Q3 2023 Financial Highlights
- Net income of $17.1 million, a
quarter-over-quarter decrease of $6.4
million.
- Adjusted earnings available to Common Shareholders* of
$12.1 million, a decrease of
$19.1 million
quarter-over-quarter.
- Adjusted earnings available to Common Shareholders* of
$0.06 per Common Share, basic, a
decrease of $0.09
quarter-over-quarter.
- Adjusted EBITDA* of $113.1
million, a decrease of $10.2
million quarter-over-quarter.
- Free Cash Flow* of $113.7
million, a decrease of $36.2
million quarter-over-quarter.
- Leverage Ratio* improved to 3.6 at September 30, 2023 from 4.4 at December 31, 2022.
HALIFAX,
NS, Nov. 8, 2023 /CNW/ - Chorus Aviation Inc.
('Chorus') (TSX: CHR) today announced its third quarter 2023
financial results.
"Chorus made steady progress in the quarter on its deleveraging
objectives, producing strong Adjusted EBITDA and Free Cash Flow,
which contributed to its leverage reduction in the quarter. I
am pleased to note that we remain on track to meet our overall
guidance for 2023," said Colin Copp,
President and Chief Executive Officer, Chorus Aviation Inc. "While
responding to ongoing macro- economic challenges affecting our
industry, our team remains laser-focused on improving our core
business fundamentals. In the third quarter, Chorus generated over
$164.3 million in cash from
operations and $113.7 million in Free
Cash Flow while moving closer to our Leverage Ratio target,
improving it from 4.4 at the end of 2022 to 3.6. While we saw
a decrease in quarter over quarter earnings, it was primarily due
to expected lower lease revenue attributable to 2022 asset sales
and last year's inclusion of customer claim recoveries. We remain
on track with our overall strategy."
"The regional aviation services segment continued to perform
well. We are pleased that Jazz reached a modified collective
agreement with its pilots to address the changing pilot wage
environment, a positive development that will help strengthen their
pilot supply, training capabilities and overall capacity," said Mr.
Copp. "A year and a half after the Falko acquisition, we
remain confident about the regional aircraft leasing sector and our
leading position within the space. Our Falko team is the leading
regional aircraft-focused lessor and has successfully completed
seventeen[1] portfolio aircraft transactions this
quarter, including, purchases of aircraft with leases attached,
placement of idle aircraft on lease and lease extensions. We also
continue to hold productive discussions on the launch of Fund III
with potential lead investors."
____________________________
|
[1] This figure does not include
transactions under additional letters of intent and other ongoing
activities that have yet to conclude.
|
[*] These are non-GAAP financial
measures, non-GAAP ratios or supplementary financial measures that
are not recognized measures
for financial statement presentation under GAAP.
As such, they do not have standardized
meanings, may not be comparable to similar measures presented by
other issuers and should not be
considered a substitute for or superior to GAAP results.
Refer to the "Non-GAAP Financial Measures" section of
this news release for more information.
|
Renewal of Normal Course Issuer Bid
Chorus also announced today that it has received approval from
the Toronto Stock Exchange (the "TSX") respecting the renewal of
its Normal Course Issuer Bid ("NCIB"). Pursuant to the
documentation filed with the TSX, Chorus may purchase for
cancellation up to a maximum of 15,160,372 of its Class A Variable
Voting Shares and/or Class B Voting Shares (collectively, the
"Shares"), representing 10% of the public float of the Shares as of
November 6, 2023, calculated in
accordance with the TSX rules.
The directors and management of Chorus believe that, during the
period of the NCIB, the market price of the Shares may not
adequately reflect their value. Therefore, the purchase of Shares
by Chorus for cancellation may be an attractive investment for
Chorus and an appropriate use of its available corporate funds.
As of November 6, 2023, Chorus had
193,873,204 Shares issued and outstanding, of which 151,603,722
Shares constitute the total public float of the Shares. Purchases
made pursuant to the bid will be made in the open market through
the facilities of the TSX and/or alternative Canadian trading
systems at the market price at the time of the purchases in
accordance with the rules of the TSX and applicable securities
laws. On any trading day, Chorus will not purchase more than 75,688
Shares, representing 25% of the average daily trading volume for
the six months ended October 31, 2023
(being 302,752 Shares), except where such purchases are made in
accordance with the block purchase exemptions under the TSX rules.
Purchases under the renewed NCIB may commence on November 14, 2023 and will conclude on the
earlier of the date on which Chorus has purchased the maximum
number of Shares permitted under the NCIB and November 13, 2024.
In connection with the renewal of the NCIB, Chorus has renewed
its automatic securities purchase plan (the "Plan") with its
designated broker to allow for the purchase of Shares on any
trading day during the NCIB during pre-determined trading blackout
periods, subject to certain parameters as to price and number of
Shares. The Plan will commence on the effective date of the renewed
NCIB and terminate when the NCIB terminates, unless terminated
earlier in accordance with the terms of the Plan. Outside of these
pre-determined blackout periods, Shares may also be repurchased in
accordance with management's discretion, subject to applicable law.
Chorus may vary, suspend or terminate the Plan only if it does not
have material non-public information, and the decision to vary,
suspend or terminate the Plan is not taken during a pre-determined
trading blackout period. The Plan constitutes an "automatic plan"
for purposes of applicable Canadian securities legislation and has
been reviewed by the TSX.
The renewal of the NCIB follows on the conclusion of Chorus'
previous NCIB that expires on November 13,
2023. Under the previous NCIB, Chorus was authorized to
purchase up to 15,928,236 Shares for cancellation. From
November 14, 2022 to November 8, 2023, Chorus purchased 9,177,784
Shares through the facilities of the TSX at a weighted average
price of $3.25 per Share.
There can be no assurance as to how many Shares,
if any, will be acquired
by Chorus pursuant to the renewed NCIB. Shares
purchased by Chorus pursuant to the NCIB will be cancelled.
On March 29, 2023, Chorus
management held an investor day at which it provided its view that
the intrinsic value of the Shares was $5.50 per Share at the date of the presentation.
This information, including the valuation approach and underlying
assumptions used by management, is publicly available on Chorus'
website: www.chorusaviation.com.
Third Quarter Summary
In the third quarter of 2023, Chorus reported Adjusted
EBITDA of $113.1 million, a
decrease of $10.2 million over the
third quarter of 2022.
The RAL segment's Adjusted EBITDA was $56.1 million, a decrease of $13.7 million over the third quarter of 2022
primarily due to lower lease revenue of $8.6
million related to the 2022 sale of wholly- owned aircraft,
recovered claims in the Virgin Australia bankruptcy recorded in the
amount of $7.9 million and a decrease
in net gain on sale of assets of $2.7
million; offset by increased lease revenue from re-leased
aircraft, the recognition of end of lease ("EOL") compensation of
$4.1 million and a higher US dollar
exchange rate.
The RAS segment's Adjusted
EBITDA was $62.3 million an increase of $0.3 million
over the third quarter of 2022.
Corporate Adjusted EBITDA of $(5.3)
million improved from the third quarter of 2022 by
$3.2 million due to:
- a decrease in stock-based compensation of $2.0 million due to a decrease in the Common
Share price, offset by the change in fair value of the Total Return
Swap; and
- a decrease in general administrative expenses related to lower
professional fees, salaries, wages and benefits and travel
expenses.
Adjusted net income was $21.4
million for the quarter, a decrease of $20.2 million over the third quarter of 2022 due
to:
- a $10.2 million decrease in
Adjusted EBITDA as previously described;
- an increase in depreciation expense of $4.9 million primarily attributable to capital
expenditures incurred in 2022 on re-leased aircraft as well as a
change in depreciation estimates on certain aircraft;
- an increase of $4.3 million in
income tax expense; and
- a change in net foreign exchange of $2.4
million; partially offset by
- a decrease in net interest costs of $1.8
million primarily related to the redemption of the 6.00%
Debentures in December 2022 partially
offset by interest on the Operating Credit Facility.
Net income decreased $6.4 million
over the third quarter of 2022 primarily due to:
- the previously noted decrease in Adjusted net income of
$20.2 million;
- an increase in impairment provisions of $25.7 million; and
- an increase in income tax expense on adjusted items of
$5.9 million; partially offset
by
- the defined benefit pension revenue of $29.9 million;
- a change in net unrealized foreign exchange of $9.0 million;
- a decrease in lease repossession costs of $5.1 million; and
- a decrease in employee separation program costs of $1.2 million.
Year-to-Date Summary
Chorus reported Adjusted EBITDA of $341.9 million for 2023, an increase of $30.4 million
over the same prior year period.
The RAL segment's Adjusted EBITDA was
$175.0 million, an increase of
$23.0 million over the same prior
year period primarily due to an increase in lease revenue
of $33.5 million primarily attributable to four
additional months of lease revenue versus the same period last year
for Falko, increased lease revenue from re-leased aircraft, the
release of EOL compensation of $4.1
million and a higher US dollar exchange rate; partially
offset by lower lease revenue of $15.0
million related to the 2022 sale of wholly-owned
aircraft and recovered claims in the Virgin Australia and
Aeromexico bankruptcies recorded in 2022 of $10.9 million.
The RAS segment's Adjusted EBITDA was $188.0 million, an increase of $6.7 million over the same prior year period due
to:
- an increase in other revenue of $7.0
million primarily due to Voyageur's increase in parts sales
and MRO activity offset by a decrease in contract flying; and
- an increase in aircraft leasing revenue under the CPA of
$3.2 million primarily due to a
higher US dollar exchange rate offset by a change in lease rates on
certain aircraft; partially offset by
- a contracted decrease in Fixed Margin of $2.3 million;
- a decrease in capitalization of major maintenance overhauls on
owned aircraft of $2.2 million;
and
- an increase in general administrative expenses attributable to
increased operations.
Corporate Adjusted EBITDA of $(21.1)
million improved from the same period 2022 by $0.7 million due to:
- a decrease in stock-based compensation of $2.9 million due to a decrease in the Common
Share price, offset by the change in fair value of the Total Return
Swap; partially offset by
- an increase in general administrative expenses related to
higher professional fees, salaries, wages and benefits and travel
expenses.
Adjusted net income of $77.8 million,
a decrease of $9.2 million
over the same prior year period primarily
due to:
- an increase in depreciation expense of $22.3 million primarily attributable to Falko,
capital expenditures incurred in 2022 on re-leased aircraft as well
as a change in depreciation estimates on certain aircraft;
- an increase of $12.5 million in
income tax expense;
- a change in net foreign exchange of $3.1
million; and
- an increase in net interest costs of $2.2 million primarily related to interest on
long-term debt assumed as part of the Falko Acquisition and the
draw on the Operating Credit Facility partially offset by the
redemption of the 6.00% Debentures in December 2022 and the recognition of income
related to the discontinuance of hedge accounting on an interest
rate swap; partially offset by
- a $30.4 million increase in
Adjusted EBITDA as previously described; and
- a decrease of $0.6 million on the
fair value of investments.
Net income of $69.5 million, an increase of $63.4 million
over the same prior year period primarily
due to:
- a change in net foreign exchange of $34.4 million;
- the defined benefit pension revenue of $29.9 million;
- a decrease in lease repossession costs of $12.2 million;
- a decrease in restructuring credit loss provision of
$10.4 million;
- a decrease in strategic advisory fees of $8.5 million; and
- a decrease in employee separation program costs of $1.3 million; partially offset by
- the previously noted decrease in Adjusted net income of
$9.2 million;
- an increase in income tax expenses on adjusted items of
$18.9 million; and
- an increase in impairment provisions of $5.2 million.
Consolidated Financial Analysis
This section provides
detailed information and analysis about
Chorus' performance for the three and
nine months ended September 30, 2023 compared
to the three and nine months ended
September 30, 2022. It focuses on
Chorus' consolidated operating results and provides financial
information for Chorus' operating segments.
(unaudited)
(expressed in thousands of Canadian dollars)
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
2023
$
|
2022
$
|
Change
$
|
Change
%
|
2023
$
|
2022
$
|
Change
$
|
Change
%
|
Operating revenue
|
447,596
|
421,326
|
26,270
|
6.2
|
1,259,623
|
1,156,049
|
103,574
|
9.0
|
Operating expenses
|
386,439
|
355,791
|
30,648
|
8.6
|
1,081,179
|
1,040,388
|
40,791
|
3.9
|
Operating income
|
61,157
|
65,535
|
(4,378)
|
(6.7)
|
178,444
|
115,661
|
62,783
|
54.3
|
Net interest expense
|
(25,081)
|
(26,875)
|
1,794
|
(6.7)
|
(74,191)
|
(72,034)
|
(2,157)
|
3.0
|
Foreign exchange (loss) gain
|
(3,179)
|
(9,766)
|
6,587
|
(67.4)
|
3,535
|
(27,758)
|
31,293
|
(112.7)
|
Gain on property and
|
|
|
|
|
|
|
|
|
equipment
|
3
|
—
|
3
|
100.0
|
13
|
156
|
(143)
|
(91.7)
|
(Loss) gain on fair value
of
|
|
|
|
|
|
|
|
|
investments
|
(50)
|
224
|
(274)
|
(122.3)
|
2,441
|
(573)
|
3,014
|
(526.0)
|
Income before
income tax
|
32,850
|
29,118
|
3,732
|
12.8
|
110,242
|
15,452
|
94,790
|
613.4
|
Income tax expense
|
(15,702)
|
(5,557)
|
(10,145)
|
(182.6)
|
(40,757)
|
(9,387)
|
(31,370)
|
334.2
|
Net income
|
17,148
|
23,561
|
(6,413)
|
(27.2)
|
69,485
|
6,065
|
63,420
|
1,045.7
|
Net income
attributable to non-controlling interest
|
553
|
1,938
|
(1,385)
|
(71.5)
|
2,310
|
2,377
|
(67)
|
(2.8)
|
Net income attributable to
Shareholders
|
16,595
|
21,623
|
(5,028)
|
(23.3)
|
67,175
|
3,688
|
63,487
|
1,721.4
|
Preferred share
dividends declared
|
(8,799)
|
(8,563)
|
(236)
|
2.8
|
(26,486)
|
(13,989)
|
(12,497)
|
89.3
|
Earnings (loss)
attributable to Common Shareholders
|
7,796
|
13,060
|
(5,264)
|
(40.3)
|
40,689
|
(10,301)
|
50,990
|
(495.0)
|
Adjusted EBITDA(1)
|
113,126
|
123,353
|
(10,227)
|
(8.3)
|
341,930
|
311,504
|
30,426
|
9.8
|
Adjusted EBT(1)
|
32,477
|
48,446
|
(15,969)
|
(33.0)
|
109,311
|
105,981
|
3,330
|
3.1
|
Adjusted net income(1)
|
21,440
|
41,686
|
(20,246)
|
(48.6)
|
77,840
|
87,016
|
(9,176)
|
(10.5)
|
(1) These are
non-GAAP financial measures, non-GAAP ratios or supplementary
financial measures that are not recognized measures for financial
statement presentation under GAAP. As such, they do not have
standardized meanings, may not be comparable to similar measures
presented by other issuers and should not be considered a
substitute for or superior to GAAP results. Refer to the "Non-GAAP
Financial Measures" section of this news release for more
information.
|
Outlook
(See cautionary statement regarding forward-looking information below)
Jazz's capacity remains constrained as the industry-wide demand
for pilots continues. In the past 12-months, Jazz has seen over 300
captain or captain-eligible pilots flow to Air Canada under the
existing pilot flow agreement, along with attrition to other
mainline airlines. In that same time period,
Jazz has successfully hired
and trained over 300 first
officers and continues to see a good supply
of new hire pilots. Effective September 1,
2023, Jazz and the Air Line Pilots Association
representing
the Jazz pilots, entered into a modified collective agreement to
address the changing pilot wage environment.
Jazz expects
this trend on flow of pilots to Air Canada to continue
in the near term.
The CPA provides a Fixed Fee to Jazz regardless of flying
levels; therefore, any variations in flying are not expected to
have any impact on Jazz's earnings.
Falko continues to have positive discussions on its new fund
(Fund III) with its existing lead investors in Fund II and others.
Chorus is also routinely exploring opportunities to sell Falko's
wholly-owned or majority-owned aircraft in order to advance the
implementation of its asset light leasing strategy.
Chorus has the key elements to successfully execute on its
strategy to transition to an asset light leasing model while
growing its contractual fund management business and its RAS
segment. The key elements include:
- Strong and predictable core earnings from the RAS segment, with
the potential to expand into adjacent and complementary business
lines;
- Significant wholly-owned or majority-owned aviation assets that
can be monetized to reduce debt and return capital to Common
Shareholders while also providing funding to improve the growth and
return profile of the business over time through accretive
investments; and
- Growth potential in the Falko series of funds from which Chorus
can generate attractive returns via asset management fees,
co-investment returns and incentive payments.
The asset light leasing model will enable Chorus to achieve
greater scale in its leasing business by co-investing alongside
third-party equity investors in Falko-managed funds, while
decreasing risk to Chorus by reducing the use of recourse debt
financing. As Chorus transitions to an asset light leasing model,
asset sales will generate Free Cash Flow that can be deployed to
pursue accretive investment opportunities and/or return capital to
Common Shareholders. As part of this asset light
transformation, Chorus is targeting:
- Aircraft asset sales: Chorus intends to
opportunistically trade RAL's wholly-owned or majority-owned
aircraft including in connection with the windup of its 67.45%
ownership in Ravelin Holdings LP by the tenth anniversary of the
commencement of Fund I (2025). As of September 30, 2023, Ravelin Holdings LP held an
interest in 39 aircraft with a net book value of US $386.5 million and secured debt of US
$193.7 million. As asset sales occur,
the related leasing revenues in RAL will decrease, which will be
partially offset by lower depreciation and debt servicing costs and
earnings from Falko managed funds.
- Reduced leverage: Chorus anticipates its Leverage Ratio
will be between 2.5 to 3.5 by December 31,
2024, given the contractual nature of Chorus' earnings,
amortizing debt repayments, and expected asset sales. Deleveraging
amounts will vary from quarter-to- quarter depending on the timing
and quantum of asset sales.
- Growth: Chorus intends to expand the number of Falko
managed funds and the RAS business into adjacent and complementary
specialty aviation business lines.
Chorus' forecast for the year ending
December 31, 2023 is as follows:
(unaudited)
(expressed in thousands of Canadian dollars)
|
Consolidated
|
From $
|
To $
|
Revenue(1)(2)
|
1,500,000
|
1,700,000
|
Adjusted EBITDA(1)(3)
|
410,000
|
450,000
|
Adjusted EBT(1)(3)
|
135,000
|
165,000
|
Leverage Ratio(1)(3)
|
3.6
|
4.0
|
Free Cash Flow(3)(4)
|
260,000
|
330,000
|
(1)
|
RAL's forecast for the year ending
December 31, 2023 is as follows: Revenue
is expected to be between $250.0 million
and $275.0 million,
Adjusted EBITDA is expected to be between
$210.0
million and $235.0 million and Adjusted EBT is expected
to be between $50.0 million and $60.0
million.
|
(2)
|
Controllable Costs and
Pass-Through Costs are expected to be between $0.95 billion and
$1.1 billion included in both revenue and expenses.
|
(3)
|
These are non-GAAP
financial measures, non-GAAP ratios or supplementary financial
measures that are not recognized measures for financial statement
presentation under GAAP. As such, they do not have standardized
meanings, may not be comparable to similar measures presented by
other issuers and should not be considered a substitute for or
superior to GAAP results. Refer to the "Non-GAAP Financial
Measures" section of this news release for more
information.
|
(4)
|
Free Cash Flow includes
the defined benefit pension revenue related to Air Canada's
agreement to reimburse Jazz for the impact of the new pilot wage
scales on the defined benefit pension plan liability of $29.9
million.
|
2023 Key Economic Assumptions:
- The forecast assumes Fund III will close outside of the 2023
year. Fund III is anticipated to have (i) a minimum of US
$500.0 million in capital commitments
and (ii) management fees and economic terms commensurate with those
in Falko's prior funds.
- The forecast revenue is based on current contracted lease
revenue and forecasted revenues for leased aircraft and asset
management fees. Aircraft leasing revenue under the CPA and Fixed
Margin revenue is expected to be US $110.0
million and $63.0 million,
respectively, in 2023 (2022: US $114.5
million and $66.3 million,
respectively).
- Asset sales of approximately US $50.0
million to $100.0 million in
2023 with a loan-to-value of between 50% and 60% generating net
proceeds between US $25.0 million and
US $50.0 million. If material asset
sales are executed in 2023, this may reduce expected revenue in
RAL, depending on the timing of such sales.
- The forecast uses a foreign exchange rate of 1.30 for 2023 to
translate USD to CAD revenue.
RAL's gross receivable, primarily related to rent relief
arrangements1, may decrease from the September 30, 2023 balance of US $111.1 million to between US $100.0 million and US $105.0 million by the end of 2023 due to
repayment expectations.
RAL's lease deferral receivable exposure is partially mitigated
by security packages held of approximately US $17.9 million (December
31, 2022 - US $17.1
million).
1
|
Following the onset of
the COVID-19 pandemic, RAL received requests from many of
its customers for some form of temporary rent relief, as they
coped with an unprecedented reduction in demand for passenger
air travel. Under rent relief arrangements, certain of which
include lease term extensions, the repayment of the deferred
amounts typically coincides with the lease term
extensions.
|
Capital Expenditures
Capital expenditures in 2023, are expected
as follows:
|
|
Actual
|
(unaudited)
(expressed in thousands of Canadian
dollars)
|
Planned 2023(1)
$
|
Nine months
ended 2023
$
|
Year ended
December 31, 2022
$
|
Capital expenditures,
excluding aircraft acquisitions
Capitalized major
maintenance overhauls(2)
Aircraft acquisitions
and improvements
|
17,000
|
to
|
22,000
|
10,911
|
15,914
|
8,000
|
to
|
13,000
|
9,696
|
15,974
|
11,000
|
to
|
15,000
|
9,365
|
30,392
|
|
36,000
|
to
|
50,000
|
29,972
|
62,280
|
(1)
|
The 2023 plan includes
reconfiguration costs on aircraft and certain aircraft improvements
which have been converted to Canadian from US dollars using a
foreign exchange rate of 1.3520, the September 30, 2023 closing day
rate from the Bank of Canada.
|
(2)
|
The 2023 plan includes
between $5.0 million to $7.0 million of costs that are expected to
be included in Controllable Costs. Actual 2023 and 2022 costs
include $5.0 million and $10.1 million, respectively, which were
included in Controllable Costs.
|
Use of Defined Terms
Capitalized terms used but not defined in this news release have
the meanings given to them in management's discussion and analysis
of results of operations and financial condition ("MD&A") dated
the date hereof, which is available on Chorus' website
(www.chorusaviation.com) and under Chorus' profile on SEDAR+
(www.sedarplus.ca).
Investor Conference Call / Audio Webcast
Chorus will hold an analyst call at 9:00
AM ET on November 9, 2023 to
discuss the third quarter 2023 financial results. The call may be
accessed by dialing 1-888-664-6392. The call will be simultaneously
audio webcast via: https://app.webinar.net/8lXRrpPr70z.
This is a listen-in
only audio webcast.
The conference call webcast will be archived on
Chorus' website at www.chorusaviation.com under Investors
> Reports. A playback of the call can also be accessed
until midnight ET, November 16, 2023, by dialing toll-free
1-888-390-0541 and using passcode 414059 # (pound key).
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
standardized meanings, may not be comparable to similar measures
presented by other entities, and should not be considered a
substitute for or superior to GAAP results.
For quantitative reconciliations of certain non-GAAP measures to
the most directly comparable financial measure in Chorus' financial
statements, please refer to Section 18 (Non-GAAP Financial
Measures) of the MD&A dated the date hereof, which is
available on Chorus' website (www.chorusaviation.com) and under
Chorus' profile on SEDAR+ (www.sedarplus.ca).
Adjusted net income, Adjusted earnings available to Common
Shareholders, Adjusted EBT, and Adjusted EBITDA
Chorus revised its definition of Adjusted net income in the
third quarter of 2023 to include the
defined benefit pension
revenue related to Air Canada's
agreement to reimburse Jazz for the impact
of the new pilot wage scales on the defined benefit pension plan
for pilots to facilitate comparability of its results.
Adjusted net income is 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, employee
separation program costs, impairment provisions, lease repossession
costs net of security packages realized, restructuring
expected credit loss provision, defined benefit pension revenue,
strategic advisory fees and the applicable tax expense (recovery).
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.
Adjusted earnings available to Common Shareholders per Common
Share is used by Chorus to assess performance and is calculated as
Adjusted net income less non-controlling interest and Preferred
Share dividends declared.
Chorus revised its definition of Adjusted EBT and Adjusted
EBITDA in the third quarter of 2023 to include the defined benefit
pension revenue related to Air Canada's agreement to reimburse Jazz
for the impact of the new pilot wage scales on the defined benefit
pension plan for pilots to facilitate comparability of its
results.
Adjusted EBT and Adjusted EBITDA should not be used as exclusive
measures of cash flow because these measures do 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.
EBT is defined as earnings before income tax. Adjusted EBT (EBT
before employee separation program costs, impairment provisions,
lease repossession costs net of security packages realized,
restructuring expected credit loss provision, defined benefit
pension revenue, 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 re-occur over the longer-term (such
as employee separation program costs, impairment provisions, lease
repossession costs net of security packages realized, restructuring
expected credit loss provision, defined benefit pension revenue 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, depreciation and amortization and impairment 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 employee separation program costs,
strategic advisory fees, impairment provisions, lease repossession
costs net of security packages realized, restructuring expected
credit loss provision, defined benefit pension revenue 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 employee separation program costs, impairment
provisions, lease repossession costs net of security packages
realized, restructuring expected credit loss provision, defined
benefit pension revenue 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.
Leverage Ratio
Leverage Ratio is used by Chorus as a means to measure financial
leverage. Leverage Ratio is calculated by dividing Net debt by
trailing 12-month Adjusted EBITDA. Leverage Ratio is not a
recognized measure under GAAP, and therefore is unlikely to be
comparable to similar measures
presented by other companies. Management believes leverage
to be a useful term when monitoring
and managing debt levels. In addition, as leverage is a measure
frequently analyzed for public companies, Chorus has calculated the
amount to assist readers in this review. Leverage should not be
construed as a measure of cash flows.
Free Cash Flow
Free Cash Flow is defined as cash provided by operating
activities less net changes in non-cash balances related to
operations, capital expenditures excluding aircraft acquisitions
and improvements plus net proceeds on asset sales (proceeds on
disposal of property and equipment less the related debt repayments
for the assets sold).
Forward-Looking Information
This news release includes forward-looking information and
statements. Forward-looking information and statements are
identified by the use of terms and phrases such as "anticipate",
"believe", "could", "estimate", "expect", "intend", "may", "plan",
"potential", "predict", "project", "will", "would", and similar
terms and phrases, including negative versions thereof. Such
information and statements may involve but are not limited to
comments with respect to assumptions, strategies, expectations,
planned operations or future actions. Forward-looking information
and statements relate to analyses and other information that are
based on forecasts of future results, estimates of amounts not yet
determinable and other uncertain events. Forward-looking
information and statements, by their nature, are based on
assumptions, including those referenced below, and are subject to
important risks and uncertainties. Any forecasts or forward-looking
predictions or statements cannot be relied upon due to, among other
things, external events, changing market conditions and general
uncertainties of the business. Such information and statements
involve 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 and statements.
Examples of forward-looking information and statements in this news release include
the discussion in the Outlook section, as well as statements
regarding expectations as to Chorus' future liquidity and financial
strength and contracted revenues, Chorus' future growth and
competitive position, the growth of Falko's asset management
business, the transition of Chorus' leasing business to an
asset light
leasing model, the generation of cash flows from asset
sales and potential deployment of those proceeds to
enhance returns to Shareholders and/or invest in accretive growth
opportunities, the completion of pending or planned transactions
(including the successful close of Falko's Fund III), Jazz's
efforts to increase flying capacity under the CPA, and expectations
with regard to Share purchases under the NCIB. Actual results may
differ materially from results indicated in forward- looking
information for a number of reasons, including if: any one or more
of the key assumptions described in the Outlook section fails to
materialize; Chorus is unable to successfully realize the
anticipated benefits of the Falko acquisition, including the
transition to an asset light model; Falko is unable to successfully
launch Fund III on the terms currently contemplated or at all;
Chorus (including any of its subsidiaries) is unable to attract and
retain the type and number of human resources it needs to operate
its business; new COVID-19 variants and/or new pandemic or endemic
diseases emerge and restrictive measures are implemented to
minimize their public health impacts; the effects of
the COVID-19 pandemic continue to adversely impact the
financial health of Chorus' contractual counterparties; general
economic conditions (including inflation and interest rates)
worsen, or general conditions for the aviation industry
deteriorate; payments cease (in whole or in part) under the
CPA and/or under aircraft lease agreements with Chorus'
customers; disputes emerge under the CPA and/or under aircraft
lease agreements; Chorus defaults under any of its debt covenants;
asset impairments and/or provisions for expected credit losses are
required; changes in law are made (including regulations relating
to climate change) which adversely affect Chorus' business or
assets; transactions (including financings) referenced in this news
release or in Chorus' public disclosure record fail to conclude on
the terms currently contemplated or at all; and/ or one or more of
the risk factors referenced in Chorus' most recent Annual
Information Form and in its public disclosure record available on
SEDAR+ at www.sedarplus.ca materializes. The forward- looking
statements contained in this news release represent Chorus'
expectations as of the date of this news release (or as of the date
they are otherwise stated to be made) and are subject to change
after such date. Chorus disclaims any intention or obligation to
update or revise such statements to reflect new information,
subsequent events or otherwise, except as required by applicable
securities laws. Readers are cautioned that the foregoing factors
and risks are not exhaustive.
About Chorus Aviation Inc.
Chorus is a leading, global aviation solutions provider and
asset manager, focused on regional aviation. Our principal
subsidiaries are: Falko Regional Aircraft, the leading pure play
regional aircraft asset manager and lessor, managing investments on
behalf of third-party fund investors; Jazz Aviation, the largest
regional operator in Canada and
provider of regional air services under the Air Canada Express
brand; Voyageur Aviation, a leading provider of specialty charter,
aircraft modifications, parts provisioning and in-service support
services; and Cygnet Aviation Academy, an industry
leading accredited training academy preparing pilots for direct
entry into airlines. Together, Chorus' subsidiaries provide
services that encompass every stage of a regional aircraft's
lifecycle, including: aircraft acquisition and leasing; aircraft
refurbishment, engineering, modification, repurposing and
transition; contract flying; aircraft and component maintenance,
disassembly, and parts provisioning; and pilot training.
Chorus Class A Variable Voting Shares and Class B Voting Shares
trade on the Toronto Stock Exchange under the trading symbol 'CHR'.
Chorus 5.75% Senior Unsecured Debentures due December 31, 2024, 6.00% Convertible Senior
Unsecured Debentures due June 30,
2026, and 5.75% Senior Unsecured Debentures due June 30, 2027 trade on the Toronto Stock Exchange
under the trading symbols 'CHR.DB.A', 'CHR.DB.B', and 'CHR.DB.C'
respectively. www.chorusaviation.com.
SOURCE Chorus Aviation Inc.