ABX AIR, INC. Reports second quarter financial results

ABX Air, Inc. reported solid financial results compared with the second quarter of 2006, as pre-tax earnings from its rapidly growing, higher-margin air charter business more than offset reductions in pre-tax earnings from its commercial agreements with DHL.
For the second quarter, ABX Air’s results included:
• USD 4.5 million or USD 0.08 per diluted share, in net earnings, which included USD 2.8 million in deferred (non-cash) income tax expense. That compares with USD 6.5 million, or USD 0.11 per diluted share, in net income for the same period last year, when no income tax expense was recorded. In 2006, income tax expense was offset by reductions in the tax valuation allowance.
• A 13 pct increase in pre-tax earnings to USD 7.3 million from USD 6.5 million, as pre-tax earnings more than doubled from ABX Air’s operations outside its commercial agreements with DHL.
• Revenues of USD 281.3 million, down 7.3 pct from a year ago, as revenues from operations related to the DHL agreements declined 12.2 pct. Prior-year second quarter revenues included a USD 17.5 million reimbursement from DHL for line-haul management services, which did not recur in 2007. Second quarter revenues from business unrelated to DHL reached USD 22.4 million, an increase of 156.8 pct.
ABX Air’s second quarter revenues from DHL declined compared with the prior year period. In addition to the USD 17.5 million reductions in line-haul management revenues, DHL’s mid-2006 consolidation of its air network has reduced the number of ABX Air aircraft and crews dedicated to DHL service.
At the same time, ABX Air’s revenues from sources outside its principal DHL agreements have expanded rapidly, offsetting a portion of the DHL decline. Revenues in the second quarter from those businesses were USD 22.4 million, generating pre-tax earnings of USD 3.3 million, a 15 pct margin. The principal driver of these results was the deployment of additional Boeing 767 freighter aircraft to service other global customers, including All Nippon Airways Co. (ANA). ABX Air’s unique, two-year agreement to dedicate two of its 767s in support of ANA’s Asian cargo network began in mid-May.
First-half pre-tax earnings were USD 14.2 million, compared with USD 14.6 million for the first half of 2006. In 2006, management of DHL’s line-haul operations added USD 1.3 million in first-half pre-tax earnings on revenues of USD 82.8 million, prior to the transfer of those operations to DHL in May 2006.
For the first six months of 2007, ABX Air’s net earnings were USD 8.8 million, or USD 0.15 per diluted share, on revenues of USD 569.4 million, compared with net earnings of USD 14.6 million, or USD 0.25 per diluted share, on revenues of USD 672.7 million, in the prior year period. Deferred (non-cash) income tax expense, which ABX Air began recognizing in the first quarter of 2007, represented USD 5.4 million, or 94 pct of the USD 5.7 million decline in first-half net earnings compared with the first half of 2006.