WestJet reports third quarter net earnings of $71 million, up 80 per cent
Airline achieves earnings per share of $0.52, an increase from $0.28
CALGARY, Nov. 7, 2012 /PRNewswire/ - WestJet (TSX: WJA) today announced third quarter net earnings of $70.6 million, or $0.52 per diluted share; up from the net earnings of $39.3 million, or $0.28 per diluted share, reported in the third quarter of 2011. These financial results mark WestJet's 30th consecutive quarter of profitability. Based on the trailing twelve months, the airline achieved a return on invested capital of 12.7 per cent, up from the 11.4 per cent reported last quarter.
"It was another great quarter for WestJet with significant earnings growth and continued margin expansion. We are also pleased to report a 12.7 per cent return on invested capital which surpasses our 12 per cent target," said WestJet President and CEO Gregg Saretsky. "This quarter, we achieved our highest ever quarterly load factor and I thank WestJetters for taking care of this record number of guests and contributing to these strong financial results."
|Operating highlights (stated in Canadian dollars)|
|Q3 2012||Q3 2011||Change||
|Net earnings (millions)||$70.6||$39.3||79.9%||$181.4||$113.1||60.4%|
|Diluted earnings per share||$0.52||$0.28||85.7%||$1.33||$0.80||66.3%|
|Total revenues (millions)||$866.5||$775.3||11.8%||$2,566.8||$2,290.0||12.1%|
|Operating margin||12.5%||8.5%||4.0 pts.||11.1%||8.6%||2.5 pts.|
|ASMs (available seat miles) (billions)||5.498||5.389||2.0%||16.576||15.857||4.5%|
|RPMs (revenue passenger miles) (billions)||4.654||4.315||7.8%||13.770||12.697||8.4%|
|Load factor||84.6%||80.1%||4.5 pts.||83.1%||80.1%||3.0 pts.|
|Yield (revenue per revenue passenger mile) (cents)||18.62||17.97||3.6%||18.64||18.04||3.3%|
|RASM (revenue per available seat mile) (cents)||15.76||14.39||9.5%||15.48||14.44||7.2%|
|CASM (cost per available seat mile) (cents)||13.80||13.16||4.9%||13.77||13.20||4.3%|
|CASM, excluding fuel and employee profit share (cents)*||9.10||8.77||3.8%||9.06||8.79||3.1%|
|*Refer to reconciliations in the accompanying tables for further information regarding calculations.|
WestJet expects that RASM growth will continue in the fourth quarter at a slightly moderated pace compared to the 2012 year-to-date growth. "Our forward bookings indicate that demand for air travel remains healthy as we head into the winter season. We expect operating margin expansion in the fourth quarter and continued profitable growth into 2013," commented Gregg Saretsky.
The airline anticipates that fuel costs per litre will range between $0.91 and $0.93 in the fourth quarter of 2012. WestJet expects the increase in the fourth quarter CASM, excluding fuel and profit share, will be in line with the year-over-year increase reported in the third quarter of 2012. The projected full-year 2012 CASM, excluding fuel and profit share, remains unchanged from the previous estimate of an increase between three to 3.5 per cent.
WestJet recently announced that the name of its low-cost regional airline will be WestJet Encore and Calgary has been selected as the head office location for the new airline. The launch of WestJet Encore remains on track for the second half of 2013. The initial flight schedule is expected to be released in early 2013 which will include the first group of new communities the new airline plans to serve.
"Our strong brand epitomizes the very principles upon which WestJet was founded. This includes a low-cost focus and a caring guest experience which will be embodied in WestJet Encore," noted Gregg Saretsky. "We are excited to bring even more Canadians access to lower fares, stimulate demand for air travel in smaller communities and repeat our success in the regional space."
On November 6, 2012 WestJet's Board of Directors declared a cash dividend of $0.08 per common voting share and variable voting share for the fourth quarter of 2012, to be paid on December 31, 2012, to shareholders of record on December 12, 2012. 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 in the fourth quarter of 2012, fourth quarter operating margin expansion, continued profitable growth into 2013, fuel costs in the fourth quarter of 2012, CASM, excluding fuel and employee profit share, for the fourth quarter and full-year 2012, the launch of the regional airline in the second half of 2013 and the early 2013 release of WestJet Encore's flight schedule 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, realized jet fuel prices for October 2012 and forward-curve prices for November and December 2012, the expected exchange rate of the Canadian dollar to the U.S. dollar in the fourth quarter of 2012, 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 quarters. 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, 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 condensed consolidated interim financial statements and notes for the three and nine months ended September 30, 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, November 7, 2012, at 9 a.m. MT (11 a.m. ET). President and CEO Gregg Saretsky and Executive Vice-President of Finance and CFO Vito Culmone will discuss WestJet's third quarter 2012 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.
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 8,600 WestJetters across Canada. Operating a fleet of 99 Boeing Next-Generation 737 aircraft with future confirmed deliveries for an additional 36 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.
Condensed Consolidated Statement of Earnings
(Stated in thousands of Canadian dollars, except per share amounts)
Three months ended
Nine months ended
|Flight operations and navigational charges||92,643||89,063||275,629||259,628|
|Sales and distribution||78,057||74,026||236,573||223,996|
|Marketing, general and administration||51,367||44,444||148,930||135,421|
|Depreciation and amortization||46,935||43,624||139,226||130,439|
|Employee profit share||16,161||5,973||34,946||18,142|
|Earnings from operations||107,997||66,120||284,120||197,300|
|Non-operating income (expense):|
|Gain on foreign exchange||463||1,255||543||3,393|
|Gain (loss) on disposal of property and equipment||4||(20)||381||(11)|
|Loss on derivatives||-||(1,233)||(6,512)||(7,649)|
|Earnings before income tax||100,782||55,305||254,686||158,172|
|Income tax expense (benefit):|
|Earnings per share:|
Condensed Consolidated Statement of Financial Position
(Stated in thousands of Canadian dollars)
|September 30||December 31|
|Cash and cash equivalents||1,452,934||1,243,605|
|Prepaid expenses, deposits and other||67,585||66,936|
|Property and equipment||1,992,490||1,911,227|
|Liabilities and shareholders' equity|
|Accounts payable and accrued liabilities||482,722||307,279|
|Advance ticket sales||508,790||432,186|
|Non-refundable guest credits||43,029||43,485|
|Current portion of long-term debt||164,851||158,832|
|Current portion of obligations under finance leases||79||75|
|Obligations under finance leases||3,115||3,174|
|Deferred income tax||339,980||326,456|
|Total shareholders' equity||1,449,251||1,370,217|
|Total liabilities and shareholders' equity||3,769,359||3,473,678|
Condensed Consolidated Statement of Cash Flows
(Stated in thousands of Canadian dollars)
Three months ended
Nine months ended
|Items not involving cash:|
|Depreciation and amortization||46,935||43,624||139,226||130,439|
|Change in long-term maintenance provisions||8,298||8,037||26,567||22,541|
|Change in other liabilities||(178)||(183)||(390)||(115)|
|Amortization of hedge settlements||350||350||1,050||1,050|
|Loss on derivative instruments||-||1,233||6,512||7,649|
|(Gain) loss on disposal of property and|
|Share-based payment expense||3,104||2,903||9,694||10,015|
|Deferred income tax expense||13,394||16,260||15,662||44,092|
|Unrealized foreign exchange (gain) loss||(251)||(696)||(2,091)||1,387|
|Change in non-cash working capital||155,747||76,596||221,699||122,674|
|Change in restricted cash||(18,712)||(16,686)||(301)||(13,889)|
|Purchase of shares pursuant to compensation plans||-||-||(1,306)||-|
|Change in other assets||(1,568)||(1,866)||(5,595)||(5,328)|
|Cash taxes received (paid)||75||1,183||(731)||417|
|Cash interest received||4,580||4,516||13,318||10,574|
|Other property and equipment and intangible|
|Increase in long-term debt||-||-||72,995||-|
|Repayment of long-term debt||(41,191)||(46,158)||(121,273)||(137,204)|
|Decrease in obligations under finance leases||(19)||(18)||(56)||(90)|
|Issuance of shares pursuant to stock option plan||52||34||162||34|
|Cash interest paid||(10,746)||(12,630)||(32,877)||(39,634)|
|Change in non-cash working capital||(1,504)||(2,054)||(4,367)||261|
|Cash flow from operating, investing and financing|
|Effect of foreign exchange on cash and cash|
|Net change in cash and cash equivalents||188,716||87,375||209,329||118,303|
|Cash and cash equivalents, beginning of period||1,264,218||1,190,244||1,243,605||1,159,316|
|Cash and cash equivalents, end of period||1,452,934||1,277,619||1,452,934||1,277,619|
CASM, excluding fuel and employee profit share
(Stated in thousands of Canadian dollars, except percentage, mile and per unit data)
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 September 30||Nine months September 30|
|CASM, excluding fuel and|
|employee profit share|
|Aircraft fuel expense||(241,837)||(230,764)||4.8%||(746,571)||(680,304)||9.7%|
|Employee profit share expense||(16,161)||(5,973)||170.6%||(34,946)||(18,142)||92.6%|
|Operating expenses, adjusted||500,542||472,428||6.0%||1,501,132||1,394,249||7.7%|
|CASM, excluding above items|
Return on invested capital (ROIC)
(Stated in thousands of Canadian dollars, except percentages)
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.
|Return on invested capital(i)|
|Earnings before income taxes||304,520||208,006||96,514|
|Implicit interest in operating leases(ii)||90,055||86,925||3,130|
|Average long-term debt(iii)||835,581||927,757||(92,176)|
|Average obligations under finance leases(iv)||3,231||3,303||(72)|
|Average shareholders' equity||1,395,935||1,337,225||58,710|
|Off-balance-sheet aircraft leases(v)||1,286,498||1,241,783||44,715|
|Return on invested capital||12.7%||10.1%||2.6 pts.|
|(i)||The trailing 12 months are used in the calculation of ROIC.|
|(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)||Average capital lease obligations include the current portion and long-term portion.|
|(v)||Off-balance-sheet aircraft leases are calculated by multiplying the trailing 12 months of aircraft leasing expense by 7.5. At September 30, 2012, the trailing 12 months of aircraft leasing costs totalled $171,533 (December 31, 2011 - $165,571).|
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