FLY Leasing Reports Second Quarter 2014 Results

DUBLIN, Ireland, July 31, 2014 /PRNewswire/ -- FLY Leasing Limited (NYSE: FLY) ("FLY"), a global lessor of modern, fuel-efficient commercial jet aircraft, today announced its financial results for the second quarter of 2014.

Second Quarter 2014 Highlights

  • Net income of $21.7 million, $0.51 per share
  • 26% growth in operating lease rental revenue
  • Sold seven aircraft and recorded gains on sale of $18.9 million
  • Achieved 100% fleet utilization
  • Acquired seven aircraft for $226 million
  • After quarter end, acquired one B737-800 and contracted to buy three A330-300s
  • Declared 27th consecutive quarterly dividend on July 17 ($0.25 per share)

"FLY had a strong second quarter with 26% growth in operating lease rental revenue compared to the same quarter last year," said Colm Barrington, FLY's Chief Executive Officer.  "This is the fourth consecutive quarter in which we have increased rental revenue, driven by FLY's strong fleet growth over the last 12 months. FLY also booked gains from the sale of seven aircraft with an average age of 12.4 years. Since its inception, FLY has sold 29 aircraft with an average age of 12.5 years for an aggregate gain of $68 million.  FLY continues to reduce the average age of its portfolio, which was 8.7 years at June 30."

"We continue to find attractive acquisition opportunities in the sale and leaseback and secondary markets," added Barrington. "We have already acquired 12 aircraft for more than $247 million this year and have an identified pipeline of more than $450 million. At June 30, we had unrestricted cash of $253 million and $325 million available under our acquisition facility, giving us ample capacity to fund our pipeline. As a result, we are confident of achieving our 15% net fleet growth target this year."

"The global airline industry continues to grow, with IATA reporting a 6.2% increase in passenger traffic in the first five months of 2014.  In addition, IATA forecasts that industry operating profits will increase by 49% to $32 billion in 2014," said Barrington.

Second Quarter Financial Results

FLY's net income and diluted earnings per share for the second quarter of 2014 were $21.7 million and $0.51, compared to $5.9 million and $0.20 in the same period of 2013.

Total revenues increased 21% to $109.5 million.  Operating lease rental revenue increased 26% for the second quarter of 2014 to $94.6 million, compared to $75.0 million for the same period in the previous year.  This increase was driven by the increase in the size of the portfolio and improved utilization.  The second quarter 2014 results include $18.9 million in gains from aircraft sales, whereas the same period in the previous year included $17.0 million in end of lease income. 

Net income and diluted earnings per share for the six months ended June 30, 2014 were $25.2 million and $0.58, compared to $38.8 million and $1.35 for the six months ended June 30, 2013.  The 2014 results included $3.9 million of end of lease income compared to $47.6 million in 2013.

Adjusted Net Income

Adjusted net income was $18.8 million for the second quarter of 2014, compared to $11.2 million in the same period in the previous year.  On a per share basis, Adjusted Net Income was $0.45 in the second quarter of 2014, compared to $0.40 for the same period in the previous year.  For the six months ended June 30, 2014, Adjusted Net Income was $24.0 million, or $0.58 per share, compared to $49.8 million, or $1.76 per share, for the same period in the previous year.

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

Dividends  

On July 17, 2014, FLY declared its 27th consecutive dividend.  This dividend of $0.25 per share in respect of the second quarter of 2014 will be paid on August 20, 2014 to shareholders of record on July 31, 2014. 

Financial Position

At June 30, 2014, FLY's total assets were $3.6 billion, including flight equipment with a net book value of $3.2 billion. Restricted and unrestricted cash at June 30, 2014 totaled $378.4 million, of which $253.2 million was unrestricted. This compares to total cash of $579.3 million at December 31, 2013, of which $404.5 million was unrestricted.  As of June 30, 2014, FLY had approximately $325 million available under its aircraft acquisition facility in addition to its unrestricted cash to fund aircraft purchases.  Further, at June 30, 2014, there were seven unencumbered aircraft with a net book value of $245.7 million.

FLY's net leverage as of June 30, 2014 was unchanged at 2.9x since March 31, 2014.  Net leverage is defined as the ratio of net debt to total shareholders' equity, and net debt is defined as book value of all borrowings, less unrestricted cash and cash equivalents.

Aircraft Portfolio

At June 30, 2014, all of FLY's 117 aircraft, as shown in the table below, were on lease to 65 airlines in 36 countries. The table does not include the four B767 aircraft owned by a joint venture in which FLY has a 57% interest.

Portfolio at

Jun 30, 2014

Dec 31, 2013

Airbus A319

19

19

Airbus A320

27

27

Airbus A330

1

1

Airbus A340

3

3

Boeing 737

52

48

Boeing 747

1

1

Boeing 757

11

11

Boeing 767

1

1

Boeing 777

1

1

Boeing 787

1

1

    Total

117

113

As of June 30, 2014, the average age of FLY's portfolio was 8.7 years weighted by the net book value of each aircraft. The average remaining lease term was 4.3 years, also weighted by net book value. As of June 30, 2014, FLY's leases were generating annualized revenues of approximately $379 million. FLY's lease utilization factor was 100% for the second quarter of 2014 and 99% for the six months ended June 30, 2014.

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 Thursday, July 31, 2014.  Participants should call +1-253-237-1145 (International) or 800-535-7056 (North America) and enter confirmation code 66858774 or ask an operator for the FLY Leasing earnings call. An earnings call presentation will also be available on FLY's website at www.flyleasing.com

A replay will be available shortly after the call. To access the replay, please dial +1-404-537-3406 (International) or 855-859-2056 (North America) and enter confirmation code 66858774. The replay recording will be available until August 10, 2014.  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 for one year.

About FLY

FLY acquires and leases modern, high-demand and fuel-efficient commercial jet aircraft under multi-year operating lease contracts to a diverse group of airlines throughout the world. FLY is managed and serviced by BBAM LP, one of the world's leading aircraft lease managers with more than 20 years of experience. For more information about FLY, please visit its 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 its  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

June  30, 
2014 (Unaudited)

Three months ended

June 30, 
2013 (Unaudited)

Six months
ended

 June 30, 
2014
(Unaudited)

Six months
ended

 June 30, 2013
(Unaudited)

Revenues





   Operating lease rental revenue

$   94,575

$   74,950

$  185,111

$   155,058

   End of lease revenue

175

16,953

3,854

47,552

   Amortization of lease incentives

(3,833)

(1,906)

(7,221)

(3,840)

   Amortization of lease premiums, discounts & other

(951)

(1,157)

(2,151)

(2,556)

      Operating lease revenue

89,966

88,840

179,593

196,214

   Gain on sale of aircraft

18,855

-

18,855

6,451

   Equity earnings from unconsolidated subsidiary

359

481

1,741

903

   Interest and other income

334

1,217

644

1,335

Total revenues

109,514

90,538

200,833

204,903

Expenses





   Depreciation

42,125

35,207

82,528

69,743

   Interest expense

33,819

29,164

68,444

60,185

   Net (gain) loss on extinguishment of debt

(4,010)

2,140

(4,010)

2,140

   Selling, general and administrative

11,329

9,554

20,959

19,258

   Ineffective, dedesignated and terminated derivatives

97

(792)

32

(860)

   Maintenance and other costs

1,584

8,534

3,994

9,924

Total expenses

84,944

83,807

171,947

160,390

Net income before provision for income taxes

24,570

6,731

28,886

44,513

   Provision for income taxes

2,896

816

3,649

5,753

Net income

$    21,674

$   5,915

$  25,237

$   38,760

Weighted average number of shares





-  Basic

41,419,515

28,150,215

41,376,963

28,109,929

-  Diluted

41,446,070

28,260,475

41,420,045

28,211,847

Earnings per share





 -  Basic

$   0.51

$   0.20

$   0.58

$   1.36

-   Diluted

$   0.51

$   0.20

$   0.58

$   1.35

Dividends declared and paid per share

$   0.25

$   0.22

$   0.50

$   0.44


FLY Leasing Limited
Consolidated Balance Sheets
(DOLLARS IN THOUSANDS)


June 30, 2014
(Unaudited)

Dec. 31, 2013
(Audited)

Assets



   Cash and cash equivalents

$  253,171

$    404,472

   Restricted cash and cash equivalents

125,229

174,829

   Rent receivables

3,408

2,922

   Investment in unconsolidated subsidiary

3,287

8,179

   Flight equipment held for operating leases, net

3,160,640

3,034,912

   Fair market value of derivative asset

1,783

7,395

   Other assets, net

32,572

39,650

Total assets

$ 3,580,090

$ 3,672,359

Liabilities



   Accounts payable and accrued liabilities

15,584

16,592

   Rentals received in advance

16,328

17,422

   Payable to related parties

2,790

3,756

   Security deposits

55,354

52,837

   Maintenance payment liabilities

248,571

233,811

   Unsecured borrowings, net

292,173

291,567

   Secured borrowings, net

2,141,045

2,254,705

   Fair market value of derivative liabilities

26,268

24,577

   Deferred tax liability, net

10,462

7,746

   Other liabilities

25,461

20,523

Total liabilities

2,834,036

2,923,536

Shareholders' equity



Common shares, $0.001 par value, 499,999,900 shares authorized; 41,432,998 and 41,306,338 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively

41

 

41

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

   Additional paid in capital

658,456

658,492

   Retained earnings

107,660

104,143

   Accumulated other comprehensive loss, net

(20,103)

(13,853)

Total shareholders' equity

746,054

748,823

Total liabilities and shareholders' equity

$ 3,580,090

$ 3,672,359

 

 


FLY Leasing Limited
Consolidated Statements of Cash Flows
(DOLLARS IN THOUSANDS)



Six months


Six months



ended


ended



June 30,


June 30,



2014


2013

Cash Flows from Operating Activities







Net Income


$

25,237


$

38,760

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







Equity in earnings from unconsolidated subsidiary



(1,741)



(903)

Gain on sale of aircraft



(18,855)



(6,451)

Depreciation



82,528



69,743

Amortization of debt issuance costs



2,716



3,748

Amortization of lease incentives



7,221



3,839

Amortization of lease discounts/premiums and other items



4,980



4,135

Amortization of fair market value adjustments associated with the GAAM acquisition



3,531



8,056

Net (gain) loss on extinguishment of debt



(4,048)



Share-based compensation



(36)



2,474

Interest included in principal balance





1,286

Provision for income taxes



3,649



4,925

Unrealized gain on derivative instruments



32



(860)

Security deposits and maintenance payment liability relieved



(3,443)



(31,377)

Security deposits and maintenance payment claims applied towards operating lease revenues





(2,101)

Distribution from unconsolidated subsidiary



4,786



Changes in operating assets and liabilities:







Rent receivables



(2,877)



(318)

Other assets



1,768



(1,023)

Payable to related parties



(3,499)



(4,193)

Accounts payable and accrued liabilities



1,060



1,544

Rentals received in advance



(724)



705

Other liabilities



4,405



4,774

Net cash flows provided by operating activities



106,690



96,763

Cash Flows from Investing Activities







Distribution from unconsolidated subsidiary



1,847



Purchase of flight equipment



(289,259)



(130,513)

Proceeds from sale of aircraft



81,867



31,039

Payment for aircraft improvement



(7,693)



Lessor contribution to maintenance



(2,422)



(9,127)

Net cash flows used in investing activities



(215,660)



(108,601)












Six months


Six months



ended


ended



June 30,


June 30,



2014


2013

Cash Flows from Financing Activities







Restricted cash and cash equivalents



49,600



(19,320)

Security deposits received



4,391



6,823

Security deposits returned



(1,828)



(2,553)

Maintenance payment liability receipts



48,191



27,166

Maintenance payment liability disbursements



(37,131)



(11,743)

Debt issuance costs



(242)



(4,364)

Proceeds from secured borrowings





138,956

Repayment of secured borrowings



(83,592)



(133,936)

Dividends



(20,676)



(12,356)

Dividend equivalents



(1,044)



(655)

Net cash flows used in financing activities



(42,331)



(11,982)

Net decrease in cash



(151,301)



(23,820)

Cash at beginning of period



404,472



163,124

Cash at end of period


$

253,171


$

139,304








Supplemental Disclosure:







Cash paid during the period for:







Interest


$

59,634


$

49,471

Taxes



152



208

Noncash Activities:







Other liabilities applied to maintenance payment liability and rent receivables



979



Security deposits applied to maintenance payment liability and rent receivables



820



1,299

Noncash activities in connection with purchase of aircraft:







Security deposits and maintenance payment liability assumed in connection with purchase of aircraft



16,019



Rent receivable applied to purchase of aircraft



1,480



Deposits applied to purchase of aircraft



550



Noncash activities in connection with sale of aircraft:







Security deposits and maintenance payment liability applied to sales price



8,678



Refundable deposits applied to sale of aircraft



2,626



Rent receivable applied to sale of aircraft



425



Secured borrowings assumed by buyer





38,500

Derivative liabilities assumed by buyer





5,000









 

 


FLY Leasing Limited
Reconciliation of Adjusted Net Income, a Non-GAAP Financial Measure, to Net Income
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)


Three months ended

June 30, 2014 (Unaudited)

Three months ended

June 30, 2013 (Unaudited)

Six months
ended

 June 30, 2014
(Unaudited)

Six months
ended

 June 30,    2013
(Unaudited)

Net Income

$   21,674

$   5,915

$   25,237

$   38,760

Add (less):





   Ineffective portion of cash flow hedges

97

(792)

32

(860)

   Net (gain) loss on extinguishment of debt

(4,010)

2,140

(4,010)

2,140


   Non-cash share based compensation

20

668

(36)

2,474


   Adjustments related to GAAM Portfolio acquisition:






        Amortization of fair value adjustments recorded in purchase accounting

1,602

3,534

3,531

8,056


   Income tax effects

(555)

(230)

(789)

(796)


Adjusted Net Income

$   18,828

$   11,235

$   23,965

$   49,774


Weighted average diluted shares outstanding

41,446,070

28,260,475

41,420,045

28,211,847


Adjusted Net Income per share

$   0.45

$   0.40

$   0.58

$   1.76







 

 


Adjusted Net Income Plus Depreciation and Amortization, a Non-GAAP Financial Measure, to Net Income
(DOLLARS IN THOUSANDS)


Three months ended

June 30, 2014 (Unaudited)

Three months ended

June 30, 2013 (Unaudited)

Six months
ended

 June 30, 2014
(Unaudited)

Six months
ended

 June 30,    2013
(Unaudited)

Adjusted Net Income

$  18,828

$   11,235

$   23,965

$   49,774

Add:





   Depreciation

42,125

35,207

82,528

69,743

   Other amortization

7,365

5,517

14,457

10,463


   Provision for deferred income taxes

3,404

1,081

4,272

5,721


Adjusted Net Income Plus Depreciation and Amortization

$   71,722

$   53,040

$   125,222

$   135,701







FLY defines Adjusted Net Income as net income plus or minus the after-tax impacts of the ineffective portion of cash flow hedges, net gains and losses on extinguishment of debt, non-cash share-based compensation, and adjustments related to the GAAM portfolio acquisition comprised of amortization of fair value adjustments recorded in purchase accounting. Management believes that Adjusted Net Income provides information that is useful in evaluating the operating performance of FLY's business and facilitates period-over-period comparisons without regard to gains and losses related to refinancing activity, share based compensation expense and the impacts of fair-value adjustments of debt, leases and derivative instruments that FLY assumed in connection with its acquisition of the GAAM portfolio. 

Adjusted Net Income Plus Depreciation and Amortization is a cash flow measure that provides investors with an additional measure for evaluating FLY's ongoing cash earnings, from which capital investments are made, debt is serviced and dividends are paid.  However, this measure excludes certain cash items, including principal payments on debt, and therefore has certain important limitations as an indicator of FLY's ability to pay dividends and reinvest in its business.  Management uses Adjusted Net Income and Adjusted Net Income Plus Depreciation and Amortization as a measure for assessing FLY's performance. 

Adjusted Net Income and Adjusted Net Income Plus Depreciation and Amortization should be considered as supplements to, and not as a substitute for, net income and other financial measures determined in accordance with Accounting Principles Generally Accepted in the United States.  FLY's definitions may be different than those used by other companies, including other companies in its industry.

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SOURCE FLY Leasing Limited



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