WestJet announces a 72 per cent increase in third quarter net earnings

WestJet announces a 72 per cent increase in third quarter net earnings

WestJet announces a 72 per cent increase in third quarter net earnings

PR Newswire

Airline reports 22nd consecutive quarter of profitability

CALGARY, Nov. 3 /PRNewswire-FirstCall/ - WestJet (TSX:WJA) today reported third quarter 2010 net earnings of $54 million, or 37 cents per diluted share, which marks its 22nd consecutive quarter of profitability and a 72 per cent increase in net earnings, year over year.

WestJet reported an operating margin of 13.2 per cent, compared to 12.8 per cent in the third quarter of 2009. WestJet's third quarter 2010 pre-tax margin was 11.1 per cent, compared to 8.3 per cent in the same period in 2009.

Operating highlights (stated in Canadian dollars) ------------------------------------------------------------------------- Year-to- Year-to- date date Q3 2010 Q3 2009 Change 2010 2009 Change ------------------------------------------------------------------------- Net earnings (millions) $54.0 $31.4 72.0% $88.8 $78.0 13.8% ------------------------------------------------------------------------- Net earnings excluding special items* (millions) $54.0 $31.4 72.0% $94.9 $75.7 25.4% ------------------------------------------------------------------------- Diluted earnings per share $0.37 $0.24 54.2% $0.61 $0.61 - ------------------------------------------------------------------------- Diluted earnings per share excluding special items* $0.37 $0.24 54.2% $0.65 $0.59 10.2% ------------------------------------------------------------------------- Total revenues (millions) $684.6 $600.6 14.0% $1,916.4 $1,711.1 12.0% ------------------------------------------------------------------------- Operating margin 13.2% 12.8% 0.4 pts. 8.8% 10.2% (1.4 pts.) ------------------------------------------------------------------------- ASMs (available seat miles) (billions) 5.031 4.503 11.7% 14.514 13.175 10.2% ------------------------------------------------------------------------- RPMs (revenue passenger miles) (billions) 4.007 3.587 11.7% 11.671 10.374 12.5% ------------------------------------------------------------------------- Load factor 79.6% 79.7% (0.1 pts.) 80.4% 78.7% 1.7 pts. ------------------------------------------------------------------------- Yield (revenue per revenue passenger mile) (cents) 17.09 16.74 2.1% 16.42 16.49 (0.4%) ------------------------------------------------------------------------- RASM (revenue per available seat mile) (cents) 13.61 13.34 2.0% 13.20 12.99 1.6% ------------------------------------------------------------------------- CASM (cost per available seat mile) (cents) 11.81 11.63 1.5% 12.04 11.66 3.3% ------------------------------------------------------------------------- CASM excluding fuel and employee profit share (cents)* 8.25 8.16 1.1% 8.53 8.37 1.9% ------------------------------------------------------------------------- * Refer to reconciliations in the accompanying tables for further information regarding adjustments.

"We are very pleased with our third quarter results," said WestJet President and CEO Gregg Saretsky. "I thank WestJetters for their passion and commitment to providing outstanding guest service, which has boosted our bottom line. While delivering strong financial results, the quarter also involved tremendous effort leading up to the execution of two significant strategic milestones for us with the October announcement of WestJet's first code-share agreement, with Cathay Pacific Airways, and the first interline agreement with a U.S. carrier, American Airlines."

WestJet continues to focus on ways to reduce costs and make its operations more efficient, while providing guests with increased self-service options. The airline has now introduced self-serve baggage tagging at both Vancouver and Calgary airports, with plans to fully implement this capability at both Toronto Pearson and Edmonton International Airport by the end of 2010.

The airline plans fourth quarter capacity to increase 13 to 14 per cent year over year which it expects to absorb while improving year-over-year RASM. WestJet is encouraged by the gradual recovery in pricing and the pace of current bookings.

WestJet is continuing its efforts to drive increased ancillary revenue while maintaining its value leadership position. Effective today, for travel on or after January 19, 2011, WestJet will begin charging a $20 fee to guests checking a second bag on all flights. Concurrent with this change, WestJet will reduce the fee for the third and fourth bags from $75 to $50. "These fees are less than what other North American airlines are charging," added Gregg Saretsky. "This, we believe, strikes the right balance for our guests, our shareholders and our employees."

Caution regarding forward-looking statements

Certain information set forth in this press release, including information regarding anticipated capacity increases in the fourth quarter of 2010, 2010 RASM, cost reductions and operational efficiency, initiatives to increase ancillary revenues, checked baggage services and fees, and corporate vision contains forward-looking statements. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond WestJet's control. These forward-looking statements are based on currently 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 described in WestJet's public reports and filings, which are available on WestJet's profile at www.sedar.com. Readers are cautioned that undue reliance should not be placed on forward-looking statements as actual results may vary materially from the forward-looking statements. WestJet does not undertake to update, correct or revise any forward-looking statements as a result of any new information, future events or otherwise, except as may be required by applicable law.

Management's Discussion & Analysis and the Consolidated Financial Statements and Notes for the three and nine months ended September 30, 2010, are available through the Internet on www.westjet.com or WestJet's SEDAR profile at www.sedar.com.

Conference call

WestJet will hold its quarterly analysts' conference call today, November 3, 2010, at 9 a.m. MDT (11 a.m. EDT). President and CEO Gregg Saretsky and Executive Vice-President of Finance and CFO Vito Culmone will discuss WestJet's third quarter 2010 results and answer questions from financial analysts. Following the analysts' question-and-answer period, media will be given an opportunity to ask questions pertaining to the airline's third quarter results. The conference call is available in Toronto by calling 1-647-427-7450 and outside Toronto through the toll-free telephone number 1-888-231-8191. The call can also be heard through an Internet webcast in the Media and Investor section of www.westjet.com.

About WestJet

WestJet is Canada's preferred airline, offering scheduled service throughout its 71-city North American and Caribbean network. Inducted into Canada's Most Admired Corporate Cultures Hall of Fame and named one of Canada's best employers, WestJet pioneered low-cost flying in Canada. WestJet offers increased legroom, leather seats and live seatback television provided by Bell TV on its modern fleet of 90 Boeing Next-Generation 737 aircraft. With future confirmed deliveries for an additional 45 aircraft through 2017, WestJet strives to be one of the five most successful international airlines in the world.

Consolidated Statement of Earnings (Stated in thousands of Canadian dollars, except per share amounts) (Unaudited) ------------------------------------------------------------------------- Three months ended Nine months ended September 30 September 30 2010 2009 2010 2009 ------------------------------------------------------------------------- Revenues: Guest $ 636,182 $ 557,413 $ 1,763,376 $ 1,539,756 Other 48,382 43,217 153,070 171,322 ------------------------------------------------------------------------- 684,564 600,630 1,916,446 1,711,078 Expenses: Aircraft fuel 170,828 150,648 495,332 421,716 Airport operations 94,134 84,131 288,036 260,432 Flight operations and navigational charges 84,149 78,327 245,288 225,449 Sales and distribution 64,938 41,721 188,729 121,943 Marketing, general and administration 44,483 52,034 142,899 153,657 Aircraft leasing 36,469 26,676 105,555 78,858 Depreciation and amortization 34,021 36,072 100,208 104,467 Inflight 30,680 26,155 92,414 85,338 Maintenance 26,085 22,414 74,464 72,388 Employee profit share 8,567 5,476 14,780 12,378 ------------------------------------------------------------------------- 594,354 523,654 1,747,705 1,536,626 ------------------------------------------------------------------------- Earnings from operations 90,210 76,976 168,741 174,452 Non-operating income (expense): Interest income 2,531 965 6,303 4,047 Interest expense (14,893) (16,729) (45,862) (51,340) Gain (loss) on foreign exchange (1,563) (7,140) 567 (11,552) Gain (loss) on disposal of property and equipment (113) (140) 285 (853) Loss on derivatives (473) (4,329) (399) (989) ------------------------------------------------------------------------- (14,511) (27,373) (39,106) (60,687) ------------------------------------------------------------------------- Earnings before income taxes 75,699 49,603 129,635 113,765 Income tax expense: Current 383 710 1,115 2,102 Future 21,333 17,475 39,708 33,660 ------------------------------------------------------------------------- 21,716 18,185 40,823 35,762 ------------------------------------------------------------------------- Net earnings $ 53,983 $ 31,418 $ 88,812 $ 78,003 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- Earnings per share: Basic $ 0.37 $ 0.24 $ 0.61 $ 0.61 Diluted $ 0.37 $ 0.24 $ 0.61 $ 0.61 ------------------------------------------------------------------------- Weighted average number of shares outstanding - basic 145,192,443 128,268,390 145,041,379 128,042,968 Weighted average number of shares outstanding - diluted 145,346,219 128,325,048 145,308,757 128,195,425 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Consolidated Balance Sheet (Stated in thousands of Canadian dollars) (Unaudited) ------------------------------------------------------------------------- September 30, December 31, 2010 2009 ------------------------------------------------------------------------- Assets Current assets: Cash and cash equivalents $ 1,218,063 $ 1,005,181 Accounts receivable 27,259 27,654 Prepaid expenses, deposits and other 34,151 56,239 Inventory 15,329 26,048 Future income tax 1,086 2,560 ------------------------------------------------------------------------- 1,295,888 1,117,682 Property and equipment 2,238,573 2,307,566 Intangible assets 13,012 14,087 Other assets 58,699 54,367 ------------------------------------------------------------------------- $ 3,606,172 $ 3,493,702 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Liabilities and shareholders' equity Current liabilities: Accounts payable and accrued liabilities $ 314,893 $ 231,401 Advance ticket sales 323,441 286,361 Non-refundable guest credits 38,906 64,506 Current portion of long-term debt 184,252 171,223 Current portion of obligations under capital leases 329 744 ------------------------------------------------------------------------- 861,821 754,235 Long-term debt 906,601 1,048,554 Obligations under capital leases 3,268 3,358 Other liabilities 19,067 19,628 Future income tax 318,990 278,999 ------------------------------------------------------------------------- 2,109,747 2,104,774 Shareholders' equity: Share capital 658,226 633,075 Contributed surplus 59,334 71,503 Accumulated other comprehensive loss (9,149) (14,852) Retained earnings 788,014 699,202 ------------------------------------------------------------------------- 1,496,425 1,388,928 ------------------------------------------------------------------------- $ 3,606,172 $ 3,493,702 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Consolidated Statement of Cash Flows (Stated in thousands of Canadian dollars) (Unaudited) ------------------------------------------------------------------------- Three months ended Nine months ended September 30 September 30 2010 2009 2010 2009 ------------------------------------------------------------------------- Operating activities: Net earnings $ 53,983 $ 31,418 $ 88,812 $ 78,003 Items not involving cash: Depreciation and amortization 34,021 36,072 100,208 104,467 Amortization of other liabilities (452) (860) (1,436) (1,749) Amortization of hedge settlements 350 350 1,049 1,050 Issuance of shares pursuant to employee share purchase plan - 7,236 - 7,236 Loss on derivatives 473 2,653 399 1,020 (Gain) loss on disposal of property and equipment 113 101 (264) 1,173 Stock-based compensation expense 3,031 5,577 12,462 11,361 Income tax credit - - (1,667) (1,952) Future income tax expense 21,333 17,475 39,708 33,660 Unrealized foreign exchange Loss 2,075 7,985 1,408 7,121 Change in non-cash working capital 48,427 24,811 132,681 12,705 ------------------------------------------------------------------------- 163,354 132,818 373,360 254,095 ------------------------------------------------------------------------- Financing activities: Repayment of long-term debt (42,843) (41,387) (128,346) (124,470) Decrease in obligations under capital leases (87) (99) (505) (294) Issuance of common shares - 172,463 520 172,463 Share issue costs - (7,456) - (7,456) Change in other assets 77 - (4,411) - Change in non-cash working capital 1,679 1,691 2,621 672 ------------------------------------------------------------------------- (41,174) 125,212 (130,121) 40,915 ------------------------------------------------------------------------- Investing activities: Aircraft additions (3,938) (24,065) (18,727) (108,261) Other property and equipment and intangible additions (6,817) (7,772) (12,064) (44,228) ------------------------------------------------------------------------- (10,755) (31,837) (30,791) (152,489) ------------------------------------------------------------------------- Cash flow from operating, financing and investing activities 111,425 226,193 212,448 142,521 Effect of foreign exchange on cash and cash equivalents (1,525) (4,176) 434 (1,087) ------------------------------------------------------------------------- Net change in cash and cash equivalents 109,900 222,017 212,882 141,434 Cash and cash equivalents, beginning of period 1,108,163 739,631 1,005,181 820,214 ------------------------------------------------------------------------- Cash and cash equivalents, end of period $ 1,218,063 $ 961,648 $ 1,218,063 $ 961,648 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash interest paid $ 15,081 $ 16,431 $ 46,764 $ 51,637 Cash taxes paid $ 712 $ 2,712 $ 2,367 $ 6,037 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Operating highlights (Unaudited) ------------------------------------------------------------------------- Three months ended September 30 2010 2009 Change ------------------------------------------------------------------------- ASMs 5,031,112,301 4,503,392,044 11.7% RPMs 4,006,665,895 3,587,028,442 11.7% Load factor 79.6% 79.7% (0.1 pts.) Yield (cents) 17.09 16.74 2.1% RASM (cents) 13.61 13.34 2.0% CASM (cents) 11.81 11.63 1.5% CASM excluding fuel and employee profit share (cents) 8.25 8.16 1.1% Fuel consumption (litres) 245,122,101 218,950,368 12.0% Fuel costs per litre (dollars) 0.70 0.69 1.4% Segment guests 3,928,723 3,654,097 7.5% Average stage length (miles) 962 921 4.5% Utilization (hours) 11.6 11.6 - Number of full-time equivalent employees at period end 6,581 6,062 8.6% Fleet size at period end 90 81 11.1% ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- Nine months ended September 30 2010 2009 Change ------------------------------------------------------------------------- ASMs 14,514,281,179 13,175,067,069 10.2% RPMs 11,671,460,713 10,373,856,153 12.5% Load factor 80.4% 78.7% 1.7pts. Yield (cents) 16.42 16.49 (0.4%) RASM (cents) 13.20 12.99 1.6% CASM (cents) 12.04 11.66 3.3% CASM excluding fuel and employee profit share (cents) 8.53 8.37 1.9% Fuel consumption (litres) 707,720,372 642,244,113 10.2% Fuel costs per litre (dollars) 0.70 0.66 6.1% Segment guests 11,370,031 10,523,659 8.0% Average stage length (miles) 963 922 4.4% Utilization (hours) 11.6 11.8 (1.7%) Number of full-time equivalent employees at period end 6,581 6,062 8.6% Fleet size at period end 90 81 11.1% ------------------------------------------------------------------------- -------------------------------------------------------------------------

Reconciliation of non-GAAP measures to GAAP

To supplement the consolidated financial statements presented in accordance with Canadian GAAP, WestJet uses various non-GAAP performance measures. These measures are provided to enhance the reader's overall understanding of WestJet's current financial performance and are included to provide investors and management with an alternative method for assessing the operating results in a manner that is focused on the performance of ongoing operations and to provide a more consistent basis for comparison between quarters. These measures are not in accordance with, or an alternative to, Canadian GAAP and do not have standardized meanings. Therefore, they are not likely to be comparable to similar measures presented by other entities.

Net earnings and diluted earnings per share excluding special items (Stated in thousands of Canadian dollars, except per unit amounts) (Unaudited) WestJet believes excluding special items is useful for investors to evaluate its recurring operational performance. ------------------------------------------------------------------------- Three months ended Nine months ended September 30 September 30 2010 2009 2010 2009 ------------------------------------------------------------------------- Net earnings - GAAP $ 53,983 $ 31,418 $ 88,812 $ 78,003 Adjusted for: CEO departure (net of tax) - - 3,700 - Income tax rate reductions and estimate change - - 2,372 (2,273) ------------------------------------------------------------------------- Net earnings excluding special items - non-GAAP $ 53,983 $ 31,418 $ 94,884 $ 75,730 Diluted weighted average number of shares outstanding 145,346,219 128,325,048 145,308,757 128,129,425 ------------------------------------------------------------------------- Diluted earnings per share excluding special items - non-GAAP $ 0.37 $ 0.24 $ 0.65 $ 0.59 ------------------------------------------------------------------------- ------------------------------------------------------------------------- CASM excluding fuel and employee profit share (Stated in thousands of Canadian dollars, except per unit amounts) (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 Nine months ended September 30 September 30 2010 2009 2010 2009 ------------------------------------------------------------------------- Operating expenses - GAAP $ 594,354 $ 523,654 $ 1,747,705 $ 1,536,626 Adjusted for: Aircraft fuel expense (170,828) (150,648) (495,332) (421,716) Employee profit share expense (8,567) (5,476) (14,780) (12,378) ------------------------------------------------------------------------- Operating expenses excluding above items - non-GAAP $ 414,959 $ 367,530 $ 1,237,593 $ 1,102,532 ASMs (in thousands) 5,031,112 4,503,392 14,514,281 13,175,067 ------------------------------------------------------------------------- CASM excluding above items - non-GAAP (cents) 8.25 8.16 8.53 8.37 ------------------------------------------------------------------------- -------------------------------------------------------------------------

SOURCE WestJet

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