Market Overview

Willis Lease Finance Reports First Quarter Pretax Profit Grew 79.0% to $6.7 Million


NOVATO, Calif., May 09, 2016 (GLOBE NEWSWIRE) -- Willis Lease Finance Corporation (NASDAQ: WLFC), the premier independent jet engine lessor in the commercial finance sector, today reported that pretax income grew 79.0% to $6.7 million in the first quarter of 2016 compared to $3.7 million in the first quarter of 2015. The Company's first quarter 2016 results include a $2.0 million non-cash write down due to the retirement of one engine for disassembly. Net income for the first quarter increased 64.0% to $3.8 million, or $0.52 per diluted share, from $2.3 million, or $0.29 per diluted share, in the first quarter of 2015 and increased 26.7% from $3.0 million, or $0.37 per diluted share, in the fourth quarter of 2015. 

We are continuing to see the benefit of the changes we have been implementing over the last twelve to eighteen months and strong market conditions," said Charles F. Willis, Chairman and CEO.  "Our total portfolio utilization, which includes our consolidated subsidiary WEST II, remains strong.  We are divesting of underperforming assets and adding to the portfolio for both  increased market demand and quality opportunities."

"In addition, in April, we expanded our revolving credit facility from $700 million to $1.0 billion, including a $110 million accordion feature, so we are prepared to invest in high quality opportunities," Willis continued.  "Our access to the banking and capital markets continues to be one of our core strengths."

"Our leasing business continues to perform with utilization at 89.8% at the end of the first quarter, which is squarely within our target range," said Brian R. Hole, President. "While utilization will remain subject to variability, we are benefitting from our ability to deliver lease engines through customer specific programs, which is a very distinct competitive advantage for our Company. We also continue to actively trade assets, both airframes and engines, and have built a solid team focused on continuing to grow in this sector."  

First Quarter 2016 Highlights (at or for the periods ended March 31, 2016, compared to March 31, 2015, and December 31, 2015):

  • Total revenue grew 18.1% to $50.6 million in the first quarter of 2016 from $42.8 million in the year ago period.   
  • Average utilization in the first quarter of 2016 was 86.7%, lower than the 90.6% achieved in the preceding quarter and a significant improvement from 80.9% reported in the year ago period.
  • First quarter lease rent revenue was $28.1 million, up 12.1% year-over-year and down 2.5% from the prior quarter.
  • Maintenance reserve revenue increased 11.8% to $15.8 million in 1Q16 compared to $14.1 million in 1Q15 and grew 10.5% from $14.3 million in 4Q15. 
  • The Company invested $39.7 million to purchase 5 engines, 4 of which were on lease, and sold $48.5 million of assets in the first quarter of 2016. 
  • The sale of 6 engines, certain parts and one airframe generated $3.0 million of gain on sale. 
  • One engine was retired and is being parted out, resulting in a $2.0 million non-cash write-down.
  • Total engines and aircraft owned and managed have grown to nearly $1.5 billion.  The owned lease portfolio grew 4.8% in the first quarter of 2016 to $1.102 billion compared to 1Q15.
  • Tangible book value per share increased 7.0% to $28.29 at March 31, 2016, compared to $26.43 at the end of the first quarter 2015.
  • A total of 200,000 shares of common stock were repurchased in the quarter under the Company's five-year repurchase plan reapproved in April 2015.
  • Liquidity available from the revolving credit facility was $161 million at March 31, 2016, down from $239 million a year ago.  With the upsizing of the revolving credit facility in April, liquidity at April 30, 2016, was $341 million.

Willis Aero spare parts sales totaled $2.6 million and margin was $0.7 million in the first quarter of 2016.  In the year ago quarter, spare parts sales were $2.2 million and margin was also $0.7 million.  In the fourth quarter of 2015, equipment and parts sales were $10.6 million, with a margin contribution of $3.0 million, with equipment sales delivering a material benefit through the sale of one airframe.

"Willis Aero continues to add value to our overall business," Hole said.  "Not only did Willis Aero deliver $0.7 million in profit for the quarter, but they also sold parts from our stock delivering over $0.23 million in gain on sale. Willis Aero's value to our core business and financial performance is multi-dimensional and we expect them to continue to grow with us."

Balance Sheet

As of March 31, 2016, 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 $1.102 billion, compared to 205 commercial aircraft engines, 5 aircraft parts packages, 5 aircraft and other engine-related equipment in its lease portfolio, with a net book value of $1.051 billion a year ago.  The Company's funded debt-to-equity ratio was 4.05 to 1 at quarter end compared to 4.12 to 1 at December 31, 2015, and 3.77 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         
(In thousands, except per share data, unaudited)Three Months Ended    
 March 31, December 31, March 31, % Change vs % Change vs
  2016   2015   2015  Dec 31, 2015 Mar 31, 2015
Lease rent revenue$28,139  $28,873  $25,097   (2.5)%  12.1%
Maintenance reserve revenue 15,819   14,320   14,148   10.5%  11.8%
Spare parts and equipment sales 2,609   10,608   2,151   (75.4)%  21.3%
Gain on sale of leased equipment 2,989   654   662   357.0%  351.5%
Other revenue 1,000   740   756   35.1%  32.3%
Total revenue 50,556   55,195   42,814   (8.4)%  18.1%
Depreciation and amortization expense 16,644   17,124   17,705   (2.8)%  (6.0)%
Cost of spare parts and equipment sales 1,915   7,647   1,480   (75.0)%  29.4%
Write-down of equipment 2,036   601   24   238.8%  8383.3%
General and administrative 11,752   11,918   9,972   (1.4)%  17.8%
Technical expense 1,696   1,567   1,832   8.2%  (7.4)%
Net finance costs         
Interest expense 10,008   9,780   9,567   2.3%  4.6%
Gain on extinguishment of debt -   -   (1,151)  0.0%  (100.0)%
Total net finance costs 10,008   9,780   8,416   2.3%  18.9%
Total expenses 44,051   48,637   39,429   (9.4)%  11.7%
Earnings from operations 6,505   6,558   3,385   (0.8)%  92.2%
Earnings from joint ventures 187   48   354   289.6%  (47.2)%
Income before income taxes 6,692   6,606   3,739   1.3%  79.0%
Income tax expense 2,924   3,633   1,441   (19.5)%  102.9%
Net income$3,768  $2,973  $2,298   26.7%  64.0%
Basic earnings per common share$0.53  $0.38  $0.29     
Diluted earnings per common share$0.52  $0.37  $0.29     
Average common shares outstanding 7,149   7,739   7,848     
Diluted average common shares outstanding 7,272   7,872   8,044     


Consolidated Balance Sheets     
(In thousands, except share data, unaudited)     
 March 31, 2016 December 31, 2015 March 31, 2015
Cash and cash equivalents$12,743  $9,732  $15,635 
Restricted cash 29,964   33,026   45,616 
Equipment held for operating lease, less accumulated depreciation 1,101,604   1,122,859   1,050,922 
Equipment held for sale 25,971   23,454   17,600 
Operating lease related receivable, net of allowances 15,690   14,072   14,596 
Spare parts inventory 19,293   20,526   18,288 
Investments 43,272   41,295   42,574 
Property, equipment & furnishings, less accumulated depreciation 17,001   20,247   21,311 
Equipment purchase deposits -   -   6,817 
Intangibles assets, net 874   932   1,106 
Other assets 11,048   9,839   10,559 
Total assets$1,277,460  $1,295,982  $1,245,024 
Accounts payable and accrued expenses$23,087  $21,665  $12,636 
Deferred income taxes 99,347   96,742   91,866 
Notes payable 850,031   866,089   827,475 
Maintenance reserves 65,554   71,054   69,672 
Security deposits 25,074   25,010   20,771 
Unearned lease revenue 4,351   5,090   3,381 
Total liabilities 1,067,444   1,085,650   1,025,801 
Shareholders' equity:     
Common stock ($0.01 par value)$74  $75  $83 
Paid-in capital in excess of par 24,925   28,720   42,140 
Retained earnings 185,826   182,058   177,000 
Accumulated other comprehensive loss, net of tax (809)  (521)  - 
Total shareholders' equity 210,016   210,332   219,223 
Total liabilities and shareholders' equity$1,277,460  $1,295,982  $1,245,024 
CONTACT: Brian R. Hole President (415) 408-4700

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