Condensed Consolidating Financial Information

9 Months Ended

Sep. 30, 2014

Condensed Consolidating Financial Information

Condensed Consolidating Financial Information

Condensed Consolidating Financial Information

The following condensed consolidating financial information is presented in accordance with Regulation S-X paragraph 210.3-10 because, in connection with the issuance by two pass-through trusts formed by Hawaiian (which is also referred to in this Note 12 as Subsidiary Issuer / Guarantor) of pass-through certificates, as discussed in Note 10, the Company (which is also referred to in this Note 12 as Parent Issuer / Guarantor), is fully and unconditionally guaranteeing the payment obligations of Hawaiian, which is a 100% owned subsidiary of the Company, under equipment notes issued by Hawaiian to purchase new aircraft, and will fully and unconditionally guarantee those obligations in connection with the future issuance of equipment notes by Hawaiian.

Condensed consolidating financial statements are presented in the following tables:

Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)

Three months ended September 30, 2014

	Parent Issuer / Guarantor			Subsidiary Issuer / Guarantor			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
Operating Revenue	$	—		$	638,414		$	1,145		$	(97	)	$	639,462
Operating Expenses:
Aircraft fuel, including taxes and delivery	—			182,219			—			—			182,219
Wages and benefits	—			114,469			—			—			114,469
Aircraft rent	—			26,724			—			—			26,724
Maintenance materials and repairs	—			51,029			264			—			51,293
Aircraft and passenger servicing	—			31,848			—			—			31,848
Commissions and other selling	—			32,024			11			(20		)	32,015
Depreciation and amortization	—			23,654			730			—			24,384
Other rentals and landing fees	5			23,632			—			—			23,637
Other	1,246			45,291			244			(77		)	46,704
Total	1,251			530,890			1,249			(97		)	533,293
Operating Income (Loss)	(1,251		)	107,524			(104		)	—			106,169
Nonoperating Income (Expense):
Undistributed net income of subsidiaries	37,900			—			—			(37,900		)	—
Interest expense and amortization of debt discounts and issuance costs	(2,260		)	(14,844		)	—			—			(17,104		)
Interest income	47			424			—			—			471
Capitalized interest	—			1,834			—			—			1,834
Losses on fuel derivatives	—			(27,892		)	—			—			(27,892		)
Other, net	—			(5,114		)	—			—			(5,114		)
Total	35,687			(45,592		)	—			(37,900		)	(47,805		)
Income (Loss) Before Income Taxes	34,436			61,932			(104		)	(37,900		)	58,364
Income tax expense (benefit)	(1,139		)	23,928			—			—			22,789
Net Income (Loss)	$	35,575		$	38,004		$	(104	)	$	(37,900	)	$	35,575
Comprehensive Income (Loss)	$	42,610		$	45,039		$	(104	)	$	(44,935	)	$	42,610

Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)

Three months ended September 30, 2013

	Parent Issuer / Guarantor			Subsidiary Issuer / Guarantor			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
Operating Revenue	$	—		$	599,361		$	(3	)	$	(60	)	$	599,298
Operating Expenses:
Aircraft fuel, including taxes and delivery	—			181,334			—			—			181,334
Wages and benefits	—			112,150			—			—			112,150
Aircraft rent	—			27,575			—			—			27,575
Maintenance materials and repairs	—			51,705			—			—			51,705
Aircraft and passenger servicing	—			31,080			—			—			31,080
Commissions and other selling	—			32,302			—			(14		)	32,288
Depreciation and amortization	—			22,092			—			—			22,092
Other rentals and landing fees	—			21,996			—			—			21,996
Other	1,072			43,530			88			(46		)	44,644
Total	1,072			523,764			88			(60		)	524,864
Operating Income (Loss)	(1,072		)	75,597			(91		)	—			74,434
Nonoperating Income (Expense):
Undistributed net income of subsidiaries	42,686			—			—			(42,686		)	—
Interest expense and amortization of debt discounts and issuance costs	(2,207		)	(11,272		)	—			—			(13,479		)
Interest income	27			146			—			—			173
Capitalized interest	—			3,005			—			—			3,005
Gains on fuel derivatives	—			2,536			—			—			2,536
Other, net	—			749			—			—			749
Total	40,506			(4,836		)	—			(42,686		)	(7,016		)
Income (Loss) Before Income Taxes	39,434			70,761			(91		)	(42,686		)	67,418
Income tax expense (benefit)	(1,170		)	27,984			—			—			26,814
Net Income (Loss)	$	40,604		$	42,777		$	(91	)	$	(42,686	)	$	40,604
Comprehensive Income (Loss)	$	37,520		$	39,693		$	(91	)	$	(39,602	)	$	37,520

Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)

Nine months ended September 30, 2014

	Parent Issuer / Guarantor			Subsidiary Issuer / Guarantor			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
Operating Revenue	$	—		$	1,737,520		$	2,801		$	(281	)	$	1,740,040
Operating Expenses:
Aircraft fuel, including taxes and delivery	—			527,497			—			—			527,497
Wages and benefits	—			334,441			—			—			334,441
Aircraft rent	—			79,098			—			—			79,098
Maintenance materials and repairs	—			167,499			503			—			168,002
Aircraft and passenger servicing	—			92,929			—			—			92,929
Commissions and other selling	—			94,149			43			(69		)	94,123
Depreciation and amortization	—			69,496			1,464			—			70,960
Other rentals and landing fees	5			65,850			—			—			65,855
Other	4,015			134,729			803			(212		)	139,335
Total	4,020			1,565,688			2,813			(281		)	1,572,240
Operating Income (Loss)	(4,020		)	171,832			(12		)	—			167,800
Nonoperating Income (Expense):
Undistributed net income of subsidiaries	64,787			—			—			(64,787		)	—
Interest expense and amortization of debt discounts and issuance costs	(6,650		)	(41,461		)	—			—			(48,111		)
Interest income	126			962			—			—			1,088
Capitalized interest	—			6,584			—			—			6,584
Losses on fuel derivatives	—			(28,506		)	—			—			(28,506		)
Other, net	—			(3,804		)	—			—			(3,804		)
Total	58,263			(66,225		)	—			(64,787		)	(72,749		)
Income (Loss) Before Income Taxes	54,243			105,607			(12		)	(64,787		)	95,051
Income tax expense (benefit)	(3,584		)	40,808			—			—			37,224
Net Income (Loss)	$	57,827		$	64,799		$	(12	)	$	(64,787	)	$	57,827
Comprehensive Income (Loss)	$	56,435		$	63,407		$	(12	)	$	(63,395	)	$	56,435

Condensed Consolidating Statements of Operations and Comprehensive Income

Nine months ended September 30, 2013

	Parent Issuer / Guarantor			Subsidiary Issuer / Guarantor			Non-Guarantor Subsidiaries		Eliminations			Consolidated
	(in thousands)
Operating Revenue	$	—		$	1,623,602		$	634	$	(256	)	$	1,623,980
Operating Expenses:
Aircraft fuel, including taxes and delivery	—			525,046			—		—			525,046
Wages and benefits	—			318,269			—		—			318,269
Aircraft rent	—			81,879			—		—			81,879
Maintenance materials and repairs	—			160,000			—		—			160,000
Aircraft and passenger servicing	—			89,367			—		—			89,367
Commissions and other selling	—			98,333			—		(48		)	98,285
Depreciation and amortization	—			60,993			—		—			60,993
Other rentals and landing fees	—			60,773			—		—			60,773
Other	6,557			122,837			283		(208		)	129,469
Total	6,557			1,517,497			283		(256		)	1,524,081
Operating Income (Loss)	(6,557		)	106,105			351		—			99,899
Nonoperating Income (Expense):
Undistributed net income of subsidiaries	43,310			—			—		(43,310		)	—
Interest expense and amortization of debt discounts and issuance costs	(6,475		)	(30,544		)	—		—			(37,019		)
Interest income	91			335			—		—			426
Capitalized interest	—			9,336			—		—			9,336
Losses on fuel derivatives	—			(10,931		)	—		—			(10,931		)
Other, net	—			(3,457		)	—		—			(3,457		)
Total	36,926			(35,261		)	—		(43,310		)	(41,645		)
Income Before Income Taxes	30,369			70,844			351		(43,310		)	58,254
Income tax expense (benefit)	(4,406		)	27,885			—		—			23,479
Net Income (Loss)	$	34,775		$	42,959		$	351	$	(43,310	)	$	34,775
Comprehensive Income	$	41,113		$	49,297		$	351	$	(49,648	)	$	41,113

Condensed Consolidating Balance Sheets

September 30, 2014

	Parent Issuer / Guarantor		Subsidiary Issuer / Guarantor			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	48,982	$	275,773		$	3,500		$	—		$	328,255
Restricted cash	—		6,566			—			—			6,566
Short-term investments	—		253,300			—			—			253,300
Accounts receivable, net	236		82,743			51			(128		)	82,902
Spare parts and supplies, net	—		19,359			928			—			20,287
Deferred tax assets, net	—		17,325			—			—			17,325
Prepaid expenses and other	3		47,557			117			—			47,677
Total	49,221		702,623			4,596			(128		)	756,312
Property and equipment at cost	—		1,941,036			34,669			—			1,975,705
Less accumulated depreciation and amortization	—		(343,263		)	(1,464		)	—			(344,727		)
Property and equipment, net	—		1,597,773			33,205			—			1,630,978
Long-term prepayments and other	777		98,546			—			—			99,323
Deferred tax assets, net	18,462		—			—			(18,462		)	—
Goodwill and other intangible assets, net	—		128,623			—			—			128,623
Intercompany receivable	58,518		—			—			(58,518		)	—
Investment in consolidated subsidiaries	414,702		—			—			(414,702		)	—
TOTAL ASSETS	$	541,680	$	2,527,565		$	37,801		$	(491,810	)	$	2,615,236
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	596	$	77,565		$	317		$	(128	)	$	78,350
Air traffic liability	—		485,624			1,901			—			487,525
Other accrued liabilities	420		114,152			145			—			114,717
Current maturities of long-term debt, less discount, and capital lease obligations	79,579		91,475			—			—			171,054
Total	80,595		768,816			2,363			(128		)	851,646
Long-term debt and capital lease obligations	—		885,486			—			—			885,486
Intercompany payable	—		58,518			—			(58,518		)	—
Other liabilities and deferred credits:												0
Accumulated pension and other postretirement benefit obligations	—		268,703			—			—			268,703
Other liabilities and deferred credits	326		69,053			750			—			70,129
Deferred tax liabilities, net	—		96,975			—			(18,462		)	78,513
Total	326		434,731			750			(18,462		)	417,345
Shareholders’ equity	460,759		380,014			34,688			(414,702		)	460,759
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	541,680	$	2,527,565		$	37,801		$	(491,810	)	$	2,615,236

Condensed Consolidating Balance Sheets

December 31, 2013

	Parent Issuer / Guarantor		Subsidiary Issuer / Guarantor			Non-Guarantor Subsidiaries		Eliminations			Consolidated
	(in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	84,797	$	333,663		$	4,924	$	—		$	423,384
Restricted cash	—		19,434			—		—			19,434
Accounts receivable, net	1,192		73,241			31		(219		)	74,245
Spare parts and supplies, net	—		19,767			—		—			19,767
Deferred tax assets, net	—		17,325			—		—			17,325
Prepaid expenses and other	—		51,613			39		—			51,652
Total	85,989		515,043			4,994		(219		)	605,807
Property and equipment at cost	—		1,629,517			31,917		—			1,661,434
Less accumulated depreciation and amortization	—		(327,102		)	—		—			(327,102		)
Property and equipment, net	—		1,302,415			31,917		—			1,334,332
Long-term prepayments and other	1,171		90,782			—		—			91,953
Restricted cash	—		1,566			—		—			1,566
Deferred tax assets, net	14,767		—			—		(14,767		)	—
Goodwill and other intangible assets, net	—		130,603			—		—			130,603
Intercompany receivable	25,286		—			—		(25,286		)	—
Investment in consolidated subsidiaries	348,040		—			—		(348,040		)	—
TOTAL ASSETS	$	475,253	$	2,040,409		$	36,911	$	(388,312	)	$	2,164,261
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	532	$	88,990		$	484	$	(219	)	$	89,787
Air traffic liability	—		407,359			1,727		—			409,086
Other accrued liabilities	1,307		96,264			—		—			97,571
Current maturities of long-term debt and capital lease obligations	—		62,187			—		—			62,187
Total	1,839		654,800			2,211		(219		)	658,631
Long-term debt, less discount, and capital lease obligations	76,550		667,736			—		—			744,286
Intercompany payable	—		25,286			—		(25,286		)	—
Other liabilities and deferred credits:											0
Accumulated pension and other postretirement benefit obligations	—		264,106			—		—			264,106
Other liabilities and deferred credits	—		59,424			—		—			59,424
Deferred tax liabilities, net	—		55,717			—		(14,767		)	40,950
Total	—		379,247			—		(14,767		)	364,480
Shareholders’ equity	396,864		313,340			34,700		(348,040		)	396,864
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	475,253	$	2,040,409		$	36,911	$	(388,312	)	$	2,164,261

Condensed Consolidating Statements of Cash Flows

Nine months ended September 30, 2014

	Parent Issuer / Guarantor			Subsidiary Issuer / Guarantor			Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
Net Cash Provided By (Used In) Operating Activities	$	(6,859	)	$	257,694		$	1,328		$	—		$	252,163
Cash Flows From Investing Activities:
Net payments to subsidiaries	(34,443		)	—			—			34,443			—
Additions to property and equipment, including pre-delivery deposits	—			(358,538		)	(2,752		)	—			(361,290		)
Net proceeds from disposition of property and equipment	—			978			—			—			978
Purchases of investments	—			(346,010		)	—			—			(346,010		)
Sales of investments	—			92,103			—			—			92,103
Net cash used in investing activities	(34,443		)	(611,467		)	(2,752		)	34,443			(614,219		)
Cash Flows From Financing Activities:
Proceeds from exercise of stock options	5,487			—			—			—			5,487
Long-term borrowings	—			293,430			—			—			293,430
Repayments of long-term debt and capital lease obligations	—			(46,392		)	—			—			(46,392		)
Debt issuance costs	—			(32		)	—			—			(32		)
Net payments from parent company	—			34,443			—			(34,443		)	—
Change in restricted cash	—			14,434			—			—			14,434
Net cash provided by financing activities	5,487			295,883			—			(34,443		)	266,927
Net decrease in cash and cash equivalents	(35,815		)	(57,890		)	(1,424		)	—			(95,129		)
Cash and cash equivalents - Beginning of Period	84,797			333,663			4,924			—			423,384
Cash and cash equivalents - End of Period	$	48,982		$	275,773		$	3,500		$	—		$	328,255

Condensed Consolidating Statements of Cash Flows

Nine months ended September 30, 2013

	Parent Issuer / Guarantor			Subsidiary Issuer / Guarantor			Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
Net Cash Provided By (Used In) Operating Activities	$	(7,244	)	$	215,589		$	(870	)	$	—		$	207,475
Cash Flows From Investing Activities:
Net payments from subsidiaries	5,553			—			—			(5,553		)	—
Additions to property and equipment, including pre-delivery deposits	—			(220,272		)	(12,445		)	—			(232,717		)
Net cash provided by (used in) investing activities	5,553			(220,272		)	(12,445		)	(5,553		)	(232,717		)
Cash Flows From Financing Activities:
Proceeds from exercise of stock options	2,376			—			—			—			2,376
Long-term borrowings	—			132,000			—			—			132,000
Repayments of long-term debt and capital lease obligations	—			(45,200		)	—			—			(45,200		)
Debt issuance costs	—			(12,416		)	—			—			(12,416		)
Net payments to parent company	—			(5,553		)	—			5,553			—
Change in restricted cash	—			(16,000		)	—			—			(16,000		)
Net cash provided by financing activities	2,376			52,831			—			5,553			60,760
Net increase (decrease) in cash and cash equivalents	685			48,148			(13,315		)	—			35,518
Cash and cash equivalents - Beginning of Period	83,626			303,967			18,287			—			405,880
Cash and cash equivalents - End of Period	$	84,311		$	352,115		$	4,972		$	—		$	441,398

Long-Term Debt

The long-term debt included in the Parent Issuer / Guarantor column represents the Convertible Notes described in Note 7 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

Income Taxes

The income tax expense (benefit) is presented as if each entity that is part of the consolidated group files a separate return.