Market Overview

AerCap Holdings N.V. Reports Financial Results for the Second Quarter 2018

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AerCap Holdings N.V. ("AerCap") (NYSE:AER):

  • Net income of $254.2 million for the second quarter of 2018 and
    $519.6 million for the first half of 2018
  • Diluted earnings per share of $1.70 for the second quarter of
    2018 and $3.42 for the first half of 2018

Highlights

  • 90 aircraft transactions executed in the second quarter of 2018,
    including 17 widebody transactions.
  • 20 aircraft purchased for $1.5 billion.
  • 6.6 years average age of owned fleet.
  • 7.1 years average remaining lease term.
  • 98.9% fleet utilization rate for the second quarter of 2018.
  • Closed on $2.7 billion of debt financing.
  • $11.7 billion of available liquidity and adjusted debt/equity ratio of
    2.8 to 1.
  • Book value per share of $59.25, an increase of 12% since June 30, 2017.
  • Repurchased 1.9 million shares in the second quarter of 2018 for $101
    million.

Aengus Kelly, CEO of AerCap, commented: "I am pleased to report
another quarter of strong operating and financial results, with earnings
per share of $1.70 and net income of $254.2 million. The AerCap platform
remained active in the quarter, completing 90 aircraft transactions,
including 17 widebody transactions. We took delivery of 20 aircraft and
expect to take delivery of over 200 new technology aircraft through the
end of 2020. We continue to see strong global demand from our airline
customers and have access to $11.7 billion of liquidity to meet our
strategic objectives."

Second Quarter 2018 Financial Results

  • Net income of $254.2 million, compared with $282.9 million for the
    same period in 2017. Diluted earnings per share of $1.70, compared
    with $1.67 for the same period in 2017.
  • The decrease in net income was primarily driven by lower other income
    as well as a decrease in net gain on sale of assets. Other income for
    the second quarter of 2017 included contractual payments related to a
    lease termination agreement.
  • The increase in diluted earnings per share was primarily driven by the
    repurchase of 24.9 million shares from April 2017 through June 2018.

Revenue and Net Spread

      Three months ended June 30,     Six months ended June 30,
        % increase/         % increase/
2018 2017 (decrease) 2018 2017 (decrease)
(U.S. Dollars in millions) (U.S. Dollars in millions)
 
Lease revenue:
Basic lease rents $ 1,023.1 $ 1,053.5 (3%) $ 2,056.0 $ 2,120.5 (3%)
Maintenance rents and other receipts 107.9 104.1 4% 195.3 194.0 1%
Lease revenue 1,131.0 1,157.6 (2%) 2,251.3 2,314.5 (3%)
Net gain on sale of assets 51.2 69.5 (26%) 140.5 116.9 20%
Other income 12.4 36.7 (66%) 22.0 69.2 (68%)
Total Revenues and other income $ 1,194.6 $ 1,263.8 (5%) $ 2,413.8 $ 2,500.6 (3%)

Basic lease rents were $1,023.1 million for the second quarter of 2018,
compared with $1,053.5 million for the same period in 2017. The decrease
was primarily due to the sale of mid-life and older aircraft from April
2017 through June 2018.

Maintenance rents and other receipts were $107.9 million for the second
quarter of 2018, compared with $104.1 million for the same period in
2017.

Net gain on sale of assets for the second quarter of 2018 was $51.2
million, relating to 30 aircraft sold and four aircraft reclassified to
finance leases, compared with $69.5 million for the same period in 2017,
relating to 24 aircraft sold and six aircraft reclassified to finance
leases. The decrease was primarily due to the composition of asset sales.

Other income for the second quarter of 2018 was $12.4 million, compared
with $36.7 million for the same period in 2017. Other income for the
second quarter of 2017 included contractual payments related to a lease
termination agreement.

  Three months ended June 30,     Six months ended June 30,
        % increase/           % increase/
2018   2017   (decrease)   2018   2017   (decrease)
(U.S. Dollars in millions) (U.S. Dollars in millions)
 
Basic lease rents $ 1,023.1 $ 1,053.5 (3%) $ 2,056.0 $ 2,120.5 (3%)
 
Interest expense 284.9 275.0 4% 559.3 560.7 (0%)
Adjusted for:
Mark-to-market of interest rate caps 4.5 (9.0) NA 21.1 (15.5) NA
Interest expense excluding mark-to-market of interest rate caps 289.4 266.0 9% 580.4 545.2 6%
           
Net interest margin, or net spread (*) $ 733.7 $ 787.5 (7%) $ 1,475.6 $ 1,575.3 (6%)
 
Average lease assets (*) $ 34,897 $ 34,047 2% $ 34,915 $ 34,065 2%
Annualized net spread (*) 8.4% 9.3% 8.5% 9.2%
 
(*) 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 $4.5
million was $289.4 million for the second quarter of 2018, compared with
$266.0 million for the same period in 2017. Our average cost of debt was
4.1% for the second quarter of 2018, compared with 3.9% for the same
period in 2017. 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.

Annualized net spread was 8.4% for the second quarter of 2018, compared
with 9.3% for the same period in 2017. The decrease was primarily due to
the lower age of our owned fleet, which increased our average remaining
lease term to 7.1 years. Younger aircraft tend to have lower yields than
older aircraft.

Selling, General and Administrative Expenses

  Three months ended June 30,   Six months ended June 30,
    % increase/     % increase/
2018 2017 (decrease) 2018 2017 (decrease)
(U.S. Dollars in millions) (U.S. Dollars in millions)
 
Selling, general and administrative expenses $ 55.0 $ 58.0 (5%) $ 109.1 $ 114.8 (5%)
Share-based compensation expenses 30.3 26.6 14% 62.0 53.3 16%
Total selling, general and administrative expenses $ 85.3 $ 84.6 1% $ 171.1 $ 168.1 2%
 

Other Expenses

Leasing expenses were $103.3 million for the second quarter of 2018,
compared with $136.3 million for the same period in 2017. The decrease
was primarily due to lower maintenance rights expense as a result of
lower maintenance activity during the period and the lower maintenance
rights intangible asset balance. Asset impairment charges were $14.0
million for the second quarter of 2018, compared to $5.3 million
recorded for the same period in 2017. Asset impairment recorded in the
second quarter of 2018 related to sales transactions and lease
terminations and was offset by maintenance revenue.

Effective Tax Rate

Our effective tax rate for the second quarter of 2018 was 13.0%,
compared to 13.0% for the same period in 2017. The effective tax rate
for the full year 2017 was 13.3%. The effective tax rate is impacted by
the source and amount of earnings among our different tax jurisdictions.

Book Value Per Share

  June 30,   June 30,
2018 2017
(U.S. Dollars in millions,
except share and per share data)
 
Total AerCap Holdings N.V. shareholders' equity $ 8,669.5 $ 8,520.8
 
Ordinary shares outstanding 148,432,487 163,418,626
Unvested restricted stock (2,101,497) (2,833,754)
Ordinary shares outstanding (excl. unvested restricted stock) 146,330,990 160,584,872
 
Book value per ordinary share outstanding (excl. unvested
restricted stock)
$ 59.25 $ 53.06

Book value per share has increased 12% since June 30, 2017.

Financial Position

      % increase/
(decrease) over
June 30, June 30, December 31,
2018 2017 2017
(U.S. Dollars in millions, except debt/equity ratio)
 
Total cash, cash equivalents and restricted cash $ 1,858.5 $ 2,024.1 (8%)
Total lease assets (*) 35,407.6 35,404.4 0%
Total assets 42,019.4 42,040.1 (0%)
Debt 28,545.5 28,420.7 0%
Total liabilities 33,295.6 33,401.3 (0%)
Total AerCap Holdings N.V. shareholders' equity 8,669.5 8,579.7 1%
Total equity 8,723.8 8,638.8 1%
Adjusted debt (*) 26,197.0 26,011.1 1%
Adjusted equity (*) 9,473.8 9,388.8 1%
Adjusted debt/equity ratio (*) 2.8 to 1 2.8 to 1 0%
 
(*) Refer to "Notes Regarding Financial Information Presented in
This Press Release" for details relating to these non-GAAP measures

As of June 30, 2018, AerCap's portfolio consisted of 1,471 aircraft that
were owned, on order or managed. The average age of our owned fleet as
of June 30, 2018 was 6.6 years and the average remaining contracted
lease term was 7.1 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 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. We believe this measure may further assist investors
in their understanding of our capital structure and leverage.

  June 30,   June 30,
2018 2017
(U.S. Dollars in millions, except
debt/equity ratio)
 
Debt $ 28,546 $ 28,421
 
Adjusted for:
Cash and cash equivalents (1,599) (1,660)
50% credit for long-term subordinated debt (750) (750)
Adjusted debt $ 26,197 $ 26,011
 
 
Equity $ 8,724 $ 8,639
 
Adjusted for:
50% credit for long-term subordinated debt 750 750
Adjusted equity $ 9,474 $ 9,389
 
Adjusted debt/equity ratio 2.8 to 1 2.8 to 1
 

Net interest margin, or net spread, and annualized net spread

Net interest margin, or net spread, is 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. 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 intangible assets.

Conference Call

In connection with the earnings release, management will host an
earnings conference call today, Monday, July 30, 2018, at 8:30 am
Eastern Daylight Time. The call can be accessed live by dialing
(U.S./Canada) +1 929 477 0448 or (International) +353 1 246 5621 and
referencing code 3294370 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, as of June 30,
2018, 1,471 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
Shannon, Los Angeles, Singapore, Amsterdam, Fort Lauderdale, 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, 2018 December 31, 2017
 
Assets
Cash and cash equivalents $ 1,598,502 $ 1,659,669
Restricted cash 259,971 364,456
Trade receivables 100,692 73,877
Flight equipment held for operating leases, net 32,947,511 32,396,827
Maintenance rights intangible and lease premium, net 1,276,039 1,501,858
Flight equipment held for sale 248,522 630,789
Net investment in finance and sales-type leases 1,049,230 995,689
Prepayments on flight equipment 3,162,686 2,930,303
Other intangibles, net 341,230 355,512
Deferred income tax assets 147,513 151,234
Other assets 887,491 979,930
Total Assets $ 42,019,387 $ 42,040,144
 
 
Liabilities and Equity
Accounts payable, accrued expenses and other liabilities $ 954,765 $ 1,017,374
Accrued maintenance liability 2,252,791 2,461,799
Lessee deposit liability 791,966 827,470
Debt 28,545,513 28,420,739
Deferred income tax liabilities 750,536 673,948
Total liabilities 33,295,571 33,401,330
 
Ordinary share capital €0.01 par value, 350,000,000 ordinary shares
authorized as of June 30, 2018 and December 31, 2017;
156,847,345 and 167,847,345 ordinary shares issued and 148,432,487
and 152,992,101 ordinary shares outstanding
(including 2,101,497 and 3,007,752 unvested restricted stock) as of
June 30, 2018 and December 31, 2017, respectively
1,923 2,058
Additional paid-in capital 2,963,443 3,714,563
Treasury shares, at cost (8,414,858 and 14,855,244 ordinary shares
as of June 30, 2018 and December 31, 2017, respectively) (434,457) (731,442)
Accumulated other comprehensive income 42,585 14,274
Accumulated retained earnings 6,095,973 5,580,257
Total AerCap Holdings N.V. shareholders' equity 8,669,467 8,579,710
Non-controlling interest 54,349 59,104
Total Equity 8,723,816 8,638,814
   
Total Liabilities and Equity $ 42,019,387 $ 42,040,144
 
 
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,
2018 2017 2018 2017
 
Revenues and other income
Lease revenue $ 1,130,981 $ 1,157,562 $ 2,251,275 $ 2,314,524
Net gain on sale of assets 51,225 69,525 140,525 116,853
Other income 12,446 36,663 21,978 69,199
Total Revenues and other income 1,194,652 1,263,750 2,413,778 2,500,576
 
Expenses
Depreciation and amortization 417,734 435,005 840,447 873,546
Asset impairment 13,978 5,300 16,086 5,300
Interest expense 284,865 275,018 559,314 560,696
Leasing expenses 103,309 136,345 235,777 258,754
Restructuring related expenses - 4,730 - 14,605
Selling, general and administrative expenses 85,272 84,633 171,054 168,115
Total Expenses 905,158 941,031 1,822,678 1,881,016
 
Income before income taxes and income of investments accounted for
under the equity method 289,494 322,719 591,100 619,560
 
Provision for income taxes (37,615) (41,956) (76,843) (80,541)
Equity in net earnings of investments accounted for under the equity
method
2,468 2,107 5,809 5,087
 
Net income $ 254,347 $ 282,870 $ 520,066 $ 544,106
 
Net (income) loss attributable to non-controlling interest (107) 10 (427) (53)
       
Net income attributable to AerCap Holdings N.V $ 254,240 $ 282,880 $ 519,639 $ 544,053
 
Basic earnings per share $ 1.75 $ 1.73 $ 3.55 $ 3.27
Diluted earnings per share $ 1.70 $ 1.67 $ 3.42 $ 3.15
 
Weighted average shares outstanding - basic 145,272,520 163,150,532 146,228,245 166,512,330
Weighted average shares outstanding - diluted 149,474,890 169,263,392 151,858,686 172,568,854
 
 
AerCap Holdings N.V.
Unaudited Consolidated Statements of Cash Flows
(U.S. Dollars in thousands)
   
Six months ended June 30,
2018 2017
 
Net income $ 520,066 $ 544,106
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 840,447 873,546
Asset impairment 16,086 5,300
Amortization of debt issuance costs and debt discount 34,753 30,202
Amortization of lease premium intangibles 7,092 8,129
Amortization of fair value adjustment on debt (80,221) (109,290)
Accretion of fair value adjustment on deposits and maintenance
liabilities
9,933 16,718
Maintenance rights write-off 160,233 283,430
Maintenance liability release to income (113,184) (107,450)
Net gain on sale of assets (140,525) (116,853)
Deferred income taxes 77,074 76,679
Restructuring related expenses - 5,097
Other 48,319 66,352
Changes in operating assets and liabilities:
Trade receivables (29,266) (14,947)
Other assets 24,142 38,447
Accounts payable, accrued expenses and other liabilities (29,731) (803)
Net cash provided by operating activities 1,345,218 1,598,663
 
Purchase of flight equipment (1,594,556) (1,260,123)
Proceeds from sale or disposal of assets 1,195,770 720,773
Prepayments on flight equipment (868,265) (575,802)
Collections of finance and sales-type leases 46,211 43,863
Other (20,935) (35,706)
Net cash used in investing activities (1,241,775) (1,106,995)
 
Issuance of debt 2,443,006 2,539,991
Repayment of debt (2,242,343) (2,966,535)
Debt issuance costs paid (40,457) (34,243)
Maintenance payments received 362,801 356,525
Maintenance payments returned (276,144) (239,574)
Security deposits received 85,808 75,096
Security deposits returned (92,999) (79,965)
Dividend paid to non-controlling interest holders (2,700) (265)
Repurchase of shares and tax withholdings on share-based compensation (508,680) (596,609)
Net cash used in financing activities (271,708) (945,579)
 
Net decrease in cash, cash equivalents and restricted cash (168,265) (453,911)
Effect of exchange rate changes on cash, cash equivalents and
restricted cash
2,613 (372)
Cash, cash equivalents and restricted cash at beginning of period 2,024,125 2,364,627
Cash, cash equivalents and restricted cash at end of period $ 1,858,473 $ 1,910,344
 

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