Aircastle Limited
May 4, 2011
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Aircastle Announces First Quarter Results

Highlights

STAMFORD, Conn., May 4, 2011 /PRNewswire via COMTEX/ -- Aircastle Limited (the "Company" or "Aircastle") (NYSE: AYR) reported first quarter 2011 net income of $42.7 million, or $0.54 per diluted common share, and adjusted net income of $32.9 million, or $0.41 per diluted common share.

 

Commenting on the results, Ron Wainshal, Aircastle's CEO, stated: "During the first quarter, Aircastle sustained its consistently strong portfolio performance, and the company's financial results started to reflect more fully the positive impact of the $500 million we invested in 2010. We also made progress expanding our asset base to further enhance our future earnings prospects. Our new Airbus A330 deliveries are coming on line as planned and, so far this year, we acquired or signed letters of intent to acquire five additional aircraft, three of which are Boeing 747-400s which we intend to convert into freighter configuration. At the same time, we are continuing to pursue asset sales selectively to take advantage of the market recovery and support our long-term goal of generating strong risk adjusted returns."

__________________

(1) Refer to the selected financial information accompanying this press release for a reconciliation of GAAP to Non-GAAP numbers.

First Quarter Results

Lease rental revenue for the first quarter was $141.1 million, up by $11.0 million, or 8%, year-over-year, due primarily to the impact of aircraft acquisitions net of dispositions of $14.9 million. The increase was partially offset by lower lease rentals due to lease terminations of $2.1 million and lease transitions and extensions of $1.8 million.

Total revenues for the first quarter were $157.9 million, up by $27.4 million year-over-year. The increase reflects higher lease rental revenue as discussed above, as well as higher maintenance and other revenue totaling $14.6 million, driven mainly by early lease terminations during the first quarter of 2011. As previously mentioned, during the first quarter of 2011, Aircastle executed early terminations for five leases - four Airbus A320-200 aircraft leased to an airline based in Egypt and one Airbus A319-100 aircraft leased to an airline in Jordan. Since the end of the first quarter, we have commitments to lease two of these A320s and the A319 aircraft to two different customers. We are remarketing the other aircraft actively.

EBITDA for the first quarter was $154.3 million, up by $33.1 million from the first quarter of 2010, reflecting higher lease rental revenue of $11.0 million as well as increases totaling $14.6 million in maintenance and other revenue. The increase in EBITDA also includes a gain of $9.7 million from the sale of four Boeing 737-400SF aircraft. These increases were partially offset by an increase in SG&A, maintenance and other costs totaling $2.2 million.

Adjusted net income plus depreciation and amortization for the quarter was $95.6 million, a year-over-year increase of $16.0 million. This was due primarily to an increase of $11.0 million in lease rental revenue as well as increases in maintenance and other revenues totaling $14.6 million, partially offset by an increase in adjusted interest expense of $6.4 million and an increase in SG&A and maintenance and other costs of $2.2 million.

Adjusted net income for the quarter was $32.9 million, up $12.3 million year-over-year, reflecting an increase of $27.4 million in total revenues, partially offset by an increase of $5.4 million in depreciation, $6.4 million in adjusted interest expense and $2.2 million in SG&A and maintenance and other costs.

Aviation Assets

In the first quarter of 2011, we completed the sale of four Boeing 737-400SF freighter aircraft for a net gain of $9.7 million and we took delivery of two Airbus A330-200 passenger aircraft, which are on lease to South African Airways.

As of March 31, 2011, Aircastle owned 134 aircraft having a net book value of $4.1 billion.


 

Owned Aircraft

as of

March 31,

2011(A)

 

113 Passenger Aircraft

69%

 

21 Freighter Aircraft

31%

 

Number of Lessees

63

 

Number of Countries

34

 

Weighted Average Remaining Lease Term (years)(B)

4.7

 

Percentage of Aircraft Leased Outside U.S.

92%

 

Percentage of "Latest Generation" Aircraft

92%

 

Weighted Average Fleet Utilization during the three months ended March 31, 2011(C)

99%

 


 

(A) Percentages calculated using net book value.

(B) Weighted average remaining lease term (years) by net book value.

(C) Aircraft on-lease days as a percent of total days in period weighted by net book value, excluding aircraft in freighter conversion.


 
   

Financing Update

In February 2011, we entered into a $72.8 million 12-year term loan with Sumitomo Mitsui Banking Corporation. The loan is supported by a guarantee from COFACE for the financing of a new Airbus A330-200 passenger aircraft. This financing bears interest at a fixed rate of 3.7875%. In March 2011, we entered into a $72.9 million 12-year term loan with Sumitomo Mitsui Banking Corporation. The loan is supported by a guarantee from COFACE for the financing of a new Airbus A330-200 passenger aircraft. This financing bears interest at a fixed rate of 3.7344%.

Share Repurchase Program

As of March 31, 2011, Aircastle repurchased 1.3 million of its shares at a total cost of $15.0 million. As of April 29, we repurchased an additional 1.6 million common shares for a total cost of $19.9 million.

Conference Call

In connection with this earnings release, management will host an earnings conference call on Wednesday, May 4, 2011 at 10:00 A.M. Eastern time. All interested parties are welcome to participate on the live call. The conference call can be accessed by dialing (866) 510-4578 (from within the U.S.) or (706) 634-9537 (from outside of the U.S.) ten minutes prior to the scheduled start and referencing the "Aircastle First Quarter Earnings Call."

A simultaneous webcast of the conference call will be available to the public on a listen-only basis at www.aircastle.com. Please allow extra time prior to the call to visit the site and download the necessary software required to listen to the internet broadcast. A replay of the webcast will be available for three months following the call. In addition to this earnings release an accompanying PowerPoint presentation has been posted to the Investor Relations section of Aircastle's website.

For those who are unable to listen to the live call, a replay will be available until 11:59 P.M. Eastern time on Saturday, June 4, 2011 by dialing (800) 642-1687 (from within the U.S.) or (706) 645-9291 (from outside of the U.S.); please reference pass code "60683997".

About Aircastle Limited

Aircastle Limited is a global company that acquires, leases and sells high-utility commercial jet aircraft to airlines throughout the world. As of March 31, 2011 Aircastle's aircraft portfolio consisted of 134 aircraft and had 63 lessees located in 34 countries.

Safe Harbor

Certain items in this press release and other information we provide from time to time, may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, but not necessarily limited to, statements relating to our ability to acquire, sell, lease or finance aircraft, raise capital, pay dividends, and increase revenues, earnings, EBITDA, Adjusted Net Income and Adjusted Net Income plus Depreciation and Amortization and the global aviation industry and aircraft leasing sector. Words such as "anticipates," "expects," "intends," "plans," "projects," "believes," "may," "will," "would," "could," "should," "seeks," "estimates" and variations on these words and similar expressions are intended to identify such forward-looking statements. These statements are based on management's current expectations and beliefs and are subject to a number of factors that could lead to actual results materially different from those described in the forward-looking statements; Aircastle Limited can give no assurance that its expectations will be attained. Accordingly, you should not place undue reliance on any forward-looking statements contained in this press release. Factors that could have a material adverse effect on our operations and future prospects or that could cause actual results to differ materially from Aircastle Limited's expectations include, but are not limited to, significant capital markets disruption and volatility, which may adversely affect our continued ability to obtain additional capital to finance our working capital needs; volatility in the value of our aircraft or in appraisals thereof, which may, among other things, result in increased principal payments under our term financings and reduce our cash flow available for investment or dividends; general economic conditions and business conditions affecting demand for aircraft and lease rates; our continued ability to obtain favorable tax treatment in Bermuda, Ireland and other jurisdictions; our ability to pay dividends; high or volatile fuel prices, lack of access to capital, reduced load factors and/or reduced yields, operational disruptions or unavailability of capital caused by political unrest in North Africa, the Middle East or elsewhere, and other factors affecting the creditworthiness of our airline customers and their ability to continue to perform their obligations under our leases; termination payments on our interest rate hedges; and other risks detailed from time to time in Aircastle Limited's filings with the SEC, including "Risk Factors" as previously disclosed in Aircastle's 2010 Annual Report on Form 10-K, and in our other filings with the SEC, press releases and other communications. In addition, new risks and uncertainties emerge from time to time, and it is not possible for Aircastle to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Such forward-looking statements speak only as of the date of this press release. Aircastle Limited expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.

Aircastle Limited and Subsidiaries

Consolidated Balance Sheets

(Dollars in thousands, except share data)

(Unaudited)

 

December 31,

March 31,

 

2010

2011

 


(Unaudited)

 

ASSETS



 

Cash and cash equivalents

$ 239,957

$ 240,275

 

Accounts receivable

1,815

1,447

 

Restricted cash and cash equivalents

191,052

191,361

 

Restricted liquidity facility collateral

75,000

71,000

 

Flight equipment held for lease, net of accumulated depreciation of $785,490

and $835,642

4,065,780

4,120,309

 

Aircraft purchase deposits and progress payments

219,898

186,009

 

Other assets

65,557

72,300

 

Total assets

$4,859,059

$4,882,701

 



 

LIABILITIES AND SHAREHOLDERS' EQUITY



 

LIABILITIES



 

Borrowings from secured and unsecured financings (including borrowings of

ACS Ireland VIEs of $314,877 and $310,573, respectively

$2,707,958

$2,748,906

 

Accounts payable, accrued expenses and other liabilities

76,470

63,847

 

Dividends payable

7,964

7,857

 

Lease rentals received in advance

43,790

38,955

 

Liquidity facility

75,000

71,000

 

Security deposits

83,241

82,391

 

Maintenance payments

342,333

327,994

 

Fair value of derivative liabilities

179,585

155,363

 

Total liabilities

3,516,341

3,496,313

 



 

Commitments and Contingencies



 



 

SHAREHOLDERS' EQUITY



 

Preference shares, $.01 par value, 50,000,000 shares authorized, no shares issued and outstanding

--

--

 

Common shares, $.01 par value, 250,000,000 shares authorized, 79,640,285 shares issued and outstanding at December 31, 2010; and 78,568,761 shares issued and outstanding at March 31, 2011

796

783

 

Additional paid-in capital

1,485,841

1,468,401

 

Retained earnings

104,301

139,121

 

Accumulated other comprehensive loss

(248,220)

(221,917)

 

Total shareholders' equity

1,342,718

1,386,388

 

Total liabilities and shareholders' equity

$4,859,059

$4,882,701

 

 
     

Aircastle Limited and Subsidiaries

Consolidated Statements of Income

(Dollars in thousands, except per share amounts)

(Unaudited)

 

Three Months Ended

March 31,

 

2010

2011

 

Revenues:



 

Lease rental revenue

$130,122

$141,116

 

Amortization of net lease discounts and lease incentives

(4,845)

(3,102)

 

Maintenance revenue

5,254

16,844

 

Total lease rentals

130,531

154,858

 

Other revenue

30

3,056

 

Total revenues

130,561

157,914

 



 

Expenses:



 

Depreciation

54,145

59,591

 

Interest, net

40,959

45,619

 

Selling, general and administrative (including non-cash share based payment expense

of $1,782, and $1,895, respectively)

11,673

12,531

 

Maintenance and other costs

2,200

3,530

 

Total expenses

108,977

121,271

 



 

Other income (expense):



 

Gain on sale of flight equipment

--

9,662

 

Other

(370)

(359)

 

Total other income (expense)

(370)

9,303

 



 

Income from continuing operations before income taxes

21,214

45,946

 

Income tax provision

2,335

3,269

 

Net income

$ 18,879

$ 42,677

 



 



 

Earnings per common share - Basic

$ 0.24

$ 0.54

 



 

Earnings per common share - Diluted

$ 0.24

$ 0.54

 



 

Dividends declared per share

$ 0.10

$ 0.10

 

 
     

Aircastle Limited and Subsidiaries

Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)

 


Three Months Ended

March 31,

 

2010

2011

 

Cash flows from operating activities:



 

Net income

$ 18,879

$ 42,677

 

Adjustments to reconcile net income to net cash provided by operating activities:



 

Depreciation

54,145

59,591

 

Amortization of deferred financing costs

2,804

3,528

 

Amortization of net lease discounts and lease incentives

4,845

3,102

 

Deferred income taxes

1,234

1,853

 

Non-cash share based payment expense

1,782

1,895

 

Cash flow hedges reclassified into earnings

2,304

2,835

 

Ineffective portion of cash flow hedges

866

(475)

 

Security deposits and maintenance payments included in earnings

(267)

(18,534)

 

Gain on sale of flight equipment

--

(9,662)

 

Other

370

(57)

 

Changes in certain assets and liabilities:



 

Accounts receivable

(346)

1,288

 

Restricted cash and cash equivalents

(22,185)

(309)

 

Other assets

(946)

(731)

 

Accounts payable, accrued expenses and other liabilities

(9,309)

(17,416)

 

Lease rentals received in advance

(2,464)

(5,381)

 

Net cash provided by operating activities

51,712

64,204

 



 

Cash flows from investing activities:



 

Acquisition and improvement of flight equipment and lease incentives

(10,136)

(110,410)

 

Proceeds from sale of flight equipment

--

75,200

 

Aircraft purchase deposits and progress payments

(39,551)

(36,630)

 

Net cash used in investing activities

(49,687)

(71,840)

 



 

Cash flows from financing activities:



 

Repurchase of shares from directors and employees

(926)

(16,367)

 

Proceeds from term debt financings

--

157,161

 

Securitization and term debt financing repayments

(37,929)

(116,340)

 

Deferred financing costs

(106)

(7,346)

 

Restricted secured liquidity facility collateral

1,000

4,000

 

Secured liquidity facility collateral

(1,000)

(4,000)

 

Security deposits received

2,413

7,009

 

Security deposits returned

(3,868)

(5,312)

 

Maintenance payments received

31,186

27,487

 

Maintenance payments returned

(5,906)

(30,374)

 

Dividends paid

(7,955)

(7,964)

 

Net cash (used in) provided by financing activities

(23,091)

7,954

 



 

Net increase (decrease) in cash and cash equivalents

(21,066)

318

 

Cash and cash equivalents at beginning of period

142,666

239,957

 

Cash and cash equivalents at end of period

$121,600

$240,275

 

 
     

Aircastle Limited and Subsidiaries

Supplemental Financial Information

(Amount in thousands, except per share amounts)

(Unaudited)

 

Three Months Ended

March 31,

 

2010


2010

 




 

Revenues

$130,561


$157,914

 




 

EBITDA

$121,163


$154,258

 




 

Adjusted net income

$ 20,563


$ 32,899

 




 

Adjusted net income allocable to common shares

$ 20,243


$ 32,522

 

Per common share - Basic

$ 0.26


$ 0.41

 

Per common share - Diluted

$ 0.26


$ 0.41

 




 

Adjusted net income plus depreciation and amortization

$ 79,553


$ 95,592

 




 

Adjusted net income plus depreciation and amortization allocable to common shares

$ 78,317


$ 94,496

 

Per common share - Basic

$ 1.00


$ 1.20

 

Per common share - Diluted

$ 1.00


$ 1.20

 




 

Basic common shares outstanding

78,416


78,786

 

Diluted common shares outstanding

78,416


78,786

 

 
         

Refer to the selected financial information accompanying this press release for a reconciliation of GAAP to Non-GAAP information.

Aircastle Limited and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures

EBITDA Reconciliation

(Dollars in thousands)

(Unaudited)

 

Three Months Ended

March 31,

 

2010

2011

 



 

Net income

$ 18,879

$ 42,677

 

Depreciation

54,145

59,591

 

Amortization of net lease discounts and lease incentives

4,845

3,102

 

Interest, net

40,959

45,619

 

Income tax provision

2,335

3,269

 

EBITDA

$121,163

$154,258

 

 
     

We define EBITDA as income from continuing operations before income taxes, interest expense, and depreciation and amortization. We use EBITDA to assess our consolidated financial and operating performance, and we believe this non-GAAP measure is helpful in identifying trends in our performance. Using EBITDA assists us in comparing our operating performance on a consistent basis by removing the impact of our capital structure (primarily interest charges on our outstanding debt) and asset base (primarily depreciation and amortization) from our operating results.

Aircastle Limited and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures

Adjusted Net Income plus Depreciation and Amortization Reconciliation

(Dollars in thousands)

(Unaudited)

 

Three Months Ended

March 31,

 

2010

2011

 



 

Net income

$18,879

$42,677

 

Ineffective portion of cash flow hedges(1)

1,314

(475)

 

Mark to market of interest rate derivative contracts(2)

370

359

 

Gain on sale of flight equipment(2)

--

(9,662)

 

Adjusted net income

20,563

32,899

 

Depreciation

54,145

59,951

 

Amortization of net lease discounts and lease incentives

4,845

3,102

 

Adjusted net income plus depreciation and amortization

$79,553

$95,592

 

__________________

(1) Included in Interest, net

(2) Included in Other income (expense)


 
     

Management believes that Adjusted Net Income ("ANI") and Adjusted Net Income plus Depreciation and Amortization ("ANIDA"), when viewed in conjunction with the Company's results under GAAP and the above reconciliation, provide useful information about operating and period-over-period performance, and provide additional information that is useful for evaluating the underlying operating performance of our business without regard to periodic reporting elements related to interest rate derivative accounting as well as gains/(losses) related to flight equipment and debt investments. Additionally, management believes that ANIDA provides investors with an additional metric to enhance their understanding of the factors and trends affecting our ongoing cash earnings, from which capital investments are made, debt is serviced and dividends are paid. However, ANI and ANIDA are not measures of financial performance or liquidity under GAAP and, accordingly, should not be considered as alternatives to net income (loss) or cash flow from operating activities as indicators of operating performance or liquidity.

Aircastle Limited and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures

Reconciliation of Net Income Allocable to Common Shares

(In thousands)

(Unaudited)

 

Three Months Ended

March 31, 2011

 

Shares


Percent(2)

 

Weighted average shares




 

Common shares outstanding - Basic

78,786


98.85 %

 

Unvested restricted common shares outstanding

913


1.15 %

 

Total weighted average shares outstanding

79,699


100.00 %

 




 

Common shares outstanding - Basic

78,786


100.00 %

 

Effect of dilutive shares(1)

--


--

 

Common shares outstanding - Diluted

78,786


100.00 %

 




 

Net income allocation




 

Net income

$42,677


100.00 %

 

Distributed and undistributed earnings allocated to unvested restricted shares

(489)


(1.15)%

 

Earnings available to common shares

$42,188


98.85 %

 




 

Adjusted net income allocation




 

Adjusted net income

$32,899


100.00 %

 

Amounts allocated to unvested restricted shares

(377)


(1.15)%

 

Amounts allocated to common shares

$32,522


98.85 %

 




 

Adjusted net income plus depreciation and amortization allocation




 

Adjusted net income plus depreciation and amortization

$95,592


100.00 %

 

Amounts allocated to unvested restricted shares

(1,096)


(1.15)%

 

Amounts allocated to common shares

$94,496


98.85 %

 

(1) The Company had no dilutive common share equivalents for the periods presented.

(2) Percentages rounded to two decimal places.


 
         

Aircastle Limited and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures

Reconciliation of Net Income Allocable to Common Shares

(In thousands)

(Unaudited)

 

Three Months Ended

March 31, 2010

 

Shares


Percent(2)

 

Weighted average shares




 

Common shares outstanding - Basic

78,416


98.45 %

 

Unvested restricted common shares outstanding

1,238


1.55 %

 

Total weighted average shares outstanding

79,654


100.00 %

 




 

Common shares outstanding - Basic

78,416


100.00 %

 

Effect of dilutive shares(1)

--


--

 

Common shares outstanding - Diluted

78,416


100.00 %

 




 

Net income allocation




 

Net income

$18,879


100.00 %

 

Distributed and undistributed earnings allocated to unvested restricted shares

(293)


(1.55)%

 

Earnings available to common shares

$18,586


98.45 %

 




 

Adjusted net income allocation




 

Adjusted net income

$20,563


100.00 %

 

Amounts allocated to unvested restricted shares

(320)


(1.55)%

 

Amounts allocated to common shares

$20,243


98.45 %

 




 

Adjusted net income plus depreciation and amortization allocation




 

Adjusted net income plus depreciation and amortization

$79,553


100.00 %

 

Amounts allocated to unvested restricted shares

(1,236)


(1.55)%

 

Amounts allocated to common shares

$78,317


98.45 %

 

(1) The Company had no dilutive common share equivalents for the periods presented.

(2) Percentages rounded to two decimal places.


 
         

Contact:
Michael Inglese - Chief Financial Officer
Tel: +1-203-504-1063

The IGB Group
Leon Berman
Tel: +1-212-477-8438
lberman@igbir.com

SOURCE Aircastle Limited