Spirit Airlines 2014 Annual Report Download - page 80

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Notes to Financial Statements—(Continued)
80
The Company had two QEC kits classified as capital leases at December 31, 2014 and 2013. Amortization of assets
recorded under capital leases are included within depreciation expense. Amounts applicable to these QEC kits that are included
in property and equipment were:
2014 2013
(in thousands)
Flight equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,234 $ 3,234
Less: accumulated amortization. . . . . . . . . . . . . . . . . . . . . . . 377 54
$ 2,857 $ 3,180
Future minimum lease payments under capital leases and noncancellable operating leases with initial or remaining terms
in excess of one year at December 31, 2014 were as follows:
Operating Leases
Capital Leases
Aircraft
and Spare Engine
Leases Property Facility
Leases Total Operating
Leases
(in thousands)
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,444 $ 214,337 $ 29,647 $ 243,984
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,044 212,512 25,239 237,751
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 196,010 25,613 221,623
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 172,323 25,759 198,082
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 144,211 23,606 167,817
2020 and thereafter . . . . . . . . . . . . . . . . . . . . . . . — 592,409 71,578 663,987
Total minimum lease payments . . . . . . . . . . . . . . $ 2,588 $ 1,531,802 $ 201,442 $ 1,733,244
Less amount representing interest . . . . . . . . . . . . 205
Present value of minimum lease payments . . . . . 2,383
Less current portion . . . . . . . . . . . . . . . . . . . . . . . 1,289
Long-term portion . . . . . . . . . . . . . . . . . . . . . . . . 1,094
12. Financial Instruments and Risk Management
As part of the Company’s risk management program, the Company from time to time uses a variety of financial
instruments to reduce its exposure to fluctuations in the price of jet fuel and interest rates. The Company does not hold or issue
derivative financial instruments for trading purposes.
The Company is exposed to credit losses in the event of nonperformance by counterparties to these financial instruments.
The Company periodically reviews and seeks to mitigate exposure to the financial deterioration and nonperformance of any
counterparty by monitoring the absolute exposure levels, each counterparty's credit ratings and the historical performance of the
counterparties relating to hedge transactions. The credit exposure related to these financial instruments is limited to the fair
value of contracts in a net receivable position at the reporting date. The Company also maintains security agreements that
require the Company to post collateral if the value of selected instruments falls below specified mark-to-market thresholds. As
of December 31, 2014, the Company did not hold any derivatives with requirements to post collateral. The Company records
financial derivative instruments at fair value, which includes an evaluation of each counterparty's credit risk.
Fuel Derivative Instruments
The Company's fuel derivative contracts generally consist of United States Gulf Coast jet fuel swaps (jet fuel swaps) and
United States Gulf Coast jet fuel options (jet fuel options). Both jet fuel swaps and jet fuel options are used at times to protect
the refining price risk between the price of crude oil and the price of refined jet fuel, and to manage the risk of increasing fuel
prices. Fair value of the instruments is determined using standard option valuation models.
The Company accounts for its fuel derivative contracts at fair value and recognizes them in the balance sheet in prepaid
expenses and other current assets or other current liabilities. The Company did not elect hedge accounting on any fuel
derivative instruments entered into during 2014, 2013 and 2012 and, as a result, changes in the fair value of these fuel