Air Transport Services Group Inc (ATSG) 2016 Q3 法說會逐字稿

Welcome to the Third Quarter 2016 Air Transport Services Group, Inc. Earnings Conference Call. My name is Ellen, and I will be your operator for today's call. (Operator Instructions) Please note that this conference is being recorded.

I will now turn the call over to Joe Hete, CEO and President of Air Transport Services Group. Mr. Hete, you may begin.

Thank you, Ellen. Good morning, and welcome to our third quarter 2016 earnings conference call. With me today are Quint Turner, our Chief Financial Officer; Joe Payne, our Chief Legal Officer; and Rich Corrado, our Chief Commercial Officer. We issued our earnings release yesterday after the market closed. It's on our website, atsginc.com. We expect to file our Form 10-Q with the SEC early next week.

Our third quarter results this year show we are still tracking the growth pace we started a year ago when we implemented a trial express network, deployed more leased freighters, added new aircraft maintenance customers and invested in more 767 feedstock to convert to freighters.

The $51 million in revenue growth for the third quarter represents our largest quarterly increase under our current business model and we anticipate continued strong growth as we move through 2017.

Our aircraft leasing, CMI and maintenance and logistics businesses, continued to increase in volume. We have deployed four more 767s this year, including first two of what will be eight, 767-300s for Amazon by the middle of next year. Our airlines continue to absorb extra cost from the ramp up for expanded customer flight operations and ABX Air incurred significant premium pay and accrued compensatory time for its pilots, even as we continue to add and train additional flight crews.

We produced financial results that were significantly better than a year ago despite airline cost headwinds and after adjusting for non-cash items. We expect a strong fourth quarter that will also be affected by continued premium pay for ABX Air pilots. We anticipate a significant reduction in premium pay next year as we continue to add crews to fully implement the expanded customer network.

You likely saw the news this week that ABX took steps to resolve differences with its pilot union over compensation and scheduling for additional flying. We're still awaiting the court's decision, which we anticipate will affirm ABX's right to manage its scheduling during its growth phase. I'll have more to say about those issues in a moment.

Quint will summarize our financial results and I will come back to review our operating items. Quint?

Thanks, Joe, and good morning everybody.

As always, let me start by saying that during the course of this call, we will make projections or other forward-looking statements that involve risks and uncertainties.

Our actual results and other future events may differ materially from those we described here. These forward-looking statements are based on information, plans and estimates as of the date of this call and Air Transport Services Group undertakes no obligation to update any forward-looking statements to reflect changes in underlying assumptions, factors, new information or other changes.

These factors include, but are not limited to:

our operating airline's ability to maintain on-time service and control costs,

ABX Air's ability to provide flight crews to meet its customers' requirements,

the number and timing of deployments and redeployments of our aircraft to customers,

the cost and timing with respect to which we're able to purchase and modify aircraft to a cargo configuration,

the successful implementation and operation of the new air network for Amazon,

changes in market demand for our assets and services and other factors as contained from time to time in our filings with the SEC, including the Form 10-Q we will file early next week.

We will also refer to non-GAAP financial measures from continuing operations, including adjusted earnings per share, adjusted pretax earnings and adjusted EBITDA which management believes are useful to investors in assessing ATSG's financial position and results.

These non-GAAP measures are not meant to be a substitute for our GAAP financials and we advise you to refer to the reconciliations to GAAP measures, which are included in our earnings release and on our website.

As Joe said, we achieved most of our financial targets for the quarter and remain on track for a good year.

Revenue growth of 36% or $51 million year-over-year is quite an accomplishment in an industry where overall growth has been modest for several years. Even more remarkable is the fact that we expect to remain on a strong growth trajectory all the way through 2017 as well.

Now let me take you through a few items in our third quarter results.

External customer revenues from continuing operations increased by $51 million to $193.3 million for the quarter. Excluding reimbursed ACMI revenues, customer revenues increased by 25% or $34.3 million, compared to the third quarter last year. Revenues were driven by more external leases of our Boeing 767 freighters, plus airline and related logistic services.

Consolidated net earnings from continuing operations on a GAAP basis were $2.1 million for the quarter, compared to $6.3 million a year ago. Those earnings include the non-cash, revaluation and lease amortization effects of the Amazon warrants along with pension and other non-cash items. Adjusted earnings from continuing operations, which exclude the after-tax effects of the Amazon warrants from our GAAP net earnings were $8.7 million for the quarter, up 37% from a year ago.

Earnings per share on a fully diluted basis were [$0.04] (corrected by the company after the call) compared with $0.10 a year ago. Adjusted for the lease incentive amortization [and the warrants revaluation] (corrected by the company after the call), diluted EPS was $0.14 for the quarter. Once again, we have provided a table in our earnings release that shows the effect of the warrant-related adjustments on our earnings per share.

Third-quarter pretax earnings from continuing operations were $3.1 million, compared to $10.3 million a year ago. Adjusted Pre-Tax excludes a net loss of $8.5 million for re-measurements of financial instruments to fair values, which is mainly the Amazon warrant revaluation, $2.2 million in non-cash pension expense and a $1.4 million lease incentive amortization. On an adjusted basis, pre-tax income increased 52% to $15.2 million for the quarter.

Our Adjusted EBITDA for the quarter totaled $52 million, roughly equal with the second quarter, and up 20% from the third quarter last year. We're at $155.4 million in adjusted EBITDA for nine months. With a strong fourth quarter, we can still achieve our $218 million adjusted EBITDA goal for the year.

CAM, our aircraft leasing business, grew revenues $3.8 million for the quarter, versus the prior year, with 38 freighters leased externally at September 30, 11 more than a year ago. Revenues from external customers totaled $27.9 million, compared to $23.7 million for the corresponding 2015 period. CAM's pre-tax earnings grew by $2.6 million to $16.1 million, reflecting additional external lease revenues, offset by higher depreciation expense for 767-300 aircraft and higher costs to place and support a larger fleet.

That growth includes twelve 767-200 freighters leased for five-year terms to Amazon through September of this year. CAM delivered a 767-300 to DHL earlier in February and another 300 to Amerijet in July, both under eight-year leases. CAM deployed another 300 to DHL in September on an ACMI basis. That aircraft is anticipated to transition to a long-term lease to DHL during the fourth quarter and be operated under ABX's CMI agreement with them.

Turning to our ACMI Services segment. Revenues increased 29% overall, but excluding reimbursables, grew by 13% to $105.7 million. Our airlines continue to operate fewer aircraft on an ACMI basis, which includes the aircraft rent in the airline revenue stream. Total block hours went up more than 35%, primarily from expanded CMI flying.

Our pretax margins and ACMI Services were down significantly from a year ago. In addition to the continuing costs of hiring and training new pilots to support growing CMI operations, ABX Air is paying pilots a significant premium over their base rates to complete its flight schedule.

All together, these costs reduced our pretax margins by about $6.5 million for the quarter. The larger pretax loss in ACMI Services also includes the increased non-cash pension expense which is $2.4 million more than a year earlier.

As was the case in the second quarter, the businesses we collectively refer to as other activities contributed a large portion of our revenue gain. External revenues from all other activities were $36.6 million, up $16.8 million from the same 2015 quarter. Our parcel and cargo handling operations increased sharply, reflecting higher rates and more volume. Increased aircraft maintenance revenues reflect additional services for Delta Air Lines. Quarterly pre-tax earnings from these businesses increased by $3 million to $5.1 million.

Through nine months, we have spent $182 million of our projected capital budget for the year. CapEx to date included $133 million to buy nine 767-300 passenger aircraft and for freighter mod costs. We drew $155 million from our revolving credit facility to help pay for those investments and we've paid down our debt balances by about $24 million.

At our current pace, we now anticipate a somewhat smaller CapEx spend for the year, or about $285 million in total. Of that new projected amount, we expect about $215 million will be for growth-related investments.

We also spent $62.2 million for the repurchase of 4.7 million ATSG shares through the first nine months of the year, including 50 million purchased from an affiliate of Red Mountain Capital in July. ATSG's Board had earlier increased the share repurchase authorization from $50 million to $100 million.

As I've told you on our August call, even our aggressive program to expand our fleet will not significantly affect our solid track record of keeping our leverage at a moderate level in this capital-intensive business. I still expect our total long-term debt to stay below 2.5 times our adjusted EBITDA through the end of this year.

Again, we are pleased with our results for the third quarter and the progress we're making to add more fleet assets and more dedicated employees to fly and maintain them. We hope to resolve our labor contract issues promptly and with minimal impact on our results for the fourth quarter.

Let me now hand you back to Joe with comments on our operations and outlook for the rest of the year. Joe?

Thanks, Quint.

Many of you have focused a lot of attention on our business with Amazon and that certainly is a strong contributor to our growth. But our revenues have grown across the board in all our major segments and other businesses, and include contributions from 767 freighter leases over the last 12 months to DHL, Amerijet, Raya Airways and our European affiliate, West Atlantic. It also includes more maintenance and logistic support for other customers such as Delta Air Lines and the U.S. Postal Service.

As we have said before, growth is good, but it's execution that counts. Our third quarter turned out to be very similar to the second in the sense that everyone at ATSG has worked plenty of extra hours to deliver on the promises we have made to customers. That includes our team at CAM, our leasing business, who have managed to meet some very challenging freighter delivery dates for its lessees. We delivered the first of eight 767-300s for Amazon on schedule, fully decked out in primary colors. The second 300 entered service for them this week, and the third one will be delivered in time to support the peak season.

In the meantime, our MRO business, AMES, has been very busy preparing the newly converted freighters, while also completing nearly all the required heavy maintenance on our other 767s prior to peak. That's in addition to the work AMES does for Delta and other customers. AMES has been able to support these volumes only because of the extra hangar capacity we added in 2014 and the additional technicians they have added since then.

As Quint noted, premium pay for pilots at ABX Air has increased significantly in recent months. As pilots take vacation and training time, ABX is obligated under its contract with the teamsters to let pilots bid to cover it which as a staffing program takes into account. ABX's pilots recently stopped volunteering for these additional trips just as the scope of its customers' air network schedules were growing.

As a result, we have had to invoke other terms in our agreement with the Teamsters to assign trips that pilots don't bid for at premium pay rates. Those assignments also have significantly increased over the last several months even as ABX has aggressively hired this year, increasing pilot headcount by about a third as CMI operations have expanded.

ABX Air went to court this week to enjoin the Teamsters from taking any action that might prevent it from continuing to provide high-quality service. ABX is seeking to maintain its right to manage pilot scheduling and trip assignments consistent with its customers' requirements while differences are resolved through ongoing discussions with the union. Last week, the Teamsters also asked the National Mediation Board to consider whether ABX and ATI should be treated as one airline. We do not believe that any combination of ATSG's airlines is in the best interest of you, the shareholders, or the customers our airlines serve.

Except for these flight crew issues, the fourth quarter is shaping up to be very good for ATSG with several more aircraft entering service. I'm confident that if all parties act with the interest of our customers in mind, we can deliver great service and meet our $218 million adjusted EBITDA goal.

I'm even more confident about still more growth and good returns to shareholders in 2017 as we complete this phase of our fleet expansion and put more of our 767s in service. In addition to the five 767-300s we will lease to Amazon, we have customer demand for another five 300s for delivery during the second half of next year. We also learned that West Atlantic, our European affiliate, was recently awarded a five-year contract by the UK's Royal Mail Group that includes nine Boeing 737s and three ATP aircraft.

During the remainder of this year, we expect every one of our current available 767 freighters to be in service. And 42, or more than 80%, will be deployed under dry lease agreements with terms averaging more than four years.

I know I speak for the vast majority of our employees, including most of those in our pilot groups when I say that we are all dedicated to making ATSG stronger and a more rewarding place to work.

That concludes our prepared remarks. Ellen, we're ready for the first question.

(Operator Instructions) Our first question is from Jack Atkins with Stephens.

So I guess just to start off, ended up here with the comment to the end about the labor issues. I guess, obviously, there's some sensitivity on what you want to talk about there, but I guess how long do you think that these issues, Joe, could sort of drag out? You talked about in the fourth quarter, would you expect a similar level of additional expense from these issues in the fourth quarter? And is that something that could drag into next year?

Yes, Jack, we would expect probably a similar amount of impact on the fourth quarter numbers. But then it will start to taper off as we transition into 2017. Keep in mind that parties are still discussing how we can get past some of these issues. And if we're successful in that endeavor, it could lessen the impact in the fourth quarter.

Okay. Okay, that's great. Can you give us an update on your joint venture in China? Where do things stand there? And sort of when would you expect to start placing some aircraft into that JV? Is that some of the aircraft that you're talking about for 2017?

I'll throw that one over to Rich, Jack.

Thanks for the question. We went through a delay in the administrative process with the application in China. The CAC actually put a hold on applications in the middle of the year for about three or four months. The reason for the hold had to do with the number of AOC applications they were getting and what they wanted to do is put a stop on it, take a step back and look at how they wanted to see airlines grow in China.

They just recently, last month, lifted the hold and our application is back in full progress. The good thing that came out of the strategy points that they made as a result of their hiatus were that they were looking rather than just have airlines develop on both pax and cargo and develop in any airline market, servicing any airline market in China, they came out with some directions on what they were going to favor. In fact, they were favoring airlines that are directly within our strategy, looking for regional airlines, looking to support cargo airlines and looking to support airlines that are not looking to hub and base out of the major markets within China.

And if you recall, we're basing our airline out of Tianjin, which is about two hours' drive from Beijing, so it's a key port market in China that they're looking to develop cargo. So the good news is, we're right in that strike zone.

All that said, we're out of our delay right now. Our application has been accepted by the CAC, we're in the process of responding to questions that we're getting. In the meantime, we have a full commercial team developed that's been dealing and speaking with all of the express operators, in particular within China. And so we're hoping to have the airline up and flying sometime during 2017, most likely towards the third quarter.

And in terms of the commercial side, we do have also the opportunity that should we be successful to start commercial operations with our partner Okay first, and then move those operations over to the joint venture. So we're actively engaged with some of the larger express operators to see if we can get that commercial jump-started ahead of the JV.

And as far as aircraft go, Jack, none of the 767s we referred to would be for China right now, though the initial aircraft for the JV would be 737s, 757s in all likelihood.

Okay. Okay. Great. Thanks for the update on all that. I guess Richard or Joe, when you think about sort of the demand that really we're seeing globally for the 767-300, what are you guys seeing out there in terms of lease rates and lease renewal rates on your aircraft that are just in the marketplace? Are you seeing some upward bias to those lease rates as they come up for renewal? Just given limitations around feedstock, limitations around pilots, just sort of curious what you guys are seeing out there on that front.

A couple of things, Jack. The lease rates are hardening, I would say, and for a couple of reasons. One is, there's not a lot of opportunity out there with the large Amazon offer over two carriers, taking up a lot of feedstock and a lot of slots. The feedstock is getting more and more difficult to find. And really what we're seeing now is the feedstock is available at higher costs and so that is going to command a higher into-service cost overall and then the lease rates are going to be commensurately higher with that. And so we're seeing the lease rates.

Obviously, when you deal with a larger entity, taking more planes for longer terms, the lease rates may be a little bit different given the credit than with a smaller airline, taking a few airplanes where you have to risk -- you have to manage your risk in accordance with what the lease rate might be. But I would say the hardening for cost reasons and also for scarcity in the market.

The next question is from David Ross with Stifel.

Just wanted to follow up a little bit again on the pilot comp issue. You talked about the $6.5 million pre-tax impact, Quint. Yes, I know a lot of that has to do with the premium pay and the vacation issues with the pilots, but there was also mentioned something about ongoing training. I didn't know if you could split out, I guess, what their costs are, of the training that you would probably have anyway, which we could consider Amazon startup costs versus what's going on specifically with these labor issues where they're telling their pilots not to volunteer for certain routes and to get back vacation time.

Thanks for the question, David. You recall in the second quarter, at that time we cited the sort of the ramp up costs, which were -- at that time primarily new hire pilots in training also at about $2.6 million. Let's say that's come back just a little bit, that component in the third quarter as we've got everything in place for the training and got the process moving. So it's probably about a couple of million, say $2 million of the $6.5 million, is just sort of the ongoing ramp of people in training. As you grow into that, the full network and the other $4.5 million, call it is the premium pay issue that we --

Yes. So as we think about it, the premium pay issue we hope gets resolved, but it may be around in 4Q. So we wouldn't expect much of that in 2017. And the startup costs, because you'll have, all 20 aircraft deployed by middle of next year, you're probably going to have that for the first quarter of '17, but maybe not at all for 2Q? Or does it go through the middle of next year as well?

Yes, it'll continue to taper down, David. So as Quint said it was $2.7 million in the second quarter, about $2 million in the third quarter. And what you're really doing is saying I've got all these people, they are not really producing revenue because they are in training, but as we add aircraft into the mix, they transition out of training and we're being compensated for. So it's just that give-and-take in terms of revenue versus carrying costs. Certainly, the first quarter we'll have it. As mentioned, we'll have five aircraft going to Amazon in the first half of the year, but by the time we get to the second quarter, we'll be in the finishing touches of that.

Excellent. And then fuel expense doubled year-over-year. Can you just talk about why that was?

Yes, I mean it's driven primarily by the build-out of the Amazon network because we do -- and it's a pass-through item for us in the income statement, but we do fuel the aircraft as part of our agreements with them.

And then as far as the ACMI pretax earnings margin goes, how long should we expect that to remain negative? Is there a sightline to where that's actually going to be a positive margin at some point?

Yes. Certainly, in the near term, when you look at fourth quarter, we've talked about this in prior calls. We pulled back on maintenance -- scheduled heavy maintenance during the fourth quarter to maximize the air frames we have available for our customers. And so that's going to be helpful to the ACMI group in this fourth quarter. So I think you could see, we have a sightline there to sort of more of a breakeven-ish outcome in the fourth quarter for them. Certainly, the headwinds with the pilot premium pay is the thing that could negatively impact that.

As we move into next year, again, if we're as we would hope, able to resolve some of these ramp-up issues and the premium pay issue, I think that the airline ACMI Services segment does have a sightline to more of a breakeven or small single-digit profitability for the full year.

They're always going to be subject to the timing of maintenance events. We've talked about that as well in the past, where the policy, for example, of ABX Air has them expensing 767-200 airframe checks as they occur, and that can, in a given quarter, impact the ability -- the profitability of the group because we get paid for those and reimbursed in a revenue stream based upon more of a smooth line over the contract period with our customers. Next year should certainly be an improvement for the ACMI Services segment.

The next question is from Helane Becker with Cowen and Company.

It's actually Steve on for Helane. So I guess just a couple more questions on the pilots here. Are any of these issues kind of affecting hiring or any other ramp for Amazon or other customers?

No. Actually we haven't had any difficulty at all bringing people on board that we've brought on board, probably a net right now for 2016 of over 110 pilots against the base that was, call it 275 to 300 coming into the year. And the turnover has been almost nonexistent out of those group once they come on board. So we haven't seen any issues in that regard at all.

Okay. And then are you guys over hiring right now for - [there I see] four or the sorry, the five aircraft that you're replacing in the second half of 2017, are we going to see some kind of issues pop up with scheduling or just training in the second half as well.

Basically when we started into the hiring process for this ramp up of the Amazon business and heading into the peak season, we targeted not only meeting the requirements that we had for what would occur in this fiscal year, but also looking a little bit ahead to say, okay, the next airplane is coming out in the early of 2017, staff up for those as well because we anticipate, during peak season, that we'll have an additional need for pilot staffing for running extra sections, double turns, things of that nature if they should pop up, you don't want to be shorthanded. We'll say what wasn't anticipated at that time was the difficulties we've had with the ABX side of the equation. So we should be pretty well-positioned for the most part in the fourth quarter and in the first quarter, like I say things will start to taper down in terms of the carrying cost of ramping up.

Okay. And it's pretty well known to the kind of the current feedstock since like airlines are holding on the 767s longer. You guys said they're becoming more expensive. Do you guys have a new estimate, kind of what buying and then converting these 767s now costs?

From our standpoint, like so we got out ahead of the feedstocks. So when we talk about the fact that we have the five we need to deliver to Amazon next year plus the demand for five more, we have that feedstock already in hand. And we have a couple other extra aircraft at this point in time that we will be inducting through the modification process above and beyond those 10 that we already have.

So when you look at the cost for us, at least, through the end of 2017, they'll still be within that price range that we think makes the most sense in terms of total in-service costs, which is that $23 million to $25 million. If we get into 2018 and start looking to buy additional aircraft at that point in time, then we might anticipate that the costs would be up, but again, from our perspective, it's got to be within a range that makes sense so we'll get the requisite return we expect on that investment.

The next question is from Adam Ritzer with R.W. Pressprich.

I guess, just going back to the last caller or I guess so all the feedstock for next year is already purchased, you said, right? For all 10?

It's either purchased or we have a contract to acquire, one or the other.

Okay. So could you give us perhaps a quick look at what you think your CapEx will be for 2017 above and beyond, say your $70 million maintenance, which looks like it's going to be for this year?

Yes. Adam, in terms of the CapEx budget for next year, as we said, we had $315 million was our original target for this year. And of course, we've revised that to $285 million. So you kind of got, and that's more about the timing of when we're paying for the modification, the conversion, Cargo Conversion Services. So that's going to move into next year.

We had said last quarter that we envisioned pretty similar CapEx year-over-year in '17 as we had in '16. So if you think about $315 million, and you got some money moving over into the following year, you're probably in the, sort of the mid-300s in terms of overall CapEx, and that includes the maintenance CapEx, which could be around that same number that we're looking at this year.

And that still seems high, the five Amazon planes, they were already purchased, right?

Right. But when you think of it, the modification costs is about 50%, or more than 50% of the ultimate into service cost of the aircraft.

Okay. So the modification for the five Amazons has not been done yet?

No.

No.

Okay. So that's -- I got it. And then the five in the second half, is the feedstock purchased already?

No. Most of them are under contract to be purchased, but haven't been acquired yet.

Yes, we'll have aircraft that we own that are in some portion of their conversion process at the end of this year. So when we talk about 10 coming into service next year, that would imply there's three more you have to buy and convert, you have to pay for the conversion whatever you haven't done on those seven that are in process and --

And two beyond that.

Right.

Got it. Okay then there's two more beyond the five for Amazon, five in the second half, got it. Okay. Okay, great. Thanks.

And then getting back to you guys, you talked about your West Atlantic deal, they need nine 737s. Are you guys supplying any of that equipment into that transaction?

We possibly could, Adam. Right now, the first handful that they'll need to get the operation kick started, they already have lined up from a leasing entity other than ATSG at this point, but as they bring the additional ones online, there is certainly an opportunity for us to do that.

Okay. And plus it's positive for your equity investment as well, right?

Certainly.

Okay. And in China, you said also was going to potentially be a buyer of you said what - 737s and 757s?

Yes. Short-term 737s, 757s, and longer term, 767s.

Okay, got it. Okay. And then the other question is, I guess, your guidance implies are going to do like $62 million, $63 million EBITDA for Q4. So you're saying it's going to be another roughly $6 million, $6.5 million of pilot cost that's built into those numbers, right?

Yes. That would be a right number.

Okay. So you'll be pushing $70 million of EBITDA if it wasn't for those additional costs?

Would they absent those, yes, it would be pretty close to that.

Great. Okay. Have you ever done $60 million in a quarter before?

I believe, we did last year in fourth quarter.

(Operator Instructions) Our next question is a follow-up from Jack Atkins with Stephens.

The other activities revenue line, I guess, just a question on how we should think about the seasonality in that line. I think historically, there has been about a 10%, 15% or so sequential 3Q to 4Q increase in revenue there. Is that the right way to continue to think about the seasonality given the ramp and maintenance? And other logistic services? Or I'm just trying to make sure I'm thinking about that line correctly on a sequential basis.

Yes, I think the one difference that we have this year, Jack, is in that same line is the ramp-up for the gateways and hub operations that we're handling for Amazon. So yes, we would have our normal postal ramp-up. Maintenance gets a little bit flat because as we said, everybody wants their assets and service in the fourth quarter so that dips some, but when you look at these sequential quarter-over-quarter, going from second to third, a big chunk of that is going to be for the support of the Amazon network and that will continue to ramp up as aircraft come into service in the fourth quarter.

So I would think with that maybe you could see more the normal seasonality. I'm just trying to think about --

Yes. It'll be a bigger spike in that segment this year than it was in prior years.

Okay, okay, that's helpful. And then last one and I'll turn it over. Quint, what sort of a good baseline to think about for diluted share count in the fourth quarter, assuming stock price is roughly where it is today?

Well, we'll have some more warrants to vest when we put the -- you may recall that some of the vesting of the warrants we issued to Amazon are tied to the final, the 767-300 leases, that are the final 8 of the 20 aircraft and those sort of vest pro rata. And I think there's about 600 -- call it 640,000 warrants per tail that vest. We'll put three of those aircraft in service during the fourth quarter, sort of spaced out through the quarter. And so you'll get that pro rata that vest each time. So it's somewhere, I would think in the neighborhood of 65 million would be a good thing, a good share count to target, Jack.

And we have no further questions at this time. I'd like to turn the call back to Mr. Hete for closing statements.

Thanks, Ellen. As I said earlier, growth is good but execution is what really matters. Our leasing, maintenance and logistics businesses really show that we can leverage our diversified business model and solid balance sheet to generate significant cash flow during our ramp-up phase. We're doing that today at our AMES maintenance business, which will host the presidential campaign event in its main hangar this afternoon with just a day's notice. We're expecting a good peak season and looking forward to even more good growth and returns in 2017, when we will be deploying at least 10 more 767s to a market eager to lease them. Don't forget to vote on Tuesday, if you haven't already done so, and have a quality day.

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for participating and you may now disconnect.