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AerCap Holdings N.V. Reports Financial Results for the First Quarter 2018 and Announces New Share Re

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AerCap Holdings N.V. Reports Financial Results for the First Quarter 2018 and Announces New Share Repurchase Program

  • Net income of $265.4 million for the first quarter of 2018
  • Diluted earnings per share of $1.72 for the first quarter of 2018

Highlights

  • 114 aircraft transactions executed in the first quarter of 2018, including 28 widebody transactions.
  • Approximately 95% of new aircraft deliveries through 2019 and approximately 80% through 2020 leased.
  • 6.9 years average remaining lease term.
  • 98.3% fleet utilization rate for the first quarter of 2018.
  • Closed on $2.9 billion of debt financing, including $1.15 billion senior unsecured notes offering.
  • $10.8 billion of available liquidity and adjusted debt/equity ratio of 2.8 to 1.
  • Book value per share of $59.60, an increase of 16% since March 31, 2017.
  • Repurchased 5.9 million shares in the first quarter of 2018 for $305 million.
  • New $200 million share repurchase program authorized, which will run through September 30, 2018.

Aengus Kelly, CEO of AerCap, commented: “I am pleased to report that the AerCap platform delivered another quarter of strong operating and financial results, with earnings per share of $1.72 and net income of $265 million. Our high level of lease placement activity reflected robust demand for our aircraft, and we continued to deploy excess capital to create value for our shareholders.”

First Quarter 2018 Financial Results

  • Net income of $265.4 million, compared with $261.2 million for the same period in 2017. Diluted earnings per share of $1.72, compared with $1.48 for the same period in 2017.
  • The increase in net income was primarily driven by an increase in net gain on sale of assets, partially offset by the impact of the Air Berlin and Monarch Airlines lease terminations in the second half of 2017, as well as by lower other income.
  • Diluted earnings per share increased 16%, primarily driven by the repurchase of 29.6 million shares from January 2017 through March 2018.

Revenue and Net Spread

 

 

Three months ended March 31,

 

 

 

 

 

 

% increase/

 

 

2018

 

2017

 

(decrease)

 

 

(U.S. Dollars in millions)

 

 

 

 

 

 

 

Lease revenue:

 

 

 

 

 

 

Basic lease rents

 

$ 1,032.9

 

$ 1,067.1

 

(3%)

Maintenance rents and other receipts

 

87.4

 

89.9

 

(3%)

Lease revenue

 

1,120.3

 

1,157.0

 

(3%)

Net gain on sale of assets

 

89.3

 

47.3

 

89%

Other income

 

9.5

 

32.5

 

(71%)

Total Revenues and other income

 

$ 1,219.1

 

$ 1,236.8

 

(1%)

Basic lease rents were $1,032.9 million for the first quarter of 2018, compared with $1,067.1 million for the same period in 2017. The decrease was primarily due to the sale of mid-life and older aircraft during 2017 and the first quarter of 2018 and lower utilization as a result of the Air Berlin and Monarch Airlines lease terminations in the second half of 2017.

Net gain on sale of assets for the first quarter of 2018 was $89.3 million, relating to 21 aircraft sold and two aircraft reclassified to finance leases, compared with $47.3 million for the same period in 2017, relating to 21 aircraft sold and three aircraft reclassified to finance leases. The increase was primarily due to the composition of asset sales.

Other income for the first quarter of 2018 was $9.5 million, compared with $32.5 million for the same period in 2017. Other income for the first quarter of 2017 included contractual payments related to a lease termination agreement with a lessee.

 

 

Three months ended March 31,

 

 

 

 

 

 

% increase/

 

 

2018

 

2017

 

(decrease)

 

 

(U.S. Dollars in millions)

 

 

 

 

 

 

 

Basic lease rents

 

$ 1,032.9

 

$ 1,067.1

 

(3%)

 

 

 

 

 

 

 

Interest expense

 

274.4

 

285.7

 

(4%)

Adjusted for:

 

 

 

 

 

 

Mark-to-market of interest rate caps and swaps

 

16.5

 

(6.5)

 

NA

Adjusted interest expense

 

290.9

 

279.2

 

4%

 

 

 

 

 

 

 

Net interest margin, or net spread (*)

 

$ 742.0

 

$ 787.9

 

(6%)

 

 

 

 

 

 

 

Average lease assets

 

$ 34,934

 

$ 34,083

 

2%

Annualized net spread (*)

 

8.5%

 

9.2%

 

 

 

 

 

 

 

 

 

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

As shown in the table above, adjusted interest expense was $290.9 million for the first quarter of 2018, compared with $279.2 million for the same period in 2017.

Annualized net spread was 8.5% for the first quarter of 2018, compared with 9.2% 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 6.9 years. Younger aircraft tend to have lower yields than older aircraft.

Selling, General and Administrative Expenses

 

 

Three months ended March 31,

 

 

 

 

 

 

% increase/

 

 

2018

 

2017

 

(decrease)

 

 

(U.S. Dollars in millions)

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

$ 54.1

 

$ 56.8

 

(5%)

Share-based compensation expenses

 

31.7

 

26.7

 

19%

Total selling, general and administrative expenses

 

$ 85.8

 

$ 83.5

 

3%

Selling, general and administrative expenses were $85.8 million for the first quarter of 2018, compared with $83.5 million for the same period in 2017. The increase was due to a temporary increase in share-based compensation expenses as a result of the timing of share grants and vesting associated with our share-based compensation programs. We expect share-based compensation expenses to decrease significantly in the second half of 2018.

Other Expenses

Leasing expenses were $132.5 million for the first quarter of 2018, compared with $122.4 million for the same period in 2017. The increase in leasing expenses was primarily due to expenses recognized as a result of the Air Berlin and Monarch Airlines lease terminations in the second half of 2017. Asset impairment charges were $2.1 million for the first quarter of 2018 and related to one older aircraft that we expect to sell. We did not record any asset impairment charges for the first quarter of 2017.

Effective Tax Rate

Our effective tax rate for the first 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

 

 

 

 

 

 

 

 

 

March 31, 2018

 

December 31, 2017

 

March 31, 2017

 

 

(U.S. Dollars in millions,

except share and per share data)

 

 

 

 

 

 

 

 

 

Total AerCap Holdings N.V. shareholders' equity

 

$ 8,592.6

 

 

$ 8,579.7

 

 

$ 8,519.7

 

 

 

 

 

 

 

 

 

Ordinary shares outstanding

 

147,156,242

 

 

152,992,101

 

 

169,850,879

Unvested restricted stock

 

(2,991,371)

 

 

(3,007,752)

 

 

(3,463,660)

Ordinary shares outstanding (excl. unvested restricted stock)

144,164,871

 

 

149,984,349

 

 

166,387,219

 

 

 

 

 

 

 

 

 

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

$ 59.60

 

 

$ 57.20

 

 

$ 51.20

Book value per share has increased 16% since March 31, 2017.

Financial Position

 

 

March 31,
2018

 

December 31,
2017

 

% increase/

(decrease) over

December 31,
2017

 

 

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

 

 

 

 

 

 

 

 

 

Cash, cash equivalents and restricted cash

 

$ 2,452.1

 

 

$ 2,024.1

 

 

21%

Total assets

 

42,493.7

 

 

42,040.1

 

 

1%

Debt

 

28,890.3

 

 

28,420.7

 

 

2%

Total liabilities

 

33,845.4

 

 

33,401.3

 

 

1%

Total AerCap Holdings N.V. shareholders' equity

 

8,592.6

 

 

8,579.7

 

 

0%

Total equity

 

8,648.3

 

 

8,638.8

 

 

0%

Adjusted debt (*)

 

25,988.1

 

 

26,011.1

 

 

(0%)

Adjusted equity (*)

 

9,398.3

 

 

9,388.8

 

 

0%

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 March 31, 2018, AerCap’s portfolio consisted of 1,519 aircraft that were owned, on order or managed. The average age of our owned fleet as of March 31, 2018 was 6.8 years and the average remaining contracted lease term was 6.9 years.

Share Repurchase Program

Our Board of Directors approved a new share repurchase program authorizing total repurchases of up to $200 million of AerCap ordinary shares through September 30, 2018. 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 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.

 

 

March 31,
2018

 

December 31,
2017

 

 

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

 

 

 

 

 

 

Debt

 

$ 28,890

 

 

$ 28,421

 

 

 

 

 

 

Adjusted for:

 

 

 

 

 

Cash and cash equivalents

 

(2,152)

 

 

(1,660)

50% credit for long-term subordinated debt

 

(750)

 

 

(750)

Adjusted debt

 

$ 25,988

 

 

$ 26,011

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

$ 8,648

 

 

$ 8,639

 

 

 

 

 

 

Adjusted for:

 

 

 

 

 

50% credit for long-term subordinated debt

 

750

 

 

750

Adjusted equity

 

$ 9,398

 

 

$ 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 and swaps. 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.

Conference Call

In connection with the earnings release, management will host an earnings conference call today, Thursday, May 3, 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 5638 and referencing code 5522203 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.

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This press release was sourced from AerCap on 03-May-2018.