Mr. Joe Randell reports
CHORUS AVIATION ANNOUNCES SOLID FIRST QUARTER EARNINGS
Chorus Aviation Inc. has released solid first quarter financial results for the period ended March 31, 2018.
"The strong fundamentals of our business delivered solid performance in the first quarter of this year," said Joe Randell, president and chief executive officer, Chorus. "We concentrated on maintaining the momentum achieved in 2017, supporting our vision of delivering regional aviation to the world. Our goal is to acquire new to midlife, marketable aircraft with brand name regional airlines that provide a diversified exposure to assets, customers and geographic markets. We were very pleased to welcome Dublin-based CityJet to our growing portfolio of strong regional carriers, bringing our current tally to 10 lessees in less than 16 months.
"In the quarter we successfully completed an equity raise that yielded approximately $107.0-million in net proceeds, bringing the total amount of capital raised to just over $300.0-million since the start of 2017. This capital positions us well to further invest in the growth of our leasing business. We have ongoing active negotiations and continue to have many good opportunities to assess, using our prudent approach.
"Our financial performance in the quarter generated $78.0-million in adjusted EBITDA, a $23.6-million or 43.0-per-cent increase over first quarter 2017 due primarily to growth in aircraft leasing. Adjusted earnings per basic share was 21 cents, an increase of eight cents or 61.5 per cent.
"We were also pleased to complete the fifth extended service program on a Dash 8-300 aircraft that is now contributing to the leasing revenue stream under the CPA with Air Canada. I'd also like to acknowledge our airport services group who ratified a new collective agreement that is in effect until January, 2022. The Chorus team remains committed to building additional shareholder value and I thank them for their hard work and professionalism," concluded Mr. Randell.
First quarter 2018
Financial performance -- first quarter 2018 compared with first quarter 2017
In the first quarter of 2018, Chorus reported adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $78.0-million versus $54.4-million in 2017, an increase of $23.6-million or 43.4 per cent.
The $23.6-million increase in adjusted EBITDA was primarily driven by:
- A $13.8-million increase mainly due to the growth in third party regional aircraft leasing;
- Increased aircraft leasing revenue under the capacity purchase agreement (CPA) with Air Canada of $2.3-million;
- Decreased stock-based compensation of $2.2-million;
- Decreased operating costs related to a $1.3-million increase in capitalized labour and maintenance costs on owned aircraft for major maintenance overhauls;
- A decrease of $4.9-million in other expenses, offset by a decline of $900,000 in CPA performance incentive revenue.
Adjusted net income was $26.5-million for the period, an increase from 2017 of $10.4-million, or 64.5 per cent. The change was a result of the $23.6-million increase in adjusted EBITDA previously described, plus a $200,000 decrease in income taxes, partially offset by:
-
$5.8-million of interest costs related to increased aircraft debt and convertible units;
- $7.6-million of additional depreciation primarily related to new aircraft.
Net income was $5.1-million for the period, a decrease of $21.9-million or 81.3 per cent from the same period of 2017. The decrease was due primarily to changes in unrealized foreign exchange losses of $32.2-million, offset by the previously noted $10.4-million increase in the adjusted net income.
2018 outlook
Chorus is committed to building additional shareholder value by growing regional aircraft leasing revenue, pursuing additional growth opportunities and strengthening the foundational contract flying segment.
Since the start of last year, Chorus has realized net proceeds of $303.0-million through the issuance of convertible debt units in March, 2017, and the issuance of common shares in March, 2018.
When combined with anticipated debt financing at typical ratios of up to three times equity, this capital affords Chorus the ability to invest up to $1.2-billion in the acquisition of aircraft for its leasing business.
Approximately 50 per cent of this capital has been invested to date and Chorus anticipates investing the balance in 2018 to mid-2019 in new to midlife aircraft with long-term leases to a diverse group of high-quality customers clients located in geographies around the world.
Capital expenditures for 2018, excluding those for the acquisition of aircraft and the ESP, and including capitalized major maintenance overhauls, are expected to be between $44.0-million and $50.0-million. Capital expenditures for ESP and aircraft acquisitions as announced at March 31, 2018, are expected to be between $81.0-million and $84.0-million in 2018, and exclude future capital for aircraft acquisitions.
Based on 2017/2018 winter schedule, the 2018 summer schedule and updated planning assumptions from Air Canada, billable block hours under the CPA for 2018 are expected to be between 360,000 and 375,000 hours based on 116 covered aircraft as at Dec. 31, 2018. The actual number of billable block hours for 2018 may vary from this anticipated range due to many factors.
Investor conference call/audio webcast
Chorus will hold an analyst call at 11 a.m. Eastern Time on Friday, May 4, 2018, to discuss the first quarter financial results. The call may be accessed by dialling 1-888-231-8191. The call will be simultaneously audio webcast.
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's website under reports, executive management presentations. A playback of the call can also be accessed until midnight Eastern Time, May 12, 2018, by dialling toll-free 1-855-859-2056, and pass code 3566599 followed by the number sign.
VARIOUS FINANCIAL MEASURES
(expressed in thousands of dollars)
Three months ended March 31,
2018 2017
Operating revenue $347,550 $319,761
Operating expenses 302,635 291,666
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Operating income 44,915 28,095
Non-operating (expenses) income (33,797) 5,176
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Income before income taxes 11,118 33,271
Income tax (expense) (6,066) (6,308)
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Net income 5,052 26,963
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Add (deduct) items to get to adjusted net income
Unrealized foreign exchange loss (gain) 17,974 (10,415)
Foreign exchange gain (loss) on cash held for deposit - (4,712)
Employee separation program (loss) 3,459 4,263
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21,433 (10,864)
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Adjusted net income 26,485 16,099
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Add (deduct) items to get to adjusted EBITDA
Net interest expense 13,805 8,014
Income tax expense 6,066 6,308
Depreciation and amortization 29,655 22,049
Foreign exchange loss 2,026 1,750
(Gain) loss on disposal of property and equipment (8) 187
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51,544 38,308
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Adjusted EBITDA 78,029 54,407
About Chorus Aviation Inc.
Headquartered in Halifax, N.S., Chorus was incorporated on Sept. 27, 2010. Chorus's vision is to deliver regional aviation to the world. Chorus has been leasing its owned regional aircraft into Jazz's Air Canada Express operation since 2009, and established Chorus Aviation Capital to become a leading, global provider of regional aircraft leases and support services. Chorus also owns Jazz Aviation and Voyageur Aviation -- companies that have long histories of safe and solid operations that deliver excellent customer service in the areas of contract flying operations, engineering, fleet management, and maintenance, repair and overhaul.
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