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WestJet reports record full-year earnings per share of $1.78, up 68 per cent

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WestJet reports record full-year earnings per share of $1.78, up 68 per cent WestJet

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
2012

Full-Year
2011

Change

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

Segment Guests

4,314,024

3,996,593

7.9%

17,423,352

16,040,682

8.6%

Yield (revenue per revenue passenger
mile) (cents)

19.16

18.64

2.8%

18.77

18.18

3.2%

RASM (revenue per available seat mile)
(cents)

15.68

14.67

6.9%

15.53

14.50

7.1%

CASM (cost per available seat mile)
(cents)

14.01

13.55

3.4%

13.83

13.29

4.1%

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

9.32

9.03

3.2%

9.12

8.85

3.1%

*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.

Dividend declaration

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.

About WestJet

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.

Connect with WestJet on Facebook at www.facebook.com/westjet
Follow WestJet on Twitter at www.twitter.com/westjet
Subscribe to WestJet on YouTube at www.youtube.com/westjet

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

2012

2011

2012

2011

Revenue:

Guest

783,750

711,246

3,133,492

2,790,299

Other

76,890

70,299

293,917

281,241

860,640

781,545

3,427,409

3,071,540

Expenses:

Aircraft fuel

246,216

235,574

992,787

915,878

Airport operations

118,051

107,295

454,114

421,561

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

Aircraft leasing

43,729

41,850

173,412

165,571

Inflight

40,199

36,144

156,411

139,478

Maintenance

35,590

42,816

154,406

146,260

Employee profit share

11,639

5,662

46,585

23,804

769,040

722,294

3,051,689

2,814,989

Earnings from operations

91,600

59,251

375,720

256,551

Non-operating income (expense):

Finance income

4,973

4,383

18,391

15,987

Finance costs

(11,636)

(14,446)

(48,900)

(60,911)

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)

(6,057)

(9,417)

(35,491)

(48,545)

Earnings before income tax

85,543

49,834

340,229

208,006

Income tax expense (benefit):

Current

8,654

274

66,230

1,236

Deferred

15,945

13,976

31,607

58,068

24,599

14,250

97,837

59,304

Net earnings

60,944

35,584

242,392

148,702

Earnings per share:

Basic

0.46

0.26

1.79

1.06

Diluted

0.46

0.26

1.78

1.06

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

December 31
2012

December 31
2011

Assets

Current assets:

Cash and cash equivalents

1,408,199

1,243,605

Restricted cash

51,623

48,341

Accounts receivable

37,576

34,122

Prepaid expenses, deposits and other

101,802

66,936

Inventory

35,595

31,695

1,634,795

1,424,699

Non-current assets:

Property and equipment

1,985,599

1,911,227

Intangible assets

50,808

33,793

Other assets

75,413

103,959

Total assets

3,746,615

3,473,678

Liabilities and shareholders' equity

Current liabilities:

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

1,187,853

941,857

Non-current liabilities:

Maintenance provisions

145,656

151,645

Long-term debt

574,139

669,880

Obligations under finance leases

-

3,174

Other liabilities

9,914

10,449

Deferred income tax

356,748

326,456

Total liabilities

2,274,310

2,103,461

Shareholders' equity:

Share capital

614,899

630,408

Equity reserves

69,856

74,184

Hedge reserves

(5,746)

(3,353)

Retained earnings

793,296

668,978

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)
(Unaudited)

Three months ended
December 31

Twelve months ended
December 31

2012

2011

2012

2011

Operating activities:

Net earnings

60,944

35,584

242,392

148,702

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

Finance income

(4,973)

(4,383)

(18,391)

(15,987)

Finance costs

11,636

14,446

48,900

60,911

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)

-

93,407

86,964

721,634

566,460

Investing activities:

Aircraft additions

(31,671)

(4,975)

(218,116)

(61,265)

Other property and equipment and intangible additions

(9,971)

(32,041)

(51,191)

(57,108)

(41,642)

(37,016)

(269,307)

(118,373)

Financing activities:

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)

Shares repurchased

(33,193)

-

(112,065)

(74,570)

Dividends paid

(10,577)

(6,914)

(37,549)

(35,000)

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)

(96,794)

(83,386)

(288,054)

(362,675)

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)
(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

2012

2011

Change

2012

2011

Change

CASM, excluding fuel and employee profit share

Operating expenses

769,040

722,294

46,746

3,051,689

2,814,989

236,700

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

ASMs

5,487,467,646

5,328,928,405

158,539,241

22,063,583,754

21,186,304,409

877,279,345

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)
(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 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.

2012

2011

Change

Return on invested capital

Earnings before income taxes

340,229

208,006

132,223

Add:

Finance costs

48,900

60,911

(12,011)

Implicit interest in operating leases(i)

91,041

86,925

4,116

480,170

355,842

124,328

Invested capital:

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

3,507,356

3,510,068

(2,712)

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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