Report of unscheduled material events or corporate changes.

8-K
2Q15 Earnings Release


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
Date of Report (Date of Earliest Event Reported): July 28, 2015
 
HAWAIIAN HOLDINGS, INC.
(Exact Name of Registrant as Specified in its Charter)
 
Delaware
 
1-31443
 
71-0879698
(State or Other Jurisdiction of
Incorporation)
 
(Commission File Number)
 
(I.R.S. Employer
Identification Number)
 
3375 Koapaka Street, Suite G-350, Honolulu, HI 96819
(Address of Principal Executive Offices) (Zip Code)
 
(808) 835-3700
(Registrant’s Telephone Number, Including Area Code)
 
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.     Results of Operations and Financial Condition.
 
On July 28, 2015 the Registrant issued a press release announcing its financial results for the quarter ended June 30, 2015 (the "Press Release").  A copy of the Press Release is furnished as Exhibit 99.1 to this report and incorporated herein by reference.
 
All of the information furnished in this Item 2.02 and in Exhibit 99.1 shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and unless expressly set forth by specific reference in such filings, shall not be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and regardless of any general incorporation language in such filings.

 
Item 9.01.     Financial Statements and Exhibits.
 
(d) Exhibits.





 
99.1

Hawaiian Holdings Reports 2015 Second Quarter Financial Results, Press Release, Dated July 28, 2015
 
SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
Dated: July 28, 2015
 
 
 
 
HAWAIIAN HOLDINGS, INC.
 
 
 
 
 
 
 
By:
/s/ Shannon L. Okinaka
 
 
Name:
Shannon L. Okinaka
 
 
Title:
Executive Vice President, Chief Financial Officer and Treasurer
EXHIBIT INDEX
 
99.1

Hawaiian Holdings Reports 2015 Second Quarter Financial Results, Press Release, Dated July 28, 2015
 



Exhibit 99.1 Q2 2015
Exhibit 99.1
 
FOR IMMEDIATE RELEASE
Tuesday, July 28, 2015
 
COMPANY CONTACT:
Shannon Okinaka, EVP & CFO - (808) 835-3700
Shannon.Okinaka@HawaiianAir.com
 
INVESTOR RELATIONS CONTACT:
Ashlee Kishimoto, Sr. Director - (808) 838-5421
Ashlee.Kishimoto@HawaiianAir.com
 
 
 
 
 
MEDIA RELATIONS CONTACT:
Alison Croyle, Director - (808) 835-3886
Alison.Croyle@HawaiianAir.com
 
Hawaiian Holdings Reports 2015 Second Quarter Financial Results
 
HONOLULU — Hawaiian Holdings, Inc. (NASDAQ: HA) (“Holdings” or the “Company”), parent company of Hawaiian Airlines, Inc. (“Hawaiian”), today reported its financial results for the second quarter of 2015.
 
·                  GAAP net income of $48.8 million or $0.79 per diluted share.
·                  Adjusted net income, reflecting economic fuel expense and excluding loss on extinguishment of debt, of $37.5 million or $0.61 per diluted share, an increase of $15.1 million or $0.26 cents per diluted share year-over-year.
·                  Adjusted pre-tax margin of 10.7% compared to 6.4% in the prior year period.
·                  Unrestricted cash, cash equivalents and short-term investments of $606 million.
·                  Lowered leverage ratio to 3.4x.        
 
“We are pleased with the results for the quarter” said Mark Dunkerley, Hawaiian Airlines president and chief executive officer. “Strong demand across our network coupled with low fuel prices more than compensated for the adverse impacts of the strengthening US dollar, the significant reduction in most fuel surcharges and the high levels of industry capacity growth from North America. Our financial performance for the second half of the year seems set to be a continuation of what we’ve seen so far in 2015. In this environment, the company expects to generate free cash flow, strengthen its balance sheet and improve its profit margins. As ever, the whole team has done a great job of looking after our customers, enhancing our reputation, and burnishing our brand. They have my thanks.”

Statistical data, as well as a reconciliation of the reported non-GAAP financial measures, can be found in the accompanying tables.
 
Liquidity and Capital Resources
 
As of June 30, 2015 the Company had:
 
·                  Unrestricted cash, cash equivalents and short-term investments of $606 million.
·                  Outstanding debt and capital lease obligations of approximately $947 million consisting of the following:
·                  $689 million outstanding under secured loan agreements to finance a portion of the purchase price for 11 Airbus A330-200 aircraft.
·                  $127 million outstanding under secured loan agreements to finance a portion of the purchase price for 15 Boeing 717-200 aircraft.
·                  $100 million in capital lease obligations to finance the acquisition of an Airbus A330-200, two Boeing 717-200 aircraft and aircraft-related equipment.
·                  $27 million outstanding under floating rate notes to finance the acquisition of two Boeing 767-300 ER aircraft.
·                  $4 million of outstanding convertible senior notes.

In the second quarter, the Company repurchased $4 million (principal balance) of its convertible senior notes outstanding. Repurchases to date have totaled $82 million (principal balance) or 95%, of the originally issued principal amount, thereby eliminating the need for the Company to issue 10.4 million shares when the notes may have otherwise converted to common stock.

In addition, during the second quarter the Company repurchased 0.8 million shares of its common stock for approximately $18 million under its previously announced $100 million stock repurchase program.

Second Quarter 2015 Highlights
 
Operational

·                  Ranked #1 nationally for on-time performance for the months of March, April and May 2015.
·                  Ranked as one of the top domestic airlines by Travel + Leisure for 2015.

Product and loyalty

·            The comprehensive interior retrofit of the Company's neighbor island fleet remains on schedule for completion in the fourth quarter of 2015 with 12 of 18 Boeing 717 aircraft completed to date.

Fleet and financing

·               Added an A330-200 aircraft under lease financing and retired a Boeing 767-300 at the end of its lease.
·               Updated the fleet plan and entered into a six-year lease agreement for one A330-200 with a delivery date of summer 2016 and accelerated the planned retirement date of certain of its Boeing 767-300 aircraft.
·               Announced the purchase of three ATR 72 turbo-prop aircraft in an all-cargo configuration for expansion of its cargo service.

Schedule

·               Los Angeles to Kona, three-times-weekly, and Los Angeles to Lihu‘e, four-times-weekly, summer seasonal service reintroduced in May.
·               Oakland to Kona, three-times-weekly and Oakland to Lihu‘e, four-times-weekly, summer seasonal service reintroduced in May.
·               Los Angeles to Maui second daily seasonal summer service reintroduced in May.
·               Announced year round service from Los Angeles to Lihu‘e, three-times-weekly, beginning in January 2016.


Third Quarter and Full Year 2015 Outlook
 
The table below summarizes the Company’s expectations for the third quarter ending September 30, 2015 and full year ending December 31, 2015, expressed as an expected percentage change compared to the results for the quarter ended September 30, 2014 or the year ended December 31, 2014 (the historical results for which are presented for reference).

 
 
Third Quarter
 
 
Item
 
2014
 
Third Quarter 2015 Guidance
Cost per ASM Excluding Fuel (cents)
 
7.80

 
Up 2.5% to up 5.5%
Operating Revenue Per ASM (cents)
 
14.20

 
Down 4% to down 7%
ASMs (millions)
 
4,502.9

 
Up 3% to up 5%
Gallons of jet fuel consumed (millions)
 
60.2

 
Up 0.5% to up 2.5%
Economic fuel cost per gallon (a)
 
$
3.10

 
$2.00 to $2.10
 
 
 
Full Year
 
 
Item
 
2014
 
Full Year 2015 Guidance
Cost per ASM Excluding Fuel (cents)
 
8.15

 
Up 1.5% to up 3.5%
ASMs (millions)
 
17,073.6

 
Up 3% to up 5%
Gallons of jet fuel consumed (millions)
 
230.2

 
Up 0.5% to up 2.5%
Economic fuel cost per gallon (a)
 
$
3.03

 
$2.05 to $2.15

(a) Economic fuel cost per gallon estimates are based on the July 22, 2015 fuel forward curve.

Investor Conference Call
 
Hawaiian Holdings’ quarterly earnings conference call is scheduled to begin today (July 28, 2015) at 4:30 p.m. Eastern Time (USA). The conference call will be broadcast live over the Internet. Investors may listen to the live audio webcast on the investor relations section of the Company’s website at www.HawaiianAirlines.com. For those who are not available for the live webcast, the call will be archived for 90 days on Hawaiian’s investor website.
 
About Hawaiian Airlines
 
Hawaiian® has led all U.S. carriers in on-time performance for each of the past 11 years (2004-2014) as reported by the U.S. Department of Transportation. Consumer surveys by Condé Nast Traveler, Travel + Leisure and Zagat have all ranked Hawaiian the highest of all domestic airlines serving Hawai‘i.

Now in its 86th year of continuous service, Hawaiian is Hawai‘i’s biggest and longest-serving airline, as well as the largest provider of passenger air service from its primary visitor markets on the U.S. mainland. Hawaiian offers nonstop service to Hawai‘i from more U.S. gateway cities (11) than any other airline, along with service from Japan, South Korea, China, Australia, New Zealand, American Samoa and Tahiti. Hawaiian also provides approximately 160 jet flights daily between the Hawaiian Islands, with a total of more than 200 daily flights system-wide.

Hawaiian Airlines, Inc. is a subsidiary of Hawaiian Holdings, Inc. (NASDAQ: HA). Additional information is available at HawaiianAirlines.com. Follow updates on Twitter about Hawaiian (@HawaiianAir) and its special fare offers (@HawaiianFares), and become a fan on its Facebook page.

Forward-Looking Statements
 
This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect the Company’s current views with respect to certain current and future events and financial performance.  Such forward-looking statements include, without limitation, the Company’s expectations regarding cost per available seat mile excluding fuel, available seat miles, gallons of jet fuel consumed and economic fuel cost per gallon, each for the quarter ending September 30, 2015 and the equivalent measures for full year 2015; the Company's expectations regarding operating revenue per available seat mile for the quarter ending September 30, 2015; the Company's timing expectations regarding the refurbishment of its Boeing 717 aircraft; the statement of the Company's CEO regarding the expected operating environment for the remainder of 2015; and statements as to other matters that do not relate strictly to historical facts or statements of assumptions underlying any of the foregoing.  Words such as “expects,” “anticipates,” “projects,” “intends,” “plans,” “believes,” “estimates,” variations of such words, and similar expressions are also intended to identify such forward-looking statements.  These forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and assumptions relating to the Company’s operations and business environment, all of which may cause the Company’s actual results to be materially different from any future results, expressed or implied, in these forward-looking statements. These risks and uncertainties include, without limitation, the Company’s ability to accurately forecast quarter and year-end results; economic volatility; the price and availability of aircraft fuel; fluctuations in demand for transportation in the markets in which the Company operates; the Company’s dependence on tourist travel; foreign currency exchange rate fluctuations; and the Company’s ability to implement its growth strategy and related cost reduction goals.

The risks, uncertainties and assumptions referred to above that could cause the Company’s results to differ materially from the results expressed or implied by such forward-looking statements also include the risks, uncertainties and assumptions discussed from time to time in the Company’s other public filings and public announcements, including the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 and the Company’s subsequent Quarterly Reports on Form 10-Q, as well as other documents that may be filed by the Company from time to time with the Securities and Exchange Commission.  All forward-looking statements included in this document are based on information available to the Company on the date hereof.  The Company does not undertake to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date hereof even if experience or future changes make it clear that any projected results expressed or implied herein will not be realized.



Table 1.
Hawaiian Holdings, Inc.
Consolidated Statements of Operations
(in thousands, except for per share data) (unaudited)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2015
 
2014
 
% Change
 
2015
 
2014
 
% Change
 
 
(unaudited)
 
(unaudited)
Operating Revenue:
 
 

 
 

 
 
 
 
 
 
 
 
Passenger
 
$
499,387

 
$
506,797

 
(1.5
)%
 
$
968,532

 
$
974,810

 
(0.6
)%
Other
 
71,908

 
68,923

 
4.3
 %
 
143,043

 
125,768

 
13.7
 %
Total
 
571,295

 
575,720

 
(0.8
)%
 
1,111,575

 
1,100,578

 
1.0
 %
Operating Expenses:
 
 

 
 

 
 
 
 
 
 
 
 
Aircraft fuel, including taxes and delivery
 
112,519

 
174,139

 
(35.4
)%
 
223,846

 
345,278

 
(35.2
)%
Wages and benefits
 
123,977

 
112,478

 
10.2
 %
 
243,991

 
219,972

 
10.9
 %
Aircraft rent
 
28,817

 
26,095

 
10.4
 %
 
57,188

 
52,374

 
9.2
 %
Maintenance materials and repairs
 
57,071

 
58,399

 
(2.3
)%
 
112,316

 
116,709

 
(3.8
)%
Aircraft and passenger servicing
 
29,348

 
30,860

 
(4.9
)%
 
57,664

 
61,081

 
(5.6
)%
Commissions and other selling
 
30,484

 
30,773

 
(0.9
)%
 
60,912

 
62,108

 
(1.9
)%
Depreciation and amortization
 
27,537

 
23,765

 
15.9
 %
 
52,716

 
46,576

 
13.2
 %
Other rentals and landing fees
 
23,248

 
21,656

 
7.4
 %
 
46,079

 
42,218

 
9.1
 %
Other
 
46,878

 
45,961

 
2.0
 %
 
94,283

 
92,631

 
1.8
 %
Total
 
479,879

 
524,126

 
(8.4
)%
 
948,995

 
1,038,947

 
(8.7
)%
Operating Income
 
91,416

 
51,594

 
77.2
 %
 
162,580

 
61,631

 
163.8
 %
Nonoperating Income (Expense):
 
 

 
 

 
 
 
 
 
 
 
 
Interest expense and amortization of debt discounts and issuance costs
 
(13,718
)
 
(15,997
)
 
 
 
(29,236
)
 
(31,007
)
 
 
Interest income
 
725

 
398

 
 
 
1,361

 
617

 
 
Capitalized interest
 
975

 
1,974

 
 
 
2,268

 
4,750

 
 
Gains (losses) on fuel derivatives
 
2,026

 
6,285

 
 
 
(3,661
)
 
(614
)
 
 
Loss on extinguishment of debt
 
(287
)
 

 
 
 
(7,242
)
 

 
 
Other, net
 
(1,876
)
 
725

 
 
 
(4,810
)
 
1,310

 
 
Total
 
(12,155
)
 
(6,615
)
 
 
 
(41,320
)
 
(24,944
)
 
 
Income Before Income Taxes
 
79,261

 
44,979

 
 
 
121,260

 
36,687

 
 
Income tax expense
 
30,427

 
17,652

 
 
 
46,543

 
14,435

 
 
Net Income
 
$
48,834

 
$
27,327

 
 
 
$
74,717

 
$
22,252

 
 
Net Income Per Share
 
 

 
 

 
 
 
 
 
 
 
 
Basic
 
$
0.89

 
$
0.51

 
 
 
$
1.37

 
$
0.42

 
 
Diluted
 
$
0.79

 
$
0.43

 
 
 
$
1.18

 
$
0.39

 
 
Weighted Average Number of Common Stock Shares Outstanding:
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
54,619

 
53,499

 
 
 
54,617

 
53,095

 
 
Diluted
 
61,855

 
62,847

 
 
 
63,390

 
57,046

 
 




Table 2.
Hawaiian Holdings, Inc.
Selected Statistical Data (unaudited)
 
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2015
 
2014
 
% Change
 
2015
 
2014
 
% Change
 
 
(in thousands, except as otherwise indicated)
Scheduled Operations (c) :
 
 

 
 

 
 
 
 

 
 

 
 
Revenue passengers flown
 
2,659

 
2,526

 
5.3
 %
 
5,180

 
4,930

 
5.1
 %
Revenue passenger miles (RPM)
 
3,588,246

 
3,393,173

 
5.7
 %
 
6,933,627

 
6,621,779

 
4.7
 %
Available seat miles (ASM)
 
4,439,349

 
4,260,565

 
4.2
 %
 
8,666,390

 
8,296,235

 
4.5
 %
Passenger revenue per RPM (Yield)
 

13.92
¢
 

14.94
¢
 
(6.8
)%
 

13.97
¢
 

14.72
¢
 
(5.1
)%
Passenger load factor (RPM/ASM)
 
80.8
%
 
79.6
%
 
1.2 pt.

 
80.0
%
 
79.8
%
 
0.2 pt.

Passenger revenue per ASM (PRASM)
 

11.25
¢
 

11.90
¢
 
(5.5
)%
 

11.18
¢
 

11.75
¢
 
(4.9
)%
Total Operations (c) :
 
 

 
 

 
 
 
 

 
 

 
 
Revenue passengers flown
 
2,660

 
2,526

 
5.3
 %
 
5,182

 
4,932

 
5.1
 %
Revenue passenger miles (RPM)
 
3,590,510

 
3,395,161

 
5.8
 %
 
6,938,120

 
6,626,880

 
4.7
 %
Available seat miles (ASM)
 
4,441,648

 
4,262,774

 
4.2
 %
 
8,671,330

 
8,301,743

 
4.5
 %
Passenger load factor (RPM/ASM)
 
80.8
%
 
79.6
%
 
1.2 pt.

 
80.0
%
 
79.8
%
 
0.2 pt.

Operating revenue per ASM (RASM)
 

12.86
¢
 

13.51
¢
 
(4.8
)%
 

12.82
¢
 

13.26
¢
 
(3.3
)%
Operating cost per ASM (CASM)
 

10.80
¢
 

12.30
¢
 
(12.2
)%
 

10.94
¢
 

12.51
¢
 
(12.5
)%
CASM excluding aircraft fuel (b)
 

8.27
¢
 

8.21
¢
 
0.7
 %
 

8.36
¢
 

8.36
¢
 
 %
Aircraft fuel expense per ASM (a)
 

2.53
¢
 

4.09
¢
 
(38.1
)%
 

2.58
¢
 

4.15
¢
 
(37.8
)%
Revenue block hours operated
 
43,418

 
41,112

 
5.6
 %
 
85,653

 
80,324

 
6.6
 %
Gallons of jet fuel consumed
 
57,998

 
56,937

 
1.9
 %
 
114,996

 
112,101

 
2.6
 %
Average cost per gallon of jet fuel (actual) (a)
 
$
1.94

 
$
3.06

 
(36.6
)%
 
$
1.95

 
$
3.08

 
(36.7
)%
Economic fuel cost per gallon (a)(d)
 
$
2.23

 
$
3.09

 
(27.8
)%
 
$
2.22

 
$
3.10

 
(28.4
)%
 
(a)          Includes applicable taxes and fees.
(b)         Represents adjusted unit costs, a non-GAAP measure. The Company believes this is a useful measure because it better reflects its controllable costs. See Table 4 for a reconciliation of operating expenses excluding aircraft fuel.
(c)          Includes the operations of the Company's contract carrier under a capacity purchase agreement.
(d) See Table 3 for a reconciliation of economic fuel costs.




Table 3.
Hawaiian Holdings, Inc.
Economic Fuel Expense
(in thousands, except per-gallon amounts) (unaudited)
 
The Company believes that economic fuel expense is the best measure of the effect of fuel prices on its business as it most closely approximates the net cash outflow associated with the purchase of fuel for its operations in a period.  The Company defines economic fuel expense as GAAP fuel expense plus (gains)/losses realized through actual cash (receipts)/payments received from or paid to hedge counterparties for fuel hedge derivative contracts settled during the period.
 
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2015
 
2014
 
Change
 
2015
 
2014
 
Change
 
 
(in thousands, except per-gallon amounts)
 
 
 
(in thousands, except per-gallon amounts)
 
 
Aircraft fuel expense, including taxes and delivery
 
$
112,519

 
$
174,139

 
(35.4
)%
 
$
223,846

 
$
345,278

 
(35.2
)%
Realized losses on settlement of fuel derivative contracts
 
16,553

 
2,009

 
723.9
 %
 
31,144

 
1,899

 
1,540.0
 %
Economic fuel expense
 
$
129,072

 
$
176,148

 
(26.7
)%
 
$
254,990

 
$
347,177

 
(26.6
)%
Fuel gallons consumed
 
57,998

 
56,937

 
1.9
 %
 
114,996

 
112,101

 
2.6
 %
Economic fuel costs per gallon
 
$
2.23

 
$
3.09

 
(27.8
)%
 
$
2.22

 
$
3.10

 
(28.4
)%

Table 4.
Hawaiian Holdings, Inc.
Non-GAAP Financial Reconciliation
(in thousands, except per-share and CASM data) (unaudited)
 
The Company evaluates its financial performance utilizing various GAAP and non-GAAP financial measures, including net income, diluted net income per share, CASM, PRASM, RASM, Passenger Revenue per RPM and EBITDAR.  Pursuant to Regulation G, the Company has included the following reconciliation of reported non-GAAP financial measures to comparable financial measures reported on a GAAP basis.  The adjustments are described below:

Adjusted net income and pre-tax income reflecting economic fuel expense and excluding loss on extinguishment of debt

Changes in fair value of fuel derivative contracts, net of tax, are based on market prices for open contracts as of the end of the reporting period. This line item includes the unrealized amounts that will settle in future periods and the reversal of prior period unrealized amounts. As the cost and availability of fuel is volatile, excluding the impact of fuel derivative adjustments allows investors to better analyze the Company's operational performance and compare its results to other airlines in the periods presented below.

Loss on extinguishment of debt, net of tax, is excluded to allow investor to better analyze the Company's core operational performance and more readily compare its results to other airlines in the periods presented below.








 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2015
 
2014
 
2015
 
2014
 
 
Net Income
 
Diluted Net Income Per Share
 
Net Income
 
Diluted Net Income Per Share
 
Net Income
 
Diluted Net Income Per Share
 
Net Income
 
Diluted Net Income Per Share
As reported - GAAP
 
$
48,834

 
$
0.79

 
$
27,327

 
$
0.43

 
$
74,717

 
$
1.18

 
$
22,252

 
$
0.39

Add: changes in fair value of fuel derivative contracts, net of tax
 
(11,519
)
 
(0.18
)
 
(4,976
)
 
(0.08
)
 
(16,862
)
 
(0.27
)
 
(771
)
 
(0.01
)
Add: loss on extinguishment of debt, net of tax
 
178

 

 

 

 
4,351

 
0.07

 

 

Adjusted net income
 
$
37,493

 
$
0.61

 
$
22,351

 
$
0.35

 
$
62,206

 
$
0.98

 
$
21,481

 
$
0.38


 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2015
 
2014
 
2015
 
2014
Income Before Income Taxes, as reported
 
$
79,261

 
$
44,979

 
$
121,260

 
$
36,687

Add: unrealized gains on fuel derivatives
 
(18,579
)
 
(8,294
)
 
(27,484
)
 
(1,285
)
Add: loss on extinguishment of debt
 
287

 

 
7,242

 

Adjusted Income Before Income Taxes
 
$
60,969

 
$
36,685

 
$
101,018

 
$
35,402


Operating Costs per Available Seat Mile (CASM)
The Company has separately listed in the table below its fuel costs per ASM and non-GAAP unit costs, excluding fuel. These amounts are included in CASM, but for internal purposes the Company consistently uses cost metrics that exclude fuel and non-recurring items (if applicable) to measure and monitor its costs.

 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2015
 
2014
 
2015
 
2014
GAAP operating expenses
 
$
479,879

 
$
524,126

 
$
948,995

 
$
1,038,947

Less: aircraft fuel, including taxes and delivery
 
(112,519
)
 
(174,139
)
 
(223,846
)
 
(345,278
)
Adjusted operating expenses - excluding aircraft fuel
 
$
367,360

 
$
349,987

 
$
725,149

 
$
693,669

Available Seat Miles
 
4,441,648

 
4,262,774

 
8,671,330

 
8,301,743

CASM - GAAP
 

10.80
¢
 

12.30
¢
 

10.94
¢
 

12.51
¢
Less: aircraft fuel
 
(2.53
)
 
(4.09
)
 
(2.58
)
 
(4.15
)
CASM - excluding aircraft fuel
 

8.27
¢
 

8.21
¢
 

8.36
¢
 

8.36
¢

Pre-tax margin
The Company excludes unrealized gains from fuel derivative contracts and losses on extinguishment of debt from pre-tax margin for the same reasons as described above.
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2015
 
2014
 
2015
 
2014
Pre-Tax Margin, as reported
 
13.9
 %
 
7.8
 %
 
10.9
 %
 
3.3
 %
Add: unrealized gains on fuel derivatives
 
(3.3
)%
 
(1.4
)%
 
(2.5
)%
 
(0.1
)%
Add: loss on extinguishment of debt
 
0.1
 %
 
 %
 
0.7
 %
 
 %
Pre-Tax Margin, adjusted
 
10.7
 %
 
6.4
 %
 
9.1
 %
 
3.2
 %




Leverage ratio
The Company uses adjusted total debt, including aircraft rent, in addition to long-term adjusted debt and capital leases, to represent long-term financial obligations. The Company excludes unrealized (gains) losses from fuel derivative contracts and losses on extinguishment of debt from earnings before interest, taxes, depreciation, amortization and rent (EBITDAR) for the reasons as described above. Management believes this metric is helpful to investor in assessing the company’s overall debt.

 
 
Twelve months ended
 
 
June 30, 2015
Debt and capital lease obligations
 
$
946,611

Plus: Aircraft leases capitalized at 7x last twelve months' aircraft rent
 
778,652

Adjusted debt and capital lease obligations
 
$
1,725,263

 
 
 
EBITDAR:
 
 
Income Before Income Taxes
 
$
198,021

Add back:
 
 
Interest and amortization of debt expense
 
62,469

Depreciation and amortization
 
102,515

Rent expense
 
111,236

EBITDAR
 
$
474,241

 
 
 
Adjustments:
 
 
Add: Unrealized losses on fuel hedges, net
 
16,907

Add: Loss on extinguishment of debt
 
11,127

Adjusted EBITDAR
 
$
502,275

 
 
 
Leverage Ratio
 
3.4
x