Exhibit 99.1

 

INDEX

 

PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	2
Item 2.	Management’s Discussion & Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
PART II	OTHER INFORMATION	24
Item 1.	Risk Factors	24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 3.	Defaults Upon Senior Securities	24
Item 4.	Mine Safety Disclosure	24
Item 5.	Other Information	24
Item 6.	Exhibits	25

 

1

 

PART I FINANCIAL INFORMATION

 

Item 1. Financial Statements (Unaudited)
Unaudited Condensed Consolidated Balance Sheets as of March 31, 2011, December 31, 2011 and March 31, 2012		3
Unaudited Condensed Consolidated Income Statements for the Three months ended March 31, 2011 and March 31, 2012		4
Unaudited Condensed Consolidated Statements of Comprehensive Income for the Three months ended March 31, 2011 and March 31, 2012		5
Unaudited Condensed Consolidated Cash Flow Statements for the Three months ended March 31, 2011 and March 31, 2012		6
Notes to the Unaudited Condensed Consolidated Financial Statements		7

 

2

 

AerCap Holdings N.V. and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

As of March 31, 2011, December 31, 2011 and March 31, 2012

 

		Note		March 31, 2011			December 31, 2011			March 31, 2012
				(US dollars in thousands except share and per share amounts)
Assets
Cash and cash equivalents				$	322,450		$	411,081		$	424,694
Restricted cash				210,134			237,325			303,652
Trade receivables, net of provisions				58,976			16,063			10,494
Flight equipment held for operating leases, net		6		8,366,553			7,895,874			7,974,747
Net investment in direct finance leases				28,633			25,094			24,103
Notes receivable, net of provisions		7		18,153			5,200			4,282
Prepayments on flight equipment				130,784			95,619			102,741
Investments				78,138			84,079			84,968
Goodwill				6,776			—			—
Intangibles				53,364			29,677			26,700
Inventory				124,985			13,953			8,864
Derivative assets		8		85,183			21,050			18,629
Deferred income taxes				89,680			91,258			86,771
Other assets		9		215,246			181,359			185,254
Total Assets				$	9,789,055		$	9,107,632		$	9,255,899
Liabilities and Equity
Accounts payable				$	18,684		$	4,142		$	674
Accrued expenses and other liabilities		10		105,176			74,458			82,994
Accrued maintenance liability				423,562			452,582			475,203
Lessee deposit liability				120,689			102,844			104,263
Debt		11		6,731,055			6,111,165			6,176,754
Accrual for onerous contracts				4,800			3,971			—
Deferred revenue				52,265			47,994			46,645
Derivative liabilities		8		40,143			27,159			20,900
Total Liabilities				7,496,374			6,824,315			6,907,433
Ordinary share capital, €0.01 par value (250,000,000 ordinary shares authorized, 149,232,426 ordinary shares issued and outstanding)				1,570			1,570			1,570
Additional paid-in capital				1,334,967			1,340,205			1,341,670
Treasury stock (9,332,982 ordinary shares)				—			(100,000		)	(100,000		)
Accumulated other comprehensive income (loss)				5,818			(8,513		)	(9,266		)
Accumulated retained earnings				943,839			1,043,974			1,108,984
Total AerCap Holdings N.V. Shareholders’ Equity		12		2,286,194			2,277,236			2,342,958
Non-controlling interest		12		6,487			6,081			5,508
Total Equity		12		2,292,681			2,283,317			2,348,466
Total Liabilities and Equity				$	9,789,055		$	9,107,632		$	9,255,899

 

The accompanying notes are an integral part of these Unaudited Financial Statements.

 

3

 

AerCap Holdings N.V. and Subsidiaries

Unaudited Condensed Consolidated Income Statements

For the Three Months Ended March 31, 2011 and 2012

 

				Three months ended March 31,
		Note		2011 (1)			2012
				(US dollars in thousands, except share and per share amounts)
Revenues
Lease revenue				$	257,242		$	252,738
Net loss on sale of assets				(1,315		)	(219		)
Management fee revenue				5,148			4,530
Interest revenue				580			622
Other revenue				2,456			229
Total Revenues				264,111			257,900
Expenses
Depreciation				90,425			89,028
Asset impairment				7,749			—
Interest on debt				58,701			63,967
Operating lease-in costs				3,051			2,522
Leasing expenses				11,096			18,477
Provision for doubtful accounts				(39		)	—
Selling, general and administrative expenses		13,14		16,834			16,328
Total Expenses				187,817			190,322
Income from continuing operations before income taxes and income of investments accounted for under the equity method				76,294			67,578
Provision for income taxes				(5,773		)	(5,878		)
Net income of investments accounted for under the equity method				2,654			2,737
Net Income from continuing operations				$	73,175		$	64,437
Loss from discontinued operations, net of tax (AeroTurbine)				(646		)	—
Net Income				$	72,529		$	64,437
Net (income) loss attributable to non-controlling interest				(440		)	573
Net Income attributable to AerCap Holdings N.V.				$	72,089		$	65,010
Total earnings per share, basic and diluted		15		$	0.48		$	0.46
Loss per share from discontinued operations, basic and diluted				$	—		$	—
Earnings per share from continued operations attributable to AerCap Holdings N.V., basic and diluted				$	0.48		$	0.46
Weighted average shares outstanding, basic and diluted				149,232,426			139,899,444

(1)                                Certain reclassifications have been made to prior year’s Unaudited Condensed Consolidated Income Statement to reflect the current year presentation.

 

The accompanying notes are an integral part of these Unaudited Financial Statements.

 

4

 

AerCap Holdings N.V. and Subsidiaries

Unaudited Condensed Consolidated Statements of Comprehensive Income

For the Three Months Ended March 31, 2011 and 2012

 

		Three months ended March 31,
		2011			2012
		(US dollars in thousands)
Net Income attributable to AerCap Holdings N.V.		$	72,089		$	65,010
Other Comprehensive Income, net of tax:
Net change in fair value of derivatives, net of tax of $116 and $108, respectively		813			(753		)
Other Comprehensive Income		813			(753		)
Total Comprehensive Income		$	72,902		$	64,257

 

The accompanying notes are an integral part of these Unaudited Financial Statements.

 

5

 

AerCap Holdings N.V. and Subsidiaries

Unaudited Condensed Consolidated Statements of Cash Flows

For the Three Months Ended March 31, 2011 and 2012

 

		Three months ended March 31,
		2011 (1)			2012
		(US dollars in thousands)
Net income		$	72,529		$	64,437
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		98,322			89,028
Asset impairment		7,749			—
Amortization of debt issuance costs		7,451			7,115
Amortization of intangibles		5,273			2,977
Provision for doubtful accounts		1,643			—
Capitalized interest on pre-delivery payments		(39		)	(336		)
Net loss on sale of assets		478			219
Mark-to-market of non-hedged derivatives		(18,376		)	(3,784		)
Deferred taxes		7,859			4,595
Share-based compensation		2,273			1,465
Changes in assets and liabilities:
Trade receivables and notes receivable, net		(14,365		)	6,487
Inventories		(368		)	5,089
Other assets and derivative assets		(28,944		)	(5,714		)
Other liabilities		(41,270		)	(4,057		)
Deferred revenue		(7,797		)	(1,349		)
Net cash provided by operating activities		92,418			166,172
Purchase of flight equipment		(359,889		)	(268,647		)
Proceeds from sale/disposal of assets		25,943			107,967
Prepayments on flight equipment		(8,678		)	(8,206		)
Purchase of investment		(2,500		)	—
Movement in restricted cash		12,330			(66,327		)
Net cash used in investing activities		(332,794		)	(235,213		)
Issuance of debt		405,904			354,590
Repayment of debt		(243,809		)	(289,106		)
Debt issuance costs paid		(14,819		)	(5,926		)
Maintenance payments received		33,907			39,708
Maintenance payments returned		(20,538		)	(18,409		)
Security deposits received		1,910			4,105
Security deposits returned		(6,717		)	(1,925		)
Net cash provided by financing activities		155,838			83,037
Net (decrease) increase in cash and cash equivalents		(84,538		)	13,996
Effect of exchange rate changes		2,538			(383		)
Cash and cash equivalents at beginning of period		404,450			411,081
Cash and cash equivalents at end of period		$	322,450		$	424,694
Supplemental cash flow information:
Interest paid		58,901			43,696
Taxes paid		1,200			1,372

 

(1)          Certain reclassifications have been made to prior year’s Unaudited Condensed Consolidated Statement of Cash Flow to reflect the current year presentation.

 

The accompanying notes are an integral part of these Unaudited Financial Statements.

 

6

 

AerCap Holdings N.V. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

(US dollars in thousands or as otherwise stated, except share and per share amounts)

 

1.     General

 

The Company

 

We are an independent aircraft leasing company with $9.3 billion of total assets on our balance sheet mainly consisting of 254 aircraft. We are a New York Stock Exchange-listed company (AER) headquartered in The Netherlands with offices in Ireland, the United States, China, Singapore and the United Arab Emirates.

 

These condensed consolidated financial statements include the accounts of AerCap Holdings N.V. and its subsidiaries. AerCap Holdings N.V. is a Netherlands public limited liability company (“naamloze vennootschap or N.V.”) formed on July 10, 2006 for the purpose of acquiring all of the assets and liabilities of AerCap Holdings C.V. AerCap Holdings C.V. is a limited partnership (“commanditaire vennootschap”) formed under the laws of The Netherlands on June 27, 2005 for the purposes of acquiring the share capital, subordinated debt and senior debt of debis AirFinance B.V. (“AerCap B.V.”), which occurred on June 30, 2005 (the “2005 Acquisition”). In anticipation of our initial public offering, we changed our corporate structure from a Netherlands partnership to a Netherlands public limited liability company. This change was effected through the acquisition of all of the assets and liabilities of AerCap Holdings C.V. by AerCap Holdings N.V. on October 27, 2006. In accordance with ASC 805, “Business Combinations”, this acquisition was a transaction under ordinary control and accordingly, AerCap Holdings N.V. recognized the acquisition of the assets and liabilities of AerCap Holdings C.V. at their carrying values and no goodwill or other intangible assets were recognized.

 

Variable interest entities

 

There have been no material changes to our variable interest entities from those disclosed in our 2011 Annual Report on Form 20-F filed with the SEC on March 23, 2012.

 

AeroTurbine Transaction

 

On October 7, 2011, we completed the sale of AeroTurbine to International Lease Finance Corporation (“ILFC”). As a result of the sale and based on ASC 205-20, which governs financial statements for discontinued operations, the results of AeroTurbine for the three months ended March 31, 2011 have been reclassified to discontinued operations in the consolidated income statements.

 

2.     Basis for presentation

 

Our financial statements are presented in accordance with accounting principles generally accepted in the United States of America.

 

We consolidate all companies in which we have a direct and indirect legal or effective control and all variable interest entities for which we are deemed the primary beneficiary under ASC 810. All intercompany balances and transactions with consolidated subsidiaries have been eliminated. The results of consolidated entities are included from the effective date of control or, in the case of variable interest entities, from the date that we are or become the primary beneficiary. The results of subsidiaries sold or otherwise deconsolidated are excluded from the date that we cease to control the subsidiary or, in the case of variable interest entities, when we cease to be the primary beneficiary.

 

Other investments in which we have the ability to exercise significant influence and joint ventures are accounted for under the equity method of accounting.

 

The consolidated financial statements are stated in United States dollars, which is our functional currency.

 

Certain information and footnote disclosures required by U.S. GAAP for complete annual financial statements have been omitted and, therefore, it is suggested that these interim financial statements be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2011. In the opinion of management, these interim financial statements, which have been prepared pursuant to the rules of the SEC and U.S. GAAP for interim financial reporting, reflect all adjustments, which consisted only of normal recurring adjustments which were necessary to state fairly the results for the interim periods. The results of operations for the three months ended March 31, 2012 are not necessarily indicative of those for a full fiscal year.

 

7

 

AerCap Holdings N.V. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

(US dollars in thousands or as otherwise stated, except share and per share amounts)

 

2.     Basis for presentation (continued)

 

The preparation of consolidated financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. For us, the use of estimates is or could be a significant factor affecting the reported carrying values of flight equipment, inventory, intangibles, goodwill, investments, trade and notes receivable, deferred tax assets and accruals and reserves. Management considers information available from professional appraisers, where possible, to support estimates, particularly with respect to flight equipment. Despite management’s best efforts to accurately estimate such amounts, actual results could materially differ from those estimates.

 

3.     Reclassifications

 

Gain or loss on sale of assets—We have historically presented our gain or loss on sale of assets on a net basis, with the net book value of the asset being sold and related direct selling costs netted against sales consideration as gain or loss on sale of assets. As a result of the acquisition of AeroTurbine, effective January 1, 2006, we changed our presentation of sales of aircraft to a gross basis in our Consolidated Income Statements. As a result of the disposal of AeroTurbine in the fourth quarter of 2011, we changed our presentation back to a net basis as it was before the AeroTurbine acquisition. This presentation has also been applied retrospectively in our Consolidated Income Statements to provide the reader with meaningful and comparable information.

 

Cash flow—The Consolidated Statements of Cash flow for the three months ended March 31, 2011, includes a reclassification of $7.2 million from net cash provided by financing activities to net cash provided by operating activities, to better reflect the operating income derived from maintenance receipts. There were no changes to the Consolidated Balance Sheets, Net Income or Total Equity as a result of these reclassifications in the respective periods.

 

4.     Recent accounting pronouncements

 

In May 2011, the FASB issued ASU 2011-04 (“ASU 2011-04”), Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurements and Disclosure Requirements in U.S. GAAP and IFRSs, to improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRS. The amendments in this update change the wording used to describe the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements which include (1) those that clarify the FASB’s intent about the application of existing fair value measurement and disclosure requirements, and (2) those that change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurement. ASU 2011-04 is effective for interim and annual reporting periods beginning after December 15, 2011. The adoption of ASU 2011-04 did not have a material impact on our consolidated financial statements.

 

In June 2011, the FASB issued Accounting Standards Update (“ASU”) 2011-05 (“ASU 2011-05”), Comprehensive Income (Topic 220): Presentation of Comprehensive Income, which gives the option to present the total of comprehensive income either in a single continuous statement of comprehensive net income or in two separate but consecutive statements. In either option, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. If a two statement approach is used, the statement of other comprehensive income should immediately follow the statement of net income. This update eliminates the option to present the components of other comprehensive income as part of the statement of changes in shareholders’ equity. It also requires the presentation on the face of the financial statements of reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement(s) where the components of net income and the components of other comprehensive income are presented. ASU 2011-05 is effective for interim and annual reporting periods beginning after December 15, 2011 and should be applied retrospectively. The Company adopted the two statement approach and the adoption of ASU 2011-05 did not have a material impact on our consolidated financial statements.

 

8

 

AerCap Holdings N.V. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

(US dollars in thousands or as otherwise stated, except share and per share amounts)

 

5.     Fair value measurements

 

In September 2006, the FASB issued ASC 820, which is effective for fiscal years beginning after November 15, 2007. The Company adopted ASC 820 for all financial assets and liabilities and non-financial assets required to be measured at fair value on a recurring basis, prospectively from January 1, 2008. The application of ASC 820 for financial instruments which are periodically measured at fair value did not have a material effect on the Company’s results of operations or financial position. Under ASC 820, the Company determines fair value based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It is the Company’s policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements, in accordance with the fair value hierarchy as described below. Where limited or no observable market data exists, fair value measurements for assets and liabilities are based primarily on management’s own estimates and are calculated based upon the Company’s pricing policy, the economic and competitive environment, the characteristics of the asset or liability and other such factors. Therefore, the results may not be realized in actual sale or immediate settlement of the asset or liability. Under ASC 820, there is a hierarchal disclosure framework associated with the level of pricing observability utilized in measuring assets and liabilities at fair value.

 

The three broad levels defined by the ASC 820 hierarchy are as follows:

 

Level 1 — Quoted prices available in active markets for identical assets or liabilities as of the reported date.

 

Level 2 — Observable market data. Inputs include quoted prices for similar assets, liabilities (risk adjusted) and market-corroborated inputs, such as market comparables, interest rates, yield curves and other items that allow value to be determined.

 

Level 3 — Unobservable inputs from the Company’s own assumptions about market risk developed based on the best information available, subject to cost benefit analysis. Inputs may include the Company’s own data.

 

When there are no observable comparables, inputs used to determine value are derived through extrapolation and interpolation and other Company-specific inputs such as projected financial data and the Company’s own views about the assumptions that market participants would use. The following table summarizes our financial assets and liabilities as of March 31, 2012 that we measured at fair value on a recurring basis by level within the fair value hierarchy. As required by ASC 820, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to their fair value measurement.

 

		March 31, 2012			Level 1			Level 2			Level 3
Cash and cash equivalents		$	424,694		$	424,694		$	—		$	—
Restricted cash		303,652			303,652			—			—
Derivative assets		18,629			—			18,629			—
Derivative liabilities		(20,900		)	—			(20,900		)	—
		$	726,075		$	728,346		$	(2,271	)	$	—

 

Our cash and cash equivalents, along with our restricted cash and cash equivalents balances, consists largely of money market securities that are considered to be highly liquid and easily tradable. These securities are valued using inputs observable in active markets for identical securities and are therefore classified as level 1 within our fair value hierarchy. Our derivative assets and liabilities included in level 2 consist of United States dollar denominated interest rate caps and foreign currency forward contracts swaps. Their fair values are determined by applying standard modeling techniques under the income approach to relevant market interest rates (cash rates, futures rates, swap rates) in effect at the period close to determine appropriate reset and discount rates. Changes in fair value are recognized immediately in income.

 

We also measure the fair value of certain assets and liabilities on a non-recurring basis, when GAAP requires the application of fair value, including events or changes in circumstances that indicate that the carrying amounts of assets may not be recoverable. Assets subject to these measurements include aircraft. We record aircraft at fair value when we determine the carrying value may not be recoverable, in accordance with ASC 360 and other accounting pronouncements requiring re- measurements at fair value. Fair value measurements for aircraft in impairment tests are based on level 3 inputs, which include the Company’s assumptions as to future cash proceeds from leasing and selling aircraft.

 

9

 

AerCap Holdings N.V. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

(US dollars in thousands or as otherwise stated, except share and per share amounts)

 

5.     Fair value measurements (continued)

 

In the three months ended March 31, 2012, we did not recognize any impairment.

 

Our financial instruments consist principally of restricted cash, derivatives, notes receivable, trade receivables, accounts payable and cash equivalents. The fair value of restricted cash, notes receivable, trade receivables, accounts payable and cash and cash equivalents approximates the carrying value of these financial instruments because of their short term nature. The fair values of our debt are estimated based on level 2 inputs using a discounted cash flow analysis, based on our current incremental borrowing rates for similar types of borrowing arrangements.

 

The carrying amounts and fair values of our most significant financial instruments at March 31, 2012 are as follows:

 

		March 31, 2012
		Book value			Fair value
Assets
Restricted cash		$	303,652		$	303,652
Derivative assets		18,629			18,629
Cash and cash equivalents		424,694			424,694
		$	746,975		$	746,975

 

		March 31, 2012
		Book value			Fair value
Liabilities
Debt		$	6,176,754		$	6,087,279
Derivative liabilities		20,900			20,900
		$	6,197,654		$	6,108,179

 

6.     Flight equipment held for operating leases, net

 

At March 31, 2012, 244 out of our 254 owned aircraft were on lease under operating leases to 86 lessees in 46 countries. At March 31, 2012, we also owned seven engines. Movements in flight equipment held for operating leases during the periods presented were as follows:

 

		Three months ended March 31, 2011			Twelve months ended December 31, 2011			Three months ended March 31, 2012
Net book value at beginning of period		$	8,061,260		$	8,061,260		$	7,895,874
Additions		442,444			882,625			270,067
Depreciation		(97,390		)	(383,148		)	(88,615		)
Impairment		(7,749		)	(23,323		)	—
Disposals		(31,953		)	(333,140		)	(102,579		)
Transfer to inventory		(59		)	(11,430		)	—
Sale of AeroTurbine		—			(296,970		)	—
Net book value at end of period		$	8,366,553		$	7,895,874		$	7,974,747
Accumulated depreciation/impairment at March 31, 2011, December 31, 2011 and March 31, 2012		$	(948,130	)	$	(1,060,416	)	$	(1,135,177	)

 

7.     Notes receivable

 

Notes receivable consist of the following:

 

		March 31, 2011			December 31, 2011			March 31, 2012
Secured notes receivable		$	14,128		$	4,794		$	4,282
Notes receivable from lessee restructurings		4,025			406			—
		$	18,153		$	5,200		$	4,282

 

10

 

AerCap Holdings N.V. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

(US dollars in thousands or as otherwise stated, except share and per share amounts)

 

8.     Derivative assets and liabilities

 

The following discussion should be read in conjunction with our audited consolidated financial statements included in our 2011 Annual Report on Form 20-F filed with the SEC on March 23, 2012, which provide further information on our derivative instruments.

 

The objective of our hedging policy is to adapt a risk adverse position with respect to changes in interest rates and foreign currencies. In the normal course of business we enter into a number of interest rate derivatives to hedge the current and future interest rate payments on our variable rate debt. Furthermore we enter into a number of foreign currency derivatives to hedge the current and future Euro-US Dollar exposure to our business. These derivative products can include interest rate swaps, caps, floors, options and forward contracts. As of March 31, 2012, we had interest rate swaps, caps and floors and several foreign currency forward contracts with a combined notional amount of $3.4 billion. We have not applied hedge accounting under ASC 815 to any of the above mentioned caps and floors and to two interest rate swaps. The change in fair value during the three months ended March 31, 2012 and March 31, 2011 was $3.8 million and $19.3 million.

 

As of March 31, 2012 we had five interest rate swaps for which we achieved cash flow hedge accounting treatment. The five interest rate swaps had a combined notional amount of $0.7 billion. The change in fair value related to the effective portion of these interest rate swaps is recorded, net of tax, in accumulated other comprehensive income.

 

9.     Other assets

 

Other assets consist of the following:

 

		March 31, 2011			December 31, 2011			March 31, 2012
Debt issuance costs		$	159,562		$	148,675		$	147,649
Other tangible fixed assets		9,040			3,802			3,407
Receivables from aircraft manufacturer		17,232			12,990			11,547
Prepaid expenses		10,505			4,601			7,882
Other receivables		18,907			11,291			14,769
		$	215,246		$	181,359		$	185,254

 

10.       Accrued expenses and other liabilities

 

Accrued expenses and other liabilities consist of the following:

 

		March 31, 2011			December 31, 2011			March 31, 2012
Guarantee liability		$	939		$	—		$	—
Accrued expenses		55,176			29,682			34,773
Accrued interest		27,898			26,702			31,066
Lease deficiency		21,163			18,074			17,155
		$	105,176		$	74,458		$	82,994

 

11

 

AerCap Holdings N.V. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

(US dollars in thousands or as otherwise stated, except share and per share amounts)

 

11.  Debt

 

Debt consists of the following:

 

		March 31, 2011			December 31, 2011			March 31, 2012 (1)
ECA-guaranteed financings		$	1,835,781		$	1,662,810		$	1,626,486
ALS I debt		766,180			640,332			592,562
ALS II debt		777,482			693,180			663,278
Revolving credit facility		584,857			461,421			455,714
GFL securitization debt		628,767			624,973			603,964
TUI portfolio acquisition facility		296,035			262,302			253,949
Skyfunding B737-800 acquisition facility		—			133,669			265,151
AT revolving credit facility		308,330			—			—
Subordinated debt joint venture partners		86,382			64,280			64,280
Other debt		1,447,241			1,568,198			1,651,370
		$	6,731,055		$	6,111,165		$	6,176,754

(1)                                 As of March 31, 2012, we remain in compliance with the respective financial covenants across the Company’s various debt obligations.

 

A detailed summary of the principal terms of our indebtedness can be found in our 2011 Annual Report on Form 20-F filed with the SEC on March 23, 2012. There have been no material changes to our indebtedness since the filing of our 2011 Annual Report on Form 20-F.

 

12.  Equity

 

Movements in equity during the periods presented were as follows:

 

		Three months ended March 31, 2011
		AerCap Holdings N.V. Shareholders Equity			Non- controlling interest			Total Equity
Beginning of the period		$	2,211,350		$	6,047		$	2,217,397
Net income for the period		72,089			440			72,529
Share-based compensation		1,942			—			1,942
Net change in fair value of derivatives, net of $116 tax		813			—			813
End of the period		$	2,286,194		$	6,487		$	2,292,681

 

		Twelve months ended December 31, 2011
		AerCap Holdings N.V. Shareholders Equity			Non- controlling interest			Total Equity
Beginning of the period		$	2,211,350		$	6,047		$	2,217,397
Net income for the period		172,224			526			172,750
Share-based compensation		7,180			—			7,180
Net change in fair value of derivatives, net of $1,913 tax		(13,518		)	—			(13,518		)
Sale of non-controlling interests		—			(492		)	(492		)
Purchase of treasury stock		(100,000		)	—			(100,000		)
End of the period		$	2,277,236		$	6,081		$	2,283,317

 

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AerCap Holdings N.V. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

(US dollars in thousands or as otherwise stated, except share and per share amounts)

 

12.  Equity (continued)

 

		Three months ended March 31, 2012
		AerCap Holdings N.V. Shareholders Equity			Non- controlling interest			Total Equity
Beginning of the period		$	2,277,236		$	6,081		$	2,283,317
Net income for the period		65,010			(573		)	64,437
Share-based compensation		1,465			—			1,465
Net change in fair value of derivatives, net of $108 tax		(753		)	—			(753		)
End of the period		$	2,342,958		$	5,508		$	2,348,466

 

13.  Share-based compensation

 

AerCap Holdings N.V. Equity Grants

 

During the three months ended March 31, 2012, 460,228 AerCap Holdings N.V. restricted share units were granted under the NV Equity Plan. During the first week of April 2012 an additional 190,000 AerCap Holdings N.V. restricted share units were granted. At March 31, 2012, there were 1,462,254 share options outstanding at an exercise price of $24.63 per share, 550,000 share options outstanding at an exercise price of $2.95 per share, 21,287 share options outstanding at an exercise price of $14.12 per share and 23,662 share options outstanding at an exercise price of $11.29 per share. At March 31, 2012, 2,012,254 outstanding options were vested and 44,949 options were subject to future vesting criteria. At March 31, 2012 2,120,228 restricted share units were outstanding and were all subject to future time and/or performance-based vesting criteria. Assuming that vesting criteria applicable to unvested share options and unvested restricted share units are met in the future, including performance criteria, and that no forfeitures occur, we expect to recognize share-based compensation charges related to NV Equity Grants of approximately $5.3 million during the remainder of 2012 and approximately $6.6 million, $6.3 million, $2.7 million and $0.4 million during the years 2013, 2014, 2015 and 2016 respectively.

 

14.  Selling, general and administrative expenses

 

Selling, general and administrative expenses include the following expenses:

 

		Three months ended March 31, 2011			Three months ended March 31, 2012
Personnel expenses(1)		$	13,353		$	11,279
Travel expenses		1,154			1,693
Professional services		2,883			3,754
Office expenses		1,627			625
Directors expenses		1,456			1,234
Aircraft management fee		1,585			462
Mark-to-market of derivative instruments		(7,153		)	(4,879		)
Other expenses		1,931			2,160
		$	16,836		$	16,328

 

(1)           Includes share-based compensation of $1,218, and $1,465 in the three months ended March 31, 2011 and 2012, respectively.

 

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AerCap Holdings N.V. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

(US dollars in thousands or as otherwise stated, except share and per share amounts)

 

15.  Earnings per ordinary share

 

Basic and diluted earnings per share is calculated by dividing net income by the weighted average of our ordinary shares outstanding. As disclosed in Note 11, there are 4,177,431 share options and restricted share units outstanding under the NV Equity Plan. These options could become dilutive in the future. The computations of basic and diluted earnings per ordinary share for the periods indicated below are shown in the following table:

 

		Three months ended March 31, 2011			Three months ended March 31, 2012
Net income for the computation of basic and diluted earnings per share		$	72,089		$	65,010
Weighted average ordinary shares outstanding		149,232,426			139,899,444
Basic and diluted earnings per ordinary share		$	0.48		$	0.46

 

16.  Segment information

 

Reportable Segments

 

Following the sale of AeroTurbine we manage our business, analyze and report our results of operations on the basis of one business segment—leasing, financing, sales and management of commercial aircraft. The leasing, financing and sales of engines and parts (“Engine and parts”) is included in this segment as this constitutes an insignificant part of our business after the sale of AeroTurbine.

 

17.  Commitments and contingencies

 

A detailed summary of our commitments and contingencies can be found in our 2011 Annual Report on Form 20-F filed with the SEC on March 23, 2012. There have been no material changes to our commitments and contingencies since the filing of those reports.

 

18.  Subsequent events

 

In April 2012, we have been assigned an investment grade corporate rating of BBB- with a stable outlook by Fitch Ratings.

 

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

You should read this discussion in conjunction with our unaudited condensed consolidated financial statements and the related notes included in this Interim Report. Our financial statements are presented in accordance with generally accepted accounting principles in the United States of America, or U.S. GAAP, and are presented in U.S. dollars.

 

Special Note About Forward Looking Statements

 

This report includes “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. We have based these forward looking statements largely on our current beliefs and projections about future events and financial trends affecting our business. Many important factors, in addition to those discussed in this report, could cause our actual results to differ substantially from those anticipated in our forward looking statements, including, among other things:

 

·                  the availability of capital to us and to our customers and changes in interest rates,

 

·                  the ability of our lessees and potential lessees to make operating lease payments to us,

 

·                  our ability to successfully negotiate aircraft purchases, sales and leases, to collect outstanding amounts due and to repossess aircraft under defaulted leases, and to control costs and expenses,

 

·                  decreases in the overall demand for commercial aircraft leasing and aircraft management services,

 

·                  the economic condition of the global airline and cargo industry,

 

·                  competitive pressures within the industry,

 

·                  the negotiation of aircraft management services contracts,

 

·                  regulatory changes affecting commercial aircraft operators, aircraft maintenance accounting standards and taxes, and

 

·                  the risks set forth in “Item 3. Key Information—Risk Factors” included in our 2011 Annual Report on Form  20-F, filed with the SEC on March 23, 2012.

 

The words “believe”, “may”, “aim”, “estimate”, “continue”, “anticipate”, “intend”, “expect” and similar words are intended to identify forward looking statements. Forward looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities, the effects of future regulation and the effects of competition. Forward looking statements speak only as of the date they were made and we undertake no obligation to update publicly or to revise any forward looking statements because of new information, future events or other factors. In light of the risks and uncertainties described above, the forward looking events and circumstances described in this annual report might not occur and are not guarantees of future performance.

 

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Aircraft Portfolio

 

Our aircraft portfolio consists primarily of modern, technologically advanced and fuel-efficient narrowbody aircraft, with a particular focus on Airbus A320 family aircraft and Boeing 737-800 aircraft. As of March 31, 2012, we owned 254 aircraft and managed 40 aircraft, making us the largest independent aircraft lessor globally. The weighted average age of our 254 owned aircraft was 5.6 years as of March 31, 2012. We own one of the youngest aircraft fleets among aircraft leasing companies. We operate our aircraft business on a global basis and as of March 31, 2012, 244 out of our 254 owned aircraft were on lease to 86 commercial airline and cargo operator customers in 46 countries. Of the 10 aircraft off lease at March 31, 2012, 10 aircraft were subject to either a lease agreement or letter of intent.

 

The following table provides details regarding our aircraft portfolio by type of aircraft as of March 31, 2012:

 

		Owned portfolio				Managed portfolio				Number of aircraft under
				Percentage of				Number of		Purchase / (sale)		Total owned,
Aircraft type		Number of aircraft owned		total net book value		Number of aircraft		aircraft on order (1)		contract or letter of intent		managed and ordered aircraft
Airbus A300 Freighter		1		0.3	%	—		—		—		1
Airbus A319		30		9.9	%	—		—		—		30
Airbus A320		104		36.8	%	8		7		(3	)	116
Airbus A320NEO		—		—		—		—		5		5
Airbus A321		20		7.2	%	2		—		—		22
Airbus A330		23		22.1	%	4		4		5		36
Boeing 737Classics		9		0.8	%	19		—		(2	)	26
Boeing 737NGs		51		18.3	%	—		42		—		93
Boeing 747		2		0.9	%	—		—		—		2
Boeing 757		3		0.5	%	1		—		(2	)	2
Boeing 767		4		1.7	%	2		—		—		6
Boeing 777		—		—		2		—		—		2
CRJ-705		—		—		1		—		—		1
CRJ-900		4		0.9	%	—		—		—		4
MD-11 Freighter		1		0.3	%	1		—		—		2
ERJ170		2		0.3	%	—		—		—		2
Total		254		100.0	%	40		53		3		350

(1)                                  Includes the remaining 27 American Airlines purchase-leaseback Boeing 737 aircraft. On November 29, 2011, American Airlines filed for voluntary Chapter 11 bankruptcy protection and as a result our remaining obligations under the purchase and leaseback contract automatically terminated. We have agreed with American Airlines to continue funding new aircraft on a one-by-one basis under the previously agreed lease terms until such time as we agree to re-instate the original contract. Since the bankruptcy filing, as of May 8, 2012 we took delivery of five aircraft. As of May 8, 2012, nine of the original 35 American Airlines purchase-leaseback Boeing 737 aircraft have delivered and financed under the Skyfunding facility.

 

Critical Accounting Policies

 

There have been no changes to our critical accounting policies from those disclosed in our 2011 Annual Report on Form 20-F filed with the SEC on March 23, 2012.

 

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