Newsroom

AerCap Holdings N.V. Reports Financial Results for 2016 and Authorizes New Share Repurchase Program

February 21, 2017

DUBLIN - AerCap Holdings N.V. (NYSE:AER):

  • Net income for the fourth quarter and full year 2016 was:
    • $364.7 million and $1,046.6 million on a reported basis (US GAAP)
  • Diluted earnings per share for the fourth quarter and full year 2016 were:
    • $2.01 and $5.52 on a reported basis (US GAAP)

The Company’s reporting of financial results was changed from prior periods. Going forward, adjusted net income and adjusted earnings per share will no longer be provided. Please refer to the Appendix for additional detail for this transitional period.

Highlights

  • 458 aircraft transactions executed in 2016, including 126 widebody transactions.
  • 99.5% fleet utilization rate for the full year 2016.
  • 7.4 years average age of owned fleet and 6.4 years average remaining lease term.
  • 98% of new aircraft deliveries through 2018 and 78% through 2019 have been leased.
  • Over $3 billion of sales closed in 2016.
  • $9.5 billion of available liquidity.
  • Adjusted debt/equity ratio of 2.7 to 1.
  • Upgraded to investment grade rating by Moody’s.
  • $49.33 book value per share.
  • Repurchased 5.7 million shares in the fourth quarter of 2016 for $241 million and 25 million shares in 2016 for $966 million.
  • Board authorized a new $350 million share repurchase program, which will run through June 30, 2017.

Aengus Kelly, CEO of AerCap, commented: “AerCap delivered record results in the fourth quarter, finishing off a very successful year for the company. During the fourth quarter, we generated $2.01 of earnings per share and net income of $364.7 million on a reported basis. This results in full year numbers of $5.52 and $1,046.6 million, respectively. We continued to focus on proactive portfolio management initiatives which have resulted in executing over $3 billion in asset sales. This, combined with signing a record 279 lease agreements, illustrates the scale of AerCap’s platform and the expertise of its people.”

Full Year 2016 Financial Results

  • Net income of $1,046.6 million, compared with $1,178.7 million for the same period in 2015. Diluted earnings per share of $5.52, compared with $5.72 for the same period in 2015.
  • Net income and diluted earnings per share decreased due to various items, including sales of older aircraft during 2015 and 2016, which reduced average lease assets by approximately $1.6 billion. Diluted earnings per share was favorably impacted by the repurchase of 40.7 million shares for $1.7 billion during 2015 and 2016.

Fourth Quarter 2016 Financial Results

  • Net income of $364.7 million, compared with $264.2 million for the same period in 2015. Diluted earnings per share of $2.01, compared with $1.33 for the same period in 2015.
  • Net income and diluted earnings per share were driven by higher gains on sale and other non-recurring items, as well as lower AeroTurbine losses.

Components of Net Income/Earnings Per Share

Set forth below are the components of net income and diluted earnings per share.

    Three months ended December 31,   Year ended December 31,
      2016       2015         2016       2015  
   

(U.S. dollar amounts in millions
except 
share data)

 

(U.S. dollar amounts in millions
except 
share data)

Components of Net Income

                 
Gains on sale and other non-recurring items     $115.4       $57.0         $248.2       $194.4  
AeroTurbine results, including restructuring related expenses     (13.6 )     (86.2 )       (123.4 )     (80.4 )
Maintenance rights amortization impact     (33.6 )     (16.7 )       (128.0 )     (72.8 )
All other earnings     296.5       310.1         1,049.8       1,137.5  
Reported Net Income     $364.7       $264.2         $1,046.6       $1,178.7  
                   

Components of Earnings Per Share

                 
Gains on sale and other non-recurring items     $0.64       $0.29         $1.31       $0.94  
AeroTurbine results, including restructuring related expenses     (0.07 )     (0.43 )       (0.65 )     (0.39 )
Maintenance rights amortization impact     (0.19 )     (0.08 )       (0.67 )     (0.35 )
All other earnings     1.63       1.55         5.53       5.52  
Reported Diluted Earnings Per Share     $2.01       $1.33         $5.52       $5.72  
 

Gains on sale and other non-recurring items includes gain on sale of assets, income from lease terminations, net insurance proceeds, a gain related to the repayment of a note receivable earlier than expected and gains from the settlement of asset value guarantees. Maintenance rights amortization impact represents the difference between the amortization cost of the maintenance rights asset as compared to depreciation expense if this asset had been classified as flight equipment. Please refer to Notes regarding Financial Information Presented in this Press Release for additional detail.

Revenue and Net Spread

    Three months ended December 31,   Year ended December 31,
    2016   2015  

% increase/

(decrease)

  2016   2015  

% increase/

(decrease)

    (U.S. dollar amounts in millions)   (U.S. dollar amounts in millions)
                         
Lease revenue:                        
Basic lease rents   $1,061.8   $ 1,148.8   (8%)   $4,395.3   $4,635.8   (5%)
Maintenance rents and other receipts   159.1   136.7   16%   472.3   355.8   33%
Lease revenue   1,220.9   1,285.5   (5%)   4,867.6   4,991.6   (2%)
Net gain on sale of assets   58.7   43.4   35%   138.5   183.3   (24%)
Other income   89.0   9.1   878%   146.0   112.7   30%
Total Revenues and other income   $1,368.6   $1,338.0   2%   $5,152.1   $5,287.6   (3%)
 

Basic lease rents were $1,061.8 million for the fourth quarter of 2016, compared with $1,148.8 million for the same period in 2015. The decrease was primarily due to sales of older aircraft during 2015 and 2016, which reduced average lease assets. Our average lease assets for the fourth quarter of 2016 were $34.2 billion, compared with $35.8 billion for the same period in 2015.

Maintenance rents and other receipts were $159.1 million for the fourth quarter of 2016, compared with $136.7 million for the same period in 2015.

Net gain on sale of assets for the fourth quarter of 2016 was $58.7 million, relating to 37 aircraft sold and three aircraft reclassified to finance leases, compared with $43.4 million for the same period in 2015, relating to 22 aircraft sold and three aircraft reclassified to finance leases.

Other income for the fourth quarter of 2016 was $89.0 million, compared with $9.1 million for the same period in 2015. Other income for the fourth quarter of 2016 included $73.2 million of non-recurring income from lease terminations and a gain related to the repayment of a note receivable earlier than expected.

    Three months ended December 31,   Year ended December 31,
      2016     2015  

% increase/
(decrease)

    2016       2015    

% increase/ 
(decrease)

    (U.S. dollar amounts in millions)   (U.S. dollar amounts in millions)
                         
Basic lease rents     $1,061.8     $1,148.8   (8%)       $4,395.3       $4,635.8     (5%)  
                         
Interest expense     252.7     274.4   (8%)       1,091.9       1,099.9     (1%)  
Adjusted for:                        
Mark-to-market of interest rate caps and swaps     18.6     0.1   14,185%       (1.6)       (18.1)     (91%)  
Adjusted interest expense     271.3     274.5   (1%)       1,090.3       1,081.8     1%  
                         
Net interest margin, or net spread     $790.5     $874.3   (10%)       $3,305.0       $3,554.0     (7%)  
                         

As shown in the table above, adjusted interest expense was $271.3 million in the fourth quarter of 2016, compared with $274.5 million for the same period in 2015.

Net spread was $790.5 million in the fourth quarter of 2016, compared with $874.3 million for the same period in 2015. The decrease was primarily impacted by lower average lease assets, lower age of owned fleet and higher average cost of debt. Our average cost of debt increased primarily due to the issuance of new longer-term bonds to replace shorter-term ILFC notes, which had lower reported interest expense as a result of ILFC acquisition purchase accounting.

 

Selling, General and Administrative Expenses

 
    Three months ended December 31,   Year ended December 31,
    2016   2015  

% increase/
(decrease)

  2016   2015  

% increase/
(decrease)

    (U.S. dollar amounts in millions)   (U.S. dollar amounts in millions)
                         
Share-based compensation expenses   $26.5   $25.0   6%   $102.8   $100.2  

3%

AeroTurbine selling, general and administrative expenses   7.6   16.4   (54%)   43.1   65.2   (34%)
AerCap selling, general and administrative expenses   62.7   62.2   1%   205.1   215.9   (5%)
Total selling, general and administrative expenses   $96.8   $103.6   (7%)   $351.0   $381.3   (8%)
 

The decrease in selling, general, and administrative expenses quarter over quarter was primarily due to the AeroTurbine downsizing.

Other Expenses

Asset impairment was $11.4 million for the fourth quarter of 2016, compared to $1.0 million for the same period in 2015. Asset impairment recorded in the fourth quarter of 2016 primarily related to the lease termination of two aircraft, which was more than offset by $13.4 million of related maintenance rents. Leasing expenses were $143.3 million for the fourth quarter of 2016, compared with $126.3 million for the same period in 2015. Transaction, integration and restructuring related expenses were $8.3 million for the fourth quarter of 2016, compared with $50.8 million for the same period in 2015. Transaction, integration and restructuring related expenses in the fourth quarter of 2016 and 2015 primarily represented non-recurring charges related to the downsizing of AeroTurbine.

Effective Tax Rate

AerCap’s effective tax rate was 14.5% during the full year 2016, compared to 13.9% for the same period in 2015. The effective tax rate in any year is impacted by the source and amount of earnings among AerCap’s different tax jurisdictions.

Book Value Per Share

         

December 31,
2016

 

December 31,
2015

 

% increase/
(decrease) over
December 31,
2015

          (U.S. dollar amounts in millions except share data)
                       

Total AerCap Holdings N.V. shareholders' equity

          $8,524.4         $8,349.0       2%
                       
Ordinary shares outstanding           176,247,154         200,342,204       (12%)
Unvested restricted stock           (3,426,810)         (3,030,724)       13%
Ordinary shares outstanding (excl. unvested restricted stock)       172,820,344         197,311,480       (12%)
                       
Book value per ordinary share outstanding (excl. unvested restricted stock)     $49.33         $42.31       17%

Financial position

   
   

December 31,
2016

 

December 31,
2015

 

% increase/
(decrease) over
December 31,
2015

    (U.S. dollar amounts in millions except d/e ratio)
                 
Total cash (incl. restricted)   $2,364.6     $2,822.5     (16%)
Total assets   41,615.5     43,749.5     (5%)
Debt   27,717.0     29,641.9     (6%)
Total liabilities   33,033.2     35,323.7     (6%)
Total AerCap Holdings N.V. shareholders' equity   8,524.4     8,349.0     2%
Total equity   8,582.3     8,425.8     2%
Adjusted debt (*)   24,931.6     26,488.8     (6%)
Adjusted equity (*)   9,332.3     9,175.8     2%
Adjusted debt/equity ratio (*)   2.7 to 1     2.9 to 1     (7%)
                 
(*) Refer to Notes Regarding Financial Information Presented in This Press Release for details relating to the adjustments
 

As of December 31, 2016, AerCap’s portfolio consisted of 1,566 aircraft that were owned, on order or managed (including aircraft owned by AerDragon, a non-consolidated joint venture). The average age of our owned fleet as of December 31, 2016 was 7.4 years and the average remaining contracted lease term was 6.4 years.

Share Repurchase Program

We have authorized a new $350 million share repurchase program, which will run through June 30, 2017. Repurchases under the program may be made through open market purchases or privately negotiated transactions in accordance with applicable U.S. federal securities laws. The timing of repurchases and the exact number of shares of common stock to be purchased will be determined by the Company’s management, in its discretion, and will depend upon market conditions and other factors. The program will be funded using the Company’s cash on hand and cash generated from operations. The program may be suspended or discontinued at any time.

Notes Regarding Financial Information Presented in This Press Release

The financial information presented in this press release is not audited.

In connection with the ILFC transaction, we have recognized maintenance rights intangible assets associated with existing leases on the legacy ILFC aircraft and we are expensing these assets during the remaining lease terms. The maintenance rights amortization impact represents the difference between expensing the maintenance rights intangible assets on a more accelerated basis during the remaining lease terms as compared to expensing these assets on a straight-line basis over the remaining economic life of the aircraft.

The following is a definition of non-GAAP measures used in this press release. We believe these measures may further assist investors in their understanding of our operational performance.

Adjusted debt/equity ratio. This measure is the ratio obtained by dividing adjusted debt by adjusted equity.

  • Adjusted debt means consolidated total debt less cash and cash equivalents, and less a 50% equity credit with respect to certain long-term subordinated debt.
  • Adjusted equity means total equity, plus the 50% equity credit relating to the long-term subordinated debt.

Adjusted debt and adjusted equity are adjusted by the 50% equity credit to reflect the equity nature of those financing arrangements and to provide information that is consistent with definitions under certain of our debt covenants.

           

December 31,
2016

 

December 31,
2015

           

(U.S. dollar amounts in millions except 
d/e ratio)

                 
Debt             $27,717       $29,642  
                 
Adjusted for:                
Cash and cash equivalents             (2,035)       (2,403)  
50% credit for long-term subordinated debt             (750)       (750)  
Adjusted debt             $24,932       $26,489  
                 
                 
Equity             $8,582       $8,426  
                 
Adjusted for:                
50% credit for long-term subordinated debt             750       750  
Adjusted equity             $9,332       $9,176  
                 
Adjusted debt/equity ratio           2.7 to 1   2.9 to 1
 

Net interest margin, or net spread (refer to second table under Revenue and Net Spread section of this press release). This measure is the difference between basic lease rents and interest expense, excluding the impact of the mark-to-market of interest rate caps and swaps. We believe this measure may further assist investors in their understanding of the changes and trends related to the earnings of our leasing activities. This measure reflects the impact from changes in the number of aircraft leased, lease rates, utilization rates, as well as the impact from changes in the amount of debt and interest rates.

Conference Call

In connection with the earnings release, management will host an earnings conference call today, Tuesday, February 21, 2017, at 8:30 am Eastern Time. The call can be accessed live by dialing (U.S./Canada) +1 719 325 2213 or (International) +353 1 246 5621 and referencing code 9184593 at least 5 minutes before start time, or by visiting AerCap’s website at www.aercap.com under “Investor Relations”.

The webcast replay will be archived in the “Investor Relations” section of the Company’s website for one year. For further details and to register for this event please email: aercap@instinctif.com.

For further information, contact Brian Canniffe: +353 1 418 0461 (bcanniffe@aercap.com) or Mark Walter (Instinctif Partners): +44 20 7457 2020 (aercap@instinctif.com).

About AerCap

AerCap is the global leader in aircraft leasing with, as of December 31, 2016, 1,566 owned, managed or on order aircraft in its portfolio. AerCap has one of the most attractive order books in the industry. AerCap serves approximately 200 customers in approximately 80 countries with comprehensive fleet solutions. AerCap is listed on the New York Stock Exchange (AER) and has its headquarters in Dublin with offices in Amsterdam, Los Angeles, Shannon, Fort Lauderdale, Miami, Singapore, Shanghai, Abu Dhabi, Seattle and Toulouse.

Forward-Looking Statements

This press release contains certain statements, estimates and forecasts with respect to future performance and events. These statements, estimates and forecasts are "forward-looking statements". In some cases, forward-looking statements can be identified by the use of forward-looking terminology such as "may," "might," "should," "expect," "plan," "intend," "estimate," "anticipate," "believe," "predict," "potential" or "continue" or the negatives thereof or variations thereon or similar terminology. All statements other than statements of historical fact included in this press release are forward-looking statements and are based on various underlying assumptions and expectations and are subject to known and unknown risks, uncertainties and assumptions, and may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied in the forward-looking statements. As a result, we cannot assure you that the forward-looking statements included in this press release will prove to be accurate or correct. In light of these risks, uncertainties and assumptions, the future performance or events described in the forward-looking statements in this press release might not occur. Accordingly, you should not rely upon forward-looking statements as a prediction of actual results and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. Except as required by applicable law, we do not undertake any obligation to, and will not, update any forward-looking statements, whether as a result of new information, future events or otherwise.

For more information regarding AerCap and to be added to our email distribution list, please visit www.aercap.com and follow us on Twitter www.twitter.com/aercapnv.

AerCap Holdings N.V.

       
Unaudited Consolidated Balance Sheets        
(U.S. Dollars in thousands)        
         
    December 31, 2016   December 31, 2015
         
Assets        
Cash and cash equivalents     $2,035,447       $2,403,098  
Restricted cash     329,180       419,447  
Trade receivables     64,923       106,794  
Flight equipment held for operating leases, net     31,501,973       32,219,494  
Maintenance rights intangible and lease premium, net     2,167,925       3,139,045  
Flight equipment held for sale     107,392       71,055  
Net investment in finance and sales-type leases     755,882       469,198  
Prepayments on flight equipment     3,265,979       3,300,426  
Other intangibles, net     397,101       461,006  
Deferred income tax assets     210,498       161,193  
Other assets     779,206       998,743  
Total Assets     $41,615,506       $43,749,499  
         
         
Liabilities and Equity        
Accounts payable, accrued expenses and other liabilities     $1,132,536       $1,239,199  
Accrued maintenance liability     2,750,576       3,185,794  
Lessee deposit liability     859,099       891,454  
Debt     27,716,999       29,641,863  
Deferred income tax liabilities     574,032       365,380  
Total liabilities     33,033,242       35,323,690  
                 
Ordinary share capital €0.01 par value, 350,000,000 ordinary                
shares authorized as of December 31, 2016 and December 31,                
2015;187,847,345 and 203,411,207 ordinary shares issued and                
176,247,154 and 200,342,204 ordinary shares                
outstanding(including 3,426,810 and 3,030,724 unvested                
restricted stock) as of December 31, 2016 and December 31,                
2015, respectively     2,282       2,457  
Additional paid-in capital     4,505,019       5,026,993  
Treasury shares, at cost (11,600,191 and 3,069,003 ordinary shares        
as of December 31, 2016 and December 31, 2015, respectively)     (490,092)       (146,312)  
Accumulated other comprehensive loss     (1,769)       (6,307)  
Accumulated retained earnings     4,509,007       3,472,132  
Total AerCap Holdings N.V. shareholders' equity     8,524,447       8,348,963  
Non-controlling interest     57,817       76,846  
Total Equity     8,582,264       8,425,809  
         
Total Liabilities and Equity     $41,615,506       $43,749,499  
                 

 

 

AerCap Holdings N.V.    
Unaudited Consolidated Income Statements    
(U.S. Dollars in thousands, except share and per share data)    
 
    Three months ended December 31,   Year ended December 31,
      2016       2015       2016       2015  
                 
Revenues and other income                
Lease revenue     $1,220,872       $1,285,446       $4,867,623       $4,991,551  
Net gain on sale of assets     58,681       43,445       138,522       183,328  
Other income     89,004       9,123       145,986       112,676  
Total Revenues and other income     1,368,557       1,338,014       5,152,131       5,287,555  
                 
Expenses                
Depreciation and amortization     433,533       471,719       1,791,336       1,843,003  
Asset impairment     11,428       980       81,607       16,335  
Interest expense     252,679       274,410       1,091,861       1,099,884  
Leasing expenses     143,306       126,309       582,530       522,413  
Transaction, integration and restructuring related expenses     8,272       50,814       53,389       58,913  
Selling, general and administrative expenses     96,768       103,579       351,012       381,308  
Total Expenses     945,986       1,027,811       3,951,735       3,921,856  
                 
Income before income taxes and income of investments accounted for              
under the equity method     422,571       310,203       1,200,396       1,365,699  
                 
Provision for income taxes     (60,712)       (47,311)       (173,496)       (189,805)  
Equity in net earnings of investments accounted for under the equity method     3,556       1,820       12,616       1,278  
                 
Net income     $365,415       $264,712       $1,039,516       $1,177,172  
                 
Net (income) loss attributable to non-controlling interest     (765)       (503)       7,114       1,558  
                 
Net income attributable to AerCap Holdings N.V     $364,650       $264,209       $1,046,630       $1,178,730  
                 
Basic earnings per share     $2.07       $1.34       $5.64       $5.78  
Diluted earnings per share     $2.01       $1.33       $5.52       $5.72  
                 
Weighted average shares outstanding - basic     175,871,138       197,310,382       185,514,370       203,850,828  
Weighted average shares outstanding - diluted     181,223,598       199,266,901       189,682,036       206,224,135  
                                 
AerCap Holdings N.V.
Unaudited Consolidated Statements of Cash Flows
(U.S. Dollars in thousands)
 
    Year ended December 31,
      2016       2015  
         
Net income     $1,039,516       $1,177,172  
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization     1,791,336       1,843,003  
Asset impairment     81,607       16,335  
Amortization of debt issuance costs and debt discount     55,768       45,582  
Amortization of lease premium intangibles     19,836       23,042  
Amortization of fair value adjustment on debt     (335,998)       (442,972)  
Accretion of fair value adjustment on deposits and maintenance liabilities     55,210       76,246  
Maintenance rights write off     652,111       628,643  
Maintenance liability release to income     (421,332)       (243,809)  
Net gain on sale of assets     (138,522)       (183,328)  
Deferred income taxes     161,340       110,353  
Restructuring related expenses     33,588       49,311  
Other     121,700       90,074  
Changes in operating assets and liabilities:        
Trade receivables     40,065       48,468  
Other assets     257,190       88,418  
Accounts payable, accrued expenses and other liabilities     (32,183)       33,502  
Net cash provided by operating activities     3,381,232       3,360,040  
         
Purchase of flight equipment     (2,892,731)       (2,772,110)  
Proceeds from sale or disposal of assets     2,366,242       1,568,235  
Prepayments on flight equipment     (947,419)       (791,546)  
Collections of finance and sales-type leases     74,207       54,975  
Movement in restricted cash     90,267       297,941  
Other     (21,678)       (73,400)  
Net cash used in investing activities     (1,331,112)       (1,715,905)  
         
Issuance of debt     3,642,166       3,913,840  
Repayment of debt     (5,213,724)       (4,043,743)  
Debt issuance costs paid     (34,687)       (49,417)  
Maintenance payments received     794,711       776,488  
Maintenance payments returned     (505,407)       (558,477)  
Security deposits received     201,970       171,408  
Security deposits returned     (270,575)       (144,445)  
Dividend paid to non-controlling interest holders     (10,501)       -  
Repurchase of shares and tax withholdings on share-based compensation     (1,021,119)       (793,945)  
Net cash used in financing activities     (2,417,166)       (728,291)  
         
Net (decrease) increase in cash and cash equivalents     (367,046)       915,844  
Effect of exchange rate changes on cash and cash equivalents     (605)       (3,115)  
Cash and cash equivalents at beginning of period     2,403,098       1,490,369  
Cash and cash equivalents at end of period     $2,035,447       $2,403,098  
 

Appendix

Following the SEC’s issuance of updated guidance on the use of non-GAAP financial measures, the Company will no longer report adjusted net income. Below are reconciliations of reported net income to adjusted net income and reported earnings per share to adjusted earnings share, as previously reported, which is provided as a final transitional disclosure.

To view the appendix click here.

For investors:
Brian Canniffe, +353 1 418 0461
Head of Investor Relations
bcanniffe@aercap.com

For media:
Gillian Culhane, +353 1 636 0945
Vice President Corporate Communications
gculhane@aercap.com

 

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