and service type:
|
For the Three Months Ended |
|
|
||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
|
|
Cargo |
|
|
Passenger |
|
|
Total |
|
|
Cargo |
|
|
Passenger |
|
|
Total |
|
|
||||||
Commercial customers |
|
$ |
i 989,169 |
|
|
$ |
i 422 |
|
|
$ |
i 989,591 |
|
|
$ |
i 819,175 |
|
|
$ |
i - |
|
|
$ |
i 819,175 |
|
|
AMC |
|
|
i 85,631 |
|
|
|
i 67,509 |
|
|
|
i 153,140 |
|
|
|
i 49,072 |
|
|
|
i 87,614 |
|
|
|
i 136,686 |
|
|
Total Airline Operations Revenue |
|
$ |
i 1,074,800 |
|
|
$ |
i 67,931 |
|
|
$ |
i 1,142,731 |
|
|
$ |
i 868,247 |
|
|
$ |
i 87,614 |
|
|
$ |
i 955,861 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
For the Six Months Ended |
||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
|
|
Cargo |
|
|
Passenger |
|
|
Total |
|
|
Cargo |
|
|
Passenger |
|
|
Total |
|
|
||||||
Commercial customers |
|
$ |
i 1,892,451 |
|
|
$ |
i 2,047 |
|
|
$ |
i 1,894,498 |
|
|
$ |
i 1,532,387 |
|
|
$ |
i 2,879 |
|
|
$ |
i 1,535,266 |
|
|
AMC |
|
|
i 114,920 |
|
|
|
i 128,668 |
|
|
|
i 243,588 |
|
|
|
i 94,384 |
|
|
|
i 152,451 |
|
|
|
i 246,835 |
|
|
Airline Operations Revenue |
|
$ |
i 2,007,371 |
|
|
$ |
i 130,715 |
|
|
$ |
i 2,138,086 |
|
|
$ |
i 1,626,771 |
|
|
$ |
i 155,330 |
|
|
$ |
i 1,782,101 |
|
|
Given the nature of our business and international flying, geographic information for revenue, long-lived assets and total assets is not presented because it is impracticable to do so.
We are exposed to a concentration of revenue from the U.S. Military Air Mobility Command (“AMC”), Polar and DHL (see above for the AMC and Note 3 for further discussion regarding Polar). No other customer accounted for more than 10.0% of our Total Operating Revenue. Revenue from DHL was $ i 142.0 million and $ i 277.6 million for the three and six months ended June 30, 2022, respectively. Revenue from DHL was $ i 169.4 million and $ i 327.3 million for the three and six months ended June 30, 2021, respectively. We have not experienced any credit issues with these customers.
/11. Labor and Legal Proceedings
Collective Bargaining Agreements
Pilots of Atlas and flight dispatchers of Atlas and Polar are represented by the International Brotherhood of Teamsters (the “IBT”). We had a i five-year collective bargaining agreement (“CBA”) with our Atlas pilots, which became amendable in September 2016, and a i four-year CBA with the Southern Air pilots, which became amendable in November 2016. On November 17, 2021, the Southern Air pilots all transferred to Atlas with the issuance of a single operating certificate for Atlas by the U.S. Federal Aviation Administration.
In March 2022, we signed a new i five-year CBA with our pilots, effective as of September 2021. This long-term CBA was reached through a binding arbitration process, with the arbitrator’s decision being issued on September 10, 2021. The new pay rates became effective as of September 1, 2021, and we are continuing to work closely together with the union’s new leadership on the final implementation of certain remaining provisions of the CBA. Under this industry competitive agreement, all of our pilots are receiving significantly higher pay, quality of life improvements and enhanced benefits.
We also have a i five-year CBA with our Atlas and Polar dispatchers, which was extended in April 2017 for an additional i four years, making the CBA amendable in November 2021. On September 15, 2021, the IBT, representing the flight dispatchers of Atlas and Polar, provided the Company with the requisite notice of its intent to commence negotiations for a new CBA pursuant to Section 6 of the Railway Labor Act. The Company and the IBT commenced bargaining with good faith discussions and are making progress towards an amended CBA.
We are subject to risks of work interruption or stoppage as permitted by the Railway Labor Act and may incur additional administrative expenses associated with union representation of our employees.
Matters Related to Alleged Pricing Practices
In the Netherlands, Stichting Cartel Compensation, successor in interest to claims of various shippers, has filed suit in the district court in Amsterdam against British Airways, KLM, Martinair, Air France, Lufthansa and Singapore Airlines seeking recovery for damages purportedly arising from allegedly unlawful pricing practices of such defendants. In response, British Airways, KLM, Martinair, Air France and Lufthansa filed third-party indemnification lawsuits against Polar Air Cargo, LLC (“Old Polar”), a consolidated subsidiary of the Company, and Polar, seeking indemnification in the event the defendants are found to be liable in the main proceedings. Another defendant, Thai Airways, filed a similar indemnification claim. Activities in the case have focused on various procedural issues and rulings, some of which are awaiting court decisions on appeal. The ultimate outcome of the lawsuit is likely to be affected by a decision readopted by the European Commission in March 2017, finding EU competition law violations by British Airways, KLM, Martinair, Air France and Lufthansa, among others, but not Old Polar or Polar. If the Company, Old Polar or Polar were to incur an unfavorable outcome, such outcome may have a material adverse impact on our business, financial condition,
16
results of operations or cash flows. We are unable to reasonably estimate a range of possible loss for this matter at this time.
Brazilian Customs Claim
Old Polar was cited for an alleged customs violation in Sao Paulo, Brazil, relating to shipments of goods dating back to asserting that goods listed on the flight manifest of an Old Polar scheduled service flight were not properly presented to customs upon arrival and therefore were improperly brought into Brazil. The claim, which also seeks unpaid customs duties, taxes and penalties from the date of the alleged infraction, is approximately $ i 1.9 million in aggregate based on June 30, 2022 exchange rates.
Old Polar has presented evidence that certain of the alleged missing goods were in fact never onboard the aircraft (due to a change in plans by the relevant shipper) and thus no customs duties should be due. Further, we believe that the amounts claimed are substantially overstated due to a calculation error when considering the type and amount of goods allegedly missing, among other things. As required to defend this claim, we have made deposits pending resolution of the matter. The balance was $ i 3.6 million as of June 30, 2022 and $ i 3.2 million as of December 31, 2021, and is included in Deferred costs and other assets.
We are currently defending this and other Brazilian customs claims and the ultimate disposition of these claims, either individually or in the aggregate, is not expected to materially affect our financial condition, results of operations or cash flows.
Other
In addition to the matters described in this note, we have certain other litigation contingencies incident to the ordinary course of business. Unless disclosed otherwise, management does not expect that the ultimate disposition of such other contingencies or matters will materially affect our financial condition, results of operations or cash flows.
/12. Stock Repurchases
We record the repurchase of our shares of common stock at cost based on the settlement date of the transaction. These shares are classified as treasury stock, which is a reduction to stockholders’ equity. Treasury shares are included in authorized and issued shares but excluded from outstanding shares.
In February 2022, our board of directors approved the establishment of a new stock repurchase program authorizing the repurchase of up to a total of $ i 200.0 million of our common stock. Purchases may be made at management's discretion in the form of accelerated share repurchase programs, open market repurchase programs, privately negotiated transactions or a combination of these methods.
In February 2022, we paid $ i 100.0 million and received an initial delivery of i 1,061,257 shares pursuant to an accelerated share repurchase program agreement with a financial institution for the repurchase of our common stock (the “ASR”). We accounted for this ASR as a repurchase of common stock and as a forward contract indexed to our own common stock. We determined that the forward contract met all of the applicable criteria for equity classification and, therefore, this ASR was not accounted for as a derivative instrument.
/In April 2022, the ASR was settled and we received an additional i 172,887 shares of common stock. In the aggregate, we repurchased i 1,234,144 shares for $ i 100.0 million at an average cost of $ i 81.03 per share under this ASR. The total number of shares of common stock repurchased by us was based on the volume-weighted average price of the common stock during the term of the ASR Agreement, less a pre-determined discount.
13. Earnings Per Share
Basic earnings per share (“EPS”) represents income divided by the weighted average number of common shares outstanding during the measurement period. Diluted EPS represents income divided by the weighted average number of common shares outstanding during the measurement period while also giving effect to all potentially dilutive common shares that were outstanding during the period.
17
The calculations of basic and diluted EPS were as follows:
|
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
|
||||||||||
Numerator: |
|
|
|
|
|
|
|
|
|
||||||||
Net Income |
|
$ |
i 88,258 |
|
|
$ |
i 107,110 |
|
|
$ |
i 169,769 |
|
|
$ |
i 197,043 |
|
|
Plus: Interest expense on convertible notes, net of tax |
|
|
i 1,040 |
|
|
|
i - |
|
|
|
i 2,086 |
|
|
|
i - |
|
|
Unrealized loss on financial instruments, net of tax |
|
|
i - |
|
|
|
i - |
|
|
|
i - |
|
|
|
i 112 |
|
|
Diluted net income |
|
$ |
i 89,298 |
|
|
$ |
i 107,110 |
|
|
$ |
i 171,855 |
|
|
$ |
i 197,155 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic EPS weighted average shares outstanding |
|
|
i 28,243 |
|
|
|
i 29,011 |
|
|
|
i 28,547 |
|
|
|
i 28,752 |
|
|
Effect of dilutive: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Convertible notes |
|
|
i 4,731 |
|
|
|
i 608 |
|
|
|
i 4,881 |
|
|
|
i 304 |
|
|
Warrants |
|
|
i 590 |
|
|
|
i 499 |
|
|
|
i 600 |
|
|
|
i 625 |
|
|
Restricted stock |
|
|
i 115 |
|
|
|
i 201 |
|
|
|
i 156 |
|
|
|
i 219 |
|
|
Diluted EPS weighted average shares outstanding |
|
|
i 33,679 |
|
|
|
i 30,319 |
|
|
|
i 34,184 |
|
|
|
i 29,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
i 3.12 |
|
|
$ |
i 3.69 |
|
|
$ |
i 5.95 |
|
|
$ |
i 6.85 |
|
|
Diluted |
|
$ |
i 2.65 |
|
|
$ |
i 3.53 |
|
|
$ |
i 5.03 |
|
|
$ |
i 6.59 |
|
|
/
Antidilutive shares related to warrants issued in connection with our convertible notes or to customers that were out of the money and excluded from the calculation of diluted EPS were i i zero / for the three and six months ended June 30, 2022, and i i 3.0 / million for the three and six months ended June 30, 2021. Diluted shares reflect the potential dilution that could occur from restricted shares using the treasury stock method. The calculation of EPS does not include restricted share units and customer warrants in which performance or market conditions were not satisfied of i i 9.3 / million for the three and six months ended June 30, 2022 and i i 9.9 / million for the three and six months ended June 30, 2021.
/14. Accumulated Other Comprehensive Income
The following table summarizes the components of Accumulated other comprehensive income:
|
|
|
|
|
Foreign |
|
|
|
|
|||
|
|
Interest Rate |
|
|
Currency |
|
|
|
|
|||
|
|
Derivatives |
|
|
Translation |
|
|
Total |
|
|||
Balance as of December 31, 2020 |
|
$ |
( i 1,913 |
) |
|
$ |
i 9 |
|
|
$ |
( i 1,904 |
) |
Reclassification to interest expense |
|
|
i 524 |
|
|
|
i - |
|
|
|
i 524 |
|
Tax effect |
|
|
( i 124 |
) |
|
|
i - |
|
|
|
( i 124 |
) |
Balance as of June 30, 2021 |
|
$ |
( i 1,513 |
) |
|
$ |
i 9 |
|
|
$ |
( i 1,504 |
) |
|
|
|
|
|
|
|
|
|
|
|||
Balance as of December 31, 2021 |
|
$ |
( i 520 |
) |
|
$ |
i 9 |
|
|
$ |
( i 511 |
) |
Reclassification to interest expense |
|
|
i 122 |
|
|
|
i - |
|
|
|
i 122 |
|
Reclassification to loss on early extinguishment of debt |
|
|
i 639 |
|
|
|
i - |
|
|
|
i 639 |
|
Tax effect |
|
|
( i 175 |
) |
|
|
i - |
|
|
|
( i 175 |
) |
Balance as of June 30, 2022 |
|
$ |
i 66 |
|
|
$ |
i 9 |
|
|
$ |
i 75 |
|
15. Subsequent Event
On August 4, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Rand Parent, LLC, a Delaware limited liability company (“Parent”) affiliated with certain funds managed by affiliates of Apollo Global Management, Inc., J.F. Lehman & Company, Inc. and Hill City Capital L.P. (collectively, the “Buyers”) and Rand Merger Sub, Inc, a Delaware corporation and wholly owned subsidiary of Parent (“MergerCo”), pursuant to which, subject to the terms and conditions thereof, MergerCo will be merged with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly owned subsidiary of Parent. Consummation of the Merger is subject to the approval of the Company’s stockholders and other customary closing conditions. Upon completion of the Merger, AAWW will become a privately held company and shares of AAWW common stock will no longer be listed or publicly traded on The NASDAQ Global Select Market.
Subject to the terms and conditions set forth in the Merger Agreement, which has been unanimously approved by the board of directors, at the effective time of the Merger (the “Effective Time”), each share of the Company’s common stock issued and outstanding (subject to certain exceptions set forth in the Merger Agreement) shall be converted into the right to receive $ i 102.50 in cash, without interest (the “Merger Consideration”).
18
At the Effective Time, each outstanding share of Warrant B issued to Amazon shall automatically vest and be exercised in accordance with its terms for the Merger Consideration and each outstanding warrant issued to the U.S. Treasury shall become exercisable for the Merger Consideration. No other warrants issued to Amazon will vest or become exercisable in connection with the Merger. In addition, at the Effective Time, each restricted share unit (including those subject to performance-based vesting conditions) will vest and be canceled and the holder will be entitled to receive an amount in cash equal to the number of shares of common stock underlying such award (assuming all performance goals are achieved at the maximum level of performance) multiplied by the Merger Consideration.
The consummation of the Merger is subject to certain closing conditions, including, among other things: (i) the approval of the Company’s stockholders; (ii) the expiration or early termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended as well as certain non-U.S. antitrust approvals; (iii) the receipt of certain required consents or approvals from (a) the U.S. Department of Transportation, (b) the Federal Communications Commission and (c) certain other regulatory agencies; (iv) the absence of legal restraints prohibiting the Merger; and (v) other customary conditions specified in the Merger Agreement.
The Merger Agreement contains certain termination rights for the Company and Parent, including, among others, the right of (1) either party to terminate the Merger Agreement if the Merger is not consummated by March 4, 2023 (subject to certain exceptions set forth in the Merger Agreement), (2) the Company to terminate the Merger Agreement in order to enter into a definitive acquisition agreement providing for a Superior Proposal (as defined in the Merger Agreement) and (3) Parent to terminate the Merger Agreement if the Board changes its recommendation with respect to the Merger Agreement.
Upon termination of the Merger Agreement under specified circumstances, the Company will be required to pay Parent a termination fee. Generally, if the termination fee becomes payable as a result of the Company terminating the Merger Agreement in order to enter into a definitive acquisition agreement, or by Parent as a result of the Board changing its recommendation with respect to the Merger or under certain other circumstances, the amount of the termination fee will be $ i 97.5 million. If the Company terminates the Merger Agreement as a result of Parent’s breach of the Merger Agreement or because Parent fails to consummate the Merger when required by the Merger Agreement, the Company will be entitled to a termination fee of $ i 227.4 million.
/
19
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our Financial Statements appearing in this report and our audited consolidated financial statements and related notes included in our 2021 Annual Report on Form 10-K.
Background
Certain Terms - Glossary
The following represents terms and statistics specific to our business and industry. They are used by management to evaluate and measure operations, results, productivity and efficiency.
ACMI |
|
Service offering, whereby we provide outsourced cargo and passenger aircraft operating solutions, including the provision of an aircraft, crew, maintenance and insurance, while customers assume fuel, demand and price risk. In addition, customers are generally responsible for landing, navigation and most other operational fees and costs. |
|
|
|
Block Hour |
|
The time interval between when an aircraft departs the terminal until it arrives at the destination terminal. |
|
|
|
C Check |
|
“Heavy” airframe maintenance checks, which are more intensive in scope than Line Maintenance and are generally performed between 18 and 24 months depending on aircraft type. |
|
|
|
Charter |
|
Service offering, whereby we provide cargo and passenger aircraft charter services to customers. The customer generally pays a fixed charter fee that includes fuel, insurance, landing fees, navigation fees and most other operational fees and costs. |
|
|
|
CMI |
|
Service offering, whereby we provide outsourced cargo and passenger aircraft operating solutions, generally including the provision of crew, Line Maintenance and insurance, but not the aircraft. Customers assume fuel, demand and price risk, and are responsible for providing the aircraft (which they may lease from us) and generally responsible for Heavy and Non-Heavy Maintenance, landing, navigation and most other operational fees and costs. |
|
|
|
D Check |
|
“Heavy” airframe maintenance checks, which are the most extensive in scope and are generally performed every six or eight years depending on aircraft type. |
|
|
|
Dry Leasing |
|
Service offering, whereby we provide cargo and passenger aircraft and engine leasing solutions for compensation that is typically based on a fixed monthly amount. The customer operates, and is generally responsible for insuring and maintaining, the flight equipment. |
|
|
|
Heavy Maintenance |
|
Scheduled maintenance activities that are extensive in scope and are primarily based on time or usage intervals, which include, but are not limited to, C Checks, D Checks and engine overhauls. In addition, unscheduled engine repairs involving the removal of the engine from the aircraft are considered to be Heavy Maintenance. |
|
|
|
Line Maintenance |
|
Maintenance events occurring during normal day-to-day operations. |
|
|
|
Non-heavy Maintenance |
|
Discrete maintenance activities for the overhaul and repair of specific aircraft components, including landing gear, auxiliary power units and engine thrust reversers. |
|
|
|
Utilization |
|
The average number of Block Hours operated per day per aircraft. |
|
|
|
Yield |
|
The average amount a customer pays to fly one tonne of cargo one mile. |
Business Overview
We are a leading global provider of outsourced aircraft and aviation operating services. We operate the world’s largest fleet of 747 freighters and provide customers a broad array of 747, 777, 767 and 737 aircraft for domestic, regional and international cargo and passenger operations. We provide unique value to our customers by giving them access to highly reliable modern production freighters that deliver the lowest unit cost in the marketplace combined with outsourced aircraft operating services that we believe lead the industry in terms of quality and global scale. Our customers include express delivery providers, e-commerce retailers, the U.S. military, charter brokers, freight forwarders, direct shippers, airlines, manufacturers, sports teams and fans, and private charter customers. We provide global services with operations in Africa, Asia, Australia, Europe, the Middle East, North America and South America.
20
We look to achieve our growth plans and enhance shareholder value by:
See “Business Overview” and “Business Strategy” in our 2021 Annual Report on Form 10-K for additional information.
Business Developments
Our Airline Operations results for the first half of 2022, compared with 2021, reflected higher Yields, net of fuel. These were more than offset by increased pilot costs related to our new CBA, higher premium pay for pilots operating in certain areas significantly impacted by the COVID-19 pandemic and higher overtime pay driven by an increase in COVID-19 cases late in the second quarter. In addition, our results were negatively impacted by lower aircraft utilization driven by operational disruptions related to this increase in COVID-19 cases. The higher Yields include the impact of expanding and enhancing our relationships with strategic customers through new and extended long-term contracts driven by strong customer demand. The increase in COVID-19 cases negatively impacted our crew availability and our ability to position them due to widespread and well-publicized cancellations of commercial passenger flights. We are closely monitoring the COVID-19 pandemic and taking numerous precautions to ensure the safety of our operations around the world and mitigate the impact of any disruptions, including continuously adjusting routes to limit exposure to regions significantly impacted.
We manage our fleet to profitably serve our customers with modern, efficient aircraft and have entered into the following transactions to secure capacity to meet strong customer demand.
We continually assess our aircraft requirements and will make adjustments to our capacity as necessary. Some of these actions may involve grounding or disposing of aircraft or engines, which could result in asset impairments or other charges in future periods.
In March 2022, we signed a new five-year CBA with our pilots, effective as of September 2021. Under this industry competitive agreement, all of our pilots are receiving significantly higher pay, quality of life improvements and enhanced benefits. Labor costs arising from the new CBA are materially greater than the costs under our previous CBAs with our pilots (see Note 11 to our Financial Statements for further discussion).
Given the dynamic nature of the COVID-19 pandemic, the financial impact cannot be reasonably estimated at this time. We have incurred and expect to incur significant additional costs, including higher premium pay for pilots operating in certain areas significantly impacted by the COVID-19 pandemic and other operational costs, including costs for continuing to provide a safe working environment for our employees. In addition, COVID-19-related airport closures, employees who are unable to work, vaccine mandates, disruption of operations by our third-party service providers, availability of hotels and restaurants, ground handling delays or reductions in passenger flights by other airlines globally, have impacted and could further impact our ability to position employees to operate and fully utilize all of our aircraft. The continuation or worsening of the aforementioned and other factors could materially affect our results for the duration of the COVID-19 pandemic.
21
Results of Operations
The following discussion should be read in conjunction with our Financial Statements and other financial information appearing and referred to elsewhere in this report.
Three Months Ended June 30, 2022 and 2021
Operating Statistics
The following tables compare our Segment Operating Fleet (average aircraft equivalents during the period) for the three months ended June 30:
Segment Operating Fleet |
|
2022 |
|
|
2021 |
|
|
Inc/(Dec) |
|
|||
Airline Operations* |
|
|
|
|
|
|
|
|
|
|||
747-8F Cargo |
|
|
10.3 |
|
|
|
10.0 |
|
|
|
0.3 |
|
747-400 Cargo |
|
|
34.7 |
|
|
|
34.6 |
|
|
|
0.1 |
|
747-400 Dreamlifter |
|
|
0.3 |
|
|
|
1.3 |
|
|
|
(1.0 |
) |
747-400 Passenger |
|
|
4.6 |
|
|
|
5.0 |
|
|
|
(0.4 |
) |
777-200 Cargo |
|
|
9.0 |
|
|
|
9.0 |
|
|
|
- |
|
767-300 Cargo |
|
|
24.0 |
|
|
|
24.0 |
|
|
|
- |
|
767-300 Passenger |
|
|
5.7 |
|
|
|
4.9 |
|
|
|
0.8 |
|
767-200 Cargo |
|
|
- |
|
|
|
2.4 |
|
|
|
(2.4 |
) |
737-800 Cargo |
|
|
8.0 |
|
|
|
8.0 |
|
|
|
- |
|
Total |
|
|
96.6 |
|
|
|
99.2 |
|
|
|
(2.6 |
) |
|
|
|
|
|
|
|
|
|
|
|||
Dry Leasing |
|
|
|
|
|
|
|
|
|
|||
777-200 Cargo |
|
|
7.0 |
|
|
|
7.0 |
|
|
|
- |
|
767-300 Cargo |
|
|
21.0 |
|
|
|
21.0 |
|
|
|
- |
|
737-300 Cargo |
|
|
- |
|
|
|
1.0 |
|
|
|
(1.0 |
) |
Total |
|
|
28.0 |
|
|
|
29.0 |
|
|
|
(1.0 |
) |
|
|
|
|
|
|
|
|
|
|
|||
Less: Aircraft Dry Leased to CMI customers |
|
|
(21.0 |
) |
|
|
(21.0 |
) |
|
|
- |
|
Total Operating Average Aircraft Equivalents |
|
|
103.6 |
|
|
|
107.2 |
|
|
|
(3.6 |
) |
* Airline Operations average fleet excludes spare aircraft provided by CMI customers.
Block Hours |
2022 |
|
|
2021 |
|
|
Inc/(Dec) |
|
|
% Change |
|
||||
Total Block Hours** |
|
83,922 |
|
|
|
93,190 |
|
|
|
(9,268 |
) |
|
|
(9.9 |
)% |
** Includes Airline Operations and other Block Hours.
22
Operating Revenue
The following table compares our Operating Revenue for the three months ended June 30 (in thousands):
|
|
2022 |
|
|
2021 |
|
|
Inc/(Dec) |
|
|
% Change |
|
||||
Operating Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Airline Operations |
|
$ |
1,142,731 |
|
|
$ |
955,861 |
|
|
$ |
186,870 |
|
|
|
19.5 |
% |
Dry Leasing |
|
|
41,314 |
|
|
|
40,404 |
|
|
|
910 |
|
|
|
2.3 |
% |
Customer incentive asset amortization |
|
|
(9,864 |
) |
|
|
(11,443 |
) |
|
|
(1,579 |
) |
|
|
(13.8 |
)% |
Other |
|
|
5,790 |
|
|
|
5,610 |
|
|
|
180 |
|
|
|
3.2 |
% |
Total Operating Revenue |
|
$ |
1,179,971 |
|
|
$ |
990,432 |
|
|
|
|
|
|
|
||
Airline Operations
|
2022 |
|
|
2021 |
|
|
Inc/(Dec) |
|
|
% Change |
|
||||
Block Hours |
|
|
|
|
|
|
|
|
|
|
|
||||
Cargo |
|
79,922 |
|
|
|
87,675 |
|
|
|
(7,753 |
) |
|
|
(8.8 |
)% |
Passenger |
|
3,285 |
|
|
|
4,713 |
|
|
|
(1,428 |
) |
|
|
(30.3 |
)% |
Total Airline Operations |
|
83,207 |
|
|
|
92,388 |
|
|
|
(9,181 |
) |
|
|
(9.9 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenue Per Block Hour |
|
|
|
|
|
|
|
|
|
|
|
||||
Airline Operations |
$ |
13,734 |
|
|
$ |
10,346 |
|
|
$ |
3,388 |
|
|
|
32.7 |
% |
Cargo |
$ |
13,448 |
|
|
$ |
9,903 |
|
|
$ |
3,545 |
|
|
|
35.8 |
% |
Passenger |
$ |
20,679 |
|
|
$ |
18,590 |
|
|
$ |
2,089 |
|
|
|
11.2 |
% |
Airline Operations revenue increased $186.9 million, or 19.5%, primarily due to an increase in Revenue per Block Hour, partially offset by a reduction in Block Hours. Revenue per Block Hour rose primarily due to higher fuel prices and Yields, net of fuel, including the impact of new and extended long-term contracts. Block Hours decreased primarily due to a reduction in less profitable smaller gauge CMI service flying and our operation of fewer passenger flights, as well as operational disruptions related to an increase in COVID-19 cases late in the second quarter. This increase in cases adversely impacted our crew availability and our ability to position them due to the widespread and well-publicized cancellations of commercial passenger flights.
Dry Leasing
Dry Leasing revenue was relatively unchanged.
Operating Expenses
The following table compares our Operating Expenses for the three months ended June 30 (in thousands):
|
|
2022 |
|
|
2021 |
|
|
Inc/(Dec) |
|
|
% Change |
|
||||
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Aircraft fuel |
|
$ |
385,882 |
|
|
$ |
214,269 |
|
|
$ |
171,613 |
|
|
|
80.1 |
% |
Salaries, wages and benefits |
|
|
285,906 |
|
|
|
208,366 |
|
|
|
77,540 |
|
|
|
37.2 |
% |
Maintenance, materials and repairs |
|
|
108,055 |
|
|
|
132,547 |
|
|
|
(24,492 |
) |
|
|
(18.5 |
)% |
Depreciation and amortization |
|
|
74,358 |
|
|
|
66,661 |
|
|
|
7,697 |
|
|
|
11.5 |
% |
Travel |
|
|
52,719 |
|
|
|
39,947 |
|
|
|
12,772 |
|
|
|
32.0 |
% |
Navigation fees, landing fees and other rent |
|
|
39,091 |
|
|
|
47,409 |
|
|
|
(8,318 |
) |
|
|
(17.5 |
)% |
Passenger and ground handling services |
|
|
34,747 |
|
|
|
41,504 |
|
|
|
(6,757 |
) |
|
|
(16.3 |
)% |
Aircraft rent |
|
|
12,613 |
|
|
|
17,687 |
|
|
|
(5,074 |
) |
|
|
(28.7 |
)% |
Loss (gain) on disposal of flight equipment |
|
|
19 |
|
|
|
- |
|
|
|
19 |
|
|
NM |
|
|
Transaction-related expenses |
|
|
- |
|
|
|
117 |
|
|
|
(117 |
) |
|
NM |
|
|
Other |
|
|
54,435 |
|
|
|
61,848 |
|
|
|
(7,413 |
) |
|
|
(12.0 |
)% |
Total Operating Expenses |
|
$ |
1,047,825 |
|
|
$ |
830,355 |
|
|
|
|
|
|
|
||
NM represents year-over-year changes that are not meaningful.
Aircraft fuel increased $171.6 million, or 80.1%, primarily due to an increase in the average fuel cost per gallon, partially offset by lower consumption related to decreased Charter flying. Our exposure to fluctuations in fuel price is generally limited to the shorter-term commercial portion of our Charter services, as fuel risk is largely mitigated by price adjustments, including those based on indexed fuel prices for longer-term commercial charter contracts. We do not incur fuel expense in providing ACMI and CMI
23
services or in our Dry Leasing business as the cost of fuel is borne by the customer. Similarly, we generally have no fuel price risk for AMC charters because the price is set under our contract with the AMC, and we receive or make payments to adjust for price increases and decreases from the contractual rate. Average fuel cost per gallon and fuel consumption for the three months ended June 30 were:
|
2022 |
|
|
2021 |
|
|
Inc/(Dec) |
|
|
% Change |
|
||||
Average fuel cost per gallon |
$ |
3.83 |
|
|
$ |
1.92 |
|
|
$ |
1.91 |
|
|
|
99.5 |
% |
Fuel gallons consumed (000s) |
|
100,860 |
|
|
|
111,818 |
|
|
|
(10,958 |
) |
|
|
(9.8 |
)% |
Salaries, wages and benefits increased $77.5 million, or 37.2%, primarily due to increased pilot costs related to our new CBA, higher premium pay for pilots operating in certain areas significantly impacted by the COVID-19 pandemic and higher overtime pay driven by an increase in COVID-19 cases. These items were partially offset by decreased flying.
Maintenance, materials and repairs decreased $24.5 million, or 18.5%, primarily reflecting decreased Heavy Maintenance expense. Heavy Maintenance expense on 747-400 aircraft decreased $16.8 million primarily due to a decrease in the number of engine overhauls, partially offset by an increase in the number of C Checks. Heavy Maintenance expense on 747-8F aircraft decreased $4.5 million primarily due to a decrease in the number of C Checks. Heavy Maintenance expense on 767 aircraft decreased $1.8 million primarily due to a decrease in the number of C Checks. Heavy airframe maintenance checks and engine overhauls impacting Maintenance, materials and repairs for the three months ended June 30 were:
Heavy Maintenance Events |
|
2022 |
|
|
2021 |
|
|
Inc/(Dec) |
|
|||
747-8F C Checks |
|
|
- |
|
|
|
2 |
|
|
|
(2 |
) |
747-400 C Checks |
|
|
4 |
|
|
|
3 |
|
|
|
1 |
|
767 C Checks |
|
|
- |
|
|
|
1 |
|
|
|
(1 |
) |
747-400 D Checks |
|
|
3 |
|
|
|
3 |
|
|
|
- |
|
CF6-80 engine overhauls |
|
|
1 |
|
|
|
3 |
|
|
|
(2 |
) |
PW4000 engine overhauls |
|
|
- |
|
|
|
1 |
|
|
|
(1 |
) |
Depreciation and amortization increased $7.7 million, or 11.5%, primarily due to an increase in depreciation related to the acquisition of 747-400 freighter aircraft throughout 2021 that were previously on lease to us and changes in 747-400 freighter aircraft leases in 2021.
Travel increased $12.8 million, or 32.0%, primarily due to increased rates.
Navigation fees, landing fees and other rent decreased $8.3 million, or 17.5%, primarily due to decreased flying.
Passenger and ground handling services decreased $6.8 million, or 16.3%, primarily due to decreased flying and lower rates.
Aircraft rent decreased $5.1 million, or 28.7%, primarily due the acquisition of 747-400 freighter aircraft throughout 2021 that were previously on lease to us and changes in 747-400 freighter aircraft leases in 2021.
Other decreased $7.4 million, or 12.0%, primarily due to a decrease in professional fees.
Non-operating Expenses (Income)
The following table compares our Non-operating Expenses (Income) for the three months ended June 30 (in thousands):
|
|
2022 |
|
|
2021 |
|
|
Inc/(Dec) |
|
|
% Change |
|
||||
Non-operating Expenses (Income) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
$ |
(873 |
) |
|
$ |
(189 |
) |
|
$ |
684 |
|
|
NM |
|
|
Interest expense |
|
|
19,924 |
|
|
|
26,992 |
|
|
|
(7,068 |
) |
|
|
(26.2 |
)% |
Capitalized interest |
|
|
(3,339 |
) |
|
|
(1,850 |
) |
|
|
1,489 |
|
|
|
80.5 |
% |
Loss on early extinguishment of debt |
|
|
689 |
|
|
|
- |
|
|
|
689 |
|
|
NM |
|
|
Other (income) expense, net |
|
|
837 |
|
|
|
(4,854 |
) |
|
|
(5,691 |
) |
|
|
(117.2 |
)% |
Interest expense decreased $7.1 million, or 26.2%, primarily due to the adoption of the amended accounting guidance for convertible notes on January 1, 2022 (see Note 2 to our Financial Statements) and the scheduled repayment of debt.
Capitalized interest increased $1.5 million primarily due to pre-delivery deposits related to our January 2021 agreement to purchase four 747-8F aircraft and our December 2021 agreement to purchase four 777-200LRF aircraft from Boeing (see Note 2 to our Financial Statements).
24
Other (income) expense, net decreased primarily due to a $4.6 million reduction in refunds of aircraft rent paid in previous years.
Income taxes. The effective income tax rates were 23.2% and 23.5% for the three months ended June 30, 2022 and 2021, respectively. The rate for the three months ended June 30, 2022 and 2021 differed from the U.S. statutory rate primarily due to state income taxes and certain expenses that are not deductible for tax purposes.
Segments
The following table compares the Direct Contribution for our reportable segments for the three months ended June 30 (see Note 10 to our Financial Statements for the reconciliation to Operating income) (in thousands):
|
|
2022 |
|
|
2021 |
|
|
Inc/(Dec) |
|
|
% Change |
|
||||
Direct Contribution |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Airline Operations |
|
$ |
196,331 |
|
|
$ |
231,793 |
|
|
$ |
(35,462 |
) |
|
|
(15.3 |
)% |
Dry Leasing |
|
|
12,646 |
|
|
|
10,766 |
|
|
|
1,880 |
|
|
|
17.5 |
% |
Total Direct Contribution |
|
$ |
208,977 |
|
|
$ |
242,559 |
|
|
$ |
(33,582 |
) |
|
|
(13.8 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Unallocated expenses and (income), net |
|
$ |
93,361 |
|
|
$ |
102,464 |
|
|
$ |
(9,103 |
) |
|
|
(8.9 |
)% |
Airline Operations Segment
Airline Operations Direct Contribution decreased $35.5 million, or 15.3%, primarily due to increased pilot costs related to our new CBA, higher premium pay for pilots operating in certain areas significantly impacted by the COVID-19 pandemic and higher overtime pay driven by an increase in COVID-19 cases late in the second quarter. In addition, Direct Contribution was negatively impacted by lower aircraft utilization driven by operational disruptions related to this increase in COVID-19 cases. The increase in COVID-19 cases negatively impacted our crew availability and our ability to position them due to the widespread and well-publicized cancellations of commercial passenger flights. Partially offsetting these items were increased Yields, net of fuel, including the impact of new and extended long-term contracts and lower Heavy Maintenance expense.
Dry Leasing Segment
Dry Leasing Direct Contribution increased $1.9 million, or 17.5%, primarily driven by lower interest expense related to the scheduled repayment of debt.
Unallocated expenses and (income), net
Unallocated expenses and (income), net decreased $9.1 million, or 8.9%, primarily due to lower professional fees and lower interest expense due to the adoption of the amended accounting guidance for convertible notes on January 1, 2022 (see Note 2 to our Financial Statements), partially offset by a reduction in refunds of aircraft rent paid in previous years.
25
Six Months Ended June 30, 2022 and 2021
Operating Statistics
The following tables compare our Segment Operating Fleet (average aircraft equivalents during the period) and total Block Hours operated for the six months ended June 30:
Segment Operating Fleet |
|
2022 |
|
|
2021 |
|
|
Inc/(Dec) |
|
|||
Airline Operations* |
|
|
|
|
|
|
|
|
|
|||
747-8F Cargo |
|
|
10.1 |
|
|
|
10.0 |
|
|
|
0.1 |
|
747-400 Cargo |
|
|
34.6 |
|
|
|
34.2 |
|
|
|
0.4 |
|
747-400 Dreamlifter |
|
|
0.3 |
|
|
|
1.2 |
|
|
|
(0.9 |
) |
747-400 Passenger |
|
|
4.7 |
|
|
|
4.9 |
|
|
|
(0.2 |
) |
777-200 Cargo |
|
|
9.0 |
|
|
|
9.0 |
|
|
|
- |
|
767-300 Cargo |
|
|
24.0 |
|
|
|
24.0 |
|
|
|
- |
|
767-300 Passenger |
|
|
5.6 |
|
|
|
4.9 |
|
|
|
0.7 |
|
767-200 Cargo |
|
|
- |
|
|
|
4.0 |
|
|
|
(4.0 |
) |
767-200 Passenger |
|
|
- |
|
|
|
0.3 |
|
|
|
(0.3 |
) |
737-800 Cargo |
|
|
8.0 |
|
|
|
8.0 |
|
|
|
- |
|
Total |
|
|
96.3 |
|
|
|
100.5 |
|
|
|
(4.2 |
) |
|
|
|
|
|
|
|
|
|
|
|||
Dry Leasing |
|
|
|
|
|
|
|
|
|
|||
777-200 Cargo |
|
|
7.0 |
|
|
|
7.0 |
|
|
|
- |
|
767-300 Cargo |
|
|
21.0 |
|
|
|
21.0 |
|
|
|
- |
|
737-300 Cargo |
|
|
- |
|
|
|
1.0 |
|
|
|
(1.0 |
) |
Total |
|
|
28.0 |
|
|
|
29.0 |
|
|
|
(1.0 |
) |
|
|
|
|
|
|
|
|
|
|
|||
Less: Aircraft Dry Leased to CMI customers |
|
|
(21.0 |
) |
|
|
(21.0 |
) |
|
|
- |
|
Total Operating Average Aircraft Equivalents |
|
|
103.3 |
|
|
|
108.5 |
|
|
|
(5.2 |
) |
* Airline Operations average fleet excludes spare aircraft provided by CMI customers.
Block Hours |
2022 |
|
|
2021 |
|
|
Inc/(Dec) |
|
|
% Change |
|
||||
Total Block Hours** |
|
166,548 |
|
|
|
181,713 |
|
|
|
(15,165 |
) |
|
|
(8.3 |
)% |
** Includes Airline Operations and other Block Hours.
26
Operating Revenue
The following table compares our Operating Revenue for the six months ended June 30 (in thousands):
|
|
2022 |
|
|
2021 |
|
|
Inc/(Dec) |
|
|
% Change |
|
||||
Operating Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Airline Operations |
|
$ |
2,138,086 |
|
|
$ |
1,782,101 |
|
|
$ |
355,985 |
|
|
|
20.0 |
% |
Dry Leasing |
|
|
87,484 |
|
|
|
80,768 |
|
|
|
6,716 |
|
|
|
8.3 |
% |
Customer incentive asset amortization |
|
|
(19,915 |
) |
|
|
(21,924 |
) |
|
|
(2,009 |
) |
|
|
(9.2 |
)% |
Other |
|
|
11,472 |
|
|
|
10,787 |
|
|
|
685 |
|
|
|
6.4 |
% |
Total Operating Revenue |
|
$ |
2,217,127 |
|
|
$ |
1,851,732 |
|
|
|
|
|
|
|
||
Airline Operations
|
2022 |
|
|
2021 |
|
|
Inc/(Dec) |
|
|
% Change |
|
||||
Block Hours |
|
|
|
|
|
|
|
|
|
|
|
||||
Cargo |
|
158,347 |
|
|
|
170,784 |
|
|
|
(12,437 |
) |
|
|
(7.3 |
)% |
Passenger |
|
6,591 |
|
|
|
8,362 |
|
|
|
(1,771 |
) |
|
|
(21.2 |
)% |
Total Airline Operations |
|
164,938 |
|
|
|
179,146 |
|
|
|
(14,208 |
) |
|
|
(7.9 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenue Per Block Hour |
|
|
|
|
|
|
|
|
|
|
|
||||
Airline Operations |
$ |
12,963 |
|
|
$ |
9,948 |
|
|
$ |
3,015 |
|
|
|
30.3 |
% |
Cargo |
$ |
12,677 |
|
|
$ |
9,525 |
|
|
$ |
3,152 |
|
|
|
33 |
% |
Passenger |
$ |
19,832 |
|
|
$ |
18,576 |
|
|
$ |
1,256 |
|
|
|
6.8 |
% |
Airline Operations revenue increased $356.0 million, or 20.0%, primarily due to an increase in Revenue per Block Hour, partially offset by a reduction in Block Hours. Revenue per Block Hour rose primarily due to higher fuel prices and Yields, net of fuel, including the impact of new and extended long-term contracts. Block hours decreased primarily due to a reduction in less profitable smaller gauge CMI service flying and our operation of fewer passenger flights, as well as operational disruptions related to an increase in COVID-19 cases late in the second quarter. This increase in cases adversely impacted our crew availability and our ability to position them due to the widespread and well-publicized cancellations of commercial passenger flights.
Dry Leasing
Dry Leasing revenue increased $6.7 million, or 8.3%, primarily due to $5.0 million of revenue from maintenance payments related to the scheduled return of an aircraft during the first quarter of 2022, which was subsequently sold during that quarter.
Operating Expenses
The following table compares our Operating Expenses for the six months ended June 30 (in thousands):
|
|
2022 |
|
|
2021 |
|
|
Inc/(Dec) |
|
|
% Change |
|
||||
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Aircraft fuel |
|
$ |
630,219 |
|
|
$ |
377,820 |
|
|
$ |
252,399 |
|
|
|
66.8 |
% |
Salaries, wages and benefits |
|
|
583,925 |
|
|
|
410,980 |
|
|
|
172,945 |
|
|
|
42.1 |
% |
Maintenance, materials and repairs |
|
|
226,954 |
|
|
|
253,680 |
|
|
|
(26,726 |
) |
|
|
(10.5 |
)% |
Depreciation and amortization |
|
|
146,560 |
|
|
|
134,450 |
|
|
|
12,110 |
|
|
|
9.0 |
% |
Travel |
|
|
95,487 |
|
|
|
77,619 |
|
|
|
17,868 |
|
|
|
23.0 |
% |
Navigation fees, landing fees and other rent |
|
|
78,445 |
|
|
|
92,296 |
|
|
|
(13,851 |
) |
|
|
(15.0 |
)% |
Passenger and ground handling services |
|
|
69,683 |
|
|
|
81,569 |
|
|
|
(11,886 |
) |
|
|
(14.6 |
)% |
Aircraft rent |
|
|
25,608 |
|
|
|
38,443 |
|
|
|
(12,835 |
) |
|
|
(33.4 |
)% |
Loss (gain) on disposal of flight equipment |
|
|
(6,221 |
) |
|
|
16 |
|
|
|
6,237 |
|
|
NM |
|
|
Special charge |
|
|
2,633 |
|
|
|
- |
|
|
|
2,633 |
|
|
NM |
|
|
Transaction-related expenses |
|
|
- |
|
|
|
318 |
|
|
|
(318 |
) |
|
NM |
|
|
Other |
|
|
110,292 |
|
|
|
120,260 |
|
|
|
(9,968 |
) |
|
|
(8.3 |
)% |
Total Operating Expenses |
|
$ |
1,963,585 |
|
|
$ |
1,587,451 |
|
|
|
|
|
|
|
||
Aircraft fuel increased $252.4 million, or 66.8%, primarily due to an increase in the average fuel cost per gallon, partially offset by lower consumption related to decreased Charter flying. Our exposure to fluctuations in fuel price is generally limited to the shorter-term commercial portion of our Charter services, as fuel risk is largely mitigated by price adjustments, including those based
27
on indexed fuel prices for longer-term commercial charter contracts. We do not incur fuel expense in providing ACMI and CMI services or in our Dry Leasing business as the cost of fuel is borne by the customer. Similarly, we generally have no fuel price risk for AMC charters because the price is set under our contract with the AMC, and we receive or make payments to adjust for price increases and decreases from the contractual rate. Average fuel cost per gallon and fuel consumption for the six months ended June 30 were:
|
2022 |
|
|
2021 |
|
|
Inc/(Dec) |
|
|
% Change |
|
||||
Average fuel cost per gallon |
$ |
3.32 |
|
|
$ |
1.82 |
|
|
$ |
1.50 |
|
|
|
82.4 |
% |
Fuel gallons consumed (000s) |
|
190,058 |
|
|
|
207,404 |
|
|
|
(17,346 |
) |
|
|
(8.4 |
)% |
Salaries, wages and benefits increased $172.9 million, or 42.1%, primarily due to increased pilot costs related to our new CBA and higher premium pay for pilots operating in certain areas significantly impacted by the COVID-19 pandemic, partially offset by decreased flying.
Maintenance, materials and repairs decreased by $26.7 million, or 10.5%, primarily reflecting $15.2 million of lower Heavy Maintenance expense and $11.6 million of reduced Line Maintenance expense. Heavy Maintenance expense on 747-8F aircraft decreased $7.6 million primarily due to a decrease in the number of D Checks. Heavy Maintenance expense on 747-400 aircraft decreased $6.0 million primarily due to a decrease in the number of engine overhauls. Line Maintenance expense decreased primarily due to the reduction in flying. Heavy airframe maintenance checks and engine overhauls impacting Maintenance, materials and repairs for the six months ended June 30 were:
Heavy Maintenance Events |
|
2022 |
|
|
2021 |
|
|
Inc/(Dec) |
|
|||
747-8F C Checks |
|
|
2 |
|
|
|
2 |
|
|
|
- |
|
747-400 C Checks |
|
|
8 |
|
|
|
8 |
|
|
|
- |
|
777-200 C Checks |
|
|
1 |
|
|
|
- |
|
|
|
1 |
|
767 C Checks |
|
|
2 |
|
|
|
3 |
|
|
|
(1 |
) |
747-8F D Checks |
|
|
- |
|
|
|
2 |
|
|
|
(2 |
) |
747-400 D Checks |
|
|
5 |
|
|
|
4 |
|
|
|
1 |
|
CF6-80 engine overhauls |
|
|
4 |
|
|
|
4 |
|
|
|
- |
|
PW4000 engine overhauls |
|
|
- |
|
|
|
2 |
|
|
|
(2 |
) |
Depreciation and amortization increased $12.1 million, or 9.0%, primarily due to an increase in depreciation related to the acquisition of 747-400 freighter aircraft throughout 2021 that were previously on lease to us and changes in 747-400 freighter aircraft leases in 2021.
Travel increased $17.9 million, or 23.0%, primarily due to increased rates.
Navigation fees, landing fees and other rent decreased $13.9 million, or 15.0%, primarily due to decreased flying.
Passenger and ground handling services decreased $11.9 million, or 14.6%, primarily due to decreased flying and lower rates.
Aircraft rent decreased $12.8 million, or 33.4%, primarily due the acquisition of 747-400 freighter aircraft throughout 2021 that were previously on lease to us and changes in 747-400 freighter aircraft leases in 2021.
Loss (gain) on disposal of flight equipment in 2022 represented a gain during the first quarter of 2022 from the sale of six spare CF6-80 engines, which were previously classified as assets held for sale (see Note 6 to our Financial Statements).
Special charge in 2022 represented a charge during the first quarter of 2022 related to two CF6-80 engines Dry Leased to a customer.
Other decreased $10.0 million, or 8.3%, primarily due to a decrease in professional fees incurred in 2021 related to costs associated with negotiations and arbitration for a new CBA (see Note 11 to our Financial Statements).
28
Non-operating (Income) Expenses
The following table compares our Non-operating (Income) Expenses for the six months ended June 30 (in thousands):
|
|
2022 |
|
|
2021 |
|
|
Inc/(Dec) |
|
|
% Change |
|
||||
Non-operating (Income) Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
$ |
(1,113 |
) |
|
$ |
(400 |
) |
|
$ |
713 |
|
|
|
178.3 |
% |
Interest expense |
|
|
40,347 |
|
|
|
54,172 |
|
|
|
(13,825 |
) |
|
|
(25.5 |
)% |
Capitalized interest |
|
|
(7,103 |
) |
|
|
(3,121 |
) |
|
|
3,982 |
|
|
|
127.6 |
% |
Loss on early extinguishment of debt |
|
|
689 |
|
|
|
- |
|
|
|
689 |
|
|
NM |
|
|
Unrealized loss on financial instruments |
|
|
- |
|
|
|
113 |
|
|
|
(113 |
) |
|
NM |
|
|
Other (income) expense, net |
|
|
219 |
|
|
|
(44,310 |
) |
|
|
(44,529 |
) |
|
|
(100.5 |
)% |
Interest expense decreased $13.8 million, or 25.5%, primarily due to the adoption of the amended accounting guidance for convertible notes on January 1, 2022 (see Note 2 to our Financial Statements) and the scheduled repayment of debt.
Capitalized interest increased $4.0 million primarily due to pre-delivery deposits related to our January 2021 agreement to purchase four 747-8F aircraft and our December 2021 agreement to purchase four 777-200LRF aircraft from Boeing (see Note 2 to our Financial Statements).
Other (income) expense, net decreased $44.5 million, or 100.5%, primarily due to $40.9 million in CARES Act grant income in 2021 (see Note 2 to our Financial Statements) and a $4.6 million reduction in refunds of aircraft rent paid in previous years.
Income taxes. The effective income tax rates were 23.0% and 23.6% for the six months ended June 30, 2022 and 2021, respectively. The rate for the six months ended June 30, 2022 and 2021 differed from the U.S. statutory rate primarily due to state income taxes and certain expenses that are not deductible for tax purposes.
Segments
The following table compares the Direct Contribution for our reportable segments for the six months ended June 30 (see Note 11 to our Financial Statements for the reconciliation to Operating income) (in thousands):
|
|
2022 |
|
|
2021 |
|
|
Inc/(Dec) |
|
|
% Change |
|
||||
Direct Contribution |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Airline Operations |
|
$ |
382,150 |
|
|
$ |
400,943 |
|
|
$ |
(18,793 |
) |
|
|
(4.7 |
)% |
Dry Leasing |
|
|
29,555 |
|
|
|
21,329 |
|
|
|
8,226 |
|
|
|
38.6 |
% |
Total Direct Contribution |
|
$ |
411,705 |
|
|
$ |
422,272 |
|
|
$ |
(10,567 |
) |
|
|
(2.5 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Unallocated expenses and (income), net |
|
$ |
194,101 |
|
|
$ |
163,998 |
|
|
$ |
30,103 |
|
|
|
18.4 |
% |
Airline Operations Segment
Airline Operations Direct Contribution decreased $18.8 million, or 4.7%, primarily due to increased pilot costs related to our new CBA, higher premium pay for pilots operating in certain areas significantly impacted by the COVID-19 pandemic and higher overtime pay driven by an increase in COVID-19 cases late in the second quarter. In addition, Direct Contribution was negatively impacted by lower aircraft utilization driven by operational disruptions related to this increase in COVID-19 cases. The increase in COVID-19 cases negatively impacted our crew availability and our ability to position them due to the widespread and well-publicized cancellations of commercial passenger flights. Partially offsetting these items were increased Yields, net of fuel, including the impact of new and extended long-term contracts and lower Heavy Maintenance expense.
Dry Leasing Segment
Dry Leasing Direct Contribution increased $8.2 million, or 38.6%, primarily due to $5.0 million of revenue from maintenance payments related to the scheduled return of an aircraft during the first quarter of 2022 and lower interest expense related to the scheduled repayment of debt.
Unallocated expenses and (income), net
Unallocated expenses and (income), net increased $30.1 million, or 18.4%, primarily due to $40.9 million in CARES Act grant income recognized in 2021 (see Note 2 to our Financial Statements) and a $4.6 million reduction in refunds of aircraft rent paid in previous years. Partially offsetting these items were a decrease in professional fees and lower interest expense due to the adoption of the amended accounting guidance for convertible notes on January 1, 2022 (see Note 2 to our Financial Statements).
29
Reconciliation of GAAP to non-GAAP Financial Measures
To supplement our Financial Statements presented in accordance with GAAP, we present certain non-GAAP financial measures to assist in the evaluation of our business performance. These non-GAAP financial measures include Adjusted Net Income, Adjusted Diluted EPS and Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”), which exclude certain noncash income and expenses, and items impacting year-over-year comparisons of our results. These non-GAAP financial measures may not be comparable to similarly titled measures used by other companies and should not be considered in isolation or as a substitute for Net Income and Diluted EPS from continuing operations, net of taxes which are the most directly comparable measures of performance prepared in accordance with GAAP.
We use these non-GAAP financial measures in assessing the performance of our ongoing operations and in planning and forecasting future periods. These adjusted measures provide a more comparable basis to analyze operating results and earnings and are measures commonly used by shareholders to measure our performance. In addition, management’s incentive compensation is determined, in part, by using Adjusted Net Income and Adjusted EBITDA. We believe that these adjusted measures, when considered together with the corresponding GAAP financial measures and the reconciliations to those measures, provide meaningful supplemental information to assist investors and analysts in understanding our business results and assessing our prospects for future performance.
The following is a reconciliation of Net Income and Diluted EPS to the corresponding non-GAAP financial measures (see Note 13 to our Financial Statements for the calculation of Diluted EPS) (in thousands, except per share data):
|
|
|
For the Three Months Ended |
|
||||||||||
|
|
|
|
|
|
|
|
Percent Change |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||
Net Income |
|
|
$ |
88,258 |
|
|
|
$ |
107,110 |
|
|
|
(17.6 |
)% |
Impact from: |
|
|
|
|
|
|
|
|
|
|
|
|||
Customer incentive asset amortization |
|
|
|
9,864 |
|
|
|
|
11,443 |
|
|
|
|
|
Noncash expenses and income, net (a) |
|
|
|
- |
|
|
|
|
4,746 |
|
|
|
|
|
Other, net (b) |
|
|
|
708 |
|
|
|
|
696 |
|
|
|
|
|
Income tax effect of reconciling items |
|
|
|
(1,580 |
) |
|
|
|
(2,220 |
) |
|
|
|
|
Adjusted Net Income |
|
|
$ |
97,250 |
|
|
|
$ |
121,775 |
|
|
|
(20.1 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Weighted average diluted shares outstanding |
|
|
|
33,679 |
|
|
|
|
30,319 |
|
|
|
|
|
Less: effect of convertible notes hedges (c) |
|
|
|
(4,731 |
) |
|
|
|
(608 |
) |
|
|
|
|
Adjusted weighted average diluted shares outstanding |
|
|
|
28,948 |
|
|
|
|
29,711 |
|
|
|
|
|
Adjusted Diluted EPS |
|
|
$ |
3.36 |
|
|
|
$ |
4.10 |
|
|
|
(18.0 |
)% |
|
|
|
For the Six Months Ended |
|
||||||||||
|
|
|
|
|
|
|
|
Percent Change |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||
Net Income |
|
|
$ |
169,769 |
|
|
|
$ |
197,043 |
|
|
|
(13.8 |
)% |
Impact from: |
|
|
|
|
|
|
|
|
|
|
|
|||
CARES Act grant income (d) |
|
|
|
- |
|
|
|
|
(40,944 |
) |
|
|
|
|
Customer incentive asset amortization |
|
|
|
19,915 |
|
|
|
|
21,924 |
|
|
|
|
|
Adjustments to CBA paid time-off benefits (e) |
|
|
|
2,154 |
|
|
|
|
- |
|
|
|
|
|
Special charge (f) |
|
|
|
2,633 |
|
|
|
|
- |
|
|
|
|
|
Noncash expenses and income, net (a) |
|
|
|
- |
|
|
|
|
9,418 |
|
|
|
|
|
Unrealized loss on financial instruments |
|
|
|
- |
|
|
|
|
113 |
|
|
|
|
|
Other, net (b) |
|
|
|
(5,532 |
) |
|
|
|
1,025 |
|
|
|
|
|
Income tax effect of reconciling items |
|
|
|
(2,909 |
) |
|
|
|
5,411 |
|
|
|
|
|
Adjusted Net Income |
|
|
$ |
186,030 |
|
|
|
$ |
193,990 |
|
|
|
(4.1 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Weighted average diluted shares outstanding |
|
|
|
34,184 |
|
|
|
|
29,900 |
|
|
|
|
|
Less: effect of convertible notes hedges (c) |
|
|
|
(4,881 |
) |
|
|
|
(304 |
) |
|
|
|
|
Adjusted weighted average diluted shares outstanding |
|
|
|
29,303 |
|
|
|
|
29,596 |
|
|
|
|
|
Adjusted Diluted EPS |
|
|
$ |
6.35 |
|
|
|
$ |
6.55 |
|
|
|
(3.1 |
)% |
30
|
|
|
For the Three Months Ended |
|
||||||||||
|
|
|
|
|
|
|
|
Percent Change |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||
Net Income |
|
|
$ |
88,258 |
|
|
|
$ |
107,110 |
|
|
|
(17.6 |
)% |
Interest expense, net |
|
|
|
15,712 |
|
|
|
|
24,953 |
|
|
|
|
|
Depreciation and amortization |
|
|
|
74,358 |
|
|
|
|
66,661 |
|
|
|
|
|
Income tax expense |
|
|
|
26,650 |
|
|
|
|
32,868 |
|
|
|
|
|
EBITDA |
|
|
|
204,978 |
|
|
|
|
231,592 |
|
|
|
|
|
Customer incentive asset amortization |
|
|
|
9,864 |
|
|
|
|
11,443 |
|
|
|
|
|
Other, net (b) |
|
|
|
708 |
|
|
|
|
696 |
|
|
|
|
|
Adjusted EBITDA |
|
|
$ |
215,550 |
|
|
|
$ |
243,731 |
|
|
|
(11.6 |
)% |
|
|
|
For the Six Months Ended |
|
||||||||||
|
|
|
|
|
|
|
|
Percent Change |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||
Net Income |
|
|
$ |
169,769 |
|
|
|
$ |
197,043 |
|
|
|
(13.8 |
)% |
Interest expense, net |
|
|
|
32,131 |
|
|
|
|
50,651 |
|
|
|
|
|
Depreciation and amortization |
|
|
|
146,560 |
|
|
|
|
134,450 |
|
|
|
|
|
Income tax expense |
|
|
|
50,734 |
|
|
|
|
60,784 |
|
|
|
|
|
EBITDA |
|
|
|
399,194 |
|
|
|
|
442,928 |
|
|
|
|
|
CARES Act grant income (d) |
|
|
|
- |
|
|
|
|
(40,944 |
) |
|
|
|
|
Customer incentive asset amortization |
|
|
|
19,915 |
|
|
|
|
21,924 |
|
|
|
|
|
Adjustments to CBA paid time-off benefits (e) |
|
|
|
2,154 |
|
|
|
|
- |
|
|
|
|
|
Special charge (f) |
|
|
|
2,633 |
|
|
|
|
- |
|
|
|
|
|
Unrealized loss on financial instruments |
|
|
|
- |
|
|
|
|
113 |
|
|
|
|
|
Other, net (b) |
|
|
|
(5,532 |
) |
|
|
|
1,025 |
|
|
|
|
|
Adjusted EBITDA |
|
|
$ |
418,364 |
|
|
|
$ |
425,046 |
|
|
|
(1.6 |
)% |
Liquidity and Capital Resources
The most significant liquidity events during the first half of 2022 were as follows:
In February 2022, we paid $100.0 million and received an initial delivery of 1,061,257 shares pursuant to an ASR under our new stock repurchase program approved by our board of directors, which authorized the repurchase of up to $200.0 million of our common stock. We subsequently settled the ASR in April 2022 and received an additional 172,887 shares of common stock. In the aggregate, we repurchased 1,234,144 shares (see Note 12 to our Financial Statements for a discussion of our ASR). In connection with the proposed Merger (see Note 15 to our Financial Statements), we have suspended the stock repurchase program.
In April 2022, we refinanced a term loan secured by a 747-8F aircraft and received proceeds of $90.0 million from a financing with an 84-month term for this aircraft at a blended fixed rate of 3.86% (see Note 7 to our Financial Statements).
In May 2022, we borrowed $140.0 million for the delivery of one 747-8F aircraft under a twelve-year term loan due in May 2034 at a fixed interest rate of 4.17% (see Note 7 to our Financial Statements).
Operating Activities. Net cash provided by operating activities was $426.0 million for the first half of 2022, which primarily reflected Net Income of $169.8 million, noncash adjustments of $172.4 million for Depreciation and amortization and $50.0 million for Deferred taxes, and a $28.7 million decrease in Accounts receivable, partially offset by a $15.8 million increase in Prepaid expenses, current assets and other assets. Net cash provided by operating activities was $343.1 million for the first half of 2021, which primarily reflected Net Income of $197.0 million and noncash adjustments of $172.2 million for Depreciation and amortization and $60.1 million for Deferred taxes, partially offset by a $56.3 million decrease in Accounts payable, accrued liabilities and other
31
liabilities, a $24.7 million increase in Accounts receivable and a $12.5 million increase in Prepaid expenses, current assets and other assets.
Investing Activities. Net cash used for investing activities was $375.8 million for the first half of 2022, consisting primarily of $329.8 million of purchase deposits and payments for flight equipment and modifications and $54.2 million of payments for core capital expenditures, excluding flight equipment, partially offset by $13.5 million of proceeds from the disposal of flight equipment. Purchase deposits and payments for flight equipment and modifications during the first half of 2022 were primarily related to the delivery of one 747-8F aircraft, 777-200LRF aircraft pre-delivery payments and spare engines. All capital expenditures for 2022 were funded through working capital and the financings discussed above. Net cash used for investing activities was $268.1 million for the first half of 2021, consisting primarily of $224.9 million of purchase deposits and payments for flight equipment and modifications and $43.4 million of payments for core capital expenditures, excluding flight equipment. Purchase deposits and payments for flight equipment and modifications during the first half of 2021 were primarily related to pre-delivery payments, spare engines and GEnx engine performance upgrade kits.
Financing Activities. Net cash used for financing activities was $354.3 million for the first half of 2022, which primarily reflected $478.9 million of payments on debt, $100.0 million related to the purchase of treasury stock and $12.1 million related to treasury shares withheld for payment of taxes, partially offset by $230.0 million of proceeds from debt issuance and $8.9 million of customer maintenance reserves and deposits received. Net cash used for financing activities was $170.9 million for the first half of 2021, which primarily reflected $171.2 million of payments on debt, $23.9 million in payments of maintenance reserves and $7.4 million related to treasury shares withheld for payment of taxes, partially offset by $23.9 million of proceeds from debt issuance and $9.0 million of customer maintenance reserves and deposits received.
We consider Cash and cash equivalents, Net cash provided by operating activities and availability under our revolving credit facility to be sufficient to meet our debt and lease obligations, to fund capital expenditures for 2022 and to purchase shares of our stock under our stock repurchase program. Core capital expenditures for the remainder of 2022 are expected to range from $70.0 to $80.0 million, which excludes flight equipment and capitalized interest. Committed capital expenditures for flight equipment for the remainder of 2022 are expected to be approximately $501.8 million.
Committed capital expenditures include pre-delivery and delivery payments for the purchase of the remaining three new 747-8F and four new 777-200LRF aircraft from Boeing, and other agreements to acquire spare engines. We expect to finance the aircraft delivery payments through secured debt financing. The remaining three 747-8F aircraft are expected to be delivered throughout 2022. The first 777-200LRF aircraft is expected to be delivered late in the fourth quarter of 2022 and the remaining three throughout 2023.
We may access external sources of capital from time to time depending on our cash requirements, assessments of current and anticipated market conditions, and the after-tax cost of capital. To that end, we filed a shelf registration statement with the SEC in April 2020 that enables us to sell debt and/or equity securities on a registered basis over the subsequent three years, depending on market conditions, our capital needs and other factors. Our access to capital markets can be adversely impacted by prevailing economic conditions and by financial, business and other factors, some of which are beyond our control. Additionally, our borrowing costs are affected by market conditions and may be adversely impacted by a tightening in credit markets.
We do not expect to pay any significant U.S. federal income tax for at least several years. Our business operations are subject to income tax in several foreign jurisdictions and in many states. We do not expect to pay any significant cash income taxes for at least several years in these foreign jurisdictions and states. We may repatriate the unremitted earnings of our foreign subsidiaries to the extent taxes are insignificant. The U.S. and numerous other countries are currently considering tax reform, which could result in significant changes to U.S. and international tax laws. The potential enactment of these laws could have a material impact on our business, results of operations and financial condition. We continue to monitor developments and assess the impact to us.
Description of Debt Agreements
See Note 7 to our Financial Statements for a description of our new debt. See our 2021 Annual Report on Form 10-K for a description of our debt obligations and amendments thereto as of December 31, 2021.
Off-Balance Sheet Arrangements
There were no material changes to our off-balance sheet arrangements during the six months ended June 30, 2022.
32
Recent Accounting Pronouncements
See Note 2 to our Financial Statements for a discussion of recent accounting pronouncements.
Forward-Looking Statements
This Quarterly Report on Form 10-Q (this “Report”), as well as other reports, releases and written and oral communications issued or made from time to time by or on behalf of AAWW, contain statements that may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Those statements are based on management’s beliefs, plans, expectations and assumptions, and on information currently available to management. Generally, the words “will,” “may,” “should,” “expect,” “anticipate,” “intend,” “plan,” “continue,” “believe,” “seek,” “project,” “estimate” and similar expressions used in this Report that do not relate to historical facts are intended to identify forward-looking statements.
The forward-looking statements in this Report are not representations or guarantees of future performance and involve certain risks, uncertainties and assumptions. Such risks, uncertainties and assumptions include, but are not limited to: the risk that the proposed transaction may not be completed in a timely manner or at all; the failure to receive, on a timely basis or otherwise, the required approvals of the proposed transaction by AAWW’s stockholders; the possibility that any or all of the various conditions to the consummation of the proposed transaction may not be satisfied or waived, including the failure to receive any required regulatory approvals from any applicable governmental entities (or any conditions, limitations or restrictions placed on such approvals); the possibility that competing offers or acquisition proposals for AAWW will be made; the occurrence of any event, change or other circumstance that could give rise to the termination of the definitive transaction agreement relating to the proposed transaction, including in circumstances which would require AAWW to pay a termination fee; incurring substantial costs related to the proposed transaction, such as legal, accounting, financial advisory and integration costs; the effect of the announcement, pendency of the proposed transaction, or any failure to successfully complete the proposed transaction on AAWW’s ability to attract, motivate or retain key executives, pilots and associates, its ability to maintain relationships with its customers, including Amazon.com, Inc., vendors, service providers and others with whom it does business, or its operating results and business generally; risks related to the proposed transaction diverting management’s attention from AAWW’s ongoing business operations; the risk of shareholder litigation in connection with the proposed transaction, including resulting expense or delay; and those described in our Annual Report on Form 10-K for the year ended December 31, 2021 and our quarterly reports on Form 10-Q. Many of such factors are beyond AAWW’s control and are difficult to predict. As a result, AAWW’s future actions, financial position, results of operations and the market price for shares of AAWW’s common stock could differ materially from those expressed in any forward-looking statements. Readers are therefore cautioned not to place undue reliance on forward-looking statements. Such forward-looking statements speak only as of the date of this report. AAWW does not intend to publicly update any forward-looking statements that may be made from time to time by, or on behalf of, AAWW, whether as a result of new information, future events or otherwise, except as required by law and expressly disclaims any obligation to revise or update publicly any forward-looking statement to reflect future events or circumstances.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes to our market risk during the six months ended June 30, 2022. For additional discussion of our exposure to market risk, refer to Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk” included in our 2021 Annual Report on Form 10-K.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
An evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d - 15(e) under the Exchange Act) as of June 30, 2022. Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and is accumulated and communicated to our management, including our CEO and CFO, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended June 30, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
33
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
With respect to the fiscal quarter ended June 30, 2022, the information required in response to this Item is set forth in Note 11 to our Financial Statements and such information is incorporated herein by reference. Such description contains all of the information required with respect hereto.
ITEM 1A. RISK FACTORS
There have been no material changes in our risk factors from those disclosed in our 2021 Annual Report on Form 10-K, except as noted below.
Risks Related to the Proposed Merger
The Merger Transactions may not be completed on the terms or timeline currently contemplated or at all, which could adversely affect our stock price, business, financial condition and results of operations.
On August 4, 2022, the Company entered into the Merger Transactions, which are subject to certain conditions, including (i) the absence of any law, order, judgment, decree, injunction or ruling prohibiting the consummation of the Merger; (ii) the accuracy of the other party’s representations and warranties (subject to certain materiality qualifiers); (iii) the other party’s compliance in all material respects with its pre-closing covenants; (iv) obtaining the approval of our stockholders; and (v) receipt of certain required regulatory approvals and the expiration or termination of any waiting period (and any extension thereof) applicable to the consummation of the Merger Transactions under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and regulations promulgated thereunder. While it is currently anticipated that the Merger Transactions will be consummated during or before the first quarter of 2023, there can be no assurance that the foregoing conditions will be satisfied in a timely manner or at all, or that an effect, event, development or change will not transpire that could delay or prevent these conditions from being satisfied.
If the Merger Transactions are not consummated for any reason, the trading price of our common stock may decline to the extent that the market price of the common stock reflects positive market assumptions that the Merger Transactions will be consummated and the related benefits will be realized. We may also be subject to additional risks if the Merger Transactions are not completed, including:
Further, we or Parent may terminate the Merger Agreement if the Merger Transactions have not been consummated by March 4, 2023 (subject to (i) an automatic extension until June 4, 2023 if all closing conditions other than those relating to a clearance, consent or restraint in respect of any antitrust law have not been received, (ii) a further extension to August 4, 2023 at the option of Parent or the Company if such regulatory closing conditions have not been satisfied, and (iii) whether or not otherwise extended, an extension until four business days following the expiration of the marketing period for Parent’s debt financing, the “Outside Date”). We or Parent also may terminate the Merger Agreement (i) by mutual written consent; (ii) if there is a final and nonappealable judgment enacted, promulgated, issued, entered, amended or enforced by any governmental authority of competent jurisdiction or any applicable law enjoining, restraining or otherwise prohibiting consummation of the Merger Transactions; (iii) if our stockholder’s meeting (including any adjournments or postponements thereof) shall have concluded and the Company stockholder approval shall not have been obtained; or (iv) if the other party has breached its representations or warranties or failed to perform any of its covenants or agreements in a way that would prevent satisfaction of a closing condition by the Outside Date and such breach or failure to perform cannot be cured within 35 calendar days following receipt of written notice of such breach or failure to perform and an intent to
34
terminate the Merger Agreement. The occurrence of the aforementioned could adversely affect our stock price, business, financial condition and results of operations
The announcement of the Merger Agreement and pendency of the Merger Transactions could negatively impact our business, financial condition and results of operations.
The announcement or pendency of the Merger Transactions could adversely affect our business, financial condition and results of operations and may result in our inability to hire or the departure of key personnel. In connection with the Merger Transactions, some of our customers and business partners may delay or defer decisions or may end their relationships with us, which could negatively affect our revenues, earnings and cash flows, regardless of whether the Merger Transactions are completed. In addition, we have undertaken certain covenants in the Merger Agreement restricting the conduct of our business during the pendency of the Merger Transactions, including restrictions on undertaking certain significant financing transactions and certain other actions, even if such actions would prove beneficial to us. Similarly, our current and prospective employees may experience uncertainty about their future roles with us following the Merger Transactions, which may materially adversely affect our ability to attract and retain key personnel during the pendency of the Merger Transactions.
Our directors and executive officers have interests in the Merger Transactions that may be different from, or in addition to, the interests of our other stockholders.
Our directors and executive officers have financial interests in the Merger Transactions that may be different from, or in addition to, the interests of our other stockholders. These interests may include:
Litigation challenging the Merger Agreement may prevent the Merger from being consummated within the expected timeframe or at all.
Lawsuits may be filed against us, our Board of Directors or other parties to the Merger Agreement, challenging our acquisition by Parent, or making other claims in connection therewith. Such lawsuits may be brought by our purported stockholders and may seek, among other things, to enjoin consummation of the Merger. One of the conditions to the consummation of the Merger is that the consummation of the Merger is not restrained, made illegal, enjoined or prohibited by any order or legal or regulatory restraint or prohibition of a court of competent jurisdiction or any governmental entity. As such, if the plaintiffs in such potential lawsuits are successful in obtaining an injunction prohibiting the defendants from completing the Merger on the agreed upon terms, then such injunction may prevent the Merger from becoming effective within the expected timeframe or at all.
35
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchase of Equity Securities
We made the following repurchases of shares of our common stock during the quarter ended June 30, 2022:
Period |
Total Number of |
|
|
Average Price Paid per Share |
|
|
Total Number of |
|
|
Maximum Number (or |
|
||||
April 1, 2022 through |
|
172,887 |
|
(b) |
|
- |
|
(b) |
|
172,887 |
|
(b) |
$ |
100,000,000 |
|
May 1, 2022 through May 31, 2022 |
|
- |
|
|
|
- |
|
|
|
- |
|
|
$ |
- |
|
June 1, 2022 through June 30, 2022 |
|
- |
|
|
|
- |
|
|
|
|
|
$ |
- |
|
|
Total |
|
172,887 |
|
|
|
- |
|
|
|
172,887 |
|
|
$ |
100,000,000 |
|
(a) In February 2022, our board of directors approved the establishment of a new stock repurchase program authorizing the repurchase of up to a total of $200.0 million of our common stock. Purchases may be made at our discretion in the form of accelerated share repurchase programs, open market repurchase programs, privately negotiated transactions or a combination of these methods. This program replaced a previous stock repurchase program that had been established in 2008 and amended in 2013. In connection with the proposed Merger, we have suspended the stock repurchase program.
(b) Reflects the repurchase of shares of common stock pursuant to our ASR. See Note 12 to our Financial Statements for a discussion of our ASR.
ITEM 6. EXHIBITS
See accompanying Exhibit Index included before the signature page of this report for a list of exhibits filed or furnished with this report.
36
EXHIBIT INDEX
Exhibit Number |
|
Description |
|
|
|
31.1 |
|
Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer. |
|
|
|
31.2 |
|
Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer. |
|
|
|
32.1 |
|
|
|
|
|
101.INS |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. * |
|
|
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document. * |
|
|
|
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document. * |
|
|
|
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document. * |
|
|
|
101.LAB |
|
Inline XBRL Taxonomy Extension Labels Linkbase Document. * |
|
|
|
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document. * |
|
|
|
104 |
|
Cover Page Interactive Data File – the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document (included in Exhibit 101). |
* Attached as Exhibit 101 to this report are the following formatted in Inline XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021, (ii) Consolidated Statements of Operations for the three and six months ended June 30, 2022 and 2021, (iii) Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2022 and 2021, (iv) Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021, (v) Consolidated Statements of Stockholders’ Equity as of and for the three and six months ended June 30, 2022 and 2021 and (vi) Notes to Unaudited Consolidated Financial Statements.
37
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.
|
|
Atlas Air Worldwide Holdings, Inc. |
|
|
|
Dated: August 4, 2022 |
|
/s/ John W. Dietrich |
|
|
|
|
|
President and Chief Executive Officer |
|
|
|
Dated: August 4, 2022 |
|
/s/ Spencer Schwartz |
|
|
|
|
|
Executive Vice President and Chief Financial Officer |
38
| This ‘10-Q’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
 | ||||
| 3/27/26 | ||||
| 6/1/24 | ||||
| 9/1/23 | ||||
| 8/4/23 | ||||
| 6/4/23 | ||||
| 5/4/23 | ||||
| 3/4/23 | ||||
| Filed on: | 8/4/22 | 8-K, DEFA14A | ||
| 7/30/22 | ||||
| For Period end: | 6/30/22 | |||
| 6/1/22 | 3, 4 | |||
| 5/31/22 | 3, 4, 8-K, DEF 14A | |||
| 5/1/22 | ||||
| 4/30/22 | ||||
| 4/1/22 | 4 | |||
| 3/31/22 | 10-Q | |||
| 1/1/22 | ||||
| 12/31/21 | 10-K, 5 | |||
| 11/17/21 | ||||
| 9/15/21 | ||||
| 9/10/21 | ||||
| 9/1/21 | ||||
| 6/30/21 | 10-Q | |||
| 3/31/21 | 10-Q | |||
| 12/31/20 | 10-K, 4 | |||
| List all Filings | ||||
As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 10/19/22 Atlas Air Worldwide Holdings Inc. DEFM14A 1:4.1M Toppan Merrill/FA 10/07/22 Atlas Air Worldwide Holdings Inc. PREM14A 10/06/22 2:4M Toppan Merrill/FA |