Ryanair 2011 Annual Report Download - page 89

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rates, the impact of which was partly offset by the drawdown of debt related to the acquisition of additional
Boeing 737-800 aircraft. These costs are expected to increase as Ryanair further expands its fleet.
Foreign exchange (losses) gains. Ryanair recorded foreign exchange losses of 11.0 million in the 2010
fiscal year, as compared with foreign exchange gains of 14.4 million in the 2009 fiscal year, with the different
result being primarily due to the strengthening of the U.K. pound sterling and U.S. dollar exchange rates against
the euro during the 2010 fiscal year.
Taxation. The effective tax rate for the 2010 fiscal year was 10.5%, as compared to a tax benefit of
(6.3%) in the 2009 fiscal year. The effective tax rate reflects the statutory rate of Irish corporation tax of 12.5%,
the positive impact of the reduced rates of tax applicable to Internet-related businesses and the loss due to the
impairment of the Company’s available-for-sale financial asset (its Aer Lingus holding, which is not subject to
corporation tax). Ryanair recorded an income tax provision of 135.7 million in the 2010 fiscal year, compared
with a tax credit of 111.3 million in the 2009 fiscal year (the tax credit of 111.3 million was primarily due to the
recognition of a deferred tax asset of 134.3 million in respect of net operating losses incurred and available to
carry forward to future periods). The determination regarding the recoverability of the deferred tax asset was
based on future income forecasts, which demonstrated that it was more likely than not that future profits would
be available in order to utilize the deferred tax asset. A deferred tax asset’s recoverability is not dependent on
material improvements over historical levels of pre-tax income, material changes in the present relationship
between income reported for financial and tax purposes, or material asset sales or other non-routine transactions.
SEASONAL FLUCTUATIONS
The Company’s results of operations have varied significantly from quarter to quarter, and
management expects these variations to continue. Among the factors causing these variations are the airline
industry’s sensitivity to general economic conditions and the seasonal nature of air travel. Ryanair typically
records higher revenues and income in the first half of each fiscal year ended March 31 than the second half of
such year.
RECENTLY ISSUED ACCOUNTING STANDARDS
Please see Note 1 to the consolidated financial statements included in Item 18 for information on
recently issued accounting standards that are material to the Company.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity. The Company finances its working capital requirements through a combination of cash
generated from operations and bank loans for the acquisition of aircraft. See “Item 3. Key Information—Risk
Factors—Risks Related to the Company—The Company Will Incur Significant Costs Acquiring New Aircraft”
for more information about risks relating to liquidity and capital resources. The Company had cash and liquid
resources at March 31, 2011 and 2010 of 12,940.6 million and 12,813.4 million, respectively. The increase at
March 31, 2011 primarily reflects cash generated from operating activities of 1786.3 million offset in part by the
cash used to fund the purchase of property, plant, and equipment – primarily 44 new Boeing 737-800 aircraft
and the payment of a 1500.0 million dividend to shareholders. During the 2011 fiscal year, the Company funded
its 1897.2 million in purchases of property, plant, and equipment out of 1991.4 million in loans. Cash and liquid
resources included 142.9 million in cash and cash equivalents and 167.8 million in “restricted cash” held on
deposit as collateral for certain derivative financial instruments entered into by the Company with respect to its
aircraft financing obligations and other banking arrangements at March 31, 2011 and 2010, respectively. See
“Item 8. Financial InformationOther Financial InformationLegal Proceedings.”
The Company’s net cash inflows from operating activities in the 2011 and 2010 fiscal years amounted
to 1786.3 million and 1871.5 million, respectively. During the last two fiscal years, Ryanair’s primary cash
requirements have been for operating expenses, additional aircraft, including advance payments in respect of
new Boeing 737-800s and related flight equipment, payments on related indebtedness and payments of
corporation tax as well as share buy-backs and the payment of a 1500.0 million special dividend to shareholders.
Cash generated from operations has been the principal source for these cash requirements, supplemented
primarily by aircraft-related bank loans.