WestJet reports second quarter net earnings of $48 million, up 32 per cent

News provided by

WestJet

Aug 01, 2017, 06:30 ET

  • Reports diluted EPS of $0.41 cents, up 36.7 per cent
  • Achieves second best second quarter EPS in its 21 year history
  • Attains its 49th consecutive profitable quarter
  • Delivers a record second quarter load factor
  • Flies a record 5.9 million guests in the second quarter
  • Announces a normal course issuer bid

CALGARY, Aug. 1, 2017 /PRNewswire/ - WestJet (TSX: WJA) today announced its second quarter results for 2017, with net earnings of $48.4 million, or $0.41 per fully diluted share, as compared with the net earnings of $36.7 million, or $0.30 per fully diluted share reported in the second quarter of 2016, up 32.0 per cent and 36.7 per cent, respectively. WestJet achieved its 49th consecutive quarter of profitability and flew a record 5.9 million guests. Based on the trailing twelve months, the airline achieved a return on invested capital of 9.8 per cent, compared with the 10.0 per cent reported in the previous quarter.

"I am very pleased with the positive momentum we are seeing in our business as we reported second quarter earnings growth, margin expansion, double digit revenue growth, and for the second consecutive quarter positive year over year RASM growth. Clearly our business fundamentals are strong and we are confident that the strategic initiatives we are pursuing position us for continued profitable growth," said WestJet President and CEO Gregg Saretsky. "These results are a great start to our November profit share, thanks to the commitment and passion of our more than 12,000 WestJetters who continue to deliver our brand of friendly caring service."

Operating highlights (stated in Canadian dollars)

Q2 2017

Q2 2016

Change

Year-to-
date 2017

Year-to-
date 2016

Change

Net earnings (millions)

$48.4

$36.7

32.0%

$96.7

$124.3

(22.2%)

Diluted earnings per share

$0.41

$0.30

36.7%

$0.82

$1.02

(19.6%)

Total revenue (millions)

$1,055.0

$949.3

11.1%

$2,169.3

$1,980.8

9.5%

Operating margin

7.4%

6.5%

0.9 pts

7.3%

9.3%

(2.0 pts)

ASMs (available seat miles) (billions)

7.564

7.116

6.3%

15.263

14.410

5.9%

RPMs (revenue passenger miles) (billions)

6.260

5.749

8.9%

12.653

11.737

7.8%

Load factor

82.8%

80.8%

2.0 pts

82.9%

81.5%

1.4 pts

Segment guests

5,908,876

5,301,338

11.5%

11,596,535

10,626,444

9.1%

Yield (revenue per revenue passenger mile) (cents)

16.85

16.51

2.1%

17.14

16.88

1.5%

RASM (revenue per available seat mile) (cents)

13.95

13.34

4.6%

14.21

13.75

3.3%

CASM (cost per available seat mile) (cents)

12.91

12.48

3.4%

13.18

12.46

5.8%

Fuel costs per litre (cents)

62

53

17.0%

63

50

26.0%

CASM, excluding fuel and employee profit share (cents)*

9.84

9.93

(0.9%)

10.06

9.89

1.7%

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

Normal course issuer bid
Today, WestJet also announced that the Toronto Stock Exchange has accepted the airline's notice to make a normal course issuer bid for five per cent of the currently issued and outstanding shares.

Dividend declaration
On July 31, 2017, WestJet's Board of Directors declared a cash dividend of $0.14 per common voting share and variable voting share for the third quarter of 2017, to be paid on September 29, 2017, to shareholders of record on September 13, 2017. 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 our confidence that the strategic initiatives we are pursuing position us for continued profitable growth is forward-looking information within the meaning of applicable 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 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 and six months ended June 30, 2017, 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 consolidated financial statements and notes for the three and six months ended June 30, 2017, 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, August 1, 2017, at 8 a.m. MT (10 a.m. ET). President and CEO Gregg Saretsky and Executive Vice-President of Finance and CFO Harry Taylor will discuss WestJet's second 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 westjet.com.

About WestJet
We are proud to be Canada's most trusted 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 100 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 150 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 westjet.com. 

Recent recognition includes:
2017 Best Airline in Canada and Travellers' Choice Winner Mid-Sized and Low-Cost Airlines – North America (TripAdvisor Travellers' Choice awards for airlines)
2016 Canada's Most Trusted Airline (Gustavson School of Business at the University of Victoria)
2016 Canada's most reputable company for Corporate Social Responsibility (Reputation Institute)
2016/2015/2014/2013/2012 Ranked top three for Canadian Brands (Canadian Business Magazine)
2016/2015/2014/2013 WestJet RBC World Elite MasterCard ranked #1 in Canada (MoneySense magazine)
2015/2011/2010/2008/2007/2006/2005 Canada's Most Admired Corporate Culture (Waterstone Human Capital)
2015 Best Employers in Canada (Aon Hewitt)

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

June 30

Six months ended

June 30

2017

2016

2017

2016





Revenue:




Guest

897,863

814,402

1,832,635

1,700,622

Other

157,163

134,911

336,664

280,136

1,055,026

949,313

2,169,299

1,980,758

Operating expenses:




Aircraft fuel

224,935

182,583

460,451

348,998

Salaries and benefits

228,710

218,250

459,725

440,573

Rates and fees

163,863

152,470

326,126

306,214

Depreciation and amortization

99,342

86,821

196,965

168,590

Sales and marketing

88,776

84,118

189,114

173,195

Maintenance

46,553

50,345

113,501

103,283

Aircraft leasing

40,565

44,973

84,907

91,280

Other

76,486

69,519

164,660

142,617

Employee profit share

7,755

(1,192)

14,782

21,310

976,985

887,887

2,010,231

1,796,060

Earnings from operations

78,041

61,426

159,068

184,698





Non-operating income (expense):




Finance income

4,448

3,547

8,647

7,294

Finance cost

(13,154)

(12,793)

(28,855)

(17,955)

Gain (loss) on foreign exchange

(4,230)

1,574

(4,513)

6,295

Gain (loss) on disposal of property and equipment

2,549

(1,782)

3,917

(2,862)

Gain (loss) on derivatives

353

(249)

(1,964)

(1,561)

(10,034)

(9,703)

(22,768)

(8,789)

Earnings before income tax

68,007

51,723

136,300

175,909





Income tax expense (recovery):




Current

9,311

14,945

20,052

54,430

Deferred

10,329

124

19,571

(2,820)

19,640

15,069

39,623

51,610

Net earnings

48,367

36,654

96,677

124,299





Earnings per share:






Basic

0.41

0.30

0.83

1.02

Diluted

0.41

0.30

0.82

1.02

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


June 30

2017

December 31

2016

Assets

Current assets:


Cash and cash equivalents

1,265,610

1,520,822

Marketable securities

147,251

-


Total cash, cash equivalents and marketable securities

1,412,861

1,520,822

Restricted cash

72,650

102,649

Accounts receivable

130,439

127,785

Prepaid expenses, deposits and other

155,630

181,070

Inventory

33,355

33,535

1,804,935

1,965,861

Non-current assets:


Property and equipment

4,354,157

4,036,880

Intangible assets

63,647

66,187

Other assets

82,503

95,368

Total assets

6,305,242

6,164,296



Liabilities and shareholders' equity

Current liabilities:


Accounts payable and accrued liabilities

427,261

547,490

Advance ticket sales

747,434

626,635

Deferred Rewards program

183,402

155,567

Non-refundable guest credits

35,903

42,942

Current portion of maintenance provisions

99,461

103,571

Current portion of long-term debt

155,066

145,128

1,648,527

1,621,333

Non-current liabilities:


Maintenance provisions

267,761

262,663

Long-term debt

1,923,020

1,901,530

Other liabilities

7,827

8,374

Deferred income tax

329,835

309,694

Total liabilities

4,176,970

4,103,594



Shareholders' equity:


Share capital

557,122

555,716

Equity reserves

97,145

93,039

Hedge reserves

(9,488)

(11,003)

Retained earnings

1,483,493

1,422,950

Total shareholders' equity

2,128,272

2,060,702

Total liabilities and shareholders' equity

6,305,242

6,164,296

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


Three months ended

June 30

Six months ended

June 30

2017

2016

2017

2016





Operating activities:



Net earnings

48,367

36,654

96,677

124,299

Items not involving cash:




Depreciation and amortization

99,342

86,821

196,965

168,590

Change in maintenance provisions

8,658

19,760

43,970

42,085

Amortization of transaction costs

1,128

929

2,554

2,162

Amortization of hedge settlements

-

247

-

567

(Gain) loss on derivatives

(372)

249

4,156

1,561

(Gain) loss on disposal of property and equipment

(2,549)

1,782

(3,917)

2,862

Share-based payment expense

5,704

6,958

9,849

11,370

Deferred income tax expense (recovery)

10,329

124

19,571

(2,820)

Unrealized foreign exchange (gain) loss

2,968

(5,276)

576

(6,183)

Change in non-cash working capital

19,776

9,302

77,276

23,409

Change in restricted cash

18,950

17,215

30,000

23,066

Change in other assets

(3,716)

(321)

(696)

6,799

Change in other liabilities

(72)

(258)

895

(977)

Purchase of shares pursuant to compensation plans

(3,338)

(6,237)

(3,517)

(6,383)

Maintenance provision settlements

(23,287)

(23,275)

(31,227)

(23,637)

181,888

144,674

443,132

366,770





Investing activities:



Aircraft additions

(336,874)

(256,701)

(491,996)

(468,247)

Aircraft disposals

5,656

(130)

7,841

73

Other property and equipment and intangible additions

(14,313)

(19,260)

(23,631)

(36,659)

Purchase of marketable securities

(50,271)

-

(150,018)

-

Change in non-cash working capital

11,833

(24,264)

(6,631)

(29,227)

(383,969)

(300,355)

(664,435)

(534,060)





Financing activities:



Increase in long-term debt

84,245

562,096

125,953

914,791

Repayment of long-term debt

(39,375)

(43,492)

(77,882)

(85,104)

Shares repurchased

(4,214)

(52,968)

(4,214)

(66,933)

Dividends paid

(16,387)

(16,782)

(32,795)

(33,914)

Cash interest paid

(16,889)

(8,361)

(31,367)

(24,715)

Change in non-cash working capital

(4,827)

2,804

(6,393)

(10,320)

2,553

443,297

(26,698)

693,805





Cash flow from operating, investing and financing activities

(199,528)

287,616

(248,001)

526,515

Effect of foreign exchange on cash and cash equivalents

(6,490)

3,722

(7,211)

(12,064)

Net change in cash and cash equivalents

(206,018)

291,338

(255,212)

514,451





Cash and cash equivalents, beginning of period

1,471,628

1,406,910

1,520,822

1,183,797





Cash and cash equivalents, end of period

1,265,610

1,698,248

1,265,610

1,698,248





Supplemental disclosure of operating cash flows



Cash interest received

4,239

3,520

8,314

7,099

Cash taxes paid, net

(31,571)

(29,533)

(76,553)

(74,472)

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 June 30

Six months ended June 30

($ in thousands)

2017

2016

Change

2017

2016

Change

Operating expenses

976,985

887,887

89,098

2,010,231

1,796,060

214,171

Aircraft fuel expense

(224,935)

(182,583)

(42,352)

(460,451)

(348,998)

(111,453)

Employee profit share expense

(7,755)

1,192

(8,947)

(14,782)

(21,310)

6,528

Operating expenses, adjusted

744,295

706,496

37,799

1,534,998

1,425,752

109,246

ASMs

7,563,808,125

7,115,577,504

6.3%

15,262,870,816

14,409,981,621

5.9%

CASM, excluding above items (cents)

9.84

9.93

(0.9%)

10.06

9.89

1.7%

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.



June 30

2017

June 30
2016

Change

Earnings before income taxes

376,624

414,831

(38,207)

Add:



Finance costs

59,975

44,221

15,754

Implicit interest in operating leases(i)

90,337

91,210

(873)

Return

526,936

550,262

(23,326)

Invested capital:



Average long-term debt(ii)

2,044,618

1,617,149

427,469

Average shareholders' equity

2,049,543

1,919,542

130,001

Off-balance-sheet aircraft leases(iii)

1,290,533

1,302,998

(12,465)

 Invested capital

5,384,694

4,839,689

545,005

Return on invested capital

9.8%

11.4%

(1.6 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)

Off-balance-sheet aircraft leases are calculated by multiplying the trailing 12 months of aircraft leasing expense by 7.5. At June 30, 2017, the trailing 12 months of aircraft leasing costs totaled $172,071 (June 30, 2016 – $173,733).

SOURCE WestJet

Related Links

http://www.westjet.com

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