Report of unscheduled material events or corporate changes.

8-K
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 25, 2017
 
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 25, 2017, the Registrant issued a press release announcing its financial results for the quarter ended June 30, 2017 (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 2017 Second Quarter Financial Results, Press Release, dated July 25, 2017.
 
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 25, 2017
 
 
 
 
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 2017 Second Quarter Financial Results, Press Release, dated July 25, 2017.
 



Exhibit
Exhibit 99.1
NEWS
http://quotemedia.10kwizard.com/cgi/image?quest=1&rid=23&ipage=11709479&doc=3
FOR IMMEDIATE RELEASE Tuesday, July 25, 2017
 
COMPANY CONTACT:
Shannon Okinaka, EVP & CFO - (808) 835-3700
Shannon.Okinaka@HawaiianAir.com
 
INVESTOR RELATIONS CONTACT:
Daniel Wong, Sr. Director - (808) 835-3291
Daniel.Wong@HawaiianAir.com

MEDIA RELATIONS CONTACT:
Alison Croyle, Sr. Director - (808) 835-3886
Alison.Croyle@HawaiianAir.com


 
Hawaiian Holdings Reports 2017 Second Quarter Financial Results
 
HONOLULU — July 25, 2017 — 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 2017.
 
Second Quarter 2017 - Key Financial Metrics
 
 
GAAP
 
YoY Change
 
Adjusted
 
YoY Change
Net Income
 
$80.4M
 
+$0.9M
 
$85.3M
 
+$20.1M
Diluted EPS
 
$1.49
 
+$0.01
 
$1.58
 
+$0.37
Pre-tax Margin
 
19.2%
 
(2.4) pts.
 
20.3%
 
+2.6 pts.
 
“Our string of outstanding results continued into the second quarter,” said Mark Dunkerley, Hawaiian Airlines president and CEO. “These results have come courtesy of strong demand for the Hawai'i vacation, low fuel prices, moderate industry capacity, and an excellent job done by my colleagues in finding new ways to strengthen our performance. My thanks go to all of Hawaiian's employees who contributed to our terrific financial and operational performance.”
 
Statistical information, as well as a reconciliation of the non-GAAP financial measures, can be found in the accompanying tables.
 
Liquidity and Capital Resources
 
As of June 30, 2017, the Company had:
 
·                  Unrestricted cash, cash equivalents and short-term investments of $844 million.
·                  Outstanding debt and capital lease obligations of $528 million.

In addition, the Company repurchased approximately 83 thousand shares of common stock for approximately $4.3 million in the second quarter.

Second Quarter 2017 Highlights
 
People

·      Contributed approximately $8 million to further reduce its pension obligations.
·      Began operating under the 63-month contract ratified in the prior quarter with its pilots represented by the Airline Pilots Association (ALPA).

Operational

·                  Ranked #1 nationally for on-time performance for the months of April and May 2017 as reported in the U.S. Department of Transportation Air Travel Consumer Report.
·                  Relocated operations at Los Angeles International Airport (LAX) from Terminal 2 to Terminal 5.

New routes and increased frequencies

·
Extended seasonal non-stop service between Los Angeles International Airport (LAX) and Kaua’i’s Lihu’e Airport (LIH) to year-round non-stop service.
·
Commenced summer seasonal service with daily non-stop flights from Oakland International Airport (OAK) to Kaua’i’s Lihu’e Airport (LIH), and thrice weekly flights from Los Angeles International Airport (LAX) to Kona International Airport (KOA).
·
Announced expanded service for 2018 between North America and Hawai’i capitalizing on the introduction of the A321neo to Hawaiian’s fleet, including:
·
New non-stop service between Portland International Airport (PDX) and Kahului Airport (OGG) beginning January 2018
·
Extending seasonal non-stop service between Los Angeles International Airport (LAX) and Kona International Airport (KOA) to year-round non-stop service beginning March 2018
·
Extending seasonal non-stop service between Oakland International Airport (OAK) and Kaua’i’s Lihu’e Airport (LIH) to year-round non-stop service beginning April 2018

Product and loyalty

·
Continued remodeling of its A330 fleet with the addition of lie flat premium seats and expanded Extra Comfort capacity.

Fleet and financing

·
Completed a sale-leaseback transaction covering three Boeing 767 aircraft as part of the planned exit from its 767 fleet.


Third Quarter and Full Year 2017 Outlook
 
The table below summarizes the Company’s expectations for the quarter ending September 30, 2017 and full year ending December 31, 2017, expressed as an expected percentage change compared to the results for the quarter ended September 30, 2016 and full year ended December 31, 2016, as applicable.

The Company is lowering its guidance range for economic fuel cost per gallon for the full year ending December 31, 2017 due to lower than expected year-to-date fuel costs and the forward fuel price curve as of July 14, 2017.

 
 
Third Quarter
 
 
 
Third Quarter
Item
 
2017 Guidance
 
GAAP Equivalent
 
2017 Guidance
Cost per ASM excluding Fuel and Special Items (a)
 
Up 7% to up 10%
 
Cost per ASM (a)
 
Up 17.6% to up 21.1%
Operating Revenue Per ASM
 
Up 4.5% to up 7.5%
 
 
 
 
ASMs
 
Up 0.5% to up 2.5%
 
 
 
 
Gallons of jet fuel consumed
 
Up 3% to up 5%
 
 
 
 
Economic fuel cost per gallon (b)(c)
 
$1.55 to $1.65
 
Fuel cost per gallon (b)
 
$1.50 to $1.60
 
 
 
Full Year
 
 
 
Full Year
Item
 
2017 Guidance
 
GAAP Equivalent
 
2017 Guidance
Cost per ASM excluding Fuel and Special Items (a)
 
Up 4.5% to up 7.5%
 
Cost per ASM (a)
 
Up 3.8% to up 7.2%
ASMs
 
Up 2% to up 5%
 
 
 
 
Gallons of jet fuel consumed
 
Up 4.5% to up 7.5%
 
 
 
 
Economic fuel cost per gallon (b)(c)
 
$1.55 to $1.65
 
Fuel cost per gallon (b)
 
$1.53 to $1.63

(a) See Table 4 for a reconciliation of operating expenses to operating expenses excluding aircraft fuel and special items.
(b) Economic fuel cost per gallon estimates are based on the July 14, 2017 fuel forward curve.
(c) See Table 3 for a reconciliation of GAAP fuel costs to economic fuel costs.

Investor Conference Call
 
Hawaiian Holdings’ quarterly earnings conference call is scheduled to begin today (July 25, 2017) 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®, the world's most punctual airline as reported by OAG, has led all U.S. carriers in on-time performance for each of the past 13 years (2004-2016) as reported by the U.S. Department of Transportation. Consumer surveys by Condé Nast Traveler, Travel + Leisure and Zagat have ranked Hawaiian among the highest of all domestic airlines serving Hawai‘i.

Now in its 88th year of continuous service, Hawaiian is Hawai‘i’s biggest and longest-serving airline. 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 170 jet flights daily between the Hawaiian Islands, with a total of more than 250 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, cost per available seat mile excluding fuel and special items, available seat miles, gallons of jet fuel consumed, fuel cost per gallon, and economic fuel cost per gallon each for the quarter ending September 30, 2017 and full year ending December 31, 2017; the Company's expectations regarding operating revenue per available seat mile for the quarter ending September 30, 2017; 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; macroeconomic developments; political developments; 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; competitive pressures, including the potential impact of rising industry capacity between North America and Hawai‘i; 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,
 
 
2017
 
2016 (a)
 
% Change
 
2017
 
2016 (a)
 
% Change
Operating Revenue:
 
 

 
 

 
 
 
 
 
 
 
 
Passenger
 
$
593,210

 
$
518,572

 
14.4
 %
 
$
1,130,800

 
$
1,000,599

 
13.0
 %
Other
 
82,125

 
76,018

 
8.0
 %
 
158,720

 
145,171

 
9.3
 %
Total
 
675,335

 
594,590

 
13.6
 %
 
1,289,520

 
1,145,770

 
12.5
 %
Operating Expenses:
 
 

 
 

 
 
 
 
 
 
 
 
Aircraft fuel, including taxes and delivery
 
102,774

 
83,798

 
22.6
 %
 
206,312

 
153,698

 
34.2
 %
Wages and benefits
 
154,660

 
130,801

 
18.2
 %
 
305,713

 
259,362

 
17.9
 %
Aircraft rent
 
34,553

 
30,066

 
14.9
 %
 
67,688

 
59,454

 
13.8
 %
Maintenance, materials and repairs
 
52,566

 
54,585

 
(3.7
)%
 
111,970

 
115,089

 
(2.7
)%
Aircraft and passenger servicing
 
34,751

 
30,723

 
13.1
 %
 
68,209

 
59,274

 
15.1
 %
Commissions and other selling
 
32,557

 
31,425

 
3.6
 %
 
65,738

 
64,456

 
2.0
 %
Depreciation and amortization
 
27,872

 
26,988

 
3.3
 %
 
55,340

 
54,134

 
2.2
 %
Other rentals and landing fees
 
27,438

 
24,978

 
9.8
 %
 
55,774

 
49,412

 
12.9
 %
Purchased services
 
28,055

 
24,543

 
14.3
 %
 
54,692

 
47,275

 
15.7
 %
Special items
 
4,771

 

 
 %
 
23,450

 

 
 %
Other
 
32,789

 
32,731

 
0.2
 %
 
64,791

 
62,714

 
3.3
 %
Total
 
532,786

 
470,638

 
13.2
 %
 
1,079,677

 
924,868

 
16.7
 %
Operating Income
 
142,549

 
123,952

 
15.0
 %
 
209,843

 
220,902

 
(5.0
)%
Nonoperating Income (Expense):
 
 

 
 

 
 
 
 
 
 
 
 
Interest expense and amortization of debt discounts and issuance costs
 
(7,711
)
 
(8,910
)
 
 
 
(15,714
)
 
(19,914
)
 
 
Interest income
 
1,467

 
1,087

 
 
 
2,619

 
1,931

 
 
Capitalized interest
 
2,082

 
463

 
 
 
3,842

 
688

 
 
Gains (losses) on fuel derivatives
 
(4,712
)
 
21,087

 
 
 
(13,510
)
 
19,022

 
 
Loss on extinguishment of debt
 

 
(6,643
)
 
 
 

 
(9,993
)
 
 
Other components of net periodic benefit cost
 
(4,750
)
 
(5,082
)
 
 
 
(9,501
)
 
(10,164
)
 
 
Other, net
 
433

 
2,686

 
 
 
3,261

 
9,272

 
 
Total
 
(13,191
)
 
4,688

 
 
 
(29,003
)
 
(9,158
)
 
 
Income Before Income Taxes
 
129,358

 
128,640

 
 
 
180,840

 
211,744

 
 
Income tax expense
 
48,925

 
49,070

 
 
 
63,495

 
80,708

 
 
Net Income
 
$
80,433

 
$
79,570

 
 
 
$
117,345

 
$
131,036

 
 
Net Income Per Share
 
 

 
 

 
 
 
 
 
 
 
 
Basic
 
$
1.50

 
$
1.48

 
 
 
$
2.19

 
$
2.45

 
 
Diluted
 
$
1.49

 
$
1.48

 
 
 
$
2.18

 
$
2.43

 
 
Weighted Average Number of Common Stock Shares Outstanding:
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
53,626

 
53,634

 
 
 
53,595

 
53,574

 
 
Diluted
 
53,914

 
53,853

 
 
 
53,948

 
53,833

 
 

(a) The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. Accounting



Standard Update 2017-07 (ASU 2017-07) is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption only permitted for the Company in the first quarter of 2017, provided all provisions of the ASU are adopted. The Company early adopted this standard during the first quarter of 2017. The adoption of ASU 2017-07 resulted in a reclassification of $5.1 million and $10.2 million from wages and benefits to other components of net periodic benefit cost on the Company's consolidated statement of operations for the three months and six months ended June 30, 2016, respectively.




Table 2.
Hawaiian Holdings, Inc.
Selected Statistical Data (unaudited)
 
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2017
 
2016
 
% Change
 
2017
 
2016
 
% Change
 
 
(in thousands, except as otherwise indicated)
 
(in thousands, except as otherwise indicated)
Scheduled Operations (a) :
 
 

 
 

 
 
 
 
 
 
 
 
Revenue passengers flown
 
2,885

 
2,755

 
4.7
%
 
5,588

 
5,401

 
3.5
%
Revenue passenger miles (RPM)
 
4,099,122

 
3,846,966

 
6.6
%
 
7,896,847

 
7,388,033

 
6.9
%
Available seat miles (ASM)
 
4,735,335

 
4,550,964

 
4.1
%
 
9,256,433

 
8,917,956

 
3.8
%
Passenger revenue per RPM (Yield)
 

14.47
¢
 

13.48
¢
 
7.3
%
 

14.32
¢
 

13.54
¢
 
5.8
%
Passenger load factor (RPM/ASM)
 
86.6
%
 
84.5
%
 
2.1 pt.

 
85.3 pt.

 
82.8 pt.

 
2.5 pt.

Passenger revenue per ASM (PRASM)
 

12.53
¢
 

11.39
¢
 
10.0
%
 

12.22
¢
 

11.22
¢
 
8.9
%
Total Operations (a) :
 
 

 
 

 
 
 
 
 
 
 
 
Revenue passengers flown
 
2,886

 
2,756

 
4.7
%
 
5,590

 
5,403

 
3.5
%
Revenue passenger miles (RPM)
 
4,099,261

 
3,847,065

 
6.6
%
 
7,897,754

 
7,389,122

 
6.9
%
Available seat miles (ASM)
 
4,735,491

 
4,551,094

 
4.1
%
 
9,257,844

 
8,919,188

 
3.8
%
Operating revenue per ASM (RASM)
 

14.26
¢
 

13.06
¢
 
9.2
%
 

13.93
¢
 

12.85
¢
 
8.4
%
Operating cost per ASM (CASM)
 

11.25
¢
 

10.34
¢
 
8.8
%
 

11.66
¢
 

10.37
¢
 
12.4
%
CASM excluding aircraft fuel and special items (b)
 

8.98
¢
 

8.50
¢
 
5.6
%
 

9.18
¢
 

8.65
¢
 
6.1
%
Aircraft fuel expense per ASM (c)
 

2.17
¢
 

1.84
¢
 
17.9
%
 

2.23
¢
 

1.72
¢
 
29.7
%
Revenue block hours operated
 
47,569

 
44,367

 
7.2
%
 
92,574

 
87,093

 
6.3
%
Gallons of jet fuel consumed
 
64,506

 
59,697

 
8.1
%
 
126,244

 
117,553

 
7.4
%
Average cost per gallon of jet fuel (actual) (c)
 
$
1.59

 
$
1.40

 
13.6
%
 
$
1.63

 
$
1.31

 
24.4
%
Economic fuel cost per gallon (c)(d)
 
$
1.62

 
$
1.55

 
4.5
%
 
$
1.63

 
$
1.54

 
5.8
%
 
(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 and special items.
(c)
Includes applicable taxes and fees.
(d)
See Table 3 for a reconciliation of GAAP 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 a good 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 losses/(gains) 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,
 
 
2017
 
2016
 
% Change
 
2017
 
2016
 
% Change
 
 
(in thousands, except per-gallon amounts)
 
 
 
(in thousands, except per-gallon amounts)
 
 
Aircraft fuel expense, including taxes and delivery
 
$
102,774

 
$
83,798

 
22.6
 %
 
$
206,312

 
$
153,698

 
34.2
 %
Realized losses (gains) on settlement of fuel derivative contracts
 
1,902

 
8,799

 
(78.4
)%
 
(687
)
 
27,824

 
(102.5
)%
Economic fuel expense
 
$
104,676

 
$
92,597

 
13.0
 %
 
$
205,625

 
$
181,522

 
13.3
 %
Fuel gallons consumed
 
64,506

 
59,697

 
8.1
 %
 
126,244

 
117,553

 
7.4
 %
Economic fuel costs per gallon
 
$
1.62

 
$
1.55

 
4.5
 %
 
$
1.63

 
$
1.54

 
5.8
 %


 
 
Estimated three months ending
September 30, 2017
 
 Estimated full year ending
December 31, 2017
 
 
(in thousands, except per-gallon amounts)
 
(in thousands, except per-gallon amounts)
Aircraft fuel expense, including taxes and delivery
 
$
100,442

to
$
109,270

 
$
390,910

to
$
428,504

Realized losses on settlement of fuel derivative contracts
 
3,200

 
3,200

 
4,500

 
4,500

Economic fuel expense
 
$
103,642

to
$
112,470

 
$
395,410

to
$
433,004

Fuel gallons consumed
 
66,866

to
68,164

 
255,103

to
262,427

Economic fuel costs per gallon
 
$
1.55

to
$
1.65

 
$
1.55

to
$
1.65


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. The Company believes that excluding the impact of these derivative adjustments helps investors 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 help investors analyze the Company's operational performance and compare its results to other airlines in the periods presented below.




The collective bargaining charge related to (1) a one-time payment to reduce the future 401K employer contribution for certain pilot groups, and (2) a one-time true up of the pilot vacation accrual at the new negotiated contract rates. The loss on sale of aircraft was a result of a sale-leaseback transaction covering three Boeing 767 aircraft as part of the planned exit from its 767 fleet. These one-time charges are considered special items by the Company and are not expected to represent ongoing expenses. The Company believes that excluding such special items helps investors analyze the Company's operational performance and compare its results to other airlines in the periods presented below.

 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2017
 
2016
 
2017
 
2016
 
 
Total
 
Diluted Per Share
 
Total
 
Diluted Per Share
 
Total
 
Diluted Per Share
 
Total
 
Diluted Per Share
GAAP net income, as reported
 
$
80,433

 
$
1.49

 
$
79,570

 
$
1.48

 
$
117,345

 
$
2.18

 
$
131,036

 
$
2.43

Add: changes in fair value of derivative contracts
 
2,810

 
0.05

 
(29,886
)
 
(0.55
)
 
14,197

 
0.26

 
(46,846
)
 
(0.87
)
Add: loss on extinguishment of debt
 

 

 
6,643

 
0.12

 

 

 
9,993

 
0.19

Add: special items
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss on sale of aircraft
 
4,771

 
0.09

 

 

 
4,771

 
0.09

 

 

Collective bargaining charge
 

 

 

 

 
18,679

 
0.34

 

 

Total special items
 
4,771

 
0.09

 

 

 
23,450

 
0.43

 

 

Add: tax effect of adjustments
 
(2,764
)
 
(0.05
)
 
8,832

 
0.16

 
(13,764
)
 
(0.26
)
 
14,004

 
0.26

Adjusted net income
 
$
85,250

 
$
1.58

 
$
65,159

 
$
1.21

 
$
141,228

 
$
2.61

 
$
108,187

 
$
2.01


 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2017
 
2016
 
2017
 
2016 (a)
Income Before Income Taxes, as reported
 
$
129,358

 
$
128,640

 
$
180,840

 
$
211,744

Add: changes in fair value of derivative contracts
 
2,810

 
(29,886
)
 
14,197

 
(46,846
)
Add: loss on extinguishment of debt
 

 
6,643

 

 
9,993

Add: special items
 
 
 
 
 
 
 
 
Loss on sale of aircraft
 
4,771

 

 
4,771

 

Collective bargaining charge
 

 

 
18,679

 

Total special items
 
4,771

 

 
23,450

 

Adjusted Income Before Income Taxes
 
136,939

 
105,397

 
218,487

 
174,891


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 and special items. These amounts are included in CASM, but for internal purposes the Company consistently uses cost metrics that exclude fuel and special items (if applicable) to measure and monitor its costs.



 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2017
 
2016 (a)
 
2017
 
2016 (a)
GAAP operating expenses
 
$
532,786

 
$
470,638

 
$
1,079,677

 
$
924,868

Less: aircraft fuel, including taxes and delivery
 
(102,774
)
 
(83,798
)
 
(206,312
)
 
(153,698
)
Loss on sale of aircraft
 
$
(4,771
)
 
$

 
$
(4,771
)
 
$

Collective bargaining charge
 
$

 
$

 
$
(18,679
)
 
$

Less: special items
 
$
(4,771
)
 
$

 
$
(23,450
)
 
$

Adjusted operating expenses - excluding aircraft fuel and special items
 
$
425,241

 
$
386,840

 
$
849,915

 
$
771,170

Available Seat Miles
 
4,735,491

 
4,551,094

 
9,257,844

 
8,919,188

CASM - GAAP
 

11.25
¢
 

10.34
¢
 

11.66
¢
 

10.37
¢
Less: aircraft fuel
 
(2.17
)
 
(1.84
)
 
(2.23
)
 
(1.72
)
Less: special items
 
 
 
 
 
 
 
 
Loss on sale of aircraft
 
(0.10
)
 

 
(0.05
)
 

Collective bargaining charge
 

 

 
(0.20
)
 

Total special items
 
(0.10
)
 

 
(0.25
)
 

CASM - excluding aircraft fuel and special items
 

8.98
¢
 

8.50
¢
 

9.18
¢
 

8.65
¢

(a) The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. Accounting Standard Update 2017-07 (ASU 2017-07) is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption only permitted for the Company in the first quarter of 2017, provided all provisions of the ASU are adopted. The Company early adopted this standard during the first quarter of 2017. The adoption of ASU 2017-07 resulted in a reclassification of $5.1 million and $10.2 million from wages and benefits to other components of net periodic benefit cost on the Company's consolidated statement of operations for the three months and six months ended June 30, 2016, respectively.

 
 
Estimated three months ending
September 30, 2017
 
Estimated full year ending
December 31, 2017
GAAP operating expenses
 
$
582,372

to
$
611,953

 
$
2,154,194

to
$
2,291,562

Less: aircraft fuel, including taxes and delivery
 
(100,442
)
to
(109,270
)
 
(390,910
)
to
(428,504
)
Less: special items
 
 
 
 
 
 
 
 
Loss on sale of aircraft
 

 

 
(4,771
)
 
(4,771
)
Collective bargaining charge
 

 

 
(18,679
)
 
(18,679
)
Post retirement benefits related (a)
 
(54,000
)
 
(54,000
)
 
(54,000
)
 
(54,000
)
Adjusted operating expenses - excluding aircraft fuel and special items
 
$
427,930

to
$
448,683

 
$
1,685,834

to
$
1,785,608

Available Seat Miles
 
4,919,242

to
5,017,137

 
18,752,329

to
19,303,868

CASM - GAAP
 

11.84
 ¢
to

12.20
 ¢
 

11.49
 ¢
to

11.87
 ¢
Less: aircraft fuel
 
(2.04
)
to
(2.18
)
 
(2.08
)
to
(2.22
)
Less: special items
 


 


 


 


Loss on sale of aircraft
 

to

 
(0.03
)
to
(0.02
)
Collective bargaining charge
 

to

 
(0.10
)
to
(0.10
)
Post retirement benefits related (a)
 
(1.10
)
to
(1.08
)
 
(0.29
)
to
(0.28
)
Total special items
 

(1.10
 

(1.08
 

(0.42
 

(0.40
CASM - excluding aircraft fuel and special items
 

8.70
 ¢
to

8.94
 ¢
 

8.99
 ¢
to

9.25
 ¢
(a) The Company expects to incur charges related to the termination of its Salaried & IAM Merged Pension Plan and the settlement of a portion of its outstanding other post-retirement medical plan obligation with its pilots, which are considered special items by the Company and are not expected to represent ongoing expenses to the



Company. Excluding such special items helps investors analyze the Company's core operational performance and more readily compare its results to other airlines in the periods presented above.

Pre-tax margin
The Company excludes unrealized gains from fuel derivative contracts, losses on extinguishment of debt, and special items from pre-tax margin for the same reasons as described above.
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2017
 
2016
 
2017
 
2016
Pre-Tax Margin, as reported
 
19.2
%
 
21.6
 %
 
14.0
%
 
18.5
 %
Add: changes in fair value of derivative contracts
 
0.4
%
 
(5.0
)%
 
1.1
%
 
(4.1
)%
Add: loss on extinguishment of debt
 
%
 
1.1
 %
 
%
 
0.9
 %
Add: special items
 
 
 
 
 
 
 
 
Loss on sale of aircraft
 
0.7
%
 
 %
 
0.4
%
 
 %
Collective bargaining charge
 
%
 
 %
 
1.4
%
 
 %
Total special items
 
0.7
%
 
 %
 
1.8
%
 
 %
Adjusted Pre-Tax Margin
 
20.3
%
 
17.7
 %
 
16.9
%
 
15.3
 %

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, losses on extinguishment of debt, and special items 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, 2017
Debt and capital lease obligations
 
$
527,511

Plus: Aircraft leases capitalized at 7x last twelve months' aircraft rent
 
929,593

Adjusted debt and capital lease obligations
 
$
1,457,104

 
 
 
EBITDAR:
 
 
Income Before Income Taxes
 
$
362,560

Add back:
 
 
Interest and amortization of debt discounts and issuance costs
 
32,412

Depreciation and amortization
 
109,334

Aircraft rent
 
132,799

EBITDAR
 
$
637,105

 
 
 
Adjustments:
 
 
Add: changes in fair value of derivative contracts
 
13,365

Add: loss on extinguishment of debt
 
480

Add: special items
 
132,592

Adjusted EBITDAR
 
$
783,542

 
 
 
Leverage Ratio
 
1.9
x