Chorus Aviation issues first quarter 2013 earnings and revises its dividend
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.
-- EBITDA(1 )of $34.2 million.
-- Operating income of $20.8 million.
-- Net income of $9.2 million, or $0.07 per basic share.
-- Adjusted net income(1) of $14.7 million, or $0.12 per basic
-- 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
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 January1, 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
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
In consideration of these factors, Chorus has reduced its quarterly dividend
from $0.15 per share to $0.075per 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
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
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 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.
EBITDA(1) 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: email@example.com 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 (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
For more information, visit www.flyjazz.ca.
Manon Stuart(902) 873-5054 Halifax, Nova Scotiamanon.firstname.lastname@example.org
Debra Williams(519) 457-8071 London, Ontariodebra.email@example.com
Nathalie Megann(902) 873-5094 Halifax, Nova
SOURCE: CHORUS AVIATION INC.
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