FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ x ] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1996
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Commission File Number
0-25732
ATLAS AIR, INC.
(Exact name of registrant as specified in its charter)
Delaware 84-1207329
(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
538 Commons Drive, Golden, Colorado 80401
(Address of principal executive offices) (Zip Code)
(303) 526-5050
(Registrant's telephone number, including area code)
Indicated by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[ x ] Yes [ ] No
As of May 10, 1996 the Registrant had 22,330,229 shares of $.01
par value Common Stock outstanding.
ATLAS AIR, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets-
March 31, 1996 and December 31, 1995
Consolidated Statements of Operations-
Three Months Ended March 31, 1996 and 1995
Consolidated Statements of Cash Flows-
Three Months Ended March 31, 1996 and 1995
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Exhibit 27 - Financial Data Schedule
Signatures
ATLAS AIR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31, December 31,
1996 1995
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $64,960 $96,990
Accounts receivable and other 33,154 18,594
Total current assets 98,114 115,584
Property and equipment:
Flight equipment 413,413 349,836
Other 3,225 3,055
416,638 352,891
Less accumulated depreciation (38,022) (33,140)
Net property and equipment 378,616 319,751
Other assets:
Debt issuance costs 8,599 8,607
Deposits 3,424 3,381
12,023 11,988
Total assets $488,753 $447,323
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt $20,897 $15,359
Accounts payable and accrued 28,317 19,203
expenses
Total current liabilities 49,214 34,562
Notes payable 350,248 335,902
Deferred income tax payable 11,562 8,144
Commitments and contingencies
Stockholders' equity (deficit):
Preferred Stock, $1 par value; -- --
10,000,000 shares authorized;
no shares issued
Common Stock, $0.01 par value;
50,000,000 shares authorized;
19,902,000 and 19,600,000
shares issued at March 31, 1996
and December 31, 1995 199 196
Treasury Stock (209) --
Additional paid-in capital 69,608 66,591
Retained earnings (deficit) 8,131 1,928
Total stockholders' equity 77,729 68,715
Total liabilities and $488,753 $447,323
stockholders' equity
See accompanying notes.
ATLAS AIR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
First Quarter and
Three Months Ended
March 31,
1996 1995
Revenues:
Contract services $55,809 $27,549
Scheduled services 414 1,222
Charters and other 2,426 167
Total operating revenues 58,649 28,938
Operating expenses:
Flight crew salaries and benefits 4,987 2,945
Other flight-related expenses 4,741 2,722
Maintenance 14,725 6,251
Aircraft and engine rentals 5,896 6,410
Fuel and ground handling 1,647 1,559
Depreciation and amortization 4,882 2,315
Other 6,361 3,195
Total operating expenses 43,239 25,397
Operating income 15,410 3,541
Other income (expense):
Interest income 1,146 121
Interest expense (6,863) (3,451)
(5,717) (3,330)
Income before income taxes 9,693 211
(Provision) benefit for income taxes (3,490) (161)
Net income $6,203 $50
Net income per common share $0.32 $0.00
Weighted average common and common
equivalent shares outstanding 19,686 15,000
See accompanying notes.
ATLAS AIR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
First Quarter and
Three Months Ended
March 31,
1996 1995
Operating activities:
Net income $6,203 $50
Adjustments to reconcile net income to
net cash provided
by operating activities:
Depreciation and amortization 4,882 2,315
Amortization of debt issuance 331 135
costs
Interest financed -- 232
Change in deferred income tax 3,418 --
payable
Changes in operating assets and
liabilities:
Accounts receivable and other (14,560) (16)
Deposits (43) 3,254
Accounts payable and accrued 9,114 245
expenses
Net cash provided by 9,345 6,215
operating activities
Investment activities:
Purchase of property and equipment (63,747) (24,088)
Net cash (used) in investing (63,747) (24,088)
activities
Financing activities:
Issuance of Common Stock 3,020 --
Purchase of Treasury Stock (209) --
Additional borrowings on notes payable 24,787 20,429
Principal payments on notes payable (4,903) (1,781)
Debt issuance costs (323) --
Advances from affiliate, net -- (1,700)
Net cash provided by 22,372 16,948
financing activities
Net (decrease) in cash (32,030) (925)
Cash and cash equivalents at beginning 96,990 10,524
of period
Cash and cash equivalents at end of $64,960 $9,599
period
See accompanying notes.
ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Unaudited Consolidated Financial Statements
In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments
(consisting only of normal recurring items) necessary to present
fairly the financial position of Atlas Air, Inc. and its wholly-
owned subsidiaries (collectively, the "Company") as of March 31,
1996 and the results of operations and cash flows for the period
presented. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted pursuant to the Securities and Exchange Commission's
rules and regulations. The results of operations for the periods
presented are not necessarily indicative of the results to be
expected for the full year. Management believes the disclosures
made are adequate to ensure that the information is not
misleading, and suggests that these financial statements be read
in conjunction with the Company's December 31, 1995 audited
financial statements.
2. Commitments and Contingencies
In January 1996, the Company entered into a contract with
Langdon Asset Management, Inc. for the purpose of acquiring six
Boeing 747-200 passenger aircraft (the "Thai Aircraft") and
certain spare engines and spare parts from Thai Airways
International Public Company Limited ("Thai Airways"). The Thai
Aircraft will be converted into freighter configuration by The
Boeing Company ("Boeing) and delivered to the Company for
placement into service between the fourth quarter of 1996 and
year-end 1997. The average cost of the six aircraft, including
conversion costs, is expected to approximate $40 million. The
Company has placed a nonrefundable deposit of $3 million with
Thai Airways with respect to its acquisition of the Thai
Aircraft. The Company has obtained financing from a single lender
for approximately 80% of the total acquisition and conversion
cost of the first Thai Aircraft, pursuant to which it initially
borrowed approximately $21.2 million in the first quarter of
1996.
In March 1996, the Company entered into an agreement with
Federal Express Corporation ("Federal Express") to lease five
747-200 freighter aircraft (the "Federal Express Aircraft"), plus
spare engines. The first Federal Express Aircraft was
delivered to the Company in March 1996, and the remaining
four Federal Express Aircraft will be delivered to the Company
over a four-month period beginning in June 1996 and each will
have a lease term ending in January 1998. The lease rate will
be $450,000 per month per aircraft. In addition, the Company
has agreed to purchase on or before October 1, 1996 a Boeing
747 simulator from Federal Express for a purchase price of $2.1
million. The Company is also negotiating the possible purchase
of certain Boeing 747-200 spare parts from Federal Express.
On September 21, 1993 and June 4, 1994, the FAA issued
Airworthiness Directives requiring the inspection and replacement
of certain engine components with which the Company must comply
by December 1997 at an estimated aggregate cost of $1.1 million
for all of the aircraft in the Company's fleet. In November
1994, the FAA issued Nacelle Strut Modification Service Bulletins
which are expected to be converted into Airworthiness Directives.
The Company's aircraft would have to be brought into compliance
with such Airworthiness Directives within the next five years at
an estimated cost of approximately $500,000 for each aircraft in
its fleet. It is possible that additional Service Bulletins or
Airworthiness Directives applicable to the types of aircraft
included in the Company's fleet could be issued in the future.
The cost of compliance with such Airworthiness Directives cannot
currently be estimated, but could be substantial.
3. Subsequent Events
On March 28, 1996, the Company filed a registration
statement with the Securities and Exchange Commission for the
purpose of offering 2,000,000 shares of its Common Stock and
1,000,000 shares of its Common Stock held by the Selling
Stockholder, Michael A. Chowdry. The registration statement was
amended on May 3 and May 6, 1996 for the purpose of updating the
statement for events occurring through April 25, 1996. In
addition, the number of shares offered was increased to 1,429,565
with respect to the Selling Stockholder.
The offering was consummated on May 10, 1996 at an offering
price of $45.75 per share, for aggregate net proceeds to the
Company of $99.8 million, including exercise in full of the
underwriters' over-allotment option, and after deducting the
aggregate underwriting discounts and the estimated expenses of
the Offering. All net proceeds will be retained for working
capital and other general corporate purposes including, but not
limited to, the acquisition and conversion of aircraft. Prior to
the use of the net proceeds of the Offering, such proceeds will
be placed in interest-bearing bank accounts or invested in short-
term United States government securities or other short-term
investment grade securities. The Company will not receive any
proceeds from the sale of shares of its Common Stock by the
Selling Stockholder.
In May 1996, the Company finalized discussions with a lender
with respect to a $175 million revolving credit facility for the
acquisition and conversion of flight equipment, including any or
all of the remaining five Thai Aircraft. The facility will have
a two-year revolving period with a subsequent two-year term loan
period in the event that permanent financing has not been
obtained for any flight equipment financed under the facility.
On May 8, 1996, the Company closed upon and drew down its initial
borrowing pursuant to the facility in an amount of approximately
$21.4 million with respect to the purchase of the second Thai
Aircraft and a related spare engine.
The Company entered into an employment agreement with Mickey
Foret dated as of April 19, 1996, pursuant to which Mr. Foret
will begin his employment as president of the Company effective
June 1, 1996. The agreement will expire on May 31, 1999. The
employment agreement provides for a base annual salary of
$400,000. In addition, Mr. Foret is entitled to receive signing
bonuses of $750,000 and $2,115,639, payable on June 1, 1996 and
January 1, 1997, respectively, as well as an annual bonus in the
discretion of the Compensation Committee. The agreement provides
that Mr. Foret be granted options on the commencement of his
employment under the 1995 Stock Option Plan to purchase 300,000
shares of Common Stock at an exercise price of $41.75 per share,
exercisable in five equal installments commencing one year
following the date of grant and annually thereafter. In
connection with Mr. Foret's relocation to the Denver area, the
Company has agreed to extend to Mr. Foret, at his option, an
interest bearing demand loan in the maximum amount of $750,000,
and to purchase his home in Minneapolis for $1.1 million. The
agreement is subject to termination by the Company with or
without cause. If the agreement is terminated by the Company
without cause, Mr. Foret is entitled to receive a termination
payment equal to 24 months of his base compensation and all
options granted to Mr. Foret under the 1995 Stock Option Plan
vest on the date of his termination. If Mr. Foret were
terminated without cause before January 1, 1997, he would be
entitled to receive his January 1, 1997 signing bonus upon
termination.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The Company, through its predecessors, began its operations
on April 22, 1992 with one Boeing 747-200 High Gross Weight
Aircraft in the service of China Airlines and expanded its
operations to a second Boeing 747-200 High Gross Weight Aircraft
in November 1992. These operations were undertaken on behalf of
the Company by another carrier utilizing pilot crews, dispatch
facilities, maintenance operations and other services provided by
such carrier. As a result, the Company's operations prior to
1993 were primarily limited to aircraft leasing and start-up
activities with normal operations commencing in early 1993. As
such, the Company's revenues and expenses during that period are
not indicative of the revenues and expenses which were incurred
by the Company from 1993 through the first quarter of 1996 and
which may be incurred in the future. Furthermore, the Company
expensed its start-up costs in 1992. As a result, the Company
does not believe that any comparison of the period prior to 1993
with later periods would be meaningful.
The table below sets forth selected financial and operating
data for the first quarter of 1996 and the four quarters of the
years ended December 31, 1995 and 1994 (dollars in thousands).
1996
1st
Quarter
Total operating revenues $58,649
Operating expenses 43,239
Operating income (loss) 15,410
Other income (expense) (5,717)
Net income (loss) 6,203
Block hours 11,125
Average aircraft operated 10.8
Operating margin 26.3%
1995
Cumu- 4th 3rd 2nd 1st
lative Quarter Quarter Quarter Quarter
Total operating revenues $171,267 $56,142 $47,769 $38,418 $28,938
Operating expenses 128,593 39,982 34,844 28,370 25,397
Operating income (loss) 42,674 16,160 12,925 10,048 3,541
Other income (expense) (16,435) (4,014) (4,805) (4,287) (3,330)
Net income (loss) 17,831 8,352 5,568 3,861 50
Block hours 33,265 10,809 9,076 7,568 5,812
Average aircraft operated 7.7 9.4 8.2 6.9 6.1
Operating margin 24.9% 28.8% 27.1% 26.2% 12.2%
1994
Cumu- 4th 3rd 2nd 1st
lative Quarter Quarter Quarter Quarter
Total operating revenues $102,979 $35,729 $34,271 $20,802 $12,177
Operating expenses 89,085 29,848 27,400 17,743 14,094
Operating income (loss) 13,894 5,881 6,871 3,059 (1,917)
Other income (expense) (10,294) (2,560) (2,635) (2,700) (2,399)
Net income (loss) 3,586 3,321 4,235 346 (4,316)
Block hours 19,049 6,619 6,226 3,789 2,415
Average aircraft operated 5.2 6 5.8 5 3.8
Operating margin 13.5% 16.5% 20.0% 14.7% (15.7)%
Operating Revenues and Results of Operations
Total operating revenues for the quarter ended March 31,
1996 increased to $58.6 million compared to $28.9 million for the
same period in 1995, an increase of approximately 103%. The
average number of aircraft in the Company's fleet during the
first quarter of 1996 was 10.8 compared to 6.1 during the same
period in 1995, excluding scheduled aircraft maintenance down-
time. Total block hours for the first quarter of 1996 were
11,125 compared to 5,812 for the same period in 1995, an increase
of approximately 91%, principally reflecting the increase in the
size of the Company's fleet. Revenue per block hour increased by
approximately 6% to $5,272 for the first quarter of 1996 compared
to $4,979 for the year-earlier period, primarily as a result of
an increase in higher-yielding charter operations. The Company's
operating results improved from a $3.5 million operating profit
for the first quarter of 1995 to an operating profit of $15.4
million for the first quarter of 1996. Net income of $0.1
million for the first quarter of 1995 improved to a net income of
$6.2 million for the first quarter of 1996.
Operating levels increased during the first quarter of 1996
as a result of placing in service four additional aircraft. In
January 1996, the Company placed in service one aircraft upon
completion of its cargo modification by Hong Kong Aircraft
Engineering Company ("HAECO"). This aircraft is being leased by
China Airlines under a long-term ACMI contract. The Company
entered into similar contracts for one aircraft with each of
Scandinavian Airlines System ("SAS") and Lufthansa. The aircraft
to be utilized for these contracts were re-delivered to the
Company upon completion of their modification by Boeing in March
1996. Finally, at the close of the first quarter, the Company
took delivery of the first Federal Express Aircraft, which was
subsequently placed into service during the second quarter with
Swissair Cargo ("Swissair").
Operating expenses
The Company's principal operating expenses include flight
crew salaries and benefits; other flight-related expenses;
maintenance; aircraft and engine rentals; fuel costs and ground
handling; depreciation and amortization; and selling, general and
administrative expenses.
Flight crew salaries and benefits include all such expenses
for the Company's pilot work force. Flight crew salaries and
benefits increased to $5.0 million in the first quarter of 1996
compared to $2.9 million in the same period of 1995, due to
increases in the number of aircraft in the Company's fleet and
aircraft block hours. While actual expense increased by
approximately 72% during the first quarter of 1996, on a block
hour basis this expense declined to $448 per hour for the first
quarter of 1996 from $507 per hour for the same period in 1995.
This reduction of 12% was due to increased efficiency in staffing
levels and scheduling resulting from the increased level of
operations.
Other flight-related expenses include hull and liability
insurance on the Company's fleet of Boeing 747 aircraft, crew
travel and meal expenses, initial and recurring crew training
costs and other expenses necessary to conduct its flight
operations.
Other flight-related expenses increased to $4.7 million in
the first quarter of 1996 compared to $2.7 million in 1995, or
approximately 74%, due primarily to the larger fleet size. On a
block hour basis, this expense declined by 9% to $426 per hour
for the first quarter of 1996 compared to $468 per hour for the
same period in 1995, due primarily to increased scheduling
efficiencies and to reduced per-aircraft insurance costs .
Maintenance expenses include all expenses related to the
upkeep of the aircraft, including maintenance, labor, parts,
supplies and maintenance reserves. The costs of C Checks and
engine overhauls not otherwise covered by maintenance reserves,
are capitalized as they are incurred and amortized over the life
of the maintenance event. In addition, in January 1995 the
Company contracted with KLM for a significant part of its regular
maintenance operations and support on a fixed cost per flight
hour basis and in April 1995 with HAECO, another contract
maintenance operator, at fixed rates to undertake conversions
and/or D Checks on ten Boeing 747 aircraft over the next 24
months, in order to reduce its maintenance expense on a per
aircraft basis in future periods.
Maintenance expense increased to $14.7 million in the first
quarter of 1996 from $6.3 million in the same period of 1995, or
approximately 133%, as a direct result of the increase in the
Company's average fleet size. On a block hour basis, maintenance
expense increased by 23% during the first quarter of 1996,
primarily due to parts support requirements associated with
scheduled and unscheduled maintenance events. During the first
quarter of 1996, the Company increased and geographically
dispersed its spares inventory in order to mitigate the need to
rely on higher cost sourcing for any unscheduled maintenance
events.
Aircraft and engine rentals include the cost of leasing
aircraft and spare engines, as well as the cost of short-term
engine leases required to replace engines removed from the
Company's aircraft for either scheduled or unscheduled
maintenance and any related short-term replacement aircraft lease
costs.
Aircraft and engine rentals were $5.9 million in the first
quarter of 1996 compared to $6.4 million in the same period of
1995, or a decrease of approximately 8%. While aircraft rentals
were comparable for both quarters, engine rentals decreased due
to the availability of spare engines purchased by the Company in
the latter part of 1995.
Because of the nature of the Company's ACMI contracts with
its airline customers, under which the Company is responsible
only for the ownership cost and maintenance of the aircraft and
for supplying aircraft crews and insurance, the Company's airline
customers bear all other operating expenses, including fuel and
fuel servicing; marketing costs associated with obtaining cargo;
airport cargo handling; landing fees; ground handling; aircraft
push-back and de-icing services; and specific cargo and mail
insurance. As a result, the Company incurs fuel and ground
handling expenses only when it operates on its own behalf, either
in scheduled services it occasionally provides between Hong Kong
and the United States, for ad hoc charters or for ferry flights.
Fuel expenses for the Company's non-ACMI contract services
include both the direct cost of aircraft fuel as well as the cost
of delivering fuel into the aircraft. Ground handling expenses
for non-ACMI contract service include the costs associated with
servicing the Company's aircraft at the various airports to which
it operates as well as other direct flight related costs.
Fuel and ground handling costs were $1.6 million for the
first quarter of 1996, approximately remaining the same level as
for the first quarter of 1995. The Company experienced a 25%
decrease in scheduled service, charter and non-revenue hours
flown. Fuel and ground handling costs did not decrease
proportionately, however, due to higher fuel costs, variability
in specific location costs with respect to ground handling and
additional fixed costs associated with a larger aircraft fleet.
Depreciation and amortization expense includes depreciation
on aircraft, spare parts and ground equipment, and the
amortization of capitalized major aircraft maintenance and engine
overhauls.
Depreciation and amortization expense increased to $4.9
million in the first quarter of 1996 from $2.3 million in the
same period of 1995, or approximately 113%. This increase
reflects the increase in owned aircraft and engines for the
first quarter of 1996 over the same period in 1995.
Other operating expenses include salaries, wages and
benefits for all employees other than pilots; accounting and
legal expenses; supplies; travel and meal expenses, excluding
those of the aircraft crews; commissions; and other miscellaneous
operating costs. Other operating costs increased to $6.4 million
in the first quarter of 1996 from $3.2 million in the same period
of 1995, or approximately 100%, reflecting the increase in the
Company's operations. On a block hour basis, these expenses
increased to $572 per hour in the first quarter of 1996 from $550
per hour in the same period of 1995, or 4%. This increase in
costs was due to increases in operational management necessary to
oversee the Company's increased business activity.
Other Income (Expense)
Other income (expense) consists of interest income and
interest expense. Interest income increased to $1.1. million for
the first quarter of 1996 from $0.1 million in the same period of
1995 due primarily to funds retained from the Initial Public
Offering ("IPO") in August 1995. Interest expense increased to
$6.9 million in the first quarter of 1996 from $3.5 million in
the same period of 1995, or approximately 97%, resulting from the
increase in financed flight equipment between these periods.
Income Taxes
The provision for income taxes for the first quarter of 1996
of $3.5 million reflects a 36% effective tax rate. The Company
has net operating loss carryforwards which will defer
substantially all of this provision to future periods. Due to
the nature of the Company's international operations, state and
local income taxes are negligible.
Seasonality
The cargo operations of the Company's airline customers are
seasonal in nature, with peak activity occurring traditionally in
the second half of the year, and with a significant decline
occurring in the first quarter. This decline in cargo activity
is largely due to the decrease in shipping that occurs following
the December and January holiday seasons associated with the
celebration of Christmas and the Chinese New Year. Certain of
the Company's customers have, in the past, elected to use that
period of the year to exercise their contractual options to
cancel a limited number (generally not more than 5%) of cargo
flights with the Company, and are expected to continue to do so
in the future. As a result, the Company's revenues typically
decline in the first quarter of the year as its minimum
contractual aircraft utilization level temporarily decreases.
The company seeks to schedule, to the extent possible, its major
aircraft maintenance activities during this period to take
advantage of any unutilized aircraft time.
Liquidity and Capital Resources
At March 31, 1996, the Company had cash and cash equivalents
of approximately $65.0 million and working capital of
approximately $48.9 million. During the first quarter of 1996,
cash and cash equivalents decreased $32.0 million, principally
reflecting investments in flight equipment of $63.7 million and
principal reductions of indebtedness of $4.9 million, partially
offset by cash provided from operations of $9.3 million, proceeds
from equipment financings of $24.8 million and Common Stock
issuances of $3.0 million.
The Company had previously contracted to purchase three
Boeing 747-200 aircraft at an average cost of approximately $36
million each (including the cost of modifying the aircraft for
long-haul cargo service), one of which was delivered to the
Company in January 1996 and the other two of which were delivered
to the Company during March 1996. The Company utilized the
proceeds from an Equipment Notes offering consummated in November
1995, together with funds from the Company, to pay the purchase
price, including modification cost, of these three aircraft.
In January 1996, the Company entered into a contract with
Langdon Asset Management, Inc. for the purpose of acquiring six
Boeing 747-200 passenger aircraft (the "Thai Aircraft") and
certain spare engines and spare parts from Thai Airways
International Public Company Limited ("Thai Airways"). The Thai
Aircraft will be converted into freighter configuration by Boeing
and delivered to the Company for placement into service between
the fourth quarter of 1996 and year-end 1997. The average cost
of the six aircraft, including conversion costs, is expected to
approximate $40 million. The Company has placed a nonrefundable
deposit of $3 million with Thai Airways with respect to its
acquisition of the Thai Aircraft. As discussed below, the
Company has obtained commitments for financing with respect to
two of the Thai Aircraft.
In March 1996, the Company entered into an agreement with
Federal Express Corporation ("Federal Express") to lease five
747-200 freighter aircraft (the "Federal Express Aircraft"), plus
spare engines. The first Federal Express Aircraft was delivered
to the Company in March 1996, and the remaining four Federal
Express Aircraft will be delivered to the Company over a four-
month period beginning in June 1996 and each will have a lease
term ending in January 1998. The lease rate will be $450,000 per
month per aircraft. In addition, the Company has agreed to
purchase on or before October 1, 1996 a Boeing 747 simulator from
Federal Express for a purchase price of $2.1 million. The Company
is also negotiating the possible purchase of certain Boeing 747-
200 spare parts from Federal Express. In addition, the Company is
in preliminary discussions for the acquisition of additional
aircraft.
On March 28, 1996, the Company filed a registration
statement with the Securities and Exchange Commission for the
purpose of offering 2,000,000 shares of its Common Stock and
1,000,000 shares of its Common Stock held by the Selling
Stockholder, Michael A. Chowdry. The registration statement was
amended on May 3 and May 6, 1996 for the purpose of updating the
statement for events occurring through April 25, 1996. In
addition, the number of shares offered was increased to 1,429,565
with respect to the Selling Stockholder.
The offering was consummated on May 10, 1996 at an offering
price of $45.75 per share, for aggregate net proceeds to the
Company of $99.8 million, including exercise in full of the
underwriters' over-allotment option, and after deducting the
aggregate underwriting discounts and the estimated expenses of
the Offering. All net proceeds will be retained for working
capital and other general corporate purposes including, but not
limited to, the acquisition and conversion of aircraft. Prior to
the use of the net proceeds of the Offering, such proceeds will
be placed in interest-bearing bank accounts or invested in short-
term United States government securities or other short-term
investment grade securities. The Company will not receive any
proceeds from the sale of shares of its Common Stock by the
Selling Stockholder.
Due to the contractual nature of the Company's business, the
Company's management does not consider its operations to be
highly working capital-intensive in nature. Because most of the
non-ACMI costs normally associated with operations are borne by
and directly paid for by the Company's customers, the Company
does not incur significant costs in advance of the receipt of
corresponding revenues. Moreover, ACMI costs, which are the
responsibility of the Company, are generally incurred on a
regular, periodic basis ranging from flight hours to months.
These costs are largely matched by revenue receipts, as the
Company's contracts require regular payments from its customers,
based upon current flight activity, generally every two to four
weeks. As a result, while the Company may in the future seek to
obtain a working capital facility, it currently has no such
facility in place and does not foresee any operating necessity
for a working capital facility.
The Company has obtained financing from a single lender for
approximately 80% of the total acquisition and conversion cost of
the first Thai Aircraft, pursuant to which it initially borrowed
approximately $21.2 million in the first quarter of 1996. In
addition, in May 1996, the Company finalized discussions with a
lender with respect to a $175 million revolving credit facility
for the acquisition and conversion of flight equipment, including
any or all of the remaining five Thai Aircraft. The facility
will have a two-year revolving period with a subsequent two-year
term loan period in the event that permanent financing has not
been obtained for any flight equipment financed under the
facility. On May 8, 1996, the Company closed upon and drew down
its initial borrowing pursuant to the facility in an amount of
approximately $21.4 million with respect to the purchase of the
second Thai Aircraft and a related spare engine.
The Company believes that the cash flow generated from its
operations and the proceeds from the May 1996 public offering of
its Common Stock, coupled with the availability of the above
referenced revolving credit facility, will be sufficient to meet
its normal ongoing liquidity needs for 1996, including the
acquisition of the remaining Thai Aircraft.
ATLAS AIR, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
Exhibit 27 - Financial Data Schedule
b. Reports filed on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
ATLAS AIR, INC.
(Registrant)
Date: May 10, 1996 By: /s/ Richard H. Shuyler
Richard H. Shuyler
Senior Vice President - Finance
Chief Financial Officer and
Treasurer (Principal Accounting
Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 64960
<SECURITIES> 0
<RECEIVABLES> 33778
<ALLOWANCES> 624
<INVENTORY> 0
<CURRENT-ASSETS> 98114
<PP&E> 416638
<DEPRECIATION> 38022
<TOTAL-ASSETS> 488753
<CURRENT-LIABILITIES> 49214
<BONDS> 0
0
0
<COMMON> 199
<OTHER-SE> 77530
<TOTAL-LIABILITY-AND-EQUITY> 488753
<SALES> 56801
<TOTAL-REVENUES> 58649
<CGS> 0
<TOTAL-COSTS> 43239
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5717
<INCOME-PRETAX> 9693
<INCOME-TAX> 3490
<INCOME-CONTINUING> 6203
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6203
<EPS-PRIMARY> 0.32
<EPS-DILUTED> 0
</TABLE>
