Aircastle Limited
Feb 27, 2009
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Aircastle Announces Fourth Quarter and Full Year 2008 Results

Fourth Quarter Highlights

Full Year Highlights

--------------------------------------

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

STAMFORD, Conn., Feb. 27 /PRNewswire-FirstCall/ -- Aircastle Limited (the "Company" or "Aircastle") (NYSE: AYR) reported fourth quarter net income of $24.7 million, or $0.32 per diluted share and adjusted net income of $46.6 million, or $0.60 per diluted share. Net income for the year ended December 31, 2008 was $115.3 million or $1.48 per diluted share and adjusted net income for the year of $150.9 million, or $1.94 per diluted share.

Fourth quarter total revenues were $157.8 million, an increase of $37.1 million or 30.7% over fourth quarter 2007. Fourth quarter lease rental revenue was $137.1 million, up 17.1% year over year, driven by growth in our flight equipment. During the quarter we recorded end of lease maintenance revenue of $24.9 million primarily related to the repossession of seven 737-700 aircraft. These amounts were partially offset by lower interest income on our debt investments resulting from a previously disclosed sale in the first quarter of 2008 and $6.5 million in lease incentive amortization. Adjusted net income for the quarter of $46.6 million grew 31.8% year over year, and excludes charges related to certain interest rate swaps totaling $22.5 million.

Total revenues for the year were $582.6 million, an increase of 52.9% over 2007. The year over year revenue increase was primarily driven by the effect of a full year of 2008 revenue for aircraft acquired in 2007 as well as lease rentals for aircraft acquired in 2008. Also contributing to the increase was maintenance revenue related to lease expirations and terminations of $34.5 million. Adjusted net income was $150.9 million, or $1.94 per diluted share, and excludes gains from asset sales of $6.5 million and charges of $41.8 million related to certain interest rate hedge agreements and deferred financing fee write-offs.

Aircastle CEO Ron Wainshal commented, "Aircastle's fourth quarter results were strong and the company continues to perform well. Our diversified fleet of modern aircraft is fully financed for several years and with our world-class platform, we believe we are very well positioned as our industry goes through a fundamental realignment."

CFO Mike Inglese added, "Aircastle posted a solid fourth quarter, with adjusted net income plus depreciation of $96.5 million, or $1.24 per diluted share. We ended the year with $81 million of operating cash and we've also addressed our aircraft leasing needs successfully, with only two aircraft requiring placement during the balance of 2009."

Aviation Assets

As of December 31, 2008, Aircastle owned aviation assets having a net book value of $3.8 billion, including 130 aircraft.

                                                               Owned
                                                              Aircraft
                                                                as of
                                                             December 31,
                                                                2008(A)
                                                            --------------
     113 Passenger Aircraft                                      71%
     17 Freighter Aircraft                                       29%
     Number of Lessees                                           55
     Number of Countries                                         31
     Weighted Average Remaining Lease Term (years)              5.1
     Percentage of Aircraft Leased Outside U.S.                  90%
     Percentage of "Latest Generation" Aircraft                  87%
     Weighted Average Fleet Utilization during Q4 2008           98%
     Weighted Average Fleet Utilization during FY 2008           99%


    (A) - Percentages calculated based on net book value

Sterling Airlines A/S ceased operations as of October 29, 2008 and Aircastle has taken possession of the seven 737-700s which had been leased to Sterling. The Company has signed lease agreements or letters of intent for six of these aircraft.

Conference Call

In connection with this earnings release, management will host an earnings conference call on Friday, February 27, 2009 at 12:00 P.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 Fourth Quarter and Year End Earnings Call."

A 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.

For those who are not available to listen to the live call, a replay will be available until 11:59 P.M. Eastern time on Friday, March 13, 2009 by dialing (800) 642-1687 (from within the U.S.) or (706) 645-9291 (from outside of the U.S.); please reference passcode "83496844."

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 December 31, 2008 Aircastle's aircraft portfolio consisted of 130 aircraft comprising a variety of passenger and freighter aircraft types that were leased to 55 lessees located in 31 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 and lease aircraft, raise capital, pay dividends, and increase revenues, earnings and EBITDA and the global aviation industry and aircraft leasing sector. Words such as "anticipate(s)," "expect(s)," "intend(s)," "plan(s)," "target(s)," "project(s)," "predict(s)," "believe(s)," "may," "will," "would," "could," "should," "seek(s)," "estimate(s)" 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, prolonged capital markets disruption and volatility, which may adversely affect our continued ability to obtain additional capital to finance our working capital needs, our pre-delivery payment obligations and other aircraft acquisition commitments and our ability to extend or replace our existing financings; our exposure to increased bank and counterparty risk caused by credit and capital markets disruptions; our ability to acquire aircraft at attractive prices and to raise or borrow capital at attractive rates to fund future aircraft acquisitions; our ability to find new ways to raise capital, including managing investment funds or other entities; our continued ability to obtain favorable tax treatment in Bermuda, Ireland and other jurisdictions; our ability to pay dividends; our ability to lease aircraft at favorable rates; an adverse change in the value of our aircraft; the possibility that conditions to closing of certain transactions will not be satisfied; general economic conditions and economic conditions in the markets in which we operate; competitive pressures within the industry and/or markets in which we operate; a continuing economic slow-down, high or volatile fuel prices, lack of access to capital and other factors affecting the creditworthiness of our airline customers and their ability to continue to perform their obligations under our leases; interest rate fluctuations; termination payments on our interest rate hedges; our ability to obtain certain required licenses and approvals; the impact of future terrorist attacks or wars on the airline industry; our concentration of customers, including geographical concentration; and other risks detailed from time to time in Aircastle Limited's filings with the Securities and Exchange Commission ( the "SEC"), including as described in Item 1A. "Risk Factors" as disclosed in Aircastle's Quarterly Report on Form 10-Q for the period ended September 30, 2008, 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)

                                                          December 31,
                                                        2007        2008
                                                        ----        ----
     ASSETS
     Cash and cash equivalents                       $13,546     $80,947
     Accounts receivable                               4,957       3,161
     Debt investments                                113,015      14,349
     Restricted cash and cash equivalents            161,317     182,623
     Flight equipment held for lease, net of
      accumulated depreciation
      of $189,737 and $371,591                     3,807,116   3,837,543
     Aircraft purchase deposits and progress
      payments                                       245,331      68,923
     Leasehold improvements, furnishings and
      equipment, net of accumulated depreciation
      of $1,335 and $1,999                             1,391       1,174
     Other assets                                     80,969      62,852
                                                  ----------  ----------
       Total assets                               $4,427,642  $4,251,572
                                                  ==========  ==========

     LIABILITIES AND SHAREHOLDERS' EQUITY
     LIABILITIES
     Borrowings under credit facilities             $798,186          $-
     Borrowings from securitizations and term
      debt financings                              1,677,736   2,476,296
     Accounts payable, accrued expenses and
      other liabilities                               65,967      60,789
     Dividends payable                                55,004       7,862
     Lease rentals received in advance                31,016      28,463
     Repurchase agreements                            67,744           -
     Security deposits                                74,661      65,307
     Maintenance payments                            208,363     224,288
     Fair value of derivative liabilities            154,388     276,401
                                                   ---------   ---------
       Total liabilities                           3,133,065   3,139,406
                                                   ---------   ---------

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, 78,574,657 shares issued
      and outstanding at December 31, 2007;
      and 78,620,320 shares issued and
      outstanding at December 31, 2008                   786         786
     Additional paid-in capital                    1,468,140   1,474,455
     Dividends in excess of earnings                 (48,960)       (473)
     Accumulated other comprehensive income (loss)  (125,389)   (362,602)
                                                  ----------  ----------
       Total shareholders' equity                  1,294,577   1,112,166
                                                  ----------  ----------
       Total liabilities and shareholders' equity $4,427,642  $4,251,572
                                                  ==========  ==========



                            Aircastle Limited and Subsidiaries
                             Consolidated Statements of Income
                     (Dollars in thousands, except per share amounts)

                         Three Months Ended      Year Ended
                             December 31,        December 31,
                             ------------        ------------
                           2007       2008     2007       2008
                           ----       ----     ----       ----
                             (Unaudited)

    Revenues:
    Lease rental revenue $117,023  $137,064  $362,497  $542,270
    Amortization of net
     lease discounts and
     lease incentives         706   (5,114)     7,379     1,815
    Maintenance revenue         -    24,885         -    34,460
                         --------  --------  --------  --------
    Total lease rentals   117,729   156,835   369,876   578,545
    Interest income         2,717       641    10,400     3,174
    Other revenue             262       306       815       868
                         --------  --------  --------  --------
    Total revenues        120,708   157,782   381,091   582,587
                         --------  --------  --------  --------
    Expenses:
    Depreciation           42,025    49,919   126,403   201,759
    Interest, net          29,509    57,087    92,660   203,529
    Selling, general and
     administrative        11,716    12,322    39,040    46,806
    Other expense             817     1,849     2,081     3,982
                         --------  --------  --------  --------
    Total operating
     expenses              84,067   121,177   260,184   456,076
                         --------  --------  --------  --------
    Other income (expense):
    Gain on sale of
     aircraft                   -       627         -     6,525
    Other                       -   (9,614)     1,154  (10,204)
                         --------  --------  --------  --------
    Total other income
     (expense)                  -   (8,987)     1,154   (3,679)
                         --------  --------  --------  --------

    Income from continuing
     operations before
     income taxes          36,641    27,618   122,061   122,832
    Income tax provision    2,723     2,879     7,658     7,541
                         --------  --------  --------  --------
    Income from continuing
     operations            33,918    24,739   114,403   115,291
    Earnings from
     discontinued
     operations, net of
     income taxes           1,347         -    12,941         -
                         --------  --------  --------  --------
    Net income            $35,265   $24,739  $127,344  $115,291
                         ========  ========  ========  ========
    Basic earnings per share:
    Income from
     continuing operations  $0.44     $0.32     $1.71    $ 1.48
    Earnings from
     discontinued
     operations,
     net of income taxes     0.02         -      0.19         -
                         --------  --------  --------  --------
    Net income per share    $0.46     $0.32     $1.90    $ 1.48
                         ========  ========  ========  ========

    Diluted earnings per share:
    Income from continuing
     operations             $0.44     $0.32     $1.70    $ 1.48
    Earnings from
     discontinued operations,
     net of income taxes     0.02         -      0.19         -
                         --------  --------  --------  --------
    Net income per share    $0.46     $0.32     $1.89    $ 1.48
                         ========  ========  ========  ========
    Dividends declared
     per share              $0.70     $0.10     $2.45    $ 0.85
                         ========  ========  ========  ========



                              Aircastle Limited and Subsidiaries
                            Consolidated Statements of Cash Flows
                                   (Dollars in thousands)


                                                Year Ended December 31,
                                               -------------------------
                                                2007               2008
                                               -------           -------
      Cash flows from operating
       activities:
      Net income                             $127,344            $115,291
        Adjustments to reconcile
         net (loss) income to net
         cash provided by operating
         activities (inclusive of
         amounts related to
         discontinued operations)
         Depreciation                         127,164             201,759
         Amortization of deferred
          financing costs                       6,991              13,603
         Amortization of net lease
          discounts and lease
          incentives                           (7,379)             (1,815)
         Deferred income taxes                 (2,957)              4,913
         Accretion of purchase
          discounts on debt
          investments                            (849)               (579)
         Non-cash share based
          payment expense                       6,674               6,529
         Cash flow hedges
          reclassified into earnings           (4,849)             16,491
         Ineffective portion of cash
          flow hedges                             171              16,623
         Security deposits and
          maintenance payments
          included in earnings                 (6,898)            (37,885)
         Gain on the sale of flight
          equipment                           (11,566)             (6,525)
         Loss on sale of debt
          investments                               -                 245
         Other                                 (1,154)             11,445
         Changes on certain assets
          and liabilities:
           Accounts receivable                  2,739               1,439
           Restricted cash and cash
            equivalents                       (55,248)            (21,306)
           Other assets                        (4,867)                559
           Accounts payable, accrued
            expenses and other
            liabilities                        12,263               3,564
           Payable to affiliates                   68                (200)
           Lease rentals received in
            advance                            12,563              (2,345)
                                            ---------           ---------
             Net cash provided by
              operating activities            200,210             321,806
                                            ---------           ---------
      Cash flows from investing
       activities:
        Acquisition and improvement
         of flight equipment               (2,207,530)           (264,586)
        Proceeds from sale of
         flight equipment                      34,945             180,112
        Aircraft purchase deposits
         and progress payments, net
         of returned deposits                (170,700)              9,545
        Purchase of debt
         investments                          (15,251)                  -
        Principal repayments on
         debt investments                      20,801              11,801
        Proceeds from sale of debt
         investments                                -              65,335
        Collateral call payments on
         derivatives and repurchase
         agreements                          (104,121)           (404,012)
        Collateral call receipts on
         derivatives and repurchase
         agreements                            72,586             439,892
        Leasehold improvements,
         furnishings and equipment               (526)               (447)
                                            ---------           ---------
         Net cash (used in) provided
          by investing activities          (2,369,796)             37,640
                                           ----------          ----------
      Cash flows from financing
       activities:
        Issuance of common shares
         in public offerings, net             830,809                   -
        Issuance of common shares
         to directors and employees             1,218                   -
        Repurchase of shares from
         directors and employees                 (445)             (1,270)
        Proceeds from
         securitizations and term
         debt financings                    1,170,000             992,715
        Securitization and term
         debt financing repayments            (41,664)           (194,155)
        Deferred financing costs              (14,140)            (24,183)
        Credit facility borrowings          2,059,741             482,723
        Credit facility repayments         (1,800,141)         (1,280,909)
        Proceeds from repurchase
         agreements                             1,967                   -
        Principal repayments on
         repurchase agreements                (17,917)            (67,744)
        Security deposits and
         maintenance payments
         received                              85,691             106,096
        Security deposits and
         maintenance payments
         returned                             (18,547)            (37,308)
        Proceeds from (payments
         for) terminated cash flow
         hedges                                 8,944            (154,064)
        Dividends paid                       (140,502)           (113,946)
                                            ---------           ---------
         Net cash provided by (used
          in) financing activities          2,125,014            (292,045)
                                            ---------           ---------
      Net increase (decrease) in
       cash and cash equivalents              (44,572)             67,401
      Cash and cash equivalents
       at beginning of year                    58,118              13,546
                                            ---------           ---------
      Cash and cash equivalents
       at end of year                         $13,546             $80,947
                                            =========           =========

      Supplemental Disclosures of
       cash flow information:
      Cash paid during the year
       for interest, net of
       capitalized interest                   $94,677            $160,892
                                            =========           =========
      Cash paid during the year
       for income taxes                        $5,804              $6,007
                                            =========           =========

    Non-cash investing
     activities:
      Security deposits and
       maintenance liabilities
       assumed in asset
       acquisitions                          $106,322                  $-
                                            =========           =========
      Lease rentals received in
       advance assumed in asset
       acquisitions                            $7,385                  $-
                                            =========           =========



                              Aircastle Limited and Subsidiaries
                               Supplemental Financial Information
                        (Amount in thousands, except per share amounts)
                                          (Unaudited)


                       Three Months Ended             Year Ended
                          December 31,                December 31,
                       ------------------ Percent  ------------------ Percent
                       2007       2008     Change   2007      2008     Change
                      ---------------------------- --------------------------

     Revenues        $120,708   $157,782    30.7% $381,091  $582,587    52.9%

     Annualized
      lease rental
      revenue at
      period end     $516,755   $514,303   (0.5)% $516,755  $514,303   (0.5)%

     EBITDA          $107,469   $139,738    30.0% $333,745  $526,305    57.7%

     Adjusted net
      income          $35,385    $46,630    31.8% $116,142  $150,859    29.9%
       Basic
        earnings
        per
        share           $0.46      $0.60    30.4%    $1.73     $1.94    12.1%
       Diluted
        earnings
        per
        share           $0.46      $0.60    30.4%    $1.72     $1.94    12.8%

     Adjusted net
      income plus
      depreciation    $77,410    $96,549    24.7% $243,306  $352,618    44.9%
       Basic
        earnings
        per
        share           $1.01      $1.24    22.8%    $3.62     $4.54    25.4%
       Diluted
        earnings
        per
        share           $1.01      $1.24    22.8%    $3.61     $4.53    25.5%

     Basic
      shares
      outstanding      76,514     77,769     1.6%   67,178    77,750    15.7%
     Diluted
      shares
      outstanding      76,779     77,769     1.3%   67,418    77,808    15.4%

Refer to the selected 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     Year Ended
                                       ------------------     ----------
                                          December 31,       December 31,
                                          ------------       ------------
                                         2007      2008     2007      2008
                                         ----      ----     ----      ----

     Net income                        $35,265   $24,739 $127,344  $115,291
     Depreciation                       42,025    49,919  126,403   201,759
     Amortization of net lease 
       discounts and lease incentives     (706)    5,114   (7,379)   (1,815)
     Interest, net                      29,509    57,087   92,660   203,529
     Income tax provision                2,723     2,879    7,658     7,541
     Earnings from discontinued
      operations, net of income taxes   (1,347)        -  (12,941)        -
                                      --------  -------- --------  --------
     EBITDA                           $107,469  $139,738 $333,745  $526,305
                                      ========  ======== ========  ========

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 Reconciliation
                                   (Dollars in thousands)
                                       (Unaudited)


                                    Three Months Ended      Year Ended
                                   --------------------  -----------------
                                       December 31,         December 31,
                                      -------------       ---------------
                                      2007     2008       2007       2008
                                      ----     ----       ----       ----
      Net income                    $35,265  $24,739   $127,344   $115,291
      Ineffective portion and
      termination of cash flow
     hedges(1)                          120   12,014        171     29,589
      Write-off of deferred
      financing fees(1)                   -        -          -        813
      Mark to market adjustment on
      undesignated derivatives(2)         -   10,504     (1,154)    11,446
      Loss on sale of debt
      investments(2)                      -        -          -        245
      Gain on sale of flight
      equipment(3)                        -     (627)   (10,219)    (6,525)
                                   -------- --------   --------   --------
      Adjusted net income            35,385   46,630    116,142    150,859

      Depreciation                   42,025   49,919    126,403    201,759
      Depreciation included in
       discontinued operations            -        -        761          -
                                   -------- --------  ---------  ---------
      Adjusted net income plus
       depreciation                 $77,410  $96,549   $243,306   $352,618
                                   ======== ========  =========  =========
    --------------------------------------
    (1)  Included in Interest, net
    (2)  Included in Other income (expense)
    (3)  2008 amounts included in Other income (expense); 2007 amounts
         included in Discontinued operations

We adjust net income for ineffective portion and termination of cash flow hedges, write-off of deferred financing fees, mark to market and termination of interest rate swaps, loss on sale of debt investments and gain on sale of flight equipment. We use adjusted net income to assess our consolidated financial and operating performance, and we believe this non-GAAP measure is helpful in identifying trends in our performance net of non-recurring items.

We use adjusted net income plus depreciation to assess our consolidated financial and operating performance, and we believe this non-GAAP measure is helpful in identifying trends in our performance on an operating cash flow basis after taking into account interest expense on our outstanding indebtedness.

SOURCE: Aircastle Limited

CONTACT:
Julia Hallisey, Investor Relations of Aircastle Limited
+1-203-504-1063

Web Site:
http://www.aircastle.com