Willis Lease Finance Corporation Reports Second Quarter Pre-tax Loss of $1.9 million

Coconut Creek, Florida, UNITED STATES

COCONUT CREEK, Fla., Aug. 03, 2021 (GLOBE NEWSWIRE) -- Willis Lease Finance Corporation (NASDAQ: WLFC) today reported second quarter total revenues of $66.5 million and pre-tax loss of $1.9 million. For the three months ended June 30, 2021, aggregate lease rent and maintenance reserve revenues were $49.7 million and spare parts and equipment sales were $3.6 million. The Company reported lower revenue in the second quarter when compared to the prior year period, primarily due to the pandemic’s impact on global travel and, consequently, worldwide fleet utilization.

“The industry continues to feel the effects of the global pandemic despite significant progress in the development and roll-out of COVID-19 vaccines,” said Charles F. Willis, Chairman and CEO. “While we are disappointed with our current financial results, we continue to position the Company for future performance by partnering with key customers on a variety of opportunities and building the Company’s long term capital base with the successful completion of our WEST VI asset backed securitization.”

“Unlike COVID’s initial impact on the aviation industry, which was severe and immediate, the recovery is happening much more slowly,” said Brian R. Hole, President. “But the recovery is underway and we are focused on what we can control: helping our customers rebuild with long term capital solutions; spare engine programs that allow airlines to defer maintenance spend; a wide variety of asset management services; and technical support for aircraft and engines.”

Second Quarter 2021 Highlights (at or for the periods ended June 30, 2021, as compared to June 30, 2020, and December 31, 2020):

  • The Company successfully completed a $336.7 million WEST VI notes offering secured by, among other things, the interests in 29 aircraft engines and one airframe. This financing was the Company’s seventh financing from its WEST platform, has an expected maturity of 8 years and a blended yield of 3.55%.
  • The Company entered into definitive agreements with Scandinavian Airlines for the purchase and long-term lease back of 20 V2500 aircraft engines, which is expected to fully close by September of 2021.
  • Total revenue was $66.5 million in the second quarter of 2021, an 11.4% decrease when compared to $75.0 million in the same quarter of 2020.
  • Lease rent revenue was $32.4 million in the second quarter of 2021, compared to $38.5 million in the second quarter of 2020.
  • Maintenance reserve revenue was $17.3 million in the second quarter of 2021, a decrease of 42.4% compared to $30.0 million in the same quarter of 2020. The decline in maintenance revenue was primarily influenced by lower long-term maintenance revenue, which is associated with engines returning from long-term lease. Long-term maintenance reserve revenue was $14.8 million in the second quarter of 2021, compared to $27.2 million in the comparable prior period.
  • The Company recognized a $6.3 million asset transition fee in the second quarter of 2021 as a result of the close out of an engine transition program.
  • Other revenue increased to $6.9 million, or 58.1%, in the second quarter of 2021, compared to $4.4 million in the second quarter of 2020, primarily reflecting interest income from our notes receivable and other service related fees.
  • Losses before income taxes were $1.9 million in the second quarter of 2021, compared to income before income taxes of $9.7 million in the second quarter of 2020.
  • Our aggregate lease assets, inclusive of our equipment held for operating lease and notes receivable, at June 30, 2021 and 2020 was $2,085.6 million and $1,824.1 million, respectively, a 14.3% year-over-year increase.
  • Diluted weighted average (loss) earnings per common share were $(0.12) for the second quarter of 2021, compared to $0.74 in the second quarter of 2020.
  • Book value per diluted weighted average common share outstanding increased to $60.37 at June 30, 2021, compared to $59.40 at December 31, 2020.

Balance Sheet

As of June 30, 2021, the Company’s $1.890 billion equipment held for operating lease portfolio and $195.6 million notes receivable represented 300 engines, eight aircraft, one marine vessel and other leased parts and equipment. As of December 31, 2020, the Company’s $1.887 billion equipment held for operating lease portfolio and $158.7 million notes receivable represented 291 engines, eight aircraft, one marine vessel and other leased parts and equipment.

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 June 30,   Six months ended June 30,  
 2021 2020 % Change 2021 2020 % Change
Lease rent revenue$32,431  $38,454  (15.7)% $63,951  $84,849  (24.6)%
Maintenance reserve revenue17,278  29,986  (42.4)% 37,090  50,514  (26.6)%
Spare parts and equipment sales3,569  2,855  25.0 % 8,135  11,960  (32.0)%
(Loss) gain on sale of leased equipment  (700) (100.0)%   1,367  (100.0)%
Asset transition fee6,256    100.0 % 6,256    100.0 %
Other revenue6,938  4,388  58.1 % 12,165  7,902  53.9 %
Total revenue66,472  74,983  (11.4)% 127,597  156,592  (18.5)%
Depreciation and amortization expense23,340  23,764  (1.8)% 47,481  47,154  0.7 %
Cost of spare parts and equipment sales3,278  2,648  23.8 % 7,087  9,336  (24.1)%
Write-down of equipment2,246  6,997  (67.9)% 4,113  9,126  (54.9)%
General and administrative19,499  15,228  28.0 % 35,650  34,795  2.5 %
Technical expense2,296  1,468  56.4 % 3,606  2,595  39.0 %
Net finance costs:           
Interest expense16,987  16,089  5.6 % 32,006  31,785  0.7 %
Loss on debt extinguishment     %   4,688  (100.0)%
Total net finance costs16,987  16,089  5.6 % 32,006  36,473  (12.2)%
Total expenses67,646  66,194  2.2 % 129,943  139,479  (6.8)%
(Loss) earnings from operations(1,174) 8,789  (113.4)% (2,346) 17,113  (113.7)%
(Loss) earnings from joint ventures(685) 948  (172.3)% (1,204) 1,155  (204.2)%
(Loss) income before income taxes(1,859) 9,737  (119.1)% (3,550) 18,268  (119.4)%
Income tax (benefit) expense(1,917) 4,365  (143.9)% (2,276) 8,610  (126.4)%
Net income (loss)58  5,372  (98.9)% (1,274) 9,658  (113.2)%
Preferred stock dividends811  811   % 1,612  1,621  (0.6)%
Accretion of preferred stock issuance costs21  21   % 42  42   %
Net (loss) income attributable to common shareholders$(774) $4,540  (117.0)% $(2,928) $7,995  (136.6)%
Basic weighted average (loss) earnings per common share$(0.12) $0.75    $(0.48) $1.35   
Diluted weighted average (loss) earnings per common share$(0.12) $0.74    $(0.48) $1.31   
Basic weighted average common shares outstanding6,218  6,016    6,107  5,938   
Diluted weighted average common shares outstanding6,218  6,103    6,107  6,113   

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

  June 30, 2021 December 31, 2020
Cash and cash equivalents $16,455  $42,540 
Restricted cash 212,734  36,385 
Equipment held for operating lease, less accumulated depreciation 1,889,908  1,886,613 
Maintenance rights 22,468  20,097 
Equipment held for sale 13,402  2,850 
Receivables, net of allowances 45,112  28,269 
Spare parts inventory 54,777  59,434 
Investments 52,940  53,275 
Property, equipment & furnishings, less accumulated depreciation 31,148  31,753 
Intangible assets, net 1,217  1,246 
Notes receivable 195,645  158,708 
Other assets 49,170  43,778 
Total assets $2,584,976  $2,364,948 
Accounts payable and accrued expenses $34,702  $26,977 
Deferred income taxes 115,657  116,838 
Debt obligations 1,911,159  1,693,753 
Maintenance reserves 73,397  82,484 
Security deposits 20,574  19,522 
Unearned revenue 11,034  11,637 
Total liabilities 2,166,523  1,951,211 
Redeemable preferred stock ($0.01 par value) 49,764  49,722 
Shareholders’ equity:    
Common stock ($0.01 par value) 67  66 
Paid-in capital in excess of par 16,196  13,696 
Retained earnings 352,442  355,370 
Accumulated other comprehensive loss, net of tax (16) (5,117)
Total shareholders’ equity 368,689  364,015 
Total liabilities, redeemable preferred stock and shareholders’ equity $2,584,976  $2,364,948 

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