FLY Leasing Fourth Quarter and Full Year 2015 Financial Results

08 Mar, 2016, 07:00 ET from FLY Leasing Limited

DUBLIN, March 8, 2016 /PRNewswire/ -- FLY Leasing Limited (NYSE: FLY), a global leader in aircraft leasing, today announced its financial results for the fourth quarter and full year of 2015.

Fourth Quarter 2015 Highlights

  • Net Income of $27.7 million, $0.68 per share
  • Adjusted Net Income of $62.7 million, $1.54 per share
  • Acquired three aircraft for $239 million
  • Completed sales of 26 older aircraft, for a gain of $17.0 million
  • Repurchased 5.7 million shares, reducing shares outstanding by 14%

2015 Full Year Highlights

  • Net Income of $6.6 million, $0.13 per share
  • Adjusted Net Income of $131.0 million, $3.17 per share
  • Reduced SG&A by $7.3 million, year over year
  • Invested $629 million in ten aircraft
  • Contracted to sell 53 older aircraft, of which 40 were delivered
  • Re-priced our $500 million Term Loan, saving $4 million in annual interest cost
  • $100 million share repurchase program, which now has been completed

"FLY has completed a major transformation, and enters 2016 with a leaner, younger and more profitable fleet, and poised for intelligent growth," said Colm Barrington, CEO of FLY.  "Our aircraft sales and related strategic initiatives have reduced business risk, lowered our SG&A expenses and cost of debt, and generated substantial cash. In the last few months, we have used our cash to repurchase $100 million in shares, at prices significantly below FLY's book value per share."

"The airline industry continues to be strong, with IATA reporting a more than 6.5% increase in revenue passenger kilometers in 2015, and record airline profits," added Barrington.  "Traffic and financial forecasts for 2016 are even more buoyant, with airlines' business being strongly supported by lower fuel prices. These factors are supporting a strong demand for leased aircraft; in FLY's case we have all but one of our 2016 redeliveries committed." 

"Our management team has worked together for more than 25 years and navigated through several industry cycles," said Barrington. "Cycles provide opportunities for outperformance.  FLY's strong capital reserves and strategy of avoiding speculative forward commitments provides us with a unique flexibility to take advantage of market conditions, and put capital to work when and where we can maximize returns."

Accounting for Maintenance Rights and Liabilities

As part of its review of FLY's public filings, the staff ("Staff") of the U.S. Securities and Exchange Commission's Division of Corporation Finance has issued comments related to the filing of FLY's Annual Report on Form 20-F for the year ended December 31, 2014. We and the Staff are currently discussing FLY's accounting policy for business combinations, including FLY's accounting policy for intangible assets and liabilities for aircraft acquired with in-place leases. FLY has provided information to the Staff supporting FLY's accounting policy, and has discussed its accounting policy with members of the Staff.

Discussions with the Staff are ongoing as of the date of this press release. While we currently have not concluded on the potential impact on our financial statements of the Staff's comments, if any, if it is determined after the conclusion of the Staff's review that FLY should separately recognize other intangible assets or liabilities from what has been previously recorded, the impact could be material to FLY's previously issued consolidated financial statements and require modification to its accounting for the current and prior year results reported herein. In addition, as a result of the ongoing discussions with the Staff, FLY may not be able to timely file its Annual Report on Form 20-F for the year ended December 31, 2015.

Financial Results

FLY is reporting Net Income of $27.7 million or $0.68 per diluted share for the fourth quarter of 2015. This compares to Net Income of $15.5 million or $0.37 per diluted share for the same period of 2014. The fourth quarter 2015 results include an impairment charge of $18.9 million related to three older aircraft, as well as $17.0 million in gains on sale of aircraft and $37.9 million in end of lease income (of which $15.0 million relates to the three impaired aircraft).  There were no sales in the 4th quarter of 2014, and end of lease income for that period was $21.7 million.

Total revenues for the fourth quarter of 2015 were $139.0 million, compared to $120.3 million for the same period in the previous year, an increase of 16%. Rental revenue includes approximately $12.5 million in rents from aircraft that were sold or are contracted to be sold.

Net Income for the year ended December 31, 2015 was $6.6 million or $0.13 per diluted share compared to $56.1 million or $1.32 per diluted share for 2014. The 2015 results include $84.3 million of non-cash impairment charges and $17.5 million in charges associated with the early repayment of debt.  For 2015, end of lease income was $64.8 million and gains on aircraft sales totaled $26.1 million. The 2014 results included $39.8 million in end of lease income and $18.9 million in gains on aircraft sales. 

Adjusted Net Income

Adjusted Net Income was $62.7 million for the fourth quarter of 2015 compared to $21.8 million in the same period in the previous year. Adjusted Net Income excludes impairment charges and other charges not considered core to operations.  On a per share basis, Adjusted Net Income was $1.54 in the fourth quarter of 2015 compared to $0.53 in the fourth quarter of 2014.

For the year ended December 31, 2015, Adjusted Net Income was $131.0 million, or $3.17 per share, as compared to $80.4 million, or $1.94 per share for the year ended December 31, 2014. 

A reconciliation of Adjusted Net Income to Net Income determined in accordance with GAAP is shown below.

Share Repurchases

FLY has completed its $100 million share repurchase program announced in November 2015.  FLY closed its $75 million modified Dutch auction tender offer in December, repurchasing 5,376,344 shares at a price of $13.95 per share.  This was in addition to 421,329 shares purchased earlier in 2015 under FLY's previous share repurchase program. 

In the first quarter of 2016, FLY repurchased $25 million, or 2,071,910 of its shares in open market transactions, at an average price of $12.04 per share.  At March 3, 2016, FLY had 33,599,490 shares outstanding, a decrease of 19% from the number of shares outstanding on January 1, 2015.

The Board of Directors has now approved a new $30 million share repurchase program.  Under this program, FLY may make share repurchases from time to time in the open market or in privately negotiated transactions.  The timing of repurchases under this program will depend upon a variety of factors, including market conditions, and the program may be suspended or discontinued at any time.

Financial Position

At December 31, 2015, FLY's total assets were $3.4 billion, and include $2.9 billion of investment in flight equipment. Total cash at December 31, 2015 was $450.9 million, of which $276.0 million was unrestricted.  

The book value per share at December 31, 2015, was $18.04.

Aircraft Portfolio

At December 31, 2015, FLY's 80 aircraft, shown in the table below, were on lease to 44 lessees in 28 countries.  The column showing our fleet as of December 31, 2015 does not include 13 aircraft that were held for sale at December 31, 2015 or the two B767 aircraft owned by a joint venture in which FLY has a 57% interest.

Portfolio at

Dec. 31, 2015

Dec 31, 2014

Airbus A319

10

18

Airbus A320

14

27

Airbus A321

3

3

Airbus A330

4

4

Airbus A340

3

3

Boeing 737NG

39

57

Boeing 747

1

Boeing 757

3

11

Boeing 767

1

1

Boeing 777

2

1

Boeing 787

1

1

      Total

80

127

At December 31, 2015, the average age of FLY's fleet, weighted by the net book value of each aircraft, was 6.6 years compared to 7.8 years at December 31, 2014. The average remaining lease term, also weighted by net book value, was 6.5 years as of December 31, 2015.  At December 31, 2015, the 80 aircraft were generating annualized rents of approximately $300 million

Conference Call and Webcast

FLY's senior management will host a conference call and webcast to discuss these results at 9:00 a.m. U.S. Eastern Time on Tuesday, March 8, 2016.  Participants should call +1-253-237-1145 (International) or 800-535-7056 (North America) and enter confirmation code 32524298 or ask an operator for the FLY Leasing earnings call. A live webcast of the conference call will be also available in the investor section of FLY's website at www.flyleasing.com. An archived webcast will be available on the company's website for one year.

About FLY

FLY is a global aircraft leasing company with a fleet of modern, high-demand and fuel-efficient commercial jet aircraft. FLY acquires and leases its aircraft under multi-year operating lease contracts to a diverse group of airlines throughout the world. FLY is managed and serviced by BBAM LP, a worldwide leader in aircraft lease management and financing. For more information about FLY, please visit our website at www.flyleasing.com.

Cautionary Statement Regarding Forward-Looking Statements

This press release contains certain "forward - looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by words such as "expects," "intends," "anticipates," "plans," "believes," "seeks," "estimates," "will," or words of similar meaning and include, but are not limited to, statements regarding the outlook for FLY's future business and financial performance. Forward-looking statements are based on management's current expectations and assumptions, which are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially due to global political, economic, business, competitive, market, regulatory and other factors and risks. Further information on the factors and risks that may affect FLY's business is included in filings FLY makes with the Securities and Exchange Commission from time to time, including its Annual Report on Form 20-F and its reports on Form 6-K.  FLY expressly disclaims any obligation to update or revise any of these forward-looking statements, whether because of future events, new information, a change in its views or expectations, or otherwise.

Contact:

Matt Dallas FLY Leasing Limited +1 203-769-5916 ir@flyleasing.com

FLY Leasing Limited

Consolidated Statements of Income

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Three months ended

Dec. 31, 2015 (Unaudited)

Three months ended

Dec. 31, 2014 (Unaudited)

Year ended

 Dec. 31, 2015 (Unaudited)

Year ended

 Dec. 31, 2014 (Audited)

Revenues

   Operating lease revenue

$ 120,618

$ 119,993

$  440,725

$   404,668

   Finance lease income

299

299

   Equity earnings from unconsolidated subsidiary

125

351

1,159

2,456

   Gain on sale of aircraft

17,005

26,090

18,878

   Interest and other income

908

(56)

2,289

662

Total revenues

138,955

120,288

470,562

426,664

Expenses

   Depreciation

36,602

49,059

168,867

175,547

   Aircraft impairment

18,857

84,255

   Interest expense

32,724

40,392

145,448

142,519

   Net (gain) loss on debt modification and extinguishment

8,116

88

17,491

(3,907)

   Selling, general and administrative

7,042

10,213

33,674

41,033

   Ineffective, dedesignated and terminated derivatives

(548)

189

4,134

72

   Maintenance and other costs

3,228

2,386

7,628

7,060

Total expenses

106,021

102,327

461,497

362,324

Net income before provision for income taxes

32,934

17,961

9,065

64,340

   Provision for income taxes

5,248

2,482

2,439

8,263

Net income

$    27,686

$   15,479

$  6,626

$   56,077

Weighted average number of shares

-  Basic

40,545,100

41,432,998

41,222,690

41,405,211

-  Diluted

40,582,169

41,479,349

41,315,149

41,527,584

Earnings per share

-  Basic

$   0.68

$   0.37

$   0.14

$   1.32

-  Diluted

$   0.68

$   0.37

$   0.13

$   1.32

FLY Leasing Limited

Consolidated Balance Sheets

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Dec. 31,

 2015 (Unaudited)

Dec. 31, 2014 (Audited)

Assets

   Cash and cash equivalents

$   275,998

$    337,560

   Restricted cash and cash equivalents

174,933

139,139

   Rent receivables

124

4,887

   Investment in unconsolidated subsidiary

7,170

4,002

   Flight equipment held for sale, net

242,189

   Flight equipment held for operating lease, net

2,662,779

3,705,407

   Investment in direct finance lease, net

34,878

   Fair market value of derivative assets

241

2,067

   Other assets, net

18,265

31,608

Total assets

$3,416,577

$ 4,224,670

Liabilities

   Accounts payable and accrued liabilities

$    17,548

$       18,431

   Rentals received in advance

14,560

19,751

   Payable to related parties

7,170

2,772

   Security deposits

48,876

64,058

   Maintenance payment liability

194,543

254,514

   Unsecured borrowings, net

691,109

689,452

   Secured borrowings, net

1,705,826

2,335,328

   Fair market value of derivative liabilities

19,327

23,311

   Deferred tax liability, net

18,764

16,289

   Other liabilities

55,442

41,890

Total liabilities

2,773,165

3,465,796

Shareholders' equity

   Common shares, $0.001 par value, 499,999,900 shares authorized; 35,671,400 and 41,432,998 shares issued and outstanding at December 31, 2015 and 2014, respectively

 

36

 

41

   Manager shares, $0.001 par value; 100 shares authorized, issued and outstanding

   Additional paid-in capital

577,290

658,522

   Retained earnings

81,586

117,402

   Accumulated other comprehensive loss, net

(15,500)

(17,091)

Total shareholders' equity

643,412

758,874

Total liabilities and shareholders' equity

$ 3,416,577

$ 4,224,670

FLY Leasing Limited

Consolidated Statements of Cash Flows

(DOLLARS IN THOUSANDS)

Year ended Dec. 31, 2015 (Unaudited)

Year ended Dec. 31, 2014 (Audited)

Cash Flows from Operating Activities

Net Income

$

6,626

$

56,077

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

      Equity earnings from unconsolidated subsidiary

(1,159)

(2,456)

      Direct finance lease

(299)

      Gain on sale of aircraft

(26,090)

(18,878)

      Depreciation

168,867

175,547

      Aircraft impairment

84,255

      Amortization of debt discounts and debt issuance costs

11,922

12,516

      Amortization of lease incentives

20,527

18,934

      Amortization of lease discounts/premiums and other items

2,046

2,841

      Amortization of fair market value adjustments associated with the GAAM acquisition

3,650

6,260

      Net loss (gain) on debt modification and extinguishment

13,868

(3,960)

      Share-based compensation

195

30

      Unrealized foreign exchange gain

(1,247)

      Provision for deferred income taxes

1,959

6,169

      Unrealized loss on derivative instruments

4,134

38

      Security deposits and maintenance payment liability relieved

(59,692)

(30,376)

      Distributions from unconsolidated subsidiary

5,501

      Changes in operating assets and liabilities:

         Rent receivables

6,814

(4,767)

         Other assets

137

(1,589)

         Payable to related parties

(19,407)

(12,848)

         Accounts payable, accrued liabilities and other liabilities

(2,183)

18,126

Net cash flows provided by operating activities

214,923

227,165

Cash Flows from Investing Activities

   Distributions from (investment in) unconsolidated subsidiary

(2,009)

1,132

   Rent received from direct finance lease

424

   Investment in direct finance lease

(33,596)

   Purchase of additional aircraft

(567,523)

(915,450)

   Proceeds from sale of aircraft

1,110,046

88,617

   Payment for aircraft improvement

(8,196)

(9,841)

   Lessor contribution to maintenance

(18,609)

(5,017)

Net cash flows provided by (used in) investing activities

480,537

(840,559)

Year ended Dec. 31, 2015 (Unaudited)

Year ended Dec. 31, 2014 (Audited)

Cash Flows from Financing Activities

   Restricted cash and cash equivalents

(35,794)

35,690

   Security deposits received

13,914

18,134

   Security deposits returned

(7,788)

(4,728)

   Maintenance payment liability receipts

84,491

85,172

   Maintenance payment liability disbursements

(38,768)

(45,412)

   Net swap termination payments

(3,737)

   Debt issuance costs

(933)

(1,803)

   Proceeds from unsecured borrowings

396,563

   Proceeds from secured borrowings

147,276

298,658

   Repayment of secured borrowings

(791,385)

(192,974)

   Repurchase of common shares

(81,432)

   Dividends

(41,388)

(41,392)

   Dividend equivalents

(1,054)

(1,426)

Net cash flows (used in) provided by financing activities

(756,598)

546,482

   Effect of exchange rate changes on cash and cash equivalents

(424)

Net decrease in cash

(61,562)

(66,912)

   Cash at beginning of period

337,560

404,472

Cash at end of period

$

275,998

$

337,560

Supplemental Disclosure:

Cash paid during the period for:

      Interest

$

132,780

$

119,745

      Taxes

384

188

Noncash Activities:

      Security deposits applied to maintenance payment liability, rent receivables, rentals received in advance, and other assets

3,292

1,938

      Maintenance payment liability applied to rent receivables and rentals received in advance

2,523

      Other liabilities applied to maintenance payment liability and rent receivables

240

979

      Noncash investing activities:

         Aircraft improvement

1,587

2,882

         Noncash activities in connection with purchase of aircraft

19,382

26,002

         Noncash activities in connection with sale of aircraft

93,819

12,479

FLY Leasing Limited

Reconciliation of Non-GAAP Measures (Unaudited)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Three months ended

Dec. 31, 2015

Three months ended

Dec. 31, 2014

Year ended

 Dec. 31, 2015

Year ended

 Dec. 31, 2014

Net Income

$   27,686

$   15,479

$   6,626

$   56,077

Adjustments:

    Aircraft impairment

18,857

84,255

    Amortization of debt discounts and loan issue costs

2,842

3,209

11,922

12,516

    Amortization of lease premiums, discounts and other

246

677

2,046

2,789

    Amortization of fair value adjustments recorded in purchase accounting

766

1,307

3,650

6,260

    Net (gain) loss on debt modification and extinguishment

8,116

88

17,491

(3,907)

    Non-cash share based compensation

80

195

30

    Unrealized foreign exchange (gain) loss

(554)

128

(1,247)

412

    Deferred income taxes

5,261

627

1,959

6,169

    Ineffective, dedesignated and terminated derivatives

(548)

189

4,134

72

Adjusted Net Income

$    62,672

$   21,784

$  131,031

$   80,418

Average Shareholders' Equity

$  672,046

$ 758,517

$ 701,143

$ 753,849

Adjusted Return on Equity

37.3%

11.5%

18.7%

10.7%

Weighted average diluted shares outstanding

40,582,169

41,479,349

41,315,149

41,527,584

Adjusted Net Income per share

$       1.54

$       0.53

$       3.17

$        1.94

FLY defines Adjusted Net Income as Net Income plus or minus (i) non-cash impairment charges; (ii) non-cash amortization of debt discounts, loan issuance costs, lease premiums and discounts, and other items; (iii) adjustments related to the GAAM portfolio acquisition comprised primarily of amortization of fair value adjustments recorded in purchase accounting; (iv) gain and losses from debt modification and extinguishment; (v) non-cash share-based compensation; (vi) unrealized foreign exchange gains and losses; (vii) deferred income taxes; (viii) the ineffective portion and charges associated with cash flow hedges.  Adjusted return on equity is calculated by dividing Adjusted Net Income by the average shareholders' equity for the periods presented.  For periods of less than one year, the resulting return is annualized.

FLY uses Adjusted Net Income and Adjusted Return on Equity to assess our core operating performance on a consistent basis from period to period.  In addition, Adjusted Net Income and Adjusted Return on Equity help us compare our performance to our competitors.  These measures should be considered in addition to, and not as a substitute for Net Income or other financial measures determined in accordance with generally accepted accounting principles ("GAAP").  FLY's definitions may be different than those used by other companies.

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SOURCE FLY Leasing Limited



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