Willis Lease Finance Corporation Continued Solid Performance Posting a Quarterly Pre-tax Profit of $21.8 Million
August 06 2019 - 7:30AM
Willis Lease Finance Corporation (NASDAQ: WLFC) today reported
pre-tax profit of $21.8 million and total revenues of $95.8 million
in the second quarter of 2019. The Company’s second quarter 2019
pre-tax results were driven by continued revenue growth in its core
leasing business and spare parts sales as well as gains associated
with the active management of its portfolio. Aggregate lease rent
and maintenance reserve revenues were $71.5 million for the second
quarter of 2019.
“Our business continues to deliver in all
verticals, producing strong cash flow and profitability, which we
believe is an indication that the market recognizes the value of
the entire Willis Platform,” said Charles F. Willis, Chairman and
CEO. “We are also very pleased to have solidified a key funding
source with the expansion and extension of our revolving credit
facility to $1 billion with an accordion feature allowing for the
facility to expand to $1.3 billion. As always, we appreciate the
support of our great banking partners.”
“The Company continues to perform well in what
has been a very active market for our products and services,” said
Brian R. Hole, President. “And while traditional demand is strong,
we are also leveraging our Platform and innovative ConstantAccess
and ConstantThrust programs to support our customers’ strong
preference to buy fewer spare engines and borrow engines on a
programmatic basis instead.”
Second Quarter 2019 Highlights
(at or for the periods ended June 30, 2019, as compared to
June 30, 2018, and December 31, 2018):
- Total revenue increased by 21.7% to
$95.8 million in the second quarter of 2019 compared to $78.7
million in the same quarter of 2018.
- Lease rent revenue was $45.0
million in the second quarter of 2019; 4.5% growth from $43.1
million in the same quarter of 2018.
- Quarterly Maintenance reserve
revenue increased by $4.4 million, or 20.1%, to $26.5 million in
the second quarter of 2019, compared to $22.0 million in the same
quarter of 2018.
- Spare parts and equipment sales
increased by 25.2% to $14.6 million in the second quarter of 2019,
compared to $11.7 million in the same quarter of 2018.
- Other revenue increased by $2.7
million to $4.6 million in the second quarter of 2019, compared to
$1.9 million in the same quarter of 2018, primarily reflecting
performance fees earned managing engines on behalf of a third
party.
- Earnings before tax were $21.8
million in the second quarter of 2019, compared to $11.6 million in
the same quarter of 2018 and were $49.6 million year to date,
compared to $21.2 million in the first half of 2018.
- Average utilization for the second
quarter of 2019 increased to 88% from 87% in the comparable prior
year quarter.
- Our equipment lease portfolio was
$1.603 billion at June 30, 2019, compared to $1.673 billion at
December 31, 2018.
- The book value of lease assets we
own directly or through our joint ventures was $2.0 billion at
June 30, 2019. As of June 30, 2019, the Company also
managed 475 engines, aircraft and related equipment on behalf of
third parties.
- The Company entered into a Fourth
Amended and Restated Credit Agreement which increased its revolving
credit facility from $890.0 million to $1.0 billion, incorporated
an accordion feature that can expand the credit facility up to $1.3
billion, extended the maturity of the credit facility to June 2024
and provided for certain other amendments to covenants, interest
rates and commitment fees.
- The Company maintained $603 million
of undrawn revolver capacity at June 30, 2019.
- Under the Company's repurchase
plan, the Company repurchased a total of 64,653 shares of common
stock in the second quarter of 2019 for $3.3 million.
- Diluted weighted average earnings
per common share was $2.66 for the second quarter of 2019, up 111%
when compared to the similar period in 2018.
- Book value per diluted weighted
average common share outstanding increased to $53.22 at
June 30, 2019, compared to $47.43 at December 31,
2018.
Balance Sheet
As of June 30, 2019, the Company had a
total lease portfolio consisting of 241 engines, 12 aircraft, 10
other leased parts and equipment and one marine vessel with a net
book value of $1.603 billion. As of December 31, 2018, the
Company had a total lease portfolio consisting of 244 engines and
related equipment, 17 aircraft and 10 other leased parts and
equipment, with a net book value of $1.673 billion.
Willis Lease Finance
Corporation
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 Limited, as well as various end-of-life solutions for
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 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.
Unaudited Consolidated Statements of
Income(In thousands, except per share data)
|
Three Months Ended June 30, |
|
|
|
Six Months Ended June 30, |
|
|
|
2019 |
|
2018 |
|
% Change |
|
2019 |
|
2018 |
|
% Change |
REVENUE |
|
|
|
|
|
|
|
|
|
|
|
Lease rent revenue |
$ |
45,025 |
|
|
$ |
43,081 |
|
|
4.5 |
% |
|
$ |
93,394 |
|
|
$ |
82,726 |
|
|
12.9 |
% |
Maintenance reserve revenue |
26,475 |
|
|
22,045 |
|
|
20.1 |
% |
|
51,825 |
|
|
37,485 |
|
|
38.3 |
% |
Spare parts and equipment sales
(1) |
14,586 |
|
|
11,653 |
|
|
25.2 |
% |
|
32,088 |
|
|
24,639 |
|
|
30.2 |
% |
Gain on sale of leased equipment
(1) |
5,120 |
|
|
52 |
|
|
9,746.2 |
% |
|
14,690 |
|
|
597 |
|
|
2,360.6 |
% |
Other revenue |
4,591 |
|
|
1,871 |
|
|
145.4 |
% |
|
7,569 |
|
|
3,752 |
|
|
101.7 |
% |
Total revenue |
95,797 |
|
|
78,702 |
|
|
21.7 |
% |
|
199,566 |
|
|
149,199 |
|
|
33.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
expense |
20,043 |
|
|
18,384 |
|
|
9.0 |
% |
|
40,301 |
|
|
35,739 |
|
|
12.8 |
% |
Cost of spare parts and equipment
sales (1) |
12,585 |
|
|
10,305 |
|
|
22.1 |
% |
|
26,997 |
|
|
21,692 |
|
|
24.5 |
% |
Write-down of equipment |
3,262 |
|
|
3,578 |
|
|
(8.8 |
)% |
|
4,367 |
|
|
3,578 |
|
|
22.1 |
% |
General and administrative |
21,389 |
|
|
16,782 |
|
|
27.5 |
% |
|
42,829 |
|
|
32,393 |
|
|
32.2 |
% |
Technical expense |
1,407 |
|
|
3,232 |
|
|
(56.5 |
)% |
|
3,195 |
|
|
6,909 |
|
|
(53.8 |
)% |
Net finance costs: |
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
16,781 |
|
|
15,138 |
|
|
10.9 |
% |
|
34,660 |
|
|
28,732 |
|
|
20.6 |
% |
Loss on debt extinguishment |
220 |
|
|
— |
|
|
100.0 |
% |
|
220 |
|
|
— |
|
|
100.0 |
% |
Total net finance costs |
17,001 |
|
|
15,138 |
|
|
12.3 |
% |
|
34,880 |
|
|
28,732 |
|
|
21.4 |
% |
Total expenses |
75,687 |
|
|
67,419 |
|
|
12.3 |
% |
|
152,569 |
|
|
129,043 |
|
|
18.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from operations |
20,110 |
|
|
11,283 |
|
|
78.2 |
% |
|
46,997 |
|
|
20,156 |
|
|
133.2 |
% |
Earnings from joint ventures |
1,676 |
|
|
316 |
|
|
430.4 |
% |
|
2,622 |
|
|
1,063 |
|
|
146.7 |
% |
Income before income taxes |
21,786 |
|
|
11,599 |
|
|
87.8 |
% |
|
49,619 |
|
|
21,219 |
|
|
133.8 |
% |
Income tax expense |
4,811 |
|
|
3,240 |
|
|
48.5 |
% |
|
11,766 |
|
|
5,776 |
|
|
103.7 |
% |
Net income |
16,975 |
|
|
8,359 |
|
|
103.1 |
% |
|
37,853 |
|
|
15,443 |
|
|
145.1 |
% |
Preferred stock dividends |
810 |
|
|
810 |
|
|
— |
% |
|
1,611 |
|
|
1,612 |
|
|
(0.1 |
)% |
Accretion of preferred stock
issuance costs |
21 |
|
|
21 |
|
|
— |
% |
|
42 |
|
|
42 |
|
|
— |
% |
Net income attributable to common
shareholders |
$ |
16,144 |
|
|
$ |
7,528 |
|
|
114.5 |
% |
|
$ |
36,200 |
|
|
$ |
13,789 |
|
|
162.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average earnings
per common share |
$ |
2.75 |
|
|
$ |
1.28 |
|
|
|
|
$ |
6.22 |
|
|
$ |
2.30 |
|
|
|
Diluted weighted average earnings
per common share |
$ |
2.66 |
|
|
$ |
1.26 |
|
|
|
|
$ |
6.01 |
|
|
$ |
2.25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average common
shares outstanding |
5,866 |
|
|
5,878 |
|
|
|
|
5,823 |
|
|
5,990 |
|
|
|
Diluted weighted average common shares outstanding |
6,061 |
|
|
5,991 |
|
|
|
|
6,020 |
|
|
6,123 |
|
|
|
(1) Effective January 1, 2018, the Company
adopted Accounting Standards Codification (“ASC”) 606 – “Revenue
from Contracts with Customers” and has identified the sale of parts
from engines previously transferred from the lease portfolio to the
Spare Parts segment as sales to customers of the reporting entity.
As such, the Company presents the sale of these assets on a gross
basis and has reclassified the three and six months ended
June 30, 2018 gross revenue and costs on sale to the Spare
parts and equipment sales and Cost of spare parts and equipment
sales line items from the net gain (loss) presentation within the
Gain on sale of leased equipment line item. For the three months
ended June 30, 2018, the reclassification resulted in an
increase in Spare parts and equipment sales of $4.6 million, a
decrease in Gain on sale of leased equipment of $0.2 million and an
increase in Cost of spare parts and equipment sales of $4.4 million
with no impact to the Company's net income. For the six months
ended June 30, 2018, the reclassification resulted in an
increase in Spare parts and equipment sales of $11.3 million, a
decrease in Gain on sale of leased equipment of $0.3 million and an
increase in Cost of spare parts and equipment sales of $11.0
million with no impact to the Company's net income.
Unaudited Consolidated Balance Sheets(In thousands, except per share data)
|
|
June 30, 2019 |
|
December 31, 2018 |
ASSETS |
|
|
|
|
Cash and cash equivalents |
|
$ |
11,604 |
|
|
$ |
11,688 |
|
Restricted cash |
|
76,448 |
|
|
70,261 |
|
Equipment held for operating
lease, less accumulated depreciation |
|
1,603,179 |
|
|
1,673,135 |
|
Maintenance rights |
|
9,944 |
|
|
14,763 |
|
Equipment held for sale |
|
4,079 |
|
|
789 |
|
Receivables, net of
allowances |
|
46,900 |
|
|
23,270 |
|
Spare parts inventory |
|
45,846 |
|
|
48,874 |
|
Investments |
|
52,242 |
|
|
47,941 |
|
Property, equipment &
furnishings, less accumulated depreciation |
|
28,339 |
|
|
27,679 |
|
Intangible assets, net |
|
1,342 |
|
|
1,379 |
|
Notes receivable |
|
30,599 |
|
|
238 |
|
Other assets |
|
20,261 |
|
|
14,926 |
|
Total assets |
|
$ |
1,930,783 |
|
|
$ |
1,934,943 |
|
|
|
|
|
|
LIABILITIES, REDEEMABLE PREFERRED
STOCK AND SHAREHOLDERS’ EQUITY |
|
|
|
|
Liabilities: |
|
|
|
|
Accounts payable and accrued
expenses |
|
$ |
32,964 |
|
|
$ |
42,939 |
|
Deferred income taxes |
|
101,711 |
|
|
90,285 |
|
Debt obligations |
|
1,285,557 |
|
|
1,337,349 |
|
Maintenance reserves |
|
113,409 |
|
|
94,522 |
|
Security deposits |
|
21,994 |
|
|
28,047 |
|
Unearned revenue |
|
5,139 |
|
|
5,460 |
|
Total liabilities |
|
1,560,774 |
|
|
1,598,602 |
|
|
|
|
|
|
Redeemable preferred stock ($0.01
par value) |
|
49,596 |
|
|
49,554 |
|
|
|
|
|
|
Shareholders’ equity: |
|
|
|
|
Common stock ($0.01 par
value) |
|
64 |
|
|
62 |
|
Paid-in capital in excess of
par |
|
— |
|
|
— |
|
Retained earnings |
|
321,577 |
|
|
286,623 |
|
Accumulated other comprehensive
(loss) income, net of tax |
|
(1,228 |
) |
|
102 |
|
Total shareholders’ equity |
|
320,413 |
|
|
286,787 |
|
Total liabilities, redeemable
preferred stock and shareholders’ equity |
|
$ |
1,930,783 |
|
|
$ |
1,934,943 |
|
CONTACT: |
Scott B. Flaherty |
|
Chief Financial Officer |
|
(561) 349-9989 |
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