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 March 31, 1998
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)
California 68-0070656
(State or other jurisdiction of incorporation (IRS Employer Identification No.)
or organization)
180 Harbor Drive, Suite 200, Sausalito, CA 94965
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (415) 331-5281
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
-----------------
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 April 30, 1998
------------------- -----------------------------
Common Stock, No Par Value 7,258,098
1
WILLIS LEASE FINANCE CORPORATION
INDEX
PART I FINANCIAL INFORMATION PAGE NO.
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets 3
As of March 31, 1998 and December 31, 1997
Consolidated Statements of Income 4
Three months ended March 31, 1998 and 1997
Consolidated Statements of Shareholders' Equity 5
Year ended December 31, 1997 and
three months ended March 31, 1998
Consolidated Statements of Cash Flows 6
Three months ended March 31, 1998 and 1997
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition 9
And Results of Operations
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 19
2
WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
1998 1997
------------- --------------
(UNAUDITED)
ASSETS
Cash and cash equivalents $3,398,420 $13,095,303
Deposits 19,251,659 18,461,456
Equipment held for operating lease, less accumulated depreciation
of $16,568,638 at March 31, 1998 and $15,267,683 at December 31, 1997 184,147,534 138,535,643
Net investment in direct finance lease 9,679,970 9,821,854
Property, equipment and furnishings, less accumulated depreciation
of $306,376 at March 31, 1998 and $275,109 at December 31, 1997 517,220 540,856
Spare parts inventory 11,743,827 10,334,113
Maintenance billings receivable 1,329,024 1,547,765
Operating lease rentals receivable 522,687 520,466
Receivables from spare parts sales 1,791,244 2,908,175
Other receivables 388,770 375,878
Other assets 8,667,340 2,288,547
------------- -------------
Total assets $241,437,695 $198,430,056
------------- -------------
------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $2,226,216 $4,010,976
Salaries and commissions payable 498,894 1,070,051
Deferred income taxes 8,917,784 8,476,040
Deferred gain 176,654 183,278
Notes payable and accrued interest 142,951,917 101,433,200
Capital lease obligation 2,765,793 2,802,119
Residual share payable 2,047,535 2,092,140
Maintenance deposits 21,070,666 20,018,195
Security deposits 3,188,651 2,435,987
Unearned lease revenue 1,169,696 1,306,613
------------- -------------
Total liabilities $185,013,806 $143,828,599
Shareholders' equity:
Common stock, no par value. Authorized 20,000,000 shares;
7,210,598 and 7,177,320 issued and outstanding at March 31, 1998
and December 31,1997, respectively 40,190,299 40,117,223
Retained earnings 16,233,590 14,484,234
------------- -------------
Total shareholders' equity 56,423,889 54,601,457
------------- -------------
Total liabilities and shareholders' equity $241,437,695 $198,430,056
------------- -------------
------------- -------------
See accompanying notes to the consolidated financial statements
3
WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
-------------------------------
1998 1997
------------- -----------
REVENUE
Lease revenue $6,436,248 $4,115,077
Gain on sale of leased equipment 3,107,852 397,379
Spare part sales 3,015,927 2,221,680
Sale of equipment acquired for resale - 2,547,840
Interest and other income 185,387 251,525
----------- ----------
Total revenue $12,745,414 $9,533,501
EXPENSES
Interest expense 2,602,350 1,471,943
Depreciation expense 1,417,509 875,460
Residual share 232,512 190,552
Cost of spare part sales 2,054,544 1,304,152
Cost of equipment acquired for resale - 2,252,517
General and administrative 3,183,837 1,778,452
----------- ----------
Total expenses $9,490,752 $7,873,076
Income before income taxes
----------- ----------
and extraordinary item 3,254,662 1,660,425
Income taxes (1,304,826) (645,284)
----------- ----------
Income before extraordinary item 1,949,836 1,015,141
Extraordinary item less applicable income taxes (200,480) 2,007,929
----------- ----------
Net income $1,749,356 $3,023,070
----------- ----------
----------- ----------
Basic earnings per common share:
Income before extraordinary item $0.27 $0.19
Extraordinary item (0.03) 0.37
----------- ----------
Net income $0.24 $0.56
----------- ----------
Diluted earnings per common share:
Income before extraordinary item $0.26 $0.18
Extraordinary item (0.03) 0.36
----------- ----------
Net income $0.23 $0.54
----------- ----------
Average common shares outstanding 7,191,844 5,430,046
Diluted average common shares outstanding 7,440,049 5,577,377
See accompanying notes to the consolidated financial statements
4
WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1997 AND THREE MONTHS ENDED MARCH 31, 1998
Issued and
outstanding Total
shares of Common Retained shareholders'
common stock stock earnings equity
------------ ----- -------- ------
Balance at December 31, 1996 5,426,793 $16,055,689 $7,146,563 $23,202,252
Shares issued 25,527 221,244 221,244
Common stock issued and
proceeds from secondary offering, net 1,725,000 23,840,290 23,840,290
Net income 7,337,671 7,337,671
--------- ----------- ----------- -----------
Balances at December 31, 1997 7,177,320 40,117,223 14,484,234 54,601,457
Shares issued 33,278 73,076 73,076
Net income 1,749,356 1,749,356
--------- ----------- ----------- -----------
Balances at March 31, 1998 (unaudited) 7,210,598 $40,190,299 $16,233,590 $56,423,889
--------- ----------- ----------- -----------
--------- ----------- ----------- -----------
See accompanying notes to the consolidated financial statements
5
WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31,
------------------------------------
1998 1997
---------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,749,356 $3,023,070
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation of equipment held for lease 1,382,180 849,494
Depreciation of property, equipment and furnishings 35,329 25,966
(Gain) loss on sale of property, equipment and furnishings (9,177) 885
(Gain) on sale of leased equipment (3,107,852) (397,379)
Increase in residual share payable (44,605) 190,552
Changes in assets and liabilities:
Deposits (790,203) 382,373
Spare parts inventory (1,409,714) (513,640)
Receivables 1,320,559 (904,116)
Other assets 181,207 (415,395)
Accounts payable and accrued expenses (1,784,760) (498,042)
Salaries and commission payable (571,157) 48,554
Deferred income taxes 441,744 1,974,693
Deferred gain (6,624) (6,624)
Accrued interest 129,925 (378,470)
Maintenance deposits 1,052,471 1,929,559
Security deposits 752,664 189,895
Unearned lease revenue (136,917) (184,610)
------------ ------------
Net cash (used in) provided by operating activities (815,574) 5,316,765
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment held for operating lease (net
of selling expenses) 6,456,215 1,000,000
Proceeds from sale of property, equipment and furnishings 15,000 3,500
Purchase of equipment held for operating lease (50,342,434) (7,269,663)
Deposits made in connection with inventory purchases (6,560,000) -
Purchase of property, equipment and furnishings (17,516) (52,643)
Principal payments received on direct finance lease 141,884 -
------------ ------------
Net cash used in investing activities (50,306,851) (6,318,806)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable 49,395,416 56,838,374
Proceeds from issuance of common stock 73,076 48,257
Principal payments on notes payable (8,006,624) (54,600,496)
Principal payments on capital lease obligation (36,326) (53,753)
------------ ------------
Net cash provided by financing activities 41,425,542 2,232,382
(Decrease) increase in cash and cash equivalents (9,696,883) 1,230,341
Cash and cash equivalents at beginning of period 13,095,303 6,573,241
------------ ------------
Cash and cash equivalents at end of period $3,398,420 $7,803,582
------------ ------------
------------ ------------
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 to Shareholders
incorporated by reference in the Company's Annual Report on Forms 10-K and
10-KA for the fiscal year ended December 31, 1997.
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 March 31, 1998, and December 31, 1997, and the results of
its operations for the three month periods ended March 31, 1998 and 1997 and
its cash flows for the three month periods ended March 31, 1998 and 1997.
The results of operations and cash flows for the three month period ended
March 31, 1998, are not necessarily indicative of the results of operations
or cash flows which may be reported for the remainder of 1998.
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.
3. SHARES ISSUED
The Company has a 1996 Employee Stock Purchase Plan (the "Purchase
Plan") under which 75,000 shares of common stock have been reserved for
issuance. This plan was effective in September 1996. Eligible employees may
designate not more than 10% of their cash compensation to be deducted each
pay period for the purchase of common stock under the Purchase Plan, and
participants may purchase not more than $25,000 of common stock in any one
calendar year. Each January 31 and July 31 shares of common stock are
purchased with the employees' payroll deductions over the immediately
preceding six months at a price per share of 85% of the lesser of the market
price of the common stock on the purchase date or the market price on the
date of entry into an offering period. During the three month period ended
March 31, 1998, the Company issued 8,040 shares of Common Stock as a result
of employee stock purchases under the Purchase Plan.
In conjunction with its initial public offering, the Company sold
five-year purchase warrants for $.01 per warrant covering an aggregate of
100,000 shares of common stock exercisable at a price equal to 130% of the
initial public offering price. The warrants are exercisable commencing 24
months after the effective date of the initial public offering or earlier,
but not earlier than 12 months after the initial public offering, if and when
the Company files a registration statement for the sale by the Company of
shares of common stock or securities exercisable for, convertible into or
exchangeable for shares of common stock (other than pursuant to a stock
option or other employee benefit or similar plan, or in connection with a
merger or an acquisition). The follow-on offering in December 1997
constituted such a
7
WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
registration. The warrants' exercise price and the number of shares of
Common Stock are subject to adjustment to protect the warrant holders against
dilution in certain events. In February, 1998, a holder of 50,000 of the
warrants exercised the warrants under the net issuance rights of the
warrants. Based on the closing price on such date, the exercise resulted in
the issuance of 25,238 shares to the holder of the warrants.
4. FINANCING
In February 1998, the Company increased the committed amount of its
revolving credit facility to $45 million and, subsequently, in April 1998, to
$65 million. This credit facility is available to finance the acquisition of
aircraft engines, aircraft and high-value spare parts for sale or lease.
This facility expires on June 30, 1998, bears interest at prime less 0.25%
and may be renewed annually.
In March 1998, the Company repaid a loan that had residual sharing
provisions and an interest rate of 10%. The repayment resulted in an
extraordinary expense of $0.2 million, net of tax.
5. COMMITMENTS
In February 1998, the Company signed a lease for office space into which
it plans to move its Sausalito operations. The initial term of this lease is
5 years and the annual rental commitments under the lease are approximately
$0.3 million. The Company has also signed a lease for a warehouse and office
facility to be used by Willis Aeronautical Services, Inc. ("WASI") in San
Diego, California into which it will move substantially all of WASI's South
San Francisco operations. This lease commenced in April 1998. The initial
term of this lease is 6 years and the annual rental commitments under the
lease are approximately $0.4 million. To the extent that the Company has
obligations remaining under its current leases after the relocations
described above, the Company expects that it can sublease to cover such
obligations.
In March 1998, the Company committed to purchase, during 1998 and 1999,
certain used aircraft and engines for its WASI parts operation. Certain
deposits were made in connection with this commitment. In April 1998, the
Company took delivery of certain of the aircraft and the total, remaining
commitment to purchase over the course of 1998 and 1999 is not more than
$33.0 million.
8
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, aircraft and other
aircraft equipment. The Company, through WASI, also specializes in the
purchase and resale of aftermarket airframe and engine parts, engines,
modules and rotable components. In addition, the Company engages in the
selective purchase and resale of commercial aircraft engines.
Revenue consists primarily of operating 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 MARCH 31, 1998 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
1997:
Revenue is summarized as follows:
Three Months Ended March 31,
-------------------------------------------------------
1998 1997
---- ----
Amount % Amount %
-------------------------------------------------------
(dollars in thousands)
Lease revenue . . . . . . . . . . . . . . $6,436 50.5% $4,115 43.2%
Gain on sale of leased equipment. . . . . 3,108 24.4 397 4.2
Spare parts sales . . . . . . . . . . . . 3,016 23.7 2,222 23.3
Sale of equipment acquired for resale . . --- --- 2,548 26.7
Interest and other income . . . . . . . . 185 1.4 252 2.6
-----------------------------------------------------
Total $12,745 100.0% $9,534 100.0%
-----------------------------------------------------
-----------------------------------------------------
LEASE PORTFOLIO. During the quarter ended March 31, 1998, 10 engines and
1 aircraft were added to the Company's lease portfolio at a total cost of
$47.3 million. One engine was sold from the lease portfolio.
LEASING ACTIVITIES. Lease revenue for the quarter ended March 31, 1998
increased 56% to $6.4 million from $4.1 million for the comparable period in
1997. This increase reflects operating and finance lease revenues from
additional engines, aircraft and spare parts packages.
Expenses directly related to operating lease activity increased 65% to
$4.1 million. Interest expense related to all leasing activities increased
72% to $2.5 million for the quarter ended March 31, 1998, from the comparable
period in 1997, due to an increase in average debt outstanding during the
period. Depreciation expense increased 63% to $1.4 million for the quarter
ended March 31, 1998, from the comparable period in 1997, due to the larger
average asset base in the first quarter of 1998. Residual sharing expense
increased 22% to $232,512 for the quarter ended March 31, 1998 from the
$190,552 for the comparable period in 1997. This expense is calculated by
comparing the net book value of the engines subject to such agreements to
their related debt balances and adjusting the residual share payable to the
appropriate amount representing the sharing percentage of any excess of the
net book value over the corresponding debt balance for such engines. In
March 1998, the Company repaid one of its loans which had residual sharing
provisions. (see "Extraordinary Items" below)
9
GAIN ON SALE OF LEASED EQUIPMENT. During the quarter ended March 31,
1998, the Company sold one engine from the lease portfolio which resulted in
a gain of $3.1 million. This compares with gains in the quarter ended March
31, 1997 of $0.4 million.
SPARE PARTS SALES. Revenues from spare parts sales in the quarter ended
March 31, 1998 increased 36% to $3.0 million from $2.2 million in the
comparable 1997 period. The gross margin decreased to 32% in the first
quarter of 1998, from 41% in the corresponding period in 1997. The Company
does not believe that the relatively high margin experienced in the first
quarter of 1997 is indicative of future results.
SALE OF EQUIPMENT ACQUIRED FOR RESALE. During the quarter ended March
31, 1997, the Company sold one engine for $2.5 million which resulted in a
gain of $0.3 million. The Company had no such sales during the comparable
1998 period.
INTEREST AND OTHER INCOME. Interest and other income for the quarter
ended March 31, 1998 was $0.2 million compared to $0.3 million for the
quarter ended March 31, 1997 due to lower cash balances held in the first
quarter of 1998.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased 79% to $3.2 million for the quarter ended March 31, 1998 from $1.8
million in the comparable period in 1997. This increase reflects expenses
associated with staff additions, recruiting costs related thereto, increased
rent due to the expansion of the WASI facility, as well as increases in
professional fees, insurance expense and expenses related to promotional and
marketing activities.
INCOME TAXES. Income taxes, exclusive of tax on extraordinary items, for
the quarter ended March 31, 1998, increased to $1.3 million from $0.6 million
for the comparable period in 1997. This increase reflects an increase in the
Company's pre-tax earnings.
EXTRAORDINARY ITEMS. In March 1998, the Company repaid a loan that had
residual sharing provisions and an interest rate of 10%. The repayment
resulted in an extraordinary expense of $0.2 million, net of tax. In
February 1997, the Company obtained a new loan agreement for $41.5 million to
replace an existing loan of $44.2 million. The transaction resulted in an
extraordinary gain of $2.0 million, net of tax.
ACCOUNTING PRONOUNCEMENTS. In June 1997, the Financial Accounting
Standards Board issued a new statement: SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which establishes annual
and interim reporting standards for a public company's operating segments and
related disclosures about its products, services, geographic areas, and major
customers. Both statements are effective for the Company's fiscal year ended
December 31, 1998, with earlier application permitted. The effect of
adoption of these statements will be limited to the form and content of the
Company's disclosures and will not impact the company's results of
operations, cash flow, or financial position.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has financed its growth through borrowings
secured by its equipment lease portfolio. (See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" above and
"Business--Aircraft Equipment Financing/Source of Funds.") Cash of
approximately $49.4 million and $56.8 million, in the quarters ended March
31, 1998 and 1997, respectively, was derived from this activity. In these
same time periods $8.0 million and $54.7 million, respectively, was used to
pay down related debt or the capital lease. In December 1997, net proceeds
from a follow-on common stock offering were approximately $23.8 million, as
discussed below. In September 1996, net proceeds from the initial public
offering were approximately $15.9 million, as discussed below. Cash flows
from operating activities generated approximately $(0.8) million and $5.3
million in the quarters ended March 31, 1998 and 1997 respectively.
The Company's primary use of funds is for the purchase of equipment for
lease. Approximately $50.3 million and $7.3 million of funds were used for
this purpose in the quarters ended March 31, 1998 and 1997 respectively.
Additional funds were used in these periods to finance the growth of
inventories to support spare parts sales.
10
The follow-on offering which occurred in December 1997 was for 1,725,000
shares of Common Stock at $15.00 per share. The proceeds to the Company, net
of all expenses, were $23.8 million. The primary use of these proceeds was
repayment of amounts outstanding under the Company's revolving credit
facility.
The initial public offering which occurred in September 1996 was for
2,300,000 shares of Common Stock at $8.00 per share. The proceeds to the
Company, net of all expenses, were $15.9 million. These proceeds were used
to prepay $1.3 million of indebtedness under an existing term facility, and
to purchase an amortizing interest rate cap to hedge a portion of the
Company's exposure to increases in interest rates on its variable rate
borrowings. The balance of the proceeds, together with debt financing, were
primarily used to acquire additional assets for lease and sale and for
working capital and other general corporate purposes.
At March 31, 1998, the Company had a $45.0 million revolving credit
facility to finance the acquisition of aircraft engines, aircraft and spare
parts for sale or lease. In April 1998, this facility was increased to $65
million. Assuming compliance with the facility's terms, including
sufficiency of collateral, at March 31, 1998 and April 30, 1998, $7.1 million
and $9.6 million was available under this facility, respectively. The
facility expires on June 30, 1998. The facility bears interest at prime less
0.25% and may be renewed annually.
The Company has an $80.0 million warehouse facility (the "WLFC Funding
Corp. Facility"), available to a special purpose finance subsidiary of the
Company, for the financing of jet aircraft engines transferred by the Company
to such finance subsidiary (the "WLFC Funding Corp. Facility"). This
transaction's structure facilitates future public or private securitized note
issuances by the special purpose finance subsidiary. The facility has an
eight year term, bears interest at LIBOR plus 2.25% and is partially
guaranteed by the Company. This facility requires the issuer to hedge 50% of
the facility against interest rate changes no later than May 31, 1998.
Assuming compliance with the facility's terms, including sufficiency of
collateral, as of March 31, 1998 and April 30, 1998, $34.1 million and $31.0
million was available under this facility, respectively.
WASI has a $3.0 million secured working capital facility for the
acquisition of aircraft engines to be dismantled and sold for parts through
WASI. This facility provides for advances against the purchase price of parts
for resale and bears interest at prime plus 1%. This facility requires
interest-only payments for the first five months with the principal balance
due six months after drawdown and is in the process of being extended to June
30, 1998. The Company directly guarantees WASI's obligations under this
facility. Assuming compliance with the facility's terms, including
sufficiency of collateral, as of March 31, 1998 and April 30, 1998,
approximately $1.3 million was available under this facility.
Approximately $57.4 million of the Company's debt is repayable during
the remainder of 1998. The majority of such repayments consist of scheduled
balloon payment maturities on term loans. The balance of the repayments
consist of scheduled installments due under term loans. The Company
anticipates that it will refinance the balloon payment maturities during the
remainder of 1998.
The Company believes that its current equity base and internally
generated funds are sufficient to fund the Company's anticipated equity
requirements and operations for the remainder of 1998, at which time
additional equity may be required to fund projected growth. The Company is
seeking to expand its existing revolving credit facility and make other
borrowing arrangements to fund future growth.
The Company's ability to successfully execute its business strategy is
highly dependent on its ability to raise equity capital and to obtain debt
capital. There can be no assurance that the necessary amount of such equity
or debt capital will continue to be available to the Company on favorable
terms, or at all. If the Company were unable to continue to obtain required
financing on favorable terms, the Company's ability to add new aircraft
engines, aircraft and spare parts packages to its portfolio, add inventory to
support its spare parts sales or to conduct profitable operations with its
existing asset base would be impaired, which would have a material adverse
effect on the Company's business, financial condition and results of
operations.
As of March 31, 1998, the Company had 8 engines and 5 spare parts packages
which had not been financed. The Company will likely seek financing for this
equipment, although no assurance can be given that such financing will be
11
available on favorable terms, if at all. In addition, certain of the
Company's engines have been financed under floating rate facilities. Until
fixed rate financing for these assets is in place, the Company is subject to
interest rate risk, since the underlying lease revenue is fixed. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Interest Rate Risks" below.
Between March 31, 1998 and April 30, 1998, the Company and WASI
purchased and exchanged engines for the lease portfolio and aircraft for the
parts operation. The total cost of these purchases and the exchange was
approximately $21.7 million. These purchases were funded with cash from
operations, and borrowings under the Company's revolving line of credit and
the WLFC Funding Corp. Facility.
The Company has committed to purchase, during 1998 and 1999, additional
used aircraft and engines for its WASI parts operation. Certain deposits
were made in connection with this commitment. In April 1998, the Company
took delivery of certain of the aircraft and the total, remaining commitment
to purchase over the course of 1998 and 1999 is not more than $33.0 million.
MANAGEMENT OF INTEREST RATE EXPOSURE
At March 31, 1998, $96.5 million of the Company's borrowings were on a
variable rate basis at various interest rates tied to either LIBOR or the
prime rate. The Company's equipment leases are generally structured at fixed
rental rates for specified terms. To date, this variable rate borrowing has
resulted in lower interest expense for the Company. 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. See "Risk Factors
- - Interest Rate Risks."
In September 1996, the Company purchased an amortizing interest rate cap
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 March 31, 1998, the
notional principal amount of the cap was $35.3 million and said amount will
decline to $26.0 million at the end of its term. The cost of the cap is
being amortized as an expense over its remaining term. The Company will be
exposed to credit risk in the event of non-performance of the interest rate
cap counter party. The Company anticipates that it will hedge additional
amounts of its floating rate debt in the second quarter of 1998.
RISK FACTORS
In addition to other information in this report, the following risk
factors should be considered carefully by potential purchasers in evaluating
an investment in the common stock of the Company. Except for historical
information contained herein, the discussions in this report contain
forward-looking statements that involve risks and uncertainties, such as
statements of the Company's plans, objectives, expectations and intentions.
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. The Company's actual results could differ materially from those
discussed here. Factors that could cause or contribute to such differences
include those discussed below as well as those discussed elsewhere herein.
OWNERSHIP RISKS
The Company leases its portfolio of aircraft engines, aircraft and spare
parts packages primarily under operating leases as opposed to finance leases.
Under an operating lease, the Company retains title to the aircraft equipment
and assumes the risk of not recovering its entire investment in the aircraft
equipment through the re-leasing and remarketing process. Operating leases
require the Company to re-lease or sell aircraft equipment in its portfolio
in a timely manner upon termination of the lease in order to minimize
off-lease time and recover its investment in the aircraft equipment. Numerous
factors, many of which are beyond the control of the Company, may have an
impact on the Company's ability to re-lease or sell aircraft equipment on a
timely basis. Among the factors are general market conditions, regulatory
changes (particularly those imposing environmental, maintenance and other
requirements on the operation of aircraft engines), changes in the supply or
cost of the aircraft equipment and technological developments. Further, the
value of a
12
particular used aircraft engine or aircraft varies greatly depending upon its
condition, the number of hours remaining until the next major maintenance of
the aircraft equipment is required and general conditions in the airline
industry. In addition, the success of an operating lease depends in part
upon having the aircraft equipment returned by the lessee in marketable
condition as required by the lease. Consequently, there can be no assurance
that the Company's estimated residual value for the aircraft equipment will
be realized. As of March 31, 1998, the Company had 51 engines, 4 aircraft and
7 parts packages under lease to 36 customers in 22 countries (2 additional
engines and one spare parts package were off lease). On April 30, 1998, the
Company purchased additional engines for its lease portfolio, some of which
have yet to be placed on lease. These engines, together with the engines
undergoing maintenance that were returned by Western Pacific Airlines, Inc.
("West Pac") (see "Customer Credit risks" below) and other engines undergoing
maintenance, give the company eight engines either currently or shortly
available for lease. If the Company is unable to lease, re-lease or sell the
aircraft equipment on favorable terms, its business, financial condition,
cash flow, ability to service debt and results of operations could be
adversely affected.
The Company, through WASI, acquires aviation equipment such as whole
aircraft engines and aircraft which can be dismantled and sold as parts.
Before parts may be installed in an aircraft, they must meet certain
standards of condition established by the Federal Aviation Administration.
See "Government Regulations" below. Parts must also be traceable to sources
deemed acceptable by the FAA. See "Business - Spare Parts Sales." Parts
owned by the Company may not meet applicable standards or standards may
change, causing parts which are already in the Company's inventory to be
scrapped or modified. Engine manufacturers may also develop new parts to be
used in lieu of parts already contained in the Company's inventory. In all
such cases, to the extent the Company has such parts in its inventory, their
value may be reduced. In addition, if the Company does not sell airframe and
engine component parts that it purchases in the time frame contemplated at
acquisition, the Company may be subject to unanticipated inventory financing
costs as well as all the risks of ownership described above.
The Company also engages in the selective purchase and resale of
commercial aircraft engines and engine components in the aftermarket. On
occasion, the Company purchases engines or components without having a
commitment for their sale. If the Company were to purchase an engine or
component without having a firm commitment for its sale or if a firm
commitment for sale were to exist but not be consummated for whatever reason,
the Company would be subject to all the risks of ownership described above.
INDUSTRY RISKS
Downturns in the air transportation industry affect the Company's
business. In particular, substantial increases in fuel costs or interest
rates, increased fare competition, slower growth in air traffic, or any
significant downturn in the general economy could adversely affect the air
transportation industry and may therefore negatively impact the Company's
business, financial condition and results of operations.
While the Company believes that its lease terms protect its aircraft
equipment and the Company's investment in such aircraft equipment, there can
be no assurance that the financial difficulties experienced by a number of
airlines will not have an adverse effect on the Company's business, financial
condition or results of operations. In recent years and as discussed in
"Customer Credit Risks" below, a number of commercial airlines have
experienced financial difficulties, in some cases resulting in bankruptcy
proceedings.
CUSTOMER CREDIT RISKS
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
existing and prospective customers include smaller domestic and foreign
passenger airlines, freight and package carriers and charter airlines, which,
together with major passenger airlines, may suffer from the factors which
have historically affected the airline industry. As a result, certain of
these customers may pose credit risks to the Company. 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 or results of
operations. A number of airlines have experienced financial difficulties,
certain airlines have filed for bankruptcy and a number of such airlines have
ceased operations. In most cases where a debtor seeks protection under
13
Chapter 11 of Title 11 of the United States Code (the "Bankruptcy 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 the aircraft equipment. Specifically,
the debtor airline has 60 days from the date the airline seeks protection
under Chapter 11 of the Bankruptcy Code to agree to perform its obligations
and to cure any defaults. If it does not do so, the lessor may repossess the
aircraft equipment. The scope of Section 1110 has been the subject of
significant litigation and there can be no assurance that the provisions of
Section 1110 will protect the Company's investment in an aircraft engine 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.
On October 5, 1997, West Pac, a domestic lessee of three of the
Company's engines, filed a petition under Chapter 11 of the Bankruptcy Code
in the District of Colorado. In that case, West Pac cured all defaults under
its leases with the Company. In March 1998, West Pac and the Company entered
into a stipulation wherein the three engines were returned to the Company.
These engines are currently undergoing maintenance. Upon completion of such
maintenance, the Company expects to re-lease or sell the engines. In February
1998, Pan American Airways Corporation, a domestic lessee with one spare
parts package with a book value of $0.3 million (the "Pan Am Lease"), filed a
petition under Chapter 11 the Bankruptcy Code in Florida. The Company
believes it lawfully terminated the Pan Am Lease prior to the bankruptcy.
The Company has possession of the majority of the spare parts in the Pan Am
Lease in value terms and has reserved for possible costs associated with
termination of the Pan Am Lease. The Company intends to re-lease or sell
these spare parts.
FLUCTUATIONS IN OPERATING RESULTS
The Company has experienced fluctuations in its quarterly operating
results and anticipates that these fluctuations may continue. Such
fluctuations may be due to a number of factors, including the timing of sales
of engines and spare parts, fluctuation in aircraft equipment marketing
activities, fluctuation of margins on such activities, unanticipated early
lease terminations, the timing of aircraft equipment acquisitions or a
default by a lessee. Given the possibility of such fluctuations, the Company
believes that comparisons of the results of its operations for preceding
quarters are not necessarily meaningful and that results for any prior
quarter should not be relied upon as an indication of future performance. In
the event the Company's revenues or earnings for any quarter are less than
the level expected by securities analysts or the market in general, such
shortfall could have an immediate and significant adverse impact on the
market price of the Company's common stock.
INTERNATIONAL RISKS
In the quarter ended March 31, 1998, approximately 66% of the Company's
lease revenue was generated by leases to foreign customers. Eight percent of
lease revenue was generated by leases to Asian 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. In addition, many foreign
countries have currency and exchange laws regulating the international
transfer of currencies. The Company attempts to minimize its currency and
exchange risks by negotiating all of its lease transactions in U.S. Dollars
and all guarantees obtained to support various lease agreements are
denominated for payment in U.S. Dollars. To date, the Company has experienced
some collection problems under certain leases with foreign airlines, and
there can be no assurance that the Company will not experience such
collection problems in the future. The Company may also experience collection
problems related to the enforcement of its lease agreements under foreign
local laws and the attendant remedies in such locales. Consequently, 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 risks associated with expropriation of the Company's leased
engines. To date, the Company has experienced limited problems in reacquiring
assets; however, there can be no assurance that the Company will not
experience more serious problems in the future.
Certain countries have no registration or other recording system with
which to locally establish the Company's or its lender's interest in the
engines and related leases, potentially making it more difficult for the
Company to prove its interest in an engine in the event that it needs to
recover an engine located in such a country.
14
The Company's engines and the aircraft on which they are installed can
be subject to certain foreign taxes and airport fees. Consequently,
unexpected liens on an engine or the aircraft on which it is installed could
be imposed in favor of a foreign entity, such as Eurocontrol or the airports
of the United Kingdom.
DEPENDENCE UPON AVAILABILITY OF FINANCING
The operating lease business is a capital intensive business. The
Company's typical operating lease transaction requires a cash investment by
the Company of approximately 15% to 25% of the aircraft equipment purchase
price, commonly known as an "equity investment." The Company's equity
investments have historically been financed from internally generated cash
and the net proceeds of equity offerings. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources." The balance of the purchase price is typically financed
with the proceeds of secured borrowings. Accordingly, the Company's ability
to successfully execute its business strategy and to sustain its operations
is dependent, in a 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 were unable to continue to obtain required financing on
favorable terms, the Company's ability to add new leases to its portfolio and
parts inventory would be limited, which would have a material adverse effect
on the Company's business, financial condition and results of operations.
In some circumstances, the Company acquires assets before it has
obtained debt financing. There can be no assurance that debt financing will
be available after the asset has been acquired or, if available, at
attractive rates or terms. Factors that could cause debt financing to be
more expensive or unavailable include changes in interest rates, financial
conditions of the lessee or the Company, prospects for the airline industry
or the asset type as well as general economic conditions. If debt financing
is not available, a like amount of the Company's equity capital would be
unavailable for use to acquire additional assets, which could have a material
adverse effect on the Company's business, financial condition or results of
operations.
INTEREST RATE RISKS
The Company's equipment leases are generally structured at fixed rental
rates for specified terms. As of March 31, 1998, borrowings subject to
interest rate risk totaled $96.5 million or 66% of the Company's total
borrowings. 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 lines of credit or loans. In 1996, the Company purchased an amortizing
interest rate cap which had a notional principal amount of $35.3 million as
of March 31, 1998, to reduce its interest rate exposure; however, there can
be no assurance that the Company's business, operating results or financial
condition will not be adversely affected during any period of increases in
interest rates. The Company anticipates that it will hedge additional
amounts of its floating rate debt in the second quarter of 1998.
COMPETITION
In the medium-term engine lease market segment, which is the Company's
target market, the Company principally competes with Shannon Engine Services,
headquartered in Shannon, Ireland, which is owned by CFM International. The
Company also competes with Rolls Royce. Rolls Royce limits its leasing
activities to products of its parent company and related parties. The Bank
of Tokyo-Mitsubishi, through its affiliate Engine Lease Finance in Shannon,
Ireland and a joint venture with The AGES Group ("AGES"), also competes with
the Company. Each of these competitors is substantially larger and has
greater financial resources than the Company which may permit, among other
things, greater access to capital markets at more favorable terms. In
addition, certain major aircraft lessors, including International Lease
Finance Corporation and General Electric Capital Aviation Services ("GECAS"),
compete with the Company to the extent that they include spare engine leases
with their aircraft leases or may compete on transactions involving numerous
engines.
With respect to engine marketing and spare parts and component sales,
the Company competes with airlines, engine manufacturers, aircraft, engine
and parts brokers, and parts distributors. The Company's major competitors
include AAR Corp., AGES Group, The Memphis Group, Aviation Sales Company,
Kellstrom Industries and AVTEAM, Inc. Certain of
15
these competitors may have, or may have access to, financial resources
substantially greater than the Company. Significant increases in competition
encountered by the Company in the future may limit the Company's ability to
expand its business, which would have a material adverse effect on the
Company's business, financial condition and results of operations.
In the spare parts package leasing market, the Company competes with AAR
Corp., AGES, Aviation Sales Company, Kellstrom Industries and others. In the
commuter aircraft leasing market, the Company competes with AGES, GECAS, the
leasing arms of certain commuter aircraft manufacturers and others.
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, original
equipment manufacturers ("OEMs"), aircraft maintenance providers, FAA
certified repair facilities and other aviation aftermarket suppliers may
vertically integrate into the aircraft engine leasing or aircraft
engine/spare parts sales industry, thereby significantly increasing industry
competition. A variety of potential actions by any of the Company's
competitors, including a reduction of product prices or the establishment by
competitors of long-term relationships with new or existing customers, could
have a material adverse effect on the Company's business, financial condition
and results of operations. There can be no assurance that the Company will
continue to compete effectively against present and future competitors or
that competitive pressures will not have a material adverse effect on the
Company's business, financial condition or results of operations.
MANAGEMENT OF GROWTH
The Company has recently experienced significant growth in revenues.
Such growth has placed, and is expected to continue to place, a significant
strain on the Company's managerial, operational and financial resources. Due
to the Company's rapid pace of growth during 1997, the Company hired three
new officers (an Executive Vice President and Chief Administrative Officer,
an Executive Vice President and Chief Financial Officer and a Senior Vice
President and General Counsel). In April 1998, the Company hired a new
President to supplement WASI's existing management. There can be 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. An inability to effectively
manage growth could have a material adverse effect on the Company's business,
financial condition or results of operations.
YEAR 2000
The Company's operations are not highly dependent on systems technology
and management believes the Company's exposure to loss as a result of year
2000 issues is minimal. The Company does not believe that the Year 2000
issue will have a bearing on lessees' ability to adhere to the terms of their
lease agreements with the Company. However, it has been reported in the
general press that airlines and the FAA may have material Year 2000 issues,
which could effect their operations. Such an effect could impact future
dealings with lessees and other customers.
ACQUISITION AND EXPANSION RISKS
One of the components of the Company's growth strategy is the possible
select acquisition of businesses complementary to the Company's existing
businesses and possible expansion into new aviation-related activities. The
inability of the Company to identify suitable acquisition candidates or to
complete acquisitions or expansions on reasonable terms could adversely
affect the Company's ability to grow. In addition, any acquisition or
expansion made by the Company may result in potentially dilutive issuances of
equity securities, the incurrence of additional debt and future charges to
earnings related to the amortization of goodwill and other intangible assets.
The Company also may experience difficulties in the assimilation of
operations, services, products and personnel, an inability to sustain or
improve historical revenue levels, the diversion of management's attention
from ongoing business operations and the potential loss of key employees. Any
of the foregoing could have a material adverse effect on the Company's
business, financial condition or results of operations. The acquisition of
other equipment leasing companies or portfolios creates certain additional
risks. For example, because acquired leases have been originated by other
companies, they are not subject to the Company's
16
underwriting policies and procedures and, therefore, may be subject to
greater risks of payment delinquencies and charge-offs. In addition, acquired
leases may consist of products not currently offered by the Company, or
offered only on a limited basis. Acquired leases may also increase the
concentration of the Company's portfolio of leases serviced in certain
geographical regions or change the relative concentration of such portfolio
among geographical regions. Acquired leases may not contain the same
indemnification provisions, maintenance provisions, equipment residual value
assumptions and other material terms as the Company's current leases.
Finally, the provisions of acquired leases may not adequately protect the
Company from claims arising out of the lessee's use of the acquired lease
equipment.
PRODUCT LIABILITY RISKS
The Company is exposed to product liability claims in the event that the
use of its aircraft engines, aircraft or parts is alleged to have resulted in
bodily injury or property damage. In addition to requiring indemnification
under the terms of the lease, the Company requires its lessees to carry the
types of insurance customary in the air transportation industry, including
comprehensive liability insurance and casualty insurance. The Company and, if
applicable its lenders, are named as an additional insured on liability
insurance policies carried by lessees, with the Company or its lenders
normally identified as the payee for loss and damage to the equipment. The
Company monitors compliance with the insurance provisions of the leases. To
date, the Company has not experienced any significant uninsured or insured
aviation-related claims and has not experienced any product liability claims
related to its aircraft engines or parts. However, an uninsured or partially
insured claim, or claim for which third-party indemnification is not
available, could have a material adverse effect upon the Company's business,
financial condition or results of operations.
RISK OF CHANGES IN TAX LAWS OR ACCOUNTING PRINCIPLES
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 could adversely affect the Company's business, financial
condition or results of operations.
DEPENDENCE ON KEY MANAGEMENT
The Company's business operations are dependent in part upon the
expertise of certain key employees. Loss of the services of such employees,
particularly Charles F. Willis, IV, President and Chief Executive Officer or
Edwin F. Dibble, the founder and Executive Vice President of WASI, would have
a material adverse effect on the Company's business. The Company has entered
into an employment agreement with Mr. Dibble and the Company maintains key
man life insurance of $2.5 million on Mr. Willis and $1.5 million on Mr.
Dibble.
GOVERNMENT REGULATION
The Company's customers are generally subject to a high degree of
regulation in the various jurisdictions in which they operate. Such
regulations also indirectly affect the Company's business operations. Under
the provisions of the Transportation Act, as amended, the FAA exercises
regulatory authority over the air transportation industry. The FAA regulates
the manufacture, repair and operation of all aircraft engines operated in the
United States. Its regulations are designed to insure that all aircraft and
aviation equipment are continuously maintained in proper condition to ensure
safe operation of the aircraft. Similar rules apply in other countries. All
aircraft must be maintained under a continuous condition monitoring program
and must periodically undergo thorough inspection and maintenance. The
inspection, maintenance and repair procedures for the various types of
commercial aircraft equipment are prescribed by regulatory authorities and
can be performed only by certified repair facilities utilizing certified
technicians. Certification and conformance is required prior to installation
of a part on an aircraft. Presently, whenever necessary with respect to a
particular engine or engine component, the Company utilizes FAA and/or Joint
Aviation Authority certified repair stations to repair and certify engines
and components to ensure worldwide marketability. The FAA can suspend or
revoke the authority of air carriers or their licensed personnel for failure
to comply with regulations and ground aircraft if their airworthiness is in
question. In addition, by the year 2000, federal regulations will stipulate
that most commercial aircraft
17
that fly in the United States and the engines appurtenant thereto hold, or be
capable of holding, a noise certificate issued under Chapter 3 of Volume 1,
Part II of Annex 16 of the Chicago Convention, or have been shown to comply
with Stage III noise levels set out in Section 36.5 of Appendix C of Part 36
of the Federal Aviation Regulations of the United States. As of March 31,
1998, all of the engines in the Company's lease portfolio were Stage III
engines. See "Business - Government Regulation."
CONTROL BY PRINCIPAL SHAREHOLDER
The Company's principal shareholder, Mr. Willis, beneficially owns
approximately 42% of the outstanding shares of Common Stock of the Company
and therefore effectively controls the Company. Accordingly, Mr. Willis will
have the power to contest the outcome of substantially all matters, including
the election of the Board of Directors of the Company, submitted to the
shareholders for approval. In addition, future sales by the Company's
principal shareholder of substantial amounts of Common Stock, or the
potential for such sales, could adversely affect the prevailing market price
of the Common Stock.
POSSIBLE VOLATILITY OF STOCK PRICE
The market price of the Company's Common Stock could be subject to
significant fluctuations in response to operating results of the Company,
changes in general conditions in the economy, the financial markets, the
airline industry, changes in accounting principles or tax laws applicable to
the Company or its lessees, or other developments affecting the Company, its
customers or its competitors, some of which may be unrelated to the Company's
performance, and changes in earnings estimates or recommendations by
securities analysts.
18
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION
3.1 Amended and Restated Articles of Incorporation, filed September
11, 1996 together with Certificate of Amendment of Amended and
Restated Articles of Incorporation filed on September 24, 1996.
Incorporated by reference to Exhibit 3.2 of the Company's report
on Form 10-K for the year ended December 31, 1996.
3.2 Bylaws. Incorporated by reference to Exhibit 3.3 to Registration
Statement No. 333-5126-LA filed on June 21, 1996.
4.1 Specimen of Common Stock Certificate Incorporated by reference to
Exhibit 4.1 to Registration Statement No. 333-5126 filed on June
21, 1996.
10.1* Aircraft Purchase and Sale Agreement dated as of March 24, 1998
between the Company and United Air Lines, Inc.
10.2 Amendment No. 3 dated February 27, 1998 to Credit Agreement for
purposes of increasing the time during which the amount of the
revolving credit facility will be $45 million.
10.3 Amendment No. 4 dated March 26, 1998 to Credit Agreement for
purposes of adding certain aircraft and aircraft engines to be
financed pursuant to revolving credit facility.
11.1 Statement regarding computation of per share earnings.
27.1 Financial Data Schedule
--------------------
*Portions of this exhibit have been omitted pursuant to a request
for confidential treatment.
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the first quarter of 1998.
19
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: , 1998
-------------
Willis Lease Finance Corporation
By: /s/ James D. McBride
---------------------------
James D. McBride
Chief Financial Officer
20