Achieves second highest ever first quarter
fully diluted earnings per share
Assigned investment
grade credit rating by Moody's Investors Services
CALGARY, May 3, 2016 /CNW/ - WestJet (TSX: WJA) today
announced its 44th consecutive profitable quarter, with
first quarter 2016 net earnings of $87.6
million, or $0.71 per diluted
share. This compares with the all-time high quarterly net earnings
of $140.7 million, or $1.09 per diluted share reported in the first
quarter of 2015. WestJet achieved an on-time performance rate of
83.0 per cent in the first quarter, a significant year-over-year
improvement of 5.0 percentage points. Based on the trailing twelve
months, the airline achieved a return on invested capital of 12.8
per cent, compared with the 15.3 per cent reported in the previous
quarter.
"Although we continue to feel the impact of economic weakness in
Alberta, the fundamentals of our
business remain strong as demonstrated by our recent assignment of
an investment grade credit rating by Moody's, and we are seeing
positive trends as a result of adjustments we have made to our
schedules and the strategic initiatives we are undertaking," said
WestJet President and CEO Gregg
Saretsky. "My thanks go out to our more than 11,000
WestJetters for continuing to provide our award-winning brand of
friendly caring service as we celebrate our 20th year of
operations."
Operating
highlights (stated in Canadian dollars)
|
|
Q1 2016
|
Q1 2015
|
Change
|
Net earnings
(millions)
|
$87.6
|
$140.7
|
(37.7%)
|
Diluted earnings per
share
|
$0.71
|
$1.09
|
(34.9%)
|
Total revenues
(millions)
|
$1,031.4
|
$1,083.5
|
(4.8%)
|
Operating
margin
|
12.0%
|
18.2%
|
(6.2 pts)
|
ASMs (available seat
miles) (billions)
|
7.294
|
6.819
|
7.0%
|
RPMs (revenue
passenger miles) (billions)
|
5.988
|
5.566
|
7.6%
|
Load
factor
|
82.1%
|
81.6%
|
0.5 pts
|
Segment
guests
|
5,325,106
|
4,914,579
|
8.4%
|
Yield (revenue per
revenue passenger mile) (cents)
|
17.22
|
19.47
|
(11.6%)
|
RASM (revenue per
available seat mile) (cents)
|
14.14
|
15.89
|
(11.0%)
|
CASM (cost per
available seat mile) (cents)
|
12.45
|
13.00
|
(4.2%)
|
CASM, excluding fuel
and employee profit share (cents)*
|
9.86
|
9.18
|
7.4%
|
*Refer to
reconciliations in the accompanying tables for further information
regarding calculations.
|
Credit ratings
WestJet recently announced that Moody's Investors Services has
assigned it an investment grade 'Baa2' senior unsecured issuer
rating and a 'Baa2' senior unsecured notes rating with a stable
outlook. This is the second credit rating agency to assign WestJet
with an investment grade corporate credit rating. In March,
Standard & Poor's confirmed WestJet's corporate credit rating
of 'BBB-' with a stable outlook.
Normal course issuer bid
Today, WestJet
also announced intention, upon the expiry of the 12-month period of
its current normal course issuer bid, to make an application to the
Toronto Stock Exchange to initiate a further normal course issuer
bid to purchase up to 4,000,000 Common Voting and Variable Voting
Shares.
Dividend declaration
On May 2, 2016, WestJet's Board of Directors
declared a cash dividend of $0.14 per
common voting share and variable voting share for the second
quarter of 2016, to be paid on June 30,
2016, to shareholders of record on June 15, 2016. 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
intention upon the expiry of the 12-month period of its current
normal course issuer bid, to make an application to the Toronto
Stock Exchange to initiate a further normal course issuer bid 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 months ended March 31,
2016, 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 months ended March
31, 2016, 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, May 3, 2016, at 8 a.m.
MDT (10 a.m. EDT). President
and CEO Gregg Saretsky and Executive
Vice-President of Finance and CFO Harry
Taylor 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 westjet.com.
Annual general meeting (AGM)
WestJet
will hold its AGM today, May 3, 2016,
at 10 a.m. MDT (12 p.m. EDT) at WestJet's Calgary Campus at 22
Aerial Place NE. The AGM webcast will be available live in 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:
2015/2011/2010/2008/2007/2006/2005 Canada's Most Admired Corporate Culture
(Waterstone Human Capital)
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
|
For the three months
ended March 31
|
(Stated in thousands
of Canadian dollars, except per share amounts)
|
(Unaudited)
|
|
|
|
|
2016
|
2015
|
|
|
|
Revenue:
|
|
|
|
Guest
|
886,220
|
956,946
|
|
Other
|
145,224
|
126,551
|
|
1,031,444
|
1,083,497
|
Operating
expenses:
|
|
|
|
Aircraft
fuel
|
166,415
|
210,445
|
|
Salaries and
benefits
|
222,321
|
203,081
|
|
Rates and
fees
|
153,747
|
134,190
|
|
Sales and
marketing
|
89,077
|
82,723
|
|
Depreciation and
amortization
|
81,769
|
57,179
|
|
Maintenance
|
52,938
|
35,477
|
|
Aircraft
Leasing
|
46,307
|
47,655
|
|
Other
|
73,098
|
65,824
|
|
Employee profit
share
|
22,501
|
49,763
|
|
908,173
|
886,337
|
Earnings from
operations
|
123,271
|
197,160
|
|
|
|
Non-operating income
(expense):
|
|
|
|
Finance
income
|
3,746
|
4,219
|
|
Finance
costs
|
(5,161)
|
(13,921)
|
|
Gain (loss) on foreign
exchange
|
4,721
|
(627)
|
|
Gain (loss) on
disposal of property and equipment
|
(1,080)
|
5,618
|
|
Loss on
derivatives
|
(1,312)
|
-
|
|
914
|
(4,711)
|
Earnings before
income tax
|
124,185
|
192,449
|
|
|
|
Income tax expense
(recovery):
|
|
|
|
Current
|
39,485
|
39,576
|
|
Deferred
|
(2,944)
|
12,136
|
|
36,541
|
51,712
|
Net
earnings
|
87,644
|
140,737
|
|
|
|
Earnings per
share:
|
|
|
|
Basic
|
0.71
|
1.11
|
|
Diluted
|
0.71
|
1.09
|
Condensed
Consolidated Statement of Financial Position
|
(Stated in thousands
of Canadian dollars)
|
(Unaudited)
|
|
|
|
|
|
|
March
31 2016
|
December
31 2015
|
Assets
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
1,406,910
|
1,183,797
|
|
Restricted
cash
|
62,722
|
68,573
|
|
Accounts
receivable
|
79,905
|
82,136
|
|
Prepaid expenses,
deposits and other
|
102,708
|
131,747
|
|
Inventory
|
36,508
|
36,018
|
|
1,688,753
|
1,502,271
|
Non-current
assets:
|
|
|
|
Property and
equipment
|
3,619,606
|
3,473,262
|
|
Intangible
assets
|
63,097
|
63,549
|
|
Other
assets
|
77,912
|
89,942
|
Total
assets
|
5,449,368
|
5,129,024
|
|
|
|
Liabilities and
shareholders' equity
|
|
|
Current
liabilities:
|
|
|
|
Accounts payable and
accrued liabilities
|
520,747
|
545,438
|
|
Advance ticket
sales
|
602,159
|
620,216
|
|
Deferred Rewards
program
|
125,706
|
117,959
|
|
Non-refundable guest
credits
|
42,184
|
40,921
|
|
Current portion of
maintenance provisions
|
95,531
|
85,819
|
|
Current portion of
long-term debt
|
139,848
|
141,572
|
|
1,526,175
|
1,551,925
|
Non-current
liabilities:
|
|
|
|
Maintenance
provisions
|
235,053
|
243,214
|
|
Long-term
debt
|
1,347,104
|
1,033,261
|
|
Other
liabilities
|
16,357
|
13,603
|
|
Deferred income
tax
|
318,562
|
327,028
|
Total
liabilities
|
3,443,251
|
3,169,031
|
|
|
|
Shareholders'
equity:
|
|
|
|
Share
capital
|
579,115
|
582,796
|
|
Equity
reserves
|
86,911
|
82,713
|
|
Hedge
reserves
|
(12,786)
|
1,903
|
|
Retained
earnings
|
1,352,877
|
1,292,581
|
Total shareholders'
equity
|
2,006,117
|
1,959,993
|
|
|
|
Total liabilities and
shareholders' equity
|
5,449,368
|
5,129,024
|
|
|
|
|
Condensed
Consolidated Statement of Cash Flows
|
For the three months
ended March 31
|
(Stated in thousands
of Canadian dollars)
|
(Unaudited)
|
|
|
|
|
2016
|
2015
|
|
|
|
Operating
activities:
|
|
|
Net
earnings
|
87,644
|
140,737
|
Items not involving
cash:
|
|
|
|
Depreciation and
amortization
|
81,769
|
57,179
|
|
Change in maintenance
provisions
|
21,963
|
5,140
|
|
Amortization of
transaction costs
|
1,233
|
1,220
|
|
Amortization of hedge
settlements
|
320
|
350
|
|
Loss on
derivatives
|
1,312
|
-
|
|
(Gain) loss on
disposal of property and equipment
|
1,080
|
(5,618)
|
|
Share-based payment
expense
|
4,412
|
3,500
|
|
Deferred income tax
expense (recovery)
|
(2,944)
|
12,136
|
|
Unrealized foreign
exchange gain
|
(907)
|
(7,352)
|
Change in non-cash
working capital
|
14,107
|
63,819
|
Change in restricted
cash
|
5,851
|
4,045
|
Change in other
assets
|
7,120
|
(9,205)
|
Change in other
liabilities
|
(719)
|
(186)
|
Purchase of shares
pursuant to compensation plans
|
(146)
|
(7,962)
|
|
222,095
|
257,803
|
|
|
|
Investing
activities:
|
|
|
Aircraft
additions
|
(211,546)
|
(209,455)
|
Aircraft
disposals
|
203
|
47,434
|
Other property and
equipment and intangible additions
|
(17,399)
|
(15,647)
|
Changes in non-cash
working capital
|
(4,963)
|
5,116
|
|
(233,705)
|
(172,552)
|
|
|
|
Financing
activities:
|
|
|
Increase in long-term
debt
|
352,695
|
66,324
|
Repayment of
long-term debt
|
(41,612)
|
(42,486)
|
Shares
repurchased
|
(13,965)
|
(44,305)
|
Dividends
paid
|
(17,132)
|
(17,672)
|
Cash interest
paid
|
(16,354)
|
(15,339)
|
Change in non-cash
working capital
|
(13,124)
|
(3,370)
|
|
250,508
|
(56,848)
|
|
|
|
Cash flow from
operating, investing and financing activities
|
238,898
|
28,403
|
Effect of foreign
exchange on cash and cash equivalents
|
(15,785)
|
18,865
|
Net change in cash
and cash equivalents
|
223,113
|
47,268
|
|
|
|
Cash and cash
equivalents, beginning of period
|
1,183,797
|
1,358,071
|
|
|
|
Cash and cash
equivalents, end of period
|
1,406,910
|
1,405,339
|
|
|
|
Supplemental
disclosure of operating cash flows
|
|
|
Cash interest
received
|
3,579
|
4,642
|
Cash taxes paid,
net
|
44,939
|
(31,272)
|
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
|
|
2016
|
2015
|
Change
|
Operating
expenses
|
908,173
|
886,337
|
21,836
|
Aircraft fuel
expense
|
(166,415)
|
(210,445)
|
(44,030)
|
Employee profit share
expense
|
(22,501)
|
(49,763)
|
(27,262)
|
Operating expenses,
adjusted
|
719,257
|
626,129
|
93,128
|
ASMs
|
7,294,404,117
|
6,818,613,161
|
7.0%
|
CASM, excluding above
items (cents)
|
9.86
|
9.18
|
7.4%
|
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 2016
|
December 31
2015
|
Change
|
Earnings before
income taxes
|
451,994
|
520,258
|
(68,264)
|
Add:
|
|
|
|
|
Finance
costs
|
44,905
|
53,665
|
(8,760)
|
|
Implicit interest in
operating leases(i)
|
90,689
|
91,397
|
(708)
|
|
587,588
|
665,320
|
(77,732)
|
Invested
capital:
|
|
|
|
|
Average long-term
debt(ii)
|
1,350,395
|
1,181,748
|
168,647
|
|
Average shareholders'
equity
|
1,930,309
|
1,868,748
|
61,561
|
|
Off-balance-sheet
aircraft leases(iii)
|
1,295,558
|
1,305,668
|
(10,110)
|
|
4,576,262
|
4,356,164
|
220,098
|
Return on invested
capital
|
12.8%
|
15.3%
|
(2.5 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 March 31, 2016, the
trailing 12
months of aircraft leasing expenses totaled $172,741 (December 31,
2015 – $174,089).
|
SOURCE WestJet