AerCap Holdings N.V. Reports Fourth Quarter and Full Year 2008 Financial Results

AMSTERDAM, Feb. 25 /PRNewswire-FirstCall/ -- 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, 2008.

Fourth Quarter 2008 Highlights

  • Fourth quarter 2008 net loss was $19.0 million, compared with net income of $45.1 million for the same period in 2007. Fourth quarter 2008 net income excluding the impact of the mark-to-market of interest rate caps and share-based compensation was $18.7 million, compared with $57.0 million in fourth quarter 2007 on the same basis.
  • Fourth quarter net loss included charges of $21.0 million, net of tax related to the previously disclosed airline defaults and inventory impairments.
  • Fourth quarter 2008 basic and diluted loss per share was $0.22. Fourth quarter 2008 basic and diluted earnings per share excluding the impact of the mark-to-market of interest rate caps and share-based compensation were $0.22.
  • Net spread, the difference between basic lease rents and interest expense excluding the impact from the mark-to-market of interest rate caps, was $87.8 million in fourth quarter 2008 compared to $79.0 million in fourth quarter 2007, an increase of 11%. This measure reflects the increase in leasing income.
  • Total revenue for the fourth quarter 2008 was $326.4 million, compared to $284.6 million for the same period in 2007. The increase was mainly due to higher aircraft sales revenue.
  • Sales revenue for the fourth quarter 2008 was $170.9 million, compared to $138.0 million for the same period in 2007, and was generated from the sale of two aircraft, five engines and parts inventory.
  • Total assets were $5.4 billion at December 31, 2008, an increase of 23% over total assets of $4.4 billion at December 31, 2007.

Full Year 2008 Key Financial Highlights

  • Full year 2008 net income was $151.8 million, compared with $188.5 million for 2007. Full year 2008 net income excluding non-cash charges relating to the mark-to-market of our interest rate caps and share-based compensation was $197.8 million, down 6% vs. $210.6 million in 2007, which was mainly caused by the previously disclosed airline defaults, inventory impairments, lower gains from sales and lower other revenue.
  • Full year 2008 basic and diluted earnings per share were $1.79. Full year 2008 basic and diluted earnings per share excluding the impact of the mark-to-market of interest rate caps and share-based compensation were $2.33.
  • Total revenue for the full year 2008 was $1,256.3 million, up 7% vs. 2007.
  • Net spread for the full year 2008 was $359.6 million, up 19% vs. 2007.
  • Sales revenue for the full year 2008 was $616.6 million, up 10% vs. 2007.
  • Aviation assets purchased and delivered in 2008 were $1.5 billion. In addition to these completed purchases, at December 31, 2008 AerCap had signed agreements for the purchase of four aircraft and letters of intent for the purchase of two aircraft.

Fourth Quarter 2008 Financing Highlights - Previously Disclosed

  • AerCap signed a facility agreement with Calyon S.A. and other banks and financial institutions, outlining the terms pursuant to which the European Export Credit Agencies may provide guarantees on up to $1.4 billion of financing. This represents a significant portion of the remaining financing needed for the Airbus A330 order delivering between 2009 and 2012. The European Export Credit Agencies consist of Coface in France, ECGD in the United Kingdom, and Euler-Hermes in Germany. The loans are to be provided by a syndicate of banks led by Calyon acting as Global Arranger and are subject to customary ECA requirements.

Klaus Heinemann, CEO of AerCap, commented: "We are operating in an extremely difficult economic climate, but despite these challenges AerCap has continued to execute its growth strategy, including entering into new lease contracts and delivering aircraft to its lessees, along with arranging and maintaining committed financing sources. The combination of our experienced management team, coupled with stable core lease revenues and committed funding facilities provide a foundation with which to deal with the ongoing market challenges. Notwithstanding, the global financial markets are marked with considerable uncertainty and volatility. As such, if conditions erode further in 2009, such developments may have an adverse impact on the Company's clients and therefore, the Company. As a result, we will remain focused on liquidity and work toward minimizing any disruption these unprecedented market conditions may have on the Company's aircraft portfolio in the coming months."

AerCap's CFO, Keith Helming, added, "We are pleased with our performance during 2008, particularly in light of the current financial crisis and related airline defaults. Notwithstanding adverse market conditions, we continue to deliver revenue growth and derive significant advantages from the current low interest rate environment as a result of our hedging strategy, which is reflected in our increased net spread."

Summary of Financial Results

AerCap recorded a fourth quarter 2008 net loss of $19.0 million or $0.22 loss per basic and diluted share. Included in the fourth quarter 2008 net loss amount were charges relating to the mark-to-market of interest rate caps and share-based compensation of $37.7 million or $0.44 per basic and diluted share, net of tax. The after-tax charge relating to the mark-to-market of our interest rate caps was $35.9 million and the after-tax charge from share-based compensation was $1.8 million.

Detailed Financial Data

($ in Millions)

Operating results

                         Three months ended          Twelve months ended
                            December 31,                 December 31,
                                    % increase/                  % increase/
                      2008     2007  (decrease)    2008    2007   (decrease)

    Revenues        $326.4   $284.6      15%   $1,256.3  $1,176.5     7%
    Net income       (19.0)    45.1    -142%      151.8     188.5   -19%

Total revenue in fourth quarter 2008 increased 15% compared with fourth quarter 2007. This increase was largely driven by a higher amount of aircraft sales revenue in the fourth quarter 2008. Fourth quarter 2008 aircraft sales included the sale of an A330 delivered from our forward order.

Revenue breakdown

                         Three months ended          Twelve months ended
                            December 31,                 December 31,
                                    % increase/                  % increase/
                      2008     2007  (decrease)    2008     2007  (decrease)

    Lease revenue:
       Basic rents   $134.7   $125.9      7%      $520.7   $494.2      5%
       Maintenance
        rents          11.7      8.5     38%        69.3     40.2     72%
       End-of-lease
        compensation    2.7      2.8     -4%        15.2     19.8    -23%
    Lease revenue    $149.1   $137.2      9%      $605.2   $554.2      9%
    Sales revenue     170.9    138.0     24%       616.6    558.3     10%
    Management fees
     and interest
     income             6.4      9.2    -30%        30.3     44.1    -31%
    Other revenue         -      0.2    100%         4.2     19.9    -79%
    Total revenue    $326.4   $284.6     15%    $1,256.3 $1,176.5      7%

Basic lease rents continue to increase when compared to prior periods as a result of our growing asset base. This increase was partially offset by the impact from airline defaults which lowered basic lease rents by $4.7 million in fourth quarter 2008.

In addition, the increase in basic lease rents was reduced by the impact from decreasing interest rates on floating rate lease rentals between the periods. However, the decrease in basic rents on floating rate leases was offset by lower interest costs on the debt associated with the floating rate leases. While basic lease rents for the fourth quarter 2008 increased 7% compared to fourth quarter 2007 to $134.7 million, interest expense excluding the impact of mark-to-market of interest rate caps and non-recurring charges remained constant at $46.9 million, as shown in the table below. We refer to the difference in these amounts of $87.8 as net spread, which increased 11% in fourth quarter 2008 over the same period in 2007.

                           Three months ended        Twelve months ended
                              December 31,               December 31,
                                      % increase/               % increase/
                         2008    2007  (decrease)  2008    2007  (decrease)

    Basic rents         $134.7  $125.9     7%     $520.7   $494.2      5%

    Interest on debt     $99.0   $57.7    72%     $219.2   $234.8     -7%
    Plus:
     mark-to-market
     of interest
     rate caps           (52.1)  (10.8)  382%      (58.1)   (14.4)   303%
    Less:
     Non-recurring
     charges to
     interest expense
     from refinancing of
     securitized bonds       -       -     0%          -    (27.4)  -100%
    Interest on debt
     excluding the impact
     of mark-to-market
     of interest
     rate caps and
     non-recurring
     charges to interest
     expense from
     refinancing of
     securitized bonds   $46.9   $46.9     0%     $161.1   $193.0    -17%

    Net Spread           $87.8   $79.0    11%     $359.6   $301.2     19%

Effective tax rate

AerCap's effective tax rate during the twelve month period ended December 31, 2008 was positive 0.3% (income), consisting of negative 2.0% (a charge) for AerCap's aircraft business and positive 56.8% (income) for AerCap's engine and parts business. The effective tax rate in 2007 was negative 11.8% (a charge). The positive tax rate resulted because the most significant portion of the charges relating to airline defaults and inventory impairments occurred in the higher tax rate jurisdictions, and the most significant portion of pre-tax earnings occurred in the lower tax rate jurisdictions.

Financial position

                                                                % Increase
                                                                    over
                                    December 31,  December 31,  December 31,
                                        2008          2007          2007

    Flight equipment held for lease  $3,989.6      $3,050.2          31%
    Total assets                      5,410.8       4,394.2          23%
    Total liabilities                 4,284.8       3,413.1          26%
    Total equity                      1,109.0         950.4          17%

As of December 31, 2008, AerCap's portfolio consisted of 297 aircraft and 75 engines 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:

Net income excluding the impact of mark-to-market of interest rate caps and share-based compensation. This measure is determined by adding the mark-to-market on our interest rate caps and share-based compensation during the applicable period, net of related tax benefits, to GAAP net income. AerCap believes this measure provides investors with a more meaningful view on AerCap's operational performance and allows investors to better understand its operational performance in relation to past and future reporting periods. AerCap uses interest rate caps to allow it to benefit from decreasing interest rates and protect against the negative impact of rising interest rates on its floating rate debt. Management determines the appropriate level of caps in any period with reference to the mix of floating and fixed cash inflows from the Company's lease and other contracts. AerCap does not apply hedge accounting to its interest rate caps. As a result, AerCap is required to recognize the change in fair value of the interest rate caps in AerCap's income statement during each period. Following is a reconciliation of net income excluding the impact of mark-to-market of interest rate caps and share-based compensation to net income for the three month and twelve month periods ended December 31, 2008 and 2007:

                        Three months ended          Twelve months ended
                           December 31,                 December 31,
                                   % increase/                   % increase/
                      2008   2007   (decrease)     2008    2007   (decrease)

    Net income      $(19.0) $45.1     -142%      $151.8   $188.5*    -19%
    Plus:
     mark-to-market
     of interest
     rate caps,
     net of tax       35.9    9.4      282%        39.6     12.6     214%
      share-based
       compensation,
       net of tax      1.8    2.5      -28%         6.4      9.5     -33%
    Net income
     excluding the
     impact of
     mark-to-market
     of interest
     rate caps and
     share-based
     compensation    $18.7  $57.0      -67%      $197.8   $210.6      -6%


    *- Includes a charge to interest expense from refinancing of securitized
    bonds of $24.0 million, net of tax.
     

Earnings per share excluding the impact of mark-to-market of interest rate caps and share-based compensation are determined by dividing the amount of net income excluding such impact by the average number of shares outstanding for that period. The average number of shares is based on a daily average.

Net spread. This measure is the difference between basic lease rents and interest expense excluding the impact from the mark-to-market of interest rate caps and non-recurring charges. AerCap believes this measure provides investors a better way to understand the changes and trends related to the earnings of its 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 for hedging purposes. The reconciliation of net spread to basic rents for the three month and twelve month periods ended December 31, 2008 and 2007 is included above.

Conference Call

In connection with the earnings release, management will host an earnings conference call today, Wednesday, February 25, 2009 at 9:30 am Eastern Time / 3:30 pm Central European Time. The call can be accessed live by dialing (U.S./Canada) 800-676-6978 or (International) +1-706-634 5464 and referencing code 82185363 at least 5 minutes before start time, or by visiting AerCap's website at http://www.aercap.com under 'Investor Relations'.

The presentation slides for the conference call will be posted on AerCap's website in advance of the call. A replay of the call will be available beginning at 10:30 am Eastern Time / 4:30 pm Central European Time on February 25, 2009 and continuing through March 30, 2009. To access the recording, call 800-642-1687 (U.S./Canada) or +1-706-645-9291 (International) and enter passcode 82185363. The 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, February 25, 2009, at 12:30 pm Eastern Time at The New York Palace (the Henry Room). Doors will open at 12:00 pm.

To participate in either event, please register at: www.sharedvalue.net/aercap/q408results

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 an integrated global aviation company with a leading market position in aircraft and engine leasing, trading and parts sales. AerCap also provides aircraft management services and performs aircraft maintenance, repair and overhaul services and aircraft disassemblies. AerCap is headquartered in The Netherlands and has offices in Ireland, the United States, Singapore, China and the United Kingdom.

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," "will," "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.

    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

    AerCap Holdings N.V.
    Consolidated Balance Sheets - Unaudited
    (In thousands of U.S. Dollars)

                                                 December 31,   December 31,
                                                      2008           2007

    Assets
    Cash and cash equivalents                       $193,563        $241,736
    Restricted cash                                  113,397          95,072
    Trade receivables, net of provisions              43,649          35,591
    Flight equipment held for operating
     leases, net                                   3,989,629       3,050,160
    Flight equipment held for sale                         -         136,135
    Net investment in direct finance leases           30,571               -
    Notes receivables, net of provisions             134,067         184,820
    Prepayments on flight equipment                  448,945         247,839
    Investments                                       18,678          11,678
    Goodwill                                           6,776           6,776
    Intangibles, net                                  47,099          41,855
    Inventory                                        102,879          90,726
    Derivative assets                                 19,352          21,763
    Deferred income taxes                             82,471          85,253
    Other assets                                     179,750         144,823
    Total Assets                                  $5,410,826      $4,394,227


    Liabilities and Shareholders' equity

    Accounts payable                                  $7,510         $16,376
    Accrued expenses and other liabilities           104,750          81,379
    Accrued maintenance liability                    202,834         255,535
    Lessee deposit liability                          98,584          83,628
    Debt                                           3,790,487*      2,892,744
    Accrual for onerous contracts                     33,306          46,411
    Deferred revenue                                  34,922          33,574
    Derivative liabilities                            12,378               -
    Deferred income taxes                                  -           3,425
    Total liabilities                              4,284,771       3,413,072

    Minority interest                                 17,018          30,782

    Share capital                                        699             699
    Additional paid-in capital                       609,327         602,469
    Retained earnings                                499,011         347,205
    Total shareholders' equity                     1,109,037         950,373

    Total Liabilities and Shareholders' equity    $5,410,826      $4,394,227


    * Includes $61.9 million of subordinated debt received from our joint
      venture partner relating to the TUI portfolio acquisition



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

                                 Three months ended    Twelve months ended
                                     December 31,          December 31,
                                  2008        2007        2008       2007

    Revenues
    Lease revenue               $149,119    $137,157    $605,253   $554,226
    Sales revenue                170,925     137,973     616,554    558,263
    Interest revenue               3,584       6,020      18,515     29,742
    Management fee revenue         2,779       3,206      11,749     14,343
    Other revenue                     25         203       4,181     19,947
    Total Revenues               326,432     284,559   1,256,252  1,176,521

    Expenses
    Depreciation                  46,061      34,815     169,392    141,113
    Asset impairment              11,100           -      18,789          -
    Cost of goods sold           146,596     104,458     506,312    432,143
    Interest on debt              98,990      57,656     219,172    234,770
    Operating lease in costs       3,303       4,664      14,512     20,176
    Leasing expenses              32,356       4,595      55,569     18,825
    Provision for doubtful notes
     and accounts receivable       2,685         390       3,746        745
    Selling, general and
     administrative expenses      31,616      34,167     128,268    116,328
    Total Expenses               372,707     240,745   1,115,760    964,100

    Income from continuing
     operations before
     income taxes and
     minority interest           (46,275)     43,814     140,492    212,421

    Provision for income taxes    15,851        (152)        430    (25,123)

    Net income before
     minority interest           (30,424)     43,662     140,922    187,298

    Minority interest, net
     of taxes                     11,426       1,453      10,883      1,155

    Net Income                  $(18,998)    $45,115    $151,805   $188,453

    Basic and diluted
     earnings per share            (0.22)      $0.53       $1.79      $2.22

    Weighted average shares
     outstanding - basic and
     diluted                  85,036,957  85,036,957  85,036,957 85,036,957



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

                                  Three months ended    Twelve months ended
                                      December 31,          December 31,
                                    2008      2007        2008        2007


    Net income (loss)             (18,998)   45,115     151,805     188,453
    Adjustments to reconcile
     net income (loss) to net
     cash provided by operating
     activities
    Minority interest             (11,426)   (1,453)    (10,883)     (1,155)
    Depreciation                   46,062    34,797     169,392     141,095
    Asset impairment               11,100         -      18,789           -
    Amortisation of debt
     issuance cost                  4,328     3,295      16,239      38,156
    Amortisation of intangibles     3,788     2,938      14,615      10,800
    Gain on elimination of
     fair value guarantee               -         -           -     (10,736)
    Gain on discounted purchase
     of securitized bonds               -         -      (2,783)          -
    Provision for doubtful notes
     and accounts receivable        2,685       390       3,746         745
    Capitalised interest on
     pre-delivery payments            210    (1,361)     (2,098)     (5,968)
    Gain on disposal of assets    (15,073)  (28,667)    (80,341)   (103,455)
    Change in fair value of
     derivative instruments        48,742    (4,231)     51,646      (3,892)
    Deferred taxes                (15,161)    3,393        (642)     13,929
    Share-based compensation        1,475     2,899       6,858      10,916
    Changes in assets and
     liabilities
      Trade receivables and
       notes receivable, net       (6,784)  (12,376)     (5,208)    (28,647)
      Inventories                 (14,683)   (4,513)     (5,469)      8,460
      Other assets and
       derivative assets             (930)    9,561     (48,580)    (16,041)
      Accounts payable and accrued
       expenses, including accrued
       maintenance liability,
       lessee deposits             (9,545)   (3,726)    (28,001)    (41,904)
      Deferred revenue             (3,594)    3,236       1,348       5,182
    Net cash provided by
     operating activities          22,196    49,297     250,433     205,938

    Purchase of flight equipment (287,515) (242,357) (1,302,157)   (699,807)
    Proceeds from sale/
     disposal of assets           135,048   116,875     487,475     449,313
    Prepayments on
     flight equipment            (132,839)  (57,440)   (339,422)   (164,074)
    Receipt of notes receivable
     in defeasance structures      44,157         -      44,157           -
    Purchase of investments        (7,550)        -     (17,550)          -
    Sale of investments                 -         -       6,234           -
    Purchase of intangibles             -    (1,633)    (21,410)    (18,427)
    Movement in restricted cash    54,446   (34,258)    (18,325)     17,205
    Net cash used in investing
     activities                  (194,253) (218,813) (1,160,998)   (415,790)

    Issuance of debt              494,446   291,588   1,642,784   2,395,956
    Repayment of debt            (306,972) (145,201)   (742,258) (2,025,298)
    Debt issuance costs paid       (6,314)   (7,162)    (44,933)    (49,579)
    Capital contributions
     from minority interests        5,000         -       5,000           -
    Net cash provided by
     financing activities         186,160   139,225     860,593     321,079

    Net increase (decrease) in
     cash and cash equivalents     14,103   (30,291)    (49,972)    111,227
    Effect of exchange rate
     changes                        3,016        30       1,799        (692)
    Cash and cash equivalents at
     beginning of period          176,444   271,997     241,736     131,201
    Cash and cash equivalents at
     end of period                193,563   241,736     193,563     241,736

SOURCE AerCap Holdings N.V.

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