Spirit Airlines 2015 Annual Report Download - page 56

56
Liquidity and Capital Resources
Our primary sources of liquidity are cash on hand, cash provided by operations and capital from asset financing. Primary
uses of liquidity are for working capital needs, capital expenditures, aircraft pre-delivery deposit payments (PDPs) and
maintenance reserves. Our total cash at December 31, 2015 was $803.6 million, an increase of $170.8 million from
December 31, 2014.
Currently, our single largest capital need is to fund the acquisition costs of our aircraft. Aircraft are acquired through sale
leaseback transactions or debt financing. In sale leaseback transactions, capital is needed to fund the initial purchase of the
aircraft prior to the sale to the lessor. During 2015, we entered into one sale leaseback transaction for an engine and no aircraft
sale leaseback transactions. In debt financing transactions, capital is needed to make equity investments in capital assets and
payments on debt obligations (principal and interest) after the acquisition of the aircraft. In 2015, we purchased 14 aircraft
through debt financing transactions and made $41.6 million in debt payment obligations (principal and interest). The debt
entered into in the current year had maturity dates ranging from 2022 to 2028 and interest rates ranging from 4.0% to 6.9%.
Capital resources required under debt financing transactions will generally be higher than those involving sale leaseback
transactions.
PDPs relating to future deliveries under our agreement with Airbus are required at various times prior to each delivery
date. During 2015, $48.4 million of PDPs have been returned related to delivered aircraft in the period and we paid $190.7
million in PDPs for future deliveries of aircraft and spare engines. As of December 31, 2015, we have secured financing for
twelve aircraft deliveries from Airbus and for five aircraft to be leased directly from a third party, all scheduled for delivery in
2016. We do not have financing commitments in place for the remaining 75 Airbus firm aircraft orders scheduled for delivery
between 2017 and 2021.
In addition to funding the acquisition of our future fleet, we are required to make maintenance reserve payments for some
of the aircraft in our current fleet. Maintenance reserves are paid to aircraft lessors and are held as collateral in advance of our
performance of major maintenance activities. In 2015, we paid $59.2 million in maintenance reserves and as of December 31,
2015, we have $279.9 million ($73.4 million in aircraft maintenance deposits and $206.5 million in long-term aircraft
maintenance deposits) on our balance sheet.
As of December 31, 2015, we were compliant with our credit card processing agreements, and 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, 2015 and December 31, 2014, was $250.2 million and $217.1
million, respectively.
In 2014, we agreed on a settlement amount of $7.0 million related to the TRA. This agreed upon settlement was in excess
of the outstanding liability of $5.6 million at the time of settlement. The $5.6 million payment is recorded as cash used in
financing activities in the statement of cash flows and the excess payment of $1.4 million is recorded within other expense in
the statement operations and recorded as cash from operations in the statement of cash flows. As of December 31, 2014, we had
made all payments in accordance with the agreed upon settlement terms and have no outstanding obligations related to the
TRA. See “Notes to the Financial Statements—17. Tax Receivable Agreement” for additional information regarding the TRA.
Net Cash Flows Provided By Operating Activities. Operating activities in 2015 provided $473.0 million in cash compared
to $260.5 million provided in 2014. The increase resulted from higher net income, larger cash collections on flights sold but not
yet flown, and higher deferrals of income taxes year over year.
Operating activities in 2014 provided $260.5 million in cash compared to $195.4 million provided in 2013. The increase
was primarily due to higher net income in 2014 coupled with a higher deferral of income taxes.
Net Cash Flows Used In Investing Activities. During 2015, investing activities used $701.3 million, compared to $302.4
million used in 2014. The increase was mainly due to the purchase of 14 aircraft and 1 spare engine sale leaseback transaction
during 2015 and a slight increase in paid PDPs, as compared to 2014, driven by the timing of aircraft deliveries.
During 2014, investing activities used $302.4 million, compared to $90.1 million used in 2013. The increase was mainly
due to the purchase of four Airbus A320s and one spare engine sale leaseback transaction during 2014 and an increase in paid
PDPs as compared to 2013, driven by the timing of aircraft deliveries.
Net Cash Provided By Financing Activities. During 2015, financing activities provided $399.1 million. We received $7.3
million in proceeds from the sale of one spare engine as part of a sale and leaseback transaction, $536.8 million in connection
with the debt financing of 14 aircraft, and retained $8.9 million as a result of excess tax benefits related to share-based