PR Newswire | Jul 29, 2020 07:01AM EDT

07/29 06:00 CDT

AerCap Holdings N.V. Reports Financial Results for the Second Quarter 2020 DUBLIN, July 29, 2020

DUBLIN, July 29, 2020 /PRNewswire/ --

* Net income of $246 million for the second quarter of 2020 and $523 million for the first half of 2020 * Diluted earnings per share of $1.92 for the second quarter of 2020 and $4.06 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.

Revenue and Net Spread

Three months ended June 30, Six months ended June 30,

2020 2019 % increase/2020 2019 % increase/ (decrease) (decrease)

(U.S. Dollars in millions) (U.S. Dollars in millions)

Lease revenue:

Basic lease $948 $1,077(12%) $1,979$2,152(8%) rents

Maintenance rents and other224 109 106% 359 196 83% receipts

Total lease 1,172 1,186 (1%) 2,337 2,348 - revenue

Net gain on 10 78 (87%) 68 100 (31%) sale of assets

Other income 15 17 (12%) 30 38 (22%)

Total Revenues and other $1,197$1,281(7%) $2,436$2,486(2%) income



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/2020 2019 % increase/ (decrease) (decrease)

(U.S. Dollars in millions) (U.S. Dollars in millions)



Basic lease $948 $1,077 (12%) $1,979 $2,152 (8%) rents



Interest 312 332 (6%) 630 667 (5%) expense

Adjusted for:

Mark-to-market of interest (2) (10) (79%) (15) (26) (43%) rate caps and swaps

Interest expense excluding mark-to-market310 323 (4%) 616 641 (4%) of interest rate caps and swaps

Net interest $638 $755 (15%) $1,363 $1,512 (10%) margin (*)

Depreciation and amortization, (424) (435) (3%) (856) (882) (3%) including maintenance rights expense

Net interest margin, less depreciation 215 319 (33%) 508 629 (19%) and amortization



Average lease $37,342$37,644(1%) $37,506$37,455-% assets (*)



Annualized net6.8% 8.0% 7.3% 8.1% spread (*)

Annualized net spread less depreciation 2.3% 3.4% 2.7% 3.4% and amortization (*)



(*) 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/ 2020 2019 % increase/ (decrease) (decrease)

(U.S. Dollars in millions) (U.S. Dollars in millions)



Selling, general and administrative $38 $46 (17%) $85 $95 (11%) expenses

Share-based compensation 15 19 (21%) 33 36 (10%) expenses

Total selling, general and $53 $65 (18%) $118$131(11%) administrative expenses

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' $9,634 $9,013 equity



Ordinary shares outstanding 129,672,783 136,602,986

Unvested restricted stock (2,087,383) (2,250,655)

Ordinary shares outstanding (excl. unvested127,585,400 134,352,331 restricted stock)



Book value per ordinary share outstanding $75.51 $67.08 (excl. unvested restricted stock)

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

Financial Position

% increase/ June 30, 2020December 31, 2019(decrease) over December 31, 2019

(U.S. Dollars in millions)



Total cash, cash equivalents and $2,643 $1,300 103% restricted cash

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' 9,634 9,315 3% equity

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

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.

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 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, 2020December 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 (1,125) (1,125) debt

Adjusted debt $27,176 $27,240





Equity $9,703 $9,382



Adjusted for:

50% credit for long-term subordinated 1,125 1,125 debt

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.

Conference Call

In connection with the earnings release, management will host an earnings conference call today, Wednesday, July 29, 2020, at 8:30 am Eastern Time. The call can be accessed live via webcast, by visiting AerCap's website https://investors.aercap.com, or by dialing (U.S./Canada) +1 323 794 2410 or (International) +353 1 246 5652 and referencing passcode 487665 at least 5 minutes before the start time.

The webcast replay will be archived in the "Investors" section of the Company's website for one year.

About AerCap

AerCap is the global leader in aircraft leasing with 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.

Forward-Looking Statements

This press release contains certain statements, estimates and forecasts with respect to future performance and events. These statements, estimates and forecasts are "forward-looking statements". In some cases, forward-looking statements can be identified by the use of forward-looking terminology such as "may," "might," "should," "expect," "plan," "intend," "estimate," "anticipate," "believe," "predict," "potential" or "continue" or the negatives thereof or variations thereon or similar terminology. All statements other than statements of historical fact included in this press release are forward-looking statements and are based on various underlying assumptions and expectations and are subject to known and unknown risks, uncertainties and assumptions, and may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors, including the impacts of, and associated responses to, the Covid-19 pandemic, that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied in the forward-looking statements. As a result, we cannot assure you that the forward-looking statements included in this press release will prove to be accurate or correct. In light of these risks, uncertainties and assumptions, the future performance or events described in the forward-looking statements in this press release might not occur. Accordingly, you should not rely upon forward-looking statements as a prediction of actual results and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. Except as required by applicable law, we do not undertake any obligation to, and will not, update any forward-looking statements, whether as a result of new information, future events or otherwise.

For more information regarding AerCap and to be added to our email distribution list, please visit www.aercap.com and follow us on Twitter www.twitter.com/aercapnv.



AerCap Holdings N.V

Unaudited Consolidated Balance Sheets

(U.S. Dollars in thousands)



June 30, 2020December 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 35,356,328 35,870,781 leases, net

Maintenance rights and lease premium, net738,227 809,615

Flight equipment held for sale 145,805 336,592

Net investment in finance and sales-type 943,013 1,011,549 leases

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 $1,235,733 $1,032,623 other liabilities

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 (eu)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 1,721 1,754 129,672,783 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

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,(496,217) (537,341) 2020 and December 31, 2019, respectively)

Accumulated other comprehensive loss (180,146) (93,587)

Accumulated retained earnings 8,232,470 7,734,609

Total AerCap Holdings N.V. shareholders' 9,633,977 9,314,897 equity

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 224,224 109,095 358,509 195,906 and other receipts

Total lease 1,172,350 1,186,163 2,337,429 2,348,256 revenue

Net gain on sale 10,002 78,157 68,368 99,698 of assets

Other income 14,927 16,956 29,659 38,349

Total Revenues and1,197,279 1,281,276 2,435,456 2,486,303 other income



Expenses

Depreciation and 411,818 419,093 827,616 844,942 amortization

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 administrative52,913 64,543 117,497 131,416 expenses

Total Expenses 927,484 899,140 1,843,727 1,822,793



Unrealized gain on investment at fair13,942 - 13,942 - value



Income before income taxes and income of investments 283,737 382,136 605,671 663,510 accounted for under the equity method



Provision for (38,305) (49,677) (81,766) (86,256) income taxes

Equity in net earnings of investments 2,173 1,935 3,504 4,037 accounted for under the equity method



Net income $247,605 $334,394 $527,409 $581,291



Net income attributable to (1,544) (2,934) (4,524) (15,645) non-controlling interest



Net income attributable to $246,061 $331,460 $522,885 $565,646 AerCap Holdings N.V



Basic earnings per$1.93 $2.44 $4.09 $4.13 share

Diluted earnings $1.92 $2.42 $4.06 $4.09 per share



Weighted average shares outstanding127,425,886 135,917,192 127,862,816137,029,147- basic

Weighted average shares outstanding128,131,663 137,072,268 128,938,138138,396,628- diluted





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 31,242 42,783 discount, debt premium and lease premium

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 3,229 (37,150) liabilities

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 (27,157) (8,422) received

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(2,746) (3,045) and others

Repurchase of shares and tax withholdings on (118,836) (320,058) share-based compensation

Net cash provided by (used in) financing 968,018 (635,334) activities



Net increase (decrease) in cash, cash equivalents1,343,408 (444,347) and restricted cash

Effect of exchange rate changes on cash, cash (634) (403) equivalents and restricted cash

Cash, cash equivalents and restricted cash at 1,300,347 1,415,035 beginning of period

Cash, cash equivalents and restricted cash at end$2,643,121 $970,285 of period



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SOURCE AerCap Holdings N.V.