Key Financial Metrics
Total lease rental and finance and sales-type lease revenues were $178.1 million, down 4.9%
Total revenues were $191.4 million, down 1.7%
Net income was $57.4 million, or $0.73 per diluted common share versus net income of $27.4 million, or $0.35 per diluted common share in the third quarter of 2016
Adjusted net income(1) was $64.4 million, or $0.82 per diluted common share versus adjusted net income of $29.7 million, or $0.38 per diluted common share in the third quarter of 2016
Adjusted EBITDA(1) was $199.5 million, up 10.2%
Cash ROE(1) was 15.2%; net cash interest margin(1) was 8.8%
Highlights
Acquired thirteen narrow-body aircraft for $359 million during the third quarter, and 28 aircraft year-to-date for $635 million
Closed or committed to acquire 39 additional mid-age narrow-body aircraft in the fourth quarter of 2017 for $860 million
Sold fifteen aircraft during the third quarter and 29 aircraft year-to-date; sales included three wide-bodies, three freighters, and one classic aircraft; year-to-date gain on sale of $35.9 million
Declared our 46th consecutive quarterly dividend and increased it to $0.28 from $0.26, or 7.7%; This is our eighth dividend increase in seven years
Aircastle Limited (the "Company" or "Aircastle") (NYSE: AYR) reported third quarter 2017 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. The third quarter results included total revenues of $191.4 million, a decrease of 1.7%, versus $194.7 million in the third quarter of 2016.
Commenting on the results, Mike Inglese, Aircastle's CEO, stated, "During the third quarter, we continued to have success in a competitive market, sourcing profitable acquisitions while simultaneously optimizing our fleet mix and realizing substantial gains on sale. With our recently announced acquisition of 20 high-quality, mid-age, narrow-body aircraft, we expect to complete $1.5 billion in aircraft investments during 2017. This will expand our owned and managed fleet to over 220 aircraft by year end, while maintaining our conservative balance sheet and limited long-term purchase commitments."
Mr. Inglese concluded, "We are pleased with the success we've had growing our business over time and establishing Aircastle's leading competitive position in the mid-life market segment. On this basis, we are increasing our quarterly dividend by 7.7% to $0.28 per share, our eighth quarterly dividend increase in seven years. By executing our proven investment strategy, we will continue to grow profitably and responsibly in order to create long-term value for our investors."
Financial Results
Third Quarter Results
Total revenues were $191.4 million, a decrease of $3.2 million, or 1.7%, from the prior year. The decrease was due to a $9.2 million decline in lease rental and finance and sales-type lease revenues, partially offset by a $7.7 million increase in maintenance revenues primarily due to the transition of one narrow-body and one wide-body aircraft during the third quarter of 2017.
Lease rental and finance and sales-type lease revenues were $178.1 million versus $187.3 million the prior year. The 4.9% decrease reflects the net year-over-year impact from aircraft acquisitions, dispositions and lease extensions.
Net income was $57.4 million, an improvement of $30.0 million compared to net income of $27.4 million in the previous year. Lower total revenues of $3.2 million were offset by a $21.7 million increase in gains from the sale of flight equipment and a $10.5 million reduction in aircraft impairment charges.
Adjusted net income improved by $34.7 million to $64.4 million. Lower revenues of $3.2 million were offset by a $32.2 million combined increase in gains from the sale of flight equipment and lower aircraft impairment charges, and a $4.1 million positive adjustment associated with deferred financing and loan termination fees that were recognized during the third quarter of 2017.
Adjusted EBITDA was $199.5 million, up 10.2%, or $18.4 million, versus the same quarter last year. This result is driven primarily by increases of $21.7 million in gains from aircraft sales and $7.7 million of higher maintenance revenue, partially offset by lower total lease revenue and finance and sales-type lease revenue of $9.2 million.
Aviation Assets
During the third quarter, we acquired thirteen aircraft for $359 million. For the first nine months of 2017, we purchased 28 aircraft for $635 million. The aircraft we've acquired year to date had a weighted average age of 9.9 years and a weighted average remaining lease term of 7.1 years. For the full year, we expect to complete $1.5 billion in aircraft acquisitions.
During the third quarter of 2017, we sold fifteen aircraft, including two freighters, three wide-bodies and one classic aircraft, for total sales proceeds of $527 million.
During the first three quarters of 2017, we sold 29 aircraft for proceeds of $765 million and a net gain on sale of $35.9 million. The average age of the aircraft sold was 11.8 years with an average remaining lease term of 5.2 years. We expect to record additional asset sales activity during the fourth quarter of 2017, including all five remaining classic aircraft that we own. For the full year, we expect total sales proceeds of almost $900 million.
Our fleet utilization during the third quarter was 100%. As of September 30, 2017, Aircastle owned 192 aircraft having a net book value of $6.0 billion. We also manage thirteen aircraft with a net book value of $661 million dollars on behalf of our joint ventures with Ontario Teachers' Pension Plan and IBJ Leasing of Japan.
Financing Activity
Year-to-date, we've secured $500 million of new financing. 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 October 31, 2017, Aircastle's Board of Directors declared a fourth quarter 2017 cash dividend on its common shares of $0.28 per share, payable on December 15, 2017 to shareholders of record on November 30, 2017. This is our 46th consecutive dividend and represents a 7.7% increase over the previous quarter's cash dividend. Over the last seven years, Aircastle has increased its dividend eight times.