Spirit Airlines 2011 Annual Report Download - page 86

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Notes to Financial Statements—(Continued)
The Company has agreements with organizations that process credit card transactions arising from the purchase of air travel, baggage fees,
and other ancillary services by customers. As it is standard in the airline industry, the Company's contractual arrangements with credit card
processors permit them, under certain circumstances, to retain a holdback or other collateral, which the Company records as restricted cash,
when future air travel and other future services are purchased via credit card transactions. The required holdback is the percentage of the
Company's overall credit card sales that its credit card processors hold to cover refunds to customers if the Company fails to fulfill its flight
obligations.
As of December 31, 2010 , the Company had advance ticket sales and $9 Fare Club memberships purchased with credit cards of
approximately $101.1 million . The Company was in compliance with its credit card processing agreements, and the required holdback was
$87.7 million
, which was partially offset by a letter of credit (LC), issued in favor of the processor in the amount of $15.0 million. As such, as of
December 31, 2010 , the processors were holding back $72.7 million of remittances after considering the letter of credit (LC), issued in favor of
the processor.
During 2011, the Company amended its processing agreements with all of its processors. Prior to the amendments, the credit card
processors required the Company to maintain cash collateral equal to approximately 100% of the Company's air traffic liability. The
amendments were approved in light of the Company's improved balance sheet as a result of the recently completed IPO, the related
recapitalization and the elimination of the holdback held by the credit card processors, effectively bringing the Company's restricted cash balance
to zero, provided that the Company continues to satisfy certain liquidity and other financial covenants. Failure to meet these covenants would
provide the processors the right to reinstate a holdback, resulting in a commensurate reduction of unrestricted cash. As of December 31, 2011 ,
the Company continued to be in compliance with its credit card processing agreements, and the processors were holding back $0 of remittances.
The maximum potential exposure to cash holdbacks by the Company's credit card processors, based upon advance ticket sales and $9 Fare
Club memberships as of December 31, 2011 and 2010 , was $115.2 million and $86.1 million , respectively.
Accrued liabilities included in other current liabilities as of December 31, 2011 and 2010 consist of the following:
During 2010, based on new information that became available to the Company, a liability previously recorded was reduced by $1.0 million
resulting in recognition of $0.7 million within other operating and $0.3 million within salaries, wages, and benefits expenses in the statement of
operations.
The Company’s amended and restated certificate of incorporation dated June 1, 2011, authorizes the Company to issue up to 240,000,000
shares of common stock, $0.0001 par value per share, 50,000,000 shares of non-voting common stock, $0.0001 par value per share, and
10,000,000 shares of preferred stock, $0.0001 par value per share. All of the Company’s issued and outstanding shares of common stock and
preferred stock are duly authorized, validly issued, fully paid and non-assessable. The Company’s shares of common stock and non-voting
common stock are not redeemable and do not have preemptive rights.
5.
Credit Card Processing Arrangements
6.
Accrued Liabilities
As of December 31,
2011
2010
(in thousands)
Current portion of Tax Receivable Agreement
$
27,399
$
—
Federal excise and other passenger taxes and fees payable
17,813
19,035
Salaries and wages
17,123
14,842
Aircraft maintenance
7,816
10,909
Airport expenses
10,682
9,523
Interest
1,142
6,885
Aircraft and facility rent
7,206
4,455
Restructuring
329
549
Other
9,346
6,843
Accrued liabilities
$
98,856
$
73,041
7.
Common Stock and Preferred Stock