Aircastle Announces Third Quarter 2012 Results

STAMFORD, Conn., Nov. 6, 2012 /PRNewswire/ — Aircastle Limited (the “Company” or “Aircastle”) (NYSE: AYR) reported a third quarter 2012 net loss of ($45.8) million, or ($0.65) per diluted common share, and an adjusted net loss of ($37.5) million, or ($0.53) per diluted common share. The third quarter results included total revenues of $172.9 million, an increase of 22%, versus $141.5 million in the third quarter of 2011.

The third quarter 2012 results also include $78.7 million of non-cash impairment charges against 15 older technology aircraft, representing approximately 1.7% of the net book value of flight equipment. Excluding the non-cash impairment charge, third quarter net income was $32.8 million, or $0.47 per diluted share, and adjusted net income was $41.2 million, or $0.59 per diluted share.

Commenting on the results, Ron Wainshal, Aircastle’s CEO, stated: “Aircastle’s third quarter operating results were strong despite a difficult economic environment. We grew our lease rental revenues nine percent, achieved portfolio utilization of 99%, and generated sizeable operating cash flows. With our strong investment origination capabilities and ability to access the unsecured bond market at today’s attractive levels, we are positioned to capitalize on opportunities that generate strong returns on equity.”

Wainshal added, “Our Board’s decision to increase the dividend by 10% to $0.165 per share demonstrates optimism about future cash flow generation and the long-term prospects for our business, and highlights our balanced approach to capital deployment. To that end, we repurchased 2.5 million shares of stock during the quarter and further expanded the share repurchase program to $50 million, which we believe will create long-term value for our shareholders.”

Third Quarter Results

Lease rental revenue for the third quarter was $159.5 million, up $13.7 million, or 9%, year over year, due primarily to the impact of aircraft acquisitions net of sales of $24.1 million, partially offset by lower revenues due to lease extensions and transitions at lower rentals of $4.6 million and the impact from early lease terminations of $4.9 million. Including revenue from our finance leases of $3.5 million, total lease revenues increased 12%.

Total revenues for the third quarter were $172.9 million, an increase of $31.4 million, or 22%, versus the previous year. This increase reflects $13.7 million of higher lease rental revenue, higher maintenance revenue of $10.9 million primarily associated with the early termination of leases on two of the aircraft we impaired during the quarter, and higher other revenues of $8.9 million. Other revenues for the third quarter of 2012 includes $3.9 million of fees paid by a lessee in connection with the early termination of a lease, $3.5 million of interest from finance leases and $1.3 million of interest income from an aircraft-backed debt investment we acquired in March.

Adjusted EBITDA for the third quarter was $166.3 million, up $25.7 million, or 18%, from the third quarter of 2011, as higher lease rental revenues of $13.7 million, and higher maintenance and total other revenues of $19.8 million were partially offset by lower gains from the sale of aircraft of $9.0 million.

Upon completion of our annual aircraft portfolio review, we recorded $78.7 million of non-cash impairment charges against a total of 15 older technology aircraft with an average age of approximately 21 years. The impairment charges reflect our current estimate of future lease rates and residual values associated with these aircraft in the current market environment. We concluded that these assets will not recover from their current market levels and, accordingly, have been written down. Partially offsetting the third quarter impairment charge is $10.2 million of maintenance revenue and $1.2 million of lease incentive benefit received from the early termination of the leases associated with the two impaired, older generation A320-200 aircraft, which we expect to part-out at their reduced carrying value.

The net loss for the third quarter was ($45.8) million versus net income of $22.7 million in the third quarter of 2011. The $31.4 million increase in total revenues was offset by a $77.4 million increase in aircraft impairment charges, an $8.3 million increase in depreciation expense, a $5.2 million increase in interest expense, and a $9.0 million reduction in gains on the sale of flight equipment. Excluding the non-cash impairment charge, net income was $32.8 million, or $0.47 per diluted share.

The adjusted net loss for the quarter was ($37.5) million, versus adjusted net income of $26.0 million the prior year. The $31.4 million increase in total revenues was primarily offset by a $77.4 million increase in impairment charges, an $8.3 million increase in depreciation, a $9.0 million reduction in gains on sale of flight equipment and an increase in adjusted interest expense of $1.0 million. Excluding the non-cash impairment charge, adjusted net income was $41.2 million, or $0.59 per diluted share.

Mike Inglese, Aircastle’s CFO, commented: “During the third quarter, we completed our annual fleet review, assessing the expected future cash flows of the 157 aircraft in our portfolio. Based on this review, we reduced the carrying values of 15 older generation aircraft to reflect our revised estimates for their earning power in today’s more challenging lease placement market. We continue to manage our company based on our expectations of future cash flows with a view towards deploying our capital most efficiently.”

Aviation Assets

Thus far in 2012, we have invested approximately $610 million in aircraft and aircraft-secured debt investments consisting of 18 aircraft and one secured loan. Approximately $120 million of these investments were closed during the third quarter. We also entered into commitments for approximately $170 million of additional aircraft which we have closed or expect to close during the fourth quarter of 2012.

With respect to aircraft sales, during the third quarter we disposed of one Boeing 737-300 aircraft following its scheduled lease expiration during the third quarter, and also finalized the part-out of a Boeing 747-400 that was originally planned to be converted to a freighter aircraft. We also expect to part-out the two A320 classic aircraft that were included in the third quarter non-cash impairment charge.

As of September 30, 2012, Aircastle owned 157 aircraft having a net book value of $4.7 billion. Of these, 70 aircraft with a net book value of $2.0 billion are unencumbered.

Common Dividend

On November 5, 2012, Aircastle’s Board of Directors declared a fourth quarter 2012 cash dividend on its common shares of $0.165 per share, payable on December 14, 2012 to shareholders of record on November 30, 2012. This is a 10% increase over the previous quarter’s cash dividend.

Share Repurchase Program

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. Under the repurchase program, through September 30, 2012 we repurchased 2,500,002 shares at a total cost of $28.5 million and we paid no commissions on this transaction. On November 5, 2012 the Board increased the share repurchase authorization by an additional $28.5 million, bringing the current authorization back to $50 million.