AerCap Holdings N.V. Reports Financial Results for the Third Quarter 2017 and Announces New Share Repurchase Program

Net income of $265.8 million for the third quarter of 2017 and $809.9 million for the nine months ended September 30, 2017
Diluted earnings per share of $1.62 for the third quarter of 2017 and $4.77 for the nine months ended September 30, 2017

Highlights

89 aircraft transactions executed in the third quarter of 2017, including 36 widebody transactions.
99.3% fleet utilization rate for the third quarter of 2017.
7.1 years average age of owned fleet and 6.6 years average remaining lease term.
100% of new aircraft deliveries through 2018 and 91% through 2019 leased.
$8.9 billion of available liquidity.
Adjusted debt/equity ratio of 2.7 to 1.
$55.06 book value per share, an increase of 17% since September 30, 2016.
Repurchased 5.4 million shares in the third quarter of 2017 for $266 million and 19.2 million shares year to date through October 27, 2017 for $888 million.
New $200 million share repurchase program authorized, which will run through March 31, 2018.
Aengus Kelly, CEO of AerCap, commented: “We are very pleased to report another quarter of consistent earnings. During the third quarter of 2017 we generated $1.62 earnings per share and net income of $265.8 million. The scale of the AerCap platform is evidenced by the 89 aircraft transactions executed this quarter. Our continued focus and disciplined approach to portfolio management was evidenced by the sale of 27 owned aircraft. AerCap’s success is underpinned by our highly consistent and disciplined approach to portfolio and liquidity management.”

Third Quarter 2017 Financial Results

Net income of $265.8 million, compared with $225.6 million for the same period in 2016. Diluted earnings per share of $1.62, compared with $1.22 for the same period in 2016.
Net income increased 18%, primarily driven by an increase in net gain on sale of assets. Furthermore, during the third quarter of 2016, we recognized charges related to the downsizing of AeroTurbine. These charges were partially offset by income related to insurance proceeds.
Diluted earnings per share increased 33%, driven by the same factors as net income as well as the repurchase of 30.4 million shares from July 2016 through September 2017.

Revenue and Net Spread

Basic lease rents were $1,038.4 million for the third quarter of 2017, compared with $1,088.0 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. Our average lease assets for the third quarter of 2017 were $34.0 billion, compared with $34.6 billion for the same period in 2016.

Maintenance rents and other receipts were $163.0 million for the third quarter of 2017, compared with $91.9 million for the same period in 2016. The increase was primarily the result of lease terminations during the third quarter of 2017.

Net gain on sale of assets for the third quarter of 2017 was $63.7 million, relating to 27 aircraft sold and eight aircraft reclassified to finance leases, compared with $22.4 million for the same period in 2016, relating to 36 aircraft sold and four aircraft reclassified to finance leases. The increase was primarily due to the timing and composition of asset sales.

Other income for the third quarter of 2017 was $8.8 million, compared with $23.8 million for the same period in 2016. Other income for the third quarter of 2016 included insurance proceeds, partially offset by charges related to the downsizing of AeroTurbine.

As shown in the table above, adjusted interest expense was $278.2 million for the third quarter of 2017, compared with $272.3 million for the same period in 2016.

Annualized net spread was 8.9% for the third quarter of 2017, compared with 9.4% for the same period in 2016. The decrease was primarily the result of the lower age of our owned fleet and the higher average cost of debt. 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.

Other Expenses

Asset impairment charges were $45.6 million for the third quarter of 2017, compared with $15.1 million recorded for the same period in 2016. Asset impairment recorded in the third 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 $137.8 million for the third quarter of 2017, compared with $128.7 million for the same period in 2016. The increase in leasing expenses was primarily related to higher maintenance rights expense associated with maintenance activity during the third quarter of 2017. Restructuring related expenses were nil for the third quarter of 2017, compared with $29.0 million for the same period in 2016. Restructuring related expenses in the third quarter 2016 related to the downsizing of AeroTurbine.

Effective Tax Rate

Our effective tax rate for the full year 2017 is expected to be 12.5%, compared with the effective tax rate of 14.5% for the full year 2016. It is impacted by the source and amount of earnings among our different tax jurisdictions. The higher effective tax rate in 2016 included a valuation allowance related to the AeroTurbine losses.

Our effective tax rate was 11.5% for the third quarter of 2017, compared to 16.5% for the same period in 2016. Our effective tax rate in any quarter can be impacted by revisions to the estimated full year rate.

As of September 30, 2017, AerCap’s portfolio consisted of 1,506 aircraft that were owned, on order or managed (including aircraft owned by AerDragon, a non-consolidated joint venture). The average age of our owned fleet as of September 30, 2017 was 7.1 years and the average remaining contracted lease term was 6.6 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 March 31, 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.

In July 2017, our Board of Directors approved a share repurchase program authorizing total repurchases of up to $250 million of AerCap ordinary shares through December 31, 2017. In October 2017, this share repurchase program was extended to run through March 31, 2018.