AYR 10-K Fiscal year ended Dec. 31, 2019

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Diversified portfolio of modern aircraft. We have a portfolio of modern aircraft that is diversified with respect to lessees, geographic markets, lease maturities and aircraft types. As of December 31, 2019 , our owned and managed aircraft portfolio consisted of 287 aircraft, comprised of a variety of aircraft types leased to 85 lessees located in 49 countries. Lease expirations for our owned aircraft are well dispersed, with a weighted-average remaining lease term of 4.8 years. This provides the company with a long-dated base of contracted revenues.

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Flexible, disciplined acquisition approach and broad investment sourcing network. Since our formation, we have acquired 519 aircraft for $17.27 billion. Our investment strategy is to seek out the best risk-adjusted return opportunities across the commercial jet market, so our acquisition targets vary with market opportunities. We source our acquisitions through well-established relationships with airlines, other aircraft lessors, manufacturers, financial institutions and other aircraft owners. Since our formation in 2004, we built our aircraft portfolio through more than 168 transactions with 94 counterparties.

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Significant experience in successfully selling aircraft throughout their life cycle. Our team is adept at managing and executing the sale of aircraft. Since our formation, we have sold 241 aircraft for $5.78 billion. These sales produced net gains of $368.4 million and involved a wide range of aircraft types and buyers. Of these aircraft, 162, or 67%, were over fourteen years old at the time of sale; many of these being sold on a part-out disposition basis, where the airframe and engines may be sold to various buyers. We believe our competence in selling older aircraft is one of the capabilities that sets us apart from many of our competitors.

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Strong capital raising track record and access to a wide range of financing sources. Aircastle is a publicly listed company, and our shares have traded on the New York Stock Exchange (“NYSE”) since 2006. Since our inception in late 2004, we raised $1.69 billion in equity capital from private and public investors. Our largest shareholder is Marubeni, with whom we maintain a strong, strategic relationship. We also obtained $16.90 billion in debt capital from a variety of sources including the unsecured bond market, commercial banks, export credit agency-backed debt, and the aircraft securitization market. The diversity and global nature of our financing sources demonstrates our ability to adapt to changing market conditions and seize new opportunities.

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Our capital structure provides investment flexibility. We have $950.0 million available from unsecured revolving credit facilities that expire in 2021 and 2022, thereby limiting our near-term financial markets exposure. Given our relatively limited future capital commitments, we have the resources to take advantage of future investment opportunities. Our large unencumbered asset base and our unsecured revolving lines of credit give us access to the unsecured bond market, allowing us to pursue a flexible and opportunistic investment strategy.

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Experienced management team with significant expertise. Each member of our management team has more than twenty years of industry experience and we have expertise in the acquisition, leasing, financing, technical management, restructuring/repossession and sale of aviation assets. This experience spans several industry cycles and a wide range of business conditions and is global in nature. We believe our management team is highly qualified to manage and grow our aircraft portfolio and to address our long-term capital needs.

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Global and scalable business platform. We operate through offices in the United States, Ireland and Singapore, using a modern asset management system designed specifically for aircraft operating lessors and capable of handling a significantly larger aircraft portfolio. We believe that our current facilities, systems and personnel are capable of supporting an increase in our revenue base and asset base without a proportional increase in overhead costs.

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Pursuing a disciplined and differentiated investment strategy. In our view, the relative values of different aircraft change over time. We continually evaluate investments across different aircraft models, ages, lessees and acquisition sources and re-evaluate these choices as market conditions and relative investment values change. We believe our team’s experience with a wide range of asset types and the financing flexibility offered through unsecured debt provides us with a competitive advantage. We view orders from equipment manufacturers to be part of our investment opportunity set, but choose to keep our long term capital commitments limited.

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Originating investments from many different sources across the globe. Our strategy is to seek out worthwhile investments by leveraging our team’s wide range of contacts. We utilize a multi-channel approach to sourcing acquisitions and have purchased aircraft from a large number of airlines, lessors, original equipment manufacturers, lenders and other aircraft owners. Since our formation in 2004, we have acquired aircraft from 94 different sellers.

•	Selling assets when attractive opportunities arise. We sell assets with the aim of realizing profits and reinvesting proceeds. We also use asset sales for portfolio management purposes, such as reducing lessee specific concentrations and lowering residual value exposures to certain aircraft types. Since our formation, we have sold aircraft to 73 buyers.

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Maintaining efficient access to capital from a wide set of sources and leveraging our recent investment grade credit rating. We believe the aircraft investment market is influenced by the business cycle. Our strategy is to increase our purchase activity when prices are low and to emphasize asset sales when prices are high. To implement this approach, we believe it is important to maintain access to a wide variety of financing sources. During 2018, we improved our corporate credit ratings to an investment grade level by maintaining strong portfolio and capital structure metrics while achieving a critical size through accretive growth. We believe our investment grade rating not only reduces our borrowing costs, but also facilitates more reliable access to both unsecured and secured debt capital throughout the business cycle.

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Leveraging our strategic relationships. We intend to capture the benefits provided through the extensive global contacts and relationships maintained by Marubeni, which is our largest shareholder and is one of the largest Japanese trading companies. Marubeni has enabled greater access to Japanese-based financing and helped source and develop our joint venture with Mizuho Leasing. See also description of Merger above.

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Capturing the value of our efficient operating platform and strong operating track record. We believe our team’s capabilities in the global aircraft leasing market places us in a favorable position to source and manage new income-generating activities. We intend to continue to focus our efforts in areas where we believe we have competitive advantages, including new direct investments as well as ventures with strategic business partners.

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Intending to pay quarterly dividends to our shareholders based on the Company ’ s sustainable earnings levels. Aircastle has paid dividends each quarter since our initial public offering in 2006. On October 28, 2019 , our Board of Directors declared a regular quarterly dividend of $0.32 per common share, or an aggregate of $23.9 million for the three months ended December 31, 2019 , which was paid on December 13, 2019 to holders of record on November 29, 2019 . These dividend amounts may not be indicative of any future dividends. Our ability to pay quarterly dividends will depend upon many factors, including those as described in Item 1A. “Risk Factors” and elsewhere in this Annual Report.

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(1)	Consisted of one Boeing 737-800 aircraft which we are marketing for lease or sale.

•	2021: 18 aircraft, representing 5%;

•	2022: 34 aircraft, representing 10%;

•	2023: 42 aircraft, representing 12%; and

•	2024: 58 aircraft, representing 21%.

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•	individual lessee exposures;

•	geographic concentrations;

•	aircraft type concentrations;

•	portfolio credit quality distribution; and

•	lease maturity distribution.

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•	passenger and air cargo demand;

•	competition;

•	passenger fare levels and air cargo rates;

•	availability of financing and other circumstances affecting airline liquidity, including covenants in financings, terms imposed by credit card issuers, collateral posting requirements contained in hedging contracts and the ability of airlines to make or refinance principal payments as they come due;

•	operating costs, including the price and availability of jet fuel, labor costs and insurance costs and coverages;

•	restrictions in labor contracts and labor difficulties, including pilot shortages;

•	economic conditions, including recession, financial system distress and currency fluctuations in the countries and regions in which the lessee operates or from which the lessee obtains financing;

•	aircraft accidents;

•	the continuing availability of government support, whether through subsidies, loans, guarantees, equity investments or otherwise;

•	changing political conditions, including risk of rising protectionism, restrictions on immigration or imposition of new trade barriers;

•	geopolitical and other events, including war, acts or threats of terrorism, outbreaks of epidemic diseases and natural disasters;

•	impact of climate change and emissions on demand for air travel;

•	cyber risk, including information hacking, viruses and malware; and

•	governmental regulation of, or affecting the air transportation business, including noise regulations, emissions regulations, climate change initiatives, and aircraft age limitations.

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•	14.7% of our net book value serves as collateral for our secured indebtedness, and the terms of certain of our indebtedness require us to use proceeds from sales of aircraft, in part, to repay amounts outstanding under such indebtedness;

•	our failure to comply with the terms of our indebtedness, including restrictive covenants contained therein, may result in additional interest being due or defaults that could result in the acceleration of the principal, and unpaid interest on, the defaulted debt, as well as the forfeiture of any aircraft pledged as collateral; and

•	non-compliance with covenants prohibiting certain investments and other restricted payments, including limitations on our ability to pay dividends, repurchase our common shares, raise additional capital or refinance our existing debt, may reduce our operational flexibility and limit our ability to refinance or grow the business.

•	Senior Notes. Our senior notes indentures impose operating and financial restrictions on our activities. These restrictions limit our ability to, or in certain cases prohibit us from, incurring or guaranteeing additional

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•	Bank Financings. Our secured bank financings contain, among other customary provisions, a $500 million minimum net worth covenant, a cross-default to certain other financings of the Company, and for one portfolio financing, a minimum debt service coverage ratio of 1.15.

•	Unsecured Revolving Credit Facilities and Loan. Our unsecured revolving credit facilities/loan contain $750 million minimum net worth covenants, minimum unencumbered asset ratios, minimum interest coverage ratios and cross-defaults to certain other financings of the Company.

•	ECA Financings. Our ECA Financings contain a $500 million minimum net worth covenant and also contain, among other customary provisions, a material adverse change default and a cross-default to certain other financings of the Company.

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•	passenger and air cargo demand;

•	operating costs, including fuel costs, and general economic conditions affecting our lessees’ operations;

•	interest rates;

•	foreign exchange rates;

•	the availability of credit;

•	airline restructurings and bankruptcies;

•	changes in control of, or restructurings of, other aircraft leasing companies;

•	manufacturer production levels and technological innovation;

•	discounting by manufacturers on aircraft types nearing end of production;

•	manufacturers merging, exiting the industry or ceasing to produce aircraft types;

•	new-entrant manufacturers producing additional aircraft models, or existing manufacturers producing newly engined aircraft models or new aircraft models, in competition with existing aircraft models;

•	geopolitical events, including war, prolonged armed conflict and acts of terrorism;

•	governmental regulation;

•	climate change initiatives, technological change, aircraft noise and emissions regulations, aircraft age limits and other factors leading to reduced demand for, early retirement or obsolescence of aircraft models;

•	tariffs and other restrictions on trade;

•	outbreaks of communicable diseases and natural disasters;

•	reintroduction into service of aircraft previously in storage; and

•	airport and air traffic control infrastructure constraints.

•	the age of the aircraft;

•	the particular maintenance and operating history of the airframe and engines;

•	the number of operators using that type of aircraft;

•	whether the aircraft is subject to a lease and, if so, whether the lease terms are favorable to us;

•	the demand for and availability of such aircraft at any given time;

•	applicable airworthiness directives or manufacturer’s service bulletins that have not yet been performed on the aircraft;

•	grounding orders or other regulatory action that could prevent or limit utilization of our aircraft;

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•	any regulatory and legal requirements that must be satisfied before the aircraft can be purchased, sold or re-leased; and

•	compatibility of our aircraft configurations or specifications with those desired by the operators of other aircraft of that type.

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•	forfeiting advance deposits and progress payments to Embraer, as well as incurring certain significant costs related to these commitments such as contractual damages and legal, accounting and financial advisory expenses;

•	defaulting on any future lease commitments we may have entered into with respect to these aircraft, which could result in monetary damages and strained relationships with lessees;

•	failing to realize the benefits of purchasing and leasing such aircraft; and

•	risking harm to our business reputation, which would make it more difficult to purchase and lease aircraft in the future on agreeable terms, if at all.

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•	the costs of casualty, liability and political risk insurance and the liability costs or losses when insurance coverage has not been or cannot be obtained as required, or is insufficient in amount or scope;

•	the costs of licensing, exporting or importing an aircraft, airport charges, customs duties, air navigation charges, landing fees and similar governmental or quasi-governmental impositions, which can be substantial;

•	penalties and costs associated with the failure of lessees to keep aircraft registered under all appropriate local requirements or obtain required governmental licenses, consents and approvals; and

•	carbon taxes or other fees, taxes or costs imposed under emissions limitations, climate change regulations or other initiatives.

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•	provisions providing for a classified board of directors with staggered three-year terms;

•	provisions regarding the election of directors, classes of directors, the term of office of directors and amalgamations to be rescinded, altered or amended only upon approval by a resolution of the directors and by a resolution of our shareholders, including the affirmative votes of at least 66% of the votes attaching to all shares in issue entitling the holder to vote on such resolution;

•	provisions in our bye-laws dealing with the removal of directors and corporate opportunity to be rescinded, altered or amended only upon approval by a resolution of the directors and by a resolution of our shareholders, including the affirmative votes of at least 80% of the votes attaching to all shares in issue entitling the holder to vote on such resolution;

•	provisions providing for the removal of directors by a resolution, including the affirmative votes of at least 80% of all votes attaching to all shares in issue entitling the holder to vote on such resolution;

•	provisions providing for our Board of Directors to determine the powers, preferences and rights of our preference shares and to issue such preference shares without shareholder approval;

•	provisions providing for advance notice requirements by shareholders for director nominations and actions to be taken at annual meetings; and

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no provision for cumulative voting in the election of directors; all the directors standing for election may be elected by our shareholders by a plurality of votes cast at a duly convened annual general meeting, the quorum for which is two or more persons present in person or by proxy at the start of the meeting and representing in excess of 50% of all votes attaching to all shares in issue entitling the holder to vote at the meeting.

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•	we may not realize a satisfactory return on our investment or the joint venture may divert management’s attention from our business;

•	our joint venture partner could have investment goals that are not consistent with our investment objectives, including the timing, terms and strategies for any investments;

•	our joint venture partner might fail to fund its share of required capital contributions or fail to fulfill its obligations as a joint venture partner;

•	decisions of our partner to sell aircraft in our joint venture may have an impact on our financial performance; and

•	our joint venture partner may have competing interests in our markets that could create conflict of interest issues, particularly if aircraft owned by the joint venture are being marketed for lease or sale at a time when the Company also has comparable aircraft available for lease or sale.

•	variations in our quarterly or annual operating results;

•	failure to meet any earnings estimates;

•	actual or perceived reduction in our growth or expected future growth;

•	actual or anticipated accounting issues;

•	publication of research reports about us, other aircraft lessors or the aviation industry or the failure of securities analysts to cover our common shares or the decision to suspend or terminate coverage in the future;

•	additions or departures of key management personnel;

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•	increased volatility in the capital markets and more limited or no access to debt financing, which may result in an increased cost of, or less favorable terms for, debt financing or may result in sales to satisfy collateral calls or other pressure on holders to sell our shares;

•	redemptions, or similar events affecting funds or other investors holding our shares, which may result in large block trades that could significantly impact the price of our common shares;

•	adverse market reaction to any indebtedness we may incur or preference or common shares we may issue in the future;

•	changes in or elimination of our dividend;

•	actions by shareholders;

•	changes in market valuations of similar companies;

•	the inability to complete the Merger due to the failure to satisfy the remaining conditions to the consummation of the Merger, including receipt of the required shareholder approval or the remaining required regulatory approvals;

•	the risk that the Merger Agreement may be terminated in certain limited circumstances that require us to pay Parent a termination fee of $73.5 million;

•	risks that the proposed Merger disrupts our current plans and operations or affects our ability to retain or recruit key employees;

•	the effect of the pending Merger on Aircastle’s business relationships (including, without limitation customers and suppliers), operating results and business generally;

•	the amount of the costs, fees, expenses and charges related to the Merger;

•	risks related to the Merger diverting management’s or employees’ attention from ongoing business operations;

•	the risk that our share price may decline significantly if the Merger is not completed;

•	announcements by us, our competitors or our suppliers of significant contracts, acquisitions, disposals, strategic partnerships, joint ventures or capital commitments;

•	speculation in the press or investment community;

•	changes or proposed changes in laws or regulations affecting the aviation industry or enforcement of these laws and regulations, or announcements relating to these matters; and

•	general market, political and economic conditions and local conditions in the markets in which our lessees are located.

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•	key management and other employees may be difficult to retain or may become distracted from day-to-day operations because matters related to the Merger may require substantial commitments of their time and resources, which could adversely affect our operations and financial results;

•	our ability to pursue alternative business opportunities, including strategic acquisitions, is limited by the terms of the Merger Agreement. If the Merger is not completed for any reason, there can be no assurance that any other transaction acceptable to us will be offered or that our business, prospects or results of operations will not be adversely affected;

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our ability to make appropriate changes to our business may be restricted by covenants in the Merger Agreement; these restrictions generally require us to conduct our business in the ordinary course and subject us to a variety of specified limitations absent Parent’s prior written consent. We may find that these and other contractual restrictions in the Merger Agreement may delay or prevent us from responding, or limit our ability to respond, effectively to competitive pressures, industry developments and future business opportunities that may arise during such period, even if our management believes they may be advisable; and

•	the costs and potential adverse outcomes of litigation relating to the Merger.

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(1)	Under our current repurchase program, we have purchased an aggregate of 476,608 common shares at an aggregate cost of $9.6 million, including commissions. The remaining dollar value of common shares that may be repurchased under the program is $90.4 million.

(2)	Repurchased to satisfy tax withholding obligations associated with the vesting of restricted common shares and performance share awards. See Note 8 for information regarding accelerated share vestings.

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(1)	See Organization and Basis of Presentation in the Notes to Consolidated Financial Statements.

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(1)	Includes $7.4 million in Other income (expense) and $0.5 million in Selling, general and administrative expenses.

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(1)	Included in Other income (expense).

(2)	Included in Interest, net.

(3)	Included in Selling, general and administrative expenses.

(4)	Includes $7.4 million in Other income (expense), $3.7 million in Income tax provision and $0.5 million in Selling, general and administrative expenses.

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(1)	Calculated using net book value at period end.

(2)	Weighted by net book value.

(3)	Aircraft on-lease days as a percent of total days in period weighted by net book value. The decrease from our historical utilization rate was due to the early termination of the leases for eleven aircraft from Avianca Brazil and seven aircraft from Jet Airways.

(4)

Lease rental revenue, interest income and cash collections on our net investment in direct financing and sales-type leases for the period as a percent of the average net book value for the period; quarterly information is annualized. The decrease from our historical portfolio yield was due to the early termination of the leases for eleven aircraft from Avianca Brazil and seven aircraft from Jet Airways. The calculation of portfolio yield includes our net investment in direct financing and sales-type leases in the average net book value, and the interest income and cash collections from our net investment in direct financing and sales-type leases in lease rentals.

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(1)	Calculated using net book value at year end.

(2)	Consisted of one Airbus A320-200 aircraft, which was delivered on lease to a customer in Europe during the first quarter of 2020, one Airbus A330-200 aircraft, which is subject to a lease commitment, and one Boeing 737-800 aircraft, which we are marketing for lease or sale.

(3)	Consisted of ten Airbus A320-200 aircraft, one Airbus A330-200 aircraft, one Boeing 737-800 aircraft and one Boeing 777-300ER aircraft, all of which delivered on lease to customers during 2019, one Airbus A330-200 aircraft, which is subject to a lease commitment, and one Airbus A320-200 aircraft, which was sold during 2019.

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(1)	If combined with four aircraft on lease to an affiliate, would represent over 4% of net book value.

(2)	Guaranteed by Volga-Dnepr Airlines. We have one additional aircraft on lease with an affiliate.

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•	a $74.2 million decrease due to lease extensions, amendments, transitions and other changes ($38.3 million of which is attributable to aircraft previously on lease to Avianca Brazil and Jet Airways which we have since transitioned to new lessees); and

•	a $34.2 million decrease due to the sale of 25 aircraft during 2019 and 2018 .

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(1)	Included a loan termination gain of $0.8 million related to the sale of aircraft during the year ended December 31, 2018 .

(2)	Included $0.2 million and $0.3 million in deferred financing fees written off related to the sale of aircraft during the years ended December 31, 2019 and 2018 , respectively.

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•	flight equipment where estimates of the manufacturers’ realized sales prices are not relevant (e.g., freighter conversions);

•	flight equipment where estimates of the manufacturers’ realized sales prices are not readily available; and

•	flight equipment which may have a shorter useful life due to obsolescence.

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•	various forms of borrowing secured by our aircraft, including bank term facilities, limited recourse securitization financings, and ECA-backed financings for new aircraft acquisitions;

•	unsecured indebtedness, including our current unsecured revolving credit facilities, term loan and senior notes;

•	asset sales; and

•	sales of common shares.

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•	a $39.0 million increase in cash from lease rentals, net of direct financing and sales-type leases,

•	a $25.8 million increase in collections from direct financing and sales-type leases (please refer to Note 1);

•	a $6.9 million decrease in cash paid for taxes; and

•	a $5.1 million increase in cash related to fees from our joint ventures.

•	a $31.7 million increase in in cash paid for interest;

•	a $22.2 million decrease in cash from working capital; and

•	a $15.9 million increase in cash paid for maintenance.

•	a $160.9 million decrease in the acquisition and improvement of flight equipment and net investment in direct financing and sales-type leases;

•	a $32.9 million increase in distribution from our Lancaster joint venture;

•	a $22.9 million increase in proceeds from the sale of flight equipment; and

•	a $16.3 million decrease in a ircraft purchase deposits and progress payments, net of returned deposits.

•	a $848.4 million increase in repayments of secured and unsecured financings;

•	a $28.2 million increase in maintenance and security deposits returned, net of deposits received; and

•	a $7.2 million increase in debt extinguishment costs.

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(1)	Future interest payments on variable rate, LIBOR-based debt obligations are estimated using the interest rate in effect at December 31, 2019 .

(2)	Represents contractual payment obligations for our office leases in Stamford, Connecticut; Dublin, Ireland and Singapore.

(3)	At December 31, 2019 , we had commitments to acquire 31 aircraft for $1.11 billion , including 25 new E-Jet E2 aircraft from Embraer S.A. These amounts include estimates for pre-delivery deposits, contractual price escalation and other adjustments. As of February 10, 2020 , we have commitments to acquire 31 aircraft for $1.11 billion .

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(1)	Includes $7.4 million in Other income (expense) and $0.5 million in Selling, general and administrative expenses.

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(1)	Included in Other income (expense).

(2)	Included in Interest, net.

(3)	Included in Selling, general and administrative expenses.

(4)	Includes $7.4 million in Other income (expense), $3.7 million in Income tax provision and $0.5 million in Selling, general and administrative expenses.

(1)	For the years ended December 31, 2019 , 2018 and 2017 , distributed and undistributed earnings to restricted shares was 0.66% , 0.61% and 0.71% , respectively, of net income. The amount of restricted share forfeitures for all periods presented was immaterial to the allocation of distributed and undistributed earnings.

(2)	For the years ended December 31, 2019 , 2018 and 2017 , dilutive shares represented contingently issuable shares related to the Company’s Performance Share Units (“PSUs”).

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•	depreciation and amortization, though not directly affecting our current cash position, represent the wear and tear and/or reduction in value of our aircraft, which affects the aircraft’s availability for use and may be indicative of future needs for capital expenditures;

•	the cash portion of income tax (benefit) provision generally represents charges (gains), which may significantly affect our financial results;

•	elements of our interest rate derivative accounting may be used to evaluate the effectiveness of our hedging policy;

•	hedge loss amortization charges related to Term Financing No. 1 and Securitization No. 1; and

•	adjustments required in calculating covenant ratios and compliance as that term is defined in the indenture governing our senior unsecured notes.

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^	Certain schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company hereby undertakes to furnish supplemental copies of any of the omitted schedules to the SEC upon request.

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Organization and Basis of Presentation

Aircastle Limited (“Aircastle,” the “Company,” “we,” “us” or “our”) is a Bermuda exempted company that was incorporated on October 29, 2004 under the provisions of Section 14 of the Companies Act of 1981 of Bermuda. Aircastle’s business is investing in aviation assets, including acquiring, leasing, managing and selling commercial jet aircraft.

Aircastle is a holding company that conducts its business through subsidiaries. Aircastle directly or indirectly owns all of the outstanding common shares of its subsidiaries. The consolidated financial statements presented are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The Company manages, analyzes and reports on its business and results of operations on the basis of one operating segment: leasing, financing, selling and managing commercial flight equipment. Our chief executive officer is the chief operating decision maker.

On November 5, 2019, Aircastle entered into an Agreement and Plan of Merger (the “Merger Agreement”), with MM Air Limited, a Bermuda exempted company (“Parent”), and MM Air Merger Sub Limited, a Bermuda exempted company and wholly owned subsidiary of Parent (“Merger Sub”), pursuant to which, among other things, Merger Sub will merge with and into the Company, with Aircastle surviving as a wholly owned subsidiary of Parent (the “Merger”). Parent and Merger Sub are newly-formed entities controlled by affiliates of Marubeni Corporation (“Marubeni”) and Mizuho Leasing Company, Limited (“Mizuho Leasing”). The Marubeni Corporation is a related party and owns 28.8 % of the Company’s outstanding common shares as of December 31, 2019.

Pursuant to the Merger Agreement, subject to certain conditions set forth therein, at the effective time of the Merger (the “Effective Time”), each issued and outstanding common share, par value $ 0.01 per share, of the Company (the “Common Shares”) (other than (i) shares to be canceled or converted into shares of the surviving company pursuant to the Merger Agreement and (ii) restricted shares to be canceled and exchanged pursuant to the Merger Agreement), shall be converted into the right to receive $ 32.00 in cash, without interest (the “Merger Consideration”).

Consummation of the Merger is subject to the satisfaction of certain remaining customary closing conditions, including, without limitation, (i) approval of the Merger Agreement and the transactions contemplated thereby by the affirmative votes of a majority of the votes cast by holders of outstanding Common Shares at a meeting of the Company’s shareholders; (ii) the receipt of any applicable pre-clearance or similar approval of certain remaining specified jurisdictions (i.e., Chile, Mexico and Morocco), and all required regulatory approvals being in full force and effect; (iii) the absence of any law, judgment or other legal restraint that prevents, makes illegal or prohibits the consummation of the Merger and the other transactions contemplated by the Merger Agreement; (iv) the accuracy of each party’s representations and warranties (subject to certain qualifications); (v) each party’s performance in all material respects of its obligations contained in the Merger Agreement; and (vi) the absence of a material adverse effect on the Company since the date of the Merger Agreement.

The Merger Agreement includes customary representations, warranties and covenants of Aircastle, Parent, and Merger Sub. Among other things, Aircastle has agreed to customary covenants regarding the operation of the business of Aircastle and its subsidiaries prior to the closing. Aircastle is permitted to pay regular quarterly dividends up to $ 0.32 per common share pursuant to the Merger Agreement. The Company currently anticipates that the Merger will close in the first half of calendar year 2020, subject to the satisfaction of the remaining customary closing conditions.

Effective January 1, 2019, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 842, Leases (“ASC 842”) which, together with all subsequent amendments, replaced the existing guidance in ASC 840, Leases (“ASC 840”). The accounting for leases by lessors remained largely unchanged from the concepts that existed in ASC 840. The FASB decided that lessors would be precluded from recognizing selling profit and revenue at lease commencement for any sales-type or direct financing lease that does not transfer control of the underlying asset to the lessee. This requirement aligns the notion of what constitutes a sale in the lessor accounting guidance with that in the revenue recognition standard, which evaluates whether a sale has occurred from the customer’s perspective.

As a result of the Company’s adoption of ASC 842, we recognized right-of-use assets and lease liabilities on our Consolidated Balance Sheet as of December 31, 2019 , for our office leases classified as operating leases under ASC 842, existing at, or entered into after, January 1, 2019. We adopted the standard using the required “modified retrospective”

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approach and the available practical expedients. ASC 842 requires collections on direct financing and sales-type leases to be reported within operating activities on our Consolidated Statement of Cash Flows for the year ended December 31, 2019. Our financial statements for comparative periods have not been adjusted and continue to be reported in accordance with ASC 840. The standard did not have a material impact on our consolidated financial statements and related disclosures.

The Company’s management has reviewed and evaluated all events or transactions for potential recognition and/or disclosure since the balance sheet date of December 31, 2019 through the date on which the consolidated financial statements included in this Form 10-K were issued.

Principles of Consolidation

The consolidated financial statements include the accounts of Aircastle and all of its subsidiaries. Aircastle consolidates four Variable Interest Entities (“VIEs”) of which Aircastle is the primary beneficiary. All intercompany transactions and balances have been eliminated in consolidation.

We consolidate VIEs in which we have determined that we are the primary beneficiary. We use judgment when deciding (a) whether an entity is subject to consolidation as a VIE, (b) who the variable interest holders are, (c) the potential expected losses and residual returns of the variable interest holders, and (d) which variable interest holder is the primary beneficiary. When determining which enterprise is the primary beneficiary, we consider (1) the entity’s purpose and design, (2) which variable interest holder has the power to direct the activities that most significantly impact the entity’s economic performance, and (3) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. When certain events occur, we reconsider whether we are the primary beneficiary of VIEs. We do not reconsider whether we are a primary beneficiary solely because of operating losses incurred by an entity.

Risk and Uncertainties

In the normal course of business, Aircastle encounters several significant types of economic risk including credit, market, aviation industry and capital market risks. Credit risk is the risk of a lessee’s inability or unwillingness to make contractually required payments and to fulfill its other contractual obligations. Market risk reflects the change in the value of financings due to changes in interest rate spreads or other market factors, including the value of collateral underlying financings. Aviation industry risk is the risk of a downturn in the commercial aviation industry which could adversely impact a lessee’s ability to make payments, increase the risk of unscheduled lease terminations and depress lease rates and the value of the Company’s aircraft. Capital market risk is the risk that the Company is unable to obtain capital at reasonable rates to fund the growth of our business or to refinance existing debt facilities.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. While Aircastle believes that the estimates and related assumptions used in the preparation of the consolidated financial statements are appropriate, actual results could differ from those estimates.

Cash and Cash Equivalents and Restricted Cash and Cash Equivalents

Aircastle considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents.

Restricted cash and cash equivalents consists primarily of rent collections, maintenance payments and security deposits received from lessees pursuant to the terms of various lease agreements held in lockbox accounts in accordance with our financings.

Virtually all of our cash and cash equivalents and restricted cash and cash equivalents are held or managed by three major financial institutions.

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Flight Equipment Held for Lease and Depreciation

Flight equipment held for lease is stated at cost and depreciated using the straight-line method, typically over a 25 -year life from the date of manufacture for passenger aircraft and over a 30 to 35 -year life for freighter aircraft, depending on whether the aircraft is a converted or purpose-built freighter, to estimated residual values. Estimated residual values are generally determined to be approximately 15 % of the manufacturer’s estimated realized price for passenger aircraft when new and 5 % to 10 % for freighter aircraft when new. Management may make exceptions to this policy on a case-by-case basis when, in its judgment, the residual value calculated pursuant to this policy does not appear to reflect current expectations of value. Examples of situations where exceptions may arise include but are not limited to:

•	flight equipment where estimates of the manufacturer’s realized sales prices are not relevant (e.g., freighter conversions);

•	flight equipment where estimates of the manufacturer’s realized sales prices are not readily available; and

•	flight equipment which may have a shorter useful life due to obsolescence.

Major improvements and modifications incurred in connection with the acquisition of aircraft that are required to get the aircraft ready for initial service are capitalized and depreciated over the remaining life of the flight equipment.

For planned major maintenance activities for aircraft off-lease, the Company capitalizes the actual maintenance costs by applying the deferral method. Under the deferral method, we capitalize the actual cost of major maintenance events, which are depreciated on a straight-line basis over the period until the next maintenance event is required.

In accounting for flight equipment held for lease, we make estimates about the expected useful lives, the fair value of attached leases, acquired maintenance assets or liabilities and the estimated residual values. In making these estimates, we rely upon actual industry experience with the same or similar aircraft types and our anticipated lessee’s utilization of the aircraft.

For purchase and lease back transactions, we account for the transaction as a single arrangement. We allocate the consideration paid based on the fair value of the aircraft and lease. The fair value of the lease may include a maintenance premium and a lease premium or discount.

When we acquire an aircraft with a lease, determining the fair value of attached leases requires us to make assumptions regarding the current fair values of leases for specific aircraft. We estimate a range of current lease rates of like aircraft in order to determine if the attached lease is within a fair value range. If a lease is below or above the range of current lease rates, we present value the estimated amount below or above the fair value range over the remaining term of the lease. The resulting lease discount or premium is amortized into lease rental income over the remaining term of the lease.

Impairment of Flight Equipment

We perform a recoverability assessment of all aircraft in our fleet, on an aircraft-by-aircraft basis annually during the second quarter. In addition, a recoverability assessment is performed whenever events or changes in circumstances, or indicators, suggest that the carrying amount or net book value of an asset may not be recoverable. Indicators may include, but are not limited to, a significant lease restructuring or early lease termination, significant change in aircraft model’s storage levels, the introduction of newer technology aircraft or engines, an aircraft type is no longer in production or a significant airworthiness directive is issued. When we perform a recoverability assessment, we measure whether the estimated future undiscounted net cash flows expected to be generated by the aircraft exceed its net book value. The undiscounted cash flows consist of cash flows from currently contracted lease rental and maintenance payments, future projected lease rates, transition costs, estimated down time, estimated residual or scrap values for an aircraft, economic conditions and other factors. In the event that an aircraft does not meet the recoverability test, the aircraft will be adjusted to fair value, resulting in an impairment charge. See Note 2 — Fair Value Measurements.

Management develops the assumptions used in the recoverability analysis based on current and future expectations of the global demand for a particular aircraft type and historical experience in the aircraft leasing market and aviation industry, as well as information received from third party industry sources. The factors considered in estimating the undiscounted

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cash flows are impacted by changes in future periods due to changes in projected lease rental and maintenance payments, residual values, economic conditions, technology, airline demand for a particular aircraft type and other factors.

In monitoring the aircraft in our fleet for impairment charges, we identify those aircraft that are most susceptible to failing the recoverability assessment and monitor those aircraft more closely, which may result in more frequent recoverability assessments. The recoverability in the value of these aircraft is more sensitive to changes in contractual cash flows, future cash flow estimates and residual values or scrap values for each aircraft. These are typically older aircraft for which lessee demand is declining.

Net Investment in Direct Financing and Sales-Type Leases

If a lease meets specific criteria at lease commencement or at the effective date of a lease modification, we recognize the lease as a direct financing or sales-type lease. The net investment in direct financing and sales-type leases consists of the lease receivable, estimated unguaranteed residual value of the leased flight equipment at lease-end and, for direct financing leases, deferred selling profit. For sales-type leases, we recognize the difference between the net book value of the aircraft and the net investment in the lease as a gain or loss on sale of fight equipment. Selling profit on a direct financing lease is deferred and amortized over the lease term, and a selling loss is recognized at lease commencement. Interest income on our net investment in leases is recognized as Direct financing and sales-type lease revenue over the lease term in a manner that produces a constant rate of return on the net investment in the lease.

Collectability of direct financing and sales-type leases is evaluated at lease commencement and periodically during the lease term. The evaluation is performed at an individual customer level and, among other things, considers the credit of the lessee and the value of the underlying aircraft. A loss allowance is established if there is evidence that we will be unable to collect all amounts due according to the contractual terms of the lease. At December 31, 2019, we had no allowance for credit losses for our Net investment in direct financing and sales-type leases.

Unconsolidated Equity Method Investment

Aircastle accounts for its interest in an unconsolidated joint venture using the equity method as we do not control the joint venture entity. Under the equity method, the investment is initially recorded at cost and the carrying amount is affected by its share of the unconsolidated joint venture’s undistributed earnings and losses, and distributions of dividends and capital. The investment may also reflect an equity loss in the event that circumstances indicate an other-than-temporary impairment.

Security Deposits

Most of our operating leases require the lessee to pay Aircastle a security deposit or provide a letter of credit. Security deposits represent cash received from the lessee that is held on deposit until lease expiration. Aircastle’s operating leases also obligate the lessees to maintain flight equipment and comply with all governmental requirements applicable to the flight equipment, including without limitation, operational, maintenance, registration requirements and airworthiness directives.

Maintenance Payments

Typically, under an operating lease, the lessee is responsible for performing all maintenance but they may also be required to make payments to us for heavy maintenance, overhaul or replacement of certain high-value components of the aircraft. These maintenance payments are based on hours or cycles of utilization or on calendar time, depending upon the component, and are required to be made monthly in arrears or at the end of the lease term. Whether to permit a lessee to make maintenance payments at the end of the lease term, rather than requiring such payments to be made monthly, depends on a variety of factors, including the creditworthiness of the lessee, the level of security deposit which may be provided by the lessee and market conditions at the time we enter into the lease. If a lease requires monthly maintenance payments, we would typically be obligated to reimburse the lessee for costs they incur for heavy maintenance, overhaul or replacement of certain high-value components to the extent of maintenance payments received in respect of the specific maintenance event, usually shortly following completion of the relevant work. If a lease requires end of lease term maintenance payments, typically the lessee would be required to pay us for its utilization of the aircraft during the lease; however, in some cases, we may owe a net payment to the lessee in the event heavy maintenance is performed and paid for by the lessee during the lease term and the aircraft is returned to us in better condition than at lease inception.

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We record monthly maintenance payments by the lessee as accrued maintenance payments liabilities in recognition of our contractual commitment to refund such receipts. In these contracts, we typically do not recognize such maintenance payments as maintenance revenue during the lease. Reimbursements to the lessee upon the receipt of evidence of qualifying maintenance work are charged against the existing accrued maintenance payments liability. We currently defer maintenance revenue recognition of most monthly maintenance payments collected until the end of the lease, when we are able to determine the amount, if any, by which the monthly maintenance payments received from a lessee exceed costs to be incurred by that lessee in performing heavy maintenance. End of lease term maintenance payments made to us are recognized as maintenance revenue, and end of lease term maintenance payments we make to a lessee are recorded as contra maintenance revenue.

Lease Incentives and Amortization

Many of our leases contain provisions which may require us to pay a portion of the lessee’s costs for heavy maintenance, overhaul or replacement of certain high-value components. We account for these expected payments as lease incentives, which are amortized as a reduction of revenue over the life of the lease. We estimate the amount of our portion for such costs, typically for the first major maintenance event for the airframe, engines, landing gear and auxiliary power units, expected to be paid to the lessee based on assumed utilization of the related aircraft by the lessee, the anticipated amount of the maintenance event cost and the estimated amounts the lessee is responsible to pay. The assumptions supporting these estimates are re-evaluated annually.

This estimated lease incentive is not recognized as a lease incentive liability at the inception of the lease. We recognize the lease incentive as a reduction of lease revenue on a straight-line basis over the life of the lease, with the offset being recorded as a lease incentive liability which is included in maintenance payments on the balance sheet. The payment to the lessee for the lease incentive liability is first recorded against the lease incentive liability, and any excess above the lease incentive liability is recorded as a prepaid lease incentive asset, which is included in other assets on the balance sheet and continues to amortize over the remaining life of the lease.

Lease acquisition costs related to reconfiguration of the aircraft cabin, other lessee specific modifications and other direct costs are capitalized and amortized into revenue over the initial life of the lease, assuming no lease renewals, and are included in other assets.

Income Taxes

Aircastle uses an asset and liability based approach in accounting for income taxes. Deferred income tax assets and liabilities are recognized for the future tax consequences attributed to differences between the financial statement and tax basis of existing assets and liabilities using enacted rates applicable to the periods in which the differences are expected to affect taxable income. A valuation allowance is established, when necessary, to reduce deferred tax assets to the amount estimated by us to be realizable. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities. We did not have any unrecognized tax benefits.

Lease Revenue Recognition

We lease flight equipment under net operating leases with lease terms typically ranging from three to seven years. We generally do not offer renewal terms or purchase options in our leases, although certain of our operating leases allow the lessee the option to extend the lease for an additional term. Operating leases with fixed rentals and step rentals are recognized on a straight-line basis over the term of the initial lease, assuming no renewals. Operating lease rentals that adjust based on a London Interbank Offered Rate (“LIBOR”) index are recognized on a straight-line basis over the lease term using the prevailing rate at lease commencement. Changes to rate-based lease rentals are recognized in the statements of income in the period of change. Revenue is not recognized when collection is not reasonably assured. When collectability is not probable, the customer is placed on non-accrual status, and revenue is recognized when cash payments are received.

Comprehensive Income

Comprehensive income consists of net income and other gains and losses, net of income taxes, if any, affecting shareholders’ equity that, under U.S. GAAP, are excluded from net income.

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Share-Based Compensation

Aircastle recognizes compensation cost relating to share-based payment transactions in the financial statements based on the fair value of the equity instruments issued. Aircastle uses the straight-line method of accounting for compensation cost on share-based payment awards that contain pro-rata vesting provisions.

Deferred Financing Costs

Deferred financing costs, which are included in borrowings from secured and unsecured financings, net of debt issuance costs, in the Consolidated Balance Sheets, are amortized using the interest method for amortizing loans over the lives of the relevant related debt.

Recent Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments and related updates. The standard affects entities holding financial assets and net investments in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The standard takes effect for annual periods beginning after December 15, 2019. The Company’s net investments in direct financing and sales-type leases compose the financial assets principally affected by the standard. Operating lease receivables are not within the scope of ASC 326.

Upon the Company’s adoption of ASC 326 in 2020, our net investments in direct financing and sales-type leases will be recorded in the consolidated financial statements net of an allowance for credit losses. This allowance for credit losses will reflect the Company’s estimate of lessee default probabilities and loss given default percentages. This estimate of expected credit losses will consider relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of reported amounts. Additional consideration will be given for potential non-credit losses to unguaranteed residual values. We will adopt the standard using the “modified retrospective” approach with a January 1, 2020 adjustment to the opening balance of retained earnings. The adoption of the standard will not have a material impact on our consolidated financial statements or related disclosures.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement .  The standard modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project.  The standard is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years.  Early adoption is permitted. The adoption of the standard will not have a material impact on our consolidated financial statements or related disclosures.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40), Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. The standard requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use-software guidance in ASC 350-40 to determine which implementation costs to capitalize as assets or expense as incurred.  The standard is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years.  Early adoption is permitted, including adoption in any interim period. The adoption of the standard will not have a material impact on our consolidated financial statements or related disclosures.

In October 2018, the FASB issued ASU No. 2018-17, Consolidation (Topic 810), Targeted Improvements to Related Party Guidance for Variable Interest Entities . The standard changes how all entities evaluate decision-making fees under the variable interest entity guidance. The standard is applied retrospectively with a cumulative-effect adjustment to retained earnings at the beginning of the earliest period presented. The standard is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The adoption of the standard will not have a material impact on our consolidated financial statements or related disclosures.

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Fair value measurements and disclosures require the use of valuation techniques to measure fair value that maximize the use of observable inputs and minimize use of unobservable inputs. These inputs are prioritized as follows:

•	Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities.

•	Level 2: Inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities or market corroborated inputs.

•	Level 3: Unobservable inputs for which there is little or no market data and which require us to develop our own assumptions about how market participants price the asset or liability.

The valuation techniques that may be used to measure fair value are as follows:

•	The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

•	The income approach uses valuation techniques to convert future amounts to a single present amount based on current market expectation about those future amounts.

•	The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost).

The following tables set forth our financial assets and liabilities as of December 31, 2019 and 2018 that we measured at fair value on a recurring basis by level within the fair value hierarchy. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to their fair value measurement.

	Fair Value as of December 31, 2019				Fair Value Measurements at December 31, 2019 Using Fair Value Hierarchy
					Level 1				Level 2				Level 3				Valuation Technique
Assets :
Cash and cash equivalents	$	140,882			$	140,882			$	—			$	—			Market
Restricted cash and cash equivalents	14,561				14,561				—				—				Market
Derivative assets	115				—				115				—				Market
Total	$	155,558			$	155,443			$	115			$	—

	Fair Value as of December 31, 2018				Fair Value Measurements at December 31, 2018 Using Fair Value Hierarchy
					Level 1				Level 2				Level 3				Valuation Technique
Assets :
Cash and cash equivalents	$	152,719			$	152,719			$	—			$	—			Market
Restricted cash and cash equivalents	15,134				15,134				—				—				Market
Derivative assets	4,886				—				4,886				—				Market
Total	$	172,739			$	167,853			$	4,886			$	—

Our cash and cash equivalents, along with our restricted cash and cash equivalents balances, consist largely of money market securities that are considered to be highly liquid and easily tradable. These securities are valued using inputs observable in active markets for identical securities and are therefore classified as Level 1 within our fair value hierarchy. Our interest rate derivative included in Level 2 consists of United States dollar-denominated interest rate cap, and its fair value is based on the market comparisons for similar instruments. We also considered the credit rating and risk of the counterparty providing the interest rate cap based on quantitative and qualitative factors.

For the years ended December 31, 2019 and 2018 , we had no transfers into or out of Level 3.

We measure the fair value of certain assets and liabilities on a non-recurring basis, when U.S. GAAP requires the application of fair value, including events or changes in circumstances that indicate that the carrying amounts of assets may

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not be recoverable. Assets subject to these measurements include our investment in unconsolidated joint ventures and aircraft. We record aircraft at fair value when we determine the carrying value may not be recoverable. Fair value measurements for aircraft in impairment tests are based on an income approach which uses Level 3 inputs, which include the Company’s assumptions and appraisal data as to future cash proceeds from leasing and selling aircraft.

We account for our investment in unconsolidated joint ventures under the equity method of accounting. Investments are recorded at cost and are adjusted by undistributed earnings and losses and the distributions of dividends and capital. These investments are also reviewed for impairment whenever events or circumstances indicate the fair value is less than its carrying value and the decline is other-than-temporary.

Aircraft Valuation

Transactional Impairments

On April 10, 2019, the Company early terminated the leases for seven Boeing 737NG aircraft on lease to Jet Airways (India) Limited (“Jet Airways”) due to lessee default. As a result of these lease terminations, the Company recognized net maintenance revenue of $ 17,554 and impairment charges of $ 7,404 in the second quarter of 2019. We did not record any transactional impairments during 2018 .

Annual Recoverability Assessment

We completed our annual recoverability assessment of our aircraft in the second quarter this year. We also performed aircraft-specific analyses where there were changes in circumstances, such as approaching lease expirations. Other than the transactional impairment discussed above, no other impairments were recorded during 2019.

The recoverability assessment is a comparison of the carrying value of each aircraft to its undiscounted expected future cash flows. We develop the assumptions used in the recoverability assessment, including those relating to current and future demand for each aircraft type, based on management’s experience in the aircraft leasing industry, as well as information received from third-party sources. Estimates of the undiscounted cash flows for each aircraft type are impacted by changes in contracted and future expected lease rates, residual values, expected scrap values, economic conditions and other factors.

Management believes that the net book value of each aircraft is currently supported by the estimated future undiscounted cash flows expected to be generated by that aircraft and, accordingly, no aircraft were impaired as a consequence of our annual recoverability assessment. However, if our estimates or assumptions change, we may revise our cash flow assumptions and record future impairment charges. While we believe that the estimates and related assumptions used in the annual recoverability assessment are appropriate, actual results could differ from those estimates.

Financial Instruments

Our financial instruments, other than cash, consist principally of cash equivalents, restricted cash and cash equivalents, accounts receivable, accounts payable, amounts borrowed under financings and interest rate derivatives. The fair value of cash, cash equivalents, restricted cash and cash equivalents, accounts receivable and accounts payable approximates the carrying value of these financial instruments because of their short-term nature.

The fair value of our senior notes is estimated using quoted market prices. The fair values of all our other financings are estimated using a discounted cash flow analysis, based on our current incremental borrowing rates for similar types of borrowing arrangements.

The carrying amounts and fair values of our financial instruments at December 31, 2019 and 2018 are as follows:

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	December 31, 2019								December 31, 2018
	Carrying Amount of Liability				Fair Value of Liability				Carrying Amount of Liability				Fair Value of Liability
Credit Facilities	$	150,000			$	150,000			$	425,000			$	425,000
Unsecured Term Loan	215,000				215,000				120,000				120,000
ECA Financings	147,644				150,805				189,080				190,216
Bank Financings	993,593				1,010,482				619,715				623,604
Senior Notes	3,600,000				3,787,268				3,450,000				3,446,826

All of our financial instruments are classified as Level 2 with the exception of our senior notes, which are classified as Level 1.

Minimum future annual lease rentals contracted to be received under our existing operating leases of flight equipment at December 31, 2019 were as follows:

Year Ended December 31,	Amount
2020	$	767,025
2021	692,351
2022	607,368
2023	525,677
2024	414,660
Thereafter	551,169
Total	$	3,558,250

Geographic concentration of lease rental revenue earned from flight equipment held for lease was as follows:

	Year Ended December 31,
Region	2019			2018			2017
Asia and Pacific	43	%		36	%		37	%
Europe	27	%		28	%		24	%
Middle East and Africa	10	%		11	%		12	%
North America	9	%		9	%		8	%
South America	11	%		16	%		19	%
Total	100	%		100	%		100	%

The classification of regions in the table above and in the tables and discussion below is determined based on the principal location of the lessee of each aircraft.

The following table shows the number of lessees with lease rental revenue of at least 5% of total lease rental revenue and their combined total percentage of lease rental revenue for the periods indicated:

Year Ended December 31,	2019				2018				2017
	Number of Lessees		Combined % of Lease Rental Revenue		Number of Lessees		Combined % of Lease Rental Revenue		Number of Lessees		Combined % of Lease Rental Revenue
Largest lessees by lease rental revenue	2		16 %		3		18 %		4		24 %

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The following table sets forth revenue attributable to individual countries representing at least 10% of total revenue (including maintenance revenue) based on each lessee’s principal place of business for the periods indicated:

Year Ended December 31,	2019						2018						2017
Country	Revenue				% of Total Revenue		Revenue				% of Total Revenue		Revenue				% of Total Revenue
Brazil (1)	$	—			— %		$	116,527			13 %		$	—			— %
India (2)	115,865				13 %		—				— %		—				— %

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(1)	For the year ended December 31, 2018 , total revenue included $ 72,242 of maintenance revenue related to early lease terminations with Avianca Brazil. Total revenue attributable to Brazil was less than 10% for the years ended December 31, 2019 and 2017 .

(2)	For the year ended December 31, 2019 , total revenue attributable to India included maintenance revenue of $ 14,915 . Total revenue attributable to India was less than 10% for the years ended December 31, 2018 and 2017 .

Geographic concentration of net book value of flight equipment (including flight equipment held for lease and net investment in direct financing and sales-type leases, or “net book value”) was as follows:

	December 31, 2019						December 31, 2018
Region	Number of Aircraft			Net Book Value %			Number of Aircraft			Net Book Value %
Asia and Pacific	94			38	%		78			36	%
Europe	99			26	%		87			27	%
Middle East and Africa	16			7	%		17			8	%
North America	40			13	%		35			10	%
South America	26			15	%		16			10	%
Off-lease	3		(1)	1	%		15		(2)	9	%
Total	278			100	%		248			100	%

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(1)	Consisted of one Airbus A320-200 aircraft, which was delivered on lease to a customer in Europe during the first quarter of 2020, one Airbus A330-200 aircraft, which is subject to a lease commitment, and one Boeing 737-800 aircraft, which we are marketing for lease or sale.

(2)	Consisted of ten Airbus A320-200 aircraft, one Airbus A330-200 aircraft, one Boeing 737-800 aircraft and one Boeing 777-300ER aircraft, all of which delivered on lease to customers during 2019, one Airbus A330-200 aircraft, which is subject to a lease commitment, and one Airbus A320-200 aircraft, which was sold during 2019.

The following table sets forth net book value of flight equipment (includes net book value of flight equipment held for lease and net investment in direct financing and sales-type leases) attributable to individual countries representing at least 10% of net book value of flight equipment based on each lessee’s principal place of business as of:

	December 31, 2019						December 31, 2018
Region	Net Book Value			Net Book Value %	Number of Lessees		Net Book Value			Net Book Value %	Number of Lessees
India	$	924,190		12 %	4		$	865,046		12 %	4

At December 31, 2019 and 2018 , the amounts of lease incentive liabilities recorded in maintenance payments on the Consolidated Balance Sheets were $ 9,176 and $ 15,636 , respectively.

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At December 31, 2019 , our net investment in direct financing and sales-type leases consisted of 29 aircraft. The components of our net investment in direct financing and sales-type leases at December 31, 2019 are as follows:

	Amount
Lease receivable	$	164,816
Unguaranteed residual value of flight equipment	254,580
Net investment in direct financing and sales-type leases	$	419,396

At December 31, 2019 , future lease payments on direct financing and sales-type leases are as follows:

Year Ending December 31,	Amount
2020	$	59,963
2021	43,716
2022	33,220
2023	27,228
2024	8,343
Thereafter	16,030
Total undiscounted lease payments	188,500
Present value of lease payments - lease receivable	( 164,816		)
Difference between undiscounted lease payments and lease receivable	$	23,684

We have joint ventures with an affiliate of Ontario Teachers’ Pension Plan (“Teachers’”) and with Mizuho Leasing.

		Amount
Investment in joint ventures at December 31, 2017		$	76,982
Investment in joint ventures		4,115
Loss from joint ventures, net of tax		( 8,086		)
Distributions		( 3,900		)
Investment in joint ventures at December 31, 2018		$	69,111
Investment in joint ventures		15,175
Earnings from joint ventures, net of tax		4,102
Distributions		( 36,750		)
Guarantee liabilities		( 18,664		)
Investment in joint venture at December 31, 2019		$	32,974

During 2019, the sale of all eight aircraft held by the joint venture with Teachers’ to a single buyer was completed. Included in Other revenue is $ 5,431 in fees earned in relation to the sale of all eight aircraft in our Lancaster joint venture. Guarantee liabilities in Maintenance payments and Security deposits were offset against the investment in joint venture, as we had no further obligations due to the sale of the joint venture’s aircraft. Teachers’, as majority shareholder, chose to liquidate the joint venture and as a result we received a distribution of $ 36,750 during 2019. As of December 31, 2019 , minimal assets remain in the joint venture as needed to complete its liquidation during 2020.

In 2019, we sold four aircraft to IBJ Air, in which we hold a 25 % equity interest. Included in Other revenue is $ 1,985 in fees earned in relation to IBJ Air’s acquisition of these four aircraft. These transactions were approved by our Audit Committee as arm’s length transactions under our related party policy. At December 31, 2019 , the net book value of the IBJ Air joint venture’s nine aircraft was $ 327,839 .

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Aircastle consolidates four VIEs of which it is the primary beneficiary. The operating activities of these VIEs are limited to acquiring, owning, leasing, maintaining, operating and, under certain circumstances, selling the six aircraft discussed below.

ECA Financings

Aircastle, through various subsidiaries, each of which is owned by a charitable trust (such entities, collectively the “Air Knight VIEs”), has entered into six different twelve -year term loans, which are supported by guarantees from Compagnie Francaise d’ Assurance pour le Commerce Extérieur (“COFACE”), the French government sponsored export credit agency (“ECA”). We refer to these COFACE-supported financings as “ECA Financings.”

Aircastle is the primary beneficiary of the Air Knight VIEs, as we have the power to direct the activities of the VIEs that most significantly impact the economic performance of such VIEs and we bear the significant risk of loss and participate in gains through a finance lease. The activity that most significantly impacts the economic performance is the leasing of aircraft of which our wholly owned subsidiary is the servicer and is responsible for managing the relevant aircraft. There is a cross collateralization guarantee between the Air Knight VIEs. In addition, Aircastle guarantees the debt of the Air Knight VIEs.

The only assets that the Air Knight VIEs have on their books are net investments in direct financing and sales-type leases that are eliminated in the consolidated financial statements. The related aircraft, with a net book value as of December 31, 2019 of $ 376,630 , were included in our flight equipment held for lease. The consolidated debt outstanding, net of debt issuance costs, of the Air Knight VIEs as of December 31, 2019 is $ 145,443 .

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The outstanding amounts of our secured and unsecured term debt financings were as follows:

	At December 31, 2019											At December 31, 2018
Debt Obligation	Outstanding Borrowings				Number of Aircraft			Interest Rate		Final Stated Maturity		Outstanding Borrowings
Secured Debt Financings:
ECA Financings (1)	$	147,644			6			3.02% to 3.96%		12/03/21 to 11/30/24		$	189,080
Bank Financings (2)	993,593				35			3.13% to 4.63%		06/17/23 to 01/19/26		619,715
Less: Debt Issuance Costs	( 11,892		)									( 10,338		)
Total secured debt financings, net of debt issuance costs and discounts	1,129,345				41							798,457
Unsecured Debt Financings:
Senior Notes due 2019 (3)	—											500,000
Senior Notes due 2020	300,000							7.625 %		04/15/20		300,000
Senior Notes due 2021	500,000							5.125 %		03/15/21		500,000
Senior Notes due 2022	500,000							5.500 %		02/15/22		500,000
Senior 5.00% Notes due 2023	500,000							5.000 %		04/01/23		500,000
Senior 4.40% Notes due 2023	650,000							4.400 %		09/25/23		650,000
Senior Notes due 2024	500,000							4.125 %		05/01/24		500,000
Senior Notes due 2026	650,000							4.250 %		06/15/26		—
Unsecured Term Loan	215,000							3.359 %		03/07/22 to 03/07/24		120,000
Revolving Credit Facilities	150,000							3.21% to 3.41%		12/27/21 to 06/27/22		425,000
Less: Debt issuance costs and discounts	( 32,509		)									( 32,104		)
Total unsecured debt financings, net of debt issuance costs and discounts	3,932,491											3,962,896
Total secured and unsecured debt financings, net of debt issuance costs and discounts	$	5,061,836										$	4,761,353

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(1)	The borrowings under these financings at December 31, 2019 have a weighted-average rate of interest of 3.58 % .

(2)	The borrowings under these financings at December 31, 2019 have a weighted-average fixed rate of interest of 3.82 % .

(3)	Repaid on July 15, 2019.

Secured Debt Financing:

Bank Financings

On May 1, 2019, we entered into a full recourse $ 320,000 secured bank financing with BNP Paribas and Société Générale in relation to eight Airbus A320-200neo aircraft on lease with a customer in Asia. This financing bears interest at a fixed rate of 3.61 % and matures in September 2024. In addition, on May 1, 2019, we entered into a full recourse $ 120,000 secured bank financing with Crédit Agricole in relation to three Airbus A320-200neo aircraft on lease with a customer in Asia. This financing bears interest at a fixed rate of 3.13 % and matures in March 2025.

On June 26, 2019, we amended and restated the original loan agreement, dated October 11, 2018, with National Bank of Australia to include an additional $ 40,000 in financing for two Boeing 737-800 aircraft on lease with a customer in North America. This financing bears interest at a fixed rate of 3.14 % and matures in December 2024.

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Unsecured Debt Financings:

Senior Notes due 2026

On June 13, 2019, Aircastle issued $ 650,000 aggregate principal amount of Senior Notes due 2026 (the “Senior Notes due 2026”) at an issue price of 99.515 % . The Senior Notes due 2026 will mature on June 15, 2026 and bear interest at the rate of 4.250 % per annum, payable semi-annually on June 15 and December 15 of each year, commencing on December 15, 2019. Interest accrues on the Senior Notes due 2026 from June 13, 2019.

Prior to April 15, 2026, we may redeem all or part of the aggregate principal amount of the Senior Notes due 2026 at any time at a redemption price equal to the greater of (a) 100 % of the principal amount of the notes redeemed, plus accrued and unpaid interest thereon to, but not including, the redemption date and (b) the sum of the present values of 100 % of the principal amount of the notes redeemed and the remaining scheduled payments of interest on the notes from the redemption date through April 15, 2026 (computed using a discount rate equal to the Treasury Rate (as defined in the indenture governing the Senior Notes due 2026) as of such redemption date plus 0.35 % , plus accrued and unpaid interest thereon to, but not including, the redemption date). In addition, on or after April 15, 2026, we may redeem all or part of the aggregate principal amount of the Senior Notes due 2026 at a redemption price equal to 100 % , plus accrued and unpaid interest thereon to, but not including, the redemption date. If the Company undergoes a change of control (as defined in the indenture governing the Senior Notes due 2026) and, as a result of the change of control, the rating of the Senior Notes due 2026 is downgraded to below an investment grade rating by certain rating agencies in the manner specified in the indenture governing the Senior Notes due 2026, it must offer to repurchase the Senior Notes due 2026 at a price of 101 % of the principal amount thereof, plus accrued and unpaid interest to, but not including, the purchase date. The Senior Notes due 2026 are not guaranteed by any of the Company's subsidiaries or any third-party.

The net proceeds from the issuance were used to repay amounts drawn under our existing revolving credit facility and to redeem the balance of our 6.25 % Senior Notes due 2019, including accrued interest of $ 3,733 and call premium of $ 7,183 , on July 15, 2019.

Unsecured Term Loan

On February 27, 2019, we entered into an aggregate $ 215,000 floating rate loan commitment with Development Bank of Japan Inc. and certain other banks (the “Unsecured Term Loan”). This loan is split into two tranches: Tranche A for $ 60,000 with a three -year term; and Tranche B for $ 155,000 with a five -year term. The loan contains a $ 750,000 minimum net worth covenant, along with other customary provisions similar to our revolving credit facilities. This loan was funded in March 2019.

The new Unsecured Term Loan replaced our existing term loan of $ 120,000 that matured on April 28, 2019.

Revolving Credit Facility

On December 27, 2018, we entered into a $ 250,000 three -year, unsecured revolving credit facility with a group of banks based in Asia. This new facility can be increased to a maximum of $ 350,000 . On January 25, 2019, we increased the facility by $ 30,000 to $ 280,000 . On June 20, 2019, we further increased the facility by $ 20,000 to $ 300,000 . The facility bears interest at a rate of LIBOR plus 1.50 % and matures in December 2021. The facility contains provisions similar to our existing credit facility, including a $ 750,000 minimum net worth covenant.

As a condition to this new facility, on January 9, 2019, we terminated our existing $ 135,000 revolving credit facility with a group of banks based in Asia.

At December 31, 2019 , we had $ 150,000 outstanding under our revolving credit facilities and had $ 950,000 available.

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Maturities of the secured and unsecured debt financings over the next five years and thereafter are as follows:

Year Ending December 31,	Amount
2020	$	429,324
2021	734,330
2022	739,934
2023	1,417,837
2024	981,886
Thereafter	802,926
Total	$	5,106,237

As of December 31, 2019 , we were in compliance with all applicable covenants in our financings.

On March 21, 2017, the Board of Directors adopted the Aircastle Limited Amended and Restated 2014 Omnibus Incentive Plan (the “Amended and Restated 2014 Plan”). The Amended and Restated 2014 Plan was approved by shareholders at the Company’s 2017 Annual General Meeting of Shareholders on May 19, 2017.

The maximum number of Common Shares reserved for issuance under the Amended and Restated 2014 Plan is 6,750,000 Common Shares. Restricted common shares outstanding under prior plans in the amount of 333,974 shares will continue to vest subject to the terms and conditions of the prior plans and the applicable awards agreements which are included in the below table.

The purpose of the Amended and Restated 2014 Plan is to provide an incentive to selected officers, employees, non-employee directors, independent contractors, and consultants of the Company or its affiliates whose contributions are essential to the growth and success of the business of the Company and its affiliates, to strengthen the commitment of such persons to the Company and its affiliates, motivate such persons to faithfully and diligently perform their responsibilities and attract and retain competent and dedicated persons whose efforts will result in the long-term growth and profitability of the Company and its affiliates. To accomplish such purposes, the Company may grant options, share appreciation rights, restricted shares, restricted share units, share bonuses, other share-based awards, cash awards or any combination of the foregoing. The Amended and Restated 2014 Plan provides that grantees of restricted common shares will have all of the rights of shareholders, including the right to receive dividends, other than the right to sell, transfer, assign or otherwise dispose of the shares until the lapse of the restricted period. Generally, the restricted common shares vest over three to five -year periods based on continued service and are being expensed on a straight-line basis over the requisite service period of the awards. The terms of the grants provide for accelerated vesting under certain circumstances, including termination without cause following a change of control.

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A summary of the fair value of non-vested restricted common shares for the years ended December 31, 2019 , 2018 and 2017 is as follows:

Non-vested Shares	Shares (in thousands)			Weighted Average Grant Date Fair Value ($)
Non-vested at December 31, 2016	676.7			$	17.84
Granted	315.5			22.41
Canceled	( 4.2	)		20.36
Vested	( 469.6	)		18.60
Non-vested at December 31, 2017	518.4			$	19.92
Granted	291.9			21.88
Canceled	( 16.8	)		21.27
Vested	( 306.3	)		19.52
Non-vested at December 31, 2018	487.2			$	21.30
Granted	303.3			19.46
Canceled	( 16.7	)		21.21
Vested	( 344.9	)		20.85
Vesting-accelerated (1)	( 94.9	)		32.01
Non-vested at December 31, 2019	334.0			$	20.31

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(1) See “ Share-based Compensation Related to Proposed Merger ” below .

The fair value of the restricted common shares granted in 2019 , 2018 and 2017 were determined based upon the market price of the shares at the grant date.

Performance Share Units

During 2019 , the Company issued performance share units (“PSUs”) to certain employees. These awards were made under the Amended and Restated 2014 Plan. The PSUs are denominated in share units without dividend rights, each of which is equivalent to one common share, and are subject to market and performance conditions and time vesting.

The PSUs granted in 2019 vest at the end of a three -year performance period which ends on December 31, 2021. Half of the PSUs vest on achieving relative total stockholder return goals (the “TSR PSUs”) while the other half vest on attaining annual Adjusted Return on Equity goals (the “AROE PSUs”). The table below shows the PSU awards issued during 2019 , including the number of common shares underlying the awards at the time of issuance:

	Minimum			Target			Maximum
TSR PSUs	—			168,784			337,568
AROE PSUs	—			168,780			337,560
Total	—			337,564			675,128

The fair value of the time-based TSR PSUs was determined at the grant date using a Monte Carlo simulation model. Included in the Monte Carlo simulation model were certain assumptions regarding a number of highly complex and subjective variables, such as expected volatility, risk-free interest rate and dividend yield. To appropriately value the award, the risk-free interest rate is estimated for the time period from the valuation date until the vesting date and the historical volatilities were estimated based on a historical time frame equal to the time from the valuation date until the end date of the performance period. The number of TSR PSUs that will ultimately vest is based on the percentile ranking of the Company’s TSR among the S&P Midcap 400 Index. The number of shares that will ultimately vest will range from 0 % to 200 % of the target TSR PSUs.

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The following table summarizes the assumption ranges used in calculating the fair value of TSR PSUs during the following periods:

	Year Ended December 31,
	2019		2018		2017
Volatility	24.8% to 32.6%		24.8% to 32.6%		29.4% to 32.6%
Dividend yield	4.3% to 5.5%		4.3% to 4.9%		4.3%
Risk-free interest rate	1.4% to 2.6%		0.8% to 2.6%		0.8% to 1.5%

The number of shares vesting from the AROE PSUs at the end of the three -year performance period will depend on the Company’s Adjusted Return on Equity as measured against the targets set by the Compensation Committee annually during the performance period, consistent with the business plan approved by the Board. The fair value of the 2019 AROE PSUs was determined based on the closing market price of the Company’s common shares on the date of grant reduced by the present value of expected dividends to be paid. The number of shares that will ultimately vest will range from 0 % to 200 % of the target AROE PSUs.

During 2019 , the Company granted a target of 225,044 PSUs of which, 168,784 are TSR PSUs and 56,260 are AROE PSUs. As of December 31, 2019 , the remaining target AROE PSUs will be considered granted upon the Compensation Committee’s setting the target AROE for the respective periods:

	Remaining AROE Target PSUs
	2020			2021
2018 PSUs	5,652			—
2019 PSUs	40,652			54,092

The following table summarizes the activities for our unvested PSUs for the years ended December 31, 2019 , 2018 and 2017 :

	Unvested Performance Stock Units
	Number of Units of TSR PSUs			Number of Units of AROE PSUs			TSR PSUs Weighted Fair Value on Date of Grant ($)				AROE PSUs Weighted Fair Value on Date of Grant ($)
Unvested at December 31, 2016	143,414			47,802			$	25.07			$	19.18
Granted (1)	107,426			116,721			25.00				20.37
Vested	( 50,899	)		( 57,637	)		24.83				20.02
Canceled/Forfeited (2)	—			( 1,697	)		—				20.55
Unvested at December 31, 2017	199,941			105,189			$	25.09			$	20.02
Granted (1)	169,631			266,244			22.15				19.65
Vested	—			( 129,522	)		—				20.14
Canceled/Forfeited (2)	( 92,515	)		( 26,006	)		25.20				19.99
Unvested as of December 31, 2018	277,057			215,905			$	23.16			$	19.47
Granted (1)	362,681			392,667			25.22				30.32
Vested	( 235,120	)		( 188,740	)		23.25				19.67
Canceled/Forfeited (2)	( 17,624	)		( 14,363	)		24.12				18.95
Vesting-accelerated (3)	( 164,810	)		( 382,502	)		32.01				32.01
Unvested as of December 31, 2019	222,184			22,967			$	23.12			$	20.14
Expected to vest after December 31, 2019	222,184			22,967			$	23.12			$	20.14

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(1)	Also includes shares above target.

(2)	Represents performance share units that were below target and as a result were forfeited.

(3)	See “ Share-based Compensation Related to Proposed Merger” below.

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During 2019 , the Company incurred share-based compensation expense of $ 6,602 related to restricted common shares and $ 9,228 related to PSUs.

As of December 31, 2019 , the Company has unrecognized compensation cost, adjusted for actual forfeitures, of $ 2,965 related to non-vested restricted common shares and $ 3,367 related to PSUs, which is expected to be recognized over a weighted average period of 1.96 years. In addition, there is $ 15,149 of unrecognized expense due to the acceleration of RSAs and PSUs related to the Merger Agreement, which will be amortized through the estimated closing date.

Share-based Compensation Related to Proposed Merger

In connection with the Merger, the Company reserved the right to take certain actions, following reasonable consultation with Parent, to reduce the amount of any potential “parachute payments” subject to the excise tax imposed under Section 4999 of the Internal Revenue Code (including amounts payable to the Company’s executive officers), including accelerating the vesting and payment of certain equity and restricted cash awards and the payment of certain incentive compensation payments into 2019.

Effective as of December 24, 2019, the Company accelerated the vesting and payment of certain PSUs and the vesting of certain restricted share awards held by the Company’s executive officers provided that, as set forth in the employment agreement amendments, if the executive officer is terminated for cause or resigns without “good reason” (as defined in the executive officer’s employment agreement) prior to the earlier of the consummation of the Merger or the termination of the Merger Agreement, the executive officer must repay to the Company the gross amount of the accelerated awards. In addition, the Merger Agreement contains additional repayment provisions as such if the Merger Agreement terminates.

Cash bonuses were accelerated and paid based on the target level of performance. Any difference between the amounts accelerated for PSUs or bonuses paid in 2019 and the amounts earned based on actual performance for 2019 will be trued-up and paid to the executive officer (or repaid by the executive officer, if applicable) on the normal payment dates for such compensation in 2020.

On May 17, 2019, our Board of Directors increased the authorization to repurchase the Company’s common shares to $ 100,000 from the $ 76,019 that was remaining under the previous authorization. During 2019 , we repurchased 973,528 common shares at an aggregate cost of $ 18,382 , including commissions. At December 31, 2019 , the remaining dollar value of common shares that may be purchased under the repurchase program is $ 90,351 . We also repurchased 640,452 shares totaling $ 18,357 from our employees and directors to settle tax obligations related to share vesting.

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The following table sets forth the quarterly dividends declared by our Board of Directors for the three years ended December 31, 2019 :

Declaration Date	Dividend per Common  Share				Aggregate Dividend Amount				Record Date		Payment Date
October 28, 2019	$	0.32			$	23,884			November 29, 2019		December 13, 2019
August 2, 2019	$	0.30			$	22,390			August 30, 2019		September 16, 2019
April 30, 2019	$	0.30			$	22,536			May 31, 2019		June 14, 2019
February 8, 2019	$	0.30			$	22,518			February 28, 2019		March 15, 2019
October 30, 2018	$	0.30			$	22,867			November 30, 2018		December 14, 2018
August 3, 2018	$	0.28			$	21,870			August 31, 2018		September 14, 2018
May 1, 2018	$	0.28			$	21,908			May 31, 2018		June 15, 2018
February 2, 2018	$	0.28			$	22,085			February 28, 2018		March 15, 2018
October 31, 2017	$	0.28			$	22,039			November 30, 2017		December 15, 2017
August 4, 2017	$	0.26			$	20,464			August 31, 2017		September 15, 2017
May 2, 2017	$	0.26			$	20,482			May 31, 2017		June 15, 2017
February 9, 2017	$	0.26			$	20,466			February 28, 2017		March 15, 2017

We include all common shares granted under our incentive compensation plan which remain unvested (“restricted common shares”) and contain non-forfeitable rights to dividends or dividend equivalents, whether paid or unpaid (“participating securities”), in the number of shares outstanding in our basic and diluted EPS calculations using the two-class method. All of our restricted common shares are currently participating securities. Our unvested PSUs are contingently issuable shares which are included in our diluted earnings per share calculations which do not include voting or dividend rights. The PSUs that vested as of December 31, 2019 are included in basic and diluted EPS as issued shares.

Under the two-class method, earnings per common share are computed by dividing the sum of distributed earnings allocated to common shareholders and undistributed earnings allocated to common shareholders by the weighted average number of common shares outstanding for the period. In applying the two-class method, distributed and undistributed earnings are allocated to both common shares and restricted common shares based on the total weighted average shares outstanding during the period as follows:

	Year Ended December 31,
	2019			2018			2017
Weighted-average shares:
Common shares outstanding	74,477,865			77,447,263			78,219,458
Restricted common shares	495,192			476,726			556,592
Total weighted-average shares	74,973,057			77,923,989			78,776,050
Percentage of weighted-average shares:
Common shares outstanding	99.34	%		99.39	%		99.29	%
Restricted common shares	0.66	%		0.61	%		0.71	%
Total	100.00	%		100.00	%		100.00	%

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The calculations of both basic and diluted earnings per share for the years ended December 31, 2019 , 2018 and 2017 are as follows:

	Year Ended December 31,
	2019				2018				2017
Earnings per common share — Basic:
Income from continuing operations	$	156,575			$	247,919			$	147,874
Less: Distributed and undistributed earnings allocated to restricted common shares (1)	( 1,034		)		( 1,517		)		( 1,045		)
Income from continuing operations available to common shareholders — Basic	$	155,541			$	246,402			$	146,829
Weighted-average common shares outstanding — Basic	74,477,865				77,447,263				78,219,458
Net income per common share — Basic	$	2.09			$	3.18			$	1.88
Earnings per common share — Diluted:
Income from continuing operations	$	156,575			$	247,919			$	147,874
Less: Distributed and undistributed earnings allocated to restricted common shares (1)	( 1,034		)		( 1,517		)		( 1,045		)
Income from continuing operations available to common shareholders — Diluted	$	155,541			$	246,402			$	146,829
Weighted-average common shares outstanding — Basic	74,477,865				77,447,263				78,219,458
Effect of diluted shares (2)	904,417				301,356				153,983
Weighted-average common shares outstanding — Diluted	75,382,282				77,748,619				78,373,441
Net income per common share — Diluted	$	2.06			$	3.17			$	1.87

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(1)	For the years ended December 31, 2019 , 2018 and 2017 , distributed and undistributed earnings to restricted shares was 0.66 % , 0.61 % and 0.71 % , respectively, of net income. The amount of restricted share forfeitures for all periods present was immaterial to the allocation of distributed and undistributed earnings.

(2)	For the years ended December 31, 2019 , 2018 and 2017 , dilutive shares represented contingently issuable shares related to the Company’s PSUs .

Income taxes have been provided for based upon the tax laws and rates in countries in which our operations are conducted and income is earned. The Company received an assurance from the Bermuda Minister of Finance that it would be exempted from local income, withholding and capital gains taxes until March 2035. Consequently, the provision for income taxes relates to income earned by certain subsidiaries of the Company which are located in, or earn income in, jurisdictions that impose income taxes, primarily the United States and Ireland.

The sources of income from continuing operations before income taxes and earnings of unconsolidated equity method investment for the years ended December 31, 2019 , 2018 and 2017 were as follows:

	Year Ended December 31,
	2019				2018				2017
U.S. operations	$	9,085			$	8,104			$	2,801
Non-U.S. operations	166,055				253,543				143,504
Income from continuing operations before income taxes and earnings of unconsolidated equity method investment	$	175,140			$	261,647			$	146,305

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The components of the income tax provision from continuing operations for the years ended December 31, 2019 , 2018 and 2017 consisted of the following:

	Year Ended December 31,
	2019				2018				2017
Current:
United States:
Federal	$	782			$	2,446			$	6,503
State	437				( 136		)		1,913
Non-U.S.	1,225				3,828				6,574
Current income tax provision	2,444				6,138				14,990
Deferred:
United States:
Federal	7,205				2,901				( 5,474		)
State	2,018				759				( 1,161		)
Non-U.S.	11,000				( 4,156		)		( 2,313		)
Deferred income tax provision (benefit)	20,223				( 496		)		( 8,948		)
Total	$	22,667			$	5,642			$	6,042

Significant components of the Company’s deferred tax assets and liabilities at December 31, 2019 , 2018 and 2017 consisted of the following:

	Year Ended December 31,
	2019				2018				2017
Deferred tax assets:
Non-cash share-based payments	$	614			$	2,182			$	1,899
Net operating loss carry forwards	69,806				48,660				22,804
Other	72,732				1,795				1,272
Total deferred tax assets	143,152				52,637				25,975
Deferred tax liabilities:
Accelerated depreciation	( 136,268		)		( 95,107		)		( 62,379		)
Other	( 70,551		)		( 338		)		354
Total deferred tax liabilities	( 206,819		)		( 95,445		)		( 62,025		)
Net deferred tax liabilities	$	( 63,667	)		$	( 42,808	)		$	( 36,050	)

The Company had $ 69,332 of net operating loss (“NOL”) carry forwards available at December 31, 2019 to offset future taxable income subject to U.S. graduated tax rates. If not utilized, $ 47,850 of these carry forwards will expire by 2039, with $ 21,482 of these carry forwards having no expiration date. The Company also had NOL carry forwards of $ 488,600 with no expiration date to offset future Irish and Mauritius taxable income. Deferred tax assets and liabilities are included in Other assets and Accounts payable and accrued liabilities, respectively, in the accompanying Consolidated Balance Sheets.

We do not expect to incur income taxes on future distributions of undistributed earnings of non-U.S. subsidiaries and accordingly, no deferred income taxes have been provided for the distributions of such earnings. As of December 31, 2019 we have elected to permanently reinvest our accumulated undistributed U.S. earnings of $ 27,970 . Accordingly, no U.S. withholding taxes have been provided. Withholding tax of $ 1,398 would be due if such earnings were remitted.

Our aircraft-owning subsidiaries that are recognized as corporations for U.S. tax purposes are primarily non-U.S. corporations. These subsidiaries generally earn income from sources outside the United States and typically are not subject to U.S. federal, state or local income taxes. The aircraft owning subsidiaries resident in Ireland, Mauritius and the U.S. are subject to tax in those respective jurisdictions.

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We have a U.S.-based subsidiary which provides management services to our subsidiaries and is subject to U.S. federal, state and local income taxes. We also have Ireland and Singapore based subsidiaries which provide management services to our non-U.S. subsidiaries and are subject to tax in those respective jurisdictions.

Differences between statutory income tax rates and our effective income tax rates applied to pre-tax income from continuing operations at December 31, 2019 , 2018 and 2017 consisted of the following:

	Year Ended December 31,
	2019				2018				2017
Notional U.S. federal income tax expense at the statutory rate:	$	36,779			$	54,946			$	51,207
U.S. state and local income tax, net	1,549				525				168
Non-U.S. operations:
Bermuda	( 16,950		)		( 41,064		)		( 21,517		)
Ireland	( 99		)		( 2,567		)		( 2,348		)
Singapore	( 28		)		( 3,232		)		( 15,839		)
Other low tax jurisdictions	( 2,504		)		( 3,246		)		( 5,581		)
Non-deductible expenses in the U.S.	3,581				157				( 236		)
Other	339				123				188
Provision for income taxes	$	22,667			$	5,642			$	6,042

The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities. We did not have any unrecognized tax benefits.

We conduct business globally and, as a result, the Company and its subsidiaries or branches are subject to foreign, U.S. federal and various state and local income taxes, as well as withholding taxes. In the normal course of business the Company is subject to examination by taxing authorities throughout the world, including such major jurisdictions as Ireland and the United States.

Our policy is that we will recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. We did not accrue interest or penalties associated with any unrecognized tax benefits, nor was any interest expense or penalty recognized during the year.

The following table shows the components of interest, net for the years ended December 31, 2019 , 2018 and 2017 :

	Year Ended December 31,
	2019				2018				2017
Interest on borrowings, net settlements on interest rate derivatives, and other liabilities (1)	$	245,673			$	221,987			$	223,260
Amortization of deferred losses related to interest rate derivatives	184				1,166				2,202
Amortization of deferred financing fees and debt discount (2)	14,578				14,627				19,435
Interest expense	260,435				237,780				244,897
Less: Interest income	( 2,365		)		( 2,943		)		( 3,411		)
Less: Capitalized interest	—				( 333		)		( 255		)
Interest, net	$	258,070			$	234,504			$	241,231

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(1)	Included a loan termination gain of $ 838 related to the sale of aircraft during the year ended December 31, 2018 .

(2)	Included $ 172 and $ 300 in deferred financing fees written off related to the sale of aircraft during the years ended December 31, 2019 and 2018 , respectively.

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Rent expense, primarily for the corporate office and sales and marketing facilities, was $ 1,601 , $ 2,865 and $ 2,143 for the years ended December 31, 2019 , 2018 and 2017 , respectively.

As of December 31, 2019 , Aircastle is obligated under non-cancelable operating leases relating principally to office facilities in Stamford, Connecticut; Dublin, Ireland; and Singapore for future minimum lease payments as follows:

Year Ending December 31,	Amount
2020	$	1,870
2021	1,901
2022	1,811
2023	1,696
2024	1,727
Thereafter	6,112
Total	$	15,117

At December 31, 2019 , we had commitments to acquire 31 aircraft for $ 1,112,825 , including 25 Embraer E2 aircraft.

Remaining commitments, including $ 120,887 of progress payments, contractual price escalations and other adjustments for these aircraft at December 31, 2019 , net of amounts already paid, are as follows:

Year Ending December 31,	Amount
2020	$	218,916
2021	508,424
2022	192,506
2023	119,131
2024	73,848
Thereafter	—
Total	$	1,112,825

As of February 10, 2020 , we have commitments to acquire 31 aircraft for $ 1,112,825 .

As of December 31, 2019, two lawsuits related to the Merger Agreement were filed against the Company by purported shareholders. The Company has not recognized a contingent liability as a result of these lawsuits as it believes the claims asserted are without merit.

The following table describes the principal components of Other assets on our Consolidated Balance Sheets as of:

	December 31,
	2019				2018
Deferred income tax asset	$	1,007			$	912
Lease incentives and premiums, net of amortization of $71,851 and $47,304, respectively	112,923				99,079
Flight equipment held for sale	333				11,707
Aircraft purchase deposits and progress payments (1)	33,754				39,948
Fair value of interest rate cap	115				4,886
Note receivable (2)	—				4,292
Right-of-use asset (3)	9,329				—
Other assets	43,748				53,537
Total other assets	$	201,209			$	214,361

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______________

(1)	Includes progress payments for Embraer E2 aircraft order.

(2)	Related to the sale of aircraft during the year ended December 31, 2017.

(3)	Net of lease incentives and tenant allowances.

The following table describes the principal components of Accounts payable, accrued expenses and other liabilities recorded on our Consolidated Balance Sheets as of:

Quarterly results of our operations for the years ended December 31, 2019 and 2018 are summarized below:

	Fourth Quarter				Third Quarter				Second Quarter				First Quarter
2019
Revenues	$	243,730			$	236,865			$	223,416			$	213,927
Net income	$	47,318			$	43,335			$	31,112			$	34,810
Basic earnings per share:
Net income	$	0.63			$	0.58			$	0.41			$	0.46
Diluted earnings per share:
Net income	$	0.62			$	0.57			$	0.41			$	0.46
2018
Revenues	$	292,566			$	190,829			$	204,276			$	202,680
Net income	$	103,837			$	36,332			$	50,203			$	57,547
Basic earnings per share:
Net income	$	1.36			$	0.47			$	0.64			$	0.73
Diluted earnings per share:
Net income	$	1.35			$	0.46			$	0.64			$	0.73

The sum of the quarterly earnings per share amounts may not equal the annual amount reported since per share amounts are computed independently for each period presented.

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