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News Release Details

Aircastle Announces Third Quarter 2018 Results

November 1, 2018 at 7:30 AM EDT
Quarterly Dividend Increased 7.1% to $0.30 per Common Share
Share Repurchase Program Increased to $100 million

STAMFORD, Conn., Nov. 1, 2018 /PRNewswire/ --

Key Financial Metrics

  • Total revenues(1) were $190.8 million
  • Net income was $36.3 million, or $0.46 per diluted common share
  • Adjusted net income(2) was $38.2 million, or $0.49 per diluted common share
  • Adjusted EBITDA(2) was $179.2 million
  • Cash ROE(2) was 13.7%; net cash interest margin was 8.6%

Third Quarter 2018 Highlights

  • Aircastle now has investment grade credit ratings from all three major credit rating agencies; Upgraded to investment grade by Moody's Investors Service in August
  • Issued our first investment grade senior unsecured note for $650 million due 2023, bearing a coupon of 4.40%
  • Acquired eight narrow-body aircraft for $262.4 million, including two A320neos
  • Closed or expect to close fifteen additional narrow-body aircraft in the fourth quarter of 2018 for $674.3 million
  • Sold three aircraft in the third quarter, including one 777-300ER, and recorded gains on sale of $3.0 million
  • Declared our 50th consecutive quarterly dividend and increased the dividend to $0.30 from $0.28, or 7.1%; This is our ninth dividend increase in eight years
  • Repurchased $53.7 million of our shares year-to-date at average price of $20.22 per share; Repurchase authorization increased by $58 million, to $100 million

Aircastle Limited (the "Company" or "Aircastle") (NYSE: AYR) reported third quarter 2018 net income of $36.3 million, or $0.46 per diluted common share, and adjusted net income of $38.2 million, or $0.49 per diluted common share.  The third quarter results included total lease rental and finance and sales-type lease revenues of $190.8 million, an increase of 7.2%, versus $178.1 million in the third quarter of 2017.  In the third quarter of 2017, the Company reported net income of $57.4 million, or $0.73 per diluted common share, and adjusted net income of $64.4 million, or $0.82 per diluted common share.

_______________

 

(1)

See Appendix for an explanation of the reclassification of the Gain on Sale of Flight Equipment.

(2)

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

Commenting on the results, Mike Inglese, Aircastle's Chief Executive Officer, stated, "We remain confident in our business model as the leading investor in the secondary aircraft market with a best-in-class asset management platform, and have increased our dividend for the ninth time in eight years.  Now with an investment grade credit rating from all three major rating agencies, we can capitalize on growth opportunities with access to attractively priced capital.  We are pleased to have recently issued our first investment grade note on very attractive terms."

Mr. Inglese concluded, "We are also pleased to announce that our Board approved an increase in Aircastle's share repurchase program to $100 million, from the $42 million that was remaining under the prior authorization.  With our strong balance sheet, shareholder-friendly capital allocation policy, and the unique ability to source attractive, value-added transactions, we are positioned to increase value in the current market environment, and will continue to grow profitably and opportunistically well into the future."

Financial Results

(In thousands, except share data)

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2018

 

2017

 

2018

 

2017

Lease rental and finance and sales-type lease revenues

$

190,836

   

$

178,099

   

$

565,115

   

$

567,734

 

Total revenues(1)

$

190,829

   

$

213,053

   

$

597,785

   

$

655,144

 

Adjusted EBITDA(2)

$

179,233

   

$

199,535

   

$

563,001

   

$

617,031

 

Net income

$

36,332

   

$

57,431

   

$

144,082

   

$

92,754

 

   Per common share - Diluted

$

0.46

   

$

0.73

   

$

1.83

   

$

1.18

 

Adjusted net income(2)

$

38,225

   

$

64,387

   

$

147,354

   

$

112,526

 

   Per common share - Diluted

$

0.49

   

$

0.82

   

$

1.87

   

$

1.43

 

_______________

 

(1)

As part of the Company's adoption of Financial Accounting Standards Board ("FASB") Accounting Standards Update ("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 and nine months ended September 30, 2017, have 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

(2)

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

 

Third Quarter Results

Total revenues were $190.8 million, a decrease of $22.2 million, or 10.4%, from the third quarter of 2017.  Core lease rental and finance and sales-type lease revenues increased by $12.7 million, which was offset by an $18.7 million decrease in gains from the sale of flight equipment and a $14.5 million decrease in maintenance revenue.  Gains from the sale of flight equipment declined because we sold fewer aircraft in the third quarter of 2018 than in the prior year.  Maintenance revenues declined as no aircraft transitioned during the third quarter of 2018.

Lease rental and finance and sales-type lease revenues were $190.8 million versus $178.1 million the prior year.  The 7.2% increase reflects the net year-over-year impact from aircraft acquisitions, dispositions and lease extensions.  Since the beginning of the third quarter of 2017, acquisitions have outpaced sales.  Over that period, we've acquired 89 aircraft and sold 48 aircraft.

In the third quarter of 2018, net income was $36.3 million, a decrease of $21.1 million.  Adjusted net income was $38.2 million, a decline of $26.2 million versus the prior year.  Similarly, adjusted EBITDA declined by $20.3 million versus the third quarter of 2017 to $179.2 million.

The declines in net income, adjusted net income and adjusted EBITDA were all primarily due to an $18.7 million decline in gains from the sale of flight equipment and $14.5 million of lower maintenance revenue, partially offset by higher lease rental and finance and sales-type lease revenue of $12.7 million.

Aviation Assets

During the third quarter, we acquired eight aircraft for $262.4 million, including two new A320neos, our first investment in new technology aircraft.  For the first nine months of 2018, we purchased 21 aircraft for $674.8 million.  The aircraft we've acquired year-to-date had a weighted average age of 7.4 years and a weighted average remaining lease term of 5.5 years.  For the full year, we expect to complete $1.35 billion in aircraft acquisitions, including eight additional A320neos.

During the third quarter of 2018, we sold three aircraft, including one 777-300ER, for total sales proceeds of $98.0 million.

Year-to-date, we sold eleven aircraft for proceeds of $276.2 million and a net gain on sale of $28.6 million.  The average age of the aircraft sold was 12.9 years with an average remaining lease term of 4.2 years.

Our fleet utilization during the third quarter was 100%.  As of September 30, 2018, Aircastle owned 234 aircraft having a net book value of $6.8 billion. We also manage twelve aircraft with a net book value of $621.1 million dollars on behalf of our joint ventures.

As of September 30, 2018, Aircastle owned and managed 246 aircraft with a net book value of $7.5 billion.

Owned Aircraft

As of
September 30,

2018(1)

 

As of

September 30,

2017(1)

Net Book Value of Flight Equipment ($ mils.)

$

6,839

   

$

5,979

 

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

$

5,606

   

$

4,572

 

Number of Aircraft

234

   

192

 

Number of Unencumbered Aircraft

207

   

163

 

Weighted Average Fleet Age (years)(2)

9.6

   

8.7

 

Weighted Average Remaining Lease Term (years)(2)

4.5

   

4.7

 

Weighted Average Fleet Utilization for the quarter ended(3)

100.0

%

 

100.0

%

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

11.8

%

 

12.3

%

Net Cash Interest Margin(5)

8.6

%

 

8.8

%

       

Managed Aircraft on behalf of Joint Ventures

     

Net Book Value of Flight Equipment ($ mils.)

$

621

   

$

661

 

Number of Aircraft

12

   

13

 

_______________

   

(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

During the third quarter, Aircastle received its third Investment Grade credit rating, when Moody's Investors Service raised the Company's senior unsecured and corporate family ratings to Baa3 from Ba1.  Earlier this year, Standard and Poor's Global Ratings raised its ratings on Aircastle, including the corporate credit rating, to 'BBB-' from 'BB+' while Fitch Ratings assigned an initial 'BBB-' rating to Aircastle's senior unsecured debt.

During the third quarter of 2018, we issued $650 million of unsecured Senior Notes due 2023 bearing a coupon of 4.40%.  This was our first senior unsecured note issue with Investment Grade credit ratings.

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

Common Dividend

On October 30, 2018, Aircastle's Board of Directors declared a fourth quarter 2018 cash dividend on its common shares of $0.30 per share, payable on December 14, 2018 to shareholders of record on November 30, 2018.  This is our 50th consecutive dividend and represents a 7.1% increase over the previous quarter's cash dividend.  Over the last eight years, Aircastle has increased its dividend nine times.

Share Repurchases

Since the beginning of the year, the Company acquired 2,655,299 shares at an average price of $20.22 per share.  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.  Since 2011, the Company has repurchased 17.1 million shares at an average cost of $14.36 per share, for approximately $246.3 million.

Conference Call

In connection with this earnings release, management will host an earnings conference call on Thursday, November 1, 2018 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 (877) 260-1479 (from within the U.S. and Canada) or (334) 323-0522 (from outside of the U.S. and Canada) ten minutes prior to the scheduled start and referencing the passcode "7563300".

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.  A replay of the webcast will be available for one month following the call.  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 Saturday, December 1, 2018 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 September 30, 2018, Aircastle owned and managed on behalf of its joint ventures 246 aircraft leased to 85 customers located in 46 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 2017 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)

 
 

September 30,
 2018

 

December 31,
 2017

 

(Unaudited)

   

ASSETS

     

Cash and cash equivalents

$

593,922

   

$

211,922

 

Restricted cash and cash equivalents

16,275

   

21,935

 

Accounts receivable

27,365

   

12,815

 

Flight equipment held for lease, net of accumulated depreciation of $1,212,799 and
$1,125,594, respectively

6,321,622

   

6,188,469

 

Net investment in finance and sales-type leases

517,221

   

545,750

 

Unconsolidated equity method investments

82,146

   

76,982

 

Other assets

172,718

   

141,210

 

Total assets

$

7,731,269

   

$

7,199,083

 
       

LIABILITIES AND SHAREHOLDERS' EQUITY

     

LIABILITIES

     

Borrowings from secured financings, net of debt issuance costs and discounts

$

717,305

   

$

849,874

 

Borrowings from unsecured financings, net of debt issuance costs and discounts

3,938,568

   

3,463,732

 

Accounts payable, accrued expenses and other liabilities

149,583

   

140,221

 

Lease rentals received in advance

81,594

   

57,630

 

Security deposits

131,000

   

130,628

 

Maintenance payments

754,522

   

649,434

 

Total liabilities

5,772,572

   

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, 77,179,863
shares issued and outstanding at September 30, 2018; and 78,707,963 shares issued
and outstanding at December 31, 2017

772

   

787

 

Additional paid-in capital

1,500,030

   

1,527,796

 

Retained earnings

458,362

   

380,331

 

Accumulated other comprehensive loss

(467)

   

(1,350)

 

Total shareholders' equity

1,958,697

   

1,907,564

 

Total liabilities and shareholders' equity

$

7,731,269

   

$

7,199,083

 

 

 

Aircastle Limited and Subsidiaries

Consolidated Statements of Income

(Dollars in thousands, except per share amounts)

(Unaudited)

 
 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2018

 

2017

 

2018

 

2017

Revenues:

             

Lease rental revenue

$

182,043

   

$

171,687

   

$

538,012

   

$

551,371

 

Finance and sales-type lease revenue

8,793

   

6,412

   

27,103

   

16,363

 

Amortization of lease premiums, discounts and incentives

(4,044)

   

(2,388)

   

(10,706)

   

(8,780)

 

Maintenance revenue

   

14,507

   

11,991

   

55,738

 

Total lease revenue

186,792

   

190,218

   

566,400

   

614,692

 

Gain on sale of flight equipment(1)

2,954

   

21,642

   

28,586

   

35,926

 

Other revenue

1,083

   

1,193

   

2,799

   

4,526

 

Total revenues(1)

190,829

   

213,053

   

597,785

   

655,144

 

Operating expenses:

             

Depreciation

78,059

   

70,018

   

229,242

   

227,446

 

Interest, net

57,131

   

60,636

   

171,637

   

185,376

 

Selling, general and administrative (including non-cash share-based
payment expense of $2,798 and $2,506 for the three months ended and
$8,252 and $10,636 for the nine months ended September 30, 2018 and
2017, respectively)

18,306

   

17,137

   

54,724

   

55,491

 

Impairment of flight equipment

   

   

   

80,430

 

Maintenance and other costs

2,179

   

2,572

   

4,728

   

7,846

 

Total operating expenses

155,675

   

150,363

   

460,331

   

556,589

 
               

Total other income (expense)

368

   

(360)

   

4,443

   

(3,069)

 
               

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

35,522

   

62,330

   

141,897

   

95,486

 

Income tax provision

1,236

   

6,195

   

3,524

   

8,536

 

Earnings of unconsolidated equity method investments, net of tax

2,046

   

1,296

   

5,709

   

5,804

 

Net income

$

36,332

   

$

57,431

   

$

144,082

   

$

92,754

 

Earnings per common share — Basic:

             

Net income per share

$

0.47

   

$

0.73

   

$

1.84

   

$

1.18

 

Earnings per common share — Diluted:

             

Net income per share

$

0.46

   

$

0.73

   

$

1.83

   

$

1.18

 

Dividends declared per share

$

0.28

   

$

0.26

   

$

0.84

   

$

0.78

 

_______________

 

(1)

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 and nine months ended September 30, 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.

 

 

Aircastle Limited and Subsidiaries

Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)

 
 

Nine Months Ended
September 30,

 

2018

 

2017

Cash flows from operating activities:

     

Net income

$

144,082

   

$

92,754

 

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

     

Depreciation

229,242

   

227,446

 

Amortization of deferred financing costs

10,802

   

15,860

 

Amortization of lease premiums, discounts and incentives

10,706

   

8,780

 

Deferred income taxes

3,850

   

(1,369)

 

Non-cash share-based payment expense

8,252

   

10,636

 

Cash flow hedges reclassified into earnings

883

   

1,725

 

Security deposits and maintenance payments included in earnings

821

   

(17,147)

 

Gain on sale of flight equipment

(28,586)

   

(35,926)

 

Impairment of flight equipment

   

80,430

 

Other

(11,377)

   

2,078

 

Changes in certain assets and liabilities:

     

Accounts receivable

(9,731)

   

415

 

Other assets

1,541

   

(6,980)

 

Accounts payable, accrued expenses and other liabilities

6,476

   

17,648

 

Lease rentals received in advance

26,336

   

(2,892)

 

Net cash and restricted cash provided by operating activities

393,297

   

393,458

 

Cash flows from investing activities:

     

Acquisition and improvement of flight equipment

(626,022)

   

(353,492)

 

Proceeds from sale of flight equipment

276,165

   

764,984

 

Net investment in finance and sales-type leases

(15,783)

   

(246,871)

 

Collections on finance and sales-type leases

22,645

   

23,673

 

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

(9,544)

   

(14,068)

 

Other

3,880

   

(405)

 

Net cash and restricted cash used in investing activities

(348,659)

   

173,821

 

Cash flows from financing activities:

     

Repurchase of shares

(36,955)

   

(4,862)

 

Proceeds from secured and unsecured debt financings

873,902

   

500,000

 

Repayments of secured and unsecured debt financings

(535,808)

   

(852,451)

 

Deferred financing costs

(6,628)

   

(8,540)

 

Security deposits and maintenance payments received

155,567

   

138,813

 

Security deposits and maintenance payments returned

(52,513)

   

(104,475)

 

Dividends paid

(65,863)

   

(61,396)

 

Net cash and restricted cash used in financing activities

331,702

   

(392,911)

 

Net increase in cash and restricted cash

376,340

   

174,368

 

Cash and restricted cash at beginning of period

233,857

   

508,817

 

Cash and restricted cash at end of period

$

610,197

   

$

683,185

 
       

Reconciliation to Consolidated Balance Sheets:

     

Cash and cash equivalents

$

593,922

   

$

662,649

 

Restricted cash and cash equivalents

16,275

   

20,536

 
       

Unrestricted and restricted cash and cash equivalents

$

610,197

   

$

683,185

 

 

 

Aircastle Limited and Subsidiaries

Selected Financial Guidance Elements for the Fourth Quarter of 2018

($ in millions, except for percentages)

(Unaudited)

 

Guidance Item

Q4:18

Lease rental revenue

$187 - $191

Finance lease revenue

$8 - $9

Amortization of net lease discounts and lease incentives

$(4) - $(5)

Maintenance revenue

$14 - $18

Gain on sale

$5 - $8

Depreciation

$79 - $83

Interest, net

$62 - $64

SG&A(1)

$17 - $18

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
September 30,

 

Nine Months Ended
September 30,

 

2018

 

2017

 

2018

 

2017

Revenues(1)

$

190,829

   

$

213,053

   

$

597,785

   

$

655,144

 
               

EBITDA(2)

$

176,802

   

$

196,668

   

$

559,191

   

$

522,892

 
               

Adjusted EBITDA(2)

$

179,233

   

$

199,535

   

$

563,001

   

$

617,031

 
               

Net income

$

36,332

   

$

57,431

   

$

144,082

   

$

92,754

 

Net income allocable to common shares

$

36,105

   

$

57,016

   

$

143,213

   

$

92,083

 

Per common share - Basic

$

0.47

   

$

0.73

   

$

1.84

   

$

1.18

 

Per common share - Diluted

$

0.46

   

$

0.73

   

$

1.83

   

$

1.18

 
               

Adjusted net income(2)

$

38,225

   

$

64,387

   

$

147,354

   

$

112,526

 

Adjusted net income allocable to common shares

$

37,986

   

$

63,922

   

$

146,465

   

$

111,712

 

Per common share - Basic

$

0.49

   

$

0.82

   

$

1.88

   

$

1.43

 

Per common share - Diluted

$

0.49

   

$

0.82

   

$

1.87

   

$

1.43

 
               

Basic common shares outstanding

77,600

   

78,237

   

77,956

   

78,197

 

Diluted common shares outstanding(3)

77,895

   

78,375

   

78,243

   

78,366

 

_______________

 

(1)

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 Statements 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 and nine months ended September 30, 2017, have 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.

(2)

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

(3)

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

 

 

Aircastle Limited and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures

EBITDA and Adjusted EBITDA Reconciliation

(Dollars in thousands)

(Unaudited)

 
 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2018

 

2017

 

2018

 

2017

Net income

$

36,332

   

$

57,431

   

$

144,082

   

$

92,754

 

Depreciation

78,059

   

70,018

   

229,242

   

227,446

 

Amortization of lease premiums, discounts and incentives

4,044

   

2,388

   

10,706

   

8,780

 

Interest, net

57,131

   

60,636

   

171,637

   

185,376

 

Income tax provision

1,236

   

6,195

   

3,524

   

8,536

 

EBITDA

176,802

   

196,668

   

559,191

   

522,892

 

Adjustments:

             

Impairment of flight equipment

   

   

   

80,430

 

Non-cash share-based payment expense

2,798

   

2,506

   

8,252

   

10,636

 

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

(367)

   

361

   

(4,442)

   

3,073

 

Adjusted EBITDA

$

179,233

   

$

199,535

   

$

563,001

   

$

617,031

 
 

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
September 30,

 

Nine Months Ended
September 30,

 

2018

 

2017

 

2018

 

2017

Net income

$

36,332

   

$

57,431

   

$

144,082

   

$

92,754

 

Loan termination (gain) fee(1)

(838)

   

1,070

   

(838)

   

2,058

 

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

(367)

   

361

   

(4,442)

   

3,073

 

Write-off of deferred financing fees(1)

300

   

3,019

   

300

   

4,005

 

Non-cash share-based payment expense(3)

2,798

   

2,506

   

8,252

   

10,636

 
               

Adjusted net income

$

38,225

   

$

64,387

   

$

147,354

   

$

112,526

 

_______________

 

  (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
Flt. Eqt.

 

Deprec.

 

Distributions

in excess

(less than)

Equity
Earnings

 

Cash
Earnings

 

Average

Shareholders

Equity

 

Trailing
Twelve
Month
Cash
ROE

2012

$

427,277

   

$

3,852

   

$

5,747

   

$

269,920

   

$

   

$

166,956

   

$

1,425,658

   

11.7

%

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

   

$

667

   

$

193,546

   

$

1,661,228

   

11.7

%

2015

$

526,285

   

$

9,559

   

$

58,017

   

$

318,783

   

$

(530)

   

$

274,548

   

$

1,759,871

   

15.6

%

2016

$

468,092

   

$

19,413

   

$

39,126

   

$

305,216

   

$

(1,782)

   

$

219,633

   

$

1,789,256

   

12.3

%

2017

$

490,871

   

$

32,184

   

$

55,167

   

$

298,664

   

$

(1,011)

   

$

278,547

   

$

1,861,005

   

15.0

%

LTM Q3:18

$

489,710

   

$

31,156

   

$

47,827

   

$

300,460

   

$

(4,815)

   

$

263,418

   

$

1,927,819

   

13.7

%

 

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.

 

 

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)

Q1:12

 

$

4,388,008

   

$

152,242

   

$

44,969

   

9.8

%

Q2:12

 

$

4,542,477

   

$

156,057

   

$

48,798

   

9.4

%

Q3:12

 

$

4,697,802

   

$

163,630

   

$

41,373

   

10.4

%

Q4:12

 

$

4,726,457

   

$

163,820

   

$

43,461

   

10.2

%

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

%

_______________

 

(1)

Management's Use of Net Cash Interest Margin: Beginning with the earnings release for the three months ended September 30, 2016, based on the growing level of finance and sales-type lease revenue, management revised the calculation of net cash interest margin 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 lease in lease rentals.  The calculation of net cash interest margin for all prior periods presented is revised to be comparable with the current period presentation.

(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, and 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.

 

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.

 

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 and nine months ended September 30, 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
September 30, 2017

 

Nine Months Ended
September 30, 2017

Total revenues as previously reported

$

191,411

 

$

619,218

Gain on sale of flight equipment

21,642

 

35,926

Total revenues

$

213,053

 

$

655,144

 

 

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

September 30, 2018

 

Nine Months Ended

September 30, 2018

Weighted-average shares:

Shares

 

Percent

 

Shares

 

Percent

Common shares outstanding – Basic

77,600

   

99.37

%

 

77,956

   

99.40

%

Unvested restricted common shares

489

   

0.63

%

 

473

   

0.60

%

Total weighted-average shares outstanding

78,089

   

100.00

%

 

78,429

   

100.00

%

               

Common shares outstanding – Basic

77,600

   

99.62

%

 

77,956

   

99.63

%

Effect of dilutive shares(1)

296

   

0.38

%

 

287

   

0.37

%

Common shares outstanding – Diluted

77,895

   

100.00

%

 

78,243

   

100.00

%

               

Net income allocation

             

Net income

$

36,332

   

100.00

%

 

$

144,082

   

100.00

%

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

(227)

   

(0.63)

%

 

(869)

   

(0.60)

%

Earnings available to common shares

$

36,105

   

99.37

%

 

$

143,213

   

99.40

%

               

Adjusted net income allocation

             

Adjusted net income

$

38,225

   

100.00

%

 

$

147,354

   

100.00

%

Amounts allocated to unvested restricted shares

(239)

   

(0.63)

%

 

(889)

   

(0.60)

%

Amounts allocated to common shares – Basic and Diluted

$

37,986

   

99.37

%

 

$

146,465

   

99.40

%

_______________

 

(1)

For the three and nine months ended September 30, 2018, distributed and undistributed earnings to restricted shares were 0.63% and 0.60%, respectively, of net income and adjusted net income.  The amount of restricted share forfeitures for the periods presented are immaterial to the allocation of distributed and undistributed earnings.

(2)

For the three and nine months ended September 30, 2018, 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

September 30, 2017

 

Nine Months Ended

September 30, 2017

Weighted-average shares:

Shares

 

Percent

 

Shares

 

Percent

Common shares outstanding – Basic

78,237

   

99.28

%

 

78,197

   

99.28

%

Unvested restricted common shares

570

   

0.72

%

 

569

   

0.72

%

Total weighted-average shares outstanding

78,807

   

100.00

%

 

78,767

   

100.00

%

               

Common shares outstanding – Basic

78,237

   

99.82

%

 

78,197

   

99.78

%

Effect of dilutive shares(1)

138

   

0.18

%

 

169

   

0.22

%

Common shares outstanding – Diluted

78,375

   

100.00

%

 

78,366

   

100.00

%

               

Net income allocation

             

Net income

$

57,431

   

100.00

%

 

$

92,754

   

100.00

%

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

(415)

   

(0.72)

%

 

(671)

   

(0.72)

%

Earnings available to common shares

$

57,016

   

99.28

%

 

$

92,083

   

99.28

%

               

Adjusted net income allocation

             

Adjusted net income

$

64,387

   

100.00

%

 

$

112,526

   

100.00

%

Amounts allocated to unvested restricted shares

(465)

   

(0.72)

%

 

(814)

   

(0.72)

%

Amounts allocated to common shares – Basic and Diluted

$

63,922

   

99.28

%

 

$

111,712

   

99.28

%

_______________

 

(1)

For the three and nine months ended September 30, 2017, distributed and undistributed earnings to restricted shares were 0.72% of net income and adjusted net income for both periods presented.  The amount of restricted share forfeitures for the periods presented are immaterial to the allocation of distributed and undistributed earnings.

(2)

For the three and nine months ended September 30, 2017, dilutive shares represented contingently issuable shares.

 

 

Cision View original content:http://www.prnewswire.com/news-releases/aircastle-announces-third-quarter-2018-results-300741831.html

SOURCE Aircastle Limited