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
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
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
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
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
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
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
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
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.
For further information:
Manon Stuart (902) 873-5054 Halifax, Nova Scotia firstname.lastname@example.org
Debra Williams (519) 457-8071 London, Ontario email@example.com
Nathalie Megann (902) 873-5094 Halifax, Nova Scotia firstname.lastname@example.org