Air Lease Earnings 2020-09-30

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-35121

AIR LEASE CORPORATION

(Exact name of registrant as specified in its charter)

Delaware		27-1840403
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2000 Avenue of the Stars, Suite 1000N Los Angeles, California		90067
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (310) 553-0555

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock	AL	New York Stock Exchange
6.150% Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series A	AL PRA	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:


Large accelerated filer ☒		Accelerated filer ☐
Non-accelerated filer ☐		Smaller reporting company ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

At November 6, 2020, there were 113,778,906 shares of Air Lease Corporation’s Class A common stock outstanding.

Air Lease Corporation and Subsidiaries

Form 10-Q

For the Quarterly Period Ended September 30, 2020

TABLE OF CONTENTS

		Page
Note About Forward-Looking Statements		3
PART I—FINANCIAL INFORMATION
Item 1	Financial Statements	4
	Consolidated Balance Sheets—September 30, 2020 and December 31, 2019 (unaudited)	4
	Consolidated Statements of Income and Comprehensive Income—Three and Nine Months Ended September 30, 2020 and 2019 (unaudited)	5
	Consolidated Statement of Shareholders’ Equity—Three and Nine Months Ended September 30, 2020 and 2019 (unaudited)	6
	Consolidated Statements of Cash Flows—Nine Months Ended September 30, 2020 and 2019 (unaudited)	8
	Notes to Consolidated Financial Statements (unaudited)	9
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4	Controls and Procedures	35
PART II—OTHER INFORMATION
Item 1	Legal Proceedings	36
Item 1A	Risk Factors	36
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3	Defaults Upon Senior Securities	36
Item 4	Mine Safety Disclosures	36
Item 5	Other Information	36
Item 6	Exhibits	37
	Signatures	39

NOTE ABOUT FORWARD-LOOKING STATEMENTS

Statements in this quarterly report on Form 10-Q that are not historical facts may constitute “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:

●

the extent to which the coronavirus (“COVID-19”) pandemic and measures taken to contain its spread ultimately impact our business, results of operation and financial condition;

●

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 obtain refinancing prior to the time our debt matures;

●

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

●

our inability to sell aircraft on favorable terms or to predict the timing of such sales;

●

impaired financial condition and liquidity of our lessees;

●

changes in overall demand for commercial aircraft leasing and aircraft management services;

●

deterioration of economic conditions in the commercial aviation industry generally;

●

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

●

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

●

changes in the regulatory environment, including tariffs and other restrictions on trade;

●

our inability to effectively oversee our managed fleet;

●

the failure of any manufacturer to meet its contractual aircraft delivery obligations to us, including or as a result of technical or other difficulties with aircraft before or after delivery, resulting in our inability to deliver the aircraft to our lessees;

●

other factors affecting our business or the business of our lessees and aircraft manufacturers or their suppliers that are beyond our or their control, including natural disasters, pandemics (such as COVID-19) and measures taken to contain its spread, and governmental actions; 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, 2019, “Part II — Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 and other SEC filings, including future SEC filings.

The factors noted above and the risks included in our other SEC filings may be increased or intensified as a result of the COVID-19 pandemic, including as a result of the recent resurgence of the COVID-19 virus in certain parts of the world, including the United States and parts of Europe, and any future resurgences of the virus. The extent to which the COVID-19 pandemic ultimately impacts our business, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted. See the risk factor in “Part II — Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, “The coronavirus (COVID-19) pandemic and related efforts to mitigate the pandemic have impacted our business, and the extent to which the COVID-19 pandemic and measures taken to contain its spread ultimately impact our business will depend on future developments, which are highly uncertain and are difficult to predict.” 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.

PART I—FINANCIAL INFORMATION

ITEM 1.
FINANCIAL STATEMENTS

Air Lease Corporation and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and par value amounts)


	September 30, 2020		December 31, 2019

	(unaudited)
Assets
Cash and cash equivalents	$	1,238,569	$	317,488
Restricted cash		23,568		20,573
Flight equipment subject to operating leases		22,671,435		21,286,154
Less accumulated depreciation		(3,154,939)		(2,581,817)
		19,516,496		18,704,337
Deposits on flight equipment purchases		1,634,152		1,564,188
Other assets		1,191,980		1,102,569
Total assets	$	23,604,765	$	21,709,155
Liabilities and Shareholders’ Equity
Accrued interest and other payables	$	401,443	$	516,497
Debt financing, net of discounts and issuance costs		15,180,145		13,578,866
Security deposits and maintenance reserves on flight equipment leases		1,054,757		1,097,061
Rentals received in advance		140,228		143,692
Deferred tax liability		850,869		749,495
Total liabilities	$	17,627,442	$	16,085,611
Shareholders’ Equity
Preferred Stock, $0.01 par value; 50,000,000 shares authorized; 10,000,000 shares of 6.150% Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series A (aggregate liquidation preference of $250,000) issued and outstanding at September 30, 2020 and December 31, 2019, respectively		100		100
Class A common stock, $0.01 par value; 500,000,000 shares authorized; 113,778,906 and 113,350,267 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively		1,138		1,134
Class B non-voting common stock, $0.01 par value; authorized 10,000,000 shares; no shares issued or outstanding		—		—
Paid-in capital		2,788,490		2,777,601
Retained earnings		3,188,566		2,846,106
Accumulated other comprehensive loss		(971)		(1,397)
Total shareholders’ equity	$	5,977,323	$	5,623,544
Total liabilities and shareholders’ equity	$	23,604,765	$	21,709,155

(See Notes to Consolidated Financial Statements)

Air Lease Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(In thousands, except share and per share amounts)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019

	(unaudited)
Revenues
Rental of flight equipment	$	468,443	$	492,869	$	1,462,999	$	1,412,478
Aircraft sales, trading and other		25,158		38,033		63,338		55,870
Total revenues		493,601		530,902		1,526,337		1,468,348
Expenses
Interest		107,519		104,637		317,753		290,681
Amortization of debt discounts and issuance costs		10,899		9,078		31,660		26,330
Interest expense		118,418		113,715		349,413		317,011
Depreciation of flight equipment		195,054		183,788		577,969		514,948
Selling, general and administrative		20,239		34,715		75,142		92,188
Stock-based compensation		6,635		4,897		14,956		14,934
Total expenses		340,346		337,115		1,017,480		939,081
Income before taxes		153,255		193,787		508,857		529,267
Income tax expense		(32,860)		(38,000)		(103,686)		(107,081)
Net income	$	120,395	$	155,787	$	405,171	$	422,186
Preferred stock dividends		(3,843)		(3,844)		(11,531)		(8,115)
Net income available to common stockholders	$	116,552	$	151,943	$	393,640	$	414,071

Other Comprehensive Income/(Loss):
Change in foreign currency translation adjustment		(5,637)		—		7,601		—
Change from current period hedged transaction		7,395		—		(7,086)		—
Total tax expense on other comprehensive income/loss		(378)		—		(89)		—
Other Comprehensive income available for common stockholders, net of tax		1,380		—		426		—
Total comprehensive income available for common stockholders	$	117,932	$	151,943	$	394,066	$	414,071

Earnings per share of common stock:
Basic	$	1.02	$	1.36	$	3.46	$	3.71
Diluted	$	1.02	$	1.34	$	3.46	$	3.67
Weighted-average shares outstanding
Basic		113,778,533		112,133,556		113,647,585		111,511,960
Diluted		113,951,102		113,263,396		113,928,775		112,837,526

Dividends declared per share of common stock	$	0.15	$	0.13	$	0.45	$	0.39

(See Notes to Consolidated Financial Statements)

Air Lease Corporation and Subsidiaries

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(In thousands, except share and per share amounts)


							Class B Non-							Accumulated
				Class A			Voting							Other
	Preferred Stock			Common Stock			Common Stock			Paid-in		Retained		Comprehensive
(unaudited)	Shares	Amount		Shares	Amount		Shares	Amount		Capital		Earnings		(Loss)/Income		Total
Balance at December 31, 2019	10,000,000	$	100	113,350,267	$	1,134	—	$	—	$	2,777,601	$	2,846,106	$	(1,397)	$	5,623,544
Issuance of common stock upon vesting of restricted stock units and upon exercise of options	—		—	480,978		4	—		—		2,021		—		—		2,025
Dividends declared on preferred stock	—		—	—		—	—		—		—		(3,844)		—		(3,844)
Stock-based compensation	—		—	—		—	—		—		4,429		—		—		4,429
Cash dividends (declared $0.15 per share of Class A common stock)	—		—	—		—	—		—		—		(17,045)		—		(17,045)
Change in foreign currency translation adjustment and from current period hedged transaction	—		—	—		—	—		—		—		—		(1,478)		(1,478)
Tax withholding related to vesting of restricted stock units and exercise of stock options	—		—	(191,334)		(2)	—		—		(8,411)		—		—		(8,413)
Net income	—		—	—		—	—		—		—		137,151		—		137,151
Balance at March 31, 2020	10,000,000	$	100	113,639,911	$	1,136	—	$	—	$	2,775,640	$	2,962,368	$	(2,875)	$	5,736,369
Issuance of common stock upon vesting of restricted stock units and upon exercise of options	—		—	144,417		2	—		—		2,500		—		—		2,502
Dividends declared on preferred stock	—		—	—		—	—		—		—		(3,844)		—		(3,844)
Stock-based compensation	—		—	—		—	—		—		3,892		—		—		3,892
Cash dividends (declared $0.15 per share of Class A common stock)	—		—	—		—	—		—		—		(17,067)		—		(17,067)
Change in foreign currency translation adjustment and from current period hedged transaction	—		—	—		—	—		—		—		—		524		524
Tax withholding related to vesting of restricted stock units and exercise of stock options	—		—	(6,605)		—	—		—		(200)		—		—		(200)
Net income	—		—	—		—	—		—		—		147,625		—		147,625
Balance at June 30, 2020	10,000,000	$	100	113,777,723	$	1,138	—	$	—	$	2,781,832	$	3,089,082	$	(2,351)	$	5,869,801
Issuance of common stock upon vesting of restricted stock units and upon exercise of options	—		—	1,352		1	—		—		27		—		—		28
Dividends declared on preferred stock	—		—	—		—	—		—		—		(3,843)		—		(3,843)
Stock-based compensation	—			—		—	—		—		6,635		—		—		6,635
Cash dividends (declared $0.15 per share of Class A common stock)	—		—	—		—	—		—		—		(17,068)		—		(17,068)
Change in foreign currency translation adjustment and from current period hedged transaction	—		—	—		—	—		—		—		—		1,380		1,380
Tax withholding related to vesting of restricted stock units and exercise of stock options	—		—	(169)		(1)	—		—		(4)		—		—		(5)
Net income	—		—	—		—	—		—		—		120,395		—		120,395
Balance at September 30, 2020	10,000,000	$	100	113,778,906	$	1,138	—	$	—	$	2,788,490	$	3,188,566	$	(971)	$	5,977,323

Air Lease Corporation and Subsidiaries

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(In thousands, except share and per share amounts)


							Class B Non-
				Class A			Voting
	Preferred Stock			Common Stock			Common Stock			Paid-in		Retained
(unaudited)	Shares	Amount		Shares	Amount		Shares	Amount		Capital		Earnings		Total
Balance at December 31, 2018	—	$	—	110,949,850	$	1,110	—	$	—	$	2,474,238	$	2,331,552	$	4,806,900
Issuance of common stock upon vesting of restricted stock units and upon exercise of options	—		—	263,218		2	—		—		439		—		441
Issuance of preferred stock	10,000,000		100	—		—	—		—		242,141		—		242,241
Stock-based compensation	—		—	—		—	—		—		4,174		—		4,174
Cash dividends (declared $0.13 per share of Class A common stock)	—		—	—		—	—		—		—		(14,445)		(14,445)
Tax withholding related to vesting of restricted stock units and exercise of stock options	—		—	(94,899)		(1)	—		—		(3,587)		—		(3,588)
Net income	—		—	—		—	—		—		—		138,094		138,094
Balance at March 31, 2019	10,000,000	$	100	111,118,169	$	1,111	—	$	—	$	2,717,405	$	2,455,201	$	5,173,817
Issuance of common stock upon vesting of restricted stock units and upon exercise of options	—		—	547,957		6	—		—		10,791		—		10,797
Issuance of preferred stock	—		—	—		—	—		—		(111)		—		(111)
Dividends declared on preferred stock	—		—	—		—	—		—		—		(4,271)		(4,271)
Stock-based compensation	—		—	—		—	—		—		5,863		—		5,863
Cash dividends (declared $0.13 per share of Class A common stock)	—		—	—		—	—		—		—		(14,516)		(14,516)
Net income	—		—	—		—	—		—		—		128,305		128,305
Balance at June 30, 2019	10,000,000	$	100	111,666,126	$	1,117	—	$	—	$	2,733,948	$	2,564,719	$	5,299,884
Issuance of common stock upon vesting of restricted stock units and upon exercise of options	—		—	1,047,695		11	—		—		20,584		—		20,595
Dividends declared on preferred stock	—		—	—		—	—		—		—		(3,844)		(3,844)
Stock-based compensation	—		—	—		—	—		—		4,897		—		4,897
Cash dividends (declared $0.13 per share of Class A common stock)	—		—	—		—	—		—		—		(14,644)		(14,644)
Tax withholding related to vesting of restricted stock units and exercise of stock options	—		—	(12,472)		(1)	—		—		(501)		—		(502)
Net income	—		—	—		—	—		—		—		155,787		155,787
Balance at September 30, 2019	10,000,000	$	100	112,701,349	$	1,127	—	$	—	$	2,758,928	$	2,702,018	$	5,462,173

(See Notes to Consolidated Financial Statements)

Air Lease Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


	Nine Months Ended
	September 30,
	2020		2019

	(unaudited)
Operating Activities
Net income	$	405,171	$	422,186
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of flight equipment		577,969		514,948
Stock-based compensation		14,956		14,934
Deferred taxes		101,285		97,566
Amortization of debt discounts and issuance costs		31,660		26,330
Amortization of prepaid lease costs		32,142		24,190
Gain on aircraft sales, trading and other activity		(27,281)		(45,123)
Changes in operating assets and liabilities:
Other assets		(330,804)		(149,740)
Accrued interest and other payables		(84,045)		51,156
Rentals received in advance		(3,464)		15,109
Net cash provided by operating activities		717,589		971,556
Investing Activities
Acquisition of flight equipment under operating lease		(777,410)		(3,021,758)
Payments for deposits on flight equipment purchases		(581,054)		(727,982)
Proceeds from aircraft sales, trading and other activity		151,131		426,382
Acquisition of aircraft furnishings, equipment and other assets		(142,866)

Price	42.50	EPS	5
Shares	113	P/E	9
MCap	4,814	P/FCF	5
Net Debt	13,563	EBIT	765
TEV	18,376	TEV/EBIT	24
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-09-30	Filed 2020-11-09
10-Q	2020-06-30	Filed 2020-08-06
10-Q	2020-03-31	Filed 2020-05-07
10-K	2019-12-31	Filed 2020-02-14
10-Q	2019-09-30	Filed 2019-11-07
10-Q	2019-06-30	Filed 2019-08-08
10-Q	2019-03-31	Filed 2019-05-09
10-K	2018-12-31	Filed 2019-02-21
10-Q	2018-09-30	Filed 2018-11-08
10-Q	2018-06-30	Filed 2018-08-09
10-Q	2018-03-31	Filed 2018-05-10
10-K	2017-12-31	Filed 2018-02-22
10-Q	2017-09-30	Filed 2017-11-09
10-Q	2017-06-30	Filed 2017-08-03
10-Q	2017-03-31	Filed 2017-05-04
10-K	2016-12-31	Filed 2017-02-23
10-Q	2016-09-30	Filed 2016-11-03
10-Q	2016-06-30	Filed 2016-08-04
10-Q	2016-03-31	Filed 2016-05-05
10-K	2015-12-31	Filed 2016-02-25
10-Q	2015-09-30	Filed 2015-11-05
10-Q	2015-06-30	Filed 2015-08-06
10-Q	2015-03-31	Filed 2015-05-07
10-K	2014-12-31	Filed 2015-02-26
10-Q	2014-09-30	Filed 2014-11-06
10-Q	2014-06-30	Filed 2014-08-07
10-Q	2014-03-31	Filed 2014-05-08
10-K	2013-12-31	Filed 2014-02-27
10-Q	2013-09-30	Filed 2013-11-07
10-Q	2013-06-30	Filed 2013-08-08
10-Q	2013-03-31	Filed 2013-05-09
10-Q	2012-09-30	Filed 2012-11-08
10-Q	2012-06-30	Filed 2012-08-09
10-Q	2012-03-31	Filed 2012-05-14
10-K	2011-12-31	Filed 2012-03-09
10-Q	2011-09-30	Filed 2011-11-10
10-Q	2011-06-30	Filed 2011-08-12
10-Q	2011-03-31	Filed 2011-05-16

8-K	2020-11-24
8-K	2020-11-09
8-K	2020-11-09
8-K	2020-08-17
8-K	2020-08-06
8-K	2020-08-06
8-K	2020-06-24
8-K	2020-05-07
8-K	2020-05-07
8-K	2020-05-06
8-K	2020-02-14
8-K	2020-02-14
8-K	2020-01-14
8-K	2019-12-20
8-K	2019-12-17
8-K	2019-12-05
8-K	2019-11-19
8-K	2019-11-07
8-K	2019-11-07
8-K	2019-09-16
8-K	2019-08-08
8-K	2019-08-08
8-K	2019-06-05
8-K	2019-06-03
8-K	2019-05-23
8-K	2019-05-09
8-K	2019-05-09
8-K	2019-05-08
8-K	2019-05-03
8-K	2019-03-05
8-K	2019-02-26
8-K	2019-02-21
8-K	2019-02-21
8-K	2019-01-23
8-K	2019-01-08
8-K	2018-11-29
8-K	2018-11-20
8-K	2018-11-14
8-K	2018-11-08
8-K	2018-11-08
8-K	2018-11-07
8-K	2018-09-17
8-K	2018-09-10
8-K	2018-08-09
8-K	2018-08-09
8-K	2018-06-18
8-K	2018-06-11
8-K	2018-05-10
8-K	2018-05-10
8-K	2018-05-09
8-K	2018-05-02
8-K	2018-03-26
8-K	2018-02-22
8-K	2018-02-22
8-K	2018-01-16
8-K	2018-01-08
8-K	2018-01-05

EX-10.1	al-20200930xex10d1.htm
EX-10.2	al-20200930xex10d2.htm
EX-10.3	al-20200930xex10d3.htm
EX-10.4	al-20200930xex10d4.htm
EX-10.5	al-20200930xex10d5.htm
EX-31.1	al-20200930xex31d1.htm
EX-31.2	al-20200930xex31d2.htm
EX-32.1	al-20200930xex32d1.htm
EX-32.2	al-20200930xex32d2.htm

AL 10Q Quarterly Report

Air Lease Earnings 2020-09-30