AIRCASTLE LIMITED 
By STAMFORD, Conn., May 7, 2014 /PRNewswire/ --
Highlights
-- Operating and finance lease revenues of $178.3 million and Adjusted
EBITDA(1) of $170.0 million
-- Net income of $5.8 million, or $0.07 per diluted common share
-- Adjusted net income(1) of $13.3 million, or $0.16 per diluted common
share
-- Fleet utilization of 99% with an aircraft portfolio yield of 13.5%
-- Purchased eight aircraft for $715 million during the first quarter
-- Issued $500 million of 5.125% unsecured senior notes due 2021 during the
first quarter; proceeds used to repay $450 million of 9.75% unsecured
senior notes in April 2014
-- Increased bank revolver to $450 million from $335 million; extended the
facility to four years and expanded the size of the bank group to nine
from seven
-- 32(nd) consecutive quarterly dividend declared by Aircastle's Board of
Directors
Aircastle Limited (the "Company" or "Aircastle") (NYSE: AYR) reported first quarter 2014 net income of $5.8 million, or $0.07 per diluted common share, and adjusted net income of $13.3 million, or $0.16 per diluted common share. The first quarter results included operating and finance lease revenues of $178.3 million versus $160.5 million in the first quarter of 2013.
Commenting on the results, Ron Wainshal, Aircastle's CEO, stated: "During the first quarter of 2014, the Company completed several large new investments totaling $715 million, including the first part of our purchase and leaseback deal with LATAM. We also took several important steps to improve our capital structure, including issuing $500 million in new unsecured notes to repay our first and most expensive bond, completing more than $300 million in well priced bank debt financings, repaying our first securitization and enlarging and enhancing our unsecured revolving credit facility. This work, along with many other actions during the quarter improved our portfolio and should increase Aircastle's core profitability."
First Quarter Results
Operating and finance lease revenues for the first quarter were $178.3 million, up $17.8 million or 11% year over year, due primarily to the revenue impact of aircraft acquisitions of $38.0 million, partially offset by lower revenues from aircraft sold of $16.9 million and the effect of lease extensions, transitions and terminations of $3.4 million.
Total revenues for the first quarter were $176.6 million, essentially flat versus the previous year. The $17.8 million increase in operating and finance lease revenues were partially offset by $13.8 million of lower maintenance revenues compared to the first quarter of 2013. Maintenance revenue in the first quarter of 2014 was reduced by $16.4 million of contra maintenance revenue, reflecting engine restoration work completed by a lessee prior to the scheduled return of three 737-800 aircraft. Other revenue was lower by $4.1 million in the first quarter of 2014 versus 2013, due primarily to the repayment of a debt investment in the first quarter of 2013 and revenues earned during the first quarter of 2013 related to aircraft returned to us early.
During the first quarter of 2014, we recorded non-cash transactional impairment charges for one 737-400 aircraft which was returned to us as scheduled by the lessee, and one Boeing 747-400 converted freighter for which we agreed to an early lease termination with our customer. For these two aircraft, we recorded impairment charges totaling $18.3 million and maintenance revenue of $17.2 million. We expect both aircraft will be sold at close to breakeven prices.
Adjusted EBITDA for the first quarter was $170.0 million, up $1.4 million from the first quarter of 2013. Operating and finance lease revenues were $17.8 million higher and maintenance expenses were $1.5 million lower. These improvements were partially offset by lower maintenance revenues and lower other revenues which decreased $17.9 million.
Net income for the first quarter was $5.8 million, down $17.3 million. Total revenues were flat as higher operating and finance lease revenues were offset by lower maintenance and other revenues. Higher interest expense of $5.1 million, higher depreciation of $4.0 million and higher non-cash aircraft impairment charges of $12.1 million were partially offset by a lower income tax provision of $2.7 million and lower maintenance costs of $1.5 million.
Adjusted net income for the quarter was $13.3 million, down $14.2 million year over year, and reflects flat total revenues as higher lease revenues were offset by lower maintenance and other revenues in the first quarter of 2014 versus the prior year. Higher non-cash impairment charges of $12.1 million, higher depreciation of $4.0 million and higher adjusted interest expense of $2.2 million were partially offset by a lower income tax provision of $2.7 million and lower maintenance costs of $1.5 million.
Aviation Assets
Thus far in 2014, we acquired or have committed to acquire thirteen aircraft for more than $1.1 billion. During the first quarter, we closed on the purchase of four 777-300ER aircraft built in 2012 leased to LATAM Airlines. We also completed the purchase of two A330-300 aircraft leased to Singapore Airlines and two 737-800 aircraft leased to Alaska Airlines.
During the first quarter of 2014, we sold six 737 "classic" aircraft, four of which were in a freighter configuration. Aircraft sales and dispositions during the quarter totaled $28.0 million, which resulted in a net gain on the sale of aircraft of $1.1 million.
As of March 31, 2014, Aircastle owned 164 aircraft having a net book value of $5.8 billion, and our unencumbered aircraft totaled 104 with a net book value of $3.3 billion. Including unrestricted cash, total unencumbered assets were $3.9 billion at the end of the first quarter of 2014 versus $3.3 billion at year-end 2013. The increase in unencumbered assets was primarily due to the repayment of our Securitization No. 1 financing in February of 2014. At year-end 2013, this financing was secured with a pool of 26 aircraft which were unencumbered after the repayment.
Owned Owned
Aircraft as
of March
31, Aircraft as of
2013(1) March 31,
2014(1)
------
Flight Equipment Held
for Lease ($ mils.) $4,693 $5,822
Unencumbered Flight
Equipment ($ mils.) $2,059 $3,280
Number of Aircraft 158 164
Number of Unencumbered
Aircraft 72 104
Passenger Aircraft (% of
NBV) 71% 84%
Freighter Aircraft (% of
NBV) 29% 16%
Weighted Average Fleet
Age - Combined
(years)((2)) 10.9 9.1
Weighted Average
Remaining Combined
Lease Term (years)((3)) 4.8 4.8
Weighted Average Fleet
Utilization for the
three months ended(4) 97% 99%
Portfolio Yield for the
three months ended(5) 13.6% 13.5%
(1) Calculated using net book value of flight equipment held for lease and net investment in finance leases at period end.
(2) Weighted average age by net book value.
(3) Weighted average remaining lease term by net book value.
(4) Aircraft on-lease days as a percent of total days in period weighted by net book value.
(5) Lease rental revenue for the period as a percent of the average net book value of flight equipment held for lease for the period; quarterly information is annualized.
Financing Update
In late March, we increased our unsecured revolving credit facility from $335 million to $450 million. We also expanded the bank group from seven to nine global financial institutions, to include Deutsche Bank and BNP Paribas, and extended the maturity date to March 2018.
In March 2014, we issued $500 million of 5.125% senior unsecured notes due in 2021. The bonds were issued at par, and Aircastle used the net proceeds from the offering to repay $450 million par value 9.75% senior notes due in 2018, plus accrued interest and fees in April 2014.
In February 2014, we repaid the outstanding amount, plus accrued interest and fees, due under Securitization No. 1 and terminated the related swap for a total cash payment of $255 million. In February 2014, we also raised $303 million in secured financing for two B777-300ER and one A330-200 aircraft acquired in 2013.
Common Dividend
On May 5, 2014, Aircastle's Board of Directors declared a second quarter 2014 cash dividend on its common shares of $0.20 per share, payable on June 13, 2014 to shareholders of record on May 30, 2014.
Conference Call
In connection with this earnings release, management will host an earnings conference call on Wednesday, May 7, 2014 at 10:00AM Eastern time. All interested parties are welcome to participate on the live call. The conference call can be accessed by dialing (800) 723-6498 (from within the U.S. and Canada) or (785) 830-7989 (from outside of the U.S. and Canada) ten minutes prior to the scheduled start and referencing the passcode "3739822".
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. A replay of the webcast will be available for one month following the call. 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 1:00PM Eastern time on Friday, June 6, 2014 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 "3739822".
About Aircastle Limited
Aircastle Limited acquires, leases and sells commercial jet aircraft to airlines throughout the world. As of March 31, 2014, Aircastle's aircraft portfolio consisted of 164 aircraft on lease with 65 customers located in 37 countries.
Safe Harbor
Certain items in this press release and other information we provide from time to time, may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, but 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 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 management's current expectations and beliefs 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 forward-looking statements contained in this press release. Factors that could have a material adverse effect on our operations and future prospects or that could cause actual results to differ materially from Aircastle's expectations include, but are not limited to, capital markets disruption or volatility which could adversely affect our continued ability to obtain additional capital to finance new investments or our working capital needs; government fiscal or tax policies, general economic and business conditions or other factors affecting demand for aircraft or aircraft values and lease rates; our continued ability to obtain favorable tax treatment in Bermuda, Ireland and other jurisdictions; our ability to pay dividends; high or volatile fuel prices, lack of access to capital, reduced load factors and/or reduced yields, operational disruptions caused by political unrest and other factors affecting the creditworthiness of our airline customers and their ability to continue to perform their obligations under our leases and other risks detailed from time to time in Aircastle's filings with the SEC, including as previously disclosed in Aircastle's 2013 Annual Report on Form 10-K, and in our other filings with the SEC, press releases and other communications. 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 Limited expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.
1. Refer to Supplemental Financial Information accompanying this press release for a reconciliation of GAAP to non-GAAP numbers.
Aircastle Limited and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands, except share data)
December 31, March 31,
2013 2014
---- ----
(Unaudited)
ASSETS
Cash and cash equivalents $654,613 $614,096
Accounts receivable 2,825 4,437
Restricted cash and cash
equivalents 122,773 102,463
Restricted liquidity facility
collateral 107,000 65,000
Flight equipment held for lease,
net of accumulated depreciation
of $1,430,325 and $1,450,597 5,044,410 5,679,723
Net investment in finance leases 145,173 142,400
Unconsolidated equity method
investment 21,123 21,440
Other assets 153,976 148,706
------- -------
Total assets $6,251,893 $6,778,265
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Borrowings from secured
financings (including
borrowings of ACS Ireland VIEs
of $152,545 and $93,938,
respectively) $1,586,835 $1,641,727
Borrowings from unsecured
financings 2,150,527 2,650,498
Accounts payable, accrued
expenses and other liabilities 111,661 156,765
Lease rentals received in
advance 49,235 51,660
Liquidity facility 107,000 65,000
Security deposits 118,804 117,024
Maintenance payments 442,432 446,742
Fair value of derivative
liabilities 39,992 4,765
------ -----
Total liabilities 4,606,486 5,134,181
--------- ---------
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,
80,806,975 shares issued and
outstanding at December 31,
2013; and 81,004,031 shares
issued and outstanding at March
31, 2014 808 810
Additional paid-in capital 1,562,106 1,561,508
Retained earnings 158,398 147,974
Accumulated other comprehensive
loss (75,905) (66,208)
------- -------
Total shareholders' equity 1,645,407 1,644,084
--------- ---------
Total liabilities and
shareholders' equity $6,251,893 $6,778,265
========== ==========
Aircastle Limited and Subsidiaries
Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
(Unaudited)
Three Months Ended
March 31,
---------
2013 2014
---- ----
Revenues:
Lease rental
revenue $156,590 $174,335
Finance lease
revenue 3,884 3,987
Amortization
of lease
premiums,
discounts and
lease
incentives (7,081) (6,591)
Maintenance
revenue 2014,
(including respectively)
contra
maintenance
revenue of $0
and $16,382
for the three
months ended
March 31,
2013 and 16,866 3,042
------ -----
Total lease
revenue 170,259 174,773
Other revenue 5,930 1,830
----- -----
Total revenues 176,189 176,603
------- -------
Operating expenses:
Depreciation 69,900 73,927
Interest, net 59,152 64,263
Selling,
general and March 31,
administrative 2013 and
(including 2014,
non-cash respectively)
share based
payment
expense of
$811 and $990
for the three
months ended 13,285 13,944
Impairment of
Aircraft 6,199 18,263
Maintenance
and other
costs 3,412 1,863
----- -----
Total expenses 151,948 172,260
------- -------
Other income:
Gain on sale
of flight
equipment 1,192 1,110
Other 1,215 757
Total other
income 2,407 1,867
----- -----
Income from
continuing
operations
before income
taxes 26,648 6,210
Income tax
provision 3,584 883
Earnings of
unconsolidated
equity method
investment,
net of tax - 450
--- ---
Net income $23,064 $5,777
======= ======
Earnings per common share -
Basic:
Net income per
share $0.34 $0.07
===== =====
Earnings per common share -
Diluted:
Net income per
share $0.34 $0.07
===== =====
Dividends
declared per
share $0.165 $0.200
====== ======
Aircastle Limited and Subsidiaries
Consolidated Statements of Comprehensive Income
(Dollars in thousands)
(Unaudited)
Three Months Ended
March 31,
---------
2013 2014
---- ----
Net income $23,064 $5,777
------- ------
Other comprehensive income, net of
tax:
Net change in fair
value of derivatives,
net of tax expense of
$118 and $804 for the
three months ended
March 2013 and 2014,
respectively 3,826 370
Net derivative loss
reclassified into
earnings 8,274 9,327
----- -----
Other comprehensive
income 12,100 9,697
------ -----
Total comprehensive
income $35,164 $15,474
======= =======
Aircastle Limited and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
Three Months Ended March 31,
----------------------------
2013 2014
---- ----
Cash flows from operating activities:
Net income $23,064 $5,777
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 69,900 73,927
Amortization of deferred financing
costs 2,435 3,420
Amortization of net lease discounts
and lease incentives 7,081 6,591
Deferred income taxes 2,194 1,347
Non-cash share based payment
expense 811 990
Cash flow hedges reclassified into
earnings 8,274 9,327
Security deposits and maintenance
payments included in earnings (23,259) (14,786)
Gain on sale of flight equipment (1,192) (1,110)
Impairment of aircraft 6,199 18,263
Other (2,773) (2,162)
Changes in certain assets and liabilities:
Accounts receivable 1,866 (1,496)
Other assets (95) (1,171)
Accounts payable, accrued expenses
and other liabilities 1,144 2,907
Lease rentals received in advance (2,902) 1,167
------ -----
Net cash provided by operating
activities 92,747 102,991
------ -------
Cash flows from investing activities:
Acquisition and improvement of
flight equipment and lease
incentives (4,157) (663,038)
Proceeds from sale of flight
equipment 19,750 28,018
Aircraft purchase deposits and
progress payments (3,869) 3,280
Net investment in finance leases (11,595) -
Collections on finance leases 1,845 2,773
Unconsolidated equity method
investment and associated costs - (159)
Distributions from unconsolidated
equity method investment in excess
of earnings - 388
Principal repayments on debt
investment 42,001 -
Other 5 (248)
--- ----
Net cash used in investing
activities 43,980 (628,986)
------ --------
Cash flows from financing activities:
Issuance of shares net of
repurchases (7,940) (2,091)
Proceeds from notes and term debt
financings - 803,200
Securitization and term debt
financing repayments (82,681) (287,778)
Deferred financing costs (441) (14,755)
Restricted secured liquidity
facility collateral - 42,000
Secured liquidity facility
collateral - (42,000)
Restricted cash and cash
equivalents related to financing
activities 2,819 20,310
Security deposits received 11,349 636
Security deposits returned (425) (4,463)
Maintenance payments received 34,142 41,265
Maintenance payments returned (7,196) (21,218)
Payments for terminated cash flow
hedges - (33,427)
Dividends paid (11,268) (16,201)
------- -------
Net cash (used in) provided by
financing activities (61,641) 485,478
------- -------
Net increase (decrease) in cash and
cash equivalents 75,086 (40,517)
Cash and cash equivalents at
beginning of period 618,217 654,613
------- -------
Cash and cash equivalents at end of
period $693,303 $614,096
======== ========
Aircastle Limited and Subsidiaries
Supplemental Financial Information
(Amount in thousands, except per share amounts)
(Unaudited)
Three Months Ended
March 31,
---------
2013 2014
---- ----
Revenues $176,189 $176,603
EBITDA $162,781 $151,441
Adjusted EBITDA $168,576 $170,013
Adjusted net income $27,412 $13,260
Adjusted net income allocable
to common shares $27,214 $13,178
Per common share - Basic $0.40 $0.16
Per common share - Diluted $0.40 $0.16
Basic common shares
outstanding 67,896 80,387
Diluted common shares
outstanding 67,896 80,387
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,
---------
2013 2014
---- ----
(Dollars in thousands)
---------------------
Net income $23,064 $5,777
Depreciation 69,900 73,927
Amortization
of net lease
discounts and
lease
incentives 7,081 6,591
Interest, net 59,152 64,263
Income tax
provision 3,584 883
----- ---
EBITDA $162,781 $151,441
Adjustments:
Impairment of
aircraft 6,199 18,263
Non-cash
share based
payment
expense 811 990
Gain on mark
to market of
interest rate
derivative
contracts (1,215) (681)
Adjusted
EBITDA $168,576 $170,013
======== ========
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-US 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 March 31,
----------------------------
2013 2014
---- ----
(Dollars in thousands)
---------------------
Net income $23,064 $5,777
Ineffective
portion and
termination of
hedges(1) 128 53
Gain on mark to
market of
interest rate
derivative
contracts(2) (1,215) (681)
Stock
compensation
expense(3) 811 990
Term Financing
No. 1 hedge
loss
amortization
charges(1) 4,283 4,104
Securitization
No. 1 hedge
loss
amortization
charges (1) 341 3,017
---
Adjusted net
income $27,412 $13,260
======= =======
(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 US 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
Reconciliation of Net Income Allocable to Common Shares
(In thousands)
(Unaudited)
Three Months Ended
March 31, 2014
--------------
Shares Percent(2)
------ ---------
Weighted average shares
-----------------------
Common shares outstanding
- Basic 80,387 99.38 %
Unvested restricted
common shares
outstanding 501 0.62 %
--- -----
Total weighted average
shares outstanding 80,888 100.00 %
====== =======
Common shares outstanding
- Basic 80,387 100.00 %
Effect of dilutive
shares(1) - -
--- ---
Common shares outstanding
- Diluted 80,387 100.00 %
====== =======
Net income allocation
---------------------
Net income $5,777 100.00 %
Distributed and
undistributed earnings
allocated to unvested
restricted shares (36) (0.62)%
--- ------
Earnings available to
common shares $5,741 99.38 %
====== ======
Adjusted net income allocation
------------------------------
Adjusted net income $13,260 100.00 %
Amounts allocated to
unvested restricted
shares (82) (0.62) %
--- -------
Amounts allocated to
common shares $13,178 99.38 %
======= ======
(1) The Company had no dilutive common share equivalents for the periods presented.
(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, 2013
--------------
Shares Percent(2)
------ ---------
Weighted average shares
-----------------------
Common shares outstanding
- Basic 67,896 99.28 %
Unvested restricted
common shares
outstanding 493 0.72 %
--- -----
Total weighted average
shares outstanding 68,389 100.00 %
====== =======
Common shares outstanding
- Basic 67,896 100.00 %
Effect of dilutive
shares(1) - -
--- ---
Common shares outstanding
- Diluted 67,896 100.00 %
====== =======
Net income allocation
---------------------
Net income $23,064 100.00 %
Distributed and
undistributed earnings
allocated to unvested
restricted shares (166) (0.72)%
---- ------
Earnings available to
common shares $22,898 99.28 %
======= ======
Adjusted net income allocation
------------------------------
Adjusted net income $27,412 100.00 %
Amounts allocated to
unvested restricted
shares (198) (0.72)%
---- ------
Amounts allocated to
common shares $27,214 99.28 %
======= ======
(1) The Company had no dilutive common share equivalents for the periods presented.
(2) Percentages rounded to two decimal places.
Contact:
Frank Constantinople, SVP Investor Relations
Tel: +1-203-504-1063
fconstantinople@aircastle.com
The IGB Group
Leon Berman
Tel: +1-212-477-8438
lberman@igbir.com
SOURCE Aircastle Limited
