Aircastle Announces First Quarter 2017 Results

Note:  Non-GAAP items reconciled in the Appendix.

(in thousands, except share data)

Three Months Ended

March 31,

2017

2016

Total Lease Rental and Finance and Sales-Type Lease Revenues

$ 194,659

$ 183,067

Total Revenues

$ 204,273

$ 183,665

Adjusted EBITDA

$ 193,391

$ 183,879

Net income

$   42,439

$   36,262

      Per common share - Diluted

$       0.54

$       0.46

Adjusted net income

$   45,691

$   44,091

      Per common share - Diluted

$       0.58

$       0.56

Owned Aircraft

As of

March 31, 

As of

March 31, 

Net Book Value of Flight Equipment ($ mils.)

$

6,596

$

5,771

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

$

4,725

$

3,752

Number of Aircraft

200

153

Number of Unencumbered Aircraft

163

111

Weighted Average Fleet Age (years)⁽²⁾

8.2

7.6

Weighted Average Remaining Lease Term (years)⁽²⁾

4.8

5.6

Weighted Average Fleet Utilization for the period ended⁽³⁾

98.3%

99.6%

Portfolio Yield for the period ended⁽⁴⁾

12.3%

12.5%

Net Cash Interest Margin⁽⁵⁾

8.7%

9.0%

Managed Aircraft on behalf of  Joint Ventures

Net Book Value of Flight Equipment ($ mils.)

$      682

$     590

Number of Aircraft

13

9

(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.

Aircastle Limited and Subsidiaries

Consolidated Balance Sheets

(Dollars in thousands, except share data)

March 31,

December  31,

2017

2016

ASSETS

Cash and cash equivalents

$

871,858

$

455,579

Restricted cash and cash equivalents

50,754

53,238

Accounts receivable

7,442

6,035

Flight equipment held for lease, net of accumulated depreciation of $1,284,855 and $1,224,899, respectively

6,295,690

6,247,585

Net investment in finance and sales-type leases

299,969

260,853

Unconsolidated equity method investments

74,653

72,977

Other assets

140,544

148,398

Total assets

$

7,740,910

$

7,244,665

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES

Borrowings from secured financings, net of debt issuance costs

$

1,189,423

$

1,219,034

Borrowings from unsecured financings, net of debt issuance costs

3,781,761

3,287,211

Accounts payable, accrued expenses and other liabilities

144,384

127,527

Lease rentals received in advance

60,302

62,225

Security deposits

123,673

122,597

Maintenance payments

585,283

591,757

Total liabilities

5,884,826

5,410,351

Commitments and Contingencies

SHAREHOLDERS' EQUITY

Preference shares, $.01 par value, 50,000,000 shares authorized, no shares issued and outstanding

—

—

Common shares, $.01 par value, 250,000,000 shares authorized, 78,717,916 shares issued and outstanding at March 31, 2017; and 78,593,133 shares issued and outstanding at December 31, 2016

787

786

Additional paid-in capital

1,520,405

1,521,190

Retained earnings

337,863

315,890

Accumulated other comprehensive loss

(2,971)

(3,552)

Total shareholders' equity

1,856,084

1,834,314

Total liabilities and shareholders' equity

$

7,740,910

$

7,244,665

Aircastle Limited and Subsidiaries

Consolidated Statements of Income

(Dollars in thousands, except per share amounts)

(Unaudited)

Three Months Ended March 31,

2017

2016

Revenues:

Lease rental revenue

$

190,586

$

179,570

Finance and sales-type lease revenue

4,073

3,498

Amortization of lease premiums, discounts and incentives

(3,112)

(1,070)

Maintenance revenue

12,287

1,260

Total lease revenue

203,834

183,258

Other revenue

439

407

Total revenues

204,273

183,665

Operating expenses:

Depreciation

79,174

76,647

Interest, net

63,068

64,241

Selling, general and administrative (including non-cash share based payment expense of $2,102 and $1,643 for the three months ended March 31, 2017 and 2016, respectively)

16,167

15,492

Impairment of flight equipment

500

-

Maintenance and other costs

2,931

1,403

Total expenses

161,840

157,783

Other income (expense):

Gain on sale of flight equipment

759

12,833

Other

(1,149)

(73)

Total other income (expense)

(390)

12,760

Income from continuing operations before income taxes and earnings of unconsolidated equity method investment

42,043

38,642

Income tax provision

1,846

3,939

Earnings of unconsolidated equity method investments, net of tax

2,242

1,559

Net income

$

42,439

$

Earnings per common share — Basic:

Net income per share

$

0.54

$

0.46

Earnings per common share — Diluted:

Net income per share

$

0.54

$

0.46

Dividends declared per share

$

0.26

$

0.24

Aircastle Limited and Subsidiaries

Consolidated Statements of Cash Flows

(Dollars in thousands) (Unaudited) 

Three Months Ended March 31,

2017

2016

Cash flows from operating activities:

Net income

$

42,439

$

36,262

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

Depreciation

79,174

76,647

Amortization of deferred financing costs

4,155

5,607

Amortization of lease premiums, discounts and incentives

3,112

1,070

Deferred income taxes

1,309

(392)

Non-cash share based payment expense

2,102

1,643

Cash flow hedges reclassified into earnings

581

5,372

Security deposits and maintenance payments included in earnings

(10,524)

(1,648)

Gain on sale of flight equipment

(759)

(12,833)

Impairment of flight equipment

500

-

Other

112

(1,558)

Changes in certain assets and liabilities:

Accounts receivable

(1,407)

992

Other assets

(1,000)

(1,137)

Accounts payable, accrued expenses and other liabilities

14,334

15,066

Lease rentals received in advance

(2,552)

(3,827)

Net cash and restricted cash provided by operating activities

131,576

121,264

Cash flows from investing activities:

Acquisition and improvement of flight equipment

(142,053)

(96,524)

Proceeds from sale of flight equipment

16,819

306,029

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

(1,935)

(7,162)

Net investment in finance and sales-type leases

(35,785)

-

Collections on finance and sales-type leases

5,614

3,663

Unconsolidated equity method investments and associated costs

-

(7,731)

Other

88

(176)

Net cash and restricted cash provided by (used in) investing activities

(157,252)

198,099

Cash flows from financing activities:

Repurchase of shares

(2,513)

(33,250)

Proceeds from secured and unsecured debt financings

500,000

500,000

Repayments of secured and unsecured debt financings

(31,178)

(352,928)

Deferred financing costs

(8,038)

(9,454)

Security deposits and maintenance payments received

41,049

33,147

Security deposits and maintenance payments returned

(39,383)

(20,936)

Dividends paid

(20,466)

(18,915)

Net cash and restricted cash provided by financing activities

439,471

97,664

Net increase in cash and restricted cash

413,795

417,027

Cash and restricted cash at beginning of period

508,817

254,041

Cash and restricted cash at end of period

$

922,612

$

671,068

Aircastle Limited and Subsidiaries

Supplemental Financial Information

(Amount in thousands, except per share amounts)

(Unaudited)

Three Months Ended

March 31,

2017

2016

Revenues

$ 204,273

$ 183,665

EBITDA

$ 189,639

$ 182,159

Adjusted EBITDA

$ 193,391

$ 183,879

Adjusted net income

$   45,691

$   44,091

Adjusted net income allocable to common shares

$   45,398

$   43,772

Per common share - Basic

$       0.58

$       0.56

Per common share - Diluted

$       0.58

$       0.56

Basic common shares outstanding

78,177

78,543

Diluted common shares outstanding

78,372

78,543

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

Aircastle Limited and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures

EBITDA and Adjusted EBITDA Reconciliation

(Dollars in thousands)

(Unaudited)

Three Months Ended March 31,

2017

2016

(Dollars in thousands)

Net income

$

42,439

$

36,262

Depreciation

79,174

76,647

Amortization of net lease discounts and lease incentives

3,112

1,070

Interest, net

63,068

64,241

Income tax provision

1,846

3,939

EBITDA

189,639

182,159

Adjustments:

Impairment of flight equipment

500

-

Non-cash share based payment expense

2,102

1,643

Loss on mark-to-market of interest rate derivative contracts

1,150

77

Adjusted EBITDA

$

193,391

$

183,879

Aircastle Limited and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures

Adjusted Net Income Reconciliation

(Dollars in thousands)

(Unaudited)

Three Months Ended March 31,

2017

2016

(Dollars in thousands)

Net income

$

42,439

$

36,262

Loan termination fee⁽¹⁾

—

1,509

Loss on mark-to-market of interest rate derivative contracts⁽²⁾

1,150

77

Write-off of deferred financing fees⁽¹⁾

—

1,972

       Non-cash share based payment expense⁽³⁾

2,102

1,643

       Securitization No. 1 hedge loss amortization charges ⁽¹⁾

—

2,628

Adjusted net income

$

45,691

$

44,091

__________________

(1)  Included in Interest, net.

(2)  Included in Other income (expense).

(3)  Included in Selling, general and administrative expenses.

Management believes that ANI, when viewed in conjunction with the Company's results under U.S. GAAP and the above reconciliation, provides useful information about operating and period-over-period performance, and 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 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)

CFFO

Finance Lease Collections

Gain (Loss) on Sale of Eqt.

Deprec.

Distributions in excess (less than) Equity Earnings

Cash Earnings

Average Shareholders' Equity

12 Month
Cash ROE

2011

$           359,377

$                       -

$             39,092

$           242,103

$                       -

$           156,366

$        1,370,513

11.4%

2012

$           427,277

$               3,852

$               5,747

$           269,920

$                       -

$           166,956

$        1,425,658

11.7%

2013

$           424,037

$               9,508

$             37,220

$           284,924

$                       -

$           185,841

$        1,513,156

12.3%

2014

$           458,786

$             10,312

$             23,146

$           299,365

$                  667

$           193,546

$        1,661,228

11.7%

2015

$           526,285

$               9,559

$             58,017

$           318,783

$                (530)

$           274,548

$        1,759,871

15.6%

2016

$           468,092

$             19,413

$             39,126

$           305,216

$             (1,782)

$           219,633

$        1,789,256

12.3%

LTM Q1:17

$           478,404

$             21,364

$             27,052

$           307,743

$             (2,067)

$           217,010

$        1,804,573

12.0%

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. 

Aircastle Limited and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures

Net Cash Interest Margin Calculation

(Dollars in thousands)

(Unaudited)

Average NBV

Quarterly
Rental
Revenue

Cash
Interest(1)

Annualized
Net Cash
Interest
Margin(2)

Q1:12

$        4,388,008

$           152,242

$             44,969

9.8%

Q2:12

$        4,542,477

$           156,057

$             48,798

9.4%

Q3:12

$        4,697,802

$           163,630

$             41,373

10.4%

Q4:12

$        4,726,457

$           163,820

$             43,461

10.2%

Q1:13

$        4,740,161

$           162,319

$             48,591

9.6%

Q2:13

$        4,840,396

$           164,239

$             44,915

9.9%

Q3:13

$        4,863,444

$           167,876

$             47,682

9.9%

Q4:13

$        5,118,601

$           176,168

$             49,080

9.9%

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%

(1)

Excludes loan termination payments of $3.0 million in the second quarter of 2013.  Also excludes loan termination payments of $1.5 million and $3.5 million in the first quarter and fourth quarter of 2016 respectively.

(2)

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.   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. 

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

Reconciliation of GAAP to Non-GAAP Measures

Reconciliation of Net Income Allocable to Common Shares

(In thousands)

(Unaudited)

Three Months Ended

March 31, 2017

Weighted-average shares:

Shares

Percent⁽²⁾

Common shares outstanding – Basic

78,177

99.36%

Unvested restricted common shares

504

0.64%

Total weighted-average shares outstanding

78,681

100.00%

Common shares outstanding – Basic

78,177

99.75%

Effect of dilutive shares⁽¹⁾

195

0.25%

Common shares outstanding – Diluted

78,372

100.00%

Net income allocation

Net income

$42,439

100.00%

Distributed and undistributed earnings allocated to unvested restricted shares

(272)

(0.64%)

Earnings available to common shares – Basic

$42,167

99.36%

Adjusted net income allocation

Adjusted net income

$45,691

100.00%

Amounts allocated to unvested restricted shares

(293)

(0.64%)

Amounts allocated to common shares – Basic and Diluted

$45,398

99.36%

(1)  For the three months ended March 31, 2017, dilutive shares represented contingently issuable shares related 
       to the Company's PSUs. 

(2)  Percentages rounded to two decimal places.

Aircastle Limited and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures

Reconciliation of Net Income Allocable to Common Shares

(In thousands)

(Unaudited)

Three Months Ended

March 31, 2016

Weighted-average shares:

Shares

Percent⁽²⁾

Common shares outstanding – Basic

78,543

99.28%

Unvested restricted common shares

572

0.72%

Total weighted-average shares outstanding

79,116

100.00%

Common shares outstanding – Basic

78,543

100.00%

Effect of dilutive shares⁽¹⁾

--

--

Common shares outstanding – Diluted

78,543

100.00%

Net income allocation

Net income

$36,262

100.00%

Distributed and undistributed earnings allocated to unvested restricted shares

(262)

(0.72%)

Earnings available to common shares -- Basic

$36,000

99.28%

Adjusted net income allocation

Adjusted net income

$44,091

100.00%

Amounts allocated to unvested restricted shares

(319)

(0.72%)

Amounts allocated to common shares – Basic and Diluted

$43,772

99.28%

(1)  For the three months ended March 31, 2016 the company had no dilutive shares.

(2)  Percentages rounded to two decimal places.

Contact:         

Aircastle Advisor LLC

The IGB Group

Frank Constantinople, SVP Investor Relations

Leon Berman

Tel: +1-203-504-1063

Tel: +1-212-477-8438

[email protected]

[email protected]