Part I Item 1. Financial Statements This section presents Air Lease Corporation's unaudited consolidated financial statements as of June 30, 2024, covering balance sheets, income, equity, and cash flows with detailed notes Consolidated Balance Sheets Total assets increased to $31.02 billion as of June 30, 2024, from $30.45 billion at year-end 2023, driven by flight equipment growth, with liabilities and equity also rising Consolidated Balance Sheet Summary | Balance Sheet Item | June 30, 2024 (in billions) | December 31, 2023 (in billions) | | :--- | :--- | :--- | | Total Assets | $31.02 | $30.45 | | Flight equipment subject to operating leases, net | $26.79 | $26.23 | | Total Liabilities | $23.71 | $23.29 | | Debt financing, net | $19.68 | $19.18 | | Total Shareholders' Equity | $7.31 | $7.16 | Consolidated Statements of Income Q2 2024 total revenues slightly decreased to $667.3 million, with net income declining to $90.4 million due to higher interest expenses, while H1 2024 revenues increased to $1.33 billion with a net income decrease to $210.8 million Consolidated Statements of Income - Q2 Comparison | Metric | Q2 2024 (in millions) | Q2 2023 (in millions) | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $667.3 | $672.9 | -0.8% | | Interest Expense | $203.3 | $185.8 | +9.4% | | Net Income | $102.9 | $132.4 | -22.2% | | Diluted EPS | $0.81 | $1.10 | -26.4% | Consolidated Statements of Income - H1 Comparison | Metric | H1 2024 (in billions) | H1 2023 (in billions) | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $1.33 | $1.31 | +1.6% | | Interest Expense | $0.398 | $0.351 | +13.5% | | Net Income | $0.211 | $0.261 | -19.3% | | Diluted EPS | $1.68 | $2.16 | -22.2% | Consolidated Statements of Cash Flows Net cash from operating activities decreased to $785.1 million for H1 2024, while financing activities significantly increased to $612.8 million due to higher debt proceeds, resulting in a net cash decrease Consolidated Statements of Cash Flows Summary | Cash Flow Activity (Six Months Ended June 30) | 2024 (in millions) | 2023 (in millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $785.1 | $880.9 | | Net cash used in investing activities | ($1,406.8) | ($1,415.5) | | Net cash provided by financing activities | $612.8 | $335.0 | | Net decrease in cash | ($8.8) | ($199.6) | Notes to Consolidated Financial Statements Detailed notes provide context on the company's fleet, debt structure, aircraft commitments, and ongoing litigation regarding Russian-detained aircraft - As of June 30, 2024, the company owned 474 aircraft, managed 67 aircraft, and had 307 aircraft on order from manufacturers25 - Total debt financing increased to $19.9 billion as of June 30, 2024, from $19.4 billion at year-end 2023, with unsecured debt comprising the vast majority31 - The company has commitments to purchase 307 aircraft through 2029, with an estimated aggregate commitment of $19.9 billion, though deliveries face ongoing delays from manufacturers505152 - The company is pursuing legal action against insurers to recover losses for aircraft detained in Russia, for which a $771.5 million write-off was recorded in 2022, with a California trial set for April 17, 20254143 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 2024 performance, noting fleet growth to $26.8 billion but declining revenues and net income due to aircraft sales and higher interest expenses, while maintaining strong liquidity and a robust order book despite delivery delays Our Fleet As of June 30, 2024, the owned fleet comprised 474 aircraft with a net book value of $26.8 billion, a weighted average age of 4.7 years, and 307 aircraft on order, facing significant delivery delays Fleet Portfolio Metrics | Portfolio Metrics | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Net book value of flight equipment | $26.8 billion | $26.2 billion | | Weighted-average fleet age | 4.7 years | 4.6 years | | Weighted-average remaining lease term | 6.9 years | 7.0 years | | Owned fleet (count) | 474 | 463 | | Aircraft on order (count) | 307 | 334 | - The company has contractual commitments to acquire 307 new aircraft for delivery through 2029, but expects significant delays from manufacturers, with expected deliveries for H2 2024 at 35 aircraft versus 50 contractual102104107 - As of August 1, 2024, 100% of aircraft delivering through 2025 and 88.3% of aircraft delivering in 2026 are placed on long-term leases114 Liquidity and Capital Resources The company ended Q2 2024 with $8.2 billion in available liquidity and $19.9 billion in total debt, with a composite cost of funds of 3.99%, maintaining investment-grade credit ratings - Total available liquidity was $8.2 billion, comprising $0.5 billion in unrestricted cash and $7.7 billion available under the unsecured revolving credit facility125 Debt Metrics | Debt Metric | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Debt Outstanding | $19.9 billion | $19.4 billion | | Percentage of fixed-rate debt | 88.3% | 84.7% | | Percentage of unsecured debt | 98.5% | 98.4% | | Composite interest rate | 3.99% | 3.77% | - The company maintains investment-grade credit ratings from all three major agencies: A- (Stable) from Kroll, BBB (Stable) from S&P, and BBB (Stable) from Fitch153 Results of Operations Q2 2024 rental revenue slightly decreased to $609.5 million, while interest expense rose to $203.3 million, leading to a decline in net income to $90.4 million - Q2 2024 vs Q2 2023: - Rental Revenue: Decreased slightly to $609.5 million from $611.7 million, impacted by sales of older, higher-yield aircraft and a $12.8 million decline in end-of-lease revenue160161 - Aircraft Sales Revenue: Decreased to $57.8 million from $61.2 million, with gains from sales falling to $39.7 million from $44.6 million162 - Interest Expense: Increased to $203.3 million from $185.8 million due to a higher composite cost of funds and increased debt166 - Net Income: Decreased to $90.4 million from $122.0 million166 - H1 2024 vs H1 2023: - Rental Revenue: Remained flat at $1.2 billion, with fleet growth offset by lower lease yields on new aircraft and a $33.5 million decline in end-of-lease revenue169170 - Aircraft Sales Revenue: Increased to $106.8 million from $79.5 million, driven by higher gains from aircraft sales171 - Interest Expense: Increased significantly to $398.0 million from $350.5 million176 - Net Income: Decreased to $187.9 million from $240.3 million176 Non-GAAP Adjusted Financial Metrics | Non-GAAP Metric | Q2 2024 (in millions) | Q2 2023 (in millions) | | :--- | :--- | :--- | | Adjusted net income before income taxes | $137.4 | $175.9 | | Adjusted diluted EPS before income taxes | $1.23 | $1.58 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exposed to interest rate risk from its $2.3 billion floating-rate debt and foreign exchange risk, primarily impacting foreign customers' ability to pay in U.S. dollars - The company has $2.3 billion in floating-rate debt outstanding; a hypothetical 1.0% increase in rates would result in an additional annual interest expense of approximately $23.2 million182 - Foreign exchange risk is limited as most contracts are U.S. dollar-denominated, but over 95% of revenues from foreign customers could be affected by local currency depreciation impacting their ability to make USD payments184 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2024, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of June 30, 2024, the company's Certifying Officers concluded that disclosure controls and procedures were effective188 - No material changes occurred in the internal control over financial reporting during the quarter ended June 30, 2024189 Part II Item 1. Legal Proceedings The company is engaged in litigation to recover losses for aircraft detained in Russia, with a California trial set for April 17, 2025, and does not expect a material adverse effect as assets were fully written off - The company filed a lawsuit in California against its aviation insurance carriers for losses related to aircraft detained in Russia, with a trial date set for April 17, 2025191 - In January 2024, a separate lawsuit was filed in England against the Russian airlines' insurers and reinsurers seeking recovery under the airlines' policies192 - The company does not believe these legal matters will have a material adverse effect on its financial condition, as the related aircraft were fully written-off in 2022193 Item 1A. Risk Factors No material changes to the company's risk factors were reported compared to the Annual Report on Form 10-K for the year ended December 31, 2023 - No material changes in risk factors were reported compared to the Annual Report on Form 10-K for the year ended December 31, 2023195 Other Items (Items 2, 3, 4, 5, 6) This section covers standard disclosures, reporting no unregistered sales of equity securities, no defaults on senior securities, no mine safety disclosures, and lists exhibits filed with the report - The company reported 'None' for Item 2 (Unregistered Sales of Equity Securities), Item 3 (Defaults Upon Senior Securities), and Item 4 (Mine Safety Disclosures)198199200 - Item 6 lists the exhibits filed with the Form 10-Q, including amendments to purchase agreements with Airbus and required officer certifications202203
Air Lease (AL) - 2024 Q2 - Quarterly Report