Chorus Aviation issues second quarter 2013 earnings

HALIFAX, Aug. 13, 2013 /CNW/ – Chorus Aviation Inc. (“Chorus”) (TSX: CHR.B CHR.A CHR.DB) today issued its second quarter 2013 earnings.

“We experienced positive operational and financial performance in the second quarter with an adjusted net income of $21.4 million or $0.17 per basic share,” stated Joseph Randell, President and Chief Executive Officer, Chorus. “Net income was $7.9 million, and was impacted by $13.5 million in unrealized foreign exchange loss on long-term debt and finance leases which has no impact on our cash flows, and by $2.3 million in expenses related to our ongoing employee voluntary separation program that will reduce our costs as one of our many cost reduction initiatives.”

“Having concluded the final round of evidentiary hearings in the benchmarking arbitration with Air Canada under our capacity purchase agreement, we are strongly of the view that the mark-up on controllable costs should not change,” continued Mr. Randell. “Our increased confidence in our position, coupled with the belief of our Board of Directors that Chorus stock is undervalued, led to our recent share repurchases. To date we have repurchased and cancelled 1,871,800 Chorus shares for a total of $4.0 million under our normal course issuer bid; reducing the issued and outstanding float by approximately 1.5%. We will continue to monitor the market, and may from time to time repurchase shares for cancellation as we believe it is an effective way to utilize capital and build shareholder value.”

Q2 2013 HIGHLIGHTS

Operating revenue of $410.3 million.
EBITDA1 of $48.0 million.
Operating income of $31.7 million.
Adjusted net income1 of $21.4 million, or $0.17 per basic share.
Net income of $7.9 million, or $0.06 per basic share.
Repurchased and cancelled 1,871,800 shares under normal course issuer bid.
Billable Block Hours of 94,062.
Financial Performance -Second Quarter 2013 Compared to Second Quarter 2012

Operating revenue decreased from $426.3 million to $410.3 million, representing a decrease of $16.0 million or 3.7%. Passenger revenue, excluding pass-through costs, decreased by $5.9 million or 2.2% primarily as a result of no activity in the quarter for Thomas Cook (in the second quarter of 2012, a $9.0 million payment was recorded related to the early termination of the Thomas Cook Flight Services Agreement) and a 4.0% decrease in Billable Block Hours; offset by rate increases made pursuant to the Capacity Purchase Agreement (‘CPA’) with Air Canada, and a higher US dollar exchange rate. Pass-through costs reimbursed by Air Canada decreased from $159.2 million to $148.7 million, a decrease of $10.6 million or 6.6%, which included a decrease of $8.6 million related to fuel costs. Other revenue increased by $0.5 million.

Operating expenses decreased from $390.0 million to $378.6 million, a decrease of $11.4 million or 2.9%. Controllable Costs decreased by $0.9 million, or 0.4%, and pass-through costs by $10.6 million or 6.6%.

Salaries, wages and benefits decreased by $0.3 million primarily as a result of a reduction in the number of full time equivalent employees, a 3.9% decrease in Block Hours, and higher capitalized salaries and wages related to major maintenance overhauls; offset by voluntary employee severance costs related to flight crew and maintenance employees, wage and scale increases under new collective agreements, and increased pension expense resulting from a revised actuarial valuation.

Depreciation and amortization expense increased by $2.4 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 estimate related to the residual value of the Dash 8-100 and 300 aircraft.

Aircraft maintenance expense decreased by $1.6 million as a result of a $1.2 million reduction reflecting the cessation of Thomas Cook activity as of the comparative quarter, and decreased Block Hours of $1.5 million; offset by increased other maintenance costs of $1.0 million and an increase in the US-dollar exchange rate on certain material purchases of $0.1 million.

Aircraft rent decreased by $2.8 million primarily as a result of no expense in the quarter for Thomas Cook and the return of CRJ100 aircraft.

Other expenses decreased by $0.8 million primarily due to decreased general overhead expenses; offset by increased travel and training costs associated with the Q400 aircraft.

Non-operating expenses increased by $10.4 million. This change was mainly attributable to an increase of $8.2 million in foreign exchange (of which $9.0 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 $2.1 million.

EBITDA1 was $48.0 million compared to $50.1 million in 2012, a decrease of $2.2 million or 4.4%, producing an EBITDA margin of 11.7%. Standardized Free Cash Flow was $9.6 million.

Operating income of $31.7 million was down $4.6 million or 12.6% over second quarter 2012 from $36.3 million.

Net income for the second quarter of 2013 was $7.9 million or $0.06 per basic share, a decrease of $14.7 million or 65.1% from $22.6 million or $0.18 per basic share. On an adjusted basis, net income was $21.4 million or $0.17 per basic share, a decrease of 21.2% or a decrease of $0.05 per basic share from $27.2 million or $0.22 per basic share. A reconciliation of these measures to their nearest GAAP measure is provided in Chorus’ Management’s Discussion and Analysis dated August 13, 2013.

Chorus Aviation Inc.‘s unaudited interim condensed consolidated financial statements for the period ended June 30, 2013 and accompanying Management’s Discussion and Analysis (MD&A) are available at www.chorusaviation.ca and at www.sedar.com. A copy may also be obtained on request by contacting Investor Relations at: investorsinfo@chorusaviation.ca or (902) 873-5094.