Views, Amazon to Date
Total Page:16
File Type:pdf, Size:1020Kb
ANNUAL REPORT 2020 Air Transport Services Group 145 Hunter Drive Wilmington, OH 45177 atsginc.com At ATSG, we believe in being resilient and STOCK INFORMATION REGISTRAR & creative. With that mentality, we help our NASDAQ: ATSG TRANSFER AGENT QUICK FACTS Computershare Investor Services Company documents customers rise beyond their challenges and electronically filed with the SEC 877.581.5548 or 781.575.2879 also may be found at www.computershare.com/investor INVESTOR + + + + + + + + + grow in their success. With over 40 years in the www.atsginc.com P.O. Box 505000 462 South 4th Street, Ste 1600 INFORMATION Louisville, KY 40233-5000 ANNUAL REPORT industry, ATSG has become the global leader in INVESTOR RELATIONS INDEPENDENT AUDITORS ANNUAL MEETING midsize freighter leasing and the A/CMI market. Inquiries may be directed to Deloitte & Touche LLP The annual meeting of stockholders will be May 26, 2021 [email protected] Cincinnati, OH at 11am EDT via a live audio webcast at www.virtualshareholdermeeting.com/ATSG2021 JOSEPH C HETE RICHARD M BAUDOUIN 5300 CEO of Air Transport Services Senior Advisor for EMPLOYEES Group, Retired Infinity Transportation, Retired 106 $1.571BILLION IN WORLDWIDE AIRCRAFT REVENUES, 2020 + + + + + IN SERVICE + + + + + PHYLLIS J CAMPBELL RICHARD F CORRADO Chairman of the Pacific President & CEO of Northwest for JPMorgan Air Transport Services Group REVENUE 777-200:3 Chase & Co. BY CUSTOMER 767-300:62 $497MILLION ADJ EBITDA, 2020* 767-200:36 *Adjusted EBITDA is a non-GAAP measure. For an explanation and a reconciliation to GAAP measures, see COUNT FLEET 757-200:5 our 8-K filed on March 8, 2021. RAYMOND E JOHNS, JR LAURA PETERSON ALL FIGURES AS OF 12/31/2020 US Air Force General, Fellow, Stanford Distinguished Retired Careers Institute, and Vice President, China Business Development, Boeing Commercial ATSG ADVANTAGE Airplanes, Retired | Largest global lessor of freighter aircraft. | Delivers integrated operational solutions to customers. RANDY D RADEMACHER J CHRISTOPHER TEETS | Business model minimally exposed to trade disruption Senior Vice President, Founding Partner of Red or business cycle. Strategy & Acquisitions at Mountain Capital Partners Reading Rock, Inc., and former LLC | Long-term leases and operating contracts with blue-chip President, Comair Holdings, LLC customer base. | Markets include air cargo and air express (package) transport, and ACMI and charter passenger transport for commercial and government entities. JEFFREY J VORHOLT PAUL S WILLIAMS Independent Consultant & Partner & Managing Director of | Headquarters located at the Wilmington Air Park in Ohio, Private Investor, and former Major, Lindsey & Africa, LLC, which also serves as a regional air hub for Amazon. Chief Financial Officer of Retired Structural Dynamics Research Corporation /ATSGinc @airtransportservicesgroup /air-transport-services-group /atsginc ©2021 Air Transport Services Group, Inc. around the world. I could not be prouder TO OUR of the way they have stepped up to those challenges, kept each other SHAREHOLDERS safe, and delivered record service IN 2020, THE In 2020, the resilience of your company’s levels to our RESILIENCE OF business model and the resourcefulness of customers. YOUR COMPANY’S its people were put to the test – and both BUSINESS MODEL excelled. While our businesses AND THE Our response to the COVID-19 pandemic was are not RESOURCEFULNESS comprehensive, creative, and safety-focused. immune to the OF ITS PEOPLE Your company’s leadership team focused disruptions the WERE PUT TO THE on providing a safe work environment with pandemic has TEST–AND BOTH open communication, increased sanitation caused, in 2020 EXCELLED. and cleaning, flexible scheduling to ensure they were able to social distancing for those not able to work seize opportunities it remotely, mask requirements, and alternatives presented while adapting to to corporate travel and in-person meetings. those it took away. On a consolidated basis, Even in the earliest stages of the pandemic, 2020 was a good year for your company, our employees developed new ways to with an eight percent increase in revenues complete critical missions while minimizing to $1.57 billion. Our earnings as measured their exposure. They prioritized movement by Generally Accepted Accounting Principles of medical supplies, essential goods, and were down for the year, but primarily due to Americans stranded in high-risk countries non-cash losses and other non-operating items. Operating Cash Flow, a GAAP financial measure that excludes the many non- cash and non-recurring items affecting our GAAP earnings, increased 29 percent to a record $512 million last year. Gains and losses in our liabilities for stock warrants we began issuing to Amazon in 2016 as lease incentives are the principal reason for wide variances in our GAAP earnings since then. Those effects reduced ATSG’s 2020 after-tax earnings by $81.8 million and $0.4 million for 2020 and 2019, respectively. Two other significant non-operating items also affected our 2020 results. We wrote down $39 million of value for our four Boeing 757 freighter aircraft and related assets in June, after DHL declined to extend agreements for us to operate three of them in its North American network. We also sought and received $76 million in cash grant assistance from the federal government under provisions of the 2020 CARES Act and other legislation intended to offset the effects of the pandemic on employment in the passenger airline industry. These funds enabled us to retain employees who otherwise might have been furloughed due to pandemic-related reductions in demand for our commercial to adopt new work processes and aircraft passenger services at Omni Air and Air performance monitoring systems that have Transport International last year. We have helped us better identify and proactively sought and received additional federal support address maintenance issues. On-time for our Omni workforce in 2021 that will help performance at our cargo airlines was very us retain employees throughout the period strong during the winter months, and we covered by the Act. expect significant performance benefits and savings from these initiatives going forward. Reduced demand affected last year’s results from our commercial passenger air operations, We expect another good year for our airlines particularly in the second half, but strong gains overall in 2021 particularly in the second from our cargo and other passenger flying still half, with more CMI flying for Amazon and led to a sharp increase in pretax earnings for ACMI operations for other customers. Our the ACMI Services segment overall. As the passenger services will remain challenged year progressed, we also made strides toward throughout the first half of 2021. two key airline objectives: the extension of our The foundation of our business is the long-term labor agreement with the union representing cash flow we generate from freighter aircraft our ABX Air pilots, and investments in new we lease to express-delivery leaders like DHL software and other technology to improve and merchandisers like Amazon. As such, we reliability and reduce fleet maintenance costs. could not have been better positioned for a In December, the pilots at time when rapid delivery of packages to homes ABX Air ratified a new became an essential service instead of a mere WE EXPECT six-year amendment convenience. We met that challenge by having ANOTHER GOOD to our collective not only the right aircraft assets, but also the YEAR FOR OUR bargaining services that make our Boeing 767 aircraft agreement, the right asset in these challenging times. AIRLINES OVERALL and we We delivered eleven more 767 freighters to IN 2021. also began customers in 2020 for a total of 73 aircraft under lease to third-party customers at year- Mexico and end, more than the eight to ten deliveries we Kenya. We OUR 767 had projected when the year began. expect that FREIGHTERS ARE progress to EXPECTED TO REMAIN As a result, our leasing subsidiary, Cargo continue in IN HIGH DEMAND FOR Aircraft Management, grew larger, with an 2021, as our eight percent increase in revenues to $309 MANY YEARS TO order book million in 2020. It also became more profitable, COME, AND WE includes as pretax segment earnings for the year were INTEND TO REMAIN more $77 million, up 13 percent. ATSG’s total fleet deliveries to THE MARKET LEADER consisted of 106 aircraft in service at the end customers in IN SUPPLYING of the fourth quarter, eight more than at the Canada, Europe, THEM. same point in 2019. Of those, CAM owned and Asia. 100 aircraft. Even as the pandemic begins to ease its grip Diversifying our customer base has been on air passenger transport in 2021, cargo a part of our strategy from our beginning in space aboard passenger aircraft remains in 2003, when a single contract with a single very tight supply, and e-commerce product customer accounted for nearly all our revenue demand continues to expand. Our 767 and earnings. In 2020, our largest customer, freighters are expected to remain in high the U.S. Department of Defense, accounted demand for many years to come, and we for 31 percent of our revenues, down from 34 intend to remain the market leader in supplying percent a year ago. Thirty percent came from them. At the same time, three-quarters of Amazon, and 12 percent from DHL. our passenger transport business is with We made significant progress toward the military and other government agencies. broadening our business base globally in Operations for those government customers 2020. CAM delivered cargo aircraft to seven recovered quickly after an early troop rotation companies in five countries last year, including freeze last year; our passenger/freighter our first deliveries to lease customers in combination (“combi”) flying for the military remained scaled down, however, largely due in a private offering at 4.75 percent fixed rate. to travel restrictions at some international Proceeds from that unsecured offering reduced destinations.