Airline achieves net earnings of $68 million, up 42 per cent
WestJet selects Bombardier Q400 NextGen aircraft for new regional airline
CALGARY, May 1, 2012 /PRNewswire/ - WestJet (TSX: WJA) today announced its first quarter results for 2012. The airline reported record first quarter net earnings of $68.3 million, or $0.49 per diluted share; up from the net earnings of $48.2 million, or $0.34 per diluted share, reported in the first quarter of 2011. This represents WestJet's 28th consecutive quarter of profitability. WestJet's operating cash flow per share for the first quarter of 2012 was $1.87, an increase of 31 per cent year over year. Based on the trailing twelve months, the airline achieved a return on invested capital of 10.8 per cent, up from the 10.1 per cent reported last quarter.
"We are extremely pleased with the record first quarter results and our margin expansion as revenue growth outpaced elevated fuel costs. We achieved our highest first quarter load factor, improved the overall yield and made good progress towards our return on invested capital target," said WestJet President and CEO Gregg Saretsky. "I thank WestJetters for their contributions to these great results and for providing that remarkable guest experience which helps distinguish us as Canada's preferred airline."
Today, WestJet also announced it has selected the Bombardier Q400 NextGen as the aircraft for its new, low-cost regional airline that is expected to launch as early as the second half of 2013. "This aircraft selection marks another significant milestone for WestJet as we enter into what we know will be a successful, long-lasting relationship with Bombardier, another great Canadian company," noted Gregg Saretsky.
| Operating highlights (stated in Canadian dollars) | |||
| Q1 2012 | Q1 2011 | Change | |
| Net earnings (millions) | $68.3 | $48.2 | 41.6% |
| Diluted earnings per share | $0.49 | $0.34 | 44.1% |
| Total revenues (millions) | $891.0 | $772.4 | 15.3% |
| Operating margin | 11.9% | 10.3% | 1.6 pts. |
| Operating cash flow per share* | $1.87 | $1.43 | 30.8% |
| ASMs (available seat miles) (billions) | 5.690 | 5.230 | 8.8% |
| RPMs (revenue passenger miles) (billions) | 4.721 | 4.290 | 10.0% |
| Load factor | 83.0% | 82.0% | 1.0 pts. |
| Segment guests | 4,230,415 | 3,899,108 | 8.5% |
| Yield (revenue per revenue passenger mile) (cents) | 18.87 | 18.00 | 4.8% |
| RASM (revenue per available seat mile) (cents) | 15.66 | 14.77 | 6.0% |
| CASM (cost per available seat mile) (cents) | 13.80 | 13.24 | 4.2% |
| CASM, excluding fuel and employee profit share (cents)* | 8.95 | 8.91 | 0.4% |
*Refer to reconciliations in the accompanying tables for further information regarding calculations.
"Revenue growth exceeded our expectations this quarter and contributions to the top-line increase are coming from the ongoing improvement in our business offering, our airline partnership strategy, the strength of WestJet Vacations and increases in ancillary revenue," commented Gregg Saretsky. WestJet achieved its highest ancillary revenue per guest of $8.39 this quarter which lifted the net earnings per guest to approximately sixteen dollars. The airline expects RASM growth to continue into the second quarter, but at a slightly moderated pace than the RASM growth achieved in the first quarter of 2012.
WestJet now projects its 2012 full-year CASM, excluding fuel and employee profit share will be up 1.5 to 2.5 per cent. This is mainly attributable to higher revenue-related expenditures resulting from an improved revenue outlook and increased airport operation costs resulting from an increase in operations at higher cost airports such as New York City, Chicago and Toronto. For the second quarter of 2012, the airline projects its fuel costs will range between $0.95 and $0.97 per litre.
Dividend declaration
WestJet's Board of Directors declared a cash dividend of $0.06 per common voting share and variable voting share for the second quarter of 2012, to be paid on June 29, 2012, to shareholders of record on June 13, 2012. All dividends paid by WestJet are, pursuant to subsection 89(14) of the Income Tax Act, designated as eligible dividends, unless indicated otherwise. An eligible dividend paid to a Canadian resident is entitled to the enhanced dividend tax credit.
Caution regarding forward-looking statements
Certain information set forth in this news release, including, without limitation, the information regarding the launch of the regional airline in the second half of 2013, RASM growth in the second quarter of 2012, fuel costs in the second quarter of 2012 and CASM, excluding fuel and employee profit share, for the full-year is forward-looking information within the meaning of applicable Canadian securities laws. By its nature, forward-looking information is subject to numerous risks and uncertainties, some of which are beyond WestJet's control. The forward-looking information contained in this news release is based on WestJet's current budget, forecasts and strategy, our fleet plan, realized jet fuel prices for April 2012 and forward-curve prices for May and June 2012, the expected exchange rate of the Canadian dollar to the U.S. dollar in the second quarter of 2012, along with available implementation plans, agreements and bookings, but may vary due to factors including, but not limited to, changes in consumer demand, changes in fuel prices, delays in aircraft delivery, changes in guest demand, general economic conditions, competitive environment, ability to effectively implement and maintain critical systems and other factors and risks described in WestJet's public reports and filings which are available under WestJet's profile at www.sedar.com. Readers are cautioned that undue reliance should not be placed on forward-looking statements as actual results may vary materially from the forward-looking information. WestJet does not undertake to update, correct or revise any forward-looking information as a result of any new information, future events or otherwise, except as may be required by applicable law.
This news release contains disclosure respecting non-GAAP performance measures including, without limitation, CASM, excluding fuel and employee profit share, operating cash flow per share, return on invested capital and net earnings per guest. These measures are included to enhance overall understanding of WestJet's current financial performance and to provide an alternative method for assessing WestJet's operating results in a manner that is focused on the performance of WestJet's ongoing operations, and to provide a more consistent basis for comparison between quarters. These measures are not calculated in accordance with, or an alternative to, GAAP and do not have standardized meanings. Therefore, they may not be comparable to similar measures provided by other entities. Readers are urged to review the section entitled "Reconciliation of non-GAAP and additional GAAP measures" in WestJet's management's discussion and analysis of financial results for the three months ended March 31, 2012, which is available under WestJet's profile on SEDAR at www.sedar.com, for a further discussion of such non-GAAP measures and a reconciliation of such measures to GAAP.
Management's discussion and analysis of financial results and condensed consolidated interim financial statements and notes for the three months ended March 31, 2012, are available through the Internet in the Media and Investor Relations section of www.westjet.com or under WestJet's SEDAR profile at www.sedar.com.
Analyst conference call
WestJet will hold its quarterly analysts' conference call today, May 1, 2012, at 8 a.m. MDT (10 a.m. EDT). President and CEO Gregg Saretsky and Executive Vice-President of Finance and CFO Vito Culmone will discuss WestJet's first quarter 2012 results and answer questions from financial analysts and members of the media. The conference call will be available in Toronto by calling 416-915-3239, in Vancouver by calling 604-638-5340 and across Canada and the United States through the toll-free telephone number 1-800-319-4610. The call can also be heard live through an Internet webcast accessible via the Media and Investor Relations section of www.westjet.com.
Annual general meeting (AGM)
WestJet will hold its AGM at 2 p.m. MDT (4 p.m. EDT) today on May 1, 2012 at WestJet's Calgary Campus at 22 Aerial Place NE. The AGM webcast will be available live in the Media and Investor Relations section of www.westjet.com.
About WestJet
WestJet is Canada's preferred airline, offering scheduled service throughout its 76-city North American and Caribbean network. Inducted into Canada's Most Admired Corporate Cultures Hall of Fame and named one of Canada's best employers, WestJet pioneered low-cost flying in Canada. Named a J.D. Power 2011 Customer Service Champion, WestJet offers increased legroom and leather seats on its modern fleet of 98 Boeing Next-Generation 737 aircraft. With future confirmed deliveries for an additional 37 aircraft through 2018, WestJet strives to be one of the five most successful international airlines in the world.
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Condensed Consolidated Statement of Earnings
For the three months ended March 31
(Stated in thousands of Canadian dollars, except share and per share amounts)
(Unaudited)
| 2012 | 2011 | |||
| Revenues: | ||||
| Guest | 802,286 | 688,588 | ||
| Other | 88,664 | 83,834 | ||
| 890,950 | 772,422 | |||
| Expenses: | ||||
| Aircraft fuel | 262,072 | 218,963 | ||
| Airport operations | 113,806 | 109,151 | ||
| Flight operations and navigational charges | 91,784 | 84,097 | ||
| Sales and distribution | 87,096 | 76,822 | ||
| Marketing, general and administration | 48,129 | 47,816 | ||
| Aircraft leasing | 46,327 | 40,713 | ||
| Depreciation and amortization | 45,144 | 43,307 | ||
| Inflight | 39,073 | 33,499 | ||
| Maintenance | 37,727 | 30,622 | ||
| Employee profit share | 14,134 | 7,592 | ||
| 785,292 | 692,582 | |||
| Earnings from operations | 105,658 | 79,840 | ||
| Non-operating income (expense): | ||||
| Finance income | 4,340 | 3,931 | ||
| Finance costs | (12,737) | (16,198) | ||
| Gain on foreign exchange | 1,286 | 1,499 | ||
| Gain (loss) on disposal of property and equipment | 19 | (7) | ||
| Loss on derivatives | (3,450) | (2,257) | ||
| (10,542) | (13,032) | |||
| Earnings before income tax | 95,116 | 66,808 | ||
| Income tax expense (recovery): | ||||
| Current | 28,999 | 581 | ||
| Deferred | (2,204) | 17,978 | ||
| 26,795 | 18,559 | |||
| Net earnings | 68,321 | 48,249 | ||
| Earnings per share: | ||||
| Basic | 0.50 | 0.34 | ||
| Diluted | 0.49 | 0.34 | ||
| Weighted average number of shares outstanding - basic | 137,773,920 | 142,308,050 | ||
| Weighted average number of shares outstanding - diluted | 138,189,084 | 143,141,454 | ||
Condensed Consolidated Statement of Financial Position
(Stated in thousands of Canadian dollars)
(Unaudited)
| March 31 | December 31 | ||||||
| 2012 | 2011 | ||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | 1,400,812 | 1,243,605 | |||||
| Restricted cash | 47,300 | 48,341 | |||||
| Accounts receivable | 31,460 | 34,122 | |||||
| Prepaid expenses, deposits and other | 55,276 | 66,936 | |||||
| Inventory | 31,680 | 31,695 | |||||
| 1,566,528 | 1,424,699 | ||||||
| Non-current assets: | |||||||
| Property and equipment | 1,921,182 | 1,911,227 | |||||
| Intangible assets | 35,923 | 33,793 | |||||
| Other assets | 104,557 | 103,959 | |||||
| Total assets | 3,628,190 | 3,473,678 | |||||
| Liabilities and shareholders' equity | |||||||
| Current liabilities: | |||||||
| Accounts payable and accrued liabilities | 401,435 | 307,279 | |||||
| Advance ticket sales | 451,995 | 432,186 | |||||
| Non-refundable guest credits | 44,065 | 43,485 | |||||
| Current portion of long-term debt | 161,919 | 158,832 | |||||
| Current portion of obligations under finance leases | 76 | 75 | |||||
| 1,059,490 | 941,857 | ||||||
| Non-current liabilities: | |||||||
| Maintenance provisions | 156,811 | 151,645 | |||||
| Long-term debt | 662,466 | 669,880 | |||||
| Obligations under finance leases | 3,155 | 3,174 | |||||
| Other liabilities | 9,830 | 10,449 | |||||
| Deferred income tax | 323,645 | 326,456 | |||||
| Total liabilities | 2,215,397 | 2,103,461 | |||||
| Shareholders' equity: | |||||||
| Share capital | 627,018 | 630,408 | |||||
| Equity reserves | 74,100 | 74,184 | |||||
| Hedge reserves | (4,742) | (3,353) | |||||
| Retained earnings | 716,417 | 668,978 | |||||
| Total shareholders' equity | 1,412,793 | 1,370,217 | |||||
| Total liabilities and shareholders' equity | 3,628,190 | 3,473,678 | |||||
Condensed Consolidated Statement of Cash Flows
For the three months ended March 31
(Stated in thousands of Canadian dollars)
(Unaudited)
| 2012 | 2011 | |||
| Operating activities: | ||||
| Net earnings | 68,321 | 48,249 | ||
| Items not involving cash: | ||||
| Depreciation and amortization | 45,144 | 43,307 | ||
| Change in long-term maintenance provisions | 7,827 | 6,698 | ||
| Change in other liabilities | (199) | (209) | ||
| Amortization of hedge settlements | 350 | 350 | ||
| Loss on derivative instruments | 3,450 | 2,257 | ||
| (Gain) loss on disposal of property and equipment | (19) | 7 | ||
| Share-based payment expense | 2,691 | 3,369 | ||
| Deferred income tax expense (recovery) | (2,204) | 17,978 | ||
| Finance income | (4,340) | (3,931) | ||
| Finance cost | 12,737 | 16,198 | ||
| Unrealized foreign exchange (gain) loss | (505) | 432 | ||
| Change in non-cash working capital | 121,229 | 77,887 | ||
| Change in restricted cash | 1,041 | (8,746) | ||
| Change in other assets | (1,541) | (2,300) | ||
| Cash taxes paid | (407) | (371) | ||
| Cash interest received | 4,591 | 2,910 | ||
| 258,166 | 204,085 | |||
| Investing activities: | ||||
| Aircraft additions | (43,764) | (43,140) | ||
| Other property and equipment and intangible additions | (12,480) | (9,380) | ||
| (56,244) | (52,520) | |||
| Financing activities: | ||||
| Increase in long-term debt | 35,303 | - | ||
| Repayment of long-term debt | (39,631) | (41,283) | ||
| Decrease in obligations under finance leases | (19) | (54) | ||
| Shares repurchased | (18,821) | (28,297) | ||
| Dividends paid | (8,226) | (14,205) | ||
| Cash interest paid | (11,271) | (14,024) | ||
| Change in non-cash working capital | (1,465) | 3,979 | ||
| (44,130) | (93,884) | |||
| Cash flow from operating, investing and financing activities | 157,792 | 57,681 | ||
| Effect of foreign exchange on cash and cash equivalents | (585) | (1,910) | ||
| Net change in cash and cash equivalents | 157,207 | 55,771 | ||
| Cash and cash equivalents, beginning of period | 1,243,605 | 1,159,316 | ||
| Cash and cash equivalents, end of period | 1,400,812 | 1,215,087 | ||
CASM, excluding fuel and employee profit share
(Stated in thousands of Canadian dollars, except per unit data)
(Unaudited)
WestJet excludes the effects of aircraft fuel expense and employee profit share expense to assess the operating performance of the business. Fuel expense is excluded from operating results due to the fact that fuel prices are impacted by a host of factors outside WestJet's control, such as significant weather events, geopolitical tensions, refinery capacity and global demand and supply. Excluding this expense allows WestJet to analyze its operating results on a comparable basis. Employee profit share expense is excluded from operating results due to its variable nature and excluding this expense allows greater comparability.
| Three months ended March 31 | ||
| 2012 | 2011 | |
| CASM, excluding fuel and employee profit share | ||
| Operating expenses | 785,292 | 692,582 |
| Aircraft fuel expense | (262,072) | (218,963) |
| Employee profit share expense | (14,134) | (7,592) |
| Operating expenses, adjusted | 509,086 | 466,027 |
| ASMs | 5,689,651,965 | 5,230,276,750 |
| CASM, excluding above items (cents) | 8.95 | 8.91 |
Return on invested capital (ROIC)
(Stated in thousands of Canadian dollars, except per unit data)
(Unaudited)
ROIC is a measure commonly used to assess the efficiency with which a company allocates its capital to generate returns. Return is calculated based on our earnings before tax, excluding special items, finance costs and implied interest on our off-balance-sheet aircraft leases. Invested capital includes average long-term debt, average finance lease obligations, average shareholders' equity and off-balance-sheet aircraft operating leases.
| ($ in thousands, except percentage amounts) | March 31, 2012 |
December 31, 2011 |
||
| Return on invested capital(i) | ||||
| Earnings before income taxes | 236,314 | 208,006 | ||
| Add: | ||||
| Finance costs | 57,450 | 60,911 | ||
| Implicit interest in operating leases(ii) | 89,872 | 86,925 | ||
| 383,636 | 355,842 | |||
| Invested capital: | ||||
| Average long-term debt(iii) | 904,639 | 927,757 | ||
| Average obligations under finance leases(iv) | 3,268 | 3,303 | ||
| Average shareholders' equity | 1,368,275 | 1,337,225 | ||
| Off-balance-sheet aircraft leases(v) | 1,283,888 | 1,241,783 | ||
| 3,560,070 | 3,510,068 | |||
| Return on invested capital | 10.8% | 10.1% | ||
| (i) | The trailing 12 months are used in the calculation of ROIC. |
| (ii) | Interest implicit in operating leases is equal to 7.0 per cent of 7.5 times the trailing 12 months of aircraft lease expense. 7.0 per cent is a proxy and does not necessarily represent actual for any given period. |
| (iii) | Average long-term debt includes the current portion and long-term portion. |
| (iv) | Average capital lease obligations include the current portion and long-term portion. |
| (v) | Off-balance-sheet aircraft leases are calculated by multiplying the trailing 12 months of aircraft leasing expense by 7.5. At March 31, 2012, the trailing 12 months of aircraft leasing costs totalled $171,185 (December 31, 2011 - $165,571). |
Net earnings per guest
(Stated in thousands of Canadian dollars, except per unit data)
(Unaudited)
Net earnings divided by the number of segment guests.
| Three months ended March 31 | |||
| 2012 | 2011 | ||
| Net earnings per guest | |||
| Net earnings | 68,321 | 48,249 | |
| Segment guests | 4,230,415 | 3,899,108 | |
| Net earnings per guests | 16.15 | 12.37 | |
Operating cash flow per share
(Stated in thousands of Canadian dollars, except per unit data)
(Unaudited)
Cash flow from operations divided by the diluted weighted average number of shares outstanding.
| Three months ended March 31 | ||
| 2012 | 2011 | |
| Operating cash flow per share | ||
| Cash flow from operating activities | 258,166 | 204,085 |
| Weighted average number of shares outstanding - diluted | 138,189,084 | 143,141,454 |
| Diluted operating cash flow per share | 1.87 | 1.43 |
SOURCE WestJet
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