UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
January 26, 2006
(Date of earliest event reported)
ALASKA AIR GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
| 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
(Registrant’s Telephone Number, Including Area Code)
(Former Name or Former Address, if Changed Since Last Report)
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):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
1
| ITEM 2.02. | Results of Operations And Financial Condition |
Alaska Air Group, Inc. (the “Company”) today issued a press release reporting financial results for the fourth quarter and year ended December 31, 2005. The press release is furnished as Exhibit 99.1.
The information in this Item 2.02, including Exhibit 99.1, is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liability of that Section, nor shall such information be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act of 1933 or the Exchange Act, except as otherwise stated in such filing.
ITEM 8.01.
Other Events
For purposes of incorporation by reference into the Company’s Registration Statement on Form S-3, filed with the Securities and Exchange Commission on December 12, 2005, the Company is filing the unaudited financial statements for the quarter and year ended December 31, 2005 and other financial and statistical data attached hereto as Exhibit 99.2.
ITEM 9.01.
Financial Statements and Exhibits
(c) Exhibits.
| 99.1 | Press Release dated January 26, 2006 |
| 99.2 | Financial and statistical data |
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: January 26, 2006
| /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 | January 26, 2006 | |
ALASKA AIR GROUP REPORTS 2005 FULL YEAR RESULTS
SEATTLE — Alaska Air Group, Inc. (NYSE:ALK) today reported full year income of $84.5 million, or $2.65 per diluted share, before the cumulative effect of a maintenance accounting policy change, compared to a loss of $15.3 million, or $0.57 per share in 2004. Both 2005 and 2004 include certain significant items related to mark-to-market fuel hedge accounting, restructuring activities, refunds of navigation fees, and impairment charges that impact the comparability of the periods. Excluding the impact of these items, 2005 net income would have been $55.0 million, or $1.78 per diluted share, compared to $5.2 million, or $0.19 per share in 2004.
The Company reported a fourth quarter net loss of $33.0 million, or $1.15 per share, compared to a net loss of $44.9 million, or $1.66 per share, in the fourth quarter of 2004. Similar to the items noted for the full year, both the 2005 and 2004 quarterly results include mark-to-market fuel hedge accounting adjustments, restructuring activities and an impairment charge in 2004. Excluding the impact of these items, fourth quarter net income would have been $0.6 million, or $0.02 per diluted share in 2005, compared to a loss of $14.3 million, or $0.53 per share, in the fourth quarter of 2004.
“Sacrifices by our employees, strong revenue performance and the benefit of our fuel hedging program enabled us to be one of only a couple of major airlines that posted a significant adjusted profit for 2005,” said Bill Ayer, chairman and chief executive officer. “Our people should be extremely proud of that. I want to thank our customers for sticking with us and our employees for their hard work. Our job now is to stay the course to secure Alaska Air Group’s position as a leader in this tumultuous industry.”
Alaska Airlines’ passenger traffic in the fourth quarter increased 3.2 percent on a capacity increase of 1.9 percent. Alaska’s load factor increased 1.0 percentage point to 73.9 percent compared to the same period in 2004. Alaska’s operating revenue per available seat mile (ASM) increased 8.4 percent and its operating costs per ASM excluding fuel and restructuring charges increased 0.9 percent. Alaska’s pretax loss for the quarter was $46.3 million, compared to a pretax loss of $68.9 million in 2004. Excluding the unusual items referenced above, Alaska’s pretax income was $0.5 million for the quarter compared to a $22.7 million loss in the fourth quarter of 2004.
Horizon Air’s passenger traffic in the fourth quarter increased 11.1 percent on an 8.2 percent capacity increase. Horizon’s load factor increased by 2.0 percentage points to 73.7 percent compared to the same period in 2004. Horizon’s operating revenue per ASM increased 1.1 percent and its operating costs per ASM excluding fuel and impairment charges increased 1.1 percent. Horizon’s pretax loss for the quarter was $6.6 million, compared to a pretax loss of $1.6 million in 2004. Excluding the unusual items referenced above, Horizon’s pretax income was $0.4 million for the quarter compared to $1.8 million in the fourth quarter of 2004.
Alaska Air Group had cash and short-term investments at December 31, 2005 of approximately $983 million compared to $874 million at December 31, 2004. The Company’s debt-to-capital ratio, assuming aircraft operating leases are capitalized at seven times annualized rent, was 73 percent as of December 31, 2005, compared to 78 percent as of December 31, 2004. The Company’s cash position and debt-to-capital ratio were positively impacted by Air Group’s recent common stock offering which raised approximately $200 million in net proceeds.
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 fourth quarter and full year 2005 results will be simulcast via the internet at 8:00 a.m. Pacific Time on January 26, 2006. It may be accessed through the company’s 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 contains forward-looking statements 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 and involve known and unknown risks and uncertainties that may cause actual outcomes to be materially different from that indicated by any forward-looking statements. Some of the things that could cause our actual results to differ from our expectations are: the competitive environment and other trends in our industry; changes in our operating costs including fuel, which can be volatile; our ability to meet our cost reduction goals; our inability to achieve or maintain profitability and fluctuations in our quarterly results; our significant indebtedness; our inability to secure new aircraft financing; the implementation of our growth strategy; possible accelerated retirement of our MD-80 fleet; compliance with our financial covenants; potential downgrades of our credit ratings and the availability of financing; the concentration of our revenue from a few key markets; general economic conditions, as well as economic conditions in the geographic regions we serve; actual or threatened terrorist attacks; global instability and potential U.S. military actions or activities; insurance costs; labor disputes; our ability to attract and retain qualified personnel; an aircraft accident or incident; liability and other claims asserted against us; operational disruptions; increases in government fees and taxes; changes in laws and regulations; our reliance on automated systems; and our reliance on third-party vendors and partners. For a discussion of these and other risk factors, see the Company’s Form S-3 Registration Statement filed on December 12, 2005. 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 press release to conform them to actual results.
# # #
Alaska Airlines and sister carrier, Horizon Air, together serve 88 cities through an expansive network throughout Alaska, the Lower 48, Canada and Mexico. For reservations visit alaskaair.com. For more news and information, visit the Alaska Airlines/Horizon Air newsroom at http://newsroom.alaskaair.com.
ALASKA AIR GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(In Millions Except Per Share Amounts)
| Three Months Ended December 31 |
Twelve Months |
|||||||||||||||
| 2005 |
2004 |
2005 |
2004 |
|||||||||||||
| Operating Revenues: |
||||||||||||||||
| Passenger |
$ | 666.8 | $ | 598.6 | $ | 2,728.7 | $ | 2,497.1 | ||||||||
| Freight and mail |
22.8 | 22.0 | 94.1 | 90.3 | ||||||||||||
| Other - net |
41.0 | 35.7 | 152.5 | 136.4 | ||||||||||||
| Total Operating Revenues |
730.6 | 656.3 | 2,975.3 | 2,723.8 | ||||||||||||
| Operating Expenses: |
||||||||||||||||
| Wages and benefits |
230.1 | 230.4 | 923.6 | 967.5 | ||||||||||||
| Contracted services |
36.2 | 29.3 | 132.4 | 108.4 | ||||||||||||
| Aircraft fuel |
196.8 | 155.9 | 722.8 | 540.7 | ||||||||||||
| Aircraft maintenance |
53.9 | 46.2 | 228.5 | 184.1 | ||||||||||||
| Aircraft rent |
47.0 | 45.9 | 187.0 | 187.4 | ||||||||||||
| Food and beverage service |
13.1 | 12.4 | 50.2 | 51.9 | ||||||||||||
| Selling expenses |
38.2 | 33.4 | 157.7 | 144.9 | ||||||||||||
| Depreciation and amortization |
37.6 | 36.8 | 143.4 | 142.6 | ||||||||||||
| Landing fees and other rentals |
51.9 | 46.6 | 208.4 | 185.1 | ||||||||||||
| Other |
51.9 | 50.4 | 208.3 | 197.4 | ||||||||||||
| Restructuring charges |
(0.3 | ) | 25.9 | 20.4 | 53.4 | |||||||||||
| Impairment of aircraft and related spare parts |
— | 0.6 | — | 40.2 | ||||||||||||
| Total Operating Expenses |
756.4 | 713.8 | 2,982.7 | 2,803.6 | ||||||||||||
| Operating Loss |
(25.8 | ) | (57.5 | ) | (7.4 | ) | (79.8 | ) | ||||||||
| Nonoperating Income (Expense): |
||||||||||||||||
| Interest income |
9.3 | 5.9 | 30.9 | 24.5 | ||||||||||||
| Interest expense |
(17.5 | ) | (13.0 | ) | (63.0 | ) | (51.9 | ) | ||||||||
| Interest capitalized |
4.0 | 0.6 | 8.9 | 1.7 | ||||||||||||
| Fuel hedging gains (losses) |
(24.7 | ) | (7.8 | ) | 173.9 | 85.5 | ||||||||||
| Other - net |
(1.6 | ) | (1.1 | ) | (6.1 | ) | (0.6 | ) | ||||||||
| (30.5 | ) | (15.4 | ) | 144.6 | 59.2 | |||||||||||
| Income (loss) before income tax and accounting change |
(56.3 | ) | (72.9 | ) | 137.2 | (20.6 | ) | |||||||||
| Income tax expense (benefit) |
(23.3 | ) | (28.0 | ) | 52.7 | (5.3 | ) | |||||||||
| Income (loss) before accounting change |
$ | (33.0 | ) | $ | (44.9 | ) | $ | 84.5 | $ | (15.3 | ) | |||||
| Cumulative effect of accounting change, net of tax |
— | — | (90.4 | ) | — | |||||||||||
| Net Loss |
$ | (33.0 | ) | $ | (44.9 | ) | $ | (5.9 | ) | $ | (15.3 | ) | ||||
| Basic Earnings Per Share: |
||||||||||||||||
| Income (loss) before accounting change |
$ | (1.15 | ) | $ | (1.66 | ) | $ | 3.06 | $ | (0.57 | ) | |||||
| Cumulative effect of accounting change |
NA | NA | (3.27 | ) | NA | |||||||||||
| Net Loss Per Share |
$ | (1.15 | ) | $ | (1.66 | ) | $ | (0.21 | ) | $ | (0.57 | ) | ||||
| Diluted Earnings Per Share: |
||||||||||||||||
| Income (loss) before accounting change |
$ | (1.15 | ) | $ | (1.66 | ) | $ | 2.65 | $ | (0.57 | ) | |||||
| Cumulative effect of accounting change |
NA | NA | (2.66 | ) | NA | |||||||||||
| Net Loss Per Share |
$ | (1.15 | ) | $ | (1.66 | ) | $ | (0.01 | ) | $ | (0.57 | ) | ||||
| Shares Used for Computation: |
||||||||||||||||
| Basic |
28.629 | 26.975 | 27.609 | 26.859 | ||||||||||||
| Diluted |
28.629 | 26.975 | 33.917 | 26.859 | ||||||||||||
4
Alaska Air Group, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
| (In Millions) |
December 31, 2005 |
December 31, 2004 | ||||
| Cash and marketable securities |
$ | 983 | $ | 874 | ||
| Total current assets |
$ | 1,540 | $ | 1,242 | ||
| Property and equipment-net |
2,032 | 1,908 | ||||
| Other assets |
220 | 185 | ||||
| Total assets |
$ | 3,792 | $ | 3,335 | ||
| Current liabilities |
$ | 1,165 | $ | 957 | ||
| Long-term debt and capital lease obligations |
969 | 990 | ||||
| Other liabilities and credits |
830 | 723 | ||||
| Shareholders’ equity |
828 | 665 | ||||
| Total liabilities and shareholders’ equity |
$ | 3,792 | $ | 3,335 | ||
5
Alaska Airlines Financial and Statistical Data
| Three Months Ended December 31 |
Twelve Months Ended December 31 |
|||||||||||||||||||||
| 2005 |
2004 |
% Change |
2005 |
2004 |
% Change |
|||||||||||||||||
| Financial Data (in millions): |
||||||||||||||||||||||
| Operating Revenues: |
||||||||||||||||||||||
| Passenger |
$ | 526.4 | $ | 477.8 | 10.2 | $ | 2,183.0 | $ | 2,023.6 | 7.9 | ||||||||||||
| Freight and mail |
21.9 | 21.1 | 3.8 | 90.3 | 86.4 | 4.5 | ||||||||||||||||
| Other - net |
38.9 | 32.4 | 20.1 | 142.8 | 123.0 | 16.1 | ||||||||||||||||
| Total Operating Revenues |
587.2 | 531.3 | 10.5 | 2,416.1 | 2,233.0 | 8.2 | ||||||||||||||||
| Operating Expenses: |
||||||||||||||||||||||
| Wages and benefits |
181.2 | 187.9 | (3.6 | ) | 737.4 | 799.7 | (7.8 | ) | ||||||||||||||
| Contracted services |
32.9 | 26.2 | 25.6 | 119.9 | 96.5 | 24.2 | ||||||||||||||||
| Aircraft fuel |
170.9 | 135.6 | 26.0 | 626.6 | 472.0 | 32.8 | ||||||||||||||||
| Aircraft maintenance |
41.7 | 34.5 | 20.9 | 185.2 | 145.8 | 27.0 | ||||||||||||||||
| Aircraft rent |
29.6 | 28.0 | 5.7 | 116.8 | 113.5 | 2.9 | ||||||||||||||||
| Food and beverage service |
12.5 | 11.9 | 5.0 | 47.7 | 49.8 | (4.2 | ) | |||||||||||||||
| Selling expenses |
29.0 | 31.1 | (6.8 | ) | 126.9 | 132.2 | (4.0 | ) | ||||||||||||||
| Depreciation and amortization |
32.5 | 32.9 | (1.2 | ) | 125.4 | 128.1 | (2.1 | ) | ||||||||||||||
| Landing fees and other rentals |
40.4 | 35.9 | 12.5 | 161.9 | 142.0 | 14.0 | ||||||||||||||||
| Other |
39.0 | 38.2 | 2.1 | 158.7 | 148.6 | 6.8 | ||||||||||||||||
| Restructuring charges |
(0.3 | ) | 25.9 | NM | 20.4 | 53.4 | NM | |||||||||||||||
| Impairment of aircraft and related spare parts |
— | — | NM | — | 36.8 | NM | ||||||||||||||||
| Total Operating Expenses |
609.4 | 588.1 | 3.6 | 2,426.9 | 2,318.4 | 4.7 | ||||||||||||||||
| Operating Loss |
(22.2 | ) | (56.8 | ) | NM | (10.8 | ) | (85.4 | ) | NM | ||||||||||||
| Interest income |
9.4 | 6.2 | 32.5 | 26.2 | ||||||||||||||||||
| Interest expense |
(14.3 | ) | (11.0 | ) | (51.2 | ) | (44.1 | ) | ||||||||||||||
| Interest capitalized |
3.6 | 0.4 | 8.1 | 1.1 | ||||||||||||||||||
| Fuel hedging gains (losses) |
(21.5 | ) | (6.8 | ) | 150.6 | 75.3 | ||||||||||||||||
| Other - net |
(1.3 | ) | (0.9 | ) | (5.0 | ) | (0.1 | ) | ||||||||||||||
| (24.1 | ) | (12.1 | ) | 135.0 | 58.4 | |||||||||||||||||
| Income (Loss) Before Income Tax and Accounting Change |
$ | (46.3 | ) | $ | (68.9 | ) | NM | $ | 124.2 | $ | (27.0 | ) | NM | |||||||||
| Operating Statistics: |
||||||||||||||||||||||
| Revenue passengers (000) |
4,043 | 3,998 | 1.1 | 16,759 | 16,295 | 2.8 | ||||||||||||||||
| RPMs (000,000) |
4,104 | 3,976 | 3.2 | 16,915 | 16,231 | 4.2 | ||||||||||||||||
| ASMs (000,000) |
5,556 | 5,452 | 1.9 | 22,292 | 22,276 | 0.1 | ||||||||||||||||
| Passenger load factor |
73.9 | % | 72.9 | % | 1.0 | pts | 75.9 | % | 72.9 | % | 3.0 | pts | ||||||||||
| Yield per passenger mile |
12.83 | ¢ | 12.02 | ¢ | 6.7 | 12.91 | ¢ | 12.47 | ¢ | 3.5 | ||||||||||||
| Operating revenue per ASM |
10.57 | ¢ | 9.75 | ¢ | 8.4 | 10.84 | ¢ | 10.02 | ¢ | 8.2 | ||||||||||||
| Operating expenses per ASM (a) |
10.97 | ¢ | 10.79 | ¢ | 1.7 | 10.89 | ¢ | 10.41 | ¢ | 4.6 | ||||||||||||
| Operating expenses per ASM excluding fuel, navigation fee recovery, restructuring and impairment charges(a) |
7.90 | ¢ | 7.83 | ¢ | 0.9 | 8.01 | ¢ | 7.92 | ¢ | 1.1 | ||||||||||||
| Raw fuel cost per gallon (a) |
$ | 2.02 | $ | 1.60 | 26.3 | $ | 1.84 | $ | 1.37 | 34.3 | ||||||||||||
| GAAP fuel cost per gallon (a) |
$ | 1.99 | $ | 1.56 | 27.6 | $ | 1.81 | $ | 1.33 | 36.1 | ||||||||||||
| Economic fuel cost per gallon (a) |
$ | 1.69 | $ | 1.40 | 20.7 | $ | 1.53 | $ | 1.26 | 21.4 | ||||||||||||
| Fuel gallons (000,000) |
85.7 | 87.1 | (1.6 | ) | 346.4 | 354.7 | (2.3 | ) | ||||||||||||||
| Average number of employees |
8,937 | 9,433 | (5.3 | ) | 9,065 | 9,968 | (9.1 | ) | ||||||||||||||
| Aircraft utilization (blk hrs/day) |
10.8 | 10.8 | 0.0 | 10.8 | 11.0 | (1.8 | ) | |||||||||||||||
| Operating fleet at period-end |
110 | 108 | 1.9 | 110 | 108 | 1.9 | ||||||||||||||||
NM = Not Meaningful
| (a) | See Note A on page 8. |
6
Horizon Air Financial and Statistical Data
| Three Months Ended December 31 |
Twelve Months Ended December 31 |
|||||||||||||||||||||
| 2005 |
2004 |
% Change |
2005 |
2004 |
% Change |
|||||||||||||||||
| Financial Data (in millions): |
||||||||||||||||||||||
| Operating Revenues: |
||||||||||||||||||||||
| Passenger |
$ | 138.2 | $ | 125.1 | 10.5 | $ | 544.0 | $ | 487.3 | 11.6 | ||||||||||||
| Freight and mail |
0.9 | 0.9 | 0.0 | 3.8 | 3.9 | (2.6 | ) | |||||||||||||||
| Other - net |
1.8 | 2.9 | (37.9 | ) | 8.6 | 12.0 | (28.3 | ) | ||||||||||||||
| Total Operating Revenues |
140.9 | 128.9 | 9.3 | 556.4 | 503.2 | 10.6 | ||||||||||||||||
| Operating Expenses: |
||||||||||||||||||||||
| Wages and benefits |
46.8 | 41.4 | 13.0 | 178.4 | 163.5 | 9.1 | ||||||||||||||||
| Contracted services |
6.1 | 5.3 | 15.1 | 23.8 | 20.7 | 15.0 | ||||||||||||||||
| Aircraft fuel |
25.9 | 20.3 | 27.6 | 96.2 | 68.7 | 40.0 | ||||||||||||||||
| Aircraft maintenance |
12.2 | 11.7 | 4.3 | 43.3 | 38.3 | 13.1 | ||||||||||||||||
| Aircraft rent |
17.4 | 17.9 | (2.8 | ) | 70.2 | 73.9 | (5.0 | ) | ||||||||||||||
| Food and beverage service |
0.6 | 0.5 | 20.0 | 2.5 | 2.1 | 19.0 | ||||||||||||||||
| Selling expenses |
7.0 | 6.6 | 6.1 | 29.1 | 26.5 | 9.8 | ||||||||||||||||
| Depreciation and amortization |
4.8 | 3.7 | 29.7 | 16.8 | 13.4 | 25.4 | ||||||||||||||||
| Landing fees and other rentals |
12.0 | 10.2 | 17.6 | 47.7 | 41.4 | 15.2 | ||||||||||||||||
| Other |
11.2 | 10.8 | 3.7 | 42.2 | 42.0 | 0.5 | ||||||||||||||||
| Impairment of aircraft and related spare parts |
— | 0.6 | NM | — | 3.4 | NM | ||||||||||||||||
| Total Operating Expenses |
144.0 | 129.0 | 11.6 | 550.2 | 493.9 | 11.4 | ||||||||||||||||
| Operating Income (Loss) |
(3.1 | ) | (0.1 | ) | NM | 6.2 | 9.3 | NM | ||||||||||||||
| Interest income |
0.6 | 0.2 | 1.6 | 1.1 | ||||||||||||||||||
| Interest expense |
(1.2 | ) | (0.7 | ) | (5.5 | ) | (3.9 | ) | ||||||||||||||
| Interest capitalized |
0.4 | 0.2 | 0.8 | 0.6 | ||||||||||||||||||
| Fuel hedging gains (losses) |
(3.2 | ) | (1.0 | ) | 23.3 | 10.2 | ||||||||||||||||
| Other - net |
(0.1 | ) | (0.2 | ) | — | (0.2 | ) | |||||||||||||||
| (3.5 | ) | (1.5 | ) | 20.2 | 7.8 | |||||||||||||||||
| Income (Loss) Before Income Tax and Accounting Change |
$ | (6.6 | ) | $ | (1.6 | ) | NM | $ | 26.4 | $ | 17.1 | NM | ||||||||||
| Operating Statistics: |
||||||||||||||||||||||
| Revenue passengers (000) |
1,613 | 1,568 | 2.9 | 6,481 | 5,930 | 9.3 | ||||||||||||||||
| RPMs (000,000) |
632 | 569 | 11.1 | 2,475 | 2,155 | 14.8 | ||||||||||||||||
| ASMs (000,000) |
858 | 793 | 8.2 | 3,400 | 3,107 | 9.4 | ||||||||||||||||
| Passenger load factor |
73.7 | % | 71.7 | % | 2.0 | pts | 72.8 | % | 69.3 | % | 3.5 | pts | ||||||||||
| Yield per passenger mile |
21.87 | ¢ | 21.99 | ¢ | (0.5 | ) | 21.98 | ¢ | 22.61 | ¢ | (2.8 | ) | ||||||||||
| Operating revenue per ASM |
16.42 | ¢ | 16.25 | ¢ | 1.1 | 16.36 | ¢ | 16.20 | ¢ | 1.0 | ||||||||||||
| Operating expenses per ASM (a) |
16.78 | ¢ | 16.26 | ¢ | 3.2 | 16.18 | ¢ | 15.90 | ¢ | 1.8 | ||||||||||||
| Operating expenses per ASM excluding fuel and impairment charges (a) |
13.76 | ¢ | 13.62 | ¢ | 1.1 | 13.35 | ¢ | 13.58 | ¢ | (1.7 | ) | |||||||||||
| Raw fuel cost per gallon (a) |
$ | 2.06 | $ | 1.66 | 24.1 | $ | 1.90 | $ | 1.42 | 33.8 | ||||||||||||
| GAAP fuel cost per gallon (a) |
$ | 2.04 | $ | 1.62 | 25.9 | $ | 1.87 | $ | 1.38 | 35.5 | ||||||||||||
| Economic fuel cost per gallon (a) |
$ | 1.74 | $ | 1.48 | 17.6 | $ | 1.58 | $ | 1.31 | 20.6 | ||||||||||||
| Fuel gallons (000,000) |
12.7 | 12.5 | 1.6 | 51.3 | 49.7 | 3.2 | ||||||||||||||||
| Average number of employees |
3,537 | 3,493 | 1.3 | 3,456 | 3,423 | 1.0 | ||||||||||||||||
| Aircraft utilization (blk hrs/day) |
8.7 | 8.5 | 2.4 | 8.7 | 8.3 | 4.8 | ||||||||||||||||
| Operating fleet at period-end |
65 | 65 | 0.0 | 65 | 65 | 0.0 | ||||||||||||||||
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), the navigation fee refund, restructuring charges or adjustments thereto, 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 December 31, |
Twelve Months Ended December 31 |
|||||||||||||||
| 2005 |
2004 |
2005 |
2004 |
|||||||||||||
| Unit cost reconciliations: |
||||||||||||||||
| Operating expenses |
$ | 609.4 | $ | 588.1 | $ | 2,426.9 | $ | 2,318.4 | ||||||||
| ASMs (000,000) |
5,556 | 5,452 | 22,292 | 22,276 | ||||||||||||
| Operating expenses per ASM |
10.97 | ¢ | 10.79 | ¢ | 10.89 | ¢ | 10.41 | ¢ | ||||||||
| Operating expenses |
$ | 609.4 | $ | 588.1 | $ | 2,426.9 | $ | 2,318.4 | ||||||||
| Less: aircraft fuel |
(170.9 | ) | (135.6 | ) | (626.6 | ) | (472.0 | ) | ||||||||
| Less: restructuring charges |
0.3 | (25.9 | ) | (20.4 | ) | (53.4 | ) | |||||||||
| Add: navigation fee refund |
— | — | 4.7 | 7.7 | ||||||||||||
| Less: impairment of aircraft and related spare parts |
— | — | — | (36.8 | ) | |||||||||||
| Operating expenses excluding fuel, navigation fee refund, restructuring and impairment charges |
$ | 438.8 | $ | 426.6 | $ | 1,784.6 | $ | 1,763.9 | ||||||||
| ASMs (000,000) |
5,556 | 5,452 | 22,292 | 22,276 | ||||||||||||
| Operating expenses per ASM excluding fuel, navigation fee refund, restructuring and impairment charges |
7.90 | ¢ | 7.83 | ¢ | 8.01 | ¢ | 7.92 | ¢ | ||||||||
| Reconciliation to GAAP income (loss) before taxes and accounting change: |
||||||||||||||||
| Income (loss) before taxes and accounting change, excluding mark-to-market hedging gains (losses), navigation fee refund, restructuring and impairment charges |
$ | 0.5 | $ | (22.7 | ) | $ | 85.8 | $ | 2.1 | |||||||
| Add: mark-to-market hedging gains (losses) included in nonoperating income (expense) |
(47.1 | ) | (20.3 | ) | 53.1 | 50.1 | ||||||||||
| Less: restructuring charges |
0.3 | (25.9 | ) | (20.4 | ) | (53.4 | ) | |||||||||
| Add: navigation fee refund and related interest received |
— | — | 5.7 | 11.0 | ||||||||||||
| Less: impairment of aircraft and related spare parts |
— | — | — | (36.8 | ) | |||||||||||
| GAAP income (loss) before taxes and accounting change as reported |
$ | (46.3 | ) | $ | (68.9 | ) | $ | 124.2 | $ | (27.0 | ) | |||||
| Three Months Ended December 31 |
||||||||||||||||
| 2005 |
2004 |
|||||||||||||||
| (000s) |
Cost/Gal |
(000s) |
Cost/Gal |
|||||||||||||
| Aircraft fuel reconciliations: |
||||||||||||||||
| Fuel expense before hedge activities (“raw” or “into-plane” fuel cost) |
$ | 172.7 | $ | 2.02 | $ | 139.3 | $ | 1.60 | ||||||||
| Less: gains on settled hedges included in fuel expense |
(1.8 | ) | (0.03 | ) | (3.7 | ) | (0.04 | ) | ||||||||
| GAAP fuel expense |
$ | 170.9 | $ | 1.99 | $ | 135.6 | $ | 1.56 | ||||||||
| Less: gains on settled hedges included in nonoperating income (expense) |
(25.6 | ) | (0.30 | ) | (13.5 | ) | (0.16 | ) | ||||||||
| Economic fuel expense |
$ | 145.3 | $ | 1.69 | $ | 122.1 | $ | 1.40 | ||||||||
| Fuel gallons (000,000) |
85.7 | 87.1 | ||||||||||||||
| Mark-to-market gains (losses) included in non-operating income (expense) related to hedges that settle in future periods, net of the reclassification of previously recorded mark-to-market gains to gains on settled hedges included in nonoperating income (expense) |
$ | (47.1 | ) | $ | (20.3 | ) | ||||||||||
| Twelve Months Ended December 31 |
||||||||||||||||
| 2005 |
2004 |
|||||||||||||||
| (000s) |
Cost/Gal |
(000s) |
Cost/Gal |
|||||||||||||
| Fuel expense before hedge activities (“raw” or “into-plane” fuel cost) |
$ | 637.9 | $ | 1.84 | $ | 486.6 | $ | 1.37 | ||||||||
| Less: gains on settled hedges included in fuel expense |
(11.3 | ) | (0.03 | ) | (14.6 | ) | (0.04 | ) | ||||||||
| GAAP fuel expense |
$ | 626.6 | $ | 1.81 | $ | 472.0 | $ | 1.33 | ||||||||
| Less: gains on settled hedges included in nonoperating income (expense) |
(97.5 | ) | (0.28 | ) | (25.2 | ) | (0.07 | ) | ||||||||
| Economic fuel expense |
$ | 529.1 | $ | 1.53 | $ | 446.8 | $ | 1.26 | ||||||||
| Fuel gallons (000,000) |
346.4 | 354.7 | ||||||||||||||
| Mark-to-market gains included in non-operating income (expense) related to hedges that settle in future periods, net of the reclassification of previously recorded mark-to-market gains to gains on settled hedges included in nonoperating income (expense) |
$ | 53.1 | $ | 50.1 | ||||||||||||
8
Horizon Air Industries, Inc.
($ in millions)
| Three Months Ended December 31, |
Twelve Months Ended December 31 |
|||||||||||||||
| 2005 |
2004 |
2005 |
2004 |
|||||||||||||
| Unit cost reconciliations: |
||||||||||||||||
| Operating expenses |
$ | 144.0 | $ | 129.0 | $ | 550.2 | $ | 493.9 | ||||||||
| ASMs (000,000) |
858 | 793 | 3,400 | 3,107 | ||||||||||||
| Operating expenses per ASM |
16.78 | ¢ | 16.26 | ¢ | 16.18 | ¢ | 15.90 | ¢ | ||||||||
| Operating expenses |
$ | 144.0 | $ | 129.0 | $ | 550.2 | $ | 493.9 | ||||||||
| Less: aircraft fuel |
(25.9 | ) | (20.3 | ) | (96.2 | ) | (68.7 | ) | ||||||||
| Less: impairment of aircraft and related spare parts |
— | (0.6 | ) | — | (3.4 | ) | ||||||||||
| Operating expenses excluding fuel and impairment charges |
$ | 118.1 | $ | 108.1 | $ | 454.0 | $ | 421.8 | ||||||||
| ASMs (000,000) |
858 | 793 | 3,400 | 3,107 | ||||||||||||
| Operating expenses per ASM excluding fuel and impairment charges |
13.76 | ¢ | 13.62 | ¢ | 13.35 | ¢ | 13.58 | ¢ | ||||||||
| Reconciliation to GAAP income (loss) before taxes and accounting change: |
||||||||||||||||
| Income before taxes and accounting change, excluding impairment charges and mark-to-market hedging gains (losses) |
$ | 0.4 | $ | 1.8 | $ | 17.8 | $ | 13.7 | ||||||||
| Add: mark-to-market hedging gains (losses) included in nonoperating income (expense) |
(7.0 | ) | (2.8 | ) | 8.6 | 6.8 | ||||||||||
| Less: impairment of aircraft and related spare parts |
— | (0.6 | ) | — | (3.4 | ) | ||||||||||
| GAAP income (loss) before taxes and accounting change as reported |
$ | (6.6 | ) | $ | (1.6 | ) | $ | 26.4 | $ | 17.1 | ||||||
| Three Months Ended December 31, |
||||||||||||||||
| 2005 |
2004 |
|||||||||||||||
| (000s) |
Cost/Gal |
(000s) |
Cost/Gal |
|||||||||||||
| Aircraft fuel reconciliations: |
||||||||||||||||
| Fuel expense before hedge activities (“raw” or “into-plane” fuel cost) |
$ | 26.1 | $ | 2.06 | $ | 20.8 | $ | 1.66 | ||||||||
| Less: gains on settled hedges included in fuel expense |
(0.2 | ) | (0.02 | ) | (0.5 | ) | (0.04 | ) | ||||||||
| GAAP fuel expense |
$ | 25.9 | $ | 2.04 | $ | 20.3 | $ | 1.62 | ||||||||
| Less: gains on settled hedges included in nonoperating income (expense) |
(3.8 | ) | (0.30 | ) | (1.8 | ) | (0.14 | ) | ||||||||
| Economic fuel expense |
$ | 22.1 | $ | 1.74 | $ | 18.5 | $ | 1.48 | ||||||||
| Fuel gallons (000,000) |
12.7 | 12.5 | ||||||||||||||
| Mark-to-market gains (losses) included in non-operating income (expense) related to hedges that settle in future periods, net of the reclassification of previously recorded mark-to-market gains to gains on settled hedges included in nonoperating income (expense) |
$ | (7.0 | ) | $ | (2.8 | ) | ||||||||||
| Twelve Months Ended December 31, |
||||||||||||||||
| 2005 |
2004 |
|||||||||||||||
| (000s) |
Cost/Gal |
(000s) |
Cost/Gal |
|||||||||||||
| Fuel expense before hedge activities (“raw” or “into-plane” fuel cost) |
$ | 97.7 | $ | 1.90 | $ | 70.7 | $ | 1.42 | ||||||||
| Less: gains on settled hedges included in fuel expense |
(1.5 | ) | (0.03 | ) | (2.0 | ) | (0.04 | ) | ||||||||
| GAAP fuel expense |
$ | 96.2 | $ | 1.87 | $ | 68.7 | $ | 1.38 | ||||||||
| Less: gains on settled hedges included in nonoperating income (expense) |
(14.7 | ) | (0.29 | ) | (3.4 | ) | (0.07 | ) | ||||||||
| Economic fuel expense |
$ | 81.5 | $ | 1.58 | $ | 65.3 | $ | 1.31 | ||||||||
| Fuel gallons (000,000) |
51.3 | 49.7 | ||||||||||||||
| Mark-to-market gains included in non-operating income (expense) related to hedges that settle in future periods, net of the reclassification of previously recorded mark-to-market gains to gains on settled hedges included in nonoperating income (expense) |
$ | 8.6 | $ | 6.8 | ||||||||||||
9
Air Group Net Income and EPS Reconciliation:
The following table reconciles Alaska Air Group, Inc.'s net income (loss) and diluted earnings per share during 2005 and 2004 excluding the cumulative effect of the accounting change, mark-to-market hedging gains (losses) net of related reclassifications, the navigation fee refund, and restructuring and impairment charges to the reported GAAP amounts (in millions except per share amounts):
| Three Months Ended December 31, |
||||||||||||||||
| 2005 |
2004 |
|||||||||||||||
| Dollars |
Diluted EPS |
Dollars |
Diluted EPS |
|||||||||||||
| Net income (loss) and diluted EPS excluding mark-to-market hedging gains (losses), restructuring and impairment charges |
$ | 0.6 | $ | 0.02 | $ | (14.3 | ) | $ | (0.53 | ) | ||||||
| Mark-to-market hedging gains (losses), net of tax |
(33.8 | ) | (1.18 | ) | (14.2 | ) | (0.53 | ) | ||||||||
| Restructuring charges, net of tax |
0.2 | 0.01 | (16.0 | ) | (0.59 | ) | ||||||||||
| Impairment charges, net of tax |
— | — | (0.4 | ) | (0.01 | ) | ||||||||||
| Reported GAAP amounts |
$ | (33.0 | ) | $ | (1.15 | ) | $ | (44.9 | ) | $ | (1.66 | ) | ||||
| Twelve Months Ended December 31, |
||||||||||||||||
| 2005 |
2004 |
|||||||||||||||
| Dollars |
Diluted EPS |
Dollars |
Diluted EPS |
|||||||||||||
| Net income and diluted EPS excluding the cumulative effect of the accounting change, mark-to-market hedging gains, navigation fee refund, restructuring and impairment charges |
$ | 55.0 | $ | 1.78 | $ | 5.2 | $ | 0.19 | ||||||||
| Cumulative effect of accounting change, net of tax |
(90.4 | ) | (2.66 | ) | — | — | ||||||||||
| Mark-to-market hedging gains, net of tax |
38.6 | 1.14 | 31.7 | 1.18 | ||||||||||||
| Navigation fee refund, net of tax |
3.6 | 0.10 | 6.3 | 0.23 | ||||||||||||
| Restructuring charges, net of tax |
(12.7 | ) | (0.37 | ) | (31.8 | ) | (1.18 | ) | ||||||||
| Impairment charges, net of tax |
— | — | (26.7 | ) | (0.99 | ) | ||||||||||
| Reported GAAP amounts |
$ | (5.9 | ) | $ | (0.01 | ) | $ | (15.3 | ) | $ | (0.57 | ) | ||||
10
Air Group EPS Calculations:
The following table summarizes Alaska Air Group, Inc.'s basic and diluted per share calculations for income (loss) before the accounting change and net income (loss) (in millions except per share amounts):
| Three Months Ended December 31, |
Twelve Months Ended December 31, |
|||||||||||||||
| 2005 |
2004 |
2005 |
2004 |
|||||||||||||
| Basic Earnings Per Share: |
||||||||||||||||
| Income (loss) before accounting change |
$ | (33.0 | ) | $ | (44.9 | ) | $ | 84.5 | $ | (15.3 | ) | |||||
| Weighted average shares outstanding |
28.629 | 26.975 | 27.609 | 26.859 | ||||||||||||
| Income (loss) per share before accounting change |
$ | (1.15 | ) | $ | (1.66 | ) | $ | 3.06 | $ | (0.57 | ) | |||||
| Cumulative effect of accounting change, net of tax |
NA | NA | $ | (90.4 | ) | NA | ||||||||||
| Weighted average shares outstanding |
NA | NA | 27.609 | NA | ||||||||||||
| Per share cumulative effect of accounting change |
NA | NA | $ | (3.27 | ) | NA | ||||||||||
| Net loss |
$ | (33.0 | ) | $ | (44.9 | ) | $ | (5.9 | ) | $ | (15.3 | ) | ||||
| Weighted average shares outstanding |
28.629 | 26.975 | 27.609 | 26.859 | ||||||||||||
| Net loss per share |
$ | (1.15 | ) | $ | (1.66 | ) | $ | (0.21 | ) | $ | (0.57 | ) | ||||
| Diluted Earnings Per Share: |
||||||||||||||||
| Income (loss) before accounting change |
$ | (33.0 | ) | $ | (44.9 | ) | $ | 84.5 | $ | (15.3 | ) | |||||
| Interest on convertible notes, net of tax |
NA | NA | 5.5 | NA | ||||||||||||
| Income before accounting change for diluted calculation |
$ | (33.0 | ) | $ | (44.9 | ) | $ | 90.0 | $ | (15.3 | ) | |||||
| Weighted average shares outstanding |
28.629 | 26.975 | 33.917 | 26.859 | ||||||||||||
| Income (loss) per share before accounting change |
$ | (1.15 | ) | $ | (1.66 | ) | $ | 2.65 | $ | (0.57 | ) | |||||
| Cumulative effect of accounting change, net of tax |
NA | NA | $ | (90.4 | ) | NA | ||||||||||
| Weighted average shares outstanding |
NA | NA | 33.917 | NA | ||||||||||||
| Per share cumulative effect of accounting change |
NA | NA | $ | (2.66 | ) | NA | ||||||||||
| Net loss |
$ | (33.0 | ) | $ | (44.9 | ) | $ | (5.9 | ) | $ | (15.3 | ) | ||||
| Interest on convertible notes, net of tax |
NA | NA | 5.5 | NA | ||||||||||||
| Net income for diluted calculation |
$ | (33.0 | ) | $ | (44.9 | ) | $ | (0.4 | ) | $ | (15.3 | ) | ||||
| Weighted average shares outstanding |
28.629 | 26.975 | 33.917 | 26.859 | ||||||||||||
| Net loss per share |
$ | (1.15 | ) | $ | (1.66 | ) | $ | (0.01 | ) | $ | (0.57 | ) | ||||
11
Forecasted Financial Measures
During our quarterly earnings conference call, we expect to discuss forward-looking forecasted unit cost information for 2006. 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 both Alaska Airlines, Inc. and Horizon Air Industries, Inc.:
| Alaska Airlines |
Horizon Air | |||||||||||
| Forecast of cost per available seat mile, excluding fuel (cents) |
Forecast of fuel seat mile (See |
Forecast of total available seat (cents) |
Forecast of cost (cents) |
Forecast of fuel cost per (See Note 1) |
Forecast of total operating cost per available seat mile, as reported on a GAAP basis (cents) | |||||||
| First quarter 2006 |
8.35 | 3.05 | 11.40 | 14.70 | 3.10 | 17.80 | ||||||
| Full year 2006 |
7.65 | 3.05 | 10.70 | 13.95 | 3.10 | 17.05 | ||||||
Note 1: Our forecast of fuel costs is based on anticipated gallons consumed and estimated fuel cost per gallon for both Alaska and 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.
12
Exhibit 99.2
ALASKA AIR GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(In Millions Except Per Share Amounts)
| Three Months Ended December 31 |
Twelve Months |
|||||||||||||||
| 2005 |
2004 |
2005 |
2004 |
|||||||||||||
| Operating Revenues: |
||||||||||||||||
| Passenger |
$ | 666.8 | $ | 598.6 | $ | 2,728.7 | $ | 2,497.1 | ||||||||
| Freight and mail |
22.8 | 22.0 | 94.1 | 90.3 | ||||||||||||
| Other - net |
41.0 | 35.7 | 152.5 | 136.4 | ||||||||||||
| Total Operating Revenues |
730.6 | 656.3 | 2,975.3 | 2,723.8 | ||||||||||||
| Operating Expenses: |
||||||||||||||||
| Wages and benefits |
230.1 | 230.4 | 923.6 | 967.5 | ||||||||||||
| Contracted services |
36.2 | 29.3 | 132.4 | 108.4 | ||||||||||||
| Aircraft fuel |
196.8 | 155.9 | 722.8 | 540.7 | ||||||||||||
| Aircraft maintenance |
53.9 | 46.2 | 228.5 | 184.1 | ||||||||||||
| Aircraft rent |
47.0 | 45.9 | 187.0 | 187.4 | ||||||||||||
| Food and beverage service |
13.1 | 12.4 | 50.2 | 51.9 | ||||||||||||
| Selling expenses |
38.2 | 33.4 | 157.7 | 144.9 | ||||||||||||
| Depreciation and amortization |
37.6 | 36.8 | 143.4 | 142.6 | ||||||||||||
| Landing fees and other rentals |
51.9 | 46.6 | 208.4 | 185.1 | ||||||||||||
| Other |
51.9 | 50.4 | 208.3 | 197.4 | ||||||||||||
| Restructuring charges |
(0.3 | ) | 25.9 | 20.4 | 53.4 | |||||||||||
| Impairment of aircraft and related spare parts |
— | 0.6 | — | 40.2 | ||||||||||||
| Total Operating Expenses |
756.4 | 713.8 | 2,982.7 | 2,803.6 | ||||||||||||
| Operating Loss |
(25.8 | ) | (57.5 | ) | (7.4 | ) | (79.8 | ) | ||||||||
| Nonoperating Income (Expense): |
||||||||||||||||
| Interest income |
9.3 | 5.9 | 30.9 | 24.5 | ||||||||||||
| Interest expense |
(17.5 | ) | (13.0 | ) | (63.0 | ) | (51.9 | ) | ||||||||
| Interest capitalized |
4.0 | 0.6 | 8.9 | 1.7 | ||||||||||||
| Fuel hedging gains (losses) |
(24.7 | ) | (7.8 | ) | 173.9 | 85.5 | ||||||||||
| Other - net |
(1.6 | ) | (1.1 | ) | (6.1 | ) | (0.6 | ) | ||||||||
| (30.5 | ) | (15.4 | ) | 144.6 | 59.2 | |||||||||||
| Income (loss) before income tax and accounting change |
(56.3 | ) | (72.9 | ) | 137.2 | (20.6 | ) | |||||||||
| Income tax expense (benefit) |
(23.3 | ) | (28.0 | ) | 52.7 | (5.3 | ) | |||||||||
| Income (loss) before accounting change |
$ | (33.0 | ) | $ | (44.9 | ) | $ | 84.5 | $ | (15.3 | ) | |||||
| Cumulative effect of accounting change, net of tax |
— | — | (90.4 | ) | — | |||||||||||
| Net Loss |
$ | (33.0 | ) | $ | (44.9 | ) | $ | (5.9 | ) | $ | (15.3 | ) | ||||
| Basic Earnings Per Share: |
||||||||||||||||
| Income (loss) before accounting change |
$ | (1.15 | ) | $ | (1.66 | ) | $ | 3.06 | $ | (0.57 | ) | |||||
| Cumulative effect of accounting change |
NA | NA | (3.27 | ) | NA | |||||||||||
| Net Loss Per Share |
$ | (1.15 | ) | $ | (1.66 | ) | $ | (0.21 | ) | $ | (0.57 | ) | ||||
| Diluted Earnings Per Share: |
||||||||||||||||
| Income (loss) before accounting change |
$ | (1.15 | ) | $ | (1.66 | ) | $ | 2.65 | $ | (0.57 | ) | |||||
| Cumulative effect of accounting change |
NA | NA | (2.66 | ) | NA | |||||||||||
| Net Loss Per Share |
$ | (1.15 | ) | $ | (1.66 | ) | $ | (0.01 | ) | $ | (0.57 | ) | ||||
| Shares Used for Computation: |
||||||||||||||||
| Basic |
28.629 | 26.975 | 27.609 | 26.859 | ||||||||||||
| Diluted |
28.629 | 26.975 | 33.917 | 26.859 | ||||||||||||
1
Alaska Air Group, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
| (In Millions) |
December 31, 2005 |
December 31, 2004 | ||||
| Cash and marketable securities |
$ | 983 | $ | 874 | ||
| Total current assets |
$ | 1,540 | $ | 1,242 | ||
| Property and equipment-net |
2,032 | 1,908 | ||||
| Other assets |
220 | 185 | ||||
| Total assets |
$ | 3,792 | $ | 3,335 | ||
| Current liabilities |
$ | 1,165 | $ | 957 | ||
| Long-term debt and capital lease obligations |
969 | 990 | ||||
| Other liabilities and credits |
830 | 723 | ||||
| Shareholders’ equity |
828 | 665 | ||||
| Total liabilities and shareholders’ equity |
$ | 3,792 | $ | 3,335 | ||
2
Alaska Airlines Financial and Statistical Data
| Three Months Ended December 31 |
Twelve Months Ended December 31 |
|||||||||||||||||||||
| 2005 |
2004 |
% Change |
2005 |
2004 |
% Change |
|||||||||||||||||
| Financial Data (in millions): |
||||||||||||||||||||||
| Operating Revenues: |
||||||||||||||||||||||
| Passenger |
$ | 526.4 | $ | 477.8 | 10.2 | $ | 2,183.0 | $ | 2,023.6 | 7.9 | ||||||||||||
| Freight and mail |
21.9 | 21.1 | 3.8 | 90.3 | 86.4 | 4.5 | ||||||||||||||||
| Other - net |
38.9 | 32.4 | 20.1 | 142.8 | 123.0 | 16.1 | ||||||||||||||||
| Total Operating Revenues |
587.2 | 531.3 | 10.5 | 2,416.1 | 2,233.0 | 8.2 | ||||||||||||||||
| Operating Expenses: |
||||||||||||||||||||||
| Wages and benefits |
181.2 | 187.9 | (3.6 | ) | 737.4 | 799.7 | (7.8 | ) | ||||||||||||||
| Contracted services |
32.9 | 26.2 | 25.6 | 119.9 | 96.5 | 24.2 | ||||||||||||||||
| Aircraft fuel |
170.9 | 135.6 | 26.0 | 626.6 | 472.0 | 32.8 | ||||||||||||||||
| Aircraft maintenance |
41.7 | 34.5 | 20.9 | 185.2 | 145.8 | 27.0 | ||||||||||||||||
| Aircraft rent |
29.6 | 28.0 | 5.7 | 116.8 | 113.5 | 2.9 | ||||||||||||||||
| Food and beverage service |
12.5 | 11.9 | 5.0 | 47.7 | 49.8 | (4.2 | ) | |||||||||||||||
| Selling expenses |
29.0 | 31.1 | (6.8 | ) | 126.9 | 132.2 | (4.0 | ) | ||||||||||||||
| Depreciation and amortization |
32.5 | 32.9 | (1.2 | ) | 125.4 | 128.1 | (2.1 | ) | ||||||||||||||
| Landing fees and other rentals |
40.4 | 35.9 | 12.5 | 161.9 | 142.0 | 14.0 | ||||||||||||||||
| Other |
39.0 | 38.2 | 2.1 | 158.7 | 148.6 | 6.8 | ||||||||||||||||
| Restructuring charges |
(0.3 | ) | 25.9 | NM | 20.4 | 53.4 | NM | |||||||||||||||
| Impairment of aircraft and related spare parts |
— | — | NM | — | 36.8 | NM | ||||||||||||||||
| Total Operating Expenses |
609.4 | 588.1 | 3.6 | 2,426.9 | 2,318.4 | 4.7 | ||||||||||||||||
| Operating Loss |
(22.2 | ) | (56.8 | ) | NM | (10.8 | ) | (85.4 | ) | NM | ||||||||||||
| Interest income |
9.4 | 6.2 | 32.5 | 26.2 | ||||||||||||||||||
| Interest expense |
(14.3 | ) | (11.0 | ) | (51.2 | ) | (44.1 | ) | ||||||||||||||
| Interest capitalized |
3.6 | 0.4 | 8.1 | 1.1 | ||||||||||||||||||
| Fuel hedging gains (losses) |
(21.5 | ) | (6.8 | ) | 150.6 | 75.3 | ||||||||||||||||
| Other - net |
(1.3 | ) | (0.9 | ) | (5.0 | ) | (0.1 | ) | ||||||||||||||
| (24.1 | ) | (12.1 | ) | 135.0 | 58.4 | |||||||||||||||||
| Income (Loss) Before Income Tax and Accounting Change |
$ | (46.3 | ) | $ | (68.9 | ) | NM | $ | 124.2 | $ | (27.0 | ) | NM | |||||||||
| Operating Statistics: |
||||||||||||||||||||||
| Revenue passengers (000) |
4,043 | 3,998 | 1.1 | 16,759 | 16,295 | 2.8 | ||||||||||||||||
| RPMs (000,000) |
4,104 | 3,976 | 3.2 | 16,915 | 16,231 | 4.2 | ||||||||||||||||
| ASMs (000,000) |
5,556 | 5,452 | 1.9 | 22,292 | 22,276 | 0.1 | ||||||||||||||||
| Passenger load factor |
73.9 | % | 72.9 | % | 1.0 | pts | 75.9 | % | 72.9 | % | 3.0 | pts | ||||||||||
| Yield per passenger mile |
12.83 | ¢ | 12.02 | ¢ | 6.7 | 12.91 | ¢ | 12.47 | ¢ | 3.5 | ||||||||||||
| Operating revenue per ASM |
10.57 | ¢ | 9.75 | ¢ | 8.4 | 10.84 | ¢ | 10.02 | ¢ | 8.2 | ||||||||||||
| Operating expenses per ASM (a) |
10.97 | ¢ | 10.79 | ¢ | 1.7 | 10.89 | ¢ | 10.41 | ¢ | 4.6 | ||||||||||||
| Operating expenses per ASM excluding fuel, navigation fee recovery, restructuring and impairment charges(a) |
7.90 | ¢ | 7.83 | ¢ | 0.9 | 8.01 | ¢ | 7.92 | ¢ | 1.1 | ||||||||||||
| Raw fuel cost per gallon (a) |
$ | 2.02 | $ | 1.60 | 26.3 | $ | 1.84 | $ | 1.37 | 34.3 | ||||||||||||
| GAAP fuel cost per gallon (a) |
$ | 1.99 | $ | 1.56 | 27.6 | $ | 1.81 | $ | 1.33 | 36.1 | ||||||||||||
| Economic fuel cost per gallon (a) |
$ | 1.69 | $ | 1.40 | 20.7 | $ | 1.53 | $ | 1.26 | 21.4 | ||||||||||||
| Fuel gallons (000,000) |
85.7 | 87.1 | (1.6 | ) | 346.4 | 354.7 | (2.3 | ) | ||||||||||||||
| Average number of employees |
8,937 | 9,433 | (5.3 | ) | 9,065 | 9,968 | (9.1 | ) | ||||||||||||||
| Aircraft utilization (blk hrs/day) |
10.8 | 10.8 | 0.0 | 10.8 | 11.0 | (1.8 | ) | |||||||||||||||
| Operating fleet at period-end |
110 | 108 | 1.9 | 110 | 108 | 1.9 | ||||||||||||||||
NM = Not Meaningful
| (a) | See Note A on page 5. |
3
Horizon Air Financial and Statistical Data
| Three Months Ended December 31 |
Twelve Months Ended December 31 |
|||||||||||||||||||||
| 2005 |
2004 |
% Change |
2005 |
2004 |
% Change |
|||||||||||||||||
| Financial Data (in millions): |
||||||||||||||||||||||
| Operating Revenues: |
||||||||||||||||||||||
| Passenger |
$ | 138.2 | $ | 125.1 | 10.5 | $ | 544.0 | $ | 487.3 | 11.6 | ||||||||||||
| Freight and mail |
0.9 | 0.9 | 0.0 | 3.8 | 3.9 | (2.6 | ) | |||||||||||||||
| Other - net |
1.8 | 2.9 | (37.9 | ) | 8.6 | 12.0 | (28.3 | ) | ||||||||||||||
| Total Operating Revenues |
140.9 | 128.9 | 9.3 | 556.4 | 503.2 | 10.6 | ||||||||||||||||
| Operating Expenses: |
||||||||||||||||||||||
| Wages and benefits |
46.8 | 41.4 | 13.0 | 178.4 | 163.5 | 9.1 | ||||||||||||||||
| Contracted services |
6.1 | 5.3 | 15.1 | 23.8 | 20.7 | 15.0 | ||||||||||||||||
| Aircraft fuel |
25.9 | 20.3 | 27.6 | 96.2 | 68.7 | 40.0 | ||||||||||||||||
| Aircraft maintenance |
12.2 | 11.7 | 4.3 | 43.3 | 38.3 | 13.1 | ||||||||||||||||
| Aircraft rent |
17.4 | 17.9 | (2.8 | ) | 70.2 | 73.9 | (5.0 | ) | ||||||||||||||
| Food and beverage service |
0.6 | 0.5 | 20.0 | 2.5 | 2.1 | 19.0 | ||||||||||||||||
| Selling expenses |
7.0 | 6.6 | 6.1 | 29.1 | 26.5 | 9.8 | ||||||||||||||||
| Depreciation and amortization |
4.8 | 3.7 | 29.7 | 16.8 | 13.4 | 25.4 | ||||||||||||||||
| Landing fees and other rentals |
12.0 | 10.2 | 17.6 | 47.7 | 41.4 | 15.2 | ||||||||||||||||
| Other |
11.2 | 10.8 | 3.7 | 42.2 | 42.0 | 0.5 | ||||||||||||||||
| Impairment of aircraft and related spare parts |
— | 0.6 | NM | — | 3.4 | NM | ||||||||||||||||
| Total Operating Expenses |
144.0 | 129.0 | 11.6 | 550.2 | 493.9 | 11.4 | ||||||||||||||||
| Operating Income (Loss) |
(3.1 | ) | (0.1 | ) | NM | 6.2 | 9.3 | NM | ||||||||||||||
| Interest income |
0.6 | 0.2 | 1.6 | 1.1 | ||||||||||||||||||
| Interest expense |
(1.2 | ) | (0.7 | ) | (5.5 | ) | (3.9 | ) | ||||||||||||||
| Interest capitalized |
0.4 | 0.2 | 0.8 | 0.6 | ||||||||||||||||||
| Fuel hedging gains (losses) |
(3.2 | ) | (1.0 | ) | 23.3 | 10.2 | ||||||||||||||||
| Other - net |
(0.1 | ) | (0.2 | ) | — | (0.2 | ) | |||||||||||||||
| (3.5 | ) | (1.5 | ) | 20.2 | 7.8 | |||||||||||||||||
| Income (Loss) Before Income Tax and Accounting Change |
$ | (6.6 | ) | $ | (1.6 | ) | NM | $ | 26.4 | $ | 17.1 | NM | ||||||||||
| Operating Statistics: |
||||||||||||||||||||||
| Revenue passengers (000) |
1,613 | 1,568 | 2.9 | 6,481 | 5,930 | 9.3 | ||||||||||||||||
| RPMs (000,000) |
632 | 569 | 11.1 | 2,475 | 2,155 | 14.8 | ||||||||||||||||
| ASMs (000,000) |
858 | 793 | 8.2 | 3,400 | 3,107 | 9.4 | ||||||||||||||||
| Passenger load factor |
73.7 | % | 71.7 | % | 2.0 | pts | 72.8 | % | 69.3 | % | 3.5 | pts | ||||||||||
| Yield per passenger mile |
21.87 | ¢ | 21.99 | ¢ | (0.5 | ) | 21.98 | ¢ | 22.61 | ¢ | (2.8 | ) | ||||||||||
| Operating revenue per ASM |
16.42 | ¢ | 16.25 | ¢ | 1.1 | 16.36 | ¢ | 16.20 | ¢ | 1.0 | ||||||||||||
| Operating expenses per ASM (a) |
16.78 | ¢ | 16.26 | ¢ | 3.2 | 16.18 | ¢ | 15.90 | ¢ | 1.8 | ||||||||||||
| Operating expenses per ASM excluding fuel and impairment charges (a) |
13.76 | ¢ | 13.62 | ¢ | 1.1 | 13.35 | ¢ | 13.58 | ¢ | (1.7 | ) | |||||||||||
| Raw fuel cost per gallon (a) |
$ | 2.06 | $ | 1.66 | 24.1 | $ | 1.90 | $ | 1.42 | 33.8 | ||||||||||||
| GAAP fuel cost per gallon (a) |
$ | 2.04 | $ | 1.62 | 25.9 | $ | 1.87 | $ | 1.38 | 35.5 | ||||||||||||
| Economic fuel cost per gallon (a) |
$ | 1.74 | $ | 1.48 | 17.6 | $ | 1.58 | $ | 1.31 | 20.6 | ||||||||||||
| Fuel gallons (000,000) |
12.7 | 12.5 | 1.6 | 51.3 | 49.7 | 3.2 | ||||||||||||||||
| Average number of employees |
3,537 | 3,493 | 1.3 | 3,456 | 3,423 | 1.0 | ||||||||||||||||
| Aircraft utilization (blk hrs/day) |
8.7 | 8.5 | 2.4 | 8.7 | 8.3 | 4.8 | ||||||||||||||||
| Operating fleet at period-end |
65 | 65 | 0.0 | 65 | 65 | 0.0 | ||||||||||||||||
NM = Not Meaningful
| (a) | See Note A on page 5. |
4
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), the navigation fee refund, restructuring charges or adjustments thereto, 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 December 31, |
Twelve Months Ended December 31 |
|||||||||||||||
| 2005 |
2004 |
2005 |
2004 |
|||||||||||||
| Unit cost reconciliations: |
||||||||||||||||
| Operating expenses |
$ | 609.4 | $ | 588.1 | $ | 2,426.9 | $ | 2,318.4 | ||||||||
| ASMs (000,000) |
5,556 | 5,452 | 22,292 | 22,276 | ||||||||||||
| Operating expenses per ASM |
10.97 | ¢ | 10.79 | ¢ | 10.89 | ¢ | 10.41 | ¢ | ||||||||
| Operating expenses |
$ | 609.4 | $ | 588.1 | $ | 2,426.9 | $ | 2,318.4 | ||||||||
| Less: aircraft fuel |
(170.9 | ) | (135.6 | ) | (626.6 | ) | (472.0 | ) | ||||||||
| Less: restructuring charges |
0.3 | (25.9 | ) | (20.4 | ) | (53.4 | ) | |||||||||
| Add: navigation fee refund |
— | — | 4.7 | 7.7 | ||||||||||||
| Less: impairment of aircraft and related spare parts |
— | — | — | (36.8 | ) | |||||||||||
| Operating expenses excluding fuel, navigation fee refund, restructuring and impairment charges |
$ | 438.8 | $ | 426.6 | $ | 1,784.6 | $ | 1,763.9 | ||||||||
| ASMs (000,000) |
5,556 | 5,452 | 22,292 | 22,276 | ||||||||||||
| Operating expenses per ASM excluding fuel, navigation fee refund, restructuring and impairment charges |
7.90 | ¢ | 7.83 | ¢ | 8.01 | ¢ | 7.92 | ¢ | ||||||||
| Reconciliation to GAAP income (loss) before taxes and accounting change: |
||||||||||||||||
| Income (loss) before taxes and accounting change, excluding mark-to-market hedging gains (losses), navigation fee refund, restructuring and impairment charges |
$ | 0.5 | $ | (22.7 | ) | $ | 85.8 | $ | 2.1 | |||||||
| Add: mark-to-market hedging gains (losses) included in nonoperating income (expense) |
(47.1 | ) | (20.3 | ) | 53.1 | 50.1 | ||||||||||
| Less: restructuring charges |
0.3 | (25.9 | ) | (20.4 | ) | (53.4 | ) | |||||||||
| Add: navigation fee refund and related interest received |
— | — | 5.7 | 11.0 | ||||||||||||
| Less: impairment of aircraft and related spare parts |
— | — | — | (36.8 | ) | |||||||||||
| GAAP income (loss) before taxes and accounting change as reported |
$ | (46.3 | ) | $ | (68.9 | ) | $ | 124.2 | $ | (27.0 | ) | |||||
| Three Months Ended December 31 |
||||||||||||||||
| 2005 |
2004 |
|||||||||||||||
| (000s) |
Cost/Gal |
(000s) |
Cost/Gal |
|||||||||||||
| Aircraft fuel reconciliations: |
||||||||||||||||
| Fuel expense before hedge activities (“raw” or “into-plane” fuel cost) |
$ | 172.7 | $ | 2.02 | $ | 139.3 | $ | 1.60 | ||||||||
| Less: gains on settled hedges included in fuel expense |
(1.8 | ) | (0.03 | ) | (3.7 | ) | (0.04 | ) | ||||||||
| GAAP fuel expense |
$ | 170.9 | $ | 1.99 | $ | 135.6 | $ | 1.56 | ||||||||
| Less: gains on settled hedges included in nonoperating income (expense) |
(25.6 | ) | (0.30 | ) | (13.5 | ) | (0.16 | ) | ||||||||
| Economic fuel expense |
$ | 145.3 | $ | 1.69 | $ | 122.1 | $ | 1.40 | ||||||||
| Fuel gallons (000,000) |
85.7 | 87.1 | ||||||||||||||
| Mark-to-market gains (losses) included in non-operating income (expense) related to hedges that settle in future periods, net of the reclassification of previously recorded mark-to-market gains to gains on settled hedges included in nonoperating income (expense) |
$ | (47.1 | ) | $ | (20.3 | ) | ||||||||||
| Twelve Months Ended December 31 |
||||||||||||||||
| 2005 |
2004 |
|||||||||||||||
| (000s) |
Cost/Gal |
(000s) |
Cost/Gal |
|||||||||||||
| Fuel expense before hedge activities (“raw” or “into-plane” fuel cost) |
$ | 637.9 | $ | 1.84 | $ | 486.6 | $ | 1.37 | ||||||||
| Less: gains on settled hedges included in fuel expense |
(11.3 | ) | (0.03 | ) | (14.6 | ) | (0.04 | ) | ||||||||
| GAAP fuel expense |
$ | 626.6 | $ | 1.81 | $ | 472.0 | $ | 1.33 | ||||||||
| Less: gains on settled hedges included in nonoperating income (expense) |
(97.5 | ) | (0.28 | ) | (25.2 | ) | (0.07 | ) | ||||||||
| Economic fuel expense |
$ | 529.1 | $ | 1.53 | $ | 446.8 | $ | 1.26 | ||||||||
| Fuel gallons (000,000) |
346.4 | 354.7 | ||||||||||||||
| Mark-to-market gains included in non-operating income (expense) related to hedges that settle in future periods, net of the reclassification of previously recorded mark-to-market gains to gains on settled hedges included in nonoperating income (expense) |
$ | 53.1 | $ | 50.1 | ||||||||||||
5
Horizon Air Industries, Inc.
($ in millions)
| Three Months Ended December 31, |
Twelve Months Ended December 31 |
|||||||||||||||
| 2005 |
2004 |
2005 |
2004 |
|||||||||||||
| Unit cost reconciliations: |
||||||||||||||||
| Operating expenses |
$ | 144.0 | $ | 129.0 | $ | 550.2 | $ | 493.9 | ||||||||
| ASMs (000,000) |
858 | 793 | 3,400 | 3,107 | ||||||||||||
| Operating expenses per ASM |
16.78 | ¢ | 16.26 | ¢ | 16.18 | ¢ | 15.90 | ¢ | ||||||||
| Operating expenses |
$ | 144.0 | $ | 129.0 | $ | 550.2 | $ | 493.9 | ||||||||
| Less: aircraft fuel |
(25.9 | ) | (20.3 | ) | (96.2 | ) | (68.7 | ) | ||||||||
| Less: impairment of aircraft and related spare parts |
— | (0.6 | ) | — | (3.4 | ) | ||||||||||
| Operating expenses excluding fuel and impairment charges |
$ | 118.1 | $ | 108.1 | $ | 454.0 | $ | 421.8 | ||||||||
| ASMs (000,000) |
858 | 793 | 3,400 | 3,107 | ||||||||||||
| Operating expenses per ASM excluding fuel and impairment charges |
13.76 | ¢ | 13.62 | ¢ | 13.35 | ¢ | 13.58 | ¢ | ||||||||
| Reconciliation to GAAP income (loss) before taxes and accounting change: |
||||||||||||||||
| Income before taxes and accounting change, excluding impairment charges and mark-to-market hedging gains (losses) |
$ | 0.4 | $ | 1.8 | $ | 17.8 | $ | 13.7 | ||||||||
| Add: mark-to-market hedging gains (losses) included in nonoperating income (expense) |
(7.0 | ) | (2.8 | ) | 8.6 | 6.8 | ||||||||||
| Less: impairment of aircraft and related spare parts |
— | (0.6 | ) | — | (3.4 | ) | ||||||||||
| GAAP income (loss) before taxes and accounting change as reported |
$ | (6.6 | ) | $ | (1.6 | ) | $ | 26.4 | $ | 17.1 | ||||||
| Three Months Ended December 31, |
||||||||||||||||
| 2005 |
2004 |
|||||||||||||||
| (000s) |
Cost/Gal |
(000s) |
Cost/Gal |
|||||||||||||
| Aircraft fuel reconciliations: |
||||||||||||||||
| Fuel expense before hedge activities (“raw” or “into-plane” fuel cost) |
$ | 26.1 | $ | 2.06 | $ | 20.8 | $ | 1.66 | ||||||||
| Less: gains on settled hedges included in fuel expense |
(0.2 | ) | (0.02 | ) | (0.5 | ) | (0.04 | ) | ||||||||
| GAAP fuel expense |
$ | 25.9 | $ | 2.04 | $ | 20.3 | $ | 1.62 | ||||||||
| Less: gains on settled hedges included in nonoperating income (expense) |
(3.8 | ) | (0.30 | ) | (1.8 | ) | (0.14 | ) | ||||||||
| Economic fuel expense |
$ | 22.1 | $ | 1.74 | $ | 18.5 | $ | 1.48 | ||||||||
| Fuel gallons (000,000) |
12.7 | 12.5 | ||||||||||||||
| Mark-to-market gains (losses) included in non-operating income (expense) related to hedges that settle in future periods, net of the reclassification of previously recorded mark-to-market gains to gains on settled hedges included in nonoperating income (expense) |
$ | (7.0 | ) | $ | (2.8 | ) | ||||||||||
| Twelve Months Ended December 31, |
||||||||||||||||
| 2005 |
2004 |
|||||||||||||||
| (000s) |
Cost/Gal |
(000s) |
Cost/Gal |
|||||||||||||
| Fuel expense before hedge activities (“raw” or “into-plane” fuel cost) |
$ | 97.7 | $ | 1.90 | $ | 70.7 | $ | 1.42 | ||||||||
| Less: gains on settled hedges included in fuel expense |
(1.5 | ) | (0.03 | ) | (2.0 | ) | (0.04 | ) | ||||||||
| GAAP fuel expense |
$ | 96.2 | $ | 1.87 | $ | 68.7 | $ | 1.38 | ||||||||
| Less: gains on settled hedges included in nonoperating income (expense) |
(14.7 | ) | (0.29 | ) | (3.4 | ) | (0.07 | ) | ||||||||
| Economic fuel expense |
$ | 81.5 | $ | 1.58 | $ | 65.3 | $ | 1.31 | ||||||||
| Fuel gallons (000,000) |
51.3 | 49.7 | ||||||||||||||
| Mark-to-market gains included in non-operating income (expense) related to hedges that settle in future periods, net of the reclassification of previously recorded mark-to-market gains to gains on settled hedges included in nonoperating income (expense) |
$ | 8.6 | $ | 6.8 | ||||||||||||
6
Air Group Net Income and EPS Reconciliation:
The following table reconciles Alaska Air Group, Inc.'s net income (loss) and diluted earnings per share during 2005 and 2004 excluding the cumulative effect of the accounting change, mark-to-market hedging gains (losses) net of related reclassifications, the navigation fee refund, and restructuring and impairment charges to the reported GAAP amounts (in millions except per share amounts):
| Three Months Ended December 31, |
||||||||||||||||
| 2005 |
2004 |
|||||||||||||||
| Dollars |
Diluted EPS |
Dollars |
Diluted EPS |
|||||||||||||
| Net income (loss) and diluted EPS excluding mark-to-market hedging gains (losses), restructuring and impairment charges |
$ | 0.6 | $ | 0.02 | $ | (14.3 | ) | $ | (0.53 | ) | ||||||
| Mark-to-market hedging gains (losses), net of tax |
(33.8 | ) | (1.18 | ) | (14.2 | ) | (0.53 | ) | ||||||||
| Restructuring charges, net of tax |
0.2 | 0.01 | (16.0 | ) | (0.59 | ) | ||||||||||
| Impairment charges, net of tax |
— | — | (0.4 | ) | (0.01 | ) | ||||||||||
| Reported GAAP amounts |
$ | (33.0 | ) | $ | (1.15 | ) | $ | (44.9 | ) | $ | (1.66 | ) | ||||
| Twelve Months Ended December 31, |
||||||||||||||||
| 2005 |
2004 |
|||||||||||||||
| Dollars |
Diluted EPS |
Dollars |
Diluted EPS |
|||||||||||||
| Net income and diluted EPS excluding the cumulative effect of the accounting change, mark-to-market hedging gains, navigation fee refund, restructuring and impairment charges |
$ | 55.0 | $ | 1.78 | $ | 5.2 | $ | 0.19 | ||||||||
| Cumulative effect of accounting change, net of tax |
(90.4 | ) | (2.66 | ) | — | — | ||||||||||
| Mark-to-market hedging gains, net of tax |
38.6 | 1.14 | 31.7 | 1.18 | ||||||||||||
| Navigation fee refund, net of tax |
3.6 | 0.10 | 6.3 | 0.23 | ||||||||||||
| Restructuring charges, net of tax |
(12.7 | ) | (0.37 | ) | (31.8 | ) | (1.18 | ) | ||||||||
| Impairment charges, net of tax |
— | — | (26.7 | ) | (0.99 | ) | ||||||||||
| Reported GAAP amounts |
$ | (5.9 | ) | $ | (0.01 | ) | $ | (15.3 | ) | $ | (0.57 | ) | ||||
7
Air Group EPS Calculations:
The following table summarizes Alaska Air Group, Inc.'s basic and diluted per share calculations for income (loss) before the accounting change and net income (loss) (in millions except per share amounts):
| Three Months Ended December 31, |
Twelve Months Ended December 31, |
|||||||||||||||
| 2005 |
2004 |
2005 |
2004 |
|||||||||||||
| Basic Earnings Per Share: |
||||||||||||||||
| Income (loss) before accounting change |
$ | (33.0 | ) | $ | (44.9 | ) | $ | 84.5 | $ | (15.3 | ) | |||||
| Weighted average shares outstanding |
28.629 | 26.975 | 27.609 | 26.859 | ||||||||||||
| Income (loss) per share before accounting change |
$ | (1.15 | ) | $ | (1.66 | ) | $ | 3.06 | $ | (0.57 | ) | |||||
| Cumulative effect of accounting change, net of tax |
NA | NA | $ | (90.4 | ) | NA | ||||||||||
| Weighted average shares outstanding |
NA | NA | 27.609 | NA | ||||||||||||
| Per share cumulative effect of accounting change |
NA | NA | $ | (3.27 | ) | NA | ||||||||||
| Net loss |
$ | (33.0 | ) | $ | (44.9 | ) | $ | (5.9 | ) | $ | (15.3 | ) | ||||
| Weighted average shares outstanding |
28.629 | 26.975 | 27.609 | 26.859 | ||||||||||||
| Net loss per share |
$ | (1.15 | ) | $ | (1.66 | ) | $ | (0.21 | ) | $ | (0.57 | ) | ||||
| Diluted Earnings Per Share: |
||||||||||||||||
| Income (loss) before accounting change |
$ | (33.0 | ) | $ | (44.9 | ) | $ | 84.5 | $ | (15.3 | ) | |||||
| Interest on convertible notes, net of tax |
NA | NA | 5.5 | NA | ||||||||||||
| Income before accounting change for diluted calculation |
$ | (33.0 | ) | $ | (44.9 | ) | $ | 90.0 | $ | (15.3 | ) | |||||
| Weighted average shares outstanding |
28.629 | 26.975 | 33.917 | 26.859 | ||||||||||||
| Income (loss) per share before accounting change |
$ | (1.15 | ) | $ | (1.66 | ) | $ | 2.65 | $ | (0.57 | ) | |||||
| Cumulative effect of accounting change, net of tax |
NA | NA | $ | (90.4 | ) | NA | ||||||||||
| Weighted average shares outstanding |
NA | NA | 33.917 | NA | ||||||||||||
| Per share cumulative effect of accounting change |
NA | NA | $ | (2.66 | ) | NA | ||||||||||
| Net loss |
$ | (33.0 | ) | $ | (44.9 | ) | $ | (5.9 | ) | $ | (15.3 | ) | ||||
| Interest on convertible notes, net of tax |
NA | NA | 5.5 | NA | ||||||||||||
| Net income for diluted calculation |
$ | (33.0 | ) | $ | (44.9 | ) | $ | (0.4 | ) | $ | (15.3 | ) | ||||
| Weighted average shares outstanding |
28.629 | 26.975 | 33.917 | 26.859 | ||||||||||||
| Net loss per share |
$ | (1.15 | ) | $ | (1.66 | ) | $ | (0.01 | ) | $ | (0.57 | ) | ||||
8