- Published: 06 February 2013
- Written by Editor
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
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
|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|
|Yield (revenue per revenue passenger
|RASM (revenue per available seat mile)
|CASM (cost per available seat mile)
|CASM, excluding fuel and employee profit
*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.
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.
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.
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Consolidated Statement of Earnings
(Stated in thousands of Canadian dollars, except per share amounts)
|Three months ended
|Twelve months ended
|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|
|Employee profit share||11,639||5,662||46,585||23,804|
|Earnings from operations||91,600||59,251||375,720||256,551|
|Non-operating income (expense):|
|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)|
|Earnings before income tax||85,543||49,834||340,229||208,006|
|Income tax expense (benefit):|
|Earnings per share:|
Consolidated Statement of Financial Position
(Stated in thousands of Canadian dollars)
|Cash and cash equivalents||1,408,199||1,243,605|
|Prepaid expenses, deposits and other||101,802||66,936|
|Property and equipment||1,985,599||1,911,227|
|Liabilities and shareholders' equity|
|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|
|Obligations under finance leases||-||3,174|
|Deferred income tax||356,748||326,456|
|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)
|Three months ended
|Twelve months ended
|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|
|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)||-|
|Other property and equipment and intangible additions||(9,971)||(32,041)||(51,191)||(57,108)|
|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)|
|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)|
|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)
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|
|CASM, excluding fuel and employee profit share|
|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|
|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)
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|
|Earnings before income taxes||340,229||208,006||132,223|
|Implicit interest in operating leases(i)||91,041||86,925||4,116|
|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|
|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).
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