Fly Leasing Limited, a global leader in aircraft leasing, has just announced its financial results for the first quarter of 2020.
The key highlights for the firm was a net income of $38.1 million, the firm sold six aircraft and two engines for a gain of $31.7 million, a 20% premium to book value. Unrestricted cash and cash equivalents of $361.2 million, $560 million net book value of unencumbered assets - a 2.1x net debt to equity.
"The COVID-19 pandemic has caused tremendous distress in the global aviation industry, and FLY remains highly focused on successfully managing through the crisis. FLY is well-positioned to face what is certain to be a difficult year," said Colm Barrington, Chief Executive Officer of FLY. "Our high cash balance and low leverage put us in a strong position to meet our operating and financial commitments in 2020. FLY does not have any orders with the aircraft manufacturers and the company has no near-term refinancing requirements."
"FLY is reporting strong financial results for the first quarter of 2020 and had an unrestricted cash balance of $361 million, and record low leverage of 2.1x at quarter-end," said Barrington. "We have grown our book value per share to $29.21, which is a 28% increase from a year ago."
"We sold six aircraft with an average age of over 10 years, as well as two engines from a parted-out aircraft, generating a pre-tax gain of nearly $32 million, which was a 20% premium to book value," added Barrington. "Our aircraft sales again monetized value from our balance sheet, reduced our lessee concentration, generated cash, and further reduced leverage."
Financial Results
FLY is reporting net income of $38.1 million, or $1.24 per share, for the first quarter of 2020. This compares to net income of $45.0 million, or $1.38 per share, for the same period in 2019. The first quarter 2020 results include a $9.4 million unrealized fair value loss related to investments in ABS equity certificates.
Adjusted Net Income
Adjusted Net Income was $43.6 million for the first quarter of 2020, compared to $47.2 million for the same period in the previous year. On a per-share basis, Adjusted Net Income was $1.42 in the first quarter of 2020, compared to $1.44 for the first quarter of 2019.
A reconciliation of Adjusted Net Income to net income determined in accordance with GAAP is shown below.
Financial Position
At March 31, 2020, FLY's total assets were $3.6 billion, including investment in flight equipment totalling $3.0 billion. Total cash at March 31, 2020,was $391.7 million, of which $361.2 million was unrestricted. The book value per share at March 31, 2020,was $29.21, a 28% increase since March 31, 2019. At March 31, 2020, FLY's net debt to equity ratio was 2.1x, reduced from 3.4x as of March 31, 2019.
Aircraft Portfolio
At March 31, 2020, FLY had 84 aircraft and seven engines in its portfolio. FLY's aircraft and engines are on lease to 40 airlines in 24 countries. The table below does not include the engines.
Portfolio at
|
Mar. 31, 2020
|
Dec. 31, 2019
| ||
Number
|
% of Net
Book Value |
Number
|
% of Net
Book Value | |
Airbus A320ceo Family
|
33
|
28%
|
34
|
28%
|
Airbus A320neo Family
|
1
|
2%
|
1
|
2%
|
Airbus A330
|
3
|
6%
|
3
|
6%
|
Boeing 737NG
|
38
|
36%
|
42
|
37%
|
Boeing 737 MAX
|
2
|
3%
|
2
|
3%
|
Boeing 757-SF
|
1
|
<1%
|
1
|
<1%
|
Boeing 777-LRF
|
2
|
10%
|
2
|
10%
|
Boeing 787
|
4
|
15%
|
4
|
14%
|
Total(1)
|
84
|
100%
|
89
|
100%
|
(1)
|
Includes six aircraft classified as flight equipment held for sale as of December 31, 2019. No aircraft was held for sale as of March 31, 2020.
| |||||
At March 31, 2020, the average age of the portfolio, weighted by net book value of each aircraft and engine, was 7.8 years. The average remaining lease term was 5.2 years, also weighted by net book value.
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.
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.
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. Additional or unforeseen effects from the COVID-19 pandemic and the global economic climate may give rise to or amplify many of these 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.
Consolidated Statements of Income
| ||
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
| ||
Three months ended Mar. 31,
| ||
2020
|
2019
| |
(Unaudited)
|
(Unaudited)
| |
Revenues
| ||
Operating lease rental revenue
|
$ 85,535
|
$ 105,328
|
End of lease income
|
2,427
|
1,564
|
Amortization of lease incentives
|
(614)
|
(1,632)
|
Amortization of lease discounts and other
|
92
|
(8)
|
Operating lease revenue
|
87,440
|
105,252
|
Finance lease revenue
|
145
|
160
|
Gain on sale of aircraft
|
31,717
|
27,620
|
Interest and other income
|
2,253
|
1,671
|
Total revenues
|
121,555
|
134,703
|
Expenses
| ||
Depreciation
|
31,631
|
37,585
|
Interest expense
|
27,155
|
38,179
|
Selling, general and administrative
|
7,664
|
8,722
|
Loss on derivatives
|
507
|
17
|
Fair value loss on marketable securities
|
9,412
|
—
|
Loss on extinguishment of debt
|
850
|
2,169
|
Maintenance and other costs
|
1,184
|
598
|
Total expenses
|
78,403
|
87,270
|
Net income before provision for income taxes
|
43,152
|
47,433
|
Provision for income taxes
|
5,080
|
2,468
|
Net income
|
$ 38,072
|
$ 44,965
|
Weighted average number of shares
| ||
- Basic
|
30,765,840
|
32,632,715
|
- Diluted
|
30,768,029
|
32,632,715
|
Earnings per share
| ||
- Basic
|
$ 1.24
|
$ 1.38
|
- Diluted
|
$ 1.24
|
$ 1.38
|
Fly Leasing Limited
| ||
Consolidated Balance Sheets
| ||
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
| ||
Mar. 31,
|
Dec. 31,
| |
2020
|
2019
| |
(Unaudited)
|
(Audited)
| |
Assets
| ||
Cash and cash equivalents
|
$ 361,151
|
$ 285,565
|
Restricted cash and cash equivalents
|
30,593
|
52,738
|
Rent receivables
|
19,688
|
14,264
|
Investment in finance lease, net
|
11,334
|
11,639
|
Flight equipment held for sale, net
|
—
|
144,119
|
Flight equipment held for operating lease, net
|
2,716,757
|
2,720,000
|
Maintenance rights
|
280,152
|
290,958
|
Deferred tax asset, net
|
15,166
|
11,675
|
Fair value of derivative assets
|
7,152
|
4,824
|
Other assets, net
|
120,123
|
129,377
|
Total assets
|
$ 3,562,116
|
$ 3,665,159
|
Liabilities
| ||
Accounts payable and accrued liabilities
|
$ 31,706
|
$ 22,746
|
Rentals received in advance
|
13,910
|
16,391
|
Payable to related parties
|
4,270
|
10,077
|
Security deposits
|
40,140
|
40,726
|
Maintenance payment liability, net
|
195,665
|
219,371
|
Unsecured borrowings, net
|
619,842
|
619,407
|
Secured borrowings, net
|
1,579,273
|
1,695,525
|
Deferred tax liability, net
|
63,030
|
57,935
|
Fair value of derivative liabilities
|
54,102
|
27,943
|
Other liabilities
|
69,942
|
76,761
|
Total liabilities
|
2,671,880
|
2,786,882
|
Shareholders' equity
| ||
Common shares, $0.001 par value, 499,999,900 shares authorized; 30,481,069 and 30,898,410 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively
|
31
|
31
|
Manager shares, $0.001 par value; 100 shares authorized, issued and outstanding
|
—
|
—
|
Additional paid-in capital
|
509,738
|
516,254
|
Retained earnings
|
418,464
|
380,392
|
Accumulated other comprehensive loss, net
|
(37,997)
|
(18,400)
|
Total shareholders' equity
|
890,236
|
878,277
|
Total liabilities and shareholders' equity
|
$ 3,562,116
|
$ 3,665,159
|
Fly Leasing Limited
| ||||||
Consolidated Statements of Cash Flows
| ||||||
(DOLLARS IN THOUSANDS)
| ||||||
Three months ended Mar. 31,
| ||||||
2020
(Unaudited) |
2019
(Unaudited) | |||||
Cash Flows from Operating Activities
| ||||||
Net income
|
$ 38,072
|
$ 44,965
| ||||
Adjustments to reconcile net income to net cash flows provided by operating activities:
| ||||||
Gain on sale of aircraft
|
(31,717)
|
(27,620)
| ||||
Depreciation
|
31,631
|
37,585
| ||||
Amortization of debt discounts and debt issuance costs
|
1,875
|
2,796
| ||||
Amortization of lease incentives and other items
|
604
|
1,839
| ||||
Fair value loss on marketable securities
|
9,412
|
—
| ||||
Loss on extinguishment of debt
|
850
|
2,169
| ||||
Provision for deferred income taxes
|
5,181
|
2,472
| ||||
Maintenance payment liability recognized into earnings
|
(2,487)
|
—
| ||||
Other
|
268
|
(333)
| ||||
Changes in operating assets and liabilities:
| ||||||
Rent receivables
|
(7,036)
|
2,505
| ||||
Other assets
|
230
|
(742)
| ||||
Payable to related parties
|
(5,807)
|
(393)
| ||||
Accounts payable, accrued liabilities and other liabilities
|
9,957
|
7,348
| ||||
Net cash flows provided by operating activities
|
51,033
|
72,591
| ||||
Cash Flows from Investing Activities
| ||||||
Purchase of flight equipment
|
(27,282)
|
—
| ||||
Proceeds from sale of aircraft, net
|
160,271
|
235,770
| ||||
Payments for aircraft improvement
|
(6,294)
|
(1,365)
| ||||
Payments for lessor maintenance obligations
|
(347)
|
(584)
| ||||
Other
|
(231)
|
(335)
| ||||
Net cash flows provided by investing activities
|
126,117
|
233,486
| ||||
Three months ended Mar. 31,
| ||||||
2020
|
2019
| |||||
(Unaudited)
|
(Unaudited)
| |||||
Cash Flows from Financing Activities
| ||||||
Security deposits received
|
3,305
|
—
| ||||
Security deposits returned
|
—
|
(1,546)
| ||||
Maintenance payment liability receipts
|
7,848
|
17,016
| ||||
Maintenance payment liability disbursements
|
(10,109)
|
(8,604)
| ||||
Debt extinguishment costs
|
(20)
|
(54)
| ||||
Debt issuance costs
|
—
|
(342)
| ||||
Repayment of secured borrowings
|
(118,211)
|
(155,184)
| ||||
Shares repurchased
|
(6,504)
|
(2,117)
| ||||
Net cash flows used in financing activities
|
(123,691)
|
(150,831)
| ||||
Effect of exchange rate changes on unrestricted and restricted cash and cash equivalents
|
(18)
|
(59)
| ||||
Net increase in unrestricted and restricted cash and cash equivalents
|
53,441
|
155,187
| ||||
Unrestricted and restricted cash and cash equivalents at beginning of period
|
338,303
|
281,080
| ||||
Unrestricted and restricted cash and cash equivalents at end of period
|
$ 391,744
|
$ 436,267
| ||||
Reconciliation to Consolidated Balance Sheets:
| ||||||
Cash and cash equivalents
|
$ 361,151
|
$ 363,930
| ||||
Restricted cash and cash equivalents
|
30,593
|
72,337
| ||||
Unrestricted and restricted cash and cash equivalents
|
$ 391,744
|
$ 436,267
| ||||
Fly Leasing Limited
| ||
Reconciliation of Non-GAAP Measures
| ||
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
| ||
Three months ended Mar. 31,
| ||
2020
|
2019
| |
(Unaudited)
|
(Unaudited)
| |
Net income
|
$ 38,072
|
$ 44,965
|
Adjustments:
| ||
Unrealized foreign exchange gain
|
(95)
|
(172)
|
Deferred income taxes
|
5,181
|
2,472
|
Fair value changes on undesignated derivatives
|
481
|
(112)
|
Adjusted Net Income
|
$ 43,639
|
$ 47,153
|
Average Shareholders' Equity
|
$ 884,257
|
$ 720,007
|
Adjusted Return on Equity
|
19.7%
|
26.2%
|
Weighted average diluted shares outstanding
|
30,768,029
|
32,632,715
|
Adjusted Net Income per diluted share
|
$ 1.42
|
$ 1.44
|
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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