A year of outstanding accomplishments
Q4 2019 Financial Highlights and Accomplishments
- Net income of
$36.6 million , or$0.23 per basic share, a period-over-period increase of$34.4 million . - Adjusted net income1 of
$23.3 million , or$0.15 per basic share, a decrease of$12.0 million due to expected reductions resulting from the 2019 amendments to the Capacity Purchase Agreement ('CPA') (the '2019 CPA Amendments') offset by growth in theRegional Aircraft Leasing segment. - Adjusted EBITDA1 of
$88.6 million , a decrease of$3.4 million . - Increased the committed leased fleet to 64 aircraft, representing growth of 60% year-over-year.
- Added new aircraft type through a sale leaseback transaction with airBaltic for five new Airbus A220-300s.
Added Croatia Airlines as a new airline customer to the leasing portfolio.- Extended three aircraft lease agreements with Aeromexico Connect and completed an additional sale leaseback transaction with IndiGo for two new aircraft.
- Completed the Extended Service Program ('ESP') on three additional Dash 8-300s, bringing the total number of ESP aircraft generating leasing revenue under the CPA to 13.
- Established a regional aircraft parts depot in
Dubai, UAE , enhancing Chorus' ability to market its parts provisioning and sales offering internationally.
Full-Year 2019 Financial Highlights and Accomplishments
- Net income of
$133.2 million , or$0.85 per basic share, a period-over-period increase of$65.7 million . - Adjusted net income1 of
$96.2 million , or$0.61 per basic share, a decrease of$26.1 million due to expected reductions resulting from the 2019 CPA Amendments offset by growth in theRegional Aircraft Leasing segment. - Adjusted EBITDA1 of
$341.7 million , an increase of$1.2 million . - Increased adjusted EBT1 in the
Regional Aircraft Leasing segment to 22% of overall adjusted EBT. - Amended and extended the CPA with Air Canada to
December 31, 2035 . - Jazz pilots ratified their collective agreement with no strike or lockout provisions for the extended term of the CPA.
- Completed Air Canada investment for gross proceeds of
$97.26 million and raised gross proceeds of$86.3 million through a public offering of 5.75% Unsecured Debentures to support the growth of Chorus. - Executed a purchase agreement for nine CRJ900s that will earn leasing revenue under the CPA starting in 2020.
- Completed the first sale of three leased Dash 8-400s, generating net proceeds, after debt repayment, of US
$25.0 million for reinvestment in theRegional Aircraft Leasing segment. - Received numerous awards as a top employer in
Canada , and named amongCanada's Safest Employers 2019, taking gold in the Transportation category.
"2019 was a transformative year for Chorus creating significant value for all of our stakeholders. On total revenues of
We secured and strengthened our partnership with Air Canada by amending and extending the CPA for a further 17 years, providing a minimum of
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
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
1. | Refer to footnote 1- Non-GAAP Measures |
2. | As of |
3. | 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 75-78 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. |
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 |
Fourth Quarter Summary
In the fourth quarter of 2019, Chorus reported adjusted EBITDA of
In line with expectations, the Regional Aviation Services segment's adjusted EBITDA decreased
- 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: and - decreased capitalization of major maintenance overhauls on owned CPA aircraft over the previous period of
$1.2 million .
Adjusted net income was
- the
$3.4 million decrease in adjusted EBITDA previously described; - an increase in depreciation of
$6.6 million primarily related to additional aircraft in theRegional Aircraft Leasing segment; - an increase in net interest costs of
$5.3 million primarily related to additional aircraft debt in theRegional Aircraft Leasing segment; and - 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$0.8 million ; offset by - a
$5.7 million decrease in income tax expense resulting from lower adjusted EBT.
Net income increased
Year-End Summary
Chorus reported adjusted EBITDA of
In line with expectations, the Regional Aviation Services segment's adjusted EBITDA decreased 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
- an increase in depreciation of
$18.5 million primarily related to additional aircraft in theRegional Aircraft Leasing segment; - an increase in net interest costs of
$15.5 million primarily related to additional aircraft debt in theRegional Aircraft Leasing segment; and - 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$0.5 million ; partially offset by - the
$1.2 million increase in adjusted EBITDA previously described; and - a decrease in income tax expense of
$12.2 million resulting from lower adjusted EBT.
Net income increased
Consolidated Financial Analysis | ||||||||||||
(expressed in thousands of Canadian dollars) | Three months ended | Year ended | ||||||||||
2019 | 2018(1) | Change | Change | 2019 | 2018(1) | Change | Change | |||||
$ | $ | $ | % | $ | $ | $ | % | |||||
Operating revenue | 338,606 | 333,724 | 4,882 | 1.5 | 1,366,447 | 1,353,287 | 13,160 | 1.0 | ||||
Operating expenses | 287,173 | 272,463 | 14,710 | 5.4 | 1,165,984 | 1,136,578 | 29,406 | 2.6 | ||||
Operating income | 51,433 | 61,261 | (9,828) | (16.0) | 200,463 | 216,709 | (16,246) | (7.5) | ||||
Net interest expense | (19,730) | (14,447) | (5,283) | (36.6) | (71,768) | (56,285) | (15,483) | (27.5) | ||||
Foreign exchange gain (loss) | 11,901 | (33,504) | 45,405 | 135.5 | 30,613 | (55,986) | 86,599 | 154.7 | ||||
Other (loss) gain(2) | (1,665) | 22 | (1,687) | (7,668.2) | (1,048) | 336 | (1,384) | (411.9) | ||||
Earnings before income tax | 41,939 | 13,332 | 28,607 | 214.6 | 158,260 | 104,774 | 53,486 | 51.0 | ||||
Income tax expense | (5,362) | (11,095) | 5,733 | 51.7 | (25,100) | (37,344) | 12,244 | 32.8 | ||||
Net income | 36,577 | 2,237 | 34,340 | 1,535.1 | 133,160 | 67,430 | 65,730 | 97.5 | ||||
Adjusted EBITDA(3) | 88,636 | 92,056 | (3,420) | (3.7) | 341,719 | 340,560 | 1,159 | 0.3 | ||||
Adjusted EBT(3) | 28,646 | 46,418 | (17,772) | (38.3) | 121,263 | 159,620 | (38,357) | (24.0) | ||||
Adjusted net income(3) | 23,284 | 35,323 | (12,039) | (34.1) | 96,163 | 122,276 | (26,113) | (21.4) |
1. | On |
2. | Other includes gain/loss on disposal of property and equipment. |
3. | These are non-GAAP financial measures. |
Outlook
(See cautionary statement regarding forward-looking information below)
The 2019 CPA Amendments became effective on a retroactive basis to
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.
With the addition of the aircraft under both the
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
Capitalized terms used but not defined in the Outlook section have the meanings given to them in Management's Discussion and Analysis (the 'MD&A') dated
The following table provides the number of closed and pending transactions announced to-date: | |||||||||
(expressed in millions of US dollars, except number of aircraft) | Completed Transactions | Pending Transactions(1) | Committed Transactions | ||||||
Customer | 2016 - | Q4 2019 | Total | Q1 2020 | Q2 2020 and | 2016 - | Increase | Total 2016 - | |
Aeromexico | 3 | 3 | 3 | 3 | |||||
4 | 4 | 4 | 4 | ||||||
airBaltic | — | 2 | 2 | 3 | — | 5 | 5 | ||
5 | 5 | 5 | 5 | ||||||
CityJet | 2 | 2 | 2 | 2 | |||||
— | 2 | 2 | — | 2 | 2 | ||||
5 | 5 | 5 | 5 | ||||||
Falcon | 3 | (3) | — | — | — | ||||
Flybe | 8 | — | 8 | 8 | 8 | ||||
Indigo | 4 | 4 | 8 | 6 | 2 | 8 | |||
Jambojet | 3 | 1 | 4 | 4 | 4 | ||||
KLM Cityhopper | 1 | 1 | 1 | 1 | |||||
2 | 2 | 4 | 4 | 4 | |||||
3 | 3 | 3 | 3 | ||||||
SpiceJet | 5 | — | 5 | 5 | 5 | ||||
Virgin Australia | 3 | 3 | 3 | 3 | |||||
1 | 1 | 1 | 2 | 2 | |||||
52 | 8 | 60 | — | 4 | 55 | 9 | 64 | ||
Deal value US | |||||||||
Future Lease Revenues US(4) | |||||||||
Total Regional Aviation Services | 49 | 3 | 52 | — | 19 | 71 | — | 71 | |
Future Lease Revenues US(4)(5) | |||||||||
Chorus Total Aircraft | 101 | 11 | 112 | — | 23 | 126 | 9 | 135 | |
Future Lease Revenues US(4) | |||||||||
1. | As of |
2. | Total announced transactions as of |
3. | A member of the |
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 |
5. | Future Regional Aviation Services segment's commitments include: nine CRJ900s to be received in 2020, five Dash 8-300s that will undergo the ESP planned for between 2020 and 2022, and five 75-78 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. |
Investor Conference Call / Audio Webcast
Chorus will hold an analyst call at
https://event.on24.com/wcc/r/2165189/D351F934627B026FBA6A5358608652A8
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' website at www.chorusaviation.ca under Reports > Executive Management Presentations. A playback of the call can also be accessed until
1NON-GAAP FINANCIAL MEASURES
This news release references several non-GAAP financial measures to supplement the analysis of Chorus' results. Chorus uses certain non-GAAP financial measures, described below, 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 to 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
Adjusted net income and Adjusted net income per Share are used by Chorus to assess performance without the effects of unrealized foreign exchange gains or losses on long-term debt and lease liability related to aircraft, signing bonuses, employee separation program costs and strategic advisory fees. Chorus manages its exposure to currency risk on such long-term debt by billing the lease payments within the CPA in the underlying currency (US dollars) related to the aircraft debt. These items are excluded because they affect the comparability of Chorus' financial results, period-over-period, and could potentially distort the analysis of trends in business performance. Excluding these items does not imply they are non-recurring due to ongoing currency fluctuations between the Canadian and US dollar.
EBT is defined as earnings before income tax. Adjusted EBT (EBT before signing bonuses, employee separation program costs, strategic advisory fees and other items such as foreign exchange gains and losses) is a non-GAAP financial measure used by Chorus as a supplemental financial measure of operational performance. Management believes adjusted EBT assists investors in comparing Chorus' performance by excluding items, which it does not believe will reoccur over the longer-term (such as signing bonuses, employee separation program costs and strategic advisory fees) as well as items that are non-cash in nature such as foreign exchange gains and losses.
EBITDA is defined as earnings before net interest expense, income taxes, and depreciation and amortization and is a non-GAAP financial measure that is used frequently by companies in the aviation industry as a measure of performance. Adjusted EBITDA (EBITDA before signing bonuses, employee separation program costs, strategic advisory fees and other items such as foreign exchange gains or losses) is a non-GAAP financial measure used by Chorus as a supplemental financial measure of operational performance. Management believes Adjusted EBITDA assists investors in comparing Chorus' performance by excluding items, which it does not believe will re-occur over the longer-term (such as signing bonuses, employee separation program costs and strategic advisory fees) as well as items that are non-cash in nature such as foreign exchange gains and losses. Adjusted EBITDA should not be used as an exclusive measure of cash flow because it does not account for the impact of working capital growth, capital expenditures, debt repayments and other sources and uses of cash, which are disclosed in the statements of cash flows, forming part of Chorus' financial statements.
Forward-Looking Information
This news release contains 'forward-looking information'. Forward-looking information is identified by the use of terms and phrases such as "anticipate", "believe", "could", "estimate", "expect", "intend", "may", "plan", "predict", "potential", "project", "will", "would", and similar terms and phrases, including references to assumptions. Forward-looking information involves known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to differ materially from those indicated in the forward-looking information. Examples of forward-looking information in this news release include the discussion in the Outlook section, statements concerning future contracted lease revenues, discussion throughout this news release regarding future growth prospects of Chorus' business, and references to transactions which are contractually committed but have not yet been completed. The material factors used to develop the estimated future contracted lease revenues are set out in the MD&A. Actual results may differ materially from results indicated in forward-looking information for a number of reasons, including those identified in Chorus' public disclosure record available at www.sedar.com and the risk factors identified in Chorus' Annual Information Form dated
About
Chorus is a global provider of integrated regional aviation solutions. Chorus' vision is to deliver regional aviation to the world. Headquartered in
Chorus Class A Variable Voting Shares and Class B Voting Shares trade on the
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