- Intention to change from quarterly to monthly dividend in
third quarter 2014
- Intention to complete the early redemption of outstanding
convertible debentures
Best on-time arrival performance in Canada for the tenth consecutive quarter
Consistent quarterly profitability since 2006
HALIFAX, May 15, 2014 /CNW/ - Chorus Aviation Inc.
('Chorus') (TSX: CHR.B CHR.A CHR.DB) today announced its first
quarter 2014 earnings.
Q1 2014 HIGHLIGHTS
- EBITDA1 of $47.3
million, up 38.3%.
- EBITDA margin of 11.4%.
- Operating income of $31.2
million, up 50.0%.
- Adjusted net income1 of $20.3
million, up 38.0%.
- Adjusted net income per share1 of $0.17 per basic share.
- $60.0 million early, partial
repayment of 9.5% maturing convertible debentures.
For the first quarter 2014, Chorus reported
EBITDA of $47.3 million compared to
$34.2 million in the same quarter
2013, an increase of $13.1 million.
Operating income was $31.2 million,
$10.4 million higher than the same
period 2013. Adjusted net income of $20.3
million or $0.17 per basic
share, was up by $5.6 million or
$0.05 per basic share over first
quarter 2013. Chorus incurred $2.8
million in voluntary employee severance in the first quarter
versus $5.7 million in the same
period in 2013. Chorus has invested $12.7
million since the inception of this cost savings program in
the first quarter of 2013.
"Our solid operational performance and our cost
reduction initiatives generated strong operating income and cash
flows from operations," said Joseph
Randell, President and Chief Executive Officer, Chorus.
"Returns from our cost reduction efforts, including our continuing
investment in voluntary employee severance programs, are to the
benefit of all our stakeholders. In addition to achieving a 38
percent increase in EBITDA and a 50 percent improvement in
operating income over the same period last year, we also topped
Canada's other major airlines for
the best on-time arrival performance for the tenth consecutive
quarter which contributed to a $1.6
million increase in performance incentives
quarter-over-quarter as reported by Flight Stats Inc. Our
operational expertise has allowed us to build an airline with
superior scope and scale, and has earned us a reputation for safe,
reliable and efficient service. I commend our employees for
their continued focus on safety and operational excellence.
"Strong cash flow from operating activities of
$45.7 million, an increase of
$12.8 million quarter over quarter,
has allowed us to announce the early redemption of the remaining
$20.2 million in 9.50% convertible
debentures. By strengthening our capital structure and increasing
our financial flexibility we believe we will deliver additional
value to our shareholders as we progress through current and future
challenges and opportunities," concluded Mr. Randell.
For reporting purposes, at each quarter end,
Chorus converts its US denominated aircraft debt into equivalent
Canadian dollars based on the prevailing exchange rate.
Chorus manages its exposure to currency risk on such long-term debt
by billing related lease payments within the Capacity Purchase
Agreement ('CPA') with Air Canada in the underlying currency
related (US dollars) to the aircraft debt. In the first
quarter of 2014, Chorus had an unrealized foreign exchange loss of
$14.7 million versus an unrealized
foreign exchange loss of $5.6 million
in the same period of 2013.
Financial Performance -First Quarter 2014
Compared to First Quarter 2013
Operating revenue decreased from $416.3 million to $414.6
million, representing a decrease of $1.7 million or 0.4%. Passenger revenue,
excluding pass-through costs, increased by $9.5 million or 3.8% primarily as a result of
rate increases made pursuant to the CPA with Air Canada, a higher
US dollar exchange rate and a $1.6
million increase in incentives earned under the CPA with Air
Canada; offset by decreased CPA Billable Block Hours. Pass-through
costs reimbursed by Air Canada decreased from $162.0 million to $149.9
million, a decrease of $12.1
million or 7.5%, which included a decrease of $1.3 million related to fuel costs, and
$9.2 million related to airport and
navigation fees and terminal handling services. (Effective
January 1, 2014, Air Canada entered
into a commercial agreement with the Greater Toronto Airport
Authority ('GTAA') that encompasses Chorus' Air Canada Express
operations. GTAA costs related to landing, terminal and other
airport user fees which are treated as pass-through costs under the
CPA are now paid directly by Air Canada pursuant to this
agreement.) Other revenue increased by $0.9
million.
Operating expenses decreased from $395.5 million to $383.3
million, a decrease of $12.1
million or 3.1%. Controllable Costs of $233.5 million were consistent with the same
period last year. Voluntary employee severance costs of
approximately $2.8 million were
incurred for the three months ended March
31, 2014.
After adjusting for voluntary employee severance
and capitalized major maintenance overhaul labour, Chorus'
salaries, wages and benefits (including pension, incentive
compensation and other employee benefits) were down $2.5 million period over period. Cost
savings initiatives introduced last year, including the voluntary
separation program, consolidation of heavy maintenance activities,
and management and administrative reductions have been successful
in reducing senior full time equivalents by 4.5% and lowering
average employee compensation. Voluntary severance costs paid
during the three months ended March 31,
2014 were $2.8 million, a
decrease of $2.9 million from the
$5.7 million paid in the same period
of 2013. Heavy maintenance labour capitalized as a result of
major maintenance overhauls on owned aircraft was $1.7 million in the quarter or approximately
$0.9 million lower than the same
period in 2013.
Depreciation and amortization expense increased
by $2.7 million, primarily related to
the Q400 aircraft, a change in the estimated residual value of the
Dash 8-100 and 300 aircraft in 2013, and increased capital
expenditures on aircraft rotable parts and other equipment; offset
by decreased major maintenance overhauls.
Aircraft maintenance expense increased by
$2.4 million as a result of a higher
US dollar exchange rate that resulted in an increase on certain
maintenance material purchases of $2.6
million; offset by decreased Block Hours and other
maintenance costs of $0.2
million.
Aircraft rent increased by $0.8 million primarily as a result of a higher US
dollar exchange rate; offset by the return of CRJ100 aircraft.
Other expenses decreased by $1.1 million primarily due to decreased general
overhead expenses.
Non-operating expenses increased by $10.4 million. This change was mainly
attributable to an increase of $8.6
million in foreign exchange (of which $9.1 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 $0.8 million, increased
interest accretion of $1.1 million
related to the partial redemption of the Convertible
Debentures and the absence in the first quarter, 2014 of
$0.8 million in other income related
to non-repayable government assistance; offset by decreased
interest expense related to the partial redemption of the
Convertible Debentures of $0.7
million.
EBITDA was $47.3
million compared to $34.2
million in 2013, an increase of $13.1
million or 38.3%, producing an EBITDA margin of 11.4 %.
Standardized free cash flow1 was $25.3 million.
Operating income of $31.2
million was up $10.4 million
or 50.0% over first quarter 2013 from $20.8
million.
Net income for the first quarter of 2014 was
$5.6 million or $0.05 per basic share, a decrease of $3.6 million from $9.2
million. On an adjusted basis, net income was $20.3 million or $0.17 per basic share, an increase of
$5.6 million from $14.7 million. A reconciliation of these non-GAAP
measures to their nearest GAAP measure is provided in Chorus'
Management's Discussion and Analysis dated May 14, 2014.
Dividend
Commencing in the third quarter, Chorus intends
to move to a monthly dividend in place of its current quarterly
dividend policy. The monthly equivalent of the current $0.1125 per share quarterly dividend is
$0.0375 per share. Chorus' Board
of Directors evaluates the dividend on a regular basis and the
dividend is declared at the discretion of the Board.
Convertible Debentures
Chorus also announced that it has exercised its
right to redeem its remaining outstanding 9.50% Convertible
Unsecured Subordinated Debentures ('Debentures') maturing on
December 31, 2014, in accordance with
the terms of the trust indenture governing the Debentures ('Trust
Indenture'). On June 20, 2014
(the 'Redemption Date'), Chorus will redeem the remaining
$20.21 million of the outstanding
balance of Debentures. On redemption, Chorus will pay to the
holders of the redeemed Debentures the outstanding principal amount
of the Debentures to be redeemed (the 'Redemption Price'), together
with all accrued and unpaid interest thereon up to but excluding
the Redemption Date, for a total of $1,045.00 per $1,000.00 principal amount of Debentures.
The Debentures that are redeemed will cease to bear interest from
and after the Redemption Date. Surplus cash from operations will
fund this transaction.
Pursuant to the terms of the Trust Indenture,
holders of the Debentures that are to be redeemed have the right
until the last business day prior to the Redemption Date to convert
their Debentures into Class A Variable Voting Shares ('Class A
Shares') or Class B Voting Shares ('Class B Shares') of Chorus, as
applicable, in accordance with the Trust Indenture and the
provisions attaching to the Class A Shares and the Class B Shares ,
at a conversion price of $5.25 per
share, being a rate of 190.4762 shares per $1,000.00 principal amount of Debentures.
"The early, full repayment of the outstanding
balance on this 9.5% maturing debt will strengthen our balance
sheet as we work to build additional value for our shareholders and
strengthen our bottom line," concluded Mr. Randell.
For more information, please contact Nyari
Chifamba at CIBC Mellon Trust Company, the indenture trustee for
the Debentures, at telephone 416.933.8524, or email
Nyari.Chifamba@bnymellon.com.
Investor Conference Call / Audio
Webcast
Chorus will hold an analyst call at 11:00 a.m. ET on Thursday,
May 15, 2014 to discuss the first quarter 2014
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/1325005/1463569 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 22, 2014, by dialing
(416) 849-0833 or toll-free 1- 855-859-2056, and passcode 17191697#
(pound key).
1 Non-GAAP Financial
Measures
EBITDA
EBITDA (net income before net interest expense, income taxes,
depreciation, amortization and other items such as asset impairment
and foreign exchange gains or losses) is a non-GAAP financial
measure used by Chorus as a supplemental financial measure of
operational performance. 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 of working capital
growth, capital expenditures, debt repayments and other sources and
uses of cash, which are disclosed in the statement of cash flows,
forming part of the financial statements.
ADJUSTED NET INCOME
Adjusted net income and Adjusted net income per share are used by
Chorus to assess performance without the effects of unrealized
foreign exchange gains or losses on long-term debt and finance
leases related to aircraft. Chorus manages its exposure to
currency risk on such long-term debt by billing the lease payments
within the CPA in the underlying currency related (US dollars) to
the aircraft debt. These items are excluded because they
affect the comparability of our financial results, period over
period, and could potentially distort the analysis of trends in
business performance. Excluding these items does not imply
they are non-recurring due to ongoing currency fluctuations between
the Canadian and US dollar. While voluntary employee
severance has not been included within our definition of adjusted
net income, it is shown separately to facilitate transparency and
comparability.
Forward Looking Statements
This news release should be read in conjunction
with Chorus' unaudited interim condensed consolidated financial
statements for the period ended March 31,
2014, and MD&A dated May 14,
2014 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, environmental factors, 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 15,
2014, 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
Headquartered in Halifax, Nova
Scotia, Chorus was incorporated on September 27, 2010 and is a dividend-paying
holding company which owns Jazz Aviation LP and a number of other
companies involved in aviation related businesses.
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
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. As the largest regional airline in Canada, Jazz has a proven track record of
industry leadership and exceptional customer service, and has
leveraged that strength to deliver value to all its stakeholders.
Jazz operates more flights and flies to more Canadian destinations
than any other airline, and currently has a workforce of
approximately 4,760 professionals highly experienced in the
challenging and complex nature of regional operations. Jazz
employees are an integral part of communities across our nation
with 20% of our workforce based in Atlantic Canada, 46% based in Central Canada, 33% based in Western Canada, and 1% in Northern Canada.
Under a capacity purchase agreement with Air
Canada, using the Air Canada Express brand, 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 2014 Jazz operated scheduled passenger service on behalf
of Air Canada with approximately 753 departures per weekday to 54
destinations in Canada and to 26
destinations in the United States.
With a fleet of 122 Canadian-made Bombardier aircraft, Jazz flies
more daily flights to more Canadian destinations than any other
airline.
Under the Jazz brand, the airline offers
charters throughout North America
with a dedicated fleet of three 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.