Air Lease Corporation Announces Fiscal Year & Fourth Quarter 2017 Results

LOS ANGELES, Feb. 22, 2018 (GLOBE NEWSWIRE) -- Air Lease Corporation (ALC) AL announces financial results for the year and three months ended December 31, 2017.

• Revenues:
  • $1,516 million for the full year 2017, an increase of 6.9%
  • $398 million for the three months ended December 31, 2017, an increase of 7.6%
• Diluted earnings per share:
  • $6.82 for the full year 2017, an increase of 98.3%
  • $4.22 for the three months ended December 31, 2017, an increase of 374.2%
• Adjusted diluted earnings per share before income taxes:
  • $5.94 for the full year 2017, an increase of 4.8%
  • $1.60 for the three months ended December 31, 2017, an increase of 8.1%
• Diluted earnings per share, excluding effects of the Tax Cuts and Jobs Act ("Tax Reform Act"):
  • $3.65 for the full year 2017, an increase of 6.1%
  • $1.06 for the three months ended December 31, 2017, an increase of 19.1%
• Margin:
  • Pre-tax margin of 40.2% for the full year 2017
  • Adjusted pre-tax margin of 43.4% for the full year 2017
• Return on equity:
  • Pre-tax return on equity of 16.2% for the full year 2017
  • Adjusted pre-tax return on equity of 17.5% for the full year 2017

Highlights

• Recorded a $354 million tax benefit or $3.16 per diluted share for the quarter ended December 31, 2017, due to the remeasurement of deferred tax liabilities as a result of the Tax Reform Act.  The Tax Reform Act lowers the U.S. corporate tax rate from 35% to 21% effective January 1, 2018.  We expect that the lower U.S. corporate tax rate will help to increase our net income and accelerate our growth.
  
  
• Took delivery of our first 737 MAX and A350 aircraft from our orderbook in the fourth quarter of 2017 and have commitments to purchase 128 737 MAX aircraft and 18 A350 aircraft between 2018 and 2023.
  
  
• Ended the year with a net book value of $13.3 billion in aircraft with a weighted average age of 3.8 years and a weighted average lease term remaining of 6.8 years.
  
  
• Placed 97% of our order book on long-term leases for aircraft delivering through 2019 and 79% through 2020.
  
  
• Ended the year with $23.4 billion in committed minimum future rental payments, including $10.1 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 a total of $2.2 billion of senior unsecured notes in 2017 and ended the year with liquidity of $3.2 billion and further decreased our composite cost of funds to 3.20%.
  
  
• Declared a quarterly cash dividend of $0.10 per share on our outstanding common stock for the fourth quarter of 2017.  The dividend will be paid on April 6, 2018 to holders of record of our common stock as of March 20, 2018.

"Air Lease achieved solid financial results for the fourth quarter and full year 2017. For the first time, we exceeded $15 billion in assets and $1.5 billion in total revenues. We also maintained a high level of profitability. The industry backdrop remains healthy with passenger traffic up 7.6% year over year in 2017, exceeding the 10-year average annual growth rate. These robust levels of passenger traffic further support the ongoing demand for new aircraft we have seen from our customers. Looking ahead, we believe ALC is well positioned for continued growth, further enhanced by expected ongoing benefits resulting from the Tax Cuts and Jobs Act," said John L. Plueger, Chief Executive Officer and President.

"The ALC team should be commended for their customer focus and strong risk management principles, both of which underpin the results of the fourth quarter and full year 2017. Since inception ALC has been focused on driving shareholder value, and over the last 5 years ALC's profits have increased more than threefold. Moving forward, we believe our valuable order book of highly in-demand, modern, fuel-efficient aircraft will service the needs of our customers, and together with our investment grade profile, will position us for continued success in the years to come," said Steven F. Udvar-Házy, Executive Chairman of the Board.

The following table summarizes the results for the three and twelve months ended December 31, 2017 and 2016 (in thousands, except per share amounts and percentages):

(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, such as settlement expense, net of recoveries, 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 earnings per share before income taxes and a reconciliation to their most comparable GAAP financial measures.

(2)   Diluted earnings per share excluding Tax Reform Act has been adjusted to exclude the impact of the Tax Reform Act, a provisional net benefit of $354.1 million, or $3.16 per diluted share and $3.17 per diluted share for the three months and year ended December 31, 2017, respectively.  The adjustment is due to the remeasurement of U.S. deferred tax liabilities at the lower enacted corporate tax rates, partially offset by other impacts of the Tax Reform Act.  See note 2 under the Consolidated Statements of Income included in this earnings release for a discussion of diluted earnings per share excluding Tax Reform Act and a reconciliation to its most comparable GAAP financial measure.

Flight Equipment Portfolio

Our fleet grew by 10.3% based on net book value of $13.3 billion as of December 31, 2017 compared to $12.0 billion as of December 31, 2016.  As of December 31, 2017, our fleet was comprised of 244 aircraft, with a weighted-average age and remaining lease term of 3.8 years and 6.8 years, respectively, and 50 managed aircraft.  We have a globally diversified customer base of 91 airlines in 55 countries.

During the quarter ended December 31, 2017, we took delivery of eight new aircraft, four incremental aircraft from the secondary market, and sold two aircraft from our operating lease portfolio.  We also received insurance proceeds relating to the insured loss of two aircraft.

Below are the key portfolio metrics of our fleet:

The following table details the region concentration of our fleet:

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

Debt Financing Activities

We ended the fourth quarter of 2017 with total debt financing, net of discounts and issuance costs, of $9.7 billion, resulting in a debt to equity ratio of 2.35:1.

Our debt financing was comprised of unsecured debt of $9.3 billion and such unsecured debt represented 94.6% of our debt portfolio as of December 31, 2017 as compared to 92.4% as of December 31, 2016.  Our fixed rate debt represented 85.4% of our debt portfolio as of December 31, 2017 as compared to 83.5% as of December 31, 2016.  Our composite cost of funds decreased to 3.20% as of December 31, 2017 as compared to 3.42% as of December 31, 2016.

Our debt financing was comprised of the following at December 31, 2017 and December 31, 2016 (in thousands, except percentages):

Conference Call

In connection with the earnings release, Air Lease Corporation will host a conference call on February 22, 2018 at 4:30 PM Eastern Time to discuss the Company's financial results for the fourth quarter of 2017.

Investors can participate in the conference call by dialing (855) 308-8321 domestic or (330) 863-3465 international. The passcode for the call is 2897358.

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 February 22, 2018 until 7:30 PM ET on February 29, 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 2897358.

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;
  
  
• 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)

Air Lease Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share, per share amounts and percentages)

(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, such as settlement expense, net of recoveries, 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, excluding insurance recoveries), 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.

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):

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):

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

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(2)   On December 22, 2017, the Tax Reform Act was signed into law.  The Tax Reform Act significantly revised the U.S. corporate income tax law by, among other things, lowering the U.S. corporate tax rate from 35% to 21%, effective January 1, 2018.  Accounting Standards Codification 740 requires that the impact of tax legislation be recognized in the period in which the law was enacted.  As a result of the Tax Reform Act, we recorded a provisional tax benefit of $354.1 million due to the remeasurement of deferred tax assets and liabilities in the year ended December 31, 2017, partially offset by other impacts of the Tax Reform Act.

The $354.1 million benefit resulting from the remeasurement of deferred tax assets and liabilities is a provisional amount and a reasonable estimate by our management of the impact of the Tax Reform Act.  Based on our initial assessment of the Tax Reform Act, we believe that the most significant impact on our financial statements is the remeasurement of deferred taxes.  We do not expect other provisions of the Tax Reform Act to have a material impact on our consolidated financial statements for the fiscal year ending December 31, 2018. Quantifying all of the impacts of the Tax Reform Act, however, requires significant judgment by our management, including the inherent complexities involved in determining the timing of reversals of our deferred tax assets and liabilities. Accordingly, we will continue to analyze the impacts of the Tax Reform Act and, if necessary, record any further adjustments to our deferred tax assets and liabilities in future periods.

The following table shows the reconciliation of net income to diluted earnings per share excluding the impact of the Tax Reform Act (in thousands, except share and per share amounts):

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(3)   Management and our board of directors use adjusted net income before income taxes, adjusted margin before income taxes, adjusted pre-tax return on equity, adjusted diluted earnings per share before income taxes, and diluted earnings per share excluding Tax Reform Act 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, adjusted diluted earnings per share before income taxes, and diluted earnings per share excluding Tax Reform Act, 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, adjusted diluted earnings per share before income taxes, and diluted earnings per share excluding Tax Reform Act 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, adjusted diluted earnings per share before income taxes, and diluted earnings per share excluding Tax Reform Act may differ from the adjusted net income before income taxes, adjusted margin before income taxes, adjusted pre-tax return on equity, adjusted diluted earnings per share before income taxes, diluted earnings per share excluding Tax Reform Act or analogous calculations of other companies in our industry, limiting their usefulness as a comparative measure.

Air Lease Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)