AerCap Holdings N.V. Reports Financial Results for Full Year 2017 and Announces New Share Repurchase Program

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

  • Net income of $266.3 million for the fourth quarter of 2017 and $1,076.2 million for the full year 2017
  • Diluted earnings per share of $1.67 for the fourth quarter of 2017 and $6.43 for the full year 2017

Highlights

  • 402 aircraft transactions executed in 2017, including 119 widebody transactions.
  • 99.1% fleet utilization rate for the full year 2017.
  • 6.8 years average age of owned fleet.
  • 6.9 years average remaining lease term.
  • $5.3 billion of aircraft purchased and $2.4 billion of aircraft sold in 2017.
  • Ordered 30 Boeing 787 aircraft and 50 Airbus A320neo Family aircraft in 2017.
  • $9.6 billion of available liquidity and adjusted debt/equity ratio of 2.8 to 1.
  • 16% increase in book value per share since December 31, 2016.
  • Repurchased 23.7 million shares in 2017 for $1.1 billion.
  • New $200 million share repurchase program authorized, which will run through June 30, 2018.

Aengus Kelly, CEO of AerCap, commented: “I am very pleased to report another strong set of financial results for 2017 which is due to the hard work and relentless focus on execution of our team. During the year, we generated earnings per share of $6.43 and net income of $1.1 billion. Our platform also purchased a record $5.3 billion of new aircraft in 2017, and sold approximately $2.4 billion of mid-life assets, as part of our transition to new technology aircraft.”

Full Year 2017 Financial Results

  • Net income of $1,076.2 million, compared with $1,046.6 million for 2016.
  • Diluted earnings per share of $6.43, compared with $5.52 for 2016, an increase of 16%, primarily driven by the repurchase of 48.7 million shares during 2016 and 2017.

Fourth Quarter 2017 Financial Results

  • Net income of $266.3 million, compared with $364.7 million for the same period in 2016. Diluted earnings per share of $1.67, compared with $2.01 for the same period in 2016.
  • The decrease in net income was primarily due to the fact that during the fourth quarter of 2016, we recognized income from lease terminations and a gain related to the repayment of a note receivable earlier than expected.
  • The decrease in diluted earnings per share was driven by the same factors as net income, partially offset by the repurchase of 29.4 million shares from October 2016 through December 2017.

Basic lease rents were $1,035.3 million for the fourth quarter of 2017, compared with $1,061.8 million for the same period in 2016. The decrease was primarily due to the sale of mid-life and older aircraft during 2016 and 2017.

Maintenance rents and other receipts were $162.6 million for the fourth quarter of 2017, compared with $159.1 million for the same period in 2016.

Net gain on sale of assets for the fourth quarter of 2017 was $48.5 million, relating to 27 aircraft sold and two aircraft reclassified to finance leases, compared with $58.7 million for the same period in 2016, relating to 37 aircraft sold and three aircraft reclassified to finance leases. The decrease was primarily due to the composition of asset sales.

Other income for the fourth quarter of 2017 was $16.6 million, compared with $89.0 million for the same period in 2016. Other income for the fourth quarter of 2016 included income from lease terminations and a gain related to the repayment of a note receivable earlier than expected.

Annualized net spread was 8.8% for the fourth quarter of 2017, compared with 9.3% for the same period in 2016. The decrease was primarily the result of the lower age of our owned fleet which is driven by aircraft sales and purchases from October 2016 to December 2017.

Other Expenses

Asset impairment charges were $10.4 million for the fourth quarter of 2017, compared with $11.4 million recorded for the same period in 2016. Asset impairment recorded in the fourth quarter of 2017 primarily related to lease terminations and was more than offset by maintenance revenue recognized as a result of these lease terminations. Leasing expenses were $141.2 million for the fourth quarter of 2017, compared with $143.3 million for the same period in 2016.

Effective Tax Rate

Our effective tax rate for the full year 2017 was 13.3%, compared with the effective tax rate of 14.5% for the full year 2016. The effective tax rate is impacted by the source and amount of earnings among our different tax jurisdictions. The effective tax rate in 2017 reflects our re-assessment of our deferred tax assets and liabilities, including as a result of recent U.S. tax reform legislation. The effective tax rate in 2016 included a valuation allowance related to the AeroTurbine losses.

As of December 31, 2017, AerCap’s portfolio consisted of 1,531 aircraft that were owned, on order or managed. The average age of our owned fleet as of December 31, 2017 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 June 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.

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 spread for the applicable period, scaled to a one year period. 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.