Aircastle Announces First Quarter 2022 Results

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Aircastle Limited

Jul 13, 2022, 07:00 ET

Three Months Ended May 31, 2022

Net income of $8 million and Adjusted EBITDA⁽¹⁾ of $153 million
Cash flows from operations up 58% compared to first quarter 2021
Sold four aircraft and other flight equipment for proceeds of $58 million and a gain on sale of $4 million
Purchased one new Embraer E2 aircraft leased to KLM Cityhopper with a further Embraer E2 aircraft purchased and delivered to the airline in June
Customer collections for the first quarter represented 101% of lease rental and direct financing and sales-type lease revenues
Maintenance and other revenue included $25 million of payments on letters of credit from our former Russian lessees
Interest expense down 13% compared to first quarter 2021, primarily due to repayments and lower cost of capital

Liquidity

Extended and upsized one of our unsecured revolving credit facilities by $50 million
As of July 1, 2022, total liquidity of $1.9 billion includes $1.2 billion of undrawn credit facilities, $0.2 billion of unrestricted cash, $0.1 billion of contracted asset sales, and $0.4 billion of projected adjusted operating cash flows through July 1, 2023
We have 210 unencumbered aircraft with a net book value of $5.3 billion

________________________________________

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

STAMFORD, Conn., July 13, 2022 /PRNewswire/ -- Mike Inglese, Aircastle's Chief Executive Officer, commented, "Demand for air travel continues to be strong despite challenges posed by supply chain disruptions, and concerns over inflation and fuel prices. We're seeing some improvement in Asian markets that had been lagging. We also expect travel to benefit from continued easing of restrictions, such as the United States now dropping its testing requirements for incoming international flights."

Mr. Inglese concluded, "We have strengthened our liquidity profile this quarter, better positioning us to move forward with strategic, new-technology investments. Our favorable credit rating, along with the opportunities afforded by our unique ownership arrangement with the Marubeni Corporation and Mizuho Leasing have us excited for disciplined future growth."

Aviation Assets

As of May 31, 2022, Aircastle owned 241 aircraft and other flight equipment having a net book value of $6.4 billion. We also manage nine aircraft with a net book value of $295 million on behalf of our joint venture with Mizuho Leasing.

Owned Aircraft	As of May 31, 2022	As of May 31, 2021
Net Book Value of Flight Equipment ($ mils.)	$ 6,388	$ 6,584
Net Book Value of Unencumbered Flight Equipment ($ mils.)	$ 5,322	$ 5,400
Number of Aircraft⁽¹⁾	241	250
Number of Unencumbered Aircraft⁽¹⁾	210	218
Number of Lessees	74	76
Number of Countries	44	42
Weighted Average Fleet Age (Years)⁽²⁾	10.4	10.8
Weighted Average Remaining Lease Term (Years)⁽²⁾	5.1	4.5
Weighted Average Fleet Utilization for the quarter ended⁽³⁾	94.8 %	93.1 %

Managed Aircraft on behalf of Joint Ventures
Net Book Value of Flight Equipment ($ mils.)	$ 295	$ 309
Number of Aircraft	9	9


(1)	Excludes eight aircraft that remain in Russia with zero net book value – see Note 3 in the Notes to Unaudited Consolidated Financial Statements.
(2)	Weighted by net book value (flight equipment held for lease and net investment in direct financing and sales-type leases, or "Net Book Value").
(3)	Aircraft on-lease days as a percent of total days in period weighted by net book value.

Conference Call

In connection with this press release, management will host a conference call on Wednesday, July 13, 2022, at 9:00 A.M. Eastern Time. All interested parties are welcome to participate on the live call. The conference call can be accessed by dialing (800) 458-4121 (from within the U.S. and Canada) or (786) 789-4772 (from outside of the U.S. and Canada) ten minutes prior to the scheduled start and referencing the passcode "6552351".

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.

For those who are not available to listen to the live call, a replay will be available until 12:00 P.M. Eastern Time on Saturday, August 13, 2022, 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 "6552351".

About Aircastle Limited

Aircastle Limited acquires, leases and sells commercial jet aircraft to airlines throughout the world. As of May 31, 2022, Aircastle owned and managed on behalf of its joint ventures 250 aircraft leased to 74 customers located in 44 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 and Adjusted EBITDA 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 most recent Form 10-K and any subsequent filings with the SEC. 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)

	May 31, 2022	February 28, 2022
	(Unaudited)
ASSETS
Cash and cash equivalents	$ 241,030	$ 167,891
Restricted cash and cash equivalents	650	2,791
Accounts receivable	61,538	63,666
Flight equipment held for lease, net	6,239,217	6,313,950
Net investment in leases, net	148,300	150,325
Unconsolidated equity method investments	38,828	38,317
Other assets	370,336	356,326
Total assets	$ 7,099,899	$ 7,093,266

LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Borrowings from secured financings, net	$ 644,763	$ 684,039
Borrowings from unsecured financings, net	3,837,104	3,835,841
Accounts payable, accrued expenses and other liabilities	174,965	177,424
Lease rentals received in advance	38,499	37,361
Security deposits	68,832	69,189
Maintenance payments	498,355	459,713
Total liabilities	5,262,518	5,263,567

Commitments and Contingencies

SHAREHOLDERS' EQUITY
Preference shares, $0.01 par value, 50,000,000 shares authorized, 400 (aggregate liquidation preference of $400,000) shares issued and outstanding at May 31, 2022 and February 28, 2022	—	—
Common shares, $0.01 par value, 250,000,000 shares authorized, 14,048 shares issued and outstanding at May 31, 2022 and February 28, 2022	—	—
Additional paid-in capital	1,878,774	1,878,774
Accumulated deficit	(41,393)	(49,075)
Total shareholders' equity	1,837,381	1,829,699
Total liabilities and shareholders' equity	$ 7,099,899	$ 7,093,266

Aircastle Limited and Subsidiaries
Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
(Dollars in thousands, except per share amounts)
(Unaudited)

	Three Months Ended May 31,
	2022	2021
Revenues:
Lease rental revenue	$ 144,144	$ 132,125
Direct financing and sales-type lease revenue	2,598	2,877
Amortization of lease premiums, discounts and incentives	(5,388)	(5,325)
Maintenance revenue	27,099	26,477
Total lease revenue	168,453	156,154
Gain on sale of flight equipment	3,687	9,021
Other revenue	3,424	635
Total revenues	175,564	165,810

Operating expenses:
Depreciation	81,318	82,391
Interest, net	50,294	58,037
Selling, general and administrative	19,916	15,583
Provision for credit losses	580	6
Impairment of flight equipment	4,428	20,583
Maintenance and other costs	8,065	7,528
Total operating expenses	164,601	184,128

Other income (expense):
Loss on extinguishment of debt	(463)	(24)
Other	—	10
Total other income (expense)	(463)	(14)

Income (loss) from continuing operations before income taxes and earnings of unconsolidated equity method investments	10,500	(18,332)
Income tax provision (benefit)	3,329	(8,292)
Earnings of unconsolidated equity method investments, net of tax	511	287

Net income (loss)	$ 7,682	$ (9,753)

Net income (loss) available to common shareholders	$ 7,682	$ (9,753)

Total comprehensive income (loss) available to common shareholders	$ 7,682	$ (9,753)

Aircastle Limited and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)

	Three Months Ended May 31,
	2022	2021
Cash flows from operating activities:
Net income (loss)	$ 7,682	$ (9,753)
Adjustments to reconcile net income (loss) to net cash and restricted cash provided by operating activities:
Depreciation	81,318	82,391
Amortization of deferred financing costs	3,597	4,191
Amortization of lease premiums, discounts and incentives	5,388	5,325
Deferred income taxes	2,865	1,850
Collections on net investment in leases	2,282	3,913
Security deposits and maintenance payments included in earnings	9,076	(13,139)
Loss on extinguishment of debt	463	24
Gain on sale of flight equipment	(3,687)	(9,021)
Impairment of flight equipment	4,428	20,583
Provision for credit losses	580	6
Other	(508)	(290)
Changes in certain assets and liabilities:
Accounts receivable	4,274	1,661
Other assets	(5,008)	(11,651)
Accounts payable, accrued expenses and other liabilities	(4,305)	(3,604)
Lease rentals received in advance	1,848	(2,496)

Net cash and restricted cash provided by operating activities	110,293	69,990
Cash flows from investing activities:
Acquisition and improvement of flight equipment	(63,724)	(70,834)
Proceeds from sale of flight equipment	58,233	63,420
Aircraft purchase deposits and progress payments, net of returned deposits and aircraft sales deposits	(8,716)	11,963

Net cash and restricted cash (used in) provided by investing activities	(14,207)	4,549
Cash flows from financing activities:
Repayments of secured and unsecured debt financings	(39,923)	(27,224)
Debt extinguishment costs	(291)	(24)
Deferred financing costs	(1,860)	(4,604)
Security deposits and maintenance payments received	27,911	22,793
Security deposits and maintenance payments returned	(425)	(475)
Dividends paid	(10,500)	—
Net cash and restricted cash used in financing activities	(25,088)	(9,534)
Net increase in cash and restricted cash	70,998	65,005
Cash and restricted cash at beginning of period	170,682	580,598

Cash and restricted cash at end of period	$ 241,680	$ 645,603

Aircastle Limited and Subsidiaries
Reconciliation of GAAP to Non-GAAP Measures
EBITDA and Adjusted EBITDA Reconciliation
(Dollars in thousands)
(Unaudited)

	Three Months Ended May 31,
	2022	2021
Net income (loss)	$ 7,682	$ (9,753)
Depreciation	81,318	82,391
Amortization of lease premiums, discounts and incentives	5,388	5,325
Interest, net	50,294	58,037
Income tax provision (benefit)	3,329	(8,292)
EBITDA	148,011	127,708
Adjustments:
Impairment of flight equipment	4,428	20,583
Loss on extinguishment of debt	463	24

Adjusted EBITDA	$ 152,902	$ 148,315

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.

Contact:
Aircastle Advisor LLC
Jim Connelly, SVP ESG & Corporate Communications
Tel: +1-203-504-1871
[email protected]

SOURCE Aircastle Limited