1 June 2009 Investor Meetings Exhibit 99.1 |
2 2 •Except for historical information contained herein, the matters discussed in this presentation contain forward-looking statements that involve risks and uncertainties. There are a number of important factors that could cause Air Transport Services Group’s ("ATSG’s") actual results to differ materially from those indicated by such forward-looking statements. These factors include, but are not limited to, further reductions in the scope of services that ABX Air is performing under its commercial agreements with DHL and the rate at which those reductions occur, ABX Air’s ability to maintain cost and service level performance under its commercial agreements with DHL, the timing for and extent to which ABX Air is reimbursed for expenditures made under its Severance and Retention Agreement with DHL and for costs associated with the termination of services under its commercial agreements with DHL, further reductions in the scope of services that ATSG is providing to its other customers, ATSG’s ability to sufficiently reduce its costs in order to compete for new business and generate reasonable returns, the timely conversion and deployment of Boeing 767 aircraft, ATSG’s ability to remain in compliance with the terms of its credit arrangements, and other factors that are contained from time to time in ATSG’s filings with the U.S. Securities and Exchange Commission, including its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Readers should carefully review this presentation and should not place undue reliance on ATSG’s forward-looking statements. These forward-looking statements were based on information, plans and estimates as of the date of this presentation. ATSG undertakes no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes. Safe Harbor Statement ATSG, Inc. Non-GAAP Reconciliation Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) (Unaudited) EBITDA is a non-GAAP financial measure and should not be considered an alternative to net income (loss) or any other performance measure derived in accordance with GAAP. EBITDA is defined as income (loss) from operations plus net interest expense, provision for income taxes, depreciation and amortization. The Company’s management uses this adjusted financial measure in conjunction with GAAP financial measures to monitor and evaluate the performance of the Company, including as a measure of liquidity. EBITDA should not be considered in isolation or as a substitute for analysis of the Company’s results as reported under GAAP, or as an alternative measure of liquidity. * Excluding goodwill and intangible impairment charges 2004 2005 2006 2007 2008 36,973 30,312 90,054 19,587 (55,990) Income Tax Expense (Benefit) - - (54,041) 13,701 10,161 Interest Income (931) (2,354) (4,775) (4,557) (2,335) Interest Expenses 8,956 10,805 11,547 14,067 37,002 Depreciation and amortization 36,817 41,167 45,660 51,747 94,451 81,815 79,930 88,445 94,545 83,289 Impairment of goodwill and intangibles - - - - 91,241 81,815 79,930 88,445 94,545 174,530 GAAP Net Earnings Reconciliation Statement ($ in 000s) Adjusted EBITDA EBITDA |
3 3 • Airborne Maintenance and Engineering Services (AMES) • ABX Cargo Services • LGSTX Services 2003 Separation 2007 Acquisition Airborne, Inc. Airborne, Inc. ACMI Agreement ACMI Agreement Hub Services Agreement Hub Services Agreement ABX Air ABX Air Holders Holders 3 Today ACMI / Charter ACMI / Charter Air Transport Air Transport Services Group Services Group Leasing Leasing Other Other • ABX Air • ATI • CCIA • CAM DHL DHL Cargo Holdings Cargo Holdings International International • Air Transport International (ATI) • Capital Cargo International Airlines (CCIA) • Cargo Aircraft Management (CAM) • LGSTX Services |
4 4 Expanded portfolio of services Downsized fleet, operations, and workforce Preserved financial flexibility while increasing cash flow Facing Challenges of Change-2008 • Assimilate new businesses • Adapt for DHL restructuring • Respond to credit crisis, soft economy |
$34 $48 Financial Performance 2004-2008 Results $s in millions Non-DHL DHL $27 $91 $1,176 $1,430 $1,212 $1,083 2004 2005 2006 2007 Pre-tax Earnings 2004 2005 2006 $37 $36 $33 $30 2007 Revenues $1,203 $1,464 $1,260 $1,174 $1,152 2008 $1,611 $459 2008 -$46 $45* * Excluding goodwill and intangible impairment charges 5 |
6 6 EBITDA* 2004 2005 2006 2007 $81.8 M $79.9 M $88.4 M $94.5 M *EBITDA and Adjusted EBITDA are non-GAAP financial measures and should not be considered as an alternative to net income (loss) or any other performance measure derived in accordance with GAAP. The Company’s management uses this adjusted financial measure in conjunction with GAAP financial measures to monitor and evaluate the performance of the Company, including as a measure of liquidity. EBITDA and Adjusted EBITDA should not be considered in isolation or as a substitute for analysis of the Company’s results as reported under GAAP, or as an alternative measure of liquidity. Please refer to Slide 2 for a statement showing a reconciliation of EBITDA to GAAP Net Income." ** Excluding goodwill and intangible impairment charges $174.5 M 2008A** |
7 7 1Q 2008 Revenues ACMI $93 M 1Q Financial Results DHL $281 M Other $9 M 1Q 2009 ACMI $86 M DHL $183 M Other $11 M Segments and Other CAM $13 M CAM $10 M Earnings 1Q 2008 ACMI $1 M CAM $4 M DHL $4 M 1Q 2009 ACMI $2 M CAM $5 M DHL $13 M Other $1 M Other $0.4 M |
8 8 Facing Challenges of Change-2009 Goals for 2009 • Restructure DHL promissory note and capital leases • Continue to support DHL transition • Reconfigure non-standard B767-PC fleet to serve broader customer base • Seek long-term commitments for B767 fleet • Further strengthen balance sheet • Leverage maintenance capability • Align cost structure |
9 9 2009 Actions to Date • Debt to be reduced approximately $113 million as result of: – DHL note balance reduced $46 million principal reduction, $15 million prepayment – $52 million capital lease transfer to DHL • Downsized DHL-related workforce by more than 7,500 people, reduced fleet by 65 aircraft • Completed modification of first 767-PC to SF, one more in mod • Executed multi-year dry leases for three 767-SFs and options for three more • Granted dry-lease options for four 767-SFs to DHL • Launched new MRO business • Reduced cost structure by $17 million |
10 10 Our Business Weak demand grounds inefficient fleets, single-mode operators Customers seeking full-service, low-cost providers Win factors: Experience, service quality, broad capabilities Market Dynamics ACMI Dry Leasing Air Mobility Command - Combis Maintenance Repair and Overhaul (MRO) Diversified Portfolio of Assets & Services DHL BAX/Schenker U.S. Military USPS Significant Customer Relationships Efficient assets delivering low unit operating costs Largest fleet of 767-200 freighters Added 757 Attractive Freighter Aircraft |
11 11 Strategy for Profitable Growth • Organic Strategy – Grow ACMI and leasing business using 767-200 fleet as the platform – Grow maintenance and technical services for higher margin returns – Leverage capabilities and resources in sort management and support services – Provide principal customers with superior, cost-effective service • Business Development – Complementary service offerings – Scale advantages – Capture cost savings from synergies |
12 12 Diversification Progress DHL OTHER* EBITDA 2004 $76M $6M $1,176B $27M 2007 $69M $26M $1,083B $91M Revenues * Excluding goodwill and intangible impairment charges 2008 $459M $97M $78M $1,152B |
13 13 Our Fleet 12/31/2007 6/1/2009 12/31/2010 DC-8 16 16 16 DC-9 57 B727 14 14 14 B757 2 2 B767-PC 24 22 8 B767-SF 19 21 27 In mod 4 2 1 Total 134 77 68 26 28 30 38 46 45 45 World’s Largest Fleet of Cost-Efficient Boeing 767-200 Cargo Aircraft |
14 14 470 654 528 683 247 260 433 481 0 500 1000 1500 2000 2500 2008 2013 Standard Medium Narrowbody Large Widebody Medium Widebody Five-Year Freighter Forecast Available Freighters 10 31 37 3 Average Annual Net Adds 2008-2013 Source: ACMG Baseline Forecast – April 2009 1,678 2,058 |
15 15 Midsize Freighter Forecast Source: Air Cargo Management Group (ACMG) Annual Twenty-Year Freighter Forecast - 2009 WIDE-BODY 1Q/2009 Retirements New Converted 2013 Total 767-200 & ER 60 0 0 30 90 767-300 & ER 51 0 35 45 131 A300B4 68 15 0 0 53 A300-600 & -600R 148 0 0 40 188 A310-200 49 0 0 0 49 A310-300 29 0 0 35 64 A330 0 0 35 0 35 DC-10-10 64 20 0 0 44 L-1011 1 1 0 0 0 NARROW-BODY 1Q/2009 Retirements New Converted 2013 Total 707 17 17 0 0 0 DC-8 96 80 0 0 16 A321 0 0 0 10 10 757-200 134 0 0 100 234 |
16 16 Redeploying Our DHL 767s 24 21 5 3 27-30* 5-8* 36 6/09 12/10 12/11 5 767-PCs put to DHL DHL assumes cap leases for 5 767-PCs 767-200 PCs, including PCs in mod program 767-200 SFs 24 11 12/09 5 *Pace of 767 modifications could be affected by possible assignment of early modification slots to DHL. 767-PCs modified to 767-SFs* |
17 17 Deployment Options Lease Sell ACMI $250K-$275K / mo., 90%+ EBITDA Margins $18-22 Mill. avg. for 767-200SF $3-$4K per B/H, 175-200hrs/ mo, 20-25% EBITDA Margins* •Assumes renegotiated CBA with ABX Air pilots effective 1Q/2010 |
18 18 767-PC Investment (in millions) Avg Per 767 14 767s Current Book Value $4.5 $63.0 Current Market Value $5.0 $70.0 Modification Cost $12.0 $168.0 Market Value After Conversion $18-22 $250-300 Lease Revenue Potential/yr $3.0-3.25 $42.0-46.0 |
19 19 Capital Expenditure Trends $65 $49 $86 $142 $14 $12 $9 2004 2005 2006 2007 Maintenance Growth $74 M $61 M $100 M $160 M $18 2008 $112 M 2009E $126 M $90 $22 $92 $34 |
20 20 Leverage Ratios 1Q09 1Q09 Actual Note/Cap Lease Covenant Results Resolution First Lien Debt / EBITDA* < 3.00 2.38 2.11 Total Debt / EBITDA* < 3.50 2.63 2.28 Fixed Charge Coverage > 1.50 2.49 2.96 1Q09 Actual Positive Outcome »»» reported results inclusive of DHL Note forgiveness »»» First Lien Ratio < 2.50 results in spread reduction to 2.625 »»» interest expense reduction ~ $800,000 for remainder of year »»» next .375 spread reduction when First Lien Ratio < 2.00 Note and capital lease resolution »»» Includes $15 million DHL Note reduction, elimination of ABX aircraft capital leases *Trailing 12 months through March 31, 2009 adjusted EBITDA excludes goodwill and intangible impairment charges |
21 21 Our Value Proposition • Strong cash flow from high-profile strategic customers, including DHL, BAX/Schenker, U.S. Military, USPS, UPS. • Global presence • Federal tax liability offset by deferred tax assets through 2011. • Nominal fuel-cost exposure via either ACMI or dry-leases. • World’s largest combined fleet of efficient 767-200SFs. • Integrated menu of value-added services: maintenance, technical, fuel management, and logistics support services. |
22 22 Attractive Opportunity 0 1 2 3 4 5 6 7 8 9 2004 2005 2006 2007 2008 Adj. Adj. TTM 3/31/09 Stock Price EBITDA per share 4.51 5.77 4.19 4.39 0.60 0.77 Stock price/EBITDA |