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Press release content from Globe Newswire. The AP news staff was not involved in its creation.

Willis Lease Finance Corporation Reports Record Quarterly Pre-tax Profit of $31.1 million

November 4, 2019 GMT

COCONUT CREEK, Fla., Nov. 04, 2019 (GLOBE NEWSWIRE) -- Willis Lease Finance Corporation (NASDAQ: WLFC) today reported record quarterly pre-tax profit and total revenues of $31.1 million and $120.4 million, respectively. The Company’s third quarter 2019 pre-tax results were driven by strong leasing revenues as well as gains associated with the active management of its portfolio. Aggregate lease rent and maintenance reserve revenues were $88.3 million for the third quarter of 2019.

“Our business had another strong quarter, driven by an in-demand portfolio of high quality lease assets and the further integration of our asset management and surplus parts businesses,” said Charles F. Willis, Chairman and CEO. “We also benefited significantly from an active trading market and the realization of maintenance revenues from long-term leases that, for the most part, matured as part of engine replacement programs.”

“In addition to strong performance across the Willis Platform™, generally, we are pleased to have closed another ConstantAccess™ program for one of our major European customers,” said Brian R. Hole, President. “We believe this deal is further evidence of the market’s evolution away from one in which airlines over-buy new spare engines toward a more efficient, programmatic market in which airlines own only the engines they need all the time and borrow the rest.”

Third Quarter 2019 Highlights (at or for the periods ended September 30, 2019, as compared to September 30, 2018, and December 31, 2018):

-- Total revenue increased by 48.7% to $120.4 million in the third quarter of 2019 compared to $81.0 million in the same quarter of 2018. -- Lease rent revenue was $49.1 million in the third quarter of 2019; 4.5% growth from $47.0 million in the same quarter of 2018. -- Maintenance reserve revenue was $39.2 million in the third quarter of 2019, an increase of $19.8 million, or 102%, compared to $19.4 million in the same quarter of 2018. Long term maintenance reserve revenue increased to $19.9 million for the third quarter of 2019, compared to $1.4 million in the comparable prior period. -- Spare parts and equipment sales were $24.4 million in the third quarter of 2019, including revenue from the sale of two engines, which is 112% growth from $11.5 million in spare parts and equipment sales during the same quarter of 2018. -- Gain on sale was $4.6 million in the third quarter of 2019, reflecting the sale of four engines, one airframe and one aircraft, compared to $1.1 million in the same quarter of 2018, reflecting the sale of two engines, one airframe and one aircraft. -- Other revenue increased by $1.1 million to $3.1 million in the third quarter of 2019, compared to $2.0 million in the same quarter of 2018, primarily reflecting interest revenue from our Notes receivable. -- Income before income taxes was $31.1 million in the third quarter of 2019, compared to $13.3 million in the same quarter of 2018 and was $80.7 million year to date, compared to $34.5 million in the nine months ended 2018. -- Our equipment lease portfolio was $1.625 billion at September 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 September 30, 2019. As of September 30, 2019, the Company also managed 460 engines, aircraft and related equipment on behalf of third parties. -- The Company maintained $616 million of undrawn revolver capacity at September 30, 2019. -- Diluted weighted average earnings per common share was $3.81 for the third quarter of 2019, compared to $1.47 in the similar period in 2018. -- Book value per diluted weighted average common share outstanding increased to $57.15 at September 30, 2019, compared to $47.43 at December 31, 2018.

Balance Sheet

As of September 30, 2019, the Company had a total lease portfolio consisting of 264 engines, 11 aircraft and 11 other leased assets with a net book value of $1.625 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 assets, 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 Nine Months Ended September 30, September 30, 2019 2018 % Change 2019 2018 % Change --------- --------- -------- ---------- ---------- ---------- REVENUE Lease rent revenue $ 49,090 $ 46,984 4.5 % $ 142,484 $ 129,710 9.8 % Maintenance reserve revenue 39,173 19,370 102.2 % 90,998 56,855 60.1 % Spare parts and equipment sales (1) 24,409 11,529 111.7 % 56,497 36,168 56.2 % Gain on sale of leased equipment (1) 4,589 1,065 330.9 % 19,279 1,662 1,060.0 % Other revenue 3,105 2,010 54.5 % 10,674 5,762 85.2 % -------- --------- Total revenue 120,366 80,958 48.7 % 319,932 230,157 39.0 % -------- -------- --------- --------- EXPENSES Depreciation and amortization expense 22,736 19,861 14.5 % 63,037 55,600 13.4 % Cost of spare parts and equipment sales (1) 20,195 8,832 128.7 % 47,192 30,524 54.6 % Write-down of equipment 6,954 1,215 472.3 % 11,321 4,793 136.2 % General and administrative 23,257 18,124 28.3 % 66,086 50,517 30.8 % Technical expense 1,739 2,290 (24.1 )% 4,934 9,199 (46.4 )% Net finance costs: Interest expense 16,572 17,885 (7.3 )% 51,232 46,617 9.9 % Loss on debt extinguishment — — — % 220 — 100.0 % -------- -------- --------- --------- Total net finance costs 16,572 17,885 (7.3 )% 51,452 46,617 10.4 % -------- --------- Total expenses 91,453 68,207 34.1 % 244,022 197,250 23.7 % -------- -------- --------- --------- Earnings from operations 28,913 12,751 126.8 % 75,910 32,907 130.7 % Earnings from joint ventures 2,165 506 327.9 % 4,787 1,569 205.1 % -------- -------- --------- --------- Income before income taxes 31,078 13,257 134.4 % 80,697 34,476 134.1 % Income tax expense 7,005 3,583 95.5 % 18,771 9,359 100.6 % -------- -------- --------- --------- Net income 24,073 9,674 148.8 % 61,926 25,117 146.6 % Preferred stock dividends 820 819 0.1 % 2,431 2,431 — % Accretion of preferred stock issuance costs 21 21 — % 63 62 1.6 % Net income attributable to common $ 23,232 $ 8,834 163.0 % $ 59,432 $ 22,624 162.7 % shareholders - ------ - ------ - ------- - ------- Basic weighted average earnings per common $ 3.97 $ 1.50 $ 10.19 $ 3.80 share - ------ - ------ - ------- - ------- Diluted weighted average earnings per $ 3.81 $ 1.47 $ 9.83 $ 3.72 common share - ------ - ------ - ------- - ------- Basic weighted average common shares 5,847 5,900 5,831 5,960 outstanding Diluted weighted average common shares 6,094 6,004 6,045 6,083 outstanding -------------------------------------------

(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 nine months ended September 30, 2018 gross revenue and costs of 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 September 30, 2018, the reclassification resulted in an increase in Spare parts and equipment sales of $3.2 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 $3.0 million with no impact to the Company’s net income. For the nine months ended September 30, 2018, the reclassification resulted in an increase in Spare parts and equipment sales of $14.5 million, a decrease in Gain on sale of leased equipment of $0.5 million and an increase in Cost of spare parts and equipment sales of $14.0 million with no impact to the Company’s net income.

Unaudited Consolidated Balance Sheets(In thousands, except per share data)

September 30, December 31, 2018 2019 ------------- ----------------- ASSETS Cash and cash equivalents $ 8,976 $ 11,688 Restricted cash 71,747 70,261 Equipment held for operating lease, less accumulated depreciation 1,624,937 1,673,135 Maintenance rights 3,133 14,763 Equipment held for sale 542 789 Receivables, net of allowances 33,890 23,270 Spare parts inventory 42,314 48,874 Investments 53,952 47,941 Property, equipment & furnishings, less accumulated depreciation 30,840 27,679 Intangible assets, net 1,327 1,379 Notes receivable 41,319 238 Other assets 17,458 14,926 ----------- - ----------- ----- Total assets $ 1,930,435 $ 1,934,943 - --------- - - --------- ----- LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY Liabilities: Accounts payable and accrued expenses $ 40,035 $ 42,939 Deferred income taxes 108,690 90,285 Debt obligations 1,258,984 1,337,349 Maintenance reserves 99,502 94,522 Security deposits 22,165 28,047 Unearned revenue 5,949 5,460 ----------- - ----------- ----- Total liabilities 1,535,325 1,598,602 ----------- - ----------- ----- Redeemable preferred stock ($0.01 par value) 49,617 49,554 Shareholders’ equity: Common stock ($0.01 par value) 64 62 Paid-in capital in excess of par 2,373 — Retained earnings 344,809 286,623 Accumulated other comprehensive (loss) income, net of tax (1,753 ) 102 ----------- - ----------- ----- Total shareholders’ equity 345,493 286,787 ----------- - ----------- ----- Total liabilities, redeemable preferred stock and shareholders’ equity $ 1,930,435 $ 1,934,943 - --------- - - --------- -----

CONTACT: Scott B. Flaherty Chief Financial Officer (561) 349-9989