EX-99.1 2 ex99_1.htm EXHIBIT 99.1
Exhibit 99.1



Fly Leasing Reports Third Quarter 2018 Financial Results

Dublin, Ireland, November 8, 2018 – Fly Leasing Limited (NYSE: FLY) (“FLY”), a global leader in aircraft leasing, today announced its financial results for the third quarter of 2018.

Highlights


 ·
Net income of $20.7 million, $0.68 per share

·
Adjusted Net Income of $22.8 million, $0.75 per share

·
13% increase in operating lease rental revenue

·
Completed acquisition of 28 A320s on lease to AirAsia group airlines

·
Book value of $20.89 per share at September 30

“FLY had one of its best quarters ever, driven by a 13% increase in operating lease rental revenue as compared to the same quarter in 2017,” said Colm Barrington, FLY’s Chief Executive Officer. “Our quarterly adjusted net income of $22.8 million, adjusted earnings per share of $0.75 and adjusted ROE of 14.4% reflect significant improvements in our business.”

“For the first nine months of the year, operating lease revenue increased by 17%, generating adjusted net income of $60.4 million, or $2.10 per share," said Barrington.

“We have completed the initial phase of the AirAsia transactions with the acquisition of 33 aircraft,” added Barrington. “We now look forward to executing on our $2 billion pipeline comprised of the 41 A320neo family aircraft that will begin delivering next year.”

Financial Results

FLY is reporting net income of $20.7 million, or $0.68 per share, for the third quarter of 2018. This compares to a net loss of $12.5 million, or $0.43 per share, for the same period in 2017.

Net income for the nine months ended September 30, 2018 was $54.7 million, or $1.90 per share, compared to a net loss of $4.6 million, or $0.15 per share, for the nine months ended September 30, 2017.

Adjusted Net Income

Adjusted Net Income was $22.8 million for the third quarter of 2018, compared to Adjusted Net Loss of $10.0 million for the same period in the previous year. On a per share basis, Adjusted Net Income was $0.75 in the third quarter of 2018, compared to Adjusted Net Loss of $0.34 for the third quarter of 2017. For the nine months ended September 30, 2018, Adjusted Net Income was $60.4 million, or $2.10 per share, compared to $0.9 million, or $0.03 per share, for the same period last year.

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

Portfolio Acquisition Update

As of September 30, 2018, FLY had completed the transfers of 29 Airbus A320 aircraft from AirAsia Group Berhad, as successor to AirAsia Berhad ("AirAsia"), and its subsidiary, Asia Aviation Capital Limited ("AACL"). In October 2018, FLY completed the transfers of four additional Airbus A320 aircraft and seven engines on operating leases to AirAsia and its affiliated airlines.

Financing

As of September 30, 2018, FLY has drawn down approximately $548.1 million to finance the acquisition of 29 Airbus A320 aircraft from AACL under a term loan facility with a consortium of lenders.

On October 30, 2018, FLY had drawn $43.9 million under a term loan facility with certain lenders to finance the acquisition of seven engines on operating leases to AirAsia and its affiliated airlines from AACL.

Share Issuance

In connection with the AirAsia transactions, on July 13, 2018, FLY issued and sold approximately 1.3 million of its common shares in the form of ADSs, at a purchase price of $15.00 per share, to affiliates of Onex Corporation ("Onex") and the management team of BBAM Limited Partnership and its subsidiaries ("BBAM"). All FLY common shares held by Onex, and the newly issued FLY common shares held by members of the BBAM management team, are subject to a 180-day lock-up from the date of issuance. In addition, on August 30, 2018, FLY issued approximately 3.3 million of its common shares in the form of ADSs, valued at $15.00 per share, to AirAsia as partial consideration in the AirAsia transactions. The FLY common shares issued to AirAsia are subject to lock-up restrictions until 2021, as well as voting and standstill undertakings until AirAsia and its affiliates own less than 10% of FLY’s outstanding shares.

Financial Position

At September 30, 2018, FLY’s total assets were $4.2 billion, including investment in flight equipment totaling $3.7 billion. Total cash at September 30, 2018 was $268.1 million, of which $180.1 million was unrestricted. The book value per share at September 30, 2018 was $20.89, an 8% increase since the beginning of the year.

2
Aircraft Portfolio

At September 30, 2018, FLY had 112 aircraft on lease to 48 airlines in 27 countries. The table below does not include one B767 aircraft owned by a joint venture in which FLY has a 57% interest.

Portfolio at
  
Sep. 30, 2018
    
Dec. 31, 2017
  
   
Number
    
% of Net
Book Value
    
Number
    
% of Net
Book Value
  
Airbus A319
    
8
      
3
%
    
9
      
4
%
Airbus A320
    
42
      
31
%
    
12
      
11
%
Airbus A321
    
3
      
4
%
    
3
      
4
%
Airbus A330
    
3
      
5
%
    
3
      
6
%
Airbus A340
    
2
      
1
%
    
2
      
1
%
Boeing 737
    
45
      
35
%
    
46
      
45
%
Boeing 757
    
3
      
1
%
    
3
      
1
%
Boeing 777
    
2
      
8
%
    
2
      
10
%
Boeing 787
    
4
      
12
%
    
5
      
18
%
Total
    
112
      
100
%
    
85
      
100
%

At September 30, 2018, the average age of the portfolio, weighted by net book value, was 7.1 years. The average remaining lease term was 5.9 years, also weighted by net book value. At September 30, 2018, FLY's 112 aircraft on lease were generating annualized rental revenue of approximately $452.1 million. FLY’s lease utilization factor was 100.0% for the third quarter of 2018 and 99.5% for the nine months ended September 30, 2018.

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 8, 2018. Participants should call +1 (409) 220-9381 (International) or (866) 438-0730 (North America) and enter confirmation code 6346059. 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.

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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, including the expected timing and benefits of the AirAsia portfolio transactions (the "AirAsia Transactions). 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; the risk that expected benefits of the AirAsia Transactions may not be fully realized or may take longer to realize than expected; the risk that business disruption resulting from the AirAsia Transactions may be greater than expected; 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

4
Fly Leasing Limited

Consolidated Statements of Income (Loss)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

   
Three months ended Sep. 30,
    
Nine months ended Sep. 30,
  
   
2018
(Unaudited)
    
2017
(Unaudited)
    
2018
(Unaudited)
    
2017
(Unaudited)
  
Revenues
                        
Operating lease rental revenue
  
$
98,863
    
$
87,616
    
$
277,191
    
$
248,118
  
End of lease income
    
3,072
      
—
      
16,069
      
1,239
  
Amortization of lease incentives
    
(2,480
)
    
(1,956
)
    
(7,124
)
    
(5,602
)
Amortization of lease premiums, discounts and other
    
(108
)
    
(106
)
    
(389
)
    
(289
)
Operating lease revenue
    
99,347
      
85,554
      
285,747
      
243,466
  
Finance lease revenue
    
167
      
181
      
512
      
554
  
Equity earnings (loss) from unconsolidated subsidiary
    
136
      
125
      
(110
)
    
377
  
Gain on sale of aircraft
    
2,579
      
—
      
5,524
      
—
  
Interest and other income
    
2,337
      
359
      
4,321
      
920
  
Total revenues
    
104,566
      
86,219
      
295,994
      
245,317
  
Expenses
                                
Depreciation
    
36,569
      
34,145
      
104,197
      
99,270
  
Aircraft impairment
    
—
      
22,000
      
—
      
22,000
  
Interest expense
    
37,472
      
32,677
      
104,039
      
96,400
  
Selling, general and administrative
    
7,719
      
6,956
      
22,698
      
23,226
  
Loss (gain) on derivatives
    
(2,095
)
    
(19
)
    
(2,615
)
    
354
  
Loss on modification and extinguishment of debt
    
560
      
82
      
1,458
      
2,511
  
Maintenance and other costs
    
323
      
406
      
2,037
      
1,636
  
Total expenses
    
80,548
      
96,247
      
231,814
      
245,397
  
Net income (loss) before provision for income taxes
    
24,018
      
(10,028
)
    
64,180
      
(80
)
Provision for income taxes
    
3,278
      
2,476
      
9,466
      
4,492
  
Net income (loss)
  
$
20,740
    
$
(12,504
)
  
$
54,714
    
$
(4,572
)
Weighted average number of shares
                                
-  Basic
    
30,302,193
      
29,299,976
      
28,764,793
      
30,958,898
  
-  Diluted
    
30,381,248
      
29,299,976
      
28,818,464
      
30,958,898
  
Earnings (loss) per share
                                
-  Basic
  
$
0.68
    
$
(0.43
)
  
$
1.90
    
$
(0.15
)
-  Diluted
  
$
0.68
    
$
(0.43
)
  
$
1.90
    
$
(0.15
)

5
Fly Leasing Limited

Consolidated Balance Sheets
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

   
Sep. 30,
2018
(Unaudited)
    
Dec. 31,
2017
(Audited)
  
Assets
            
Cash and cash equivalents
  
$
180,078
    
$
329,105
  
Restricted cash and cash equivalents
    
88,058
      
127,710
  
Rent receivables
    
4,425
      
2,059
  
Investment in unconsolidated subsidiary
    
4,138
      
8,196
  
Investment in finance lease, net
    
13,108
      
13,946
  
Flight equipment held for operating lease, net
    
3,450,199
      
2,961,744
  
Maintenance rights
    
270,638
      
131,299
  
Deferred tax asset, net
    
9,279
      
9,943
  
Fair value of derivative assets
    
13,561
      
2,643
  
Other assets, net
    
203,983
      
8,970
  
Total assets
  
$
4,237,467
    
$
3,595,615
  
Liabilities
                
Accounts payable and accrued liabilities
  
$
34,452
    
$
18,305
  
Rentals received in advance
    
19,541
      
14,968
  
Payable to related parties
    
6,247
      
2,084
  
Security deposits
    
58,702
      
49,689
  
Maintenance payment liability
    
292,221
      
244,151
  
Unsecured borrowings, net
    
617,229
      
615,922
  
Secured borrowings, net
    
2,409,975
      
2,029,675
  
Deferred tax liability, net
    
40,828
      
30,112
  
Fair value of derivative liabilities
    
2,173
      
7,344
  
Other liabilities
    
73,961
      
39,656
  
Total liabilities
    
3,555,329
      
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 September 30, 2018 and December 31, 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
    
123,338
      
68,624
  
Accumulated other comprehensive gain (loss), net
    
9,644
      
(4,580
)
Total shareholders’ equity
    
682,138
      
543,709
  
Total liabilities and shareholders’ equity
  
$
4,237,467
    
$
3,595,615
  

6
Fly Leasing Limited

Consolidated Statements of Cash Flows
(DOLLARS IN THOUSANDS)

   
Nine months ended Sep. 30,
  
   
2018
(Unaudited)
    
2017
(Unaudited)
  
Cash Flows from Operating Activities
            
Net income (loss)
  
$
54,714
    
$
(4,572
)
Adjustments to reconcile net income (loss) to net cash flows provided by operating activities:
                
Equity in (earnings) loss from unconsolidated subsidiary
    
110
      
(377
)
Finance lease revenue
    
(512
)
    
(554
)
Gain on sale of aircraft
    
(5,524
)
    
—
  
Depreciation
    
104,197
      
99,270
  
Aircraft impairment
    
—
      
22,000
  
Amortization of debt discounts and issuance costs
    
6,399
      
6,053
  
Amortization of other comprehensive income into interest expense
    
3,026
      
—
  
Amortization of lease incentives
    
7,124
      
5,602
  
Amortization of lease discounts, premiums and other items
    
389
      
289
  
Amortization of acquisition fair value adjustments
    
861
      
928
  
Loss on modification and extinguishment of debt
    
1,458
      
2,511
  
Unrealized foreign exchange (gain) loss
    
(481
)
    
2,004
  
Provision for deferred income taxes
    
9,637
      
4,457
  
(Gain) loss on derivatives
    
(4,847
)
    
105
  
Maintenance payment liability recognized into earnings
    
(11,846
)
    
—
  
Distributions from unconsolidated subsidiary
    
2,075
      
—
  
Cash receipts from maintenance rights
    
3,013
      
—
  
Changes in operating assets and liabilities:
                
Rent receivables
    
(5,665
)
    
(2,441
)
Other assets
    
(3,835
)
    
(1,925
)
Payable to related parties
    
(11,159
)
    
(9,061
)
Accounts payable, accrued and other liabilities
    
20,161
      
13,757
  
Net cash flows provided by operating activities
    
169,295
      
138,046
  
Cash Flows from Investing Activities
                
Distributions from unconsolidated subsidiary
    
1,874
      
—
  
Rent received from finance lease
    
1,350
      
1,430
  
Purchase of flight equipment
    
(617,370
)
    
(383,426
)
Proceeds from sale of aircraft, net
    
113,829
      
—
  
Deposit for AirAsia transactions
    
(299,945
)
    
—
  
Payments for aircraft improvement
    
(170
)
    
(5,157
)
Payments for lessor maintenance obligations
    
(8,229
)
    
(12,123
)
Net cash flows used in investing activities
    
(808,661
)
    
(399,276
)

7
   
Nine months ended Sep. 30,
  
   
2018
(Unaudited)
    
2017
(Unaudited)
  
Cash Flows from Financing Activities
            
Security deposits received
    
10,907
      
7,196
  
Security deposits returned
    
(6,224
)
    
(3,554
)
Maintenance payment liability receipts
    
59,611
      
56,439
  
Maintenance payment liability disbursements
    
(8,902
)
    
(13,734
)
Net swap termination payments
    
1,136
      
—
  
Debt modification and extinguishment costs
    
436
      
(602
)
Debt issuance costs
    
(2,216
)
    
(307
)
Proceeds from secured borrowings
    
705,201
      
184,685
  
Repayment of secured borrowings
    
(328,595
)
    
(140,194
)
Net proceeds from shares issued
    
19,394
      
—
  
Shares repurchased
    
—
      
(47,010
)
Net cash flows provided by financing activities
    
450,748
      
42,919
  
Effect of exchange rate changes on unrestricted and restricted cash and cash equivalents
    
(61
)
    
438
  
Net decrease in unrestricted and restricted cash and cash equivalents
    
(188,679
)
    
(217,873
)
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
  
$
268,136
    
$
394,214
  
                 
Reconciliation to Consolidated Balance Sheets:
                
Cash and cash equivalents
  
$
180,078
    
$
272,080
  
Restricted cash and cash equivalents
    
88,058
      
122,134
  
Unrestricted and restricted cash and cash equivalents
  
$
268,136
    
$
394,214
  

8
Fly Leasing Limited

Reconciliation of Non-GAAP Measures
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

   
Three months ended Sep. 30,
    
Nine months ended Sep. 30,
  
   
2018
(Unaudited)
    
2017(1)
(Unaudited)
    
2018
(Unaudited)
    
2017(1)
(Unaudited)
  
Net income (loss)
  
$
20,740
    
$
(12,504
)
  
$
54,714
    
$
(4,572
)
Adjustments:
                                
Unrealized foreign exchange (gain) loss
    
(25
)
    
476
      
(481
)
    
2,004
  
Deferred income taxes
    
3,310
      
2,469
      
9,637
      
4,457
  
Fair value changes on undesignated derivatives
    
(1,206
)
    
(449
)
    
(3,446
)
    
(944
)
Adjusted Net Income (Loss)
  
$
22,819
    
$
(10,008
)
  
$
60,424
    
$
945
  
Average Shareholders’ Equity
  
$
635,193
    
$
559,679
    
$
592,402
    
$
577,875
  
Adjusted Return on Equity
    
14.4
%
    
(7.2
)%
    
13.6
%
    
0.2
%
                                 
Weighted average diluted shares outstanding
    
30,381,248
      
29,299,976
      
28,818,464
      
30,958,898
  
Adjusted Net Income (Loss) per diluted share
  
$
0.75
    
$
(0.34
)
  
$
2.10
    
$
0.03
  
(1) Revised to conform to current period presentation.

FLY defines Adjusted Net Income as net income (loss) 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.

9