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Willis Lease Finance Reports 2015 Pretax Profit Up 19.4% to $14.1 Million

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NOVATO, Calif., March 07, 2016 (GLOBE NEWSWIRE) -- Willis Lease Finance Corporation (NASDAQ: WLFC), the premier independent jet engine lessor in the commercial finance sector, today reported pretax earnings for 2015 of $14.1 million, up 19.4% from $11.8 million in 2014.  Net income for 2015 was $7.4 million, or $0.92 cents per diluted share, compared to $7.2 million, or $0.89 per diluted share the prior year. Fourth quarter 2015 net income increased to $3.0 million, or $0.38 per diluted share, compared to a loss of $0.3 million, or $0.03 per diluted share, in the same quarter a year ago. The year ago quarter was impacted by a $2.7 million non-cash engines write-down and the expensing of a $3.5 million engine repair.

"I am pleased to report that on a pretax basis our financial performance in 2015 was the best since 2011," said Charles F. Willis, Chairman and CEO.  "Our fourth quarter and full year results reflect a combination of improvements in utilization, greater trading activity and growth in the lease portfolio—all contributing to record total revenues of $200 million. I believe we have a lot of momentum going into 2016. Many of our customers are having record years as well, due in large part to the low cost of fuel. Demand for our engines remains strong. Our product and service offerings are expanding and should present opportunities for revenue growth in the future—this includes our end of life solutions business, Willis Aero, which is registering impressive growth.  Our joint ventures in China and Ireland are also continuing to grow and develop.  The market remains favorable for leasing and trading assets, and we are optimistic about the opportunities we see for the coming year."

"In 2015, we achieved record levels of lease rent and maintenance reserve revenue, mainly due to higher utilization," said Donald A. Nunemaker, President. "We placed a lot of focus on utilization improvement last year and the hard work paid off.  Our average utilization for 2015 reached 87%, which was the highest level achieved since 2009. Utilization for the fourth quarter of 2015 averaged 91%.  We have said before that our utilization is subject to upward and downward swings from quarter to quarter due to a variety of different factors, and it remains to be seen how long it can be held at historically high levels like the last two quarters of 2015."

2015 Highlights (at or for the periods ended December 31, 2015, compared to December 31, 2014, and September 30, 2015):

  • Total revenues grew 14.5% to $199.6 million in 2015, fueled by higher portfolio utilization, the growing lease portfolio and higher spare parts and equipment sales.  In the fourth quarter of 2015, revenues increased 32.8% to $55.2 million from $41.6 million in the year ago quarter.
  • Average utilization in the fourth quarter of 2015 was sustained at 91%, equaling our performance in the previous quarter and a significant improvement from 82% reported in the year ago period. For 2015, average utilization improved to 87% from 83% in 2014. Utilization at year-end was 90% compared to 79% a year ago. 
  • Total engines and aircraft owned and managed have grown to nearly $1.5 billion.  The owned lease portfolio grew 5.3% in 2015 to $1.123 billion from $1.066 billion a year ago, with $171 million in acquisitions compared to $112 million acquired in 2014.  In the fourth quarter of 2015, one aircraft and seven engines were purchased for $48 million. 
  • Fourth quarter lease rent revenue of $28.9 million increased 16.0% year-over-year and grew 2.8% from the prior quarter.
  • Maintenance reserve revenue was $14.3 million in 4Q15 compared to $16.1 million in 3Q15 and $11.7 million in the fourth quarter a year ago. 
  • Willis Aero parts sales increased 75% to $15.6 million in 2015 from $8.9 million a year ago, and margin improved 143% to $3.5 million from $1.4 million in 2014.
  • Tangible book value per share increased 7.2% to $27.86 at December 31, 2015, compared to $25.99 a year ago.
  • A total of 60,567 shares of common stock were repurchased in the quarter for $1.0 million under the Company's five-year repurchase plan reapproved in April 2015.  In addition, the successful Dutch Auction completed in December 2015 facilitated the repurchase of an additional 643,821 shares for $11.9 million.  For the full year, share repurchases totaled 912,247 shares for $16.5 million.
  • Liquidity available from the revolving credit facility was $151 million, down from $270 million a year ago when liquidity was positively impacted by the upsizing of our revolving credit facility in the second quarter of 2014.
  • Cash provided by operating activities increased during 2015 to $109.1 million or 74.0% from $62.7 million during 2014.

"We have stepped up our trading activity in the last year to capitalize on solid opportunities in the market," said Brian Hole, Chief Investment Officer and incoming President. "We've been managing our own portfolio more effectively, and at the same time seeking opportunities to leverage our creativity and our experience with engines, either for trade, lease or for surplus material, in order to deliver value-added solutions for our customers. Whether this results in us financing, buying or selling aircraft or engines, or simply providing technical and asset management services, we're looking forward to developing even deeper relationships with our many customers around the world."

"After 19 years on our management team, we are bidding farewell to Don Nunemaker who is retiring, and welcoming Brian Hole as our incoming President," said Willis. "In addition, we have initiated a search for a new Chief Financial Officer, following Brad Forsyth's recent resignation for personal reasons. Our business continues to evolve, and we are building our senior management team to be fully prepared for the opportunities and challenges of the future."

Balance Sheet

As of December 31, 2015, Willis Lease had 201 commercial aircraft engines, 10 aircraft and 5 aircraft parts packages and other engine-related equipment in its lease portfolio, with a net book value of $1.123 billion, compared to 207 commercial aircraft engines, 5 aircraft and 5 aircraft parts packages and other engine-related equipment in its lease portfolio, with a net book value of $1.066 billion, a year ago. The Company's funded debt-to-equity ratio was 4.18 to 1 at year end, compared to 3.88 to 1 a year ago.

Willis Lease Finance

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 supported by cutting edge technology, 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/A and other continuing reports filed with the Securities and Exchange Commission.

            
Consolidated Statements of Income (Loss)           
(In thousands, except per share data)Three Months Ended  Years Ended   
 December 31, % December 31, %
  2015   2014  Change  2015   2014  Change
REVENUE           
Lease rent revenue$  28,873  $  24,883   16.0% $  107,866  $  101,748   6.0%
Maintenance reserve revenue   14,320     11,706   22.3%    55,064     53,363   3.2%
Spare parts and equipment sales   10,608     2,227   376.4%    25,608     8,917   187.2%
Gain on sale of leased equipment   654     2,040   (67.9)%    8,354     5,753   45.2%
Other revenue   740     706   4.8%    2,718     4,506   (39.7)%
Total revenue   55,195     41,562   32.8%    199,610     174,287   14.5%
            
EXPENSES           
Depreciation and amortization expense   17,124     17,282   (0.9)%    69,586     65,441   6.3%
Cost of spare parts and equipment sales   7,647     1,301   487.9%    17,866     7,474   139.0%
Write-down of equipment   601     2,674   (77.5)%    9,181     5,602   63.9%
General and administrative   11,918     7,804   52.7%    42,744     35,859   19.2%
Technical expense   1,567     4,593   (65.9)%    9,403     12,336   (23.8)%
Net finance costs           
Interest expense   9,780     9,127   7.2%    39,012     37,062   5.3%
Gain on extinguishment of debt   -      -    0.0%    (1,151)    -    100.0%
Total net finance costs   9,780     9,127   7.2%    37,861     37,062   2.2%
Total expenses   48,637     42,781   13.7%    186,641     163,774   14.0%
            
Earnings (loss) from operations   6,558     (1,219) n/a    12,969     10,513   23.4%
            
Earnings from joint ventures   48     510   (90.6)%    1,175     1,329   (11.6)%
            
Income (loss) before income taxes    6,606     (709) n/a    14,144     11,842   19.4%
Income tax expense (benefit)   3,633     (431) n/a    6,788     4,595   47.7%
Net income (loss)$  2,973  $  (278) n/a $  7,356  $  7,247   1.5%
            
Basic earnings (loss) per common share$  0.38  $  (0.04)   $  0.94  $  0.92   
            
Diluted earnings (loss) per common share$  0.38  $  (0.03)   $  0.92  $  0.89   
            
Average common shares outstanding   7,733     7,839       7,811     7,917   
Diluted average common shares outstanding    7,865     8,037       7,982     8,141   
            


 

        
Consolidated Balance Sheets       
(In thousands, except per share data) December 31,
2015
 September 30,
2015
 December 31,
2014
 
ASSETS       
Cash and cash equivalents $  9,732  $  9,245  $  13,493  
Restricted cash    33,026     26,883     51,258  
Equipment held for operating lease, less accumulated depreciation    1,122,859     1,097,815     1,066,448  
Equipment held for sale    23,454     21,054     18,114  
Spare parts inventory    20,526     22,811     18,593  
Operating lease related receivable, net of allowances     14,072     16,576     8,912  
Investments    41,295     41,740     41,590  
Property, equipment & furnishings, less accumulated depreciation    20,247     20,475     17,955  
Intangible assets, net    932     990     1,164  
Other assets    22,434     27,516     24,099  
Total assets $  1,308,577  $  1,285,105  $  1,261,626  
        
LIABILITIES AND SHAREHOLDERS' EQUITY       
Liabilities:       
Accounts payable and accrued expenses $  21,665  $  18,883  $  21,614  
Deferred income taxes    96,742     93,341     90,510  
Notes payable    878,684     852,156     840,956  
Maintenance reserves    71,054     69,789     66,474  
Security deposits    25,010     25,973     20,869  
Unearned lease revenue    5,090     5,115     4,342  
Total liabilities    1,098,245     1,065,257     1,044,765  
        
Shareholders' equity:       
Common stock ($0.01 par value) $  75  $  83  $  83  
Paid-in capital in excess of par    28,720     40,880     42,076  
Retained earnings    182,058     179,085     174,702  
Accumulated other comprehensive income (loss), net of tax    (521)    (200)    -   
Total shareholders' equity    210,332     219,848     216,861  
        
Total liabilities and shareholders' equity $  1,308,577  $  1,285,105  $  1,261,626  
        
        


             
Consolidated Statements of Income            
(In thousands, except per share data)Years Ended 
 December 31, 
  2015   2014   2013   2012   2011    
REVENUE            
Lease rent revenue$  107,866  $  101,748  $  101,737  $  94,591  $  104,663    
Maintenance reserve revenue   55,064     53,363     46,694     41,387     39,161    
Spare parts and equipment sales   25,608     8,917     -      -      -     
Gain on sale of leased equipment   8,354     5,753     5,675     5,499     11,110    
Other revenue   2,718     4,506     4,306     6,613     1,719    
Total revenue   199,610     174,287     158,412     148,090     156,653    
             
EXPENSES            
Depreciation and amortization expense   69,586     65,441     58,727     52,591     51,250    
Cost of spare parts and equipment sales   17,866     7,474     -      -      -     
Write-down of equipment   9,181     5,602     6,461     5,874     3,341    
General and administrative   42,744     35,859     33,868     34,551     35,701    
Technical expense   9,403     12,336     12,863     7,006     8,394    
Net finance costs            
Interest expense   39,012     37,062     38,719     31,669     35,034    
Loss (Gain) on extinguishment of debt and derivatives termination   (1,151)    -      -      15,462     343    
Total net finance costs   37,861     37,062     38,719     47,131     35,377    
Total expenses   186,641     163,774     150,638     147,153     134,063    
             
Earnings from operations   12,969     10,513     7,774     937     22,590    
             
Earnings from joint ventures   1,175     1,329     3,526     1,759     1,295    
             
Income before income taxes    14,144     11,842     11,300     2,696     23,885    
Income tax expense (benefit)   6,788     4,595     (4,326)    1,161     9,377    
Net income   7,356     7,247     15,626     1,535     14,508    
             
Preferred stock dividends   -      -      -      2,493     3,128    
Preferred stock redemption costs   -      -      -      2,835     -     
Net income (loss) attributable to common shareholders$  7,356  $  7,247  $  15,626  $  (3,793) $  11,380    
             
Basic earnings (loss) per common share$  0.94  $  0.92  $  1.95  $  (0.45) $  1.35    
             
Diluted earnings (loss) per common share$  0.92  $  0.89  $  1.89  $  (0.43) $  1.28    
             
Average common shares outstanding   7,811     7,917     8,029     8,490     8,423    
Diluted average common shares outstanding    7,982     8,141     8,289     8,791     8,876    
             
CONTACT: Charles F. Willis Chairman & CEO (415) 408-4700 The Cereghino Group IR CONTACT: 206-388-5785

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