Media | AerCap

Media

View all news

May 12, 2016

AerCap Holdings N.V. Reports Financial Results for the First Quarter 2016

DUBLIN-- AerCap (NYSE: AER):

  • Adjusted net income of $301.6 million for the first quarter of 2016
    (Reported net income of $223.1 million)
  • Adjusted basic earnings per share of $1.54 for the first quarter of 2016
    (Reported basic earnings per share of $1.14)

Highlights

  • 131 aircraft transactions executed in the first quarter of 2016, including 36 widebody transactions.
  • 99.3% fleet utilization rate for the first quarter of 2016.
  • 6.1 years of average remaining lease term, as of March 31, 2016.
  • 90% of new aircraft deliveries through 2018 have been leased under a contract or letter of intent on an average 12-year lease term, as of May 9, 2016.
  • $9.1 billion of available liquidity, as of March 31, 2016.
  • Debt/equity ratio of 2.8 to 1 as of March 31, 2016.
  • Upgraded to investment grade rating (BBB-) by Standard & Poor’s and to Ba1 by Moody’s.
  • Repurchased 5.4 million shares in the first quarter of 2016 (repurchased 8.1 million shares in total through May 9, 2016).

Aengus Kelly, CEO of AerCap, commented: “AerCap produced strong first quarter results, demonstrating the consistent earnings power of our global leasing platform. We delivered adjusted earnings per share of $1.54, and expect to generate $800 million of excess capital during 2016. We continue to see global demand for our aircraft and have access to $9.1 billion of liquidity to meet our strategic objectives. Our proactive portfolio management initiatives, coupled with return of capital, are focused on maximizing long-term value for our shareholders.”

First Quarter 2016 Financial Results

  • Adjusted net income of $301.6 million, compared with $302.1 million for the same period in 2015. Adjusted basic earnings per share of $1.54, compared with $1.42 for the same period in 2015. The increase in adjusted earnings per share was primarily due to a lower number of outstanding shares as a result of share repurchases completed in 2015 and the first quarter of 2016.
  • Reported net income of $223.1 million, compared with $311.5 million for the same period in 2015. Reported basic earnings per share of $1.14, compared with $1.47 for the same period in 2015. Reportednet income and earnings per share were driven by the same factors as adjusted net income and earnings per share in addition to losses related to AeroTurbine included in the results for the first quarter of 2016 and higher maintenance rights related expenses relative to those included in the results for the first quarter of 2015.

Net Income/Earnings Per Share

Set forth below are the details to reconcile reported net income to adjusted net income, including the specific adjustments.

  Three months ended March 31,
  2016 2015

% increase/
(decrease)

(U.S. dollars in millions except per share amounts)

Net income $ 223.1 $ 311.5 (28%)
       
Adjusted for:      
Mark-to-market of interest rate caps and swaps, net of tax 9.7 6.6 47%
Transaction, integration and restructuring related expenses, net of tax 12.6 3.8 232%
AeroTurbine results excluding restructuring related expenses, net of tax 12.9 (2.5) NA
Maintenance rights related expenses, net of tax 43.3 (17.3) NA
Adjusted net income $ 301.6 $ 302.1 0%
       
Adjusted earnings per share - basic $ 1.54 $ 1.42 8%
Adjusted earnings per share - diluted $ 1.53 $ 1.41 8%

First quarter 2016 adjusted net income was comparable to the same period in 2015, and first quarter 2016 adjusted earnings per share increased 8% over the same period in 2015. Adjusted net income was primarily impacted by higher maintenance rents and other receipts, offset by lower gain on sale of assets. In addition to the above factors, the increase in adjusted earnings per share was primarily due to a lower number of outstanding shares as a result of share repurchases completed in 2015 and the first quarter of 2016. First quarter 2016 reported net income and reported earnings per share were impacted by the same drivers and the adjustments set forth in the table above.

Adjusted net income reflects, among other items, expensing the maintenance rights asset over the remaining economic life of the aircraft as compared to expensing this asset during the remaining lease term as reflected in reported net income. The maintenance rights asset represents the difference between the actual physical condition of the former ILFC aircraft at the acquisition date and the value based on the contractual return conditions in the lease contracts. The difference in the two methods has no economic impact as it is non-cash and equalizes over time. In addition, as a result of the restructuring and downsizing at our wholly-owned subsidiary, AeroTurbine, we incurred $5.0 million of costs relating to severance and terminations and $7.6 million of write-downs on leased engines and other assets, both of which we recognized as restructuring related expenses, and a period loss of $12.9 million during the first quarter of 2016. In order to present AerCap Holdings N.V. core earnings relating to aircraft leasing, adjusted net income excludes AeroTurbine related income and losses. We believe adjusted net income may further assist investors in their understanding of our operational and financial performance. Refer to Notes Regarding Financial Information Presented in This Press Release for details relating to the adjustments.

Revenue and Net Spread

  Three months ended March 31,
  2016 2015

% increase/
(decrease)

 (U.S. dollars in millions)
Lease revenue:      
Basic lease rents $ 1,139.3 $ 1,157.9 (2%)
Maintenance rents and other receipts 150.4 68.2 121%
Lease revenue 1,289.7 1,226.1 5%
Net gain on sale of assets 19.0 33.7 (44%)
Other income 9.3 29.4 (68%)
Total Revenues and other income $ 1,318.0 $ 1,289.2 2%

Basic lease rents were $1,139.3 million for the first quarter of 2016, compared with $1,157.9 million for the same period in 2015. The decrease was primarily due to the sale of older aircraft. Our average lease assets for the first quarter of 2016 were $35.5 billion, compared with $36.4 billion for the same period in 2015.

Maintenance rents and other receipts were $150.4 million for the first quarter of 2016, compared with $68.2 million for the same period in 2015. The increase was driven primarily by lease terminations and amendments in the first quarter of 2016.

Net gain on sale of assets for the first quarter of 2016 was $19.0 million, relating to 19 aircraft sold and 9 aircraft reclassified to finance leases, compared with a gain of $33.7 million for the same period in 2015, relating to 12 aircraft sold and 5 aircraft reclassified to finance leases.

Other income for the first quarter of 2016 was $9.3 million, compared with $29.4 million for the same period in 2015. The decrease is primarily related to lower AeroTurbine gross profit on engine, airframe, parts and supplies sales as a result of the restructuring and downsizing of AeroTurbine.

  Three months ended March 31,
  2016 2015

% increase/
(decrease)

  (U.S. dollars in millions)
Basic lease rents $ 1,139.3 $ 1,157.9 (2%)
       
Interest expense 284.6 287.6 (1%)
Adjusted for:      
Mark-to-market of interest rate caps and swaps (11.0) (7.6) 46%
Adjusted interest expense 273.6 280.0 (2%)
       
Net interest margin, or net spread $ 865.7 $ 877.9 (1%)

As shown in the table above, adjusted interest expense was $273.6 million in the first quarter of 2016. Net spread was $865.7 million in the first quarter of 2016, a 1% decrease compared with the same period in 2015, driven primarily by lower average lease assets resulting in lower basic lease rents.

Selling, General and Administrative Expenses

  Three months ended March 31,
  2016 2015

% increase/
(decrease)

  (U.S. dollars in millions)
Share-based compensation expenses $ 25.7 $ 24.8 4%
AeroTurbine selling, general and administrative expenses 13.3 16.6 (20%)
AerCap selling, general and administrative expenses 48.0 53.7 (11%)
Total selling, general and administrative expenses $ 87.0 $ 95.1 (9%)

The decrease in selling, general, and administrative expenses, quarter over quarter, is due to realized synergies after the acquisition of ILFC and lower overhead expenses due to the restructuring and downsizing of AeroTurbine.

Other Expenses

Asset impairment was $44.6 million for the first quarter of 2016, compared to $4.7 million for the same period in 2015. The increase was primarily driven by impairments recorded as a result of lease terminations and amendments, and were more than offset by revenue of $62.1 million due to the release of associated maintenance reserves and other collateral. Leasing expenses were $167.4 million for the first quarter of 2016, compared with $89.7 million for the same period in 2015. The increase was driven primarily by higher maintenance rights related expenses. Transaction, integration and restructuring related expenses were $12.6 million for the first quarter of 2016, compared with $4.4 million for the same period in 2015. Transaction, integration and restructuring related expenses in the first quarter of 2016 are related to the restructuring and downsizing of AeroTurbine and in the first quarter of 2015 are related to the acquisition of ILFC.

Effective Tax Rate

AerCap’s effective tax rate during the first quarter of 2015 and 2016 was 13.5%. The effective tax rate for the full year 2015 was 13.9%. The effective tax rate in any year is impacted by the source and amount of earnings among AerCap’s different tax jurisdictions.

Financial Position

 

March 31, 2016

December 31, 2015

% increase/
(decrease) over
December 31, 2015

  (U.S. dollars in millions except d/e ratio)
Total cash (incl. restricted) $ 3,327.5 $ 2,822.5 18%
Total lease assets(*) 35,311.3 35,652.3 (1%)
Total assets 43,717.7 43,749.5 (0%)
Debt 29,812.8 29,641.9 1%
Total liabilities 35,258.5 35,323.7 (0%)
Total equity 8,459.3 8,425.8 0%
Adjusted debt(**) 26,133.6 26,488.8 (1%)
Adjusted equity(**) 9,209.3 9,175.8 0%
Debt/equity ratio 2.8 to 1 2.9 to 1 (3%)
       
(*) Includes flight equipment held for operating lease, net investment in finance and sales-type leases and maintenance rights intangible asset
(**) Refer to Notes Regarding Financial Information Presented in This Press Release for details relating to the adjustments

As of March 31, 2016, AerCap’s portfolio consisted of 1,672 aircraft that were owned, on order, under contract or managed (including aircraft owned by AerDragon, a non-consolidated joint venture). The average age of the owned fleet as of March 31, 2016 was 7.7 years and the average remaining contracted lease term was 6.1 years.

Notes Regarding Financial Information Presented in This Press Release

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

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 net income and adjusted earnings per share. These measures are determined by adding non-cash charges relating to gains and losses created by a mark-to-market of our interest rate caps and swaps, an adjustment for maintenance rights related expense, transaction, expenses related to the ILFC transaction and integration, and an adjustment for the AeroTurbine results, including restructuring related expenses, in each case during the applicable period and net of tax, to GAAP net income. The average number of shares is based on a daily average.

We use interest rate caps and swaps to allow us to benefit from decreasing interest rates and protect against the negative impact of rising interest rates on our floating rate debt. Management determines the appropriate level of caps in any period with reference to the mix of floating and fixed cash flows from our lease, debt and other contracts. We do not apply hedge accounting to our interest rate caps and some of our swaps. As a result, we recognize the change in fair value of these interest rate caps and swaps in our income statement during each period.

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 adjustment for maintenance rights related expense represents the difference between expensing the maintenance rights intangible assets on a more accelerated basis during the remaining lease terms (as in the Company’s reported net income) as compared to expensing these assets on a straight-line basis over the remaining economic life of the aircraft (as in the Company’s adjusted net income).

Adjusted net income for the first quarter of 2015 excludes non-recurring expenses of $3.8 million, net of tax, relating to the ILFC transaction and integration. We recorded no expenses related to the ILFC transaction and integration during the first quarter of 2016.

During the fourth quarter of 2015, we made the decision to restructure and downsize the AeroTurbine business. After completion of the downsizing, AeroTurbine will only provide services to support AerCap’s aircraft leasing business. In order to present AerCap Holdings N.V. core earnings relating to aircraft leasing, adjusted net income reflects an adjustment for AeroTurbine results, including AeroTurbine restructuring related expenses. Adjusted net income for the first quarter of 2016 excludes restructuring related expenses of $12.6 million and a period loss of $12.9 million, net of tax, in each case related to AeroTurbine and adjusted net income for the first quarter of 2015 excludes income of $2.5 million, net of tax, related to AeroTurbine.

In addition to GAAP net income and earnings per share, we believe these measures may further assist investors in their understanding of our operational performance in relation to past and future reporting periods. A reconciliation of adjusted net income to net income for the three months ended March 31, 2016 and 2015 is presented in a table under the Net Income/Earnings Per Share section of this press release.

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. 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.

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.

Conference Call
In connection with the earnings release, management will host an earnings conference call today, Thursday, May 12, 2016, at 9:00 am Eastern Time. The call can be accessed live by dialing (U.S./Canada) +1 646 254 3365 or (International) +353 1 246 5602 and referencing code 3419700 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 John Wikoff: +31 63 169 9430 (jwikoff@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 approximately 1,670 owned, managed or on order aircraft in its portfolio. AerCap has one of the most attractive order books in the industry. AerCap serves over 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.

AerCap Holdings N.V.
Unaudited Consolidated Balance Sheets
(U.S. Dollars in thousands)

  March 31, 2016 December 31, 2015
Assets    
Cash and cash equivalents $ 2,929,232 $ 2,403,098
Restricted cash 398,222 419,447
Trade receivables 77,018 106,794
Flight equipment held for operating leases, net 31,987,882 32,219,494
Maintenance rights intangible and lease premium, net 2,854,320 3,139,045
Flight equipment held for sale 20,725 71,055
Net investment in finance and sales-type leases 634,813 469,198
Prepayments on flight equipment 3,304,803 3,300,426
Other intangibles, net 449,883 461,006
Deferred income tax assets 160,894 161,193
Other assets 899,918 998,743
Total Assets $ 43,717,710 $ 43,749,499
     
Liabilities and Equity    
Accounts payable, accrued expenses and other liabilities $ 1,144,404 $ 1,239,199
Accrued maintenance liability 3,027,631 3,185,794
Lessee deposit liability 876,288 891,454
Debt 29,812,797 29,641,863
Deferred income tax liabilities 397,334 365,380
Total liabilities 35,258,454 35,323,690
     
Ordinary share capital €0.01 par value (350,000,000 ordinary  
shares authorized, 199,040,467 ordinary shares issued and  
195,570,263 ordinary shares outstanding at March 31, 2016 and  
203,411,207 ordinary shares issued and 200,342,204 ordinary  
shares outstanding at December 31, 2015) 2,408 2,457
Additional paid-in capital 4,862,988 5,026,993
Treasury shares, at cost (3,470,204 ordinary shares as of March 31,    
2016 and 3,069,003 ordinary shares as of December 31, 2015) (155,573) (146,312)
Accumulated other comprehensive loss (7,926) (6,307)
Accumulated retained earnings 3,690,953 3,472,132
Total AerCap Holdings N.V. shareholders' equity 8,392,850 8,348,963
Non-controlling interest 66,406 76,846
Total Equity 8,459,256 8,425,809
     
Total Liabilities and Equity $ 43,717,710 $ 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 March 31,
  2016 2015
Revenues and other income    
Lease revenue $ 1,289,666 $ 1,226,138
Net gain on sale of assets 19,033 33,701
Other income 9,319 29,376
Total Revenues and other income 1,318,018 1,289,215
     
Expenses    
Depreciation and amortization 466,611 452,229
Asset impairment 44,628 4,696
Interest expense 284,562 287,605
Leasing expenses 167,403 89,728
Transaction, integration and restructuring related expenses 12,602 4,385
Selling, general and administrative expenses 87,028 95,080
Total Expenses 1,062,834 933,723

 

   
Income before income taxes and income of investments accounted for under the equity method 255,184 355,492
     
Provision for income taxes (34,449) (47,990)
Equity in net earnings of investments accounted for under the    
equity method 2,406 1,868
     
Net income $ 223,141 $ 309,370
     
Net (income) loss attributable to non-controlling interest (61) 2,125
     

Net income attributable to AerCap Holdings N.V.

$ 223,080 $ 311,495
     
Basic earnings per share $ 1.14 $ 1.47
Diluted earnings per share $ 1.13 $ 1.45
     
Weighted average shares outstanding - basic 196,022,650 212,119,050
Weighted average shares outstanding - diluted 197,743,117 214,823,708

AerCap Holdings N.V.
Unaudited Consolidated Statements of Cash Flows
(U.S. Dollars in thousands)

  Three Months ended March 31,
  2016 2015
Net income $ 223,141 $ 309,370
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 466,611 452,229
Asset impairment 44,628 4,696
Amortization of debt issuance costs and debt discount 13,646 11,188
Amortization of lease premium intangibles 5,331 6,263
Amortization of fair value adjustment on debt (95,128) (122,455))
Accretion of fair value adjustment on deposits and maintenance liabilities 14,286 21,920
Maintenance rights write off 229,904 57,751
Maintenance liability release to income (157,491) (6,255)
Net gain on sale of assets (19,033) (33,701)
Deferred income taxes 32,345 44,007
Restructuring related expenses 12,602 -
Other 37,826 32,900
Changes in operating assets and liabilities:    
Trade receivables 30,984 9,792
Other assets 45,713 12,200
Accounts payable, accrued expenses and other liabilities (46,592) (39,290)
Net cash provided by operating activities 838,773 760,615
     
Purchase of flight equipment (498,037) (1,044,294)
Proceeds from sale or disposal of assets 341,952 112,829
Prepayments on flight equipment (194,146) (108,661)
Collections of finance and sales-type leases 14,175 15,694
Movement in restricted cash 21,225 383,403
Net cash used in investing activities (314,831) (641,029)
     
Issuance of debt 791,749 413,569
Repayment of debt (533,078) (431,612)
Debt issuance costs paid (6,115) (4,920)
Maintenance payments received 172,317) 136,971)
Maintenance payments returned (147,119) (126,484)
Security deposits received 38,201 44,738
Security deposits returned (58,033) (45,676)
Dividend paid to non-controlling interest holders (10,501) -
Repurchase of shares and tax withholdings on share-based compensation (246,732) -
Net cash (used in) provided by financing activities 689 (13,414)
     
Net increase in cash and cash equivalents 524,631 106,172
Effect of exchange rate changes on cash and cash equivalents 1,503 (2,523)
Cash and cash equivalents at beginning of period 2,403,098 1,490,369
Cash and cash equivalents at end of period $ 2,929,232 $ 1,594,018
     

For Investors:
Keith Helming
Chief Financial Officer
Tel. +353 1 636 0924
khelming@aercap.com

John Wikoff
Investor Relations
Tel. +31 20 655 9661
jwikoff@aercap.com

For Media:
Gillian Culhane
Corporate Communications
Tel. +353 1 636 0945
gculhane@aercap.com