Spirit Airlines 2012 Annual Report Download - page 54

LIQUIDITY AND CAPITAL RESOURCES
Our primary source of liquidity is cash on hand and cash provided by operations. Our primary uses of liquidity are for working capital needs, capital expenditures,
aircraft pre-delivery deposits (“PDPs”), and maintenance reserves. Our total cash at December 31, 2012 was $416.8 million , an increase of $73.5 million from
December 31, 2011 .
During 2011, we completed our IPO, which raised net proceeds of $150.0 million after repayment of debt, payment of transaction expenses and payments of fees to
certain unaffiliated holders of our notes. Additionally, during 2011, the IPO allowed us to amend our agreements with our credit card processors enabling us to eliminate our
restricted cash balance, which was 72.7 million at year-end 2010 , and increase our unrestricted cash balance.
In prior periods, restricted cash represented cash collateral related primarily to a portion of our obligation to fulfill future flights, or air traffic liability (“ATL”),
held by
credit card processors. Our credit card processors have historically required holdbacks (collateral), which we record as restricted cash, when future air travel and other future
services are purchased via credit card transactions. At September 30, 2011, our restricted cash balance was eliminated, reflecting a complete release of all holdback
requirements by all of our credit card processors provided that we continue to satisfy certain financial criteria. Failure to meet these liquidity covenants would provide the
processors the right to reinstate a holdback, resulting in a commensurate reduction of unrestricted cash that could be material. As of December 31, 2012
, we continued to be
in compliance with our credit card processing agreements, and we were not subject to any credit card holdbacks. The maximum potential exposure to cash holdbacks by our
credit card processors, based upon advance ticket sales and $9 Fare Club memberships as of December 31, 2012 and December 31, 2011 , was $144.8 million and $115.2
million , respectively.
Our short-term capital needs are funded primarily by cash from operations. Our most significant capital needs are to fund the acquisition costs of our aircraft. PDPs
relating to future deliveries under our agreement with Airbus are required at various times prior to each delivery date. During 2012 , $40.5 million of PDPs have been
returned related to delivered aircraft in the period, and we have paid $53.1 million in PDPs for future deliveries of aircraft and spare engines. As of December 31, 2012 ,
we have $96.7 million of PDPs on our balance sheet, representing the amount paid since inception, net of refunds.
Maintenance reserves are paid to aircraft lessors and are held as collateral in advance of our performance of major maintenance activities. In 2012 , we paid $31.6
million in maintenance reserves, net of reimbursements, and as of December 31, 2012 , we have $198.5 million ( $76.1 million in other current assets and $122.4 million
in aircraft maintenance deposits) on our balance sheet, representing the amount paid in reserves since inception, net of reimbursements.
We have secured financing commitments for our next nine aircraft deliveries which are scheduled for delivery in 2013. We do not have financing commitments in
place for the remaining 97 aircraft currently on firm order which are scheduled for delivery in 2014 through 2021 . These future aircraft deliveries may be leased or
otherwise financed based on market conditions, our prevailing level of liquidity, and capital market availability.
Net Cash Flows Provided By Operating Activities. Operating activities in 2012 provided $113.6 million in cash compared to $171.2 million provided in 2011 . The
decrease is primarily due to $72.7 million received from the release of all credit card holdbacks in 2011 coupled with significantly higher heavy scheduled maintenance cost
in 2012, slightly offset by higher cash received on future travel as of December 31, 2012 .
Operating activities in 2011 provided $171.2 million in cash compared to $27.0 million in cash generated in 2010. The increase is primarily due to the release of all
our holdbacks by our credit card processors and higher earnings during 2011 compared to 2010.
Net Cash Flows Used In Investing Activities. During 2012 , investing activities used $27.3 million , compared to $67.2 million used for the prior year period. The
decrease is mainly due to the refund of $40.5 million in PDPs related to the delivery of seven aircraft from Airbus and corresponding sale and leaseback transactions, and
the sale of airport slots for $9.1 million. These effects were offset by higher capital expenditures, including the purchase of two spare engines for $10.3 million during 2012
.
During 2011, investing activities used $67.2 million, compared to $30.5 million used for 2010. The increase is mainly related to higher PDPs made period over period
due to timing of the delivery schedule for future aircraft, coupled with slightly higher capital expenditures including a spare engine for which we entered into a sale-lease
back transaction during 2011. In addition, $6.7 million in returned PDPs were received from two completed aircraft sale and leaseback transactions.
Net Cash Provided By Financing Activities. During 2012 , we paid $27.2 million related to the Tax Receivable Agreement (TRA), received $12.5 million in
proceeds from the sale of two spare engines as part of sale and leaseback transactions,
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