Spirit Airlines 2013 Annual Report Download - page 84

Notes to Financial Statements—(Continued)
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for one share of common stock. In addition, interest expense was reduced by $0.4 million due to a write off of the unamortized
portion of prepaid loan fees and deferred interest.
In connection with the IPO, the Company entered into the TRA and thereby distributed immediately prior to the
completion of the IPO to the holders of common stock as of such time, or the Pre-IPO Stockholders, the right to receive an
amount equal to 90% of the cash savings in federal income tax realized by it by virtue of the use of the federal net operating
loss, deferred interest deductions and alternative minimum tax credits held by the Company as of March 31, 2011, which is
defined as the Pre-IPO NOL. Cash tax savings generally will be computed by comparing actual federal income tax liability to
the amount of such taxes that the Company would have been required to pay had such Pre-IPO NOLs (as defined in the TRA)
not been available. Upon consummation of the IPO and execution of the TRA, the Company recorded a liability with an
offsetting reduction to additional paid in capital. The amount and timing of payments under the TRA will depend upon a
number of factors, including, but not limited to, the amount and timing of taxable income generated in the future and any future
limitations that may be imposed on the Company's ability to use the Pre-IPO NOLs. The term of the TRA will continue until
the first to occur (a) the full payment of all amounts required under the agreement with respect to utilization or expiration of all
of the Pre-IPO NOLs, (b) the end of the taxable year including the tenth anniversary of the IPO or (c) a change in control of the
Company.
In accordance with the TRA, the Company is required to submit a Tax Benefit Schedule showing the proposed TRA
payout amount to the Stockholder Representatives within 45 calendar days after the Company files its tax return. Stockholder
Representatives are defined as Indigo Pacific Partners, LLC and OCM FIE, LLC, representing the two largest ownership
interest of pre-IPO shares. The Tax Benefit Schedule shall become final and binding on all parties unless a Stockholder
Representative, within 45 calendar days after receiving such schedule, provides the Company with notice of a material
objection to such schedule. If the parties, for any reason, are unable to successfully resolve the issues raised in any notice
within 30 calendar days of receipt of such notice, the Company and the Stockholder Representatives have the right to employ
the TRA's reconciliation procedures. If the Tax Benefit Schedule is accepted, the Company has five days after acceptance to
make payments to the Pre-IPO stockholders. Pursuant to the TRA's reconciliation procedures, any disputes that cannot be
settled amicably, are settled by arbitration conducted by a single arbitrator jointly selected by both parties.
During the second quarter of 2012, the Company paid $27.2 million, or 90% of the 2011 tax savings realized from the
utilization of NOLs, including $0.3 million of applicable interest. During 2012, management adjusted for an immaterial error in
the original estimate of the liability. This adjustment reduced the liability with an offset to additional paid in capital.
During 2013, the Company filed an amended 2009 income tax return in order to correct its NOL carry forward as of
December 31, 2009. See Note 14. As a result, the Company's NOL carry forward as of March 31, 2011 was consequently
reduced by $7.8 million, which corresponds to a reduction in the estimated TRA benefit of $2.4 million with an offset to
additional paid in capital. On September 13, 2013, the Company filed its 2012 federal income tax return, and on October 14,
2013, the Company submitted a Tax Benefit Schedule to the Stockholder Representatives. On November 27, 2013, pursuant to
the TRA, the Company received an objection notice to the Tax Benefit Schedule from the Stockholder Representatives. As of
December 31, 2013, the Company estimated the TRA liability to be $5.6 million. The Company and the Stockholder
Representatives are in discussions attempting to resolve the objection related to the Tax Benefit Schedule and have not
employed the TRA's reconciliation procedures.
19. Quarterly Financial Data (Unaudited)
Quarterly results of operations for the year ended December 31, 2013 are summarized below: