Air Transport Services (ATSG) 8-K Results of Operations and Financial Condition

0

Investor Presentations

New York City

November 16-17, 2010

Exhibit 99.1

1

Safe Harbor, Non-GAAP Reconciliations

Except

for

historical

information

contained

herein,

the

matters

discussed

in

this

release

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,

changes

in

market

demand

for

our

assets

and

services,

the

cost

and

timing

associated

with

the

modification

of

Boeing

767-200

and

767-300

aircraft,

ABX

Air’s

ability

to

maintain

on-time

service

and

control

costs

under

its

new

operating

agreement

with

DHL,

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

release

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

release.

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.

ATSG, Inc. Non-GAAP Reconciliation

Earnings from Continuing Operations Before Interest, Taxes, Depreciation & Amortization (Adjusted EBITDA)

Net Debt

2008

2009

9Mo.10

3Q09

3Q10

(56,619)

45,358

43,352

4,647

16,670

Impairment of goodwill & intangibles

91,241

0

0

0

0

34,622

45,358

43,352

4,647

16,670

Interest Income

(2,335)

(449)

(241)

(74)

(83)

Interest Expense

37,002

26,881

14,424

6,236

4,641

Depreciation and amortization

93,752

83,964

65,310

19,954

22,758

163,041

155,754

122,845

30,763

43,986

GAAP Pre-tax Earnings (Loss)

Reconciliation Statement ($ in 000s)

Adjusted EBITDA from Cont. Oper.

from Continuing Operations

Adjusted Pre-Tax Earnings                        

from Continuing Operations

12/31/07

12/31/08

12/31/09

9/30/10

Long term debt obligations

567,987

450,628

325,690

277,031

Current portion of debt obligations

22,815

61,858

51,737

36,112

Cash and cash equivalents

(59,271)

(116,114)

(83,229)

(44,465)

Net Debt

531,531

396,372

294,198

268,678

Reconciliation Statement ($ in 000s)

EBITDA, Adjusted EBITDA and Net Debt are

non-GAAP financial measures and should not

be considered alternatives 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.

Net Debt

is defined as Long-term debt

obligations plus Current portion of debt

obligations minus Cash and cash equivalents.

The Company’s management uses these

adjusted financial measures in conjunction

with GAAP finance measures to monitor and

evaluate its performance, including as a

measure of liquidity.  EBITDA, Adjusted

EBITDA and Net Debt should not be

considered in isolation or as a substitute for

analysis of the Company’s results as reported

under GAAP, or as alternative measures of

liquidity.

2

The Restructured ATSG:

Cash Generation With Less Risk, More Growth

Differentiated Business Model With Global Leadership

Lessor

and operator of world’s largest fleet of converted medium widebody Boeing 767 freighters

Accretive, lower-risk conversion plan will expand highly efficient 767 freighter fleet by 50% by 2012

Long-term leases and operating agreements with global leader DHL, long-term relationships with Bax

Schenker, U.S. Military, USPS, TNT and Qantas

Provide full spectrum of air transport services throughout the world: Dry leasing, ACMI (wet leasing),

maintenance, and technical, fuel management and logistics services

Favorable Industry Dynamics

Booming air cargo recovery fueled by restocking, alternate mode issues, better logistics management

767 is most-favored replacement for 150-200 less efficient mid-sized freighters flying now

767 is ideal regional ‘spoke’

freighter complement to inter-continental 747 and 777 hub locations

Strong Financial Characteristics and Performance

Minimal leverage and off-balance sheet liabilities

Strong free cash flow generation, not projected to be Federal Income Tax cash-payer until 2013 or later

Disciplined capital allocation with established ROIC hurdles

3

Unique Blend of Complementary Businesses

Business

Description

Dry leases 767, 757, 727 and DC-8 freighters to ATSG airlines and external customers

Access to engine maintenance and component services

External customers include DHL, Amerijet, CargoJet, First Air

Provides 767 ACMI services

Customers include DHL, JAL and TNT

Provides 767, DC-8, DC-8 Combi ACMI services

Customers include BAX Schenker, U.S. Military and Qantas

Provides 727, 757 ACMI services

Customers include BAX Schenker and DHL

Heavy & line maintenance, component overhaul, engineering and manufacturing

Customers include major airlines, private operators

Equipment leasing, and equipment and facility maintenance services

Customers include: DHL, Allegiant Air, Branson Airport, Tampa International Jet Center

Contracted sort management services for USPS

Logistic support services

4

ACMI:

ACMI:

Dedicated Aircraft,

Dedicated Aircraft,

Crew, Maintenance

Crew, Maintenance

& Insurance

& Insurance

(excludes fuel)

(excludes fuel)

Charter:

Charter:

Unscheduled & military

Unscheduled & military

Dry Lease Plus

Dry Lease Plus

Crew

Crew

Airframe, Engine

Airframe, Engine

Maintenance

Maintenance

Pilot Training

Pilot Training

Cert. Support

Cert. Support

Standard

Standard

Dry Lease

Dry Lease

ATSG Business Model:

Cargo Aircraft

Dry or ACMI, With Complementary Services

Leased Externally

Leased to ATSG Airline

5

Recent DHL Agreements:

Growth with

Secure Cash Flows, Minimal Risk

Aircraft (A) Lease Terms

DHL

to

lease

thirteen

767Fs

from

CAM

under

7-year

terms;

DHL

responsible

for

airframe

and

engine

maintenance costs

Airborne

Maintenance

and

Engineering

Services

(“AMES”)

will

provide

airframe

heavy

maintenance

DHL provides fuel at its own expense

Crew, Maintenance, Insurance (CMI) Agreement Terms

ABX

operates

13

aircraft

for

DHL

for

5

years,

with

2-year

extension

right

to

DHL,

2

5

years

mutual

Defined-fee

scaled

for

the

number

of

aircraft;

logical

choice

to

support

domestic

network

expansion

ABX operates with monthly performance incentive bonuses

Subject

to

$70mm

amortizing

break-up

fee

if

DHL

prematurely

terminates

$27.9

mm

balance

of

the

DHL

Note

(at

September

30,

2010)

amortizes

to

zero

over

the

CMI’s

term;

no

cash,

interest

fully

reimbursable

Thirteen seven-year 767SF leases,

Aircraft operating agreement for five to ten years

nd

6

ATSG Global Presence:

Positioned With Growth-Market Customers

3.0%

3.6%

4.2%

5.1%

5.6%

5.7%

6.0%

6.5%

6.6%

6.7%

7.9%

9.2%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Intra North America

Intra Europe

Europe-N. America

Europe-Africa

Europe-Latin America

L. America-N. America

Europe-Middle East

S Asia-Europe

Europe-Asia

Asia-N. America

Intra Asia

Intra China

Growth Trends By Region, 2009-2029

Source: Boeing World Air Cargo Forecast, 2010-2011

ATSG markets

7

Global Freighter Fleets:

Big Opportunity in Medium-Size Market

Source: ACMG

Aircraft

Fuel

(gallon/

block hr)*

Crew

Payload (lbs.)/

Capacity (cu. ft.)

Range

(NM)

767-300SF

1,775

2

124,900 / 16,034

3,200

767-200SF

1,380

2

100,000 / 11,138

2,800

A300-B4

1,900

3

99,200 / 11,445

1,680

A300-600F

1,850

2

104,900 / 14,654

2,650

A310-300F

1,390

2

88,420/ 10,922

3,360

DC-8 63

1,760

3

96,800 / 10,060

2,150

DC-8 73

1,600

3

111,800 / 10,060

2,470

Medium Freighter Comparisons

Narrow-body

213 Units

12   B707-320s

28

DC-8-50/60

(1*)

29

DC-8-70s

(15*)

* includes 4 combis

Wide-body

436 Units

65   A310-200/300s

47

A300-B4s

150 A300-600s

55   B767-200s

(36)

59   B767-300s (4)

ATSG fleet (2012)

Prime candidates for

replacement with 767s

Medium Freighters-

2010

Source: Boeing, Airbus

8

767s Serve Asia, Americas, Europe:

‘Spoke’

Routes from Global Airfreight Hubs

45-60 ton payload potential

to global “gateway”

cargo

airports, regional hub cities.

Pallet size, layout options

complement larger 747/

777s.

767-200ER,

767-300 Ranges

w/ max. payload

Frankfurt

Miami

Hong

Kong

Miami

767 reaches booming Brazil markets, perishable food and floral

markets in Colombia, Venezuela, Puerto Rico, etc..

Frankfurt

Range covers NE U.S., entire Middle East, Mumbai & New

Delhi, Lagos, Moscow, etc.

Hong Kong

Entire Asian continent from India to all of China and Japan, plus

Australia/New Zealand

9

ATSG Investment Strategy:

Value-Creating Freighter Conversions

11-14

12-19*

April 2011

Jan. 2012

DHL-CAM Dry Leased

Other Customers-CAM Dry Leased

11-14

11

Jan. 2011

4

* Includes freighter conversion by 2012 of ten owned Boeing 767-200s, three Boeing 767-300s pending

purchase.  Modification schedule of 767-200s subject to DHL options. Deployment as leased vs. ACMI

operated aircraft subject to market conditions, customer preference.

7

11

April 2010

DHL-

Interim Leased

ACMI Services –

ACMI/Charter

13

13

4

5-8

5-8

7-14*

26

30

32

39*

Dry Lease Investment

Return Illustration*

(in millions)

(13)

767-Series

Freighters

Capex Required

$200 MM

Projected EBIT

$23.4 MM

Unlevered ROIC

11.7%

*

Margin from ACMI or other

complementary services would

be incremental.

10

Go-to-Market Strategy

Drive higher return on capital by optimally

positioning opportunities and bundling

additional services

CAM a neutral, non-airline, lead sales

organization that can drive a bundled

marketing strategy

Develop packaged programs cross-selling

entities

Amerijet International program (ACMI

migration to CAM-leased 767s, with full ATSG

support) symbolizes this approach

Market Approach

Market Opportunities

Airline Operators

Key drivers

Replacement

Capacity growth

New markets

Non-Operators

Examples

Forwarders/Brokers

Integrators

Shippers

11

Flexible

Global

Solutions

Premier Source of  Medium Freighter Solutions

767-200, -300

with GE CF6

engines

Low fuel cost

Low

maintenance

cost

Flexible

configuration

Power By Hour

engine services

The Global Leader of Medium Wide Body Operating and Leasing Solutions

Efficient Medium

Wide-Body

Aircraft

Dry leasing

ACMI/ wet

leasing

CMI

Combi

Full service

charter

Flight

operations

Heavy

maintenance

Line

maintenance

Maintenance

programs

Engineering

Technical

support

Manual services

Parts,

components

sales & service

Aircraft

conversion

services

Global

aircraft

deployment

Logistics

support

DHL

BAX

Schenker

TNT

JAL

UPS

Qantas

Amerijet

Air

Mobility

Command

CargoJet

Bundled

Maintenance

Solutions

Program

Management

Meeting Diverse

Customer Needs

12

Balance Sheet Improves as Earnings Grow

EBITDA* (from continuing operations)

Pre-tax Earnings (from continuing operations)

Net Debt*

Stockholders’

Equity

$531.5

$396.4

$294.2

$268.7

$200.0

$80.4

$246.0

$297.2

$155.8

$122.8

2008

2009

9Mo 2010

$30.8

$44.0

2009

2010

Year

Third Quarter

Year

Third Quarter

-$56.6

$45.4

$43.4

2008

2009

9 Mo 2010

$34.6**

$4.6

$16.7

2009

2010

12/31/07

12/31/08

12/31/09

9/30/10

12/31/07

12/31/08

12/31/09

9/30/10

$163.0**

No settlement or

severance from legacy

DHL agreements.

*

EBITDA is defined as income (loss) from operations plus net interest expense, provision for income taxes, depreciation and amortization. Net Debt is defined as Long-Term Obligations plus

Current Portion of Debt Obligations minus Cash and Cash Equivalents. EBITDA, and Net Debt are non-GAAP financial measures and should not be considered alternatives to net income (loss)

or any other performance measure derived in accordance with GAAP. See Reconciliation Tables.  

* *   2008 EBITDA and 2008 Pre-tax Earnings adjusted to exclude impairment charges of $91.2 million.

13

Employer

Employer

contributions

contributions

DHL Promissory

DHL Promissory

Note Extinguishment

Note Extinguishment

De-levering Continues:

Cash Flow Available for Current Capex Commits

Transfer of Aircraft

Transfer of Aircraft

Capital Leases to DHL

Capital Leases to DHL

Principal

Principal

payments

payments

$313.1

$512.5

12/31/2008

9/30/2010

Total Debt Reduced 39%

Credit Facility Covenant Compliance

$98.3

$297.3

Actuarial costs

Actuarial costs

& adjustments

& adjustments

$119.6

$102.5

$102.4

Workforce

Workforce

contraction

contraction

& plan freeze

& plan freeze

$79.3

$ in millions

Gains on

Gains on

assets

assets

12/31/2008

9/30/2010

Post-Retirement Liabilities Reduced 64%

$ in millions

$22

$31

$32

$142

$90

$70

$82

$18

Maintenance

Growth

2007

2008

2009

2010 est.

$160

$112

$101

$114

$ in millions

*  Requirements at year-end 2008 were 3.00 / 3.50 / 1.50 / 1.25

** Based upon twelve months trailing EBITDA

Capital Spending Trends

$104.2

$49.5

$45.7

Required*

2008

2009

3Q2010**

First Lien Debt /

EBITDA

< 2.75

2.58

2.17

1.83

Total Debt / EBITDA

< 3.25

3.10

2.44

1.99

Fixed Charge

Coverage Ratio

> 1.50

2.55

1.99

2.17

Capital Expenditures

> 1.05

1.58

1.65

1.20

14

New Business on Three Continents

On November 1, ABX Air began operating one Boeing 767-200 freighter for Japan

Airlines in ACMI service in Asia.

Also on November 1, ATI added one DC-8 freighter and CCIA added one 727

freighter to BAX Global’s

North American network. 

Amerijet exercised the first of three options for a 767-200 freighter for a seven-

year dry lease, to be effective in January 2011. Amerijet currently leases two 767-

200 freighters from CAM.

On November 7, ABX Air began transatlantic ACMI service for DHL between

England and Cincinnati via a 767-300 freighter that ABX Air has leased from a third

party.

In October, DHL selected ABX Air to operate four of DHL’s own Boeing 767

freighters in its U.S. network, under terms of the CMI agreement. The four are in

addition to 13 Boeing 767s that CAM will lease and ABX Air operates in the U.S. for

DHL.

15

ATSG Value Gaining Altitude

Limited

risk,

strong

cash

and

asset-value

returns

from

converted

767

freighters

Expanding

767

freighter

fleet

will

yield

attractive,

annuity-like

cash

ROIs

via

long-term

leases

ACMI/CMI

flexibility

offers

options,

low-risk

transition

to

widebody

767s

from

older

narrow-bodys

767

platform

flexible

as

trans-continental

leader,

compatible

feeder

to

inter-continental

747s/777s

Significant

market-value

gains

on

P-2-F

aircraft

conversion

investments

Long-term

agreements

with

key

customers

Lease/CMI

approach

unlocks

value

of

aircraft

from

ACMI,

creates

more

options

for

customers

18

767s

&

757s

now

under

fixed

3-7

year

leases

or

operating

agreements

with

DHL,

CargoJet,

Amerijet,

etc.

5-year

CMI

with

DHL,

with

performance

factor

plus

$31m

amortized

note

forgiveness,

DPW

backing   

Integrated,

value-added

services

Increase

return

on

invested

capital

Comprehensive

mix

allows

for

turnkey

customer

solutions

Competitive

terms

and

service

packages

for

third

party

maintenance

business

Attractive

balance

sheet

and

liquidity,

growth

capital

capacity

Current

low-rate

term

&

revolver

facility

runs

through

2012,

limited

off-balance

sheet

obligations

Manageable

2010-2011

capital

commitments:

maintenance

plus

convert

767-200s,

and

acquire

and

convert

three

767-300s

using

existing

cash

and

credit

resources,

yielding

significant

asset-value

gains

Secure

long-term

cash

flow

enhances

access

to

growth

capital

if

needed

Expanding

opportunities

around

the

globe

Expanding

presence

in

large,

fast-growing

air

cargo

regions:

Asia,

South

America,

Europe

&

Africa

Unique

provider

of

combi

airlift

to

military

in

South

Pacific

region

Uniquely

positioned

as

largest

independent

source

of

premier

medium

wide-body

freighter

–

the

767

16

Appendix

17

Balance Sheet Trend

September 30,

Dec. 31,

September 30,

Dec. 31

2010

2009

2009

2008

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

44,465

$                                           

83,229

89,699

$                                           

116,114

Marketable securities - available-for-sale

-

-

-

26

Accounts receivable, net of allowances

37,331

87,708

95,071

87,857

Inventory

5,769

5,226

6,523

11,259

Prepaid supplies and other

10,480

7,093

8,900

11,151

Deferred income taxes

31,597

31,597

20,171

20,172

Aircraft and engines held for sale

-

30,634

32,521

2,353

TOTAL CURRENT ASSETS

129,642

245,487

252,885

248,932

Property and equipment, net

660,988

636,089

614,433

671,552

Other assets

28,463

21,307

22,225

25,281

Deferred income taxes

-

-

1,040

54,807

Intangibles

9,472

10,113

10,335

11,000

Goodwill

89,777

89,777

89,777

89,777

TOTAL ASSETS

918,342

$                                         

$1,002,773

990,695

$                                         

$1,101,349

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Accounts payable

37,329

$                    ��                      

38,174

32,825

$                                           

36,618

Accrued salaries, wages and benefits

23,651

44,077

37,605

63,500

Accrued severance and retention

1,039

18,959

13,718

67,846

Accrued expenses

15,367

16,429

20,628

13,772

Current portion of debt obligations

36,112

51,737

55,487

61,858

Unearned revenue

14,335

15,340

17,251

14,813

TOTAL CURRENT LIABILITIES

127,833

184,716

177,514

258,407

Long-term obligations

277,031

325,690

350,463

450,628

Post-retirement liabilities

97,292

152,297

239,292

294,881

Other liabilities

54,863

44,044

44,321

17,041

Deferred income taxes

64,172

50,044

-

-

STOCKHOLDERS' EQUITY:

Preferred stock, 20,000,000 shares authorized, including 75,000 Series A

Junior Participating Preferred Stock

-

-

-

-

Common stock, par value $0.01 per share;

638

634

635

632

Additional paid-in capital

513,898

502,822

495,551

460,155

Accumulated deficit

(183,090)

(211,085)

(222,593)

(245,534)

Accumulated other comprehensive loss

(34,295)

(46,389)

(94,488)

(134,861)

TOTAL STOCKHOLDERS' EQUITY

297,151

245,982

179,105

80,392

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

918,342

$                                         

1,002,773

$                                      

990,695

$                                         

1,101,349

$