AerCap Holdings N.V. Reports Fourth Quarter and Full Year 2012 Financial Results

Amsterdam, Netherlands; February 20, 2013 – AerCap Holdings N.V. (the “Company” or “AerCap”) (NYSE: AER) today announced the results of its operations for the fourth quarter and full year ended December 31, 2012.

Fourth Quarter 2012 Financial Highlights
Fourth quarter 2012 reported net income was $11.2 million, compared with $76.4 million for the same period in 2011. Fourth quarter 2012 reported basic and diluted earnings per share was $0.09, compared with $0.54 for the same period in 2011.

Fourth quarter 2012 included a $54.6 million charge, net of tax, relating to the sale of our ALS portfolio which is essentially offset by expected future servicing fees and interest income.

Fourth quarter 2012 adjusted net income was $67.5 million, compared with $79.8 million for the same period in 2011. Fourth quarter 2012 adjusted earnings per share was $0.57, unchanged from the same period in 2011.

The sale of our ALS securitization portfolio results in cash generation of approximately $380 million, inclusive of expected future servicing fees, and reduces the average age of the AerCap portfolio to 5.1 years.

Net interest margin earned on lease assets, or net spread, was $159.9 million in the fourth quarter of 2012 compared with $178.3 million for the same period in 2011. Net interest margin as a percentage of average lease assets was 8.5% for fourth quarter 2012 as compared with 9.0% for the same period in 2011. The decrease is attributable primarily to the sale of the ALS portfolio.

Total assets were $8.6 billion at December 31, 2012, a decrease of 8% over total assets of $9.1 billion at December 31, 2011. The net decrease was primarily attributable to the sale of the ALS portfolio, which was partially offset by new aircraft deliveries.

The debt to equity ratio was 2.7 to 1 at December 31, 2012, unchanged from December 31, 2011.

Financing transactions totaling $670 million were closed, including a $285 million working capital facility.

Unrestricted cash as of December 31, 2012 was $520.4 million. In addition, the undrawn working capital facility of $285 million was available.

Aengus Kelly, CEO of AerCap, commented: “2012 was an outstanding year for AerCap. We became the first and only independent lessor to be rated investment grade. We also executed a large share buyback program that has generated significant value for our shareholders. In addition, we continued with our proactive portfolio management strategy, disposing of over $1.4 billion of predominantly older aircraft and acquiring over $1.1 billion of new aircraft on long term leases. All of this was achieved as we continued to produce industry leading profitability with $258 million of adjusted net income.”

Full Year 2012 Financial Highlights
Full year 2012 reported net income was $163.7 million, compared with $172.2 million for full year 2011. Full year 2012 reported basic and diluted earnings per share was $1.24, compared with $1.17 for full year 2011.

Full year 2012 adjusted net income was $258.0 million, compared with $303.1 million for full year 2011. Full year 2012 adjusted earnings per share was $1.96, compared with $2.07 for full year 2011.

Net interest margin earned on lease assets, or net spread, was $684.2 million for the full year 2012 compared with $718.1 million for full year 2011. Net interest margin as a percent to average lease assets was 8.70% for full year 2012 as compared with 9.05% for full year 2011. The decrease is attributable primarily to the sale of the ALS portfolio.

Repurchases of 26.5 million shares were completed in 2012 with a total cost of $320 million (average price per share of $12.06). The book value per share at December 31, 2012 was $18.74, as compared with $16.28 at December 31, 2011.

AerCap’s CFO, Keith Helming, added:“We are extremely pleased with our capital raising initiatives during 2012, completing $1.5 billion of financing transactions including the Company’s initial $300 million unsecured bond issuance in May. Additionally, the fourth quarter sale of our ALS portfolio and closing of the working capital facility improved the company’s liquidity by $650 million. As a result, the Company is extremely well positioned for 2013 with year-end liquidity of over $800 million including unrestricted cash.”

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

The decrease in adjusted net income, in the fourth quarter of 2012 compared with the fourth quarter of 2011, was driven primarily by the impact from defaults and restructurings.

Revenue and Net Spread

Basic lease rents were $222.2 million for the fourth quarter of 2012, a decrease of 6% compared with the same period in 2011, due primarily to the sale of the ALS portfolio. Our average lease assets decreased by 5% to $7.5 billion compared with the fourth quarter of 2011.
Basic rents, maintenance rents and other receipts, or total lease revenue, for the fourth quarter of 2012 was $233.4 million, compared with $263.2 million for the same period in 2011, a decrease of 11%. The decrease is driven by the sale of the ALS portfolio and defaults and restructurings.
Net loss on sale of assets for the fourth quarter of 2012 was $47.5 million. This included a $59.9 million pretax loss on sale of the ALS portfolio. Net gain on sale of aircraft excluding this $59.9 million loss was $12.4 million, compared to $0.1 million for the same period in 2011.

As shown in the table above, interest expense excluding the impact of the mark-to-market of interest rate caps was $62.3 million in the fourth quarter of 2012, a 6% increase compared with the same period in 2011. The increase was driven primarily by an increase in the amount of long-term, fixed rate funding. Net spread in the fourth quarter of 2012 decreased 10% compared with the same period in 2011, due primarily to the sale of the ALS portfolio.
Selling, General and Administrative expenses

Effective Tax Rate
AerCap’s blended effective tax rate during the full year 2012 was 5.2%. The blended effective tax rate in 2011 was 6.7%.
Financial Position

As of December 31, 2012, AerCap’s portfolio consisted of 333 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, adjusted net income excludes the following non-recurring charges:
Fourth quarter 2012 adjusted net income of $67.5 million excludes the loss on sale of the ALS portfolio of $54.6 million, net of tax.
Adjusted net income of $258.0 million for the twelve months ended December 31, 2012 excludes the non-recurring charges to interest expense from the early repayment of secured loans of $20.9 million, net of tax and the loss on sale of the ALS portfolio of $54.6 million, net of tax.
Adjusted net income of $303.1 million for the twelve months ended December 31, 2011 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 $52.8 million, net of tax.

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 adjusted net income to net income for the three- and twelve-month periods ended December 31, 2012 and 2011:

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.