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WestJet 2009 Annual Report 59
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
For the years ended December 31, 2009 and 2008
(Stated in thousands of Canadian dollars, except share and per share data)
3. Capital management (continued)
In the management of capital, the Corporation includes shareholders’ equity (excluding AOCL), long-term debt, capital leases, cash and cash
equivalents and the Corporation’s off-balance-sheet obligations related to its aircraft operating leases, all of which are presented in detail below.
The Corporation monitors capital on a number of bases, including adjusted debt-to-equity and adjusted net debt to earnings before interest, taxes,
depreciation and aircraft rent (EBITDAR). EBITDAR is a non-GAAP fi nancial measure commonly used in the airline industry to evaluate results by
excluding differences in the method by which an airline fi nances its aircraft. In addition, the Corporation will adjust EBITDAR for one-time special
items, for non-operating gains and losses on derivatives and for gains and losses on foreign exchange. The calculation of EBITDAR is a measure
that does not have a standardized meaning prescribed under GAAP and is therefore not likely to be comparable to similar measures presented
by other issuers. The Corporation adjusts debt to include its off-balance-sheet aircraft operating leases. Common industry practice is to multiply
the trailing twelve months of aircraft leasing expense by 7.5 to derive a present-value debt equivalent. The Corporation defi nes adjusted net debt
as adjusted debt less cash and cash equivalents. The Corporation defi nes equity as the sum of share capital, contributed surplus and retained
earnings, and excludes AOCL.
2009 2008 Change
Restated
Adjusted debt-to-equity:
Long-term debt (i) $ 1,219,777 $ 1,351,903 $ (132,126)
Obligations under capital leases (ii) 4,102 1,108 2,994
Off-balance-sheet aircraft leases (iii) 779,655 645,375 134,280
Adjusted debt $ 2,003,534 $ 1,998,386 $ 5,148
Total shareholders’ equity 1,388,928 1,075,990 312,938
Add: AOCL 14,852 38,112 (23,260)
Adjusted equity $ 1,403,780 $ 1,114,102 $ 289,678
Adjusted debt-to-equity 1.43 1.79 (20.1%)
Adjusted net debt to EBITDAR: (iv)
Net earnings $ 98,178 $ 178,506 $ (80,328)
Add:
Net interest (v) 62,105 50,593 11,512
Taxes 38,618 76,243 (37,625)
Depreciation and amortization 141,303 136,485 4,818
Aircraft leasing 103,954 86,050 17,904
Other (vi) 10,478 (13,256) 23,734
EBITDAR $ 454,636 $ 514,621 $ (59,985)
Adjusted debt (as above) 2,003,534 1,998,386 5,148
Less: cash and cash equivalents (1,005,181) (820,214) (184,967)
Adjusted net debt $ 998,353 $ 1,178,172 $ (179,819)
Adjusted net debt to EBITDAR 2.20 2.29 (3.9%)
(i) As at December 31, 2009, long-term debt includes the current portion of long-term debt of $171,223 (2008 – $165,721) and long-term debt of $1,048,554 (2008 – $1,186,182).
(ii) As at December 31, 2009, obligations under capital leases includes the current portion of obligations under capital leases of $744 (2008 – $395) and
obligations under capital leases of $3,358 (2008 – $713).
(iii) Off-balance-sheet aircraft leases is calculated by multiplying the trailing twelve months of aircraft leasing expense by 7.5. As at December 31, 2009, the
trailing twelve months of aircraft leasing costs totalled $103,954 (2008 – $86,050).
(iv) The trailing twelve months are used in the calculation of EBITDAR.
(v) As at December 31, 2009, net interest includes the trailing twelve months of interest income of $5,601 (2008 – $25,485) and the trailing twelve months of
interest expense of $67,706 (2008 – $76,078).
(vi) As at December 31, 2009, other includes the trailing twelve months foreign exchange loss of $12,306 (2008 – gain of $30,587) and the trailing twelve months
non-operating gain on derivatives of $1,828 (2008 – loss of $17,331).