Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 26, 2018
____________________
SPIRIT AIRLINES, INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation)

001-35186
(Commission File Number)
38-1747023
(IRS Employer Identification Number)

2800 Executive Way
Miramar, Florida 33025
(Address of principal executive offices, including Zip Code)

(954) 447-7920
(Registrant's telephone number, including area code)
____________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
[]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
[]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
[]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
  






The information in this report furnished pursuant to Item 2.02 shall not be deemed “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to liability under that section. It may only be incorporated by reference in another filing under the Exchange Act or the Securities Act of 1933, as amended (the “Securities Act”), if such subsequent filing specifically references the information furnished pursuant to Item 2.02 of this report.


Item 2.02.
Results of Operations and Financial Condition.
On April 26, 2018, Spirit Airlines, Inc. (the “Company” or “Spirit”) issued a press release announcing its unaudited financial results for the first quarter 2018. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
Non-GAAP financial measures that reflect adjustments from historical financial data prepared under GAAP, including adjustments for special items, are included in the press release as supplemental disclosures because the Company believes they are useful indicators of the Company's operating performance for comparative purposes. These non-GAAP financial measures are well recognized performance measurements in the airline industry that are frequently used by investors, securities analysts and other interested parties in comparing the operating performance of companies in the airline industry. The non-GAAP financial measures provided have limitations as an analytical tool. Because of these limitations, non-GAAP financial measures should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. The Company has also provided in the press release reconciliations of these non-GAAP financial measures to the appropriate GAAP financial measures.


Item 9.01.
Financial Statements and Exhibits.
(d)    Exhibits

The following is furnished as an exhibit to this report and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act:

Exhibit No.
Description
 
 
99.1
Press Release regarding first quarter 2018 financial results.









SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


Date: April 26, 2018
SPIRIT AIRLINES, INC.


By: /s/ Thomas Canfield    
Name: Thomas Canfield
Title: Senior Vice President and General Counsel




EXHIBIT INDEX

Exhibit No.
Description
 
 

 


Exhibit


http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12204507&doc=3EXHIBIT 99.1

Spirit Airlines Reports First Quarter 2018 Results

MIRAMAR, Fla., April 26, 2018 - Spirit Airlines, Inc. (NYSE: SAVE) today reported first quarter 2018 financial results.
For the first quarter 2018, Spirit reported a GAAP net loss of $44.9 million (loss of $0.66 per diluted share). Excluding special items, first quarter 2018 net income was $29.9 million ($0.44 per diluted share)1.

GAAP operating margin for the first quarter 2018 was negative 5.5 percent. Excluding special items, operating margin for the first quarter 2018 was 7.3 percent1.

Spirit ended the first quarter 2018 with unrestricted cash, cash equivalents, and short-term investments of $999.7 million.

“We ran a very good operation in the first quarter 2018, despite numerous winter storms. We achieved a record high March DOT on-time performance of 85.1 percent, an increase of 10.1 percentage points year over year, contributing to a record high first quarter DOT on-time performance of 83.4 percent.  I congratulate and thank the Spirit family for delivering this operational excellence.  I’m also pleased to say that during the quarter, we finalized a five-year contract with our pilot union.  This new contract provides our pilots increased wage rates and gives the Company the platform to further improve our operational reliability,” said Robert Fornaro, Spirit’s Chief Executive Officer.

Revenue Performance
For the first quarter 2018, Spirit's total operating revenue was $704.1 million, an increase of 19.4 percent compared to the first quarter 2017, driven by a 14.4 percent increase in flight volume.

Total revenue per available seat mile ("TRASM") for the first quarter 2018 decreased 2.4 percent compared to the same period last year, primarily driven by a 1.7 percent decrease in operating yields and a 4.1 percent increase in average stage length. During the first quarter 2018, the Company's results benefited from the calendar shift of Easter by approximately 200 basis points.

On a per passenger flight segment basis, total revenue for the first quarter 2018 increased 1.7 percent year over year to $107.71, driven by non-ticket revenue per passenger flight segment increasing 5.9 percent to $55.292, partially offset by fare revenue per passenger flight segment decreasing 2.4 percent to $52.42.

Cost Performance
For the first quarter 2018, total GAAP operating expense, including special items of $90.0 million3, increased 39.8 percent, or $211.3 million year over year to $742.9 million. The year-over-year increase in GAAP operating expense was primarily driven by special charges in connection with the new pilot agreement approved in February 2018; increased flight volume; and higher fuel rates.


1




Adjusted operating expense for the first quarter 2018 increased 24.2 percent, or $127.2 million to $652.9 million4. The year-over-year increase in adjusted operating expense was primarily driven by increases in flight volume, salaries, wages and benefits, and fuel rates. In addition, higher rates for crew lodging and ground handling, along with greater deicing expense, drove an increase in other operating expense.

Aircraft fuel expense increased in the first quarter 2018 by 46.4 percent, or $64.9 million, compared to the same period last year, due to a 21.5 percent increase in the cost of fuel per gallon and a 20.2 percent increase in fuel gallons consumed.
 
Spirit reported first quarter 2018 cost per available seat mile ("ASM"), excluding special items and fuel (“Adjusted CASM ex-fuel”), of 5.33 cents4, a decrease of 5.0 percent compared to the same period last year. The decrease year over year was primarily driven by lower aircraft rent per ASM.

Labor
Spirit and its pilots, represented by the Air Line Pilots Association, announced the ratification of a new five-year working agreement in February 2018.

Fleet
Spirit took delivery of five new A321ceo aircraft and one new A320ceo aircraft during the first quarter 2018, ending the quarter with 118 aircraft in its fleet.

Aircraft Agreement
On March 28, 2018, the Company entered into an agreement with an aircraft lessor to purchase 14 A319 aircraft, which the Company was operating under lease agreements. The purchases of all 14 aircraft are scheduled throughout the second quarter of 2018, for an aggregate gross purchase price of $285.0 million, which will be reduced by the application of maintenance reserves and security deposits held by the lessor. Effective March 31, 2018, the lease agreements associated with these aircraft will be classified as capital leases on the balance sheet until the closing of each individual sale. All transactions are anticipated to be completed prior to June 30, 2018.

Recent New Routes and Service Announcements
Columbus, Ohio - Fort Lauderdale (02/15/2018)
Columbus, Ohio - Orlando (02/15/2018)
Columbus, Ohio - Las Vegas (02/15/2018)
Columbus, Ohio - Fort Myers (02/15/18)*
Columbus, Ohio - Tampa (02/15/2018)*
Richmond - Fort Lauderdale (03/15/2018)
Richmond - Orlando (03/15/2018)
Fort Lauderdale - Guayaquil, Ecuador (03/22/2018)
Baltimore - Denver (03/22/2018)
Baltimore - Montego Bay (03/22/2018)
Columbus, Ohio - Myrtle Beach (03/22/2018)*
Columbus, Ohio - New Orleans (03/22/2018)*
Atlantic City - New Orleans (04/12/2018)
Fort Lauderdale - St. Croix, U.S. Virgin Islands (05/24/2018)

* Indicates seasonal service

Conference Call/Webcast Detail
Spirit will conduct a conference call to discuss these results today, April 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.



2




About Spirit Airlines:
Spirit Airlines (NYSE: 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 Fit Fleet™, the youngest fleet of any major U.S. airline, we operate more than 500 daily flights to 65 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, 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.


3




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


 
Three Months Ended
 
 
 
March 31,
 
Percent

2018

2017
 
Change
Operating revenues:
 
 
 
 

Passenger
$
689,141

 
$
572,287

 
20.4

Other
14,997

 
17,670

 
(15.1
)
Total operating revenues
704,138

 
589,957

 
19.4

 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
Aircraft fuel
204,646

 
139,782

 
46.4

Salaries, wages and benefits
155,096

 
127,138

 
22.0

Aircraft rent
50,191

 
57,070

 
(12.1
)
Landing fees and other rents
49,630

 
40,448

 
22.7

Depreciation and amortization
39,373

 
31,509

 
25.0

Maintenance, materials and repairs
29,710

 
26,312

 
12.9

Distribution
30,631

 
25,772

 
18.9

Special charges
89,168

 
4,776

 
nm

Loss on disposal of assets
848

 
1,105

 
nm

Other operating
93,642

 
77,703

 
20.5

Total operating expenses
742,935

 
531,615

 
39.8

 
 
 
 
 
 
Operating income (loss)
(38,797
)
 
58,342

 
(166.5
)
 
 
 
 
 
 
Other (income) expense:
 
 
 
 
 
Interest expense
17,849

 
12,473

 
43.1

Capitalized interest
(2,252
)
 
(3,580
)
 
(37.1
)
Interest income
(4,066
)
 
(1,313
)
 
209.7

Other expense
133

 
3

 
nm

Special charges, non-operating
9,201

 

 
nm

Total other (income) expense
20,865

 
7,583

 
175.2

 
 
 
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes
(59,662
)
 
50,759

 
(217.5
)
Provision (benefit) for income taxes
(14,740
)
 
19,498

 
(175.6
)
 
 
 
 
 
 
Net income (loss)
$
(44,922
)
 
$
31,261

 
(243.7
)
Basic earnings per share
$
(0.66
)
 
$
0.45

 
(246.7
)
Diluted earnings per share
$
(0.66
)
 
$
0.45

 
(246.7
)

 
 
 
 
 
Weighted average shares, basic
68,222

 
69,348

 
(1.6
)
Weighted average shares, diluted
68,222

 
69,592

 
(2.0
)




4




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

 
Three Months Ended
 
March 31,
 
2018
 
2017
Net income (loss)
$
(44,922
)
 
$
31,261

Unrealized gain (loss) on short-term investment securities, net of deferred taxes of ($8) and ($8)
(23
)
 
(13
)
Interest rate derivative loss reclassified into earnings, net of taxes of $21 and $31
58

 
53

Other comprehensive income (loss)
$
35

 
$
40

Comprehensive income (loss)
$
(44,887
)
 
$
31,301





5




SPIRIT AIRLINES, INC.
Condensed Balance Sheets
(unaudited, in thousands)
 
March 31,
 
December 31,
 
2018
 
2017
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
898,457

 
$
800,849

Short-term investment securities
101,254

 
100,937

Accounts receivable, net
52,313

 
49,323

Aircraft maintenance deposits, net
95,167

 
175,615

Income tax receivable
69,844

 
69,844

Prepaid expenses and other current assets
81,806

 
85,542

Total current assets
1,298,841

 
1,282,110

 
 
 
 
Property and equipment:
 
 
 
Flight equipment
2,853,431

 
2,291,110

Ground property and equipment
161,398

 
155,166

Less accumulated depreciation
(235,532
)
 
(207,808
)
 
2,779,297

 
2,238,468

Deposits on flight equipment purchase contracts
205,040

 
253,687

Long-term aircraft maintenance deposits
149,751

 
150,617

Deferred heavy maintenance, net
138,942

 
99,915

Other long-term assets
82,560

 
121,003

Total assets
$
4,654,431

 
$
4,145,800

 
 
 
 
Liabilities and shareholders’ equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
31,674

 
$
22,822

Air traffic liability
357,193

 
263,711

Current maturities of long-term debt and capital leases
280,281

 
115,430

Other current liabilities
378,178

 
262,370

Total current liabilities
1,047,326

 
664,333

 
 
 
 
Long-term debt, less current maturities
1,570,926

 
1,387,498

Deferred income taxes
292,888

 
308,814

Deferred gains and other long-term liabilities
23,486

 
22,581

Shareholders’ equity:
 
 
 
Common stock
7

 
7

Additional paid-in-capital
363,230

 
360,153

Treasury stock, at cost
(66,813
)
 
(65,854
)
Retained earnings
1,424,810

 
1,469,732

Accumulated other comprehensive loss
(1,429
)
 
(1,464
)
Total shareholders’ equity
1,719,805

 
1,762,574

Total liabilities and shareholders’ equity
$
4,654,431

 
$
4,145,800



6




SPIRIT AIRLINES, INC.
Condensed Statement of Cash Flows (unaudited, in thousands)
 
Three Months Ended March 31,
 
2018
 
2017
Operating activities:
 
 
 
Net income
$
(44,922
)
 
$
31,261

Adjustments to reconcile net income to net cash provided by operations:
 
 
 
Losses reclassified from other comprehensive income
79

 
84

Stock-based compensation
3,075

 
2,816

Allowance for doubtful accounts (recoveries)
(7
)
 
(30
)
Amortization of deferred gains and losses and debt issuance costs
1,624

 
3,351

Depreciation and amortization
39,373

 
31,509

Deferred income tax expense (benefit)
(20,266
)
 
19,474

Loss on disposal of assets
848

 
1,105

Lease termination costs

 
4,776

Special charges, non-operating
9,201

 

 
 
 
 
Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(2,983
)
 
(7,526
)
Aircraft maintenance deposits, net
14,844

 
(12,774
)
Prepaid income taxes

 
(846
)
Long-term deposits and other assets
3,512

 
(13,559
)
Deferred heavy maintenance
(50,712
)
 
(9,558
)
Accounts payable
6,227

 
18,937

Air traffic liability
93,483

 
104,285

Other liabilities
117,779

 
(382
)
Other
(20
)
 
115

Net cash provided by operating activities
171,135

 
173,038

Investing activities:
 
 
 
Purchase of available-for-sale investment securities
(30,853
)
 
(24,490
)
Proceeds from the maturity of available-for-sale investment securities
30,504

 
24,219

Pre-delivery deposits for flight equipment, net of refunds
(41,580
)
 
(44,752
)
Capitalized interest
(1,500
)
 
(1,647
)
Purchase of property and equipment
(237,221
)
 
(111,141
)
Net cash used in investing activities
(280,650
)
 
(157,811
)
Financing activities:
 
 
 
Proceeds from issuance of long-term debt
227,128

 
115,526

Proceeds from stock options exercised
2

 

Payments on debt and capital lease obligations
(18,847
)
 
(10,235
)
Repurchase of common stock
(959
)
 
(1,034
)
Debt issuance costs
(201
)
 
(2,274
)
Net cash provided by financing activities
207,123

 
101,983

Net (decrease) increase in cash and cash equivalents
97,608

 
117,210

Cash and cash equivalents at beginning of period
800,849

 
700,900

Cash and cash equivalents at end of period
$
898,457

 
$
818,110

Supplemental disclosures
 
 
 
Cash payments for:
 
 
 
Interest, net of capitalized interest
$
8,569

 
$
3,943

Income taxes paid, net of refunds
$
679

 
$
2,881

Non-cash transactions:
 
 
 
Capital expenditures funded by capital lease borrowings
$
(237,042
)
 
$
(130
)

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

7




SPIRIT AIRLINES, INC.
Selected Operating Statistics (unaudited)
 
Three Months Ended March 31,

 
Operating Statistics
2018

2017

Change
Available seat miles (ASMs) (thousands)
8,408,764


6,875,899


22.3
 %
Revenue passenger miles (RPMs) (thousands)
6,813,519


5,613,422


21.4
 %
Load factor (%)
81.0


81.6


(0.6
) pts
Passenger flight segments (thousands)
6,537


5,570


17.4
 %
Block hours
122,954


104,035


18.2
 %
Departures
44,982


39,330


14.4
 %
Total operating revenue per ASM (TRASM) (cents)
8.37


8.58


(2.4
)%
Average yield (cents)
10.33


10.51


(1.7
)%
Average fare revenue per passenger flight segment ($)
52.42


53.69


(2.4
)%
Average non-ticket revenue per passenger flight segment ($)
55.29


52.23


5.9
 %
Total revenue per passenger flight segment ($)
107.71


105.92


1.7
 %
CASM (cents)
8.84


7.73


14.4
 %
Adjusted CASM (cents) (1)
7.76


7.65


1.4
 %
Adjusted CASM ex-fuel (cents) (2)
5.33


5.61


(5.0
)%
Fuel gallons consumed (thousands)
95,003


79,064


20.2
 %
Average economic fuel cost per gallon ($)
2.15


1.77


21.5
 %
Aircraft at end of period
118


100


18.0
 %
Average daily aircraft utilization (hours)
12.0


11.9


0.8
 %
Average stage length (miles)
1,025


985


4.1
 %
 
 
 
 
 
 

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

















8




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.
Special Items
(unaudited)
 
Three Months Ended
 
March 31,
(in thousands)
2018
 
2017
Operating special items include the following:
 
 
 
Loss on disposal of assets
848

 
1,105

Operating special charges (1)
89,168

 
4,776

Total operating special items
$
90,016

 
$
5,881

Non-operating special items include the following:
 
 
 
Non-operating special charges (2)
9,201

 

Total non-operating special items
$
9,201

 
$

 
 
 
 
Total special items
$
99,217

 
$
5,881



(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. Operating special charges for the first quarter of 2017 primarily consisted of lease termination costs.
(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 capital 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)
2018

2017
Total operating expenses, as reported
$
742,935

 
$
531,615

Less operating special items
90,016

 
5,881

Adjusted operating expenses, non-GAAP (1)
652,919

 
525,734

Less: Economic fuel expense
204,646

 
139,782

Adjusted operating expenses excluding fuel, non-GAAP (2)
$
448,273

 
$
385,952


 
 
 
Available seat miles
8,408,764

 
6,875,899


 
 
 
CASM (cents)
8.84

 
7.73

Adjusted CASM (cents) (1)
7.76

 
7.65

Adjusted CASM ex-fuel (cents) (2)
5.33

 
5.61




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


9




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)
2018
 
2017
Net income (loss), as reported
$
(44,922
)
 
$
31,261

Add: Provision (benefit) for income taxes
(14,740
)
 
19,498

Income (loss) before income taxes, as reported
(59,662
)
 
50,759

Pre-tax margin
(8.5
)%
 
8.6
%
Add special items (1)
$
99,217

 
$
5,881

Adjusted income before income taxes, non-GAAP (2)
39,555

 
56,640

Adjusted pre-tax margin, non-GAAP (2)
5.6
 %
 
9.6
%
Add: Total other (income) expense (3)
11,664

 
7,583

Adjusted operating income, non-GAAP (4)
51,219

 
64,223

Adjusted operating margin, non-GAAP (4)
7.3
 %
 
10.9
%
 
 
 
 
Provision for income taxes
9,612

 
21,757

Adjusted net income, non-GAAP (2)
$
29,943

 
$
34,883

 
 
 
 
Weighted average shares, diluted
68,222

 
69,592

 
 
 
 
Adjusted net income per share, diluted (2)
$0.44
 
$0.50
 
 
 
 
Total operating revenues
$
704,138

 
$
589,957











(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.












10




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

 
Three Months Ended March 31,
 
2018
 
2017
 
(in thousands, except per segment data)
Operating revenue
 
 
 
Fare
$
342,695

 
$
299,035

Non-fare
346,446

 
273,252

Total passenger revenue
689,141

 
572,287

Other revenue
14,997

 
17,670

Total operating revenue
$
704,138

 
$
589,957

 
 
 
 
Non-ticket revenue (1)
$
361,443

 
$
290,922

 
 
 
 
Passenger segments
6,537

 
5,570

 
 
 
 
Total non-ticket revenue per passenger segment ($)
$
55.29

 
$
52.23





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
















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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)
March 31, 2018
Operating income
$
287,686

Add operating special items (1)
96,846

Adjustment for aircraft rent
203,058

Adjusted operating income, non-GAAP
587,590

Tax (35.4%)
208,007

Adjusted operating income, after-tax, non-GAAP
$
379,583

Invested capital:
 
Adjusted total debt (2)
$
1,707,416

Book equity
1,719,805

Less: Unrestricted cash, cash equivalents & short-term investments
999,711

Add: Capitalized aircraft operating leases (7x Aircraft Rent)
1,421,406

Total invested capital, non-GAAP
$
3,848,916

 
 
Return on invested capital (ROIC), pre-tax, non-GAAP
15.3
%
Return on invested capital (ROIC), after-tax, non-GAAP
9.9
%








(1)
See "Special Items" for more details
(2)
Excludes the effect of temporarily capitalizing the leases associated with the purchase of 14 leased A319 aircraft. Aircraft rent associated with these aircraft is included in aircraft rent.


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