Key Financial Metrics
- Total revenues of $243.7 million for the fourth quarter of 2019 and $917.9 million for the year
- Net income of $47.3 million, or $0.62 per diluted common share, for the fourth quarter and $156.6 million, or $2.06 per diluted common share, for the year
- Adjusted net income(1) was $66.0 million, or $0.87 per diluted common share, for the fourth quarter and $196.5 million, or $2.59 per diluted common share, for the year
- Adjusted EBITDA(1) was $229.5 million for the fourth quarter and $862.2 million for the year
- Cash ROE(1) of 11.1%; net cash interest margin(1) of 8.1%
- Previously announced acquisition of Aircastle by affiliates of Marubeni Corporation and Mizuho Leasing Company, Limited is on track to close in the first half
- Acquired sixteen narrow-body aircraft during the fourth quarter for $283.6 million and 49 aircraft in 2019 for $1.3 billion
- Committed to acquire seven additional narrow-body aircraft in 2020 for $165.0 million
- Sold eight aircraft during the fourth quarter and twenty aircraft for the full year; full year gain on sale of $45.5 million represents 12.6% of net proceeds; 2019 sales included two wide-body aircraft
- Placed eleven Embraer E195-E2 aircraft with KLM
- Declared our 55th consecutive quarterly dividend
- Returned $109.7 million of capital to shareholders during 2019; $91.3 million in dividends paid and $18.4 million of shares repurchased
Aircastle Limited (the "Company" or "Aircastle") (NYSE: AYR) reported fourth quarter 2019 net income of $47.3 million, or $0.62 per diluted common share, and adjusted net income of $66.0 million, or $0.87 per diluted common share. Net income for the year ended December 31, 2019 was $156.6 million, or $2.06 per diluted common share, and adjusted net income was $196.5 million, or $2.59 per diluted common share. The fourth quarter results included total revenues of $243.7 million versus $292.6 million in the prior year. For the full year, total revenues were $917.9 million versus $890.4 million in 2018, an increase of 3.1%.
Commenting on the results, Mike Inglese, Aircastle's Chief Executive Officer, stated, "Our professional placement capability and fleet of high-quality, in-demand aircraft enabled Aircastle to deliver strong financial results in a shifting market environment throughout 2019. During the fourth quarter, we continued to execute our strategy focused on acquiring narrow-body aircraft. We closed a total of 49 aircraft during the full year 2019 for $1.3 billion. The fourth quarter also saw fleet utilization average 99.2%, a return to the level that we have consistently achieved throughout our history, following the placement of aircraft that were previously on lease with Avianca Brazil and Jet Airways. I am also pleased to report that we've made progress on our E2 program. During the fourth quarter, we placed eleven additional E-Jets, for a total of fourteen placements out of the twenty-five E2s ordered."
Mr. Inglese concluded, "With the pending acquisition of Aircastle by affiliates of Marubeni and Mizuho Leasing, we are very optimistic about Aircastle'sfuture. We expect this strong, high-quality sponsorship, and our disciplined investment approach, will enable our company to continue to grow profitably, increase sustainable cash flow and generate attractive, long-term returns. Both now and following the anticipated acquisition, we will remain consistently focused on the responsible stewardship of investor capital for the benefit of our owners and Aircastle's fixed income investors."
Fourth Quarter Results
Total revenues were $243.7 million, a decrease of $48.8 million, or 16.7%, from the prior year. While lease rental and direct financing and sales-type lease revenues were up $14.9 million, total revenues declined due to a $72.8 million drop in maintenance revenues. We recognized substantial maintenance revenue in the fourth quarter of 2018 due to the termination of the leases on eleven aircraft with Avianca Brazil.
Lease rental and direct financing and sales-type lease revenues were $207.6 million, versus $192.7 million the prior year. The 7.7% increase was primarily due to net fleet growth. Over the past two years, Aircastle's aircraft fleet increased by 24.1%, from 224 aircraft at the beginning of 2018 to 278 aircraft at year-end 2019.
Net income was $47.3 million, a decline of $56.5 million, while adjusted net income fell by $43.9 million to $66.0 million. The decrease was due to lower maintenance revenues of $72.8 million.
Adjusted EBITDA was $229.5 million, down 17.1%, or $47.3 million. Lower maintenance revenues of $72.8 million were partially offset by higher lease rental and direct financing and sales-type lease revenues of $14.9 million and higher gains from the sale of flight equipment of $11.9 million.
Full Year Results
Total revenues in 2019 were $917.9 million, an increase of $27.6 million, while lease rental and direct financing and sales-type lease revenues rose $51.9 million to $809.7 million. The increase in total revenues was primarily driven by higher lease rental and direct financing and sales-type lease revenues due to fleet growth, along with $8.8 million of higher gains from the sale of flight equipment. These increases were partially offset by lower maintenance revenues of $30.8 million. The higher year-over-year gains from the sale of flight equipment were driven by twenty aircraft sold in 2019, versus fourteen sold in 2018.
Net income for the full year was $156.6 million, down $91.3 million year-over-year, while adjusted net income was $196.5 million, a decrease of $60.7 million. Total revenues increased by $27.6 million as our fleet of owned aircraft rose to 278 at year-end 2019, versus 224 aircraft at the beginning of 2018. The revenue increase was offset by higher depreciation expense of $45.2 million and higher interest expense of $23.6 million due to fleet growth and larger average debt balances, while the income tax provision was $17.0 million higher primarily due to an increase in income earned in Ireland and the U.S. In addition, maintenance expenses increased by $15.9 million primarily due to transitioning aircraft from leases terminated with Avianca Brazil and Jet Airways, while non-recurring debt extinguishment and merger related expenses added $22.5 million of incremental cost.
Adjusted EBITDA for the full year was $862.2 million, up $22.3 million versus 2018. Lease rental and direct financing and sales-type lease revenues rose $51.9 million, and gains from the sale of flight equipment increased by $8.8 million. These increases were partially offset by lower maintenance revenues of $30.8 million and higher maintenance expenses of $15.9 million.
During the fourth quarter, we acquired sixteen aircraft for $283.6 million and for the year we acquired 49 aircraft for $1.3 billion. Full year acquisitions consisted entirely of narrow-body aircraft and included four Airbus A320-200neos. At the end of 2019, Aircastle's owned fleet of 278 aircraft had a weighted average age of 9.9 years and a weighted average remaining lease term of 4.8 years.
During the fourth quarter of 2019, we sold eight aircraft for total sales proceeds of $132.7 million and a gain on sale of $20.1 million. This represents a 15.1% margin on net sales proceeds. Our fourth quarter sales included one Boeing 777-200ER and one Airbus A330-200 wide-body aircraft.
During the year ended 2019, we sold a total of twenty aircraft for proceeds of $361.7 million and a gain on sale of $45.5 million. The average age of the aircraft sold was 14.6 years with an average remaining lease term of 2.4 years.
Our fleet utilization for the fourth quarter was 99.2% and 96.4% for the full year 2019. As of December 31, 2019, Aircastle owned 278 aircraft having a net book value of $7.8 billion. We also managed nine aircraft with a net book value of $327.8 million on behalf of our joint venture with Mizuho Leasing.
2019 Financing Activity
At the end of the fourth quarter of 2019, the undrawn available balance under our committed credit facilities totaled $950 million. Borrowings under our credit facilities totaled $150 million at the end of 2019.
During 2019, the Company issued $650 million of unsecured Senior Notes due 2026 bearing a coupon of 4.25%, and we raised an additional $480 million of fixed rate, secured bank financing for eleven Airbus A320neo aircraft and two Boeing 737-800 aircraft. We also increased the size of one of our unsecured revolving credit facilities to $300 million from $250 million.
Lastly, during the year we entered into an unsecured $215 million floating rate loan commitment with Development Bank of Japan Inc., and certain other banks.
On February 10, 2020, Aircastle's Board of Directors declared a first quarter 2020 cash dividend on its common shares of $0.32 per share, payable on March 6, 2020, to shareholders of record on February 28, 2020. This is our 55th consecutive quarterly dividend. Since going public in 2006, the Company has paid total dividends of $948.7 million.
In 2019, the Company acquired 973,528 shares at an average price of $18.88 per share. Since 2011, the Company repurchased 19.0 million shares at an average cost of $14.72 per share, for approximately $279.9 million.
Merger Agreement with Affiliates of Marubeni and Mizuho Leasing
On November 6, 2019, the Company announced that it entered into a definitive agreement to be acquired by a newly formed entity controlled by affiliates of Marubeni Corporation ("Marubeni") and Mizuho Leasing Company, Limited. Under the terms of the merger agreement, Aircastle shareholders will receive $32.00 in cash for each common share of Aircastle (other than shares already owned by Marubeni and its affiliates), representing a total valuation of approximately $2.4 billion, or approximately $7.4 billion including debt obligations to be assumed or refinanced net of cash.
The cash consideration of $32.00 per share represented a 34% premium over Aircastle's closing stock price on October 23, 2019, the last trading day prior to Aircastle's public announcement that Aircastle was evaluating strategic alternatives, and a 41% premium over the volume weighted average share price during the 20 trading days ended October 23, 2019.
The transaction is subject to customary closing conditions, including approval by Aircastle's shareholders and receipt of certain regulatory approvals, and is expected to close in the first half of 2020. Marubeni has agreed to vote the common shares of Aircastle that Marubeni and its affiliates beneficially own in favor of the transaction.