Exhibit 99.1
Investor Update
April 10, 2018
This investor update provides Spirit's first quarter 2018 guidance and a recast of certain 2017 financial information in accordance with the adoption of Accounting Standards Update (ASU) No. 2014-09, (ASU 2014-09), "Revenue from Contracts with Customers.” Guidance data is based on preliminary estimates.
Total revenue per available seat mile (TRASM) for the first quarter 2018 is estimated to be approximately 8.37 cents, down approximately 2.4 percent compared to first quarter 2017 recast TRASM of 8.58 cents. This result is near the low end of our previous guidance range, partially due to a better than expected completion factor.
Adjusted cost per available seat mile ex-fuel (CASM ex-fuel) for the first quarter 2018 is expected to be down approximately 5.0 percent year over year which is better than previously expected, largely due to better operational performance. In addition, due to the timing of certain maintenance events, depreciation and amortization is expected to be better than anticipated by approximately $1 million.
Earlier this month, the Company announced the purchase of 14 A319 aircraft which are currently operated under lease arrangements. As a result of this transaction, the Company now estimates its 2018 full year CASM ex-fuel will be down between 3 and 4 percent year over year.
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| 1Q18E | ||||
| Capacity - Available Seat Miles (ASMs) | ||||
| Year-over-Year % Change | 22.3% | |||
| Total Revenue per ASM (TRASM) | ||||
| Year-over-Year % Change | Down ~ 2.4% | |||
| Adjusted Operating Expense Ex-Fuel per ASM | ||||
Adjusted CASM ex-fuel year-over-year % change(1) | Down ~ 5% | |||
| Average Stage Length (miles) | 1,025 | |||
| Fuel Expense | ||||
| Fuel gallons (millions) | 95.0 | |||
Economic fuel cost per gallon ($)(2) | $2.15 | |||
| Selected Operating Expenses ($Millions) | ||||
| Aircraft rent | $50.2 | |||
| Depreciation and amortization | $39.3 | |||
| Interest Expense, net of Capitalized Interest ($Millions) | ||||
| Interest expense | $17.9 | |||
| Capitalized interest | $(2.3) | |||
| Interest Income | $(4.1) | |||
| Interest expense, net | $11.5 | |||
| Effective Tax Rate | 24% | |||
| Wtd. Average Diluted Share Count (Millions) | 68.3 | |||
Footnotes
| (1) | Excludes all components of fuel expense, loss on disposal of assets, and special items. | ||||
| (2) | Includes fuel taxes and into-plane fuel cost. | ||||
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The following table shows adjusted balances after the adoption of ASU 2014-09, "Revenue from Contracts with Customers" on the quarterly statements of operations for each quarter of 2017. These recast amounts were derived from unaudited financial statements included in the quarterly reports on Form 10-Q during the year ended December 31, 2017.
| For the Quarter ended | |||||||||||||||
| March 31, 2017 | June 30, 2017 | September 30, 2017 | December 31, 2017 | ||||||||||||
| (in thousands, except per share data) | |||||||||||||||
| Operating revenues: | |||||||||||||||
| Passenger | $ | 572,407 | $ | 681,010 | $ | 669,208 | $ | 650,798 | |||||||
| Other | 17,670 | 19,305 | 18,155 | 15,535 | |||||||||||
| Total operating revenues | 590,077 | 700,315 | 687,363 | 666,333 | |||||||||||
| Operating expenses: | |||||||||||||||
| Aircraft fuel | 139,782 | 142,294 | 158,300 | 175,205 | |||||||||||
| Salaries, wages and benefits | 127,138 | 129,892 | 134,114 | 136,815 | |||||||||||
| Aircraft rent | 57,070 | 52,566 | 53,396 | 42,820 | |||||||||||
| Landing fees and other rents | 40,448 | 45,592 | 48,498 | 46,117 | |||||||||||
| Depreciation and amortization | 31,509 | 35,331 | 36,840 | 36,472 | |||||||||||
| Maintenance, materials and repairs | 26,312 | 28,985 | 26,176 | 28,966 | |||||||||||
| Distribution | 25,772 | 29,835 | 29,695 | 28,170 | |||||||||||
| Special charges | 4,776 | — | 7,853 | — | |||||||||||
| Loss on disposal of assets | 1,105 | 1,493 | 516 | 1,054 | |||||||||||
| Other operating | 77,703 | 102,885 | 87,965 | 79,267 | |||||||||||
| Total operating expenses | 531,615 | 568,873 | 583,353 | 574,886 | |||||||||||
| Operating income | 58,462 | 131,442 | 104,010 | 91,447 | |||||||||||
| Other (income) expense: | |||||||||||||||
| Interest expense | 12,473 | 13,746 | 15,018 | 16,065 | |||||||||||
| Capitalized interest | (3,580 | ) | (3,342 | ) | (3,203 | ) | (3,668 | ) | |||||||
| Interest income | (1,313 | ) | (1,828 | ) | (2,605 | ) | (2,990 | ) | |||||||
| Other expense | 3 | 104 | 114 | 145 | |||||||||||
| Total other (income) expense | 7,583 | 8,680 | 9,324 | 9,552 | |||||||||||
| Income before income taxes | 50,879 | 122,762 | 94,686 | 81,895 | |||||||||||
| Provision (benefit) for income taxes | 19,542 | 45,439 | 34,555 | (165,249 | ) | ||||||||||
| Net income | $ | 31,337 | $ | 77,323 | $ | 60,131 | $ | 247,144 | |||||||
| Basic earnings per share | $ | 0.45 | $ | 1.11 | $ | 0.87 | $ | 3.59 | |||||||
| Diluted earnings per share | $ | 0.45 | $ | 1.11 | $ | 0.87 | $ | 3.59 | |||||||
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The following table shows quarterly adjustments made due to the adoption of ASU 2014-09, "Revenue from Contracts with Customers" on the statements of operations for 2017.
| Adjustments, for the Quarter ended | |||||||||||||||||||||||
| Full Year 2017 As Reported | March 31, 2017 | June 30, 2017 | September 30, 2017 | December 31, 2017 | Full Year 2017 Adjusted | ||||||||||||||||||
| (in thousands, except per share data) | |||||||||||||||||||||||
| Operating revenues: | |||||||||||||||||||||||
| Passenger | $ | 1,366,034 | $ | 272,645 | $ | 309,088 | $ | 313,001 | $ | 312,655 | $ | 2,573,423 | |||||||||||
| Other | 1,281,632 | (274,314 | ) | (310,455 | ) | (312,869 | ) | (313,329 | ) | 70,665 | |||||||||||||
| Total operating revenues | 2,647,666 | (1,669 | ) | (1,367 | ) | 132 | (674 | ) | 2,644,088 | ||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Aircraft fuel | 615,581 | — | — | — | — | 615,581 | |||||||||||||||||
| Salaries, wages and benefits | 527,959 | — | — | — | — | 527,959 | |||||||||||||||||
| Aircraft rent | 205,852 | — | — | — | — | 205,852 | |||||||||||||||||
| Landing fees and other rents | 180,655 | — | — | — | — | 180,655 | |||||||||||||||||
| Depreciation and amortization | 140,152 | — | — | — | — | 140,152 | |||||||||||||||||
| Maintenance, materials and repairs | 110,439 | — | — | — | — | 110,439 | |||||||||||||||||
| Distribution | 113,620 | (726 | ) | (73 | ) | 226 | 425 | 113,472 | |||||||||||||||
| Special charges | 12,629 | — | — | — | — | 12,629 | |||||||||||||||||
| Loss on disposal of assets | 4,168 | — | — | — | — | 4,168 | |||||||||||||||||
| Other operating | 347,820 | — | — | — | — | 347,820 | |||||||||||||||||
| Total operating expenses | 2,258,875 | (726 | ) | (73 | ) | 226 | 425 | 2,258,727 | |||||||||||||||
| Operating income | 388,791 | (943 | ) | (1,294 | ) | (94 | ) | (1,099 | ) | 385,361 | |||||||||||||
| Other (income) expense: | |||||||||||||||||||||||
| Interest expense | 57,302 | — | — | — | — | 57,302 | |||||||||||||||||
| Capitalized interest | (13,793 | ) | — | — | — | — | (13,793 | ) | |||||||||||||||
| Interest income | (8,736 | ) | — | — | — | — | (8,736 | ) | |||||||||||||||
| Other expense | 366 | — | — | — | — | 366 | |||||||||||||||||
| Total other (income) expense | 35,139 | — | — | — | — | 35,139 | |||||||||||||||||
| Income before income taxes | 353,652 | (943 | ) | (1,294 | ) | (94 | ) | (1,099 | ) | 350,222 | |||||||||||||
| Provision (benefit) for income taxes | (66,954 | ) | (345 | ) | (474 | ) | (35 | ) | 2,095 | (65,713 | ) | ||||||||||||
| Net income | $ | 420,606 | $ | (598 | ) | $ | (820 | ) | $ | (59 | ) | $ | (3,194 | ) | $ | 415,935 | |||||||
| Basic earnings per share | $ | 6.08 | $ | (0.01 | ) | $ | (0.01 | ) | $ | — | $ | (0.05 | ) | $ | 6.01 | ||||||||
| Diluted earnings per share | $ | 6.06 | $ | (0.01 | ) | $ | (0.01 | ) | $ | — | $ | (0.05 | ) | $ | 6.00 | ||||||||
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ASU 2014-09 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers (see Note 2 of our Consolidated Financial Statements within the Form 10-K filed on February 13, 2018). The adoption of the ASU impacted the classification and timing of recognition of certain ancillary items such as bags, seats and other travel-related fees, since they are deemed part of the single performance obligation of providing passenger transportation. These ancillary items are now recognized in passenger revenue (disclosed below as non-fare passenger revenue). Other revenue primarily consists of the marketing component of the sale of frequent flyer miles to our credit card partner and revenue from the sale of various items such as hotels and rental cars. In addition, the adoption of the ASU eliminated the incremental cost method for frequent flier program accounting, which required the Company to re-value and record a liability associated with customer flight miles earned as part of the Company’s frequent flier program with a relative fair value. This change did not have a material impact on our income statement or balance sheet in any period presented.
The following table provides additional detail about the components of non-ticket revenue:
| Supplemental Information | As adjusted for the Quarter ended | ||||||||||||||||||
| March 31, 2017 | June 30, 2017 | September 30, 2017 | December 31, 2017 | Full Year 2017 Adjusted | |||||||||||||||
| (in thousands, except per segment data) | |||||||||||||||||||
| Non fare passenger revenue | $ | 273,252 | $ | 309,437 | $ | 313,479 | $ | 313,323 | $ | 1,209,491 | |||||||||
| Other revenue | 17,670 | 19,305 | 18,155 | 15,535 | 70,665 | ||||||||||||||
| Non-ticket revenue | $ | 290,922 | $ | 328,742 | $ | 331,634 | $ | 328,858 | $ | 1,280,156 | |||||||||
| Passenger segments | 5,570 | 6,206 | 6,307 | 6,100 | 24,183 | ||||||||||||||
| Total non-ticket revenue per passenger segment ($) | $ | 52.23 | $ | 52.97 | $ | 52.58 | $ | 53.91 | $ | 52.94 | |||||||||
The following table shows total revenue per available seat mile (TRASM) calculation after the adoption of ASU 2014-09, "Revenue from Contracts with Customers" on the quarterly statements of operations for each quarter of 2017.
| Total operating revenue per available seat mile (TRASM) | |||||||||||||||||||
| As adjusted for the Quarter ended | |||||||||||||||||||
| March 31, 2017 | June 30, 2017 | September 30, 2017 | December 31, 2017 | Full Year 2017 Adjusted | |||||||||||||||
| (in thousands, except per ASM data) | |||||||||||||||||||
| Total operating revenues | $ | 590,077 | $ | 700,315 | $ | 687,363 | $ | 666,333 | $ | 2,644,088 | |||||||||
| Available seat miles (ASMs) | 6,875,899 | 7,294,578 | 7,681,312 | 7,741,030 | 29,592,819 | ||||||||||||||
| Total operating revenue per ASM (TRASM) (cents) | 8.58 | 9.60 | 8.95 | 8.61 | 8.93 | ||||||||||||||
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Forward-Looking Statements
Statements in this release and certain oral statements made from time to time by representatives of the Company contain various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act) which are subject to the “safe harbor” created by those sections. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. All statements other than statements of historical facts are “forward-looking statements” for purposes of these provisions. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential,” and similar expressions intended to identify forward-looking statements. Forward-looking statements include, without limitation, statements regarding the Company's intentions and expectations regarding the delivery schedule of aircraft on order, guidance and estimates for the first quarter 2018, 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.
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