UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): June 29, 2011

 

 

SPIRIT AIRLINES, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

(State or other jurisdiction of incorporation)

 

001-35186   38-1747023
(Commission File Number)   (IRS Employer Identification Number)

2800 Executive Way

Miramar, Florida 33025

(Address of principal executive offices, including Zip Code)

(954) 447-7920

(Registrant’s telephone number, including area code)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 2.02. Results of Operations and Financial Condition.

 

Item 7.01. Regulation FD Disclosure.

The information in this report furnished pursuant to Items 2.02 and 7.01 shall not be deemed “filed” for the purposes of Section 18 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section. It may only be incorporated by reference in another filing under the Exchange Act or the Securities Act of 1933, as amended, if such subsequent filing specifically references the information furnished pursuant to Items 2.02 and 7.01 of this report.

Spirit Airlines, Inc. (the “Company” or “Spirit”) is providing below the following supplemental financial information to facilitate further analysis of its financial results:

 

   

Statement of operations data, under generally accepted accounting principles (“GAAP”), for each of the four quarters of the year ended December 31, 2010 and for the quarter ended March 31, 2011. This data is unchanged from that presented in the final prospectus, dated May 25, 2011 (the “Final Prospectus”), filed with the Securities and Exchange Commission in connection with our initial public offering (“IPO”);

 

   

Operating expense and net income data for the same periods referenced above, adjusted to exclude the impact of certain special items identified in the presentation;

 

   

Operating expense and net income data for the same periods referenced above, adjusted to exclude the impact of certain special items, and further adjusted to give pro forma effect to our IPO as if completed on January 1, 2010;

 

   

Selected operating metrics for the same periods referenced above, adjusted to exclude the impact of certain special items, and further adjusted to give pro forma effect to our IPO as if completed on January 1, 2010; and

 

   

Guidance regarding management’s current expectations regarding weighted average shares outstanding, effective income tax rates and capacity for the balance of 2011.

This data should be read in conjunction with our historical audited financial statements, Management’s Discussion and Analysis of Financial Condition and Results of Operations and other information included in the Final Prospectus, as well as the information provided under the caption “Forward Looking Statements” below. A copy of the Final Prospectus may be obtained by accessing the Edgar database maintained by the Securities and Exchange Commission at www.sec.gov.

The financial data provided herein that reflects adjustments from historical financial data prepared under GAAP, including adjustments for special items and for pro forma calculations assuming our IPO had been completed as of an earlier date than it was actually completed, are non-GAAP financial measures included as supplemental disclosures because we believe they are useful indicators of our operating performance for comparative purposes. These non-GAAP financial measures are well recognized performance measurements in the airline industry that are frequently used by investors, securities analysts and other interested parties in comparing the operating performance of

 

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companies in our industry. These non-GAAP financial measures have limitations as an analytical tool. Because of these limitations, determinations of our operating performance adjusted for special items and pro forma for our IPO should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We have also provided reconciliations of these non-GAAP financial measures to the appropriate GAAP financial measures.

 

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Statement of Operations Data- GAAP (1)

(Unaudited)

 

     1Q10     2Q10     3Q10     4Q10     2010     1Q11  
     (in thousands except per share data)  

Operating Revenue:

            

Passenger

   $ 136,909      $ 126,372      $ 138,232      $ 136,456      $ 537,969      $ 153,280   

Non-ticket

     47,142        50,987        65,423        79,744        243,296        79,382   
                                                

Total operating revenue

     184,051        177,359        203,655        216,200        781,265        232,662   

Operating Expense:

            

Aircraft fuel

     53,826        60,780        63,553        70,047        248,206        80,912   

Salaries, wages and benefits

     36,064        38,720        39,935        41,724        156,443        43,193   

Aircraft rent

     22,576        24,873        25,487        28,409        101,345        27,708   

Landing fees and other rents

     10,744        11,868        13,039        12,467        48,118        11,655   

Distribution

     9,288        10,227        10,906        10,758        41,179        11,932   

Maintenance, material and repairs

     6,692        5,714        8,238        7,545        28,189        8,058   

Depreciation and amortization

     1,370        1,430        1,518        1,302        5,620        1,546   

Other operating

     19,338        21,985        19,783        21,488        82,594        20,733   

Loss on disposal of assets

     49        28        —          —          77        —     

Restructuring

     (20     (57     214        484        621        81   
                                                

Total operating expense

     159,927        175,568        182,673        194,224        712,392        205,818   

Operating income

     24,124        1,791        20,982        21,976        68,873        26,844   

Other expense (income)

            

Interest expense

     12,772        12,667        12,568        12,306        50,313        14,286   

Capitalized interest

     (237     (293     (397     (564     (1,491     (1,037

Interest income

     (60     (99     (83     (86     (328     (86

Gain on extinguishment of debt

     —            —          —          —          —     

Other expense

     34        45        23        92        194        48   
                                                

Total other expense

     12,509        12,320        12,111        11,748        48,688        13,211   

Income/(loss) before income taxes

     11,615        (10,529     8,871        10,228        20,185        13,633   

Provision/(benefit) for income taxes

     339        (463     (52,869     697        (52,296     5,750   

Net income/(loss)

   $ 11,276      $ (10,066   $ 61,740      $ 9,531      $ 72,481      $ 7,883   
                                                

Weighted average shares, basic

     26,057        26,164        26,241        26,270        26,184        26,348   

Weighted average shares, diluted

     26,761        26,164        26,525        26,678        26,690        26,689   

Earnings/(loss) per share, basic

   $ 0.43      $ (0.38   $ 2.35      $ 0.36      $ 2.77      $ 0.30   

Earnings/(loss) per share, diluted

   $ 0.42      $ (0.38   $ 2.33      $ 0.36      $ 2.72      $ 0.30   

 

(1) The data in this table is as presented in the Final Prospectus.

 

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Reconciliation of Operating Expenses and Net Income as Adjusted for Special Items

(Unaudited)

 

     1Q10     2Q10     3Q10     4Q10     FY10     1Q11  
     (in thousands except per share data)  

Total operating revenue

   $ 184,051      $ 177,359      $ 203,655      $ 216,200      $ 781,265      $ 232,662   

Total operating expense

     159,927        175,568        182,673        194,224        712,392        205,818   

Less Special Items:

            

Restructuring expense (credit) (1)

     (20     (57     214        484        621        81   

Unrealized mark-to-market (gains) losses (2)

     (628     2,294        (2,594     (1,137     (2,065     (546

Loss on disposal of assets

     49        28        —          —          77        —     
                                                

Adjusted total operating expense

     160,526        173,303        185,053        194,877        713,759        206,283   

Adjusted operating income

     23,525        4,056        18,602        21,323        67,506        26,379   

Total other expense

     12,509        12,320        12,111        11,748        48,688        13,211   

Adjusted income/(loss) before income taxes

     11,016        (8,264     6,491        9,575        18,818        13,168   

Provision/(benefit) for income taxes (3)

     322        (363     366        653        978        5,554   

Adjusted net income/(loss)

   $ 10,694      $ (7,901   $ 6,125      $ 8,922      $ 17,840      $ 7,614   
                                                

Adjusted earnings/(loss) per share, basic

   $ 0.41      $ (0.30   $ 0.23      $ 0.34      $ 0.68      $ 0.29   

Adjusted earnings/(loss) per share, diluted

   $ 0.40      $ (0.30   $ 0.23      $ 0.33      $ 0.67      $ 0.29   

 

(1) Restructuring charges include: (i) for 2009 and 2010, amounts relating to the sale of previously-expensed MD-80 parts and (ii) for 2010 and for the three months ended March 31, 2011, amounts relating to exit facility costs associated with moving our Detroit, Michigan maintenance operations to Fort Lauderdale, Florida.
(2) Unrealized mark-to-market gains and losses is comprised of non-cash adjustments to aircraft fuel expenses.
(3) Excludes a $(52.9) million net tax benefit in the third quarter of 2010 primarily due to the release of a valuation allowance resulting in a deferred tax benefit of $(53.5) million in that quarter.

Note: Additional detail regarding the foregoing adjustments is available on page 77 of the Final Prospectus.

 

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Reconciliation of Pro Forma Adjustments (1)

(Unaudited)

 

     1Q10     2Q10     3Q10     4Q10     FY10     1Q11  
     (in thousands except per share data)  

Adjusted operating income (2)

   $ 23,525      $ 4,056      $ 18,602      $ 21,323      $ 67,506      $ 26,379   

Total other expense

     12,509        12,320        12,111        11,748        48,688        13,211   

Less:

            

Interest expense

     12,772        12,667        12,568        12,306        50,313        14,286   
                                                

Pro forma total other income

     (263     (347     (457     (558     (1,625     (1,075

Pro forma adjusted Income before income taxes

     23,788        4,403        19,059        21,881        69,131        27,454   

Provision for income taxes

     8,875        1,643        7,111        8,164        25,793        10,512   

Pro forma adjusted net income

   $ 14,913      $ 2,760      $ 11,948      $ 13,717      $ 43,338      $ 16,942   
                                                

Pro forma adjusted:

            

Weighted average shares, basic

     71,735        71,844        71,920        71,950        71,155        71,320   

Weighted average shares, diluted

     72,440        72,473        72,205        72,358        71,662        71,661   

Earnings per share, basic

   $ 0.21      $ 0.04      $ 0.17      $ 0.19      $ 0.61      $ 0.24   

Earnings per share, diluted

   $ 0.21      $ 0.04      $ 0.17      $ 0.19      $ 0.60      $ 0.24   

 

(1) Pro forma earnings is presented to give effect to the following transactions as if they occurred as of January 1, 2010: (i) the elimination of all of our outstanding indebtedness and preferred stock, and the termination of any outstanding letter of credit facility supporting collateral obligations due to our credit card processors through (x) the application of a portion of the net proceeds from the sale of shares of common stock by us in our IPO, (y) the exchange of any notes not repaid with net proceeds from the IPO for shares of common stock and (z) the exchange of any shares of preferred stock not redeemed with net proceeds from the IPO for shares of common stock; (ii) adding back to net income the interest expense recorded in our statement of operations related to the indebtedness and preferred stock assumed to be retired ($50.3 million for 2010 and $14.3 million for the three months ended March 31, 2011); (iii) the issuance of shares of common stock in the IPO and in connection with the related recapitalization transactions; and (iv) the estimated tax impact resulting from the above transactions.
(2) Excludes special items as described in the prior table.

 

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Selected Operating Metrics

(Unaudited)

 

     1Q10      2Q10      3Q10      4Q10      FY10      1Q11  

Available Seat Miles (000’s)

     1,820,131         1,905,053         2,194,099         2,200,640         8,119,923         2,200,097   

Unit costs (cost per ASM, “CASM”) (cents)

                 

CASM

     8.79         9.22         8.33         8.83         8.77         9.35   

Adjusted CASM (1)(3)

     8.82         9.10         8.43         8.86         8.79         9.38   

Aircraft fuel per ASM (2)(3)

     2.99         3.07         3.01         3.24         3.08         3.71   

Adjusted CASM excluding fuel

     5.83         6.03         5.42         5.62         5.71         5.67   

 

(1) Excludes special items as described in the prior tables.
(2) Includes fuel taxes and into plane fuel costs; excludes unrealized mark-to-market gains and losses.
(3) Pro forma adjustments for the IPO do not affect this calculation.

 

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Selected Financial Guidance

 

                       Pro forma  
Estimated weighted average shares (000’s)          2Q11E     FY11E     2Q11E     FY11E  

Basic

       41,493        53,200        72,114        72,097   

Diluted

       42,139        53,845        72,759        72,743   
Estimated tax rates          2Q11E     FY11E              

Estimated tax rate*

       35.3     37.9    

* Second quarter tax rate is not indicative of the tax rate for the remainder of the year.

  

Capacity - Available Seat Miles (ASMs)    1Q11A     2Q11E     3Q11E     4Q11E     FY11E  

ASMs Year-over-Year % Change

     20.9     27.5     11.7     6.7     16.1

Forward-Looking Statements

This report includes forward-looking statements, including in particular as provided under the caption “Selected Financial Guidance.” We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting the financial condition of our business. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made and/or management’s belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements, including the information under the caption “Risk Factors” included in the Final Prospectus. Important factors that could cause such differences include, but are not limited to:

 

   

the competitive environment in our industry;

 

   

our ability to keep cost low;

 

   

changes in our fuel cost;

 

   

the impact of worldwide economic conditions, including the impact of the economic recession on customer travel behavior;

 

   

actual or threatened terrorist attacks, global instability and potential U.S. military actions or activities;

 

   

ability to generate non-ticket revenues;

 

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restriction on third-party membership programs;

 

   

external conditions, including air traffic congestion, weather and outbreak of disease;

 

   

air travel substitutes;

 

   

labor disputes, employee strikes and other labor-related disruptions, including in connection with our current negotiations with the union representing our flight attendants;

 

   

ability to attract and retain qualified personnel;

 

   

loss of key personnel;

 

   

aircraft-related fixed obligations;

 

   

dependence on cash balances and operating cash flows;

 

   

ability to hedge fuel requirements;

 

   

our aircraft utilization rate;

 

   

maintenance costs;

 

   

our reliance on automated systems and the risks associated with changes made to those systems;

 

   

use of personal data;

 

   

lack of marketing alliances;

 

   

government regulation;

 

   

our ability to fulfill growth strategy;

 

   

operational disruptions;

 

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our liquidity;

 

   

the concentration of our revenue from South Florida;

 

   

our reliance on third-party vendors and partners;

 

   

our reliance on a single fuel provider;

 

   

an aircraft accident or incident;

 

   

our aircraft and engine suppliers;

 

   

changes in the Caribbean and Latin America markets;

 

   

insurance costs;

 

   

environmental regulations; and

 

   

other risk factors included under “Risk Factors” in the Final Prospectus.

In addition, in this report, the words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “predict,” “potential” and similar expressions, as they relate to our company, our business and our management, are intended to identify forward-looking statements. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this report may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements.

All forward-looking statements attributable to us are expressly qualified in their entirety by the cautionary statements set forth above. Forward-looking statements speak only as of the date of this report. You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable law. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

* * * * * * * * *

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: June 29, 2011   SPIRIT AIRLINES, INC.
  By:  

/s/ Thomas Canfield

  Name:   Thomas Canfield
  Title:   Senior Vice President and General Counsel

 

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