Earnings Release
Copa Holdings Reports Net Income of $63.0 million and EPS of $1.49 for the Second Quarter of 2017
Copa Holdings, S.A. (CPA), today announced financial results for the second quarter of 2017 (2Q17). The terms "Copa Holdings" and "the Company" refer to the consolidated entity. The following financial information, unless otherwise indicated, is presented in accordance with International Financial Reporting Standards (IFRS). See the accompanying reconciliation of non-IFRS financial information to IFRS financial information included in the financial tables section of this earnings release. Unless otherwise stated, all comparisons with prior periods refer to the second quarter of 2016 (2Q16).
OPERATING AND FINANCIAL HIGHLIGHTS
• Copa Holdings reported net income of US$63.0 million for 2Q17 or earnings per share (EPS) of US$1.49, compared to net income of US$54.5 million or earnings per share of US$1.29 in 2Q16.
• Excluding special items, the Company would have reported an adjusted net income of US$62.8 million, or adjusted EPS of US$1.48, compared to an adjusted net income of US$21.5 million or adjusted EPS of US$0.51 in 2Q16. Special items for 2Q17 include a non-cash gain of US$0.2 million associated with the mark-to-market of fuel hedge contracts. Special items for 2Q16 include a US$7.6 million loss related to foreign currency fluctuations and a non-cash gain of US$40.6 million associated with the mark-to-market of fuel hedge contracts.
• Operating income for 2Q17 came in at US$83.0 million, representing a 139.9% increase over operating income of US$34.6 million in 2Q16, as a result of 8.6% additional capacity, a 7.5% increase in unit revenue per available seat mile (RASM), and a 1% decrease in unit costs. Operating margin for 2Q17 came in at 14.4%, compared to an operating margin of 7.0% in 2Q16.
• Total revenues for 2Q17 increased 16.8% to US$578.1 million. Yield per passenger mile increased 3.0% to 11.8 cents and RASM came in at 10 cents, or 7.5% above 2Q16.
• For 2Q17, consolidated passenger traffic grew 14.1% while consolidated capacity grew 8.6%. As a result, consolidated load factor for the quarter increased 3.9 percentage points to 82.2%.
• Operating cost per available seat mile (CASM) decreased 1%, from 8.6 cents in 2Q16 to 8.5 cents in 2Q17. CASM excluding fuel costs remained flat at 6.3 cents in 2Q17 and 2Q16.
• Cash, short-term and long-term investments ended 2Q17 at US$924.6 million, representing 39% of the last twelve months’ revenues.
• In June, Copa Airlines announced a new flight to Mendoza, Argentina, starting in November 2017.
• During the Paris Airshow in June, Copa Airlines announced the order of 15 Boeing 737 MAX 10 aircraft, to be delivered in 2021 and 2022. The order is a conversion of previously ordered Boeing 737 MAX 8 aircraft.
• Copa Airlines reported consolidated on-time performance of 85.1% and a flight-completion factor of 99.7% for 2Q17, maintaining its position among the best in the industry.
Subsequent Events
• Given the Company’s strong cash position and financial performance, the Board of Directors today approved an increase in dividend payout of more than US$20 million for the second half of 2017, which will represent an additional $0.24 per share, per quarter, for the third and fourth quarters of 2017. As such, the third quarter dividend payment will increase from US$0.51 to US$0.75 per share, payable on September 15, 2017, on all outstanding Class A and Class B shares, to stockholders of record as of August 31, 2017.
Consolidated Financial
2Q17
2Q16
Variance 1Q17
Variance
& Operating Highlights
vs. 2Q16
vs. 1Q17
Revenue Passengers Carried (’000)
2,262
2,010
12.6%
2,264
-0.1%
RPMs (mm)
4,766
4,178
14.1%
4,732
0.7%
ASMs (mm)
5,796
5,335
8.6%
5,808
-0.2%
Load Factor
82.2%
78.3%
3.9 p.p. 81.5%
0.8 p.p.
Yield
11.8
11.4
3.0%
12.7
-7.3%
PRASM (US$ Cents)
9.7
9.0
8.2%
10.4
-6.4%
RASM (US$ Cents)
10.0
9.3
7.5%
10.6
-6.1%
CASM (US$ Cents)
8.5
8.6
-1.0%
8.6
-0.6%
CASM Excl. Fuel (US$ Cents)
6.3
6.3
0.2%
6.2
0.6%
Fuel Gallons Consumed (Millions)
74.1
69.4
6.9%
74.2
-0.1%
Avg. Price Per Fuel Gallon (US$ Dollars)
1.77
1.81
-2.4%
1.84
-3.9%
Average Length of Haul (Miles)
2,107
2,079
1.3%
2,090
0.8%
Average Stage Length (Miles)
1,259
1,194
5.4%
1,274
-1.2%
Departures
31,092
30,313 2.6%
31,095
0.0%
Block Hours
102,435 95,171 7.6%
101,495 0.9%
Average Aircraft Utilization (Hours)
11.2
10.4
7.7%
11.3
-0.4%
Operating Revenues (US$ mm)
578.1
494.8
16.8%
616.7
-6.3%
Operating Income (US$ mm)
83.0
34.6
139.9%
117.5
-29.4%
Operating Margin
14.4%
7.0%
7.4 p.p. 19.1%
-4.7 p.p.
Net Income (US$ mm)
63.0
54.5
15.5%
102.3
-38.4%
Adjusted Net Income (US$ mm) (1)
62.8
21.5
192.2%
103.2
-39.1%
EPS - Basic and Diluted (US$)
1.49
1.29
15.3%
2.41
-38.5%
Adjusted EPS - Basic and Diluted (US$) (1) 1.48
0.51
191.7%
2.43
-39.2%
# of Shares - Basic and Diluted (’000)
42,419
42,336 0.2%
42,396
0.1%
(1) Adjusted Net Income and Adjusted EPS for 2Q17, 2Q16 and 1Q17 exclude non-cash charges/gains associated with the mark-to-market of fuel hedges and 2Q16 also excludes the impact of the Venezuelan currency devaluations. Note: Attached to this press release is a reconciliation of non-IFRS financial measures to the comparable IFRS measures.
FULL 2Q17 EARNINGS RELEASE AVAILABLE FOR DOWNLOAD AT: http://investor.shareholder.com/copa/results.cfm
2Q17 EARNINGS RESULTS CONFERENCE CALL AND WEBCAST
Time:
11:00 AM US ET (10:00 AM Local Time)
Conference telephone number: 877-293-5456 (US Domestic Callers)
707-287-9357 (International Callers)
Speakers:
Pedro Heilbron, Chief Executive Officer
Jos? Montero, Chief Financial Officer
About Copa Holdings Copa Holdings is a leading Latin American provider of passenger and cargo services. The Company, through its operating subsidiaries, provides service to 75 destinations in 31 countries in North, Central and South America and the Caribbean with one of the youngest and most modern fleets in the industry, consisting of 101 aircraft: 80 Boeing 737NG aircraft and 21 EMBRAER-190s. For more information visit: www.copa.com.
CONTACT: Copa Holdings S.A. Investor Relations: Ph: (507) 304-2774 www.copa.com (IR section)
This release includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on current plans, estimates and expectations, and are not guarantees of future performance. They are based on management’s expectations that involve a number of business risks and uncertainties, any of which could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. The Company undertakes no obligation to update or revise any forward-looking statement. The risks and uncertainties relating to the forward-looking statements in this release are among those disclosed in Copa Holdings’ filed disclosure documents and are subject to change without prior notice
CPA-G
Unaudited
Unaudited
%
Unaudited
%
2Q17
2Q16*
Change
1Q17
Change
Passenger revenue
561,696
477,894
17.5%
601,478
-6.6%
Cargo and mail revenue
13,994
14,025
-0.2%
12,856
8.9%
Other operating revenue
2,398
2,879
-16.7%
2,389
0.4%
Total Operating Revenue
578,087
494,798
16.8%
616,722
-6.3%
Fuel
130,878
125,539
4.3%
136,343
-4.0%
Wages, salaries, benefits and other employees’ expenses
99,603
87,542
13.8%
100,817
-1.2%
Passenger servicing
22,883
19,755
15.8%
23,074
-0.8%
Airport facilities and handling charges
42,614
40,346
5.6%
40,966
4.0%
Sales and distribution
48,942
46,087
6.2%
49,841
-1.8%
Maintenance, materials and repairs
27,404
25,943
5.6%
25,596
7.1%
Depreciation and amortization
40,572
34,815
16.5%
39,832
1.9%
Flight operations
25,999
20,730
25.4%
24,031
8.2%
Aircraft rentals and other rentals
33,614
35,575
-5.5%
34,231
-1.8%
Cargo and courier expenses
1,892
1,545
22.4%
1,464
29.2%
Other operating and administrative expenses
20,727
22,334
-7.2%
23,001
-9.9%
Total Operating Expense
495,127
460,212
7.6%
499,197
-0.8%
Operating Profit
82,960
34,586
139.9%
117,526
-29.4%
Non-operating Income (Expense):
Finance cost
(8,938)
(9,147)
-2.3%
(8,921)
0.2%
Finance income
4,249
3,238
31.2%
3,446
23.3%
Gain (loss) on foreign currency fluctuations
(2,858)
(8,655)
-67.0%
2,652
-207.8%
Net change in fair value of derivatives
176
40,644
-99.6%
(860)
-120.4%
Other non-operating (income) expense
(190)
(368)
-48.4%
(558)
-66.0%
Total Non-Operating Income/(Expense)
(7,561)
25,713
-129.4%
(4,241)
78.3%
Profit before taxes
75,399
60,299
25.0%
113,284
-33.4%
Income tax expense
12,401
5,772
114.8%
10,971
13.0%
Net Profit
62,997
54,527
15.5%
102,314
-38.4%
EPS - Basic and Diluted
1.49
1.29
15.3%
2.41
-38.5%
Shares - Basic and Diluted
42,419,150
42,336,196
0.2%
42,395,784
0.1%
* During 2017, the Company implemented a business, planning and financial consolidation system, which resulted in a new classification of the chart of accounts. Prior periods have been reclassified for ease of comparison.
Copa Holdings, S. A. and subsidiaries
(US$ Thousands)
June 30
December 31
Cash and cash equivalents
243,645
331,687
Restricted cash and cash equivalents
-
-
Short-term investments
679,991
483,002
Total cash, cash equivalents and short-term investments 923,636
814,689
Accounts receivable, net
153,813
113,408
Accounts receivable from related parties
1,834
499
Expendable parts and supplies, net
79,482
74,502
Prepaid expenses
47,343
58,370
Other current assets
6,675
7,650
TOTAL CURRENT ASSETS
1,212,783
1,069,118
Long-term investments
953
953
Long-term accounts receivable
2,346
1,957
Long-term prepaid expenses
30,071
26,398
Property and equipment, net
2,708,433
2,623,682
Intangible, net
74,166
69,502
Net pension asset
4,941
8,826
Deferred tax assets
15,602
18,339
Other Non-Current Assets
31,133
27,064
TOTAL NON-CURRENT ASSETS
2,867,645
2,776,721
TOTAL ASSETS
4,080,428
3,845,839
Current maturities of long-term debt
209,615
222,718
Accounts payable
105,654
104,590
Accounts payable to related parties
8,770
8,680
Air traffic liability
476,750
395,580
Frequent flyer deferred revenue
39,058
35,368
Taxes and interest payable
96,648
68,483
Employee benefits obligations
37,175
41,707
Income tax payable
3,138
1,401
Other Current Liabilities
5,085
4,385
TOTAL CURRENT LIABILITIES
981,893
882,912
Long-term debt
965,366
961,414
Other long - term liabilities
118,765
114,268
Deferred tax Liabilities
45,690
44,974
TOTAL NON-CURRENT LIABILITIES
1,129,821
1,120,656
TOTAL LIABILITIES
2,111,714
2,003,568
Class A - 33,778,404 issued and 31,185,641 outstanding
20,946
20,988
Class B - 10,938,125 shares issued and outstanding
7,466
7,466
Additional Paid-In Capital
69,296
64,986
Treasury Stock
(136,388)
(136,388)
Retained Earnings
1,843,871
1,552,547
Other Comprehensive Income
(1,859)
(1,872)
TOTAL EQUITY
1,968,714
1,842,271
TOTAL LIABILITIES AND EQUITY
4,080,428
3,845,839
* During 2017, the Company implemented a business, planning and financial consolidation system, which resulted in a new classification of the chart of accounts. Prior periods have been reclassified for ease of comparison.
Copa Holdings, S. A. and subsidiaries
Consolidated Statement of Cash Flows
For the six months ended June 30,
(Unaudited)
(Unaudited)
(Unaudited)
Cash flow from operating activities
330,227
267,049
194,620
Cash flow used in from investing activities
(241,655)
(124,608)
(59,718)
Cash flow used in financing activities
(176,614)
(139,539)
(166,017)
Net (decrease) increase in cash and cash equivalents
(88,042)
2,902
(31,115)
Cash and cash equivalents at January 1
331,687
204,715
221,443
Cash and cash equivalents at June 30
$
243,645
$
207,617
$
190,328
Short-term investments
679,991
535,484
410,000
Long-term investments *
953
856
526,132
Restricted cash and cash equivalents **
-
20,787
27,260
Total cash and cash equivalents and investments at June 30
$
924,589
$
764,744
$ 1,153,720
* Long-term investments include $435 million at June 2015 of cash in Venezuela.
** Restricted cash corresponds to a margin calls to secure derivative financial instruments transactions.
Copa Holdings, S.A. NON-IFRS FINANCIAL MEASURE RECONCILIATION
This press release includes the following non IFRS financial measures: CASM Excluding Fuel, Adjusted Net Income and Adjusted EPS. This supplemental information is presented because we believe it is a useful indicator of our operating performance and is useful in comparing our performance with other companies in the airline industry. These measures should not be considered in isolation, and should be considered together with comparable IFRS measures, in particular operating income and net income. The following is a reconciliation of these non-IFRS financial measures to the comparable IFRS measures:
Reconciliation of Adjusted Net Income
and Adjusted EPS
2Q17
2Q16
1Q17
Net profit as Reported
$62,997
$54,527
$102,314
Special Items (adjustments):
Gain (loss) due to devaluation of Venezuelan Bolivar
(7,607)
Net change in fair value of derivatives
176
40,644
(860)
Adjusted Net Income
$62,822
$21,490
$103,174
Shares used for Computation (in thousands)
Basic and Diluted
42,419
42,336
42,396
Adjusted earnings per share - Basic and Diluted
1.48
0.51
2.43
Reconciliation of Operating Costs per ASM
Excluding Fuel (CASM Excl. Fuel)
2Q17
2Q16
1Q17
Operating Costs per ASM as Reported
8.5
8.6
8.6
Aircraft fuel per ASM
(2.3)
(2.4)
(2.3)
Operating Costs per ASM excluding fuel
6.3
6.3
6.2
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SOURCE Copa Holdings, S.A.
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