UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): November 14, 2002
Atlas Air Worldwide Holdings, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 0-25732 13-4146982
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
2000 Westchester Avenue, Purchase, New York 10577
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (914) 701-8000
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(Former name or former address, if changed since last report)
Atlas Air, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 0-25732 84-1207329
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
2000 Westchester Avenue, Purchase, New York 10577
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (914) 701-8000
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(Former name or former address, if changed since last report)
This combined Form 8-K is separately filed by Atlas Air Worldwide Holdings, Inc.
and Atlas Air, Inc. Information contained herein relating to any individual
registrant is filed by such registrant on its behalf. No registrant makes any
representation as to information relating to any other registrant.
ITEM 5. Other Events.
INTRODUCTION
Atlas Air Worldwide Holdings, Inc. (the "Company" or "we" or "us" or "our")
announced in its press release dated October 16, 2002, filed as an Exhibit to
its Current Report on Form 8-K filed on October 16, 2002, that it will restate
financial results for fiscal years 2000 and 2001 and, as appropriate, re-audit
prior periods as a result of its determination that adjustments must be made in
certain areas.
We are continuing to conduct a systematic review of our financial records and
accounting policies and practices in consultation with our new auditors, Ernst &
Young LLP ("E&Y"). In addition, we have under way a review of our internal
controls for financial reporting purposes. We will attempt to conclude these
reviews promptly; however, as a result of the re-audit of financial data for the
prior two fiscal years, we anticipate the completion of audited financial
statements for fiscal 2002 and the filing of our Quarterly Report on Form 10-Q
for the third quarter of 2002 to occur in early 2003. Consequently, on November
14, 2002, we filed Form 12b-25 with the Securities and Exchange Commission
("SEC"), notifying the SEC of the reasons why we are unable to file our
Quarterly Report on Form 10-Q for the quarter ended September 30, 2002 on a
timely basis.
This Current Report on Form 8-K contains additional financial disclosure and
certain operating statistics, including discussions about the expected
restatement of our results, liquidity and capital resources and the status of
certain commitments and contingencies. We will file our third quarter 2002 Form
10-Q once we have completed our analyses of our expected restatement described
above. We have not provided any of the exhibits required by Form 10-Q and will
file those items at the time we make such quarterly filing.
The Board of Directors has authorized an Independent Committee (the "Independent
Committee") of the Board to review the facts and circumstances relating to the
re-audit of financial results described in the announcement and to consider and
recommend any changes or additions to our accounting policies, procedures and
controls. The Independent Committee expects to proceed in an expeditious manner
and has retained independent counsel to assist it with the review. We have
informed the staff of the SEC of the Independent Committee's review.
REVIEW OF THIRD QUARTER FINANCIAL STATEMENTS
We cannot provide at this time the full detail on our third-quarter results due
to the expected restatement of financial information covering the years 2000 and
2001 and for the quarters ended March 31, and June 30, 2002. E&Y has informed us
that due to the identification of the adjustments which we believe are required
to be made in our financial statements and the ongoing systematic review by us
and E&Y of our accounting policies and practices, E&Y is not able to complete,
as of the date of this Report, all the procedures necessary to finalize its
review of the financial statements to be included in the September 30, 2002
Report on Form 10-Q required to be filed with the SEC under the federal
securities laws. We anticipate filing the Quarterly Report Form 10-Q for the
quarter ended September 30, 2002 in early 2003.
RESULTS OF OPERATIONS
Until we determine the adjustments required by the restatement, we are not in a
position to determine the impact on the results of operations for the three and
nine months ended September 30, 2002 and 2001.
As part of this Current Report on Form 8-K, we have provided the following
comparative statistical data and analysis of revenue, which are not expected to
be affected by the restatements, for the three months ended September 30, 2002
and 2001.
2002(1) 2001
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ATLAS AIR WORLDWIDE HOLDINGS, INC.
Block Hours: Total 36,939 24,125
ACMI services 15,296 22,822
Hub services 3,453 422
Scheduled service 9,298 --
Charter and other services 8,892 881
Dry Lease hours 2,664 987
2002(1) 2001
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ATLAS AIR, INC.
Block Hours: Total 24,404 24,125
ACMI services (2) 14,581 22,822
Hub services 3,453 422
Charter and other services (3) 6,370 881
Dry Lease hours (4) 4,564 987
POLAR AIR CARGO, INC. (SCHEDULED SERVICE) (5)
Revenue Ton Miles (000's) 320,930 --
Available Ton Miles (000's) 535,216 --
Load Factor 60.0% --
Yield per RTM (cents) 28.63 --
Revenue per ATM (cents) 17.17 --
AIRCRAFT AT END OF PERIOD
Atlas Air, Inc. (6) 39 37
Polar Air Cargo, Inc. (7) 12 --
Total operating aircraft 51 37
(1) 2002 operating statistics include Polar Air Cargo, Inc. (a wholly owned
subsidiary acquired November 1, 2001) whereas 2001 statistics do not.
(2) Wet-leases to Polar were 2% of total Atlas Air, Inc.'s ACMI services
block hours in Q3, 2002 and 0% in Q3, 2001.
(3) Charters to Polar represented 11% of total Atlas Air, Inc. charter
block hours in Q3, 2002.
(4) Dry-leases to Polar were 51% of total Atlas Air, Inc. dry lease block
hours in Q3, 2002 and 0% in Q3, 2001. Dry lease block hours are
excluded from total operated block hours.
(5) Scheduled service statistics are prior to revenue eliminations
resulting from consolidation.
(6) Total Atlas aircraft include one parked aircraft and eight aircraft
that are dry-leased to other carriers (five of which were dry-leased to
Polar) in Q3, 2002 and two parked aircraft in Q3, 2001.
(7) Total Polar aircraft include one parked aircraft and one that was
dry-leased to another carrier. In addition one B747-200 was added under
an operating lease in Q3, 2002. Rents are paid on a per flight hour
basis.
THREE MONTHS ENDED PERCENT
(in millions) 2002 2001 DIFFERENCE VARIANCE
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Operating Revenue:
Contract Services $ 103.1 $ 142.8 $ (39.7) -28%
Charter Services 87.4 4.6 82.8 1800%
Scheduled Service 89.9 -- 89.9 --
Other 10.4 3.3 7.1 215%
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Total Operating Revenue $ 290.8 $ 150.7 $ 140.1 93%
Total operating revenues increased $140.1 million, or 93.0 percent, in the third
quarter of 2002 from the same period last year due in large part to the 2002
inclusion of Polar Air Cargo, Inc.'s ("Polar") revenues. At Atlas Air, revenues
were up $20.9 million, as strong commercial and military charter activity offset
contract service revenue declines.
Contracted revenues were $103.1 million during the third quarter or 35.5 percent
of the total operating revenue for the quarter as compared to $142.8 for the
same period in 2001. ACMI block hours decreased 33% from the same period last
year.
Charter revenues were $87.4 million during the third quarter or 30.1 percent of
the total operating revenue for the quarter as compared to $4.6 million for the
same period in 2001. The increase of $82.8 million is primarily due to increased
charter demand from both commercial and military customers, which are typically
the highest unit revenues we offer. Polar's operation contributed $27.8 million
of military charter revenue and $8.1 million of commercial charter revenue in
the third quarter 2002. Military charters are awarded within 45 days in advance
of flight, making forecasting difficult. There can be no assurance that the US
Government will continue military missions or that commercial demand will remain
at the same levels in the future.
Scheduled service revenues were $89.9 million during the third quarter or 30.9
percent of our total operating revenue. There were no scheduled service revenues
last year since these revenues were derived from Polar's operations which were
acquired on November 1, 2001. The scheduled service traffic (revenue ton-miles)
were 320.9 million on total capacity of 535.2 million available ton-miles. Third
quarter load factor was 60 percent with a 28.63 cent yield (the average rate a
customer pays to ship one ton one mile). Polar's Scheduled Service revenues
for the quarter ended September 30, 2001 are presented, for comparative purposes
only, in the following table:
POLAR AIR CARGO, INC.
THREE MONTHS ENDED PERCENT
2002 2001 DIFFERENCE VARIANCE
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Scheduled Service Revenue (millions) (1) $ 91.9 $ 38.0 $ 53.9 141.8%
Yield (cents) (2) 28.63 22.70 5.93 26.1%
Load Factor 60.0% 60.8% -0.8% -1.3%
Capacity in terms of Available Ton-Miles (millions) 535,216 275,458 259,758 94.3%
(1) 2002 includes approximately $2.0 million of Scheduled Service Revenue from
Atlas Air.
(2) Purchase Block Space Agreement represents 1.63 cents of the 5.93 cent
increase.
OUTLOOK
As disclosed in our October 16, 2002 press release, the Company currently
expects fourth quarter activity to result in a record revenue performance for
both Atlas Air and the Company as a whole. In order to meet the expected heavy
demand in the fourth quarter, the Company has or is in the process of
reactivating all but one of the six aircraft that were parked by Atlas Air at
the end of the second quarter. Since the close of the third quarter, China
Southern airlines announced a new service between China and Europe using a
wet-leased Atlas Air aircraft. China Southern was one of three existing ACMI
contracts, which we had previously indicated were expiring in 2002. Of those
three contracts, one has not renewed, a second, China Southern, has signed a new
ACMI agreement (see above) and the third contract has expired but we continue
our efforts to re-sign. Our discussions with China Southern have resulted in two
additional wet-lease agreements that commence late in the fourth quarter of
2002.
As noted above, the September - December period is traditionally a period of
peak activity in the global cargo market. We expect this to be the case this
year. In addition, disruptions caused by the October 2002 work stoppage at
certain West coast ports, and the continued strong demand in charter activity by
the US military, are having a positive impact on the market for air cargo
carriers. We currently expect that consolidated block hour production during
this period, which does not include dry lease hours, will be in the 45 to 47
thousand range.
In terms of the outlook for the first quarter of 2003, we normally experience a
seasonal reduction in block hour production. However, this trend may be offset,
in part, by continued high levels of charter activity by the US Military and a
continuing disruption caused by a work stoppage or slowdown at certain West
coast ports.
We are currently unable to determine the impact of the re-audit and the
restatement of prior period financials on our financial results for fiscal 2002.
OVERVIEW OF LIQUIDITY
LIQUIDITY
As of September 30, 2002, we had $204.1 million in cash and investments,
including $180.5 million at Atlas Air. The contractual nature of our debt and
lease obligations is such that first and third quarter payments are
significantly larger than those in the second and fourth quarters. In addition,
our business is highly seasonal, with peak revenue activity typically occurring
in the second half of the year, particularly in the fourth quarter.
At September 30, 2002 our outstanding long-term debt, including the current
portion, amounted to $958.9 million on a consolidated basis and $933.9 million
at Atlas Air. On that date, total future payments of long-term lease obligations
amounted to $3.2 billion on a consolidated basis and $2.4 billion at Atlas Air.
We believe that our current cash and investment balances, together with cash
flow from operations, will be sufficient to meet our anticipated liquidity needs
for the next twelve months. Based on the current conditions in the aviation
industry and the global economy, however, positive cash flow from operations
over a similar time frame cannot be assured. To the extent that operating cash
flow and cash and investments on hand prove insufficient to fund planned
operating activities, to service our debt and to meet our lease obligations, we
would be required to sell assets and/or engage in refinancing to meet any such
deficiency. There can be no assurance that any such refinancing or sale of
assets could be realized, or, if realized, could be obtained on terms favorable
to the Company.
During the second and third quarters, certain terms of Atlas Air's Aircraft Loan
Facility and its AFL III term loan (the "credit facilities") were amended. The
amendments primarily focused on easing the minimum liquidity and consolidated
net worth covenants and revising the leverage and interest coverage ratios
through December 31, 2002.
Although we will not have complete financials for the quarter ended September
30, 2002 until the adjustments required by the restatement are identified, we
expect that we will not be in compliance with certain of the covenants contained
in the credit facilities. We are currently in discussions with our lenders
seeking a waiver of certain covenants through December 31, 2002 in order to give
us time to assess the impact of the restatement and to set future covenant
levels accordingly, and we are hopeful that our lenders will continue to work
with us as they have done to date; however, there can be no assurance that any
such waiver will be granted on terms favorable to us. If we were unable to
obtain a waiver of covenant violations, the lenders would be entitled to require
immediate repayment of all amounts outstanding under the credit facilities. In
addition, other debt instruments include covenants and cross-default or cross
acceleration provisions pursuant to which a default or acceleration under one
instrument may cause a default under one or more other instruments. In the event
that lenders choose to accelerate payment of a substantial portion of our debt,
our ongoing viability would be seriously threatened, and we would be forced to
evaluate a number of strategic alternatives, including, but not limited to, a
debt restructuring or other reorganization, a curtailment of capital spending, a
further reduction in expenses and a modification to our planned operations, or
the sale of certain or all of our assets in order to continue to fund our
operations.
COMMITMENTS AND CONTINGENCIES
COMMITMENTS
Boeing 747-400 Purchase Agreement
We have two aircraft deliveries remaining with respect to our Boeing 747-400
Purchase Agreement; one is scheduled for delivery in November 2002, and one in
October 2003. The Company has no obligations or commitments with respect to
additional new aircraft deliveries beyond those noted above.
With respect to the November 2002 delivery, we have secured a commitment from
Boeing Capital Corporation ("Boeing Capital") for a 20-year operating lease.
Under the terms of the Boeing Capital financing, $6.0 million in previously paid
aircraft deposits will be returned to Atlas in the fourth quarter of 2002.
With respect to the October 2003 aircraft, Atlas Air is required to make a
further $21.4 million in purchase deposits. Boeing agreed to modify the payment
profile of these deposits. Atlas Air had previously been required to pay $15.6
million in deposits in the second half of 2002 and a further $5.8 million in
January of 2003. The entire $21.4 million is now payable in four equal
installments between February and May 2003.
CONTINGENCIES
The following disclosure is intended as a supplement to Item 1 of Part II to our
Form 10-Q, filed for the quarter ended June 30, 2002, and only purports to
disclose those legal contingency matters for which there was a material change
since the last reporting period.
Legal Proceedings
On October 18, 2002, a Class Action Complaint titled Weinberg v. Atlas Air
Worldwide Holdings, Inc., Richard H. Shuyler, James T. Matheny, Brian Rowe,
Douglas A. Carty, Stuart G. Weinroth, and Morgan Stanley Dean Witter, No. 02 CV
8334 (CM), was filed against the Company and five of its senior officers and
directors in the United States District Court for the Southern District of New
York on behalf of purchasers of the Company's common stock during the period
April 18, 2000 through October 15, 2002, inclusive (the "Class Period"),
including shares purchased pursuant or traceable to May 2000 and September 2000
prospectuses for public offerings of the Company's common shares. The action
charges that the defendants violated federal securities laws by issuing a series
of materially false and misleading statements to the market throughout the Class
Period, which statements had the effect of artificially inflating the market
price of the Company's securities.
On October 22, 2002, a Class Action Complaint titled Foxhall v. Atlas Air
Worldwide Holdings, Inc., f/k/a Atlas Air, Inc., Richard H. Shuyler, Brian H.
Rowe, Douglas A. Carty, Stanley J. Gadek, James T. Matheny and Stuart G.
Weinroth, No. 02 CV 8455 (__), was filed against the Company and six of its
senior officers and directors in the United States District Court for the
Southern District of New York on behalf of purchasers of the Company's common
stock during the period April 18, 2000 through October 15, 2002, inclusive (the
"Class Period"), including shares purchased or traceable to May 2000 and
September 2000 prospectuses for public offerings of the Company's common shares.
The action charges that the defendants violated the federal securities laws by
issuing a series of materially false and misleading statements to the market
throughout the Class Period, which statements had the effect of artificially
inflating the market price of the Company's securities.
On October 24, 2002, a Class Action Complaint titled Ingoglia v. Atlas Air
Worldwide Holdings, Inc., Brian Rowe, Richard H. Shuyler and Douglas Carty, No.
02 CV 8482 (__), was filed against the Company and three of its senior officers
and directors in the United States District Court for the Southern District of
New York on behalf of purchasers of the Company's common stock during the period
April 18, 2000 through October 15, 2002, inclusive (the "Class Period). The
action charges that the defendants violated federal securities laws by issuing a
series of materially false and misleading statements to the market throughout
the Class Period, which statements had the effect of artificially inflating the
market price of the Company's securities.
On October 25, 2002, a Class Action Complaint titled Barry Zemel CPA Money
Purchase Plan & Trust dtd 2/1/89 v. Atlas Air Worldwide Holdings, Inc., Brian
Rowe, Richard H. Shuyler, Douglas Carty, James Matheny, Stan Gadek and Stuart
Weinroth, No. 02 CV 8566 (__), was filed against the Company and six of its
senior officers and directors in the United States District Court for the
Southern District of New York on behalf of purchasers of the Company's common
stock during the period April 18, 2000 through October 15, 2002, inclusive (the
"Class Period"). The action charges that the defendants violated federal
securities laws by issuing a series of materially false and misleading
statements to the market throughout the Class Period, which statements had the
effect of artificially inflating the market price of the Company's securities.
On October 25, 2002, a Class Action Complaint titled Colby v. Atlas Air
Worldwide Holdings, Inc., f/k/a Atlas Air, Inc., Richard H. Shuyler, Brian H.
Rowe, Douglas A. Carty, Stanley J. Gadek, James T. Matheny and Stuart G.
Weinroth, No. 02 CV 8566 (__), was filed against the Company and six of its
senior officers and directors in the United States District Court for the
Southern District of New York on behalf of purchasers of the Company's common
stock during the period April 18, 2000 through October 15, 2002, inclusive (the
"Class Period"). The action charges that the defendants violated federal
securities laws by issuing a series of materially false and misleading
statements to the market throughout the Class Period, which statements had the
effect of artificially inflating the market price of the Company's securities.
On October 25, 2002, a complaint titled Whitford v. Linda Chowdry, Lawrence W.
Clarkson, Richard A. Galbraith, Stephen A. Greene, David K.P. Li, James T.
Matheny, Brian H. Rowe, Richard H. Shuyler and Ronald B. Woodard, Defendants,
and Atlas Air, Inc., as Nominal Defendant, No. 02-18765, was filed derivatively
on behalf of the Company against the members of the Company's Board of Directors
in the Supreme Court of New York, Westchester, County. The action charges that
the defendants violated (1) their fiduciary duties of loyalty and good faith,
(2) Generally Accepted Accounting Principles, (3) the Company's Audit Committee
Charter by failing to implement and maintain an adequate internal accounting
control system, and that Linda Chowdry further breached her fiduciary duties of
loyalty and good faith by using material non-public information to sell shares
of the Company's stock at artificially inflated prices. The Company is not aware
of any prior demand for corporate action by Plaintiff Whitford.
Given the current environment, the Company anticipates that additional lawsuits
against the Company and its officers, directors and/or employees, and possibly
others, including its independent auditors, underwriters and financial advisors,
will be commenced on behalf of purchasers of the Company's securities. Such
lawsuits may take the form of individual actions, class actions or derivative
lawsuits.
FORWARD LOOKING INFORMATION
This Current Report on Form 8-K contains projections and other forward-looking
statements that involve assumptions, risks and uncertainties. Readers are
cautioned not to place undue reliance on these statements, which speak only as
of the day of this Report. These statements are inherently uncertain, and
readers must recognize that our actual results may differ materially from our
expectations. Further, we undertake no duty to update any of these
forward-looking statements. Readers are referred to the documents filed by Atlas
Air Worldwide Holdings, Inc. (together with its affiliates, "Atlas", "we" or
"us") with the Securities and Exchange Commission, specifically our Annual
Report on Form 10-K for the year ended December 31, 2001, our Quarterly Reports
on Form 10-Q for the quarters ended March 31, 2002 and June 30, 2002 and our
Current Reports on Form 8-K dated October 16 and October 18, 2002, which
identify important risk factors that could cause
our actual results to differ from those contained in the forward-looking
statements. Other factors that may affect our plans or results include, without
limitation, the outcome of various legal actions brought against Atlas, the
filing of additional lawsuits against us, the nature, scope and results of the
Company's internal accounting investigation and the restatement of its financial
statements, the outcome of the SEC's informal inquiry concerning our decision to
initiate a re-audit of our financial statements for 2000 and 2001, our ability
to obtain waivers of certain financial and non-financial covenants from our
lenders, significant changes in fuel prices and other operating and maintenance
expenses and the availability and cost of war and terrorism risk and other
insurance for the Company.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ATLAS AIR WORLDWIDE HOLDINGS, INC.
DATE: November 14, 2002
By: /s/ Douglas A. Carty
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Douglas A. Carty
Senior Vice President and Chief Financial
Officer
ATLAS AIR, INC.
DATE: November 14, 2002
By: /s/ Douglas A. Carty
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Douglas A. Carty
Senior Vice President and Chief Financial
Officer