FLY Leasing reports fourth quarter and full year 2015 financial results

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By admin March 9, 2016 11:43

FLY Leasing reports fourth quarter and full year 2015 financial results

FLY Leasing has reported a net income of $27.7 million, or $0.68 per share, for the fourth quarter of 2015. Adjusted Net Income was $62.7 million, $1.54 per share.
For the full year 2015, FLY’s net income was $6.6 million, or $0.13 per share. Adjusted net income was $131.0 million, $3.17 per share. During the year, FLY managed to reduce its SG&A by $7.3 million, year over year, re-price its $500 million Term Loan, saving $4 million in annual interest cost, and complete a $100 million share repurchase program.

“FLY has completed a major transformation, and enters 2016 with a leaner, younger and more profitable fleet, and poised for intelligent growth,” said Colm Barrington, CEO of FLY.  “Our aircraft sales and related strategic initiatives have reduced business risk, lowered our SG&A expenses and cost of debt, and generated substantial cash. In the last few months, we have used our cash to repurchase $100 million in shares, at prices significantly below FLY’s book value per share.”

“The airline industry continues to be strong, with IATA reporting a more than 6.5% increase in revenue passenger kilometers in 2015, and record airline profits,” added Barrington.  “Traffic and financial forecasts for 2016 are even more buoyant, with airlines’ business being strongly supported by lower fuel prices. These factors are supporting a strong demand for leased aircraft; in FLY’s case we have all but one of our 2016 redeliveries committed.”

“Our management team has worked together for more than 25 years and navigated through several industry cycles,” said Barrington. “Cycles provide opportunities for outperformance.  FLY’s strong capital reserves and strategy of avoiding speculative forward commitments provides us with a unique flexibility to take advantage of market conditions, and put capital to work when and where we can maximize returns.”

Along with these results, FLY has also disclosed that the SEC is reviewing the company’s accounting for certain aircraft purchases. Gary Liebowitz explains in his latest Leasing Letter, that the purchases in question are “where some value of the asset is embedded in the lease attached – namely, the “maintenance rights” (MR) that requires an aircraft is to be returned at lease-end in a condition that is better than the physical condition of the plane at the time of purchase. As an intangible, this MR would be more rapidly amortized – suggesting higher D&A accruals will be (and had been) required.”

Liebowitz maintains that although the “outcome of such a review is uncertain, it does present buying opportunity given that: (1) any change to FLY’s cash flow is doubtful; (2) total earnings would be unaffected (just the timing of D&A recognition); and (3) if differences are material, FLY could switch to an “MR-adjusted” EPS metric similar to one adopted by AerCap (AER, $36.39, 1-rated).”

Last week, FLY Leasing announced that it closed a $385 million blind pool aircraft acquisition facility. The facility has a three-year revolving period followed by a three-year term and will bear interest at LIBOR plus 2.00% during the revolving period. The lenders include Commonwealth Bank of Australia New York Branch, MUFG’s banking arm Bank of Tokyo-Mitsubishi UFJ Ltd., New York Life Insurance Company and National Australia Bank. Commonwealth Bank of Australia New York Branch will serve as the Administrative Agent for the facility.

“The completion of this facility provides FLY with the resources to continue to grow its fleet with young, desirable aircraft. Our focus remains on the most popular narrow-body aircraft with the largest user bases,” said Barrington. “BBAM sourced and structured the facility, saving FLY significant fees and demonstrating BBAM’s deep value. The syndicate includes two new lending relationships for FLY as we continue to diversify our financing sources.”

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By admin March 9, 2016 11:43