Willis Lease Finance Corporation Reports Third Quarter Pre-tax Profit of $13.3 Million
05 November 2018 - 12:00PM
Willis Lease Finance Corporation Reports Third Quarter Pre-tax
Profit of $13.3 Million
Willis Lease Finance Corporation (NASDAQ: WLFC) today reported a
pre-tax profit of $13.3 million in the third quarter of 2018,
including record quarterly lease rent revenue of $47.0 million.
Leasing results were driven by continued high utilization and 18.5%
growth of our portfolio to $1.590 billion at quarter-end compared
to $1.343 billion at December 31, 2017. Aggregate lease rent and
maintenance reserve revenues were $66.4 million for the third
quarter 2018, up 23.2% from the comparable period in 2017.
“We continue to deliver positive profits and
cash flow during a significant period of expansion for the
Company,” said Charles F. Willis, Chairman and CEO. “We are
very excited about our growth and capabilities in our asset
management business, which we believe will be what helps us
re-shape the industry and especially the way airlines utilize and
manage engines.”
“Demand for engines, parts and technical
services grew in the third quarter and our financial results
reflect that our Platform is uniquely situated to deliver value for
our customers across the spectrum,” said Brian R. Hole, President.
“While our priority is to deliver for customers today, we are
always looking for ways to grow the Platform with new and
innovative products and programs for tomorrow.”
Third Quarter 2018
Highlights (at or for the periods ended September
30, 2018, as compared to September 30, 2017, and December 31,
2017):
- Total revenue grew by 18.4% to $78.0 million in the third
quarter of 2018, compared to $65.9 million in the comparable prior
year period.
- Lease rent revenue achieved a record quarterly high of $47.0
million in the third quarter of 2018; 40.4% growth from $33.5
million in the comparable quarter of 2017.
- Earnings before tax was $13.3 million in the third quarter of
2018, up 60.7% when compared to the comparable quarter of
2017.
- We closed our $373.4 million WEST IV ABS transaction during the
third quarter of 2018, which helps us lock in attractive long-term
fixed rate debt and de-lever our revolving credit facility.
- General and administrative expenses increased, primarily due to
one-time costs associated with facility relocations and employee
transitions, increased headcount to support our broadening Platform
and increased compensation accruals due to operating
performance.
- Utilization at the end of the third quarter of 2018 was 92%
compared to 89% at 2017 year-end.
- Our equipment lease portfolio grew 18.5% to $1.590 billion,
from $1.343 billion at December 31, 2017, net of asset sales and
depreciation expense. The book value of lease assets we own
directly or through our joint ventures was $1.9 billion at
September 30, 2018. As of September 30, 2018, the Company managed
423 engines, aircraft and related equipment on behalf of third
parties.
- The Company maintained $424 million of undrawn revolver
capacity at September 30, 2018.
- Diluted weighted average earnings per common share grew 84% to
$1.47 per share from the comparable period in 2017.
- Book value per diluted weighted average common share
outstanding increased to $44.50 at September 30, 2018, compared to
$41.63 at December 31, 2017.
Balance
SheetAs of September 30, 2018, the Company had a
total lease portfolio consisting of 250 engines, 14 aircraft and 10
other leased parts and equipment with a net book value of $1.590
billion. As of December 31, 2017, the Company had a total lease
portfolio consisting of 225 engines, 16 aircraft and 7 other leased
parts and equipment, with a net book value of $1.343 billion.
Willis Lease Finance
CorporationWillis 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.
CONTACT: Scott
B. FlahertyChief Financial Officer(415) 408-4700
Unaudited Condensed Consolidated
Statements of Income(In thousands, except per
share data)
|
|
Three Months Ended |
|
|
|
Nine Months Ended |
|
|
|
|
September 30, |
|
% |
|
September 30, |
|
% |
|
|
2018 |
|
2017 |
|
Change |
|
2018 |
|
2017 |
|
Change |
REVENUE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease rent revenue |
|
$ |
46,984 |
|
$ |
33,474 |
|
40.4% |
|
$ |
129,710 |
|
$ |
95,045 |
|
|
36.5% |
|
Maintenance
reserve revenue |
|
|
19,370 |
|
|
20,370 |
|
(4.9)% |
|
|
56,855 |
|
|
64,212 |
|
|
(11.5)% |
|
Spare parts and
equipment sales |
|
|
8,354 |
|
|
9,294 |
|
(10.1)% |
|
|
21,701 |
|
|
41,273 |
|
|
(47.4)% |
|
Gain on sale of
leased equipment |
|
|
1,256 |
|
|
174 |
|
621.8% |
|
|
2,142 |
|
|
4,684 |
|
|
(54.3)% |
|
Other
revenue |
|
|
2,010 |
|
|
2,549 |
|
(21.1)% |
|
|
5,762 |
|
|
6,439 |
|
|
(10.5)% |
|
Total
revenue |
|
|
77,974 |
|
|
65,861 |
|
18.4% |
|
|
216,170 |
|
|
211,653 |
|
|
2.1% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization expense |
|
|
19,861 |
|
|
16,142 |
|
23.0% |
|
|
55,600 |
|
|
48,786 |
|
|
14.0% |
|
Cost of spare
parts and equipment sales (1) |
|
|
5,848 |
|
|
7,148 |
|
(18.2)% |
|
|
16,537 |
|
|
32,121 |
|
|
(48.5)% |
|
Write-down of
equipment (1) |
|
|
1,215 |
|
|
6,226 |
|
(80.5)% |
|
|
4,793 |
|
|
19,668 |
|
|
(75.6)% |
|
General and
administrative |
|
|
18,124 |
|
|
14,308 |
|
26.7% |
|
|
50,517 |
|
|
40,574 |
|
|
24.5% |
|
Technical
expense |
|
|
2,290 |
|
|
2,605 |
|
(12.1)% |
|
|
9,199 |
|
|
7,345 |
|
|
25.2% |
|
Interest
expense |
|
|
17,885 |
|
|
14,220 |
|
25.8% |
|
|
46,617 |
|
|
36,398 |
|
|
28.1% |
|
Total
expenses |
|
|
65,223 |
|
|
60,649 |
|
7.5% |
|
|
183,263 |
|
|
184,892 |
|
|
(0.9)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from
operations |
|
|
12,751 |
|
|
5,212 |
|
144.6% |
|
|
32,907 |
|
|
26,761 |
|
|
23.0% |
|
Earnings from
joint ventures |
|
|
506 |
|
|
3,040 |
|
(83.4)% |
|
|
1,569 |
|
|
6,055 |
|
|
(74.1)% |
|
Income before
income taxes |
|
|
13,257 |
|
|
8,252 |
|
60.7% |
|
|
34,476 |
|
|
32,816 |
|
|
5.1% |
|
Income tax
expense |
|
|
3,583 |
|
|
2,960 |
|
21.0% |
|
|
9,359 |
|
|
13,367 |
|
|
(30.0)% |
|
Net income |
|
|
9,674 |
|
|
5,292 |
|
82.8% |
|
|
25,117 |
|
|
19,449 |
|
|
29.1% |
|
Preferred stock dividends |
|
|
819 |
|
|
344 |
|
138.1% |
|
|
2,431 |
|
|
988 |
|
|
146.1% |
|
Accretion of preferred stock issuance costs |
|
|
21 |
|
|
9 |
|
133.3% |
|
|
62 |
|
|
25 |
|
|
148.0% |
|
Net income
attributable to common shareholders |
|
$ |
8,834 |
|
$ |
4,939 |
|
78.9% |
|
$ |
22,624 |
|
$ |
18,436 |
|
|
22.7% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted
average earnings per common share |
|
$ |
1.50 |
|
$ |
0.82 |
|
|
|
$ |
3.80 |
|
$ |
3.04 |
|
|
|
Diluted weighted
average earnings per common share (2) |
|
$ |
1.47 |
|
$ |
0.80 |
|
|
|
$ |
3.72 |
|
$ |
2.97 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted
average common shares outstanding |
|
|
5,900 |
|
|
6,055 |
|
|
|
|
5,960 |
|
|
6,068 |
|
|
|
Diluted weighted
average common shares outstanding (2) |
|
|
6,004 |
|
|
6,184 |
|
|
|
|
6,083 |
|
|
6,215 |
|
|
|
__________________________________(1) The amounts herein include
reclassifications of scrap inventory write-offs and lower of cost
or market write-downs that were previously presented within
Write-down of equipment to the Costs of spare parts and equipment
sales expense line item. The three and nine months ended September
30, 2017 were impacted by a reclassification of $0.7 million and
$2.6 million, respectively, reflected as an increase to Cost of
spare parts and equipment sales and a decrease to Write-down of
equipment.
(2) Diluted earnings per common share and
diluted weighted average common shares outstanding have been
adjusted to properly exclude the effects of income tax benefits on
unvested restricted stock in accordance with ASU 2016-09. The
adjustment did not impact diluted earnings per common share and
impacted diluted weighted average common shares outstanding by
approximately 11,000 shares for the third quarter of 2017. The
adjustment impacted diluted earnings per common share and diluted
weighted average common shares outstanding for the nine months of
2017 by $0.01 and approximately 17,000 shares, respectively.
Unaudited Condensed Consolidated Balance
Sheets(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
September 30, 2018 |
|
December 31, 2017 |
|
ASSETS |
|
|
|
|
|
|
|
Cash and cash
equivalents |
|
$ |
8,436 |
|
$ |
7,052 |
|
Restricted
cash |
|
|
155,420 |
|
|
40,272 |
|
Equipment held
for operating lease, less accumulated depreciation |
|
|
1,590,482 |
|
|
1,342,571 |
|
Maintenance
rights |
|
|
14,763 |
|
|
14,763 |
|
Equipment held
for sale |
|
|
40,931 |
|
|
34,172 |
|
Operating lease
related receivables, net of allowances |
|
|
24,777 |
|
|
18,848 |
|
Spare parts
inventory |
|
|
24,409 |
|
|
16,379 |
|
Investments |
|
|
44,438 |
|
|
50,641 |
|
Property,
equipment & furnishings, less accumulated depreciation |
|
|
26,245 |
|
|
26,074 |
|
Intangible
assets, net |
|
|
1,430 |
|
|
1,727 |
|
Other assets |
|
|
33,865 |
|
|
50,932 |
|
Total assets |
|
$ |
1,965,196 |
|
$ |
1,603,431 |
|
|
|
|
|
|
|
|
|
LIABILITIES,
REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
Accounts payable
and accrued expenses |
|
$ |
40,879 |
|
$ |
22,072 |
|
Deferred income
taxes |
|
|
87,142 |
|
|
78,280 |
|
Debt
obligations |
|
|
1,392,113 |
|
|
1,085,405 |
|
Maintenance
reserves |
|
|
88,986 |
|
|
75,889 |
|
Security
deposits |
|
|
28,591 |
|
|
25,302 |
|
Unearned
revenue |
|
|
7,264 |
|
|
8,102 |
|
Total
liabilities |
|
|
1,644,975 |
|
|
1,295,050 |
|
|
|
|
|
|
|
|
|
Redeemable
preferred stock ($0.0l par value) |
|
|
49,533 |
|
|
49,471 |
|
|
|
|
|
|
|
|
|
Shareholders'
equity: |
|
|
|
|
|
|
|
Common stock
($0.0l par value) |
|
|
62 |
|
|
64 |
|
Paid-in capital
in excess of par |
|
|
- |
|
|
2,319 |
|
Retained
earnings |
|
|
269,664 |
|
|
256,301 |
|
Accumulated other
comprehensive income, net of tax |
|
|
962 |
|
|
226 |
|
Total
shareholders' equity |
|
|
270,688 |
|
|
258,910 |
|
Total
liabilities, redeemable preferred stock and shareholders'
equity |
|
$ |
1,965,196 |
|
$ |
1,603,431 |
|
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