Stamford, CT. August 10, 2007 – 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
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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.
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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.
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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, | |
| | 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 $2,740 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 | |
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Aircastle Limited and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands, except share data)
| | December 31,
2006 | | June 30,
2007 | |
ASSETS | | | | | | (unaudited) | |
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 67,433,451shares 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 | |
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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 | |
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