AerCap Holdings N.V. Reports Second Quarter 2010 Financial Results
Net spread, which is the margin earned on our leased assets, was $169.0 million for the second quarter of 2010, an increase of 50% over second quarter 2009

AMSTERDAM, Aug. 5 /PRNewswire-FirstCall/ -- AerCap Holdings N.V. (the "Company" or "AerCap") (NYSE: AER) today announced the results of its operations for the second quarter ended June 30, 2010.

The all-share acquisition of Genesis Lease Limited ("Genesis") which was completed on March 25, 2010 is fully reflected in all AerCap Holdings N.V. second 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 a 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).

Second Quarter 2010 Highlights

  • Second quarter 2010 basic and diluted earnings per share were $0.41, compared with $0.67 for the same period in 2009. Second 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 $0.50, compared with $0.46 in the second quarter 2009 on the same basis.
  • Second quarter 2010 net income was $48.9 million, compared with net income of $56.6 million for the same period in 2009. Second quarter 2010 net income excluding the impact of the mark-to-market of interest rate caps and share-based compensation was $59.6 million, compared with $39.1 million in the second 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 $169.0 million in the second quarter of 2010 compared to $112.6 million in the second quarter of 2009, an increase of 50%. This measure reflects the increase in leasing income and excludes income derived from the sale of aircraft.
  • Sales revenue for the second quarter 2010 was $328.1 million, compared to $117.9 million for the same period in 2009, and was generated from the sale of five aircraft, five engines and parts inventory.
  • Basic lease rents for the second quarter of 2010 were $228.6 million, compared to $141.4 million for the same period in 2009, an increase of 62%. Total lease revenue (basic rents, maintenance rents and end-of-lease compensation) for the second quarter of 2010 was $260.7 million, compared to $169.8 million for the same period in 2009, an increase of 54%.
  • Total revenue for the second quarter of 2010 was $594.7 million, compared to $294.7 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 Genesis Transaction and the deliveries of forward order aircraft.
  • Total assets were $9.1 billion at June 30, 2010, an increase of 48% over total assets of $6.1 billion at June 30, 2009. The Genesis Transaction accounted for $1.5 billion of the increase in total assets.  The remaining $1.5 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 $1.8 billion closed in the first half year of 2010.

Financing Highlights – previously disclosed

  • AerCap signed agreements for $380 million of new debt facilities in the second quarter and a total of $835 million in the year to date. In addition, a $151 million refinancing through the issuance of notes guaranteed by the United Kingdom's Export Credit Agency was completed during the second quarter.

Klaus Heinemann, CEO of AerCap, commented: “AerCap has continued to deliver asset, revenue and net margin growth quarter after quarter while maintaining earnings per share that are consistently at the top end of the range among our listed competitors. AerCap’s solid liquidity is reflected in our total cash position, which now exceeds $500 million and represents one third of our current market capitalization.”

AerCap's CFO, Keith Helming, said: "We are pleased with our second quarter results which include a full quarter's financial impact of the Genesis Transaction, which is performing according to our expectations.  The 48% year-on-year increase in total assets as well as the 50% increase in net spread highlight the profitability of our growing and diverse lease portfolio.  In addition, our committed capital expenditures are essentially fully funded and we have secured $835 million of new debt facilities year-to-date 2010 which demonstrates AerCap's ability to tap global financing markets throughout varying market conditions." 

Summary of Financial Results

AerCap recorded second quarter 2010 net income of $48.9 million or $0.41 earnings per basic and diluted share. Second quarter 2010 net income included net charges relating to the mark-to-market of interest rate caps and share-based compensation of $10.7 million or $0.09 per basic and diluted share, net of tax. The after-tax charge relating to the mark-to-market of our interest rate caps was $10.1 million reflecting changes in forecasted interest rates. The after-tax charge from share-based compensation was $0.6 million.

Detailed Financial Data

($ in Millions)

Operating results
















Three months ended
June 30,


Six months ended
June 30,



2010


2009


% increase/
(decrease)


2010


2009


% increase/
(decrease)














Revenues


$           594.7


$           294.7


102%


$ 958.7


$ 503.2


91%

Net income


48.9


56.6


(14%)


83.3


86.6


(4%)

Net income excluding the impact of
mark-to-market of interest rate caps
and share-based compensation


59.6


39.1


52%


106.3


70.7


50%



Total revenue in the second quarter of 2010 increased 102% compared to the second 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 the mark-to-market of interest rate caps and share-based compensation increased by 52%.

Revenue breakdown
















Three months ended
June 30,


Six months ended
June 30,



2010


2009


% increase/
(decrease)


2010


2009


% increase/
(decrease)














Lease revenue:













  Basic lease rents


$           228.6


$           141.4


62%


$ 394.4


$ 282.8


39%

  Maintenance rents


32.1


26.9


19%


41.6


39.5


5%

  End-of-lease compensation and other receipts


-


1.5


(100%)


-


8.7


(100%)

Lease revenue


$           260.7


$           169.8


54%


$ 436.0


$ 331.0


32%

Sales revenue


328.1


117.9


178%


510.6


159.6


220%

Management fees and interest income


4.1


6.3


(35%)


7.9


11.7


(32%)

Other revenue


1.8


0.7


157%


4.2


0.9


367%

Total revenue


$           594.7


$           294.7


102%


$ 958.7


$ 503.2


91%





























Basic lease rents were $228.6 million for the second quarter of 2010, an increase of 62% compared to the second quarter of 2009, as a result of our growing asset base. Our average lease assets increased by 71% to $7.5 billion compared to the second quarter of 2009. As shown in the table below, interest expense excluding the impact of the mark-to-market of interest rate caps was $59.6 million in the second quarter of 2010, an increase of $30.8 million over the same period in 2009. The increase was primarily driven by the Genesis Transaction ($17.3 million) and the increase in our lease portfolio from the delivery of forward order aircraft. As a result, net spread increased 50% to $169.0 million in the second quarter of 2010 over the same period in 2009.
















Three months ended
June 30,


Six months ended
June 30,



2010


2009


% increase/
(decrease)


2010


2009


% increase/
(decrease)














Basic lease rents


$           228.6


$           141.4


62%


$ 394.4


$ 282.8


39%














Interest on debt


$             75.5


$               6.0


1,158%


$ 126.9


$   35.5


257%

Plus: mark-to-market of interest rate caps


(15.9)


22.8


(170%)


(34.2)


22.2


(254%)

Interest on debt excluding the impact of mark-to-market of interest rate caps


$             59.6


$             28.8


107%


$   92.7


$   57.7


61%














Net Spread


$           169.0


$           112.6


50%


$ 301.7


$ 225.1


34%



Effective tax rate

AerCap's blended effective tax rate during the first half year of 2010 was 8.8% (charge), consisting of 9.5% (charge) for AerCap's aircraft business and 32.1% (income) for AerCap's engine and parts business. The blended effective tax rate in 2009 was 1.9% (charge).

Financial position










June 30, 2010


June 30, 2009


% Increase over
June 30, 2009








Total cash (incl. restricted)


$           506.7


$           346.6


46%

Flight equipment held for lease


7,624.7


4,493.8


70%

Total assets


9,098.4


6,130.8


48%

Total liabilities


7,176.9


4,835.8


48%

Total equity


1,921.5


1,295.1


48%



As of June 30, 2010, AerCap's portfolio consisted of 327 aircraft and 87 engines that were either owned, on order, under contract or letter of intent, or managed. This includes the 53 aircraft that AerCap added through the Genesis Transaction in March 2010. Subsequent to quarter-end, one of our lessees, Mexicana, filed for bankruptcy protection.

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 the 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 the mark-to-market of interest rate caps and share-based compensation to net income for the three and six month periods ended June 30, 2010 and 2009:
















Three months ended
June 30,


Six months ended
June 30,



2010


2009


% increase/
(decrease)


2010


2009


% increase/
(decrease)














Net income


$             48.9


$             56.6


(14%)


$   83.3


$   86.6


(4%)

Plus: mark-to-market of interest rate caps, net of tax


10.1


(18.3)


155%


21.7


(17.5)


224%

          share-based compensation, net of tax


0.6


0.8


(25%)


1.3


1.6


(19%)

Net income excluding the impact of mark-to-market
of interest rate caps and share-based compensation


$             59.6


$             39.1


52%


$ 106.3


$   70.7


50%





























Earnings per share excluding the impact of the 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 second 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 six month periods ended June 30, 2010 and 2009 is included above.

Conference Call

In connection with the earnings release, management will host an earnings conference call today, Thursday, August 5, 2010 at 9:30 am Eastern Time / 3:30 pm Central European Time. The call can be accessed live by dialing (U.S./Canada) 1-888-935-4575 or (International) +31-20-707-5512 and referencing code 4905052 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.

To participate in either event, please register at: http://client.sharedvalue.net/AerCap/Q210

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.

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



Financial Statements Follow


AerCap Holdings N.V.
Consolidated Balance Sheets - Unaudited
(In thousands of U.S. Dollars)












June 30, 2010


December 31, 2009


June 30, 2009










Assets








Cash and cash equivalents


$       260,256


$                  182,617


$       218,423


Restricted cash


246,462


140,746


128,184


Trade receivables, net of provisions


47,991


48,070


39,244


Flight equipment held for operating leases, net


7,624,655


5,230,437


4,493,793


Flight equipment held for sale


39,442


-


-


Net investment in direct finance leases


31,692


34,532


34,822


Notes receivables, net of provisions


9,861


138,488


136,084


Prepayments on flight equipment


259,387


527,666


576,754


Investments


29,775


21,031


20,111


Goodwill


6,776


6,776


6,776


Intangibles, net


70,498


31,399


37,893


Inventory


125,057


102,538


131,416


Derivative assets


23,447


44,866


40,035


Deferred income taxes


108,080


80,098


81,187


Other assets


214,980


180,237


186,105


Total Assets


$    9,098,359


$               6,769,501


$    6,130,827


















Liabilities and Equity
















Accounts payable


$         25,724


$                    11,832


$         28,290


Accrued expenses and other liabilities


94,975


80,399


76,559


Accrued maintenance liability


371,482


228,006


206,873


Lessee deposit liability


139,357


126,093


112,112


Debt


6,393,867

*

4,846,664


4,336,966


Accrual for onerous contracts


12,477


22,363


29,878


Deferred revenue


57,050


33,011


36,805


Derivative liabilities


81,973


7,801


8,285


Total liabilities


7,176,905


5,356,169


4,835,768










Share capital


1,163


699


699


Additional paid-in capital


968,625


593,133


591,623


Retained earnings


747,431


664,177


585,560


Total AerCap Holdings N.V. shareholders' equity


1,717,219


1,258,009


1,177,882


Non-controlling interest


204,235


155,323


117,177


Total Equity


1,921,454


1,413,332


1,295,059










Total Liabilities and Equity


$    9,098,359


$               6,769,501


$    6,130,827










* Includes $82.3 million of subordinated debt received from our joint venture partners












Supplemental information


June 30, 2010


December 31, 2009


June 30, 2009


Debt/equity ratio


3.3


3.4


3.3


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
June 30,


Six months ended
June 30,



2010


2009


2010


2009











Revenues









Lease revenue

$      260,695


$    169,829


$      436,005


$    331,042


Sales revenue

328,131


117,879


510,585


159,596


Interest revenue

1,547


2,602


2,869


5,223


Management fee revenue

2,515


3,732


5,048


6,473


Other revenue

1,785


653


4,202


863


Total Revenues

594,673


294,695


958,709


503,197











Expenses









Depreciation

86,597


53,243


149,974


104,490


Asset impairment

2,721


13,733


2,721


20,950


Cost of goods sold

313,684


105,496


469,822


139,320


Interest on debt *

75,529


5,989


126,931


35,475


Operating lease in costs

3,063


3,273


6,214


6,587


Leasing expenses

15,926


22,076


26,416


41,237


Provision for doubtful notes and accounts receivable

(224)


(879)


516


353


Selling, general and administrative expenses

34,899


27,777


64,778


54,990


Total Expenses

532,195


230,708


847,372


403,402











Income from continuing operations before income taxes

62,478


63,987


111,337


99,795











Provision for income taxes

(4,862)


(827)


(9,748)


(2,687)


Amalgamation gain, net of transaction expenses and tax

-


-


274


-











Net Income

57,616


63,160


101,863


97,108











Net (income) attributable to non-controlling interest

(8,761)


(6,564)


(18,609)


(10,558)











Net Income attributable to AerCap Holdings N.V.

$        48,855


$      56,596


$        83,254


$      86,550











Basic and diluted earnings per share

$            0.41


$          0.67


$            0.81


$          1.02











Weighted average shares outstanding - basic and diluted

119,386,445


85,036,957


102,211,701


85,036,957



* The increase of $69.5 million in interest on debt in the second quarter 2010 as compared to the second quarter 2009 was primarily driven by (i) a $38.7 million increase in the mark-to-market on interest rate caps, (ii) a $17.3 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 first half year of 2010 as compared to the first half year of 2009.


AerCap Holdings N.V.
Consolidated Statements of Cash Flows - Unaudited
(In thousands of U.S. Dollars)




Three months ended
June 30,


Six months ended
June 30,




2010


2009


2010


2009












Net income


57,616


63,160


101,863


97,108


Adjustments to reconcile net income to net cash provided by
operating activities










Depreciation


86,597


53,243


149,974


104,490


Asset impairment


2,721


13,733


2,721


20,950


Amortisation of debt issuance cost


7,024


4,054


12,330


7,888


Amortisation of intangibles


6,959


4,415


10,162


9,205


Provision for doubtful notes and accounts receivable


(339)


(879)


357


353


Capitalised interest on pre-delivery payments


(153)


(338)


(313)


(709)


Gain on disposal of assets


(9,029)


570


(29,252)


1,018


Mark-to-market of non-hedged derivatives


19,497


(18,502)


41,836


(19,504)


Deferred taxes


3,520


(102)


8,285


1,139


Share-based compensation


678


996


1,557


1,998


Changes in assets and liabilities










   Trade receivables and notes receivable, net


4,501


1,244


6,151


5,528


   Inventories


3,463


(17,205)


8,876


(2,721)


   Other assets and derivative assets


(15,274)


(6,543)


(7,636)


(10,730)


   Other liabilities


748


(10,563)


(13,552)


(36,762)


   Deferred revenue


(749)


(3,328)


11,997


1,884


Net cash provided by operating activities


167,780


83,955


305,356


181,135












Purchase of flight equipment


(691,633)


(286,726)


(1,321,362)


(574,814)


Proceeds from sale/disposal of assets


283,137


76,560


425,763


78,352


Prepayments on flight equipment


(36,253)


(127,857)


(84,780)


(286,361)


Purchase of subsidiaries, net of cash acquired


-


-


70,618


-


Purchase of investments


(7,500)


-


(7,500)


-


Purchase of intangibles


-


-


(9,006)


-


Movement in restricted cash


(31,977)


16,770


(74,260)


(14,787)


Net cash used in investing activities


(484,226)


(321,253)


(1,000,527)


(797,610)












Issuance of debt


896,904


835,278


1,616,282


1,280,978


Repayment of debt


(542,821)


(671,944)


(885,640)


(768,429)


Debt issuance costs paid


(25,353)


(10,743)


(35,284)


(14,113)


Maintenance payments received


37,949


25,115


68,533


48,883


Maintenance payments returned


(12,800)


(11,057)


(22,724)


(25,609)


Security deposits received


7,533


15,051


16,921


23,065


Security deposits returned


(14,564)


(4,569)


(17,128)


(7,530)


Capital contributions from non-controlling interests


3,375


104,200


32,375


104,200


Net cash provided by financing activities


350,223


281,331


773,335


641,445












Net increase in cash and cash equivalents


33,777


44,033


78,164


24,970


Effect of exchange rate changes


571


(691)


(525)


(110)


Cash and cash equivalents at beginning of period


225,908


175,081


182,617


193,563


Cash and cash equivalents at end of period


260,256


218,423


260,256


218,423



Certain reclassifications have been made to prior years consolidated statements of cash flow to reflect the current year presentation.

SOURCE AerCap Holdings N.V.

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