Atlas Air Worldwide (AAWW) 8-K Atlas Air Worldwide Reports Second-Quarter 2014 Results

Atlas Air Worldwide
Reports Second-Quarter 2014 Results

• Adjusted Net Income of $15.9 Million, $0.63 per Share

• Reported Net Income of $29.6 Million, $1.17 per Share

• Maintaining Full-Year Earnings Outlook

PURCHASE, N.Y.,July 31, 2014 –Atlas Air Worldwide Holdings, Inc. (Nasdaq: AAWW), a leading global provider of outsourced aircraft and aviation operating services, today announced adjusted net income attributable to common stockholders of $15.9 million, or $0.63 per diluted share, for the three months ended June 30, 2014, compared with $20.4 million, or $0.79 per diluted share, for the three months ended June 30, 2013.

On a reported basis, net income attributable to common stockholders in the second quarter of 2014 totaled $29.6 million, or $1.17 per diluted share, compared with $20.1 million, or $0.78 per diluted share, in the year-ago quarter.

“We are off to a good start in 2014. Airfreight demand is improving, and we are encouraged about our full-year outlook,” said William J. Flynn, President and Chief Executive Officer. “As we continue to gather additional insight into second-half yields, demand and military requirements, we are maintaining our full-year earnings framework.”

Mr. Flynn added: “Atlas is an entrepreneurial company. Our second-quarter results illustrate the positive contributions being generated by the investments we’ve made and the initiatives we’ve undertaken. In the face of an uncertain airfreight market and an anticipated decline in military cargo demand, we have diversified our business mix and are driving business resilience.

“Results within our ACMI segment are benefiting from modern 747-8 freighters as well as an increase in flying for our CMI customers. In Dry Leasing, the investments we’ve made since early 2013 in attractive 777 freighters on long-term leases with strong customers are driving a significant increase in contribution from highly predictable revenue and earnings streams.

“In addition, the expansion of our 767 platform and our growth into military and commercial passenger charter operations are providing added strength, complementing the improvement in airfreight demand.

“Led by the strength of our brand, our global market leadership in outsourced aircraft assets and services, and our ability to work closely with our customers as they enhance their route networks and grow their businesses, we are well-positioned to take advantage of market opportunities and improvement – and to continue our focus on longer-term business growth.”

Adjusted earnings in the second quarter of 2014 exclude an income tax benefit of $24.0 million, or $0.95 per diluted share, due to beneficial tax planning related to the tax treatment of extraterritorial income. This was partly offset by a noncash loss of $9.4 million after tax, or $0.37 per diluted share, resulting from the trade-in of used spare engines for new engines under the company’s engine-acquisition program, as well as additional charges totaling $1.0 million after tax, or $0.04 per diluted share, which were primarily related to the company’s U.K. affiliate, Global Supply Systems Limited.

Adjusted earnings in the second quarter of 2013 exclude an after-tax loss of $0.6 million, or $0.02 per diluted share, on the early extinguishment of debt, partly offset by an after-tax gain of $0.3 million, or $0.01 per diluted share, on the disposal of aircraft.

Second-Quarter Results

Profitability in our ACMI business during the second quarter reflected an increase in 747-8F revenue and an increase in CMI flying, offset by higher maintenance expense for aircraft operating in this segment.

ACMI revenues benefited from an increase in our average rate per block hour driven by our 747-8Fs, but were impacted by a decline in block-hour volumes related to the return of three 8Fs from British Airways in April and early May. This decline was partially offset by the placement of two of the 8Fs with DHL Express in May, the start-up of ACMI 8F flying for BST Logistics in February 2014 and Etihad in May 2013, as well as the start-up of ACMI 747-400 flying for Astral Aviation in September 2013. Block-hour volumes during the second quarter also reflected an increase in CMI Dreamlifter flying for Boeing and the initiation of CMI 767-200 passenger aircraft service for MLW Air during the third quarter of 2013.

In Dry Leasing, revenue and profitability grew following the addition of three 777F aircraft in January 2014 and two in July 2013, which raised our 777F fleet count to six. Each of these aircraft are leased to customers on a long-term basis.

In AMC Charter, results benefited from an increase in the volume of passenger flying on higher-yielding 747-400 aircraft, partially offset by a decrease in demand for cargo flying. Segment results in Commercial Charter reflected a decrease in market rates and increases in maintenance and crewmember travel expense, partially offset by an increase in block-hour volumes.

Reported earnings for the period reflected an effective income tax rate benefit of 461.0%, driven by tax-planning efforts regarding a federal income tax benefit related to the treatment of extraterritorial income from the offshore leasing of certain of our aircraft.

Half-Year Results

For the six months ended June 30, 2014, adjusted net income attributable to common stockholders totaled $27.3 million, or $1.08 per diluted share, compared with $26.3 million, or $1.01 per diluted share, for the six months ended June 30, 2013.

On a reported basis, first-half 2014 net income attributable to common stockholders totaled $37.5 million, or $1.49 per diluted share, compared with $40.1 million, or $1.54 per diluted share, in the first half of 2013.

Cash and Short-Term Investments

At June 30, 2014, our cash, cash equivalents, short-term investments and restricted cash totaled $299.2 million, compared with $339.2 million at December 31, 2013.

The change in position reflected cash provided by operating and financing activities offset by cash used for investing activities.

Net cash used for investing activities during the first half of 2014 primarily related to the purchase of three 777F aircraft for our Dry Leasing business.

Net cash provided by financing activities primarily reflected proceeds from the issuance of debt in connection with the acquisitions of these aircraft. Those proceeds were partially offset by payments on debt obligations and debt issuance costs.

Outlook

We are encouraged by our performance in the first half of 2014 and the positive direction of market trends so far this year.

Airfreight volumes continue to improve, and recent forecasts suggest that airfreight demand may grow by several percentage points in 2014 – the first real growth after three essentially flat years. Airfreight yields continue to lag behind, however, and there is still limited visibility into peak-season yields, demand and second-half military requirements. As a result, we are maintaining our earnings outlook for the full year.

On a sequential basis, per-share earnings in the third quarter of this year should improve over our adjusted second-quarter results by an increment similar to the increase between our first- and second-quarter adjusted earnings.

For the full year, we expect total block hours to be comparable to 2013, with more than 70% in ACMI, approximately 10% in AMC Charter, and the balance in Commercial Charter. Our Dry Leasing segment should show dramatic growth compared with 2013. While our share of military flying, mainly in passenger service, has increased due to a reduction in the number of carriers serving the market and our ability to capitalize on additional flying opportunities, we continue to expect an overall decline in military demand, primarily in cargo, compared with 2013.

We also expect aircraft maintenance expense to total approximately $180 million in 2014, with depreciation of approximately $120 to $125 million. Core capital expenditures this year are expected to total approximately $45 to $50 million, mainly for spare parts for our expanded fleet.

We remain confident in the resilience of our business model, as well as our ability to adapt to the market and to leverage the scale and efficiencies in our operations. The business initiatives we have undertaken and the investments we have made have enabled the company to deliver meaningful earnings in any environment.

Should 2014 be the inflection point when growth returns to commercial airfreight and yields improve, our business initiatives and the investments we have made have positioned Atlas to be one of the prime beneficiaries.

Conference Call

Management will host a conference call to discuss Atlas Air Worldwide’s second-quarter 2014 financial and operating results at 11:00 a.m. Eastern Time on Thursday, July 31, 2014.

Interested parties are invited to listen to the call live over the Internet at [omitted] (click on “Investor Information”, click on “Presentations” and on the link to the second-quarter call) or at the following Web address:

[omitted]

For those unable to listen to the live call, a replay will be available on the above Web sites following the call. A replay will also be available through August 6 by dialing (855) 859-2056 (domestic) and (404) 537-3406 (international) and using Access Code 70670671#.

About Non-GAAP Financial Measures

To supplement our financial statements presented in accordance with U.S. GAAP, we present certain non-GAAP financial measures to assist in the evaluation of our business performance. These non-GAAP measures include EBITDAR, as adjusted; EBITDA, as adjusted; Direct Contribution; Adjusted Net Income Attributable to Common Stockholders; Adjusted Diluted EPS; and Free Cash Flow, which exclude certain items. These non-GAAP 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 measures of performance prepared in accordance with U.S. GAAP.

Our management uses these non-GAAP financial measures in assessing the performance of the Company’s ongoing operations and in planning and forecasting future periods. We believe that these adjusted measures provide meaningful information to assist investors and analysts in understanding our financial results and assessing our prospects for future performance.

About Atlas Air Worldwide:

Atlas Air Worldwide is the parent company of Atlas Air, Inc. (Atlas) and Titan Aviation Leasing (Titan), and is the majority shareholder of Polar Air Cargo Worldwide, Inc. (Polar). Through Atlas and Polar, Atlas Air Worldwide operates the world’s largest fleet of Boeing 747 freighter aircraft.

Atlas, Titan and Polar offer a range of outsourced aircraft and aviation operating services that include ACMI service – in which customers receive an aircraft, crew, maintenance and insurance on a long-term basis; CMI service, for customers that provide their own aircraft; express network and scheduled air cargo service; military cargo and passenger charters; commercial cargo and passenger charters; and dry leasing of aircraft and engines.

Atlas Air Worldwide’s press releases, SEC filings and other information can be accessed through the Company’s home page, www.atlasair.com.

This release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect Atlas Air Worldwide’s current views with respect to certain current and future events and financial performance. Such forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors relating to the operations and business environments of Atlas Air Worldwide and its subsidiaries (collectively, the “companies”) that may cause the actual results of the companies to be materially different from any future results, express or implied, in such forward-looking statements.

Factors that could cause actual results to differ materially from these forward-looking statements include, but are not limited to, the following: the ability of the companies to operate pursuant to the terms of their financing facilities; the ability of the companies to obtain and maintain normal terms with vendors and service providers; the companies’ ability to maintain contracts that are critical to their operations; the ability of the companies to fund and execute their business plan; the ability of the companies to attract, motivate and/or retain key executives and associates; the ability of the companies to attract and retain customers; the continued availability of our wide-body aircraft; demand for cargo services in the markets in which the companies operate; economic conditions; the effects of any hostilities or act of war (in the Middle East or elsewhere) or any terrorist attack; labor costs and relations; financing costs; the cost and availability of war risk insurance; our ability to maintain adequate internal controls over financial reporting; aviation fuel costs; security-related costs; competitive pressures on pricing (especially from lower-cost competitors); volatility in the international currency markets; weather conditions; government legislation and regulation; consumer perceptions of the companies’ products and services; anticipated and future litigation; and other risks and uncertainties set forth from time to time in Atlas Air Worldwide’s reports to the United States Securities and Exchange Commission.

For additional information, we refer you to the risk factors set forth under the heading “Risk Factors” in the most recent Annual Report on Form 10-K and subsequent reports on Form 10-Q filed by Atlas Air Worldwide with the Securities and Exchange Commission. Other factors and assumptions not identified above may also affect the forward-looking statements, and these other factors and assumptions may also cause actual results to differ materially from those discussed.

Except as stated in this release, Atlas Air Worldwide is not providing guidance or estimates regarding its anticipated business and financial performance for 2014 or thereafter.

Atlas Air Worldwide assumes no obligation to update such statements contained in this release to reflect actual results, changes in assumptions or changes in other factors affecting such estimates other than as required by law.

* * *

1

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
			June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Operating Revenue
	ACMI		$	186,720		$	181,957		$	384,861		$	363,127
	AMC Charter			91,281			94,135			154,155			192,172
	Commercial Charter			133,953			117,783			248,452			208,883
	Dry Leasing			25,524			6,223			50,200			9,970
	Other			3,691			3,475			6,864			6,757
	Total Operating Revenue		$	441,169		$	403,573		$	844,532		$	780,909
Operating Expenses
	Aircraft fuel			103,842			102,743			185,586			196,101
	Salaries, wages and benefits			77,948			72,518			150,803			145,049
	Maintenance, materials and repairs			50,386			43,477			109,432			101,846
	Aircraft rent			34,826			39,854			70,236			78,348
	Depreciation and amortization			30,381			20,371			58,536			38,179
	Navigation fees, landing fees and other rent			30,906			18,744			58,032			34,370
	Passenger and ground handling services			21,859			17,300			41,230			34,072
	Travel			18,774			13,771			36,056			28,950
	Special charge			1,449			-			9,477		—
	Loss/(gain) on disposal of aircraft			14,679			(399	)		14,679			(422	)
	Other			29,462			26,733			55,678			53,358
	Total Operating Expenses			414,512			355,112			789,745			709,851
	Operating Income			26,657			48,461			54,787			71,058
Non-operating Expenses (Income)
	Interest income			(4,719	)		(4,978	)		(9,446	)		(10,154	)
	Interest expense			26,365			20,677			52,817			39,117
	Capitalized interest			(67	)		(292	)		(379	)		(1,694	)
	Loss on early extinguishment of debt			-			994			-			994
	Other expense (income), net			(88	)		1,104			64			1,656
	Total Non-operating Expenses (Income)			21,491			17,505			43,056			29,919
	Income before income taxes			5,166			30,956			11,731			41,139
	Income tax expense (benefit)			(23,815	)		9,993			(21,276	)		73
Net Income				28,981			20,963			33,007			41,066
	Less: Net income (loss) attributable
	to noncontrolling interests			(612	)		903			(4,530	)		928
Net Income Attributable
		to Common Stockholders	$	29,593		$	20,060		$	37,537		$	40,138
Earnings per share:
	Basic		$	1.17		$	0.78		$	1.49		$	1.54
	Diluted		$	1.17		$	0.78		$	1.49		$	1.54
Weighted average shares:
	Basic			25,241			25,691			25,169			26,009
	Diluted			25,279			25,716			25,215			26,076

2

Atlas Air Worldwide Holdings, Inc.
Consolidated Balance Sheets
(in thousands, except share data)
(Unaudited)

				June 30, 2014			December 31, 2013
Assets
Current Assets
	Cash and cash equivalents			$	276,404		$	321,816
	Short-term investments				9,592			10,904
	Restricted cash				13,215			6,491
	Accounts receivable, net of allowance of $1,618 and $1,402, respectively				162,860			132,159
	Prepaid maintenance				10,411			31,620
	Deferred taxes				28,977			54,001
	Prepaid expenses and other current assets				30,131			36,962
	Total current assets				531,590			593,953
Property and Equipment
	Flight equipment				3,474,759			2,969,379
	Ground equipment				49,246			46,951
			Less: accumulated depreciation		(304,257	)		(256,685	)
	Purchase deposits for flight equipment				5,665			69,320
	Property and equipment, net				3,225,413			2,828,965
Other Assets
	Long-term investments and accrued interest				129,092			130,267
	Deposits and other assets				142,012			131,216
	Intangible assets, net				71,957			33,858
Total Assets				$	4,100,064		$	3,718,259
Liabilities and Equity
Current Liabilities
	Accounts payable			$	46,094		$	65,367
	Accrued liabilities				233,079			194,292
	Current portion of long-term debt1,2				193,819			157,486
	Total current liabilities				472,992			417,145
Other Liabilities
	Long-term debt1,2				1,876,961			1,539,139
	Deferred taxes				328,707			371,655
	Other liabilities				65,853			68,195
	Total other liabilities				2,271,521			1,978,989
	Commitments and contingencies
Equity
	Stockholders’ Equity
		Preferred stock, $1 par value; 10,000,000 shares authorized; no shares issued			¯			¯
		Common stock, $0.01 par value; 50,000,000 shares authorized; 28,547,138 and
			28,200,213 shares issued, 25,256,124 and 25,038,629, shares outstanding
			(net of treasury stock), as of June 30, 2014 and December 31, 2013, respectively		285			282
	Additional paid-in-capital				565,310			561,481
	Treasury stock, at cost; 3,291,014 and 3,161,584 shares, respectively				(130,203	)		(125,826	)
	Accumulated other comprehensive loss				(9,891	)		(10,677	)
	Retained earnings				930,050			892,513
	Total stockholders’ equity				1,355,551			1,317,773
	Noncontrolling interest				¯			4,352
	Total equity				1,355,551			1,322,125
Total Liabilities and Equity				$	4,100,064		$	3,718,259

¹ Balance sheet debt at June 30, 2014 totaled $2,070.8 million, including the impact of $38.7 million of unamortized discount.

² The face value of our debt at June 30, 2014 totaled $2,109.5 million, compared with $1,738.0 million on December 31, 2013.

Atlas Air Worldwide Holdings, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)

		For the Six Months Ended
		June 30, 2014			June 30, 2013
Operating Activities:
Net Income Attributable to Common Stockholders		$	37,537		$	40,138
Net income (loss) attributable to noncontrolling interests			(4,530	)		928
Net Income			33,007			41,066
Adjustments to reconcile Net Income to net cash provided by operating activities:
	Depreciation and amortization		67,195			45,374
	Accretion of debt securities discount		(4,081	)		(4,591	)
	Provision for allowance for doubtful accounts		232			17
	Special charge		7,171			-
	Loss on early extinguishment of debt		-			994
	Loss (gain) on disposal of aircraft		14,679			(422	)
	Deferred taxes		(21,498	)		(548	)
	Stock-based compensation expense		5,805			7,866
Changes in:
	Accounts receivable		(23,248	)		11,844
	Prepaid expenses and other current assets		27,613			9,478
	Deposits and other assets		(4,603	)		481
	Accounts payable and accrued liabilities		4,854			15,072
Net cash provided by operating activities			107,126			126,631
Investing Activities:
	Capital expenditures		(10,653	)		(19,491	)
	Purchase deposits and delivery payments for flight equipment		(494,072	)		(342,584	)
	Changes in restricted cash		(6,724	)		-
	Proceeds from short-term investments		2,060			4,422
	Proceeds from insurance		-			9,109
	Proceeds from disposal of aircraft		-			2,100
Net cash used for investing activities			(509,389	)		(346,444	)
Financing Activities:
	Proceeds from debt issuance		572,552			510,808
	Refund of accelerated share repurchase		-			13,510
	Maintenance reserves received		8,757			1,546
	Prepayment of accelerated share repurchase		-			(29,510	)
	Purchase of treasury stock		(4,377	)		(73,253	)
	Excess tax benefit from stock-based compensation expense		(1,973	)		465
	Payment of debt issuance costs		(17,087	)		(13,096	)
	Payments of debt		(201,021	)		(244,645	)
Net cash provided by financing activities			356,851			165,825
Net increase (decrease) in cash and cash equivalents			(45,412	)		(53,988	)
Cash and cash equivalents at the beginning of period			321,816			409,763
Cash and cash equivalents at the end of period		$	276,404		$	355,775

Non-cash Investing and Financing Activities

Acquisition of flight and ground equipment included in Accounts payable and accrued liabilities	$	29,087	$—
Disposition of aircraft included in Accounts receivable	$7,000		$-

Atlas Air Worldwide Holdings, Inc.
Direct Contribution
(in thousands)
(Unaudited)

	For the Three Months Ended						For the Six Months Ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Operating Revenue:
ACMI	$	186,720		$	181,957		$	384,861		$	363,127
AMC Charter		91,281			94,135			154,155			192,172
Commercial Charter		133,953			117,783			248,452			208,883
Dry Leasing		25,524			6,223			50,200			9,970
Other		3,691			3,475			6,864			6,757
Total Operating Revenue	$	441,169		$	403,573		$	844,532		$	780,909
Direct Contribution:
ACMI	$	44,128		$	55,063		$	89,326		$	95,007
AMC Charter		15,620			12,658			25,088			25,395
Commercial Charter		(6,056	)		(2,480	)		(18,301	)		(11,164	)
Dry Leasing		8,738			2,437			16,909			3,613
Total Direct Contribution	$	62,430		$	67,678		$	113,022		$	112,851
Add back (subtract):
Unallocated income and expenses, net	(41,136)			(36,127)			(77,135)			(71,140)
Loss on early extinguishment of debt	-			(994)			-			(994)
Special charge		(1,449	)		-			(9,477	)		-
Loss (gain) on disposal of aircraft		(14,679	)		399			(14,679	)		422
Income before Income Taxes		5,166			30,956			11,731			41,139
Add back (subtract):
Interest income		(4,719	)		(4,978	)		(9,446	)		(10,154	)
Interest expense		26,365			20,677			52,817			39,117
Capitalized interest		(67	)		(292	)		(379	)		(1,694	)
Loss on early extinguishment of debt	-			994			-			994
Other expense (income), net		(88	)		1,104			64			1,656
Operating Income	$	26,657		$	48,461		$	54,787		$	71,058

Atlas Air Worldwide uses an economic performance metric, Direct Contribution, to show the profitability of each of its segments after allocation of direct ownership costs. Atlas Air Worldwide currently has the following reportable segments: ACMI, AMC Charter, Commercial Charter, and Dry Leasing. Each segment has different operating and economic characteristics, which are separately reviewed by senior management.

Direct Contribution consists of income (loss) before taxes, excluding special charges, nonrecurring items, gains on the sale of aircraft, and unallocated fixed costs.

Direct costs include crew costs, maintenance costs, fuel, ground operations, sales costs, aircraft rent, interest expense related to aircraft debt and aircraft depreciation.

Unallocated income and expenses include corporate overhead, non-aircraft depreciation, interest income, foreign exchange gains and losses, other revenue and other non-operating costs, including one-time items.

3

Atlas Air Worldwide Holdings, Inc.
Reconciliation to Non-GAAP Measures
(in thousands, except per share data)
(Unaudited)

	For the Three Months Ended
	June 30, 2014	June 30, 2013			Percent Change
Net Income Attributable to Common Stockholders	$ 29,593	$	20,060			47.5	%
After-tax impact from:
ETI tax benefit	(24,013)		-
Loss (gain) on disposal of aircraft	9,389		(254	)
Special charge1	658		-
Accrual for legal matters	300		-
Loss on early extinguishment of debt2	-		633
Adjusted Net Income Attributable to Common Stockholders	15,927	20,439			(22.1%)
Diluted EPS	$ 1.17	$	0.78			50.0	%
After-tax impact from:
ETI tax benefit	(0.95)		-
Loss (gain) on disposal of aircraft	0.37		(0.01)
Special charge1	0.03		-
Accrual for legal matters	0.01		-
Loss on early extinguishment of debt2	-		0.02
Adjusted Diluted EPS	0.63		0.79			(20.3	%)
	For the Six Months Ended
	June 30, 2014	June 30, 2013			Percent Change
Net Income Attributable to Common Stockholders	$37,537	$	40,138			(6.5	%)
After-tax impact from:
ETI tax benefit	(24,013)		(14,160)
Loss (gain) on disposal of aircraft	9,389		(269)
Special charge1	4,041		-
Accrual for legal matters	300		-
Loss on early extinguishment of debt2	-		633
Adjusted Net Income Attributable to Common Stockholders	$ 27,254	$ 26,342			3.5%
Diluted EPS	$1.49	$	1.54			(3.2	%)
After-tax impact from:
ETI tax benefit	(0.95)		(0.54)
Loss (gain) on disposal of aircraft	0.37		(0.01)
Special charge1	0.16		-
Accrual for legal matters	0.01		-
Loss on early extinguishment of debt2	-		0.02
Adjusted Diluted EPS	$1.08	$	1.01			6.9	%

¹ Included in Special charge in 2014 were GSS employee termination benefits, a GSS loan reserve and an adjustment to lease termination costs for two 747-400BCFs.

² Loss on early extinguishment of debt was related to the financing of 747-8F aircraft.

Atlas Air Worldwide Holdings, Inc.
Reconciliation to Non-GAAP Measures
(in thousands, except per share data)
(Unaudited)

	For the Three Months Ended
		June 30, 2014		June 30, 2013
Net Cash Provided by Operating Activities		$	61,682	$	72,242
Less:
Capital expenditures			6,558		8,943
Capitalized interest			67		292
Free Cash Flow1		$	55,057	$	63,007

	For the Six Months Ended
		June 30, 2014		June 30, 2013
Net Cash Provided by Operating Activities		$	107,126	$	126,631
Less:
Capital expenditures			10,653		19,491
Capitalized interest			379		1,694
Free Cash Flow1		$	96,094	$	105,446

¹ Free Cash Flow = Cash Flows from Operations minus Base Capital Expenditures and Capitalized Interest.

Base Capital Expenditures excludes purchases of aircraft.

4

Atlas Air Worldwide Holdings, Inc.
Reconciliation to Non-GAAP Measures
(in thousands)
(Unaudited)

	For the Three Months Ended					For the Six Months Ended
	June 30, 2014		June 30, 2013			June 30, 2014		June 30, 2013
Income before income taxes	$	5,166	$	30,956		$	11,731	$	41,139
Loss (gain) on disposal of aircraft		14,679		(399	)		14,679		(422	)
Special charge1		1,449		-			9,477		-
Accrual for legal matters		469		-			469	—
Loss on early extinguishment of debt2	-		994			-		994
Adjusted pretax income		21,763		31,551			36,356		41,711
Interest (income) expense, net		21,579		15,407			42,992		27,269
Other non-operating expenses (income)	(88)		1,104			64		1,656
Adjusted operating income		43,254		48,062			79,412		70,636
Depreciation and amortization		30,381		20,371			58,536		38,179
EBITDA, as adjusted3		73,635		68,433			137,948		108,815
Aircraft rent		34,826		39,854			70,236		78,348
EBITDAR, as adjusted4	$	108,461	$	108,287		$	208,184	$	187,163

¹ Included in Special charge in 2014 were GSS employee termination benefits, a GSS loan reserve and an adjustment to lease termination costs for two 747-400BCFs.

² Loss on early extinguishment of debt was related to the financing of 747-8F aircraft.

³ Adjusted EBITDA: Earnings before interest, taxes, depreciation, amortization, special charge, and loss (gain) on disposal of aircraft, as applicable.

⁴ Adjusted EBITDAR: Earnings before interest, taxes, depreciation, amortization, aircraft rent expense, special charge, loss on early extinguishment of debt, and loss (gain) on disposal of aircraft, as applicable.

5

Atlas Air Worldwide Holdings, Inc.
Operating Statistics and Traffic Results
(Unaudited)

			For the Three Months Ended								For the Six Months Ended
				June 30,				Increase/			June 30,				Increase/
				2014		2013		(Decrease)			2014		2013		(Decrease)
Block Hours
	ACMI				27,652		28,372		(720	)		55,675		56,461		(786	)
	AMC Charter
	Cargo				1,167		1,891		(724	)		1,601		3,765		(2,164	)
	Passenger				3,165		2,675		490			5,699		5,235		464
	Commercial Charter				6,727		6,331		396			12,373		11,050		1,323
	Nonrevenue				299		245		54			535		435		100
	Total Block Hours				39,010		39,514		(504	)		75,883		76,946		(1,063	)
Revenue Per Block Hour
	ACMI			$	6,752	$	6,413	$	339		$	6,913	$	6,431	$	482
	AMC Charter				21,071		20,617		455			21,117		21,352		(235	)
	Cargo				23,043		22,615		428			22,608		22,973		(365	)
	Passenger				20,344		19,204		1,140			20,698		20,187		511
	Commercial Charter				19,913		18,604		1,309			20,080		18,903		1,177
Average Utilization (block hours per day)
	ACMI1				9.4		10.7		(1.3	)		9.4		10.5		(1.1	)
	AMC Charter
	Cargo				8.5		7.4		1.1			8.0		7.2		0.8
	Passenger				7.7		6.4		1.3			7.0		6.7		0.3
	Commercial Charter				8.5		7.5		1.0			8.0		7.4		0.6
	All Operating Aircraft1,2				9.1		9.5		(0.4	)		8.9		9.4		(0.5	)
Fuel
	AMC
		Average fuel cost
		per gallon		$	3.35	$	3.63	$	(0.28	)	$	3.34	$	3.63	$	(0.29	)
		Fuel gallons			10,470		11,105		(635	)		17,303		22,523		(5,220	)
		consumed (000s)
	Commercial Charter
		Average fuel cost
		per gallon		$	3.11	$	3.03	$	0.08		$	3.15	$	3.15	$	—
		Fuel gallons			22,090		20,628		1,462			40,556		36,254		4,302
		consumed (000s)
	1 ACMI and All Operating Aircraft averages in the second quarter and first six months of 2014 reflect the impact of increases in the number of CMI aircraft
	and amount of CMI flying compared with the same periods of 2013.
	2 Average of All Operating Aircraft excludes Dry Leasing aircraft, which do not contribute to block-hour volumes.

Atlas Air Worldwide Holdings, Inc.
Operating Statistics and Traffic Results
(Unaudited)

For the Three Months Ended				For the Six Months Ended
	June 30,		Increase/		June 30,		Increase/
	2014	2013	(Decrease)		2014	2013	(Decrease)

Segment Operating Fleet (average
aircraft equivalents during the
period)
	ACMI1
	747-8F Cargo	8.3	8.2	0.1		8.5	7.6	0.9
	747-400 Cargo	11.7	11.4	0.3		12.1	12.3	(0.2	)
	747-400 Dreamlifter	3.3	1.6	1.7		3.2	1.6	1.6
	767-300 Cargo	2.0	2.0	—		2.0	1.7	0.3
	767-200 Cargo	5.0	5.0	—		5.0	5.0	—
	747-400 Passenger	1.0	1.0	—		1.0	1.0	—
	767-300 Passenger	—	—	—		—	0.4	(0.4	)
	767-200 Passenger	1.0	—	1.0		1.0	—	1.0
	Total	32.3	29.2	3.1		32.8	29.6	3.2
	AMC Charter
	747-400 Cargo	1.5	2.8	(1.3	)	1.1	2.9	(1.8	)
	747-400 Passenger	1.8	1.8	—		1.8	1.8	—
	767-300 Passenger	2.7	2.8	(0.1	)	2.7	2.5	0.2
	Total	6.0	7.4	(1.4	)	5.6	7.2	(1.6	)
	Commercial Charter
	747-8F Cargo	0.6	0.3	0.3		0.4	0.1	0.3
	747-400 Cargo	7.7	8.6	(0.9	)	7.7	7.9	(0.2	)
	747-400 Passenger	0.2	0.2	—		0.2	0.2	—
	767-300 Passenger	0.2	0.2	—		0.2	0.1	0.1
	Total	8.7	9.3	(0.6	)	8.5	8.3	0.2
	Dry Leasing
	777-200 Cargo	6.0	1.0	5.0		5.9	0.6	5.3
	757-200 Cargo	1.0	1.0	—		1.0	1.0	—
	737-300 Cargo	1.0	1.0	—		1.0	1.0	—
	737-800 Passenger	2.0	2.0	—		2.0	2.0	—
	Total	10.0	5.0	5.0		9.9	4.6	5.3
	Total Operating Aircraft	57.0	50.9	6.1		56.8	49.7	7.1
	Out of Service2	1.0	1.0	—		1.0	0.7	0.3

1	ACMI average fleet excludes spare aircraft provided by CMI customers.
2	Out-of-service aircraft were temporarily parked during the period and are completely unencumbered.

6