HALIFAX,
May 9, 2013 /CNW/ - Chorus Aviation
Inc. ("Chorus") (TSX: CHR.B CHR.A CHR.DB) today
issued its first quarter 2013 earnings, and is revising its
quarterly dividend to $0.075 per
share from $0.15 per share.
Q1 2013 HIGHLIGHTS
- Operating revenue of $416.3
million.
- EBITDA1 of $34.2
million.
- Operating income of $20.8
million.
- Net income of $9.2 million, or
$0.07 per basic share.
- Adjusted net income1 of $14.7
million, or $0.12 per basic
share.
- Billable Block Hours of 97, 202.
"The first quarter delivered solid results;
however, two items negatively impacted the bottom line," said
Joseph Randell, President and Chief
Executive Officer, Chorus. "In our continued efforts to
improve operational efficiency and to reduce costs, we enacted a
voluntary separation program for our more senior pilots and
maintenance employees. The severance cost of $5.7 million will provide a return within the
next two years as ongoing operational costs are reduced. This
expense, when factored with the unrealized foreign exchange loss of
$5.6 million into the adjusted net
income for the quarter, increases earnings per share to the current
market consensus of $0.17 per basic
share."
DIVIDEND
Chorus and Air Canada are involved in an ongoing
complex arbitration process regarding the 2009 Benchmark.
Chorus remains confident in its position that the Controllable
Mark-up of 12.5% in the Capacity Purchase Agreement ('CPA') should
not change as a result of the arbitration. Accordingly, no
amounts have been recorded in the accounts of Chorus in 2010, 2011,
2012 or 2013 related to the Air Canada claim. Management has
determined that it is not probable that the Air Canada claim will
be successful, and it is not practicable to determine an estimate
of the possible financial effect, if any, with sufficient
reliability.
However, in any litigation process there is
always some risk of an adverse outcome. This risk combined with the
extended duration of the arbitration has created the risk of a
material retroactive amount owing to Air Canada for the period
commencing January 1, 2010
should Air Canada succeed in its claim for a material fleet age
adjustment in its favour. The longer this process continues
without resolution, the larger the amount of any potential
retroactive payment.
In addition, Chorus' $80.2 million convertible debentures come due in
December 2014. Chorus anticipates
that an increase in liquidity will provide increased flexibility in
addressing the maturity of those debentures, in the context of
challenging conditions for the airline industry and global economic
uncertainty. Those debentures, issued in November 2009, were used to pay part of the term
debt of $115.0 million which was
established at the time of the Chorus initial public offering in
2006 and matured in February
2010. As a result, Chorus believes that strengthening
its cash position during this period is prudent.
Chorus will continue to manage its financial
leverage ratios, such as its adjusted net debt to equity ratio
which has increased as a result of the financing of its new Q400
aircraft fleet. Such continued accretive investment in fleet
renewal may occur either through refurbishment of the classic Dash
8-100 and Dash 8-300 series aircraft or further investment in new
generation aircraft.
In consideration of these factors, Chorus has
reduced its quarterly dividend from $0.15 per share to $0.075 per share going forward. This will
enable Chorus to retain additional cash of $9.3 million per quarter.
While Chorus has current cash available to pay
the dividend at the previous rate, the Board of Directors has
determined that, given the factors discussed above, it is prudent
and advisable to conserve Chorus' financial resources.
"We have, and continue to prudently manage our
financial resources," continued Mr. Randell. "The regional
airline industry is changing dramatically both here and south of
the border. Competition is increasing significantly. We must
continue in our efforts to reduce costs, strengthen the
fundamentals of our business, and improve our financial position to
ensure we have the flexibility required to effectively respond and
compete in our ever-changing markets."
The Board of Directors will continue to assess
the dividend payment on an ongoing basis.
Financial Performance -First Quarter 2013
Compared to First Quarter 2012
Operating revenue decreased from $437.1 million to $416.3
million, representing a decrease of $20.8 million or 4.8%. Passenger revenue,
excluding pass-through costs, decreased by $6.4 million or 2.5% primarily as a result of no
activity in the quarter for Thomas
Cook; offset by rate increases made pursuant to the CPA with
Air Canada, an increase in Billable Block Hours of 0.8%, a
$0.2 million increase in incentives
earned under the CPA, and a higher US dollar exchange rate.
Pass-through costs decreased from $176.7
million to $162.0 million; a
decrease of $14.7 million or 8.3%,
which included a decrease of $1.8
million related to fuel costs. Other revenue increased by
$0.2 million.
Operating expenses decreased from $407.4 million to $395.5
million, a decrease of $12.0
million or 2.9%. Controllable Costs increased by
$2.7 million, or 1.2%; offset by a
decrease in pass-through costs of $14.7
million.
Salaries, wages and benefits increased by
$3.1 million primarily as a result of
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; offset by a reduction in the number
of full time equivalent employees and higher capitalized salaries
and wages related to major maintenance overhauls.
Depreciation and amortization expense increased
by $0.5 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
$2.4 million as a result of a
$4.6 million reduction related to no
activity for Thomas Cook; offset by
an increase in engine maintenance activity due to engine charges
for the CRJ705 and Dash 8 - 300 aircraft of $1.2 million, increased other maintenance costs
of $0.5 million and an increase in
the US-dollar exchange rate on certain material purchases of
$0.5 million.
Aircraft rent decreased by $5.4 million primarily as a result of no expense
in the quarter for Thomas Cook
aircraft and the return of CRJ aircraft.
Other expenses increased by $1.3 million primarily due to increased
professional fees, increased travel and training costs associated
with the Q400 aircraft and increased general overhead expenses.
Non-operating expenses increased by $9.0 million. This change was mainly
attributable to an increase in foreign exchange of $8.8 million (of which $8.9 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 $1.0 million; offset by
$0.8 million in other income related
to a government grant.
EBITDA1 was $34.2 million compared to $42.6 million in 2012, a decrease of $8.4 million or 19.6%, producing an EBITDA margin
of 8.2%. Standardized Free Cash Flow was negative $110.9 million, impacted primarily by the
continuing growth capital expenditures related to the purchase of
Q400 aircraft.
Operating income of $20.8
million was down $8.8 million
or 29.7% over first quarter 2012 from $29.6
million.
Net income for the first quarter of 2013 was
$9.2 million or $0.07 per basic share, a decrease of $17.0 million or 64.9% from $26.2 million or $0.21 per basic share. On an adjusted basis, net
income was $14.7 million or
$0.12 per basic share, a decrease of
35.4% or $0.06 per basic share from
$22.8 million or $0.18 per basic share.
Chorus Aviation Inc.'s unaudited interim
condensed consolidated financial statements for the period ended
March 31, 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:
investorsinfo@chorusaviation.ca or (902) 873-5094.
Investor Conference Call / Audio
Webcast
Chorus will hold an analyst call at 11:00 a.m. ET on Friday,
May 10, 2013 to discuss the first quarter 2013
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/1097399/1195627 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, May 17,
2013, by dialing (416) 849-0833 or toll-free 1-
855-859-2056, and passcode 34548114# (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.
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 first quarter of 2013, Chorus recorded an
$5.6 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 March 31,
2013 and MD&A dated May 9,
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 May 9, 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 first quarter of
2013, Jazz operated scheduled passenger service on behalf of Air
Canada with approximately 789 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.