Delivering regional aviation to the world
Q3 adjusted EBITDA1 of $83.4 million.
Q3 adjusted net income1 of $48.6 million, or $0.39 per basic share.
Q3 net income of $79.1 million, or $0.64 per basic share, including an unrealized foreign exchange gain of $31.1 million.
Chorus' leased fleet diversifies and grows to 60 upon completion of announced leasing transactions for 19 regional aircraft to date by Chorus Aviation Capital.
Jazz Technical Services completed the second Extended Service Program on Dash 8-300 aircraft.
HALIFAX, Nov 8, 2017 /CNW/ - Chorus Aviation Inc. ('Chorus') (TSX: CHR) today announced solid financial results for the third quarter of 2017.
"I'm pleased with our financial performance in the third quarter, delivering increases in all key financial metrics including growth in adjusted EBITDA and adjusted net earnings of 19.2% and 68.9% respectively over the same period in 2016," said Joe Randell, President and Chief Executive Officer, Chorus. "In a short period of time, we have consummated significant transactions around the world, establishing a strong market position in the regional aircraft leasing sector. Aside from the 41 regional aircraft under lease in the CPA we have announced an additional 19 aircraft. Upon closing previously announced transactions, we will have 60 regional aircraft on lease, valued at over one billion dollars. We are making progress towards our goal of becoming one of the largest global players focused on regional aircraft."
"We are transitioning our business with contracted leases and margins on attractive regional aircraft," continued Mr. Randell. "We are differentiated from our competitors as we can deliver customers a complete suite of regional aviation services including contracted flying, aircraft engineering, maintenance, repair and overhaul, parts provisioning and aircraft leasing solutions by leveraging the strengths in Jazz and Voyageur."
Q3 2017 Overview
Chorus remains focused on its vision of delivering regional aviation to the world. Chorus delivered solid financial results, in line with management's expectations, and showing progress in its growth and diversification initiatives.
Chorus Aviation Capital ('CAC') is executing on the regional aircraft leasing strategy through the acquisition of aircraft and leases with new, well-established customers located in seven countries across five continents, and a diversified fleet comprising five of the best regional jet and turbo-prop offerings from Bombardier, ATR and Embraer.
To date CAC has completed the acquisition of:
four CRJ1000s on lease to Air Nostrum;
six ATR 72-600 aircraft on lease to Flybe and Virgin Australia;
three Bombardier Q400s leased to Falcon Aviation Services;
two Embraer 190s on lease to KLM Cityhopper and to Aeromexico Connect; and
two Embraer 195s leased to Azul Brazilian Airlines.
CAC also expects to complete the acquisition of two additional E190s on lease to Aeromexico Connect in the fourth quarter. Upon completion of pending aircraft acquisitions, CAC will have grown Chorus' fleet of regional aircraft, outside of the Capacity Purchase Agreement ('CPA'), with Air Canada, to 19 aircraft with the average age of this fleet being under three years old.
During the quarter, Jazz Technical Services completed the Extended Service Program on one additional Dash 8-300 aircraft, bringing the total to two that are now being leased into the CPA operation. In October, Voyageur delivered a fourth Dash 8-100 on lease to Wasaya Airways.
Financial Performance - third quarter 2017 compared to third quarter 2016
In the third quarter of 2017, Chorus reported adjusted EBITDA of $83.4 million versus $70.0 million in 2016; an increase of $13.4 million or 19.2%.
The $13.4 million increase in adjusted EBITDA was primarily driven by:
a $10.9 million increase related to incremental margin mainly attributed to non-CPA aircraft leasing;
increased aircraft leasing under the CPA with Air Canada of $3.5 million;
additional income from international ACMI flying in the Voyageur operation contributed $0.7 million; and
a reduction in other expense of $1.9 million, including $1.5 million related to a reduction in contingent consideration payable.
These increases were partially offset by:
a decline of $2.2 million in CPA performance incentive revenue; and
an increase of $1.4 million in stock-based compensation expense.
Adjusted net income was $48.6 million for the quarter, an increase from the third quarter of 2016 of $19.8 million, or 68.9%. The change was a result of the $13.4 million increase in adjusted EBITDA previously described, plus a $15.2 million decrease in income taxes; partially offset by:
$5.9 million of additional depreciation primarily related to new aircraft;
$5.9 million of interest costs related to increased aircraft debt and the convertible units; and
$3.0 million of foreign exchange gains related to working capital.
Net income was $79.1 million for the quarter, an increase of $59.0 million from the third quarter of 2016. The increase was primarily due to the previously noted $19.8 million increase in adjusted net income plus an increase of $39.6 million in unrealized foreign exchange gains on long-term debt.
Year to date 2017 compared to year to date 2016
For the nine months ended September 30, 2017, Chorus reported adjusted EBITDA of $203.0 million versus $178.7 million in 2016; an increase of $24.3 million or 13.6%.
The $24.3 million increase in adjusted EBITDA was primarily driven by:
a $20.1 million increase related to incremental margin attributed to non-CPA aircraft leasing and maintenance, repair and overhaul;
increased aircraft leasing under the CPA with Air Canada of $14.2 million; and additional income from international ACMI flying in the Voyageur operation of $2.0 million.
These increases were partially offset by:
a decline of $5.6 million in CPA performance incentive revenue;
an increase of $4.0 million, mostly attributable to increased crew costs including travel and training related to incremental flying activity; and
an increase of $2.4 million in stock-based compensation expense.
Adjusted net income was $91.1 million for the period, an increase from 2016 of $20.3 million, or 28.6%. The change was a result of the $24.3 million increase in adjusted EBITDA previously described, plus a $17.6 million decrease in income taxes and a $4.7 million foreign exchange gain related to working capital, partially offset by:
$14.2 million of interest costs related to increased aircraft debt and the convertible units.
$12.0 million of additional depreciation primarily related to new aircraft.
Net income was $146.6 million for the period, an increase of $47.5 million, or 47.9% from the same period of 2016. The increase was due primarily to the previously noted $20.3 million increase in adjusted net income plus:
an increase of $25.7 million in unrealized foreign exchange gains on long-term debt;
no signing bonuses in the first nine months of 2017, versus $5.5 million in signing bonuses in the same period of 2016; and
foreign exchange gains of $1.6 million on US dollar denominated cash held on deposit for investment in the aircraft leasing business.
This was offset by $9.4 million in employee separation program costs in the first nine months of 2017, versus $3.7 million in the same period of 2016.
(See cautionary statement regarding forward-looking information below)
Chorus' subsidiaries continue to deliver results within management's expectations, supporting positive operating income and cash flows from operations. Chorus is determined to create additional long-term shareholder value by strengthening the foundational CPA business, growing and diversifying aircraft leasing revenues, and pursuing additional growth opportunities.
Chorus intends to grow its regional aircraft leasing business through CAC by leveraging the proceeds from the private placement of convertible debt units to acquire aircraft for lease to regional aircraft operators. CAC intends to deploy the capital by mid-2018 leveraging that capital with further debt financing at a ratio ranging between three and four to one, to acquire new to mid-life regional aircraft for lease to high-quality operators.
Based on updated planning assumptions received from Air Canada, Billable Block Hours for 2017 are expected to be between 358,000 and 363,000 hours based on 117 Covered Aircraft as at December 31, 2017. The actual number of Billable Block Hours for 2017 may vary from this anticipated range due to several factors, (see Section 9 - Risk Factors in the third quarter 2017 MD&A). However, the CPA fleet transition to larger aircraft will generate approximately 8% more available seat miles in fiscal 2017 over the same period in 2016.
Capital expenditures for 2017, excluding those for the acquisition of aircraft and the extended service program, and including capitalized major maintenance overhauls, are expected to be between $47.0 million and $56.0 million. We are projecting 2017 expenditures for aircraft related acquisitions and the extended service program to range between $490 and $510 million. This includes the acquisition of two CRJ1000s, six ATR72-600s, four Embraer 190s, two Embraer 195s, three Q400s and the ESP, and excludes any additional capital for CAC beyond what has been announced.