2014

WestJet reports record full-year earnings per share of $1.78, up 68 per cent

Airline achieves fourth quarter earnings per share of $0.46, an increase of 77 per cent
Announces increase to quarterly dividend and intent to pursue a further normal course issuer bid

CALGARY, Feb. 6, 2013 /PRNewswire/ - WestJet (TSX: WJA) today announced its fourth quarter and year-end results for 2012. The airline reported fourth quarter net earnings of $60.9 million, or $0.46 per share and full-year net earnings of $242.4 million, or $1.78 per share; up significantly from the net earnings of $148.7 million, or $1.06 per share, reported for 2011. These financial results mark WestJet's 31st consecutive quarter of profitability. Based on the trailing twelve months, the airline achieved a return on invested capital of 13.7 per cent, up from the 12.7 per cent reported last quarter.

"We are very pleased with the positive momentum generated in 2012 that culminated with us reporting record annual earnings, record high load factors and for the second consecutive quarter, we surpassed our return on invested capital target of 12 per cent by achieving 13.7 per cent for the year," said WestJet President and CEO Gregg Saretsky. "Fundamentally our momentum is traced to the commitment and dedication of our over 9,000 WestJetters, and I am very proud of the positive and caring attitude they exemplify each and every day."

Operating highlights (stated in Canadian dollars)

  Q4 2012  Q4 2011 Change Full-Year
2012
Full-Year
2011
Change
Net earnings (millions) $60.9 $35.6 71.3% $242.4 $148.7 63.0%
Diluted earnings per share $0.46 $0.26 76.9% $1.78 $1.06 67.9%
Total revenues (millions) $860.6 $781.5 10.1% $3,427.4 $3,071.5 11.6%
Operating margin 10.6% 7.6% 3.0 pts 11.0% 8.4% 2.6 pts
ASMs (available seat miles) (billions) 5.487 5.329 3.0% 22.064 21.186 4.1%
RPMs (revenue passenger miles) (billions) 4.493 4.194 7.1% 18.263 16.891 8.1%
Load factor 81.9% 78.7% 3.2 pts 82.8% 79.7% 3.1 pts
Segment Guests 4,314,024 3,996,593 7.9% 17,423,352 16,040,682 8.6%
Yield (revenue per revenue passenger
mile) (cents)
19.16 18.64 2.8% 18.77 18.18 3.2%
RASM (revenue per available seat mile)
(cents)
15.68 14.67 6.9% 15.53 14.50 7.1%
CASM (cost per available seat mile)
(cents)
14.01 13.55 3.4% 13.83 13.29 4.1%
CASM, excluding fuel and employee profit
share (cents)*
9.32 9.03 3.2% 9.12 8.85 3.1%

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

Today, WestJet also announced its intention, upon the expiry of the 12-month period of its 2012 normal course issuer bid, to make an application to the Toronto Stock Exchange to initiate a further normal course issuer bid for up to 5 per cent of the currently issued and outstanding shares. The airline also declared an increase to its quarterly dividend from $0.08 to $0.10. "Continuing the share buy-back program and increasing the dividend signals our confidence in the strength of the business and our commitment to return value to shareholders," added Gregg Saretsky.

Throughout 2012, WestJet was able to expand its virtual network with the implementation of 13 new interline partnerships, and by evolving four existing interline partnerships (Delta Air Lines, Korean Air, China Eastern Airlines and British Airways) into code-share relationships, bringing the total number of airline partnerships to thirty worldwide.

"Our positive momentum continues into 2013 as we launch WestJet Encore, add to and evolve our airline partnerships and enhance value to more business and leisure guests. Our introduction of fare bundles and WestJet Plus will include options for more comfort, convenience and flexibility to our guests," commented Gregg Saretsky.

WestJet expects moderate growth in RASM and margin expansion in the first quarter of 2013, notwithstanding the difficult prior year comparisons and increases in system wide capacity. For the full year 2013, the airline expects CASM, excluding fuel and employee profit share, to increase between two to three percent year-over-year. For the first quarter of 2013, WestJet expects fuel costs to range between $0.94 and $0.96 per litre.

Dividend declaration

On February 5, 2013 WestJet's Board of Directors declared a cash dividend of $0.10 per common voting share and variable voting share for the first quarter of 2013, to be paid on March 28, 2013, to shareholders of record on March 13, 2013. 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 RASM growth and margin expansion in the first quarter of 2013, fuel costs in the first quarter of 2013, CASM, excluding fuel and employee profit share for the full-year 2013, initiating a normal course issuer bid and commitment to return value to shareholders, the launch of the regional airline WestJet Encore, our airline partnerships, fare bundles and WestJet Plus 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 budget, forecasts and strategy, the expected demand environment, our fleet plan, forward-curve jet fuel prices for the first quarter of 2013, and the expected exchange rate of the Canadian dollar to the U.S. dollar in the first quarter of 2013, along with available implementation plans, agreements and bookings, but may vary due to factors including, but not limited to, changes in consumer demand, changes in fuel prices, delays in aircraft delivery, changes in guest demand, 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.

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, 2012, 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, 2012, 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 6, 2013, at 9 a.m. MST (11 a.m. EST). President and CEO Gregg Saretsky and Executive Vice-President of Finance and CFO Vito Culmone will discuss WestJet's 2012 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

WestJet is Canada's most preferred airline, offering scheduled service to 81 destinations in North America, Central America and the Caribbean. Powered by an award-winning culture of care, WestJet has pioneered low-cost flying in Canada. Recognized nationally as a top employer, WestJet now has more than 9,000 WestJetters across Canada. Operating a fleet of 101 Boeing Next-Generation 737 aircraft with future confirmed deliveries for an additional 34 Boeing Next-Generation 737 aircraft through 2018 and plans to launch a low-cost regional airline in 2013, WestJet strives to be one of the five most successful international airlines in the world.

Connect with WestJet on Facebook at www.facebook.com/westjet
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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
  2012 2011 2012 2011
         
Revenue:        
  Guest 783,750 711,246 3,133,492 2,790,299
  Other 76,890 70,299 293,917 281,241
  860,640 781,545 3,427,409 3,071,540
Expenses:        
  Aircraft fuel 246,216 235,574 992,787 915,878
  Airport operations 118,051 107,295 454,114 421,561
  Flight operations and navigational charges 91,242 84,814 366,871 344,442
  Sales and distribution 76,509 72,958 313,082 296,954
  Marketing, general and administration 59,690 50,869 208,620 186,290
  Depreciation and amortization 46,175 44,312 185,401 174,751
  Aircraft leasing 43,729 41,850 173,412 165,571
  Inflight 40,199 36,144 156,411 139,478
  Maintenance 35,590 42,816 154,406 146,260
  Employee profit share 11,639 5,662 46,585 23,804
  769,040 722,294 3,051,689 2,814,989
Earnings from operations 91,600 59,251 375,720 256,551
         
Non-operating income (expense):        
  Finance income 4,973 4,383 18,391 15,987
  Finance costs (11,636) (14,446) (48,900) (60,911)
  Gain (loss) on foreign exchange 518 (908) 1,061 2,485
  Gain (loss) on disposal of property and equipment 88 (43) 469 (54)
  Loss on fuel derivatives - 1,597 (6,512) (6,052)
  (6,057) (9,417) (35,491) (48,545)
Earnings before income tax 85,543 49,834 340,229 208,006
         
Income tax expense (benefit):        
  Current 8,654 274 66,230 1,236
  Deferred 15,945 13,976 31,607 58,068
  24,599 14,250 97,837 59,304
Net earnings 60,944 35,584 242,392 148,702
         
Earnings per share:        
  Basic 0.46 0.26 1.79 1.06
  Diluted 0.46 0.26 1.78 1.06

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

     
  December 31
2012
December 31
2011
Assets    
Current assets:    
  Cash and cash equivalents 1,408,199 1,243,605
  Restricted cash 51,623 48,341
  Accounts receivable 37,576 34,122
  Prepaid expenses, deposits and other 101,802 66,936
  Inventory 35,595 31,695
  1,634,795 1,424,699
Non-current assets:    
  Property and equipment 1,985,599 1,911,227
  Intangible assets 50,808 33,793
  Other assets 75,413 103,959
Total assets 3,746,615 3,473,678
     
Liabilities and shareholders' equity    
Current liabilities:    
  Accounts payable and accrued liabilities 460,003 307,109
  Advance ticket sales 480,947 432,186
  Non-refundable guest credits 47,859 43,485
  Current portion of long-term debt 164,909 158,832
  Current portion of maintenance provisions 34,135 245
  1,187,853 941,857
Non-current liabilities:    
  Maintenance provisions 145,656 151,645
  Long-term debt 574,139 669,880
  Obligations under finance leases - 3,174
  Other liabilities 9,914 10,449
  Deferred income tax 356,748 326,456
Total liabilities 2,274,310 2,103,461
     
Shareholders' equity:    
  Share capital 614,899 630,408
  Equity reserves 69,856 74,184
  Hedge reserves (5,746) (3,353)
  Retained earnings 793,296 668,978
Total shareholders' equity 1,472,305 1,370,217
     
Total liabilities and shareholders' equity 3,746,615 3,473,678

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

     
  Three months ended
December 31
Twelve months ended
December 31
  2012 2011 2012 2011
         
Operating activities:        
Net earnings 60,944 35,584 242,392 148,702
Items not involving cash:        
  Depreciation and amortization 46,175 44,312 185,401 174,751
  Change in long-term maintenance provisions 7,859 15,981 34,426 38,522
  Change in other liabilities 7 (198) (383) (313)
  Amortization of hedge settlements 350 350 1,400 1,400
  Loss on fuel derivatives - (1,597) 6,512 6,052
  (Gain) loss on disposal of property and equipment (88) 43 (469) 54
  Share-based payment expense 3,121 2,538 12,815 12,553
  Deferred income tax expense 15,945 13,976 31,607 58,068
  Finance income (4,973) (4,383) (18,391) (15,987)
  Finance costs 11,636 14,446 48,900 60,911
  Unrealized foreign exchange (gain) loss 604 66 (1,487) 1,453
Change in non-cash working capital (48,136) (32,935) 173,563 89,739
Change in restricted cash (2,981) (5,869) (3,282) (19,758)
Change in other assets (1,299) 984 (6,894) (4,344)
Cash taxes received (paid) (219) (391) (950) 26
Cash interest received 4,462 4,057 17,780 14,631
Purchase of shares pursuant to compensation plans - - (1,306) -
  93,407 86,964 721,634 566,460
         
Investing activities:        
Aircraft additions (31,671) (4,975) (218,116) (61,265)
Other property and equipment and intangible additions (9,971) (32,041) (51,191) (57,108)
  (41,642) (37,016) (269,307) (118,373)
         
Financing activities:        
Increase in long-term debt - - 72,995 -
Repayment of long-term debt (41,405) (62,021) (162,678) (199,225)
Decrease in obligations under finance leases (19) (18) (75) (108)
Shares repurchased (33,193) - (112,065) (74,570)
Dividends paid (10,577) (6,914) (37,549) (35,000)
Issuance of shares pursuant to compensation plans 36 - 198 34
Cash interest paid (10,178) (12,088) (43,055) (51,722)
Change in non-cash working capital (1,458) (2,345) (5,825) (2,084)
  (96,794) (83,386) (288,054) (362,675)
         
Cash flow from operating, investing and financing activities (45,029) (33,438) 164,273 85,412
Effect of foreign exchange on cash and cash equivalents 294 (576) 321 (1,123)
Net change in cash and cash equivalents (44,735) (34,014) 164,594 84,289
         
Cash and cash equivalents, beginning of period 1,452,934 1,277,619 1,243,605 1,159,316
         
Cash and cash equivalents, end of period 1,408,199 1,243,605 1,408,199 1,243,605

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
  2012 2011 Change 2012 2011 Change
CASM, excluding fuel and employee profit share            
Operating expenses 769,040 722,294 46,746 3,051,689 2,814,989 236,700
Aircraft fuel expense (246,216) (235,574) (10,642) (992,787) (915,878) (76,909)
Employee profit share expense (11,639) (5,662) (5,977) (46,585) (23,804) (22,781)
Operating expenses, adjusted 511,185 481,058 30,127 2,012,317 1,875,307 137,010
ASMs 5,487,467,646 5,328,928,405 158,539,241 22,063,583,754 21,186,304,409 877,279,345
CASM, excluding above items (cents) 9.32 9.03 3.2% 9.12 8.85 3.1%

Return on invested capital (ROIC)
(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 earnings before tax, excluding special items, finance costs and implied interest on 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.

       
  2012 2011 Change
Return on invested capital      
Earnings before income taxes 340,229 208,006 132,223
Add:      
  Finance costs 48,900 60,911 (12,011)
  Implicit interest in operating leases(i) 91,041 86,925 4,116
  480,170 355,842 124,328
Invested capital:      
  Average long-term debt(ii) 783,880 927,757 (143,877)
  Average obligations under finance leases(iii) 1,625 3,303 (1,678)
  Average shareholders' equity 1,421,261 1,337,225 84,036
  Off-balance-sheet aircraft leases(iv) 1,300,590 1,241,783 58,807
  3,507,356 3,510,068 (2,712)
Return on invested capital 13.7% 10.1% 3.6 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, 2012, the trailing 12
months of aircraft leasing costs totaled $173,412 (December 31, 2011 - $165,571).
 

 

SOURCE WestJet



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