Adjusted net income of $21.4 million, $0.17 per share
Consistently profitable since 2006
HALIFAX, Aug. 13, 2013 /CNW/ – Chorus Aviation Inc. ("Chorus") (TSX: CHR.B CHR.A CHR.DB) today issued its second quarter 2013 earnings.
"We experienced positive operational and financial performance in the second quarter with an adjusted net income of $21.4 million or $0.17 per basic share," stated Joseph Randell, President and Chief Executive Officer, Chorus. "Net income was $7.9 million, and was impacted by $13.5 million in unrealized foreign exchange loss on long-term debt and finance leases which has no impact on our cash flows, and by $2.3 million in expenses related to our ongoing employee voluntary separation program that will reduce our costs as one of our many cost reduction initiatives."
"Having concluded the final round of evidentiary hearings in the benchmarking arbitration with Air Canada under our capacity purchase agreement, we are strongly of the view that the mark-up on controllable costs should not change," continued Mr. Randell. "Our increased confidence in our position, coupled with the belief of our Board of Directors that Chorus stock is undervalued, led to our recent share repurchases. To date we have repurchased and cancelled 1,871,800 Chorus shares for a total of $4.0 million under our normal course issuer bid; reducing the issued and outstanding float by approximately 1.5%. We will continue to monitor the market, and may from time to time repurchase shares for cancellation as we believe it is an effective way to utilize capital and build shareholder value."
Q2 2013 HIGHLIGHTS
- Operating revenue of $410.3 million.
- EBITDA1 of $48.0 million.
- Operating income of $31.7 million.
- Adjusted net income1 of $21.4 million, or $0.17 per basic share.
- Net income of $7.9 million, or $0.06 per basic share.
- Repurchased and cancelled 1,871,800 shares under normal course issuer bid.
- Billable Block Hours of 94,062.
Financial Performance -Second Quarter 2013 Compared to Second Quarter 2012
Operating revenue decreased from $426.3 million to $410.3 million, representing a decrease of $16.0 million or 3.7%. Passenger revenue, excluding pass-through costs, decreased by $5.9 million or 2.2% primarily as a result of no activity in the quarter for Thomas Cook (in the second quarter of 2012, a $9.0 million payment was recorded related to the early termination of the Thomas Cook Flight Services Agreement) and a 4.0% decrease in Billable Block Hours; offset by rate increases made pursuant to the Capacity Purchase Agreement ('CPA') with Air Canada, and a higher US dollar exchange rate. Pass-through costs reimbursed by Air Canada decreased from $159.2 million to $148.7 million, a decrease of $10.6 million or 6.6%, which included a decrease of $8.6 million related to fuel costs. Other revenue increased by $0.5 million.
Operating expenses decreased from $390.0 million to $378.6 million, a decrease of $11.4 million or 2.9%. Controllable Costs decreased by $0.9 million, or 0.4%, and pass-through costs by $10.6 million or 6.6%.
Salaries, wages and benefits decreased by $0.3 million primarily as a result of a reduction in the number of full time equivalent employees, a 3.9% decrease in Block Hours, and higher capitalized salaries and wages related to major maintenance overhauls; offset by voluntary employee severance costs related to flight crew and maintenance employees, wage and scale increases under new collective agreements, and increased pension expense resulting from a revised actuarial valuation.
Depreciation and amortization expense increased by $2.4 million, primarily related to the purchase of Q400 aircraft, increased capital expenditures on aircraft rotable parts and other equipment, and increased major maintenance overhauls; offset by certain assets having reached full amortization and a change in estimate related to the residual value of the Dash 8-100 and 300 aircraft.
Aircraft maintenance expense decreased by $1.6 million as a result of a $1.2 million reduction reflecting the cessation of Thomas Cook activity as of the comparative quarter, and decreased Block Hours of $1.5 million; offset by increased other maintenance costs of $1.0 million and an increase in the US-dollar exchange rate on certain material purchases of $0.1 million.
Aircraft rent decreased by $2.8 million primarily as a result of no expense in the quarter for Thomas Cook and the return of CRJ100 aircraft.
Other expenses decreased by $0.8 million primarily due to decreased general overhead expenses; offset by increased travel and training costs associated with the Q400 aircraft.
Non-operating expenses increased by $10.4 million. This change was mainly attributable to an increase of $8.2 million in foreign exchange (of which $9.0 million was related to an increase in unrealized foreign exchange loss on long-term debt and finance leases) and increased interest expense related to Q400 aircraft financing of $2.1 million.
EBITDA1 was $48.0 million compared to $50.1 million in 2012, a decrease of $2.2 million or 4.4%, producing an EBITDA margin of 11.7%. Standardized Free Cash Flow was $9.6 million.
Operating income of $31.7 million was down $4.6 million or 12.6% over second quarter 2012 from $36.3 million.
Net income for the second quarter of 2013 was $7.9 million or $0.06 per basic share, a decrease of $14.7 million or 65.1% from $22.6 million or $0.18 per basic share. On an adjusted basis, net income was $21.4 million or $0.17 per basic share, a decrease of 21.2% or a decrease of $0.05 per basic share from $27.2 million or $0.22 per basic share. A reconciliation of these measures to their nearest GAAP measure is provided in Chorus' Management's Discussion and Analysis dated August 13, 2013.
Chorus Aviation Inc.'s unaudited interim condensed consolidated financial statements for the period ended June 30, 2013 and accompanying Management's Discussion and Analysis (MD&A) are available at www.chorusaviation.ca and at www.sedar.com. A copy may also be obtained on request by contacting Investor Relations at: email@example.com or (902) 873-5094.
Investor Conference Call / Audio Webcast
Chorus will hold an analyst call at 9:30 a.m. ET on Wednesday, August 14, 2013 to discuss the second quarter 2013 results. The call may be accessed by dialing 1-888-231-8191. The call will be simultaneously audio webcast via: http://www.newswire.ca/en/webcast/detail/1194523/1309711 or in the Investor Relations section at www.chorusaviation.ca. This is a listen-in only audio webcast. Media Player or Real Player is required to listen to the broadcast; please download well in advance of the call.
The conference call webcast will be archived on Chorus' Investor Relations website at www.chorusaviation.ca. A playback of the call can also be accessed until midnight ET, August 21, 2013, by dialing (416) 849-0833 or toll-free 1- 855-859-2056, and passcode 15949049# (pound key).
1 Non-GAAP Financial Measures
EBITDA (earnings before interest, taxes, depreciation, amortization and obsolescence) is a non-GAAP financial measure commonly used throughout all industries to view operating results before interest expense, interest income, depreciation and amortization, gains and losses on property and equipment and other non-operating income and expenses. Management believes EBITDA assists investors in comparing Chorus' performance on a consistent basis without regard to depreciation and amortization, which are non-cash in nature and can vary significantly depending on accounting methods and non-operating factors such as historical cost. EBITDA should not be used as an exclusive measure of cash flow because it does not account for the impact on working capital growth, capital expenditures, debt repayments and other sources and uses of cash, which are disclosed in the statement of cash flows which form part of the financial statements.
STANDARDIZED FREE CASH FLOW
Standardized Free Cash Flow is defined as cash flows from operating activities, as reported in accordance with GAAP, less total capital expenditures and dividends.
ADJUSTED NET INCOME
Adjusted net income and adjusted earnings per share are calculated by adjusting net income by the amount of any unrealized foreign exchange gains and losses on long-term debt and finance leases. During the second quarter of 2013, Chorus recorded a $13.5 million loss in unrealized foreign exchange on long-term debt and finance leases. These adjustments more clearly reflect earnings from an operating perspective.
Caution regarding forward-looking information
This news release should be read in conjunction with Chorus' unaudited interim condensed consolidated financial statements for the period ended June 30, 2013 and MD&A dated August 13, 2013 filed with Canadian Securities regulatory authorities (available at www.sedar.com).
Certain statements in this news release may contain statements which are forward-looking. These forward-looking statements are identified by the use of terms and phrases such as "anticipate", "believe", "could", "estimate", "expect", "intend", "may", "plan", "predict", "project", "will", "would", and similar terms and phrases, including references to assumptions. Such statements may involve but are not limited to comments with respect to strategies, expectations, planned operations or future actions.
Forward-looking statements relate to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and other uncertain events. Forward-looking statements, by their nature, are based on assumptions, including those described below, and are subject to important risks and uncertainties. Any forecasts or forward-looking predictions or statements cannot be relied upon due to, amongst other things, changing external events and general uncertainties of the business. Such statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements to differ materially from those expressed in the forward-looking statements. Results indicated in forward-looking statements may differ materially from actual results for a number of reasons, including without limitation, risks relating to Chorus' relationship with Air Canada, risks relating to the airline industry, energy prices, general industry, market, credit, and economic conditions, competition, insurance issues and costs, supply issues, war, terrorist attacks, epidemic diseases, acts of God, changes in demand due to the seasonal nature of the business, the ability to reduce operating costs and employee counts, secure financing, employee relations, labour negotiations or disputes, restructuring, pension issues, currency exchange and interest rates, leverage and restructure covenants in future indebtedness, dilution of Chorus shareholders, uncertainty of dividend payments, managing growth, changes in laws, adverse regulatory developments or proceedings, pending and future litigation and actions by third parties. The forward-looking statements contained in this discussion represent Chorus' expectations as of August 13, 2013, and are subject to change after such date. However, Chorus disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required under applicable securities regulations.
About Chorus Aviation Inc.
Chorus Aviation Inc. was incorporated on September 27, 2010 and is a dividend-paying holding company which owns Jazz Aviation LP, and Chorus Leasing III Inc.
Chorus is traded on the Toronto Stock Exchange under the trading symbols of CHR.A, CHR.B and CHR.DB.
For more information, visit www.chorusaviation.ca
About Jazz Aviation LP
Jazz Aviation LP has a strong history in Canadian aviation with its roots going back to the 1930s. Jazz is wholly owned by Chorus Aviation Inc. and continues to generate some of the strongest operational and financial results in the North American aviation industry.
There are two airline divisions operated by Jazz Aviation LP: Air Canada Express and Jazz.
Air Canada Express: Under a capacity purchase agreement with Air Canada, Jazz provides service to and from lower-density markets as well as higher-density markets at off-peak times throughout Canada and to and from certain destinations in the United States. In the second quarter of 2013, Jazz operated scheduled passenger service on behalf of Air Canada with approximately 771 departures per weekday to 78 destinations in Canada and in the United States with a fleet of Canadian-made Bombardier aircraft.
Jazz: Under the Jazz brand, the airline offers charters throughout North America with a dedicated fleet of five Bombardier aircraft for corporate clients, governments, special interest groups and individuals seeking more convenience. Jazz also has the ability to offer airline operators services such as ground handling, dispatching, flight load planning, training and consulting.
For more information, visit www.flyjazz.ca.
SOURCE Chorus Aviation Inc.