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Equipment Held for Operating Lease | 12 Months Ended
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Dec. 31, 2022
Leases [Abstract] |
Equipment Held for Operating Lease | Leases As lessor, and as of December 31, 2022, the majority of our leases were operating leases with the exception of certain failed sale-leaseback transactions classified as notes receivable or investments in sales-type leases under the guidance provided by ASC 842. As lessee, the significant majority of leases the Company enters are for real estate (office and warehouse space for our operations) as well as automobiles. These lease agreements do not contain any material residual value guarantees or material restrictive covenants. Additionally, in December 2022, the Company subleased a Willis Mitsui & Company Engine Support Limited (“WMES”) engine to a third party, with WMES as the head lessor. Under ASC 842, the Company recognized a ROU asset of $4.9 million and a lease liability of $4.9 million for this lease during the year ended December 31, 2022. Leases with terms of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. Some of the Company’s leases include variable non-lease components (e.g., taxes) which are not separated from associated lease components (e.g., fixed rent, common-area maintenance costs, vehicle protection plans and other service fees) as elected under the practical expedient package provided by ASC 842. The Company’s leases have remaining lease terms of approximately one to seven years, some of which include options to renew or extend the lease term from one to five years. Our automobile leases include an option to purchase the vehicle at lease termination. The depreciable life of assets is limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. The exercise of lease renewal options or purchase at lease termination is at the Company’s sole discretion. If it is reasonably certain that we will exercise such options, the periods covered by such options are included in the lease term and are recognized as part of our ROU assets and lease liabilities. Supplemental balance sheet information related to leases was as follows:
Leases |  | Classification |  | December 31, 2022 |  | December 31, 2021
|  |  |  | (in thousands, except lease term and discount rate)
Assets |  |  |  |  |  |
Operating lease right-of-use assets |  | Other assets |  | $ | 11,382 |  |  | $ | 6,067 |
Total leased assets |  |  |  | $ | 11,382 |  |  | $ | 6,067 |
Liabilities |  |  |  |  |  |
Operating lease right-of-use liabilities |  | Accounts payable and accrued expenses |  | $ | 10,365 |  |  | $ | 5,206 |
Total lease liabilities |  |  |  | $ | 10,365 |  |  | $ | 5,206 |
Weighted average remaining lease term (years) |  |  |  |
Operating leases |  |  |  | 3.45 |  | 6.49
Weighted average discount rate |  |  |  |  |  |
Operating leases |  |  |  | 4.9 | % |  | 3.4 | %
The weighted average discount rate is based on the discount rate for each lease and the remaining balance of the lease payments for each lease at the reporting date. Future maturities of the Company’s operating lease liabilities at December 31, 2022 are as follows:
Year |  | (in thousands)
2023 |  | $ | 3,253 |
2024 |  | 3,218 |
2025 |  | 2,690 |
2026 |  | 757 |
2027 |  | 562 |
Thereafter |  | 854 |
Total lease payments |  | 11,334 |
Less: interest |  | (969) |
Total lease liabilities |  | $ | 10,365 |
The following table represents future minimum lease payments under non-cancelable operating leases at December 31, 2022:
Year |  | (in thousands)
2023 |  | $ | 3,268 |
2024 |  | 3,218 |
2025 |  | 2,691 |
2026 |  | 757 |
2027 |  | 562 |
Thereafter |  | 854 |
|  | $ | 11,350 |
The components of lease expense were as follows:
|  |  |  | Years Ended December 31,
Lease expense |  | Classification |  | 2022 |  | 2021
|  |  |  | (in thousands)
Operating lease cost |  | General and administrative |  | $ | 1,692 |  |  | $ | 1,239 |
Net lease cost |  |  |  | $ | 1,692 |  |  | $ | 1,239 |
Supplemental cash flow information related to leases was as follows:
|  | Years Ended December 31,
|  | 2022 |  | 2021
|  | (in thousands)
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |
Operating cash flows from operating leases |  | $ | 1,388 |  |  | $ | 1,446 |
Right-of-use assets obtained in exchange for lease obligations: |  |  |  |
Operating leases |  | $ | 6,478 |  |  | $ | 4,131 |
Equipment Held for Operating Lease As of December 31, 2022, the Company had $2,111.9 million of equipment held in our operating lease portfolio, $81.4 million of notes receivable, $17.7 million of maintenance rights, and $6.4 million of investments in sales-type leases, which represented 339 engines, 13 aircraft, one marine vessel and other leased parts and equipment. As of December 31, 2021, the Company had $1,991.4 million of equipment held in our operating lease portfolio, $115.5 million of notes receivable, and $22.5 million of maintenance rights, which represented 304 engines, 12 aircraft, one marine vessel and other leased parts and equipment. The following table disaggregates equipment held for operating lease by asset class (in thousands):
| As of December 31,
| 2022 |  | 2021
| Gross value | Accumulated depreciation | Net book value |  | Gross value | Accumulated depreciation | Net book value
| (in thousands)
Engines and related equipment | $ | 2,491,448 |  | $ | (525,172) |  | $ | 1,966,276 |  |  | $ | 2,368,496 |  | $ | (515,442) |  | $ | 1,853,054 |
Aircraft and airframes | 150,089 |  | (15,543) |  | 134,546 |  |  | 134,370 |  | (7,790) |  | 126,580 |
Marine vessel | 13,581 |  | (2,468) |  | 11,113 |  |  | 13,470 |  | (1,736) |  | 11,734 |
| $ | 2,655,118 |  | $ | (543,183) |  | $ | 2,111,935 |  |  | $ | 2,516,336 |  | $ | (524,968) |  | $ | 1,991,368 |
Notes Receivable During the years ended December 31, 2022 and 2021, the Company recorded interest income related to the notes receivable, recorded in Other revenue of $7.6 million and $12.9 million, respectively. The effective interest rates on our notes receivable ranged from 7.1% to 12.2% as of December 31, 2022 and 6.3% to 12.2% as of December 30, 2021. A majority of the equipment is leased and operated internationally. Substantially all leases relating to this equipment are denominated and payable in U.S. dollars. The Company leases equipment to lessees domiciled in seven geographic regions. The tables below set forth geographic information about the leased equipment grouped by domicile of the lessee (which is not necessarily indicative of the asset’s actual location):
|  | Years Ended December 31,
Lease rent revenue |  | 2022 |  | 2021
Region |  | (in thousands)
United States |  | $ | 64,767 |  |  | $ | 61,947 |
Asia-Pacific |  | 40,270 |  |  | 27,117 |
Europe |  | 35,621 |  |  | 29,769 |
South America |  | 12,246 |  |  | 11,338 |
Canada |  | 5,083 |  |  | 1,245 |
Central America |  | 3,391 |  |  | 2,461 |
Middle East |  | 1,193 |  |  | 954 |
Totals |  | $ | 162,571 |  |  | $ | 134,831 |
|  | As of December 31,
Net book value of equipment held for operating lease |  | 2022 |  | 2021
Region |  | (in thousands)
Asia-Pacific |  | $ | 485,737 |  |  | $ | 371,554 |
United States |  | 471,184 |  |  | 425,822 |
Europe |  | 353,661 |  |  | 474,198 |
South America |  | 141,145 |  |  | 111,941 |
Central America |  | 130,187 |  |  | 163,526 |
Canada |  | 69,030 |  |  | 55,109 |
Middle East |  | 42,853 |  |  | 22,320 |
Off-lease |  | 418,138 |  |  | 366,898 |
Totals |  | $ | 2,111,935 |  |  | $ | 1,991,368 |
As of December 31, 2022, the lease status of the equipment held for operating lease (in thousands) was as follows:
Lease Term |  | Net Book Value
Off-lease and other |  | $ | 418,138 |
Month-to-month leases |  | 400,293 |
Leases expiring 2023 |  | 665,055 |
Leases expiring 2024 |  | 156,784 |
Leases expiring 2025 |  | 89,600 |
Leases expiring 2026 |  | 92,682 |
Leases expiring 2027 |  | 85,708 |
Leases expiring thereafter |  | 203,675 |
|  | $ | 2,111,935 |
As of December 31, 2022, minimum future payments under non-cancelable leases were as follows:
Year |  | (in thousands)
2023 |  | $ | 146,842 |
2024 |  | 66,513 |
2025 |  | 52,000 |
2026 |  | 39,410 |
2027 |  | 27,763 |
Thereafter |  | 35,708 |
|  | $ | 368,236 |

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- Definition The entire disclosure for lessor's operating leases. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 30 -URI https://asc.fasb.org/subtopic&trid=77888252 + Details
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