FLY Leasing Reports Third Quarter 2015 Financial Results and Announces Share Repurchase Program

12 Nov, 2015, 07:00 ET from FLY Leasing Limited

DUBLIN, Nov. 12, 2015 /PRNewswire/ -- FLY Leasing Limited (NYSE: FLY) ("FLY"), a global leader in aircraft leasing, today announced its financial results for the third quarter of 2015 and a $100 million share repurchase program.

Third Quarter 2015 Highlights

  • Adjusted net income of $32.3 million or $0.78 per share
  • Net income of $19.9 million or $0.47 per share
  • Invested $214 million in new aircraft
  • Completed sales of 15 aircraft
  • Executed an agreement to sell 12 older aircraft

Tender Offer and Share Repurchase Program

  • $75 million modified Dutch auction tender offer
  • $25 million open market repurchase program
  • $10 million in additional open market purchases by BBAM shareholders
  • These initiatives replace the dividend

"Our third quarter results demonstrate our progress in selling older and underperforming assets, enhancing our fleet metrics and reducing costs," said Colm Barrington, FLY's CEO. "Today we announced the next step in FLY's transformation: a $100 million share repurchase program that will replace our dividend. The tender offer and open market share repurchase announced today will accelerate the return of capital to shareholders and drive improved return on equity and earnings per share for FLY."

"We have entered into agreements to sell a total of 57 aircraft with an average age of 13 years," added Barrington. "Aircraft sales, combined with our purchase of seven newer aircraft, have reduced our average fleet age to seven years at quarter end, a decrease of one year over the prior quarter. We have also improved our cost structure by driving lower annual SG&A and interest expense."

"Our aircraft sales have generated significant levels of investible cash, enabling us to simultaneously invest in newer, higher yielding aircraft and accelerate the return of capital to our shareholders," added Barrington. "With our younger fleet, the financial firepower to carry out our growth strategy and our new initiatives, FLY will continue to grow the value of the business for our shareholders."

Financial Results

FLY is reporting net income of $19.9 million or $0.47 per diluted share for the third quarter of 2015. This compares to net income of $15.4 million or $0.37 per diluted share for the same period in 2014.

Total revenues increased to $106.2 million. Operating lease rental revenue for the third quarter of 2015 was $104.4 million, compared to $98.0 million for the same period in the previous year, an increase of 7%. The increase was driven primarily by recently acquired aircraft and improved utilization. Revenues include $27.7 million of rents from aircraft that are contracted to be sold.   

The net loss for the nine month period ended September 30, 2015 was $21.1 million, or $0.53 per share. This compares to net income of $40.6 million, or $0.95 per share, for the same period in 2014. The current year loss reflects a non-cash $65.4 million impairment charge taken in the second quarter. The prior year results included $18.0 million of end of lease income and $18.9 million of gain on sale of aircraft.  For the current year, end of lease income was $26.9 million and gain on sale of aircraft totaled $9.1 million.

Adjusted Net Income

Adjusted Net Income for the third quarter of 2015 was $32.3 million, or $0.78 per share, as compared to $22.8 million, or $0.55 per share, for the same period in 2014.  For the nine month period ended September 30, 2015, Adjusted Net Income was $68.4 million, or $1.65 per share, as compared to $58.6 million, or 1.42 per share, for the same period in 2014.

Dividend and Share Repurchases

FLY announced today that its Board of Directors approved a $100 million share repurchase plan, including a $75 million modified Dutch auction tender offer, replacing its dividend. The share repurchases will be funded using FLY's unrestricted cash. The $25 million open market share repurchase plan will be authorized through the end of 2016 and may be suspended or discontinued at any time. BBAM shareholders have informed FLY's Board that they intend to acquire an additional $10 million of shares in the open market following the tender offer.   

Under FLY's previously authorized share repurchase program, through September 30, 2015, the company repurchased 141,773 shares at an average price of $13.01 per share for a total cost of approximately $1.9 million. Subsequent to quarter end, FLY acquired an additional 279,556 shares through November 11, 2015, for a total aggregate of 421,329 shares and a total cost of $5.5 million.

On October 15, 2015, FLY declared a dividend of $0.25 per share in respect of the third quarter of 2015. This dividend will be paid on November 20, 2015 to shareholders of record on October 30, 2015.   

Financial Position

At September 30, 2015, FLY's total assets were $4.0 billion, and include $2.6 billion of flight equipment held for operating lease and $796.1 million of flight equipment held for sale.  The aircraft classified as held for sale are subject to sale agreements and are expected to be sold over the next few months.    

Total cash at September 30, 2015 was $564.6 million, of which $378.9 million is unrestricted.  This compares to total cash of $476.7 million at December 31, 2014, of which $337.6 million was unrestricted.  At September 30, 2015, FLY owned 13 unencumbered aircraft with a net book value of $532.2 million, of which two were held for sale with a net book value of $50.2 million

Aircraft Portfolio

At September 30, 2015, FLY's 83 aircraft held for operating lease, shown in the table below, were on lease to 43 lessees in 26 countries. The table does not include 33 aircraft that were held for sale at September 30, 2015 or the two B767 aircraft owned by a joint venture in which FLY has a 57% interest.

Portfolio at

Sep 30, 2015

Dec 31, 2014

Airbus A319

10

18

Airbus A320

14

27

Airbus A321

3

3

Airbus A330

3

4

Airbus A340

3

3

Boeing 737

38

57

Boeing 747

-

1

Boeing 757

9

11

Boeing 767

1

1

Boeing 777

1

1

Boeing 787

1

1

      Total

83

127

At September 30, 2015, the average age of FLY's aircraft held for operating lease, weighted by the net book value of each aircraft, was 7.0 years. The average remaining lease term was 5.9 years, also weighted by net book value. At September 30, 2015, the 83 aircraft were generating annualized rents of approximately $301 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, November 12, 2015.  Participants should call +1-253-237-1145 (International) or 800-535-7056 (North America) and enter confirmation code 55763805 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 for one year.

Information Regarding the Planned Tender Offer

The discussion of the planned tender offer is for informational purposes only and is not an offer to buy or the solicitation of an offer to sell any FLY shares. The tender offer described in this press release has not yet commenced, and there can be no assurance that FLY will commence the tender offer on the terms described in this press release or at all. If FLY commences the tender offer, the tender offer will be made solely by an Offer to Purchase and the related Letter of Transmittal, as they may be amended or supplemented. Shareholders and investors are urged to read any Tender Offer Statement on Schedule TO, filed by FLY with the Securities and Exchange Commission (the "SEC") in connection with the tender offer including the Offer to Purchase, the related Letter of Transmittal and other offer materials and exhibits thereto, as well as any amendments or supplements to the Schedule TO when they become available, because they will contain important information. If FLY commences the tender offer, it will file each of the documents referenced in this paragraph with the SEC, and, when available, investors may obtain them for free from the SEC at its website (www.sec.gov) or from the information agent engaged by FLY in connection with the tender offer.

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.

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, financial performance and the planned tender offer and repurchase program. 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. 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

Sep. 30, 2015 (Unaudited)

Three months ended

Sep. 30, 2014 (Unaudited)

Nine months ended

Sep. 30, 2015 (Unaudited)

Nine months ended

Sep. 30, 2014 (Unaudited)

Revenues

   Operating lease rental revenue

$     104,356

$     97,984

$  310,910

$   283,095

   End of lease revenue

1,270

14,181

26,882

18,035

   Amortization of lease incentives

(6,845)

(6,149)

(15,638)

(13,370)

   Amortization of lease premiums, discounts and other

(461)

(934)

(2,047)

(3,085)

Operating lease revenue

98,320

105,082

320,107

284,675

   Equity earnings from unconsolidated subsidiary

353

364

1,034

2,105

   Gain on sale of aircraft

7,188

23

9,085

18,878

   Interest and other income

378

74

1,381

718

Total revenues

106,239

105,543

331,607

306,376

Expenses

   Depreciation

32,529

43,960

132,265

126,488

   Aircraft impairment

65,398

   Interest expense

36,195

33,683

112,724

102,127

   Net (gain) loss on debt modification and extinguishment

3,206

9,375

(3,995)

   Selling, general and administrative

7,795

9,876

26,632

30,820

   Ineffective, dedesignated and terminated derivatives

3,190

(149)

4,682

(117)

   Maintenance and other costs

1,737

680

4,400

4,674

Total expenses

84,652

88,050

355,476

259,997

Net income (loss) before provision for income taxes

21,587

17,493

(23,869)

46,379

   Provision (benefit) for income taxes

1,658

2,132

(2,809)

5,781

Net income (loss)

$       19,929

$     15,361

$  (21,060)

$     40,598

Weighted average number of shares

-  Basic

41,462,995

41,432,998

41,451,035

41,395,847

-  Diluted

41,544,423

41,463,474

41,451,035

41,434,681

Earnings per share

-  Basic

$      0.48

$    0.37

$    (0.53)

$     0.95

-  Diluted

$      0.47

$    0.37

$    (0.53)

$     0.95

Dividends declared and paid per share

$      0.25

$    0.25

$      0.75

$     0.75

FLY Leasing Limited

Consolidated Balance Sheets

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Sep. 30, 2015 (Unaudited)

Dec. 31, 2014 (Audited)

Assets

   Cash and cash equivalents

$      378,872

$     337,560

   Restricted cash and cash equivalents

185,722

139,139

   Rent receivables

2,549

4,887

   Investment in unconsolidated subsidiary

7,045

4,002

   Flight equipment held for sale, net

796,113

   Flight equipment held for operating lease, net

2,575,246

3,705,407

   Fair market value of derivative assets

2,067

   Other assets, net

20,867

31,608

Total assets

$   3,966,414

$ 4,224,670

Liabilities

   Accounts payable and accrued liabilities

$        31,494

$       18,431

   Rentals received in advance

16,972

19,751

   Payable to related parties

6,620

2,772

   Security deposits

55,176

64,058

   Maintenance payment liability

254,114

254,514

   Unsecured borrowings, net

690,695

689,452

   Secured borrowings, net

2,106,679

2,335,328

   Deferred tax liability, net

12,510

16,289

   Fair market value of derivative liabilities

28,919

23,311

   Other liabilities

62,555

41,890

Total liabilities

3,265,734

3,465,796

Shareholders' equity

   Common shares, $0.001 par value, 499,999,900 shares authorized; 41,327,300 and 41,432,998 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively

41

41

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

   Additional paid in capital

656,864

658,522

   Retained earnings

64,409

117,402

   Accumulated other comprehensive loss, net

(20,634)

(17,091)

Total shareholders' equity

700,680

758,874

Total liabilities and shareholders' equity

$   3,966,414

$ 4,224,670

FLY Leasing Limited

Consolidated Statements of Cash Flows

(DOLLARS IN THOUSANDS)

Nine months ended Sep. 30, 2015 (Unaudited)

Nine months ended Sep. 30, 2014 (Unaudited)

Cash Flows from Operating Activities

Net income (loss)

$      (21,060)

$             40,598

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

Equity in earnings from unconsolidated subsidiary

(1,034)

(2,105)

Gain on sale of aircraft

(9,085)

(18,878)

Depreciation

132,265

126,488

Aircraft impairment

65,398

Amortization of debt discounts and loan issuance costs

9,080

9,307

Amortization of lease incentives

15,638

13,370

Amortization of lease discounts, premiums and other items

1,800

2,112

Amortization of fair market value adjustments associated with the GAAM acquisition

2,884

4,953

Net (gain) loss on debt modification and extinguishment

7,307

(4,048)

Share-based compensation

195

(50)

Unrealized foreign exchange loss on cash balances

119

284

Unrealized foreign exchange gain on debt and other items

(812)

Provision for deferred income taxes

(3,302)

5,781

Unrealized loss on derivative instruments

3,562

(117)

Security deposits and maintenance payment liability relieved

(27,118)

(17,223)

Distribution from unconsolidated subsidiary

5,149

Changes in operating assets and liabilities:

Rent receivables

5,251

(3,494)

Other assets

1,708

1,549

Payable to related parties

(7,912)

(4,450)

Accounts payable and accrued liabilities

11,260

5,084

Rentals received in advance

(2,779)

1,139

Other liabilities

11,262

6,129

Net cash flows provided by operating activities

194,627

171,578

Cash Flows from Investing Activities

Investment on unconsolidated subsidiary

(2,009)

Distribution from unconsolidated subsidiary

1,484

Purchase of flight equipment

(366,772)

(643,950)

Proceeds from sale of aircraft, net

527,898

88,617

Payment for aircraft improvement

(7,495)

(8,698)

Payments for maintenance

(16,653)

(4,034)

Net cash flows provided by (used in) investing activities

134,969

(566,581)

Nine months ended Sep. 30, 2015 (Unaudited)

Nine months ended Sep. 30, 2014 (Unaudited)

Cash Flows from Financing Activities

Restricted cash and cash equivalents

(46,583)

43,292

Security deposits received

7,882

10,558

Security deposits returned

(7,448)

(2,578)

Maintenance payment liability receipts

63,865

68,203

Maintenance payment liability disbursements

(33,901)

(44,413)

Proceeds from termination of interest rate swaps

23

Debt issuance costs

(917)

(1,390)

Proceeds from secured borrowings

147,276

165,942

Repayment of secured borrowings

(384,576)

(135,264)

Shares repurchased

(1,853)

Dividends

(31,084)

(31,034)

Dividend equivalents

(849)

(1,235)

Net cash flows provided by (used in) financing activities

(288,165)

72,081

      Effect of exchange rate changes on cash and cash equivalents

(119)

(284)

Net increase (decrease) in cash

41,312

(323,206)

Cash at beginning of period

337,560

404,472

Cash at end of period

$         378,872

$           81,266

Supplemental Disclosure:

Cash paid during the period for:

Interest

$           91,408

$           83,833

Taxes

157

156

Noncash Activities:

Security deposits applied to maintenance payment liability and rent receivables

3,292

1,598

Maintenance payment liability applied to rent receivables

2,523

Other liabilities applied to maintenance payment liability and rent receivables

240

979

Noncash investing activities:

Aircraft improvement

1,693

3,035

Noncash activities in connection with purchase of aircraft

20,344

26,002

Noncash activities in connection with sale of aircraft

36,595

12,479

FLY Leasing Limited

Reconciliation of Non-GAAP Measures

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Three months ended

Sep. 30, 2015 (Unaudited)

Three months ended

Sep. 30, 2014 (Unaudited)

Nine months ended

 Sep. 30, 2015 (Unaudited)

Nine months ended

 Sep. 30, 2014 (Unaudited)

Net income (loss)

$        19,929

$       15,361

$      (21,060)

$     40,598

Adjustments:

   Aircraft impairment

65,398

   Amortization of debt discounts and loan issue costs

3,123

3,068

9,080

9,307

   Amortization of lease premiums, discounts and other

479

707

1,800

2,112

   Amortization of fair value adjustments recorded in purchase accounting

748

1,422

2,884

4,953

   Net (gain) loss on debt modification and extinguishment

3,206

9,375

(3,995)

   Non-cash share based compensation

(14)

195

(50)

   Unrealized foreign exchange (gain) loss

67

304

(693)

284

   Deferred income taxes

1,513

2,059

(3,302)

5,542

   Ineffective, dedesignated and terminated derivatives

3,190

(149)

4,682

(117)

Adjusted Net Income

$       32,255

$       22,758

$       68,359

$     58,634

Average Shareholders' Equity

$     699,530

$    752,107

$     729,777

$   753,491

Adjusted Return on Equity

18.4%

12.1%

12.5%

10.4%

Weighted average diluted shares outstanding

41,544,423

41,463,474

41,451,035

41,434,681

Adjusted Net Income per share

$              0.78

$            0.55

$                 1.65

$             1.42

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; and (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, not as a substitute for net income or other financial measure determined in accordance with Accounting Principles Generally Accepted in the United States.  FLY's definitions may be different than those used by other companies.

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SOURCE FLY Leasing Limited



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