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 togains 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 togains 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 togains 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 togains 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