ayr-20211013
Aircastle LTD0001362988false00013629882021-10-132021-10-13
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) October 13, 2021
 
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 October 13, 2021, Aircastle Limited announced financial results for its second quarter ended August 31, 2021, 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

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: October 14, 2021


Document

Exhibit 99.1
https://cdn.kscope.io/5c0262cc8b3968f1e568f14594d61ab7-image_0.jpg

October 13, 2021        

FOR IMMEDIATE RELEASE
Contact:    
Aircastle Advisor LLC    
Jim Connelly, SVP ESG & Corporate Communications    
Tel: +1-203-504-1871    
jconnelly@aircastle.com     

Aircastle Announces Second Quarter 2021 Results
Completed Four A320neo Aircraft Deliveries to Frontier Airlines
Closed $400 million 5.25% Preference Share Issue

Key Financial Metrics for the Three Months ended August 31, 2021
• 1Total revenues of $157.7 million
• 2Net income of $9.8 million
• 3Adjusted EBITDA(1) of $197.5 million
• 4Gain on sale of flight equipment of $1.5 million

Highlights for the Three Months ended August 31, 2021
• 1Delivered four new Airbus A320neo aircraft to Frontier Airlines, completing four-aircraft deal; acquired two additional single-aisle aircraft
• 2Issued $400 million of Preference Shares at a coupon of 5.25%; issue was four times oversubscribed
• 3Generated sales proceeds of $55 million from the sale of bankruptcy claims
• 4For the first six months cash flows from operations increased to $180 million, up 57%, from first quarter 2021
• 5In June, Moody’s upgraded Aircastle’s outlook to Stable
• 6For the six months ended August 31, 2021, sold four aircraft and other flight equipment for proceeds of $78 million and a total gain on sale of $11 million

Liquidity
• 7As of October 1, 2021, total liquidity of $2.4 billion includes $1.4 billion of undrawn credit facilities, $0.3 billion of unrestricted cash, $0.3 billion of contracted asset sales, and $0.4 billion of projected adjusted operating cash flows through October 1, 2022
• 8For the three months ended August 2021, collections represented approximately 87% of lease rental and direct financing and sales-type lease revenues
• 9We have 223 unencumbered aircraft with a net book value of $5.6 billion
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Mike Inglese, Aircastle’s Chief Executive Officer, commented, “We are on the recovery side of what has been the worst economic shock in aviation history. Traffic levels in China, the US, Mexico, Brazil, Russia and parts of Europe have shown near-2019 air traffic volumes. The recent announcement of the re-opening of the US to all vaccinated travelers should bode well for long haul traffic. Our laser-focus on liquidity has helped us to keep cashflows strong and move forward with strategic investing.”
Mr. Inglese concluded, “Aircraft leasing has been a vital source of capital for airlines looking to de-lever their balance sheets as global aviation continues to recover, aided by the narrowing vaccine gap. We believe our favorable credit rating, along with the opportunities afforded by our unique ownership arrangement with the Marubeni Corporation and Mizuho Leasing, strategically position us for future growth.”

Aviation Assets
As of August 31, 2021, Aircastle owned 255 aircraft and other flight equipment having a net book value of $6.8 billion. We also manage nine aircraft with a net book value of $305 million dollars on behalf of our joint venture with Mizuho Leasing.
Owned Aircraft
As of
Aug 31, 2021
(1)
As of
Aug 31, 2020
(1)
Net Book Value of Flight Equipment ($ mils.)$6,761$7,121
Net Book Value of Unencumbered Flight Equipment ($ mils.)$5,593$5,578
Number of Aircraft255273
Number of Unencumbered Aircraft223237
Number of Lessees7680
Number of Countries4245
Weighted Average Fleet Age (years)(2)
10.610.5
Weighted Average Remaining Lease Term (years)(2)
4.64.2
Weighted Average Fleet Utilization for the quarter ended(3)
94.1%93.6%
Weighted Average Fleet Utilization for the six months ended(3)
93.6%95.1%
Managed Aircraft on behalf of Joint Ventures
Net Book Value of Flight Equipment ($ mils.)$305$319
Number of Aircraft99

_______________
(1)Calculated using net book value 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 for the three months ended August 31, 2021, and 2020, was primarily due to off-lease aircraft as a result of early lease terminations and scheduled lease expirations.
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Deferrals
Even as the airline industry recovers, airlines continue to seek support from their respective governments, raise debt and equity, delay or cancel new aircraft orders and request concessions from lessors. As of October 8, 2021, six of our airline customers were subject to judicial insolvency proceedings or similar protection. We lease 22 aircraft to these customers, which comprise 13% of our net book value of flight equipment and 10% of our reported lease rental and direct financing and sales-type lease revenues for the twelve months ended August 31, 2021. Of these 22 aircraft, thirteen are on lease with LATAM for which we have signed restructured leases, subject only to LATAM emerging from the Chapter 11 process. While additional airline bankruptcies and liquidations may yet occur in future periods, we remain confident that our core customers who are leading low-cost carriers and major US and global carriers, have the means to survive the COVID-19 crisis.
As of October 8, 2021, our total deferrals, net of repayments, were $101.8 million. These deferrals have been agreed with twenty airlines, representing 26% of our customer base. Of the total deferrals, $89.8 million is included in our August 31, 2021, Consolidated Balance Sheet with the balance representing future lease payments. Approximately 77% of our total deferrals as of October 8, 2021, have been agreed to as part of broader lease restructurings, which generally include term extensions, better security packages or other valuable consideration in exchange for near-term economic concessions and have repayment terms that extend beyond twelve months. Deferrals represented approximately 18% of our reported lease rental and direct financing and sales-type lease revenues for the twelve months ended August 31, 2021.
We hold $518.3 million of maintenance reserves and $77.1 million of security deposits, as well as an additional $143.3 million in letters of credit from our lessees. These combined reserves total $738.7 million, represent 11% of NBV, and provide significant protection against potential future airline failures and the unscheduled return of additional aircraft.

Preference Share Issuance
In early June we issued $400 million of preference shares with a dividend of 5.25%. The original proposed amount for this capital raise was $300 million at targeted dividend of 5.625%. Due to strong demand, the transaction was upsized with the lower dividend. The issue has a perpetual term and receives 50% equity credit treatment from Moody’s, S&P and Fitch Ratings, in line with their respective rating methodologies. At the time of issuance, Aircastle’s outlook was upgraded to Stable by Moody’s.
Conference Call
In connection with this press release, management will host a conference call on Wednesday, Oct 13, 2021, at 9:00 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 “2526167”.
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 12:00 P.M. Eastern Time on Friday, October 15, 2021, 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 “2526167”.
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About Aircastle Limited
Aircastle Limited acquires, leases, and sells commercial jet aircraft to airlines throughout the world. As of August 31, 2021, Aircastle owned and managed on behalf of its joint ventures 264 aircraft leased to 76 customers located in 42 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 most recent Form 10-K and any subsequent filings with the SEC. 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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Aircastle Limited and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands, except share data)


August 31,
2021
February 28,
2021
ASSETS
Cash and cash equivalents$337,455 $578,004 
Restricted cash and cash equivalents2,740 2,594 
Accounts receivable80,877 82,572 
Flight equipment held for lease, net of accumulated depreciation of $2,253,085 and $2,076,972, respectively6,573,891 6,492,471 
Net investment in leases, net of allowance for credit losses of $876 and $864, respectively187,299 195,376 
Unconsolidated equity method investments36,122 35,377 
Other assets326,575 311,944 
Total assets$7,544,959 $7,698,338 
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES
Borrowings from secured financings, net of debt issuance costs and discounts$723,054 $768,850 
Borrowings from unsecured financings, net of debt issuance costs and discounts3,869,574 4,366,261 
Accounts payable, accrued expenses and other liabilities180,422 174,267 
Lease rentals received in advance57,692 58,013 
Security deposits77,104 80,699 
Maintenance payments518,289 519,178 
Total liabilities5,426,135 5,967,268 
Commitments and Contingencies
SHAREHOLDERS’ EQUITY
Preference shares, $0.01 par value, 50,000,000 shares authorized, 400 (aggregate liquidation preference of $400,000) shares issued and outstanding at August 31, 2021 and no shares issued and outstanding at February 28, 2021— — 
Common shares, $0.01 par value, 250,000,000 shares authorized, 14,048 shares issued and outstanding at August 31, 2021 and February 28, 2021— — 
Additional paid-in capital1,879,139 1,485,777 
Retained earnings239,685 245,293 
Total shareholders’ equity2,118,824 1,731,070 
Total liabilities and shareholders’ equity$7,544,959 $7,698,338 

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Aircastle Limited and Subsidiaries
Consolidated Statements of Income (Loss)
(Dollars in thousands)


Three Months Ended August 31,
Six Months Ended
 August 31,
2021202020212020
Revenues:
Lease rental revenue$137,589 $150,895 $269,714 $334,073 
Direct financing and sales-type lease revenue2,776 4,747 5,653 10,064 
Amortization of lease premiums, discounts and incentives(5,835)(4,629)(11,159)(11,975)
Maintenance revenue21,218 20,034 47,694 96,665 
Total lease revenue155,748 171,047 311,902 428,827 
Gain (loss) on sale of flight equipment1,502 (848)10,524 11,230 
Other revenue402 1,123 1,036 13,793 
Total revenues157,652 171,322 323,462 453,850 
Operating expenses:
Depreciation83,391 86,749 165,782 175,961 
Interest, net55,413 55,324 113,450 114,050 
Selling, general and administrative (including non-cash share-based payment expense of $0 and $0 for the three months ended, and $0 and $28,049 for the six months ended August 31, 2021 and 2020, respectively)15,996 13,555 31,585 61,006 
Impairment of flight equipment21,232 212,387 41,815 289,685 
Maintenance and other costs8,087 4,271 15,615 9,837 
Total operating expenses184,119 372,286 368,247 650,539 
Other income (expense):
Loss on extinguishment of debt(14,132)(57)(14,156)(65)
Merger expenses— 27 — (32,042)
Other57,609 (173)57,619 (192)
Total other income (expense)43,477 (203)43,463 (32,299)
Income (loss) from continuing operations before income taxes and earnings of unconsolidated equity method investments17,010 (201,167)(1,322)(228,988)
Income tax provision (benefit)7,665 13,020 (627)12,469 
Earnings of unconsolidated equity method investments, net of tax458 674 745 1,405 
Net income (loss)$9,803 $(213,513)$50 $(240,052)
Preference share dividends(5,658)— (5,658)— 
Net income (loss) available to common shareholders$4,145 $(213,513)$(5,608)$(240,052)
Total comprehensive income (loss) available to common shareholders$4,145 $(213,513)$(5,608)$(240,052)
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Aircastle Limited and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars in thousands)


Six Months Ended August 31,
20212020
Cash flows from operating activities:
Net income (loss)$50 $(240,052)
Adjustments to reconcile net income (loss) to net cash and restricted cash provided by operating activities:
Depreciation165,782 175,961 
Amortization of deferred financing costs8,384 6,713 
Amortization of lease premiums, discounts and incentives11,159 11,975 
Deferred income taxes4,240 4,374 
Non-cash share-based payment expense— 28,049 
Collections on net investment in leases8,065 8,670 
Security deposits and maintenance payments included in earnings(30,420)(102,523)
Gain on sale of flight equipment(10,524)(11,230)
Loss on extinguishment of debt14,156 65 
Impairment of flight equipment41,815 289,685 
Provision for credit losses12 4,513 
Other(745)(1,386)
Changes in certain assets and liabilities:
Accounts receivable(5,479)(45,747)
Other assets(15,413)(57,441)
Accounts payable, accrued expenses and other liabilities(10,664)(3,723)
Lease rentals received in advance(704)(42,311)
Net cash and restricted cash provided by operating activities179,714 25,592 
Cash flows from investing activities:
Acquisition and improvement of flight equipment(370,187)(33,643)
Proceeds from sale of flight equipment77,900 53,229 
Aircraft purchase deposits and progress payments, net of deposits returned and aircraft sales deposits10,003 (3,463)
Other(64)(594)
Net cash and restricted cash (used in) provided by investing activities(282,348)15,529 
Cash flows from financing activities:
Repurchase of shares— (25,536)
Parent contribution at Merger— 25,536 
Net proceeds from preference share issuance393,362 — 
Proceeds from secured and unsecured debt financings— 1,193,871 
Repayments of secured and unsecured debt financings(546,903)(851,404)
Debt extinguishment costs(13,372)(65)
Deferred financing costs(4,748)(5,508)
Security deposits and maintenance payments received44,111 33,553 
Security deposits and maintenance payments returned(10,219)(38,710)
Dividends paid— (24,025)
Net cash and restricted cash (used in) provided by financing activities(137,769)307,712 
Net (decrease) increase in cash and restricted cash:(240,403)348,833 
Cash and restricted cash at beginning of period580,598 171,437 
Cash and restricted cash at end of period$340,195 $520,270 

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

 Three Months Ended August 31,Six Months Ended August 31,
 2021202020212020
 
Net income (loss)$9,803 $(213,513)$50 $(240,052)
Depreciation83,391 86,749 165,782 175,961 
Amortization of lease premiums, discounts and incentives5,835 4,629 11,159 11,975 
Interest, net55,413 55,324 113,450 114,050 
Income tax provision (benefit)7,665 13,020 (627)12,469 
EBITDA162,107 (53,791)289,814 74,403 
Adjustments:
Impairment of flight equipment21,232 212,387 41,815 289,685 
Loss on extinguishment of debt14,132 57 14,156 65 
Non-cash share-based payment expense— — — 28,049 
Merger related expenses(1)
— (27)— 34,601 
Loss on mark-to-market of interest rate derivative contracts— — 19 
Contract termination expense— 172 — 172 
Adjusted EBITDA$197,471 $158,800 $345,785 $426,994 



(1) Included $32.1 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.


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