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Air Lease Corporation Announces Third Quarter 2012 Results

Stocks in this article: AL

The earnings call will 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.

About Air Lease Corporation

Air Lease Corporation is an 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 partners worldwide through customized aircraft leasing and financing solutions. For more information, visit ALC’s website at www.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 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;
  • 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;
  • our inability to effectively deploy the net proceeds from our capital raising activities; and
  • potential natural disasters and terrorist attacks and the amount of our insurance coverage, if any, relating thereto.

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)

 

 
  September 30,   December 31,
2012   2011
(unaudited)
Assets
Cash and cash equivalents $ 439,681 $ 281,805
Restricted cash 111,784 96,157
Flight equipment subject to operating leases 6,158,762 4,368,985
Less accumulated depreciation   (286,374 )   (131,569 )
5,872,388 4,237,416
Deposits on flight equipment purchases 544,817 405,549

Deferred debt issue costs - less accumulated amortization of $27,592 and $17,500 as of September 30, 2012 and December 31, 2011, respectively

76,603 47,609
Other assets   120,205     96,057  
Total assets $ 7,165,478   $ 5,164,593  
 
Liabilities and Shareholders' Equity
Accrued interest and other payables $ 95,240 $ 54,648
Debt financing 4,296,076 2,602,799
Security deposits and maintenance reserves on flight equipment leases 380,272 284,154
Rentals received in advance 36,953 26,017
Deferred tax liability   71,265     20,692  
Total liabilities   4,879,806     2,988,310  
 
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 99,417,998 and 98,885,131 shares at September 30, 2012 and December 31, 2011, respectively

991 984

Class B Non-Voting Common Stock, $0.01 par value; authorized 10,000,000 shares; issued and outstanding 1,829,339 shares

18 18
Paid-in capital 2,191,361 2,174,089
Retained earnings   93,302     1,192  
Total shareholders' equity   2,285,672     2,176,283  
Total liabilities and shareholders' equity $ 7,165,478   $ 5,164,593  
 
 

Air Lease Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except share amounts)

 
  Three Months Ended   Nine Months Ended
September 30, September, 30
2012   2011 2012   2011
(unaudited) (unaudited)
Revenues
Rental of flight equipment $ 172,856 $ 90,476 $ 459,643 $ 219,092
Interest and other   2,069     1,649     6,008     2,592  
Total revenues 174,925 92,125 465,651 221,684
 
Expenses
Interest 35,248 10,993 91,308 30,143
Amortization of discounts and deferred debt issue costs 4,595 2,308

11,553

6,972

Extinguishment of debt  

   

   

    3,349  
Interest expense 39,843 13,301 102,861 40,464
 
Depreciation of flight equipment 57,932 30,657 154,805 73,431
Selling, general and administrative 12,833 11,512 40,750 32,661
Stock-based compensation   7,124     8,314     24,548     30,974  
Total expenses   117,732     63,784     322,964     177,530  
 
Income before taxes 57,193 28,341 142,687 44,154
Income tax expense   (20,182 )   (10,070 )   (50,577 )   (15,684 )
Net income $ 37,011   $ 18,271   $ 92,110   $ 28,470  
 
Net income per share of Class A and Class B Common Stock:
Basic $ 0.37 $ 0.18 $ 0.91 $ 0.33
Diluted $ 0.36 $ 0.18 $ 0.90 $ 0.33
Weighted-average shares outstanding:
Basic 101,247,337 100,714,470 100,906,094 85,845,031
Diluted 107,875,105 100,767,839 107,574,616 85,946,120
 
Other financial data:

Adjusted net income (1)

$ 44,602 $ 25,122 $ 115,415 $ 56,294

Adjusted EBITDA (2)

$ 161,467 $ 79,954 $ 422,683 $ 188,001
 

(1) Adjusted net income (defined as net income before stock-based compensation expense and non-cash interest expense, which includes the amortization of debt issuance costs and extinguishment of debt) is a measure of both operating performance and liquidity that is not defined by United States generally accepted accounting principles (“GAAP”) and should not be considered as an alternative to net income, income from operations or any other performance measures derived in accordance with GAAP. Adjusted net income is presented as a supplemental disclosure because management believes that it may be a useful performance measure that is used within our industry. We believe adjusted net income provides useful information on our earnings from ongoing operations, our ability to service our long-term debt and other fixed obligations, and our ability to fund our expected growth with internally generated funds. Set forth below is additional detail as to how we use adjusted net income as a measure of both operating performance and liquidity, as well as a discussion of the limitations of adjusted net income as an analytical tool and a reconciliation of adjusted net income to our GAAP net loss and cash flow from operating activities.

Operating Performance: Management and our board of directors use adjusted net income in a number of ways to assess our consolidated financial and operating performance, and we believe this measure is helpful in identifying trends in our performance. We use adjusted net income as a measure of our consolidated operating performance exclusive of income and expenses that relate to the financing, income taxes, and capitalization of the business. Also, adjusted net income assists us in comparing our operating performance on a consistent basis as it removes the impact of our capital structure (primarily one-time amortization of convertible debt discounts) and stock-based compensation expense from our operating results. In addition, adjusted net income helps management identify controllable expenses and make decisions designed to help us meet our current financial goals and optimize our financial performance. Accordingly, we believe this metric measures our financial performance based on operational factors that we can influence in the short term, namely the cost structure and expenses of the organization.

Liquidity: In addition to the uses described above, management and our board of directors use adjusted net income as an indicator of the amount of cash flow we have available to service our debt obligations, and we believe this measure can serve the same purpose for our investors.

Limitations: Adjusted net income has limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of our operating results or cash flows as reported under GAAP. Some of these limitations are as follows:

  • adjusted net income does not reflect (i) our cash expenditures or future requirements for capital expenditures or contractual commitments, or (ii) changes in or cash requirements for our working capital needs; and
  • our calculation of adjusted net income may differ from the adjusted net income or analogous calculations of other companies in our industry, limiting its usefulness as a comparative measure.

The following tables show the reconciliation of net income and cash flows from operating activities, the most directly comparable GAAP measures of performance and liquidity, to adjusted net income (in thousands):

  Three Months Ended   Nine Months Ended
September 30, September 30,
2012   2011 2012   2011
(unaudited) (unaudited)
Reconciliation of cash flows from operating activities to adjusted net income:
Net cash provided by operating activities $ 132,276 $ 83,076 $ 372,496 $ 166,197
Depreciation of flight equipment (57,932 ) (30,657 ) (154,805 ) (73,431 )
Stock-based compensation (7,124 ) (8,314 ) (24,548 ) (30,974 )
Deferred taxes (20,182 ) (10,070 ) (50,573 ) (15,684 )
Amortization of discounts and deferred debt issue costs (4,595 ) (2,308 ) (11,553 ) (6,972 )
Extinguishment of debt

(3,349 )
Changes in operating assets and liabilities:
Other assets 11,727 (900 ) 20,114 15,427
Accrued interest and other payables (16,924 ) (10,444 ) (48,085 ) (13,465 )
Rentals received in advance   (235 )   (2,112 )   (10,936 )   (9,279 )
Net income 37,011 18,271 92,110 28,470
Amortization of discounts and deferred debt issue costs 4,595 2,308 11,553 6,972
Extinguishment of debt

3,349
Stock-based compensation 7,124 8,314 24,548 30,974
Tax effect   (4,128 )   (3,771 )   (12,796 )   (13,471 )
Adjusted net income $ 44,602   $ 25,122   $ 115,415   $ 56,294  
 
 
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
(unaudited) (unaudited)
Reconciliation of net income to adjusted net income:
Net income $ 37,011 $ 18,271 $ 92,110 $ 28,470
Amortization of discounts and deferred debt issue costs 4,595 2,308 11,553 6,972
Extinguishment of debt

3,349
Stock-based compensation 7,124 8,314 24,548 30,974
Tax effect   (4,128 )   (3,771 )   (12,796 )   (13,471 )
Adjusted net income $ 44,602   $ 25,122   $ 115,415   $ 56,294  
 

(2) Adjusted EBITDA (defined as net income before net interest expense, stock-based compensation expense, income tax expense, and depreciation and amortization expense) is a measure of both operating performance and liquidity that is not defined by GAAP and should not be considered as an alternative to net income, income from operations or any other performance measures derived in accordance with GAAP. Adjusted EBITDA is presented as a supplemental disclosure because management believes that it may be a useful performance measure that is used within our industry. We believe adjusted EBITDA provides useful information on our earnings from ongoing operations, our ability to service our long-term debt and other fixed obligations, and our ability to fund our expected growth with internally generated funds. Set forth below is additional detail as to how we use adjusted EBITDA as a measure of both operating performance and liquidity, as well as a discussion of the limitations of adjusted EBITDA as an analytical tool and a reconciliation of adjusted EBITDA to our GAAP net loss and cash flow from operating activities.

Operating Performance: Management and our board of directors use adjusted EBITDA in a number of ways to assess our consolidated financial and operating performance, and we believe this measure is helpful in identifying trends in our performance. We use adjusted EBITDA as a measure of our consolidated operating performance exclusive of income and expenses that relate to the financing, income taxes, and capitalization of the business. Also, adjusted EBITDA assists us in comparing our operating performance on a consistent basis as it removes the impact of our capital structure (primarily one-time amortization of convertible debt discounts) and stock-based compensation expense from our operating results. In addition, adjusted EBITDA helps management identify controllable expenses and make decisions designed to help us meet our current financial goals and optimize our financial performance. Accordingly, we believe this metric measures our financial performance based on operational factors that we can influence in the short term, namely the cost structure and expenses of the organization.

Liquidity: In addition to the uses described above, management and our board of directors use adjusted EBITDA as an indicator of the amount of cash flow we have available to service our debt obligations, and we believe this measure can serve the same purpose for our investors.

Limitations: Adjusted EBITDA has limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of our operating results or cash flows as reported under GAAP. Some of these limitations are as follows:

  • adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;
  • adjusted EBITDA does not reflect changes in or cash requirements for our working capital needs;
  • adjusted EBITDA does not reflect interest expense or cash requirements necessary to service interest or principal payments on our debt; and
  • other companies in our industry may calculate these measures differently from how we calculate these measures, limiting their usefulness as comparative measures.

The following tables show the reconciliation of net income and cash flows from operating activities, the most directly comparable GAAP measures of performance and liquidity, to adjusted EBITDA (in thousands):

  Three Months Ended   Nine Months Ended

September 30,

September 30,

2012   2011 2012   2011
(unaudited) (unaudited)

Reconciliation of cash flows from operating activities to adjusted EBITDA:

Net cash provided by operating activities $ 132,276 $ 83,076 $ 372,496 $ 166,197
Depreciation of flight equipment (57,932 ) (30,657 ) (154,805 ) (73,431 )
Stock-based compensation (7,124 ) (8,314 ) (24,548 ) (30,974 )
Deferred taxes (20,182 ) (10,070 ) (50,573 ) (15,684 )
Amortization of discounts and deferred debt issue costs (4,595 ) (2,308 ) (11,553 ) (6,972 )
Extinguishment of debt - - - (3,349 )
Changes in operating assets and liabilities:
Other assets 11,727 (900 ) 20,114 15,427
Accrued interest and other payables (16,924 ) (10,444 ) (48,085 ) (13,465 )
Rentals received in advance   (235 )   (2,112 )   (10,936 )   (9,279 )
Net income 37,011 18,271 92,110 28,470
Net interest expense 39,218 12,642 100,643 39,442
Income taxes 20,182 10,070 50,577 15,684
Depreciation 57,932 30,657 154,805 73,431
Stock-based compensation   7,124     8,314     24,548     30,974  
Adjusted EBITDA $ 161,467   $ 79,954   $ 422,683   $ 188,001  
 
 
Three Months Ended Three Months Ended

September 30,

September 30,

2012 2011 2012 2011
Reconciliation of net income to adjusted EBITDA: (unaudited) (unaudited)
Net income $ 37,011 $ 18,271 $ 92,110 $ 28,470
Net interest expense 39,218 12,642 100,643 39,442
Income taxes 20,182 10,070 50,577 15,684
Depreciation 57,932 30,657 154,805 73,431
Stock-based compensation   7,124     8,314     24,548     30,974  
Adjusted EBITDA $ 161,467   $ 79,954   $ 422,683   $ 188,001  
 
 

Air Lease Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 
  Nine Months Ended
September 30,
2012   2011
(unaudited)
Operating Activities
Net income $ 92,110 $ 28,470
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of flight equipment 154,805 73,431
Stock-based compensation 24,548 30,974
Deferred taxes 50,573 15,684
Amortization of discounts and deferred debt issue costs 11,553 6,972
Extinguishment of debt

3,349
Changes in operating assets and liabilities:
Other assets (20,114 ) (15,427 )
Accrued interest and other payables 48,085 13,465
Rentals received in advance   10,936     9,279  
Net cash provided by operating activities   372,496     166,197  
Investing Activities
Acquisition of flight equipment under operating lease

(1,651,831

) (1,706,278 )
Payments for deposits on flight equipment purchases (185,373 ) (278,820 )
Acquisition of furnishings, equipment and other assets   (71,484 )   (66,910 )
Net cash used in investing activities  

(1,908,688

)   (2,052,008 )
Financing Activities
Issuance of common stock 43 867,365
Tax withholdings on stock-based compensation (7,312 ) (8,456 )
Net change in unsecured revolving facilities (28,000 ) 153,000
Proceeds from debt financings

2,042,389

800,043
Payments in reduction of debt financings (344,912 ) (62,376 )
Restricted cash (15,627 ) (26,143 )
Debt issue costs (39,487 ) (10,338 )
Security deposits and maintenance reserve receipts 108,968 127,262
Security deposits and maintenance reserve disbursements   (21,994 )   (3,720 )
Net cash provided by financing activities  

1,694,068

    1,836,637  
Net increase (decrease) in cash 157,876 (49,174 )
Cash and cash equivalents at beginning of period   281,805     328,821  
Cash and cash equivalents at end of period $ 439,681   $ 279,647  
Supplemental Disclosure of Cash Flow Information

Cash paid during the period for interest, including capitalized interest of $13,698 at September 30, 2012 and capitalized interest of $7,297 at September 30, 2011

$ 68,307 $ 34,849
Supplemental Disclosure of Noncash Activities

Buyer furnished equipment, capitalized interest, deposits on flight equipment purchases and seller financing applied to acquisition of flight equipment under operating leases

$ 136,850 $ 33,408
 




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