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Press Release
AerCap Holdings N.V. Reports Third Quarter 2012 Financial Results

Adjusted net income for the third quarter of 2012 was $62.2 million and adjusted earnings per share was $0.48.

Amsterdam, Netherlands; November 7, 2012 - AerCap Holdings N.V. (the "Company" or "AerCap") (NYSE: AER) today announced the results of its operations for the third quarter ended September 30, 2012.

Third Quarter 2012 Financial Highlights

  • Third quarter 2012 reported net income was $57.9 million, compared with a $7.1 million loss for the same period in 2011. Third quarter 2011 included a $53.5 million one-time charge relating to discontinued operations. Third quarter 2012 reported basic and diluted earnings per share was $0.45, compared with a reported basic and diluted loss per share of $0.05 for the same period in 2011.
  • Third quarter 2012 adjusted net income was $62.2 million, compared with third quarter 2011 adjusted net income of $75.6 million. Third quarter 2012 adjusted earnings per share was $0.48, compared with $0.51 for the same period in 2011. The decrease in adjusted net income and adjusted earnings per share was primarily the result of increased default and restructuring related costs and a lower gain on the sale of aircraft.
  • Net interest margin earned on lease assets, or net spread, was $176.5 million in the third quarter of 2012 compared with $182.3 million for the same period in 2011. Net interest margin as a percentage of average lease assets was 8.77% for third quarter 2012 as compared to 9.17% for third quarter 2011. The decrease in net interest margin is driven primarily by the higher interest cost relating to the increase in the amount of long-term fixed rate funding plus the impact from defaults mentioned above.
  • Total assets were $9.1 billion at September 30, 2012, a decrease of 4% over total assets of $9.6 billion at September 30, 2011. The net decrease is primarily attributable to the sale of AeroTurbine, which was partially offset by new aircraft deliveries.
  • Debt to equity ratio was 2.8 to 1 at September 30, 2012, unchanged from the September 30, 2011 period.
  • Committed purchases of aviation assets delivered or scheduled for delivery in 2012 are $1,101 million, of which $743 million closed in the first nine months of 2012. The total amount of aircraft acquisitions in the third quarter 2012 was $225 million.
  • Repurchases of 12.9 million shares were completed in third quarter 2012 with a total cost of $154.7 million (average price per share of $11.99). Repurchases of 18.5 million shares were completed in the first nine months of 2012 with a total cost of $217.4 million (average price per share of $11.75). The book value per share at September 30, 2012 was $18.25.
  • The total amount of financing transactions closed in the third quarter 2012 was $210 million. The total amount of financing transactions completed in the first nine months was $860 million.


Aengus Kelly, CEO of AerCap, commented: "During the third quarter we remained focused on executing our operating strategy. In that regard, we maintained a fleet wide utilization rate of 98%, and continued our efforts to optimize the fleet through the acquisition of next generation aircraft along with the disposal of certain older aircraft. Related to aircraft acquisitions, we raised over $210 million of long term debt to finance deliveries. Finally, due to our robust liquidity position, we took advantage of a unique opportunity during the quarter to acquire 12.9 million of our shares at an average price of $11.99. This repurchase coupled with the repurchases completed earlier this year demonstrate our commitment and focus to enhance shareholder value."

AerCap's CFO, Keith Helming, added: "Given the ongoing volatility in the global markets, we are pleased with the financial results reported today. We continue our concerted efforts to optimize our aircraft portfolio with an average age of 5.8 years, which is among the youngest in the aircraft leasing sector. In addition, our liquidity profile remains strong which positions us further to execute on additional investment opportunities."

Net Income

Set forth below are the details to reconcile reported net income to adjusted net income, including the specific adjustments.

Three months ended
September 30,
Nine months ended
September 30,
2012 2011 % increase/
(decrease)
2012 2011 % increase/
(decrease)
Net income $ 57.9 $ (7.1) 915% $ 152.5 $ 95.8 59%
Plus: mark-to-market of interest rate caps, net of tax 2.7 27.6 (90%) 12.5 47.9 (74%)
share-based compensation, net of tax 1.6 1.6 0% 4.6 4.1 12%
Net income excluding the impact of mark-to-market of interest rate caps and share-based compensation 62.2 22.1 181% 169.6 147.8 15%
Plus: buy-out of the Genesis portfolio servicing rights, net of tax - - 0% - 21.4 (100%)
loss on discontinued operations - 53.5 (100%) - 54.1 (100%)
non-recurring charges to interest expense from the early
repayment of secured loans, net of tax
- - 100% 20.9 - 100%
Adjusted net income 62.2 75.6 (18%) 190.5 223.3 (15%)

The decrease in adjusted net income, in the third quarter of 2012 compared with the third quarter of 2011, was mainly the result of increased default and restructuring related costs and a lower gain on the sale of aircraft.

Revenue and Net Spread

Three months ended
September 30,
Nine months ended
September 30,
2012 2011 % increase/
(decrease)
2012 2011 % increase/
(decrease)
Lease revenue:
Basic lease rents $ 239.5 $ 238.6 0% $ 709.6 $ 714.1 (1%)
Maintenance rents and other receipts 24.1 27.0 (11%) 54.2 73.3 (26%)
Lease revenue 263.6 265.6 (1%) 763.8 787.4 (3%)
Net gain on sale of assets 0.6 4.0 (85%) 1.0 9.2 (89%)
Management fees and interest income 4.1 5.3 (23%) 13.7 16.7 (18%)
Other revenue 1.2 1.4 (14%) 1.8 4.2 (57%)
Total revenue $ 269.5 $ 276.3 (2%) $ 780.3 $ 817.5 (5%)

Basic lease rents were $239.5 million for the third quarter of 2012, compared to $238.6 for the same period in 2011. Our average lease assets increased by 1% to $8.1 billion compared with the third quarter of 2011.

Basic rents, maintenance rents and other receipts, or total lease revenue, for the third quarter of 2012 was $263.6 million, compared to $265.6 million for the same period in 2011, a decrease of 1%. The decrease is driven by the impact from defaults and restructurings previously mentioned.

Net gain on sale of aircraft for the third quarter of 2012 was $0.6 million, compared to $4.0 million for the same period in 2011. During the third quarter of 2012 we sold one A330 aircraft and one A320 aircraft.

Three months ended
September 30,
Nine months ended
September 30,
2012 2011 % increase/
(decrease)
2012 2011 % increase/
(decrease)
Basic lease rents $ 239.5 $ 238.6 0% $ 709.6 $ 714.1 (1%)
Interest on debt 66.1 (a) 88.1 (25%) 223.7 229.7 (3%)
Plus: mark-to-market of interest rate caps (3.1) (31.8) (90%) (14.4) (55.4) (74%)
non-recurring charges to interest expense from repayment of secured loans - - 100% (23.9) - 100%
Interest on debt excluding the impact of mark-to-market of interest rate caps and non-recurring charges to interest expense from the early repayment of secured loans 63.0 56.3 12% 185.4 174.3 6%
Net interest margin, or net spread $ 176.5 $ 182.3 (3%) $ 524.2 $ 539.8 (3%)
       

 

(a) Interest on debt for the quarter ended September 30, 2012 includes $6.8 million of amortization of debt issuance costs.


As shown in the table above, interest expense excluding the impact of the mark-to-market of interest rate caps was $63.0 million in the third quarter of 2012, a 12% increase compared with the third quarter of 2011. The increase was driven primarily by an increase in the amount of long-term, fixed rate funding.  Net spread in the third quarter of 2012 decreased 3% compared with the same period in 2011.

Selling, General and Administrative Expenses

Three months ended
September 30,
Nine months ended
September 30,
2012 2011 % increase/
(decrease)
2012 2011 % increase/
(decrease)
Mark-to-market of foreign currency hedges, foreign currency balances and other derivatives $ - $ 11.4 (100%) $ (3.0) $ 3.9 (177%)
Share-based compensation expenses 1.8 1.8 0% 5.2 4.7 11%
Other selling, general and administrative expenses 20.5 18.8 9% 58.1 89.7 (a) (35%)
Total selling, general and administrative expenses $ 22.3 $ 32.0 (30%) $ 60.3 $ 98.3 (39%)

 

(a) Other selling, general and administrative expenses for the nine months ended September 30, 2011 includes $24.5 million one-time charge relating to the buy-out of the Genesis portfolio servicing rights.


Effective Tax Rate

AerCap's blended effective tax rate during the first nine months of 2012 was 5.5%. The blended effective tax rate in 2011 was 6.7%.

Financial Position

September 30,
2012
September 30,
2011
% increase/
(decrease) over
September 30, 2011
Total cash (incl. restricted) $ 620.0 $ 485.0 28%
Flight equipment held for lease 8,045.7 7,936.0 1%
Total assets 9,133.8 9,553.4 (4%)
Debt 6,131.2 6,200.7 (1%)
Total liabilities 6,915.8 7,308.5 (5%)
Total equity 2,218.1 2,244.9 (1%)
Debt/equity ratio 2.8 2.8 0%

As of September 30, 2012, AerCap's portfolio consisted of 337 aircraft that were either owned, on order, under contract or letter of intent, or managed.

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:

Adjusted net income and adjusted earnings per share. These measures are 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. The average number of shares is based on a daily average.

In addition to GAAP net income and earnings per share, we believe these measures 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 flows from our lease, debt 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 nine-month periods ended September 30, 2012 and 2011:

Three months ended
September 30,
Nine months ended
September 30,
2012 2011 % increase/
(decrease)
2012 2011 % increase/
(decrease)
Net income $ 57.9 $ (7.1) 915% $ 152.5 $ 95.8 59%
Plus: mark-to-market of interest rate caps, net of tax 2.7 27.6 (90%) 12.5 47.9 (74%)
share-based compensation, net of tax 1.6 1.6 0% 4.6 4.1 12%
Net income excluding the impact of mark-to-market of interest rate caps and share-based compensation 62.2 22.1 (a) 181% 169.6 (b) 147.8 (c) 15%

 

(a) Third quarter 2011 adjusted net income of $75.6 million also excludes the one-time charges relating to the sale of AeroTurbine of $53.5 million, net of tax.

(b) Adjusted net income of $190.5 million for the nine months ended September 30, 2012 also excludes the non-recurring charges to interest expense from the early repayment of secured loans of $20.9 million, net of tax.

(c) Adjusted net income of $223.3 million for the nine months ended September 30, 2011 also excludes the one-time charge relating to the buy-out of the Genesis portfolio servicing rights of $21.4 million, net of tax and the one-time charges relating to the sale of AeroTurbine of $54.1 million, net of tax.


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 from the mark-to-market of interest rate caps. 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.

Conference Call

In connection with the earnings release, management will host an earnings conference call today, Wednesday, November 7, 2012 at 9:30 am Eastern Time / 3:30 pm Central European Time. The call can be accessed live by dialing (U.S./Canada) 1-480-629-9835 or (International) +31-20-794-8504 and referencing code 4567280 at least 5 minutes before start time, or by visiting AerCap's website at http://www.aercap.com under "Investor Relations".

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, Wednesday, November 7, 2012, at 12:30 pm Eastern Time at The New York Palace (the Garrison Room), 455 Madison Avenue, New York. Doors will open at 12:00 pm.

To participate in either event, please register at: http://client.sharedvalue.net/AerCap/Q312

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 and has one of the youngest fleets in the industry. AerCap is a New York Stock Exchange-listed company (AER) headquartered in The Netherlands with offices in Ireland, the United States, China, Singapore and the United Arab Emirates.

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.
Unaudited Consolidated Balance Sheets
(In thousands of U.S. Dollars) 
September 30,
2012
December 31,
2011
September 30,
2011
Assets
Cash and cash equivalents $ 309,654 $ 411,081 $ 274,337
Restricted cash 310,309 237,325 210,631
Trade receivables, net of provisions 12,657 16,063 13,353
Flight equipment held for operating leases, net 8,045,708 7,895,874 7,936,045
Net investment in direct finance leases 22,426 25,094 26,193
Notes receivables, net of provisions 9,105 5,200 7,073
Prepayments on flight equipment 50,723 95,619 81,524
Investments 90,602 84,079 81,686
Intangibles 20,950 29,677 34,232
Inventory 6,506 13,953 16,470
Derivative assets 10,176 21,050 24,165
Deferred income taxes 83,678 91,258 101,235
Other assets 161,320 181,359 184,597
Disposal group assets (AeroTurbine) - - 561,843
Total Assets $ 9,133,814 $ 9,107,632 $ 9,553,384
Liabilities and Equity
Accounts payable $ 406 $ 4,142 $ 5,931
Accrued expenses and other liabilities 92,315 74,458 73,027
Accrued maintenance liability 525,702 452,582 427,989
Lessee deposit liability 101,999 102,844 100,783
Debt 6,131,199 * 6,111,165 6,200,711
Accrual for onerous contracts - 3,971 6,209
Deferred revenue 47,249 47,994 48,440
Derivative liabilities 16,885 27,159 36,459
Disposal group liabilities (AeroTurbine) - - 408,917
Total liabilities 6,915,755 6,824,315 7,308,466
 
Ordinary share capital €0.01 par value (250,000,000 ordinary shares authorized, 121,507,414 ordinary shares issued and outstanding) 1,278 1,570 1,570
Additional paid-in capital 1,029,593 1,340,205 1,338,736
Treasury stock  (105,379 ordinary shares) (1,300) (100,000) (60,632)
Accumulated other comprehensive income loss (10,927) (8,513) (8,351)
Accumulated retained earnings 1,196,476 1,043,974 967,586
Total AerCap Holdings N.V. shareholders' equity 2,215,120 2,277,236 2,238,909
Non-controlling interest 2,939 6,081 6,009
Total Equity 2,218,059 2,283,317 2,244,918
Total Liabilities and Equity $ 9,133,814 $ 9,107,632 $ 9,553,384
* Includes $64.3 million of subordinated debt received from our joint venture partners
Supplemental information September 30,
2012
December 31,
2011
September 30,
2011
Debt/equity ratio 2.8 2.7 2.8
Debt/equity ratio (adjusted for subordinated debt) 2.7 2.6 2.7

AerCap Holdings N.V.
Unaudited Consolidated Income Statements 
(In thousands of U.S. Dollars, except share and per share data) 
Three months ended
September 30,
Nine months ended
September 30,
2012 2011 2012 2011
Revenues
Lease revenue $ 263,570 $ 265,562 $ 763,751 $ 787,339
Net gain on sale of assets 601 3,976 1,035 9,159
Management fee revenue 3,692 4,637 12,396 14,874
Interest revenue 405 668 1,351 1,849
Other revenue 1,250 1,438 1,764 4,249
Total Revenues 269,518 276,281 780,297 817,470
Expenses
Depreciation 93,364 90,135 275,479 271,378
Asset impairment 7,399 3,834 7,399 11,583
Interest on debt 66,097 88,074 223,718 229,691
Operating lease-in costs 1,592 3,017 4,494 9,057
Leasing expenses 23,314 13,478 59,657 43,258
Provision for doubtful accounts - - - 2,311
Selling, general and administrative expenses 22,284 32,018 60,330 98,265
Total Expenses 214,050 230,556 631,077 665,543
Income from continuing operations before income taxes and income of investments accounted for under the equity method 55,468 45,725 149,220 151,927
Provision for income taxes (732) (2,532) (8,229) (10,086)
Net income of investments accounted for under the equity method 1,907 3,340 8,369 8,511
Net Income from continuing operations 56,643 46,533 149,360 150,352
Loss from discontinued operations, net of tax (AeroTurbine) - (53,481) - (54,063)
Net income (loss) 56,643 (6,948) 149,360 96,289
Net loss (income) attributable to non-controlling interest 1,268 (147) 3,142 (453)
Net Income (loss) attributable to AerCap Holdings N.V. $ 57,911 $ (7,095) $ 152,502 $ 95,836
Total earnings (loss) per share, basic and diluted $ 0.45 $ (0.05) $ 1.12 $ 0.64
Weighted average shares outstanding, basic and diluted 128,369,027 147,430,663 135,635,274 148,618,178

Certain reclassifications have been made to prior years Unaudited Consolidated Income Statements to reflect the current year presentation.

AerCap Holdings N.V.
Unaudited Consolidated Statements of Cash Flows
(In thousands of U.S. Dollars)
Three months ended
September 30,
Nine months ended
September 30,
2012 2011 2012 2011
Net income (loss) $ 56,643 $ (6,948) $ 149,360 $ 96,289
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 93,364 97,846 275,479 295,023
Asset impairment 7,399 7,752 7,399 20,485
Amortization of debt issuance costs 6,765 8,417 44,306 25,965
Amortization of intangibles 2,875 4,109 8,727 13,937
Provision for doubtful accounts - (215) - 3,819
Capitalised interest on pre-delivery payments (244) (322) (864) (374)
Net gain on sale of assets (601) (3,976) (1,035) (12,814)
Loss on discontinued operations (AeroTurbine) - 53,481 - 54,063
Mark-to-market of non-hedged derivatives (972) 33,589 2,461 28,524
Deferred taxes 1,926 2,469 7,925 12,574
Share-based compensation 1,813 465 5,210 4,767
Changes in assets and liabilities:
Trade receivables and notes receivable, net (6,294) 1,086 (499) (14,573)
Inventories 661 (20,496) 7,447 (20,617)
Other assets and derivative assets 2,514 (7,466) (3,284) (40,887)
Other liabilities 19,034 30,817 9,545 (20,514)
Deferred revenue 2,469 1,769 (745) (8,843)
Net cash provided by operating activities 187,352 202,377 511,432 436,824
Purchase of flight equipment (193,556) (184,823) (678,231) (683,209)
Proceeds from sale/disposal of assets 107,666 56,477 328,321 115,828
Prepayments on flight equipment (11,225) (17,292) (29,067) (33,283)
Purchase of investments - - - (2,500)
Movement in restricted cash (19,474) (19,695) (72,984) 10,863
Net cash used in investing activities (116,589) (165,333) (451,961) (592,301)
Issuance of debt 108,163 348,746 931,832 1,482,989
Repayment of debt (202,056) (360,652) (912,113) (1,347,805)
Debt issuance costs paid (4,169) (5,440) (28,457) (30,052)
Maintenance payments received 31,575 22,550 103,850 75,252
Maintenance payments returned (13,412) (10,243) (36,752) (43,979)
Security deposits received 3,195 1,351 15,033 14,035
Security deposits returned (3,619) (7,289) (14,941) (33,239)
Repurchase of shares (154,695) (59,183) (217,414) (60,632)
Net cash provided by (used in) financing activities (235,018) (70,160) (158,962) 56,569
Net decrease in cash and cash equivalents (164,255) (33,116) (99,491) (98,908)
Effect of exchange rate changes (342) 901 (1,936) 6,304
Less cash and cash equivalents of discontinued operations at end of period - (37,509) - (37,509)
Cash and cash equivalents at beginning of period 474,251 344,061 411,081 404,450
Cash and cash equivalents at end of period $ 309,654 $ 274,337 $ 309,654 $ 274,337

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


HUG#1655637