Aircastle Announces Fourth Quarter and Full Year 2014 Results

STAMFORD, Conn., Feb. 19, 2015 /PRNewswire/ --

Key Financial Metrics

• Total revenues were $238.3 million for the fourth quarter and $818.6 million for the full year, up 24% and 16% year over year, respectively
• Net income was $72.8 million, or $0.90 per diluted common share for the fourth quarter, and $100.8 million, or $1.25 per diluted common share, for the full year
• Adjusted net income was $80.1 million, or $0.99 per diluted common share for the fourth quarter, and $167.6 million, or $2.07 per diluted common share, for the full year
• Adjusted EBITDA was $233.2 million for the fourth quarter and $792.3 million for the full year, up 19% and 10% year over year, respectively
• Full year 2014 cash ROE was 11.7% and net cash interest margin was 10.0%

Highlights

• Upgraded our portfolio during 2014 through $1.8 billion in acquisitions and the sale of 49 aircraft for $833 million
• Reduced our average interest cost in 2014 to 4.69% from 5.37% the prior year
• 35^th consecutive quarterly dividend declared by Aircastle's Board of Directors
• Grew our joint venture with Ontario Teachers' to $545 million in assets at year end

Aircastle Limited (the "Company" or "Aircastle") (NYSE: AYR) reported fourth quarter 2014 net income of $72.8 million, or $0.90 per diluted common share and adjusted net income of $80.1 million, or $0.99 per diluted common share.  Net income for the year ended December 31, 2014 was $100.8 million, or $1.25 per diluted common share, and adjusted net income was $167.6 million, or $2.07 per diluted common share.  The fourth quarter results included total revenues of $238.3 million, an increase of 24%, versus $192.0 million in the fourth quarter of 2013.  For the full year 2014, total revenues were $818.6 million, up 16% versus $708.6 million in 2013. 

Commenting on the results, Ron Wainshal, Aircastle's CEO, stated "2014 was a year full of significant activity in which we solidified Aircastle's position as the leading value investor in the aircraft leasing industry.  Aircastle's strategy is differentiated from that of our competitors, and we saw the merits of this approach in the great progress we made over the past year in growing our business and improving our financial metrics while simultaneously improving the quality of our portfolio despite a very competitive and fluid business environment." 

Mr. Wainshal continued, "We plan to continue demonstrating the competitive advantages of our leading position as a value investor, supported by our world-class team, our flexible capital structure and our key long term shareholders.  We are gratified and energized by the steady progress we are making.  We are intent on driving further improvements in our financial performance, and I believe achieving an investment grade credit rating will bring us closer to realizing the company's full potential." 

Fourth Quarter Results

Total revenues for the fourth quarter were $238.3 million, an increase of $46.3 million, or 24% from the previous year, driven by higher maintenance revenues of $27.6 million reflecting the early return of several aircraft on lease with Russia-based airlines and higher lease rentals of $8.9 million. 

Adjusted EBITDA for the fourth quarter was $233.2 million, up $37.2 million, or 19% from the fourth quarter of 2013, due primarily to higher total revenues, excluding amortization of net lease discounts and incentives, of $38.3 million.        

Adjusted net income for the quarter was $80.1 million, up $25.2 million or 46%, year over year.  The increase was due primarily to higher total revenues of $46.3 million partially offset by higher non-cash impairment charges of $22.0 million primarily related to the early return and exit of aircraft.

Full Year Results

Total revenues for 2014 were $818.6 million, an increase of $110.0 million, up 16% from the previous year.  The increase reflects higher lease rental and finance lease revenue of $64.5 million, higher maintenance revenue of $19.7 million and lower amortization of lease premiums, discounts and lease incentive amortization of $26.2 million.      

Adjusted EBITDA for the full year was $792.3 million, up $75.1 million or 10% versus 2013, reflecting higher total revenues excluding amortization of net lease discounts and lease incentives of $83.7 million, partially offset by lower gains from the sale of flight equipment of $14.1 million.   

Adjusted net income for the full year was $167.6 million compared to $59.3 million in 2013, an increase of $108.4 million.  Higher total revenues of $110.0 million and lower adjusted operating expenses of $15.4 million were partially offset by lower gains from the sale of flight equipment of $14.1 million. 

Aviation Assets

During 2014, we acquired 35 aircraft for $1.8 billion, including 21 aircraft for $749.2 million during the fourth quarter.  Most of our 2014 acquisitions by value were aircraft less than five years old that are on long term leases with relatively strong operators.  Additionally, we also acquired $467.4 million in mid-aged narrow-body aircraft, including twelve aircraft through a purchase and lease-back transaction with a major European flag carrier.  In many cases, we believe we were successful in winning business due to our ability to move quickly and reliably given our cash reserves and team strengths.     

During 2014, we sold 49 aircraft for net proceeds of $833.0 million, resulting in a pre-tax impact of $40.2 million.  Three of these aircraft were sold to our joint venture with Ontario Teachers', which grew to $545 million in total assets at year end 2014.  We continue to use the joint venture to pursue larger transactions and help us manage exposure concentrations. 

The other 46 sold aircraft had an average age of 19 years and consisted of a mix of "exit" and "opportunistic" sales.  Exit sales aircraft are generally nearing the end of their economic lives and are, in most cases, older technology models.  Consistent with our strategy to reduce exposure to the air cargo market, our sales in this category include five freighter aircraft.  Opportunistic sales entail situations where we sought to capture strong market demand and have enabled us to realize gains. 

Given the sharp deterioration of business conditions and a significantly weakened home currency since the start of the fourth quarter, we reduced our passenger aircraft exposure to Russia-based airlines from ten to three aircraft today.  One of these aircraft was sold during the fourth quarter for a modest profit and another has been leased.  We are in the process of remarketing the other aircraft, which we expect to have on lease by the end of the second quarter of 2015.    

As of December 31, 2014, Aircastle owned 148 aircraft having a net book value of $5.7 billion.

Marubeni Shareholder Agreement Update

On February 18, 2015, Aircastle Limited and The Marubeni Corporation of Japan ("Marubeni") modified the terms of the existing Shareholder Agreement dated as of June 6, 2013.  Under the existing Shareholder Agreement, Marubeni was restricted to holding a maximum of 21.0% of the voting power of the Company until July 12, 2016, and 27.5% thereafter until the agreement expired on July 12, 2023.   The amendment permits Marubeni to acquire up to 27.5% of the voting power in the Company through secondary market purchases.  In return, the term of the standstill provision of the Shareholder Agreement will be extended from July 12, 2023 until January 12, 2025.

Financing Activity

During 2014, we raised more than $900 million of senior debt which reduced the average interest cost to 4.69% from 5.37% while maintaining our average remaining debt term at 4.2 years.  This activity included issuing $500 million of 5.125% senior unsecured notes due in 2021 in March and using the proceeds to redeem $450 million of 9.75% senior unsecured notes that were due in 2018.  In connection with the redemption of the 9.75% notes, we recorded a $36.6 million debt extinguishment expense, which included a $32.8 million call premium paid to the noteholders during the second quarter.  We also completed $303 million of secured borrowings related to various aircraft and increased the size and duration of our unsecured revolving credit facility.

Thus far in 2015, we issued $500 million in unsecured 5.50% Senior Notes due 2022, and further increased the size of our unsecured revolving credit facility to $600 million.  This additional capital provides us with increased resources to pursue aircraft acquisitions while also enhancing our financial flexibility.

Common Dividend

On February 17, 2015, Aircastle's Board of Directors declared a first quarter 2015 cash dividend on its common shares of $0.22 per share, payable on March 13, 2015 to shareholders of record on March 6, 2015.  This is our 35^th consecutive dividend.  During 2014, Aircastle increased the dividend to common shareholders to the current quarterly rate of $0.22 per share, a 10% increase over the quarterly rate at the end of 2013. 

Conference Call

In connection with this earnings release, management will host an earnings conference call on Thursday, February 19, 2015 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) 210-9006 (from within the U.S. and Canada) or (719) 325-2168 (from outside of the U.S. and Canada) ten minutes prior to the scheduled start and referencing the passcode "9750029".

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, March 21, 2015 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 "9750029".

About Aircastle Limited

Aircastle Limited acquires, leases and sells commercial jet aircraft to airlines throughout the world.  As of December 31, 2014, Aircastle's aircraft portfolio consisted of 148 aircraft on lease with 54 customers located in 34 countries.

Safe Harbor

Certain items in this press release and other information we provide from time to time, may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, but not necessarily limited to, statements relating to our ability to acquire, sell, lease or finance aircraft, raise capital, pay dividends, and increase revenues, earnings, EBITDA, Adjusted EBITDA, Adjusted Net Income, Cash ROE 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 forward-looking statements contained in this report. Factors that could have a material adverse effect on our operations and future prospects or that could cause actual results to differ materially from Aircastle's expectations include, but are not limited to, capital markets disruption or volatility which could adversely affect our continued ability to obtain additional capital to finance new investments or our working capital needs; government fiscal or tax policies, general economic and business conditions or other factors affecting demand for aircraft or aircraft values and lease rates; our continued ability to obtain favorable tax treatment in Bermuda, Ireland and other jurisdictions; our ability to pay dividends; high or volatile fuel prices, lack of access to capital, reduced load factors and/or reduced yields, operational disruptions caused by political unrest and other factors affecting the creditworthiness of our airline customers and their ability to continue to perform their obligations under our leases, and other risks detailed from time to time in Aircastle's filings with the Securities and Exchange Commission ("SEC"), including as described in Item 1A. "Risk Factors" and elsewhere in this report. 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 report. Aircastle expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.

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

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.

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. 

 

Contact:
Frank Constantinople, SVP Investor Relations
Tel: +1-203-504-1063
[email protected]

The IGB Group
Leon Berman
Tel: +1-212-477-8438
[email protected]

SOURCE Aircastle Limited