Willis Lease(WLFC) - 2022 Q4 - Annual Report

Revenue Sources - 60% of the company's lease rent revenue for the year ended December 31, 2022, was generated from foreign customers[135] - The company derived approximately 60% of its core lease rent revenue from international business, exposing it to global market uncertainties[148] - In 2022, 60% of the company's total lease rent revenues came from non-U.S. domiciled lessees, exposing it to currency devaluation risk[251] Financial Risks - The company faces risks from inflation, which has increased costs of labor and other services, potentially reducing profit margins[131] - Substantially all leases require payments in U.S. dollars, posing risks if foreign currencies devalue against the dollar[136] - The company has $727.0 million of outstanding variable rate debt, with an estimated annual interest expense increase of $2.3 million for every 1% rise in interest rates[249] Market Competition - The company operates in a highly competitive market, with primary competitors having significantly greater resources[150] Operational Challenges - The company may face challenges in managing the expansion of its operations effectively[154] - Political and economic instability, such as the conflict between Russia and Ukraine, may adversely affect operations[138] - Changes in trade policies and tariffs could materially impact the company's business and financial condition[145] - The company is subject to stringent governmental regulations, and failure to comply could harm its operations[156] Ownership and Control - As of December 31, 2022, Charles F. Willis, IV beneficially owned approximately 46% of the company's common stock, giving him effective control over the company[158] - Provisions in Delaware law and the company's charter may hinder or delay a change of control, complicating potential acquisitions[166] - The company has authorized the issuance of 6.5% Series A Preferred Stock, which could discourage mergers or proxy contests[167] Potential Transactions - The company is currently negotiating a potential "take-private" transaction with Mitsui & Co., Ltd. and other partners, which could adversely affect its stock price if negotiations fail[159] - The company has incurred significant expenses related to the potential transaction, which will not be recovered if the deal is not completed, potentially harming its business[159] - The company may face challenges in retaining employees and customers if the potential "take-private" transaction creates uncertainty about its future[160] Financial Compliance - As of December 31, 2022, the company was in compliance with financial covenants related to its servicing and administrative agency agreements, but future compliance is uncertain[165] - The company receives monthly fees of 11.5% as servicer and 2.0% as administrative agent for the WEST facilities, which are critical to its cash flows[164]