43% Increase in FY Adjusted Net Income; 2014 FY Adjusted ROE
of 12.5%
Avolon (NYSE: AVOL), the international aircraft leasing company,
today announced results for the 2014 fourth quarter (“Q4”) and full
year (“FY”).
2014 Full Year | Financial Highlights
- Adjusted Net Income growth of 43% to
$179 million1; Net Income of $91 million
- Year on year revenue growth of 35% to
$606 million
- Sold nine aircraft in 2014 recording a
total gain of $64 million
- 282 basis point increase in Adjusted
Return on Equity to 12.5%; Return on Equity of 6.4%
- Undrawn debt of $1.2 billion at
year-end and reduction in average interest rate2 by 60 basis points
to 3.8%
2014 Fourth Quarter & Full Year | Key Performance
Measures
Three Months EndedDecember 31
Twelve Months EndedDecember 31 $’000
except where indicated
2013 2014
2013 2014 Total Revenue 124,065
172,729 449,773 606,018 Net Income
19,638 (13,078) 112,800 91,103 Per Common Share – Diluted ($) 0.25
(0.17) 1.44 1.16 Adjusted Net Income1 27,827 48,547 125,151 178,994
Per Common Share1 – Adjusted ($) 0.34 0.59
1.53 2.19
1 Throughout this release, we use adjusted metrics. See Non-GAAP
reconciliation for the three months and the twelve months ended
December 31, 2014 on page 8 together with reconciliation for 2015
guidance. 2 Annualised Cost of Funds at December 31, 2014 does not
include the effect of up-front fees, undrawn fees, issuance cost
amortization or fair value gains / losses on derivative financial
instruments.
2014 Full Year | Portfolio Highlights
- Delivery of 41 owned and managed
aircraft; sale of nine aircraft
- Sustaining industry leading fleet and
lease profile: average age of owned fleet is 2.5 years while
average remaining lease term is 7.1 years
2015 | Outlook
- All deliveries for 2015 placed;
sustained progress in aircraft trading activity year-to-date
- 69% year-on-year increase in total
commitments to $6.6 billion at end of 2014 providing substantial
‘locked-in’ growth for the business in years ahead
- Current expectation for 2015 is to
deliver $1.6 billion of aircraft commitments and $700 million of
aircraft trading volume - delivering an adjusted Return on Equity
of 14.7% to 15.0%1 or a Return on Equity of 12.8% to 13.1%
Dómhnal Slattery, Avolon, CEO commented:
“Avolon delivered a strong performance against key financial and
operating metrics in 2014. Revenue increased 35% year-on-year and
our adjusted net income increased 43%. The strength of this
performance is due to the strong growth in our fleet, our reducing
cost of funding balanced origination model and consistent ability
to deliver trading gains underpinned by what we believe is the
industry’s leading risk-management system.”
“At the end of 2014, the embedded market value in our fleet,
according to independent industry appraisers, was
$568 million. This significant premium highlights the
intrinsic value of the Avolon business and reflects our industry
leading aircraft portfolio, our ability to acquire and trade assets
at attractive prices and our robust underwriting criteria and asset
risk management processes.”
“We are excited about the prospects for our business. We believe
we have the right team and right business model, underpinned by a
best-in-class risk management system, to continue to deliver
superior growth with lower risk, which will in turn drive returns
for our shareholders.”
______
2014 Fourth Quarter Performance
Total revenue increased by $49 million, or 39%, to $173 million
for the fourth quarter compared to $124 million for the same period
in 2013. Adjusted Net Income increased by $21 million, or 74%, to
$49 million for the quarter compared to $28 million for same
period in 2013. Net Income for the fourth quarter was a loss of $13
million reflecting the one-off costs associated with the initial
public offering and share-based compensation charges.
2014 Full Year Performance
Total revenue increased by $156 million, or 35%, to $606 million
for 2014 full year compared to $450 million for 2013. Adjusted Net
Income increased by $54 million, or 43%, to $179 million for the
full year compared to $125 million for the prior year. Net Income
for the 2014 full year was $91 million compared to $113 million in
2013.
Balance Sheet at the end of 2014
Aircraft Net Book Value at the end of 2014 was $5,607 million,
an increase of $1,347 million or 32% on 2013. Total debt at the end
of 2014 was $4,548 million. At the year-end, Avolon also had $1,176
million of undrawn debt facilities. The weighted average interest
rate of outstanding debt at the end of December was 3.8% and the
weighted average remaining debt maturity was 4.6 years.
Annual Report on Form 20-F
Avolon’s 2014 full year financial performance is set out in
detail in the company’s Annual Report which will be available from
today, March 3, 2015, on the investor relations section of the
website: www.avolon.aero
Conference Call and Webcast
Avolon will host a conference call and live webcast at 9.00am ET
(2.00pm GMT) today, March 3, 2015. Dial in details are outlined
below and the webcast will be available on: www.avolon.aero
US: +1 718 873 9077
Europe: +44 203 139 4830
Asia: +86 400 681 5421
Passcode: 12469046#
A copy of the related slide presentation is available on the
Avolon website. An audio archive and transcript of the event will
be available on the website shortly following the call. A
conference call replay will also be available for 30 days on US: 1
866 535 8030 or UK: +44 20 3426 2807. Passcode is 654161#.
Avolon Portfolio at the end of 2014
2013 2014 Owned aircraft
99 126 Managed aircraft 10 11 Committed aircraft 73
98 Total 182 235 Average age of owned
fleet* (years) 2.4 2.5 Average remaining lease term* (years) 7.0
7.1 Net Book Value of owned aircraft ($ million) $4,260
$5,607
* Weighted by net book value.
Avolon Owned Managed and Committed Portfolio at the end of
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
126 11 98 235
About Avolon Holdings Limited (“Avolon”)
Headquartered in Ireland, with offices in the United States,
Dubai, Singapore and China, Avolon provides aircraft leasing and
lease management services. Avolon has an owned, managed and
committed fleet of 235 aircraft serving 49 customers in 28
countries as of December 31, 2014. Avolon is listed on the New York
Stock Exchange, under the ticker symbol AVOL.
www.avolon.aero
Note Regarding Forward-Looking Statements
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 known and unknown risks and
uncertainties, many of which are beyond our control and all of
which are based on our management’s current beliefs and
expectations about future events. Forward-looking statements are
sometimes identified by the use of forward-looking terminology such
as “believe,” “expects,” “may,” “will,” “could,” “should,” “shall,”
“risk,” “intends,” “estimates,” “aims,” “plans,” “predicts,”
“continues,” “assumes,” “positioned” or “anticipates” or the
negative thereof, other variations thereon or comparable
terminology or by discussions of strategy, plans, objectives,
goals, future events or intentions. These forward-looking
statements include all matters that are not historical facts.
Forward-looking statements may and often do differ materially from
actual results. No assurance can be given that such future results
will be achieved.
These risks, uncertainties and assumptions include, but are not
limited to, the following: general economic and financial
conditions; the financial condition of our lessees; our ability to
obtain additional capital to finance our growth and operations on
attractive terms; decline in the value of our aircraft and market
rates for leases; the loss of key personnel; lessee defaults and
attempts to repossess aircraft; our ability to regularly sell
aircraft; our ability to successfully re-lease our existing
aircraft and lease new aircraft; our ability to negotiate and enter
into profitable leases; periods of aircraft oversupply during which
lease rates and aircraft values decline; changes in the appraised
value of our aircraft; changes in interest rates; competition from
other aircraft lessors; and the limited number of aircraft and
engine manufacturers. These and other important factors, including
those discussed under “Item 3. Key Information—Risk Factors”
included in our Annual Report on Form 20-F filed with the U.S.
Securities and Exchange Commission on March 3, 2015, may cause our
actual events or results to differ materially from any future
results, performances or achievements expressed or implied by the
forward-looking statements contained in this document. Such
forward-looking statements contained in this document speak only as
of the date of this document. We expressly disclaim any obligation
or undertaking to update these forward-looking statements contained
in this document to reflect any change in our expectations or any
change in events, conditions, or circumstances on which such
statements are based unless required to do so by applicable
law.
The financial information included herein includes financial
information that is not presented in accordance with generally
accepted accounting principles in the United States (“GAAP”),
including adjusted net income, adjusted earnings per share and
adjusted return on equity. The reconciliation below includes a
reconciliation of adjusted net income, adjusted earnings per share
and adjusted return on equity with the most directly comparable
financial measures calculated in accordance with GAAP.
More detailed information about these and other factors is set
forth in the Annual Report on Form 20-F which is available on the
Avolon website, www.avolon.aero and has also been filed with the
U.S. Securities and Exchange Commission.
Avolon Holdings Limited
Consolidated Balance Sheets (Audited) December
31, 2013 and 2014
(In US$ thousands except share and per share
data)
2013 2014 Assets Cash and
cash equivalents 177,924 111,392 Restricted cash 256,426 195,095
Accounts receivable 6,763 11,010 Assets held for sale 127,227 -
Flight equipment, net 4,133,185 5,606,556 Derivative financial
assets 20,011 8,137 Deposits on flight equipment 206,781 199,514
Deferred issuance costs, net 85,050 105,952 Deferred income taxes
19,431 18,996 Investment in unconsolidated equity investees 5,917
16,453 Loan receivables 10,338 - Other assets 21,425 53,002
Total Assets including US$5,047,967 as of December 31, 2013 and
US$6,326,107 as of December 31, 2014, representing collateral of
VIE entities) 5,070,478 6,326,107
Liabilities, Temporary Equity and Shareholders’ Equity
Accounts payable 1,748 203 Accrued expenses and other liabilities
26,421 27,223 Income tax payable 303 434 Deferred revenue 27,472
35,193 Accrued maintenance liabilities 126,549 180,526 Lease
deposits liability 44,943 82,677 Debt financing (including debt
financing of VIEs of US$1,839,781 as of December 31, 2013,
US$1,385,762 as of December 31, 2014, that do not have recourse to
the general credit of the Company) 3,442,749 4,465,187 Capital
lease obligations 94,043 83,261 Deferred income taxes 12,131 17,006
Derivative financial liabilities 368 1,400
Total Liabilities
3,776,727 4,893,110 Commitments and contingencies
(Note 19)
Temporary Equity Class A Common Stock, US$0.01 par
value; at accreted distribution value: Authorized: 673,531 shares;
Issued and outstanding 673,531 shares at December 31, 2013 2,536 -
Liabilities, Temporary Equity and Shareholders’ Equity
(continued) Class B Common Stock, US$0.01 par value; at
accreted distribution value: Authorized: 11,400,234 shares; Issued
and outstanding:
11,400,234 shares at December 31, 2013
1,281,937 - Class C Common Stock, US$0.01 par value; at accreted
distribution value: Authorized: 50,766,000 shares; Issued and
outstanding:
50,766 shares at December 31, 2013
580 -
Shareholders’ Equity
Common shares, US$0.000004 par value Authorized:
750,000,000; Issued and outstanding:
81,681,131 shares at December 31, 2014
- - Additional paid-in-capital - 1,421,864 Preference shares,
US$0.001 par value Authorized: 250,000,000; Issued and outstanding:
nil at December 31, 2014
- - Legal reserve 8,698 Retained earnings - 11,133
Total
Shareholders’ Equity 8,698 1,432,997 Total
Liabilities, Temporary Equity and Shareholders’ Equity
5,070,478 6,326,107
The accompanying notes are an integral part of these
consolidated financial statements.
Avolon Holdings Limited
Unaudited Condensed Consolidated Statements of
Comprehensive Income
Three and twelve months ended December 31, 2013
and 2014
(In US$ thousands, except per share data)
Three months ended December 31,
Twelve months endedDecember 31, Revenues
2013 2014 2013
2014 Lease revenue 112,544 158,873 415,006 537,547
Management fee revenue 362 1,971 2,468 3,366 Net gain on disposal
of flight equipment 10,804 11,841 31,051 64,409 Interest income 355
44 1,248 696
Total revenues 124,065 172,729
449,773 606,018 Expenses Depreciation
(39,554) (51,579) (145,615) (182,437) Interest expense (53,447)
(53,132) (154,360) (206,580) - (9,785) - (9,785) Selling, general
and administrative expenses (10,959) (68,574) (36,748) (110,147)
Total expenses (103,960) (183,070)
(336,723) (508,949) Income before income
tax and interest in earnings in earnings/(loss) from
unconsolidated equity investees 20,105 (10,341)
113,050
97,069
Income tax benefit/(expense) (421) (2,902) (204) (6,273)
Profit from unconsolidated equity investees, net of tax (46)
165 (46) 307
Net income and total comprehensive income
19,638 (13,078) 112,800 91,103 Net
income per share of: Basic 0.25
(0.17) 1.44 1.16 Diluted 0.25 (0.17) 1.44 1.16
Avolon Holdings Limited
Consolidated Statements of Cash Flows (Audited)
Years ended December 31, 2013 and 2014
(In US$ thousands)
2013 2014 Cash flows provided by
operating activities Net income 112,800 91,103 Adjustments
to reconcile net income to net cash provided by operating
activities: Depreciation 145,615 182,437 Gain on disposal of flight
equipment (31,051) (64,409) Share-based compensation - 53,733
Amortisation of debt issuance costs 18,766 24,277 Deferred income
tax (benefit)/ expense (101) 5,837 (Earnings)/loss from
unconsolidated equity investees 46 (307) Unrealised loss/(gain) on
derivatives (6,390) 12,240 Changes in operating assets and
liabilities: Increase in accounts receivables (957) (4,217)
(Increase)/decrease in other assets (16,114) (22,396) Increase in
deferred revenue 9,993 7,721 Increase/(decrease) in accounts
payable, accrued expenses and other liabilities 10,227 (1,178)
Net cash provided by operating activities
242,834
284,841 Cash flows from investing activities
Acquisition of flight equipment (1,281,110) (1,939,561) Deposits
for flight equipment purchases (108,006) (84,017) Proceeds from
disposal of flight equipment 595,194 567,273 Investment in
unconsolidated equity investees (5,963) (10,229) Net cash
used in investing activities
(799,885) (1,466,534)
Cash flows from financing activities
Issuance of ordinary shares 34,335 - Repurchase of Class C shares -
(5,591) (Increase)/decrease in restricted cash (74,193) 61,331
Issuance of debt 2,208,965 2,368,037 Repayment of debt (1,477,199)
(1,356,049) Debt issuance costs paid (46,287) (44,944) Net
acquisition of interest rate caps (5,243) 666 Maintenance payments
received 51,012 64,103 Maintenance payments returned (24,866)
(10,126) Security deposits received 22,689 53,951 Security deposits
returned (8,082) (16,217) Net cash provided by financing activities
681,131 1,115,161 Net increase/(decrease) in cash and
cash equivalents 124,080 (66,532) Cash at beginning of period
53,844 177,924
Cash at end of period 177,924
111,392 Supplemental cash flow information:
Cash paid for interest including amounts capitalized of $1,966
$1,170, and $2,651 for the years ended December 31, 2012, 2013, and
2014, respectively (148,333) (177,941) Cash paid for income
taxes (304) (252) Supplemental disclosures of non-cash
investing and financing activities: Security deposits, maintenance
liabilities and otherliabilities settled on sale of flight
equipment 17,716 9,073 Acquisition of flight equipment through
capital lease - - Issuance of capital lease obligation for
acquisition of flight equipment - - Advance lease rentals,
security deposits and maintenance reserves assumed in asset
acquisitions 3,788 29,567 Accretion of income to Class A, Class B
and Class C shares 107,160 70,798
Number of outstanding shares at December 31, 2014 was
81,681,131
For Non-GAAP measure Adjusted Net
Income see reconciliation below
Three Months Ended
December 31
Twelve Months Ended
December 31
US$ ‘000
2013
2014
2013
2014
Net Income
19,638
(13,078)
112,800
91,103
Amortization of debt issuance costs 8,396 6,349 18,766 24,277
Unrealized (gain) loss on derivatives
(172)
3,051
(6,390)
12,240 Share based compensation - 53,733 - 53,733 Tax effect
(35)
(1,508)
(25)
(2,359)
Adjusted net income
27,827
48,547
125,151
178,994
For Non-GAAP measure Adjusted Net
Income Per Common Share see reconciliation below
Three Months Ended
December 31
Twelve Months Ended
December 31
US$ cent except where indicated 2013 2014 2013 2014
Net Income (US$’000)
19,638
(13,078)
112,800
91,103
Weighted Average Shares Outstanding Diluted 78,241 78,762 78,241
78,402 Diluted EPS 0.25
(0.17)
1.44 1.16 Amortization of debt issuance costs 0.11 0.08 0.24 0.31
Unrealized (gain) loss on derivatives
(0.00)
0.04 -0.08 0.16 Share based compensation - 0.68 - 0.69 Tax effect
(0.00)
(0.02)
(0.00)
(0.03)
Effect of number of outstanding shares Dec 31 2014
(0.01)
(0.02)
(0.07)
(0.09)
Adjusted EPS
0.34
0.59
1.53
2.19
Number of outstanding shares at December 31, 2014 was
81,681,131
For Non-GAAP measure Return on Equity
(ROE) see reconciliation below
Twelve Months Ended
December 31
Twelve Months Ended
December 31
% except where indicated 2013 2014
Net Income ($ 000s)
112,800
91,103
Total shareholders’ equity ($ 000s) 1,293,751 1,432,997 ROE
8.7%
6.4%
Amortization of debt issuance costs
1.5%
1.7%
Unrealized (gain) loss on derivatives
(0.5%)
0.90% Share based compensation - 3.70% Tax effect
(0.0%)
(0.2%)
Adjusted ROE
9.70%
12.50%
For Non-GAAP measures in 2015 guidance
see reconciliation below
Twelve Months Ended
December 31
Twelve Months Ended
December 31
% 2015 2015
Return on Equity
12.8%
13.1%
Amortization of debt issuance costs 1.40% 1.40% Unrealized (gain)
loss on derivatives - - Share based payments 0.60% 0.60% Tax effect
(0.1%)
(0.1%)
Adjusted Return on Equity (%)
14.7%
15.0%
AvolonJonathan NeilanT: +353 1 663 3686M: +353 86 231
4135IR@avolon.aeroorJennifer PetersT: +353 1 663 3684M: +353 87 178
7021IR@avolon.aero