Spirit Airlines 2011 Annual Report Download - page 89

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Notes to Financial Statements—(Continued)
Prior to the Company’s IPO and related recapitalization on June 1, 2011, there were issued and outstanding 100,000 shares of Class A
preferred stock, 2,850 shares of Class B preferred stock, 20,848,847 shares of Class A common stock and 5,964,489 shares of Class B common
stock. In the recapitalization consummated on June 1, 2011, all shares of preferred stock and all notes not repaid with the net proceeds received
by the Company in the IPO were exchanged for shares of common stock in accordance with the Recapitalization Agreement. In addition, each
share of Class B common stock was exchanged for one share of common stock.
Prior to the closing of the Company’s IPO and the transactions contemplated by the Recapitalization Agreement on June 1, 2011, the
Company had authority to issue up to 1,000,000 shares of preferred stock, with a par value of $0.0001, of which 125,000 shares were designated
Class A preferred stock and issued with a liquidation value of $1,000 per share and a dividend rate of 5%, compounded quarterly, and 5,000
shares were designated as Class B preferred stock and 2,850 shares were issued with a liquidation value of $1,000 per share and a dividend rate
of 17%, compounded quarterly. Prior to the liquidation preference adjustments discussed below, all shares of Class A preferred stock were held
by Indigo and Oaktree, and all shares of Class B preferred stock were held by other non-controlling shareholders. The remaining 870,000
authorized shares could have been designated and issued from time to time in one or more series, as decided by the Board of Directors. The
dividend rates for the Class A and Class B preferred stock are per annum and applied to the sum of their respective liquidation value per share
plus all accumulated and unpaid dividends whether or not they have been declared and whether or not there are profits, surplus, or other funds
legally available for payment. Neither series of preferred stock was, by its terms, convertible into or exchangeable for any other property or
securities of the Company, and neither series had voting rights. The Class A and B preferred stock were both subject to mandatory redemption
on the earlier of July 1, 2012, or a change of control. As such, the Company’
s preferred stock was classified as mandatorily redeemable preferred
stock (a liability) in the accompanying balance sheets and dividends were recorded as interest expense in the accompanying statements of
operations.
With respect to dividend distributions and upon liquidation of the corporation, Class B preferred stock ranked senior to all other classes of
stock, followed by Class A preferred stock, and lastly, common stock.
The liquidation preference of the Class A preferred stock was subject to adjustments as follows:
The following table represents the distribution of ownership of the Class A preferred stock as of December 31, 2006, prior to any
liquidation value adjustment events:
78
8.
Redeemable Preferred Stock
• If a new collective bargaining agreement between the Company and its pilots had not been ratified by or before January 1, 2008, the
liquidation value of the Class A preferred stock would be reduced by $22.5 million and any accrued and unpaid dividends
corresponding to the liquidation value reduction would be eliminated. Additionally, pursuant to the terms of a Put and Escrow
Agreement among the Company and its major shareholders dated July 13, 2006, if this liquidation value adjustment was triggered, the
25,000 shares of Class A preferred stock owned by Indigo must be returned to the Company, whereupon such shares were to be
cancelled and any accrued and unpaid dividends corresponding to such cancelled shares were to be eliminated.
• If, as of December 31, 2009, the net cost to the Company related to the return of MD-80 aircraft, over the period from January 1, 2006
through December 31, 2009, exceeded a target threshold of $20.7 million, the liquidation value of the Class A preferred stock would be
reduced by the amount of such excess (and accrued and unpaid dividends corresponding to such reduction amount would be
eliminated), subject to a maximum reduction of $30.0 million.
• The liquidation value of the Class A preferred stock would be reduced by the amount equal to the aggregate principal amount of
additional Tranche B notes purchased by Indigo after July 13, 2006 (see Note 11).
Class A Preferred Stock as of December 31, 2006
Outstanding
Shares
% of Shares
Owned
Liquidation
Value
per Share
Liquidation
Value *
(in thousands except share and per share amounts)
Oaktree
100,000
80
%
$
1,000
$
100,000
Indigo
25,000
20
%
1,000
25,000
Total Class A preferred stock
125,000
100
%
$
125,000
* Liquidation value does not include accrued and unpaid dividends.