Tuesday, 5 May 2020

AerCap first quarter results 2020

The aircraft leasing giant AerCap has released its latest results which make interesting reading as the firm has managed to maintain a strong liquidy during the ongoing crisis that is affecting the global aviation industry.  

"The Covid-19 pandemic is creating significant challenges for the global aviation industry and for economies around the world. We would like to express our support for those directly affected by this illness and those whose jobs and businesses have been impacted," said Aengus Kelly, Chief Executive Officer of AerCap. 

The firm saw its net income increased by 18% to $276.8 million, from $234.2 million for the same period in 2019 and managed to achieve a 98% active lease rents through to 2022 already contracted. During the first quarter, it also experienced a 99% fleet utilization rate.  There are still concerns over the grounded Boeing 737 MAX aircraft,  with no clear date of when the aircraft will gain regulatory approval or under what special conditions they will be allowed to fly. The firm has 95 of the type on order with Boeing, but it is sure many of its Boeing 737 MAX leases have now been cancelled, furthermore, it fully expects additional leases to be cancelled in the future. In cases where leases have been cancelled, AerCap now has the right to cancel its corresponding orders for delivery of those aircraft from Boeing.  Nevertheless, those lease cancellations could have an adverse effect on future cash flows and results.   


AerCap is one of the largest aircraft leasing firms with 1,372 aircraft owned, managed or on order and $47.1 billion of total assets as of March 31, 2020. 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.
 .
  • Net income of $276.8 million for the first quarter of 2020
  • Diluted earnings per share of $2.14 for the first quarter of 2020
Highlights
  • Approximately $11 billion sources of liquidity.
  • Over $28 billion of unencumbered assets.
  • Adjusted debt/equity ratio of 2.5 to 1.
  • Secured debt-to-total assets ratio of 19.6%.
  • 100% of new aircraft deliveries through December 2021 already leased.
  • New technology aircraft comprise 59% of fleet.
  • Approximately 98% of lease rents through 2022 already contracted.
  • Average current lease expires in the third quarter of 2027.
  • 99% fleet utilization rate for the first quarter of 2020.
  • 27% increase in diluted EPS year over year.
  • 14% increase in book value per share since March 31, 2019 to $73.69.
"The Covid-19 pandemic is creating significant challenges for the global aviation industry and for economies around the world. We would like to express our support for those directly affected by this illness and those whose jobs and businesses have been impacted," said Aengus Kelly, Chief Executive Officer of AerCap. "AerCap entered this crisis in a position of strength, with a strong balance sheet and liquidity position, an attractive aircraft portfolio and a high-quality customer base including many of the world's leading airlines. Most importantly, we have an unrivalled operating platform with a strong track record of successfully managing through challenging environments. With approximately $11 billion sources of liquidity, over $28 billion of unencumbered assets and a record low leverage ratio of 2.5 to 1, we are well-positioned to weather an extended period of turbulence and support the recovery of the airline industry in the future."

First Quarter 2020 Financial Results
  • Net income increased by 18% to $276.8 million, from $234.2 million for the same period in 2019. Diluted earnings per share was $2.14, compared with $1.68 for the same period in 2019.
  • The increase in net income was primarily driven by higher maintenance revenue and higher net gain on sale of assets.
  • Diluted earnings per share increased 27%, driven by the same factors as net income and the repurchase of 14.1 million shares from January 2019 through March 2020.
Revenue and Net Spread


Three months ended March 31,


2020

2019

% increase/

(decrease
)


(U.S. Dollars in millions)
Lease revenue:






   Basic lease rents

$1,030.8


$1,075.3


(4%)

   Maintenance rents and other receipts

134.3


86.8


55%

Total lease revenue

1,165.1


1,162.1


—%

Net gain on sale of assets

58.4


21.5


171%

Other income

14.7


21.4


(31%)

Total Revenues and other income

$1,238.2


$1,205.0


3%


Basic lease rents were $1,030.8 million for the first quarter of 2020, compared with $1,075.3 million for the same period in 2019. The decrease was primarily due to downtime relating to re-leasing activity and the write-off of certain lessee receivables.

Maintenance rents and other receipts were $134.3 million for the first quarter of 2020, compared with $86.8 million for the same period in 2019. The increase was primarily due to higher maintenance revenue recognized as a result of lease terminations and higher end of lease compensation recognized during the first quarter of 2020.

Net gain on sale of assets for the first quarter of 2020 was $58.4 million, relating to 12 aircraft sold for $265 million, compared with $21.5 million for the same period in 2019, relating to 19 aircraft sold for $340 million. The increase was primarily due to the composition of asset sales.

Other income for the first quarter of 2020 was $14.7 million, compared with $21.4 million for the same period in 2019. The decrease was primarily due to higher interest income and income from net insurance proceeds in the first quarter of 2019.


Three months ended March 31,


2020

2019

% increase/

(decrease)


(U.S. Dollars in millions)







Basic lease rents

$1,030.8


$1,075.3


(4%)








Interest expense

318.6


334.2


(5%)

Adjusted for:






   Mark-to-market of interest rate caps and swaps

(12.5)


(15.9)


(21%)

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

306.1


318.3


(4%)

Net interest margin (*)

$724.7


$757.0


(4%)

Depreciation and amortization, including maintenance rights expense

(432.0)


(447.2)


(3%)

Net interest margin, less depreciation and amortization

$292.7


$309.8


(6%)








Average lease assets (*)

$37,671


$37,266


1%








Annualized net spread (*)

7.7%


8.1%



Annualized net spread less depreciation and amortization (*)

3.1%


3.3%










(*) 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 $12.5 million was $306.1 million for the first quarter of 2020, compared with $318.3 million for the same period in 2019. Our average cost of debt was 4.1% for the first quarter of 2020, compared with 4.2% 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 March 31,


2020

2019

% increase/

(decrease)


(U.S. Dollars in millions)







Selling, general and administrative expenses

$46.8


$49.5


(5%)

Share-based compensation expenses

17.8


17.4


2%

Total selling, general and administrative expenses

$64.6


$66.9


(3%)


Other Expenses
Leasing expenses were $103.3 million for the first quarter of 2020, compared with $91.7 million for the same period in 2019. The increase was primarily due to an increase in leasing expenses as a result of higher lessor maintenance contributions, 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 $13.9 million for the first quarter of 2020, compared to $5.0 million recorded for the same period in 2019. Asset impairment charges recorded in the first quarter of 2020 related to sales transactions and lease terminations and were more than offset by maintenance revenue.


Effective Tax Rate
Our effective tax rate for the first quarter of 2020 was 13.5%, compared to 13.0% for the first 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


March 31, 2020

March 31, 2019


(U.S. Dollars in millions,

except share and per share data)





Total AerCap Holdings N.V. shareholders' equity

$9,382.9


$8,906.2






Ordinary shares outstanding

129,637,008


139,597,805

Unvested restricted stock

(2,300,595)


(2,418,788)

Ordinary shares outstanding (excl. unvested restricted stock)

127,336,413


137,179,017






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

$73.69


$64.92

Book value per share has increased 14% since March 31, 2019.


Financial Position


March 31, 2020

December 31, 2019

% increase/

(decrease) over

December 31, 2019


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







Total cash, cash equivalents and restricted cash

$4,882.5


$1,300.3


275%

Total lease assets (*)

37,658.6


37,930.4


(1%)

Total assets

47,144.8


43,749.2


8%

Debt

32,760.8


29,486.1


11%

Total liabilities

37,692.8


34,367.0


10%

Total AerCap Holdings N.V. shareholders' equity

9,382.9


9,314.9


1%

Total equity

9,452.0


9,382.2


1%








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

In March 2020, we borrowed $4.0 billion under a senior unsecured revolving credit facility. This resulted in an increase in total cash, cash equivalents and restricted cash, debt and total liabilities during the first quarter of 2020. In April 2020, we repaid $3.0 billion of the outstanding amount.

As of March 31, 2020, AerCap's portfolio consisted of 1,372 aircraft that were owned, on order or managed. The average age of our owned fleet as of March 31, 2020 was 6.2 years (2.5 years for new technology aircraft, 11.5 years for current technology aircraft) and the average remaining contracted lease term was 7.5 years.

Boeing 737 MAX Delays
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 March 31, 2020, we had 95 Boeing 737 MAX aircraft on order with Boeing and five already delivered and on lease. Boeing currently expects that the necessary regulatory approvals will be obtained in time to support resumption of the Boeing 737 MAX deliveries during the third quarter of 2020. It is uncertain, however, 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, and we expect additional leases to be cancelled in the future. In cases where leases have been cancelled, 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.




AerCap Holdings N.V






Unaudited Consolidated Balance Sheets






(U.S. Dollars in thousands)















March 31, 2020

December 31, 2019









Assets






Cash and cash equivalents

$4,693,872


$1,121,396



Restricted cash

188,671


178,951



Trade receivables

94,558


47,935



Flight equipment held for operating leases, net

35,670,631


35,870,781



Maintenance rights and lease premium, net

774,039


809,615



Flight equipment held for sale

331,387


336,592



Net investment in finance and sales-type leases

978,783


1,011,549



Prepayments on flight equipment

3,108,703


2,954,478



Other intangibles, net

302,100


307,394



Deferred income tax assets

106,267


95,077



Other assets

895,817


1,015,476



Total Assets

$47,144,828


$43,749,244

















Liabilities and Equity






Accounts payable, accrued expenses and other liabilities

$1,108,037


$1,032,623



Accrued maintenance liability

2,149,884


2,190,159



Lessee deposit liability

723,949


747,790



Debt

32,760,773


29,486,131



Deferred income tax liabilities

950,199


910,336



Total liabilities

37,692,842


34,367,039










Ordinary share capital €0.01 par value, 350,000,000 ordinary shares authorized as of March 31, 2020 and December 31, 2019; 138,847,345 and 141,847,345 ordinary shares issued and 129,637,008 and 131,583,489 ordinary shares outstanding (including 2,300,595 and 2,354,318 unvested restricted stock) as of March 31, 2020 and December 31, 2019, respectively

1,721


1,754





Additional paid-in capital

2,067,647


2,209,462



Treasury shares, at cost (9,210,337 and 10,263,856 ordinary shares as of March 31, 2020 and December 31, 2019, respectively)

(498,003)


(537,341)




Accumulated other comprehensive loss

(174,581)


(93,587)



Accumulated retained earnings

7,986,142


7,734,609



Total AerCap Holdings N.V. shareholders' equity

9,382,926


9,314,897



Non-controlling interest

69,060


67,308



Total Equity

9,451,986


9,382,205










Total Liabilities and Equity

$47,144,828


$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 March 31,




2020

2019









Revenues and other income






Lease revenue:






Basic lease rents

$1,030,794


$1,075,282



Maintenance rents and other receipts

134,285


86,811



Total lease revenue

1,165,079


1,162,093



Net gain on sale of assets

58,366


21,541



Other income

14,732


21,393



Total Revenues and other income

1,238,177


1,205,027










Expenses






Depreciation and amortization

415,798


425,849



Asset impairment

13,947


5,031



Interest expense

318,617


334,179



Leasing expenses

103,297


91,721



Selling, general and administrative expenses

64,584


66,873



Total Expenses

916,243


923,653










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

321,934


281,374











Provision for income taxes

(43,461)


(36,579)



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

1,331


2,102










Net income

$279,804


$246,897










Net income attributable to non-controlling interest

(2,980)


(12,711)










Net income attributable to AerCap Holdings N.V

$276,824


$234,186










Basic earnings per share

$2.16


$1.70



Diluted earnings per share

$2.14


$1.68










Weighted average shares outstanding - basic

128,299,745


138,153,456



Weighted average shares outstanding - diluted

129,340,501


139,618,644

















AerCap Holdings N.V






Unaudited Consolidated Statements of Cash Flows






(U.S. Dollars in thousands)








Three months ended March 31,




2020

2019









Net income

$279,804


$246,897



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






Depreciation and amortization

415,798


425,849



Asset impairment

13,947


5,031



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

16,298


19,033



Amortization of fair value adjustment on debt

(16,267)


(27,060)



Maintenance rights write-off

33,393


52,357



Maintenance liability release to income

(63,422)


(46,285)



Net gain on sale of assets

(58,366)


(21,541)



Deferred income taxes

44,616


37,769



Collections of finance and sales-type leases

19,115


19,890



Other

75,395


56,079



 Changes in operating assets and liabilities:






   Trade receivables

(49,342)


(55,039)



   Other assets

(96,013)


(10,172)



   Accounts payable, accrued expenses and other liabilities

13,962


42,892



Net cash provided by operating activities

628,918


745,700










Purchase of flight equipment

(61,326)


(815,274)



Proceeds from sale or disposal of assets

176,961


312,431



Prepayments on flight equipment

(350,836)


(280,335)



Other



(11)



Net cash used in investing activities

(235,201)


(783,189)










Issuance of debt

4,200,000


1,816,306



Repayment of debt

(918,422)


(537,246)



Debt issuance costs paid, net of debt premium received

(1,739)


(13,863)



Maintenance payments received

144,876


174,390



Maintenance payments returned

(95,189)


(108,437)



Security deposits received

28,392


86,860



Security deposits returned

(48,608)


(78,270)



Dividend paid to non-controlling interest holders and others

(1,228)


(1,674)



Repurchase of shares and tax withholdings on share-based compensation

(118,571)


(140,978)



Net cash provided by financing activities

3,189,511


1,197,088










Net increase in cash, cash equivalents and restricted cash

3,583,228


1,159,599



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

(1,032)


(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

$4,882,543


$2,574,231









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