MIRAMAR, Fla., Feb. 09, 2016 (GLOBE NEWSWIRE) -- Spirit Airlines, Inc. (NASDAQ:SAVE) today reported fourth quarter and full year 2015 financial results.
- Adjusted net income for the fourth quarter 2015 increased 24.9 percent to $73.3 million ($1.02 per diluted share) compared to the fourth quarter 20141. GAAP net income for the fourth quarter 2015 increased 33.1 percent year over year to $74.4 million ($1.04 per diluted share) compared to the fourth quarter 2014.
- Adjusted net income for the full year 2015 increased 33.6 percent to $316.2 million ($4.37 per diluted share) compared to the full year 20141. GAAP net income for the full year 2015 increased 40.7 percent year over year to $317.2 million ($4.38 per diluted share).
- Adjusted pre-tax margin for the fourth quarter 2015 increased 270 basis points to 22.4 percent1. For the full year 2015, adjusted pre-tax margin increased 420 basis points to 23.4 percent1. On a GAAP basis, pre-tax margin for the fourth quarter 2015 increased 390 basis points to 22.7 percent and for the full year 2015 increased 520 basis points to 23.5 percent.
- Spirit ended 2015 with unrestricted cash and cash equivalents of $803.6 million.
- Spirit's return on invested capital (before taxes and excluding special items) for the twelve months ended December 31, 2015 was 28.2 percent2.
“I want to thank and congratulate our Spirit team members for successfully delivering solid financial results in 2015. Although increased industry capacity and aggressive competitive pricing pressured our unit revenues, our excellent cost execution and ability to adapt to a changing environment drove improved year-over-year results,” said Bob Fornaro, Spirit’s Chief Executive Officer. “I am excited to lead this innovative team. As CEO, I plan to improve upon the already very strong base of fundamentals that Spirit possesses with a focus on continuing to improve operational reliability and customer service, and maintaining our financial discipline to drive value for all of Spirit’s stakeholders.”
Revenue Performance
For the fourth quarter 2015, Spirit's total operating revenue was $519.8 million, an increase of 9.6 percent compared to the fourth quarter 2014, driven by an increase in flight volume, partially offset by a decrease in operating yields.
Total revenue per passenger flight segment ("PFS") for the fourth quarter 2015 decreased 12.6 percent year over year to $111.78, primarily driven by a 21.4 percent decrease in ticket revenue per PFS. The decline in ticket revenue per PFS was driven by lower fare levels as a result of increased competitive pricing pressures as well as a higher percentage of Spirit's markets being under development compared to the same period last year. Non-ticket revenue remained stable, declining only 0.8 percent year over year on a per flight segment basis to $54.26.
Cost Performance
Adjusted operating expenses for the fourth quarter 2015 increased 5.6 percent to $401.2 million3. GAAP total operating expenses increased 3.9 percent year over year to $399.5 million. Operating expenses benefited from fuel expense decreasing 23.8 percent, or $32.8 million, on a fuel volume increase of 27.9 percent.
Spirit reported fourth quarter 2015 cost per available seat mile ("ASM") excluding special items and fuel (“Adjusted CASM ex-fuel”)3 of 5.15 cents, a decrease of 8.2 percent compared to the same period last year, driven primarily by lower aircraft rent per ASM and lower labor expense per ASM. The decrease in aircraft rent per ASM was driven by a change in the mix of leased (rent recorded under aircraft rent) and purchased (depreciation recorded under depreciation and amortization) aircraft. Labor expense per ASM in the fourth quarter 2015 was lower compared to the same period last year primarily due to scale benefits from overall growth and from larger gauge aircraft. These decreases were partially offset by higher depreciation and amortization expense related to the depreciation of aircraft.
"Spirit’s cost performance in the fourth quarter and throughout 2015 should be a source of pride for all our team members,” said Ted Christie, Spirit's Chief Financial Officer. “Our ultra-low cost structure is the foundation of our competitive advantage, providing us the platform to define our future.”
Fleet
Spirit took delivery of three new A321ceo aircraft during the fourth quarter 2015.
Full Year 2015 Highlights
- Maintained its commitment to offer low fares to its valued customers; ticket revenue per PFS for 2015 averaged $65.25 with total revenue per PFS averaging $119.49.
- Launched service on 40 new nonstop routes during 2015.
- Added Cleveland, Ohio to its list of destinations and announced the addition of service from its newest destination, Seattle-Tacoma, Washington beginning in the Spring of 2016.
- Added 14 (8 A320ceos and 6 A321ceos) new Airbus aircraft to its fleet, ending the year with 79 aircraft. As of year-end 2015, Spirit's Fit Fleet™ averaged 5.2 years, the youngest fleet of any major US airline.
- Issued $576.6 million of enhanced equipment trust certificates, its first aircraft-backed bond publicly offered.
- Repurchased approximately 1.5 million shares for approximately $99 million during 2015 under an initial share repurchase program and authorized another $100 million share repurchase program.
- Created over 600 new jobs, bringing our total number of team members to nearly 5,000.
Conference Call/Webcast Detail
Spirit will conduct a conference call to discuss these results today, February 9, 2016, at 8:00 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 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 US airline, we operate more than 385 daily flights to 56 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 to GAAP Net Income" table below for more details.
(2) See "Calculation for Return on Invested Capital" table below for more details.
(3) 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. Factors that could cause or contribute to such differences include, but are not limited to, those identified below. Furthermore, such forward-looking statements speak only as of the date of this report. 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. Additional 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. You should carefully consider the risks described below and the other information in this report. If any of the following risks materialize, our business could be materially harmed, and our financial condition and results of operations could be materially and adversely affected. 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 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, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K.
SPIRIT AIRLINES, INC. | |||||||||||||||||||||
Statement of Operations | |||||||||||||||||||||
(unaudited, in thousands, except per share data) | |||||||||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||||||||
December 31, | Percent | December 31, | Percent | ||||||||||||||||||
2015 | 2014 | Change | 2015 | 2014 | Change | ||||||||||||||||
Operating revenues: | |||||||||||||||||||||
Passenger | $ | 267,487 | $ | 271,569 | (1.5 | ) | $ | 1,169,338 | $ | 1,144,972 | 2.1 | ||||||||||
Non-ticket | 252,359 | 202,918 | 24.4 | 972,125 | 786,608 | 23.6 | |||||||||||||||
Total operating revenues | 519,846 | 474,487 | 9.6 | 2,141,463 | 1,931,580 | 10.9 | |||||||||||||||
Operating expenses: | |||||||||||||||||||||
Aircraft fuel | 105,215 | 138,002 | (23.8 | ) | 461,447 | 612,909 | (24.7 | ) | |||||||||||||
Salaries, wages and benefits | 97,035 | 81,212 | 19.5 | 378,210 | 313,988 | 20.5 | |||||||||||||||
Aircraft rent | 52,091 | 51,209 | 1.7 | 211,531 | 195,827 | 8.0 | |||||||||||||||
Landing fees and other rents | 32,590 | 27,533 | 18.4 | 131,077 | 105,115 | 24.7 | |||||||||||||||
Distribution | 20,656 | 15,893 | 30.0 | 86,576 | 74,823 | 15.7 | |||||||||||||||
Maintenance, materials and repairs | 18,544 | 17,515 | 5.9 | 80,448 | 73,956 | 8.8 | |||||||||||||||
Depreciation and amortization | 22,278 | 13,168 | 69.2 | 73,908 | 46,971 | 57.3 | |||||||||||||||
Other operating | 50,796 | 38,630 | 31.5 | 206,867 | 149,675 | 38.2 | |||||||||||||||
Loss on disposal of assets | 304 | 1,350 | nm | 1,604 | 3,008 | nm | |||||||||||||||
Special charges | — | — | nm | 673 | 45 | nm | |||||||||||||||
Total operating expenses | 399,509 | 384,512 | 3.9 | 1,632,341 | 1,576,317 | 3.6 | |||||||||||||||
Operating income | 120,337 | 89,975 | 33.7 | 509,122 | 355,263 | 43.3 | |||||||||||||||
Other (income) expense: | |||||||||||||||||||||
Interest expense | 7,200 | 1,659 | nm | 20,382 | 2,747 | nm | |||||||||||||||
Capitalized interest | (3,161 | ) | (1,659 | ) | nm | (11,553 | ) | (2,747 | ) | nm | |||||||||||
Interest income | (1,581 | ) | (101 | ) | nm | (2,125 | ) | (336 | ) | nm | |||||||||||
Other expense | (267 | ) | 1,048 | nm | 15 | 2,605 | nm | ||||||||||||||
Total other (income) expense | 2,191 | 947 | nm | 6,719 | 2,269 | nm | |||||||||||||||
Income before income taxes | 118,146 | 89,028 | 32.7 | 502,403 | 352,994 | 42.3 | |||||||||||||||
Provision for income taxes | 43,746 | 33,119 | 32.1 | 185,183 | 127,530 | 45.2 | |||||||||||||||
Net income | $ | 74,400 | $ | 55,909 | 33.1 | $ | 317,220 | $ | 225,464 | 40.7 | |||||||||||
Basic earnings per share | $ | 1.04 | $ | 0.77 | 35.1 | $ | 4.39 | $ | 3.10 | 41.6 | |||||||||||
Diluted earnings per share | $ | 1.04 | $ | 0.76 | 36.8 | $ | 4.38 | $ | 3.08 | 42.2 | |||||||||||
Weighted average shares, basic | 71,543 | 72,776 | (1.7 | ) | 72,208 | 72,739 | (0.7 | ) | |||||||||||||
Weighted average shares, diluted | 71,672 | 73,324 | (2.3 | ) | 72,426 | 73,294 | (1.2 | ) |
SPIRIT AIRLINES, INC. | |||||||||||||||
Statements of Comprehensive Income | |||||||||||||||
(unaudited, in thousands) | |||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Net income | $ | 74,400 | $ | 55,909 | $ | 317,220 | $ | 225,464 | |||||||
Unrealized gain (loss) on interest rate derivative instruments, net of deferred tax expense (benefit) of $34, ($423), ($500), and $(423), respectively in each period. | 58 | (718 | ) | (828 | ) | (718 | ) | ||||||||
Other comprehensive income (loss) | $ | 58 | $ | (718 | ) | $ | (828 | ) | $ | (718 | ) | ||||
Comprehensive income | $ | 74,458 | $ | 55,191 | $ | 316,392 | $ | 224,746 |
SPIRIT AIRLINES, INC. | |||||||
Balance Sheets | |||||||
(unaudited, in thousands) | |||||||
December 31, | December 31, | ||||||
2015 | 2014 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 803,632 | $ | 632,784 | |||
Accounts receivable, net | 28,266 | 22,685 | |||||
Aircraft maintenance deposits | 73,415 | 29,172 | |||||
Prepaid income taxes | 72,278 | — | |||||
Prepaid expenses and other current assets | 48,749 | 36,857 | |||||
Total current assets | 1,026,340 | 721,498 | |||||
Property and equipment: | |||||||
Flight equipment | 827,282 | 204,462 | |||||
Ground and other equipment | 82,459 | 57,012 | |||||
Less accumulated depreciation | (65,524 | ) | (36,099 | ) | |||
844,217 | 225,375 | ||||||
Deposits on flight equipment purchase contracts | 286,837 | 242,881 | |||||
Long-term aircraft maintenance deposits | 206,485 | 213,147 | |||||
Deferred heavy maintenance, net | 89,127 | 123,108 | |||||
Other long-term assets | 77,539 | 66,744 | |||||
Total assets | $ | 2,530,545 | $ | 1,592,753 | |||
Liabilities and shareholders’ equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 17,043 | $ | 13,402 | |||
Air traffic liability | 216,831 | 188,870 | |||||
Current maturities of long-term debt | 49,637 | 10,431 | |||||
Other current liabilities | 182,729 | 152,921 | |||||
Total current liabilities | 466,240 | 365,624 | |||||
Long-term debt less current maturities | 596,693 | 135,232 | |||||
Long-term deferred income taxes | 221,481 | 66,367 | |||||
Deferred gains and other long-term liabilities | 20,821 | 22,455 | |||||
Shareholders’ equity: | |||||||
Common stock | 7 | 7 | |||||
Additional paid-in-capital | 544,277 | 526,173 | |||||
Treasury stock, at cost | (116,182 | ) | (3,921 | ) | |||
Retained earnings | 798,754 | 481,534 | |||||
Accumulated other comprehensive loss | (1,546 | ) | (718 | ) | |||
Total shareholders’ equity | 1,225,310 | 1,003,075 | |||||
Total liabilities and shareholders’ equity | $ | 2,530,545 | $ | 1,592,753 | |||
Note: The Company adopted ASU 2015-17, Balance Sheet Classification of Deferred Taxes, utilizing retrospective application as permitted. As such, certain prior period amounts have been reclassified to conform to the current presentation. In the Balance Sheet as of December 31, 2014, the Company has reclassified $9.6 million from Deferred income taxes in current assets to Deferred income taxes within non-current liabilities.
SPIRIT AIRLINES, INC. | |||||||
Statement of Cash Flows | |||||||
(unaudited, in thousands) | |||||||
Year Ended December 31, | |||||||
2015 | 2014 | ||||||
Operating activities: | |||||||
Net income | $ | 317,220 | $ | 225,464 | |||
Adjustments to reconcile net income to net cash provided by operations: | |||||||
Unrealized (gains) losses on open derivative contracts, net | 2,334 | — | |||||
Equity-based compensation, net | 9,222 | 8,797 | |||||
Allowance for doubtful accounts (recoveries) | 12 | (45 | ) | ||||
Amortization of deferred gains and losses | 1,165 | (185 | ) | ||||
Depreciation and amortization | 73,908 | 46,971 | |||||
Deferred income tax expense | 155,614 | 34,118 | |||||
Loss on disposal of assets | 1,604 | 3,008 | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (5,592 | ) | 606 | ||||
Prepaid maintenance reserves | (32,101 | ) | (31,925 | ) | |||
Long-term deposits and other assets | (103,613 | ) | (48,382 | ) | |||
Accounts payable | 2,706 | (10,034 | ) | ||||
Air traffic liability | 36,387 | 21,135 | |||||
Other liabilities | 14,119 | 13,731 | |||||
Other | — | (2,747 | ) | ||||
Net cash provided by operating activities | 472,985 | 260,512 | |||||
Investing activities: | |||||||
Pre-delivery deposits for flight equipment, net of refunds | (142,323 | ) | (115,802 | ) | |||
Capitalized interest | (10,159 | ) | — | ||||
Purchase of property and equipment | (548,800 | ) | (186,569 | ) | |||
Net cash used in investing activities | (701,282 | ) | (302,371 | ) | |||
Financing activities: | |||||||
Proceeds from issuance of long-term debt | 536,780 | 148,000 | |||||
Proceeds from stock options exercised | 32 | 174 | |||||
Payments on debt and capital lease obligations | (26,364 | ) | (1,233 | ) | |||
Proceeds from sale and leaseback transactions | 7,300 | 7,200 | |||||
Payments to pre-IPO shareholders pursuant to tax receivable agreement | — | (5,643 | ) | ||||
Excess tax benefits from equity-based compensation | 8,850 | 1,871 | |||||
Repurchase of common stock | (112,261 | ) | (1,630 | ) | |||
Debt issuance costs | (15,192 | ) | (4,727 | ) | |||
Net cash provided by financing activities | 399,145 | 144,012 | |||||
Net increase in cash and cash equivalents | 170,848 | 102,153 | |||||
Cash and cash equivalents at beginning of period | 632,784 | 530,631 | |||||
Cash and cash equivalents at end of period | $ | 803,632 | $ | 632,784 | |||
Supplemental disclosures | |||||||
Cash payments for: | |||||||
Interest (net of capitalized interest) | $ | 7,061 | $ | — | |||
Income taxes paid, net of refunds | $ | 95,933 | $ | 89,104 | |||
Non-cash transactions: | |||||||
Capital expenditures funded by capital lease borrowings | $ | — | $ | (173 | ) |
SPIRIT AIRLINES, INC. | ||||||||
Selected Operating Statistics (unaudited) | ||||||||
Three Months Ended December 31, | ||||||||
Operating Statistics | 2015 | 2014 | Change | |||||
Available seat miles (ASMs) (thousands) | 5,705,398 | 4,372,511 | 30.5 | % | ||||
Revenue passenger miles (RPMs) (thousands) | 4,727,996 | 3,707,271 | 27.5 | % | ||||
Load factor (%) | 82.9 | 84.8 | (1.9 | ) pts | ||||
Passenger flight segments (thousands) | 4,651 | 3,709 | 25.4 | % | ||||
Block hours | 89,016 | 70,730 | 25.9 | % | ||||
Departures | 33,662 | 27,167 | 23.9 | % | ||||
Total operating revenue per ASM (TRASM) (cents) | 9.11 | 10.85 | (16.0 | )% | ||||
Average yield (cents) | 11.00 | 12.80 | (14.1 | )% | ||||
Average ticket revenue per passenger flight segment ($) | 57.52 | 73.21 | (21.4 | )% | ||||
Average non-ticket revenue per passenger flight segment ($) | 54.26 | 54.70 | (0.8 | )% | ||||
Total revenue per passenger flight segment ($) | 111.78 | 127.91 | (12.6 | )% | ||||
CASM (cents) | 7.00 | 8.79 | (20.4 | )% | ||||
Adjusted CASM (cents) (1) | 7.03 | 8.69 | (19.1 | )% | ||||
Adjusted CASM ex-fuel (cents) (2) | 5.15 | 5.61 | (8.2 | )% | ||||
Fuel gallons consumed (thousands) | 67,467 | 52,732 | 27.9 | % | ||||
Average economic fuel cost per gallon ($) | 1.59 | 2.56 | (37.9 | )% | ||||
Aircraft at end of period | 79 | 65 | 21.5 | % | ||||
Average daily aircraft utilization (hours) | 12.5 | 12.5 | — | |||||
Average stage length (miles) | 1,000 | 983 | 1.7 | % | ||||
Airports served in the period (3) | 53 | 53 | — | |||||
Year Ended December 31, | ||||||||
Operating Statistics | 2015 | 2014 | Change | |||||
Available seat miles (ASMs) (thousands) | 21,246,156 | 16,340,142 | 30.0 | % | ||||
Revenue passenger miles (RPMs) (thousands) | 17,995,311 | 14,159,860 | 27.1 | % | ||||
Load factor (%) | 84.7 | 86.7 | (2.0 | ) pts | ||||
Passenger flight segments (thousands) | 17,921 | 14,294 | 25.4 | % | ||||
Block hours | 337,956 | 267,305 | 26.4 | % | ||||
Departures | 128,902 | 102,594 | 25.6 | % | ||||
Total operating revenue per ASM (TRASM) (cents) | 10.08 | 11.82 | (14.7 | )% | ||||
Average yield (cents) | 11.90 | 13.64 | (12.8 | )% | ||||
Average ticket revenue per passenger flight segment ($) | 65.25 | 80.11 | (18.5 | )% | ||||
Average non-ticket revenue per passenger flight segment ($) | 54.24 | 55.03 | (1.4 | )% | ||||
Total revenue per passenger flight segment ($) | 119.49 | 135.14 | (11.6 | )% | ||||
CASM (cents) | 7.68 | 9.65 | (20.4 | )% | ||||
Adjusted CASM (cents) (1) | 7.69 | 9.55 | (19.5 | )% | ||||
Adjusted CASM ex-fuel (cents) (2) | 5.50 | 5.88 | (6.5 | )% | ||||
Fuel gallons consumed (thousands) | 255,008 | 200,498 | 27.2 | % | ||||
Average economic fuel cost per gallon ($) | 1.82 | 2.99 | (39.1 | )% | ||||
Average daily aircraft utilization (hours) | 12.7 | 12.7 | — | |||||
Average stage length (miles) | 987 | 980 | 0.7 | % | ||||
Airports served in the period (3) | 57 | 56 | 1.8 | % | ||||
(1) Excludes special items.
(2) Excludes economic fuel expense and special items.
(3) Includes seasonal airports not served at the end of the period.
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 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 | |||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
(in thousands) | 2015 | 2014 | 2015 | 2014 | |||||||||||
Operating special items include the following (1): | |||||||||||||||
Prior years' additional federal excise tax | $ | — | $ | — | $ | — | $ | 9,278 | |||||||
Unrealized losses (gains) related to fuel derivative contracts | (1,988 | ) | 3,118 | (3,880 | ) | 3,881 | |||||||||
Loss on disposal of assets | 304 | 1,350 | 1,604 | 3,008 | |||||||||||
Special charges | — | — | 673 | 45 | |||||||||||
Total operating special items | $ | (1,684 | ) | $ | 4,468 | $ | (1,603 | ) | $ | 16,212 | |||||
Non-operating special items include the following (2): | |||||||||||||||
Settlement paid to Pre-IPO Stockholders | $ | — | $ | — | $ | — | $ | 1,388 | |||||||
Total non-operating special items | $ | — | $ | — | $ | — | $ | 1,388 | |||||||
Total special items | $ | (1,684 | ) | $ | 4,468 | $ | (1,603 | ) | $ | 17,600 |
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) | 2015 | 2014 | 2015 | 2014 | ||||||||||||
Total operating expenses, as reported | $ | 399,509 | $ | 384,512 | $ | 1,632,341 | $ | 1,576,317 | ||||||||
Less operating special items (1) | (1,684 | ) | 4,468 | (1,603 | ) | 16,212 | ||||||||||
Adjusted operating expenses, non-GAAP (3) | 401,193 | 380,044 | 1,633,944 | 1,560,105 | ||||||||||||
Less: Economic fuel expense | 107,203 | 134,884 | 465,327 | 599,750 | ||||||||||||
Adjusted operating expenses excluding fuel, non-GAAP (4) | $ | 293,990 | $ | 245,160 | $ | 1,168,617 | $ | 960,355 | ||||||||
Available seat miles | 5,705,398 | 4,372,511 | 21,246,156 | 16,340,142 | ||||||||||||
CASM (cents) | 7.00 | 8.79 | 7.68 | 9.65 | ||||||||||||
Adjusted CASM (cents) (3) | 7.03 | 8.69 | 7.69 | 9.55 | ||||||||||||
Adjusted CASM ex-fuel (cents) (4) | 5.15 | 5.61 | 5.50 | 5.88 | ||||||||||||
(1) Special items include additional federal excise tax on a minority of fuel volume for the period beginning July 1, 2009 through December 31, 2013, unrealized gains and losses related to outstanding fuel derivative contracts, loss on disposal of assets, and special charges.
(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 operating special items.
(4) Excludes operating special items and economic fuel expense as described in the "Reconciliation of Economic Fuel Expense to GAAP Fuel Expense" table below.
Reconciliation of Adjusted Net Income to GAAP Net Income | |||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||||||||||
December 31, | December 31, | ||||||||||||||||||||||
(in thousands, except per share data) | 2015 | 2014 | 2015 | 2014 | |||||||||||||||||||
Net income, as reported | $ | 74,400 | $ | 55,909 | $ | 317,220 | $ | 225,464 | |||||||||||||||
Add: Provision for income taxes | 43,746 | 33,119 | 185,183 | 127,530 | |||||||||||||||||||
Income before income taxes, as reported | 118,146 | 89,028 | 502,403 | 352,994 | |||||||||||||||||||
Pre-tax margin, GAAP | 22.7 | % | 18.8 | % | 23.5 | % | 18.3 | % | |||||||||||||||
Add operating special items (1) | (1,684 | ) | 4,468 | (1,603 | ) | 16,212 | |||||||||||||||||
Add non-operating special charges (1) | — | — | — | 1,388 | |||||||||||||||||||
Income before income taxes, non-GAAP (2) | 116,462 | 93,496 | 500,800 | 370,594 | |||||||||||||||||||
Adjusted pre-tax margin, non-GAAP (2) | 22.4 | % | 19.7 | % | 23.4 | % | 19.2 | % | |||||||||||||||
Provision for income taxes (3) | 43,122 | 34,781 | 184,592 | 133,889 | |||||||||||||||||||
Adjusted net income, non-GAAP (2)(3) | $ | 73,340 | $ | 58,715 | $ | 316,208 | $ | 236,705 | |||||||||||||||
Weighted average shares, diluted | 71,672 | 73,324 | 72,426 | 73,294 | |||||||||||||||||||
Adjusted net income per share, diluted (2)(3) | $ | 1.02 | $ | 0.80 | $ | 4.37 | $ | 3.23 |
Reconciliation of Adjusted Operating Income to GAAP Operating Income | |||||||||||||||
(unaudited) | |||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
(in thousands) | 2015 | 2014 | 2015 | 2014 | |||||||||||
Operating income, as reported | $ | 120,337 | $ | 89,975 | $ | 509,122 | $ | 355,263 | |||||||
Operating margin, GAAP | 23.1 | % | 19.0 | % | 23.8 | % | 18.4 | % | |||||||
Add operating special items (1) | (1,684 | ) | 4,468 | (1,603 | ) | 16,212 | |||||||||
Operating income, non-GAAP (4) | $ | 118,653 | $ | 94,443 | $ | 507,519 | $ | 371,475 | |||||||
Operating margin (4) | 22.8 | % | 19.9 | % | 23.7 | % | 19.2 | % | |||||||
(1) See "Special Items" for more details.
(2) Excludes operating and non-operating special items.
(3) Assumes same marginal tax rate as is applicable to GAAP net income.
(4) Excludes special items.
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 | Year Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
(in thousands, except per gallon data) | 2015 | 2014 | 2015 | 2014 | |||||||||||
Fuel expense | |||||||||||||||
Aircraft fuel, as reported | $ | 105,215 | $ | 138,002 | $ | 461,447 | $ | 612,909 | |||||||
Less: | |||||||||||||||
Prior years' additional federal excise tax | — | — | — | 9,278 | |||||||||||
Unrealized losses (gains) related to fuel derivative contracts | (1,988 | ) | 3,118 | (3,880 | ) | 3,881 | |||||||||
Economic fuel expense, non-GAAP | $ | 107,203 | $ | 134,884 | $ | 465,327 | $ | 599,750 | |||||||
Fuel gallons consumed | 67,467 | 52,732 | 255,008 | 200,498 | |||||||||||
Economic fuel cost per gallon, non-GAAP | $ | 1.59 | $ | 2.56 | $ | 1.82 | $ | 2.99 |
Calculation of Return on Invested Capital | |||
(unaudited) | |||
Twelve Months Ended | |||
(in thousands) | December 31, 2015 | ||
Operating income | $ | 509,122 | |
Add operating special items (1) | (1,603 | ) | |
Adjustment for aircraft rent | 211,531 | ||
Adjusted operating income (2) | 719,050 | ||
Tax (36.9%) (3) | 265,035 | ||
Adjusted operating income, after-tax | 454,015 | ||
Invested capital | |||
Total debt | $ | 646,330 | |
Book equity | 1,225,310 | ||
Less: Unrestricted cash | 803,632 | ||
Add: Capitalized aircraft operating leases (7x Aircraft Rent) | 1,480,717 | ||
Total invested capital | 2,548,725 | ||
Return on invested capital (ROIC), pre-tax (2) | 28.2 | % | |
Return on invested capital (ROIC), after-tax (2)(3) | 17.8 | % | |
(1) See "Special Items" for more details.
(2) Excludes special items.
(3) Assumes same marginal tax rate as is applicable to GAAP net income for the twelve months ended December 31, 2015.