Aircastle Limited
Aircastle LTD (Form: 8-K, Received: 05/04/2017 16:27:43)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) May 4, 2017 (May 4, 2017)

 

 

Aircastle Limited

(Exact name of registrant as specified in its charter)

 

 

 

Bermuda   001-32959   98-0444035

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

 

c/o Aircastle Advisor LLC, 300 First Stamford Place,

Stamford, Connecticut

  06902
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code (203) 504-1020

(Former name or former address, if changed since last report.)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 


Section 2 – Financial Information

Item 2.02 Results of Operations and Financial Condition.

On May 4, 2017, Aircastle Limited announced financial results for its first quarter 2017 as described in the press release furnished hereto as Exhibit 99.1, which is incorporated herein by reference.

The information furnished pursuant to this Current Report on Form 8-K, including the exhibit hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into any of the Company’s filings under the Securities Act of 1933, as amended, or the Exchange Act, unless expressly set forth as being incorporated by reference into such filing.

Section 9 – Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

99.1    Press Release dated May 4, 2017 which is being furnished hereto pursuant to Item 2.02.


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

AIRCASTLE LIMITED

            (Registrant)

/s/ Christopher Beers

Christopher Beers
General Counsel

Date: May 4, 2017


EXHIBIT INDEX

 

Exhibit Number

  

Description

99.1    Press Release dated May 4, 2017

Exhibit 99.1

 

LOGO

 

FOR IMMEDIATE RELEASE   
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

Aircastle Announces First Quarter 2017 Results

Total Revenues increased 11% and Net Income rose 17%

Declared Second Quarter 2017 Dividend of $0.26 per Common Share

Key Financial Metrics

 

    Total revenues were $204.3 million

 

    Total lease rental and finance and sales-type lease revenues were $194.7 million

 

    Net income was $42.4 million, or $0.54 per diluted common share

 

    Adjusted net income was $45.7 million, or $0.58 per diluted common share

 

    Adjusted EBITDA was $193.4 million

 

    Cash ROE was 12.0%; net cash interest margin was 8.7%

First Quarter 2017 Highlights

 

    Issued $500 million of new seven year, senior unsecured notes at a record low coupon of 4.125%

 

    Closed or committed to acquire eighteen aircraft this year for more than $400 million

 

    Declared our 44 th consecutive quarterly dividend

Stamford, CT.  May  4, 2017 – Aircastle Limited (the “Company” or “Aircastle”) (NYSE: AYR) reported first quarter 2017 net income of $42.4 million, or $0.54 per diluted common share and adjusted net income of $45.7 million, or $0.58 per diluted common share. The first quarter results included total lease rental and finance and sales-type lease revenues of $194.7 million, an increase of 6.3%, versus $183.1 million in the first quarter of 2016.

Commenting on the results, Mike Inglese, Aircastle’s Chief Financial Officer and Acting CEO, stated “Amid a strong aircraft financing environment, Aircastle has continued to benefit from our strategic flexibility, solid balance sheet, and our opportunistic investment strategy. We have remained disciplined in the pursuit of acquisitions and are determined to act only where opportunities have appealing risk and return profiles. With our unique ability to provide value-added solutions to customers, we successfully closed $190 million of aircraft acquisitions during the first quarter and secured commitments to close a further $220 million. We also seized the opportunity to sell or commit to sell several additional aircraft on appealing terms, continuing our progress in optimizing the fleet mix. A number of these aircraft sales are expected to close in the second quarter.”

 

Note:   Non-GAAP items reconciled in the Appendix.

 

1


Mr. Inglese added, “We also made significant strides in our efforts to continue strengthening our balance sheet. Notably, we successfully raised $500 million during the first quarter to replace a maturing 6.75% debt financing with highly attractive, seven year unsecured notes at a record low coupon of 4.125%. This refinancing will generate more than $13 million of annual interest savings.”

Mr. Inglese concluded, “In addition to achieving significant improvements to our fleet and our balance sheet, Aircastle also continued to deliver solid financial and operational results. We increased our net income by $6.2 million versus the prior year’s first quarter, to $42.4 million, and achieved a solid cash ROE of 12.0%, while maintaining fleet utilization of 98.3%, in line with our historical average. Moving forward, Aircastle is in a strong position to continue expanding our earnings power, enhance our fleet, and provide our investors with an attractive, reliable dividend.”

Peter V. Ueberroth, Aircastle’s Chairman of the Board, also provided an update on the status of Ron Wainshal’s medical leave of absence. Mr. Ueberroth, speaking on behalf of the Board of Directors stated, “Ron continues to work hard on his recovery and is making progress; however, we do not expect him to return as CEO during the second quarter.” Mr. Ueberroth continued, “The Board continues to have great faith in Acting CEO Mike Inglese’s service in that role, and the depth and capability of the management team at Aircastle.”

Financial Results

 

(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  

First Quarter Results

Total revenues were $204.3 million, an increase of $20.6 million, or 11.2% from the previous year. The increase was driven by an $11.6 million increase in lease rental and finance and sales-type lease revenues, and an $11.0 million increase in maintenance revenues. Rental revenues were higher due to net fleet growth, while maintenance revenues rose primarily due to return compensation from two lessees during the first quarter of 2017. Total maintenance revenues were $12.3 million in the first quarter of 2017 versus $1.3 million in the prior year.

 

2


Adjusted EBITDA for the first quarter was $193.4 million, up $9.5 million, or 5.2% from the first quarter of 2016, due primarily to higher rental and maintenance revenues of $22.6 million, partially offset by lower gains from aircraft sales of $12.1 million. We sold twelve aircraft for a gain on sale of $12.8 million during the first quarter of 2016 versus one aircraft sale that was closed during the current year’s first quarter.

Adjusted net income for the quarter was $45.7 million, an increase of $1.6 million versus the prior year. Higher total rental and maintenance revenues were mostly offset by lower gains from aircraft sales along with higher maintenance, depreciation and other expenses.    

Aviation Assets

During the first quarter of 2017, we acquired eight aircraft for approximately $190 million and had commitments to acquire ten additional aircraft for more than $220 million. These eighteen aircraft have a weighted average age of approximately 7.9 years and a weighted average remaining lease term of 7.6 years. Narrow-body aircraft comprise seventeen of the total aircraft acquired.                

As of March 31, 2017, Aircastle owned 200 aircraft having a net book value of $6.6 billion. We also managed thirteen aircraft with a net book value of $682 million on behalf of our joint ventures.

 

Owned Aircraft           As of
March 31,
2017 (1)
           As of
March 31,
2016 (1)
 

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.

 

3


Financing Activity

During the first quarter of 2017, we issued $500 million in unsecured Senior Notes due 2024 bearing a coupon of 4.125%. On April 17, 2017 we repaid $500 million of maturing, unsecured Senior Notes bearing a coupon of 6.75%. The associated annual interest expense savings is approximately $13.1 million.

Common Dividend

On May 2, 2017, Aircastle’s Board of Directors declared a second quarter 2017 cash dividend on its common shares of $0.26 per share, payable on June 15, 2017 to shareholders of record on May 31, 2017. This is our 44 th consecutive dividend.

Conference Call

In connection with this earnings release, management will host an earnings conference call on Thursday, May 4, 2017 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) 300-2343 (from within the U.S. and Canada) or (719) 325-2170 (from outside of the U.S. and Canada) ten minutes prior to the scheduled start and referencing the passcode “5337956”.

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 3:00 P.M. Eastern time on Saturday, June 3, 2017 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 “5337956”.

About Aircastle Limited

Aircastle Limited acquires, leases and sells commercial jet aircraft to airlines throughout the world. As of March 31, 2017, Aircastle owned and managed on behalf of its joint ventures 213 aircraft leased to 72 customers located in 37 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

 

4


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 2016 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.

 

 

5


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  
  

 

 

      

 

 

 

 

6


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     $ 36,262  
  

 

 

   

 

 

 

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  
  

 

 

   

 

 

 

 

7


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  
  

 

 

   

 

 

 

 

8


Aircastle Limited and Subsidiaries

Selected Financial Guidance Elements for the Second Quarter of 2017

($ in millions, except for percentages)

(Unaudited)

 

Guidance Item

   Q2:17

Lease rental revenue

   $184 - $188  

Finance lease revenue

   $5 - $6  

Maintenance revenue

   $14 - $16  

Amortization of net lease discounts and lease incentives

   ($2) - ($3)

SG&A (1)

   $16 - $17  

Depreciation

   $77 - $79  

Interest, net

   $62 - $64  

Gain on sale

   $6 - $14  

Full year effective tax rate

   4% - 7%

 

(1) Includes ~$2.8M of non-cash share based payment expense.

 

9


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.

 

10


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  
  

 

 

    

 

 

 

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.

 

11


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.

 

12


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.

 

13


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.

 

14


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
 
     Shares      Percent (2)  

Weighted-average shares:

     

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.

 

15


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
 
     Shares      Percent (2)  

Weighted-average shares:

     

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.

 

16