Aircastle Limited
Aug 10, 2007
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Aircastle Announces Second Quarter 2007 Results

STAMFORD, Conn., Aug. 10 /PRNewswire-FirstCall/ --

Second Quarter 2007 Highlights

  • Net income increased to $38.1 million, income from continuing operations increased 30% from the first quarter of 2007 to $27.2 million, including non-cash charges of $30.6 million for depreciation and share-based compensation expense, and total revenues increased 22% from the first quarter of 2007 to $85.1 million.

  • Completed $693.1 million in acquisitions for the quarter and $1.15 billion during the first half of 2007. Aircastle had outstanding commitments to acquire an additional $2.4 billion of aviation assets as of June 30, 2007.

  • Declared a second quarter dividend of $0.60 per common share, an increase of 20% over our first quarter 2007 dividend.

  • Successfully closed our second securitization, a $1.17 billion financing of 59 aircraft with an all in cost of approximately 6.20% per annum.

  • Agreed to acquire 15 new Airbus Model A330-200F freighter aircraft from Airbus SAS with scheduled deliveries in 2010 and 2011.



Financial Results

 

Aircastle Limited (the "Company" or "Aircastle") (NYSE: AYR) reported second quarter net income of $38.1 million, including non-cash charges of $30.6 million for depreciation and share-based compensation expense, or $0.57 per diluted common share. Income from continuing operations was $27.2 million, or $0.41 per diluted common share. Income from discontinued operations of $10.9 million, or $0.16 per diluted common share, includes the gain on the disposition in May of an aircraft previously classified as flight equipment held for sale, as well as related lease rents, depreciation, interest expense and other related expenses.

Second quarter revenue of $85.1 million increased 22% versus the first quarter 2007, and 110% over second quarter 2006. Income from continuing operations grew 30% over first quarter 2007 and 477% year over year. The increases in both revenues and income from continuing operations reflect the continued growth in our portfolio of aviation assets compared to the prior periods.

For the six months ended June 30, 2007 net income was $59.6 million, including non-cash charges of $53.4 million for depreciation and share-based compensation expense, or $0.95 of net income per diluted common share. Income from continuing operations for the six months ended June 30, 2007 was $48.0 million, or $0.77 per diluted common share, while income from discontinued operations was $11.6 million, or $0.18 per diluted common share.

For the six months ended June 30, 2007, total revenue was $155.1 million, an increase of 116% versus the first six months of 2006. For the same period, income from continuing operations grew 295% year over year, to $48.0 million.

Investments in Aviation Assets

As of June 30, 2007 Aircastle owned aviation assets having an aggregate purchase price of $2.9 billion, including 100 aircraft, all of which are on lease. In addition, the Company had outstanding commitments to acquire an additional $2.4 billion in aviation assets, which combined with its owned portfolio, would aggregate to $5.3 billion, including 140 aircraft.

During the second quarter, Aircastle acquired 23 aircraft for approximately $693.1 million, bringing the total for the first half of 2007 to 32 aircraft for approximately $1.15 billion. Of the aircraft acquired during the first half of 2007, 24 aircraft representing $780.4 million were part of the $1.595 billion, 38 aircraft portfolio acquisition announced in January 2007. As of June 30, 2007, we expect to acquire 15 additional aircraft for approximately $672.6 million during the balance of 2007. We have $633.2 million of aircraft funding obligations for 2008 and $1.06 billion in funding commitments in 2009 through 2011.

On June 20, 2007, Aircastle entered into an acquisition agreement as a launch customer with Airbus SAS ("Airbus") to acquire 15 new Airbus Model A330-200F freighter aircraft with deliveries in 2010 and 2011. The A330-200F is a new freighter variant of the A330 passenger aircraft, and we believe that it will be the most modern and operationally efficient aircraft in its size class.

Joe Adams, Deputy Chairman of Aircastle, commented, "We are very pleased with the strong financial performance of our business since last year's IPO which is reflected in the growth of our dividend by 71%. We have closed approximately $1.7 billion of aircraft acquisitions since August 2006. In June, we financed fifty-nine aircraft in a $1.2 billion securitization at an attractive all-in cost of 6.20%. Through the management of our existing fleet and continued accretive acquisitions, we are well positioned to realize substantial growth in earnings and dividends."

Aircastle's CEO, Ron Wainshal, added, "In addition to our considerable investment and capital markets accomplishments, we're continuing to capitalize on the strength in global demand for high utility leased aircraft through our placement efforts. We have new lease commitments on attractive terms for all of our owned aircraft with 2007 lease expiries, and have made significant progress on our 2008 re-lease requirements."

Capital Markets Activity

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"). The Certificates will bear interest on a floating rate basis at the rate of one month LIBOR plus 0.26%. The all-in cost over the expected five year life of the Certificates, including interest rate hedges and transaction costs, is approximately 6.20% per annum.

Securitization No. 2 is comprised of 59 aircraft of which 26 aircraft were purchased during 2006, 29 aircraft were acquired during the first half of 2007 and four aircraft are committed to and scheduled to be acquired by us during the third quarter of 2007. As of June 30, 2007, 39 of 59 aircraft had been transferred into Securitization No. 2 and approximately $501 million of the Company's restricted cash was held pending release upon the transfer of the remaining 20 aircraft. As of August 9, 2007, 53 of the 59 aircraft had been transferred to ACS 2007-1, with approximately $90 million of restricted cash remaining for the transfer of the final six aircraft. We expect to transfer all remaining aircraft into Securitization No. 2 during the third quarter of 2007.

    As of August 9, 2007, we had:

    -- $214.6 million of outstanding borrowings under our $1.0 billion Amended
       Credit Facility No. 2;
    -- no outstanding borrowings under our $250.0 million Revolving Credit
       Facility and $13.9 million of letters of credit outstanding; and
    -- operating cash of approximately $22.0 million.

    Conference Call

In connection with this earnings release, management will host an earnings conference call on Friday, August 10, 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 (877) 704-5379 (from within the U.S.) or (913) 312-1293 (from outside of the U.S.) ten minutes prior to the scheduled start and referencing the "Aircastle Second 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, August 17, 2007 by dialing (888) 203-1112 (from within the U.S.) or (719) 457-0820 (from outside of the U.S.); please reference passcode "4807520."

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 August 9, 2007, Aircastle had acquired and committed to acquire aviation assets having an aggregate purchase price equal to $3.1 billion and $2.4 billion, respectively, for a total of approximately $5.5 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. 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 Statements of Income
               (Dollars in thousands, except per share amounts)
                                 (Unaudited)

                                       Three Months           Six Months
                                       Ended June 30,        Ended June 30,
                                      2006       2007       2006       2007
    Revenues
       Lease rentals                $38,008    $81,926    $67,760    $149,284
       Interest income                2,460      2,728      4,101       5,316
       Other revenue                      -        460          -         519
          Total revenues             40,468     85,114     71,861     155,119
    Expenses
       Depreciation                  11,162     27,764     20,238      49,398
       Interest (net of interest
        income of $1,466 and
        $4,122 for the three
        months ended and $2,854
        and $5,883 for the six
        months ended June 30,
        2006 and 2007,
        respectively)                12,714     19,345     20,078      36,077
       Selling, general and
        administrative (including
        non-cash share based
        payment expense of
        $5,393 and $2,789 for
        the three months ended
        and $6,685 and $4,046 for
        the six months ended
        June 30, 2006 and 2007,
        respectively)                 9,973     10,448     15,847      18,944
       Other expenses                   277       (774)       917        (393)
          Total expenses             34,126     56,783     57,080     104,026
       Income from continuing
        operations before income
        taxes                         6,342     28,331     14,781      51,093
       Income tax provision           1,634      1,173      2,638       3,078
       Income from continuing
        operations                    4,708     27,158     12,143      48,015
       Earnings from discontinued
        operations, net of income
        taxes                           342     10,910      4,087      11,594
       Net income                    $5,050    $38,068    $16,230     $59,609
       Basic earnings per share:
          Income from continuing
           operations                 $0.11      $0.41      $0.28       $0.77
          Earnings from
           discontinued operations,
           net of income taxes         0.01       0.16       0.10        0.18
          Net income per share        $0.12      $0.57      $0.38       $0.95
       Diluted earnings per share:
          Income from continuing
           operations                 $0.10      $0.41      $0.28       $0.77
          Earnings from
           discontinued operations,
           net of income taxes         0.01       0.16       0.10        0.18
          Net income per share        $0.11      $0.57      $0.38       $0.95
       Dividends declared per share      $-      $0.60         $-       $1.10



                      Aircastle Limited and Subsidiaries
                         Consolidated Balance Sheets
                  (Dollars in thousands, except share data)

                                                   December 31,    June 30,
                                                       2006          2007
                                                                  (unaudited)
    ASSETS
    Cash and cash equivalents                        $58,118        $67,714
    Accounts receivable                                7,696          5,474
    Debt investments                                 121,273        122,728
    Restricted cash and cash equivalents             106,069        629,506
    Flight equipment held for sale                    31,280              -
    Flight equipment held for lease,
     net of accumulated depreciation of
     $64,111 and $113,156                          1,559,364      2,672,453
    Aircraft purchase deposits and
     progress payments                                 4,650         94,063
    Leasehold improvements, furnishings
     and equipment, net of accumulated
     depreciation of $694 and $993                     1,506          1,466
    Fair value of derivative assets                      313         36,622
    Other assets                                      28,434         41,206
       Total assets                               $1,918,703     $3,671,232

    LIABILITIES AND SHAREHOLDERS' EQUITY
    LIABILITIES
    Borrowings under credit facilities              $442,660       $339,536
    Borrowings from securitizations                  549,400      1,708,534
    Accounts payable, accrued expenses
     and other liabilities                            31,384         58,238
    Aircraft acquisition payable                           -         65,171
    Dividends payable                                 22,584         40,467
    Lease rentals received in advance                 11,068         14,672
    Repurchase agreements                             83,694         75,163
    Security deposits                                 39,767         57,836
    Maintenance payments                              82,914        132,284
    Fair value of derivative liabilities              18,035          3,021
          Total liabilities                        1,281,506      2,494,922

    Commitments and Contingencies

    SHAREHOLDERS' EQUITY
    Preference shares, $.01 par value,
     50,000,000 shares authorized,
     no shares issued and outstanding at
     December 31, 2006 and June 30, 2007                   -              -
    Common shares, $.01 par value,
     250,000,000 shares authorized,
     51,621,279 shares issued and
     outstanding at December 31, 2006;
     and 67,433,451 shares issued and
     outstanding at June 30, 2007                        516            674
    Additional paid-in capital                       630,154      1,127,950
    Dividends in excess of earnings                   (3,382)       (17,867)
    Accumulated other comprehensive income             9,909         65,553
       Total shareholders' equity                    637,197      1,176,310
       Total liabilities and shareholders'
        equity                                    $1,918,703     $3,671,232



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

                                                    Six Months Ended June 30,
                                                        2006         2007
    Cash flows from operating activities
    Net income                                         $16,230      $59,609
       Adjustments to reconcile net income
        to net cash provided by operating
        activities (inclusive of amounts
        related to discontinued operations)
          Depreciation                                  21,763       50,158
          Amortization of deferred financing costs       3,435        3,166
          Amortization of lease premiums and
           discounts, and other related lease items     (1,542)      (3,493)
       Deferred income taxes                               805       (3,109)
       Accretion of purchase discounts on
        debt investments                                  (382)        (405)
       Non-cash share based payment expense              6,685        4,046
       Cash flow hedges reclassified into earnings        (172)      (2,110)
       Realized gain on derivative contract                  -       (1,154)
       Ineffective portion of cash flow hedges            (858)        (418)
       Gain on the sale of flight equipment             (2,240)     (10,219)
       Changes in certain assets and liabilities:
          Accounts receivable                           (3,114)       2,222
          Restricted cash and cash equivalents         (21,748)     (22,872)
          Other assets                                    (804)      (2,269)
          Accounts payable, accrued expenses
           and other liabilities                          (744)       5,187
          Lease rentals received in advance              2,646        3,604
          Security deposits and maintenance payments    37,531       67,790
             Net cash provided by operating
              activities                                58,979      149,733

    Cash flows from investing activities
       Acquisition and improvement of flight
        equipment                                     (385,433)  (1,070,216)
       Disposition of flight equipment held
        for sale                                        57,157       34,946
       Purchase of debt investments                    (92,726)     (15,251)
       Margin deposits                                       -        3,688
       Leasehold improvements, furnishings
        and equipment                                     (602)        (259)
       Aircraft purchase deposits and progress
        payments                                       (29,522)     (88,413)
       Principal repayments on debt investments          3,589       13,372
          Net cash used in investing activities       (447,537)  (1,122,133)

    Cash flows from financing activities
       Issuance of common shares                        38,702      493,056
       Issuance of common shares to employees                -        1,216
       Repurchase of shares from employees                   -         (364)
       Proceeds from securitizations                   560,000    1,170,000
       Credit facility borrowings                      294,730    1,009,779
       Restricted cash and cash equivalents
        related to unreleased securitization
        borrowings                                     (32,865)    (500,565)
       Securitization repayments                             -      (10,866)
       Credit facility repayments                     (522,883)  (1,112,902)
       Deferred financing costs                        (13,872)     (11,552)
       Proceeds from repurchase agreements              75,978          894
       Proceeds from terminated cash flow hedges        16,142        8,936
       Restricted cash from terminated cash
        flow hedges                                    (16,142)           -
       Principal repayments on repurchase agreements      (199)      (9,425)
       Dividends paid                                        -      (56,211)
          Net cash provided by financing activities    399,591      981,996

       Net increase in cash and cash equivalents        11,033        9,596
       Cash and cash equivalents at beginning of
        period                                          79,943       58,118
       Cash and cash equivalents at end of period      $90,976      $67,714

SOURCE Aircastle Limited

CONTACT: Julia Hallisey, Investor Relations, Aircastle Limited,
+1-203-504-1063
Web site: http://www.aircastle.com