Fourth Quarter 2011 Highlights

• Adjusted net income of $20.7 million, $0.80 per share
• Net loss of $9.2 million, $0.37 per share
• Acquired 51 aircraft for $1.3 billion
• Sold two aircraft for a pre-tax gain of $9.1 million
• Declared 17^th consecutive quarterly dividend on January 16, 2012

2011 Full Year Highlights

• Adjusted net income of $35.8 million, $1.38 per share
  • Net income of $1.1 million, EPS of $0.03
  • Acquired 52 aircraft for $1.4 billion
  • Recognized $5.4 million in pre-tax income from investment in BBAM
  • Repurchased 1.1 million shares bringing total repurchased to 24% of IPO shares
  • Paid $0.80 per share in dividends

Colm Barrington, FLY Leasing's chief executive officer said, “2011 was a transformational year for FLY as we grew our fleet from 59 to 109 aircraft, an 85% year-on-year increase.

“This significant growth was achieved without raising any additional equity capital, and we expect that our larger fleet will have a positive impact on adjusted net income and EPS in future reporting periods.

“In the fourth quarter, we incurred a $7.5 million impairment charge in respect of two twenty-year old aircraft,” said Barrington. "We expect to recover approximately $6 million later this year from end of lease compensation payments from our lessee, retained maintenance reserves and disposition proceeds, reducing our net economic loss to approximately $750,000 per aircraft. 

“We have recently extended a $600 million financing facility from 2012 until 2018 on attractive terms,” noted Barrington. “FLY has enjoyed continued access to financing through BBAM’s worldwide banking relationships. Also related to BBAM, our 15% interest generated pre-tax income of $5.4 million in 2011, proving it to be an excellent investment for shareholders.

“With a larger fleet, a strong balance sheet and BBAM’s experienced management team, FLY is well-positioned to execute on its strategy of taking advantage of attractive opportunities for growth and shareholder value enhancement, including rewarding our shareholders with an attractive dividend”.

Financial Results

FLY’s net loss and basic and diluted loss per share for the fourth quarter of 2011 were $9.2 million and $0.37, respectively compared to net income of $10.6 million and net income per share of $0.39 in the same period of 2010. The 2011 loss was driven primarily by $16.1 million of fees and expenses recognized in connection with the acquisition of the portfolio of 49 aircraft which was completed in the quarter and a $7.5 million impairment charge taken on two twenty-year old Boeing 737 classic aircraft which will be returned from the lessee in 2012. Our larger fleet, earnings from our investment in BBAM and the gain from the sale of two aircraft contributed positively to fourth quarter 2011 earnings. In 2010, fourth quarter earnings were favorably impacted by a gain of $4.5 million from the sale of an aircraft and $4.3 million of end of lease revenue.

Net income and diluted earnings per share for the year ended December 31, 2011 were $1.1 million and $0.03, respectively, compared to $52.7 million and $1.86 million in 2010, respectively. The 2011 results include a gain of $9.1 million from the sale of two aircraft and $2.9 million of end of lease revenue but were unfavorably impacted by $18.0 million in fees and expenses associated with the portfolio acquisition and the $7.5 million impairment charge. The 2010 results benefited from a gain of $12.5 million from the sale of an option to purchase our notes payable, gains of $13.5 million from the sale of four aircraft and $21.4 million of end of lease revenue.

Adjusted Net Income

Adjusted Net Income was $20.7 million for the fourth quarter of 2011 compared to $11.6 million in the same period in the previous year. On a per share basis, Adjusted Net Income was $0.80 in the fourth quarter of 2011 compared to $0.43 for the same period in the previous year.

For the year ended December 31, 2011, Adjusted Net Income was $35.8 million or $1.38 per share. This compares to $56.4 million or $1.99 per share in 2010. In 2010, Adjusted Net Income included $21.4 million of end of lease revenue and $12.5 million from the sale of an option to purchase our notes payable.

FLY defines Adjusted Net Income as net income plus or minus the ineffective portion of cash flow hedges, aircraft impairment, non-cash share-based compensation and adjustments related to the GAAM portfolio acquisition comprised of amortization of fair value adjustments recorded in purchase accounting and acquisition transaction fees and expenses. Management believes that Adjusted Net Income provides useful information about operating performance and period-over-period comparisons. It also provides additional information that is useful in evaluating the underlying operating performance of our business without regard to the impact of items such as fair value adjustments of debt that the company has assumed, acquired leases and derivative instruments and other non-recurring items of income and expense affecting current period results. Adjusted Net Income should be used as a supplement to and not as a substitute for financial measures determined in accordance with Accounting Principles Generally Accepted in the United States (GAAP). Please see the reconciliation of Adjusted Net Income to net income determined in accordance with GAAP below.

Available Cash Flow

Available Cash Flow (“ACF”) was $44.6 million in the fourth quarter of 2011 compared to $37.8 million in the same period of 2010. ACF per share was $1.73 for the fourth quarter of 2011 compared to $1.42 in the same period of 2010. For the year ended December 31, 2011, ACF was $133.0 million or $5.12 per share compared to $165.7 million or $5.85 per share for 2010.

FLY defines ACF as net income plus depreciation and impairment charges, non-cash share-based compensation, ineffective portion of cash flow hedges, deferred taxes, amortization of lease incentives, debt issue costs, lease premiums and discounts and debt discounts and other one-time, non-cash items.

Management believes ACF provides an additional measure for evaluating its on-going cash earnings from which capital investments are made, debt is serviced, and dividends are paid. ACF excludes certain positive and negative cash items, including principal payments and has certain limitations as an indicator of FLY’s ability to pay dividends and reinvest in its business. ACF should be used as a supplement to and not as a substitute for financial measures determined in accordance with GAAP.

Dividends and Share Repurchases

On January 16, 2012, FLY declared a dividend of $0.20 per share in respect of the fourth quarter of 2011. This dividend was paid on February 17, 2012 to shareholders of record on January 30, 2012. FLY paid four quarterly dividends totaling $0.80 per share in respect of 2011.

During 2011, FLY repurchased 1.1 million shares. FLY has now repurchased 8.1 million shares at an average price of $7.91 per share, representing 24% of the shares issued in our IPO in 2007. At December 31, 2011 there were 25.7 million shares outstanding.

Financial Position

At December 31, 2011, FLY’s total assets were $3.2 billion, including flight equipment with a net book value of $2.8 billion. This represents an increase of $1.2 billion from December 31, 2010 in total assets and an increase of $1.1 billion in the net book value of flight equipment compared to December 31, 2010. The increases are primarily driven by the addition of 52 aircraft during 2011.

Cash and cash equivalents at December 31, 2011 totaled $380.5 million, of which $82.1 million was unrestricted. This compares to total cash and cash equivalents of $329.0 million at December 31, 2010, of which $164.1 million was unrestricted.

Aircraft Portfolio

At December 31, 2011, FLY’s 109 aircraft were on lease to 53 airlines in 29 countries. The table below shows the aircraft in FLY’s portfolio on December 31, 2011 and 2010. The table does not include four B767 aircraft owned by a joint venture in which FLY has a 57% interest.

At December 31, 2011, the average age of the portfolio was 8.5 years weighted by the net book value of each aircraft. The average remaining lease term was 3.6 years, also weighted by net book value. At December 31, 2011 FLY’s leases were generating annualized revenues of $363 million compared to $194 million at December 31, 2010, a 87% increase.