1 / 14

Spirit Airlines: Financial Statement Reformulation

Spirit Airlines: Financial Statement Reformulation. Module 2 Carl Brinker January 22, 2014. Spirit Airlines: Brief Company Background. “Ultra-Low Cost” Passenger Airline Company 2-star rating Services USA and Latin America IPO – June 1, 2011 (Dec. 31 year end)

thai
Download Presentation

Spirit Airlines: Financial Statement Reformulation

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Spirit Airlines: Financial Statement Reformulation Module 2 Carl Brinker January 22, 2014

  2. Spirit Airlines: Brief Company Background • “Ultra-Low Cost” Passenger Airline Company • 2-star rating • Services USA and Latin America • IPO – June 1, 2011 • (Dec. 31 year end) • $1 billion revenue, $190 million net income

  3. Financial Statements (as Presented)

  4. Income Statement

  5. Balance Sheet

  6. Net Enterprise Assets Financing LiabilitiesCommon Shareholder Equity

  7. Net Enterprise Assets • In general, no major issues determining Enterprise Assets or Liabilities • Used 2% of sales for cash E.A. • Restricted cash: what is it? • Credit card companies require Spirit to have cash-on-hand for pre-booked flights • Ended post-IPO

  8. Net Financing Liabilities • No financial liabilities • post-IPO • Used proceeds to • pay off debts • Mandatorily redeemable • preferred stock • Related to IPO?

  9. Common Shareholder Equity & Calculation Check

  10. Enterprise Profit After TaxFinancing Expense After TaxComprehensive Income

  11. Tax Shield Calculation • Issue: what tax rate should be used? • Notes to Financial Statements give no marginal rate • Rate given: 37.90% (effective tax rate) • Concluded that this rate was appropriate • Federal rate (35%) plus state tax of approx 2% = 37% • This is close to 37.90%; I will use Spirit’s ETR for this calculation

  12. Enterprise Profit After Tax • No major issues • Special charges merit • future investigation

  13. Financing Expense After Tax & Calculation Check

  14. Summary of Issues • Large negative tax provision • Interferes with trend analysis? • Restricted cash • Enterprise asset or financial asset? • Mandatorily redeemed preferred stock • Needs special consideration? • Marginal tax rate assumption • Appropriate assumption? • “Special charges” • What do they relate to?

More Related