Fly Leasing Limited (FLY)

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FLY Leasing Limited (FLY)

Q2 2013 Earnings Conference Call

August 01, 2013, 09:00 AM ET

Executives

Matt Dallas - Investor Relations Manager

Colm Barrington - Chief Executive Officer

Gary Dales - Chief Financial Officer

Steven Zissis - President and CEO, BBAM

Analysts

Gary Liebowitz - Wells Fargo

Richa Talwar - Deutsche Bank

Helane Becker - Cowen & Company

John Godyn - Morgan Stanley

Glenn Engel - Bank of America Merrill Lynch

Andrew Light - Citigroup

Presentation

Operator

Good morning. My name is Lushaira and I will be your conference operator today. At this time I would like to welcome everyone to the FLY Leasing Limited Second Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer question. (Operator Instructions). Thank you.

Mr. Dallas, you may begin the conference.

Matt Dallas

Thank you and good morning. I am Matt Dallas, the Investor Relations Manager at FLY Leasing. And I’d like to welcome everyone to our second quarter 2013 earnings conference call.

FLY Leasing, which we will refer to as FLY or the company throughout this call, issued its second quarter earnings results press release earlier today, which is posted on the company’s website at www.flyleasing.com. Representing the company today on this call will be Colm Barrington, our Chief Executive Officer; Gary Dales, our Chief Financial Officer; and Steve Zissis, the President and CEO of BBAM, the company that manages and services FLY’s fleet.

I’d like to begin the call today by reading the following Safe Harbor statement. This conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements regarding the outlook for the company’s future business and financial performance. Forward-looking statements are based on current expectations and assumptions of FLY’s management, which are subject to uncertainties, risks, and changes in circumstances that are difficult to predict.

Actual outcomes and results may differ materially due to factors that are summarized in the earnings press release and are described more fully in the company’s filings with the SEC. Please refer to these sources for additional information. 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 and expectations, or otherwise.

This call is the property of FLY and cannot be distributed or broadcast in any form without the express written consent of the company. A replay of this call is available for one week from today. An archived webcast of the call will be available for 90 days on the company’s website.

I'd now like to hand the call over to Steve Zissis, the President and CEO of BBAM. Steve?

Steven Zissis

Thanks Matt, and good morning everyone. Consistent with my comments on prior calls, the market continues to show gradual improvement with steady demand and slight improvement in lease rates. As we sit here today demand has firmed up somewhat for Airbus narrow body equipment albeit open after low level.

We had as of yet to see significant increases in lease rates from these assets, although the supply demand dynamic was much healthier than it did at this time last year. Boeing narrow body equipment continues to be a solid performance for the lessor community.

We've had a lot of re-marketing activity in 2013, with a total of 29 aircraft extended with existing lessees, transitioned to lessees or being sold. Of these 29 aircraft we delivered nine to new customers extended 10 aircraft with existing customers and sold three aircraft. Of the remaining seven aircraft three aircrafts are subject to LOIs for delivering the fourth quarter and two 15 year old aircraft are expected to be sold approximately at book value in the fourth quarter.

We are left with two unplaced aircraft for the second half and expect these to be delivered to new customers by the end of the fourth quarter. As you can see it's been busy on the re-marketing with almost 30% of our fleet turning over. This positive progress on remarketing will be helpful to the company's revenue in the future quarters as previously off-lease aircraft start generating rent.

Despite this progress on the remarketing front, we believe that it's necessary for the company to grow its business through the acquisition of new aircraft. Growth will ensure that we are growing the revenue of the business as well as the per share earnings and cash flow of the company.

To this end, the company is well positioned to take the advantage of attractive opportunities to acquire additional aircraft. As of June 30, the company had approximately $140 million of unrestricted cash on its balance sheet and through the sale of new shares the company received another $173 million in July for a total [audio gap] 1.2 billion when combined with our warehouse facility.

We have an identified pipeline of aircraft with an aggregate purchase price of 600 million. We have already acquired six aircraft for approximately 330 million. Over the medium to long term, we intend to drive FLY's fleet aircraft portfolio by 10% to 15% per annum, net of depreciation and aircraft sale.

Finally a quick word about financing market. The acquisition of aircraft at good prices and with good lease rates are pre-requisites for long term success in this business. But often overlooked is equally important to securing attractive financing for the portfolio. We have long held the belief that lessors are best funded with long term secured debt arrangement. We own long lived assets and we want long term debt in place on these aircraft to manage any refinancing risk and to lock in our profit spread through our anticipated investment horizon.

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