CARGOJET PROVIDES UPDATE ON FLEET STRATEGY

MISSISSAUGA, ON, Jan. 15, 2024 /CNW/ - Cargojet Inc. ("Cargojet" or the "Corporation") (TSX: CJT) today provided an update on its ongoing efforts to further streamline its fleet strategy and the associated impacts to capital expenditures and cashflows.

"Throughout 2023 we exercised caution in deploying growth capital given the softer economic conditions," said Dr. Ajay Virmani, Executive Chairman, "Forecasts continue to indicate that the international air cargo market will remain soft in the short to medium term and deploying B-777s into the market would not be strategically prudent. We have decided to exit our commitments for the four remaining B-777 aircraft, while continuing to flex our B767 fleet to accommodate our organic growth strategy," noted Dr. Virmani. "Cargojet has substantially completed the operational groundwork to be able to enter the B-777 market should economic conditions change. Cargojet has also retained the rights to provide the optionality for future conversion slots."

"The holiday season performance for 2023 was in line with our expectations," noted Jamie Porteous, Co-Chief Executive Officer. "With our optimized fleet strategy and cost efficiencies gained throughout 2023, we are well positioned to deliver strong cashflows and shareholder value," commented Pauline Dhillon, Co-Chief Executive Officer.

As a further update to the above comment, the Corporation is providing the following estimated capital expenditures targets for the years ending December31, 2024 and 2025 (see "Notice on Forward-Looking Statements" below):

Cargojet is not expecting to incur any meaningful Growth Capital Expenditures in 2024. However, the Corporation continues to monitor macro-economic conditions for opportunities to deploy capital if profitable growth opportunities emerge in the future.

Cargojet will continue with a disciplined approach to capital allocation, focusing on four key principles;

1. Maintain dividend growth;
2. Continue to identify growth opportunities to deploy capital that meet its margin requirements;
3. Maintain a share buyback program under its normal course issuer bid ("NCIB"). The Corporation will determine the ultimate size of the buyback program based on available growth opportunities and subject to market conditions; and
4. Target Net Debt to Adjusted EBITDA Leverage Ratio(1) of 1.5xto 2.5x (2022 Leverage Ratio of 2.1).

Under its NCIB, the Corporation has purchased for cancellation an aggregate of 366,408 voting shares as at December31, 2023 for an average purchase price of $104.66, at a total cost of $38.3 million.

The table below sets forth the Corporation's cargo operating fleet as at December31, 2023 as well as the expected operating fleet requirements for the next two years (see "Notice on Forward-Looking Statements" below):

As previously disclosed, the Corporation has four surplus B757 freighters and is exploring options such as dry lease or ultimate sale of these aircraft. The potential sale of these four B757's is not anticipated to have a material impact on Revenues and/or Adjusted EBITDA(1). In the event that the Corporation enters into a leasing agreement, the Revenue and Adjusted EBITDA would increase in accordance with typical market terms and conditions for similar aircraft. The fleet table above assumes two aircraft are dry leased and the remaining two B757's are sold.

Cargojet currently owns the feedstock for two B767's and plans to convert them as the demand begins to recover over the next couple of years. Management believes that the current fleet plan will be sufficient to meet its short to medium-term objectives and Cargojet is well positioned to scale up operations as the economic cycle returns to growth.

All references to "$" in this press release are to Canadian dollars.

Notice on Forward-Looking Statements:

Implicit in forward-looking statements in respect of Cargojet's expectations for the Corporation's capital expenditure plans for 2024 and 2025 as described above are certain current assumptions, including assumptions regarding the Corporation's expectations for proceeds from aircraft dispositions and resulting Net Capital Expenditures, the expected operating fleet as described above (including plans for the four surplus B757 freighters and conversion feedstock for two B767's), expectations regarding the international air cargo market remaining soft in the short to medium term, the continuation of the Corporation's long-term contracts with key customers and on-time performance; the continued diversification of the Corporation's service offerings and demand for such offerings; the Corporation's expectations for long-term e-commerce growth trends; the availability of debt financing; availability of unrestricted air space; the availability of jet fuel at costs within historical trends; an average currency exchange rate of $1.35 per U.S. dollar in 2023-2026. The Corporation may review and revise its outlook and capital expenditure plans as economic, geopolitical, market and regulatory environments change.

In addition, forward-looking statements in this press release, including in respect of expected operating fleet and associated impacts to capital expenditures, are based on current expectations and entail various risks and uncertainties. There can be no assurances regarding (a)credit, market, currency, commodity market, inflation, interest rates, global supply chains, operational, and liquidity risks generally; (b)geopolitical events; and (c)other risks inherent to Cargojet's business and/or factors beyond its control which could have a material adverse effect on the Corporation.

Reference should be made to the Corporation's public filings available at www.sedar.com and at www.cargojet.com, including its most recent Annual Information Form filed with the Canadian securities regulators, its most recent Annual Consolidated Financial Statements and Notes thereto and related Management's Discussion and Analysis ("MD&A"), for a summary of material risks. These risks are not intended to represent a complete list of the risks that could affect the Corporation; however, these risks should be considered carefully. Actual results may materially differ from expectations, if known and unknown risks or uncertainties affect our business, or if our estimates or assumptions prove inaccurate. The forward-looking statements contained herein describe the Corporation's expectations as of the date of this news release and are subject to change after such date. However, Cargojet disclaims any intention or obligation to update or revise any forward-looking statements whether because of new information, future events or otherwise, except as required under applicable securities regulations.

Non-GAAP Financial Measures

Below is a description of certain non-GAAP financial measures and non-GAAP financial ratios used by the Corporation to provide readers with additional information on its financial and operating performance. Non-GAAP financial ratios are ratios or percentages that are calculated using a non-GAAP financial measure. Such measures are not recognized measures for financial statement presentation under GAAP, do not have standardized meanings, may not be comparable to similar measures presented by other entities and should not be considered a substitute for or superior to GAAP results.

"Adjusted EBITDA" is defined as earnings before share-based compensation, interest, taxes, depreciation, amortization, and other adjustments. Adjusted EBITDA is calculated as net income or loss excluding the following: depreciation, aircraft heavy maintenance amortization, contract asset amortization, unrealized gains or losses on fair value of cash settled share based payment arrangement, swaps and warrants, realized gain or losses on settlement of swaps, interest on long-term debt, deferred income taxes, provision for current income taxes, gain or loss on disposal of property, plant and equipment, impairment of property plant and equipment, unrealized foreign exchange gains or losses, gains or losses on settlement of debts or finance lease liabilities, share based compensation and provision for employee pension. For a reconciliation of historical Adjusted EBITDA, please refer to page 15 of our annual MD&A.

"EBITDA" is defined as earnings before interest, taxes, depreciation and amortization. EBITDA is calculated as net income or loss excluding the following: depreciation, and aircraft heavy maintenance amortization, interest on long-term debt, deferred income taxes and provision for current income taxes. For a reconciliation of historical EBITDA, please refer to page 15 of our annual MD&A.

"Growth Capital Expenditures" (or "Growth Capex") are defined as discretionary investments of the Corporation to increase capacity, geographic reach and to acquire more customers with a purpose to grow operational revenue, profits and cash flows.

"Maintenance Capital Expenditures" (or "Maintenance Capex") are defined as any fixed assets acquired during a reporting period to maintain the Corporation aircraft fleet and other assets at the level required to continue operating the existing business. They also include any capital expenditure required to extend the operational life of the fleet including heavy maintenance. Maintenance capital expenditures exclude any capital expenditures that result in new and additional capacity required to grow operational revenue and cash flows. For historical Growth Capital Expenditures and Maintenance Capital Expenditures, please refer to page 15 of our annual MD&A.

"Net Capital Expenditures" are defined as Growth Capital Expenditures plus Maintenance Capital Expenditures less proceeds from dispositions of owned or leased aircraft, commitments to convert aircraft.

"Net Debt to Adjusted EBITDA Leverage Ratio" (or "Leverage Ratio") is a measure of our level of financial leverage and is obtained by dividing Net Debt by Adjusted EBITDA and is measure of the Corporation's ability to meet its financial obligations. Net Debt is a metric obtained by subtracting cash from debt and lease liabilities and is used to monitor the Corporation's financial leverage. For a historical calculation of Net Debt, please refer to page 28 of our annual Consolidated Financial Statements.

About Cargojet

Cargojet is Canada's leading provider of time sensitive premium air cargo services to all major cities across North America, providing Dedicated, ACMI and International Charter services and carries over 25,000,000 pounds of cargo weekly. Cargojet operates its network with its own fleet of 41 aircraft.

SOURCE Cargojet Inc.

View original content: http://www.newswire.ca/en/releases/archive/January2024/15/c6237.html