AerCap Holdings N.V. Reports Second Quarter 2013 Financial Results

Adjusted net income for the second quarter of 2013 was $67.1 million and adjusted earnings per share were $0.59. Adjusted earnings per share for the first half of 2013 were $1.19, a record high and an increase of 29% over the first half of 2012.

Amsterdam, Netherlands; August 6, 2013 – AerCap Holdings N.V. (the “Company” or “AerCap”) (NYSE: AER) today announced the results of its operations for the second quarter ended June 30, 2013.

During the second quarter of 2013:
$0.9 billion of aircraft were purchased,
$0.3 billion of aircraft were sold,
$1.5 billion of financing transactions were completed,
and 81 aircraft transactions were executed.

Aengus Kelly, CEO of AerCap, commented: “Our record EPS number for the first half of 2013 is the result of the rigorous application of our core principles. It is this combination of highly disciplined aircraft acquisitions and disposals as well as a long term stable liability structure that has enabled us to return $420 million to our shareholders, obtain an investment grade rating and generate record earnings.”

Second quarter 2013 Financial Highlights
Second quarter 2013 reported net income was $75.7 million, compared with $29.6 million for the same period in 2012. Second quarter 2013 reported basic earnings per share were $0.67, compared with $0.21 for the same period in 2012.

Second quarter 2013 adjusted net income was $67.1 million, compared with $59.2 million for the same period in 2012. Second quarter 2013 adjusted earnings per share were $0.59, compared with $0.43 for the same period in 2012.

Net interest margin earned on lease assets, or net spread, was $160.1 million in the second quarter of 2013 compared with $173.1 million for the same period in 2012. Net interest margin as a percentage of average lease assets was 8.5% for second quarter 2013 as compared with 8.7% for the same period in 2012. The decrease is primarily attributable to the sale of the ALS portfolio in the fourth quarter of 2012.

Total owned assets were $9.0 billion as of June 30, 2013 and total managed aircraft were valued at $2.1 billiona). Total owned assets decreased by 3% from $9.3 billion as of June 30, 2012.

In the second quarter of 2013, we entered into a $2.6 billion purchase and leaseback agreement for 25 widebody aircraft with LATAM Airlines Group, of which 10 A330 aircraft were purchased and delivered in the second quarter of 2013.

We sold our interest in eight Boeing 737-800 aircraft on lease to American Airlines to an affiliate of Guggenheim Partners, LLC. We retained 20% ownership of the equity position and will continue to service these aircraft.

We closed financing transactions totaling $1.5 billion including the amendment and increase of our AerFunding revolving credit facility.

Total committed aircraft purchases were $3.3 billion as of June 30, 2013, which relates to 42 aircraft including purchase options. All of these aircraft are placed on long term leases.

The debt to equity ratio was 2.6 to 1 at June 30, 2013, compared with 2.7 to 1 for the same period in 2012.

Includes aircraft under our management and owned by our non-consolidated joint ventures. The aircraft value was based on the average appraised value provided by three external appraisers between September 2012 and March 2013.

Net Income/Earnings Per Share
Set forth below are the details to reconcile reported net income to adjusted net income, including the specific adjustments.

Second quarter 2013 adjusted net income increased 13% over the same period in 2012 driven primarily by income generated on aircraft sales in the second quarter of 2013.

Second quarter 2013 adjusted earnings per share increased 39% over the same period in 2012 driven primarily by the income from aircraft sales as well as the share repurchases completed in 2012.

The decrease in total revenue (basic lease rents) and net spread was driven primarily by the sale of older aircraft including the ALS portfolio, partially offset by purchases of new aircraft.

Basic lease rents were $219.5 million for the second quarter of 2013, a decrease of 7% compared with the same period in 2012. Our average lease assets decreased by 5% to $7.6 billion compared with the second quarter of 2012.

Lease revenue for the second quarter of 2013 was $229.8 million, compared with $247.4 million for the same period in 2012, a decrease of 7%.

Net gain on sale of assets for the second quarter of 2013 was $10.5 million, compared to $0.7 million for the same period in 2012.

Interest on debt excluding the above non-recurring charges for the three months ended June 30, 2013 and 2012 includes $8.3 million and $6.5 million of amortization of debt issuance costs, respectively. Interest on debt excluding the above non-recurring charges for the six months ended June 30, 2013 and 2012 includes $15.9 million and $13.6 million of amortization of debt issuance costs, respectively.

As shown in the table above, interest expense excluding the impact of the mark-to-market of interest rate caps and non-recurring charges was $59.4 million in the second quarter of 2013, a 4% decrease compared with the same period in 2012. Net spread in the second quarter of 2013 decreased 8% compared with the same period in 2012. The decrease in net spread was driven primarily by the sale of older aircraft including the ALS portfolio, partially offset by purchases of new aircraft. As a result, the average age of our aircraft portfolio was reduced to 5.3 years.

Selling, General and Administrative Expenses
Other selling, general and administrative expenses were $21.8 million in the second quarter of 2013, compared to $18.0 million in the same period in 2012. The increase was primarily due to project related fees.

Effective Tax Rate
AerCap’s blended effective tax rate during the first six months of 2013 was 8.5%. The blended effective tax rate in 2012 was 5.2%. The blended effective tax rate in any year is impacted by the source and amount of earnings among AerCap’s different tax jurisdictions. The 2012 tax rate was reduced by the loss from the ALS transaction and non-recurring charges from repayment of certain secured loans.

The decrease in our total cash balance was driven primarily by the use of $257 million cash for share repurchases in the second half of 2012, a temporary decrease of approximately $100 million from funding several aircraft with cash, and a $42 million repayment in 2013 of our most expensive debt.

As of June 30, 2013, AerCap’s portfolio consisted of 368 aircraft that were either owned and consolidated, on order, under contract or letter of intent, managed or owned by AerDragon, a non-consolidated joint venture. The average age of the owned fleet as of June 30, 2013 is 5.3 years and the average remaining contracted lease term is 6.6 years.