Spirit Airlines Reports Second Quarter 2019 Results

Company Release - 7/24/2019 4:10 PM ET

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

 Second Quarter 2019 Second Quarter 2018
 As Reported Adjusted As Reported Adjusted
 (GAAP) (non-GAAP)1 (GAAP) (non-GAAP)1
Revenue$1,013.0 million $1,013.0 million $851.8 million $851.8 million
Operating Income (loss)$163.9 million $165.5 million $108.5 million $113.3 million
Operating Margin 16.2%  16.3%  12.7%  13.3%
Net Income (loss)$114.5 million $115.7 million $11.3 million $75.7 million
Diluted EPS$1.67  $1.69  $0.16  $1.11 

"Our team once again delivered strong quarterly profits.  In the second quarter 2019, we improved our operating margin by 300 basis points and delivered very strong earnings growth." said Ted Christie, Spirit’s President and Chief Executive Officer.  "Operationally, we experienced numerous storm systems across our network which negatively impacted our operational reliability.  However, on a relative basis, year-to-date through June 30, 2019 we still rank among the best in the industry for on-time performance2.  I want to thank the entire Spirit team for all that they do every day to care for our Guests, especially during this busy travel season under challenging operational conditions."

Revenue Performance
For the second quarter 2019, Spirit's total operating revenue was $1,013.0 million, an increase of 18.9 percent compared to the second quarter 2018, driven by an 18.4 percent increase in flight volume and increases in both yields and load factor.

Total operating revenue per available seat mile ("TRASM") for the second quarter 2019 increased 5.0 percent compared to the same period last year.  During the second quarter 2019, the Company's results benefited from its strategic network changes, revenue management initiatives, and a strong underlying demand environment.  In addition, the Company estimates the calendar shift of Easter from the first quarter in 2018 to the second quarter in 2019 contributed approximately 200 basis points to the TRASM improvement.

Non-ticket revenue per passenger flight segment for the second quarter 2019 increased 1.8 percent to $55.543.   Fare revenue per passenger flight segment decreased 1.0 percent to $57.60 and total revenue per passenger segment increased 0.3 percent year over year to $113.14.

Cost Performance
For the second quarter 2019, total GAAP operating expenses increased 14.2 percent year over year to $849.0 million.  Adjusted operating expenses for the second quarter 2019 increased 14.8 percent year over year to $847.5 million4.  These changes were primarily driven by higher flight volume, higher passenger re-accommodation expense, higher salaries, wages and benefits, and airport rent and landing fees.

Aircraft fuel expense increased in the second quarter 2019 by 7.6 percent year over year, due to a 15.4 percent increase in fuel gallons consumed.

Spirit reported second quarter 2019 cost per available seat mile ("ASM"), excluding operating special items and fuel (“Adjusted CASM ex-fuel”), of 5.41 cents4, up 4.6 percent compared to the same period last year.  As previously disclosed, a severe storm system impacted a large majority of Spirit’s flights to and from Florida during the Easter holiday weekend.  As a result, the Company canceled numerous flights and incurred costs of about $6 million for passenger re-accommodation and disrupted crew expense.  The additional expense and loss of ASMs related to this storm contributed approximately 150 basis points to adjusted CASM ex-fuel year over year percent change for the second quarter 2019.  In addition to the Easter storm, the Company experienced multiple storm-related flight disruptions throughout the rest of the quarter which drove additional passenger re-accommodation expense.  Higher ground handling rates, amortization expense, and other items contributed to the adjusted CASM ex-fuel change year over year.

Liquidity
Spirit ended the second quarter 2019 with unrestricted cash, cash equivalents, and short-term investments of $1.2 billion.  For the six months ended June 30, 2019, Spirit generated $341.0 million of operating cash flow, after investing $238.5 million, primarily for aircraft purchases and pre-delivery deposits.  Adjusted for proceeds from issuance of long-term debt, operating cash flow for the quarter ended June 30, 2019 was $205.2 million5.  For the six months ended June 30, 2019, net cash provided by financing activities was $3.5 million.

Fleet
Spirit took delivery of two new aircraft (one A320ceo and one A320neo) during the second quarter 2019, ending the quarter with 135 aircraft in its fleet.

Conference Call/Webcast Detail
Spirit will conduct a conference call to discuss these results tomorrow, July 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 76 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 Statements of Operations
(unaudited, in thousands, except per-share amounts)

 Three Months Ended   Six Months Ended  
 June 30, Percent June 30, Percent
 2019 2018 Change 2019 2018 Change
Operating revenues:           
Passenger$994,430  $836,350  18.9  $1,832,495  $1,525,491  20.1 
Other18,526  15,421  20.1  36,257  30,418  19.2 
Total operating revenues1,012,956  851,771  18.9  1,868,752  1,555,909  20.1 
            
Operating expenses:           
Aircraft fuel265,006  246,180  7.6  494,642  450,826  9.7 
Salaries, wages and benefits

216,375  187,756  15.2  420,276  342,852  22.6 
Landing fees and other rents64,711  58,602  10.4  124,360  108,232  14.9 
Aircraft rent46,522  41,745  11.4  92,304  91,936  0.4 
Depreciation and amortization54,913  45,618  20.4  105,639  84,991  24.3 
Distribution40,602  34,997  16.0  76,321  65,628  16.3 
Maintenance, materials and repairs34,688  31,653  9.6  66,292  61,363  8.0 
Special charges  174  nm    89,342  nm 
Loss on disposal of assets1,550  4,644  nm  3,463  5,492  nm 
Other operating124,651  91,881  35.7  233,713  185,523  26.0 
Total operating expenses849,018  743,250  14.2  1,617,010  1,486,185  8.8 
            
Operating income (loss)163,938  108,521  51.1  251,742  69,724  261.1 
            
Other (income) expense:           
Interest expense25,266  20,498  23.3  50,237  38,347  31.0 
Capitalized interest(2,975) (2,296) 29.6  (5,532) (4,548) 21.6 
Interest income(7,066) (4,430) 59.5  (13,990) (8,496) 64.7 
Other expense144  188  nm  377  321  nm 
Special charges, non-operating  79,412  nm    88,613  nm 
Total other (income) expense15,369  93,372  (83.5) 31,092  114,237  (72.8)
            
            
Income (loss) before income taxes148,569  15,149  880.7  220,650  (44,513) 595.7 
Provision (benefit) for income taxes34,068  3,895  774.7  50,073  (10,845) 561.7 
            
Net income (loss)$114,501  $11,254  917.4  $170,577  $(33,668) 606.6 
Basic earnings (loss) per share$1.67  $0.16  943.8  $2.49  $(0.49) 608.2 
Diluted earnings (loss) per share$1.67  $0.16  943.8  $2.49  $(0.49) 608.2 
            
Weighted average shares, basic68,439  68,251  0.3  68,410  68,237  0.3 
Weighted average shares, diluted68,620  68,310  0.5  68,568  68,237  0.5 

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

 Three Months Ended Six Months Ended
 June 30, June 30,
 2019 2018 2019 2018 
Net income (loss)$114,501  $11,254  $170,577  $(33,668)
Unrealized gain on short-term investment securities, net of deferred taxes of $29, $33, $67 and $2698  101  228  78 
Interest rate derivative loss reclassified into earnings, net of taxes of $19, $18, $46, and $39

54  61  101  120 
Other comprehensive income$152  $162  $329  $198 
Comprehensive income (loss)$114,653  $11,416  $170,906  $(33,470)


SPIRIT AIRLINES, INC.

Selected Operating Statistics
 (unaudited)

 Three Months Ended June 30,  
Operating Statistics2019 2018 Change
Available seat miles (ASMs) (thousands)10,775,878  9,515,842  13.2%
Revenue passenger miles (RPMs) (thousands)9,157,488  7,961,128  15.0%
Load factor (%)85.0  83.7  1.3pts
Passenger flight segments (thousands)8,953  7,554  18.5%
Block hours157,182  136,357  15.3%
Departures58,517  49,404  18.4%
Total operating revenue per ASM (TRASM) (cents)9.40  8.95  5.0%
Average yield (cents)11.06  10.70  3.4%
Fare revenue per passenger flight segment ($)57.60  58.19  (1.0)%
Non-ticket revenue per passenger flight segment ($)55.54  54.57  1.8%
Total revenue per passenger flight segment ($)113.14  112.76  0.3%
CASM (cents)7.88  7.81  0.9%
Adjusted CASM (cents) (1)7.86  7.76  1.3%
Adjusted CASM ex-fuel (cents) (2)5.41  5.17  4.6%
Fuel gallons consumed (thousands)122,447  106,144  15.4%
Average economic fuel cost per gallon ($)2.16  2.32  (6.9)%
Aircraft at end of period135  119  13.4%
Average daily aircraft utilization (hours)12.8  12.6  1.6%
Average stage length (miles)1,004  1,051  (4.5)%


      
 Six Months Ended June 30,  
Operating Statistics2019 2018 Change
Available seat miles (ASMs) (thousands)20,604,922  17,924,606  15.0%
Revenue passenger miles (RPMs) (thousands)17,290,518  14,774,647  17.0%
Load factor (%)83.9  82.4  1.5pts
Passenger flight segments (thousands)16,773  14,092  19.0%
Block hours300,612  259,310  15.9%
Departures110,692  94,386  17.3%
Total operating revenue per ASM (TRASM) (cents)9.07  8.68  4.5%
Average yield (cents)10.81  10.53  2.7%
Fare revenue per passenger flight segment ($)55.57  55.51  0.1%
Non-ticket revenue per passenger flight segment ($)55.85  54.90  1.7%
Total revenue per passenger flight segment ($)111.42  110.41  0.9%
CASM (cents)7.85  8.29  (5.3)%
Adjusted CASM (cents) (1)7.83  7.76  0.9%
Adjusted CASM ex-fuel (cents) (2)5.43  5.25  3.4%
Fuel gallons consumed (thousands)232,275  201,147  15.5%
Average economic fuel cost per gallon ($)2.13  2.24  (4.9)%
Average daily aircraft utilization (hours)12.5  12.3  1.6%
Average stage length (miles)1,016  1,038  (2.1)%
  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 June 30, Six Months Ended June 30,
(in thousands, except per segment data)2019 2018 2019 2018
Operating revenues               
Fare$515,696  $439,549  $932,041  $782,244 
Non-fare478,734  396,801  900,454  743,247 
Total passenger revenues994,430  836,350  1,832,495  1,525,491 
Other revenues18,526  15,421  36,257  30,418 
Total operating revenues$1,012,956  $851,771  $1,868,752  $1,555,909 
        
Non-ticket revenues (1)$497,260  $412,222  $936,711  $773,665 
        
Passenger segments8,953  7,554  16,773  14,092 
        
Non-ticket revenue per passenger segment ($)$55.54  $54.57  $55.85  $54.90 

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

Special Items
(unaudited)

 Three Months Ended Six Months Ended
 June 30, June 30,
(in thousands)2019 2018 2019 2018
Operating special items include the following:           
Loss on disposal of assets1,550  4,644  3,463  5,492 
Operating special charges (1)  174    89,342 
Total operating special items$1,550  $4,818  $3,463  $94,834 
Non-operating special items include the following:       
Non-operating special charges (2)  79,412    $88,613 
Total non-operating special items$  $79,412  $  $88,613 
        
Total special items$1,550  $84,230  $3,463  $183,447 
  1. Operating special charges for 2018 include amounts primarily due to a one-time ratification incentive recognized in connection with a new pilot agreement approved in February 2018. 
  2. Non-operating special charges in 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 Six Months Ended
 June 30, June 30,
(in thousands, except CASM data in cents)2019 2018 2019 2018
Total operating expenses, as reported$849,018  $743,250  $1,617,010  $1,486,185 
Less operating special items1,550  4,818  3,463  94,834 
Adjusted operating expenses, non-GAAP (1)847,468  738,432  1,613,547  1,391,351 
Less: Economic fuel expense265,006  246,180  494,642  450,826 
Adjusted operating expenses excluding fuel, non-GAAP (2)$582,462  $492,252  $1,118,905  $940,525 
        
Available seat miles10,775,878  9,515,842  20,604,922  17,924,606 
        
CASM (cents)7.88  7.81  7.85  8.29 
Adjusted CASM (cents) (1)7.86  7.76  7.83  7.76 
Adjusted CASM ex-fuel (cents) (2)5.41  5.17  5.43  5.25 
  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 Six Months Ended
 June 30, June 30,
(in thousands, except per share data)2019 2018 2019 2018
Net income, as reported$114,501  $11,254  $170,577  $(33,668)
Add: Provision (benefit) for income taxes34,068  3,895  50,073  (10,845)
Income (loss) before income taxes, as reported148,569  15,149  220,650  (44,513)
Pre-tax margin14.7% 1.8% 11.8% (2.9)%
Add special items (1)$1,550  $84,230  $3,463  $183,447 
Adjusted income before income taxes, non-GAAP (2)150,119  99,379  224,113  138,934 
Adjusted pre-tax margin, non-GAAP (2)14.8% 11.7% 12.0% 8.9%
Add:  Total other (income) expense (3)15,369  13,960  31,092  25,624 
Adjusted operating income, non-GAAP (4)165,488  113,339  255,205  164,558 
Adjusted operating margin, non-GAAP (4)16.3% 13.3% 13.7% 10.6%
        
Provision for income taxes34,411  23,645  50,875  33,257 
Adjusted net income, non-GAAP (2)$115,708  $75,734  $173,238  $105,677 
        
Weighted average shares, diluted68,620  68,310  68,568  68,237 
        
Adjusted net income per share, diluted (2)$1.69
  $1.11
  $2.53
  $1.55
 
 
       
Total operating revenues$1,012,956  $851,771  $1,868,752  $1,555,909 
  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 assess 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)

 Six Months Ended
 June 30,
(in thousands)2019 2018
Net cash provided by operating activities$341,024  $250,988 
Less:   
Purchase of property and equipment (1)154,702  323,229 
Pre-delivery deposits on flight equipment, net of refunds (1)75,826  92,205 
Add: Proceeds from issuance of long-term debt (2)94,706  440,340 
Adjusted free cash flow$205,202  $275,894 
    
Net cash used in investing activities(238,459) (410,835)
Net cash provided by financing activities3,499  171,360 
    
Net increase in cash and cash equivalents106,064  11,513 
  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.

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Source: Spirit Airlines, Inc.