Fly Leasing Reports Fourth Quarter and Full Year 2018 Financial Results

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DUBLIN, March 7, 2019 /PRNewswire/ -- Fly Leasing Limited FLY ("FLY"), a global leader in aircraft leasing, today announced its financial results for the fourth quarter and full year of 2018.

FLY Leasing Limited logo. (PRNewsFoto/FLY Leasing Limited)

Fourth Quarter 2018 Highlights

  • Net income of $31.0 million, $0.95 per share
  • Adjusted Net Income of $30.8 million, $0.94 per share
  • 26% increase in operating lease rental revenue
  • 100% fleet utilization
  • Sold three aircraft for a gain of $7.9 million, a 12% premium to book value

2018 Full Year Highlights

  • Net income of $85.7 million, $2.88 per share
  • Adjusted Net Income of $91.2 million, $3.06 per share
  • 15% increase in operating lease rental revenue
  • Sold six aircraft at a 17% premium to book value
  • Grew book value 11% to $21.50 per share

"FLY is reporting a great financial outcome for the fourth quarter and a record result for the full year," said Colm Barrington, FLY's Chief Executive Officer. "Our renewed and larger fleet drove a 26% increase in operating lease rental revenue as compared to the fourth quarter of 2017. We held expenses below last year's level, resulting in Adjusted Net Income of $30.8 million for the quarter, or 94 cents per share."

"FLY's strong operating performance throughout 2018 produced a record full-year result, with Adjusted EPS of $3.06 per share," added Barrington. "Based on these strong trends, FLY is expecting another great financial result in 2019, starting with first quarter expected pre-tax income of more than $45 million." 

"The strategy that we have implemented at FLY over the last few years is bearing fruit," said Barrington. "During 2018 we increased our fleet significantly, and since then we have reduced our leverage through profitable aircraft sales and now have ample financial capacity for growth."

Financial Results

FLY is reporting net income of $31.0 million, or $0.95 per share, for the fourth quarter of 2018. This compares to a net income of $7.2 million, or $0.25 per share, for the same period in 2017.

Net income for the year ended December 31, 2018 was $85.7 million, or $2.88 per share, compared to a net income of $2.6 million, or $0.09 per share, for the year ended December 31, 2017.

Adjusted Net Income

Adjusted Net Income was $30.8 million for the fourth quarter of 2018, compared to Adjusted Net Income of $7.3 million for the same period in the previous year. On a per share basis, Adjusted Net Income was $0.94 in the fourth quarter of 2018, compared to Adjusted Net Income of $0.26 for the fourth quarter of 2017. For the year ended December 31, 2018, Adjusted Net Income was $91.2 million, or $3.06 per share, compared to $8.2 million, or $0.27 per share, for the same period last year.

A reconciliation of Adjusted Net Income to net income determined in accordance with GAAP is shown below.

Portfolio Acquisition Update

As of December 31, 2018, FLY had completed the acquisition of 33 Airbus A320 aircraft and seven engines pursuant to the transaction that was first announced in February 2018.

Financial Position

At December 31, 2018, FLY's total assets were $4.2 billion, including investment in flight equipment totaling $3.8 billion. Total cash at December 31, 2018 was $281.1 million, of which $180.2 million was unrestricted. The book value per share at December 31, 2018 was $21.50, an 11% increase since the beginning of the year. At December 31, 2018, FLY's net debt to equity ratio was 4.0x, an improvement from 4.3x as of the beginning of the year.

Aircraft Portfolio

At December 31, 2018, FLY had 113 aircraft and seven engines in its portfolio. Of the 113 aircraft, 100 were held for operating lease, one was classified as an investment in finance lease and 12 were classified as held for sale. FLY's aircraft  are on lease to 46 airlines in 26 countries. The table below does not include one B767 aircraft owned by a joint venture in which FLY has a 57% interest, nor the seven engines.

Portfolio at

Dec. 31, 2018

Dec. 31, 2017


Number

% of Net
Book Value

Number

% of Net
Book Value

Airbus A319

8

3%

9

4%

Airbus A320(1)

44

32%

12

11%

Airbus A321

3

3%

3

4%

Airbus A330

3

5%

3

6%

Airbus A340

2

1%

2

1%

Boeing 737(1)

42

32%

44

42%

Boeing 737 MAX

2

3%

2

3%

Boeing 757

3

1%

3

1%

Boeing 777

2

8%

2

10%

Boeing 787

4

12%

5

18%

      Total

113

100%

85

100%


(1) At December 31, 2018, includes ten Airbus A320 and two Boeing 737 aircraft classified as held for sale.

At December 31, 2018, the average age of the portfolio, weighted by net book value of each aircraft and engine, was 7.2 years. The average remaining lease term was 5.8 years, also weighted by net book value. At December 31, 2018, FLY's portfolio, excluding aircraft held for sale, was generating annualized rental revenue of approximately $453.2 million. FLY's lease utilization factor was 100% for the fourth quarter of 2018 and 99.7% for the year ended December 31, 2018.

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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, March 7, 2019. Participants should call +1 (409) 220-9381 (International) or (866) 438-0730 (North America) and enter confirmation code 2569936. A live webcast with slide presentation will be available on the Events and Presentations 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, a worldwide leader in aircraft lease management and financing. For more information about FLY, please visit our website at www.flyleasing.com.

Non-GAAP Financial Measures

FLY provides all financial information in accordance with Generally Accepted Accounting Principles in the United States (GAAP). To supplement our consolidated financial statements presented in accordance with GAAP, we are also providing with this press release, and on our conference call, certain non-GAAP financial measures, including Adjusted Net Income and Adjusted Return on Equity.  In calculating these non-GAAP financial measures, we have excluded certain amounts, as detailed in the reconciliation below.

Beginning in the first quarter of 2018, we modified our reporting of Adjusted Net Income and Adjusted Return on Equity. As a result, we have modified our historical presentation of these measures. Prior period information has been revised to conform to the current period presentation.

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, operations 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; and the risk that FLY may be unable to achieve its portfolio growth expectations, or to reap the benefits of such growth. 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 ended Dec. 31,


Year ended Dec. 31,


2018
(Unaudited)

2017

(Unaudited)


2018

(Audited)

2017

(Audited)

Revenues






Operating lease rental revenue

$    112,159

$     89,019


$    389,350

$    337,137

End of lease income

4,264

16,598


20,333

17,837

Amortization of lease incentives

(2,614)

(2,066)


(9,738)

(7,668)

Amortization of lease premiums, discounts and other

(42)

(123)


(431)

(412)

Operating lease revenue

113,767

103,428


399,514

346,894

Finance lease revenue

163

177


675

731

Equity earnings (loss) from unconsolidated subsidiary

56

119


(54)

496

Gain on sale of aircraft

7,874

3,926


13,398

3,926

Interest and other income

445

284


4,766

1,204

Total revenues

122,305

107,934


418,299

353,251

Expenses






Depreciation

39,887

33,957


144,084

133,227

Aircraft impairment


22,000

Interest expense

40,703

31,382


144,742

127,782

Selling, general and administrative

8,487

7,445


31,185

30,671

Loss (gain) on derivatives

233

(546)


(2,382)

(192)

Loss on modification and extinguishment of debt

1,016

20,798


2,474

23,309

Maintenance and other costs

510

888


2,547

2,524

Total expenses

90,836

93,924


322,650

339,321

Net income before provision for income taxes

31,469

14,010


95,649

13,930

Provision for income taxes

460

6,840


9,926

11,332

Net income

$      31,009

$       7,170


$       85,723

$        2,598

Weighted average number of shares






-  Basic

32,650,019

28,373,978


29,744,083

30,307,357

-  Diluted

32,661,240

28,427,967


29,783,904

30,353,425

Earnings per share






-  Basic

$           0.95

$         0.25


$           2.88

$           0.09

-  Diluted

$           0.95

$         0.25


$           2.88

$           0.09

 

Fly Leasing Limited

Consolidated Balance Sheets

(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)


Dec. 31,

 2018

(Audited)

Dec. 31,

2017

(Audited)

Assets



Cash and cash equivalents

$          180,211

$           329,105

Restricted cash and cash equivalents

100,869

127,710

Rent receivables

9,307

2,059

Investment in finance lease, net

12,822

13,946

Flight equipment held for sale, net

259,644

Flight equipment held for operating lease, net

3,228,018

2,961,744

Maintenance rights

298,207

131,299

Deferred tax asset, net

6,505

9,943

Fair value of derivative assets

5,929

2,643

Other assets, net

124,960

17,166

Total assets

$      4,226,472

$       3,595,615

Liabilities



Accounts payable and accrued liabilities

$            23,146

$             18,305

Rentals received in advance

21,322

14,968

Payable to related parties

4,462

2,084

Security deposits

60,097

49,689

Maintenance payment liability, net

292,586

244,151

Unsecured borrowings, net

617,664

615,922

Secured borrowings, net

2,379,869

2,029,675

Deferred tax liability, net

36,256

30,112

Fair value of derivative liabilities

8,558

7,344

Other liabilities

80,402

39,656

Total liabilities

3,524,362

3,051,906

Shareholders' equity



Common shares, $0.001 par value, 499,999,900 shares authorized; 32,650,019 and 27,983,352 shares issued and outstanding at December 31, 2018 and 2017, respectively

33

28

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

Additional paid in capital

549,123

479,637

Retained earnings

154,347

68,624

Accumulated other comprehensive loss, net

(1,393)

(4,580)

Total shareholders' equity

702,110

543,709

Total liabilities and shareholders' equity

$      4,226,472

$       3,595,615

 

Fly Leasing Limited

Consolidated Statements of Cash Flows 

(DOLLARS IN THOUSANDS)


Year ended Dec. 31,


2018

(Audited)

2017
(Audited)

Cash Flows from Operating Activities



Net income

$             85,723

$             2,598

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



Finance lease revenue

(675)

(731)

Equity in (earnings) loss from unconsolidated subsidiary

54

(496)

Gain on sale of aircraft

(13,398)

(3,926)

Depreciation

144,084

133,227

Aircraft impairment

22,000

Amortization of debt discounts and issuance costs

9,455

7,955

Amortization of lease incentives

9,738

7,668

Amortization of lease discounts, premiums and other items

432

412

Amortization of acquisition fair value adjustments

1,239

1,223

Loss on modification and extinguishment of debt

2,474

23,309

Unrealized foreign exchange (gain) loss

(563)

2,305

Provision for deferred income taxes

9,864

5,178

Gain on derivatives

(1,269)

(478)

Security deposits and maintenance payment liability recognized into earnings

(15,597)

(16,268)

Distributions from unconsolidated subsidiary

2,131

Cash receipts from maintenance rights

3,013

Maintenance rights recognized into earnings

465

Changes in operating assets and liabilities:



Rent receivables

(12,866)

(4,251)

Other assets

(4,119)

(2,599)

Payable to related parties

2,378

(10,126)

Accounts payable, accrued liabilities and other liabilities

18,982

11,588

Net cash flows provided by operating activities

241,080

179,053

Cash Flows from Investing Activities



Distributions from unconsolidated subsidiary

3,103

Rent received from finance lease

1,800

1,880

Investment in Horizon I Limited equity certificates

(5,747)

Purchase of flight equipment

(934,481)

(434,122)

Proceeds from sale of aircraft, net

177,702

21,750

Purchase price allocated to Portfolio B orderbook value

(80,450)

Payments for aircraft improvement

(6,779)

(7,357)

Payments for lessor maintenance obligations

(8,601)

(12,564)

Net cash flows used in investing activities

(853,453)

(430,413)



Year ended Dec. 31,


2018

(Audited)

2017

(Audited)

Cash Flows from Financing Activities



Security deposits received

15,042

7,196

Security deposits returned

(8,716)

(3,554)

Maintenance payment liability receipts

84,102

75,765

Maintenance payment liability disbursements

(15,495)

(14,303)

Net swap termination payments

1,801

Debt modification and extinguishment costs

301

(17,396)

Debt issuance costs

(3,619)

(1,464)

Proceeds from unsecured borrowings

295,150

Repayment of unsecured borrowings

(375,000)

Proceeds from secured borrowings

826,396

513,459

Repayment of secured borrowings

(482,703)

(326,909)

Net proceeds from issuance of shares

19,624

Shares repurchased

(57,286)

Net cash flows provided by financing activities

436,733

95,658

Effect of exchange rate changes on unrestricted and restricted cash and cash equivalents

(95)

430

Net decrease in unrestricted and restricted cash and cash equivalents

(175,735)

(155,272)

Unrestricted and restricted cash and cash equivalents at beginning of period

456,815

612,087

Unrestricted and restricted cash and cash equivalents at end of period

$             281,080

$         456,815




Reconciliation to Consolidated Balance Sheets:



Cash and cash equivalents

$             180,211

$         329,105

Restricted cash and cash equivalents

100,869

127,710

Unrestricted and restricted cash and cash equivalents

$             281,080

$         456,815




 

Fly Leasing Limited

Reconciliation of Non-GAAP Measures

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)


Three months ended Dec. 31,


Year ended Dec. 31,


2018

(Unaudited)

2017(1)

(Unaudited)


2018

(Unaudited)

2017(1)

(Unaudited)

Net income

$     31,009

$         7,170


$     85,723

$        2,598

Adjustments:






Unrealized foreign exchange (gain) loss

(187)

301


(668)

2,305

Deferred income taxes

227

721


9,864

5,178

Fair value changes on undesignated derivatives

(286)

(899)


(3,732)

(1,843)

Adjusted Net Income

$     30,763

$         7,293


$     91,187

$        8,238

Average Shareholders' Equity

$   692,124

$     543,705


$     614,344

$   571,042

Adjusted Return on Equity

17.8%

5.4%


14.8%

1.4%







Weighted average diluted shares outstanding

32,661,240

28,427,967


29,783,904

30,353,425

Adjusted Net Income per diluted share

$         0.94

$             0.26


$               3.06

$              0.27







(1) 

Revised to conform to current period presentation.

FLY defines Adjusted Net Income as net income plus or minus (i) unrealized foreign exchange gains and losses; (ii) deferred income taxes; (iii) the fair value changes associated with interest rate derivative contracts that are not accounted for as cash flow hedges; and (iv) non-recurring expenses. The adjustments included within Adjusted Net Income are primarily non-cash or non-recurring items that we consider unrelated to the ongoing performance of our operations. Adjusted Return on Equity is calculated by dividing Adjusted Net Income by average shareholders' equity for each period 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 or non-recurring items 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 substitutes for, net income or other financial measures determined in accordance with GAAP. FLY's definitions may be different than those used by other companies.

 

SOURCE Fly Leasing Limited

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