Net income per share of $0.18
Consistent quarterly profitability since 2006
HALIFAX,
Aug. 13, 2012 /CNW/ - Chorus Aviation
Inc. ("Chorus") (TSX: CHR.B CHR.A CHR.DB) today
announced its second quarter 2012 earnings, with net income of
$22.9 million or $0.18 per share, and adjusted net
income1 of $27.4 million
or $0.22 per share.
Q2 2012 HIGHLIGHTS
- Operating revenue of $426.3
million.
- Free Cash Flow1 of $38.7
million, or $0.31 per
share.
- Operating income of $36.6
million.
- Net income of $22.9 million, or
$0.18 per share.
- Adjusted net income1 of $27.4
million, or $0.22 per
share.
"I'm pleased with our second quarter
performance," said Joseph Randell,
President and Chief Executive Officer, Chorus. "Cash flow
remains strong, and we remain focused on strengthening our
foundation, improving our cost competitiveness and building value
for all our stakeholders."
"Safety is at the core of all that we do and we
were very pleased to take first place for innovation in Aviation
Safety Management at the European Safety Management Symposium last
May," stated Mr. Randell. "Jazz was selected from a strong field of
inspiring finalists spanning a wide spectrum of aviation
organizations from civilian and military sectors. Our
selection for this international award was attributed to our
success at integrating several existing systems into one safety and
business management system. Jazz employees are tremendously
proud of the accomplishment and I thank them for their continued
commitment to our top priority."
"The delivery of the last three Q400 aircraft,
from the original order of 15, was seamless, and our employees
continue to deliver a solid and safe operation," continued Mr.
Randell. "For the summer peak period we're operating 16 Q400s under
the Air Canada Express brand, and we were pleased to announce last
month that six additional Q400s will be added to the Jazz fleet by
the second quarter of 2013. The rejuvenation of the fleet
will deliver benefits to our stakeholders as the replacement of the
older regional jets with these efficient, state-of-the-art aircraft
will translate into better operating economics and passenger
comfort with less environmental impact."
"In our efforts to further improve our operating
efficiencies, we will consolidate our heavy maintenance operations
in Halifax by next summer," said
Mr. Randell. "By increasing the number of newer aircraft in
the Jazz fleet, the requirement for heavy maintenance work is
reduced. While we recognize the impact of this decision is
difficult for a number of our employees - it is the right direction
to take if we are to become more cost competitive and remain
relevant in this industry as the competitive landscape continues to
change."
"We were also very pleased to have successfully
negotiated with Air Canada new rates for controllable costs payable
by Air Canada under the Capacity Purchase Agreement ('CPA')
in respect of the years 2012 to 2014 inclusive. I thank the
members of the team for their efforts and believe the agreed cost
levels are achievable as long as we continue to focus on the solid
cost control we've exercised to date."
Financial Performance -Second Quarter 2012
Compared to Second Quarter 2011
Operating revenue increased from $402.0 million to $426.3
million, representing an increase of $24.2 million or 6.0%. Passenger revenue,
excluding pass-through costs, increased by $25.7 million or 10.8% primarily as a result of
$9.0 million related to the early
termination of the Thomas Cook Flight Services Agreement, rate
increases made pursuant to the CPA, an adjustment of $1.8 million related to the new rates which were
retroactive to January 1, 2012,
a higher US dollar exchange rate, and a $1.4
million increase in incentives earned under the CPA with Air
Canada; offset by a $1.9 million or
1.2% decrease in pass-through costs from $161.1 million to $159.2
million, which included $5.3
million related to fuel. Other revenue increased by
$0.3 million.
Operating expenses increased from $378.1 million to $389.7
million, an increase of $11.6
million or 3.1%. Controllable Costs increased by
$13.5 million, or 6.2%; offset by a
decrease in pass-through costs of $1.9
million. Controllable operating expenses were impacted
by the changes in the fleet ownership structure for the Q400
aircraft. CRJ-100 aircraft, previously under operating
leases, are being replaced by owned Q400 aircraft, whose ownership
costs are comprised of depreciation under operating expenses, and
interest under non-operating expenses. The Q400 aircraft lease
revenue under the CPA is captured under operating revenue and is
designed to provide compensation to Chorus for both depreciation
and interest expense. As interest expense is shown below the
operating margin, operating income increased by a similar amount on
a quarter over quarter basis.
Depreciation and amortization expense increased
by $4.0 million, of which
$3.0 million is related to the
purchase of Q400 aircraft, with the balance due to the increased
major maintenance overhauls and increased capital expenditures on
aircraft rotable parts and other equipment; offset by certain
assets reaching full amortization.
Aircraft maintenance expense increased by
$2.3 million as a result of increased
Block Hours of $0.4 million, the
effect of the increase in the US-dollar exchange rate on certain
material purchases of $1.3 million,
and increased other maintenance costs of $2.6 million; offset by a decrease in engine
maintenance activity due to the return of CRJ aircraft of
$2.0 million.
Salaries, wages and benefits increased by
$2.8 million as a result of wage and
scale increases under new collective agreements, increased Block
Hours, and increased pension expense resulting from a revised
actuarial valuation; offset by a reduction in the number of full
time equivalent employees.
Other expenses increased by $3.4 million primarily due to increased general
overhead expenses (crew expenses increased due to increased
activity, rates and training expenses) and professional fees.
Non-operating expenses increased $7.8 million. This change was mainly
attributable to a foreign exchange loss of $4.8 million (of which $4.5 million was related to an unrealized foreign
exchange loss on long-term debt and finance leases) arising as a
result of the change in value of the Canadian dollar relative to
the US dollar, and increased interest expense related to the Q400
aircraft financing of $2.1
million.
EBITDA1 was $50.4 million compared to $33.9 million in 2011, an increase of
$16.5 million or 48.9%. Free
Cash Flow was $38.7 million, an
increase of $15.4 million or 66.5%
from $23.3 million.
Operating income of $36.6
million for the three months ended June 30, 2012, was up $12.6 million or 52.6% over second quarter 2011
from $24.0 million.
Net income for the second quarter of 2012 was
$22.9 million or $0.18 per share, an increase of $6.0 million or 35.3% from $16.9 million or $0.14 per share.
CPA rate setting negotiations
On August 7, 2012,
Jazz and Air Canada finalized an agreement on the establishment of
new rates for controllable costs that are payable by Air Canada
under the CPA in respect of the years 2012 to 2014 inclusive.
This rate review and adjustment is required under the terms of the
CPA. The new rates are retroactive to January 1, 2012, and the parties have reconciled
the amounts previously paid to the amount owing based on the new
rates. The reconciliation is conducted so that the parties will be
in the same position they would have been had the new rates been in
effect as of January 1, 2012.
Update on investment in South American
regional carrier Pluna.
On April 30, 2010,
Chorus purchased a 33% non-voting interest in Latin American
Regional Aviation Holding Corporation ('LARAH'). LARAH
held an indirect 75% equity interest in Pluna Líneas Aéreas
Uruguayas S.A. ('Pluna'). The remaining 25% equity interest
in Pluna was held, indirectly, by the Government of Uruguay.
In the second quarter of 2012, it was announced
that Pluna was in financial difficulty, and that the Uruguayan
government had taken control of the airline, allowing it to
continue operating. All of the shares in Pluna held
indirectly by LARAH, including the portion indirectly owned by
Chorus, were placed in trust with the Montevideo Stock Exchange in return for
certain conditions and indemnities from the Uruguayan
government. As a result, Chorus recorded a write-down of
$16.4 million to the fair value of
the investment through other comprehensive loss, as there is no
indication that the LARAH shares hold any current value, and there
can be no assurances that a successful recapitalization of Pluna
will result in Chorus holding an ownership stake in the resulting
entity.
Subsequent to June 30,
2012, Pluna announced that it had ceased operations
indefinitely. The situation with Pluna has no effect on Jazz
operations or current cash flows.
Chorus Aviation Inc.'s unaudited interim
condensed consolidated financial statements for the three months
ended June 30, 2012, 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:
investorsinfo@chorusaviation.ca or (902) 873-5094.
Investor Conference Call / Audio
Webcast
Chorus will hold an analyst call at 9:30 a.m. ET on Tuesday,
August 14, 2012 to discuss the second quarter results.
The call may be accessed by dialing 1-888-231-8191. The call
will be simultaneously audio webcast via:
www.newswire.ca/en/webcast/detail/1001247/1081477 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's Investor Relations website at www.chorusaviation.ca.
A playback of the call can also be accessed until midnight ET, August 21,
2012, by dialing (416) 849-0833 or toll-free 1-
855-859-2056, and passcode 96894971# (pound key).
1 Non-GAAP Financial
Measures
EBITDA
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.
FREE CASH FLOW
Pre-conversion distributable cash was a key performance indicator
used by management to evaluate the ongoing performance of Jazz Air
Income Fund. Distributable cash is not a measure which is
commonly utilized in respect of a public corporation. Management
believes, however, that it is a term with which its shareholders
are familiar and has provided Free Cash Flow as a proxy for
previously reported distributable income. Free Cash Flow is
calculated in the same manner as distributable cash. Free Cash Flow
is defined as EBITDA less non-operating expenses, Maintenance
Capital Expenditures to sustain the operation, and adjusted for any
unrealized foreign exchange gain or loss on long-term debt and
finance leases and any unusual non-operating one-time items.
Other capital expenditures incurred to facilitate growth of the
business are excluded from this calculation.
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 2012, Chorus recorded a
$4.5 million loss in unrealized
foreign exchange on long-term debt and finance leases. This
adjustment more clearly reflects 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 three months ended June
30, 2012 and MD&A dated August
13, 2012, 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, 2012,
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. ("Chorus") was incorporated
on September 27, 2010 and is a
dividend-paying holding company which owns Jazz Aviation LP, Chorus
Leasing I Inc., Chorus Leasing II Inc., and Chorus Leasing III Inc.
(the leasing companies own the Q400 aircraft) and 7503695 Canada
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. Jazz currently operates
scheduled passenger service on behalf of Air Canada with over 860
departures per weekday to 84 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.