EX-99.1 2 earningsrelease1q14.htm EARNINGSRELEASE1Q14 Earnings Release 1Q14



EXHIBIT 99.1
Spirit Airlines Announces First Quarter 2014 Results:
First Quarter 2014 Adjusted Net Income Increases 15.4 percent to $37.8 million
 

MIRAMAR, Fla. (April 29, 2014) - Spirit Airlines, Inc. (NASDAQ: SAVE) today reported first quarter 2014 financial results.
•
Adjusted net income for the first quarter 2014 increased 15.4 percent to $37.8 million ($0.52 per diluted share) compared to $32.8 million ($0.45 per diluted share) for the first quarter 20131. GAAP net income for the first quarter 2014 was $37.7 million ($0.51 per diluted share) compared to $30.6 million ($0.42 per diluted share) in the first quarter 2013.

•
For the first quarter 2014, Spirit achieved an adjusted pre-tax margin of 13.7 percent compared to 14.4 percent over the same period in 20131. On a GAAP basis, pre-tax margin for the first quarter 2014 was 13.7 percent compared to 13.4 percent in the first quarter 2013.

•
Spirit ended the first quarter 2014 with $544.0 million in unrestricted cash.

•
Spirit's return on invested capital (before taxes and excluding special items) for the twelve months ended March 31, 2014 was 31.2 percent. See "Calculation for Return on Invested Capital" table below for more details.

“During the first quarter, our team did a great job serving our customers while overcoming the challenges caused by numerous severe winter storms and managing to the new crew duty and rest rules.  Our solid operational and financial performance in the first quarter is a great start to the year and provides a firm foundation as we grow our business and bring our low fares to more people in more places,” said Ben Baldanza, Spirit’s Chief Executive Officer. 
 
Revenue Performance
For the first quarter 2014, Spirit's total operating revenue was $438.0 million, an increase of 18.2 percent compared to the first quarter 2013. The increase was primarily driven by our growth in flight volume. In the first quarter 2014, Spirit had 256 weather-related flight cancellations compared to 59 in the first quarter 2013, which negatively impacted revenue for the quarter.

Total revenue per available seat mile (“RASM”) for the first quarter 2014 was 11.57 cents, a decrease of 2.4 percent compared to the first quarter 2013. Average stage length for the first quarter 2014 increased 6.3 percent year over year, contributing an estimated 3.0 percentage point decline in RASM. In the first quarter 2014, RASM was further impacted by an estimated 1.5 percentage points due to the calendar shift of Easter occurring in April this year compared to in March last year.

Passenger flight segment ("PFS") volume for the first quarter 2014 grew 17.9 percent year over year, and the Company's load factor for the first quarter 2014 increased 1.8 points year over year. Total revenue per PFS for the first quarter 2014 increased 0.3 percent year over year to $134.20.

Cost Performance
Total operating expenses for the first quarter 2014 increased 17.9 percent year over year to $378.0 million on a capacity increase of 21.0 percent.
 
Spirit reported first quarter 2014 cost per available seat mile excluding special items and fuel (“Adjusted CASM ex-fuel”) of 6.06 cents, an increase of 0.3 percent compared to the same period last year. An increased number of scheduled maintenance events resulted in higher depreciation and amortization expense and higher maintenance, material and repairs expense per ASM. These expenses were partially offset by improved operational reliability,

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resulting in lower passenger re-accommodation expense (recorded within Other operating expense) per ASM. The Company also benefited from lower aircraft rent per ASM.

Selected Balance Sheet and Cash Flow Items
As of March 31, 2014, Spirit had $544.0 million in unrestricted cash and cash equivalents, no restricted cash, no debt on its balance sheet, and total shareholders' equity of $809.4 million.

In the first quarter 2014, Spirit incurred capital expenditures of $4.1 million, paid $73.2 million in pre-delivery deposits for future deliveries of aircraft, net of refunds, and recorded an increase of $14.7 million in maintenance deposits, net of reimbursements.

Fleet
In the first quarter 2014, Spirit took delivery of two new A320 aircraft, ending the quarter with 56 aircraft in its fleet.  During the quarter, the Company signed an amendment to its aircraft purchase agreement with Airbus; changes include the conversion of five (5) A320 ceo aircraft to A321 ceo aircraft, the conversion of five (5) A320 neo aircraft to A321 neo aircraft, the acceleration of one (1) A321 ceo aircraft from 2016 to 2015, and the deferral of two (2) A320 ceo aircraft from 2017 to 2018. 

First Quarter 2014 and Other Current Highlights
•Added/announced new service between (service start date):
 - Minneapolis-St. Paul and Houston (5/1/14)2
 - Minneapolis-St. Paul and Baltimore/Washington (5/1/14)2
 - Chicago O'Hare and Oakland/San Francisco (5/1/14)
 - Minneapolis-St. Paul and Detroit (5/22/14)2
 - Chicago O'Hare and Baltimore/Washington (5/22/14)2
 - Chicago O'Hare and Portland, OR (5/22/14)2
 - Fort Lauderdale and New Orleans (8/1/14)
 - Houston and New Orleans (8/1/14)
 - Houston and Atlanta (8/1/14)
 - Kansas City and Chicago (8/7/14)
 - Kansas City and Dallas/Fort Worth (8/7/14)
 - Kansas City and Detroit (8/7/14)
 - Kansas City and Las Vegas (8/7/14)
 - Kansas City and Houston (8/8/14)
 - Fort Lauderdale and Houston (9/3/14)
 - Houston and San Diego (9/3/14)

•
Maintained its commitment to offer low fares to its valued customers; average ticket revenue per passenger flight segment for the first quarter 2014 was $77.79 with total revenue per passenger flight segment of $134.20.

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, April 29, 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.


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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 270 daily flights to 55 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, and announced new service routes. 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



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SPIRIT AIRLINES, INC.
Statement of Operations (1) 
(in thousands, except per share data)
(unaudited)


Three Months Ended

 
 
March 31,
 
Percent

2014

2013

Change
Operating revenues:





Passenger
$
253,878


$
218,897


16.0

Non-ticket
184,109


151,540


21.5

Total operating revenues
437,987


370,437


18.2







Operating expenses:





Aircraft fuel
148,471


131,666


12.8

Salaries, wages and benefits
76,249


61,497


24.0

Aircraft rent
46,387


41,072


12.9

Landing fees and other rents
24,016


18,056


33.0

Distribution
18,569


15,681


18.4

Maintenance, materials and repairs
17,614


11,780


49.5

Depreciation and amortization
11,121


6,324


75.9

Other operating
35,448


34,499


2.8

Loss on disposal of assets
150


170


(11.8
)
Special charges (credits)
9


23


(60.9
)
Total operating expenses
378,034


320,768


17.9










Operating income
59,953


49,669


20.7







Other (income) expense:





Interest expense
107


9


na

Capitalized interest
(107
)

(9
)

na

Interest income
(68
)

(116
)

(41.4
)
Other expense
37


101


(63.4
)
Total other (income) expense
(31
)

(15
)

(145.2
)








Income before income taxes
59,984


49,684


20.7

Provision for income taxes
22,278


19,130


16.5

Net income
$
37,706


$
30,554


23.4

Basic earnings per share
$
0.52


$
0.42


23.8

Diluted earnings per share
$
0.51


$
0.42


21.4







Weighted average shares, basic
72,684


72,486


0.3

Weighted average shares, diluted
73,254


72,804


0.6



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


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

 
March 31,
 
December 31,
 
2014
 
2013
Assets



Current assets:



Cash and cash equivalents
$
543,989


$
530,631

Accounts receivable, net
33,915


23,246

Deferred income taxes
14,387


16,243

Prepaid expenses and other current assets
83,086


78,955

Total current assets
675,377


649,075





Property and equipment:



Flight equipment
10,657


9,847

Ground and other equipment
54,176


50,987

Less accumulated depreciation
(27,306
)

(25,221
)

37,527


35,613

Deposits on flight equipment purchase contracts
229,537


157,669

Aircraft maintenance deposits
171,862


161,484

Deferred heavy maintenance, net
127,774


125,288

Other long-term assets
57,178


51,636

Total assets
$
1,299,255


$
1,180,765





Liabilities and shareholders’ equity



Current liabilities:



Accounts payable
$
24,741


$
23,104

Air traffic liability
230,068


167,627

Other current liabilities
161,172


145,262

Total current liabilities
415,981


335,993







Long-term deferred income taxes
47,469


48,916

Deferred credits and other long-term liabilities
26,428


26,739

Shareholders’ equity:



Common stock
7


7

Additional paid-in-capital
518,506


515,331

Treasury stock
(2,912
)

(2,291
)
Retained earnings
293,776


256,070

Total shareholders’ equity
809,377


769,117

Total liabilities and shareholders’ equity
$
1,299,255


$
1,180,765



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


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SPIRIT AIRLINES, INC.
Statement of Cash Flows
(unaudited, in thousands)
 
Three Months Ended March 31,
 
2014
 
2013
Operating activities:



Net income
$
37,706


$
30,554

Adjustments to reconcile net income to net cash provided by operations:



Changes in fair value of open fuel hedge contracts
—


3,381

Equity-based compensation, net
2,547


1,420

Allowance for doubtful accounts
(13
)

26

Amortization of deferred gains and losses
(89
)

(195
)
Depreciation and amortization
11,121


6,324

Deferred income tax benefit
410


2,532

Loss on disposal of assets
150


170

Capitalized interest
(107
)

(9
)
Changes in operating assets and liabilities:



Accounts receivable
(10,656
)

(1,902
)
Prepaid maintenance reserves
(14,661
)

(6,803
)
Long-term deposits and other assets
(15,691
)

(11,741
)
Accounts payable
1,457


(7,335
)
Air traffic liability
62,328


44,390

Other liabilities
16,137


24,381

Net cash provided by operating activities
90,639


85,193





Investing activities:



Pre-delivery deposits for flight equipment, net of refunds
(73,201
)

(15,127
)
Purchase of property and equipment
(4,086
)

(10,588
)
Net cash used in investing activities
(77,287
)

(25,715
)
Financing activities:



Proceeds from options exercised
39


449

Excess tax benefits from equity-based compensation
588


162

Repurchase of common stock
(621
)

(321
)
Net cash provided by financing activities
6


7,190

Net increase in cash and cash equivalents
13,358


66,668

Cash and cash equivalents at beginning of period
530,631


416,816

Cash and cash equivalents at end of period
$
543,989


$
483,484

Supplemental disclosures



Cash payments for:



Interest
$
—


$
9

Taxes
$
3,218


$
932


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SPIRIT AIRLINES, INC.
Selected Operating Statistics (unaudited)

Three Months Ended March 31,

 
Operating Statistics
2014

2013

Change
Available seat miles (ASMs) (thousands)
3,784,727


3,127,214


21.0
 %
Revenue passenger miles (RPMs) (thousands)
3,289,287


2,661,491


23.6
 %
Load factor (%)
86.9


85.1


1.8 pts

Passenger flight segments (thousands)
3,264


2,768


17.9
 %
Block hours
63,139


52,850


19.5
 %
Departures
23,561


20,761


13.5
 %
Operating revenue per ASM (RASM) (cents)
11.57


11.85


(2.4
)%
Average yield (cents)
13.32


13.92


(4.3
)%
Average ticket revenue per passenger flight segment ($)
77.79


79.09


(1.6
)%
Average non-ticket revenue per passenger flight segment ($)
56.41


54.75


3.0
 %
Total revenue per passenger flight segment ($)
134.20


133.84


0.3
 %
CASM (cents)
9.99


10.26


(2.6
)%
Adjusted CASM (cents) (1)
9.98


10.14


(1.6
)%
Adjusted CASM ex-fuel (cents) (2)
6.06


6.04


0.3%

Fuel gallons consumed (thousands)
46,677


38,628


20.8
 %
Average economic fuel cost per gallon ($)
3.18


3.32


(4.2
)%
Aircraft at end of period
56


49


14.3
 %
Average daily aircraft utilization (hours)
12.8


12.6


1.6
 %
Average stage length (miles)
1,000


941


6.3
 %
Airports served in the period (3)
53


52


1.9
 %



(1)
Excludes unrealized mark-to-market losses 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 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.

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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

March 31,
(in thousands, except per share data)
2014

2013
Net income, as reported
$
37,706


$
30,554

Add: Provision for income taxes
22,278


19,130

Income before income taxes, as reported
59,984


49,684

Pre-tax margin, GAAP
13.7
%

13.4
%
Add: Unrealized mark-to-market losses(1)
—


3,381

Add special items (2):



Loss on disposal of assets
150


170

Special charges
9


23

Income before income taxes, non-GAAP (3)
60,143


53,258

Pre-tax margin, non-GAAP (3)
13.7
%

14.4
%
Provision for income taxes (4)
22,337


20,506

Adjusted net income, non-GAAP (3)
$
37,806


$
32,752





Weighted average shares, basic
72,684


72,486

Weighted average shares, diluted
73,254


72,804





Adjusted net income per share, basic
$
0.52


$
0.45

Adjusted net income per share, diluted
$
0.52


$
0.45



(1)
Unrealized mark-to-market losses are comprised of non-cash adjustments to aircraft fuel expense.
(2)
Special items include loss on disposal of assets and special charges (credits).
(3)
Excludes unrealized mark-to-market 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

March 31,
(in thousands, except CASM data in cents)
2014

2013
Total operating expenses, as reported
$
378,034


$
320,768

Less: Unrealized mark-to-market losses
—


3,381

Less special items:



Loss on disposal of assets
150


170

Special charges
9


23

Operating expenses, non-GAAP (1)
377,875


317,194

Less: Economic fuel expense, non-GAAP
148,471


128,285

Operating expenses excluding fuel, non-GAAP (1) (2)
$
229,404


$
188,909





Available seat miles
3,784,727


3,127,214





CASM (cents)
9.99


10.26

Adjusted CASM (cents) (1)
9.98


10.14

Adjusted CASM ex-fuel (cents) (2)
6.06


6.04



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


Three Months Ended

March 31,
(in thousands)
2014

2013
Operating income, as reported
$
59,953


$
49,669

Operating margin, GAAP
13.7
%

13.4
%
Add: Unrealized mark-to-market losses
—


3,381

Add special items:



Loss on disposal of assets
150


170

Special charges
9


23

Operating income, non-GAAP (1)
$
60,112


$
53,243

Operating margin (1)
13.7
%

14.4
%


(1)
Excludes unrealized fuel hedge 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 losses, and special items as described in the “Reconciliation of Adjusted Net Income to GAAP Net Income” table above.


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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

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

2013
Fuel Expense



Aircraft fuel, as reported
$
148,471


$
131,666

Less: Unrealized mark-to-market losses (1)
—


3,381

Economic fuel expense, non-GAAP
$
148,471


$
128,285





Fuel gallons consumed
46,677


38,628





Economic fuel cost per gallon, non-GAAP
$
3.18


$
3.32


Calculation of Return on Invested Capital
(unaudited)
 
Twelve Months Ended
(in thousands)
March 31, 2014
Operating Income
$
292,576

Add: Unrealized mark-to-market (gains) (1)
(3,116
)
Add special items:

  Special charges
160

  Loss on disposal of assets
505

Adjustment for aircraft rent
175,052

Adjusted Operating Income (2)
$
465,177

Tax (37.1%) (3)
172,581

Adjusted Operating Income, after-tax
$
292,596

Invested Capital

Total debt
$
—

Book equity
809,377

Less: Unrestricted cash
543,989

Add: Capitalized aircraft operating leases (7x Aircraft Rent)
1,225,364

Total Invested Capital
$
1,490,752



Return on Invested Capital (ROIC), pre-tax
31.2
%
Return on Invested Capital (ROIC), after-tax
19.6
%


(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 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 twelve months ended March 31, 2014.

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