WestJet reports record full-year and fourth quarter results
Airline achieves record fourth quarter net earnings of $91 million, up 34 per cent year over year, its 39th consecutive profitable quarter
Announces a 17 per cent increase to its quarterly dividend
CALGARY, Feb. 3, 2015 /CNW/ - WestJet (TSX: WJA) today announced its fourth quarter and year-end results for 2014, with record adjusted full-year net earnings1 of $317.2 million, or $2.46 per diluted share. This compares with the net earnings of $268.7 million, or $2.03 per diluted share reported in the full-year 2013, up 18 per cent and 21 per cent, respectively. For the fourth quarter, the airline reported record diluted earnings per share of $0.70, up 35 per cent from $0.52 reported last year. These fourth quarter 2014 results include pre-tax incentive payments of $9.8 million associated with WestJet's new pilot agreement reached in December 2014 and a pre-tax non-cash loss of $2.5 million related to the previously disclosed sale of 10 of our oldest Boeing 737 aircraft.
This represents WestJet's 39th consecutive quarter of profitability and based on the trailing twelve months, the airline achieved a return on invested capital of 14.3 per cent, compared with the 13.8 per cent reported in the previous quarter, representing the 10th consecutive quarter in which WestJet exceeded its 12 per cent target.
"In 2014 we continued to execute on our profitable growth strategies which included the expansion of WestJet Encore, the further unbundling of our fares, the introduction of WestJet Rewards tiers, and the very successful launch of our first transatlantic service to Dublin, Ireland," said WestJet President and CEO Gregg Saretsky. "I want to thank our more than 10,000 WestJetters for all their contributions that made 2014 a record year, and I look forward to an exciting 2015 which will see us flying our own wide-body aircraft for the first time."
Operating highlights (stated in Canadian dollars)
| Q4 2014 |
Q4 2013 |
Change |
Full-year 2014 |
Full-year 2013 |
Change |
|
| Net earnings (millions) |
$90.7 |
$67.8 |
33.8% |
$284.0 |
$268.7 |
5.7% |
| Adjusted net earnings (millions)1 |
$90.7 |
$67.8 |
33.8% |
$317.2 |
$268.7 |
18.0% |
| Diluted earnings per share |
$0.70 |
$0.52 |
34.6% |
$2.20 |
$2.03 |
8.4% |
| Adjusted diluted earnings per share1 |
$0.70 |
$0.52 |
34.6% |
$2.46 |
$2.03 |
21.2% |
| Total revenues (millions) |
$994.4 |
$926.4 |
7.3% |
$3,976.6 |
$3,662.2 |
8.6% |
| Operating margin |
14.0% |
11.0% |
3.0 pts |
12.0% |
10.9% |
1.1 pts |
| ASMs (available seat miles) (billions) |
6.378 |
5.942 |
7.3% |
25.584 |
23.971 |
6.7% |
| RPMs (revenue passenger miles) (billions) |
5.081 |
4.769 |
6.5% |
20.829 |
19.591 |
6.3% |
| Load factor |
79.7% |
80.3% |
(0.6 pts) |
81.4% |
81.7% |
(0.3 pts) |
| Segment guests |
4,826,149 |
4,557,606 |
5.9% |
19,651,977 |
18,485,144 |
6.3% |
| Yield (revenue per revenue passenger mile) (cents) |
19.57 |
19.43 |
0.7% |
19.09 |
18.69 |
2.1% |
| RASM (revenue per available seat mile) (cents) |
15.59 |
15.59 |
0.0% |
15.54 |
15.28 |
1.7% |
| CASM (cost per available seat mile) (cents) |
13.40 |
13.88 |
(3.5%) |
13.68 |
13.61 |
0.5% |
| CASM, excluding fuel and employee profit share (cents)* |
9.21 |
9.29 |
(0.9%) |
9.15 |
9.06 |
1.0% |
| (1) |
Full-year 2014 adjusted net earnings exclude an after-tax non-cash loss of $33.2 million recorded in the third quarter of 2014 associated |
Dividend declaration
On February 2, 2015, 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 2015, to be paid on March 31, 2015, to shareholders of record on March 18, 2015. 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.
"This marks the fifth dividend increase since we first introduced our quarterly dividend in 2010 and demonstrates both our confidence in WestJet's investment grade business model and our commitment to returning value to shareholders," added Gregg Saretsky.
Caution regarding forward-looking information
Certain information set forth in this news release is forward-looking information within the meaning of applicable Canadian securities law. By its nature, forward-looking information is subject to numerous risks and uncertainties, some of which are beyond the Corporation's control, including those risk factors 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 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.
(1)Non-GAAP measures
This news release contains disclosure respecting non-GAAP performance measures including, without limitation, adjusted net earnings, adjusted diluted earnings per share, 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, 2014, 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 year ended December 31, 2014, 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 3, 2015, at 8 a.m. MST (10 a.m. EST). President and CEO Gregg Saretsky and Executive Vice-President of Finance and CFO Vito Culmone 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-preferred 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 90 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 120 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:
2015 Best Employers in Canada (Aon Hewitt)
2014 Interbrand Canada's Best Canadian Brands (Rank #20)
2014 Brands of the Year (Strategy magazine)
2014 Canada's Most Preferred Airline (Ipsos)
2014 Value Airline of the Year (Air Transport World magazine)
2014/2013/2012 Canada's Most Attractive Employer (Randstad)
2014/2013 WestJet RBC MasterCard ranked #1 in Canada (Money Sense magazine and RewardsCanada.ca)
2013 Highest equity score: airline, vacation package supplier brands (Harris/Decima EquiTrend Study)
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 |
||||
| 2014 |
2013 |
2014 |
2013 |
||
| Revenue: |
|||||
| Guest |
884,771 |
836,399 |
3,599,157 |
3,337,569 |
|
| Other |
109,623 |
90,018 |
377,395 |
324,628 |
|
| 994,394 |
926,417 |
3,976,552 |
3,662,197 |
||
| Operating expenses: |
|||||
| Aircraft fuel |
243,816 |
260,528 |
1,090,330 |
1,039,448 |
|
| Airport operations |
130,565 |
116,251 |
507,743 |
460,566 |
|
| Flight operations and navigational charges |
118,530 |
100,252 |
458,146 |
408,951 |
|
| Sales and distribution |
94,078 |
94,267 |
376,676 |
356,988 |
|
| Depreciation and amortization |
54,696 |
52,168 |
226,740 |
200,840 |
|
| Marketing, general and administration |
60,753 |
64,562 |
224,783 |
222,567 |
|
| Maintenance |
42,073 |
44,999 |
193,685 |
169,197 |
|
| Aircraft leasing expense |
45,546 |
42,462 |
182,450 |
175,646 |
|
| Inflight expense |
41,331 |
36,790 |
171,741 |
176,907 |
|
| Employee profit share |
23,399 |
12,463 |
68,787 |
51,577 |
|
| 854,787 |
824,742 |
3,501,081 |
3,262,687 |
||
| Earnings from operations |
139,607 |
101,675 |
475,471 |
399,510 |
|
| Non-operating income (expense): |
|||||
| Finance income |
4,721 |
4,522 |
17,070 |
17,848 |
|
| Finance cost |
(14,192) |
(11,565) |
(51,838) |
(43,447) |
|
| Gain (loss) on foreign exchange |
(2,471) |
178 |
(2,064) |
1,136 |
|
| Loss on disposal of property and equipment |
(2,849) |
(637) |
(48,332) |
(2,962) |
|
| (14,791) |
(7,502) |
(85,164) |
(27,425) |
||
| Earnings before income tax |
124,816 |
94,173 |
390,307 |
372,085 |
|
| Income tax expense (recovery): |
|||||
| Current |
28,223 |
60,159 |
114,521 |
154,964 |
|
| Deferred |
5,880 |
(33,793) |
(8,171) |
(51,601) |
|
| 34,103 |
26,366 |
106,350 |
103,363 |
||
| Net earnings |
90,713 |
67,807 |
283,957 |
268,722 |
|
| Earnings per share: |
|||||
| Basic |
0.71 |
0.52 |
2.22 |
2.05 |
|
| Diluted |
0.70 |
0.52 |
2.20 |
2.03 |
|
| Consolidated Statement of Financial Position |
|||
| (Stated in thousands of Canadian dollars) |
|||
| (Unaudited) |
|||
| December 31 2014 |
December 31 2013 |
||
| Assets |
|||
| Current assets: |
|||
| Cash and cash equivalents |
1,358,071 |
1,256,005 |
|
| Restricted cash |
58,149 |
58,106 |
|
| Accounts receivable |
54,950 |
42,164 |
|
| Prepaid expenses, deposits and other |
144,192 |
133,263 |
|
| Inventory |
36,658 |
36,722 |
|
| Assets held for sale |
78,306 |
- |
|
| 1,730,326 |
1,526,260 |
||
| Non-current assets: |
|||
| Property and equipment |
2,793,194 |
2,487,734 |
|
| Intangible assets |
60,623 |
58,691 |
|
| Other assets |
62,290 |
70,778 |
|
| Total assets |
4,646,433 |
4,143,463 |
|
| Liabilities and shareholders' equity |
|||
| Current liabilities: |
|||
| Accounts payable and accrued liabilities |
502,432 |
543,167 |
|
| Advance ticket sales |
575,781 |
551,022 |
|
| Non-refundable guest credits |
45,434 |
46,975 |
|
| Current portion of maintenance provisions |
54,811 |
76,105 |
|
| Current portion of long-term debt |
159,843 |
189,191 |
|
| 1,338,301 |
1,406,460 |
||
| Non-current liabilities: |
|||
| Maintenance provisions |
191,768 |
142,411 |
|
| Long-term debt |
1,028,820 |
689,204 |
|
| Other liabilities |
13,150 |
8,834 |
|
| Deferred income tax |
296,892 |
306,714 |
|
| Total liabilities |
2,868,931 |
2,553,623 |
|
| Shareholders' equity: |
|||
| Share capital |
603,287 |
603,861 |
|
| Equity reserves |
75,094 |
69,079 |
|
| Hedge reserves |
(3,179) |
105 |
|
| Retained earnings |
1,102,300 |
916,795 |
|
| Total shareholders' equity |
1,777,502 |
1,589,840 |
|
| Total liabilities and shareholders' equity |
4,646,433 |
4,143,463 |
|
| Consolidated Statement of Cash Flows |
|||||
| (Stated in thousands of Canadian dollars) |
|||||
| (Unaudited) |
|||||
| Three months ended December 31 |
Twelve months ended December 31 |
||||
| 2014 |
2013 |
2014 |
2013 |
||
| Operating activities: |
|||||
| Net earnings |
90,713 |
67,807 |
283,957 |
268,722 |
|
| Items not involving cash: |
|||||
| Depreciation and amortization |
54,696 |
52,168 |
226,740 |
200,840 |
|
| Change in maintenance provisions |
(11,113) |
7,788 |
8,413 |
26,610 |
|
| Change in other liabilities |
(158) |
(203) |
(529) |
1,782 |
|
| Amortization of hedge settlements |
350 |
350 |
1,400 |
1,400 |
|
| Loss on disposal of property and equipment |
2,849 |
637 |
48,332 |
2,962 |
|
| Share-based payment expense |
4,316 |
3,885 |
18,626 |
14,533 |
|
| Deferred income tax expense/(recovery) |
5,880 |
(33,793) |
(8,171) |
(51,601) |
|
| Unrealized foreign exchange gain |
(2,323) |
(3,477) |
(10,634) |
(12,020) |
|
| Change in non-cash working capital |
5,530 |
88,053 |
208,595 |
298,697 |
|
| Change in restricted cash |
(4,293) |
(1,274) |
(43) |
(6,484) |
|
| Change in other assets |
(105) |
499 |
(6,833) |
(1,374) |
|
| Cash interest received |
4,776 |
4,914 |
17,243 |
19,079 |
|
| Cash taxes paid |
(10,894) |
(26,860) |
(204,489) |
(147,868) |
|
| Purchase of shares pursuant to compensation plans |
(166) |
(481) |
(10,989) |
(7,131) |
|
| 140,058 |
160,013 |
571,618 |
608,147 |
||
| Investing activities: |
|||||
| Aircraft additions |
(228,106) |
(167,023) |
(694,200) |
(639,734) |
|
| Aircraft disposals |
75,597 |
(9) |
75,655 |
142 |
|
| Other property and equipment and intangible additions |
(5,506) |
(16,421) |
(46,586) |
(75,580) |
|
| (158,015) |
(183,453) |
(665,131) |
(715,172) |
||
| Financing activities: |
|||||
| Increase in long-term debt |
16,507 |
140,710 |
613,885 |
318,075 |
|
| Repayment of long-term debt |
(40,241) |
(49,001) |
(303,573) |
(178,647) |
|
| Shares repurchased |
(9,856) |
(29,565) |
(39,431) |
(112,362) |
|
| Dividends paid |
(15,334) |
(12,861) |
(61,313) |
(52,188) |
|
| Issuance of shares pursuant to compensation plans |
56 |
37 |
96 |
106 |
|
| Cash interest paid |
(9,421) |
(9,501) |
(39,507) |
(36,677) |
|
| Change in non-cash working capital |
2,864 |
229 |
4,866 |
146 |
|
| (55,425) |
40,048 |
175,023 |
(61,547) |
||
| Cash flow from operating, investing and financing activities |
(73,382) |
16,608 |
81,510 |
(168,572) |
|
| Effect of foreign exchange on cash and cash equivalents |
6,707 |
6,434 |
20,556 |
16,378 |
|
| Net change in cash and cash equivalents |
(66,675) |
23,042 |
102,066 |
(152,194) |
|
| Cash and cash equivalents, beginning of period |
1,424,746 |
1,232,963 |
1,256,005 |
1,408,199 |
|
| Cash and cash equivalents, end of period |
1,358,071 |
1,256,005 |
1,358,071 |
1,256,005 |
|
| Adjusted net earnings/Adjusted diluted earnings per share |
||||
| (Stated in thousands of Canadian dollars, except per share data) |
||||
| (Unaudited) |
||||
| ($ in thousands, except share and per share data) |
December 31 2014 |
December 31 2013 |
Change |
|
| Net earnings |
283,957 |
268,722 |
15,235 |
|
| Adjusted for: |
||||
| Special item(i) |
33,231 |
- |
33,231 |
|
| Adjusted net earnings |
317,188 |
268,722 |
48,466 |
|
| Weighted average number of shares outstanding - diluted |
129,142,940 |
132,074,002 |
(2,931,062) |
|
| Adjusted diluted earnings per share |
2.46 |
2.03 |
21.2% |
|
| (i) |
After-tax non-cash loss recorded in the third quarter of 2014 associated with the sale of 10 aircraft to Southwest. |
| 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) |
2014 |
2013 |
Change |
2014 |
2013 |
Change |
| Operating expenses |
854,787 |
824,742 |
30,045 |
3,501,081 |
3,262,687 |
238,394 |
| Aircraft fuel expense |
(243,816) |
(260,528) |
16,712 |
(1,090,330) |
(1,039,448) |
(50,882) |
| Employee profit share expense |
(23,399) |
(12,463) |
(10,936) |
(68,787) |
(51,577) |
(17,210) |
| Operating expenses, adjusted |
587,572 |
551,751 |
35,821 |
2,341,964 |
2,171,662 |
170,302 |
| ASMs |
6,378,247,018 |
5,942,032,692 |
7.3% |
25,584,033,077 |
23,970,921,260 |
6.7% |
| CASM, excluding above items (cents) |
9.21 |
9.29 |
(0.9%) |
9.15 |
9.06 |
1.0% |
| 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 2014 |
December 31 |
Change |
|
| Earnings before income taxes |
390,307 |
372,085 |
18,222 |
|
| Special item(i) |
45,459 |
- |
45,459 |
|
| Adjusted earnings before income taxes |
435,766 |
372,085 |
63,681 |
|
| Add: |
||||
| Finance costs |
51,838 |
43,447 |
8,391 |
|
| Implicit interest in operating leases(ii) |
95,786 |
92,214 |
3,572 |
|
| 583,390 |
507,746 |
75,644 |
||
| Invested capital: |
||||
| Average long-term debt(iii) |
1,033,529 |
808,722 |
224,807 |
|
| Average shareholders' equity |
1,683,671 |
1,531,072 |
152,599 |
|
| Off-balance-sheet aircraft leases(iv) |
1,368,375 |
1,317,345 |
51,030 |
|
| 4,085,575 |
3,657,139 |
428,436 |
||
| Return on invested capital |
14.3% |
13.9% |
0.4 pts. |
|
| (i) |
Pre-tax non-cash loss recorded in the third quarter of 2014 associated with the sale of 10 aircraft to Southwest. |
| (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) |
Off-balance-sheet aircraft leases are calculated by multiplying the trailing 12 months of aircraft leasing expense by 7.5. At December 31, 2014, the trailing 12 months of aircraft leasing costs totaled $182,450 (2013 – $175,646). |
SOURCE WestJet
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