Willis Lease Finance 3Q15 Profits Increase as Utilization Improves to 92%

NOVATO, Calif., Nov. 2, 2015 (GLOBE NEWSWIRE) — Willis Lease Finance Corporation (NASDAQ:WLFC), the premier independent jet engine lessor in the commercial finance sector, today reported its third quarter 2015 net income increased 163% to $2.6 million, or $0.32 per diluted share, compared to $1.0 million, or $0.12 per diluted share, in the third quarter of 2014. This follows a net loss in the second quarter of 2015 which totaled $0.5 million or $0.06 per share resulting from a $3.1 million non-cash write-down related to the part-out of a wide-body aircraft engine. For the first nine months of 2015, net income was $4.4 million, or $0.55 per diluted share, compared to $7.5 million, or $0.92 per diluted share, for the first nine months of 2014.

“I was very pleased with the results we achieved in the third quarter,” said Charles F. Willis, Chairman and CEO. “The improvement we have made in our portfolio utilization over the last nine months has been exceptional, reaching 92% at the end of the quarter–the highest point in the last six years. Due to the improvement in utilization as well as the growth in the portfolio, we achieved the highest level of quarterly lease rent revenue in our history. All of our major revenue categories registered impressive gains compared to the previous quarter as well as the same quarter last year. Besides utilization, we also ramped up our trading activity and parts sales during the third quarter. The opportunities in the market to trade assets are attractive right now and enhance our ability to build our portfolio and acquire inventory for our spare parts subsidiary, Willis Aero.”

Third quarter 2015 Highlights (at or for the three-month periods ended September 30, 2015, compared to September 30, 2014, and June 30, 2015):

  • Average utilization in the current quarter was 91%, a significant improvement from 84% reported for 2Q15 and 81% reported for 1Q15 and 82% in the year ago period.
  • Utilization was 92% at quarter-end, compared to 87% at the end of 2Q15 and 82% a year ago.
  • Total revenues increased 32% to $57.8 million in the current quarter from $43.8 million in the preceding quarter, and increased 27% from $45.5 million in the third quarter of 2014, fueled by the growing lease portfolio, higher portfolio utilization and higher gains from the sale of equipment.
  • Lease rent revenue has increased 11.6% year-over-year in 3Q15 due to improving utilization and growth in the lease portfolio. The average size of the lease portfolio for the YTD period increased 5.3% or $53 million from the year ago period.
  • Maintenance reserve revenues increased to $16.1 million in the third quarter, up from $10.5 million in the preceding quarter and $13.1 million in the third quarter a year ago, reflecting higher usage of engines under lease due to improving portfolio utilization.
  • Tangible book value per share increased 0.6% to $26.55 at September 30, 2015, compared to $26.39 a year ago.
  • A total of 99,387 shares of common stock were repurchased in the quarter for $1.6 million under the Company’s five-year repurchase plan authorized in October 2012 and reapproved in April 2015.
  • Liquidity available from the revolving credit facility was $183 million, down from $357 million a year ago. The prior year liquidity was positively impacted by the upsizing of the revolver in the second quarter of 2014.

“We have been working hard all year to improve our utilization, and the results are clear and impressive,” said Donald A. Nunemaker, President. “Our utilization percentage has increased from 79% at December 31, 2014 to 92% at September 30, 2015. Along the way, we registered 8 out of 9 months of consecutive increases. Besides a lot of hard work and a great team effort, some of the other main reasons for the improvement include placing engines on longer term leases, securing longer term extensions and renewals, using capex to purchase primarily on-lease assets as well as proactive portfolio management, all underpinned by favorable market conditions. Over the years, we have seen our utilization fluctuate and rarely remain constant for an extended period of time. While we expect this to continue, we feel that our efforts to manage utilization will reduce some of the variability going forward.”

“In the third quarter, we booked a non-cash write-down on equipment of $5.5 million for two older wide-body engines that will be transferred to Willis Aero for part out, as well as a write-down of parts inventories related to engines we consigned to third parties in the past,” said Brad Forsyth, Chief Financial Officer. The non-cash write-down expense was more than offset by profit on selling equipment and spare parts for both the quarter and the year-to-date periods. 

Balance Sheet

As of September 30, 2015, Willis Lease had 197 commercial aircraft engines, 10 aircraft and 5 aircraft parts packages and other engine-related equipment in its lease portfolio, with a net book value of $1.098 billion, compared to 196 commercial aircraft engines, 4 aircraft and 5 aircraft parts packages and other engine-related equipment in its lease portfolio, with a net book value of $1.006 billion, a year ago. The Company’s funded debt-to-equity ratio was 3.88 to 1 at quarter end, compared to 3.95 to 1 at June 30, 2015, and 3.50 to 1 a year ago.

Willis Lease Finance

Willis Lease Finance Corporation leases large and regional spare commercial aircraft engines, auxiliary power units and aircraft to airlines, aircraft engine manufacturers and maintenance, repair and overhaul providers in 120 countries. These leasing activities are integrated with engine and aircraft trading, engine lease pools supported by cutting edge technology, as well as various end-of-life solutions for aircraft, engines and aviation materials provided through its subsidiary, Willis Aeronautical Services, Inc.

Except for historical information, the matters discussed in this press release contain forward-looking statements that involve risks and uncertainties. Do not unduly rely on forward-looking statements, which give only expectations about the future and are not guarantees. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update them. Our actual results may differ materially from the results discussed in forward-looking statements. Factors that might cause such a difference include, but are not limited to: the effects on the airline industry and the global economy of events such as terrorist activity, changes in oil prices and other disruptions to the world markets; trends in the airline industry and our ability to capitalize on those trends, including growth rates of markets and other economic factors; risks associated with owning and leasing jet engines and aircraft; our ability to successfully negotiate equipment purchases, sales and leases, to collect outstanding amounts due and to control costs and expenses; changes in interest rates and availability of capital, both to us and our customers; our ability to continue to meet the changing customer demands; regulatory changes affecting airline operations, aircraft maintenance, accounting standards and taxes; the market value of engines and other assets in our portfolio; and risks detailed in the Company’s Annual Report on Form 10-K/A and other continuing reports filed with the Securities and Exchange Commission.

Consolidated Statements of Income                
(In thousands, except per share data, unaudited) Three Months Ended     Nine Months Ended   
  Sept 30, June 30, Sept 30, % Change vs % Change vs September 30, %
  2015 2015 2014 June 30, 2015 Sept 30, 2014 2015 2014 Change
REVENUE                
Lease rent revenue  $ 28,083  $ 25,813  $ 25,165 8.8% 11.6%  $ 78,993  $ 76,865 2.8%
Maintenance reserve revenue  16,119  10,477  13,066 53.9% 23.4%  40,744  41,657 (2.2)%
Spare parts and equipment sales  9,133  3,716  4,628 145.8% 97.3%  15,000  6,690 124.2%
Gain on sale of leased equipment  3,804  3,234  1,891 17.6% 101.2%  7,700  3,713 107.4%
Other revenue  619  603  769 2.7% (19.5)%  1,978  3,800 (47.9)%
Total revenue  57,758  43,843  45,519 31.7% 26.9%  144,415  132,725 8.8%
                 
EXPENSES                
Depreciation and amortization expense  17,089  17,668  16,714 (3.3)% 2.2%  52,462  48,159 8.9%
Cost of spare parts and equipment sales  5,919  2,820  4,218 109.9% 40.3%  10,219  6,173 65.5%
Write-down of equipment  5,498  3,058  450 79.8% 1121.8%  8,580  2,928 193.0%
General and administrative  11,742  9,112  9,107 28.9% 28.9%  30,826  28,055 9.9%
Technical expense  3,570  2,434  3,855 46.7% (7.4)%  7,836  7,743 1.2%
Net finance costs                
Interest expense  9,805  9,860  9,181 (0.6)% 6.8%  29,232  27,935 4.6%
Gain on extinguishment of debt  —   —   —  0.0% 0.0%  (1,151)  —  100.0%
Total net finance costs  9,805  9,860  9,181 (0.6)% 6.8%  28,081  27,935 0.5%
Total expenses  53,623  44,952  43,525 19.3% 23.2%  138,004  120,993 14.1%
                 
Earnings (loss) from operations  4,135  (1,109)  1,994 n/a 107.4%  6,411  11,732 n/a
                 
Earnings from joint ventures  558  215  269 159.5% 107.4%  1,127  819 37.6%
                 
Income (loss) before income taxes   4,693  (894)  2,263 n/a 107.4%  7,538  12,551 (39.9)%
Income tax expense (benefit)  2,116  (402)  1,284 n/a 64.8%  3,155  5,026 (37.2)%
Net income (loss) attributable to common shareholders  $ 2,577  $ (492)  $ 979 n/a 163.2%  $ 4,383  $ 7,525 (41.8)%
                 
Basic earnings (loss) per common share  $ 0.33  $ (0.06)  $ 0.12      $ 0.56  $ 0.95  
                 
Diluted earnings (loss) per common share  $ 0.32  $ (0.06)  $ 0.12      $ 0.55  $ 0.92  
                 
Average common shares outstanding  7,839  7,841  7,938      7,843  7,943  
Diluted average common shares outstanding   7,963  7,991  8,123      8,011  8,163  
       
Consolidated Balance Sheets      
(In thousands, except share data, unaudited)      
  Sept 30,
2014
June 30,
2015
Sept 30,
2014
ASSETS      
Cash and cash equivalents  $ 9,245  $ 16,172  $ 10,841
Restricted cash  26,883  50,686  47,116
Equipment held for operating lease, less accumulated depreciation  1,097,815  1,063,950  1,006,316
Equipment held for sale  21,054  29,352  20,795
Spare parts inventory  22,811  19,006  12,690
Operating lease related receivable, net of allowances   16,576  13,692  11,532
Investments  41,740  42,789  26,427
Property, equipment & furnishings, less accumulated depreciation  20,475  20,828  18,152
Intangible assets, net  990  1,048  1,222
Other assets  27,516  24,704  31,965
Total assets  $ 1,285,105  $ 1,282,227  $ 1,187,056
       
LIABILITIES AND SHAREHOLDERS’ EQUITY      
Liabilities:      
Accounts payable and accrued expenses  $ 18,883  $ 19,730  $ 20,949
Deferred income taxes  93,341  91,443  91,199
Notes payable  852,156  860,979  761,230
Maintenance reserves  69,789  67,770  73,298
Security deposits  25,973  19,359  19,899
Unearned lease revenue  5,115  5,018  3,046
Total liabilities  1,065,257  1,064,299  969,621
       
Shareholders’ equity:      
Common stock ($0.01 par value)  $ 83  $ 82  $ 82
Paid-in capital in excess of par  40,880  41,338  42,284
Retained earnings  179,085  176,508  174,980
Accumulated other comprehensive income (loss), net of tax  (200)  —   89
Total shareholders’ equity  219,848  217,928  217,435
       
Total liabilities and shareholders’ equity  $ 1,285,105  $ 1,282,227  $ 1,187,056
CONTACT: Brad Forsyth
         Chief Financial Officer
         (415) 408-4700
         
         The Cereghino Group
         IR CONTACT: 206-388-5785

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