SEGMENT AND REVENUE INFORMATION

The Company operates in three reportable segments. The CAM segment consists of the Company's aircraft leasing operations and its segment earnings include an allocation of interest expense. The ACMI Services segment consists of the Company's airline operations, including CMI agreements as well as ACMI and charter service agreements that the Company has with its customers. The MRO Services segment provides airframe maintenance services, aircraft modifications and other maintenance services. The MRO Services became reportable during 2018 due to the size of its revenues. Prior periods presented below have been prepared by separating MRO Services from "All other" for comparative purposes. The Company's ground services and other activities, which include the mail and package sorting services, maintenance services for ground equipment, facilities and material handling equipment, the sales of aviation fuel and other services, are not large enough to constitute reportable segments and are combined in All other. Inter-segment revenues are valued at arms-length market rates. Cash and cash equivalents are reflected in Assets - All other below.

The Company's segment information for revenue from continuing operations is presented below (in thousands):



	Three Months Ending						Six Months Ending
	June 30,						June 30,
	2018			2017			2018			2017
Total revenues:
CAM	$	54,377		$	49,530		$	106,753		$	97,508
ACMI Services	119,606			144,499			238,980			289,448
MRO Services	45,794			66,336			98,517			106,674
All other	19,730			50,172			39,013			99,040
Eliminate inter-segment revenues	(35,900		)	(57,326		)	(76,616		)	(101,542		)
Total	$	203,607		$	253,211		$	406,647		$	491,128
Customer revenues:
CAM	$	38,016		$	32,380		$	73,903		$	63,162
ACMI Services	119,589			144,499			238,963			289,448
MRO Services	29,069			31,159			60,009			56,576
All other	16,933			45,173			33,772			81,942
Total	$	203,607		$	253,211		$	406,647		$	491,128

The Company adopted Topic 606 for revenue recognition using a modified retrospective approach, under which financial statements are prepared under the revised guidance for the year of adoption, but not for prior years. The effects of Topic 606 on the Company's customer revenues are summarized below:



	For the three months ending							For the six months ending
	June 30, 2018							June 30, 2018
	Revenue							Revenue
	As Reported		Without Topic 606		Increase (decrease)			As Reported		Without Topic 606		Increase (decrease)
ACMI Services	$	119,589	$	167,724	$	(48,135	)	$	238,963	$	336,272	$	(97,309	)
MRO Services	29,069		28,549		520			60,009		54,918		5,091
Other (ground services)	16,933		62,682		(45,749		)	33,772		130,868		(97,096		)

ACMI Services revenues are generated from airline service agreements and are typically based on hours flown, the amount of aircraft operated and crew resources provided during a month. ACMI Services revenues are recognized over time as flight hours are performed for the customer. Certain agreements include provisions for incentive payments based upon on-time reliability. These incentives are measured on a monthly basis and recorded to revenue in the corresponding month earned. Under CMI agreements, the Company's airlines have an obligation to provide integrated services including flight crews, aircraft maintenance and insurance for the customer's cargo network. Under ACMI agreements, the Company's airlines are also obligated to provide aircraft. Under CMI and ACMI agreements, customers are generally responsible for aviation fuel, landing fees, navigation fees and certain other flight expenses. When functioning as the customers agent for arranging such services, the Company records amounts reimbursable from the customer as revenues net of the related expenses as the costs are incurred. Under charter agreements the Company's airline is obligated to provide full services for one or more flights having specific origins and destinations. Under charter agreements, in which the Company's airline is responsible for fuel, airport fees and all flight services, the related costs are recorded in operating expenses. ACMI Services are invoiced monthly or more frequently.

MRO Services revenues for customer contracts for airframe maintenance and aircraft modification services that do not have an alternative use and for which the Company has an enforceable right to payment are generally recognized over time based on the percentage of costs completed. Other MRO Services revenues for aircraft part sales, component repairs and line service are recognized at a point in time typically when the parts are delivered to the customer and the the services are completed. For airframe maintenance, aircraft modifications and aircraft component repairs, contracts include assurance warranties that are not sold separately.

Effective January 1, 2018 the Company records revenues and estimated earnings for its airframe maintenance and aircraft modification contracts using the percentage-of-completion cost-to-cost method. For such services, the Company estimates the earnings on a contract as the difference between the expected revenue and estimated costs to complete a contract and recognizes revenues and earnings based on the proportion of costs incurred compared to the total estimated costs. The Company's estimates consider the timing and extent of the services, including the amount and rates of labor, materials and other resources required to perform the services. The Company recognizes adjustments in estimated earnings on a contract under the cumulative catch-up method in which the impact of the adjustment on estimated earnings of a contract is recognized in the period the adjustment is identified.

The Company's external customer revenues for providing mail and package sorting services and related equipment maintenance for the three and six month periods ending June 30, 2018 were $16.2 million and $32.3 million, respectively, compared to $44.7 million and $80.9 million for the corresponding periods in 2017. During the three and six month periods ended June 30, 2018, the Company netted $45.7 million and $97.1 million of customer reimbursable revenues against the related expenses when functioning as the customers agent for arranging ground services, respectively. These revenues are reported in All other. The Company's external customer revenues from providing mail and package sorting services are recognized as the services are performed for the customer over time. Revenues from related equipment maintenance services are recognized over time and at a point in time depending on the nature of the customer contracts.

Revenue is not recognized until collectibility of customer payment is probable. For customers that are not a governmental agency or department, the Company generally receives partial payment in advance of services, otherwise customer balances are typically paid within 30 to 60 days of service. For the three and six month periods ended June 30, 2018, the Company recognized $3.4 million and $8.0 million of non lease revenue that was reported in deferred revenue at the beginning of the respective period.

CAM's aircraft lease revenues are recognized as operating lease revenues on a straight-line basis over the term of the applicable lease agreements. Customer payments for leased aircraft and equipment are typically paid monthly in advance.

The Company's other segment information from continuing operations is presented below (in thousands):



	Three Months Ending						Six Months Ending
	June 30,						June 30,
	2018			2017			2018			2017
Depreciation and amortization expense:
CAM	$	30,540		$	26,253		$	59,465		$	50,554
ACMI Services	10,327			10,491			20,552			21,563
MRO Services	830			685			1,680			1,359
All other	(77		)	352			(73		)	747
Total	$	41,620		$	37,781		$	81,624		$	74,223
Segment earnings (loss):
CAM	$	15,394		$	12,795		$	30,858		$	26,125
ACMI Services	991			258			4,932			(3,276		)
MRO Services	1,321			11,103			5,783			14,291
All other	2,749			1,400			5,330			3,863
Inter-segment earnings eliminated	(1,031		)	(5,958		)	(4,356		)	(6,820		)
Net unallocated interest expense	(838		)	(216		)	(1,657		)	(387		)
Net gain (loss) on financial instruments	11,697			(67,649		)	10,812			(65,780		)
Other non-service components of retiree benefit costs, net	2,045			(177		)	4,090			(354		)
Loss from non-consolidated affiliate	(2,417		)	—			(4,953		)	—
Pre-tax earnings from continuing operations	$	29,911		$	(48,444	)	$	50,839		$	(32,338	)

The Company's assets are presented below by segment (in thousands):



	June 30		December 31
	2018		2017
Assets:
CAM	$	1,214,986	$	1,192,890
ACMI Services	190,309		189,379
MRO Services	99,129		87,177
All other	13,050		79,398
Total	$	1,517,474	$	1,548,844

Interest expense allocated to CAM was $4.5 million and $9.0 million for the three and six month periods ending June 30, 2018, respectively, compared to $3.5 million and $6.9 million for the corresponding periods of 2017.