WestJet reports record third quarter results

News provided by

WestJet

Nov 04, 2014, 06:29 ET

Airline achieves record third quarter adjusted net earnings of $85 million, up 31 per cent year over year, its 38th consecutive profitable quarter

CALGARY, Nov. 4, 2014 /PRNewswire/ - WestJet (TSX: WJA) today announced its third quarter 2014 results, with record adjusted net earnings1 of $85.4 million, or $0.66 per diluted share. This compares with the net earnings of $65.1 million, or $0.50 per diluted share reported in the third quarter of 2013, up 31.2 per cent and 32.0 per cent, respectively. Based on the trailing twelve months, the airline achieved a return on invested capital of 13.8 per cent, compared with the 13.7 per cent reported in the previous quarter. These adjusted results exclude a pre-tax non-cash loss of $45.5 million associated with the previously disclosed sale of 10 of our oldest Boeing 737 aircraft.

"We are very pleased with another quarter of record financial results, exceeding our ROIC target for the ninth consecutive quarter and improving our on-time performance rate by 3.4 percentage points year over year to 81.9 per cent," said WestJet President and CEO Gregg Saretsky. "We continue to strengthen WestJet's network with the further rollout of WestJet Encore, our recent announcement of service to Glasgow, our first destination in the United Kingdom, and the evolution of our existing interline agreements with China Airlines and Qantas into code-share agreements. My thanks go out to our more than 10,000 WestJetters for their tremendous dedication to providing a remarkable guest experience as our airline continues to grow profitably and I am thrilled to add another $19 million in profit share this quarter to be paid out later this month."

                         
Operating highlights (stated in Canadian dollars)
    Q3 2014    Q3 2013   Change   Year-to-
date 2014 		  Year-to-
date 2013 		  Change
Net earnings (millions)   $52.2   $65.1   (19.8%)   $193.2   $200.9   (3.8%)
Adjusted net earnings (millions)1   $85.4   $65.1   31.2%   $226.5   $200.9   12.7%
Diluted earnings per share   $0.40   $0.50   (20.0%)   $1.50   $1.51   (0.7%)
Adjusted diluted earnings per share1   $0.66   $0.50   32.0%   $1.76   $1.51   16.6%
Total revenue (millions)   $1,009.7   $924.8   9.2%   $2,982.2   $2,735.8   9.0%
Operating margin   12.5%   10.7%   1.8 pts   11.3%   10.9%   0.4 pts
ASMs (available seat miles) (billions)   6.498   6.109   6.4%   19.206   18.029   6.5%
RPMs (revenue passenger miles) (billions)   5.401   5.059   6.8%   15.748   14.823   6.2%
Load factor   83.1%   82.8%   0.3 pts   82.0%   82.2%   (0.2 pts)
Segment guests   5,246,819   4,940,943   6.2%   14,825,828   13,927,538   6.4%
Yield (revenue per revenue passenger mile) (cents)   18.70   18.28   2.3%   18.94   18.46   2.6%
RASM (revenue per available seat mile) (cents)   15.54   15.14   2.6%   15.53   15.17   2.4%
CASM (cost per available seat mile) (cents)   13.60   13.52   0.6%   13.78   13.52   1.9%
CASM, excluding fuel and employee profit share (cents)*   8.90   8.96   (0.7%)   9.13   8.99   1.6%

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

In September, WestJet announced the launch of its new WestJet Rewards tiers program, which will make frequent guests eligible for higher WestJet dollar earn rates on WestJet flights, additional companion flights, and new easy-to-use flight benefits. In addition, the WestJet RBC World Elite MasterCard was once again named Canada's best travel rewards card, according to an annual review and ranking of credit cards in the September 2014 issue of MoneySense magazine. The number-one-ranked WestJet RBC World Elite MasterCard provides a complimentary first checked bag, as well as another option to earn WestJet dollars that can be redeemed to anywhere WestJet flies, at any time.

Dividend declaration
On November 3, 2014, WestJet's Board of Directors declared a cash dividend of $0.12 per common voting share and variable voting share for the fourth quarter of 2014, to be paid on December 31, 2014, to shareholders of record on December 17, 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 respecting the new WestJet Rewards tiers program 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.

1Non-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 three and nine months ended September 30, 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 condensed consolidated financial statements and notes for the three and nine months ended September 30, 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, November 4, 2014, 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 third quarter 2014 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 91 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 vacation 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:

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)
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

               

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

  Three months ended
September 30 		  Nine months ended
September 30
  2014   2013   2014   2013
               
Revenue:              
  Guest 930,103   853,164   2,714,386   2,501,170
  Other 79,625   71,680   267,772   234,610
  1,009,728   924,844   2,982,158   2,735,780
Operating expenses:              
  Aircraft fuel 286,817   266,668   846,514   778,920
  Airport operations 128,381   117,767   377,178   344,315
  Flight operations and navigational charges 112,886   104,390   339,616   308,699
  Sales and distribution 94,764   88,681   282,598   262,721
  Depreciation and amortization 56,620   51,499   172,044   148,672
  Marketing, general and administration 50,647   54,005   164,030   158,005
  Maintenance 48,062   44,248   151,612   124,198
  Aircraft leasing 43,082   41,791   136,904   133,184
  Inflight 43,600   44,824   130,410   140,117
  Employee profit share 19,039   11,969   45,388   39,114
  883,898   825,842   2,646,294   2,437,945
Earnings from operations 125,830   99,002   335,864   297,835
               
Non-operating income (expense):              
  Finance income 4,220   4,144   12,349   13,326
  Finance cost (14,588)   (10,921)   (37,646)   (31,882)
  Gain (loss) on foreign exchange 1,377   (793)   407   958
  Loss on disposal of property and equipment (45,438)   (545)   (45,483)   (2,325)
  (54,429)   (8,115)   (70,373)   (19,923)
Earnings before income tax 71,401   90,887   265,491   277,912
               
Income tax expense (recovery):              
  Current 18,829   32,357   86,298   94,805
  Deferred 381   (6,577)   (14,051)   (17,808)
  19,210   25,780   72,247   76,997
Net earnings 52,191   65,107   193,244   200,915
               
Earnings per share:              
  Basic 0.41   0.50   1.51   1.53
  Diluted 0.40   0.50   1.50   1.51
         

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

       
    September 30
2014 		  December 31
2013
Assets        
Current assets:        
  Cash and cash equivalents   1,424,746   1,256,005
  Restricted cash   53,856   58,106
  Accounts receivable   57,811   42,164
  Prepaid expenses, deposits and other   114,999   133,263
  Inventory   35,730   36,722
  Assets held for sale   151,193   -
    1,838,335   1,526,260
Non-current assets:        
  Property and equipment   2,653,457   2,487,734
  Intangible assets   63,582   58,691
  Other assets   58,454   70,778
Total assets   4,613,828   4,143,463
         
Liabilities and shareholders' equity        
Current liabilities:        
  Accounts payable and accrued liabilities   484,321   543,167
  Advance ticket sales   614,200   551,022
  Non-refundable guest credits   44,141   46,975
  Current portion of maintenance provisions   105,198   76,105
  Current portion of long-term debt   160,829   189,191
    1,408,689   1,406,460
Non-current liabilities:        
  Maintenance provisions   144,218   142,411
  Long-term debt   1,051,650   689,204
  Other liabilities   10,221   8,834
  Deferred income tax   291,173   306,714
Total liabilities   2,905,951   2,553,623
         
Shareholders' equity:        
  Share capital   603,568   603,861
  Equity reserves   71,880   69,079
  Hedge reserves   (3,075)   105
  Retained earnings   1,035,504   916,795
Total shareholders' equity   1,707,877   1,589,840
         
Total liabilities and shareholders' equity   4,613,828   4,143,463
         

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

   
  Three months ended
September 30 		Nine months ended
September 30
  2014 2013 2014 2013
         
Operating activities:        
Net earnings 52,191 65,107 193,244 200,915
Items not involving cash:        
  Depreciation and amortization 56,620 51,499 172,044 148,672
  Change in maintenance provisions 9,444 5,444 19,526 18,822
  Change in other liabilities (144) (196) (371) 1,985
  Amortization of hedge settlements 350 350 1,050 1,050
  Loss on disposal of property and equipment 45,438 545 45,483 2,325
  Share-based payment expense 4,548 3,594 14,310 10,648
  Deferred income tax expense/(recovery) 381 (6,577) (14,051) (17,808)
  Unrealized foreign exchange gain (3,185) (4,258) (8,311) (8,543)
Change in non-cash working capital 122,607 109,823 203,065 210,644
Change in restricted cash (19,152) (19,813) 4,250 (5,210)
Change in other assets 4,695 874 (6,728) (1,873)
Cash interest received 3,848 4,272 12,467 14,165
Cash taxes paid (23,521) (23,494) (193,595) (121,008)
Purchase of shares pursuant to compensation plans (406) (63) (10,823) (6,650)
  253,714 187,107 431,560 448,134
         
Investing activities:        
Aircraft additions (128,017) (190,215) (466,036) (472,560)
Other property and equipment and intangible additions (11,501) (19,923) (41,080) (59,159)
  (139,518) (210,138) (507,116) (531,719)
         
Financing activities:        
Increase in long-term debt 416,192 144,291 597,378 177,365
Repayment of long-term debt (167,531) (47,081) (263,332) (129,646)
Shares repurchased − (46,184) (29,575) (82,797)
Dividends paid (15,342) (12,935) (45,979) (39,327)
Issuance of shares pursuant to compensation plans − 36 40 69
Cash interest paid (10,284) (8,763) (30,086) (27,176)
Change in non-cash working capital 2,429 474 2,002 (83)
  225,464 29,838 230,448 (101,595)
         
Cash flow from operating, investing and financing activities 339,660 6,807 154,892 (185,180)
Effect of foreign exchange on cash and cash equivalents 8,415 2,558 13,849 9,944
Net change in cash and cash equivalents 348,075 9,365 168,741 (175,236)
         
Cash and cash equivalents, beginning of period 1,076,671 1,223,598 1,256,005 1,408,199
         
Cash and cash equivalents, end of period 1,424,746 1,232,963 1,424,746 1,232,963

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 September 30   Nine months ended September 30
($ in thousands)   2014   2013   Change   2014   2013   Change
Operating expenses   883,898   825,842   58,056   2,646,294   2,437,945   208,349
Aircraft fuel expense   (286,817)   (266,668)   (20,149)   (846,514)   (778,920)   (67,594)
                         
Employee profit share expense   (19,039)   (11,969)   (7,070)   (45,388)   (39,114)   (6,274)
                         
Operating expenses, adjusted   578,042   547,205   30,837   1,754,392   1,619,911   134,481
                         
ASMs   6,498,320,506   6,108,626,819   6.4%   19,205,786,059   18,028,888,568   6.5%
CASM, excluding above items (cents)   8.90   8.96   (0.7%)   9.13   8.99   1.6%

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.

             
    September 30
2014 		  December 31
2013 		  Change
Earnings before income taxes   359,664   372,085   (12,421)
  Special item(i)   45,459   -   45,459
Adjusted earnings before income taxes   405,123   372,085   33,038
Add:            
  Finance costs   49,211   43,447   5,764
  Implicit interest in operating leases(ii)   94,167   92,214   1,953
    548,501   507,746   40,755
Invested capital:            
  Average long-term debt(iii)   999,606   808,722   190,884
  Average shareholders' equity   1,633,421   1,531,072   102,349
  Off-balance-sheet aircraft leases(iv)   1,345,245   1,317,345   27,900
    3,978,272   3,657,139   321,133
Return on invested capital   13.8%   13.9%   (0.1 pts.)
(i) Pre-tax non-cash of $45,459 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 September 30, 2014, the trailing 12 months of aircraft leasing costs totaled $179,366 (December 31, 2013 - $175,646).

Adjusted net earnings/Adjusted diluted earnings per share

               
    Three months ended September 30
($ in thousands, except share and per share data)   September 30
2014 		  September 30
2013 		  Change
Net earnings   52,191   65,107   (12,916)
Adjusted for:            
  Special item(i)   33,231   ―   33,231
Adjusted net earnings   85,422   65,107   20,315
Weighted average number of shares outstanding - diluted   129,175,388   131,519,619   (2,344,231)
Adjusted diluted earnings per share   0.66   0.50   32.0%
     
    Nine months ended September 30
($ in thousands, except share and per share data)   September 30
2014 		  September 30
2013 		  Change
Net earnings   193,244   200,915   (7,671)
Adjusted for:            
  Special item(i)   33,231   ―   33,231
Adjusted net earnings   226,475   200,915   25,560
Weighted average number of shares outstanding - diluted   128,961,472   132,754,015   (3,792,543)
Adjusted diluted earnings per share   1.76   1.51   16.6%

(i) After-tax non-cash loss recorded in the third quarter of 2014 associated with the sale of 10 aircraft to Southwest.

 

SOURCE WestJet

WANT YOUR COMPANY'S NEWS FEATURED ON PRNEWSWIRE.COM?

icon3
440k+
Newsrooms &
Influencers
icon1
9k+
Digital Media
Outlets
icon2
270k+
Journalists
Opted In
GET STARTED