Atlas Air Worldwide (AAWW) 8-K Results of Operations and Financial Condition

Atlas Air Worldwide
Reports Fourth-Quarter and Full-Year 2014 Earnings

• 4Q14 Adjusted Net Income of $38.8 Million, $1.55 per Share

• Full-Year Adjusted Net Income of $93.5 Million, $3.72 per Share

• 4Q14 Reported Net Income of $41.6 Million, $1.66 per Share

• Full-Year Reported Net Income of $106.8 Million, $4.25 per Share

PURCHASE, N.Y.,February 12, 2015 –Atlas Air Worldwide Holdings, Inc. (Nasdaq: AAWW) today announced adjusted net income attributable to common stockholders of $38.8 million, or $1.55 per diluted share, for the three months ended December 31, 2014, compared with $41.8 million, or $1.66 per diluted share, for the three months ended December 31, 2013.

On a reported basis, fourth-quarter 2014 net income attributable to common stockholders totaled $41.6 million, or $1.66 per diluted share, compared with $30.0 million, or $1.19 per diluted share, in the fourth quarter of 2013.

Free cash flow of $97.2 million in the fourth quarter of 2014 compared with $92.0 million in the fourth quarter of 2013.

“2014 ended on a strong note, continuing the improvement we saw throughout the year, and 2015 is starting out well,” said William J. Flynn, President and Chief Executive Officer. “After the first significant peak-season in several years, airfreight activity in the first quarter so far continues to reflect the broad-based pickup in demand that began in 2014.

“Both operationally and financially, our fourth-quarter and full-year performance stemmed from the leadership and strength of our ACMI and Charter businesses, the growth of our Dry Leasing platform, and ongoing efforts to drive efficiency and productivity through our continuous improvement initiatives. In addition, average utilization of our operating fleet rose during the year as we capitalized on the improvement in market demand with our modern, efficient aircraft and innovative services.

“We performed a substantial amount of conditions-based heavy maintenance activity during the fourth quarter, primarily for engine overhauls on our 747-400 fleet. This positions us to continue to take advantage of market growth and business opportunities ahead.”

Fourth-Quarter Results

Profitability in our ACMI business during the fourth quarter reflected an increase in aircraft utilization driven by market demand. This was offset by an increase in heavy maintenance expense on our 747-400 aircraft and engines.

Improved Charter contribution during the quarter reflected an increase in cargo aircraft block-hour rates and utilization, driven by market demand and our decision to reduce cargo capacity at the end of 2013, and an increase in passenger block-hour volumes. These were partially offset by increases in heavy maintenance expense as well as crewmember travel and ground handling expenses from flying to higher cost locations.

In Dry Leasing, revenue and profitability grew following the acquisition of three 777 freighter aircraft in the first quarter of 2014, which raised our 777 fleet count to six. Each of these aircraft is leased to a customer on a long-term basis.

Reported results in the fourth-quarter included an income tax rate benefit of 7.0%, primarily due to an income tax benefit of $10.7 million related to beneficial tax planning regarding the treatment of extraterritorial income from the offshore leasing of certain of our aircraft. Reported results also included a pretax special charge of $5.5 million, primarily related to an aircraft held for sale.

Beginning with the fourth quarter of 2014, we have combined our commercial and military charter businesses in a single Charter segment as we now assess operating results at that level. Our decision recognizes the smaller size of our military business compared with the past and the increased interchangeability of our Charter aircraft between commercial and military customers.

Full-Year Results

For the twelve months ended December 31, 2014, adjusted net income attributable to common stockholders totaled $93.5 million, or $3.72 per diluted share, compared with $96.8 million, or $3.78 per diluted share, for the twelve months ended December 31, 2013.

On a reported basis, full-year 2014 net income attributable to common stockholders totaled $106.8 million, or $4.25 per diluted share, compared with $93.8 million, or $3.66 per diluted share, in 2013.

Reported earnings in 2014 included an effective income tax rate benefit of 14.2%, primarily due to an income tax benefit of $34.8 million related to beneficial tax planning regarding the tax treatment of extraterritorial income from the offshore leasing of certain of our aircraft. Our effective income tax rate also reflected the ongoing beneficial impact of lower taxes for certain foreign subsidiaries in our Dry Leasing business as well as the favorable change in our deferred foreign tax rates.

Free cash flow totaled $247.8 million in 2014 compared with $270.2 million in 2013.

Cash and Short-Term Investments

At December 31, 2014, our cash, cash equivalents, short-term investments and restricted cash totaled $330.7 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 2014 primarily related to the purchase of three 777 freighters 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 begin 2015 with a favorable view about the prospects for the overall airfreight environment and the demand for our aircraft and services. As a result, we look for moderate growth in adjusted fully diluted earnings per share this year.

Our current outlook reflects two primary considerations.

First, industry forecasts indicate that global airfreight demand will grow approximately 4% to 5% in 2015, outpacing projected growth in global trade. Similar to 2014, achieving growth at this level will require a continuation of positive global economic activity driven by healthy consumer and business confidence.

Second, while our operating results are expected to benefit from a reduction in maintenance expense in 2015 compared with 2014, we face a continued contraction in military demand as U.S. military activities overseas are scaled down.

We are seeing good airfreight demand in the first quarter of 2015 leading up to the start of the Lunar New Year holidays in Asia on February 19. We expect earnings per share in the first quarter, which is usually the lowest volume-generating and highest maintenance expense quarter of the year, to be in line with or better than our first-quarter 2014 adjusted EPS of $0.45.

At this point in the year, there is limited visibility into second-half airfreight market demand. Typically, the majority of our earnings are generated in the second half, and we will update our expectations as the year progresses. Should commercial airfreight continue to grow as anticipated in 2015, our business initiatives and investments have positioned Atlas to be one of the prime beneficiaries.

For the full year, we expect total block hours to be several percentage points higher than 2014, with approximately 75% in ACMI and the balance in Charter. ACMI block hours are anticipated to reflect additional 747-8 and 747-400 flying as well as an increase in CMI operations, driven primarily by the addition of four customer-owned 767 freighters to our fleet in the first quarter.

In March, we will place an additional 747-8 freighter into ACMI service for the benefit of DHL Express. This aircraft will initially replace an existing 747-400 operating for DHL today. The placement reflects the continuing growth of DHL’s transpacific operations. To effect this, one 747-8 freighter currently in ACMI service for Panalpina will transition promptly to DHL.

We will continue to operate a 747-8 freighter for Panalpina between Europe, the United States and points in Mexico on an ACMI basis. We have also entered into a long-term 747-400 charter agreement with Panalpina as it expands its unique network and extends its customer service. This new freighter service for Panalpina commences in March.

Results in our Dry Leasing segment will continue to be driven largely by the six 777 freighters that we acquired in 2013 and 2014, each with a long-term customer lease in place.

Aircraft maintenance expense in 2015 should total approximately $175 million, and depreciation is expected to total approximately $125 million. In addition, we anticipate an effective book income tax rate of approximately 28%. Core capital expenditures, excluding aircraft and engine purchases, are expected to total between $30 to $40 million, mainly for spare parts for our fleet.

Mr. Flynn added: “In addition to expected earnings growth this year, we continue to focus on the longer-term growth of our business. With a resilient business model, strong customer relationships and a superior fleet, we are well-positioned to capitalize on market improvements, to generate substantial earnings and cash flow, and to continue to enhance shareholder value.”

Conference Call

Management will host a conference call to discuss Atlas Air Worldwide’s fourth-quarter and full-year 2014 financial and operating results at 11:00 a.m. Eastern Time on Thursday, February 12, 2015.

Interested parties are invited to listen to the call live over the Internet at www.atlasair.com (click on “Investor Information”, click on “Presentations” and on the link to the fourth-quarter call) or at the following Web address:

http://edge.media-server.com/m/p/dunzmhep

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 February 18 by dialing (855) 859-2056 (domestic) and (404) 537-3406 (international) and using Access Code 74290072#.

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 a leading global provider of outsourced aircraft and aviation operating services. It is the parent company of Atlas Air, Inc. (Atlas) and Titan Aviation Holdings, Inc. (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 solutions 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; 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 2015 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 Twelve Months Ended
			December 31, 2014			December 31, 2013			December 31, 2014			December 31, 2013
Operating Revenue
	ACMI		$	209,162		$	202,297		$	778,091		$	755,008
	Charter			251,214			251,125			906,676			852,452
	Dry Leasing			24,448			13,324			100,059			35,168
	Other			4,041			3,855			14,372			14,272
	Total Operating Revenue		$	488,865		$	470,601		$	1,799,198		$	1,656,900
Operating Expenses
	Aircraft fuel			102,987			120,818			404,263			410,353
	Salaries, wages and benefits			81,506			79,920			311,143			299,136
	Maintenance, materials and repairs			59,051			29,820			203,567			162,972
	Aircraft rent			35,971			41,662			140,390			160,415
	Navigation fees, landing fees, and other rent			37,770			31,882			131,138			90,733
	Depreciation and amortization			32,392			24,549			120,793			86,389
	Passenger and ground handling services			20,714			20,394			86,820			72,503
	Travel			21,501			17,935			79,199			61,420
	Loss (gain) on disposal of aircraft			-			272			14,679			351
	Special charge			5,547			18,642			15,114			18,642
	Other			31,230			26,680			116,120			107,196
	Total Operating Expenses			428,669			412,574			1,623,226			1,470,110
	Operating Income			60,196			58,027			175,972			186,790
Non-operating Expenses (Income)
	Interest income			(4,446	)		(4,810	)		(18,480	)		(19,813	)
	Interest expense			25,475			21,948			104,252			83,659
	Capitalized interest			(30	)		(365	)		(453	)		(2,350	)
	Loss on early extinguishment of debt			-			-			-			5,518
	Other expense (income), net			273			539			1,104			1,954
	Total Non-operating Expenses			21,272			17,312			86,423			68,968
	Income before income taxes			38,924			40,715			89,549			117,822
	Income tax expense (benefit)			(2,720)			12,513			(12,678	)		23,833
Net Income				41,644			28,202			102,227			93,989
	Less: Net income (loss) attributable
	to noncontrolling interests			-			(1,756	)		(4,530	)		152
Net Income Attributable
		to Common Stockholders	$	41,644		$	29,958		$	106,757		$	93,837
Earnings per share:
	Basic		$	1.68		$	1.20		$	4.26		$	3.67
	Diluted		$	1.66		$	1.19		$	4.25		$	3.66
Weighted average shares:
	Basic			24,807			25,039			25,031			25,541
	Diluted			25,018			25,159			25,127			25,627

2

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

				December 31 ,
				2014			December 31, 2013
Assets
Current Assets
	Cash and cash equivalents			$	298,601		$	321,816
	Short-term investments				17,802			10,904
	Restricted cash				14,281			6,491
	Accounts receivable, net of allowance of $1,658 and $1,402, respectively				162,092			132,159
	Prepaid maintenance				20,806			31,620
	Deferred taxes				40,923			54,001
	Prepaid expenses and other current assets				51,599			36,962
	Total current assets				606,104			593,953
Property and Equipment
	Flight equipment				3,448,791			2,969,379
	Ground equipment				51,418			46,951
			Less: accumulated depreciation		(348,036	)		(256,685	)
	Purchase deposits for flight equipment				20,054			69,320
	Property and equipment, net				3,172,227			2,828,965
Other Assets
	Long-term investments and accrued interest				120,478			130,267
	Deposits and other assets				135,401			131,216
	Intangible assets, net				67,410			33,858
Total Assets				$	4,101,620		$	3,718,259
Liabilities and Equity
Current Liabilities
	Accounts payable			$	42,864		$	65,367
	Accrued liabilities				251,594			194,292
	Current portion of long-term debt1,2				190,340			157,486
	Total current liabilities				484,798			417,145
Other Liabilities
	Long-term debt1,2				1,782,744			1,539,139
	Deferred taxes				350,868			371,655
	Other liabilities				65,415			68,195
	Total other liabilities				2,199,027			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; 28,561,160 and
			28,200,213 shares issued, 24,807,718 and 25,038,629 shares outstanding
			(net of treasury stock), as of December 31, 2014 and December 31,
			2013, respectively		286			282
	Additional paid-in-capital				573,133			561,481
	Treasury stock, at cost; 3,753,442 and 3,161,584 shares, respectively				(145,322	)		(125,826	)
	Accumulated other comprehensive loss				(9,572	)		(10,677	)
	Retained earnings				999,270			892,513
	Total stockholders’ equity				1,417,795			1,317,773
	Noncontrolling interest				¯			4,352
	Total equity				1,417,795			1,322,125
Total Liabilities and Equity				$	4,101,620		$	3,718,259

¹ Balance sheet debt at December 31, 2014 totaled $1,973.1 million, including the impact of $35.9 million of unamortized discount.

² The face value of our debt at December 31, 2014 totaled $2,009.0 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 Twelve Months Ended
		December 31, 2014			December 31, 2013
Operating Activities:
Net Income Attributable to Common Stockholders		$	106,757		$	93,837
Net income (loss) attributable to noncontrolling interests			(4,530	)		152
Net Income			102,227			93,989
Adjustments to reconcile Net Income
	to net cash provided by operating activities:
	Depreciation and amortization		138,324			101,671
	Accretion of debt securities discount		(7,947	)		(8,889	)
	Provision for allowance for doubtful accounts		643			178
	Special charge		12,013			18,642
	Loss on early extinguishment of debt		-			5,518
	Loss (gain) on disposal of aircraft		14,679			351
	Deferred taxes		(12,714	)		22,856
	Stock-based compensation expense		13,606			16,690
Changes in:
	Accounts receivable		(21,070	)		(6,029	)
	Prepaid expenses and other current assets		27,079			(4,298	)
	Deposits and other assets		(3,474	)		4,106
	Accounts payable and accrued liabilities		9,779			57,308
Net cash provided by operating activities			273,145			302,093
Investing Activities:
	Capital expenditures		(24,920	)		(29,531	)
	Purchase deposits and delivery payments for flight equipment		(519,399	)		(573,416	)
	Changes in restricted cash		(7,790	)		(6,491	)
	Proceeds from short-term investments		3,728			5,569
	Proceeds from insurance		-			9,109
	Proceeds from disposal of aircraft		-			4,780
Net cash used for investing activities			(548,381	)		(589,980	)
Financing Activities:
	Proceeds from debt issuance		572,552			709,484
	Customer maintenance reserves received		17,555			2,907
	Refund of accelerated share repurchase		-			21,886
	Prepayment of accelerated share repurchase		-			(21,886	)
	Proceeds from stock option exercises		69			-
	Purchase of treasury stock		(19,496	)		(80,976	)
	Excess tax benefit from stock-based compensation expense		8			465
	Payment of debt issuance costs		(17,117	)		(19,769	)
	Payments of debt		(301,550	)		(412,171	)
Net cash provided by financing activities			252,021			199,940
Net decrease in cash and cash equivalents			(23,215	)		(87,947	)
Cash and cash equivalents at the beginning of period			321,816			409,763
Cash and cash equivalents at the end of period		$	298,601		$	321,816
Non-cash Investing and Financing Activities:
Acquisition of flight equipment and assumed debt		$	-		$	90,498
Acquisition of flight equipment included in Accounts payable and accrued liabilities		$	29,087		$	21,823
Disposition of aircraft included in Accounts receivable		$	5,072		$	-

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

	For the Three Months Ended						For the Twelve Months Ended
	December 31, 2014			December 31, 2013			December 31, 2014			December 31, 2013
Operating Revenue:
ACMI	$	209,162		$	202,297		$	778,091		$	755,008
Charter		251,214			251,125			906,676			852,452
Dry Leasing		24,448			13,324			100,059			35,168
Other		4,041			3,855			14,372			14,272
Total Operating Revenue	$	488,865		$	470,601		$	1,799,198		$	1,656,900
Direct Contribution:
ACMI	$	54,196		$	70,235		$	197,750		$	227,829
Charter		29,139			27,426			54,099			52,546
Dry Leasing		7,594			5,723			33,224			14,017
Total Direct Contribution for Reportable Segments	$	90,929		$	103,384		$	285,073		$	294,392
Unallocated income and expenses, net		(46,458	)		(43,755	)		(165,731	)		(152,059	)
Special charge		(5,547	)		(18,642	)		(15,114	)		(18,642	)
Loss on early extinguishment of debt		—			—			—			(5,518	)
Loss (gain) on disposal of aircraft		—			(272	)		(14,679	)		(351	)
Income before Income Taxes		38,924			40,715			89,549			117,822
Interest income		(4,446	)		(4,810	)		(18,480	)		(19,813	)
Interest expense		25,475			21,948			104,252			83,659
Capitalized interest		(30	)		(365	)		(453	)		(2,350	)
Loss on early extinguishment of debt		-			-			-			5,518
Other expense (income), net		273			539			1,104			1,954
Operating Income	$	60,196		$	58,027		$	175,972		$	186,790

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, Charter, and Dry Leasing. Each segment has different operating and economic characteristics.

Direct Contribution consists of income (loss) before taxes, excluding special charges, nonrecurring items, losses (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
	December 31, 2014			December 31, 2013			Percent Change
Net Income Attributable to Common Stockholders	$	41,644		$	29,958			39.0	%
After-tax impact from:
ETI tax benefit		(10,742	)		-
Special charge1		7,024			11,714
Accrual for legal matters		850			-
Loss on disposal of aircraft		-			174
Adjusted Net Income Attributable to Common Stockholders	$	38,776		$	41,846			(7.3	%)
Diluted EPS	$	1.66		$	1.19			39.5	%
After-tax impact from:
ETI tax benefit		(0.43	)		-
Special charge1		0.28			0.47
Accrual for legal matters		0.03			-
Loss on disposal of aircraft		-			0.01
Adjusted Diluted EPS	$	1.553		$	1.663			(6.6	%)
	For the Twelve Months Ended
	December 31, 2014			December 31, 2013			Percent Change
Net Income Attributable to Common Stockholders	$	106,757		$	93,837			13.8	%
After-tax impact from:
ETI tax benefit		(34,755	)		(14,160	)
Special charge1		10,930			11,714
Accrual for legal matters		1,150			-
Loss on early extinguishment of debt2		-			5,160
Loss on disposal of aircraft		9,389			224
Adjusted Net Income Attributable to Common Stockholders	$	93,471		$	96,775			(3.4	%)
Diluted EPS	$	4.25		$	3.66			16.1	%
After-tax impact from:
ETI tax benefit		(1.38	)		(0.55	)
Special charge1		0.43			0.46
Accrual for legal matters		0.05			-
Loss on early extinguishment of debt2		-			0.20
Loss on disposal of aircraft		0.37			0.01
Adjusted Diluted EPS	$	3.72		$	3.78			(1.6	%)

¹ Included in Special charge in 2014 were a loss on an aircraft held for sale, employee termination benefits, a loan reserve, and professional fees and tax adjustments related to GSS. Included in Special charge in 2013 were lease termination charges related to two leased 747-400BCFs and an impairment charge for a customer relationship intangible asset.

² Loss on early extinguishment of debt was related to the financing of 747-8F and 777-200LRF aircraft.

³ Items may not sum due to rounding.

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

	For the Three Months Ended
		December 31, 2014		December 31, 2013
Net Cash Provided by Operating Activities		$	104,617	$	97,000
Less:
Capital expenditures			7,411		4,671
Capitalized interest			30		365
Free Cash Flow1		$	97,176	$	91,964

	For the Twelve Months Ended
		December 31, 2014		December 31, 2013
Net Cash Provided by Operating Activities		$	273,145	$	302,093
Less:
Capital expenditures			24,920		29,531
Capitalized interest			453		2,350
Free Cash Flow1		$	247,772	$	270,212

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 Twelve Months Ended
	December 31, 2014		December 31, 2013		December 31, 2014		December 31, 2013
Income before income taxes	$	38,924	$	40,715	$	89,549	$	117,822
Special charge1		5,547		18,642		15,114		18,642
Accrual for legal matters		850		—		1,319		—
Loss on early extinguishment of debt2		—		—		—		5,518
Loss (gain) on disposal of aircraft		—		272		14,679		351
Adjusted pretax income		45,321		59,629		121,661		142,333
Interest (income) expense, net		20,999		16,773		85,319		61,496
Other non-operating expenses (income)		273		539		1,104		1,954
Adjusted operating income		66,593		76,941		207,084		205,783
Depreciation and amortization		32,392		24,549		120,793		86,389
EBITDA, as adjusted3		98,985		101,490		327,877		292,172
Aircraft rent		35,971		41,662		140,390		160,415
EBITDAR, as adjusted4	$	134,956	$	143,152	$	468,267	$	452,587

¹ Included in Special charge in 2014 were a loss on an aircraft held for sale, employee termination benefits, a loan reserve, and professional fees and tax adjustments related to GSS. Included in Special charge in 2013 were lease termination charges related to two leased 747-400BCFs and an impairment charge for a customer relationship intangible asset.

² Loss on early extinguishment of debt was related to the financing of 747-8F and 777-200LRF aircraft.

³ Adjusted EBITDA: Earnings before interest, taxes, depreciation, amortization, special charge, accrual for legal matters, loss on early extinguishment of debt, and loss (gain) on disposal of aircraft, as applicable.

⁴ Adjusted EBITDAR: Earnings before interest, taxes, depreciation, amortization, aircraft rent expense, special charge, accrual for legal matters, 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 Twelve Months Ended
				December 31,				Increase/			December 31,				Increase/
				2014		2013		(Decrease)			2014		2013		(Decrease)
Block Hours
	ACMI				31,272		30,084		1,188			115,042		115,358		(316	)
	Charter
	Cargo				9,467		9,906		(439	)		31,612		30,816		796
	Passenger				2,876		2,704		172			13,085		11,713		1,372
	Nonrevenue				555		395		160			1,351		1,050		301
	Total Block Hours				44,170		43,089		1,081			161,090		158,937		2,153
Revenue Per Block Hour
	ACMI			$	6,688	$	6,724	$	(36	)	$	6,764	$	6,545	$	219
	Charter
	Cargo				20,641		19,717		924			20,217		19,829		388
	Passenger				19,404		20,640		(1,236	)		20,449		20,609		(160	)
Average Utilization (block hours per day)
	ACMI1				10.1		9.6		0.5			9.6		10.2		(0.6	)
	Charter
	Cargo				11.8		11.1		0.7			9.1		7.7		1.4
	Passenger				6.9		6.8		0.1			7.8		7.1		0.7
	All Operating Aircraft1,2				10.2		9.7		0.5			9.4		9.4		-
Fuel
	Charter
		Average fuel cost
		per gallon		$	2.75	$	3.19	$	(0.44	)	$	3.07	$	3.28	$	(0.21	)
		Fuel gallons			37,445		37,893		(448	)		131,787		124,949		6,838
		consumed (000s)
	1 ACMI and All Operating Aircraft averages in the fourth quarter and full-year 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 Twelve Months Ended
	December 31,		Increase/		December 31,		Increase/
	2014	2013	(Decrease)		2014	2013	(Decrease)

Segment Operating Fleet (average
aircraft equivalents during the
period)
	ACMI1
	747-8F Cargo	8.5	8.0	0.5		8.5	7.8	0.7
	747-400 Cargo	13.0	13.8	(0.8	)	12.0	12.6	(0.6	)
	747-400 Dreamlifter	2.9	2.6	0.3		3.1	1.8	1.3
	767-300 Cargo	2.0	2.0	—		2.0	1.8	0.2
	767-200 Cargo	5.0	5.0	—		5.0	5.0	—
	747-400 Passenger	1.4	1.7	(0.3	)	1.2	1.3	(0.1	)
	767-300 Passenger	—	—	—		—	0.2	(0.2	)
	767-200 Passenger	1.0	1.0	—		1.0	0.5	0.5
	Total	33.8	34.1	(0.3	)	32.8	31.0	1.8
	Charter
	747-8F Cargo	0.4	0.9	(0.5	)	0.5	0.6	(0.1	)
	747-400 Cargo	8.3	8.8	(0.5	)	9.0	10.3	(1.3	)
	747-400 Passenger	1.5	1.3	0.2		1.7	1.7	—
	767-300 Passenger	3.0	3.0	—		2.9	2.8	0.1
	Total	13.2	14.0	(0.8	)	14.1	15.4	(1.3	)
	Dry Leasing
	777-200 Cargo	6.0	3.0	3.0		6.0	1.7	4.3
	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	7.0	3.0		10.0	5.7	4.3
	Total Operating Aircraft	57.0	55.1	1.9		56.9	52.1	4.8
	Out of Service2	1.0	1.11.1	(0.1	)	1.0	0.9	0.1

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.

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