Air Lease (AL) - 2024 Q1 - Quarterly Report

PART I—FINANCIAL INFORMATION Financial Statements This section presents Air Lease Corporation's unaudited consolidated financial statements, showing total assets of $30.9 billion and net income of $107.9 million for Q1 2024 Consolidated Balance Sheets As of March 31, 2024, total assets increased to $30.91 billion, driven by flight equipment, with total liabilities at $23.68 billion and shareholders' equity at $7.23 billion Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Assets | $30,912,435 | $30,452,252 | | Flight equipment subject to operating leases, net | $26,544,503 | $26,231,208 | | Total Liabilities | $23,680,564 | $23,292,214 | | Debt financing, net | $19,479,961 | $19,182,657 | | Total Shareholders' Equity | $7,231,871 | $7,160,038 | Consolidated Statements of Income and Other Comprehensive Income For Q1 2024, total revenues increased 4.3% to $663.3 million, but net income attributable to common stockholders decreased to $97.4 million due to higher interest expenses Q1 2024 vs Q1 2023 Income Statement (in thousands, except per share data) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total Revenues | $663,310 | $636,142 | | Total Expenses | $527,981 | $477,876 | | Interest Expense | $194,703 | $164,686 | | Net Income | $107,866 | $128,720 | | Net Income Attributable to Common Stockholders | $97,441 | $118,295 | | Diluted EPS | $0.87 | $1.06 | Consolidated Statements of Cash Flows In Q1 2024, net cash from operating activities was $371.3 million, investing activities used $630.3 million, and financing activities provided $350.4 million, ending with $555.9 million in cash Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $371,330 | $348,490 | | Net cash used in investing activities | ($630,324) | ($1,273,376) | | Net cash provided by financing activities | $350,427 | $846,406 | | Net increase/(decrease) in cash | $91,433 | ($78,480) | Notes to Consolidated Financial Statements The notes detail the company's business, $19.7 billion debt, $20.9 billion aircraft acquisition commitments for 320 aircraft, and updates on Russian aircraft litigation - As of March 31, 2024, the company owned 472 aircraft, managed 73, and had an order book for 320 new aircraft[23] - Total debt financing stood at $19.7 billion as of March 31, 2024, with the majority being senior unsecured securities[29] - The company has commitments to purchase 320 aircraft from Airbus and Boeing for an estimated $20.9 billion, with deliveries scheduled through 2029[46][54] - The company is pursuing insurance claims and litigation to recover losses for aircraft detained in Russia, with a trial date set for April 17, 2025, in its suit against its own insurers[40] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2024 performance, highlighting a 4.3% revenue increase driven by fleet growth, challenges from delivery delays and higher interest rates, and a strong $6.5 billion liquidity position Overview In Q1 2024, ALC's owned fleet reached 472 aircraft with $26.5 billion net book value, revenues increased 4.3% to $663.3 million, but net income fell to $97.4 million due to higher interest expenses Q1 2024 Financial Highlights | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total Revenues | $663.3M | $636.1M | | Net Income (Common) | $97.4M | $118.3M | | Diluted EPS | $0.87 | $1.06 | - The company ended Q1 with 472 owned aircraft, a weighted average fleet age of 4.7 years, and a weighted average remaining lease term of 7.0 years[88] - Total liquidity was $6.5 billion, and the composite cost of funds was 4.03% at quarter-end[89] Our Fleet and Commitments The fleet's net book value grew to $26.5 billion with 472 owned aircraft, and 320 aircraft on order, but delivery delays are expected, particularly for the 737 MAX Fleet Portfolio Metrics | Metric | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Net book value | $26.5 billion | $26.2 billion | | Owned fleet | 472 | 463 | | Managed fleet | 73 | 78 | | Aircraft on order | 320 | 334 | Geographic Fleet Distribution (by Net Book Value) | Region | % of Total (Mar 2024) | | :--- | :--- | | Europe | 39.0% | | Asia Pacific | 38.4% | | Central/South America & Mexico | 9.0% | | The Middle East and Africa | 7.7% | | U.S. and Canada | 5.9% | - The company expects further delivery delays on its 737 MAX orders due to FAA-imposed production constraints on Boeing[109] Liquidity and Capital Resources The company ended Q1 with $6.5 billion in liquidity, $19.7 billion total debt (83.3% fixed-rate), and a composite cost of funds at 4.03%, prioritizing fleet investment and shareholder returns - Available liquidity stood at $6.5 billion at the end of Q1 2024[125] Debt Profile Comparison | Metric | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Debt | $19.7 billion | $19.4 billion | | % Fixed-Rate | 83.3% | 84.7% | | % Unsecured | 98.5% | 98.4% | | Composite Interest Rate | 4.03% | 3.77% | - In April 2024, the company amended and extended its revolving credit facility, increasing commitments to approximately $7.8 billion and extending the maturity to May 2028[143] Results of Operations Q1 2024 total revenues increased to $663.3 million driven by aircraft sales, but net income fell to $97.4 million due to a $30.0 million rise in interest expense from a higher composite cost of funds - Rental revenue decreased slightly, primarily due to recognizing $12.7 million in end-of-lease revenue from two aircraft, compared to $33.6 million from ten aircraft in the prior-year period[160] - Aircraft sales, trading, and other revenue increased to $49.0 million from $18.4 million YoY, mainly from gains on the sale of five aircraft[161] - Interest expense increased by $30.0 million YoY, driven by a rise in the composite cost of funds to 4.03% from 3.42%[162] - The effective tax rate increased to 20.3% from 18.7% YoY, partly due to the implementation of the Pillar Two global minimum tax[166] Quantitative and Qualitative Disclosures About Market Risk The company faces interest rate risk, where a 1.0% increase would add $32.9 million to annual interest expense, and limited foreign exchange risk, as most transactions are in U.S. dollars - As of March 31, 2024, the company had $3.29 billion in floating-rate debt outstanding[173] - A hypothetical 1.0% increase in the composite interest rate on floating-rate debt would increase annual interest expense by approximately $32.9 million[173] - Foreign exchange risk is limited as most contracts are in U.S. dollars, however, a strong U.S. dollar poses a risk to foreign lessees' payment capacity[176] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of March 31, 2024, the Certifying Officers concluded that the company's disclosure controls and procedures were effective[178] - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[179] PART II—OTHER INFORMATION Legal Proceedings The company is pursuing legal proceedings in California and England to recover losses for aircraft detained in Russia, but does not expect a material adverse effect as assets were written off in 2022 - The company filed suit against its aviation insurance carriers in California, with a trial date set for April 17, 2025, to recover losses for aircraft detained in Russia[181] - In January 2024, a separate lawsuit was filed in England against the Russian airlines' insurers and reinsurers[182][184] - The company believes these legal matters will not have a material adverse effect, as the related aircraft were fully written off in 2022[185] Risk Factors There have been no material changes to the company's risk factors from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2023 - No material changes in risk factors were reported since the last Annual Report on Form 10-K[187] Unregistered Sales of Equity Securities and Use of Proceeds None - None[188] Defaults Upon Senior Securities None - None[189] Mine Safety Disclosures None - None[190] Other Information None - None[191] Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, capital stock descriptions, and amendments to credit and aircraft purchase agreements - Filed exhibits include amendments to the A320 NEO and A220 purchase agreements with Airbus[193] - The Ninth Amendment and Extension Agreement to the Second Amended and Restated Credit Agreement was filed as an exhibit[193]