Aircastle Limited
Aircastle LTD (Form: 8-K, Received: 02/15/2017 16:27:26)

 

 

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) February 15, 2017 (February 14, 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))

 

 

 


Section 2 – Financial Information

Item 2.02 Results of Operations and Financial Condition.

On February 14, 2017, Aircastle Limited announced financial results for its fourth quarter and full year 2016 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 February 14, 2017 which is being furnished hereto pursuant to Item 2.02.

 

2


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: February 15, 2017

 

3


EXHIBIT INDEX

 

Exhibit Number

  

Description

99.1    Press Release dated February 14, 2017

 

4

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 Fourth Quarter and Full Year 2016 Results

Fleet Upgrade and Portfolio De-risking Continued in the Fourth Quarter

First Quarter 2017 Dividend of $0.26 per Common Share Declared

Key Financial Metrics

 

    Total revenues were $204.7 million for the fourth quarter of 2016 and $773.0 million for the full year

 

    Total lease rental 1 revenues were $191.7 million for the fourth quarter and $742.4 million for the full year

 

    Net income was $67.7 million, or $0.86 per diluted common share for the fourth quarter, and $151.5 million, or $1.92 per diluted common share, for the full year

 

    Adjusted net income 2 was $70.5 million, or $0.90 per diluted common share for the fourth quarter, and $168.5 million, or $2.14 per diluted common share, for the full year

 

    Adjusted EBITDA 2 was $220.5 million for the fourth quarter and $768.0 million for the full year

 

    Cash ROE 2 of 12.3% in 2016; 8.7% net cash interest margin

Highlights

 

    206 aircraft owned and managed for joint ventures

 

    Acquired 60 aircraft in 2016 for $1.6 billion, including 57 narrow-body aircraft

 

    Sold 30 aircraft in 2016 for $755.9 million; sales included seven wide-body and three freighter aircraft; gain on sale was $39.1 million for the full year

 

    Strong lease placement progress during the fourth quarter, including three Singapore A330s; total of two aircraft remaining to place on lease in 2017

 

1 Includes finance and sales-type lease revenue
2   Non-GAAP items reconciled in the Appendix


    Raised $1.3 billion in new financing during 2016 from funding sources worldwide

 

    Declared our 43 rd consecutive quarterly dividend

Stamford, CT. February  14, 2017 – Aircastle Limited (the “Company” or “Aircastle”) (NYSE: AYR) reported fourth quarter 2016 net income of $67.7 million, or $0.86 per diluted common share and adjusted net income of $70.5 million, or $0.90 per diluted common share. Net income for the year ended December 31, 2016 was $151.5 million, or $1.92 per diluted common share, and adjusted net income was $168.5 million, or $2.14 per diluted common share. The fourth quarter results included lease rental revenues of $191.7 million, an increase of 3%, versus $185.7 million in the fourth quarter of 2015. For the full year 2016, lease rental revenues were $742.4 million, versus $741.1 million in 2015.

“The Board is very pleased with Aircastle’s strong 2016 financial performance, and the outstanding effort put forth by the leadership team,” said Peter V. Ueberroth, Aircastle’s Chairman of the Board, speaking on behalf of the Board of Directors.

Mr. Ueberroth added, “We are all looking forward to Ron Wainshal’s full recovery and to his speedy return to the helm of our organization. The company’s management is deep and capable, and under the current leadership of Mike Inglese as acting CEO, we are highly confident the team will capably execute Aircastle’s business plan.”

Commenting on Aircastle’s results, Mike Inglese, Acting Chief Executive Officer, stated, “During the fourth quarter and full year 2016, Aircastle achieved solid earnings growth and generated a strong cash return on equity. At the same time, we seized on opportunities in a dynamic market environment, further expanding the fleet and significantly improving asset quality as we continue to de-risk the business.”

Mr. Inglese continued, “Aircastle took important steps to profitably grow the Company in 2016, with an emphasis on capitalizing on attractive narrow-body opportunities. Specifically, we completed $1.6 billion in aircraft acquisitions during the year, with more than $600 million closing in the fourth quarter. Profitable sales also remained a priority for Aircastle in 2016, as we sold 30 aircraft and further reduced our exposure to the wide-body and freighter markets.”

Mr. Inglese concluded, “We enter 2017 in a strong position with a lot of flexibility. We have significantly transformed our portfolio to focus on narrow-body aircraft, continued to successfully place aircraft and have limited capital commitments. Our success raising $1.3 billion in financing during 2016 has also provided Aircastle with significant liquidity to continue to grow the Company and opportunistically provide value-added solutions to potential sellers of aircraft.”

Financial Results

 

(in thousands, except share data)    Three Months Ended
December 31,
     Year Ended
December 31,
 
     2016      2015      2016      2015  

Total Revenues

   $ 204,653       $ 208,267       $ 772,958       $ 819,202   

Adjusted EBITDA

   $ 220,493       $ 210,972       $ 767,953       $ 832,105   

Net income

   $ 67,724       $ 50,641       $ 151,453       $ 121,729   

Per common share – Diluted

   $ 0.86       $ 0.63       $ 1.92       $ 1.50   

Adjusted net income

   $ 70,525       $ 54,264       $ 168,527       $ 142,271   

Per common share – Diluted

   $ 0.90       $ 0.67       $ 2.14       $ 1.75   


Fourth Quarter Results

Total revenues for the fourth quarter were $204.7 million, a decline of $3.6 million, driven by lower maintenance revenue and lease end termination fees. Maintenance revenues in the fourth quarter of 2015 were $2.9 million higher versus the current year’s fourth quarter due to an unscheduled lease termination with an airline in Russia in the prior year.

Net income for the quarter was $67.7 million, up $17.1 million year-over-year, while adjusted net income was $70.5 million, an increase of $16.3 million. The improvement in both was due to a $16.1 million reduction in non-cash impairment charges along with higher gains on the sale of flight equipment of $9.2 million, partially offset by higher interest expense of $7.7 million.

Adjusted EBITDA for the fourth quarter was $220.5 million, up $9.5 million, due to $9.2 million of higher gains on sale of flight equipment in 2016 versus 2015.

Full Year Results

Lease rental revenues totaled $742.4 million, an increase of $1.3 million versus the previous year. Total revenues in 2016 were $773.0 million, a decline of $46.2 million versus the previous year. The decrease in total revenues was driven by a $37.5 million reduction in maintenance revenues and a $10.4 million decline in lease end termination fees due to a lower number of aircraft that came off lease during 2016 compared to the previous year.

Net income for the full year was $151.5 million, up $29.7 million year-over-year, while adjusted net income was $168.5 million, an increase of $26.3 million. The improvements were primarily driven by a $91.3 million reduction in non-cash aircraft impairment charges, partially offset by lower maintenance revenues, lower gain on sale and lower lease termination fees, which declined a combined $66.8 million.

Adjusted EBITDA for the full year was $768.0 million, down $64.2 million versus 2015, reflecting a $37.5 million decline in maintenance revenue, lower gains from the sale of flight equipment of $18.9 million, and a $10.4 million decrease in lease termination fees mainly associated with the disposal of freighter aircraft during 2015.

Aviation Assets

During 2016, we acquired 60 aircraft for $1.6 billion, including 28 aircraft for $635.8 million during the fourth quarter. The average age of the aircraft acquired during 2016 was 7.4 years and the leases had an average remaining term of approximately 5.4 years. Of the 60 aircraft purchased during the year, 57 aircraft were narrow-bodies.

We currently have acquired or committed to acquire three aircraft in 2017 for $137.3 million. Including our order commitment with Embraer for 25 E-2 aircraft, we have commitments to acquire a total of 28 aircraft for $1.1 billion through 2021.


During 2016, we sold 30 aircraft for net proceeds of $755.9 million, and realized a gain on the sale of flight equipment of $39.1 million. The average age of the aircraft sold during 2016, excluding sales to our joint ventures, was 15.0 years.

In the fourth quarter of 2016, we completed the sale of eleven aircraft, including two wide-body and one freighter aircraft. Full year sales included seven wide-body and three freighter aircraft. Our portfolio sales reduced our freighter exposure to eight aircraft, accounting for 8% of our total fleet net book value.

As of December 31, 2016, Aircastle owned 193 aircraft having a net book value of $6.5 billion. We also managed thirteen aircraft with a net book value of $689 million on behalf of our joint ventures with Ontario Teachers’ Pension Plan and IBJ Ltd. of Japan.

 

    

As of

December 31,

2016 (1)

   

As of

December 31,

2015 (1)

   

As of

December 31,

2014 (1)

 

Owned Aircraft

      

Total Flight Equipment Held for Lease ($ mils.)

   $ 6,508      $ 6,068      $ 5,686   

Unencumbered Flight Equipment Held for Lease ($ mils.)

   $ 4,614      $ 3,928      $ 3,341   

Number of Aircraft

     193        162        148   

Number of Unencumbered Aircraft

     156        118        95   

Weighted Average Fleet Age (years) (2)

     7.9        7.5        8.4   

Weighted Average Remaining Lease Term (years) (2)

     5.1        5.9        5.4   

Weighted Average Fleet Utilization for the year ended (3)

     98.9     99.3     99.6

Portfolio Yield for the year ended (4)

     12.4     12.7     13.4

Net Cash Interest Margin (5)

     8.7     9.2     10.1

Managed Aircraft on behalf of Joint Ventures

      

Flight Equipment

   $ 689      $ 484      $ 505   

Number of Aircraft

     13        5        5   

 

(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.

2016 Financing Activity

We raised $1.3 billion of new financing during 2016. This included $500 million of Senior Notes due in 2023, $434 million of secured bank financing in Europe and a $135 million unsecured revolving credit facility in the Asian market. We also raised $120 million of unsecured financing with Japanese banks and increased the size of our existing revolving credit facility by $75 million to $675 million. The capital raised during the year provides us with an enhanced liquidity profile and significant financial flexibility.


Common Dividend

On February 9, 2017, Aircastle’s Board of Directors declared a first quarter 2017 cash dividend on its common shares of $0.26 per share, payable on March 15, 2017 to shareholders of record on February 28, 2017. Since 2011, Aircastle has increased the dividend seven times for a total increase of 260% over that period.

Conference Call

In connection with this earnings release, management will host an earnings conference call on Tuesday, February 14, 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 (877) 741-4244 (from within the U.S. and Canada) or (719) 325-4834 (from outside of the U.S. and Canada) ten minutes prior to the scheduled start and referencing the passcode “7920472”.

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, March 16, 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 “7920472”.

About Aircastle Limited

Aircastle Limited acquires, leases and sells commercial jet aircraft to airlines throughout the world. As of December 31, 2016, Aircastle owned and managed on behalf of its joint ventures 206 aircraft leased to 71 customers located in 36 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 2015 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)

 

     December 31,  
     2016     2015  

ASSETS

    

Cash and cash equivalents

   $ 455,579      $ 155,904   

Accounts receivable

     6,035        8,566   

Restricted cash and cash equivalents

     53,238        98,137   

Restricted liquidity facility collateral

     —          65,000   

Flight equipment held for lease, net of accumulated depreciation of $1,224,899 and $1,306,024, respectively

     6,247,585        5,867,062   

Net investment in finance and sales-type leases

     260,853        201,211   

Unconsolidated equity method investment

     72,977        50,377   

Other assets

     148,398        123,707   
  

 

 

   

 

 

 

Total assets

   $ 7,244,665      $ 6,569,964   
  

 

 

   

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

    

LIABILITIES

    

Borrowings from secured financings, net of debt issuance costs

   $ 1,219,034      $ 1,146,238   

Borrowings from unsecured financings, net of debt issuance costs

     3,287,211        2,894,918   

Accounts payable, accrued expenses and other liabilities

     127,527        131,058   

Lease rentals received in advance

     62,225        67,327   

Liquidity facility

     —          65,000   

Security deposits

     122,597        115,642   

Maintenance payments

     591,757        370,281   
  

 

 

   

 

 

 

Total liabilities

     5,410,351        4,790.464   
  

 

 

   

 

 

 

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, 78,593,133 shares issued and outstanding at December 31, 2016; and 80,232,260 shares issued and outstanding at December 31, 2015

     786        802   

Additional paid-in capital

     1,521,190        1,550,337   

Retained earnings

     315,890        241,574   

Accumulated other comprehensive loss

     (3,552     (13,213
  

 

 

   

 

 

 

Total shareholders’ equity

     1,834,314        1,779,500   
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 7,244,665      $ 6,569,964   
  

 

 

   

 

 

 


Aircastle Limited and Subsidiaries

Consolidated Statements of Income

(Dollars in thousands, except per share amounts)

(Unaudited)

 

     Three Months Ended
December 31,
    Year Ended
December 31,
 
     2016     2015     2016     2015  

Revenues:

        

Lease rental revenue

   $ 187,550      $ 183,394      $ 725,220      $ 733,417   

Finance and sales-type lease revenue

     4,164        2,306        17,190        7,658   

Amortization of lease premiums, discounts and lease incentives

     (4,934     (376     (10.353     (10,664

Maintenance revenue

     12,987        15,901        33,590        71,049   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total lease revenue

     199,767        201,225        765,647        801,460   

Other revenue

     4,886        7,042        7,311        17,742   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     204,653        208,267        772,958        819,202   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Depreciation

     77,298        81,245        305,216        318,783   

Interest, net

     67,170        59,514        255,660        243,577   

Selling, general and administrative (including non-cash share based payment expense of $2,105 and $1,556 for the three months ended and $7,901 and $5,537 for the twelve months ended December 31, 2016 and 2015, respectively)

     14,989        13,535        61,872        56,198   

Impairment of aircraft

     1,400        17,477        28,585        119,835   

Maintenance and other costs

     2,269        2,376        7,773        11,502   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     163,126        174,147        659,106        749,895   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expense):

        

Gain on sale of flight equipment

     24,194        14,983        39,126        58,017   

Other

     3,663        578        3,527        919   
    

 

 

   

 

 

   

 

 

 

Total other income (expense)

     27,857        15,561        42,653        58,936   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations before income taxes

     69,384        49,681        156,505        128,243   

Income tax provision

     3,525        734        12,307        12,771   

Earnings of unconsolidated equity method investment, net of tax

     1,865        1,694        7,255        6,257   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 67,724      $ 50,641      $ 151,453      $ 121,729   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per common share — Basic:

        

Net income per share

   $ 0.86      $ 0.63      $ 1.92      $ 1.50   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per common share — Diluted:

        

Net income per share

   $ 0.86      $ 0.63      $ 1.92      $ 1.50   
  

 

 

   

 

 

   

 

 

   

 

 

 

Dividends declared per share

   $ 0.26      $ 0.24      $ 0.98      $ 0.90   
  

 

 

   

 

 

   

 

 

   

 

 

 


Aircastle Limited and Subsidiaries

Consolidated Statements of Cash Flows

(Dollars in thousands)

 

     Year Ended December 31,  
     2016     2015  

Cash flows from operating activities:

    

Net income

   $ 151,453      $ 121,729   

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

    

Depreciation

     305,216        318,783   

Amortization of deferred financing costs

     18,508        14,878   

Amortization of net lease discounts and lease incentives

     10,353        10,664   

Deferred income taxes

     6,156        (6,889

Non-cash share based payment expense

     7,901        5,537   

Cash flow hedges reclassified into earnings

     9,662        24,023   

Security deposits and maintenance payments included in earnings

     (23,123     (35,843

Gain on the sale of flight equipment

     (39,126     (58,017

Impairment of aircraft

     28,585        119,835   

Other

     (6,867     (896

Changes on certain assets and liabilities:

    

Accounts receivable

     832        (5,406

Other assets

     (1,089     (5,033

Accounts payable, accrued expenses and other liabilities

     (4,014     7,255   

Lease rentals received in advance

     3,645        15,665   
  

 

 

   

 

 

 

Net cash provided by operating activities

     468,092        526,285   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Acquisition and improvement of flight equipment

     (1,331,059     (1,320,669

Proceeds from sale of flight equipment

     755,898        562,518   

Restricted cash and cash equivalents related to sale of flight equipment

     17,000        (17,000

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

     (9,628     (6,812

Net investment in finance leases

     (78,892     (91,648

Collections on finance leases

     19,413        9,559   

Unconsolidated equity method investment and associated costs

     (18,048     —     

Other

     (839     (610
  

 

 

   

 

 

 

Net cash used in investing activities

     (646,155     (864,662
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Repurchase of shares

     (37,337     (20,881

Proceeds from secured and unsecured debt financings

     1,054,250        975,000   

Repayments of secured and unsecured debt financings

     (588,778     (681,393

Deferred financing costs

     (18,890     (11,881

Restricted secured liquidity facility collateral

     65,000        —     

Liquidity facility

     (65,000     —     

Restricted cash and cash equivalents related to financing activities

     27,899        17,747   

Security deposits and maintenance payments received

     171,672        152,391   

Security deposits and maintenance payments returned

     (51,658     (33,398

Other

     (2,283     —     

Dividends paid

     (77,137     (72,960
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     477,738        324,625   
  

 

 

   

 

 

 

Net increase in cash and cash equivalents

     299,675        (13,752

Cash and cash equivalents at beginning of year

     155,904        169,656   
  

 

 

   

 

 

 

Cash and cash equivalents at end of year

   $ 455,579      $ 155,904   
  

 

 

   

 

 

 


Aircastle Limited and Subsidiaries

Supplemental Financial Information

(Amount in thousands, except per share amounts)

(Unaudited)

 

     Three Months Ended
December 31,
     Year Ended
December 31,
 
     2016      2015      2016      2015  

Revenues

   $ 204,653       $ 208,267       $ 772,958       $ 819,202   

EBITDA 1

   $ 220,651       $ 192,510       $ 734,989       $ 707,524   

Adjusted EBITDA 1

   $ 220,493       $ 210,972       $ 767,953       $ 832,105   

Adjusted net income 1

   $ 70,525       $ 54,264       $ 168,527       $ 142,271   

Adjusted net income allocable to common shares 1

   $ 69,918       $ 53,828       $ 167,129       $ 141,191   

Per common share – Basic

   $ 0.90       $ 0.67       $ 2.14       $ 1.75   

Per common share – Diluted

   $ 0.90       $ 0.67       $ 2.14       $ 1.75   

Basic common shares outstanding

     77,957         80,263         78,161         80,489   

Diluted common shares outstanding

     78,021         80,263         78,204         80,489   

 

1   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
December 31,
    Year Ended
December 31,
 
     2016     2015     2016     2015  
     (Dollars in thousands)  

Net income

   $ 67,724      $ 50,641      $ 151,453      $ 121,729   

Depreciation

     77,298        81,245        305,216        318,783   

Amortization of net lease discounts and lease incentives

     4,934        376        10,353        10,664   

Interest, net

     67,170        59,514        255,660        243,577   

Income tax provision

     3,525        734        12,307        12,771   
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

   $ 220,651      $ 192,510      $ 734,989      $ 707,524   

Adjustments:

        

Impairment of aircraft

     1,400        17,477        28,585        119,835   

Non-cash share-based payment expense

     2,105        1,556        7,901        5,537   

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

     (3,663     (571     (3,522     (791
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 220,493      $ 210,972      $ 767,953      $ 832,105   
  

 

 

   

 

 

   

 

 

   

 

 

 

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
December 31,
    Year Ended
December 31,
 
     2016     2015     2016     2015  
     (Dollars in thousands)  

Net income

   $ 67,724      $ 50,641      $ 151,453      $ 121,729   

Ineffective portion and termination of hedges (1)

     —          (54     —          455   

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

     (3,663     (571     (3,522     (791

Loan termination fee (1)

     3,451        —          4,960        —     

Write-off of deferred financing fees (1)

     908        —          2,880        —     

Non-cash share-based payment expense (3)

     2,105        1,556        7,901        5,537   

Term Financing No. 1 hedge loss amortization charges (1)

     —          —          —          4,401   

Securitization No. 1 hedge loss amortization charges (1)

     —          2,692        4,855        10,940   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income

   $ 70,525      $ 54,264      $ 168,527      $ 142,271   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Included in Interest, net.
(2) Included in Other income (expense).
(3) Included in Selling, general and administrative expenses.

Management believes that Adjusted Net Income (“ANI”) when viewed in conjunction with the Company’s results under U.S. GAAP and the above reconciliation, provides useful information about operating and period-over-period performance, and provides additional information that is useful for evaluating the underlying operating performance of our business without regard to periodic reporting elements related to interest rate derivative accounting, changes related to refinancing activity and non-cash share-based payment expense.


Aircastle Limited and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures

Cash Return on Equity Calculation

(Dollars in thousands)

(Unaudited)

 

                                 Distributions in                      
                                 excess (less            Average         
            Finance Lease      Gain (Loss) on             than) Equity            Shareholders’      12 Month Cash  
     CFFO      Collections      Sale of Eqt.      Deprec.      Earnings     Cash Earnings      Equity      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

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 US 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)

 

            Quarterly             Annualized Net  
            Rental             Cash Interest  
     Average NBV      Revenue      Cash Interest (1)      Margin (2)  

Q1:11

   $ 4,041,967       $ 141,116       $ 41,278         9.9

Q2:11

   $ 4,143,446       $ 143,356       $ 40,021         10.0

Q3:11

   $ 4,222,512       $ 145,890       $ 42,066         9.8

Q4:11

   $ 4,374,921       $ 149,848       $ 43,041         9.8

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

 

1. Excludes loan termination payments of $3.2 million and $3.0 million in the second quarter of 2011 and 2013 respectively. Also excludes loan termination payments of $1.5 million and $3.5 million in the first quarter and fourth quarter of 2016 respectively.
2. Net Cash Interest Margin = Lease rental yield plus finance lease revenue and collections minus interest on borrowings, net of settlements on interest rate derivatives, and other liabilities / average NBV of flight equipment for the period calculated on a quarterly basis, annualized. Based on the growing level of finance and sales-type lease revenue, management revised the calculation of portfolio yield to include our net investment in finance and sales-type leases in the average net book value and to include the interest income and cash collections on our net investment in finance and sales-type leases in lease rentals.

Management believes that net cash interest margin, when viewed in conjunction with the Company’s results under U.S. GAAP and the above reconciliation, provides useful information about the effective deployment of our capital in the context of the yield on our aircraft assets, the utilization of those assets by our lessees, and our ability to borrow efficiently.


Aircastle Limited and Subsidiaries

Selected Financial Guidance Elements for the First Quarter of 2017

($ in millions, except for percentages)

(Unaudited)

 

Guidance Item

   Q1:17

Lease rental revenue

   $188 - $192

Finance lease revenue

   $4 - $5

Maintenance revenue

   $4 - $12

Amortization of net lease discounts and lease incentives

   ($2) - ($3)

SG&A 1

   $15 - $16

Depreciation

   $77 - $79

Interest, net

   $61 - $63

Gain on sale

   $7 - $11

Full year effective tax rate

   9% - 11%

 

1. Includes ~$2.4M of 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
December 31, 2016
    Year Ended
December 31, 2016
 
     Shares     Percent (2)     Shares     Percent (2)  

Weighted-average shares (1) - Basic:

        

Common shares outstanding – Basic

     77,957        99.14     78,161        99.17

Unvested restricted common shares

     677        0.86     654        0.83
  

 

 

   

 

 

   

 

 

   

 

 

 

Total weighted-average shares outstanding

     78,634        100.00     78,815        100.00
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income allocation

        

Net income

   $ 67,724        100.00   $ 151,453        100.00

Distributed and undistributed earnings allocated to unvested restricted shares

     (583     (0.86 %)      (1,257     (0.83 %) 
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings available to common shares

   $ 67,141        99.14   $ 150,196        99.17
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income allocation

        

Adjusted net income

   $ 70,525        100.00   $ 168,527        100.00

Amounts allocated to unvested restricted shares

     (607     (0.86 %)      (1,398     (0.83 %) 
  

 

 

   

 

 

   

 

 

   

 

 

 

Amounts allocated to common shares

   $ 69,918        99.14   $ 167,129        99.17
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) For the three and twelve months ended December 31, 2016, dilutive shares represented contingently issuable shares related to the Company’s PSUs.
(2) Percentages rounded to two decimal places.


Aircastle Limited and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures

Reconciliation of Net Income Allocable to Common Shares

(In thousands)

(Unaudited)

 

     Three Months Ended
December 31, 2015
    Year Ended
December 31, 2015
 
     Shares     Percent (1)     Shares     Percent (1)  

Weighted-average shares:

        

Common shares outstanding – Basic

     80,263        99.20     80,489        99.24

Unvested restricted common shares

     650        0.80     616        0.76
  

 

 

   

 

 

   

 

 

   

 

 

 

Total weighted-average shares outstanding

     80,912        100.00     81,105        100.00
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income allocation

        

Net income

   $ 50,641        100.00   $ 121,729        100.00

Distributed and undistributed earnings allocated to unvested restricted shares

     (407     (0.80 %)      (924     (0.76 %) 
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings available to common shares

   $ 50,234        99.20   $ 120,805        99.24
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income allocation

        

Adjusted net income

   $ 54,264        100.00   $ 142,271        100.00

Amounts allocated to unvested restricted shares

     (436     (0.80 %)      (1,080     (0.76 %) 
  

 

 

   

 

 

   

 

 

   

 

 

 

Amounts allocated to common shares

   $ 53,828        99.20   $ 141,191        99.24
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Percentages rounded to two decimal places.