FEBRUARY 21ST, 2017
AerCap Holdings N.V. Reports Financial Results for 2016 and Authorizes New Share Repurchase Program of $350 million
Net income for the fourth quarter and full year 2016 was:
$364.7 million and $1,046.6 million on a reported basis (US GAAP)
Diluted earnings per share for the fourth quarter and full year 2016 were:
$2.01 and $5.52 on a reported basis (US GAAP)
The Company’s reporting of financial results was changed from prior periods. Going forward, adjusted net income and adjusted earnings per share will no longer be provided. Please refer to the Appendix for additional detail for this transitional period.
458 aircraft transactions executed in 2016, including 126 widebody transactions.
99.5% fleet utilization rate for the full year 2016.
7.4 years average age of owned fleet and 6.4 years average remaining lease term.
98% of new aircraft deliveries through 2018 and 78% through 2019 have been leased.
Over $3 billion of sales closed in 2016.
$9.5 billion of available liquidity.
Adjusted debt/equity ratio of 2.7 to 1.
Upgraded to investment grade rating by Moody’s.
$49.33 book value per share.
Repurchased 5.7 million shares in the fourth quarter of 2016 for $241 million and 25 million shares in 2016 for $966 million.
Board authorized a new $350 million share repurchase program, which will run through June 30, 2017.
Aengus Kelly, CEO of AerCap, commented: “AerCap delivered record results in the fourth quarter, finishing off a very successful year for the company. During the fourth quarter, we generated $2.01 of earnings per share and net income of $364.7 million on a reported basis. This results in full year numbers of $5.52 and $1,046.6 million, respectively. We continued to focus on proactive portfolio management initiatives which have resulted in executing over $3 billion in asset sales. This, combined with signing a record 279 lease agreements, illustrates the scale of AerCap’s platform and the expertise of its people.”
Full Year 2016 Financial Results
Net income of $1,046.6 million, compared with $1,178.7 million for the same period in 2015. Diluted earnings per share of $5.52, compared with $5.72 for the same period in 2015.
Net income and diluted earnings per share decreased due to various items, including sales of older aircraft during 2015 and 2016, which reduced average lease assets by approximately $1.6 billion. Diluted earnings per share was favorably impacted by the repurchase of 40.7 million shares for $1.7 billion during 2015 and 2016.
Fourth Quarter 2016 Financial Results
Net income of $364.7 million, compared with $264.2 million for the same period in 2015. Diluted earnings per share of $2.01, compared with $1.33 for the same period in 2015.
Net income and diluted earnings per share were driven by higher gains on sale and other non-recurring items, as well as lower AeroTurbine losses.
Components of Net Income/Earnings Per Share
Gains on sale and other non-recurring items includes gain on sale of assets, income from lease terminations, net insurance proceeds, a gain related to the repayment of a note receivable earlier than expected and gains from the settlement of asset value guarantees. Maintenance rights amortization impact represents the difference between the amortization cost of the maintenance rights asset as compared to depreciation expense if this asset had been classified as flight equipment. Please refer to Notes regarding Financial Information Presented in this Press Release for additional detail.
Basic lease rents were $1,061.8 million for the fourth quarter of 2016, compared with $1,148.8 million for the same period in 2015. The decrease was primarily due to sales of older aircraft during 2015 and 2016, which reduced average lease assets. Our average lease assets for the fourth quarter of 2016 were $34.2 billion, compared with $35.8 billion for the same period in 2015.
Maintenance rents and other receipts were $159.1 million for the fourth quarter of 2016, compared with $136.7 million for the same period in 2015.
Net gain on sale of assets for the fourth quarter of 2016 was $58.7 million, relating to 37 aircraft sold and three aircraft reclassified to finance leases, compared with $43.4 million for the same period in 2015, relating to 22 aircraft sold and three aircraft reclassified to finance leases.
Other income for the fourth quarter of 2016 was $89.0 million, compared with $9.1 million for the same period in 2015. Other income for the fourth quarter of 2016 included $73.2 million of non-recurring income from lease terminations and a gain related to the repayment of a note receivable earlier than expected.
As shown in the table above, adjusted interest expense was $271.3 million in the fourth quarter of 2016, compared with $274.5 million for the same period in 2015.
Net spread was $790.5 million in the fourth quarter of 2016, compared with $874.3 million for the same period in 2015. The decrease was primarily impacted by lower average lease assets, lower age of owned fleet and 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.
The decrease in selling, general, and administrative expenses quarter over quarter was primarily due to the AeroTurbine downsizing.
Asset impairment was $11.4 million for the fourth quarter of 2016, compared to $1.0 million for the same period in 2015. Asset impairment recorded in the fourth quarter of 2016 primarily related to the lease termination of two aircraft, which was more than offset by $13.4 million of related maintenance rents. Leasing expenses were $143.3 million for the fourth quarter of 2016, compared with $126.3 million for the same period in 2015. Transaction, integration and restructuring related expenses were $8.3 million for the fourth quarter of 2016, compared with $50.8 million for the same period in 2015. Transaction, integration and restructuring related expenses in the fourth quarter of 2016 and 2015 primarily represented non-recurring charges related to the downsizing of AeroTurbine.
Effective Tax Rate
AerCap’s effective tax rate was 14.5% during the full year 2016, compared to 13.9% for the same period in 2015. The effective tax rate in any year is impacted by the source and amount of earnings among AerCap’s different tax jurisdictions.
As of December 31, 2016, AerCap’s portfolio consisted of 1,566 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 December 31, 2016 was 7.4 years and the average remaining contracted lease term was 6.4 years.
Share Repurchase Program
We have authorized a new $350 million share repurchase program, which will run through June 30, 2017. 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 shares of common stock 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.
In connection with the ILFC transaction, we have recognized maintenance rights intangible assets associated with existing leases on the legacy ILFC aircraft and we are expensing these assets during the remaining lease terms. The maintenance rights amortization impact represents the difference between expensing the maintenance rights intangible assets on a more accelerated basis during the remaining lease terms as compared to expensing these assets on a straight-line basis over the remaining economic life of the aircraft.
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.
Net interest margin, or net spread (refer to second table under Revenue and Net Spread section of this press release). This measure is the difference between basic lease rents and interest expense, excluding the impact of the mark-to-market of interest rate caps and swaps. We believe this measure may further assist investors in their understanding of the changes and trends related to the earnings of our leasing activities. This measure reflects the impact from changes in the number of aircraft leased, lease rates, utilization rates, as well as the impact from changes in the amount of debt and interest rates.