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

STAMFORD, Conn., Nov. 3, 2020 /PRNewswire/ --

Key Financial Metrics for the Three Months ended September 30, 2020

  • Total revenues were $192.4 million
  • Net income of $5.8 million
  • Adjusted EBITDA(1) was $181.1 million

Highlights

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

Liquidity

  • 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
  • 226 unencumbered aircraft with a net book value of $5.5 billion
  • $771 million of total adjusted contractual commitments through October 30, 2021; includes $500 million of notes due in March 2021

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."

(1)

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

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 Aircraft

262



268


Number of Unencumbered Aircraft

226



226


Number of Lessees

81



87


Number of Countries

45



48


Weighted Average Fleet Age (years)(2)

10.4



9.8


Weighted Average Remaining Lease Term (years)(2)

4.2



4.8


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 Aircraft

9



9


_______________

(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 equivalents

5,342



14,561


Accounts receivable

69,655



18,006


Flight equipment held for lease, net of accumulated depreciation of $1,895,914 and $1,501,664, respectively

6,725,615



7,375,018


Net investment in leases, net of allowance for credit losses of $2,948 and $0, respectively

315,879



419,396


Unconsolidated equity method investments

35,055



32,974


Other assets

284,507



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 discounts

4,128,133



3,932,491


Accounts payable, accrued expenses and other liabilities

167,059



172,114


Lease rentals received in advance

55,518



108,060


Security deposits

85,714



124,954


Maintenance payments

592,941



682,398


Total liabilities

5,978,546



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 capital

1,485,777



1,446,664


Retained earnings

355,650



605,269


Total shareholders' equity

1,841,427



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,


2020


2019


2020


2019

Revenues:








Lease rental revenue

$

152,323



$

203,005



$

523,623



$

577,062


Direct financing and sales-type lease revenue

4,744



8,229



16,047



24,993


Amortization of lease premiums, discounts and incentives

(5,355)



(5,895)



(17,455)



(16,951)


Maintenance revenue

37,720



11,095



156,440



54,063


Total lease revenue

189,432



216,434



678,655



639,167


Gain (loss) on sale of flight equipment

(232)



13,083



26,538



25,431


Other revenue

3,162



7,348



25,119



9,610


Total revenues

192,362



236,865



730,312



674,208










Operating expenses:








Depreciation

86,942



90,997



264,764



265,310


Interest, net

57,492



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 equipment

19,464





362,209



7,404


Maintenance and other costs

3,259



7,250



12,256



19,867


Total operating expenses

181,134



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 investments

10,648



47,566



(211,206)



120,447


Income tax provision

5,482



5,505



10,302



14,595


Earnings of unconsolidated equity method investments, net of tax

605



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,


2020


2019

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:




Depreciation

264,764



265,310


Amortization of deferred financing costs

10,472



10,778


Amortization of lease premiums, discounts and incentives

17,455



16,951


Deferred income taxes

6,961



10,513


Non-cash share-based payment expense

38,727



9,203


Cash flow hedges reclassified into earnings



184


Collections on net investment in leases

15,537



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 debt

4,020



7,577


Impairment of flight equipment

362,209



7,404


Provision for credit losses

4,777




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 activities

152,173



393,089


Cash flows from investing activities:




Acquisition and improvement of flight equipment

(55,209)



(892,186)


Proceeds from sale of flight equipment

157,507



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 activities

93,321



(658,933)


Cash flows from financing activities:




Repurchase of shares

(27,906)



(21,297)


Parent contribution at Merger

25,536




Proceeds from secured and unsecured debt financings

1,293,871



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 received

70,492



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 period

155,443



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)



Three Mos. Ended Sept. 30,


Nine Mos. Ended Sept. 30,



2020


2019


2020


2019











 Net income (loss) 

$         5,771


$      43,335


$    (219,427)


$    109,257


 Depreciation 

86,942


90,997


264,764


265,310


 Amortization of lease premiums, discounts and incentives 

5,355


5,895


17,455


16,951


 Interest, net 

57,492


65,261


175,225


195,101


 Income tax provision 

5,482


5,505


10,302


14,595


      EBITDA 

161,042


210,993


248,319


601,214











 Adjustments: 









   Impairment of Aircraft 

19,464


-


362,209


7,404


   Equity share of joint venture impairment 

-


-


-


2,724


   Loss on Extinguishment of debt 

-


7,577


4,020


7,577


   Non-cash share based payment expense 

-


3,300


38,727


9,203


   Contract termination expense 

172


-


172


-


   Merger related expense * 

405


-


35,395


-


   (Gain) Loss on MTM of interest rate derivative contracts 

2


513


115


4,508


      Adjusted EBITDA 

$    181,085


$    222,383


$     688,957


$    632,630











* 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.

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

 

(PRNewsfoto/Aircastle Limited)

 

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SOURCE Aircastle Limited

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