8-K
WILLIS LEASE FINANCE CORP (WLFC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________________________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
______________________________________________________________________
Date of Report (Date of earliest event reported): March 9, 2023
Willis Lease Finance Corporation
(Exact Name of Registrant as Specified in Charter)
| Delaware | 001-15369 | 68-0070656 |
|---|---|---|
| (State or Other Jurisdiction<br>of Incorporation) | (Commission File<br>Number) | (I.R.S. Employer<br>Identification Number) |
4700 Lyons Technology Parkway
Coconut Creek, FL 33073
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code: (561) 349-9989
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of exchange on which registered |
|---|---|---|
| Common Stock, $0.01 par value per share | WLFC | Nasdaq Global Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Item 2.02(a) Results of Operations and Financial Condition
Item 7.01 Regulation FD Disclosure
The following information and exhibit are furnished pursuant to Item 2.02(a), “Results of Operations and Financial Condition” and Item 7.01, “Regulation FD Disclosure.” This information shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.
On March 9, 2023, the Company issued a news release setting forth the Company’s results from operations for the three and twelve months ended December 31, 2022 and financial condition as of December 31, 2022. A copy of the news release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
Item 9.01 Financial Statements & Exhibits
The Company hereby furnishes the following exhibit pursuant to Item 2.02(a), “Results of Operations and Financial Condition” and Item 7.01, “Regulation FD Disclosure.”
| Exhibit No. | Description |
|---|---|
| 99.1 | News Release issued by Willis Lease Finance Corporation datedMarch9, 2023. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned duly authorized officer.
Dated: March 9, 2023
| WILLIS LEASE FINANCE CORPORATION | |
|---|---|
| By: | /s/ Scott B. Flaherty |
| Scott B. Flaherty | |
| Senior Vice President and Chief Financial Officer |
3
Document
Exhibit 99.1
| CONTACT: | Scott B. Flaherty | ||
|---|---|---|---|
| NEWS RELEASE | Chief Financial Officer | ||
| (561) 349-9989 |
Willis Lease Finance Corporation Reports
Annual Pre-tax Income of $9.8 million
COCONUT CREEK, FL — March 9, 2023 — Willis Lease Finance Corporation (NASDAQ: WLFC) today reported annual total revenues of $311.9 million and pre-tax income of $9.8 million. For the year ended December 31, 2022, aggregate lease rent and maintenance reserve revenues were $246.0 million and spare parts and equipment sales were $27.0 million. The Company reported increased total revenues in the fourth quarter when compared to the prior year period, primarily due to an increase in the Company's core lease rent and short-term maintenance revenues.
“2022 represents the beginnings of a solid recovery for our business,” said Austin C. Willis, the Company’s Chief Executive Officer. “The recovery in the leasing markets, driving increased demand and rate, positions the Company to combat the inflationary effects of a new, post-COVID environment.”
“Our programs are becoming the bellwether for airlines looking for efficiency and to de-couple from counterparties that are struggling to produce consistently,” said Brian R. Hole, President. “As a result, the fourth quarter likely was the busiest we have been in my time with the Company, and I am incredibly proud of the effort our people put into delivering for our customers.”
Fourth Quarter 2022 Highlights (at or for the quarter and year ended December 31, 2022, as compared to at or for the quarter and year ended December 31, 2021):
•Lease rent revenue increased by $27.7 million, or 20.6%, to $162.6 million in 2022, compared to $134.8 million in 2021, primarily reflecting an increase in the number of engines acquired and placed on lease, including an increase in utilization compared to the prior period.
•Maintenance reserve revenue was $83.4 million in 2022, an increase of 12.8%, compared to $74.0 million in 2021. Short-term maintenance revenue, a proxy for flight activity, was $47.4 million in 2022, compared to $17.7 million in 2021, as a result of the continued recovery in global flight traffic. As of December 31, 2022, there was $6.3 million of collected use fees included in Unearned Revenue, which further reflects increased usage of the lease portfolio.
•Spare parts and equipment sales increased to $27.0 million in 2022, compared to $17.4 million in 2021. The increase in spare parts sales was driven by an industry-wide increase in engine and aircraft utilization, and the demand for parts associated with such increase compared to the prior year period.
•Gain on sale of leased equipment was $3.1 million in 2022, reflecting the sale of 25 engines. Gain on sale of leased equipment was $6.0 million in 2021, reflecting the sale of 12 engines and one airframe.
•Gain on sale of financial assets was $3.1 million in 2022, reflecting the sale of four notes receivable. Gain on sale of financial assets was $10.9 million in 2021, reflecting the sale of two notes receivable.
•The Company generated $9.8 million of pre-tax income in 2022 compared to $9.1 million in the comparable period of 2021.
•The book value of lease assets we own directly or through our joint ventures, inclusive of our notes receivable, maintenance rights, and investment in sales-type leases, was $2,518.6 million at December 31, 2022. As of December 31, 2022, the Company also managed 324 engines, aircraft and related equipment on behalf of other parties.
•The Company maintained $273.0 million of undrawn revolver capacity at December 31, 2022.
•Diluted weighted average income per common share was $0.33 for 2022, compared to $0.00 in 2021.
•Book value per diluted weighted average common share outstanding increased to $64.27 at December 31, 2022, compared to $59.23 at December 31, 2021.
Balance Sheet
As of December 31, 2022, the Company's lease portfolio was $2,217.5 million, consisting of $2,111.9 million of equipment held in our operating lease portfolio, $81.4 million of notes receivable, $17.7 million of maintenance rights, and $6.4 million of investments in sales-type leases, which represented 339 engines, 13 aircraft, one marine vessel and other leased parts and equipment. As of December 31, 2021, the Company's lease portfolio was $2,129.3 million, consisting of $1,991.4 million of equipment held in our operating lease portfolio, $115.5 million of notes receivable, and $22.5 million of maintenance rights, which represented 304 engines, 12 aircraft, one marine vessel and other leased parts and equipment.
Willis Lease Finance Corporation
Willis Lease Finance Corporation (“WLFC”) leases large and regional spare commercial aircraft engines, auxiliary power units and aircraft to airlines, aircraft engine manufacturers and maintenance, repair and overhaul providers worldwide. These leasing activities are integrated with engine and aircraft trading, engine lease pools and asset management services through Willis Asset Management Limited, as well as various end-of-life solutions for engines and aviation materials provided through Willis Aeronautical Services, Inc. Additionally, through Willis Engine Repair Center®, Jet Centre by Willis, and Willis Aviation Services Limited, the Company’s service offerings include Part 145 engine maintenance, aircraft line and base maintenance, aircraft disassembly, parking and storage, airport FBO and ground and cargo handling services.
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 war, terrorist activity and the COVID-19 pandemic; changes in oil prices, rising inflation and other disruptions to 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 December 31, | Years Ended December 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | % Change | 2022 | 2021 | % Change | |||||||
| REVENUE | ||||||||||||
| Lease rent revenue | $ | 48,227 | $ | 37,972 | 27.0 | % | $ | 162,571 | $ | 134,831 | 20.6 | % |
| Maintenance reserve revenue | 23,907 | 13,212 | 80.9 | % | 83,424 | 73,961 | 12.8 | % | ||||
| Spare parts and equipment sales | 6,621 | 4,191 | 58.0 | % | 27,009 | 17,417 | 55.1 | % | ||||
| Interest income | 1,789 | 2,820 | (36.6) | % | 7,579 | 12,938 | (41.4) | % | ||||
| (Loss) Gain on sale of leased equipment | (583) | 3,535 | (116.5) | % | 3,133 | 5,975 | (47.6) | % | ||||
| Gain on sale of financial assets | — | 10,874 | (100.0) | % | 3,116 | 10,874 | (71.3) | % | ||||
| Asset transition fee | — | — | N/A | — | 6,256 | (100.0) | % | |||||
| Other revenue | 8,183 | 3,210 | 154.9 | % | 25,095 | 11,950 | 110.0 | % | ||||
| Total revenue | 88,144 | 75,814 | 16.3 | % | 311,927 | 274,202 | 13.8 | % | ||||
| EXPENSES | ||||||||||||
| Depreciation and amortization expense | 22,780 | 21,749 | 4.7 | % | 88,260 | 90,504 | (2.5) | % | ||||
| Cost of spare parts and equipment sales | 4,753 | 3,919 | 21.3 | % | 20,833 | 14,927 | 39.6 | % | ||||
| Write-down of equipment | — | 3,602 | (100.0) | % | 21,849 | 7,715 | 183.2 | % | ||||
| General and administrative | 25,710 | 21,038 | 22.2 | % | 92,530 | 75,350 | 22.8 | % | ||||
| Technical expense | 3,193 | 3,251 | (1.8) | % | 14,415 | 9,381 | 53.7 | % | ||||
| Net finance costs: | ||||||||||||
| Interest expense | 17,534 | 17,654 | (0.7) | % | 66,743 | 67,985 | (1.8) | % | ||||
| Gain on debt extinguishment | (2,558) | — | N/A | (2,558) | — | N/A | ||||||
| Total net finance costs | 14,976 | 17,654 | (15.2) | % | 64,185 | 67,985 | (5.6) | % | ||||
| Total expenses | 71,412 | 71,213 | 0.3 | % | 302,072 | 265,862 | 13.6 | % | ||||
| Income from operations | 16,732 | 4,601 | 263.7 | % | 9,855 | 8,340 | 18.2 | % | ||||
| Income (Loss) from joint ventures | 1,469 | 1,983 | (25.9) | % | (62) | 800 | (107.8) | % | ||||
| Income before income taxes | 18,201 | 6,584 | 176.4 | % | 9,793 | 9,140 | 7.1 | % | ||||
| Income tax expense | 3,858 | 4,842 | (20.3) | % | 4,354 | 5,788 | (24.8) | % | ||||
| Net income | 14,343 | 1,742 | 723.4 | % | 5,439 | 3,352 | 62.3 | % | ||||
| Preferred stock dividends | 819 | 821 | (0.2) | % | 3,250 | 3,251 | 0.0 | % | ||||
| Accretion of preferred stock issuance costs | 21 | 20 | 5.0 | % | 84 | 83 | 1.2 | % | ||||
| Net income attributable to common shareholders | $ | 13,503 | $ | 901 | 1,398.7 | % | $ | 2,105 | $ | 18 | 11,594.4 | % |
| Basic weighted average income per common share | $ | 2.21 | $ | 0.15 | $ | 0.35 | $ | — | ||||
| Diluted weighted average income per common share | $ | 2.12 | $ | 0.14 | $ | 0.33 | $ | — | ||||
| Basic weighted average common shares outstanding | 6,110 | 6,044 | 6,071 | 6,112 | ||||||||
| Diluted weighted average common shares outstanding | 6,379 | 6,304 | 6,297 | 6,346 |
Unaudited Consolidated Balance Sheets
(In thousands, except per share data)
| December 31, 2022 | December 31, 2021 | |||
|---|---|---|---|---|
| ASSETS | ||||
| Cash and cash equivalents | $ | 12,146 | $ | 14,329 |
| Restricted cash | 76,870 | 81,312 | ||
| Equipment held for operating lease, less accumulated depreciation | 2,111,935 | 1,991,368 | ||
| Maintenance rights | 17,708 | 22,511 | ||
| Equipment held for sale | 3,275 | 6,952 | ||
| Receivables, net of allowances | 46,954 | 39,623 | ||
| Spare parts inventory | 38,577 | 50,959 | ||
| Investments | 56,189 | 55,927 | ||
| Property, equipment & furnishings, less accumulated depreciation | 35,350 | 31,327 | ||
| Intangible assets, net | 1,129 | 1,188 | ||
| Notes receivable | 81,439 | 115,456 | ||
| Investments in sales-type leases | 6,440 | — | ||
| Other assets | 87,205 | 51,975 | ||
| Total assets | $ | 2,575,217 | $ | 2,462,927 |
| LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY | ||||
| Liabilities: | ||||
| Accounts payable and accrued expenses | $ | 43,040 | $ | 26,858 |
| Deferred income taxes | 132,516 | 124,332 | ||
| Debt obligations | 1,847,278 | 1,790,264 | ||
| Maintenance reserves | 59,453 | 65,976 | ||
| Security deposits | 20,490 | 19,349 | ||
| Unearned revenue | 17,863 | 10,458 | ||
| Total liabilities | 2,120,640 | 2,037,237 | ||
| Redeemable preferred stock ($0.01 par value) | 49,889 | 49,805 | ||
| Shareholders’ equity: | ||||
| Common stock ($0.01 par value) | 66 | 65 | ||
| Paid-in capital in excess of par | 20,386 | 15,401 | ||
| Retained earnings | 357,493 | 355,388 | ||
| Accumulated other comprehensive income, net of tax | 26,743 | 5,031 | ||
| Total shareholders’ equity | 404,688 | 375,885 | ||
| Total liabilities, redeemable preferred stock and shareholders’ equity | $ | 2,575,217 | $ | 2,462,927 |