All:
Here is that conference call summary I was talking about. Not much new than what I posted earlier, but what the heck....
FOOL CONFERENCE CALL SYNOPSIS*
By Greg Markus (TMF Boring)
Atlas Air, Inc.
(Nasdaq: ATLS) (N) (S)
538 Commons Dr
Golden, CO 80401
(303) 526-5050
ANN ARBOR, Mich. (Oct. 29, 1997) /FOOLWIRE/ -- Atlas Air is a U.S. certificated air carrier that operates a fleet of 747 freighter aircraft under long-term ACMI contracts. These contracts include the provision by Atlas of Aircraft, Crew, Maintenance and Insurance for some of the world's leading air carriers, including British Airways, China Airlines, Emirates, Fast Air, KLM LAS, Lufthansa, SAS, and Thai International Airways, serving 62 cities in 38 countries.
THIRD QUARTER RESULTS. Atlas Air today reported net earnings for the quarter ended Sept. 30, 1997 of $6.2 million, or $0.28 per share. That compares with net income of $8.2 million, or $0.37 per share, for the year-earlier period. Revenues for the third quarter of 1997 increased 31%, to $104.2 million. This was Atlas's first quarter ever in which revenues in excess of $100 million were achieved. Atlas flew 19,937 block hours for the quarter, up 29% over last year. Operating income was $21.7 million for the quarter, versus $20.0 million for the prior year period, an increase of 8%.
NINE MONTH RESULTS. Nine-month revenues rose by 33% to $280.1 million. Block hours increased 30% to 52,921. Net income for the first nine months of 1997 was $14.3 million, compared to $24.4 million for the year-earlier period, or $0.64 per share versus $1.16 per share for the prior period. Operating income, excluding special items, was $55.3 million, versus $58.1 million for the same period in 1996, representing a 20% operating
margin.
FINANCIAL DETAILS. During the quarter, Atlas placed $150 million in unsecured notes at 10.75%, which will cover all required predelivery deposits to Boring for the ordered 747-400s. Atlas also completed a $185 million bank term loan for the long-term financing of three aircraft and eight spare engines and at the same time recast its $250 million revolving aircraft facility. As a result, Atlas ended the quarter with approximately $145 million in its bank account. Long-term debt as of Sept. 30 was a bit over $800 million.
ADDITIONAL COMMENTS ON Q3. The cargo market continues to be quite strong in all areas of the world, especially Asia, and Atlas's customers' flying levels and tariffs have reflected that. Atlas entered into a second long-term contract during the quarter with the South American airline LAS and also extended the first contract with LAS for an additional year.
FEDEX AIRCRAFT. The performance of the five leased Federal Express aircraft improved considerably, achieving higher utilization than for any prior period, despite their continuing high cost compared to the rest of the fleet. The five FedEx aircraft operated a monthly average of around 250 hours each, as compared with approximately 190 hours each in the second quarter. Average costs per block hour for the entire fleet fell about 6% sequentially, to $4136. Average maintenance costs declined from a peak level of around $1800 per block hour in Q2 to $1678 per block hour in Q3. Atlas expects these performance levels to continue through the fourth quarter and until the end of the lease term for the FedEx aircraft, in early 1998.
MOVING TO NYSE. Effective Nov. 11, Atlas Air will commence trading on the New York Stock Exchange under the symbol CGO -- signifying
"cargo."
DELAYS AT BOEING. While Atlas has yet to receive final word from Boeing with respect to any impact from their production difficulties on planned deliveries of 747-400 aircraft to Atlas, management believes it is possible that Atlas will see some modest delays, probably on the order of 30 to 60 days, in the planned delivery of two aircraft in the second quarter and two in the third quarter of 1998. Atlas would be fully compensated by Boeing for any such delays. In addition, Boeing is working closely with Atlas to secure interim replacement 747-200 aircraft to fill any flying gaps. Atlas's current expectation is that they will have three short-term replacement aircraft in early 1998 subsequent to the return of the FedEx aircraft and that they would be operated until at least the time of delivery of the first three 747-400 aircraft, and possibly longer.
ADDITIONAL COMMENTS ON PLANNED CAPACITY. Atlas also
continues to negotiate the early return of two aircraft that Philippine Air Lines is currently operating in passenger configuration under lease from Atlas. The lease on one of those two aircraft expires in June 1998, in any event. Finally, Chinese New Years falls in late January and early February in 1998, and a number of Atlas's key customers typically utilize their contractual annual cancellation options at that time. As a result, Atlas's management said they do not expect any near-term capacity shortages as they move into the first quarter of next year and are "fully confident" that any impact on Atlas of current production delays at Boeing will be minimal. Atlas is also working closely with its prospective 747-400 customers to keep them informed of any developments and to ensure that their needs will be met in a timely manner. Atlas holds open the possibility of placing an order with Boeing for delivery of a fifth 747-400 aircraft in 1998.
ASIAN FINANCIAL UNREST. All of Atlas's contracts, and therefore all of its revenues, are dollar-denominated. Consequently, Atlas is unaffected by any currency devaluations that are occurring in many Asian nations. Moreover, all of Atlas's contracts are non-cancelable. In the longer-term, should there be a sustained slowing of economic growth in Asia, that could have repercussions for the air cargo business. However, that business remains extraordinarily strong globally, including in Asia. Also, it is management's belief that devaluation of Asian currencies would only make Asian goods more attractive in the world markets, thereby increasing further the need for air cargo capacity.
GUIDANCE. Atlas management upped their guidance for total block-hours to be flown in Q4 by approximately 1000 hours, to 21,000 to 21,500. Given Atlas's recent history of disappointing the Street, management emphasized that they would not upgrade their guidance unless they were confident about the numbers. |
