Aircastle Limited (AYR)
Q2 2010 Earnings Call Transcript
August 10, 2010 10:00 am ET
Julia Hallisey – IR
Ron Wainshal – CEO
Mike Inglese – CFO
Jamie Baker – JPMorgan Chase & Co.
Gary Liebowitz – Wells Fargo Securities
Andrew Light – Citigroup
Scott Valentin – FBR Capital Markets
Josh Pinkerton – Goldman Sachs
Andrew Hong – CIGNA
Previous Statements by AYR
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Good morning. My name is Ashley and I will be your conference operator today. At this time, I would like to welcome everyone to the Aircastle second quarter 2010 earnings conference call. All lines have be place on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator instructions) Thank you.
I would now like to turn today’s conference over to Julia Hallisey, Head of Investor Relations. Ma’am, you may begin your conference.
Thank you, Ashley, and good morning, everyone. I would like to welcome all of you to the second quarter 2010 earnings call for Aircastle Limited. Joining us today are Ron Wainshal, our Chief Executive Officer, and Mike Inglese, our Chief Financial Officer.
Before I turn the call over to Ron, I would like to mention that this call is being recorded and the replay number is 800-642-1687 from within the US or 706-645-9291 from outside of the US, with the replay pass code of 89643753. This call will also be available via webcast on our Web site, www.aircastle.com in addition to the earnings release and an accompanying PowerPoint presentation.
I would also like to point out that statements today which are not historical facts may be deemed forward-looking statements. Actual results may differ materially from the estimates or expectations expressed in those statements and certain factors that could cause actual results to differ materially from Aircastle Limited’s expectations are detailed in our SEC reports. I direct you to Aircastle Limited’s earning release for the full forward-looking statement legend.
Now I would like to turn the call over to Ron.
Thanks, Julia, and thank you all for joining us. Today, we will discuss Aircastle’s performance during the second quarter and current strategic priorities. I will also share some thoughts with you, as usual, on the broader trends in the industry and increasingly convincing signs of a sustained recovery in many of our markets we serve around the world. Mike Inglese will then speak about our financial results, and after Mike’s remarks we will open to questions.
This was an important quarter for Aircastle. We delivered solid results again as the company benefitted from an excellent execution and improving market conditions. Further, we saw strong signs of continued improvement inside of our key industry metrics, including passenger and freight traffic levels, load factors and parked aircraft trends.
Demand for leased aircraft is up, as evidenced by increasing rental rates and improving deal terms. Overall, we believe this is an excellent time to invest in new assets and we have the capital structure and platform to position us to pursue a wide range of investment opportunities offering attractive risk-adjusted returns.
Let’s review our second quarter results. Our portfolio continues to perform well. We reported fleet utilization of 98% in Q2 and a portfolio yield of nearly 14%. With that, we demonstrated again the good demand for our modern fleet across a global and diverse customer base.
Thanks for a high fleet utilization, rental revenue is $128 million, almost the same level as $129 million we recorded in Q2 2009 against essentially the same asset base. This is a very good result that demonstrates our ability to manage through a tough cyclical downturn.
Earnings and cash flows were strong with adjusted net income plus depreciation for Q2 coming in at nearly $80 million or $1 per diluted common share, same as during the first quarter.
Since June, we have secured more than $1.1 billion in financing commitments, further strengthening our capital structure and adding several important new funding sources. We now have bank commitments to finance nearly all of our Airbus A330 new order positions and we've also sourced flexible capital, which positions us to pursue exciting new investment opportunities which may prove beyond the reach of competitors with weaker capital structures and less established platforms.
At the end of June, our fleets stood at 129 aircraft. Measured by book value, 88% of our fleet were latest-generation aircraft. The weighted average remaining lease term for our portfolio is 4.6 years and we had 63 customers based in 36 countries reflecting a good spread of risk. We continue managing our portfolio proactively, keeping a close eye on market conditions across the globe and on the financial health of our customers.
Turning to our portfolio, we continued to make good progress in securing new leases for our aircraft. At this point, counting signed letters of intent, we’ve placed all of our aircraft coming off lease this year. Presently, we only have one off lease aircraft, the 757, which we expect to sell within the next few days. We also sold a second 757 in June to the same buyer.
Looking ahead to 2011, our lease placement requirements are also relatively small with only 9 aircraft left representing about 6% of our portfolio’s net book value and we are making very good progress on several of these aircrafts. In other words, our portfolio is in terrific shape and allows our team to focus on new business.
As I mentioned before, during the past few weeks, we’ve made great progress in securing financing for our Airbus A330 program. We obtained approximately $700 million in long-term financing commitments from three leading global banks to help fund our next nine deliveries on extremely attractive terms.