AerCap Holdings N.V. Reports Record Third Quarter Financial Results

Adjusted net income was $315.8 million for the third quarter of 2014, an increase of 253% over the same period in 2013.

Adjusted earnings per share were $1.49 for the third quarter of 2014, an increase of 89% over the same period in 2013.

Operational Update

The integration of the ILFC business remains on track. The primary IT systems were successfully integrated on schedule by the end of the third quarter of 2014.

Annualized net spread percentage for the third quarter was 10.1%, up from 8.8% in the same period of 2013.

Our fleet utilization rate was 99.3% for the third quarter of 2014. The average age of the owned fleet as of September 30, 2014 was 7.6 years and the average remaining contracted lease term was 5.5 years.

We executed 134 aircraft transactions during the third quarter of 2014.

As of September 30, 2014, we had committed to purchase 391 aircraft with scheduled delivery dates up to 2022. Over 90% of our committed aircraft purchases delivering through December 2016 and nearly 60% delivering through 2019 are placed, either under lease contract or letter of intent.

Nearly all of the ILFC aircraft as well as substantial business operations have been transferred to Ireland.

As of September 30, 2014, we had $6.6 billion of available liquidity. Since the announcement of the ILFC transaction in December 2013, $8.9 billion of funding has been raised.

Aengus Kelly, CEO of AerCap, commented: “The third quarter of 2014 was the first fully consolidated quarter and I am pleased to report that we have achieved record earnings of over $300 million and ended the quarter with total assets of $44 billion. These financial results are a testament to the success of the integration and the tireless efforts of the entire AerCap team around the globe.”

Third Quarter Key Highlights

We purchased nine aircraft with a total value of $0.7 billion and exercised an option to purchase 50 A320neo family aircraft from Airbus.

We executed $1.5 billion of financing transactions, including the previously announced private placement of $800 million of notes.

We signed agreements with Virgin Atlantic Airways for the purchase and leaseback of seven Boeing 787 aircraft that Virgin Atlantic Airways has on order from Boeing. The lease terms for all aircraft are twelve years and deliveries will start in October 2014.

Third Quarter 2014 Financial Results

Third quarter 2014 reported net income was $340.9 million, compared with $83.6 million for the same period in 2013. Third quarter 2014 reported basic earnings per share were $1.61, compared with $0.74 for the same period in 2013. The increase in net income and earnings per share over third quarter 2013 were driven primarily by the ILFC transaction.

Third quarter 2014 adjusted net income was $315.8 million, compared with $89.4 million for the same period in 2013. Third quarter 2014 adjusted earnings per share were $1.49, compared with $0.79 for the same period in 2013. The increase in adjusted net income and earnings per share over third quarter 2013 were driven primarily by the ILFC transaction.

Net interest margin earned on lease assets, or net spread, was $905.8 million in the third quarter of 2014 compared with $174.8 million for the same period in 2013. Annualized net spread percentage was 10.1% for the third quarter 2014, compared with 8.8% for the same period in 2013. The increase was primarily attributable to the ILFC transaction.

The adjusted debt to equity ratio was 3.5 to 1 at September 30, 2014, compared to 2.6 to 1 for the same period in 2013, reflecting our acquisition of ILFC.

Total assets were $43.9 billion as of September 30, 2014.

Net Income/Earnings Per Share

Third quarter 2014 adjusted net income increased 253% over the same period in 2013 and third quarter 2014 adjusted earnings per share increased 89% over the same period in 2013. The increases were driven primarily by the ILFC transaction. Reported and adjusted net income included $20 million of non-recurring income.

Adjusted net income reflects expensing the maintenance rights asset over the remaining economic life of the aircraft as compared to expensing this asset during the remaining lease term as reflected in reported net income. The maintenance rights asset represents the difference between the actual physical condition of the aircraft at the ILFC acquisition date and the value based on the contractual return conditions in the lease contracts. We believe this measure may further assist investors in their understanding of our operational and financial performance. The difference in the two methods will have no economic impact as it is non-cash and equalizes over time.

Revenue and Net Spread

Basic lease rents were $1,172.3 million for the third quarter of 2014, compared with $234.3 million in the same period in 2013. The increase was driven primarily by the ILFC transaction and new aircraft purchases. Our average lease assets were $35.9 billion, compared with $8.0 billion for the same period in 2013.

Lease revenue for the third quarter of 2014 was $1,222.1 million, compared with $258.0 million for the same period in 2013.

Net gain on sale of assets for the third quarter of 2014 was $2.8 million, compared with $10.7 million for the same period in 2013.

Other income for the third quarter of 2014 was $26.1 million, compared with $10.7 million for the same period in 2013. The increase was driven by the ILFC acquisition and relates primarily to income from our AeroTurbine subsidiary.

As shown in the table above, adjusted interest expenses were $266.5 million in the third quarter of 2014, a 348% increase compared with the same period in 2013. Net spread was $905.8 million in the third quarter of 2014, a 418% increase compared with the same period in 2013.

Selling, General and Administrative Expenses

The increase in selling, general, and administrative expenses, period over period, reflects the ILFC acquisition.

Effective Tax Rate

AerCap’s blended effective tax rate during the first nine months of 2014 was 17.5%. The blended effective tax rate for the year ended December 31, 2013 was 8.4%. The increase is driven primarily by the ILFC acquisition. The blended effective tax rate in any year is impacted by the source and amount of earnings among AerCap’s different tax jurisdictions.

Financial Position

As of September 30, 2014, AerCap’s portfolio consisted of 1,676 aircraft that were owned (including aircraft owned by AerDragon, a non-consolidated joint venture), on order, under contract or managed. The average age of the owned fleet as of September 30, 2014 was 7.6 years and the average remaining contracted lease term was 5.5 years.