Spirit Airlines Announces First Quarter 2015 Results; Adjusted Net Income Increases 87.1 Percent to $70.7 Million and Pre-Tax Margin Increases 900 Basis Points to 22.7 Percent

Company Release - 4/29/2015 6:30 AM ET

MIRAMAR, Fla., April 29, 2015 (GLOBE NEWSWIRE) -- Spirit Airlines, Inc. (Nasdaq:SAVE) today reported first quarter 2015 financial results.

  • Adjusted net income for the first quarter 2015 increased 87.1 percent to $70.7 million ($0.96 per diluted share) compared to the first quarter 20141. GAAP net income for the first quarter 2015 increased 83.0 percent year over year to $69.0 million ($0.94 per diluted share).
  • Adjusted pre-tax margin for the first quarter 2015 was 22.7 percent, up 900 basis points year over year1. On a GAAP basis, pre-tax margin for the first quarter 2015 was 22.1 percent.
  • Spirit ended the first quarter 2015 with an unrestricted cash and cash equivalents balance of $741.6 million.
  • Spirit's return on invested capital (before taxes and excluding special items) for the twelve months ended March 31, 2015 was 30.2 percent2.

"I want to thank our team members for delivering strong first quarter operational and financial performance while continuing to execute on our growth plan. We've announced 38 of the new routes to begin in 2015 and, over the last two fiscal quarters, we have added 12 new aircraft to our fleet all while improving our on-time performance and maintaining our high degree of reliability," said Ben Baldanza, Spirit's Chief Executive Officer. "Our consistent, reliable operational performance, solid track record in successfully launching new markets, and continued strong financial performance position us well for the year ahead."

Revenue Performance

For the first quarter 2015, Spirit's total operating revenue was $493.4 million, an increase of 12.6 percent compared to the first quarter 2014, driven by an increase in flight volume.

Total revenue per available seat mile ("RASM") for the first quarter 2015 decreased 9.9 percent compared to the first quarter 2014 on a capacity increase of 25.0 percent. The RASM decrease was primarily driven by a 7.8 percent decrease in average yield due to the ramp up of our growth in new and mature markets, overall fare compression in many of our markets, and increased capacity from other carriers in the Dallas markets.

Total revenue per passenger flight segment ("PFS") for the first quarter 2015 decreased 7.6 percent year over year to $123.96, primarily driven by a 11.7 percent decrease in ticket revenue per PFS and a 2.1 percent decrease in non-ticket revenue per PFS. The decrease in non-ticket revenue per PFS was primarily attributable to lower bag revenue per PFS and the outsourcing of the Company's onboard catering to a third-party provider under a revenue share agreement.

Cost Performance

Total operating expenses for the first quarter 2015, excluding $2.7 million of special items, increased 0.9 percent to $381.4 million3. Including special items, total operating expenses increased 1.6 percent year over year to $384.1 million. Operating expenses benefited from economic fuel expense decreasing 25.4 percent, or $37.7 million, on a fuel volume increase of 21.5 percent.

Spirit reported first quarter 2015 cost per available seat mile ("ASM") excluding special items and fuel ("Adjusted CASM ex-fuel")3 of 5.72 cents, a decrease of 5.6 percent compared to the same period last year driven primarily by lower labor expense per ASM and lower aircraft rent per ASM. Labor expense per ASM in the first quarter 2015 was lower compared to the same period last year primarily due to scale benefits from overall growth and from larger gauge aircraft. The decrease in aircraft rent per ASM was driven by a change in the mix of leased (rent recorded under aircraft rent) and purchased (depreciation recorded under depreciation and amortization) aircraft.

"Once again our team executed well on improving our cost structure. Despite very disruptive winter weather which caused a number of cancelations, and nearly a one percent shorter stage length, our first quarter 2015 Adjusted CASM ex-fuel decreased 5.6 percent year-over-year. This performance sets us up nicely to meet our full year target of delivering Adjusted CASM ex-fuel down 6 to 8 percent year over year," said Ted Christie, Spirit's Chief Financial Officer.


In the first quarter 2015, Spirit took delivery of 5 new A320 aircraft, ending the quarter with 70 aircraft in its fleet.

First Quarter 2015 and Other Current Highlights

  • Maintained its commitment to offer low fares to its valued customers; average ticket revenue per PFS for the first quarter 2015 was $68.71 with total revenue per PFS of $123.96.
  • Launched service on nine new nonstop routes in the first quarter 2015.
  • Added Cleveland, Ohio as Spirit's 57th destination.
  • Improved on-time performance and maintained one of the highest completion factors in the industry.
  • Named 2015 Value Airline of the Year by Air Transport World.

Conference Call/Webcast Detail

Spirit will conduct a conference call to discuss these results today, April 29, 2015, at 10:00 a.m. ET. A live audio webcast of the conference call will be available to the public on a listen-only basis at http://ir.spirit.com. An archive of the webcast will be available under Webcasts & Presentations for 60 days.

About Spirit Airlines:

Spirit Airlines (Nasdaq:SAVE) is committed to offering the lowest total price to the places we fly, on average much lower than other airlines. Our customers start with an unbundled, stripped-down Bare Fare™ and get Frill Control™ which allows them to pay only for the options they choose - like bags, seat assignments and refreshments - the things other airlines bake right into their ticket prices. We help people save money and travel more often, create new jobs and stimulate business growth in the communities we serve. With our modern and fuel-efficient all-Airbus fleet, we operate more than 340 daily flights to 57 destinations in the U.S., Latin America and the Caribbean. Come save with us at www.spirit.com.

Investors are encouraged to read the Company's periodic and current reports filed with or furnished to the Securities and Exchange Commission, including its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, for additional information regarding the Company.

End Notes

(1) See "Reconciliation of Adjusted Net Income to GAAP Net Income" table below for more details.

(2) See "Calculation for Return on Invested Capital" table below for more details.

(3) See "Reconciliation of Adjusted Operating Expense to GAAP Operating Income" table below for more details.

Forward-Looking Statements

Statements in this release and certain oral statements made from time to time by representatives of the Company contain various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which represent the Company's expectations or beliefs concerning future events. The words "expects," "estimates," "plans," "anticipates," "indicates," "believes," "forecast," "guidance," "outlook," "may," "will," "should," "seeks," "targets" and similar expressions are intended to identify forward-looking statements. Similarly, statements that describe the Company's objectives, plans or goals, or actions the Company may take in the future, are forward-looking statements. Forward-looking statements include, without limitation, statements regarding the Company's intentions and expectations regarding revenues, cost of operations, the delivery schedule of aircraft on order, and announced new service routes. All forward-looking statements are based upon information available to the Company at the time the statement is made. The Company has no intent, nor undertakes any obligation, to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law. Forward-looking statements are subject to a number of factors that could cause the Company's actual results to differ materially from the Company's expectations, including the competitive environment in the airline industry; the Company's ability to keep costs low; changes in fuel costs; the impact of worldwide economic conditions on customer travel behavior; the Company's ability to generate non-ticket revenues; and government regulation. Additional information concerning these and other factors is contained in the Company's Securities and Exchange Commission filings, including but not limited to the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K. 

Statement of Operations
(in thousands, except per share data)
 Three Months Ended  
 March 31,Percent
Operating revenues:      
Passenger  $ 273,466  $ 253,878 7.7
Non-ticket 219,889 184,109 19.4
Total operating revenues493,355437,98712.6
Operating expenses:      
Aircraft fuel 112,426 148,471 (24.3)
Salaries, wages and benefits 89,057 76,249 16.8
Aircraft rent 52,788 46,387 13.8
Landing fees and other rents 30,546 24,016 27.2
Distribution 20,497 18,569 10.4
Maintenance, materials and repairs 19,160 17,614 8.8
Depreciation and amortization 14,863 11,121 33.6
Other operating 43,747 35,448 23.4
Loss on disposal of assets 595 150 na
Special charges 425 9 na
Total operating expenses384,104378,0341.6
Operating income109,25159,95382.2
Other (income) expense:      
Interest expense 2,812 107 na
Capitalized interest (2,533) (107) na
Interest income (134) (68) 97.1
Other expense 72 37 94.6
Total other (income) expense217(31)na
Income before income taxes109,03459,98481.8
Provision for income taxes 40,032 22,278 79.7
Net income $ 69,002  $ 37,706 83.0
Basic earnings per share $ 0.94  $ 0.52 80.8
Diluted earnings per share $ 0.94  $ 0.51 84.3
Weighted average shares, basic 73,054 72,684 0.5
Weighted average shares, diluted 73,370 73,254 0.2
Statements of Comprehensive Income
(unaudited, in thousands)
 Three Months Ended March 31,
 (in thousands)
Net income  $ 69,002  $ 37,706
Unrealized gain (loss) on interest rate derivative instruments, net of deferred taxes of $940 and $0 (1,594)
Other comprehensive income (loss) $ (1,594) $ —
Comprehensive income  $ 67,408  $ 37,706
Balance Sheets
(unaudited, in thousands)
 March 31,December 31,
Current assets:    
Cash and cash equivalents  $ 741,627  $ 632,784
Accounts receivable, net 28,097 22,685
Deferred income taxes 9,643 9,643
Prepaid expenses and other current assets 76,706 66,029
Total current assets856,073731,141
Property and equipment:    
Flight equipment 422,617 204,462
Ground and other equipment 60,860 57,012
Less accumulated depreciation (41,472) (36,099)
  442,005 225,375
Deposits on flight equipment purchase contracts 260,334 242,881
Aircraft maintenance deposits 212,786 213,147
Deferred heavy maintenance, net 115,584 123,108
Other long-term assets 69,074 66,744
Total assets $ 1,955,856  $ 1,602,396
Liabilities and shareholders' equity    
Current liabilities:    
Accounts payable  $ 13,835  $ 13,402
Air traffic liability 259,404 188,870
Current maturities of long-term debt 22,184 10,431
Other current liabilities 190,874 152,921
Total current liabilities486,297365,624
Long-term debt less current maturities 302,800 135,232
Long-term deferred income taxes 69,510 76,010
Deferred gains and other long-term liabilities 27,832 22,455
Shareholders' equity:    
Common stock 7 7
Additional paid-in-capital 536,050 526,173
Treasury stock, at cost (14,864) (3,921)
Retained earnings 550,536 481,534
Accumulated other comprehensive loss (2,312) (718)
Total shareholders' equity1,069,4171,003,075
Total liabilities and shareholders' equity $ 1,955,856  $ 1,602,396
Statement of Cash Flows
(unaudited, in thousands)
 Three Months Ended March 31,
Operating activities:    
Net income$ 69,002$ 37,706
Adjustments to reconcile net income to net cash provided by operations:    
Unrealized (gains) losses on open fuel derivative contracts 3,783
Equity-based compensation, net 1,985 2,547
Allowance for doubtful accounts (recoveries) 31 (13)
Amortization of deferred gains and losses 164 (89)
Depreciation and amortization 14,863 11,121
Deferred income tax expense (benefit) (5,560) 410
Loss on disposal of assets 595 150
Capitalized interest (2,533) (107)
Changes in operating assets and liabilities:    
Accounts receivable (5,444) (10,656)
Prepaid maintenance reserves (12,317) (14,661)
Long-term deposits and other assets (6,160) (15,691)
Accounts payable 433 1,457
Air traffic liability 79,350 62,328
Other liabilities 29,643 16,137
Net cash provided by operating activities167,83590,639
Investing activities:    
Pre-delivery deposits for flight equipment, net of refunds (50,388) (73,201)
Purchase of property and equipment (184,609) (4,086)
Net cash used in investing activities(234,997)(77,287)
Financing activities:    
Proceeds from issuance of long-term debt 185,000
Proceeds from stock options exercised 15 39
Payments on debt and capital lease obligations (2,968)
Excess tax benefits from equity-based compensation 7,877 588
Repurchase of common stock (10,943) (621)
Debt issuance costs (2,976)
Net cash provided by financing activities176,0056
Net increase in cash and cash equivalents 108,843 13,358
Cash and cash equivalents at beginning of period632,784530,631
Cash and cash equivalents at end of period$ 741,627$ 543,989
Supplemental disclosures    
Cash payments for:    
Interest (net of capitalized interest)$ 11 $ —
Taxes$ 9,883$ 3,218
Selected Operating Statistics (unaudited)
 Three Months Ended March 31, 
Operating Statistics20152014Change
Available seat miles (ASMs) (thousands) 4,729,463 3,784,727 25.0%
Revenue passenger miles (RPMs) (thousands) 4,017,559 3,289,287 22.1%
Load factor (%) 84.9 86.9 (2.0) pts
Passenger flight segments (thousands) 3,980 3,264 21.9%
Block hours 77,035 63,139 22.0%
Departures 29,044 23,561 23.3%
Operating revenue per ASM (RASM) (cents) 10.43 11.57 (9.9)%
Average yield (cents) 12.28 13.32 (7.8)%
Average ticket revenue per passenger flight segment ($) 68.71 77.79 (11.7)%
Average non-ticket revenue per passenger flight segment ($) 55.25 56.41 (2.1)%
Total revenue per passenger flight segment ($) 123.96 134.20 (7.6)%
CASM (cents) 8.12 9.99 (18.7)%
Adjusted CASM (cents) (1) 8.06 9.98 (19.2)%
Adjusted CASM ex-fuel (cents) (2) 5.72 6.06 (5.6)%
Fuel gallons consumed (thousands) 56,723 46,677 21.5%
Average economic fuel cost per gallon ($) 1.95 3.18 (38.7)%
Aircraft at end of period 70 56 25.0%
Average daily aircraft utilization (hours) 12.7 12.8 (0.8)%
Average stage length (miles) 991 1,000 (0.9)%
Airports served in the period 55 53 3.8%
(1)  Excludes special items.
(2)  Excludes economic fuel expense and special items.

The Company is providing a reconciliation of GAAP financial information to non-GAAP financial information as it believes that non-GAAP financial measures provide management and investors the ability to measure the performance of the Company on a consistent basis. These non-GAAP financial measures have limitations as an analytical tool. Because of these limitations, determinations of the Company's operating performance excluding unrealized gains and losses or special items should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.

Special Items
 Three Months Ended
 March 31,
(in thousands)20152014
Operating special items include the following:    
Unrealized losses (gains) related to fuel derivative contracts  $ 1,695 $ — 
Loss on disposal of assets 595 150
Special charges (credits) 425 9
Total special items:  $ 2,715  $ 159
Reconciliation of Adjusted Operating Expense to GAAP Operating Expense
 Three Months Ended
 March 31,
(in thousands)20152014
Total operating expenses, as reported  $ 384,104  $ 378,034
Less special items (1) 2,715 159
Adjusted operating expenses, non-GAAP (2) 381,389 377,875
Less: Economic fuel expense 110,731 148,471
Adjusted operating expenses excluding fuel, non-GAAP (3)  $ 270,658  $ 229,404
Available seat miles 4,729,463 3,784,727
CASM (cents) 8.12 9.99
Adjusted CASM (cents) (2) 8.06 9.98
Adjusted CASM ex-fuel (cents) (3) 5.72 6.06
(1)  See "Special Items" for more detail. 
(2)  Excludes special items.
(3)  Excludes special items and economic fuel expense as described in the "Reconciliation of Economic Fuel Expense to GAAP Fuel Expense" table below.
Reconciliation of Adjusted Net Income to GAAP Net Income
 Three Months Ended
 March 31,
(in thousands, except per share data)20152014
Net income, as reported $ 69,002  $ 37,706
Add: Provision for income taxes 40,032 22,278
Income before income taxes, as reported 109,034 59,984
Pre-tax margin, GAAP22.1%13.7%
Add special items (1) 2,715 159
Income before income taxes, non-GAAP (2) 111,749 60,143
Pre-tax margin, non-GAAP (2)22.7%13.7%
Provision for income taxes (3) 41,029 22,337
Adjusted net income, non-GAAP (2)  $ 70,720  $ 37,806
Weighted average shares, diluted 73,370 73,254
Adjusted net income per share, diluted$0.96$0.52
(1)  See "Special Items" for more details. 
(2)  Excludes special items.
(3)  Assumes same marginal tax rate as is applicable to GAAP net income. 
Reconciliation of Adjusted Operating Income to GAAP Operating Income
 Three Months Ended
 March 31,
(in thousands)20152014
Operating income, as reported$ 109,251$ 59,953
Operating margin, GAAP22.1%13.7%
Add special items (1) 2,715 159
Operating income, non-GAAP (2)$ 111,966$ 60,112
Operating margin (2)22.7%13.7%
(1)  See "Special Items" for more detail.
(2)  Excludes special items. 

The Company believes economic fuel expense is the best measure of the effect fuel prices are currently having on our business, because it most closely approximates the net cash outflow associated with purchasing fuel used for our operations during the period. Economic fuel expense is defined as into-plane fuel expense, realized gains or losses on derivative contracts, plus the economic premium expense related to fuel option contracts in the period the option is benefiting. The key difference between aircraft fuel expense as recorded in our statement of operations and economic fuel expense is unrealized mark-to-market changes in the value of aircraft fuel derivatives outstanding and the timing of premium gain or loss recognition on our outstanding fuel option contracts. Many industry analysts evaluate airline results using economic fuel expense, and it is used in our internal management reporting. 

Reconciliation of Economic Fuel Expense to GAAP Fuel Expense
 Three Months Ended
 March 31,
(in thousands, except per gallon data)20152014
Fuel expense    
Aircraft fuel, as reported  $ 112,426  $ 148,471
Less Unrealized losses (gains) related to fuel derivative contracts 1,695
Economic fuel expense, non-GAAP $ 110,731  $ 148,471
Fuel gallons consumed 56,723 46,677
Economic fuel cost per gallon, non-GAAP $ 1.95  $ 3.18
Calculation of Return on Invested Capital
 Twelve Months Ended
(in thousands)March 31, 2015
Operating Income  $ 404,561
Add special items (1) 18,768
Adjustment for aircraft rent 202,228
Adjusted operating income (2) 625,557
Tax (36.1%) (3) 225,826
Adjusted operating income, after-tax 399,731
Invested Capital  
Total debt  $ 324,984
Book equity 1,069,417
Less: Unrestricted cash 741,627
Add: Capitalized aircraft operating leases (7x Aircraft Rent) 1,415,596
Total invested capital 2,068,370
Return on invested capital (ROIC), pre-tax 30.2%
Return on invested capital (ROIC), after-tax 19.3%
(1)  Special items include unrealized gains or losses related to fuel derivative contracts, loss on disposal of assets, special charges (credits), and additional federal excise tax on a minority of fuel volume for the period beginning July 1, 2009 through December 31, 2013 recorded in the third quarter 2014.
(2)  Excludes special items as described above.
(3)  Assumes same marginal tax rate as is applicable to GAAP net income for the twelve months ended March 31, 2015. 
CONTACT: Investor Relations Contact:
         DeAnne GabelInvestorRelations@Spirit.com
         (954) 447-7920

         Media Contact:
         Paul BerryPaul.Berry@Spirit.com
         (954) 628-4827

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Source: Spirit Airlines