WestJet reports first quarter net earnings of $89 million - CBS46 News

WestJet reports first quarter net earnings of $89 million

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SOURCE WestJet

Airline achieves 36th consecutive profitable quarter and record earnings per share

CALGARY, May 6, 2014 /PRNewswire/ - WestJet (TSX: WJA) today announced its first quarter results for 2014, with net earnings of $89.3 million, or $0.69 per diluted share. This compares with the net earnings of $91.1 million, or $0.68 per diluted share reported in the first quarter of 2013. Based on the trailing twelve months, the airline achieved a return on invested capital of 13.7 per cent, compared with the 13.9 per cent reported in the previous quarter. These results include pre-tax recoveries of value added taxes of $17.6 million associated with fuel costs and $2.5 million associated with airport costs incurred from 2009 to 2013.

"We had a very strong start to 2014, as we achieved our second best ever first quarter earnings, recorded our 36th consecutive quarter of profitability and exceeded our 12 per cent ROIC target for the seventh consecutive quarter, even when we exclude the tax recoveries," said WestJet President and CEO Gregg Saretsky. "Our continued track record of profitability combined with strong liquidity and solid market position contributed to Standard & Poor's assigning WestJet an investment grade credit rating of BBB- this past February, placing us among the very few airlines in the world to be rated investment grade. I want to thank our nearly 10,000 WestJetters for all their hard work that makes these accomplishments possible."

Operating highlights (stated in Canadian dollars)

  Q1 2014 Q1 2013 Change
Net earnings (millions) $89.3 $91.1 (2.0%)
Diluted earnings per share $0.69 $0.68 1.5%
Total revenues (millions) $1,042.1 $967.2 7.7%
Operating margin 12.6% 13.7%  (1.1 pts) 
ASMs (available seat miles) (billions) 6.515 6.032 8.0%
RPMs (revenue passenger miles) (billions) 5.416 5.088 6.4%
Load factor 83.1% 84.3% (1.2 pts)
Segment guests  4,806,685   4,493,324  7.0%
Yield (revenue per revenue passenger mile) (cents) 19.24 19.01 1.2%
RASM (revenue per available seat mile) (cents) 16.00 16.03 (0.2%)
CASM (cost per available seat mile) (cents) 13.98 13.84 1.0%
CASM, excluding fuel and employee profit share (cents)*     9.28 8.94 3.8%
*Refer to reconciliations in the accompanying tables for further information regarding calculations.

Supporting WestJet Encore's expansion across Canada, WestJet announced in March 2014 that it had converted five of its 25 options to firm orders for Bombardier Q400 NextGen aircraft, scheduled for delivery in the second half of 2015.

In February 2014, WestJet announced it had signed a multi-year agreement with Panasonic Avionics Corporation to provide the airline with a new inflight entertainment system with added connectivity and entertainment options. "Combining wireless connectivity with our continually improving schedule and network, our WestJet Rewards program and the additional amenities and space offered by our Plus product is part of our ongoing plans to enhance our value proposition for both business and leisure travelers," said Bob Cummings, WestJet Executive Vice-President, Sales, Marketing and Guest Experience.

Dividend declaration
On May 5, 2014, WestJet's Board of Directors declared a cash dividend of $0.12 per common voting share and variable voting share for the second quarter of 2014, to be paid on June 30, 2014, to shareholders of record on June 18, 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 the timing of future aircraft deliveries 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 three months ended March 31, 2014, 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 three months ended March 31, 2014, 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 6, 2014, at 6 a.m. MDT (8 a.m. EDT). President and CEO Gregg Saretsky and Executive Vice-President of Finance and CFO Vito Culmone will discuss WestJet's first quarter 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 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 www.westjet.com.

Recent recognition includes:
2014 Value Airline of the Year (Air Transport World magazine)
2014/2013/2012 Canada's Most Attractive Employer (Randstad)
2013 Highest equity score: airline, vacation package supplier brands (Harris/Decima EquiTrend Study)
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 WestJet RBC MasterCard ranked #1 in Canada (Money Sense 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
For the three months ended March 31
(Stated in thousands of Canadian dollars, except per share amounts)
(Unaudited)
                 
                     
        2014         2013
                   
Revenue:                  
  Guest       936,829         879,394
  Other       105,261         87,848
        1,042,090         967,242
Operating expenses:                  
  Aircraft fuel       284,836         271,048
  Airport operations       127,361         115,275
  Flight operations and navigational charges       116,145         101,875
  Sales and distribution       101,310         91,310
  Depreciation and amortization       61,022         48,019
  Maintenance       52,795         39,697
  Marketing, general and administration       52,221         49,515
  Aircraft leasing       49,108         47,509
  Inflight       44,702         46,319
  Employee profit share       20,998         24,311
        910,498         834,878
Earnings from operations       131,592         132,364
                   
Non-operating income (expense):                  
  Finance income       4,357         4,744
  Finance costs       (11,668)         (10,698)
  Gain (loss) on foreign exchange       (1,487)         79
  Gain (loss) on disposal of property and equipment       11         (1,018)
        (8,787)         (6,893)
Earnings before income tax       122,805         125,471
                   
Income tax expense (recovery):                  
  Current       44,694         46,653
  Deferred       (11,180)         (12,255)
        33,514         34,398
Net earnings       89,291         91,073
                   
Earnings per share:                  
  Basic       0.70         0.69
  Diluted       0.69         0.68
           

                 
Condensed Consolidated Statement of Financial Position
(Stated in thousands of Canadian dollars)
(Unaudited)
               
                 
        March 31
2014
      December 31
2013
Assets                
Current assets:                
  Cash and cash equivalents       1,112,484       1,256,005
  Restricted cash       46,547       58,106
  Accounts receivable       55,446       42,164
  Prepaid expenses, deposits and other       111,042       133,263
  Inventory       35,347       36,722
        1,360,866       1,526,260
Non-current assets:                
  Property and equipment       2,613,317       2,487,734
  Intangible assets       61,313       58,691
  Other assets       71,118       70,778
Total assets       4,106,614       4,143,463
                 
Liabilities and shareholders' equity                
Current liabilities:                
  Accounts payable and accrued liabilities       510,456       543,167
  Advance ticket sales       518,523       551,022
  Non-refundable guest credits       45,761       46,975
  Current portion of maintenance provisions       57,964       76,105
  Current portion of long-term debt       188,004       189,191
        1,320,708       1,406,460
Non-current liabilities:                
  Maintenance provisions       169,061       142,411
  Long-term debt       675,191       689,204
  Other liabilities       8,759       8,834
  Deferred income tax       295,394       306,714
Total liabilities       2,469,113       2,553,623
                 
Shareholders' equity:                
  Share capital       599,748       603,861
  Equity reserves       69,354       69,079
  Hedge reserves       58       105
  Retained earnings       968,341       916,795
Total shareholders' equity       1,637,501       1,589,840
                 
Total liabilities and shareholders' equity       4,106,614       4,143,463
                 

                     
Condensed Consolidated Statement of Cash Flows
For the three months ended March 31
(Stated in thousands of Canadian dollars)
(Unaudited)
                   
                     
            2014       2013
                     
Operating activities:                    
Net earnings           89,291       91,073
Items not involving cash:                    
  Depreciation and amortization           61,022       48,019
  Change in maintenance provisions           432       9,082
  Change in other liabilities           (75)       (207)
  Amortization of hedge settlements           350       350
  (Gain) loss on disposal of property and equipment           (11)       1,018
  Share-based payment expense           3,858       3,575
  Deferred income tax expense (recovery)           (11,180)       (12,255)
  Unrealized foreign exchange (gain) loss           (2,808)       (1,125)
Change in non-cash working capital           31,912       105,480
Change in restricted cash           11,559       1,499
Change in other assets           8,551       (1,939)
Cash interest received           4,492       5,353
Cash taxes paid           (129,662)       (77,183)
Purchase of shares pursuant to compensation plans           (5,432)       (1,486)
            62,299       171,254
                     
Investing activities:                    
Aircraft additions           (136,905)       (125,481)
Other property and equipment and intangible additions           (9,757)       (22,990)
            (146,662)       (148,471)
                     
Financing activities:                    
Increase in long-term debt           32,430       -
Repayment of long-term debt           (47,674)       (41,240)
Shares repurchased           (24,724)       (4,064)
Dividends paid           (15,325)       (13,231)
Issuance of shares pursuant to compensation plans           40       33
Cash interest paid           (10,186)       (9,568)
Change in non-cash working capital           (418)       (455)
            (65,857)       (68,525)
                     
Cash flow from operating, investing and financing activities           (150,220)       (45,742)
Effect of foreign exchange on cash and cash equivalents           6,699       2,343
Net change in cash and cash equivalents           (143,521)       (43,399)
                     
Cash and cash equivalents, beginning of period           1,256,005       1,408,199
                     
Cash and cash equivalents, end of period           1,112,484       1,364,800

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 March 31
            2014       2013           Change
Operating expenses           910,498       834,878           75,620
Aircraft fuel expense           (284,836)       (271,048)           (13,788)
Employee profit share expense           (20,998)       (24,311)           3,313
Operating expenses, adjusted           604,664       539,519           65,145
ASMs           6,514,585,070       6,032,096,070           8.0%
CASM, excluding above items (cents)           9.28       8.94           3.8%

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.

                               
            March 31
2014
      December 31
2013
        Change
Earnings before income taxes           369,419       372,085         (2,666)
Add:                              
  Finance costs           44,417       43,447         970
  Implicit interest in operating leases(i)           93,054       92,214         840
            506,890       507,746         (856)
Invested capital:                              
  Average long-term debt(ii)           780,523       808,722         (28,199)
  Average obligations under finance leases(iii)           -       -         -
  Average shareholders' equity           1,593,465       1,531,073         62,392
  Off-balance-sheet aircraft leases(iv)           1,329,338       1,317,345         11,993
            3,703,326       3,657,140         46,186
Return on invested capital           13.7%       13.9%         (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 March 31, 2014, the trailing 12 months of aircraft leasing costs totaled $177,245 (December 31, 2013 - $175,646).

 

 

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