Thank you, moderator. Good morning, and welcome to our fourth quarter and year end 2011 conference call.

I'm Joe Hete, President and Chief Executive Officer. With me today are Quint Turner, our Chief Financial Officer; Joe Payne, our Senior Vice President and Corporate General Counsel; and Rich Corrado, our Chief Commercial Officer.

Yesterday afternoon, we released our fourth quarter and year-end results and filed our 10-K with the SEC. Both are on our website, atsginc.com.

Since we talked last November, ATSG has completed a very solid year with record pretax earnings and EBITDA after adjusting for impairment and other financing-related charges. Our adjusted pretax earnings increased by $16 million or 27% to a record $75.8 million.

2011 revenues increased 9%, including increases for each of our 2 business segments and in each of our smaller businesses.

Our progress is continuing under the lease-based aircraft allocation strategy we adopted nearly 2 years ago. We added 10 more converted freighters to our fleet in 2011, leasing 4 more to outside customers and deploying the rest in ACMI or CMI service via our airlines for new and existing customers, and more on the way with at least 6 more 767s and 2 757 combis already in our 2012 deployment schedule.

You may have already noticed that we have tried to make our fleet size map a little easier for you to follow through a new table at the end of our earnings release. Similar to the aircraft tables in our 10-K, the new one shows our in-service fleet by aircraft type at the end of 2010, 2011 and provides our current outlook for what we have and expect to deploy or retire by the end of 2012.

You should not regard those 2012 totals as fixed commitments, but rather as the starting point against which we will provide update each quarter as the mix changes. Please stay tuned.

Our strategy is to grow, and we will be expanding our fleet in 2012.

Quint is standing by to begin our report with the details of our fourth quarter and year. I'll return after that with more operating and outlook comments.

Quint?

Thanks, Joe, and good morning, everybody. As I always do, I need to start by advising everyone that during the course of this call, we'll 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 may describe 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 the underlying assumptions, factors, new information or other changes.

These factors include, but aren't limited to, changes in market demand for assets and services; timely completion of additional Boeing 767 and 757 aircraft modifications scheduled during 2012; our continuing ability to place completed aircraft into commercial service; the availability and cost to apply our used passenger aircraft for freighter conversion and redeploy or sell surplus aircraft; our operating airline's ability to maintain on-time service and control cost; and our ability to restructure airline operations impacted by Schenker's reduction of its air cargo operations in 2011. There are also other factors contained from time to time on our filings with the SEC, including our 2011 Form 10-K and 10-Qs.

I'll also refer to non-GAAP financial measures from continuing operations, including EBITDA and adjusted EBITDA, as well as adjusted pretax earnings, which management believes are useful to investors in assessing ATSG's financial position and results. These non-GAAP measures are not meant to substitute for the GAAP financials, and we advise you to refer to the reconciliations to the GAAP measures, which we've included in our fourth quarter year-end news release, which can also be found on our website.

As Joe said, we achieved solid results in 2011, once again demonstrating the resiliency of our business model and the talents of our employees who put it into motion. The principal driver of our results is our ability to acquire, modify, deploy and operate profitably our converted midsize freighter aircraft, and we were very successful at that in 2011.

You'll see from the table that Joe mentioned that our in-service fleet at year end 2011 included 46 Boeing 767 and 757 aircraft, including 41 we own and 5 we lease from others. That is 9 more 767s and 10 more in total of those 2 aircraft types that we added at the end of 2010.

21 of them were deployed at the end of 2011 under dry lease agreements with outside customers. Those increases in aircraft deployed and revenue generating service are our signature achievement of 2011 and the principal sources of the strong cash flow that our model generated last year and is likely to do again this year.

And as Joe just said, stay tuned. More are on the way.

Turning to our financial results. Let me start with our pretax earnings from continuing operations, which for the fourth quarter rose 17% to $23.3 million.

Fourth quarter net earnings from continuing operations were $13.5 million or $0.21 per share, a 14% year-over-year increase. Revenues for the quarter were $166.5 million versus $178.6 million in the prior year period, which was a decrease of 7%.

That revenue includes reimbursements of our fuel expense from Schenker. Those reimbursement payments dropped sharply during the fourth quarter last year as our air operations for Schenker wound down.

Excluding reimbursed fuel and related expenses, however, our consolidated revenues still increased by 5%.

Revenues for the year rose 9% to $730.1 million, which included $160.7 million in reimbursements for fuel and related expenses. Net earnings from continued operations for the year were $23.9 million versus $39.9 million.

Pretax earnings from continuing operations were $40.9 million compared with pretax earnings of $63.3 million in 2010. Lower pretax earnings in 2011 compared with 2010 were primarily the result of one-time items.

Those included the $27.1 million in non-cash impairment -- asset impairment charges we took in the third quarter and a non-cash write-off of $2.9 million of unamortized debt issuance cost when we accepted terms for a new credit facility in the first quarter. We also recorded a net $4.9 million in unrealized losses on our interest rate swaps throughout the year.

Adjusted pretax earnings, a non-GAAP measure, looks at our results minus the 2011 items I just mentioned. Adjusted pretax was a record $75.8 million for 2011, a 27% increase over the $59.8 million in 2010.

That 2010 number excludes $3.5 million in earnings from severance and retention agreements in the first quarter of that year.

Adjusted EBITDA from continuing operations, which we continue to regard as the best measure of returns on the assets we deploy, was $48.1 million for the fourth quarter, including an adjustment to remove $556,000 in gain in interest rate swaps. That is up 4% from the $46.4 million in the fourth quarter of 2010.

For the year, adjusted EBITDA from continuing operations, including all of the one-time items mentioned before, was $180.8 million, up 9% from $165.7 million in 2010. The EBITDA adjustments are the same items included in the pretax earnings adjustments.

Turning to our operating results. I'm pleased to tell you that our leasing business, Cargo Aircraft Management, earned $16.7 million pretax, up 26% from the fourth quarter last year.

CAM's revenues in the fourth quarter were up 28% to $38.5 million. CAM ended the year with 52 owned aircraft available for service, which was 8 fewer than we had in service at the end of 2010.

The change is a net of the 8 767 and 757 aircraft that CAM added in 2011 minus the 8 DC-8s and 8 727s that were removed from service by the end of the year. Of CAM's 38 767s, 21 of them were under long-term dry leases with external customers with expiration dates between 2015 and 2018 and an average remaining lease term of approximately 5 years.

In addition to the 767s that CAM owns, our airlines were flying 5 more we leased from others. Again, you'll be better able to track these fleet mix changes over the course of the year in our 2012 projection scale included with our earnings release.

Joe will have more to say about what's in the pipeline in just a minute.

Turning to ACMI Services. Our revenues, excluding fuel and other reimbursable expenses, were $108.3 million for the quarter, down 1% from last year's fourth quarter.

Pretax earnings for the fourth quarter were $1.8 million compared to $6 million for the fourth quarter last year. The wind-down of DB Schenker's North American operations reduced our ACMI results during the fourth quarter and into the first quarter as we continued to face significant transition costs, primarily the migration of senior flight crew members from our DC-8 and 727s to our other aircraft types.

Still, our continuing ACMI business was relatively strong overall during the fourth quarter with benefits from the holiday season work we typically do for other carriers. Excluding revenues from Schenker for 2010 and 2011, fourth quarter ACMI revenues rose 14% from a year earlier to $96.5 million.

Fourth quarter block hours, excluding the Schenker business, increased 8%. The resulting increase in our average revenue per block hour mainly reflects the addition of 767-300s to our ACMI fleet.

As we said in our news release, the majority of those transitioning and related reorganization cost at ATI and CCIA will affect our 2012 results, along with an increase in pension expense related to ABX Air's frozen pension plans that we advised you about on our third quarter call, as well as increases in engine maintenance cost later on. Joe will elaborate on our efforts to improve these businesses and on our outlook for 2012 in a minute.

Our revenues from Other Activities rose 15% to $28 million in the quarter. The increase in revenues reflects additional aircraft maintenance projects and additional sort center management work for the U.S.

Postal Service since April of 2011. Pretax profits from our Other Activities totaled $4.3 million in the fourth quarter compared to $2.4 million a year earlier.

Overall, our operations continued to generate strong cash flow in 2011, up 21% to $136.1 million. Part of that was due to a smaller cash pension contribution in 2011 versus 2010.

But as I explained on our third quarter call, both the declining discount rate applied to pension obligation and the lower-than-targeted asset investment returns were expected to negatively impact both our funding obligations and pension expenses for 2012. We now anticipate that pension expense will be increased approximately $5.7 million on continuing operations in 2012, which will be spread ratably across our quarterly results during the year.

An additional $1.3 million of increased annual pension expense is anticipated to impact our discontinued operations. We expect to make approximately $25 million in cash contributions to the pension plans in 2012.

Our interest expenses on outstanding debt decreased $4.5 million in 2011. That decline reflects the more attractive rates available to us under our new credit facility, lower market interest rates and an increase in capitalized interest for aircraft undergoing freighter modification.

You should expect to see that increase in 2012 consistent with our supplemental borrowing to buy and convert more aircraft and in addition to the substantial operating cash we are using to fund those investments.

Interest rates on the company's variable unsubordinated debt decreased from an average of 2.9% in 2010 to 2.4% in 2011. A main contributor to our decreasing variable interest rate cost has been the improved pricing we have enjoyed under the terms of the credit facility we completed back in May of 2011.

Also favorably impacting pricing in the new facility is our continued low debt-to-EBITDA leverage ratio. During the year, $6.2 million were extinguished from the amortization of the remaining balance of the promissory note between ABX Air and DHL, leaving a $20.2 million balance on December 31.

As specified in the CMI agreement with DHL, this note will continue to decline by $1.6 million each quarter until fully extinguished as we continue to perform services for the remaining term of the CMI operating agreement.

The company's balance sheet remains very likely levered at below 2x adjusted EBITDA. This means that we have the needed liquidity and growth capacity to add to our aircraft fleet and achieve our desired return on investment capital targets.

In 2011, our capital expenditures almost doubled to $213.7 million from $110.7 million in 2010. The primary driver for the increase was growth and preparation of our fleet for future business as we spent $184.3 million to acquire and modify additional aircraft.

Most of the rest of our 2011 CapEx or $21.9 million went toward required heavy maintenance costs at our airlines that capitalize that spending.

We are projecting 2012's capital expenditures to be in a range of $180 million to $200 million. Again, the overwhelming majority of that will be used to buy and convert Boeing 767-300s and 757-200s.

Where we wind up in that range will depend on availability and price of feedstock aircraft, how quickly we can find and acquire suitable ones at prices that meet our criteria and how quickly they move through the cargo modification process. As we mentioned last November, the retirement of the vast majority of our legacy 727s and DC-8s will reduce our maintenance CapEx by approximately $15 million for 2012.

Our effective tax rate for continuing operations in the fourth quarter was 41.9% compared to 40.6% in the fourth quarter of 2010. For the full year, the effective tax rate was 41.6%, which was affected by a $2.8 million non-deductible goodwill impairment charge.

Excluding those charges, our 2011 effective tax rate was 39.2% versus 37% in 2010, which had been reduced by $400,000 for a deferred tax benefit.

As of December 31, 2011, the company had $97.9 million in operating loss carryforwards to offset future taxable income. We do not expect to pay federal taxes until 2014 or later.

Before I turn the call back to Joe, I want to echo Joe's confidence about our business and its prospects for the future. While we have trimmed our adjusted EBITDA guidance slightly for 2012, it's worth remembering that we still expect to acquire and deploy about the same number of aircraft this year as we did last year.

That commitment to keep investing in our fleet for future growth based on both the attractive economics and risk profile of converting and opportunistically operating medium-sized freighters and our opportunities to place them with customers around the world, are strong evidence that we are in this business for the long run.

And with that, I'll turn the call back to Joe Hete for his operating review and more on our outlook. Joe?

Thanks, Quint. As I mentioned at the outset, our results for 2011 were solid and we accomplished a great deal to strengthen us for the future.

Ever since March 2010 when we restructured our business to emphasize the dry-lease-based return rates as a foundation of our freighter aircraft business, the improvement in our cash-generating power has been dramatic. Our ability to earn a more consistent lease return on our aircraft, apart from many incremental returns from operating them, is a major driver of that improvement.

We are convinced that we are on the right track and that our formula is likely to provide -- to prove sustainable over the long term.

The wind-down of our direct relationship with Schenker's North American logistics network proceeded very much as we indicated it would last fall. As Schenker closes Toledo hub and wind down at their operations, it outsourced its remaining air freight requirements to DHL.

That means that we continue to support Schenker's customers indirectly to the extent their volume migrated into the DHL system. A few of our Schenker network aircraft began operating for DHL in January to expand DHL's network capacity to meet Schenker requirements.

Those aircraft, plus a few others that remain available as backups or for ad hoc service, means that we will continue to keep a handful of our 727s and DC-8s in service well into 2012.

Compared with the many challenges we faced from the huge DHL restructuring in 2008, our adjustment to the termination of the Schenker air network was much smoother. While we have lost the services of many talented airline employees, we are gratified that still many of them worked very hard throughout the wind-down period and met our commitments to both Schenker and DHL.

After Schenker, our ACMI business will be changing in several important respects. As in nearly all 767 and 757 operator, we can offer our aircraft with greater confidence in their performance while reducing our projected maintenance costs.

Our already good reputation for service quality will get even better. In addition, the phase out of our 727s and DC-8s will lead to a proportionally larger reduction in our flight crews.

767s and 757s only require 2-person crews compared with 3 for the 727s and DC-8s. So our operating efficiency will rise as well.

Some of that benefit will be coming a little later than expected. Our commitments to UPS through the holiday season delayed our ability to respond to the reductions in the Schenker network, which meant that we entered the first quarter with more crews than the seasonally soft first quarter requires.

Finally, this transaction has led us to take a closer look at how we structure and manage our airline operations. We're still studying our options, but so far, we have reduced the aggregate workforces at our 2 airlines that supported Schenker, ATI and CCIA by about 30%.

They continue for now as separately certificated airlines but will be sharing certain management and administrative resources. We will be looking for other ways to make ATI and CCIA even stronger this year as the year progresses.

These restructuring and delays in redeploying 2 aircraft freed up from outsourced network cutbacks, means we'll have a loss in our ACMI Services segment for the first quarter somewhat larger than we anticipated when we issued updated guidance last month.

As Quint mentioned, our CAM leasing segment keeps delivering outstanding cash flow and will do even better in 2012 with even more 767s under lease and a full year of returns from those we added last year. CAM will have at least 6 more 767s in service by the end of this year, including 2 we acquired last month.

Today, CAM's 767 deployment outlook includes the 1 767-200 we completed in the first quarter, 2 767-300s each in the second and third quarters, and 1 300 in the fourth. Our year end 2012 aircraft table also shows us picking up another 767-300 in June on an operating lease to meet customer demand.

We're hoping to buy even more 767s and 757s to keep our mod partners busy. All of our 767 additions will be of the extended range 300 variety as passenger airlines replace them with new 787s.

Any 757 freighters we add would be in addition to that 2 757 combis and mod now targeted for second half completion. The word we get from the Air Mobility Command continues be positive for our 757 combi.

Eventually, we expect 757 combis to replace our 4 DC-8 combis. But right now, our plans call for 2 of the DC-8 versions to remain in service into 2013.

On the new business front, I'm pleased to tell you that we will see an add to our operations in Asia with one 767 to be deployed there for a significant customer and the prospect of another later in the year. And we hope to deploy additional 767s to the Middle East.

A final word on that arrangement is expected in the next few weeks.

In our meetings with investors early this year, we described our outlook for 2012 as one of continuing improvement with a weak first quarter and progressive improvement as our ACMI service changes are completed and aircraft deployments ramp up. Quint also mentioned the additional pension expense and engine maintenance costs we will bear this year.

Overall, we still expect a good year in 2012 with an increase in adjusted EBITDA compared with 2011.

Amid all those issues, I want to leave with an indication of our sense of the tone of the market for our midsize aircraft, which remains more positive than the airfreight market in general based on what you might be reading and hearing elsewhere. Our customers' willingness to make commitments is growing as the year progresses.

2012 may not be as bright as we had hoped 6 months ago, but it's shaping up to be a good one and my optimism about our ability to generate strong cash flow by applying our strategic -- our strategy effectively remains intact.

Thank you. And now, moderator, we're ready to handle some questions.

So first off, I guess, to start off, could you maybe talk about how you expect 2012 to play out? So could you maybe provide a little bit of color for us on how you expect profitability to ramp sort of throughout the year?

I'm not asking you guys to give specific guidance per quarter, but I think it would be helpful for folks to understand sort of as you guys think about '12, how do you expect EBITDA to ramp towards your $190 million to $200 million goal?

Well, Jack, I think if you look at the way we started off 2011, it's probably a good benchmark. We had a low first quarter last year and then ramped up each successive quarter to finish strong up for the latter part of the year.

And I think you'll see a similar ramp up this year, although obviously, we're going to have to put up stronger numbers in the third and fourth quarters of 2012 than what we did in '11 in order to hit our target of $190 million to $200 million in EBITDA.

Okay, that's helpful. And then when I think about each plane that you are -- each new 767 that you're adding to your fleet, what's the incremental EBITDA on an annualized basis for each one of those planes that you're adding will add to 2Q results?

Jack, I think if you think about the -- of course the 767-200, which we now all have deployed, but remember, they weren't in-service for a full year last year. A lot of those came online during the year.

On an annualized basis, we think of those as sort of $3 million. And then depending upon what the plusses are, you can get some increase over that.

But a good kind of rule of thumb is $3 million annualized for 767-200. For 300, you're looking at more like $4 million plus on an annualized basis.

And again, some of that depends upon the -- whether we go with the straight dry lease deployment or a dry plus maintenance or a dry plus the full CMI.

Okay, that's helpful, Quint. And then when we think about sort of that ramp throughout the year towards your guidance goal of $190 million to $200 million, when you think about where you're going to exit the year at, maybe this will help folks sort of picture how the guidance -- how the year should ramp, but where do you think you're going to exit the year?

What sort of EBITDA run rate do you think you're going to exit to 2012? I know it's early, but any color there would be helpful, I think.

Yes. I mean, if you think about -- I guess, we spent some time talking about first quarter, being as that's the one that, I guess, clearest and focused since we're in March now, right?

And we always benchmark versus the prior year quarter. If you remember back first quarter of 2011 on an adjusted basis -- let's talk a minute about sort of our pretax earnings on an adjusted basis, as well as our adjusted EBITDA.

I think we had $37.8 million of adjusted EBITDA for the quarter and first quarter of '11. The adjustment, I think we added back some bank fees that we had charged off.

We think that in terms of our first quarter, we're probably looking at slightly below that. It's currently where we're thinking.

And as Joe mentioned, what that means is that you make that up. Remember, we're going to grow, we believe, year-over-year.

We're seeing for the year a range of $190 million to $200 million. So that sort of implies you're going to see a stronger third and fourth quarter than we saw, obviously, in 2011.

So if you think about the first quarter of 2011's pretax earnings, that was $11.4 million, and we had a tax rate of about $37.5 million. So if you think about on an EPS basis, I don't know, we were around 11%, call it, on a -- at that time.

And again, similar to EBITDA, we -- current target for first quarter for some of the reasons we pointed out would be a little weaker than that. And so that, again, implies that ramp.

In terms of exiting the year, again, we've got the full year impact of the 2011 aircraft. We've got the aircraft that we've talked about going online in 2012.

I think as we exit the year and just on an EBITDA basis, we'll probably be somewhere $55 million to $60 million in that range.

Okay, that's very helpful. Last question for me and I'll jump back in queue.

Quint, could you maybe talk about the tax rate in the quarter and what sort of drove that up versus where you've been tracking on adjusted basis all year? And then what sort tax rates should we expect for modeling purposes in 2012?

Yes, the -- of course, we had the -- third quarter, we charged off $2.8 million of non-deductible goodwill, which drove the effective rate up. I would say when you model it -- and I think in the remarks we had prepared, I think we said on an adjusted basis, we were around 39% for the year 2011.

So we're probably in the 30% -- 38.5% to 39% range for 2012.

This is Sterling in for Alex. So with the aircraft count, I thought there were 16 aircraft that were originally under contract with BAX.

But when I look at that table where you give the fleet profile, if I total the DC-8s and 727s, I see 24 in 2010 and that goes to 7 in 2012. So that's a reduction of 17.

So can you help me understand that?

We had other DC-8s out, Sterling, besides the ones that were tied into BAX. We had 4 aircraft in total, I think, that we were operating, using for military charters and ad hoc work.

So the 16 still is a number that apply to the BAX piece. So it's just we reduced the total number that we have available for ad hoc work through 2012.

So how many aircraft were reduced for ad hoc work?

Basically, through the course of the year last year, we reduced 1. We had 4, then we went to 3.

And then would have gone from 3 to 2 for 2012.

Okay, and that's work with military?

Military and others.

And others, okay. So you're still reducing, what, the original BAX order aircraft by 14.

Is that right?

We had the, there's 2 727s that are still operating that were part of the BAX network, although they're operating for DHL today. All of the DC-8s that we're operating for BAX are out of service at this point.

Okay. And those 2 727s are expected to continue operating with DHL?

Right now, all indications are unless they decide they want to replace those with 757, for example, to get a newer generation aircraft, although as we sit here right now, we said we have nothing definitive along those lines. So we're anticipating those 2 72s running through the balance of the year.

Okay. Joe, so the 2 72s that you added to DHL, that's a lot -- I don't know.

I won't say a lot, but that's less than what you had anticipated to bulk up the DHL contract with after BAX closed down the U.S. operations.

So can you help us understand what happened there? Why didn't DHL either get the freight that they were expecting or they didn't need the aircraft to outsource it to you guys?

Keep in mind, nobody knew at the time that BAX closed down their network how much of their business they would be able to retain when they combined efforts with DHL. As you recall, we went from 8 DC-8s and 8 727s down to 5 DC-8s and 3 727s by the time they closed down Toledo.

Then the DC-8s were further reduced in the October timeframe. As things shook out, we added one additional 767-200 into the DHL network, essentially call it to replace one of those DC-8s, in the November timeframe.

So realistically, we added 3 aircraft -- or kept 3 aircraft going, although the 8s were replaced by a 767 and we kept the 2 727s.

Okay. Joe, I wanted to ask, in the press release, you mentioned that CAM has no external leases expiring before 2015.

Can you also talk about the ACMI contracts? What expires in the next year or 2 on that side of the business?

If you look at the CAM piece, we did have one lease to expire in June of this year and the customer just renewed that this month. So it's going out for another 3 years from June of 2012.

On the ACMI side, we don't usually get into expirations on those since most of the agreements, Sterling, tend to be a year in duration and their constantly rolling over. So I would say that if you looked at where we're at today, probably half of the aircraft that we have on the ACMI side are going to come up for a renewal, so to speak, at some point in time during the year.

That said, keep in mind that we have aircraft out there that's been on 1-year agreements that have been going on for 7 or 8 years, continuously. So we don't tend to focus too much on how many are coming up just because they are constantly turning over.

Okay, that's very helpful. Joe, I just have one last one.

The 767-300s that you're adding over the course of 2012, can you give us an idea of the pace of the adds quarter by quarter through the year? Is it back-end loaded?

Is it relatively equal through the year?

Now there's 2 in the second quarter, 2 in the third quarter and 1 in the fourth quarter based on what we have -- that we own today. That doesn't take into account any potential additional acquisitions we might do.

Guys, just a couple of quick guidance here. First, could you maybe just talk a little bit more about the availability of 767-300 feedstock.

I got the sense from your press release that you would be willing to use your balance sheet to aggressively acquire feedstock if it became available. I was just wondering if you could maybe talk for a minute about what you're seeing out there as far as opportunities to acquire passenger aircraft sort of within your hurdle rates?

I think right now, Jack, it's best to say that market hasn't loosened a bit in terms of available feedstock. The 2 that we closed on this year so far essentially were aircraft that we started working on the latter part of last year.

And right now, nothing on the horizon that I can say would be something that we would have in our sights as being able to close on in the near term. So still not much in the way of aircraft coming available with the 787s coming into service.

Now that said, we also are seeing some demand for 757s. And so we are assessing that market as well as potential investment candidates.

Okay, that's helpful. And then maybe if you could just talk for a moment about sort of the military charter business and what's the outlook for that business in 2012 as you talk to your customer there, the U.S.

Military.

We don't do a lot other than the combi business. I mean, we do some ad hoc work here and there.

I know both ABX and ATI will run routes down to Guantánamo Bay in Cuba, for example. That's a regularly scheduled route, and we do that quite a few times during the year.

But when you look at the combi piece of business, as we advised last year on our last call, we're -- we've got the combi bid locked up through the end of June. And the first time they would open the door for somebody else to potentially bid on that would be for the -- our third quarter, military fourth quarter this year, the July to September timeframe.

And then the next bid going out would be for fiscal '13 and '14. This is the first time the military will do more than a 1-year deal, and we expect to be able to have ready for that bid period at least 2 757 combis to present to the military the new modern version of the legacy DC-8s out there.

Right now, everything -- like I said, we're -- everything we hear. So that's going to come to pass because obviously, we still have to finish the modification and certification of our first aircraft.

Right now, that's anticipated to take place in the third quarter. And the second aircraft would complete its modification right around the start of the -- our fiscal fourth quarter, first fiscal quarter for the military.

Okay, that's helpful. And one last question, if I could just jump back to the 767 feedstock issue for a moment.

What leverage level would you feel comfortable going up to if you were able to find a decent number of planes available for purchase? If you could sort of give us some color on sort of how you'd be willing to get your balance sheet if the opportunity came along?

Well, Jack, in terms of -- of course, first off, where we sit now is, as we said, slightly under 2x EBITDA on an adjusted basis. We have, of course, this year, we have added some debt.

We ended up, I think, with about $347 million of debt at the end of the year, approximately. And the plan we have with the $180 million to $200 million of CapEx is going to result in us, again, adding some debt during 2012.

I think it's going to put us between 2x and 2.25x in terms of our EBITDA leverage, just with the plan that's sort of on the table. If we got more aggressive, as Joe said, we do feel comfortable levering more than that.

Certainly, 2.5x to 3x is not an impossible leverage for us. However, in terms of our borrowing capacity, we are likely to -- as you know, we had $175 million revolver.

I think if we were to do that -- in fact, even if we don't do that, we'll probably go ahead and expand the size of that revolver. We'll seek to expand our revolver using the accordion and adding another $50 million of headroom on top of $175 million.

And of course, there are other financing sources that are available to us based on our balance sheet, our collateral, et cetera. So we're -- we've got a lot of room to grow if the opportunities present themselves.

Jack, if you go back, we entered the CHI acquisition at the end of 2007. We levered up to about 3x EBITDA at that point.

It's actually Conor in for Helane. I had a quick question.

So cargo demand has kind of weakened over the past several months. I'm just kind of curious on what are you guys' thoughts on lease rates are and rates are in general?

I've seen that you have 50% turnover in your ACMI stuff.

I'll turn that one over to Rich Corrado, our Chief Commercial Officer. Rich?

Yes, airfreight growth has been flat through the first quarter of year over 2011. There was an uptick in growth in November and December, but it's remained flat.

That's put a little pressure on freight rates. One of the things that's bolstered our pipeline has been their attractiveness of the replacement characteristics of the 767 aircraft.

If you look at our pipeline, our top 3 opportunities, in fact, are opportunities where the -- either a 767-300 or 767-200 are projected to replace older aging aircraft. And I think it speaks well to the strength of the 767 asset in our overall strategy.

So although demand is soft, our pipeline remains bolstered by the attractiveness of our assets.

Great. And just a quick follow-up, have you guys thought about 2013 CapEx and kind of where you're thinking of growing and anything surrounding that?

Some color would be great.

The nice thing, I guess, is, Conor, that the -- in terms of committed CapEx based on the plan that we have in the aircraft that are in mod, while we're projecting that $180 million to $200 million for 2012, if you think about what's kind of implied based on the assets we have to complete modification on for 2013, there's not a lot of committed CapEx. It would be under -- probably under $100 million, call it $90 million to $100 million.

Now that said, all that means is, of course, that we'll be looking for -- to opportunistically grow. And with the introduction of the 787 and the number of 767-300s out there in the world's fleet, we do expect that feedstock problem to lessen and we'll have opportunity to insert some additional growth aircraft into that 2013 capital plan.

The other thing, we'll be looking at the latter part of 2012 and the 2013 timeframe depending upon how the bid process goes. We have 2 757 combis we'll put in service this year.

We actually operate 4 DC-8s today. So if we are successful in retaining all of that business, we will look to have to increase that number of 757 combis as well, which would fall into the 2013 cap budget.

I want to thank all of our investors for their support in 2011, another good year for ATSG, and tell you that we're very committed to making 2012 even better as we expand our position as the leading independent source of converted, wide-body 767 freighters. We will be on the road meeting with many of you to talk about our unique dry leasing plus ACMI model, and why the future cash flow streams, it can produce -- should have a set of better stock price multiples than we have today.

If you live in a Super Tuesday primary state, don't forget to vote and have a quality day.