Fly Leasing Reports Third Quarter 2017 Financial Results
DUBLIN, Nov. 9, 2017 /PRNewswire/ -- Fly Leasing Limited (NYSE: FLY) ("FLY"), a global leader in aircraft leasing, today announced its financial results for the third quarter of 2017.
Third Quarter 2017 Highlights
- Net loss of $12.5 million, $0.43 per share
- Adjusted Net Income of $14.9 million, $0.51 per share
- Acquired three aircraft for $114 million
- Repurchased 1.5 million shares
- Priced $300 million of unsecured 5.25% senior notes due 2024
"We were active on several fronts this quarter as we acquired three aircraft, including another new 737 MAX 8, repurchased a further 1.5 million shares and refinanced our unsecured notes that were due 2020," said Colm Barrington, CEO of FLY. "We have acquired eight aircraft in the first nine months of 2017 for a total of $403 million, growing the fleet to 84 aircraft. Our growth capacity remains strong with the ability to acquire over $2 billion worth of new aircraft without the need to raise additional funds."
"FLY has repurchased a total of 3.6 million shares so far this year, and we ended the quarter with a net book value per share of $18.95," added Barrington. "We see great value in our shares and will continue to repurchase stock under our current buyback program."
"We also remain focused on driving down our cost of debt," said Barrington. "The refinancing of our unsecured notes will result in substantial savings, reducing our borrowing costs by nearly $10 million per year starting in 2018. Further, following quarter end, we repriced our term loan, which will result in an additional $1 million of annual interest cost savings."
Financial Results
FLY is reporting a net loss of $12.5 million, or $0.43 per share, for the third quarter of 2017, primarily driven by a $22.0 million non-cash impairment charge. This compares to net income of $22.9 million, or $0.70 per share, for the same period in 2016.
Net loss for the nine months ended September 30, 2017 was $4.6 million, or $0.15 per share. For the same nine-month period in 2016, net income was $34.7 million, or $1.03 per share.
Adjusted Net Income
Adjusted Net Income was $14.9 million for the third quarter of 2017, compared to $17.3 million for the same period in the previous year. On a per share basis, Adjusted Net Income was $0.51 in the third quarter of 2017, compared to $0.53 for the third quarter of 2016. For the nine months ended September 30, 2017, Adjusted Net Income was $35.7 million, or $1.15 per share, compared to $48.7 million, or $1.45 per share, for the same nine-month period in 2016.
A reconciliation of Adjusted Net Income to net income (loss) determined in accordance with GAAP is shown below.
Aircraft Impairment
As a result of a lessee's insolvency filing during the third quarter, FLY recorded an impairment charge of $22.0 million on a 2001 vintage Airbus A330-200 to write the aircraft down to its estimated current market value.
Share Repurchases
During the nine months ended September 30, 2017, FLY repurchased 3.6 million shares for $47.3 million at an average price of $13.29 per share. At September 30, 2017, $19.3 million remained under the share repurchase authorization. Subsequent to quarter end, FLY repurchased 159,462 shares at an average price of $13.90 per share through November 3, 2017. As of November 3, 2017, $17.1 million remained under the share repurchase authorization.
Senior Unsecured Notes Due 2024
On October 16, 2017, FLY completed its offering of $300 million of unsecured 5.25% Senior Notes due 2024. The net proceeds were approximately $294.2 million, which FLY has used, together with cash on hand, to discharge its outstanding 6.75% Senior Notes due 2020.
Financial Position
At September 30, 2017, FLY's total assets were $3.5 billion, including investment in flight equipment totaling $3.1 billion. Total cash at September 30, 2017 was $394.2 million, of which $272.1 was unrestricted. The book value per share at September 30, 2017 was $18.95.
Aircraft Portfolio
At September 30, 2017, FLY's 84 aircraft were on lease to 45 airlines in 29 countries. The table below does not include the two B767 aircraft owned by a joint venture in which FLY has a 57% interest.
Portfolio at | Sep. 30, | Dec. 31, |
Airbus A319 | 9 | 9 |
Airbus A320(1) | 13 | 12 |
Airbus A321 | 3 | 3 |
Airbus A330 | 3 | 3 |
Airbus A340 | 2 | 2 |
Boeing 737 | 44 | 38 |
Boeing 757 | 3 | 3 |
Boeing 777 | 2 | 2 |
Boeing 787 | 5 | 4 |
Total | 84 | 76 |
(1) One aircraft was held for sale at September 30, 2017. |
At September 30, 2017, the average age of the portfolio, weighted by net book value of each aircraft, was 6.2 years. The average remaining lease term was 6.5 years, also weighted by net book value. At September 30, 2017, the 84 aircraft were generating annualized rental revenue of approximately $366 million. FLY's lease utilization factor was 100% for the third quarter of 2017.
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 9, 2017. Participants should call +1-253-237-1145 (International) or 800-535-7056 (North America) and enter confirmation code 96666152. A live webcast with slide presentation will be available on the Events 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.
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 (Loss) | |||||
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) | |||||
Three months ended | Nine months ended | ||||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 (Unaudited) | Sep. 30, 2016 (Unaudited) | ||
Revenues | |||||
Operating lease rental revenue | $ 87,616 | $ 82,714 | $ 248,118 | $ 231,221 | |
End of lease income | — | 66 | 1,239 | 8,148 | |
Amortization of lease incentives | (1,956) | (2,000) | (5,602) | (7,090) | |
Amortization of lease premiums, discounts and other | (106) | (103) | (289) | (310) | |
Operating lease revenue | 85,554 | 80,677 | 243,466 | 231,969 | |
Finance lease revenue | 181 | 226 | 554 | 2,002 | |
Equity earnings from unconsolidated subsidiary | 125 | 140 | 377 | 404 | |
Gain on sale of aircraft | — | 4,103 | — | 9,689 | |
Interest and other income | 359 | 151 | 920 | 375 | |
Total revenues | 86,219 | 85,297 | 245,317 | 244,439 | |
Expenses | |||||
Depreciation | 34,145 | 31,389 | 99,270 | 88,890 | |
Aircraft impairment | 22,000 | — | 22,000 | 4,122 | |
Interest expense | 32,677 | 31,079 | 96,400 | 91,387 | |
Selling, general and administrative | 6,956 | 8,369 | 23,226 | 24,022 | |
Ineffective, dedesignated and terminated derivatives | (19) | 79 | 354 | 343 | |
Net loss on modification and extinguishment of debt | 82 | 7 | 2,511 | 5,146 | |
Maintenance and other costs | 406 | 274 | 1,636 | 1,928 | |
Total expenses | 96,247 | 71,197 | 245,397 | 215,838 | |
Net income (loss) before provision (benefit) for income taxes | (10,028) | 14,100 | (80) | 28,601 | |
Provision (benefit) for income taxes | 2,476 | (8,842) | 4,492 | (6,118) | |
Net income (loss) | $ (12,504) | $ 22,942 | $ (4,572) | $ 34,719 | |
Weighted average number of shares | |||||
- Basic | 29,299,976 | 32,824,486 | 30,958,898 | 33,561,684 | |
- Diluted | 29,299,976 | 32,824,486 | 30,958,898 | 33,561,684 | |
Earnings (loss) per share | |||||
- Basic and Diluted | $ (0.43) | $ 0.70 | $ (0.15) | $ 1.03 | |
Fly Leasing Limited | ||
Consolidated Balance Sheets | ||
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) | ||
Sep. 30, 2017 (Unaudited) | Dec. 31, 2016 (Audited) | |
Assets | ||
Cash and cash equivalents | $ 272,080 | $ 517,964 |
Restricted cash and cash equivalents | 122,134 | 94,123 |
Rent receivables | 634 | 419 |
Investment in unconsolidated subsidiary | 8,077 | 7,700 |
Investment in finance lease, net | 14,219 | 15,095 |
Flight equipment held for sale, net | 22,499 | — |
Flight equipment held for operating lease, net | 2,949,628 | 2,693,821 |
Maintenance right asset, net | 116,863 | 101,969 |
Deferred tax assets | 7,149 | 7,445 |
Fair value of derivative assets | 1,879 | 1,905 |
Other assets, net | 8,374 | 6,568 |
Total assets | $ 3,523,536 | $ 3,447,009 |
Liabilities | ||
Accounts payable and accrued liabilities | $ 26,706 | $ 13,786 |
Rentals received in advance | 14,815 | 13,123 |
Payable to related parties | 2,028 | 5,042 |
Security deposits | 49,249 | 42,495 |
Maintenance payment liability | 240,593 | 182,571 |
Unsecured borrowings, net | 692,877 | 691,390 |
Secured borrowings, net | 1,885,963 | 1,831,985 |
Deferred tax liability, net | 24,376 | 19,847 |
Fair value of derivative liabilities | 10,291 | 13,281 |
Other liabilities | 32,938 | 40,254 |
Total liabilities | 2,979,836 | 2,853,774 |
Shareholders' equity | ||
Common shares, $0.001 par value, 499,999,900 shares authorized; 28,697,805 and 32,256,440 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively | 29 | 32 |
Manager shares, $0.001 par value; 100 shares authorized, issued and outstanding | — | — |
Additional paid in capital | 489,447 | 536,922 |
Retained earnings | 61,454 | 66,026 |
Accumulated other comprehensive loss, net | (7,230) | (9,745) |
Total shareholders' equity | 543,700 | 593,235 |
Total liabilities and shareholders' equity | $ 3,523,536 | $ 3,447,009 |
Fly Leasing Limited | ||
Consolidated Statements of Cash Flows | ||
(DOLLARS IN THOUSANDS) | ||
Nine months ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | |
Cash Flows from Operating Activities | ||
Net income (loss) | $ (4,572) | $ 34,719 |
Adjustments to reconcile net income (loss) to net cash flows provided by operating activities: | ||
Equity in earnings from unconsolidated subsidiary | (377) | (404) |
Finance lease revenue | (554) | (2,002) |
Gain on sale of aircraft | — | (9,689) |
Depreciation | 99,270 | 88,890 |
Aircraft impairment | 22,000 | 4,122 |
Amortization of debt discounts and issuance costs | 6,053 | 7,205 |
Amortization of lease incentives | 5,602 | 7,090 |
Amortization of lease discounts, premiums and other items | 289 | 300 |
Amortization of GAAM acquisition fair value adjustments | 928 | 1,305 |
Net loss on debt modification and extinguishment | 2,511 | 4,096 |
Unrealized foreign exchange loss | 2,004 | 750 |
Provision for deferred income taxes | 4,457 | (6,304) |
Loss on derivative instruments | 105 | 349 |
Security deposits and maintenance payment liability recognized into earnings | — | (3,450) |
Security deposits and maintenance payment claims applied towards operating lease revenues | — | (774) |
Cash receipts in settlement of maintenance rights | — | 6,150 |
Changes in operating assets and liabilities: | ||
Rent receivables | (2,441) | (731) |
Other assets | (1,925) | (1,395) |
Payable to related parties | (9,061) | (9,765) |
Accounts payable, accrued and other liabilities | 13,757 | 5,542 |
Net cash flows provided by operating activities | 138,046 | 126,004 |
Cash Flows from Investing Activities | ||
Rent received from finance lease | 1,430 | 2,777 |
Purchase of flight equipment | (383,426) | (505,824) |
Proceeds from sale of aircraft, net | — | 273,877 |
Payments for aircraft improvement | (5,157) | (2,266) |
Payments for lessor maintenance obligations | (12,123) | (1,942) |
Net cash flows used in investing activities | (399,276) | (233,378) |
Nine months ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | |
Cash Flows from Financing Activities | ||
Restricted cash and cash equivalents | (27,828) | 113,025 |
Security deposits received | 7,196 | 3,920 |
Security deposits returned | (3,554) | (6,640) |
Maintenance payment liability receipts | 56,439 | 54,654 |
Maintenance payment liability disbursements | (13,734) | (6,068) |
Net swap termination payments | — | (709) |
Debt extinguishment costs | (602) | — |
Debt issuance costs | (307) | (1,169) |
Proceeds from secured borrowings | 184,685 | 408,282 |
Repayment of secured borrowings | (140,194) | (371,579) |
Shares repurchased | (47,010) | (37,899) |
Net cash flows provided by financing activities | 15,091 | 155,817 |
Effect of exchange rate changes on cash and cash equivalents | 255 | 62 |
Net increase (decrease) in cash | (245,884) | 48,505 |
Cash and cash equivalents at beginning of period | 517,964 | 275,998 |
Cash and cash equivalents at end of period | $ 272,080 | $ 324,503 |
Fly Leasing Limited | |||||
Reconciliation of Non-GAAP Measures | |||||
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) | |||||
Three months ended | Nine months ended | ||||
Sep. 30, 2017 (Unaudited) | Sep. 30, 2016 (Unaudited) | Sep. 30, 2017 (Unaudited) | Sep. 30, 2016 (Unaudited) | ||
Net income (loss) | $ (12,504) | $ 22,942 | $ (4,572) | $ 34,719 | |
Adjustments: | |||||
Aircraft impairment | 22,000 | — | 22,000 | 4,122 | |
Amortization of debt discounts and issue costs | 1,963 | 2,510 | 6,053 | 7,205 | |
Amortization of lease premiums, discounts and other | 106 | 94 | 289 | 300 | |
Amortization of fair value adjustments recorded in purchase accounting | 306 | 313 | 928 | 1,305 | |
Net loss on debt modification and extinguishment | 82 | 7 | 2,511 | 5,146 | |
Professional fees related to restatement | — | 33 | — | 1,134 | |
Transaction fees and expenses | — | — | 1,669 | — | |
Unrealized foreign exchange loss | 476 | 220 | 2,004 | 750 | |
Deferred income taxes | 2,469 | (8,897) | 4,457 | (6,304) | |
(Gain) loss on ineffective, dedesignated and terminated derivatives | (19) | 79 | 354 | 343 | |
Adjusted Net Income | $ 14,879 | $ 17,301 | $ 35,693 | $ 48,720 | |
Average Shareholders' Equity | $ 559,679 | $ 640,618 | $ 577,875 | $ 642,714 | |
Adjusted Return on Equity | 10.6% | 10.8% | 8.2% | 10.1% | |
Weighted average diluted shares outstanding(1) | 29,360,178 | 32,824,486 | 31,003,598 | 33,561,684 | |
Adjusted Net Income per diluted share | $ 0.51 | $ 0.53 | $ 1.15 | $ 1.45 | |
(1) | The weighted average diluted shares outstanding for the three and nine months ended September 30, 2017 includes dilutive common share equivalents of 60,202 and 44,700, respectively. |
FLY defines Adjusted Net Income as net income (loss) 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) net losses from debt modification and extinguishment; (v) non-recurring expenses; (vi) unrealized foreign exchange losses; (vii) deferred income taxes; and (viii) the ineffective portion and gains and losses associated with cash flow hedges. The adjustments included within Adjusted Net Income are primarily non-cash items, one-time or non-recurring items that are not expected to continue in the future, and certain other items that we consider unrelated to the ongoing performance of our operations. 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, in addition to GAAP net income and earnings per share, to assess our 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, one-time or non-recurring items that are not expected to continue in the future, 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 a substitute for net income or other financial measures 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
