Aircastle Announces First Quarter 2019 Results

STAMFORD, Conn., May 2, 2019 /PRNewswire/ -- 

Key First Quarter 2019 Financial Metrics

• Total revenues were $213.9 million
• Total lease rental and direct financing and sales-type lease revenues were $189.7 million
• Net income was $34.8 million, or $0.46 per diluted common share
• Adjusted net income⁽¹⁾ was $39.6 million, or $0.52 per diluted common share
• Adjusted EBITDA⁽¹⁾ was $199.3 million
• Cash ROE⁽¹⁾ was 11.8%; net cash interest margin was 7.3%

First Quarter 2019 Highlights

• Acquired fourteen narrow-body aircraft for $444.7 million; committed to acquire twelve additional narrow-bodies for $385 million
• Sold four older narrow-body aircraft for $56.3 million and a gain on sale of $12.0 million
• Declared our 52^nd consecutive quarterly dividend
• Repurchased $8.7 million of our shares year-to-date at average price of $17.57 per share

Aircastle Limited (the "Company" or "Aircastle") (NYSE: AYR) reported first quarter 2019 net income of $34.8 million, or $0.46 per diluted common share, and adjusted net income of $39.6 million, or $0.52 per diluted common share.  The first quarter results included total lease rental and direct financing and sales-type lease revenues of $189.7 million, versus $186.9 million in the first quarter of 2018, an increase of 1.5%.

Commenting on the results, Mike Inglese, Aircastle's Chief Executive Officer, stated, "Aircastle continued to deliver strong financial results in the first quarter of 2019.  By focusing on value-added growth opportunities, we have acquired or committed to acquire $830 million of attractively priced aircraft thus far in 2019, while simultaneously improving the quality and composition of our fleet.  Our acquisitions consist entirely of modern, narrow-body aircraft where we continue to see very strong demand from our airline customers."

Mr. Inglese continued, "Our asset management skills were recently highlighted, with the successful recovery and transition of ten Airbus A320-200 aircraft from Avianca Brazil to LATAM Airlines Group S.A.  In line with our earlier expectations, the aircraft will begin to return to service during the second quarter.  In addition, we have lease commitments and are in the process of transitioning the seven Boeing 737 family aircraft that were previously on-lease with Jet Airways."

Mr. Inglese concluded, "As a professional manager of commercial aircraft, we will continue to be responsible stewards of investor capital.  Since our initial public offering in 2006 we have acquired nearly $16 billion of aircraft, paid out $880 million of dividends, and have repurchased more than $270 million of our shares at an average price of $14.57.  We are dedicated to creating long-term value for our shareholders, and our sensible, balanced capital allocation strategy positions us well moving forward."

Financial Results

First Quarter Results

Net income for the quarter was $34.8 million, a decrease of $22.7 million versus the prior year, while adjusted net income was $39.6 million, a decrease of $17.1 million.  Higher total revenues of $11.2 million were offset by higher depreciation of $9.7 million, driven by the effect of net aircraft acquired since the beginning of 2018; higher maintenance expense of $6.4 million due to transition related costs; higher interest expense of $6.4 million from higher average debt balances; and higher combined hedging related costs and income taxes of $9.2 million.

Total revenues were $213.9 million, an increase of $11.2 million, or 5.5%, from the previous year.  The increase was driven by a $2.8 million rise in lease rental and direct financing and sales-type lease revenues, a $6.2 million increase in the gain on the sale of flight equipment, and a $4.4 million increase in maintenance revenues.  Rental revenues were 1.5% higher due to the positive impact of aircraft acquisitions, partly offset by aircraft sold, and the impact of the bankruptcies of Avianca Brazil and Jet Airways.  While rental revenues were $2.8 million higher in the first quarter of 2019 versus the prior year, the unrecognized rental revenue from the two bankrupt airlines totaled $15.9 million for the quarter, or approximately $0.21 per diluted share.  Maintenance revenues improved mainly due to higher lease transitions versus the prior year.  Gain on sale was higher driven by the sale of four aircraft at larger gains versus the prior year and two aircraft which were reclassified as net investment in direct financing and sales-type leases.

Adjusted EBITDA for the first quarter was $199.3 million, an increase of $8.2 million, or 4.3%, from the first quarter of 2018.  The increase was due to higher rental revenues, higher maintenance revenues, and higher gains from aircraft sales, partly offset by higher maintenance related costs.

Aviation Assets

During the first quarter 2019, we acquired fourteen aircraft for $445 million and made commitments to acquire twelve additional aircraft in 2019 for $385 million.  These 26 aircraft have a weighted average age of 7.8 years and a weighted average remaining lease term of 4.8 years.  All of the aircraft that we have acquired or have committed to acquire this year are narrow-body aircraft.

As of March 31, 2019, Aircastle owned 259 aircraft having a net book value of $7.6 billion.  We also manage fifteen aircraft with a net book value of $686 million dollars on behalf of our joint ventures.

Financing Activity

At the end of the first quarter of 2019, the current undrawn available balance under our committed credit facilities totaled $705 million.  Borrowings under our credit facilities totaled $375 million at the end of the first quarter of 2019.

Common Dividend

On April 30, 2019, Aircastle's Board of Directors declared a second quarter 2019 cash dividend on its common shares of $0.30 per share, payable on June 14, 2019 to shareholders of record on May 31, 2019.  This is our 52^nd consecutive dividend.

Share Repurchases

Since the beginning of the year, the Company acquired approximately 497,000 shares at an average price of $17.57 per share.  Aircastle's Board of Directors previously authorized a $100 million share repurchase program, and there is approximately $76 million remaining under this authorization.  Since 2011, the Company has repurchased 18.5 million shares at an average cost of $14.57 per share.

Conference Call

In connection with this earnings release, management will host an earnings conference call on Thursday, May 2, 2019 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 (800) 667-5617 (from within the U.S. and Canada) or (334) 323-0509 (from outside of the U.S. and Canada) ten minutes prior to the scheduled start and referencing the passcode "6382988".

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 Saturday, June 1, 2019 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 "6382988".

About Aircastle Limited

Aircastle Limited acquires, leases and sells commercial jet aircraft to airlines throughout the world.  As of March 31, 2019, Aircastle owned and managed on behalf of its joint ventures 274 aircraft leased to 86 customers located in 47 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 2018 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.

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.

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.

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.

Pro forma Q1:19 estimates the impact of the Avianca Brazil and Jet Airways bankruptcies on cash ROE.

We define net cash interest margin as lease rentals from operating leases, interest income and cash collections from direct financing 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 direct financing 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.

Pro-forma Q1:19 estimates the impact of the Avianca Brazil and Jet Airways bankruptcies on annualized net cash interest margin.

SOURCE Aircastle Limited