UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
April 21, 2005
(Date of earliest event reported)
ALASKA AIR GROUP, INC.
Delaware
1-8957 | 91-1292054 | |
(Commission File Number) | (IRS Employer Identification No.) | |
19300 Pacific Highway South, Seattle, Washington | 98188 | |
(Address of Principal Executive Offices) | (Zip Code) |
(206) 392-5040
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.02.
Results of Operations And Financial Condition
Alaska Air Group, Inc. today issued a press release reporting financial results for the first quarter ended March 31, 2005. The press release is furnished as Exhibit 99.1.
2
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
ALASKA AIR GROUP, INC. Registrant |
||||
Date: April 21, 2005 | /s/ Brandon S. Pedersen | |||
Brandon S. Pedersen | ||||
Staff Vice President/Finance and Controller | ||||
/s/ Bradley D. Tilden | ||||
Bradley D. Tilden | ||||
Executive Vice President/Finance and Chief Financial Officer | ||||
3
EXHIBIT 99.1
Contact:
|
Brad Tilden | -or- | Caroline Boren | |||
206/392-5362 | 206/392-5799 |
FOR IMMEDIATE RELEASE | April 21, 2005 |
ALASKA AIR GROUP REPORTS FIRST QUARTER RESULTS
SEATTLE Alaska Air Group, Inc. (NYSE:ALK) today reported a first quarter net loss of $80.5 million, or $2.39 per diluted share, compared to a net loss of $42.7 million, or $1.59 per diluted share, in the first quarter of 2004.
First quarter results in 2005 include a charge of $144.7 million ($90.4 million, net of tax, or $2.73 per diluted share) resulting from the cumulative effect of a change in the way the Company accounts for airframe and engine overhauls and a $7.4 million restructuring charge ($4.6 million, net of tax, or $0.13 per diluted share), primarily associated with a decision to terminate the lease at the Companys Oakland heavy maintenance base. This quarters results also include $90.0 million ($56.2 million, net of tax, or $1.69 per diluted share) in mark-to-market gains on fuel hedges that settle in future periods compared to $0.4 million ($0.3 million, net of tax, or $0.01 per diluted share) in 2004. Without these items, and excluding the impairment charge of $2.4 million ($1.6 million, net of tax, or $.06 per diluted share) in the first quarter of 2004, the net loss would have been $41.7 million, or $1.54 per share during the first quarter of 2005 compared to a loss of $41.4 million, or $1.54 per diluted share in the first quarter of 2004.
Making excuses for our results would be easy based on the current environment of extremely high fuel prices, very little pricing power and a seasonally soft first quarter, said Bill Ayer, Alaska Air Groups chairman and chief executive officer. But these realities, along with the cost reductions achieved by others in the industry mean that we simply must have lower costs.
Alaska Airlines passenger traffic in the first quarter increased 8.9 percent on a capacity
increase of 3.7 percent. Alaskas load factor increased 3.5 percentage points to 72.6 percent compared to the same period in 2004. Alaskas operating revenue per available seat mile (ASM) increased 2.6 percent, while its operating cost per ASM excluding fuel and restructuring charges decreased 0.7 percent. Alaskas pretax income for the quarter was $15.4 million. Excluding the restructuring charges of $7.4 million and the gains on fuel hedges that settle in future periods of $77.7 million in 2005 and $0.4 million in 2004, Alaskas pretax loss was $54.9 million for the quarter, compared to a pretax loss of $53.6 million in 2004.
Horizon Airs passenger traffic in the first quarter increased 20.0 percent on a 13.0 percent capacity increase. Horizons load factor increased by 4.0 percentage points to 69.0 percent compared to the same period in 2004. Horizons operating revenue per available seat mile (ASM) decreased 2.8 percent, while its operating cost per ASM excluding fuel and impairment charge decreased 4.4 percent. The decrease in Horizons revenue per ASM and cost per ASM excluding fuel is largely due to the addition of Horizons contract flying for Frontier Airlines, which began in January 2004. This flying represented 23.0 percent of Horizons capacity during the first quarter and 10.1 percent of its passenger revenues compared to 16.2% of its capacity and 7.4% of its passenger revenues in the first quarter of 2004. Horizons pretax income for the quarter was $4.6 million, compared to a pretax loss of $10.4 million in 2004. Excluding gains on fuel hedges that settle in future periods of $12.3 million and the impairment charge in 2004, Horizons pretax loss was $7.7 million for the quarter, compared to $8.0 million in the first quarter of 2004.
Alaska Air Group had cash and short-term investments at March 31, 2005 of approximately $764 million compared to $874 million at December 31, 2004.
A summary of financial and statistical data for Alaska Airlines and Horizon Air as well as a reconciliation of the reported non-GAAP financial measures can be found on pages 6 through 10.
A conference call regarding the first quarter 2005 results will be simulcast via the internet at 8:30 a.m. Pacific Time. It may be accessed through the Companys website at www.alaskaair.com. For those unable to listen to the live broadcast, a replay will be available after the conclusion of the call at www.alaskaair.com.
This report may contain forward-looking statements that are intended to be subject to the safe harbor protection provided by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements relate to future events or our future financial performance and involve known and unknown risks and uncertainties that may cause our actual results or performance to be materially different from those indicated by any forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as forecast, may, will, could, should, expect, plan, believe, potential or other similar words indicating future events or contingencies. Some of the things that could cause our actual results to differ from our expectations are: changes in our operating costs including fuel, which can be volatile; the competitive environment and other trends in our industry; our ability to meet our cost reduction goals; the outcome of the arbitration with the Air Line Pilots Association; other labor disputes; economic conditions; our reliance on automated systems; actual or threatened terrorist attacks, global instability and potential U.S. military actions or activities; changes in laws and regulations; liability and other claims asserted against us; failure to expand our business; interest rates and the availability of financing; our ability to attract and retain qualified personnel; changes in our business plans; our significant indebtedness; downgrades of our credit ratings; and inflation. For a discussion of these and other risk factors, see Item 7 of the Companys Annual Report for the year ended December 31, 2004 on Form 10-K. All of the forward-looking statements are qualified in their entirety by reference to the risk factors discussed therein. These risk factors may not be exhaustive. We operate in a continually changing business environment, and new risk factors emerge from time to time. Management cannot predict such new risk factors, nor can it assess the impact, if any, of such new risk factors on our business or events described in any forward-looking statements. We disclaim any obligation to publicly update or revise any forward-looking statements after the date of this report to conform them to actual results.
# # #
ALASKA AIR GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(In Millions Except Per Share Amounts)
Three Months | ||||||||
Ended March 31 | ||||||||
2005 | 2004 | |||||||
Operating Revenues: |
||||||||
Passenger |
$ | 587.0 | $ | 553.3 | ||||
Freight and mail |
20.3 | 18.6 | ||||||
Other net |
35.2 | 26.1 | ||||||
Total Operating Revenues |
642.5 | 598.0 | ||||||
Operating Expenses: |
||||||||
Wages and benefits |
244.7 | 241.8 | ||||||
Contracted services |
30.6 | 27.5 | ||||||
Aircraft fuel |
146.7 | 107.8 | ||||||
Aircraft maintenance |
61.2 | 50.8 | ||||||
Aircraft rent |
46.1 | 47.8 | ||||||
Food and beverage service |
11.5 | 11.6 | ||||||
Other selling expenses and commissions |
37.4 | 38.4 | ||||||
Depreciation and amortization |
34.2 | 36.1 | ||||||
(Gain) loss on sale of assets |
(0.2 | ) | 0.4 | |||||
Landing fees and other rentals |
52.2 | 42.6 | ||||||
Other |
51.6 | 49.3 | ||||||
Impairment of F-28 aircraft and spare engines |
| 2.4 | ||||||
Restructuring charges, primarily write off of Oakland
leasehold improvements |
7.4 | | ||||||
Total Operating Expenses |
723.4 | 656.5 | ||||||
Operating Loss |
(80.9 | ) | (58.5 | ) | ||||
Nonoperating Income (Expense): |
||||||||
Interest income |
5.9 | 4.6 | ||||||
Interest expense |
(14.1 | ) | (12.7 | ) | ||||
Interest capitalized |
0.8 | 0.3 | ||||||
Other net, including fuel hedging gains |
105.3 | 0.1 | ||||||
97.9 | (7.7 | ) | ||||||
Income (loss) before income tax and accounting change |
17.0 | (66.2 | ) | |||||
Income tax expense (benefit) |
7.1 | (23.5 | ) | |||||
Income (loss) before accounting change |
$ | 9.9 | $ | (42.7 | ) | |||
Cumulative effect of accounting change, net of tax |
(90.4 | ) | | |||||
Net Loss |
$ | (80.5 | ) | $ | (42.7 | ) | ||
Basic Earnings (Loss) Per Share: |
||||||||
Income (loss) before accounting change |
$ | 0.36 | $ | (1.59 | ) | |||
Cumulative effect of accounting change |
(3.33 | ) | | |||||
Net Loss Per Share |
$ | (2.97 | ) | $ | (1.59 | ) | ||
Diluted Earnings (Loss) Per Share: |
||||||||
Income (loss) before accounting change |
$ | 0.34 | $ | (1.59 | ) | |||
Cumulative effect of accounting change |
(2.73 | ) | | |||||
Net Loss Per Share |
$ | (2.39 | ) | $ | (1.59 | ) | ||
Shares Used for Computation: |
||||||||
Basic |
27.147 | 26.778 | ||||||
Diluted |
33.158 | 26.778 |
4
Alaska Air Group, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
March 31, | December 31, | |||||||
(In Millions) | 2005 | 2004 | ||||||
Cash and marketable securities |
$ | 764 | $ | 874 | ||||
Total current assets |
$ | 1,234 | $ | 1,242 | ||||
Property and equipment-net |
1,824 | 1,908 | ||||||
Other assets |
243 | 185 | ||||||
Total assets |
$ | 3,301 | $ | 3,335 | ||||
Current liabilities |
$ | 1,056 | $ | 957 | ||||
Long-term debt and capital lease obligations |
980 | 990 | ||||||
Other liabilities and credits |
680 | 723 | ||||||
Shareholders equity |
585 | 665 | ||||||
Total liabilities and shareholdersequity |
$ | 3,301 | $ | 3,335 | ||||
5
Alaska Airlines Financial and Statistical Data
Quarter Ended March 31 | ||||||||||||
% | ||||||||||||
Financial Data (in millions): | 2005 | 2004 | Change | |||||||||
Operating Revenues: |
||||||||||||
Passenger |
$ | 471.3 | $ | 449.3 | 4.9 | |||||||
Freight and mail |
19.3 | 17.7 | 9.0 | |||||||||
Other net |
32.7 | 24.3 | 34.6 | |||||||||
Total Operating Revenues |
523.3 | 491.3 | 6.5 | |||||||||
Operating Expenses: |
||||||||||||
Wages and benefits |
199.7 | 200.8 | (0.5 | ) | ||||||||
Contracted services |
27.8 | 23.1 | 20.3 | |||||||||
Aircraft fuel |
127.6 | 93.6 | 36.3 | |||||||||
Aircraft maintenance |
50.1 | 43.5 | 15.2 | |||||||||
Aircraft rent |
28.4 | 29.5 | (3.7 | ) | ||||||||
Food and beverage service |
10.9 | 11.2 | (2.7 | ) | ||||||||
Other selling expenses and commissions |
32.7 | 33.9 | (3.5 | ) | ||||||||
Depreciation and amortization |
30.3 | 32.8 | (7.6 | ) | ||||||||
Loss on sale of assets |
| 0.8 | NM | |||||||||
Landing fees and other rentals |
40.6 | 33.2 | 22.3 | |||||||||
Other |
38.4 | 36.9 | 4.1 | |||||||||
Restructuring charges, primarily write off of Oakland
leasehold improvements |
7.4 | | NM | |||||||||
Total Operating Expenses |
593.9 | 539.3 | 10.1 | |||||||||
Operating Loss |
(70.6 | ) | (48.0 | ) | NM | |||||||
Interest income |
6.3 | 5.3 | ||||||||||
Interest expense |
(11.5 | ) | (10.8 | ) | ||||||||
Interest capitalized |
0.7 | 0.1 | ||||||||||
Other net, including fuel hedging gains |
90.5 | 0.2 | ||||||||||
86.0 | (5.2 | ) | ||||||||||
Income (Loss) Before Income Tax and Accounting Change |
$ | 15.4 | $ | (53.2 | ) | NM | ||||||
Operating Statistics: |
||||||||||||
Revenue passengers (000) |
3,851 | 3,592 | 7.2 | |||||||||
RPMs (000,000) |
3,897 | 3,580 | 8.9 | |||||||||
ASMs (000,000) |
5,370 | 5,178 | 3.7 | |||||||||
Passenger load factor |
72.6 | % | 69.1 | % | 3.5pts | |||||||
Yield per passenger mile |
12.09 | ¢ | 12.55 | ¢ | (3.7 | ) | ||||||
Operating revenue per ASM |
9.74 | ¢ | 9.49 | ¢ | 2.6 | |||||||
Operating expenses per ASM (a) |
11.06 | ¢ | 10.42 | ¢ | 6.1 | |||||||
Operating expense per ASM excluding fuel and
restructuring charges(a) |
8.55 | ¢ | 8.61 | ¢ | (0.7 | ) | ||||||
Raw fuel cost per gallon (a) |
155.6 | ¢ | 116.6 | ¢ | 33.4 | |||||||
GAAP fuel cost per gallon (a) |
151.5 | ¢ | 112.9 | ¢ | 34.2 | |||||||
Economic fuel cost per gallon (a) |
132.9 | ¢ | 112.9 | ¢ | 17.7 | |||||||
Fuel gallons (000,000) |
84.2 | 82.9 | 1.6 | |||||||||
Average number of employees |
9,219 | 9,984 | (7.7 | ) | ||||||||
Aircraft utilization (blk hrs/day) |
10.7 | 10.4 | 2.9 | |||||||||
Operating fleet at period-end |
109 | 108 | 0.9 |
NM = Not Meaningful
(a) | See Note A on page 8. |
6
Horizon Air Financial and Statistical Data
Quarter Ended March 31 | ||||||||||||
% | ||||||||||||
Financial Data (in millions): | 2005 | 2004 | Change | |||||||||
Operating Revenues: |
||||||||||||
Passenger |
$ | 117.7 | $ | 106.5 | 10.5 | |||||||
Freight and mail |
1.0 | 0.9 | 11.1 | |||||||||
Other net |
2.5 | 2.9 | (13.8 | ) | ||||||||
Total Operating Revenues |
121.2 | 110.3 | 9.9 | |||||||||
Operating Expenses: |
||||||||||||
Wages and benefits |
43.2 | 41.5 | 4.1 | |||||||||
Contracted services |
5.5 | 5.2 | 5.8 | |||||||||
Aircraft fuel |
19.1 | 14.2 | 34.5 | |||||||||
Aircraft maintenance |
11.1 | 7.3 | 52.1 | |||||||||
Aircraft rent |
17.7 | 18.3 | (3.3 | ) | ||||||||
Food and beverage service |
0.6 | 0.4 | 50.0 | |||||||||
Other selling expenses and commissions |
6.7 | 6.5 | 3.1 | |||||||||
Depreciation and amortization |
3.6 | 3.0 | 20.0 | |||||||||
Gain on sale of assets |
(0.2 | ) | (0.4 | ) | NM | |||||||
Landing fees and other rentals |
11.8 | 9.9 | 19.2 | |||||||||
Other |
11.5 | 11.5 | 0.0 | |||||||||
Impairment of F-28 aircraft and spare engines |
| 2.4 | NM | |||||||||
Total Operating Expenses |
130.6 | 119.8 | 9.0 | |||||||||
Operating Income (Loss) |
(9.4 | ) | (9.5 | ) | NM | |||||||
Interest income |
0.3 | | ||||||||||
Interest expense |
(1.2 | ) | (1.3 | ) | ||||||||
Interest capitalized |
0.1 | 0.2 | ||||||||||
Other net, including fuel hedging gains |
14.8 | 0.2 | ||||||||||
14.0 | (0.9 | ) | ||||||||||
Income (Loss) Before Income Tax and Accounting Change |
$ | 4.6 | $ | (10.4 | ) | NM | ||||||
Operating Statistics: |
||||||||||||
Revenue passengers (000) |
1,475 | 1,267 | 16.4 | |||||||||
RPMs (000,000) |
540 | 450 | 20.0 | |||||||||
ASMs (000,000) |
782 | 692 | 13.0 | |||||||||
Passenger load factor |
69.0 | % | 65.0 | % | 4.0pts | |||||||
Yield per passenger mile |
21.82 | ¢ | 23.67 | ¢ | (7.8 | ) | ||||||
Operating revenue per ASM |
15.50 | ¢ | 15.94 | ¢ | (2.8 | ) | ||||||
Operating expenses per ASM(a) |
16.69 | ¢ | 17.30 | ¢ | (3.5 | ) | ||||||
Operating expense per ASM excluding fuel and
impairment charges (a) |
14.25 | ¢ | 14.91 | ¢ | (4.4 | ) | ||||||
Raw fuel cost per gallon(a) |
162.5 | ¢ | 121.7 | ¢ | 33.5 | |||||||
GAAP fuel cost per gallon(a) |
158.5 | ¢ | 117.7 | ¢ | 34.8 | |||||||
Economic fuel cost per gallon(a) |
137.7 | ¢ | 117.7 | ¢ | 17.0 | |||||||
Fuel gallons (000,000) |
12.0 | 12.0 | 0.0 | |||||||||
Average number of employees |
3,363 | 3,344 | 0.6 | |||||||||
Aircraft utilization (blk hrs/day) |
8.4 | 7.7 | 8.3 | |||||||||
Operating fleet at period-end |
66 | 64 | 3.1 |
NM = Not Meaningful | ||
(a) | See Note A on page 8. |
7
Note A:
Pursuant to Item 10 of Regulation S-K, we are providing disclosure of the reconciliation of reported non-GAAP financial measures to their most directly comparable financial measures reported on a GAAP basis. The non-GAAP financial measures provide management the ability to measure and monitor performance both with and without the cost of aircraft fuel (including the gains and losses associated with our fuel hedging program where appropriate), restructuring charges, and aircraft impairment charges. Because the cost and availability of aircraft fuel are subject to many economic and political factors beyond our control and we record changes in the fair value of our hedge portfolio in our income statement, it is our view that the measurement and monitoring of performance without fuel is important. In addition, we believe the disclosure of financial performance without impairment and restructuring charges is useful to investors. Finally, these non-GAAP financial measures are also more comparable to financial measures reported to the Department of Transportation by other major network airlines.
The following tables reconcile our non-GAAP financial measures to the most directly comparable GAAP financial measures for both Alaska Airlines, Inc. and Horizon Air Industries, Inc.:
Alaska Airlines, Inc.: | |||||||||
($ in millions) | Three Months Ended March 31, | ||||||||
Unit cost reconciliations: | 2005 | 2004 | |||||||
Operating expenses |
$ | 593.9 | $ | 539.3 | |||||
ASMs (000,000) |
5,370 | 5,178 | |||||||
Operating expenses per ASM |
11.06¢ | ¢ | 10.42 | ¢ | |||||
Operating expenses |
$ | 593.9 | $ | 539.3 | |||||
Less: aircraft fuel |
(127.6 | ) | (93.6 | ) | |||||
Less: restructuring charges |
(7.4 | ) | | ||||||
Operating expense excluding fuel & restructuring charges |
$ | 458.9 | $ | 445.7 | |||||
ASMs (000,000) |
5,370 | 5,178 | |||||||
Operating expenses per ASM excluding fuel and
restructuring charges |
8.55 | ¢ | 8.61 | ¢ | |||||
Reconciliation
to GAAP pretax income (loss): |
|||||||||
Pretax income (loss) reported GAAP amounts |
$ | 15.4 | $ | (53.2 | ) | ||||
Less: mark-to-market hedging gains included
in nonoperating income (expense) |
(77.7 | ) | (0.4 | ) | |||||
Add: restructuring charges |
7.4 | | |||||||
Pretax loss excluding restructuring charges and mark-to-market hedging gains |
$ | (54.9 | ) | $ | (53.6 | ) | |||
Aircraft fuel reconciliations:
Three Months Ended March 31, | ||||||||||||||||
2005 | 2004 | |||||||||||||||
(000s) | Cost/Gal | (000s) | Cost/Gal | |||||||||||||
Fuel expense before hedge activities (raw fuel) |
$ | 131.0 | $ | 1.56 | $ | 96.7 | $ | 1.17 | ||||||||
Less: gains on settled hedges included in fuel expense |
(3.4 | ) | (0.04 | ) | (3.1 | ) | (0.04 | ) | ||||||||
GAAP fuel expense |
$ | 127.6 | $ | 1.52 | $ | 93.6 | $ | 1.13 | ||||||||
Less: gains on settled hedges included in nonoperating
income (expense) |
(15.7 | ) | (0.19 | ) | | | ||||||||||
Economic fuel expense |
$ | 111.9 | $ | 1.33 | $ | 93.6 | $ | 1.13 | ||||||||
Fuel gallons (000,000) |
84.2 | 82.9 | ||||||||||||||
Mark-to-market gains included in non-operating income
related to hedges that settle in future periods |
$ | 77.7 | $ | 0.4 | ||||||||||||
8
Horizon Air Industries, Inc. | ||||||||
($ in millions) | Three Months Ended March 31, | |||||||
Unit cost reconciliations: | 2005 | 2004 | ||||||
Operating expenses |
$ | 130.6 | $ | 119.8 | ||||
ASMs (000,000) |
782 | 692 | ||||||
Operating expenses per ASM |
16.69¢ | 17.30¢ | ||||||
Operating expenses |
$ | 130.6 | $ | 119.8 | ||||
Less: aircraft fuel |
(19.1 | ) | (14.2 | ) | ||||
Less: impairment of aircraft and spare engines |
| (2.4 | ) | |||||
Operating expenses excluding fuel and impairment charge |
$ | 111.5 | $ | 103.2 | ||||
ASMs (000,000) |
782 | 692 | ||||||
Operating expenses per ASM excluding fuel and impairment charge |
14.25¢ | 14.91¢ | ||||||
Reconciliation to GAAP pretax income (loss): |
||||||||
Pretax income (loss) reported GAAP amounts |
$ | 4.6 | $ | (10.4 | ) | |||
Less: mark-to-market hedging gains included
in nonoperating income (expense) |
(12.3 | ) | | |||||
Add: impairment of aircraft and spare engines |
| 2.4 | ||||||
Pretax loss excluding impairment charge
and mark-to-market hedging gains |
$ | (7.7 | ) | $ | (8.0 | ) | ||
Aircraft fuel reconciliations:
Three Months Ended March 31, | ||||||||||||||||
2005 | 2004 | |||||||||||||||
(000s) | Cost/Gal | (000s) | Cost/Gal | |||||||||||||
Fuel expense before hedge activities (raw fuel) |
$ | 19.5 | $ | 1.63 | $ | 14.6 | $ | 1.22 | ||||||||
Less: gains on settled hedges included in fuel expense |
(0.4 | ) | (0.04 | ) | (0.4 | ) | (0.04 | ) | ||||||||
GAAP fuel expense |
$ | 19.1 | $ | 1.59 | $ | 14.2 | $ | 1.18 | ||||||||
Less: gains on settled hedges included in nonoperating
income (expense) |
(2.5 | ) | (0.21 | ) | | | ||||||||||
Economic fuel expense |
$ | 16.6 | $ | 1.38 | $ | 14.2 | $ | 1.18 | ||||||||
Fuel gallons (000,000) |
12.0 | 12.0 | ||||||||||||||
Mark-to-market gains included in non-operating income related
to hedges that settle in future periods |
$ | 12.3 | | |||||||||||||
9
Air Group Net Income (Loss) and EPS Reconciliation:
The following table summarizes Alaska Air Group, Inc.s net loss and diluted loss per share during 2005 and 2004 excluding the cumulative effect of the accounting change, restructuring and impairment charges, and mark-to-market gains of fuel hedges that settle in future periods, as reported in accordance with GAAP (in millions except per share amounts):
Three Months Ended March 31, | ||||||||||||||||
2005 | 2004 | |||||||||||||||
Dollars | Diluted EPS | Dollars | Diluted EPS | |||||||||||||
Net loss and diluted EPS excluding the cumulative effect of
the accounting change, restructuring and impairment
charges, and mark-to-market hedging gains * |
($41.7 | ) | ($1.54 | ) | ($41.4 | ) | (1.54 | ) | ||||||||
Effect of dilutive shares and interest on convertible bonds * |
NA | $ | 0.32 | NA | NA | |||||||||||
Cumulative effect of accounting change |
(90.4 | ) | (2.73 | ) | | | ||||||||||
Mark-to-market hedging gains, net of tax |
56.2 | 1.69 | 0.3 | 0.01 | ||||||||||||
Restructuring charges, primarily write off of Oakland leasehold improvements, net of tax |
(4.6 | ) | (0.13 | ) | | | ||||||||||
Impairment charges, net of tax |
| | (1.6 | ) | (0.06 | ) | ||||||||||
Reported GAAP amounts |
($80.5 | ) | ($2.39 | ) | ($42.7 | ) | ($1.59 | ) | ||||||||
* | Diluted loss per share excluding the impact of the accounting change, mark to market gain on fuel hedges, restructuring and impairment charges has been calculated using the weighted average number of shares oustanding (27.1 million at March 31, 2005). This share count excludes the dilutive impact of stock awards and the contingently convertible senior notes as the impact would have been antidilutive (and thus excluded) if calculated based on a net loss of $41.7 million. | |||
In order to reconcile the diluted loss per share to the GAAP loss per share, the table above includes $0.32, which represents the impact of the additional shares that were used in the GAAP loss per share as well as $1.2 million of interest, net of tax, on the contingently convertible senior notes added back to earnings in order to derive the loss per share in accordance with GAAP. | ||||
The per share impact of the change in accounting, mark to market gain on fuel hedges, restructuring and impairment charges have been presented in the table above assuming 33.2 million fully diluted shares outstanding. |
The following table summarizes Alaska Air Group, Inc.s basic and diluted per share calculations for earnings before the accounting change and net loss (in millions except per share amounts):
Three Months Ended March 31, | ||||||||
2005 | 2004 | |||||||
Basic Earnings (Loss) Per Share: |
||||||||
Income (loss) before accounting change |
$ | 9.9 | $ | (42.7 | ) | |||
Weighted average shares outstanding |
27.147 | 26.778 | ||||||
Income (loss) per share before accounting change |
$ | 0.36 | $ | (1.59 | ) | |||
Cumulative effect of accounting change, net of tax |
$ | (90.4 | ) | NA | ||||
Weighted average shares outstanding |
27.147 | NA | ||||||
Per share cumulative effect of accounting change |
$ | (3.33 | ) | NA | ||||
Net loss |
$ | (80.5 | ) | $ | (42.7 | ) | ||
Weighted average shares outstanding |
27.147 | 26.778 | ||||||
Net loss per share |
$ | (2.97 | ) | $ | (1.59 | ) | ||
Diluted Earnings (Loss) Per Share: |
||||||||
Income (loss) before accounting change |
$ | 9.9 | $ | (42.7 | ) | |||
Interest on convertible notes, net of tax |
1.2 | | ||||||
Income (loss) before accounting change for diluted calculation |
$ | 11.1 | $ | (42.7 | ) | |||
Weighted average shares outstanding |
33.158 | 26.778 | ||||||
Income (loss) per share before accounting change |
$ | 0.34 | $ | (1.59 | ) | |||
Cumulative effect of accounting change, net of tax |
$ | (90.4 | ) | NA | ||||
Weighted average shares outstanding |
33.158 | NA | ||||||
Per share cumulative effect of accounting change |
$ | (2.73 | ) | NA | ||||
Net loss |
$ | (80.5 | ) | $ | (42.7 | ) | ||
Interest on convertible notes, net of tax |
1.2 | | ||||||
Net loss for diluted calculation |
$ | (79.3 | ) | $ | (42.7 | ) | ||
Weighted average shares outstanding |
33.158 | 26.778 | ||||||
Net loss per share |
$ | (2.39 | ) | $ | (1.59 | ) | ||
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Forecasted Financial Measures
During our quarterly earnings conference call, we expect to discuss forward-looking forecasted unit cost information for 2005. This forecasted unit cost information includes non-GAAP unit cost estimates which are summarized in the following table together with the most directly comparable GAAP unit cost for Horizon Air Industries, Inc.:
Horizon Air | ||||||||||||
Forecast of total | ||||||||||||
Forecast of cost | Forecast of fuel | operating cost per | ||||||||||
per available seat | cost per available | available seat | ||||||||||
mile, excluding | seat mile | mile, as reported | ||||||||||
fuel (cents) | (See Note 1) | on a GAAP basis (cents) | ||||||||||
Second quarter 2005 |
13.2 | 2.9 | 16.1 | |||||||||
Third quarter 2005 |
12.0 | 2.8 | 14.8 | |||||||||
Fourth quarter 2005 |
12.8 | 2.8 | 15.6 | |||||||||
Total 2005 |
13.0 | 2.8 | 15.8 |
Note 1: Our forecast of fuel costs is based on anticipated gallons consumed and estimated fuel cost per gallon for Horizon. The estimate also excludes the benefit from settled hedges recorded in other non-operating income as it does not impact our operating cost per available seat mile as presented on a GAAP basis. Given the volatility of fuel prices, readers should be cautioned that actual fuel expense will likely differ from the forecast above.
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