FLY Leasing reports Q4 and full year 2015 earnings results


DUBLIN, Ireland – FLY Leasing Limited 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.