Aircastle Announces Second Quarter 2018 Results

Aircastle Announces Second Quarter 2018 Results

Net Earnings per Diluted Share of $0.64

Declared Third Quarter 2018 Dividend of $0.28 per Common Share

PR Newswire

STAMFORD, Conn., Aug. 7, 2018 /PRNewswire/ --

Key Financial Metrics

  • Total revenues(1) were $204.3 million
  • Total lease rental and finance and sales-type lease revenues were $187.4 million
  • Net income was $50.2 million, or $0.64 per diluted common share
  • Adjusted net income(2) was $52.4 million, or $0.67 per diluted common share
  • Adjusted EBITDA(2) was $192.6 million
  • Cash ROE(2) was 14.9%; net cash interest margin was 8.3%

Second Quarter 2018 Highlights

  • Acquired nine narrow-body aircraft for $302 million
  • Sold four narrow-body aircraft for $134 million and recorded gains on sale of $19.9 million
  • Acquired or committed to acquire more than $1.2 billion of aviation assets in 2018
  • Received Investment Grade credit rating of BBB- from Standard & Poor's and Fitch Ratings
  • Increased Revolving Credit Facility to $800 million; extended maturity to June 2022 and reduced the borrowing margin by 75 basis points
  • Declared our 49th consecutive quarterly dividend; repurchased $13.7 million of our shares year-to-date at average price of $19.62 per share

Aircastle Limited (the "Company" or "Aircastle") AYR reported second quarter 2018 net income of $50.2 million, or $0.64 per diluted common share, and adjusted net income of $52.4 million, or $0.67 per diluted common share.  The second quarter results included total lease rental and finance and sales-type lease revenues of $187.4 million, a decrease of 3.9%, versus $195.0 million in the second quarter of 2017.  In the second quarter of 2017, the Company reported a net loss of $(7.1) million, or $(0.09) per diluted common share, and adjusted net income of $2.4 million, or $0.03 per diluted common share.

______________





(1)

See Appendix for an explanation of the reclassification of the Gain on Sale of Flight Equipment.

(2)

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

 

Commenting on the results, Mike Inglese, Aircastle's Chief Executive Officer, stated, "Through the first half of the year, with over $1.2 billion of aircraft acquired or committed to be acquired in 2018, along with a steady stream of profitable aircraft sales, Aircastle remains active in the secondary market for modern, in-demand aircraft.  In addition to producing excellent second quarter results, we were awarded investment grade credit ratings from two major credit ratings agencies, Standard & Poor's and Fitch. This significant milestone broadens our already strong base of liquidity and enhances our ability to access competitively priced capital to support ongoing fleet expansion."

Mr. Inglese concluded, "Our disciplined growth strategy, solid balance sheet, strong operational capabilities and shareholder-friendly capital allocation policy place Aircastle in an excellent position to increase shareholder value both near-term and over the long-run."

Financial Results





(In thousands, except share data)

Three Months Ended June 30,



Six Months Ended June 30,



2018



2017



2018



2017

Lease rental and finance and sales-type lease

revenues

$

187,354





$

194,976





$

374,279





$

389,635



Total revenues(1)

$

204,276





$

237,059





$

406,956





$

442,091



Adjusted EBITDA(2)

$

192,623





$

224,105





$

383,768





$

417,496



Net income (loss)

$

50,203





$

(7,116)





$

107,750





$

35,323



   Per common share - Diluted

$

0.64





$

(0.09)





$

1.37





$

0.45



Adjusted net income(2)

$

52,378





$

2,448





$

109,129





$

48,139



   Per common share - Diluted

$

0.67





$

0.03





$

1.38





$

0.61



_______________





(1)

As part of the Company's adoption of Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606), we have reclassified Gain on sale of flight equipment from Other income (expense) to Revenues on our Consolidated Statement of Income as of March 31, 2018.  We believe this better reflects the sale of flight equipment as part of our ordinary activities and conforms our presentation to those of our publicly traded peers.  The presentation for the three and six months ended June 30, 2017, have also been reclassified to conform to the current period presentation.  The standard did not have a material impact on our consolidated financial statements and related disclosures





(2)

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

 

Second Quarter Results

Total revenues were $204.3 million, a decline of $32.8 million, or 13.8%, from the previous year as we recognized no maintenance revenue in the second quarter of 2018.  During the second quarter of 2017, we recorded $28.9 million of maintenance revenue, driven by return compensation associated with several wide-body aircraft which transitioned.

During the second quarter of 2018, we completed our annual fleet review with no impairment charges.  As a result, total expenses declined by $90.7 million, or 37.1%.  This was mainly due to $79.9 million of impairment charges that were incurred in the prior year's second quarter.

Net income in the second quarter was $50.2 million, versus a net loss of $(7.1) million the prior year, while adjusted net income for the quarter was $52.4 million, versus $2.4 million the prior year.  Lower aircraft impairment charges of $79.9 million, interest expense of $4.3 million, SG&A of $3.6 million and depreciation of $2.1 million were partially offset by lower maintenance revenue of $28.9 million.   Depreciation expense declined mainly due to wide-body and freighter aircraft sold over the past year, while interest expense decreased due to lower debt balances and the repayment of higher coupon debt in the prior year.

Adjusted EBITDA for the second quarter was $192.6 million, a decrease of $31.5 million, or 14.0%, from the second quarter of 2017, due primarily to lower maintenance revenue of $28.9 million, as discussed above.

Aviation Assets

During the second quarter of 2018, we acquired nine mid-aged narrow-body aircraft for approximately $302 million.  In the first half of 2018, we acquired a total of 13 aircraft for approximately $412 million.  These aircraft have a weighted average age of approximately 8.4 years and a weighted average remaining lease term of 5.7 years.

During the second quarter, we sold four aircraft for approximately $134 million.  In the first half of 2018, we sold eight aircraft for total proceeds of approximately $178 million and recorded gains on sale of $25.6 million.

As of June 30, 2018, Aircastle owned and managed 240 aircraft with a net book value of $7.4 billion.

Owned Aircraft

As of

June 30,

2018(1)



As of

June 30,

2017(1)

Net Book Value of Flight Equipment ($ mils.)

$

6,776





$

6,173



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

$

5,419





$

4,497



Number of Aircraft

228





190



Number of Unencumbered Aircraft

199





157



Weighted Average Fleet Age (years)(2)

9.5





8.3



Weighted Average Remaining Lease Term (years)(2)

4.7





4.7



Weighted Average Fleet Utilization for the quarter ended(3)

99.5

%



99.3

%

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

11.5

%



12.3

%

Net Cash Interest Margin(5)

8.3

%



8.8

%









Managed Aircraft on behalf of  Joint Ventures







Net Book Value of Flight Equipment ($ mils.)

$

628





$

675



Number of Aircraft

12





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.

 

Financing Activity

In June, we increased the size of one of our unsecured revolving credit facilities to $800 million from $675 million, extended the facility maturity by more than two years, to June 2022, and lowered the borrowing margin by 75 basis points.

In May, S&P Global Ratings raised its ratings on Aircastle Ltd., including the corporate credit rating, to 'BBB-' from 'BB+' and Fitch Ratings assigned an initial 'BBB-' rating to Aircastle's senior unsecured debt.  In June, Moody's Investors Service placed the Ba1 corporate family and Ba1 senior unsecured ratings of Aircastle on review for possible upgrade.

Common Dividend

On August 3, 2018, Aircastle's Board of Directors declared a third quarter 2018 cash dividend on its common shares of $0.28 per share, payable on September 14, 2018, to shareholders of record on August 31, 2018.  This is our 49th consecutive dividend.

Share Repurchases

Since the beginning of the year, the Company acquired approximately 697,000 shares at an average price of $19.62 per share.  Aircastle's Board of Directors previously authorized a $100 million share repurchase program, and there is approximately $82 million remaining under this authorization.  Since 2011, the Company has repurchased 15.2 million shares at an average cost of $13.58 per share.

Conference Call

In connection with this earnings release, management will host an earnings conference call on Tuesday, August 7, 2018 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 (888) 254-3590 (from within the U.S. and Canada) or (323) 994-2093 (from outside of the U.S. and Canada) ten minutes prior to the scheduled start and referencing the passcode "5231757".

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 1:00 P.M. Eastern time on Thursday, September 6, 2018 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 "1757279".

About Aircastle Limited

Aircastle Limited acquires, leases and sells commercial jet aircraft to airlines throughout the world.  As of June 30, 2018, Aircastle owned and managed on behalf of its joint ventures 240 aircraft leased to 84 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, 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 previously disclosed under "Risk Factors" in Item 1A of Aircastle's 2017 Annual Report on Form 10-K.  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)





June 30,

 2018



December 31,

 2017



(Unaudited)





ASSETS







Cash and cash equivalents

$

142,360





$

211,922



Restricted cash and cash equivalents

20,880





21,935



Accounts receivable

19,357





12,815



Flight equipment held for lease, net of accumulated depreciation of $1,177,448 and

$1,125,594, respectively

6,249,406





6,188,469



Net investment in finance and sales-type leases

526,738





545,750



Unconsolidated equity method investments

80,100





76,982



Other assets

174,307





141,210



Total assets

$

7,213,148





$

7,199,083











LIABILITIES AND SHAREHOLDERS' EQUITY







LIABILITIES







Borrowings from secured financings, net of debt issuance costs

$

798,522





$

849,874



Borrowings from unsecured financings, net of debt issuance costs

3,392,169





3,463,732



Accounts payable, accrued expenses and other liabilities

131,364





140,221



Lease rentals received in advance

76,780





57,630



Security deposits

131,101





130,628



Maintenance payments

719,806





649,434



Total liabilities

5,249,742





5,291,519











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, 78,244,038

shares issued and outstanding at June 30, 2018; and 78,707,963 shares issued and

outstanding at December 31, 2017

782





787



Additional paid-in capital

1,519,479





1,527,796



Retained earnings

443,900





380,331



Accumulated other comprehensive loss

(755)





(1,350)



Total shareholders' equity

1,963,406





1,907,564



Total liabilities and shareholders' equity

$

7,213,148





$

7,199,083



 

 

Aircastle Limited and Subsidiaries

Consolidated Statements of Income (Loss)

(Dollars in thousands, except per share amounts)

(Unaudited)





Three Months Ended June 30,



Six Months Ended June 30,



2018



2017



2018



2017

Revenues:















Lease rental revenue

$

178,486





$

189,098





$

355,969





$

379,684



Finance and sales-type lease revenue

8,868





5,878





18,310





9,951



Amortization of lease premiums, discounts and incentives

(3,534)





(3,280)





(6,662)





(6,392)



Maintenance revenue





28,944





11,991





41,231



Total lease revenue

183,820





220,640





379,608





424,474



Gain on sale of flight equipment(1)

19,864





13,525





25,632





14,284



Other revenue

592





2,894





1,716





3,333



Total revenues(1)

204,276





237,059





406,956





442,091



Operating expenses:















Depreciation

76,181





78,254





151,183





157,428



Interest, net

57,398





61,672





114,506





124,740



Selling, general and administrative (including non-cash share-based

payment expense of $3,076 and $6,028 for the three months ended and

$5,454 and $8,130 for the six months ended June 30, 2018 and 2017,

respectively)

18,583





22,187





36,418





38,354



Impairment of flight equipment





79,930









80,430



Maintenance and other costs

1,561





2,343





2,549





5,274



Total expenses

153,723





244,386





304,656





406,226



















Total other income (expense)

901





(1,560)





4,075





(2,709)



















Income (loss) from continuing operations before income taxes and

earnings of unconsolidated equity method investments

51,454





(8,887)





106,375





33,156



Income tax provision

3,132





495





2,288





2,341



Earnings of unconsolidated equity method investments, net of tax

1,881





2,266





3,663





4,508



Net income (loss)

$

50,203





$

(7,116)





$

107,750





$

35,323



Earnings (loss)per common share — Basic:















Net income (loss) per share

$

0.64





$

(0.09)





$

1.37





$

0.45



Earnings (loss) per common share — Diluted:















Net income (loss) per share

$

0.64





$

(0.09)





$

1.37





$

0.45



Dividends declared per share

$

0.28





$

0.26





$

0.56





$

0.52



_______________





(1)

As part of the Company's adoption of FASB ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), we have reclassified Gain on sale of flight equipment from Other income (expense) to Revenues on our Consolidated Statement of Income as of March 31, 2018.  We believe this better reflects the sale of flight equipment as part of our ordinary activities and conforms our presentation to those of our publicly traded peers.  The presentation for the three and six months ended June 30, 2017, have also been reclassified to conform to the current period presentation.  The standard did not have a material impact on our consolidated financial statements and related disclosures.

 

 

Aircastle Limited and Subsidiaries

Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)





Six Months Ended June 30,



2018



2017

Cash flows from operating activities:







Net income

$

107,750





$

35,323



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







Depreciation

151,183





157,428



Amortization of deferred financing costs

7,042





9,125



Amortization of lease premiums, discounts and incentives

6,662





6,392



Deferred income taxes

3,126





(833)



Non-cash share-based payment expense

5,454





8,130



Cash flow hedges reclassified into earnings

595





1,156



Security deposits and maintenance payments included in earnings

(554)





(23,063)



Gain on sale of flight equipment

(25,632)





(14,284)



Impairment of flight equipment





80,430



Other

(7,491)





1,211



Changes in certain assets and liabilities:







Accounts receivable

(7,315)





2,090



Other assets

(3,086)





(11,407)



Accounts payable, accrued expenses and other liabilities

(14,799)





(2,194)



Lease rentals received in advance

16,908





(2,115)



Net cash and restricted cash provided by operating activities

239,843





247,389



Cash flows from investing activities:







Acquisition and improvement of flight equipment

(365,505)





(148,364)



Proceeds from sale of flight equipment

178,185





238,277



Net investment in finance and sales-type leases

(16,256)





(119,971)



Collections on finance and sales-type leases

13,127





17,185



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

(3,965)





(2,892)



Other

2,956





88



Net cash and restricted cash used in investing activities

(191,458)





(15,677)



Cash flows from financing activities:







Repurchase of shares

(14,987)





(2,513)



Proceeds from secured and unsecured debt financings





500,000



Repayments of secured and unsecured debt financings

(128,342)





(667,472)



Deferred financing costs

(1,615)





(8,540)



Security deposits and maintenance payments received

108,653





87,185



Security deposits and maintenance payments returned

(38,718)





(77,593)



Dividends paid

(43,993)





(40,948)



Net cash and restricted cash used in financing activities

(119,002)





(209,881)



Net increase in cash and restricted cash

(70,617)





21,831



Cash and restricted cash at beginning of period

233,857





508,817



Cash and restricted cash at end of period

$

163,240





$

530,648



 

 

Aircastle Limited and Subsidiaries

Selected Financial Guidance Elements for the Third Quarter of 2018

($ in millions, except for percentages)

(Unaudited)



Guidance Item

Q3:18

Lease rental revenue

$181 - $185

Finance lease revenue

$8 - $9

Amortization of net lease discounts and lease incentives

$(4) - $(5)

Maintenance revenue

$0 - $1

Gain on sale

$0 - $8

Depreciation

$77 - $81

Interest, net

$58 - $60

SG&A(1)

$17 - $18

Full year effective tax rate

4% - 6%





(1)

Includes ~$2.9M of non-cash share-based payment expense.

 

 

Aircastle Limited and Subsidiaries

Supplemental Financial Information

(Amount in thousands, except per share amounts)

(Unaudited)





Three Months Ended June 30,



Six Months Ended June 30,



2018



2017



2018



2017

Revenues(1)

$

204,276





$

237,059





$

406,956





$

442,091



















EBITDA(2)

$

190,448





$

136,585





$

382,389





$

326,224



















Adjusted EBITDA(2)

$

192,623





$

224,105





$

383,768





$

417,496



















Net income (loss)

$

50,203





$

(7,116)





$

107,750





$

35,323



Net income (loss) allocable to common shares

$

49,884





$

(7,116)





$

107,113





$

35,068



Per common share - Basic

$

0.64





$

(0.09)





$

1.37





$

0.45



Per common share - Diluted

$

0.64





$

(0.09)





$

1.37





$

0.45



















Adjusted net income(2)

$

52,378





$

2,448





$

109,129





$

48,139



Adjusted net income allocable to common shares

$

52,045





$

2,428





$

108,483





$

47,791



Per common share - Basic

$

0.67





$

0.03





$

1.39





$

0.61



Per common share - Diluted

$

0.67





$

0.03





$

1.38





$

0.61



















Basic common shares outstanding

77,911





78,177





78,137





78,177



Diluted common shares outstanding(3)

78,248





78,177





78,420





78,404



_______________





(1)

As part of the Company's adoption of FASB ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), we have reclassified Gain on sale of flight equipment from Other income (expense) to Revenues on our Consolidated Statements of Income as of March 31, 2018.  We believe this better reflects the sale of flight equipment as part of our ordinary activities and conforms our presentation to those of our publicly traded peers.  The presentation for the three and six months ended June 30, 2017, have also been reclassified to conform to the current period presentation.  The standard did not have a material impact on our consolidated financial statements and related disclosures.





(2)

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





(3)

For the three months ended June 30, 2018, and for the six months ended June 30, 2018 and 2017, dilutive shares represented contingently issuable shares.   For the three months ended June 30, 2017, the effect of 170,116 contingently issuable shares related to the Company's PSUs would have been anti-dilutive and were excluded from the calculation.

 

 

Aircastle Limited and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures

EBITDA and Adjusted EBITDA Reconciliation

(Dollars in thousands)

(Unaudited)





Three Months Ended June 30,



Six Months Ended June 30,



2018



2017



2018



2017

Net income (loss)

$

50,203





$

(7,116)





$

107,750





$

35,323



Depreciation

76,181





78,254





151,183





157,428



Amortization of lease premiums, discounts and incentives

3,534





3,280





6,662





6,392



Interest, net

57,398





61,672





114,506





124,740



Income tax provision

3,132





495





2,288





2,341



   EBITDA

190,448





136,585





382,389





326,224



Adjustments:















Impairment of flight equipment





79,930









80,430



Non-cash share-based payment expense

3,076





6,028





5,454





8,130



(Gain) loss on mark-to-market of interest rate derivative contracts

(901)





1,562





(4,075)





2,712



   Adjusted EBITDA

$

192,623





$

224,105





$

383,768





$

417,496





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 June 30,



Six Months Ended June 30,



2018



2017



2018



2017

Net income (loss)

$

50,203





$

(7,116)





$

107,750





$

35,323



Loan termination fee(1)





988









988



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

(901)





1,562





(4,075)





2,712



Write-off of deferred financing fees(1)





986









986



Non-cash share-based payment expense(3)

3,076





6,028





5,454





8,130



Adjusted net income

$

52,378





$

2,448





$

109,129





$

48,139



_______________





(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 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)



Period

CFFO



Finance

Lease

Collections



Gain on

Sale of

Flt. Eqt.



Deprec.



Distributions

in excess

(less than)

Equity Earnings



Cash

Earnings



Average

Shareholders

Equity



Trailing

12

Month

Cash

ROE

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

%

2017

$

490,872





$

32,184





$

55,167





$

298,664





$

(1,011)





$

278,548





$

1,861,005





15.0

%

LTM Q2:18

$

483,325





$

28,126





$

66,515





$

292,419





$

(2,265)





$

283,282





$

1,903,097





14.9

%



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)



Period



Average NBV



Quarterly Rental

Revenue(1)



Cash Interest(2)



Annualized Net Cash

Interest Margin(1)(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

%

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

%

_______________





(1)

Management's Use of Net Cash Interest Margin: Beginning with the earnings release for the three months ended September 30, 2016, based on the growing level of finance and sales-type lease revenue, management revised the calculation of net cash interest margin 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 lease in lease rentals.  The calculation of net cash interest margin for all prior periods presented is revised to be comparable with the current period presentation.





(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, and loan termination payments of $1.0 million in both the second and third quarters of 2017.



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.



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

Presentation of Reclassification of Gain on Sale of Flight Equipment

(Dollars in thousands)

(Unaudited)



As part of the Company's adoption of FASB ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), we have reclassified Gain on sale of flight equipment from Other income (expense) to Revenues on our Consolidated Statement of Income as of March 31, 2018.  We believe this better reflects the sale of flight equipment as part of our ordinary activities and conforms our presentation to those of our publicly traded peers.  The presentation for the three and six months ended June 30, 2017, have also been reclassified to conform to the current period presentation.  The standard did not have a material impact on our consolidated financial statements and related disclosures.





Three Months Ended

June 30, 2017



Six Months Ended

June 30, 2017

Total revenues as previously reported

$

223,534





$

427,807



Gain on sale of flight equipment

13,525





14,284



Total revenues

$

237,059





$

442,091



 

 

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

June 30, 2018



Six Months Ended

June 30, 2018

Weighted-average shares:

Shares



Percent



Shares



Percent

Common shares outstanding – Basic

77,911





99.36

%



78,137





99.41

%

Unvested restricted common shares

498





0.64

%



465





0.59

%

Total weighted-average shares outstanding

78,409





100.00

%



78,602





100.00

%

















Common shares outstanding – Basic

77,911





99.57

%



78,137





99.64

%

Effect of dilutive shares(1)

338





0.43

%



283





0.36

%

Common shares outstanding – Diluted

78,248





100.00

%



78,420





100.00

%

















Net income allocation















Net income

$

50,203





100.00

%



$

107,750





100.00

%

Distributed and undistributed earnings allocated to unvested restricted

shares(2)

(319)





(0.64)

%



(637)





(0.59)

%

Earnings available to common shares

$

49,884





99.36

%



$

107,113





99.41

%

















Adjusted net income allocation















Adjusted net income

$

52,378





100.00

%



$

109,129





100.00

%

Amounts allocated to unvested restricted shares

(333)





(0.64)

%



(646)





(0.59)

%

Amounts allocated to common shares – Basic and Diluted

$

52,045





99.36

%



$

108,483





99.41

%

_______________



(1)

For the three and six months ended June 30, 2018, distributed and undistributed earnings to restricted shares were 0.64% and 0.59%, respectively, of net income and adjusted net income. The amount of restricted share forfeitures for the period presented is immaterial to the allocation of distributed and undistributed earnings.





(2)

For both 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

June 30, 2017



Six Months Ended

June 30, 2017

Weighted-average shares:

Shares



Percent



Shares



Percent

Common shares outstanding – Basic

78,177





99.20

%



78,177





99.28

%

Unvested restricted common shares

634





0.80

%



569





0.72

%

Total weighted-average shares outstanding

78,811





100.00

%



78,746





100.00

%

















Common shares outstanding – Basic

78,177





100.00

%



78,177





99.71

%

Effect of dilutive shares(1)





0.00

%



227





0.29

%

Common shares outstanding – Diluted

78,177





100.00

%



78,404





100.00

%

















Net income allocation















Net income (loss)

$

(7,116)





100.00

%



$

35,323





100.00

%

Distributed and undistributed earnings allocated to unvested restricted

shares(2)









(255)





(0.72)

%

Earnings (loss) available to common shares

$

(7,116)





100.00

%



$

35,068





99.28

%

















Adjusted net income allocation















Adjusted net income

$

2,448





100.00

%



$

48,139





100.00

%

Amounts allocated to unvested restricted shares

(20)





(0.80)

%



(348)





(0.72)

%

Amounts allocated to common shares – Basic and Diluted

$

2,428





99.20

%



$

47,791





99.28

%

_______________



(1)

For the three months ended June 30, 2017, the effect of any diluted shares on distributed and undistributed earnings to restricted shares would have been anti-dilutive and was excluded from the calculation.   For the six months ended 2017, distributed and undistributed earnings to restricted shares were 0.72%, of net income and adjusted net income.  The amount of restricted share forfeitures for the period presented is immaterial to the allocation of distributed and undistributed earnings.





(2)

For the three months ended June 30, 2017, the effect of 170,116 contingently issuable shares related to the Company's PSUs would have been anti-dilutive and were excluded from the calculation.  For the six months ended June 30, 2017, 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-second-quarter-2018-results-300692845.html

SOURCE Aircastle Limited

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