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

(1)

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

As of
Nov. 30, 2020⁽¹⁾

As of
Nov. 30, 2019⁽¹⁾

Net Book Value of Flight Equipment ($ mils.)

$

6,979

$

7,717

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

$

5,406

$

5,900

Number of Aircraft

260

270

Number of Unencumbered Aircraft

224

229

Number of Lessees

80

85

Number of Countries

45

48

Weighted Average Fleet Age (years)⁽²⁾

10.5

9.9

Weighted Average Remaining Lease Term (years)⁽²⁾

4.3

4.8

Weighted Average Fleet Utilization for the quarter ended⁽³⁾

94.0

99.3

%

Managed Aircraft on behalf of Joint Ventures

Net Book Value of Flight Equipment ($ mils.)

$

315

$

329

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.

Consolidated Balance Sheets

(Dollars in thousands, except share data)

(Unaudited)

February 29,
2020

ASSETS

Cash and cash equivalents

$       416,621

$       166,083

Restricted cash and cash equivalents

5,341

5,354

Accounts receivable

85,141

27,269

Flight equipment held for lease, net of accumulated depreciation of
$1,939,501 and $1,542,938, respectively

6,666,574

7,142,987

Net investment in leases, net of allowance for credit losses of $3,714 and
$6,558, respectively

312,038

426,252

Unconsolidated equity method investments

35,448

33,470

Other assets

271,237

206,617

  Total assets

$     7,792,400

$     8,008,032

LIABILITIES AND SHAREHOLDERS' EQUITY 

LIABILITIES

Borrowings from secured financings, net of debt issuance costs and
discounts

$       937,603

$     1,012,518

Borrowings from unsecured financings, net of debt issuance costs and
discounts

4,130,141

3,884,235

Accounts payable, accrued expenses and other liabilities

191,437

207,114

Lease rentals received in advance

55,480

107,944

Security deposits

82,706

109,663

Maintenance payments

650,369

  Total liabilities

5,965,502

5,971,843

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 November 30, 2020 and 75,076,794
shares issued and outstanding at February 29, 2020

—

751

Additional paid-in capital

1,485,777

1,456,977

Retained earnings

341,121

578,461

  Total shareholders' equity

1,826,898

2,036,189

  Total liabilities and shareholders' equity

$     7,792,400

$     8,008,032

Aircastle Limited and Subsidiaries

Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)

(Dollars in thousands)

(Unaudited)

 Nine Months Ended
November 30, 2020 

2019

2020

2019

$    139,493

$    199,847

$       473,566

$     588,141

Direct financing and sales-type lease revenue

4,839

7,760

14,903

24,407

Amortization of lease premiums, discounts and
incentives

(5,384)

(5,819)

(17,360)

(17,077)

Maintenance revenue

24,843

15,360

121,508

55,807

  Total lease revenue

163,791

217,148

592,617

651,278

Gain (loss) on sale of flight equipment

12,951

26,512

24,181

39,134

Other revenue

4,169

5,215

17,962

9,370

  Total revenues

180,911

248,875

634,760

699,782

Operating expenses:

Depreciation

86,845

90,737

262,806

269,689

Interest, net

59,945

63,204

173,996

194,952

Selling, general and administrative (including
non-cash share-based payment expense of $0
and $3,209 for the three months ended
November 30, 2020 and 2019, and $28,049 and
$9,793 for the nine months ended November
30, 2020 and 2019, respectively)

15,145

18,389

76,152

55,060

Impairment of flight equipment

9,867

—

299,551

7,404

Maintenance and other costs

4,207

6,696

14,044

18,744

Total operating expenses

176,009

179,026

826,549

545,849

Other expense:

Loss on extinguishment of debt

(43)

—

(108)

(7,577)

Merger expenses

(450)

(3,044)

(32,492)

(3,044)

Other

—

(198)

(191)

(3,987)

Total other expense

(493)

(32,791)

(14,608)

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

4,409

66,607

(224,580)

139,325

Income tax provision

2,269

7,659

14,738

17,280

Earnings of unconsolidated equity method
investments, net of tax

572

601

1,978

2,281

Net income (loss)

$       2,712

$     59,549

$     (237,340)

$     124,326

Total comprehensive income (loss)

$       2,712

$     59,549

$     (237,340)

$     124,326

Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited) 

Nine Months Ended
November 30, 2020

2020

2019

Cash flows from operating activities:

Net income (loss)

$         (237,340)

$           124,326

Adjustments to reconcile net income (loss) to net cash and restricted
cash provided by operating activities

Depreciation

262,806

269,689

Amortization of deferred financing costs

10,642

11,105

Amortization of lease premiums, discounts and incentives

17,360

17,077

Deferred income taxes

12,109

10,512

Non-cash share-based payment expense

28,049

9,793

Collections on net investment in leases

12,953

19,081

Security deposits and maintenance payments included in earnings

(107,732)

(40,496)

Gain on sale of flight equipment

(24,181)

(39,134)

Loss on extinguishment of debt

108

7,577

Impairment of flight equipment

299,551

7,404

Provision for credit losses

5,255

—

Other

(1,991)

219

Changes in certain assets and liabilities:

Accounts receivable

(55,946)

(6,516)

Other assets

(40,780)

6,689

Accounts payable, accrued expenses and other liabilities

(1,875)

(2,951)

Lease rentals received in advance

(54,608)

16,604

Net cash and restricted cash provided by operating activities

124,380

410,979

Cash flows from investing activities:

Acquisition and improvement of flight equipment

(134,263)

(953,170)

Proceeds from sale of flight equipment

113,588

345,318

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

(4,083)

(13,093)

Unconsolidated equity method investments and associated costs

—

(11,681)

Other

(594)

3,572

Net cash and restricted cash used in investing activities

(25,352)

(629,054)

Cash flows from financing activities:

Repurchase of shares

(25,536)

(9,873)

Parent contribution at Merger

25,536

—

Proceeds from secured and unsecured debt financings

1,193,871

2,141,848

Repayments of secured and unsecured debt financings

(1,027,164)

(1,814,686)

Debt extinguishment costs

(108)

(7,183)

Deferred financing costs

(6,358)

(13,343)

Security deposits and maintenance payments received

63,443

149,195

Security deposits and maintenance payments returned

(48,162)

(81,351)

Dividends paid

(24,025)

(67,453)

Net cash and restricted cash provided by financing activities

151,497

297,154

Net increase in cash and restricted cash:

250,525

79,079

Cash and restricted cash at beginning of period

171,437

133,299

Cash and restricted cash at end of period

$           421,962

$           212,378

Reconciliation of GAAP to non-GAAP Measures

EBITDA and Adjusted EBITDA Reconciliation

(Dollars in thousands)

(Unaudited)

     Three Mos. Ended Nov. 30,

     Nine Mos. Ended Nov. 30,

2020

2019

2020

2019

 Net income (loss) 

$        2,712

$      59,549

$    (237,340)

$     124,326

 Depreciation 

86,845

90,737

262,806

269,689

 Amortization of lease premiums, discounts
and incentives 

5,384

5,819

17,360

17,077

 Interest, net 

59,945

63,204

173,996

194,952

 Income tax provision 

2,269

7,659

14,738

17,280

      EBITDA 

157,155

226,968

231,560

623,324

 Adjustments: 

   Impairment of Aircraft 

9,867

-

299,551

7,404

   Equity share of joint venture impairment 

-

-

-

2,724

   Loss on Extinguishment of debt 

43

-

280

7,577

   Non-cash share based payment expense 

-

3,209

28,049

9,793

   Merger related expense * 

437

3,043

35,039

3,043

   Loss on MTM of interest rate derivative
contracts 

-

394

19

4,267

      Adjusted EBITDA 

$     167,502

$     233,614

$      594,498

$     658,132

* Included $32.5 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.