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Chorus Aviation Inc. (‘Chorus’) has announced its fourth quarter and year end 2013 earnings.
Q4 2013 HIGHLIGHTS
- EBITDA of $48.9 million; EBITDA margin of 11.8 per cent.
- Operating income of $32.5 million.
- Adjusted net income of $20.8 million, or $0.17 per basic share.
For the fourth quarter 2013, Chorus reported earnings before interest, taxes, depreciation and amortization (‘EBITDA’) of $48.9 million compared to $39.9 million in the same quarter 2012, an increase of $9.0 million. Operating income was $32.5 million, $7.3 million higher than the same period 2012. Adjusted net income of $20.8 million or $0.17 per basic share, was up by $3.1 million or $0.03 per basic share over fourth quarter 2012.
“Our consistent profitability since becoming publicly traded in 2006 has contributed significantly to the value we provide to our shareholders, and we thank them for their support throughout a challenging 2013,” said Joseph Randell, president and chief executive Officer, Chorus. “We are pleased with our execution during the quarter which resulted in increases in EBITDA, operating income, and adjusted net income. We remain committed to perfecting our operational performance while continuing to focus on reducing costs and improving efficiencies which manifest themselves in these measures of our financial performance.”
Year end 2013 HIGHLIGHTS
- EBITDA of $186.9 million; EBITDA margin of 11.2 per cent.
- Operating income of $124.3 million.
- Adjusted net income of $84.7 million, or $0.69 per basic share.
For the year ended Dec. 31, 2013, EBITDA, operating income, and adjusted net income were impacted by $9.9 million in voluntary employee severance costs which were offset by savings of $2.7 million in reduced salaries, benefits, training and other costs. Operating income of $124.3 million was down $3.1 million year-over-year due to severance cost and the one-time Thomas Cook termination settlement of $9.0 million recorded as revenue in 2012. In 2013, Chorus reported adjusted net income of $84.7 million or $0.69 per basic share compared to an adjusted net income of $94.6 million or $0.76 per basic share in 2012, a decrease of $9.9 million or $0.07 per basic share, including the above noted items.
“We are very pleased with our operational performance in the quarter and full year 2013,” continued Randell. “For the last thirteen months we have maintained the leading position amongst Canada’s largest airlines for on-time flight arrivals. Our operational expertise generated a record level of performance incentive revenue with approximately 88 percent of the available incentives earned – an improvement of $1.3 million over the annual performance incentive earned in 2012.
“Further, the success and the certainty of the recent arbitration result have enabled us to complete the early redemption of $60 million of our convertible debentures.
“Looking ahead, we are confident that we will continue to build on our successes in 2013 to strengthen our competitive position as we progress through our strategic plans. The team delivered terrific performance, and I’m certain their efforts will contribute to the increased value we strive to create for our shareholders,” concluded Randell.
For reporting purposes, at each quarter and year end, Chorus converts its US denominated debt into equivalent Canadian dollars based on the prevailing exchange rate. The exchange rate adjustments will not be realized and are not reflective of Chorus’ underlying US dollar currency exposure as it manages its currency risk by billing related lease payments to service such debt in US dollars under the Capacity Purchase Agreement (‘CPA’). In the fourth quarter of 2013, Chorus had an unrealized foreign exchange loss of $12.1 million versus an unrealized foreign currency loss of $3.3 million for the same period in 2012. For the full year 2013, Chorus recorded an unrealized foreign currency loss of $22.8 million versus a $5.6 million gain in 2012.
Financial Performance -Fourth Quarter 2013 Compared to Fourth Quarter 2012
Operating revenue increased from $411.7 million to $413.2 million, representing an increase of $1.5 million or 0.4 per cent. Passenger revenue, excluding pass-through costs, increased by $5.6 million or 2.2 per cent primarily as a result of rate increases made pursuant to the CPA with Air Canada, a higher US dollar exchange rate and a $0.2 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 $157.4 million to $153.0 million, a decrease of $4.4 million or 2.8 per cent, which included a decrease of $5.1 million related to fuel costs. Other revenue increased by $0.3 million.
Operating expenses decreased from $386.6 million to $380.8 million, a decrease of $5.8 million or 1.5 per cent. Controllable Costs decreased by $1.5 million, or 0.6 per cent, and pass-through costs decreased by $4.4 million or 2.8 per cent. Voluntary employee severance costs of approximately $1.2 million were incurred for the three months ended Dec. 31, 2013.
Salaries, wages and benefits increased by $0.1 million, primarily as a result of voluntary employee severance costs, wage and scale increases under new collective agreements, lower capitalized salaries and wages related to major maintenance overhauls, increased pension expense resulting from a revised actuarial valuation and increased incentive compensation expense; offset by a reduction in the number of full time equivalent employees and decreased Block Hours.
Depreciation and amortization expense increased by $1.7 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 the estimated residual value of the Dash 8-100 and 300 aircraft.
Aircraft maintenance expense decreased by $3.6 million as a result of decreased Block Hours of $2.4 million, and decreased other maintenance costs of $2.9 million; offset by an increase in the US dollar exchange rate on certain material purchases of $1.7 million.
Aircraft rent decreased by $0.1 million primarily as a result of the return of CRJ100 aircraft; offset by a higher US dollar exchange rate.
Other expenses decreased by $0.4 million primarily due to decreased general overhead expenses.
Non-operating expenses increased by $7.1 million. This change was mainly attributable to an increase of $7.5 million in foreign exchange (of which $8.8 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 $0.9 million; offset by an increase of $1.2 million in other income related to non-repayable government assistance.
EBITDA was $48.9 million compared to $39.9 million in 2012, an increase of $9.0 million or 22.7 per cent, producing an EBITDA margin of 11.8 per cent. Standardized free cash flow was $14.7 million.
Operating income of $32.5 million was up $7.3 million or 29.2 per cent over fourth quarter 2012 from $25.1 million.
Net income for the fourth quarter of 2013 was $8.8 million or $0.07 per basic share, a decrease of $5.7 million or 39.4 per cent from $14.5 million. On an adjusted basis, net income was $20.8 million or $0.17 per basic share, an increase of $3.1 million or 17.5 per cent from $17.7 million. A reconciliation of these measures to their nearest GAAP measure is provided in Chorus’ Management’s Discussion and Analysis dated Feb. 19, 2014.
