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Willis Lease Finance Corporation Reports Record Annual Pre-tax Profit of $56.3 Million

COCONUT CREEK, Fla., March 13, 2019 (GLOBE NEWSWIRE) -- Willis Lease Finance Corporation (WLFC) today reported a record annual pre-tax profit of $56.3 million, from $36.0 million in 2017, including record total revenues of $348.3 million. The Company’s 2018 pretax results were driven by continued revenue growth in the core leasing business and an increase in spare parts and equipment sales. Aggregate lease rent and maintenance reserve revenues of $262.6 million were driven by high utilization of a lease portfolio that grew 24.6% to $1.673 billion at year-end.

“We are very pleased to have delivered strong performance across the Willis Lease Platform in 2018,” said Charles F. Willis, Chairman and CEO.  “Our global client base is recognizing the value of our vertically integrated offering of core lease services, materials, fleet transition solutions, asset management and materials services.”

“The continued evolution of our Platform lets us offer the industry new options for financing, managing and transitioning into and out of equipment,” said Brian R. Hole, President. “This includes our ConstantAccess program, which allows customers seeking operational and cost efficiency to leverage our portfolio instead of buying too many new, dedicated spare engines. We are pleased to be able to support our customers with these unique products and services during a period of very high demand in the market.”  

2018 Highlights (at or for the period ended December 31, 2018, as compared to December 31, 2017):

  • Total revenue increased by 26.7% to $348.3 million in 2018, compared to $274.8 million in 2017.
  • Lease rent revenue achieved an annual high of $175.6 million in 2018; 34.7% growth from $130.4 million in 2017.
  • Earnings before tax were $56.3 million in 2018, up 56.3% when compared to $36.0 million in 2017.
  • General and administrative expenses increased, primarily due to one-time costs associated with facility relocations and employee transitions, increased headcount to support our broadening Platform and increased compensation accruals due to operating performance.
  • Utilization at the end of 2018 was 89% and consistent with 2017 year-end levels.
  • Our equipment lease portfolio grew 24.6% to $1.673 billion, from $1.343 billion at December 31, 2017, net of asset sales and depreciation expense.
  • The book value of 308 lease assets we own directly or through our joint ventures was $2.0 billion at December 31, 2018. As of December 31, 2018, the Company managed 422 engines, aircraft and related equipment on behalf of third parties.
  • The Company maintained $463 million of undrawn revolver capacity at December 31, 2018.
  • A total of 471,595 shares of common stock were repurchased in 2018 under the Company’s repurchase plan for $16.2 million. On December 31, 2018, the Company’s Board of Directors approved the renewal of the stock repurchase plan, extending the plan through December 31, 2020 allowing for the repurchase of up to $60 million.
  • Diluted weighted average earnings per common share was $6.60 per share for the year 2018.
  • Book value per diluted weighted average common share outstanding increased to $47.43 at December 31, 2018, compared to $41.63 at December 31, 2017.

Balance Sheet
As of December 31, 2018, the Company had a total lease portfolio consisting of 244 engines and related equipment, 17 aircraft and 10 other leased parts and equipment with a net book value of $1.673 billion. As of December 31, 2017, the Company had a total lease portfolio consisting of 225 engines, 16 aircraft and 7 other leased parts and equipment, with a net book value of $1.343 billion.

Willis Lease Finance Corporation
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 and asset management services supported by cutting edge technology through its subsidiary Willis Asset Management Limited, 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 and other continuing reports filed with the Securities and Exchange Commission.

Unaudited Consolidated Statements of Income                        
(In thousands, except per share data)                        
  Three Months Ended         Years Ended    
  December 31,     %   December 31,   %
    2018     2017       Change     2018     2017     Change
REVENUE                        
Lease rent revenue $ 45,900   $ 35,324       29.9 %   $ 175,609   $ 130,369     34.7 %
Maintenance reserve revenue   30,154     15,977       88.7 %     87,009     80,189     8.5 %
Spare parts and equipment sales (1)   34,973     10,150       244.6 %     71,141     51,423     38.3 %
Gain on sale of leased equipment (1)   5,282     245       2055.9 %     6,944     4,929     40.9 %
Other revenue   1,881     1,493       26.0 %     7,644     7,930     (3.6 )%
Total revenue   118,190     63,189       87.0 %     348,347     274,840     26.7 %
                         
EXPENSES                        
Depreciation and amortization expense   21,214     17,238       23.1 %     76,814     66,023     16.3 %
Cost of spare parts and equipment sales (1)   30,501     11,302       169.9 %     61,025     40,848     49.4 %
Write-down of equipment   5,858     2,687       118.0 %     10,651     24,930     (57.3 )%
General and administrative   21,504     15,164       41.8 %     72,021     55,737     29.2 %
Technical expense   1,943     2,384       (18.5 )%     11,142     9,729     14.5 %
Interest expense   17,603     12,322       42.9 %     64,220     48,720     31.8 %
Total expenses   98,623     61,097       61.4 %     295,873     245,987     20.3 %
                         
Earnings from operations   19,567     2,092       835.3 %     52,474     28,853     81.9 %
Earnings from joint ventures   2,231     1,103       102.3 %     3,800     7,158     (46.9 )%
Income before income taxes   21,798     3,195       582.3 %     56,274     36,011     56.3 %
Income tax expense (benefit)   3,684     (39,515 )     (109.3 )%     13,043     (26,147 )   (149.9 )%
Net income   18,114     42,710       (57.6 )%     43,231     62,158     (30.4 )%
Preferred stock dividends   819     825       (0.7 )%     3,250     1,813     79.3 %
Accretion of preferred stock issuance costs   21     21       0.0 %     83     46     80.4 %
Net income attributable to common shareholders $ 17,274   $ 41,864       (58.7 )%   $ 39,898   $ 60,299     (33.8 )%
                         
Basic weighted average earnings per common share $ 2.99   $ 6.87           $ 6.75   $ 9.93      
Diluted weighted average earnings per common share $ 2.91   $ 6.75           $ 6.60   $ 9.69      
                         
Basic weighted average common shares outstanding   5,782     6,090             5,915     6,074      
Diluted weighted average common shares outstanding   5,939     6,201             6,046     6,220      


(1) Effective January 1, 2018, the Company adopted ASC 606 – Revenue from Contracts with Customers and has identified the transfer of engines and airframes from the lease portfolio to the Spare Parts segment for part out as sales to customers in accordance with the ordinary operations of our Spare Parts reportable segment. As such, we present the sale of these assets on a gross basis and have reclassified the gross revenue and costs of sale to the Spare parts and equipment sales and Cost of spare parts and equipment sales line items from the net gain (loss) presentation within the Gain on sale of leased equipment line item. The reclassification resulted in an increase in Spare parts and equipment sales of $1.9 million, a decrease in Gain on sale of leased equipment of $0.2 million and an increase in Cost of spare parts and equipment sales of $1.7 million for the quarter ended December 31, 2018. Additionally, the reclassification resulted in an increase in Spare parts and equipment sales of $16.4 million, a decrease in Gain on sale of leased equipment of $0.7 million and an increase in Cost of spare parts and equipment sales of $15.7 million for the year ended December 31, 2018. The Company adopted ASC 606 on January 1, 2018, using the modified retrospective approach applied only to contracts not completed as of the date of adoption, with no restatement of comparative periods. Therefore, the comparative information has not been adjusted and continues to be reported under ASC Topic 605 – Revenue Recognition.

         
         
Unaudited Consolidated Balance Sheets        
(In thousands, except per share data)        
  December 31, 2018     December 31, 2017
ASSETS        
Cash and cash equivalents $ 11,688     $ 7,052
Restricted cash   70,261       40,272
Equipment held for operating lease, less accumulated depreciation   1,673,135       1,342,571
Maintenance rights   14,763       14,763
Equipment held for sale (1)   789       34,172
Receivables, net of allowances   23,270       18,848
Spare parts inventory (1)   48,874       16,379
Investments   47,941       50,641
Property, equipment & furnishings, less accumulated depreciation   27,679       26,074
Intangible assets, net   1,379       1,727
Other assets   15,164       50,932
Total assets $ 1,934,943     $ 1,603,431
         
LIABILITIES, REDEEMABLE PREFERRED STOCK AND  SHAREHOLDERS' EQUITY        
Liabilities:        
Accounts payable and accrued expenses $ 42,939     $ 22,072
Deferred income taxes   90,285       78,280
Debt obligations   1,337,349       1,085,405
Maintenance reserves   94,522       75,889
Security deposits   28,047       25,302
Unearned revenue   5,460       8,102
Total liabilities   1,598,602       1,295,050
         
Redeemable preferred stock ($0.01 par value)   49,554       49,471
         
Shareholders' equity:        
Common stock ($0.01 par value)   62       64
Paid-in capital in excess of par   -       2,319
Retained earnings   286,623       256,301
Accumulated other comprehensive income, net of tax   102       226
Total shareholders' equity   286,787       258,910
Total liabilities, redeemable preferred stock and shareholders' equity $ 1,934,943     $ 1,603,431
         


(1) Effective January 1, 2018, the Company adopted ASC 606 – Revenue from Contracts with Customers and has identified the transfer of engines and airframes from the lease portfolio to the Spare Parts segment for part out as sales of nonfinancial assets to customers of the reporting entity. As such, as of December 31, 2018, $22.9 million of these assets which had previously been included in Equipment held for sale are now within the Spare parts inventory line item on our Consolidated Balance Sheet. The Company adopted ASC 606 on January 1, 2018, using the modified retrospective approach applied only to contracts not completed as of the date of adoption, with no restatement of comparative 2017 periods. Therefore, the comparative information has not been adjusted and continues to be reported under ASC Topic 605 – Revenue Recognition.

Contact:
Scott B. Flaherty
Chief Financial Officer
(415) 408-4700