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Press release from GlobeNewswire (a Nasdaq OMX company)

Spirit Airlines Reports Third Quarter Adjusted Net Income of $25.2 million and Delivers on the Promise of Low Fares at $71.85 Per Flight Segment Average

Wednesday, October 31, 2012

Spirit Airlines Reports Third Quarter Adjusted Net Income of $25.2 million and Delivers on the Promise of Low Fares at $71.85 Per Flight Segment Average03:00 EDT Wednesday, October 31, 2012MIRAMAR, Fla., Oct. 31, 2012 (GLOBE NEWSWIRE) -- Spirit Airlines, Inc. (Nasdaq:SAVE) today reported third quarter 2012 financial results. Net income, excluding special items, for the third quarter 2012 was $25.2 million, or $0.35 per diluted share1. GAAP net income for the third quarter 2012 was $30.9 million, or $0.43 per diluted share.   Operating margin, excluding special items, for the third quarter of 2012 was 11.8 percent1. Operating margin on a GAAP basis was 14.5 percent for the third quarter of 2012.   Adjusted EBITDAR for the third quarter 2012 was $81.8 million, resulting in an Adjusted EBITDAR margin of 23.9 percent.    Spirit ended the third quarter 2012 with $399.1 million in unrestricted cash. "As we grow our network, we are pleased to continue to offer our customers the lowest fares in our markets. Giving our customers the freedom to choose only the services and products they value allows them to save money and helps us keep our costs low which, in turn, provides value to our shareholders," said Ben Baldanza, Spirit's President and Chief Executive Officer. "While this quarter reflected previously described difficult revenue comparisons as we lapped the benefit from the Federal Excise Tax holiday last year, we remain on target to achieve our goal of growing capacity 15 to 20 percent while sustaining an annualized EBITDAR margin of 24 to 26 percent for the full year 2012." Revenue Performance  For the third quarter 2012, Spirit's total operating revenue was $342.3 million, an increase of $53.6 million, or 18.6 percent, compared to third quarter 2011 on a capacity increase of 22.7 percent. Total revenue per available seat mile ("RASM") for the third quarter 2012 was 11.52 cents, a decrease of 3.4 percent compared to the third quarter 2011, driven by lower load factor and operating yields against very strong results last year.    Passenger flight segment ("PFS") volume grew 23.2 percent year-over-year in the third quarter 2012 with total revenue per PFS of $121.65. Average non-ticket revenue per PFS for the third quarter 2012 increased 11.5 percent year-over-year to $49.80 while average ticket revenue per PFS for the quarter decreased 12.1 percent year-over-year to $71.85 as Spirit continued its strategy to offer low base fares while increasing revenue from non-ticket sources. In addition, ticket revenue per passenger segment in the third quarter 2011 included the benefit from the Federal Excise Tax holiday.Cost Performance Total operating expenses in the third quarter 2012 were $292.6 million, an increase of $48.5 million, or 19.9 percent, compared to the same period in 2011, primarily driven by fuel and other expenses associated with increased flight volume, partially offset by a gain associated with the sale of four air carrier slots at Ronald Reagan National Airport. Other expense drivers included passenger re-accommodation costs related to flight cancellations and crew-related costs as a result of network scope changes.  Cost per available seat mile excluding special items and fuel ("Adjusted CASM ex-fuel") for the third quarter 2012 was 6.02 cents, an increase of 4.9 percent year-over-year, largely driven by higher passenger re-accommodation costs related to flight cancellations. Other primary drivers included additional rent for an aircraft temporarily leased from a third-party provider to maintain desired capacity levels during the summer, start-up costs associated with the Company's seat maintenance program and implementation costs of an Enterprise Resource Planning (ERP) system. During the third quarter 2012, the Company incurred start-up costs related to its seat maintenance program of $2.3 million, bringing its total costs incurred related to this program to $5.4 million. Spirit estimates that total start-up costs related to this program will be approximately $7 million with the remaining balance incurred in the fourth quarter 2012. Selected Balance Sheet and Cash Flow Items At the end of the third quarter 2012, Spirit had $399.1 million in unrestricted cash and cash equivalents and no restricted cash balance.   As of September 30, 2012, the Company had no debt on its balance sheet and total shareholders' equity of $559.5 million.  During the third quarter 2012, the Company had capital expenditures of $2.5 million, paid $11.5 million in pre-delivery deposits ("PDPs") for future deliveries of aircraft and spare engines and paid $13.0 million in maintenance reserves, net of reimbursements. Fleet Spirit ended the third quarter 2012 with 42 aircraft in its fleet.  The Company has two new A320 aircraft scheduled for delivery in the fourth quarter 2012, which deliveries would bring the year-end 2012 fleet to 44 aircraft. In addition, in October 2012, Spirit signed a Letter of Intent with ILFC to lease three used A319 and five A320neo aircraft, subject to final documentation.  These aircraft are undergoing customary maintenance checks, and the Company currently expects one A319 aircraft to be delivered in December 2012 with two expected to be delivered in January 2013.  Delivery dates for the A320neo aircraft will be confirmed after Spirit has made a decision on its engine type selection for the A320neo.    Third Quarter 2012 and Other Current Highlights Recently added/announced new service between (service start date):     - Dallas/Fort Worth and Baltimore/Washington (9/6/12) - San Diego and Portland, Oregon (11/8/12) - Fort Lauderdale and Baltimore/Washington (9/6/12) - San Diego and Los Cabos, Mexico (11/8/12)** - Dallas/Fort Worth and Houston (9/20/12) - Dallas/Fort Worth and New Orleans (1/24/13) - Houston and Chicago (10/4/12)  - Dallas/Fort Worth and Oakland/ - Houston and Las Vegas (10/4/12)  San Francisco (4/25/13) - Denver and Phoenix/Mesa (10/4/12) - Dallas/Fort Worth and Los Angeles (4/25/13) - Chicago and Tampa (11/8/12)* - Dallas/Fort Worth and Cancun, Mexico (4/25/13) - Chicago and Phoenix/Mesa (11/8/12)* - Dallas/Fort Worth and Minneapolis/St. Paul (4/25/13) - Minneapolis/St. Paul and Fort Lauderdale (11/8/12)* - Dallas/Fort Worth and Philadelphia (4/25/13) - Minneapolis/St. Paul and Fort Myers (11/8/12)* - Dallas/Fort Worth and Los Cabos, Mexico (6/13/12)** - Dallas/Fort Worth and Fort Myers (11/8/12)* - Dallas/Fort Worth and Latrobe/Pittsburgh (6/14/13) - Boston and Fort Myers (11/8/12)*   Announced opening a Crew Base at Dallas/Fort Worth International Airport on December 1, 2012. *Seasonal service only **Spirit has filed with the U.S. Department of Transportation ("DOT") to begin nonstop service between Dallas/Fort Worth and Los Cabos, Mexico and between San Diego and Los Cabos, Mexico, subject to necessary governmental approval. Investors are urged to read carefully the Company's periodic reports filed with or furnished to the Securities and Exchange Commission, including its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, for additional information regarding the Company. (1) See "Reconciliation of Adjusted Net Income to GAAP Net Income" table below for additional information.Conference Call/Webcast Details Spirit will conduct a conference call to discuss these results today, October 31, 2012, at 11:00 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 (Nasdaq:SAVE) empowers customers to save money on air travel by offering ultra low base fares with a range of optional services for a fee, allowing customers the freedom to choose only the extras they value. This innovative approach grows the traveling market and stimulates new economic activity while creating new jobs.  Spirit's modern fleet, configuration and other innovations enable Spirit to burn less fuel per seat than competitors, making Spirit one of the most environmentally-friendly U.S. carriers.  Spirit's all-Airbus fleet currently operates more than 200 daily flights to over 50 destinations within the U.S., Latin America and Caribbean.  Visit Spirit at www.spirit.com.  The Spirit Airlines logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=9737Forward-Looking Statements Statements in this release contain various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which represent the Company's expectations or beliefs concerning future events. When used in this release, the words "expects," "estimates," "plans," "anticipates," "indicates," "believes," "forecast," "guidance," "outlook," "may," "will," "should," "seeks," "targets" and similar expressions are intended to identify forward-looking statements. Similarly, statements that describe the Company's objectives, plans or goals, or actions the Company may take in the future, are forward-looking statements. Forward-looking statements include, without limitation, statements regarding the Company's intentions and expectations regarding the management of future maintenance costs related to the Company's seat maintenance program, the delivery schedule of aircraft on order, announced new service routes and customer savings programs, and expectations regarding future results of operations, including EBITDAR margin and capacity growth. All forward-looking statements in this release are based upon information available to the Company on the date of this release. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. Forward-looking statements are subject to a number of factors that could cause the Company's actual results to differ materially from the Company's expectations, including the competitive environment in the airline industry; the Company's ability to keep costs low; changes in fuel costs; the impact of worldwide economic conditions on customer travel behavior; the Company's ability to generate non-ticket revenues; and government regulation. Additional information concerning these and other factors is contained in the Company's Securities and Exchange Commission filings, including but not limited to the Company's Annual Report on Form 10-K for the year ended December 31, 2011.SPIRIT AIRLINES, INC. Statement of Operations (1) (in thousands, except per share data) (unaudited)                  Three Months Ended  Nine Months Ended    September 30,PercentSeptember 30,Percent  20122011Change2012  2011Change Operating revenues:               Passenger $ 202,181 $ 186,682 8.3 $ 594,071   $ 520,380 14.2 Non-ticket 140,136 102,032 37.3 396,049   276,887 43.0Total operating revenue 342,317 288,714 18.6 990,120   797,267 24.2 Operating expenses:               Aircraft fuel 122,016 104,985 16.2 350,974   293,219 19.7 Salaries, wages and benefits 54,413 45,148 20.5 160,556   133,514 20.3 Aircraft rent 37,536 29,220 28.5 106,469   86,009 23.8 Landing fees and other rents 19,060 13,966 36.5 51,240   38,628 32.6 Distribution 14,620 14,177 3.1 43,559   39,146 11.3 Maintenance, materials and repairs 14,211 11,010 29.1 37,254   25,903 43.8 Depreciation and amortization 3,815 2,059 85.3 10,012   5,296 89.0 Other operating 35,253 23,571 49.6 95,862   66,775 43.6 Loss on disposal of assets — 4 na 482   39 na Special charges (credits) (2) (8,288) 18 na (8,345)   2,379 naTotal operating expenses 292,636 244,158 19.9 848,063   690,908 22.7Operating income 49,681 44,556 11.5 142,057   106,359 33.6 Other (income) expense:               Interest expense 10 444 na 1,344   24,408 na Capitalized interest (10) (444) na (1,344)   (2,519) na Interest income (171) (99) na (766)   (256) na Other expense 109 42 na 236   165 na Total other (income) expense (62) (57) na (530)   21,798 naIncome before income taxes 49,743 44,613 11.5 142,587   84,561 68.6 Provision for income taxes 18,859 16,956 11.2 53,693   32,104 67.2Net income $ 30,884 $ 27,657 11.7 $ 88,894   $ 52,457 69.5 Net income per share, basic $ 0.43 $ 0.38 13.2 $ 1.23   $ 1.12 9.8Net income per share, diluted $ 0.43 $ 0.38 13.2 $ 1.22   $ 1.11 9.9 Weighted average shares, basic 72,427 72,175 0.3 72,367   46,840 54.5 Weighted average shares, diluted 72,658 72,427 0.3 72,581   47,129 54.0                 (1) Certain prior period amounts have been reclassified to conform to the current year's presentation. (2) Special charges (credits) for 2012 include recognition of a gain on the sale of four carrier slots at Ronald Reagan National Airport and secondary offering costs related to the sale of 9.4 million shares by Oaktree Capital Management; and for 2011 include amounts relating to exit facility costs associated with moving our Detroit, Michigan maintenance operations to Fort Lauderdale, Florida and termination costs in connection with the IPO during the three months ended June 30, 2011 comprised of amounts paid to Indigo Partners, LLC to terminate its professional service agreement with Spirit and fees paid to three individual, unaffiliated holders of the Company's subordinated notes.  SPIRIT AIRLINES, INC. Condensed Balance Sheets (1) (unaudited, in thousands)        September 30,December 31,  20122011Assets     Current assets:     Cash and cash equivalents $ 399,143 $ 343,328 Accounts receivable, net 23,761 15,425 Deferred income taxes 14,962 20,738 Other current assets 100,499 63,217Total current assets538,365442,708 Property and equipment:     Flight equipment 4,029 4,182 Ground and other equipment 53,490 46,608 Less accumulated depreciation (31,562) (27,580)   25,957 23,210 Deposits on flight equipment purchase contracts 95,862 91,450 Prepaid aircraft maintenance to lessors 117,506 120,615 Security deposits and other long-term assets 106,990 67,830Total assets$ 884,680 $ 745,813 Liabilities and shareholders' equity     Current liabilities:     Accounts payable $ 21,317 $ 15,928 Air traffic liability 136,693 112,280 Other current liabilities 109,810 98,856Total current liabilities267,820227,064 Long-term deferred income taxes 28,311 12,108 Deferred credits and other long-term liabilities 29,040 39,935Shareholders' equity:     Common stock 7 7 Additional paid-in-capital 500,981 496,136 Treasury stock (1,065) (129) Retained earnings (deficit) 59,586 (29,308)Total shareholders' equity559,509466,706Total liabilities and shareholders' equity$ 884,680 $ 745,813       (1) Certain prior period amounts have been reclassified to conform to the current year's presentation.  SPIRIT AIRLINES, INC. Condensed Statement of Cash Flows (unaudited, in thousands)        Nine Months Ended September 30,  20122011Net cash provided by operating activities$88,807 $149,488      Investing activities:     Proceeds from sale of slots 9,060 — Proceeds from sale of property and equipment 14 5,604 Pre-delivery deposits for flight equipment, net of refunds (6,817) (27,194) Purchase of property and equipment (21,711) (9,573)Net cash used in investing activities(19,454)(31,163)      Financing activities:     Proceeds from exercise of stock options 410 419 Proceeds from issuance of common stock — 170,828 Payments on debt — (20,564) Proceeds from sale leaseback transactions 12,427 — Payments to pre-IPO shareholders pursuant to tax receivable agreement (26,905) — Excess tax benefits from share-based compensation 1,466 — Repurchase of restricted common stock (936) (757) Debt issuance costs — 8Net cash (used in) provided by financing activities(13,538)149,934       Net increase in cash and cash equivalents $ 55,815 $ 268,259 Cash and cash equivalents at beginning of period $ 343,328 $ 82,714Cash and cash equivalents at end of period399,143350,973       Supplemental disclosures     Cash payments for:     Interest paid $ 297 $ 8,219 Taxes paid $ 39,350 $ 379 Non-cash transactions     Exchange of Notes due to related parties for common stock $ — $ 279,206 Exchange of mandatorily redeemable preferred stock for common stock $ — $ 81,747 Liability and offsetting reduction to equity recorded related to tax receivable agreement $ — $ 36,522        SPIRIT AIRLINES, INC. Selected Operating Statistics (unaudited)          Three Months Ended September 30,  Operating Statistics20122011Change Available seat miles (ASMs) (thousands) 2,972,651 2,422,962 22.7% Revenue passenger miles (RPMs) (thousands) 2,552,316 2,109,119 21.0% Load factor (%) 85.9 87.0 (1.1) pts Passenger flight segments (thousands) 2,814 2,285 23.2% Block hours 50,159 41,558 20.7% Operating revenue per ASM (RASM) (cents) 11.52 11.92 (3.4)% Average yield (cents) 13.41 13.69 (2.0)% Average ticket revenue per passenger flight segment ($) 71.85 81.71 (12.1)% Average non-ticket revenue per passenger flight segment ($) 49.80 44.66 11.5% Total revenue per passenger flight segment ($) 121.65 126.37 (3.7)% CASM (cents) 9.84 10.08 (2.4)% Adjusted CASM (cents) (1) 10.15 10.01 1.4% Adjusted CASM ex-fuel (cents) (2) 6.02 5.74 4.9% Fuel gallons consumed (thousands) 37,761 31,640 19.3% Average economic fuel cost per gallon ($) 3.26 3.27 (0.3)% Aircraft at end of period 42 35 20.0% Average daily Aircraft utilization (hours) 12.8 12.9 (0.8)% Average stage length (miles) 892 909 (1.9)% Airports served at end of period 52 47 10.6%                Nine Months Ended September 30,  Operating Statistics20122011Change Available seat miles (ASMs) (thousands) 8,388,581 7,048,701 19.0% Revenue passenger miles (RPMs) (thousands) 7,144,329 6,040,203 18.3% Load factor (%) 85.2 85.7 (0.5) pts Passenger flight segments (thousands) 7,776 6,347 22.5% Block hours 142,779 121,523 17.5% Operating revenue per ASM (RASM) (cents) 11.80 11.31 4.3% Average yield (cents) 13.86 13.20 5.0% Average ticket revenue per passenger flight segment ($) 76.40 81.98 (6.8)% Average non-ticket revenue per passenger flight segment ($) 50.93 43.62 16.8% Total revenue per passenger flight segment ($) 127.33 125.60 1.4% CASM (cents) 10.11 9.80 3.2% Adjusted CASM (cents) (1) 10.20 9.71 5.0% Adjusted CASM ex-fuel (cents) (2) 6.02 5.61 7.3% Fuel gallons consumed (thousands) 106,320 91,076 16.7% Average economic fuel cost per gallon ($) 3.30 3.17 4.1% Average daily Aircraft utilization (hours) 12.8 12.9 (0.8)% Average stage length (miles) 902 933 (3.3)%         (1)  Excludes unrealized mark-to-market (gains) and losses and special items as described in the "Reconciliation of Adjusted Operating Income to GAAP Operating Income" table below. (2)  Excludes all components of fuel expense, including realized and unrealized mark-to-market hedge (gains) and losses, and special items as described in the "Reconciliation of Adjusted Operating Income to GAAP Operating Income" table below.         The Company is providing a reconciliation of GAAP financial information to non-GAAP financial information as it believes that non-GAAP financial measures provide management and investors the ability to measure the performance of the Company on a consistent basis. These non-GAAP financial measures have limitations as an analytical tool.  Because of these limitations, determinations of Spirit's operating performance excluding unrealized gains and losses or special items should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.Reconciliation of Adjusted Net Income to GAAP Net Income(unaudited)  Three Months Ended  September 30, (in thousands, except per share data)20122011Net income, as reported$ 30,884$ 27,657 Add: Provision for income taxes 18,859 16,956 Income before income taxes, as reported 49,743 44,613       Add: Unrealized mark-to-market (gains) and losses (921) 1,495 Add special items:     Loss on disposal of assets — 4 Special charges (credits) (8,288) 18 Income before income taxes, non-GAAP (1) 40,534 46,130 Provision for income taxes (2) 15,368 17,533Adjusted net income, non-GAAP (1)$ 25,166$ 28,597       Weighted average shares, basic 72,427 72,175 Weighted average shares, diluted 72,658 72,427      Adjusted net income per share, basic$ 0.35$ 0.40Adjusted net income per share, diluted$ 0.35$ 0.39 (1)    Excludes unrealized mark-to-market losses and special items as described in the "Reconciliation of Adjusted Operating Income to GAAP Operating Income" table below. (2)    Assumes same marginal tax rate as is applicable to GAAP net income. Reconciliation of Adjusted CASM ex-fuel to CASM (unaudited)  Three Months Ended  September 30, (in thousands, except CASM data in cents)20122011Total operating expenses, as reported$ 292,636$ 244,158 Less: Unrealized mark-to-market (gains) and losses (1) (921) 1,495 Less special items (2):     Loss on disposal of assets — 4 Special charges (credits) (3) (8,288) 18 Operating expenses, non-GAAP (4) 301,845 242,641 Less: Economic fuel expense, non-GAAP 122,937 103,490Operating expenses excluding fuel, non-GAAP (5)$ 178,908$ 139,151       Available seat miles 2,972,651 2,422,962       CASM (cents) 9.84 10.08 Adjusted CASM (cents) (4) 10.15 10.01 Adjusted CASM ex-fuel (cents) (5) 6.02 5.74Reconciliation of Adjusted Operating Income to GAAP Operating Income (unaudited)  Three Months Ended  September 30, (in thousands)20122011Operating income, as reported$ 49,681$ 44,556 Operating margin, GAAP 14.5% 15.4% Add: Unrealized mark-to-market (gains) and losses (1) (921) 1,495 Add special items (2):     Loss on disposal of assets — 4 Special charges (credits) (3) (8,288) 18Operating income, non-GAAP$ 40,472$ 46,073 Operating margin (4) 11.8% 16.0% (1)    Unrealized mark-to-market (gains) and losses are comprised of non-cash adjustments to aircraft fuel expenses. (2)    Special items include loss on disposal of assets and special charges (credits). (3)    Special charges (credits) for 2012 include recognition of a gain on the sale of four carrier slots at Ronald Reagan National Airport and secondary offering costs related to the sale of 9.4 million shares by Oaktree Capital Management; and for 2011 include amounts relating to exit facility costs associated with moving our Detroit, Michigan maintenance operations to Fort Lauderdale, Florida and termination costs in connection with the IPO during the three months ended June 30, 2011 comprised of amounts paid to Indigo Partners, LLC to terminate its professional service agreement with Spirit and fees paid to three individual, unaffiliated holders of the Company's subordinated notes. (4)    Excludes unrealized fuel hedge (gains) and losses and special items. (5)    Excludes all components of fuel expense, including realized and unrealized fuel hedge (gains) and losses, and special items. The Company's economic fuel cost per gallon differs from GAAP results in that it only includes the cash settlements related to fuel hedge contracts that settled during the period whereas the GAAP results also include the non-cash mark-to-market impact of all fuel hedge contracts expected to settle in future periods.   The Company believes that net fuel hedge adjustments provide management and investors the ability to better assess and compare its performance.Reconciliation of non-GAAP Economic Fuel Expense to GAAP Fuel Expense(unaudited)  Three Months Ended  September 30, (in thousands, except per gallon data)20122011Fuel Expense     Aircraft fuel, as reported $122,016 $104,985 Less: Unrealized mark-to-market (gains) and losses (921) 1,495      Economic fuel expense, non-GAAP$ 122,937$ 103,490       Fuel gallons consumed 37,761 31,640      Economic fuel cost per gallon, non-GAAP$ 3.26$ 3.27Reconciliation of EBITDA, Adjusted EBITDA and Adjusted EBITDAR to GAAP net income (unaudited)  Three Months Ended  September 30, (in thousands)20122011Net income, as reported$ 30,884$ 27,657 Add: Provision for income taxes 18,859 16,956 Income before income taxes, as reported 49,743 44,613 Add:     Interest expense 10 444 Capitalized interest (10) (444) Interest income (171) (99) Depreciation and amortization 3,815 2,059 EBITDA 53,387 46,573 Other expense 109 42 Unrealized mark-to-market (gains) and losses (921) 1,495 Loss on disposal of assets — 4 Special charges (credits) (8,288) 18Adjusted EBITDA44,28748,132 Aircraft rent 37,536 29,220Adjusted EBITDAR (1)$ 81,823$ 77,352 Adjusted EBITDAR margin (1) 23.9% 26.8% (1)    Excludes unrealized mark-to-market fuel hedge (gains) and losses and special items as described in the "Reconciliation of Adjusted Operating Income to GAAP Operating Income" table above.CONTACT: Investor Relations Contact: DeAnne Gabel Director, Investor Relations 954-447-7920 InvestorRelations@spirit.com Media Contacts: Misty Pinson Director, Corporate Communications misty.pinson@spirit.com 954-628-4827/cell (954) 918-9432 Manuel Jaquez (Latin America & Caribbean) Senior Manager Commercial - Latin America manuel.jaquez@spirit.com 954-628-4898