Copa Holdings Reports Net Profit of $74.3 million and EPS of $1.75 for the First Quarter of 2020

May 06, 2020

Q1 2020 Earnings Release - Long Version 231.5 KB

PANAMA CITY, May 6, 2020 /PRNewswire/ -- Copa Holdings, S.A. (NYSE: CPA), today announced financial results for the first quarter of 2020 (1Q20). 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 first quarter of 2019 (1Q19).

OPERATING AND FINANCIAL HIGHLIGHTS

Due to air travel restrictions implemented in response to the Covid-19 outbreak, the Company was forced to temporarily suspend all commercial flights on March 22^nd, 2020. The Company currently expects to re-start a scaled-down operation on June 1^st, 2020, although this date could be delayed as a result of further travel restrictions.
For 1Q20, Copa Holdings reported net profit of US$74.3 million or earnings per share (EPS) of US$1.75, as compared to net profit of US$89.4 million or earnings per share of US$2.11 in 1Q19.
Operating profit for 1Q20 came in at US$98.7 million, representing a 12.6% decrease from operating profit of US$112.9 million in 1Q19. Operating margin for 1Q20 came in at 16.6%, compared to an operating margin of 16.8% in 1Q19.
For 1Q20, consolidated passenger traffic decreased 16.3% on a 14.4% capacity reduction. As a result, consolidated load factor for the quarter decreased 1.9 percentage points to 81.5%.
Total revenues for 1Q20 decreased 11.4% to US$595.5 million. Yield per passenger mile increased 5.8% to 12.8 cents and RASM came in at 10.8 cents, or 5.8% higher than 1Q19.
Operating cost per available seat mile (CASM) increased 3.8%, from 8.7 cents in 1Q19 to 9.0 cents in 1Q20. CASM excluding fuel costs increased 8.0% from 6.1 cents in 1Q19 to 6.6 cents in 1Q20, mainly as a result of flight cancellations in March due to the Covid-19 outbreak and, later in the month, the unexpected grounding of the Company´s fleet, resulting in a significant year over year capacity reduction.
During 1Q20 the Company drew US$145 million from its available short-term lines of credit.
Cash, short-term and long-term investments ended the quarter at US$ 1.13 billion, representing approximately 43% of the last twelve months' revenues.
Copa Holdings ended the quarter with a consolidated fleet of 102 aircraft – 6 Boeing 737MAX9s, 68 Boeing 737-800s, 14 Boeing 737-700s, and 14 Embraer-190s.

Subsequent Events

Given the uncertainty related to the Covid-19 crisis, including the effect on future air travel demand, on April 26, 2020 our Board of Directors postponed dividend payments for the remaining quarters of 2020.
Throughout the month of April, the Company obtained unsecured, committed credit facilities with three local banks, for an aggregate amount of US$150 million dollars. These facilities remain unutilized.
On April 30, 2020, the Company further bolstered its cash position by successfully closing a US$350 million convertible senior notes offering, maturing in 2025.

Consolidated Financial & Operating Highlights	1Q20	1Q19	Variance vs. 1Q19	4Q19	Variance vs. 4Q19
Revenue Passengers Carried ('000)	2,118	2,588	-18.2%	2,633	-19.5%
RPMs (mm)	4,473	5,345	-16.3%	5,244	-14.7%
ASMs (mm)	5,491	6,415	-14.4%	6,149	-10.7%
Load Factor	81.5%	83.3%	-1.9 p.p.	85.3%	-3.8 p.p.
Yield	12.8	12.1	5.8%	12.5	2.4%
PRASM (US$ Cents)	10.5	10.1	3.5%	10.7	-2.2%
RASM (US$ Cents)	10.8	10.5	3.5%	11.1	-2.2%
CASM (US$ Cents)	9.0	8.7	3.8%	10.8	-16.2%
Adjusted CASM (US$ Cents) ⁽¹⁾	9.0	8.7	3.8%	9.3	-3.2%
CASM Excl. Fuel (US$ Cents)	6.6	6.1	8.0%	8.0	-18.2%
Adjusted CASM Excl. Fuel (US$ cents) ⁽¹⁾	6.6	6.1	8.0%	6.6	-0.1%
Fuel Gallons Consumed (Millions)	70.0	81.2	-13.8%	78.9	-11.3%
Avg. Price Per Fuel Gallon (US$ Dollars)	1.95	2.09	-6.7%	2.16	-9.9%
Average Length of Haul (Miles)	2,112	2,065	2.3%	1,992	6.0%
Average Stage Length (Miles)	1,308	1,299	0.7%	1,279	2.2%
Departures	28,286	33,329	-15.1%	32,441	-12.8%
Block Hours	93,568	110,089	-15.0%	105,620	-11.4%
Average Aircraft Utilization (Hours)	10.1	11.6	-13.5%	11.3	-10.4%
Operating Revenues (US$ mm)	595.5	672.2	-11.4%	681.9	-12.7%
Operating Profit (US$ mm)	98.7	112.9	-12.6%	17.8	n/m
Adjusted Operating Profit (US$ mm) ⁽¹⁾	98.7	112.9	-12.6%	107.1	-7.9%
Operating Margin	16.6%	16.8%	-0.2 p.p.	2.6%	14.0 p.p.
Adjusted Operating Margin ⁽¹⁾	16.6%	16.8%	-0.2 p.p.	15.7%	0.9 p.p.
Net Profit (US$ mm)	74.3	89.4	-16.9%	2.7	n/m
Adjusted Net Profit (US$ mm) ⁽¹⁾	74.3	89.4	-16.9%	92.1	-19.3%
EPS - Basic and Diluted (US$)	1.75	2.11	-17.0%	0.06	n/m
Adjusted EPS - Basic and Diluted (US$) ⁽¹⁾	1.75	2.11	-17.0%	2.17	-19.4%
# of Shares - Basic and Diluted ('000)	42,501	42,478	0.1%	42,487	0.0%

⁽¹⁾Adjusted CASM, Adjusted CASM Excl. Fuel, Adjusted Operating Profit, Adjusted Net Profit, Adjusted Operating Margin and Adjusted EPS for 4Q19, exclude non-cash charges associated with the Embraer 190 Fleet impairment.

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

FULL 1Q20 EARNINGS RELEASE AVAILABLE FOR DOWNLOAD AT:
https://copa.gcs-web.com/financial-information/quarterly-results

1Q20 EARNINGS RESULTS CONFERENCE CALL AND WEBCAST

Date:	May 7, 2020
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)
Webcast:	https://copa.gcs-web.com/events-and-presentations
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 33 countries in North, Central and South America and the Caribbean with a modern fleet consisting of 102 aircraft: 6 Boeing 737MAX9s, 82 Boeing 737NG aircraft and 14 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	%
	1Q20	1Q19	Change	4Q19	Change
Operating Revenues
Passenger revenue	574,650	648,790	-11.4%	657,940	-12.7%
Cargo and mail revenue	13,017	15,316	-15.0%	16,033	-18.8%
Other operating revenue	7,785	8,063	-3.4%	7,955	-2.1%
Total Operating Revenue	595,453	672,169	-11.4%	681,927	-12.7%

Operating Expenses
Fuel	136,954	170,163	-19.5%	171,314	-20.1%
Wages, salaries, benefits and other employees' expenses	110,289	113,662	-3.0%	115,036	-4.1%
Passenger servicing	21,890	25,571	-14.4%	24,798	-11.7%
Airport facilities and handling charges	40,365	45,362	-11.0%	44,877	-10.1%
Sales and distribution	42,011	53,133	-20.9%	53,222	-21.1%
Maintenance, materials and repairs	27,144	28,047	-3.2%	37,648	-27.9%
Depreciation and amortization	66,375	68,187	-2.7%	70,469	-5.8%
Flight operations	23,731	25,875	-8.3%	24,908	-4.7%
Other operating and administrative expenses	28,008	29,297	-4.4%	32,506	-13.8%
Fleet Impairment				89,344	n/m
Total Operating Expense	496,766	559,296	-11.2%	664,123	-25.2%

Operating Profit	98,687	112,873	-12.6%	17,804	n/m

Non-operating Income (Expense):
Finance cost	(11,085)	(14,010)	-20.9%	(17,154)	-35.4%
Finance income	6,320	5,954	6.2%	6,289	0.5%
Gain (loss) on foreign currency fluctuations	(10,950)	(5,960)	83.7%	2,406	n/m
Other non-operating income (expense)	(11)	(825)	-98.6%	(989)	-98.9%
Total Non-Operating Income/(Expense)	(15,726)	(14,841)	n/m	(9,448)	66.5%

Profit before taxes	82,961	98,032	-15.4%	8,356	n/m

Income tax expense	8,687	8,600	1.0%	5,629	54.3%

Net Profit	74,273	89,431	-16.9%	2,728	n/m


EPS - Basic and Diluted	1.75	2.11	-17.0%	0.06	n/m
Shares - Basic and Diluted	42,501,338	42,477,761	0.1%	42,486,717	0.0%

Copa Holdings, S. A. and subsidiaries
Consolidated statement of financial position
(US$ Thousands)	March	December
	2020	2019
	(Unaudited)
ASSETS

Current Assets
Cash and cash equivalents	339,926	158,733
Short-term investments	672,721	692,403
Total cash, cash equivalents and short-term investments	1,012,646	851,136

Accounts receivable, net	49,708	129,634
Accounts receivable from related parties	1,488	147
Expendable parts and supplies, net	74,454	69,100
Prepaid expenses	41,382	49,034
Prepaid income tax	1,286	1,181
Other current assets	14,056	14,206
	182,374	263,301
Assets held for sale	119,299	120,006

TOTAL CURRENT ASSETS	1,314,320	1,234,442

Long-term investments	114,277	134,347
Long-term accounts receivable	2,364	2,139
Long-term prepaid expenses	15,018	17,743
Property and equipment, net	2,522,205	2,532,402
Right of use assets	284,552	290,843
Intangible, net	107,047	108,116
Net pension asset	665	249
Deferred tax assets	17,050	19,216
Other Non-Current Assets	16,027	17,881
TOTAL NON-CURRENT ASSETS	3,079,207	3,122,935

TOTAL ASSETS	4,393,526	4,357,377

Current maturities of long-term debt	261,219	117,238
Current portion of lease liability	97,908	97,732
Accounts payable	126,941	119,332
Accounts payable to related parties	2,574	14,086
Air traffic liability	411,912	497,374
Frequent flyer deferred revenue	84,165	80,325
Taxes and interest payable	33,061	51,611
Employee benefits obligations	36,121	55,373
Income tax payable	13,530	9,683
Other Current Liabilities	95	83
TOTAL CURRENT LIABILITIES	1,067,526	1,042,836

Long-term debt	907,960	938,182
Lease Liability	199,534	206,832
Other long - term liabilities	197,469	191,221
Deferred tax Liabilities	44,379	43,397
TOTAL NON-CURRENT LIABILITIES	1,349,343	1,379,633

TOTAL LIABILITIES	2,416,869	2,422,469

EQUITY
Issued Capital
Class A -33,860,663 issued and 31,399,270 outstanding	21,184	21,142
Class B common stock - 10,938,125	7,466	7,466
Additional Paid-In Capital	87,540	86,135
Treasury Stock	(136,388)	(136,388)
Retained Earnings	1,931,214	1,718,179
Net profit	74,273	247,002
Other comprehensive loss	(8,632)	(8,628)

TOTAL EQUITY	1,976,658	1,934,908

TOTAL EQUITY LIABILITIES	4,393,526	4,357,377

Copa Holdings, S. A. and subsidiaries

Consolidated Statement of Cash Flows

For the three months ended March 31,

(In US$ thousands)

2020

2019

2018

(Unaudited)

Cash flow from operating activities

106,340

144,061

171,810

Cash flow from investing activities

19,795

(3,591)

(74,198)

Cash flow from financing activities

55,058

(84,361)

(139,820)

Net increase (decrease) in cash and cash equivalents

181,193

56,109

(42,208)

Cash and cash equivalents at January 1

158,732

156,158

238,792

Cash and cash equivalents at March 31

$ 339,925

$ 212,267

$ 196,584

Short-term investments

672,721

556,127

650,110

Long-term investments

114,277

128,992

155,313

Total cash and cash equivalents and investments at March 31

$ 1,126,923

$ 897,386

$ 1,002,007

Copa Holdings, S.A.

NON-IFRS FINANCIAL MEASURE RECONCILIATION

This press release includes the following non IFRS financial measures: Adjusted Operating CASM Excluding Fuel, Adjusted Operating Profit, Adjusted Net Profit, 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 profit and net profit. The following is a reconciliation of these non-IFRS financial measures to the comparable IFRS measures:

Reconciliation of Adjusted Operating Profit
Adjusted Net Profit and Adjusted EPS	1Q20	1Q19	4Q19

Operating Profit as Reported	$ 98,687	$ 112,873	$ 17,804
Special Items (adjustments):
Fleet Impairment			$ 89,344
Adjusted Operating Profit	$ 98,687	$ 112,873	$ 107,148

Net profit as Reported	$ 74,273	$ 89,431	$ 2,728
Special Items (adjustments):
Fleet Impairment			$ 89,344
Adjusted Net Profit	$ 74,273	$ 89,431	$ 92,071

Shares used for Computation (in thousands)
Basic and Diluted	42,501	42,478	42,487

Adjusted earnings per share - Basic and Diluted	$ 1.75	$ 2.11	$ 2.17



Reconciliation of Adjusted Operating Costs per ASM
Excluding Fuel (Adjusted CASM Excl. Fuel)	1Q20	1Q19	4Q19

Operating Costs per ASM as Reported (in US$ Cents)	9.0	8.7	10.8
Fleet Impairment per ASM (in US$ Cents)			(1.5)
Aircraft fuel per ASM (in US$ Cents)	(2.5)	(2.7)	(2.8)
Adjusted Operating Costs per ASM excluding fuel (in US$ Cents)	6.6	6.1	6.6

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SOURCE Copa Holdings, S.A.

News Release Details

Copa Holdings Reports Net Profit of $74.3 million and EPS of $1.75 for the First Quarter of 2020