Wednesday, 29 July 2020

AerCap Holdings publishes its financial results for the second quarter 2020


AerCap, one of the global leaders in commercial aircraft leasing with one of the biggest order books in the industry has released details of its financial results for the second quarter of 2020.


The firm that has approximately 200 customers in as many as 80 countries with offices in Dublin, Shannon, Los Angeles, Singapore, Amsterdam, Shanghai, Abu Dhabi, Seattle and Toulouse has reported a net income of $246 million for the second quarter of 2020 and $523 million for the first half of 2020. 


Highlights
  • Approximately $12 billion sources of liquidity.
  • 2.2x next 12 months' sources-to-uses coverage ratio, representing $6.4 billion of excess coverage.
  • $3 billion of new financing raised in the second quarter of 2020.
  • Approximately $27 billion of unencumbered assets.
  • Adjusted debt/equity ratio of 2.5 to 1.
  • Secured debt-to-total assets ratio of 23%.
  • New technology aircraft comprise 59% of fleet.
  • Average current lease expires in the fourth quarter of 2027.
"The Covid-19 pandemic continues to create significant challenges for the global aviation industry and for our airline customers," said Aengus Kelly, Chief Executive Officer of AerCap. "In response, we have maintained a record amount of liquidity and strong access to funding. We currently have $12 billion sources of liquidity, which is more than double our cash needs over the next 12 months. Since April, we have raised $3 billion of new funding, and have over $2 billion of additional funding initiatives in progress. With $27 billion of unencumbered assets, a record low leverage ratio of 2.5 to 1 and an unrivalled operating platform, we are well-positioned to weather an extended period of turbulence and support the recovery of the airline industry in the future."


Second Quarter 2020 Financial Results
  • Net income was $246 million, compared with $331 million for the same period in 2019. Diluted earnings per share was $1.92, compared with $2.42 for the same period in 2019.
  • The decrease in net income was primarily driven by lower basic lease rents and lower net gain on sale of assets.
  • Diluted earnings per share was affected by the same factors as net income and by the repurchase of 11 million shares from April 2019 through June 2020.
Boeing 737 MAX

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 June 30, 2020, we had five Boeing 737 MAX aircraft delivered and on lease. It is uncertain 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 by our lessees, and additional leases may be cancelled in the future. In cases where lessees have the right to cancel Boeing 737 MAX leases, 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.
In July 2020, we reached agreement with Boeing to restructure our order book for Boeing 737 MAX aircraft, including the cancellation of 15 of our Boeing 737 MAX aircraft on order. Following this cancellation, we have 80 Boeing 737 MAX aircraft on order.

Aircraft Portfolio
As of June 30, 2020, AerCap's portfolio consisted of 1,357 aircraft that were owned, on order or managed, as adjusted to reflect our cancellation of 15 Boeing 737 MAX aircraft orders in in July 2020. The average age of our owned fleet as of June 30, 2020 was 6.4 years (2.7 years for new technology aircraft, 11.7 years for current technology aircraft) and the average remaining contracted lease term was 7.3 years.

AerCap recently leased a brand new Airbus NEO to Canadian leisure airline AirTransat


Revenue and Net Spread


Three months ended June 30,

Six months ended June 30,


2020

2019

% increase/

(decrease)

2020

2019

% increase/

(decrease)


(U.S. Dollars in millions)

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












   Basic lease rents

$948


$1,077


(12%)


$1,979


$2,152


(8%)

   Maintenance rents and other receipts

224


109


106%


359


196


83%

Total lease revenue

1,172


1,186


(1%)


2,337


2,348



Net gain on sale of assets

10


78


(87%)


68


100


(31%)

Other income

15


17


(12%)


30


38


(22%)

Total Revenues and other income

$1,197


$1,281


(7%)


$2,436


$2,486


(2%)














Basic lease rents were $948 million for the second quarter of 2020, compared with $1,077 million for the same period in 2019. The decrease was primarily due to lease restructurings, transitions and the impact of airline bankruptcies.
Maintenance rents and other receipts were $224 million for the second quarter of 2020, compared with $109 million for the same period in 2019. The increase was primarily due to higher maintenance revenue recognized as a result of lease terminations during the second quarter of 2020.
Net gain on sale of assets for the second quarter of 2020 was $10 million, relating to nine aircraft sold for $188 million, compared with $78 million for the same period in 2019, relating to 22 aircraft sold for $502 million. The decrease was primarily due to the lower volume and composition of asset sales.
Other income for the second quarter of 2020 was $15 million, compared with $17 million for the same period in 2019.


Three months ended June 30,

Six months ended June 30,


2020

2019

% increase/

(decrease)

2020

2019

% increase/

(decrease)


(U.S. Dollars in millions)

(U.S. Dollars in millions)













Basic lease rents

$948


$1,077


(12%)


$1,979


$2,152


(8%)














Interest expense

312


332


(6%)


630


667


(5%)

Adjusted for:












   Mark-to-market of interest rate caps and swaps

(2)


(10)


(79%)


(15)


(26)


(43%)

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

310


323


(4%)


616


641


(4%)

Net interest margin (*)

$638


$755


(15%)


$1,363


$1,512


(10%)

Depreciation and amortization, including maintenance rights expense

(424)


(435)


(3%)


(856)


(882)


(3%)

Net interest margin, less depreciation and amortization

215


319


(33%)


508


629


(19%)














Average lease assets (*)

$37,342


$37,644


(1%)


$37,506


$37,455


—%














Annualized net spread (*)

6.8%


8.0%




7.3%


8.1%



Annualized net spread less depreciation and amortization (*)

2.3%


3.4%




2.7%


3.4%





(*) 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 $2 million was $310 million for the second quarter of 2020, compared with $323 million for the same period in 2019. Our average cost of debt was 4.0% for the second quarter of 2020, compared with 4.3% 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 June 30,

Six months ended June 30,


2020

2019

% increase/

(decrease)

2020

2019

% increase/

(decrease)


(U.S. Dollars in millions)

(U.S. Dollars in millions)













Selling, general and administrative expenses

$38


$46


(17%)


$85


$95


(11%)

Share-based compensation expenses

15


19


(21%)


33


36


(10%)

Total selling, general and administrative expenses

$53


$65


(18%)


$118


$131


(11%)

Selling, general and administrative expenses decreased primarily as a result of lower compensation-related expenses.


Other Expenses
Leasing expenses were $78 million for the second quarter of 2020, compared with $65 million for the same period in 2019. The increase was primarily driven by an increase in our provision for expected credit losses, 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 $73 million for the second quarter of 2020, compared to $18 million recorded for the same period in 2019. Asset impairment charges recorded in the second quarter of 2020 primarily related to lease terminations and were largely offset by maintenance revenue.


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


June 30, 2020

June 30, 2019


(U.S. Dollars in millions,

except share and per share data)





Total AerCap Holdings N.V. shareholders' equity

$9,634


$9,013






Ordinary shares outstanding

129,672,783


136,602,986

Unvested restricted stock

(2,087,383)


(2,250,655)

Ordinary shares outstanding (excl. unvested restricted stock)

127,585,400


134,352,331






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

$75.51


$67.08

Book value per share has increased 13% since June 30, 2019.
Financial Position 


June 30, 2020

December 31, 2019

% increase/

(decrease) over

December 31, 2019


(U.S. Dollars in millions)







Total cash, cash equivalents and restricted cash

$2,643


$1,300


103%

Total lease assets (*)

37,090


37,930


(2%)

Total assets

45,194


43,749


3%

Debt

30,684


29,486


4%

Total liabilities

35,491


34,367


3%

Total AerCap Holdings N.V. shareholders' equity

9,634


9,315


3%

Total equity

9,703


9,382


3%


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




Notes Regarding Financial Information Presented Here 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, 2020

December 31, 2019


(U.S. Dollars in millions,

except debt/equity ratio)





Debt

$30,684


$29,486






Adjusted for:




   Cash and cash equivalents

(2,383)


(1,121)

   50% credit for long-term subordinated debt

(1,125)


(1,125)

Adjusted debt

$27,176


$27,240











Equity

$9,703


$9,382






Adjusted for:




   50% credit for long-term subordinated debt

1,125


1,125

Adjusted equity

$10,828


$10,507






Adjusted debt/equity ratio

2.5 to 1


2.6 to 1

Net interest margin, annualized net spread, annualized net spread less depreciation and amortization and average cost of debt
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 and swaps. 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. Average cost of debt is calculated as interest expense, excluding mark-to-market on interest rate caps and swaps, divided by average debt balance. 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.










AerCap Holdings N.V






Unaudited Consolidated Balance Sheets






(U.S. Dollars in thousands)















June 30, 2020

December 31, 2019









Assets






Cash and cash equivalents

$2,382,655


$1,121,396



Restricted cash

260,466


178,951



Trade receivables

200,819


47,935



Flight equipment held for operating leases, net

35,356,328


35,870,781



Maintenance rights and lease premium, net

738,227


809,615



Flight equipment held for sale

145,805


336,592



Net investment in finance and sales-type leases

943,013


1,011,549



Prepayments on flight equipment

3,370,096


2,954,478



Other intangibles, net

293,316


307,394



Deferred income tax assets

106,970


95,077



Other assets

1,396,079


1,015,476



Total Assets

$45,193,774


$43,749,244

















Liabilities and Equity






Accounts payable, accrued expenses and other liabilities

$1,235,733


$1,032,623



Accrued maintenance liability

1,930,874


2,190,159



Lessee deposit liability

649,947


747,790



Debt

30,683,892


29,486,131



Deferred income tax liabilities

990,265


910,336



Total liabilities

35,490,711


34,367,039










Ordinary share capital €0.01 par value, 350,000,000 ordinary shares authorized as of June 30, 2020 and December 31, 2019; 138,847,345 and 141,847,345 ordinary shares issued and 129,672,783 and 131,583,489 ordinary shares outstanding (including 2,087,383 and 2,354,318 unvested restricted stock) as of June 30, 2020 and December 31, 2019, respectively

1,721


1,754



Additional paid-in capital

2,076,149


2,209,462



Treasury shares, at cost (9,174,562 and 10,263,856 ordinary shares as of June 30, 2020 and December 31, 2019, respectively)

(496,217)


(537,341)



Accumulated other comprehensive loss

(180,146)


(93,587)



Accumulated retained earnings

8,232,470


7,734,609



Total AerCap Holdings N.V. shareholders' equity

9,633,977


9,314,897



Non-controlling interest

69,086


67,308



Total Equity

9,703,063


9,382,205










Total Liabilities and Equity

$45,193,774


$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 June 30,

Six months ended June 30,




2020

2019

2020

2019













Revenues and other income










Lease revenue:










Basic lease rents

$948,126


$1,077,068


$1,978,920


$2,152,350



Maintenance rents and other receipts

224,224


109,095


358,509


195,906



Total lease revenue

1,172,350


1,186,163


2,337,429


2,348,256



Net gain on sale of assets

10,002


78,157


68,368


99,698



Other income

14,927


16,956


29,659


38,349



Total Revenues and other income

1,197,279


1,281,276


2,435,456


2,486,303














Expenses










Depreciation and amortization

411,818


419,093


827,616


844,942



Asset impairment

73,421


17,819


87,368


22,850



Interest expense

311,758


332,441


630,375


666,620



Leasing expenses

77,574


65,244


180,871


156,965



Selling, general and administrative expenses

52,913


64,543


117,497


131,416



Total Expenses

927,484


899,140


1,843,727


1,822,793














Unrealized gain on investment at fair value

13,942




13,942
















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

283,737


382,136


605,671


663,510














Provision for income taxes

(38,305)


(49,677)


(81,766)


(86,256)



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

2,173


1,935


3,504


4,037














Net income

$247,605


$334,394


$527,409


$581,291














Net income attributable to non-controlling interest

(1,544)


(2,934)


(4,524)


(15,645)














Net income attributable to AerCap Holdings N.V

$246,061


$331,460


$522,885


$565,646














Basic earnings per share

$1.93


$2.44


$4.09


$4.13



Diluted earnings per share

$1.92


$2.42


$4.06


$4.09














Weighted average shares outstanding - basic

127,425,886


135,917,192


127,862,816


137,029,147



Weighted average shares outstanding - diluted

128,131,663


137,072,268


128,938,138


138,396,628





















AerCap Holdings N.V






Unaudited Consolidated Statements of Cash Flows






(U.S. Dollars in thousands)








Six months ended June 30,




2020

2019









Net income

$527,409


$581,291



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






Depreciation and amortization

827,616


844,942



Asset impairment

87,368


22,850



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

31,242


42,783



Amortization of fair value adjustment on debt

(32,740)


(45,961)



Maintenance rights write-off

65,265


144,267



Maintenance liability release to income

(228,640)


(89,985)



Net gain on sale of assets

(68,368)


(99,698)



Deferred income taxes

84,658


88,055



Collections of finance and sales-type leases

26,991


45,448



Unrealized gains on investment at fair value

(13,942)





Other

133,876


92,232



 Changes in operating assets and liabilities:






   Trade receivables

(157,410)


(21,075)



   Other assets

(349,746)


(47,755)



   Accounts payable, accrued expenses and other liabilities

3,229


(37,150)



Net cash provided by operating activities

936,808


1,520,244










Purchase of flight equipment

(159,930)


(1,483,186)



Proceeds from sale or disposal of assets

322,241


733,157



Prepayments on flight equipment

(723,729)


(579,217)



Other



(11)



Net cash used in investing activities

(561,418)


(1,329,257)










Issuance of debt

6,890,002


4,157,089



Repayment of debt

(5,652,418)


(4,618,972)



Debt issuance costs paid, net of debt premium received

(27,157)


(8,422)



Maintenance payments received

194,779


358,694



Maintenance payments returned

(208,630)


(206,456)



Security deposits received

43,791


147,200



Security deposits returned

(150,767)


(141,364)



Dividend paid to non-controlling interest holders and others

(2,746)


(3,045)



Repurchase of shares and tax withholdings on share-based compensation

(118,836)


(320,058)



Net cash provided by (used in) financing activities

968,018


(635,334)










Net increase (decrease) in cash, cash equivalents and restricted cash

1,343,408


(444,347)



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

(634)


(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

$2,643,121


$970,285









SOURCE AerCap Holdings N.V.

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