Westjet 2014 Annual Report Download - page 25

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WestJet Annual Report 2014│ 23
At December 31, 2014, restricted cash consisted of $47.8 million (2013 – $48.5 million) for cash held in trust by WestJet
Vacations; $9.5 million (2013 – $8.3 million) for security on letters of guarantee; and, in accordance with U.S. regulatory
requirements, $0.8 million (2013 – $1.3 million) for cash not yet remitted for passenger facility charges.
Investing cash flows
For the year ended December 31, 2014, cash used for investing activities totaled $665.1 million as compared to $715.2 million
in the prior year. The majority of our investing activities during 2014 related to the delivery of seven Boeing 737 NG 800
aircraft and seven Bombardier Q400s, scheduled future aircraft deposits and costs incurred for owned aircraft engine
overhauls. These investing cash outflows were offset by the proceeds received from the physical delivery of five of the 10
aircraft sold to Southwest.
Financing cash flows
For the year ended December 31, 2014, our financing cash inflow of $175.0 million was mainly the result of our $400.0 million
3.287 per cent Senior Unsecured Notes, as well as additional borrowing from our existing Export Development Canada (EDC)
facility for the financing of seven Bombardier Q400 aircraft. Partially offsetting these inflows were financing outflows of $303.6
million for repayments of long-term debt, $39.5 million in cash interest paid, $61.3 million in dividends paid and $39.4 million
for shares repurchased under our February 2013 and May 2014 normal course issuer bids.
Free cash flow
Free cash flow is a measure that represents the cash that a company is able to generate after meeting its requirements to
maintain or expand its asset base. It is a calculation of operating cash flow, less the amount of cash used in investing
activities related to property and equipment. Our free cash flow for the year ended December 31, 2014, was a negative $93.6
million, as compared to a negative $107.0 million in the prior year. On a per share basis, for the year ended December 31,
2014, this equated to negative $0.72 per share compared to negative $0.81 per share in 2013. This improvement in free cash
flow and free cash flow per share is due to continued strong earnings and cash inflows from the proceeds received from the
delivery of five aircraft to Southwest. In the short-term, when capital and investing activities are expected to be high due to
aircraft and aircraft related expenditures, we expect to experience negative free cash flow, which we anticipate to manage
through our cash and cash equivalents balances and future debt financing. However, over a longer period of time, we expect
our operating cash flows to sufficiently fund all our capital and investing activities.
Please refer to page 48 of this MD&A for a reconciliation of non-GAAP and additional GAAP measures.
Financing
We have grown through acquisitions of Boeing 737 NG and Bombardier Q400 aircraft. Our seven Bombardier Q400 aircraft
deliveries during 2014 were financed by secured term loans with EDC for approximately 80 per cent of the purchase price of
the aircraft. We also took delivery of seven Boeing 737 NG 800 series aircraft during 2014, which were funded with cash on
hand from the issuance of our Senior Unsecured Notes. Our aircraft related debt is in Canadian dollars, eliminating the foreign
exchange exposure on any US-dollar denominated debt. At December 31, 2014, we had 49 Boeing 737 NG aircraft and 15
Q400 aircraft financed with a remaining debt balance of $790.8 million, net of transaction costs. There are no financial
covenant requirements associated with our debt.
To mitigate the earnings impact of changing interest rates on our variable rate loans, we have entered into interest rate swap
agreements to fix the interest rates over the term of the loans. Upon proper qualification, we designated the interest rate
swap contracts as effective cash flow hedges for accounting purposes. At December 31, 2014, no portion of the interest rate
swap agreements was considered ineffective.