Chorus Aviation announces strong third quarter earnings

HALIFAX, Nov. 13, 2014 (Canada NewsWire via COMTEX) —Consistent quarterly profitability since 2006

Chorus Aviation Inc. (‘Chorus’) (TSX: CHR.B CHR.A) today announced its third quarter 2014 earnings.

Q3 2014 HIGHLIGHTS

— EBITDAof $56.2 million. — Operating income of $39.4 million. — Adjusted net income(1) of $29.0 million. — Adjusted net income per share(1) of $0.24 per basic share. — Net income of $11.3 million. — Net income per share of $0.09 per basic share.

For the third quarter 2014, Chorus reported EBITDA of $56.2 million compared to $55.8 million in the same quarter 2013, an increase of $0.4 million. Operating income was $39.4 million, $0.2 million higher than the same period 2013. Adjusted net income of $29.0 million or $0.24 per basic share was up by $1.3 million or $0.01 per basic share over the third quarter 2013. Chorus incurred $3.3 million in employee separation program costs in the third quarter versus $0.7 million in the same period in 2013. Chorus has invested $20.5 million in employee separation since the inception of this cost savings program in the first quarter of 2013.

“I’m pleased to share strong financial and operational results again this quarter,” said Joseph Randell, President and Chief Executive Officer, Chorus. “We experienced increases in adjusted earnings per share, operating income and EBITDA over the same period in 2013. The team delivered leading operational performance and our cost reduction initiatives continue to strengthen our bottom line. Additional shareholder value was created through our normal course issuer bid with the repurchase and cancellation of an additional 252,000 shares in the third quarter. As of today, we have repurchased for cancellation an aggregate of 4,162,600 since the commencement of our first normal course issuer bid on March 14, 2013.”

For reporting purposes, at each quarter end, Chorus converts its US denominated aircraft debt into equivalent Canadian dollars based on the prevailing exchange rate. Chorus manages its exposure to currency risk on such long-term debt by billing related lease payments under the Capacity Purchase Agreement (‘CPA’) with Air Canada in the underlying currency (US dollars) related to the aircraft debt. In the third quarter of 2014, Chorus had an unrealized foreign exchange loss of $17.8 million versus an unrealized foreign exchange gain of $8.3 million in the same period of 2013.

Financial Performance -Third Quarter 2014 Compared to Third Quarter 2013

Operating revenue increased from $432.3 million to $432.6 million, representing an increase of $0.3 million or 0.1%. Controllable revenue increased by $8.0 million or 3.0%. $7.4 million of this increase resulted from rate increases made pursuant to the CPA. The remaining increase of $3.8 million resulted from a favourable US dollar exchange rate. These increases were offset by decreased billable block hours of $2.6 million, and a $0.6 million decrease in incentives earned under the CPA.

Pass-through revenue decreased by $8.6 million or 5.4% from $160.9 million to $152.2 million, which included a decrease of $8.8 million related to reduced airport and navigation fees and terminal handling services. (Effective January 1, 2014, Air Canada entered into a commercial agreement with the Greater Toronto Airport Authority (‘GTAA’) that encompasses Chorus’ Air Canada Express operations. GTAA costs related to landing, terminal and other airport user fees, which are treated as pass-through costs under the CPA, are now paid directly by Air Canada pursuant to this agreement.) These decreases were offset by a favourable US dollar exchange rate of $0.6 million. The sale of consignment inventory was the primary factor in other revenue increasing by $0.9 million.

Operating expenses increased from $393.0 million to $393.2 million, an increase of $0.2 million. An unfavourable US dollar exchange rate compared to the same period in 2013 increased operating expenses by $3.5 million. Controllable costs increased from $232.1 million to $240.9 million, an increase of $8.8 million or 3.8%. $2.9 million of this controllable cost increase is attributable to an unfavourable US dollar exchange rate. Pass-through costs decreased from $160.9 million to $152.2 million, a decrease of $8.6 million or 5.4%.

Salaries, wages and benefits increased by $1.5 million from $102.2 million to $103.6 million. Adjusted salaries, wages and benefits (adjusted by removing employee separation program costs and capitalized major maintenance overhaul labour costs), which includes pension, incentive compensation and other employee benefits, decreased by $2.7 million. Employee separation program costs incurred during the three months ended September 30, 2014 were $3.3 million, an increase of $2.5 million over the same period of 2013. These costs include employee separation program costs of $0.6 million in 2014 related to the commencement of outsourcing of passenger handling services under the applicable collective agreement. Salaries and wages were also affected by a decrease in labour costs being capitalized on owned aircraft for major maintenance overhauls of $1.6 million.

Aircraft maintenance expense increased by $3.7 million from $39.1 million to $42.8 million. The increase was generated by an unfavourable US dollar exchange rate on certain maintenance material purchases of $1.6 million, increased other maintenance costs of $1.9 million, and fewer maintenance costs being capitalized as a result of reduced major maintenance overhauls of $0.7 million. These increases were offset by decreased Block Hours of $0.5 million.

Other expenses increased by $1.7 million from $30.1 million to $31.8 million. The increase was the result of increased general overhead expenses.

Non-operating expenses increased by $23.4 million from a non-operating income of $4.4 million to a non-operating expense of $19.0 million. The weakening of the Canadian dollar during the quarter contributed to a foreign exchange loss of $16.0 million compared to a foreign exchange gain of $7.8 million in the same period last year. Interest expense related to long-term debt increased by $0.6 million.

EBITDA was $56.2 million compared to $55.8 million in 2013, an increase of $0.4 million or 0.7%, producing an EBITDA margin of 13.0%.

Operating income of $39.4 million was up $0.2 million or 0.4% over third quarter 2013 from $39.3 million.

Net income for the third quarter of 2014 was $11.3 million or $0.09 per basic share, a decrease of $24.8 million from $36.0 million. On an adjusted basis, net income was $29.0 million or $0.24 per basic share, an increase of $1.3 million from $27.7 million. A reconciliation of these non-GAAP measures to their nearest GAAP measure is provided in Chorus’ Management’s Discussion and Analysis dated November 12, 2014.