News Column

Willis Lease Finance Earns $2.2 Million in 2Q14

August 6, 2014

NOVATO, Calif., Aug. 6, 2014 (GLOBE NEWSWIRE) -- Willis Lease Finance Corporation (Nasdaq:WLFC), the premier independent jet engine lessor in the commercial finance sector, today reported second quarter 2014 net income was $2.2 million, or $0.27 per diluted share, compared to $9.7 million, or $1.17 per diluted share, in the second quarter of 2013, and $4.3 million, or $0.53 per diluted share, in the first quarter of 2014. Earnings for the second quarter of 2013 were positively impacted by a one-time $8.6 million tax benefit related to a reduction in the company's deferred tax liability and higher than normal earnings from joint ventures due to the recording of $3.4 million of maintenance reserve revenue related to the termination of aircraft leases within the WOLF joint venture.

"Our core earnings have shown considerable improvement this year compared to last year, with pretax income growing 88% in the second quarter and increasing 128% in the first half of the year," said Charles F. Willis, Chairman and CEO. "We continue to build a dynamic business model that has demonstrated long-term vibrancy through multiple market cycles."

"In the second quarter, we completed two major projects that will provide significant opportunities for future growth," Willis continued. "After more than a year of discussions and negotiations, we signed a ground-breaking joint venture agreement with China Aviation Supplies Import & Export Corporation Limited ("CASC"), China's leader in aviation supplies trade, distribution and logistics. This joint venture called CASC Willis Engine Leasing Company, Ltd. will be the primary leasing vehicle we will use to pursue engine leasing and related services in China in the future. We also successfully renewed and extended our revolving credit facility, upsizing the debt facility by $250 million to $700 million in an offering that was substantially oversubscribed. Three new banks joined the facility and all nine banks in the prior revolver either maintained or increased their commitment levels. We are pleased to be partnering with some of the most prestigious companies in the aviation and banking communities to grow our engine fleet and further expand the services that meet the needs of our airline customers and build value for our shareholders."

Second Quarter 2014 Highlights (at or for the three-month periods ended June 30, 2014, compared to June 30, 2013, and March 31, 2014):

• Tangible book value per share increased 8.9% to $26.13 at June 30, 2014, compared to $24.00 a year ago.• Lease rent revenues were flat at $24.8 million in 2Q14 compared to the year ago period and increased 5.0% to $51.7 million in the first half of the year from the year ago period.• Maintenance reserve revenues increased 23.5% to $14.6 million in the second quarter and grew 36.0% to $28.6 million in the first half of the year from the year ago period.• Total revenues increased 11.3% to $42.3 million in 2Q14 from $38.0 million in 2Q13 with increases recorded in all revenue line items.• Average utilization in the current quarter was 81% compared to 83% in the second quarter of 2013.• Utilization was 82% at quarter end, compared to 84% at the end of the first quarter and 83% a year ago.• Liquidity under the revolving credit facility was $357 million at quarter end, up from $111 million a year ago, reflecting the upsizing of the revolver during the quarter.

"While new leasing activity continues to be strong, we had an unusually high number of engines come off lease in the latter part of the first quarter, which continued into the first part of the second quarter," said Donald A. Nunemaker, President. "As a result, utilization was down slightly at the end of the second quarter and lease rent revenues were flat compared to the year ago quarter. Leasing spare engines continues to make economic sense for our customers, and we remain confident that the long-term outlook for our business is strong.  In the short-term, however, headwinds created by supply and demand dynamics are contributing to a challenging environment for us."

Balance Sheet

At June 30, 2014, Willis Lease had 196 commercial aircraft engines, 5 aircraft parts packages and 4 aircraft and other engine-related equipment in its lease portfolio, with a net book value of $1.017 billion, compared to 194 commercial aircraft engines, 3 aircraft parts packages and 7 aircraft and other engine-related equipment in its lease portfolio, with a net book value of $1.015 billion, a year ago.  The Company's funded debt-to-equity is 3.44 to 1 at quarter end, compared to 3.53 to 1 at March 31, 2014, and 3.50 to 1 a year ago.

About Willis Lease Finance

Willis Lease Finance Corporation leases large and regional spare commercial aircraft engines, APU's and aircraft to airlines, aircraft engine manufacturers and maintenance, repair and overhaul providers in 110 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  Six Months Ended  
 June 30,%June 30,%
 20142013Change20142013Change
REVENUE            
Lease rent revenue  $ 24,801  $ 24,750 0.2%  $ 51,701  $ 49,237 5.0%
Maintenance reserve revenue  14,560  11,788 23.5%  28,590  21,017 36.0%
Gain on sale of leased equipment  1,620  848 91.0%  1,929  1,534 25.7%
Other revenue  1,270  567 124.0%  3,031  1,469 106.3%
Total revenue  42,251  37,953 11.3%  85,251  73,257 16.4%
             
EXPENSES            
Depreciation and amortization expense  15,735  14,191 10.9%  31,445  27,801 13.1%
Write-down of equipment  2,183  1,985 10.0%  2,478  1,985 24.8%
General and administrative  9,261  9,204 0.6%  18,947  17,473 8.4%
Technical expense  2,370  4,216 (43.8)%  3,890  5,890 (34.0)%
Net finance costs  9,396  9,852 (4.6)%  18,755  19,079 (1.7)%
Total expenses  38,945  39,448 (1.3)%  75,515  72,228 4.6%
             
Earnings (loss) from operations  3,306  (1,495) n/a  9,736  1,029 846.2%
             
Earnings from joint ventures  245  3,382 (92.8)%  551  3,475 (84.2)%
             
Income before income taxes  3,551  1,887 88.2%  10,287  4,504 128.4%
Income tax expense (benefit)  1,337  (7,805) n/a  3,742  (6,798) n/a
Net income attributable to common shareholders  $ 2,214  $ 9,692 (77.2)%  $ 6,545  $ 11,302 (42.1)%
             
Basic earnings per common share  $ 0.28  $ 1.20    $ 0.82  $ 1.40  
             
Diluted earnings per common share  $ 0.27  $ 1.17    $ 0.80  $ 1.36  
             
Average common shares outstanding  7,976  8,106    7,946  8,073  
Diluted average common shares outstanding  8,179  8,303    8,164  8,307  
       
Consolidated Balance Sheets
(In thousands, except share data, unaudited)
 June 30, 2014Dec 31, 2013June 30, 2013
ASSETS      
Cash and cash equivalents  $ 12,372  $ 12,801  $ 4,340
Restricted cash  44,547  50,794  35,336
Equipment held for operating lease, less accumulated depreciation  1,016,507  1,033,022  1,015,298
Equipment held for sale  27,804  32,491  22,786
Operating lease related receivable, net of allowances   9,837  13,286  8,774
Inventory  13,981  3,280  -- 
Investments  24,036  23,485  31,451
Property, equipment & furnishings, less accumulated depreciation  4,811  4,950  5,316
Intangible assets, net  1,280  1,396  -- 
Equipment purchase deposits  1,869  1,369  1,369
Other assets  22,208  22,355  20,905
Total assets  $ 1,179,252  $ 1,199,229  $ 1,145,575
       
LIABILITIES AND SHAREHOLDERS' EQUITY      
Liabilities:      
Accounts payable and accrued expenses  $ 19,645  $ 16,283  $ 18,334
Liabilities under derivative instruments  --   --   781
Deferred income taxes  89,846  86,685  83,677
Notes payable  753,820  787,614  744,498
Maintenance reserves  75,103  77,335  70,493
Security deposits  18,197  15,158  10,974
Unearned lease revenue  3,824  3,549  4,130
Total liabilities  960,435  986,624  932,887
       
Shareholders' equity:      
Common stock ($0.01 par value)  $ 84  $ 84  $ 89
Paid-in capital in excess of par  44,566  44,741  49,166
Retained earnings  174,000  167,455  164,213
Accumulated other comprehensive income (loss), net of tax  167  325  (780)
Total shareholders' equity  218,817  212,605  212,688
       
Total liabilities and shareholders' equity  $ 1,179,252  $ 1,199,229  $ 1,145,575

CONTACT: Brad Forsyth Chief Financial Officer (415) 408-4700

Source: Willis Lease Finance Corp.


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