Airline achieves record return on invested capital and its
sixth quarter of consecutive record net earnings reporting
$101.8 million, up 19.2 per cent year
over year
CALGARY,
Nov. 3, 2015 /PRNewswire/ - WestJet
(TSX: WJA) today announced its third quarter 2015 results, with
record net earnings of $101.8
million, or $0.82 per diluted
share, as compared with the adjusted net earnings1 of
$85.4 million, or $0.66 per diluted share reported in the third
quarter of 2014, up 19.2 per cent and 24.2 per cent, respectively,
notwithstanding the significant weakening of the Canadian dollar
year over year and the softening of the Western Canadian economy as
a result of the collapse in energy prices. WestJet achieved an
on-time performance rate of 86.0 per cent in the third quarter, a
year-over-year improvement of 4.1 percentage points, placing
WestJet as the top performing North American airline for the second
consecutive quarter. Based on the trailing twelve months, the
airline achieved a record return on invested capital of 16.1 per
cent, compared with the 16.0 per cent reported in the previous
quarter while our total assets surpassed $5
billion for the first time in WestJet's history.
"We are very pleased with another quarter of record
financial results, as we improved our return on invested capital
and operating margin while leading North American airlines in
on-time performance for a second straight quarter," said WestJet
President and CEO Gregg Saretsky.
"We are very excited about the next chapter of WestJet's evolution,
as we recently began flying wide-body aircraft in scheduled revenue
service for the first time and announced non-stop service to London
Gatwick from six Canadian cities beginning in the spring of 2016. I
want to thank our 11,000 WestJetters for their commitment to
delivering our award-winning brand of friendly caring service, and
I look forward to celebrating a record November profit share with
them later this month."
Operating highlights (stated in Canadian
dollars)
|
Q3 2015 |
Q3 2014 |
Change |
Year-to-date 2015 |
Year-to-date 2014 |
Change |
Net earnings (millions) |
$101.8 |
$52.2 |
95.0% |
$304.1 |
$193.2 |
57.4% |
Adjusted net earnings (millions)1 |
$101.8 |
$85.4 |
19.2% |
$304.1 |
$226.5 |
34.3% |
Diluted earnings per share |
$0.82 |
$0.40 |
105.0% |
$2.40 |
$1.50 |
60.0% |
Adjusted diluted earnings per
share1 |
$0.82 |
$0.66 |
24.2% |
$2.40 |
$1.76 |
36.4% |
Total revenue (millions) |
$1,045.1 |
$1,009.7 |
3.5% |
$3,070.6 |
$2,982.2 |
3.0% |
Operating margin |
15.3% |
12.5% |
2.8 pts |
14.9% |
11.3% |
3.6 pts |
ASMs (available seat miles) (billions) |
6.904 |
6.498 |
6.2% |
20.377 |
19.206 |
6.1% |
RPMs (revenue passenger miles) (billions) |
5.647 |
5.401 |
4.5% |
16.412 |
15.748 |
4.2% |
Load factor |
81.8% |
83.1% |
(1.3 pts) |
80.5% |
82.0% |
(1.5 pts) |
Segment guests |
5,517,289 |
5,246,819 |
5.2% |
15,388,356 |
14,825,828 |
3.8% |
Yield (revenue per revenue passenger mile)
(cents) |
18.51 |
18.70 |
(1.0%) |
18.71 |
18.94 |
(1.2%) |
RASM (revenue per available seat mile)
(cents) |
15.14 |
15.54 |
(2.6%) |
15.07 |
15.53 |
(3.0%) |
CASM (cost per available seat mile) (cents) |
12.83 |
13.60 |
(5.7%) |
12.83 |
13.78 |
(6.9%) |
CASM, excluding fuel and employee profit share
(cents)* |
9.35 |
8.90 |
5.1% |
9.27 |
9.13 |
1.5% |
*Refer to reconciliations in the accompanying tables for further
information regarding calculations.
Dividend declaration
On November 2, 2015, WestJet's Board
of Directors declared a cash dividend of $0.14 per common voting share and variable voting
share for the fourth quarter of 2015, to be paid on December 31, 2015, to shareholders of record on
December 16, 2015. 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 WestJet's expected
service to London Gatwick 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, 2015, 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, 2015, 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 3, 2015, at 8 a.m. MST (10 a.m.
EST). President and CEO Gregg
Saretsky and Executive Vice-President of Finance and CFO
Harry Taylor will discuss WestJet's
third quarter 2015 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
highest-rated airline for customer service, powered by an
award-winning culture of care and recognized as one of the
country's top employers. We offer scheduled service to 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:
2015/2014/2013/2012 Top three brands in Canada (Canadian Business magazine)
2015 Best Employers in Canada
(Aon Hewitt)
2015/2014/2013 WestJet RBC World Elite MasterCard ranked #1 in
Canada (MoneySense magazine)
2014/2013 WestJet RBC World Elite MasterCard ranked #1 in the
Canada's Choice ranking
(RewardsCanada.ca)
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)
2014/2013/2012/2011 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 |
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
Guest |
928,821 |
|
930,103 |
|
2,714,676 |
|
2,714,386 |
|
Other |
116,234 |
|
79,625 |
|
355,874 |
|
267,772 |
|
1,045,055 |
|
1,009,728 |
|
3,070,550 |
|
2,982,158 |
Operating expenses: |
|
|
|
|
|
|
|
|
Aircraft fuel |
206,924 |
|
286,817 |
|
632,317 |
|
846,514 |
|
Airport operations |
142,176 |
|
128,381 |
|
412,510 |
|
377,178 |
|
Flight operations and navigational charges |
126,821 |
|
112,886 |
|
372,560 |
|
339,616 |
|
Sales and distribution |
98,351 |
|
94,764 |
|
285,304 |
|
282,598 |
|
Depreciation and amortization |
69,739 |
|
56,620 |
|
189,684 |
|
172,044 |
|
Marketing, general and administration |
58,604 |
|
50,647 |
|
175,108 |
|
164,030 |
|
Maintenance |
62,347 |
|
48,062 |
|
171,599 |
|
151,612 |
|
Inflight |
47,029 |
|
43,600 |
|
150,098 |
|
130,410 |
|
Aircraft leasing |
40,572 |
|
43,082 |
|
132,208 |
|
136,904 |
|
Employee profit share |
32,974 |
|
19,039 |
|
92,096 |
|
45,388 |
|
885,537 |
|
883,898 |
|
2,613,484 |
|
2,646,294 |
Earnings from operations |
159,518 |
|
125,830 |
|
457,066 |
|
335,864 |
|
|
|
|
|
|
|
|
Non-operating income (expense): |
|
|
|
|
|
|
|
|
Finance income |
3,550 |
|
4,220 |
|
12,020 |
|
12,349 |
|
Finance cost |
(13,314) |
|
(14,588) |
|
(40,712) |
|
(37,646) |
|
Gain (loss) on foreign exchange |
(549) |
|
1,377 |
|
(236) |
|
407 |
|
Loss on disposal of property and equipment |
(2,766) |
|
(45,438) |
|
(364) |
|
(45,483) |
|
Loss on derivatives |
(144) |
|
− |
|
(144) |
|
− |
|
(13,223) |
|
(54,429) |
|
(29,436) |
|
(70,373) |
Earnings before income tax |
146,295 |
|
71,401 |
|
427,630 |
|
265,491 |
|
|
|
|
|
|
|
|
Income tax expense (recovery): |
|
|
|
|
|
|
|
|
Current |
39,645 |
|
18,829 |
|
106,066 |
|
86,298 |
|
Deferred |
4,847 |
|
381 |
|
17,470 |
|
(14,051) |
|
44,492 |
|
19,210 |
|
123,536 |
|
72,247 |
Net earnings |
101,803 |
|
52,191 |
|
304,094 |
|
193,244 |
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
Basic |
0.82 |
|
0.41 |
|
2.42 |
|
1.51 |
|
Diluted |
0.82 |
|
0.40 |
|
2.40 |
|
1.50 |
Condensed Consolidated Statement of Financial
Position
(Stated in thousands of Canadian dollars)
(Unaudited)
|
|
|
|
|
September 30
2015 |
|
December 31
2014 |
Assets |
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
1,419,679 |
|
1,358,071 |
|
Restricted cash |
57,315 |
|
58,149 |
|
Accounts receivable |
74,218 |
|
54,950 |
|
Prepaid expenses, deposits and other |
98,670 |
|
144,192 |
|
Inventory |
33,540 |
|
36,658 |
|
Assets held for sale |
− |
|
78,306 |
|
1,683,422 |
|
1,730,326 |
Non-current assets: |
|
|
|
|
Property and equipment |
3,231,294 |
|
2,793,194 |
|
Intangible assets |
61,975 |
|
60,623 |
|
Other assets |
88,513 |
|
62,290 |
Total assets |
5,065,204 |
|
4,646,433 |
|
|
|
|
Liabilities and shareholders'
equity |
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable and accrued liabilities |
546,417 |
|
415,562 |
|
Advance ticket sales |
624,509 |
|
575,781 |
|
Deferred Rewards program |
114,034 |
|
86,870 |
|
Non-refundable guest credits |
36,499 |
|
45,434 |
|
Current portion of maintenance provisions |
69,809 |
|
54,811 |
|
Current portion of long-term debt |
150,264 |
|
159,843 |
|
1,541,532 |
|
1,338,301 |
Non-current liabilities: |
|
|
|
|
Maintenance provisions |
233,527 |
|
191,768 |
|
Long-term debt |
1,047,696 |
|
1,028,820 |
|
Other liabilities |
17,141 |
|
13,150 |
|
Deferred income tax |
314,709 |
|
296,892 |
Total liabilities |
3,154,605 |
|
2,868,931 |
|
|
|
|
Shareholders' equity: |
|
|
|
|
Share capital |
583,478 |
|
603,287 |
|
Equity reserves |
78,828 |
|
75,094 |
|
Hedge reserves |
(1,147) |
|
(3,179) |
|
Retained earnings |
1,249,440 |
|
1,102,300 |
Total shareholders' equity |
1,910,599 |
|
1,777,502 |
|
|
|
|
Total liabilities and shareholders'
equity |
5,065,204 |
|
4,646,433 |
Condensed Consolidated Statement of Cash
Flows
(Stated in thousands of Canadian dollars)
(Unaudited)
|
|
|
|
|
|
|
|
|
Three months ended
September 30 |
|
Nine months ended
September 30 |
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
|
|
|
|
|
|
|
Operating activities: |
|
|
|
|
|
|
|
Net earnings |
101,803 |
|
52,191 |
|
304,094 |
|
193,244 |
Items not involving cash: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
69,739 |
|
56,620 |
|
189,684 |
|
172,044 |
|
Change in maintenance provisions |
13,612 |
|
9,444 |
|
21,303 |
|
19,526 |
|
Change in other liabilities |
(238) |
|
(144) |
|
45 |
|
(371) |
|
Amortization of hedge settlements |
350 |
|
350 |
|
1,050 |
|
1,050 |
|
Loss on derivatives |
144 |
|
− |
|
144 |
|
− |
|
Loss on disposal of property and equipment |
2,766 |
|
45,438 |
|
364 |
|
45,483 |
|
Share-based payment expense |
4,125 |
|
4,548 |
|
12,875 |
|
14,310 |
|
Deferred income tax recovery |
4,847 |
|
381 |
|
17,470 |
|
(14,051) |
|
Unrealized foreign exchange gain |
(9,772) |
|
(3,185) |
|
(21,541) |
|
(8,311) |
Change in non-cash working
capital |
161,447 |
|
102,934 |
|
212,392 |
|
21,937 |
Change in restricted cash |
(14,697) |
|
(19,152) |
|
835 |
|
4,250 |
Change in other assets |
(3,240) |
|
4,695 |
|
(9,132) |
|
(6,728) |
Purchase of shares pursuant to
compensation plans |
(601) |
|
(406) |
|
(13,672) |
|
(10,823) |
|
330,285 |
|
253,714 |
|
715,911 |
|
431,560 |
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
Aircraft additions |
(128,332) |
|
(128,017) |
|
(523,427) |
|
(466,094) |
Aircraft disposals |
565 |
|
− |
|
83,216 |
|
58 |
Other property and equipment and
intangible additions |
(22,242) |
|
(11,501) |
|
(49,075) |
|
(41,080) |
|
(150,009) |
|
(139,518) |
|
(489,286) |
|
(507,116) |
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
Increase in long-term debt |
17,510 |
|
416,192 |
|
135,380 |
|
597,378 |
Repayment of long-term debt |
(42,795) |
|
(167,531) |
|
(125,981) |
|
(263,332) |
Shares repurchased |
(47,897) |
|
− |
|
(119,803) |
|
(29,575) |
Dividends paid |
(17,258) |
|
(15,342) |
|
(52,465) |
|
(45,979) |
Issuance of shares pursuant to
compensation plans |
− |
|
− |
|
36 |
|
40 |
Cash interest paid |
(15,540) |
|
(10,284) |
|
(39,369) |
|
(30,086) |
Change in non-cash working
capital |
(3,708) |
|
2,429 |
|
(3,734) |
|
2,002 |
|
(109,688) |
|
225,464 |
|
(205,936) |
|
230,448 |
|
|
|
|
|
|
|
|
Cash flow from operating, investing
and financing activities |
70,588 |
|
339,660 |
|
20,689 |
|
154,892 |
Effect of foreign exchange on cash and
cash equivalents |
19,539 |
|
8,415 |
|
40,919 |
|
13,849 |
Net change in cash and cash
equivalents |
90,127 |
|
348,075 |
|
61,608 |
|
168,741 |
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning
of period |
1,329,552 |
|
1,076,671 |
|
1,358,071 |
|
1,256,005 |
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of
period |
1,419,679 |
|
1,424,746 |
|
1,419,679 |
|
1,424,746 |
|
|
|
|
|
|
|
|
Supplemental disclosure of operating cash
flows |
|
|
|
|
|
|
|
Cash interest received |
3,619 |
|
3,848 |
|
12,772 |
|
12,467 |
Cash taxes paid, net |
(27,781) |
|
(23,521) |
|
(89,085) |
|
(193,595) |
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) |
|
2015 |
|
2014 |
|
Change |
|
2015 |
|
2014 |
|
Change |
Operating expenses |
|
885,537 |
|
883,898 |
|
1,639 |
|
2,613,484 |
|
2,646,294 |
|
(32,810) |
Aircraft fuel expense |
|
(206,924) |
|
(286,817) |
|
79,893 |
|
(632,317) |
|
(846,514) |
|
214,197 |
Employee profit share expense |
|
(32,974) |
|
(19,039) |
|
(13,935) |
|
(92,096) |
|
(45,388) |
|
(46,708) |
Operating expenses, adjusted |
|
645,639 |
|
578,042 |
|
67,597 |
|
1,889,071 |
|
1,754,392 |
|
134,679 |
ASMs |
|
6,904,193,981 |
|
6,498,320,506 |
|
6.2% |
|
20,377,438,384 |
|
19,205,786,059 |
|
6.1% |
CASM, excluding above items
(cents) |
|
9.35 |
|
8.90 |
|
5.1% |
|
9.27 |
|
9.13 |
|
1.5% |
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
2015 |
|
December
31
2014 |
|
Change |
Earnings before income
taxes |
|
552,446 |
|
390,307 |
|
162,139 |
|
Special item(i) |
|
- |
|
45,459 |
|
(45,459) |
Adjusted earnings
before income taxes |
|
552,446 |
|
435,766 |
|
116,680 |
Add: |
|
|
|
|
|
|
|
Finance costs |
|
54,904 |
|
51,838 |
|
3,066 |
|
Implicit interest in operating
leases(ii) |
|
93,321 |
|
95,786 |
|
(2,465) |
|
|
700,671 |
|
583,390 |
|
117,281 |
Invested capital: |
|
|
|
|
|
|
|
Average long-term debt(iii) |
|
1,205,220 |
|
1,033,529 |
|
171,691 |
|
Average shareholders' equity |
|
1,809,238 |
|
1,683,671 |
|
125,567 |
|
Off-balance-sheet aircraft
leases(iv) |
|
1,333,155 |
|
1,368,375 |
|
(35,220) |
|
|
4,347,613 |
|
4,085,575 |
|
262,038 |
Return on invested
capital |
|
16.1% |
|
14.3% |
|
1.8 pts. |
|
|
(i) |
Pre-tax non-cash loss recorded in 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, 2015, the trailing 12 months of aircraft leasing
costs totaled $177,754 (December 31, 2014 - $182,450). |
|
Adjusted net earnings/Adjusted diluted earnings per
share
(Stated in thousands of Canadian dollars, except percentages)
(Unaudited)
WestJet excludes the effect of the after-tax non-cash loss
related to the 10 aircraft sold to Southwest being classified as
held for sale in the third quarter of 2014 from net earnings to
calculate an adjusted diluted earnings per share.
|
|
|
|
|
|
|
|
|
Three months ended
September 30 |
($ in thousands, except share and per
share data) |
|
2015 |
|
2014 |
|
Change |
Net earnings |
|
101,803 |
|
52,191 |
|
49,612 |
Adjusted for: |
|
|
|
|
|
|
|
Special item(i) |
|
― |
|
33,231 |
|
(33,231) |
Adjusted net earnings |
|
101,803 |
|
85,422 |
|
16,381 |
Weighted average
number of shares outstanding - diluted |
|
124,720,091 |
|
129,175,388 |
|
(4,455,297) |
Adjusted diluted earnings per
share |
|
0.82 |
|
0.66 |
|
24.2% |
|
|
|
|
|
Nine months ended
September 30 |
($ in thousands,
except share and per share data) |
|
2015 |
|
2014 |
|
Change |
Net earnings |
|
304,094 |
|
193,244 |
|
110,850 |
Adjusted for: |
|
|
|
|
|
|
|
Special item(i) |
|
― |
|
33,231 |
|
(33,231) |
Adjusted net earnings |
|
304,094 |
|
226,475 |
|
77,619 |
Weighted average
number of shares outstanding - diluted |
|
126,671,206 |
|
128,961,472 |
|
(2,290,266) |
Adjusted diluted earnings per
share |
|
2.40 |
|
1.76 |
|
36.4% |
(i) After-tax
non-cash loss recorded in the third quarter of 2014 associated with
the sale of 10 aircraft to Southwest. |
SOURCE WestJet