Willis Lease Finance Corporation (WLFC) reported a 2014 net income of $7.2 million, compared to net income of $15.6 million in 2013. Aftertax income for 2013 included a one-time $8.6 million tax benefit. On record annual sales of $174.3 million, pretax earnings from operations increased 35.2% to $10.5 million in 2014 from $7.8 million a year ago and income before income taxes increased 4.8% to $11.8 million in 2014 from $11.3 million a year ago.
In the fourth quarter of 2014, Willis Lease reported a net loss of $0.3 million, or $0.03 per diluted share, compared to net income of $6.6 million, or $0.81 per diluted share, in the fourth quarter of 2013. The loss in the current period included $2.7 million of non-cash write-downs and the expensing of $3.5 million related to an engine repair. The foregoing expenses overshadowed an otherwise profitable quarter – excluding these charges, fourth quarter pre-tax income was $5.5 million.
“Our pre-tax income for 2014 was the highest since 2011, but we still have work to do to improve utilization and grow our top line,” said Charles F. Willis, Chairman and CEO. “While overall demand in the engine lease market is good, our portfolio utilization rate has been negatively impacted by an excess supply of certain engine types. This happens from time to time, and we expect to see improvement over the next several quarters.”
“The improving profitability of commercial carriers aided by the rapid drop in fuel prices, together with the abundant availability and low cost of capital, bode well for the growth of engine leasing,” Willis continued. “We expect to capitalize on these factors in 2015 by placing greater emphasis on growing our asset base and expanding our service offerings. We have been preparing for this over the last year by significantly enhancing our senior management team and expanding our sales presence in the field. We should begin to see the benefits of these moves later this year.”
“Our two engine leasing joint ventures are opening new avenues of business for us, as is our new supply chain and ‘end-of-life’ solutions business,” said Donald A. Nunemaker, President. “Our Dublin-based JV with Mitsui & Co., Ltd. is improving our access to overseas markets and our recent business venture with China Aviation Supplies Import & Export Corporation Limited (CASC) will accelerate our market penetration in the coming years in the fast growing Chinese market. In addition to providing a better alternative for managing the older engines in our portfolio, Willis Aeronautical Services, Inc. (Willis Aero) will allow us to capitalize on the opportunities in the aircraft leasing business, through the part-out of airframes and harvesting of engines. We believe these collaborative efforts provide operating and financial synergies that are a competitive advantage for us in our markets.”
“The fourth quarter loss from operations includes a $2.6 million non-cash write-down recorded on two engines and higher technical expense recorded in the period due to an expensed engine shop visit totaling $3.5 million. In 2014, engine repair expense totaled $8.6 million compared to $8.9 million a year ago,” said Brad Forsyth, Chief Financial Officer. “The expensing of engine refurbishing can vary significantly from quarter to quarter depending on the type of repairs completed and the level of shop visit activity. In those cases where the engine life is extended, the shop visit is capitalized and depreciated.”
At December 31, 2014, Willis Lease had 207 commercial aircraft engines, five aircraft parts packages and five aircraft and other engine-related equipment in its lease portfolio, with a net book value of $1.066 billion, compared to 202 commercial aircraft engines, five aircraft parts packages and four aircraft and other engine-related equipment in its lease portfolio, with a net book value of $1.033 billion, a year ago. The Company’s funded debt-to-equity is 3.88 to 1 at year end, compared to 3.50 to 1 at September 30, 2014, and 3.70 to 1 a year ago.