Aircastle Announces Second Quarter 2012 Results

STAMFORD, Conn., Aug. 2, 2012 /PRNewswire via COMTEX/ — Aircastle Limited (the “Company” or “Aircastle”) AYR +3.18% reported second quarter 2012 net income of $16.3 million, or $0.23 per diluted common share, and adjusted net income of $25.8 million, or $0.36 per diluted common share. The second quarter results included lease rental revenues of $153.6 million versus $143.4 million in the second quarter of 2011.

Commenting on the results, Ron Wainshal, Aircastle’s CEO, stated: “We are executing our business plan effectively. During the second quarter, we were very successful in acquiring attractive investments as shrinking bank market capacity is making it more difficult for many of our competitors to source financing. At the same time and in conjunction with the issuance of $800 million in unsecured notes, we increased our unencumbered asset base to $2.0 billion, or 42% of our fleet, enhancing our profile with capital markets investors. Operationally, we are continuing to manage our portfolio well and have made good progress with lease placements despite challenging market conditions.”

(1). Refer to Supplemental Financial Information accompanying this press release for a reconciliation of GAAP to non-GAAP numbers.

Second Quarter Results

Lease rental revenues for the second quarter were $153.6 million, up $10.3 million, or 7%, year over year, due primarily to an increase of $27.0 million from aircraft acquisitions, partially offset by lower revenues from aircraft sold of $8.5 million and lease extensions, transitions and terminations of $8.2 million.

Total revenues for the second quarter were $172.2 million, an increase of $23.3 million, or 16%, versus the previous year. This increase primarily reflects higher lease rental revenue as discussed above, as well as $5.4 million of higher maintenance revenues and $5.1 million of lower amortization of net lease premiums, discounts and incentives.

Following Cimber Sterling’s bankruptcy in May, we repossessed three aircraft. In the second quarter, we recorded $7.7 million of maintenance revenue and reversed $6.9 million of lease incentive amortization for work we had anticipated being completed prior to the return of these aircraft that was not performed. These aircraft have all been successfully placed with new lessees.

EBITDA for the second quarter was $146.8 million, up $4.5 million, or 3%, from the second quarter of 2011, as higher lease rental revenues of $10.3 million and higher maintenance and other revenues totaling $8.0 million were partially offset by lower gains from the sale of aircraft of $7.4 million, higher aircraft impairment charges of $4.9 million and higher maintenance expenses of $1.9 million.

During the second quarter, we recorded a $2.9 million gain reflecting an insurance settlement associated with a Boeing 767-300ER that had been leased to LOT Polish Airlines. Additionally, after evaluating future revenues and higher than expected aircraft-specific maintenance costs relating to one Boeing 767-300ER, which came off lease during the quarter, we recorded an impairment charge of $8.0 million. This was partially offset by maintenance and other revenue of $2.4 million. We also sold one Boeing 757-200 during the quarter which resulted in an impairment charge of $2.1 million.

Net income for the second quarter was $16.3 million, down $7.0 million, or 30%, as the $23.3 million increase in total revenues was offset by higher interest, net of $8.2 million, higher depreciation of $8.5 million, lower gains on the sale of flight equipment of $7.4 million and higher aircraft impairment charges of $4.9 million.

Adjusted net income for the quarter was $25.8 million, down $6.4 million year over year, and reflects higher total revenues of $23.3 million offset by higher depreciation of $8.5 million, higher adjusted interest expense of $7.4 million, lower gains on sale of flight equipment of $7.4 million, higher aircraft impairment charges of $4.9 million and higher maintenance costs of $1.9 million.

Aviation Assets

Thus far in 2012, we have invested $490 million in aircraft and aircraft-secured debt investments consisting of 14 aircraft and one secured loan. More than $400 million of these investments were completed during the second quarter. In addition, we have entered into commitments to acquire more than $200 million in aircraft which we expect to close during the second half of 2012.

With respect to aircraft sales, during the second quarter we disposed of two aircraft: the Boeing 767-300ER leased to LOT Polish Airlines as mentioned above, and one Boeing 757-200 aircraft that had been scheduled to come off lease later this year and that we sold to the lessee.

As of June 30, 2012, Aircastle owned 155 aircraft having a net book value of $4.7 billion. Of these, 67 aircraft with a net book value of $2.0 billion are unencumbered.

Financing Update

In April 2012, we closed an $800 million unsecured notes offering, consisting of $500 million of 6.75% senior notes due 2017 and $300 million of 7.625% senior notes due in 2020, both of which were issued at par. Aircastle used the net proceeds from the offering to repay outstanding indebtedness under its Term Financing No. 1 and the termination of associated interest rate derivatives, with the balance used for general corporate purposes, including the purchase of aviation assets.

In June 2012, our new five-year interest rate swap arrangement became effective for Securitization No. 2, resulting in a new fixed pay interest rate of 1.58%. The new swap arrangement provides a significant reduction in interest costs compared to the previous equivalent rate of 5.56% with estimated savings of approximately $30 million over the next twelve months. The new swap arrangement was structured to hedge approximately 75% of the expected debt balance of Securitization No. 2 and matures in June of 2017.

Also in April 2012, we delivered a new Airbus A330-200 aircraft on long-term lease to Virgin Australia Airlines, one of Australia’s leading carriers. Debt financing for this purchase was arranged and provided by The Bank of Tokyo – Mitsubishi UFJ, Ltd. (BTMU) and supported by a guarantee from Compagnie Francaise d’Assurance pour le Commerce Exterieur (COFACE), the French export credit agency. This debt bears interest at a fixed rate of 3.81% per annum and will be repaid over twelve years.

Common Dividend

On August 1, 2012, Aircastle’s Board of Directors declared a third quarter 2012 cash dividend on its common shares of $0.15 per share, payable on September 14, 2012 to shareholders of record on August 31, 2012.

Share Repurchase Authorization

On May 24, 2012 the Company’s Board of Directors authorized the repurchase of up to $50 million of the Company’s common shares. Under the program, the Company may purchase its common shares from time to time in the open market or in privately negotiated transactions. The amount and timing of the purchases will depend on a number of factors including the price and availability of the Company’s common shares, trading volume and general market conditions. The Company may also from time to time establish a trading plan under Rule 10b5-1 of the Securities Exchange Act of 1934 to facilitate purchases of its common shares under this authorization.