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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