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
percent1. 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 percent2.
“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 million3 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 million4
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 |
% |
| |
|
|
|
|
|
|
|
|
- Excludes special items.
- 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 |
|
| |
|
|
|
|
|
- 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.
- Excludes operating special items.
- 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 |
% |
| |
- See "Special Items" for more details.
- Excludes operating special items.
- 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 |
% |
- 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.
- Excludes special items as described above.
- Assumes same marginal tax rate as is applicable to GAAP net
income for the twelve months ended March 31, 2016.
Investor Relations Contact:
DeAnne Gabel
InvestorRelations@Spirit.com
(954) 447-7920
Media Contact:
Paul Berry
Paul.Berry@Spirit.com
(954) 628-4827
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