WestJet reports record full-year results

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February 2, 2016 6:30 AM UTC

Airline achieves record full-year net earnings of $368 million, up 16 per cent year over yearAnnounces plans to increase normal course issuer bid by 2 million shares

CALGARY, Feb. 2, 2016 /CNW/ - WestJet (TSX: WJA) today announced its fourth quarter and year-end results for 2015, with record full-year net earnings of $367.5 million, or $2.92 per diluted share. This compares with the adjusted net earnings1 of $317.2 million, or $2.46 per diluted share reported in the full-year 2014, up 16 per cent and 19 per cent, respectively. For the fourth quarter, the airline reported diluted earnings per share of $0.51, down 27 per cent from $0.70 reported last year. These fourth quarter 2015 results include a pre-tax loss on foreign exchange of $10.1 million.

This represents WestJet's 43rd consecutive quarter of profitability and based on the trailing twelve months, the airline achieved a return on invested capital of 15.3 per cent, compared with the 16.1 per cent reported in the previous quarter, and within WestJet's target range of 13 to 16 per cent.

"Today we reported the third best fourth quarter in WestJet's history to complete a record year in 2015. Notwithstanding the impact that recent economic weakness in Alberta has had on our results, our decision to increase our normal course issuer bid demonstrates our confidence in WestJet's proven business model and the financial strength of our airline," said WestJet President and CEO Gregg Saretsky. "My thanks go out to our more than 11,000 WestJetters for all their hard work in driving our continuing success as we look forward to celebrating WestJet's 20th birthday in 2016, a year which will see the launch of our exciting new wide-body service to London Gatwick."

Operating highlights (stated in Canadian dollars)

Q4 2015

Q4 2014

Change

Full-year2015

Full-year2014

Change

Net earnings (millions)

$63.4

$90.7

(30.1%)

$367.5

$284.0

29.4%

Adjusted net earnings (millions)1

$63.4

$90.7

(30.1%)

$367.5

$317.2

15.9%

Diluted earnings per share

$0.51

$0.70

(27.1%)

$2.92

$2.20

32.7%

Adjusted diluted earnings per share1

$0.51

$0.70

(27.1%)

$2.92

$2.46

18.7%

Total revenues (millions)

$958.7

$994.4

(3.6%)

$4,029.3

$3,976.6

1.3%

Operating margin

11.8%

14.0%

(2.2 pts)

14.1%

12.0%

2.1 pts

ASMs (available seat miles) (billions)

6.525

6.378

2.3%

26.902

25.584

5.2%

RPMs (revenue passenger miles) (billions)

5.114

5.081

0.6%

21.526

20.829

3.3%

Load factor

78.4%

79.7%

(1.3 pts)

80.0%

81.4%

(1.4 pts)

Segment guests

4,893,020

4,826,149

1.4%

20,281,376

19,651,977

3.2%

Yield (revenue per revenue passenger mile)(cents)

18.75

19.57

(4.2%)

18.72

19.09

(1.9%)

RASM (revenue per available seat mile)(cents)

14.69

15.59

(5.8%)

14.98

15.54

(3.6%)

CASM (cost per available seat mile)(cents)

12.97

13.40

(3.2%)

12.86

13.68

(6.0%)

CASM, excluding fuel and employee profitshare (cents)*

10.04

9.21

9.0%

9.46

9.15

3.4%

(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.

Normal course issuer bidToday, WestJet also announced that the Toronto Stock Exchange has approved WestJet's amendment to its existing normal course issuer bid to increase the maximum number of shares the Company is authorized to purchase from 4 million shares to 6 million shares during the period of May 13, 2015 to May 12, 2016.

Dividend declarationOn February 1, 2016, 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 2016, to be paid on March 31, 2016, to shareholders of record on March 16, 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 informationCertain 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 measuresThis news release contains disclosure of 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, 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 consolidated financial statements and notes for the year ended December 31, 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 callWestJet will hold its quarterly analysts' conference call today, February 2, 2016, 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 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 WestJetWe 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:2015/2011/2008-2005 Canada's 10 Most-Admired Corporate Cultures (Waterstone Human Capital)2015/2014/2013/2012 Canada's Most Attractive Employer (Randstad)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)2015/2014/2013 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)2014/2013/2012/2011 Highest equity score: airline, vacation package supplier brands (Harris/Decima EquiTrend Study)

Connect with WestJet on Facebook at facebook.com/westjetFollow WestJet on Twitter at twitter.com/westjetSubscribe to WestJet on YouTube at youtube.com/westjetRead the WestJet blog at blog.westjet.com

Website: www.westjet.com

Consolidated Statement of Earnings

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

(Unaudited)

Three months ended 

Twelve months ended

December 31

December 31

2015

2014

2015

2014

Revenue:

Guest 

842,546

884,771

3,557,222

3,599,157

Other 

116,169

109,623

472,043

377,395

958,715

994,394

4,029,265

3,976,552

Operating expenses:

Aircraft fuel

182,181

243,816

814,498

1,090,330

Salaries and benefits

198,310

184,210

801,715

724,941

Rates and fees

139,534

128,289

562,745

520,340

Sales and marketing

84,009

85,852

325,127

325,370

Depreciation and amortization

75,237

54,696

264,921

226,740

Aircraft leasing

41,881

45,546

174,089

182,450

Maintenance

47,160

24,927

164,305

126,761

Other

68,847

64,052

251,147

235,362

Employee profit share

8,869

23,399

100,965

68,787

846,028

854,787

3,459,512

3,501,081

Earnings from operations

112,687

139,607

569,753

475,471

Non-operating income (expense):

Finance income

3,509

4,721

15,529

17,070

Finance cost

(12,953)

(14,192)

(53,665)

(51,838)

Gain (loss) on foreign exchange

(10,090)

(2,471)

(10,326)

(2,064)

Loss on disposal of property and equipment

(1,496)

(2,849)

(1,860)

(48,332)

Gain on derivatives

971

-

827

-

(20,059)

(14,791)

(49,495)

(85,164)

Earnings before income tax

92,628

124,816

520,258

390,307

Income tax expense (recovery):

Current

17,873

28,223

123,939

114,521

Deferred 

11,319

5,880

28,789

(8,171)

29,192

34,103

152,728

106,350

Net earnings

63,436

90,713

367,530

283,957

Earnings per share: 

Basic 

0.51

0.71

2.94

2.22

Diluted

0.51

0.70

2.92

2.20

Consolidated Statement of Financial Position

(Stated in thousands of Canadian dollars)

(Unaudited)

December 31

December 31

2015

2014

Assets

Current assets:

Cash and cash equivalents

1,183,797

1,358,071

Restricted cash 

68,573

58,149

Accounts receivable

82,136

54,950

Prepaid expenses, deposits and other

131,747

144,192

Inventory 

36,018

36,658

Assets held for sale

-

78,306

1,502,271

1,730,326

Non-current assets:

Property and equipment

3,473,262

2,793,194

Intangible assets

63,549

60,623

Other assets

89,942

62,290

Total assets

5,129,024

4,646,433

Liabilities and shareholders' equity

Current liabilities:

Accounts payable and accrued liabilities 

545,438

415,562

Advance ticket sales

620,216

575,781

Deferred Rewards program

117,959

86,870

Non-refundable guest credits

40,921

45,434

Current portion of maintenance provisions 

85,819

54,811

Current portion of long-term debt

141,572

159,843

1,551,925

1,338,301

Non-current liabilities:

Maintenance provisions

243,214

191,768

Long-term debt

1,033,261

1,028,820

Other liabilities

13,603

13,150

Deferred income tax 

327,028

296,892

Total liabilities

3,169,031

2,868,931

Shareholders' equity:

Share capital

582,796

603,287

Equity reserves

82,713

75,094

Hedge reserves

1,903

(3,179)

Retained earnings

1,292,581

1,102,300

Total shareholders' equity

1,959,993

1,777,502

Total liabilities and shareholders' equity

5,129,024

4,646,433

Consolidated Statement of Cash Flows

(Stated in thousands of Canadian dollars)

(Unaudited)

Three months endedDecember 31 

Twelve months endedDecember 31

2015

2014

2015

2014

Operating activities:

Net earnings

63,436

90,713

367,530

283,957

Items not involving cash:

Depreciation and amortization

75,237

54,696

264,921

226,740

Change in maintenance provisions

14,483

(11,113)

35,786

8,413

Change in other liabilities

(3,237)

(158)

(3,192)

(529)

Amortization of transaction costs

1,093

1,204

4,503

5,015

Amortization of hedge settlements

340

350

1,390

1,400

Gain on derivatives

(971)

-

(827)

-

Loss on disposal of property and equipment 

1,496

2,849

1,860

48,332

Share-based payment expense

4,379

4,316

17,254

18,626

Deferred income tax expense/(recovery)

11,319

5,880

28,789

(8,171)

Unrealized foreign exchange (gain)/loss

20,603

(2,323)

(938)

(10,634)

Change in non-cash working capital

(12,686)

(588)

199,706

21,349

Change in restricted cash

(11,259)

(4,293)

(10,424)

(43)

Change in other assets

(6,780)

(105)

(15,912)

(6,833)

Purchase of shares pursuant to compensation plans

(333)

(166)

(14,005)

(10,989)

157,120

141,262

876,441

576,633

Investing activities:

Aircraft additions

(318,064)

(228,106)

(841,491)

(694,200)

Aircraft disposals

132

75,597

83,348

75,655

Other property and equipment and intangible additions

(15,714)

(5,506)

(64,789)

(46,586)

(333,646)

(158,015)

(822,932)

(665,131)

Financing activities:

Increase in long-term debt

17,732

16,507

153,112

613,885

Repayment of long-term debt

(42,099)

(41,445)

(171,490)

(308,588)

Shares repurchased

(4,010)

(9,856)

(123,813)

(39,431)

Dividends paid

(17,246)

(15,334)

(69,711)

(61,313)

Issuance of shares pursuant to compensation plans

120

56

156

96

Cash interest paid

(7,936)

(9,421)

(47,305)

(39,507)

Change in non-cash working capital

3,755

2,864

21

4,866

(49,684)

(56,629)

(259,030)

170,008

Cash flow from operating, investing and financing activities

(226,210)

(73,382)

(205,521)

81,510

Effect of foreign exchange on cash and cash equivalents

(9,672)

6,707

31,247

20,556

Net change in cash and cash equivalents

(235,882)

(66,675)

(174,274)

102,066

Cash and cash equivalents, beginning of period

1,419,679

1,424,746

1,358,071

1,256,005

Cash and cash equivalents, end of period

1,183,797

1,358,071

1,183,797

1,358,071

Supplemental disclosure of operating cash flows

Cash interest received

3,577

4,776

16,349

17,243

Cash taxes paid

(25,667)

(10,894)

(114,752)

(204,489)

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)

2015

2014

Change

2015

2014

Change

Operating expenses

846,028

854,787

(8,759)

3,459,512

3,501,081

(41,568)

Aircraft fuel expense

(182,181)

(243,816)

61,635

(814,498)

(1,090,330)

275,832

Employee profit share

expense

(8,869)

(23,399)

14,530

(100,965)

(68,787)

(32,178)

Operating expenses,

adjusted

654,978

587,572

67,406

2,544,049

2,341,964

202,086

ASMs

6,524,788,975

6,378,247,018

2.3%

26,902,227,359

25,584,033,077

5.2%

CASM, excluding above

items (cents)

10.04

9.21

9.0%

9.46

9.15

3.4%

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.

($ in thousands)

December 31

2015

December 312014

Change

Earnings before income taxes

520,258

390,307

129,951

Special item(i)

-

45,459

(45,459)

Adjusted earnings before income taxes

520,258

435,766

84,492

Add:

Finance costs

53,665

51,838

1,827

Implicit interest in operating leases(ii)

91,397

95,786

(4,389)

665,320

583,390

81,930

Invested capital:

Average long-term debt(iii)

1,181,748

1,033,529

148,219

Average shareholders' equity

1,868,748

1,683,671

185,077

Off-balance-sheet aircraft leases(iv)

1,305,668

1,368,375

(62,707)

4,356,164

4,085,575

270,589

Return on invested capital

15.3%

14.3%

1.0 pt.

(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 operating leases are calculated by multiplying the trailing 12 months of aircraft leasing expense by 7.5. At December 31, 2015, the trailing 12 months of aircraft leasing expenses totaled $174,089 (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.

Twelve months ended December 31

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

2015

2014

Change

Net earnings

367,530

283,957

83,573

Adjusted for:

Special item(i)

-

33,231

(33,231)

Adjusted net earnings

367,530

317,188

50,342

Weighted average number of shares outstanding - diluted

125,964,541

129,142,940

(3,178,399)

Adjusted diluted earnings per share

2.92

2.46

18.7%

(i)

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

SOURCE WestJet


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