Copa Airlines Results

Copa Holdings Reports Net Income of $95.8 Million and EPS of $2.26 for the Fourth Quarter of 2016

Excluding special items, adjusted net income came in at $60.0 million, or EPS of $1.42 per share

Copa Airlines

Copa Holdings, S.A. (NYSE:  CPA), today announced financial results for the fourth quarter of 2016 (4Q16) and full year 2016. 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 financial tables section of this earnings release. Unless otherwise stated, all comparisons with prior periods refer to the fourth quarter of 2015 (4Q15).

The financial information included in this press release is preliminary as the Company has not yet issued its audited financial statements and may differ from those results. During the course of the preparation of the financial statements and related notes and our year-end audit, additional items that would require material adjustments to the preliminary financial information included in this press release may be identified.

OPERATING AND FINANCIAL HIGHLIGHTS 

  • Copa Holdings reported net income of US$95.8 million for 4Q16 or earnings per share (EPS) of US$2.26, as compared to net loss of US$408.5 million or loss per share of US$9.44 in 4Q15. Excluding special items, which for 4Q16 include a non-cash gain of US$24.3 million associated with the mark-to-market of fuel hedge contracts, and a US$11.5 million gain related to a non-cash currency translation of Venezuelan Bolivars, the Company would have reported a net income of US$60.0 million, or adjusted EPS of US$1.42, compared to an adjusted net income of US$41.5 million or adjusted EPS of US$0.96 in 4Q15. 
  • For full year 2016, net income reached US$339.8 million or EPS of US$8.02, compared to a loss of US$225.0 million or loss per share of US$5.13 for full year 2015. Excluding special items, which for 2016 include a non-cash gain of US$111.6 million associated with the mark-to-market of fuel hedge contracts and a US$21.5 million non-cash gain related to currency translation of Venezuelan Bolivars, Copa Holdings would have reported an adjusted net income of US$206.7 million or EPS of US$4.88, compared to adjusted net income of US$226.0 million or adjusted EPS of US$5.15 for full year 2015. 
  • Operating income for 4Q16 came in at US$71.1 million, representing an 82.1% increase over operating income of US$39.1 million in 4Q15, as a result of a 10.7% increase in unit revenue per available seat mile (RASM), partly offset by a 5.3% increase in unit costs. Operating margin for 4Q16 came in at 11.8%, compared to an operating margin of 7.3% in 4Q15. 
  • Operating results for the quarter were significantly affected by a US$21.3 million realized fuel hedge loss, compared to US$24.1 million in 4Q15. Excluding these fuel hedge losses, operating margin for the quarter would have been 15.4% for 4Q16 compared to 11.9% for 4Q15. 
  • For full year 2016, the Company reported operating income of US$276.6 million, representing an increase of 4.0% over operating income of US$266.1 million for full year 2015. Operating margin for full year 2016 came in at 12.4%, compared to an operating margin of 11.8% in 2015. 
  • Operating results for the year 2016 were significantly affected by a US$93.7 million realized fuel hedge loss, compared to US$95.2 million in 2015. Excluding these fuel hedge losses, operating margin for 2016 would have been 16.7%, compared to 16.1% for 2015. 
  • Total revenues for 4Q16 increased 12.9% to US$601.3 million. Yield per passenger mile increased 1.3% to 12.6 cents and RASM came in at 10.7 cents, or 10.7% above 4Q15. 
  • For 4Q16, consolidated passenger traffic grew 11.3% while consolidated capacity grew 2.0%. As a result, consolidated load factor for the quarter increased 6.8 percentage points to 81.6%. For full year 2016, consolidated load factor came in at 80.4%, 5.1 percentage points higher than 2015 on 1.5% capacity growth. 
  • Operating cost per available seat mile (CASM) increased 5.3%, from 9.0 cents in 4Q15 to 9.5 cents in 4Q16, mostly as a result of a non-cash increase in depreciation expense related to an adjustment in our aircraft useful life assumption from 30 to 27 years, for which the full year 2016 impact was recorded in 4Q16. CASM excluding fuel costs increased 6.7% from 6.5 cents in 4Q15 to 6.9 cents in 4Q16, mainly as a result of this non-cash adjustment in our aircraft useful life assumptions. 
  • Cash, short-term and long-term investments ended 2016 at US$815.6 million, representing 37% of the last twelve months' revenues. 
  • Copa Holdings ended the year with a consolidated fleet of 99 aircraft – 64 Boeing 737-800s, 14 Boeing 737-700s, and 21 Embraer-190s. 
  • For 2016, Copa Holdings reported consolidated on-time performance of 88.4% and a flight-completion factor of 99.8%, maintaining its position among the best in the industry.

Subsequent Events

  • In January 2017, the company took delivery of one Boeing 737-800, increasing the consolidated fleet to 100 aircraft. 
  • Also in January 2017, the company was recognized by FlightStats – for the fourth consecutive year – as the most on-time airline in Latin America, and by OAG – for the second consecutive year– as the second most on-time airline in the world. 
  • On February 15th, 2017, the Board of Directors of Copa Holdings approved a 2017 dividend payment of 51 cents per share per quarter. Dividends will be distributed quarterly during the months of March, June, September and December. The first quarterly dividend of 51 cents per share will be paid on March 15 to shareholders on record as of February 28th, 2017. 

 

Consolidated Financial & Operating Highlights

4Q16

4Q15

Variance vs. 4Q15

3Q16

Variance vs. 3Q16

FY 2016

FY 2015

Variance vs. 2015

Revenue Passengers Carried ('000)

2,148

2,055

4.5%

2,231

-3.7%

8,508

7,875

8.0%

RPMs (mm) 

4,568

4,103

11.3%

4,637

-1.5%

17,690

16,310

8.5%

ASMs (mm) 

5,597

5,486

2.0%

5,506

1.7%

22,004

21,675

1.5%

Load Factor 

81.6%

74.8%

6.8 p.p.

84.2%

-2.6 p.p.

80.4%

75.2%

5.1 p.p.

Yield

12.6

12.5

1.3%

11.8

7.5%

12.1

13.3

-9.2%

PRASM (US$ Cents) 

10.3

9.3

10.5%

9.9

4.2%

9.7

10.0

-3.0%

RASM (US$ Cents) 

10.7

9.7

10.7%

10.3

4.1%

10.1

10.4

-2.7%

CASM (US$ Cents) 

9.5

9.0

5.3%

8.9

6.0%

8.8

9.2

-3.4%

CASM Excl. Fuel (US$ Cents) 

6.9

6.5

6.7%

6.4

8.7%

6.4

6.4

1.1%

Breakeven Load Factor

64.8%

150.9%

-86.1 p.p.

70.2%

-5.4 p.p.

64.4%

85.1%

-20.7 p.p.

Adjusted Breakeven Load Factor (1)

71.1%

67.1%

4.0 p.p.

73.7%

-2.6 p.p.

70.7%

65.4%

5.3 p.p.

Fuel Gallons Consumed (Millions) 

72.4

70.5

2.6%

70.9

2.1%

284.3

277.2

2.6%

Avg. Price Per Fuel Gallon (US$ Dollars)

1.96

1.94

0.7%

1.98

-1.2%

1.86

2.17

-14.6%

Average Length of Haul (Miles)

2,127

1,997

6.5%

2,079

2.3%

2,079

2,071

0.4%

Average Stage Length (Miles)

1,244

1,222

1.8%

1,192

4.4%

1,213

1,236

-1.9%

Departures

30,499

31,184

-2.2%

30,737

-0.8%

123,098

122,588

0.4%

Block Hours

98,150

97,788

0.4%

97,077

1.1%

388,058

388,355

-0.1%

Average Aircraft Utilization (Hours)

10.8

10.7

1.0%

10.5

2.5%

10.6

10.8

-2.0%

Operating Revenues (US$ mm) 

601.3

532.6

12.9%

569.0

5.7%

2,221.8

2250.1

-1.3%

Operating Income (US$ mm)

71.1

39.1

82.1%

77.2

-7.8%

276.6

266.1

4.0%

Operating Margin 

11.8%

7.3%

4.5 p.p.

13.6%

-1.7 p.p.

12.4%

11.8%

0.6 p.p.

Net Income (US$ mm)

95.8

-408.5

n/m

74.0

29.5%

339.8

-225.0

n/m

Adjusted Net Income (US$ mm) (1)

60.0

41.5

44.6%

55.3

8.5%

206.7

226.0

-8.6%

EPS - Basic and Diluted (US$)

2.26

-9.44

n/m

1.75

29.5%

8.02

-5.13

n/m

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

1.42

0.96

47.7%

1.30

8.5%

4.88

5.15

-5.3%

# of Shares - Basic and Diluted ('000) 

42,383

43,286

-2.1%

42,372

0.0%

42,358

43,861

-3.4%

(1Adjusted Breakeven Load Factor, Adjusted Net Income and Adjusted EPS for 4Q16, 4Q15, 3Q16, 2016 and 2015 exclude non-cash charges/gains associated with the mark-to-market of fuel hedges and shares repurchased, and the impact of the Argentinean and Venezuelan currency devaluations. 

 

Copa Holdings, S.A.

                               

Income Statement - IFRS

                               

(US$ Thousands)

                               
                                 
   

Unaudited

 

Unaudited

 

%

 

Unaudited

 

%

 

Unaudited

 

Audited

 

%

   

4Q16

 

4Q15

 

Change

 

3Q16

 

Change

 

2016

 

2015

 

Change

Operating Revenues

                               

Passenger Revenue

 

577,493

 

512,150

 

12.8%

 

545,066

 

5.9%

 

2,133,186

 

2,166,727

 

-1.5%

Cargo, mail and other

 

23,810

 

20,451

 

16.4%

 

23,959

 

-0.6%

 

88,663

 

83,336

 

6.4%

Total Operating Revenue

 

601,303

 

532,601

 

12.9%

 

569,025

 

5.7%

 

2,221,849

 

2,250,063

 

-1.3%

                                 

Operating Expenses

                               

Aircraft fuel

 

141,743

 

136,881

 

3.6%

 

140,366

 

1.0%

 

527,918

 

602,776

 

-12.4%

Salaries and benefits

 

77,102

 

70,407

 

9.5%

 

73,194

 

5.3%

 

293,044

 

289,512

 

1.2%

Passenger servicing

 

69,854

 

63,689

 

9.7%

 

65,612

 

6.5%

 

259,524

 

258,303

 

0.5%

Commissions

 

21,496

 

19,556

 

9.9%

 

20,862

 

3.0%

 

83,981

 

88,557

 

-5.2%

Reservations and sales

 

26,029

 

24,882

 

4.6%

 

23,970

 

8.6%

 

99,918

 

88,051

 

13.5%

Maintenance, material and repairs

 

34,861

 

31,528

 

10.6%

 

32,410

 

7.6%

 

122,873

 

111,181

 

10.5%

Depreciation

 

54,548

 

34,083

 

60.0%

 

35,525

 

53.5%

 

159,277

 

134,887

 

18.1%

Flight operations

 

32,413

 

34,028

 

-4.7%

 

32,893

 

-1.5%

 

127,777

 

130,930

 

-2.4%

Aircraft rentals

 

28,917

 

31,530

 

-8.3%

 

30,282

 

-4.5%

 

120,842

 

122,218

 

-1.1%

Landing fees and other rentals

 

14,322

 

13,481

 

6.2%

 

13,828

 

3.6%

 

55,498

 

56,703

 

-2.1%

Other

 

28,869

 

33,458

 

-13.7%

 

22,893

 

26.1%

 

94,585

 

100,855

 

-6.2%

Total Operating Expense

 

530,154

 

493,523

 

7.4%

 

491,835

 

7.8%

 

1,945,235

 

1,983,974

 

-2.0%

                                 

Operating Income

 

71,150

 

39,077

 

82.1%

 

77,191

 

-7.8%

 

276,614

 

266,089

 

4.0%

                                 

Non-operating Income (Expense):

                               

Interest expense

 

(8,894)

 

(8,922)

 

-0.3%

 

(9,683)

 

-8.1%

 

(37,024)

 

(33,155)

 

11.7%

Interest income

 

3,479

 

8,155

 

-57.3%

 

3,506

 

-0.8%

 

13,000

 

25,947

 

-49.9%

Other, net

 

33,181

 

(440,284)

 

n/m

 

15,658

 

111.9%

 

120,226

 

(451,096)

 

n/m

Total Non-Operating Income/(Expense)

 

27,766

 

(441,051)

 

n/m

 

9,481

 

192.8%

 

96,202

 

(458,305)

 

n/m

                                 

Income before Income Taxes

 

98,915

 

(401,973)

 

n/m

 

86,672

 

14.1%

 

372,816

 

(192,215)

 

n/m

                                 

Provision for Income Taxes

 

3,071

 

6,499

 

-52.7%

 

12,654

 

-75.7%

 

32,971

 

32,759

 

0.6%

                                 

Net Income

 

95,844

 

(408,472)

 

n/m

 

74,018

 

29.5%

 

339,845

 

(224,974)

 

n/m

                                 
                                 

EPS - Basic and Diluted

 

2.26

 

-9.44

 

-124.0%

 

1.75

 

29.5%

 

8.02

 

-5.13

 

n/m

Shares - Basic and Diluted

 

42,382,757

 

43,285,727

 

-2.1%

 

42,371,617

 

0.0%

 

42,358,091

 

43,861,084

 

-3.4%

 

Copa Holdings, S. A.

       

Balance Sheet - IFRS

       

(US$ Thousands)

 

December 31

 

December 31

   

2016

 

2015

   

(Unaudited) 

 

(Audited) 

ASSETS

       

Current Assets:

       

Cash and cash equivalents

 

$ 331,687

 

$ 204,715

Restricted cash and cash equivalents

 

-

 

64,228

Short-term investments

 

483,002

 

416,005

Total cash, cash equivalents and short-term investments

 

814,689

 

684,948

         

Accounts receivable, net of allowance for doubtful accounts

 

113,664

 

105,135

Accounts receivable from related parties

 

479

 

642

Expendable parts and supplies, net of allowance for obsolescence

 

74,502

 

62,247

Prepaid expenses

 

58,407

 

48,667

Other current assets

 

7,650

 

5,946

Total Current Assets

 

1,069,391

 

907,585

         

Long-term investments

 

953

 

861

         

Property and Equipment:

       

Owned property and equipment:

       

Flight equipment

 

3,118,316

 

3,030,361

Other equipment

 

129,577

 

121,205

   

3,247,893

 

3,151,565

Less: Accumulated depreciation

 

(874,377)

 

(743,982)

   

2,373,516

 

2,407,583

Purchase deposits for flight equipment

 

250,166

 

243,070

Total Property and Equipment

 

2,623,682

 

2,650,653

         

Other Assets:

       

Long term account receivable

 

1,957

 

-

Net pension asset

 

8,826

 

6,050

Goodwill

 

20,380

 

20,380

Intangible asset

 

49,122

 

49,046

Deferred tax Assets

 

18,339

 

12,708

Other assets

 

53,463

 

68,193

Total Other Assets

 

152,087

 

156,377

Total Assets

 

$ 3,846,113

 

$ 3,715,476

         
         

LIABILITIES AND SHAREHOLDER'S EQUITY

       

Current Liabilities:

       

Current maturities of long-term debt

 

$ 222,718

 

$ 245,514

Accounts payable

 

104,174

 

94,741

Accounts payable to related parties

 

8,683

 

5,605

Air traffic liability

 

396,237

 

352,110

Frequent flyer deferred revenue

 

35,368

 

18,884

Taxes and interest payable

 

69,884

 

67,242

Accrued expenses payable

 

77,796

 

82,948

Other current liabilities

 

7,580

 

118,623

Total Current Liabilities

 

922,440

 

985,667

         

Non-Current Liabilities:

       

Long-term debt

 

961,414

 

1,055,183

Other long-term liabilities

 

75,014

 

54,339

Deferred tax liabilities

 

39,674

 

32,865

Total Non-Current Liabilities

 

1,076,102

 

1,142,387

         

Total Liabilities

 

1,998,542

 

2,128,054

         

Shareholders' Equity:

       

Class A - 33,731,823 issued and 31,111,310 outstanding

 

20,988

 

20,924

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

 

7,466

 

7,466

Additional paid in capital

 

64,986

 

57,455

Treasury Stock

 

(136,388)

 

(136,388)

Retained earnings

 

1,892,391

 

1,638,733

Accumulated other comprehensive income (loss)

 

(1,872)

 

(768)

Total Shareholders' Equity

 

1,847,571

 

1,587,422

Total Liabilities and Shareholders' Equity

 

$ 3,846,113

 

$ 3,715,476

         

 

Copa Holdings, S. A. and subsidiaries 

           

Consolidated Statement of Cash Flows

           

For the twelve months ended December 31, 

           

(In US$ thousands)

             
                 

2016

 

2015

 

2014

                 

(Unaudited)

 

(Audited)

 

(Audited)

Cash flow from operating activities 

 

586,590

 

316,863

 

384,892

Cash flow (used in) from investing activities 

 

(171,909)

 

32,384

 

21,147

Cash flow used in financing activities 

 

(248,625)

 

(357,466)

 

(316,420)

Net increase (decrease) in cash and cash equivalents 

 

166,056

 

(8,219)

 

89,619

Cash and cash equivalents at January 1

 

204,715

 

221,443

 

139,110

Cash and cash equivalents at December 31

 

$ 331,687

 

$ 204,715

 

$ 221,443

                           

Short-term investments *

 

483,002

 

416,005

 

492,735

Long-term investments **

 

953

 

861

 

396,802

Restricted cash and cash equivalents ***

 

-

 

64,228

 

52,425

Total cash and cash equivalents and investments at December 31

 

$ 815,642

 

$ 685,809

 

$ 1,163,405

                           

* Short-term investments include $135.7 million of cash in Venezuela at December 2014. 

       

** Long-term investments include $322.9 million of cash in Venezuela at December 2014.

       

*** Restricted cash correspond 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 Net Income

           

Excluding Special Items

 

4Q16

 

4Q15

 

3Q16

             

Net income as Reported

 

$95,844

 

-$408,472

 

$74,018

             

Special Items (adjustments):

           

Unrealized gain (loss) on fuel hedging instruments 

 

24,341

 

(15,296)

 

19,225

(Loss) gain due to devaluation of Venezuelan Bolivar

 

11,501

 

(430,073)

 

(484)

(Loss) gain due to devaluation of Argentinian Pesos

 

0

 

(6,901)

 

0

Unrealized gain (loss) on Shares Repurchased

 

0

 

2,296

 

0

Adjusted Net Income

 

$60,002

 

$41,501

 

$55,278

             

Shares used for Computation (in thousands)

           

Basic and Diluted

 

42,383

 

43,286

 

42,372

             

Adjusted earnings per share - Basic and Diluted

 

1.42

 

0.96

 

1.30

             

Reconciliation of Operating Costs per ASM

           

Excluding Fuel and Special Items

 

4Q16

 

4Q15

 

3Q16

             

Operating Costs per ASM as Reported

 

9.5

 

9.0

 

8.9

Aircraft fuel per ASM

 

(2.5)

 

(2.5)

 

(2.5)

Operating Costs per ASM excluding fuel 

 

6.9

 

6.5

 

6.4

             

Reconciliation of Breakeven Load Factor

           

Excluding Special Items

 

4Q16

 

4Q15

 

3Q16

             

Total Operating Expenses, Non-Operating Results and Provision for Income Taxes

 

505,459

 

941,073

 

495,007

             

Breakeven Load Factor

 

64.8%

 

150.9%

 

70.2%

             

Special Items (adjustments):

           

Unrealized gain (loss) on fuel hedging instruments 

 

24,341

 

(15,296)

 

19,225

(Loss) gain due to devaluation of Venezuelan Bolivar

 

11,501

 

(430,073)

 

(484)

(Loss) gain due to devaluation of Argentinian Pesos

 

0

 

(6,901)

 

0

Unrealized (gain) loss on Shares Repurchased

 

0

 

2,296

 

0

Total Operating Expenses, Non-Operating Results and Provision for Income Taxes excluding special items

 

$541,302

 

$491,100

 

$513,748

             

Adjusted Breakeven Load Factor (Excluding Special items)

 

71.1%

 

67.1%

 

73.7%

             



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