Aircastle Announces Fourth Quarter and Full Year 2013 Results

        Aircastle Announces Fourth Quarter and Full Year 2013 Results  Board Declares First Quarter 2014 Dividend of $0.20 Per Common Share  PR Newswire  STAMFORD, Conn., Feb. 25, 2014  STAMFORD, Conn., Feb. 25, 2014 /PRNewswire/ --  Highlights    oOperating and finance lease revenue of $173.3 million for the fourth     quarter and $661.1 million for the full year   oNet income of $48.4 million, or $0.60 per diluted common share for the     fourth quarter, and $29.8 million, or $0.40 per diluted common share, for     the full year   oAdjusted EBITDA^1 of $196.0 million for the fourth quarter and $717.2     million for the full year   oAdjusted net income^1 of $54.9 million, or $0.68 per diluted common share,     for the fourth quarter and $59.3 million, or $0.80 per diluted common     share, for the full year   oFleet utilization of 99.5% for the fourth quarter and 98.7% for the full     year, with aircraft portfolio yield of 13.6% for both the fourth quarter     and the full year   oPurchased eight aircraft during the fourth quarter for $472 million, and     closed 25 aircraft investments in 2013 with a total cost of $1.45 billion   oSold 22 aircraft during 2013 for $548 million; realized gain on sale of     $37.2 million for the year   oIssued $400 million of 4.625% unsecured Senior Notes due 2018 during the     fourth quarter   o31^st consecutive quarterly dividend declared by Aircastle's Board of     Directors   oEstablished a joint venture with Ontario Teachers' Pension Plan and we     sold two A330 family aircraft to the joint venture in the fourth quarter  Aircastle Limited (the "Company" or "Aircastle") (NYSE: AYR) reported fourth quarter 2013 net income of $48.4 million, or $0.60 per diluted common share and adjusted net income of $54.9 million, or $0.68 per diluted common share. Net income for the year ended December 31, 2013 was $29.8 million, or $0.40 per diluted common share, and adjusted net income was $59.3 million, or $0.80 per diluted common share. The fourth quarter results included total revenues of $192.0 million, an increase of 9%, versus $176.6 million in the fourth quarter of 2012. For the full year 2013, total revenues were $708.6 million, up 3% versus $686.6 million in 2012.  Commenting on the results, Ron Wainshal, Aircastle's CEO, stated, "Thanks to a strong fourth quarter, 2013 was a successful and important year for Aircastle, as we grew and upgraded our portfolio with $1.5 billion of investments and significant and profitable asset sales, including many end-of-life aircraft. We strengthened our shareholder base and capital structure through Marubeni's strategic investment, a larger unencumbered asset base, several well priced debt financings and an expanded unsecured revolver. Aircastle delivered strong results including a full-year cash ROE of 12.1% and asset utilization of nearly 99%.   All in all, over the past twelve months I believe we significantly enhanced the Company's competitive standing as a nimble and flexible value-oriented investor. As we enter 2014, we remain well positioned to capitalize on a robust acquisition pipeline, very attractive financial market conditions, a terrific team and operating platform and an improving demand environment for leased aircraft."  Fourth Quarter Results  Lease rental and finance lease revenues for the fourth quarter were $173.3 million, up $11.3 million or 7% year over year, due primarily to the impact of new aircraft acquisitions of $33.5 million, partially offset by lower revenue due to aircraft sales of $16.8 million and the net year over year impact of lease extensions, transitions and terminations and other changes of $5.5 million.  Total revenues for the fourth quarter were $192.0 million, an increase of $15.4 million, or 9% from the previous year, reflecting higher lease rental and finance lease revenue of $11.3 million and higher maintenance revenue of $9.2 million associated with a year over year increase in lease transitions. These increases were partially offset by a decline in other revenues of $4.7 million reflecting early lease termination fees earned in the fourth quarter of 2012 and the maturity of a debt investment in the first quarter of 2013.  Adjusted EBITDA for the fourth quarter was $196.0 million, up $23.7 million, or 14% from the fourth quarter of 2012, due primarily to higher total revenues excluding amortization of net lease discounts and incentives of $15.8 million and higher gains from aircraft sales of $8.9 million. These improvements were partially offset by an increase in net operating expenses of $1.2 million.   Adjusted net income for the quarter was $54.9 million, up $18.5 million or 51%, year over year. The change reflects higher total revenues of $15.4 million, higher gains from the sale of aircraft of $8.9 million and lower aircraft impairment charges of $2.7 million. These improvements were partially offset by higher adjusted interest expense of $5.2 million, higher depreciation of $2.6 million and higher net operating expenses of $1.2 million.  Full Year Results  Lease rental and finance lease revenues for the full year were $661.1 million, up $29.2 million, or 5% year over year, reflecting the net impact of 41 aircraft acquisitions made during 2013 and 2012 totaling $103.0 million and higher full year finance lease revenues of $7.8 million. These increases were offset by lower lease rentals due to aircraft sales and disposals of $52.7 million and the impact of transitions, extensions and terminations and other changes totaling $28.8 million.  Total revenues for 2013 were $708.6 million, an increase of $22.1 million, up 3% from the previous year. The increase reflects higher lease rental and finance lease revenue of $29.2 million and higher maintenance revenue from lease terminations of $15.0 million. These increases were partially offset by an increase in the amortization of net lease discounts and lease incentives of $19.6 million associated with fleet expansion, and $2.6 million of lower other revenue, primarily from a debt investment which matured in the first quarter of 2013.  During the year, we recorded maintenance revenue from seven scheduled lease terminations of $20.6 million versus $18.4 million for five scheduled lease terminations in 2012. In addition, we recorded $47.7 million of maintenance revenue from ten aircraft returned ahead of schedule in 2013, versus $34.9 million from ten aircraft that were returned early in 2012.  We recorded total non-cash impairment charges of $117.3 million in 2013 versus $96.5 million in 2012. The year over year increase was primarily driven by impairment charges taken during the third quarter 2013 annual fleet review, where we wrote down the value of six 747-400 converted freighters coming off lease in 2014. To date, three of these six converted freighters have been placed.  Adjusted EBITDA for the full year was $717.2 million, up $69.6 million or 11% versus 2012, due primarily to higher total revenues excluding amortization of net lease discounts and incentives of $41.6 million and higher gains from aircraft sales of $31.5 million. These improvements were partially offset by an increase in net operating expenses of $3.7 million.   Adjusted net income for the full year was $59.3 million compared to $57.0 million in 2012, an increase of $2.3 million. Higher total revenues of $22.1 million, higher gains from sale of aircraft of $31.5 million and higher other net income of $5.5 million were partially offset by higher aircraft impairment charges of $20.9 million, higher adjusted interest expense of $15.9 million, higher depreciation of $15.0 million, and higher SG&A, taxes and other expenses, net of $5.1 million.  Aviation Assets  During 2013, we acquired 25 aircraft investments for $1.45 billion. We also sold 22 aircraft for $548 million which resulted in a pre-tax gain of approximately $37.2 million for the year.  As of December 31, 2013, Aircastle owned 162 aircraft having a net book value of $5.2 billion.                                  Owned           Owned           Owned                                  Aircraft as of  Aircraft as of  Aircraft as of                                  December31,   December31,   December31,                                  2011^(1)        2012^(1)        2013^(1) Flight Equipment Held for Lease $   4,388       $   4,783       $   5,190 ($ mils.) Unencumbered Flight Eqt. included in Flight Eqt. Held    $   677         $   2,092       $   2,655 for Lease ($ mils.) Number of Aircraft              144             159             162 Number of Unencumbered Aircraft 27              72              80 Passenger Aircraft (% of NBV)   69%             71%             81% Freighter Aircraft (% of NBV)   31%             29%             19% Weighted Average Fleet Age –    10.9            10.7            9.9 Combined (years)^(^2^) Weighted Average Remaining Combined Lease Term             4.9             5.0             5.0 (years)^(^3^) Weighted Average Fleet Utilization for the year        99%             99%             99% ended^(^4^) Portfolio Yield for the year    14%             14%             14% ended^(5)    (1) Calculated using net book value of flight equipment held for lease and net investment in finance leasesat 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 heldfor lease for the period.  2013 Financing Activity  During 2013, we raised approximately $971 million of capital, including the following:     oIssuing 12,320,000 common shares to an affiliate of Marubeni Corporation,     for gross proceeds of approximately $209 million, in the third quarter of     2013. Combined with additional subsequent purchases of Aircastle common     shares in the secondary market, as of February 14, 2014, Marubeni     Corporation owned approximately 20% of Aircastle's issued and outstanding     common shares.   oIssuing $400 million in aggregate principal amount of unsecured 4.625%     Senior Notes due 2018, in the fourth quarter of 2013.   oEntering into $177 million of secured borrowings related to various     aircraft.   oIncreasing our unsecured revolving credit from $150 million to $335     million, expanding the bank group from four to seven global financial     institutions and extending the maturity of the facility to a three year     term expiring in August 2016.This revolving credit facility is currently     undrawn.  In February 2014, we repaid the outstanding amount, plus accrued interest and fees, due under Securitization No. 1 and terminated the related swap for a total cash payment of $255 million. In February 2014, we also raised $303 million in secured financing for two B777-300ER and one A330-200 aircraft we acquired in 2013.  Joint Venture with Ontario Teachers' Pension Plan  In December 2013, Aircastle formed a joint venture to invest in leased aircraft with an affiliate of Ontario Teachers' Pension Plan. The joint venture's first investment is two Airbus A330 family aircraft manufactured in 2013 that we sold to the joint venture, also in December 2013.  Teachers' holds more than 5% of our common shares and, therefore, the joint venture and the sale of the initial Airbus A330 family aircraft are related party transactions under our related party policy. Accordingly, the formation of the joint venture and the sale of these aircraft was submitted to, and approved by, our Audit Committee under that policy.  Common Dividend  On February 21, 2014, Aircastle's Board of Directors declared a first quarter 2014 cash dividend on its common shares of $0.20 per share, payable on March 14, 2014 to shareholders of record on March 7, 2014. This is our 31^st consecutive dividend. During 2013, Aircastle increased the dividend to common shareholders to the current quarterly rate of $0.20 per share, a 21% increase over the quarterly rate at the end of 2012.  Conference Call  In connection with this earnings release, management will host an earnings conference call on Tuesday, February 25, 2014 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 (888) 556-4997 (from within the U.S. and Canada) or (719) 457-2628 (from outside of the U.S. and Canada) ten minutes prior to the scheduled start and referencing the passcode "6185816".  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 Thursday, March 27, 2014 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 "6185816".  About Aircastle Limited  Aircastle Limited acquires, leases and sells commercial jet aircraft to airlines throughout the world. As of December 31, 2013, Aircastle's aircraft portfolio consisted of 162 aircraft on lease with 64 customers located in 37 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 and Adjusted Net Income 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 management's current expectations and beliefs 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 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 SEC, including as previously disclosed in Aircastle's 2012 Annual Report on Form 10-K, 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 Limited 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.  ^1 Refer to Supplemental Financial Information accompanying this press release for a reconciliation of GAAP to non-GAAP numbers.  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 Limited and Subsidiaries Consolidated Balance Sheets (Dollars in thousands, except share data)                                                     December31,                                                     2012          2013 ASSETS Cash and cash equivalents                           $ 618,217     $ 654,613 Accounts receivable                                 5,625         2,825 Restricted cash and cash equivalents                111,942       122,773 Restricted liquidity facility collateral            107,000       107,000 Flight equipment held for lease, net of accumulated depreciation of $1,305,064 and                      4,662,661     5,044,410  $1,430,325 Net investment in finance leases                    119,951       145,173 Unconsolidated equity method investment             —             21,123 Aircraft purchase deposits                          131           10,000 Other assets                                        186,633       143,976 Total assets                                        $ 5,812,160   $ 6,251,893 LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Borrowings from secured financings (including borrowings of ACS Ireland VIEs of                   $ 1,848,034   $ 1,586,835  $207,926 and $152,545, respectively) Borrowings from unsecured financings                1,750,642     2,150,527 Accounts payable, accrued expenses and other        108,593       111,661 liabilities Lease rentals received in advance                   53,189        49,235 Liquidity facility                                  107,000       107,000 Security deposits                                   87,707        118,804 Maintenance payments                                379,391       442,432 Fair value of derivative liabilities                61,978        39,992 Total liabilities                                   4,396,534     4,606,486 Commitments and Contingencies SHAREHOLDERS' EQUITY Preference shares, $.01par value, 50,000,000shares authorized, no shares issued and  —             — outstanding Common shares, $.01par value, 250,000,000shares authorized, 68,639,729 shares issued and outstanding at December31, 2012; and               686           808 80,806,975shares issued and outstanding at December31, 2013 Additional paid-in capital                          1,360,555     1,562,106 Retained earnings                                   180,675       158,398 Accumulated other comprehensive loss                (126,290)     (75,905) Total shareholders' equity                          1,415,626     1,645,407 Total liabilities and shareholders' equity          $ 5,812,160   $ 6,251,893    Aircastle Limited and Subsidiaries Consolidated Statements of Operations (Dollars in thousands, except per share amounts) (Unaudited)                                 Three Months Ended      Twelve Months Ended                                  December 31,            December 31,                                 2012        2013        2012        2013 Revenues: Lease rental revenue            $ 158,090   $ 169,273   $ 623,503   $ 644,929 Finance lease revenue           3,919       4,045       8,393       16,165 Amortization of lease premiums, (6,452)     (6,884)     (12,844)    (32,411) discounts and lease incentives Maintenance revenue             16,194      25,359      53,320      68,342 Total lease rentals             171,751     191,793     672,372     697,025 Other revenue                   4,859       195         14,200      11,620 Total revenues                  176,610     191,988     686,572     708,645 Expenses: Depreciation                    69,896      72,476      269,920     284,924 Interest, net                   55,605      60,106      222,808     243,757 Selling, general and administrative (including non-cash share  based payment expense of $999 and $1,638 for the three months 11,754      14,139      48,370      53,436  ended, and $4,232 and $4,569 for the twelve months ended  December 31, 2012 and 2013, respectively) Impairment of Aircraft          7,667       4,971       96,454      117,306 Maintenance and other costs     2,713       2,167       14,656      13,631 Total expenses                  147,635     153,859     652,208     713,054 Other income: Gain on sale of flight          2,685       11,619      5,747       37,220 equipment Other                           (2)         1,116       602         6,132 Total other income              2,683       12,735      6,349       43,352 Income from continuing          31,658      50,864      40,713      38,943 operations before income taxes Income tax provision            1,869       2,496       7,845       9,215 Earnings of unconsolidated      -           53          -           53 equity method investment Net income                      $ 29,789    $ 48,421    $ 32,868    $ 29,781 Earnings per common share — Basic: Net income per share            $ 0.43      $ 0.60      $ 0.46      $ 0.40 Earnings per common share — Diluted: Net income per share            $ 0.43      $ 0.60      $ 0.46      $ 0.40 Dividends declared per share    $ 0.165     $ 0.20      $ 0.615     $ 0.695    Aircastle Limited and Subsidiaries Consolidated Statements of Cash Flows (Dollars in thousands)                                     Year Ended December31,                                     2011           2012           2013 Cash flows from operating activities: Net income                          $   124,270    $    32,868    $ 29,781 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation                        242,103        269,920        284,924 Amortization of deferred financing  15,271         12,449         14,719 costs Amortization of net lease discounts 16,445         12,844         32,411 and lease incentives Deferred income taxes               5,615          6,828          4,416 Non-cash share based payment        5,786          4,232          4,569 expense Net derivative loss reclassified    23,078         30,777         33,265 into earnings Ineffective portion of cash flow    (101)          2,893          371 hedges Security deposits and maintenance   (35,500)       (54,180)       (60,112) payments included in earnings Gain on the sale of flight          (39,092)       (5,747)        (37,220) equipment Impairment of aircraft              6,436          96,454         117,306 Earnings of unconsolidated equity   —              —              (53) method investment, net of tax Other                               742            (2,218)        (5,641) Changes on certain assets and liabilities: Accounts receivable                 (4,818)        (2,530)        3,397 Restricted cash and cash equivalents related to operating    4,418          —              — activities Other assets                        (2,675)        919            1,164 Accounts payable, accrued expenses  (1,848)        17,732         3,016 and other liabilities Lease rentals received in advance   (753)          4,036          (2,276) Net cash provided by operating      359,377        427,277        424,037 activities Cash flows from investing activities: Acquisition and improvement of      (776,750)      (693,227)      (1,263,706) flight equipment Proceeds from sale of flight        489,196        61,489         568,045 equipment Restricted cash and cash equivalents related to sale of      (35,762)       35,762         — flight equipment Aircraft purchase deposits and progress payments, net of returned deposits and                        (122,069)      (20,553)       (6,094)   aircraft sales deposits Net investment in finance leases    —              (91,500)       (11,595) Collections on finance leases       —              3,852          9,508 Unconsolidated equity method        —              —              (20,189) investment and associated costs Purchase of debt investment         —              (43,626)       — Principal repayments on debt        —              6,585          42,001 investment Other                               (35)           (691)          (903) Net cash used in investing          (445,420)      (741,909)      (682,933) activities Cash flows from financing activities: Issuance of shares net of           (91,610)       (44,180)       197,437 repurchases Proceeds from notes and term debt   669,047        1,459,690      563,230 financings Securitization and term debt        (390,945)      (847,415)      (510,162) financing repayments Deferred financing costs            (20,179)       (31,691)       (10,865) Restricted secured liquidity        (35,000)       3,000          — facility collateral Secured liquidity facility          35,000         (3,000)        — collateral Restricted cash and cash equivalents related to security deposits and                        (25,056)       99,748         (10,831)   maintenance payments Security deposits received          20,574         17,453         20,889 Security deposits returned          (7,914)        (6,152)        (5,104) Maintenance payments received       122,050        142,122        179,789 Maintenance payments returned       (89,300)       (57,822)       (77,033) Payments for terminated cash flow   —              (50,757)       — hedges and payment for option Dividends paid                      (45,059)       (43,669)       (52,058) Net cash provided by financing      141,608        637,327        295,292 activities Net increase in cash and cash       55,565         322,695        36,396 equivalents Cash and cash equivalents at        239,957        295,522        618,217 beginning of year Cash and cash equivalents at end of $  295,522   $  618,217   $ 654,613 year    Aircastle Limited and Subsidiaries Supplemental Financial Information (Amount in thousands, except per share amounts) (Unaudited)                         Three Months Ended          Twelve Months Ended                          December 31,                December 31,                         2012          2013          2012          2013 Revenues                $ 176,610     $ 191,988     $ 686,572     $ 708,645 EBITDA                  $ 163,611     $ 190,383     $ 546,285     $ 600,088 Adjusted EBITDA         $ 172,279     $ 195,965     $ 647,622     $ 717,209 Adjusted net income     $  36,372    $  54,899    $  57,009    $  59,260 Adjusted net income allocable to common     $  36,079    $  54,433    $  56,539    $  58,786 shares Per common share -      $    0.52  $    0.68  $    0.80  $    0.80 Basic Per common share -      $    0.52  $    0.68  $    0.80  $    0.80 Diluted Basic common shares     69,120        80,154        70,717        73,653 outstanding Diluted common shares   69,120        80,154        70,717        73,653 outstanding  Refer to the selected information accompanying this press release for a reconciliation of GAAP to Non-GAAP information.    Aircastle Limited and Subsidiaries Reconciliation of GAAP to Non-GAAP Measures EBITDA and Adjusted EBITDA Reconciliation (Dollars in thousands) (Unaudited)                                Three Months Ended       Twelve Months Ended                                 December 31,             December 31,                                2012        2013         2012        2013 Net income                     $ 29,789    $ 48,421     $ 32,868    $ 29,781 Depreciation                   69,896      72,476       269,920     284,924 Amortization of net lease      6,452       6,884        12,844      32,411 discounts and lease incentives Interest, net                  55,605      60,106       222,808     243,757 Income tax provision           1,869       2,496        7,845       9,215 EBITDA                           163,611      190,383     546,285     600,088 Adjustments:  Impairment of aircraft       7,667       4,971        96,454      117,306  Non-cash share based payment 999         1,638        4,232       4,569 expense  Loss (gain) on mark to market of interest rate        2           (1,027)      (597)       (4,754) derivative contracts  Contract termination expense -           -            1,248       - Adjusted EBITDA                $ 172,279   $ 195,965    $ 647,622   $ 717,209  We define EBITDA as income 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-GAAP measure is helpful in identifying trends in our performance. Using EBITDA assists us in comparing our operating performance on a consistent basis by removing the impact of our capital structure (primarily interest charges on our outstanding debt) and asset base (primarily depreciation and amortization) from our operating results. 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.  Aircastle Limited and Subsidiaries Reconciliation of GAAP to Non-GAAP Measures Adjusted Net Income (Loss) Reconciliation (Dollars in thousands) (Unaudited)                                    Three Months Ended     Twelve Months Ended                                                           December 31,                                    December 31,                                    2012       2013        2012       2013                                    (Dollars in thousands) Net income                         $ 29,789   $ 48,421    $ 32,868   $ 29,781  Loan termination fee^(1)  -          -           -          2,954 Ineffective portion and            1,053      171         2,893      2,393 termination of hedges^(1) Gain (loss) on mark to market of interest rate derivative           2          (1,027)     (597)      (4,754) contracts^(2)  Write-off of deferred     120        -           3,034      3,975 financing fees^(1) Stock compensation expense^(3)     999        1,638       4,232      4,569  Term Financing No. 1 hedge 4,409      4,365       13,331     17,843 loss amortization charges^(1)  Securitization No. 1 hedge -          1,331       -          2,499 loss amortization charges ^(1)  Contract termination       -          -           1,248      - expense Adjusted net income                $ 36,372   $ 54,899    $ 57,009   $ 59,260 (1) Included in Interest, net. (2) Included in Other income (expense). (3) Included in Selling, general and administrative expenses.  Management believes that ANI, when viewed in conjunction with the Company's results under USGAAP and the below reconciliation, provides useful information about operating and period-over-period performance, and provides additional information that is useful for evaluating the underlying operating performance of our business without regard to periodic reporting elements related to interest rate derivative accounting and gains or losses related to flight equipment and debt investments.  Aircastle Limited and Subsidiaries Reconciliation of GAAP to Non-GAAP Measures Cash Earnings and Cash ROE (Dollars in thousands) (Unaudited)                         2009       2010       2011       2012       2013 Net cash provided by    $ 327,641  $ 356,530  $ 359,377  $ 427,277  $ 424,037 operating activities Collections on Finance  -          -          -          3,852      9,508 Leases Gain on Sale of Flight  1,162      7,084      39,092     5,747      37,220 Equipment Less: Depreciation    (209,481)  (220,476)  (242,103)  (269,920)  (284,924) Cash Earnings           $ 119,322  $ 143,138  $ 156,366  $ 166,956  $ 185,841 Average Shareholder's   $1,201,702 $1,316,978 $1,373,663 $1,410,117 $1,530,516 Equity Cash Earnings / Average Shareholder's   9.9%       10.9%      11.4%      11.8%      12.1% Equity    Note: Average Shareholder's Equity is the sum of the current and prior year shareholder's equity divided by two. 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.    Aircastle Limited and Subsidiaries Reconciliation of GAAP to Non-GAAP Measures Reconciliation of Net Income Allocable to Common Shares (In thousands) (Unaudited)                                 Three Months Ended      Twelve Months Ended                                  December 31, 2013       December 31, 2013 Weighted-average shares:        Shares    Percent^(2)   Shares    Percent^(2) Common shares outstanding –     80,154    99.15%        73,653    99.20% Basic Unvested restricted common      686       0.85%         594       0.80% shares Total weighted-average shares   80,839    100.00%       74,247    100.00% outstanding Net income allocation Net income                      $48,421   100.00%       $29,781   100.00% Distributed and undistributed earnings allocated to unvested  (411)     (0.85%)       (238)     (0.80%) restricted shares Earnings available to common    $48,010   99.15%        $29,543   99.20% shares Adjusted net income allocation Adjusted net income             $54,899   100.00%       $59,260   100.00% Amounts allocated to unvested restricted                      (466)     (0.85%)       (474)     (0.80%)  shares Amounts allocated to common     $54,433   99.15%        $58,786   99.20% shares (1) For the three and twelve months ended December 31, 2013, the company had no dilutive shares. (2) Percentages rounded to two decimal places.    Aircastle Limited and Subsidiaries Reconciliation of GAAP to Non-GAAP Measures Reconciliation of Net Income Allocable to Common Shares (In thousands) (Unaudited)                                  Three Months Ended     Twelve Months Ended                                   December 31, 2012      December 31, 2012 Weighted-average shares:         Shares    Percent^(2)  Shares    Percent^(2) Common shares outstanding –      69,120    99.19%       70,717       99.18% Basic Unvested restricted common       561       0.81%        588          0.82% shares Total weighted-average shares    69,681    100.00%      71,305       100.00% outstanding Net income allocation Net income                       $29,789   100.00%      $32,868      100.00% Distributed and undistributed earnings allocated to unvested   (240)     (0.81%)      (271)        (0.82%) restricted shares Earnings available to common     $29,549   99.19%       $32,597      99.18% shares Adjusted net income (loss) allocation Adjusted net income              $36,372   100.00%      $57,009      100.00% Amounts allocated to unvested    (293)     (0.81%)      (470)        (0.82%) restricted shares Amounts allocated to common      $36,079   99.19%       $56,539      99.18% shares (1) For the three and twelve months ended December 31, 2012, the company had no dilutive shares. (2) Percentages rounded to two decimal places.    SOURCE Aircastle Limited  Website: http://www.aircastle.com  
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