Aircastle Announces First Quarter 2017 Results

Key Financial Metrics

Total revenues were $204.3 million
Total lease rental and finance and sales-type lease revenues were $194.7 million
Net income was $42.4 million, or $0.54 per diluted common share
Adjusted net income was $45.7 million, or $0.58 per diluted common share
Adjusted EBITDA was $193.4 million
Cash ROE was 12.0%; net cash interest margin was 8.7%

First Quarter 2017 Highlights

Issued $500 million of new seven year, senior unsecured notes at a record low coupon of 4.125%
Closed or committed to acquire eighteen aircraft this year for more than $400 million
Declared our 44th consecutive quarterly dividend
Aircastle Limited (the “Company” or “Aircastle”) (NYSE: AYR) reported first quarter 2017 net income of $42.4 million, or $0.54 per diluted common share and adjusted net income of $45.7 million, or $0.58 per diluted common share. The first quarter results included total lease rental and finance and sales-type lease revenues of $194.7 million, an increase of 6.3%, versus $183.1 million in the first quarter of 2016.

Commenting on the results, Mike Inglese, Aircastle’s Chief Financial Officer and Acting CEO, stated, “Amid a strong aircraft financing environment, Aircastle has continued to benefit from our strategic flexibility, solid balance sheet, and our opportunistic investment strategy. We have remained disciplined in the pursuit of acquisitions and are determined to act only where opportunities have appealing risk and return profiles. With our unique ability to provide value-added solutions to customers, we successfully closed $190 million of aircraft acquisitions during the first quarter and secured commitments to close a further $220 million. We also seized the opportunity to sell or commit to sell several additional aircraft on appealing terms, continuing our progress in optimizing the fleet mix. A number of these aircraft sales are expected to close in the second quarter.”

Mr. Inglese added, “We also made significant strides in our efforts to continue strengthening our balance sheet. Notably, we successfully raised $500 million during the first quarter to replace a maturing 6.75% debt financing with highly attractive, seven year unsecured notes at a record low coupon of 4.125%. This refinancing will generate more than $13 million of annual interest savings.”

Mr. Inglese concluded, “In addition to achieving significant improvements to our fleet and our balance sheet, Aircastle also continued to deliver solid financial and operational results. We increased our net income by $6.2 million versus the prior year’s first quarter, to $42.4 million, and achieved a solid cash ROE of 12.0%, while maintaining fleet utilization of 98.3%, in line with our historical average. Moving forward, Aircastle is in a strong position to continue expanding our earnings power, enhance our fleet, and provide our investors with an attractive, reliable dividend.”

Peter V. Ueberroth, Aircastle’s Chairman of the Board, also provided an update on the status of Ron Wainshal’s medical leave of absence. Mr. Ueberroth, speaking on behalf of the Board of Directors, stated, “Ron continues to work hard on his recovery and is making progress; however, we do not expect him to return as CEO during the second quarter.” Mr. Ueberroth continued, “The Board continues to have great faith in Acting CEO Mike Inglese’s service in that role, and the depth and capability of the management team at Aircastle.”

First Quarter Results

Total revenues were $204.3 million, an increase of $20.6 million, or 11.2% from the previous year. The increase was driven by an $11.6 million increase in lease rental and finance and sales-type lease revenues, and an $11.0 million increase in maintenance revenues. Rental revenues were higher due to net fleet growth, while maintenance revenues rose primarily due to return compensation from two lessees during the first quarter of 2017. Total maintenance revenues were $12.3 million in the first quarter of 2017 versus $1.3 million in the prior year.

Adjusted EBITDA for the first quarter was $193.4 million, up $9.5 million, or 5.2% from the first quarter of 2016, due primarily to higher rental and maintenance revenues of $22.6 million, partially offset by lower gains from aircraft sales of $12.1 million. We sold twelve aircraft for a gain on sale of $12.8 million during the first quarter of 2016 versus one aircraft sale that was closed during the current year’s first quarter.

Adjusted net income for the quarter was $45.7 million, an increase of $1.6 million versus the prior year. Higher total rental and maintenance revenues were mostly offset by lower gains from aircraft sales along with higher maintenance, depreciation and other expenses.

Aviation Assets

During the first quarter of 2017, we acquired eight aircraft for approximately $190 million and had commitments to acquire ten additional aircraft for more than $220 million. These eighteen aircraft have a weighted average age of approximately 7.9 years and a weighted average remaining lease term of 7.6 years. Narrow-body aircraft comprise seventeen of the total aircraft acquired.

As of March 31, 2017, Aircastle owned 200 aircraft having a net book value of $6.6 billion. We also managed thirteen aircraft with a net book value of $682 million on behalf of our joint ventures.

Financing Activity

During the first quarter of 2017, we issued $500 million in unsecured Senior Notes due 2024 bearing a coupon of 4.125%. On April 17, 2017 we repaid $500 million of maturing, unsecured Senior Notes bearing a coupon of 6.75%. The associated annual interest expense savings is approximately $13.1 million.

Common Dividend

On May 2, 2017, Aircastle’s Board of Directors declared a second quarter 2017 cash dividend on its common shares of $0.26 per share, payable on June 15, 2017 to shareholders of record on May 31, 2017. This is our 44th consecutive dividend.