WestJet reports record full-year and fourth quarter results

Airline achieves record fourth quarter net earnings of $91 million, up 34 per cent year over year, its 39th consecutive profitable quarter
Announces a 17 per cent increase to its quarterly dividend

CALGARY, Feb. 3, 2015 /CNW/ - WestJet (TSX: WJA) today announced its fourth quarter and year-end results for 2014, with record adjusted full-year net earnings1 of $317.2 million, or $2.46 per diluted share. This compares with the net earnings of $268.7 million, or $2.03 per diluted share reported in the full-year 2013, up 18 per cent and 21 per cent, respectively. For the fourth quarter, the airline reported record diluted earnings per share of $0.70, up 35 per cent from $0.52 reported last year. These fourth quarter 2014 results include pre-tax incentive payments of $9.8 million associated with WestJet's new pilot agreement reached in December 2014 and a pre-tax non-cash loss of $2.5 million related to the previously disclosed sale of 10 of our oldest Boeing 737 aircraft.

This represents WestJet's 39th consecutive quarter of profitability and based on the trailing twelve months, the airline achieved a return on invested capital of 14.3 per cent, compared with the 13.8 per cent reported in the previous quarter, representing the 10th consecutive quarter in which WestJet exceeded its 12 per cent target.

"In 2014 we continued to execute on our profitable growth strategies which included the expansion of WestJet Encore, the further unbundling of our fares, the introduction of WestJet Rewards tiers, and the very successful launch of our first transatlantic service to Dublin, Ireland," said WestJet President and CEO Gregg Saretsky. "I want to thank our more than 10,000 WestJetters for all their contributions that made 2014 a record year, and I look forward to an exciting 2015 which will see us flying our own wide-body aircraft for the first time."

Operating highlights (stated in Canadian dollars)


Q4 2014

Q4 2013

Change

Full-year 2014

Full-year 2013

Change

Net earnings (millions)

$90.7

$67.8

33.8%

$284.0

$268.7

5.7%

Adjusted net earnings (millions)1

$90.7

$67.8

33.8%

$317.2

$268.7

18.0%

Diluted earnings per share

$0.70

$0.52

34.6%

$2.20

$2.03

8.4%

Adjusted diluted earnings per share1

$0.70

$0.52

34.6%

$2.46

$2.03

21.2%

Total revenues (millions)

$994.4

$926.4

7.3%

$3,976.6

$3,662.2

8.6%

Operating margin

14.0%

11.0%

3.0 pts

12.0%

10.9%

1.1 pts

ASMs (available seat miles) (billions)

6.378

5.942

7.3%

25.584

23.971

6.7%

RPMs (revenue passenger miles) (billions)

5.081

4.769

6.5%

20.829

19.591

6.3%

Load factor

79.7%

80.3%

(0.6 pts)

81.4%

81.7%

(0.3 pts)

Segment guests

4,826,149

4,557,606

5.9%

19,651,977

18,485,144

6.3%

Yield (revenue per revenue passenger mile) (cents)

19.57

19.43

0.7%

19.09

18.69

2.1%

RASM (revenue per available seat mile) (cents)

15.59

15.59

0.0%

15.54

15.28

1.7%

CASM (cost per available seat mile) (cents)

13.40

13.88

(3.5%)

13.68

13.61

0.5%

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

9.21

9.29

(0.9%)

9.15

9.06

1.0%



(1)

Full-year 2014 adjusted net earnings exclude an after-tax non-cash loss of $33.2 million recorded in the third quarter of 2014 associated
with the previously disclosed sale of 10 of WestJet's oldest Boeing 737 aircraft. Refer to reconciliations in the accompanying tables for further
information regarding calculations.

 

Dividend declaration
On February 2, 2015, WestJet's Board of Directors declared a cash dividend of $0.14 per common voting share and variable voting share for the first quarter of 2015, to be paid on March 31, 2015, to shareholders of record on March 18, 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.

"This marks the fifth dividend increase since we first introduced our quarterly dividend in 2010 and demonstrates both our confidence in WestJet's investment grade business model and our commitment to returning value to shareholders," added Gregg Saretsky.

Caution regarding forward-looking information
Certain information set forth in this news release 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.

(1)Non-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 year ended December 31, 2014, 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 year ended December 31, 2014, 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, February 3, 2015, at 8 a.m. MST (10 a.m. EST). President and CEO Gregg Saretsky and Executive Vice-President of Finance and CFO Vito Culmone will discuss WestJet's 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 westjet.com.

About WestJet
We are proud to be Canada's most-preferred 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 90 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 120 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 Best Employers in Canada (Aon Hewitt)
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 WestJet RBC MasterCard ranked #1 in Canada (Money Sense magazine and RewardsCanada.ca)
2013 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

 

Consolidated Statement of Earnings

(Stated in thousands of Canadian dollars, except per share amounts)

(Unaudited)





Three months ended

December 31

Twelve months ended

December 31


2014

2013

2014

2013






Revenue:






Guest

884,771

836,399

3,599,157

3,337,569


Other

109,623

90,018

377,395

324,628


994,394

926,417

3,976,552

3,662,197

Operating expenses:






Aircraft fuel

243,816

260,528

1,090,330

1,039,448


Airport operations

130,565

116,251

507,743

460,566


Flight operations and navigational charges

118,530

100,252

458,146

408,951


Sales and distribution

94,078

94,267

376,676

356,988


Depreciation and amortization

54,696

52,168

226,740

200,840


Marketing, general and administration

60,753

64,562

224,783

222,567


Maintenance

42,073

44,999

193,685

169,197


Aircraft leasing expense

45,546

42,462

182,450

175,646


Inflight expense

41,331

36,790

171,741

176,907


Employee profit share

23,399

12,463

68,787

51,577


854,787

824,742

3,501,081

3,262,687

Earnings from operations

139,607

101,675

475,471

399,510






Non-operating income (expense):






Finance income

4,721

4,522

17,070

17,848


Finance cost

(14,192)

(11,565)

(51,838)

(43,447)


Gain (loss) on foreign exchange

(2,471)

178

(2,064)

1,136


Loss on disposal of property and equipment

(2,849)

(637)

(48,332)

(2,962)


(14,791)

(7,502)

(85,164)

(27,425)

Earnings before income tax

124,816

94,173

390,307

372,085






Income tax expense (recovery):






Current

28,223

60,159

114,521

154,964


Deferred

5,880

(33,793)

(8,171)

(51,601)


34,103

26,366

106,350

103,363

Net earnings

90,713

67,807

283,957

268,722






Earnings per share:






Basic

0.71

0.52

2.22

2.05


Diluted

0.70

0.52

2.20

2.03

 

 

Consolidated Statement of Financial Position

(Stated in thousands of Canadian dollars)

(Unaudited)



December 31

2014

December 31

2013

Assets



Current assets:




Cash and cash equivalents

1,358,071

1,256,005


Restricted cash

58,149

58,106


Accounts receivable

54,950

42,164


Prepaid expenses, deposits and other

144,192

133,263


Inventory

36,658

36,722


Assets held for sale

78,306

-


1,730,326

1,526,260

Non-current assets:




Property and equipment

2,793,194

2,487,734


Intangible assets

60,623

58,691


Other assets

62,290

70,778

Total assets

4,646,433

4,143,463




Liabilities and shareholders' equity



Current liabilities:




Accounts payable and accrued liabilities

502,432

543,167


Advance ticket sales

575,781

551,022


Non-refundable guest credits

45,434

46,975


Current portion of maintenance provisions

54,811

76,105


Current portion of long-term debt

159,843

189,191


1,338,301

1,406,460

Non-current liabilities:




Maintenance provisions

191,768

142,411


Long-term debt

1,028,820

689,204


Other liabilities

13,150

8,834


Deferred income tax

296,892

306,714

Total liabilities

2,868,931

2,553,623




Shareholders' equity:




Share capital

603,287

603,861


Equity reserves

75,094

69,079


Hedge reserves

(3,179)

105


Retained earnings

1,102,300

916,795

Total shareholders' equity

1,777,502

1,589,840




Total liabilities and shareholders' equity

4,646,433

4,143,463

 

 


Consolidated Statement of Cash Flows

(Stated in thousands of Canadian dollars)

(Unaudited)



Three months ended December 31

Twelve months ended December 31


2014

2013

2014

2013






Operating activities:





Net earnings

90,713

67,807

283,957

268,722

Items not involving cash:






Depreciation and amortization

54,696

52,168

226,740

200,840


Change in maintenance provisions

(11,113)

7,788

8,413

26,610


Change in other liabilities

(158)

(203)

(529)

1,782


Amortization of hedge settlements

350

350

1,400

1,400


Loss on disposal of property and equipment

2,849

637

48,332

2,962


Share-based payment expense

4,316

3,885

18,626

14,533


Deferred income tax expense/(recovery)

5,880

(33,793)

(8,171)

(51,601)


Unrealized foreign exchange gain

(2,323)

(3,477)

(10,634)

(12,020)

Change in non-cash working capital

5,530

88,053

208,595

298,697

Change in restricted cash

(4,293)

(1,274)

(43)

(6,484)

Change in other assets

(105)

499

(6,833)

(1,374)

Cash interest received

4,776

4,914

17,243

19,079

Cash taxes paid

(10,894)

(26,860)

(204,489)

(147,868)

Purchase of shares pursuant to compensation plans

(166)

(481)

(10,989)

(7,131)


140,058

160,013

571,618

608,147






Investing activities:





Aircraft additions

(228,106)

(167,023)

(694,200)

(639,734)

Aircraft disposals

75,597

(9)

75,655

142

Other property and equipment and intangible additions

(5,506)

(16,421)

(46,586)

(75,580)


(158,015)

(183,453)

(665,131)

(715,172)






Financing activities:





Increase in long-term debt

16,507

140,710

613,885

318,075

Repayment of long-term debt

(40,241)

(49,001)

(303,573)

(178,647)

Shares repurchased

(9,856)

(29,565)

(39,431)

(112,362)

Dividends paid

(15,334)

(12,861)

(61,313)

(52,188)

Issuance of shares pursuant to compensation plans

56

37

96

106

Cash interest paid

(9,421)

(9,501)

(39,507)

(36,677)

Change in non-cash working capital

2,864

229

4,866

146


(55,425)

40,048

175,023

(61,547)






Cash flow from operating, investing and financing activities

(73,382)

16,608

81,510

(168,572)

Effect of foreign exchange on cash and cash equivalents

6,707

6,434

20,556

16,378

Net change in cash and cash equivalents

(66,675)

23,042

102,066

(152,194)






Cash and cash equivalents, beginning of period

1,424,746

1,232,963

1,256,005

1,408,199






Cash and cash equivalents, end of period

1,358,071

1,256,005

1,358,071

1,256,005

 

 

Adjusted net earnings/Adjusted diluted earnings per share

(Stated in thousands of Canadian dollars, except per share data)

(Unaudited)


($ in thousands, except share and per share data)

December 31 2014

December 31 2013

Change

Net earnings

283,957

268,722

15,235

Adjusted for:





Special item(i)

33,231

-

33,231

Adjusted net earnings

317,188

268,722

48,466

Weighted average number of shares outstanding - diluted

129,142,940

132,074,002

(2,931,062)

Adjusted diluted earnings per share

2.46

2.03

21.2%

(i)     

After-tax non-cash loss recorded in the third quarter of 2014 associated with the sale of 10 aircraft to Southwest.

 

 

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 December 31

Twelve months ended December 31

($ in thousands)

2014

2013

Change

2014

2013

Change

Operating expenses

854,787

824,742

30,045

3,501,081

3,262,687

238,394

Aircraft fuel expense

(243,816)

(260,528)

16,712

(1,090,330)

(1,039,448)

(50,882)

Employee profit share expense

(23,399)

(12,463)

(10,936)

(68,787)

(51,577)

(17,210)

Operating expenses, adjusted

587,572

551,751

35,821

2,341,964

2,171,662

170,302

ASMs

6,378,247,018

5,942,032,692

7.3%

25,584,033,077

23,970,921,260

6.7%

CASM, excluding above items (cents)

9.21

9.29

(0.9%)

9.15

9.06

1.0%








 

 

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.


($ in thousands)

December 31

2014

December 31 
2013

Change

Earnings before income taxes

390,307

372,085

18,222


Special item(i)

45,459

-

45,459

Adjusted earnings before income taxes

435,766

372,085

63,681

Add:





Finance costs

51,838

43,447

8,391


Implicit interest in operating leases(ii)

95,786

92,214

3,572


583,390

507,746

75,644

Invested capital:





Average long-term debt(iii)

1,033,529

808,722

224,807


Average shareholders' equity

1,683,671

1,531,072

152,599


Off-balance-sheet aircraft leases(iv)

1,368,375

1,317,345

51,030


4,085,575

3,657,139

428,436

Return on invested capital

14.3%

13.9%

0.4 pts.

(i)   

Pre-tax non-cash loss recorded in the third quarter of 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 December 31, 2014, the trailing 12 months of aircraft leasing costs totaled $182,450 (2013 – $175,646).



 

SOURCE WestJet

For further information: WestJet Media Relations, 1-888-WJ-4-NEWS (1-888-954-6397), Email: media@westjet.com; WestJet Investor Relations, 1-877-493-7853, Email: investor_relations@westjet.com; Website: www.westjet.com

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