Aircastle Reports Financial Results for the Three-Month Period Ended November 30, 2020

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Aircastle Limited

Jan 14, 2021, 07:30 ET

STAMFORD, Conn., Jan. 14, 2021 /PRNewswire/ --

Key Financial Metrics for the Three Months ended November 30, 2020

Total revenues of $180.9 million
Net income of $2.7 million
Adjusted EBITDA⁽¹⁾ of $167.5 million
Gain on sale of flight equipment of $13.0 million

Recent Highlights

For the nine months ended November 30, 2020, acquired five aircraft for $154.3 million, two of which were A320neo aircraft acquired in a sale leaseback transaction with Volaris
For the nine months ended November 30, 2020, sold six aircraft; average age of approximately eleven years; nine-month gain on sale of $24.2 million; through January 8, 2021, sold four additional aircraft
For the three months ended November 30, 2020, collections represented approximately 90% of lease rental and direct financing and sales-type lease revenues
In September, Moody's affirmed Aircastle's senior unsecured debt rating at Baa3

Liquidity

As of December 31, 2020, total liquidity of $2.2 billion includes $1.25 billion of undrawn credit facilities, $463 million of unrestricted cash, $153 million of contracted asset sales, and $343 million of projected operating cash flows through December 31, 2021
224 unencumbered aircraft with a net book value of $5.4 billion
$753 million of total adjusted contractual commitments through December 31, 2021; includes $500 million of notes due in March 2021

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

Mike Inglese, Aircastle's Chief Executive Officer, commented, "Although 2020 has proven to be a very challenging environment for the aviation industry, we remain optimistic about the recovery of the global airline industry over the long term. As vaccines become more widely available during 2021, we expect passengers to return, and aircraft leasing will play a critical role in the industry's recovery over the next few years. With the strong, long-term shareholder support of Marubeni Corporation and Mizuho Leasing, along with our experienced management team, Aircastle is well positioned to grow in a disciplined and profitable manner over the long run."

Aviation Assets
As of November 30, 2020, Aircastle owned 260 aircraft and other flight equipment having a net book value of $7.0 billion. We also manage nine aircraft with a net book value of $315 million dollars on behalf of our joint venture with Mizuho Leasing.

Owned Aircraft	As of Nov. 30, 2020⁽¹⁾			As of Nov. 30, 2019⁽¹⁾
Net Book Value of Flight Equipment ($ mils.)	$	6,979		$	7,717
Net Book Value of Unencumbered Flight Equipment ($ mils.)	$	5,406		$	5,900
Number of Aircraft	260			270
Number of Unencumbered Aircraft	224			229
Number of Lessees	80			85
Number of Countries	45			48
Weighted Average Fleet Age (years)⁽²⁾	10.5			9.9
Weighted Average Remaining Lease Term (years)⁽²⁾	4.3			4.8
Weighted Average Fleet Utilization for the quarter ended⁽³⁾	94.0		%	99.3		%

Managed Aircraft on behalf of Joint Ventures
Net Book Value of Flight Equipment ($ mils.)	$	315		$	329
Number of Aircraft	9			9

_______________
(1)	Calculated using net book value of flight equipment held for lease and net investment in 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. The decrease from our historical utilization rate was primarily due to the early termination of leases.

Deferrals
In the current environment airlines have sought support from their lessor partners. These requests have generally come in the form of payment deferrals and lease restructurings. As of January 8, 2021, seven of our airline customers are subject to judicial insolvency proceedings or similar protection. We lease 22 aircraft to these customers, which comprise 13% of our net book value of flight equipment and 11% of our reported lease rental and direct financing and sales-type lease revenues for the trailing twelve months ended November 30, 2020. While we anticipate that there may be additional airline bankruptcies and liquidations during the winter, we remain confident that the major US and global carriers, as well as the largest low-cost carriers, have the means to survive the COVID-19 crisis.

We continue to grant deferrals to help certain clients manage through the crisis. As of January 8, 2021, we had executed documents or had approved deferral arrangements with 37 airlines representing approximately 46% of our customer base. The amount currently deferred is $101 million, including $76 million that appears in our November 30, 2020 Consolidated Balance Sheet. This represented approximately 15% of our reported lease rental and direct financing and sales-type lease revenues for the trailing twelve months ended November 30, 2020.

New Fiscal Year End
Aircastle previously announced that we changed our fiscal year end to the twelve-month period ending on the last day in February, beginning February 28, 2021. This change better aligns our financial reporting with the financial reporting cycle of our shareholders, Marubeni Corporation and Mizuho Leasing Company, Limited.

Conference Call
In connection with this press release, management will host a conference call on Thursday, January 14, 2021, 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) 430-8332 (from within the U.S. and Canada) or (786) 204-3966 (from outside of the U.S. and Canada) ten minutes prior to the scheduled start and referencing the passcode "8160028".

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, February 13, 2021, 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 "8160028".

About Aircastle Limited
Aircastle Limited acquires, leases, and sells commercial jet aircraft to airlines throughout the world. As of November 30, 2020, Aircastle owned and managed on behalf of its joint ventures 269 aircraft leased to 80 customers located in 45 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 2019 Annual Report on Form 10-K and in our Form 10-Q for the quarterly period ended March 31, 2020. 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)
(Unaudited)

	November 30, 2020	February 29, 2020
ASSETS
Cash and cash equivalents	$ 416,621	$ 166,083
Restricted cash and cash equivalents	5,341	5,354
Accounts receivable	85,141	27,269
Flight equipment held for lease, net of accumulated depreciation of $1,939,501 and $1,542,938, respectively	6,666,574	7,142,987
Net investment in leases, net of allowance for credit losses of $3,714 and $6,558, respectively	312,038	426,252
Unconsolidated equity method investments	35,448	33,470
Other assets	271,237	206,617
Total assets	$ 7,792,400	$ 8,008,032

LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Borrowings from secured financings, net of debt issuance costs and discounts	$ 937,603	$ 1,012,518
Borrowings from unsecured financings, net of debt issuance costs and discounts	4,130,141	3,884,235
Accounts payable, accrued expenses and other liabilities	191,437	207,114
Lease rentals received in advance	55,480	107,944
Security deposits	82,706	109,663
Maintenance payments	568,135	650,369
Total liabilities	5,965,502	5,971,843

SHAREHOLDERS' EQUITY
Preference shares, $0.01 par value, 50,000,000 shares authorized, no shares issued and outstanding
Common shares, $0.01 par value, 250,000,000 shares authorized, 14,048 shares issued and outstanding at November 30, 2020 and 75,076,794 shares issued and outstanding at February 29, 2020	—	751
Additional paid-in capital	1,485,777	1,456,977
Retained earnings	341,121	578,461

Total shareholders' equity	1,826,898	2,036,189
Total liabilities and shareholders' equity	$ 7,792,400	$ 8,008,032

Aircastle Limited and Subsidiaries
Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
(Dollars in thousands)
(Unaudited)

	Three Months Ended November 30, 2020		Nine Months Ended November 30, 2020
	2020	2019	2020	2019
Revenues:
Lease rental revenue	$ 139,493	$ 199,847	$ 473,566	$ 588,141
Direct financing and sales-type lease revenue	4,839	7,760	14,903	24,407
Amortization of lease premiums, discounts and incentives	(5,384)	(5,819)	(17,360)	(17,077)
Maintenance revenue	24,843	15,360	121,508	55,807
Total lease revenue	163,791	217,148	592,617	651,278
Gain (loss) on sale of flight equipment	12,951	26,512	24,181	39,134
Other revenue	4,169	5,215	17,962	9,370
Total revenues	180,911	248,875	634,760	699,782

Operating expenses:
Depreciation	86,845	90,737	262,806	269,689
Interest, net	59,945	63,204	173,996	194,952
Selling, general and administrative (including non-cash share-based payment expense of $0 and $3,209 for the three months ended November 30, 2020 and 2019, and $28,049 and $9,793 for the nine months ended November 30, 2020 and 2019, respectively)	15,145	18,389	76,152	55,060
Impairment of flight equipment	9,867	—	299,551	7,404
Maintenance and other costs	4,207	6,696	14,044	18,744
Total operating expenses	176,009	179,026	826,549	545,849

Other expense:
Loss on extinguishment of debt	(43)	—	(108)	(7,577)
Merger expenses	(450)	(3,044)	(32,492)	(3,044)
Other	—	(198)	(191)	(3,987)
Total other expense	(493)	(3,242)	(32,791)	(14,608)

Income (loss) from continuing operations before income taxes and earnings of unconsolidated equity method investments	4,409	66,607	(224,580)	139,325
Income tax provision	2,269	7,659	14,738	17,280
Earnings of unconsolidated equity method investments, net of tax	572	601	1,978	2,281
Net income (loss)	$ 2,712	$ 59,549	$ (237,340)	$ 124,326
Total comprehensive income (loss)	$ 2,712	$ 59,549	$ (237,340)	$ 124,326

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

	Nine Months Ended November 30, 2020
	2020	2019
Cash flows from operating activities:
Net income (loss)	$ (237,340)	$ 124,326
Adjustments to reconcile net income (loss) to net cash and restricted cash provided by operating activities
Depreciation	262,806	269,689
Amortization of deferred financing costs	10,642	11,105
Amortization of lease premiums, discounts and incentives	17,360	17,077
Deferred income taxes	12,109	10,512
Non-cash share-based payment expense	28,049	9,793
Collections on net investment in leases	12,953	19,081
Security deposits and maintenance payments included in earnings	(107,732)	(40,496)
Gain on sale of flight equipment	(24,181)	(39,134)
Loss on extinguishment of debt	108	7,577
Impairment of flight equipment	299,551	7,404
Provision for credit losses	5,255	—
Other	(1,991)	219
Changes in certain assets and liabilities:
Accounts receivable	(55,946)	(6,516)
Other assets	(40,780)	6,689
Accounts payable, accrued expenses and other liabilities	(1,875)	(2,951)
Lease rentals received in advance	(54,608)	16,604
Net cash and restricted cash provided by operating activities	124,380	410,979
Cash flows from investing activities:
Acquisition and improvement of flight equipment	(134,263)	(953,170)
Proceeds from sale of flight equipment	113,588	345,318
Aircraft purchase deposits and progress payments, net of returned deposits and aircraft sales deposits	(4,083)	(13,093)
Unconsolidated equity method investments and associated costs	—	(11,681)
Other	(594)	3,572
Net cash and restricted cash used in investing activities	(25,352)	(629,054)
Cash flows from financing activities:
Repurchase of shares	(25,536)	(9,873)
Parent contribution at Merger	25,536	—
Proceeds from secured and unsecured debt financings	1,193,871	2,141,848
Repayments of secured and unsecured debt financings	(1,027,164)	(1,814,686)
Debt extinguishment costs	(108)	(7,183)
Deferred financing costs	(6,358)	(13,343)
Security deposits and maintenance payments received	63,443	149,195
Security deposits and maintenance payments returned	(48,162)	(81,351)
Dividends paid	(24,025)	(67,453)
Net cash and restricted cash provided by financing activities	151,497	297,154
Net increase in cash and restricted cash:	250,525	79,079
Cash and restricted cash at beginning of period	171,437	133,299
Cash and restricted cash at end of period	$ 421,962	$ 212,378

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

	Three Mos. Ended Nov. 30,		Nine Mos. Ended Nov. 30,
	2020	2019	2020	2019

Net income (loss)	$ 2,712	$ 59,549	$ (237,340)	$ 124,326
Depreciation	86,845	90,737	262,806	269,689
Amortization of lease premiums, discounts and incentives	5,384	5,819	17,360	17,077
Interest, net	59,945	63,204	173,996	194,952
Income tax provision	2,269	7,659	14,738	17,280
EBITDA	157,155	226,968	231,560	623,324
Adjustments:
Impairment of Aircraft	9,867	-	299,551	7,404
Equity share of joint venture impairment	-	-	-	2,724
Loss on Extinguishment of debt	43	-	280	7,577
Non-cash share based payment expense	-	3,209	28,049	9,793
Merger related expense *	437	3,043	35,039	3,043
Loss on MTM of interest rate derivative contracts	-	394	19	4,267
Adjusted EBITDA	$ 167,502	$ 233,614	$ 594,498	$ 658,132

* Included $32.5 million in Other expense and $2.6 million in Selling, general and administrative expenses.

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

SOURCE Aircastle Limited