Air Lease (AL) - 2021 Q2 - Quarterly Report

PART I—FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited consolidated financial statements for Air Lease Corporation as of June 30, 2021, reflecting asset growth from fleet expansion but a year-over-year decline in revenue and net income due to COVID-19 impacts Consolidated Balance Sheets Total assets grew to $25.76 billion by June 30, 2021, driven by flight equipment, while liabilities slightly increased and shareholders' equity expanded to $6.50 billion Consolidated Balance Sheet Highlights (in billions) | Metric | June 30, 2021 (unaudited) | December 31, 2020 | | :--- | :--- | :--- | | Total Assets | $25.755 | $25.215 | | Flight equipment, net | $21.531 | $20.380 | | Total Liabilities | $19.253 | $19.142 | | Debt financing, net | $16.540 | $16.518 | | Total Shareholders' Equity | $6.501 | $6.072 | Consolidated Statements of Income and Comprehensive Income Q2 2021 total revenues decreased to $491.9 million, with net income available to common stockholders falling to $85.6 million, resulting in $0.75 diluted EPS Q2 and H1 2021 vs 2020 Income Statement (in millions, except per share data) | Metric | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $491.877 | $521.349 | $966.704 | $1,032.736 | | Rental of flight equipment | $452.044 | $497.869 | $920.139 | $994.556 | | Net Income | $93.422 | $147.625 | $177.514 | $284.776 | | Net income available to common stockholders | $85.587 | $143.781 | $165.835 | $277.088 | | Diluted EPS | $0.75 | $1.26 | $1.45 | $2.43 | Consolidated Statements of Cash Flows H1 2021 net cash from operations increased to $602.7 million, while investing activities used $1.40 billion, leading to a net cash decrease of $525.0 million Cash Flow Summary for Six Months Ended June 30 (in millions) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $602.665 | $468.342 | | Net cash used in investing activities | ($1,401.373) | ($902.563) | | Net cash provided by financing activities | $273.701 | $1,038.150 | | Net (decrease)/increase in cash | ($525.007) | $603.929 | Notes to Consolidated Financial Statements Notes detail operations, $16.7 billion total debt, $22.2 billion aircraft purchase commitments, and $90.3 million unrecognized H1 2021 rental revenue due to COVID-19 impacts - As of June 30, 2021, the company owned 354 aircraft, managed 89, and had 338 aircraft on order[30] - Total debt financing stood at $16.7 billion as of June 30, 2021, with senior unsecured notes comprising the majority at $16.4 billion[33][34] - The company has commitments to acquire 338 aircraft for an estimated aggregate price of $22.2 billion for delivery through 2027[49][50] - Due to collection uncertainty related to the COVID-19 pandemic, the company did not recognize rental revenue of $41.6 million in Q2 2021 and $90.3 million in H1 2021 for certain lessees[78] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses COVID-19's impact on operations, including lease deferrals and reduced collection rates, while highlighting $7.6 billion liquidity, fleet growth, and declining revenues due to unrecognized rental income Impact of the COVID-19 Pandemic COVID-19 continues to impact airline customers, leading to accommodations with 63% of lessees, 87% Q2 2021 collection rate, and $41.6 million unrecognized rental revenue - The company has agreed to accommodations, mainly lease deferrals, with approximately 63% of its lessees. As of August 5, 2021, total net deferrals stood at $115.0 million[85] - The collection rate was 87% for Q2 2021 and 86% for H1 2021. The company expects this rate to remain under pressure[86] - In Q2 2021, $41.6 million of rental revenue was not recognized because collection was not reasonably assured for certain lessees, who represent 10.9% of the fleet's net book value[86][87] Our Fleet As of June 30, 2021, the owned fleet grew to 354 aircraft with a $21.5 billion net book value, complemented by 338 aircraft on order and geographic diversification Fleet Metrics as of June 30, 2021 | Metric | Value | | :--- | :--- | | Owned Fleet | 354 aircraft | | Managed Fleet | 89 aircraft | | Aircraft on Order | 338 aircraft | | Aggregate Fleet Net Book Value | $21.5 billion | | Weighted-Average Fleet Age | 4.3 years | | Weighted-Average Remaining Lease Term | 6.9 years | | Total Committed Rentals | $27.1 billion | - The company faces significant delivery delays from manufacturers, particularly for the Boeing 737 MAX and 787 models, which may lead to further lease and order cancellations[104][109][110] - As of August 5, 2021, the company has placed 100% of its aircraft scheduled for delivery in 2021 and 87.7% of those for 2022 on lease[116] Liquidity and Capital Resources The company maintained a strong liquidity position of $7.6 billion in Q2 2021, with $16.7 billion total debt, 99.1% unsecured, and a 2.91% composite cost of funds - Total available liquidity was $7.6 billion as of Q2 2021, including a $6.4 billion unsecured revolving credit facility[133][95] Debt Profile | Metric | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total Debt Financing | $16.7 billion | $16.7 billion | | Unsecured Debt % | 99.1% | 98.2% | | Fixed-Rate Debt % | 94.6% | 93.0% | | Composite Interest Rate | 2.91% | 3.13% | - In H1 2021, the company issued approximately $2.6 billion in Medium-Term Notes and 300,000 shares of Series B Preferred Stock with a liquidation preference of $300.0 million[139][145] Results of Operations This section details financial results for Q2 and H1 2021, showing declining rental revenue due to unrecognized income and lease restructurings, alongside increased interest and depreciation expenses - Q2 2021 vs Q2 2020: Rental revenue decreased primarily due to $41.6 million of unrecognized revenue and a $45.1 million negative impact from lease restructurings[164] - H1 2021 vs H1 2020: Rental revenue decreased due to $90.3 million of unrecognized revenue and an $82.1 million negative impact from lease restructurings[169] - Aircraft sales, trading and other revenue in Q2 2021 included $34.0 million from the sale of unsecured claims related to Aeromexico's insolvency proceedings[165] - Interest expense increased in both the three and six-month periods due to a higher average debt balance to fund fleet growth, partially offset by a lower composite interest rate[166][171] Item 3. Quantitative and Qualitative Disclosures About Market Risk Primary market risks include interest rate risk, where a 1.0% rate increase would add $9.0 million in annual interest expense, and largely mitigated foreign exchange risk - As of June 30, 2021, the company had $0.9 billion in floating-rate debt. A 1.0% increase in interest rates would result in an additional $9.0 million in annualized interest expense[180][181] - Foreign exchange risk is largely mitigated as most revenues, expenses, and debt are denominated in U.S. dollars. The company's Canadian dollar-denominated notes are hedged with a cross-currency swap[183][184] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2021, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of June 30, 2021, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[186] - No changes occurred during the quarter ended June 30, 2021, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[187] PART II—OTHER INFORMATION Item 1. Legal Proceedings The company is not currently a party to any material legal proceedings - The company is not presently a party to any material legal proceedings[188] Item 1A. Risk Factors No material changes to risk factors from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020 - No material changes in risk factors from those discussed in the Annual Report on Form 10-K for the year ended December 31, 2020[189] Item 6. Exhibits This section lists exhibits filed with Form 10-Q, including amendments to credit and aircraft purchase agreements, and CEO/CFO certifications - Exhibits filed include the Sixth Amendment to the company's credit agreement and various amendments to purchase agreements with Airbus and Boeing[191][192][197] - Certifications by the Chief Executive Officer and Chief Financial Officer pursuant to the Sarbanes-Oxley Act of 2002 are included as exhibits[198][199]