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Willis Lease Finance Corporation Reports Second Quarter Pre-tax Profit of $9.7 million

Willis Lease Finance Corp.
·9 mins read

COCONUT CREEK, Fla., Aug. 05, 2020 (GLOBE NEWSWIRE) -- Willis Lease Finance Corporation (NASDAQ: WLFC) today reported second quarter total revenues of $75.0 million and pre-tax profit of $9.7 million. The Company reported lower revenue in the second quarter of 2020 than the prior year period due primarily to the impact the COVID-19 pandemic has had on the aviation industry, generally, leading to reduced revenues in the core leasing business. Aggregate lease rent and maintenance reserve revenues were $68.4 million for the second quarter of 2020.

“We are pleased to have maintained profitability in the second quarter, with $9.7 million of reported pre-tax income, given the unprecedented impacts the COVID-19 pandemic has had on our industry,” said Charles F. Willis, Chairman and CEO. “As we have from the beginning of this event, we are working closely with our global customer base to provide tailored lease and service solutions while also maintaining a focus on the strength of our own balance sheet and liquidity."

“At this point, our customers are fighting to survive what essentially has been the disappearance of a flying public,” said Brian R. Hole, President. “We believe we are well-positioned, though, to support the recovery by leveraging our entire Platform, from available financing, hundreds of lease engines and aircraft, technical services, aircraft storage and maintenance, surplus material and a multitude of specialized programs, all of which are designed to drive out cost and help our customers return to profitability.”

Second Quarter 2020 Highlights (at or for the periods ended June 30, 2020, as compared to June 30, 2019, and December 31, 2019):

  • Total revenue was $75.0 million in the second quarter of 2020, a 21.7% decrease when compared to $95.8 million in the same quarter of 2019.

  • Lease rent revenue was $38.5 million in the second quarter of 2020.

  • Maintenance reserve revenue was $30.0 million in the second quarter of 2020, an increase of $3.5 million, or 13.3%, compared to $26.5 million in the same quarter of 2019. Long term maintenance reserve revenue, which is influenced by end of lease compensation, increased to $27.2 million for the second quarter of 2020, compared to $6.7 million in the comparable prior period. Short term maintenance reserve revenue, which is influenced by lease asset usage, was $2.8 million for the second quarter of 2020 compared to $19.8 million in the comparable prior period.

  • Spare parts and equipment sales were $2.9 million in the second quarter of 2020, compared to $14.6 million during the same quarter of 2019.

  • Income before income taxes was $9.7 million in the second quarter of 2020, compared to $21.8 million in the same quarter of 2019 and was $18.3 million in the first half of 2020, compared to $49.6 million in the first half of 2019.

  • Our equipment held for operating lease portfolio was $1.654 billion at June 30, 2020, compared to $1.651 billion at December 31, 2019.

  • The book value of lease assets we own directly or through our joint ventures was $2.0 billion at June 30, 2020. As of June 30, 2020, the Company also managed 402 engines, aircraft and related equipment on behalf of third parties.

  • The Company maintained $447 million of undrawn revolver capacity at June 30, 2020.

  • Under the Company’s repurchase plan, the Company repurchased a total of 54,626 shares of common stock in the second quarter of 2020 for $1.5 million.

  • Diluted weighted average earnings per common share was $0.74 for the second quarter of 2020, compared to $2.66 in the similar period in 2019.

  • Book value per diluted weighted average common share outstanding increased to $58.56 at June 30, 2020, compared to $57.83 at December 31, 2019.

Balance Sheet

As of June 30, 2020, the Company’s $1.654 billion equipment held for operating lease portfolio consisted of 264 engines, 10 aircraft and 11 other leased assets. As of December 31, 2019, the Company’s $1.651 billion equipment held for operating lease portfolio consisted of 263 engines, 10 aircraft and 11 other leased assets.

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 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 and the COVID-19 pandemic; 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 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 June 30,

Six Months Ended June 30,

2020

2019

% Change

2020

2019

% Change

REVENUE

Lease rent revenue

$

38,454

$

45,025

(14.6

)%

$

84,849

$

93,394

(9.1

)%

Maintenance reserve revenue

29,986

26,475

13.3

%

50,514

51,825

(2.5

)%

Spare parts and equipment sales

2,855

14,586

(80.4

)%

11,960

32,088

(62.7

)%

(Loss) Gain on sale of leased equipment

(700

)

5,120

(113.7

)%

1,367

14,690

(90.7

)%

Other revenue

4,388

4,591

(4.4

)%

7,902

7,569

4.4

%

Total revenue

74,983

95,797

(21.7

)%

156,592

199,566

(21.5

)%

EXPENSES

Depreciation and amortization expense

23,764

20,043

18.6

%

47,154

40,301

17.0

%

Cost of spare parts and equipment sales

2,648

12,585

(79.0

)%

9,336

26,997

(65.4

)%

Write-down of equipment

6,997

3,262

114.5

%

9,126

4,367

109.0

%

General and administrative

15,228

21,389

(28.8

)%

34,795

42,829

(18.8

)%

Technical expense

1,468

1,407

4.3

%

2,595

3,195

(18.8

)%

Net finance costs:

Interest expense

16,089

16,781

(4.1

)%

31,785

34,660

(8.3

)%

Loss on debt extinguishment

220

(100.0

)%

4,688

220

2,030.9

%

Total net finance costs

16,089

17,001

(5.4

)%

36,473

34,880

4.6

%

Total expenses

66,194

75,687

(12.5

)%

139,479

152,569

(8.6

)%

Earnings from operations

8,789

20,110

(56.3

)%

17,113

46,997

(63.6

)%

Earnings from joint ventures

948

1,676

(43.4

)%

1,155

2,622

(55.9

)%

Income before income taxes

9,737

21,786

(55.3

)%

18,268

49,619

(63.2

)%

Income tax expense

4,365

4,811

(9.3

)%

8,610

11,766

(26.8

)%

Net income

5,372

16,975

(68.4

)%

9,658

37,853

(74.5

)%

Preferred stock dividends

811

810

0.1

%

1,621

1,611

0.6

%

Accretion of preferred stock issuance costs

21

21

%

42

42

%

Net income attributable to common shareholders

$

4,540

$

16,144

(71.9

)%

$

7,995

$

36,200

(77.9

)%

Basic weighted average earnings per common share

$

0.76

$

2.75

$

1.35

$

6.22

Diluted weighted average earnings per common share

$

0.74

$

2.66

$

1.31

$

6.01

Basic weighted average common shares outstanding

6,012

5,866

5,936

5,823

Diluted weighted average common shares outstanding

6,098

6,061

6,111

6,020


Unaudited Consolidated Balance Sheets
(In thousands, except per share data)

June 30, 2020

December 31, 2019

ASSETS

Cash and cash equivalents

$

100,096

$

6,720

Restricted cash

71,312

56,948

Equipment held for operating lease, less accumulated depreciation

1,653,695

1,650,918

Maintenance rights

767

3,133

Equipment held for sale

50

120

Receivables, net of allowances

41,678

24,059

Spare parts inventory

50,670

41,759

Investments

58,865

57,936

Property, equipment & furnishings, less accumulated depreciation

32,260

31,520

Intangible assets, net

1,282

1,312

Notes receivable

170,362

38,145

Other assets

28,534

28,038

Total assets

$

2,209,571

$

1,940,608

LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY

Liabilities:

Accounts payable and accrued expenses

$

32,359

$

45,648

Deferred income taxes

117,915

110,418

Debt obligations

1,520,240

1,251,006

Maintenance reserves

100,179

106,870

Security deposits

22,841

20,569

Unearned revenue

8,489

6,121

Total liabilities

1,802,023

1,540,632

Redeemable preferred stock ($0.01 par value)

49,680

49,638

Shareholders’ equity:

Common stock ($0.01 par value)

66

64

Paid-in capital in excess of par

7,203

4,557

Retained earnings

356,960

348,965

Accumulated other comprehensive loss, net of tax

(6,361

)

(3,248

)

Total shareholders’ equity

357,868

350,338

Total liabilities, redeemable preferred stock and shareholders’ equity

$

2,209,571

$

1,940,608

CONTACT:
Scott B. Flaherty
Chief Financial Officer
(561) 349-9989