EX-99.1 2 earningsrelease4q13.htm EXHIBIT Earnings Release 4Q13



EXHIBIT 99.1
Spirit Airlines Announces Fourth Quarter and Full Year 2013 Results:
Fourth Quarter Adjusted Net Income Increases 109.9 percent to $41.0 million
Full-Year Adjusted Net Income Increases 71.0 percent to $177.5 million

MIRAMAR, Fla. (February 19, 2014) - Spirit Airlines, Inc. (NASDAQ: SAVE) today reported fourth quarter and full year 2013 financial results.
•
Adjusted net income for the fourth quarter 2013 increased 109.9 percent to $41.0 million ($0.56 per diluted share) compared to $19.5 million ($0.27 per diluted share) for the fourth quarter 20121. GAAP net income for the fourth quarter 2013 was $43.2 million ($0.59 per diluted share) compared to $19.6 million ($0.27 per diluted share) in the fourth quarter 2012.

•
Adjusted net income for the full year 2013 increased 71.0 percent to $177.5 million ($2.43 per diluted share) compared to $103.8 million ($1.43 per diluted share) for the full year 20121. GAAP net income for the full year 2013 was $176.9 million ($2.42 per diluted share) compared to $108.5 million ($1.49 per diluted share) for the full year 2012.

•
For the fourth quarter 2013, Spirit achieved an adjusted pre-tax margin of 15.4 percent, an improvement of 5.7 percentage points over the same period in 20121. On a GAAP basis, pre-tax margin for the fourth quarter 2013 was 16.2 percent, compared to 9.7 percent in the fourth quarter 2012. For the full year 2013, Spirit's adjusted pre-tax margin was 17.1 percent, compared to 12.7 percent in 20121. Pre-tax margin on a GAAP basis for the full year 2013 was 17.1 percent, compared to 13.2 percent in 2012.

•
Spirit ended 2013 with $530.6 million in unrestricted cash.

•
Spirit's return on invested capital (before taxes and excluding special items) for the twelve months ended December 31, 2013 was 31.8 percent. See "Calculation for Return on Invested Capital" table below for more details.

“For the full year 2013, we delivered record profitability and return as demand for our low-cost, ultra-low fare model remained very high.  These strong financial results reflect our vigilance on maintaining our cost discipline and low fare strategy while executing on our growth plan and delivering high returns for our shareholders,” said Ben Baldanza, Spirit’s Chief Executive Officer.  “I thank all our team members who helped us achieve these results.“
 
Revenue Performance
For the fourth quarter 2013, Spirit's total operating revenue was $420.0 million, an increase of 27.9 percent compared to the fourth quarter 2012. The year-over-year increase was driven by continued strong demand and our growth in capacity. The increase was also partly attributable to the negative revenue impact in the fourth quarter 2012 related to Hurricane Sandy.

Total revenue per available seat mile (“RASM”) for the fourth quarter 2013 was 11.43 cents, an increase of 3.0 percent compared to the fourth quarter 2012 as a result of both higher average passenger yields and load factors.

Passenger flight segment ("PFS") volume for the fourth quarter 2013 grew 19.4 percent year over year. Average revenue per PFS for the fourth quarter 2013 increased 7.1 percent year over year to $132.86 primarily driven by an increase in ticket revenue per PFS.

For the full year 2013, total operating revenue increased 25.5 percent to $1,654.4 million compared to the full year 2012 and total RASM increased 2.8 percent to 11.94 cents.


1



Cost Performance
Total operating expenses for the fourth quarter 2013 increased 18.8 percent year over year to $351.9 million on a capacity increase of 24.3 percent.
 
Spirit reported fourth quarter 2013 cost per available seat mile excluding special items and fuel (“Adjusted CASM ex-fuel”) of 5.78 cents, a decrease of 2.5 percent compared to the same period last year. Better operational performance during the fourth quarter 2013 compared to fourth quarter 2012 helped to drive lower wage expense and lower passenger re-accommodation expense. These decreases were partially offset by higher depreciation and amortization expense related to the amortization of an increased number of heavy maintenance events.

In its Investor Update dated January 15, 2014, the Company estimated that it would record $8 million of expense related to the repair and damage of the engine and aircraft associated with the engine failure experienced in October 2013. The Company now believes it will receive insurance proceeds covering all related expenses in excess of a $750,000 deductible, which was expensed in the fourth quarter.

Total operating expense for the full year 2013 was $1,372.1 million, up 19.9 percent year over year driven primarily by fuel and other expenses associated with increased flight volume. Adjusted CASM ex-fuel for the full year 2013
decreased 1.5 percent year over year to 5.91 cents.
 
Selected Balance Sheet and Cash Flow Items
As of December 31, 2013, Spirit had $530.6 million in unrestricted cash and cash equivalents, no restricted cash, no debt on its balance sheet, and total shareholders' equity of $769.1 million.

For the full year 2013, Spirit incurred capital expenditures of $19.8 million. The Company paid $70.3 million in pre-delivery deposits for future deliveries of aircraft, net of refunds, and recorded an increase of $24.1 million in maintenance deposits, net of reimbursements.

Fleet
In the fourth quarter 2013, Spirit took delivery of three new A320 aircraft, ending the year with 54 aircraft in its fleet. 

Full Year 2013 and Other Current Highlights
•Added/announced new service between (service start date):
 - Dallas/Fort Worth and New Orleans (1/24/13)
 - Houston and Denver (6/13/13)
 - Houston and Orlando (2/14/13)
 - Houston and Detroit (6/13/13)
 - Detroit and Denver (2/14/13)
 - Phoenix Sky Harbor and Dallas/Fort Worth (10/24/13)
 - Dallas/Fort Worth and Minneapolis-St. Paul (4/4/13)
 - Phoenix Sky Harbor and Chicago/O'Hare (11/7/13)2
 - Dallas/Fort Worth and Philadelphia (4/5/13)
 - Phoenix Sky Harbor and Denver (11/7/13)
 - Houston and Los Angeles (4/25/13)
 - Minneapolis-St. Paul and Los Angeles (11/7/13)
 - Dallas/Fort Worth and Oakland/
 - Minneapolis-St. Paul and Orlando (11/7/13)2
      San Francisco (4/25/13)
 - Minneapolis-St. Paul and Phoenix (11/7/13)2
 - Dallas/Fort Worth and Los Angeles (4/25/13)
 - Minneapolis-St. Paul and Tampa (11/7/13)2
 - Dallas/Fort Worth and Cancun, Mexico (4/25/13)
 - Minneapolis-St. Paul and Houston (5/1/14)2
 - Baltimore/Washington and Las Vegas (4/25/13)
 - Minneapolis-St. Paul and Baltimore/
 - Baltimore/Washington and Myrtle Beach (4/25/13)2
      Washington (5/1/14)2
 - Philadelphia and Myrtle Beach (4/25/13)2
 - Chicago O'Hare and Oakland/San Francisco (5/1/14)
 - Philadelphia and Las Vegas (4/25/13)
 - Minneapolis-St. Paul and Detroit (5/22/14)2
 - Minneapolis-St. Paul and Denver (4/25/13)2
 - Chicago O'Hare and Baltimore/Washington (5/22/14)2
 - Dallas/Fort Worth and Los Cabos, Mexico (6/13/13)
 - Chicago O'Hare and Portland, OR (5/22/14)2
 - Dallas/Fort Worth and Latrobe/Pittsburgh (6/14/13)
 



2



•
Launched service to 25 new markets in 2013.
•
Ratified a new five-year contract with its dispatchers which are represented by the Transport Workers Union.
•
Elected H. McIntyre (Mac) Gardner as Chairman of the Board of Directors.
•
Ordered an additional 20 new A321 aircraft, converted 10 existing A320 orders to A321 orders, and converted 5 A321ceo orders to A321neo orders. These aircraft are scheduled to deliver between 2015 and 2018. The Company also advanced 4 A320 aircraft originally scheduled to deliver in 2015 to deliver in 2014, bringing its total planned aircraft deliveries in 2014 to 11.
•
Maintained its commitment to offer low fares to its valued customers (average ticket revenue per passenger flight segment for the full year 2013 was $79.43).

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

Conference Call/Webcast Detail
Spirit will conduct a conference call to discuss these results today, February 19, 2014, at 10:00 a.m. ET. A live audio webcast of the conference call will be available to the public on a listen-only basis at http://ir.spirit.com. An archive of the webcast will be available under Webcasts & Presentations for 60 days.

About Spirit Airlines
Spirit Airlines (NASDAQ: SAVE) empowers customers to save money on air travel by offering ultra low base fares with a range of optional services, allowing customers the freedom to choose only the extras they value. This innovative approach grows the traveling market and stimulates new economic activity while creating new jobs.  Spirit's modern fleet, configuration and other innovations enable Spirit to burn less fuel per seat than competitors, making Spirit one of the most environmentally-friendly U.S. carriers.  Spirit's all-Airbus fleet currently operates more than 250 daily flights to over 50 destinations in the U.S., Latin America and the Caribbean.  Visit Spirit at www.spirit.com.

End Notes
(1) See "Reconciliation of Adjusted Net Income to GAAP Net Income" table below for additional information.
(2) Seasonal service only.


Forward-Looking Statements
Statements in this release 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. When used in this release, the words “expects,” “estimates,” “plans,” “anticipates,” “indicates,” “believes,” “forecast,” “guidance,” “outlook,” “may,” “will,” “should,” “seeks,” “targets” and similar expressions are intended to identify forward-looking statements. Similarly, statements that describe the Company's objectives, plans or goals, or actions the Company may take in the future, are forward-looking statements. Forward-looking statements include, without limitation, statements regarding the Company's intentions and expectations regarding the delivery schedule of aircraft on order, announced new service routes and customer savings programs. All forward-looking statements in this release are based upon information available to the Company on the date of this release. The Company has no intent, nor undertakes any obligation to, publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law. Forward-looking statements are subject to a number of factors that could cause the Company's actual results to differ materially from the Company's expectations, including the competitive environment in the airline industry; the Company's ability to keep costs low; changes in fuel costs; the impact of worldwide economic conditions on customer travel behavior; the Company's ability to generate non-ticket revenues; and government regulation. Additional information concerning these and other factors is contained in the Company's Securities and Exchange Commission filings, including but not limited to the Company's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.

Investor Inquiries:  InvestorRelations@spirit.com/954-447-7920
Media Inquiries:  MediaRelations@spirit.com/954-628-4827



3



SPIRIT AIRLINES, INC.
Statement of Operations (1) 
(in thousands, except per share data)
(unaudited)
 
Three Months Ended
 
 
 
Year Ended
 
 
 
December 31,
 
Percent

 
December 31,
 
Percent

 
2013
 
2012
 
Change

 
2013
 
2012
 
Change

Operating revenues:
 
 
 
 
 
 
 
 
 
 
 
Passenger
$
246,503

 
$
188,721

 
30.6

 
$
986,018

 
$
782,792

 
26.0

Non-ticket
173,481

 
139,547

 
24.3

 
668,367

 
535,596

 
24.8

Total operating revenues
419,984

 
328,268

 
27.9

 
1,654,385

 
1,318,388

 
25.5

 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
 
 

Aircraft fuel
139,843

 
120,789

 
15.8

 
551,746

 
471,763

 
17.0

Salaries, wages and benefits
69,392

 
58,363

 
18.9

 
262,150

 
218,919

 
19.7

Aircraft rent
44,616

 
37,103

 
20.2

 
169,737

 
143,572

 
18.2

Landing fees and other rents
22,096

 
17,128

 
29.0

 
83,604

 
68,368

 
22.3

Distribution
16,607

 
13,109

 
26.7

 
67,481

 
56,668

 
19.1

Maintenance, materials and repairs
16,253

 
12,206

 
33.2

 
60,143

 
49,460

 
21.6

Depreciation and amortization
9,544

 
5,244

 
82.0

 
31,947

 
15,256

 
109.4

Other operating
33,787

 
32,024

 
5.5

 
144,586

 
127,886

 
13.1

Loss on disposal of assets
99

 
474

 
na

 
525

 
956

 
na

Special charges (credits)
(314
)
 
(105
)
 
na

 
174

 
(8,450
)
 
na

Total operating expenses
351,923

 
296,335

 
18.8

 
1,372,093

 
1,144,398

 
19.9

 
 
 
 
 
 
 
 
 
 
 
 
Operating income
68,061

 
31,933

 
113.1

 
282,292

 
173,990

 
62.2

 
 
 
 
 
 
 
 
 
 
 
 
Other (income) expense:
 
 
 
 
 
 
 
 
 
 
 
Interest expense
74

 
6

 
1,133.3

 
214

 
1,350

 
(84.1
)
Capitalized interest
(74
)
 
(6
)
 
1,133.3

 
(214
)
 
(1,350
)
 
(84.1
)
Interest income
(93
)
 
(159
)
 
(41.5
)
 
(401
)
 
(925
)
 
(56.6
)
Other expense
31

 
95

 
(67.4
)
 
283

 
331

 
(14.5
)
Total other (income) expense
(62
)
 
(64
)
 
na

 
(118
)
 
(594
)
 
na

Income before income taxes
68,123

 
31,997

 
112.9

 
282,410

 
174,584

 
61.8

Provision for income taxes
24,930

 
12,431

 
100.5

 
105,492

 
66,124

 
59.5

Net income
$
43,193

 
$
19,566

 
120.8

 
$
176,918

 
$
108,460

 
63.1

Basic earnings per share
$
0.59

 
$
0.27

 
118.5

 
$
2.44

 
$
1.50

 
62.7

Diluted earnings per share
$
0.59

 
$
0.27

 
118.5

 
$
2.42

 
$
1.49

 
62.4

 
 
 
 
 
 
 
 
 
 
 
 
Weighted average shares, basic
72,658

 
72,442

 
0.3

 
72,593

 
72,386

 
0.3

Weighted average shares, diluted
73,195

 
72,623

 
0.8

 
72,999

 
72,591

 
0.6


(1) Certain prior period amounts have been reclassified to conform to the current year's presentation.


4




SPIRIT AIRLINES, INC.
Balance Sheets (1) 
(unaudited, in thousands)

 
December 31,
 
December 31,
 
2013
 
2012
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
530,631

 
$
416,816

Accounts receivable, net
23,246

 
22,740

Deferred income taxes
16,243

 
12,591

Prepaid expenses and other current assets
78,955

 
95,210

Total current assets
649,075

 
547,357

 
 
 
 
Property and equipment:
 
 
 
Flight equipment
9,847

 
2,648

Ground and other equipment
50,987

 
43,580

Less accumulated depreciation
(25,221
)
 
(17,825
)
 
35,613

 
28,403

Deposits on flight equipment purchase contracts
157,669

 
96,692

Aircraft maintenance deposits
161,484

 
122,379

Deferred heavy maintenance, net
125,288

 
80,533

Other long-term assets
51,636

 
44,520

Total assets
$
1,180,765

 
$
919,884

 
 
 
 
Liabilities and shareholders’ equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
23,104

 
$
24,166

Air traffic liability
167,627

 
131,414

Other current liabilities
145,262

 
121,314

Total current liabilities
335,993

 
276,894

 
 
 
 
Long-term deferred income taxes
48,916

 
33,216

Deferred credits and other long-term liabilities
26,739

 
27,239

Shareholders’ equity:
 
 
 
Common stock
7

 
7

Additional paid-in-capital
515,331

 
504,527

Treasury stock
(2,291
)
 
(1,151
)
Retained earnings
256,070

 
79,152

Total shareholders’ equity
769,117

 
582,535

Total liabilities and shareholders’ equity
$
1,180,765

 
$
919,884



(1) Certain prior period amounts have been reclassified to conform to the current year's presentation.


5



SPIRIT AIRLINES, INC.
Statement of Cash Flows
(unaudited, in thousands)


 
Year Ended December 31,
 
2013
 
2012
Operating activities:
 
 
 
Net income
$
176,918

 
$
108,460

Adjustments to reconcile net income to net cash provided by operations:
 
 
 
Changes in fair value of open fuel hedge contracts
265

 
46

Equity based stock compensation, net
5,689

 
4,327

Allowance for doubtful accounts
143

 
78

Amortization of deferred gains, losses and debt issuance costs
(558
)
 
(830
)
Depreciation and amortization
31,947

 
15,256

Deferred income tax benefit
12,047

 
29,255

Loss on disposal of assets
525

 
956

Gain on slot sale
—

 
(9,060
)
Capitalized interest
(214
)
 
(1,350
)
Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(461
)
 
(7,393
)
Prepaid maintenance reserves
(24,058
)
 
(31,567
)
Long-term deposits and other assets
(65,654
)
 
(68,248
)
Accounts payable
(1,674
)
 
8,452

Air traffic liability
36,226

 
19,134

Other liabilities
24,235

 
46,115

Net cash provided by operating activities
195,376

 
113,631

 
 
 
 
Investing activities:
 
 
 
Proceeds from sale of property and equipment
—

 
14

Proceeds from sale of slots
—

 
9,060

Pre-delivery deposits for flight equipment, net of refunds
(70,288
)
 
(12,626
)
Purchase of property and equipment
(19,812
)
 
(23,771
)
Net cash used in investing activities
(90,100
)
 
(27,323
)
Financing activities:
 
 
 
Proceeds from options exercised
852

 
469

Proceeds from sale and leaseback transactions
6,900

 
12,540

Payments to pre-IPO shareholders pursuant to tax receivable agreement
—

 
(26,905
)
Excess tax benefits from share-based compensation
1,927

 
2,098

Repurchase of common stock
(1,140
)
 
(1,022
)
Net cash provided by (used in) financing activities
8,539

 
(12,820
)
Net increase in cash and cash equivalents
113,815

 
73,488

Cash and cash equivalents at beginning of period
416,816

 
343,328

Cash and cash equivalents at end of period
$
530,631

 
$
416,816

Supplemental disclosures
 
 
 
Cash payments for:
 
 
 
Interest
$
29

 
$
303

Taxes
$
85,705

 
$
40,204

Non-cash transactions:
 
 
 
Liability and equity related to tax receivable agreement
$
(2,336
)
 
$
(1,497
)
Capital expenditures funded by capital lease borrowings
$
(3,234
)
 
$
—


6



SPIRIT AIRLINES, INC.
Selected Operating Statistics (unaudited)
 
Three Months Ended December 31,
 
 
Operating Statistics
2013
 
2012
 
Change

Available seat miles (ASMs) (thousands)
3,675,972

 
2,956,150

 
24.3
 %
Revenue passenger miles (RPMs) (thousands)
3,167,376

 
2,519,392

 
25.7
 %
Load factor (%)
86.2

 
85.2

 
1.0 pts

Passenger flight segments (thousands)
3,161

 
2,647

 
19.4
 %
Block hours
60,596

 
49,625

 
22.1
 %
Departures
22,957

 
19,908

 
15.3
 %
Operating revenue per ASM (RASM) (cents)
11.43

 
11.10

 
3.0
 %
Average yield (cents)
13.26

 
13.03

 
1.8
 %
Average ticket revenue per passenger flight segment ($)
77.98

 
71.30

 
9.4
 %
Average non-ticket revenue per passenger flight segment ($)
54.88

 
52.73

 
4.1
 %
Total revenue per passenger flight segment ($)
132.86

 
124.03

 
7.1
 %
CASM (cents)
9.57

 
10.02

 
(4.5
)%
Adjusted CASM (cents) (1)
9.67

 
10.03

 
(3.6
)%
Adjusted CASM ex-fuel (cents) (2)
5.78

 
5.93

 
(2.5)%

Fuel gallons consumed (thousands)
45,100

 
36,670

 
23.0
 %
Average economic fuel cost per gallon ($)
3.17

 
3.31

 
(4.2
)%
Aircraft at end of period
54

 
45

 
20.0
 %
Average daily aircraft utilization (hours)
12.5

 
12.6

 
(0.8
)%
Average stage length (miles)
998

 
932

 
7.1
 %
Airports served in the period (3)
53

 
53

 
—
 %

 
Year Ended December 31,
 
 
Operating Statistics
2013
 
2012
 
Change

Available seat miles (ASMs) (thousands)
13,861,393

 
11,344,731

 
22.2
 %
Revenue passenger miles (RPMs) (thousands)
12,001,088

 
9,663,721

 
24.2
 %
Load factor (%)
86.6

 
85.2

 
1.4
  pts
Passenger flight segments (thousands)
12,414

 
10,423

 
19.1
 %
Block hours
231,148

 
192,403

 
20.1
 %
Departures
90,284

 
78,582

 
14.9
 %
Operating revenue per ASM (RASM) (cents)
11.94

 
11.62

 
2.8
 %
Average yield (cents)
13.79

 
13.64

 
1.1
 %
Average ticket revenue per passenger flight segment ($)
79.43

 
75.11

 
5.8
 %
Average non-ticket revenue per passenger flight segment ($)
53.84

 
51.39

 
4.8
 %
Total revenue per passenger flight segment ($)
133.27

 
126.50

 
5.4
 %
CASM (cents)
9.90

 
10.09

 
(1.9
)%
Adjusted CASM (cents) (1)
9.89

 
10.15

 
(2.6
)%
Adjusted CASM ex-fuel (cents) (2)
5.91

 
6.00

 
(1.5
)%
Fuel gallons consumed (thousands)
171,931

 
142,991

 
20.2
 %
Average economic fuel cost per gallon ($)
3.21

 
3.30

 
(2.7
)%
Average daily aircraft utilization (hours)
12.7

 
12.8

 
(0.8
)%
Average stage length (miles)
958

 
909

 
5.4
 %
Airports served in the period (3)
56

 
55

 
1.8
 %

(1)
Excludes unrealized mark-to-market gains and special items as described in the “Reconciliation of Adjusted Net Income to GAAP Net Income” table below.
(2)
Excludes all components of fuel expense, including realized and unrealized mark-to-market hedge (gains) and losses, and special items as described in the “Reconciliation of Adjusted Net Income to GAAP Net Income” table below.
(3)
Includes airports served during the period that had service canceled as of the end of the period. Previously, we reported only airports served during the period with continuing operations.

7




The Company is providing a reconciliation of GAAP financial information to non-GAAP financial information as it believes that non-GAAP financial measures provide management and investors the ability to measure the performance of the Company on a consistent basis. These non-GAAP financial measures have limitations as an analytical tool. Because of these limitations, determinations of Spirit's operating performance excluding unrealized gains and losses or special items should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.
Reconciliation of Adjusted Net Income to GAAP Net Income
(unaudited)


 
Three Months Ended
 
Year Ended
 
December 31,
 
December 31,
(in thousands, except per share data)
2013
 
2012
 
2013

2012
Net income, as reported
$
43,193

 
$
19,566

 
$
176,918


$
108,460

Add: Provision for income taxes
24,930

 
12,431

 
105,492


66,124

Income before income taxes, as reported
68,123

 
31,997

 
282,410


174,584

Pre-tax margin, GAAP
16.2
%
 
9.7
%
 
17.1
%

13.2
%
Add: Unrealized mark-to-market (gains) and losses(1)
(3,224
)
 
(414
)
 
265


46

Add special items (2):
 
 
 
 



Loss on disposal of assets
99

 
474

 
525


956

Special charges (credits)
(314
)
 
(105
)
 
174


(8,450
)
Income before income taxes, non-GAAP (3)
64,684

 
31,952

 
283,374


167,136

Pre-tax margin, non-GAAP (3)
15.4
%
 
9.7
%
 
17.1
%

12.7
%
Provision for income taxes (4)
23,671

 
12,414

 
105,852


63,303

Adjusted net income, non-GAAP (3)
$
41,013

 
$
19,538

 
$
177,522


$
103,833

 
 
 
 
 



Weighted average shares, basic
72,658

 
72,442

 
72,593


72,386

Weighted average shares, diluted
73,195

 
72,623

 
72,999


72,591

 
 
 
 
 



Adjusted net income per share, basic
$
0.56

 
$
0.27

 
$
2.45


$
1.43

Adjusted net income per share, diluted
$
0.56

 
$
0.27

 
$
2.43


$
1.43



(1)
Unrealized mark-to-market (gains) and losses are comprised of non-cash adjustments to aircraft fuel expense.
(2)
Special items include loss on disposal of assets and special charges (credits). Special charges (credits) for 2012 include: (i) recognition of a gain on the sale of four carrier slots at Ronald Reagan National Airport, and (ii) offering costs related to the sale of 12.1 million shares of common stock by certain stockholders affiliated with Indigo Partners LLC.
(3)
Excludes unrealized mark-to-market (gains) and losses and special items.
(4)
Assumes same marginal tax rate as is applicable to GAAP net income.

8




Reconciliation of Adjusted CASM ex-fuel to CASM
(unaudited)

 
Three Months Ended
 
Year Ended
 
December 31,
 
December 31,
(in thousands, except CASM data in cents)
2013
 
2012
 
2013

2012
Total operating expenses, as reported
$
351,923

 
$
296,335

 
$
1,372,093


$
1,144,398

Less: Unrealized mark-to-market (gains) and losses
(3,224
)
 
(414
)
 
265


46

Less special items:
 
 
 
 



Loss on disposal of assets
99

 
474

 
525


956

Special charges (credits)
(314
)
 
(105
)
 
174


(8,450
)
Operating expenses, non-GAAP (1)
355,362

 
296,380

 
1,371,129


1,151,846

Less: Economic fuel expense, non-GAAP
143,067

 
121,203

 
551,481


471,717

Operating expenses excluding fuel, non-GAAP (1) (2)
$
212,295

 
$
175,177

 
$
819,648


$
680,129

 
 
 
 
 



Available seat miles
3,675,972

 
2,956,150

 
13,861,393


11,344,731

 
 
 
 
 



CASM (cents)
9.57

 
10.02

 
9.90


10.09

Adjusted CASM (cents) (1)
9.67

 
10.03

 
9.89


10.15

Adjusted CASM ex-fuel (cents) (2)
5.78

 
5.93

 
5.91


6.00


Reconciliation of Adjusted Operating Income to GAAP Operating Income
(unaudited)
 
Three Months Ended
 
Year Ended
 
December 31,
 
December 31,
(in thousands)
2013
 
2012
 
2013

2012
Operating income, as reported
$
68,061

 
$
31,933

 
$
282,292


$
173,990

Operating margin, GAAP
16.2
%
 
9.7
%
 
17.1
%

13.2
%
Add: Unrealized mark-to-market (gains) and losses
(3,224
)
 
(414
)
 
265


46

Add special items:
 
 
 
 



Loss on disposal of assets
99

 
474

 
525


956

Special charges (credits)
(314
)
 
(105
)
 
174


(8,450
)
Operating income, non-GAAP (1)
$
64,622

 
$
31,888

 
$
283,256


$
166,542

Operating margin (1)
15.4
%
 
9.7
%
 
17.1
%

12.6
%

(1)
Excludes unrealized fuel hedge (gains) and losses and special items as described in the "Reconciliation of Adjusted Net Income to GAAP Net Income" table above.
(2)
Excludes all components of fuel expense, including realized and unrealized fuel hedge (gains) and losses, and special items as described in the “Reconciliation of Adjusted Net Income to GAAP Net Income” table above.


9



The Company's economic fuel cost per gallon differs from GAAP results in that it only includes the cash settlements related to fuel hedge contracts that settled during the period, whereas the GAAP results also include the non-cash mark-to-market impact of all fuel hedge contracts expected to settle in future periods. The Company believes that net fuel hedge adjustments provide management and investors the ability to better assess and compare its performance.
Reconciliation of non-GAAP Economic Fuel Expense to GAAP Fuel Expense
(unaudited)
 
Three Months Ended
 
Year Ended
 
December 31,
 
December 31,
(in thousands, except per gallon data)
2013
 
2012
 
2013

2012
Fuel Expense
 
 
 
 



Aircraft fuel, as reported
$
139,843

 
$
120,789

 
$
551,746


$
471,763

Less: Unrealized mark-to-market (gains) and losses (1)
(3,224
)
 
(414
)
 
265


46

Economic fuel expense, non-GAAP
$
143,067

 
$
121,203

 
$
551,481


$
471,717

 
 
 
 
 



Fuel gallons consumed
45,100

 
36,670

 
171,931


142,991

 
 
 
 
 



Economic fuel cost per gallon, non-GAAP
$
3.17

 
$
3.31

 
$
3.21


$
3.30


Calculation of Return on Invested Capital
(unaudited)
 
Twelve Months Ended
(in thousands)
December 31, 2013
Operating Income
$
282,292

 
Add: Unrealized mark-to-market losses (1)
265

 
Add special items:
 
 
  Special charges (credits)
174

 
  Loss on disposal of assets
525

 
Adjustment for aircraft rent
169,737

 
Adjusted Operating Income (2)
$
452,993

 
Tax (37.4%) (3)
169,419

 
Adjusted Operating Income, after-tax
$
283,574

 
Invested Capital
 
 
Total debt
$
—

 
Book equity
769,117

 
Less: Unrestricted cash
530,631

 
Add: Capitalized aircraft operating leases (7x Aircraft Rent)
1,188,159

 
Total Invested Capital
$
1,426,645

 

 
 
Return on Invested Capital (ROIC), pre-tax
31.8
%
 
Return on Invested Capital (ROIC), after-tax
19.9
%
 

(1)
Unrealized mark-to-market (gains) and losses are comprised of non-cash adjustments to aircraft fuel expenses.
(2)
Excludes unrealized mark-to-market (gains) and losses and special items as described in the “Reconciliation of Adjusted Net Income to GAAP Net Income” table above.
(3)
Assumes same marginal tax rate as is applicable to GAAP net income for the year ended December 31, 2013.


###

10