Key Financial Metrics
- Total revenues(1) were $204.3 million
- Total lease rental and finance and sales-type lease revenues were $187.4 million
- Net income was $50.2 million, or $0.64 per diluted common share
- Adjusted net income(2) was $52.4 million, or $0.67 per diluted common share
- Adjusted EBITDA(2) was $192.6 million
- Cash ROE(2) was 14.9%; net cash interest margin was 8.3%
Second Quarter 2018 Highlights
- Acquired nine narrow-body aircraft for $302 million
- Sold four narrow-body aircraft for $134 million and recorded gains on sale of $19.9 million
- Acquired or committed to acquire more than $1.2 billion of aviation assets in 2018
- Received Investment Grade credit rating of BBB- from Standard & Poor's and Fitch Ratings
- Increased Revolving Credit Facility to $800 million; extended maturity to June 2022 and reduced the borrowing margin by 75 basis points
- Declared our 49th consecutive quarterly dividend; repurchased $13.7 million of our shares year-to-date at average price of $19.62 per share
Aircastle Limited (NYSE: AYR) reported second quarter 2018 net income of $50.2 million, or $0.64 per diluted common share, and adjusted net income of $52.4 million, or $0.67 per diluted common share. The second quarter results included total lease rental and finance and sales-type lease revenues of $187.4 million, a decrease of 3.9%, versus $195.0 million in the second quarter of 2017. In the second quarter of 2017, the Company reported a net loss of $(7.1) million, or $(0.09) per diluted common share, and adjusted net income of $2.4 million, or $0.03 per diluted common share.
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| (1) | See Appendix for an explanation of the reclassification of the Gain on Sale of Flight Equipment. |
| (2) | Refer to the selected financial information accompanying this press release for a reconciliation of GAAP to Non-GAAP numbers. |
Commenting on the results, Mike Inglese, Aircastle's Chief Executive Officer, stated, "Through the first half of the year, with over $1.2 billion of aircraft acquired or committed to be acquired in 2018, along with a steady stream of profitable aircraft sales, Aircastle remains active in the secondary market for modern, in-demand aircraft. In addition to producing excellent second quarter results, we were awarded investment grade credit ratings from two major credit ratings agencies, Standard & Poor's and Fitch. This significant milestone broadens our already strong base of liquidity and enhances our ability to access competitively priced capital to support ongoing fleet expansion."
Mr. Inglese concluded, "Our disciplined growth strategy, solid balance sheet, strong operational capabilities and shareholder-friendly capital allocation policy place Aircastle in an excellent position to increase shareholder value both near-term and over the long-run."
Second Quarter Results
Total revenues were $204.3 million, a decline of $32.8 million, or 13.8%, from the previous year as we recognized no maintenance revenue in the second quarter of 2018. During the second quarter of 2017, we recorded $28.9 million of maintenance revenue, driven by return compensation associated with several wide-body aircraft which transitioned.
During the second quarter of 2018, we completed our annual fleet review with no impairment charges. As a result, total expenses declined by $90.7 million, or 37.1%. This was mainly due to $79.9 million of impairment charges that were incurred in the prior year's second quarter.
Net income in the second quarter was $50.2 million, versus a net loss of $(7.1) million the prior year, while adjusted net income for the quarter was $52.4 million, versus $2.4 million the prior year. Lower aircraft impairment charges of $79.9 million, interest expense of $4.3 million, SG&A of $3.6 million and depreciation of $2.1 million were partially offset by lower maintenance revenue of $28.9 million. Depreciation expense declined mainly due to wide-body and freighter aircraft sold over the past year, while interest expense decreased due to lower debt balances and the repayment of higher coupon debt in the prior year.
Adjusted EBITDA for the second quarter was $192.6 million, a decrease of $31.5 million, or 14.0%, from the second quarter of 2017, due primarily to lower maintenance revenue of $28.9 million, as discussed above.
Aviation Assets
During the second quarter of 2018, we acquired nine mid-aged narrow-body aircraft for approximately $302 million. In the first half of 2018, we acquired a total of 13 aircraft for approximately $412 million. These aircraft have a weighted average age of approximately 8.4 years and a weighted average remaining lease term of 5.7 years.
During the second quarter, we sold four aircraft for approximately $134 million. In the first half of 2018, we sold eight aircraft for total proceeds of approximately $178 million and recorded gains on sale of $25.6 million.
Financing Activity
In June, 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.
In May, S&P Global Ratings raised its ratings on Aircastle Ltd., including the corporate credit rating, to 'BBB-' from 'BB+' and Fitch Ratings assigned an initial 'BBB-' rating to Aircastle's senior unsecured debt. In June, Moody's Investors Service placed the Ba1 corporate family and Ba1 senior unsecured ratings of Aircastle on review for possible upgrade.
Common Dividend
On August 3, 2018, Aircastle's Board of Directors declared a third quarter 2018 cash dividend on its common shares of $0.28 per share, payable on September 14, 2018, to shareholders of record on August 31, 2018. This is our 49th consecutive dividend.
Share Repurchases
Since the beginning of the year, the Company acquired approximately 697,000 shares at an average price of $19.62 per share. Aircastle's Board of Directors previously authorized a $100 million share repurchase program, and there is approximately $82 million remaining under this authorization. Since 2011, the Company has repurchased 15.2 million shares at an average cost of $13.58 per share.
About Aircastle Limited
Aircastle Limited acquires, leases and sells commercial jet aircraft to airlines throughout the world. As of June 30, 2018, Aircastle owned and managed on behalf of its joint ventures 240 aircraft leased to 84 customers located in 45 countries.
