Document


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 21, 2016
 
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 21, 2016 the Registrant issued a press release announcing its financial results for the quarter ended June 30, 2016 (the "Press Release").  A copy of the Press Release is furnished as Exhibit 99.1 to this report and incorporated herein by reference.
 
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 2016 Second Quarter Financial Results, Press Release, Dated July 21, 2016.
 
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 21, 2016
 
 
 
 
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 2016 Second Quarter Financial Results, Press Release, Dated July 21, 2016.
 



Exhibit
Exhibit 99.1
 
FOR IMMEDIATE RELEASE Thursday, July 21, 2016
 
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 2016 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 2016.
 
Second Quarter 2016 - Key Financial Metrics
 
 
GAAP
 
YoY Change
 
Adjusted
 
YoY Change
Net Income
 
$79.6M
 
+$30.7M
 
$65.2M
 
+$27.7M
Diluted EPS
 
$1.48
 
+$0.69
 
$1.21
 
+$0.60
Pre-tax Margin
 
21.6%
 
+7.7 pts.
 
17.7%
 
+7 pts.
 
“These outstanding second quarter results distinguish us from the rest of the industry and reinforce our confidence in 2016,” said Mark Dunkerley, Hawaiian Airlines president and CEO. “Robust demand for a Hawai'i vacation, moderate industry capacity through the majority of our network, lower fuel costs, and our commitment to operational excellence drove the record-breaking second quarter results. My thanks go to all of Hawaiian's employees who contributed to our terrific financial and operational performance.”  

Statistical data, as well as a reconciliation of the adjusted non-GAAP financial measures to the equivalent GAAP financial measures, can be found in the accompanying tables.
 
Liquidity and Capital Resources
 
As of June 30, 2016 the Company had:
 
·                  Unrestricted cash, cash equivalents and short-term investments of $622 million.
·                  Outstanding debt and capital lease obligations of $586 million.

The Company early retired $89 million of existing debt in the second quarter and contributed $11 million to its pension plans doubling the minimum funding requirement for 2016.

In addition, the Company repurchased 208,660 common shares for approximately $8 million in the second quarter.

Second Quarter 2016 Highlights
 
Operational

·                  Ranked #1 nationally for on-time performance for the months of March, April, and May 2016 as reported in the U.S. Department of Transportation Air Travel Consumer Report.

New routes and increased frequencies

·
Awarded three times weekly non-stop service between Kona International Airport and Tokyo’s Haneda International Airport and additional non-stop frequencies four times weekly between Honolulu International Airport and Haneda International Airport beginning December 2016.

Product and loyalty

·
Won the 2016 Skytrax World Airline Award for 'Best Airline Staff' in North America.
·
Announced new uniforms for front line employees to debut in 2017.
·
Launched Bid Up, a new first class upgrade auction offering North America guests the chance to name their price for first class seats.
·
Welcomed the first retrofitted A330 aircraft with the new 278 passenger seat configuration featuring 18 fully lie-flat Premium Cabin seats, 68 Extra Comfort seats, and 192 Main Cabin seats.

Fleet and financing

·    Took delivery of its 23rd A330 under a six-year lease.


Third Quarter and Full Year 2016 Outlook
 
The table below summarizes the Company’s expectations for the third quarter ending September 30, 2016 and full year ending December 31, 2016, expressed as an expected percentage change compared to the results for the quarter ended September 30, 2015 and full year ended December 31, 2015, as applicable (the historical results for which are presented for reference).

 
 
Third Quarter
 
 
Item
 
2015
 
Third Quarter 2016 Guidance
Cost per ASM Excluding Fuel (cents)(a)
 
7.97

 
Up 2% to up 5%
Operating Revenue Per ASM (cents)
 
13.55

 
Down 1% to up 2%
ASMs (millions)
 
4,663.2

 
Up 4.5% to up 6.5%
Gallons of jet fuel consumed (millions)
 
61.2

 
Up 4% to 6%
Economic fuel cost per gallon (a)(b)
 
$
1.95

 
$1.50 to $1.60
 
 
 
Full Year
 
 
Item
 
2015
 
Full Year 2016 Guidance
Cost per ASM Excluding Fuel (cents)(a)
 
8.31

 
Up 2.5% to up 4.5%
ASMs (millions)
 
17,726.3

 
Up 3% to up 5%
Gallons of jet fuel consumed (millions)
 
234.2

 
Up 2.5% to up 4.5%
Economic fuel cost per gallon (a)(b)
 
$
2.04

 
$1.50 to $1.60

(a) The Company does not reconcile these forward looking non-GAAP financial measures because fuel derivative settlements will not be known until the end of the period and could be significant.
(b) Economic fuel cost per gallon estimates are based on the July 12, 2016 fuel forward curve.


Investor Conference Call
 
Hawaiian Holdings’ quarterly earnings conference call is scheduled to begin today (July 21, 2016) 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 the investor relations section of the Company's website.
 
About Hawaiian Airlines
 
Hawaiian® has led all U.S. carriers in on-time performance for each of the past 12 years (2004-2015) 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 87th 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, 2016 and full year ending December 31, 2016; the Company's expectations regarding operating revenue per available seat mile for the quarter ending September 30, 2016; the statement of the Company's CEO regarding expectations for 2016; 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 quarterly and annual 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; labor negotiations and related developments; 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 and the Company’s 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,
 
 
2016
 
2015
 
% Change
 
2016
 
2015
 
% Change
Operating Revenue:
 
 

 
 

 
 
 
 
 
 
 
 
Passenger
 
$
518,572

 
$
499,387

 
3.8
 %
 
$
1,000,599

 
$
968,532

 
3.3
 %
Other
 
76,018

 
71,908

 
5.7
 %
 
145,171

 
143,043

 
1.5
 %
Total
 
594,590

 
571,295

 
4.1
 %
 
1,145,770

 
1,111,575

 
3.1
 %
Operating Expenses:
 
 

 
 

 
 
 
 
 
 
 
 
Aircraft fuel, including taxes and delivery
 
83,798

 
112,519

 
(25.5
)%
 
153,698

 
223,846

 
(31.3
)%
Wages and benefits
 
135,883

 
123,977

 
9.6
 %
 
269,526

 
243,991

 
10.5
 %
Aircraft rent
 
30,066

 
28,817

 
4.3
 %
 
59,454

 
57,188

 
4.0
 %
Maintenance, materials and repairs
 
54,585

 
57,071

 
(4.4
)%
 
115,089

 
112,316

 
2.5
 %
Aircraft and passenger servicing
 
30,723

 
29,348

 
4.7
 %
 
59,274

 
57,664

 
2.8
 %
Commissions and other selling
 
31,425

 
30,484

 
3.1
 %
 
64,456

 
60,912

 
5.8
 %
Depreciation and amortization
 
26,988

 
27,537

 
(2.0
)%
 
54,134

 
52,716

 
2.7
 %
Other rentals and landing fees
 
24,978

 
23,248

 
7.4
 %
 
49,412

 
46,079

 
7.2
 %
Purchased services
 
24,543

 
19,842

 
23.7
 %
 
47,275

 
41,081

 
15.1
 %
Other
 
32,731

 
27,036

 
21.1
 %
 
62,714

 
53,202

 
17.9
 %
Total
 
475,720

 
479,879

 
(0.9
)%
 
935,032

 
948,995

 
(1.5
)%
Operating Income
 
118,870

 
91,416

 
30.0
 %
 
210,738

 
162,580

 
29.6
 %
Nonoperating Income (Expense):
 
 

 
 

 
 
 
 
 
 
 
 
Interest expense and amortization of debt discounts and issuance costs
 
(8,910
)
 
(13,718
)
 
 
 
(19,914
)
 
(29,236
)
 
 
Interest income
 
1,087

 
725

 
 
 
1,931

 
1,361

 
 
Capitalized interest
 
463

 
975

 
 
 
688

 
2,268

 
 
Gains on fuel derivatives
 
21,087

 
2,026

 
 
 
19,022

 
(3,661
)
 
 
Loss on extinguishment of debt
 
(6,643
)
 
(287
)
 
 
 
(9,993
)
 
(7,242
)
 
 
Other, net
 
2,686

 
(1,876
)
 
 
 
9,272

 
(4,810
)
 
 
Total
 
9,770

 
(12,155
)
 
 
 
1,006

 
(41,320
)
 
 
Income Before Income Taxes
 
128,640

 
79,261

 
 
 
211,744

 
121,260

 
 
Income tax expense
 
49,070

 
30,427

 
 
 
80,708

 
46,543

 
 
Net Income
 
$
79,570

 
$
48,834

 
 
 
$
131,036

 
$
74,717

 
 
Net Income Per Share
 
 

 
 

 
 
 
 
 
 
 
 
Basic
 
$
1.48

 
$
0.89

 
 
 
$
2.45

 
$
1.37

 
 
Diluted
 
$
1.48

 
$
0.79

 
 
 
$
2.43

 
$
1.18

 
 
Weighted Average Number of Common Stock Shares Outstanding:
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
53,634

 
54,619

 
 
 
53,574

 
54,617

 
 
Diluted
 
53,853

 
61,855

 
 
 
53,833

 
63,390

 
 




Table 2.
Hawaiian Holdings, Inc.
Selected Statistical Data (unaudited)
 
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2016
 
2015
 
% Change
 
2016
 
2015
 
% Change
 
 
(in thousands, except as otherwise indicated)
Scheduled Operations (a) :
 
 

 
 

 
 
 
 

 
 

 
 
Revenue passengers flown
 
2,755

 
2,659

 
3.5
 %
 
5,401

 
5,180

 
4.3
 %
Revenue passenger miles (RPM)
 
3,846,966

 
3,588,246

 
7.2
 %
 
7,388,033

 
6,933,627

 
6.6
 %
Available seat miles (ASM)
 
4,550,964

 
4,439,349

 
2.5
 %
 
8,917,956

 
8,666,390

 
2.9
 %
Passenger revenue per RPM (Yield)
 

13.48
¢
 

13.92
¢
 
(3.2
)%
 

13.54
¢
 

13.97
¢
 
(3.1
)%
Passenger load factor (RPM/ASM)
 
84.5
%
 
80.8
%
 
3.7 pt.

 
82.8
%
 
80.0
%
 
2.8 pt.

Passenger revenue per ASM (PRASM)
 

11.39
¢
 

11.25
¢
 
1.2
 %
 

11.22
¢
 

11.18
¢
 
0.4
 %
Total Operations (a) :
 
 

 
 

 
 
 
 

 
 

 
 
Revenue passengers flown
 
2,756

 
2,660

 
3.6
 %
 
5,403

 
5,182

 
4.3
 %
Revenue passenger miles (RPM)
 
3,847,065

 
3,590,510

 
7.1
 %
 
7,389,122

 
6,938,120

 
6.5
 %
Available seat miles (ASM)
 
4,551,094

 
4,441,648

 
2.5
 %
 
8,919,188

 
8,671,330

 
2.9
 %
Operating revenue per ASM (RASM)
 

13.06
¢
 

12.86
¢
 
1.6
 %
 

12.85
¢
 

12.82
¢
 
0.2
 %
Operating cost per ASM (CASM)
 

10.45
¢
 

10.80
¢
 
(3.2
)%
 

10.48
¢
 

10.94
¢
 
(4.2
)%
CASM excluding aircraft fuel (b)
 

8.61
¢
 

8.27
¢
 
4.1
 %
 

8.76
¢
 

8.36
¢
 
4.8
 %
Aircraft fuel expense per ASM (c)
 

1.84
¢
 

2.53
¢
 
(27.3
)%
 

1.72
¢
 

2.58
¢
 
(33.3
)%
Revenue block hours operated
 
44,367

 
43,418

 
2.2
 %
 
87,093

 
85,653

 
1.7
 %
Gallons of jet fuel consumed
 
59,697

 
57,998

 
2.9
 %
 
117,553

 
114,996

 
2.2
 %
Average cost per gallon of jet fuel (actual) (c)
 
$
1.40

 
$
1.94

 
(27.8
)%
 
$
1.31

 
$
1.95

 
(32.8
)%
Economic fuel cost per gallon (c)(d)
 
$
1.55

 
$
2.23

 
(30.5
)%
 
$
1.54

 
$
2.22

 
(30.6
)%
 
(a)          Includes the operations of the Company's contract carrier under a capacity purchase agreement.
(b)         See Table 4 for a reconciliation of operating expenses to operating expenses excluding aircraft fuel.
(c)          Includes applicable taxes and fees.
(d) See Table 3 for a reconciliation of actual fuel costs to 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,
 
 
2016
 
2015
 
% Change
 
2016
 
2015
 
% Change
 
 
(in thousands, except per-gallon amounts)
 
 
 
(in thousands, except per-gallon amounts)
 
 
Aircraft fuel expense, including taxes and delivery
 
$
83,798

 
$
112,519

 
(25.5
)%
 
$
153,698

 
$
223,846

 
(31.3
)%
Realized losses on settlement of fuel derivative contracts
 
8,799

 
16,553

 
(46.8
)%
 
27,824

 
31,144

 
(10.7
)%
Economic fuel expense
 
$
92,597

 
$
129,072

 
(28.3
)%
 
$
181,522

 
$
254,990

 
(28.8
)%
Fuel gallons consumed
 
59,697

 
57,998

 
2.9
 %
 
117,553

 
114,996

 
2.2
 %
Economic fuel costs per gallon
 
$
1.55

 
$
2.23

 
(30.5
)%
 
$
1.54

 
$
2.22

 
(30.6
)%

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:

Changes in fair value of 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 of fuel and interest rate derivatives (not designated as hedges) that will settle in future periods and the reversal of prior period unrealized amounts. Excluding the impact of these derivative adjustments allows investors to better analyze our operational performance and compare our results to other airlines in the periods presented below.

Loss on extinguishment of debt, net of tax, is excluded to allow investors 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,
 
 
2016
 
2015
 
2016
 
2015
 
 
Total
 
Diluted Per Share
 
Total
 
Diluted Per Share
 
Total
 
Diluted Per Share
 
Total
 
Diluted Per Share
GAAP net income
 
$
79,570

 
$
1.48

 
$
48,834

 
$
0.79

 
$
131,036

 
$
2.43

 
$
74,717

 
$
1.18

Changes in fair value of derivative contracts
 
(29,886
)
 
(0.55
)
 
(18,579
)
 
(0.30
)
 
(46,846
)
 
(0.87
)
 
(27,483
)
 
(0.43
)
Loss on extinguishment of debt
 
6,643

 
0.12

 
287

 

 
9,993

 
0.19

 
7,242

 
0.11

Tax effect of adjustments

8,832


0.16


6,951


0.12


14,004


0.26


7,730


0.12

Adjusted net income
 
$
65,159

 
$
1.21

 
$
37,493

 
$
0.61

 
$
108,187

 
$
2.01

 
$
62,206

 
$
0.98


 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2016
 
2015
 
2016
 
2015
Income Before Income Taxes, as reported
 
$
128,640

 
$
79,261

 
$
211,744

 
$
121,260

Changes in fair value of derivative contracts
 
(29,866
)
 
(18,579
)
 
(46,846
)
 
(27,484
)
Loss on extinguishment of debt
 
6,643

 
287

 
9,993

 
7,242

Adjusted Income Before Income Taxes
 
$
105,417

 
$
60,969

 
$
174,891

 
$
101,018


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,
 
 
2016
 
2015
 
2016
 
2015
GAAP operating expenses
 
$
475,720

 
$
479,879

 
$
935,032

 
$
948,995

Less: aircraft fuel, including taxes and delivery
 
(83,798
)
 
(112,519
)
 
(153,698
)
 
(223,846
)
Adjusted operating expenses - excluding aircraft fuel
 
$
391,922

 
$
367,360

 
$
781,334

 
$
725,149

Available Seat Miles
 
4,551,094

 
4,441,648

 
8,919,188

 
8,671,330

CASM - GAAP
 

10.45
¢
 

10.80
¢
 

10.48
¢
 

10.94
¢
Less: aircraft fuel
 
(1.84
)
 
(2.53
)
 
(1.72
)
 
(2.58
)
CASM - excluding aircraft fuel
 

8.61
¢
 

8.27
¢
 

8.76
¢
 

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,
 
 
2016
 
2015
 
2016
 
2015
Pre-Tax Margin, as reported
 
21.6
 %
 
13.9
 %
 
18.5
 %
 
10.9
 %
Changes in fair value of derivative contracts
 
(5.0
)%
 
(3.3
)%
 
(4.1
)%
 
(2.5
)%
Loss on extinguishment of debt
 
1.1
 %
 
0.1
 %
 
0.9
 %
 
0.7
 %
Adjusted Pre-Tax Margin
 
17.7
 %
 
10.7
 %
 
15.3
 %
 
9.1
 %

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 investors in assessing the Company’s overall debt.

 
 
Twelve months ended
 
 
June 30, 2016
Debt and capital lease obligations
 
$
585,977

Plus: Aircraft leases capitalized at 7x last twelve months' aircraft rent
 
825,433

Adjusted debt and capital lease obligations
 
$
1,411,410

 
 
 
EBITDAR:
 
 
Income Before Income Taxes
 
$
386,172

Add back:
 
 
Interest and amortization of debt discounts and issuance costs
 
46,245

Depreciation and amortization
 
106,999

Aircraft rent
 
117,918

EBITDAR
 
$
657,334

 
 
 
Adjustments:
 
 
Add: changes in fair value of derivative contracts
 
(20,378
)
Add: loss on extinguishment of debt
 
14,809

Adjusted EBITDAR
 
$
651,765

 
 
 
Leverage Ratio
 
2.2
x