Aircastle Announces Third Quarter 2018 Results

STAMFORD, Conn., Nov. 1, 2018 /PRNewswire/ --

Key Financial Metrics

• Total revenues⁽¹⁾ were $190.8 million
• Net income was $36.3 million, or $0.46 per diluted common share
• Adjusted net income⁽²⁾ was $38.2 million, or $0.49 per diluted common share
• Adjusted EBITDA⁽²⁾ was $179.2 million
• Cash ROE⁽²⁾ was 13.7%; net cash interest margin was 8.6%

Third Quarter 2018 Highlights

• Aircastle now has investment grade credit ratings from all three major credit rating agencies; Upgraded to investment grade by Moody's Investors Service in August
• Issued our first investment grade senior unsecured note for $650 million due 2023, bearing a coupon of 4.40%
• Acquired eight narrow-body aircraft for $262.4 million, including two A320neos
• Closed or expect to close fifteen additional narrow-body aircraft in the fourth quarter of 2018 for $674.3 million
• Sold three aircraft in the third quarter, including one 777-300ER, and recorded gains on sale of $3.0 million
• Declared our 50th consecutive quarterly dividend and increased the dividend to $0.30 from $0.28, or 7.1%; This is our ninth dividend increase in eight years
• Repurchased $53.7 million of our shares year-to-date at average price of $20.22 per share; Repurchase authorization increased by $58 million, to $100 million

Aircastle Limited (the "Company" or "Aircastle") (NYSE: AYR) reported third quarter 2018 net income of $36.3 million, or $0.46 per diluted common share, and adjusted net income of $38.2 million, or $0.49 per diluted common share.  The third quarter results included total lease rental and finance and sales-type lease revenues of $190.8 million, an increase of 7.2%, versus $178.1 million in the third quarter of 2017.  In the third quarter of 2017, the Company reported net income of $57.4 million, or $0.73 per diluted common share, and adjusted net income of $64.4 million, or $0.82 per diluted common share.

Commenting on the results, Mike Inglese, Aircastle's Chief Executive Officer, stated, "We remain confident in our business model as the leading investor in the secondary aircraft market with a best-in-class asset management platform, and have increased our dividend for the ninth time in eight years.  Now with an investment grade credit rating from all three major rating agencies, we can capitalize on growth opportunities with access to attractively priced capital.  We are pleased to have recently issued our first investment grade note on very attractive terms."

Mr. Inglese concluded, "We are also pleased to announce that our Board approved an increase in Aircastle's share repurchase program to $100 million, from the $42 million that was remaining under the prior authorization.  With our strong balance sheet, shareholder-friendly capital allocation policy, and the unique ability to source attractive, value-added transactions, we are positioned to increase value in the current market environment, and will continue to grow profitably and opportunistically well into the future."

Financial Results

Third Quarter Results

Total revenues were $190.8 million, a decrease of $22.2 million, or 10.4%, from the third quarter of 2017.  Core lease rental and finance and sales-type lease revenues increased by $12.7 million, which was offset by an $18.7 million decrease in gains from the sale of flight equipment and a $14.5 million decrease in maintenance revenue.  Gains from the sale of flight equipment declined because we sold fewer aircraft in the third quarter of 2018 than in the prior year.  Maintenance revenues declined as no aircraft transitioned during the third quarter of 2018.

Lease rental and finance and sales-type lease revenues were $190.8 million versus $178.1 million the prior year.  The 7.2% increase reflects the net year-over-year impact from aircraft acquisitions, dispositions and lease extensions.  Since the beginning of the third quarter of 2017, acquisitions have outpaced sales.  Over that period, we've acquired 89 aircraft and sold 48 aircraft.

In the third quarter of 2018, net income was $36.3 million, a decrease of $21.1 million.  Adjusted net income was $38.2 million, a decline of $26.2 million versus the prior year.  Similarly, adjusted EBITDA declined by $20.3 million versus the third quarter of 2017 to $179.2 million.

The declines in net income, adjusted net income and adjusted EBITDA were all primarily due to an $18.7 million decline in gains from the sale of flight equipment and $14.5 million of lower maintenance revenue, partially offset by higher lease rental and finance and sales-type lease revenue of $12.7 million.

Aviation Assets

During the third quarter, we acquired eight aircraft for $262.4 million, including two new A320neos, our first investment in new technology aircraft.  For the first nine months of 2018, we purchased 21 aircraft for $674.8 million.  The aircraft we've acquired year-to-date had a weighted average age of 7.4 years and a weighted average remaining lease term of 5.5 years.  For the full year, we expect to complete $1.35 billion in aircraft acquisitions, including eight additional A320neos.

During the third quarter of 2018, we sold three aircraft, including one 777-300ER, for total sales proceeds of $98.0 million.

Year-to-date, we sold eleven aircraft for proceeds of $276.2 million and a net gain on sale of $28.6 million.  The average age of the aircraft sold was 12.9 years with an average remaining lease term of 4.2 years.

Our fleet utilization during the third quarter was 100%.  As of September 30, 2018, Aircastle owned 234 aircraft having a net book value of $6.8 billion. We also manage twelve aircraft with a net book value of $621.1 million dollars on behalf of our joint ventures.

As of September 30, 2018, Aircastle owned and managed 246 aircraft with a net book value of $7.5 billion.

Financing Activity

During the third quarter, Aircastle received its third Investment Grade credit rating, when Moody's Investors Service raised the Company's senior unsecured and corporate family ratings to Baa3 from Ba1.  Earlier this year, Standard and Poor's Global Ratings raised its ratings on Aircastle, including the corporate credit rating, to 'BBB-' from 'BB+' while Fitch Ratings assigned an initial 'BBB-' rating to Aircastle's senior unsecured debt.

During the third quarter of 2018, we issued $650 million of unsecured Senior Notes due 2023 bearing a coupon of 4.40%.  This was our first senior unsecured note issue with Investment Grade credit ratings.

In addition, earlier this year we increased the size of one of our unsecured revolving credit facilities to $800 million from $675 million, extended the facility maturity by more than two years to June 2022, and lowered the borrowing margin by 75 basis points.

Common Dividend

On October 30, 2018, Aircastle's Board of Directors declared a fourth quarter 2018 cash dividend on its common shares of $0.30 per share, payable on December 14, 2018 to shareholders of record on November 30, 2018.  This is our 50^th consecutive dividend and represents a 7.1% increase over the previous quarter's cash dividend.  Over the last eight years, Aircastle has increased its dividend nine times.

Share Repurchases

Since the beginning of the year, the Company acquired 2,655,299 shares at an average price of $20.22 per share.  Aircastle's Board of Directors increased the authorization to repurchase shares to $100 million from the $42 million that was remaining under the previous authorization.  Since 2011, the Company has repurchased 17.1 million shares at an average cost of $14.36 per share, for approximately $246.3 million.

Conference Call

In connection with this earnings release, management will host an earnings conference call on Thursday, November 1, 2018 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 (877) 260-1479 (from within the U.S. and Canada) or (334) 323-0522 (from outside of the U.S. and Canada) ten minutes prior to the scheduled start and referencing the passcode "7563300".

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, December 1, 2018 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 "1757279".

About Aircastle Limited

Aircastle Limited acquires, leases and sells commercial jet aircraft to airlines throughout the world.  As of September 30, 2018, Aircastle owned and managed on behalf of its joint ventures 246 aircraft leased to 85 customers located in 46 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 previously disclosed under "Risk Factors" in Item 1A of Aircastle's 2017 Annual Report on Form 10-K.  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.