Alaska Airlines and Horizon Air 2012 Annual Report Download - page 123

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CONSOLIDATED NONOPERATING INCOME
(EXPENSE)
Net nonoperating expense decreased $37 million
from 2011. This is due to lower interest expense
of $13 million on lower average outstanding debt
balances and additional capitalized interest due
to higher levels of aircraft purchase deposits and
capital expenditures. Additionally, we incurred
pre-payment penalties of $8 million and an
impairment charge of $6 million on an owned
aircraft that was leased to another carrier that
filed for bankruptcy protection in the prior year.
The decrease was partially offset by lower
interest income earned on our marketable
securities portfolio.
CONSOLIDATED INCOME TAX EXPENSE
Our effective income tax rate for 2012 was
38.5% compared to 37.9% for 2011. The
difference between the effective tax rates and
our statutory tax rate of approximately 37.5% is
due primarily to miscellaneous non-deductible
expenses.
Our effective tax rate can vary significantly
between quarters and for the full year, depending
on the magnitude of non-deductible expenses in
proportion to pretax results.
2011 COMPARED WITH 2010
Our consolidated net income for 2011 was $245
million, or $3.33 per diluted share, compared to
net income of $251 million, or $3.41 per diluted
share, in 2010. Significant items impacting the
comparability between the periods were as
follows:
• Both periods included adjustments to reflect
the timing of net unrealized mark-to-market
gains or losses related to our fuel hedge
positions. For 2011, we recognized net
mark-to-market losses of $30 million ($18
million after tax, or $0.26 per share)
compared to losses of $5 million ($4 million
after tax, or $0.05 per share) in 2010.
• 2011 included Horizon fleet transition costs
of $39 million ($24 million after tax, of
$0.33 per share) compared to $13 million
($8 million, or $0.11 per share) in 2010.
Excluding the mark-to-market adjustments and
other special charges, our adjusted consolidated
net income for 2011 was $287 million, or $3.92
per diluted share, compared to an adjusted
consolidated net income of $263 million, or
$3.57 per share, in 2010.
Year Ended December 31,
2011 2010
(in millions, except
per share amounts) Dollars
Diluted
EPS Dollars
Diluted
EPS
Net income and
diluted EPS as
reported ....... $245 $3.33 $251 $3.41
Fleet transition
costs, net of
tax ........... 24 0.33 8 0.11
Mark-to-market fuel
hedge
adjustments, net
oftax ......... 18 0.26 4 0.05
Non-GAAP adjusted
income and per
share
amounts ....... $287 $3.92 $263 $3.57
OPERATING REVENUES
Total operating revenues increased $486 million,
or 13%, during 2011 compared to the same
period in 2010. The changes are summarized in
the following table:
Year Ended December 31,
(in millions) 2011 2010
%
Change
Passenger
Mainline......... $2,995 $2,595 15
Regional ........ 713 671 6
Total passenger
revenue ........... $3,708 $3,266 14
Freight and mail .......... 109 106 2
Other—net .............. 501 460 9
Total operating revenues . . . $4,318 $3,832 13
Passenger Revenue—Mainline
Mainline passenger revenue for 2011 increased
by 15% on an 8.5% increase in capacity and a
6.2% increase in passenger revenue per
available seat mile (PRASM) compared to 2010.
The increase in capacity was driven by the
annualization of new routes added in 2010 and
new routes in 2011, most of which was Hawaii.
35
ŠForm 10-K