WestJet reports fourth quarter and full-year results

News provided by

WestJet

Feb 07, 2017, 05:30 ET

Airline flies a record number of guests and achieves its 47th consecutive profitable quarter

CALGARY, Feb. 7, 2017 /PRNewswire/ - WestJet (TSX: WJA) today announced its fourth quarter and year-end results for 2016, with full-year net earnings of $295.5 million, or $2.45 per diluted share. This compares with the record net earnings of $367.5 million, or $2.92 per diluted share reported in the full-year 2015. The airline achieved its 47th consecutive quarter of profitability, reporting fourth quarter net earnings of $55.2 million, or $0.47 per diluted share compared to $63.4 million, or $0.51 per diluted share reported in the fourth quarter of 2015. For the full-year and in each quarter of 2016 the airline flew a record number of guests. Based on the trailing twelve months, the airline recorded a return on invested capital of 11.3 per cent, down 0.3 percentage points from the 11.6 per cent reported in the previous quarter.

"In 2016 we continued to execute on our profitable growth strategies, which included the further expansion of WestJet Encore and the successful launch of wide-body transatlantic service. Our resilient business model delivered topline revenue growth, double-digit traffic growth, flew a record number of guests and achieved our second highest annual load factor in our history, despite facing economic weakness in Alberta," said WestJet President and CEO Gregg Saretsky. "I want to thank our more than 12,000 WestJetters for their continued passion and commitment to safely providing our record number of guests with WestJet's award-winning brand of friendly caring service."

Operating highlights (stated in Canadian dollars)

Q4 2016

Q4 2015

Change

Full-year 2016

Full-year 2015

Change

Net earnings (millions)

$55.2

$63.4

(13.0%)

$295.5

$367.5

(19.6%)

Diluted earnings per share

$0.47

$0.51

(7.8%)

$2.45

$2.92

(16.1%)

Total revenue (millions)

$1,017.8

$958.7

6.2%

$4,122.9

$4,029.3

2.3%

Operating margin

8.4%

11.8%

(3.4 pts)

10.7%

14.1%

(3.4 pts)

ASMs (available seat miles) (billions)

7.253

6.525

11.2%

29.298

26.902

8.9%

RPMs (revenue passenger miles) (billions)

5.816

5.114

13.7%

23.968

21.526

11.3%

Load factor

80.2%

78.4%

1.8 pts

81.8%

80.0%

1.8 pts

Segment guests

5,424,052

4,893,020

10.9%

21,951,463

20,281,376

8.2%

Yield (revenue per revenue passenger mile) (cents)

17.50

18.75

(6.7%)

17.20

18.72

(8.1%)

RASM (revenue per available seat mile) (cents)

14.03

14.69

(4.5%)

14.07

14.98

(6.1%)

CASM (cost per available seat mile) (cents)

12.86

12.97

(0.8%)

12.57

12.86

(2.3%)

CASM, excluding fuel and employee profit share (cents)*

9.87

10.04

(1.7%)

9.75

9.46

3.1%

 *Refer to reconciliations in the accompanying tables for further information regarding calculations.

Dividend declaration
On February 6, 2017, WestJet's Board of Directors declared a cash dividend of $0.14 per common voting share and variable voting share for the first quarter of 2017, to be paid on March 31, 2017, to shareholders of record on March 15, 2017. 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.

Board of Directors
WestJet appoints Brad Armitage as the new employee representative on the Board of Directors filling the vacancy created by the resignation of Antonio Faiola, effective February 6, 2017. Mr. Armitage succeeded Mr. Faiola as the Chair of the WestJet Employee Association in early 2017. Mr. Armitage first joined WestJet in 2011 and in 2012, he joined the employee association as a representative in Halifax, Nova Scotia. "For the last 17 years, we have invited WestJet's employee association to put forward a nominee to join our Board and we are pleased to welcome Brad to the seat," commented WestJet's Chair of the Board, Clive Beddoe. "On behalf of the Board, I would also like to thank Antonio for his dedication and contributions over the past five years."

Caution regarding forward-looking information
Certain information set forth in this news release is forward-looking information within the meaning of applicable 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 forecasts and strategy, the expected demand environment, the utilization of our fleet, the forward-curve for jet fuel price, the expected exchange rate of the Canadian dollar to the U.S. dollar, agreements and bookings, but may vary due to factors including, but not limited to, changes in guest demand, changes in fuel prices, delays in aircraft delivery, 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 sedar.com. Readers are cautioned that undue reliance should not be placed on forward-looking information 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.

Non-GAAP measures
This news release contains disclosure respecting non-GAAP performance measures including, without limitation, CASM, excluding fuel and employee profit share and return on invested capital. These measures are included to enhance the 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 reporting periods. 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 year ended December 31, 2016, which is available under WestJet's profile on SEDAR at sedar.com, for a further discussion of such non-GAAP measures and a reconciliation of such measures to GAAP. The financial information accompanying this news release was prepared in accordance with International Financial Reporting Standards unless otherwise noted.

Management's discussion and analysis of financial results and consolidated financial statements and notes for the three and twelve months ended December 31, 2016, are available through the Internet in the Media and Investor Relations section of westjet.com or under WestJet's SEDAR profile at sedar.com.

Analyst conference call
WestJet will hold its quarterly analysts' conference call today, February 7, 2017, at 8 a.m. MDT (10 a.m. EDT). President and CEO Gregg Saretsky and Executive Vice-President of Finance and CFO Harry Taylor will discuss WestJet's fourth quarter and year end 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 westjet.com.

About WestJet
We are proud to be Canada's most trusted airline, powered by an award-winning culture of care and recognized as one of the country's top employers. We offer scheduled service to more than 100 destinations in North America, Central America, the Caribbean and Europe. Through our regional airline, WestJet Encore, and with partnerships with airlines representing every major region of the world, we offer our guests more than 150 destinations in more than 20 countries. Leveraging WestJet's extensive network, flight schedule and remarkable guest experience, WestJet Vacations delivers affordable, flexible travel experiences with a variety of accommodation options for every guest. Members of our WestJet Rewards program earn WestJet dollars on flights, vacation packages and more. Our members use WestJet dollars towards the purchase of WestJet flights and vacations packages on any day, at any time, to any WestJet destination with no blackout periods  ̶  even on seat sales. For more information about everything WestJet, please visit westjet.com. 

Recent recognition includes:
2016 Canada's Most Trusted Airline (Gustavson School of Business at the University of Victoria)
2016 Canada's most reputable company for Corporate Social Responsibility (Reputation Institute)
2016/2015/2014/2013/2012 Ranked top three for Canadian Brands (Canadian Business Magazine)
2016/2015/2014/2013 WestJet RBC World Elite MasterCard ranked #1 in Canada (MoneySense magazine)
2015/2011/2010/2008/2007/2006/2005 Canada's Most Admired Corporate Culture (Waterstone Human Capital)
2015 Best Employers in Canada (Aon Hewitt)

Connect with WestJet on Facebook at facebook.com/westjet
Follow WestJet on Twitter at twitter.com/westjet
Subscribe to WestJet on YouTube at youtube.com/westjet
Read the WestJet blog at blog.westjet.com

Consolidated Statement of Earnings
(Stated in thousands of Canadian dollars, except per share amounts)
(Unaudited)


Three months ended

December 31

Twelve months ended

December 31

2016

2015

2016

2015





Revenue:




Guest

867,990

842,546

3,556,941

3,557,222

Other

149,769

116,169

565,918

472,043

1,017,759

958,715

4,122,859

4,029,265

Operating expenses:




Salaries and benefits

204,679

198,310

854,056

801,715

Aircraft fuel

210,489

182,181

765,867

814,498

Rates and fees

150,770

139,534

617,573

562,745

Sales and marketing

91,521

84,009

356,745

325,127

Depreciation and amortization

93,722

75,237

350,484

264,921

Maintenance

54,985

47,160

209,226

164,305

Aircraft leasing

41,987

41,881

178,445

174,089

Other

77,885

68,847

291,024

251,147

Employee profit share

6,454

8,869

59,342

100,965

932,492

846,028

3,682,762

3,459,512

Earnings from operations

85,267

112,687

440,097

569,753





Non-operating income (expense):




Finance income

4,745

3,509

16,618

15,529

Finance cost

(15,380)

(12,953)

(49,074)

(53,665)

Gain (loss) on foreign exchange

(220)

(10,090)

7,402

(10,326)

Loss on disposal of property and equipment

(497)

(1,496)

(3,314)

(1,860)

Gain on derivatives

3,847

971

4,504

827

(7,505)

(20,059)

(23,864)

(49,495)

Earnings before income tax

77,762

92,628

416,233

520,258





Income tax expense (recovery):




Current

32,576

17,873

133,055

123,939

Deferred

(10,003)

11,319

(12,280)

28,789

22,573

29,192

120,775

152,728

Net earnings

55,189

63,436

295,458

367,530





Earnings per share:






Basic

0.47

0.51

2.46

2.94

Diluted

0.47

0.51

2.45

2.92

Consolidated Statement of Financial Position
(Stated in thousands of Canadian dollars)
(Unaudited)


December 31

2016

December 31

2015

Assets

Current assets:


Cash and cash equivalents

1,520,822

1,183,797

Restricted cash

102,649

68,573

Accounts receivable

127,785

82,136

Prepaid expenses, deposits and other

181,070

131,747

Inventory

33,535

36,018

1,965,861

1,502,271

Non-current assets:


Property and equipment

4,036,880

3,473,262

Intangible assets

66,187

63,549

Other assets

95,368

89,942

Total assets

6,164,296

5,129,024



Liabilities and shareholders' equity

Current liabilities:


Accounts payable and accrued liabilities

547,490

545,438

Advance ticket sales

626,635

620,216

Deferred Rewards program

155,567

117,959

Non-refundable guest credits

42,942

40,921

Current portion of maintenance provisions

103,571

85,819

Current portion of long-term debt

145,128

141,572

1,621,333

1,551,925

Non-current liabilities:


Maintenance provisions

262,663

243,214

Long-term debt

1,901,530

1,033,261

Other liabilities

8,374

13,603

Deferred income tax

309,694

327,028

Total liabilities

4,103,594

3,169,031



Shareholders' equity:


Share capital

555,716

582,796

Equity reserves

93,039

82,713

Hedge reserves

(11,003)

1,903

Retained earnings

1,422,950

1,292,581

Total shareholders' equity

2,060,702

1,959,993



Total liabilities and shareholders' equity

6,164,296

5,129,024

Consolidated Statement of Cash Flows
(Stated in thousands of Canadian dollars)
(Unaudited)


Three months ended
December 31

Twelve months ended
December 31

2016

2015

2016

2015





Operating activities:



Net earnings

55,189

63,436

295,458

367,530

Items not involving cash:




Depreciation and amortization

93,722

75,237

350,484

264,921

Change in maintenance provisions

22,186

14,663

82,564

64,404

Amortization of transaction costs

1,017

1,093

5,092

4,503

Amortization of hedge settlements

79

340

833

1,390

Gain on derivatives

(2,028)

(971)

(2,472)

(827)

Loss on disposal of property and equipment

497

1,496

3,314

1,860

Share-based payment expense

4,184

4,379

18,432

17,254

Deferred income tax expense/(recovery)

(10,003)

11,319

(12,280)

28,789

Unrealized foreign exchange (gain)/loss

(1,806)

20,603

(4,498)

(938)

Change in non-cash working capital

(77,509)

(12,686)

40,384

199,706

Change in restricted cash

(21,163)

(11,259)

(34,076)

(10,424)

Change in other assets

133

(6,780)

7,129

(15,912)

Change in other liabilities

(1,444)

(3,237)

(2,486)

(3,192)

Purchase of shares pursuant to compensation plans

(632)

(333)

(7,197)

(14,005)

Maintenance provision settlements

(1,642)

(180)

(36,094)

(28,618)

60,780

157,120

704,587

876,441





Investing activities:



Aircraft additions

(238,903)

(297,662)

(847,718)

(867,870)

Aircraft disposals

595

132

4,660

83,348

Other property and equipment and intangible additions

(21,520)

(22,752)

(76,996)

(88,999)

Change in non-cash working capital

2,131

(13,364)

(22,288)

50,589

(257,697)

(333,646)

(942,342)

(822,932)





Financing activities:



Increase in long-term debt

42,717

17,732

998,715

153,112

Repayment of long-term debt

(34,704)

(42,099)

(157,193)

(171,490)

Shares repurchased

(35,901)

(4,010)

(126,152)

(123,813)

Dividends paid

(16,408)

(17,246)

(66,967)

(69,711)

Issuance of shares pursuant to compensation plans

-

120

40

156

Cash interest paid

(16,552)

(7,936)

(56,046)

(47,305)

Change in non-cash working capital

(2,888)

3,755

(14,066)

21

(63,736)

(49,684)

578,331

(259,030)





Cash flow from operating, investing and financing activities

(260,653)

(226,210)

340,576

(205,521)

Effect of foreign exchange on cash and cash equivalents

8,225

(9,672)

(3,551)

31,247

Net change in cash and cash equivalents

(252,428)

(235,882)

337,025

(174,274)





Cash and cash equivalents, beginning of period

1,773,250

1,419,679

1,183,797

1,358,071





Cash and cash equivalents, end of period

1,520,822

1,183,797

1,520,822

1,183,797





Supplemental disclosure of operating cash flows



Cash interest received

4,459

3,577

16,148

16,349

Cash taxes paid

(16,666)

(25,667)

(118,014)

(114,752)

CASM, excluding fuel and employee profit share
(Stated in thousands of Canadian dollars, except percentage, mile and 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 December 31

Twelve months ended December 31

($ in thousands)

2016

2015

Change

2016

2015

Change

Operating expenses

932,492

846,028

86,464

3,682,762

3,459,512

223,250

Aircraft fuel expense

(210,489)

(182,181)

(28,308)

(765,867)

(814,498)

48,631

Employee profit share expense

(6,454)

(8,869)

2,415

(59,342)

(100,965)

41,623

Operating expenses, adjusted

715,549

654,978

60,571

2,857,553

2,544,049

313,504

ASMs

7,253,281,603

6,524,788,975

11.2%

29,298,340,363

26,902,227,359

8.9%

CASM, excluding above items (cents)

9.87

10.04

(1.7%)

9.75

9.46

3.1%

Return on invested capital
(Stated in thousands of Canadian dollars, except percentages)
(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)

December 31

2016

December 31
2015

Change

Earnings before income taxes

416,233

520,258

(104,025)

Add:



Finance costs

49,074

53,665

(4,591)

Implicit interest in operating leases(i)

93,684

91,397

2,287

558,991

665,320

(106,329)

Invested capital:



Average long-term debt(ii)

1,610,746

1,181,748

428,998

Average shareholders' equity

2,010,348

1,868,748

141,600

Off-balance-sheet aircraft leases(iii)

1,338,338

1,305,668

32,670

4,959,432

4,356,164

603,268

Return on invested capital

11.3%

15.3%

(4.0 pts.)

(i)

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.

(ii)

Average long-term debt includes the current portion and long-term portion.

(iii)

Off-balance-sheet aircraft operating leases are calculated by multiplying the trailing 12 months of aircraft leasing expense by 7.5. At December 31, 2016, the trailing 12 months of aircraft leasing expenses totaled $178,445 (December 31, 2014 – $174,089).

 

SOURCE WestJet

Related Links

http://www.westjet.com

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