WestJet reports record full-year net earnings and earnings per share

News provided by

WestJet

Feb 04, 2014, 06:30 ET

Airline achieves 35th consecutive profitable quarter and flies over a million additional guests year over year
Announces a 20 per cent increase to its quarterly dividend

CALGARY, Feb. 4, 2014 /PRNewswire/ - WestJet (TSX: WJA) today announced its fourth quarter and year-end results for 2013, with record net earnings of $268.7 million, or $2.03 per diluted share, up from the net earnings of $242.4 million, or $1.78 per diluted share reported for the full-year 2012. For the fourth quarter, the airline reported diluted earnings per share of $0.52, up from $0.46 reported last year. This represents WestJet's 35th consecutive quarter of profitability, and based on the trailing twelve months, the airline achieved a return on invested capital of 13.9 per cent, compared with the 13.8 per cent reported in the previous quarter.

"We continued to expand on our success in 2013 as several key accomplishments, including the launch of WestJet Encore and our Fare Bundles product, helped us achieve a year of record earnings, and a return on invested capital above our 12 per cent target for the sixth consecutive quarter," said WestJet President and CEO Gregg Saretsky. "We are very excited about continuing our success into 2014, and I am grateful to our nearly 10,000 WestJetters for the commitment they demonstrate to our guests every day."

                                                                Operating highlights (stated in Canadian dollars)
  Q4 2013 Q4 2012 Change Full-year
2013 		Full-year
2012 		Change
Net earnings (millions) $67.8 $60.9 11.3% $268.7 $242.4 10.9%
Diluted earnings per share $0.52 $0.46 13.0% $2.03 $1.78 14.0%
Total revenues (millions) $926.4 $860.6 7.6% $3,662.2 $3,427.4 6.9%
Operating margin 11.0% 10.6% 0.4 pts 10.9% 11.0% (0.1 pts)
ASMs (available seat miles) (billions) 5.942 5.487 8.3% 23.971 22.064 8.6%
RPMs (revenue passenger miles) (billions) 4.769 4.493 6.1% 19.591 18.263 7.3%
Load factor 80.3% 81.9% (1.6 pts) 81.7% 82.8% (1.1 pts)
Segment guests 4,557,606 4,314,024 5.6% 18,485,144 17,423,352 6.1%
Yield (revenue per revenue passenger mile) (cents) 19.43 19.16 1.4% 18.69 18.77 (0.4%)
RASM (revenue per available seat mile) (cents) 15.59 15.68 (0.6%) 15.28 15.53 (1.6%)
CASM (cost per available seat mile) (cents) 13.88 14.01 (0.9%) 13.61 13.83 (1.6%)
CASM, excluding fuel and employee profit share (cents)* 9.29 9.32 (0.3%) 9.06 9.12 (0.7%)
*Refer to reconciliations in the accompanying tables for further information regarding calculations.

Today, WestJet declared a 20 per cent increase to its quarterly dividend from $0.10 to $0.12 per common voting share and variable voting share. "We are pleased to be able to continue returning value to our shareholders as we are confident in our robust business model and strong balance sheet," added Gregg Saretsky.

WestJet expects continued strong traffic and revenue growth in the first quarter of 2014, and to achieve continued earnings growth for the full-year 2014.

On January 9, 2014, WestJet was named 2014 Value Airline of the Year as part of Air Transport World magazine's 40th annual global airlines industry achievement awards, adding to the list of numerous awards the airline has received in previous years. "To be recognized globally for value is an enormous honour and a testament to the hard work of our nearly 10,000 WestJetters," added Gregg Saretsky. "Value is in our DNA. We strive every day to bring value to our guests and we are grateful for their loyalty and support. We are very proud to win this award and especially, in a category so close to our hearts."

Dividend declaration
On February 3, 2014, WestJet's Board of Directors declared a cash dividend of $0.12 per common voting share and variable voting share for the first quarter of 2014, to be paid on March 31, 2014, to shareholders of record on March 19, 2014. 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 information
Certain information set forth in this news release, including, without limitation, information regarding traffic and revenue growth in the first quarter of 2014 and earnings growth for the full-year 2014 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 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 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.

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, 2013, 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. 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, 2013, 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, February 4, 2014, 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 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 www.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 85 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 140 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 www.westjet.com.

Recent recognition includes:

2014 Value Airline of the Year (Air Transport World magazine)
2013 Gold Stevie Award Best Transportation Company (American Business Awards)
2013 Chairman's Circle Award: WestJet Vacations (CPSC)
2013 Canada's Most Preferred Airline (Leger Marketing)
2013/2012 Canada's Most Attractive Employer (Randstad)
2013 WestJet RBC MasterCard ranked #1 in Canada (MoneySense magazine)

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

Condensed 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
  2013 2012 2013 2012
         
Revenue:        
  Guest 836,399 783,750 3,337,569 3,133,492
  Other 90,018 76,890 324,628 293,917
  926,417 860,640 3,662,197 3,427,409
Operating expenses:        
  Aircraft fuel 260,528 246,216 1,039,448 992,787
  Airport operations 115,938 109,895 459,465 424,911
  Flight operations and navigational charges 100,565 94,408 410,052 376,050
  Sales and distribution 94,267 81,499 356,988 333,106
  Marketing, general and administration 64,562 57,505 222,567 202,398
  Depreciation and amortization 52,168 46,175 200,840 185,401
  Inflight 36,790 42,384 176,907 162,633
  Aircraft leasing 42,462 43,729 175,646 173,412
  Maintenance 44,999 35,590 169,197 154,406
  Employee profit share 12,463 11,639 51,577 46,585
  824,742 769,040 3,262,687 3,051,689
Earnings from operations 101,675 91,600 399,510 375,720
         
Non-operating income (expense):        
  Finance income 4,522 4,973 17,848 18,391
  Finance costs (11,565) (11,636) (43,447) (48,900)
  Gain on foreign exchange 178 518 1,136 1,061
  Gain (loss) on disposal of property and equipment (637) 88 (2,962) 469
  Loss on derivatives - - -- (6,512)
  (7,502) (6,057) (27,425) (35,491)
Earnings before income tax 94,173 85,543 372,085 340,229
         
Income tax expense (recovery):        
  Current 60,159 8,654 154,964 66,230
  Deferred (33,793) 15,945 (51,601) 31,607
  26,366 24,599 103,363 97,837
Net earnings 67,807 60,944 268,722 242,392
         
Earnings per share:        
  Basic 0.52 0.46 2.05 1.79
  Diluted 0.52 0.46 2.03 1.78

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

     
  December 31, 2013 December 31, 2012
Assets    
Current assets:    
  Cash and cash equivalents 1,256,005 1,408,199
  Restricted cash 58,106 51,623
  Accounts receivable 42,164 37,576
  Prepaid expenses, deposits and other 133,263 101,802
  Inventory 36,722 35,595
  1,526,260 1,634,795
Non-current assets:    
  Property and equipment 2,487,734 1,985,599
  Intangible assets 58,691 50,808
  Other assets 70,778 75,413
Total assets 4,143,463 3,746,615
     
Liabilities and shareholders' equity    
Current liabilities:    
  Accounts payable and accrued liabilities 543,167 460,003
  Advance ticket sales 551,022 480,947
  Non-refundable guest credits 46,975 47,859
  Current portion of maintenance provisions 76,105 34,135
  Current portion of long-term debt 189,191 164,909
  1,406,460 1,187,853
Non-current liabilities:    
  Maintenance provisions 142,411 145,656
  Long-term debt 689,204 574,139
  Other liabilities 8,834 9,914
  Deferred income tax 306,714 356,748
Total liabilities 2,553,623 2,274,310
     
Shareholders' equity:    
  Share capital 603,861 614,899
  Equity reserves 69,079 69,856
  Hedge reserves 105 (5,746)
  Retained earnings 916,795 793,296
Total shareholders' equity 1,589,840 1,472,305
     
Total liabilities and shareholders' equity 4,143,463 3,746,615

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

         
  Three months ended
December 31 		Twelve months ended
December 31
  2013 2012 2013 2012
         
Operating activities:        
Net earnings 67,807 60,944 268,722 242,392
Items not involving cash:        
  Depreciation and amortization 52,168 46,175 200,840 185,401
  Change in maintenance provisions 7,788 4,248 26,610 31,378
  Change in other liabilities (203) 7 1,782 (383)
  Amortization of hedge settlements 350 350 1,400 1,400
  Loss on fuel derivatives - - - 6,512
  (Gain) loss on disposal of property and equipment 637 (88) 2,962 (469)
  Share-based payment expense 3,885 3,121 14,533 12,815
  Deferred income tax expense (recovery) (33,793) 15,945 (51,601) 31,607
  Unrealized foreign exchange (gain) loss (3,477) 604 (12,020) (1,487)
Change in non-cash working capital 88,053 (37,591) 298,697 208,110
Change in restricted cash (1,274) (2,981) (6,484) (3,282)
Change in other assets 499 (1,299) (1,374) (6,894)
Cash interest received 4,914 4,462 19,079 17,780
Cash taxes paid (26,860) (219) (147,868) (950)
Purchase of shares pursuant to compensation plans (481) - (7,131) (1,306)
  160,013 93,678 608,147 722,624
         
Investing activities:        
Aircraft additions (167,032) (31,671) (639,592) (218,116)
Other property and equipment and intangible additions (16,421) (9,971) (75,580) (51,191)
  (183,453) (41,642) (715,172) (269,307)
         
Financing activities:        
Increase in long-term debt 140,710 - 318,075 72,995
Repayment of long-term debt (49,001) (41,405) (178,647) (162,678)
Decrease in obligations under finance leases - (19) - (75)
Shares repurchased (29,565) (33,193) (112,362) (112,065)
Dividends paid (12,861) (10,577) (52,188) (37,549)
Issuance of shares pursuant to compensation plans 37 36 106 198
Cash interest paid (9,501) (10,178) (36,677) (43,055)
Change in non-cash working capital 229 (1,729) 146 (6,815)
  40,048 (97,065) (61,547) (289,044)
         
Cash flow from operating, investing and financing activities 16,608 (45,029) (168,572) 164,273
Effect of foreign exchange on cash and cash equivalents 6,434 294 16,378 321
Net change in cash and cash equivalents 23,042 (44,735) (152,194) 164,594
         
Cash and cash equivalents, beginning of period 1,232,963 1,452,934 1,408,199 1,243,605
         
Cash and cash equivalents, end of period 1,256,005 1,408,199 1,256,005 1,408,199

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 for greater comparability.

             
  Three months ended December 31 Twelve months ended December 31
  2013 2012 Change 2013 2012 Change
Operating expenses 824,742 769,040 55,702 3,262,687 3,051,689 210,998
Aircraft fuel expense (260,528) (246,216) (14,312) (1,039,448) (992,787) (46,661)
Employee profit share expense (12,463) (11,639) (824) (51,577) (46,585) (4,992)
Operating expenses, adjusted 551,751 511,185 40,566 2,171,662 2,012,317 159,345
ASMs 5,942,032,692 5,487,467,646 8.3% 23,970,921,260 22,063,583,754 8.6%
CASM, excluding above items (cents) 9.29 9.32 (0.3%) 9.06 9.12 (0.7%)

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.

       
  December 31, 2013 December 31, 2012 Change
Earnings before income taxes 372,085 340,229 31,856
Add:      
   Finance costs 43,447 48,900 (5,453)
   Implicit interest in operating leases(i) 92,214 91,041 1,173
  507,746 480,170 27,576
Invested capital:      
   Average long-term debt(ii) 808,722 783,880 24,842
   Average obligations under finance leases(iii) - 1,625 (1,625)
   Average shareholders' equity 1,531,073 1,421,261 109,812
   Off-balance-sheet aircraft leases(iv) 1,317,345 1,300,590 16,755
  3,657,140 3,507,356 149,784
Return on invested capital 13.9% 13.7% 0.2 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)      Average obligations under finance leases include 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, 2013, the trailing 12 months of aircraft leasing costs totaled $175,646 (December 31, 2012 - $173,412).

 

 

 

SOURCE WestJet

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