Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2017 | Aug. 07, 2017 | |
Document and Entity Information | ||
Entity Registrant Name | WILLIS LEASE FINANCE CORP | |
Entity Central Index Key | 1,018,164 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 6,434,074 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q2 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
ASSETS | ||
Cash and cash equivalents | $ 11,256 | $ 10,076 |
Restricted cash | 43,244 | 22,298 |
Equipment held for operating lease, less accumulated depreciation of $351,616 and $351,553 at June 30, 2017 and December 31, 2016, respectively | 1,160,545 | 1,136,603 |
Maintenance rights | 17,159 | 17,670 |
Equipment held for sale | 27,826 | 30,710 |
Operating lease related receivables, net of allowances of $1,058 and $787 at June 30, 2017 and December 31, 2016, respectively | 12,867 | 16,484 |
Spare parts inventory | 22,955 | 25,443 |
Investments | 45,928 | 45,406 |
Property, equipment & furnishings, less accumulated depreciation of $6,586 and $5,858 at June 30, 2017 and December 31, 2016, respectively | 16,400 | 16,802 |
Intangible assets, net | 1,980 | 2,182 |
Other assets | 26,194 | 14,213 |
Total assets | 1,386,354 | 1,337,887 |
Liabilities: | ||
Accounts payable and accrued expenses | 24,452 | 17,792 |
Deferred income taxes | 114,127 | 104,978 |
Notes payable | 921,782 | 900,255 |
Maintenance reserves | 68,512 | 71,602 |
Security deposits | 23,074 | 21,417 |
Unearned revenue | 5,195 | 5,823 |
Total liabilities | 1,157,142 | 1,121,867 |
Redeemable preferred stock ($0.01 par value, 1,000,000 shares authorized; 1,000,000 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively) | 19,777 | 19,760 |
Shareholders' equity: | ||
Common stock ($0.01 par value, 20,000,000 shares authorized; 6,440,049 and 6,401,929 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively) | 64 | 64 |
Paid-in capital in excess of par | 708 | 2,512 |
Retained earnings | 209,497 | 194,729 |
Accumulated other comprehensive loss, net of income tax benefit of $439 and benefit $551 at June 30, 2017 and December 31, 2016, respectively. | (834) | (1,045) |
Total shareholders' equity | 209,435 | 196,260 |
Total liabilities, redeemable preferred stock and shareholders' equity | $ 1,386,354 | $ 1,337,887 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Equipment held for operating lease, accumulated depreciation (in dollars) | $ 351,616 | $ 351,553 |
Operating lease related receivable, allowances (in dollars) | 1,058 | 787 |
Property, equipment & furnishings, accumulated depreciation (in dollars) | $ 6,586 | $ 5,858 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 20,000,000 | 20,000,000 |
Common stock, shares issued | 6,440,049 | 6,401,929 |
Common stock, shares outstanding | 6,440,049 | 6,401,929 |
Accumulated other comprehensive loss, income tax benefit (in dollars) | $ 439 | $ 551 |
Restricted cash | 43,244 | 22,298 |
Other assets | 26,194 | 14,213 |
Notes payable | $ 921,782 | $ 900,255 |
Par value | $ 0.01 | $ 0.01 |
Shares authorized | 1,000,000 | 1,000,000 |
Shares issued | 1,000,000 | 1,000,000 |
Shares outstanding | 1,000,000 | 1,000,000 |
Variable Interest Entity [Member] | ||
Cash | $ 72 | $ 257 |
Restricted cash | 43,244 | 22,298 |
Equipment | 281,472 | 309,815 |
Other assets | 8,026 | 4,139 |
Notes payable | $ 263,884 | $ 273,380 |
Consolidated Statements of Inco
Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
REVENUE | ||||
Lease rent revenue | $ 31,337 | $ 29,181 | $ 61,572 | $ 57,457 |
Maintenance reserve revenue | 11,881 | 15,514 | 43,843 | 31,333 |
Spare parts and equipment sales | 19,383 | 3,673 | 31,979 | 6,305 |
Gain on sale of leased equipment | 3,527 | 258 | 4,509 | 3,250 |
Other revenue | 1,716 | 992 | 3,888 | 1,992 |
Total revenue | 67,844 | 49,618 | 145,791 | 100,337 |
EXPENSES | ||||
Depreciation and amortization expense | 16,015 | 16,188 | 32,644 | 32,607 |
Cost of spare parts and equipment sales | 13,730 | 2,787 | 23,130 | 4,719 |
Write-down of equipment | 2,277 | 1,893 | 15,285 | 3,929 |
General and administrative | 13,065 | 10,685 | 26,265 | 22,437 |
Technical expense | 2,448 | 1,803 | 4,740 | 3,499 |
Net finance costs: | ||||
Interest expense | 11,312 | 10,397 | 22,178 | 20,405 |
Gain on debt extinguishment | (137) | (137) | ||
Total net finance costs | 11,312 | 10,534 | 22,178 | 20,542 |
Total expenses | 58,847 | 43,890 | 124,242 | 87,733 |
Earnings from operations | 8,997 | 5,728 | 21,549 | 12,604 |
Earnings from joint ventures | 1,161 | 56 | 3,015 | 243 |
Income before income taxes | 10,158 | 5,784 | 24,564 | 12,847 |
Income tax expense | 4,168 | 2,418 | 10,406 | 5,470 |
Net income | 5,990 | 3,366 | 14,158 | 7,377 |
Preferred stock dividends | 324 | 646 | ||
Accretion of preferred stock issuance costs | 9 | 17 | ||
Net income attributable to common shareholders | $ 5,657 | $ 3,366 | $ 13,495 | $ 7,377 |
Basic earnings per common share: (in dollars per share) | $ 0.94 | $ 0.50 | $ 2.22 | $ 1.07 |
Diluted earnings per common share: (in dollars per share) | $ 0.92 | $ 0.49 | $ 2.18 | $ 1.05 |
Average common shares outstanding (in shares) | 6,036 | 6,685 | 6,075 | 6,917 |
Diluted average common shares outstanding (in shares) | 6,142 | 6,819 | 6,201 | 7,047 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Consolidated Statements of Comprehensive Income | ||||
Net income | $ 5,990 | $ 3,366 | $ 14,158 | $ 7,377 |
Other comprehensive income (loss): | ||||
Currency translation adjustment | 226 | 967 | 326 | 526 |
Unrealized gain on derivative instruments | (338) | (3) | ||
Net gain (loss) recognized in other comprehensive income | (112) | 967 | 323 | 526 |
Tax benefit (expense) related to items of other comprehensive income | 40 | (334) | (112) | (182) |
Other comprehensive income (loss) | (72) | 633 | 211 | 344 |
Total comprehensive income | $ 5,918 | $ 3,999 | $ 14,369 | $ 7,721 |
Consolidated Statements of Shar
Consolidated Statements of Shareholders' Equity - USD ($) $ in Thousands | Common Stock | Paid-in Capital in Excess of par | Accumulated Other Comprehensive Income | Retained Earnings | Preferred Stock | Total |
Balances at Dec. 31, 2015 | $ 75 | $ 28,720 | $ (521) | $ 180,949 | $ 209,223 | |
Balances (in shares) at Dec. 31, 2015 | 7,548,000 | |||||
Increase (Decrease) in Shareholders' Equity | ||||||
Net income attributable to common shareholders | 7,377 | 7,377 | ||||
Net unrealized loss from currency translation adjustment, net of tax benefit | 345 | 345 | ||||
Shares repurchased | $ (9) | (22,390) | (22,399) | |||
Shares repurchased (in shares) | (942,000) | |||||
Shares issued under stock compensation plans | $ 1 | 81 | 82 | |||
Shares issued under stock compensation plans (in shares) | 112,000 | |||||
Cancellation of restricted stock units in satisfaction of withholding tax | (581) | (581) | ||||
Cancellation of restricted stock units in satisfaction of withholding tax (in shares) | (29,000) | |||||
Stock-based compensation, net of forfeitures | 1,849 | 1,849 | ||||
Tax benefit on disqualified disposition of shares | 254 | 254 | ||||
Balances at Jun. 30, 2016 | $ 67 | 7,933 | (176) | 188,326 | $ 196,150 | |
Balances (in shares) at Jun. 30, 2016 | 6,689,000 | |||||
Increase (Decrease) in Shareholders' Equity | ||||||
Issuance of preferred stock (in shares) | 1,000,000 | |||||
Cumulative-effect adjustment | 1,273 | $ 1,273 | ||||
Balance, adjusted | $ 64 | 2,512 | (1,045) | 196,002 | $ 19,760 | 197,533 |
Balances (Scenario, Previously Reported) at Dec. 31, 2016 | $ 64 | 2,512 | (1,045) | 194,729 | $ 19,760 | 196,260 |
Balances at Dec. 31, 2016 | 196,260 | |||||
Balances (in shares) (Scenario, Previously Reported) at Dec. 31, 2016 | 6,402,000 | 1,000 | ||||
Balances (in shares) at Dec. 31, 2016 | 6,402,000 | 1,000 | ||||
Increase (Decrease) in Shareholders' Equity | ||||||
Net income attributable to common shareholders | 14,158 | 14,158 | ||||
Net unrealized loss from currency translation adjustment, net of tax benefit | 214 | 214 | ||||
Net unrealized gain from derivative instruments, net of tax expense | (3) | (3) | ||||
Shares repurchased | $ (2) | (3,347) | (3,349) | |||
Shares repurchased (in shares) | (155,000) | |||||
Shares issued under stock compensation plans | $ 2 | 91 | 93 | |||
Shares issued under stock compensation plans (in shares) | 211,000 | |||||
Cancellation of restricted stock units in satisfaction of withholding tax | (622) | (622) | ||||
Cancellation of restricted stock units in satisfaction of withholding tax (in shares) | (18,000) | |||||
Stock-based compensation, net of forfeitures | 2,074 | 2,074 | ||||
Accretion of preferred stock issuance costs | (17) | $ 17 | (17) | |||
Preferred stock dividends paid | (646) | (646) | ||||
Balances at Jun. 30, 2017 | $ 64 | $ 708 | $ (834) | $ 209,497 | $ 19,777 | $ 209,435 |
Balances (in shares) at Jun. 30, 2017 | 6,440,000 | 1,000 | ||||
Increase (Decrease) in Shareholders' Equity | ||||||
Issuance of preferred stock (in shares) | 1,000,000 |
Consolidated Statements of Sha7
Consolidated Statements of Shareholders' Equity (Parenthetical) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Consolidated Statements of Shareholders' Equity | ||
Net unrealized loss from currency translation adjustment, tax benefit | $ 112 | $ 182 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | |
Cash flows from operating activities: | |||||
Net income | $ 5,990 | $ 3,366 | $ 14,158 | $ 7,377 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |||||
Depreciation and amortization expense | 16,015 | 16,188 | 32,644 | 32,607 | |
Write-down of equipment | 2,277 | 1,893 | 15,285 | 3,929 | |
Stock-based compensation expenses | 2,074 | 1,849 | |||
Amortization of deferred costs | 2,361 | 2,157 | |||
Allowances and provisions | 272 | (419) | |||
Gain on sale of leased equipment | (3,527) | (258) | (4,509) | (3,250) | |
Gain on debt extinguishment | (137) | (137) | |||
Income from joint ventures | (3,015) | (243) | |||
Excess tax benefit from stock-based compensation | 254 | ||||
Deferred income taxes | 10,406 | 4,990 | |||
Changes in assets and liabilities: | |||||
Receivables | 3,345 | (225) | |||
Spare parts inventory | 645 | 1,799 | |||
Other assets | (3,315) | 297 | |||
Accounts payable and accrued expenses | 8,139 | (2,322) | |||
Maintenance reserves | (342) | (1,782) | |||
Security deposits | 1,757 | (105) | |||
Unearned lease revenue | (628) | (256) | |||
Net cash provided by operating activities | 79,277 | 46,794 | |||
Cash flows from investing activities: | |||||
Proceeds from sale of equipment (net of selling expenses) | 37,754 | 54,204 | |||
Capital contribution to joint ventures | (4,610) | ||||
Distributions received from joint ventures | 1,880 | 1,167 | |||
Purchase of equipment held for operating lease | (112,233) | (61,472) | |||
Purchase of maintenance rights | (4,634) | ||||
Purchase of property, equipment and furnishings | (326) | (183) | |||
Net cash provided by ( used in) investing activities | (72,925) | (15,528) | |||
Cash flows from financing activities: | |||||
Proceeds from issuance of notes payable | 93,000 | 55,000 | |||
Debt issuance cost | (3,755) | ||||
Proceeds from shares issued under stock compensation plans | 93 | 82 | |||
Cancellation of restricted stock units in satisfaction of withholding tax | (622) | (581) | |||
Repurchase of common stock | (3,348) | (22,399) | |||
Preferred stock dividends, net | (596) | ||||
Principal payments on notes payable | (72,752) | (42,501) | |||
Net cash used in financing activities | 15,775 | (14,154) | |||
Increase (decrease) in cash, cash equivalents and restricted cash | 22,127 | 17,112 | |||
Cash, cash equivalents and restricted cash at beginning of period | 32,373 | 42,758 | $ 42,758 | ||
Cash, cash equivalents and restricted cash at end of period | $ 54,500 | $ 59,870 | 54,500 | 59,870 | 32,373 |
Net cash paid for: | |||||
Interest | 19,426 | 18,653 | |||
Income Taxes | 332 | 72 | |||
Supplemental disclosures of non-cash investing activities: | |||||
Purchase of aircraft and engines, liability incurred but not paid | 1,624 | 2,565 | |||
Engines and equipment, transferred from Held for Operating Lease to Held for Sale but not settled | $ 27,408 | $ 18,371 | |||
Transfer from property, equipment and furnishings to assets held for lease | $ 2,925 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2017 | |
Organization and Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 1. Summary of Significant Accounting Policies (a) Basis of Presentation: Our unaudited consolidated financial statements include the accounts of Willis Lease Finance Corporation and its subsidiaries (“we” or the “Company”) and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for reporting on Form 10-Q. Pursuant to such rules and regulations, certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. The accompanying unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly our financial position as of June 30, 2017 and December 31, 2016, and the results of our operations for the three and six months ended June 30, 2017 and 2016, and our cash flows for the six months ended June 30, 2017 and 2016. The results of operations and cash flows for the period ended June 30, 2017 are not necessarily indicative of the results of operations or cash flows which may be reported for the remainder of 2017. (b) Principles of Consolidation: We evaluate all entities in which we have an economic interest firstly to determine whether for accounting purposes the entity is a variable interest entity or voting interest entity. If the entity is a variable interest entity we consolidate the financial statements of that entity if we are the primary beneficiary of the entities’ activities. If the entity is a voting interest entity we consolidate the entity when we have a majority of voting interests. All inter-company balances are eliminated upon consolidation. (c) Fair Value Measurements : Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs, to the extent possible. We use a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, to measure fair value which are the following: Level 1 - Quoted prices in active markets for identical assets or liabilities. Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Assets Measured and Recorded at Fair Value on a Nonrecurring Basis We determine fair value of long-lived assets held and used, such as Equipment held for operating lease and Equipment held for sale, by reference to independent appraisals, quoted market prices (e.g. an offer to purchase) and other factors. An impairment charge is recorded when the carrying value of the asset exceeds its fair value. The following table shows by level, within the fair value hierarchy, the Company’s assets measured at fair value on a nonrecurring basis during the six months ended June 30, 2017 and 2016, and the losses recorded during the six months ended June 30, 2017 and 2016 on those assets: Assets at Fair Value Total Losses June 30, 2017 June 30, 2016 Six Months Ended June 30, Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total 2017 2016 (in thousands) (in thousands) Equipment held for lease $ — $ 11,483 $ — $ 11,483 $ — $ 758 $ — $ 758 $ (9,019) $ (1,893) Equipment held for sale — 27,547 — 27,547 — 1,448 — 1,448 (4,423) (2,036) Spare parts inventory — 21,275 — 21,275 — — — — (1,843) — Total $ — $ 60,305 $ — $ 60,305 $ — $ 2,206 $ — $ 2,206 $ (15,285) $ (3,929) At June 30, 2017, the Company used Level 2 inputs to measure equipment held for sale. Level 2 inputs include quoted prices for similar assets in inactive markets. An impairment charge is recorded when the carrying value of the asset exceeds its fair value. A write-down of $13.4 million was recorded during the six months ended June 30, 2017 for four engines and three aircraft for which their leases ended or were modified in the period. We evaluated the equipment return condition, end of lease compensation, accumulated maintenance reserves and expected future proceeds from part out and sale to record our initial best estimate of impairment. An additional asset write-down of $1.8 million was recorded in the six months ended June 30, 2017 based upon a comparison of the spare parts net book values with the revised net proceeds expected from part sales. A write-down of equipment totaling $3.9 million was recorded in the six months ended June 30, 2016 due to a management decision to consign two engines for part-out and sale, in which the asset’s net book value exceeded the estimated proceeds. (d) Foreign Currency Translation: The Company’s foreign investments have been converted at rates of exchange at June 30, 2017. The changes in exchange rates in our foreign investments reported under the equity method are included in stockholders’ equity as accumulated other comprehensive income. (e) Recent Accounting Pronouncements: Recent Accounting Pronouncements Already Adopted by the Company: In July 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-11 ,Simplifying the Measurement of Inventory, which simplifies the measurement of inventory by requiring certain inventory to be measured at the lower of cost or net realizable value. The amendments in this ASU are effective for fiscal years beginning after December 15, 2017 and for interim periods therein. The Company adopted ASU 2015-11 during the quarter ended March 31, 2017 and it did not have a material impact on our consolidated financial statements. In November 2016, the FASB issued ASU 2016-18, Restricted Cash, which requires amounts generally described as restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the total beginning and ending amounts for the periods shown on the statement of cash flows. ASU 2016-08 is effective for fiscal years beginning after December 15, 2018 (including interim periods within those periods) using a retrospective transition method to each period presented. The Company adopted this standard as of March 31, 2017 and included $43.2 million and $22.3 million of restricted cash in the total of cash, cash equivalents and restricted cash in its statements of consolidated cash flows for the six months ended June 30, 2017 and 2016, respectively. The adoption of this standard also resulted in an increase (decrease) in cash flows from operating, investing and financing activities of ($5.8 million), $1.3 million and ($1.3 million), respectively, for the six months ended June 30, 2016. In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The standard is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. The new guidance became effective for the Company in the first quarter of fiscal 2017. The Company adopted ASU 2016-09 on January 1, 2017 on a modified retrospective method through a cumulative adjustment to retained earnings of $1.3 million. As of the six months ended June 30, 2017, excess tax benefit from stock-based compensation of $54,000 were reflected in the Consolidated Statements of Income as income tax expense, whereas they previously were recognized in equity. Additionally, our Consolidated Statements of Cash Flows now present excess tax benefits as an operating activity, with the prior periods adjusted accordingly. We have elected to account for forfeitures as they occur, rather than estimate expected forfeitures. As a result of the adoption of ASU 2016-09, the Consolidated Statement of Cash Flows for the six months ended June 30, 2016 was adjusted as follows: a $0.2 million increase to net cash provided by operating activities and a $0.2 million decrease to net cash used in financing activities. Recent Accounting Pronouncements To Be Adopted by the Company: In 2014, the Financial Accounting Standards Board (“FASB”) issued new guidance applicable to revenue recognition that will be effective January 1, 2018. Early adoption was permitted for the year-ending December 31, 2017. The new guidance applies a more principles based approach to recognizing revenue. Under the new guidance, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration that an entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new guidance must be adopted using either a modified retrospective approach or a full retrospective approach for all periods presented. Under the modified retrospective method, the cumulative effect of applying the standard would be recognized at the date of initial application within retained earnings. Under the full retrospective approach, the standard would be applied to each prior reporting period presented. The Company continued its evaluation of the new guidance and the effect of adoption on the consolidated financial statements and believes the new standard has no impact on lease revenue and initial evaluation concluding no material impact to other revenue streams. In January 2017, the FASB issued ASU 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” that eliminates “Step 2” from the goodwill impairment test. The new standard is effective for us in the first quarter of fiscal 2020, and early adoption is permitted. The new guidance must be applied on a prospective basis. We do not anticipate that the adoption of this standard will have a significant impact on our consolidated financial statements or the related disclosures. In May 2017, the FASB issued ASU 2017-09, “Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting,” that provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The new guidance became effective for the Company in the first quarter of fiscal 2018. The new guidance must be applied on a prospective basis. We do not anticipate that the adoption of this standard will have a significant impact on our consolidated financial statements or the related disclosures. |
Management Estimates
Management Estimates | 6 Months Ended |
Jun. 30, 2017 | |
Management Estimates | |
Management Estimates | 2. Management Estimates These financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States. The preparation of consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to residual values, estimated asset lives, impairments and bad debts. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Management believes that the accounting policies on revenue recognition, maintenance reserves and expenditures, useful life of equipment, asset residual values, asset impairment and allowance for doubtful accounts are critical to the results of operations. If the useful lives or residual values are lower than those estimated by us, upon sale of the asset a loss may be realized. Significant management judgment is required in the forecasting of future operating results, which are used in the preparation of projected undiscounted cash-flows and should different conditions prevail, material impairment write-downs may occur. |
Investments
Investments | 6 Months Ended |
Jun. 30, 2017 | |
Investments | |
Investments | 3. Investments On May 25, 2011, we entered into an agreement with Mitsui & Co., Ltd. to participate in a joint venture formed as a Dublin-based Irish limited company — Willis Mitsui & Company Engine Support Limited (“WMES”) for the purpose of acquiring and leasing jet engines. Each partner holds a fifty percent interest in the joint venture and the Company uses the equity method in recording investment activity. The investment has increased to $32.6 million as of June 30, 2017 as a net result of the Company receiving $1.9 million in distributions, recording $0.4 million as deferred gain as a result of the Company selling an engine to WMES and the Company’s share of WMES reported income of $2.4 million during the six months ended June 30, 2017. On June 3, 2014 we entered into an agreement with China Aviation Supplies Import & Export Corporation (“CASC”) to participate in a joint venture named CASC Willis Engine Lease Company Limited (“CASC Willis”), a new joint venture based in Shanghai, China. Each partner holds a fifty percent interest in the joint venture. In October 2014, we made a $15.0 million initial capital contribution, representing our fifty percent, up-front funding contribution to the new joint venture. The company acquires and leases jet engines to Chinese airlines and concentrates on meeting the fast growing demand for leased commercial aircraft engines and aviation assets in the People’s Republic of China. During the six months ended June 30, 2017 the Company recorded $0.5 million as deferred gain as a result of the Company selling an engine to CASC Willis, recorded $0.3 million foreign currency translation adjustment and the Company’s share of CASC Willis reported income of $0.6 million. Our investment in the joint venture is $13.4 million as of June 30, 2017. Six Months Ended June 30, 2017 WMES CASC Total (in thousands) Investment in joint ventures as of December 31, 2016 $ 32,470 $ 12,936 $ 45,406 Earnings from joint venture 2,426 589 3,015 Deferred gain on engine sale (443) (496) (939) Distribution (1,880) — (1,880) Foreign Currency Translation Adjustment — 326 326 Investment in joint ventures as of June 30, 2017 $ 32,573 $ 13,355 $ 45,928 “Other revenue” on the Consolidated Statement of Income includes management fees earned of $1.3 million and $0.5 million during the six months ended June 30, 2017 and 2016, respectively, related to the servicing of engines for the WMES lease portfolio. “Gain on sale of leased equipment” on the Consolidated Statement of Income includes $0.9 million for the six months ended June 30, 2017 related to both the sale of an engine to WMES ($0.4 million gain) and the sale of an engine to CASC Willis ($0.5 million gain). “Gain on sale of leased equipment” on the Consolidated Statement of Income includes $1.2 million for the six months ended June 30, 2016 related to the sale of four engines to WMES for $46.1 million. As 50% owners of WMES and CASC Willis, we deferred these gains to our investment which is being amortized over a 15-year period to a 55% residual value. Summarized financial information for 100% of WMES is presented in the following tables: Three Months Ended June, 2017 2016 (in thousands) Revenue $ 8,199 $ 7,752 Expenses 6,700 7,209 WMES net income $ 1,499 $ 543 Six Months Ended June 30, 2017 2016 (in thousands) Revenue $ 19,860 $ 16,998 Expenses 15,129 16,390 WMES net income $ 4,731 $ 608 June 30, December 31, 2017 2016 (in thousands) Total assets $ 265,341 $ 307,152 Total liabilities 190,986 238,790 Total WMES net equity $ 74,355 $ 68,362 |
Notes Payable
Notes Payable | 6 Months Ended |
Jun. 30, 2017 | |
Notes Payable | |
Notes Payable | 4. Notes Payable Notes payable consisted of the following: June 30, December 31, 2017 2016 (in thousands) Credit facility at a floating rate of interest of LIBOR plus 2.75%, secured by engines. The facility has a committed amount of $890.0 million at June 30, 2017, which revolves until the maturity date of April 2021. $ 640,000 $ 608,000 WEST II Series 2012-A term notes payable at a fixed rate of interest of 5.50%, maturing in September 2037. Secured by engines. 269,336 279,541 Note payable at fixed interest rates ranging from 2.60% to 2.97%, maturing in July 2024. Secured by an aircraft. 13,592 14,453 Note payable at a variable interest rate of LIBOR plus 2.25%, maturing in January 2018. Secured by engines. 11,023 11,709 Notes payable 933,951 913,703 Less: unamortized debt issuance costs (12,169) (13,448) Total notes payable $ 921,782 $ 900,255 We maintain a revolving credit facility to finance the acquisition of aircraft engines for lease as well as for general working capital purposes. On April 20, 2016 we entered into a Third Amended and Restated Credit Agreement which increased the revolving credit facility to $890.0 million from $700.0 million and extended the term to April 2021. This $890 million revolving credit facility has an accordion feature which would expand the entire credit facility up to $1 billion. The initial interest rate on the facility is LIBOR plus 2.75%. The interest rate is adjusted quarterly, based on the Company’s leverage ratio, as calculated under the terms of the revolving credit facility. For further information on our debt instruments, see the "Notes Payable" note in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2016. The following is a summary of the aggregate maturities of our long-term debt at June 30, 2017: Year (in thousands) 2017 $ 11,872 2018 33,294 2019 23,430 2020 23,031 2021 663,268 Thereafter 179,056 $ 933,951 |
Derivative Instruments
Derivative Instruments | 6 Months Ended |
Jun. 30, 2017 | |
Derivative Instruments | |
Derivative Instruments | 5. Derivative Instruments We periodically hold interest rate derivative instruments to mitigate exposure to changes in interest rates, in particular one-month LIBOR, with $651.0 million and $619.7 million of our borrowings at June 30, 2017 and December 31, 2016, respectively, at variable rates. As a matter of policy, we do not use derivatives for speculative purposes. During 2016, we entered into one interest rate swap agreement which has notional outstanding amount of $100.0 million, with remaining terms of 46 months. The fair value of the swap at June 30, 2017 was $64,000 representing a net asset for us. We recorded a $0.4 million and nil expense to net finance costs during the six months ended June 30, 2017 and 2016, respectively, from derivative instruments. The Company estimates the fair value of derivative instruments using a discounted cash flow technique and has used creditworthiness inputs that corroborate observable market data evaluating the Company’s and counterparties’ risk of non-performance. Valuation of the derivative instruments requires certain assumptions for underlying variables and the use of different assumptions would result in a different valuation. Management believes it has applied assumptions consistently during the period. We apply hedge accounting and account for the change in fair value of our cash flow hedges through other comprehensive income for all derivative instruments. Earnings Effects of Derivative Instruments on the Statements of Income The following table provides information about the income effects of our cash flow hedging relationships for June 30, 2017 and 2016: Amount of Loss (Gain) Recognized on Derivatives in the Statements of Income Derivatives in Cash Flow Hedging Location of Loss (Gain) Recognized on Three Months Ended June 30, Relationships Derivatives in the Statements of Income 2017 2016 (in thousands) Interest rate contracts Interest expense $ 174 $ — Total $ 174 $ — Amount of Loss (Gain) Recognized on Derivatives in the Statements of Income Derivatives in Cash Flow Hedging Location of Loss (Gain) Recognized on Six Months Ended June 30, Relationships Derivatives in the Statements of Income 2017 2016 (in thousands) Interest rate contracts Interest expense $ 400 $ — Total $ 400 $ — Effect of Cash Flow Hedge Derivative Instruments The following tables provide additional information about the financial statement effects related to our cash flow hedges for the six months ended June 30, 2017 and 2016: Amount of Gain (Loss) Recognized Location of Loss (Gain) Amount of Loss (Gain) Recognized in OCI on Derivatives Reclassified from from Accumulated OCI into Income Derivatives in (Effective Portion) Accumulated OCI into (Effective Portion) Cash Flow Hedging Three Months Ended June 30, Income Three Months Ended June 30, Relationships 2017 2016 (Effective Portion) 2017 2016 (in thousands) (in thousands) Interest rate contracts $ (338) $ — Interest expense $ 174 $ — Total $ (338) $ — Total $ 174 $ — Amount of Gain (Loss) Recognized Location of Loss (Gain) Amount of Loss (Gain) Recognized in OCI on Derivatives Reclassified from from Accumulated OCI into Income Derivatives in (Effective Portion) Accumulated OCI into (Effective Portion) Cash Flow Hedging Six Months Ended June 30, Income Six Months Ended June 30, Relationships 2017 2016 (Effective Portion) 2017 2016 (in thousands) (in thousands) Interest rate contracts $ (3) $ — Interest expense $ 400 $ — Total $ (3) $ — Total $ 400 $ — The effective portion of the change in fair value on a derivative instrument designated as a cash flow hedge is reported as a component of other comprehensive income and is reclassified into earnings in the period during which the transaction being hedged affects earnings or it is probable that the forecasted transaction will not occur. The ineffective portion of the hedges is recorded in earnings in the current period. However, these are highly effective hedges and no significant ineffectiveness occurred in the periods presented. Counterparty Credit Risk The Company evaluates the creditworthiness of the counterparties under its hedging agreements. The swap counterparty for the interest rate swap in place during 2017 was a large financial institution in the United States that possessed an investment grade credit rating. Based on this rating, the Company believes that the counterparty was creditworthy and that their continuing performance under the hedging agreement was probable, and did not require the counterparty to provide collateral or other security to the Company. |
Stock-Based Compensation Plans
Stock-Based Compensation Plans | 6 Months Ended |
Jun. 30, 2017 | |
Stock-Based Compensation Plans | |
Stock-Based Compensation Plans | 6. Stock-Based Compensation Plans Our 2007 Stock Incentive Plan (the 2007 Plan) was adopted on May 24, 2007. Under this 2007 Plan, a total of 2,000,000 shares are authorized for stock based compensation available in the form of either restricted stock or stock options. On May 28, 2015, the Company’s shareholders authorized an increase in the number of shares of Common Stock available for grant by 800,000 shares bringing the total to 2,800,000 shares authorized. 2,615,960 shares of restricted stock were granted under the 2007 Stock Incentive Plan by June 30, 2017. Of this amount, 166,411 shares of restricted stock were cancelled and returned to the pool of shares which could be granted under the 2007 Stock Incentive Plan resulting in a net number of 350,451 shares which were available as of June 30, 2017 for future issuance under the 2007 Incentive Plan. The fair value of the restricted stock awards equaled the stock price at the date of grants. The following table summarizes restricted stock activity during the year ended December 31, 2016 and the six months ended June 30, 2017 Shares Restricted stock at December 31, 2015 396,595 Granted in 2016 (vesting over 2 years) 20,000 Granted in 2016 (vesting over 3 years) 85,000 Granted in 2016 (vesting over 4 years) 13,250 Granted in 2016 (vesting on first anniversary from date of issuance) 18,395 Cancelled in 2016 (20,377) Vested in 2016 (213,528) Restricted stock at December 31, 2016 299,335 Granted in 2017 (vesting over 3 years) 200,700 Granted in 2017 (vesting in 1 year) 9,903 Granted in 2017 (vesting in less than 1 year) 5,000 Vested in 2017 (82,413) Cancelled in 2017 (10,666) Restricted stock at June 30, 2017 421,859 All cancelled shares have returned to the share reserve and are available for issuance at a later date, in accordance with the 2007 Plan. Our accounting policy is to recognize the associated expense of such awards on a straight-line basis over the vesting period. At June 30, 2017 the stock compensation expense related to the restricted stock awards that will be recognized over the average remaining vesting period of 1.8 years totals $6.8 million. At June 30, 2017, the intrinsic value of unvested restricted stock awards is $11.3 million. The 2007 Plan was extend in May 2015 for 5 years until May 2020. |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2017 | |
Income Taxes | |
Income Taxes | 7. Income Taxes Income tax expense for the three and six month ended June 30, 2017 was $4.2 million and $10.4 million, respectively. Income tax expense for the three and six month ended June 30, 2016 was $2.4 million and $5.5 million, respectively. The effective tax rates for the three and six month ended June 30, 2017 were 42.3% and 41.8%, respectively. The effective tax rates for the three month and six months ended June 30, 2016 were 41.8% and 42.6%, respectively. The Company records tax expense or benefit for unusual or infrequent items discretely in the period in which they occur. Our tax rate is subject to change based on changes in the mix of assets leased to domestic and foreign lessees, the proportions of revenue generated within and outside of California, the amount of executive compensation exceeding $1.0 million as defined in IRS code 162(m) and numerous other factors, including changes in tax law. |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 6 Months Ended |
Jun. 30, 2017 | |
Fair Value of Financial Instruments | |
Fair Value of Financial Instruments | 8. Fair Value of Financial Instruments The carrying amount reported in the consolidated balance sheets for cash and cash equivalents, restricted cash, operating lease related receivable and accounts payable approximates fair value because of the immediate or short-term maturity of these financial instruments. The carrying amount of the Company’s outstanding balance on its Notes Payable as of June 30, 2017 and December 31, 2016 was estimated to have a fair value of approximately $858.8 million and $864.0 million, respectively, based on the fair value of estimated future payments calculated using the prevailing interest rates at each period end. |
Operating Segments
Operating Segments | 6 Months Ended |
Jun. 30, 2017 | |
Operating Segments | |
Operating Segments | 9. Operating Segments The Company operates in two business segments: (i) Leasing and Related Operations which involves acquiring and leasing, primarily pursuant to operating leases, commercial aircraft, aircraft engines and other aircraft equipment and the selective purchase and resale of commercial aircraft engines and other aircraft equipment and (ii) Spare Parts Sales which involves the purchase and resale of after-market engine and airframe parts, whole engines, engine modules and portable aircraft components and leasing of engines destined for disassembly and sale of parts. The Company evaluates the performance of each of the segments based on profit or loss after general and administrative expenses and inter-company allocation of interest expense. While the Company believes there are synergies between the two business segments, the segments are managed separately because each requires different business strategies. The following tables present a summary of the operating segments (amounts in thousands): Leasing and For the three months ended June 30, 2017 Related Operations Spare Parts Sales Eliminations (1) Total Revenue: Lease rent revenue $ 31,337 $ — $ — $ 31,337 Maintenance reserve revenue 11,881 — — 11,881 Spare parts and equipment sales 12,874 6,509 — 19,383 Gain on sale of leased equipment 3,527 — — 3,527 Other revenue 1,649 276 (209) 1,716 Total revenue 61,268 6,785 (209) 67,844 Expenses: Depreciation and amortization expense 15,929 86 — 16,015 Cost of spare parts and equipment sales 9,918 3,812 — 13,730 Write-down of equipment 1,351 926 — 2,277 General and administrative 12,207 858 — 13,065 Technical expense 2,448 — — 2,448 Net finance costs 11,312 — — 11,312 Total expenses 53,165 5,682 — 58,847 Earnings (loss) from operations $ 8,103 $ 1,103 $ (209) $ 8,997 Leasing and For the six months ended June 30, 2017 Related Operations Spare Parts Sales Eliminations (1) Total Revenue: Lease rent revenue $ 61,572 $ — $ — $ 61,572 Maintenance reserve revenue 43,843 — — 43,843 Spare parts and equipment sales 19,299 12,680 — 31,979 Gain on sale of leased equipment 4,509 — — 4,509 Other revenue 3,774 450 (336) 3,888 Total revenue 132,997 13,130 (336) 145,791 Expenses: Depreciation and amortization expense 32,470 174 — 32,644 Cost of spare parts and equipment sales 14,623 8,507 — 23,130 Write-down of equipment 13,442 1,843 — 15,285 General and administrative 24,620 1,645 — 26,265 Technical expense 4,740 — — 4,740 Net finance costs 22,178 — — 22,178 Total expenses 112,073 12,169 — 124,242 Earnings (loss) from operations $ 20,924 $ 961 $ (336) $ 21,549 Leasing and For the three months ended June 30, 2016 Related Operations Spare Parts Sales Eliminations (1) Total Revenue: Lease rent revenue $ 29,181 $ — $ — $ 29,181 Maintenance reserve revenue 15,514 — — 15,514 Spare parts sales 900 2,773 — 3,673 Gain on sale of leased equipment 258 — — 258 Other revenue 972 590 (570) 992 Total revenue 46,825 3,363 (570) 49,618 Expenses: Depreciation and amortization expense 16,103 85 — 16,188 Cost of spare parts and equipment sales 648 2,139 — 2,787 Write-down of equipment 1,893 — — 1,893 General and administrative 9,958 727 — 10,685 Technical expense 1,803 — — 1,803 Net finance costs 10,414 120 — 10,534 Total expenses 40,819 3,071 — 43,890 Earnings from operations $ 6,006 $ 292 $ (570) $ 5,728 Leasing and For the six months ended June 30, 2016 Related Operations Spare Parts Sales Eliminations (1) Total Revenue: Lease rent revenue $ 57,457 $ — $ — $ 57,457 Maintenance reserve revenue 31,333 — — 31,333 Spare parts sales 900 5,405 — 6,305 Gain on sale of leased equipment 3,250 — — 3,250 Other revenue 1,905 948 (861) 1,992 Total revenue 94,845 6,353 (861) 100,337 Expenses: Depreciation and amortization expense 32,440 167 — 32,607 Cost of spare parts sales 648 4,071 — 4,719 Write-down of equipment 3,929 — — 3,929 General and administrative 20,938 1,499 — 22,437 Technical expense 3,499 — — 3,499 Net finance costs 20,327 215 — 20,542 Total expenses 81,781 5,952 — 87,733 Earnings from operations $ 13,064 $ 401 $ (861) $ 12,604 (1) Represents revenue generated between our operating segments Total assets as of June 30, 2017 $ 1,359,406 $ 26,948 $ — $ 1,386,354 Total assets as of December 31, 2016 $ 1,307,460 $ 30,427 $ — $ 1,337,887 |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2017 | |
Subsequent Events | |
Subsequent Events | 10. Subsequent Event West III Securitization On July 31, 2017, the Company through, its wholly owned, special-purpose Delaware statutory trust, Willis Engine Structured Trust III (“WEST III”) issued $335.7 million of notes (the “Notes”). The Notes consist of two series; Initial Series A Notes in the aggregate principal amount of $293.7 million bearing a 4.69% fixed rate coupon and issued at a price of 99.91% and Initial Series B Notes in the aggregate principal amount of $42.0 million bearing a 6.36% fixed rate coupon and issued at a price of 98.3%. The net proceeds from the Notes offering will be applied, in part, to pay fees and expenses related to the issuance and to pay the Company periodically over a 270-day delivery period in consideration for the aircraft engines acquired by WEST III from Willis. The Company will primarily utilize net proceeds received as consideration for aircraft engine sales to repay certain amounts drawn under our revolving credit facility. The Notes will be secured by, among other things, WEST III’s direct and indirect interests in a portfolio of 56 aircraft engines. |
Summary of Significant Accoun19
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2017 | |
Organization and Summary of Significant Accounting Policies | |
Basis of Presentation | (a) Basis of Presentation: Our unaudited consolidated financial statements include the accounts of Willis Lease Finance Corporation and its subsidiaries (“we” or the “Company”) and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for reporting on Form 10-Q. Pursuant to such rules and regulations, certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. The accompanying unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly our financial position as of June 30, 2017 and December 31, 2016, and the results of our operations for the three and six months ended June 30, 2017 and 2016, and our cash flows for the six months ended June 30, 2017 and 2016. The results of operations and cash flows for the period ended June 30, 2017 are not necessarily indicative of the results of operations or cash flows which may be reported for the remainder of 2017. |
Principles of Consolidation | (b) Principles of Consolidation: We evaluate all entities in which we have an economic interest firstly to determine whether for accounting purposes the entity is a variable interest entity or voting interest entity. If the entity is a variable interest entity we consolidate the financial statements of that entity if we are the primary beneficiary of the entities’ activities. If the entity is a voting interest entity we consolidate the entity when we have a majority of voting interests. All inter-company balances are eliminated upon consolidation. |
Fair Value Measurements | (c) Fair Value Measurements : Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs, to the extent possible. We use a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, to measure fair value which are the following: Level 1 - Quoted prices in active markets for identical assets or liabilities. Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Assets Measured and Recorded at Fair Value on a Nonrecurring Basis We determine fair value of long-lived assets held and used, such as Equipment held for operating lease and Equipment held for sale, by reference to independent appraisals, quoted market prices (e.g. an offer to purchase) and other factors. An impairment charge is recorded when the carrying value of the asset exceeds its fair value. The following table shows by level, within the fair value hierarchy, the Company’s assets measured at fair value on a nonrecurring basis during the six months ended June 30, 2017 and 2016, and the losses recorded during the six months ended June 30, 2017 and 2016 on those assets: Assets at Fair Value Total Losses June 30, 2017 June 30, 2016 Six Months Ended June 30, Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total 2017 2016 (in thousands) (in thousands) Equipment held for lease $ — $ 11,483 $ — $ 11,483 $ — $ 758 $ — $ 758 $ (9,019) $ (1,893) Equipment held for sale — 27,547 — 27,547 — 1,448 — 1,448 (4,423) (2,036) Spare parts inventory — 21,275 — 21,275 — — — — (1,843) — Total $ — $ 60,305 $ — $ 60,305 $ — $ 2,206 $ — $ 2,206 $ (15,285) $ (3,929) At June 30, 2017, the Company used Level 2 inputs to measure equipment held for sale. Level 2 inputs include quoted prices for similar assets in inactive markets. An impairment charge is recorded when the carrying value of the asset exceeds its fair value. A write-down of $13.4 million was recorded during the six months ended June 30, 2017 for four engines and three aircraft for which their leases ended or were modified in the period. We evaluated the equipment return condition, end of lease compensation, accumulated maintenance reserves and expected future proceeds from part out and sale to record our initial best estimate of impairment. An additional asset write-down of $1.8 million was recorded in the six months ended June 30, 2017 based upon a comparison of the spare parts net book values with the revised net proceeds expected from part sales. A write-down of equipment totaling $3.9 million was recorded in the six months ended June 30, 2016 due to a management decision to consign two engines for part-out and sale, in which the asset’s net book value exceeded the estimated proceeds. |
Foreign Currency Translation | (d) Foreign Currency Translation: The Company’s foreign investments have been converted at rates of exchange at June 30, 2017. The changes in exchange rates in our foreign investments reported under the equity method are included in stockholders’ equity as accumulated other comprehensive income. |
Recent Accounting Pronouncements | (e) Recent Accounting Pronouncements: Recent Accounting Pronouncements Already Adopted by the Company: In July 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-11 ,Simplifying the Measurement of Inventory, which simplifies the measurement of inventory by requiring certain inventory to be measured at the lower of cost or net realizable value. The amendments in this ASU are effective for fiscal years beginning after December 15, 2017 and for interim periods therein. The Company adopted ASU 2015-11 during the quarter ended March 31, 2017 and it did not have a material impact on our consolidated financial statements. In November 2016, the FASB issued ASU 2016-18, Restricted Cash, which requires amounts generally described as restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the total beginning and ending amounts for the periods shown on the statement of cash flows. ASU 2016-08 is effective for fiscal years beginning after December 15, 2018 (including interim periods within those periods) using a retrospective transition method to each period presented. The Company adopted this standard as of March 31, 2017 and included $43.2 million and $22.3 million of restricted cash in the total of cash, cash equivalents and restricted cash in its statements of consolidated cash flows for the six months ended June 30, 2017 and 2016, respectively. The adoption of this standard also resulted in an increase (decrease) in cash flows from operating, investing and financing activities of ($5.8 million), $1.3 million and ($1.3 million), respectively, for the six months ended June 30, 2016. In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The standard is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. The new guidance became effective for the Company in the first quarter of fiscal 2017. The Company adopted ASU 2016-09 on January 1, 2017 on a modified retrospective method through a cumulative adjustment to retained earnings of $1.3 million. As of the six months ended June 30, 2017, excess tax benefit from stock-based compensation of $54,000 were reflected in the Consolidated Statements of Income as income tax expense, whereas they previously were recognized in equity. Additionally, our Consolidated Statements of Cash Flows now present excess tax benefits as an operating activity, with the prior periods adjusted accordingly. We have elected to account for forfeitures as they occur, rather than estimate expected forfeitures. As a result of the adoption of ASU 2016-09, the Consolidated Statement of Cash Flows for the six months ended June 30, 2016 was adjusted as follows: a $0.2 million increase to net cash provided by operating activities and a $0.2 million decrease to net cash used in financing activities. Recent Accounting Pronouncements To Be Adopted by the Company: In 2014, the Financial Accounting Standards Board (“FASB”) issued new guidance applicable to revenue recognition that will be effective January 1, 2018. Early adoption was permitted for the year-ending December 31, 2017. The new guidance applies a more principles based approach to recognizing revenue. Under the new guidance, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration that an entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new guidance must be adopted using either a modified retrospective approach or a full retrospective approach for all periods presented. Under the modified retrospective method, the cumulative effect of applying the standard would be recognized at the date of initial application within retained earnings. Under the full retrospective approach, the standard would be applied to each prior reporting period presented. The Company continued its evaluation of the new guidance and the effect of adoption on the consolidated financial statements and believes the new standard has no impact on lease revenue and initial evaluation concluding no material impact to other revenue streams. In January 2017, the FASB issued ASU 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” that eliminates “Step 2” from the goodwill impairment test. The new standard is effective for us in the first quarter of fiscal 2020, and early adoption is permitted. The new guidance must be applied on a prospective basis. We do not anticipate that the adoption of this standard will have a significant impact on our consolidated financial statements or the related disclosures. In May 2017, the FASB issued ASU 2017-09, “Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting,” that provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The new guidance became effective for the Company in the first quarter of fiscal 2018. The new guidance must be applied on a prospective basis. We do not anticipate that the adoption of this standard will have a significant impact on our consolidated financial statements or the related disclosures. |
Summary of Significant Accoun20
Summary of Significant Accounting Policies (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Organization and Summary of Significant Accounting Policies | |
Schedule of fair value hierarchy of assets measured on nonrecurring basis and gain (losses) recorded | Assets at Fair Value Total Losses June 30, 2017 June 30, 2016 Six Months Ended June 30, Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total 2017 2016 (in thousands) (in thousands) Equipment held for lease $ — $ 11,483 $ — $ 11,483 $ — $ 758 $ — $ 758 $ (9,019) $ (1,893) Equipment held for sale — 27,547 — 27,547 — 1,448 — 1,448 (4,423) (2,036) Spare parts inventory — 21,275 — 21,275 — — — — (1,843) — Total $ — $ 60,305 $ — $ 60,305 $ — $ 2,206 $ — $ 2,206 $ (15,285) $ (3,929) |
Investments (Tables)
Investments (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Investments | |
Schedule of investments | Six Months Ended June 30, 2017 WMES CASC Total (in thousands) Investment in joint ventures as of December 31, 2016 $ 32,470 $ 12,936 $ 45,406 Earnings from joint venture 2,426 589 3,015 Deferred gain on engine sale (443) (496) (939) Distribution (1,880) — (1,880) Foreign Currency Translation Adjustment — 326 326 Investment in joint ventures as of June 30, 2017 $ 32,573 $ 13,355 $ 45,928 |
Summarized financial information | Three Months Ended June, 2017 2016 (in thousands) Revenue $ 8,199 $ 7,752 Expenses 6,700 7,209 WMES net income $ 1,499 $ 543 Six Months Ended June 30, 2017 2016 (in thousands) Revenue $ 19,860 $ 16,998 Expenses 15,129 16,390 WMES net income $ 4,731 $ 608 June 30, December 31, 2017 2016 (in thousands) Total assets $ 265,341 $ 307,152 Total liabilities 190,986 238,790 Total WMES net equity $ 74,355 $ 68,362 |
Notes Payable (Tables)
Notes Payable (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Notes Payable | |
Schedule of notes payable | June 30, December 31, 2017 2016 (in thousands) Credit facility at a floating rate of interest of LIBOR plus 2.75%, secured by engines. The facility has a committed amount of $890.0 million at June 30, 2017, which revolves until the maturity date of April 2021. $ 640,000 $ 608,000 WEST II Series 2012-A term notes payable at a fixed rate of interest of 5.50%, maturing in September 2037. Secured by engines. 269,336 279,541 Note payable at fixed interest rates ranging from 2.60% to 2.97%, maturing in July 2024. Secured by an aircraft. 13,592 14,453 Note payable at a variable interest rate of LIBOR plus 2.25%, maturing in January 2018. Secured by engines. 11,023 11,709 Notes payable 933,951 913,703 Less: unamortized debt issuance costs (12,169) (13,448) Total notes payable $ 921,782 $ 900,255 |
Schedule or principal outstanding | Year (in thousands) 2017 $ 11,872 2018 33,294 2019 23,430 2020 23,031 2021 663,268 Thereafter 179,056 $ 933,951 |
Derivative Instruments (Tables)
Derivative Instruments (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Derivative Instruments | |
Schedule of income effects of cash flow hedging relationships | Amount of Loss (Gain) Recognized on Derivatives in the Statements of Income Derivatives in Cash Flow Hedging Location of Loss (Gain) Recognized on Three Months Ended June 30, Relationships Derivatives in the Statements of Income 2017 2016 (in thousands) Interest rate contracts Interest expense $ 174 $ — Total $ 174 $ — Amount of Loss (Gain) Recognized on Derivatives in the Statements of Income Derivatives in Cash Flow Hedging Location of Loss (Gain) Recognized on Six Months Ended June 30, Relationships Derivatives in the Statements of Income 2017 2016 (in thousands) Interest rate contracts Interest expense $ 400 $ — Total $ 400 $ — |
Schedule of information about financial statement effects related to cash flow hedges | Amount of Gain (Loss) Recognized Location of Loss (Gain) Amount of Loss (Gain) Recognized in OCI on Derivatives Reclassified from from Accumulated OCI into Income Derivatives in (Effective Portion) Accumulated OCI into (Effective Portion) Cash Flow Hedging Three Months Ended June 30, Income Three Months Ended June 30, Relationships 2017 2016 (Effective Portion) 2017 2016 (in thousands) (in thousands) Interest rate contracts $ (338) $ — Interest expense $ 174 $ — Total $ (338) $ — Total $ 174 $ — Amount of Gain (Loss) Recognized Location of Loss (Gain) Amount of Loss (Gain) Recognized in OCI on Derivatives Reclassified from from Accumulated OCI into Income Derivatives in (Effective Portion) Accumulated OCI into (Effective Portion) Cash Flow Hedging Six Months Ended June 30, Income Six Months Ended June 30, Relationships 2017 2016 (Effective Portion) 2017 2016 (in thousands) (in thousands) Interest rate contracts $ (3) $ — Interest expense $ 400 $ — Total $ (3) $ — Total $ 400 $ — |
Stock-Based Compensation Plans
Stock-Based Compensation Plans (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Stock-Based Compensation Plans | |
Summary of activity under the 2007 Plan | Shares Restricted stock at December 31, 2015 396,595 Granted in 2016 (vesting over 2 years) 20,000 Granted in 2016 (vesting over 3 years) 85,000 Granted in 2016 (vesting over 4 years) 13,250 Granted in 2016 (vesting on first anniversary from date of issuance) 18,395 Cancelled in 2016 (20,377) Vested in 2016 (213,528) Restricted stock at December 31, 2016 299,335 Granted in 2017 (vesting over 3 years) 200,700 Granted in 2017 (vesting in 1 year) 9,903 Granted in 2017 (vesting in less than 1 year) 5,000 Vested in 2017 (82,413) Cancelled in 2017 (10,666) Restricted stock at June 30, 2017 421,859 |
Operating Segments (Tables)
Operating Segments (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Operating Segments | |
Summary of the operating segments | Leasing and For the three months ended June 30, 2017 Related Operations Spare Parts Sales Eliminations (1) Total Revenue: Lease rent revenue $ 31,337 $ — $ — $ 31,337 Maintenance reserve revenue 11,881 — — 11,881 Spare parts and equipment sales 12,874 6,509 — 19,383 Gain on sale of leased equipment 3,527 — — 3,527 Other revenue 1,649 276 (209) 1,716 Total revenue 61,268 6,785 (209) 67,844 Expenses: Depreciation and amortization expense 15,929 86 — 16,015 Cost of spare parts and equipment sales 9,918 3,812 — 13,730 Write-down of equipment 1,351 926 — 2,277 General and administrative 12,207 858 — 13,065 Technical expense 2,448 — — 2,448 Net finance costs 11,312 — — 11,312 Total expenses 53,165 5,682 — 58,847 Earnings (loss) from operations $ 8,103 $ 1,103 $ (209) $ 8,997 Leasing and For the six months ended June 30, 2017 Related Operations Spare Parts Sales Eliminations (1) Total Revenue: Lease rent revenue $ 61,572 $ — $ — $ 61,572 Maintenance reserve revenue 43,843 — — 43,843 Spare parts and equipment sales 19,299 12,680 — 31,979 Gain on sale of leased equipment 4,509 — — 4,509 Other revenue 3,774 450 (336) 3,888 Total revenue 132,997 13,130 (336) 145,791 Expenses: Depreciation and amortization expense 32,470 174 — 32,644 Cost of spare parts and equipment sales 14,623 8,507 — 23,130 Write-down of equipment 13,442 1,843 — 15,285 General and administrative 24,620 1,645 — 26,265 Technical expense 4,740 — — 4,740 Net finance costs 22,178 — — 22,178 Total expenses 112,073 12,169 — 124,242 Earnings (loss) from operations $ 20,924 $ 961 $ (336) $ 21,549 Leasing and For the three months ended June 30, 2016 Related Operations Spare Parts Sales Eliminations (1) Total Revenue: Lease rent revenue $ 29,181 $ — $ — $ 29,181 Maintenance reserve revenue 15,514 — — 15,514 Spare parts sales 900 2,773 — 3,673 Gain on sale of leased equipment 258 — — 258 Other revenue 972 590 (570) 992 Total revenue 46,825 3,363 (570) 49,618 Expenses: Depreciation and amortization expense 16,103 85 — 16,188 Cost of spare parts and equipment sales 648 2,139 — 2,787 Write-down of equipment 1,893 — — 1,893 General and administrative 9,958 727 — 10,685 Technical expense 1,803 — — 1,803 Net finance costs 10,414 120 — 10,534 Total expenses 40,819 3,071 — 43,890 Earnings from operations $ 6,006 $ 292 $ (570) $ 5,728 Leasing and For the six months ended June 30, 2016 Related Operations Spare Parts Sales Eliminations (1) Total Revenue: Lease rent revenue $ 57,457 $ — $ — $ 57,457 Maintenance reserve revenue 31,333 — — 31,333 Spare parts sales 900 5,405 — 6,305 Gain on sale of leased equipment 3,250 — — 3,250 Other revenue 1,905 948 (861) 1,992 Total revenue 94,845 6,353 (861) 100,337 Expenses: Depreciation and amortization expense 32,440 167 — 32,607 Cost of spare parts sales 648 4,071 — 4,719 Write-down of equipment 3,929 — — 3,929 General and administrative 20,938 1,499 — 22,437 Technical expense 3,499 — — 3,499 Net finance costs 20,327 215 — 20,542 Total expenses 81,781 5,952 — 87,733 Earnings from operations $ 13,064 $ 401 $ (861) $ 12,604 (1) Represents revenue generated between our operating segments Total assets as of June 30, 2017 $ 1,359,406 $ 26,948 $ — $ 1,386,354 Total assets as of December 31, 2016 $ 1,307,460 $ 30,427 $ — $ 1,337,887 |
Organization and Summary of Sig
Organization and Summary of Significant Accounting Policies (Fair Value on a Nonrecurring Basis) (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017USD ($)engineaircraft | Jun. 30, 2016USD ($) | Jun. 30, 2017USD ($)engineaircraft | Jun. 30, 2016USD ($)engine | Dec. 31, 2016USD ($) | |
Assets at fair value and gains (losses) recorded | |||||
Equipment held for sale | $ 27,826 | $ 27,826 | $ 30,710 | ||
Asset write-down | 2,277 | $ 1,893 | 15,285 | $ 3,929 | |
Engine Parts | |||||
Assets at fair value and gains (losses) recorded | |||||
Number of engines for which impairment is recorded earlier due to part out and sale | engine | 2 | ||||
Asset write-down | $ 3,900 | ||||
Additional write-down | 1,800 | ||||
Nonrecurring | |||||
Assets at fair value and gains (losses) recorded | |||||
Equipment held for lease | 11,483 | 758 | 11,483 | 758 | |
Equipment held for sale | 27,547 | 1,448 | 27,547 | 1,448 | |
Spare parts inventory | 21,275 | 21,275 | |||
Assets at fair value | 60,305 | 2,206 | 60,305 | 2,206 | |
Total losses on equipment held for lease | (9,019) | (1,893) | |||
Total losses on equipment held for sale | (4,423) | (2,036) | |||
Total losses on spare parts inventory | (1,843) | ||||
Total losses on assets | (15,285) | (3,929) | |||
Nonrecurring | Level 2 | |||||
Assets at fair value and gains (losses) recorded | |||||
Equipment held for lease | 11,483 | 758 | 11,483 | 758 | |
Equipment held for sale | 27,547 | 1,448 | 27,547 | 1,448 | |
Spare parts inventory | 21,275 | 21,275 | |||
Assets at fair value | $ 60,305 | $ 2,206 | $ 60,305 | $ 2,206 | |
Engines and related equipment | |||||
Assets at fair value and gains (losses) recorded | |||||
Number of engines | engine | 4 | 4 | |||
Number of aircraft | aircraft | 3 | 3 | |||
Asset write-down | $ 13,400 |
Organization and Summary of S27
Organization and Summary of Significant Accounting Policies (Recent Accounting Pronouncements) (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Restricted cash | $ 43,244 | $ 43,244 | $ 22,298 | ||
Excess tax benefit from stock-based compensation | $ (254) | ||||
Retained earnings | 209,497 | 209,497 | 194,729 | ||
Income Tax Expense (Benefit) | 4,168 | $ 2,418 | 10,406 | 5,470 | |
ASU cumulative adjustment to retained earnings | $ 1,273 | ||||
Accounting Standards Update 2016-18 | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Restricted cash | 43,200 | $ 22,300 | 43,200 | 22,300 | |
Increase to net cash flows from operating activities | (5,800) | ||||
Increase Decrease In Cash Flows From Investing Activities | 1,300 | ||||
Increase Decrease In Cash Flows From Financing Activities | (1,300) | ||||
Accounting Standards Update 2016-09 | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Increase to net cash flows from operating activities | 200 | ||||
Increase Decrease In Cash Flows From Financing Activities | $ (200) | ||||
Retained earnings | $ 1,300 | 1,300 | |||
Income Tax Expense (Benefit) | $ 54 |
Investments (Details)
Investments (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 6 Months Ended | ||||||
Oct. 31, 2014 | Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Dec. 31, 2016 | Jun. 03, 2014 | May 25, 2011 | |
Investments | |||||||||
Investment in WMES joint ventures at beginning of the period | $ 45,406 | ||||||||
Investment | $ 4,610 | ||||||||
Earnings from joint venture | 3,015 | ||||||||
Distribution | (1,880) | ||||||||
Foreign Currency Translation Adjustment | 326 | ||||||||
Investment in WMES joint ventures at end of the period | $ 45,928 | 45,928 | |||||||
Deferred gain on engine sale | (939) | ||||||||
Property Subject to or Available for Operating Lease, Net | $ 1,160,545 | $ 1,136,603 | |||||||
Equity Method Investments | 45,928 | 45,406 | $ 45,928 | 45,406 | |||||
Sale of engines | 37,754 | 54,204 | |||||||
Gain (Loss) on Sale of Leased Equipment | |||||||||
Investments | |||||||||
Gain on sale of equipment | 900 | ||||||||
WMES | |||||||||
Investments | |||||||||
Ownership interest (as a percent) | 100.00% | 50.00% | |||||||
Investment in WMES joint ventures at beginning of the period | 32,470 | ||||||||
Earnings from joint venture | 2,426 | ||||||||
Distribution | (1,880) | ||||||||
Investment in WMES joint ventures at end of the period | 32,573 | 32,573 | |||||||
Deferred gain on engine sale | (443) | ||||||||
Equity Method Investments | 32,573 | $ 32,470 | $ 32,573 | 32,470 | |||||
Sale of engines | 46,100 | ||||||||
Amortized Gain Period | 15 years | ||||||||
Amortized Gain Residual Value Percent | 55.00% | ||||||||
Consolidated Statements of Income | |||||||||
Revenue | 8,199 | $ 7,752 | $ 19,860 | 16,998 | |||||
Expenses | 6,700 | 7,209 | 15,129 | 16,390 | |||||
WMES net income | 1,499 | $ 543 | 4,731 | 608 | |||||
Consolidated Balance Sheets | |||||||||
Total assets | 265,341 | 307,152 | |||||||
Total liabilities | 190,986 | 238,790 | |||||||
Total WMES net equity | 74,355 | 68,362 | |||||||
WMES | Other Revenue | |||||||||
Investments | |||||||||
Management fees | 1,300 | 500 | |||||||
WMES | Gain (Loss) on Sale of Leased Equipment | |||||||||
Investments | |||||||||
Gain on sale of equipment | $ 1,200 | ||||||||
CASC | |||||||||
Investments | |||||||||
Ownership interest (as a percent) | 50.00% | ||||||||
Investment in WMES joint ventures at beginning of the period | 12,936 | ||||||||
Investment | $ 15,000 | ||||||||
Earnings from joint venture | 589 | ||||||||
Foreign Currency Translation Adjustment | 326 | ||||||||
Investment in WMES joint ventures at end of the period | 13,355 | 13,355 | |||||||
Deferred gain on engine sale | (496) | ||||||||
Equity Method Investments | $ 13,355 | $ 12,936 | $ 13,355 | $ 12,936 |
Notes Payable (Details)
Notes Payable (Details) - USD ($) $ in Thousands | Apr. 20, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | Apr. 19, 2016 |
Principal outstanding repayable | |||||
2,017 | $ 11,872 | ||||
2,018 | 33,294 | ||||
2,019 | 23,430 | ||||
2,020 | 23,031 | ||||
2,021 | 663,268 | ||||
Thereafter | 179,056 | ||||
Notes payable | 933,951 | $ 913,703 | |||
Less: unamortized debt issuance costs | (12,169) | (13,448) | |||
Total notes payable | 921,782 | $ 900,255 | |||
Net proceeds received from notes issued and sold | $ 93,000 | $ 55,000 | |||
WEST II Series 2012-A term notes payable at a fixed rate of interest maturing in September 2037. Secured by engines | WEST II | |||||
Long Term Debt | |||||
Fixed rate (as a percent) | 5.50% | 5.50% | |||
Principal outstanding repayable | |||||
Notes payable | $ 269,336 | $ 279,541 | |||
Note payable at fixed interest rates ranging from 2.60% to 2.97%, maturing in July 2024. Secured by an aircraft | |||||
Principal outstanding repayable | |||||
Notes payable | $ 13,592 | 14,453 | |||
Note payable at fixed interest rates ranging from 2.60% to 2.97%, maturing in July 2024. Secured by an aircraft | Minimum | |||||
Long Term Debt | |||||
Fixed rate (as a percent) | 2.60% | ||||
Note payable at fixed interest rates ranging from 2.60% to 2.97%, maturing in July 2024. Secured by an aircraft | Maximum | |||||
Long Term Debt | |||||
Fixed rate (as a percent) | 2.97% | ||||
Note payable at a fixed interest rate of 2.25%, maturing in January 2018, secured by engines | |||||
Principal outstanding repayable | |||||
Notes payable | $ 11,023 | 11,709 | |||
Note payable at a fixed interest rate of 2.25%, maturing in January 2018, secured by engines | LIBOR | |||||
Long Term Debt | |||||
Basis spread on variable rate (as a percent) | 2.25% | ||||
Revolving credit facility | |||||
Long Term Debt | |||||
Basis spread on variable rate (as a percent) | 2.75% | ||||
Maximum borrowing capacity under credit facility | $ 890,000 | $ 700,000 | |||
Amount of debt available under accordion feature | $ 1,000,000 | ||||
Credit facility at a floating rate of interest of LIBOR plus 2.75%, secured by engines | |||||
Long Term Debt | |||||
Maximum borrowing capacity under credit facility | $ 890,000 | ||||
Principal outstanding repayable | |||||
Notes payable | $ 640,000 | $ 608,000 | |||
Credit facility at a floating rate of interest of LIBOR plus 2.75%, secured by engines | LIBOR | |||||
Long Term Debt | |||||
Basis spread on variable rate (as a percent) | 2.75% |
Derivative Instruments (Details
Derivative Instruments (Details) $ in Thousands | 6 Months Ended | ||
Jun. 30, 2017USD ($)item | Jun. 30, 2016USD ($) | Dec. 31, 2016USD ($) | |
Derivative instruments | |||
Number of interest rate swap agreements | item | 1 | ||
Notional amount outstanding | $ 100,000 | ||
Remaining maturity term | 46 months | ||
(Benefit) expense recorded to net finance costs | $ 400 | $ 0 | |
Net fair value of swap liability | 64,000 | ||
Interest rate contracts | |||
Derivative instruments | |||
Borrowings at variable interest rates | $ 651,000 | $ 619,700 |
Derivative Instruments (Detai31
Derivative Instruments (Details) - Cash Flow Hedging - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended |
Jun. 30, 2017 | Jun. 30, 2017 | |
Effects of derivative instruments | ||
Amount of loss recognized in the income statement as an increase in interest expense | $ 174 | $ 400 |
Interest rate contracts | Interest expense Member | ||
Effects of derivative instruments | ||
Amount of loss recognized in the income statement as an increase in interest expense | $ 174 | $ 400 |
Derivative Instruments (Detai32
Derivative Instruments (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Effects of derivative instruments | ||||
Amount of Gain Recognized in OCI on Derivatives (Effective Portion) | $ (112) | $ 967 | $ 323 | $ 526 |
Cash Flow Hedging | ||||
Effects of derivative instruments | ||||
Amount of Gain Recognized in OCI on Derivatives (Effective Portion) | (338) | (3) | ||
Amount of Loss (Gain) Reclassified from Accumulated OCI into Income (Effective Portion) | 174 | 400 | ||
Cash Flow Hedging | Interest expense Member | ||||
Effects of derivative instruments | ||||
Amount of Loss (Gain) Reclassified from Accumulated OCI into Income (Effective Portion) | 174 | 400 | ||
Cash Flow Hedging | Interest rate contracts | Interest expense Member | ||||
Effects of derivative instruments | ||||
Amount of Gain Recognized in OCI on Derivatives (Effective Portion) | $ (338) | $ (3) |
Stock-Based Compensation Plan33
Stock-Based Compensation Plans (Details) - The 2007 plan - shares | 6 Months Ended | ||
Jun. 30, 2017 | May 28, 2015 | May 24, 2007 | |
Stock-based compensation plans | |||
Number of shares authorized | 2,800,000 | 800,000 | 2,000,000 |
Options cancelled (in shares) | 166,411 | ||
Outstanding at the end of the period (in shares) | 350,451 | ||
Restricted stock | |||
Stock-based compensation plans | |||
Number of shares authorized | 2,615,960 |
Stock-Based Compensation Plan34
Stock-Based Compensation Plans - Restricted stock activity (Details) - The 2007 plan - Restricted stock - USD ($) $ in Millions | 6 Months Ended | 12 Months Ended |
Jun. 30, 2017 | Dec. 31, 2016 | |
Number Outstanding | ||
Balance at the beginning of the period (in shares) | 299,335 | 396,595 |
Shares vested | (82,413) | (213,528) |
Shares cancelled | (10,666) | (20,377) |
Balance at the end of the period (in shares) | 421,859 | 299,335 |
Remaining average vesting period for recognition of unrecognized compensation expense | 1 year 9 months 18 days | |
Unrecognized compensation expense (in dollars) | $ 6.8 | |
Intrinsic value of unvested awards (in dollars) | $ 11.3 | |
Awards Vesting Over Two Year Member | ||
Number Outstanding | ||
Shares granted | 20,000 | |
Vesting period | 2 years | |
Awards Vesting Over Three Years [Member] | ||
Number Outstanding | ||
Shares granted | 200,700 | 85,000 |
Vesting period | 3 years | 3 years |
Awards vesting over four years [Member] | ||
Number Outstanding | ||
Shares granted | 13,250 | |
Vesting period | 4 years | |
Awards vesting on first anniversary | ||
Number Outstanding | ||
Shares granted | 18,395 | |
Awards Vesting Over One Year [Member] | ||
Number Outstanding | ||
Shares granted | 9,903 | |
Vesting period | 1 year | |
Awards Vesting Over Less Than One Year [Member] | ||
Number Outstanding | ||
Shares granted | 5,000 | |
Vesting period | 1 year |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Income Taxes | ||||
Income tax expense | $ 4,168 | $ 2,418 | $ 10,406 | $ 5,470 |
Effective tax rate (as a percent) | 42.30% | 41.80% | 41.80% | 42.60% |
Fair Value of Financial Instr36
Fair Value of Financial Instruments (Details) - USD ($) $ in Millions | Jun. 30, 2017 | Dec. 31, 2016 |
Level 3 | ||
Fair value of financial instruments | ||
Fair value of notes payable | $ 858.8 | $ 864 |
Operating Segments (Details)
Operating Segments (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017USD ($) | Jun. 30, 2016USD ($) | Jun. 30, 2017USD ($)segment | Jun. 30, 2016USD ($) | Dec. 31, 2016USD ($) | |
Operating segments | |||||
Number of operating segments | segment | 2 | ||||
Revenue: | |||||
Lease rent revenue | $ 31,337 | $ 29,181 | $ 61,572 | $ 57,457 | |
Maintenance reserve revenue | 11,881 | 15,514 | 43,843 | 31,333 | |
Spare parts and equipment sales | 19,383 | 3,673 | 31,979 | 6,305 | |
Gain on sale of leased equipment | 3,527 | 258 | 4,509 | 3,250 | |
Other revenue | 1,716 | 992 | 3,888 | 1,992 | |
Total revenue | 67,844 | 49,618 | 145,791 | 100,337 | |
Expenses: | |||||
Depreciation and amortization expense | 16,015 | 16,188 | 32,644 | 32,607 | |
Cost of spare parts and equipment sales | 13,730 | 2,787 | 23,130 | 4,719 | |
Write-down of equipment | 2,277 | 1,893 | 15,285 | 3,929 | |
General and administrative | 13,065 | 10,685 | 26,265 | 22,437 | |
Technical expense | 2,448 | 1,803 | 4,740 | 3,499 | |
Net finance costs | 11,312 | 10,534 | 22,178 | 20,542 | |
Total expenses | 58,847 | 43,890 | 124,242 | 87,733 | |
Earnings from operations | 8,997 | 5,728 | 21,549 | 12,604 | |
Total assets | 1,386,354 | 1,386,354 | $ 1,337,887 | ||
Operating Segments [Member] | Leasing and Related Operations | |||||
Revenue: | |||||
Lease rent revenue | 31,337 | 29,181 | 61,572 | 57,457 | |
Maintenance reserve revenue | 11,881 | 15,514 | 43,843 | 31,333 | |
Spare parts and equipment sales | 12,874 | 900 | 19,299 | 900 | |
Gain on sale of leased equipment | 3,527 | 258 | 4,509 | 3,250 | |
Other revenue | 1,649 | 972 | 3,774 | 1,905 | |
Total revenue | 61,268 | 46,825 | 132,997 | 94,845 | |
Expenses: | |||||
Depreciation and amortization expense | 15,929 | 16,103 | 32,470 | 32,440 | |
Cost of spare parts and equipment sales | 9,918 | 648 | 14,623 | 648 | |
Write-down of equipment | 1,351 | 1,893 | 13,442 | 3,929 | |
General and administrative | 12,207 | 9,958 | 24,620 | 20,938 | |
Technical expense | 2,448 | 1,803 | 4,740 | 3,499 | |
Net finance costs | 11,312 | 10,414 | 22,178 | 20,327 | |
Total expenses | 53,165 | 40,819 | 112,073 | 81,781 | |
Earnings from operations | 8,103 | 6,006 | 20,924 | 13,064 | |
Total assets | 1,359,406 | 1,359,406 | 1,307,460 | ||
Operating Segments [Member] | Spare Parts Sales | |||||
Revenue: | |||||
Spare parts and equipment sales | 6,509 | 2,773 | 12,680 | 5,405 | |
Other revenue | 276 | 590 | 450 | 948 | |
Total revenue | 6,785 | 3,363 | 13,130 | 6,353 | |
Expenses: | |||||
Depreciation and amortization expense | 86 | 85 | 174 | 167 | |
Cost of spare parts and equipment sales | 3,812 | 2,139 | 8,507 | 4,071 | |
Write-down of equipment | 926 | 1,843 | |||
General and administrative | 858 | 727 | 1,645 | 1,499 | |
Net finance costs | 120 | 215 | |||
Total expenses | 5,682 | 3,071 | 12,169 | 5,952 | |
Earnings from operations | 1,103 | 292 | 961 | 401 | |
Total assets | 26,948 | 26,948 | $ 30,427 | ||
Intersegment Eliminations [Member] | |||||
Revenue: | |||||
Other revenue | (209) | (570) | (336) | (861) | |
Total revenue | (209) | (570) | (336) | (861) | |
Expenses: | |||||
Earnings from operations | $ (209) | $ (570) | $ (336) | $ (861) |
Subsequent Events (Details)
Subsequent Events (Details) - Subsequent event | Jul. 31, 2017USD ($)engine |
WEST III | |
Subsequent events | |
Aggregate principal amount | $ 335,700,000 |
Delivery Term | 270 days |
Number of aircraft engine | engine | 56 |
Series A Notes | |
Subsequent events | |
Aggregate principal amount | $ 293,700,000 |
Fixed rate (as a percent) | 4.69% |
Issued price (as a percent) | $ 99.91 |
Series B Notes | |
Subsequent events | |
Aggregate principal amount | $ 42,000,000 |
Fixed rate (as a percent) | 6.36% |
Issued price (as a percent) | $ 98.3 |