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): July 25, 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))
 
  






Item 2.02.
Results of Operations and Financial Condition.
On July 25, 2018, Spirit Airlines, Inc. (the “Company” or “Spirit”) issued a press release announcing its unaudited financial results for the second 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 7.01
Regulation FD Disclosure.
The information in this report furnished pursuant to Item 7.01 shall not be deemed “filed” for the purposes of Section 18 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of 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 7.01 of this report.
On July 25, 2018, the Company provided an update to investors regarding the Company's third quarter and full year 2018 guidance; a copy of which is attached hereto as Exhibit 99.2 and is incorporated herein by reference. The guidance provided therein is only an estimate of what the Company believes is realizable as of the date of this investor update. Actual results may vary from the guidance and the variations may be material. The Company undertakes no intent or obligation to publicly update or revise any of these projections, whether as a result of new information, future events or otherwise, except as required by law.


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 second quarter 2018 financial results.
99.2
Investor Update Regarding third quarter and full year 2018 guidance.









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: July 25, 2018
SPIRIT AIRLINES, INC.


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




EXHIBIT INDEX

Exhibit No.
Description
 
 
99.1
99.2

 


Exhibit


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EXHIBIT 99.1


Spirit Airlines Reports Second Quarter 2018 Results

MIRAMAR, Fla., July 25, 2018 - 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

1




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



2




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.


3




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
)




4




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





5




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



6




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.

7




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.




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.
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.

9




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.

10




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.



###









11

Exhibit


http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12369318&doc=6 Exhibit 99.2
Investor Update
July 25, 2018
This investor update provides Spirit's third quarter and full year 2018 guidance. All data is based on preliminary estimates.
Total revenue per available seat mile (“TRASM”) for the third quarter 2018 is estimated to be up between 2 to 3 percent year over year.  This takes into account a 170 basis point drag from a 3.4 percent increase in average stage length compared to the second quarter last year as well as an estimated 100 basis point negative impact related to softness in Cancun believed to be driven by recent travel warnings for the region.
Year over year capacity growth for the third quarter is estimated to be up approximately 24.5 percent.  This includes 350 basis points of growth related to the cancellations in the third quarter last year due to several hurricanes. 
 
 
 
3Q18E
 
 
 
FY18E
 
Capacity - Available Seat Miles (ASMs)
 
 
 
 
 
Year-over-Year % Change
24.5%
 
22.7%
 
 
 
 
 
 
 
 
 
Total Revenue per ASM (TRASM) (Cents)
 
 
 
 
 
 
 
Year-over-Year % Change
Up 2% to 3%
 
 
 
 
Adjusted Operating Expense Ex-Fuel per ASM
 
 
 
 
 
 
 
Adjusted CASM ex-fuel year-over-year % change(1)
Down 3% to 4%
 
Down 3.5% to 4.0%
 
 
 
 
 
 
Average Stage Length (Miles)
 
1,040
 
 
 
1,037
 
 
 
 
 
 
 
 
 
Fuel Expense
 
 
 
 
 
 
 
Fuel gallons (Millions)
 
110.4
 
 
 
~410
 
Economic fuel cost per gallon ($)(2)
 
$2.33
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Selected Operating Expenses ($Millions)
 
 
 
 
 
Aircraft rent
 
$43.0
 
 
$175 to $180
Depreciation and amortization
 
$46.9
 
 
$180 to $185
 
 
 
 
 
 
 
 
 
Interest Expense, net of Capitalized Interest ($Millions)
 
 
 
 
 
 
 
Interest expense
 
$21.6
 
 
 
$82.0
 
Capitalized interest
 
$(2.5)
 
 
 
$(9.7)
 
Interest Income
 
$(4.5)
 
 
 
$(17.6)
 
     Interest expense, net
 
$14.6
 
 
 
$54.7
 
 
 
 
 
 
 
 
 
 
Effective Tax Rate
 
24%
 
 
 
24%
 
 
 
 
 
 
 
 
 
 
Wtd. Average Diluted Share Count (Millions)
 
68.3
 
 
 
68.3
 




1




 
 
 
 
 
Full Year 2018 Guidance
 
 
 
 
Full Year 2018E
 
 
 
 
Estimated Cash Tax Rate(3)
 
~0%
 
 
 
Capital Expenditures ($Millions)
 
Aircraft capital commitments, net of pre-delivery deposits:(4)
 
$677
 
Other capital expenditures(5)
 
$150
 
Pre-delivery deposits paid in current year for flight equipment
 
$190
 
Total capital expenditures
 
$1,017
 
 
 
Anticipated proceeds from issuance of long-term debt ($Millions)
 
$685
 
 
 
Other Working Capital Requirements ($Millions)
 
Payments for heavy maintenance events(6)
 
$183
 
Pre-paid maintenance deposits, net of reimbursements
 
$7
 
 
 
 
 
 

 
 
 
 

Footnotes
(1)
Excludes special items which may include loss on disposal of assets, special charges, and other items.
(2)
Includes fuel taxes and into-plane fuel cost.
(3)
Spirit's cash tax rate differs from its effective tax rate primarily due to the benefit related to bonus depreciation on the acquisition of purchased aircraft.
(4)
Includes amounts related to 14 of the aircraft delivered, or scheduled to be delivered in 2018, net of $177 million funded as pre-delivery deposits for these aircraft.
(5)
Includes the purchase of nine spare engines.
(6)
Payments for heavy maintenance events are recorded as "Deferred heavy maintenance" within "Changes in operating assets and liabilities" on the Company's cash flow statement.
 
 
 
 
 
 




2




 
 
 
 
 
 
 
 
 
 
 
 
 
 
Spirit Airlines, Inc.
 
 
 
 
 
 
 
 
 
 
 
Aircraft Delivery Schedule (net of Scheduled Retirements) as of July 25, 2018
 
A319

 
A320 CEO

 
A320 NEO

 
A321 CEO

 
Total

 
Total Year-end 2017
31

 
51

 
5

 
25

 
112

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1Q18
 

 
1

 

 
5

 
6

 
 
 
2Q18
 

 
1

 

 

 
1

 
 
 
3Q18
 

 
2

 

 

 
2

 
 
 
4Q18
 

 
5

 
2

 

 
7

 
Total Year-end 2018
31

 
60

 
7

 
30

 
128

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1Q19
 

 
1

 
5

 

 
6

 
 
 
2Q19
 

 
1

 

 

 
1

 
 
 
3Q19
 

 

 
3

 

 
3

 
 
 
4Q19
 

 

 
6

 

 
6

 
Total Year-end 2019
31

 
62

 
21

 
30

 
144

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2020
 

 

 
16

 

 
16

 
 
 
2021
 
(1
)
 

 
18

 

 
17

 
Total Year-end 2021
30

 
62

 
55

 
30

 
177

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Seat Configurations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A319
145
 
 
 
 
 
 
 
 
 
 
 
A320
182
 
 
 
 
 
 
 
 
 
 
A321
228
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 





















3




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. Forward-looking statements include, without limitation, statements regarding the Company's intentions and expectations regarding the delivery schedule of aircraft on order, guidance and estimates for the third quarter and full year 2018, including expectations regarding the delivery schedule of aircraft on order, announced new service routes, revenues, TRASM, cost of operations, operating margin, capacity, CASM, CASM ex-fuel, fuel expense, economic fuel cost, expected unrealized mark-to-market gains or losses, capital expenditures and other working capital requirements, aircraft rent, depreciation and amortization, fuel hedges and tax rates. 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.







4