Aircastle's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Aircastle LTD (AYR)

Q1 2012 Results Earnings Call

May 3, 2012 10:00 AM ET

Executives

Frank Constantinople – Senior Vice President, Investor Relations

Ron Wainshal – Chief Executive Officer

Mike Inglese – Chief Financial Officer

Analysts

Gary Liebowitz – Wells Fargo

Andrew Light – Citi

Josh Pinkerton – Goldman Sachsg

Anthony Sibilia – Credit Suisse

Isaac Husseini – Barclays Capital

Halane Becker – Dahlman Rose

John Godyn – Morgan Stanley

Arren Cyganovich – Evercore

Glenn Engel – Bank of America-Merrill Lynch

Mark Streeter – JPMorgan

Presentation

Operator

Please standby, we are about to begin. Good day. And welcome to the Q1 2012 Aircastle Limited Earnings Conference Call. Today’s conference is being recorded.

At this time, I would like to turn the conference over to Frank Constantinople, Senior Vice President of Investor Relations. Please go ahead, sir.

Frank Constantinople

Thank you, Kelly. Good morning, everyone. I’m Frank Constantinople, Senior Vice President of Investor Relations, and I’d like to welcome all of you to Aircastle Limited’s first quarter 2012 earnings call.

With me today are Ron Wainshal, Aircastle’s Chief Executive Officer; and Mike Inglese, our CFO.

We will begin the presentation shortly but I would like to mention that the call is being recorded and the replay number is 888-203-1112 that’s from within the United States and Canada, from outside of the U.S. and Canada the number is 719-457-0820. The replay passcode for this call is 4711325. This call will also be available via webcast on our website at www.aircastle.com along with the earnings press release and an accompanying Powerpoint presentation.

I would like to point out that statements today, which are not historical facts, may be deemed forward-looking statements. Actual results may differ materially from these estimates or expectations expressed in those statements and certain facts that could cause actual results to differ materially from Aircastle Limited’s expectations are detailed in our SEC filings which can also be found on our website. I’ll direct you to Aircastle Limited’s earnings release for the full forward-looking statement legend.

And I’ll now turn the call over to Ron.

Ron Wainshal

Thanks Frank. Hello and thanks for joining us today. I’d like to start by reviewing our accomplishments for the first quarter of 2012. I’ll then discuss our current view of the overall market environment and provide an update on our plans, and in doing so amplifying some of observations we made during our Investor Day meeting in mid April. Mike will then review our financial results and capital structure. We’ll then open the call up for questions.

We are off to a very good start in 2012. Our revenues are up, thanks to the billion dollars aircraft acquisitions we made last year and due to the consistently strong portfolio performance we’ve been achieving.

Moreover, the present market is attracted for aircraft acquisitions as demand for lease financing grows from airlines. We are taking advantage of these favorable conditions by pursuing and capitalizing on accretive investment opportunities.

We’ve proven our ability to access capital through the unsecured debt market and believe this is strategically significant given structural change is taking in the traditional bank sector for aircraft financing.

Last month, we issued a $100 million unsecured debt and we paid our bank comp facility. This provides important benefit to Aircastle. It enhances our capital structure, extensive debt maturity profile, increases our unencumbered assets base substantially, frees up cash flow for additional high return investments and provides additional growth capital. Mike will discuss this further during his remarks.

In short, with significant unrestricted cash balance today, good operating cash flow going forward, no debt maturities for several years and no major remaining capital commitments, we are excited about Aircastle’s position to continue executing on our strategy of discipline, return oriented growth.

Now let’s turn to our performance during the first quarter of 2012. Regarding our topline results, total revenue grew to $165 million, with lease rental revenue accounting for around $152 million of that. Lease rental revenue is up 8% due to our investments in 2011, more than offsetting the revenue loss from last year’s profitable asset sales.

Net income was $32.6 million or $0.45 per diluted common share, while adjusted net income was $32.4 million. At the end of the first quarter, our fleet stood at 145 aircraft, which are leased to 64 customers in 34 countries. The average remaining lease term was 4.7 years, providing the company with the diverse and long lasting contractual revenue base.

Portfolio performance during Q1 was solid with fleet utilization coming in at 99%, while rental yield stayed at 14%. As evidence by these results, we continue to keep our fleet well deployed as we done throughout the business cycle and despite geopolitical development such as the Arab Spring last year. In fact, managing through customers issues is something all leasing companies must address and do well.

Over the past several weeks we reacted quickly to the bankruptcy filling with World Airways which leased two 747-400 freighters from us. We agreed with the World to terminate lease for one aircraft and quickly sign new lease agreement with another operator. We also re-negotiate the lease for the other aircraft which World is continuing to operate. Our team did a terrific job of managing through this situation and keeping plains flying.

This morning one of our customers, Cimber Sterling, a small airline in Denmark filed for bankruptcy. We had four 737-700 on lease there, representing less than 2% of the net book value of our fleet, one aircraft had already completed it return process and another was schedule to come off lease later this quarter. Last unit is schedule to come off lease in Q1 next year.

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