FLY Leasing addresses SEC comments

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DUBLIN, Ireland – FLY Leasing Limited today announced that it has addressed the issues raised by the Securities and Exchange Commission (“SEC”) in relation to its accounting for maintenance rights associated with its acquisition of on-lease aircraft and has restated its previously issued financial statements for fiscal years 2014 and 2013 to reflect the resolution of these issues. Investors should now rely on the Company’s restated financial statements for fiscal years 2014 and 2013 included in its Annual Report on Form 20-F for fiscal year 2015, which was filed today.


In prior years, when purchasing aircraft already on lease, the Company, in line with industry practice, did not separately identify, measure and account for maintenance rights provisions in the leases. Following discussions with the staff (the “Staff”) of the SEC, the Company has been advised that it should separately identify, measure and account for maintenance rights. In addition, the Company has included certain other immaterial adjustments in its restated financial statements. None of the adjustments implicates misconduct with respect to the Company or its management. The Company’s restatement will not impact its ability to run its business or to borrow under its existing credit facilities.

The adjustments to the Company’s financial statements for fiscal years 2014 and 2013 have had no material effect on reported cash flow from operations or on the Company’s balance sheet. In the Company’s three most recent fiscal years, the net impact of these items on its statements of income was to increase net income and earnings per share:

• Fiscal year 2015: increase in net income of $16.2 million, or $0.39 per diluted share

• Fiscal year 2014: increase in net income of $4.1 million, or $0.10 per diluted share

• Fiscal year 2013: increase in net income of $1.5 million, or $0.05 per diluted share

For fiscal year 2015, the Company’s audited results are compared to the results reported in its earnings release issued on March 8, 2016. For fiscal years 2014 and 2013, the Company’s restated results are compared to its previously issued financial statements.

Impact of the Adjustments

The adjustments to the Company’s consolidated statements of income for fiscal years ended December 31, 2015, 2014 and 2013 are summarized in the tables below.

Year Ended December 31, 2015
(Dollars in thousands, except per share data)
As previously reported Maintenance rights adjustments Other adjustments As adjusted

Operating lease revenue $ 440,725 $ (11,034) $ — $ 429,691
Gain on sale of aircraft 26,090 1,284 1,585 28,959
Depreciation 168,867 (8,770) (365) 159,732
Aircraft impairment 84,255 (17,328) (834) 66,093
Provision for income taxes 2,439 1,984 976 5,399
Earnings per share:
Basic $ 0.14 $ 0.52
Diluted $ 0.13 $ 0.52

Year Ended December 31, 2014
(Dollars in thousands, except per share data)
As previously reported Maintenance rights adjustments Other adjustments As restated

Operating lease revenue $ 404,668 $ 1,895 $ — $ 406,563
Equity earnings from unconsolidated subsidiary 2,456 — 1,106 3,562
Gain on sale of aircraft 18,878 (4,564) 447 14,761
Depreciation 175,547 (8,290) (274) 166,983
Aircraft impairment — — 1,200 1,200
Selling, general and administrative 41,148 — (115) 41,033
Net (gain) loss on extinguishment of debt (3,922) 1,713 15 (2,194)
Maintenance and other costs 6,960 — 100 7,060
Provision for income taxes 8,263 751 (323) 8,691
Earnings per share:
Basic $ 1.32 $ 1.42
Diluted $ 1.32 $ 1.42

Year Ended December 31, 2013
(Dollars in thousands, except per share data)
As previously reported Maintenance rights adjustments Other adjustments As restated

Operating lease revenue $ 359,409 $ (8,062) $ 445 $ 351,792
Equity earnings from unconsolidated subsidiary 1,871 — (380) 1,491
Gain on sale of aircraft 6,277 (856) — 5,421
Depreciation 146,400 (7,854) (210) 138,336
Aircraft impairment 8,825 (2,659) — 6,166
Selling, general and administrative 37,418 — 2,175 39,593
Net (gain) loss on extinguishment of debt (15,881) — 734 (15,147)
Maintenance and other costs 15,454 — 22 15,476
Provision for income taxes 5,659 118 (2,643) 3,134
Earnings per share:
Basic $ 1.51 $ 1.55
Diluted $ 1.50 $ 1.55

For further details, please refer to the Company’s Annual Report on Form 20-F for fiscal year 2015.

The Company’s management expects to report its first quarter earnings on Wednesday, May 18, 2016, and will address any investor questions on these matters at that time.