Spirit Airlines, Inc.
Feb 6, 2018

Spirit Airlines Reports Fourth Quarter and Full Year 2017 Results

MIRAMAR, Fla., Feb. 06, 2018 (GLOBE NEWSWIRE) -- Spirit Airlines, Inc. (NYSE:SAVE) today reported fourth quarter and full year 2017 financial results.

"I want to thank the Spirit family for their contributions throughout 2017.  Together, we overcame several major operational challenges while still delivering a record on-time performance," said Robert Fornaro, Spirit's Chief Executive Officer. "Looking ahead to 2018, we are focused on finalizing a deal with our pilots union, improving upon our operational reliability, continuing to enhance our guest experience, and delivering earnings growth for our shareholders."

Revenue Performance
For the fourth quarter 2017, Spirit's total operating revenue was $667.0 million, an increase of 15.3 percent compared to the fourth quarter 2016, driven by a 10.4 percent increase in flight volume.

Total revenue per available seat mile (TRASM) for the fourth quarter 2017 decreased 1.8 percent compared to the same period last year, driven by a 2.2 percent decrease in operating yields.

On a per passenger flight segment basis, total revenue for the fourth quarter 2017 increased 1.1 percent year over year to $109.34 driven by non-ticket revenue per passenger flight segment increasing 3.8 percent to $53.91, partially offset by ticket revenue per passenger flight segment decreasing 1.4 percent to $55.43.

Cost Performance
For the fourth quarter 2017, total GAAP operating expense, including special items credit of $3.0 million2, increased 16.5 percent, or $81.4 million, year over year to $574.5 million.  Adjusted operating expense for the fourth quarter 2017 increased 19.2 percent, or $93.1 million to $577.5 million4. The year-over-year increase in both GAAP and adjusted operating expense was primarily driven by an increase in flight volume; higher other operating expense, partially driven by increased ground handling rates; higher depreciation and amortization expense; and higher fuel rates.

Aircraft fuel expense increased in the fourth quarter 2017 by 38.5 percent, or $48.7 million, compared to the same period last year, due to a 20.1 percent increase in the cost of fuel per gallon and a 15.5 percent increase in fuel gallons consumed.

Spirit reported fourth quarter 2017 cost per available seat mile ("ASM"), excluding special items and fuel ("Adjusted CASM ex-fuel"), of 5.20 cents4, a decrease of 4.4 percent compared to the same period last year.   The decrease year over year was primarily driven by lower aircraft rent and salaries, wages, and benefits per ASM, partially offset by higher depreciation and amortization per ASM.

"For the full year 2017, our team delivered an adjusted CASM ex-fuel of 5.51 cents, up 1.1 percent year over year.  This was an admirable performance considering the hurricanes and other disruptions this year," said Ted Christie, Spirit's President and Chief Financial Officer.  "Should the tentative agreement with our pilots be ratified, we will gain tools that will allow us to further improve our operational reliability and drive efficiencies, which gives us confidence that we will be able to maintain or grow our relative cost advantage."

Labor
Spirit and its pilots, represented by the Air Line Pilots Association, reached a tentative agreement in January 2018 with the assistance of the National Mediation Board.  The tentative agreement is subject to ratification.

Fleet
Spirit took delivery of four new A321ceo aircraft and two new A320ceo aircraft and returned one leased A321ceo aircraft during the fourth quarter 2017, ending the quarter with 112 aircraft in its fleet.

Share Repurchase
During the fourth quarter and full year 2017, Spirit returned approximately $45 million to shareholders by repurchasing 1.2 million shares under our share repurchase program.

Recent New Service Announcements
Columbus, Ohio - Orlando (02/15/2018)
Columbus, Ohio - Fort Lauderdale (02/15/2018)
Columbus, Ohio - Las Vegas (02/15/2018)
Columbus, Ohio - Fort Myers (02/15/2018)**
Columbus, Ohio - Tampa (02/16/2018 )**
Richmond - Orlando (03/15/2018)
Richmond - Fort Lauderdale (03/15/2018)
Baltimore - Montego Bay (03/22/2018)
Baltimore - Denver (03/22/2018)
Columbus, Ohio - New Orleans (03/22/2018)*
Fort Lauderdale - Guayaquil, Ecuador (03/22/2018)
Columbus, Ohio - Myrtle Beach (03/23/2018)*
Fort Lauderdale - Cap-Haïtien, Haiti (04/12/2018)
Fort Lauderdale - Seattle (04/12/2018)*
Minneapolis - Myrtle Beach (04/12/2018)*
Orlando - Las Vegas (04/12/2018)
Tampa - Los Angeles (04/12/2018)
Tampa - Las Vegas (04/12/2018)
Seattle - Chicago (04/12/2018)*
Seattle - Dallas/Ft. Worth (04/12/2018)*
Seattle - Minneapolis/St. Paul (04/12/2018)*
Atlantic City - New Orleans (04/13/2018)
Detroit - Portland, Oregon (04/23/2018)*
Detroit - San Diego (04/23/2018)*

* Seasonal Summer Service
** Seasonal Winter Service

Full Year 2017 Highlights

Conference Call/Webcast Detail
Spirit will conduct a conference call to discuss these results today, February 6, 2018, at 9:00 a.m. ET.  A live audio webcast of the conference call will be available to the public on a listen-only basis at http://ir.spirit.com.  An archive of the webcast will be available under Webcasts & Presentations for 60 days.

About Spirit Airlines:
Spirit Airlines (NYSE:SAVE) is committed to 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 60 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)  During the fourth quarter of 2017, the Company recorded a credit to income tax expense due to The Tax Cuts and Jobs Act of 2017 as a result of the difference between rates in effect when income tax expense was accrued, and the rates expected to be in effect when the income taxes will be paid.
(2)  See "Special Items" table for more details.
(3)  See "Reconciliation of Adjusted Net Income, Adjusted Pre-tax Income, and Adjusted Operating Income to GAAP Net Income" table below 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   Year Ended  
 December 31, Percent December 31, Percent
 2017 2016 Change 2017 2016 Change
Operating revenues:           
Passenger$338,143  $300,590  12.5  $1,366,034  $1,200,621  13.8 
Non-ticket328,864  277,761  18.4  1,281,632  1,121,335  14.3 
Total operating revenues667,007  578,351  15.3  2,647,666  2,321,956  14.0 
            
Operating expenses:           
Aircraft fuel175,205  126,535  38.5  615,581  447,553  37.5 
Salaries, wages and benefits
136,815  122,941  11.3  527,959  472,471  11.7 
Aircraft rent42,820  50,242  (14.8) 205,852  201,675  2.1 
Landing fees and other rents46,117  37,583  22.7  180,655  151,679  19.1 
Depreciation and amortization36,472  27,766  31.4  140,152  101,136  38.6 
Maintenance, materials and repairs28,966  26,577  9.0  110,439  98,587  12.0 
Distribution27,745  23,437  18.4  113,620  96,627  17.6 
Special charges  5,580  nm  12,629  37,189  nm 
Loss on disposal of assets1,054  3,021  nm  4,168  4,187  nm 
Other operating79,267  69,358  14.3  347,820  267,191  30.2 
Total operating expenses574,461  493,040  16.5  2,258,875  1,878,295  20.3 
            
Operating income92,546  85,311  8.5  388,791  443,661  (12.4)
            
Other (income) expense:           
Interest expense16,065  12,066  33.1  57,302  41,654  37.6 
Capitalized interest(3,668) (3,542) 3.6  (13,793) (12,705) 8.6 
Interest income(2,990) (1,041) 187.2  (8,736) (5,276) 65.6 
Other expense145  121  19.8  366  528  (30.7)
Total other (income) expense9,552  7,604  25.6  35,139  24,201  45.2 
            
Income before income taxes82,994  77,707  6.8  353,652  419,460  (15.7)
Provision (benefit) for income taxes(167,344) 29,214  (672.8) (66,954) 154,581  (143.3)
            
Net income$250,338  $48,493  416.2  $420,606  $264,879  58.8 
Basic earnings per share$3.64  $0.70  420.0  $6.08  $3.77  61.3 
Diluted earnings per share$3.63  $0.70  418.6  $6.06  $3.76  61.2 
            
Weighted average shares, basic68,799  69,325  (0.8) 69,221  70,344  (1.6)
Weighted average shares, diluted68,901  69,551  (0.9) 69,377  70,508  (1.6)
                  


SPIRIT AIRLINES, INC.
Condensed Statements of Comprehensive Income
(unaudited, in thousands)
 
 Three Months Ended Year Ended
 December 31, December 31,
 2017 2016 2017 2016
Net income$250,338  $48,493  $420,606  $264,879 
Unrealized gain (loss) on short-term investment securities, net of deferred taxes of ($34), ($16), ($41) and ($13)(71) (27) (82) (23)
Interest rate derivative losses reclassified into earnings, net of taxes of $279, $33, $372 and $130
(196) 55  (37) 224 
Other comprehensive income (loss)$(267) $28  $(119) $201 
Comprehensive income$250,071  $48,521  $420,487  $265,080 




SPIRIT AIRLINES, INC.
Condensed Balance Sheets
(unaudited, in thousands)
 
 December 31, December 31,
 2017 2016
Assets   
Current assets:   
Cash and cash equivalents$800,849  $700,900 
Short-term investment securities100,937  100,155 
Accounts receivable, net49,323  41,136 
Aircraft maintenance deposits, net175,616  87,035 
Income tax receivable69,844   
Prepaid expenses and other current assets79,687  46,619 
Total current assets1,276,256  975,845 
    
Property and equipment:   
Flight equipment2,291,110  1,461,525 
Ground property and equipment155,166  126,206 
Less accumulated depreciation(207,808) (122,509)
 2,238,468  1,465,222 
Deposits on flight equipment purchase contracts253,687  325,688 
Long-term aircraft maintenance deposits150,617  199,415 
Deferred heavy maintenance, net99,915  75,534 
Other long-term assets121,002  110,223 
Total assets$4,139,945  $3,151,927 
    
Liabilities and shareholders' equity   
Current liabilities:   
Accounts payable$5,334  $15,193 
Air traffic liability246,403  206,392 
Current maturities of long-term debt115,430  84,354 
Other current liabilities275,854  226,011 
Total current liabilities643,021  531,950 
    
Long-term debt, less current maturities1,387,498  897,359 
Deferred income taxes313,140  308,143 
Deferred gains and other long-term liabilities19,205  19,868 
Shareholders' equity:   
Common stock7  7 
Additional paid-in-capital360,153  551,004 
Treasury stock, at cost(65,854) (218,692)
Retained earnings1,484,239  1,063,633 
Accumulated other comprehensive loss(1,464) (1,345)
Total shareholders' equity1,777,081  1,394,607 
Total liabilities and shareholders' equity$4,139,945  $3,151,927 
        



SPIRIT AIRLINES, INC.
Condensed Statement of Cash Flows (unaudited, in thousands)
 
 Year Ended December 31,
 2017 2016
Operating activities:   
Net income$420,606  $264,879 
Adjustments to reconcile net income to net cash provided by operations:   
Losses reclassified from other comprehensive income335  354 
Stock-based compensation8,522  7,105 
Allowance for doubtful accounts (recoveries)(53) 80 
Amortization of deferred gains and losses and debt issuance costs7,944  5,732 
Depreciation and amortization140,152  101,136 
Deferred income tax expense (benefit)(1,610
 86,146 
Loss on disposal of assets4,168  4,187 
Lease termination costs12,629  37,189 
Changes in operating assets and liabilities:   
Accounts receivable(8,134) (12,951)
Aircraft maintenance deposits, net(37,930) (45,869)
Long-term deposits and other assets(46,799) (45,558)
Deferred heavy maintenance(78,237) (30,222)
Income tax receivable(69,844)  
Prepaid income taxes  72,278 
Accounts payable(11,458) (6,823)
Air traffic liability40,011  (11,582)
Other liabilities44,558  47,391 
Other380  206 
Net cash provided by operating activities425,240  473,678 
Investing activities:   
Purchase of available-for-sale investment securities(107,246) (103,258)
Proceeds from the maturity of available-for-sale investment securities105,906  2,842 
Proceeds from sale of property and equipment  50 
Pre-delivery deposits for flight equipment, net of refunds(149,477) (173,947)
Capitalized interest(12,305) (10,834)
Purchase of property and equipment(628,881) (541,122)
Net cash used in investing activities(792,003) (826,269)
Financing activities:   
Proceeds from issuance of long-term debt629,725  417,275 
Proceeds from stock options exercised45  92 
Payments on debt and capital lease obligations(102,738) (64,421)
Excess tax (deficiency) benefit from equity-based compensation  (470)
Repurchase of common stock(46,580) (102,510)
Debt issuance costs(13,740) (107)
Net cash provided by financing activities466,712  249,859 
Net (decrease) increase in cash and cash equivalents99,949  (102,732)
Cash and cash equivalents at beginning of period700,900  803,632 
Cash and cash equivalents at end of period$800,849  $700,900 
Supplemental disclosures   
Cash payments for:   
Interest, net of capitalized interest$37,902  $39,963 
Income taxes paid, net of refunds$5,826  $(5,579)
Non-cash transactions:   
Capital expenditures funded by capital lease borrowings$(1,370) $(31)

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 December 31,  
Operating Statistics2017 2016 Change
Available seat miles (ASMs) (thousands)7,741,030  6,585,018  17.6%
Revenue passenger miles (RPMs) (thousands)6,319,924  5,362,518  17.9%
Load factor (%)81.6  81.4  0.2pts
Passenger flight segments (thousands)6,100  5,350  14.0%
Block hours112,695  99,385  13.4%
Departures41,957  38,019  10.4%
Total operating revenue per ASM (TRASM) (cents)8.62  8.78  (1.8)%
Average yield (cents)10.55  10.79  (2.2)%
Average ticket revenue per passenger flight segment ($)55.43  56.19  (1.4)%
Average non-ticket revenue per passenger flight segment ($)53.91  51.92  3.8%
Total revenue per passenger flight segment ($)109.34  108.11  1.1%
CASM (cents)7.42  7.49  (0.9)%
Adjusted CASM (cents) (1)7.46  7.36  1.4%
Adjusted CASM ex-fuel (cents) (2)5.20  5.44  (4.4)%
Fuel gallons consumed (thousands)88,838  76,930  15.5%
Average economic fuel cost per gallon ($)1.97  1.64  20.1%
Aircraft at end of period112  95  17.9%
Average daily aircraft utilization (hours)11.3  11.7  (3.4)%
Average stage length (miles)1,023  981  4.3%


 Year Ended December 31,  
Operating Statistics2017 2016 Change
Available seat miles (ASMs) (thousands)29,592,819  25,494,645  16.1%
Revenue passenger miles (RPMs) (thousands)24,605,512  21,581,611  14.0%
Load factor (%)83.1  84.7  (1.6) pts
Passenger flight segments (thousands)24,183  21,618  11.9%
Block hours438,728  389,914  12.5%
Departures165,449  149,514  10.7%
Total operating revenue per ASM (TRASM) (cents)8.95  9.11  (1.8)%
Average yield (cents)10.76  10.76  %
Average ticket revenue per passenger flight segment ($)56.49  55.54  1.7%
Average non-ticket revenue per passenger flight segment ($)53.00  51.87  2.2%
Total revenue per passenger flight segment ($)109.49  107.41  1.9%
CASM (cents)7.63  7.37  3.5%
Adjusted CASM (cents) (1)7.59  7.21  5.3%
Adjusted CASM ex-fuel (cents) (2)5.51  5.45  1.1%
Fuel gallons consumed (thousands)343,709  302,781  13.5%
Average economic fuel cost per gallon ($)1.79  1.48  20.9%
Average daily aircraft utilization (hours)11.6  12.4  (6.5)%
Average stage length (miles)999  979  2.0%

(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.

Special Items
(unaudited)
    
 Three Months Ended Year Ended
 December 31, December 31,
(in thousands)2017 2016 2017 2016
Operating special items include the following:       
Supplemental rent credit (1)(4,086)   (4,086)  
Loss on disposal of assets1,054  3,021  4,168  4,187 
Special charges  5,580  12,629  37,189 
Total operating special items$(3,032) $8,601  $12,711  $41,376 
                


Reconciliation of Adjusted Operating Expense to GAAP Operating Expense
(unaudited)
 
 Three Months Ended Year Ended
 December 31, December 31,
(in thousands, except CASM data in cents)2017 2016 2017 2016
Total operating expenses, as reported$574,461  $493,040  $2,258,875  $1,878,295 
Less operating special items (1)(3,032) 8,601  12,711  41,376 
Adjusted operating expenses, non-GAAP (2)577,493  484,439  2,246,164  1,836,919 
Less: Economic fuel expense175,205  126,535  615,581  447,553 
Adjusted operating expenses excluding fuel, non-GAAP (3)$402,288  $357,904  $1,630,583  $1,389,366 
        
Available seat miles7,741,030  6,585,018  29,592,819  25,494,645 
        
CASM (cents)7.42  7.49  7.63  7.37 
Adjusted CASM (cents) (2)7.46  7.36  7.59  7.21 
Adjusted CASM ex-fuel (cents) (3)5.20  5.44  5.51  5.45 

(1)   Supplemental rent adjustment for liability accrued in prior years related to certain maintenance reserves and return conditions that are no longer probable.
(2)   Excludes operating special items.
(3)   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 Year Ended
 December 31, December 31,
(in thousands, except per share data) 2017  2016  2017  2016
Net income, as reported$250,338  $48,493  $420,606  $264,879 
Add: Provision (benefit) for income taxes (167,344)  29,214   (66,954)  154,581 
Income before income taxes, as reported 82,994   77,707   353,652   419,460 
Pre-tax margin 12.4%  13.4%  13.4%  18.1%
Add operating special items (1)$ (3,032) $ 8,601  $ 12,711  $ 41,376 
Adjusted income before income taxes, non-GAAP (2) 79,962   86,308   366,363   460,836 
Adjusted pre-tax margin, non-GAAP (2) 12.0%  14.9%  13.8%  19.8%
Add:  Total other (income) expense 9,552   7,604   35,139   24,201 
Adjusted operating income, non-GAAP(2) 89,514   93,912   401,502   485,037 
Adjusted operating margin, non-GAAP(2) 13.4%  16.2%  15.2%  20.9%
        
Provision for adjusted income taxes 29,586   32,448   135,554   169,829 
Adjusted net income, non-GAAP (2)$ 50,376  $ 53,860  $ 230,809  $ 291,007 
        
Weighted average shares, diluted 68,901   69,551   69,377   70,508 
        
Adjusted net income per share, diluted (2)$ 0.73  $ 0.77  $ 3.33  $ 4.13 
        
Total operating revenues$667,007  $578,351  $2,647,666  $2,321,956 

(1)   See "Special Items" for more details.
(2)   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)December 31, 2017
Operating income$388,791 
Add operating special items (1)12,711 
Adjustment for aircraft rent205,852 
Adjusted operating income, non-GAAP607,354 
Tax (37%)224,721 
Adjusted operating income, after-tax, non-GAAP$382,633 
Invested capital: 
Total debt$1,502,928 
Book equity1,777,081 
Less: Unrestricted cash, cash equivalents & short-term investments901,786 
Add: Capitalized aircraft operating leases (7x Aircraft Rent)1,440,964 
Total invested capital, non-GAAP$3,819,187 
  
Return on invested capital (ROIC), pre-tax, non-GAAP15.9%
Return on invested capital (ROIC), after-tax, non-GAAP10.0%

(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