ayr-20201103
Aircastle LTD0001362988false00013629882020-11-032020-11-03
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) November 3, 2020
 
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
Connecticut06901
(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 November 3, 2020, Aircastle Limited announced financial results for the Three-Month Period Ended September 30, 2020 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.

Item 9.01    Financial Statements and Exhibits.
(d)     Exhibits.
Exhibit
No.
Description
99.1
104Cover Page Interactive Data File (embedded within the Inline XBRL document).










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)
/s/ Christopher L. Beers
Christopher L. Beers
Chief Legal Officer and Secretary
Date: November 4, 2020


Document

Exhibit 99.1

November 3, 2020    https://cdn.kscope.io/d3b86d8aa00e8eee092971e4fed0eb5c-image_01a.jpg

FOR IMMEDIATE RELEASE
Contact:    
Aircastle Advisor LLC    
Frank Constantinople, SVP Investor Relations    
Tel: +1-203-504-1063    
fconstantinople@aircastle.com     

Aircastle Reports Financial Results for the Three-Month Period Ended September 30, 2020

Key Financial Metrics for the Three Months ended September 30, 2020
1.Total revenues were $192.4 million
2.Net income of $5.8 million
3.Adjusted EBITDA(1) was $181.1 million

Highlights
1.Issued $650 million of 5.25%, senior unsecured notes due in 2025
2.In September, Moody’s affirmed Aircastle’s senior unsecured debt rating at Baa3
3.For the three months ended September 30, 2020 collections represented approximately 73% of lease rental and direct financing and sales-type lease revenues
4.Agreements in place to sell 21 narrow body aircraft as they come off lease

Liquidity
5.As of October 30, 2020, total liquidity of $2.1 billion includes $1.25 billion of undrawn credit facilities, unrestricted cash of $432 million, $120 million of contracted asset sales, and $340 million of projected operating cash flows through October 30, 2021
6.226 unencumbered aircraft with a net book value of $5.5 billion
7.$771 million of total adjusted contractual commitments through October 30, 2021; includes $500 million of notes due in March 2021
Refer to the selected financial information accompanying this press release for a reconciliation of GAAP to Non-GAAP numbers.

Mike Inglese, Aircastle’s Chief Executive Officer, commented, “We are optimistic about the eventual recovery of global aviation and the global airline industry. While it is impossible to predict the timing of recovery, we are confident passengers will return, and we are confident about the increasingly important role operating leasing will play in facilitating the industry’s recovery.”
Mr. Inglese continued, “Aircastle’s fleet of predominantly mid-age, single-aisle, fuel efficient aircraft represents a strong value proposition for capital constrained, sensibly managed airlines around the globe. Our management team is deep and experienced, and we enjoy the strong shareholder support of Marubeni Corporation and Mizuho



Leasing. Driven by our strategic ownership, management’s track record, minimal forward commitments, strong liquidity and conservative balance sheet, Aircastle’s investment grade credit rating was recently affirmed at Baa3 by Moody’s.”

Aviation Assets
As of September 30, 2020, Aircastle owned 262 aircraft and other flight equipment having a net book value of $7.0 billion. We also manage nine aircraft with a net book value of $318 million dollars on behalf of our joint venture with Mizuho Leasing.

Owned Aircraft
As of
Sept. 30, 2020(1)
As of
Sept. 30, 2019(1)
Net Book Value of Flight Equipment ($ mils.)$7,041$7,735
Net Book Value of Unencumbered Flight Equipment ($ mils.)$5,456$5,873
Number of Aircraft262268
Number of Unencumbered Aircraft226226
Number of Lessees8187
Number of Countries4548
Weighted Average Fleet Age (years)(2)
10.49.8
Weighted Average Remaining Lease Term (years)(2)
4.24.8
Weighted Average Fleet Utilization for the quarter ended(3)
93.8%98.8%
Managed Aircraft on behalf of Joint Ventures
Net Book Value of Flight Equipment ($ mils.)$318$331
Number of Aircraft99
_______________
(1)Calculated using net book value of flight equipment held for lease and net investment in 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 primarily due to the early termination of leases.
Deferrals
In the current environment airlines have sought support from their lessor partners. These requests have generally come in the form of payment deferrals and lease restructurings. Through mid-October, forty-three airlines across the globe have either entered bankruptcy proceedings or completely ceased or suspended operations. We are confident that the major US and global carriers, as well as the largest low-cost carriers, have the means to survive the crisis. We also anticipate that there will be further airline bankruptcies and liquidations in the winter.
We continue to grant deferrals to help certain clients manage through the crisis. As of October 30, 2020, we had executed documents or had approved deferral arrangements with 40 lessees representing approximately 50% of our customer base. The amount deferred currently approximates $101 million, including $80 million that appear in our September 30, 2020 Consolidated Balance Sheet. This represented approximately 14% of our reported lease rental and direct financing and sales-type lease revenues for the trailing twelve months ended September 30, 2020.

New Fiscal Year End
Aircastle previously announced that we changed our fiscal year end to the twelve-month period ending on the last day in February. This change better aligns our financial reporting with the financial reporting cycle of our shareholders, Marubeni Corporation and Mizuho Leasing Company, Limited. To assist investors with the



transition to the new fiscal year, we expect to file a Transition Report on Form 10-Q with the Securities Exchange Commission for the two-month period ending February 29, 2020.
Conference Call
In connection with this press release, management will host a conference call on Thursday, November 12, 2020, 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) 437-2398 (from within the U.S. and Canada) or (786) 204-3966 (from outside of the U.S. and Canada) ten minutes prior to the scheduled start and referencing the passcode “2739140”.
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.
For those who are not available to listen to the live call, a replay will be available until 11:30 A.M. Eastern time on Saturday, December 12, 2020, 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 “2739140”.
About Aircastle Limited
Aircastle Limited acquires, leases and sells commercial jet aircraft to airlines throughout the world. As of September 30, 2020, Aircastle owned and managed on behalf of its joint ventures 271 aircraft leased to 81 customers located in 45 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 and Adjusted EBITDA 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 2019 Annual Report on Form 10-K and in our Form 10-Q for the quarterly period ended March 31, 2020. 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.



Aircastle Limited and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands, except share data)
(Unaudited)
September 30,
2020
December 31,
2019
(Unaudited)
ASSETS
Cash and cash equivalents$383,920 $140,882 
Restricted cash and cash equivalents5,342 14,561 
Accounts receivable69,655 18,006 
Flight equipment held for lease, net of accumulated depreciation of $1,895,914 and $1,501,664, respectively6,725,615 7,375,018 
Net investment in leases, net of allowance for credit losses of $2,948 and $0, respectively315,879 419,396 
Unconsolidated equity method investments35,055 32,974 
Other assets284,507 201,209 
Total assets$7,819,973 $8,202,046 
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES
Borrowings from secured financings, net of debt issuance costs and discounts$949,181 $1,129,345 
Borrowings from unsecured financings, net of debt issuance costs and discounts4,128,133 3,932,491 
Accounts payable, accrued expenses and other liabilities167,059 172,114 
Lease rentals received in advance55,518 108,060 
Security deposits85,714 124,954 
Maintenance payments592,941 682,398 
Total liabilities5,978,546 6,149,362 
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, 14,048 shares issued and outstanding at September 30, 2020; and 75,122,129 shares issued and outstanding at December 31, 2019— 751 
Additional paid-in capital1,485,777 1,446,664 
Retained earnings355,650 605,269 
Total shareholders’ equity1,841,427 2,052,684 
Total liabilities and shareholders’ equity$7,819,973 $8,202,046 
The preliminary financial information presented in this press release has not been reviewed by an independent registered public accounting firm because, due to the change of Aircastle’s fiscal year-end to the last day in February, the quarterly period no longer ends on September 30, 2020.





Aircastle Limited and Subsidiaries
Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
(Dollars in thousands)
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020201920202019
Revenues:
Lease rental revenue$152,323 $203,005 $523,623 $577,062 
Direct financing and sales-type lease revenue4,744 8,229 16,047 24,993 
Amortization of lease premiums, discounts and incentives(5,355)(5,895)(17,455)(16,951)
Maintenance revenue37,720 11,095 156,440 54,063 
Total lease revenue189,432 216,434 678,655 639,167 
Gain (loss) on sale of flight equipment(232)13,083 26,538 25,431 
Other revenue3,162 7,348 25,119 9,610 
Total revenues192,362 236,865 730,312 674,208 
Operating expenses:
Depreciation86,942 90,997 264,764 265,310 
Interest, net57,492 65,261 175,225 195,101 
Selling, general and administrative (including non-cash share-based payment expense of $0 and $3,300 for the three months ended, and $38,727 and $9,203 for the nine months ended September 30, 2020 and 2019, respectively)13,977 17,956 89,923 54,273 
Impairment of flight equipment19,464 362,209 7,404 
Maintenance and other costs3,259 7,250 12,256 19,867 
Total operating expenses181,134 181,464 904,377 541,955 
Other expense:
Loss on extinguishment of debt— (7,577) (4,020)(7,577) 
Merger expenses(405)— (32,835)— 
Other(175)(258)(286)(4,229)
Total other expense(580)(7,835)(37,141)(11,806)
Income (loss) from continuing operations before income taxes and earnings of unconsolidated equity method investments10,648 47,566 (211,206)120,447 
Income tax provision5,482 5,505 10,302 14,595 
Earnings of unconsolidated equity method investments, net of tax605 1,274 2,081 3,405 
Net income (loss)$5,771 $43,335 $(219,427)$109,257 
Other comprehensive income (loss), net of tax:
Net derivative loss reclassified into earnings— — — 184 
Other comprehensive income— — — 184 
Total comprehensive income (loss)$5,771 $43,335 $(219,427)$109,441 
The preliminary financial information presented in this press release has not been reviewed by an independent registered public accounting firm because, due to the change of Aircastle’s fiscal year-end to the last day in February, the quarterly period no longer ends on September 30, 2020.





Aircastle Limited and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
Nine Months Ended September 30,
20202019
Cash flows from operating activities:
Net income (loss)$(219,427)$109,257 
Adjustments to reconcile net income (loss) to net cash and restricted cash provided by operating activities:
Depreciation264,764 265,310 
Amortization of deferred financing costs10,472 10,778 
Amortization of lease premiums, discounts and incentives17,455 16,951 
Deferred income taxes6,961 10,513 
Non-cash share-based payment expense38,727 9,203 
Cash flow hedges reclassified into earnings— 184 
Collections on net investment in leases15,537 17,260 
Security deposits and maintenance payments included in earnings(155,940)(37,281)
Gain on sale of flight equipment(26,538)(25,431)
Loss on extinguishment of debt4,020 7,577 
Impairment of flight equipment362,209 7,404 
Provision for credit losses4,777 — 
Other(2,102)641 
Changes in certain assets and liabilities:
Accounts receivable(52,719)(11,994)
Other assets(52,723)2,437 
Accounts payable, accrued expenses and other liabilities(8,310)(2,118)
Lease rentals received in advance(54,990)12,398 
Net cash and restricted cash provided by operating activities152,173 393,089 
Cash flows from investing activities:
Acquisition and improvement of flight equipment(55,209)(892,186)
Proceeds from sale of flight equipment157,507 229,061 
Aircraft purchase deposits and progress payments, net of returned deposits and aircraft sales deposits(8,327)15,829 
Unconsolidated equity method investments and associated costs— (15,176)
Other(650)3,539 
Net cash and restricted cash provided by (used in) investing activities93,321 (658,933)
Cash flows from financing activities:
Repurchase of shares(27,906)(21,297)
Parent contribution at Merger25,536 — 
Proceeds from secured and unsecured debt financings1,293,871 2,066,848 
Repayments of secured and unsecured debt financings(1,283,928)(1,637,269)
Debt extinguishment costs(2,750)(7,183)
Deferred financing costs(6,205)(13,711)
Security deposits and maintenance payments received70,492 147,490 
Security deposits and maintenance payments returned(56,760)(99,109)
Dividends paid(24,025)(67,444)
Net cash and restricted cash (used in) provided by financing activities(11,675)368,325 
Net increase in cash and restricted cash:233,819 102,481 
Cash and restricted cash at beginning of period155,443 167,853 
Cash and restricted cash at end of period$389,262 $270,334 
The preliminary financial information presented in this press release has not been reviewed by an independent registered public accounting firm because, due to the change of Aircastle’s fiscal year-end to the last day in February, the quarterly period no longer ends on September 30, 2020.




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

https://cdn.kscope.io/d3b86d8aa00e8eee092971e4fed0eb5c-capture1a.jpg

* Included $32.8 million in Other expense and $2.6 million in Selling, general and administrative expenses.

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.
The preliminary financial information presented in this press release has not been reviewed by an independent registered public accounting firm because, due to the change of Aircastle’s fiscal year-end to the last day in February, the quarterly period no longer ends on September 30, 2020.