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Press release from PR Newswire

Aircastle Announces Second Quarter 2010 Results

Tuesday, August 10, 2010

Aircastle Announces Second Quarter 2010 Results08:00 EDT Tuesday, August 10, 2010Second Quarter Highlights - Lease rental revenue of $128.1 million, Total revenues of $130.2 million, and EBITDA(1) of $119.2 million - Net income of $18.1 million, or $0.23 per diluted common share - Adjusted net income(1) of $20.5 million, or $0.26 per diluted common share - Adjusted net income plus depreciation and amortization(1) of $79.8 million or $1.00 per diluted common share - Secured $1.1 billion of financing commitments - Purchased or committed to purchase five aircraft for $170 million - Fleet utilization of 98% and portfolio yield of 13.6%STAMFORD, Conn., Aug. 10 /PRNewswire-FirstCall/ -- Aircastle Limited (the "Company" or "Aircastle") (NYSE: AYR) reported second quarter net income of $18.1 million or $0.23 per diluted common share, and adjusted net income of $20.5 million or $0.26 per diluted common share. Commenting on the results, Ron Wainshal, Aircastle's CEO, stated: "We continued delivering consistently solid portfolio performance during the second quarter, as we benefitted from effective asset management and improving industry conditions.  We also capitalized on our strong operating track record and balance sheet by securing $1.1 billion in new financing commitments from a variety of debt sources, positioning us well to take advantage of a growing set of attractive new investment opportunities."Lease rental revenue for the second quarter 2010 was $128.1 million, down 1.0% year over year and includes a decrease of $4.0 million due to aircraft transitions and lease extensions, of which $1.1 million relates to aircraft that were on the ground subject to a forward sale agreement.  These decreases were partially offset by the impact of aircraft acquisitions net of dispositions of $3.1 million.Second quarter total revenues were $130.2 million, a decrease of $6.7 million from the second quarter 2009, and reflect lower lease rental revenue of $1.3 million, lower end of lease maintenance revenue of $2.8 million due to fewer scheduled lease transitions in 2010 and higher non-cash lease incentive amortization of $2.1 million.EBITDA was $119.2 million, down $6.4 million from the second quarter of 2009, due to lower lease rental revenue and maintenance revenue of $4.1 million, higher mark to market expense on our undesignated hedges of $1.2 million and a loss on the sale of aircraft of $1.3 million.  These decreases in EBITDA were partially offset by lower maintenance and other costs of $1.1 million as a result of higher costs incurred in the second quarter of 2009 for repossessed aircraft.Adjusted net income plus depreciation and amortization for the quarter was $79.8 million, down $1.5 million year over year, due primarily to lower lease rental revenue and maintenance revenue of $4.1 million, offset by lower maintenance and other expenses of $1.1 million and lower adjusted interest, net of $1.8 million.Adjusted net income for the quarter was $20.5 million, down $6.4 million year over year, and reflects lower total revenues of $6.7 million, higher depreciation expense of $2.7 million, partially offset by lower maintenance and other costs of $1.1 million and lower adjusted interest, net of $1.8 million.As disclosed previously, Aircastle owned three Boeing 757-200 aircraft subject to a forward sale agreement.  During the second quarter we completed the sale of the first aircraft and recorded a loss on the sale of $1.3 million reflecting additional maintenance costs incurred to meet delivery conditions under the sale agreement.  We anticipate completing the sale of the second aircraft during the third quarter of 2010.  The final aircraft is currently on lease and is scheduled to return from the current lessee and deliver under the sale agreement in late 2011.(1) Refer to the selected financial information accompanying this press release for a reconciliation of GAAP to Non-GAAP numbers.Aviation AssetsAs of June 30, 2010, Aircastle owned 129 aircraft having a net book value of $3.7 billion.Owned Aircraft as ofJune 30, 2010(A)108 Passenger Aircraft                                                                  71%21 Freighter Aircraft                                                                     29%Number of Lessees                                                                     63Number of Countries                                                                     36Weighted Average Remaining Lease Term (years)(B)                                           4.6Percentage of Aircraft Leased Outside U.S.                                                  91%Percentage of "Latest Generation" Aircraft                                                   88%Weighted Average Fleet Utilization during the Three Months ended June 30, 2010(C)                  98%Weighted Average Fleet Utilization during the Six Months ended June 30, 2010(C)                    98%(A)  Percentages calculated using net book value.(B)  Weighted average remaining lease term (years) by net value.(C)  Aircraft on-lease days as a percent of total days in period weighted by net book value, excluding aircraft in freighter conversion.In June we purchased a Boeing 737-800 aircraft and placed it on lease.  We also have a commitment to acquire three Airbus A330-200 aircraft from Sri Lankan Airlines, the flag carrier of Sri Lanka, in a sale-leaseback transaction (the "A330 SLB Aircraft").  The first aircraft closed in July 2010.  The remaining two aircraft are expected to close in the third quarter of 2010.  In addition we entered into a commitment to purchase one Boeing 737-800 aircraft which is subject to lease and is expected to close in the third quarter of 2010.Financing UpdateIn July 2010, Aircastle Limited closed a private placement offering of 9.75% senior unsecured notes due in 2018, in an aggregate principal amount of $300 million.  The notes were issued at 98.645% of par and were offered only to qualified institutional buyers and buyers outside the United States in accordance with Rule 144A and Regulation S, respectively, under the Securities Act of 1933.  We used a portion of the net proceeds of the private placement to repay $25 million drawn under a credit facility used in connection with the purchase of the first A330 SLB Aircraft and plan to use the remaining net proceeds to repay all of its outstanding indebtedness under our Term Financing No. 2 and for general corporate purposes, including the purchase of aviation assets.We secured a commitment from Citigroup Global Markets Inc. for a $50 million senior unsecured revolving credit facility which will have a three-year term and, subject to the completion of satisfactory documentation, is anticipated to be closed during the course of the third quarter.In June, we entered into a $108 million loan facility to finance a portion of the pre delivery payments on six new Airbus A330 aircraft under the airbus A330 acquisition agreement (Airbus A330 Agreement).In addition, in July 2010, we secured new financing commitments for our Airbus A330 Agreement which will benefit from an ECA guarantee provided by Compagnie Francaise d'Assurance pour le Commerce Exterieur, or COFACE, as follows:Sumitomo Mitsui Banking Corporation (SMBC) committed $250 million in debt to finance the first three new A330 Aircraft delivering to South African Airways; andCitibank, N.A. committed approximately $221 million and The Bank of Tokyo-Mitsubishi UFJ, Ltd. (BOTM) committed approximately $227 million, to finance six new A330 Aircraft.Conference Call In connection with this earnings release, management will host an earnings conference call on August 10, 2010 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 power point presentation has been posted to the Investor Relations section of Aircastle's website. 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 Tuesday, August 17, 2010 by dialing (800) 642-1687 (from within the U.S.) or (706) 645-9291 (from outside of the U.S.);  please reference passcode "89643753."About Aircastle LimitedAircastle Limited is a global company that acquires, leases and sells high-utility commercial jet aircraft to airlines throughout the world.  As of June 30, 2010 Aircastle's aircraft portfolio consisted of 129 aircraft and had 63 lessees located in 36 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, 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, our ability to extend or replace our existing financings, and the demand for and value of aircraft; our exposure to increased bank and counterparty risk caused by credit and capital markets disruptions; 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 caused by volcanic activity 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 2009 Annual Report on Form 10-K, and in our other filings with the SEC, press releases and other communications. In addition, new risks and uncertainties emerge from time to time, and it is not possible for Aircastle to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Such forward-looking statements speak only as of the date of this press release. Aircastle Limited expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.Aircastle Limited and SubsidiariesConsolidated Balance Sheets (Dollars in thousands, except share data)December 31,2009June 30,2010(Unaudited)ASSETSCash and cash equivalents                                                     $      142,666$    149,696Accounts receivable                                                           2,9413,041Restricted cash and cash equivalents                                             207,834213,105Restricted liquidity facility collateral                                               81,00079,000Flight equipment held for lease, net of accumulated depreciation of $586,537 and $688,492   3,812,9703,742,080Aircraft purchase deposits and progress payments                                 141,144210,297Leasehold improvements, furnishings and equipment, net of accumulated depreciation of $2,455 and $2,654802619Other assets                                                                 65,15566,504Total assets                                                               $   4,454,512$    4,464,342LIABILITIES AND SHAREHOLDERS' EQUITYLIABILITIESBorrowings from securitizations and term debt financings (including borrowings of ACS Ireland VIEs of $331,856 and $322,453, respectively)$   2,464,560$ 2,433,308Accounts payable, accrued expenses and other liabilities                             60,39258,542Dividends payable                                                             7,9557,947Lease rentals received in advance                                               34,38131,288Liquidity facility                                                               81,00079,000Security deposits                                                             82,53374,670Maintenance payments                                                         253,175279,235Fair value of derivative liabilities                                                 179,279211,698Total liabilities                                                              3,163,2753,175,688Commitments and Contingencies SHAREHOLDERS' EQUITYPreference shares, $.01 par value, 50,000,000 shares authorized, no shares issued and outstanding----Common shares, $.01 par value, 250,000,000 shares authorized, 79,550,421 shares issued and outstanding at December 31, 2009; and 79,472,390 shares issued and outstanding at June 30, 2010796795Additional paid-in capital                                                       1,479,9951,482,044Retained earnings                                                             70,29491,414Accumulated other comprehensive loss                                           (259,848)(285,599)Total shareholders' equity                                                    1,291,2371,288,654Total liabilities and shareholders' equity                                         $     4,454,512$ 4,464,342Aircastle Limited and SubsidiariesConsolidated Statements of Income (Dollars in thousands, except per share amounts) (Unaudited)Three Months EndedJune 30,Six Months EndedJune 30,2009201020092010Revenues:Lease rental revenue                                  $  129,406$  128,133$  255,400$  258,255Amortization of net lease discounts and lease incentives      (2,810)(4,909)(3,927)(9,754)Maintenance revenue                                  9,6376,83616,24012,090    Total lease rentals                                   136,233130,060267,713260,591Interest income                                       594--1,227--Other revenue                                       86124111154  Total revenues                                     136,913130,184269,051260,745Expenses:Depreciation                                         51,68854,424103,249108,569Interest, net                                         41,48240,16684,89381,125Selling, general and administrative (including non-cash share based payment expense of $1,729 and $1,929 for the three months ended, and $3,387 and $3,711 for the six months ended June 30, 2009 and 2010, respectively)11,12211,03622,21722,709Maintenance and other costs                            4,5023,43710,2785,637 Total expenses                                      108,794109,063220,637218,040Other income (expense):  Loss on sale of aircraft                               --(1,291)--(1,291)  Other income (expense)                               1,501(176)1,593(546)  Total other income (expense)                           1,501(1,467)1,593(1,837)Income from continuing operations before income taxes       29,62019,65450,00740,868Income tax provision                                   2,0491,5153,9653,850Net income                                           $  27,571$  18,139$  46,042$  37,018Earnings per common share - Basic                       $          0.35$        0.23$        0.58$         0.46Earnings per common share - Diluted                      $          0.35$        0.23$        0.58$         0.46Dividends declared per share                            $          0.10$        0.10$        0.20$         0.20Aircastle Limited and SubsidiariesConsolidated Statements of Cash Flows (Dollars in thousands) (Unaudited)Six Months EndedJune 30, 20092010Cash flows from operating activities:Net income$    46,042$   37,018Adjustments to reconcile net income to net cash provided by operating activities:Depreciation                                                                       103,249108,569Amortization of deferred financing costs                                                5,7315,760Amortization of net lease discounts and lease incentives                                   3,9279,754Deferred income taxes                                                              3,3482,537Accretion of purchase discounts on debt investments                                     (288)?Non-cash share based payment expense                                               3,3873,711Cash flow hedges reclassified into earnings                                             7,7964,074Ineffective portion of cash flow hedges                                                 (573)1,769Loss on sale of flight equipment                                                       ?1,291Security deposits and maintenance payments included in earnings                           (10,506)(9,978)Other                                                                            (1,164)546Changes in certain assets and liabilities: Accounts receivable                                                              (2,281)(662)Restricted cash and cash equivalents                                                (16,754)12,436Other assets                                                                    (4,077)655Accounts payable, accrued expenses and other liabilities                                 (10,118)(5,445)Lease rentals received in advance                                                   (1,228)(1,343)Net cash provided by operating activities                                            126,491170,692Cash flows from investing activities:Acquisition and improvement of flight equipment and lease incentives                           (105,746)(55,353)Proceeds from sale of flight equipment, net of gain                                          ?17,707Restricted cash and cash equivalents related to sale of flight equipment                         ?(17,707)Aircraft purchase deposits and progress payments, net of returned deposits                     (39,715)(74,666)Principal repayments on debt investments                                                 808?Leasehold improvements, furnishings and equipment                                        (82)(16)Net cash used in investing activities                                                (144,735)(130,035)Cash flows from financing activities:Repurchase of shares from directors and employees                                       (247)(1,663)Proceeds from debt financings                                                         70,91657,089Debt repayments                                                                     (65,847)(88,341)Deferred financing costs                                                               (3,098)(2,023)Restricted secured liquidity facility collateral                                               (81,186)2,000Secured liquidity facility collateral                                                        81,186(2,000)Security deposits received                                                             37,4753,917Security deposits returned                                                             (6,267)(8,760)Maintenance payments received                                                         33,22057,762Maintenance payments returned                                                         (14,527)(35,702)Payments for terminated cash flow hedges                                               (2,758)?Dividends paid                                                                       (15,785)(15,906)Net cash provided by (used in) financing activities                                     33,082(33,627)Net increase (decrease) in cash and cash equivalents                                   14,8387,030Cash and cash equivalents at beginning of period                                             80,947142,666Cash and cash equivalents at end of period                                                 $   95,785$   149,696Aircastle Limited and SubsidiariesSupplemental Financial Information(Amount in thousands, except per share amounts)(Unaudited)Three Months EndedJune 30,Six Months EndedJune 30,2009201020092010Revenues$ 136,913$ 130,184$  269,051$ 260,745EBITDA$ 125,600$ 119,153$  242,076$ 240,316Adjusted net income $   26,884$   20,514$    48,009$   41,077Adjusted net income allocable to common shares$   26,413$   20,217$    47,229$   40,467Per common share - Basic$       0.34$       0.26$        0.61$       0.52Per common share - Diluted$       0.34$       0.26$        0.61$       0.52Adjusted net income plus depreciation and amortization$   81,382$   79,847$  155,185$ 159,400Adjusted net income plus depreciation and amortization allocable to common shares$   79,957$   78,690$  152,665$ 157,033Per common share - Basic$       1.03$       1.00$        1.96$       2.00Per common share - Diluted$       1.03$       1.00$        1.96$       2.00Basic common shares outstanding77,97778,46577,95978,437Diluted common shares outstanding77,97778,46577,95978,437Refer to the selected information accompanying this press release for a reconciliation of GAAP to Non-GAAP information.Aircastle Limited and SubsidiariesReconciliation of GAAP to Non-GAAP MeasuresEBITDA Reconciliation(Dollars in thousands)(Unaudited)Three Months Ended June 30,Six Months Ended June 30,2009201020092010Net income                                          $    27,571$     18,139$     46,042$     37,018Depreciation                                         51,68854,424103,249108,569Amortization of net lease discounts and lease incentives      2,8104,9093,9279,754Interest, net                                         41,48240,16684,89381,125Income tax provision                                   2,0491,5153,9653,850EBITDA                                             $  125,600$   119,153$   242,076$   240,316We 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 SubsidiariesReconciliation of GAAP to Non-GAAP MeasuresAdjusted Net Income plus Depreciation Reconciliation(Dollars in thousands)(Unaudited)Three Months Ended June 30,Six Months Ended June 30,2009201020092010Net income                                             $  27,571$  18,139$  46,042$  37,018   Ineffective portion and termination of cash flow hedges(1)     3859083,1312,222   Mark to market of interest rate derivative contracts(2)         (1,072)176(1,164)546  Loss on sale of flight equipment(2)                         ?1,291?1,291Adjusted net income                                      26,88420,51448,00941,077   Depreciation                                           51,68854,424103,249108,569   Amortization of net lease discounts and lease incentives       2,8104,9093,9279,754Adjusted net income plus depreciation and amortization          $  81,382$  79,847$  155,185$  159,400(1)  Included in Interest, net(2)  Included in Other income (expense)Management believes that Adjusted Net Income ("ANI") and Adjusted Net Income plus Depreciation and Amortization ("ANIDA"), when viewed in conjunction with the Company's results under GAAP and the above reconciliation, provide useful information about operating and period-over-period performance, and provide additional information that is useful for evaluating the underlying operating performance of our business without regard to periodic reporting elements related to interest rate derivative accounting as well as gains/(losses) related to flight equipment and debt investments. Additionally, management believes that ANIDA provides investors with an additional metric to enhance their understanding of the factors and trends affecting our ongoing cash earnings, from which capital investments are made, debt is serviced and dividends are paid. However, ANI and ANIDA are not measures of financial performance or liquidity under GAAP and, accordingly, should not be considered as alternatives to net income (loss) or cash flow from operating activities as indicators of operating performance or liquidity. Aircastle Limited and SubsidiariesReconciliation of GAAP to Non-GAAP MeasuresReconciliation of Net Income Allocable to Common Shares(In thousands)(Unaudited)Three Months EndedJune 30, 2010Six Months EndedJune 30, 2010SharesPercent(2)SharesPercent(2)Weighted average sharesCommon shares outstanding ? Basic78,46598.55 %78,43798.52 %Unvested restricted common shares outstanding1,1531.45 %1,1821.48 %Total weighted average shares outstanding79,619100.00 %79,619100.00 %Common shares outstanding ? Basic78,465100.00 %78,437100.00 %Effect of dilutive shares(1)????Common shares outstanding - Diluted78,465100.00 %78,437100.00 %Net income allocationNet income$18,139100.00 %$  37,018100.00 %Distributed and undistributed earnings allocated to unvested restricted shares(263)(1.45)%(550)(1.48)%Earnings available to common shares$17,87698.55 %$  36,46898.52 %Adjusted net income allocationAdjusted net income$20,514100.00 %$  41,077100.00 %Amounts allocated to unvested restricted shares(297)(1.45)%(610)(1.48)%Amounts allocated to common shares$20,21798.55 %$  40,46798.52 %Adjusted net income plus depreciation and amortization allocationAdjusted net income plus depreciation and amortization$79,847100.00 %$159,400100.00 %Amounts allocated to unvested restricted shares(1,157)(1.45)%(2,367)(1.48)%Amounts allocated to common shares$78,69098.55 %$157,03398.52 %(1)  The Company had no dilutive common share equivalents for the periods presented.(2)  Percentages rounded to two decimal placesAircastle Limited and SubsidiariesReconciliation of GAAP to Non-GAAP MeasuresReconciliation of Net Income Allocable to Common Shares(In thousands)(Unaudited)Three Months EndedJune 30, 2009Six Months EndedJune 30, 2009SharesPercent(2)SharesPercent(2)Weighted average sharesCommon shares outstanding ? Basic77,97798.25 %77,95998.38 %Unvested restricted common shares outstanding1,3901.75 %1,2871.62 %Total weighted average shares outstanding79,367100.00 %79,246100.00 %Common shares outstanding ? Basic77,977100.00 %77,759100.00 %Effect of dilutive shares(1)????Common shares outstanding - Diluted77,977100.00 %77,759100.00 %Net income allocationNet income$27,571100.00 %$  46,042100.00 %Distributed and undistributed earnings allocated to unvested restricted shares(483)(1.75)%(748)(1.62)%Earnings available to common shares$27,08898.25 %$  45,29498.38 %Adjusted net income allocationAdjusted net income$26,884100.00 %$  48,009100.00 %Amounts allocated to unvested restricted shares(471)(1.75)%(780)(1.62)%Amounts allocated to common shares$26,41398.25 %$  47,22998.38 %Adjusted net income plus depreciation and amortization allocationAdjusted net income plus depreciation and amortization$81,382100.00 %$155,185100.00 %Amounts allocated to unvested restricted shares(1,425)(1.75)%(2,520)(1.62)%Amounts allocated to common shares$79,95798.25 %$152,66598.38 %(1)  The Company had no dilutive common share equivalents for the periods presented.(2)  Percentages rounded to two decimal placesSOURCE Aircastle LimitedFor further information: Julia Hallisey, Investor Relations, +1-203-504-1063, for Aircastle Limited