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

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

Source:Willis Lease Finance Corp.