Aircastle Announces Second Quarter 2013 Results

Highlights

Lease rental including finance lease revenues of $162.0 million and Adjusted EBITDA1 of $183.4 million
Net income of $32.9 million, or $0.48 per diluted common share
Adjusted net income1 of $46.0 million, or $0.67 per diluted common share
More than $960 million of closed or committed aircraft investments year to date
Eleven aircraft sold during the first half of 2013; second quarter gains on sale of $21.3 million
Fleet utilization of 98% with an aircraft portfolio yield of 13.4%
Issued 12.3 million shares of common equity, at $17.00 per share, to Marubeni Corporation on July 12, 2013 for $209 million of gross proceeds
Increased our unsecured revolving credit facility from $150 million to $335 million and expanded the size of the bank group to seven
29th consecutive dividend declared by Aircastle’s Board of Directors
Aircastle Limited (the “Company” or “Aircastle”) (NYSE: AYR) reported second quarter 2013 net income of $32.9 million, or $0.48 per diluted common share, and adjusted net income of $46.0 million, or $0.67 per diluted common share. The second quarter results included lease rental and finance lease revenues of $162.0 million versus $154.6 million in the second quarter of 2012.

Commenting on the results, Ron Wainshal, Aircastle’s CEO, stated: “Aircastle’s second quarter financial results were very good, reflecting strong portfolio performance and effective asset management. I’m particularly encouraged by our acquisition activity, where we have been able to find attractive investment values consistent with our disciplined approach and return targets. In that regard, the majority of our recent investments have been for new wide-body aircraft on long-term leases with high quality lessees, and this is gradually transforming and enhancing the mix of our portfolio. We’re in an excellent position to capitalize on our team’s transaction origination capabilities with the new capital we’ve sourced.” Mr. Wainshal added, “We’re extremely pleased to welcome Marubeni as an important new strategic shareholder. Marubeni brings a long-term, globally minded perspective to our business and we believe there are exciting business opportunities for us as we work together.”

Mike Inglese, Aircastle’s CFO, stated: “We continue to broaden and diversify our funding sources to strengthen Aircastle’s overall liquidity profile. Our enlarged unsecured revolving credit facility, along with the recent Marubeni transaction, complements our capital markets and export credit agency funding sources, strengthening our already deep access to capital.”

Second Quarter Results

Lease rental and finance lease revenues for the second quarter were $162.0 million, up $7.5 million or 5% year over year, due primarily to the impact of aircraft acquisitions of $26.1 million, partially offset by lower revenues due to aircraft dispositions of $9.5 million and from the effect of lease extensions, transitions and terminations of $9.1 million.

Total revenues for the second quarter were $170.4 million, a decrease of $1.8 million, or 1% versus the previous year. This was primarily due to the amortization of lease premiums, discounts and lease incentives being $10.8 million higher in 2013. In the second quarter of 2012, lease incentive amortization was driven lower by lease incentive reversals resulting from early lease terminations. This revenue decrease was partially offset by $7.5 million of higher lease rental and finance lease revenue, and $1.8 million of higher other revenues, primarily early lease termination fees relating to an aircraft that transitioned during the quarter.

Adjusted EBITDA for the second quarter was $183.4 million, up $26.3 million or 17% from the second quarter of 2012. The increase was primarily driven by higher lease rental and finance lease revenue of $7.5 million, higher gain on the sale of flight equipment of $18.5 million, and higher other revenue of $1.8 million. The second quarter gain on sale included the disposition of three A330-200 freighter aircraft.

Net income for the second quarter was $32.9 million, up $16.5 million, or 101%. The increase was primarily due to higher gains from the sale of aircraft of $18.5 million and lower aircraft impairment charges of $10.1 million. These improvements were partially offset by higher depreciation of $5.0 million, higher interest expense of $2.5 million, a higher tax provision of $2.4 million and lower total revenues of $1.8 million.

Adjusted net income for the quarter was $46.0 million, up $20.3 million year over year, and reflects higher gain on sale of $18.5 million, lower non-cash impairment charges of $10.1 million, and lower adjusted interest of $1.1 million. Partially offsetting these increases were higher depreciation of $5.0 million, a higher tax provision of $2.4 million and higher SG&A of $1.5 million.

Aviation Assets

To date, we have closed or committed to acquire 17 aircraft for more than $960 million in 2013. During the first half of the year, we acquired ten aircraft for more than $450 million, including nine aircraft in the second quarter. In addition, during the first half of the year we sold eleven aircraft, including three A330-200 freighter aircraft and eight older aircraft with a total net book value of approximately $250 million.

As of June 30, 2013, Aircastle owned 158 aircraft having a net book value of $4.8 billion.

Common Share Purchase by Marubeni Corporation

On July 12, 2013, we successfully completed the issuance to Marubeni Corporation of 12,320,000 common shares, representing 15.25% of Aircastle’s issued and outstanding common shares, after giving effect to the issuance, at a price of $17.00 per share, for gross proceeds of approximately $209 million.

Financing Update

In early August we increased our unsecured revolving credit facility from $150 million to $335 million. We also expanded the bank group from four to seven global financial institutions and extended the maturity of the facility to a three year term to expire in August 2016. The bank group includes Citibank, N.A., Goldman Sachs Bank USA, J.P. Morgan Chase Bank N.A., Royal Bank of Canada, Credit Agricole Corporate & Investment Bank, DBS Bank Ltd., Los Angeles Agency, and Union Bank, N.A.

Common Dividend and Share Repurchases

On August 2, 2013, Aircastle’s Board of Directors declared a third quarter 2013 cash dividend on its common shares of $0.165 per share, payable on September 13, 2013 to shareholders of record on August 30, 2013.

Since early 2011, we have repurchased 11.7 million common shares at an average cost of $11.87 per share, and we continue to have $30 million remaining under the current repurchase authorization.