Spirit Airlines 2011 Annual Report Download - page 101

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Notes to Financial Statements—(Continued)
agreement. The Company’s dispatchers, which represent approximately one percent of the Company’s employees, ratified a five-
year contract in
July 2007.
The Company is self-insured for health care claims for eligible participating employee and qualified dependent medical claims, subject to
deductibles and limitations. The Company’s liabilities for claims incurred but not reported are determined based on an estimate of the ultimate
aggregate liability for claims incurred. The estimate is calculated from actual claim rates and reviewed and adjusted periodically, as necessary.
The Company has accrued $2.0 million , $2.1 million , and $1.6 million for health care claims as of December 31, 2011 , 2010 , and 2009 ,
respectively.
Other
The Company is contractually obligated to pay the following minimum guaranteed payments to the provider of its reservation systems as
of December 31, 2011: $2.9 million in 2012 , $3.1 million in 2013 , $3.7 million in 2014 , $3.7 million in 2015 , $3.7 million in 2016 and $6.2
million in 2017 and beyond .
Under ASC 820, Fair Value Measurements and Disclosures , disclosures are required about how fair value is determined for assets and
liabilities, and a hierarchy for which these assets and liabilities must be grouped is established, based on significant levels of inputs, as follows:
Level 1 —Quoted prices in active markets for identical assets or liabilities.
Level 2 —Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that
are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or
liabilities.
Level 3 —Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or
liabilities.
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal
or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Spirit
utilizes several valuation techniques in order to assess the fair value of the Company’s financial assets and liabilities. The Company’s fuel
derivative contracts, which primarily consist of costless collar contracts, are valued using energy and commodity market data, which is derived
by combining raw inputs with quantitative models and processes to generate forward curves and volatilities.
The Company utilizes the market approach to measure fair value for its financial assets and liabilities. The market approach uses prices
and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
Assets and liabilities measured at fair value on a recurring basis are summarized below:
90
18.
Fair Value Measurements
Fair Value Measurements as of December 31, 2011
Total
Level 1
Level 2
Level 3
(in millions)
Cash and cash equivalents
$
343.3
$
343.3
$
—
$
—
Aircraft fuel derivatives
0.3
—
—
0.3
Total assets
$
343.6
$
343.3
$
—
$
0.3
Total Liabilities
$
—
$
—
$
—
$
—
Fair Value Measurements as of December 31, 2010
Total
Level 1
Level 2
Level 3
(in millions)
Cash and cash equivalents
$
82.7
$
82.7
$
—
$
—
Aircraft fuel derivatives
$
3.5
$
—
$
—
$
3.5
Total assets
$
86.2
$
82.7
$
—
$
3.5
Total liabilities
$
—
$
—
$
—
$
—