WestJet reports a 33.4% increase in first quarter net earnings
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)
|
17.55 |
17.50 |
0.3% |
RASM (revenue per available seat mile) |
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 |
10.59 |
10.50 |
0.9% |
*Refer to reconciliations in the accompanying tables for further information regarding calculations. |
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, |
||
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
|
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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