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Leases

12 Months Ended

Dec. 31, 2023

Leases [Abstract]

Leases

Leases

As lessor, and as of December 31, 2023, 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 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 right-of-use (“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 Consolidated Balance Sheets; 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 14 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 lives of assets are limited by the expected lease terms, 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 information to the Consolidated Balance Sheets related to leases was as follows:

Leases						Classification						December 31, 2023						December 31, 2022
												(in thousands, except lease term and discount rate)
Assets
Operating lease right-of-use assets						Other assets						$	8,652					$	11,382
Liabilities
Lease liabilities						Accounts payable and accrued expenses						$	7,941					$	10,365
Weighted average remaining lease term (years)
Operating leases												2.90						3.45
Weighted average discount rate
Operating leases												4.6		%				4.9		%

The weighted average discount rate is based on the incremental borrowing 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 lease liabilities at December 31, 2023 are as follows:

Year						(in thousands)
2024						$	3,341
2025						2,797
2026						822
2027						604
2028						409
Thereafter						626
Total lease payments						8,599
Less: interest						(658)
Total lease liabilities						$	7,941

The following table represents future minimum lease payments under non-cancelable operating leases at December 31, 2023:

Year						(in thousands)
2024						$	3,363
2025						2,797
2026						822
2027						604
2028						409
Thereafter						626
						$	8,621

The components of lease expense were as follows:

												Years Ended December 31,
Lease expense						Classification						2023						2022
												(in thousands)
Operating lease cost						General and administrative						$	3,709					$	1,692
Net lease cost												$	3,709					$	1,692

Supplemental cash flow information related to leases was as follows:

						Years Ended December 31,
						2023						2022
						(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases						$	3,327					$	1,388
Right-of-use assets obtained in exchange for lease obligations:
Operating leases						$	307					$	6,478

Leases

Leases

As lessor, and as of December 31, 2023, 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 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 right-of-use (“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 Consolidated Balance Sheets; 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 14 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 lives of assets are limited by the expected lease terms, 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 information to the Consolidated Balance Sheets related to leases was as follows:

Leases						Classification						December 31, 2023						December 31, 2022
												(in thousands, except lease term and discount rate)
Assets
Operating lease right-of-use assets						Other assets						$	8,652					$	11,382
Liabilities
Lease liabilities						Accounts payable and accrued expenses						$	7,941					$	10,365
Weighted average remaining lease term (years)
Operating leases												2.90						3.45
Weighted average discount rate
Operating leases												4.6		%				4.9		%

The weighted average discount rate is based on the incremental borrowing 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 lease liabilities at December 31, 2023 are as follows:

Year						(in thousands)
2024						$	3,341
2025						2,797
2026						822
2027						604
2028						409
Thereafter						626
Total lease payments						8,599
Less: interest						(658)
Total lease liabilities						$	7,941

The following table represents future minimum lease payments under non-cancelable operating leases at December 31, 2023:

Year						(in thousands)
2024						$	3,363
2025						2,797
2026						822
2027						604
2028						409
Thereafter						626
						$	8,621

The components of lease expense were as follows:

												Years Ended December 31,
Lease expense						Classification						2023						2022
												(in thousands)
Operating lease cost						General and administrative						$	3,709					$	1,692
Net lease cost												$	3,709					$	1,692

Supplemental cash flow information related to leases was as follows:

						Years Ended December 31,
						2023						2022
						(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases						$	3,327					$	1,388
Right-of-use assets obtained in exchange for lease obligations:
Operating leases						$	307					$	6,478

Equipment Held for Operating Lease

As of December 31, 2023, the Company had $2,112.8 million of equipment held in our operating lease portfolio, $92.6 million of notes receivable, $9.2 million of maintenance rights, and $8.8 million of investments in sales-type leases, which represented 337 engines, 12 aircraft, one marine vessel and other leased parts and equipment. 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.

The following table disaggregates equipment held for operating lease by asset class (in thousands):

			As of December 31,
			2023												2022
			Gross value			Accumulated depreciation			Net book value						Gross value			Accumulated depreciation			Net book value
			(in thousands)
Engines and related equipment			$	2,535,148		$	(569,596)		$	1,965,552					$	2,491,448		$	(525,172)		$	1,966,276
Aircraft and airframes			157,616			(21,409)			136,207						150,089			(15,543)			134,546
Marine vessel			14,366			(3,288)			11,078						13,581			(2,468)			11,113
			$	2,707,130		$	(594,293)		$	2,112,837					$	2,655,118		$	(543,183)		$	2,111,935

Notes Receivable and Investments in Sales-Type Leases

During the years ended December 31, 2023 and 2022, the Company recorded interest income related to the notes receivable and investments in sales-type leases of $8.7 million and $7.6 million, respectively. The effective interest rates on our notes receivable and investments in sales-type leases ranged from 7.1% to 12.2% as of December 31, 2023 and 7.1% to 12.2% as of December 31, 2022.

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						2023						2022
Region						(in thousands)
United States						$	71,436					$	64,767
Asia-Pacific						69,692						40,270
Europe						43,790						35,621
South America						17,375						12,246
Canada						8,293						5,083
Central America						1,921						3,391
Middle East						631						1,193
Totals						$	213,138					$	162,571

						As of December 31,
Net book value of equipment held for operating lease						2023						2022
Region						(in thousands)
Asia-Pacific						$	530,309					$	485,737
United States						464,088						471,184
Europe						443,901						353,661
South America						136,917						141,145
Canada						109,056						69,030
Central America						43,192						130,187
Middle East						42,965						42,853
Off-lease						342,409						418,138
Totals						$	2,112,837					$	2,111,935

As of December 31, 2023, the lease status of the equipment held for operating lease (in thousands) was as follows:

Lease Term						Net Book Value
Off-lease and other						$	342,409
Month-to-month leases						360,550
Leases expiring 2024						613,557
Leases expiring 2025						230,389
Leases expiring 2026						180,004
Leases expiring 2027						105,166
Leases expiring 2028						118,635
Leases expiring thereafter						162,127
						$	2,112,837

As of December 31, 2023, minimum future payments under non-cancelable leases were as follows:

Year						(in thousands)
2024						$	158,408
2025						78,803
2026						50,926
2027						36,122
2028						6,431
Thereafter						45,031
						$	375,721

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- Definition

The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 842
-SubTopic 20
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org//842-20/tableOfContent

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The entire disclosure for lessor's operating leases.

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-Topic 842
-SubTopic 30
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org//842-30/tableOfContent

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