EX-99.1 2 earningsrelease1q15.htm EARNINGS RELEASE 1Q15 Earnings Release 1Q15



EXHIBIT 99.1

Spirit Airlines Announces First Quarter 2015 Results;
Adjusted Net Income Increases 87.1 Percent to $70.7 Million and
Pre-Tax Margin Increases 900 Basis Points to 22.7 Percent


MIRAMAR, FL. (April 29, 2015) - Spirit Airlines, Inc. (NASDAQ: SAVE) today reported first quarter 2015 financial results.
•
Adjusted net income for the first quarter 2015 increased 87.1 percent to $70.7 million ($0.96 per diluted share) compared to the first quarter 20141. GAAP net income for the first quarter 2015 increased 83.0 percent year over year to $69.0 million ($0.94 per diluted share).

•
Adjusted pre-tax margin for the first quarter 2015 was 22.7 percent, up 900 basis points year over year1. On a GAAP basis, pre-tax margin for the first quarter 2015 was 22.1 percent.

•
Spirit ended the first quarter 2015 with an unrestricted cash and cash equivalents balance of $741.6 million.

•
Spirit's return on invested capital (before taxes and excluding special items) for the twelve months ended March 31, 2015 was 30.2 percent2.

“I want to thank our team members for delivering strong first quarter operational and financial performance while continuing to execute on our growth plan.  We've announced 38 of the new routes to begin in 2015 and, over the last two fiscal quarters, we have added 12 new aircraft to our fleet all while improving our on-time performance and maintaining our high degree of reliability,” said Ben Baldanza, Spirit’s Chief Executive Officer.  “Our consistent, reliable operational performance, solid track record in successfully launching new markets, and continued strong financial performance position us well for the year ahead.”   

Revenue Performance
For the first quarter 2015, Spirit's total operating revenue was $493.4 million, an increase of 12.6 percent compared to the first quarter 2014, driven by an increase in flight volume.

Total revenue per available seat mile (“RASM”) for the first quarter 2015 decreased 9.9 percent compared to the first quarter 2014 on a capacity increase of 25.0 percent. The RASM decrease was
primarily driven by a 7.8 percent decrease in average yield due to the ramp up of our growth in new and mature markets, overall fare compression in many of our markets, and increased capacity from other carriers in the Dallas markets.

Total revenue per passenger flight segment ("PFS") for the first quarter 2015 decreased 7.6 percent year over year to $123.96, primarily driven by a 11.7 percent decrease in ticket revenue per PFS and a 2.1 percent decrease in non-ticket revenue per PFS. The decrease in non-ticket revenue per PFS was primarily attributable to lower bag revenue per PFS and the outsourcing of the Company's onboard catering to a third-party provider under a revenue share agreement.


1




Cost Performance
Total operating expenses for the first quarter 2015, excluding $2.7 million of special items, increased 0.9 percent to $381.4 million3. Including special items, total operating expenses increased 1.6 percent year over year to $384.1 million. Operating expenses benefited from economic fuel expense decreasing 25.4 percent, or $37.7 million, on a fuel volume increase of 21.5 percent.
 
Spirit reported first quarter 2015 cost per available seat mile ("ASM") excluding special items and fuel (“Adjusted CASM ex-fuel”)3 of 5.72 cents, a decrease of 5.6 percent compared to the same period last year driven primarily by lower labor expense per ASM and lower aircraft rent per ASM. Labor expense per ASM in the first quarter 2015 was lower compared to the same period last year primarily due to scale benefits from overall growth and from larger gauge aircraft. 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.

"Once again our team executed well on improving our cost structure.  Despite very disruptive winter weather which caused a number of cancelations, and nearly a one percent shorter stage length, our first quarter 2015 Adjusted CASM ex-fuel decreased 5.6 percent year-over-year.  This performance sets us up nicely to meet our full year target of delivering Adjusted CASM ex-fuel down 6 to 8 percent year over year,” said Ted Christie, Spirit's Chief Financial Officer."

Fleet
In the first quarter 2015, Spirit took delivery of 5 new A320 aircraft, ending the quarter with 70 aircraft in its fleet. 

First Quarter 2015 and Other Current Highlights
•
Maintained its commitment to offer low fares to its valued customers; average ticket revenue per PFS for the first quarter 2015 was $68.71 with total revenue per PFS of $123.96.
•
Launched service on nine new nonstop routes in the first quarter 2015.
•
Added Cleveland, Ohio as Spirit's 57th destination.
•
Improved on-time performance and maintained one of the highest completion factors in the industry.
•
Named 2015 Value Airline of the Year by Air Transport World.


2





Conference Call/Webcast Detail
Spirit will conduct a conference call to discuss these results today, April 29, 2015, 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 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 modern and fuel-efficient all-Airbus fleet, we operate more than 340 daily flights to 57 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 Income" 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, 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 revenues, cost of operations, 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, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K.


3



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

 
Three Months Ended

 
 
March 31,
 
Percent

2015

2014

Change
Operating revenues:





Passenger
$
273,466


$
253,878


7.7

Non-ticket
219,889


184,109


19.4

Total operating revenues
493,355


437,987


12.6







Operating expenses:





Aircraft fuel
112,426


148,471


(24.3
)
Salaries, wages and benefits
89,057


76,249


16.8

Aircraft rent
52,788


46,387


13.8

Landing fees and other rents
30,546


24,016


27.2

Distribution
20,497


18,569


10.4

Maintenance, materials and repairs
19,160


17,614


8.8

Depreciation and amortization
14,863


11,121


33.6

Other operating
43,747


35,448


23.4

Loss on disposal of assets
595


150


na

Special charges
425


9


na

Total operating expenses
384,104


378,034


1.6










Operating income
109,251


59,953


82.2







Other (income) expense:





Interest expense
2,812


107


na

Capitalized interest
(2,533
)

(107
)

na

Interest income
(134
)

(68
)

97.1

Other expense
72


37


94.6

Total other (income) expense
217


(31
)

na









Income before income taxes
109,034


59,984


81.8

Provision for income taxes
40,032


22,278


79.7

Net income
$
69,002


$
37,706


83.0

Basic earnings per share
$
0.94


$
0.52


80.8

Diluted earnings per share
$
0.94


$
0.51


84.3







Weighted average shares, basic
73,054


72,684


0.5

Weighted average shares, diluted
73,370


73,254


0.2








4



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

 
Three Months Ended March 31,
 
2015
 
2014
 
(in thousands)
Net income
$
69,002

 
$
37,706

Unrealized gain (loss) on interest rate derivative instruments, net of deferred taxes of $940 and $0
(1,594
)
 
—

Other comprehensive income (loss)
$
(1,594
)
 
$
—

Comprehensive income
$
67,408

 
$
37,706





5



SPIRIT AIRLINES, INC.
Balance Sheets
(unaudited, in thousands)
 
March 31,
 
December 31,
 
2015
 
2014
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
741,627

 
$
632,784

Accounts receivable, net
28,097

 
22,685

Deferred income taxes
9,643

 
9,643

Prepaid expenses and other current assets
76,706

 
66,029

Total current assets
856,073

 
731,141

 
 
 
 
Property and equipment:
 
 
 
Flight equipment
422,617

 
204,462

Ground and other equipment
60,860

 
57,012

Less accumulated depreciation
(41,472
)
 
(36,099
)
 
442,005

 
225,375

Deposits on flight equipment purchase contracts
260,334

 
242,881

Aircraft maintenance deposits
212,786

 
213,147

Deferred heavy maintenance, net
115,584

 
123,108

Other long-term assets
69,074

 
66,744

Total assets
$
1,955,856

 
$
1,602,396

 
 
 
 
Liabilities and shareholders’ equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
13,835

 
$
13,402

Air traffic liability
259,404

 
188,870

Current maturities of long-term debt
22,184

 
10,431

Other current liabilities
190,874

 
152,921

Total current liabilities
486,297

 
365,624

 
 
 
 
Long-term debt less current maturities
302,800

 
135,232

Long-term deferred income taxes
69,510

 
76,010

Deferred gains and other long-term liabilities
27,832

 
22,455

Shareholders’ equity:
 
 
 
Common stock
7

 
7

Additional paid-in-capital
536,050

 
526,173

Treasury stock, at cost
(14,864
)
 
(3,921
)
Retained earnings
550,536

 
481,534

Accumulated other comprehensive loss
(2,312
)
 
(718
)
Total shareholders’ equity
1,069,417

 
1,003,075

Total liabilities and shareholders’ equity
$
1,955,856

 
$
1,602,396


6



SPIRIT AIRLINES, INC.
Statement of Cash Flows
(unaudited, in thousands)
 
Three Months Ended March 31,
 
2015
 
2014
Operating activities:
 
 
 
Net income
$
69,002

 
$
37,706

Adjustments to reconcile net income to net cash provided by operations:
 
 
 
Unrealized (gains) losses on open fuel derivative contracts
3,783

 
—

Equity-based compensation, net
1,985

 
2,547

Allowance for doubtful accounts (recoveries)
31

 
(13
)
Amortization of deferred gains and losses
164

 
(89
)
Depreciation and amortization
14,863

 
11,121

Deferred income tax expense (benefit)
(5,560
)
 
410

Loss on disposal of assets
595

 
150

Capitalized interest
(2,533
)
 
(107
)
Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(5,444
)
 
(10,656
)
Prepaid maintenance reserves
(12,317
)
 
(14,661
)
Long-term deposits and other assets
(6,160
)
 
(15,691
)
Accounts payable
433

 
1,457

Air traffic liability
79,350

 
62,328

Other liabilities
29,643

 
16,137

Net cash provided by operating activities
167,835

 
90,639

 
 
 
 
Investing activities:
 
 
 
Pre-delivery deposits for flight equipment, net of refunds
(50,388
)
 
(73,201
)
Purchase of property and equipment
(184,609
)
 
(4,086
)
Net cash used in investing activities
(234,997
)
 
(77,287
)
Financing activities:
 
 
 
Proceeds from issuance of long-term debt
185,000

 
—

Proceeds from stock options exercised
15

 
39

Payments on debt and capital lease obligations
(2,968
)
 
—

Excess tax benefits from equity-based compensation
7,877

 
588

Repurchase of common stock
(10,943
)
 
(621
)
Debt issuance costs
(2,976
)
 
—

Net cash provided by financing activities
176,005

 
6

Net increase in cash and cash equivalents
108,843

 
13,358

Cash and cash equivalents at beginning of period
632,784

 
530,631

Cash and cash equivalents at end of period
$
741,627

 
$
543,989

Supplemental disclosures
 
 
 
Cash payments for:
 
 
 
Interest (net of capitalized interest)
$
11

 
$
—

Taxes
$
9,883

 
$
3,218


7



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

 
Operating Statistics
2015

2014

Change
Available seat miles (ASMs) (thousands)
4,729,463


3,784,727


25.0
 %
Revenue passenger miles (RPMs) (thousands)
4,017,559


3,289,287


22.1
 %
Load factor (%)
84.9


86.9


(2.0) pts

Passenger flight segments (thousands)
3,980


3,264


21.9
 %
Block hours
77,035


63,139


22.0
 %
Departures
29,044


23,561


23.3
 %
Operating revenue per ASM (RASM) (cents)
10.43


11.57


(9.9
)%
Average yield (cents)
12.28


13.32


(7.8
)%
Average ticket revenue per passenger flight segment ($)
68.71


77.79


(11.7
)%
Average non-ticket revenue per passenger flight segment ($)
55.25


56.41


(2.1
)%
Total revenue per passenger flight segment ($)
123.96


134.20


(7.6
)%
CASM (cents)
8.12


9.99


(18.7
)%
Adjusted CASM (cents) (1)
8.06


9.98


(19.2
)%
Adjusted CASM ex-fuel (cents) (2)
5.72


6.06


(5.6)%

Fuel gallons consumed (thousands)
56,723


46,677


21.5
 %
Average economic fuel cost per gallon ($)
1.95


3.18


(38.7
)%
Aircraft at end of period
70


56


25.0
 %
Average daily aircraft utilization (hours)
12.7


12.8


(0.8)%

Average stage length (miles)
991


1,000


(0.9
)%
Airports served in the period
55


53


3.8%

 
 
 
 
 
 


























(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 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
 
March 31,
(in thousands)
2015

2014
Operating special items include the following:
 
 
 
Unrealized losses (gains) related to fuel derivative contracts
$
1,695

 
$
—

Loss on disposal of assets
595

 
150

Special charges (credits)
425

 
9

Total special items:
$
2,715

 
$
159


Reconciliation of Adjusted Operating Expense to GAAP Operating Expense
(unaudited)


 
Three Months Ended

March 31,
(in thousands)
2015

2014
Total operating expenses, as reported
$
384,104

 
$
378,034

Less special items (1)
2,715

 
159

Adjusted operating expenses, non-GAAP (2)
381,389

 
377,875

Less: Economic fuel expense
110,731

 
148,471

Adjusted operating expenses excluding fuel, non-GAAP (3)
$
270,658

 
$
229,404


 
 
 
Available seat miles
4,729,463

 
3,784,727


 
 
 
CASM (cents)
8.12

 
9.99

Adjusted CASM (cents) (2)
8.06

 
9.98

Adjusted CASM ex-fuel (cents) (3)
5.72

 
6.06



(1)
See "Special Items" for more detail.
(2)
Excludes special items.
(3)
Excludes special items and economic fuel expense as described in the "Reconciliation of Economic Fuel Expense to GAAP Fuel Expense" table below.




9



Reconciliation of Adjusted Net Income to GAAP Net Income
(unaudited)


 
Three Months Ended
 
March 31,
(in thousands, except per share data)
2015
 
2014
Net income, as reported
$
69,002

 
$
37,706

Add: Provision for income taxes
40,032

 
22,278

Income before income taxes, as reported
109,034

 
59,984

Pre-tax margin, GAAP
22.1
%
 
13.7
%
Add special items (1)
2,715

 
159

Income before income taxes, non-GAAP (2)
111,749

 
60,143

Pre-tax margin, non-GAAP (2)
22.7
%
 
13.7
%
Provision for income taxes (3)
41,029

 
22,337

Adjusted net income, non-GAAP (2)
$
70,720

 
$
37,806

 
 
 
 
Weighted average shares, diluted
73,370

 
73,254

 
 
 
 
Adjusted net income per share, diluted
$0.96
 
$0.52



(1)
See "Special Items" for more details.
(2)
Excludes special items.
(3)
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

March 31,
(in thousands)
2015
 
2014
Operating income, as reported
$
109,251


$
59,953

Operating margin, GAAP
22.1
%

13.7
%
Add special items (1)
2,715

 
159

Operating income, non-GAAP (2)
$
111,966


$
60,112

Operating margin (2)
22.7
%

13.7
%


(1)
See "Special Items" for more detail.
(2)
Excludes special items.




10



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
 
March 31,
(in thousands, except per gallon data)
2015
 
2014
Fuel expense



Aircraft fuel, as reported
$
112,426


$
148,471

Less Unrealized losses (gains) related to fuel derivative contracts
1,695

 
—

Economic fuel expense, non-GAAP
$
110,731


$
148,471





Fuel gallons consumed
56,723


46,677

 



Economic fuel cost per gallon, non-GAAP
$
1.95


$
3.18


Calculation of Return on Invested Capital
(unaudited)
 
Twelve Months Ended
(in thousands)
March 31, 2015
Operating Income
$
404,561

Add special items (1)
18,768

Adjustment for aircraft rent
202,228

Adjusted operating income (2)
625,557

Tax (36.1%) (3)
225,826

Adjusted operating income, after-tax
399,731

Invested Capital
 
Total debt
$
324,984

Book equity
1,069,417

Less: Unrestricted cash
741,627

Add: Capitalized aircraft operating leases (7x Aircraft Rent)
1,415,596

Total invested capital
2,068,370

 
 
Return on invested capital (ROIC), pre-tax
30.2
%
Return on invested capital (ROIC), after-tax
19.3
%

(1)
Special items include unrealized gains or losses related to fuel derivative contracts, loss on disposal of assets, special charges (credits), and additional federal excise tax on a minority of fuel volume for the period beginning July 1, 2009 through December 31, 2013 recorded in the third quarter 2014.
(2)
Excludes special items as described above.
(3)
Assumes same marginal tax rate as is applicable to GAAP net income for the twelve months ended March 31, 2015.

###

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