Alaska Air Group Reports Record Adjusted First Quarter 2013 Results

SEATTLE, April 25, 2013 /PRNewswire/ --

Financial Highlights:

  • Reported record first quarter net income, excluding special items, of $44 million, or $0.62 per diluted share, compared to adjusted net income of $28 million, or $0.39 per diluted share in the prior year quarter. This quarter's results compare to a First Call analyst consensus estimate of $0.56 per share.
  • Recorded net income for the first quarter under Generally Accepted Accounting Principles (GAAP) of $37 million, or $0.51 per diluted share, compared to net income of $41 million, or $0.56 per diluted share in 2012.
  • Achieved trailing twelve-month return on invested capital of 13.4 percent compared to 11.6 percent in the twelve months ended March 31, 2012.
  • Lowered adjusted debt-to-total-capitalization ratio by 1 point, to 53 percent, since Dec. 31, 2012.
  • Repurchased 373,185 shares of common stock for $19 million. Since 2007, Air Group has used $340 million to repurchase 19 million shares.
  • Held $1.3 billion in unrestricted cash and marketable securities as of March 31, 2013.

Operational Highlights:

  • Awarded 2012 On-Time Performance Service Award among major North American airlines by FlightStats.com.
  • Held the No. 1 spot in U.S. Department of Transportation on-time performance among the 10 largest U.S. airlines for the twelve months ended February 2013.
  • Improved employee productivity by 4.3 percent.

New routes:

  • Began new service between San Diego and Boston and between Seattle and Salt Lake City.
  • Will begin new service between San Diego and Lihue and seasonal service between Portland and Fairbanks in June.

Alaska Air Group, Inc., (NYSE: ALK) today reported first quarter 2013 GAAP net income of $37 million, or $0.51 per diluted share, compared to $41 million, or $0.56 per diluted share in 2012. Excluding the impact of mark-to-market fuel hedge adjustments of $12 million ($7 million after tax, or $0.11 per diluted share), the company reported record first quarter 2013 net income of $44 million, or $0.62 per diluted share, compared to net income excluding mark-to-market fuel hedge adjustments of $28 million, or $0.39 per diluted share, in 2012.

"Our record performance in what is seasonally our weakest quarter is due to steady demand that kept pace with our growth, and to the many changes we've made to improve our business over the last several years," Alaska Air Group CEO Brad Tilden said. "Looking ahead, we're facing increased competition in certain markets, and we will closely monitor the environment and continue to adjust our plans to appropriately address these challenges. Our first quarter results, and our ability to be flexible and adapt to an ever-changing industry landscape, would not be possible without the dedication and determination of our employees at Alaska and Horizon."

The following table reconciles the company's reported GAAP net income and earnings per diluted share (EPS) during the first quarters of 2013 and 2012 to adjusted amounts:

 


Three Months Ended March 31,


2013


2012

(in millions, except per-share amounts)

Dollars


Diluted EPS


Dollars


Diluted EPS

Reported GAAP net income

$

37



$

0.51



$

41



$

0.56


Mark-to-market fuel hedge adjustments, net of tax

7



0.11



(13)



(0.17)


Non-GAAP adjusted income and per-share amounts

$

44



$

0.62



$

28



$

0.39


 

Statistical data, as well as a reconciliation of the reported non-GAAP financial measures, can be found in the accompanying tables. A glossary of financial terms can be found on the last page of this release.

A conference call regarding the first quarter results will be simulcast via the Internet at 8:30 a.m. Pacific time on April 25, 2013. It can be accessed through the company's website at alaskaair.com/investors. For those unable to listen to the live broadcast, a replay will be available after the conclusion of the call.

References in this news release to "Air Group," "company," "we," "us" and "our" refer to Alaska Air Group, Inc. and its subsidiaries, unless otherwise specified. Alaska Airlines, Inc. and Horizon Air Industries, Inc. are referred to as "Alaska" and "Horizon," respectively, and together as our "airlines."

This news release may contain forward-looking statements subject to the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These statements relate to future events and involve known and unknown risks and uncertainties that may cause actual outcomes to be materially different from those indicated by any forward-looking statements. For a comprehensive discussion of potential risk factors, see Item 1A of the company's Annual Report on Form 10-K for the year ended Dec. 31, 2012. Some of these risks include general economic conditions, increases in operating costs including fuel, competition, labor costs and relations, our significant indebtedness, inability to meet cost reduction goals, seasonal fluctuations in our financial results, an aircraft accident, and changes in laws and regulations. All of the forward-looking statements are qualified in their entirety by reference to the risk factors discussed therein. 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 expressly disclaim any obligation to publicly update or revise any forward-looking statements after the date of this report to conform them to actual results. Over time, our actual results, performance or achievements will likely differ from the anticipated results, performance or achievements that are expressed or implied by our forward-looking statements, and such differences might be significant and materially adverse.

Alaska Airlines, a subsidiary of Alaska Air Group (NYSE: ALK), together with its partner regional airlines, serves 95 cities through an expansive network in Alaska, the Lower 48, Hawaii, Canada and Mexico. Alaska Airlines has ranked "Highest in Customer Satisfaction Among Traditional Network Carriers" in the J.D. Power and Associates North America Airline Satisfaction StudySM for five consecutive years from 2008 to 2012. For reservations, visit www.alaskaair.com. For more news and information, visit the Alaska Airlines newsroom at www.alaskaair.com/newsroom.

 


CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

Alaska Air Group, Inc.













Three Months Ended March 31,


(in millions, except per-share amounts)

2013


2012


Change

Operating Revenues:






Passenger






Mainline

$

796



$

723



10

%

Regional

182



173



5

%

Total passenger revenue

978



896



9

%

Freight and mail

26



24



6

%

Other - net

129



119



9

%

Total Operating Revenues

1,133



1,039



9

%







Operating Expenses:






Wages and benefits

264



257



3

%

Variable incentive pay

21



16



30

%

Aircraft fuel, including hedging gains and losses

381



319



19

%

Aircraft maintenance

66



50



33

%

Aircraft rent

30



28



5

%

Landing fees and other rentals

60



62



(2)

%

Contracted services

53



48



10

%

Selling expenses

38



41



(7)

%

Depreciation and amortization

69



64



8

%

Food and beverage service

20



18



12

%

Other

67



64



5

%

Total Operating Expenses

1,069



967



11

%

Operating Income

64



72



(11)

%







Nonoperating Income (Expense):






Interest income

4



5




Interest expense

(16)



(17)




Interest capitalized

5



5




Other - net

2



1





(5)



(6)




Income Before Income Tax

59



66



(11)

%

Income tax expense

22



25




Net Income

$

37



$

41



(11)

%







Basic Earnings Per Share:

$

0.52



$

0.57




Diluted Earnings Per Share:

$

0.51



$

0.56




Shares Used for Computation:






Basic

70.431



71.192




Diluted

71.414



72.659





 

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)




Alaska Air Group, Inc.








(in millions)

March 31, 2013


December 31, 2012

Cash and marketable securities

$

1,265



$

1,252






Total current assets

1,839



1,737


Property and equipment-net

3,639



3,609


Other assets

166



159


Total assets

5,644



5,505






Air traffic liability

691



534


Current portion of long-term debt

106



161


Other current liabilities

801



806


Current liabilities

1,598



1,501


Long-term debt

840



871


Other liabilities and credits

1,744



1,712


Shareholders' equity

1,462



1,421


Total liabilities and shareholders' equity

$

5,644



$

5,505






Debt to Capitalization, adjusted for operating leases

53%:47%



54%:46%








Number of common shares outstanding

70.493



70.377


 

 



OPERATING STATISTICS SUMMARY (unaudited)

Alaska Air Group, Inc.













Three Months Ended March 31,


2013


2012


Change

Consolidated Operating Statistics:(a)






Revenue passengers (000)

6,346



5,995



5.8

%

RPMs (000,000) "traffic"

6,796



6,232



9.0

%

ASMs (000,000) "capacity"

7,983



7,344



8.7

%

Load factor

85.1%



84.9%



0.2pts


Yield

14.38

¢


14.38

¢


%

PRASM

12.24

¢


12.20

¢


0.3

%

RASM

14.19

¢


14.15

¢


0.3

%

CASM excluding fuel(b)

8.62

¢


8.82

¢


(2.3%)


Economic fuel cost per gallon(c)

$

3.48



$

3.41



2.1

%

Fuel gallons (000,000)

106



99



6.6

%

Average number of full-time equivalent employees

12,013



11,832



1.5

%







Mainline Operating Statistics:






Revenue passengers (000)

4,534



4,275



6.1

%

RPMs (000,000) "traffic"

6,172



5,637



9.5

%

ASMs (000,000) "capacity"

7,203



6,575



9.6

%

Load factor

85.7%



85.7%




Yield

12.90

¢


12.83

¢


0.5

%

PRASM

11.05

¢


11.00

¢


0.4

%

RASM

12.97

¢


12.92

¢


0.4

%

CASM excluding fuel(b)

7.59

¢


7.90

¢


(3.9%)


Economic fuel cost per gallon(c)

$

3.47



$

3.40



2.1

%

Fuel gallons (000,000)

93



87



6.9

%

Average number of full-time equivalent employees

9,351



9,010



3.8

%

Aircraft utilization

10.6



10.2



3.9

%

Average aircraft stage length

1,203



1,152



4.4

%

Operating fleet

127



119



8a/c








Regional Operating Statistics:(d)






Revenue passengers (000)

1,812



1,720



5.3

%

RPMs (000,000) "traffic"

624



595



4.9

%

ASMs (000,000) "capacity"

780



769



1.5

%

Load factor

80.0%



77.4%



2.6pts


Yield

29.09

¢


29.07

¢


0.1

%

PRASM

23.27

¢


22.49

¢


3.5

%

Operating fleet (Horizon only)

48



48





(a) Except for full-time equivalent employees, data includes information related to third-party regional capacity purchase flying arrangements.

(b) See a reconciliation of operating expenses excluding fuel and certain special items and Note A for a discussion of why these measures may be important to investors in the accompanying pages.

(c) See a reconciliation of economic fuel cost in the accompanying pages.

(d) Data presented includes information related to flights operated by Horizon Air and third-party carriers.


 

OPERATING SEGMENTS (unaudited)

Alaska Air Group, Inc.




























Three Months Ended March 31, 2013


Alaska











(in millions)

Mainline


Regional


Horizon


Consolidating


Air Group
Adjusted(a)


Special
Items


Consolidated

Operating revenues














Passenger














Mainline

$

796



$



$



$



$

796



$



$

796


Regional



182







182





182


Total passenger revenues

796



182







978





978


CPA revenues





94



(94)








Freight and mail

25



1







26





26


Other-net

113



14



2





129





129


Total operating revenues

934



197



96



(94)



1,133





1,133
















Operating expenses














Operating expenses, excluding fuel

547



147



89



(95)



688





688


Economic fuel

323



46







369



12



381


Total operating expenses

870



193



89



(95)



1,057



12



1,069
















Nonoperating income (expense)














Interest income

4









4





4


Interest expense

(11)





(3)



(2)



(16)





(16)


Other

6







1



7





7



(1)





(3)



(1)



(5)





(5)


Income (loss) before income tax

$

63



$

4



$

4



$



$

71



$

(12)



$

59