FLY Leasing Fourth Quarter and Full Year 2015 Financial Results
Tuesday, March 08, 2016 7:00:00 AM ET FLY Leasing Limited (FLY ), a global leader in aircraft leasing, today announced its financial results for the fourth quarter and full year of 2015.
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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, Dec 31,
2015 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 Three months Year ended Year ended
ended ended Dec. 31, 2015 Dec. 31, 2014
Dec. 31, 2015 Dec. 31, 2014 (Unaudited) (Audited)
(Unaudited) (Unaudited)
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, Dec. 31,
2015 2014
(Unaudited) (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 Year ended
Dec. 31, 2015 Dec. 31, 2014
(Unaudited) (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 Year ended
Dec. 31, 2015 Dec. 31, 2014
(Unaudited) (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 Three months Year ended Year ended
ended ended Dec. 31, 2015 Dec. 31, 2014
Dec. 31, 2015 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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