Spirit Airlines Announces Record Second Quarter 2014 Results: Second Quarter 2014 Adjusted Net Income Increases 45.2 Percent to $66.5 Million

        Print
| Source: Spirit Airlines

MIRAMAR, Fla., July 29, 2014 (GLOBE NEWSWIRE) -- Spirit Airlines, Inc. (Nasdaq:SAVE) today reported second quarter 2014 financial results.

  • Adjusted net income for the second quarter 2014 increased 45.2 percent to $66.5 million ($0.91 per diluted share) compared to $45.8 million ($0.63 per diluted share) for the second quarter 20131. GAAP net income for the second quarter 2014 was $64.8 million ($0.88 per diluted share) compared to $42.1 million ($0.58 per diluted share) in the second quarter 2013.
     
  • For the second quarter 2014, Spirit achieved an adjusted pre-tax margin of 21.3 percent compared to 17.8 percent over the same period in 20131. On a GAAP basis, pre-tax margin for the second quarter 2014 was 20.8 percent compared to 16.4 percent in the second quarter 2013.
     
  • Spirit ended the second quarter 2014 with $567.2 million in unrestricted cash.
     
  • Spirit's return on invested capital (before taxes and excluding special items) for the twelve months ended June 30, 2014 was 32.0 percent. See "Calculation for Return on Invested Capital" table below for more details.

"The Spirit team delivered another strong quarter. While growing our capacity 17.2 percent year over year, we grew our top line 22.6 percent year over year," said Ben Baldanza, Spirit's Chief Executive Officer. "Our efforts to drive operational excellence have produced material improvements in controllable components of our cost structure which contributed to the 3.5 percentage point year-over-year increase in our Adjusted Operating Margin. I want to thank all our team members that contributed to these excellent results. A few months ago, we launched a series of initiatives aimed at better aligning our customers' expectations with the Spirit business model. We are very encouraged at the early results of this effort, and the Bare Fare™ plus Frill Control™ messaging is resonating well with customers as they see the benefit of only paying for what they truly value. As we continue down this path, we expect ever increasing alignment to a business model that provides the lowest total fares and the highest consumer choice all while maintaining our commitment to deliver value to our customers and to our shareholders."

Revenue Performance

For the second quarter 2014, Spirit's total operating revenue was $499.3 million, an increase of 22.6 percent compared to the second quarter 2013. The increase was driven by our growth in flight volume, higher load factors, and higher operating yields.

Total revenue per available seat mile ("RASM") for the second quarter 2014 was 12.46 cents, an increase of 4.6 percent compared to the second quarter 2013. The calendar shift of Easter occurring in April this year compared to March in 2013 contributed to the strong second quarter 2014 results.

Passenger flight segment ("PFS") volume for the second quarter 2014 grew 14.7 percent year over year, and the Company's load factor for the second quarter 2014 increased 1.8 points year over year to 87.5 percent. Total revenue per PFS for the second quarter 2014 increased 6.8 percent year over year to $139.90.

Cost Performance

Total operating expenses for the second quarter 2014 increased 15.7 percent year over year to $394.2 million on a capacity increase of 17.2 percent.

Spirit reported second quarter 2014 cost per available seat mile excluding special items and fuel ("Adjusted CASM ex-fuel") of 5.95 cents, a decrease of 0.8 percent compared to the same period last year. The primary driver of the decrease was lower passenger re-accommodation expense (recorded within Other operating expense) per ASM as a result of improved operational reliability. The Company also benefited from lower aircraft rent per ASM. These benefits were partially offset by higher depreciation and amortization expense and increased salary, wages, and benefits, as well as higher maintenance, material, and repairs expense per ASM.

Selected Balance Sheet and Cash Flow Items

As of June 30, 2014, Spirit had $567.2 million in unrestricted cash and cash equivalents. For the six months ended June 30, 2014, Spirit incurred capital expenditures of $7.4 million, paid $94.0 million in pre-delivery deposits for future deliveries of aircraft, net of refunds, and recorded an increase of $14.3 million in maintenance deposits, net of reimbursements.

Fleet

In the second quarter 2014, Spirit took delivery of one new A320 aircraft, ending the quarter with 57 aircraft in its fleet.  The Company has eight more new A320 aircraft scheduled for delivery by year-end 2014.

Second Quarter 2014 and Other Current Highlights

• Added/announced new service between (service start date):  

 - Minneapolis-St. Paul and Houston (5/1/14)2
 - Minneapolis-St. Paul and Baltimore/Washington (5/1/14)2
 - Chicago O'Hare and Oakland/San Francisco (5/1/14)
 - Minneapolis-St. Paul and Detroit (5/22/14)2
 - Chicago O'Hare and Baltimore/Washington (5/22/14)2
 - Chicago O'Hare and Portland, OR (5/22/14)2
 - Fort Lauderdale and New Orleans (8/1/14)
 - Houston and New Orleans (8/1/14)
 - Houston and Atlanta (8/1/14)
 - Kansas City and Chicago (8/7/14)
 - Kansas City and Dallas/Fort Worth (8/7/14)
 - Kansas City and Detroit (8/7/14)
 - Kansas City and Las Vegas (8/7/14)
 - Kansas City and Houston (8/8/14)
 - Fort Lauderdale and Houston (9/3/14)
 - Houston and San Diego (9/3/14)
 - Boston and West Palm Beach (11/21/14)2
 - Latrobe/Pittsburgh and Fort Myers (12/18/14)2
 - Latrobe/Pittsburgh and Tampa (12/19/14)2

• Maintained its commitment to offer low fares to its valued customers; average ticket revenue per passenger flight segment for the second quarter 2014 was $84.75 with total revenue per passenger flight segment of $139.90.

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.

Conference Call/Webcast Detail

Spirit will conduct a conference call to discuss these results today, July 29, 2014, at 10:00 a.m. ET. A live audio webcast of the conference call will be available to the public on a listen-only basis at http://ir.spirit.com. An archive of the webcast will be available under Webcasts & Presentations for 60 days.

About Spirit Airlines:

Spirit Airlines (Nasdaq: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 customers 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 modern and fuel-efficient all-Airbus fleet, we operate more than 270 daily flights to 55 destinations in the U.S., Latin America and the Caribbean. Come save with us at www.spirit.com.

End Notes

(1) See "Reconciliation of Adjusted Operating Expense to GAAP Operating Expense" table below for additional information.
(2) Seasonal service only.

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, and Section 21E of the Securities Exchange Act of 1934, as amended, which represent the Company's expectations or beliefs concerning future events. The words "expects," "estimates," "plans," "anticipates," "indicates," "believes," "forecast," "guidance," "outlook," "may," "will," "should," "seeks," "targets" and similar expressions are intended to identify forward-looking statements. Similarly, statements that describe the Company's objectives, plans or goals, or actions the Company may take in the future, are 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, and announced new service routes. All forward-looking statements are based upon information available to the Company at the time the statement is made. The Company has no intent, nor undertakes any obligation, to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law. Forward-looking statements are subject to a number of factors that could cause the Company's actual results to differ materially from the Company's expectations, including the competitive environment in the airline industry; the Company's ability to keep costs low; changes in fuel costs; the impact of worldwide economic conditions on customer travel behavior; the Company's ability to generate non-ticket revenues; and government regulation. Additional information concerning these and other 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 and Quarterly Reports on Form 10-Q. 

 
SPIRIT AIRLINES, INC.
Statement of Operations
(in thousands, except per share data)
(unaudited)
 
  Three Months Ended   Six Months Ended  
  June 30, Percent June 30, Percent
  2014 2013 Change 2014 2013 Change
Operating revenues:            
Passenger $ 302,487 $ 241,119 25.5 $ 556,365 $ 460,016 20.9
Non-ticket 196,850 166,220 18.4 380,959 317,760 19.9
Total operating revenues 499,337 407,339 22.6 937,324 777,776 20.5
             
Operating expenses:            
Aircraft fuel 154,852 135,251 14.5 303,323 266,917 13.6
Salaries, wages and benefits 77,440 64,456 20.1 153,689 125,953 22.0
Aircraft rent 48,222 41,915 15.0 94,609 82,987 14.0
Landing fees and other rents 25,831 21,346 21.0 49,847 39,402 26.5
Distribution 20,159 17,277 16.7 38,728 32,958 17.5
Maintenance, materials and repairs 19,205 15,202 26.3 36,819 26,982 36.5
Depreciation and amortization 11,344 7,604 49.2 22,465 13,928 61.3
Other operating 36,408 37,416 (2.7) 71,856 71,915 (0.1)
Loss on disposal of assets 715 91 na 865 261 na
Special charges (credits) 17 23 na 26 46 na
Total operating expenses 394,193 340,581 15.7 772,227 661,349 16.8
             
Operating income 105,144 66,758 57.5 165,097 116,427 41.8
             
Other (income) expense:            
Interest expense 103 95 8.4 210 104 101.9
Capitalized interest (103) (95) 8.4 (210) (104) 101.9
Interest income (83) (105) (21.0) (151) (221) (31.7)
Other expense 1,439 36 na 1,476 137 na
Total other (income) expense 1,356 (69) na 1,325 (84) na
             
Income before income taxes 103,788 66,827 55.3 163,772 116,511 40.6
Provision for income taxes 38,939 24,759 57.3 61,217 43,889 39.5
Net income $ 64,849 $ 42,068 54.2 $ 102,555 $ 72,622 41.2
Basic earnings per share $ 0.89 $ 0.58 53.4 $ 1.41 $ 1.00 41.0
Diluted earnings per share $ 0.88 $ 0.58 51.7 $ 1.40 $ 1.00 40.0
             
Weighted average shares, basic 72,740 72,593 0.2 72,712 72,540 0.2
Weighted average shares, diluted 73,294 72,992 0.4 73,274 72,898 0.5
 

 

SPIRIT AIRLINES, INC.
Balance Sheets
(unaudited, in thousands)
 
  June 30, December 31,
  2014 2013
Assets    
Current assets:    
Cash and cash equivalents $ 567,239 $ 530,631
Accounts receivable, net 37,467 23,246
Deferred income taxes 15,166 16,243
Prepaid expenses and other current assets 68,589 78,955
Total current assets 688,461 649,075
     
Property and equipment:    
Flight equipment 12,397 9,847
Ground and other equipment 55,112 50,987
Less accumulated depreciation (29,516) (25,221)
  37,993 35,613
Deposits on flight equipment purchase contracts 248,770 157,669
Aircraft maintenance deposits 185,699 161,484
Deferred heavy maintenance, net 129,021 125,288
Other long-term assets 59,906 51,636
Total assets $ 1,349,850 $ 1,180,765
     
Liabilities and shareholders' equity    
Current liabilities:    
Accounts payable $ 21,842 $ 23,104
Air traffic liability 232,072 167,627
Other current liabilities 146,624 145,262
Total current liabilities 400,538 335,993
     
Long-term deferred income taxes 47,443 48,916
Deferred credits and other long-term liabilities 26,258 26,739
Shareholders' equity:    
Common stock 7 7
Additional paid-in-capital 520,492 515,331
Treasury stock (3,513) (2,291)
Retained earnings 358,625 256,070
Total shareholders' equity 875,611 769,117
Total liabilities and shareholders' equity $ 1,349,850 $ 1,180,765
 

 

SPIRIT AIRLINES, INC.
Statement of Cash Flows
(unaudited, in thousands)
 
  Six Months Ended
  2014 2013
Operating activities:    
Net income $ 102,555 $72,622
Adjustments to reconcile net income to net cash provided by operations:    
Unrealized (gains) losses on open fuel hedge contracts 9,144
Equity-based compensation, net 3,872 2,788
Allowance for doubtful accounts (33) 156
Amortization of deferred gains and losses (178) (324)
Depreciation and amortization 22,465 13,928
Deferred income tax (395) 5,962
Loss on disposal of assets 865 261
Capitalized interest (210) (104)
Changes in operating assets and liabilities:    
Accounts receivable (14,188) (10,223)
Prepaid maintenance reserves (14,286) (16,641)
Long-term deposits and other assets (27,020) (36,304)
Accounts payable (1,462) (991)
Air traffic liability 64,331 74,374
Other liabilities 7,819 19,612
Net cash provided by operating activities 144,135 134,260
     
Investing activities:    
Pre-delivery deposits for flight equipment, net of refunds (94,009) (19,748)
Purchase of property and equipment (7,430) (13,816)
Net cash used in investing activities (101,439) (33,564)
Financing activities:    
Proceeds from options exercised 63 555
Payments on capital lease obligations (511)
Proceeds from sale and leaseback transactions 6,900
Payments to pre-IPO shareholders pursuant to tax receivable agreement (5,643)
Excess tax benefits from equity-based compensation 1,225 875
Repurchase of common stock (1,222) (937)
Net cash (used in) provided by financing activities (6,088) 7,393
Net increase in cash and cash equivalents 36,608 108,089
Cash and cash equivalents at beginning of period 530,631 416,816
Cash and cash equivalents at end of period $ 567,239 $ 524,905
Supplemental disclosures    
Cash payments for:    
Interest $ 326 $ 17
Taxes $ 52,093 $ 44,806
 

 

SPIRIT AIRLINES, INC.
Selected Operating Statistics (unaudited)
 
  Three Months Ended June 30,  
Operating Statistics 2014 2013 Change
Available seat miles (ASMs) (thousands) 4,008,507 3,420,257 17.2%
Revenue passenger miles (RPMs) (thousands) 3,506,459 2,930,912 19.6%
Load factor (%) 87.5 85.7 1.8 pts
Passenger flight segments (thousands) 3,569 3,111 14.7%
Block hours 65,732 57,693 13.9%
Departures 25,353 22,862 10.9%
Operating revenue per ASM (RASM) (cents) 12.46 11.91 4.6%
Average yield (cents) 14.24 13.90 2.4%
Average ticket revenue per passenger flight segment ($) 84.75 77.51 9.3%
Average non-ticket revenue per passenger flight segment ($) 55.15 53.43 3.2%
Total revenue per passenger flight segment ($) 139.90 130.94 6.8%
CASM (cents) 9.83 9.96 (1.3)%
Adjusted CASM (cents) (1) 9.80 9.79 0.1%
Adjusted CASM ex-fuel (cents) (2) 5.95 6.00 (0.8)%
Fuel gallons consumed (thousands) 49,401 42,683 15.7%
Average economic fuel cost per gallon ($) 3.13 3.03 3.3%
Aircraft at end of period 57 50 14.0%
Average daily aircraft utilization (hours) 12.8 12.8 —%
Average stage length (miles) 976 935 4.4%
Airports served in the period (3) 54 54 —%

 

  Six Months Ended June 30,  
Operating Statistics 2014 2013 Change
Available seat miles (ASMs) (thousands) 7,793,234 6,547,470 19.0%
Revenue passenger miles (RPMs) (thousands) 6,795,746 5,592,403 21.5%
Load factor (%) 87.2 85.4 1.8 pts
Passenger flight segments (thousands) 6,833 5,879 16.2%
Block hours 128,870 110,544 16.6%
Departures 48,914 43,623 12.1%
Operating revenue per ASM (RASM) (cents) 12.03 11.88 1.3%
Average yield (cents) 13.79 13.91 (0.9)%
Average ticket revenue per passenger flight segment ($) 81.43 78.25 4.1%
Average non-ticket revenue per passenger flight segment ($) 55.76 54.05 3.2%
Total revenue per passenger flight segment ($) 137.19 132.30 3.7%
CASM (cents) 9.91 10.10 (1.9)%
Adjusted CASM (cents) (1) 9.89 9.96 (0.7)%
Adjusted CASM ex-fuel (cents) (2) 6.01 6.02 (0.2)%
Fuel gallons consumed (thousands) 96,078 81,311 18.2%
Average economic fuel cost per gallon ($) 3.15 3.17 (0.6)%
Average daily aircraft utilization (hours) 12.8 12.7 0.8%
Average stage length (miles) 988 938 5.3%

(1) Excludes special items as described in the "Reconciliation of Adjusted Operating Expense to GAAP Operating Expense" table below.
(2) Excludes economic fuel expense and special items as described in the "Reconciliation of Adjusted Operating Expense to GAAP Operating Expense" table below.
(3) Includes airports served during the period that had service canceled as of the end of the period. Previously, we reported only airports served during the period with continuing operations.

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 an analytical tool. Because of these limitations, determinations of Spirit'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.

 

Reconciliation of Adjusted Operating Expense to GAAP Operating Expense
(unaudited)
 
  Three Months Ended
  June 30,
(in thousands, except CASM data in cents) 2014 2013
Total operating expenses, as reported $ 394,193 $ 340,581
Less special items (1):    
Unrealized (gains) and losses arising from mark-to-market adjustments to outstanding fuel derivatives 5,763
Premium expense recognized related to fuel option contracts 467
Loss on disposal of assets 715 91
Special charges 17 23
Operating expenses, non-GAAP (2) 392,994 334,704
Less: Economic fuel expense, non-GAAP 154,385 129,488
Operating expenses excluding fuel, non-GAAP (3) 238,609 205,216
     
Available seat miles 4,008,507 3,420,257
     
CASM (cents) 9.83 9.96
Adjusted CASM (cents) (1) 9.80 9.79
Adjusted CASM ex-fuel (cents) (2) 5.95 6.00

(1) Special items include unrealized (gains) and losses arising from mark-to-market adjustments to outstanding fuel derivatives, premium expense recognized related to fuel option contracts, loss on disposal of assets, and special charges.
(2) Excludes special items as referred to above.
(3) Excludes economic fuel expense as described in the "Reconciliation of Economic Fuel Expense to GAAP Fuel Expense" table below and special items as referred to above.

 

Reconciliation of Adjusted Net Income to GAAP Net Income
(unaudited)
 
  Three Months Ended
  June 30,
(in thousands, except per share data) 2014 2013
Net income, as reported $ 64,849 $ 42,068
Add: Provision for income taxes 38,939 24,759
Income before income taxes, as reported 103,788 66,827
Pre-tax margin, GAAP 20.8% 16.4%
Add special items (1) 1,199 5,877
Add: Non-operating special charges (2) 1,388
Income before income taxes, non-GAAP (3) 106,375 72,704
Pre-tax margin, non-GAAP (3) 21.3% 17.8%
Provision for income taxes (4) 39,910 26,936
Adjusted net income, non-GAAP (3) $ 66,465 $ 45,768
     
Weighted average shares, diluted 73,294 72,992
     
Adjusted net income per share, diluted $ 0.91 $ 0.63

(1) Includes special items as described in the "Reconciliation of Adjusted Operating Expense to GAAP Operating Expense" table above.
(2) Non-operating special charges relate to the settlement paid to the Pre-IPO Stockholders in excess of the liability the Company had previously estimated related to the Company's Tax Receivable Agreement. 
(3) Excludes special items as described in the "Reconciliation of Adjusted Operating Expense to GAAP Operating Expense" table above and non-operating special charges.
(4) Assumes same marginal tax rate as is applicable to GAAP net income. 

 

Reconciliation of Adjusted Operating Income to GAAP Operating Income
(unaudited)
 
  Three Months Ended
  June 30,
(in thousands) 2014 2013
Operating income, as reported $ 105,144 $ 66,758
Operating margin, GAAP 21.1% 16.4%
Add special items (1) 1,199 5,877
Operating income, non-GAAP (2) $ 106,343 $ 72,635
Operating margin (2) 21.3% 17.8%

(1) Includes special items as described in the "Reconciliation of Adjusted Operating Expense to GAAP Operating Expense" table above.
(2) Excludes special items as described in the "Reconciliation of Adjusted Operating Expense to GAAP Operating Expense" table above.

The Company believes economic fuel expense is the best measure of the effect fuel prices are currently having on our business, because it most closely approximates the net cash outflow associated with purchasing fuel used for our operations during the period. Economic fuel expense is defined as into-plane fuel expense, realized gains or losses on derivative contracts, plus the economic premium expense related to fuel option contracts in the period the option is benefiting. The key difference between aircraft fuel expense as recorded in our statement of operations and economic fuel expense is unrealized mark-to-market changes in the value of aircraft fuel derivatives outstanding and the timing of premium gain or loss recognition on our outstanding fuel option contracts. Many industry analysts evaluate airline results using economic fuel expense, and it is used in our internal management reporting.

 

Reconciliation of Economic Fuel Expense to GAAP Fuel Expense
(unaudited)
 
  Three Months Ended
  June 30,
(in thousands, except per gallon data) 2014 2013
Fuel Expense    
Aircraft fuel, as reported $ 154,852 $ 135,251
Impact on fuel expense from unrealized (gains) and losses arising from mark-to-market adjustments to outstanding fuel derivatives 5,763
Premium expense recognized related to fuel option contracts 467
     
Economic fuel expense, non-GAAP $ 154,385 $ 129,488
     
Fuel gallons consumed 49,401 42,683
     
Economic fuel cost per gallon, non-GAAP $ 3.13 $ 3.03
 

 

Calculation of Return on Invested Capital  
(unaudited)  
   
  Twelve Months Ended
(in thousands) June 30, 2014
Operating Income $ 330,962
Add special items (1) (7,129)
Adjustment for aircraft rent 181,359
Adjusted Operating Income (2) 505,192
Tax (37.3%) (3) 188,437
Adjusted Operating Income, after-tax 316,755
Invested Capital  
Total debt $ —
Book equity 875,611
Less: Unrestricted cash 567,239
Add: Capitalized aircraft operating leases (7x Aircraft Rent) 1,269,513
Total Invested Capital 1,577,885
   
Return on Invested Capital (ROIC), pre-tax 32.0%
Return on Invested Capital (ROIC), after-tax 20.1%

(1) Includes special items as described in the "Reconciliation of Adjusted Operating Expense to GAAP Operating Expense" table above.
(2) Excludes special items as described in the "Reconciliation of Adjusted Operating Expense to GAAP Operating Expense" table above.
(3) Assumes same marginal tax rate as is applicable to GAAP net income for the twelve months ended June 30, 2014. 

Investor Contact:
DeAnne Gabel

954-447-7920

Media Contact:
Paul Berry

954-918-9432