Mr. Joe Randell reports
CHORUS AVIATION ANNOUNCES SOLID SECOND QUARTER EARNINGS
Chorus Aviation Inc. has released solid second quarter financial results for the period ended June 30, 2018.
"Our business delivered solid performance in the second quarter of this year," said Joe Randell, president and chief executive officer, Chorus. "Our financial performance in the quarter generated over $84.0-million in adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), an $18.8-million or 28.6-per-cent increase over second quarter 2017 due primarily to growth in aircraft leasing. Adjusted earnings per basic share was 21 cents.
"We continue to build our regional aircraft leasing business and have executed new term sheets with various customers for the acquisition of several regional aircraft that are either currently on lease or will be placed on lease pursuant to sale and lease back transactions. These term sheets remain subject to the negotiation and execution of definitive agreements; further details will follow as transactions are finalized," continued Mr. Randell. "The pipeline of opportunities is strong, and I'm confident in the growth potential of our leasing business.
"In the quarter, we completed our sixth extended service program on a Dash 8-300 which is now generating leasing revenue under the CPA, and the seventh aircraft is currently in production. We won new flying contracts utilizing CRJ 200 aircraft in Sudan and the Democratic Republic of [the] Congo. Customer demand for our parts division, Avparts, is encouraging. We recently acquired two Dash 8-300s to build our available parts inventory and have parted out 10 aircraft to date. We generate healthy margins on this business and see potential for growth.
"The Chorus team remains committed to building additional shareholder value and I thank them for embracing our vision to deliver regional aviation to the world," concluded Mr. Randell.
Second quarter 2018
Financial performance -- second quarter 2018 compared with second quarter 2017
In the second quarter of 2018, Chorus reported adjusted EBITDA of $84.6-million versus $65.8-million in 2017, an increase of $18.8-million or 28.6 per cent.
The $18.8-million increase in adjusted EBITDA was primarily driven by:
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A $14.9-million increase due to the growth in third party regional aircraft leasing;
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Increased aircraft leasing revenue under the CPA of $1.4-million;
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Decreased stock-based compensation of $1.8-million;
- A decrease of $700,000 in other expenses.
Adjusted net income was $29.4-million for the period, an increase from 2017 of $2.5-million, or 9.3 per cent. The change was a result of the $18.8-million increase in adjusted EBITDA previously described and $300,000 increase in other income, offset by:
- An additional $7.4-million in depreciation, primarily related to new aircraft;
- A $6.1-million increase in income taxes;
- Interest costs of $3.1-million related to additional aircraft debt and convertible units.
Net income was $16.2-million for the period, a decrease of $24.9-million or 60.6 per cent from the same period of 2017. The decrease was primarily due to quarter-over-quarter change in foreign exchange of $31.3-million, offset by the previously noted $2.5-million increase in the adjusted net income and decreased employee separation program costs of $3.9-million.
Year to date 2018 compared with year to date 2017
For the six months ended June 30, 2018, Chorus reported adjusted EBITDA of $162.6-million versus $120.3-million in 2017, an increase of $42.3-million or 35.2 per cent.
The $42.3-million increase in adjusted EBITDA was primarily driven by:
- A $28.7-million increase mainly due to the growth in third party regional aircraft leasing;
- Increased aircraft leasing revenue under the CPA of $3.6-million;
- Decreased stock-based compensation of $4.0-million;
- A reduction of $6.0-million in other costs, which includes decreased crew cycle and training costs, and other general overhead.
Adjusted net income was $55.9-million for the period, an increase from 2017 of $12.9-million, or 29.9 per cent. The change was a result of the $42.3-million increase in adjusted EBITDA previously described and a $300,000 increase in other income offset by:
- An additional $15.0-million in depreciation primarily related to new aircraft;
- A $5.8-million increase in income taxes;
- Interest costs of $8.9-million related to additional aircraft debt and convertible units.
Net income was $21.2-million for the period, a decrease of $46.8-million or 68.8 per cent from the same period of 2017. The decrease was primarily due to a year-over-year change in foreign exchange of $64.4-million; offset by the previously noted $12.9-million increase in the adjusted net income and decreased employee separation program costs of $4.7-million.
2018 outlook
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 committing the balance by mid-2019 in new to midlife aircraft with long-term leases to a diverse group of high-quality customers 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.
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 8:00 a.m. Eastern Time on Thursday, Aug. 9, 2018, to discuss the second 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 ET, Aug. 16, 2018, by dialling toll-free 1-855-859-2056, and pass code 7499366 followed by the number sign.
SECOND QUARTER SUMMARY
(expressed in thousands of dollars)
Three months ended June 30,
2018 2017
Operating revenue $378,285 $332,721
Operating expenses 324,236 293,943
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Operating income 54,049 38,778
Non-operating (expenses) income (27,265) 6,793
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Income before income taxes 26,784 45,571
Income tax (expense) (10,589) (4,519)
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Net income 16,195 41,052
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Add (deduct) items to get to adjusted net income
Unrealized foreign exchange loss (gain) 12,621 (21,723)
Foreign exchange loss on cash held for deposit - 3,066
Employee separation program (loss) 590 4,519
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13,211 (14,138)
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Adjusted net income 29,406 26,914
======= =======
Add (deduct) items to get to adjusted EBITDA
Net interest expense 13,657 10,524
Income tax expense 10,589 4,519
Depreciation and amortization 29,952 22,549
Foreign exchange loss 1,487 2,027
Other (gain) (500) (687)
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55,185 38,932
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Adjusted EBITDA 84,591 65,846
YEAR-TO-DATE SUMMARY
(expressed in thousands of dollars)
Six months ended June 30,
2018 2017
Operating revenue $725,835 $652,482
Operating expenses 626,871 585,609
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Operating income 98,964 66,873
Non-operating (expenses) income (61,062) 11,969
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Income (loss) before income taxes 37,902 78,842
Income tax (expense) (16,655) (10,827)
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Net income 21,247 68,015
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Add (deduct) items to get to adjusted net income
Unrealized foreign exchange loss (gain) 30,595 (32,138)
Foreign exchange (gain) on cash held for deposit - (1,646)
Employee separation program (gain) 4,049 8,782
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34,644 (25,002)
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Adjusted net income 55,891 43,013
======= =======
Add (deduct) items to get to adjusted EBITDA
Net interest expense 27,462 18,538
Income tax expense 16,655 10,827
Depreciation and amortization 59,607 44,598
Foreign exchange (loss) 3,513 3,777
(Gain) loss on disposal of property and equipment (8) 187
Other (loss) (500) (687)
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106,729 77,240
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Adjusted EBITDA 162,620 120,253
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 has established Chorus Aviation Capital Corp. 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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