Fly Leasing Reports Second Quarter 2019 Financial Results
DUBLIN, Aug. 22, 2019 /PRNewswire/ -- Fly Leasing Limited (NYSE: FLY) ("FLY"), a global leader in aircraft leasing, today announced its financial results for the second quarter of 2019.
Highlights
- Net income of $54.1 million, $1.68 per share
- Adjusted Net Income of $61.9 million, $1.92 per share
- Sold seven aircraft for an economic gain of $18.9 million, a 10% premium to book value
- Repurchased 1.47 million shares at an average price of $16.53 per share
- $24.28 book value per share at quarter end, a 13% increase since December 31, 2018
- Purchased two aircraft for $60.9 million
"FLY continues to achieve record results, producing its fifth straight quarter of double-digit ROE," said Colm Barrington, FLY's Chief Executive Officer. "Our renewed fleet contributed to a 13% increase in operating lease rental revenue compared to the same quarter last year. Economic gains of nearly $19 million from the sale of seven aircraft helped us to achieve record Adjusted Net Income of $61.9 million, or $1.92 per share, in the quarter, and Adjusted Net Income of $109.0 million, or $3.37 per share, for the first six months of the year. Looking ahead, we expect another strong result in the third quarter."
"As a result of our deleveraging strategy following last year's major fleet acquisition, we have met our leverage target a year ahead of schedule," said Barrington. "We also have been repurchasing stock, buying back 1.47 million shares in the quarter. FLY will begin taking delivery of its $1 billion of contracted A320neo family aircraft later this year, and is well positioned to add aircraft as opportunities arise."
"We sold seven aircraft in the quarter at a 10% premium to book value, and in the third quarter, we have contracted to sell 14 more aircraft, also at gains, again demonstrating the value embedded in FLY's fleet," added Barrington. "Our record results have also added significantly to shareholders' equity, which is now over $24 per share and 13% above the level at the end of 2018. We continue to see great value in FLY's shares, which are trading at a 26% discount to book value. At its August meeting, FLY's board of directors authorized a new $50 million share repurchase program."
Financial Results
FLY is reporting net income of $54.1 million, or $1.68 per share, for the second quarter of 2019. This compares to net income of $24.3 million, or $0.87 per share, for the same period in 2018.
Net income for the six months ended June 30, 2019 was $99.0 million, or $3.06 per share, compared to net income of $34.0 million, or $1.21 per share, for the six months ended June 30, 2018.
Adjusted Net Income
Adjusted Net Income was $61.9 million for the second quarter of 2019, compared to $25.2 million for the same period in the previous year. On a per share basis, Adjusted Net Income was $1.92 in the second quarter of 2019, compared to $0.90 for the second quarter of 2018.
For the six months ended June 30, 2019, Adjusted Net Income was $109.0 million, or $3.37 per share, compared to $37.6 million, or $1.34 per share, for the same period last year.
A reconciliation of Adjusted Net Income to net income determined in accordance with GAAP is shown below.
Share Repurchases
During the six months ended June 30, 2019, FLY repurchased 1.67 million shares in the open market at an average price of $16.18 per share, for a total cost of $27.0 million. As of June 30, 2019, FLY had approximately 31 million shares outstanding. On August 21, 2019, FLY's board of directors approved a new $50 million share repurchase program to replace its current program.
Financial Position
At June 30, 2019, FLY's total assets were $3.9 billion, including investment in flight equipment totaling $3.4 billion. Total cash at June 30, 2019 was $415.1 million, of which $351.9 million was unrestricted. The book value per share at June 30, 2019 was $24.28, a 13% increase since December 31, 2018. At June 30, 2019, FLY's net debt to equity ratio was 3.1x, reduced from 4.0x at December 31, 2018.
Aircraft Portfolio
At June 30, 2019, FLY had 98 aircraft and seven CFM engines on lease to 45 airlines in 25 countries. Of the 98 aircraft, 12 were classified as held for sale. The table below does not include one B767 aircraft owned by a joint venture in which FLY has a 57% interest, nor the seven engines.
Portfolio at | Jun. 30, 2019 | Dec. 31, 2018 | ||
Number | % of Net | Number | % of Net | |
Airbus A320 Family(1) | 42 | 33% | 55 | 38% |
Airbus A330 | 3 | 5% | 3 | 5% |
Airbus A340 | 2 | 1% | 2 | 1% |
Boeing 737NG(2) | 42 | 35% | 42 | 32% |
Boeing 737 MAX | 2 | 3% | 2 | 3% |
Boeing 757-SF | 1 | 0% | 3 | 1% |
Boeing 777-LRF | 2 | 9% | 2 | 8% |
Boeing 787 | 4 | 14% | 4 | 12% |
Total | 98 | 100% | 113 | 100% |
(1) | Includes five and ten Airbus A320 aircraft classified as held for sale at June 30, 2019 and December 31, 2018, respectively. |
(2) | Includes seven and two aircraft classified as held for sale at June 30, 2019 and December 31, 2018, respectively. |
At June 30, 2019, the average age of the portfolio, weighted by net book value of each aircraft and engine, was 7.4 years. The average remaining lease term was 5.3 years, also weighted by net book value. At June 30, 2019, FLY's portfolio, excluding aircraft held for sale, was generating annualized rental revenue of approximately $354.2 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 Thursday, August 22, 2019. Participants should call +1 (409) 220-9381 (International) or (866) 438-0730 (North America) and enter confirmation code 8491508. A live webcast with slide presentation will be available on the Events and Presentations page in the Investor Relations section of FLY's website at www.flyleasing.com. A webcast replay 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 leases its aircraft under multi-year 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.
Non-GAAP Financial Measures
FLY provides all financial information in accordance with Generally Accepted Accounting Principles in the United States (GAAP). To supplement our consolidated financial statements presented in accordance with GAAP, we are also providing with this press release, and on our conference call, certain non-GAAP financial measures, including Adjusted Net Income and Adjusted Return on Equity. In calculating these non-GAAP financial measures, we have excluded certain amounts, as detailed in the reconciliation below.
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, operations 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, and the risk that FLY may be unable to achieve its portfolio growth expectations, or to reap the benefits of such growth. 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
Fly Leasing Limited | ||||
Consolidated Statements of Income | ||||
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) | ||||
Three months ended Jun. 30, | Six months ended Jun. 30, | |||
2019 | 2018 (Unaudited) | 2019 (Unaudited) | 2018 (Unaudited) | |
Revenues | ||||
Operating lease rental revenue | $ 101,108 | $ 89,215 | $ 206,436 | $ 178,328 |
End of lease income | 28,823 | 12,612 | 30,387 | 12,997 |
Amortization of lease incentives | (1,319) | (2,361) | (2,951) | (4,644) |
Amortization of lease discounts and other | 11 | (142) | 3 | (281) |
Operating lease revenue | 128,623 | 99,324 | 233,875 | 186,400 |
Finance lease revenue | 156 | 171 | 316 | 345 |
Equity earnings (loss) from unconsolidated subsidiary | 54 | (358) | 110 | (246) |
Gain on sale of aircraft | 16,078 | 2,945 | 43,698 | 2,945 |
Interest and other income | 2,122 | 591 | 3,737 | 1,984 |
Total revenues | 147,033 | 102,673 | 281,736 | 191,428 |
Expenses | ||||
Depreciation | 37,303 | 33,895 | 74,888 | 67,628 |
Interest expense | 35,439 | 33,644 | 73,618 | 66,567 |
Selling, general and administrative | 9,438 | 6,369 | 18,160 | 14,979 |
Loss (gain) on derivatives | 255 | (1,309) | 272 | (520) |
Loss on extinguishment of debt | 1,541 | 898 | 3,710 | 898 |
Maintenance and other costs | 1,625 | 936 | 2,223 | 1,714 |
Total expenses | 85,601 | 74,433 | 172,871 | 151,266 |
Net income before provision for income taxes | 61,432 | 28,240 | 108,865 | 40,162 |
Provision for income taxes | 7,382 | 3,896 | 9,850 | 6,188 |
Net income | $ 54,050 | $ 24,344 | $ 99,015 | $ 33,974 |
Weighted average number of shares | ||||
- Basic | 32,053,830 | 27,983,352 | 32,341,674 | 27,983,352 |
- Diluted | 32,187,115 | 28,045,890 | 32,396,717 | 28,023,419 |
Earnings per share | ||||
- Basic | $ 1.69 | $ 0.87 | $ 3.06 | $ 1.21 |
- Diluted | $ 1.68 | $ 0.87 | $ 3.06 | $ 1.21 |
Fly Leasing Limited | ||
Consolidated Balance Sheets | ||
(DOLLARS IN THOUSANDS, EXCEPT PAR VALUE DATA) | ||
Jun. 30, 2019 (Unaudited) | Dec. 31, | |
Assets | ||
Cash and cash equivalents | $ 351,892 | $ 180,211 |
Restricted cash and cash equivalents | 63,161 | 100,869 |
Rent receivables | 5,864 | 9,307 |
Investment in finance lease, net | 12,238 | 12,822 |
Flight equipment held for sale, net | 320,359 | 259,644 |
Flight equipment held for operating lease, net | 2,788,459 | 3,228,018 |
Maintenance rights | 251,797 | 298,207 |
Deferred tax asset, net | 16,740 | 6,505 |
Fair value of derivative assets | 4,540 | 5,929 |
Other assets, net | 130,170 | 124,960 |
Total assets | $ 3,945,220 | $ 4,226,472 |
Liabilities | ||
Accounts payable and accrued liabilities | $ 23,232 | $ 23,146 |
Rentals received in advance | 16,431 | 21,322 |
Payable to related parties | 6,593 | 4,462 |
Security deposits | 47,991 | 60,097 |
Maintenance payment liability, net | 267,006 | 292,586 |
Unsecured borrowings, net | 618,535 | 617,664 |
Secured borrowings, net | 2,062,047 | 2,379,869 |
Deferred tax liability, net | 52,711 | 36,256 |
Fair value of derivative liabilities | 31,621 | 8,558 |
Other liabilities | 65,390 | 80,402 |
Total liabilities | 3,191,557 | 3,524,362 |
Shareholders' equity | ||
Common shares, $0.001 par value, 499,999,900 shares authorized; 31,038,292 and 32,650,019 shares issued and outstanding at June 30, 2019 and 2018, respectively | 31 | 33 |
Manager shares, $0.001 par value; 100 shares authorized, issued and outstanding | — | — |
Additional paid-in capital | 522,050 | 549,123 |
Retained earnings | 253,530 | 154,347 |
Accumulated other comprehensive loss, net | (21,948) | (1,393) |
Total shareholders' equity | 753,663 | 702,110 |
Total liabilities and shareholders' equity | $ 3,945,220 | $ 4,226,472 |
Fly Leasing Limited | |||||
Consolidated Statements of Cash Flows | |||||
(DOLLARS IN THOUSANDS) | |||||
Six months ended Jun. 30, | |||||
2019 | 2018 | ||||
Cash Flows from Operating Activities | |||||
Net income | $ 99,015 | $ 33,974 | |||
Adjustments to reconcile net income to net cash flows provided by operating activities: | |||||
Finance lease revenue | (316) | (345) | |||
Equity (earnings) loss from unconsolidated subsidiary | (110) | 246 | |||
Gain on sale of aircraft | (43,698) | (2,945) | |||
Depreciation | 74,888 | 67,628 | |||
Amortization of debt discounts and debt issuance costs | 5,369 | 3,961 | |||
Amortization of lease incentives and other items | 3,324 | 5,453 | |||
Loss on extinguishment of debt | 3,710 | 898 | |||
Unrealized foreign exchange gain | (104) | (456) | |||
Provision for deferred income taxes | 9,991 | 6,327 | |||
Loss (gain) on derivative instruments | 198 | (74) | |||
Security deposits and maintenance payment liability recognized into earnings | (26,145) | (9,965) | |||
Distributions from unconsolidated subsidiary | 109 | 2,212 | |||
Cash receipts from maintenance rights | 1,741 | 3,013 | |||
Changes in operating assets and liabilities: | |||||
Rent receivables | (2,011) | (2,766) | |||
Other assets | (3,250) | (2,212) | |||
Payable to related parties | 2,131 | (2,168) | |||
Accounts payable, accrued liabilities and other liabilities | (2,054) | 2,005 | |||
Net cash flows provided by operating activities | 122,788 | 104,786 | |||
Cash Flows from Investing Activities | |||||
Distributions from unconsolidated subsidiary | 205 | 1,275 | |||
Rent received from finance lease | 900 | 900 | |||
Swap termination proceeds | 114 | — | |||
Investment income from Horizon I Limited equity certificates | 571 | — | |||
Purchase of flight equipment | (61,381) | (69,258) | |||
Deposit on aircraft purchases | — | (30,000) | |||
Proceeds from sale of aircraft, net | 410,939 | 99,339 | |||
Capitalized interest on Portfolio B orderbook | (2,433) | — | |||
Payments for aircraft improvement | (2,832) | (170) | |||
Payments for lessor maintenance obligations | (1,461) | (817) | |||
Net cash flows provided by investing activities | 344,622 | 1,269 | |||
Six months ended Jun. 30, | |||||
2019 (Unaudited) | 2018 (Unaudited) | ||||
Cash Flows from Financing Activities | |||||
Security deposits received | — | 1,417 | |||
Security deposits returned | (1,546) | (3,549) | |||
Maintenance payment liability receipts | 33,633 | 38,830 | |||
Maintenance payment liability disbursements | (12,738) | (2,104) | |||
Debt extinguishment costs | (74) | (12) | |||
Debt issuance costs | (342) | (5,534) | |||
Proceeds from secured borrowings | — | 49,288 | |||
Repayment of secured borrowings | (325,317) | (175,035) | |||
Shares repurchased | (27,025) | — | |||
Net cash flows used in financing activities | (333,409) | (96,699) | |||
Effect of exchange rate changes on unrestricted and restricted cash and cash equivalents | (28) | (47) | |||
Net increase in unrestricted and restricted cash and cash equivalents | 133,973 | 9,309 | |||
Unrestricted and restricted cash and cash equivalents at beginning of period | 281,080 | 456,815 | |||
Unrestricted and restricted cash and cash equivalents at end of period | $ 415,053 | $ 466,124 | |||
Reconciliation to Consolidated Balance Sheets: | |||||
Cash and cash equivalents | $ 351,892 | $ 406,508 | |||
Restricted cash and cash equivalents | 63,161 | 59,616 | |||
Unrestricted and restricted cash and cash equivalents | $ 415,053 | $ 466,124 | |||
Fly Leasing Limited | ||||
Reconciliation of Non-GAAP Measures | ||||
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) | ||||
Three months ended Jun. 30, | Six months ended Jun. 30, | |||
2019 (Unaudited) | 2018 (Unaudited) | 2019 (Unaudited) | 2018 (Unaudited) | |
Net income | $ 54,050 | $ 24,344 | $ 99,015 | $ 33,974 |
Adjustments: | ||||
Unrealized foreign exchange loss (gain) | 68 | (864) | (104) | (456) |
Deferred income taxes | 7,519 | 3,974 | 9,991 | 6,327 |
Fair value changes on undesignated derivatives | 255 | (2,238) | 143 | (2,240) |
Adjusted Net Income | $ 61,892 | $ 25,216 | $ 109,045 | $ 37,605 |
Average Shareholders' Equity | $ 745,783 | $ 571,881 | 731,225 | 562,490 |
Adjusted Return on Equity | 33.2% | 17.6% | 29.8% | 13.4% |
Weighted average diluted shares outstanding | 32,187,115 | 28,045,890 | 32,396,717 | 28,023,419 |
Adjusted Net Income per diluted share | $ 1.92 | $ 0.90 | $ 3.37 | $ 1.34 |
FLY defines Adjusted Net Income as net income plus or minus (i) unrealized foreign exchange gains and losses; (ii) deferred income taxes; (iii) the fair value changes associated with interest rate derivative contracts that are not accounted for as cash flow hedges; and (iv) non-recurring expenses. The adjustments included within Adjusted Net Income are primarily non-cash or non-recurring items that we consider unrelated to the ongoing performance of our operations. Adjusted Return on Equity is calculated by dividing Adjusted Net Income by average shareholders' equity for each period presented. For periods of less than one year, the resulting return is annualized.
FLY uses Adjusted Net Income and Adjusted Return on Equity, in addition to GAAP net income and earnings per share, to assess its core operating performance on a consistent basis from period to period. Management believes these measures are helpful in evaluating the operating performance of our ongoing operations and identifying trends in our performance, because they remove the effects of certain non-cash or non-recurring items and certain other items that are not indicative of our overall operating trends. 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 substitutes for, net income or other financial measures determined in accordance with GAAP. FLY's definitions may be different than those used by other companies.
SOURCE Fly Leasing Limited
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