Willis Lease Finance Reports Net Profit of $7.2 Million, or $0.89 Per Share in 2014

NOVATO, Calif., March 11, 2015 (GLOBE NEWSWIRE) — Willis Lease Finance Corporation (Nasdaq:WLFC), the premier independent jet engine lessor in the commercial finance sector, today reported 2014 net income of $7.2 million, or $0.89 per diluted share, compared to net income of $15.6 million, or $1.89 per diluted share, in 2013. After-tax income for 2013 included a one-time $8.6 million tax benefit. On record annual sales of $174.3 million, pre-tax earnings from operations increased 35.2% to $10.5 million in 2014 from $7.8 million a year ago and income before income taxes increased 4.8% to $11.8 million in 2014 from $11.3 million a year ago.

In the fourth quarter of 2014, Willis Lease reported a net loss of $0.3 million, or $0.03 per diluted share, compared to net income of $6.6 million, or $0.81 per diluted share, in the fourth quarter of 2013. The loss in the current period included $2.7 million of non-cash write-downs and the expensing of $3.5 million related to an engine repair. The foregoing expenses overshadowed an otherwise profitable quarter – excluding these charges, fourth quarter pre-tax income was $5.5 million.

“Our pre-tax income for 2014 was the highest since 2011, but we still have work to do to improve utilization and grow our top line,” said Charles F. Willis, Chairman and CEO. “While overall demand in the engine lease market is good, our portfolio utilization rate has been negatively impacted by an excess supply of certain engine types. This happens from time to time, and we expect to see improvement over the next several quarters.”

“The improving profitability of commercial carriers aided by the rapid drop in fuel prices, together with the abundant availability and low cost of capital, bode well for the growth of engine leasing,” Willis continued. “We expect to capitalize on these factors in 2015 by placing greater emphasis on growing our asset base and expanding our service offerings. We have been preparing for this over the last year by significantly enhancing our senior management team and expanding our sales presence in the field. We should begin to see the benefits of these moves later this year.”

Fourth Quarter and 2014 Highlights (at or for the three-month periods ended December 31, 2014, compared to December 31, 2013, and September 30, 2014):

Tangible book value per share increased 2.7% to $25.99 at year end, compared to $25.31 a year ago.
Repurchased 61,688 shares of common stock in the quarter for $1.3 million, increasing share repurchases for the year to 249,105 shares at an average price per share of $21.49, totaling $5.4 million.
All revenue line items increased over the prior year, contributing to record revenues of $174.3 million, a 10% increase over the prior year.
Lease rent revenues dropped 6.9% in the fourth quarter to $24.9 million, compared to the year ago quarter, primarily due to lower portfolio utilization. Lease rent revenues of $101.7 million were flat compared to the prior year as growth in the size of the lease portfolio offset lower utilization.
Maintenance reserve revenues decreased 30.3% to $11.7 million in the fourth quarter and grew 14.3% to $53.4 million in 2014, compared to the year ago periods.
The continued development of Willis Aero, our spare parts, supply chain and ‘end-of-life’ solutions business launched at the end of 2013, added $6.4 million and $8.9 million to fourth quarter and 2014 full year revenues, respectively. Net margin on part sales contributed $0.9 million to fourth quarter and $1.4 million to 2014 operating profits.
Total revenues decreased 3.0% to $45.8 million in 4Q14 from $47.2 million in 4Q13, reflecting both lower lease rents and maintenance reserve revenues which was partially offset by an increase in spare parts sales.
Average utilization in the current quarter was 82%, even with 3Q14 and down from 86% in 4Q13. In 2014, average utilization was 83% compared to 84% in 2013.
Utilization was 79% at year end, compared to 82% at the end of the third quarter and 86% a year ago. The 79% utilization rate at year end reflected the impact of the purchase of four off-lease engines totaling $26.1 million just prior to year end, as well as the return of three engines with NBV of $19.8 million from long-term leases on December 30, 2014. Excluding these seven engines, utilization would have been 83% at December, 31, 2014.
Liquidity under the revolving credit facility was $270 million at year end, up from $88 million a year ago, reflecting the upsizing of the revolver in the second quarter of 2014.
“Our two engine leasing joint ventures are opening new avenues of business for us, as is our new supply chain and ‘end-of-life’ solutions business,” said Donald A. Nunemaker, President. “Our Dublin-based JV with Mitsui & Co., Ltd. is improving our access to overseas markets and our recent business venture with China Aviation Supplies Import & Export Corporation Limited (”CASC") will accelerate our market penetration in the coming years in the fast growing Chinese market. In addition to providing a better alternative for managing the older engines in our portfolio, Willis Aeronautical Services, Inc. (Willis Aero) will allow us to capitalize on the opportunities in the aircraft leasing business, through the part-out of airframes and harvesting of engines. We believe these collaborative efforts provide operating and financial synergies that are a competitive advantage for us in our markets."

“The fourth quarter loss from operations includes a $2.6 million non-cash write-down recorded on two engines and higher technical expense recorded in the period due to an expensed engine shop visit totaling $3.5 million. In 2014, engine repair expense totaled $8.6 million compared to $8.9 million a year ago,” said Brad Forsyth, Chief Financial Officer. “The expensing of engine refurbishing can vary significantly from quarter to quarter depending on the type of repairs completed and the level of shop visit activity. In those cases where the engine life is extended, the shop visit is capitalized and depreciated.”

Balance Sheet

At December 31, 2014, Willis Lease had 207 commercial aircraft engines, 5 aircraft parts packages and 5 aircraft and other engine-related equipment in its lease portfolio, with a net book value of $1.066 billion, compared to 202 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 $1.033 billion, a year ago. The Company’s funded debt-to-equity is 3.88 to 1 at year end, compared to 3.50 to 1 at September 30, 2014, and 3.70 to 1 a year ago.