AerCap Holdings N.V. Reports Record Financial Results for the Second Quarter 2019

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

• Net income of $331.5 million for the second quarter of 2019 and $565.6 million for the first half of 2019
• Record earnings per share of $2.42 for the second quarter of 2019 and $4.09 for the first half of 2019

Highlights

• New technology aircraft now comprise 53% of our owned fleet.
• Order book approximately 90% placed through 2021.
• Over $40 billion of contracted future lease revenues.
• Approximately 95% of lease rents through 2021 already contracted.
• Average current lease expires in the fourth quarter of 2026.
• 99.4% fleet utilization rate for the second quarter of 2019.
• $2.7 billion increase in average lease assets year over year.
• 2.0x ratio of liquidity sources to uses for next 12 months.
• 13% increase in book value per share since June 30, 2018.
• Repurchased 3.5 million shares in the second quarter of 2019 for $169 million and 7.2 million shares year to date through July 24, 2019 for $337 million.

Aengus Kelly, CEO of AerCap, commented: “I am very pleased to announce record earnings per share of $2.42 for the second quarter. This outstanding result is the product of our unrivaled platform capabilities and our disciplined approach to capital allocation. Our focus on acquiring only the most in-demand, new technology aircraft types rather than end-of-the-line current technology aircraft and on selling large numbers of older aircraft at a considerable premium has produced an excellent portfolio and enabled us to repurchase over 40% of the outstanding shares at a discount to book value, while reducing our leverage and maintaining the highest liquidity levels in our industry.”

Second Quarter 2019 Financial Results

• Lease revenue was $1,186.2 million, compared with $1,131.0 million for the same period in 2018, primarily due to the delivery of new technology aircraft from April 2018 through June 2019, resulting in a $2.7 billion increase in average lease assets.
• Net income was $331.5 million, compared with $254.2 million for the same period in 2018. Diluted earnings per share was $2.42, compared with $1.70 for the same period in 2018.
• Net income increased 30%, primarily driven by higher lease rents resulting from the increase in average lease assets as well as higher net gain on sale of assets.
• Diluted earnings per share increased 42%, driven by the same factors as net income and the repurchase of 14.6 million shares from April 2018 through June 2019.

Revenue and Net Spread

			Three months ended June 30,										Six months ended June 30,
			2019			2018			% increase/ (decrease)				2019			2018			% increase/ (decrease)
			(U.S. Dollars in millions)										(U.S. Dollars in millions)
Lease revenue:
Basic lease rents			$ 1,077.1			$ 1,023.1			5	%			$ 2,152.4			$ 2,056.0			5	%
Maintenance rents and other receipts			109.1			107.9			1	%			195.9			195.3			0	%
Lease revenue			1,186.2			1,131.0			5	%			2,348.3			2,251.3			4	%
Net gain on sale of assets			78.2			51.2			53	%			99.7			140.5			(29	%)
Other income			17.0			12.4			37	%			38.3			22.0			74	%
Total Revenues and other income			$ 1,281.3			$ 1,194.6			7	%			$ 2,486.3			$ 2,413.8			3	%

Basic lease rents were $1,077.1 million for the second quarter of 2019, compared with $1,023.1 million for the same period in 2018. The increase was primarily due to the increase in average lease assets.

Net gain on sale of assets for the second quarter of 2019 was $78.2 million, relating to 22 aircraft sold for $502.4 million, compared with $51.2 million for the same period in 2018, relating to 30 aircraft sold for $737.7 million. The increase was primarily due to the composition of asset sales.

Other income for the second quarter of 2019 was $17.0 million, compared with $12.4 million for the same period in 2018. The increase was primarily the result of higher interest income recognized during the second quarter of 2019.

		Three months ended June 30,								Six months ended June 30,
		2019			2018			% increase/ (decrease)		2019			2018			% increase/ (decrease)
		(U.S. Dollars in millions)								(U.S. Dollars in millions)
Basic lease rents		$ 1,077.1			$ 1,023.1			5%		$ 2,152.4			$ 2,056.0			5%
Interest expense		332.4			284.9			17%		666.6			559.3			19%
Adjusted for:
Mark-to-market of interest rate caps		(9.8	)		4.5			NA		(25.7	)		21.1			NA
Interest expense excluding mark-to-market of interest rate caps		322.6			289.4			11%		640.9			580.4			10%
Net interest margin (*)		$ 754.5			$ 733.7			3%		$ 1,511.5			$ 1,475.6			2%
Depreciation and amortization, including maintenance rights expense		(435.2	)		(452.7	)		(4%)		(882.4	)		(929.1	)		(5%)
Net interest margin less depreciation and amortization (*)		$ 319.3			$ 281.1			14%		$ 629.1			$ 546.5			15%
Average lease assets (*)		$ 37,644			$ 34,897			8%		$ 37,455			$ 34,915			7%
Annualized net spread (*)		8.0	%		8.4	%				8.1	%		8.5	%
Net Spread less depreciation and amortization (*)		3.4	%		3.2	%				3.4	%		3.1	%

(*) 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 $9.8 million was $322.6 million for the second quarter of 2019, compared with $289.4 million for the same period in 2018. Our average cost of debt was 4.3% for the second 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 0.34% for the second quarter of 2019, compared with 0.31% for the same period in 2018.

Selling, General and Administrative Expenses

		Three months ended June 30,							Six months ended June 30,
		2019		2018		% increase/ (decrease)			2019		2018		% increase/ (decrease)
		(U.S. Dollars in millions)							(U.S. Dollars in millions)
Selling, general and administrative expenses		$ 45.9		$ 55.0		(17	%)		$ 95.4		$ 109.1		(13	%)
Share-based compensation expenses		18.6		30.3		(39	%)		36.0		62.0		(42	%)
Total selling, general and administrative expenses		$ 64.5		$ 85.3		(24	%)		$ 131.4		$ 171.1		(23	%)

Selling, general and administrative expenses were $64.5 million for the second quarter of 2019, compared with $85.3 million for the same period in 2018. The decrease was primarily due to a decrease in compensation-related expenses.

Other Expenses

Leasing expenses were $65.2 million for the second quarter of 2019, compared with $103.3 million for the same period in 2018. The decrease was primarily due to a decrease in maintenance rights expense as a result of 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 $17.8 million for the second quarter of 2019, compared to $14.0 million recorded for the same period in 2018. Asset impairment charges recorded in the second quarter of 2019 related to lease terminations and sales transactions. The maintenance revenue recognized with respect to the impaired aircraft more than offset the asset impairment charges.

Effective Tax Rate

Our effective tax rate for the second quarter of 2019 was 13.0%, the same as for the second 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

		June 30, 2019		June 30, 2018
		(U.S. Dollars in millions, except share and per share data)
Total AerCap Holdings N.V. shareholders' equity		$ 9,013.0		$ 8,669.5
Ordinary shares outstanding		136,602,986		148,432,487
Unvested restricted stock		(2,250,655)		(2,101,497)
Ordinary shares outstanding (excl. unvested restricted stock)		134,352,331		146,330,990
Book value per ordinary share outstanding (excl. unvested restricted stock)		$ 67.08		$ 59.25

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

Financial Position

		June 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		$ 970.3		$ 1,415.0		(31	%)
Total lease assets (*)		37,620.7		37,244.6		1	%
Total assets		43,067.9		43,208.9		(0	%)
Debt		29,019.7		29,507.6		(2	%)
Total liabilities		33,989.7		34,328.3		(1	%)
Total AerCap Holdings N.V. shareholders' equity		9,013.0		8,828.0		2	%
Total equity		9,078.2		8,880.6		2	%

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

As of June 30, 2019, AerCap’s portfolio consisted of 1,373 aircraft that were owned, on order or managed. The average age of our owned fleet as of June 30, 2019 was 6.2 years (2.0 years for new technology aircraft, 10.9 years for current technology aircraft) and the average remaining contracted lease term was 7.4 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.

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, 2019
		(U.S. Dollars in millions, except debt/equity ratio)
Debt		$ 29,020
Adjusted for:
Cash and cash equivalents		(783)
50% credit for long-term subordinated debt		(750)
Adjusted debt		$ 27,487
Equity		$ 9,078
Adjusted for:
50% credit for long-term subordinated debt		750
Adjusted equity		$ 9,828
Adjusted debt/equity ratio		2.8 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, Tuesday, July 30, 2019, at 8:30 am Eastern Daylight Time. The call can be accessed live by dialing (U.S./Canada) [phone] or (International) [phone] 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: [phone] ([e-mail]).

About AerCap

AerCap is the global leader in aircraft leasing with 1,373 aircraft owned, managed or on order and $43.1 billion of total assets as of June 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)
		June 30, 2019		December 31, 2018
Assets
Cash and cash equivalents		$ 782,884		$ 1,204,018
Restricted cash		187,401		211,017
Trade receivables		60,302		40,379
Flight equipment held for operating leases, net		35,255,248		35,052,335
Maintenance rights and lease premium, net		958,207		1,113,190
Flight equipment held for sale		507,949		184,129
Net investment in finance and sales-type leases		1,002,452		1,003,286
Prepayments on flight equipment		2,961,367		3,024,520
Other intangibles, net		317,982		328,570
Deferred income tax assets		150,951		138,281
Other assets		883,181		909,190
Total Assets		$ 43,067,924		$ 43,208,915
Liabilities and Equity
Accounts payable, accrued expenses and other liabilities		$ 1,060,845		$ 1,009,945
Accrued maintenance liability		2,242,753		2,237,494
Lessee deposit liability		774,312		768,677
Debt		29,019,666		29,507,587
Deferred income tax liabilities		892,173		804,598
Total liabilities		33,989,749		34,328,301
Ordinary share capital €0.01 par value, 350,000,000 ordinary shares authorized as of June 30, 2019 and December 31, 2018;
146,847,345 and 151,847,345 ordinary shares issued and 136,602,986 and 142,674,664 ordinary shares outstanding
(including 2,250,655 and 2,429,442 unvested restricted stock) as of June 30, 2019 and December 31, 2018, respectively		1,810		1,866
Additional paid-in capital		2,444,458		2,712,417
Treasury shares, at cost (10,244,359 and 9,172,681 ordinary shares
as of June 30, 2019 and December 31, 2018, respectively)		(494,545)		(476,085)
Accumulated other comprehensive income		(95,900)		(1,824)
Accumulated retained earnings		7,157,186		6,591,674
Total AerCap Holdings N.V. shareholders' equity		9,013,009		8,828,048
Non-controlling interest		65,166		52,566
Total Equity		9,078,175		8,880,614
Total Liabilities and Equity		$ 43,067,924		$ 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 June 30,				Six months ended June 30,
		2019		2018		2019		2018
Revenues and other income
Lease revenue:
Basic rents		$ 1,077,068		$ 1,023,121		$ 2,152,350		$ 2,055,996
Maintenance rents and other receipts		109,095		107,860		195,906		195,279
Net gain on sale of assets		78,157		51,225		99,698		140,525
Other income		16,956		12,446		38,349		21,978
Total Revenues and other income		1,281,276		1,194,652		2,486,303		2,413,778
Expenses
Depreciation and amortization		419,093		417,734		844,942		840,447
Asset impairment		17,819		13,978		22,850		16,086
Interest expense		332,441		284,865		666,620		559,314
Leasing expenses		65,244		103,309		156,965		235,777
Selling, general and administrative expenses		64,543		85,272		131,416		171,054
Total Expenses		899,140		905,158		1,822,793		1,822,678
Income before income taxes and income of investments accounted for
under the equity method		382,136		289,494		663,510		591,100
Provision for income taxes		(49,677)		(37,615)		(86,256)		(76,843)
Equity in net earnings of investments accounted for under the equity method		1,935		2,468		4,037		5,809
Net income		$ 334,394		$ 254,347		$ 581,291		$ 520,066
Net income attributable to non-controlling interest		(2,934)		(107)		(15,645)		(427)
Net income attributable to AerCap Holdings N.V.		$ 331,460		$ 254,240		$ 565,646		$ 519,639
Basic earnings per share		$ 2.44		$ 1.75		$ 4.13		$ 3.55
Diluted earnings per share		$ 2.42		$ 1.70		$ 4.09		$ 3.42
Weighted average shares outstanding - basic		135,917,192		145,272,520		137,029,147		146,228,245
Weighted average shares outstanding - diluted		137,072,268		149,474,890		138,396,628		151,858,686

AerCap Holdings N.V.
Unaudited Consolidated Statements of Cash Flows
(U.S. Dollars in thousands)
		Six months ended June 30,
		2019		2018
Net income		$ 581,291		$ 520,066
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		844,942		840,447
Asset impairment		22,850		16,086
Amortization of debt issuance costs, debt discount, debt premium and lease premium		42,783		41,845
Amortization of fair value adjustment on debt		(45,961)		(80,221)
Accretion of fair value adjustment on deposits and maintenance liabilities		7,449		9,933
Maintenance rights write-off		144,267		160,233
Maintenance liability release to income		(89,985)		(113,184)
Net gain on sale of assets		(99,698)		(140,525)
Deferred income taxes		88,055		77,074
Collections of finance and sales-type leases		45,448		-
Other		84,783		48,319
Changes in operating assets and liabilities:
Trade receivables		(21,075)		(29,266)
Other assets		(47,755)		24,142
Accounts payable, accrued expenses and other liabilities		(37,150)		(29,731)
Net cash provided by operating activities		1,520,244		1,345,218
Purchase of flight equipment.		(1,483,186)		(1,594,556)
Proceeds from sale or disposal of assets		733,157		1,195,770
Prepayments on flight equipment		(579,217)		(868,265)
Collections of finance and sales-type leases		-		46,211
Other		(11)		(20,935)
Net cash used in investing activities		(1,329,257)		(1,241,775)
Issuance of debt		4,157,089		2,443,006
Repayment of debt		(4,618,972)		(2,242,343)
Debt issuance costs paid, net of debt premium received		(8,422)		(40,457)
Maintenance payments received		358,694		362,801
Maintenance payments returned		(206,456)		(276,144)
Security deposits received		147,200		85,808
Security deposits returned		(141,364)		(92,999)
Dividend paid to non-controlling interest holders		(3,045)		(2,700)
Repurchase of shares and tax withholdings on share-based compensation		(320,058)		(508,680)
Net cash used in financing activities		(635,334)		(271,708)
Net decrease in cash, cash equivalents and restricted cash		(444,347)		(168,265)
Effect of exchange rate changes		(403)		2,613
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		$ 970,285		$ 1,858,473

 

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