MIRAMAR, Fla., April 26, 2016 (GLOBE NEWSWIRE) -- Spirit Airlines, Inc. (NASDAQ:SAVE) today reported first quarter 2016 financial results.
  • Adjusted net income for the first quarter 2016 was $72.3 million ($1.01 per diluted share) 1.  GAAP net income for the first quarter 2016 was $61.9 million ($0.86 per diluted share).
  • Adjusted pre-tax margin for the first quarter 2016 was 21.3 percent 1.  On a GAAP basis, pre-tax margin for the first quarter 2016 was 18.2 percent. 
  • Unrestricted cash and cash equivalents as of March 31, 2016 was $902.8 million. 
  • Spirit's return on invested capital (before taxes and excluding special items) for the twelve months ended March 31, 2016 was 28.3 percent 2.

"I want to thank our Spirit team members for their contributions in achieving these solid first quarter results.  The pricing environment remains very competitive, but we aren't just sitting passively by.  We have upgraded our pricing systems, made modest revisions to our schedules, and adjusted our approach to inventory management, all of which have produced improvements to our revenue results," said Bob Fornaro, Spirit's Chief Executive Officer.  "As we head into the peak summer travel months, we are focused on continued cost and revenue execution, improving our operational reliability and providing friendly customer service."

Revenue Performance For the first quarter 2016, Spirit's total operating revenue was $538.1 million, an increase of 9.1 percent compared to the first quarter 2015, driven by an increase in flight volume, partially offset by a decrease in operating yields.

Total revenue per passenger flight segment ("PFS") for the first quarter 2016 decreased 13.0 percent, or $16.08, year over year to $107.88, primarily driven by a 20.5 percent decrease, or $14.06, in ticket revenue per PFS.  Non-ticket revenue declined 3.7 percent, or $2.02, year over year on a per flight segment basis to $53.23.  Although non-ticket revenue per passenger segment remains relatively stable, the Company has experienced modest pressure on take rates for certain ancillary items which it believes is correlated to low fare levels in its markets.

Cost PerformanceAdjusted operating expense for the first quarter 2016 increased 10.2 percent, or $39.0 million, to $420.4 million 3 on a capacity increase of 26.5 percent year over year.  During the first quarter 2016, the Company purchased two A319 aircraft it formerly financed under operating lease agreements which resulted in lease termination charges.  GAAP total operating expenses, including special items of $16.4 million 4 that are primarily driven by lease termination charges, increased 13.7 percent, or $52.7 million, year over year to $436.8 million.

Economic fuel expense decreased 23.5 percent, or $24.7 million, year over year on a 24.4 percent increase in fuel volume.  This decrease was driven by a 37.4 percent decrease in the average economic fuel cost per gallon compared to the same period last year.

Spirit reported first quarter 2016 cost per available seat mile ("ASM") excluding special items and fuel ("Adjusted CASM ex-fuel") 3 of 5.59 cents, a decrease of 2.3 percent compared to the same period last year, driven primarily by lower aircraft rent per ASM.  The decrease in aircraft rent per ASM was driven by a change in the mix of leased (rent recorded under aircraft rent) and purchased (depreciation recorded under depreciation and amortization) aircraft.  This benefit was partially offset by higher other operating expense related to increased passenger re-accommodation expense, and higher depreciation and amortization expense related to the depreciation of aircraft.  Additionally, during the first quarter 2016, the Company and its flight attendants, represented by the Association of Flight Attendants - CWA (AFA), reached a tentative agreement for a five-year contract.  During the first quarter 2016, labor expense per ASM was higher year over year due to the accrual of a one-time ratification incentive payment of $8.4 million related to this tentative agreement.

"Our greatest competitive strength is our relative cost advantage.  We are focused on getting better all the time and doing so while maintaining, or improving upon, our relative cost advantage," said Ted Christie, Spirit's Chief Financial Officer.  "After adjusting for the economic impact of our tentative flight attendant agreement, including the $8.4 million ratification incentive accrual, we are confident we can hold the line on costs and now estimate our full year 2016 adjusted CASM ex-fuel will be about flat year over year."

FleetDuring the first quarter 2016, Spirit took delivery of 4 new aircraft (2 A320ceo and 2 A321ceo aircraft), ending the quarter with 83 aircraft in its fleet.

Conference Call/Webcast DetailSpirit will conduct a conference call to discuss these results today, April 26, 2016, at 8:30 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 (NASDAQ:SAVE) is committed to offering the lowest total price to the places we fly, on average much lower than other airlines. Our customers start with an unbundled, stripped-down Bare Fare™ and get Frill Control™ which allows them to pay only for the options they choose - like bags, seat assignments and refreshments - the things other airlines bake right into their ticket prices. We help people save money and travel more often, create new jobs and stimulate business growth in the communities we serve. With our Fit Fleet™, the youngest fleet of any major US airline, we operate more than 400 daily flights to 56 destinations in the U.S., Latin America and the Caribbean. Come save with us at www.spirit.com.

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 to GAAP Net Income" table below for more details.(2)  See "Calculation for Return on Invested Capital" table below for more details.(3)  See "Reconciliation of Adjusted Operating Expense to GAAP Operating Expense" table below for more details.(4)  See "Special Items" table for more details.

Forward-Looking StatementsStatements 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. Factors that could cause or contribute to such differences include, but are not limited to, those identified below. Furthermore, such forward-looking statements speak only as of the date of this report. 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. Additional 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. You should carefully consider the risks described below and the other information in this report. If any of the following risks materialize, our business could be materially harmed, and our financial condition and results of operations could be materially and adversely affected. 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 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, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K.

SPIRIT AIRLINES, INC.
Statement of Operations
(unaudited, in thousands, except per share data)
 
  Three Months Ended      
  March 31,   Percent  
  2016   2015   Change  
Operating revenues:            
Passenger $ 272,626     $ 273,466     (0.3 )  
Non-ticket 265,517     219,889     20.8    
Total operating revenues 538,143     493,355     9.1    
             
Operating expenses:            
Aircraft fuel 85,982     112,426     (23.5 )  
Salaries, wages and benefits 116,410     88,961     30.9    
Aircraft rent 52,202     52,788     (1.1 )  
Landing fees and other rents 34,807     30,546     13.9    
Distribution 22,933     20,497     11.9    
Maintenance, materials and repairs 20,940     19,160     9.3    
Depreciation and amortization 23,109     14,863     55.5    
Other operating 64,045     43,843     46.1    
Loss on disposal of assets 214     595     (64.0 )  
Special charges 16,202     425     nm    
Total operating expenses 436,844     384,104     13.7    
             
Operating income 101,299     109,251     (7.3 )  
             
Other (income) expense:            
Interest expense 8,060     2,812     nm    
Capitalized interest (3,325 )   (2,533 )   31.3    
Interest income (1,566 )   (134 )   nm    
Other expense 70     72     (2.8 )  
Total other (income) expense 3,239     217     nm    
             
Income before income taxes 98,060     109,034     (10.1 )  
Provision for income taxes 36,140     40,032     (9.7 )  
Net income $ 61,920     $ 69,002     (10.3 )  
Basic earnings per share $ 0.87     $ 0.94     (7.4 )  
Diluted earnings per share $ 0.86     $ 0.94     (8.5 )  
             
Weighted average shares, basic 71,572     73,054     (2.0 )  
Weighted average shares, diluted 71,777     73,370     (2.2 )  

SPIRIT AIRLINES, INC.
Statements of Comprehensive Income
(unaudited, in thousands)
 
  Three Months Ended
  March 31,
  2016   2015
Net income $ 61,920     $ 69,002  
Unrealized loss on interest rate derivative instruments, net of deferred tax benefit of $0 and $940     (1,594 )
Interest rate swap losses reclassified into earnings $ 90     $  
Other comprehensive income (loss) $ 90     $ (1,594 )
Comprehensive income $ 62,010     $ 67,408  

SPIRIT AIRLINES, INC.
Balance Sheets
(unaudited, in thousands)
 
  March 31,   December 31,
  2016   2015
Assets      
Current assets:      
Cash and cash equivalents $ 902,809     $ 803,632  
Accounts receivable, net 32,469     28,266  
Aircraft maintenance deposits 79,276     73,415  
Prepaid income taxes     72,278  
Prepaid expenses and other current assets 54,760     48,749  
Total current assets 1,069,314     1,026,340  
       
Property and equipment:      
Flight equipment 1,031,886     827,282  
Ground and other equipment 93,724     82,459  
Less accumulated depreciation (76,703 )   (65,524 )
  1,048,907     844,217  
Deposits on flight equipment purchase contracts 289,835     286,837  
Long-term aircraft maintenance deposits 196,470     206,485  
Deferred heavy maintenance, net 80,144     89,127  
Other long-term assets 78,578     77,539  
Total assets $ 2,763,248     $ 2,530,545  
       
Liabilities and shareholders' equity      
Current liabilities:      
Accounts payable $ 23,017     $ 17,043  
Air traffic liability 263,430     216,831  
Current maturities of long-term debt 53,012     49,637  
Other current liabilities 228,137     182,729  
Total current liabilities 567,596     466,240  
       
Long-term debt less current maturities 655,103     596,693  
Long-term deferred income taxes 242,602     221,481  
Deferred gains and other long-term liabilities 20,179     20,821  
Shareholders' equity:      
Common stock 7     7  
Additional paid-in-capital 545,377     544,277  
Treasury stock, at cost (126,779 )   (116,182 )
Retained earnings 860,674     798,754  
Accumulated other comprehensive loss (1,511 )   (1,546 )
Total shareholders' equity 1,277,768     1,225,310  
Total liabilities and shareholders' equity $ 2,763,248     $ 2,530,545  

SPIRIT AIRLINES, INC.SPIRIT AIRLINES, INC.
Statement of Cash Flows
(unaudited, in thousands)
 
  Three Months Ended March 31,
  2016   2015
Operating activities:      
Net income 61,920     69,002  
Adjustments to reconcile net income to net cash provided by operations:      
Unrealized losses on open derivative contracts, net     3,783  
Losses reclassified from other comprehensive income 90      
Equity-based compensation 1,790     1,985  
Allowance for doubtful accounts (recoveries) 25     31  
Amortization of deferred gains and losses 1,968     164  
Depreciation and amortization 23,109     14,863  
Deferred income tax expense (benefit) 21,066     (5,560 )
Loss on disposal of assets 214     595  
Lease termination cost 16,202      
Changes in operating assets and liabilities:      
Accounts receivable (4,229 )   (5,444 )
Aircraft maintenance deposits (12,311 )   (12,317 )
Prepaid Income Taxes 72,278      
Long-term deposits and other assets (8,495 )   (6,160 )
Accounts payable 4,703     433  
Air traffic liability 46,473     79,350  
Other liabilities 33,296     28,810  
Net cash provided by operating activities 258,099     169,535  
Investing activities:      
Pre-delivery deposits for flight equipment, net of refunds (50,358 )   (50,388 )
Capitalized interest (2,575 )   (1,700 )
Purchase of property and equipment (159,829 )   (184,609 )
Net cash used in investing activities (212,762 )   (236,697 )
Financing activities:      
Proceeds from issuance of long-term debt 73,914     185,000  
Proceeds from stock options exercised 88     15  
Payments on debt and capital lease obligations (9,749 )   (2,968 )
Excess tax benefit (deficiency) from equity-based compensation (778 )   7,877  
Repurchase of common stock (9,601 )   (10,943 )
Debt issuance costs (34 )   (2,976 )
Net cash provided by financing activities 53,840     176,005  
Net increase in cash and cash equivalents 99,177     108,843  
Cash and cash equivalents at beginning of period 803,632     632,784  
Cash and cash equivalents at end of period $ 902,809     $ 741,627  
Supplemental disclosures      
Cash payments for:      
Interest, net of capitalized interest $ 3,430     $ 11  
Income taxes paid, net of refunds $ (64,158 )   $ 9,883  

SPIRIT AIRLINES, INC.
Selected Operating Statistics (unaudited)
 
  Three Months Ended March 31,    
Operating Statistics 2016   2015   Change
Available seat miles (ASMs) (thousands) 5,983,005     4,729,463     26.5 %
Revenue passenger miles (RPMs) (thousands) 5,070,313     4,017,559     26.2 %
Load factor (%) 84.7     84.9     (0.2 ) pts
Passenger flight segments (thousands) 4,988     3,980     25.3 %
Block hours 93,545     77,035     21.4 %
Departures 35,160     29,044     21.1 %
Total operating revenue per ASM (TRASM) (cents) 8.99     10.43     (13.8 )%
Average yield (cents) 10.61     12.28     (13.6 )%
Average ticket revenue per passenger flight segment ($) 54.65     68.71     (20.5 )%
Average non-ticket revenue per passenger flight segment ($) 53.23     55.25     (3.7 )%
Total revenue per passenger flight segment ($) 107.88     123.96     (13.0 )%
CASM (cents) 7.30     8.12     (10.1 )%
Adjusted CASM (cents) (1) 7.03     8.06     (12.8 )%
Adjusted CASM ex-fuel (cents) (2) 5.59     5.72     (2.3 )%
Fuel gallons consumed (thousands) 70,550     56,723     24.4 %
Average economic fuel cost per gallon ($) 1.22     1.95     (37.4 )%
Aircraft at end of period 83     70     18.6 %
Average daily aircraft utilization (hours) 12.8     12.7     0.8 %
Average stage length (miles) 995     991     0.4 %
                 
  1. Excludes special items.
  2. Excludes economic fuel expense and special items.

The Company is providing a reconciliation of GAAP financial information to non-GAAP financial information as it believes that non-GAAP financial measures provide management and investors the ability to measure the performance of the Company on a consistent basis.  These non-GAAP financial measures have limitations as an analytical tool.  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.

Special Items  
   
  Three Months Ended
  March 31,
(in thousands) 2016   2015
Operating special items include the following (1):      
Unrealized losses (gains) related to fuel derivative contracts $     $ 1,695  
Loss on disposal of assets 214     595  
Special charges 16,202     425  
Total operating special items $ 16,416     $ 2,715  

Reconciliation of Adjusted Operating Expense to GAAP Operating Expense
(unaudited)
   
  Three Months Ended
  March 31,
(in thousands, except CASM data in cents) 2016   2015
Total operating expenses, as reported $ 436,844     $ 384,104  
Less operating special items (1) 16,416     2,715  
Adjusted operating expenses, non-GAAP (2) 420,428     381,389  
Less: Economic fuel expense 85,982     110,731  
Adjusted operating expenses excluding fuel, non-GAAP (3) $ 334,446     $ 270,658  
       
Available seat miles 5,983,005     4,729,463  
       
CASM (cents) 7.30     8.12  
Adjusted CASM (cents) (2) 7.03     8.06  
Adjusted CASM ex-fuel (cents) (3) 5.59     5.72  
           
  1. Special items include unrealized gains and losses related to outstanding outstanding fuel derivative contracts, loss on disposal of assets, and special charges.  Special charges for the first quarter 2016 are primarily related to lease termination costs.
  2. Excludes operating special items.
  3. Excludes operating special items and economic fuel expense as described in the "Reconciliation of Economic Fuel Expense to GAAP Fuel Expense" table below.
Reconciliation of Adjusted Net Income to GAAP Net Income
(unaudited)
  Three Months Ended
  March 31,
(in thousands, except per share data)   2016       2015  
Net income, as reported $ 61,920     $ 69,002  
Add: Provision for income taxes 36,140     40,032  
Income before income taxes, as reported 98,060     109,034  
Pre-tax margin, GAAP 18.2 %   22.1 %
Add operating special items (1) 16,416     2,715  
Income before income taxes, non-GAAP (2) 114,476     111,749  
Adjusted pre-tax margin, non-GAAP (2) 21.3 %   22.7 %
Provision for income taxes (3) 42,190     41,029  
Adjusted net income, non-GAAP (2)(3) $ 72,286     $ 70,720  
       
Weighted average shares, diluted 71,777     73,370  
       
Adjusted net income per share, diluted (2)(3) $ 1.01     $ 0.96  

Reconciliation of Adjusted Operating Income to GAAP Operating Income
(unaudited)
   
  Three Months Ended
  March 31,
(in thousands) 2016   2015
Operating income, as reported $ 101,299     $ 109,251  
Operating margin, GAAP 18.8 %   22.1 %
Add operating special items (1) 16,416     2,715  
Adjusted operating income, non-GAAP (2) $ 117,715     $ 111,966  
Adjusted operating margin, non-GAAP (2) 21.9 %   22.7 %
 
  1. See "Special Items" for more details.
  2. Excludes operating special items.
  3. Assumes same marginal tax rate as is applicable to GAAP net income.

The Company believes economic fuel expense is the best measure of the effect fuel prices are currently having on our business, because it most closely approximates the net cash outflow associated with purchasing fuel used for our operations during the period. Economic fuel expense is defined as into-plane fuel expense, realized gains or losses on derivative contracts, plus the economic premium expense related to fuel option contracts in the period the option is benefiting. The key difference between aircraft fuel expense as recorded in our statement of operations and economic fuel expense is unrealized mark-to-market changes in the value of aircraft fuel derivatives outstanding and the timing of premium gain or loss recognition on our outstanding fuel option contracts. Many industry analysts evaluate airline results using economic fuel expense, and it is used in our internal management reporting.

Reconciliation of Economic Fuel Expense to GAAP Fuel Expense
(unaudited)
 
  Three Months Ended
  March 31,
(in thousands, except per gallon data) 2016   2015
Fuel expense      
Aircraft fuel, as reported $ 85,982     $ 112,426  
Less:      
Unrealized losses (gains) related to fuel derivative contracts     1,695  
Economic fuel expense, non-GAAP $ 85,982     $ 110,731  
       
Fuel gallons consumed 70,550     56,723  
       
Economic fuel cost per gallon, non-GAAP $ 1.22     $ 1.95  

Calculation of Return on Invested Capital
(unaudited)
   
  Twelve Months Ended
(in thousands) March 31, 2016
Operating Income $ 501,170  
Add operating special items (1) 12,098  
Adjustment for aircraft rent 210,945  
Adjusted operating income (2) 724,213  
Tax (36.9%) (3) 267,235  
Adjusted operating income, after-tax 456,978  
Invested Capital      
Total debt $ 708,115  
Book equity 1,277,768  
Less: Unrestricted cash 902,809  
Add: Capitalized aircraft operating leases (7x Aircraft Rent) 1,476,615  
Total invested capital 2,559,689  
   
Return on invested capital (ROIC), pre-tax (2) 28.3 %
Return on invested capital (ROIC), after-tax (2)(3) 17.9 %
  1. Special items include unrealized gains or losses related to outstanding fuel derivative contracts, loss on disposal of assets, and special charges primarily related to lease termination costs in the first quarter 2016.
  2. Excludes special items as described above.
  3. Assumes same marginal tax rate as is applicable to GAAP net income for the twelve months ended March 31, 2016. 
Investor Relations Contact:DeAnne GabelInvestorRelations@Spirit.com(954) 447-7920         Media Contact:Paul BerryPaul.Berry@Spirit.com(954) 628-4827

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