SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM 10-Q
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2000
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-28774
-------------------------------
WILLIS LEASE FINANCE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 68-0070656
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2320 Marinship Way, Suite 300 94965
Sausalito, CA (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code (415) 331-5281
-------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
TITLE OF EACH CLASS OUTSTANDING AT OCTOBER 31, 2000
------------------- -------------------------------
Common Stock, $0.01 Par Value 7,404,638
1
WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES
INDEX
PART I FINANCIAL INFORMATION PAGE NO.
--------
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets
As of September 30, 2000 and December 31, 1999 3
Consolidated Statements of Income
Three and nine months ended September 30, 2000 and 1999 4
Consolidated Statements of Shareholders' Equity
Year ended December 31, 1999 and nine months ended September 30, 2000 5
Consolidated Statements of Cash Flows
Nine months ended September 30, 2000 and 1999 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 13
Item 3. Quantitative and Qualitative Disclosures About Market Risk 22
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 24
2
WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
2000 1999
-------------- --------------
ASSETS
Cash and cash equivalents including restricted cash of $14,051
at September 30, 2000 and $15,992 at December 31, 1999 $24,303 $25,468
Equipment held for operating lease, less accumulated depreciation
of $25,982 at September 30, 2000 and $21,592 at December 31, 1999 327,697 338,788
Net investment in direct finance lease 8,112 8,666
Spare parts inventory 27,344 22,237
Operating lease related receivable 3,889 3,236
Trade receivables, net 6,833 1,904
Investment in unconsolidated affiliates 5,724 5,082
Other assets 7,600 6,934
-------------- --------------
Total assets $411,502 $412,315
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $7,570 $6,138
Deferred income taxes 16,400 12,815
Notes payable 282,736 289,678
Capital lease obligation -- 2,489
Residual share payable 2,500 3,465
Maintenance reserves 18,491 18,555
Security deposits 4,199 5,522
Unearned lease revenue 4,422 4,115
-------------- --------------
Total liabilities 336,318 342,777
-------------- --------------
Shareholders' equity:
Preferred stock ($0.01 par value, 5,000,000 shares authorized; none
outstanding) -- --
Common stock, ($0.01 par value, 20,000,000 shares authorized; 7,404,638 and
7,397,877 shares issued and outstanding
as of September 30, 2000 and December 31,1999, respectively) 74 74
Paid-in capital in excess of par 42,485 42,446
Retained earnings 32,625 27,018
-------------- --------------
Total shareholders' equity 75,184 69,538
-------------- --------------
Total liabilities and shareholders' equity $411,502 $412,315
============== ==============
See accompanying notes to the consolidated financial statements
3
WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- ---------------------
2000 1999 2000 1999
--------- ---------- ---------- ---------
REVENUE
Lease revenue $12,553 $12,779 $38,233 $34,426
Gain on sale of leased equipment 3,225 2,202 8,129 9,462
Spare part sales 6,022 6,065 21,331 21,254
Sale of equipment acquired for resale -- -- 2,500 9,775
--------- ---------- ---------- ---------
Total revenue 21,800 21,046 70,193 74,917
--------- ---------- ---------- ---------
EXPENSES
Depreciation expense 3,644 3,501 10,639 9,485
Cost of spare part sales 4,283 13,989 16,270 25,248
Cost of equipment acquired for resale -- -- 2,150 8,354
General and administrative 3,648 4,545 11,476 13,633
--------- ---------- ---------- ---------
Total expenses 11,575 22,035 40,535 56,720
--------- ---------- ---------- ---------
Earnings (loss) from operations 10,225 (989) 29,658 18,197
Interest expense 6,601 6,048 19,568 16,054
Interest and other income (264) (334) (726) (911)
Residual share 168 212 508 635
--------- ---------- ---------- ---------
Net interest and finance cost 6,505 5,926 19,350 15,778
--------- ---------- ---------- ---------
Loss from unconsolidated affiliate (325) (395) (1,116) (435)
--------- ---------- ---------- ---------
Earnings (loss) before income taxes 3,395 (7,310) 9,192 1,984
Income taxes (1,324) 2,926 (3,585) (794)
--------- ---------- ---------- ---------
Net earnings (loss) $2,071 $(4,384) $5,607 $1,190
========= ========== ========== =========
Basic earnings per common share:
--------- ---------- ---------- ---------
Net earnings $0.28 ($0.59) $0.76 $0.16
========= ========== ========== =========
Diluted earnings per common share:
--------- ---------- ---------- ---------
Net earnings $0.28 ($0.59) $0.75 $0.16
========= ========== ========== =========
Average common shares outstanding 7,403 7,394 7,401 7,377
Diluted average common shares
outstanding 7,496 7,448 7,489 7,447
See accompanying notes to the consolidated financial statements
4
WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1999 AND NINE MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS)
Issued and
outstanding Paid-in Total
shares of Common capital in Retained shareholders'
common stock stock excess of par earnings equity
------------ ------- ------------- -------- ------
Balance at December 31, 1998 7,361 $74 $42,033 $23,735 $65,842
Shares issued 37 -- 339 -- 339
Tax benefit from disqualified
dispositions of qualified shares -- -- 74 -- 74
Net income -- -- -- 3,283 3,283
------------ ------- ------------- -------- -------
Balances at December 31, 1999 7,398 74 42,446 27,018 69,538
Shares issued 7 -- 39 -- 39
Tax benefit from disqualified
dispositions of qualified shares -- -- -- -- --
Net income -- -- -- 5,607 5,607
------------ ------- ------------- -------- -------
Balances at September 30, 2000 (unaudited) 7,405 $74 $42,485 $32,625 $75,184
============ ======= ============= ======== =======
See accompanying notes to the consolidated financial statements
5
WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
Nine Months Ended September 30,
---------------------------------
2000 1999
-------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $5,607 $1,190
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation expense 10,639 9,485
Gain on sale of leased equipment (8,129) (9,462)
(Decrease) increase in residual share payable (965) 635
Loss from unconsolidated affiliate 1,116 435
Changes in assets and liabilities:
Spare parts inventory 5,525 11,758
Receivables (5,582) 2,557
Other assets (327) (2,327)
Accounts payable and accrued expenses 1,432 (5,085)
Deferred income taxes 3,585 410
Unearned lease revenue 307 243
Maintenance reserves (64) 4,343
Security deposits (1,323) 874
-------------- ---------------
Net cash provided by operating activities 11,821 15,056
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment held for operating lease (net
of selling expenses) 47,024 45,730
Purchase of equipment held for operating lease (48,855) (107,946)
Purchase of property, equipment and furnishings (558) (1,516)
Investment in unconsolidated affiliates (1,758) (87)
Principal payments received on direct finance lease 554 303
-------------- ---------------
Net cash used in investing activities (3,593) (63,516)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable 66,777 113,781
Proceeds from issuance of common stock 39 339
Principal payments on notes payable (73,720) (59,470)
Principal payments on capital lease obligation (2,489) (121)
-------------- ---------------
Net cash (used in) provided by financing activities (9,393) 54,529
(Decrease) increase in cash and cash equivalents (1,165) 6,069
Cash and cash equivalents at beginning of period including
restricted cash of $15,992 and $13,738 at December 31,
1999 and 1998, respectively 25,468 24,043
-------------- ---------------
Cash and cash equivalents at end of period including restricted cash
of $14,051 and $15,420 at September 30, 2000 and 1999, respectively 24,303 30,112
============== ==============
Supplemental information:
Net cash paid for: Interest $20,416 $15,251
-------------- ---------------
Income Taxes $0 $674
-------------- ---------------
Non-cash investing activity:
Transfer of assets to unconsolidated affiliate (net) $0 $5,630
-------------- ---------------
Non-cash financing activity:
Installment loan related to sale of equipment held for
operating lease $0 $852
-------------- ---------------
See accompanying notes to the consolidated financial statements
6
WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements of Willis
Lease Finance Corporation and its subsidiaries (the "Company") 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 footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. The accompanying unaudited interim 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 the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1999. In
addition, certain amounts in the prior period's financial statements have been
reclassified to conform to the current period's presentation.
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal and
recurring adjustments) necessary to present fairly the financial position of the
Company as of September 30, 2000 (unaudited), and December 31, 1999, and the
unaudited results of its operations for the three and nine month periods ended
September 30, 2000 and 1999 and its cash flows for the nine month periods ended
September 30, 2000 and 1999. The results of operations and cash flows for the
periods ended September 30, 2000 are not necessarily indicative of the results
of operations or cash flows which may be reported for the remainder of 2000.
Effective January 1, 2000, the Company revised its inventory cost
allocation methodology for whole engine and aircraft purchases. Under the
revised method, the Company estimates a period of time over which the Company
expects to liquidate its investment in such purchases. Periodically, the Company
compares its remaining investment in such purchases to its expected remaining
investment in such purchases and, to the extent necessary, recognizes an
additional amount of cost and spare parts sales to bring the remaining
investment in such purchases in line with the expected level of investment.
2. MANAGEMENT ESTIMATES
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
7
WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. COMMITMENTS
The Company has two leases for its office and warehouse space. The
annual lease rental commitments, as applicable, are $364,000 and $309,000 and
the leases expire on November 30, 2005 and May 31, 2003, respectively.
The Company has committed to purchase, during the remainder of 2000,
one additional used engine for its operations, for not more than $4.5 million.
Under the terms of the Sichuan Snecma joint venture (see note 4 below),
the Company is committed to fund up to an additional $2.2 million to the joint
venture over the next three years. During the nine month period ended September
30, 2000, $0.8 million has been contributed.
Under the terms of the Pacific Gas Turbine Center, LLC ("PGTC LLC")
joint venture (see note 4 below), to the extent that PGTC LLC requires
additional working capital and the Company and its partner in PGTC LLC agree to
provide such capital, each partner is required to contribute to such capital
requirement, equally. During the nine month period ended September 30, 2000, the
Company contributed $1.0 million of additional capital to PGTC LLC. In addition,
the Company loaned PGTC LLC $1.5 million during the three months ended September
30, 2000 at a rate of 9.5% p.a. repayable within 120 days.
In January 2000, a suit was filed against the Company in connection
with the sale by the Company of an aircraft engine for cash consideration. The
buyer of the engine alleges that the sale was not validly consummated and
amongst other things requests that the purchase price of the engine, $3.2
million, be returned to the buyer. The Company is vigorously contesting the suit
and has filed a cross-complaint in connection with the suit. The Company
believes that the loss, if any, resulting from the suit will not have a material
impact on the Company's financial position.
4. INVESTMENT IN UNCONSOLIDATED AFFILIATES
In May 1999, the Company entered into an agreement with the Chromalloy
Gas Turbine Corporation, a subsidiary of Sequa Corporation, to operate a joint
venture to perform maintenance, repair and overhaul of commercial jet engines.
Under the terms of the joint venture agreement, the Company and Chromalloy
formed a new company, PGTC LLC. The Company contributed the operations and
assets of its wholly owned subsidiary Pacific Gas Turbine Center, Incorporated
("PGTC Inc.") (with a book value of $5.7 million) and Chromalloy contributed
working capital to the joint venture. Both the Company and Chromalloy have a 50%
interest in the joint venture. Under the equity method, the original
contribution was recorded at cost and is adjusted periodically to recognize the
Company's share of the earnings or losses of PGTC LLC after the date of
formation. The contribution is shown in the Company's Consolidated Balance Sheet
as a single amount and earnings or losses are shown in the Consolidated
Statement of Income as a single amount. All intercompany profits or losses are
eliminated.
In July 1999, the Company entered into an agreement to participate in a
joint venture - Sichuan Snecma Aero-engine Maintenance Co. Ltd. Sichuan Snecma
will focus on providing maintenance services for CFM56 series engines. Other
participants in the joint venture are China Southwest Airlines, Snecma Services
and Beijing Kailan Aviation Technology Development and Services Corporation. The
Company's investment in Sichuan Snecma at September 30, 2000 is $0.8 million.
This investment represents approximately a 7% interest in the joint venture.
This joint venture is in its start-up phase of activity.
8
WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. 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 spare engines and other aircraft equipment
and (ii) Spare Parts Sales which involves the purchase and resale of after
market engine and airframe parts.
In July 1998, the Company formed PGTC Inc. to engage in engine
disassembly and maintenance, repair and overhaul services. At the end of May
1999, the Company's investment in and the operations of PGTC Inc. were
contributed to a joint venture, PGTC LLC (see note 4 above). During the five
months ended May 31, 1999, while PGTC Inc. was a wholly owned subsidiary of the
Company, the majority of PGTC Inc.'s revenue was derived from services provided
to Willis Aeronautical Services, Inc. (WASI), the Company's spare parts
subsidiary. Revenue from third parties during this period was not material.
Accordingly, for the five months ended May 31, 1999 the operations of PGTC Inc.
are included in the Spare Parts Sales segment. Subsequent to the formation of
PGTC LLC, because PGTC LLC is an unconsolidated affiliate accounted for using
the equity method of accounting, PGTC LLC is not included in the operating
segment analysis for the three and nine months ended September 30, 2000.
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.
In September 1999, the Company recognized an inventory write down due
to a revaluation of inventory of WASI. The write-down, which totaled $7.4
million, was taken as an expense for the quarter ended September 30, 1999.
9
WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table presents a summary of the operating segments (in thousands):
For the three months ended September 30, 2000 For the three months ended September 30, 1999
--------------------------------------------- ---------------------------------------------
Spare Spare
Parts Parts
Leasing Sales Total Leasing Sales Total
--------------------------------------------- ---------------------------------------------
Revenue
Lease revenue $11,770 $783 $12,553 $11,229 $1,550 $12,779
Gain on sale of leased
equipment 3,225 3,225 2,202 2,202
Spare parts sales 6,022 6,022 6,065 6,065
--------------------------------------------- ---------------------------------------------
Total revenue 14,995 6,805 21,800 13,431 7,615 21,046
Expenses
Depreciation expense 2,854 790 3,644 2,696 805 3,501
Cost of spare parts 4,283 4,283 13,989 13,989
General and administrative 2,521 1,127 3,648 3,499 1,046 4,545
--------------------------------------------- ---------------------------------------------
Total expenses 5,375 6,200 11,575 6,195 15,840 22,035
--------------------------------------------- ---------------------------------------------
Earnings (loss) from
operations 9,620 605 10,225 7,236 (8,225) (989)
Interest expense 5,690 911 6,601 5,031 1,017 6,048
Interest and other income (258) (6) (264) (252) (82) (334)
Residual share 168 168 212 212
--------------------------------------------- ---------------------------------------------
Net interest and finance cost 5,600 905 6,505 4,991 935 5,926
--------------------------------------------- ---------------------------------------------
Earnings (loss)
before taxes* $4,020 ($300) $3,720 $2,245 ($9,160) ($6,915)
============================================= =============================================
Total assets as of
September 30, 2000 and 1999* $358,242 $47,536 $405,778 $367,671 $43,356 $411,027
============================================= =============================================
* Earnings (loss) before taxes and total assets for
the periods ended September 30, 2000 and 1999 do not
include results from or investment in unconsolidated
affiliates.
10
WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table presents a summary of the operating segments (in thousands):
For the nine months ended September 30, 2000 For the nine months ended September 30, 1999
--------------------------------------------- ---------------------------------------------
Spare Spare
Parts Parts
Leasing Sales Total Leasing Sales Total
--------------------------------------------- ---------------------------------------------
Revenue
Lease revenue $35,208 $3,025 $38,233 $31,854 $2,572 $34,426
Gain on sale of leased
equipment 8,129 8,129 9,462 9,462
Spare parts sales 21,331 21,331 21,254 21,254
Sale of equipment acquired
for resale 2,500 2,500 9,775 9,775
--------------------------------------------- ---------------------------------------------
Total revenue 43,337 26,856 70,193 51,091 23,826 74,917
Expenses
Depreciation Expense 8,339 2,300 10,639 8,118 1,367 9,485
Cost of spare parts 16,270 16,270 25,248 25,248
Cost of equipment acquired
for resale 2,150 2,150 8,354 8,354
General and administrative 8,362 3,114 11,476 8,935 4,698 13,633
--------------------------------------------- ---------------------------------------------
Total expenses 16,701 23,834 40,535 25,407 31,313 56,720
--------------------------------------------- ---------------------------------------------
Earnings (loss)
from operations 26,636 3,022 29,658 25,684 (7,487) 18,197
Interest expense 16,728 2,840 19,568 13,588 2,466 16,054
Interest and other income (743) 17 (726) (714) (197) (911)
Residual share 508 508 635 635
--------------------------------------------- ---------------------------------------------
Net interest and finance cost 16,493 2,857 19,350 13,509 2,269 15,778
--------------------------------------------- ---------------------------------------------
Earnings (loss) before taxes* $10,143 $165 $10,308 $12,175 ($9,756)(1) $2,419
============================================= =============================================
Total assets as of
September 30, 2000 and 1999* $358,242 $47,536 $405,778 $367,671 $43,356 $411,027
============================================= =============================================
* Earnings (loss) before taxes and total assets for the periods ended
September 30, 2000 and 1999 do not include results from or investment in
unconsolidated affiliates.
(1) The Company estimates that loss from operations would have been
$8.7 million if the effect of PGTC Inc.'s operations, after intercompany
eliminations, were eliminated from the results of the spare parts segment.
11
WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. NOTES PAYABLE
At September 30, 2000 notes payable consists of bank loans totaling
$282.7 million payable over periods of 2 to 6 years with current interest rates
varying between approximately 6.95% and 11.8%.
Included in notes payable is a $150.0 million revolving credit
facility. As of September 30, 2000 $25.8 million was available under this
facility subject to the Company providing sufficient collateral. The facility
has a two-year revolving period which ended September 2000 but has been extended
to December 15, 2000 followed by a term-out period ending September 2004. It is
renewable annually with an interest rate currently of LIBOR plus 2.0%.
At September 30, 2000 the Company also had a $125.0 million debt
warehouse facility available to a wholly owned, consolidated special purpose
finance subsidiary, WLFC Funding Corporation. The facility is renewable
annually and has an eight-year term with a revolving period to February 2001
followed by a seven-year amortization period. Currently the interest rate is
commercial paper plus 1.55%. As of September 30, 2000, $28.4 million was
available under this facility subject to the Company providing sufficient
collateral.
At September 30, 2000, the Company had a $29.2 million term loan
facility available to a wholly owned, consolidated special purpose subsidiary
of the Company, WLFC AC1 Corporation, for the financing of jet aircraft
engines transferred by the Company to such subsidiary. The facility is a five
year term loan with a final maturity of June 30, 2005. The interest rate on
this facility is currently LIBOR plus 2.05%. This facility is fully drawn.
The following is a summary of the aggregate maturities of notes payable at
September 30, 2000 (dollars in thousands):
Year ending December 31,
2000 $6,540
2001 37,082
2002 37,397
2003 34,273
2004 68,522
2005 and thereafter 98,922
---------
$282,736
=========
12
WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Company's core business is acquiring and leasing, primarily
pursuant to operating leases, commercial aircraft spare engines and related
aircraft equipment. In addition, the Company engages in the selective purchase,
sale and resale of commercial aircraft engines. The Company, through Willis
Aeronautical Services, Inc. ("WASI"), also specializes in the purchase and
resale of aftermarket airframe and engine parts, engines, modules and rotable
components. The Company, through its joint venture PGTC LLC (see footnote 4)
provides engine disassembly and maintenance, repair and overhaul services to the
Company and third parties from its San Diego location.
Revenue consists primarily of lease revenue, income from the sale of
spare parts and components and income from the sale of engines and equipment.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1999:
LEASING RELATED ACTIVITIES. Lease related revenue for the quarter ended
September 20, 2000, decreased 2% to $12.6 million from $12.8 million for the
comparable period in 1999. This decrease reflects lease related revenues from
fewer engines. The aggregate of net book value of leased equipment and net
investment in direct finance lease at September 30, 2000 and 1999 was $335.8
million and $345.2 million, respectively.
During the quarter ended September 30, 2000, two engines were added to
the Company's lease portfolio at a total cost of $2.7 million. Seven engines
from the lease portfolio were sold or transferred to inventory for sale. The
engines sold from the lease portfolio had a total net book value of $20.6
million and were sold for a gain of $3.2 million.
During the quarter ended September 30, 1999, 12 engines and one
aircraft were added to the Company's lease portfolio at a cost of $27.6 million.
The Company sold or transferred five engines from the lease portfolio. The
engines sold from the lease portfolio had a net book value of $7.1 million and
were sold for a gain of $2.2 million.
SPARE PARTS SALES. During the quarter ended September 30, 2000, revenue
from spare parts sales totaled $6.0 million. The level of revenue during the
third quarter was 1% lower than the $6.1 million in the comparable period in
1999. Gross margin increased to 29% from negative margins in the corresponding
period in 1999. The negative gross margin in the comparable period was due to an
inventory write-down of $7.4 million.
DEPRECIATION EXPENSE. Depreciation expense increased 4% to $3.6 million
for the quarter ended September 30, 2000 from the comparable period in 1999.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses decreased 20% to $3.6 million for the quarter ended September 30, 2000,
from the comparable period in 1999. The decrease reflects reductions in general
and administrative expenses associated with the leasing and spare parts business
segments.
INTEREST EXPENSE AND FINANCE COSTS. Interest expense related to all
activities increased 9% to $6.6 million for the quarter ended September 30,
2000 from the comparable period in 1999, due to an increase in interest
rates. Residual sharing expense related to debt decreased 21% to $168,000 for
the quarter ended September 30, 2000 from $212,000 for the comparable period
in 1999. Residual sharing arrangements apply to two of the Company's engines
as of September 30, 2000 and are a function of the difference between the
debt associated with the residual sharing arrangement and estimated residual
13
WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES
proceeds. The Company accrues for its residual sharing obligations using net
book value as an estimate for residual proceeds. Interest and other income
for each of the quarters ended September 30, 2000 and 1999, was $0.3 million.
Interest is earned on cash, deposits held and notes receivable.
INCOME TAXES. Income tax expense for the quarter ended September 30,
2000 was $1.3 million compared to an income tax benefit of $2.9 million for the
comparable period in 1999. The effective tax rate for the quarters ended
September 30, 2000 and 1999 were 39% and 40%, respectively.
LOSS FROM UNCONSOLIDATED AFFILIATE. In May 1999, the Company entered
into a joint venture to perform maintenance, repair and overhaul of commercial
jet aircraft engines (see footnote 4 above). The Company accounts for its 50%
interest in the joint venture using the equity method. During the three months
ended September 30, 2000 and 1999, the Company's share of net losses from the
joint venture, after inter-company eliminations, was $325,000 and $395,000
respectively.
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THE NINE MONTHS
ENDED SEPTEMBER 30, 1999:
LEASING RELATED ACTIVITIES. Leasing related revenue for the nine months
ended September 30, 2000, increased 11% to $38.2 million from $34.4 million for
the comparable period in 1999. This increase reflects lease related revenues
from a higher average level of leased assets held during that period.
During the nine months ended September 30, 2000, 15 engines were added
to the Company's lease portfolio at a total cost of $48.9 million. Nineteen
engines from the lease portfolio were sold or transferred to inventory for sale.
The engines sold from the lease portfolio had a total net book value of $38.9
million and were sold for a gain of $8.1 million.
During the nine months ended September 30, 1999, 42 engines and one
aircraft were added to the Company's lease portfolio at a total cost of $107.9
million. Nineteen engines and three spare parts packages were sold or
transferred from the lease portfolio. The engines sold had a net book value of
$36.2 million and were sold for a gain of $9.5 million.
SPARE PARTS SALES. During the nine months ended September 30, 2000,
revenue from spare parts sales totaled $21.3 million of which $3.5 million
was associated with the sale of whole engines. Gross margins increased to 24%
from negative margins in the corresponding period in 1999. The negative
margin in 1999 was due to an inventory write-down of $7.4 million.
DEPRECIATION EXPENSE. Depreciation expense increased 12% to $10.6
million for the nine months ended September 30, 2000 from the comparable period
in 1999, due primarily to a higher average level of lease portfolio assets held
during the period.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses decreased 16% to $11.5 million for the nine months ended September 30,
2000, from the comparable period in 1999. This change was primarily due to the
five months of expenses related to PGTC Inc. included in the period ended
September 30, 1999 whereas, under the equity method of accounting, no expenses
from PGTC LLC's operations are included in the period ended September 30, 2000.
Additionally, the decrease reflects reductions in general and administrative
expenses associated with the leasing and spare parts business segments.
INTEREST EXPENSE AND FINANCE COSTS. Interest expense related to all
activities increased 22% to $19.6 million for the nine months ended September
30, 2000 from the comparable period in 1999, due to an increase in interest
rates and average debt outstanding. This increase in debt was primarily related
to debt associated with the higher average level of lease portfolio assets held
14
during the period. Residual sharing expense related to debt decreased 20% to
$508,000 for the nine months ended September 30, 2000 from $635,000 for the
comparable period in 1999. Residual sharing arrangements apply to two of the
Company's engines as of September 30, 2000 and are a function of the
difference between the debt associated with the residual sharing arrangement
and estimated residual proceeds. The Company accrues for its residual sharing
obligations using net book value as an estimate for residual proceeds.
Interest and other income for each of the nine months ended September 30,
2000 and 1999 were $0.7 million and $0.9 million, respectively. Interest is
earned on cash, deposits held and notes receivable.
INCOME TAXES. Income tax expense for the nine months ended September
30, 2000 was $3.6 million compared to income tax expense of $0.8 million for the
comparable period in 1999. This increase reflects an increase in the Company's
pre-tax earnings partially due to the inventory write-down in September, 1999.
The effective tax rate for the nine months ended September 30, 2000 and 1999
were 39% and 40%, respectively.
LOSS FROM UNCONSOLIDATED AFFILIATE. In May 1999, the Company entered
into a joint venture to perform maintenance, repair and overhaul of commercial
jet aircraft engines (see footnote 4 above). The Company accounts for its 50%
interest in the joint venture using the equity method. During the nine months
ended September 30, 2000 and 1999, the Company's share of net losses from the
joint venture, after inter-company eliminations, was $1.1 million and $435,000
(representing 4 months trading from May 1999), respectively.
ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (FASB) issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
which standardizes the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, by requiring that an entity
recognize those items as assets or liabilities in the statement of financial
position and measure them at fair value.
SFAS No. 137, "Accounting for Derivatives, Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133, an
amendment of FASB Statement No. 133," issued in June 1999, defers the effective
date of SFAS No. 133. SFAS No. 133, as amended, is now effective for all fiscal
quarters of all fiscal years beginning after June 15, 2000. As of September 30,
2000, the Company is reviewing the effect SFAS No. 133 will have on the
Company's consolidated financial statements.
15
WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES
In September 2000 FASB issued SFAS No. 140, "Accounting for transfers
and servicing of financial assets and extinguishment of liabilities, an
amendment of FASB Statement No. 125."
Statement 140 provides guidance on the following topics: securitization
transactions involving financial assets, sales of financial assets such as
receivables, loans and securities, collateralized borrowing arrangements,
repurchase agreements, and extinguishments of liabilities. The provisions of
Statement 140 will become effective for transactions entered into after March
31, 2001. The Company is currently evaluating the impact of SFAS 140 on the
Company's consolidated financial statements.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has financed its growth through borrowings
secured by its equipment lease portfolio, operating cash flow and unrestricted
cash balances. Cash of approximately $66.8 million and $113.8 million, in the
nine month period ended September 30, 2000 and 1999, respectively, was derived
from borrowings. Cash flow from operating activities provided $11.8 million and
$15.1 million in the nine month periods ended September 30, 2000 and 1999,
respectively. In these same time periods, $73.7 million and $59.5 million,
respectively, of cash was used to repay debt.
The Company's primary use of funds is for the purchase of equipment for
lease. Approximately $48.9 million and $107.9 million of funds were used for
this purpose in the nine month period ended September 30, 2000 and 1999,
respectively.
At September 30, 2000, the Company had a $150.0 million revolving
credit facility to finance the acquisition of aircraft engines, aircraft and
spare parts for sale or lease as well as for general working capital purposes.
As of September 30, 2000, $25.8 million was available under this facility,
subject to the Company providing sufficient collateral.
At September 30, 2000, the Company had a $125.0 million debt warehouse
facility. The facility is available to a wholly owned special purpose finance
subsidiary of the Company, WLFC Funding Corporation, for the financing of jet
aircraft engines transferred by the Company to such finance subsidiary or
acquired by it. The subsidiary is consolidated for financial statement
presentation purposes. The Company has guaranteed the obligations under the
facility on a limited basis, up to an amount equal to the greater of: (i) the
lesser of $5 million and 20% of the outstanding obligations or (ii) 10% of the
outstanding obligations. As of September 30, 2000, $28.4 million was available
under this facility assuming compliance with the facility's terms including
sufficiency of collateral.
Approximately $6.5 million of the Company's debt is repayable during
the remainder of 2000. Such repayments consist of scheduled installments due
under term loans.
The Company believes that its current equity base, internally
generated funds and existing debt facilities are sufficient to maintain the
Company's current level of operations. A decline in the level of internally
generated funds or the availability under the Company's existing debt
facilities would impair the Company's ability to sustain its current level of
operations. The Company is currently discussing additions to its debt and
equity capital bases with its commercial and investment banks. If the Company
is not able to access additional debt and equity capital, its ability to
continue to grow its asset base consistent with historical trends will be
impaired and its future growth limited to that which can be funded from
internally generated capital.
Certain of the Company's engines have been financed under floating
rate facilities. Accordingly, the Company is subject to interest rate risk,
since the underlying lease revenue is fixed. See "Management of Interest Rate
Exposure" below.
16
WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES
The Company has committed to purchase, during the remainder of 2000,
one additional used engine for its operations for not more than $4.5 million.
MANAGEMENT OF INTEREST RATE EXPOSURE
At September 30, 2000, $250.1 million of the Company's borrowings were
on a variable rate basis at various interest rates tied to LIBOR, the commercial
paper rate, or the prime rate. The Company's equipment leases are generally
structured at fixed rental rates for specified terms. Increases in interest
rates could narrow or eliminate the spread, or result in a negative spread,
between the rental revenue the Company realizes under its leases and the
interest rate that the Company pays under its borrowings.
In September 1996, the Company purchased an amortizing interest rate
cap, maturing in October, 2000, in order to limit its exposure to increases in
interest rates on a portion of its variable rate borrowings. Pursuant to this
cap, the counter party will make payments to the Company, based on the notional
amount of the cap, if the three-month LIBOR rate is in excess of 7.66%. As of
September 30, 2000, the notional principal amount of the cap was $26.0 million.
The cost of the cap is being amortized as an expense over its remaining term. To
further mitigate exposure to interest rate changes, the Company has entered into
interest rate swap agreements which have notional outstanding amounts of $60.0
million, a weighted average remaining term of 15 months and a weighted average
fixed rate of 5.90%.
Under its borrowing agreement, WLFC Funding Corporation is required to
hedge a certain portion of its $125 million warehouse facility against changes
in interest rates. WLFC Funding Corporation has entered into interest rate swap
agreements in order to meet such hedging requirements and to manage the variable
interest rate risk related to its debt. As of September 30, 2000, such swap
agreements had notional outstanding amounts totaling $65.0 million, a weighted
average remaining term of 29 months and a weighted average fixed rate of 6.02%.
Interest expense for the three and nine month periods ended
September 30, 2000 was affected by the Company's interest rate hedges by
approximately $206,000 and $331,000, respectively. The Company will be
exposed to risk in the event of non-performance of the interest rate hedge
counter parties. The Company anticipates that it will hedge additional
amounts of its floating rate debt during the next several months.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Except for historical information contained herein, the discussion in
this report contains forward-looking statements that involve risks and
uncertainties, such as statements of the Company's plans, objectives,
expectations and intentions. The Company's actual results could differ
materially from those discussed herein. Factors that could cause or contribute
to such differences include those discussed below as well as those discussed
elsewhere herein and in the Company's report on Form 10-K for the year ended
December 31, 1999. The cautionary statements made in this report should be read
as being applicable to all related forward-looking statements wherever they
appear in this report or in other written or oral statements by the company.
The businesses in which the Company is engaged are capital intensive
businesses. Accordingly, the Company's ability to successfully execute its
business strategy and to sustain its operations is dependent, in large part, on
the availability of debt and equity capital. There can be no assurance that the
necessary amount of such capital will continue to be available to the Company on
favorable terms or at all. If the Company is not successful in obtaining
sufficient capital, the Company's ability to: (i) add new aircraft engines,
aircraft and spare parts packages to its portfolio, (ii) add inventory to
support its spare parts sales, (iii) fund its working capital needs, (iv)
develop the business of PGTC LLC, and (v) finance possible future acquisitions,
would be impaired. The Company's inability to obtain sufficient capital would
have a material adverse effect on the Company's business, financial condition
and/or results of operations.
The Company retains title to the aircraft engines, aircraft and parts
packages that it leases to third parties. Upon termination of a lease, the
Company will seek to re-lease or sell the aircraft equipment or will dismantle
the equipment and will sell the parts. The Company also engages in the selective
purchase and resale of commercial aircraft engines and engine
17
WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES
components. On occasion, the Company purchases engines or components without
having a firm commitment for their sale. Numerous factors, many of which are
beyond the Company's control, may have an impact on the Company's ability to
re-lease or sell aircraft equipment on a timely basis, including the following:
(i) general market conditions, (ii) the condition of the aircraft equipment upon
termination of the lease, (iii) the maintenance services performed during the
lease term and, as applicable, the number of hours remaining until the next
major maintenance is required, (iv) regulatory changes (particularly those
imposing environmental, maintenance and other requirements on the operation of
aircraft engines), (v) changes in the supply or cost of aircraft engines, and
(vi) technological developments. There is no assurance that the Company will be
able to re-lease or sell aircraft equipment on a timely basis or on favorable
terms. The failure to re-lease or sell aircraft equipment on a timely basis or
on favorable terms could have a material adverse effect on the Company's
business, financial condition and/or results of operations.
The Company experiences fluctuations in its operating results. Such
fluctuations may be due to a number of factors, including: (i) general economic
conditions, (ii) the timing of sales of engines and spare parts, (iii) financial
difficulties experienced by airlines, (iv) interest rates, (v) fuel costs, (vi)
downturns in the air transportation industry, (vii) increased fare competition,
(viii) decreases in growth of air traffic, (ix) unanticipated early lease
termination or a default by a lessee, (v) the timing of engine acquisitions,
(xi) engine marketing activities, (xii) fluctuations in market prices for the
Company's assets. The Company anticipates that fluctuations from period to
period will continue in the future. As a result, the Company believes that
comparisons to results of operations for preceding periods are not necessarily
meaningful and that results of prior periods should not be relied upon as an
indication of future performance.
A lessee may default in performance of its lease obligations and the
Company may be unable to enforce its remedies under a lease. The Company's
inability to collect receivables due under a lease or to repossess aircraft
equipment in the event of a default by a lessee could have a material adverse
effect on the Company's business, financial condition and/or results of
operations. Various airlines have experienced financial difficulties in the
past, certain airlines have filed for bankruptcy and a number of such airlines
have ceased operations. In most cases where a debtor seeks protection under
Chapter 11 of Title 11 of the United States Code, creditors are automatically
stayed from enforcing their rights. In the case of United States certified
airlines, Section 1110 of the Bankruptcy Code provides certain relief to lessors
of aircraft equipment. The scope of Section 1110 has been the subject of
significant litigation and there is no assurance that the provisions of Section
1110 will protect the Company's investment in an aircraft, aircraft engines or
parts in the event of a lessee's bankruptcy. In addition, Section 1110 does not
apply to lessees located outside of the United States and applicable foreign
laws may not provide comparable protection. Leases of spare parts may involve
additional risks. For example, it is likely to be more difficult to recover
parts in the event of a lessee default and the residual value of parts may be
less ascertainable than the engine.
The Company's leases are generally structured at fixed rental rates for
specified terms while many of the Company's borrowings are at a floating rate.
Increases in interest rates could narrow or eliminate the spread, or result in a
negative spread, between the rental revenue the Company realizes under its
leases and the interest rate the Company pays under its borrowings, and have a
material adverse effect on the Company's business, financial condition and/or
results of operations.
During the nine month period ended September 30, 2000, 74% of the
Company's lease revenue was generated by leases to foreign customers. Such
international leases may present greater risks to the Company because certain
foreign laws, regulations and judicial procedures may not be as protective of
lessor rights as those which apply in the United States. The Company is subject
to the timing and access to courts and the remedies local laws impose in order
to collect its lease payments and recover its assets. In addition, political
instability abroad and changes in international policy also present risk of
expropriation of the Company's leased engines. Furthermore, many foreign
countries have currency and exchange laws regulating the international transfer
of currencies.
The Company has experienced significant growth in lease revenues during
the last twelve months. The Company's growth has placed, and is expected to
continue to place, a significant strain on the Company's managerial, operational
18
and financial resources. There is no assurance that the Company will be able to
effectively manage the expansion of its operations, or that the Company's
systems, procedures or controls will be adequate to support the Company's
operations, in which event the Company's business, financial condition and/or
results of operations could be adversely affected. The Company may also acquire
businesses that would complement or expand the Company's existing businesses.
Any acquisition or expansion made by the Company may result in one or more of
the following events: (i) the incurrence of additional debt, (ii) future changes
to earnings related to the amortization of goodwill and other intangible assets,
(iii) difficulties in the assimilation of operations, services, products and
personnel, (iv) an inability to sustain or improve historical revenue levels,
(v) diversion of management's attention from ongoing business operations, and
(iv) potential loss of key employees. Any of the foregoing factors could have
a material adverse effect on the Company's business, financial condition
and/or results of operations.
19
WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES
The markets for the Company's products and services are extremely
competitive, and the Company faces competition from a number of sources. These
include aircraft and aircraft part manufacturers, aircraft and aircraft engine
lessors, airline and aircraft service companies and aircraft spare parts
redistributors. Certain of the Company's competitors have substantially greater
resources than the Company, including greater name recognition, larger
inventories, a broader range of material, complementary lines of business and
greater financial, marketing and other resources. In addition, equipment
manufacturers, aircraft maintenance providers, FAA certified repair facilities
and other aviation aftermarket suppliers may vertically integrate into the
markets that the Company serves, thereby significantly increasing industry
competition. There can be no assurance that competitive pressures will not
materially and adversely affect the Company's business, financial condition
and/or results of operations.
The Company's leasing activities generate significant depreciation
allowances that provide the Company with substantial tax benefits on an ongoing
basis. In addition, the Company's lessees currently enjoy favorable accounting
and tax treatment by entering into operating leases. Any change to current tax
laws or accounting principles that make operating lease financing less
attractive or affect the Company's recognition of revenue or expense would have
a material impact on the Company's business, financial condition and/or results
of operations.
Before parts may be installed in an aircraft, they must meet certain
standards of condition established by the FAA and/or the equivalent regulatory
agencies in other countries. Specific regulations vary from country to country,
although regulatory requirements in other countries are generally satisfied by
compliance with FAA requirements. Parts must also be traceable to sources deemed
acceptable by the FAA or such equivalent regulatory agencies. Such standards may
change in the future, requiring engine components already contained in the
Company's inventory to be scrapped or modified. In all such cases, to the extent
the Company has such engine components in its inventory, their value may be
reduced and the Company's business, financial condition and/or results of
operations could be adversely affected.
The Company obtains a substantial portion of its inventories of
aircraft, engines and engine parts from airlines, overhaul facilities and other
suppliers. There is no organized market for aircraft, engines and engine parts,
and the Company must rely on field representatives and personnel, advertisements
and its reputation as a buyer of surplus inventory in order to generate
opportunities to purchase such equipment. The market for bulk sales of surplus
20
WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES
aircraft, engines and engine parts is highly competitive, in some instances
involving a bidding process. While the Company has been able to purchase
surplus inventory in this manner successfully in the past, there is no
assurance that surplus aircraft, engines and engine parts of the type
required by the Company's customers will be available on acceptable terms
when needed in the future or that the Company will continue to compete
effectively in the purchase of such surplus equipment.
A change in the market for aircraft and engine parts or a reduction in
demand for the parts carried by the Company could result in the Company's
inventory being overvalued and could require the Company to write down its
inventory valuations in order to bring them into line with the revised fair
market value. Airline manufacturers may also develop new parts to be used in
lieu of parts already contained in the Company's inventory. There is no
assurance that a write-down would not adversely affect the Company's business,
operating results or financial condition.
21
WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risk exposure is that of interest rate
risk. A change in the U.S. prime interest rate, LIBOR rate, or cost of funds
based on commercial paper market rates, would affect the rate at which the
Company could borrow funds under its various borrowing facilities. Increases in
interest rates to the Company, which may cause the Company to raise the implicit
rates charged to its customers, could result in a reduction in demand for the
Company's leases. Certain of the Company's warehouse credit facilities are
variable rate debt. The Company estimates a one percent increase or decrease in
the Company's variable rate debt would result in an increase or decrease,
respectively, in interest expense of $1.2 million per annum. The Company
estimates a two percent increase or decrease in the Company's variable rate debt
would result in an increase or decrease, respectively, in interest expense of
$2.3 million per annum. The foregoing effect of interest rate changes, net of
interest rate hedges, on per annum interest expense is estimated as constant due
to the terms of the Company's variable rate borrowings, which generally provide
for the maintenance of borrowing levels given adequacy of collateral and
compliance with other loan conditions.
The Company hedges a portion of its borrowings, effectively fixing the
rate of these borrowings. The Company is currently required to hedge a portion
of debt of the WLFC Funding Corporation Facility. Such hedging activities may
limit the Company's ability to participate in the benefits of any decrease in
interest rates, but may also protect the Company from increases in interest
rates. A portion of the Company's leases provides that lease payments be
adjusted based on changes in interest rates. Furthermore, since lease rates tend
to vary with interest rate levels, it is likely that the company can adjust
lease rates for the effect of change in interest rates at the termination of
leases. Other financial assets and liabilities are at fixed rates.
The Company is also exposed to currency devaluation risk. During the
nine month period ended September 30, 2000, 74% of the Company's total lease
revenues came from non-United States domiciled lessees. All of the leases
require payment in United States (U.S.) currency. If these lessees' currency
devalues against the U.S. dollar, the lessees could potentially encounter
difficulty in making the U.S. dollar denominated lease payments.
22
WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: November 2, 2000
Willis Lease Finance Corporation
By: /s/ NICHOLAS J. NOVASIC
---------------------------
Nicholas J. Novasic
Chief Financial Officer
23
WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT DESCRIPTION
NUMBER
3.1 Certificate of Incorporation, filed on March 12, 1998 together
with Certificate of Amendment of Certificate of Incorporation
filed on May 6, 1998. Incorporated by reference to Exhibits
4.01 and 4.02 of the Company's report on Form 8-K filed on
June 23, 1998.
3.2 Bylaws. Incorporated by reference to Exhibit 4.03 of the
Company's report on Form 8-K filed on June 23, 1998.
4.1 Specimen of Common Stock Certificate incorporated by
reference to Exhibit 4.1 of the Company's report on form 10-Q
for the quarter ended June 30, 1998.
4.2 Rights Agreement dated September 24, 1999, by and between
the Company and American Stock Transfer and Trust
Company, as Rights Agent, incorporated by reference to
Exhibit 4.1 of the Company's report on Form 8-K filed on
October 4, 1999.
10.1 Second Amendment to Amended and Restated Series 1997-1
Supplement, incorporated by reference to Exhibit 10.1 of
the Company's report on Form 10-Q for the quarter ended March
31, 2000.*
10.2 Amended and Restated Credit Agreement as of February 10,
2000, incorporated by reference to Exhibit 10.2 of the
Company's report on Form 10-Q for the quarter ended March 31,
2000.*
10.3 Employment contract for Nicholas J. Novasic dated June 15,
2000.
11.1 Statement regarding computations of per share earnings.
27.1 Financial Data Schedule.
- -----------------------------------------
* Portions of this exhibit have been omitted pursuant to a request for
confidential treatment and the redacted material has been filed separately
with the Commission.
(b) Reports on Form 8-K
On August 18, 2000 the Company filed a report on Form 8-K disclosing
under Item 5 that Director Robert Rau resigned from the Board of
Directors.
24