Spirit Airlines Reports First Quarter 2019 Results

Company Release - 4/24/2019 4:10 PM ET

MIRAMAR, Fla., April 24, 2019 (GLOBE NEWSWIRE) -- Spirit Airlines, Inc. (NYSE: SAVE) today reported first quarter 2019 financial results.

 First Quarter 2019 First Quarter 2018
 As Reported Adjusted As Reported Adjusted
 (GAAP) (non-GAAP)1 (GAAP) (non-GAAP)1
Revenue$855.8 million $855.8 million $704.1 million $704.1 million
Operating Income (loss)$87.8 million $89.7 million $(38.8) million $51.2 million
Operating Margin10.3% 10.5% (5.5)% 7.3%
Net Income (loss)$56.1 million $57.5 million $(44.9) million $29.9 million
Diluted EPS$0.82 $0.84 $(0.66) $0.44

“Solid execution of our revenue initiatives and strong underlying demand trends drove adjusted diluted earnings per share growth of over 90 percent1 for the first quarter 2019 compared to the first quarter last year.  On capacity growth of 16.9 percent year over year, for the first quarter 2019, the team delivered a total revenue per available seat mile increase of 4.1 percent driven by improvements in both ticket and non-ticket yields.  We also ran a great operation during the quarter, improving our completion factor by 70 basis points to 98.9 percent despite more weather disruptions than the year prior and delivering an on-time performance of 82.6 percent2, which was among the best in the industry,” said Ted Christie, Spirit’s President and Chief Executive Officer.

Revenue Performance
For the first quarter 2019, Spirit's total operating revenue was $855.8 million, an increase of 21.5 percent compared to the first quarter 2018, driven by a 16.0 percent increase in flight volume and increases in both passenger yields and load factor.

Total operating revenue per available seat mile ("TRASM") for the first quarter 2019 increased 4.1 percent compared to the same period last year.  During the first quarter 2019, the Company's results continued to benefit from its ticket and non-ticket revenue initiatives.

On a per passenger flight segment basis, total revenue for the first quarter 2019 increased 1.6 percent year over year to $109.44 with fare revenue per passenger flight segment increasing 1.6 percent to $53.24 and non-ticket revenue per passenger flight segment increasing 1.6 percent to $56.203.  The improvement in non-ticket revenue per passenger segment year over year was largely driven by dynamic pricing initiatives and improved take rates of bundled service offerings.

Cost Performance
For the first quarter 2019, total GAAP operating expenses increased 3.4 percent year over year to $768.0 million.  Adjusted operating expenses for the first quarter 2019 increased 17.3 percent year over year to $766.1 million4.  Drivers of the increase in adjusted operating expense compared to the first quarter last year include higher flight volume, contracted pilot rate increases, airport rent and landing fee escalations, and higher depreciation expense.  On a GAAP basis, these increases were largely offset by lower special charges year over year.

Aircraft fuel expense increased in the first quarter 2019 by 12.2 percent year over year, due to a 15.6 percent increase in fuel gallons consumed.

Spirit reported first quarter 2019 cost per available seat mile ("ASM"), excluding special items and fuel (“Adjusted CASM ex-fuel”), of 5.46 cents4, an increase of 2.4 percent compared to the same period last year, primarily due to higher salaries, wages and benefits per ASM, largely driven by contracted rate increases pilots received effective March 1, 2018.  This increase was partially offset by lower aircraft rent per ASM and better operational performance.

“Strong revenue performance coupled with solid cost control helped produce a 320 basis point improvement in our adjusted operating margin for the first quarter 2019,” said Scott Haralson, Spirit’s Chief Financial Officer.  “We are continuing to capture the benefits of the hard work and dedication by all our team members to profitably grow our business, improve our brand image, execute on our plan to drive revenue improvement, and maintain an industry-leading cost position.  We are committed to keeping this momentum going and delivering strong returns for our shareholders.”

Liquidity
Spirit ended the first quarter 2019 with unrestricted cash, cash equivalents, and short-term investments of $1.2 billion.  Spirit generated $205.2 million of operating cash flow and ended first quarter 2019 with adjusted free cash flow of $163.8 million5.

Fleet
Spirit took delivery of five new aircraft (one A320ceo and four A320neo) during the first quarter 2019, ending the quarter with 133 aircraft in its fleet.

Network
During the quarter, Spirit continued its goal to broaden and diversify its network with new service from Austin and Indianapolis primarily to large leisure destinations.  Spirit also added new service between existing destinations, bringing its operation to over 600 daily flights to 75 destinations in the U.S., Latin America, and the Caribbean.

Conference Call/Webcast Detail
Spirit will conduct a conference call to discuss these results tomorrow, April 25, 2019, at 9:30 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 (NYSE: SAVE) is committed to delivering the best value in the sky while providing an exceptional Guest experience.  We are the leader in providing customizable travel options starting with an unbundled fare.  This allows every Guest to pay only for the options they choose - like bags, seat assignments, and refreshments - something we call Á La Smarte.  We make it possible for our Guests to venture further, travel more often, and discover more than ever before.  Our Fit Fleet® is one of the youngest and most fuel-efficient in the U.S.  We operate more than 600 daily flights to 75 destinations in the U.S., Latin America, and the Caribbean, and are dedicated to giving back and improving the communities we serve.  Come save with us at www.spirit.com.  At Spirit Airlines, we go.  We go for you.

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, Adjusted Pre-tax Income, and Adjusted Operating Income to GAAP Net Income" table below for more details.
(2)  Preliminary data using DOT A:14 methodology.
(3)  See "Calculation of Total Non-ticket Revenue per Passenger Segment" table below for more details.
(4)  See "Reconciliation of Adjusted Operating Expense to GAAP Operating Expense" table below for   more details.
(5)  See "Reconciliation of Adjusted Free Cash Flow to GAAP Net Operating Cash Flow" 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 (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which are subject to the “safe harbor” created by those sections. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. All statements other than statements of historical facts are “forward-looking statements” for purposes of these provisions. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential,” and similar expressions intended to identify forward-looking statements. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Furthermore, such forward-looking statements speak only as of the date of this release. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. Risks or uncertainties (i) that are not currently known to us, (ii) that we currently deem to be immaterial, or (iii) that could apply to any company, could also materially adversely affect our business, financial condition, or future results. References in this report to “Spirit,” “we,” “us,” “our,” or the “Company” shall mean Spirit Airlines, Inc., unless the context indicates otherwise.  Additional information concerning certain 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.



SPIRIT AIRLINES, INC.
Condensed Statement of Operations
(unaudited, in thousands, except per-share amounts)

 Three Months Ended  
 March 31, Percent
 2019 2018 Change
Operating revenues:     
Passenger$838,065  $689,141  21.6 
Other17,731  14,997  18.2 
Total operating revenues855,796  704,138  21.5 
      
Operating expenses:     
Aircraft fuel229,636  204,646  12.2 
Salaries, wages and benefits
203,901  155,096  31.5 
Landing fees and other rents59,649  49,630  20.2 
Aircraft rent45,782  50,191  (8.8)
Depreciation and amortization50,726  39,373  28.8 
Distribution35,719  30,631  16.6 
Maintenance, materials and repairs31,604  29,710  6.4 
Special charges  89,168  nm 
Loss on disposal of assets1,913  848  nm 
Other operating109,062  93,642  16.5 
Total operating expenses767,992  742,935  3.4 
      
Operating income (loss)87,804  (38,797) 326.3 
      
Other (income) expense:     
Interest expense24,971  17,849  39.9 
Capitalized interest(2,557) (2,252) 13.5 
Interest income(6,924) (4,066) 70.3 
Other expense233  133  nm 
Special charges, non-operating  9,201  nm 
Total other (income) expense15,723  20,865  (24.6)
      
      
Income (loss) before income taxes72,081  (59,662) 220.8 
Provision (benefit) for income taxes16,005  (14,740) 208.6 
      
Net income (loss)$56,076  $(44,922) 224.8 
Basic earnings (loss) per share$0.82  $(0.66) 224.2 
Diluted earnings (loss) per share$0.82  $(0.66) 224.2 
      
Weighted average shares, basic68,380  68,222  0.2 
Weighted average shares, diluted68,516  68,222  0.4 
         
         
         

SPIRIT AIRLINES, INC.
Condensed Statements of Comprehensive Income (Loss)
(unaudited, in thousands)

 Three Months Ended
March 31,
 2019 2018
Net income (loss)$56,076  $(44,922)
Unrealized gain (loss) on short-term investment securities, net of deferred taxes of $39 and ($8)130  (23)
Interest rate derivative loss reclassified into earnings, net of taxes of $27 and $21
47  58 
Other comprehensive income$177  $35 
Comprehensive income (loss)$56,253  $(44,887)
        
        
        


SPIRIT AIRLINES, INC.

Selected Operating Statistics
 (unaudited)

 Three Months Ended March 31,  
Operating Statistics2019 2018 Change
Available seat miles (ASMs) (thousands)9,829,044 8,408,764 16.9%
Revenue passenger miles (RPMs) (thousands)8,133,030 6,813,519 19.4%
Load factor (%)82.7 81.0 1.7pts
Passenger flight segments (thousands)7,820 6,537 19.6%
Block hours143,429 122,954 16.7%
Departures52,175 44,982 16.0%
Total operating revenue per ASM (TRASM) (cents)8.71 8.37 4.1%
Average yield (cents)10.52 10.33 1.8%
Fare revenue per passenger flight segment ($)53.24 52.42 1.6%
Non-ticket revenue per passenger flight segment ($)56.20 55.29 1.6%
Total revenue per passenger flight segment ($)109.44 107.71 1.6%
CASM (cents)7.81 8.84 (11.7)%
Adjusted CASM (cents) (1)7.79 7.76 0.4%
Adjusted CASM ex-fuel (cents) (2)5.46 5.33 2.4%
Fuel gallons consumed (thousands)109,828 95,003 15.6%
Average economic fuel cost per gallon ($)2.09 2.15 (2.8)%
Aircraft at end of period133 118 12.7%
Average daily aircraft utilization (hours)12.2 12.0 1.7%
Average stage length (miles)1,029 1,025 0.4%

(1) Excludes operating special items.
(2) Excludes economic fuel expense and operating 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 analytical tools.  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.  These non-GAAP financial measures may be presented on a different basis than other companies using similarly titled non-GAAP financial measures.



Calculation of Total Non-Ticket Revenue per Passenger Segment
(unaudited)

 Three Months Ended
 March 31,
(in thousands, except per segment data)2019 2018
Operating revenues     
Fare$416,345 $342,695
Non-fare421,720 346,446
Total passenger revenues838,065 689,141
Other revenues17,731 14,997
Total operating revenues$855,796 $704,138
    
Non-ticket revenues (1)$439,451 $361,443
    
Passenger segments7,820 6,537
    
Non-ticket revenue per passenger segment ($)$56.20 $55.29

(1) Non-ticket revenues equals the sum of non-fare passenger revenues and other revenues.



Special Items
(unaudited)

 Three Months Ended
 March 31,
(in thousands)2019 2018
Operating special items include the following:   
Loss on disposal of assets1,913 848
Operating special charges (1) 89,168
Total operating special items$1,913 $90,016
Non-operating special items include the following:   
Non-operating special charges (2) 9,201
Total non-operating special items$ $9,201
    
Total special items$1,913 $99,217

(1) Operating special charges for the first quarter of 2018 consisted of $89.2 million recognized in connection with the new pilot agreement approved in February 2018. The total amount includes a one-time $80.7 million ratification incentive bonus, including payroll taxes, and a $8.5 million adjustment related to other contractual provisions.
(2) Non-operating special charges for the first quarter 2018 are related to the purchase of 14 A319-100 aircraft.  The contract was deemed a lease modification which resulted in a change of classification from operating leases to finance leases for the 14 aircraft.



Reconciliation of Adjusted Operating Expense to GAAP Operating Expense
(unaudited)

 Three Months Ended
 March 31,
(in thousands, except CASM data in cents)2019 2018
Total operating expenses, as reported$767,992 $742,935
Less operating special items1,913 90,016
Adjusted operating expenses, non-GAAP (1)766,079 652,919
Less: Economic fuel expense229,636 204,646
Adjusted operating expenses excluding fuel, non-GAAP (2)$536,443 $448,273
    
Available seat miles9,829,044 8,408,764
    
CASM (cents)7.81 8.84
Adjusted CASM (cents) (1)7.79 7.76
Adjusted CASM ex-fuel (cents) (2)5.46 5.33

(1) Excludes operating special items.
(2) Excludes operating special items and economic fuel expense.



Reconciliation of Adjusted Net Income, Adjusted Pre-Tax Income, and Adjusted Operating Income to GAAP Net Income
(unaudited)

 Three Months Ended
 March 31,
(in thousands, except per share data)2019 2018
Net income, as reported$56,076  $(44,922)
Add: Provision (benefit) for income taxes16,005  (14,740)
Income (loss) before income taxes, as reported72,081  (59,662)
Pre-tax margin8.4% (8.5)%
Add special items (1)$1,913  $99,217 
Adjusted income before income taxes, non-GAAP (2)73,994  39,555 
Adjusted pre-tax margin, non-GAAP (2)8.6% 5.6%
Add:  Total other (income) expense (3)15,723  11,664 
Adjusted operating income, non-GAAP (4)89,717  51,219 
Adjusted operating margin, non-GAAP (4)10.5% 7.3%
    
Provision for income taxes16,464  9,612 
Adjusted net income, non-GAAP (2)$57,530  $29,943 
    
Weighted average shares, diluted68,516  68,222 
    
Adjusted net income per share, diluted (2)$0.84  $
0.44 
        
Total operating revenues$855,796  $704,138 
    

(1) See "Special Items" for more details.
(2) Excludes operating and non-operating special items.
(3) Excludes non-operating special items.
(4) Excludes operating special items.

As most of the Company’s capital expenditures are related to acquiring assets to grow the business, the Company believes it is beneficial for investors to use Adjusted Free Cash Flow to asses whether the Company has sufficient liquidity.  Adjusted Free Cash Flow adjusts for Purchase of property and equipment, Pre-delivery deposits on flight equipment, net of refunds, and Proceeds from issuance of long-term debt to provide a consistent view of the Company’s liquidity regardless of how the Company chooses to finance aircraft required for growth.  Management believes investors should have a metric to assess the Company’s liquidity on a consistent basis regardless of how the Company chooses to finance assets used for growth.



Reconciliation of Adjusted Free Cash Flow to GAAP Net Operating Cash Flow
(unaudited)

 Three Months Ended 
 March 31,
(in thousands)2019 2018
Net cash provided by operating activities$205,151  $171,135 
Less:   
Purchase of property and equipment(1)63,109  237,221 
Pre-delivery deposits on flight equipment, net of refunds(1)37,913  41,580 
Add: Proceeds from issuance of long-term debt(2)59,706  227,128 
Adjusted free cash flow$163,835  $119,462 
    
Net cash used in investing activities(103,951) (280,650)
Net cash provided by financing activities16,206  207,123 
    
Net increase in cash and cash equivalents117,406  97,608 

(1) Included within net cash used in investing activities in the Company's Condensed Statements of Cash Flows.
(2) Included within net cash provided by financing activities in the Company's Condensed Statements of Cash Flows.

Investor Relations Contact:
DeAnne Gabel
Investorrelations@spirit.com
(954) 447-7920

Media Contact:
Stephen Schuler
Stephen.schuler@spirit.com
(954) 364-0231

 

 

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Source: Spirit Airlines, Inc.