Record 4Q Revenues, Significant Increase in 4Q Reported Earnings, Record Adjusted 4Q Earnings; Positioned for Earnings Growth in 2017

4Q16 Reported Income from Continuing Operations of $28.7 Million, $1.12 per Share
4Q16 Adjusted Income from Continuing Operations of $59.0 Million, $2.24 per Share

2016 Reported Income from Continuing Operations of $42.6 Million, $1.70 per Share
2016 Adjusted Income from Continuing Operations of $114.3 Million, $4.50 per Share

Adjusted EPS Reflects Higher Diluted Shares Related to Warrant Accounting
PURCHASE, N.Y., Feb. 23, 2017 (GLOBE NEWSWIRE) — Atlas Air Worldwide Holdings, Inc. (Nasdaq:AAWW) today announced income from continuing operations, net of taxes, of $28.7 million, or $1.12 per diluted share, which included an unrealized loss on financial instruments of $27.9 million related to outstanding warrants, for the three months ended December 31, 2016. Results compared with a loss from continuing operations, net of taxes, of $37.6 million, or $1.53 per diluted share, for the three months ended December 31, 2015, which was primarily due to charges of $102.8 million associated with a litigation settlement.

On an adjusted basis, income from continuing operations, net of taxes, in the fourth quarter of 2016 totaled $59.0 million, or $2.24 per diluted share, compared with $39.4 million, or $1.59 per diluted share, in the year-ago quarter.

Adjusted earnings per share for the fourth quarter and full year of 2016 were affected by the increase in the market price of the company’s shares, which, as a consequence of warrant accounting, led to an increase in the number of diluted shares.

“2016 was a historic year for Atlas, and we finished it on a strong note,” said William J. Flynn, President and Chief Executive Officer.

“We acquired Southern Air, expanding the array of aircraft and services that we provide, especially to the fast-growing express market. We entered into strategic, long-term agreements with Amazon to serve its rapidly growing e-commerce business. And we generated strong sequential and year-over-year improvements in our block-hour volumes, revenue, profitability and margins in the fourth quarter. In addition to record revenues in the quarter, we delivered a significant increase in reported earnings and record adjusted earnings for the period.

“Our performance in the fourth quarter was driven by the additional seasonal flying we did for express operators, growing e-commerce demand, and a lower level of maintenance expense. It also reflected a solid peak season and a seasonal improvement in commercial airfreight yields.

“In ACMI, we benefited from Southern Air’s 777 and 737 express CMI services and better contributions and synergies than originally anticipated. We also continued ramping up for Amazon, which enabled us to place the second of twenty 767-300 aircraft into service for them this month. In Charter, our results reflected an increase in commercial cargo demand. And our Dry Leasing business maintained its steady, annuity-like performance.”

Mr. Flynn added: “With our expanding business base and the ongoing development of our strategic platform, we are well-positioned to grow earnings this year.

“In addition to the demand we are seeing for our aircraft and services, including our recently announced agreements with Asiana Cargo, Nippon Cargo Airlines and FedEx, we expect to see initial accretion from our operations for Amazon and a full year of contribution from Southern Air in 2017. We expect those positives to be partially offset by an increase in maintenance expense and lower cost-based rates paid by the military.

“As a result, we expect to increase adjusted income from continuing operations, net of taxes, by a mid-single-digit to low-double-digit percentage in 2017.”

Fourth-Quarter Results

Record ACMI segment revenues and contribution in the fourth quarter of 2016 were primarily driven by our acquisition of Southern Air and lower heavy maintenance expense, partially offset by the temporary redeployment of 747-8F aircraft to our Charter segment. Segment revenue growth benefited from an increase in block-hour volumes, partially offset by a lower average rate per block hour. Both our volumes and average rate reflected an increase in 777 and 737 CMI flying following the acquisition of Southern Air, an increase in 767 CMI flying, as well as the temporary redeployment of 747-8F aircraft to our Charter segment.

Higher Charter segment contribution during the period reflected an increase in commercial cargo demand, including the beneficial impact of additional 747-8F flying, and a decrease in heavy maintenance expense. Lower revenue per block hour during the period was primarily due to a reduction in fuel prices in 2016, which was partially offset by the beneficial impact of additional 747-8F aircraft.

Segment contribution in Dry Leasing was slightly better on a year-over-year basis.

Lower unallocated income and expenses in the fourth quarter of 2016 primarily reflected the absence of charges incurred in the fourth quarter of 2015 in connection with the settlement of a U.S. class action litigation and for related legal fees.

Reported earnings for the fourth quarter of 2016 included an effective income tax rate of 47.2%, principally due to a nondeductible customer incentive. On an adjusted basis, our results reflected an effective income tax rate of 31.3%.

Full-Year Results

For the twelve months ended December 31, 2016, our continuing operations generated income of $42.6 million, or $1.70 per diluted share. For the twelve months ended December 31, 2015, our income from continuing operations totaled $7.3 million, or $0.29 per diluted share.

On an adjusted basis, income from continuing operations in 2016 totaled $114.3 million, or $4.50 per diluted share, compared with $125.3 million, or $5.01 per diluted share, in 2015.

Both reported and adjusted results in 2016 reflected the impact of startup expenses for our new service for Amazon, while reported and adjusted results in 2015 benefited from U.S. West Coast port-congestion-related earnings.

Reported earnings in 2016 included an effective income tax rate of 52.3%, principally due to a nondeductible customer incentive and to nondeductible compensation expenses. On an adjusted basis, our results reflected an effective income tax rate of 29.8%.

Cash and Short-Term Investments

At December 31, 2016, our cash, cash equivalents, restricted cash and short-term investments totaled $142.6 million, compared with $444.0 million at December 31, 2015. The change in position resulted from cash used for investing and financing activities, partially offset by cash provided by operating activities.

Net cash used for investing activities during 2016 primarily related to payments for flight equipment and modifications, including the acquisition of 767-300 aircraft to be converted to freighter configuration for our service for Amazon; our acquisition of Southern Air; and capital expenditures. We expect to finance a substantial portion of the acquisition and conversion costs for these aircraft as they are placed into service with Amazon.

Net cash used for financing activities primarily reflected payments on debt obligations, partially offset by new debt financing.

2017 Guidance Framework

Our guidance framework in 2017 and the foreseeable future will focus primarily on our adjusted income from continuing operations, net of taxes. We view this as the most useful information to provide securities analysts and investors.

Earnings per share remain very important, but, because of the unique characteristics of warrant accounting, our EPS can be substantially influenced by changes in the market price of our shares.

Those analysts and investors who wish to focus on EPS as an analytical metric should use the treasury stock method of accounting to calculate the weighted average shares outstanding.

We provide guidance on an adjusted basis because we are unable to predict, with reasonable certainty, significant items that could be material to our reported results, including the effects of outstanding warrants.

Outlook

We are a stronger company today. We begin 2017 with solid demand from our customers for our aircraft and services. We are also capitalizing on the steps we have taken to align our business with the faster-growing express and e-commerce markets.

We believe the current demand, the initial accretion from our Amazon operations, and the first full-year of contribution from Southern Air provide a strong foundation for earnings growth this year.

As a result, we expect our adjusted income from continuing operations, net of taxes, to grow by a mid-single-digit to low-double-digit percentage compared with 2016. Given the inherent seasonality of airfreight demand, we anticipate that results in 2017 will reflect historical patterns, with approximately 70% of our adjusted income occurring in the second half.

In addition, we expect adjusted income in the first quarter of 2017, which is usually the lowest demand and highest maintenance-expense quarter of the year, to be consistent with or slightly better than the first quarter of 2016.

For the full year, we expect total block hours to increase approximately 20% compared with 2016, including Southern Air, our new services for Asiana Cargo and Nippon Cargo Airlines, and our ongoing ramp up for Amazon. More than 75% of our 2017 hours are expected to be in ACMI and the balance in Charter.

Aircraft maintenance expense in 2017 should total approximately $240 million, and depreciation and amortization is expected to total approximately $170 million. In addition, core capital expenditures, which exclude aircraft and engine purchases, are expected to total approximately $55 to $65 million, mainly for parts and components for our fleet.