AerCap Holdings N.V. Q1 2018 Financial Summary
Business Context and Reporting Period
This Form 6-K filing, dated May 3, 2018, incorporates AerCap Holdings N.V.'s interim financial report for the quarter ended March 31, 2018. AerCap is a global leader in aircraft leasing, owning and managing a fleet of commercial aircraft. As of March 31, 2018, the company owned 966 aircraft and managed 122 additional aircraft, with 431 new aircraft on order.
Key Financial Metrics
| Metric | Q1 2018 | Q1 2017 |
|---|---|---|
| Total Revenues | $1,219.1 million | $1,236.8 million |
| Net Income | $265.7 million | $261.2 million |
| Diluted EPS | $1.72 | $1.48 |
| Operating Cash Flow | $738.0 million | $801.5 million |
| Total Debt (Principal) | $28.8 billion | $28.1 billion (avg) |
| Cash & Equivalents | $2.15 billion | $1.94 billion |
| Undrawn Credit Facilities | $7.3 billion | N/A |
| Adjusted Debt/Equity Ratio | 2.8 to 1 | 2.8 to 1 |
Material Changes vs. Prior Period
- Revenue: Total revenues decreased 1% to $1,219.1 million. Basic lease rents declined 3% ($34.2 million) due to the sale of 120 aircraft and lower rates on re-leases/extensions, partially offset by the acquisition of 65 new aircraft.
- Asset Sales: Net gain on sale of assets increased 89% to $89.3 million, driven by the composition of 21 aircraft sold during the quarter.
- Expenses: Interest expense decreased 4% to $274.4 million, aided by a $23.0 million benefit from mark-to-market gains on derivatives. Leasing expenses increased 8% to $132.5 million, primarily due to costs associated with Air Berlin and Monarch Airlines bankruptcies.
- Profitability: Net income increased 2% to $265.7 million. Diluted EPS rose to $1.72 from $1.48, benefiting from share repurchases which reduced the weighted average shares outstanding.
Outlook, Risks, and Management Commentary
- Liquidity: Management reports total sources of liquidity of $14.0 billion, sufficient to cover 1.5x of debt maturities and contracted capital requirements for the next 12 months. This includes $2.2 billion in unrestricted cash and $7.3 billion in undrawn credit lines.
- Capital Allocation: The company continues an aggressive share repurchase program. In Q1 2018, 5.9 million shares were repurchased at an average price of $51.60. In April 2018, the Board approved an additional $200 million repurchase authorization.
- Legal Proceedings: Significant ongoing litigation includes the VASP case in Brazil, where the Federal Supreme Court declined to accept an extraordinary appeal in April 2018, though the company intends to defend its position vigorously. The company also faces the Transbrasil litigation in Brazil, where a trial court has dismissed provisional enforcement actions regarding statutory penalties.
- Market Risks: Primary risks include interest rate fluctuations (managed via swaps and caps), foreign currency exposure, and the ability of lessees to meet payment obligations.
Investor Verification Checklist
- Verify the status and potential financial impact of the VASP and Transbrasil litigation outcomes in Brazil.
- Monitor the re-lease rates and utilization of the 26 aircraft currently off-lease as of March 31, 2018.
- Assess the impact of the Air Berlin and Monarch Airlines bankruptcies on future leasing expenses and asset recovery.
- Review the execution of the $200 million share repurchase program approved in April 2018.
- Track the funding of 431 aircraft on order, requiring significant capital deployment through 2024.