19:50:33 EDT Thu 28 Mar 2024
Enter Symbol
or Name
USA
CA



Chorus Aviation Inc
Symbol CHR
Shares Issued 160,678,919
Close 2020-02-12 C$ 7.95
Market Cap C$ 1,277,397,406
Recent Sedar Documents

Chorus earns $133.16-million in 2019

2020-02-13 02:35 ET - News Release

Mr. Joe Randell reports

CHORUS AVIATION ANNOUNCES FOURTH QUARTER AND YEAR-END 2019 FINANCIAL RESULTS

Chorus Aviation Inc. has released fourth quarter and year-end 2019 financial results.

"Two thousand nineteen was a transformative year for Chorus, creating significant value for all of our stakeholders. On total revenues of $1.4-billion, we generated adjusted EBITDA [earnings before net interest expense, income taxes, and depreciation and amortization before signing bonuses, employee separation program costs, strategic advisory fees, and other items such as foreign exchange gains or losses] of $341.7-million.

"We secured and strengthened our partnership with Air Canada by amending and extending the CPA for a further 17 years, providing a minimum of $2.5-billion in contracted revenues with opportunities to increase further. This was a critical accomplishment as it laid a strong, long-term foundation from which we continue to build and diversify our company. Air Canada's $97.26-million investment in Chorus equity, which included a five-year hold period, further aligns our organizations and is a strong endorsement of our growth and diversification strategy.

"Our group of companies performed very well and, most importantly, did so safely and with operational integrity. We carried just under 11 million passengers under the Air Canada Express brand, secured new contracted flying missions in several international markets and established an aircraft parts depot in Dubai.

"We made significant advancements in maturing our business to become a worldwide provider of regional aviation solutions. We successfully raised $183.5-million in capital and secured a $300-million (U.S.) warehouse facility to support our expansion in regional aircraft leasing. We now have a committed portfolio of 64 aircraft, a 60-per-cent increase over 2018, placed with 16 customers. We're pleased with the returns we're generating in our leasing business, which is delivering strong and consistent margins. Together with the aircraft we have leased under the CPA, our committed portfolio comprises 135 (1, 2) aircraft with approximately $2.1-billion (U.S.) (1, 2, 3) in future contracted lease revenue, making Chorus one of the world's largest regional aircraft lessors.

"We remain confident that we can expand our leasing portfolio by up to 20 aircraft per year funded through a combination of debt and cash from operations. The timing of these future transactions will not occur on a consistent basis; however, we expect the majority will be executed in the second half of this year. The expected growth in aircraft leasing will more than offset planned fixed-fee reductions in the CPA in 2020 and beyond.

"I extend my thanks and gratitude to the Chorus team for making 2019 a standout year in our history, and I look forward to the many new, exciting milestones we'll achieve together," stated Joe Randell, president and chief executive officer, Chorus.

(1) As of Feb. 12, 2020, there were 64 committed aircraft, four of which are pending transactions, in the regional aircraft leasing segment. All pending transactions and lease commitments are subject to satisfaction of customary conditions precedent to closing.

(2) Regional aviation services segment's commitments include: nine CRJ900s to be received in 2020, five Dash 8-300s that will undergo the ESP that are planned for between 2020 and 2022, and five 75- to 78-seat aircraft to be delivered in 2025, all of which will earn leasing revenue under the CPA. All pending acquisitions and lease commitments are subject to satisfaction of customary conditions precedent to closing.

(3) The estimates are based on agreed lease rates in the CPA and certain assumptions and estimates for future market lease rates related to new and extended leases under the CPA as at Jan. 1, 2019. A foreign exchange rate of $1.3000 (based on the long-term average historical rate, which is reviewed and adjusted annually) was used in the calculation of the estimates. The regional aircraft leasing segment's estimates are based on agreed lease rates and assumes no default by lessees.

Fourth quarter summary

In the fourth quarter of 2019, Chorus reported adjusted EBITDA of $88.6-million, a decrease of $3.4-million or 3.7 per cent relative to the fourth quarter of 2018.

The Regional aircraft leasing segment's adjusted EBITDA increased by $12.3-million primarily related to the growth in aircraft earning leasing revenue. The sale of three Dash 8-400s resulted in net cash proceeds of $25.0-million (U.S.) and produced a strong internal rate of return since the acquisition of these aircraft. This disposal also produced an accounting loss related to the windup of the special-purpose entities that lowered adjusted EBITDA and adjusted net income by $3.4-million and $1.3-million, respectively.

In line with expectations, the regional aviation services segment's adjusted EBITDA decreased $15.8-million. The decrease reflects the 2019 CPA amendments, which reduced the fixed-margin and performance incentive revenue when Chorus moved to market-based compensation rates. Beyond the changes related to the 2019 CPA amendments, fourth quarter results were impacted by:

  • Increased stock-based compensation of $6.0-million due to the change in the share price inclusive of the reduction related to the change in fair value of the total return swap, which was implemented in the fourth quarter of 2019;
  • Decreased capitalization of major maintenance overhauls on owned CPA aircraft over the previous period of $1.2-million.

Adjusted net income was $23.3-million for the quarter, a decrease of $12.0-million, due to:

  • The $3.4-million decrease in adjusted EBITDA previously described;
  • An increase in depreciation of $6.6-million primarily related to additional aircraft in the regional aircraft leasing segment;
  • An increase in net interest costs of $5.3-million primarily related to additional aircraft debt in the regional aircraft leasing segment;
  • An increase in non-operating costs of $2.5-million primarily related to the loss on disposal of an engine of $1.2-million and a change in foreign exchange losses of $800,000, offset by:
  • A $5.7-million decrease in income tax expense resulting from lower adjusted EBT (earnings before income tax).

Net income increased $34.3-million primarily due to the change in net unrealized foreign exchange gains on long-term debt of $46.2-million offset by the previously noted $12.0-million decrease in adjusted net income.

Year-end summary

Chorus reported adjusted EBITDA of $341.7-million for 2019, an increase of $1.2-million over 2018.

The regional aircraft leasing segment's adjusted EBITDA increased by $42.4-million was primarily due to the growth in aircraft earning leasing revenue.

In line with expectations, the regional aviation services segment's adjusted EBITDA decreased by $41.3-million, which reflect the 2019 CPA amendments, which reduced the fixed-margin and performance incentive revenue when Chorus moved to market-based compensation rates. These reductions were partially offset by the implementation of the controllable cost guardrail that mitigated the expected CPA margin shortfall resulting from reduced fees. Beyond the changes related to the 2019 CPA amendments, 2019 results were impacted by:

  • Increased stock-based compensation of $15.0-million due to the change in the share price inclusive of the reduction related to the change in fair value of the total return swap, which was implemented in the fourth quarter of 2019;
  • Decreased capitalization of major maintenance overhauls on owned CPA aircraft of $1.9-million over the previous period, offset by:
  • Increased aircraft leasing under the CPA.

Adjusted net income of $96.2-million, decreased over 2018 by $26.1-million, due to:

  • An increase in depreciation of $18.5-million primarily related to additional aircraft in the regional aircraft leasing segment;
  • An increase in net interest costs of $15.5-million primarily related to additional aircraft debt in the regional aircraft leasing segment;
  • An increase in non-operating costs of $5.6-million primarily related to foreign exchange losses of $4.2-million in addition to a loss on disposal of property and equipment of $500,000, partially offset by:
  • The $1.2-million increase in adjusted EBITDA previously described;
  • A decrease in income tax expense of $12.2-million resulting from lower adjusted EBT.

Net income increased $65.7-million over 2018 due to the change in net unrealized foreign exchange gains on long-term debt of $90.8-million and decreased employee separation program costs of $3.1-million, offset by the previously noted decrease of $26.1-million in adjusted net income and increased signing bonuses of $2.0-million related to the Jazz pilot collective agreement.

                                    CONSOLIDATED FINANCIAL ANALYSIS
                                  (expressed in thousands of dollars)

                                       Three months ended Dec. 31,               Year ended Dec. 31,     
                                            2019          2018 (1)            2019          2018 (1)

Operating revenue                       $338,606         $333,724       $1,366,447       $1,353,287
Operating expenses                       287,173          272,463        1,165,984        1,136,578
                                      ----------       ----------       ----------       ----------  
Operating income                          51,433           61,261          200,463          216,709
Net interest expense                     (19,730)         (14,447)         (71,768)         (56,285)
Foreign exchange gain (loss)              11,901          (33,504)          30,613          (55,986)
Other (loss) gain (2)                     (1,665)              22           (1,048)             336
                                      ----------       ----------       ----------       ----------  
Earnings before income tax                41,939           13,332          158,260          104,774
Income tax expense                        (5,362)         (11,095)         (25,100)         (37,344)
                                      ----------       ----------       ----------       ----------  
Net income                                36,577            2,237          133,160           67,430
                                      ----------       ----------       ----------       ----------  
Adjusted EBITDA (3)                       88,636           92,056          341,719          340,560
Adjusted EBT (3)                          28,646           46,418          121,263          159,620
Adjusted net income (3)                   23,284           35,323           96,163          122,276
                                      ==========       ==========       ==========       ==========  

(1) On Jan. 1, 2019, Chorus adopted international financial reporting standard 16 using the 
retrospective transition approach with restatement to comparative periods. 
(2) Other includes gain/loss on disposal of property and equipment.
(3) These are non-generally accepted accounting principle financial measures.

Outlook

The 2019 CPA amendments became effective on a retroactive basis to Jan. 1, 2019. Further information concerning the 2019 CPA amendments and the Air Canada investment is contained in Chorus's material change reports dated Jan. 24, 2019, and Feb. 13, 2019, which are available on SEDAR. The 2019 CPA amendments resulted in a reduction in fixed fees starting on Jan. 1, 2019, as Chorus moved to market-based rates under the CPA. The reduction was implemented by eliminating the infrastructure fee per covered aircraft and the fixed margin per covered aircraft (as this term was defined in the CPA), which were replaced with a single fixed margin. As a result, fixed-fee revenue in each of 2019 and 2020 is anticipated to be $75.2-million per year as compared with $111.3-million in 2018. In addition, the maximum future available performance incentives reduce from $23.4-million in 2019 and 2020 to an annual average maximum available amount of $3.4-million for the full term of the CPA. The near-term reductions are more than offset over the term of the CPA by incremental contracted revenue secured with the extension of the agreement, including fixed fees and aircraft leasing.

Aircraft leasing revenue under the CPA, which is included in the regional aviation services segment, is expected to grow with the delivery of nine committed CRJ900s in 2020, three ESPs to be completed in 2020 and two remaining ESPs by 2022. The regional aircraft leasing segment's future revenue is expected to grow in 2020, and, at a minimum, Chorus will have 60 aircraft equivalent earning revenue during the year versus 43 in 2019.

With the addition of the aircraft under both the regional aircraft leasing segment and the aircraft leasing revenue under the CPA, Chorus's estimated future contracted lease revenue is approximately $2.1-billion (U.S.) (4). When the CPA fixed-margin revenue of $600,000 (U.S.) is included with the total future contracted revenue, Chorus's future revenue approximates $2.7-billion (U.S.) (4).

(4) The estimates are based on agreed lease rates in the CPA and certain assumptions and estimates for future market lease rates related to new and extended leases under the CPA as at Jan. 1, 2019. A foreign exchange rate of $1.3000 (based on the long-term average historical rate, which is reviewed and adjusted annually) was used in the calculation of the estimates. The regional aircraft leasing segment's estimates are based on agreed lease rates and assumes no default by lessees.

Capital expenditures in 2020, including capitalized major maintenance overhauls but excluding expenditures for the acquisition of aircraft and the ESP, are expected to be between $38.0-million and $44.0-million. Aircraft-related acquisitions and the ESP capital expenditures in 2020 are expected to be between $442.0-million and $452.0-million.

Capitalized terms used but not defined in the outlook section have the meanings given to them in management's discussion and analysis dated Feb. 12, 2020, which is available on Chorus's website and SEDAR.

Investor conference call/audio webcast

Chorus will hold an analyst call at 9 a.m. ET on Feb. 13, 2020, to discuss the fourth quarter and year-end 2019 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 under executive management presentations. A playback of the call can also be accessed until 12 a.m. ET on Feb. 20, 2020, by dialling toll-free 1-855-859-2056 and passcode 8883625 followed by the number sign.

Non-generally accepted accounting principle financial measures

This news release references several non-GAAP financial measures to supplement the analysis of Chorus's results. Chorus uses certain non-GAAP financial measures to evaluate and assess performance. These non-GAAP measures are generally numerical measures of a company's financial performance, financial position or cash flows that include or exclude amounts from the most comparable GAAP measure. As such, these measures are not recognized for financial statement presentation under GAAP, do not have a standardized meaning and are therefore not likely to be comparable with similar measures presented by other public entities.

A reconciliation of these non-GAAP measures to their nearest GAAP measure is provided in the MD&A dated Feb. 12, 2020.

About Chorus Aviation Inc.

Chorus is a global provider of integrated regional aviation solutions. Chorus's vision is to deliver regional aviation to the world. Headquartered in Halifax, N.S., Chorus is composed of Chorus Aviation Capital, a leading, global lessor of regional aircraft, and Jazz Aviation and Voyageur Aviation, companies that have long histories of safe operations with excellent customer service. Chorus provides a full suite of regional aviation support services that encompasses every stage of an aircraft's life cycle, including: aircraft acquisitions and leasing; aircraft refurbishment, engineering, modification, repurposing and preparation; contract flying; and aircraft and component maintenance, disassembly and parts provisioning.

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