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Section 1: 8-K (8-K)

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false0001498710 0001498710 2020-02-05 2020-02-05


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

February 5, 2020
Date of Report (date of earliest event reported)

SPIRIT AIRLINES, INC.
(Exact name of registrant as specified in its charter)

Delaware
001-35186
38-1747023
(State or other jurisdiction of incorporation)
(Commission File Number)
(IRS Employer Identification Number)
 
 
 
 
2800 Executive Way
Miramar,
Florida
33025
(Address of Principal Executive)
(Zip Code)
(954) 447-7920
(Registrant's telephone number, including area code)
(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.0001 par value
SAVE
New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐





Item 2.02.
Results of Operations and Financial Condition.
On February 5, 2020, Spirit Airlines, Inc. (the “Company” or “Spirit”) issued a press release announcing its unaudited financial results for the fourth quarter and full year 2019. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
Non-GAAP financial measures that reflect adjustments from historical financial data prepared under GAAP, including adjustments for special items, are included in the press release as supplemental disclosures because the Company believes they are useful indicators of the Company's operating performance for comparative purposes. These non-GAAP financial measures are well recognized performance measurements in the airline industry that are frequently used by investors, securities analysts and other interested parties in comparing the operating performance of companies in the airline industry. The non-GAAP financial measures provided have limitations as an analytical tool. Because of these limitations, non-GAAP financial measures should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. The Company has also provided in the press release reconciliations of these non-GAAP financial measures to the appropriate GAAP financial measures.

Item 7.01
Regulation FD Disclosure.
The information in this report furnished pursuant to Item 7.01 shall not be deemed “filed” for the purposes of Section 18 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section. It may only be incorporated by reference in another filing under the Exchange Act or the Securities Act of 1933, as amended (the “Securities Act”), if such subsequent filing specifically references the information furnished pursuant to Item 7.01 of this report.
On February 5, 2020, the Company provided an update to investors regarding the Company's first quarter and full year 2020 guidance; a copy of which is attached hereto as Exhibit 99.2 and is incorporated herein by reference. The guidance provided therein is only an estimate of what the Company believes is realizable as of the date of this investor update. Actual results may vary from the guidance and the variations may be material. The Company undertakes no intent or obligation to publicly update or revise any of these projections, whether as a result of new information, future events or otherwise, except as required by law.


Item 9.01.
Financial Statements and Exhibits.
(d)    Exhibits

The following is furnished as an exhibit to this report and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act:

Exhibit No.
Description
 
 
99.1
99.2










SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


Date: February 5, 2020
SPIRIT AIRLINES, INC.


By: /s/ Thomas Canfield    
Name: Thomas Canfield
Title: Senior Vice President and General Counsel




EXHIBIT INDEX

Exhibit No.
Description
 
 
99.1
99.2

 


(Back To Top)

Section 2: EX-99.1 (EARNINGS RELEASE 4Q19)

Exhibit



402659946_logo3a17.jpg 402659946_contactinformationasof102319.jpg
EXHIBIT 99.1


Spirit Airlines Reports Fourth Quarter and Full Year 2019 Results

MIRAMAR, Fla., February 5, 2020 - Spirit Airlines, Inc. (NYSE: SAVE) today reported fourth quarter and full year 2019 financial results.
 
Fourth Quarter 2019
 
Fourth Quarter 2018
 
As Reported
 
Adjusted
 
As Reported
 
Adjusted
 
(GAAP)
 
(non-GAAP)1
 
(GAAP)
 
(non-GAAP)1
Revenue
$969.8 million
 
$969.8 million
 
$862.8 million
 
$862.8 million
Operating Income
$124.6 million
 
$129.6 million
 
$136.1 million
 
$139.3 million
Operating Margin
12.9%
 
13.4%
 
15.8%
 
16.2%
Net Income
$81.2 million
 
$85.0 million
 
$91.9 million
 
$94.7 million
Diluted EPS
$1.18
 
$1.24
 
$1.34
 
$1.38
 
 
 
 
 
 
 
 

"2019 was a year of many accomplishments for Spirit. Our improving operational reliability, and the investments we're making to provide our Guests the best value in the sky are being noticed by our Guests and earning us international acclaim.  We once again achieved a fourth-place ranking for on-time performance among reporting U.S. carriers2. Spirit also recently received several global recognitions: Low-Cost Airline of the Year at the CAPA World Aviation Summit; Value Airline of the Year by Air Transport World; and, most on-time Low Cost Airline by Flight Global. Our team also delivered strong financial results for 2019. For the full year 2019, our GAAP pre-tax earnings increased 112.9 percent year over year.  Excluding special items, our Adjusted pre-tax earnings increased 15.3 percent year over year1,” said Ted Christie, Spirit’s President and Chief Executive Officer. "I am very proud of the Spirit team for these accomplishments.  Looking ahead to 2020, we are focused on running a safe and reliable airline, leveraging technology and automation to drive further efficiencies, and executing on our revenue initiatives to deliver strong returns for our shareholders.”

Revenue Performance
For the fourth quarter 2019, Spirit's total operating revenue was $969.8 million, an increase of 12.4 percent compared to the fourth quarter 2018, driven by an 18.6 percent increase in flight volume. Fourth quarter 2019 revenue includes approximately $7.2 million of out-of-period revenue related to the reclamation of over-remitted Federal Excise Tax.  

Total operating revenue per available seat mile ("TRASM") for the fourth quarter 2019 decreased 3.6 percent compared to the same period last year. Without the out-of-period revenue, the Company estimates its fourth quarter 2019 TRASM would have been down about 4.3 percent year-over-year. The decrease in TRASM was driven by lower operating yields, as load factor for the period was up slightly.
 
On a per passenger flight segment ("PFS") basis, for the fourth quarter 2019 total revenue per PFS decreased 5.5 percent year over year, to $110.71, non-ticket revenue per PFS increased 2.3 percent to $58.033, and fare revenue per PFS decreased 12.9 percent to $52.68.




1




Cost Performance
For the fourth quarter 2019, total GAAP operating expenses increased 16.3 percent year over year to $845.2 million. Adjusted operating expenses for the fourth quarter 2019 increased 16.1 percent year over year to $840.2 million4. Primary drivers of the increase in adjusted operating expense compared to the fourth quarter last year include increased flight volume and higher ground handling rates.
 
Aircraft fuel expense increased in the fourth quarter 2019 by 6.7 percent year over year, due to a 14.8 percent increase in fuel gallons consumed, partially offset by a 7.1 percent decrease in fuel rates.
 
Spirit reported fourth quarter 2019 cost per available seat mile ("ASM"), excluding operating special items and fuel (“Adjusted CASM ex-fuel”), of 5.67 cents4, up 3.3 percent compared to the same period last year. Primary drivers of the increase on a per ASM basis compared to the same period last year included heavy maintenance amortization, maintenance, material and repairs and other operating expenses.

“Our team did a great job recovering from the operational issues we faced in the summer and finished the year 2019 with strong operational results.  Strong operational performance is key to our continued good cost management and we believe we are well-positioned as we enter 2020.  As we’ve noted previously, we have several inflationary pressures we are facing such that we expect our 2020 CASM ex-fuel to increase 1 to 2 percent year over year.  From a timing perspective, we face the toughest hurdle in the first quarter, but we anticipate the headwinds will ease as we progress through the year.  And, while we already have one of the most fuel-efficient fleets in the U.S., with our growing fleet of A320neo aircraft we should see even greater fuel efficiency this year, helping us offset some Adjusted CASM ex-fuel pressure,” said Scott Haralson, Spirit’s Chief Financial Officer.
 
Liquidity
Spirit ended the year with unrestricted cash, cash equivalents, and short-term investments of $1.1 billion. For the twelve months ended December 31, 2019, Spirit generated $409.2 million of operating cash flow. After investing $294.5 million for aircraft purchases and pre-delivery deposits, and receiving $225.9 million of proceeds from issuance of long-term debt, Adjusted free cash flow for the twelve months ended December 31, 2019 was $340.6 million5. For the twelve months ended December 31, 2019, net cash used in financing activities was $120.2 million.

Fleet
Spirit took delivery of nine new aircraft (seven A320neo and two A320ceo) during the fourth quarter 2019, ending the year with 145 aircraft in its fleet.

Full Year 2019 Highlights
Launched service to the following new destinations: Austin, Burbank, Charlotte-Douglas, Indianapolis, Nashville, Raleigh-Durham and Sacramento.
Received global recognition as the Low-Cost Airline of the Year at the CAPA (Centre for Aviation) World Aviation Summit. CAPA, part of the Aviation Week Network, is one of the world’s most trusted sources of market intelligence for the aviation and travel industry.
Continued its commitment to invest in the Guest experience with an industry-leading technology to connect with its Guests via the messaging application WhatsApp.
Unveiled new, ergonomic and more comfortable seats that provide additional usable legroom as well as added comfort to its Big Front Seats, making the best value in the sky even better.
Announced a new $250 million global headquarters investment at a new campus in Dania Beach, Florida.
Announced an order for 100 Airbus A320neo Family Aircraft, with an option to purchase up to 50 more, to support the airline's growth and sustain one of the youngest, most fuel-efficient fleets in the U.S.  These aircraft are planned for delivery through 2027.





2




Conference Call/Webcast Detail
Spirit will conduct a conference call to discuss these results tomorrow, February 6, 2020, 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. 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 77 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) Preliminary data using DOT A:14 methodology.
(3) See "Calculation of Total Non-Ticket Revenue per Passenger Flight 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.


3




SPIRIT AIRLINES, INC.
Statements of Operations
(unaudited, in thousands, except per-share amounts)


 
Three Months Ended
 
 
 
Year Ended
 
 
 
December 31,
 
Percent
 
December 31,
 
Percent

2019

2018
 
Change
 
2019
 
2018
 
Change
Operating revenues:
 
 
 
 

 
 
 
 
 
 
Passenger
$
951,757

 
$
846,568

 
12.4

 
$
3,757,605

 
$
3,260,015

 
15.3

Other
18,059

 
16,227

 
11.3

 
72,931

 
63,019

 
15.7

Total operating revenues
969,816

 
862,795

 
12.4

 
3,830,536

 
3,323,034

 
15.3

 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
Aircraft fuel
244,989

 
229,680

 
6.7

 
993,478

 
939,324

 
5.8

Salaries, wages and benefits
220,674

 
191,740

 
15.1

 
865,019

 
719,635

 
20.2

Landing fees and other rents
62,773

 
51,903

 
20.9

 
256,275

 
214,677

 
19.4

Depreciation and amortization
61,913

 
47,963

 
29.1

 
225,264

 
176,727

 
27.5

Aircraft rent
50,279

 
43,023

 
16.9

 
182,609

 
177,641

 
2.8

Distribution
38,289

 
33,505

 
14.3

 
153,770

 
137,001

 
12.2

Maintenance, materials and repairs
41,131

 
29,937

 
37.4

 
143,575

 
129,078

 
11.2

Loss on disposal of assets
477

 
3,019

 
nm

 
17,350

 
9,580

 
nm

Special charges
717

 
265

 
nm

 
717

 
88,921

 
nm

Other operating
123,950

 
95,695

 
29.5

 
491,432

 
379,536

 
29.5

Total operating expenses
845,192

 
726,730

 
16.3

 
3,329,489

 
2,972,120

 
12.0

 
 
 
 
 
 
 
 
 
 
 
 
Operating income
124,624

 
136,065

 
(8.4
)
 
501,047

 
350,914

 
42.8

 
 
 
 
 
 
 
 
 
 
 
 
Other (income) expense:
 
 
 
 
 
 
 
 
 
 
 
Interest expense
25,975

 
23,505

 
10.5

 
101,350

 
83,777

 
21.0

Capitalized interest
(3,539
)
 
(2,636
)
 
34.3

 
(12,471
)
 
(9,841
)
 
26.7

Interest income
(4,851
)
 
(5,835
)
 
(16.9
)
 
(25,133
)
 
(19,107
)
 
31.5

Other expense
276

 
129

 
nm

 
875

 
752

 
nm

Special charges, non-operating

 

 
nm

 

 
90,357

 
nm

Total other (income) expense
17,861

 
15,163

 
17.8

 
64,621

 
145,938

 
(55.7
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income before income taxes
106,763

 
120,902

 
(11.7
)
 
436,426

 
204,976

 
112.9

Provision for income taxes
25,549

 
28,965

 
(11.8
)
 
101,171

 
49,227

 
105.5

 
 
 
 
 
 
 
 
 
 
 
 
Net income
$
81,214

 
$
91,937

 
(11.7
)
 
$
335,255

 
$
155,749

 
115.3

Basic earnings per share
$
1.19

 
$
1.35

 
(11.9
)
 
$
4.90

 
$
2.28

 
114.9

Diluted earnings per share
$
1.18

 
$
1.34

 
(11.9
)
 
$
4.89

 
$
2.28

 
114.5


 
 
 
 
 
 
 
 
 
 
 
Weighted average shares, basic
68,452

 
68,267

 
0.3

 
68,429

 
68,249

 
0.3

Weighted average shares, diluted
68,553

 
68,687

 
(0.2
)
 
68,559

 
68,431

 
0.2


 



4




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

 
Three Months Ended
 
Year Ended
 
December 31,
 
December 31,
 
2019
 
2018
 
2019
 
2018
Net income
$
81,214

 
$
91,937

 
$
335,255

 
$
155,749

Unrealized gain (loss) on short-term investment securities and cash and cash equivalents, net of deferred taxes of ($9), $22, $38 and $44
6

 
(40
)
 
167

 
30

Interest rate derivative loss reclassified into earnings, net of taxes of $13, $9, $76 and $75
82

 
68

 
239

 
241

Other comprehensive income
$
88

 
$
28

 
$
406

 
$
271

Comprehensive income
$
81,302

 
$
91,965

 
$
335,661

 
$
156,020



































 
 
 
 


 
 
 
 



 


5




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

 
Operating Statistics
2019

2018

Change
Available seat miles (ASMs) (thousands)
10,491,833


8,998,928


16.6
 %
Revenue passenger miles (RPMs) (thousands)
8,897,193


7,606,962


17.0
 %
Load factor (%)
84.8


84.5


0.3
  pts
Passenger flight segments (thousands)
8,760


7,365


18.9
 %
Block hours
151,277


130,309


16.1
 %
Departures
57,035


48,073


18.6
 %
Total operating revenue per ASM (TRASM) (cents)
9.24


9.59


(3.6
)%
Average yield (cents)
10.90


11.34


(3.9
)%
Fare revenue per passenger flight segment ($)
52.68


60.45


(12.9
)%
Non-ticket revenue per passenger flight segment ($)
58.03


56.70


2.3
 %
Total revenue per passenger flight segment ($)
110.71


117.15


(5.5
)%
CASM (cents)
8.06


8.08


(0.2
)%
Adjusted CASM (cents) (1)
8.01


8.04


(0.4
)%
Adjusted CASM ex-fuel (cents) (2)
5.67


5.49


3.3
 %
Fuel gallons consumed (thousands)
116,591


101,595


14.8
 %
Average fuel cost per gallon ($)
2.10


2.26


(7.1
)%
Aircraft at end of period
145


128


13.3
 %
Average daily aircraft utilization (hours)
11.7


11.5


1.7
 %
Average stage length (miles)
998


1,019


(2.1
)%
 
 
 
 
 
 
 
Year Ended December 31,
 
 
Operating Statistics
2019

2018

Change
Available seat miles (ASMs) (thousands)
41,783,001


36,502,982


14.5
 %
Revenue passenger miles (RPMs) (thousands)
35,245,285


30,623,379


15.1
 %
Load factor (%)
84.4


83.9


0.5
  pts
Passenger flight segments (thousands)
34,537


29,312


17.8
 %
Block hours
607,055


526,343


15.3
 %
Departures
227,041


192,845


17.7
 %
Total operating revenue per ASM (TRASM) (cents)
9.17


9.10


0.8
 %
Average yield (cents)
10.87


10.85


0.2
 %
Fare revenue per passenger flight segment ($)
54.63


58.14


(6.0
)%
Non-ticket revenue per passenger flight segment ($)
56.28


55.23


1.9
 %
Total revenue per passenger flight segment ($)
110.91


113.37


(2.2
)%
CASM (cents)
7.97


8.14


(2.1
)%
Adjusted CASM (cents) (1)
7.93


7.87


0.8
 %
Adjusted CASM ex-fuel (cents) (2)
5.55


5.30


4.7
 %
Fuel gallons consumed (thousands)
470,939


412,256


14.2
 %
Average fuel cost per gallon ($)
2.11


2.28


(7.5
)%
Average daily aircraft utilization (hours)
12.3


12.1


1.7
 %
Average stage length (miles)
1,002


1,032


(2.9
)%

(1)
Excludes operating special items.
(2)
Excludes fuel expense and operating special items.



6




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
 
Year Ended
 
December 31,
 
December 31,
(in thousands, except per segment data)
2019
 
2018
 
2019
 
2018
Operating revenues
 
 
 
 
 
 
 
Fare
$
461,438

 
$
445,203

 
$
1,886,855

 
$
1,704,107

Non-fare
490,319

 
401,365

 
1,870,750

 
1,555,908

Total passenger revenues
951,757

 
846,568

 
3,757,605

 
3,260,015

Other revenues
18,059

 
16,227

 
72,931

 
63,019

Total operating revenues
$
969,816

 
$
862,795

 
$
3,830,536

 
$
3,323,034

 
 
 
 
 
 
 
 
Non-ticket revenues (1)
$
508,378

 
$
417,592

 
$
1,943,681

 
$
1,618,927

 
 
 
 
 
 
 
 
Passenger segments
8,760

 
7,365

 
34,537

 
29,312

 
 
 
 
 
 
 
 
Non-ticket revenue per passenger flight segment ($)
$
58.03

 
$
56.70

 
$
56.28

 
$
55.23


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

Special Items
(unaudited)
 
Three Months Ended
 
Year Ended
 
December 31,
 
December 31,
(in thousands)
2019
 
2018
 
2019
 
2018
Operating special items include the following:
 
 
 
 
 
 
 
Supplemental rent (credit) (1)
3,774

 

 
(530
)
 

Loss on disposal of assets (2)
477

 
3,019

 
17,350

 
9,580

Operating special charges (3)
717

 
265

 
717

 
88,921

Total operating special items
$
4,968

 
$
3,284

 
$
17,537

 
$
98,501

Non-operating special items include the following:
 
 
 
 
 
 
 
Non-operating special charges (4)

 

 

 
$
90,357

Total non-operating special items
$

 
$

 
$

 
$
90,357

 
 
 
 
 
 
 
 
Total special items
$
4,968

 
$
3,284

 
$
17,537

 
$
188,858


(1)
Accrual adjustments related to lease modifications.
(2)
2019 includes amounts primarily related to the disposal of excess and obsolete inventory, partially offset by gains on aircraft sale-leaseback transactions. 2018 includes amounts primarily related to losses on sale of engines and the disposal of excess and obsolete inventory.
(3)
Operating special charges for 2019 are related to the write-off of aircraft related credits resulting from the exchange of credits negotiated under the new purchase agreement with Airbus S.A.S ("Airbus") executed during the fourth quarter of 2019. 2018 includes amounts primarily related to a one-time ratification incentive recognized in connection with a 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.


7




Reconciliation of Adjusted Operating Expense to GAAP Operating Expense
(unaudited)
 
Three Months Ended
 
Year Ended

December 31,
 
December 31,
(in thousands, except CASM data in cents)
2019

2018
 
2019
 
2018
Total operating expenses, as reported
$
845,192

 
$
726,730

 
$
3,329,489

 
$
2,972,120

Less operating special items expense
4,968

 
3,284

 
17,537

 
98,501

Adjusted operating expenses, non-GAAP (1)
840,224

 
723,446

 
3,311,952

 
2,873,619

Less: Fuel expense
244,989

 
229,680

 
993,478

 
939,324

Adjusted operating expenses excluding fuel, non-GAAP (2)
$
595,235

 
$
493,766

 
$
2,318,474

 
$
1,934,295


 
 
 
 
 
 
 
Available seat miles
10,491,833

 
8,998,928

 
41,783,001

 
36,502,982


 
 
 
 
 
 
 
CASM (cents)
8.06

 
8.08

 
7.97

 
8.14

Adjusted CASM (cents) (1)
8.01

 
8.04

 
7.93

 
7.87

Adjusted CASM ex-fuel (cents) (2)
5.67

 
5.49

 
5.55

 
5.30


(1)
Excludes operating special items.
(2)
Excludes operating special items and fuel expense.


Reconciliation of Adjusted Net Income, Adjusted Pre-Tax Income, and Adjusted Operating Income to GAAP Net Income
(unaudited)
 
Three Months Ended
 
Year Ended
 
December 31,
 
December 31,
(in thousands, except per share data)
2019
 
2018
 
2019

2018
Net income, as reported
$
81,214

 
$
91,937

 
$
335,255


$
155,749

Add: Provision for income taxes
25,549

 
28,965

 
101,171


49,227

Income before income taxes, as reported
106,763

 
120,902

 
436,426


204,976

Pre-tax margin
11.0
%
 
14.0
%
 
11.4
%

6.2
%
Add special items expense (1) (2)
$
4,968

 
$
3,284

 
$
17,537


$
188,858

Adjusted income before income taxes, non-GAAP (2)
111,731

 
124,186

 
453,963


393,834

Adjusted pre-tax margin, non-GAAP (2)
11.5
%
 
14.4
%
 
11.9
%

11.9
%
Add: Total other (income) expense (3)
17,861

 
15,163

 
64,621


55,581

Adjusted operating income, non-GAAP (4)
129,592

 
139,349

 
518,584


449,415

Adjusted operating margin, non-GAAP (4)
13.4
%
 
16.2
%
 
13.5
%

13.5
%
 
 
 
 
 





Provision for income taxes
26,704

 
29,494

 
105,219


92,920

Adjusted net income, non-GAAP (2)
$
85,027

 
$
94,692

 
$
348,744


$
300,914

 
 
 
 
 
 
 
 
Weighted average shares, diluted
68,553

 
68,687

 
68,559

 
68,431

 
 
 
 
 
 
 
 
Adjusted net income per share, diluted (2)
$1.24
 
$1.38
 
$5.09
 
$4.40
 
 
 
 
 
 
 
 
Total operating revenues
$
969,816

 
$
862,795

 
$
3,830,536

 
$
3,323,034


(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.


8




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)

 
Year Ended
 
December 31,
(in thousands)
2019
 
2018
Net cash provided by operating activities
$
409,221

 
$
506,463

Less:
 
 
 
Purchase of property and equipment (1)
192,437

 
606,971

Pre-delivery deposits on flight equipment, net of refunds (1)
102,102

 
177,424

Add: Proceeds from issuance of long-term debt (2)
225,891

 
832,099

Adjusted free cash flow
$
340,573

 
$
554,167

 
 
 
 
Net cash used in investing activities
(314,829
)
 
(783,708
)
Net cash (used in) provided by financing activities
(120,168
)
 
481,129

 
 
 
 
Net increase (decrease) in cash and cash equivalents
(25,776
)
 
203,884



(1)
Included within net cash used in investing activities in the Company's Statements of Cash Flows.
(2)
Included within net cash (used in) provided by financing activities in the Company's Statements of Cash Flows.


9

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Section 3: EX-99.2 (INVESTOR UPDATE 02.05.20)

Exhibit



402659946_logo3a45.jpg
Exhibit 99.2
Investor Update
February 5, 2020
This investor update provides Spirit's first quarter and full year 2020 guidance. All data is based on preliminary estimates.
 
 
 
 
 
FIRST QUARTER 2020
 
1Q20E
1Q19A
 
 
Capacity - Available Seat Miles (ASMs) (%Change/Thousands)
Up 15.0%
9,829,044
 
 
 
Adjusted Operating Expense Ex-Fuel per ASM (%Change/Cents)(1)
Up 3.5% to 4.5%
5.46
 
 
Fuel Expense
 
 
Fuel gallons (Millions)
125
110
Fuel cost per gallon ($)(2)
$1.90
$2.09
 
 
 
 
 
Pre-tax Margin (%)
 
6.5% to 7.5%
8.6%
 
 
 
 
 
Wtd. Average Diluted Share Count (Millions)
68.6
68.5
 
 
 
 
 
Effective Tax Rate
 
25%
22.2%
 
 
 
 
 
FULL YEAR 2020
 
FY2020E
FY2019A
 
 
Capacity - Available Seat Miles (ASMs) (%Change/Thousands)
Up 17% to 19%
41,783,001
 
 
 
 
 
Adjusted Operating Expense Ex-Fuel per ASM (%Change/Cents)(1)
Up 1% to 2%
5.55
 
 
 
 
 
Fuel Expense
 
 
 
Fuel gallons (Millions)
540 to 549
471
Fuel cost per gallon ($)(2)
$2.05
$2.11
 
 
 
 
 
Pre-tax Margin (%)
 
About 12%
11.9%
 
 
 
 
 
Wtd. Average Diluted Share Count (Millions)
68.7
68.6
 
 
 
 
 
Effective Tax Rate
 
24%
23.2%
 
 
 
 
 



1




 
 
 
 
 
Full Year 2020 Guidance
 
 
 
 
Full Year 2020E
 
Estimated Cash Tax Rate(3)
 
1% to 2%
 
 
 
Capital Expenditures ($Millions)
 
Purchase of property and equipment, net of pre-delivery deposits and refunds:(4)
 
$710
 
Other capital expenditures
 
$110
 
Total capital expenditures
 
$820
 
 
 
Anticipated proceeds from issuance of long-term debt ($Millions)
 
$512
 
 
 
Payments for heavy maintenance events ($Millions)(5)
 
$100
 
 
 
 
 
 
Footnotes
(1)
Excludes special items which may include loss on disposal of assets, special charges, and other items.
(2)
Includes fuel taxes and into-plane fuel cost.
(3)
Spirit's cash tax rate differs from its effective tax rate primarily due to the benefit related to bonus depreciation on the acquisition of purchased aircraft.
(4)
Includes the purchase of 1 spare engine.
(5)
Payments for heavy maintenance events are recorded as "Deferred heavy maintenance" within "Changes in operating assets and liabilities" on the Company's cash flow statement.


2




 
 
 
 
 
 
 
 
 
 
 
 
 
 
Spirit Airlines, Inc.
 
 
 
 
 
 
 
 
Aircraft Delivery Schedule (net of Scheduled Retirements) as of February 5, 2020
 
A319

 
A320 CEO

 
A320 NEO

 
A321 CEO

 
Total

 
Total Year-end 2019
31

 
64

 
20

 
30

 
145

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1Q20
 

 

 
8

 

 
8

 
 
 
2Q20
 

 

 
4

 

 
4

 
 
 
3Q20
 

 

 

 

 

 
 
 
4Q20
 

 

 
3

 

 
3

 
Total Year-end 2020
31

 
64

 
35

 
30

 
160

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1Q21
 

 

 
6

 

 
6

 
 
 
2Q21
 

 

 
6

 

 
6

 
 
 
3Q21
 

 

 
8

 

 
8

 
 
 
4Q21
 

 

 
6

 

 
6

 
Total Year-end 2021
31

 
64

 
61

 
30

 
186

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Does not include 107 aircraft scheduled for delivery between 2022 and 2027.
 
 
 
Seat Configurations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A319
145
 
 
 
 
 
 
 
 
 
 
 
A320
182
 
 
 
 
 
 
 
 
 
 
A321
228
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 















3




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. Forward-looking statements include, without limitation, statements regarding the Company's intentions and expectations regarding the delivery schedule of aircraft on order, guidance and estimates for the first quarter and full year 2020 , including expectations regarding the delivery schedule of aircraft on order, announced new service routes, revenues, TRASM, cost of operations, operating margin, capacity, CASM, CASM ex-fuel, fuel expense, economic fuel cost, expected unrealized mark-to-market gains or losses, capital expenditures and other working capital requirements, aircraft rent, depreciation and amortization, fuel hedges and tax rates. 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.







4

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