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CST: 15/11/2019 02:19:51   

Spirit Airlines Reports Third Quarter 2019 Results

22 Days ago

MIRAMAR, Fla., Oct. 23, 2019 (GLOBE NEWSWIRE) -- Spirit Airlines, Inc. (NYSE: SAVE) today reported third quarter 2019 financial results.

  Third Quarter 2019   Third Quarter 2018
  As Reported   Adjusted   As Reported   Adjusted
  (GAAP)   (non-GAAP)1   (GAAP)   (non-GAAP)1
Revenue $992.0 million   $992.0 million   $904.3 million   $904.3 million
Operating Income $124.7 million   $133.8 million   $145.1 million   $145.5 million
Operating Margin  12.6%    13.5%    16.0%    16.1%
Net Income $83.5 million   $90.5 million   $97.5 million   $100.5 million
Diluted EPS $1.22    $1.32    $1.42    $1.47 

“I want to thank all our team members for their dedication and commitment to provide our Guests a quality travel experience in what was a very busy summer travel period.  In addition to record passenger volumes, numerous summer storm systems across our network, including Hurricane Dorian, made for a challenging operating environment.  We have made several adjustments to improve our ability to better recover from adverse weather and we are already seeing the effects.  Over the past couple of months, our operational performance has rebounded and we have consistently achieved high completion factors along with great on-time performance,” said Ted Christie, Spirit’s President and Chief Executive Officer. “We are committed to continuously drive improvement throughout our business and to deliver strong earnings growth and returns for our shareholders.”

Revenue Performance
For the third quarter 2019, Spirit's total operating revenue was $992.0 million, an increase of 9.7 percent compared to the third quarter 2018, driven by a 17.7 percent increase in flight volume.

Total operating revenue per available seat mile ("TRASM") for the third quarter 2019 decreased 1.7 percent compared to the same period last year, driven by lower load factor, softer passenger yields and the negative impact from Hurricane Dorian.  Excluding the impact of Hurricane Dorian, the Company estimates its TRASM for the third quarter 2019 would have been down approximately 1 percent year over year.

Non-ticket revenue per passenger flight segment for the third quarter 2019 increased 1.7 percent to $55.372.   Fare revenue per passenger flight segment decreased 9.7 percent to $54.80 and total revenue per passenger segment decreased 4.3 percent year over year to $110.17, driven by shorter average stage length and lower passenger yields as compared to the third quarter 2018.

Cost Performance
For the third quarter 2019, total GAAP operating expenses increased 14.2 percent year over year to $867.3 million.  Adjusted operating expenses for the third quarter 2019 increased 13.1 percent year over year to $858.2 million3.  In addition to increased flight volume, these changes were primarily driven by salaries, wages and benefits and other operating expense (largely driven by passenger re-accommodation expense).

Aircraft fuel expense decreased in the third quarter 2019 by 1.9 percent year over year, due to an 11.9 percent decrease in fuel rates, largely offset by an 11.5 percent increase in fuel gallons consumed.

Spirit reported third quarter 2019 cost per available seat mile ("ASM"), excluding operating special items and fuel (“Adjusted CASM ex-fuel”), of 5.66 cents3, up 8.4 percent compared to the same period last year.   Throughout the quarter, storm systems across its network, including Hurricane Dorian, along with other operational challenges, led to a higher percentage of flight cancellations, additional crew costs, and passenger re-accommodation expense.  These additional expenses, loss of ASMs, and a shorter average stage length year over year, were the primary contributors to the increase in the third quarter Adjusted 2019 CASM ex-fuel year over year.

Liquidity
Spirit ended the third quarter 2019 with unrestricted cash, cash equivalents, and short-term investments of $1.0 billion.  For the nine months ended September 30, 2019, Spirit generated $358.4 million of operating cash flow.  After investing $283.6 million for aircraft purchases and pre-delivery deposits, and receiving $94.7 million of proceeds from issuance of long-term debt, Adjusted free cash flow for the nine months ended September 30, 2019 was $169.5 million4.  For the nine months ended September 30, 2019, net cash used in financing activities was $127.4 million.

Fleet
Spirit took delivery of one new A320neo aircraft during the third quarter 2019, ending the quarter with 136 aircraft in its fleet.

“We have reached a memorandum of understanding with Airbus to purchase 100 new Airbus A320neo family aircraft with options to purchase up to 50 additional aircraft.  We went through an extensive fleet evaluation process and determined that the fuel-efficient A320neo family of aircraft were the best option to support our continued growth as we expand our network,” said Scott Haralson, Spirit Airlines’ Chief Financial Officer.

Conference Call/Webcast Detail
Spirit will conduct a conference call to discuss these results tomorrow, October 24, 2019, 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 (NYSE: SAVE) is committed to delivering the best value in the sky.  We are the leader in providing customizable travel options starting with an unbundled fare. This allows our Guests to pay only for the options they choose - like bags, seat assignments and refreshments - something we call À La Smarte.  We make it possible for our Guests to venture further 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 75 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 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)  See "Calculation of Total Non-Ticket Revenue per Passenger Flight Segment" table below for more details.
(3)  See "Reconciliation of Adjusted Operating Expense to GAAP Operating Expense" table below for more details.
(4)  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       Nine Months Ended    
  September 30,   Percent   September 30,   Percent
  2019   2018   Change   2019   2018   Change
Operating revenues:                      
Passenger $ 973,353     $ 887,956     9.6     $ 2,805,848     $ 2,413,447     16.3  
Other 18,615     16,374     13.7     54,872     46,792     17.3  
Total operating revenues 991,968     904,330     9.7     2,860,720     2,460,239     16.3  
                       
Operating expenses:                      
Aircraft fuel 253,847     258,818     (1.9 )   748,489     709,644     5.5  
Salaries, wages and benefits

224,069     185,043     21.1     644,345     527,895     22.1  
Landing fees and other rents 69,142     54,542     26.8     193,502     162,774     18.9  
Aircraft rent 40,026     42,682     (6.2 )   132,330     134,618     (1.7 )
Depreciation and amortization 57,712     43,773     31.8     163,351     128,764     26.9  
Distribution 39,160     37,868     3.4     115,481     103,496     11.6  
Maintenance, materials and repairs 36,152     37,778     (4.3 )   102,444     99,141     3.3  
Special charges (credits)     (686 )   nm         88,656     nm  
Loss on disposal of assets 13,410     1,069     nm     16,873     6,561     nm  
Other operating 133,769     98,318     36.1     367,482     283,841     29.5  
Total operating expenses 867,287     759,205     14.2     2,484,297     2,245,390     10.6  
                       
Operating income 124,681     145,125     14.1     376,423     214,849     75.2  
                       
Other (income) expense:                      
Interest expense 25,138     21,925     14.7     75,375     60,272     25.1  
Capitalized interest (3,400 )   (2,657 )   28.0     (8,932 )   (7,205 )   24.0  
Interest income (6,292 )   (4,776 )   31.7     (20,282 )   (13,272 )   52.8  
Other expense 222     302     nm     599     623     nm  
Special charges, non-operating     1,744     nm         90,357     nm  
Total other (income) expense 15,668     16,538     (5.3 )   46,760     130,775     (64.2 )
                       
                       
Income before income taxes 109,013     128,587     15.2     329,663     84,074     292.1  
Provision for income taxes 25,549     31,107     17.9     75,622     20,262     273.2  
                       
Net income $ 83,464     $ 97,480     14.4     $ 254,041     $ 63,812     298.1  
Basic earnings per share $ 1.22     $ 1.43     14.7     $ 3.71     $ 0.94     294.7  
Diluted earnings per share $ 1.22     $ 1.42     14.1     $ 3.71     $ 0.93     298.9  
                       
Weighted average shares, basic 68,442     68,254     0.3     68,421     68,243     0.3  
Weighted average shares, diluted 68,545     68,503     0.1     68,561     68,346     0.3  

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

  Three Months Ended   Nine Months Ended
  September 30,   September 30,
  2019   2018   2019   2018
Net income $ 83,464     $ 97,480     $ 254,041     $ 63,812  
Unrealized gain (loss) on short-term investment securities, net of deferred taxes of ($20), ($5), $47, and $21 (68 )   (7 )   161     70  
Interest rate derivative loss reclassified into earnings, net of taxes of $17, $27, $63, and $66 57     52     157     172  
Other comprehensive income (loss) $ (11 )   $ 45     $ 318     $ 242  
Comprehensive income $ 83,453     $ 97,525     $ 254,359     $ 64,054  


       


       

SPIRIT AIRLINES, INC.
Selected Operating Statistics
 (unaudited)

  Three Months Ended September 30,    
Operating Statistics 2019   2018   Change
Available seat miles (ASMs) (thousands) 10,686,246     9,579,448     11.6 %
Revenue passenger miles (RPMs) (thousands) 9,057,574     8,241,771     9.9 %
Load factor (%) 84.8     86.0     (1.2 ) pts
Passenger flight segments (thousands) 9,004     7,856     14.6 %
Block hours 155,167     136,723     13.5 %
Departures 59,314     50,386     17.7 %
Total operating revenue per ASM (TRASM) (cents) 9.28     9.44     (1.7 )%
Average yield (cents) 10.95     10.97     (0.2 )%
Fare revenue per passenger flight segment ($) 54.80     60.67     (9.7 )%
Non-ticket revenue per passenger flight segment ($) 55.37     54.44     1.7 %
Total revenue per passenger flight segment ($) 110.17     115.11     (4.3 )%
CASM (cents) 8.12     7.93     2.4 %
Adjusted CASM (cents) (1) 8.03     7.92     1.4 %
Adjusted CASM ex-fuel (cents) (2) 5.66     5.22     8.4 %
Fuel gallons consumed (thousands) 122,072     109,515     11.5 %
Average economic fuel cost per gallon ($) 2.08     2.36     (11.9 )%
Aircraft at end of period 136     121     12.4 %
Average daily aircraft utilization (hours) 12.5     12.4     0.8 %
Average stage length (miles) 979     1,033     (5.2 )%


           
  Nine Months Ended September 30,    
Operating Statistics 2019   2018   Change
Available seat miles (ASMs) (thousands) 31,291,168     27,504,053     13.8 %
Revenue passenger miles (RPMs) (thousands) 26,348,093     23,016,417     14.5 %
Load factor (%) 84.2     83.7     0.5 pts
Passenger flight segments (thousands) 25,777     21,947     17.5 %
Block hours 455,778     396,034     15.1 %
Departures 170,006     144,772     17.4 %
Total operating revenue per ASM (TRASM) (cents) 9.14     8.95     2.1 %
Average yield (cents) 10.86     10.69     1.6 %
Fare revenue per passenger flight segment ($) 55.30     57.36     (3.6 )%
Non-ticket revenue per passenger flight segment ($) 55.68     54.74     1.7 %
Total revenue per passenger flight segment ($) 110.98     112.10     (1.0 )%
CASM (cents) 7.94     8.16     (2.7 )%
Adjusted CASM (cents) (1) 7.90     7.82     1.0 %
Adjusted CASM ex-fuel (cents) (2) 5.51     5.24     5.2 %
Fuel gallons consumed (thousands) 354,347     310,661     14.1 %
Average economic fuel cost per gallon ($) 2.11     2.28     (7.5 )%
Average daily aircraft utilization (hours) 12.4     12.3     0.8 %
Average stage length (miles) 1,003     1,037     (3.3 )%
  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 Flight Segment
(unaudited)

  Three Months Ended   Nine Months Ended
  September 30,   September 30,
(in thousands, except per segment data) 2019   2018   2019   2018
Operating revenues              
Fare $ 493,376     $ 476,660     $ 1,425,417     $ 1,258,904  
Non-fare 479,977     411,296     1,380,431     1,154,543  
Total passenger revenues 973,353     887,956     2,805,848     2,413,447  
Other revenues 18,615     16,374     54,872     46,792  
Total operating revenues $ 991,968     $ 904,330     $ 2,860,720     $ 2,460,239  
               
Non-ticket revenues (1) $ 498,592     $ 427,670     $ 1,435,303     $ 1,201,335  
               
Passenger segments 9,004     7,856     25,777     21,947  
               
Non-ticket revenue per passenger flight segment ($) $ 55.37     $ 54.44     $ 55.68     $ 54.74  

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

Special Items
(unaudited)

  Three Months Ended   Nine Months Ended
  September 30,   September 30,
(in thousands) 2019   2018   2019   2018
Operating special items include the following:              
Supplemental rent (credit) (1) (4,304 )       (4,304 )    
Loss on disposal of assets (2) 13,410     1,069     16,873     6,561  
Operating special charges (credits) (3)     (686 )       88,656  
Total operating special items $ 9,106     $ 383     $ 12,569     $ 95,217  
Non-operating special items include the following:              
Non-operating special charges (4)     1,744         $ 90,357  
Total non-operating special items $     $ 1,744     $     $ 90,357  
               
Total special items $ 9,106     $ 2,127     $ 12,569     $ 185,574  
  1. Accrual release related to a lease modification.
  2. 2019 includes amounts primarily related to the disposal of excess and obsolete inventory; 2018 includes amounts primarily related to  losses on sale of engines and the disposal of excess and obsolete inventory.
  3. Operating special charges for 2018 include amounts primarily related to a one-time ratification incentive recognized in connection with a new pilot agreement approved in February 2018. 
  4. 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   Nine Months Ended
  September 30,   September 30,
(in thousands, except CASM data in cents) 2019   2018   2019   2018
Total operating expenses, as reported $ 867,287     $ 759,205     $ 2,484,297     $ 2,245,390  
Less operating special items 9,106     383     12,569     95,217  
Adjusted operating expenses, non-GAAP (1) 858,181     758,822     2,471,728     2,150,173  
Less: Economic fuel expense 253,847     258,818     748,489     709,644  
Adjusted operating expenses excluding fuel, non-GAAP (2) $ 604,334     $ 500,004     $ 1,723,239     $ 1,440,529  
               
Available seat miles 10,686,246     9,579,448     31,291,168     27,504,053  
               
CASM (cents) 8.12     7.93     7.94     8.16  
Adjusted CASM (cents) (1) 8.03     7.92     7.90     7.82  
Adjusted CASM ex-fuel (cents) (2) 5.66     5.22     5.51     5.24  
  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   Nine Months Ended
  September 30,   September 30,
(in thousands, except per share data)   2019     2018     2019     2018
Net income, as reported $ 83,464     $ 97,480     $ 254,041     $ 63,812  
Add: Provision for income taxes   25,549       31,107       75,622       20,262  
Income before income taxes, as reported   109,013       128,587       329,663       84,074  
Pre-tax margin   11.0 %     14.2 %     11.5 %     3.4 %
Add special items (1) $ 9,106     $ 2,127     $ 12,569     $ 185,574  
Adjusted income before income taxes, non-GAAP (2)   118,119       130,714       342,232       269,648  
Adjusted pre-tax margin, non-GAAP (2)   11.9 %     14.5 %     12.0 %     11.0 %
Add:  Total other (income) expense (3)   15,668       14,794       46,760       40,418  
Adjusted operating income, non-GAAP (4)   133,787       145,508       388,992       310,066  
Adjusted operating margin, non-GAAP (4)   13.5 %     16.1 %     13.6 %     12.6 %
               
Provision for income taxes   27,640       30,169       78,515       63,426  
Adjusted net income, non-GAAP (2) $ 90,479     $ 100,545     $ 263,717     $ 206,222  
               
Weighted average shares, diluted   68,545       68,503       68,561       68,346  
               
Adjusted net income per share, diluted (2) $ 1.32
    $ 1.47
    $ 3.85
    $ 3.02
 
               
Total operating revenues $ 991,968     $ 904,330     $ 2,860,720     $ 2,460,239  
  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)

  Nine Months Ended
  September 30,
(in thousands) 2019   2018
Net cash provided by operating activities $ 358,397     $ 308,498  
Less:      
Purchase of property and equipment (1) 114,396     420,586  
Pre-delivery deposits on flight equipment, net of refunds (1) 169,200     132,297  
Add: Proceeds from issuance of long-term debt (2) 94,706     518,171  
Adjusted free cash flow $ 169,507     $ 273,786  
       
Net cash used in investing activities (300,056 )   (550,593 )
Net cash (used in) provided by financing activities (127,396 )   214,956  
       
Net increase (decrease) in cash and cash equivalents (69,055 )   (27,139 )
  1. Included within net cash used in investing activities in the Company's Condensed Statements of Cash Flows.
  2. Included within net cash (used in) provided by financing activities in the Company's Condensed Statements of Cash Flows.

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