Aircastle Announces Fourth Quarter and Full Year 2019 Results; Acquisition on Track

STAMFORD, Conn., Feb. 13, 2020 /PRNewswire/ --

Key Financial Metrics

  • Total revenues of $243.7 million for the fourth quarter of 2019 and $917.9 million for the year
  • Net income of $47.3 million, or $0.62 per diluted common share, for the fourth quarter and $156.6 million, or $2.06 per diluted common share, for the year
  • Adjusted net income(1) was $66.0 million, or $0.87 per diluted common share, for the fourth quarter and $196.5 million, or $2.59 per diluted common share, for the year
  • Adjusted EBITDA(1) was $229.5 million for the fourth quarter and $862.2 million for the year
  • Cash ROE(1) of 11.1%; net cash interest margin(1) of 8.1%

Highlights

  • Previously announced acquisition of Aircastle by affiliates of Marubeni Corporation and Mizuho Leasing Company, Limited is on track to close in the first half
  • Acquired sixteen narrow-body aircraft during the fourth quarter for $283.6 million and 49 aircraft in 2019 for $1.3 billion
  • Committed to acquire seven additional narrow-body aircraft in 2020 for $165.0 million
  • Sold eight aircraft during the fourth quarter and twenty aircraft for the full year; full year gain on sale of $45.5 million represents 12.6% of net proceeds; 2019 sales included two wide-body aircraft
  • Placed eleven Embraer E195-E2 aircraft with KLM
  • Declared our 55th consecutive quarterly dividend
  • Returned $109.7 million of capital to shareholders during 2019; $91.3 million in dividends paid and $18.4 million of shares repurchased

(1)

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

Aircastle Limited (the "Company" or "Aircastle") (NYSE: AYR) reported fourth quarter 2019 net income of $47.3 million, or $0.62 per diluted common share, and adjusted net income of $66.0 million, or $0.87 per diluted common share.  Net income for the year ended December 31, 2019 was $156.6 million, or $2.06 per diluted common share, and adjusted net income was $196.5 million, or $2.59 per diluted common share.  The fourth quarter results included total revenues of $243.7 million versus $292.6 million in the prior year.  For the full year, total revenues were $917.9 million versus $890.4 million in 2018, an increase of 3.1%.

Commenting on the results, Mike Inglese, Aircastle's Chief Executive Officer, stated, "Our professional placement capability and fleet of high-quality, in-demand aircraft enabled Aircastle to deliver strong financial results in a shifting market environment throughout 2019.  During the fourth quarter, we continued to execute our strategy focused on acquiring narrow-body aircraft.  We closed a total of 49 aircraft during the full year 2019 for $1.3 billion.  The fourth quarter also saw fleet utilization average 99.2%, a return to the level that we have consistently achieved throughout our history, following the placement of aircraft that were previously on lease with Avianca Brazil and Jet Airways.  I am also pleased to report that we've made progress on our E2 program.  During the fourth quarter, we placed eleven additional E-Jets, for a total of fourteen placements out of the twenty-five E2s ordered."

Mr. Inglese concluded, "With the pending acquisition of Aircastle by affiliates of Marubeni and Mizuho Leasing, we are very optimistic about Aircastle's future.  We expect this strong, high-quality sponsorship, and our disciplined investment approach, will enable our company to continue to grow profitably, increase sustainable cash flow and generate attractive, long-term returns.  Both now and following the anticipated acquisition, we will remain consistently focused on the responsible stewardship of investor capital for the benefit of our owners and Aircastle's fixed income investors."

Financial Results

(In thousands, except share data)

Three Months Ended
December 31,


Twelve Months Ended
December 31,


2019


2018


2019


2018

Total revenues

$

243,730


$

292,566


$

917,938


$

890,351

Lease rental and direct financing and sales-type lease revenues

$

207,643


$

192,711


$

809,698


$

757,826

Adjusted EBITDA(1)

$

229,531


$

276,830


$

862,161


$

839,831

Net income

$

47,318


$

103,837


$

156,575


$

247,919

   Per common share - Diluted

$

0.62


$

1.35


$

2.06


$

3.17

Adjusted net income(1)

$

66,002


$

109,883


$

196,547


$

257,237

   Per common share - Diluted

$

0.87


$

1.43


$

2.59


$

3.29

_______________

(1)

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

Fourth Quarter Results

Total revenues were $243.7 million, a decrease of $48.8 million, or 16.7%, from the prior year.  While lease rental and direct financing and sales-type lease revenues were up $14.9 million, total revenues declined due to a $72.8 million drop in maintenance revenues.  We recognized substantial maintenance revenue in the fourth quarter of 2018 due to the termination of the leases on eleven aircraft with Avianca Brazil.

Lease rental and direct financing and sales-type lease revenues were $207.6 million, versus $192.7 million the prior year.  The 7.7% increase was primarily due to net fleet growth.  Over the past two years, Aircastle's aircraft fleet increased by 24.1%, from 224 aircraft at the beginning of 2018 to 278 aircraft at year-end 2019.

Net income was $47.3 million, a decline of $56.5 million, while adjusted net income fell by $43.9 million to $66.0 million.  The decrease was due to lower maintenance revenues of $72.8 million.

Adjusted EBITDA was $229.5 million, down 17.1%, or $47.3 million.  Lower maintenance revenues of $72.8 million were partially offset by higher lease rental and direct financing and sales-type lease revenues of $14.9 million and higher gains from the sale of flight equipment of $11.9 million.

Full Year Results

Total revenues in 2019 were $917.9 million, an increase of $27.6 million, while lease rental and direct financing and sales-type lease revenues rose $51.9 million to $809.7 million.  The increase in total revenues was primarily driven by higher lease rental and direct financing and sales-type lease revenues due to fleet growth, along with $8.8 million of higher gains from the sale of flight equipment.  These increases were partially offset by lower maintenance revenues of $30.8 million.  The higher year-over-year gains from the sale of flight equipment were driven by twenty aircraft sold in 2019, versus fourteen sold in 2018.

Net income for the full year was $156.6 million, down $91.3 million year-over-year, while adjusted net income was $196.5 million, a decrease of $60.7 million.  Total revenues increased by $27.6 million as our fleet of owned aircraft rose to 278 at year-end 2019, versus 224 aircraft at the beginning of 2018.  The revenue increase was offset by higher depreciation expense of $45.2 million and higher interest expense of $23.6 million due to fleet growth and larger average debt balances, while the income tax provision was $17.0 million higher primarily due to an increase in income earned in Ireland and the U.S.  In addition, maintenance expenses increased by $15.9 million primarily due to transitioning aircraft from leases terminated with Avianca Brazil and Jet Airways, while non-recurring debt extinguishment and merger related expenses added $22.5 million of incremental cost.

Adjusted EBITDA for the full year was $862.2 million, up $22.3 million versus 2018.  Lease rental and direct financing and sales-type lease revenues rose $51.9 million, and gains from the sale of flight equipment increased by $8.8 million.  These increases were partially offset by lower maintenance revenues of $30.8 million and higher maintenance expenses of $15.9 million.

Aviation Assets

During the fourth quarter, we acquired sixteen aircraft for $283.6 million and for the year we acquired 49 aircraft for $1.3 billion.  Full year acquisitions consisted entirely of narrow-body aircraft and included four Airbus A320-200neos.  At the end of 2019, Aircastle's owned fleet of 278 aircraft had a weighted average age of 9.9 years and a weighted average remaining lease term of 4.8 years.

During the fourth quarter of 2019, we sold eight aircraft for total sales proceeds of $132.7 million and a gain on sale of $20.1 million.  This represents a 15.1% margin on net sales proceeds.  Our fourth quarter sales included one Boeing 777-200ER and one Airbus A330-200 wide-body aircraft.

During the year ended 2019, we sold a total of twenty aircraft for proceeds of $361.7 million and a gain on sale of $45.5 million.  The average age of the aircraft sold was 14.6 years with an average remaining lease term of 2.4 years.

Our fleet utilization for the fourth quarter was 99.2% and 96.4% for the full year 2019.  As of December 31, 2019, Aircastle owned 278 aircraft having a net book value of $7.8 billion. We also managed nine aircraft with a net book value of $327.8 million on behalf of our joint venture with Mizuho Leasing.

Owned Aircraft

As of

December 31,

2019(1)


As of

December 31,

2018(1)

Net Book Value of Flight Equipment ($ mils.)

$

7,794



$

7,405


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

$

5,979



$

6,055


Number of Aircraft

278



248


Number of Unencumbered Aircraft

237



217


Weighted Average Fleet Age (years)(2)

9.9



9.1


Weighted Average Remaining Lease Term (years)(2)

4.8



4.5


Weighted Average Fleet Utilization for the fourth quarter(3)

99.2

%


97.0

%

Weighted Average Fleet Utilization for the year ended(3)

96.4

%


99.6

%

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

11.2

%


11.2

%

Net Cash Interest Margin(5) for the fourth quarter

8.1

%


7.8

%





Managed Aircraft on behalf of Joint Ventures




Net Book Value of Flight Equipment ($ mils.)

$

328



$

602


Number of Aircraft

9



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.

2019 Financing Activity

At the end of the fourth quarter of 2019, the undrawn available balance under our committed credit facilities totaled $950 million.  Borrowings under our credit facilities totaled $150 million at the end of 2019.

During 2019, the Company issued $650 million of unsecured Senior Notes due 2026 bearing a coupon of 4.25%, and we raised an additional $480 million of fixed rate, secured bank financing for eleven Airbus A320neo aircraft and two Boeing 737-800 aircraft.  We also increased the size of one of our unsecured revolving credit facilities to $300 million from $250 million.

Lastly, during the year we entered into an unsecured $215 million floating rate loan commitment with Development Bank of Japan Inc., and certain other banks.

Common Dividend

On February 10, 2020, Aircastle's Board of Directors declared a first quarter 2020 cash dividend on its common shares of $0.32 per share, payable on March 6, 2020, to shareholders of record on February 28, 2020.  This is our 55th consecutive quarterly dividend.  Since going public in 2006, the Company has paid total dividends of $948.7 million.

Share Repurchases

In 2019, the Company acquired 973,528 shares at an average price of $18.88 per share.  Since 2011, the Company repurchased 19.0 million shares at an average cost of $14.72 per share, for approximately $279.9 million.

Merger Agreement with Affiliates of Marubeni and Mizuho Leasing

On November 6, 2019, the Company announced that it entered into a definitive agreement to be acquired by a newly formed entity controlled by affiliates of Marubeni Corporation ("Marubeni") and Mizuho Leasing Company, Limited.  Under the terms of the merger agreement, Aircastle shareholders will receive $32.00 in cash for each common share of Aircastle (other than shares already owned by Marubeni and its affiliates), representing a total valuation of approximately $2.4 billion, or approximately $7.4 billion including debt obligations to be assumed or refinanced net of cash.

The cash consideration of $32.00 per share represented a 34% premium over Aircastle's closing stock price on October 23, 2019, the last trading day prior to Aircastle's public announcement that Aircastle was evaluating strategic alternatives, and a 41% premium over the volume weighted average share price during the 20 trading days ended October 23, 2019.

The transaction is subject to customary closing conditions, including approval by Aircastle's shareholders and receipt of certain regulatory approvals, and is expected to close in the first half of 2020. Marubeni has agreed to vote the common shares of Aircastle that Marubeni and its affiliates beneficially own in favor of the transaction.

Conference Call

In connection with this earnings release, management will host an earnings conference call on Thursday, February 13, 2020, at 11:00 A.M. Eastern time.  All interested parties are welcome to participate on the live call.  The conference call can be accessed by dialing (866) 575-6539 (from within the U.S. and Canada) or (720) 543-0214 (from outside of the U.S. and Canada) ten minutes prior to the scheduled start and referencing the passcode "2629280".

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

For those who are not available to listen to the live call, a replay will be available until 1:00 P.M. Eastern time on Saturday, March 14, 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 "2629280".

About Aircastle Limited

Aircastle Limited acquires, leases and sells commercial jet aircraft to airlines throughout the world.  As of December 31, 2019, Aircastle owned and managed on behalf of its joint ventures 287 aircraft leased to 85 customers located in 49 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 disclosed under "Risk Factors" in Item 1A of Aircastle's 2018 and 2019 Annual Report on Form 10-K and in our Form 10-Q for the quarterly period ended September 30, 2019.  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)



December 31,


2019


2018

ASSETS




Cash and cash equivalents

$

140,882


$

152,719

Restricted cash and cash equivalents

14,561


15,134

Accounts receivable

18,006


15,091

Flight equipment held for lease, net of accumulated depreciation of $1,501,664 and $1,221,985, respectively

7,375,018


6,935,585

Net investment in finance and sales-type leases

419,396


469,180

Unconsolidated equity method investment

32,974


69,111

Other assets

201,209


214,361

Total assets

$

8,202,046


$

7,871,181





LIABILITIES AND SHAREHOLDERS' EQUITY




LIABILITIES




Borrowings from secured financings, net of debt issuance costs

$

1,129,345


$

798,457

Borrowings from unsecured financings, net of debt issuance costs

3,932,491


3,962,896

Accounts payable, accrued expenses and other liabilities

172,114


153,341

Lease rentals received in advance

108,060


87,772

Security deposits

124,954


120,962

Maintenance payments

682,398


739,072

Total liabilities

6,149,362


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, 75,122,129 shares issued and outstanding at December 31, 2019; and 75,454,511 shares issued and outstanding at December 31, 2018

751


754

Additional paid-in capital

1,446,664


1,468,779

Retained earnings

605,269


539,332

Accumulated other comprehensive loss


(184)

Total shareholders' equity

2,052,684


2,008,681





Total liabilities and shareholders' equity

$

8,202,046


$

7,871,181

 

 

Aircastle Limited and Subsidiaries

Consolidated Statements of Income

(Dollars in thousands, except per share amounts)

(Unaudited)



Three Months Ended
December 31,


Year Ended 
December 31,


2019


2018


2019


2018

Revenues:








Lease rental revenue

$

200,341


$

184,682


$

777,403


$

722,694

Direct financing and sales-type lease revenue

7,302


8,029


32,295


35,132

Amortization of lease premiums, discounts and incentives

(5,685)


(4,563)


(22,636)


(15,269)

Maintenance revenue

20,924


93,747


74,987


105,738

Total lease revenue

222,882


281,895


862,049


848,295

Gain on sale of flight equipment

20,101


8,180


45,532


36,766

Other revenue

747


2,491


10,357


5,290

Total revenues

243,730


292,566


917,938


890,351

Operating expenses:








Depreciation

90,711


81,608


356,021


310,850

Interest, net

62,969


62,867


258,070


234,504

Selling, general and administrative (including non-cash share-based payment expense of $6,627 and $3,236 for the three months ended, and $15,830 and $11,488 for the years ended December 31, 2019 and 2018, respectively)

22,761


21,301


77,034


76,025

Impairment of flight equipment



7,404


Maintenance and other costs

4,961


4,233


24,828


8,961

Total operating expenses

181,402


170,009


723,357


630,340









Other income (expense):








Loss on extinguishment of debt



(7,577)


Other

(7,635)


(2,807)


(11,864)


1,636

Total other income (expense)

(7,635)


(2,807)


(19,441)


1,636









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

54,693


119,750


175,140


261,647

Income tax provision

8,072


2,118


22,667


5,642

Earnings (loss) of unconsolidated equity method investments, net of tax

697


(13,795)


4,102


(8,086)

Net income

$

47,318


$

103,837


$

156,575


$

247,919

Earnings per common share — Basic:








Net income per share

$

0.63


$

1.36


$

2.09


$

3.18

Earnings per common share — Diluted:








Net income per share

$

0.62


$

1.35


$

2.06


$

3.17

Dividends declared per share

$

0.32


$

0.30


$

1.22


$

1.14

 

 

Aircastle Limited and Subsidiaries

Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)



Year Ended December 31,


2019


2018

Cash flows from operating activities:




Net income

$

156,575


$

247,919

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




Depreciation

356,021


310,850

Amortization of deferred financing costs

14,578


14,627

Amortization of lease premiums, discounts and incentives

22,636


15,269

Deferred income taxes

20,223


(496)

Non-cash share-based payment expense

15,830


11,488

Cash flow hedges reclassified into earnings

184


1,166

Collections on direct financing and sales-type leases

25,842


Security deposits and maintenance payments included in earnings

(49,029)


(80,628)

Gain on the sale of flight equipment

(45,532)


(36,766)

Loss on extinguishment of debt

7,577


Impairment of aircraft

7,404


Other

206


3,032

Changes on certain assets and liabilities:




Accounts receivable

(13,162)


(12,328)

Other assets

2,594


5,065

Accounts payable, accrued expenses and other liabilities

(5,483)


10,526

Lease rentals received in advance

19,954


32,868

Net cash and restricted cash provided by operating activities

536,418


522,592

Cash flows from investing activities:




Acquisition and improvement of flight equipment

(1,172,370)


(1,317,497)

Proceeds from sale of flight equipment

361,747


338,831

Net investment in direct financing and sales-type leases


(15,783)

Collections on direct financing and sales-type leases


29,961

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

760


(15,494)

Unconsolidated equity method investment and associated costs

(15,175)


(3,350)

Distributions from unconsolidated equity method investment in excess of earnings

36,750


3,900

Other

4,259


4,745

Net cash and restricted cash used in investing activities

(784,029)


(974,687)

Cash flows from financing activities:




Repurchase of shares

(36,739)


(71,421)

Proceeds from secured and unsecured debt financings

2,116,848


1,413,901

Repayments of secured and unsecured debt financings

(1,817,558)


(969,139)

Deferred financing costs

(13,800)


(11,642)

Debt extinguishment costs

(7,183)


Security deposits and maintenance payments received

202,833


203,925

Security deposits and maintenance payments returned

(117,872)


(90,803)

Dividends paid

(91,328)


(88,730)

Net cash and restricted cash provided by financing activities

235,201


386,091

Net decrease increase in cash and restricted cash

(12,410)


(66,004)

Cash and restricted cash at beginning of year

167,853


233,857

Cash and restricted cash at end of year

$

155,443


$

167,853

 

 

Aircastle Limited and Subsidiaries

Supplemental Financial Information

(Amount in thousands, except per share amounts)

(Unaudited)



Three Months Ended
December 31,


Year Ended 
December 31,


2019


2018


2019


2018

Revenues

$

243,730


$

292,566


$

917,938


$

890,351









EBITDA(1)

$

214,755


$

254,993


$

815,969


$

814,184









Adjusted EBITDA(1)

$

229,531


$

276,830


$

862,161


$

839,831









Net income

$

47,318


$

103,837


$

156,575


$

247,919

Net income allocable to common shares

$

46,991


$

103,174


$

155,541


$

246,402

Per common share - Basic

$

0.63


$

1.36


$

2.09


$

3.18

Per common share - Diluted

$

0.62


$

1.35


$

2.06


$

3.17









Adjusted net income(1)

$

66,002


$

109,883


$

196,547


$

257,237

Adjusted net income allocable to common shares

$

65,546


$

109,182


$

195,249


$

255,663

Per common share - Basic

$

0.88


$

1.44


$

2.62


$

3.30

Per common share - Diluted

$

0.87


$

1.43


$

2.59


$

3.29









Basic common shares outstanding

74,232


75,937


74,478


77,447

Diluted common shares outstanding(2)

75,525


76,281


75,382


77,749

_________________

(1)

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

(2)

For the three and twelve months ended December 31, 2019, includes 1,292,798 and 904,417 dilutive shares, respectively.  For the three and twelve months ended December 31, 2018, includes 344,020 and 301,356 dilutive shares, respectively.

 

 

Aircastle Limited and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures

EBITDA and Adjusted EBITDA Reconciliation

(Dollars in thousands)

(Unaudited)



Three Months Ended
December 31,


Year Ended 
December 31,


2019


2018


2019


2018

Net income

$

47,318


103,837


$

156,575


$

247,919

Depreciation

90,711


81,608


356,021


310,850

Amortization of lease premiums, discounts and incentives

5,685


4,563


22,636


15,269

Interest, net

62,969


62,867


258,070


234,504

Income tax provision

8,072


2,118


22,667


5,642

EBITDA

214,755


254,993


815,969


814,184

Adjustments:








Impairment of flight equipment



7,404


Equity share of joint venture impairment


15,791


2,724


15,791

Loss on extinguishment of debt



7,577


Non-cash share-based payment expense

6,627


3,236


15,830


11,488

Merger related expenses(1)

7,886



7,886


Loss (gain) on mark-to-market of interest rate derivative contracts

263


2,810


4,771


(1,632)









Adjusted EBITDA

$

229,531


276,830


$

862,161


$

839,831

_____________

(1)

Includes $7.4 million in Other income (expense) and $0.5 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.

 

Aircastle Limited and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures

Adjusted Net Income Reconciliation

(Dollars in thousands)

(Unaudited)



Three Months Ended
December 31,


Year Ended 
December 31,


2019


2018


2019


2018

Net income

$

47,318


$

103,837


$

156,575


$

247,919

Loss on extinguishment of debt(1)



7,577


Loss (gain) on mark-to-market of interest rate derivative contracts(1)

263


2,810


4,771


(1,632)

Loan termination gain(2)




(838)

Write-off of deferred financing fees(2)

172



172


300

Non-cash share-based payment expense(3)

6,627


3,236


15,830


11,488

Merger related expenses and taxes(4)

11,622



11,622










Adjusted net income

$

66,002


$

109,883


$

196,547


$

257,237

_______________

(1)

Included in Other income (expense).

(2)

Included in Interest, net.

(3)

Included in Selling, general and administrative expenses.

(4)

Includes $7.4 million in Other income (expense), $3.7 million in Income tax provision and $0.5 million in Selling, general and administrative expenses.

Management believes that Adjusted Net Income ("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 provides 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, merger related expenses 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 and
Collections on
Finance
Leases

+

Gain on Sale
of Flight
Equipment

-

Depreciation

=

Cash
Earnings


Average

Shareholders

Equity


Trailing
Twelve
Month Cash
ROE

2014

$

469,098


$

23,146


$

299,365


$

192,879


$

1,661,228


11.6

%

2015

$

535,844


$

58,017


$

318,783


$

275,078


$

1,759,871


15.6

%

2016

$

487,505


$

39,126


$

305,216


$

221,415


$

1,789,256


12.4

%

2017

$

523,055


$

55,167


$

298,664


$

279,558


$

1,861,005


15.0

%

2018

$

552,553


$

36,766


$

310,850


$

278,469


$

1,955,160


14.2

%

2019

$

536,418


$

45,532


$

356,021


$

225,929


$

2,026,823


11.1

%

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

 

Aircastle Limited and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures

Net Cash Interest Margin Calculation

(Dollars in thousands)

(Unaudited)


Period


Average NBV


Quarterly Rental
Revenue(1)


Cash Interest(2)


Annualized Net
Cash Interest
Margin(1)(2)

Q1:14


$

5,312,651


$

181,095


$

51,685


9.7

%

Q2:14


$

5,721,521


$

190,574


$

48,172


10.0

%

Q3:14


$

5,483,958


$

182,227


$

44,820


10.0

%

Q4:14


$

5,468,637


$

181,977


$

44,459


10.1

%

Q1:15


$

5,743,035


$

181,027


$

50,235


9.1

%

Q2:15


$

5,967,898


$

189,238


$

51,413


9.2

%

Q3:15


$

6,048,330


$

191,878


$

51,428


9.3

%

Q4:15


$

5,962,874


$

188,491


$

51,250


9.2

%

Q1:16


$

5,988,076


$

186,730


$

51,815


9.0

%

Q2:16


$

5,920,030


$

184,469


$

55,779


8.7

%

Q3:16


$

6,265,175


$

193,909


$

57,589


8.7

%

Q4:16


$

6,346,361


$

196,714


$

58,631


8.7

%

Q1:17


$

6,505,355


$

200,273


$

58,839


8.7

%

Q2:17


$

6,512,100


$

199,522


$

55,871


8.8

%

Q3:17


$

5,985,908


$

184,588


$

53,457


8.8

%

Q4:17


$

6,247,581


$

187,794


$

53,035


8.6

%

Q1:18


$

6,700,223


$

193,418


$

53,978


8.3

%

Q2:18


$

6,721,360


$

193,988


$

53,979


8.3

%

Q3:18


$

6,787,206


$

200,354


$

54,521


8.6

%

Q4:18


$

7,136,627


$

200,027


$

60,348


7.8

%

Q1:19


$

7,449,957


$

195,601


$

60,279


7.3

%

Q2:19


$

7,729,637


$

206,190


$

63,639


7.4

%

Q3:19


$

7,824,911


$

217,524


$

62,203


7.9

%

Q4:19


$

7,753,309


$

216,225


$

59,552


8.1

%

_____________

(1)

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

(2)

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

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

 

Aircastle Limited and Subsidiaries

Book Value per Share Calculation

(Amount in thousands, except per share amounts)

(Unaudited)


Period


Shares Issued
and Outstanding


Shareholders'
Equity


Book Value

per share


% Change

Q4:15


80,232


$1,779,500


$22.18


4.4%

Q4:16


78,593


$1,834,314


$23.34


5.2%

Q4:17


78,708


$1,907,564


$24.24


3.8%

Q4:18


75,455


$2,008,681


$26.62


9.8%

Q4:19


75,122


$2,052,684


$27.32


2.6%














Q4:15 - Q4:19 CAGR


5.4%

 

 

Aircastle Limited and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures

Reconciliation of Net Income Allocable to Common Shares

(In thousands)

(Unaudited)



Three Months Ended

December 31, 2019


Year Ended
December 31, 2019

Weighted-average shares:

Shares


Percent


Shares


Percent

Common shares outstanding – Basic

74,232


99.31

%


74,478


99.34

%

Unvested restricted common shares

517


0.69

%


495


0.66

%

Total weighted-average shares outstanding

74,749


100.00

%


74,973


100.00

%









Common shares outstanding – Basic

74,232


98.29

%


74,478


98.80

%

Effect of dilutive shares(1)

1,293


1.71

%


904


1.20

%

Common shares outstanding – Diluted

75,525


100.00

%


75,382


100.00

%









Net income allocation








Net income

$

47,318


100.00

%


$

156,575


100.00

%

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

(327)


(0.69)

%


(1,034)


(0.66)

%

Earnings available to common shares

$

46,991


99.31

%


$

155,541


99.34

%









Adjusted net income allocation








Adjusted net income

$

66,002


100.00

%


$

196,547


100.00

%

Amounts allocated to unvested restricted shares

(456)


(0.69)

%


(1,298)


(0.66)

%

Amounts allocated to common shares – Basic and Diluted

$

65,546


99.31

%


$

195,249


99.34

%

______________

(1)

For the three months and year ended December 31, 2019, distributed and undistributed earnings to restricted shares were 0.69% and 0.66%, respectively, of net income and adjusted net income. The amount of restricted share forfeitures for all periods present is immaterial to the allocation of distributed and undistributed earnings.

(2)

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

 

 

Aircastle Limited and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures

Reconciliation of Net Income Allocable to Common Shares

(In thousands)

(Unaudited)



Three Months Ended
December 31, 2018


Year Ended
December 31, 2018

Weighted-average shares:

Shares


Percent


Shares


Percent

Common shares outstanding – Basic

75,937


99.36

%


77,447


99.39

%

Unvested restricted common shares

488


0.64

%


477


0.61

%

Total weighted-average shares outstanding

76,425


100.00

%


77,924


100.00

%









Common shares outstanding – Basic

75,937


99.55

%


77,447


99.61

%

Effect of dilutive shares(1)

344


0.45

%


301


0.39

%

Common shares outstanding – Diluted

76,281


100.00

%


77,749


100.00

%









Net income allocation








Net income

$

103,837


100.00

%


$

247,919


100.00

%

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

(663)


(0.64)

%


(1,517)


(0.61)

%

Earnings available to common shares

$

103,174


99.36

%


$

246,402


99.39

%









Adjusted net income allocation








Adjusted net income

$

109,883


100.00

%


$

257,237


100.00

%

Amounts allocated to unvested restricted shares

(701)


(0.64)

%


(1,574)


(0.61)

%

Amounts allocated to common shares – Basic and Diluted

$

109,182


99.36

%


$

255,663


99.39

%

________________

(1)

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

(2)

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

 

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

 

Cision View original content:http://www.prnewswire.com/news-releases/aircastle-announces-fourth-quarter-and-full-year-2019-results-acquisition-on-track-301004191.html

SOURCE Aircastle Limited

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