Allegiant Travel Company Reports Fourth Quarter, Full Year 2007 Financial Results, Announces $25 Million Share Repurchase Program
Las Vegas, Nev., January 29, 2008 /PRNewswire/ – Allegiant Travel Company (NASDAQ: ALGT), parent company of Allegiant Air and Allegiant Vacations, today reported the following fourth quarter and full year 2007 results, and comparisons to prior year equivalents:
Unaudited
4Q07
4Q06
Change
2007
2006
Change
Total operating revenue (millions)
$
101.0
$
63.1
59.9
%
$
360.6
$
243.4
48.2
%
Operating income (millions)
$
6.1
$
7.4
-17.8
%
$
44.1
$
22.6
95.4
%
Operating margin
6.0
%
11.7
%
-5.7pp
12.2
%
9.3
%
2.9pp
Net income (loss) (millions)
$
4.8
($1.5
)
N/M
$
31.5
$
8.7
260.5
%
Diluted earnings per share
$
0.23
($0.17
)
N/M
$
1.53
$
0.52
194.2
%
Diluted non-GAAP earnings per share adjusted by excluding non-cash mark-to-market loss/gain on fuel derivatives and (in 2006) one-time tax accrual (reconciled to GAAP on pgs. 9 and 14)
$
0.24
$
0.24
0.0
%
$
1.48
$
0.96
54.2
%
Scheduled Service:
Ancillary revenue per passenger
$
24.30
$
18.84
29.0
%
$
21.53
$
16.11
33.6
%
Total revenue per ASM (cents)
9.36
8.68
7.8
%
9.46
8.47
11.7
%
Average stage length (miles)
922
945
(2.4
)%
923
1,006
(8.3
)%
Total System*:
Operating expense per ASM or CASM (cents)
8.69
7.59
14.5
%
8.19
7.69
6.5
%
CASM, excluding fuel (cents)
4.21
4.34
(3.0
)%
4.25
4.15
2.4
%
Average stage length (miles)
899
912
(1.4
)%
906
966
(6.2
)%
*Total system includes scheduled service, fixed fee contract and non-revenue flying.
“2007 was an outstanding year for our company,” said Maurice J. Gallagher, Jr., Chairman, CEO and President of Allegiant Travel Company. “We grew revenues by 48.2% to $360.6 million, nearly doubled operating profits to $44.0 million, increased pre-tax income 220.6% to $50.7 million and net income by 260.5% to $31.5 million. However, the sharp increase in fuel prices at the end of the year did affect our fourth quarter results, dropping our fourth quarter operating margin by almost half relative to the prior year. We take some small comfort in realizing that had fuel prices remained constant compared with the fourth quarter of 2006, our operating margin would have been almost 19%. We have previously demonstrated the ability, over time, to improve margins in the face of substantial fuel price increases and we fully expect to do so this time as well. We remain confident in our business model, its profitability potential and our ability to execute.”
Gallagher continued, “The tremendous efforts of our team members enabled us to achieve a great deal in the fourth quarter. We established three new bases, including two new major leisure destinations of Phoenix, AZ and Ft. Lauderdale, FL, and our new charter base at Tunica, MS to support previously announced new flying for Harrah’s Entertainment, each of which supports two MD-80 aircraft. On the revenue front, we succeeded in further increasing system revenue per available seat mile by 7.6% due mostly to a 29.0% year over year increase in ancillary revenue per passenger.”
Gallagher concluded, “Lastly our Board of Directors has authorized a share repurchase program to acquire up to $25 million of the Company’s common stock. Our strong balance sheet enables us to continually evaluate ways to enhance shareholder value.”
Andrew C. Levy, CFO & Managing Director – Planning, stated, “We have made many changes to our route network, our pricing and our future planning in keeping with our goal to deliver double digit operating margins in spite of current high fuel prices. The changes made to date have been effective, but we have more hard work to do to ensure we can reach our margin targets. We remain steadfast in our determination to deliver the highest margins in the industry.”
“Our balance sheet and liquidity remain very strong. We ended the quarter with $171.4 million in cash and short-term investments, down from $172.7 million at the end of the September quarter due to the purchase of $17.0 million in aircraft and parts to support our fourth quarter and 2008 growth. Cash was used to purchase $9.8 million of these assets with the balance being financed, resulting in an increase in debt of $3.1 million compared with the prior quarter and largely flat compared with year end 2006. Cash flow from operations for the quarter was $11.1 million and our total for the year was $74.0 million.”
Levy continued, “We again are pleased with our cost management. Cost per ASM, excluding fuel, decreased by 3.0% compared with the prior year despite a 1.4% decline in average stage length.”
During the fourth quarter, Allegiant Air initiated service to two new major leisure destinations (Phoenix and Ft. Lauderdale), two new small cities (Bangor, ME and Plattsburgh, NY) and on 28 new routes. We also resumed our seasonal service from Bellingham, WA to Palm Springs, CA.
Network Summary*
January 29, 2008
Year End 2007
Year End 2006
“World-class leisure destinations”
5
5
3
Small cities served
53
53
47
Total cities served
58
58
50
Routes to Las Vegas
36
37
34
Routes to Orlando
27
27
21
Routes to Tampa Bay/St. Petersburg
14
14
12
Routes to Phoenix-Mesa
13
13
0
Routes to Ft. Lauderdale
11
12
0
Other routes
2
2
0
Total routes
103
105
67
• includes cities served seasonally
During the fourth quarter, we placed three MD-80s in service, bringing our operating fleet to 32 MD-80 aircraft at year end 2007. We also purchased three additional MD-80 aircraft in the fourth quarter 2007. We placed these three aircraft in service subsequent to year-end 2007 and now have an operating fleet of 35 aircraft. We have a commitment to purchase two additional MD-80 aircraft for delivery to us by the early part of the second quarter of 2008. We expect to have these aircraft in our operating fleet by the end of the second quarter 2008, for a total operating fleet of 37 MD-80s.
The following table summarizes year-over-year and recent changes in Allegiant Air’s fleet:
MD-80 Aircraft in Service
January 29, 2008
Year End 2007
Year End 2006
Owned (including capital leases)
31
28
22
Leased
4
4
2
Total
35
32
24
At this time, Allegiant Travel Company provides the following guidance to investors, which are subject to revision:
•
We expect first quarter 2008 year-over-year departure growth of at least 42% and ASM growth of at least 35%.
•
We expect second quarter 2008 year-over-year departure growth of at least 35% and ASM growth of at least 25%.
•
We expect full year 2008 year-over-year departure growth of at least 35% and ASM growth of at least 30%.
•
By the end of 2008, Allegiant Air expects to operate at least 40 MD-80 aircraft. There currently appear to be sufficient high-quality MD-80 aircraft available on the market to support Allegiant Air growth.
•
We expect 2008 capital expenditures of $45 million, comprising $36 million for six aircraft and $9 million for engines and other.
The Company is hedged to a negligible amount of its anticipated scheduled service jet fuel consumption for the first quarter of 2008 and does not have any fuel hedges for later periods.
Allegiant Travel Company will host a conference call with analysts at 1 pm EST tomorrow, January 30, 2008, to discuss its fourth quarter and year end 2007 financial results. A live broadcast of the conference call will be available via the Company’s Investor Relations website homepage at http://ir.allegiantair.com. The webcast will also be archived in the “Events & Presentations” section of the website.
About the Company Las Vegas-based Allegiant Travel Company (NASDAQ: ALGT), is focused on linking travelers in small cities to world-class leisure destinations such as Las Vegas, Nev., Phoenix, Ariz., Fort Lauderdale, Fla., Orlando, Fla. and Tampa/St. Petersburg, Fla. Through its subsidiary, Allegiant Air, LLC the Company operates a low-cost, high-efficiency, all-jet passenger airline offering air travel both on a stand-alone basis and bundled with hotel rooms, rental cars and other travel related services.ALGT/G
Media Inquiries: Tyri Squyres +1-702-851-7370 mediarelations@allegiantair.com
Investor Inquiries: Robert Ashcroft +1-702-430-3275 ir@allegiantair.com
Under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, statements in this press release that are not historical facts are forward-looking statements. These forward-looking statements are only estimates or predictions based on our management’s beliefs and assumptions and on information currently available to our management. Forward-looking statements include our statements regarding ASM growth, departure growth, fleet growth and expected capital expenditures, as well as information concerning future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities, the effects of future regulation and the effects of competition. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate”, “project” or similar expressions.
Forward-looking statements involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed in the forward-looking statements. Important risk factors that could cause our results to differ materially from those expressed in the forward-looking statements generally may be found in our periodic reports filed with the Securities and Exchange Commission at www.sec.gov. These risk factors include, without limitation, increases in fuel prices, terrorist attacks, risks inherent to airlines, demand for air services to Las Vegas, Orlando, Tampa/St. Petersburg, Phoenix and Ft. Lauderdale from the markets served by us, our ability to implement our growth strategy, our fixed obligations, our dependence on our leisure destination markets, our ability to add, renew or replace gate leases, our competitive environment, problems with our aircraft, dependence on fixed fee customers, our reliance on our automated systems, economic and other conditions in markets in which we operate, governmental regulation, increases in maintenance costs and insurance premiums and cyclical and seasonal fluctuations in our operating results.
Any forward-looking statements are based on information available to us today and we undertake no obligation to update publicly any forward-looking statements, whether as a result of future events, new information or otherwise.
Detailed financial information follows:
1
Allegiant Travel Company Consolidated Statements of Operations Quarters Ended December 31, 2007 and 2006 (in thousands, except per share amounts) (Unaudited)
Three months ended December 31,
Percent
2007
2006
change
OPERATING REVENUE:
Scheduled service revenue
$
72,816
$
46,620
56.2
Fixed fee contract revenue
7,138
6,497
9.9
Ancillary revenue
20,443
10,019
104.0
Other revenue
559
—
N/M
Total operating revenue
100,956
63,136
59.9
OPERATING EXPENSES:
Aircraft fuel
48,884
23,900
104.5
Salary and benefits
14,698
10,049
46.3
Station operations
8,705
6,192
40.6
Maintenance and repairs
7,612
5,248
45.0
Sales and marketing
��
3,428
2,338
46.6
Aircraft lease rentals
879
825
6.5
Depreciation and amortization
4,379
2,985
46.7
Other
6,313
4,229
49.3
Total operating expenses
94,898
55,766
70.2
OPERATING INCOME
6,058
7,370
(17.8
)
As a percent of total operating revenue
6.0
%
11.7
%
OTHER (INCOME) EXPENSE:
(Gain) loss on fuel derivatives, net
(361
)
1,266
N/M
Earnings from joint venture, net
(160
)
—
N/M
Interest income
(2,326
)
(930
)
150.1
Interest expense
1,386
1,547
(10.4
)
Total other (income) expense
(1,461
)
1,883
N/M
INCOME BEFORE INCOME TAXES
7,519
5,487
37.0
As a percent of total operating revenue
7.4
%
8.7
%
PROVISION FOR INCOME TAXES
2,748
7,033
(60.9
)
NET INCOME (LOSS)
$
4,771
($1,546
)
N/M
As a percent of total operating revenue
4.7
%
-2.4
%
Earnings per share
Basic
$
0.23
($0.17
)
N/M
Diluted
$
0.23
($0.17
)
N/M
2
Weighted average shares outstanding:
Basic
20,651
9,028
128.7
Diluted
20,939
9,028
131.9
Unaudited pro forma data for 2006 (reflecting change in tax status)(1):
Income before income taxes
$
7,519
$
5,487
37.0
Pro-forma provision for income taxes
2,748
1,975
39.1
Pro-forma net income
$
4,771
$
3,512
35.8
Unaudited pro-forma net income per share data for 2006 (reflecting change in tax status):
Basic pro-forma net income per share
$
0.23
$
0.39
(41.0
)
Diluted pro-forma net income per share
$
0.23
$
0.20
15.0
(1) Prior to its December 2006 initial public offering, the Company was organized as a limited liability company (LLC) and as such was generally not subject to income taxes, except in certain state and local jurisdictions. The pro-forma tax provision for 2006 reflects income taxes as if the Company were organized as a corporation effective January 1, 2006.
3
Allegiant Travel Company Operating Statistics Quarters Ended December 31, 2007 and 2006 (Unaudited)
Three months ended December 31,
Percent
2007
2006
change*
OPERATING STATISTICS
Total system statistics
Passengers
894,834
579,516
54.4
Revenue passenger miles (RPMs) (thousands)
848,933
560,738
51.4
Available seat miles (ASMs) (thousands)
1,092,135
734,761
48.6
Load factor
77.7
%
76.3
%
1.4
Operating revenue per ASM (cents)
9.24
8.59
7.6
Operating expense per ASM or CASM (cents)
8.69
7.59
14.5
CASM, excl fuel (cents)
4.21
4.34
(3.0
)
Departures
8,192
5,442
50.5
Block hours
19,603
13,131
49.3
Average stage length (miles)
899
912
(1.4
)
Avg number of operating aircraft during period
30.3
21.9
38.4
Total aircraft in service end of period
32
24
33.3
Full-time equivalent employees at end of period
1,180
846
39.5
Fuel gallons consumed (thousands)
18,511
12,325
50.2
Average fuel cost per gallon
$
2.64
$
1.94
36.1
Scheduled service statistics
Passengers
841,117
531,718
58.2
Revenue passenger miles (RPMs) (thousands)
790,821
512,657
54.3
Available seat miles (ASMs) (thousands)
996,759
652,469
52.8
Load factor
79.3
%
78.6
%
0.7
Departures
7,293
4,667
56.3
Block hours
17,835
11,615
53.5
Yield (cents)
9.21
9.09
1.3
Scheduled service revenue per ASM (cents)
7.31
7.15
2.2
Ancillary revenue per ASM (cents)
2.05
1.54
33.1
Total revenue per ASM (cents)
9.36
8.68
7.8
Average fare — scheduled service
$
86.57
$
87.68
(1.3
)
Average fare — ancillary
24.30
18.84
29.0
Average fare — total
$
110.87
$
106.52
4.1
Average stage length (miles)
922
945
(2.4
)
Percent of sales through website during period
85.5
%
86.3
%
(0.8
)
• except load factor and percent of sales through website, which is percentage point change
4
Allegiant Travel Company Non-GAAP Presentations Quarters Ended December 31, 2007 and 2006 (in thousands, except per share and per ASM amounts) (Unaudited)
Unlike many airlines, we do not qualify for fuel hedge accounting treatment under FAS 133. To facilitate investor comparisons with airlines that do qualify for fuel hedge accounting, we provide adjusted non-GAAP measures of net income and operating expense as if we did qualify for fuel hedge accounting, by excluding the mark-to-market non-cash gains or losses on fuel derivatives from net income and by treating cash gains or losses realized on fuel derivatives as part of aircraft fuel expense. Adjusted net income for fourth quarter 2006 also eliminates the effect of a one-time tax adjustment recorded upon our conversion from a limited liability company to a corporation at the time of our initial public offering in December 2006. We believe use of these non-GAAP measures assists investors in understanding the underlying economic performance of the Company without regard to different accounting treatment for fuel hedging activities and the transitory effects of changing from an LLC to a C-corporation.
The SEC has adopted rules (Regulation G) regulating the use of non-GAAP financial measures. Because of our use of non-GAAP financial measures, Adjusted net income and Adjusted aircraft fuel expense, to supplement our consolidated financial statements presented on a GAAP basis, Regulation G requires us to include in this press release a presentation of the most directly comparable GAAP measures, which are Net income or loss (which reflects the mark-to-market non-cash loss or gain on fuel derivatives and the tax accrual upon our conversion to a corporation), and Aircraft fuel expense (which is not impacted by the cash gain or loss on fuel derivatives), and a reconciliation of the non-GAAP measures to the most comparable GAAP measures. Our utilization of non-GAAP measurements is not meant to be considered in isolation or as a substitute for net income, aircraft fuel expense and other measures of financial performance prepared in accordance with GAAP. Adjusted net income and adjusted aircraft fuel expense are not GAAP measurements and our use of them may not be comparable to similarly titled measures employed by other companies in the airline industry. The reconciliations to GAAP measures follow:
Derivation of adjusted net income (net of one-time tax accrual) from GAAP net income:
Three months ended December 31,
Percent
(in thousands, except per share amounts)
2007
2006
change
Net income (loss)
$
4,771
($1,546
)
N/M
Recognition of net deferred tax liabilities upon C-corporation conversion
—
6,425
N/M
Net of recognition of net deferred tax liabilities upon C-corporation conversion:
Adjusted net income
$
4,771
$
4,879
(2.2
)
Adjusted earnings per share:
Basic
$
0.23
$
0.54
(57.4
)
Diluted
$
0.23
$
0.28
(17.9
)
Derivation of adjusted net income (excluding non-cash mark-to-market loss or gain on fuel derivatives and one-time tax accrual) from adjusted net income (net of one-time tax accrual) as derived in the table above:
Three months ended December 31,
Percent
(in thousands, except per share amounts)
2007
2006
change
Adjusted net income (net of one time tax accrual)
$
4,771
$
4,879
(2.2
)
Mark-to-market non-cash loss (gain) on fuel derivatives
343
(959
)
N/M
Tax impact of mark-to-market non-cash loss/gain on fuel derivatives
(125
)
341
N/M
Net of mark-to-market non-cash loss/gain on fuel derivatives:
Adjusted net income
$
4,989
$
4,261
17.1
Adjusted earnings per share:
Basic
$
0.24
$
0.47
(48.9
)
Diluted
$
0.24
$
0.24
—
Derivation of adjusted aircraft fuel expense:
Three months ended December 31,
Percent
(in thousands)
2007
2006
change
Aircraft fuel expense
$
48,884
$
23,900
104.5
Cash (gain) loss on fuel derivatives
(704
)
2,225
N/M
Adjusted aircraft fuel expense
$
48,180
$
26,125
84.4
Derivation of operating cost per ASM treating cash (gain) loss on fuel derivatives as part of total operating expense per ASM:
Three months ended December 31,
Percent
(in cents)
2007
2006
change
Total operating expense per ASM
8.69
7.59
14.5
Cash (gain) loss on fuel derivatives per ASM
(0.06
)
0.30
N/M
Operating cost per ASM treating cash gain or loss on fuel derivatives as part of operating expenses
8.63
7.89
9.4
Split of (gain) loss on fuel derivatives into cash-settled portion and mark-to-market non-cash portion:
Three months ended December 31,
Percent
(in thousands)
2007
2006
change
Mark-to-market non-cash loss (gain) on fuel derivatives
$
343
($959
)
N/M
Cash (gain) loss on fuel derivatives
(704
)
2,225
N/M
(Gain) loss on fuel derivatives, net
($361
)
$
1,266
N/M
5
Allegiant Travel Company Consolidated Statements of Income Years Ended December 31, 2007 and 2006 (in thousands, except per share amounts) (Unaudited)
Years ended December 31,
Percent
2007
2006
change
OPERATING REVENUE:
Scheduled service revenue
$
258,943
$
178,349
45.2
Fixed fee contract revenue
35,378
33,743
4.8
Ancillary revenue
64,988
31,258
107.9
Other revenue
1,264
—
N/M
Total operating revenue
360,573
243,350
48.2
OPERATING EXPENSES:
Aircraft fuel
152,149
101,561
49.8
Salary and benefits
50,761
34,950
45.2
Station operations
33,724
24,866
35.6
Maintenance and repairs
25,764
19,482
32.2
Sales and marketing
12,803
9,293
37.8
Aircraft lease rentals
3,004
5,102
(41.1
)
Depreciation and amortization
15,992
10,584
51.1
Other
22,316
14,959
49.2
Total operating expenses
316,513
220,797
43.4
OPERATING INCOME
44,060
22,553
95.4
As a percent of total operating revenue
12.2
%
9.3
%
OTHER (INCOME) EXPENSE:
(Gain) loss on fuel derivatives, net
(2,613
)
4,193
N/M
Earnings from joint venture, net
(457
)
—
N/M
Other expense
63
—
N/M
Interest income
(9,161
)
(2,973
)
208.1
Interest expense
5,523
5,517
0.1
Total other (income) expense
(6,645
)
6,737
N/M
INCOME BEFORE INCOME TAXES
50,705
15,816
220.6
As a percent of total operating revenue
14.1
%
6.5
%
PROVISION FOR INCOME TAXES:
19,196
7,076
171.3
NET INCOME
$
31,509
$
8,740
260.5
As a percent of total operating revenue
8.7
%
3.6
%
Earnings per share
Basic
$
1.56
$
1.23
26.8
Diluted
$
1.53
$
0.52
194.2
6
Weighted average shares outstanding:
Basic
20,243
7,092
185.4
Diluted
20,529
16,961
21.0
Unaudited pro forma data for 2006 (reflecting change in tax status)(1):
Income before income taxes
$
50,705
$
15,816
220.6
Pro-forma provision for income taxes
19,196
5,694
237.1
Pro-forma net income
$
31,509
$
10,122
211.3
Unaudited pro-forma net income per share data for 2006 (reflecting change in tax status):
Basic pro-forma net income per share
$
1.56
$
1.43
9.1
Diluted pro-forma net income per share
$
1.53
$
0.60
155.0
(1) Prior to its December 2006 initial public offering, the Company was organized as a limited liability company (LLC) and as such was generally not subject to income taxes, except in certain state and local jurisdictions. The pro-forma tax provision for 2006 reflects income taxes as if the Company were organized as a corporation effective January 1, 2006.
7
Allegiant Travel Company Operating Statistics Years Ended December 31, 2007 and 2006 (Unaudited)
Years ended December 31,
Percent
2007
2006
change*
OPERATING STATISTICS
Total system statistics
Passengers
3,264,506
2,179,367
49.8
Revenue passenger miles (RPMs) (thousands)
3,140,927
2,251,341
39.5
Available seat miles (ASMs) (thousands)
3,865,337
2,871,071
34.6
Load factor
81.3
%
78.4
%
2.9
Operating revenue per ASM (cents)
9.33
8.48
10.0
Operating expense per ASM or CASM (cents)
8.19
7.69
6.5
CASM, excl fuel (cents)
4.25
4.15
2.4
Departures
28,788
20,074
43.4
Block hours
68,488
50,584
35.4
Average stage length (miles)
906
966
(6.2
)
Avg # of operating aircraft during period
27.8
20.8
33.7
Total aircraft in service end of period
32
24
33.3
Full-time equivalent employees at period end
1,180
846
39.5
Fuel gallons consumed (thousands)
66,035
47,984
37.6
Average fuel cost per gallon
$
2.30
$
2.12
8.5
Scheduled service statistics
Passengers
3,017,843
1,940,456
55.5
Revenue passenger miles (RPMs) (thousands)
2,844,358
1,996,559
42.5
Available seat miles (ASMs) (thousands)
3,423,783
2,474,285
38.4
Load factor
83.1
%
80.7
%
2.4
Departures
25,088
16,634
50.8
Block hours
60,607
43,391
39.7
Yield (cents)
9.10
8.93
1.9
Scheduled service revenue per ASM (cents)
7.56
7.21
4.9
Ancillary revenue per ASM (cents)
1.90
1.26
50.8
Total revenue per ASM (cents)
9.46
8.47
11.7
Average fare — scheduled service
$
85.80
$
91.91
(6.6
)
Average fare — ancillary
21.53
16.11
33.6
Average fare — total
$
107.34
$
108.02
(0.6
)
Average stage length (miles)
923
1,006
(8.3
)
Percent of sales through website during period
86.6
%
85.9
%
0.7
• except load factor and percent of sales through website, which is percentage point change
8
Allegiant Travel Company Non-GAAP Presentations Years Ended December 31, 2007 and 2006 (in thousands, except per share and per ASM amounts) (Unaudited)
Unlike many airlines, we do not qualify for fuel hedge accounting treatment under FAS 133. To facilitate investor comparisons with airlines that do qualify for fuel hedge accounting, we provide adjusted non-GAAP measures of net income and operating expense as if we did qualify for fuel hedge accounting, by excluding the mark-to-market non-cash gains or losses on fuel derivatives from net income and by treating cash gains or losses realized on fuel derivatives as part of aircraft fuel expense. Adjusted net income for 2006 also eliminates the effect of a one-time tax adjustment recorded upon our conversion from a limited liability company to a corporation at the time of our initial public offering in December 2006. We believe use of these non-GAAP measures assists investors in understanding the underlying economic performance of the Company without regard to different accounting treatment for fuel hedging activities and the transitory effects of changing from an LLC to a C-corporation.
The SEC has adopted rules (Regulation G) regulating the use of non-GAAP financial measures. Because of our use of non-GAAP financial measures, Adjusted net income and Adjusted aircraft fuel expense, to supplement our consolidated financial statements presented on a GAAP basis, Regulation G requires us to include in this press release a presentation of the most directly comparable GAAP measures, which are Net income (which reflects the mark-to-market non-cash loss or gain on fuel derivatives and the tax accrual upon our conversion to a corporation), and Aircraft fuel expense (which is not impacted by the cash gain or loss on fuel derivatives), and a reconciliation of the non-GAAP measures to the most comparable GAAP measures. Our utilization of non-GAAP measurements is not meant to be considered in isolation or as a substitute for net income, aircraft fuel expense and other measures of financial performance prepared in accordance with GAAP. Adjusted net income and adjusted aircraft fuel expense are not GAAP measurements and our use of them may not be comparable to similarly titled measures employed by other companies in the airline industry. The reconciliations to GAAP measures follow:
Derivation of adjusted net income (net of one-time tax accrual) from GAAP net income:
Years ended December 31,
Percent
(in thousands, except per share amounts)
2007
2006
change
Net income
$
31,509
$
8,740
260.5
Recognition of net deferred tax liabilities upon C-corporation conversion
—
6,425
N/M
Net of recognition of net deferred tax liabilities upon C-corporation conversion:
Adjusted net income
$
31,509
$
15,165
107.8
Adjusted earnings per share:
Basic
$
1.56
$
2.14
(27.1
)
Diluted
$
1.53
$
0.89
71.9
Derivation of adjusted net income (excluding non-cash mark-to-market loss or gain on fuel derivatives and one-time tax accrual) from adjusted net income (net of one-time tax accrual) as derived in the table above:
Years ended December 31,
Percent
(in thousands, except per share amounts)
2007
2006
change
Adjusted net income (net of one time tax accrual)
$
31,509
$
15,165
107.8
Mark-to-market non-cash (gain) loss on fuel derivatives
(1,702
)
1,641
N/M
Tax impact of mark-to-market non-cash loss/gain on fuel derivatives
644
(584
)
N/M
Net of mark-to-market non-cash loss/gain on fuel derivatives:
Adjusted net income
$
30,451
$
16,222
87.7
Adjusted earnings per share:
Basic
$
1.50
$
2.29
(34.5
)
Diluted
$
1.48
$
0.96
54.2
Derivation of adjusted aircraft fuel expense:
Years ended December 31,
Percent
2007
2006
change
Aircraft fuel expense
$
152,149
$
101,561
49.8
Cash (gain) loss on fuel derivatives
(911
)
2,552
N/M
Adjusted aircraft fuel expense
$
151,238
$
104,113
45.3
Derivation of operating cost per ASM treating cash (gain) loss on fuel derivatives as part of total operating expense per ASM:
Years ended December 31,
Percent
(in cents)
2007
2006
change
Total operating expense per ASM
8.19
7.69
6.5
Cash (gain) loss on fuel derivatives per ASM
(0.02
)
0.09
N/M
Operating cost per ASM treating cash gain or loss on fuel derivatives as part of operating expenses
8.17
7.78
5.0
Split of (gain) loss on fuel derivatives into cash-settled portion and mark-to-market non-cash portion:
Years ended December 31,
Percent
(in thousands)
2007
2006
change
Mark-to-market non-cash (gain) loss on fuel derivatives
($1,702
)
$
1,641
N/M
Cash (gain) loss on fuel derivatives
(911
)
2,552
N/M
(Gain) loss on fuel derivatives, net
($2,613
)
$
4,193
N/M
9
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