Aircastle Management Discusses Q3 2010 Results – Earnings Call Transcript
Aircastle Ltd. (
)
Q3 2010 Earnings Call
November 4, 2010; 10:00 am ET
Executives
Ron Wainshal - Chief Executive Officer
Mike Inglese - Chief Financial Officer
Julia Hallisey - Head of Investor Relations
Analysts
Jamie Baker - JPMorgan
Gary Liebowitz - Wells Fargo Securities
Andrew Light - Citi
Bill Mastoris - Gleacher & Company
Ray Neidl - Maxim
Scott Valentin - FBR Capital Markets
Josh Pinkerton - Goldman Sachs
Presentation
Operator
Compare to:
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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 Third Quarter 2010 Earnings Conference Call. All lines have been placed 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. Ms. Hallisey, you may begin your conference.
Julia Hallisey
Thank you, Ashley, and good morning, everyone. I would like to welcome all of you to the third 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 U.S. or 706-645-9291 from outside of the U.S., with the replay pass code of 18283666. This call will also be available via webcast on our website, 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.
Ron Wainshal
Thanks, Julia, and thank you all for joining us. I will start our discussion today by reviewing our performance during the third quarter, highlighting a number of important achievements. I will then touch on the continuing recovery in demand for leased aircraft and talk about where we are heading including our strategic priorities. Mike Inglese will present our financial results and then we will welcome your questions.
Q3 2010 was an eventful quarter for Aircastle with lot of activity in all fronts. Our operational performance was strong once again with fleet utilization coming in nearly 100%. We’ve seized on a number of attractive buying opportunities where our strategy has been to focus on transactions where we add value and differentiate ourselves. And since June we’ve made new investments and commitments totaling about $300 million.
As Mike will described further, these investments together with our A330 program and the capital structure enhancements we’ve put in place recently will enhance our future earnings and cash flow base meaningfully. With $310 million of unrestricted cash as of September 30, was financing commitments for most of our remaining new aircraft purchases, our capital structure and our liquidity position are in great shape. All in all I’m happy with the current performance and believe we’re in an excellent position to prosper from a continuing industry recovery.
Let’s focus on the performance of our fleet first. Not only did we deliver close to 100% utilization during Q3, our portfolio also produced rental yield of more than 14% demonstrating both strong demand for aircraft and good industry dynamics. At the end of September, our fleet cap stood at 132 with latest generation models now accounting for 89% of our portfolio as measured by book value.
The weighted average remaining lease terms of our portfolio is 4.6 years and we had a customer base consisting of 63 airlines based in 36 countries around the world. We’re staying at top of receivables. As of this morning our cash receivables more than 30 days outstanding totaled only about $340,000. We’ve been proactive in keeping our fleet on lease. Through the end of September 2011, with including signed letters of intent we only have five scheduled lease expirations requiring placement, which is very natural task for a fleet with our – team of our capabilities.
Also counting signed letters of intent since the end of June we secured lease placements or extensions for a mix of different aircraft including two 737-800s, two 737-400s one 767-300ER and a 777-200ER. I’m also pleased to announce we also signed a letter of intent to lease the last remaining unplaced A330 from our new order string. It’s scheduled to deliver in spring of 2012.
We also took several portfolio management steps with financial effects will fall unevenly over the next few quarters. More specifically during the third quarter, we took non cash impairments on 2737 Classic aircraft, which we expect to dispose over the next few months. One aircraft is the last of our 737-500s and the other is a 737-300 we took back for [Inaudible] failure of a customer in Saudi Arabia.
We also complete the sale of the 757 aircraft during Q3 breakeven level. On the other hand we also execute sales agreements to sell four 737-400 freighter and we expect to realize insurance proceeds on the 737-700 that suffered an event of loss during the third quarter.
We expect these transactions will combine to contribute pre tax profits in excess of $13 million during the fourth quarter of 2010. Our financial performance during Q3 is beginning to reflect the growth in our portfolio. Lease rental revenue of $133.5 million is up more than $5 million versus the preceding quarter, with the increase coming primarily from aircrafts acquisitions.
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