Intention to change from quarterly to monthly dividend in third quarter
Intention to complete the early redemption of outstanding convertible
Best on-time arrival performance in Canada for the tenth consecutive
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
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
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.
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
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
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 (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
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.
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
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
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.
For further information:
Chorus Media Contacts:
Manon Stuart - Halifax, Nova Scotia - (902) 873-5054 firstname.lastname@example.org
Debra Williams - Toronto, Ontario - (905) 671-7769 email@example.com
Nathalie Megann - Halifax, Nova Scotia - (902) 873-5094 firstname.lastname@example.org