Willis Lease Finance Q1 pre-tax income up 79.0%

Dino D'Amore
By Dino D'Amore May 9, 2016 19:58

Willis Lease Finance Q1 pre-tax income up 79.0%

Willis Lease Finance Corporation has reported that pretax income grew 79.0% to $6.7 million in the first quarter of 2016 compared to $3.7 million in the first quarter of 2015. The company’s first quarter 2016 results include a $2.0 million non-cash write down due to the retirement of one engine for disassembly. Net income for the first quarter increased 64.0% to $3.8 million, or $0.52 per diluted share, from $2.3 million, or $0.29 per diluted share, in the first quarter of 2015 and increased 26.7% from $3.0 million, or $0.37 per diluted share, in the fourth quarter of 2015.

“We are continuing to see the benefit of the changes we have been implementing over the last twelve to eighteen months and strong market conditions,” said Charles F. Willis, Chairman and CEO. “Our total portfolio utilization, which includes our consolidated subsidiary WEST II, remains strong. We are divesting of underperforming assets and adding to the portfolio for both increased market demand and quality opportunities.”

Total revenue grew 18.1% to $50.6 million in the first quarter of 2016 from $42.8 million in the year ago period. Willis Lease announced that its average utilization in the first quarter of 2016 was 86.7%, lower than the 90.6% achieved in the preceding quarter and a significant improvement from 80.9% reported in the year ago period.  First quarter lease rent revenue was $28.1 million, up 12.1% year-over-year and down 2.5% from the prior quarter. Maintenance reserve revenue increased 11.8% to $15.8 million in 1Q16 compared to $14.1 million in 1Q15 and grew 10.5% from $14.3 million in 4Q15.

The lessor invested $39.7 million in the first quarter of 2016 to purchase five engines, four of which were on lease, and sold $48.5 million of assets. The sale of six engines, certain parts and one airframe generated $3.0 million of gain on sale. One engine was retired and is being parted out, resulting in a $2.0 million non-cash write-down.

Total engines and aircraft owned and managed have grown to nearly $1.5 billion. The owned lease portfolio grew 4.8% in the first quarter of 2016 to $1.102 billion compared to 1Q15.

Tangible book value per share increased 7.0% to $28.29 at March 31, 2016, compared to $26.43 at the end of the first quarter 2015.

“In April, we expanded our revolving credit facility from $700 million to $1.0 billion, including a $110 million accordion feature, so we are prepared to invest in high quality opportunities,” Willis continued. “Our access to the banking and capital markets continues to be one of our core strengths.”

Liquidity available from the revolving credit facility was $161 million at March 31, 2016, down from $239 million a year ago. With the upsizing of the revolving credit facility in April, liquidity at April 30, 2016, was $341 million.

“Our leasing business continues to perform with utilization at 89.8% at the end of the first quarter, which is squarely within our target range,” said Brian R. Hole, President. “While utilization will remain subject to variability, we are benefitting from our ability to deliver lease engines through customer specific programs, which is a very distinct competitive advantage for our Company. We also continue to actively trade assets, both airframes and engines, and have built a solid team focused on continuing to grow in this sector.”

Willis Aero spare parts sales totalled $2.6 million and margin was $0.7 million in the first quarter of 2016. In the year ago quarter, spare parts sales were $2.2 million and margin was also $0.7 million. In the fourth quarter of 2015, equipment and parts sales were $10.6 million, with a margin contribution of $3.0 million, with equipment sales delivering a material benefit through the sale of one airframe.

“Willis Aero continues to add value to our overall business,” Hole said. “Not only did Willis Aero deliver $0.7 million in profit for the quarter, but they also sold parts from our stock delivering over $0.23 million in gain on sale. Willis Aero’s value to our core business and financial performance is multi-dimensional and we expect them to continue to grow with us.”

As of March 31, 2016, Willis Lease had 201 commercial aircraft engines, 10 aircraft and 5 aircraft parts packages and other engine-related equipment in its lease portfolio, with a net book value of $1.102 billion, compared to 205 commercial aircraft engines, 5 aircraft parts packages, 5 aircraft and other engine-related equipment in its lease portfolio, with a net book value of $1.051 billion a year ago. The Company’s funded debt-to-equity ratio was 4.05 to 1 at quarter end compared to 4.12 to 1 at December 31, 2015, and 3.77 to 1 a year ago.

Dino D'Amore
By Dino D'Amore May 9, 2016 19:58