SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 6-K

 

 

Report of Foreign Issuer

 

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

 

Report on Form 6-K dated For the month of May, 2013

 

 

Copa Holdings, S.A.

(Translation of Registrant's Name Into English)

 

 

Boulevard Costa del Este, Avenida Principal y Avenida de la Rotonda

Urbanización Costa del Este

Complejo Business Park, Torre Norte

ParqueLefevre

Panama City, Panama

(Address of principal executive offices)

 

 

(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.)

 

Form 20-F x    Form 40-F ¨

 

(Indicate by check whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)

 

Yes ¨    No x

 

(If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b);82-             )

 

 

 

Enclosure: 1Q13 Earnings Release

 

 

SIGNATURES

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

 

 

 

	Copa Holdings, S.A. (Registrant)
Date: 5/14/2013
	By:	/s/ José Montero
		Name: José Montero Title: CFO

 

 

 

 

 

 

 

Copa Holdings Reports Net Income of US$113.8 Million and EPS of US$2.56 for the First Quarter of 2013 

Excluding special items, adjusted net income came in at $124.4 million, or EPS of $2.80 per share

 

Panama City, Panama — May 13, 2013. Copa Holdings, S.A. (NYSE: CPA), today announced financial results for the first quarter of 2013(1Q13). The terms “Copa Holdings" or "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 financial tables section of this earnings release. Unless otherwise stated, all comparisons with prior periods refer to the first quarter of 2012 (1Q12).

 

OPERATING AND FINANCIAL HIGHLIGHTS

 

§

Copa Holdings reported net income of US$113.8 million for 1Q13, or diluted earnings per share (EPS) of US$2.56. Excluding special items, Copa Holdings would have reported an adjusted net income of $124.4 million, or $2.80 per share, a 37.3% increase over adjusted net income of US$90.6 million and US$2.04 per share for 1Q12.

 

§

Operating income for 1Q13 came in at US$142.6 million, a 27.9% increase over operating income of US$111.6 million in 1Q12. Operating margin for the period came in at 22.2%, compared to 20.5% in 1Q12, as a result of lower unit costs.

 

§

Total revenues increased 18.0% to US$641.3 million. Yield per passenger mile decreased 0.8% to 17.6 cents and operating revenue per available seat mile (RASM) decreased 1.5% to 14.0 cents. However, adjusting for a 6.3% increase in length of haul, yields and RASM increased 2.2% and 1.5%, respectively.

 

§

For 1Q13, robust demand trends resulted in passenger traffic (RPMs) growth of 19.5% on a 19.9% capacity expansion. Consolidated load factor came in at 76.9%, or 0.3 percentage points below 1Q12.

 

§

Operating cost per available seat mile (CASM) decreased 3.6%, from 11.3 cents in 1Q12 to 10.9 cents in 1Q13. CASM, excluding fuel, decreased 4.7% to 6.5 cents.

 

§

Cash, short term and long term investments ended 1Q13 at US$733.4 million, representing 31.2% of the last twelve months’ revenues.

 

§

During the first quarter, Copa Airlines took delivery of two Boeing 737-800 aircraft. As a result, Copa Holdings ended the quarter with a consolidated fleet of 85 aircraft.

 

§

For 1Q13, Copa Holdings reported consolidated on-time performance of 90.0% and a flight-completion factor of 99.7%, maintaining its position among the best in the industry.

 

 

 

Consolidated Financial &
Operating Highlights		1Q13				1Q12				% Change				4Q12				% Change
Revenue Passengers Carried ('000)			1,926				1,714				12.4	%			1,899				1.4	%
RPMs (mm)			3,529				2,954				19.5	%			3,366				4.8	%
ASMs (mm)			4,590				3,829				19.9	%			4,447				3.2	%
Load Factor			76.9	%			77.2	%			-0.3 p.p.				75.7	%			1.2 p.p.
Yield			17.6				17.7				-0.8	%			17.1				2.8	%
PRASM (US$ Cents)			13.5				13.7				-1.2	%			12.9				4.4	%
RASM (US$ Cents)			14.0				14.2				-1.5	%			13.5				3.6	%
CASM (US$ Cents)			10.9				11.3				-3.6	%			11.1				-2.5	%
CASM Excl. Fuel (US$ Cents)			6.5				6.8				-4.7	%			6.8				-4.1	%
Breakeven Load Factor (1)			58.7	%			61.2	%			-2.5 p.p.				61.6	%			-2.9 p.p.
Fuel Gallons Consumed (Millions)			60.1				51.3				17.1	%			58.4				2.9	%
Avg. Price Per Fuel Gallon (US$ Dollars)			3.34				3.33				0.4	%			3.34				0.1	%
Average Length of Haul (Miles)			1,832				1,724				6.3	%			1,772				3.4	%
Average Stage Length (Miles)			1,123				1,066				5.4	%			1,090				3.1	%
Departures			29,428				26,647				10.4	%			29,555				-0.4	%
Block Hours			84,490				73,394				15.1	%			83,146				1.6	%
Average Aircraft Utilization (Hours)			11.3				10.9				3.1	%			11.0				2.7	%
Operating Revenues (US$ mm)			641.3				543.3				18.0	%			599.8				6.9	%
Operating Income (US$ mm)			142.6				111.6				27.9	%			104.3				36.8	%
Operating Margin			22.2	%			20.5	%			1.7 p.p.				17.4	%			4.9 p.p.
Net Income (US$ mm)			113.8				95.9				18.7	%			86.6				31.4	%
Adjusted Net Income (US$ mm) (1)			124.4				90.6				37.3	%			89.3				39.3	%
EPS - Basic and Diluted (US$)			2.56				2.16				18.5	%			1.95				31.5	%
Adjusted EPS - Basic and Diluted (US$) (1)			2.80				2.04				37.1	%			2.01				39.4	%
# of Shares - Basic and Diluted ('000)			44,387				44,341				0.1	%			44,409				0.0	%

⁽¹⁾ Breakeven Load Factor, Adjusted Net Income and Adjusted EPS for 1Q13, 1Q12, and 4Q12 exclude non-cash charges/gains associated with the mark-to-market of fuel hedges. Additionally, for 1Q13 excludes a US$13.9 million charge related to the devaluation of the Venezuelan currency.

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

 

MANAGEMENT’S COMMENTS ON 1Q13 RESULTS

 

Copa Holdings first quarter results continued to benefit from positive demand trends, which resulted in solid load factors and yields, as well as lower unit costs. For 1Q13, the company reported operating income of US$142.6 million, a 27.9% increase over 1Q12. As a result, operating margin for the quarter stood at 22.2%, an increase of 1.7 percentage points over 1Q12.

 

 

 

Consolidated operating revenues increased 18.0%, slightly below a 19.9% capacity expansion during the period. Load factor came in at 76.9%, or 0.3 percentage points below 1Q12, while yields decreased 0.8% to 17.6 cents. As a result, passenger revenues per ASM (PRASM) decreased 1.2%, from 13.7 cents in 1Q12 to 13.5 cents in 1Q13. However, adjusting for a 6.3% increase in length of haul, PRASM increased 1.9% over 1Q12.

 

Consolidated operating expenses for 1Q13 increased 15.5% to US$498.7 million, while consolidated operating expenses per ASM (CASM) decreased 3.6% to 10.9 cents. Excluding fuel costs, unit costs decreased 4.7% to 6.5 cents, mainly as a result of the dilution of fixed cost associated with increased capacity, an increase in average stage length and the timing of certain expenses.

 

Aircraft fuel expense increased 17.5% or US$29.9 million compared to 1Q12, mostly as a result of increased capacity. The Company’s effective jet fuel price, which includes realized hedge gains of US$2.3 million and US$4.5 million for 1Q13 and 1Q12, respectively, increased from an average of US$3.33 in 1Q12 to US$3.34 in 1Q13. 

 

At the end of 1Q13, the Company had fuel hedges in place representing 31% of its consolidated volume. Continuing with the execution of its fuel hedge policy, the Company currently has hedged approximately 31% in 2Q13, 35% in 3Q13 and 33% in 4Q13. For 2014 and 2015, the Company had hedged approximately 16% and 10%, respectively, of its forecasted fuel consumption.

 

The Company recorded a net non-operating expense of US$14.2 million for 1Q13 compared to a net non-operating expense of US$0.8 million for 1Q12. Non-operating income (expense) included a fuel hedge mark-to-market gain of US$3.4 million and a US$13.9 million loss related to the devaluation of the Venezuelan Bolivar, compared to a fuel hedge mark-to-market gain of US$5.3 million for 1Q12.

 

Copa Holdings closed the quarter with US$733.4 million in cash, short term and long term investments, representing 31.2% of last twelve months´ revenues. Total debt at the end of 1Q13 amounted to US$1.2 billion, all of which is related to aircraft and equipment financing.  

 

Copa Holdings’ strong first quarter results are the product of solid and well executed business model which leverages the company’s unique competitive advantages, such as geographic position and infrastructure, among others, to operate the best and most convenient network for intra-Latin America travel from the Hub of the Americas in Panama. Going forward, the Company will continue to strengthen its long-term competitive position by taking advantage of new growth opportunities and implementing initiatives to further strengthen its network and product.

 

 

 

OUTLOOK FOR 2013

 

For 2013, the company continues to expect consolidated capacity growth in the range of 14%, as a result of the full year effect of capacity added in 2012 and the introduction of seven new 737-800 aircraft during 2013. 

 

Despite a higher year over year load factor, we are now projecting unit revenues to come in at 13.6 cents, or flat over 2012, as a result of a lower fuel cost environment and its historical correlation with passenger yields. Additionally, we are maintaining our CASM ex-fuel at 6.6 cents, or approximately 3% below 2012 levels.

 

Nevertheless, factored into the current guidance is an estimated effective price per gallon of jet fuel, including the effect of current hedge contracts and into-plane costs, of US$3.20 per gallon. As a result, the Company is improving its full year operating margin to a range of 19% to 21%, from its previous range of 18% to 20%. 

 

Financial Outlook		2013 - Full Year Revised		2013 - Full Year Prior		2012 Actual
Capacity - YOY ASM Growth		+/-14	%	+/-14	%		24.1	%
Average Load Factor		+/-76	%	+/-76	%		75.4	%
RASM (cents)		+/-13.6		+/-13.7			13.6
CASM Ex-fuel (cents)		+/-6.6		+/-6.6			6.8
Operating Margin		19-21	%	18-20	%		17.9	%

 

CONSOLIDATED FIRST QUARTER RESULTS

 

Operating revenue

 

Copa Holdings’ operating revenue for 1Q13 totaled US$641.3 million, an 18.0% increase over operating revenue of US$543.3 million in 1Q12. This increase was due to an 18.5% or US$96.7 million increase in passenger revenue.

 

Passenger revenue. For 1Q13 passenger revenue totaled US$620.5 million, an 18.5% increase over passenger revenue of US$523.8 million in 1Q12. A 0.8% decline in passenger yield and a 0.3 percentage point decline in load factor led to a 1.2% decrease in passenger revenue per ASM (PRASM).

 

Cargo, mail and other. Cargo, mail and other revenue totaled US$20.8 million in 1Q13, a 6.9% increase over cargo, mail and other of US$19.4 million in 1Q12.

 

 

 

Operating expenses

 

For 1Q13, consolidated operating expenses increased 15.5% to US$498.7 million, representing operating cost per available seat mile (CASM) of 10.9 cents. CASM, excluding fuel costs, decreased 4.7% to 6.5 cents. An overview of the major variances on a consolidated basis follows:

 

Aircraft fuel. For 1Q13, aircraft fuel totaled US$200.8 million, a US$29.9 million or 17.5% increase over aircraft fuel of US$170.9 million in 1Q12. This increase was primarily a result of a 17.1% increase in gallons consumed and a 0.4% increase in the average price per gallon of jet fuel (all-in), which averaged US$3.34 in 1Q13 as compared to US$3.33 in 1Q12. The all-in average price per gallon of jet fuel for 1Q13 includes a $2.3 million fuel hedge gain, compared to a US$4.5 million gain in 1Q12. Excluding the effect of fuel hedge gains for both periods, fuel prices decreased 1.1%, from US$3.42 per gallon in 1Q12 to US$3.38 in 1Q13.

 

Salaries and benefits. For 1Q13, salaries and benefits totaled US$66.7 million, a 16.0% increase over salaries and benefits of US$57.5 million in 1Q12. The main driver was an increase in operating headcount to support additional capacity, as well as the full year effect of salary adjustments.

 

Passenger servicing. For 1Q13, passenger servicing totaled US$60.3 million, a 22.0% increase over passenger servicing of US$49.4 million in 1Q12. This increase resulted from the growth in our operations, higher effective rates related to on board and airport services.

 

Commissions. For 1Q13, commissions totaled US$24.3 million, a 9.2% increase over commissions of US$22.2 million in 1Q12. This increase was primarily a result a higher revenue base, partly offset by a lower average commission rate.

 

Reservations and sales. Reservations and sales totaled US$21.4 million, a 6.8% increase over reservation and sales of US$20.1 million in 1Q12. This increase was primarily a result of an 18.5% increase in passenger revenue, which was partly offset by lower advertising expenses due to timing.

 

Maintenance, material and repairs. For 1Q13, maintenance, material and repairs totaled US$22.3 million, an 8.5% increase over maintenance, material and repairs of US$20.5 million in 1Q12. This increase was a result of more repairs and materials as a result of an increase in operations.

 

Depreciation. Depreciation totaled US$24.8 million in 1Q13, a 20.9% increase over depreciation of US$20.5 million in 1Q12. This increase was primarily driven by additional aircraft and spares.

 

Flight operations, aircraft rentals, landing fees and other rentals. Combined, flight operations, aircraft rentals, landing fees and other rentals increased 15.9% from US$53.2 million in 1Q12 to US$61.6 million in 1Q13, primarily as a result of an increase in departures and additional aircraft rentals.

 

Other. Other expenses totaled US$16.4 million, a decline of US$0.9 million from 1Q12.

 

 

 

Non-operating income (expense)

 

Consolidated non-operating income (expense) totaled a net expense of US$14.2 million in 1Q13, compared to a net expense of US$0.8 million in 1Q12.

 

Interest expense. Interest expense totaled US$7.7 million in 1Q13, a 3.7% decline from interest expense of US$8.0 million in 1Q12, as a result of lower interest rates on our variable rate debt, partly offset by a higher outstanding debt balance.

 

Interest income. Interest income totaled US$2.7 million, an 18.3% increase over interest income of US$2.3 million in 1Q12, mainly as a result of a higher average cash and investments balance.

 

Other, net. Other, net totaled a net loss of US$9.2 million in 1Q13, compared to a net gain of US$4.9 million in 1Q12. Other, net, for 1Q13, Includes a fuel hedge mark-to-market gain of US$3.4 million and a US$13.9 million loss related to the devaluation of the Venezuelan Bolivar, compared to a fuel hedge mark-to-market gain of US$5.3 million for 1Q12.

 

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 64 destinations in 29 countries in North, Central and South America and the Caribbean with one of the youngest and most modern fleets in the industry, consisting of 86 aircraft: 60 Boeing 737NG aircraft and 26 EMBRAER-190s. For more information visit: www.copaair.com.

 

CONTACT: Copa Holdings S.A.

Investor Relations:

Ph: (507) 304-2677

www.copaair.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.

 

 

 

Copa Holdings, S.A.

Income Statement - IFRS

(US$ Thousands)

 

		Unaudited				Unaudited				%				Unaudited				%
		1Q13				1Q12				Change				4Q12				Change
Operating Revenues
Passenger Revenue			620,488				523,812				18.5	%			575,731				7.8	%
Cargo, mail and other			20,793				19,444				6.9	%			24,109				-13.8	%
Total Operating Revenue			641,282				543,257				18.0	%			599,839				6.9	%
Operating Expenses
Aircraft fuel			200,773				170,875				17.5	%			194,754				3.1	%
Salaries and benefits			66,728				57,536				16.0	%			65,782				1.4	%
Passenger servicing			60,316				49,433				22.0	%			59,788				0.9	%
Commissions			24,260				22,223				9.2	%			22,382				8.4	%
Reservations and sales			21,449				20,090				6.8	%			22,112				-3.0	%
Maintenance, material and repairs			22,284				20,530				8.5	%			24,311				-8.3	%
Depreciation			24,806				20,526				20.9	%			24,446				1.5	%
Flight operations			29,479				25,039				17.7	%			27,747				6.2	%
Aircraft rentals			19,952				17,300				15.3	%			19,472				2.5	%
Landing fees and other rentals			12,195				10,846				12.4	%			12,266				-0.6	%
Other			16,412				17,300				-5.1	%			22,510				-27.1	%
Total Operating Expense			498,655				431,699				15.5	%			495,570				0.6	%
Operating Income			142,626				111,558				27.9	%			104,269				36.8	%
Non-operating Income (Expense):
Interest expense			(7,660	)			(7,959	)			-3.7	%			(8,130	)			-5.8	%
Interest capitalized			0				0				nm				0				nm
Interest income			2,706				2,286				18.3	%			3,427				-21.0	%
Other, net			(9,195	)			4,866				-289.0	%			(2,721	)			238.0	%
Total Non-Operating Income/(Expense)			(14,150	)			(806	)			n/a				(7,424	)			90.6	%
Income before Income Taxes			128,476				110,751				16.0	%			96,845				32.7	%
Provision for Income Taxes			14,646				14,822				-1.2	%			10,222				43.3	%
Net Income			113,830				95,930				18.7	%			86,623				31.4	%
EPS - Basic and Diluted			2.56				2.16				18.5	%			1.95				31.5	%
Shares - Basic and Diluted			44,387,148				44,340,562				0.1	%			44,409,211				0.0	%

 

 

 

Copa Holdings, S.A.

Balance Sheet - IFRS

(US$ Thousands)

 

		March 31,				December 31,
		2013				2012
		(Unaudited)				(Audited)
ASSETS
Current Assets:
Cash and cash equivalents		$	325,184			$	76,094
Short-term investments			349,628				575,009
Total cash, cash equivalents and short-term investments			674,812				651,103
Accounts receivable, net of allowance for doubtful accounts			174,537				135,207
Accounts receivable from related parties			1,121				1,129
Expendable parts and supplies, net of allowance for obsolescence			58,050				50,603
Prepaid expenses			56,767				63,120
Other current assets			19,687				16,328
Total Current Assets			984,974				917,490
Long-term investments			58,598				69,445
Property and Equipment:
Owned property and equipment:
Flight equipment			2,420,436				2,405,346
Other equipment			68,893				66,330
			2,489,329				2,471,676
Less: Accumulated depreciation			(456,281	)			(432,589	)
			2,033,048				2,039,087
Purchase deposits for flight equipment			271,916				245,544
Total Property and Equipment			2,304,964				2,284,631
Other Assets:
Net pension asset			10,618				10,009
Goodwill			26,612				27,575
Intangible asset			59,127				59,382
Other assets			122,357				110,968
Total Other Assets			218,714				207,934
Total Assets		$	3,567,250			$	3,479,500
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Current maturities of long-term debt		$	122,414			$	136,268
Accounts payable			114,498				104,975
Accounts payable to related parties			23,857				20,255
Air traffic liability			369,286				382,807
Taxes and interest payable			98,795				85,436
Accrued expenses payable			46,374				48,047
Other current liabilities			9,309				10,902
Total Current Liabilities			784,533				788,690
Non-Current Liabilities:
Long-term debt			1,038,793				1,069,836
Post employment benefits liability			6,322				6,340
Other long-term liabilities			46,285				43,726
Deferred tax liabilities			37,691				34,364
Total Non-Current Liabilities			1,129,091				1,154,266
Total Liabilities			1,913,624				1,942,956
Shareholders' Equity:
Class A - 33,418,117 shares issued and outstanding			22,630				22,591
Class B - 10,938,125 shares issued and outstanding			7,466				7,466
Additional paid in capital			42,363				40,660
Retained earnings			1,572,088				1,458,258
Accumulated other comprehensive income (loss)			9,078				7,569
Total Shareholders' Equity			1,653,626				1,536,544
Total Liabilities and Shareholders' Equity		$	3,567,250			$	3,479,500

 

 

 

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 Net Income
Excluding Special Items		1Q13				1Q12				4Q12
Net income as Reported		$	113,830			$	95,930			$	86,623
Special Items (adjustments):
Unrealized (gain) loss on fuel hedging instruments			(3,376	)			(5,328	)			2,673
Loss due to devaluation of Venezuelan Bolivar			13,927
Adjusted Net Income		$	124,381			$	90,602			$	89,296
Shares used for Computation (in thousands)
Basic and Diluted			44,387				44,341				44,409
Adjusted earnings per share - Basic and Diluted			2.80				2.04				2.01

 

Reconciliation Operating Costs per ASM
Excluding Fuel and Special Items		1Q13				1Q12				4Q12
Operating Costs per ASM as Reported			10.9				11.3				11.1
Aircraft fuel per ASM			(4.4	)			(4.5	)			(4.4	)
Operating Costs per ASM excluding fuel			6.5				6.8				6.8