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July 29, 2020

AerCap Holdings N.V. Reports Financial Results for the Second Quarter 2020

DUBLIN, July 29, 2020

  • Net income of $246 million for the second quarter of 2020 and $523 million for the first half of 2020
  • Diluted earnings per share of $1.92 for the second quarter of 2020 and $4.06 for the first half of 2020

Highlights

  • Approximately $12 billion sources of liquidity.
  • 2.2x next 12 months' sources-to-uses coverage ratio, representing $6.4 billion of excess coverage.
  • $3 billion of new financing raised in the second quarter of 2020.
  • Approximately $27 billion of unencumbered assets.
  • Adjusted debt/equity ratio of 2.5 to 1.
  • Secured debt-to-total assets ratio of 23%.
  • New technology aircraft comprise 59% of fleet.
  • Average current lease expires in the fourth quarter of 2027.

"The Covid-19 pandemic continues to create significant challenges for the global aviation industry and for our airline customers," said Aengus Kelly, Chief Executive Officer of AerCap. "In response, we have maintained a record amount of liquidity and strong access to funding. We currently have $12 billion sources of liquidity, which is more than double our cash needs over the next 12 months. Since April, we have raised $3 billion of new funding, and have over $2 billion of additional funding initiatives in progress. With $27 billion of unencumbered assets, a record low leverage ratio of 2.5 to 1 and an unrivalled operating platform, we are well-positioned to weather an extended period of turbulence and support the recovery of the airline industry in the future."

Second Quarter 2020 Financial Results

  • Net income was $246 million, compared with $331 million for the same period in 2019. Diluted earnings per share was $1.92, compared with $2.42 for the same period in 2019.
  • The decrease in net income was primarily driven by lower basic lease rents and lower net gain on sale of assets.
  • Diluted earnings per share was affected by the same factors as net income and by the repurchase of 11 million shares from April 2019 through June 2020.

Revenue and Net Spread

 

Three months ended June 30,

Six months ended June 30,

 

2020

2019

% increase/
(decrease)

2020

2019

% increase/
(decrease)

 

(U.S. Dollars in millions)

(U.S. Dollars in millions)

Lease revenue:

           

   Basic lease rents

$948

$1,077

(12%)

$1,979

$2,152

(8%)

   Maintenance rents and other receipts

224

109

106%

359

196

83%

Total lease revenue

1,172

1,186

(1%)

2,337

2,348

Net gain on sale of assets

10

78

(87%)

68

100

(31%)

Other income

15

17

(12%)

30

38

(22%)

Total Revenues and other income

$1,197

$1,281

(7%)

$2,436

$2,486

(2%)


Basic lease rents were $948 million for the second quarter of 2020, compared with $1,077 million for the same period in 2019. The decrease was primarily due to lease restructurings, transitions and the impact of airline bankruptcies.

Maintenance rents and other receipts were $224 million for the second quarter of 2020, compared with $109 million for the same period in 2019. The increase was primarily due to higher maintenance revenue recognized as a result of lease terminations during the second quarter of 2020.

Net gain on sale of assets for the second quarter of 2020 was $10 million, relating to nine aircraft sold for $188 million, compared with $78 million for the same period in 2019, relating to 22 aircraft sold for $502 million. The decrease was primarily due to the lower volume and composition of asset sales.

Other income for the second quarter of 2020 was $15 million, compared with $17 million for the same period in 2019.

 

Three months ended June 30,

Six months ended June 30,

 

2020

2019

% increase/
(decrease)

2020

2019

% increase/
(decrease)

 

(U.S. Dollars in millions)

(U.S. Dollars in millions)

Basic lease rents

$948

$1,077

(12%)

$1,979

$2,152

(8%)

             

Interest expense

312

332

(6%)

630

667

(5%)

Adjusted for:

           

   Mark-to-market of interest rate caps and swaps

(2)

(10)

(79%)

(15)

(26)

(43%)

Interest expense excluding mark-to-market of interest rate caps and swaps

310

323

(4%)

616

641

(4%)

Net interest margin (*)

$638

$755

(15%)

$1,363

$1,512

(10%)

Depreciation and amortization, including maintenance rights expense

(424)

(435)

(3%)

(856)

(882)

(3%)

Net interest margin, less depreciation and amortization

215

319

(33%)

508

629

(19%)

             

Average lease assets (*)

$37,342

$37,644

(1%)

$37,506

$37,455

—%

             

Annualized net spread (*)

6.8%

8.0%

 

7.3%

8.1%

 

Annualized net spread less depreciation and amortization (*)

2.3%

3.4%

 

2.7%

3.4%

 

(*) Refer to "Notes Regarding Financial Information Presented in This Press Release" for details relating to these non-GAAP measures

Interest expense excluding mark-to-market of interest rate caps and swaps of $2 million was $310 million for the second quarter of 2020, compared with $323 million for the same period in 2019. Our average cost of debt was 4.0% for the second quarter of 2020, compared with 4.3% for the same period in 2019. Our average cost of debt includes debt issuance costs, upfront fees and other impacts of approximately 0.3% to 0.4%.

Selling, General and Administrative Expenses

 

Three months ended June 30,

Six months ended June 30,

 

2020

2019

% increase/ 
(decrease)

2020

2019

% increase/ 
(decrease)

 

(U.S. Dollars in millions)

(U.S. Dollars in millions)

Selling, general and administrative expenses

$38

$46

(17%)

$85

$95

(11%)

Share-based compensation expenses

15

19

(21%)

33

36

(10%)

Total selling, general and administrative expenses

$53

$65

(18%)

$118

$131

(11%)

Selling, general and administrative expenses decreased primarily as a result of lower compensation-related expenses.

Other Expenses

Leasing expenses were $78 million for the second quarter of 2020, compared with $65 million for the same period in 2019. The increase was primarily driven by an increase in our provision for expected credit losses, partially offset by a decrease in maintenance rights expense as a result of lower maintenance activity during the period and the lower maintenance rights asset balance. Asset impairment charges were $73 million for the second quarter of 2020, compared to $18 million recorded for the same period in 2019. Asset impairment charges recorded in the second quarter of 2020 primarily related to lease terminations and were largely offset by maintenance revenue.

Effective Tax Rate

Our effective tax rate for the second quarter of 2020 was 13.5%, compared to 13.0% for the second quarter of 2019. The effective tax rate for the full year 2019 was 12.5%. The effective tax rate is impacted by the source and amount of earnings among our different tax jurisdictions.

Book Value Per Share

 

June 30, 2020

June 30, 2019

(U.S. Dollars in millions, except share and per share data)

Total AerCap Holdings N.V. shareholders' equity

$9,634

$9,013

     

Ordinary shares outstanding

129,672,783

136,602,986

Unvested restricted stock

(2,087,383)

(2,250,655)

Ordinary shares outstanding (excl. unvested restricted stock)

127,585,400

134,352,331

     

Book value per ordinary share outstanding (excl. unvested restricted stock)

$75.51

$67.08

Book value per share has increased 13% since June 30, 2019.

Financial Position

 

June 30, 2020

December 31, 2019

% increase/
(decrease) over
December 31, 2019

 

(U.S. Dollars in millions)

Total cash, cash equivalents and restricted cash

$2,643

$1,300

103%

Total lease assets (*)

37,090

37,930

(2%)

Total assets

45,194

43,749

3%

Debt

30,684

29,486

4%

Total liabilities

35,491

34,367

3%

Total AerCap Holdings N.V. shareholders' equity

9,634

9,315

3%

Total equity

9,703

9,382

3%


(*) Refer to "Notes Regarding Financial Information Presented in This Press Release" for details relating to this non-GAAP measure

Boeing 737 MAX

Following the fatal accidents of two Boeing 737 MAX aircraft, the worldwide fleet of these aircraft was grounded by aviation authorities in March 2019 and production was temporarily suspended by Boeing in January 2020, resulting in ongoing delays in the delivery of our aircraft on order from Boeing. As of June 30, 2020, we had five Boeing 737 MAX aircraft delivered and on lease. It is uncertain when and under what conditions our Boeing 737 MAX aircraft will return to service and when Boeing will resume making deliveries of our Boeing 737 MAX aircraft on order. As a result, we expect to incur future delays on our scheduled Boeing 737 MAX deliveries, and any such future delays are likely to have an impact on our financial results. Certain of our Boeing 737 MAX leases have now been cancelled by our lessees, and additional leases may be cancelled in the future. In cases where lessees have the right to cancel Boeing 737 MAX leases, we have the right to cancel our corresponding orders for delivery of those aircraft. Nevertheless, these lease cancellations may have an adverse effect on our future cash flows and results of operations, which could be material.

In July 2020, we reached agreement with Boeing to restructure our order book for Boeing 737 MAX aircraft, including the cancellation of 15 of our Boeing 737 MAX aircraft on order. Following this cancellation, we have 80 Boeing 737 MAX aircraft on order.

Aircraft Portfolio

As of June 30, 2020, AerCap's portfolio consisted of 1,357 aircraft that were owned, on order or managed, as adjusted to reflect our cancellation of 15 Boeing 737 MAX aircraft orders in in July 2020. The average age of our owned fleet as of June 30, 2020 was 6.4 years (2.7 years for new technology aircraft, 11.7 years for current technology aircraft) and the average remaining contracted lease term was 7.3 years.

Notes Regarding Financial Information Presented in This Press Release

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

Due to rounding, numbers presented throughout this document may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.

The following are definitions 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. We believe this measure may further assist investors in their understanding of our capital structure and leverage.

 

June 30, 2020

December 31, 2019

(U.S. Dollars in millions, except debt/equity ratio)

Debt

$30,684

$29,486

     

Adjusted for:

   

   Cash and cash equivalents

(2,383)

(1,121)

   50% credit for long-term subordinated debt

(1,125)

(1,125)

Adjusted debt

$27,176

$27,240

     

Equity

$9,703

$9,382

     

Adjusted for:

   

   50% credit for long-term subordinated debt

1,125

1,125

Adjusted equity

$10,828

$10,507

     

Adjusted debt/equity ratio

2.5 to 1

2.6 to 1

Net interest margin, annualized net spread, annualized net spread less depreciation and amortization and average cost of debt

Net interest margin is calculated as the difference between basic lease rents and interest expense, excluding the impact of the mark-to-market of interest rate caps and swaps. Annualized net spread is net interest margin expressed as a percentage of average lease assets. Annualized net spread less depreciation and amortization is net interest margin less depreciation and amortization, including maintenance rights expense, expressed as a percentage of average lease assets. Average cost of debt is calculated as interest expense, excluding mark-to-market on interest rate caps and swaps, divided by average debt balance. We believe these measures may further assist investors in their understanding of the changes and trends related to the earnings of our leasing activities. These measures reflect the impact from changes in the number of aircraft leased, lease rates and utilization rates, as well as the impact from changes in the amount of debt and interest rates.

Lease assets

Lease assets include flight equipment held for operating leases, flight equipment held for sale, net investment in finance and sales-type leases and maintenance rights assets.

Conference Call

In connection with the earnings release, management will host an earnings conference call today, Wednesday, July 29, 2020, at 8:30 am Eastern Time. The call can be accessed live via webcast, by visiting AerCap's website https://investors.aercap.com, or by dialing (U.S./Canada) +1 323 794 2410 or (International) +353 1 246 5652 and referencing passcode 487665 at least 5 minutes before the start time.

The webcast replay will be archived in the "Investors" section of the Company's website for one year.

About AerCap

AerCap is the global leader in aircraft leasing with 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 Shannon, Los Angeles, Singapore, Amsterdam, 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, including the impacts of, and associated responses to, the Covid-19 pandemic, 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)

 

June 30, 2020

December 31, 2019

Assets

   

Cash and cash equivalents

$2,382,655

$1,121,396

Restricted cash

260,466

178,951

Trade receivables

200,819

47,935

Flight equipment held for operating leases, net

35,356,328

35,870,781

Maintenance rights and lease premium, net

738,227

809,615

Flight equipment held for sale

145,805

336,592

Net investment in finance and sales-type leases

943,013

1,011,549

Prepayments on flight equipment

3,370,096

2,954,478

Other intangibles, net

293,316

307,394

Deferred income tax assets

106,970

95,077

Other assets

1,396,079

1,015,476

Total Assets

$45,193,774

$43,749,244

     

Liabilities and Equity

   

Accounts payable, accrued expenses and other liabilities

$1,235,733

$1,032,623

Accrued maintenance liability

1,930,874

2,190,159

Lessee deposit liability

649,947

747,790

Debt

30,683,892

29,486,131

Deferred income tax liabilities

990,265

910,336

Total liabilities

35,490,711

34,367,039

     

Ordinary share capital €0.01 par value, 350,000,000 ordinary shares authorized as of June 30, 2020 and December 31, 2019; 138,847,345 and 141,847,345 ordinary shares issued and 129,672,783 and 131,583,489 ordinary shares outstanding (including 2,087,383 and 2,354,318 unvested restricted stock) as of June 30, 2020 and December 31, 2019, respectively

 

1,721

 

1,754

Additional paid-in capital

2,076,149

2,209,462

Treasury shares, at cost (9,174,562 and 10,263,856 ordinary shares as of June 30, 2020 and December 31, 2019, respectively)

(496,217)

(537,341)

Accumulated other comprehensive loss

(180,146)

(93,587)

Accumulated retained earnings

8,232,470

7,734,609

Total AerCap Holdings N.V. shareholders' equity

9,633,977

9,314,897

Non-controlling interest

69,086

67,308

Total Equity

9,703,063

9,382,205

     

Total Liabilities and Equity

$45,193,774

$43,749,244

AerCap Holdings N.V
Unaudited Consolidated Income Statements
(U.S. Dollars in thousands, except share and per share data)

 

Three months ended June 30,

Six months ended June 30,

 

2020

2019

2020

2019

Revenues and other income

       

Lease revenue:

       

Basic lease rents

$948,126

$1,077,068

$1,978,920

$2,152,350

Maintenance rents and other receipts

224,224

109,095

358,509

195,906

Total lease revenue

1,172,350

1,186,163

2,337,429

2,348,256

Net gain on sale of assets

10,002

78,157

68,368

99,698

Other income

14,927

16,956

29,659

38,349

Total Revenues and other income

1,197,279

1,281,276

2,435,456

2,486,303

         

Expenses

       

Depreciation and amortization

411,818

419,093

827,616

844,942

Asset impairment

73,421

17,819

87,368

22,850

Interest expense

311,758

332,441

630,375

666,620

Leasing expenses

77,574

65,244

180,871

156,965

Selling, general and administrative expenses

52,913

64,543

117,497

131,416

Total Expenses

927,484

899,140

1,843,727

1,822,793

         

Unrealized gain on investment at fair value

13,942

13,942

         

Income before income taxes and income of investments accounted for under the equity method

283,737

382,136

605,671

663,510

         

Provision for income taxes

(38,305)

(49,677)

(81,766)

(86,256)

Equity in net earnings of investments accounted for under the equity method

2,173

1,935

3,504

4,037

         

Net income

$247,605

$334,394

$527,409

$581,291

         

Net income attributable to non-controlling interest

(1,544)

(2,934)

(4,524)

(15,645)

         

Net income attributable to AerCap Holdings N.V

$246,061

$331,460

$522,885

$565,646

         

Basic earnings per share

$1.93

$2.44

$4.09

$4.13

Diluted earnings per share

$1.92

$2.42

$4.06

$4.09

         

Weighted average shares outstanding - basic

127,425,886

135,917,192

127,862,816

137,029,147

Weighted average shares outstanding - diluted

128,131,663

137,072,268

128,938,138

138,396,628

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

 

Six months ended June 30,

 

2020

2019

Net income

$527,409

$581,291

Adjustments to reconcile net income to net cash provided by operating activities:

   

Depreciation and amortization

827,616

844,942

Asset impairment

87,368

22,850

Amortization of debt issuance costs, debt discount, debt premium and lease premium

31,242

42,783

Amortization of fair value adjustment on debt

(32,740)

(45,961)

Maintenance rights write-off

65,265

144,267

Maintenance liability release to income

(228,640)

(89,985)

Net gain on sale of assets

(68,368)

(99,698)

Deferred income taxes

84,658

88,055

Collections of finance and sales-type leases

26,991

45,448

Unrealized gains on investment at fair value

(13,942)

Other

133,876

92,232

 Changes in operating assets and liabilities:

   

   Trade receivables

(157,410)

(21,075)

   Other assets

(349,746)

(47,755)

   Accounts payable, accrued expenses and other liabilities

3,229

(37,150)

Net cash provided by operating activities

936,808

1,520,244

     

Purchase of flight equipment

(159,930)

(1,483,186)

Proceeds from sale or disposal of assets

322,241

733,157

Prepayments on flight equipment

(723,729)

(579,217)

Other

(11)

Net cash used in investing activities

(561,418)

(1,329,257)

     

Issuance of debt

6,890,002

4,157,089

Repayment of debt

(5,652,418)

(4,618,972)

Debt issuance costs paid, net of debt premium received

(27,157)

(8,422)

Maintenance payments received

194,779

358,694

Maintenance payments returned

(208,630)

(206,456)

Security deposits received

43,791

147,200

Security deposits returned

(150,767)

(141,364)

Dividend paid to non-controlling interest holders and others

(2,746)

(3,045)

Repurchase of shares and tax withholdings on share-based compensation

(118,836)

(320,058)

Net cash provided by (used in) financing activities

968,018

(635,334)

     

Net increase (decrease) in cash, cash equivalents and restricted cash

1,343,408

(444,347)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

(634)

(403)

Cash, cash equivalents and restricted cash at beginning of period

1,300,347

1,415,035

Cash, cash equivalents and restricted cash at end of period

$2,643,121

$970,285