WILLIS LEASE FINANCE CORP - 10-Q Quarterly Report

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the Quarterly Period Ended March 31, 2004

	OR

o	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)

Delaware		68-0070656
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

2320 Marinship Way, Suite 300 Sausalito, CA		94965
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (415) 331-5281

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 ý No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b.2 of the Exchange Act). Yes o No ý

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 May 4, 2004
Common Stock, $0.01 Par Value		8,887,910

WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES

INDEX

PART I	FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (Unaudited)

	Consolidated Balance Sheets as of March 31, 2004 and December 31, 2003

	Consolidated Statements of Income for the Three months ended March 31, 2004 and 2003

	Consolidated Statements of Shareholders’ Equity and Comprehensive Income for the Three months ended March 31, 2004 and 2003 (as restated)

	Consolidated Statements of Cash Flows for the Three months ended March 31, 2004 and 2003

	Notes to Consolidated Financial Statements

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 4.	CONTROLS AND PROCEDURES

PART II.	OTHER INFORMATION

ITEM 6.	EXHIBITS AND REPORTS ON FORM 8-K

WILLIS LEASE FINANCE CORPORATION

AND SUBSIDIARIES

Consolidated Balance Sheets
(In thousands, except share data)
(Unaudited)

	March 31, 2004			December 31, 2003
ASSETS
Cash and cash equivalents including restricted cash of $33,609 and $33,784 at March 31, 2004 and December 31, 2003, respectively	$	36,860		$	42,986
Equipment held for operating lease, less accumulated depreciation of $73,010 and $67,873 at March 31, 2004 and December 31, 2003, respectively	497,078			499,454
Net investment in direct finance lease	5,253			5,551
Operating lease related receivable, net of allowances of $465 and $440 at March 31, 2004 and December 31, 2003, respectively	4,149			2,095
Investments	1,480			1,480
Assets under derivative instruments	—			7
Other assets	6,833			8,449
Total assets	$	551,653		$	560,022

LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Accounts payable and accrued expenses	$	8,340		$	5,753
Liabilities under derivative instruments	1,441			696
Deferred income taxes	25,487			25,283
Notes payable	350,702			362,395
Maintenance reserves	46,765			46,408
Security deposits	2,221			2,314
Unearned lease revenue	5,927			7,111
Total liabilities	440,883			449,960

Shareholders’ equity:
Preferred stock ($0.01 par value, 5,000,000 shares authorized; none outstanding)	—			—
Common stock, ($0.01 par value, 20,000,000 shares authorized; 8,887,160 and 8,846,805 shares issued and outstanding at March 31, 2004 and December 31, 2003, respectively)	89			88
Paid-in capital in excess of par	61,915			61,710
Accumulated other comprehensive loss, net of tax of $776 and $584 at March 31, 2004 and December 31, 2003, respectively	(1,127		)	(660		)
Retained earnings	49,893			48,924
Total shareholders’ equity	110,770			110,062
Total liabilities and shareholders’ equity	$	551,653		$	560,022

See accompanying notes to the consolidated financial statements.

WILLIS LEASE FINANCE CORPORATION

AND SUBSIDIARIES

Consolidated Statements of Income

(In thousands, except per share data)

(Unaudited)

	Three Months Ended March 31,
	2004			2003
REVENUE
Lease revenue	$	14,764		$	14,004
Gain on sale of leased equipment	148			38
Other income	174			—
Total revenue	15,086			14,042

EXPENSES
Depreciation expense	5,722			5,254
General and administrative	3,691			3,386
Total expenses	9,413			8,640

Earnings from operations	5,673			5,402

Interest expense	4,363			4,242
Interest income	(58		)	(69		)
Net interest and finance costs	4,305			4,173

Income before income taxes	1,368			1,229
Income tax expense	(399		)	(387		)
Net income	$	969		$	842

Basic earnings per common share	$	0.11		$	0.10

Diluted earnings per common share	$	0.11		$	0.09

Average common shares outstanding	8,856			8,836
Diluted average common shares outstanding	9,161			8,875

See accompanying notes to the consolidated financial statements.

WILLIS LEASE FINANCE CORPORATION

AND SUBSIDIARIES

Consolidated Statements of Shareholders’ Equity and Comprehensive Income

Three Months Ended March 31, 2004 and 2003

(In thousands)

(Unaudited)

	Issued and outstanding shares of common stock	Common Stock		Paid-in Capital in Excess of par		Accumulated Other Comprehensive Income/(Loss) (net)			Retained earnings		Total shareholders’ equity
Balances at December 31, 2002 (as restated)	8,834	$	88	$	61,646	$	(1,576	)	$	44,747	$	104,905

Net Income	—	—		—		—			842		842

Other comprehensive income
Net loss on cashflow hedging instruments, net of tax of $68	—	—		—		(147		)	—		(147		)
Total comprehensive income											695