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Babcock & Brown Air Reports First Quarter 2009 Results

Posted on: Thursday, 7 May 2009, 06:04 CDT

DUBLIN, May 7 /PRNewswire-FirstCall/ -- Babcock & Brown Air Limited (NYSE: FLY) ("B&B Air"), a global lessor of modern, fuel-efficient commercial jet aircraft, today announced its financial results for the first quarter of 2009.

First Quarter Highlights

• Net income of $47.0 million, EPS of $1.45
• Available Cash Flow of $35.3 million, $1.09 per share
• Purchased $100 million principal amount of notes payable for $48.7 million
• Unrestricted Cash of $34.5 million at quarter end
• Repurchased 2.2 million shares after March 31st
• First Quarter Dividend of $0.20 per share declared on April 15th

"The highlight of our first quarter was the purchase of $100 million principal amount of our debt securitization notes for $48.7 million, after associated expenses, which resulted in a gain of $49.0 million in the quarter," said Colm Barrington, CEO of B&B Air. "In addition, after March 31st, we repurchased 2.2 million shares, which represented approximately 7% of our shares outstanding, for $9.0 million. Including the dividend paid, the shares repurchased and the debt purchased, B&B Air has utilized cash of $64 million during the first quarter to enhance shareholder value. We will continue to evaluate future transactions that will create additional value for our shareholders."

"Despite difficult airline market conditions, our portfolio of 62 aircraft continues to generate stable income and cash flow," added Barrington. "All of our aircraft are currently on or committed to leases. After the debt purchase we ended the quarter with $34.5 million in unrestricted cash."

First Quarter 2009 Financial Results

B&B Air's net income and basic and diluted earnings per share for the first quarter of 2009 were $47.0 million and $1.45 per share compared to $11.7 million and $0.35 per share in the same period in the preceding year. The first quarter 2009 result includes a $49.0 million gain, before associated income tax, from purchasing $100 million principal amount of notes payable for $48.7 million and $6.5 million representing a partial settlement in respect of aircraft repossessed in a prior period. The gain from the notes payable purchase includes a charge for loan issuance costs and unamortized discount associated with the original notes payable issuance.

Operating lease revenue for the first quarter of 2009 was $53.4 million compared to $48.4 million in the same period of the previous year, an increase of $5.0 million, or 10%. The increase is principally due to the acquisition of aircraft. First quarter 2008 revenue included $3.2 million of end of lease revenue and $2.4 million of financing lease income, neither of which were earned in 2009. Interest and other income was $0.2 million in the first quarter of 2009 compared to $1.1 million in the first quarter of 2008.

Total expenses in the first quarter of 2009 were $48.1 million, compared to $38.5 million in the same period in the previous year. The increase in expenses was primarily due to the increase in the size of the portfolio.

Depreciation expense in the first quarter of 2009 was $20.6 million compared to $15.0 million for the same period in the previous year. This increase is also mainly due to the addition of aircraft to the portfolio and the commencement of depreciation for four aircraft reclassified from finance leases to flight equipment held for operating leases.

Interest expense in the first quarter of 2009 was $20.6 million compared to $17.9 million for the same period in the previous year. The increase is mainly due to increased borrowing incurred in connection with the growth of the portfolio, partially offset by decreases in LIBOR which reduced interest costs on the debt amounts associated with aircraft with variable rate leases.

Selling, general and administrative expenses were $6.2 million in the first quarter of 2009 compared to $5.0 million in the same period of the previous year.

The provision for income taxes was $14.0 million in the first quarter of 2009 and reflects the recognition of deferred taxes at a 25% rate on the gain associated with the purchase of the notes payable. The effective income tax rate for the first quarter of 2009 was 23.0% compared to 13.3% for the same period in the previous year.

Available Cash Flow

Available Cash Flow ("ACF"), which B&B Air defines as net income plus depreciation, lease incentive amortization, amortization of debt issue costs and the deferred tax provision, was $35.3 million for the first quarter of 2009 compared to $29.9 million for the same period in the previous year. On a per share basis, ACF was $1.09 and $0.89 for the first quarter of 2009 and 2008, respectively, an increase of 22%. The gain on the purchase of notes payable is excluded from ACF.

ACF should be used as a supplement to and not as a substitute for financial measures determined in accordance with Generally Accepted Accounting Principles in the United States.

Dividend and Share Repurchases

On April 15th, B&B Air declared a dividend of $0.20 per share in respect of the first quarter of 2009. This dividend will be paid on May 20, 2009 to shareholders of record on April 30, 2009. This dividend represents 18% of ACF for the first quarter of 2009.

Subsequent to March 31, 2009, B&B Air repurchased 2,208,963 shares at an average price of $4.08 per share or $9.0 million. These shares represented 6.8% of the shares outstanding at March 31, 2009. After repurchase of these shares, B&B Air has 30,279,948 shares outstanding. Under the $30 million share repurchase program that has been extended to June 2010, B&B Air may make further share repurchases from time to time in open market or in privately negotiated transactions. The timing of share repurchases under the program will depend upon a variety of factors, including market conditions, and may be suspended or discontinued at any time.

Financial Position

At March 31, 2009, B&B Air's total assets were $2.03 billion, including flight equipment held for operating lease with a net book value of $1.81 billion. Restricted and unrestricted cash at March 31, 2009 totaled $154.4 million compared to $170.4 million at December 31, 2008. The decrease reflects the cash used to purchase the $100 million of notes payable and a dividend payment, partially offset by operating cash generated from our portfolio.

Aircraft Portfolio

During the first quarter of 2009, B&B Air's utilization factor was 97%. At March 31st, all but one of the aircraft in B&B Air's portfolio were on lease. The aircraft were on lease to 36 lessees in 19 countries.

The table below shows the aircraft in B&B Air's initial portfolio and the portfolios on March 31, 2008, December 31, 2008, and March 31, 2009:

Portfolio On Oct 2, 2007 Mar 31, 2008 Dec 31, 2008 Mar 31, 2009 Airbus A319 5 10 10 10 Airbus A320 16 17 17 17 Airbus A330 - 1 1 1 Boeing 737 16 17 19 19 Boeing 747 - 1 1 1 Boeing 757 9 11 12 12 Boeing 767 1 1 1 1 Boeing 777 - 1 1 1 Total 47 59 62 62

On March 31, 2009, the average age of B&B Air's portfolio was 6.6 years weighted by the net book value of each aircraft. The average remaining lease term was 5.2 years, also weighted by value and including the aircraft off-lease at a lease term of zero. At March 31, 2009 the leases generate annualized revenues of $225 million.

Conference Call and Webcast

B&B Air's senior management will host a conference call and webcast to discuss these results at 8:30 a.m. U.S. Eastern Time on Thursday, May 7, 2009.

Participants should call +1-706-643-7953 (International) or 866-696-7906 (North America) and enter confirmation code 96537355. A replay will be available shortly after the call. To access the replay, please dial +1-706-645-9291 (International) or 800-642-1687 (North America) and enter confirmation code 96537355. The replay recording will be available until May 21, 2009.

A live webcast of the conference call will be also available in the investor section of B&B Air's website at www.babcockbrownair.com. An archived webcast will be available for one year.

About B&B Air

B&B Air acquires and leases modern, high-demand and fuel-efficient commercial jet aircraft under multi-year operating lease contracts to a diverse group of airlines throughout the world. B&B Air is managed and serviced by Babcock & Brown Aircraft Management ("BBAM"), the world's fourth largest aircraft lessor. For more information about B&B Air, please visit our website at www.babcockbrownair.com.

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 B&B Air'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, regulatory and other factors and risks. B&B Air 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.

Babcock & Brown Air Limited Consolidated Statements of Operations (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Three months Three months ended ended March 31, 2008 March 31, 2009 (Unaudited) (Unaudited) Revenues Operating lease revenue $48,388 $53,380 Finance lease income 2,446 - Gain on purchase of notes payable - 48,980 Lease termination settlement - 6,475 Interest and other income 1,111 245 Total revenues 51,945 109,080 Expenses Depreciation 15,045 20,605 Interest expense 17,939 20,641 Selling, general and administrative 5,044 6,168 Maintenance and other costs 439 688 Total expenses 38,467 48,102 Net income before provision for income taxes 13,478 60,978 Provision for income taxes 1,794 14,027 Net income $11,684 $46,951 Weighted average number of shares - basic and diluted 33,603,450 32,488,911 Earnings per share - basic and diluted $0.35 $1.45 Dividends declared and paid per share $0.50 $0.20

Babcock & Brown Air Limited Consolidated Balance Sheets (DOLLARS IN THOUSANDS, EXCEPT PAR VALUE DATA) December 31, March 31, 2009 2008 (Audited) (Unaudited) Assets Cash and cash equivalents $56,763 $34,469 Restricted cash and cash equivalents 113,658 119,887 Rent receivables 4,148 4,981 Flight equipment held for operating lease, net 1,830,612 1,810,189 Deferred tax asset, net 40,734 25,690 Fair market value of derivative asset 2,368 2,818 Other assets, net 37,891 29,292 Total assets 2,086,174 2,027,326 Liabilities Accounts payable and accrued liabilities 13,809 8,542 Rentals received in advance 9,476 9,209 Payable to related parties 2,728 1,934 Security deposits 35,664 35,713 Maintenance payment liability 88,526 95,034 Notes payable, net 826,301 726,626 Borrowings under aircraft acquisition facility 597,471 597,471 Fair market value of derivative liabilities 113,374 105,593 Other liabilities 9,412 9,991 Total liabilities 1,696,761 1,590,113 Shareholders' equity Common shares, $0.001 par value; 499,999,900 shares authorized; 32,488,911 shares issued and outstanding at December 31, 2008 and March 31, 2009 32 32 Manager shares, $0.001 par value; 100 shares authorized, issued and outstanding − − Additional paid-in capital 499,882 499,882 Retained earnings (deficit) (16,584) 23,869 Accumulated other comprehensive loss, net (93,917) (86,570) Total shareholders' equity 389,413 437,213 Total liabilities and shareholders' equity $2,086,174 $2,027,326

Babcock & Brown Air Limited Reconciliation of Available Cash Flow, a Non-GAAP Financial Measure to Net Income (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Three months Three months ended ended March 31, March 31, 2008 2009 (Unaudited) (Unaudited) ----------- ----------- Net income $11,684 $46,951 Add (less): Depreciation 15,045 20,605 Amortization of lease incentives − 1,059 Amortization of debt issuance costs 1,515 1,715 Gain on purchase of notes payable − (48,980) Provision for deferred income taxes 1,608 13,994 ----- ------ Available cash flow $29,852 $35,344 ======= ======= Weighted average share outstanding 33,603,450 32,488,911 Available cash flow per share $0.89 $1.09 ===== =====

B&B Air defines Available Cash Flow ("ACF") as net income plus depreciation, amortization of lease incentives and debt issue costs, and provision for deferred income taxes. In addition, gain on purchase of notes payable is excluded from ACF. B&B Air's definition of ACF may not be consistent with similar definitions used by other companies. The reconciliation above compares ACF to net income computed in accordance with Generally Accepted Accounting Principles in the United States (GAAP), the most directly comparable GAAP financial measure. B&B Air believes ACF provides investors with a measure for evaluating its ability to pay dividends and reinvest in its business. However, ACF excludes certain positive and negative cash items, including principal payments, if any, and has certain important limitations as an indicator of B&B Air's ability to pay dividends and reinvest in its business. Management uses ACF as a measure for assessing B&B Air's operating performance. ACF should be considered in addition to, not as a substitute for net income or other financial measures determined in accordance with GAAP. For additional information, please see B&B Air's financial statements and "Management's Discussion and Analysis of Operations and Financial Condition" that will be included in the periodic report it expects to file with the Securities and Exchange Commission with respect to the financial statements discussed herein.

Contact: Matt Dallas Babcock & Brown + 1-212-796-3918 matt.dallas@babcockbrown.com

SOURCE Babcock & Brown Air Limited

Source: PR Newswire

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