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Spirit Airlines Reports Second Quarter 2018 Results

Jul 25, 2018

MIRAMAR, Fla., July 25, 2018 (GLOBE NEWSWIRE) -- Spirit Airlines, Inc. (NYSE:SAVE) today reported second quarter 2018 financial results.

  • GAAP net income for the second quarter 2018 was $11.3 million ($0.16 per diluted share), or $75.7 million ($1.11 per diluted share)1 excluding special items.
     
  • GAAP operating margin for the second quarter 2018 was 12.7 percent, or 13.3 percent excluding special items1.
     
  • Spirit ended the second quarter 2018 with unrestricted cash, cash equivalents, and short-term investments of $914.1 million.

“Our team delivered excellent operational performance during the second quarter 2018, achieving a DOT on-time performance of 79.6 percent - the best second quarter performance in our Company’s history.  Despite paying materially higher fuel prices, our second quarter earnings results exceeded our expectations due to strong ancillary revenue production and better-than-expected cost performance,” said Robert Fornaro, Spirit’s Chief Executive Officer.  "Our commitment to grow ancillary revenue, deliver excellent operational reliability, and improving our overall guest experience while maintaining our low cost structure positions us well to drive returns for our shareholders."

“In addition to running a great operation during the quarter and outperforming on our cost expectations, we are excited about our upcoming network additions.  During the quarter, we announced a major international expansion from Orlando to 11 destinations in Latin America and the Caribbean that we believe will nicely complement our existing international services,” said Ted Christie, Spirit’s President and Chief Financial Officer.  "Looking ahead to the third quarter, we expect the trend of year-over-year improvement in non-ticket revenue per passenger segment to continue.  We believe this, together with a continued strong demand environment, will allow us to deliver solid year-over-year TRASM improvement in the third quarter 2018.”

Revenue Performance
For the second quarter 2018, Spirit's total operating revenue was $851.8 million, an increase of 21.6 percent compared to the second quarter 2017, driven by an 18.9 percent increase in flight volume.

Total revenue per available seat mile ("TRASM") for the second quarter 2018 decreased 6.8 percent compared to the same period last year.  An increase in average stage length and the calendar shift of Easter contributed approximately 520 basis points to the Company's second quarter 2018 TRASM decline.

On a per passenger flight segment basis, total revenue for the second quarter 2018 was $112.76, flat compared to the second quarter last year.  Non-ticket revenue per passenger flight segment increased 3.0 percent to $54.572 and fare revenue per passenger flight segment decreased 2.8 percent to $58.19.

Cost Performance
For the second quarter 2018, total GAAP operating expenses, including special items of $4.8 million3, increased 30.7 percent year over year to $743.3 million.  Adjusted operating expenses for the second quarter 2018 increased 30.1 percent year over year to $738.4 million4.  These changes were primarily driven by increases in flight volume, fuel rates, and salaries, wages and benefits.

Aircraft fuel expense increased in the second quarter 2018 by 73.0 percent, compared to the same period last year, due to a 39.8 percent increase in the cost of fuel per gallon and a 24.1 percent increase in fuel gallons consumed.

Spirit reported second quarter 2018 cost per available seat mile ("ASM"), excluding special items and fuel (“Adjusted CASM ex-fuel”), of 5.17 cents4, a decrease of 11.3 percent compared to the same period last year.  Better operational performance was a large driver of this improvement and resulted in lower passenger re-accommodation expense and lower crew disruption expense per ASM (both recorded within other operating expenses), as well as improved labor productivity and efficiency, which helped to partially offset the impact of higher wage rates.  Additionally, aircraft rent per ASM was lower year over year, primarily due to the elimination of lease expense related to the 14 aircraft the Company purchased off-lease during the quarter.

Fleet
Spirit took delivery of one new A320ceo aircraft during the second quarter 2018, ending the quarter with 119 aircraft in its fleet.

Aircraft Purchase Agreement
On March 28, 2018, the Company entered into an aircraft purchase agreement to purchase 14 A319 aircraft, which were previously operated by the Company under operating lease agreements.  Upon execution of the agreement, the lease agreements associated with these aircraft were classified as capital leases on the balance sheet at lower of cost or fair value.  The difference between the resulting capital lease obligation and the purchase price was accreted as interest expense in special charges, non-operating in the statement of operations, through the closing of each individual purchase.  All the transactions were completed prior to June 30, 2018.  The amount of special charges, non-operating recognized for the three months ending June 30, 2018 related to these agreements was $79.4 million.

New Routes
Seattle - Fort Lauderdale (04/12/2018)*
Seattle - Chicago (04/12/2018)*
Seattle - Dallas (04/12/2018)*
Seattle - Minneapolis (04/12/2018)*
Tampa - Las Vegas (04/12/2018)
Tampa - Los Angeles (04/12/2018)*
Orlando - Las Vegas (04/12/2018)
Minneapolis - Myrtle Beach (04/12/2018)*
Fort Lauderdale - Cap-Haïtien, Haiti (04/12/2018)
Fort Lauderdale - Kingston, Jamaica (04/12/2018)**
Atlantic City - New Orleans (04/13/2018)*
Detroit - San Diego (04/23/2018)*
Fort Lauderdale - St. Maarten, U.S. Virgin Islands (05/05/2018)***
Fort Lauderdale - St. Croix, U.S. Virgin Islands (05/24/2018)

* Indicates seasonal service
** Indicates expanded seasonal daily service
*** Indicates resumed service

Conference Call/Webcast Detail
Spirit will conduct a conference call to discuss these results tomorrow, July 26, 2018, 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 extraordinary 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 500 daily flights to 67 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) See "Calculation of Total Non-ticket Revenue per Passenger Segment" table below for more details.
(3)  See "Special Items" table for more details.
(4) See "Reconciliation of Adjusted Operating Expense to GAAP Operating Expense" 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 data)
               
  Three Months Ended       Six Months Ended    
  June 30,   Percent   June 30,   Percent
  2018   2017   Change   2018   2017   Change
Operating revenues:                      
Passenger $ 836,350     $ 680,880     22.8     $ 1,525,491     $ 1,253,167     21.7  
Other 15,421     19,305     (20.1 )   30,418     36,975     (17.7 )
Total operating revenues 851,771     700,185     21.6     1,555,909     1,290,142     20.6  
                       
Operating expenses:                      
Aircraft fuel 246,180     142,294     73.0     450,826     282,076     59.8  
Salaries, wages and benefits
 
187,756     129,892     44.5     342,852     257,030     33.4  
Aircraft rent 41,745     52,566     (20.6 )   91,936     109,636     (16.1 )
Landing fees and other rents 58,602     45,592     28.5     108,232     86,040     25.8  
Depreciation and amortization 45,618     35,331     29.1     84,991     66,840     27.2  
Maintenance, materials and repairs 31,653     28,985     9.2     61,363     55,297     11.0  
Distribution 34,997     29,835     17.3     65,628     55,607     18.0  
Special charges 174         nm   89,342     4,776     nm
Loss on disposal of assets 4,644     1,493     nm   5,492     2,598     nm
Other operating 91,881     102,885     (10.7 )   185,523     180,588     2.7  
Total operating expenses 743,250     568,873     30.7     1,486,185     1,100,488     35.0  
                       
Operating income 108,521     131,312     (17.4 )   69,724     189,654     (63.2 )
                       
Other (income) expense:                      
Interest expense 20,498     13,746     49.1     38,347     26,219     46.3  
Capitalized interest (2,296 )   (3,342 )   (31.3 )   (4,548 )   (6,922 )   (34.3 )
Interest income (4,430 )   (1,828 )   142.3     (8,496 )   (3,141 )   170.5  
Other expense 188     104     nm   321     107     nm
Special charges, non-operating 79,412         nm   88,613         nm
Total other (income) expense 93,372     8,680     975.7     114,237     16,263     602.4  
                       
                       
Income (loss) before income taxes 15,149     122,632     (87.6 )   (44,513 )   173,391     (125.7 )
Provision (benefit) for income taxes 3,895     45,391     (91.4 )   (10,845 )   64,889     (116.7 )
                       
Net income (loss) $ 11,254     $ 77,241     (85.4 )   $ (33,668 )   $ 108,502     (131.0 )
Basic earnings (loss) per share $ 0.16     $ 1.11     (85.6 )   $ (0.49 )   $ 1.56     (131.4 )
Diluted earnings (loss) per share $ 0.16     $ 1.11     (85.6 )   $ (0.49 )   $ 1.56     (131.4 )
                       
Weighted average shares, basic 68,251     69,370     (1.6 )   68,237     69,359     (1.6 )
Weighted average shares, diluted 68,310     69,561     (1.8 )   68,237     69,576     (1.9 )

 

SPIRIT AIRLINES, INC.
Condensed Statements of Comprehensive Income (Loss)
(unaudited, in thousands)
       
  Three Months Ended   Six Months Ended
  June 30,   June 30,
  2018   2017   2018   2017
Net income (loss) $ 11,254     $ 77,241     $ (33,668 )   $ 108,502  
Unrealized gain (loss) on short-term investment securities, net of deferred taxes of $33, ($6), $26 and ($14) 101     (11 )   78     (24 )
Interest rate derivative loss reclassified into earnings, net of taxes of $18, $31, $39 and $62
 
61     53     120     107  
Other comprehensive income $ 162     $ 42     $ 198     $ 83  
Comprehensive income (loss) $ 11,416     $ 77,283     $ (33,470 )   $ 108,585  

 

SPIRIT AIRLINES, INC.
Condensed Balance Sheets
(unaudited, in thousands)
       
  June 30,   December 31,
  2018   2017
Assets      
Current assets:      
Cash and cash equivalents $ 812,362     $ 800,849  
Short-term investment securities 101,714     100,937  
Accounts receivable, net 58,547     49,323  
Aircraft maintenance deposits, net 107,252     175,615  
Income tax receivable 70,672     69,844  
Prepaid expenses and other current assets 79,788     85,542  
Total current assets 1,230,335     1,282,110  
       
Property and equipment:      
Flight equipment 2,911,378     2,291,110  
Ground property and equipment 168,039     155,166  
Less accumulated depreciation (261,314 )   (207,808 )
  2,818,103     2,238,468  
Deposits on flight equipment purchase contracts 240,224     253,687  
Long-term aircraft maintenance deposits 141,183     150,617  
Deferred heavy maintenance, net 172,799     99,915  
Other long-term assets 79,081     121,003  
Total assets $ 4,681,725     $ 4,145,800  
       
Liabilities and shareholders’ equity      
Current liabilities:      
Accounts payable $ 50,310     $ 22,822  
Air traffic liability 357,645     263,711  
Current maturities of long-term debt and capital leases 145,865     115,430  
Other current liabilities 346,407     262,370  
Total current liabilities 900,227     664,333  
       
Long-term debt, less current maturities 1,731,766     1,387,498  
Deferred income taxes 295,601     308,814  
Deferred gains and other long-term liabilities 20,630     22,581  
Shareholders’ equity:      
Common stock 7     7  
Additional paid-in-capital 365,536     360,153  
Treasury stock, at cost (66,840 )   (65,854 )
Retained earnings 1,436,064     1,469,732  
Accumulated other comprehensive income (loss) (1,266 )   (1,464 )
Total shareholders’ equity 1,733,501     1,762,574  
Total liabilities and shareholders’ equity $ 4,681,725     $ 4,145,800  

 

SPIRIT AIRLINES, INC.
Condensed Statement of Cash Flows (unaudited, in thousands)
   
  Six Months Ended June 30,
  2018   2017
Operating activities:      
Net income (loss) $ (33,668 )   $ 108,502  
Adjustments to reconcile net income (loss) to net cash provided by operations:      
Losses reclassified from other comprehensive income 159     167  
Stock-based compensation 5,381     4,671  
Allowance for doubtful accounts (recoveries) (12 )   (51 )
Amortization of deferred gains and losses and debt issuance costs 4,552     4,761  
Depreciation and amortization 84,991     66,840  
Deferred income tax expense (benefit) (17,604 )   64,789  
Loss on disposal of assets 5,492     2,598  
Lease termination costs     4,776  
Special charges, non-operating 88,613      
       
Changes in operating assets and liabilities:      
Accounts receivable (9,212 )   (6,808 )
Aircraft maintenance deposits, net 11,222     (17,940 )
Prepaid income taxes     (1,598 )
Long-term deposits and other assets 3,003     (17,507 )
Deferred heavy maintenance (94,267 )   (28,191 )
Income tax receivable (828 )    
Accounts payable 25,413     16,387  
Air traffic liability 93,936     108,574  
Other liabilities 83,809     13,518  
Other 8     239  
Net cash provided by operating activities 250,988     323,727  
Investing activities:      
Purchase of available-for-sale investment securities (73,687 )   (68,459 )
Proceeds from the maturity of available-for-sale investment securities 72,964     67,857  
Proceeds from sale of property and equipment 9,500      
Pre-delivery deposits for flight equipment, net of refunds (92,205 )   (79,357 )
Capitalized interest (4,178 )   (6,375 )
Purchase of property and equipment (323,229 )   (269,519 )
Net cash used in investing activities (410,835 )   (355,853 )
Financing activities:      
Proceeds from issuance of long-term debt 440,340     255,827  
Proceeds from stock options exercised 2     29  
Payments on debt obligations (60,649 )   (49,980 )
Payments on capital lease obligations (205,403 )   (119 )
Repurchase of common stock (986 )   (1,217 )
Debt issuance costs (1,944 )   (4,164 )
Net cash provided by financing activities 171,360     200,376  
Net (decrease) increase in cash and cash equivalents 11,513     168,250  
Cash and cash equivalents at beginning of period 800,849     700,900  
Cash and cash equivalents at end of period $ 812,362     $ 869,150  
Supplemental disclosures      
Cash payments for:      
Interest, net of capitalized interest $ 16,769     $ 16,869  
Income taxes paid, net of refunds $ 3,270     $ 4,340  
Non-cash transactions:      
Capital expenditures funded by capital lease borrowings $ (315 )   $ (1,370 )

Certain prior period amounts have been reclassified to conform to the current year's presentation.

 

SPIRIT AIRLINES, INC.
Selected Operating Statistics (unaudited)
       
  Three Months Ended June 30,    
Operating Statistics 2018   2017   Change
Available seat miles (ASMs) (thousands) 9,515,842     7,294,578     30.5 %
Revenue passenger miles (RPMs) (thousands) 7,961,128     6,219,638     28.0 %
Load factor (%) 83.7     85.3     (1.6 ) pts
Passenger flight segments (thousands) 7,554     6,206     21.7 %
Block hours 136,357     109,296     24.8 %
Departures 49,404     41,563     18.9 %
Total operating revenue per ASM (TRASM) (cents) 8.95     9.60     (6.8 )%
Average yield (cents) 10.70     11.26     (5.0 )%
Fare revenue per passenger flight segment ($) 58.19     59.85     (2.8 )%
Non-ticket revenue per passenger flight segment ($) 54.57     52.97     3.0 %
Total revenue per passenger flight segment ($) 112.76     112.82     (0.1 )%
CASM (cents) 7.81     7.80     0.1 %
Adjusted CASM (cents) (1) 7.76     7.78     (0.3 )%
Adjusted CASM ex-fuel (cents) (2) 5.17     5.83     (11.3 )%
Fuel gallons consumed (thousands) 106,144     85,533     24.1 %
Average economic fuel cost per gallon ($) 2.32     1.66     39.8 %
Aircraft at end of period 119     104     14.4 %
Average daily aircraft utilization (hours) 12.6     11.7     7.7 %
Average stage length (miles) 1,051     982     7.0 %

 

           
  Six Months Ended June 30,    
Operating Statistics 2018   2017   Change
Available seat miles (ASMs) (thousands) 17,924,606     14,170,478     26.5 %
Revenue passenger miles (RPMs) (thousands) 14,774,647     11,833,060     24.9 %
Load factor (%) 82.4     83.5     (1.1 ) pts
Passenger flight segments (thousands) 14,092     11,775     19.7 %
Block hours 259,310     213,332     21.6 %
Departures 94,386     80,893     16.7 %
Total operating revenue per ASM (TRASM) (cents) 8.68     9.10     (4.6 )%
Average yield (cents) 10.53     10.90     (3.4 )%
Fare revenue per passenger flight segment ($) 55.51     56.94     (2.5 )%
Non-ticket revenue per passenger flight segment ($) 54.90     52.63     4.3 %
Total revenue per passenger flight segment ($) 110.41     109.57     0.8 %
CASM (cents) 8.29     7.77     6.7 %
Adjusted CASM (cents) (1) 7.76     7.71     0.6 %
Adjusted CASM ex-fuel (cents) (2) 5.25     5.72     (8.2 )%
Fuel gallons consumed (thousands) 201,147     164,597     22.2 %
Average economic fuel cost per gallon ($) 2.24     1.71     31.0 %
Average daily aircraft utilization (hours) 12.3     11.8     4.2 %
Average stage length (miles) 1,038     983     5.6 %

(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 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.

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) 2018   2017   2018   2017
Operating revenues              
Fare $ 439,549     $ 371,443     $ 782,244     $ 670,478  
Non-fare 396,801     309,437     743,247     582,689  
Total passenger revenues 836,350     680,880     1,525,491     1,253,167  
Other revenues 15,421     19,305     30,418     36,975  
Total operating revenues $ 851,771     $ 700,185     $ 1,555,909     $ 1,290,142  
               
Non-ticket revenues (1) $ 412,222     $ 328,742     $ 773,665     $ 619,664  
               
Passenger segments 7,554     6,206     14,092     11,775  
               
Non-ticket revenue per passenger segment ($) $ 54.57     $ 52.97     $ 54.90     $ 52.63  

(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) 2018   2017   2018   2017
Operating special items include the following:              
Loss on disposal of assets 4,644     1,493     5,492     2,598  
Operating special charges (1) 174         89,342     4,776  
Total operating special items $ 4,818     $ 1,493     $ 94,834     $ 7,374  
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 $ 84,230     $ 1,493     $ 183,447     $ 7,374  

(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 the first quarter 2018.  Operating special charges for 2017 are related to engine lease termination costs.

(2) Non-operating special charges in 2018 are related to the purchase of 14 A319 aircraft, previously operated by the Company under operating leases.  Upon execution of the purchase agreement, the lease agreements associated with these aircraft were classified as capital leases on the balance sheet at lower of cost or fair value.  The difference between the resulting capital lease obligation and the purchase price was accreted as interest expense in special charges, non-operating in the statement of operations, through the closing of each individual purchase.  All the transactions were completed prior to June 30, 2018.

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) 2018   2017   2018   2017
Total operating expenses, as reported $ 743,250     $ 568,873     $ 1,486,185     $ 1,100,488  
Less operating special items 4,818     1,493     94,834     7,374  
Adjusted operating expenses, non-GAAP (1) 738,432     567,380     1,391,351     1,093,114  
Less: Economic fuel expense 246,180     142,294     450,826     282,076  
Adjusted operating expenses excluding fuel, non-GAAP (2) $ 492,252     $ 425,086     $ 940,525     $ 811,038  
               
Available seat miles 9,515,842     7,294,578     17,924,606     14,170,478  
               
CASM (cents) 7.81     7.80     8.29     7.77  
Adjusted CASM (cents) (1) 7.76     7.78     7.76     7.71  
Adjusted CASM ex-fuel (cents) (2) 5.17     5.83     5.25     5.72  

(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)   2018     2017     2018     2017
Net income (loss), as reported $ 11,254     $ 77,241     $ (33,668 )   $ 108,502  
Add: Provision (benefit) for income taxes   3,895       45,391       (10,845 )     64,889  
Income (loss) before income taxes, as reported   15,149       122,632       (44,513 )     173,391  
Pre-tax margin   1.8 %     17.5 %     (2.9 )%     13.4 %
Add special items (1) $ 84,230     $ 1,493     $ 183,447     $ 7,374  
Adjusted income before income taxes, non-GAAP (2)   99,379       124,125       138,934       180,765  
Adjusted pre-tax margin, non-GAAP (2)   11.7 %     17.7 %     8.9 %     14.0 %
Add:  Total other (income) expense (3)   13,960       8,680       25,624       16,263  
Adjusted operating income, non-GAAP (4)   113,339       132,805       164,558       197,028  
Adjusted operating margin, non-GAAP (4)   13.3 %     19.0 %     10.6 %     15.3 %
               
Provision for income taxes   23,645       45,939       33,257     $ 67,696  
Adjusted net income, non-GAAP (2) $ 75,734     $ 78,186     $ 105,677     $ 113,069  
               
Weighted average shares, diluted   68,310       69,561       68,237       69,576  
               
Adjusted net income per share, diluted (2) $   1.11     $   1.12     $   1.55     $   1.63  
               
Total operating revenues $ 851,771     $ 700,185     $ 1,555,909     $ 1,290,142  

(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.

The Company tracks a non-GAAP calculation of Return on Invested Capital ("ROIC"), as a way of measuring our efficiency in delivering returns and in allocating capital.  We calculate ROIC as Adjusted Operating Income (non-GAAP), divided by Total Invested Capital (non-GAAP), on a pre-tax and after-tax basis, expressed as a percentage.

Because a substantial portion of our aircraft fleet is held under operating leases, which do not appear on the balance sheet, a GAAP-based calculation of our total capital deployed may be considered understated (which would have the effect of overstating ROIC, if calculated solely using GAAP line items).  Accordingly, we adjust our total capital, the denominator of the ROIC measurement, by capitalizing operating leases at a multiple of seven times our aircraft rent expense, a measure used commonly in the airline industry and by analysts.

To calculate Adjusted Operating Income (non-GAAP), we add back aircraft rent to GAAP operating income, consistent with the adjustment to total capital discussed above.  In order to remove the effects of non-recurring gains and losses that may affect GAAP operating income, we also exclude special items from Adjusted Operating Income (non-GAAP). We present Adjusted Operating Income (non-GAAP) on a pre-tax basis and present Adjusted Operating Income (non-GAAP) on an after-tax basis, using our effective tax rate for the period.

Calculation of Return on Invested Capital, non-GAAP
 (unaudited)

  Twelve Months Ended
(in thousands) June 30, 2018
Operating income, as reported $ 264,895  
Add operating special items (1) 100,171  
Adjustment for aircraft rent 192,237  
Adjusted operating income, non-GAAP 557,303  
Tax (31.2%) 173,879  
Adjusted operating income, after-tax, non-GAAP $ 383,424  
Invested capital:  
Adjusted total debt $ 1,877,631  
Book equity 1,733,501  
Less: Unrestricted cash, cash equivalents & short-term investments 914,076  
Add: Capitalized aircraft operating leases (7x Aircraft Rent) 1,345,659  
Total invested capital, non-GAAP $ 4,042,715  
   
Return on invested capital (ROIC), pre-tax, non-GAAP 13.8 %
Return on invested capital (ROIC), after-tax, non-GAAP 9.5 %

(1) See "Special Items" for more details.

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.