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EX-10.40 - EX-10.40 - WILLIS LEASE FINANCE CORPwlfc-20180930ex1040ecaf6.htm
EX-32 - EX-32 - WILLIS LEASE FINANCE CORPwlfc-20180930xex32.htm
EX-31.2 - EX-31.2 - WILLIS LEASE FINANCE CORPwlfc-20180930ex312f302d6.htm
EX-31.1 - EX-31.1 - WILLIS LEASE FINANCE CORPwlfc-20180930ex311b5fed2.htm
EX-10.41 - EX-10.41 - WILLIS LEASE FINANCE CORPwlfc-20180930ex1041dba43.htm
EX-10.39 - EX-10.39 - WILLIS LEASE FINANCE CORPwlfc-20180930ex103934927.htm
EX-10.38 - EX-10.38 - WILLIS LEASE FINANCE CORPwlfc-20180930ex1038a8284.htm
EX-10.37 - EX-10.37 - WILLIS LEASE FINANCE CORPwlfc-20180930ex103747b7b.htm
EX-10.36 - EX-10.36 - WILLIS LEASE FINANCE CORPwlfc-20180930ex10361e5c4.htm
EX-10.35 - EX-10.35 - WILLIS LEASE FINANCE CORPwlfc-20180930ex10358742f.htm
EX-10.34 - EX-10.34 - WILLIS LEASE FINANCE CORPwlfc-20180930ex103421394.htm

f

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 10-Q

 

(Mark One)

 

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

 

For the Quarterly Period Ended September 30, 2018

 

OR

 

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

 

Commission File Number: 001-15369


 

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.)

 

 

 

 

4700 Lyons Technology Parkway, Coconut Creek, FL

 

 

33073

(Address of principal executive offices)

 

 

(Zip Code)

 

Registrant’s telephone number, including area code (415) 408-4700

 


 

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   No 

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer”, “non-accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer 

 

 

 

Non-accelerated filer

 

Smaller reporting company 

 

 

 

Emerging growth company

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No

 

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 November 5, 2018

Common Stock, $0.01 par value per share

 

6,208,941

 

 

 

 

 

 

 


 

WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES

 

INDEX

 

 

 

 

PART I. 

FINANCIAL INFORMATION

4

 

 

 

Item 1. 

Condensed Consolidated Financial Statements (Unaudited)

4

 

 

 

 

Condensed Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017

4

 

 

 

 

Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2018 and 2017

5

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2018 and 2017

6

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017

7

 

 

 

 

Notes to Condensed Consolidated Financial Statements

8

 

 

 

Item 2. 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

22

 

 

 

Item 3. 

Quantitative and Qualitative Disclosures About Market Risk

28

 

 

 

Item 4. 

Controls and Procedures

28

 

 

 

PART II. 

OTHER INFORMATION

29

 

 

 

Item 1A. 

Risk Factors

29

 

 

 

Item 2. 

Unregistered Sales of Equity Securities and Use of Proceeds

29

 

 

 

Item 5. 

Other Information

30

 

 

 

Item 6. 

Exhibits

31

 

 

 

 

 

 

 

2


 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains certain forward-looking statements, including, without limitation, statements concerning the conditions in our industry, our operations, our economic performance and financial condition, including, in particular, statements relating to our business, operations, growth strategy and service development efforts. The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for certain forward-looking statements so long as such information is identified as forward-looking and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those projected in the information. When used in this Quarterly Report on Form 10-Q, the words “may,” “might,” “should,” “estimate,” “project,” “plan,” “anticipate,” “expect,” “intend,” “outlook,” “believe” and other similar expressions are intended to identify forward-looking statements and information. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. These forward-looking statements are based on estimates and assumptions by our management that, although we believe to be reasonable, are inherently uncertain and subject to a number of risks and uncertainties. These risks and uncertainties include, without limitation, those in our Annual Report on Form 10-K for the year ended December 31, 2017 filed with the Securities and Exchange Commission (SEC) on March 15, 2018 and our other reports filed with the SEC. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law. Reference is also made to such risks and uncertainties detailed from time to time in our other filings with the SEC.

 

 

3


 

PART I — FINANCIAL INFORMATION

 

Item 1.Condensed Consolidated Financial Statements (Unaudited)

 

WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

    

September 30,

    

December 31,

 

 

2018

 

2017

ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$

8,436

 

$

7,052

Restricted cash

 

 

155,420

 

 

40,272

Equipment held for operating lease, less accumulated depreciation of $392,444 and $368,683 at September 30, 2018 and December 31, 2017, respectively

 

 

1,590,482

 

 

1,342,571

Maintenance rights

 

 

14,763

 

 

14,763

Equipment held for sale

 

 

40,931

 

 

34,172

Operating lease related receivables, net of allowances of $1,823 and $949 at September 30, 2018 and December 31, 2017, respectively

 

 

24,777

 

 

18,848

Spare parts inventory

 

 

24,409

 

 

16,379

Investments

 

 

44,438

 

 

50,641

Property, equipment & furnishings, less accumulated depreciation of $8,770 and $7,374 at September 30, 2018 and December 31, 2017, respectively

 

 

26,245

 

 

26,074

Intangible assets, net

 

 

1,430

 

 

1,727

Other assets

 

 

33,865

 

 

50,932

Total assets (1)

 

$

1,965,196

 

$

1,603,431

 

 

 

 

 

 

 

LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

40,879

 

$

22,072

Deferred income taxes

 

 

87,142

 

 

78,280

Debt obligations

 

 

1,392,113

 

 

1,085,405

Maintenance reserves

 

 

88,986

 

 

75,889

Security deposits

 

 

28,591

 

 

25,302

Unearned revenue

 

 

7,264

 

 

8,102

Total liabilities (2)

 

 

1,644,975

 

 

1,295,050

 

 

 

 

 

 

 

Redeemable preferred stock ($0.01 par value, 2,500 shares authorized; 2,500 shares issued at September 30, 2018 and December 31, 2017, respectively)

 

 

49,533

 

 

49,471

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

Common stock ($0.01 par value, 20,000 shares authorized; 6,230 and 6,419 shares issued at September 30, 2018 and December 31, 2017, respectively)

 

 

62

 

 

64

Paid-in capital in excess of par

 

 

 —

 

 

2,319

Retained earnings

 

 

269,664

 

 

256,301

Accumulated other comprehensive income, net of income tax expense of $273 and $83 at September 30, 2018 and December 31, 2017, respectively

 

 

962

 

 

226

Total shareholders’ equity

 

 

270,688

 

 

258,910

Total liabilities, redeemable preferred stock and shareholders' equity

 

$

1,965,196

 

$

1,603,431


(1)

Total assets at September 30, 2018 and December 31, 2017, respectively, include the following assets of variable interest entities (“VIEs”) that can only be used to settle the liabilities of the VIEs: Cash $393 and $130; Restricted cash $155,420  and $40,272;  Equipment $1,054,258  and $657,333;  and Other assets $834  and $20,090, respectively.

(2)

Total liabilities at September 30, 2018 and December 31, 2017, respectively, include the following liabilities of VIEs for which the VIEs’ creditors do not have recourse to Willis Lease Finance Corporation: Debt obligations $919,026  and $577,056, respectively.

 

See accompanying notes to the unaudited condensed consolidated financial statements.

4


 

WILLIS LEASE FINANCE CORPORATION

AND SUBSIDIARIES

Condensed Consolidated Statements of Income

(In thousands, except per share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

    

2018

    

2017

    

2018

    

2017

REVENUE

 

 

 

 

 

 

 

 

 

 

 

 

Lease rent revenue

 

$

46,984

 

$

33,474

 

$

129,710

 

$

95,045

Maintenance reserve revenue

 

 

19,370

 

 

20,370

 

 

56,855

 

 

64,212

Spare parts and equipment sales

 

 

8,354

 

 

9,294

 

 

21,701

 

 

41,273

Gain on sale of leased equipment

 

 

1,256

 

 

174

 

 

2,142

 

 

4,684

Other revenue

 

 

2,010

 

 

2,549

 

 

5,762

 

 

6,439

Total revenue

 

 

77,974

 

 

65,861

 

 

216,170

 

 

211,653

 

 

 

 

 

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

19,861

 

 

16,142

 

 

55,600

 

 

48,786

Cost of spare parts and equipment sales

 

 

5,848

 

 

7,148

 

 

16,537

 

 

32,121

Write-down of equipment

 

 

1,215

 

 

6,226

 

 

4,793

 

 

19,668

General and administrative

 

 

18,124

 

 

14,308

 

 

50,517

 

 

40,574

Technical expense

 

 

2,290

 

 

2,605

 

 

9,199

 

 

7,345

Interest expense

 

 

17,885

 

 

14,220

 

 

46,617

 

 

36,398

Total expenses

 

 

65,223

 

 

60,649

 

 

183,263

 

 

184,892

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings from operations

 

 

12,751

 

 

5,212

 

 

32,907

 

 

26,761

Earnings from joint ventures

 

 

506

 

 

3,040

 

 

1,569

 

 

6,055

Income before income taxes

 

 

13,257

 

 

8,252

 

 

34,476

 

 

32,816

Income tax expense

 

 

3,583

 

 

2,960

 

 

9,359

 

 

13,367

Net income

 

 

9,674

 

 

5,292

 

 

25,117

 

 

19,449

Preferred stock dividends

 

 

819

 

 

344

 

 

2,431

 

 

988

Accretion of preferred stock issuance costs

 

 

21

 

 

 9

 

 

62

 

 

25

Net income attributable to common shareholders

 

$

8,834

 

$

4,939

 

$

22,624

 

$

18,436

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average earnings per common share

 

$

1.50

 

$

0.82

 

$

3.80

 

$

3.04

Diluted weighted average earnings per common share

 

$

1.47

 

$

0.80

 

$

3.72

 

$

2.97

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average common shares outstanding

 

 

5,900

 

 

6,055

 

 

5,960

 

 

6,068

Diluted weighted average common shares outstanding

 

 

6,004

 

 

6,184

 

 

6,083

 

 

6,215

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

5


 

WILLIS LEASE FINANCE CORPORATION

AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

    

2018

    

2017

    

2018

    

2017

Net income

 

$

9,674

 

$

5,292

 

$

25,117

 

$

19,449

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

Currency translation adjustment

 

 

(530)

 

 

294

 

 

(762)

 

 

620

Unrealized gain on derivative instruments

 

 

221

 

 

164

 

 

1,636

 

 

160

Net (loss) gain recognized in other comprehensive income

 

 

(309)

 

 

458

 

 

874

 

 

780

Tax benefit (expense) related to items of other comprehensive income

 

 

70

 

 

(158)

 

 

(197)

 

 

(270)

Impact from adoption of ASU 2018-02 (1)

 

 

 —

 

 

 —

 

 

59

 

 

 —

Other comprehensive (loss) income

 

 

(239)

 

 

300

 

 

736

 

 

510

Total comprehensive income

 

$

9,435

 

$

5,592

 

$

25,853

 

$

19,959


(1)

Reflects the stranded tax effects from change in tax rate as a result of the early adoption of ASU 2018-02 which has been reclassified to retained earnings.

 

See accompanying notes to the unaudited condensed consolidated financial statements.

6


 

WILLIS LEASE FINANCE CORPORATION
AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

    

2018

    

2017

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

25,117

 

$

19,449

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization expense

 

 

55,600

 

 

48,786

Write-down of equipment

 

 

4,793

 

 

19,668

Stock-based compensation expenses

 

 

4,004

 

 

3,228

Amortization of deferred costs

 

 

4,143

 

 

3,639

Allowances and provisions

 

 

1,022

 

 

282

Gain on sale of leased equipment

 

 

(2,142)

 

 

(4,684)

Gain on insurance settlement

 

 

 —

 

 

(1,288)

Income from joint ventures

 

 

(1,569)

 

 

(6,055)

Deferred income taxes

 

 

9,359

 

 

13,367

Changes in assets and liabilities:

 

 

 

 

 

 

Receivables

 

 

(6,951)

 

 

(220)

Distributions received from joint ventures

 

 

5,540

 

 

1,880

Spare parts and equipment

 

 

(27,537)

 

 

7,021

Other assets

 

 

(3,173)

 

 

(1,692)

Accounts payable and accrued expenses

 

 

13,472

 

 

(687)

Maintenance reserves

 

 

16,431

 

 

1,706

Security deposits

 

 

3,519

 

 

6,651

Unearned revenue

 

 

(838)

 

 

990

Net cash provided by operating activities

 

 

100,790

 

 

112,041

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

Proceeds from sale of equipment (net of selling expenses)

 

 

51,600

 

 

53,849

Distributions received from joint ventures

 

 

190

 

 

 —

Purchase of equipment held for operating lease

 

 

(320,186)

 

 

(177,263)

Purchase of property, equipment and furnishings

 

 

(1,574)

 

 

(493)

Net cash used in investing activities

 

 

(269,970)

 

 

(123,907)

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from issuance of debt obligations

 

 

616,439

 

 

485,700

Debt issuance cost

 

 

(6,068)

 

 

(7,473)

Principal payments on debt obligations

 

 

(306,800)

 

 

(448,237)

Interest bearing security deposits

 

 

 —

 

 

(3,261)

Proceeds from shares issued under stock compensation plans

 

 

292

 

 

177

Cancellation of restricted stock units in satisfaction of withholding tax

 

 

(1,252)

 

 

(747)

Repurchase of common stock

 

 

(14,459)

 

 

(3,546)

Proceeds from the issuance of preferred stock

 

 

 —

 

 

29,700

Preferred stock dividends

 

 

(2,440)

 

 

(891)

Net cash provided by financing activities

 

 

285,712

 

 

51,422

 

 

 

 

 

 

 

Increase in cash, cash equivalents and restricted cash

 

 

116,532

 

 

39,556

Cash, cash equivalents and restricted cash at beginning of period

 

 

47,324

 

 

32,374

Cash, cash equivalents and restricted cash at end of period

 

$

163,856

 

$

71,930

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

Net cash paid for:

 

 

 

 

 

 

Interest

 

$

44,990

 

$

31,932

Income Taxes

 

$

1,074

 

$

346

 

 

 

 

 

 

 

Supplemental disclosures of non-cash activities:

 

 

 

 

 

 

Purchase of aircraft and engines

 

$

3,600

 

$

2,931

Transfers from Equipment held for operating lease to Equipment held for sale

 

$

6,995

 

$

36,285

Accrued preferred stock dividends

 

$

819

 

$

988

 

See accompanying notes to the unaudited condensed consolidated financial statements.

7


 

WILLIS LEASE FINANCE CORPORATION 

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2018

(Unaudited)

 

Unless the context requires otherwise, references to “the “Company”, “we”, “us” or “our” in this Quarterly Report on Form 10-Q refer to Willis Lease Finance Corporation and its subsidiaries.

 

1.  Summary of Significant Accounting Policies

 

The significant accounting policies of the Company were described in Note 1 to the audited consolidated financial statements included in the Company’s 2017 Annual Report on Form 10-K (“2017 Form 10-K”). There have been no significant changes in the Company’s significant accounting policies for the nine months ended September 30, 2018.

 

(a)   Basis of Presentation

 

The accompanying Unaudited Condensed Consolidated Financial Statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission. Therefore, they do not include all information and footnotes normally included in annual consolidated financial statements and should be read in conjunction with the consolidated financial statements and notes thereto included in the 2017 Form 10-K. In the opinion of management, the Unaudited Condensed Consolidated Financial Statements contain all adjustments (consisting principally of normal recurring accruals) necessary for a fair presentation of the condensed consolidated balance sheets, statements of income, statements of comprehensive income and statements of cash flows for such interim periods presented. Additionally, operating results for interim periods are not necessarily indicative of the results that can be expected for a full year.

 

In accordance with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. In preparing these financial statements, management has made its best estimates and judgments of certain amounts included in the financial statements, giving due consideration to materiality. These estimates and judgments are based on historical experience and other assumptions that management believes are reasonable. However, application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ materially from these estimates. The significant estimates made in the accompanying Unaudited Condensed Consolidated Financial Statements include certain assumptions related to goodwill, intangible assets, long-lived assets, equipment held for sale, estimated income taxes and stock-based compensation. Actual results may differ from these estimates under different assumptions or conditions.

 

(b)   Reclassifications

 

In conjunction with our review of the fourth quarter of 2017, the Company reclassified scrap inventory write-offs and inventory lower of cost or market write-downs that were previously presented within Write-down of equipment to the Cost of spare parts and equipment sales line item. The three and nine month periods ended September 30, 2017 were impacted by an adjustment of $0.7 million and $2.6 million, respectively, with the adjustment reflected as an increase to Cost of spare parts and equipment sales and a decrease to Write-down of equipment. These reclassified items had no effect on the reported results of operations, financial condition or statements of cash flows.

 

 

(c)    Principles of Consolidation

 

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, including VIEs where the Company is the primary beneficiary in accordance with consolidation guidance. The Company evaluates all entities in which it has an economic interest firstly to determine whether for accounting purposes the entity is a variable interest entity or voting interest entity. If the entity is a VIE the Company consolidates the financial statements of that entity if it is the primary beneficiary of the entities’ activities.  If the entity is a voting interest entity the Company consolidates the entity when it has a majority of voting interests. Intercompany transactions and balances have been eliminated in consolidation.

 

8


 

 

(d)   Recent Accounting Pronouncements

 

Recent Accounting Pronouncements Adopted by the Company

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). ASU 2014-09 amends the accounting guidance on revenue recognition. The amendments in this accounting standard update are intended to provide a more robust framework for addressing revenue issues, improve comparability of revenue recognition practices, and improve disclosure requirements. Under the new standard, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. The principles in the standard should be applied using a five-step model that includes 1) identifying the contract(s) with a customer, 2) identifying the performance obligations in the contract, 3) determining the transaction price, 4) allocating the transaction price to the performance obligations in the contract, and 5) recognizing revenue when (or as) the performance obligations are satisfied. The standard also requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In addition, the standard amends the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer (for example, sales of real estate) to be consistent with the standard’s guidance on recognition and measurement (including the constraint on revenue). The FASB also subsequently issued several amendments to the standard, including clarification on principal versus agent guidance, identifying performance obligations, and immaterial goods and services in a contract.

 

The Company adopted ASU 2014-09 and its related amendments (collectively known as Accounting Standards Codification (“ASC”) 606) effective on January 1, 2018 using the modified retrospective approach applied only to contracts not completed as of the date of adoption. Please see Note 2 "Revenue from Contracts with Customers" for the required disclosures related to the impact of adopting this standard and a discussion of the Company's updated policies related to revenue recognition and accounting for costs to obtain and fulfill a customer contract.

 

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments a consensus of the Emerging Issues Task Force) to improve the diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The update provides guidance on specific cash flow classification issues including the following: (1) debt prepayment or debt extinguishment costs; (2) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; (3) contingent consideration payments made after a business combination; (4) proceeds from the settlement of insurance claims; (5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; (6) distributions received from equity method investees; (7) beneficial interests in securitization transactions; and (8) separately identifiable cash flows and application of the predominance principle. Prior GAAP did not include specific guidance on these eight cash flow classification issues. The Company adopted the guidance effective January 1, 2018 and utilizing the cumulative earnings approach on a retrospective basis,  reclassified $1.9 million of distributions from joint ventures during the nine months ended September 30, 2017 from cash flows from investing activities to cash flows from operating activities. The remaining provisions of this update did not have a material impact on the Company’s consolidated statements of cash flows.

 

In January 2017, the FASB issued ASU 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” that eliminates “Step 2” from the goodwill impairment test. The Company has made the election to early adopt ASU 2017-04 as of January 1, 2018 and the standard was applied on a prospective basis, as required.  The adoption of this standard did not have an impact on the consolidated financial statements or the related disclosures.

 

In May 2017, the FASB issued ASU 2017-09, “Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting,” that provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The new guidance became effective for the Company on January 1, 2018 and was applied on a prospective basis, as required. The adoption of this standard did not have an impact on the consolidated financial statements or the related disclosures.

 

In February 2018, the FASB issued ASU 2018-02, “Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” to address

9


 

stakeholder concerns about the guidance in current GAAP that requires deferred tax liabilities and assets to be adjusted for the effect of a change in tax laws or rates with the effect included in income from continuing operations in the reporting period that includes the enactment date. The amendments in this update allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017. The ASU must be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the Act is recognized. The Company made the election to early adopt ASU 2018-02 as of January 1, 2018 (the period of adoption) and recorded a reclassification of $59 thousand between Other comprehensive income and Retained earnings as of January 1, 2018.

 

In September 2018, the FASB issued ASU 2018-15, “Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract” which requires cloud computing arrangements in a service contact to follow the internal-use software guidance provided by ASC 350-40 in determining the accounting treatment of implementation costs. ASC 350-40 states that only qualifying costs incurred during the application development stage may be capitalized. The Company made the election to early adopt ASU 2018-15 on a retrospective basis, and during 2018 has capitalized $1.0 million in cloud computing arrangement implementation costs. There was no prior period impact related to the adoption of ASU 2018-15.

 

Recent Accounting Pronouncements To Be Adopted by the Company

 

In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.” The ASU is targeted at simplifying the application of hedge accounting and aims at aligning the recognition and presentation of the effects of hedge instruments and hedge items. ASU 2016-02 is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The Company plans to adopt this guidance effective January 1, 2019 and is currently evaluating the potential impact adoption will have on the consolidated financial statements and related disclosures.

 

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). The FASB issued ASU 2016-02 to increase transparency and comparability among organizations recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Under ASU 2016-02, lessors will account for leases using an approach that is substantially equivalent to existing GAAP for sales-type leases, direct financing leases and operating leases. Unlike current guidance, however, a lease with collectability uncertainties may be classified as a sales-type lease. If collectability of lease payments, plus any amount necessary to satisfy a lessee residual value guarantee, is not probable, lease payments received will be recognized as a deposit liability and the underlying assets will not be derecognized until collectability of the remaining amounts becomes probable. ASU 2016-02 is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted, and must be adopted using a modified retrospective transition. The Company plans to adopt this guidance effective January 1, 2019 utilizing the lessor practical expedient and is currently evaluating the potential impact adoption will have on the consolidated financial statements and related disclosures.

 

2. Revenue from Contracts with Customers

 

As of January 1, 2018, the Company adopted ASU 2014-09 and all subsequent ASUs that modified ASC 606. While only a portion of the Company’s revenues is impacted by this guidance as it does not apply to contracts falling under the leasing standard, as part of the implementation process the Company performed an analysis to identify accounting policies that needed to change and additional disclosures that are  required. The Company considered factors such as customer contracts with unique revenue recognition considerations, the nature and type of goods and services offered, the degree to which contracts include multiple performance obligations or variable consideration, and the pattern in which revenue is currently recognized, among other things. All revenue streams applicable to the new standard (Spare parts and equipment sales and Managed services which is reflected within Other revenue) were evaluated by management. The Company considered recognition under the new standard and concluded the timing of the Company’s revenue recognition will remain the same. The Company has also evaluated the changes in controls and processes that are necessary to implement the new standard, and no material changes were required.

 

10


 

The following table disaggregates revenue by major source for the three and nine months ended September 30, 2018 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Leasing and 

    

 

 

    

 

 

 

 

Three months ended  September 30, 2018

 

Related Operations

 

Spare Parts Sales

 

Eliminations (1)

 

Total

Leasing revenue (2)

 

$

67,240

 

$

 —

 

$

 —

 

$

67,240

Gain on sale of leased equipment (3)

 

 

1,150

 

 

106

 

 

 —

 

 

1,256

Spare parts and equipment sales

 

 

 —

 

 

8,354

 

 

 —

 

 

8,354

Managed services

 

 

1,124

 

 

 —

 

 

 —

 

 

1,124

Other revenue

 

 

 —

 

 

274

 

 

(274)

 

 

 —

Total revenue

 

$

69,514

 

$

8,734

 

$

(274)

 

$

77,974

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Leasing and 

    

 

 

    

 

 

 

 

Nine months ended September 30, 2018

 

Related Operations

 

Spare Parts Sales

 

Eliminations (1)

 

Total

Leasing revenue (2)

 

$

188,984

 

$

 —

 

$

 —

 

$

188,984

Gain on sale of leased equipment (3)

 

 

1,917

 

 

225

 

 

 —

 

 

2,142

Spare parts and equipment sales

 

 

 —

 

 

21,701

 

 

 —

 

 

21,701

Managed services

 

 

3,297

 

 

 —

 

 

 —

 

 

3,297

Other revenue

 

 

 —

 

 

1,596

 

 

(1,550)

 

 

46

Total revenue

 

$

194,198

 

$

23,522

 

$

(1,550)

 

$

216,170

 

 

 

 

 

 

 

 

 

 

 

 

 


(1)

Represents revenue generated between our reportable segments.

(2)

Leasing revenue is recognized under the lease accounting guidance in ASC 840 Leases, and therefore qualifies for the scope exception under ASC 606.

(3)

Gain on sale of leased equipment is accounted for under ASC 610-20, Gains and losses from the derecognition of nonfinancial assets.

 

Leasing revenue

 

Revenue from leasing of engines, aircraft and related parts and equipment is recognized as operating lease revenue on a straight-line basis over the terms of the applicable lease agreements. Revenue is not recognized when cash collection is not reasonably assured. When collectability is not reasonably assured, the customer is placed on non-accrual status and revenue is recognized when cash payments are received.

 

Under the terms of some of the Company’s leases, the lessees pay use fees (also known as maintenance reserves) to the Company based on usage of the leased asset, which are designed to cover expected future maintenance costs. Some of these amounts are reimbursable to the lessee if they make specifically defined maintenance expenditures. Use fees received are recognized in revenue as maintenance reserve revenue if they are not reimbursable to the lessee. Use fees that are reimbursable are recorded as a maintenance reserve liability until they are reimbursed to the lessee,  the lease terminates, or the obligation to reimburse the lessee for such reserves ceases to exist, at which time they are recognized in revenue as maintenance reserve revenue.

 

Certain lessees may be significantly delinquent in their rental payments and may default on their lease obligations. As of September 30, 2018, the Company had an aggregate of approximately $5.0  million in lease rent and $2.1  million in maintenance reserve receivables more than 30 days past due. Inability to collect receivables or to repossess engines or other leased equipment in the event of a default by a lessee could have a material adverse effect on the Company. The Company estimates an allowance for doubtful accounts for lease receivables it does not consider fully collectible. The allowance for doubtful accounts includes the following: (1) specific reserves for receivables which are impaired for which management believes full collection is doubtful; and (2) a general reserve for estimated losses based on historical experience.

 

Gain on sale of leased equipment  

 

The Company regularly sells equipment from its lease portfolio. This equipment may or may not be subject to a lease at the time of sale. The gain or loss on such sales is recognized as revenue and consists of proceeds associated with the sale less the net book value of the asset sold and any direct costs associated with the sale. To the extent that deposits associated with the engine are not included in the sale, any such amount is included in the calculation of gain or loss.

 

11


 

Spare parts sales

 

The Spare Parts Sales reportable segment primarily engages in the sale of aircraft engine parts and materials through the acquisition or consignment of engines from third parties. The parts are sold at a fixed price with no right of return. In determining the performance obligation, management has identified the promise in the contract to be the shipment of the spare parts to the customer.  Title passes to the buyer when the goods are shipped, and the buyer is responsible for any loss in transit, and the Company has a legal right to payment for the spare parts. Management has determined that physical acceptance of the spare parts to be a formality in accordance with ASC 606-10-5-86 and as the Company is not obliged to perform additional services under these arrangements, the shipment of the spare parts is the performance obligation. 

 

The spare parts transaction price is a fixed dollar amount and is stated on each purchase order for a fixed amount by total number of parts. Spare parts revenue is based on a set price for a set number of parts as defined in the purchase order. The performance obligation is completed once the parts have shipped and, as a result, all of the transaction price is allocated to that performance obligation. Management has determined that it is appropriate for the Company to recognize spare parts sales at a point in time (i.e., the date the parts are shipped) under ASC 606. Additionally, there is no impact to the timing and amounts of revenue recognized for spare parts sales related to the implementation of ASC 606.

 

Equipment Sales

 

Equipment sales represent the selective purchase and resale of commercial aircraft engines and other aircraft equipment. The Company and customer enter into an agreement which outlines the place and date of sale, purchase price, payment terms, condition of the asset, bill of sale, and the assignment of rights and warranties from the Company to the customer. Management has identified the promise in the equipment sale contract to be the transfer of ownership of the asset. Management believes the asset holds standalone value to the customer as it is not dependent on any other services for functionality purposes and therefore is distinct within the context of the contract and as described in ASC 606-10. As such, management has identified the transfer of the asset as the performance obligation. The transaction price is set at a fixed dollar amount per fixed quantity (number of assets) and is explicitly stated in each contract. Equipment sales revenue is based on a set price for a set number of assets, which is allocated to the performance obligation discussed above, in its entirety. The Company has determined the date of transfer to the customer to be the date the customer obtains control and title over the asset and the date which revenue is to be recognized and payment is due. As such, there is no impact to the timing and amounts of revenue recognized for equipment sales related to the implementation of ASC 606.

 

Managed Services

 

Managed Services revenue predominantly represents fleet management and engine storage services which may be combined on a single contract with a customer. Fleet management services are performed for a stated fixed fee as agreed upon in the services agreement. Engine storage services are for a fixed monthly fee. For a contract containing more than one performance obligation, the allocation of the transaction price is generally performed on the basis of the relative stand-alone selling price of each distinct good or service in the contract. The result of allocation consideration on this basis is consistent with the overall core principal of ASC 606 (to recognize revenue in an amount that depicts the consideration to which the Company expects to be entitled in exchange for the promised goods or services). As each of the services provided within the contract have separate prices, the Company allocates the stated price to its related performance obligation described above. Management has determined each of the revenue elements contain performance obligations that are satisfied over time and therefore recognizes revenue over time in accordance with ASC 606-10-25-27. The Company will continue utilizing the percentage-of-completion method (input method) for recognizing Fleet Management services and will calculate revenues based on labor hours incurred. Additionally, as is required by ASC 606-10-25-35, as circumstances change over time, the Company will update its measure of progress to reflect any changes in the outcome of the performance obligation. Engine storage services will continue to be recognized on a monthly basis utilizing the input method of days passed. Therefore, there is no impact to the timing and amounts of revenue recognized for Managed Services related to the implementation of ASC 606.

 

Amounts owed for Managed services are typically billed upon contract completion. At January 1, 2018, $0.4 million of unbilled revenue associated with outstanding contracts was reported in Other Assets, all of which was recognized by September 30, 2018. At September 30, 2018, unbilled revenue was $0.8 million and the Company

12


 

expects it to be fully recognized by March 31, 2019. Additionally, Managed services are presented within the Other revenue line in the condensed consolidated statements of income.

 

3.  Investments

 

The Company is a partner with Mitsui & Co., Ltd. in a joint venture based in Dublin, Ireland — Willis Mitsui & Company Engine Support Limited (“WMES”) which acquires and leases jet engines. Each partner holds a fifty percent interest in the joint venture and the Company uses the equity method in recording investment activity. WMES owned a lease portfolio of 35 engines and one aircraft with a net book value of $266.1 million as of September 30, 2018.

 

The Company is a partner with China Aviation Supplies Company Ltd. (“CASC”) in a joint venture named CASC Willis Engine Lease Company Limited (“CASC Willis”), which is based in Shanghai, China. The Company holds a fifty percent interest in the joint venture and uses the equity method in recording investment activity. CASC Willis acquires and leases jet engines to Chinese airlines and concentrates on the demand for leased commercial aircraft engines and aviation assets in the People’s Republic of China. CASC Willis owned a lease portfolio of four engines with a net book value of $52.8 million as of September 30, 2018.

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2018

    

WMES

 

CASC Willis

 

Total

 

 

(in thousands)

Investment in joint ventures as of December 31, 2017

 

$

36,014

 

$

14,627

 

$

50,641

Earnings (losses) from joint ventures

 

 

1,831

 

 

(262)

 

 

1,569

Deferred gain on engine sale

 

 

(1,280)

 

 

 —

 

 

(1,280)

Distribution

 

 

(5,730)

 

 

 —

 

 

(5,730)

Foreign currency translation adjustment

 

 

 —

 

 

(762)

 

 

(762)

Investment in joint ventures as of September 30, 2018

 

$

30,835

 

$

13,603

 

$

44,438

 

“Other revenue” on the Consolidated Statements of Income includes management fees earned of $0.6 million  and $0.5 million during the three months ended September 30, 2018 and 2017, respectively, and $1.8 million during the nine months ended September 30, 2018 and 2017, respectively. These fees related to the servicing of engines for the WMES lease portfolio. During the nine months ended September 30, 2018, the Company sold two engines to WMES for $23.2 million. During the nine months ended September 30, 2017, the Company sold two engines to WMES for $14.8 million.

 

There were no engine sales to CASC Willis during the nine months ended September 30, 2018. During the nine months ended September 30, 2017, the Company sold one engine to CASC Willis for $11.2 million. 

 

Summarized financial information for 100% of WMES is presented in the following tables:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

    

2018

    

2017

    

    

2018

    

2017

 

 

(in thousands)

    

    

(in thousands)

Revenue

 

$

9,987

 

$

12,286

    

    

$

26,633

 

$

32,146

Expenses

 

 

8,408

 

 

6,366

    

    

 

22,762

 

 

20,820

WMES income before income taxes

 

$

1,579

 

$

5,920

    

    

$

3,871

 

$

11,326

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

December 31,

 

 

 

 

 

 

 

 

2018

 

2017

 

 

 

 

 

(in thousands)

Total assets

 

 

 

 

 

 

 

 

$

284,988

 

$

246,309

Total liabilities

 

 

 

 

 

 

 

 

 

211,981

 

 

165,228

Total WMES net equity

 

 

 

 

 

 

 

 

$

73,007

 

$

81,081

 

 

13


 

4.  Debt Obligations

 

Debt obligations consisted of the following:

 

 

 

 

 

 

 

 

 

 

September 30,

    

December 31,

 

    

2018

 

2017

 

 

(in thousands)

Credit facility at a floating rate of interest of one-month LIBOR plus 2.0% at September 30, 2018, secured by engines. The facility has a committed amount of $890.0 million at September 30, 2018, which revolves until the maturity date of April 2021

 

$

466,000

 

$

491,000

WEST IV Series A 2018 term notes payable at a fixed rate of interest of 4.75%, maturing in September 2043, secured by engines

 

 

326,759

 

 

 —

WEST IV Series B 2018 term notes payable at a fixed rate of interest of 5.44%, maturing in September 2043, secured by engines

 

 

46,680

 

 

 —

WEST III Series A 2017 term notes payable at a fixed rate of interest of 4.69%, maturing in August 2042, secured by engines

 

 

279,382

 

 

289,295

WEST III Series B 2017 term notes payable at a fixed rate of interest of 6.36%, maturing in August 2042, secured by engines

 

 

39,953

 

 

41,370

WEST II Series A 2012 term notes payable at a fixed rate of interest of 5.50%, maturing in September 2037, secured by engines

 

 

243,221

 

 

259,022

Note payable at fixed interest rates ranging from 2.60% to 2.97%, maturing in July 2024, secured by an aircraft

 

 

11,388

 

 

12,720

Note payable at a variable interest rate of one-month LIBOR plus 2.25%, matured in January 2018, secured by engines

 

 

 —

 

 

10,336

 

 

 

1,413,383

 

 

1,103,743

Less: unamortized debt issuance costs

 

 

(21,270)

 

 

(18,338)

Total debt obligations

 

$

1,392,113

 

$

1,085,405

 

Principal outstanding at September 30, 2018, is repayable as follows:

 

 

 

 

 

Year

    

(in thousands)

2018

 

$

13,812

2019

 

 

55,380

2020

 

 

54,980

2021 (includes $466.0 million outstanding on revolving credit facility)

 

 

521,217

2022 (includes $173.8 million outstanding on WEST II Series A 2012 term notes)

 

 

207,733

Thereafter

 

 

560,261

Total

 

$

1,413,383

 

On August 22, 2018, Willis Engine Structured Trust IV (“WEST IV”), a direct, wholly-owned subsidiary of the Company closed its offering of $373.4 million in aggregate principal amount of fixed rate notes (the “WEST IV Notes”). The WEST IV Notes were issued in two series, with the Series A Notes issued in an aggregate principal amount of $326.8 million and the Series B Notes in an aggregate principal amount of $46.7 million. The WEST IV Notes are secured by, among other things, WEST IV’s direct and indirect interests in a portfolio of 55 engines and one airframe.

 

The Series A Notes have a fixed coupon of 4.75%, an expected maturity of approximately eight years and a final maturity date of September 15, 2043. The Series B Notes have a fixed coupon of 5.44%, an expected maturity of approximately eight years and a final maturity date of September 15, 2043. The Series A Notes were issued at a price of 99.99504% of par and the Series B Notes were issued at a price of 99.99853% of par. Principal and interest on the WEST IV Notes are payable monthly to the extent of available cash in accordance with a priority of payments included in the Indenture. Proceeds from asset sales by WEST IV will be used, at WEST IV’s election subject to certain conditions, to reduce WEST IV’s debt or to acquire other engines or airframes.

 

As of September 30,  2018, $373.4 million of the WEST IV Notes were outstanding. The assets of WEST IV are not available to satisfy the Company’s obligations other than the obligations specific to WEST IV. WEST IV is

14


 

consolidated for financial statement presentation purposes. WEST IV’s ability to make distributions and pay dividends to the Company is subject to the prior payments of its debt and other obligations and WEST IV’s maintenance of adequate reserves and capital. Under WEST IV, cash is collected in a restricted account, which is used to service the debt and any remaining amounts, after debt service and defined expenses, are distributed to the Company. Additionally, a portion of the maintenance reserve payments and lease security deposits are formulaically accumulated in restricted accounts and are available to fund future maintenance events and to secure lease payments, respectively.

 

The Company maintains a revolving credit facility to finance the acquisition of aircraft engines for lease as well as for general working capital purposes. The $890 million revolving credit facility has an accordion feature which would expand the entire credit facility up to $1 billion. The interest rate is adjusted quarterly, based on the Company’s leverage ratio, as calculated under the terms of the revolving credit facility. 

 

Virtually all of the above debt requires ongoing compliance with the covenants of each financing, including debt/equity ratios, minimum tangible net worth and minimum interest coverage ratios, and other eligibility criteria including customer and geographic concentration restrictions. The Company also has certain negative financial covenants such as liens, advances, change in business, sales of assets, dividends and stock repurchases. These covenants are tested either monthly or quarterly and the Company was in full compliance with all financial covenant requirements at September 30, 2018.

 

 

5.  Derivative Instruments

 

The Company periodically holds interest rate derivative instruments to mitigate exposure to changes in interest rates, in particular one-month LIBOR, with $466.0 million and $501.3 million of borrowings at September 30, 2018 and December 31, 2017, respectively, at variable rates. As a matter of policy, management does not use derivatives for speculative purposes.  During 2016, the Company entered into one interest rate swap agreement which has a notional outstanding amount of $100.0 million, with a remaining term of 31 months as of September 30, 2018. The fair value of the swap at September 30, 2018 and December 31, 2017 was $2.8 million and $1.1 million, respectively, representing a net asset. The Company recorded a gain of $0.1 million and a loss of $0.1 million in the three months ended September 30, 2018 and 2017, respectively, and a gain of $0.2 million and a loss of $0.5 million during the nine months ended September 30, 2018 and 2017, respectively, from derivative instruments.

 

The Company estimates the fair value of  derivative instruments using a discounted cash flow technique and has used creditworthiness inputs that corroborate observable market data evaluating the Company’s and counterparty’s risk of non-performance. Valuation of the derivative instruments requires certain assumptions for underlying variables and the use of different assumptions would result in a different valuation. Management believes it has applied assumptions consistently during the period. The Company applies hedge accounting and accounts for the change in fair value of its cash flow hedges through other comprehensive income for all derivative instruments.

 

15


 

Effect of Derivative Instruments on Earnings in the Statements of Income and on Comprehensive Income 

 

The following tables provide additional information about the financial statement effects related to the cash flow hedges for the three and nine months ended September 30, 2018 and 2017:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amount of Gain Recognized

 

Location of Gain (Loss)

 

Amount of Gain (Loss) Recognized

 

 

 

in OCI on Derivatives

 

Reclassified from

 

from Accumulated OCI into Income

 

Derivatives in

 

(Effective Portion)

 

Accumulated OCI into

 

(Effective Portion)

 

Cash Flow Hedging

 

Three Months Ended September 30,

 

Income

 

Three Months Ended September 30,

 

Relationships

    

2018

    

2017

    

(Effective Portion)

    

2018

    

2017

 

 

 

(in thousands)

 

 

 

(in thousands)

 

Interest rate contracts

 

$

221

 

$

164

 

Interest expense

 

$

113

 

$

(117)

 

Total

 

$

221

 

$

164

 

Total

 

$

113

 

$

(117)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amount of Gain Recognized

 

Location of Gain (Loss)

 

Amount of Gain (Loss) Recognized

 

 

 

in OCI on Derivatives

 

Reclassified from

 

from Accumulated OCI into Income

 

Derivatives in

 

(Effective Portion)

 

Accumulated OCI into

 

(Effective Portion)

 

Cash Flow Hedging

 

Nine Months Ended September 30,

 

Income

 

Nine Months Ended September 30,

 

Relationships

 

2018

    

2017

 

(Effective Portion)

    

2018

    

2017

 

 

 

(in thousands)

 

 

 

(in thousands)

 

Interest rate contracts

 

$

1,636

 

$

160

 

Interest expense

 

$

182

 

$

(517)

 

Total

 

$

1,636

 

$

160

 

Total

 

$

182

 

$

(517)