Aircastle Limited
Aug 4, 2011
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Aircastle Announces Second Quarter Results

Second Quarter Highlights

STAMFORD, Conn., Aug. 4, 2011 /PRNewswire/ -- Aircastle Limited (the "Company" or "Aircastle") (NYSE: AYR) reported second quarter 2011 net income of $23.3 million, or $0.30 per diluted common share, and adjusted net income of $20.6 million, or $0.27 per diluted common share.

Commenting on the results, Ron Wainshal, Aircastle's CEO, stated: "During the second quarter, we realized tangible benefits from our disciplined, value-added investment approach.  Specifically, the $760 million of investments we made during the past four quarters enabled the Company to post higher revenues and earnings.  I'm excited about our investment pipeline, which I believe will allow us to generate more than half a billion of accretive acquisitions during the second half of 2011, on top of the built-in growth from the Airbus A330 delivery stream.  Consistent with our focus on achieving superior risk adjusted returns, we will also look for opportunities to take advantage of strong asset prices through successful dispositions, while continuing to return value to shareholders in the form of quarterly dividends and share repurchases."

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

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

Second Quarter Results

Lease rental revenue for the second quarter was $143.4 million, up by $15.2 million, or 12%, year-over-year, due primarily to the impact of aircraft acquisitions net of dispositions of $18.5 million.  The increase was partially offset by lower lease rentals due to lease terminations and lease transitions and extensions of $3.7 million.

Total revenues for the second quarter were $148.8 million, up by $18.7 million, or 14%, year-over-year.  The increase reflects higher lease rental revenue as discussed above, as well as higher maintenance revenue of $1.3 million and lower lease incentive amortization of $1.9 million.

During the second quarter we early terminated a lease related to one Boeing Model 737-400 aircraft and recorded maintenance and other revenue totaling $3.1 million and an impairment charge of $5.2 million.

EBITDA for the second quarter was $142.3 million, up by $23.2 million from the second quarter of 2010, reflecting higher lease rental and maintenance revenue totaling $16.5 million compared to the second quarter of 2010.  The increase in EBITDA also includes a gain of $10.3 million from the sale of one Airbus A330-200 aircraft.  The impact of these items was partially offset by the impairment charge of $5.2 million discussed above.

Adjusted net income plus depreciation and amortization for the quarter was $82.2 million, a year-over-year increase of $2.4 million.  This was due primarily to an increase in lease rental and maintenance revenue totaling $16.5 million, partially offset by an increase in adjusted interest expense of $9.3 million and the $5.2 million impairment charge discussed above.

Adjusted net income for the quarter was $20.6 million, up $0.1 million year-over-year, reflecting an increase of $18.7 million in total revenues, partially offset by increases of $4.2 million in depreciation, $9.3 million in adjusted interest expense and the impairment charge of $5.2 million discussed above.

Aviation Assets

During the second quarter, we took delivery of one Airbus A330-200 passenger aircraft, which is on lease to South African Airways, one leased Airbus A320 aircraft and one Boeing Model 747-400 aircraft which is being converted to freighter configuration. We have a letter of intent to lease this aircraft when the freighter conversion process is complete.  Consistent with our focus on achieving superior returns through successful asset disposition, we also sold one Airbus A330-200 aircraft during the quarter, resulting in a gain of $10.3 million before certain non-cash charges and loan termination fees.

As of June 30, 2011, Aircastle owned 136 aircraft having a net book value of $4.1 billion.


 

Owned Aircraft

as of

June 30,

2011(A)

 

114 Passenger Aircraft       

69%

 

22 Freighter Aircraft    

31%

 

Number of Lessees     

59

 

Number of Countries   

32

 

Weighted Average Remaining Lease Term (years)(B)

4.8

 

Percentage of Aircraft Leased Outside U.S.

92%

 

Percentage of "Latest Generation" Aircraft 

92%

 

Weighted Average Fleet Utilization during the three months ended June 30,2011©

98%

 


 

(A)  Percentages calculated using net book value.

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

©  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 May 2011, we entered into a12-year term loan with Sumitomo Mitsui Banking Corporation, supported by a guarantee from the French export credit agency, COFACE, for the financing of a new Airbus A330-200 passenger aircraft.  This financing bears interest at a fixed rate of 3.9625%.  In June 2011, we repaid in full the outstanding principal balance of one of our ECA term financings from the proceeds of the sale of an Airbus Model A330-200 aircraft.

Share Repurchase Program

As of June 30, 2011, Aircastle repurchased 4.9 million of its shares at a total cost of $60.0 million under its initial share repurchase program.  In June 2011, the Company's Board of Directors authorized an increase in the Company's share repurchase program by up to $30 million of its common shares, for a total of up to $90 million of its common shares in the aggregate.

Conference Call

In connection with this earnings release, management will host an earnings conference call on Thursday, August 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 Second 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 Sunday, September 4, 2011 by dialing (855) 859-2056 (from within the U.S.) or (404) 537-3406 (from outside of the U.S.); please reference passcode "83374902".

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 June 30, 2011 Aircastle's aircraft portfolio consisted of 136 aircraft and had 59 lessees located in 32 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.

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

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

Aircastle Limited and Subsidiaries

Consolidated Balance Sheets

(Dollars in thousands, except share data)

(Unaudited)

 

 

December 31,

June 30,

 

2010

2011

 


(Unaudited)

 

ASSETS



 

Cash and cash equivalents   

$  239,957

$   184,017

 

Accounts receivable           

1,815

2,665

 

Restricted cash and cash equivalents

191,052

185,245

 

Restricted liquidity facility collateral   

75,000

112,000

 

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

and $891,810

4,065,780

4,099,641

 

Aircraft purchase deposits and progress payments 

219,898

188,599

 

Other assets                            

65,557

74,529

 

 Total assets                           

$4,859,059

$4,846,696

 



 

LIABILITIES AND SHAREHOLDERS' EQUITY



 

LIABILITIES



 

Borrowings from secured and unsecured financings (including borrowings of

ACS Ireland VIEs of $314,877 and $306,040, respectively)      

$2,707,958

$2,685,632

 

Accounts payable, accrued expenses and other liabilities     

76,470

80,899

 

Dividends payable                                   

7,964

9,364

 

Lease rentals received in advance                  

43,790

39,066

 

Liquidity facility                                

75,000

112,000

 

Security deposits                             

83,241

78,959

 

Maintenance payments                         

342,333

320,696

 

Fair value of derivative liabilities                 

179,585

154,655

 

 Total liabilities                             

3,516,341

3,481,271

 



 

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 74,915,769 shares issued and outstanding at June 30, 2011

796

749

 

Additional paid-in capital                     

1,485,841

1,427,558

 

Retained earnings                         

104,301

153,066

 

Accumulated other comprehensive loss       

(248,220)

(215,948)

 

 Total shareholders' equity                

1,342,718

1,365,425

 

 Total liabilities and shareholders' equity     

$4,859,059

$4,846,696

 



 

 
     


Aircastle Limited and Subsidiaries

Consolidated Statements of Income

(Dollars in thousands, except per share amounts)

(Unaudited)

 

 

Three Months Ended
June 30,


Six Months Ended
June 30,

 

2010


2011


2010


2011

 

Revenues:








 

Lease rental revenue                    

$  128,133


$  143,355


$  258,255


$  284,471

 

Amortization of net lease discounts and lease incentives

(4,909)


(3,030)


(9,754)


(6,132)

 

Maintenance revenue                       

6,836


8,162


12,090


25,006

 

   Total lease rentals                       

130,060


148,487


260,591


303,345

 

Other revenue                           

124


351


154


3,407

 

 Total revenues                       

130,184


148,838


260,745


306,752

 








 

Expenses:








 

Depreciation                         

54,424


58,576


108,569


118,167

 

Interest, net                         

40,166


55,893


81,125


101,512

 

Selling, general and administrative (including non-cash share based payment expense of $1,929 and $1,178 for the three months ended, and $3,711 and $3,073 for the six months ended, June 30, 2010 and 2011, respectively)

11,036


11,578


22,709


24,109

 

Impairment of aircraft                   


5,200



5,200

 

Maintenance and other costs              

3,437


3,369


5,637


6,899

 

Total expenses                       

109,063


134,616


218,040


255,887

 








 

Other income (expense):








 

 Gain (loss) on sale of flight equipment     

(1,291)


10,299


(1,291)


19,961

 

 Other                               

(176)


323


(546)


(36)

 

 Total other income (expense)            

(1,467)


10,622


(1,837)


19,925

 








 

Income from continuing operations before income taxes

19,654


24,844


40,868


70,790

 

Income tax provision                        

1,515


1,535


3,850


4,804

 

Net income                               

$  18,139


$  23,309


$  37,018


$  65,986

 








 








 

Earnings per common share - Basic           

$          0.23


$         0.30


$         0.46


$     0.84

 








 

Earnings per common share - Diluted         

$          0.23


$         0.30


$         0.46


$          0.84

 








 

Dividends declared per share             

$ 0.10


$0.125


$   0.20


$0.225

 








 

 
               


Aircastle Limited and Subsidiaries

Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)

 

 


   Six Months Ended

        June 30,       

 

2010

2011

 

Cash flows from operating activities:



 

Net income

$  37,018

$  65,986

 

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



 

Depreciation                              

108,569

118,167

 

Amortization of deferred financing costs       

5,760

9,417

 

Amortization of net lease discounts and lease incentives 

9,754

6,132

 

Deferred income taxes                           

2,537

2,712

 

Non-cash share based payment expense           

3,711

3,073

 

Cash flow hedges reclassified into earnings         

4,074

8,226

 

Ineffective portion of cash flow hedges                      

1,769

(598)

 

Security deposits and maintenance payments included in earnings

(9,978)

(25,282)

 

(Gain) loss on sale of flight equipment

1,291

(19,961)

 

Impairment of aircraft

5,200

 

Other                                               

546

566

 

Changes in certain assets and liabilities:



 

Accounts receivable                             

(662)

(1,366)

 

Restricted cash and cash equivalents               

12,436

5,807

 

Other assets                                  

655

(1,276)

 

Accounts payable, accrued expenses and other liabilities

(5,445)

(11,861)

 

Lease rentals received in advance                 

(1,343)

(5,231)

 

Net cash provided by operating activities          

170,692

159,711

 



 

Cash flows from investing activities:



 

Acquisition and improvement of flight equipment and lease incentives

(55,353)

(196,132)

 

Proceeds from sale of flight equipment                       

17,707

151,577

 

Restricted cash and cash equivalents related to sale of flight equipment 

(17,707)

 

Aircraft purchase deposits and progress payments, net of aircraft sale deposits

(74,666)

(76,897)

 

Other                                           

(16)

(10)

 

Net cash used in investing activities               

(130,035)

(121,462)

 



 

Cash flows from financing activities:



 

Repurchase of shares                           

(1,663)

(61,403)

 

Proceeds from term debt financings                 

57,089

230,333

 

Securitization and term debt financing repayments     

(88,341)

(252,912)

 

Deferred financing costs                       

(2,023)

(11,253)

 

Restricted secured liquidity facility collateral         

2,000

(37,000)

 

Secured liquidity facility collateral                 

(2,000)

37,000

 

Security deposits received                       

3,917

10,317

 

Security deposits returned                       

(8,760)

(7,764)

 

Maintenance payments received                   

57,762

57,571

 

Maintenance payments returned                   

(35,702)

(43,257)

 

Dividends paid                                 

(15,906)

(15,821)

 

Net cash (used in) financing activities         

(33,627)

(94,189)

 



 

Net increase (decrease) in cash and cash equivalents                 

7,030

(55,940)

 

Cash and cash equivalents at beginning of period       

142,666

239,957

 

Cash and cash equivalents at end of period           

$149,696

$184,017

 



 

 
     


Aircastle Limited and Subsidiaries

Supplemental Financial Information

(Amount in thousands, except per share amounts)

(Unaudited)

 

 

Three Months Ended

June 30,


Six Months Ended

June 30,

 

2010

2011


2010

2011

 






 

Revenues                     

$130,184

$148,838


$260,745

$306,752

 






 

EBITDA                       

$119,153

$142,343


$240,316

$296,601

 






 

Adjusted net income               

$  20,514

$  20,643


$  41,077

$  53,542

 






 

Adjusted net income allocable to common shares

$  20,217

$  20,369


$  40,467

$  52,887

 

Per common share - Basic

$      0.26

$      0.27


$      0.52

$      0.68

 

Per common share - Diluted             

$      0.26

$      0.27


$      0.52

$      0.68

 






 

Adjusted net income plus depreciation and amortization

$  79,847

$  82,249


$159,400

$177,841

 






 

Adjusted net income plus depreciation and amortization allocable to common shares

$  78,690

$ 81,158


$157,033

$175,666

 

Per common share - Basic                     

$      1.00

$      1.07


$      2.00

$      2.27

 

Per common share - Diluted                   

$      1.00

$1.07


$      2.00

$      2.27

 






 

Basic common shares outstanding             

78,465

75,701


78,436

77,235

 

Diluted common shares outstanding           

78,465

75,701


78,436

77,235

 

 

 
           


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

June 30,


Six Months Ended

June 30,

 

2010

2011


2010

2011

 






 

Net income                    

$  18,139

$23,309


$  37,018

$65,986

 

Depreciation                    

54,424

58,576


108,569

118,167

 

Amortization of net lease discounts and lease incentives

4,909

3,030


9,754

6,132

 

Interest, net                                 

40,166

55,893


81,125

101,512

 

Income tax provision                        

1,515

1,535


3,850

4,804

 

EBITDA                                  

$119,153

$142,343


$240,316

$296,601

 

 

 
           


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

June 30,


Six Months Ended

June 30,

 

2010

2011


2010

2011

 






 

Net income                                 

$18,139

$23,309


$  37,018

$65,986

 

  Ineffective portion of cash flow hedges(1)      

908

1,724


2,222

1,249

 

  Loan termination payment(2)                 

3,196


3,196

 

  Write-off of deferred financings fees(2)        

2,456


2,456

 

  Mark to market of interest rate derivative contracts(3)

176

257


546

616

 

  Gain on sale of flight equipment(3)          

1,291

(10,299)


1,291

(19,961)

 

Adjusted net income                      

20,514

20,643


41,077

53,542

 

  Depreciation                            

54,424

58,576


108,569

118,167

 

  Amortization of net lease discounts and lease incentives

4,909

3,030


9,754

6,132

 

Adjusted net income plus depreciation and amortization

$79,847

$82,249


$159,400

$177,841

 

 

(1)  Included in Interest, net.  For the three and six months ended June 30, 2011, includes accelerated amortization of deferred hedge losses in the amount of $1,839 related to an aircraft sold in June 2011.

(2)  Included in Interest, net.  These amounts relate to an aircraft sold in June 2011.

(3)  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

June 30, 2011


Six Months Ended

June 30, 2011

 

Shares

Percent(2)


Shares

Percent(2)

 

Weighted average shares






 

Common shares outstanding — Basic       

75,701

98.67 %


77,235

98.78 %

 

Unvested restricted common shares outstanding

1,018

1.33 %


956

1.22 %

 

Total weighted average shares outstanding

76,719

100.00%


78,191

100.00%

 






 

Common shares outstanding — Basic         

75,701

100.00%


77,235

100.00%

 

Effect of dilutive shares(1)                 


 

Common shares outstanding — Diluted

75,701

100.00%


77,235

100.00%

 






 

Net income allocation






 

Net income                               

$23,309

100.00%


$65,986

100.00%

 

Distributed and undistributed earnings allocated to unvested restricted shares

(309)

(1.33)%


(807)

(1.22)%

 

Earnings available to common shares

$23,000

98.67 %


$65,179

98.78 %

 






 

Adjusted net income allocation






 

Adjusted net income

$20,643

100.00%


$53,542

100.00%

 

Amounts allocated to unvested restricted shares

(274)

(1.33)%


(655)

(1.22)%

 

Amounts allocated to common shares

$20,369

98.67 %


$52,887

98.78 %

 






 

Adjusted net income plus depreciation and amortization allocation






 

Adjusted net income plus depreciation and amortization

$82,249

100.00%


$177,841

100.00%

 

Amounts allocated to unvested restricted shares

(1,091)

(1.33)%


(2,175)

(1.22)%

 

Amounts allocated to common shares

$81,158

98.67 %


$175,666

98.78 %

 

 

(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

June 30, 2010


Six Months Ended

June 30, 2010

 

Shares

Percent(2)


Shares

Percent(2)

 

Weighted average shares






 

Common shares outstanding — Basic

78,465

98.55 %


78,437

98.52 %

 

Unvested restricted common shares outstanding

1,154

1.45 %


1,182

1.48 %

 

Total weighted average shares outstanding

79,619

100.00%


79,619

100.00%

 






 

Common shares outstanding — Basic

78,465

100.00%


78,436

100.00%

 

Effect of dilutive shares(1)


 

Common shares outstanding — Diluted

78,465

100.00%


78,436

100.00%

 






 

Net income allocation






 

Net income

$18,139

100.00%


$  37,018

100.00%

 

Distributed and undistributed earnings allocated to unvested restricted shares

(263)

(1.45)%


(550)

(1.48)%

 

Earnings available to common shares

$17,876

98.55 %


$  36,468

98.52 %

 






 

Adjusted net income allocation






 

Adjusted net income

$20,514

100.00%


$  41,077

100.00%

 

Amounts allocated to unvested restricted shares

(297)

(1.45)%


(610)

(1.48)%

 

Amounts allocated to common shares

$20,217

98.55 %


$  40,467

98.52 %

 






 

Adjusted net income plus depreciation and amortization allocation






 

Adjusted net income plus depreciation and amortization

$79,847

100.00%


$159,400

100.00%

 

Amounts allocated to unvested restricted shares

(1,157)

(1.45)%


(2,367)

(1.48)%

 

Amounts allocated to common shares

$78,690

98.55 %


$157,033

98.52 %

 

 

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

(2)  Percentages rounded to two decimal places

 
           


SOURCE Aircastle Limited

 

 

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