Aircastle Announces Fourth Quarter and Full Year 2019 Results; Acquisition on Track

STAMFORD, Conn., Feb. 13, 2020 /PRNewswire/ --

Key Financial Metrics

• Total revenues of $243.7 million for the fourth quarter of 2019 and $917.9 million for the year
• Net income of $47.3 million, or $0.62 per diluted common share, for the fourth quarter and $156.6 million, or $2.06 per diluted common share, for the year
• Adjusted net income⁽¹⁾ was $66.0 million, or $0.87 per diluted common share, for the fourth quarter and $196.5 million, or $2.59 per diluted common share, for the year
• Adjusted EBITDA⁽¹⁾ was $229.5 million for the fourth quarter and $862.2 million for the year
• Cash ROE⁽¹⁾ of 11.1%; net cash interest margin⁽¹⁾ of 8.1%

Highlights

• Previously announced acquisition of Aircastle by affiliates of Marubeni Corporation and Mizuho Leasing Company, Limited is on track to close in the first half
• Acquired sixteen narrow-body aircraft during the fourth quarter for $283.6 million and 49 aircraft in 2019 for $1.3 billion
• Committed to acquire seven additional narrow-body aircraft in 2020 for $165.0 million
• Sold eight aircraft during the fourth quarter and twenty aircraft for the full year; full year gain on sale of $45.5 million represents 12.6% of net proceeds; 2019 sales included two wide-body aircraft
• Placed eleven Embraer E195-E2 aircraft with KLM
• Declared our 55^th consecutive quarterly dividend
• Returned $109.7 million of capital to shareholders during 2019; $91.3 million in dividends paid and $18.4 million of shares repurchased

Aircastle Limited (the "Company" or "Aircastle") (NYSE: AYR) reported fourth quarter 2019 net income of $47.3 million, or $0.62 per diluted common share, and adjusted net income of $66.0 million, or $0.87 per diluted common share.  Net income for the year ended December 31, 2019 was $156.6 million, or $2.06 per diluted common share, and adjusted net income was $196.5 million, or $2.59 per diluted common share.  The fourth quarter results included total revenues of $243.7 million versus $292.6 million in the prior year.  For the full year, total revenues were $917.9 million versus $890.4 million in 2018, an increase of 3.1%.

Commenting on the results, Mike Inglese, Aircastle's Chief Executive Officer, stated, "Our professional placement capability and fleet of high-quality, in-demand aircraft enabled Aircastle to deliver strong financial results in a shifting market environment throughout 2019.  During the fourth quarter, we continued to execute our strategy focused on acquiring narrow-body aircraft.  We closed a total of 49 aircraft during the full year 2019 for $1.3 billion.  The fourth quarter also saw fleet utilization average 99.2%, a return to the level that we have consistently achieved throughout our history, following the placement of aircraft that were previously on lease with Avianca Brazil and Jet Airways.  I am also pleased to report that we've made progress on our E2 program.  During the fourth quarter, we placed eleven additional E-Jets, for a total of fourteen placements out of the twenty-five E2s ordered."

Mr. Inglese concluded, "With the pending acquisition of Aircastle by affiliates of Marubeni and Mizuho Leasing, we are very optimistic about Aircastle's future.  We expect this strong, high-quality sponsorship, and our disciplined investment approach, will enable our company to continue to grow profitably, increase sustainable cash flow and generate attractive, long-term returns.  Both now and following the anticipated acquisition, we will remain consistently focused on the responsible stewardship of investor capital for the benefit of our owners and Aircastle's fixed income investors."

Financial Results

Fourth Quarter Results

Total revenues were $243.7 million, a decrease of $48.8 million, or 16.7%, from the prior year.  While lease rental and direct financing and sales-type lease revenues were up $14.9 million, total revenues declined due to a $72.8 million drop in maintenance revenues.  We recognized substantial maintenance revenue in the fourth quarter of 2018 due to the termination of the leases on eleven aircraft with Avianca Brazil.

Lease rental and direct financing and sales-type lease revenues were $207.6 million, versus $192.7 million the prior year.  The 7.7% increase was primarily due to net fleet growth.  Over the past two years, Aircastle's aircraft fleet increased by 24.1%, from 224 aircraft at the beginning of 2018 to 278 aircraft at year-end 2019.

Net income was $47.3 million, a decline of $56.5 million, while adjusted net income fell by $43.9 million to $66.0 million.  The decrease was due to lower maintenance revenues of $72.8 million.

Adjusted EBITDA was $229.5 million, down 17.1%, or $47.3 million.  Lower maintenance revenues of $72.8 million were partially offset by higher lease rental and direct financing and sales-type lease revenues of $14.9 million and higher gains from the sale of flight equipment of $11.9 million.

Full Year Results

Total revenues in 2019 were $917.9 million, an increase of $27.6 million, while lease rental and direct financing and sales-type lease revenues rose $51.9 million to $809.7 million.  The increase in total revenues was primarily driven by higher lease rental and direct financing and sales-type lease revenues due to fleet growth, along with $8.8 million of higher gains from the sale of flight equipment.  These increases were partially offset by lower maintenance revenues of $30.8 million.  The higher year-over-year gains from the sale of flight equipment were driven by twenty aircraft sold in 2019, versus fourteen sold in 2018.

Net income for the full year was $156.6 million, down $91.3 million year-over-year, while adjusted net income was $196.5 million, a decrease of $60.7 million.  Total revenues increased by $27.6 million as our fleet of owned aircraft rose to 278 at year-end 2019, versus 224 aircraft at the beginning of 2018.  The revenue increase was offset by higher depreciation expense of $45.2 million and higher interest expense of $23.6 million due to fleet growth and larger average debt balances, while the income tax provision was $17.0 million higher primarily due to an increase in income earned in Ireland and the U.S.  In addition, maintenance expenses increased by $15.9 million primarily due to transitioning aircraft from leases terminated with Avianca Brazil and Jet Airways, while non-recurring debt extinguishment and merger related expenses added $22.5 million of incremental cost.

Adjusted EBITDA for the full year was $862.2 million, up $22.3 million versus 2018.  Lease rental and direct financing and sales-type lease revenues rose $51.9 million, and gains from the sale of flight equipment increased by $8.8 million.  These increases were partially offset by lower maintenance revenues of $30.8 million and higher maintenance expenses of $15.9 million.

Aviation Assets

During the fourth quarter, we acquired sixteen aircraft for $283.6 million and for the year we acquired 49 aircraft for $1.3 billion.  Full year acquisitions consisted entirely of narrow-body aircraft and included four Airbus A320-200neos.  At the end of 2019, Aircastle's owned fleet of 278 aircraft had a weighted average age of 9.9 years and a weighted average remaining lease term of 4.8 years.

During the fourth quarter of 2019, we sold eight aircraft for total sales proceeds of $132.7 million and a gain on sale of $20.1 million.  This represents a 15.1% margin on net sales proceeds.  Our fourth quarter sales included one Boeing 777-200ER and one Airbus A330-200 wide-body aircraft.

During the year ended 2019, we sold a total of twenty aircraft for proceeds of $361.7 million and a gain on sale of $45.5 million.  The average age of the aircraft sold was 14.6 years with an average remaining lease term of 2.4 years.

Our fleet utilization for the fourth quarter was 99.2% and 96.4% for the full year 2019.  As of December 31, 2019, Aircastle owned 278 aircraft having a net book value of $7.8 billion. We also managed nine aircraft with a net book value of $327.8 million on behalf of our joint venture with Mizuho Leasing.

2019 Financing Activity

At the end of the fourth quarter of 2019, the undrawn available balance under our committed credit facilities totaled $950 million.  Borrowings under our credit facilities totaled $150 million at the end of 2019.

During 2019, the Company issued $650 million of unsecured Senior Notes due 2026 bearing a coupon of 4.25%, and we raised an additional $480 million of fixed rate, secured bank financing for eleven Airbus A320neo aircraft and two Boeing 737-800 aircraft.  We also increased the size of one of our unsecured revolving credit facilities to $300 million from $250 million.

Lastly, during the year we entered into an unsecured $215 million floating rate loan commitment with Development Bank of Japan Inc., and certain other banks.

Common Dividend

On February 10, 2020, Aircastle's Board of Directors declared a first quarter 2020 cash dividend on its common shares of $0.32 per share, payable on March 6, 2020, to shareholders of record on February 28, 2020.  This is our 55^th consecutive quarterly dividend.  Since going public in 2006, the Company has paid total dividends of $948.7 million.

Share Repurchases

In 2019, the Company acquired 973,528 shares at an average price of $18.88 per share.  Since 2011, the Company repurchased 19.0 million shares at an average cost of $14.72 per share, for approximately $279.9 million.

Merger Agreement with Affiliates of Marubeni and Mizuho Leasing

On November 6, 2019, the Company announced that it entered into a definitive agreement to be acquired by a newly formed entity controlled by affiliates of Marubeni Corporation ("Marubeni") and Mizuho Leasing Company, Limited.  Under the terms of the merger agreement, Aircastle shareholders will receive $32.00 in cash for each common share of Aircastle (other than shares already owned by Marubeni and its affiliates), representing a total valuation of approximately $2.4 billion, or approximately $7.4 billion including debt obligations to be assumed or refinanced net of cash.

The cash consideration of $32.00 per share represented a 34% premium over Aircastle's closing stock price on October 23, 2019, the last trading day prior to Aircastle's public announcement that Aircastle was evaluating strategic alternatives, and a 41% premium over the volume weighted average share price during the 20 trading days ended October 23, 2019.

The transaction is subject to customary closing conditions, including approval by Aircastle's shareholders and receipt of certain regulatory approvals, and is expected to close in the first half of 2020. Marubeni has agreed to vote the common shares of Aircastle that Marubeni and its affiliates beneficially own in favor of the transaction.

Conference Call

In connection with this earnings release, management will host an earnings conference call on Thursday, February 13, 2020, at 11:00 A.M. Eastern time.  All interested parties are welcome to participate on the live call.  The conference call can be accessed by dialing (866) 575-6539 (from within the U.S. and Canada) or (720) 543-0214 (from outside of the U.S. and Canada) ten minutes prior to the scheduled start and referencing the passcode "2629280".

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.  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 14, 2020, 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 "2629280".

About Aircastle Limited

Aircastle Limited acquires, leases and sells commercial jet aircraft to airlines throughout the world.  As of December 31, 2019, Aircastle owned and managed on behalf of its joint ventures 287 aircraft leased to 85 customers located in 49 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 disclosed under "Risk Factors" in Item 1A of Aircastle's 2018 and 2019 Annual Report on Form 10-K and in our Form 10-Q for the quarterly period ended September 30, 2019.  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 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, merger related expenses 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.  To reflect the expected sale of the assets in one of our joint ventures and to simplify the presentation of Cash ROE, we are no longer adjusting for joint venture distributions in excess of/less than joint venture earnings recorded under the equity method of investment accounting.

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.

SOURCE Aircastle Limited