Document


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) May 3, 2019 (May 2, 2019)

Aircastle Limited
(Exact name of registrant as specified in its charter)

Bermuda
001-32959
98-0444035
(State or other jurisdiction of incorporation)
(Commission File Number)
(IRS Employer
Identification No.)

c/o Aircastle Advisor LLC, 201 Tresser Boulevard, Suite 400, Stamford, Connecticut
 
06901
(Address of principal executive offices)

 
(Zip Code)


Registrant’s telephone number, including area code (203) 504-1020            
                                                    
(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
[ ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use
the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐











Section 2 - Financial Information
Item 2.02 Results of Operations and Financial Condition.

On May 2, 2019, Aircastle Limited announced financial results for its first quarter 2019 as described in the press release furnished hereto as Exhibit 99.1, which is incorporated herein by reference.

The information furnished pursuant to this Current Report on Form 8-K, including the exhibit hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into any of the Company’s filings under the Securities Act of 1933, as amended, or the Exchange Act, unless expressly set forth as being incorporated by reference into such filing.

Section 9 - Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits.
 
(d) Exhibits

99.1 Press Release dated May 2, 2019 which is being furnished hereto pursuant to Item 2.02.
     
SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
AIRCASTLE LIMITED
(Registrant)
 
 
Christopher Beers
 
Chief Legal Officer
Date: May 3, 2019






























EXHIBIT INDEX

Exhibit Number     Description

99.1
Press Release dated May 2, 2019            




Exhibit


http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12880104&doc=3    

FOR IMMEDIATE RELEASE
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 Announces First Quarter 2019 Results

Total Revenues Rose 5.5% to $213.9 million; Book Value per share increased 8.7% versus Q1:18
Declared Second Quarter 2019 Dividend of $0.30 per Common Share

Key First Quarter 2019 Financial Metrics
Total revenues were $213.9 million
Total lease rental and direct financing and sales-type lease revenues were $189.7 million
Net income was $34.8 million, or $0.46 per diluted common share
Adjusted net income(1) was $39.6 million, or $0.52 per diluted common share
Adjusted EBITDA(1) was $199.3 million
Cash ROE(1) was 11.8%; net cash interest margin was 7.3%
First Quarter 2019 Highlights
Acquired fourteen narrow-body aircraft for $444.7 million; committed to acquire twelve additional narrow-bodies for $385 million
Sold four older narrow-body aircraft for $56.3 million and a gain on sale of $12.0 million
Declared our 52nd consecutive quarterly dividend
Repurchased $8.7 million of our shares year-to-date at average price of $17.57 per share
Stamford, CT.  May 2, 2019 – Aircastle Limited (the “Company” or “Aircastle”) (NYSE: AYR) reported first quarter 2019 net income of $34.8 million, or $0.46 per diluted common share, and adjusted net income

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




of $39.6 million, or $0.52 per diluted common share. The first quarter results included total lease rental and direct financing and sales-type lease revenues of $189.7 million, versus $186.9 million in the first quarter of 2018, an increase of 1.5%.
Commenting on the results, Mike Inglese, Aircastle’s Chief Executive Officer, stated, “Aircastle continued to deliver strong financial results in the first quarter of 2019. By focusing on value-added growth opportunities, we have acquired or committed to acquire $830 million of attractively priced aircraft thus far in 2019, while simultaneously improving the quality and composition of our fleet. Our acquisitions consist entirely of modern, narrow-body aircraft where we continue to see very strong demand from our airline customers.”
Mr. Inglese continued, “Our asset management skills were recently highlighted, with the successful recovery and transition of ten Airbus A320-200 aircraft from Avianca Brazil to LATAM Airlines Group S.A. In line with our earlier expectations, the aircraft will begin to return to service during the second quarter. In addition, we have lease commitments and are in the process of transitioning the seven Boeing 737 family aircraft that were previously on-lease with Jet Airways.”
Mr. Inglese concluded, “As a professional manager of commercial aircraft, we will continue to be responsible stewards of investor capital. Since our initial public offering in 2006 we have acquired nearly $16 billion of aircraft, paid out $880 million of dividends, and have repurchased more than $270 million of our shares at an average price of $14.57. We are dedicated to creating long-term value for our shareholders, and our sensible, balanced capital allocation strategy positions us well moving forward.”
Financial Results
(In thousands, except share data)
Three Months Ended March 31,
 
2019
 
2018
Lease rental and direct financing and sales-type lease revenues
$
189,677
 
 
$
186,925
 
Total revenues
$
213,927
 
 
$
202,680
 
Adjusted EBITDA(1)
$
199,347
 
 
$
191,145
 
Net income
$
34,810
 
 
$
57,547
 
Per common share - Diluted
$
0.46
 
 
$
0.73
 
Adjusted net income(1)
$
39,616
 
 
$
56,751
 
Per common share - Diluted
$
0.52
 
 
$
0.72
 
_______________

(1)
Refer to the selected financial information accompanying this press release for a reconciliation of GAAP to Non-GAAP numbers.
First Quarter Results
Net income for the quarter was $34.8 million, a decrease of $22.7 million versus the prior year, while adjusted net income was $39.6 million, a decrease of $17.1 million. Higher total revenues of $11.2 million were offset by higher depreciation of $9.7 million, driven by the effect of net aircraft acquired since the beginning of 2018; higher maintenance expense of $6.4 million due to transition related costs; higher

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interest expense of $6.4 million from higher average debt balances; and higher combined hedging related costs and income taxes of $9.2 million.
Total revenues were $213.9 million, an increase of $11.2 million, or 5.5%, from the previous year. The increase was driven by a $2.8 million rise in lease rental and direct financing and sales-type lease revenues, a $6.2 million increase in the gain on the sale of flight equipment, and a $4.4 million increase in maintenance revenues. Rental revenues were 1.5% higher due to the positive impact of aircraft acquisitions, partly offset by aircraft sold, and the impact of the bankruptcies of Avianca Brazil and Jet Airways. While rental revenues were $2.8 million higher in the first quarter of 2019 versus the prior year, the unrecognized rental revenue from the two bankrupt airlines totaled $15.9 million for the quarter, or approximately $0.21 per diluted share. Maintenance revenues improved mainly due to higher lease transitions versus the prior year. Gain on sale was higher driven by the sale of four aircraft at larger gains versus the prior year and two aircraft which were reclassified as net investment in direct financing and sales-type leases.
Adjusted EBITDA for the first quarter was $199.3 million, an increase of $8.2 million, or 4.3%, from the first quarter of 2018. The increase was due to higher rental revenues, higher maintenance revenues, and higher gains from aircraft sales, partly offset by higher maintenance related costs.
Aviation Assets
During the first quarter 2019, we acquired fourteen aircraft for $445 million and made commitments to acquire twelve additional aircraft in 2019 for $385 million. These 26 aircraft have a weighted average age of 7.8 years and a weighted average remaining lease term of 4.8 years. All of the aircraft that we have acquired or have committed to acquire this year are narrow-body aircraft.
As of March 31, 2019, Aircastle owned 259 aircraft having a net book value of $7.6 billion. We also manage fifteen aircraft with a net book value of $686 million dollars on behalf of our joint ventures.
Owned Aircraft
As of
March 31, 2019
(1)
 
As of
March 31, 2018
(1)
Net Book Value of Flight Equipment ($ mils.)
$
7,645
 
 
$
6,677
 
Net Book Value of Unencumbered Flight Equipment ($ mils.)
$
6,298
 
 
$
5,304
 
Number of Aircraft
259
 
 
222
 
Number of Unencumbered Aircraft
228
 
 
193
 
Weighted Average Fleet Age (years)(2)
9.4
 
 
9.3
 
Weighted Average Remaining Lease Term (years)(2)
4.5
 
 
4.8
 
Weighted Average Fleet Utilization for the quarter ended(3)
93.7
%
 
99.4
%
Portfolio Yield for the quarter ended(2)(4)
10.5
%
 
11.5
%
Net Cash Interest Margin(5)
7.3
%
 
8.3
%
 
 
 
 
Managed Aircraft on behalf of Joint Ventures
 
 
 
Net Book Value of Flight Equipment ($ mils.)
$
686
 
 
$
634
 
Number of Aircraft
15
 
 
12
 
_______________

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(1)
Calculated using net book value of flight equipment held for lease and net investment in direct financing and sales-type 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. The decrease from our historical utilization rate was due to discontinued revenue recognition from eleven aircraft from Avianca Brazil and seven aircraft from Jet Airways during the three months ended March 31, 2019.
(4)
Lease rental revenue, interest income and cash collections on our net investment in direct financing 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 direct financing and sales-type lease revenue management revised the calculation of portfolio yield to include our net investment in direct financing and sales-type leases in the average net book value and to include the interest income and cash collections on our net investment in direct financing and sales-type leases in lease rentals.
(5)
Net Cash Interest Margin = Lease rental yield including direct financing and sales-type 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
At the end of the first quarter of 2019, the current undrawn available balance under our committed credit facilities totaled $705 million. Borrowings under our credit facilities totaled $375 million at the end of the first quarter of 2019.

Common Dividend

On April 30, 2019, Aircastle’s Board of Directors declared a second quarter 2019 cash dividend on its common shares of $0.30 per share, payable on June 14, 2019 to shareholders of record on May 31, 2019. This is our 52nd consecutive dividend.

Share Repurchases

Since the beginning of the year, the Company acquired approximately 497,000 shares at an average price of $17.57 per share. Aircastle’s Board of Directors previously authorized a $100 million share repurchase program, and there is approximately $76 million remaining under this authorization. Since 2011, the Company has repurchased 18.5 million shares at an average cost of $14.57 per share.

Conference Call

In connection with this earnings release, management will host an earnings conference call on Thursday, May 2, 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 (800) 667-5617 (from within the U.S. and Canada) or (334) 323-0509 (from outside of the U.S. and Canada) ten minutes prior to the scheduled start and referencing the passcode "6382988".


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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, June 1, 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 “6382988”.

About Aircastle Limited

Aircastle Limited acquires, leases and sells commercial jet aircraft to airlines throughout the world. As of March 31, 2019, Aircastle owned and managed on behalf of its joint ventures 274 aircraft leased to 86 customers located in 47 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.

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6




Aircastle Limited and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands, except share data)

 
March 31,
2019
 
December 31,
2018
 
(Unaudited)
 
 
ASSETS
 
 
 
Cash and cash equivalents
$
92,629

 
 
$
152,719

 
Restricted cash and cash equivalents
15,579
 
 
 
15,134
 
 
Accounts receivable
15,636
 
 
 
15,091
 
 
Flight equipment held for lease, net of accumulated depreciation of $1,276,266 and $1,221,985, respectively
7,138,689
 
 
 
6,935,585
 
 
Net investment in direct financing and sales-type leases
505,964
 
 
 
469,180
 
 
Unconsolidated equity method investments
76,306
 
 
 
69,111
 
 
Other assets
177,398
 
 
 
214,361
 
 
Total assets
$
8,022,201

 
 
$
7,871,181

 
 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
LIABILITIES
 
 
 
Borrowings from secured financings, net of debt issuance costs and discounts
$
773,153

 
 
$
798,457

 
Borrowings from unsecured financings, net of debt issuance costs and discounts
4,128,491
 
 
 
3,962,896
 
 
Accounts payable, accrued expenses and other liabilities
156,887
 
 
 
153,341
 
 
Lease rentals received in advance
91,190
 
 
 
87,772
 
 
Security deposits
124,989
 
 
 
120,962
 
 
Maintenance payments
734,552
 
 
 
739,072
 
 
Total liabilities
6,009,262
 
 
 
5,862,500
 
 
 
 
 
 
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, 75,077,638 shares issued and outstanding at March 31, 2019; and 75,454,511 shares issued and outstanding at December 31, 2018
751
 
 
 
754
 
 
Additional paid-in capital
1,460,564
 
 
 
1,468,779
 
 
Retained earnings
551,624
 
 
 
539,332
 
 
Accumulated other comprehensive loss
 
 
 
(184
 
)
Total shareholders’ equity
2,012,939
 
 
 
2,008,681
 
 
Total liabilities and shareholders’ equity
$
8,022,201

 
 
$
7,871,181

 



7




Aircastle Limited and Subsidiaries
Consolidated Statements of Income
(Dollars in thousands, except per share amounts)
(Unaudited)

 
Three Months Ended March 31,
 
2019
 
2018
Revenues:
 
 
 
Lease rental revenue
$
181,234
 
 
$
177,483
 
Direct financing and sales-type lease revenue
8,443
 
 
9,442
 
Amortization of lease premiums, discounts and incentives
(5,711
)
 
(3,128
)
Maintenance revenue
16,401
 
 
11,991
 
Total lease revenue
200,367
 
 
195,788
 
Gain on sale of flight equipment
12,002
 
 
5,768
 
Other revenue
1,558
 
 
1,124
 
Total revenues
213,927
 
 
202,680
 
Operating expenses:
 
 
 
Depreciation
84,735
 
 
75,002
 
Interest, net
63,463
 
 
57,108
 
Selling, general and administrative (including non-cash share-based payment expense of $2,726 and $2,378 for the three months ended March 31, 2019 and 2018, respectively)

18,000
 
 
17,835
 
Maintenance and other costs
7,404
 
 
988
 
Total operating expenses
173,602
 
 
150,933
 
 
 
 
 
Total other income (expense)
(2,061
)
 
3,174
 
 
 
 
 
Income from continuing operations before income taxes and earnings (loss) of unconsolidated equity method investments
38,264
 
 
54,921
 
Income tax provision (benefit)
3,098
 
 
(844
)
Earnings (loss) of unconsolidated equity method investments, net of tax
(356
)
 
1,782
 
Net income
$
34,810
 
 
$
57,547
 
Earnings per common share — Basic:
 
 
 
Net income per share
$
0.46
 
 
$
0.73
 
Earnings per common share — Diluted:
 
 
 
Net income per share
$
0.46
 
 
$
0.73
 
Dividends declared per share
$
0.30
 
 
$
0.28
 





8




Aircastle Limited and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
 
Three Months Ended March 31,
 
2019
 
2018
Cash flows from operating activities:
 
 
 
Net income
$
34,810

 
 
$
57,547

 
Adjustments to reconcile net income to net cash and restricted cash provided by operating activities:
 
 
 
Depreciation
84,735
 
 
 
75,002
 
 
Amortization of deferred financing costs
3,364
 
 
 
3,533
 
 
Amortization of lease premiums, discounts and incentives
5,711
 
 
 
3,128
 
 
Deferred income taxes
3,164
 
 
 
1,306
 
 
Non-cash share-based payment expense
2,726
 
 
 
2,378
 
 
Cash flow hedges reclassified into earnings
184
 
 
 
301
 
 
Collections on direct financing and sales-type leases
5,925
 
 
 
6,493
 
 
Security deposits and maintenance payments included in earnings
(14,975
 
)
 
(665
 
)
Gain on sale of flight equipment
(12,002
 
)
 
(5,768
 
)
Other
1,613
 
 
 
(4,501
 
)
Changes in certain assets and liabilities:
 
 
 
Accounts receivable
(3,662
 
)
 
4,320
 
 
Other assets
(1,030
 
)
 
(2,666
 
)
Accounts payable, accrued expenses and other liabilities
(7,337
 
)
 
(57
 
)
Lease rentals received in advance
3,134
 
 
 
8,554
 
 
Net cash and restricted cash provided by operating activities
106,360
 
 
 
148,905
 
 
Cash flows from investing activities:
 
 
 
Acquisition and improvement of flight equipment
(355,817
 
)
 
(82,493
 
)
Proceeds from sale of flight equipment
56,307
 
 
 
43,917
 
 
Net investment in direct financing and sales-type leases
 
 
 
(16,256
 
)
Aircraft purchase deposits and progress payments, net of returned deposits and aircraft sales deposits
19,697
 
 
 
2,900
 
 
Unconsolidated equity method investments and associated costs
(7,551
 
)
 
 
 
Other
1,118
 
 
 
1,320
 
 
Net cash and restricted cash used in investing activities
(286,246
 
)
 
(50,612
 
)
Cash flows from financing activities:
 
 
 
Repurchase of shares
(11,424
 
)
 
(9,413
 
)
Proceeds from secured and unsecured debt financings
215,000
 
 
 
 
 
Repayments of secured and unsecured debt financings
(76,131
 
)
 
(101,725
 
)
Deferred financing costs
(1,921
 
)
 
 
 
Security deposits and maintenance payments received
45,149
 
 
 
53,674
 
 
Security deposits and maintenance payments returned
(27,914
 
)
 
(20,262
 
)
Dividends paid
(22,518
 
)
 
(22,085
 
)
Net cash and restricted cash used in financing activities
120,241
 
 
 
(99,811
 
)
Net increase in cash and restricted cash
(59,645
 
)
 
(1,518
 
)
Cash and restricted cash at beginning of period
167,853
 
 
 
233,857
 
 
Cash and restricted cash at end of period
$
108,208

 
 
$
232,339

 
 
 
 
 
Reconciliation to Consolidated Balance Sheets:
 
 
 
Cash and cash equivalents
$
92,629

 
 
$
210,815

 
Restricted cash and cash equivalents
15,579
 
 
 
21,524
 
 
 
 
 
 
Unrestricted and restricted cash and cash equivalents
$
108,208

 
 
$
232,339

 
 
______________________
(1) As part of the Company’s adoption of FASB ASC 842, we classified collections on direct financing and sales-type leases within operating activities on our Consolidated Statement of Cash Flows for the three months ended March 31, 2019. This had previously been included in investing activities. The presentation for the three months ended March 31, 2018, 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.

9




Aircastle Limited and Subsidiaries
Selected Financial Guidance Elements for the Second Quarter of 2019
($ in millions, except for percentages)
(Unaudited)

Guidance Item
Q2:19
Lease rental revenue(1)
$186 - $190
Direct financing and sales-type lease revenue
$8 - $9
Amortization of net lease discounts and lease incentives
$(5) - $(6)
Maintenance revenue(2)
$16 - $20
Gain on sale of flight equipment
$4 - $8
Depreciation
$87 - $90
Interest, net
$66 - $69
SG&A(3)
$18 - $19
Full year effective tax rate
7% - 9%
_______________
(1)
Reflects the return to service of Avianca Brazil and Jet Airways aircraft commencing in Q2:19.
(2)
Includes $10.1M of net maintenance revenue (maintenance reserves net of a transactional impairment) in connection with the early return of seven aircraft from Jet Airways.
(3)
Includes $3.2M of non-cash share-based payment expense.


10




Aircastle Limited and Subsidiaries
Supplemental Financial Information
(Amount in thousands, except per share amounts)
(Unaudited)

 
Three Months Ended March 31,
 
2019
 
2018
Revenues
$
213,927
 
 
$
202,680
 
 
 
 
 
EBITDA(1)
$
191,817
 
 
$
191,941
 
 
 
 
 
Adjusted EBITDA(1)
$
199,347
 
 
$
191,145
 
 
 
 
 
Net income
$
34,810
 
 
$
57,547
 
Net income allocable to common shares
$
34,609
 
 
$
57,232
 
Per common share - Basic
$
0.46
 
 
$
0.73
 
Per common share - Diluted
$
0.46
 
 
$
0.73
 
 
 
 
 
Adjusted net income(1)
$
39,616
 
 
$
56,751
 
Adjusted net income allocable to common shares
$
39,387
 
 
$
56,440
 
Per common share - Basic
$
0.53
 
 
$
0.72
 
Per common share - Diluted
$
0.52
 
 
$
0.72
 
 
 
 
 
Basic common shares outstanding
74,704
 
 
78,367
 
Diluted common shares outstanding(2)
75,274
 
 
78,595
 
_______________
(1)
Refer to the selected information accompanying this press release for a reconciliation of GAAP to Non-GAAP information.
(2)
For the three months ended March 31, 2019 and March 31, 2018 dilutive shares represented contingently issuable shares related to the Company’s PSUs.

Aircastle Limited and Subsidiaries
Reconciliation of GAAP to Non-GAAP Measures
EBITDA and Adjusted EBITDA Reconciliation
(Dollars in thousands)
(Unaudited)

 
Three Months Ended March 31,
 
2019
 
2018
Net income
$
34,810
 
 
$
57,547

 
Depreciation
84,735
 
 
75,002
 
 
Amortization of lease premiums, discounts and incentives
5,711
 
 
3,128
 
 
Interest, net
63,463
 
 
57,108
 
 
Income tax provision (benefit)
3,098
 
 
(844
 
)
EBITDA
191,817
 
 
191,941
 
 
Adjustments:
 
 
 
Equity share of joint venture impairment
2,724
 
 
 
 
Non-cash share-based payment expense
2,726
 
 
2,378
 
 
Loss (gain) on mark-to-market of interest rate derivative contracts
2,080
 
 
(3,174
 
)
Adjusted EBITDA
$
199,347
 
 
$
191,145

 

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 March 31,
 
2019
 
2018
Net income
$
34,810
 
 
$
57,547
 
Loss (gain) on mark-to-market of interest rate derivative contracts(1)
2,080
 
 
(3,174
)
Non-cash share-based payment expense(2)
2,726
 
 
2,378
 
 
 
 
 
Adjusted net income
$
39,616
 
 
$
56,751
 
_______________
(1)
Included in Other income (expense).
(2)
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
 
Gain on
Sale of
Flight
Equipment
 
Deprec.
 
Cash Earnings
 
Average
Shareholders
Equity
 
Trailing Twelve Month Cash ROE
Q1:15
$
498,536
 
 
$
28,289
 
 
$
300,284
 
 
$
226,541
 
 
$
1,682,857
 
 
13.5
%
Q1:16
$
525,569
 
 
$
64,597
 
 
$
320,584
 
 
$
269,582
 
 
$
1,769,981
 
 
15.2
%
Q1:17
$
499,768
 
 
$
27,052
 
 
$
307,743
 
 
$
219,077
 
 
$
1,804,573
 
 
12.1
%
Q1:18
$
534,771
 
 
$
60,176
 
 
$
294,492
 
 
$
300,455
 
 
$
1,881,633
 
 
16.0
%
Q1:19
$
510,008
 
 
$
43,000
 
 
$
320,583
 
 
$
232,425
 
 
$
1,976,235
 
 
11.8
%
Pro-forma Q1:19
$
525,899
 
 
$
43,000
 
 
$
320,583
 
 
$
248,316
 
 
$
1,976,235
 
 
12.6
%


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.


Pro forma Q1:19 estimates the impact of the Avianca Brazil and Jet Airways bankruptcies on cash ROE

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)
Q1:15
 
$
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
%
Q1:19
 
$
7,449,957
 
 
$
195,601
 
 
$
60,279
 
 
7.3
%
Pro-forma Q1:19
 
$
7,449,957
 
 
$
211,501
 
 
$
60,279
 
 
8.1
%
_______________
(1)
Based on the growing level of direct financing and sales-type lease revenue, management revised the calculation of net cash interest margin to include our net investment in direct financing and sales-type leases in the average net book value and to include the interest income and cash collections on our net investment in direct financing 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 $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.

We define net cash interest margin as lease rentals from operating leases, interest income and cash collections from direct financing 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 direct financing 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.
Pro-forma Q1:19 estimates the impact of the Avianca Brazil and Jet Airways bankruptcies on annualized net cash interest margin.


11




Aircastle Limited and Subsidiaries
Presentation of Reclassification of Collections on Direct Financing and Sales-Type Leases
(Dollars in thousands)
(Unaudited)

As part of the Company’s adoption of FASB ASC 842, we classified collections on direct financing and sales-type leases within operating activities on our Consolidated Statement of Cash Flows for the three months ended March 31, 2019. This had previously been included in investing activities. The presentation for the three months ended March 31, 2018, has also been reclassified to conform to the current period presentation:

 
Three Months Ended March 31, 2018
Net cash and restricted cash provided by operating activities as previously reported
$
142,412
 
Collections on direct financing and sales-type leases
6,493
 
Net cash and restricted cash provided by operating activities
$
148,905
 






12




Aircastle Limited and Subsidiaries
Supplemental Financial Information
(Amount in thousands, except per share amounts)
(Unaudited)

 
 
Shares Issued and Outstanding
 
Shareholders' Equity
 
Book Value
per share
 
% Change
Q1:15
 
81,181
 
1,753,552
 
21.60
 
1.7%
Q1:16
 
78,811
 
1,770,884
 
22.47
 
4.0%
Q1:17
 
78,718
 
1,856,084
 
23.58
 
4.9%
Q1:18
 
78,539
 
1,937,454
 
24.67
 
4.6%
Q1:19
 
75,078
 
2,012,939
 
26.81
 
8.7%
 
 
 
 
 
 
 
 
 
 
 
 
 
Q1:15 - Q1:19 CAGR
 
5.6%




13




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
March 31, 2019
Weighted-average shares:
Shares
 
Percent
Common shares outstanding – Basic
74,704
 
 
99.42
%
Unvested restricted common shares
435
 
 
0.58
%
Total weighted-average shares outstanding
75,138
 
 
100.00
%
 
 
 
 
Common shares outstanding – Basic
74,704
 
 
99.24
%
Effect of dilutive shares(1)
570
 
 
0.76
%
Common shares outstanding – Diluted
75,274
 
 
100.00
%
 
 
 
 
Net income allocation
 
 
 
Net income
$
34,810
 
 
100.00
%
Distributed and undistributed earnings allocated to unvested restricted shares(2)
(201
)
 
(0.58
)%
Earnings available to common shares
$
34,609
 
 
99.42
%
 
 
 
 
Adjusted net income allocation
 
 
 
Adjusted net income
$
39,616
 
 
100.00
%
Amounts allocated to unvested restricted shares
(229
)
 
(0.58
)%
Amounts allocated to common shares – Basic and Diluted
$
39,387
 
 
99.42
%
_______________
(1)
For the three months ended March 31, 2019, distributed and undistributed earnings to restricted shares were 0.58% 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 months ended March 31, 2019, dilutive shares represented contingently issuable shares.


14




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
March 31, 2018
Weighted-average shares:
Shares
 
Percent
Common shares outstanding – Basic
78,367
 
 
99.45
%
Unvested restricted common shares
431
 
 
0.55
%
Total weighted-average shares outstanding
78,798
 
 
100.00
%
 
 
 
 
Common shares outstanding – Basic
78,367
 
 
99.71
%
Effect of dilutive shares(1)
228
 
 
0.29
%
Common shares outstanding – Diluted
78,595
 
 
100.00
%
 
 
 
 
Net income allocation
 
 
 
Net income
$
57,547
 
 
100.00
%
Distributed and undistributed earnings allocated to unvested restricted shares(2)
(315
)
 
(0.55
)%
Earnings available to common shares
$
57,232
 
 
99.45
%
 
 
 
 
Adjusted net income allocation
 
 
 
Adjusted net income
$
56,751
 
 
100.00
%
Amounts allocated to unvested restricted shares
(311
)
 
(0.55
)%
Amounts allocated to common shares – Basic and Diluted
$
56,440
 
 
99.45
%
_______________
(1)
For the three months ended March 31, 2018, distributed and undistributed earnings to restricted shares were 0.55% 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 months ended March 31, 2018, dilutive shares represented contingently issuable shares.

15