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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of Report: November 30, 2000
WILLIS LEASE FINANCE CORPORATION
(Exact Name of Registrant as Specified in Charter)
DELAWARE 0-28774 68-0070656
(State or Other Jurisdiction (Commission File (I.R.S. Employer
of Incorporation ) Number) Identification Number)
2320 MARINSHIP WAY, SUITE 300
SAUSALITO, CALIFORNIA 94965
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (415) 331-5281
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On November 30, 2000 (the "Closing Date"), Willis Lease Finance
Corporation, a Delaware corporation (the "Registrant"), closed the transactions
described in the agreements with Flightlease AG, a corporation organized under
the laws of Switzerland ("Flightlease"), SR Technics Group, a corporation
organized under the laws of Switzerland ("SRT"), FlightTechnics, LLC, a Delaware
limited liability company ("FlightTechnics") and SR Technics Group America,
Inc., a Delaware corporation ("SRT Group America"), as described in the
Registrant's Current Report on Form 8-K filed with the Securities and Exchange
Commission on November 13, 2000.
On the Closing Date, the Registrant sold its aircraft parts and
components subsidiary, Willis Aeronautical Services, Inc. ("WASI"), to SRT Group
America for $26,690,741 subject to a post-closing price adjustment based on net
book value and inventory value as of the Closing Date pursuant to the Share
Purchase Agreement, dated as of November 7, 2000, by and between the Registrant
and SRT Group America. The WASI purchase price was determined after an
arms-length negotiation between the parties. In addition, the Registrant
acquired five aircraft engines from SRT pursuant to the Aircraft Engine Purchase
Agreement, dated as of November 7, 2000, by and between the Registrant and SRT,
for $42,998,000 drawn from the proceeds of the sale of WASI and its membership
interests in PGTC (as described below). The aircraft engine purchase price was
determined after an arms-length negotiation between the parties. The Registrant
then leased the engines back to SRT for periods of four and ten years, with
termination fees for early termination.
In connection with its sale of WASI to SRT Group America, the
Registrant has agreed to provide transition services to WASI for a limited
period pursuant to a Transition Services Agreement (the "Transition Services
Agreement"), dated as of the Closing Date. The Transition Services Agreement is
filed as Exhibit 10.2 to this report.
On the Closing Date, the Registrant sold its 50% membership interest in
Pacific Gas Turbine Center LLC ("PGTC"), its engine maintenance, repair and
testing joint venture with Chromalloy Gas Turbine Corporation, to SRT Group
America for $15,000,000, subject to a post-closing price adjustment based on 50%
of PGTC's net book value as of the Closing Date.
In addition, the Registrant issued and sold 1,300,000 shares of its
common stock to FlightTechnics, an affiliate of each of SRT and SRT Group
America, for $15.00 per share, for an aggregate purchase price of $19,500,000.
The Registrant also granted FlightTechnics an option, exercisable within 18
months of the Closing Date and subject to stockholder approval (if required by
the NASD and Nasdaq), to purchase newly issued shares of its common stock in a
private placement in an amount between 1,700,000 shares and up to an amount that
would give FlightTechnics 34.9% of the Registrant's issued and outstanding
common stock. The price per share for the first additional 1,700,000 shares
purchased pursuant to this option will be $15.00, and the price per share for
any shares purchased in excess of the first additional 1,700,000 shares will be
$16.50.
In connection with the sale of its common stock to FlightTechnics, the
Registrant entered into an amendment to its Rights Agreement dated September 24,
1999 (the "First Amendment to Rights Agreement") by and between the Registrant
and American Stock Transfer & Trust
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Company, dated as of the Closing Date, to include FlightTechnics and its
affiliates under the definition of an "Exempt Person", subject to FlightTechnics
and its affiliates owning a certain percentage of the Registrant's common stock.
The First Amendment to Rights Agreement is filed as Exhibit 10.1 to this report.
The Registrant and FlightTechnics, together with Mr. Charles F. Willis,
IV, CFW Partners, L.P., and the Austin Chandler Willis 1995 Irrevocable Trust,
have entered into an agreement (the "Stockholders' Agreement"), dated as of
November 7, 2000, and effective upon the Closing Date (Mr. Willis, CFW Partners,
L.P., and the Austin Chandler Willis 1995 Irrevocable Trust collectively known
as the "Stockholders"). Under the Stockholders' Agreement, FlightTechnics may
purchase 250,000 shares of the Registrant's common stock on the open market
beginning immediately after the Closing Date and may purchase more within five
years of the Closing Date upon the occurrence of certain conditions, but in no
event may FlightTechnics and its affiliates own in the aggregate in excess of
49.9% of the Registrant's issued and outstanding common stock. FlightTechnics
will agree to divest itself if and to the extent that it and its affiliates own
more than 49.9% of the Registrant's common stock within the five year period
from the Closing Date. The Stockholders and FlightTechnics have also agreed to
restrictions on their respective abilities to sell their shares of the
Registrant's common stock for a five year period from the Closing Date, and
subject to the parties owning a certain percentage of the Registrant's common
stock.
As part of the transaction, Director Donald A. Nunemaker resigned as a
member of the Registrant's board of directors as of the Closing Date. Mr.
Nunemaker remains the Registrant's Executive Vice President and Chief
Administrative Officer. Effective as of the Closing Date, the Registrant's board
of directors appointed Hans Jorg Hunziker, President of Flightlease, as a
director to fill the vacancy on the board of directors created by Mr.
Nunemaker's resignation.
The Registrant issued a press release on November 30, 2000 announcing
the close of this series of transactions. The press release is filed as Exhibit
99.1 to this report.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORM FINANCIAL INFORMATION AND
EXHIBITS.
(b) PRO FORMA FINANCIAL INFORMATION.
WILLIS LEASE FINANCE CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The unaudited pro forma condensed consolidated financial information as
of September 30, 2000 and for the nine months ended September 30, 2000 and the
year ended December 31, 1999 presented in this 8-K filing gives effect to the
sale of our spare parts and repair operations, and associated transactions
involving the sale of shares and purchase of engines. The unaudited pro forma
condensed consolidated statement of income for the nine months ended September
30, 2000 assumes that the proposed sale occurred on January 1, 2000.
Accordingly, the pro forma financial information for 2000 is based upon our
historical financial statements for the nine months ended September 30, 2000.
The pro forma financial information for 1999 is based on our historical
financial statements for the twelve months ended December 31, 1999.
The unaudited pro forma condensed financial statements give effect to
events that are directly attributable to the sale and related transactions.
Explanations for these adjustments are included in the notes accompanying the
unaudited pro forma condensed consolidated balance sheet and income
statements. The unaudited pro forma condensed financial statements include
certain rounding adjustments.
Our unaudited pro forma condensed consolidated financial information
should be read in conjunction with our historical financial statements and the
information contained in our "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained in our annual report on Form 10-K
for the year ended December 31, 1999 and quarterly report on form 10-Q for the
nine-month period ended September 30, 2000. The unaudited pro forma condensed
consolidated financial data should not be construed to be indicative of our
financial condition, results of operations or covenant compliance had the
proposed sale and events described above been completed on the dates assumed and
are not intended to project our financial condition on any future date or our
results of operations for any future period.
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WILLIS LEASE FINANCE CORPORATION
UNAUDITED PRO-FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
SALE OF PRO-FORMA ADDITIONAL UNAUDITED
HISTORICAL WASI SUB-TOTAL TRANSACTIONS PRO-FORMA
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<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents including restricted cash of $14,051 $ 24,303 17,864 42,167 (8,498) $ 33,669
Equipment held for operating lease, less accumulated depreciation 327,697 - 327,697 43,498 371,195
Net investment in direct finance lease 8,112 - 8,112 - 8,112
Spare parts inventory 27,344 (26,773) 571 - 571
Operating lease related receivable 3,889 - 3,889 - 3,889
Trade receivables, net 6,833 (6,016) 817 - 817
Investment in unconsolidated affiliates 5,724 - 5,724 (4,945) 779
Other assets 7,600 (722) 6,878 (1,500) 5,378
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Total assets $411,502 $(15,648) $ 395,854 $ 28,555 $ 424,409
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Accounts payable and accrued expenses $ 7,570 (3,842) 3,728 - $ 3,728
Deferred income taxes 16,400 (1,545) 14,855 3,921 18,777
Notes payable 282,736 (8,300) 274,436 - 274,436
Residual share payable 2,500 - 2,500 - 2,500
Maintenance reserves 18,491 - 18,491 - 18,491
Security deposits 4,199 - 4,199 - 4,199
Unearned lease revenue 4,422 (425) 3,997 - 3,997
Shareholders' equity 75,184 (1,536) 73,648 24,634 98,281
---------- --------- ---------- ------------ ----------
Total liabilities and shareholders' equity $411,502 $(15,648) $ 395,854 $ 28,555 $ 424,409
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</TABLE>
The notes to the unaudited pro-forma condensed consolidated financial
statements are an integral part of this statement.
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WILLIS LEASE FINANCE CORPORATION
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
1. THE TRANSACTION
The pro forma condensed consolidated balance sheet gives effect to the
sale of the shares of the spare parts subsidiary Willis Aeronautical Services,
Inc. (WASI) and our equity investment in the repairs business Pacific Gas
Turbine LLC (PGTC). It also reflects the sale of common stock and stock option
and the purchase and leaseback of engines.
A. SALE OF SHARES OF WASI
The transaction assumes the following for Willis Lease Finance
Corporation (WLFC) (in thousands of dollars):
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<S> <C>
Projected net sales proceeds $ 26,164
Net assets of WASI at September 30, 2000 (28,682)
Reduction in tax liability of WLFC 982
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Loss from transaction $ (1,536)
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</TABLE>
The net loss amount has been included in shareholders' equity in the
pro forma condensed consolidated balance sheet as of September 30, 2000.
B. ADDITIONAL TRANSACTIONS
The transaction includes the sale of our equity investment in PGTC for
$15,000,000 giving rise to an estimated gain, net of tax, of
$6,134,000.
The transaction includes the purchase and leaseback of five engines
from SRT for $43,498,000 including estimated transaction costs of
$500,000.
The transaction includes the sale of common stock and stock option for
$19,500,000 before estimated transaction costs of $1,000,000.
2. USE OF PROCEEDS
The following table represents the estimated net sale proceeds (in
thousands of dollars):
<TABLE>
<S> <C>
Projected net sales proceeds from sale of WASI $26,164
Net proceeds from sale of PGTC 15,000
Net proceeds from sale of common stock and option 18,500
Other assets sold by WLFC 1,500
Repayments of notes payable (8,300)
Purchase of engines (43,498)
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Net cash proceeds $ 9,366
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The net cash proceeds will be deposited into the bank and are presumed to be
non-interest bearing.
3. CLOSING ADJUSTMENTS
The actual sales proceeds will be adjusted after the Closing Date from
the amounts presented herein on a dollar for dollar basis for increases or
decreases in the net book value of the assets sold (excluding inventory) and
liabilities assumed of WASI between September 30, 2000 and the Closing Date.
Inventory is subject to adjustment based on the valuation formula outlined in
the agreements.
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WILLIS LEASE FINANCE CORPORATION
UNAUDITED PRO-FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO-FORMA ADDITIONAL UNAUDITED
HISTORICAL WASI SUB-TOTAL TRANSACTIONS PRO-FORMA
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<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Total revenues 70,193 (21,636) 48,557 3,950 52,507
Depreciation expense 10,639 (72) 10,567 967 11,534
Cost of spare part sales 18,420 (15,988) 2,432 - 2,432
General and administrative 11,476 (2,150) 9,326 - 9,326
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Operating income 29,658 (3,426) 26,232 2,983 29,214
Interest expense 19,568 (767) 18,801 (597) 18,203
Interest and other income (726) (26) (752) (752)
Residual share 508 - 508 - 508
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Net interest and finance cost 19,350 (793) 18,557 (597) 17,960
Loss from unconsolidated affiliate (1,116) - (1,116) 1,116 -
Income taxes (3,585) 1,010 (2,575) (1,831) (4,407)
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Income from continuing operations 5,607 (1,623) 3,984 2,864 6,848
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Basic earnings per common share:
Net earnings $ 0.76 $ 0.79
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Diluted earnings per common share:
Net earnings $ 0.75 $ 0.78
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Average common shares outstanding 7,401 1,300 8,701
Diluted average common shares outstanding 7,489 1,300 8,789
</TABLE>
The notes to the unaudited pro-forma condensed consolidated financial
statements are an integral part of this statement.
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WILLIS LEASE FINANCE CORPORATION
UNAUDITED PRO-FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO-FORMA ADDITIONAL UNAUDITED
HISTORICAL WASI SUB-TOTAL TRANSACTIONS PRO-FORMA
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<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Total revenues 94,749 (21,060) 73,689 5,266 78,955
Depreciation expense 13,639 (75) 13,564 1,290 14,854
Cost of spare part sales 36,671 (22,496) 14,175 - 14,175
General and administrative 17,466 (4,718) 12,748 - 12,748
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Operating income 26,973 6,229 33,202 3,976 37,178
Interest expense 22,357 (1,603) 20,754 (796) 19,958
Interest and other income (1,182) (38) (1,220) - (1,220)
Residual share 847 - 847 - 847
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Net interest and finance cost 22,022 (1,641) 20,381 (796) 19,585
Loss from unconsolidated affiliate (622) - (622) 622 -
Income taxes (1,046) (1,871) (2,917) (2,011) (4,927)
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Income from continuing operations 3,283 5,999 9,282 3,384 12,666
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Basic earnings per common share:
Net earnings $ 0.44 $ 1.46
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Diluted earnings per common share:
Net earnings $ 0.44 $ 1.45
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Average common shares outstanding 7,382 1,300 8,682
Diluted average common shares outstanding 7,447 1,300 8,747
</TABLE>
The notes to the unaudited pro-forma condensed consolidated financial
statements are an integral part of this statement.
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WILLIS LEASE FINANCE CORPORATION
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENTS
1. SPARE PARTS AND REPAIRS
The pro forma condensed consolidated statements of income give effect
to the sale of the equity investment in PGTC and shares of WASI assuming the
sale occurred on the first day of the periods together with the sale of common
stock and stock option of the Registrant and purchase and leaseback of engines.
The pro forma condensed consolidated statements of income exclude all direct
expenses and overhead costs of WASI and PGTC that will be eliminated on the
completion of the sale of these assets.
2. OPERATIONS SUPPORT
The pro forma condensed consolidated statements of income exclude all
direct expenses and overhead costs of WLFC related to WASI and PGTC that will be
eliminated on the completion of the sale of these assets.
3. THE TRANSACTION
The estimated gain on the sale of the assets of WASI and PGTC, net of
taxes, is $4.6 million. The estimated gain has not been included in any of the
pro-forma income statements.
The additional transactions include lease revenue at the contracted
amounts, depreciation based on the Company's existing depreciation policy and
a reduction in interest expense, at average interest rates, due to the
application of the net transaction proceeds.
4. INCOME TAXES
The pro forma condensed consolidated statements of income give
effect to the tax adjustments at a statutory rate of 39% for 2000, of which
35% is for Federal tax and 4% for state tax and an average rate of 28% for
1999, which is a blend of the historical rate of 24% and the rate on the
incremental income arising from the transaction of 39%.
5. CLOSING ADJUSTMENTS
The actual sales proceeds were adjusted after the Closing Date from the
amounts presented herein on a dollar for dollar basis for increases or decreases
in the net book value of the assets sold (excluding inventory) and liabilities
assumed of WASI between September 30, 2000 and the Closing Date.
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(ITEM 7. FINANCIAL STATEMENTS, PRO FORM FINANCIAL INFORMATION AND
EXHIBITS, CONTINUED).
(c) Exhibits
<TABLE>
<S> <C>
10.1 First Amendment to Rights Agreement, dated as of
November 30, 2000, by and between Willis Lease
Finance Corporation and American Stock Transfer &
Trust Company.
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10.2 Transition Services Agreement, dated as of
November 30, 2000 by and between Willis Lease
Finance Corporation and Willis Aeronautical
Services, Inc.
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10.3 Investment Agreement, dated as of November 7,
2000, by and among Willis Lease Finance
Corporation, FlightTechnics LLC, Flightlease AG,
SR Technics Group and SR Technics Group America,
Inc. Previously filed as Exhibit 10.1 to the
Registrant's Current Report of Form 8-K filed
with the Securities and Exchange Commission on
November 13, 2000 and incorporated herein by
reference in its entirety.
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10.4 Membership Interest Purchase Agreement, dated as
of November 7, 2000, by and between Willis Lease
Finance Corporation and SR Technics Group
America, Inc. Previously filed as Exhibit 10.3 to
the Registrant's Current Report of Form 8-K filed
with the Securities and Exchange Commission on
November 13, 2000 and incorporated herein by
reference in its entirety.
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10.5 Share Purchase Agreement, dated as of November 7,
2000, by and between Willis Lease Finance
Corporation and SR Technics Group America, Inc.
Previously filed as Exhibit 10.4 to the
Registrant's Current Report of Form 8-K filed
with the Securities and Exchange Commission on
November 13, 2000 and incorporated herein by
reference in its entirety.
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10.6* Cooperation Agreement, dated as of November 7,
2000, by and among Willis Lease Finance
Corporation, Flightlease AG and SR Technics
Group. Previously filed as Exhibit 10.6 to the
Registrant's Current Report of Form 8-K filed
with the Securities and Exchange Commission on
November 13, 2000 and incorporated herein by
reference in its entirety.
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10.7* Aircraft Engine Purchase Agreement, dated as of
November 7, 2000, by and between Willis Lease
Finance Corporation and SR Technics Group AG.
Previously filed as Exhibit 10.7 to the
Registrant's Current Report of Form 8-K filed
with the Securities and Exchange Commission on
November 13, 2000 and incorporated herein by
reference in its entirety.
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10.8 Stockholders' Agreement, dated as of November 7,
2000, by and among Willis Lease Finance
Corporation, Charles F. Willis, IV, CFW Partners,
L.P., Austin Chandler Willis 1995 Irrevocable
Trust and FlightTechnics LLC. Previously filed as
Exhibit 10.8 to the Registrant's Current Report
of Form 8-K filed with the Securities and
Exchange Commission on November 13, 2000 and
incorporated herein by reference in its entirety.
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99.1 Press Release of Willis Lease Finance Corporation
dated as of November 30, 2000.
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</TABLE>
* Confidential treatment requested of the Securities and Exchange
Commission in connection with the filing of the Current Report filed on
November 13, 2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated as of December 15, 2000.
WILLIS LEASE FINANCE CORPORATION
By: /S/ NICHOLAS J. NOVASIC
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Nicholas J. Novasic
Chief Financial Officer
