Spirit Airlines Reports Third Quarter 2019 Results

Company Release - 10/23/2019 4:10 PM ET

MIRAMAR, Fla., Oct. 23, 2019 (GLOBE NEWSWIRE) -- Spirit Airlines, Inc. (NYSE: SAVE) today reported third quarter 2019 financial results.

 Third Quarter 2019 Third Quarter 2018
 As Reported Adjusted As Reported Adjusted
 (GAAP) (non-GAAP)1 (GAAP) (non-GAAP)1
Revenue$992.0 million $992.0 million $904.3 million $904.3 million
Operating Income$124.7 million $133.8 million $145.1 million $145.5 million
Operating Margin 12.6%  13.5%  16.0%  16.1%
Net Income$83.5 million $90.5 million $97.5 million $100.5 million
Diluted EPS$1.22  $1.32  $1.42  $1.47 

“I want to thank all our team members for their dedication and commitment to provide our Guests a quality travel experience in what was a very busy summer travel period.  In addition to record passenger volumes, numerous summer storm systems across our network, including Hurricane Dorian, made for a challenging operating environment.  We have made several adjustments to improve our ability to better recover from adverse weather and we are already seeing the effects.  Over the past couple of months, our operational performance has rebounded and we have consistently achieved high completion factors along with great on-time performance,” said Ted Christie, Spirit’s President and Chief Executive Officer. “We are committed to continuously drive improvement throughout our business and to deliver strong earnings growth and returns for our shareholders.”

Revenue Performance
For the third quarter 2019, Spirit's total operating revenue was $992.0 million, an increase of 9.7 percent compared to the third quarter 2018, driven by a 17.7 percent increase in flight volume.

Total operating revenue per available seat mile ("TRASM") for the third quarter 2019 decreased 1.7 percent compared to the same period last year, driven by lower load factor, softer passenger yields and the negative impact from Hurricane Dorian.  Excluding the impact of Hurricane Dorian, the Company estimates its TRASM for the third quarter 2019 would have been down approximately 1 percent year over year.

Non-ticket revenue per passenger flight segment for the third quarter 2019 increased 1.7 percent to $55.372.   Fare revenue per passenger flight segment decreased 9.7 percent to $54.80 and total revenue per passenger segment decreased 4.3 percent year over year to $110.17, driven by shorter average stage length and lower passenger yields as compared to the third quarter 2018.

Cost Performance
For the third quarter 2019, total GAAP operating expenses increased 14.2 percent year over year to $867.3 million.  Adjusted operating expenses for the third quarter 2019 increased 13.1 percent year over year to $858.2 million3.  In addition to increased flight volume, these changes were primarily driven by salaries, wages and benefits and other operating expense (largely driven by passenger re-accommodation expense).

Aircraft fuel expense decreased in the third quarter 2019 by 1.9 percent year over year, due to an 11.9 percent decrease in fuel rates, largely offset by an 11.5 percent increase in fuel gallons consumed.

Spirit reported third quarter 2019 cost per available seat mile ("ASM"), excluding operating special items and fuel (“Adjusted CASM ex-fuel”), of 5.66 cents3, up 8.4 percent compared to the same period last year.   Throughout the quarter, storm systems across its network, including Hurricane Dorian, along with other operational challenges, led to a higher percentage of flight cancellations, additional crew costs, and passenger re-accommodation expense.  These additional expenses, loss of ASMs, and a shorter average stage length year over year, were the primary contributors to the increase in the third quarter Adjusted 2019 CASM ex-fuel year over year.

Liquidity
Spirit ended the third quarter 2019 with unrestricted cash, cash equivalents, and short-term investments of $1.0 billion.  For the nine months ended September 30, 2019, Spirit generated $358.4 million of operating cash flow.  After investing $283.6 million for aircraft purchases and pre-delivery deposits, and receiving $94.7 million of proceeds from issuance of long-term debt, Adjusted free cash flow for the nine months ended September 30, 2019 was $169.5 million4.  For the nine months ended September 30, 2019, net cash used in financing activities was $127.4 million.

Fleet
Spirit took delivery of one new A320neo aircraft during the third quarter 2019, ending the quarter with 136 aircraft in its fleet.

“We have reached a memorandum of understanding with Airbus to purchase 100 new Airbus A320neo family aircraft with options to purchase up to 50 additional aircraft.  We went through an extensive fleet evaluation process and determined that the fuel-efficient A320neo family of aircraft were the best option to support our continued growth as we expand our network,” said Scott Haralson, Spirit Airlines’ Chief Financial Officer.

Conference Call/Webcast Detail
Spirit will conduct a conference call to discuss these results tomorrow, October 24, 2019, 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 (NYSE: SAVE) is committed to delivering the best value in the sky.  We are the leader in providing customizable travel options starting with an unbundled fare. This allows our Guests to pay only for the options they choose - like bags, seat assignments and refreshments - something we call À La Smarte.  We make it possible for our Guests to venture further 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 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)  See "Calculation of Total Non-Ticket Revenue per Passenger Flight Segment" table below for more details.
(3)  See "Reconciliation of Adjusted Operating Expense to GAAP Operating Expense" table below for more details.
(4)  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   Nine Months Ended  
 September 30, Percent September 30, Percent
 2019 2018 Change 2019 2018 Change
Operating revenues:           
Passenger$973,353  $887,956  9.6  $2,805,848  $2,413,447  16.3 
Other18,615  16,374  13.7  54,872  46,792  17.3 
Total operating revenues991,968  904,330  9.7  2,860,720  2,460,239  16.3 
            
Operating expenses:           
Aircraft fuel253,847  258,818  (1.9) 748,489  709,644  5.5 
Salaries, wages and benefits

224,069  185,043  21.1  644,345  527,895  22.1 
Landing fees and other rents69,142  54,542  26.8  193,502  162,774  18.9 
Aircraft rent40,026  42,682  (6.2) 132,330  134,618  (1.7)
Depreciation and amortization57,712  43,773  31.8  163,351  128,764  26.9 
Distribution39,160  37,868  3.4  115,481  103,496  11.6 
Maintenance, materials and repairs36,152  37,778  (4.3) 102,444  99,141  3.3 
Special charges (credits)  (686) nm    88,656  nm 
Loss on disposal of assets13,410  1,069  nm  16,873  6,561  nm 
Other operating133,769  98,318  36.1  367,482  283,841  29.5 
Total operating expenses867,287  759,205  14.2  2,484,297  2,245,390  10.6 
            
Operating income124,681  145,125  14.1  376,423  214,849  75.2 
            
Other (income) expense:           
Interest expense25,138  21,925  14.7  75,375  60,272  25.1 
Capitalized interest(3,400) (2,657) 28.0  (8,932) (7,205) 24.0 
Interest income(6,292) (4,776) 31.7  (20,282) (13,272) 52.8 
Other expense222  302  nm  599  623  nm 
Special charges, non-operating  1,744  nm    90,357  nm 
Total other (income) expense15,668  16,538  (5.3) 46,760  130,775  (64.2)
            
            
Income before income taxes109,013  128,587  15.2  329,663  84,074  292.1 
Provision for income taxes25,549  31,107  17.9  75,622  20,262  273.2 
            
Net income$83,464  $97,480  14.4  $254,041  $63,812  298.1 
Basic earnings per share$1.22  $1.43  14.7  $3.71  $0.94  294.7 
Diluted earnings per share$1.22  $1.42  14.1  $3.71  $0.93  298.9 
            
Weighted average shares, basic68,442  68,254  0.3  68,421  68,243  0.3 
Weighted average shares, diluted68,545  68,503  0.1  68,561  68,346  0.3 

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

 Three Months Ended Nine Months Ended
 September 30, September 30,
 2019 2018 2019 2018
Net income$83,464  $97,480  $254,041  $63,812 
Unrealized gain (loss) on short-term investment securities, net of deferred taxes of ($20), ($5), $47, and $21(68) (7) 161  70 
Interest rate derivative loss reclassified into earnings, net of taxes of $17, $27, $63, and $6657  52  157  172 
Other comprehensive income (loss)$(11) $45  $318  $242 
Comprehensive income$83,453  $97,525  $254,359  $64,054 


    


    

SPIRIT AIRLINES, INC.
Selected Operating Statistics
 (unaudited)

 Three Months Ended September 30,  
Operating Statistics2019 2018 Change
Available seat miles (ASMs) (thousands)10,686,246  9,579,448  11.6%
Revenue passenger miles (RPMs) (thousands)9,057,574  8,241,771  9.9%
Load factor (%)84.8  86.0  (1.2) pts
Passenger flight segments (thousands)9,004  7,856  14.6%
Block hours155,167  136,723  13.5%
Departures59,314  50,386  17.7%
Total operating revenue per ASM (TRASM) (cents)9.28  9.44  (1.7)%
Average yield (cents)10.95  10.97  (0.2)%
Fare revenue per passenger flight segment ($)54.80  60.67  (9.7)%
Non-ticket revenue per passenger flight segment ($)55.37  54.44  1.7%
Total revenue per passenger flight segment ($)110.17  115.11  (4.3)%
CASM (cents)8.12  7.93  2.4%
Adjusted CASM (cents) (1)8.03  7.92  1.4%
Adjusted CASM ex-fuel (cents) (2)5.66  5.22  8.4%
Fuel gallons consumed (thousands)122,072  109,515  11.5%
Average economic fuel cost per gallon ($)2.08  2.36  (11.9)%
Aircraft at end of period136  121  12.4%
Average daily aircraft utilization (hours)12.5  12.4  0.8%
Average stage length (miles)979  1,033  (5.2)%


      
 Nine Months Ended September 30,  
Operating Statistics2019 2018 Change
Available seat miles (ASMs) (thousands)31,291,168  27,504,053  13.8%
Revenue passenger miles (RPMs) (thousands)26,348,093  23,016,417  14.5%
Load factor (%)84.2  83.7  0.5pts
Passenger flight segments (thousands)25,777  21,947  17.5%
Block hours455,778  396,034  15.1%
Departures170,006  144,772  17.4%
Total operating revenue per ASM (TRASM) (cents)9.14  8.95  2.1%
Average yield (cents)10.86  10.69  1.6%
Fare revenue per passenger flight segment ($)55.30  57.36  (3.6)%
Non-ticket revenue per passenger flight segment ($)55.68  54.74  1.7%
Total revenue per passenger flight segment ($)110.98  112.10  (1.0)%
CASM (cents)7.94  8.16  (2.7)%
Adjusted CASM (cents) (1)7.90  7.82  1.0%
Adjusted CASM ex-fuel (cents) (2)5.51  5.24  5.2%
Fuel gallons consumed (thousands)354,347  310,661  14.1%
Average economic fuel cost per gallon ($)2.11  2.28  (7.5)%
Average daily aircraft utilization (hours)12.4  12.3  0.8%
Average stage length (miles)1,003  1,037  (3.3)%
  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 Flight Segment
(unaudited)

 Three Months Ended Nine Months Ended
 September 30, September 30,
(in thousands, except per segment data)2019 2018 2019 2018
Operating revenues       
Fare$493,376  $476,660  $1,425,417  $1,258,904 
Non-fare479,977  411,296  1,380,431  1,154,543 
Total passenger revenues973,353  887,956  2,805,848  2,413,447 
Other revenues18,615  16,374  54,872  46,792 
Total operating revenues$991,968  $904,330  $2,860,720  $2,460,239 
        
Non-ticket revenues (1)$498,592  $427,670  $1,435,303  $1,201,335 
        
Passenger segments9,004  7,856  25,777  21,947 
        
Non-ticket revenue per passenger flight segment ($)$55.37  $54.44  $55.68  $54.74 

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

Special Items
(unaudited)

 Three Months Ended Nine Months Ended
 September 30, September 30,
(in thousands)2019 2018 2019 2018
Operating special items include the following:       
Supplemental rent (credit) (1)(4,304)   (4,304)  
Loss on disposal of assets (2)13,410  1,069  16,873  6,561 
Operating special charges (credits) (3)  (686)   88,656 
Total operating special items$9,106  $383  $12,569  $95,217 
Non-operating special items include the following:       
Non-operating special charges (4)  1,744    $90,357 
Total non-operating special items$  $1,744  $  $90,357 
        
Total special items$9,106  $2,127  $12,569  $185,574 
  1. Accrual release related to a lease modification.
  2. 2019 includes amounts primarily related to the disposal of excess and obsolete inventory; 2018 includes amounts primarily related to  losses on sale of engines and the disposal of excess and obsolete inventory.
  3. Operating special charges for 2018 include amounts primarily related to a one-time ratification incentive recognized in connection with a new pilot agreement approved in February 2018. 
  4. 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 Nine Months Ended
 September 30, September 30,
(in thousands, except CASM data in cents)2019 2018 2019 2018
Total operating expenses, as reported$867,287  $759,205  $2,484,297  $2,245,390 
Less operating special items9,106  383  12,569  95,217 
Adjusted operating expenses, non-GAAP (1)858,181  758,822  2,471,728  2,150,173 
Less: Economic fuel expense253,847  258,818  748,489  709,644 
Adjusted operating expenses excluding fuel, non-GAAP (2)$604,334  $500,004  $1,723,239  $1,440,529 
        
Available seat miles10,686,246  9,579,448  31,291,168  27,504,053 
        
CASM (cents)8.12  7.93  7.94  8.16 
Adjusted CASM (cents) (1)8.03  7.92  7.90  7.82 
Adjusted CASM ex-fuel (cents) (2)5.66  5.22  5.51  5.24 
  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 Nine Months Ended
 September 30, September 30,
(in thousands, except per share data) 2019  2018  2019  2018
Net income, as reported$83,464  $97,480  $254,041  $63,812 
Add: Provision for income taxes 25,549   31,107   75,622   20,262 
Income before income taxes, as reported 109,013   128,587   329,663   84,074 
Pre-tax margin 11.0%  14.2%  11.5%  3.4%
Add special items (1)$9,106  $2,127  $12,569  $185,574 
Adjusted income before income taxes, non-GAAP (2) 118,119   130,714   342,232   269,648 
Adjusted pre-tax margin, non-GAAP (2) 11.9%  14.5%  12.0%  11.0%
Add:  Total other (income) expense (3) 15,668   14,794   46,760   40,418 
Adjusted operating income, non-GAAP (4) 133,787   145,508   388,992   310,066 
Adjusted operating margin, non-GAAP (4) 13.5%  16.1%  13.6%  12.6%
        
Provision for income taxes 27,640   30,169   78,515   63,426 
Adjusted net income, non-GAAP (2)$90,479  $100,545  $263,717  $206,222 
        
Weighted average shares, diluted 68,545   68,503   68,561   68,346 
        
Adjusted net income per share, diluted (2)$1.32
  $1.47
  $3.85
  $3.02
 
        
Total operating revenues$991,968  $904,330  $2,860,720  $2,460,239 
  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)

 Nine Months Ended
 September 30,
(in thousands)2019 2018
Net cash provided by operating activities$358,397  $308,498 
Less:   
Purchase of property and equipment (1)114,396  420,586 
Pre-delivery deposits on flight equipment, net of refunds (1)169,200  132,297 
Add: Proceeds from issuance of long-term debt (2)94,706  518,171 
Adjusted free cash flow$169,507  $273,786 
    
Net cash used in investing activities(300,056) (550,593)
Net cash (used in) provided by financing activities(127,396) 214,956 
    
Net increase (decrease) in cash and cash equivalents(69,055) (27,139)
  1. Included within net cash used in investing activities in the Company's Condensed Statements of Cash Flows.
  2. Included within net cash (used in) provided by financing activities in the Company's Condensed Statements of Cash Flows.

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Source: Spirit Airlines, Inc.