NOVATO, Calif., March 27, 2008 (PRIME NEWSWIRE) -- Willis Lease Finance Corporation (Nasdaq:WLFC), a leading lessor of commercial jet engines, today reported that strong demand for leased engines and high utilization of its growing engine portfolio contributed to 24% lease rent revenue growth and record earnings per share in 2007 on total revenues of $121.9 million, a 15% increase over the prior year. Willis Lease generated net income available to common stockholders of $14.5 million, or $1.66 per diluted share, compared to $14.9 million, or $1.56 per diluted share, in 2006. The strong financial performance was reported despite the inclusion of a non-cash debt extinguishment charge of $2.7 million in the year, which reduced net income by $0.19 per diluted share in 2007.
Fourth quarter 2007 net income totaled $5.1 million and after preferred dividends was $4.3 million, or $0.48 per diluted share. Fourth quarter results are subject to significant variability due to a number of factors including year-end evaluation of assets for impairment, tax rate adjustments and other expense true-up calculations. In the fourth quarter a year ago, the company reported a loss of $1.0 million and a loss applicable to common stockholders of $1.9 million, or $0.19 per share, due to lower reported revenues resulting from the combination of lower maintenance reserve revenues and higher expense levels due to higher asset impairment charges recorded in the period.
2007 Highlights
* The lease portfolio increased 23% to $742 million from a year
ago.
* Average utilization was 93% compared with 90% a year ago.
* At year end, utilization was 91%, down slightly from the
immediate prior quarter of 93%, but up compared to 90% a year
ago.
* Lease rent revenues rose 24% to $86.1 million, contributing
to a 15% increase in total revenue of $121.9 million.
* Maintenance reserve revenues totaled $28.2 million compared
to $32.7 million a year ago.
* Book value per common share was $16.93 at December 31, 2007
versus $16.49 at December 31, 2006.
* Liquidity available from warehouse and revolving credit
facilities increased to $300 million at year end, up from $76
million a year ago.
"Last year was one of the best years ever for Willis Lease Finance. We added nearly $200 million of equipment to our lease portfolio, a new record. We did this while maintaining the highest annual portfolio utilization rate ever of 93%. This exceptional growth and efficient use of our assets helped lead the way to record revenues of $122 million and the highest ever diluted earnings per share of $1.66." said Charles F. Willis, President and CEO. "We also continue to make great strides in expanding our innovative engine pooling programs. We are seeing strong activity within our North American CFM56-7B pool program and are also leading the effort to form a pooling program for the new Boeing 787 aircraft, and early feedback from potential members has been extremely positive."
"We continue to see significant opportunity for further growth as we add more CFM engines that power the popular Boeing and Airbus narrow body fleets to our portfolio," added Lee Beaumont, Willis Lease Chief Operating Officer. "We believe the high cost of fuel combined with carbon emission trading programs being proposed today will pressure airlines and cargo carriers to place a premium value on newer, more efficient engine types. We continue to update our engine portfolio by taking delivery of newer engines and selling older engines from the portfolio, positioning us well to exploit this trend in the market."
Results from Operations
In 2007, lease rent revenues grew 24% to $86.1 million compared to $69.2 million in 2006, in line with the year over year growth in the engine portfolio of 23%. This sharp increase contributed to 15% growth in total revenues, reaching $121.9 million in 2007, up from $106.1 million a year ago. The increase in lease rent revenues was partially offset by a 14% drop in maintenance reserve revenues from $32.7 million in 2006 to $28.2 million in 2007 due to a reduction in the number of long term contracts that matured in the period. In 2006, $14.1 million of maintenance reserve revenues were recognized related to the recovery of nine engines and the termination of the associated long term leases with a customer that filed for bankruptcy. Strong residual values on our engines contributed to increased gains from the sale of leased equipment in 2007. Five engines were sold in 2007 generating a gain of $6.9 million compared to eleven engines sold in 2006 for a net gain of $3.8 million.
Fourth quarter 2007 revenues grew 57% to $34.0 million up from $21.7 million a year ago. Lease rent revenues increased 31% to $23.4 million in the fourth quarter of 2007, up from $17.8 million in the fourth quarter of 2006. Maintenance reserve revenues totaled $4.8 million in the fourth quarter of 2007, up from $2.8 million in the fourth quarter of 2006. Gains from sale of leased equipment contributed $5.6 million to fourth quarter revenues and $0.7 million to revenues in the fourth quarter of 2006.
Total expenses increased 19% in 2007 reflecting growth in net finance costs and higher depreciation expense related to the increased size of the engine portfolio. Total net finance costs increased $8.4 million or 30% to $36.8 million. This increase was driven by a 20% increase in interest expenses due to higher debt levels and average interest rates during the year and included the $2.7 million loss on extinguishment of debt. Depreciation increased 19% in 2007 to $31.1 million from $26.3 million a year ago. Write-down of equipment was $3.8 million in 2007 compared to $3.4 million a year ago.
In the fourth quarter of 2007, total expenses grew 7% to $26.4 million from $24.7 million in the fourth quarter a year ago. Depreciation in the fourth quarter of 2007 grew 34% to $8.5 million from $6.3 million a year ago. The write-down of equipment was $1.7 million in the fourth quarter compared to $3.4 million a year ago. Fourth quarter net finance costs increased 33% to $10.2 million with interest expense up 17%, and was further impacted by the recording of the $1.2 million debt extinguishment charge in the period.
General and administrative expenses were up 7% in 2007 at $23.1 million compared to $21.5 million in 2006 due to an increase in employment related costs. Fourth quarter 2007 general and administrative expense decreased 18% to $6.0 million, down from $7.3 million due to a reduction in bonus related compensation expense.
In 2007, Willis Lease adopted the FASB Staff Position (FSP), Accounting for Planned Major Maintenance Events, which required a change in the presentation of the company's financial statements, and was applied retroactively to financial results for all periods in the prior five years. The accompanying table provides the income statements for the past five years, which have been adjusted to reflect the current accounting method for maintenance reserves. "Because of this change in accounting, our quarterly maintenance reserve revenues are subject to significant variability depending on the number of long term leases that mature in the period, which tends to even out over the course of a full year," said Brad Forsyth, Willis Lease Chief Financial Officer.
In 2007, Willis Lease generated increased income from operations and higher pretax income compared to the year ago period, but reported lower after tax income due to an increase in its effective overall tax rate. Willis Lease generated $27.0 million in income from operations in 2007 compared to $26.5 million in 2006 and produced 2007 pretax income of $27.7 million compared to $27.0 million in 2006. Net income dropped slightly in 2007 to $17.7 million from $17.9 million in 2006. After payment of preferred dividends, net income available to common stockholders was $14.5 million, or $1.66 per diluted share, compared to $14.9 million, or $1.56 per diluted share in 2006.
Balance Sheet
At December 31, 2007 the company had 144 commercial jet engines, 3 aircraft parts packages, and 6 aircraft and other engine-related equipment in its lease portfolio, with a net book value of $742.3 million, compared to 131 commercial jet engines, 3 aircraft parts packages, 4 aircraft and other engine-related equipment in its lease portfolio with a net book value of $602.3 million at December 31, 2006.
Total assets increased 19% to $868.6 million at December 31, 2007, compared to $730.0 million a year ago. Total shareholders' equity was $174.7 million compared to $164.0 million a year ago, reflecting the $11.7 million paid to repurchase 1.3 million shares in December 2006. Book value per common share increased to $16.93 compared to $16.49 at December 31, 2006.
With the establishment of the new WEST $200 million warehouse facility in December 2007, the company had $300 million of availability under its revolving credit and warehouse facilities at December 31, 2007, compared to $76 million a year earlier. The company's funded debt to equity ratio was 3.25 to 1 at December 31, 2007, compared to 2.84 to 1 at December 31, 2006.
About Willis Lease Finance
Willis Lease Finance Corporation leases spare commercial aircraft engines, rotable parts and aircraft to commercial airlines, aircraft engine manufacturers and overhaul/repair facilities worldwide. These leasing activities are integrated with the purchase and resale of used and refurbished commercial aircraft engines.
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 and other continuing reports filed with the Securities and Exchange Commission.
Consolidated Statements of Income
(In thousands, except per share data, audited)
Three Months Ended Twelve Months Ended
December 31, December 31,
As As
Adjusted % Adjusted %
2007 2006 Change 2007 2006 Change
------- -------- ------ ------- -------- ------
REVENUE
Lease rent
revenue $23,404 $17,845 31.2% $86,084 $69,230 24.3%
Maintenance
reserve
revenue 4,793 2,835 69.1% 28,169 32,744 (14.0)%
Gain on
sale of
leased
equipment 5,613 742 656.5% 6,876 3,781 81.9%
Other income 190 252 (24.6)% 768 300 156.0%
------- -------- ------- --------
Total revenue 34,000 21,674 56.9% 121,897 106,055 14.9%
------- -------- ------- --------
EXPENSES
Depreciation
expense 8,480 6,324 34.1% 31,136 26,255 18.6%
Write-down of
equipment 1,680 3,389 (50.4)% 3,822 3,389 12.8%
General and
administra-
tive 6,047 7,349 (17.7)% 23,094 21,539 7.2%
Net finance
costs
Interest
expense 10,012 8,567 16.9% 37,940 31,610 20.0%
Interest
income (999) (886) 12.8% (3,795) (3,082) 23.1%
Realized
and
unrealized
gains on
deriviative
instruments -- -- 0.0% -- (153) (100.0)%
Net Loss on
extinguish-
ment of
debt 1,208 -- 100.0% 2,667 -- 100.0%
------- -------- ------- --------
Total net
finance
costs 10,221 7,681 33.1% 36,812 28,375 29.7%
------- -------- ------- --------
Total
expenses 26,428 24,743 6.8% 94,864 79,558 19.2%
------- -------- ------- --------
Earnings from
operations 7,572 (3,069) (346.7)% 27,033 26,497 2.0%
Earnings from
joint venture 245 118 107.6% 700 466 50.2%
Income before
income taxes 7,817 (2,951) (364.9)% 27,733 26,963 2.9%
Income tax
expense 2,703 (1,933) (239.8)% 10,069 9,077 10.9%
------- -------- ------- --------
Net income $ 5,114 $(1,018) (175.1)% $ 17,664 $ 17,886 (1.2)%
Preferred
stock
dividends
paid and
declared-
Series A 782 913 (14.4)% 3,128 2,945 6.2%
------- -------- ------- --------
Net income
attributable
to common
shareholders $ 4,332 $(1,931) (324.4)% $ 14,536 14,941 (2.7)%
======= ======== ======== =======
Basic earnings
per common
share $ 0.53 $ (0.21) $ 1.79 $ 1.63
======= ======== ======== =======
Diluted
earnings per
common share $ 0.48 $ (0.19) $ 1.66 $ 1.56
======= ======== ======== =======
Average common
shares
outstanding 8,176 9,019 8,115 9,169
Diluted
average
common shares
outstanding 9,007 9,499 8,742 9,606
Consolidated Balance Sheets
(In thousands, except share data, audited)
As
Adjusted
December December
31, 31,
2007 2006
--------- ---------
ASSETS
Cash and cash equivalents $ 7,234 $ 387
Restricted cash 64,960 72,759
Equipment held for operating
lease, less accumulated depreciation 742,296 602,278
Equipment held for sale 7,537 9,802
Operating lease related
receivable, net of allowances 5,550 5,002
Notes receivable -- 12
Investments 10,327 10,602
Assets under derivative instruments 12 1,508
Property, equipment &
furnishings, less accumulated depreciation 6,771 7,272
Other assets 23,903 20,397
--------- ---------
Total assets $ 868,590 $ 730,019
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued
expenses $ 11,825 $ 14,755
Liabilities under derivative instruments 7,709 96
Deferred income taxes 46,632 40,480
Notes payable 567,108 465,249
Maintenance reserves 49,481 36,628
Security deposits 5,890 4,848
Unearned lease revenue 5,293 3,961
--------- ---------
Total liabilities 693,938 566,017
--------- ---------
Shareholders' equity:
Preferred stock $ 31,915 $ 31,915
Common stock ($0.01 par value) 84 80
Paid-in capital in excess of par 55,712 53,820
Accumulated other comprehensive loss,
net of tax (6,749) (967)
Retained earnings 93,690 79,154
--------- ---------
Total shareholders' equity 174,652 164,002
--------- ---------
Total liabilities and shareholders'
equity $ 868,590 $ 730,019
========= =========
Consolidated Statements of Income
(In thousands, except per share data)
Twelve Months Ended
December 31,
As As As As
Adjusted Adjusted Adjusted Adjusted
2007 2006 2005 2004 2003
-------- -------- -------- -------- --------
REVENUE
Lease rent
revenue $ 86,084 $ 69,230 $ 63,119 $ 58,177 $ 56,977
Maintenance
reserve revenue 28,169 32,744 15,983 13,045 8,756
Gain/(Loss) on
sale of leased
equipment 6,876 3,781 (1,844) 360 1,454
Other income 768 300 366 677 520
-------- -------- -------- -------- --------
Total revenue 121,897 106,055 77,624 72,259 67,707
-------- -------- -------- -------- --------
EXPENSES
Depreciation
expense 31,136 26,255 25,786 23,336 21,686
Write-down of
equipment 3,822 3,389 6,781 12,755 4,144
General and
administrative 23,094 21,539 17,604 16,176 15,347
Net finance
costs:
Interest
expense 37,940 31,610 24,514 16,350 14,957
Interest
income (3,795) (3,082) (1,541) (434) (244)
Realized and
unrealized
(gains)/
losses on
derivative
instruments -- (153) (1,589) (465) 1,160
Net Loss on
extinguish-
ment
of debt 2,667 -- 1,375 -- --
-------- -------- -------- -------- --------
Total net
finance costs 36,812 28,375 22,759 15,451 15,873
-------- -------- -------- -------- --------
Total expenses 94,864 79,558 72,930 67,718 57,050
-------- -------- -------- -------- --------
Earnings from
operations 27,033 26,497 4,694 4,541 10,657
Earnings from
joint venture 700 466 -- -- --
Income before
income taxes 27,733 26,963 4,694 4,541 10,657
Income tax
expense 10,069 9,077 1,053 1,213 3,352
-------- -------- -------- -------- --------
Net income $ 17,664 $ 17,886 $ 3,641 $ 3,328 $ 7,305
Preferred stock
dividends paid
and declared-
Series A 3,128 2,945 -- -- --
-------- -------- -------- -------- --------
Net income
attributable
to common
shareholders $ 14,536 $ 14,941 $ 3,641 $ 3,328 $ 7,305
======== ======== ======== ======== ========
Basic earnings
per common
share $ 1.79 $ 1.63 $ 0.40 $ 0.37 $ 0.83
======== ======== ======== ======== ========
Diluted
earnings per
common share $ 1.66 $ 1.56 $ 0.38 $ 0.36 $ 0.82
======== ======== ======== ======== ========
Average common
shares
outstanding 8,115 9,169 9,075 8,925 8,840
Diluted average
common shares
outstanding 8,742 9,606 9,515 9,276 8,888