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Willis Lease Finance 3Q15 Profits Increase as Utilization Improves to 92%

NOVATO, Calif., Nov. 2, 2015 (GLOBE NEWSWIRE) -- Willis Lease Finance Corporation (NASDAQ:WLFC), the premier independent jet engine lessor in the commercial finance sector, today reported its third quarter 2015 net income increased 163% to $2.6 million, or $0.32 per diluted share, compared to $1.0 million, or $0.12 per diluted share, in the third quarter of 2014. This follows a net loss in the second quarter of 2015 which totaled $0.5 million or $0.06 per share resulting from a $3.1 million non-cash write-down related to the part-out of a wide-body aircraft engine. For the first nine months of 2015, net income was $4.4 million, or $0.55 per diluted share, compared to $7.5 million, or $0.92 per diluted share, for the first nine months of 2014.

"I was very pleased with the results we achieved in the third quarter," said Charles F. Willis, Chairman and CEO. "The improvement we have made in our portfolio utilization over the last nine months has been exceptional, reaching 92% at the end of the quarter--the highest point in the last six years. Due to the improvement in utilization as well as the growth in the portfolio, we achieved the highest level of quarterly lease rent revenue in our history. All of our major revenue categories registered impressive gains compared to the previous quarter as well as the same quarter last year. Besides utilization, we also ramped up our trading activity and parts sales during the third quarter. The opportunities in the market to trade assets are attractive right now and enhance our ability to build our portfolio and acquire inventory for our spare parts subsidiary, Willis Aero."

Third quarter 2015 Highlights (at or for the three-month periods ended September 30, 2015, compared to September 30, 2014, and June 30, 2015):

  • Average utilization in the current quarter was 91%, a significant improvement from 84% reported for 2Q15 and 81% reported for 1Q15 and 82% in the year ago period.
  • Utilization was 92% at quarter-end, compared to 87% at the end of 2Q15 and 82% a year ago.
  • Total revenues increased 32% to $57.8 million in the current quarter from $43.8 million in the preceding quarter, and increased 27% from $45.5 million in the third quarter of 2014, fueled by the growing lease portfolio, higher portfolio utilization and higher gains from the sale of equipment.
  • Lease rent revenue has increased 11.6% year-over-year in 3Q15 due to improving utilization and growth in the lease portfolio. The average size of the lease portfolio for the YTD period increased 5.3% or $53 million from the year ago period.
  • Maintenance reserve revenues increased to $16.1 million in the third quarter, up from $10.5 million in the preceding quarter and $13.1 million in the third quarter a year ago, reflecting higher usage of engines under lease due to improving portfolio utilization.
  • Tangible book value per share increased 0.6% to $26.55 at September 30, 2015, compared to $26.39 a year ago.
  • A total of 99,387 shares of common stock were repurchased in the quarter for $1.6 million under the Company's five-year repurchase plan authorized in October 2012 and reapproved in April 2015.
  • Liquidity available from the revolving credit facility was $183 million, down from $357 million a year ago. The prior year liquidity was positively impacted by the upsizing of the revolver in the second quarter of 2014.

"We have been working hard all year to improve our utilization, and the results are clear and impressive," said Donald A. Nunemaker, President. "Our utilization percentage has increased from 79% at December 31, 2014 to 92% at September 30, 2015. Along the way, we registered 8 out of 9 months of consecutive increases. Besides a lot of hard work and a great team effort, some of the other main reasons for the improvement include placing engines on longer term leases, securing longer term extensions and renewals, using capex to purchase primarily on-lease assets as well as proactive portfolio management, all underpinned by favorable market conditions. Over the years, we have seen our utilization fluctuate and rarely remain constant for an extended period of time. While we expect this to continue, we feel that our efforts to manage utilization will reduce some of the variability going forward."

"In the third quarter, we booked a non-cash write-down on equipment of $5.5 million for two older wide-body engines that will be transferred to Willis Aero for part out, as well as a write-down of parts inventories related to engines we consigned to third parties in the past," said Brad Forsyth, Chief Financial Officer. The non-cash write-down expense was more than offset by profit on selling equipment and spare parts for both the quarter and the year-to-date periods.

Balance Sheet

As of September 30, 2015, Willis Lease had 197 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 $1.098 billion, compared to 196 commercial aircraft engines, 4 aircraft and 5 aircraft parts packages and other engine-related equipment in its lease portfolio, with a net book value of $1.006 billion, a year ago. The Company's funded debt-to-equity ratio was 3.88 to 1 at quarter end, compared to 3.95 to 1 at June 30, 2015, and 3.50 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 Nine Months Ended
Sept 30, June 30, Sept 30, % Change vs % Change vs September 30, %
2015 2015 2014 June 30, 2015 Sept 30, 2014 2015 2014 Change
REVENUE
Lease rent revenue $ 28,083 $ 25,813 $ 25,165 8.8% 11.6% $ 78,993 $ 76,865 2.8%
Maintenance reserve revenue 16,119 10,477 13,066 53.9% 23.4% 40,744 41,657 (2.2)%
Spare parts and equipment sales 9,133 3,716 4,628 145.8% 97.3% 15,000 6,690 124.2%
Gain on sale of leased equipment 3,804 3,234 1,891 17.6% 101.2% 7,700 3,713 107.4%
Other revenue 619 603 769 2.7% (19.5)% 1,978 3,800 (47.9)%
Total revenue 57,758 43,843 45,519 31.7% 26.9% 144,415 132,725 8.8%
EXPENSES
Depreciation and amortization expense 17,089 17,668 16,714 (3.3)% 2.2% 52,462 48,159 8.9%
Cost of spare parts and equipment sales 5,919 2,820 4,218 109.9% 40.3% 10,219 6,173 65.5%
Write-down of equipment 5,498 3,058 450 79.8% 1121.8% 8,580 2,928 193.0%
General and administrative 11,742 9,112 9,107 28.9% 28.9% 30,826 28,055 9.9%
Technical expense 3,570 2,434 3,855 46.7% (7.4)% 7,836 7,743 1.2%
Net finance costs
Interest expense 9,805 9,860 9,181 (0.6)% 6.8% 29,232 27,935 4.6%
Gain on extinguishment of debt -- -- -- 0.0% 0.0% (1,151) -- 100.0%
Total net finance costs 9,805 9,860 9,181 (0.6)% 6.8% 28,081 27,935 0.5%
Total expenses 53,623 44,952 43,525 19.3% 23.2% 138,004 120,993 14.1%
Earnings (loss) from operations 4,135 (1,109) 1,994 n/a 107.4% 6,411 11,732 n/a
Earnings from joint ventures 558 215 269 159.5% 107.4% 1,127 819 37.6%
Income (loss) before income taxes 4,693 (894) 2,263 n/a 107.4% 7,538 12,551 (39.9)%
Income tax expense (benefit) 2,116 (402) 1,284 n/a 64.8% 3,155 5,026 (37.2)%
Net income (loss) attributable to common shareholders $ 2,577 $ (492) $ 979 n/a 163.2% $ 4,383 $ 7,525 (41.8)%
Basic earnings (loss) per common share $ 0.33 $ (0.06) $ 0.12 $ 0.56 $ 0.95
Diluted earnings (loss) per common share $ 0.32 $ (0.06) $ 0.12 $ 0.55 $ 0.92
Average common shares outstanding 7,839 7,841 7,938 7,843 7,943
Diluted average common shares outstanding 7,963 7,991 8,123 8,011 8,163
Consolidated Balance Sheets
(In thousands, except share data, unaudited)
Sept 30,
2014
June 30,
2015
Sept 30,
2014
ASSETS
Cash and cash equivalents $ 9,245 $ 16,172 $ 10,841
Restricted cash 26,883 50,686 47,116
Equipment held for operating lease, less accumulated depreciation 1,097,815 1,063,950 1,006,316
Equipment held for sale 21,054 29,352 20,795
Spare parts inventory 22,811 19,006 12,690
Operating lease related receivable, net of allowances 16,576 13,692 11,532
Investments 41,740 42,789 26,427
Property, equipment & furnishings, less accumulated depreciation 20,475 20,828 18,152
Intangible assets, net 990 1,048 1,222
Other assets 27,516 24,704 31,965
Total assets $ 1,285,105 $ 1,282,227 $ 1,187,056
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 18,883 $ 19,730 $ 20,949
Deferred income taxes 93,341 91,443 91,199
Notes payable 852,156 860,979 761,230
Maintenance reserves 69,789 67,770 73,298
Security deposits 25,973 19,359 19,899
Unearned lease revenue 5,115 5,018 3,046
Total liabilities 1,065,257 1,064,299 969,621
Shareholders' equity:
Common stock ($0.01 par value) $ 83 $ 82 $ 82
Paid-in capital in excess of par 40,880 41,338 42,284
Retained earnings 179,085 176,508 174,980
Accumulated other comprehensive income (loss), net of tax (200) -- 89
Total shareholders' equity 219,848 217,928 217,435
Total liabilities and shareholders' equity $ 1,285,105 $ 1,282,227 $ 1,187,056

CONTACT: Brad Forsyth Chief Financial Officer (415) 408-4700 The Cereghino Group IR CONTACT: 206-388-5785Source:Willis Lease Finance Corp.