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Air Lease Corporation Announces First Quarter 2018 Results

LOS ANGELES, May 10, 2018 (GLOBE NEWSWIRE) -- Air Lease Corporation (ALC) (AL) announces financial results for the three months ended March 31, 2018.

  • Revenues:

    • $381 million for the three months ended March 31, 2018, an increase of 5.8%

  • Diluted earnings per share:

    • $1.00 for the three months ended March 31, 2018, an increase of 28.2%

  • Adjusted diluted earnings per share before income taxes:

    • $1.38 for the three months ended March 31, 2018, an increase of 3.8%

  • Margin:

    • Pre-tax margin of 37.1% for the three months ended March 31, 2018

    • Adjusted pre-tax margin of 40.1% for the three months ended March 31, 2018

  • Return on equity:

    • Pre-tax return on equity of 16.1% for the trailing twelve months ended March 31, 2018

    • Adjusted pre-tax return on equity of 17.3% for the trailing twelve months ended March 31, 2018

Highlights

  • Took delivery of four aircraft from our order book and five incremental aircraft from the secondary market, representing $441 million in capital expenditures, ending the quarter with $13.6 billion in aircraft with a weighted average age of 3.9 years and a weighted average lease term remaining of 6.7 years.

  • Our aircraft on order are 100% placed through 2019 and 81% placed through 2020 on long term leases.

  • Signed a firm order with Boeing for an additional eight Boeing 737-8 MAX aircraft with deliveries beginning in 2020 through 2022.

  • Ended the quarter with $23.5 billion in committed minimum future rental payments consisting of $10.2 billion in contracted minimum rental payments on the aircraft in our existing fleet and $13.3 billion in minimum future rental payments related to aircraft delivering in the future.

  • Issued $1.25 billion of unsecured senior notes including $550 million of 2.50% unsecured senior notes due 2021 and $700 million of 3.25% unsecured senior notes due 2025.

  • In May 2018, completed an amendment to our Syndicated Unsecured Revolving Credit Facility, increasing the capacity to $4.5 billion and extending the final maturity to May 2022 with an interest rate of LIBOR plus 1.05%.

  • Declared a quarterly cash dividend of $0.10 per share on our outstanding common stock for the first quarter of 2018.  The dividend will be paid on July 10, 2018 to holders of record of our common stock as of June 5, 2018.

“We had another strong quarter of growth in revenues and earnings per share.  We were also able to add nine aircraft to our industry leading fleet and eight planes for future delivery.  Global passenger growth remains strong, as do our financial metrics and forward lease placements,” said John L. Plueger, Chief Executive Officer and President.

“The airline industry continues to perform well, with IATA forecasting another year of global industry profits in excess of $30 billion.  Supply chain delays and engine technical issues continue to have a short term impact on new aircraft deliveries.  As such, we continue to source aircraft opportunistically,” said Steven F. Udvar-Házy, Executive Chairman of the Board.

The following table summarizes the results for the three months ended March 31, 2018 and 2017 (in thousands, except per share amounts and percentages):

                         
    Three Months Ended
March 31,
 
    2018   2017   $ change   % change  
Revenues   $ 381,209    $ 360,187    $ 21,022    5.8  %
Income before taxes   $ 141,319    $ 133,878    $ 7,441    5.6  %
Net income   $ 110,651    $ 84,937    $ 25,714    30.3  %
Adjusted net income before income taxes(1)    $ 152,773    $ 146,643    $ 6,130    4.2  %
Diluted EPS   $ 1.00    $ 0.78    $ 0.22    28.2  %
Adjusted diluted EPS before income taxes(1)    $ 1.38    $ 1.33    $ 0.05    3.8  %
                         

(1)  Adjusted net income before income taxes and adjusted diluted earnings per share before income taxes have been adjusted to exclude the effects of certain non-cash items, one-time or non-recurring items, that are not expected to continue in the future and certain other items. See note 1 under the Consolidated Statements of Income included in this earnings release for a discussion of the non-GAAP measures adjusted net income before income taxes and adjusted diluted EPS before income taxes and a reconciliation to their most comparable GAAP financial measures.

Flight Equipment Portfolio

Our fleet grew by 2.3% based on net book value of $13.6 billion as of March 31, 2018 compared to $13.3 billion as of December 31, 2017.  As of March 31, 2018, our fleet was comprised of 253 owned aircraft, with a weighted-average age and remaining lease term of 3.9 years and 6.7 years, respectively, and 49 managed aircraft.  We have a globally diversified customer base of 93 airlines in 56 countries.

During the quarter ended March 31, 2018, we took delivery of four aircraft from our order book and five incremental aircraft from the secondary market ending the quarter with 253 aircraft in our operating lease portfolio.

Below are the key portfolio metrics of our fleet:

               
    March 31, 2018   December 31, 2017  
Aggregate fleet net book value   $ 13.6 billion   $ 13.3 billion  
Weighted-average fleet age(1)     3.9 years     3.8 years  
Weighted-average remaining lease term(1)     6.7 years     6.8 years  
               
Fleet size     253      244   
Managed fleet     49      50   
Order book     372      368   
Total     674      662   
               
Current fleet contracted rentals   $ 10.2 billion   $ 10.1 billion  
Committed fleet rentals   $ 13.3 billion   $ 13.3 billion  
Total committed rentals   $ 23.5 billion   $ 23.4 billion  
               

(1)  Weighted-average fleet age and remaining lease term calculated based on net book value.

The following table details the region concentration of our fleet:

           
    March 31, 2018   December 31, 2017  
Region   % of Net Book Value   % of Net Book Value  
Europe   31.3 31.7 %
Asia (excluding China)   23.4 22.4 %
China   19.8 20.5 %
The Middle East and Africa   11.7 11.2 %
Central America, South America and Mexico   6.7 7.0 %
U.S. and Canada   4.4 4.5 %
Pacific, Australia and New Zealand   2.7 2.7 %
Total   100.0 100.0 %
           

The following table details the composition of our fleet by aircraft type:

                   
    March 31, 2018   December 31, 2017  
Aircraft type   Number of
Aircraft
  % of Total   Number of
Aircraft
  % of Total  
Airbus A319-100   1   0.4 % 1   0.4 %
Airbus A320-200   42   16.6 % 40   16.4 %
Airbus A320-200neo   5   2.0 % 5   2.1 %
Airbus A321-200   29   11.4 % 29   11.9 %
Airbus A321-200neo   6   2.4 % 5   2.1 %
Airbus A330-200   15   5.9 % 15   6.2 %
Airbus A330-300   5   2.0 % 5   2.0 %
Airbus A350-900   3   1.2 % 2   0.9 %
Boeing 737-700   5   2.0 % 3   1.2 %
Boeing 737-800   103   40.7 % 102   41.8 %
Boeing 737-8 MAX   4   1.6 % 2   0.8 %
Boeing 767-300ER   1   0.4 % 1   0.4 %
Boeing 777-200ER   1   0.4 % 1   0.4 %
Boeing 777-300ER   24   9.5 % 24   9.8 %
Boeing 787-9   8   3.1 % 8   3.3 %
Embraer E190   1   0.4 % 1   0.3 %
Total   253   100.0 % 244   100.0 %
                   

Debt Financing Activities

We ended the first quarter of 2018 with total debt financing, net of discounts and issuance costs, of $9.9 billion, resulting in a debt to equity ratio of 2.34:1.

Our debt financing was comprised of unsecured debt of $9.5 billion representing 95.0% of our debt portfolio as of March 31, 2018 as compared to 94.6% as of December 31, 2017.  Our fixed rate debt represented 91.1% of our debt portfolio as of March 31, 2018 as compared to 85.4% as of December 31, 2017.  Our composite cost of funds increased to 3.28% as of March 31, 2018 as compared to 3.20% as of December 31, 2017.

Our debt financing was comprised of the following at March 31, 2018 and December 31, 2017 (dollars in thousands):

               
    March 31,
 2018
  December 31,
 2017
 
Unsecured              
Senior notes   $ 8,768,445   $ 8,019,871  
Revolving credit facility     337,000     847,000  
Convertible senior notes     199,975     199,983  
Term financings     195,016     203,704  
Total unsecured debt financing     9,500,436     9,270,558  
Secured              
Term financings     458,371     484,036  
Export credit financing     43,256     44,920  
Total secured debt financing     501,627     528,956  
               
Total debt financing     10,002,063     9,799,514  
  Less: Debt discounts and issuance costs     (114,564 )   (100,729 )
Debt financing, net of discounts and issuance costs   $ 9,887,499   $ 9,698,785  
Selected interest rates and ratios:              
Composite interest rate(1)     3.28   3.20
Composite interest rate on fixed-rate debt(1)      3.29   3.27 %
Percentage of total debt at fixed-rate     91.07   85.42
               

(1)  This rate does not include the effect of upfront fees, undrawn fees or amortization of debt discounts and issuance costs.

Conference Call

In connection with this earnings release, Air Lease Corporation will host a conference call on May 10, 2018 at 4:30 PM Eastern Time to discuss the Company's financial results for the first quarter of 2018.

Investors can participate in the conference call by dialing (855) 308-8321 domestic or (330) 863-3465 international. The passcode for the call is 6995138.

The conference call will also be broadcast live through a link on the Investor Relations page of the Air Lease Corporation website at www.airleasecorp.com. Please visit the website at least 15 minutes prior to the call to register, download and install any necessary audio software. A replay of the broadcast will be available on the Investor Relations page of the Air Lease Corporation website.

For your convenience, the conference call can be replayed in its entirety beginning at 7:30 PM ET on May 10, 2018 until 7:30 PM ET on May 17, 2018. If you wish to listen to the replay of this conference call, please dial (855) 859-2056 domestic or (404) 537-3406 international and enter passcode 6995138.

About Air Lease Corporation (AL)

Air Lease Corporation is a leading aircraft leasing company based in Los Angeles, California that has airline customers throughout the world. ALC and its team of dedicated and experienced professionals are principally engaged in purchasing commercial aircraft and leasing them to its airline customers worldwide through customized aircraft leasing and financing solutions. For more information, visit ALC's website at www.airleasecorp.com.

Contact

Investors:
Mary Liz DePalma
Assistant Vice President, Investor Relations
Email: mdepalma@airleasecorp.com

Media:
Laura Woeste
Manager, Media and Investor Relations
Email: lwoeste@airleasecorp.com

Forward-Looking Statements

Statements in this press release that are not historical facts are hereby identified as “forward-looking statements,” including any statements about our expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance. These statements are often, but not always, made through the use of words or phrases such as “anticipate,” “believes,” “can,” “could,” “may,” “predicts,” “potential,” “should,” “will,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” “intends” and similar words or phrases. These statements are only predictions and involve estimates, known and unknown risks, assumptions and uncertainties that could cause actual results to differ materially from those expressed in such statements, including as a result of the following factors, among others:

  • our inability to make acquisitions of, or lease, aircraft on favorable terms;

  • our inability to sell aircraft on favorable terms;

  • our inability to obtain additional financing on favorable terms, if required, to complete the acquisition of sufficient aircraft as currently contemplated or to fund the operations and growth of our business;

  • our inability to effectively oversee our managed fleet;

  • our inability to obtain refinancing prior to the time our debt matures;

  • impaired financial condition and liquidity of our lessees;

  • deterioration of economic conditions in the commercial aviation industry generally;

  • increased maintenance, operating or other expenses or changes in the timing thereof;

  • changes in the regulatory environment;

  • unanticipated impacts of the Tax Cuts and Jobs Act of 2017 (the “Tax Reform Act”), including as a result of changes in assumptions we make in our interpretation of the Tax Reform Act, guidance related to application of the Tax Reform Act that may be issued in the future, and actions that we may take as a result of our expected impact of the Tax Reform Act;

  • potential natural disasters and terrorist attacks and the amount of our insurance coverage, if any, relating thereto; and

  • the factors discussed under “Part I – Item 1A. Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2017, and other SEC filings, including future SEC filings.

All forward-looking statements are necessarily only estimates of future results, and there can be no assurance that actual results will not differ materially from expectations. You are therefore cautioned not to place undue reliance on such statements. Any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. 

 
Air Lease Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and par value amounts)
 
    March 31, 2018   December 31, 2017  
    (unaudited)  
Assets          
Cash and cash equivalents   $ 252,491   $ 292,204  
Restricted cash   19,133   16,078  
Flight equipment subject to operating leases   15,544,868   15,100,040  
Less accumulated depreciation   (1,955,924 ) (1,819,790 )
    13,588,944   13,280,250  
Deposits on flight equipment purchases   1,567,690   1,562,776  
Other assets   516,588   462,856  
Total assets   $ 15,944,846   $ 15,614,164  
Liabilities and Shareholders’ Equity          
Accrued interest and other payables   $ 281,122   $ 309,182  
Debt financing, net of discounts and issuance costs   9,887,499   9,698,785  
Security deposits and maintenance reserves on flight equipment leases   894,323   856,140  
Rentals received in advance   106,844   104,820  
Deferred tax liability   548,435   517,795  
Total liabilities   $ 11,718,223   $ 11,486,722  
Shareholders’ Equity          
Preferred stock, $0.01 par value; 50,000,000 shares authorized; no shares issued or outstanding      
Class A common stock, $0.01 par value; authorized 500,000,000 shares; issued and outstanding 103,979,834 and 103,621,629 shares at March 31, 2018 and December 31, 2017, respectively   1,040   1,036  
Class B non-voting common stock, $0.01 par value; authorized 10,000,000 shares; no shares issued or outstanding      
Paid-in capital   2,258,987   2,260,064  
Retained earnings   1,966,596   1,866,342  
Total shareholders’ equity   $ 4,226,623   $ 4,127,442  
Total liabilities and shareholders’ equity   $ 15,944,846   $ 15,614,164  
 

 

 
Air Lease Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share, per share amounts and percentages)
 
    Three Months Ended 
March 31,
 
    2018   2017  
    (unaudited)  
Revenues          
Rental of flight equipment   $ 377,862   $ 354,653  
Aircraft sales, trading and other   3,347   5,534  
Total revenues   381,209   360,187  
           
Expenses          
Interest   68,943   67,063  
Amortization of debt discounts and issuance costs   8,022   8,992  
Interest expense   76,965   76,055  
           
Depreciation of flight equipment   136,134   123,909  
Selling, general and administrative   23,359   22,572  
Stock-based compensation   3,432   3,773  
Total expenses   239,890   226,309  
           
Income before taxes   141,319   133,878  
Income tax expense   (30,668 ) (48,941 )
Net income   $ 110,651   $ 84,937  
           
Net income per share of Class A and B common stock          
Basic   $ 1.07   $ 0.83  
Diluted   $ 1.00   $ 0.78  
Weighted-average shares outstanding          
Basic   103,747,920   102,947,611  
Diluted   112,230,410   111,429,926  
           
Other financial data          
Pre-tax profit margin   37.1 % 37.2 %
Adjusted net income before income taxes(1)   $ 152,773   $ 146,643  
Adjusted margin before income taxes(1)   40.1 % 40.7 %
Adjusted diluted earnings per share before income taxes(1)   $ 1.38   $ 1.33  
Pre-tax return on equity (TTM)   16.1 % 17.4 %
Adjusted pre-tax return on equity (TTM)(1)   17.3 % 18.8 %
           

(1) Adjusted net income before income taxes (defined as net income excluding the effects of certain non-cash items, one-time or non-recurring items, that are not expected to continue in the future and certain other items), adjusted margin before income taxes (defined as adjusted net income before income taxes divided by total revenues), adjusted pre-tax return on equity (defined as adjusted net income before income taxes divided by average shareholders' equity) and adjusted diluted earnings per share before income taxes (defined as adjusted net income before income taxes divided by the weighted average diluted common shares outstanding) are measures of operating performance that are not defined by GAAP and should not be considered as an alternative to net income, pre-tax profit margin, earnings per share, pre-tax return on equity, and diluted earnings per share, or any other performance measures derived in accordance with GAAP. Adjusted net income before income taxes, adjusted margin before income taxes, adjusted pre-tax return on equity and adjusted diluted earnings per share before income taxes, are presented as supplemental disclosure because management believes they provide useful information on our earnings from ongoing operations.

Management and our board of directors use adjusted net income before income taxes, adjusted margin before income taxes, adjusted pre-tax return on equity and adjusted diluted earnings per share before income taxes to assess our consolidated financial and operating performance.  Management believes these measures are helpful in evaluating the operating performance of our ongoing operations and identifying trends in our performance, because they remove the effects of certain non-cash items, one-time or non-recurring items that are not expected to continue in the future and certain other items from our operating results.  Adjusted net income before income taxes, adjusted margin before income taxes, adjusted pre-tax return on equity and adjusted diluted earnings per share before income taxes, however, should not be considered in isolation or as a substitute for analysis of our operating results or cash flows as reported under GAAP. Adjusted net income before income taxes, adjusted margin before income taxes, adjusted pre-tax return on equity and adjusted diluted earnings per share before income taxes do not reflect our cash expenditures or changes in our cash requirements for our working capital needs. In addition, our calculation of adjusted net income before income taxes, adjusted margin before income taxes, adjusted pre-tax return on equity and adjusted diluted earnings per share before income taxes may differ from the adjusted net income before income taxes, adjusted margin before income taxes, adjusted pre-tax return on equity and adjusted diluted earnings per share before income taxes or analogous calculations of other companies in our industry, limiting their usefulness as a comparative measure.

The following tables show the reconciliation of net income to adjusted net income before income taxes and adjusted margin before income taxes (in thousands, except percentages):

               
    Three Months Ended
March 31,
 
    2018   2017  
    (unaudited)  
Reconciliation of net income to adjusted net income before income taxes:          
Net income   $ 110,651   $ 84,937  
Amortization of debt discounts and issuance costs   8,022   8,992  
Stock-based compensation   3,432   3,773  
Provision for income taxes   30,668   48,941  
Adjusted net income before income taxes   $ 152,773   $ 146,643  
Adjusted margin before income taxes(1)   40.1 % 40.7 %
           

(1)  Adjusted margin before income taxes is adjusted net income before income taxes divided by total revenues

The following table shows the reconciliation of net income to adjusted diluted earnings per share before income taxes (in thousands, except share and per share amounts):

               
    Three Months Ended
March 31,
 
    2018   2017  
    (unaudited)  
Reconciliation of net income to adjusted diluted earnings per share before income taxes:          
Net income   $ 110,651   $ 84,937  
Amortization of debt discounts and issuance costs   8,022   8,992  
Stock-based compensation   3,432   3,773  
Provision for income taxes   30,668   48,941  
Adjusted net income before income taxes   $ 152,773   $ 146,643  
Assumed conversion of convertible senior notes   1,739   1,424  
Adjusted net income before income taxes plus assumed conversions   $ 154,512   $ 148,067  
Weighted-average diluted shares outstanding   112,230,410   111,429,926  
Adjusted diluted earnings per share before income taxes   $ 1.38   $ 1.33  
               

The following table shows the reconciliation of net income to adjusted pre-tax return on equity (in thousands, except percentages):

               
    Trailing Twelve Months
March 31,
 
    2018   2017  
    (unaudited)  
Reconciliation of net income to adjusted pre-tax return on equity:          
Net income   $ 781,866   $ 367,004  
Amortization of debt discounts and issuance costs   28,484   32,773  
Stock-based compensation   19,463   17,475  
Insurance recovery on settlement   (950 ) (2,000 )
Provision for income taxes   (164,895 ) 203,121  
Adjusted net income before income taxes   $ 663,968   $ 618,373  
           
Shareholders' equity as of March 31, 2017 and 2016, respectively   $ 3,459,232   $ 3,104,403  
Shareholders' equity as of March 31, 2018 and 2017, respectively   $ 4,226,623   $ 3,459,232  
Average shareholders' equity   $ 3,842,928   $ 3,281,818  
           
Adjusted pre-tax return on equity (TTM)   17.3 % 18.8 %
           

 

 
Air Lease Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 
    Three Months Ended
March 31,
 
    2018   2017  
    (unaudited)  
Operating Activities          
Net income   $ 110,651   $ 84,937  
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation of flight equipment   136,134   123,909  
Stock-based compensation   3,432   3,773  
Deferred taxes   30,668   48,941  
Amortization of debt discounts and issuance costs   8,022   8,992  
Amortization of prepaid lease costs   7,020   4,037  
Gain on aircraft sales, trading and other activity   (765 ) (7,264 )
Changes in operating assets and liabilities:          
Other assets   (25,605 ) (20,359 )
Accrued interest and other payables   (24,913 ) (30,549 )
Rentals received in advance   2,023   3,247  
Net cash provided by operating activities   246,667   219,664  
Investing Activities          
Acquisition of flight equipment under operating lease   (362,519 ) (597,254 )
Payments for deposits on flight equipment purchases   (63,751 ) (200,549 )
Proceeds from aircraft sales, trading and other activity     96,840  
Acquisition of aircraft furnishings, equipment and other assets   (54,970 ) (51,464 )
Net cash used in investing activities   (481,240 ) (752,427 )
Financing Activities          
Issuance of common stock upon exercise of options and warrants   2,628   864  
Cash dividends paid   (10,359 ) (7,714 )
Tax withholdings on stock-based compensation   (7,141 ) (5,252 )
Net change in unsecured revolving facility   (510,000 ) (60,000 )
Proceeds from debt financings   1,230,765   487,955  
Payments in reduction of debt financings   (537,444 ) (46,598 )
Debt issuance costs   (2,623 ) (1,531 )
Security deposits and maintenance reserve receipts   48,754   56,165  
Security deposits and maintenance reserve disbursements   (16,665 ) (7,840 )
Net cash provided by financing activities   197,915   416,049  
Net decrease in cash   (36,658 ) (116,714 )
Cash, cash equivalents and restricted cash at beginning of period   308,282   290,802  
Cash, cash equivalents and restricted cash at end of period   $ 271,624   $ 174,088  
Supplemental Disclosure of Cash Flow Information          
Cash paid during the period for interest, including capitalized interest of $12,816 and $11,402 at March 31, 2018 and 2017, respectively   $ 95,466   $ 90,059  
Supplemental Disclosure of Noncash Activities          
Buyer furnished equipment, capitalized interest, deposits on flight equipment purchases and seller financing applied to acquisition of flight equipment and other assets applied to payments for deposits on flight equipment purchases   $ 79,677   $ 220,610  
Cash dividends declared, not yet paid   $ 10,397   $ 7,736