The following table presents the number of aircraft included in Genesis’s initial portfolio of 41 aircraft and the number of those aircraft that were owned by its predecessor as of each of the following dates:
As of March 31, 2007, all 41 leases are performing and generating rents, as expected under the respective lease agreements.
As previously reported, Ajet Aviation of Cyprus defaulted in the fourth quarter of 2006 on a lease for a Boeing 737-800 that was scheduled to expire in 2008. Following Ajet’s default, the aircraft was re-leased to XL Airways of the United Kingdom through April 2007. During the first quarter, Genesis executed a new lease agreement for this aircraft with Sun Express of Turkey. The portfolio contains no further scheduled lease expiries in 2007.
In April 2007, Genesis signed an agreement to purchase two new Airbus 320 aircraft from Air Deccan of India. The aircraft are expected to be delivered in July and September of this year and will be leased back on long term leases to Air Deccan.
On April 5, 2007, a subsidiary of Genesis entered into a $1 billion senior secured credit facility with a syndicate of lenders. The credit facility permits initial loans in an aggregate principal amount of up to $250 million, with an option for Genesis to increase the aggregate principal amount of available loans by an additional amount of up to $750 million during the first 18 months following the closing date of the credit facility, for a total commitment amount of up to $1 billion. The credit facility will provide funding for 65.0-72.5% (depending on aircraft type) of the agreed value of the aircraft that Genesis may acquire. The commitments under the credit facility are available until April 2010, at which time Genesis will have the option to convert any outstanding amount under the credit facility to a term loan with a two-year maturity. Borrowings under the facility will bear interest at one- or three-month LIBOR plus an applicable margin of 1.50-1.75%.
Genesis Lease Limited is a global commercial aircraft leasing company that is headquartered in Limerick, Ireland. Genesis acquires and leases modern, operationally efficient passenger and cargo jet aircraft to a diverse group of airlines throughout the world. Genesis leverages the
worldwide platform of GE Commercial Aviation Services Limited, or GECAS, to service its portfolio of leases, allowing management to focus on executing its growth strategy.
Genesis’s common shares, in the form of American Depositary Shares, are listed on the New York Stock Exchange under the symbol “GLS.”
On December 19, 2006, Genesis completed its initial public offering (“IPO”) and issued 27,860,000 shares at a public offering price of $23.00 per share. On December 19, 2006, Genesis also issued 3,450,000 shares to an affiliate of General Electric Company (“GE”), in a private placement for a price of $23.00 per share, and issued $810 million of floating-rate aircraft lease-backed notes in a securitization transaction. Genesis used the net proceeds of the IPO, the private placement of shares to GE and the securitization to finance the acquisition of a portfolio of 41 aircraft from affiliates of GE. On January 16, 2007, Genesis sold an additional 4,179,000 shares after the underwriters of its initial public offering exercised their over-allotment option in full, as well as 517,500 additional shares in a private placement to GE, for aggregate additional proceeds of $108.0 million. References to amounts raised in offerings or other sales of securities are gross proceeds and do not reflect discounts and commissions paid to the underwriters or initial purchasers of those securities. Financial statements for periods prior to the IPO reflect the results of operations and financial condition of Genesis’s predecessor. The predecessor’s financial statements reflect the combination of the 41 aircraft in Genesis’s portfolio from the date that each such aircraft was acquired by an affiliate of General Electric Company (“GE”).
Conference Call and Webcast
Genesis will host a conference call and webcast for investors and analysts to discuss its results for the quarter on Wednesday, April 25, 2007, at 2:00pm (GMT) / 9:00am (Eastern time) / 6:00am (Pacific time).
Participants should call (866) 409-1559 (United States/Canada) or (913) 312-6684 (International) and request the Genesis call or utilize the confirmation code 6923843. A telephonic replay will be available for anyone unable to participate in the live call. To access the replay, call (888) 203-1112 or (719) 457-0820 and enter confirmation code 6923843. The recording will be available from Wednesday, April 25, 2007 until Wednesday, May 16, 2007 at 11:59 p.m. (Eastern Time). A live broadcast of the earnings conference call will also be available via the Internet at http://www.genesislease.com under Investor Relations. The webcast will be archived on the site for one year.
The Genesis Lease Limited logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=3178
Cautionary Statement Regarding Forward-Looking Statements
This press release contains certain “forward - looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by words such as “expects,” “intends,” “anticipates,” “plans,” “believes,” “seeks,” “estimates,” “will,” or words of similar meaning and include, but are not limited to, statements regarding the outlook for the company’s future business and financial performance. Forward-looking statements are based on management’s current expectations and assumptions, which are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially due to global political, economic, business, competitive, market,
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regulatory and other factors and risks, including the lack of an independent operating history upon which to assess the company’s prospects or ability to pay dividends to its shareholders; the possibility that the company’s subsidiaries may have unknown contingent liabilities; the company’s inability to pay or maintain dividends on its shares; reliance on subsidiaries to provide funds necessary to meet the company’s financial obligations and pay dividends; unforeseen difficulties and costs associated with the acquisition and/or management of the company’s aircraft portfolio; the need for additional capital to finance the company’s growth; the death, incapacity or departure of senior management; the company’s obligations to comply with reporting and corporate governance requirements; an inability to refinance the company’s indebtedness on favorable terms or at all; operational restrictions imposed by the company’s indebtedness; exposure to interest rate fluctuations; dependence on GECAS; limitations on the company’s opportunities to purchase additional aircraft; potential conflicts of interests between the company and GECAS and its affiliates; competition with GECAS for acquisitions and dispositions of aircraft; limitations on remedies against GECAS for unsatisfactory performance; reliance on third-party service providers for certain administrative, accounting and other services; variability of supply and demand for aircraft and other aviation assets that could depress lease rates and the value of the company’s leased assets; a decline in aircraft values and achievable lease rates; the possibility that the company may be required to substitute some of the aircraft in its portfolio; past damage to some of the aircraft in the company’s portfolio; the advent of superior aircraft technology that could cause the company’s existing aircraft portfolio to become outdated and therefore less desirable; increased operational costs as the company’s aircraft age; concentration of aircraft types in the company’s aircraft portfolio; competition for investment opportunities in aircraft and other aviation assets; an inability to expand due to limited demand for leased aircraft; possible depreciation expenses and impairment charges; the effect of aircraft liens on the company’s ability to repossess, re-lease or resell its aircraft; failure by lessees to comply with the registration requirements in the jurisdiction where they operate; compliance with government regulations; difficulty to obtain title to one of the aircraft in the company’s portfolio; an inability to re-lease or sell aircraft on favorable terms as leases expire; reliance on lessees’ continuing performance of their lease obligations; difficulties in collecting lease payments from airlines; potential restructuring of leases with lessees that encounter financial difficulties; economic and political risks faced by lessees that operate in emerging markets; the possibility that the company may have to purchase repossession insurance if GECAS re-leases aircraft to lessees located in certain jurisdictions; potential lease defaults; an inability by lessees to fund their maintenance requirements on the company’s aircraft; failure by lessees to pay certain operational costs that could result in grounding of aircraft; inadequate insurance coverage maintained by lessees; failure by lessees to obtain certain required licenses, consents and approvals; early termination rights contained in some leases; the concentration of lessees in certain geographical regions; a deterioration in the financial condition of the commercial airline industry; airline reorganizations that could impair lessees’ ability to comply with lease payment obligations; the effect of high fuel prices on the profitability of the airline industry; the effects of terrorist attacks and geopolitical conditions on the airline industry; the effects of pandemic diseases on the airline industry; dependence on aircraft and engine manufacturers’ continuing financial stability; the company’s tax status as a passive foreign investment company; failure to qualify for tax treaty benefits and U.S. statutory tax exemptions; and exposure to potential taxation in jurisdictions in which the company’s aircraft operate, where its lessees are located or where it perform certain services.
Genesis expressly disclaims any obligation to update or revise any of these forward-looking statements, whether because of future events, new information, a change in its views or expectations, or otherwise.
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GENESIS LEASE LIMITED
CONDENSED COMBINED AND CONSOLIDATED BALANCE SHEETS
| | December 31,
2006 | | March 31,
2007 | |
| | | | (unaudited) | |
| | (USD in thousands) | |
ASSETS | | | | | | | |
Cash and cash equivalents | | $ | 26,855 | | $ | 152,127 | |
Restricted cash | | | 15,471 | | | 19,793 | |
Accounts receivable | | | 1,366 | | | 2,785 | |
Other assets | | | 22,315 | | | 18,971 | |
Flight equipment under operating leases, net | | | 1,219,738 | | | 1,206,124 | |
Deferred income taxes | | | 30,313 | | | 29,243 | |
Total Assets | | $ | 1,316,058 | | $ | 1,429,043 | |
| | | | | | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | |
Accounts payable | | $ | 2,787 | | $ | 3,044 | |
Other liabilities | | | 26,596 | | | 28,518 | |
Dividends payable | | | — | | | 19,107 | |
Long-term debt | | | 810,000 | | | 810,000 | |
Total Liabilities | | | 839,383 | | | 860,669 | |
Commitments and contingencies | | | — | | | — | |
Shareholders’ equity: | | | | | | | |
Par value $0.001 U.S. dollars per share; 500,000,000 shares authorized, 31,342,176 and 36,051,328 shares issued and outstanding at December 31, 2006 and March 31, 2007 respectively | | $ | 31 | | $ | 36 | |
Additional paid-in capital | | | 474,202 | | | 577,514 | |
Accumulated other comprehensive income | | | 3,375 | | | (142) | |
Accumulated deficit | | | (933) | | | (9,034) | |
Total shareholders’ equity | | | 476,675 | | | 568,374 | |
Total liabilities and shareholders’ equity | | $ | 1,316,058 | | $ | 1,429,043 | |
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GENESIS LEASE LIMITED
UNAUDITED CONDENSED COMBINED AND CONSOLIDATED STATEMENTS OF
INCOME
| | Three Months Ended March 31, | |
| | 2006 | | 2007 | |
| | (USD in thousands ) | |
Revenues | | | | | | | |
Rental of flight equipment | | $ | 35,956 | | $ | 40,483 | |
Other income | | | — | | | 1,729 | |
Total revenues | | | 35,956 | | | 42,212 | |
Expenses: | | | | | | | |
Depreciation | | | 11,872 | | | 14,082 | |
Interest | | | 10,224 | | | 11,606 | |
Maintenance | | | 1,765 | | | — | |
Selling, general and administrative | | | 839 | | | 3,946 | |
Total operating expenses | | | 24,700 | | | 29,634 | |
Income Before Taxes | | | 11,256 | | | 12,578 | |
Provision for income taxes | | | 4,165 | | | 1,572 | |
Net Income | | | 7,091 | | | 11,006 | |
Dividends | | | — | | | 19,107 | |
Transfer to Retained Earnings | | $ | 7,091 | | | ($8,101) | |
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Reconciliation of Non-GAAP Financial Measures – EBITDA
EBITDA is a measure of operating performance and liquidity that is not calculated in accordance with U.S. generally accepted accounting principles, or GAAP. Genesis defines EBITDA as net income before provision for income taxes, interest and depreciation and amortization. EBITDA is a key measure of Genesis’s operating performance and liquidity that management uses to focus on consolidated operating results exclusive of expenses that relate to the financing and capitalization of its business. Management uses EBITDA as a financial measure to evaluate the consolidated financial and operating performance and liquidity of the business that, when viewed with GAAP results and the following reconciliation, provides a more complete understanding of factors and trends affecting Genesis’s business than GAAP measures alone. EBITDA assists Genesis in comparing its operating performance on a consistent basis as it removes the impact of its capital structure (primarily interest charges), asset base (primarily depreciation and amortization) and items outside the control of the management team (taxes) from its operating results. EBITDA also assists Genesis in comparing its liquidity on a consistent basis by providing a measure to demonstrate cash flow available for the payment of interest and dividends. EBITDA is presented in this press release because Genesis believes that EBITDA is frequently used by securities analysts, investors and other interested parties as a measure of financial performance and of debt service and dividend paying capacity. Accordingly, EBITDA is one of the metrics used by management and the board of directors to review Genesis’s financial performance and liquidity.
EBITDA should not be considered a substitute for net income, income from operations or cash flows provided by or used in operations, as determined in accordance with GAAP. In evaluating EBITDA, investors should be aware that in the future Genesis may incur expenses similar to the adjustments described above. In particular, Genesis expects that depreciation of flight equipment and interest expense will continue to represent the substantial portion of its operating expenses. Therefore, the use of EBITDA as a measure of operating performance and liquidity is limited by the exclusion of a majority of Genesis’s operating expenses from the measure. The following presentation of EBITDA should not be construed as an implication that future results will be unaffected by expenses that are unusual, non-routine or non-recurring items. Investors are urged to review the GAAP financial measures included in this earnings release and Genesis’s public filings, and to not rely on any single financial measure to evaluate its business.
RECONCILIATION OF NET INCOME TO EBITDA FOR THE THREE MONTH PERIODS ENDED
MARCH 31, 2006 AND 2007 (UNAUDITED)
| | Three Months Ended March 31, | |
| | 2006 | | 2007 | |
| | (USD in thousands,) | |
Net Income | | $ | 7,091 | | $ | 11,006 | |
Provision for income taxes | | | 4,165 | | | 1,572 | |
Depreciation and amortization | | | 11,967 | | | 14,343 | |
Interest | | | 10,224 | | | 11,473 | |
EBITDA | | $ | 33,447 | | $ | 38,394 | |
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