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Press release from CNW Group

WestJet reports first quarter net earnings record

Tuesday, May 01, 2012

WestJet reports first quarter net earnings record07:00 EDT Tuesday, May 01, 2012Airline achieves net earnings of $68 million, up 42 per centWestJet selects Bombardier Q400 NextGen aircraft for new regional airlineCALGARY, May 1, 2012 /CNW/ - WestJet (TSX: WJA) today announced its first quarter results for 2012. The airline reported record first quarter net earnings of $68.3 million, or $0.49 per diluted share; up from the net earnings of $48.2 million, or $0.34 per diluted share, reported in the first quarter of 2011. This represents WestJet's 28th consecutive quarter of profitability. WestJet's operating cash flow per share for the first quarter of 2012 was $1.87, an increase of 31 per cent year over year. Based on the trailing twelve months, the airline achieved a return on invested capital of 10.8 per cent, up from the 10.1 per cent reported last quarter."We are extremely pleased with the record first quarter results and our margin expansion as revenue growth outpaced elevated fuel costs. We achieved our highest first quarter load factor, improved the overall yield and made good progress towards our return on invested capital target," said WestJet President and CEO Gregg Saretsky. "I thank WestJetters for their contributions to these great results and for providing that remarkable guest experience which helps distinguish us as Canada's preferred airline."Today, WestJet also announced it has selected the Bombardier Q400 NextGen as the aircraft for its new, low-cost regional airline that is expected to launch as early as the second half of 2013. "This aircraft selection marks another significant milestone for WestJet as we enter into what we know will be a successful, long-lasting relationship with Bombardier, another great Canadian company," noted Gregg Saretsky.Operating highlights (stated in Canadian dollars) Q1 2012 Q1 2011ChangeNet earnings (millions)$68.3$48.241.6%Diluted earnings per share$0.49$0.3444.1%Total revenues (millions)$891.0$772.415.3%Operating margin11.9%10.3%1.6 pts.Operating cash flow per share*$1.87$1.4330.8%ASMs (available seat miles) (billions)5.6905.2308.8%RPMs (revenue passenger miles) (billions)4.7214.29010.0%Load factor83.0%82.0%1.0 pts.Segment guests4,230,4153,899,1088.5%Yield (revenue per revenue passenger mile) (cents)18.8718.004.8%RASM (revenue per available seat mile) (cents)15.6614.776.0%CASM (cost per available seat mile)(cents)13.8013.244.2%CASM, excluding fuel and employee profit share (cents)*8.958.910.4%*Refer to reconciliations in the accompanying tables for further information regarding calculations."Revenue growth exceeded our expectations this quarter and contributions to the top-line increase are coming from the ongoing improvement in our business offering, our airline partnership strategy, the strength of WestJet Vacations and increases in ancillary revenue," commented Gregg Saretsky. WestJet achieved its highest ancillary revenue per guest of $8.39 this quarter which lifted the net earnings per guest to approximately sixteen dollars. The airline expects RASM growth to continue into the second quarter, but at a slightly moderated pace than the RASM growth achieved in the first quarter of 2012.WestJet now projects its 2012 full-year CASM, excluding fuel and employee profit share will be up 1.5 to 2.5 per cent. This is mainly attributable to higher revenue-related expenditures resulting from an improved revenue outlook and increased airport operation costs resulting from an increase in operations at higher cost airports such as New York City, Chicago and Toronto. For the second quarter of 2012, the airline projects its fuel costs will range between $0.95 and $0.97 per litre.Dividend declarationWestJet's Board of Directors declared a cash dividend of $0.06 per common voting share and variable voting share for the second quarter of 2012, to be paid on June 29, 2012, to shareholders of record on June 13, 2012. 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 statements Certain information set forth in this news release, including, without limitation, the information regarding the launch of the regional airline in the second half of 2013, RASM growth in the second quarter of 2012, fuel costs in the second quarter of 2012 and CASM, excluding fuel and employee profit share, for the full-year 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, our fleet plan, realized jet fuel prices for April 2012 and forward-curve prices for May and June 2012, the expected exchange rate of the Canadian dollar to the U.S. dollar in the second quarter of 2012, 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 Readers are cautioned that undue reliance should not be placed on forward-looking statements 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, operating cash flow per share, return on invested capital and net earnings per guest. These measures are included to enhance 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 quarters. 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 three months ended March 31, 2012, which is available under WestJet's profile on SEDAR at, for a further discussion of such non-GAAP measures and a reconciliation of such measures to GAAP. Management's discussion and analysis of financial results and condensed consolidated interim financial statements and notes for the three months ended March 31, 2012, are available through the Internet in the Media and Investor Relations section of or under WestJet's SEDAR profile at conference callWestJet will hold its quarterly analysts' conference call today, May 1, 2012, at 8 a.m. MDT (10 a.m. EDT). President and CEO Gregg Saretsky and Executive Vice-President of Finance and CFO Vito Culmone will discuss WestJet's first quarter 2012 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 general meeting (AGM)WestJet will hold its AGM at 2 p.m. MDT (4 p.m. EDT) today on May 1, 2012 at WestJet's Calgary Campus at 22 Aerial Place NE. The AGM webcast will be available live in the Media and Investor Relations section of About WestJet WestJet is Canada's preferred airline, offering scheduled service throughout its 76-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. Named a J.D. Power 2011 Customer Service Champion, WestJet offers increased legroom and leather seats on its modern fleet of 98 Boeing Next-Generation 737 aircraft. With future confirmed deliveries for an additional 37 aircraft through 2018, WestJet strives to be one of the five most successful international airlines in the world.Connect with WestJet on Facebook at WestJet on Twitter at to WestJet on YouTube at Consolidated Statement of EarningsFor the three months ended March 31(Stated in thousands of Canadian dollars, except share and per share amounts)(Unaudited)      20122011    Revenues:    Guest 802,286688,588 Other 88,66483,834  890,950772,422Expenses:    Aircraft fuel 262,072218,963 Airport operations 113,806109,151 Flight operations and navigational charges 91,78484,097 Sales and distribution 87,09676,822 Marketing, general and administration 48,12947,816 Aircraft leasing 46,32740,713 Depreciation and amortization 45,14443,307 Inflight 39,07333,499 Maintenance 37,72730,622 Employee profit share 14,1347,592  785,292692,582Earnings from operations 105,65879,840    Non-operating income (expense):    Finance income 4,3403,931 Finance costs (12,737)(16,198) Gain on foreign exchange 1,2861,499 Gain (loss) on disposal of property and equipment 19(7) Loss on derivatives (3,450)(2,257)  (10,542)(13,032)Earnings before income tax 95,11666,808    Income tax expense (recovery):    Current 28,999581 Deferred (2,204)17,978  26,79518,559Net earnings 68,32148,249    Earnings per share:    Basic 0.500.34 Diluted 0.490.34    Weighted average number of shares outstanding - basic 137,773,920142,308,050Weighted average number of shares outstanding - diluted 138,189,084143,141,454    Condensed Consolidated Statement of Financial Position(Stated in thousands of Canadian dollars)(Unaudited)        March 31December 31    20122011Assets   Current assets:    Cash and cash equivalents 1,400,8121,243,605 Restricted cash 47,30048,341 Accounts receivable 31,46034,122 Prepaid expenses, deposits and other 55,27666,936 Inventory 31,68031,695  1,566,5281,424,699Non-current assets:    Property and equipment 1,921,1821,911,227 Intangible assets 35,92333,793 Other assets 104,557103,959 Total assets 3,628,1903,473,678    Liabilities and shareholders' equity   Current liabilities:    Accounts payable and accrued liabilities 401,435307,279 Advance ticket sales 451,995432,186 Non-refundable guest credits 44,06543,485 Current portion of long-term debt 161,919158,832 Current portion of obligations under finance leases 7675  1,059,490941,857Non-current liabilities:    Maintenance provisions 156,811151,645 Long-term debt 662,466669,880 Obligations under finance leases 3,1553,174 Other liabilities 9,83010,449 Deferred income tax 323,645326,456Total liabilities 2,215,3972,103,461    Shareholders' equity:    Share capital 627,018630,408 Equity reserves 74,10074,184 Hedge reserves (4,742)(3,353) Retained earnings 716,417668,978Total shareholders' equity 1,412,7931,370,217    Total liabilities and shareholders' equity 3,628,1903,473,678    Condensed Consolidated Statement of Cash FlowsFor the three months ended March 31(Stated in thousands of Canadian dollars)(Unaudited)      20122011    Operating activities:   Net earnings 68,32148,249Items not involving cash:    Depreciation and amortization 45,14443,307 Change in long-term maintenance provisions 7,8276,698 Change in other liabilities (199)(209) Amortization of hedge settlements 350350 Loss on derivative instruments 3,4502,257 (Gain) loss on disposal of property and equipment (19)7 Share-based payment expense 2,6913,369 Deferred income tax expense (recovery) (2,204)17,978 Finance income (4,340)(3,931) Finance cost 12,73716,198 Unrealized foreign exchange (gain) loss (505)432 Change in non-cash working capital 121,22977,887Change in restricted cash 1,041(8,746)Change in other assets (1,541)(2,300)Cash taxes paid (407)(371)Cash interest received 4,5912,910  258,166204,085    Investing activities:   Aircraft additions (43,764)(43,140)Other property and equipment and intangible additions (12,480)(9,380)  (56,244)(52,520)    Financing activities:   Increase in long-term debt 35,303-Repayment of long-term debt (39,631)(41,283)Decrease in obligations under finance leases (19)(54)Shares repurchased (18,821)(28,297)Dividends paid (8,226)(14,205)Cash interest paid (11,271)(14,024)Change in non-cash working capital (1,465)3,979  (44,130)(93,884)    Cash flow from operating, investing and financing activities 157,79257,681Effect of foreign exchange on cash and cash equivalents (585)(1,910)Net change in cash and cash equivalents 157,20755,771    Cash and cash equivalents, beginning of period 1,243,6051,159,316    Cash and cash equivalents, end of period 1,400,8121,215,087    CASM, excluding fuel and employee profit share(Stated in thousands of Canadian dollars, except 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 20122011CASM, excluding fuel and employee profit share  Operating expenses785,292692,582Aircraft fuel expense(262,072)(218,963)Employee profit share expense(14,134)(7,592)Operating expenses, adjusted509,086466,027ASMs5,689,651,9655,230,276,750CASM, excluding above items (cents)8.958.91   Return on invested capital (ROIC)(Stated in thousands of Canadian dollars, except per unit data)(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, except percentage amounts)March 31,2012December 31, 2011 Return on invested capital(i)   Earnings before income taxes236,314208,006 Add:    Finance costs57,45060,911  Implicit interest in operating leases(ii)89,87286,925  383,636355,842 Invested capital:    Average long-term debt(iii)904,639927,757  Average obligations under finance leases(iv)3,2683,303  Average shareholders' equity1,368,2751,337,225  Off-balance-sheet aircraft leases(v)1,283,8881,241,783  3,560,0703,510,068 Return on invested capital10.8%10.1%(i)  The trailing 12 months are used in the calculation of ROIC.(ii) Interest implicit in operating leases is equal to 7.0 per cent of 7.5 timesthe trailing 12 months of aircraft lease expense. 7.0 per cent is a proxyand does not necessarily represent actual for any given period.(iii)Average long-term debt includes the current portion and long-term portion.(iv)Average capital lease obligations include the current portion and long-term portion.(v)Off-balance-sheet aircraft leases are calculated by multiplying the trailing 12months of aircraft leasing expense by 7.5. At March 31, 2012, the trailing 12months of aircraft leasing costs totalled $171,185 (December 31, 2011 - $165,571).  Net earnings per guest(Stated in thousands of Canadian dollars, except per unit data)(Unaudited)Net earnings divided by the number of segment guests.   Three months ended March 31 20122011Net earnings per guest  Net earnings68,32148,249Segment guests4,230,4153,899,108Net earnings per guests16.1512.37   Operating cash flow per share(Stated in thousands of Canadian dollars, except per unit data)(Unaudited)Cash flow from operations divided by the diluted weighted average number of shares outstanding.   Three months ended March 31 20122011Operating cash flow per share  Cash flow from operating activities258,166204,085Weighted average number of shares outstanding - diluted138,189,084143,141,454Diluted operating cash flow per share1.871.43   For further information: WestJet Media Relations 1-888-WJ-4-NEWS (1-888-954-6397) Email:  WestJet Investor Relations 1-877-493-7853 Email: Website: