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WestJet reports a 33.4% increase in first quarter net earnings

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WestJet reports a 33.4% increase in first quarter net earnings

WestJet (TSX: WJA) today announced its first quarter results for 2019, with net earnings of $45.6 million, or $0.40 per fully diluted share compared with net earnings of $34.2 million, or $0.30 per fully diluted share reported in the first quarter of 2018.

"We remain confident in our strategic direction and continue to see positive trends as a result of our prudent growth and the strategic initiatives we are undertaking." said Ed Sims, WestJet President and CEO. "I want to thank all of our guests for their continued loyalty and all WestJetters for their on-going commitment to providing an award-winning service through a busy first quarter."

Operating highlights (stated in Canadian dollars)

 

Q1 2019

Q1 2018

Change

Net earnings (millions)

$45.6

$34.2

33.4%

Diluted earnings per share

$0.40

$0.30

33.3%

Total revenue (millions)

$1,257.7

$1,191.7

5.5%

Operating margin

4.8%

5.1%

(0.3 pts)

ASMs (available seat miles) (billions)

8.456

8.029

5.3%

RPMs (revenue passenger miles) (billions)

7.168

6.810

5.3%

Load factor

84.8%

84.8%

0.0 pts

Segment guests

6,282,781

6,088,954

3.2%

Yield (revenue per revenue passenger mile)
(cents)

17.55

17.50

0.3%

RASM (revenue per available seat mile) 
(cents)

14.87

14.84

0.2%

CASM (cost per available seat mile) (cents)

14.16

14.08

0.6%

Fuel costs per litre (cents)

77

73

5.5%

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

10.59

10.50

0.9%

 

*Refer to reconciliations in the accompanying tables for further information regarding calculations.

Note: All values in the above table are at a consolidated WestJet group level

Dividend declaration

On May 6, 2019, 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 2019, to be paid on June 28, 2019, to shareholders of record on June 12, 2019. 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.

Condensed Consolidated Statements of Earnings

For the three months ended March 31

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

(Unaudited)

 
 

2019

2018(i)

     

Revenue:

   

Guest

1,178,296

1,109,307

Other

79,360

82,417

 

1,257,656

1,191,724

Operating expenses:

   

Aircraft fuel

296,922

281,151

Salaries and benefits

269,576

255,125

Rates and fees

175,203

168,930

Depreciation and amortization

157,806

146,499

Sales and marketing

126,096

119,579

Maintenance

51,563

49,995

Other

115,347

103,134

Employee profit share

5,249

6,384

 

1,197,762

1,130,797

Earnings from operations

59,894

60,927

     

Non-operating income (expense):

   

Finance income

9,384

6,710

Finance cost

(25,858)

(13,532)

Gain (loss) on foreign exchange

6,764

(7,101)

Gain on disposal of property and equipment

14,876

2,217

Gain (loss) on derivatives

(679)

65

 

4,487

(11,641)

Earnings before income tax

64,381

49,286

     

Income tax expense:

   

Current

4,761

7,824

Deferred

14,005

7,262

 

18,766

15,086

Net earnings

45,615

34,200

     

Earnings per share:

   

Basic

0.40

0.30

Diluted

0.40

0.30

(i)    Certain 2018 numbers have been restated for the adoption of IFRS 16.

 

Condensed Consolidated Statements of Financial Position

(Stated in thousands of Canadian dollars)

(Unaudited)

 
 

March 31

2019

December 31

2018(i)

January 1, 
2018(i)

Assets

     

Current assets:

     

Cash and cash equivalents

1,521,785

1,185,806

1,147,076

Marketable securities

93,005

93,771

226,090

Total cash, cash equivalents and marketable securities

1,614,790

1,279,577

1,373,166

Restricted cash

103,411

115,615

109,700

Accounts receivable

133,123

145,544

152,492

Prepaid expenses, deposits and other

163,895

190,224

138,676

Inventory

45,525

39,742

43,045

 

2,060,744

1,770,702

1,817,079

Non-current assets:

     

Property and equipment

5,597,318

5,312,995

5,028,980

Intangible assets

51,884

54,851

59,517

Other assets

92,421

102,537

66,029

Total assets

7,802,367

7,241,085

6,971,605

       

Liabilities and shareholders' equity

     

Current liabilities:

     

Accounts payable and accrued liabilities

721,233

658,067

550,426

Advance ticket sales

775,939

695,367

659,953

Deferred Rewards program

227,803

224,608

185,991

Non-refundable guest credits

64,066

62,914

58,575

Current portion of maintenance provisions

35,860

22,576

35,400

Current portion of long-term debt and lease obligations

949,266

689,135

300,229

 

2,774,167

2,352,667

1,790,574

Non-current liabilities:

     

Maintenance provisions

373,058

387,023

362,205

Long-term debt and lease obligations

1,954,792

1,836,825

2,226,956

Other liabilities

11,238

10,263

17,564

Deferred income tax

415,869

405,160

371,389

Total liabilities

5,529,124

4,991,938

4,768,688

       

Shareholders' equity:

     

Share capital

549,037

548,979

548,977

Equity reserves

109,940

106,655

97,514

Hedge reserves

(2,046)

6,856

(1,902)

Retained earnings

1,616,312

1,586,657

1,558,328

Total shareholders' equity

2,273,243

2,249,147

2,202,917

Total liabilities and shareholders' equity

7,802,367

7,241,085

6,971,605

(i)   Certain 2018 numbers have been restated for the adoption of IFRS 16.

 

 

Condensed Consolidated Statements of Cash Flows

For the three months ended March 31

(Stated in thousands of Canadian dollars)

(Unaudited)

 
 

2019

2018(i)

     

Operating activities:

   

Net earnings

45,615

34,200

Items not involving cash:

   

Depreciation and amortization

157,806

146,499

Change in maintenance provisions

15,898

1,517

Amortization of transaction costs

965

1,136

Unrealized (gain) loss on derivatives

399

(267)

Gain on disposal of property and equipment

(14,876)

(2,217)

Share-based payment expense

3,470

3,878

Deferred income tax expense

14,005

7,262

Unrealized foreign exchange (gain) loss

(4,483)

3,112

Change in non-cash working capital

193,060

85,131

Change in restricted cash

12,204

12,896

Change in other assets

(2,692)

(1,375)

Change in other liabilities

(3)

(324)

Purchase of shares pursuant to compensation plans

(135)

(14)

Maintenance provision settlements

(8,128)

(18,244)

 

413,105

273,190

     

Investing activities:

   

Aircraft additions

(516,651)

(149,222)

Aircraft disposals

1,036

4,310

Proceeds from sale-and-leaseback transaction

577,143

-

Other property and equipment and intangible additions and disposals

(22,452)

(22,256)

Purchases of marketable securities

(33,922)

(1,169)

Maturities of marketable securities

33,047

-

Changes in non-cash working capital

(2,115)

14,336

 

36,086

(154,001)

     

Financing activities:

   

Increase in long-term debt

-

20,555

Repayment of long-term debt

(26,541)

(37,623)

Repayment of long-term lease obligations

(43,508)

(33,419)

Dividends paid

(15,953)

(15,970)

Cash interest paid

(19,975)

(17,263)

Change in non-cash working capital

(1,379)

(2,319)

 

(107,356)

(86,039)

     

Cash flow from operating, investing and financing activities

341,835

33,150

Effect of foreign exchange on cash and cash equivalents

(5,856)

7,231

Net change in cash and cash equivalents

335,979

40,381

     

Cash and cash equivalents, beginning of period

1,185,806

1,147,076

     

Cash and cash equivalents, end of period

1,521,785

1,187,457

     

Supplemental disclosure of operating cash flows

   

Cash interest received

9,478

6,780

Cash taxes paid, net

(3,743)

(19,640)

(i)      Certain 2018 numbers have been restated for the adoption of IFRS 16.

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

 

2019

2018(i)

Change

Operating expenses

1,197,762

1,130,797

66,965

Aircraft fuel expense

(296,922)

(281,151)

(15,771)

Employee profit share expense

(5,249)

(6,384)

1,135

Operating expenses, adjusted

895,591

843,262

52,329

ASMs

8,456,091,578

8,028,866,429

5.3%

CASM, excluding above items (cents)

10.59

10.50

0.9%

(i)    Certain 2018 numbers have been restated for the adoption of IFRS 16.

 

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

2019

December 31
2018(i)

Change

Earnings before income taxes

154,417

139,325

15,092

Add:

     

   Finance costs

68,685

67,511

1,174

 

223,102

206,836

16,266

Invested capital:

     

   Average long-term debt and lease obligations(ii)

2,717,034

2,526,573

190,461

   Average shareholders' equity

2,249,698

2,226,033

23,665

 

4,966,732

4,752,606

214,126

Return on invested capital

4.5%

4.4%

0.1 pts

(i)    Certain 2018 numbers have been restated for the adoption of IFRS 16.

(ii)   Average long-term debt and lease obligations is comprised of the current portion and long-term portion of long-term debt and lease obligations.

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This press release was sourced from WestJet on 07-May-2019.