EX-99.1 3 v96899exv99w1.htm EXHIBIT 99.1 exv99w1
 

Exhibit 99.1

ALASKA AIR GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (In Millions Except Per Share Amounts)

                                 
    Three Months Ended   Year Ended
    December 31
   December 31
    2002
   2003
   2002
   2003
Operating Revenues:
                                
Passenger
   $ 485.7     $ 564.8     $ 2,037.7     $ 2,243.0  
Freight and mail
     17.7       18.7       77.1       82.3  
Other — net
     24.3       29.8       109.3       119.5  
 
    
 		      
 		      
 		      
 		  
Total Operating Revenues
     527.7       613.3       2,224.1       2,444.8  
 
    
 		      
 		      
 		      
 		  
Operating Expenses:
                                
Wages and benefits
     219.3       240.4       858.1       937.9  
Employee profit sharing
     —       3.7       —       3.7  
Contracted services
     23.7       25.6       93.0       100.1  
Aircraft fuel
     79.4       91.9       302.0       356.9  
Aircraft maintenance
     48.9       43.6       170.2       183.8  
Aircraft rent
     48.8       48.8       190.4       194.9  
Food and beverage service
     16.3       14.4       66.2       61.0  
Other selling expenses and commissions
     32.6       34.1       159.9       133.2  
Depreciation and amortization
     31.8       34.8       132.5       133.0  
Loss on sale of assets
     0.9       2.0       0.1       2.2  
Landing fees and other rentals
     36.4       44.3       140.3       164.9  
Other
     49.4       45.0       200.3       184.3  
 
    
 		      
 		      
 		      
 		  
Total Operating Expenses
     587.5       628.6       2,313.0       2,455.9  
 
    
 		      
 		      
 		      
 		  
Operating Loss
     (59.8 )     (15.3 )     (88.9 )     (11.1 )
 
    
 		      
 		      
 		      
 		  
Nonoperating Income (Expense):
                                
Interest income
     5.1       4.5       21.2       12.8  
Interest expense
     (11.5 )     (12.4 )     (46.3 )     (47.8 )
Interest capitalized
     1.2       0.4       2.7       2.3  
U.S. government compensation
     —       —       0.5       71.4  
Other — net
     0.1       (1.3 )     9.0       1.4  
 
    
 		      
 		      
 		      
 		  
 
     (5.1 )     (8.8 )     (12.9 )     40.1  
 
    
 		      
 		      
 		      
 		  
Income (loss) before income tax and accounting change
     (64.9 )     (24.1 )     (101.8 )     29.0  
Income tax expense (benefit)
     (21.8 )     (8.0 )     (34.6 )     15.5  
 
    
 		      
 		      
 		      
 		  
Income (loss) before accounting change
     (43.1 )     (16.1 )     (67.2 )     13.5  
Cumulative effect of accounting change
     —       —       (51.4 )     -  
 
    
 		      
 		      
 		      
 		  
Net Income (Loss)
     ($43.1 )     ($16.1 )     ($118.6 )   $ 13.5  
 
    
 		      
 		      
 		      
 		  
Basic and Diluted Earnings (Loss) Per Share:
                                
Earnings (loss) before accounting change
   $ (1.62 )   $ (0.60 )   $ (2.53 )   $ 0.51  
Cumulative effect of accounting change
     —       —       (1.94 )     -  
 
    
 		      
 		      
 		      
 		  
Earnings (Loss) Per Share
   $ (1.62 )   $ (0.60 )   $ (4.47 )   $ 0.51  
 
    
 		      
 		      
 		      
 		  
Shares used for computation:
                                
Basic
     26.556       26.728       26.546       26.648  
Diluted
     26.556       26.728       26.546       26.730  

Note 1:
Diluted shares excludes the shares of common stock issuable upon conversion of the convertible notes issued on March 21, 2003. Although we previously reported our expectation that the notes would become convertible in the fourth quarter of 2003, the actual closing prices of Alaska Air Group common stock during the quarter did not trigger the convertibility feature.

Note 2:
Operating loss for the three months and year ended December 31, 2003 includes adjustments to increase operating expenses by $2.8 million (pretax) and $3.1 million (pretax), respectively, related to prior years. Operating loss for the three months ended December 31, 2003 also includes adjustments to increase operating expenses by $1.8 million (pretax) and increase operating revenues by $6.3 million (pretax), both related to previous quarters in 2003. In addition, interest income for the 2003 year includes an adjustment recorded in the first quarter that reduced interest income by $2.8 million (pretax) related to the previous year. Management does not believe that these amounts are material to the periods affected.

 

 

Alaska Air Group, Inc.

CONDENSED CONSOLIDATED BALANCE SHEET (unaudited)

                 
    December 31   December 31
(In Millions)
   2002
   2003
Cash and marketable securities
   $ 636     $ 812  
 
    
 		      
 		  
Total current assets
     954       1,148  
Property and equipment-net
     1,802       1,949  
Other assets
     125       162  
 
    
 		      
 		  
Total assets
   $ 2,881     $ 3,259  
 
    
 		      
 		  
Current liabilities
     778       1,017  
Long-term debt and capital lease obligations
     857       907  
Other liabilities and credits
     590       661  
Shareholders’ equity
     656       674  
 
    
 		      
 		  
Total liabilities and shareholders’ equity
   $ 2,881     $ 3,259  
 
    
 		      
 		  

Note: Certain reclassifications have been made to the December 31, 2002 balance sheet to conform to the December 31, 2003 presentation.

 

 

Alaska Airlines Financial and Statistical Data (unaudited)

                                                 
    Three Months Ended December 31
   Year Ended December 31
                    %                   %
Financial Data (in millions):
   2002
   2003
   Change
   2002
   2003
   Change
Operating Revenues:
                                                
Passenger
   $ 392.2     $ 460.3       17.4 %   $ 1,667.7     $ 1,840.4       10.4 %
Freight and mail
     16.5       17.5       6.1 %     72.1       77.3       7.2 %
Other — net
     21.1       26.7       26.5 %     93.3       109.7       17.6 %
 
    
 		      
 		              
 		      
 		          
Total Operating Revenues
     429.8       504.5       17.4 %     1,833.1       2,027.4       10.6 %
 
    
 		      
 		              
 		      
 		          
Operating Expenses:
                                                
Wages and benefits
     179.4       199.9       11.4 %     703.4       778.6       10.7 %
Employee profit sharing
     —       2.9       NM       —       2.9       NM  
Contracted services
     20.3       20.7       2.0 %     80.1       81.6       1.9 %
Aircraft fuel
     67.2       79.1       17.7 %     257.3       306.7       19.2 %
Aircraft maintenance
     41.9       35.7       -14.8 %     145.2       153.4       5.6 %
Aircraft rent
     32.4       31.1       -4.0 %     128.2       123.9       -3.4 %
Food and beverage service
     15.6       13.9       -10.9 %     63.5       58.7       -7.6 %
Other selling expenses and commissions
     31.8       39.0       22.6 %     154.6       148.0       -4.3 %
Depreciation and amortization
     28.3       31.7       12.0 %     114.0       119.5       4.8 %
Loss on sale of assets
     1.0       2.1       NM       1.7       3.4       NM  
Landing fees and other rentals
     28.3       34.3       21.2 %     110.5       127.8       15.7 %
Other
     37.5       34.0       -9.3 %     148.8       136.9       -8.0 %
 
    
 		      
 		              
 		      
 		          
Total Operating Expenses
     483.7       524.4       8.4 %     1,907.3       2,041.4       7.0 %
 
    
 		      
 		              
 		      
 		          
Operating Loss
     (53.9 )     (19.9 )     NM       (74.2 )     (14.0 )     NM  
 
    
 		      
 		              
 		      
 		          
Interest income
     5.7       4.9               23.2       15.2          
Interest expense
     (11.6 )     (11.3 )             (46.6 )     (45.2 )        
Interest capitalized
     1.0       0.2               2.1       1.5          
U.S. government compensation
     —       —               0.3       52.8          
Other — net
     0.2       (1.2 )             7.9       1.5          
 
    
 		      
 		              
 		      
 		          
 
     (4.7 )     (7.4 )             (13.1 )     25.8          
 
    
 		      
 		              
 		      
 		          
Income (Loss) Before Income Tax and Accounting Change
   $ (58.6 )   $ (27.3 )     NM     $ (87.3 )   $ 11.8       NM  
 
    
 		      
 		              
 		      
 		          
Operating Statistics:
                                                
Revenue passengers (000)
     3,367       3,712       10.2 %     14,154       15,047       6.3 %
RPMs (000,000)
     3,164       3,608       14.0 %     13,186       14,554       10.4 %
ASMs (000,000)
     4,758       5,194       9.2 %     19,360       20,804       7.5 %
Passenger load factor
     66.5 %     69.5 %     3.0 pts     68.1 %     70.0 %     1.9 pts
Breakeven load factor
     78.4 %     74.4 %     -4.0 pts     73.1 %     72.3 %     -0.8 pts
Yield per passenger mile
     12.40 ¢     12.76 ¢     2.9 %     12.65 ¢     12.65 ¢     0.0 %
Operating revenue per ASM
     9.03 ¢     9.71 ¢     7.5 %     9.47 ¢     9.74 ¢     2.9 %
Operating expenses per ASM (a)
     10.17 ¢     10.10 ¢     -0.7 %     9.85 ¢     9.81 ¢     -0.4 %
Operating expenses per ASM excluding fuel (a)
     8.75 ¢     8.57 ¢     -2.1 %     8.52 ¢     8.34 ¢     -2.1 %
Fuel cost per gallon
     84.7 ¢     94.8 ¢     11.9 %     79.6 ¢     90.9 ¢      14.2 %
Fuel gallons (000,000)
     79.3       83.4       5.2 %     323.3       337.3       4.3 %
Average number of employees
     10,065       9,921       -1.4 %     10,142       10,040       -1.0 %
Aircraft utilization (blk hrs/day)
     10.3       10.3       0.0 %     10.6       10.5       -0.9 %
Operating fleet at period-end
     102       109       6.9 %     102       109       6.9 %

NM = Not Meaningful

(a) See Note A on Page 5

Note 1:
Certain reclassifications have been made to the December 31, 2002 statements of operations to conform to the December 31, 2003 presentation.

Note 2:
Operating loss for the three months and year ended December 31, 2003 includes adjustments to increase operating expenses by $2.4 million (pretax) and $3.1 million (pretax), respectively, related to prior years. Operating loss for the three months ended December 31, 2003 also includes adjustments to increase operating expenses by $1.8 million (pretax) and increase operating revenues by $6.3 million (pretax), both related to previous quarters in 2003. In addition, interest income for the 2003 year includes an adjustment recorded in the first quarter that reduced interest income by $2.8 million (pretax) related to the previous year. Management does not believe that these amounts are material to the periods affected.

 

 

Horizon Air Financial and Statistical Data (unaudited)

                                                 
    Three Months Ended December 31
   Year Ended December 31
                    %                   %
Financial Data (in millions):
   2002
   2003
   Change
   2002
   2003
   Change
Operating Revenues:
                                                
Passenger
   $ 99.0     $ 115.5       16.7 %   $ 393.9     $ 442.3       12.3 %
Freight and mail
     1.1       1.2       9.1 %     5.0       5.0       0.0 %
Other — net
     4.4       4.8       9.1 %     20.7       16.5       -20.3 %
 
    
 		      
 		              
 		      
 		          
Total Operating Revenues
     104.5       121.5       16.3 %     419.6       463.8       10.5 %
 
    
 		      
 		              
 		      
 		          
Operating Expenses:
                                                
Wages and benefits
     39.4       40.5       2.8 %     152.6       159.3       4.4 %
Employee profit sharing
     —       0.8       NM       —       0.8       NM  
Contracted services
     5.4       6.6       22.2 %     21.0       25.0       19.0 %
Aircraft fuel
     12.2       12.8       4.9 %     44.7       50.2       12.3 %
Aircraft maintenance
     7.0       7.9       12.9 %     25.1       30.4       21.1 %
Aircraft rent
     16.3       17.7       8.6 %     62.2       71.0       14.1 %
Food and beverage service
     0.7       0.5       -28.6 %     2.7       2.3       -14.8 %
Other selling expenses and commissions
     6.3       6.1       -3.2 %     29.4       24.9       -15.3 %
Depreciation and amortization
     3.2       2.8       -12.5 %     17.0       12.3       -27.6 %
Gain on sale of assets
     (0.1 )     (0.1 )     0.0 %     (1.6 )     (1.2 )     NM  
Landing fees and other rentals
     8.4       10.3       22.6 %     31.2       38.5       23.4 %
Other
     11.1       10.0       -9.9 %     48.7       42.6       -12.5 %
 
    
 		      
 		              
 		      
 		          
Total Operating Expenses
     109.9       115.9       5.5 %     433.0       456.1       5.3 %
 
    
 		      
 		              
 		      
 		          
Operating Income (Loss)
     (5.4 )     5.6       NM       (13.4 )     7.7       NM  
 
    
 		      
 		              
 		      
 		          
Interest income
     —       0.2               0.7       0.7          
Interest expense
     (0.5 )     (0.5 )             (2.1 )     (2.4 )        
Interest capitalized
     0.2       0.2               0.6       0.8          
Government compensation
     —       —               0.2       18.6          
Other — net
     (0.1 )     (0.1 )             1.2       (0.1 )        
 
    
 		      
 		              
 		      
 		          
 
     (0.4 )     (0.2 )             0.6       17.6          
 
    
 		      
 		              
 		      
 		          
Income (Loss) Before Income Tax and Accounting Change
   $ (5.8 )   $ 5.4       NM     $ (12.8 )   $ 25.3       NM  
 
    
 		      
 		              
 		      
 		          
Operating Statistics:
                                                
Revenue passengers (000)
     1,194       1,263       5.8 %     4,815       4,934       2.5 %
RPMs (000,000)
     386       416       7.8 %     1,514       1,640       8.3 %
ASMs (000,000)
     632       619       -2.1 %     2,428       2,569       5.8 %
Passenger load factor
     61.1 %     67.3 %     6.2 pts     62.4 %     63.9 %     1.5 pts
Breakeven load factor
     65.0 %     64.1 %     -0.9 pts     65.0 %     63.1 %     -1.9 pts
Yield per passenger mile
     25.62 ¢     27.72 ¢     8.2 %     26.02 ¢     26.96 ¢     3.6 %
Operating revenue per ASM
     16.53 ¢     19.62 ¢     18.7 %     17.29 ¢     18.06 ¢     4.5 %
Operating expenses per ASM (a)
     17.39 ¢     18.72 ¢     7.7 %     17.84 ¢     17.76 ¢     -0.4 %
Operating expenses per ASM excluding fuel (a)
     15.46 ¢     16.64 ¢     7.6 %     15.99 ¢     15.80 ¢     -1.2 %
Fuel cost per gallon
     87.7 ¢     98.2 ¢     12.0 %     82.0 ¢     93.4 ¢     13.9 %
Fuel gallons (000,000)
     13.9       13.1       -5.8 %     54.5       53.7       -1.5 %
Average number of employees
     3,518       3,320       -5.6 %     3,476       3,361       -3.3 %
Aircraft utilization (blk hrs/day)
     7.5       7.5       0.0 %     7.5       7.8       4.0 %
Operating fleet at period-end
     63       62       -1.6 %     63       62       -1.6 %

NM = Not Meaningful

(a) See Note A on Page 5

Note:
Certain reclassifications have been made to the December 31, 2002 statements of operations to conform to the December 31, 2003 presentation.

 

 

Note A:
Pursuant to new guidelines issued by the Securities and Exchange Commission, we are providing the following unaudited reconciliation of non-GAAP performance indicators to their comparable financial measures reported on a GAAP basis. Our disclosure of operating costs and cost per available seat mile, excluding fuel, provides us the ability to measure and monitor our performance both with and without the cost of aircraft fuel as both the cost and availability of fuel are subject to economic and political factors beyond our control. We also believe that disclosing net income (loss) and diluted earnings (loss) per share excluding the change in accounting principle and government compensation is helpful to investors in evaluating our operational performance because we believe the reimbursements received from the government and the write-off of goodwill are unusual events. The following table reconciles operating expenses excluding fuel and operating expense per ASM excluding fuel for Alaska Airlines, Inc. and Horizon Air Industries, Inc.:

                                 
Alaska Airlines, Inc.:        
($ in millions)   Three Months Ended December 31
   Year Ended December 31
                 
    2002
   2003
   2002
   2003
                                 
Operating expenses
   $ 483.7     $ 524.4     $ 1,907.3     $ 2,041.4  
ASMs (000,000)
     4,758       5,194       19,360       20,804  
Operating expenses per ASM
     10.17 ¢     10.10 ¢     9.85 ¢     9.81 ¢
 
    
 		      
 		      
 		      
 		  
Operating expenses
   $ 483.7     $ 524.4     $ 1,907.3     $ 2,041.4  
Less: aircraft fuel
     67.2       79.1       257.3       306.7  
 
    
 		      
 		      
 		      
 		  
Operating expense excluding fuel
   $ 416.5     $ 445.3     $ 1,650.0     $ 1,734.7  
ASMs (000,000)
     4,758       5,194       19,360       20,804  
Operating expense per ASM excluding fuel
     8.75 ¢     8.57 ¢     8.52 ¢     8.34 ¢
 
    
 		      
 		      
 		      
 		  
                                 
Horizon Air Industries, Inc.:                
($ in millions)                
    2002
   2003
   2002
   2003
                                 
Operating expenses
   $ 109.9     $ 115.9     $ 433.0     $ 456.1  
ASMs (000,000)
     632       619       2,428       2,569  
Operating expenses per ASM
     17.39 ¢     18.72 ¢     17.84 ¢     17.76 ¢
 
    
 		      
 		      
 		      
 		  
Operating expenses
   $ 109.9     $ 115.9     $ 433.0     $ 456.1  
Less: aircraft fuel
     12.2       12.8       44.7       50.2  
 
    
 		      
 		      
 		      
 		  
Operating expense excluding fuel
   $ 97.7     $ 103.1     $ 388.3     $ 405.9  
ASMs (000,000)
     632       619       2,428       2,569  
Operating expense per ASM excluding fuel
     15.46 ¢     16.64 ¢     15.99 ¢     15.80 ¢
 
    
 		      
 		      
 		      
 		  

The following table summarizes Alaska Air Group, Inc.’s earnings (loss) and diluted earnings (loss) per share during 2002 and 2003 excluding the change in accounting principle and government compensation and as reported in accordance with GAAP (dollars in millions). There were no such amounts in the three months ended December 31, 2002 or 2003.

                                 
    Year Ended December 31
    2002
   2003
    Dollars
   Loss Per Share
   Dollars
   Earnings Per Share
Net loss and loss per share excluding the change in accounting principle and government compensation
    ($67.5 )     ($2.54 )     ($30.8 )     ($1.15 )
Change in accounting principle relating to goodwill
     (51.4 )     (1.94 )     —       —  
Government compensation, net of tax
     0.3       0.01       44.3     $ 1.66  
 
    
 		      
 		      
 		      
 		  
GAAP net income (loss) and earnings (loss) per share
     ($118.6 )     ($4.47 )   $ 13.5     $ 0.51