WLFC - Willis Lease Finance Corporation Reports Third Quarter Pre-tax Profit of $6.0 million
COCONUT CREEK, Fla., Nov. 02, 2020 (GLOBE NEWSWIRE) -- Willis Lease Finance Corporation (NASDAQ: WLFC) today reported third quarter total revenues of $70.6 million and pre-tax profit of $6.0 million. The Company reported lower revenue in the third quarter of 2020 as compared to the prior year period, primarily due to the impact of the COVID-19 pandemic. The slowdown in global travel has led to a reduction in aircraft and engine utilization as well as a reduction in demand for aircraft and engine spare parts which keep airline fleets in operation. For the third quarter of 2020, aggregate lease rent and maintenance reserve revenues were $62.3 million and spare parts sales were $2.9 million.
“We are pleased to have produced $6.0 million of pre-tax profit in the third quarter as we manage through the substantial impact the pandemic continues to have on our industry,” said Charles F. Willis, Chairman and CEO. “We are working closely with our global customers and partners to develop and provide capital solutions in an evolving marketplace. I believe that our liquidity, and ability to provide unique customer solutions in trying times will position the Company well for the eventual recovery and beyond."
“The fear of COVID-19 and related government travel restrictions continue to deprive airlines of a flying public,” said Brian R. Hole, President. “But as our customers begin to settle into the pandemic-affected landscape, we believe our multi-faceted role in providing liquidity options for airlines, helping them reduce costs by avoiding maintenance spend and also assisting their efforts to plan for the future will become even more important.”
Third Quarter 2020 Highlights (at or for the periods ended September 30, 2020, as compared to September 30, 2019, and December 31, 2019):
- Total revenue was $70.6 million in the third quarter of 2020, a 41.3% decrease when compared to $120.4 million in the same quarter of 2019.
- Lease rent revenue was $30.0 million in the third quarter of 2020.
- Maintenance reserve revenue was $32.3 million in the third quarter of 2020, a decrease of $6.9 million, or 17.5%, compared to $39.2 million in the same quarter of 2019. Long term maintenance reserve revenue, which is influenced by end of lease compensation, increased to $30.6 million for the third quarter of 2020, compared to $19.9 million in the comparable prior period. Short term maintenance reserve revenue, which is influenced by our customers' usage of assets we lease to them, was $1.7 million for the third quarter of 2020 compared to $19.2 million in the comparable prior period.
- Spare parts and equipment sales were $2.9 million in the third quarter of 2020, compared to $24.4 million during the same quarter of 2019. The 2019 quarter included equipment sales of $9.4 million, primarily reflecting the sale of two engines.
- Income before income taxes was $6.0 million in the third quarter of 2020, compared to $31.1 million in the same quarter of 2019 and was $24.3 million year-to-date 2020, compared to $80.7 million year-to-date 2019.
- Our aggregate lease assets, inclusive of our equipment held for operating lease and notes receivable, at September 30, 2020 and 2019 was $1.776 billion and $1.666 billion, respectively, which is a 6.6% year-over-year increase and also includes a transition to next generation technology.
- The book value of lease assets we own directly or through our joint ventures, including our notes receivable, was $2.1 billion at September 30, 2020. As of September 30, 2020, the Company also managed 408 engines, aircraft and related equipment on behalf of third parties.
- The Company maintained $482 million of undrawn revolver capacity at September 30, 2020.
- Under the Company's repurchase plan, the Company repurchased a total of 800 shares of common stock in the third quarter of 2020 for $19,500.
- Diluted weighted average earnings per common share was $0.35 for the third quarter of 2020, compared to $3.81 in the similar period in 2019.
- Book value per diluted weighted average common share outstanding increased to $59.74 at September 30, 2020, compared to $57.83 at December 31, 2019.
Balance Sheet
As of September 30, 2020, the Company's $1.617 billion equipment held for operating lease portfolio and $159.6 million notes receivable represented 258 engines, nine aircraft, 10 other leased parts and equipment and one marine vessel. As of December 31, 2019, the Company's $1.651 billion equipment held for operating lease portfolio and $38.1 million notes receivable represented 263 engines, 12 aircraft, 10 other leased parts and equipment and one marine vessel.
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 and the COVID-19 pandemic; 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 September 30, |
| Nine Months Ended September 30, |
| 2020 |
| 2019 |
| % Change |
| 2020 |
| 2019 |
| % Change |
| REVENUE |
| Lease rent revenue |
| $ |
| 30,025 |
| $ |
| 49,090 |
| (38.8 |
| ) |
| % |
| $ |
| 114,874 |
| $ |
| 142,484 |
| (19.4 |
| ) |
| % |
| Maintenance reserve revenue |
| 32,302 |
| 39,173 |
| (17.5 |
| ) |
| % |
| 82,816 |
| 90,998 |
| (9.0 |
| ) |
| % |
| Spare parts and equipment sales |
| 2,888 |
| 24,409 |
| (88.2 |
| ) |
| % |
| 14,848 |
| 56,497 |
| (73.7 |
| ) |
| % |
| Gain on sale of leased equipment |
| — |
| 4,589 |
| (100.0 |
| ) |
| % |
| 1,367 |
| 19,279 |
| (92.9 |
| ) |
| % |
| Other revenue |
| 5,398 |
| 3,105 |
| 73.8 |
| % |
| 13,300 |
| 10,674 |
| 24.6 |
| % |
| Total revenue |
| 70,613 |
| 120,366 |
| (41.3 |
| ) |
| % |
| 227,205 |
| 319,932 |
| (29.0 |
| ) |
| % |
| EXPENSES |
| Depreciation and amortization expense |
| 24,022 |
| 22,736 |
| 5.7 |
| % |
| 71,176 |
| 63,037 |
| 12.9 |
| % |
| Cost of spare parts and equipment sales |
| 4,125 |
| 20,195 |
| (79.6 |
| ) |
| % |
| 13,461 |
| 47,192 |
| (71.5 |
| ) |
| % |
| Write-down of equipment |
| 5,245 |
| 6,954 |
| (24.6 |
| ) |
| % |
| 14,371 |
| 11,321 |
| 26.9 |
| % |
| General and administrative |
| 16,461 |
| 23,257 |
| (29.2 |
| ) |
| % |
| 51,256 |
| 66,086 |
| (22.4 |
| ) |
| % |
| Technical expense |
| 827 |
| 1,739 |
| (52.4 |
| ) |
| % |
| 3,422 |
| 4,934 |
| (30.6 |
| ) |
| % |
| Net finance costs: |
| Interest expense |
| 15,351 |
| 16,572 |
| (7.4 |
| ) |
| % |
| 47,136 |
| 51,232 |
| (8.0 |
| ) |
| % |
| Loss on debt extinguishment |
| — |
| — |
| — |
| % |
| 4,688 |
| 220 |
| 2,030.9 |
| % |
| Total net finance costs |
| 15,351 |
| 16,572 |
| (7.4 |
| ) |
| % |
| 51,824 |
| 51,452 |
| 0.7 |
| % |
| Total expenses |
| 66,031 |
| 91,453 |
| (27.8 |
| ) |
| % |
| 205,510 |
| 244,022 |
| (15.8 |
| ) |
| % |
| Earnings from operations |
| 4,582 |
| 28,913 |
| (84.2 |
| ) |
| % |
| 21,695 |
| 75,910 |
| (71.4 |
| ) |
| % |
| Earnings from joint ventures |
| 1,457 |
| 2,165 |
| (32.7 |
| ) |
| % |
| 2,612 |
| 4,787 |
| (45.4 |
| ) |
| % |
| Income before income taxes |
| 6,039 |
| 31,078 |
| (80.6 |
| ) |
| % |
| 24,307 |
| 80,697 |
| (69.9 |
| ) |
| % |
| Income tax expense |
| 3,055 |
| 7,005 |
| (56.4 |
| ) |
| % |
| 11,665 |
| 18,771 |
| (37.9 |
| ) |
| % |
| Net income |
| 2,984 |
| 24,073 |
| (87.6 |
| ) |
| % |
| 12,642 |
| 61,926 |
| (79.6 |
| ) |
| % |
| Preferred stock dividends |
| 819 |
| 820 |
| (0.1 |
| ) |
| % |
| 2,440 |
| 2,431 |
| 0.4 |
| % |
| Accretion of preferred stock issuance costs |
| 21 |
| 21 |
| — |
| % |
| 63 |
| 63 |
| — |
| % |
| Net income attributable to common shareholders |
| $ |
| 2,144 |
| $ |
| 23,232 |
| (90.8 |
| ) |
| % |
| $ |
| 10,139 |
| $ |
| 59,432 |
| (82.9 |
| ) |
| % |
| Basic weighted average earnings per common share |
| $ |
| 0.36 |
| $ |
| 3.97 |
| $ |
| 1.70 |
| $ |
| 10.19 |
| Diluted weighted average earnings per common share |
| $ |
| 0.35 |
| $ |
| 3.81 |
| $ |
| 1.66 |
| $ |
| 9.83 |
| Basic weighted average common shares outstanding |
| 5,972 |
| 5,847 |
| 5,948 |
| 5,831 |
| Diluted weighted average common shares outstanding |
| 6,071 |
| 6,094 |
| 6,098 |
| 6,045 |
Unaudited Consolidated Balance Sheets
(In thousands, except per share data)
| September 30, 2020 |
| December 31, 2019 |
| ASSETS |
| Cash and cash equivalents |
| $ |
| 91,485 |
| $ |
| 6,720 |
| Restricted cash |
| 66,373 |
| 56,948 |
| Equipment held for operating lease, less accumulated depreciation |
| 1,616,513 |
| 1,650,918 |
| Maintenance rights |
| 767 |
| 3,133 |
| Equipment held for sale |
| 2,843 |
| 120 |
| Receivables, net of allowances |
| 42,244 |
| 24,059 |
| Spare parts inventory |
| 54,986 |
| 41,759 |
| Investments |
| 53,673 |
| 57,936 |
| Property, equipment & furnishings, less accumulated depreciation |
| 32,155 |
| 31,520 |
| Intangible assets, net |
| 1,261 |
| 1,312 |
| Notes receivable |
| 159,627 |
| 38,145 |
| Other assets |
| 27,296 |
| 28,038 |
| Total assets |
| $ |
| 2,149,223 |
| $ |
| 1,940,608 |
| LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY |
| Liabilities: |
| Accounts payable and accrued expenses |
| $ |
| 27,086 |
| $ |
| 45,648 |
| Deferred income taxes |
| 121,053 |
| 110,418 |
| Debt obligations |
| 1,462,730 |
| 1,251,006 |
| Maintenance reserves |
| 96,210 |
| 106,870 |
| Security deposits |
| 21,209 |
| 20,569 |
| Unearned revenue |
| 6,939 |
| 6,121 |
| Total liabilities |
| 1,735,227 |
| 1,540,632 |
| Redeemable preferred stock ($0.01 par value) |
| 49,701 |
| 49,638 |
| Shareholders’ equity: |
| Common stock ($0.01 par value) |
| 66 |
| 64 |
| Paid-in capital in excess of par |
| 10,524 |
| 4,557 |
| Retained earnings |
| 359,104 |
| 348,965 |
| Accumulated other comprehensive loss, net of tax |
| (5,399 |
| ) |
| (3,248 |
| ) |
| Total shareholders’ equity |
| 364,295 |
| 350,338 |
| Total liabilities, redeemable preferred stock and shareholders’ equity |
| $ |
| 2,149,223 |
| $ |
| 1,940,608 |
| CONTACT: |
| Scott B. Flaherty |
| Chief Financial Officer |
| (561) 349-9989 |