Third Quarter 2008 Financial Highlights: -- 70th consecutive quarter of profitability, excluding special items -- Record quarterly revenues of $2.9 billion, up 11.7 percent from third quarter 2007 -- Net income, excluding special items, of $69 million, down 55.8 percent -- Net income per diluted share, excluding special items, of $.09, down 57.1 percent -- Cash settlement gains of $448 million from fuel contracts reflected in net income
Under SFAS 133, a portion of the Company's fuel derivative portfolio is marked-to-market through the income statement if the requirements for hedge accounting have not been met, which can create significant volatility in the Company's financial statements. For contracts settling in future periods, these derivative contracts generally result in recording unrealized gains during periods of rising fuel costs; conversely, during periods of decreasing fuel prices, these contracts generally result in recording unrealized losses. As a result, the $247 million in charges for the third quarter 2008 essentially reversed a large portion of mark-to-market gains recognized in prior periods. These charges led to the net loss reported for third quarter 2008 under generally accepted accounting principles (GAAP). However, the actual cash settlement gains realized in third quarter 2008 from the Company's hedging activities were $448 million, compared to $189 million in third quarter 2007.
The Company views its fuel derivative contracts as an integral component of managing its costs related to jet fuel purchases. Therefore, the Company believes it is more meaningful to evaluate its financial performance including the impact of the net cash settlements each quarter and excluding the mark-to- market adjustments for unrealized gains and losses recorded in the income statement for contracts settling in future periods.