Actionable news
0
All posts from Actionable news
Actionable news in AER: AERCAP HOLDINGS N.V.,

Aercap Holdings: ManagementS Discussion And Analysis Of Financial Condition And Results Of Operations Item 3.

The following excerpt is from the company's SEC filing.

Quantitative and Qualitative Disclosures About Market Risk

PART II

OTHER INFORMATION

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.

Defaults Upon Senior Securities

Item 4.

Mine Safety Disclosures

Item 5.

Other Information

Item 6.

Exhibits

TABLE OF DEFINITIONS

AeroTurbine

AeroTurbine, Inc.

AerCap, We or the Company

AerCap Holdings N.V. and its subsidiaries

AerCap Trust

AerCap Global Aviation Trust and its consolidated subsidiaries

AerLift

AerLift Leasing Ltd.

AerLift Jet

AerLift Leasing Jet Ltd.

American International Group, Inc.

Airbus

Airbus S.A.S.

ALS II

Aircraft Lease Securitisation II Limited

Boeing

The Boeing Company

Export Credit Agency

Enhanced Capital Advantaged Preferred Securities

Embraer

Embraer S.A.

EOL contract

End of lease contract

Export-Import Bank of the United States

Financial Accounting Standards Board

Genesis Funding Limited

GFL Transaction

AerCap sale of 100 percent of the class A common shares in GFL to GFL Holdings, LLC, an affiliate of Wood Creek Capital Management, LLC on April 22, 2014

International Lease Finance Corporation

ILFC Transaction

AerCap and AerCap Ireland Limited, a wholly-owned subsidiary of AerCap, purchase of 100 percent of ILFCs common shares from AIG on May 14, 2014

London Interbank Offered Rates

MR contract

Maintenance reserved contract

Part-out

Disassembly of an aircraft for the sale of its parts

Primary beneficiary

U.S. Securities and Exchange Commission

Special purpose entity

U.S. GAAP

Accounting Principles Generally Accepted in the United States of America

Variable interest entity

Waha Capital PJSC

PART I FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Unaudited Condensed Consolidated Balance Sheets as of September 30, 2015 and December 31, 2014

Unaudited Condensed Consolidated Income Statements for the Three and Nine Months ended September 30, 2015 and September 30, 2014

Unaudited Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months ended September 30, 2015 and September 30, 2014

Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2015 and September 30, 2014

Notes to the Unaudited Condensed Consolidated Financial Statements

AerCap Holdings N.V. and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

As of September 30, 2015 and December 31, 2014

(U.S. dollar amounts in thousands,

except share data)

Assets

Cash and cash equivalents

1,301,492

1,490,369

Restricted cash

384,657

717,388

Trade receivables

178,520

160,412

Flight equipment held for operating leases, net

32,247,129

31,984,668

Maintenance rights intangible and lease premium, net

3,406,062

3,906,026

Flight equipment held for sale

14,082

Net investment in finance and sales-type leases

436,063

347,091

Prepayments on flight equipment

3,436,012

3,486,514

Other intangibles, net

499,817

523,709

Deferred income tax assets

149,571

190,029

Other assets

1,152,875

1,047,092

Total Assets

43,202,087

43,867,380

Liabilities and Equity

Accounts payable, accrued expenses and other liabilities

1,141,038

1,195,880

Accrued maintenance liability

3,315,132

3,194,365

Lessee deposit liability

906,458

848,332

29,321,208

30,402,392

Deferred income tax liabilities

381,963

283,863

Commitments and contingencies

Total Liabilities

35,065,799

35,924,832

Ordinary share capital, 0.01 par value (350,000,000 ordinary shares authorized, 213,109,795 ordinary shares issued and 197,532,637 ordinary shares outstanding at September 30, 2015 and 350,000,000 ordinary shares authorized, 212,318,291 ordinary shares issued and outstanding at December 31, 2014)

Additional paid-in capital

5,598,512

5,557,627

Treasury shares (15,577,158 ordinary shares)

(755,118

Accumulated other comprehensive loss

(6,539

(6,895

Accumulated retained earnings

3,220,402

2,310,486

Total AerCap Holdings N.V. shareholders equity

8,059,825

7,863,777

Non-controlling interest

76,463

78,771

Total Equity

8,136,288

7,942,548

Total Liabilities and Equity

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

Unaudited Condensed Consolidated Income Statements

For the Three and Nine Months Ended September 30, 2015 and 2014

Three Months Ended September 30,

Nine Months Ended September 30,

(U.S. dollar amounts in thousands, except share data)

Revenues and other income

Lease revenue

1,245,689

1,216,016

3,706,105

2,210,733

Net gain on sale of assets

51,576

139,883

11,656

Other income

25,542

26,139

103,553

76,530

Total Revenues and other income

1,322,807

1,244,941

3,949,541

2,298,919

Expenses

Depreciation and amortization

459,669

456,672

1,371,284

823,716

Asset impairment

15,355

Interest expense

282,855

265,375

825,474

500,039

Leasing expenses

132,951

31,394

396,104

66,728

Transaction and integration related expenses

14,386

136,863

Selling, general and administrative expenses

91,191

96,011

277,729

182,398

Total Expenses

977,201

865,422

2,894,045

1,711,615

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

345,606

379,519

1,055,496

587,304

Provision for income taxes

(46,658

(65,374

(142,494

(102,781

Equity in net (losses) earnings of investments accounted for under the equity method

(4,550

21,037

27,200

Net income

294,398

335,182

912,460

511,723

Net (income) loss attributable to non-controlling interest

(1,341

Net income attributable to AerCap Holdings N.V.

293,917

333,841

914,521

512,224

Basic earnings per share

Diluted earnings per share

Weighted average shares outstanding - basic

197,264,160

212,070,104

206,054,934

163,722,591

Weighted average shares outstanding - diluted

199,215,352

214,398,654

208,568,730

166,095,640

Unaudited Condensed Consolidated Statements of Comprehensive Income

(U.S. dollar amounts in thousands)

Net income attributable to AerCap Holdings N.V.

Other comprehensive income (loss):

Change in fair value of derivatives (Note 9), net of tax of $(7), $9, $(51), and $(623), respectively, and net of reclassification adjustments (a)

Total other comprehensive income (loss)

Total comprehensive income attributable to AerCap Holdings N.V.

293,963

333,777

914,877

516,588

During the three and nine months ended September 30, 2015, we did not reclassify any amounts from Accumulated other comprehensive loss to Interest expense in the Condensed Consolidated Income Statements. During the three and nine months ended September 30, 2014, we reclassified $3.1 million from Accumulated other comprehensive loss to Interest expense in the Condensed Consolidated Income Statements.

Unaudited Condensed Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 2015 and 2014

Adjustments to reconcile net income to net cash provided by operating activities:

Amortization of debt issuance costs and debt discount

34,322

74,284

Amortization of lease premium intangibles

17,689

11,618

Amortization of fair value adjustments on debt

(348,377

(208,510

Accretion of fair value adjustments on deposits and maintenance liabilities

59,215

44,809

Maintenance rights write off (a)

396,007

34,411

Maintenance liability release to income

(78,769

(25,853

(139,883

(11,656

Deferred income taxes

138,558

98,114

88,230

64,596

Changes in operating assets and liabilities:

Trade receivables

(20,108

88,612

65,257

(45,063

(99,002

Net cash provided by operating activities

2,406,230

1,473,990

Purchase of flight equipment

(2,029,973

(1,373,863

Proceeds from sale or disposal of assets

1,086,513

487,555

(643,499

(265,398

Acquisition of ILFC, net of cash acquired

(195,311

Collections of finance and sales-type leases

40,388

28,900

Movement in restricted cash

332,731

326,604

Other (b)

(46,400

Net cash used in investing activities

(1,260,240

(991,513

Issuance of debt

2,725,275

4,453,455

Repayment of debt

(3,441,730

(3,562,887

Debt issuance costs paid

(22,801

(111,190

Maintenance payments received

576,282

367,146

Maintenance payments returned

(415,698

(162,824

Security deposits received

146,586

48,052

Security deposits returned

(108,124

(62,448

Repurchase of shares and tax withholdings on share-based compensation

(792,473

Net cash (used in) provided by financing activities

(1,332,683

969,304

Net (decrease) increase in cash and cash equivalents

(186,693

1,451,781

Effect of exchange rate changes

(2,184

(3,001

Cash and cash equivalents at beginning of period

295,514

Cash and cash equivalents at end of period

1,744,294

Supplemental cash flow information:

Interest paid, net of amounts capitalized

1,072,420

1,028,325

Income taxes, net

30,257

25,343

Maintenance rights write off consisted of the following:

EOL and MR contract maintenance rights expense

263,372

EOL contract maintenance rights write off due to cash receipt

78,479

22,706

MR contract maintenance rights write off due to maintenance liability release

54,156

Includes $46.4 million relating to the settlement of two asset value guarantees in the nine months ended September 30, 2015. Refer to Note 20

Commitments and contingencies

Unaudited Condensed Consolidated Statements of Cash Flows (Continued)

Non-Cash Investing and Financing Activities

Nine Months Ended September 30, 2015:

Flight equipment held for operating leases in the amount of $108.5 million was reclassified to Net investment in finance and sales-type leases.

Flight equipment held for operating leases in the amount of $30.5 million was reclassified to inventory, which is included in Other assets.

Nine Months Ended September 30, 2014:

Flight equipment held for operating leases in the amount of $23.0 million was reclassified to Net investment in finance and sales-type leases.

Flight equipment held for operating leases in the amount of $36.9 million was reclassified to inventory, which is included in Other assets.

AerCap Holdings N.V. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

(U.S. dollar amounts in thousands

or as otherwise stated

, except share data)

1. General

The Company

We are an independent aircraft leasing company with total assets of $43.2 billion mainly consisting of 1,124 owned aircraft as of September 30, 2015. Our ordinary shares are listed on the New York Stock Exchange (AER) and our headquarters are located in Amsterdam with offices in Dublin, Los Angeles, Shannon, Fort Lauderdale, Miami, Singapore, Shanghai, Abu Dhabi and representation offices at the worlds largest aircraft manufacturers, Boeing in Seattle and Airbus in Toulouse.

The Condensed Consolidated Financial Statements presented herein include the accounts of AerCap Holdings N.V. and its subsidiaries (AerCap). AerCap Holdings N.V. is a Netherlands public limited liability company (

naamloze vennootschap or N.V.

) formed on July 10, 2006.

On May 14, 2014 (the Closing Date), AerCap successfully completed the ILFC Transaction, as further described in Note 4

. The total consideration paid to AIG on the Closing Date consisted of $2.4 billion in cash and 97,560,976 newly issued AerCap ordinary shares. Immediately following the ILFC Transaction, AIG owned approximately 46 percent of AerCap.

On June 9, 2015, AIG sold 71,184,686 of its AerCap ordinary shares in a secondary public offering pursuant to a registration statement on Form F-3 that was filed with the SEC on March 31, 2015 by AerCap in accordance with the terms of a registration rights agreement we entered into with AIG in connection with the ILFC Transaction. Also, on June 9, 2015, AerCap repurchased 15,698,588 of its ordinary shares from AIG for consideration consisting of $500 million of junior subordinated notes due 2045 issued to AIG (the Junior Subordinated Notes) and $250 million of cash on hand (the Share Repurchase). Upon the issuance of the Junior Subordinated Notes, the amount available under the AIG revolving credit facility expiring in 2019 was reduced from $1.0 billion to $500 million.

On August 24, 2015, AIG sold 10,677,702 of its AerCap ordinary shares in a secondary public offering pursuant to the registration statement on Form F-3 and the terms of the registration rights agreement. Following both secondary public offerings and the Share Repurchase, AIG no longer owns any of our outstanding ordinary shares, and AIGs remaining designee resigned from AerCaps Board of Directors.

2. Basis of presentation

Our Condensed Consolidated Financial Statements are presented in accordance with U.S. GAAP.

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 to be the PB and have control 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 PB. 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 PB.

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

Our Condensed Consolidated Financial Statements are stated in U.S. dollars, which is our functional currency.

These interim financial statements have been prepared pursuant to the rules of the SEC and U.S. GAAP for interim financial reporting, and reflect all normally recurring adjustments that are necessary to fairly state the results for the interim periods presented. 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 should be read in conjunction with our Annual Report on Form 20-F for the year ended December 31, 2014, filed with the SEC on March 30, 2015. The results of operations for the three and nine months ended September 30, 2015 are not necessarily indicative of those for a full fiscal year.

Use of estimates

The preparation of Condensed Consolidated Financial Statements in conformity with U.S. 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 acquisition accounting in a business combination, the reported carrying values of flight equipment, intangibles, 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 managements best efforts to accurately estimate such amounts, actual results could materially differ from those estimates.

In the nine months ended September 30, 2015 and 2014, we changed our estimates of residual values and useful lives of certain aircraft. The changes in estimates are a result of the current market conditions that have negatively affected the useful lives and residual values for such aircraft. The effect for the three and nine months ended September 30, 2015 was to reduce Net income by $6.8 million and $13.0 million, respectively, or $0.03 basic and diluted earnings per share and $0.06 basic and diluted earnings per share, respectively. The effect for the three and nine months ended September 30, 2014 was to reduce Net income by $1.4 million and $2.9 million, respectively, or $0.01 basic and diluted earnings per share and $0.02 basic and diluted earnings per share, respectively.

Prior period comparative information

As of December 31, 2014, we finalized all known measurement period adjustments related to the ILFC Transaction, as further described in Note 4

in our Annual Report on Form 20-F for the year ended December 31, 2014, filed with the SEC on March 30, 2015. The final measurement period adjustments were retrospectively recognized as adjustments in our prior period comparative information.

The Condensed Consolidated Income Statements for the three and nine months ended September 30, 2014 include a reclassification, as compared to the quarterly report on Form 6-K for the third quarter ended September 30, 2014, filed with the SEC on November 20, 2014, of $4.5 million to reduce Lease revenue and Leasing expenses. Commencing in the second quarter of 2015, for MR contracts, the release of maintenance rights intangible and accrued maintenance liability at lease termination are presented on a net basis in the Condensed Consolidated Income Statement. Previously, these amounts were presented on a gross basis. There were no changes to the Condensed Consolidated Balance Sheets, Net income or Total Equity as a result of this reclassification in the periods.

The Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2014 includes a reclassification, as compared to the quarterly report on Form 6-K for the third quarter ended September 30, 2014, filed with the SEC on November 20, 2014, of $9.4 million to reduce investing cash flows related to the Collection for finance and sales-type leases and increase Net cash provided by operating activities for the interest income received associated with the collections for finance and sales-type leases. There were no changes to the Condensed Consolidated Balance Sheets, Net income or Total Equity as a result of this reclassification in the period.

Out of period adjustment

Our Condensed Consolidated Income Statement for the nine months ended September 30, 2015, includes an out of period adjustment which decreased Net income by $14.4 million, or $0.07 basic and diluted earnings per share. This adjustment corrects the capitalized interest on Prepayments on flight equipment in prior periods. Management has determined, after evaluating the quantitative and qualitative aspects of this out of period adjustment, that our current and prior period financial statements taken as a whole are not materially misstated.

Reportable segments

We manage our business and analyze and report our results of operations on the basis of one business segment: leasing, financing, sales and management of commercial aircraft and engines.

. Summary of significant accounting policies

Our significant accounting policies are described in our Annual Report on Form 20-F for the year ended December 31, 2014, filed with the SEC on March 30, 2015.

Recent accounting guidance adopted during 2015:

Reporting discontinued operations

In April 2014, the FASB issued an accounting standard that changes the requirements for presenting a component or group of components of an entity as a discontinued operation and requires new disclosures. Under the standard, the disposal of a component or group of components of an entity should be reported as a discontinued operation if the disposal represents a strategic shift that has (or will have) a major effect on an entitys operations and financial results. Disposals of equity method investments, or those reported as held-for-sale, will be eligible for presentation as a discontinued operation if they meet the new definition. The standard also requires entities to provide specified disclosures about a disposal of an individually significant component of an entity that does not qualify for discontinued operations presentation.

We adopted the standard on its required effective date of January 1, 2015 and it did not have any effect on our consolidated financial condition, results of operations or cash flows.

Future application of accounting guidance:

Revenue from contracts with customers

In May 2014, the FASB issued an accounting standard that provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This guidance does not apply to lease contracts with customers. The standard will require an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This update creates a five-step model that requires entities to exercise judgment when considering the terms of the contract(s) which include

identifying the contract(s) with the customer,

identifying the separate performance obligations in the contract,

determining the transaction price,

allocating the transaction price to the separate performance obligations, and

recognizing revenue when each performance obligation is satisfied.

This standard was originally effective for the fiscal year beginning after December 15, 2016 and subsequent interim periods. In August 2015, the FASB issued an update to the standard which defers the effective date by one year, to January 1, 2018. The standard may be applied either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of applying this standard recognized at the date of adoption. Early adoption would be permitted but not before the original effective date. We plan to adopt the standard on its required effective date of January 1, 2018. We are evaluating the effect the adoption of the standard will have on our consolidated financial condition, results of operations and cash flows.

Disclosure of going concern uncertainties

In August 2014, the FASB issued an accounting standard that requires management to assess an entitys ability to continue as a going concern, and to provide related footnote disclosure in certain circumstances. The new standard will be effective for all entities in the first annual period ending after December 15, 2016. Earlier adoption is permitted. We plan to adopt the standard on its required effective date of January 1, 2017.

Amendments to the consolidation analysis

In February 2015, the FASB issued an accounting standard that affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. Specifically, the amendments modify the evaluation of whether limited partnerships and similar legal entities are VIEs or voting interest entities; eliminate the presumption that a general partner should consolidate a limited partnership; affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships; and provide a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds.

This standard will be effective for interim and annual reporting periods beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. The standard may be applied retrospectively or through a cumulative effect adjustment to equity as of the beginning of the year of adoption. We plan to adopt the standard on its required effective date of January 1, 2016. We are evaluating the effect the adoption of the standard will have on our consolidated financial condition, results of operations and cash flows.

Presentation of debt issuance costs

In April 2015, the FASB issued an accounting standard that requires debt issuance costs related to a recognized debt liability to be presented on the balance sheet as a direct deduction from the debt liability. In August 2015, the FASB issued an accounting standard to clarify that entities are permitted to defer and present debt issuance costs related to line-of-credit arrangements as an asset, and subsequently amortize the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The standards are effective for fiscal years beginning after December 15, 2015. Early adoption is permitted. Upon adoption, the standards should be applied retrospectively to all prior periods presented in the financial statements. We plan to adopt the standards on their required effective date of January 1, 2016. The adoption of these standards will only result in a change in presentation of these costs in our Condensed Consolidated Balance Sheets.

Inventory

In July 2015, the FASB issued an accounting standard that simplifies the subsequent measurement of all inventory except for inventory measured using the last-in, first-out or the retail inventory method. Inventory within the scope of this standard will be measured at the lower of cost and net realizable value instead of the lower of cost or market as required under existing guidance. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This standard also requires that substantial and unusual losses that result from the subsequent measurement of inventory be disclosed in the financial statements. The new standard will be effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. This standard should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. We plan to adopt the standard on its required effective date of January 1, 2017. We are evaluating the effect the adoption of the standard will have on our consolidated financial condition, results of operations and cash flows.

4. ILFC Transaction

On the Closing Date, AerCap and AerCap Ireland Limited, a wholly-owned subsidiary of AerCap, completed the purchase of 100 percent of ILFCs common shares from AIG. See Note 1

AerCap reported transaction and integration expenses related to the ILFC Transaction as provided in the table below. These expenses are included in the Condensed Consolidated Income Statements.

Severance and other compensation expenses

50,431

Banking fees

45,740

Professional fees and other expenses

40,692

The following unaudited pro forma summary presents consolidated information of AerCap as if the business combination had occurred on January 1, 2013.

Pro Forma

Three Months Ended

September 30, 2014

Nine Months Ended

Total Revenues and other income

1,245,425

3,919,774

256,245

725,990

5. Flight equipment held for operating leases, net

Movements in flight equipment held for operating leases during the nine months ended September 30, 2015 and 2014 were as follows:

Net book value at beginning of period

8,085,947

24,038,423

(726,985

Additions

2,615,416

1,546,287

(1,340,932

(805,110

Impairment

(15,355

(1,871

Disposals/Transfers to held for sale

(857,660

(234,736

Transfers to Net investment in finance and sales-type leases/Inventory

(139,008

(59,943

Net book value at end of period

31,842,012

Accumulated depreciation at September 30, 2015 and September 30, 2014, respectively

(3,581,457

(1,926,623

6. Maintenance rights intangible and lease premium, net

Maintenance rights intangible and lease premium consist of the following at September 30, 2015 and December 31, 2014:

September 30, 2015

December 31, 2014

3,329,985

3,812,259

Lease premium

76,077

93,767

Movements in maintenance rights intangible during the nine months ended September 30, 2015 and 2014 were as follows:

Maintenance rights intangible, net at beginning of period

3,975,286

(263,372

(7,223

(54,156

(4,482

(78,479

(22,706

EOL and MR contract intangible write off due to sale of aircraft

(86,267

Maintenance rights intangible, net at end of period

3,940,875

The following table presents details of lease premium and related accumulated amortization at September 30, 2015 and December 31, 2014:

September 30, 2015

Gross carrying

amount

Net carrying

107,989

(31,912

December 31, 2014

119,763

(25,996

Lease premiums that are fully amortized are removed from the gross carrying amount and accumulated amortization columns in the tables above.

During the three months ended September 30, 2015 and 2014, we recorded amortization expense for lease premium of $5.5 million and $6.4 million, respectively. During the nine months ended September 30, 2015 and 2014, we recorded amortization expense for lease premium of $17.7 million and $11.6 million, respectively.

7. Other intangibles, net

Other intangibles consist of the following at September 30, 2015 and December 31, 2014:

Goodwill

58,094

Customer relationships

330,765

346,647

Contractual vendor intangible assets

44,508

47,580

Tradename and other intangible assets

66,450

71,388

The following table presents details of customer relationships and tradename and other intangible assets and related accumulated amortization at September 30, 2015 and December 31, 2014.

360,000

(29,235

83,973

(17,523

443,973

(46,758

397,215

(13,353

79,365

(7,977

439,365

(21,330

418,035

During the three months ended September 30, 2015 and 2014, we recorded amortization expense for customer relationships and tradename and other intangible assets of $8.5 million and $8.5 million, respectively. During the nine months ended September 30, 2015 and 2014, we recorded amortization expense for customer relationships and tradename and other intangible assets of $25.4 million and $12.9 million, respectively.

During the three and nine months ended September 30, 2015, we utilized $3.1 million of contractual vendor intangible assets to reduce the cash outlay related to purchases of goods and services from our vendors.

8. Other assets

Other assets consist of the following at September 30, 2015 and December 31, 2014:

304,079

315,532

194,874

203,965

Lease incentives

169,823

116,061

Other receivables

185,057

75,819

Investments

112,752

115,554

Notes receivable

111,721

135,154

Derivative assets (Note 9)

15,248

24,549

Other tangible fixed assets

19,250

21,028

Straight-line rents, prepaid expenses and other

40,071

39,430

As of September 30, 2015, we did not have an allowance for credit losses on notes receivable. We recognized a $2.0 million provision in the second quarter of 2015, which was used in the third quarter of 2015, upon termination of the related leases.

As of December 31, 2014, we did not have an allowance for credit losses on notes receivable and there was no activity recorded for credit losses during the twelve months ended December 31, 2014.

9. Derivative assets and liabilities

We have entered into a number of interest rate derivatives to hedge the current and future interest rate payments on our variable rate debt. These derivative products can include interest rate swaps, caps, floors, options and forward contracts.

As of September 30, 2015, we had interest rate caps outstanding, with underlying variable benchmark interest rates ranging from one to three-month U.S. dollar LIBOR.

All of our interest rate swaps matured in August 2015. Interest rate swaps acquired as part of the ILFC Transaction were subject to a master netting agreement, which allowed the netting of derivative assets and liabilities in the case of default under any one contract.

Some of our agreements with derivative counterparties require a two-way cash collateralization of derivative fair values. As of September 30, 2015 and December 31, 2014, the Company received cash collateral of $5.0 million and $8.1 million, respectively, from various counterparties and the obligation to return such collateral was recorded in Accounts payable, accrued expenses and other liabilities. The Company had not advanced any cash collateral to counterparties as of September 30, 2015 and December 31, 2014.

The counterparties to our interest rate derivatives are major international financial institutions. The Company continually monitors its positions and the credit ratings of the counterparties involved and limits the amount of credit exposure to any one party. We could be exposed to potential losses due to the credit risk of non-performance by these counterparties. We have not experienced any material losses to date.

Our derivative assets are recorded in Other assets and our derivative liabilities are recorded in Accounts payable, accrued expenses and other liabilities in the Condensed Consolidated Balance Sheets. The following tables present notional amounts and fair values of derivatives outstanding at September 30, 2015 and December 31, 2014:

Notional amount

Fair value

Derivative assets not designated as hedges:

Interest rate caps

1,749,340

1,635,002

Total derivative assets

Derivative liabilities not designated as hedges:

Interest rate floors

35,440

Interest rate swaps

51,630

Derivative liabilities designated as cash flow hedges:

39,000

Total derivative liabilities

We recorded the following in OCI related to derivative instruments for the three and nine months ended September 30, 2015 and 2014:

Gain (Loss)

Effective portion of change in fair market value of derivatives designated as cash flow hedges:

(3,199

Reclassification of derivative loss to Interest expense

Income tax effect

Net changes in cash flow hedges, net of taxes

The following table presents the effect of derivatives recorded in Interest expense in the Condensed Consolidated Income Statements:

Loss (Gain)

Derivatives not designated as hedges:

Interest rate caps, floors and swaps

10,612

(2,633

18,245

Reclassification to Condensed Consolidated Income Statements:

Reclassification of amounts previously recorded in Accumulated other comprehensive loss

Effect from derivatives

11,895

10. Accounts payable, accrued expenses and other liabilities

Accounts payable, accrued expenses and other liabilities consist of the following at September 30, 2015 and December 31, 2014:

Accounts payable and accrued expenses

306,094

349,632

Deferred revenue

446,802

391,573

Accrued interest

308,262

318,967

Guarantees (Note 20)

79,880

133,500

Derivative liabilities (Note 9)

Accrued maintenance liability

Movements in Accrued maintenance liability during the nine months ended September 30, 2015 and 2014 were as follows:

Accrued maintenance liability at beginning of period

466,293

2,575,118

(88,523

Maintenance payments received

Maintenance payments reimbursed

Release to income upon redelivery

Release to income upon sale

(6,562

Lessor contribution and top ups

Interest accretion

38,229

33,615

Accrued maintenance liability at end of period

3,165,374

12. Debt

As of September 30, 2015, the principal amount of our outstanding indebtedness totaled $28.4 billion, which excludes fair value adjustments of $0.9 billion. As of September 30, 2015, we remain in compliance with the respective financial covenants across our various debt obligations.

The following table provides a summary of our indebtedness at September 30, 2015 and December 31, 2014:

Debt Obligation

Collateral

(Number

aircraft)

Undrawn

amounts

Outstanding

average

rate (a)

Maturity

Unsecured

ILFC Legacy Notes

9,220,000

2016-2022

11,230,020

AerCap Aviation Notes

300,000

AerCap Trust & AerCap Ireland Capital Limited Notes

4,399,864

2017-2022

3,400,000

DBS revolving credit facility

Citi revolving credit facility

3,000,000

AIG revolving credit facility

500,000

Other unsecured debt

34,497

10.67%

53,101

Fair value adjustment

737,734

999,869

TOTAL UNSECURED

17,754,361

3,500,000

14,992,095

15,982,990

Secured

Export credit facilities

2,308,818

2015-2027

2,691,316

Senior secured notes

2,550,000

2016-2018

Institutional secured term loans

3,263,793

2020-2021

3,355,263

ALS II debt

239,972

325,920

AerFunding revolving credit facility

2,160,000

1,084,747

1,075,253

887,385

AeroTurbine revolving credit agreement (b)

220,164

329,836

302,142

Other secured debt

2,754,095

2016-2026

2,781,801

Boeing 737 800 pre-delivery payment facility

40,068

174,306

Secured debt committed amounts

120,389

203,234

287,227

TOTAL SECURED

13,987,135

1,425,300

12,765,069

13,355,360

ECAPS subordinated notes

1,000,000

Junior Subordinated Notes

Subordinated debt joint ventures partners

64,280

2015-2022

TOTAL SUBORDINATED

1,564,280

1,564,044

1,064,042

33,305,776

4,925,300

The weighted average interest rate for our floating rate debt is calculated based on the U.S. dollar LIBOR rate as of September 30, 2015, and excludes the impact of related derivative instruments which we hold to hedge our exposure to interest rates as well as any amortization of debt issuance costs.

AeroTurbines assets serve as collateral for the AeroTurbine revolving credit facility.

Additional details of the principal terms of our indebtedness can be found in our Annual Report on Form 20-F for the year ended December 31, 2014, filed with the SEC on March 30, 2015, our quarterly report on Form 6-K for the first quarter ended March 31, 2015, filed with the SEC on May 20, 2015 and our quarterly report on Form 6-K for the second quarter ended June 30, 2015, filed with the SEC on August 18, 2015. There have been no material changes to our indebtedness since the filing of those reports, except for scheduled repayments and as described below.

Other secured debt

In August 2015, following the full repayment of the Genesis Portfolio Funding Facility, Cloudfunding III Limited (Cloudfunding) entered into a term loan facility in the amount of $123.0 million. Cloudfunding is a special purpose company, with one class of shares entitled to general voting rights and all economic interests (other than a nominal dividend), which are held by AerCap International Bermuda Limited, a wholly owned subsidiary of AerCap Ireland Limited, and another class of shares entitled to a nominal annual dividend and to vote on certain bankruptcy, reorganization and similar matters, which are held by a charitable trust and to be voted in accordance with the instructions of the noteholders of Cloudfunding while their debt is outstanding. The loan bears interest at the applicable swap rate plus a margin of 2.40%, and the principal amount amortizes to zero at loan maturity in August 2022. We can voluntarily prepay the loan at any time, subject to certain conditions. The obligations of Cloudfunding are guaranteed by AerCap. The loan is secured by a portfolio of 11 aircraft with an average age of approximately 12 years, and equity interests in certain SPEs that own the pledged aircraft. The loan facility contains customary covenants and events of default, including covenants that limit the ability of Cloudfunding and its subsidiaries to incur additional indebtedness and create liens.

13. Income taxes

Our blended effective tax rate was 13.5% for the three and nine months ended September 30, 2015 and 17.2% and 17.5% for...


More