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http://sec.gov/Archives/edgar/data/894081/000119312510058468/0001193125-10-058468-index.htm

 

The Registrant was unable to complete and file its Annual Report on Form 10-K for the year ended December 31, 2009 within the prescribed time because it needs additional time to evaluate the appropriateness and adequacy of its financial statements and other disclosures with respect to compensation and related accruals associated with the wind-down of the operations of Registrant’s subsidiary, ABX Air, Inc. (“ABX”), under that certain ACMI Service Agreement between DHL Network Operations (USA), Inc. and ABX, dated August 15, 2003, that certain expired Hub and Line-haul Services Agreement between DHL Express (USA), Inc. and ABX, dated August 15, 2003, and that certain Severance and Retention Agreement between DPWN Holdings (USA), Inc. and ABX, dated August 15, 2008.

 

Cheers

 

Michael

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ATSG is one of Pabrai's old holdings. Its similar to SFK Pulp. Seemed like an easy buy at $6 due to a take over offer from a DHL affiliate at $7.50 or so. They rejected the offer and bought another small package carrier for cash to diversify from DHL. DHL promptly cut the contract and announced a pull out of the US Market and a deal with Fedex to carry the packages from International shipments.

 

ATSG had 80% of their business with DHL and went down to .16 cents. The deal with Fedex feel through and DHL and ATSG are working out a few things, but not much is finalized. ATSG has the largest fleet of 767 planes and if they can find business for them (DHL or other companies) they should be worth north of $5. Its hard to tell, the balance sheet changes significantly quarterly due to layoffs and payoffs from DHL and its tough to model the cash flow for the planes as they come off of contract. We need 1 - 2 more quarters (with additional color on profitability for the planes / customers) or an announced deal from DHL to make this one a slam dunk.

 

This is my largest holding due to me buying at .16 cents after a wash sale for tax purposes. My true basis is probably around $2, I added an insignificant amount today and thought the coaster rides were largely over.

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I believe DHL was trying to cut a deal with UPS, not FedEx.

No one who followed what was happening with DHL/UPS had any hope that a deal would be struck.

 

http://www.abxair.com/atsg/pr2008-06-26.html

 

When they were 'working together' (I use the term loosely) DHL gave ATSG incentives, then when ATSG exceeded the goals DHL would try to screw them over with technicalities. In the end, ATSG extracted a lot of money from DHL. I say good riddance to DHL.

 

It seems to me that this is an accounting issue. Joe Hete is a great manager and will pull ATSG through but he's not been one to give out information unnecessarily.

 

 

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Sorry about that you are right it was UPS.

 

Even still I hope a dry / wet lease with DHL goes through. It would give some visibility on cash flows and a straight forward lease doesnt leave alot of wiggle room for disputes. Also I believe the stock price would double back to $5 or $6 which would be great for my portfolio. ATSG could diversify its customer base as it converts old aircraft over to the freighter config.

 

DHL has to find someone to provide the lift and per ATSG, there arent really any other options in terms of 767s. The only issue is its been 7 months and still no deal. Something has to give pretty soon.

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Cha Ching.

 

Still working through the details, but any long term holders will finally receive a return on capital. This one of my larger holdings so definitely good news.

 

http://www.businesswire.com/portal/site/home/permalink/?ndmViewId=news_view&newsId=20100330006893&newsLang=en

 

I have glanced at the deal and the details look very good. It looks like the balance sheet is firmed up with the items below and the transformation of ATSG to a cash cow leasing company is closer to being complete. Hopefully the call will provide us with details relating to profitability.

 

#  Remaining $31.0 million DHL Note to be amortized on a monthly basis so as to be extinguished at the end of the initial five year term, with no cash payment requirement from ABX Air

 

Significant Items Resolved through Termination Agreement:

 

    * DHL agreed to pay ABX Air $31.1 million in settlement of open DC-9 and Boeing 767 freighter aircraft put values

 

    * Pursuant to a Letter Agreement between ABX Air and DHL signed in March 2009, ABX agreed to pay $15.0 million toward the outstanding DHL Note balance, thereby reducing the remaining balance outstanding to $31.0 million

 

    * DHL agreed to pay ABX Air an additional $11.2 million for reimbursement of accrued vacation paid out to ABX employees adversely impacted by DHL’s restructuring in the United States. ABX Air agreed to seek no additional reimbursement

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Cha Ching.

 

I didn't have the guts to buy any more on the dip since 1) this is my largest position (bought in the penny-stock days) and 2) it would have required too much leverage.  But I definitely smiled when I read this news yesterday. :)

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I guess great minds think alike. Its a slight speculation without the details but I am buying a big chunk around $3.05. I thought it would have went higher today and it just downed on me to buy more. Should have bought in the morning at around $2.75. Seems like a great way to juice the returns.

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The call was interesting. Management believes the stock is undervalued and analyst were trying to figure out how to value the company.

 

ATSG is now by far my largest holding, but we will not really have a great idea of what the numbers look like until Q2 under the new agreement. Even then they will continue to go up as more plans are modified.

 

Here is an earlier presentation given by ATSG. Which was referenced on the call. Management believes you have all the numbers to work out cash flow and it looks like everything is there. You can take Q4 numbers for all the other units and annualize them and model out the numbers from the new agreement. Either way ATSG will be generating tons of excess cash starting in 2011.

 

http://yahoo.brand.edgar-online.com/displayfilinginfo.aspx?FilingID=6651535-4935-67730&type=sect&dcn=0001193125-09-128378

 

Here is my quick and dirty attempt at valuation.

 

Total Fleet 36 Monthly Income Annual Income

DHL Fleet        13 $2,574,000        $30,888,000     - Only 767 includes 12% discount referenced on the call $250k per plane

Non DHL Fleet 23 $4,554,000       $54,648,000       - Only 767 no Discount included $250k per plane

 

Total CF From CAM 767 Leases, Doesn’t Include other Segments $85,536,000

Multiple on this Lease Based Cash Flow x8, Low Costs and Repeatable $598,752,000

 

Assumes All Costs and Debt Service are Covered by Other Segments and Planes. This is a simply valuation based on leasing the 36 767s that they own. They have other assets, acmi agreement, and other segments which are profitable. This is purely based on CAM leasing 767s and everything else breaking even / covering maintenance capex.

 

I think ATSG still has legs and is worth at least $500 million if not more and this is on an extremely conservative basis. Q2 release will be the one to watch. 2011 should be great also once all the capex spending is behind us.

 

------

 

If we take 2009 EBITDA and subtract out a maintenance capex of $30 million we get = $125.8 if we assume that this number will go up and that the growth will carry the debt and put a multiply of 8 on the number we get a market value of = $1.06 billion vs a market cap of $250 million. Now we do have taxes of 40% assuming no additional growth payable in 3 years which decreases this number, but its a start and shows ATSG is still fairly cheap. 

 

 

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Guest kawikaho

Congrats, you guys.  When the stock plunged 25% a week or so ago, I was tempted to buy.  You guys rock for being able to hold on after that.  Nerves of steel.

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Myth, I read through the 10-K and am waiting for them to put the conference call online so that I can see if there are any interesting tidbits of info in there.

 

I definitely agree that ATSG is still cheap at this point.  By my own quick and dirty calculations, I estimate that they will have a minimum of $65M after-tax owner earnings going forward.  Since I'm not taking into account that they won't be paying cash taxes for 3 years, that their 767s undergoing modification will be put into service, and that their ACMI services will be more profitable going forward, I think this is a conservative estimation of owner earnings.  Even after adjusting the market price by taking into account long term debt, we're talking about a double digit owner earnings yield. 

 

ATSG is now my largest position after the big run up.  I'm tempted to take profits, but I really like the business model going forward and the way that management has handled all the adversity of the past couple of years.  I think we may have a great business in our pockets here. 

 

Congrats to everyone who participated! 

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Myth, I read through the 10-K and am waiting for them to put the conference call online so that I can see if there are any interesting tidbits of info in there.

 

They already have it up.  Just go to the "Live Webcast" link and you can listen to it.  At least I did that after the call..

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TX this makes up a significant amount of my portfolio. Between it and FFH Leaps all other holdings are dwarfed. I think its best to hold though. Per the conference call they will be telling the story to get the stock price up.

 

We have the annual meeting and they will probably attend a few investment conferences as well. I am guessing they give some sort of guidance and announce future contracts as they come. At the last shareholders meeting they gave margin info, and I am hoping they will do more over the next few months. I see this hitting $8 to $10 by year end barring serious bad news.

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