Attached files

file filename
8-K - FORM 8-K - Aircastle LTDd877449d8k.htm

Exhibit 99.1

 

LOGO

FOR IMMEDIATE RELEASE

Contact:

Frank Constantinople, SVP Investor Relations

Tel: +1-203-504-1063

fconstantinople@aircastle.com

The IGB Group

Leon Berman

Tel: +1-212-477-8438

lberman@igbir.com

Aircastle Announces Fourth Quarter and Full Year 2014 Results

Board Declares First Quarter 2015 Dividend of $0.22 per Common Share

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

 

    35th 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

Stamford, CT. February 19, 2015 – 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

 

 

Note: Non-GAAP items reconciled in the Appendix.


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.”

Financial Results

 

(in thousands, except share data)

   Three Months Ended
December 31,
     Twelve Months Ended
December 31,
 
     2013      2014      2013      2014  

Total Revenues

   $ 191,988       $ 238,257       $ 708,645       $ 818,602   

Adjusted EBITDA

   $ 195,965       $ 233,200       $ 717,209       $ 792,283   

Net income

   $ 48,421       $ 72,764       $ 29,781       $ 100,828   

Per common share – Diluted

   $ 0.60       $ 0.90       $ 0.40       $ 1.25   

Adjusted net income

   $ 54,899       $ 80,145       $ 59,260       $ 167,642   

Per common share – Diluted

   $ 0.68       $ 0.99       $ 0.80       $ 2.07   

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.

 

2


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.

 

($ in thousands)

   Number
of
Aircraft
     Maintenance
Revenue
     Lease
Incentive
Revenue
     Gain
(Loss) on
Sale of
Flight
Equipment
    Impairment     Pre-tax
Impact
 

Opportunistic sales

     28       $ 3,171       $ —         $ 38,363      $ —        $ 41,534   

Exit Sales

     19         56,129         776         (15,217     (24,940     16,748   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total Sales

  47      59,300      776      23,146      (24,940   58,282   

Freighters Held for Sale1

  2      9,137    $ 3,626      —        (30,877   (18,114
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total

  49    $ 68,437    $ 4,402    $ 23,146    $ (55,817 $ 40,168   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

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.

 

 

1  Includes two 747-400 converted freighter aircraft which were designated for sale. One of these aircraft was sold in January, 2015 while the other is under a consignment contract and is in the process of being parted out.

 

3


    

Owned

Aircraft as of

December 31,

2012(1)

   

Owned

Aircraft as of

December 31,

2013(1)

   

Owned

Aircraft as of

December 31,

2014(1)

 

Total Flight Equipment Held for Lease ($ mils.)

   $ 4,783      $ 5,190      $ 5,686   

Unencumbered Flight Equipment Held for Lease ($ mils.)

   $ 2,092      $ 2,655      $ 3,341   

Number of Aircraft

     159        162        148   

Number of Unencumbered Aircraft

     72        80        95   

Passenger Aircraft (% of NBV)

     71     81     86

Freighter Aircraft (% of NBV)

     29     19     14

Weighted Average Fleet Age (years)(2)

     10.7        9.9        8.4   

Weighted Average Remaining Lease Term (years)(3)

     5.0        5.0        5.4   

Weighted Average Fleet Utilization for the year ended(4)

     98.8     98.7     99.6

Portfolio Yield for the year ended(5)

     13.8     13.6     13.3

Net Cash Interest Margin(6)

     10.0     9.7     10.0

 

(1) Calculated using net book value of flight equipment held for lease and net investment in finance leases at period end.
(2) Weighted average age (years) by net book value.
(3) Weighted average remaining lease term (years) by net book value.
(4) Aircraft on-lease days as a percent of total days in period weighted by net book value.
(5) Lease rental revenue for the period as a percent of the average net book value of flight equipment held for lease for the period.
(6) Net Cash Interest Margin = Lease rental yield minus interest on borrowings, net of settlements on interest rate derivatives, and other liabilities / average NBV of flight equipment for the period calculated on a quarterly basis, annualized.

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.

 

4


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 35th 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”.

 

5


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.

 

6


Aircastle Limited and Subsidiaries

Consolidated Balance Sheets

(Dollars in thousands, except share data)

 

     December 31,  
     2013     2014  

ASSETS

    

Cash and cash equivalents

   $ 654,613      $ 169,656   

Accounts receivable

     2,825        3,334   

Restricted cash and cash equivalents

     122,773        98,884   

Restricted liquidity facility collateral

     107,000        65,000   

Flight equipment held for lease, net of accumulated depreciation of $1,430,325 and $1,294,063

     5,044,410        5,579,718   

Net investment in finance leases

     145,173        106,651   

Unconsolidated equity method investment

     21,123        46,453   

Other assets

     153,976        157,317   
  

 

 

   

 

 

 

Total assets

$ 6,251,893    $ 6,227,013   
  

 

 

   

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

LIABILITIES

Borrowings from secured financings (including borrowings of ACS Ireland VIEs of $152,545 and $64,183, respectively)

$ 1,586,835    $ 1,396,454   

Borrowings from unsecured financings

  2,150,527      2,400,000   

Accounts payable, accrued expenses and other liabilities

  111,661      137,984   

Lease rentals received in advance

  49,235      53,216   

Liquidity facility

  107,000      65,000   

Security deposits

  118,804      117,689   

Maintenance payments

  442,432      333,456   

Fair value of derivative liabilities

  39,992      2,879   
  

 

 

   

 

 

 

Total liabilities

  4,606,486      4,506,678   
  

 

 

   

 

 

 

Commitments and Contingencies

SHAREHOLDERS’ EQUITY

Preference shares, $.01 par value, 50,000,000 shares authorized, no shares issued and outstanding

  —        —     

Common shares, $.01 par value, 250,000,000 shares authorized, 80,806,975 shares issued and outstanding at December 31, 2013; and 80,983,249 shares issued and outstanding at December 31, 2014

  808      810   

Additional paid-in capital

  1,562,106      1,565,180   

Retained earnings

  158,398      192,805   

Accumulated other comprehensive loss

  (75,905   (38,460
  

 

 

   

 

 

 

Total shareholders’ equity

  1,645,407      1,720,335   
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

$ 6,251,893    $ 6,227,013   
  

 

 

   

 

 

 

 

7


Aircastle Limited and Subsidiaries

Consolidated Statements of Income

(Dollars in thousands, except per share amounts)

(Unaudited)

 

     Three Months Ended
December 31,
     Twelve Months Ended
December 31,
 
     2013     2014      2013     2014  

Revenues:

         

Lease rental revenue

   $ 169,273      $ 178,202       $ 644,929      $ 714,654   

Finance lease revenue

     4,045        1,559         16,165        10,906   

Amortization of lease premiums, discounts and lease incentives

     (6,884     1,080         (32,411     (6,172

Maintenance revenue (including contra maintenance revenue of $0 and $6,217 for the three months ended and $0 and $31,254 for the twelve months ended December 31, 2013 and 2014, respectively)

     25,359        52,971         68,342        88,006   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total lease revenue

  191,793      233,812      697,025      807,394   

Other revenue

  195      4,445      11,620      11,208   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total revenues

  191,988      238,257      708,645      818,602   
  

 

 

   

 

 

    

 

 

   

 

 

 

Operating expenses:

Depreciation

  72,476      74,135      284,924      299,365   

Interest, net

  60,106      56,827      243,757      238,378   

Selling, general and administrative (including non-cash share based payment expense of $1,638 and $1,077 for the three months ended and $4,569 and $4,244 for the twelve months ended December 31, 2013 and 2014, respectively)

  14,139      13,955      53,436      55,773   

Impairment of Aircraft

  4,971      26,988      117,306      93,993   

Maintenance and other costs

  2,167      2,017      13,631      7,239   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total expenses

  153,859      173,922      713,054      694,748   
  

 

 

   

 

 

    

 

 

   

 

 

 

Other income (expense):

Gain on sale of flight equipment

  11,619      9,762      37,220      23,146   

Loss on extinguishment of debt

  —        —        —        (36,570

Other

  1,116      449      6,132      1,207   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total other income (expense)

  12,735      10,211      43,352      (12,217
  

 

 

   

 

 

    

 

 

   

 

 

 

Income from continuing operations before income taxes

  50,864      74,546      38,943      111,637   

Income tax provision

  2,496      2,938      9,215      13,863   

Earnings of unconsolidated equity method investment, net of tax

  53      1,156      53      3,054   
  

 

 

   

 

 

    

 

 

   

 

 

 

Net income

$ 48,421    $ 72,764    $ 29,781    $ 100,828   
  

 

 

   

 

 

    

 

 

   

 

 

 

Earnings per common share – Basic:

Net income per share

$ 0.60    $ 0.90    $ 0.40    $ 1.25   
  

 

 

   

 

 

    

 

 

   

 

 

 

Earnings per common share – Diluted:

Net income per share

$ 0.60    $ 0.90    $ 0.40    $ 1.25   
  

 

 

   

 

 

    

 

 

   

 

 

 

Dividends declared per share

$ 0.20    $ 0.22    $ 0.695    $ 0.82   
  

 

 

   

 

 

    

 

 

   

 

 

 

 

8


Aircastle Limited and Subsidiaries

Consolidated Statements of Cash Flows

(Dollars in thousands)

 

     Years Ended December 31,  
     2013     2014  

Cash flows from operating activities:

    

Net income

   $ 29,781      $ 100,828   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation

     284,924        299,365   

Amortization of deferred financing costs

     14,719        13,961   

Amortization of net lease discounts and lease incentives

     32,411        6,172   

Deferred income taxes

     4,416        2,863   

Non-cash share based payment expense

     4,569        4,244   

Cash flow hedges reclassified into earnings

     33,265        34,979   

Security deposits and maintenance payments included in earnings

     (60,112     (107,031

Gain on the sale of flight equipment

     (37,220     (23,146

Loss on extinguishment of debt

     —          36,570   

Impairment of aircraft

     117,306        93,993   

Other

     (5,323     (878

Changes on certain assets and liabilities:

    

Accounts receivable

     3,397        (509

Restricted cash and cash equivalents related to operating activities

     —          —     

Other assets

     1,164        (11,146

Accounts payable, accrued expenses and other liabilities

     3,016        1,345   

Lease rentals received in advance

     (2,276     7,176   
  

 

 

   

 

 

 

Net cash provided by operating activities

  424,037      458,786   
  

 

 

   

 

 

 

Cash flows from investing activities:

Acquisition and improvement of flight equipment

  (1,263,706   (1,672,460

Proceeds from sale of flight equipment

  568,045      832,961   

Restricted cash and cash equivalents related to sale of flight equipment

  —        —     

Aircraft purchase deposits and progress payments, net of returned deposits and aircraft sales deposits

  (6,094   —     

Net investment in finance leases

  (11,595   (14,258

Collections on finance leases

  9,508      10,312   

Unconsolidated equity method investment and associated costs

  (20,189   (18,255

Distributions from unconsolidated equity method investment in excess of earnings

  —        667   

Purchase of debt investment

  —        —     

Principal repayments on debt investment

  42,001      —     

Other

  (903   (569
  

 

 

   

 

 

 

Net cash used in investing activities

  (682,933   (861,602
  

 

 

   

 

 

 

Cash flows from financing activities:

Issuance of shares net of repurchases

  197,437      (2,092

Proceeds from notes and term debt financings

  563,230      1,003,200   

Securitization and term debt financing repayments

  (510,162   (984,517

Deferred financing costs

  (10,865   (15,843

Restricted secured liquidity facility collateral

  —        42,000   

Secured liquidity facility collateral

  —        (42,000

Restricted cash and cash equivalents related to financing activities

  (10,831   23,889   

Debt extinguishment costs

  —        (32,835

Security deposits and maintenance payments received

  200,678      178,805   

Security deposits and maintenance payments returned

  (82,137   (152,900

Payments for terminated cash flow hedges and payment for option

  —        (33,427

Dividends paid

  (52,058   (66,421
  

 

 

   

 

 

 

Net cash provided by financing activities

  295,292      (82,141
  

 

 

   

 

 

 

Net increase in cash and cash equivalents

  36,396      (484,957

Cash and cash equivalents at beginning of year

  618,217      654,613   
  

 

 

   

 

 

 

Cash and cash equivalents at end of year

$ 654,613    $ 169,656   
  

 

 

   

 

 

 

 

9


Aircastle Limited and Subsidiaries

Supplemental Financial Information

(Amount in thousands, except per share amounts)

(Unaudited)

 

     Three Months Ended
December 31,
     Twelve Months Ended
December 31,
 
     2013      2014      2013      2014  

Revenues

   $ 191,988       $ 238,257       $ 708,645       $ 818,602   

EBITDA

   $ 190,383       $ 205,584       $ 600,088       $ 658,606   

Adjusted EBITDA

   $ 195,965       $ 233,200       $ 717,209       $ 792,283   

Adjusted net income

   $ 54,899       $ 80,145       $ 59,260       $ 167,642   

Adjusted net income allocable to common shares

   $ 54,433       $ 79,545       $ 58,786       $ 166,425   

Per common share – Basic

   $ 0.68       $ 0.99       $ 0.80       $ 2.07   

Per common share – Diluted

   $ 0.68       $ 0.99       $ 0.80       $ 2.07   

Basic common shares outstanding

     80,154         80,390         73,653         80,389   

Diluted common shares outstanding

     80,154         80,390         73,653         80,389   

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

 

10


Aircastle Limited and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures

EBITDA and Adjusted EBITDA Reconciliation

(Dollars in thousands)

(Unaudited)

 

     Three Months Ended
December 31,
     Twelve Months Ended
December 31,
 
     2013      2014      2013      2014  
     (Dollars in thousands)  

Net income (loss)

   $ 48,421       $ 72,764       $ 29,781       $ 100,828   

Depreciation

     72,476         74,135         284,924         299,365   

Amortization of net lease discounts and lease incentives

     6,884         (1,080      32,411         6,172   

Interest, net

     60,106         56,827         243,757         238,378   

Income tax provision

     2,496         2,938         9,215         13,863   
  

 

 

    

 

 

    

 

 

    

 

 

 

EBITDA

$ 190,383    $ 205,584    $ 600,088    $ 658,606   

Adjustments:

Impairment of aircraft

  4,971      26,988      117,306      93,993   

Loss on extinguishment of debt

  —        —        —        36,570   

Non-cash share based payment expense

  1,638      1,077      4,569      4,244   

Gain on mark to market of interest rate derivative contracts

  (1,027   (449   (4,754   (1,130
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

$ 195,965    $ 233,200    $ 717,209    $ 792,283   
  

 

 

    

 

 

    

 

 

    

 

 

 

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.

 

11


Aircastle Limited and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures

Adjusted Net Income Reconciliation

(Dollars in thousands)

(Unaudited)

 

     Three Months Ended
December 31,
     Twelve Months Ended
December 31,
 
     2013      2014      2013      2014  
     (Dollars in thousands)  

Net income

   $ 48,421       $ 72,764       $ 29,781       $ 100,828   

Loss on extinguishment of debt(2)

     —           —           —           36,570   

Loan termination fee(1)

     —           —           2,954         —     

Ineffective portion and termination of hedges(1)

     171         619         2,393         660   

Gain on mark to market of interest rate derivative contracts(2)

     (1,027      (449      (4,754      (1,130

Write-off of deferred financing fees(1)

     —           —           3,975         —     

Non-cash share based payment expense(3)

     1,638         1,077         4,569         4,244   

Term Financing No. 1 hedge loss amortization charges(1)

     4,365         3,310         17,843         14,854   

Securitization No. 1 hedge loss amortization charges(1)

     1,331         2,824         2,499         11,616   
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted net income

$ 54,899    $ 80,145    $ 59,260    $ 167,642   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Included in Interest, net.
(2) Included in Other income (expense).
(3) Included in Selling, general and administrative expenses.

 

12


Aircastle Limited and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures

Cash Return on Equity Calculation

(Dollars in thousands)

(Unaudited)

 

Quarter Ending

   Cash Flow
from
Operations
     Collections
on Finance
Leases
     Gain/
(Loss) on
Sale of
Flight
Equipment
     Depreciation     Distributions
from Joint
Venture
    Cash
Earnings
     Cash
Earnings
Trailing 12
Months
     LTM
Average
Shareholders’
Equity
     Cash
ROE
 

3/31/2012

   $ 72,966          $ 196       ($ 64,514     $ 8,648       $ 151,436       $ 1,391,290         10.9

6/30/2012

   $ 119,142       $ 1,476       $ 2,855       ($ 67,097     $ 56,376       $ 156,313       $ 1,407,491         11.1

9/30/2012

   $ 113,848       $ 565       $ 11       ($ 68,413     $ 46,011       $ 161,569       $ 1,413,218         11.4

12/31/2012

   $ 121,321       $ 1,811       $ 2,685       ($ 69,896     $ 55,921       $ 166,956       $ 1,425,658         11.7

3/31/2013

   $ 92,747       $ 1,845       $ 1,192       ($ 69,900     $ 25,884       $ 184,192       $ 1,431,146         12.9

6/30/2013

   $ 100,692       $ 2,207       $ 21,317       ($ 72,079     $ 52,137       $ 179,953       $ 1,436,324         12.5

9/30/2013

   $ 125,874       $ 2,606       $ 3,092       ($ 70,469     $ 61,103       $ 195,045       $ 1,462,886         13.3

12/31/2013

   $ 104,724       $ 2,850       $ 11,619       ($ 72,476     $ 46,717       $ 185,841       $ 1,513,156         12.3

3/31/2014

   $ 102,991       $ 2,773       $ 1,110       ($ 73,927   $ 388      $ 33,335       $ 193,292       $ 1,558,848         12.4

6/30/2014

   $ 111,014       $ 3,446       $ 884       ($ 75,784   $ 263      $ 39,823       $ 180,978       $ 1,600,660         11.3

9/30/2014

   $ 151,970       $ 1,877       $ 11,390       ($ 75,519   $ 346      $ 90,064       $ 209,939       $ 1,637,202         12.8

12/31/2014

   $ 92,811       $ 2,216       $ 9,762       ($ 74,135   ($ 330   $ 30,324       $ 193,546       $ 1,661,240         11.7

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.

 

13


Aircastle Limited and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures

Net Cash Interest Margin Calculation

(Dollars in thousands)

(Unaudited)

 

     Average
NBV of
Flight
Equipment
     Quarterly
Lease
Rental
Revenue
     Cash
Interest1
     Annualized
Net Cash
Interest
Margin
 

Q1:12

   $ 4,388,008       $ 152,242       $ 44,969         9.8

Q2:12

   $ 4,516,973       $ 153,624       $ 48,798         9.3

Q3:12

   $ 4,602,185       $ 159,546       $ 41,373         10.3

Q4:12

   $ 4,605,783       $ 158,090       $ 43,461         10.0

Q1:13

   $ 4,619,204       $ 156,590       $ 48,591         9.4

Q2:13

   $ 4,711,790       $ 157,918       $ 47,869         9.3

Q3:13

   $ 4,717,877       $ 161,148       $ 47,682         9.6

Q4:13

   $ 4,972,040       $ 169,274       $ 49,080         9.7

Q1:14

   $ 5,168,851       $ 174,335       $ 51,684         9.5

Q2:14

   $ 5,582,359       $ 183,231       $ 48,173         9.7

Q3:14

   $ 5,412,299       $ 178,886       $ 44,820         9.9

Q4:14

   $ 5,373,733       $ 178,202       $ 44,459         10.0

 

1. Excludes loan termination payments of $3.2 million and $3.0 million in the second quarter of 2011 and 2013 respectively.

 

14


Aircastle Limited and Subsidiaries

Selected Financial Guidance Elements for the First Quarter of 2015

($ in millions, except for percentages)

(Unaudited)

 

Guidance Item

   Q1:15  

Lease rental revenue1

   $ 177 – $180   

Finance lease revenue

   $ 1 – $2   

Maintenance revenue

   $ 15 – $17   

Amortization of net lease discounts and lease incentives

   $ 4 – $5   

SG&A

   $ 13 – $14   

Depreciation

   $ 75 – $77   

Interest, net 2

   $ 62 – $64   

Gain on sale

   $ 0 – $8   

Full year effective tax rate

     12% – 13
  

 

 

 

 

1. Reflects no rental revenue for five mid-aged 737-800 aircraft that were removed from Russia and an unusual level of lease extension and transition activity in late Q4:14 and early Q1:15. These will have a combined effect of $5-6 million per quarter.
2. Includes non-cash hedge loss amortization charges related to the payoff of Term Financing No.1 and Securitization No.1 of $5.9 million.

 

15


Aircastle Limited and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures

Reconciliation of Net Income Allocable to Common Shares

(In thousands)

(Unaudited)

 

Weighted-average shares:    Three Months Ended
December 31, 2014
    Twelve Months Ended
December 31, 2014
 
   Shares      Percent(2)     Shares      Percent(2)  

Common shares outstanding – Basic

     80,390         99.25     80,389         99.27

Unvested restricted common shares

     606         0.75     588         0.73
  

 

 

    

 

 

   

 

 

    

 

 

 

Total weighted-average shares outstanding

  80,996      100.00   80,977      100.00
  

 

 

    

 

 

   

 

 

    

 

 

 

Net income allocation

Net income

$ 72,764      100.00 $ 100,828      100.00

Distributed and undistributed earnings allocated to unvested restricted shares

  (544   (0.75 %)    (732   (0.73 %) 
  

 

 

    

 

 

   

 

 

    

 

 

 

Earnings available to common shares

$ 72,220      99.25 $ 100,096      99.27
  

 

 

    

 

 

   

 

 

    

 

 

 

Adjusted net income allocation

Adjusted net income

$ 80,145      100.00 $ 167,642      100.00

Amounts allocated to unvested restricted shares

  (600   (0.75 %)    (1,217   (0.73 %) 
  

 

 

    

 

 

   

 

 

    

 

 

 

Amounts allocated to common shares

$ 79,545      99.25 $ 166,425      99.27
  

 

 

    

 

 

   

 

 

    

 

 

 

 

(1) For the three and twelve months ended December 31, 2014 the company had no dilutive shares.
(2) Percentages rounded to two decimal places.

 

16


Aircastle Limited and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures

Reconciliation of Net Income Allocable to Common Shares

(In thousands)

(Unaudited)

 

Weighted-average shares:    Three Months Ended
December 31, 2013
    Twelve Months Ended
December 31, 2013
 
   Shares      Percent(2)     Shares      Percent(2)  

Common shares outstanding – Basic

     80,154         99.15     73,653         99.20

Unvested restricted common shares

     686         0.85     594         0.80
  

 

 

    

 

 

   

 

 

    

 

 

 

Total weighted-average shares outstanding

  80,839      100.00   74,247      100.00
  

 

 

    

 

 

   

 

 

    

 

 

 

Net income allocation

Net income

$ 48,421      100.00 $ 29,781      100.00

Distributed and undistributed earnings allocated to unvested restricted shares

  (411   (0.85 %)    (238   (0.80 %) 
  

 

 

    

 

 

   

 

 

    

 

 

 

Earnings available to common shares

$ 48,010      99.15 $ 29,543      99.20
  

 

 

    

 

 

   

 

 

    

 

 

 

Adjusted net income allocation

Adjusted net income

$ 54,899      100.00 $ 59,260      100.00

Amounts allocated to unvested restricted shares

  (466   (0.85 %)    (474   (0.80 %) 
  

 

 

    

 

 

   

 

 

    

 

 

 

Amounts allocated to common shares

$ 54,433      99.15 $ 58,786      99.20
  

 

 

    

 

 

   

 

 

    

 

 

 

 

(1) For the three and twelve months ended December 31, 2013 the company had no dilutive shares.
(2) Percentages rounded to two decimal places.

 

17