MIRAMAR, Fla., Feb. 10, 2015 (GLOBE NEWSWIRE) -- Spirit Airlines, Inc. (Nasdaq: SAVE ) today reported fourth quarter and full year 2014 financial results.
- Adjusted net income for the fourth quarter 2014 increased 43.2 percent to $58.7 million ($0.80 per diluted share) compared to the fourth quarter 2013 1 . GAAP net income for the fourth quarter 2014 increased 29.4 percent year over year to $55.9 million ($0.76 per diluted share).
- Adjusted net income for the full year 2014 increased 33.3 percent year over year to $236.7 million ($3.23 per diluted share) 1 . GAAP net income for the full year 2014 increased 27.4 percent year over year to $225.5 million ($3.08 per diluted share).
- Adjusted pre-tax margin for the fourth quarter 2014 was 19.7 percent, up 4.3 percentage points year over year. For the full year 2014, adjusted pre-tax margin was 19.2 percent, up 2.1 percentage points compared to 2013 1 . On a GAAP basis, pre-tax margin for the fourth quarter 2014 was 18.8 percent and for the full year 2014 was 18.3 percent.
- Spirit ended 2014 with an unrestricted cash and cash equivalents balance of $632.8 million.
- Spirit's return on invested capital (before taxes and excluding special items) for the twelve months ended December 31, 2014 was 30.1 percent 2 .
"I want to thank our team members that contributed to our solid operational and financial performance in 2014. During 2014, we improved our customers' understanding of our Bare Fare™ plus Frill Control™ product design, which led to increased customer satisfaction, improved our financial results, and maintained a very high completion rate while improving our on-time performance by 600 basis points," said Ben Baldanza, Spirit's Chief Executive Officer. "We have the right team, resources, and business model to continue to successfully grow our business. I'm pleased to be a part of the Spirit team and am excited about bringing our ultra-low fares to even more people in more places."
Revenue Performance
For the fourth quarter 2014, Spirit's total operating revenue was $474.5 million, an increase of 13.0 percent compared to the fourth quarter 2013, driven by an increase in flight volume.
Total revenue per available seat mile ("RASM") for the fourth quarter 2014 decreased 5.1 percent compared to the fourth quarter 2013 on a capacity increase of 18.9 percent. The decrease was driven by a mix of lower passenger yields and a 1.4 point decline in load factor.
Total revenue per passenger flight segment ("PFS") for the fourth quarter 2014 decreased 3.7 percent year over year to $127.91, driven by a 6.1 percent decrease in ticket revenue per PFS and a 0.3 percent decrease in non-ticket revenue per PFS. During the fourth quarter, the Company transitioned its onboard catering to a third-party provider under a revenue share agreement. As a result of this change, in the fourth quarter 2014, the Company recorded lower non-ticket revenue and correspondingly lower costs than it would have otherwise.
Cost Performance
Total operating expenses for the fourth quarter 2014, excluding $4.5 million of special items 3 , increased 6.9 percent to $380.0 million. Including special items, total operating expenses increased 9.3 percent year over year to $384.5 million.
Spirit reported fourth quarter 2014 cost per available seat mile ("ASM") excluding special items and fuel ("Adjusted CASM ex-fuel") 3 of 5.61 cents, a decrease of 2.9 percent compared to the same period last year driven in part by lower distribution expense, maintenance expense, and aircraft rent per ASM. Distribution expense per ASM in the fourth quarter 2014 was lower compared to the same period last year primarily due to a one-time litigation settlement gain of approximately $2.9 million and a larger percentage of tickets being booked directly through spirit.com, the Company's lowest cost distribution channel. The decrease in maintenance expense per ASM year over year was driven by an expense reversal in the fourth quarter 2014 associated with an insurance claim, along with a one-time $750,000 insurance deductible expense in the fourth quarter 2013. The decrease in aircraft rent per ASM was driven by a change in the mix of leased (rent recorded under aircraft rent) and purchased (amortization recorded under depreciation and amortization) aircraft.
"I am extremely proud of the cost improvements our team continues to deliver. Full year 2014 Adjusted CASM ex-fuel decreased 0.5 percent despite 200 basis points of pressure from depreciation and amortization related to the amortization of heavy maintenance events, and increases in pilot costs as a result of FAR 117," said Ted Christie, Spirit's Chief Financial Officer. "Our team's dedication and commitment to improve our ultra-low cost structure positions us well to deliver a step function change in our cost structure for 2015 and to further increase our competitive cost advantage."
Fleet
In the fourth quarter 2014, Spirit took delivery of seven new A320 aircraft, ending the year with 65 aircraft in its fleet.
Full Year 2014 Highlights
- Maintained its commitment to offer low fares to its valued customers; average ticket revenue per PFS for the fourth quarter 2014 was $73.21 with total revenue per PFS of $127.91.
- Launched service in 24 new nonstop routes in 2014 and added Kansas City, Missouri as Spirit's 56th destination.
- Announced service in 26 new nonstop routes starting in 2015, including new routes to Cleveland, Ohio as Spirit's 57th destination.
- Improved on-time performance and maintained one of the highest completion factors in the industry.
- Named Value Airline of the Year by Air Transport World and the Most Fuel-efficient Airline by the International Council on Clean Transportation.
- Announced a $100 million share buyback authorization.
- Purchased its first A320 aircraft using on-balance sheet debt, and finished the year with four owned aircraft.
- Revealed a new logo, revitalized digital presence, including introducing fun videos and more, all designed to help customers learn the keys to saving on Spirit.
- Created over 600 new jobs, bringing our total number of team members to 4,338.
Conference Call/Webcast Detail
Spirit will conduct a conference call to discuss these results today, February 10, 2015, 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 (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 modern and fuel-efficient all-Airbus fleet, we operate more than 325 daily flights to 57 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 Income" 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, and Section 21E of the Securities Exchange Act of 1934, as amended, which represent the Company's expectations or beliefs concerning future events. 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 revenues, cost of operations, the delivery schedule of aircraft on order, and announced new service routes. All forward-looking statements are based upon information available to the Company at the time the statement is made. The Company has no intent, nor undertakes any obligation, to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law. 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, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K.
| SPIRIT AIRLINES, INC. | ||||||
| Statement of Operations | ||||||
| (in thousands, except per share data) | ||||||
| (unaudited) | ||||||
| Three Months Ended | Year Ended | |||||
| December 31, | Percent | December 31, | Percent | |||
| 2014 | 2013 | Change | 2014 | 2013 | Change | |
| Operating revenues: | ||||||
| Passenger | $ 271,569 | $ 246,503 | 10.2 | $ 1,144,972 | $ 986,018 | 16.1 |
| Non-ticket | 202,918 | 173,481 | 17.0 | 786,608 | 668,367 | 17.7 |
| Total operating revenues | 474,487 | 419,984 | 13.0 | 1,931,580 | 1,654,385 | 16.8 |
| Operating expenses: | ||||||
| Aircraft fuel | 138,002 | 139,843 | (1.3) | 612,909 | 551,746 | 11.1 |
| Salaries, wages and benefits | 81,212 | 69,392 | 17.0 | 313,988 | 262,150 | 19.8 |
| Aircraft rent | 51,209 | 44,616 | 14.8 | 195,827 | 169,737 | 15.4 |
| Landing fees and other rents | 27,533 | 22,096 | 24.6 | 105,115 | 83,604 | 25.7 |
| Distribution | 15,893 | 16,607 | (4.3) | 74,823 | 67,481 | 10.9 |
| Maintenance, materials and repairs | 17,515 | 16,253 | 7.8 | 73,956 | 60,143 | 23.0 |
| Depreciation and amortization | 13,168 | 9,544 | 38.0 | 46,971 | 31,947 | 47.0 |
| Other operating | 38,630 | 33,787 | 14.3 | 149,675 | 144,586 | 3.5 |
| Loss on disposal of assets | 1,350 | 99 | na | 3,008 | 525 | na |
| Special charges (credits) | — | (314) | na | 45 | 174 | na |
| Total operating expenses | 384,512 | 351,923 | 9.3 | 1,576,317 | 1,372,093 | 14.9 |
| Operating income | 89,975 | 68,061 | 32.2 | 355,263 | 282,292 | 25.8 |
| Other (income) expense: | ||||||
| Interest expense | 1,659 | 74 | na | 2,747 | 214 | na |
| Capitalized interest | (1,659) | (74) | na | (2,747) | (214) | na |
| Interest income | (101) | (93) | 8.6 | (336) | (401) | (16.2) |
| Other expense | 1,048 | 31 | na | 2,605 | 283 | na |
| Total other (income) expense | 947 | (62) | na | 2,269 | (118) | na |
| Income before income taxes | 89,028 | 68,123 | 30.7 | 352,994 | 282,410 | 25.0 |
| Provision for income taxes | 33,119 | 24,930 | 32.8 | 127,530 | 105,492 | 20.9 |
| Net income | $ 55,909 | $ 43,193 | 29.4 | $ 225,464 | $ 176,918 | 27.4 |
| Basic earnings per share | $ 0.77 | $ 0.59 | 30.5 | $ 3.10 | $ 2.44 | 27.0 |
| Diluted earnings per share | $ 0.76 | $ 0.59 | 28.8 | $ 3.08 | $ 2.42 | 27.3 |
| Weighted average shares, basic | 72,776 | 72,658 | 0.2 | 72,739 | 72,593 | 0.2 |
| Weighted average shares, diluted | 73,324 | 73,195 | 0.2 | 73,294 | 72,999 | 0.4 |
| SPIRIT AIRLINES, INC. | ||
| Balance Sheets | ||
| (unaudited, in thousands) | ||
| December 31, | December 31, | |
| 2014 | 2013 | |
| Assets | ||
| Current assets: | ||
| Cash and cash equivalents | $ 632,784 | $ 530,631 |
| Accounts receivable, net | 22,685 | 23,246 |
| Deferred income taxes | 9,643 | 16,243 |
| Prepaid expenses and other current assets | 66,029 | 78,955 |
| Total current assets | 731,141 | 649,075 |
| Property and equipment: | ||
| Flight equipment | 204,462 | 12,744 |
| Ground and other equipment | 57,012 | 48,090 |
| Less accumulated depreciation | (36,099) | (25,221) |
| 225,375 | 35,613 | |
| Deposits on flight equipment purchase contracts | 242,881 | 157,669 |
| Aircraft maintenance deposits | 213,147 | 161,484 |
| Deferred heavy maintenance, net | 123,108 | 125,288 |
| Other long-term assets | 67,329 | 51,636 |
| Total assets | $ 1,602,981 | $ 1,180,765 |
| Liabilities and shareholders' equity | ||
| Current liabilities: | ||
| Accounts payable | $ 13,402 | $ 23,104 |
| Air traffic liability | 188,870 | 167,627 |
| Current maturities of long-term debt | 10,431 | — |
| Other current liabilities | 152,921 | 145,262 |
| Total current liabilities | 365,624 | 335,993 |
| Long-term debt less current maturities | 135,817 | — |
| Long-term deferred income taxes | 76,010 | 48,916 |
| Deferred gains and other long-term liabilities | 22,455 | 26,739 |
| Shareholders' equity: | ||
| Common stock: Common stock, $0.0001 par value, 240,000,000 shares authorized at December 31, 2014 and 2013, respectively; 72,992,498 and 72,670,673 issued and 72,860,356 and 72,566,426 outstanding as of December 31, 2014 and 2013, respectively | 7 | 7 |
| Additional paid-in-capital | 526,173 | 515,331 |
| Treasury stock, at cost: 132,142 and 104,247 shares as of December 31, 2014 and 2013, respectively | (3,921) | (2,291) |
| Retained earnings | 481,534 | 256,070 |
| Accumulated other comprehensive income (loss) | (718) | — |
| Total shareholders' equity | 1,003,075 | 769,117 |
| Total liabilities and shareholders' equity | $ 1,602,981 | $ 1,180,765 |
| SPIRIT AIRLINES, INC. | ||
| Statement of Cash Flows | ||
| (unaudited, in thousands) | ||
| Year Ended December 31, | ||
| 2014 | 2013 | |
| Operating activities: | ||
| Net income | $ 225,464 | $ 176,918 |
| Adjustments to reconcile net income to net cash provided by operations: | ||
| Unrealized (gains) losses on open fuel hedge contracts | — | 265 |
| Non-cash restructuring credit charges, net | ||
| Equity-based compensation, net | 8,797 | 5,689 |
| Allowance for doubtful accounts (recoveries) | (45) | 143 |
| Amortization of deferred gains and losses and debt issuance costs | (185) | (558) |
| Depreciation and amortization | 46,971 | 31,947 |
| Deferred income tax | 34,118 | 12,047 |
| Loss on disposal of assets | 3,008 | 525 |
| Gain on slot sale | ||
| Capitalized interest | (2,747) | (214) |
| Changes in operating assets and liabilities: | ||
| Accounts receivable | 606 | (461) |
| Prepaid maintenance reserves | (31,925) | (24,058) |
| Long-term deposits and other assets | (48,382) | (65,654) |
| Accounts payable | (10,034) | (1,674) |
| Air traffic liability | 21,135 | 36,226 |
| Other liabilities | 13,731 | 24,235 |
| Net cash provided by operating activities | 260,512 | 195,376 |
| Investing activities: | ||
| Pre-delivery deposits for flight equipment, net of refunds | (115,802) | (70,288) |
| Purchase of property and equipment | (186,569) | (19,812) |
| Net cash used in investing activities | (302,371) | (90,100) |
| Financing activities: | ||
| Proceeds from issuance of long-term debt | 148,000 | — |
| Proceeds from stock options exercised | 174 | 852 |
| Payments on debt and capital lease obligations | (1,233) | — |
| Proceeds from sale and leaseback transactions | 7,200 | 6,900 |
| Payments to pre-IPO shareholders pursuant to tax receivable agreement | (5,643) | — |
| Excess tax benefits from equity-based compensation | 1,871 | 1,927 |
| Repurchase of common stock | (1,630) | (1,140) |
| Debt issuance costs | (4,727) | — |
| Net cash provided by financing activities | 144,012 | 8,539 |
| Net increase in cash and cash equivalents | 102,153 | 113,815 |
| Cash and cash equivalents at beginning of period | 530,631 | 416,816 |
| Cash and cash equivalents at end of period | $ 632,784 | $ 530,631 |
| Supplemental disclosures | ||
| Cash payments for: | ||
| Interest | $ 1,318 | $ 29 |
| Taxes | $ 89,104 | $ 85,705 |
| SPIRIT AIRLINES, INC. | |||
| Selected Operating Statistics (unaudited) | |||
| Three Months Ended December 31, | |||
| Operating Statistics | 2014 | 2013 | Change |
| Available seat miles (ASMs) (thousands) | 4,372,511 | 3,675,972 | 18.9% |
| Revenue passenger miles (RPMs) (thousands) | 3,707,271 | 3,167,376 | 17.0% |
| Load factor (%) | 84.8 | 86.2 | (1.4) pts |
| Passenger flight segments (thousands) | 3,709 | 3,161 | 17.3% |
| Block hours | 70,730 | 60,596 | 16.7% |
| Departures | 27,167 | 22,957 | 18.3% |
| Operating revenue per ASM (RASM) (cents) | 10.85 | 11.43 | (5.1)% |
| Average yield (cents) | 12.80 | 13.26 | (3.5)% |
| Average ticket revenue per passenger flight segment ($) | 73.21 | 77.98 | (6.1)% |
| Average non-ticket revenue per passenger flight segment ($) | 54.70 | 54.88 | (0.3)% |
| Total revenue per passenger flight segment ($) | 127.91 | 132.86 | (3.7)% |
| CASM (cents) | 8.79 | 9.57 | (8.2)% |
| Adjusted CASM (cents) (1) | 8.69 | 9.67 | (10.1)% |
| Adjusted CASM ex-fuel (cents) (2) | 5.61 | 5.78 | (2.9)% |
| Fuel gallons consumed (thousands) | 52,732 | 45,100 | 16.9% |
| Average economic fuel cost per gallon ($) | 2.56 | 3.17 | (19.2)% |
| Aircraft at end of period | 65 | 54 | 20.4% |
| Average daily aircraft utilization (hours) | 12.5 | 12.5 | —% |
| Average stage length (miles) | 983 | 998 | (1.5)% |
| Airports served in the period | 53 | 53 | —% |
| Year Ended December 31, | |||
| Operating Statistics | 2014 | 2013 | Change |
| Available seat miles (ASMs) (thousands) | 16,340,142 | 13,861,393 | 17.9% |
| Revenue passenger miles (RPMs) (thousands) | 14,159,860 | 12,001,088 | 18.0% |
| Load factor (%) | 86.7 | 86.6 | 0.1 pts |
| Passenger flight segments (thousands) | 14,294 | 12,414 | 15.1% |
| Block hours | 267,305 | 231,148 | 15.6% |
| Departures | 102,594 | 90,284 | 13.6% |
| Operating revenue per ASM (RASM) (cents) | 11.82 | 11.94 | (1.0)% |
| Average yield (cents) | 13.64 | 13.79 | (1.1)% |
| Average ticket revenue per passenger flight segment ($) | 80.11 | 79.43 | 0.9% |
| Average non-ticket revenue per passenger flight segment ($) | 55.03 | 53.84 | 2.2% |
| Total revenue per passenger flight segment ($) | 135.14 | 133.27 | 1.4% |
| CASM (cents) | 9.65 | 9.90 | (2.5)% |
| Adjusted CASM (cents) (1) | 9.55 | 9.89 | (3.4)% |
| Adjusted CASM ex-fuel (cents) (2) | 5.88 | 5.91 | (0.5)% |
| Fuel gallons consumed (thousands) | 200,498 | 171,931 | 16.6% |
| Average economic fuel cost per gallon ($) | 2.99 | 3.21 | (6.9)% |
| Average daily aircraft utilization (hours) | 12.7 | 12.7 | —% |
| Average stage length (miles) | 980 | 958 | 2.3% |
| (1) Excludes special items as described in the "Reconciliation of Adjusted Operating Expense to GAAP Operating Expense" table below. | |||
| (2) Excludes economic fuel expense and special items as described in the "Reconciliation of Adjusted Operating Expense to GAAP Operating Expense" 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 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.
| Reconciliation of Adjusted Operating Expense to GAAP Operating Expense | ||||
| (unaudited) | ||||
| Three Months Ended | Year Ended | |||
| December 31, | December 31, | |||
| (in thousands, except CASM data in cents) | 2014 | 2013 | 2014 | 2013 |
| Operating special items include the following: | ||||
| Prior years' additional federal excise tax | $ — | $ — | $ 9,278 | $ — |
| Unrealized (gains) and losses arising from mark-to-market adjustments to outstanding fuel derivatives | — | (3,224) | — | 265 |
| Loss on disposal of assets | 1,350 | 99 | 3,008 | 525 |
| Special charges (credits) | — | (314) | 45 | 174 |
| Expense recognized related to premiums paid on fuel option contracts | 3,963 | — | 4,876 | — |
| Fuel option premium realized in the period | (845) | — | (995) | — |
| Total special items: | $ 4,468 | $ (3,439) | $ 16,212 | $ 964 |
| Total operating expenses, as reported | $ 384,512 | $ 351,923 | $ 1,576,317 | $ 1,372,093 |
| Less special items (1) | 4,468 | (3,439) | 16,212 | 964 |
| Adjusted operating expenses, non-GAAP (2) | 380,044 | 355,362 | 1,560,105 | 1,371,129 |
| Less: Economic fuel expense | 134,884 | 143,067 | 599,750 | 551,481 |
| Adjusted operating expenses excluding fuel, non-GAAP (3) | $ 245,160 | $ 212,295 | $ 960,355 | $ 819,648 |
| Available seat miles | 4,372,511 | 3,675,972 | 16,340,142 | 13,861,393 |
| CASM (cents) | 8.79 | 9.57 | 9.65 | 9.90 |
| Adjusted CASM (cents) (2) | 8.69 | 9.67 | 9.55 | 9.89 |
| Adjusted CASM ex-fuel (cents) (3) | 5.61 | 5.78 | 5.88 | 5.91 |
| (1) Special items include additional federal excise tax on a minority of fuel volume for the period beginning July 1, 2009 through December 31, 2013, unrealized gains and losses arising from mark-to-market adjustments to outstanding fuel derivatives, loss on disposal of assets, special charges (credits), premium expense recognized related to fuel option contracts, and realized fuel option premium expense related to options settling in the period. | ||||
| (2) Excludes special items as referred to above. | ||||
| (3) Excludes economic fuel expense as described in the "Reconciliation of Economic Fuel Expense to GAAP Fuel Expense" table below and special items as referred to above. | ||||
| Reconciliation of Adjusted Net Income to GAAP Net Income | ||||
| (unaudited) | ||||
| Three Months Ended | Year Ended | |||
| December 31, | December 31, | |||
| (in thousands, except per share data) | 2014 | 2013 | 2014 | 2013 |
| Net income, as reported | $ 55,909 | $ 43,193 | $ 225,464 | $ 176,918 |
| Add: Provision for income taxes | 33,119 | 24,930 | 127,530 | 105,492 |
| Income before income taxes, as reported | 89,028 | 68,123 | 352,994 | 282,410 |
| Pre-tax margin, GAAP | 18.8% | 16.2% | 18.3% | 17.1% |
| Add special items (1) | 4,468 | (3,439) | 16,212 | 964 |
| Add: Non-operating special charges (2) | — | — | 1,388 | — |
| Income before income taxes, non-GAAP (3) | 93,496 | 64,684 | 370,594 | 283,374 |
| Pre-tax margin, non-GAAP (3) | 19.7% | 15.4% | 19.2% | 17.1% |
| Provision for income taxes (4) | 34,781 | 23,671 | 133,889 | 105,852 |
| Adjusted net income, non-GAAP (3) | $ 58,715 | $ 41,013 | $ 236,705 | $ 177,522 |
| Weighted average shares, diluted | 73,324 | 73,195 | 73,294 | 72,999 |
| Adjusted net income per share, diluted | $0.80 | $0.56 | $3.23 | $2.43 |
| (1) See special items as described in the "Reconciliation of Adjusted Operating Expense to GAAP Operating Expense" table above for more details. | ||||
| (2) Non-operating special charges relate to the settlement paid to the Pre-IPO Stockholders in excess of the liability the Company had previously estimated related to the Company's Tax Receivable Agreement. | ||||
| (3) Excludes special items as described in the "Reconciliation of Adjusted Operating Expense to GAAP Operating Expense" table above and non-operating special charges. | ||||
| (4) Assumes same marginal tax rate as is applicable to GAAP net income. | ||||
| Reconciliation of Adjusted Operating Income to GAAP Operating Income | ||||
| (unaudited) | ||||
| Three Months Ended | Year Ended | |||
| December 31, | December 31, | |||
| (in thousands) | 2014 | 2013 | 2014 | 2013 |
| Operating income, as reported | $ 89,975 | $ 68,061 | $ 355,263 | $ 282,292 |
| Operating margin, GAAP | 19.0% | 16.2% | 18.4% | 17.1% |
| Add special items (1) | 4,468 | (3,439) | 16,212 | 964 |
| Operating income, non-GAAP (2) | $ 94,443 | $ 64,622 | $ 371,475 | $ 283,256 |
| Operating margin (2) | 19.9% | 15.4% | 19.2% | 17.1% |
| (1) See special items as described in the "Reconciliation of Adjusted Operating Expense to GAAP Operating Expense" table above for more details. | ||||
| (2) Excludes special items as described in the "Reconciliation of Adjusted Operating Expense to GAAP Operating Expense" table above. | ||||
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 | Year Ended | |||
| December 31, | December 31, | |||
| (in thousands, except per gallon data) | 2014 | 2013 | 2014 | 2013 |
| Fuel Expense | ||||
| Aircraft fuel, as reported | $ 138,002 | $ 139,843 | $ 612,909 | $ 551,746 |
| Less: | ||||
| Prior years' additional federal excise tax | — | — | 9,278 | — |
| Impact on fuel expense from unrealized (gains) and losses arising from mark-to-market adjustments to our outstanding fuel derivatives | — | (3,224) | — | 265 |
| Expense recognized related to premiums paid on fuel option contracts | 3,963 | — | 4,876 | — |
| Add: Fuel option premium realized in the period | 845 | — | 995 | — |
| Economic fuel expense, non-GAAP | $ 134,884 | $ 143,067 | $ 599,750 | $ 551,481 |
| Fuel gallons consumed | 52,732 | 45,100 | 200,498 | 171,931 |
| Economic fuel cost per gallon, non-GAAP | $ 2.56 | $ 3.17 | $ 2.99 | $ 3.21 |
| Calculation of Return on Invested Capital | |
| (unaudited) | |
| Twelve Months Ended | |
| (in thousands) | December 31, 2014 |
| Operating Income | $ 355,263 |
| Add special items (1) | 16,212 |
| Adjustment for aircraft rent | 195,827 |
| Adjusted Operating Income (2) | 567,302 |
| Tax (36.1%) (3) | 204,796 |
| Adjusted Operating Income, after-tax | 362,506 |
| Invested Capital | |
| Total debt | $ 146,248 |
| Book equity | 1,003,075 |
| Less: Unrestricted cash | 632,784 |
| Add: Capitalized aircraft operating leases (7x Aircraft Rent) | 1,370,789 |
| Total Invested Capital | 1,887,328 |
| Return on Invested Capital (ROIC), pre-tax | 30.1% |
| Return on Invested Capital (ROIC), after-tax | 19.2% |
| (1) See special items as described in the "Reconciliation of Adjusted Operating Expense to GAAP Operating Expense" table above for more details. | |
| (2) Excludes special items as described in the "Reconciliation of Adjusted Operating Expense to GAAP Operating Expense" table above. | |
| (3) Assumes same marginal tax rate as is applicable to GAAP net income for the twelve months ended December 31, 2014. | |
Investor Relations Contact: DeAnne Gabel (954) 447-7920 Media Contact: Paul Berry (954) 628-4827
