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November 8, 2019

AerCap Holdings N.V. Reports Financial Results for the Third Quarter 2019 and Announces New Share Repurchase Program

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

  • Net income of $270.3 million for the third quarter of 2019 and $835.9 million for the nine months ended September 30, 2019
  • Diluted earnings per share of $2.01 for the third quarter of 2019 and $6.10 for the nine months ended September 30, 2019

Highlights

  • 12% increase in EPS year over year.
  • Upgraded to BBB rating by S&P Global Ratings and placed on Positive Outlook by Moody’s.
  • 108 aircraft transactions executed in the third quarter of 2019.
  • New technology aircraft now comprise 55% of our owned fleet.
  • Over $40 billion of contracted future lease revenues.
  • Approximately 97% of lease rents through 2022 already contracted.
  • Average current lease expires in 2027.
  • 99.8% fleet utilization rate for the third quarter of 2019.
  • $2.4 billion increase in average lease assets year over year.
  • 13% increase in book value per share since September 30, 2018.
  • Repurchased 2.0 million shares in the third quarter of 2019 for $104 million and 9.1 million shares year to date through November 6, 2019 for $438 million.
  • New $200 million share repurchase program authorized, which will run through March 31, 2020.

Aengus Kelly, CEO of AerCap, commented: “We are very pleased to report another quarter of strong results. During the third quarter of 2019 we generated earnings per share of $2.01 and net income of $270 million. The 108 aircraft transactions executed this quarter demonstrate the scale and reach of the AerCap platform. Our earnings consistency and the discipline we have shown in managing our business are reflected in S&P’s recent upgrade of AerCap to BBB, another important milestone in our continuing upward ratings trajectory.”

Third Quarter 2019 Financial Results 

  • Net income was $270.3 million, compared with $263.4 million for the same period in 2018. Diluted earnings per share was $2.01, compared with $1.79 for the same period in 2018.
  • The increase in net income was primarily driven by higher lease rents resulting from an increase in average lease assets due to the delivery of new technology aircraft from July 2018 through September 2019, as well as higher net gain on sale of assets.
  • Diluted earnings per share increased 12%, driven by the same factors as net income and the repurchase of 14.7 million shares from July 2018 through September 2019.

Revenue and Net Spread 

 

Three months ended September 30,

Nine months ended September 30,

 

2019

2018

% increase/  (decrease)

2019

2018

% increase/  (decrease)

 

(U.S. Dollars in millions)

(U.S. Dollars in millions)

Lease revenue:

 

 

 

 

 

 

   Basic lease rents

$1,066.6

$1,038.5

3%

$3,218.9

$3,094.5

4%

   Maintenance rents and other receipts

72.6

93.9

(23%)

268.5

289.2

(7%)

Lease revenue

1,139.2

1,132.4

1%

3,487.4

3,383.7

3%

Net gain on sale of assets

40.5

20.0

103%

140.2

160.5

(13%)

Other income

14.4

14.1

2%

52.7

36.0

46%

Total Revenues and other income

$1,194.1

$1,166.5

2%

$3,680.4

$3,580.3

3%

Basic lease rents were $1,066.6 million for the third quarter of 2019, compared with $1,038.5 million for the same period in 2018. The increase was primarily due to a $2.4 billion increase in average lease assets.

Maintenance rents and other receipts were $72.6 million for the third quarter of 2019, compared with $93.9 million for the same period in 2018. The decrease was primarily due to lower maintenance revenue recognized as a result of lease terminations.

Net gain on sale of assets for the third quarter of 2019 was $40.5 million, relating to 19 aircraft sold for $561.3 million, compared with $20.0 million for the same period in 2018, relating to 13 aircraft sold for $187.5 million. The increase was primarily due to the volume and composition of asset sales.

 

Three months ended September 30,

Nine months ended September 30,

 

2019

2018

% increase/ decrease

2019

2018

% increase/  (decrease)

 

 (U.S. Dollars in millions)

 (U.S. Dollars in millions)

Basic lease rents

$1,066.6

$1,038.5

3%

$3,218.9

$3,094.5

4%

Interest expense

312.3

292.1

7%

978.9

851.4

15%

Adjusted for:

 

 

 

 

 

 

   Mark-to-market of interest rate caps

(3.4)

4.9

NA

(29.1)

26.0

NA

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

308.9

297.0

4%

949.8

877.4

8%

Net interest margin (*)

$757.7

$741.5

2%

$2,269.1

$2,217.1

2%

Depreciation and amortization, including maintenance rights expenses

(429.2)

(446.2)

(4)%

(1,311.7)

(1,375.3)

(5)%

Net interest margin, less depreciation and amortization

$328.5

$295.3

11%

$957.4

$841.8

14%

 

 

 

 

 

 

 

Average lease assets (*)

$37,663

$35,280

7%

$37,524

$35,037

7%

Annualized net spread (*)

8.0%

8.4%

 

8.1%

8.4%

 

Annualized net spread less depreciation and amortization (*)

3.5%

3.3%

 

3.4%

3.2%

 

(*) 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 of $3.4 million was $308.9 million for the third quarter of 2019, compared with $297.0 million for the same period in 2018. Our average cost of debt was 4.2% for the third quarter of 2019, compared with 4.1% for the same period in 2018. Our average cost of debt includes debt issuance costs, upfront fees, undrawn fees, commitment fees and original issuance discount fees of approximately 0.3%.

Selling, General and Administrative Expenses

 

Three months ended September 30,

Nine months ended September 30,

 

2019

2018

% increase/  (decrease)

2019

2018

% increase/  (decrease)

 

(U.S. Dollars in millions)

(U.S. Dollars in millions)

Selling, general and administrative expenses

$49.0

$48.4

1%

$144.4

$157.4

(8%)

Share-based compensation expenses

15.7

15.0

5%

51.7

77.1

(33%)

Total selling, general and administrative expenses

$64.7

$63.4

2%

$196.1

$234.5

(16%)

Other Expenses

Leasing expenses were $44.1 million for the third quarter of 2019, compared with $84.8 million for the same period in 2018. The decrease was primarily due to a decrease in maintenance rights expense as a result of lower maintenance activity during the period and the lower maintenance rights asset balance as well as a decrease in other leasing expenses recognized as a result of lease terminations. Asset impairment charges were $31.2 million for the third quarter of 2019, compared to $12.8 million recorded for the same period in 2018. Asset impairment charges recorded in the third quarter of 2019 primarily related to lease terminations and were partially offset by related maintenance revenue recognized upon termination.

Effective Tax Rate

Our effective tax rate for the third quarter of 2019 was 13.0%, the same as for the third quarter of 2018. The effective tax rate for the full year 2018 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

 

September 30, 2019

September 30, 2018

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

 

 

 

Total AerCap Holdings N.V. shareholders' equity

$9,174.9

$8,869.9

 

 

 

Ordinary shares outstanding

134,742,482

146,961,077

Unvested restricted stock

(2,229,371)

(2,133,610)

Ordinary shares outstanding (excl. unvested restricted stock)

132,513,111

144,827,467

 

 

 

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

$69.24

$61.24

Book value per share has increased 13% since September 30, 2018.

Financial Position

 

September 30, 2019

December 31, 2018

% increase/
(decrease) over 
December 31, 2018

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

Total cash, cash equivalents and restricted cash

$1,196.6

$1,415.0

(15%)

Total lease assets (*)

37,888.5

37,244.6

2%

Total assets

43,549.0

43,208.9

1%

Debt

29,283.5

29,507.6

(1%)

Total liabilities

34,309.0

34,328.3

0%

Total AerCap Holdings N.V. shareholders' equity

9,174.9

8,828.0

4%

Total equity

9,240.0

8,880.6

4%

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

As of September 30, 2019, AerCap’s portfolio consisted of 1,360 aircraft that were owned, on order or managed. The average age of our owned fleet as of September 30, 2019 was 6.2 years (2.2 years for new technology aircraft, 11.1 years for current technology aircraft) and the average remaining contracted lease term was 7.5 years.

Boeing 737 MAX Delays

On March 13, 2019, the Federal Aviation Administration issued an order to suspend operations of all Boeing 737 MAX aircraft in the U.S. and by U.S. aircraft operators following two recent fatal accidents involving Boeing 737 MAX aircraft. Non-U.S. civil aviation authorities have also issued directives to similar effect. Boeing has suspended deliveries of the Boeing 737 MAX until clearance is granted by the appropriate regulatory authorities. Prior to the grounding, we had delivered five Boeing 737 MAX aircraft that are currently on lease to an airline customer, and we currently have 95 Boeing 737 MAX aircraft on order. It is uncertain when and under what conditions the Boeing 737 MAX will return to service and when Boeing will resume making deliveries of these aircraft. As a result, we have incurred delays and expect to incur future delays on our scheduled Boeing 737 MAX deliveries.

Share Repurchase Program

In November 2019, our Board of Directors approved a new share repurchase program authorizing total repurchases of up to $200 million of AerCap ordinary shares through March 31, 2020. 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 common shares 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.

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.

 

September 30, 2019

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

Debt

$29,284

Adjusted for:

 

   Cash and cash equivalents

(1,037)

   50% credit for long-term subordinated debt

(750)

Adjusted debt

$27,497

   

Equity

$9,240

Adjusted for:

 

   50% credit for long-term subordinated debt

750

Adjusted equity

$9,990

 

 

Adjusted debt/equity ratio

2.75 to 1

Net interest margin, annualized net spread and annualized net spread less depreciation and amortization

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. 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. 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, Friday, November 8, 2019, at 8:30 am Eastern Standard Time. The call can be accessed live by dialing (U.S./Canada) +1 929 477 0448 or (International) +353 1 246 5638 and referencing code 7778627 at least 5 minutes before start time, or by visiting AerCap’s website at www.aercap.com under “Investors.”

The webcast replay will be archived in the “Investors” section of the Company’s website for one year.

For further information, contact Joseph McGinley: +353 1 418 0428 (jmcginley@aercap.com).

About AerCap
AerCap is the global leader in aircraft leasing with 1,360 aircraft owned, managed or on order and $43.5 billion of total assets as of September 30, 2019. 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 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 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)

 

September 30, 2019

December 31, 2018

Assets

 

 

Cash and cash equivalents

$1,036,919

$1,204,018

Restricted cash

159,694

211,017

Trade receivables

54,863

40,379

Flight equipment held for operating leases, net

35,231,489

35,052,335

Maintenance rights and lease premium, net

917,353

1,113,190

Flight equipment held for sale

801,645

184,129

Net investment in finance and sales-type leases

1,038,832

1,003,286

Prepayments on flight equipment

2,930,971

3,024,520

Other intangibles, net

312,688

328,570

Deferred income tax assets

152,428

138,281

Other assets

912,132

909,190

Total Assets

$43,549,014

$43,208,915

 

 

 

Liabilities and Equity

 

 

Accounts payable, accrued expenses and other liabilities

$1,046,204

$1,009,945

Accrued maintenance liability

2,281,224

2,237,494

Lessee deposit liability

762,261

768,677

Debt

29,283,522

29,507,587

Deferred income tax liabilities

935,812

804,598

Total liabilities

34,309,023

34,328,301

 

 

 

Ordinary share capital €0.01 par value, 350,000,000 ordinary shares authorized as of September 30, 2019 and December 31, 2018;
146,847,345 and 151,847,345 ordinary shares issued and 134,742,482 and 142,674,664 ordinary shares outstanding
(including 2,229,371 and 2,429,442 unvested restricted stock) as of September 30, 2019 and December 31, 2018, respectively

1,810

1,866

Additional paid-in capital

2,448,236

2,712,417

Treasury shares, at cost 12,104,863 and 9,172,681 ordinary shares
as of September 30, 2019 and December 31, 2018, respectively)

(591,085)

(476,085)

Accumulated other comprehensive loss

(108,139)

(1,824)

Accumulated retained earnings

7,424,094

6,591,674

Total AerCap Holdings N.V. shareholders' equity

9,174,916

8,828,048

Non-controlling interest.

65,075

52,566

Total Equity

9,239,991

8,880,614

Total Liabilities and Equity

$43,549,014

$43,208,915

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

 

Three months ended September 30,

Nine months ended September 30,

 

2019

2018

2019

2018

Revenues and other income

 

 

 

 

Lease revenue:

 

 

 

 

Basic lease rents

$1,066,584

$1,038,521

$3,218,934

$3,094,517

Maintenance rents and other receipts

72,600

93,939

268,506

289,218

Net gain on sale of assets

40,519

19,992

140,217

160,517

Other income

14,382

14,065

52,731

36,043

Total Revenues and other income

1,194,085

1,166,517

3,680,388

3,580,295

 

 

 

 

 

Expenses

 

 

 

 

Depreciation and amortization

415,313

412,722

1,260,255

1,253,169

Asset impairment

31,168

12,843

54,018

28,929

Interest expense

312,311

292,082

978,931

851,396

Leasing expenses

44,080

84,814

201,045

320,591

Selling, general and administrative expenses

64,712

63,401

196,128

234,455

Total Expenses

867,584

865,862

2,690,377

2,688,540

 

 

 

 

 

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

326,501

300,655

990,011

891,755

 

 

 

 

 

Provision for income taxes

(42,445)

(39,08)

(128,701)

(115,932)

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

(12,065)

2,711

(8,028))

8,520

 

 

 

 

 

Net income

$271,991

$264,277

$853,282

$784,343

Net income attributable to non-controlling interest

(1,701)

(926)

(17,346)

(1,353)

 

 

 

 

 

Net income attributable to AerCap Holdings N.V.

$270,290

$263,351

$835,936

$782,990

 

 

 

 

 

Basic earnings per share

$2.03

$1.81

$6.16

$5.36

Diluted earnings per share

$2.01

$1.79

$6.10

$5.21

Weighted average shares outstanding - basic

133,182,744

145,669,773

135,732,923

146,040,042

Weighted average shares outstanding - diluted

134,175,597

147,123,818

136,990,028

150,231,051

 

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

Nine months ended September 30,

 

2019

2018

Net income

$853,282

$784,343

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

 

 

Depreciation and amortization

1,260,255

1,253,169

Asset impairment

54,018

28,929

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

61,297

59,631

Amortization of fair value adjustment on debt

(62,361)

(115,549)

Maintenance rights write-off

174,544

234,964

Maintenance liability release to income

(143,316)

(177,264)

Net gain on sale of assets

(140,217)

(160,517)

Deferred income taxes

131,708

117,716

Collections of finance and sales-type leases

72,775

Other

134,416

88,593

 Changes in operating assets and liabilities:

 

 

   Trade receivables

(15,424)

(47,430)

   Other assets

(7,053)

(11,206)

   Accounts payable, accrued expenses and other liabilities

(36,561)

6,555

Net cash provided by operating activities

2,337,363

2,061,934

 

 

 

Purchase of flight equipment

(2,396,772)

(2,200,397)

Proceeds from sale or disposal of assets

1,171,886

1,338,776

Prepayments on flight equipment

(1,015,332)

(1,505,490)

Collections of finance and sales-type leases

73,617

Other

(17)

(21,359)

Net cash used in investing activities

(2,240,185)

(2,314,853)

 

 

 

Issuance of debt

5,339,455

4,069,555

Repayment of debt

(5,523,401)

(3,981,988)

Debt issuance costs paid, net of debt premium received

(18,524)

(52,734)

Maintenance payments received

564,374

567,511

Maintenance payments returned

(249,382)

(364,319)

Security deposits received

199,091

141,114

Security deposits returned

(194,841)

(144,795)

Dividend paid to non-controlling interest holders and others

(4,837)

(2,700)

Repurchase of shares and tax withholdings on share-based compensation

(425,609)

(597,047)

Net cash used in financing activities

(313,674)

(365,403)

 

 

 

Net decrease in cash, cash equivalents and restricted cash

(216,496)

(618,322)

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

(1,926)

2,966

Cash, cash equivalents and restricted cash at beginning of period

1,415,035

2,024,125

Cash, cash equivalents and restricted cash at end of period

$1,196,613

$1,408,769