(%)

News Release Details

Aircastle Announces Fourth Quarter and Full Year 2018 Results

February 12, 2019 at 7:30 AM EST
Acquired 39 Aircraft During 2018; Full Year Net Income of $247.9 million
First Quarter 2019 Dividend of $0.30 per Common Share Declared

STAMFORD, Conn., Feb. 12, 2019 /PRNewswire/ --

Key Financial Metrics

  • Total revenues of $292.6 million for the fourth quarter of 2018 and $890.4 million for the year
  • Net income of $103.8 million, or $1.35 per diluted common share, for the fourth quarter and $247.9 million, or $3.17 per diluted common share, for the year
  • Adjusted net income(1) was $109.9 million, or $1.43 per diluted common share, for the fourth quarter and $257.2 million, or $3.29 per diluted common share, for the year
  • Adjusted EBITDA(1) was $276.8 million for the fourth quarter and $839.8 million for the year
  • GAAP ROE of 12.7%; Cash ROE(1) of 14.2%; net cash interest margin(1) of 7.8%

Highlights

  • Acquired eighteen narrow-body aircraft during the fourth quarter for $760 million and 39 aircraft in 2018, exclusively narrow-bodies, for $1.4 billion; acquisitions included ten Airbus A320neos
  • Closed or committed to acquire ten additional narrow-body aircraft in 2019 for $378 million
  • Sold three aircraft during the fourth quarter and fourteen aircraft for the full year; full year gain on sale of $36.8 million represents 10.9% of net proceeds; 2018 sales included two wide-body aircraft
  • Declared our 51st consecutive quarterly dividend
  • Returned $157.7 million of capital to shareholders during 2018; $88.7 million in dividends paid and $68.9 million of shares repurchased

Aircastle Limited (the "Company" or "Aircastle") (NYSE: AYR) reported fourth quarter 2018 net income of $103.8 million, or $1.35 per diluted common share, and adjusted net income of $109.9 million, or $1.43 per diluted common share.  Net income for the year ended December 31, 2018 was $247.9 million, or $3.17 per diluted common share, and adjusted net income was $257.2 million, or $3.29 per diluted common share.  The fourth quarter results included total revenues of $292.6 million versus $196.6 million in the prior year.  For the full year 2018, total revenues were $890.4 million versus $851.8 million in 2017, an increase of 4.5%.

Commenting on the results, Mike Inglese, Aircastle's CEO, stated, "The successful execution of our active fleet management strategy enabled us to achieve strong financial results. We enhanced and expanded our fleet of in-demand modern aircraft and realized substantial gains from opportunistic sales throughout the year.  Furthermore, the achievement of an investment grade credit rating enables us to access attractively priced capital.  This places Aircastle in a strong competitive position to expand the Company's fleet and earnings and to continue to return capital to our shareholders in the form of dividends and opportunistic share repurchases."

Mr. Inglese concluded, "Narrow-body aircraft remain in high demand globally and we continue to benefit from the broad operator base and liquidity these aircraft afford.  Solid air traffic growth and heightened investor interest in commercial aircraft as an asset class continue to create new opportunities for an asset manager with technical expertise, operational and financial flexibility and the ability to execute value-added transactions. Looking ahead, we have minimal forward commitments and our primary focus will continue to be on responsible capital stewardship.  By maintaining investment discipline with the ability to adapt quickly to changing market conditions, we are positioned to create lasting value for our shareholders."

Financial Results

(In thousands, except share data)

Three Months Ended
December 31,


Twelve Months Ended
December 31,


2018


2017


2018


2017

Total revenues

$

292,566



$

196,643



$

890,351



$

851,787


Lease rental and finance and sales-type lease revenues

$

192,711



$

179,284



$

757,826



$

747,018


Adjusted EBITDA(1)

$

276,830



$

184,553



$

839,831



$

801,584


Net income

$

103,837



$

55,120



$

247,919



$

147,874


   Per common share - Diluted

$

1.35



$

0.70



$

3.17



$

1.87


Adjusted net income(1)

$

109,883



$

57,040



$

257,237



$

169,566


   Per common share - Diluted

$

1.43



$

0.72



$

3.29



$

2.15


___________________

(1)  Refer to the selected financial information accompanying this press release for a reconciliation of GAAP to Non-GAAP numbers.

Full Year Results

Total revenues in 2018 were $890.4 million, an increase of $38.6 million, while lease rental and finance and sales-type lease revenues were $757.8 million, an increase of $10.8 million.  The increase in total revenues was primarily driven by $49.6 million of higher maintenance revenues associated with the early termination of eleven leased aircraft with Avianca Brazil in the fourth quarter and higher lease rental and finance and sales-type lease revenues of $10.8 million associated with net fleet growth during the year.  These increases were partially offset by $18.4 million of lower gains from the sale of flight equipment due to fourteen aircraft sold in 2018 versus 37 sold in 2017.

Net income for the full year was $247.9 million, up $100.0 million year-over-year, while adjusted net income was $257.2 million, an increase of $87.7 million.  Higher maintenance revenues of $49.6 million and no aircraft impairment charges in 2018 versus $80.4 million the previous year, were offset by lower gains from the sale of flight equipment of $18.4 million and lower joint venture investment returns of $15.7 million.

Adjusted EBITDA for the full year was $839.8 million, up $38.2 million versus 2017, reflecting a $49.6 million increase in maintenance revenue and higher lease rental and finance and sales type lease revenue of $10.8 million, partially offset by lower gains from the sale of flight equipment of $18.4 million.

Fourth Quarter Results

Total revenues were $292.6 million, an increase of $95.9 million, or 48.8%, from the prior year.  The increase was due to a $93.4 million rise in maintenance revenues, mostly reflecting the early termination of eleven aircraft leased to Avianca Brazil.

Lease rental and finance and sales-type lease revenues were $192.7 million versus $179.3 million the prior year.  The 7.5% increase was mostly due to net fleet growth.  Over the previous two years, the Company's aircraft fleet increased from 193 aircraft at the end of 2016 to 248 aircraft at year-end 2018.

Net income was $103.8 million, an increase of $48.7 million and adjusted net income rose by $52.8 million to $109.9 million.  Higher total revenues of $95.9 million were partially offset by a $15.6 million decline in joint venture investment returns, higher depreciation from fleet growth of $10.4 million, higher interest expense of $7.0 million and higher tax expense of $4.6 million.  Interest expense for the fourth quarter reflected higher debt balances which included a $400 million note that was repaid in December.

Adjusted EBITDA was $276.8 million, up 50.0%, or $92.3 million.  This was primarily driven by higher maintenance revenues of $93.4 million in the fourth quarter of 2018 versus 2017.

Aviation Assets

During the fourth quarter, we acquired eighteen aircraft for $760 million and for the year ended 2018, we acquired 39 aircraft for $1.4 billion.  Full year acquisitions included ten A320neo aircraft, our first investment in new technology aircraft.  At the end of 2018, Aircastle's owned fleet of 248 aircraft had a weighted average age of 9.1 years and a weighted average remaining lease term of 4.5 years.

During the fourth quarter of 2018, we sold one A330 and two narrow-bodies for total sales proceeds of $62.7 million and a gain on sale of $8.2 million.  This represents a 13.1% margin on net sales proceeds.

During the year ended 2018, we sold a total of fourteen aircraft for proceeds of $338.8 million and a gain on sale of $36.8 million.  The average age of the aircraft sold was 13.3 years with an average remaining lease term of 4.1 years.

Our fleet utilization for the fourth quarter was 97.0% and 99.6% for the full year 2018.  As of December 31, 2018, Aircastle owned 248 aircraft having a net book value of $7.4 billion. We also managed thirteen aircraft with a net book value of $602 million on behalf of our joint ventures.  We are in the process of repossessing ten desirable, modern A320 aircraft from Avianca Brazil, which we expect will be placed quickly once we recover these assets.

Owned Aircraft

As of

December 31,

2018(1)


As of

December 31,

2017(1)

Net Book Value of Flight Equipment ($ mils.)

$

7,405



$

6,734


Net Book Value of Unencumbered Flight Equipment ($ mils.)

$

6,055



$

5,346


Number of Aircraft

248



224


Number of Unencumbered Aircraft

217



195


Weighted Average Fleet Age (years)(2)

9.1



9.1


Weighted Average Remaining Lease Term (years)(2)

4.5



5.0


Weighted Average Fleet Utilization for the fourth quarter(3)

97.0

%


99.5

%

Weighted Average Fleet Utilization for the year ended(3)

99.6

%


99.3

%

Portfolio Yield for the fourth quarter(2)(4)

11.2

%


12.0

%

Net Cash Interest Margin(5) for the fourth quarter

7.8

%


8.6

%





Managed Aircraft on behalf of  Joint Ventures




Net Book Value of Flight Equipment ($ mils.)

$

602



$

641


Number of Aircraft

13



12


_______________

(1)

Calculated using net book value of flight equipment held for lease and net investment in finance leases at period end.

(2)

Weighted by net book value.

(3)

Aircraft on-lease days as a percent of total days in period weighted by net book value.

(4)

Lease rental revenue, interest income and cash collections on our net investment in finance and sales-type leases for the period as a percent of the average net book value for the period; quarterly information is annualized.  Based on the growing level of finance and sales-type lease revenue management revised the calculation of portfolio yield to include our net investment in finance and sales-type leases in the average net book value and to include the interest income and cash collections on our net investment in finance and sales-type leases in lease rentals.

(5)

Net Cash Interest Margin = Lease rental yield plus finance lease revenue and collections minus interest on borrowings, net of settlements on interest rate derivatives, and other liabilities / average NBV of flight equipment for the period calculated on a quarterly basis, annualized.

Financing Activity

In 2018, Aircastle received investment grade credit ratings from Moody's, Standard and Poor's and Fitch Ratings.  During the third quarter of 2018, the Company issued $650 million of unsecured Senior Notes due 2023 bearing a coupon of 4.40%.  This was our first senior unsecured note issued with investment grade credit ratings.

Earlier this year, we increased the size of one of our unsecured revolving credit facilities from $675 million to $800 million, extended the facility maturity by more than two years to June 2022 and lowered the borrowing margin by 75 basis points.

In December, we entered into a three-year, $250 million unsecured revolving credit facility with a group of banks based in Asia that matures in December 2021.  The facility replaced a $135 million Asian bank revolving credit facility that we had previously arranged in 2016.  The borrowing margin on this larger facility is 75 basis points lower than the margin on the smaller facility that it replaced.

Common Dividend

On February 8, 2019, Aircastle's Board of Directors declared a first quarter 2019 cash dividend on its common shares of $0.30 per share, payable on March 15, 2019, to shareholders of record on February 28, 2019.  This is our 51st consecutive dividend.  Since going public in 2006, the Company has paid total dividends of $857.3 million.

Share Repurchases

In 2018, the Company acquired 3,556,091 shares at an average price of $19.38 per share.  In the fourth quarter, Aircastle's Board of Directors increased the authorization to repurchase shares to $100 million from the $42 million that was remaining under the previous authorization.  There is currently $76 million remaining under this current authorization.  Since 2011, the Company has repurchased 18.5 million shares at an average cost of $14.57 per share, for approximately $270.3 million.

Conference Call

In connection with this earnings release, management will host an earnings conference call on Tuesday, February 12, 2019, at 10:00 A.M. Eastern time.  All interested parties are welcome to participate on the live call.  The conference call can be accessed by dialing (866) 575-6539 (from within the U.S. and Canada) or (323) 794-2423 (from outside of the U.S. and Canada) ten minutes prior to the scheduled start and referencing the passcode "9979093".

A simultaneous webcast of the conference call will be available to the public on a listen-only basis at www.aircastle.com.  Please allow extra time prior to the call to visit the site and download the necessary software required to listen to the internet broadcast.  In addition to this earnings release an accompanying power point presentation has been posted to the Investor Relations section of Aircastle's website.

For those who are not available to listen to the live call, a replay will be available until 1:00 P.M. Eastern time on Thursday, March 14, 2019, by dialing (888) 203-1112 (from within the U.S. and Canada) or (719) 457-0820 (from outside of the U.S. and Canada); please reference passcode "1757279".

About Aircastle Limited

Aircastle Limited acquires, leases and sells commercial jet aircraft to airlines throughout the world.  As of December 31, 2018, Aircastle owned and managed on behalf of its joint ventures 261 aircraft leased to 81 customers located in 44 countries.

Safe Harbor

All statements in this press release, other than characterizations of historical fact, are forward-looking statements within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995. Examples of forward-looking statements include, but are not necessarily limited to, statements relating to our proposed public offering of notes and our ability to acquire, sell, lease or finance aircraft, raise capital, pay dividends, and increase revenues, earnings, EBITDA, Adjusted EBITDA, Adjusted Net Income, Cash Return on Equity and Net Cash Interest Margin and the global aviation industry and aircraft leasing sector. Words such as "anticipates," "expects," "intends," "plans," "projects," "believes," "may," "will," "would," "could," "should," "seeks," "estimates" and variations on these words and similar expressions are intended to identify such forward-looking statements. These statements are based on our historical performance and that of our subsidiaries and on our current plans, estimates and expectations and are subject to a number of factors that could lead to actual results materially different from those described in the forward-looking statements; Aircastle can give no assurance that its expectations will be attained. Accordingly, you should not place undue reliance on any such forward-looking statements which are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated as of the date of this press release. These risks or uncertainties include, but are not limited to, those described from time to time in Aircastle's filings with the SEC and previously disclosed under "Risk Factors" in Item 1A of Aircastle's 2018 Annual Report on Form 10- K.  In addition, new risks and uncertainties emerge from time to time, and it is not possible for Aircastle to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Such forward-looking statements speak only as of the date of this press release. Aircastle expressly disclaims any obligation to revise or update publicly any forward-looking statement to reflect future events or circumstances.

Contact:


Aircastle Advisor LLC

The IGB Group

Frank Constantinople, SVP Investor Relations 

Leon Berman

Tel: +1-203-504-1063

Tel: +1-212-477-8438

fconstantinople@aircastle.com

lberman@igbir.com

 

Aircastle Limited and Subsidiaries

Consolidated Balance Sheets

(Dollars in thousands, except share data)



December 31,


2018


2017

ASSETS




Cash and cash equivalents

$

152,719



$

211,922


Restricted cash and cash equivalents

15,134



21,935


Accounts receivable

15,091



12,815


Flight equipment held for lease, net of accumulated depreciation of $1,221,985 and
$1,125,594, respectively

6,935,585



6,188,469


Net investment in finance and sales-type leases

469,180



545,750


Unconsolidated equity method investment

69,111



76,982


Other assets

214,361



141,210


Total assets

$

7,871,181



$

7,199,083






LIABILITIES AND SHAREHOLDERS' EQUITY




LIABILITIES




Borrowings from secured financings, net of debt issuance costs

$

798,457



$

849,874


Borrowings from unsecured financings, net of debt issuance costs

3,962,896



3,463,732


Accounts payable, accrued expenses and other liabilities

153,341



140,221


Lease rentals received in advance

87,772



57,630


Security deposits

120,962



130,628


Maintenance payments

739,072



649,434


Total liabilities

5,862,500



5,291,519






Commitments and Contingencies








SHAREHOLDERS' EQUITY




Preference shares, $0.01 par value, 50,000,000 shares authorized, no shares issued and
outstanding




Common shares, $0.01 par value, 250,000,000 shares authorized, 75,454,511 shares issued
and outstanding at December 31, 2018; and 78,707,963 shares issued and outstanding at
December 31, 2017

754



787


Additional paid-in capital

1,468,779



1,527,796


Retained earnings

539,332



380,331


Accumulated other comprehensive loss

(184)



(1,350)


Total shareholders' equity

2,008,681



1,907,564


Total liabilities and shareholders' equity

$

7,871,181



$

7,199,083


 

Aircastle Limited and Subsidiaries

Consolidated Statements of Income

(Dollars in thousands, except per share amounts)

(Unaudited)



Three Months Ended
December 31,


Year Ended 
December 31,


2018


2017


2018


2017

Revenues:








Lease rental revenue

$

184,682



$

169,931



$

722,694



$

721,302


Finance and sales-type lease revenue

8,029



9,353



35,132



25,716


Amortization of lease premiums, discounts and incentives

(4,563)



(2,934)



(15,269)



(11,714)


Maintenance revenue

93,747



390



105,738



56,128


Total lease revenue

281,895



176,740



848,295



791,432


Gain on sale of flight equipment

8,180



19,241



36,766



55,167


Other revenue

2,491



662



5,290



5,188


Total revenues

292,566



196,643



890,351



851,787


Operating expenses:








Depreciation

81,608



71,218



310,850



298,664


Interest, net

62,867



55,855



234,504



241,231


Selling, general and administrative (including non-cash share-based
payment expense of $3,236 and $2,512 for the three months ended, and
$11,488 and $13,148 for the year ended December 31, 2018 and 2017,
respectively)

21,301



18,113



76,025



73,604


Impairment of flight equipment







80,430


Maintenance and other costs

4,233



1,231



8,961



9,077


Total expenses

170,009



146,417



630,340



703,006










Total other income

(2,807)



593



1,636



(2,476)










Income from continuing operations before income taxes and earnings of
unconsolidated equity method investments

119,750



50,819



261,647



146,305


Income tax provision (benefit)

2,118



(2,494)



5,642



6,042


Earnings of unconsolidated equity method investments, net of tax

(13,795)



1,807



(8,086)



7,611


Net income

$

103,837



$

55,120



$

247,919



$

147,874


Earnings per common share — Basic:








Net income per share

$

1.36



$

0.70



$

3.18



$

1.88


Earnings per common share — Diluted:








Net income per share

$

1.35



$

0.70



$

3.17



$

1.87


Dividends declared per share

$

0.30



$

0.28



$

1.14



$

1.06


 

Aircastle Limited and Subsidiaries

Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)



Year Ended December 31,


2018


2017

Cash flows from operating activities:




Net income

$

247,919



$

147,874


Adjustments to reconcile net income to net cash provided by operating activities:




Depreciation

310,850



298,664


Amortization of deferred financing costs

14,627



19,435


Amortization of lease premiums, discounts and incentives

15,269



11,714


Deferred income taxes

(496)



(8,948)


Non-cash share-based payment expense

11,488



13,148


Cash flow hedges reclassified into earnings

1,166



2,202


Security deposits and maintenance payments included in earnings

(80,628)



(17,947)


Gain on the sale of flight equipment

(36,766)



(55,167)


Impairment of aircraft



80,430


Other

3,032



1,476


Changes on certain assets and liabilities:




Accounts receivable

(12,328)



(6,734)


Other assets

5,065



(7,655)


Accounts payable, accrued expenses and other liabilities

10,526



13,857


Lease rentals received in advance

32,868



(1,478)


   Net cash and restricted cash provided by operating activities

522,592



490,871


Cash flows from investing activities:




Acquisition and improvement of flight equipment

(1,317,497)



(1,038,343)


Proceeds from sale of flight equipment

338,831



833,576


Net investment in finance and sales-type leases

(15,783)



(331,721)


Collections on finance and sales-type leases

29,961



32,184


Aircraft purchase deposits and progress payments, net of returned deposits and aircraft sales
deposits

(15,494)



(7,681)


Unconsolidated equity method investment and associated costs

(3,350)




Other

8,645



(5,122)


Net cash and restricted cash used in investing activities

(974,687)



(517,107)


Cash flows from financing activities:




Repurchase of shares

(71,421)



(4,862)


Proceeds from secured and unsecured debt financings

1,413,901



675,000


Repayments of secured and unsecured debt financings

(969,139)



(878,534)


Deferred financing costs

(11,642)



(8,540)


Security deposits and maintenance payments received

203,925



192,830


Security deposits and maintenance payments returned

(90,803)



(141,185)


Dividends paid

(88,730)



(83,433)


Net cash and restricted cash (used in) provided by financing activities

386,091



(248,724)


Net (decrease) increase in cash and restricted cash

(66,004)



(274,960)


Cash and restricted cash at beginning of year

233,857



508,817


Cash and restricted cash at end of year

$

167,853



$

233,857


 

Aircastle Limited and Subsidiaries

Selected Financial Guidance Elements for the First Quarter of 2019

($ in millions, except for percentages)

(Unaudited)


Guidance Item

Q1:19

Lease rental revenue

$179 - $185

Finance lease revenue

$8 - $9

Amortization of net lease discounts and lease incentives

($5) - ($6)

Maintenance revenue

$10 - $12

Gain on sale of flight equipment

$6 - $9

Depreciation

$83 - $87

Interest, net

$65 - $68

SG&A(1)

$18 - $19

Full year effective tax rate

4% - 6%


(1)      Includes ~$3.0M of non-cash share-based payment expense.

 

Aircastle Limited and Subsidiaries

Supplemental Financial Information

(Amount in thousands, except per share amounts)

(Unaudited)



Three Months Ended
December 31,


Year Ended 
December 31,


2018


2017


2018


2017

Revenues

$

292,566



$

196,643



$

890,351



$

851,787










EBITDA(1)

$

254,993



$

182,633



$

814,184



$

705,525










Adjusted EBITDA(1)

$

276,830



$

184,553



$

839,831



$

801,584










Net income

$

103,837



$

55,120



$

247,919



$

147,874


Net income allocable to common shares

$

103,174



$

54,757



$

246,402



$

146,829


Per common share - Basic

$

1.36



$

0.70



$

3.18



$

1.88


Per common share - Diluted

$

1.35



$

0.70



$

3.17



$

1.87










Adjusted net income(1)

$

109,883



$

57,040



$

257,237



$

169,566


Adjusted net income allocable to common shares

$

109,182



$

56,665



$

255,663



$

168,368


Per common share - Basic

$

1.44



$

0.72



$

3.30



$

2.15


Per common share - Diluted

$

1.43



$

0.72



$

3.29



$

2.15










Basic common shares outstanding

75,937



78,286



77,447



78,219


Diluted common shares outstanding(2)

76,281



78,393



77,749



78,373


_______________

(1)

Refer to the selected information accompanying this press release for a reconciliation of GAAP to Non-GAAP information.

(2)

For the three and twelve months ended December 31, 2018, includes 344,020 and 301,356 dilutive shares, respectively.  For the three and twelve months ended December 31, 2017, includes 107,523 and 153,983 dilutive shares, respectively.

 

Aircastle Limited and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures

EBITDA and Adjusted EBITDA Reconciliation

(Dollars in thousands)

(Unaudited)



Three Months Ended
December 31,


Year Ended 
December 31,


2018


2017


2018


2017

Net income

$

103,837



55,120



$

247,919



$

147,874


Depreciation

81,608



71,218



310,850



298,664


Amortization of lease premiums, discounts and incentives

4,563



2,934



15,269



11,714


Interest, net

62,867



55,855



234,504



241,231


Income tax provision

2,118



(2,494)



5,642



6,042


EBITDA

254,993



182,633



814,184



705,525


Adjustments:








Impairment of flight equipment







80,430


Equity share of joint venture impairment

15,791





15,791




Non-cash share-based payment expense

3,236



2,512



11,488



13,148


(Gain) loss on mark-to-market of interest rate derivative contracts

2,810



(592)



(1,632)



2,481


Adjusted EBITDA

$

276,830



184,553



$

839,831



$

801,584



We define EBITDA as income (loss) from continuing operations before income taxes, interest expense, and depreciation and amortization. We use EBITDA to assess our consolidated financial and operating performance, and we believe this non-U.S. GAAP measure is helpful in identifying trends in our performance.


This measure provides an assessment of controllable expenses and affords management the ability to make decisions which are expected to facilitate meeting current financial goals as well as achieving optimal financial performance. It provides an indicator for management to determine if adjustments to current spending decisions are needed.


EBITDA provides us with a measure of operating performance because it assists us in comparing our operating performance on a consistent basis as it removes the impact of our capital structure (primarily interest charges on our outstanding debt) and asset base (primarily depreciation and amortization) from our operating results. Accordingly, this metric measures our financial performance based on operational factors that management can impact in the short-term, namely the cost structure, or expenses, of the organization. EBITDA is one of the metrics used by senior management and the Board of Directors to review the consolidated financial performance of our business.


We define Adjusted EBITDA as EBITDA (as defined above) further adjusted to give effect to adjustments required in calculating covenant ratios and compliance as that term is defined in the indenture governing our senior unsecured notes.  Adjusted EBITDA is a material component of these covenants.

 

Aircastle Limited and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures

Adjusted Net Income Reconciliation

(Dollars in thousands)

(Unaudited)



Three Months Ended
December 31,


Year Ended
December 31,


2018


2017


2018


2017

Net income

$

103,837



$

55,120



$

247,919



$

147,874


Loan termination fee(1)





(838)



2,058


(Gain) loss on mark-to-market of interest rate derivative contracts(2)

2,810



(592)



(1,632)



2,481


Write-off of deferred financing fees(1)





300



4,005


Non-cash share-based payment expense(3)

3,236



2,512



11,488



13,148


Adjusted net income

$

109,883



$

57,040



$

257,237



$

169,566


_______________

(1)  Included in Interest, net.

(2)  Included in Other income (expense).

(3)  Included in Selling, general and administrative expenses.


Management believes that ANI, when viewed in conjunction with the Company's results under U.S. GAAP and the above reconciliation, provides useful information about operating and period-over-period performance and additional information that is useful for evaluating the underlying operating performance of our business without regard to periodic reporting elements related to interest rate derivative accounting, changes related to refinancing activity and non-cash share-based payment expense.

 

Aircastle Limited and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures

Cash Return on Equity Calculation

(Dollars in thousands)

(Unaudited)


Period

CFFO

+

Finance

Lease

Collections

+

Gain on
Sale of
Flight
Equipment

-

Deprec.

=

Cash Earnings


Average

Shareholders

Equity


Trailing
Twelve
Month
Cash
ROE

2013

$

424,037



$

9,508



$

37,220



$

284,924



$

185,841



$

1,513,156



12.3

%

2014

$

458,786



$

10,312



$

23,146



$

299,365



$

192,879



$

1,661,228



11.6

%

2015

$

526,285



$

9,559



$

58,017



$

318,783



$

275,078



$

1,759,871



15.6

%

2016

$

468,092



$

19,413



$

39,126



$

305,216



$

221,415



$

1,789,256



12.4

%

2017

$

490,871



$

32,184



$

55,167



$

298,664



$

279,558



$

1,861,005



15.0

%

2018

$

522,592



$

29,961



$

36,766



$

310,850



$

278,469



$

1,955,160



14.2

%


Note:  LTM Average Shareholders' Equity is the average of the most recent five quarters period end Shareholders' Equity.  Management believes that the cash return on equity metric ("Cash ROE") when viewed in conjunction  with the Company's results under U.S. GAAP and the above reconciliation, provide useful information about operating and period-over-period performance, and provide additional information that is useful for evaluating the underlying operating performance of our business without regard to periodic reporting impacts related to non-cash revenue and expense items and interest rate derivative accounting, while recognizing the depreciating nature of our assets.  To reflect the expected sale of the assets in one of our joint ventures and to simplify the presentation of Cash ROE, we are no longer adjusting for joint venture distributions in excess of/less than joint venture earnings recorded under the equity method of investment accounting.

 

Aircastle Limited and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures

Net Cash Interest Margin Calculation

(Dollars in thousands)

(Unaudited)


Period


Average NBV


Quarterly Rental
Revenue(1)


Cash Interest(2)


Annualized Net
Cash Interest
Margin(1)(2)

Q1:13


$

4,740,161



$

162,319



$

48,591



9.6

%

Q2:13


$

4,840,396



$

164,239



$

44,915



9.9

%

Q3:13


$

4,863,444



$

167,876



$

47,682



9.9

%

Q4:13


$

5,118,601



$

176,168



$

49,080



9.9

%

Q1:14


$

5,312,651



$

181,095



$

51,685



9.7

%

Q2:14


$

5,721,521



$

190,574



$

48,172



10.0

%

Q3:14


$

5,483,958



$

182,227



$

44,820



10.0

%

Q4:14


$

5,468,637



$

181,977



$

44,459



10.1

%

Q1:15


$

5,743,035



$

181,027



$

50,235



9.1

%

Q2:15


$

5,967,898



$

189,238



$

51,413



9.2

%

Q3:15


$

6,048,330



$

191,878



$

51,428



9.3

%

Q4:15


$

5,962,874



$

188,491



$

51,250



9.2

%

Q1:16


$

5,988,076



$

186,730



$

51,815



9.0

%

Q2:16


$

5,920,030



$

184,469



$

55,779



8.7

%

Q3:16


$

6,265,175



$

193,909



$

57,589



8.7

%

Q4:16


$

6,346,361



$

196,714



$

58,631



8.7

%

Q1:17


$

6,505,355



$

200,273



$

58,839



8.7

%

Q2:17


$

6,512,100



$

199,522



$

55,871



8.8

%

Q3:17


$

5,985,908



$

184,588



$

53,457



8.8

%

Q4:17


$

6,247,581



$

187,794



$

53,035



8.6

%

Q1:18


$

6,700,223



$

193,418



$

53,978



8.3

%

Q2:18


$

6,721,360



$

193,988



$

53,979



8.3

%

Q3:18


$

6,787,206



$

200,354



$

54,521



8.6

%

Q4:18


$

7,136,627



$

200,027



$

60,348



7.8

%

_______________

(1)

We define net cash interest margin as lease rentals from operating leases, interest income and cash collections from finance and sales-type leases minus interest on borrowings, net settlements on interest rate derivatives and other liabilities adjusted for loan termination payments divided by the average net book of flight equipment (which includes net investment on finance and sales-type leases) for the period calculated on a quarterly and annualized basis. The second quarter of 2017 excludes a non-recurring, $7.0 million accelerated collection received from a lessee in connection with a finance lease.

(2)

Excludes loan termination payments of $3.0 million in the second quarter of 2013, $1.5 million and $3.5 million in the first quarter and fourth quarter of 2016, respectively, loan termination payments of $1.0 million in both the second and third quarters of 2017 and a loan termination gain of $0.8 million in the third quarter of 2018.



Management believes that net cash interest margin, when viewed in conjunction with the Company's results under U.S. GAAP and the above reconciliation, provides useful information about the effective deployment of our capital in the context of the yield on our aircraft assets, the utilization of those assets by our lessees, and our ability to borrow efficiently.

 

Aircastle Limited and Subsidiaries

Presentation of Reclassification of Gain on Sale of Flight Equipment

(Dollars in thousands)

(Unaudited)


As part of the Company's adoption of FASB ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), we have reclassified Gain on sale of flight equipment from Other income (expense) to Revenues on our Consolidated Statement of Income as of March 31, 2018.  We believe this better reflects the sale of flight equipment as part of our ordinary activities and conforms our presentation to those of our publicly traded peers.  The presentation for the three months and year ended December 31, 2017, has also been reclassified to conform to the current period presentation.  The standard did not have a material impact on our consolidated financial statements and related disclosures.



Three Months Ended December 31, 2017


Year Ended
December 31, 2017

Total revenues as previously reported

$

177,402



$

796,620


Gain on sale of flight equipment

19,241



55,167


Total revenues

$

196,643



$

851,787


 

Aircastle Limited and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures

Reconciliation of Net Income Allocable to Common Shares

(In thousands)

(Unaudited)



Three Months Ended

December 31, 2018


Year Ended
December 31, 2018

Weighted-average shares:

Shares


Percent


Shares


Percent

Common shares outstanding – Basic

75,937



99.36

%


77,447



99.39

%

Unvested restricted common shares

488



0.64

%


477



0.61

%

Total weighted-average shares outstanding

76,425



100.00

%


77,924



100.00

%









Common shares outstanding – Basic

75,937



99.55

%


77,447



99.61

%

Effect of dilutive shares(1)

344



0.45

%


301



0.39

%

Common shares outstanding – Diluted

76,281



100.00

%


77,749



100.00

%









Net income allocation








Net income

$

103,837



100.00

%


$

247,919



100.00

%

Distributed and undistributed earnings allocated to unvested restricted
shares(2)

(663)



(0.64)

%


(1,517)



(0.61)

%

Earnings available to common shares

$

103,174



99.36

%


$

246,402



99.39

%









Adjusted net income allocation








Adjusted net income

$

109,883



100.00

%


$

257,237



100.00

%

Amounts allocated to unvested restricted shares

(701)



(0.64)

%


(1,574)



(0.61)

%

Amounts allocated to common shares – Basic and Diluted

$

109,182



99.36

%


$

255,663



99.39

%

_______________

(1)

For the three months and year ended December 31, 2018, distributed and undistributed earnings to restricted shares were 0.64% and 0.61%, respectively, of net income and adjusted net income. The amount of restricted share forfeitures for all periods present is immaterial to the allocation of distributed and undistributed earnings.

(2)

For all periods presented, dilutive shares represented contingently issuable shares.

 

Aircastle Limited and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures

Reconciliation of Net Income Allocable to Common Shares

(In thousands)

(Unaudited)



Three Months Ended

December 31, 2017


Year Ended
December 31, 2017

Weighted-average shares:

Shares


Percent


Shares


Percent

Common shares outstanding – Basic

78,286



99.34

%


78,219



99.29

%

Unvested restricted common shares

518



0.66

%


557



0.71

%

Total weighted-average shares outstanding

78,804



100.00

%


78,776



100.00

%









Common shares outstanding – Basic

78,286



99.86

%


78,219



99.80

%

Effect of dilutive shares(1)

108



0.14

%


154



0.20

%

Common shares outstanding – Diluted

78,393



100.00

%


78,373



100.00

%









Net income allocation








Net income

$

55,120



100.00

%


$

147,874



100.00

%

Distributed and undistributed earnings allocated to unvested restricted
shares(2)

(363)



(0.66)

%


(1,045)



(0.71)

%

Earnings available to common shares

$

54,757



99.34

%


$

146,829



99.29

%









Adjusted net income allocation








Adjusted net income

$

57,040



100.00

%


$

169,566



100.00

%

Amounts allocated to unvested restricted shares

(375)



(0.66)

%


(1,198)



(0.71)

%

Amounts allocated to common shares – Basic and Diluted

$

56,665



99.34

%


$

168,368



99.29

%

_______________

(1)

For the three months and year ended December 31, 2017, distributed and undistributed earnings to restricted shares were 0.66% and 0.71%, respectively, of net income and adjusted net income.  The amount of restricted share forfeitures for all periods present is immaterial to the allocation of distributed and undistributed earnings.

(2)

For all periods presented, dilutive shares represented contingently issuable shares.

 

Cision View original content:http://www.prnewswire.com/news-releases/aircastle-announces-fourth-quarter-and-full-year-2018-results-300793654.html

SOURCE Aircastle Limited