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Willis Lease Finance Reports First Quarter Pretax Profit Grew 104% to $14.4 Million

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NOVATO, Calif., May 08, 2017 (GLOBE NEWSWIRE) -- Willis Lease Finance Corporation (NASDAQ:WLFC) today reported that pretax income grew 104% to $14.4 million in the first quarter of 2017 compared to $7.1 million in the first quarter of 2016 on revenues of $77.9 million. The Company's first quarter 2017 results were bolstered by $32.0 million of maintenance reserve revenue, of which $21.5 million was long term maintenance revenue related to assets coming off lease. These revenues were offset by related non-cash write downs totaling $13.0 million. Net income attributable to common shareholders for the first quarter increased 95.4% to $7.8 million, or $1.26 per diluted share, from $4.0 million, or $0.55 per diluted share, in the first quarter of 2016. 

"We continue to produce strong pre-tax financial results in 2017, realizing our most profitable quarter since 2008," said Charles F. Willis, Chairman and CEO.  "Utilization remains strong at 89% at the end of the first quarter, our lease portfolio is growing and Willis Aero is delivering better than expected revenues and margin."

"Our complementary leasing, surplus material and trading businesses performed well, resulting in the Company achieving record quarterly revenues of $78 million," said Brian R. Hole, President. "We do not expect to repeatedly earn such large long-term maintenance reserve revenues but our pre-tax income exceeded expectations even without the net impact of long-term reserve revenue and non-cash writedowns. We continue to actively manage the portfolio in an effort to maximize cash and margin efficiency."

First Quarter 2017 Highlights (at or for the periods ended March 31, 2017, compared to March 31, 2016, and December 31, 2016):

  • Total revenue grew 53.7% to $77.9 million in the first quarter of 2017 from $50.7 million in the year ago period. 
  • Average utilization in the first quarter of 2017 was 89% as compared to 92% in the preceding quarter and 87% in the year ago comparable period.
  • First quarter lease rent revenue was $30.2 million, up 6.9% year-over-year and down 3% from the prior quarter.
  • Maintenance reserve revenue increased 102% to $32 million compared to $15.8 million and $11.5 million in 1Q16 and 4Q16, respectively. 
  • The Company purchased $40.3 million of assets in the first quarter of 2017, and sold $32.7 million of assets.
  • During the quarter the Company recorded a $13 million non-cash writedown associated with the disposition, retirement and part out of certain assets. 
  • The equipment portfolio grew 1.0% in the first quarter of 2017 to $1.095 billion compared to 1Q16.
  • Tangible book value per share increased 1% to $31.49 at March 31, 2017, compared to $30.66 at the end of the first quarter 2016.
  • A total of 40,479 shares of common stock were repurchased in the quarter under the Company's five-year repurchase plan for $0.9 million.
  • Liquidity available from the revolving credit facility was $305 million at March 31, 2017, up from $161 million a year ago.
  • Willis Aero spare parts sales totaled $6.2 million with a margin of $1.5 million in the first quarter of 2017.  In the year ago period, spare parts sales were $2.6 million with a margin of $0.7 million. 
  • Trading equipment sales in the first quarter of 2017 were $6.4 million, with a margin of $1.7 million.

Balance Sheet

As of March 31, 2017, Willis Lease had 209 commercial aircraft engines, 9 aircraft and 5 aircraft parts packages and other engine-related equipment in its lease portfolio, with a net book value of $1.095 billion, compared to 201 commercial aircraft engines, 10 aircraft, 5 aircraft parts packages, and other engine-related equipment in its lease portfolio, with a net book value of $1.084 billion a year ago.  The Company's funded debt-to-equity ratio was 4.24 to 1 at quarter end compared to 4.59 to 1 at December 31, 2016, and 4.06 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 and asset management services supported by cutting edge technology through its subsidiary Willis Asset Management, 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 and other continuing reports filed with the Securities and Exchange Commission.

                     
                     
WILLIS LEASE FINANCE CORPORATION                    
AND SUBSIDIARIES                    
                     
Consolidated Statements of Income (Loss)                    
(In thousands, except per share data, unaudited)            
    Three Months Ended        
    March 31,   December 31,   March 31,   % Change vs   % Change vs
     2017    2016    2016   Dec 31, 2016   Mar 31, 2016
REVENUE                    
Lease rent revenue   $ 30,233   $ 31,168   $ 28,276   (3.0 )%   6.9 %
Maintenance reserve revenue     31,961     11,529     15,819   177.2 %   102.0 %
Spare parts and equipment sales     12,596     7,318     2,632   72.1 %   378.6 %
Gain on sale of leased equipment     983     52     2,992   1790.4 %   (67.1 )%
Other revenue     2,173     5,409     1,000   (59.8 )%   117.3 %
Total revenue     77,946     55,476     50,719   40.5 %   53.7 %
                     
EXPENSES                    
Depreciation and amortization expense     16,628     17,045     16,419   (2.4 )%   1.3 %
Cost of spare parts and equipment sales     9,400     5,508     1,932   70.7 %   386.5 %
Write-down of equipment     13,009     3,590     2,036   262.4 %   538.9 %
General and administrative     13,201     13,086     11,752   0.9 %   12.3 %
Technical expense     2,292     2,080     1,696   10.2 %   35.1 %
Net finance costs     10,865     10,509     10,008   3.4 %   8.6 %
Total expenses     65,395     51,818     43,843   26.2 %   49.2 %
                     
Earnings from operations     12,551     3,658     6,876   243.1 %   82.5 %
                     
Earnings from joint ventures     1,854     939     187   97.4 %   891.4 %
                     
Income before income taxes     14,405     4,597     7,063   213.4 %   104.0 %
Income tax expense     6,238     1,890     3,052   230.1 %   104.4 %
Net income   $ 8,167   $ 2,707   $ 4,011   201.7 %   103.6 %
Preferred stock dividends     321     281     -   14.2 %   100.0 %
Accretion of preferred stock issuance costs     7     8     -   (12.5 )%   100.0 %
Net income attributable to common shareholders   $ 7,839   $ 2,418   $ 4,011   224.2 %   95.4 %
                     
Basic earnings per common share   $ 1.28   $ 0.39   $ 0.56        
                     
Diluted earnings per common share   $ 1.26   $ 0.39   $ 0.55        
                     
Average common shares outstanding     6,114     6,149     7,149        
Diluted average common shares outstanding     6,240     6,275     7,272        
                     


             
WILLIS LEASE FINANCE CORPORATION            
AND SUBSIDIARIES            
             
Consolidated Balance Sheets            
(In thousands, except share data, unaudited)            
    March 31, 2017   December 31, 2016   March 31, 2016
ASSETS            
Cash and cash equivalents   $ 11,890     $ 10,076     $ 12,743  
Restricted cash     29,306       22,298       29,964  
Equipment held for operating lease, less accumulated depreciation     1,094,673       1,136,603       1,083,506  
Maintenance rights     17,160       17,670       16,774  
Equipment held for sale     58,083       30,710       25,971  
Operating lease related receivable, net of allowances     11,771       16,484       15,690  
Spare parts inventory     24,475       25,443       19,293  
Investments     44,540       45,406       43,272  
Property, equipment & furnishings, less accumulated depreciation     16,638       16,802       17,001  
Intangibles assets, net     2,081       2,182       874  
Other assets     12,372       14,213       11,048  
Total assets   $ 1,322,989     $ 1,337,887     $ 1,276,136  
                         
LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY            
Liabilities:            
Accounts payable and accrued expenses   $ 22,239     $ 17,792     $ 23,087  
Deferred income taxes     110,063       104,978       98,889  
Notes payable     872,201       900,255       850,031  
Maintenance reserves     66,751       71,602       65,554  
Security deposits     21,256       21,417       25,074  
Unearned lease revenue     5,243       5,823       4,351  
Total liabilities     1,097,753       1,121,867       1,066,986  
                         
Redeemable preferred stock ($0.01 par value)     19,767       19,760       -  
             
Shareholders' equity:            
Common stock ($0.01 par value)     65       64       74  
Paid-in capital in excess of par     2,324       2,512       24,925  
Retained earnings     203,841       194,729       184,960  
Accumulated other comprehensive loss, net of tax     (761 )     (1,045 )     (809 )
Total shareholders' equity     205,469       196,260       209,150  
                         
Total liabilities, redeemable preferred stock and shareholders' equity   $ 1,322,989     $ 1,337,887     $ 1,276,136  
                         

CONTACT:  

Scott B. Flaherty
Chief Financial Officer
(415) 408-4700

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