Alaska Air Group Reports Second Quarter Results
Share
Alaska Air Group, Inc. today reported second quarter net income of $55.5 million, or $1.38 per diluted share, compared to $17.4 million, or $0.56 per diluted share, in the second quarter of 2005....
Alaska Air Group, Inc.
"We are extremely pleased with this quarter’s earnings, which were the result of a combination of revenue gains and cost improvements," said Bill Ayer, chairman and chief executive officer. "It’s gratifying to see everyone’s hard work pay off, and I would like to thank and congratulate our employees on an outstanding quarter."
Alaska Airlines’ passenger traffic in the second quarter increased 7.2 percent on a capacity increase of 5.2 percent. Alaska’s load factor increased 1.4 percentage points to 79.3 percent, compared to the same period in 2005. Alaska’s operating revenue per available seat mile (ASM) increased 9.5 percent, while its operating cost per ASM excluding fuel and restructuring charges and adjustments decreased 2.1 percent. Alaska’s pretax income for the quarter was $72.5 million, compared to $22.1 million in 2005. Excluding the items noted above, Alaska would have reported pretax income of $79.6 million for the quarter, compared to $34.2 million in the second quarter of 2005.
Horizon Air’s passenger traffic in the second quarter increased 11.3 percent on a 6.1 percent capacity increase. Horizon’s load factor increased by 3.6 percentage points to 76.6 percent, compared to the same period in 2005. Horizon’s operating revenue per ASM increased 9.0 percent, and its operating cost per ASM excluding fuel increased 9.8 percent. Horizon’s pretax income for the quarter was $9.7 million, compared to $11.1 million in 2005. Excluding the mark-to-market fuel hedge adjustments, Horizon’s pretax income would have been $10.2 million for the quarter, compared to $10.7 million in the second quarter of 2005.
Alaska Air Group had cash and short-term investments at June 30, 2006, of approximately $1.1 billion compared to $983 million at Dec. 31, 2005. The company’s debt-to-capital ratio, assuming aircraft operating leases are capitalized at seven times annualized rent, was 69 percent as of June 30, 2006, compared to 73 percent as of Dec. 31, 2005. The decrease from Dec. 31, 2005, is primarily due to the conversion to equity of the company’s senior convertible notes in April 2006, partially offset by the $23.6 million net loss for the six months, coupled with an increase in the company’s outstanding debt resulting from new aircraft-secured debt arrangements in the first six months of 2006.
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 second quarter 2006 results will be simulcast via the Internet at 8:30 a.m. Pacific time on July 25, 2006. It may be accessed through the company’s Web site at alaskaair.com. For those unable to listen to the live broadcast, a replay will be available after the conclusion of the call at alaskaair.com/investors.
This report contains 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: 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; the implementation of our growth strategy; the timing of the MD-80 fleet disposal, and the amounts of potential lease termination payments with lessors and sublease payments from sub lessees; 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 Item 1A of the company’s Annual Report on Form 10-K for the year ended Dec. 31, 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 alaskaair.com/newsroom.
ALASKA AIR GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(In Millions Except Per Share Amounts)
Three Months Six Months
Ended June 30 Ended June 30
2006 2005 2006 2005
Operating Revenues:
Passenger $807.4 $697.5 $1,486.9 $1,284.5
Freight and mail 26.7 24.9 48.1 45.2
Other - net 38.9 34.1 73.4 69.3
Total Operating Revenues 873.0 756.5 1,608.4 1,399.0
Operating Expenses:
Wages and benefits 234.4 224.3 457.6 464.9
Variable incentive pay 10.6 3.0 19.1 7.1
Contracted services 39.6 34.8 76.7 65.4
Aircraft fuel, including hedging
gains and losses 199.8 147.7 362.9 186.2
Aircraft maintenance 57.8 58.2 119.0 119.4
Aircraft rent 46.1 47.0 92.7 93.1
Food and beverage service 12.5 12.1 24.0 23.6
Selling expenses 46.4 39.2 87.9 77.9
Depreciation and amortization 36.7 35.3 73.6 69.5
Landing fees and other rentals 52.0 50.5 99.5 101.4
Other 53.2 53.1 105.6 104.5
Impairment of aircraft -- -- 131.1 --
Restructuring charges and
adjustments 3.8 14.7 3.8 22.1
Total Operating Expenses 792.9 719.9 1,653.5 1,335.1
Operating Income (Loss) 80.1 36.6 (45.1) 63.9
Nonoperating Income (Expense):
Interest income 14.1 7.1 25.2 13.0
Interest expense (18.1) (15.3) (37.2) (29.4)
Interest capitalized 5.8 1.3 10.5 2.1
Other - net (0.8) -- (1.7) (2.9)
1.0 (6.9) (3.2) (17.2)
Income (loss) before income tax
and accounting change 81.1 29.7 (48.3) 46.7
Income tax expense (benefit) 25.6 12.3 (24.7) 19.4
Income (loss) before accounting
change $55.5 $17.4 $(23.6) $27.3
Cumulative effect of accounting
change, net of tax -- -- -- (90.4)
Net Income (Loss) $55.5 $17.4 $(23.6) $(63.1)
Basic Earnings (Loss) Per Share:
Income (loss) before accounting
change $1.46 $0.64 $(0.66) $1.01
Cumulative effect of accounting
change NA NA NA (3.33)
Net Income (Loss) Per Share $1.46 $0.64 $(0.66) $(2.32)
Diluted Earnings (Loss) Per Share:
Income (loss) before accounting
change $1.38 $0.56 $(0.66) $0.90
Cumulative effect of accounting
change NA NA NA (2.72)
Net Income (Loss) Per Share $1.38 $0.56 $(0.66) $(1.82)
Shares Used for Computation:
Basic 38.028 27.200 35.759 27.173
Diluted 40.076 33.273 35.759 33.256
Alaska Air Group, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
June 30, December 31,
(In Millions) 2006 2005
Cash and marketable securities $1,103 $983
Total current assets $1,732 $1,540
Property and equipment - net 2,131 2,032
Other assets 229 220
Total assets $4,092 $3,792
Current liabilities $1,423 $1,165
Long-term debt 889 969
Other liabilities and credits 806 830
Shareholders' equity 974 828
Total liabilities and shareholders' equity $4,092 $3,792
Alaska Airlines Financial and Statistical Data
Three Months Ended June 30 Six Months Ended June 30
Financial Data
(in millions): 2006 2005 % Change 2006 2005 % Change
Operating Revenues:
Passenger $647.3 $561.2 15.3 $1,184.1 $1,032.5 14.7
Freight and mail 25.6 23.9 7.1 46.1 43.2 6.7
Other - net 37.5 31.2 20.2 70.2 63.9 9.9
Total Operating
Revenues 710.4 616.3 15.3 1,300.4 1,139.6 14.1
Operating Expenses:
Wages and benefits 186.9 180.1 3.8 362.6 377.0 (3.8)
Variable incentive
pay 7.6 1.9 300.0 14.0 4.7 197.9
Contracted services 34.2 31.6 8.2 66.1 59.4 11.3
Aircraft fuel,
including hedging
gains and losses 173.7 127.6 36.1 315.7 161.8 95.1
Aircraft maintenance 41.9 50.2 (16.5) 86.2 100.3 (14.1)
Aircraft rent 28.9 29.3 (1.4) 58.2 57.7 0.9
Food and beverage
service 11.9 11.5 3.5 22.7 22.4 1.3
Selling expenses 38.5 32.6 17.9 73.2 66.6 9.9
Depreciation and
amortization 32.2 30.7 4.9 64.4 61.0 5.6
Landing fees and
other rentals 40.5 39.1 3.6 77.4 78.4 (1.3)
Other 39.4 41.5 (5.1) 78.4 79.9 (1.9)
Impairment of aircraft -- -- NM 131.1 -- NM
Restructuring charges
and adjustments 3.8 14.7 NM 3.8 22.1 NM
Total Operating
Expenses 639.5 590.8 8.2 1,353.8 1,091.3 24.1
Operating Income
(Loss) 70.9 25.5 NM (53.4) 48.3 NM
Interest income 14.8 7.6 26.6 13.9
Interest expense (17.8) (12.4) (33.6) (23.9)
Interest capitalized 5.1 1.2 9.4 1.9
Other - net (0.5) 0.2 (1.2) (2.7)
1.6 (3.4) 1.2 (10.8)
Income (Loss) Before
Income Tax and
Accounting Change $72.5 $22.1 NM $(52.2) $37.5 NM
Operating Statistics:
Revenue passengers
(000) 4,443 4,232 5.0 8,348 8,083 3.3
RPMs (000,000)
"traffic" 4,626 4,317 7.2 8,706 8,214 6.0
ASMs (000,000)
"capacity" 5,834 5,543 5.2 11,373 10,913 4.2
Passenger load factor 79.3% 77.9% 1.4pts 76.5% 75.3% 1.2pts
Yield per passenger
mile (in cents) 13.99 13.00 7.6 13.60 12.57 8.2
Operating revenue
per ASM (in cents) 12.18 11.12 9.5 11.43 10.44 9.5
Operating expenses
per ASM(a) (in
cents) 10.96 10.66 2.8 11.90 10.00 19.0
Operating expense
per ASM excluding
fuel, impairment
of aircraft, and
restructuring
charges and
adjustments(a)
(in cents) 7.92 8.09 (2.1) 7.94 8.31 (4.4)
GAAP fuel cost per
gallon(a) $1.96 $1.48 32.1 $1.82 $0.95 91.6
Economic fuel cost
per gallon(a) $1.92 $1.51 27.0 $1.80 $1.42 26.4
Fuel gallons
(000,000) 88.8 86.2 3.0 173.3 170.4 1.7
Average number of
full-time equivalent
employees 9,347 9,144 2.2 9,168 9,180 (0.1)
Aircraft utilization
(blk hrs/day) 11.0 10.7 2.8 11.0 10.3 6.8
Average aircraft
stage length (miles) 920 903 1.9 921 900 2.3
Operating fleet at
period-end 113 109 3.7 113 109 3.7
NM = Not Meaningful
(a) See Note A on page 8.
Horizon Air Financial and Statistical Data
Three Months Ended June 30 Six Months Ended June 30
Financial Data
(in millions): 2006 2005 % Change 2006 2005 % Change
Operating Revenues:
Passenger $160.4 $136.9 17.2 $304.2 $254.6 19.5
Freight and mail 1.1 0.9 22.2 2.0 1.9 5.3
Other - net 1.2 2.8 (57.1) 2.7 5.3 (49.1)
Total Operating
Revenues 162.7 140.6 15.7 308.9 261.8 18.0
Operating Expenses:
Wages and benefits 46.5 42.0 10.7 93.0 83.9 10.8
Variable incentive
pay 3.0 1.1 172.7 5.1 2.4 112.5
Contracted services 6.9 6.1 13.1 13.4 11.6 15.5
Aircraft fuel,
including hedging
gains and losses 26.1 20.1 29.9 47.2 24.4 93.4
Aircraft maintenance 15.9 8.1 96.3 32.8 19.2 70.8
Aircraft rent 17.2 17.6 (2.3) 34.5 35.3 (2.3)
Food and beverage
service 0.6 0.6 -- 1.3 1.2 8.3
Selling expenses 8.3 7.3 13.7 16.4 14.0 17.1
Depreciation and
amortization 4.3 4.3 -- 8.7 7.9 10.1
Landing fees and
other rentals 11.7 11.7 -- 22.6 23.5 (3.8)
Other 12.0 9.6 25.0 23.4 20.9 12.0
Total Operating
Expenses 152.5 128.5 18.7 298.4 244.3 22.1
Operating Income 10.2 12.1 NM 10.5 17.5 NM
Interest income 1.0 0.4 1.7 0.7
Interest expense (2.2) (1.5) (4.0) (2.7)
Interest capitalized 0.7 0.1 1.1 0.2
Other - net -- -- -- --
(0.5) (1.0) (1.2) (1.8)
Income Before Income
Tax and Accounting
Change $9.7 $11.1 NM $9.3 $15.7 NM
Operating Statistics:
Revenue passengers
(000) 1,745 1,638 6.5 3,339 3,113 7.3
RPMs (000,000)
"traffic" 690 620 11.3 1,310 1,160 12.9
ASMs (000,000)
"capacity" 901 849 6.1 1,778 1,631 9.0
Passenger load
factor 76.6% 73.0% 3.6pts 73.7% 71.1% 2.6pts
Yield per passenger
mile (in cents) 23.25 22.08 5.3 23.22 21.95 5.8
Operating revenue
per ASM (in cents) 18.06 16.57 9.0 17.37 16.05 8.2
Operating expenses
per ASM(a) (in
cents) 16.93 15.14 11.8 16.78 14.98 12.0
Operating expense
per ASM excluding
fuel(a) (in cents) 14.03 12.78 9.8 14.13 13.48 4.8
GAAP fuel cost per
gallon(a) $1.98 $1.56 26.9 $1.81 $0.98 84.5
Economic fuel cost
per gallon(a) $1.94 $1.59 22.0 $1.84 $1.49 23.2
Fuel gallons
(000,000) 13.2 12.9 2.3 26.1 24.9 4.8
Average number of
full-time
equivalent
employees 3,531 3,414 3.4 3,535 3,389 4.3
Aircraft utilization
(blk hrs/day) 8.8 8.5 3.5 8.8 8.4 4.8
Operating fleet at
period-end 69 65 6.2 69 65 6.2
NM = Not Meaningful
(a) See Note A on page 8.
Note A:
Pursuant to Item 10 of Regulation S-K, we are providing disclosure of the reconciliation of reported non-GAAP financial measures to their most directly comparable financial measures reported on a GAAP basis. The non-GAAP financial measures provide management the ability to measure and monitor performance both with and without the cost of aircraft fuel (including the gains and losses associated with our fuel hedging program where appropriate), aircraft impairment charges, and restructuring charges and adjustments. Because the cost and availability of aircraft fuel are subject to many economic and political factors beyond our control and we record changes in the fair value of our hedge portfolio in our income statement, it is our view that the measurement and monitoring of performance without fuel is important. In addition, we believe the disclosure of financial performance without impairment and restructuring charges is useful to investors. Finally, these non-GAAP financial measures are also more comparable to financial measures reported to the Department of Transportation by other major network airlines.
The following tables reconcile our non-GAAP financial measures to the most directly comparable GAAP financial measures for both Alaska Airlines, Inc. and Horizon Air Industries, Inc.:
Alaska Airlines, Inc.: Three Months Ended Six Months Ended
($ in millions) June 30, June 30,
Unit cost reconciliations: 2006 2005 2006 2005
Operating expenses $639.5 $590.8 $1,353.8 $1,091.3
ASMs (000,000) 5,834 5,543 11,373 10,913
Operating expenses per ASM (in
cents) 10.96 10.66 11.90 10.00
Operating expenses $639.5 $590.8 $1,353.8 $1,091.3
Less: aircraft fuel (173.7) (127.6) (315.7) (161.8)
Less: impairment of aircraft -- -- (131.1) --
Less: restructuring charges and
adjustments (3.8) (14.7) (3.8) (22.1)
Operating expenses excluding fuel,
impairment of aircraft, and
restructuring charges and
adjustments $462.0 $448.5 $903.2 $907.4
ASMs (000,000) 5,834 5,543 11,373 10,913
Operating expenses per ASM
excluding fuel, impairment of
aircraft, and restructuring
charges and adjustments (in
cents) 7.92 8.09 7.94 8.31
Reconciliation to GAAP income
(loss) before taxes and
accounting change:
Income (loss) before taxes and
accounting change, excluding
mark-to-market hedging gains
(losses), impairment of aircraft,
and restructuring charges
and adjustments $79.6 $34.2 $87.2 $(20.7)
Mark-to-market hedging gains
(losses) included in aircraft
fuel (3.3) 2.6 (4.5) 80.3
Less: impairment of aircraft -- -- (131.1) --
Less: restructuring charges and
adjustments (3.8) (14.7) (3.8) (22.1)
GAAP income (loss) before
taxes and accounting change
as reported $72.5 $22.1 $(52.2) $37.5
Aircraft fuel reconciliations:*
($ in millions except per
gallon amounts) Three Months Ended June 30,
2006 2005
Cost/Gal Cost/Gal
Raw or "into-plane" fuel cost $200.0 $2.25 $154.7 $1.79
Less: gains on settled hedges (29.6) (0.33) (24.5) (0.28)
Economic fuel expense* $170.4 $1.92 $130.2 $1.51
Less: mark-to-market gains or losses
related to hedges that settle in
future periods, net of the
reclassification of previously
recorded mark-to-market gains on
settled hedges 3.3 0.04 (2.6) (0.03)
GAAP fuel expense* $173.7 $1.96 $127.6 $1.48
Fuel gallons (000,000) 88.8 86.2
Six Months Ended June 30,
2006 2005
Cost/Gal Cost/Gal
Raw or "into-plane" fuel cost $366.6 $2.12 $285.7 $1.68
Less: gains on settled hedges (55.4) (0.32) (43.6) (0.26)
Economic fuel expense* $311.2 $1.80 $242.1 $1.42
Less: mark-to-market gains or losses
related to hedges that settle in
future periods, net of the
reclassification of previously
recorded mark-to-market gains on
settled hedges 4.5 0.02 (80.3) (0.47)
GAAP fuel expense* $315.7 $1.82 $161.8 $0.95
Fuel gallons (000,000) 173.3 170.4
* Beginning in the first quarter of 2006, the Company records all fuel hedging activity, including mark-to-market gains and losses, in aircraft fuel expense. Prior year amounts have been reclassified for consistency.
Horizon Air Industries, Inc. Three Months Ended Six Months Ended
($ in millions) June 30, June 30,
Unit cost reconciliations: 2006 2005 2006 2005
Operating expenses $152.5 $128.5 $298.4 $244.3
ASMs (000,000) 901 849 1,778 1,631
Operating expenses per ASM (in cents) 16.93 15.14 16.78 14.98
Operating expenses $152.5 $128.5 $298.4 $244.3
Less: aircraft fuel (26.1) (20.1) (47.2) (24.4)
Operating expenses excluding fuel $126.4 $108.4 $251.2 $219.9
ASMs (000,000) 901 849 1,778 1,631
Operating expenses per ASM excluding
fuel (in cents) 14.03 12.78 14.13 13.48
Reconciliation to GAAP income before
taxes and accounting change:
Income before taxes and accounting
change, excluding mark-to-market
hedging gains (losses) $10.2 $10.7 $8.6 $3.0
Mark-to-market hedging gains (losses)
included in aircraft fuel (0.5) 0.4 0.7 12.7
GAAP income before taxes and accounting
change as reported $9.7 $11.1 $9.3 $15.7
Aircraft fuel reconciliations:*
($ in millions except per gallon amounts) Three Months Ended June 30,
2006 2005
Cost/Gal Cost/Gal
Raw or "into-plane" fuel cost $30.4 $2.30 $24.2 $1.88
Less: gains on settled hedges (4.8) (0.36) (3.7) (0.29)
Economic fuel expense* $25.6 $1.94 $20.5 $1.59
Less: mark-to-market gains or losses
related to hedges that settle in
future periods, net of the
reclassification of previously
recorded mark-to-market gains on
settled hedges 0.5 0.04 (0.4) (0.03)
GAAP fuel expense* $26.1 $1.98 $20.1 $1.56
Fuel gallons (000,000) 13.2 12.9
Six Months Ended June 30,
2006 2005
Cost/Gal Cost/Gal
Raw or "into-plane" fuel cost $56.9 $2.18 $43.6 $1.75
Less: gains on settled hedges (9.0) (0.34) (6.5) (0.26)
Economic fuel expense* $47.9 $1.84 $37.1 $1.49
Less: mark-to-market gains or losses
related to hedges that settle in
future periods, net of the
reclassification of previously
recorded mark-to-market gains on
settled hedges (0.7) (0.03) (12.7) (0.51)
GAAP fuel expense* $47.2 $1.81 $24.4 $0.98
Fuel gallons (000,000) 26.1 24.9
* Beginning in the first quarter of 2006, the Company records all fuel hedging activity, including mark-to-market gains and losses, in aircraft fuel expense. Prior year amounts have been reclassified for consistency.
Air Group Net Income (Loss) and EPS Reconciliation:
The following table summarizes Alaska Air Group, Inc.’s net income (loss) and earnings (loss) per share during 2006 and 2005 excluding the cumulative effect of the accounting change, mark-to-market hedging gains (losses) net of related reclassifications, impairment of aircraft, and restructuring charges and adjustments, as reported in accordance with GAAP (in millions except per share amounts):
Three Months Ended June 30,
2006 2005
Dollars Diluted EPS Dollars Diluted EPS
Net income and diluted EPS
excluding the cumulative
effect of the accounting
change, mark-to-market
hedging gains (losses),
impairment of aircraft
and restructuring charges
and adjustments* $60.3 $1.50 $24.7 $0.78
Mark-to-market hedging
gains (losses), net of tax (2.4) (0.06) 1.9 0.06
Restructuring charges and
adjustments, net of tax (2.4) (0.06) (9.2) (0.28)
Reported GAAP amounts $55.5 $1.38 $17.4 $0.56
Six Months Ended June 30,
2006 2005
Dollars Diluted EPS Dollars Diluted EPS
Net income (loss) and
diluted EPS excluding
the cumulative effect
of the accounting change,
mark-to-market hedging
gains (losses), impairment
of aircraft and
restructuring charges
and adjustments* $63.1 $1.77 $(17.0) $(0.63)
Effect of dilutive shares
and interest on
convertible bonds* -- -- NA 0.19
Cumulative effect of
accounting change, net
of tax -- -- (90.4) (2.72)
Mark-to-market hedging
gains (losses), net of
tax (2.4) (0.07) 58.1 1.75
Impairment of aircraft,
net of tax (81.9) (2.29) -- --
Restructuring charges and
adjustments, net of tax (2.4) (0.07) (13.8) (0.41)
Reported GAAP amounts $(23.6) $(0.66) $(63.1) $(1.82)
* Diluted loss per share for the six months ended June 30, 2005, excluding
the impact of the accounting change, mark to market gains on fuel
hedges, and restructuring charges and adjustments has been calculated
using the weighted average number of shares outstanding (27.2 million at
June 30, 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 $17.0 million.
In order to reconcile the diluted loss per share to the GAAP loss per
share for the six months ended June 30, 2005, the table above includes
$0.19 per share, which represents the impact of the additional shares
that were used in the GAAP loss per share as well as $2.5 million of
interest, net of tax, on the contingently convertible senior notes, that
were outstanding at the time, 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 33.3 million fully diluted shares outstanding.
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 Six Months Ended
June 30, June 30,
2006 2005 2006 2005
Basic Earnings (Loss) Per Share:
Income (loss) before accounting change $55.5 $17.4 $(23.6) $27.3
Weighted average shares outstanding 38.028 27.200 35.759 27.173
Income (loss) per share before
accounting change $1.46 $0.64 $(0.66) $1.01
Cumulative effect of accounting
change, net of tax NA NA NA $(90.4)
Weighted average shares outstanding NA NA NA 27.173
Per share cumulative effect of
accounting change NA NA NA $(3.33)
Net income (loss) $55.5 $17.4 $(23.6) $(63.1)
Weighted average shares outstanding 38.028 27.200 35.759 27.173
Net income (loss) per share $1.46 $0.64 $(0.66) $(2.32)
Diluted Earnings (Loss) Per Share:
Income (loss) before accounting change $55.5 $17.4 $(23.6) $27.3
Interest on convertible notes, net of
tax NA 1.3 NA 2.5
Income (loss) before accounting change
for diluted calculation $55.5 $18.7 $(23.6) $29.8
Weighted average shares outstanding 40.076 33.273 35.759 33.256
Income (loss) per share before
accounting change $1.38 $0.56 $(0.66) $0.90
Cumulative effect of accounting change,
net of tax NA NA NA $(90.4)
Weighted average shares outstanding NA NA NA 33.256
Per share cumulative effect of
accounting change NA NA NA $(2.72)
Net income (loss) $55.5 $17.4 $(23.6) $(63.1)
Interest on convertible notes, net of
tax NA 1.3 NA 2.5
Net income (loss) for diluted
calculation $55.5 $18.7 $(23.6) $(60.6)
Weighted average shares outstanding 40.076 33.273 35.759 33.256
Net income (loss) per share $1.38 $0.56 $(0.66) $(1.82)
Forecasted Financial Measures
During our quarterly earnings conference call, we expect to discuss forward-looking forecasted unit cost information for the remainder of 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
Fore- Fore- Fore- Fore- Fore- Fore- Fore-
cast cast cast cast cast cast cast
of of of of of of of
cost fuel impair- total cost fuel total
per cost ment oper- per cost oper-
avail- per charge ating avail- per ating
able avail- per cost able avail- cost
seat able avail- per seat able per
mile, seat able avail- mile, seat avail-
exclu- mile seat able exclu- mile able
ding (cents) mile seat ding (See seat
fuel (See (cents) mile, fuel Note 1) mile,
and Note 1) as (cents) as
impair- report- report-
ment ed ed on
charges on a a GAAP
(cents) GAAP basis
basis (cents)
(cents)
(See
Note 2)
Third quarter
2006 7.4 3.2 -- 10.6 13.9 3.3 17.2
Fourth quarter
2006 7.6 3.4 -- 11.0 14.7 3.4 18.1
Full year 2006 7.7 3.0 0.6 11.3 14.2 3.1 17.3
Note 1: Our forecast of fuel costs is based on anticipated gallons consumed and estimated fuel cost per gallon. The estimate also includes the expected benefit from settled hedges. Given the volatility of fuel prices and the mark-to-market adjustments on our fuel hedge portfolio, readers should be cautioned that actual fuel expense will likely differ from the forecast above.
Note 2: The Company has excluded from the forecast of GAAP operating cost per available seat mile any impact resulting from the possible buyout of five MD-80 aircraft leases and the restructuring charges that will result from the severance package offered as part of the recently ratified contract with Alaska employees represented by the IAM. These items are further discussed in the 8-K filed today.
SOURCE: Alaska Air Group, Inc.
CONTACT: Brad Tilden, +1-206-392-5362, or Amanda Tobin Bielawski,
+1-206-392-5134, both of Alaska Air Group, Inc.
Web site: http://www.alaskaair.com/
