EX-99 2 dex99.htm PRESS RELEASE Press Release

Exhibit 99

 

ABX AIR, INC. REPORTS SECOND QUARTER REVENUES AND EARNINGS

 

WILMINGTON, OH—August 9, 2005—ABX Air, Inc., (NASDAQ: ABXA) reported today improved revenues and earnings for the quarter ended June 30, 2005. Highlights of those results as compared with the second quarter of 2004 include:

 

    Revenues up 27.9% to $351.2 million;

 

    Net earnings up 15.9% to $6.8 million, or $0.12 per diluted share;

 

    Revenues from customers other than DHL Express (USA), Inc. (“DHL”) grew 84.3% to $7.0 million; Earnings from non-DHL sources grew to $1.7 million, a 55.2% increase;

 

    Packages handled increased 27.2% to 157.3 million;

 

“We are encouraged to report continued year-over-year improvement in our revenues and net earnings,” said President and CEO Joe Hete. “While our primary focus remains on serving our largest customer, particularly as its main hub consolidation nears, we are continuing to make steady progress at diversifying our revenue stream,” stated Hete.

 

For the first six months of 2005, ABX Air’s net earnings were $13.8 million, or $0.24 per diluted share, on revenues of $697.8 million. Net earnings improved from the first six months of 2004, when ABX Air earned $11.8 million, or $0.20 per diluted share, on revenues of $551.3 million. ABX Air’s net earnings from its two commercial agreements with DHL were $10.2 million during the first six months of 2005 and $9.5 million in the first six months of 2004.

 

Results Associated with the DHL Agreements

 

ABX Air has two commercial agreements with DHL: the aircraft, crew, maintenance and insurance agreement (“ACMI agreement”) and a hub and line-haul services agreement (“Hub Services agreement”). Under each agreement, ABX Air earns a base mark-up of 1.75% on eligible costs and can earn incremental mark-up for meeting certain quarterly cost-related goals as well as annual cost-related and service goals. Any mark-up earned from attainment of the annual cost-related and service goals is recognized in the fourth quarter.

 

ABX Air’s second quarter 2005 net earnings of $5.1 million from the two contracts included $4.6 million from the base mark-up and $0.5 million, or 39.4% of the maximum, cost-related incremental mark-up under the two agreements. Incremental mark-up from the ACMI agreement totaled $0.4 million, or 67.5% of the maximum quarterly mark-up. Incremental mark-up from the Hub Services agreement totaled $0.1 million, or 15.4% of the maximum quarterly mark-up.

 

The $4.7 million earned during the second quarter of 2004 from the two DHL agreements included $3.7 million from the base mark-up and $1.0 million, or 87.6% of the maximum, from attainment of cost-related incremental mark-up. Incremental mark-up from the ACMI agreement totaled $0.5 million, or 85.6% of the maximum quarterly mark-up. Incremental mark-up from the Hub Services agreement totaled $0.5 million, or 90.1% of the maximum quarterly mark-up.

 

The factors contributing to the incremental mark-up decrease under the Hub Services agreement during the second quarter of 2005 as compared to the prior year include the impact of additional labor costs required to process higher than budgeted package volumes and a greater proportion of box shipments, which require more labor to process, as compared to smaller letter shipments. In addition, DHL requested that ABX perform additional package handling processes for which the associated labor hours were greater than budgeted. DHL packages handled during the second quarter of 2005 totaled 157.3 million, a 27.2% increase compared to the second quarter 2004 volume.


Results Associated with Sources other than DHL

 

Non-DHL revenues grew 84.3% to $7.0 million in the second quarter of 2005, compared with $3.8 million in the second quarter of 2004. Earnings from non-DHL sources increased to $1.7 million, up 55.2% as compared to the second quarter of 2004 non-DHL earnings of $1.1 million. The increase in non-DHL revenues was primarily the result of an increase in the level of aircraft maintenance services and parts sales, airport-to-airport space available cargo space, as well as revenues associated with ABX Air’s operation of a U.S. postal hub. Revenues from these sources increased by $2.7 million as compared to the second quarter of 2004, while the earnings from these sources accounted for $0.8 million of the increase in non-DHL earnings as compared to 2004.

 

Earnings from non-DHL ACMI flights decreased by $0.5 million as compared to the second quarter of 2004, due primarily to incurring depreciation cost on two Boeing 767 aircraft that were recently assigned to non-DHL ACMI operations. These two aircraft experienced low utilization during the start-up period. The reduction in non-DHL ACMI earnings was offset by interest income earned on invested cash balances. “We continue to make strides in growing our non-DHL business. In mid-May, we added a second Boeing 767 to our non-DHL ACMI business, and expect the utilization of that aircraft to make a positive contribution to our non-DHL ACMI earnings during the balance of the year,” stated Hete.

 

Other Items/Outlook

 

As disclosed by the Company today in an 8-K filing, ABX Air and DHL have agreed to amend the Hub Services agreement to extend the initial term of the agreement by one year in exchange for temporarily placing more of the Company’s revenue potential under a cost-related incentive. The amendment temporarily reduces the base mark-up under the agreement from 1.75% to 1.25% during the last six months of 2005. The maximum incremental mark-up that ABX Air can earn from cost incurred during the third and fourth quarters of 2005 from its quarterly cost-related incentives under the agreement was temporarily increased from approximately 0.54% to 1.04%. In consideration, the initial term of the agreement was extended for an additional year and will not be subject to annual renewals until August 15, 2007. In 2006, the base mark-up will revert to the previous level of 1.75% and the maximum incremental mark-up from the quarterly cost-related incentive will revert to the previous level of approximately 0.54%.

 

As previously reported by the Company, DHL intends to reduce the number of aircraft that ABX Air operates on its behalf by the end of 2005, at which time DHL will have completed the consolidation at the main sort hub in Wilmington, Ohio.

 

ABX Air will host a conference call to review its financial results for the second quarter of 2005 on Wednesday, August 10, 2005, at 10am Eastern Time. Participants should dial (866) 770-7051 and international participants should dial (617) 213-8064 ten minutes before the scheduled start of the call and ask for conference ID #82574149. The call will also be webcast live (listen-only mode) via either www.abxair.com, or via www.earnings.com for individual investors and www.streetevents.com for institutional investors.

 

ABX Air, Inc. is a cargo airline with a fleet of 115 in-service aircraft that operates out of Wilmington, Ohio, and 18 hubs throughout the United States. ABX Air became an independent public company effective August 16, 2003, as a result of the separation from its former parent company, Airborne, Inc., which was acquired by DHL Worldwide Express B. V. In addition to providing airlift capacity and sort center staffing to DHL Express (USA), Inc., ABX Air provides charter and maintenance services to a diverse group of customers. With over 9,000 employees, ABX Air is the largest employer in a several county area in southwestern Ohio.


Except for historical information contained herein, the matters discussed in this release contain forward-looking statements that involve risks and uncertainties. ABX Air’s actual results may differ materially from the results discussed in the forward-looking statements. There are a number of important factors that could cause ABX Air’s actual results to differ materially from those indicated by such forward-looking statements. These factors include but are not limited to a significant reduction in the scope of services under the commercial agreements with DHL, maintaining cost and service level performance, the ability to generate revenues from sources other than DHL and other factors that are contained from time to time in ABX Air’s filings with the U.S. Securities and Exchange Commission, including ABX Air’s 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 ABX Air’s forward-looking statements. These forward-looking statements were based on information, plans and estimates as of the date of this release. ABX Air undertakes no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.


ABX AIR, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

 

    

Three Months Ended

June 30


  

Six Months Ended

June 30


     2005

   2004

   2005

   2004

REVENUES

   $ 351,237    $ 274,654    $ 697,831    $ 551,340

OPERATING EXPENSES:

                           

Salaries, wages and benefits

     143,746      119,326      286,206      239,754

Purchased line-haul

     77,273      51,267      151,108      99,223

Fuel

     63,549      43,049      122,266      85,427

Maintenance, materials and repairs

     26,243      26,911      54,016      54,395

Depreciation and amortization

     10,252      9,262      19,884      18,358

Landing and ramp

     4,490      4,116      14,256      11,983

Rent

     1,865      1,577      3,964      3,183

Other operating expenses

     14,748      11,363      27,885      23,047
    

  

  

  

       342,166      266,871      679,585      535,370
    

  

  

  

EARNINGS FROM OPERATIONS

     9,071      7,783      18,246      15,970

INTEREST EXPENSE, NET OF INTEREST

                           

INCOME

     2,316      1,957      4,408      4,164
    

  

  

  

EARNINGS BEFORE INCOME TAXES

     6,755      5,826      13,838      11,806

INCOME TAX EXPENSE

     —        —        —        —  
    

  

  

  

NET EARNINGS

   $ 6,755    $ 5,826    $ 13,838    $ 11,806
    

  

  

  

EARNINGS PER SHARE:

                           

Basic earnings per share

   $ 0.12    $ 0.10    $ 0.24    $ 0.20
    

  

  

  

Diluted earnings per share

   $ 0.12    $ 0.10    $ 0.24    $ 0.20
    

  

  

  

WEIGHTED AVERAGE SHARES:

                           

Basic

     58,270      58,270      58,270      58,270
    

  

  

  

Diluted

     58,454      58,270      58,454      58,270
    

  

  

  


ABX AIR, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

(In thousands)

 

     June 30,
2005


   December 31,
2004


ASSETS:

             

Cash and cash equivalents

   $ 82,099    $ 38,749

Accounts receivable, net

     24,655      54,677

Other current assets

     18,726      17,595
    

  

Total Current Assets

     125,480      111,021

Property and equipment, net

     349,188      351,646

Other assets

     10,029      10,256
    

  

Total Assets

   $ 484,697    $ 472,923
    

  

LIABILITIES AND STOCKHOLDERS’ EQUITY:

             

Current Liabilities

   $ 136,059    $ 142,569

Long-term Obligations

     246,800      242,405

Stockholders’ Equity

     101,838      87,949
    

  

Total Liabilities and Stockholders’ Equity

   $ 484,697    $ 472,923
    

  


ABX AIR, INC.

EARNINGS SUMMARY

(In thousands)

 

    

Three Months Ended

June 30


  

Six Months Ended

June 30


     2005

   2004

   2005

   2004

REVENUES

                           

DHL Contracts

                           

ACMI

                           

Base mark-up

   $ 121,495    $ 118,463    $ 244,193    $ 238,532

Incremental mark-up

     435      538      996      1,003
    

  

  

  

Total ACMI

     121,930      119,001      245,189      239,535

Hub Services

                           

Base mark-up

     142,238      98,951      279,118      195,683

Incremental mark-up

     116      473      196      989
    

  

  

  

Total Hub Services

     142,354      99,424      279,314      196,672

Other Reimbursable

     79,933      52,421      159,888      107,895
    

  

  

  

Total-DHL

     344,217      270,846      684,391      544,102

Non-DHL

     7,020      3,808      13,440      7,238
    

  

  

  

Total Revenues

     351,237      274,654      697,831      551,340

EXPENSES

                           

DHL Contracts

                           

ACMI

     119,405      116,426      239,993      234,430

Hub services

     139,792      97,248      274,318      192,317

Other Reimbursable

     79,933      52,421      159,888      107,895
    

  

  

  

Total DHL

     339,130      266,095      674,199      534,642

Non-DHL

     5,880      2,733      10,649      4,892
    

  

  

  

Total Expenses

     345,010      268,828      684,848      539,534

EARNINGS

                           

DHL Contracts

     5,087      4,751      10,192      9,460

Non-DHL

     1,140      1,075      2,791      2,346

Interest Income

     528      —        855      —  
    

  

  

  

Total Earnings

   $ 6,755    $ 5,826    $ 13,838    $ 11,806
    

  

  

  

 

Note: The results above for customers other than DHL do not reflect an allocation of overhead costs. The provisions of the commercial agreements with DHL do not require an allocation of overhead until such time as ABX derives more than 10% of its total revenue from non-DHL sources.