Spirit Airlines 2012 Annual Report Download - page 51

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to terminate its professional services agreement with us and $0.5 million paid to three individual, unaffiliated holders of our subordinated notes.
Other (income) expense, net
2012 compared to 2011
Other (income) expense, net decrease d by $22.1 million to $0.6 million net income for 2012 from $21.6 million net expense for 2011 . Interest expense and
corresponding capitalized interest in 2012 and 2011 primarily relates to interest on pre-delivery deposits and interest related to the TRA.
2011 compared to 2010
Other (income) expense, net decrease d by $27.1 million to $21.6 million net expense for 2011 from $48.7 million net expense for 2010 . The decrease is primarily
related to interest on debt for only five months in 2011 compared to a full year in 2010 as a result of the elimination of our debt in conjunction with the IPO in June of 2011.
Related-party interest expense incurred during 2011 and 2010 was $21.0 million and $44.6 million, respectively, and consisted primarily of paid-in-kind interest on notes
and preferred stock dividends due to related parties. Non-related party interest expense during 2011 and 2010 was $3.8 million and $5.7 million, respectively.
Income Taxes
As of December 31, 2012, the Company has fully utilized an alternative minimum tax (“AMT”) credit carryforward of approximately $3.2 million and federal net
operating losses (“NOLs”) of approximately $20.8 million against federal taxable income. In addition, as of December 31, 2012 and 2011, we had state NOLs of
approximately $2.2 million and $9.1 million, respectively, which can be used to offset future state taxable income. State net operating losses begin to expire in 2017. The
effective tax rate for 2012 was approximately 37.9% compared to 37.8% in the prior year period.
At December 31, 2009, we had recorded a full valuation allowance against existing net deferred tax assets. As of September 30, 2010, we determined that, under
generally accepted accounting principles, the valuation allowance should be reduced by $53.5 million, which we recognized as a deferred tax benefit.
Immediately prior to the IPO, we entered into the Tax Receivable Agreement and thereby distributed to the Pre-IPO Stockholders the right to receive a pro rata share
of the future payments to be made under such agreement. These future payments to the Pre-IPO Stockholders will be in an amount equal to 90% of the cash savings in
federal income tax realized by us by virtue of our future use of federal NOL, deferred interest deductions and certain tax credits held by us as of March 31, 2011. Please see
“Certain Relationships and Related Transactions—Tax Receivable Agreement.”
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