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February 23, 2016

AerCap Reports Record 2015 Financial Results and Authorizes Share Repurchase Program of $400 Million

DUBLIN

  • Adjusted net income was:
    • $1,275.8 million for the full year 2015
      (reported net income of $1,178.7 million)
    • $282.1 million for the fourth quarter of 2015
      (reported net income of $264.2 million)
  • Adjusted basic earnings per share were:
    • $6.26 for the full year 2015
      (reported basic earnings per share of $5.78)
    • $1.43 for the fourth quarter of 2015
      (reported basic earnings per share of $1.34)

Highlights

  • 405 aircraft transactions executed in 2015, including 117 widebody aircraft.
  • $9.2 billion of available liquidity, as of December 31, 2015.
  • $1.9 billion of funding raised since December 1, 2015, at an average cost of ~3.6%.
  • 99.5% fleet utilization rate for the full year 2015.
  • 5.9 years of average remaining lease term, as of December 31, 2015.
  • Over 85% of aircraft deliveries through 2018 have been leased under a contract or letter of intent on an average 12-year lease term.
  • Debt/equity ratio of 2.9 to 1 as of December 31, 2015.
  • Book value per share over $42 as of December 31, 2015.
  • Board authorized a $400 million share repurchase program, which will run through June 30, 2016.

Aengus Kelly, CEO of AerCap, commented: “We ended 2015 with record earnings and liquidity of $1.3 billion and $9.2 billion, respectively. These results reflect the consistency of our earnings and the excellent operational performance of AerCap. As we look forward to 2016 we continue to see robust demand for our aircraft and a financing market that is extremely receptive to the AerCap name. As a result, we are pleased to announce a $400 million share repurchase program.”

Full Year 2015 Financial Results

  • Adjusted net income of $1,275.8 million, compared with $855.5 million for full year 2014. Adjusted basic earnings per share of $6.26, compared with $4.86 for full year 2014. Increases in adjusted net income and earnings per share over full year 2014 were driven primarily by the full year impact of the ILFC Transaction and gain on sale of assets.
  • Reported net income of $1,178.7 million, compared with $810.4 million for full year 2014. Reported basic earnings per share of $5.78, compared with $4.61 for full year 2014. Increases in reported net income and earnings per share were driven by the same factors as adjusted net income.

Fourth Quarter 2015 Financial Results

  • Adjusted net income of $282.1 million, compared with $296.7 million for the same period in 2014. Adjusted basic earnings per share of $1.43, compared with $1.40 for the same period in 2014. Adjusted net income and earnings per share were primarily impacted by non-cash expenses related to the restructuring of AeroTurbine, partially offset by higher gain on sale of assets and, in the case of earnings per share, lower outstanding shares as a result of share repurchases completed in the second quarter of 2015.
  • Reported net income of $264.2 million, compared with $298.2 million for the same period in 2014. Reported basic earnings per share of $1.34, compared with $1.41 for the same period in 2014. Reportednet income and earnings per share were driven by the same factors as adjusted net income in addition to lower maintenance rights related expenses included in the results for the fourth quarter of 2014.

Net Income/Earnings Per Share

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

  Three months ended December 31, Year ended December 31,
  2015 2014

% increase/
(decrease)

2015 2014

% increase/
(decrease)

   (U.S. dollars in millions except per share amounts)
             
Net income $264.2 $298.2 (11%) $1,178.7 $810.4 45%
             
Adjusted for:            
Mark-to-market of interest rate caps and swaps, net of tax (0.1) 4.2 NA 15.9 $14.6 9%
Transaction and integration related expenses, net of tax 1.3 10.4 (88%) 8.4 130.2 (94%)
Maintenance rights related expenses, net of tax 16.7 (16.1) NA 72.8 (99.7) NA
Adjusted net income $282.1 $296.7 (5%) $1,275.8 $855.5 49%
             
Adjusted earnings per share - basic $1.43 $1.40 2% $6.26 $4.86 29%
Adjusted earnings per share - diluted $1.42 $1.38 2% $6.19 $4.79 29%

Fourth quarter 2015 adjusted net income decreased 5% compared with the same period in 2014 and fourth quarter 2015 adjusted earnings per share increased 2% over the same period in 2014 both of which were primarily impacted by non-cash expenses related to the restructuring of AeroTurbine, partially offset by higher gain on sale of assets and, in the case of earnings per share, lower outstanding shares as a result of share repurchases completed in the second quarter of 2015. Fourth quarter 2015 reported net income and reportedearnings per share were impacted by the same drivers and the adjustments set forth in the table.

Adjusted net income reflects, among other items, 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 former ILFC aircraft at the acquisition date and the value based on the contractual return conditions in the lease contracts. We believe adjusted net income may further assist investors in their understanding of our operational and financial performance. The difference in the two methods has no economic impact as it is non-cash and equalizes over time. Refer to Notes Regarding Financial Information Presented in This Press Release for details relating to the adjustments.

Revenue and Net Spread

  Three months ended December 31, Year ended December 31,
  2015 2014

% increase/
(decrease)

2015 2014

% increase/
(decrease)

   (U.S. dollars in millions)
Lease revenue:            
Basic lease rents $1,148.8 $1,159.0 (1%) $4,635.8 $3,282.8 41%
Maintenance rents and other receipts 136.7 79.8 71% 355.8 166.8 113%
Lease revenue 1,285.5 1,238.8 4% 4,991.6 3,449.6 45%
Net gain on sale of assets 43.4 25.8 68% 183.3 37.5 389%
Other income 9.1 28.0 (68%) 112.7 104.5 8%
Total Revenues and other income 1,338.0 $1,292.6 4% $5,287.6 $3,591.6 47%

Basic lease rents were $1,148.8 million for the fourth quarter of 2015, compared with $1,159.0 million for the same period in 2014. The decrease was primarily due to the sale of older aircraft, partially offset by the purchase of new aircraft. Our average lease assets for the fourth quarter of 2015 were $35.8 billion, compared with $36.1 billion for the same period in 2014.

Maintenance rents and other receipts were $136.7 million for the fourth quarter of 2015, compared with $79.8 million for the same period in 2014. The increase was driven primarily by maintenance liability releases upon agreed lease terminations related to 17 aircraft in the fourth quarter of 2015. All of these aircraft have been released or sold or are expected to be sold.

Net gain on sale of assets for the fourth quarter of 2015 was $43.4 million, relating to 22 aircraft, compared with a net gain of $25.8 million for the same period in 2014, relating to nine aircraft. During the fourth quarter of 2015, we also parted-out three aircraft and reclassified three aircraft to finance leases, which had no impact on net gain on sale of assets.

Other income for the fourth quarter of 2015 was $9.1 million, compared with $28.0 million for the same period in 2014.

  Three months ended December 31, Year ended December 31,
  2015 2014

% increase/
(decrease)

  2014

% increase/
(decrease)

 (U.S. dollars in millions)
Basic lease rents $1,148.8 $1,159.0 (1%)   $3,282.8 41%
             
Interest expense 274.4 280.3 (2%)   780.3 41%
Adjusted for:            
Mark-to-market of interest rate caps and swaps 0.1 (4.8) NA   (16.7) 9%
Adjusted interest expense 274.5 275.5 (0%)   763.6 42%
             
Net interest margin, or net spread $874.3 $883.5 (1%)   $2,519.2 41%

As shown in the table above, adjusted interest expense was $274.5 million in the fourth quarter of 2015. Net spread was $874.3 million in the fourth quarter of 2015, a 1% decrease compared with the same period in 2014, driven primarily by lower average lease assets resulting in lower basic lease rents.

Selling, General and Administrative Expenses

  Three months ended December 31, Year ended December 31,
  2015 2014

% increase/
(decrease)

2015 2014

% increase/
(decrease)

   (U.S. dollars in millions)
Selling, general and administrative expenses $78.6 $92.6 (15%) $281.1 $231.7 21%
Share-based compensation expenses 25.0 24.9 0% 100.2 68.2 47%
Total selling, general and administrative expenses $103.6 $117.5 (12%) $381.3 $299.9 27%

The decrease in selling, general, and administrative expenses, quarter over quarter, reflects realized synergies after the ILFC Transaction.

Other Expenses

Leasing expenses were $126.3 million for the fourth quarter of 2015, compared with $74.8 million for the same period in 2014. The increase was driven primarily by higher maintenance rights related expenses. Transaction, integration and restructuring related expenses were $50.8 million for the fourth quarter of 2015, compared with $11.9 million for the same period in 2014. Transaction, integration and restructuring related expenses in the fourth quarter of 2015 include a write down of leased engines and intangibles of $22.4 million and $24.8 million, respectively and $2.1 million of severance expenses all related to the restructuring of AeroTurbine, and $1.5 million related to the ILFC acquisition.

Effective Tax Rate

AerCap’s blended effective tax rate during the full year 2015 was 13.9%. The blended effective tax rate for the full year 2014 was 15.0%. The decrease in our effective tax rate is driven primarily by the transfer of aircraft from the United States to Ireland. 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

 

December 31,
2015

December 31,
2014

% increase/
(decrease) over
December 31,
2014

 (U.S. dollars in millions except d/e ratio)
Total cash (incl. restricted) $2,822.5 $2,207.8 28%
Total lease assets (*) 35,652.3 36,034.9 (1%)
Total assets 43,914.5 43,867.4 0%
Debt 29,806.8 30,402.4 (2%)
Total liabilities 35,488.7 35,924.8 (1%)
Total equity 8,425.8 7,942.5 6%
Adjusted debt (**) 26,653.7 28,412.0 (6%)
Adjusted equity (**) 9,175.8 8,442.5 9%
Debt/equity ratio 2.9 to 1 3.4 to 1 (15%)
(*) Includes flight equipment held for operating lease, net investment in finance and sales-type leases and maintenance rights intangible asset
(**) Refer to Notes Regarding Financial Information Presented in This Press Release for details relating to the adjustments

As of December 31, 2015, AerCap’s portfolio consisted of 1,697 aircraft that were owned, on order, under contract or managed (including aircraft owned by AerDragon, a non-consolidated joint venture). The average age of the owned fleet as of December 31, 2015 was 7.7 years and the average remaining contracted lease term was 5.9 years.

Share Repurchase Program

We have authorized a $400 million share repurchase program, which will run through June 30, 2016. Repurchases under the program may be made through open market purchases or privately negotiated transactions in accordance with applicable U.S. federal securities laws. The timing of repurchases and the exact number of shares of common stock to be purchased will be determined by the Company’s management, in its discretion, and will depend upon market conditions and other factors. The program will be funded using the Company’s cash on hand and cash generated from operations. The program may be suspended or discontinued at any time.

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. We believe these measures may further assist investors in their understanding of our operational performance.

Adjusted net income and adjusted earnings per share. These measures are determined by adding non-cash charges relating to gains and losses created by a mark-to-market of our interest rate caps and swaps, an adjustment for maintenance rights related expense, and transaction and integration related expenses, in each case during the applicable period and net of tax, to GAAP net income. The average number of shares is based on a daily average.

We use interest rate caps and swaps 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 and some of our swaps. As a result, we recognize the change in fair value of these interest rate caps and swaps in our income statement during each period.

In connection with the ILFC Transaction, we have recognized maintenance rights intangible assets associated with existing leases on the legacy ILFC aircraft and we are expensing these assets during the remaining lease terms. The adjustment for maintenance rights related expense represents the difference between expensing the maintenance rights intangible assets on a more accelerated basis during the remaining lease terms (as in the Company’s reported net income) as compared to expensing these assets on a straight-line basis over the remaining economic life of the aircraft (as in the Company’s adjusted net income).

In addition, adjusted net income excludes the following non-recurring charges:

  • Fourth quarter 2015 adjusted net income of $282.1 million excludes expenses relating to the ILFC transaction and integration of $1.3 million, net of tax.
  • Adjusted net income of $1,275.8 million for the full year 2015 excludes expenses relating to the ILFC transaction and integration of $8.4 million, net of tax.
  • Fourth quarter 2014 adjusted net income of $296.7 million excludes expenses relating to the ILFC transaction and integration of $10.4 million, net of tax.
  • Adjusted net income of $855.5 million for the full year 2014 excludes expenses relating to the ILFC transaction and integration of $130.2 million, net of tax.

In addition to GAAP net income and earnings per share, we believe these measures may further assist investors in their understanding of our operational performance in relation to past and future reporting periods. A reconciliation of adjusted net income to net income for the three and twelve month periods ended December 31, 2015 and 2014 is presented in a table under the Net Income/Earnings Per Share section of this press release.

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 of 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 changes in the amount of debt and interest rates.

Debt/equity ratio. This measure is the ratio obtained by dividing adjusted debt by adjusted equity.

  • Adjusted debt means consolidated total debt less cash and cash equivalents, and less a 50% equity credit with respect to certain long-term subordinated debt.
  • Adjusted equity means total equity, plus the 50% equity credit relating to the long-term subordinated debt.

Adjusted debt and adjusted equity are adjusted by the 50% equity credit to reflect the equity nature of those financing arrangements and to provide information that is consistent with definitions under certain of our debt covenants.

Conference Call
In connection with the earnings release, management will host an earnings conference call today, Tuesday, February 23, 2016, at 9:00 am Eastern Time. The call can be accessed live by dialing (U.S./Canada) +1 646 254 3366 or (International) +353(0)1 4860920 and referencing code 6266402 at least 5 minutes before start time, or by visiting AerCap’s website at 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.

For further details and to register for this event please email: aercap@instinctif.com.

For further information, contact John Wikoff: +31 63 169 9430 (jwikoff@aercap.com) or Mark Walter (Instinctif Partners): +44 20 7457 2020 (aercap@instinctif.com).

About AerCap
AerCap is the global leader in aircraft leasing with approximately 1,700 owned, managed or on order aircraft in its portfolio. AerCap has one of the most attractive order books in the industry. AerCap serves over 200 customers in approximately 80 countries with comprehensive fleet solutions, and provides part-out and engine leasing services through its subsidiary, AeroTurbine. AerCap is listed on the New York Stock Exchange (AER) and has its headquarters in Dublin with offices in Amsterdam, Los Angeles, Shannon, Fort Lauderdale, Miami, Singapore, Shanghai, Abu Dhabi, Seattle and Toulouse.

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 and 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, we cannot assure you 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. Except as required by applicable law, 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 www.aercap.com.

Financial Statements Follow
The results of ILFC have been consolidated in AerCap Holdings N.V.'s financial statements as of May 14, 2014, the completion date of the acquisition.

  December 31, 2015 December 31, 2014
Assets    
Cash and cash equivalents $2,403,098 $1,490,369
Restricted cash 419,447 717,388
Trade receivables 106,794 160,412
Flight equipment held for operating leases, net 32,219,494 31,984,668
Maintenance rights intangible and lease premium, net 3,139,045 3,906,026
Flight equipment held for sale 71,055 14,082
Net investment in finance and sales-type leases 469,198 347,091
Prepayments on flight equipment 3,300,426 3,486,514
Other intangibles, net 461,006 523,709
Deferred income tax assets 161,193 190,029
Other assets 1,163,723 1,047,092
Total Assets $43,914,479 $43,867,380
     
Liabilities and Equity    
Accounts payable, accrued expenses and other liabilities $1,239,199 $1,195,880
Accrued maintenance liability 3,185,794 3,194,365
Lessee deposit liability 891,454 848,332
Debt 29,806,843 30,402,392
Deferred income tax liabilities 365,380 283,863
Total liabilities 35,488,670 35,924,832
     
Ordinary share capital €0.01 par value (350,000,000 ordinary  
shares authorized, 203,411,207 ordinary shares issued and  
200,342,204 ordinary shares outstanding at December 31, 2015  
and 212,318,291 ordinary shares issued and outstanding at  
December 31, 2014) 2,457 2,559
Additional paid-in capital 5,026,993 5,557,627
Treasury shares (3,069,003 ordinary shares) (146,312) -
Accumulated other comprehensive loss (6,307) (6,895)
Accumulated retained earnings 3,472,132 2,310,486
Total AerCap Holdings N.V. shareholders' equity 8,348,963 7,863,777
Non-controlling interest 76,846 78,771
Total Equity 8,425,809 7,942,548
     
Total Liabilities and Equity 43,914,479 43,867,380

AerCap Holdings N.V.
Unaudited Consolidated Income Statements
(U.S. Dollars in thousands, except share and per share data)

  Three months ended December 31, Year ended December 31,
  2015 2014 2015 2014
Revenues and other income        
Lease revenue $1,285,446 $1,238,837 $4,991,551 $3,449,571
Net gain on sale of assets 43,445 25,841 183,328 37,497
Other income 9,123 27,961 112,676 104,491
Total Revenues and other income 1,338,014 1,292,639 5,287,555 3,591,559
         
Expenses        
Depreciation and amortization 471,719 458,512 1,843,003 1,282,228
Asset impairment 980 19,957 16,335 21,828
Interest expense 274,410 280,310 1,099,884 780,349
Leasing expenses 126,309 74,843 522,413 141,572
Transaction, integration and restructuring related expenses 50,814 11,929 58,913 148,792
Selling, general and administrative expenses 103,579 117,494 381,308 299,892
Total Expenses 1,027,811 963,045 3,921,856 2,674,661
         

Income before income taxes and income of investments accounted for under the equity method

310,203 329,594 1,365,699 916,898
         
Provision for income taxes (47,311) (34,595) (189,805) (137,373)
Equity in net earnings of investments accounted for under the equity method 1,820 1,773 1,278 28,973
         
Net income $264,712 $296,772 $1,177,172 $808,498
         
Net (income) loss attributable to non-controlling interest (503) 1,448 1,558 1,949
         

Net income attributable to AerCap Holdings N.V.

$264,209 298,220 1,178,730 810,447
         
Basic earnings per share $1.34 $1.41 $5.78 $4.61
Diluted earnings per share $1.33 $1.39 $5.72 $4.54
         
Weighted average shares outstanding - basic 197,310,382 212,086,151 203,850,828 175,912,662
Weighted average shares outstanding - diluted 199,266,901 214,580,092 206,224,135 178,684,989

AerCap Holdings N.V.
Unaudited Consolidated Statements of Cash Flows
(U.S. Dollars in thousands)

  Year ended December 31,
  2015 2014
Net income $1,177,172 $808,498
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization 1,843,003 1,282,228
Asset impairment 16,335 21,828
Amortization of debt issuance costs and debt discount 45,582 86,184
Amortization of lease premium intangibles 23,042 17,967
Amortization of fair value adjustment on debt (442,972) (330,924)
Accretion of fair value adjustment on deposits and maintenance liabilities 76,246 71,806
Maintenance rights write off 628,643 130,806
Maintenance liability release to income (243,809) (92,296)
Net gain on sale of assets (183,328) (37,497
Deferred income taxes 110,353 115,859
Restructuring expenses 49,311 -
Other 90,074 102,139
Changes in operating assets and liabilities: -
Trade receivables 48,468 102,547
Other assets 88,418 12,704
Accounts payable, accrued expenses and other liabilities 33,502 21,825
Net cash provided by operating activities 3,360,040 2,313,674
     
Purchase of flight equipment (2,772,110 (2,088,444)
Proceeds from sale or disposal of assets 1,568,235 569,633
Prepayments on flight equipment (791,546 (458,174)
Acquisition of ILFC, net of cash acquired - (195,311)
Collections of finance and sales-type leases 54,975 40,983
Movement in restricted cash 297,941 282,523
Other (73,400) -
Net cash used in investing activities (1,715,905) (1,848,790
     
Issuance of debt 3,913,840 5,411,602
Repayment of debt (4,043,743) (4,826,775)
Debt issuance costs paid (49,417) (134,963)
Maintenance payments received 776,488 561,558
Maintenance payments returned (558,477) (286,041)
Security deposits received 171,408 107,332
Security deposits returned (144,445) (98,656)
Repurchase of shares and tax withholdings on share-based compensation (793,945) -
Net cash (used in) provided by financing activities (728,291) 734,057
     
Net increase in cash and cash equivalents 915,844 1,198,941
Effect of exchange rate changes on cash and cash equivalents (3,115) (4,086)
Cash and cash equivalents at beginning of period 1,490,369 295,514
Cash and cash equivalents at end of period $2,403,098 $1,490,369

For Investors:
Keith Helming, +353 1 636 0924
Chief Financial Officer
khelming@aercap.com #

or

For Investors/Media:
John Wikoff, +31 20 655 9661
Investor Relations
jwikoff@aercap.com