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CST: 17/11/2019 04:33:51   

Spirit Airlines Reports Second Quarter 2019 Results

115 Days ago

MIRAMAR, Fla., July 24, 2019 (GLOBE NEWSWIRE) -- Spirit Airlines, Inc. (NYSE: SAVE) today reported second quarter 2019 financial results.

  Second Quarter 2019   Second Quarter 2018
  As Reported   Adjusted   As Reported   Adjusted
  (GAAP)   (non-GAAP)1   (GAAP)   (non-GAAP)1
Revenue $1,013.0 million   $1,013.0 million   $851.8 million   $851.8 million
Operating Income (loss) $163.9 million   $165.5 million   $108.5 million   $113.3 million
Operating Margin  16.2%    16.3%    12.7%    13.3%
Net Income (loss) $114.5 million   $115.7 million   $11.3 million   $75.7 million
Diluted EPS $1.67    $1.69    $0.16    $1.11 

"Our team once again delivered strong quarterly profits.  In the second quarter 2019, we improved our operating margin by 300 basis points and delivered very strong earnings growth." said Ted Christie, Spirit’s President and Chief Executive Officer.  "Operationally, we experienced numerous storm systems across our network which negatively impacted our operational reliability.  However, on a relative basis, year-to-date through June 30, 2019 we still rank among the best in the industry for on-time performance2.  I want to thank the entire Spirit team for all that they do every day to care for our Guests, especially during this busy travel season under challenging operational conditions."

Revenue Performance
For the second quarter 2019, Spirit's total operating revenue was $1,013.0 million, an increase of 18.9 percent compared to the second quarter 2018, driven by an 18.4 percent increase in flight volume and increases in both yields and load factor.

Total operating revenue per available seat mile ("TRASM") for the second quarter 2019 increased 5.0 percent compared to the same period last year.  During the second quarter 2019, the Company's results benefited from its strategic network changes, revenue management initiatives, and a strong underlying demand environment.  In addition, the Company estimates the calendar shift of Easter from the first quarter in 2018 to the second quarter in 2019 contributed approximately 200 basis points to the TRASM improvement.

Non-ticket revenue per passenger flight segment for the second quarter 2019 increased 1.8 percent to $55.543.   Fare revenue per passenger flight segment decreased 1.0 percent to $57.60 and total revenue per passenger segment increased 0.3 percent year over year to $113.14.

Cost Performance
For the second quarter 2019, total GAAP operating expenses increased 14.2 percent year over year to $849.0 million.  Adjusted operating expenses for the second quarter 2019 increased 14.8 percent year over year to $847.5 million4.  These changes were primarily driven by higher flight volume, higher passenger re-accommodation expense, higher salaries, wages and benefits, and airport rent and landing fees.

Aircraft fuel expense increased in the second quarter 2019 by 7.6 percent year over year, due to a 15.4 percent increase in fuel gallons consumed.

Spirit reported second quarter 2019 cost per available seat mile ("ASM"), excluding operating special items and fuel (“Adjusted CASM ex-fuel”), of 5.41 cents4, up 4.6 percent compared to the same period last year.  As previously disclosed, a severe storm system impacted a large majority of Spirit’s flights to and from Florida during the Easter holiday weekend.  As a result, the Company canceled numerous flights and incurred costs of about $6 million for passenger re-accommodation and disrupted crew expense.  The additional expense and loss of ASMs related to this storm contributed approximately 150 basis points to adjusted CASM ex-fuel year over year percent change for the second quarter 2019.  In addition to the Easter storm, the Company experienced multiple storm-related flight disruptions throughout the rest of the quarter which drove additional passenger re-accommodation expense.  Higher ground handling rates, amortization expense, and other items contributed to the adjusted CASM ex-fuel change year over year.

Liquidity
Spirit ended the second quarter 2019 with unrestricted cash, cash equivalents, and short-term investments of $1.2 billion.  For the six months ended June 30, 2019, Spirit generated $341.0 million of operating cash flow, after investing $238.5 million, primarily for aircraft purchases and pre-delivery deposits.  Adjusted for proceeds from issuance of long-term debt, operating cash flow for the quarter ended June 30, 2019 was $205.2 million5.  For the six months ended June 30, 2019, net cash provided by financing activities was $3.5 million.

Fleet
Spirit took delivery of two new aircraft (one A320ceo and one A320neo) during the second quarter 2019, ending the quarter with 135 aircraft in its fleet.

Conference Call/Webcast Detail
Spirit will conduct a conference call to discuss these results tomorrow, July 25, 2019, at 9:30 a.m. ET.  A live audio webcast of the conference call will be available to the public on a listen-only basis at http://ir.spirit.com.  An archive of the webcast will be available under "Webcasts & Presentations" for 60 days.

About Spirit Airlines:
Spirit Airlines (NYSE: SAVE) is committed to delivering the best value in the sky while providing an exceptional Guest experience.  We are the leader in providing customizable travel options starting with an unbundled fare.  This allows every Guest to pay only for the options they choose - like bags, seat assignments, and refreshments - something we call Á La Smarte.  We make it possible for our Guests to venture further, travel more often, and discover more than ever before.  Our Fit Fleet® is one of the youngest and most fuel-efficient in the U.S.  We operate more than 600 daily flights to 76 destinations in the U.S., Latin America, and the Caribbean, and are dedicated to giving back and improving the communities we serve.  Come save with us at www.spirit.com.  At Spirit Airlines, we go.  We go for you.

Investors are encouraged to read the Company's periodic and current reports filed with or furnished to the Securities and Exchange Commission, including its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, for additional information regarding the Company.

End Notes
(1) See "Reconciliation of Adjusted Net Income, Adjusted Pre-tax Income, and Adjusted Operating    Income to GAAP Net Income" table below for more details.
(2) Preliminary data using DOT A:14 methodology.
(3) See "Calculation of Total Non-Ticket Revenue per Passenger Segment" table below for more details.
(4) See "Reconciliation of Adjusted Operating Expense to GAAP Operating Expense" table below for   more details.
(5) See "Reconciliation of Adjusted Free Cash Flow to GAAP Net Operating Cash Flow" 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 Statements of Operations
(unaudited, in thousands, except per-share amounts)

  Three Months Ended       Six Months Ended    
  June 30,   Percent   June 30,   Percent
  2019   2018   Change   2019   2018   Change
Operating revenues:                      
Passenger $ 994,430     $ 836,350     18.9     $ 1,832,495     $ 1,525,491     20.1  
Other 18,526     15,421     20.1     36,257     30,418     19.2  
Total operating revenues 1,012,956     851,771     18.9     1,868,752     1,555,909     20.1  
                       
Operating expenses:                      
Aircraft fuel 265,006     246,180     7.6     494,642     450,826     9.7  
Salaries, wages and benefits

216,375     187,756     15.2     420,276     342,852     22.6  
Landing fees and other rents 64,711     58,602     10.4     124,360     108,232     14.9  
Aircraft rent 46,522     41,745     11.4     92,304     91,936     0.4  
Depreciation and amortization 54,913     45,618     20.4     105,639     84,991     24.3  
Distribution 40,602     34,997     16.0     76,321     65,628     16.3  
Maintenance, materials and repairs 34,688     31,653     9.6     66,292     61,363     8.0  
Special charges     174     nm         89,342     nm  
Loss on disposal of assets 1,550     4,644     nm     3,463     5,492     nm  
Other operating 124,651     91,881     35.7     233,713     185,523     26.0  
Total operating expenses 849,018     743,250     14.2     1,617,010     1,486,185     8.8  
                       
Operating income (loss) 163,938     108,521     51.1     251,742     69,724     261.1  
                       
Other (income) expense:                      
Interest expense 25,266     20,498     23.3     50,237     38,347     31.0  
Capitalized interest (2,975 )   (2,296 )   29.6     (5,532 )   (4,548 )   21.6  
Interest income (7,066 )   (4,430 )   59.5     (13,990 )   (8,496 )   64.7  
Other expense 144     188     nm     377     321     nm  
Special charges, non-operating     79,412     nm         88,613     nm  
Total other (income) expense 15,369     93,372     (83.5 )   31,092     114,237     (72.8 )
                       
                       
Income (loss) before income taxes 148,569     15,149     880.7     220,650     (44,513 )   595.7  
Provision (benefit) for income taxes 34,068     3,895     774.7     50,073     (10,845 )   561.7  
                       
Net income (loss) $ 114,501     $ 11,254     917.4     $ 170,577     $ (33,668 )   606.6  
Basic earnings (loss) per share $ 1.67     $ 0.16     943.8     $ 2.49     $ (0.49 )   608.2  
Diluted earnings (loss) per share $ 1.67     $ 0.16     943.8     $ 2.49     $ (0.49 )   608.2  
                       
Weighted average shares, basic 68,439     68,251     0.3     68,410     68,237     0.3  
Weighted average shares, diluted 68,620     68,310     0.5     68,568     68,237     0.5  

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

  Three Months Ended   Six Months Ended
  June 30,   June 30,
  2019   2018   2019   2018 
Net income (loss) $ 114,501     $ 11,254     $ 170,577     $ (33,668 )
Unrealized gain on short-term investment securities, net of deferred taxes of $29, $33, $67 and $26 98     101     228     78  
Interest rate derivative loss reclassified into earnings, net of taxes of $19, $18, $46, and $39

54     61     101     120  
Other comprehensive income $ 152     $ 162     $ 329     $ 198  
Comprehensive income (loss) $ 114,653     $ 11,416     $ 170,906     $ (33,470 )


SPIRIT AIRLINES, INC.

Selected Operating Statistics
 (unaudited)

  Three Months Ended June 30,    
Operating Statistics 2019   2018   Change
Available seat miles (ASMs) (thousands) 10,775,878     9,515,842     13.2 %
Revenue passenger miles (RPMs) (thousands) 9,157,488     7,961,128     15.0 %
Load factor (%) 85.0     83.7     1.3 pts
Passenger flight segments (thousands) 8,953     7,554     18.5 %
Block hours 157,182     136,357     15.3 %
Departures 58,517     49,404     18.4 %
Total operating revenue per ASM (TRASM) (cents) 9.40     8.95     5.0 %
Average yield (cents) 11.06     10.70     3.4 %
Fare revenue per passenger flight segment ($) 57.60     58.19     (1.0 )%
Non-ticket revenue per passenger flight segment ($) 55.54     54.57     1.8 %
Total revenue per passenger flight segment ($) 113.14     112.76     0.3 %
CASM (cents) 7.88     7.81     0.9 %
Adjusted CASM (cents) (1) 7.86     7.76     1.3 %
Adjusted CASM ex-fuel (cents) (2) 5.41     5.17     4.6 %
Fuel gallons consumed (thousands) 122,447     106,144     15.4 %
Average economic fuel cost per gallon ($) 2.16     2.32     (6.9 )%
Aircraft at end of period 135     119     13.4 %
Average daily aircraft utilization (hours) 12.8     12.6     1.6 %
Average stage length (miles) 1,004     1,051     (4.5 )%


           
  Six Months Ended June 30,    
Operating Statistics 2019   2018   Change
Available seat miles (ASMs) (thousands) 20,604,922     17,924,606     15.0 %
Revenue passenger miles (RPMs) (thousands) 17,290,518     14,774,647     17.0 %
Load factor (%) 83.9     82.4     1.5 pts
Passenger flight segments (thousands) 16,773     14,092     19.0 %
Block hours 300,612     259,310     15.9 %
Departures 110,692     94,386     17.3 %
Total operating revenue per ASM (TRASM) (cents) 9.07     8.68     4.5 %
Average yield (cents) 10.81     10.53     2.7 %
Fare revenue per passenger flight segment ($) 55.57     55.51     0.1 %
Non-ticket revenue per passenger flight segment ($) 55.85     54.90     1.7 %
Total revenue per passenger flight segment ($) 111.42     110.41     0.9 %
CASM (cents) 7.85     8.29     (5.3 )%
Adjusted CASM (cents) (1) 7.83     7.76     0.9 %
Adjusted CASM ex-fuel (cents) (2) 5.43     5.25     3.4 %
Fuel gallons consumed (thousands) 232,275     201,147     15.5 %
Average economic fuel cost per gallon ($) 2.13     2.24     (4.9 )%
Average daily aircraft utilization (hours) 12.5     12.3     1.6 %
Average stage length (miles) 1,016     1,038     (2.1 )%
  1. Excludes operating special items.
  2. Excludes economic fuel expense and operating 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.  These non-GAAP financial measures may be presented on a different basis than other companies using similarly titled non-GAAP financial measures.

Calculation of Total Non-Ticket Revenue per Passenger Segment
(unaudited)

  Three Months Ended June 30,   Six Months Ended June 30,
(in thousands, except per segment data) 2019   2018   2019   2018
Operating revenues                              
Fare $ 515,696     $ 439,549     $ 932,041     $ 782,244  
Non-fare 478,734     396,801     900,454     743,247  
Total passenger revenues 994,430     836,350     1,832,495     1,525,491  
Other revenues 18,526     15,421     36,257     30,418  
Total operating revenues $ 1,012,956     $ 851,771     $ 1,868,752     $ 1,555,909  
               
Non-ticket revenues (1) $ 497,260     $ 412,222     $ 936,711     $ 773,665  
               
Passenger segments 8,953     7,554     16,773     14,092  
               
Non-ticket revenue per passenger segment ($) $ 55.54     $ 54.57     $ 55.85     $ 54.90  

(1) Non-ticket revenues equals the sum of non-fare passenger revenues and other revenues.

Special Items
(unaudited)

  Three Months Ended   Six Months Ended
  June 30,   June 30,
(in thousands) 2019   2018   2019   2018
Operating special items include the following:                      
Loss on disposal of assets 1,550     4,644     3,463     5,492  
Operating special charges (1)     174         89,342  
Total operating special items $ 1,550     $ 4,818     $ 3,463     $ 94,834  
Non-operating special items include the following:              
Non-operating special charges (2)     79,412         $ 88,613  
Total non-operating special items $     $ 79,412     $     $ 88,613  
               
Total special items $ 1,550     $ 84,230     $ 3,463     $ 183,447  
  1. Operating special charges for 2018 include amounts primarily due to a one-time ratification incentive recognized in connection with a new pilot agreement approved in February 2018. 
  2. Non-operating special charges in 2018 are related to the purchase of 14 A319-100 aircraft.  The contract was deemed a lease modification which resulted in a change of classification from operating leases to finance leases for the 14 aircraft.

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

  Three Months Ended   Six Months Ended
  June 30,   June 30,
(in thousands, except CASM data in cents) 2019   2018   2019   2018
Total operating expenses, as reported $ 849,018     $ 743,250     $ 1,617,010     $ 1,486,185  
Less operating special items 1,550     4,818     3,463     94,834  
Adjusted operating expenses, non-GAAP (1) 847,468     738,432     1,613,547     1,391,351  
Less: Economic fuel expense 265,006     246,180     494,642     450,826  
Adjusted operating expenses excluding fuel, non-GAAP (2) $ 582,462     $ 492,252     $ 1,118,905     $ 940,525  
               
Available seat miles 10,775,878     9,515,842     20,604,922     17,924,606  
               
CASM (cents) 7.88     7.81     7.85     8.29  
Adjusted CASM (cents) (1) 7.86     7.76     7.83     7.76  
Adjusted CASM ex-fuel (cents) (2) 5.41     5.17     5.43     5.25  
  1. Excludes operating special items.
  2. Excludes operating special items and economic fuel expense.

Reconciliation of Adjusted Net Income, Adjusted Pre-Tax Income, and Adjusted Operating Income to GAAP Net Income
(unaudited)

  Three Months Ended   Six Months Ended
  June 30,   June 30,
(in thousands, except per share data) 2019   2018   2019   2018
Net income, as reported $ 114,501     $ 11,254     $ 170,577     $ (33,668 )
Add: Provision (benefit) for income taxes 34,068     3,895     50,073     (10,845 )
Income (loss) before income taxes, as reported 148,569     15,149     220,650     (44,513 )
Pre-tax margin 14.7 %   1.8 %   11.8 %   (2.9 )%
Add special items (1) $ 1,550     $ 84,230     $ 3,463     $ 183,447  
Adjusted income before income taxes, non-GAAP (2) 150,119     99,379     224,113     138,934  
Adjusted pre-tax margin, non-GAAP (2) 14.8 %   11.7 %   12.0 %   8.9 %
Add:  Total other (income) expense (3) 15,369     13,960     31,092     25,624  
Adjusted operating income, non-GAAP (4) 165,488     113,339     255,205     164,558  
Adjusted operating margin, non-GAAP (4) 16.3 %   13.3 %   13.7 %   10.6 %
               
Provision for income taxes 34,411     23,645     50,875     33,257  
Adjusted net income, non-GAAP (2) $ 115,708     $ 75,734     $ 173,238     $ 105,677  
               
Weighted average shares, diluted 68,620     68,310     68,568     68,237  
               
Adjusted net income per share, diluted (2) $1.69
    $1.11
    $2.53
    $1.55
 
 
             
Total operating revenues $ 1,012,956     $ 851,771     $ 1,868,752     $ 1,555,909  
  1. See "Special Items" for more details.
  2. Excludes operating and non-operating special items.
  3. Excludes non-operating special items.
  4. Excludes operating special items.

As most of the Company’s capital expenditures are related to acquiring assets to grow the business, the Company believes it is beneficial for investors to use Adjusted Free Cash Flow to assess whether the Company has sufficient liquidity.  Adjusted Free Cash Flow adjusts for Purchase of property and equipment, Pre-delivery deposits on flight equipment, net of refunds, and Proceeds from issuance of long-term debt to provide a consistent view of the Company’s liquidity regardless of how the Company chooses to finance aircraft required for growth.  Management believes investors should have a metric to assess the Company’s liquidity on a consistent basis regardless of how the Company chooses to finance assets used for growth.

Reconciliation of Adjusted Free Cash Flow to GAAP Net Operating Cash Flow
(unaudited)

  Six Months Ended
  June 30,
(in thousands) 2019   2018
Net cash provided by operating activities $ 341,024     $ 250,988  
Less:      
Purchase of property and equipment (1) 154,702     323,229  
Pre-delivery deposits on flight equipment, net of refunds (1) 75,826     92,205  
Add: Proceeds from issuance of long-term debt (2) 94,706     440,340  
Adjusted free cash flow $ 205,202     $ 275,894  
       
Net cash used in investing activities (238,459 )   (410,835 )
Net cash provided by financing activities 3,499     171,360  
       
Net increase in cash and cash equivalents 106,064     11,513  
  1. Included within net cash used in investing activities in the Company's Condensed Statements of Cash Flows.
  2. Included within net cash provided by financing activities in the Company's Condensed Statements of Cash Flows.

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