Westjet 2012 Annual Report Download - page 75

Notes to Consolidated Financial Statements
For the years ended December 31, 2012 and 2011
(Stated in thousands of Canadian dollars, except share and per share amounts)
3. Capital management
The Corporation’s policy is to maintain a strong capital base in order to maintain investor, creditor and market confidence and to
sustain the future development of the airline. The Corporation manages its capital structure and makes adjustments in light o f
changes in economic conditions and the risk characteristics of the underlying assets.
In order to maintain the capital structure, the Corporation may, from time to time, purchase shares for cancellation pursuant to
normal course issuer bids, issue new shares, pay dividends and adjust current and projected debt levels.
In the management of capital, the Corporation includes shareholders’ equity (excluding hedge reserves), long-term debt, finance
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 its capital structure on a number of bases, including adjusted debt-to-equity and adjusted net debt to
earnings before net finance costs, taxes, depreciation and amortization and aircraft leasing (EBITDAR). EBITDAR is an additional
GAAP financial measure commonly used in the airline industry to evaluate results by excluding differences in tax jurisdictions and
in the method an airline finances its aircraft. In addition, the Corporation will adjust EBITDAR for non-operating gains and losses
on derivatives and foreign exchange. The calculation of EBITDAR is a measure that does not have a standardized meaning
prescribed under IFRS and therefore may not 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 12
months of aircraft leasing expense by 7.5 to derive a present-value debt equivalent. The Corporation defines adjusted net debt
as adjusted debt less cash and cash equivalents. The Corporation defines equity as total shareholders’ equity, excluding hedge
reserves.
2012
2011
Change
Adjusted debt-to-equity
Long-term debt (i)
739,048
(89,664)
Obligations under finance leases (ii)
(3,249)
Off-balance-sheet aircraft leases (iii)
1,300,590
58,807
Adjusted debt
2,039,638
(34,106)
Total shareholders’ equity
1,472,305
102,088
Add: Hedge reserves
5,746
2,393
Adjusted equity
1,478,051
104,481
Adjusted debt-to-equity (vi)
1.38
(8.6%)
Adjusted net debt to EBITDAR
Adjusted debt (as above)
2,039,638
(34,106)
Less: Cash and cash equivalents
(1,408,199)
(164,594)
Adjusted net debt
631,439
(198,700)
Net earnings
242,392
93,690
Add:
Net finance costs (iv)
30,509
(14,415)
Taxes
97,837
38,533
Depreciation and amortization
185,401
10,650
Aircraft leasing
173,412
7,841
Other (v)
5,451
1,884
EBITDAR
735,002
138,183
Adjusted net debt to EBITDAR (vi)
0.86
(38.1%)
(i) As at December 31, 2012, long-term debt includes the current portion of long-term debt of $164,909 (2011 – $158,832) and long-term debt of
$574,139 (2011 – $669,880).
(ii) As at December 31, 2012, obligations under finance leases includes the current portion of obligations under finance leases of $nil (2011 – $ ) and
obligations under finance leases of $nil (2011 – $ ).
(iii) Off-balance-sheet aircraft leases is calculated by multiplying the trailing 12 months of aircraft leasing expense by 7.5. As at December 31, 2012, the
trailing 12 months of aircraft leasing costs totaled $173,412 (2011 – $ ).
(iv) As at December 31, 2012, net finance costs includes the trailing 12 months of finance income of $18,391 (2011 – $ ) and the trailing 12 months
of finance costs of $48,900 (2011 – $ ).
(v) As at December 31, 2012, other includes the trailing 12 months foreign exchange gain of $1,061 (2011 – gain of $ ) and the trailing 12 months
non-operating loss on derivatives of $ 51 (2011 – loss of $ ).
(vi) As at December 31, 2012 and 2011, the Corporation exceeded its internal targets of an adjusted debt-to-equity measure of no more than 3.00 and an
adjusted net debt to EBITDAR measure of no more than 3.00.
WestJet 2012 Annual Report
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