AerCap Holdings N.V. Reports Third Quarter 2010 Financial Results
Net spread, which is the margin earned on our leased assets, was $171.8 million for the third quarter of 2010, an increase of 50% over third quarter 2009
AMSTERDAM, Nov. 5, 2010 /PRNewswire-FirstCall/ -- AerCap Holdings N.V. (the "Company" or "AerCap") (NYSE: AER) today announced the results of its operations for the third quarter ended September 30, 2010.
Third Quarter 2010 Highlights
-- Third quarter 2010 basic and diluted earnings per share were $0.43,
compared with $0.42 for the same period in 2009. Third quarter 2010
basic and diluted earnings per share excluding the impact of the
mark-to-market of interest rate caps and share-based compensation were
$0.51, compared with $0.46 in the third quarter 2009 on the same basis.
-- Third quarter 2010 net income was $51.9 million, compared with net
income of $35.5 million for the same period in 2009. Third quarter 2010
net income excluding the impact of the mark-to-market of interest rate
caps and share-based compensation was $61.1 million, compared with $39.2
million in the third quarter 2009 on the same basis.
-- Net spread, the difference between basic lease rents and interest
expense excluding the impact from the mark-to-market of interest rate
caps, was $171.8 million in the third quarter of 2010 compared to $114.6
million in the third quarter of 2009, an increase of 50%. This measure
reflects the increase in leasing income and excludes income derived from
the sale of aircraft.
-- Basic lease rents for the third quarter of 2010 were $233.9 million,
compared to $142.4 million for the same period in 2009, an increase of
64%. Total lease revenue (basic rents, maintenance rents and
end-of-lease compensation) for the third quarter of 2010 was $254.0
million, compared to $153.8 million for the same period in 2009, an
increase of 65%.
-- Sales revenue for the third quarter 2010 was $218.2 million, compared to
$49.0 million for the same period in 2009, and was generated from the
sale of three aircraft, five engines and parts inventory.
-- Total revenue for the third quarter of 2010 was $478.1 million, compared
to $212.5 million for the same period in 2009. The increase was mainly
due to the increase in sales revenue and an increase in lease revenue
which was primarily driven by the all-share acquisition of Genesis Lease
Limited ("the Genesis Transaction") which occurred in March 2010 and the
deliveries of forward order aircraft.
-- Total assets were $9.3 billion at September 30, 2010, an increase of 46%
over total assets of $6.4 billion at September 30, 2009. The Genesis
Transaction accounted for $1.5 billion of the increase in total assets.
The remaining $1.4 billion increase was driven primarily by deliveries
of forward order aircraft.
-- Committed purchases of aviation assets delivered or scheduled for
delivery in 2010 are $2.5 billion, of which $2.4 billion closed in the
nine month period ended September 30, 2010.
Klaus Heinemann, CEO of AerCap, commented: "The end of the third quarter 2010 marks the completion of the largest expansion program in AerCap's history. Lease assets increased by 67% to $7.97 billion compared to the end of the same quarter last year. This growth was achieved with solid equity support. AerCap's total equity reached $1.98 billion by quarter end, and we were able to achieve this without dilution of earnings per share. Third quarter earnings per share were 51 cents on an adjusted basis compared to 46 cents for the same quarter last year. This strong financial performance coupled with the recent addition of Waha Leasing to the AerCap family positions the Company for continued long term success."
AerCap's CFO, Keith Helming, said: "The 125% increase in total revenue, 50% growth in net spread and the consequent 46% increase in net income in the third quarter 2010 compared to the same period in 2009 further underlines our ability to deliver profitable growth. The increase in these key metrics was mainly due to the completion of the Genesis Transaction and the deliveries of our forward order aircraft. In addition, our liquidity position continues to be strong as demonstrated by the $520 million of cash on hand at the end of September."
Summary of Financial Results
The Genesis Transaction which was completed on March 25, 2010 is fully reflected in all AerCap Holdings N.V. second and third quarter 2010 consolidated financial statements. The Genesis Transaction was not included in the AerCap Holdings N.V. first quarter 2010 income statement (including the number of outstanding shares used for earnings per share calculations) other than one line item reflecting a $0.3 million amalgamation gain (net of transaction expenses and tax). The impact of the Genesis Transaction was also reflected in one line item in the AerCap Holdings N.V. first quarter 2010 consolidated cash flow statement (purchase of subsidiaries, net of cash acquired).
AerCap recorded third quarter 2010 net income of $51.9 million or $0.43 earnings per basic and diluted share. Third quarter 2010 net income included net charges relating to mark-to-market of interest rate caps and share-based compensation of $9.2 million or $0.08 per basic and diluted share, net of tax. The after-tax charge relating to the mark-to-market of our interest rate caps was $9.0 million reflecting changes in forecasted interest rates. The after-tax charge from share-based compensation was $0.2 million.
Detailed Financial Data
($ in Millions)
Operating results
Three months ended Nine months ended
September 30, September 30,
% increase/ % increase/
2010 2009 (decrease) 2010 2009 (decrease)
Revenues $ 478.1 $ 212.5 125% $ 1,436.8 $ 715.7 101%
Net income 51.9 35.5 46% 135.1 122.0 11%
Net income
excluding the
impact of
mark-to-market
of interest
rate caps and
share-based
compensation 61.1 39.2 56% 167.4 109.9 52%
Total revenue in the third quarter of 2010 increased 125% compared to the third quarter of 2009. This increase resulted primarily from an increase in sales revenue and basic lease rents driven by the additional aircraft acquired in the Genesis Transaction and the deliveries of forward order aircraft. For similar reasons, net income excluding the impact of mark-to-market of interest rate caps and share-based compensation increased by 56%.
Revenue breakdown
Three months ended Nine months ended
September 30, September 30,
% increase/ % increase/
2010 2009 (decrease) 2010 2009 (decrease)
Lease
revenue:
Basic lease
rents $ 233.9 $ 142.4 64% $ 633.2 $ 425.2 49%
Maintenance
rents 20.1 10.4 93% 56.8 49.9 14%
End-of-lease
compensation
and other
receipts - 1.0 (100%) - 9.7 (100%)
Lease revenue $ 254.0 $ 153.8 65% $ 690.0 $ 484.8 42%
Sales revenue 218.2 49.0 345% 728.8 208.6 249%
Management
fees and
interest
income 3.8 5.3 (28%) 11.7 17.0 (31%)
Other revenue 2.1 4.4 (52%) 6.3 5.2 21%
Total revenue $ 478.1 $ 212.5 125% $ 1,436.8 $ 715.6 101%
Basic lease rents were $233.9 million for the third quarter of 2010, an increase of 64% compared to the third quarter of 2009, as a result of our growing asset base. Our average lease assets increased by 70% to $7.8 billion compared to the third quarter of 2009. As shown in the table below, interest expense excluding the impact of the mark-to-market of interest rate caps was $62.1 million in the third quarter of 2010, an increase of $34.3 million over the same period in 2009. The increase was primarily driven by the Genesis Transaction ($15.0 million) and the increase in our lease portfolio from the delivery of forward order aircraft. As a result, net spread increased 50% to $171.8 million in the third quarter of 2010 over the same period in 2009.
Three months ended Nine months ended
September 30, September 30,
% increase/ % increase/
2010 2009 (decrease) 2010 2009 (decrease)
Basic lease
rents $ 233.9 $ 142.4 64% $ 633.2 $ 425.2 49%
Interest on
debt $ 75.1 $ 32.8 129% $ 202.1 $ 68.3 196%
Plus:
mark-to-market
of interest
rate caps (13.0) (5.0) 160% (47.6) 17.2 (377%)
Interest on
debt excluding
the impact of
mark-to-market
of interest
rate caps $ 62.1 $ 27.8 123% $ 154.5 $ 85.5 81%
Net Spread $ 171.8 $ 114.6 50% $ 478.7 $ 339.7 41%
* The increase in net spread is lower than the increase in basic lease rents as a result of the delivery of new forward order aircraft and the Genesis Transaction. For new aircraft, the net spread is lower at the start of the lease because of higher interest expenses resulting from a higher loan to value.
Effective tax rate
AerCap's blended effective tax rate during the nine month period ended September 30, 2010 was 9.0% (charge), consisting of 9.3% (charge) for AerCap's aircraft business and 29.8% (income) for AerCap's engine and parts business. The blended effective tax rate in 2009 was 1.9% (charge). The blended effective tax rate in any year is impacted by the source and the amount of earnings among AerCap's different tax jurisdictions. The increase in the 2010 blended tax rate as compared to 2009 is the result of having more earnings generated from higher tax rate jurisdictions.
Financial position
% Increase
over
September 30, September 30, September 30,
2010 2009 2009
Total cash (incl. restricted). $ 519.7 $ 324.4 60%
Flight equipment held for lease 7,974.1 4,761.9 67%
Total assets 9,338.6 6,417.6 46%
Total liabilities 7,358.1 5,082.9 45%
Total equity 1,980.5 1,334.8 48%
As of September 30, 2010, AerCap's portfolio consisted of 324 aircraft and 83 engines that were either owned, on order, under contract or letter of intent, or managed. This includes aircraft that AerCap added through the Genesis Transaction in March 2010.
Notes Regarding Financial Information Presented In This Press Release
The financial information presented in this press release is not audited.
The following is a definition of non-GAAP measures used in this press release and a reconciliation of such measure to the most closely related GAAP measure:
Net income excluding the impact of mark-to-market of interest rate caps and share-based compensation. This measure is determined by adding non-cash charges related to the mark-to-market losses on our interest rate caps and share based compensation during the applicable period, net of related tax benefits, to GAAP net income. In addition to GAAP net income, we believe this measure may provide investors with supplemental information regarding our operational performance and may further assist investors in their understanding of our operational performance in relation to past and future reporting periods. We use interest rate caps to allow us to benefit from decreasing interest rates and protect against the negative impact of rising interest rates on our floating rate debt. Management determines the appropriate level of caps in any period with reference to the mix of floating and fixed cash inflows from our lease and other contracts. We do not apply hedge accounting to our interest rate caps. As a result, we recognize the change in fair value of the interest rate caps in our income statement during each period. Following is a reconciliation of net income excluding the impact of mark-to-market of interest rate caps and share-based compensation to net income for the three and nine month periods ended September 30, 2010 and 2009:
Three months ended Nine months ended
September 30, September 30,
% increase/ % increase/
2010 2009 (decrease) 2010 2009 (decrease)
Net income $ 51.9 $ 35.5 46% $ 135.1 $ 122.0 11%
Plus:
mark-to-market of
interest rate
caps, net of tax 9.0 3.0 (200%) 30.8 (14.5) 312%
share-based
compensation, net
of tax 0.2 0.7 (71%) 1.5 2.4 (38%)
Net income
excluding the
impact of
mark-to-market of
interest rate
caps and
share-based
compensation $ 61.1 $ 39.2 56% $ 167.4 $ 109.9 52%
Earnings per share excluding the impact of mark-to-market of interest rate caps and share-based compensation are determined by dividing the amount of net income excluding such impact by the average number of shares outstanding for that period. The average number of shares is based on a daily average.
Net spread (refer to third table under Revenue breakdown section of this press release). This measure is the difference between basic lease rents and interest expense excluding the impact from the mark-to-market of interest rate caps and non-recurring charges. 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 the use of interest rate caps instead of swaps to hedge our interest rate risk. The reconciliation of net spread to basic lease rents for the three and nine month periods ended September 30, 2010 and 2009 is included above.
Conference Call
In connection with the earnings release, management will host an earnings conference call today, Friday, November 5, 2010 at 9:30 am Eastern Time / 2:30 pm Central European Time. The call can be accessed live by dialing (U.S./Canada) 1-866-239-0753 or (International) +31-20-713-2998 and referencing code 7436381 at least 5 minutes before start time, or by visiting AerCap's website at http://www.aercap.com under "Investor Relations."
The presentation slides for the conference call will be posted on AerCap's website in advance of the call. The webcast replay will be archived in the "Investor Relations" section of the company's website for one year.
In addition, a New York Group Lunch Presentation for investors and analysts will be hosted by AerCap's management today, Friday, November 5, 2010, at 12:30 pm Eastern Time at The New York Palace (the Henry Room), 455 Madison Avenue, New York. Doors will open at 12:00 pm.
To participate in either event, please register at: www.sharedvalue.net/aercap/Q310
For further information, contact Peter Wortel: +31 20 655 9658 (pwortel@aercap.com)
or Mark Walter (Shared Value): +44 (0)20 7321 5039 (aercap@sharedvalue.net).
About AerCap Holdings N.V.
AerCap is the world's leading independent aircraft leasing company. AerCap also provides engine leasing, aircraft management services, aircraft maintenance, repair and overhaul services and aircraft disassemblies. AerCap is headquartered in The Netherlands and has offices in Ireland, the United States, Singapore, China and the United Kingdom.
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, 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 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, there can be no assurance 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. 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 http://www.aercap.com.
Financial Statements Follow
AerCap Holdings N.V.
Consolidated Balance Sheets -
Unaudited
(In thousands of U.S. Dollars)
September 30, December 31, September 30,
2010 2009 2009
Assets
Cash and cash equivalents $ 285,763 $ 182,617 $ 203,377
Restricted cash 233,954 140,746 121,067
Trade receivables, net of
provisions 60,001 48,070 49,037
Flight equipment held for
operating leases, net 7,974,109 5,230,437 4,761,918
Net investment in direct finance
leases 28,170 34,532 34,069
Notes receivables, net of
provisions 7,939 138,488 141,628
Prepayments on flight equipment 197,616 527,666 632,333
Investments 30,774 21,031 20,367
Goodwill 6,776 6,776 6,776
Intangibles, net 64,568 31,399 34,602
Inventory 119,097 102,538 108,444
Derivative assets 23,981 44,866 38,572
Deferred income taxes 102,117 80,098 80,463
Other assets 203,715 180,237 184,975
Total Assets $ 9,338,580 $ 6,769,501 $ 6,417,628
Liabilities and Equity
Accounts payable $ 17,516 $ 11,832 $ 16,004
Accrued expenses and other
liabilities 98,149 80,399 77,591
Accrued maintenance liability 400,461 228,006 216,345
Lessee deposit liability 138,316 126,093 113,025
Debt 6,562,293 * 4,846,664 4,593,268
Accrual for onerous contracts 10,917 22,363 24,378
Deferred revenue 66,106 33,011 33,479
Derivative liabilities 64,302 7,801 8,783
Total liabilities 7,358,060 5,356,169 5,082,873
Share capital 1,163 699 699
Additional paid-in capital 968,724 593,133 592,133
Accumulated other comprehensive
income (loss) (470) - -
Retained earnings 799,309 664,177 621,012
Total AerCap Holdings N.V.
shareholders' equity 1,768,726 1,258,009 1,213,844
Non-controlling interest 211,794 155,323 120,911
Total Equity 1,980,520 1,413,332 1,334,755
Total Liabilities and Equity $ 9,338,580 $ 6,769,501 $ 6,417,628
* Includes $88.0 million of subordinated debt received from
our joint venture partners
September 30, December 31, September 30,
Supplemental information 2010 2009 2009
Debt/equity ratio 3.3 3.4 3.4
Debt/equity ratio (adjusted for
subordinated debt) 3.1 3.2 3.2
AerCap Holdings N.V.
Consolidated Income
Statements - Unaudited
(In thousands of U.S.
Dollars, except share and
per share data)
Three months ended Nine months ended
September 30, September 30,
2010 2009 2010 2009
Revenues
Lease revenue $ 254,008 $ 153,890 $ 690,013 $ 484,932
Sales revenue 218,194 49,012 728,779 208,608
Interest revenue 748 2,433 3,617 7,656
Management fee revenue 3,021 2,821 8,069 9,294
Other revenue 2,117 4,354 6,319 5,217
Total Revenues 478,088 212,510 1,436,797 715,707
Expenses
Depreciation 89,946 55,663 239,920 160,153
Asset impairment 2,761 382 5,482 21,332
Cost of goods sold 202,053 39,973 671,875 179,293
Interest on debt 75,144 32,844 202,075 68,319
Operating lease in costs 3,057 3,268 9,271 9,855
Leasing expenses 17,322 10,648 43,738 51,885
Provision for doubtful notes
and accounts receivable 514 55 1,030 408
Selling, general and
administrative expenses 21,710 27,806 86,488 82,796
Other expenses - 1,900 - 1,900
Total Expenses 412,507 172,539 1,259,879 575,941
Income from continuing
operations before income
taxes 65,581 39,971 176,918 139,766
Provision for income taxes (6,144) (784) (15,892) (3,471)
Amalgamation gain, net of
transaction expenses and tax - - 274 -
Net Income 59,437 39,187 161,300 136,295
Net (income) attributable to
non-controlling interest (7,559) (3,735) (26,168) (14,293)
Net Income attributable to
AerCap Holdings N.V. $ 51,878 $ 35,452 $ 135,132 $ 122,002
Basic and diluted earnings
per share $ 0.43 $ 0.42 $ 1.25 $ 1.43
Weighted average shares
outstanding - basic and
diluted 119,386,445 85,036,957 107,936,616 85,036,957
* The increase of $42.3 million in interest on debt in the third quarter 2010 as compared to the third quarter 2009 was primarily driven by (i) a $8.1 million increase in the mark-to-market on interest rate caps, (ii) a $15.0 million increase from the Genesis Transaction and (iii) the increase in our lease portfolio from the delivery of our forward order aircraft. The same items were also the primary drivers for the increase in the nine month period ended September 30, 2010 as compared to the nine month period ended September 30, 2009.
AerCap Holdings N.V.
Consolidated Statements of
Cash Flows - Unaudited
(In thousands of U.S. Dollars)
Three months ended Nine months ended
September 30, September 30,
2010 2009 2010 2009
Net income 59,437 39,187 161,300 136,295
Adjustments to reconcile net
income to net cash provided by
operating activities
Depreciation 89,945 55,663 239,919 160,153
Asset impairment 2,761 382 5,482 21,332
Amortisation of debt issuance
cost 7,347 3,901 19,677 11,789
Amortisation of intangibles 5,930 3,294 16,092 12,499
Provision for doubtful notes
and accounts receivable 563 587 920 940
Capitalised interest on
pre-delivery payments (155) (225) (468) (934)
Gain on disposal of assets (6,798) 21 (36,050) 1,039
Mark-to-market of non-hedged
derivatives (5,931) 3,862 35,905 (15,642)
Deferred taxes 6,007 724 14,292 1,863
Share-based compensation 99 912 1,656 2,910
Changes in assets and
liabilities -
Trade receivables and notes
receivable, net (9,459) (11,378) (3,308) (5,850)
Inventories 2,885 35,867 11,761 33,146
Other assets and derivative
assets 2,120 (3,791) (5,516) (14,521)
Other liabilities (13,298) (26,865) (26,850) (63,627)
Deferred revenue 9,057 (3,326) 21,054 (1,442)
Net cash provided by operating
activities 150,510 98,815 455,866 279,950
Purchase of flight equipment (467,600) (271,054) (1,788,962) (845,868)
Proceeds from sale/disposal of
assets 167,862 1,891 593,625 80,243
Prepayments on flight
equipment (25,979) (116,693) (110,759) (403,054)
Purchase of subsidiaries, net
of cash acquired - - 70,618 -
Purchase of investments - - (7,500) -
Purchase of intangibles - - (9,006) -
Movement in restricted cash 12,508 7,117 (61,752) (7,670)
Net cash used in investing
activities (313,209) (378,739) (1,313,736) (1,176,349)
Issuance of debt 496,126 562,464 2,112,408 1,843,442
Repayment of debt (327,805) (313,149) (1,213,445) (1,081,578)
Debt issuance costs paid (12,809) (6,212) (48,093) (20,325)
Maintenance payments received 38,030 25,546 106,563 74,429
Maintenance payments returned (5,843) (8,011) (28,567) (33,620)
Security deposits received 7,971 9,222 24,892 32,287
Security deposits returned (8,187) (9,020) (25,315) (16,550)
Capital contributions from
non-controlling interests - - 32,375 104,200
Net cash provided by financing
activities 187,483 260,840 960,818 902,285
Net increase in cash and cash
equivalents 24,784 (19,084) 102,948 5,886
Effect of exchange rate
changes 723 4,038 198 3,928
Cash and cash equivalents at
beginning of period 260,256 218,423 182,617 193,563
Cash and cash equivalents at
end of period 285,763 203,377 285,763 203,377
Certain reclassifications have been made to prior years consolidated statements of cash flow to reflect the current year presentation.
For Investors: Keith Helming Chief Financial Officer +31 20 655 9670 khelming@aercap.com Peter Wortel Investor Relations +31 20 655 9658 pwortel@aercap.com For Media: Frauke Oberdieck Corporate Communications +31 20 655 9616 foberdieck@aercap.com
SOURCE AerCap Holdings N.V.
Released November 5, 2010