Annual adjusted net earnings per share increases to
$0.77
Consistent quarterly profitability since 2006
HALIFAX,
Feb. 20, 2013 /CNW/ - Chorus Aviation
Inc. ("Chorus") (TSX: CHR.B CHR.A CHR.DB) today
announced of its fourth quarter and year end 2012 earnings.
The highlights are provided below.
Q4 2012 HIGHLIGHTS
- Operating revenue of $411.7
million.
- Free Cash Flow1 of $30.3
million, or $0.24 per basic
share.
- Operating income of $25.4
million.
- Net income of $14.7 million, or
$0.12 per basic share.
- Adjusted net income1 of $17.9
million, or $0.14 per basic
share.
- Billable Block Hours of 97,249.
Year end 2012 HIGHLIGHTS
- Operating revenue of $1,710.7
million.
- Free Cash Flow1 of $139.8
million, or $1.13 per basic
share.
- Operating income of $128.6
million.
- Net income of $101.1 million, or
$0.81 per basic share.
- Adjusted net income1 of $95.5
million, or $0.77 per basic
share.
- Billable Block Hours of 404,101.
"I am pleased with our annual and fourth quarter
financial and operational performance," said Joseph Randell, President and Chief Executive
Officer, Chorus. "Our operating income improvement of
$26.6 million was driven by the
operating margin from our Q400 leasing operations, the one-time
termination fee from Thomas Cook and
incentive revenue earned under the CPA. Our continuous focus on
safety and operational excellence resulted in a $4.4 million increase in performance incentives
earned in 2012 over 2011 as we consistently maintained the highest
standing in on-time performance amongst Canada's major operators. This is a
great accomplishment when you consider we fly more daily flights
within Canada and fly to more
Canadian destinations than any other carrier - I commend our
employees for their exceptional hard work and dedication."
"The resolution to the benchmarking arbitration
with Air Canada has unfortunately been further delayed," continued
Randell. "Although there can be no assurances as to the outcome, we
remain confident in our position and continue to work to reach a
successful conclusion on the remaining issues in dispute. In the
meantime, we prepare for the future by focusing on the imperative
of cost competitiveness while strengthening our foundation. This
will allow us to sustain a strong organization."
Financial Performance - Fourth Quarter 2012
Compared to Fourth Quarter 2011
Operating revenue increased from $407.7 million to $411.7
million, representing an increase of $4.0 million or 1.0%. Passenger revenue,
excluding pass-through costs, increased by $4.9 million or 2.0% primarily as a result of an
increase in Billable Block Hours, rate increases made pursuant to
the Capacity Purchase Agreement ('CPA') with Air Canada, increased
revenue related to a new engine maintenance contract for the Q400
aircraft of $5.5 million, and a
$0.1 million increase in incentives
earned under the CPA; offset by a lower US dollar exchange rate and
no activity in the quarter for Thomas
Cook. Pass-through costs decreased from $158.4 million to $157.4
million; a decrease of $1.0
million or 0.7% which included an increase of $1.8 million related to fuel costs. Other revenue
increased by $0.1 million.
Operating expenses increased from $382.4 million to $386.3
million, an increase of $3.8
million or 1.0%. Controllable Costs increased by
$4.9 million, or 2.2%; offset by a
decrease in pass-through costs of $1.0
million.
Depreciation and amortization expense increased
by $2.1 million, primarily related to
the purchase of Q400 aircraft, with the balance due to increased
capital expenditures on aircraft rotable parts and other equipment;
offset by decreased major maintenance overhauls and certain assets
having reached full amortization.
Aircraft maintenance expense increased by
$7.9 million as a result of increased
Block Hours of $0.6 million,
increased maintenance cost for a new maintenance contract for the
Q400 aircraft of $5.5 million,
increased engine overhaul on charter aircraft of $1.2 million, an inventory adjustment of
$1.6 million and increased other
maintenance costs of $1.9 million;
offset by a decrease in engine maintenance activity due to engine
charges for the CRJ aircraft of $1.8
million and a decrease in the US-dollar exchange rate on
certain material purchases of $1.1
million.
Aircraft rent decreased by $4.4 million primarily as a result of no expense
in the fourth quarter for Thomas
Cook aircraft, the return of CRJ aircraft of $2.1 million and a lower US dollar exchange rate
of $0.9 million.
Salaries, wages and benefits decreased by
$2.1 million primarily as a result of
a reduction in the number of full time equivalent employees; offset
by wage and scale increases under new collective agreements,
increased incentive compensation expense, increased pension expense
resulting from a revised actuarial valuation and lower capitalized
salaries and wages related to major maintenance overhauls.
Other expenses decreased by $0.7 million primarily due to decreased
professional fees and general overhead expenses.
Non-operating expenses increased $10.2 million. This change was mainly
attributable to a foreign exchange loss of $3.8 million (of which $3.3 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 $1.0
million.
EBITDA1 was $40.2 million compared to $38.0 million in 2011, an increase of
$2.2 million or 5.9%, producing an
EBITDA margin of 9.8%. Free Cash Flow was $30.3 million, an increase of $1.0 million or 3.3% from $29.4 million.
Operating income of $25.4
million for the three months ended December 31, 2012, was up $0.1 million or 0.4% over fourth quarter 2011
from $25.3 million.
Net income for the fourth quarter of 2012 was
$14.7 million or $0.12 per basic share, a decrease of $8.0 million or 35.3% from $22.7 million or $0.18 per basic share. On an adjusted basis, net
income was $17.9 million or
$0.14 per basic share, a decrease of
8.3% or $0.02 per basic share from
$19.6 million or $0.16 per basic share.
Financial Performance - Year End 2012
Compared to Year End 2011
Operating revenue increased from $1,664.5 million to $1,710.7 million, representing an increase of
$46.2 million or 2.8%.
Passenger revenue, excluding pass-through costs, increased by
$56.8 million or 5.8% primarily as a
result of a $9.0 million settlement
fee related to the early termination of the Thomas Cook Flight
Services Agreement, a 0.7% increase in Billable Block Hours, rate
increases made pursuant to the CPA with Air Canada, a higher US
dollar exchange rate, and a $4.4
million increase in incentives earned under the CPA.
Pass-through costs decreased from $670.6
million to $659.3 million, or
$11.3 million or 1.7%, which included
$14.6 million related to fuel cost.
Other revenue increased by $0.7
million.
Operating expenses increased from $1,562.5 million to $1,582.1 million, an increase of $19.6 million or 1.3%. Controllable Costs
increased by $30.9 million or 3.5%;
offset by a decrease in pass-through costs of $11.3 million.
Non-operating expenses decreased by $4.1 million. This change was mainly
attributable to a foreign exchange gain of $5.9 million (of which $5.6 million was related to an unrealized foreign
exchange gain 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; offset by increased interest expense related to the
Q400 aircraft financing of $6.6
million.
EBITDA1 was $185.3 million compared to $146.1 million in 2011, an increase of
$39.3 million or 26.9%, producing an
EBITDA margin of 10.8%. Free Cash Flow was $139.8 million, an increase of $33.0 million or 30.9% from $106.8 million.
Operating income was $128.6 million for the year ended December 31, 2012, was up $26.6 million or 26.1% over the year 2011 from
$101.9 million.
Net income for the year 2012 was $101.1 million or $0.81 per basic share, an increase of
$33.0 million or 48.4% from
$68.1 million or $0.55 per basic share. On an adjusted basis, net
income was $95.5 million or
$0.77 per basic share, an increase of
$23.8 million or 33.3% from
$71.7 million or $0.58 per share.
Benchmarking Arbitration (Refer to
Section 14 -Economic Dependence and Section 19 - Risks Relating to
Current Legal Proceedings of Chorus' 2012 MD&A for additional
information)
As communicated on October 2 and 3, 2012, the arbitration panel (the
'Panel') released its award (the 'Award') on the 2009 benchmark
exercise between Jazz Aviation LP ('Jazz') (a wholly owned
subsidiary of Chorus) and Air Canada.
In the Award, two of the three member Panel
concluded that the component unit cost driver methodology ('CUCD')
put forward by Air Canada was the appropriate methodology to use in
the 2009 Benchmark to compare Chorus' Unit Costs to the stage
length adjusted median controllable unit costs of the Comparable
Operators. However, the Panel also agreed with Chorus that a number
of the additional adjustments proposed by Chorus were also required
to be made (the "Adjustments") but did not provide guidance on the
calculation of such Adjustments. The Panel also agreed with Chorus
that fleet age impacts the rate at which maintenance costs
increase. However, the Panel did not specify a methodology for the
Fleet Age Adjustment and directed Air Canada and Chorus to
negotiate a further adjustment that would account for the impact of
fleet age on the rate at which maintenance costs increase (the
"Fleet Age Adjustment") failing which the parties will submit new
proposals and analysis to the Panel on that issue.
There remain substantive disputes between the
parties with respect to the interpretation and application of the
Award and its impact on the Controllable Mark-Up. The parties
have been unable to reach agreement on either the calculation of
certain of the Adjustments or the Fleet Age Adjustment.
Air Canada took
the position at the hearing that there should be no such Fleet
Age Adjustment but now is taking the position that a Fleet Age
Adjustment ought to be made and that such adjustment should be in
its favour. The effect of making the Fleet Age Adjustment, in
the manner asserted by Air Canada, would be to materially reduce
the Controllable Mark-Up below the 11.41% rate that Air Canada
asserts should otherwise result from the application of the other
Adjustments.
Chorus remains of the view that, given its older
fleet relative to those of the relevant comparable operators, and
consistent with the position it took at the initial hearing, any
Fleet Age Adjustment would only be to the benefit of Chorus and
therefore regardless of the decision on the other Adjustment, the
Fleet Age Adjustment should result in the Controllable Mark-Up
remaining at 12.50% going forward until at least the 2015
Benchmark and that it should not be required to repay Air
Canada any amounts in respect of payments made since January 1, 2010.
Following the release of the Award, the parties
had scheduled a further hearing with the Panel to occur in the last
week of November 2012 to resolve the
outstanding issues in dispute, including the impact of the Fleet
Age Adjustment. That hearing was subsequently adjourned to the last
week of January 2013 and then to the
first week of April 2013 in order to
provide the parties with additional time to put forward evidence on
the issues which remain in dispute.
Normal Course Issuer Bid
Chorus also announced today that it intends to
make a normal course issuer bid. Under the bid, which is subject to
acceptance by the Toronto Stock Exchange (the "TSX"), Chorus
will have the right to purchase for cancellation up to a maximum of
11,087,520 of its Class A Variable Voting shares and/or Class B
Voting shares (collectively, the "Shares"), representing 10%
of the public float of the Shares. As of February 19, 2013, Chorus had 124,015,471 Shares
issued and outstanding, of which 110,875,196 Shares constitute the
total public float of the Shares. Purchases made pursuant to the
bid will be made in the open market through the facilities of the
TSX in accordance with the rules and policies of the TSX. Chorus is
proposing to commence the bid on or about February 28, 2013 and have it remain in effect
until one year from the date on which purchases commence. Shares
purchased by Chorus pursuant to the bid will be cancelled. Chorus
has not purchased any common shares during the previous year
pursuant to any issuer bid.
"The directors and management of Chorus believe
that the market price of the Shares during the period of the bid
may be such that the purchase of Shares by Chorus for cancellation
would be in the best interests of Chorus and an appropriate use of
corporate funds in light of potential benefits to remaining
shareholders," said Mr. Randell.
Chorus Aviation Inc.'s audited consolidated
financial statements for the years ended December 31, 2012 and December 31, 2011, 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 9:00 a.m. ET on Thursday,
February 21, 2013 to discuss the fourth quarter and year end
2012 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/1097399/1195627or 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, February 28,
2013, by dialing (416) 849-0833 or toll-free 1-
855-859-2056, and passcode 88335638# (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 fourth quarter of 2012, Chorus recorded a
$3.3 million loss in unrealized
foreign exchange on long-term debt and finance leases. On an
annual basis, Chorus recorded a $5.6
million gain 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' audited consolidated financial statements for the
years ended December 31, 2012 and
December 31, 2011, and MD&A dated
February 20, 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 Jazz Aviation LP's 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 February 20,
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. ("Chorus") 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 fourth quarter of
2012, Jazz operated scheduled passenger service on behalf of Air
Canada with approximately 779 departures per weekday to 82
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.