Willis Lease Finance Corporation Reports Second Quarter Pre-tax Income of $19.0 million
COCONUT CREEK, Fla., Aug. 03, 2023 (GLOBE NEWSWIRE) -- Willis Lease Finance Corporation (NASDAQ: WLFC) today reported second quarter total revenues of $109.0 million and pre-tax earnings of $19.0 million. For the three months ended June 30, 2023, aggregate lease rent and maintenance reserve revenues were $89.8 million and spare parts and equipment sales were $4.6 million. The Company reported increased total revenues in the second quarter when compared to the prior year period, primarily due to an increase in the Company's core lease rent and short-term maintenance revenues driven by continued global recovery in travel.
“Our second quarter results reflect the fundamental strength of our core leasing business,” said Austin Willis, the Company’s Chief Executive Officer. “A scarcity of serviceable spare engines and strong demand from the airlines, continues to drive favorable lease rates and terms.”
“Despite huge demand and industry-wide shortages, our teams continue to deliver for our customers that planned ahead and signed up for our custom-built programs as well as for those requiring ad hoc support,” said Brian R. Hole, President. “As always, people make the difference and ours are world class.”
Second Quarter 2023 Highlights (at or for the period ended June 30, 2023, as compared to June 30, 2022, and December 31, 2022):
Lease rent revenue increased by $17.7 million, or 48.3%, to $54.4 million in the second quarter of 2023, compared to $36.7 million in the second quarter of 2022. The increase is due to an increase in the number of engines acquired and placed on lease, including an increase in utilization compared to that of the prior period.
Maintenance reserve revenue was $35.4 million in the second quarter of 2023, an increase of 46.1%, compared to $24.2 million in the same quarter of 2022. There was $6.8 million long-term maintenance revenue recognized for the three months ended June 30, 2023, compared to $15.1 million in the comparable prior period. “Non-reimbursable” maintenance reserve revenue is directly influenced by on lease engine flight hours and cycles. Engines out on lease with “non-reimbursable” usage fees generated $28.6 million of short-term maintenance revenues, compared to $9.2 million in the comparable prior period. As of June 30, 2023 and December 31, 2022, there was $19.8 million and $6.3 million, respectively, of cumulative deferred in-substance fixed payment use fees included in “Unearned revenue.”
Spare parts and equipment sales decreased to $4.6 million in the second quarter of 2023, compared to $6.8 million in the second quarter of 2022.
Gain on sale of leased equipment was $4.5 million in the second quarter of 2023, reflecting the sale of two engines and other parts and equipment from the lease portfolio. Gain on sale of leased equipment was $0.5 million in the second quarter of 2022, reflecting the sale of eight engines.
There was no gain on sale of financial assets during the second quarter of 2023 as we did not sell any notes receivable. Gain on sale of financial assets was $3.1 million in the second quarter of 2022, reflecting the sale of four notes receivable.
The Company generated $19.0 million of pre-tax income in the second quarter of 2023, a 73.2% increase as compared to pre-tax income of $11.0 million in the second quarter of 2022.
The book value of lease assets we own directly or through our joint ventures, inclusive of our notes receivable, maintenance rights, and investments in sales-type leases, was $2,551.3 million at June 30, 2023. As of June 30, 2023, the Company also managed 339 engines, aircraft and related equipment on behalf of other parties.
The Company maintained $242.0 million of undrawn revolver capacity at June 30, 2023.
Diluted weighted average income per common share was $2.02 for the second quarter of 2023, compared to diluted weighted average income of $0.81 in the second quarter of 2022.
Book value per diluted weighted average common share outstanding increased to $64.69 at June 30, 2023, compared to $64.27 at December 31, 2022.
Balance Sheet
As of June 30, 2023, $2,161.7 million of equipment held in our operating lease portfolio, $95.0 million of notes receivable, $14.0 million of maintenance rights, and $5.8 million of investments in sales-type leases, which represented 348 engines, 12 aircraft, one marine vessel and other leased parts and equipment. As of December 31, 2022, the Company had $2,111.9 million 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.
Willis Lease Finance Corporation
Willis Lease Finance Corporation (“WLFC”) leases large and regional spare commercial aircraft engines, auxiliary power units and aircraft to airlines, aircraft engine manufacturers and maintenance, repair and overhaul providers worldwide. These leasing activities are integrated with engine and aircraft trading, engine lease pools and asset management services through Willis Asset Management Limited, as well as various end-of-life solutions for engines and aviation materials provided through Willis Aeronautical Services, Inc. Additionally, through Willis Engine Repair Center®, Jet Centre by Willis, and Willis Aviation Services Limited, the Company’s service offerings include Part 145 engine maintenance, aircraft line and base maintenance, aircraft disassembly, parking and storage, airport FBO and ground and cargo handling services.
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 war, terrorist activity and the COVID-19 pandemic; changes in oil prices, rising inflation and other disruptions to 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.
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| Three months ended June 30, |
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| Six months ended June 30, |
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| 2023 |
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| 2022 |
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| % Change |
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| 2023 |
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| 2022 |
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| % Change | ||
REVENUE |
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Lease rent revenue |
| $ | 54,416 |
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| $ | 36,704 |
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| 48.3 | % |
| $ | 107,636 |
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| $ | 74,829 |
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| 43.8 | % |
Maintenance reserve revenue |
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| 35,415 |
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| 24,245 |
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| 46.1 | % |
|
| 58,913 |
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|
| 39,079 |
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| 50.8 | % |
Spare parts and equipment sales |
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| 4,550 |
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| 6,792 |
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| (33.0 | )% |
|
| 9,602 |
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|
| 13,422 |
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| (28.5 | )% |
Interest revenue |
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| 2,258 |
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|
| 1,865 |
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| 21.1 | % |
|
| 4,304 |
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|
| 3,978 |
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| 8.2 | % |
Gain on sale of leased equipment |
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| 4,461 |
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|
| 498 |
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| 795.8 | % |
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| 4,328 |
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|
| 2,796 |
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| 54.8 | % |
Gain on sale of financial assets |
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| — |
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| 3,116 |
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| (100.0 | )% |
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| — |
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|
| 3,116 |
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| (100.0 | )% |
Other revenue |
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| 7,896 |
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| 4,855 |
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| 62.6 | % |
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| 13,748 |
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| 9,672 |
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| 42.1 | % |
Total revenue |
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| 108,996 |
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|
| 78,075 |
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| 39.6 | % |
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| 198,531 |
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|
| 146,892 |
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| 35.2 | % |
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EXPENSES |
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Depreciation and amortization expense |
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| 22,494 |
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| 21,612 |
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| 4.1 | % |
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| 45,043 |
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|
| 43,421 |
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| 3.7 | % |
Cost of spare parts and equipment sales |
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| 3,058 |
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|
| 7,014 |
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| (56.4 | )% |
|
| 7,557 |
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|
| 11,876 |
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| (36.4 | )% |
Write-down of equipment |
|
| 1,671 |
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|
| 78 |
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| 2,042.3 | % |
|
| 1,671 |
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|
| 21,195 |
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| (92.1 | )% |
General and administrative |
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| 38,327 |
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|
| 20,427 |
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| 87.6 | % |
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| 71,598 |
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|
| 44,032 |
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| 62.6 | % |
Technical expense |
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| 4,919 |
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|
| 3,436 |
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| 43.2 | % |
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| 7,748 |
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|
| 9,082 |
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| (14.7 | )% |
Net finance costs: |
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Interest expense |
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| 19,085 |
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|
| 16,023 |
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| 19.1 | % |
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| 37,474 |
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|
| 32,906 |
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| 13.9 | % |
Total net finance costs |
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| 19,085 |
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|
| 16,023 |
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| 19.1 | % |
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| 37,474 |
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|
| 32,906 |
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| 13.9 | % |
Total expenses |
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| 89,554 |
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|
| 68,590 |
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| 30.6 | % |
|
| 171,091 |
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|
| 162,512 |
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| 5.3 | % |
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Income (Loss) from operations |
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| 19,442 |
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|
| 9,485 |
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| 105.0 | % |
|
| 27,440 |
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|
| (15,620 | ) |
| (275.7 | )% |
(Loss) Income from joint ventures |
|
| (474 | ) |
|
| 1,469 |
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| (132.3 | )% |
|
| (1,635 | ) |
|
| (1,147 | ) |
| 42.5 | % |
Income (Loss) before income taxes |
|
| 18,968 |
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|
| 10,954 |
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| 73.2 | % |
|
| 25,805 |
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|
| (16,767 | ) |
| (253.9 | )% |
Income tax expense (benefit) |
|
| 5,152 |
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|
| 5,046 |
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| 2.1 | % |
|
| 7,595 |
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|
| (1,474 | ) |
| (615.3 | )% |
Net income (loss) |
|
| 13,816 |
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|
| 5,908 |
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| 133.9 | % |
|
| 18,210 |
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|
| (15,293 | ) |
| (219.1 | )% |
Preferred stock dividends |
|
| 811 |
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|
| 811 |
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| — | % |
|
| 1,612 |
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|
| 1,612 |
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| — | % |
Accretion of preferred stock issuance costs |
|
| 21 |
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|
| 21 |
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| — | % |
|
| 42 |
|
|
| 42 |
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| — | % |
Net income (loss) attributable to common shareholders |
| $ | 12,984 |
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| $ | 5,076 |
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| 155.8 | % |
| $ | 16,556 |
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| $ | (16,947 | ) |
| (197.7 | )% |
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Basic weighted average income (loss) per common share |
| $ | 2.04 |
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| $ | 0.83 |
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|
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| $ | 2.65 |
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| $ | (2.81 | ) |
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Diluted weighted average income (loss) per common share |
| $ | 2.02 |
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| $ | 0.81 |
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|
|
| $ | 2.57 |
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| $ | (2.81 | ) |
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Basic weighted average common shares outstanding |
|
| 6,354 |
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|
| 6,129 |
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|
|
|
| 6,239 |
|
|
| 6,040 |
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Diluted weighted average common shares outstanding |
|
| 6,442 |
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|
| 6,246 |
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|
|
|
| 6,449 |
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|
| 6,040 |
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Unaudited Consolidated Balance Sheets | ||||||||
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| June 30, 2023 |
| December 31, 2022 | ||||
ASSETS |
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Cash and cash equivalents |
| $ | 5,918 |
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| $ | 12,146 |
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Restricted cash |
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| 49,094 |
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|
| 76,870 |
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Equipment held for operating lease, less accumulated depreciation |
|
| 2,161,650 |
|
|
| 2,111,935 |
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Maintenance rights |
|
| 14,032 |
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|
| 17,708 |
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Equipment held for sale |
|
| 2,713 |
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|
| 3,275 |
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Receivables, net of allowances |
|
| 52,259 |
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|
| 46,954 |
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Spare parts inventory |
|
| 41,764 |
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|
| 38,577 |
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Investments |
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| 53,716 |
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|
| 56,189 |
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Property, equipment & furnishings, less accumulated depreciation |
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| 37,329 |
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|
| 35,350 |
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Intangible assets, net |
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| 1,100 |
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|
| 1,129 |
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Notes receivable, net of allowances |
|
| 95,047 |
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|
| 81,439 |
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Investments in sales-type leases, net of allowances |
|
| 5,827 |
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|
| 6,440 |
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Other assets |
|
| 83,507 |
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|
| 87,205 |
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Total assets |
| $ | 2,603,956 |
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| $ | 2,575,217 |
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LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY |
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Liabilities: |
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Accounts payable and accrued expenses |
| $ | 41,927 |
|
| $ | 43,040 |
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Deferred income taxes |
|
| 137,884 |
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|
| 132,516 |
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Debt obligations |
|
| 1,827,021 |
|
|
| 1,847,278 |
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Maintenance reserves |
|
| 73,872 |
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|
| 59,453 |
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Security deposits |
|
| 22,528 |
|
|
| 20,490 |
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Unearned revenue |
|
| 33,626 |
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|
| 17,863 |
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Total liabilities |
|
| 2,136,858 |
|
|
| 2,120,640 |
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|
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Redeemable preferred stock ($0.01 par value) |
|
| 49,931 |
|
|
| 49,889 |
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Shareholders’ equity: |
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|
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Common stock ($0.01 par value) |
|
| 68 |
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|
| 66 |
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Paid-in capital in excess of par |
|
| 21,740 |
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|
| 20,386 |
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Retained earnings |
|
| 373,965 |
|
|
| 357,493 |
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Accumulated other comprehensive income, net of tax |
|
| 21,394 |
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|
| 26,743 |
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Total shareholders’ equity |
|
| 417,167 |
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|
| 404,688 |
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Total liabilities, redeemable preferred stock and shareholders’ equity |
| $ | 2,603,956 |
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| $ | 2,575,217 |
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CONTACT: | Scott B. Flaherty |
| Chief Financial Officer |
| (561) 349-9989 |
