Avolon — FY2014 Earnings Presentation
28 slides from Avolon's earnings presentation, Mar 3, 2015
Slide 1: 2014 Fourth Quarter & Full Year Earnings
Exhibit 99.2 2014 Fourth Quarter & Full YearEarnings | March 2015
Slide 2: Disclaimer Concerning Forward-Looking Statements and Non-GAAP Information
Disclaimer Concerning Forward-Looking Statements and Non-GAAP Information This document includes forward-looking statements, beliefs or opinions, including statements with respect to Avolon’s business, financial condition, results of operations and plans. These forward-looking statements involve kno
Slide 3: Strong Growth with Low Risk
Strong Growth with Low Risk STRONG GROWTH LOW RISK FY FY Average Fleet Age 2.5 years $ millions Change 2013 2014 Average Remaining Revenue 450 606 +35% Lease Term 7.1 years 1 Adjusted Net Income 125 179 +43% Debt Weighted Average Life Net Income (WAL) 4.6 years 113 91 -19% Commitments 3,891 6,593 +6
Slide 4: Continued Momentum Across the Business
Continued Momentum Across the Business Q4 2014 $638m of New Commitments $554m of Aircraft Deliveries 15 Aircraft: eight B737-800, six 8 Aircraft A320-200 and one A321-200 $11.8m Gains; Sale of 4 Aircraft $347m of Additional Debt Financing Commitments $0.8m Debt Prepayment Costs Related to Disposals
Slide 5: Delivering Robust Fleet Growth
Delivering Robust Fleet Growth OWNED FLEET +$1.3bn Net Book Value Growth From FY13 6.0 5.0 5.6 41 Aircraft Deliveries in 1 4.0 2014 4.3 3.0 3.6 2.0 1.0 $6.6bn Capital commitments 0.0 2012 2013 2014 Net Book 2011 B/S Not Available +19% +32% Value Growth Owned 87 99 126 Aircraft 1 Owned and Managed Po
Slide 6: Attractive & Diversified Portfolio
Attractive & Diversified Portfolio 1 1 ASSET TYPE GEOGRAPHIC SPLIT Twin- Asia Aisle Americas Pacific 27% 28% 40% Single- Aisle EMEA 73% 32% 2.5 1 49 2 28 2 Average Fleet Age Airline Customers Countries 1 st OwnedPortfolio asat Dec31 2014 measuredby Net BookValue.Single-Aisleincludes :B737-800,A319ce
Slide 7: Deep Intrinsic Value on Balance Sheet
Deep Intrinsic Value on Balance Sheet OWNED FLEET126 – AIRCRAFT 2 Embedded Value Per Share $6.95 $ millions Current Market Value1 6,175 APPRAISAL METHODOLOGY 2 Less Net Book Value -5,607 • 9 Appraisal Firms • Valuation date 31st Dec 2014 Embedded Equity Value 5681 • Market values adjusted for lease
Slide 8: Sustainable Trading Gains
Sustainable Trading Gains 3 TRADING GAINS 27 AIRCRAFT SOLD of $107 million on $1.2bn of aircraft sold $ millions FY 2012 FY 2013 FY 2014 Twin- Aisle 1 Trading Gain 11.3 31.1 64.4 28% Total Interest Breakage Costs 7.5 – – Net Book Value 154.9 564.1 510.2 Single- Aisle 2 72% % Gain on Sale 7.3% 5.5% 1
Slide 9: Financial Highlights
AVOLON FINANCIAL HIGHLIGHTS
Slide 10: Continued Momentum Across the Business
Continued Momentum Across the Business Q4 2014 $638m of New Commitments $554m of Aircraft Deliveries 15 Aircraft: eight B737-800, six A320-200 8 Aircraft;3 x October, 4 x November and and one A321-200; 11 delivering in 2015, 4 1 x December delivering in 2016 $11.8m Gains; Sale of 4 Aircraft: $347m o
Slide 11: Sustained Strong Growth
FY 2014 Sustained Strong Growth NET BOOK VALUE REVENUE $ millions CAGR 25% $ millions CAGR 36% 6,000 700 5,000 5,607 600 500 606 4,000 4,260 400 3,000 3,576 450 300 2,000 200 326 1,000 100 0 0 2012 2013 2014 2012 2013 2014 1 NET INCOME ADJUSTED NETINCOME $ millions $ millions CAGR 22% CAGR 57% 120 2
Slide 12: Selected Financial Highlights
FY 2014 Selected Financial Highlights $ thousands FY 2013 FY 2014 % Change Lease Revenue 415,006 537,547 +30% Maintenance Income 6,102 16,428 Lease Revenue excl. Maintenance Income 408,904 521,119 +27% Interest Expense (154,360) (206,580) +34% Unrealized (gain) loss on derivatives (6,390) 12,240 Int
Slide 13: Driving Returns
Driving Returns Yield and ROE Progression INCREASING YIELD RETURN ON EQUITY Adjusted CAGR 40% ROE 1 Annualised Lease Yield Interest Rate2 CAGR 10% ROE 14% 4 12.0% Adjusted ROE ROE 10.0% 11.0% 12% 8.0% 10% 6.0% 8% 4.0% 3.8% 6% 2.0% 12.5% 6.4% 8.7% 0.0% 4% 9.7% 5.3% 2011 2012 2013 2014 2% 6.4% 2011 B/
Slide 14: Diluted Earnings Per Share
FY 2014 Diluted Earnings Per Share CAGR 57% Adjusted EPS CAGR 12% Diluted EPS 2.50 1 Adjusted EPS 2.00 2.19 Diluted EPS 2.19 1.50 1.53 1.44 1.00 1.16 0.92 1.44 0.89 0.50 1.1 0.00 2012 2013 2014 Diluted EPS ($) 0.92 1.44 1.16 1 Adjusted EPS($) 0.89 1.53 2.19 Weighted Average Shares Outstanding Dilute
Slide 15: Prudent Balance Sheet & Capital Structure
FY 2014 Prudent Balance Sheet & Capital Structure DIVERSIFIED DEBT CHANNELS 3.8% 3 : 1 % Total Debt $ millions Full recourse term facilities 43% 1,974 1 2 Non recourse term facilities 18% 797 Cost of Funds Net Debt : Equity Securitizations 13% 588 ECA and EXIM backed facilities 16% 725 Warehouse fac
Slide 16: 2015 Financial Outlook
2015 Financial Outlook 1 Adjusted ROErange of 14.7%15.0%; - ROE of 12.8%13.1% - Assuming no impact for interest rate caps Current commitments of $1.6bn delivering in 2015 Approximately $400m deliveries in Q1 (mainly March), $700m deliveries in Q2 Consistent with net D:E target of approximately 3:1 S
Slide 17: Strengths of our Franchise
Strengths of our Franchise Strong, committed growth profile Upward ROE trajectory Fleet quality; embedded value Balance sheet positioned to support growth Favourable industry outlook attractive – opportunity set Avolon | Slide 17
Slide 18: Appendix
AVOLON APPENDIX ce] Find out more at www.avolon.aero
Slide 19: Reconciliation of Adjusted Net Income
Reconciliation of Adjusted Net Income Adjustednet incomeis a measureof both liquidity andoperating performancethat is not defined by GAAPandshould not be considered as an alternative to net income, income from operations, net cash provided by operating activities, or any other liquidity or performan
Slide 20: Reconciliation of Adjusted EPS
Reconciliation of Adjusted EPS $ FY 2012 FY 2013 FY 2014 Diluted EPS 0.92 1.44 1.16 Amortization of debt issuance costs 0.14 0.24 0.31 Unrealized (gain) loss on derivatives 0.03 (0.08) 0.16 Share based compensation - - 0.69 Tax effect 0.00 (0.00) (0.03) Effect of number of outstanding shares 31st De
Slide 21: Reconciliation of Adjusted ROE
Reconciliation of Adjusted ROE FY 2012 FY 2013 FY 2014 Net Income ($ thousands) 61,161 112,800 91,103 Total shareholder’s equity ($ thousands) 1,146,618 1,293,751 1,432,997 ROE 5.3% 8.7% 6.4% Amortization of debt issuance costs 0.8% 1.5% 1.7% Unrealized (gain) loss on derivatives 0.2% (0.5%) 0.9% Sh
Slide 22: Reconciliation of Net Debt to Equity
Reconciliation of Net Debt to Equity $ thousands FY 2012 FY 2013 FY 2014 Debt Financing 2,573,104 3,442,749 4,465,187 Capital Lease Obligation 231,676 94,043 83,261 Total Debt 2,804,780 3,536,792 4,548,448 Cash and cash equivalents 53,844 177,924 111,392 Net Debt 2,750,936 3,358,868 4,437,056 Total
Slide 23: Reconciliation of 2015 Adjusted ROE
Reconciliation of 2015 Adjusted ROE % FY 2015 FY 2015 ROE 12.8% 13.1% Amortization of debt issuance costs 1.4% 1.4% Unrealized (gain) loss on derivatives - - Share based compensation 0.6% 0.6% Tax effect (0.1%) (0.1%) Adjusted ROE 14.7% 15.0% Avolon | Slide 23
Slide 24: Reconciliation of 2015 Cash SG&A
Reconciliation of 2015 Cash SG&A $ millions FY 2015 Selling, general and administrative costs 65 Share Based Compensation 10 Cash SG&A 55 CashSG&Ais (Selling,generalandadministrativecosts)– (ShareBasedCompensation) Avolon | Slide 24
Slide 25: Quarterly Income Statement
Quarterly Income Statement $ thousands Revenues Q1 14 Q2 14 Q3 14 Q4 14 FY 14 Lease revenue 118,223 123,072 137,379 158,873 537,547 Management fee revenue 354 563 478 1,971 3,366 Net gain on disposal of flight equipment 16,826 9,219 26,523 11,841 64,409 Interest income 351 241 60 44 696 Total revenu
Slide 26: Quarterly Balance Sheet
Quarterly Balance Sheet $ thousands Q1 14 Q2 14 Q3 14 FY 14 Assets 31 MAR 30 JUN 30 SEP 31 DEC Cash and cash equivalents 176,297 99,481 95,869 111,392 Restricted cash 289,734 242,572 217,143 195,095 Accounts receivable 4,898 11,590 10,439 11,010 Assets held for sale - - 39,741 - Flight equipment, ne
Slide 27: Portfolio
Portfolio at December 31 2014 AIRCRAFT TYPE OWNED MANAGED COMMITTED TOTAL A319 1 - - 1 A320ceo 46 3 10 59 A321ceo 7 1 3 11 A320neo - - 20 20 A330neo - - 15 15 A330-200/300 11 - - 11 B737-800 51 3 19 73 B737 MAX - - 20 20 B787-8/9 1 - 11 12 Boeing B777-300ER 3 - - 3 B777-200LRF - 4 - 4 E190 6 - - 6 1
Slide 28: Thank You
AVOLON THANK YOU ce] Find out more at www.avolon.aero