Atlas Air Worldwide Holdings Inc (AAWW) 2005 Q2 法說會逐字稿

Ladies and gentlemen, welcome to Atlas Air Worldwide Holdings second quarter 2005 earnings conference call. At this time all participants are in a listen-only mode. Following today's presentation instructions will be given for the question-and-answer session. [OPERATOR INSTRUCTIONS]. As a reminder this conference is being recorded today, Thursday, September 22nd, of 2005. I will now like to turn the conference over to William Bradley, Vice President and Treasurer of Atlas Air Worldwide Holdings. Please go ahead, sir.

Thank you and good morning. I am Bill Bradley, Vice President and Treasurer of Atlas Air Worldwide Holdings. And welcome to our second quarter 2005 results conference call. Today's conference call will be hosted by Jeff Erickson, our President and Chief Executive Officer, and Mike Barna, Senior VP and Chief Financial Officer. Before I turn it over to Jeff and Mike I would like to remind you that in discussing the Company's performance today we've included some forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to future events and expectations and involve unknown risks and uncertainties. Atlas Air Worldwide Holdings' actual results or actions may differ materially from those projected in the forward-looking statements. For a summary of specific risk factors that could cause results to differ materially from those expressed in the forward-looking statements please refer to the Safe Harbor language in our recent press releases and to the risk factors set forth in our Annual Report on Form 10-K filed with the SEC on June 30, 2005, as updated by our Form 8-K filed with the SEC on August 17, 2005. In our discussions today we also include some non-GAAP financial measures. You can find our presentation on the most directly comparable GAAP financial measures calculated in accordance with Generally Accepted Accounting Principles and our related reconciliation in our recent press releases which are posted on our website at www.atlasair.com. You may access these releases by clicking on the link to Financial News in the Investor Relations section of the website. At this point I would like to turn the call over to Jeff.

Thanks, Bill, and welcome, everyone. I greatly appreciate your investment interest in the Company and we all greatly appreciate this opportunity to bring you up to date on a couple of important developments. First, our strong second quarter results and also the labor situation with our Polar Air Cargo crew members. Ordinarily, we would have held this call on Tuesday after our release of our second quarter results, but because Tuesday was a day for meetings with our Board of Directors, following our annual meeting of stockholders on Monday, we elected to hold the conference today. And give us all a better opportunity to focus on our discussion with you. Our remarks today will be brief and I would like to reserve as much time as possible for the Q&A segment.

As our latest earnings demonstrate, we have an exciting story to tell. We're looking to build upon our global market leadership role in air transportation services. We have a flexible operating strategy that's helping us both optimize our assets and maximize our profitability. And we see a dynamic future for the air cargo industry and, therefore, also for us. Mike Barna will discuss our second quarter '05 earnings details with you in a moment. But first on the Polar labor front, goes without saying that we are disappointed that we could not reach an agreement with the representatives of our Polar crew members, and it's particularly disappointing that our Polar crew members were not even allowed to vote on our offer. That is an offer that reserved their contract including work rules and all respects, an offer that included a 10.5% pay raise effective July 1, 2005, effectively creating a small signing bonus, and as we have said before, an offer that would have put our Polar crew members at full parity with our Atlas Air crew members. While we would still very much like to reach an agreement with our Polar crew members, our business goes on.

To this end we will continue to evaluate and implement the strategic changes to our fleet that makes sense for our business and despite the strike we are looking forward to an active September to mid-December peak business season in the rest of our operations ahead of the year-end holidays. Longer term, though, we'll continue to build upon our fundamental strengths and we'll continue to focus on strengthening and growing our business and improving our profitability. For many reasons I continue to be very excited about the future of Atlas Air Worldwide Holdings. We're transforming AAWW into a stronger more efficient company. We're developing a more profitable business mix. We're on the watch for prudent growth opportunities and the market fundamentals are favorable. On that note let me turn it over to Mike Barna to tell you about our specific second quarter results. Mike will also brief you about some related developments. Mike?

Thanks, Jeff, and good morning, everyone. As you have seen in our press release we reported net earnings of 15.9 million or $0.77 per diluted share for the second quarter of 2005. We also reported pre-tax profit of 26.9 million, which was 78.3 million better than our pre-tax loss of 51.4 million in the second quarter of 2004. Our second quarter pre-tax profit reflected sharply higher revenues, up almost 17% versus second quarter 2004. A more than 10% increase in total block-hour activity, better aircraft utilization, and improved unit revenues in all four of our service types. Operating expenses, excluding aircraft fuel, were essentially flat, and significantly lower non-operating expenses principally, a 39.4 million reduction in net reorganization expenses and a 2.6 million reduction in net interest expense.

Revenues of 395 million in the latest quarter were nearly 57 million better than in the year-ago quarter, primarily driven by increases in revenue from our ACMI and our ace AMC military charter businesses, but partly offset by a reduction in scheduled-service revenue. ACMI revenues increased nearly 38 million, or 44%, primarily due to an increase in the number of ACMI contracts. A nearly 44% increase in ACMI block hours and a slight increase in average ACMI contract rates. 19 aircraft, including ten 747-400s and nine 747-200s were under full time ACMI contracts at June 30, 2005. That compares with 14 aircraft comprised of six 400s and eight 200s on June 30, 2004. AMC revenues increased 26 million or about 34% during the quarter mainly due to a higher volume of AMC charter flights. AMC block hours were up 20% and there was an 11% increase in AMC charter rates. The increase in AMC charter rates was partly due to an increase in the fixed rate for AMC fuel, which was pegged at $1.40 per gallon in second quarter 2005 compared with $1.01 in second quarter 2004.

Scheduled-service revenues mean while were about 14.5 million or 9% below the year-ago quarter, largely due to a restructuring of our scheduled-service network and our active efforts to reallocate aircraft to more beneficial opportunities in the ACMI and AMC markets. While our actions reduced capacity in the scheduled-service segment by 31% compared with the second quarter of 2004, the continued optimization of Scheduled Service's network and the impact of higher fuel surcharges helped to improve unit revenues and yield in this segment by significant amounts. The continued reallocation of capacity from scheduled service into ACMI leasing and AMC charter operations also had a positive impact on direct operating expenses, including ground handling, landing, and overfly fees during the quarter. Overall, operating expenses of 351.4 million were up 6% versus the same period last year. Excluding the impact of aircraft fuel, however, they were essentially flat.

Higher fuel prices, increased salaries, wages and benefits, and increased aircraft rent were partially offset by reductions in ground handling charges and landing fees, lower depreciation expense and lower maintenance expense. For some further detail, higher salary, wages and benefits reflect a 1.9 million increase in crew salary attributable to the 10% increase in total block hours. Higher salaries, wages and benefits also include the impact of 2.9 million in profit sharing and incentive compensation expense, which did not occur in 2004. Lower maintenance expense during the quarter was primarily due to fewer D-checks in the latest quarter compared with the same quarter last year, but offset in part by an increase in the number of C-checks. The latest quarter included one 747-200 D-check compared with three 747-400 D-checks and two 747-200 D-checks last year. In contrast, we had five 747-200 C-checks this year compared with only one 747-200 C-check last year.

With revenue gains outpacing operating expenses, operating income rose to 43.8 million in the second quarter, about 35.6 million better than in second quarter 2004. In addition, EBITDAR of 95.2 million was more than 1.5 times greater than EBITDAR of 57.8 million in last year's second quarter. As an aside, just as a reminder, for those of you looking at the detail, book interest expense for second quarter 2005 and first half 2005 were 17.9 million and 35.8 million respectively, but cash interest was approximately 13.9 million and 28.1 million respectively. The difference being the amortization of the debt discount which occurred as a result of fresh-start accounting. For the quarter, we had an effective income tax rate of 41%. Again, for those who are interested, we do not foresee or expect to pay cash taxes for the year 2005 and think it is very unlikely for the year 2006 as well. Our effective rate differed from the U.S. statutory rate due to nondeductible professional fees related to our reorganization and the effective incremental tax reserves.

I also want to highlight the continuing improvement in our cash position during the quarter. At June 30, 2005, our cash and cash equivalence totaled 192.5 million, that was up almost 59 million from our year-end 2004 balance and 29 million up from March 31, 2005. In addition, our cash position after June 30, 2005, has benefited further from the release of 15 million in restricted funds from the Polar Creditor Trust and from the receipt of 12.6 million in insurance claim proceeds. With regard to capital expenditures this year we have revised our estimated capital spending levels somewhat. We now expect capital expenditures to total approximately 30 million in 2005 compared with our previous estimates in the $25 million range. The modest increment is largely due to increased spending on engine rotable parts. Fly more, you need more parts and you do more maintenance.

Just as a reminder, on July 12th we made the first distribution out of the remaining total of 17,202,666 shares of our new common stock to holders of allowed, general, unsecured claims pursuant to our joint plan of reorganization. This July pro-rata distribution totaled nearly 16.1 million shares. We maintain a reserve of a little over 1.1 million new shares per pending claims, which totaled just over $50 million on August 31, 2005. Distribution of shares from this reserve are scheduled to take place on a quarterly basis with the next distribution being made around mid-October, 2005. Based on the latest information available to us we do not anticipate that that upcoming October distribution will be a large number of the 1.1 million share reserve. As of August 5, 2005, the record date for our annual shareholders meeting, the number of shares outstanding totaled 19,685,544. Please note that for purposes of calculating earnings per share for our quarterly results, we include the 1.1 million new shares reserved for pending claims in our share counts when we determined the number of weighted average shares outstanding. Thus, our second quarter 2005 EPS calculations were based on a total of 20.2 million basic shares and 20.5 million diluted shares. Finally, we anticipate that we will file a Form 8-K report with detailed financial statements for the second quarter of 2005, including our balance sheet and cash flow statement by the end of this month. In addition, we expect to report results for the third quarter of 2005 on or about the middle of December. With that I'd like to turn it back to Jeff.

Thank you, Mike, and I think it's a good time now to go to our Q&A session. Operator, if we can coordinate the first question, please.

Thank you. Ladies and gentleman, at this time we will begin the question-and-answer session. [OPERATOR INSTRUCTIONS]. Our first question comes from David Campbell. Please state your company name followed by your question.

Good morning, this is David Campbell from Thompson Davis.

Good morning, David.

How are you?

Terrific, thanks.

Can you quantify the revenue benefit from fuel surcharges in the various services you provide assuming, I guess, no impact on the ACMI business?

Yes, I am going to give you sort of rough numbers or so, but before getting into that just as a general rule of thumb, changes in fuel we work off of the Lufthansa index currently. And where we sit today, generally, we can recapture somewhere between 60/65% recovery on increases in fuel. And so what it looks like with respect to the second quarter for our scheduled-service commercial business it was approximately somewhere between 25 and 30 million or so for the second quarter. But I think as a general rule of thumb you can look at sort of 60 to 65% recovery.

And David, that all shows up in the revenue line.

Right, the 25 to 30 million. But the 65%, does that mean you don't recover the other 35 or is there a lag or what do you mean?

That is not recovered.

So that's a negative impact on -- a net negative on your P&L?

That's correct. But I think if you look at -- and Jeff has spoken about this before. If you look at the portfolio businesses that we have and I am not trying to downplay the impact of fuel. But if you look at our block hour exposure and across our businesses, and assuming that -- a 60% recovery, we probably got -- I don't know, something around 12 to 15% block-hour exposure to fuel when you take into account the fuel surcharge.

Okay. And I'm sure other people interested in the more detailed explanation of the Polar pilot strike and what it means, I mean your scheduled capacity is I guess going to be zero if this continues in the fourth quarter. And are you going to make those revenues up with some of their -- other revenue sources? Can you just be a little more specific about --?

Yes, the -- David, the good side to that is without the scheduled service operating we have no fuel risk. And to kind of put it in perspective for you, prior to the work stoppage, we had 12 of our 42 aircraft devoted to the Polar operation. That number is now down to six aircraft. It's difficult to assess how long the strike will go on. If it is measured in days we will look to resurrect as much of the scheduled service as we can. If it goes on at great length, we will continue to deploy assets into other profitable opportunities.

Okay, thanks. I'll let someone else have it.

Thanks, David.

Your next question comes from Helane Becker. Please state your company name followed by your question.

Thank you, Operator, it's Helane Becker from The Benchmark Company. Hi, Jeff.

Hi, Helane.

Just to follow-up on that question that David was asking, what's your next step with the Polar pilots? Do you have more negotiations scheduled at this point or is that just kind of -- they're on strike and that's about that?

Yes, the latter. It's just about that. We have no negotiations scheduled. We made it fairly clear prior to this start of the 30-day cooling-off period and through that period that our last and best offer was on the table, which is as I said before, 10.5% wage increase, not bad in this environment where the day our Polar guys walked out Northwest announced 400 pilot furloughs. You know I'd like to get these guys back, but we're not going to mortgage our future by getting into a labor contract that we simply cannot afford. So no talks scheduled. I would like to see it settled, but it needs to be settled at an appropriate level.

Okay. So it's really, the ball is in their court right now?

Yes. They're the ones that walked off the job and walked away from a 10.5% increase. The leadership never allowed the rank-and-file to -- first of all even review our offer let alone vote on it. We think that that was very unfortunate, but we're optimistic that we can get it resolved and get scheduled service back operating.

Okay. And then my second question is with respect to the trends in the current quarter, I don't think you mentioned maybe what you were -- could you just talk about what you saw in the last quarter, June versus July -- July versus June and August and then what you're seeing now in September? Or maybe that's the current quarter. [Laughter]. You know, what the trends you're seeing in your business? Did the peaks start earlier --?

In terms of the overall are you talking about peak season year-over-year?

Yes. I guess I'm trying to figure out on a month sequentially did the peaks start later this year than it did last year and then on a year-on-year basis, how is it versus last year?

I think we're actually seeing an earlier peak this year. I mean it looks like the robust, strong, high season for our market place, and very difficult to predict. But we have no indications that it doesn't go well into December, which is normally what we see. Last year was a bit shortened on both ends.

Right. Got you. Okay. Thank you very much.

Thanks, Helane.

Your next question comes from Julius Maldutis. Please state your company name followed by your question.

Good morning. Julius Maldutis, Aviation Dynamics. Good morning, Jeff and your team. The question I have is assuming that this strike continues well towards the end of the fourth quarter, legally what are your options? Can you basically just shut it down and cancel that side of the business?

Yes, if I was to take your analogy forward, if we were shut down that long through peak season, our assets would be fully deployed to other uses, Julius. And that being that -- airplanes that were Atlas airplanes that previously flew for Polar are already back flying 100% for Atlas. We have an airplane, a 200 that likely we'll sell in the upcoming days. It is for sale. We have a 200 that's available for dry lease and to the extent that we have other airplanes grounded with no settlement, we will dry lease them to other operating airlines.

Thank you. But could you legally just shut down the business?

Absolutely.

Okay. Thank you.

And would do so if that's the choice that our pilots direct us to.

Okay. Thank you very much again.

Thanks, Julius.

Thank you. Our next question comes from Mark Foster. Please state your company name followed by your question.

Good morning. It's Mark Foster with Kirr, Marbach & Company.

Hi, Mark.

I know you haven't filed your "K" yet, but could you give us a debt balance at the end of the second quarter?

Sure. Debt balance -- and I think we touched on this in the call at the end of July. But it's approximately 725 million and it's a caveat, that is sort of on the unamortized basis. Remember, we did fresh-start accounting. On the balance sheet you really have to add the balance sheet debt plus the unamortized discount and the discount I believe at June was approximately 116 million. So I'm giving you the debt balance adding that back in and on June it was about 725 million and we expect it to be about 710 at the end of Q3.

Okay. And then your obviously sitting on a lot of cash, your free cash flow looks pretty good given that your second half is stronger, presumably those numbers will continue to grow. Can you kind of prioritize your use of free cash as you go forward?

Well, I think the Company strategically is looking at the entire balance sheet, not just the cash account, and I think we're looking at what makes sense to give us the flexibility that we need going forward in anticipation of growing this Company. So clearly we want to increase the amount of flexibility we have to be prepared to take advantage of those opportunistic events that take place in the industry, as well as our longer range plans some of which we've already discussed that are out there a few years.

Okay. So along those lines, then, are there specific areas that you want to fill in, in terms of acquisition activity?

Well, I think I would defer to Jeff, but I guess we're a company that looks at the future as a fresh start for a company that's gone through a challenging period the last 24 months and I think we're going to be very open-minded to see how best we can position this Company for growth. So we are very open-minded. We are looking at many alternatives and we are assessing those literally day by day.

Yes, I can just add we're still highly leveraged. I'd like to continue to improve that situation while at the same time preparing for a phase retirement of older equipment and bringing new equipment in. You're already aware that we can add as many as ten of the converted 747 passenger to freighter airplanes, not only to cover a replacement, but also we're looking to have the opportunity to grow the Company and support some of the anticipated year-over-year growth that's projected by many people in this sector. So we're trying to be nimble, Mark, and just be prepared for any opportunity to improve in those three areas.

Okay. And one last one, in the past you guys have given us a little bit of guidance in terms of your expectations versus plan or expectations for the current quarter. Anything you want to share with us this morning?

Well, the problem with giving guidance is then you guys always want it, which I understand. The historic guidance that you got that we gave earlier this year for the full year, I will not change. I think certainly we're concerned about fuel. We're concerned about the labor situation. But I think we're going to have a very good year and I stand by what I said.

Okay, great. Thank you.

Thank you. Your next question comes from Matthew Barnett. Please state your company name followed by your question.

Hi, it's Matt Barnett from Jet Capital. A couple quick questions. You recently issued a [8-K] reindicated Atlas subsidiaries operating at 100%. Could you give us a ballpark of where it was operating in the first and second quarter?

100%.

100%.

That's just operating 100% with more airplanes because we previously had as many as four airplanes leased from Atlas into Polar, once the work stoppage happened those airplanes were moved back to the Atlas side and are fully deployed.

Okay, and ballpark at 10.5% salary increase, what kind of dollar amount are we talking about?

3.9 annual.

Million dollars?

Yes.

Okay. That's all I had. Thanks a lot.

Thanks, Matt.

Your next question comes from Evan Ratner. Please state your company name followed by your question.

Evan Ratner, Credit Suisse. Good morning, guys.

Good morning, Evan.

Two quick questions. One, in terms of -- any sense in terms of what you guys are doing to invest in kind of some of the people in terms of getting the financials filed on time. When do we get off the pink sheets?

Okay. You want us to -- we'll deal with that one first, Mike?

Sure. Evan, I guess I would assure you that the Company has not only many but the right resources tackling that challenge and has substantial support from outside expert resources as well. We are not committing to a future date but our internal goal for the Company is in 2006 to be a timely filer, preferably sooner rather than later in 2006.

Okay because you guys seem to be getting closer and closer and we're anxious.

As are we, Evan.

As are we. And just a little color on that, you have to recall that some of what we are undertaking then needs a bit of time to prove itself out. So it's not like we do the work, flip the switch and it's done. But, in fact, external auditors like to see it work for a period of time.

But mid-2006 or earlier is what we're anticipating.

Okay. Second, on the business side, as you guys kind of -- you said you're relooking at the whole Polar situation. How hard is it both legally and otherwise to, if you guys wanted to sell these very valuable China rounds that you have received, how hard is that? And are you looking at that versus selling it to UPS or someone else like that?

Well, that certainly is very much what we look at. We would prefer to continue to operate them, but if our pilots don't want to fly, we will entertain appropriate offers to transfer them.

Okay, but there is no kind of some kind of special restrictions or anything like that?

No, other than -- I mean you've got to get approval of the authorities, but other than that, nothing that really precludes that from happening.

Okay. Regarding cash taxes, after 2006 you anticipate being a cash taxpayer?

Yes, what's cash -- do you have cash income? Cash income tax?

Right. It's -- Evan, the truth is it is unlikely even in 2007.

Okay. That you will be -- okay.

Obviously, there's a lot of wide-open space between now and 2007.

Absolutely. Okay. And in terms of the CapEx number, should we assume in our models just 30 million sort of maintenance CapEx going forward or is it just this year was a 5 million bump up from the -- ?

I think, yes, 30 this year, it's maintenance and IT primarily, but I think 25 is a good number going forward.

I see. Okay. Very good. Good quarter. Thanks, guys.

Thank you.

Thank you. Your next question comes from Abe Joseph. Please state your company name followed by your question.

Hey, guys, it's Abe Joseph with Delaware Street Capital. I haven't actually asked most of my questions. Just a follow-up on the cash tax side, what is the current NOL balance?

I don't believe we've issued a specific number. It's in the range of several hundred million dollars. It is limited by our IRS Code, Section 382. But as we've said, we really don't anticipate paying cash taxes -- let me be more specific. We don't anticipate paying federal income taxes for the next couple of years.

Okay. Great. Thanks, guys.

You bet.

Thank you. Ladies and gentlemen, [OPERATOR INSTRUCTIONS]. Our next question is a follow-up from David Campbell. Please go ahead.

Hi, back on the subject of scheduled service, those four aircraft that came back from Polar to Atlas, those are operating in some sort of leases?

Well, yes, David, just to put everything in perspective, the Atlas side does ACMI leases, does military charters, as well as commercial charters, the Polar side does scheduled service and military charters. Our ACMI leases have remained at 19, so the work is primarily on the military commercial charter side.

All right. Of course that makes sense. Then Atlas has scheduled route authority overseas that's what your lessees use in some cases to -- when they operate your aircraft or when you fly aircraft for them. Can you not use those authorities to operate scheduled services on your own?

Well, there are a couple of things. So, one thing that we've tried to be real careful of is to make sure that Atlas is not perceived as flying [struck] work. We want to be very careful about that. But over the longer term, if Polar disappears and we have opportunities on the Atlas side in scheduled service with customers or with freight forwarders, we'll certainly take a hard look at it. We have an excellent brand out there with fabulous reliability, so we'll just generally, Dave, we'll take care -- take advantage of every opportunity we have to fully deploy.

Right. Including one of the questioneers asked about sale of the Polar routes, I mean Atlas could be a buyer; isn't that correct?

Yes, we in terms of the route rights, we could certainly look to transfer back and forth between Atlas and Polar just as we had as answered in an earlier question, we could sell route rights as well. If we can profitably operate them, and it's the best use of our asset, we will do it. If not, we'll look for other ways to monetize given regulatory approval.

Okay, thank you.

Thanks, David.

Thank you. Our next question comes from Gil Nathan. Please state your company name followed by your question.

Hi, Gil Nathan, Restoration Capital. About the Polar routes, are they salable? Which you already said. I'm sorry. What's the value of them or have you attributed a certain value to the China rights in particular?

Yes, I don't think we've gone public with that. But, yes, we have them reviewed on a periodic basis.

And do you have the ability to do more military business without Polar since they do have some military routes? Are you able to transfer that business also?

I'm not sure transfer is the right word. We have a charter business unit that talks to Scott Air Force Base every day about their needs and then deploys the lift based on aircraft ability between Atlas and Polar. As you might have guessed we have a shortage of Polar pilots, so all of the deployment is on the Atlas side.

Okay. And one last question is, you've talked about before you have a high cash balance. Are you guys looking to maybe recapitalize your balance sheet and how much cash do you need to operate the business on a day-to-day basis?

Well, some would argue that our cash isn't high enough. It's certainly way ahead of our previous plan. We're pleased about that. But I kind of defer back to what we said before in terms of the cash that we have on hand and everything else related to the balance sheet will be opportunistic about what we do with it. But I'd like to see the cash continue to climb.

Okay. Thank you, guys.

Thanks, Gil.

Our next question comes from Jeff Rosencrantz. Please state your company name followed by your question.

Good morning. Jeff Rosencrantz from Durham Asset Management. How are you guys?

Hey, Jeff.

Good morning, Jeff.

Could you just run through I guess I got bits and pieces, but just so we see the whole picture. All of your aircraft, sort of where they were deployed, let's say day before the strike and then let's say as of now, at your 42 aircraft I think you said 19 in ACMI and you had -- and you're now flying six in scheduled. Could you just kind of run through where they all were deployed pre and now post the strike?

Yes -- .

I guess it fluctuates day-to-day based on military and commercial, but as best of your ability.

Yes, in ACMI, 19. In scheduled service, 8. In military and charter, 12. If I did that right, that should add up to 39. And then we have three airplanes which are dry leased through our U.K. facility to British Airways. The current situation still is with 19 aircraft in ACMI. We have six aircraft grounded on the scheduled service side, not counting one that is offered for sale and is likely to leave very quickly and then the balance -- because I don't have a calculator right in front of me -- the balance to 39 is fully deployed in the charter business unit, again, with the same three dry leased to British Airways.

Okay. And so is it fair to assume that to the extent you can absorb this six additional grounded aircraft in the scheduled business into more military and commercial, would that -- that would be your first -- well, I guess if you could put them into more ACMI, if not, you're trying to absorb them into more military and commercial which would be on the Atlas side?

Yes, the options are to use them in the charter business unit primarily with military, to place them out into an ACMI wet lease or the third alternative is to place them out on a long-term dry lease.

Okay. And are the six that are grounded that excluding the one that's for sale, are those 200s and is it fair to assume those are the aircraft that are getting closer to a C or a D-check?

No, it's just the opposite. You have five 400s and one 200. But I think you can appreciate that those 400s will be very attractive to a potential dry lease customer.

Okay. Thanks very much, guys.

Thank you, Jeff.

Thank you. Your next question comes from Andrew Carlino. Please state your company name followed by your question.

Hey, guys, it's Andy Carlino from Sankaty.

Hi, Andy.

Did you guys disclose the current cash balance? I may have missed it. But I know you guys talked about cash at the end of the second quarter and gave some of the inflows that you were expecting in July. But do you guys have a more current number?

Yes, I think, Andy, we've given the June numbers, we've also shown the two large sort of nonrecurring kinds of items, return of the Polar Creditor Trust and the receipt of the insurance proceeds. And, right, I think if you add those numbers up and I guess at this stage, Andy, I guess I'd just say we continue to grow cash.

Got it. So somewhere north of 225 by those numbers at the end of the third quarter?

Good math.

Okay.

Although we have not finished the third quarter.

Right. Third quarter is not finished yet.

Right. Thanks, guys.

You bet.

North of 225 definitely.

Thank you. [OPERATOR INSTRUCTIONS]. Okay, gentlemen, I'm showing we do not have any more audio questions. I'll turn the call back over to you for any closing comments you may have.

Okay, Operator, thank you very much. And thank you to everyone for your investment interest in our Company and for joining us today. I would ask you again when you think of air cargo think of us, think of market leadership, think of Atlas Air Worldwide Holdings. We're excited about our business. We're excited about where we're going. We've talked about some of the difficulties, but we're anticipating a very nice year. I hope that you, too, appreciate our excitement. So thanks again and we'll talk to you again soon.

Thank you. Ladies and gentlemen, this concludes today's teleconference. If you would like to listen to a replay of today's conference you may dial in at 303-590-3000 or 1-800-405-2236 followed by the access code of 11039909 and then followed by the # sign. Once again, those numbers are 303-590-3000 or 1-800-405-2236 followed by the access code of 11039909 and then followed by the # sign. Thank you for your participation in today's conference and at this time you may disconnect.