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Section 1: 8-K (8-K)

Document
false0001498710 0001498710 2019-10-23 2019-10-23


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

October 23, 2019
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 October 23, 2019, Spirit Airlines, Inc. (the “Company” or “Spirit”) issued a press release announcing its unaudited financial results for the third quarter 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 October 23, 2019, the Company provided an update to investors regarding the Company's fourth quarter 2019 and full year 2019 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: October 23, 2019
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 3Q19)

Exhibit



400583669_logo3a17.jpg 400583669_contactinformationasof102319.jpg
EXHIBIT 99.1


Spirit Airlines Reports Third Quarter 2019 Results

MIRAMAR, Fla., October 23, 2019 - 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

1




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




(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.


3




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


 



4




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



































 
 
 
 


 
 
 
 



 



5




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.




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
 
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.



7





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.

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)

 
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.


9

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Section 3: EX-99.2 (8-K INVESTOR UPDATE 10.23.19)

Exhibit



400583669_logo3a29.jpg
Exhibit 99.2
Investor Update
October 23, 2019
This investor update provides Spirit's fourth quarter and full year 2019 guidance. All data is based on preliminary estimates.
The Company will provide additional details regarding its outlook for 2019 on its conference call scheduled for October 24, 2019.
 
 
 
 
 
 
 
4Q19E
4Q18A
 
 
Capacity - Available Seat Miles (ASMs) (%Change/Thousands)
Up ~16%
8,998,928
 
 
 
 
 
Total Revenue per ASM (TRASM) (%Change/Cents)
Down 4.5% to 6.5%
9.59
 
 
 
Adjusted Operating Expense Ex-Fuel per ASM (%Change/Cents)(1)
Up 3.5% to 4.5%
5.49
 
 
Average Stage Length (Miles)
1,005
1,019
 
 
 
 
Fuel Expense
 
 
Fuel gallons (Millions)
117
102
Economic fuel cost per gallon ($)(2)
$2.09
$2.26
 
 
 
 
 
Interest Expense, Net of Capitalized Interest and Interest Income ($Millions)
$16.4
$15.0
 
 
 
 
 
Effective Tax Rate, Non-GAAP
24%
23.7%
 
 
 
 
Wtd. Average Diluted Share Count (Millions)
68.7
68.7



1




 
 
 
 
 
Full Year 2019 Guidance
 
 
 
 
Full Year 2019E
Estimated Cash Tax Rate(3)
 
1% to 2%
 
 
 
Capital Expenditures ($Millions)
 
Purchase of property and equipment, net of pre-delivery deposits and refunds:(4)
 
$317
 
Other capital expenditures
 
$90
 
Total capital expenditures
 
$407
 
 
 
Anticipated proceeds from issuance of long-term debt ($Millions)
 
$177
 
 
 
Other Working Capital Requirements ($Millions)
 
Payments for heavy maintenance events(5)
 
$193
 
Pre-paid maintenance deposits, net of reimbursements
 
$(79)
 
 
 
 
 
 
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)
Excludes capital commitments related to 6 aircraft that the Company anticipates to be financed via sale leaseback transactions. Includes the purchase of 3 spare engines. Excludes $140 million related to the purchase of 4 A320 aircraft off lease, which was recorded as a capital lease obligation payment.
(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 October 23, 2019 (1)
 
A319

 
A320 CEO

 
A320 NEO

 
A321 CEO

 
Total

 
Total Year-end 2018
31

 
60

 
7

 
30

 
128

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1Q19
 

 
1

 
4

 

 
5

 
 
 
2Q19
 

 
1

 
1

 

 
2

 
 
 
3Q19
 

 
2

 
2

 

 
4

 
 
 
4Q19
 

 

 
6

 

 
6

 
Total Year-end 2019
31

 
64

 
20

 
30

 
145

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1Q20
 

 

 
8

 

 
8

 
 
 
2Q20
 

 

 
5

 

 
5

 
 
 
3Q20
 

 

 
1

 

 
1

 
 
 
4Q20
 

 

 
7

 

 
7

 
Total Year-end 2020
31

 
64

 
41

 
30

 
166

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2021
 

 

 
27

 

 
27

 
Total Year-end 2021
31

 
64

 
68

 
30

 
193

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 fourth quarter and full year 2019 , 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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