Virgin America financials.

[bri5150]

A press release was sent out with 4q and 1q numbers. 4q was operating profit of $5 million and 1q was operating loss of $15 million. 4q was the first time VX has made an operating profit in that quarter, and 1q was the lowest operating loss in the history of the company for that quarter. There was a $75 million infusion from investors and the debt has been restructured at a lower interest rate. With all this, the expectation is an operating profit for 2013 and net profit for the second half of 2013. More news tomorrow it sounds like. Something has to be up because they never release quarterly numbers this early (q1 already released).

 

[Flyer1015]

VIRGIN AMERICA REPORTS FOURTH QUARTER 2012 AND FIRST QUARTER 2013 FINANCIAL RESULTS ​

Airline Reports $5 Million in Operating Profit in Q4 2012, Industry Leading 18 % RASM Growth in Q1 2013;​

Airline Improves Balance Sheet and Raises Additional Financing from Investors​

San Francisco ?May 13, 2013 ? Virgin America today reports its financial results for the fourth quarter of 2012, full-year 2012, and the first quarter of 2013. The airline reported its first-ever fourth quarter operating profit in the quarter ending in December 2012, with a 4.4 point improvement in operating margin over the fourth quarter of 2011. In addition, Virgin America improved financial results in the first quarter of 2013, significantly narrowing its operating loss from the same period the year prior. For the first quarter of 2013, Virgin America reported a 69 percent year-over-year improvement in operating results compared with the first quarter of 2012, driven by an 18 percent growth in RASM.
Highlights of the two quarters are as follows:
Fourth Quarter 2012 Financial Highlights
? Virgin America achieved its first-ever fourth quarter operating profit with $5.1 million of operating income, an improvement of $13.2 million, compared with the fourth quarter of 2011.
? Fourth quarter revenue per available seat mile (RASM) increased by 9 percent, the highest in the domestic industry.
? Available seat miles (ASMs) increased by 16 percent, primarily the result of increases to the fleet size early in 2012.
? The airline recorded operating revenues of $350.4 million in the fourth quarter, a year-over-year increase of 27 percent.
? Its average fare increased 14 percent year-over-year, indicative of growing awareness and guest loyalty that Virgin America has built in its markets through its industry-leading product and service.
? Cost per available seat mile (CASM) excluding fuel increased by 6 percent compared to the year earlier quarter, largely a result of the airline?s change in strategy to reduce aircraft utilization and eliminate seasonally weaker frequencies.
? The average fuel cost per gallon during the quarter was $3.00, a decline of 6 percent year-over-year.
? EBITDAR increased to $65.1 million in the fourth quarter, a year-over-year improvement of 54 percent.
? The airline held $76 million in unrestricted cash as of December 31, 2012.
First Quarter 2013 Financial Highlights
? Virgin America reduced its operating loss by $33.6 million or 69 percent year-over-year, posting a modest operating loss of $15 million.
? The Company significantly outpaced the entire U.S. airline industry with year-over-year RASM growth of 18 percent.
? ASMs decreased by 4 percent year-over-year, as the airline focused on improving its schedule for business travelers and eliminating seasonally weak frequencies during the winter.
? Its average fare increased by 19 percent over the year earlier quarter, continuing the trend demonstrated in the fourth quarter of 2012 of increased demand by guests for Virgin America?s product.
? Operating revenues were $301.3 million, an increase of 13 percent from the first quarter of 2012.
? CASM excluding fuel increased by 8 percent year-over-year, primarily due to reduced utilization of the fleet.
? EBITDAR increased seven fold to $44.7 million from $6.5 million in the same period a year-ago.
? Unrestricted cash was $58 million as of March 31, 2013.
?We?re pleased with our first-ever fourth quarter operating profit and the progress we have seen in the first quarter ? traditionally the most challenging period for our industry,? said David Cush, Virgin America?s President and CEO. ?Our improved financial performance reflects the changes we made last year to optimize our winter network schedule as we slow our growth. And it also reflects the growing guest awareness and loyalty we?ve seen as our network has grown. We?ve always said that once people fly us, they stick with us ? and show a preference for our service. Our industry-leading RASM growth for the past six months is a testament to that and to the work of a team that has truly delivered on the promise of creating the best guest experience in the skies.?
The airline?s full-year 2012 operating loss was $31.7 million. The Company?s operating margin for 2012 improved by 0.2 points, to (2.4) percent, compared with 2011. Year-over-year, revenue grew by 29 percent in 2012, to $1.3 billion, on a 27 percent increase in capacity. Virgin America added six Airbus A320 family aircraft to its fleet during 2012, ending the year with an operating fleet of 52 aircraft. The airline ended 2012 with $76 million in unrestricted cash.
Virgin America completed a major two-year growth phase during 2012, having taken delivery of 25 aircraft between the second quarter of 2010 and the second quarter of 2012, almost doubling the size of the fleet. With this major growth phase largely behind the Company, Virgin America is now experiencing improved revenue performance across its network. Virgin America took delivery of one aircraft in the first quarter of 2013, increasing its total operating fleet to 53 aircraft. The Company does not expect to increase its fleet size again until 2015, when aircraft on order from Airbus are scheduled for delivery. The Company expects continued improved year-over-year financial performance throughout the remainder of 2013 as a result of the slower growth strategy.
In addition to slowing growth by deferring new aircraft deliveries, Virgin America made targeted changes to its network schedule in the first quarter to optimize seasonal flying and better match supply with winter demand. These changes resulted in a 17 percent reduction in the average daily utilization of the fleet to 10.3 hours per aircraft per day. While the reduced schedule was a major driver behind the 18 percent improvement in RASM, it also contributed to an 8 percent increase in CASM excluding fuel costs. The airline ended the quarter with $58 million in unrestricted cash.

 

[Flyer1015]

Balance Sheet Improvements

The airline also announces today that it has recently reached agreements with investors to modify the interest rate on a large portion of existing debt and to eliminate certain indebtedness to restructure its balance sheet. The restructuring eliminated $290 million of debt as of December 31, 2012, and approximately $20 million of accrued interest recorded in the first quarter of 2013. If this restructuring had been in place on January 1, 2013, Virgin America?s first quarter net loss would have been reduced by approximately $20 million. These changes with investors are a first step toward preparing the Company for access to the public markets at a future date.
In addition, the Company closed an additional $75 million debt financing that was fully funded at the closing. This additional liquidity will further strengthen Virgin America?s improving financial position.
As a result of these balance sheet and liquidity initiatives, the Company expects its interest expense for the second half of 2013 to be approximately $20 million, or roughly one third of the interest expense recorded in the second half of 2012.
?With the strong improvement in first quarter 2013 financial performance, we are on track for a significant operating profit for the full year,? said David Cush. ?The agreements reached with our investors enhance the improvements we are seeing in our business, and are a first step in modifying the Company?s capital structure to one more in line with public companies. With this solid improvement to our capital structure, we now expect to achieve a net profit in the second half of 2013, and are well positioned for sustained healthy financial performance in 2014 and beyond.?
Virgin America continued to drive significant growth in 2012: expanding its fleet from 46 aircraft in January 2012 to 52 aircraft in December 2012 (in March 2013, the carrier took delivery of its 53rd aircraft, which came into service in April); achieving major carrier status as defined by the U.S. Department of Transportation (DOT); launching service to Philadelphia, Portland, Ore., and Washington D.C.?s Reagan National Airport; and in December announcing plans to inaugurate Newark service from both San Francisco and Los Angeles in 2013. Since its 2007 launch, the airline has created 2,600 new jobs, expanded to more than 20 cities, signed up 2.6 million Elevate? frequent flyer program members and swept the reader-based travel awards including ?Best Domestic Airline? in Cond? Nast Traveler?s Readers? Choice Awards and Travel + Leisure?s World?s Best Awards. As one of the few growing U.S. airlines, Virgin America grew by 283 teammates in 2012.


Operational Highlights
? In 2012 the Virgin America achieved an 83.5 percent cumulative A-14 on-time ranking, compared to the industry average of 81.9 percent.

? The airline?s baggage handling rate for 2012 was 0.87 mishandled baggage reports per 1,000 guests, placing it first among all U.S. carriers reporting to the DOT for baggage reliability.

• Virgin America took the top honors for the fifth consecutive year as ?Best Domestic Airline? in the prestigious Travel + Leisure World?s Best Awards readers? survey as well as the Cond? Nast Traveler?s 2012 Readers? Choice Awards.
• Virgin America was named the best airline in 2012 in the Airline Quality Rating, a joint research project conducted annually by faculty at Wichita State University and Purdue University that looks at airlines? on-time performance and baggage handling, involuntary denied boarding and the customer complaint rates as reported by the DOT.

Key milestones achieved in the fourth quarter of 2012 include:

• The airline added three new interline partners.
• The airline introduced codeshare and agreed upon frequent flyer partnerships with Singapore Airlines and Hawaiian Airlines.
• In December, the airline announced plans to begin flying to Newark Liberty International Airport from both SFO and LAX.
• In December, the airline opened its first ever domestic lounge, the Virgin America Loft at LAX.
• In December, the airline entered into a codeshare agreement with Singapore Airlines.
• In December, the airline inaugurated the only nonstop flight offered from the New York City area (JFK) to Palm Springs with new winter seasonal service between the two cities.

Key milestones achieved in the first quarter of 2013 include:
? In January, the airline announced plans for new daily service between Los Angeles and Las Vegas.
? In February, the airline announced plans for new daily service betweenSan Jose and Los Angeles. Also in February, the airline announced plans for new daily service between San Francisco and Austin, Texas and new summer seasonal service between San Francisco and Anchorage, Alaska.
? In March, the airline announced the appointment of industry veteran Steve Forte as its chief operating officer.
Virgin America currently flies to San Francisco, Los Angeles, New York, Newark (began April 21, 2013), Washington D.C. (IAD and DCA), Las Vegas, San Diego, Seattle, Boston, Fort Lauderdale, Orlando, Dallas-Fort Worth, Los Cabos, Cancun, Chicago, Puerto Vallarta, Palm Springs (seasonal), Philadelphia, and Portland. This month, the carrier launched service between LAX and Norman Y. Mineta San Jose International Airport (SJC). Later this month, the airline will inaugurate new daily service between San Francisco and Austin-Bergstrom International Airport (AUS). The airline will begin summer seasonal service to Ted Stevens Anchorage International Airport (ANC) in June.
Although a privately held company, Virgin America is announcing these financial results in advance of the DOT quarterly reports.
Photos of Virgin America?s unique aircraft:http://www.virginamerica.com/about/airline-photos/virgin-america-pictures.html
Broadcast quality video b-roll can also be downloaded at:http://www.virginamerica.com/about/airline-company.html

 

[Grandpa +65]

Good Job well done Guys.

 

[Andy]

Oh man, that was a lot worse than I was expecting. Underneath the pretty numbers, the cash burn rate was through the roof.

Unrestricted cash at end of 3Q2012: $75 million
+ Additional $75 million in debt financing
- Unrestricted cash at end of 1Q2013: $58 million

= $92 million cash burn rate for combined 4Q2012 and 1Q2013.

You guys have enough unrestricted cash to limp through the summer months but you're going to need more money to get through Q4 this year. I'm not seeing an IPO in VX's future.

 

[tzskipper]

Oh man, that was a lot worse than I was expecting. Underneath the pretty numbers, the cash burn rate was through the roof.

Unrestricted cash at end of 3Q2012: $75 million
+ Additional $75 million in debt financing
- Unrestricted cash at end of 1Q2013: $58 million

= $92 million cash burn rate for combined 4Q2012 and 1Q2013.

You guys have enough unrestricted cash to limp through the summer months but you're going to need more money to get through Q4 this year. I'm not seeing an IPO in VX's future.

Good morning Andy,

Did you assume that the restructuring and new financing closed in Q1, or did you read somewhere that it had? From the release I read, it was not clear.

S

 

[Flyby1206]

Congrats to VX, I hope things continue in this direction.

Related article:
http://www.thestreet.com/story/1192...sses-and-sees-ipo.html?puc=yahoo&cm_ven=YAHOO

Cush told AP the carrier is reducing costs by suspending aircraft deliveries until 2015 and by a recent deal to eliminate $290 million in debt, a majority of it owed to Virgin Group, Cush said. The debt was converted to "conditional equity," he said.
A share offering would be a way for Virgin Group and other shareholders to recoup some of their investments, Cush told the AP. But aviation consultant Robert Mann said that while the airline may be hopeful, "it's not clear that a recapitalization, interest rate reduction and allowing the network to 'mature' will reverse the losses, which are a function of a lack of network scope and appeal to large volume corporate travel buyers, in a space dominated by three network/alliance competitors.
"Slowing unprofitable growth helps, but also hurts, in the sense that the network continues to lack scope, and many markets lack sufficient frequency," Mann said. "Consolidation has to be a hoped-for end game."

Any thoughts from current VXers what the "end-game" would be for the company?

 

[Caddaddy]

Buried in that press release was a $31.7 million loss for 2012.

 

[Andy]

Good morning Andy,

Did you assume that the restructuring and new financing closed in Q1, or did you read somewhere that it had? From the release I read, it was not clear.

S

Valid point; I assumed that the $75 million financing was in either Q4 or Q1. If it was in Q2, the Q4 and Q1 numbers are great.

If the money was received in Q2, the cash burn was only $17 million for the two quarters which would be a great turnaround from the past.

 

[bri5150]

Buried in that press release was a $31.7 million loss for 2012.

The problem was 1q2012. I wasnt here, but there was a horribly botched IT transition on top of our worst quarter of the year. Apparently that was rectified by our numbers in 2013.

 

[Grandpa +65]

Virgin America posts 2012 loss; eyes possible IPO
The Associated Press9:41 a.m. EDT May 13, 2013

Virgin America said it's close to turning around its financial losses and could be ready for an initial public offering as early as next year.
The airline reported another annual loss on Monday, but it's aiming for a profit in the second half of the year after reworking debt it owes to Sir Richard Branson's Virgin Group and others. The improved finances should be one step on its way toward a public offering in late 2014 or in 2015, CEO David Cush said in an interview.
A share offering would be a way for Virgin Group and other shareholders to recoup some of their investments, Cush said. Virgin America, based in Burlingame, California, is privately held but reports its finances as part of financial disclosures required by the U.S. Transportation Department.
On Monday the airline said its 2012 net loss jumped 45% to $145.4 million. Virgin America started flying in 2007 but has not turned an annual profit.
It posted a fourth-quarter loss of $25 million, an improvement from its loss of $30.8 million a year earlier. In the first quarter of this year it lost $46.4 million, an improvement from its $76 million loss during the same period last year.
Full-year revenue rose 29 percent to $1.33 billion.
Virgin America has already deferred deliveries of new planes until 2015. Stopping its growth is a key part of making the airline profitable, Cush said.
It's also cutting interest payments.
Virgin America recently closed a deal that eliminates $290 million in debt, a majority of it owed to Virgin Group, Cush said. The debt was converted to "conditional equity," he said.
The U.S. caps foreign ownership of U.S. airlines at 25%. Cush said the debt transaction keeps its foreign ownership under that threshold and was approved by the Transportation Department. Discussion about reworking the debt began about six months ago, at the same time it was talking about delaying its aircraft deliveries. "We were certainly interested in doing it, but ultimately it was the call of the debt holders and the shareholders," he said.
Cush said it's too soon to know how much of the company might be offered to the public. It will depend on how well Virgin America is doing financially, how receptive investors are, and how much the current private shareholders are willing to sell.
First, though, it needs to fix its finances.
"People are going to want to see some profit" before they decide how much Virgin America is worth, he said

http://www.usatoday.com/story/today...ca-posts-2012-loss-eyes-possible-ipo/2155005/

 

[duc driver]

Valid point; I assumed that the $75 million financing was in either Q4 or Q1. If it was in Q2, the Q4 and Q1 numbers are great.

If the money was received in Q2, the cash burn was only $17 million for the two quarters which would be a great turnaround from the past.

From Bloomberg

"Virgin America also borrowed an additional $75 million after the first quarter ended, said Chief Financial Officer Peter Hunt"

 

[Flyer1015]

Correct, the 75 million is new after the first quarter.

Andy, can you comment on debt restructuring? How does one wipe out nearly 1/3 billion in debt? Was it just a lower interest rate now?

and what's this part:

Virgin America recently closed a deal that eliminates $290 million in debt, a majority of it owed to Virgin Group, Cush said. The debt was converted to "conditional equity," he said.

??? Conversion to conditional equity?

 

[Flyer1015]

Congrats to VX, I hope things continue in this direction.

Related article:
http://www.thestreet.com/story/1192...sses-and-sees-ipo.html?puc=yahoo&cm_ven=YAHOO



Any thoughts from current VXers what the "end-game" would be for the company?

The end game is still an IPO. It is the only way investors will get their money's worth. After it goes public, then there could be room to stand-alone or merge with another LCC/Legacy.

 

[clickclickboom]

Gotta Love it

Branson eats 290 mil for " conditional equity " and someone loans you 75 mil to boost cash on hand..

That " SHOULD " be illegal

 

[Flyer1015]

Gotta Love it

Branson eats 290 mil for " conditional equity " and someone loans you 75 mil to boost cash on hand..

That " SHOULD " be illegal

What law is that breaking to be illegal?

It's his money. If I loan you money, at a certain rate, I can then lower your rate and you'd owe me less. Who's gonna argue against that?

 

[redflyer65]

46 Million dollar First Quarter Loss (145M loss for all of 2012). Cush tries to spin an IPO next year. I think next year he might say it will be 2015, etc, etc.

http://www.usatoday.com/story/today...ca-posts-2012-loss-eyes-possible-ipo/2155005/

I don't see any IPO on the horizon, just more spin from Cush and more cash from Branson.

 

[Andy]

From Bloomberg

"Virgin America also borrowed an additional $75 million after the first quarter ended, said Chief Financial Officer Peter Hunt"

Peter Hunt doesn't have a reputation for being honest. It could be that a lot of that $75 million was informally loaned to VX prior to the end of Q1. I don't know and I don't trust Hunt.
I do find it almost impossible that VX could increase cash on hand by $1 million in Q4 with a net loss.
I'm thinking that VX did a bridge loan prior to the $75 million loan, and simply used a large part of the $75 million to pay off the bridge loan.

Andy, can you comment on debt restructuring? How does one wipe out nearly 1/3 billion in debt? Was it just a lower interest rate now?

and what's this part:


??? Conversion to conditional equity?

It sounds like a debt to equity conversion where debtholders were converted to stockholders. And it's likely that only the Virgin Group did that. Hence the 'conditional equity'.
The reason why it's labeled conditional equity is due to the 25% limitation of stock owned by foreign interests. But if you dig a bit deeper in that rule, you'll find that it's 25% voting stock limit to foreigners. So the new stock holdings of Virgin Group is almost certainly nonvoting stock. That's much less valuable stock and there's probably a provision where the stock magically becomes voting stock when sold by Virgin Group.

The devil's in the details and I'll comment further once I have a chance to look at the VX form 41.


The timing of the $75 million loan doesn't make sense. $49 million cash on hand is enough to get through the summer without a problem, especially if losses in Q4 and Q1 total $18 million. Q2 and Q3 are VX's best quarters. That's why I think that a large part of the $75 million was added to the balance sheet prior to the close of Q1. But I really can't prove that until Q2's numbers are released and we can see cash on hand.

In closing, I think I stated that VX would need around $100 million to keep its doors open past 2013. I consider the $75 million to be 'close enough'. If there's an extra $75 million that shows up on Q2's cash on hand, they'll have no problem getting well beyond 2013 and could pull off an IPO after a few decent quarters.

 

[fam62c]

They are talking about an IPO now, if they do it it will be interesting to see what they will value the company at and what investors will actually be willing to pay. A small airline that has lost a lot of money in an industry of giants doesn't seem like it would generate much investor excitement.

http://www.thestreet.com/story/1192...sses-and-sees-ipo.html?puc=yahoo&cm_ven=YAHOO

 

[LoveGun]

IPO is about growth potential. If Virgin can show consistent profits while fending off attacks from the mega carriers, then VA really has unlimited growth opportunities. Virgin has moved into some of the hardest fought territory in the US. We are not a Spirit or Allegiant that has found niche markets. We are not a Southwest that grew by flying into secondary airports. Virgin goes right into a major hub and offers a better experience for the customer. If we can do Chicago, Dallas, and Newark profitably, what's going to stop us from going into Atlanta, Denver, Charlotte, Minneapolis, etc... United is throwing everything at us in Newark and our planes are still full. Last time I flew to Newark, I had 10 guests tell me as they de-planed that this was the best flight they had ever been on and they never want to fly the competition again. We are the In and Out Burger/Trader Joe's of the airlines. In the Bay Area and LA people rave about us. Moral here is through the roof. Our FAs are young and happy and cost half as much as a legacy FA -- same could be said about our gate agents. What other airline has this much potential for growth?