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Willis Lease Finance Corporation Reports Record Quarterly Pre-tax Profit of $31.1 million

COCONUT CREEK, Fla., Nov. 04, 2019 (GLOBE NEWSWIRE) -- Willis Lease Finance Corporation (WLFC) today reported record quarterly pre-tax profit and total revenues of $31.1 million and $120.4 million, respectively. The Company’s third quarter 2019 pre-tax results were driven by strong leasing revenues as well as gains associated with the active management of its portfolio. Aggregate lease rent and maintenance reserve revenues were $88.3 million for the third quarter of 2019.

“Our business had another strong quarter, driven by an in-demand portfolio of high quality lease assets and the further integration of our asset management and surplus parts businesses,” said Charles F. Willis, Chairman and CEO. “We also benefited significantly from an active trading market and the realization of maintenance revenues from long-term leases that, for the most part, matured as part of engine replacement programs.”

“In addition to strong performance across the Willis Platform™, generally, we are pleased to have closed another ConstantAccess™ program for one of our major European customers,” said Brian R. Hole, President. “We believe this deal is further evidence of the market’s evolution away from one in which airlines over-buy new spare engines toward a more efficient, programmatic market in which airlines own only the engines they need all the time and borrow the rest.”

Third Quarter 2019 Highlights (at or for the periods ended September 30, 2019, as compared to September 30, 2018, and December 31, 2018):

  • Total revenue increased by 48.7% to $120.4 million in the third quarter of 2019 compared to $81.0 million in the same quarter of 2018.

  • Lease rent revenue was $49.1 million in the third quarter of 2019; 4.5% growth from $47.0 million in the same quarter of 2018.

  • Maintenance reserve revenue was $39.2 million in the third quarter of 2019, an increase of $19.8 million, or 102%, compared to $19.4 million in the same quarter of 2018. Long term maintenance reserve revenue increased to $19.9 million for the third quarter of 2019, compared to $1.4 million in the comparable prior period.

  • Spare parts and equipment sales were $24.4 million in the third quarter of 2019, including revenue from the sale of two engines, which is 112% growth from $11.5 million in spare parts and equipment sales during the same quarter of 2018.

  • Gain on sale was $4.6 million in the third quarter of 2019, reflecting the sale of four engines, one airframe and one aircraft, compared to $1.1 million in the same quarter of 2018, reflecting the sale of two engines, one airframe and one aircraft.

  • Other revenue increased by $1.1 million to $3.1 million in the third quarter of 2019, compared to $2.0 million in the same quarter of 2018, primarily reflecting interest revenue from our Notes receivable.

  • Income before income taxes was $31.1 million in the third quarter of 2019, compared to $13.3 million in the same quarter of 2018 and was $80.7 million year to date, compared to $34.5 million in the nine months ended 2018.

  • Our equipment lease portfolio was $1.625 billion at September 30, 2019, compared to $1.673 billion at December 31, 2018.

  • The book value of lease assets we own directly or through our joint ventures was $2.0 billion at September 30, 2019. As of September 30, 2019, the Company also managed 460 engines, aircraft and related equipment on behalf of third parties.

  • The Company maintained $616 million of undrawn revolver capacity at September 30, 2019.

  • Diluted weighted average earnings per common share was $3.81 for the third quarter of 2019, compared to $1.47 in the similar period in 2018.

  • Book value per diluted weighted average common share outstanding increased to $57.15 at September 30, 2019, compared to $47.43 at December 31, 2018.

Balance Sheet

As of September 30, 2019, the Company had a total lease portfolio consisting of 264 engines, 11 aircraft and 11 other leased assets with a net book value of $1.625 billion. 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 assets, with a net book value of $1.673 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 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 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
September 30,

Nine Months Ended
September 30,

2019

2018

% Change

2019

2018

% Change

REVENUE

Lease rent revenue

$

49,090

$

46,984

4.5

%

$

142,484

$

129,710

9.8

%

Maintenance reserve revenue

39,173

19,370

102.2

%

90,998

56,855

60.1

%

Spare parts and equipment sales (1)

24,409

11,529

111.7

%

56,497

36,168

56.2

%

Gain on sale of leased equipment (1)

4,589

1,065

330.9

%

19,279

1,662

1,060.0

%

Other revenue

3,105

2,010

54.5

%

10,674

5,762

85.2

%

Total revenue

120,366

80,958

48.7

%

319,932

230,157

39.0

%

EXPENSES

Depreciation and amortization expense

22,736

19,861

14.5

%

63,037

55,600

13.4

%

Cost of spare parts and equipment sales (1)

20,195

8,832

128.7

%

47,192

30,524

54.6

%

Write-down of equipment

6,954

1,215

472.3

%

11,321

4,793

136.2

%

General and administrative

23,257

18,124

28.3

%

66,086

50,517

30.8

%

Technical expense

1,739

2,290

(24.1

)%

4,934

9,199

(46.4

)%

Net finance costs:

Interest expense

16,572

17,885

(7.3

)%

51,232

46,617

9.9

%

Loss on debt extinguishment

%

220

100.0

%

Total net finance costs

16,572

17,885

(7.3

)%

51,452

46,617

10.4

%

Total expenses

91,453

68,207

34.1

%

244,022

197,250

23.7

%

Earnings from operations

28,913

12,751

126.8

%

75,910

32,907

130.7

%

Earnings from joint ventures

2,165

506

327.9

%

4,787

1,569

205.1

%

Income before income taxes

31,078

13,257

134.4

%

80,697

34,476

134.1

%

Income tax expense

7,005

3,583

95.5

%

18,771

9,359

100.6

%

Net income

24,073

9,674

148.8

%

61,926

25,117

146.6

%

Preferred stock dividends

820

819

0.1

%

2,431

2,431

%

Accretion of preferred stock issuance costs

21

21

%

63

62

1.6

%

Net income attributable to common shareholders

$

23,232

$

8,834

163.0

%

$

59,432

$

22,624

162.7

%

Basic weighted average earnings per common share

$

3.97

$

1.50

$

10.19

$

3.80

Diluted weighted average earnings per common share

$

3.81

$

1.47

$

9.83

$

3.72

Basic weighted average common shares outstanding

5,847

5,900

5,831

5,960

Diluted weighted average common shares outstanding

6,094

6,004

6,045

6,083

(1) Effective January 1, 2018, the Company adopted Accounting Standards Codification (“ASC”) 606 – “Revenue from Contracts with Customers” and has identified the sale of parts from engines previously transferred from the lease portfolio to the Spare Parts segment as sales to customers of the reporting entity. As such, the Company presents the sale of these assets on a gross basis and has reclassified the three and nine months ended September 30, 2018 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. For the three months ended September 30, 2018, the reclassification resulted in an increase in Spare parts and equipment sales of $3.2 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 $3.0 million with no impact to the Company's net income. For the nine months ended September 30, 2018, the reclassification resulted in an increase in Spare parts and equipment sales of $14.5 million, a decrease in Gain on sale of leased equipment of $0.5 million and an increase in Cost of spare parts and equipment sales of $14.0 million with no impact to the Company's net income.

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

September 30, 2019

December 31, 2018

ASSETS

Cash and cash equivalents

$

8,976

$

11,688

Restricted cash

71,747

70,261

Equipment held for operating lease, less accumulated depreciation

1,624,937

1,673,135

Maintenance rights

3,133

14,763

Equipment held for sale

542

789

Receivables, net of allowances

33,890

23,270

Spare parts inventory

42,314

48,874

Investments

53,952

47,941

Property, equipment & furnishings, less accumulated depreciation

30,840

27,679

Intangible assets, net

1,327

1,379

Notes receivable

41,319

238

Other assets

17,458

14,926

Total assets

$

1,930,435

$

1,934,943

LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY

Liabilities:

Accounts payable and accrued expenses

$

40,035

$

42,939

Deferred income taxes

108,690

90,285

Debt obligations

1,258,984

1,337,349

Maintenance reserves

99,502

94,522

Security deposits

22,165

28,047

Unearned revenue

5,949

5,460

Total liabilities

1,535,325

1,598,602

Redeemable preferred stock ($0.01 par value)

49,617

49,554

Shareholders’ equity:

Common stock ($0.01 par value)

64

62

Paid-in capital in excess of par

2,373

Retained earnings

344,809

286,623

Accumulated other comprehensive (loss) income, net of tax

(1,753

)

102

Total shareholders’ equity

345,493

286,787

Total liabilities, redeemable preferred stock and shareholders’ equity

$

1,930,435

$

1,934,943


CONTACT:

Scott B. Flaherty

Chief Financial Officer

(561) 349-9989