Willis Lease(US:WLFC)2021-11-02 21:46Financial Performance - Total revenue for the three months ended September 30, 2021, was $70.791 million, a slight increase of 0.3% compared to $70.613 million in the same period of 2020 [105]. - Total revenue for the nine months ended September 30, 2021, decreased by $28.8 million, or 12.7%, to $198.4 million compared to $227.2 million for the same period in 2020 [119]. - Lease rent revenue increased by $2.9 million, or 9.6%, to $32.9 million for the three months ended September 30, 2021, driven by lower COVID-19 related rent concessions [105]. - Lease rent revenue decreased by $18.0 million, or 15.7%, to $96.9 million for the nine months ended September 30, 2021, primarily due to lower utilization compared to the prior year [119]. - Maintenance reserve revenue decreased by $8.6 million, or 26.8%, to $23.7 million for the three months ended September 30, 2021, influenced by long-term maintenance revenue associated with engines coming off lease [108]. - Maintenance reserve revenue decreased by $22.1 million, or 26.6%, to $60.7 million for the nine months ended September 30, 2021, reflecting a decline in global flight traffic related to the COVID-19 pandemic [121]. - Spare parts sales increased by $2.2 million, or 76.3%, to $5.1 million for the three months ended September 30, 2021, due to an industry-wide increase in engine and aircraft utilization [109]. - Spare parts and equipment sales decreased by $1.6 million, or 10.9%, to $13.2 million for the nine months ended September 30, 2021 [122]. - Other revenue increased by $5.6 million, or 41.8%, to $18.9 million for the nine months ended September 30, 2021, driven by increases in service-related fees and interest income [125]. Expenses and Costs - General and administrative expenses increased by $2.2 million, or 13.4%, to $18.7 million for the three months ended September 30, 2021, primarily due to increased stock-based compensation [115]. - General and administrative expenses increased by $3.1 million, or 6.0%, to $54.3 million for the nine months ended September 30, 2021, primarily due to increased stock-based compensation [129]. - Net finance costs rose by $3.0 million, or 19.4%, to $18.3 million for the three months ended September 30, 2021, attributed to higher leverage levels [117]. - Net finance costs decreased by $1.5 million, or 2.9%, to $50.3 million for the nine months ended September 30, 2021, primarily due to a loss on debt extinguishment recognized in the prior year [131]. Utilization and Operational Metrics - Average utilization based on net book value was approximately 82% for the three months ended September 30, 2021, down from 86% in the same period of 2020 [107]. - Average utilization based on net book value was approximately 81% for the nine months ended September 30, 2021, down from 86% in the prior year [120]. Cash Flow and Debt - Cash flows provided by operating activities decreased to $68.6 million for the nine months ended September 30, 2021, compared to $83.5 million for the same period in 2020 [136]. - Cash flows used in investing activities were $180.9 million for the nine months ended September 30, 2021, primarily reflecting purchases of equipment held for operating lease [138]. - As of September 30, 2021, total debt obligations amounted to $1,834.7 million, with interest rates ranging from approximately 1.8% to 7.4% [151]. - The company recognized a loss of $4.7 million on debt extinguishment related to the repayment of the WEST II Series A 2012 term notes in March 2020 [150]. - The company is in compliance with financial covenants, including an Interest Coverage Ratio of at least 2.25 to 1.00 and a Total Leverage Ratio below 4.50 to 1.00 as of September 30, 2021 [153]. Commitments and Future Outlook - The company has contractual commitments totaling $2,580.6 million, with $75.1 million due within one year and $908.7 million due beyond five years [155]. - The company has committed to purchasing 12 additional LEAP-1B engines, anticipating increased demand as the 737 Max is re-certified [155]. - Future maintenance services are anticipated to cost $24.0 million by 2024, with additional commitments for overhaul and maintenance services ranging from $70.2 million to $112.0 million by 2030 [156]. Risk Factors - The company is exposed to currency devaluation risk, with 54% of lease rent revenues from non-U.S. domiciled lessees during the nine months ended September 30, 2021 [161]. - As of September 30, 2021, $603.0 million of the company's outstanding debt is variable rate debt, with an estimated annual interest expense fluctuation of $1.0 million for every 1% change in interest rates [159]. Taxation - The effective tax rate for the third quarter of 2021 was 52.8%, compared to 50.6% in the prior year period, mainly due to executive compensation exceeding $1.0 million [118]. Asset Holdings - As of September 30, 2021, the company held $1,971.3 million in equipment under operating leases and $196.1 million in notes receivable, representing a total of 313 engines and eight aircraft [95].