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11/14/18

Copa Holdings Reports Net Income of $57.7 million and EPS of $1.36 for the Third Quarter of 2018

PANAMA CITY, Nov. 14, 2018 /PRNewswire/ -- Copa Holdings, S.A. (NYSE: CPA), today announced financial results for the third quarter of 2018 (3Q18). 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 third quarter of 2017 (3Q17).

OPERATING AND FINANCIAL HIGHLIGHTS

  • Copa Holdings reported net income of US$57.7 million for 3Q18 or earnings per share (EPS) of US$1.36, as compared to net income of US$105.3 million or earnings per share of US$2.48 in 3Q17.
  • Operating income for 3Q18 came in at US$74.3 million, representing a 38.4% decrease over operating income of US$120.7 million in 3Q17, mainly as a result of a 4.3% increase in unit costs (CASM) due to higher fuel prices, and a 4.2% decrease in unit revenues (RASM) mostly due to weakness of the Brazilian and Argentinian currencies. Operating margin for 3Q18 came in at 11.0%, compared to an operating margin of 18.3% in 3Q17.
  • For 3Q18, consolidated passenger traffic grew 4.8% while consolidated capacity grew 6.6%. As a result, consolidated load factor for the quarter decreased 1.4 percentage points to 84.3%.
  • Total revenues for 3Q18 increased 2.1% to US$672.4 million. Yield per passenger mile decreased 3.3% to 11.6 cents and RASM came in at 10.1 cents, or 4.2% below 3Q17.
  • Operating cost per available seat mile (CASM) increased 4.3% from 8.6 cents in 3Q17 to 9.0 cents in 3Q18, driven by a 31.6% increase in the effective price of jet fuel. CASM excluding fuel costs decreased 5.5% from 6.3 cents in 3Q17 to 6.0 cents in 3Q18, mainly as a result of timing of expenses, fewer operational disruptions and cost reduction efforts.
  • Cash, short-term and long-term investments ended the quarter at US$915.8 million, representing 36.0% of the last twelve months' revenues.
  • Copa Holdings ended the quarter with a consolidated fleet of 102 aircraft – 1 Boeing 737 MAX9, 68 Boeing 737-800s, 14 Boeing 737-700s, and 19 Embraer-190s.
  • For 3Q18, Copa Airlines had an on-time performance of 88.3% and a flight-completion factor of 99.8%, maintaining its position among the best in the industry.

Subsequent Events  

  • Copa Holdings will pay its fourth quarterly dividend of $0.87 per share on December 14, to all Class A and Class B shareholders on record as of November 30, 2018.
  • In October and November, Copa Airlines took delivery of its 2nd and 3rdBoeing 737 MAX 9 aircraft, bringing Copa Holdings' consolidated fleet to 104 aircraft.
  • As a result of the Company's continuing fleet optimization and efficiency efforts, in October the Company signed a letter of intent with Azorra Aviation for the sale of up to 6 Embraer-190 aircraft, 5 of which are expected to exit the fleet in 2019. In connection with the transaction an impairment of our entire Embraer-190 fleet and related spare parts will be caused. This impairment will generate a one-time non-cash loss of US$162.9 million, which will be recorded in the fourth quarter of 2018.
  • As part of its process to implement the new Lease accounting standard – IFRS 16 – the Company has determined that an error existed in its previously filed annual financial statements for the years ended December 31, 2017, 2016 and 2015 filed on form 20-F with the Securities and Exchange Commission (SEC). The error relates to the application of International Accounting Standard No. 16 related to componentization of required maintenance overhauls on our owned aircraft, which if properly applied, would have resulted in more quickly depreciating a portion of the owned aircraft, related to the first maintenance event for the airframe and certain components. The error in the application of this policy dates back to our initial adoption of IFRS in the year ended December 31, 2010, and the principal impact of the correction is to reduce Property and Equipment and Retained Earnings, as well as to increase depreciation for each of the three years ended December 31, 2017. The correction is non-cash. The estimated impact on the opening retained earnings as of January 1, 2015 is a reduction in equity of US$180 million, and for depreciation in each of the three years ended December 31, 2017 is an increase of US$15 million. The Company will file an amended Form 20F/A to reflect these adjustments.

 

Consolidated Financial
& Operating Highlights

3Q18

3Q17*

Variance
vs. 3Q17

2Q18

Variance
vs. 2Q18

Revenue Passengers Carried ('000)

2,591

2,518

2.9%

2,458

5.4%

RPMs (mm) 

5,587

5,330

4.8%

5,384

3.8%

ASMs (mm) 

6,629

6,221

6.6%

6,446

2.8%

Load Factor 

84.3%

85.7%

-1.4 p.p.

83.5%

0.7 p.p.

Yield

11.6

12.0

-3.3%

11.4

2.3%

PRASM (US$ Cents) 

9.8

10.3

-4.8%

9.5

3.2%

RASM (US$ Cents) 

10.1

10.6

-4.2%

9.8

3.1%

CASM (US$ Cents) 

9.0

8.6

4.3%

9.0

0.8%

CASM Excl. Fuel (US$ Cents) 

6.0

6.3

-5.5%

6.0

-0.1%

Fuel Gallons Consumed (Millions) 

84.2

80.0

5.3%

81.7

3.2%

Avg. Price Per Fuel Gallon (US$ Dollars)

2.40

1.82

31.6%

2.35

2.3%

Average Length of Haul (Miles)

2,156

2,117

1.9%

2,190

-1.6%

Average Stage Length (Miles)

1,331

1,300

2.4%

1,331

-0.1%

Departures

33,775

32,593

3.6%

32,843

2.8%

Block Hours

114,009

108,916

4.7%

110,893

2.8%

Average Aircraft Utilization (Hours)

12.3

11.7

4.4%

12.1

1.6%

Operating Revenues (US$ mm) 

672.4

658.7

2.1%

634.1

6.0%

Operating Income (US$ mm)

74.3

120.7

-38.4%

57.1

30.2%

Operating Margin 

11.0%

18.3%

-7.3 p.p.

9.0%

2.0 p.p.

Net Income (US$ mm)

57.7

105.3

-45.2%

49.9

15.7%

Adjusted Net Income (US$ mm) (1)

57.7

102.4

-43.6%

49.9

15.7%

EPS - Basic and Diluted (US$)

1.36

2.48

-45.2%

1.18

15.7%

Adjusted EPS - Basic and Diluted (US$) (1)

1.36

2.41

-43.6%

1.18

15.7%

# of Shares - Basic and Diluted ('000)

42,469

42,430

0.1%

42,447

0.1%

(1)Adjusted Net Income and Adjusted EPS for 3Q17 exclude non-cash charges/gains associated with the mark-to-market of fuel hedges.
* Restated for retrospective adoption of IFRS 15.

Note:  Attached to this press release is a reconciliation of non-IFRS financial measures to the comparable IFRS measures.

FULL 3Q18 EARNINGS RELEASE AVAILABLE FOR DOWNLOAD AT:
http://investor.shareholder.com/copa/results.cfm

3Q18 EARNINGS RESULTS CONFERENCE CALL AND WEBCAST

Date:

November 15, 2018

Time:

11:00 AM US ET (11:00 AM Local Time)

Conference telephone number: 

877-293-5456 (US Domestic Callers)


707-287-9357 (International Callers)

Webcast:

http://investor.shareholder.com/copa/events.cfm

Speakers:

Pedro Heilbron, Chief Executive Officer


José 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 80 destinations in 32 countries in North, Central and South America and the Caribbean with one of the youngest and most modern fleets in the industry, consisting of 104 aircraft: 82 Boeing 737NGs, 3 Boeing 737 MAX 9s, and 19 EMBRAER-190s. For more information visit: www.copa.com. 

CONTACT: Copa Holdings S.A.
Investor Relations: 
Ph: 011 507 304-2774
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, therefore, subject to change without prior notice.

CPA-G

Copa Holdings, S.A.

Income Statement - IFRS

(US$ Thousands)














Unaudited


Unaudited


%


Unaudited


%



3Q18


3Q17*


Change


2Q18


Change

Operating Revenues











Passenger revenue


649,110


640,089


1.4%


611,605


6.1%

Cargo and mail revenue


15,919


13,600


17.1%


16,003


-0.5%

Other operating revenue


7,375


4,979


48.1%


6,528


13.0%

Total Operating Revenue


672,405


658,668


2.1%


634,136


6.0%












Operating Expenses











Fuel


203,121


145,968


39.2%


192,474


5.5%

Wages, salaries, benefits and other employees' expenses


109,814


103,775


5.8%


108,449


1.3%

Passenger servicing


26,487


27,008


-1.9%


26,113


1.4%

Airport facilities and handling charges


47,415


45,222


4.8%


45,945


3.2%

Sales and distribution


51,832


50,126


3.4%


52,760


-1.8%

Maintenance, materials and repairs


24,626


39,777


-38.1%


27,840


-11.5%

Depreciation and amortization


44,435


41,847


6.2%


43,261


2.7%

Flight operations


27,434


26,535


3.4%


25,417


7.9%

Aircraft rentals and other rentals


33,105


33,382


-0.8%


32,968


0.4%

Cargo and courier expenses


2,139


1,801


18.8%


2,046


4.6%

Other operating and administrative expenses


27,705


22,569


22.8%


19,787


40.0%

Total Operating Expense


598,113


538,011


11.2%


577,061


3.6%












Operating Profit


74,292


120,657


-38.4%


57,076


30.2%












Non-operating Income (Expense):











Finance cost


(8,954)


(8,639)


3.6%


(9,181)


-2.5%

Finance income


6,228


4,801


29.7%


6,038


3.1%

Gain (loss) on foreign currency fluctuations


(2,571)


593


n/m


3,583


n/m

Net change in fair value of derivatives


-


2,946


n/m


-


n/m

Other non-operating income (expense)


40


(616)


n/m


(279)


n/m

Total Non-Operating Income/(Expense)


(5,257)


(916)


n/m


162


n/m












Profit before taxes


69,035


119,741


-42.3%


57,237


20.6%












Income tax expense


11,298


14,416


-21.6%


7,343


53.9%












Net Profit


57,737


105,325


-45.2%


49,894


15.7%























EPS - Basic and Diluted


1.36


2.48


-45.2%


1.18


15.7%

Shares - Basic and Diluted


42,469,122


42,429,841


0.1%


42,447,386


0.1%












 *  Restated for retrospective adoption of IFRS 15 

 

 

Copa Holdings, S. A. and subsidiaries 

Balance Sheet - IFRS

(US$ Thousands)

September 30

December 31


2018

2017


 (Unaudited) 

 (Restated) * 




 ASSETS 






 Current Assets 



Cash and cash equivalents

170,731

238,792

Restricted cash and cash equivalents

-

-

Short-term investments

579,246

705,108

Total cash, cash equivalents and short-term investments

749,977

943,900




Accounts receivable, net

117,775

115,323

Accounts receivable from related parties

1,510

318

Expendable parts and supplies, net

93,294

81,825

Prepaid expenses

77,032

45,421

Other current assets

11,924

11,701

TOTAL CURRENT ASSETS

1,051,512

1,198,488




Long-term investments

165,856

65,953

Long-term accounts receivable

2,141

2,444

Long-term prepaid expenses

26,189

26,130

Property and equipment, net

2,972,969

2,825,904

Intangible, net

93,453

81,115

Net pension asset

4,879

3,185

Deferred tax assets

14,715

18,572

Other Non-Current Assets

33,638

31,140

TOTAL NON-CURRENT ASSETS

3,313,840

3,054,443




TOTAL ASSETS

4,365,351

4,252,931




 LIABILITIES AND EQUITY 






 Current Liabilities: 



Current maturities of long-term debt

268,994

298,462

Accounts payable

125,834

116,554

Accounts payable to related parties

10,551

12,880

Air traffic liability

489,499

477,168

Frequent flyer deferred revenue

64,175

50,312

Taxes and interest payable

27,949

81,440

Accrued expenses payable 

44,263

60,321

Income tax payable

-

3,700

Other Current Liabilities

64

1,156

TOTAL CURRENT LIABILITIES

1,031,328

1,101,993




Long-term debt

918,688

876,119

Other long - term liabilities

130,805

123,182

Deferred tax Liabilities

46,586

50,628

TOTAL NON-CURRENT LIABILITIES

1,096,079

1,049,929




TOTAL LIABILITIES

2,127,407

2,151,922




 EQUITY 



Issued Capital



Class A - 33,817,684 issued and 31,257,214 outstanding

21,087

21,038

Class B - 10,938,125 shares issued and outstanding

7,466

7,466

Additional Paid-In Capital

78,249

72,945

Treasury Stock

(136,388)

(136,388)

Retained Earnings

2,027,386

1,775,426

Net Income

244,103

364,410

Other Comprehensive Income

(3,960)

(3,888)

TOTAL EQUITY

2,237,944

2,101,009




TOTAL LIABILITIES AND EQUITY

4,365,351

4,252,931




 *  Restated for retrospective adoption of IFRS 15 

 

 

Copa Holdings, S. A. and subsidiaries 

Consolidated Statement of Cash Flows

For the nine months ended September 30, 

(In US$ thousands)










2018


2017


2016










(Unaudited)


(Unaudited)


(Unaudited)

Cash flow from operating activities 


298,084


522,527


384,822

Cash flow used in investing activities 


(129,541)


(344,088)


(170,057)

Cash flow used in financing activities 


(236,604)


(260,533)


(197,677)

Net (decrease) increase  in cash and cash equivalents 


(68,061)


(82,094)


17,088

Cash and cash equivalents at January 1


238,792


331,687


204,715

Cash and cash equivalents at September 30


$   170,731


$   249,593


$   221,803















Short-term investments 


579,246


565,994


540,502

Long-term investments



165,856


155,953


954

Restricted cash and cash equivalents


-


-


10,128

Total cash and cash equivalents and investments at September 30


$   915,833


$   971,540


$   773,387















* Restricted cash corresponds to 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


3Q18


3Q17*


2Q18








Net profit as Reported


$ 57,737


$ 105,325


$ 49,894








Special Items (adjustments):







Net change in fair value of derivatives


$          -


$    (2,946)


$          -

Adjusted Net Income


$ 57,737


$ 102,379


$ 49,894








Shares used for Computation (in thousands)







     Basic and Diluted


$ 42,469


$   42,430


$ 42,447








Adjusted earnings per share - Basic and Diluted


$      1.36


$        2.41


$      1.18








Reconciliation of Operating Costs per ASM







Excluding Fuel (CASM Excl. Fuel)


3Q18


3Q17*


2Q18








Operating Costs per ASM as Reported (in US$ Cents)


9.0


8.6


9.0

Aircraft fuel per ASM  (in US$ Cents)


(3.1)


(2.3)


(3.0)

Operating Costs per ASM excluding fuel  (in US$ Cents)


6.0


6.3


6.0








 *  Restated for retrospective adoption of IFRS 15 

 

Cision View original content:http://www.prnewswire.com/news-releases/copa-holdings-reports-net-income-of-57-7-million-and-eps-of-1-36-for-the-third-quarter-of-2018--300750792.html

SOURCE Copa Holdings, S.A.