UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
Amendment No. 1
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 31, 1996
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number:
WILLIS LEASE FINANCE CORPORATION
(Exact name of registrant as specified in its charter)
California 68-0070656
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation 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
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
------------------- ----------------
None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class
-------------------
None
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Registration S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendments to this Form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates of
the registrant as of March 21, 1997 was approximately $31,980,464 (based on a
closing sale price of $13.88 per share as reported on the NASDAQ National Market
System). Shares of Common Stock held by each executive officer and director and
by each person who owns 5% or more of the outstanding Common Stock have been
excluded in that such persons may be deemed to be affiliates. This determination
of affiliate status is not necessarily a conclusive determination for other
purposes.
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The following information relates to the Company's Common Stock, which
is listed on the NASDAQ National Market under the symbol WLFC. As of March 21,
1997, there were 1,170 stockholders of record of the Company's Common Stock. The
foregoing number does not include beneficial holders of the Company's common
stock. The high and low sales price of the Common Stock for each quarter since
the effective date of the Initial Public Offering (the "Offering"), September
18, 1996, as reported by NASDAQ, are set forth below:
1996
----
High Low
Third Quarter $ 10 $ 8 1/2
Fourth Quarter $ 12 7/8 $ 8 3/4
The Company did not declare any dividends for the year ended December
31, 1996.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
The following table summarizes selected consolidated financial data and
operating information of the Company. The selected consolidated financial data
should be read in conjunction with the Consolidated Financial Statements and
notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this Form 10-K.
<CAPTION>
Years Ended December 31,
------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenue:
Operating lease revenue $ 13,740 13,771 13,636 10,323 8,744
Gain (loss) on sale of leased engines 2 (483) 633 (281) 659
Spare parts sales 5,843 3,859 795 -- --
Sale of equipment acquired for resale 12,105 5,472 2,184 -- 3,598
Interest and other income 618 119 542 938 70
-------------------------------------------------------
$ 32,308 22,738 17,790 10,980 13,071
Expenses:
Cost of spare parts sales $ 3,308 2,546 659 -- --
Cost of equipment acquired for resale 10,789 2,742 1,863 -- 3,140
All other expenses 13,351 14,168 13,295 9,857 9,117
Gain on modification of credit facility -- 2,203 -- -- --
Income before income taxes and minority interest 4,860 5,485 1,973 1,123 814
Net income 2,804 3,216 1,172 669 487
Balance Sheet Data:
Total assets $124,933 91,437 83,542 68,632 69,711
Debt financing 73,186 69,911 69,456 59,840 64,349
Shareholders' equity 23,202 4,812 1,959 1,151 463
Lease Portfolio:
Engine portfolio at the end of the period 32 31 26 25 26
</TABLE>
11
<PAGE>
Year Ended December 31, 1996 compared to Year Ended December 31, 1995
<TABLE>
Revenue is summarized as follows:
<CAPTION>
Years ended December 31,
----------------------------------------------------------------
1996 1995
----------------------------------------------------------------
Amount % Amount %
------ --- ------ ---
(dollars in thousands)
<S> <C> <C> <C> <C>
Revenue:
Operating lease revenue $13,740 42.5 $13,771 60.6
Gain (loss) on sale of leased engines 2 0.0 (483) (2.1)
Spare parts sales 5,843 18.1 3,859 17.0
Sale of equipment acquired for resale 12,105 37.5 5,472 24.0
Interest and other income 618 1.9 119 0.5
----------------------------------------------------------------
Total $32,308 100.00 $22,738 100.0
================================================================
</TABLE>
The Company's results of operation are significantly impacted by
changes in the portfolio of equipment.
Lease Portfolio. At December 31, 1995, the Company had 31 engines in
its operating lease portfolio. During 1996, four engines were transferred from
the lease portfolio to the equipment sale portfolio and subsequently sold. One
engine was transferred at its net book value to WASI to be dismantled and is
held for sale as spare parts inventory. Another engine was sold under a sale and
leaseback agreement and is now reflected on the Company's balance sheet as an
engine on capital lease. The remaining three engines were sold to third parties.
In the third quarter of 1996, the Company acquired one engine for $2.8 million
and in the fourth quarter, the Company acquired four engines for a total cost of
approximately $16.3 million as well as two auxiliary power units (APU's) and a
spare parts package for a total cost of approximately $3.2 million. At December
31, 1996, the Company owned 31 engines in its lease portfolio and had 1 engine
on a capital lease.
Operating Leases. Operating lease revenue for the year-ended December
31, 1996 decreased to $13.7 million from $13.8 million from the corresponding
period in 1995. This decrease is primarily due to a decrease in revenue from one
engine which was off-lease and in a repair facility for eight months in 1996 and
two engines which were sold in 1996, offset slightly by five engines purchased
and leased late in 1996.
In 1996, expenses directly related to operating lease activity dropped
23% to $8.1 million from $10.6 million in 1995. The reduction in expenses in
1996 was due to a reduction in depreciation expenses of $1.6 million (33%) as a
result of two engines subject to component depreciation in 1995 that were fully
depreciated and the sale of two engines in the 3rd quarter of 1996. Interest
expense dropped $1.2 million (22%) in 1996 from 1995, due primarily to the
modification of the existing term loan in June 1995 resulting in more favorable
interest rates. Residual sharing expenses, however, increased 77% to $723,000 in
1996 from the corresponding period in 1995 due to changes in the Company's
portfolio of engines subject to such agreements.
Gain (Loss) on Sale of Leased Engines. The loss in 1995 was
attributable to unanticipated overhaul expenses of $373,000 required in order to
prepare an engine for resale and a $110,000 loss on the sale of the engine.
Spare Parts Sales. Revenues from spare parts sales increased 51% to
$5.8 million and the gross margin rose to 43% in 1996 from 34% in the
corresponding period in 1995, primarily due to a changed inventory mix and
increased volume.
13
<PAGE>
WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
<TABLE>
(2) Aircraft Engines Held for Operating Lease (Continued)
<CAPTION>
Years ended December 31,
--------------------------------------------------------------
Region 1996 1995 1994
- ------ ---- ---- ----
<S> <C> <C> <C>
Operating lease revenue less
depreciation, interest, spare parts
interest and residual share:
United States $2,405,061 $463,336 $275,681
Canada 548,769 301,039 185,746
Mexico 306,007 348,900 307,843
Australia/New Zealand 471,293 271,355 410,112
Europe 1,409,631 1,521,563 675,408
South America 185,297 77,569 82,059
Asia 339,545 185,196 125,121
Off-lease and other (60,711) (231,210) (105,484)
--------------------------------------------------------------
Total operating lease revenue
less depreciation, interest, spare
parts interest and residual share $5,604,892 $2,937,748 $1,956,486
==============================================================
Years ended December 31,
--------------------------------------------------------------
Region 1996 1995 1994
- ------ ---- ---- ----
Net book value of engines:
United States $31,332,388 $24,138,266 $23,601,123
Canada 7,115,984 7,356,011 7,596,038
Mexico 13,441,445 9,255,029 9,506,072
Australia/New Zealand 5,509,070 5,706,410 9,332,036
Europe 30,051,738 19,056,190 16,921,539
South America 2,033,831 1,951,012 4,829,647
Asia 4,109,446 4,243,830 7,202,126
Off-lease 2,498,527 2,997,631 --
--------------------------------------------------------------
Total net book value of engines
owned and on Capitol Lease $96,092,429 $74,704,379 $78,988,581
==============================================================
</TABLE>
38
<PAGE>
WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(13) Accounting for Stock Based Compensation (SFAS 123)
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, Accounting for Stock Based
Compensation (SFAS 123). SFAS 123 establishes financial accounting and reporting
standards for stock-based employee compensation plans. SFAS 123 encourages all
entities to adopt a fair value based method of accounting for stock based
compensation plans in which compensation cost is measured at the date the award
is granted based on the value of the award and is recognized over the employee
service period. However, SFAS 123 allows an entity to continue to use the method
prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees (APB 25), with pro forma disclosures of net income and
earnings per share as if the fair value based method had been applied. APB 25
requires compensation expense to be recognized over the employee service period
based on the excess, if any, of the quoted market price of the stock at the date
the award is granted or other measurement date, as applicable, over an amount an
employee must pay to acquire the stock. SFAS 123 is effective for financial
statements for fiscal years beginning after December 31, 1995.
At December 31, 1996, the Company has two stock-based compensation
plans and has issued warrants, which are described below. The Company applies
APB 25 in accounting for its plans. Accordingly, no compensation cost has been
recognized for its fixed stock option plans and its stock purchase plan. Had
compensation cost for the Company's two stock-based compensation plans been
determined consistent with SFAS 123, the Company's net income and earnings per
share would have been reduced to $2,398,699 and $.63, respectively.
Employee Stock Purchase Plan
Under the 1996 Stock Purchase Plan, the Company is authorized to issue
up to 75,000 shares of its Common Stock to its full-time employees, nearly all
of whom are eligible to participate. Under the terms of the Plan, the employees
may elect to have up to 10% of their annual base salary, to a maximum of $25,000
per year, withheld for the purchase of the Company's Common Stock. Purchase
intervals are six months each, ending on January 31 and July 31. The purchase
price is the lesser of 85% of the market price of the Common Stock at the
beginning of each purchase interval or 85% of the market price of the Common
Stock at the end of each purchase interval. The first stock purchase date was
January 31, 1997; accordingly, the Company had sold no shares to employees under
the plan through December 31, 1996.
Under FASB Statement 123, compensation cost is recognized for the fair
value of the employees' purchase rights, which was estimated using the Black
Scholes model with the following assumptions for 1996: Dividend yield of zero;
an expected life of 1.25 years; expected volatility of 84 percent; and weighted
average risk-free interest rate of 6.22 percent. The weighted average fair value
of those purchase rights granted in 1996 was $3.08.
1996 Stock Option/Stock Issuance Plan
Under the 1996 Stock Option/Stock Issuance Plan, 525,000 shares of the
Company's shares have been set aside to provide eligible persons with the
opportunity to acquire a proprietary interest in the Company. The plan includes
a Discretionary Option Grant Program, a Stock Issuance Program, and an Automatic
Option Grant Program for eligible non-employee Board members.
The fair value of each option grant was estimated on the date of grant
using the Black Scholes option-pricing model with the following assumptions for
1996: weighted average risk-free interest rate of 6.22 percent; dividend yield
of zero; expected life of 2.43 years, and volatility of 84 percent.
45
<PAGE>
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.
April 1, 1997
Willis Lease Finance Corporation
By: /s/ CHARLES F. WILLIS, IV
---------------------------------
Charles F. Willis, IV
Chairman of the Board, President, and
Chief Executive Officer
<TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed by the followings persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<CAPTION>
Date Title Signature
---- ----- ---------
<S> <C> <C> <C>
Date: April 1, 1997 Chief Executive Officer /s/ CHARLES F. WILLIS, IV
(Principal Executive Officer) ---------------------
Charles F. Willis, IV
Date: April 1, 1997 Executive Vice President and /s/ WILLIAM L. McELFRESH
Director --------------------
William L. McElfresh
Date: April 1, 1997 Chief Financial Officer and /s/ ELLIOT M. FISCHER
Chief Accounting Officer -----------------
(Principal Financial and Elliot M. Fischer
Principal Accounting Officer)
Date: April 1, 1997 Director /s/ ROSS K. ANDERSON
----------------
Ross K. Anderson
Date: April 1, 1997 Director /s/ WILLIAM M. LEROY
----------------
William M. LeRoy
Date: April 1, 1997 Director /s/ WILLARD H. SMITH, JR
--------------------
Willard H. Smith, Jr.
</TABLE>
27
Accountants' Consent
--------------------
The Board of Directors
Willis Lease Finance Corporation
We consent to incorporation by reference in the registration statement on Form
S-8 of Willis Lease Finance Corporation of our report dated March 6, 1997,
relating to the balance sheets of Willis Lease Finance Corporation as of
December 31, 1996 and 1995, and the related statements of income, shareholders'
equity and cash flows for each of the years in the three-year period ended
December 31, 1996, which report appears in the December 31, 1996, annual report
on Form 10-KSB of Willis Lease Finance Corporation.
San Francisco, California
March 28, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 20,173,445
<SECURITIES> 0
<RECEIVABLES> 3,196,972
<ALLOWANCES> 0
<INVENTORY> 4,057,648
<CURRENT-ASSETS> 0
<PP&E> 96,551,209
<DEPRECIATION> 16,532,825
<TOTAL-ASSETS> 124,932,693
<CURRENT-LIABILITIES> 0
<BONDS> 76,146,114
<COMMON> 16,055,689
0
0
<OTHER-SE> 7,146,563
<TOTAL-LIABILITY-AND-EQUITY> 124,932,693
<SALES> 17,947,922
<TOTAL-REVENUES> 32,307,712
<CGS> 14,096,658
<TOTAL-COSTS> 18,000,627
<OTHER-EXPENSES> 5,123,813
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,323,276
<INCOME-PRETAX> 4,859,996
<INCOME-TAX> 1,976,471
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,804,472
<EPS-PRIMARY> 0.74
<EPS-DILUTED> 0.74
</TABLE>
