Len Cereghino & Co. CLIENT: WILLIS LEASE FINANCE
CORPORATE INVESTOR RELATIONS CONTACT: Elliot M. Fischer
2605 Western Ave., Seattle, WA 98121 Chief Financial Officer
(206) 448-1996 (415) 331-5281
NEWS RELEASE
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WILLIS LEASE FINANCIAL NINE MONTH REVENUES GAIN 34% TO $24 MILLION;
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NET INCOME EQUALS $2 MILLION OR $.62 PER SHARE
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SAUSALITO, CA -- November 11, 1996 -- Willis Lease Finance Corporation
(NASDAQ: WLFC), today released its third quarter results, the company's first
earnings report since completing its Initial Public Offering of 2.3 million
shares. Willis reported total revenues of $7.3 million for the third quarter of
1996, compared to $10.1 million in the third quarter of last year. In the third
quarter of 1995, Willis' revenues were increased by sales of $5.4 million of jet
engines acquired for resale compared to $2.8 million in the third quarter this
year. Improved margins in its operating lease portfolio and spare parts business
helped offset lower equipment sales in the third quarter. For the first nine
months of 1996, Willis' total revenues increased 34% to $23.5 million, compared
to $17.5 million in the nine months ended September 30, 1995.
Net income for the third quarter of 1996 was $434,000, or $.13 per share,
compared to $1.98 million, or $.58 per share (pro forma), in the like quarter a
year ago. Net income for the first nine months of 1996 was $2.0 million, or $.62
per share, compared to $3.28 million, or $1.02 per share (pro forma), in the
like period of 1995. Earnings were higher in 1995 primarily because the company
had a $2.2 million gain on the modification of a credit facility, the
contribution from the third quarter equipment sales mentioned above, and lower
general and administrative expenses.
"We are beginning to use the proceeds from our IPO, which we received at
the end of the third quarter, to purchase additional engines for our operating
lease portfolio and additional inventory for WASI (Willis Aeronautical Services,
Inc.), our spare parts subsidiary. The offering was completed at the end of the
third quarter and had virtually no impact on our third quarter results," said
Charles F. Willis, President. For the trailing twelve month period ended
September 30, 1996, the return on weighted average assets was 2.2% and the
return on weighted average equity was 34.7%.
At September 30, 1996, Willis had 28 engines on lease with a book value of
$75.4 million compared to 27 engines with a book value of $69.4 million at the
end of 1995's third quarter. The operating lease portfolio generated $3.5
million in lease revenues in the third quarter of 1996 compared to $3.9 million
in the third quarter of 1995. For the first nine months of 1996, Willis
generated operating lease revenue of $10.4 million up 4.5% from $9.9 million in
the like period of 1995. Year-to-date, margins on the operating leases improved
to 39.0% compared to 22.5% in the like period of 1995.
"The number of engines dropped by a total of 2 engines during the quarter.
We will continue to purchase additional engines that meet our acquisition
criteria. We completed the acquisition of one engine in September. With the $17
million proceeds from our IPO used together with debt financing, we intend to
increase the size of our lease portfolio," Willis noted.
(more)
WLFC - Third Quarter Earnings
November 11, 1996
Page Two
"WASI increased its contribution to sales and operating margins this year,"
Willis said. In the third quarter, spare parts sales increased 9.5% to $869,000
compared to sales of $794,000 in the third quarter a year ago. For the first
nine months of 1996, parts sales increased 55% to $3.3 million compared to $2.2
million in the like quarter a year ago. Nine month margins in 1996 also improved
to 50% compared to 36.1% in the like period of 1995. The company increased the
spare parts inventories by 23% since the beginning of the year."
"The small number and large transaction size of engine resales means that
our revenues and earnings can fluctuate widely from quarter to quarter," stated
Elliot Fischer, Chief Financial Officer. Third quarter sales of equipment
acquired for resale generated revenue of $2.8 million compared to $5.4 million
in the third quarter of 1995. In the first nine months of 1996 Willis generated
$9.6 million from engines acquired for resale compared to $5.4 million in the
first nine months of 1995.
In the third quarter of 1995, Willis completed three transactions
generating a gross margin of 49%. "We believe the margins on these transactions
were unusually high," Fischer explained. "So far this year, the gross margin on
resale transactions was 12%. The 1996 margin was adversely affected by a loss of
$237,000 on third quarter transactions due to higher than expected refurbishment
costs on two engines.
"General and administrative expenses were higher in 1996 by $333,000 in the
third quarter and $1.1 million for the nine months in order to support our
growth in assets and volume of transactions," Fischer explained.
"At September 30, Willis had 28 engines under lease to 20 airlines
operating in 11 countries," Willis noted. The company focuses on commercial jet
aircraft engines, particularly engines for the most commonly used Boeing,
McDonnell-Douglas, and Airbus aircraft.
According to The Boeing Report, 12,000 net new aircraft are forecast for
delivery worldwide over the next 20 years, requiring about 39,000 installed
engines. Assuming a ratio of approximately 17% spare engines to installed
engines, the Report estimates potential market demand for approximately 6,600
additional spare engines through the year 2015.
Willis' debt to equity ratio dropped to 3.1:1 due to the equity raised in
September. Willis' assets totaled $108.6 million at September 30, 1996, compared
to $85.8 million a year ago. Shareholder' equity was $20.3 million following the
IPO and tangible book value was $3.96 per share at quarter end.
Willis Lease Finance Corporation's primary businesses are the leasing of
spare replacement aircraft engines and the strategic acquisition and resale of
aircraft engines and parts to the worldwide commercial airline aftermarket. The
company commenced leasing operations in 1988 and established WASI (Willis
Aeronautical Services, Inc.) to conduct its spare parts resale operation in
October 1994. On Friday, November 7, the stock closed the trading day at $11.125
per share.
Except for historical information contained herein, the matters discussed
in this release contain forward looking statements that involve risks and
uncertainties. The company's actual results may differ materially from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, the effect of changing
economic conditions, trends in the airline industry, changes in interest rates,
liability risks associated with providing engines and services to aircraft, the
ability of the Company to profitably remarket or release engines in a timely
manner, changes in maintenance requirements and safety regulation, and other
risk detailed in the Company's Registration Statement and continuing reports
filed with the Securities and Exchange Commission.
(more)
WLFC - Third Quarter Earnings
November 11, 1996
Page Three
FINANCIAL HIGHLIGHTS Third Quarter Ended Nine Months Ended
- -------------------- September 30, September 30,
(in thousands except per share)(unaudited) 1996 1995 1996 1995
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Revenues:
Operating lease revenue $3,544 $ 3,866 $10,379 $ 9,931
Gain (loss) on sale of leased engines $ 0 0 0 (110)
Spare parts sales $ 869 794 3,303 2,205
Sale of equipment acquired for resale $2,781 5,372 9,605 5,372
Interest and other income $ 150 26 197 82
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TOTAL REVENUE $7,344 $10,058 $23,484 $17,480
Expenses:
Interest $1,101 $1,174 $ 3,371 $ 4,355
Depreciation 735 1,228 2,513 3,078
Residual share 162 118 536 283
Cost of spare parts sales 218 494 1,604 1,388
Cost of equipment acquired for resale 3,018 2,740 8,551 2,740
General & administrative expense 1,331 999 3,434 2,322
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TOTAL EXPENSES $6,565 $6,753 $20,009 $14,166
Gain on modification of credit facility 0 0 0 2,203
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Income (loss) before income taxes and minority interest $ 779 3,305 3,475 5,517
Income taxes (300) (1,316) (1,395) (2,207)
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Income (loss) before minority interest 479 1,989 2,080 3,310
Less: minority interest in net income of subsidiary (45) (8) (79) (29)
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Net income (loss) $ 434 $ 1,981 $2,001 $3,281
Earnings per share (pro forma) $ 0.13 $ 0.58 $ 0.62 $ 1.02
Weighted average shares outstanding 3,425 3,425 3,215 3,215
Period Ended Year Ended Period Ended
Sept. 30, 1996 Dec. 31, 1995 Sept. 30, 1995
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Cash and short term investments $ 14,681 $ 816 $ 2,310
Aircraft engines net $ 75,368 $ 74,704 $ 69,427
Spare parts inventory $ 3,598 $ 2,916 $ 3,115
Total receivables $ 2,036 $ 1,259 $ 1,394
Total assets $ 108,604 $ 91,437 $ 85,819
Total liabilities $ 88,316 $ 86,540 $ 80,774
Shareholders' equity $ 20,288 $ 4,812 $ 4,988
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NOTE: Transmitted on PR NewsWire at 1:59 p.m. PST, November 11, 1996.
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