Aircastle Limited
Nov 9, 2007
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Aircastle Announces Third Quarter 2007 Results

STAMFORD, Conn., Nov. 9 /PRNewswire-FirstCall/ --

    Highlights

     - Income from continuing operations of $32.5 million in Q3 2007 increased
       by 121% compared to Q3 2006 and by 20% from Q2 2007.

     - Total revenues of $105.3 million increased by 105% over Q3 2006 and by
       24% from Q2 2007.

     - Completed $381.7 million in acquisitions for the quarter and $1.52
       billion during the first three quarters of 2007.

     - Declared a third quarter dividend of $0.65 per common share.

     - Successfully completed a follow-on public equity offering on October
       10, 2007, raising $349.3 million in gross proceeds for Aircastle.

     - Aircastle had outstanding commitments to acquire an additional $2.1
       billion of aviation assets as of November 7, 2007.

    Financial Results

Aircastle Limited (the "Company" or "Aircastle") (NYSE: AYR) reported third quarter net income of $32.5 million, including non-cash charges of $36.2 million for depreciation and share-based compensation expense, or $0.49 per diluted common share. Income from continuing operations for the third quarter was also $32.5 million, or $0.49 per diluted common share.

Third quarter revenue of $105.3 million increased 105% over third quarter 2006 and 24% versus the second quarter 2007. Income from continuing operations grew 121% year over year and 20% over second quarter 2007. The increases in both revenues and income from continuing operations primarily reflect the continued growth in our portfolio of aviation assets compared to the prior periods.

For the nine months ended September 30, 2007, net income was $92.1 million, including non-cash charges of $89.7 million for depreciation and share-based compensation expense, or $1.43 of net income per diluted common share. Income from continuing operations for the nine months ended September 30, 2007 was $80.5 million, or $1.25 per diluted common share, while income from discontinued operations was $11.6 million, or $0.18 per diluted common share.

For the nine months ended September 30, 2007, total revenue was $260.4 million, an increase of 111% compared to the first nine months of 2006. For the same period, income from continuing operations grew 200% year over year, to $80.5 million.

Investments in Aviation Assets

As of September 30, 2007, Aircastle owned aviation assets having an aggregate purchase price of $3.3 billion, including 109 aircraft, all of which are on lease. In addition, as of November 7, 2007 the Company has acquired an additional 8 aircraft for $368 million and had outstanding commitments to acquire an additional $2.1 billion in aviation assets, which, combined with its owned portfolio, would aggregate to $5.7 billion, including 156 aircraft.

During the third quarter, Aircastle acquired 9 aircraft for approximately $381.7 million, bringing the total for the first three quarters of 2007 to 41 aircraft for approximately $1.5 billion. Of the aircraft acquired through the third quarter of 2007, 26 aircraft representing $950.4 million were part of the GAIF transaction.

Joe Adams, Deputy Chairman of Aircastle, commented, "Aircastle's dividend growth of 86% since IPO underscores the Company's ability to execute individual aircraft acquisitions, complete opportunistic portfolio transactions and lease aircraft. In 2007 we completed and committed to $2.3 billion in investments and 41 leases -- an outstanding result. Despite the current financial market instability, global air traffic growth and demand for aircraft continue to strengthen and support Aircastle's excellent asset performance. We think this could represent an attractive investment environment for new acquisitions and are well positioned with our successful follow on equity offering in October."

Aircastle's CEO, Ron Wainshal, added, "With nearly $382 million in acquisitions completed during the third quarter and more than $600 million expected during the fourth quarter, the Company is continuing to demonstrate solid, accretive growth. The strong financial performance during the third quarter, not only reflected the growth in our investment portfolio but also the success we've been having in placing aircraft coming off lease. Secondary market investment activity is very healthy and our pipeline of new investment opportunities is robust as restrictions on liquidity could potentially be impacting some competitors."

Capital Markets Activity

In October 2007, Aircastle successfully completed a follow-on public offering of 10,000,000 primary common shares, as well as the offering of 10,000,000 secondary common shares by certain funds managed by affiliates of Fortress Investment Group LLC, at a public offering price of $31.75 per share. The underwriters in the offering exercised their option to purchase 1,000,000 additional common shares from the Company and 1,000,000 additional common shares from the selling Fortress funds to cover over-allotments, resulting in gross proceeds from the offering of $698.5 million, of which the Company received $349.25 million in gross proceeds.

In June 2007, we closed our second securitization ("Securitization No. 2") involving the issuance of a single tranche of $1.17 billion of Class G-1 Floating Rate Asset Backed Certificates (the "Certificates"). Securitization No. 2 is comprised of 59 aircraft of which 26 aircraft were purchased during 2006 and 33 aircraft were acquired during 2007. As of September 30, 2007, all 59 aircraft had been transferred into the securitization.

Conference Call

In connection with this earnings release, management will host an earnings conference call on Friday, November 9, 2007 at 11:00 A.M. Eastern time. All interested parties are welcome to participate on the live call. The conference call can be accessed by dialing (888) 686-9705 (from within the U.S.) or (913) 312-9309 (from outside of the U.S.) ten minutes prior to the scheduled start and referencing the "Aircastle Third Quarter 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, November 16, 2007 by dialing (888) 203-1112 (from within the U.S.) or (719) 457-0820 (from outside of the U.S.); please reference passcode "2603948."

About Aircastle Limited

Aircastle Limited is a global aviation company that acquires and leases high-utility commercial jet aircraft to airlines throughout the world. As of November 7, 2007, Aircastle had acquired and committed to acquire aviation assets having an aggregate purchase price equal to $3.6 billion and $2.1 billion, respectively, for a total of approximately $5.7 billion.

Safe Harbor

Certain items in this press release 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 and lease aircraft, pay and grow dividends, realize gains or income from our debt investments, secure financing and increase revenues and earnings. Words such as "anticipate(s)", "expect(s)", "intend(s)", "plan(s)", "target(s)", "project(s)", "believe(s)", "will", "would", "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. Factors that could cause actual results to differ materially from Aircastle Limited's expectations include, but are not limited to, our significant customer concentration; our continued ability to obtain additional capital to finance our growth; our continued ability to acquire aircraft at attractive prices; our continued ability to obtain favorable tax treatment in Bermuda and other jurisdictions; our ability to pay or maintain dividends; our ability to lease aircraft at favorable rates and maintain the value of our aircraft; our ability to realize gains or income from our debt investments; 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; the creditworthiness of our airline customers; interest rate fluctuations; our ability to obtain certain required licenses and approvals; the impact of future terrorist attacks or wars on the airline industry; our concentration of leases in certain geographical regions; and other risks detailed from time to time in Aircastle's filings with the Securities and Exchange Commission ('SEC"), including its Annual Report on Form 10-K filed with the SEC on March 22, 2007 and updated in our Quarterly Report on Form 10-Q filed on August 14, 2007. Such forward-looking statements speak only as of the date of this press release. Aircastle expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's 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,   September 30,
                                                      2006           2007
                                                                  (unaudited)

                                    ASSETS

    Cash and cash equivalents                        $58,118        $26,867
    Accounts receivable                                7,696          4,365
    Debt investments                                 121,273        114,717
    Restricted cash and cash equivalents             106,069        125,362
    Flight equipment held for sale                    31,280            --
    Flight equipment held for lease,
     net of accumulated depreciation
     of $64,111 and $147,937                       1,559,365      3,029,686
    Aircraft purchase deposits and progress payments   4,650        226,167
    Leasehold improvements,
     furnishings and equipment, net of
     accumulated depreciation of $694 and $1,160       1,506          1,320
    Fair value of derivative assets                      313          2,007
    Other assets                                      28,433         44,615
      Total assets                                $1,918,703     $3,575,106


                     LIABILITIES AND SHAREHOLDERS' EQUITY

    LIABILITIES
    Borrowings under credit facilities              $442,660       $336,165
    Borrowings from securitizations                  549,400      1,693,232
    Accounts payable, accrued expenses
     and other liabilities                            31,384         64,224
    Dividends payable                                 22,584         43,822
    Lease rentals received in advance                 11,068         17,736
    Repurchase agreements                             83,694         67,506
    Security deposits                                 39,767         66,645
    Maintenance payments                              82,914        153,432
    Fair value of derivative liabilities              18,035         55,105
      Total liabilities                            1,281,506      2,497,867

    Commitments and Contingencies - Note 13

    SHAREHOLDERS' EQUITY
    Preference shares, $.01 par value,
     50,000,000 shares authorized,
     no shares issued and outstanding
     at December 31, 2006 and September 30,              --              --
    Common shares, $.01 par value,
     250,000,000 shares authorized,
     51,621,279 shares issued and
     outstanding at December 31, 2006;
     and 67,417,321 shares issued and
     outstanding at September 30, 2007                   516            674
    Additional paid-in capital                       630,154      1,129,179
    Dividends in excess of earnings                   (3,382)       (29,220)
    Accumulated other comprehensive income (loss)      9,909        (23,394)
    Total shareholders' equity                       637,197      1,077,239
    Total liabilities and shareholders' equity    $1,918,703     $3,575,106



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


                             Three Months Ended         Nine Months Ended
                                September 30,             September 30,
                              2006         2007         2006         2007
    Revenues:
     Lease rentals         $48,796     $102,863    $ 116,557    $ 252,147
     Interest income         2,487        2,367        6,588        7,683
     Other revenue             153           34          153          553
      Total revenues        51,436      105,264      123,298      260,383
    Expenses:
     Depreciation           15,502       34,980       35,740       84,378
     Interest, net -
      Note 17               14,069       27,074       34,147       63,151
     Selling, general and
      administrative
      (including non-cash
      share based
      payment expense of
      $1,044 and $1,230 for the
      three months ended
      and $7,729  and $5,276
      for the nine months ended
      September 30,
      2006 and 2007,
      respectively)          5,107        8,380       20,976       27,324
     Other expense             304          503        1,200          110
      Total expenses        34,982       70,937       92,063      174,963
     Income from continuing
      operations before
      income taxes          16,454       34,327       31,235       85,420
     Income tax provision    1,742        1,857        4,380        4,935
     Income from
      continuing operations 14,712       32,470       26,855       80,485
     Earnings from
      discontinued
      operations, net of
      income taxes             470            -        4,557       11,594
     Net income            $15,182      $32,470      $31,412      $92,079

    Basic earnings per share:
     Income from
      continuing
      operations             $0.31       $ 0.49        $0.61        $1.26
     Earnings from
      discontinued
      operations, net of
      income taxes            0.01           --         0.11         0.18
    Net income per share     $0.32       $ 0.49        $0.72        $1.44

    Diluted earnings per share:
     Income from
      continuing
      operations             $0.31       $ 0.49        $0.60        $1.25
     Earnings from
      discontinued
      operations, net of
      income taxes             0.01           --         0.11        0.18
     Net income per share     $0.32       $ 0.49        $0.71       $1.43

     Dividends declared
      per share              $0.506       $ 0.65       $0.506       $1.75



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

                                                         Nine Months Ended
                                                            September 30,
                                                         2006          2007
    Cash flows from operating activities
    Net income                                         $31,412       $ 92,079
     Adjustments to reconcile net income
      to net cash provided by operating
      activities (inclusive of amounts
      related to discontinued operations):
       Depreciation                                     38,182         85,139
       Amortization of deferred financing costs          5,827          5,150
       Amortization of lease premiums and
        discounts, and other related lease              (2,846)        (6,673)
       Deferred income taxes                             2,239         (3,652)
       Accretion of purchase discounts
         on debt investments                              (619)          (627)
       Non-cash share based payment expense              7,729          5,276
       Capitalized interest                                  -         (2,733)
       Cash flow hedges reclassified into earnings      (1,197)        (3,481)
       Realized gain on derivative contract                  -         (1,154)
       Ineffective portion of cash flow hedges            (815)            52
       Gain on the sale of flight equipment             (2,240)       (10,219)
       Changes in certain assets and liabilities:
        Accounts receivable                             (2,374)          3,331
        Restricted cash and cash equivalents           (53,244)       (19,130)
        Other assets                                      (818)        (6,413)
        Accounts payable, accrued
         expenses and other liabilities                    922          6,440
        Lease rentals received in advance                3,992          6,668
        Security deposits and maintenance payments      74,101        103,621
         Net cash provided by operating activities     100,251        253,674
    Cash flows from investing activities
     Acquisition and improvement of
      flight equipment                                (746,081)    (1,494,683)
     Disposition of flight equipment held for sale      57,157         34,946
     Aircraft purchase deposits
      and progress payments                            (40,997)      (153,657)
     Leasehold improvements,
       furnishings and equipment                          (347)          (280)
     Margin deposits                                    (1,555)          3,688
     Purchase of debt investments                      (92,726)       (15,251)
     Principal repayments on debt investments            3,589         20,262
       Net cash used in investing activities          (820,960)    (1,604,975)
    Cash flows from financing activities
     Issuance of common shares                         258,547         493,056
     Issuance, net of repurchases, of
      common shares to employees                            -             851
     Repurchase of shares from affiliate               (36,932)            -
     Proceeds from securitizations                     560,000      1,170,000
     Securitization repayments                          (5,267)       (26,168)
     Restricted cash and cash equivalents
      related to unreleased securitization
      borrowings                                       (12,818)          (163)
     Deferred financing costs                          (14,978)       (11,174)
     Credit facility borrowings                        660,302      1,330,962
     Credit facility repayments                       (799,664)    (1,533,383)
     Proceeds from repurchase agreements                76,007            894
     Principal repayments on repurchase agreements        (833)       (17,082)
     Proceeds from terminated cash flow hedges          16,142          8,936
     Dividends paid                                    (20,770)       (96,679)
      Net cash provided by financing activities        679,736      1,320,050
    Net decrease in cash and cash equivalents          (40,973)       (31,251)
    Cash and cash equivalents at beginning of period    79,943         58,118
    Cash and cash equivalents at end of period         $38,970       $ 26,867
SOURCE  Aircastle Limited
    -0-                             11/09/2007
    /CONTACT:  Julia Hallisey, Investor Relations, Aircastle Limited,
+1-203-504-1063/
    /Web site:  http://www.aircastle.com /
    (AYR)