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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period endedSeptember 30, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from               to            
Commission File Number 001-33166
https://cdn.kscope.io/2733ab4880a22e4961fabcb0c1fb724d-algt-20200930_g1.jpg
Allegiant Travel Company
(Exact Name of Registrant as Specified in Its Charter)
Nevada20-4745737
(State or Other Jurisdiction of Incorporation or Organization)(IRS Employer Identification No.)
1201 North Town Center Drive
Las Vegas,Nevada89144
(Address of Principal Executive Offices)(Zip Code)
Registrant’s Telephone Number, Including Area Code: (702) 851-7300

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common stock, par value $.001ALGTNASDAQ Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes   No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes    No

As of October 30, 2020, the registrant had 16,389,481 shares of common stock, $.001 par value per share, outstanding.



ALLEGIANT TRAVEL COMPANY
FORM 10-Q
TABLE OF CONTENTS
PART I.FINANCIAL INFORMATION 
  
ITEM 1.
  
ITEM 2.
  
ITEM 3.
  
ITEM 4.
  
PART II.OTHER INFORMATION
  
ITEM 1.
  
ITEM 1A.
  
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 5.
  
ITEM 6.
2


PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements
ALLEGIANT TRAVEL COMPANY
CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30, 2020December 31, 2019
(unaudited)
CURRENT ASSETS 
Cash and cash equivalents$268,042 $121,888 
Restricted cash17,426 14,897 
Short-term investments441,764 335,928 
Accounts receivable166,924 25,516 
Expendable parts, supplies and fuel, net26,305 28,375 
Prepaid expenses and other current assets30,742 35,617 
TOTAL CURRENT ASSETS951,203 562,221 
Property and equipment, net2,004,829 2,236,808 
Long-term investments 15,542 
Deferred major maintenance, net127,457 129,654 
Operating lease right-of-use assets, net114,573 22,081 
Deposits and other assets25,031 44,497 
TOTAL ASSETS:$3,223,093 $3,010,803 
CURRENT LIABILITIES
Accounts payable$64,674 $27,667 
Accrued liabilities130,665 159,031 
Current operating lease liabilities13,814 2,662 
Air traffic liability334,061 249,950 
Current maturities of long-term debt and finance lease obligations, net of related costs233,680 173,274 
TOTAL CURRENT LIABILITIES776,894 612,584 
Long-term debt and finance lease obligations, net of current maturities and related costs1,316,171 1,248,579 
Deferred income taxes292,661 232,520 
Noncurrent operating lease liabilities101,864 21,290 
Other noncurrent liabilities23,805 12,279 
TOTAL LIABILITIES:2,511,395 2,127,252 
SHAREHOLDERS' EQUITY
Common stock, par value $.00123 23 
Treasury shares(648,118)(617,579)
Additional paid in capital315,150 289,933 
Accumulated other comprehensive income, net183 98 
Retained earnings1,044,460 1,211,076 
TOTAL EQUITY:711,698 883,551 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY:$3,223,093 $3,010,803 
 
The accompanying notes are an integral part of these consolidated financial statements.
3


ALLEGIANT TRAVEL COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
 (unaudited)
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
OPERATING REVENUES:
Passenger$181,916 $391,222 $677,347 $1,265,978 
Third party products11,337 18,207 35,756 53,557 
Fixed fee contracts5,284 19,797 17,440 42,859 
Other2,447 7,283 12,969 17,498 
   Total operating revenues200,984 436,509 743,512 1,379,892 
OPERATING EXPENSES:
Salary and benefits95,829 107,586 303,264 340,589 
Aircraft fuel52,540 104,583 168,711 324,253 
Depreciation and amortization45,291 39,436 132,285 114,112 
Station operations39,954 43,522 108,359 128,357 
Maintenance and repairs14,038 24,768 48,866 68,470 
Sales and marketing7,967 17,591 35,331 59,057 
Aircraft lease rental3,015  5,404  
Other19,755 26,907 70,225 73,756 
CARES Act grant recognition(77,909) (152,448) 
Special charges33,585  280,852  
   Total operating expenses234,065 364,393 1,000,849 1,108,594 
OPERATING INCOME (LOSS)(33,081)72,116 (257,337)271,298 
OTHER (INCOME) EXPENSES:
Interest expense11,943 19,506 44,149 58,531 
Capitalized interest (903)(4,067)(3,444)
Interest income(868)(3,335)(4,596)(10,038)
Loss on debt extinguishment  1,222 3,677 
Special charges  26,632  
Other, net552 (57)1,173 (41)
   Total other expenses11,627 15,211 64,513 48,685 
INCOME (LOSS) BEFORE INCOME TAXES(44,708)56,905 (321,850)222,613 
INCOME TAX PROVISION (BENEFIT)(15,565)12,976 (166,595)51,017 
NET INCOME (LOSS)$(29,143)$43,929 $(155,255)$171,596 
Earnings (loss) per share to common shareholders:
Basic$(1.82)$2.70 $(9.75)$10.55 
Diluted$(1.82)$2.70 $(9.75)$10.54 
Shares used for computation:
Basic16,006 16,037 15,953 16,037 
Diluted16,006 16,039 15,953 16,045 
Cash dividends declared per share:$ $0.70 $0.70 $2.10 

The accompanying notes are an integral part of these consolidated financial statements.
4


ALLEGIANT TRAVEL COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
 
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
NET INCOME (LOSS)$(29,143)$43,929 $(155,255)$171,596 
Other comprehensive income (loss):  
Change in available for sale securities, net of tax(292)16 32 669 
Foreign currency translation adjustments51 17 53 21 
Total other comprehensive income(241)33 85 690 
TOTAL COMPREHENSIVE INCOME (LOSS)$(29,384)$43,962 $(155,170)$172,286 

The accompanying notes are an integral part of these consolidated financial statements.
5


ALLEGIANT TRAVEL COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands)
(unaudited)
Three Months Ended September 30, 2020
Common stock outstandingPar valueAdditional paid-in capitalAccumulated other comprehensive income (loss)Retained earningsTreasury sharesTotal shareholders' equity
Balance at June 30, 202016,240 $23 $310,628 $424 $1,073,603 $(648,118)$736,560 
Share-based compensation58 — 4,099 — — — 4,099 
Other comprehensive income (loss)— — — (241)— — (241)
CARES Act warrant issuance— — 423 — — — 423 
Net loss— — — — (29,143)— (29,143)
Balance at September 30, 202016,298 $23 $315,150 $183 $1,044,460 $(648,118)$711,698 
Nine Months Ended September 30, 2020
Common stock outstandingPar valueAdditional paid-in capitalAccumulated other comprehensive incomeRetained earningsTreasury sharesTotal shareholders' equity
Balance at December 31, 201916,303 $23 $289,933 $98 $1,211,076 $(617,579)$883,551 
Share-based compensation171 — 23,842 — — — 23,842 
Shares repurchased by the Company and held as treasury shares(217)— — — — (33,773)(33,773)
Stock issued under employee stock purchase plan41 — — — — 3,234 3,234 
Cash dividends declared, $0.70 per share— — — — (11,361)— (11,361)
Other comprehensive income (loss)— — — 85 — — 85 
CARES Act warrant issuance— — 1,375 — — — 1,375 
Net loss— — — — (155,255)— (155,255)
Balance at September 30, 202016,298 $23 $315,150 $183 $1,044,460 $(648,118)$711,698 
6


Three Months Ended September 30, 2019
Common stock outstandingPar valueAdditional paid-in capitalAccumulated other comprehensive income (loss)Retained earningsTreasury sharesTotal shareholders' equity
Balance at June 30, 201916,305 $23 $280,783 $(4)$1,128,822 $(605,115)$804,509 
Share-based compensation— — 4,535 — — — 4,535 
Shares repurchased by the Company and held as treasury shares(110)— — — — (15,540)(15,540)
Cash dividends declared, $0.70 per share— — — — (11,409)— (11,409)
Other comprehensive income (loss)— — — 33 551 — 584 
Net income— — — — 43,929 — 43,929 
Balance at September 30, 201916,195 $23 $285,318 $29 $1,161,893 $(620,655)$826,608 
Nine Months Ended September 30, 2019
Common stock outstandingPar valueAdditional paid-in capitalAccumulated other comprehensive income (loss)Retained earningsTreasury sharesTotal shareholders' equity
Balance at December 31, 201816,183 $23 $270,935 $(661)$1,025,061 $(605,037)$690,321 
Share-based compensation124 — 14,383 — — — 14,383 
Shares repurchased by the Company and held as treasury shares(132)— — — — (18,549)(18,549)
Stock issued under employee stock purchase plan20 — — — — 2,931 2,931 
Cash dividends, $2.10 per share— — — — (34,214)— (34,214)
Other comprehensive income (loss)— — — 690  — 690 
Net income— — — — 171,596 — 171,596 
Cumulative effect of the New Lease Standard— — — — (550)— (550)
Balance at September 30, 201916,195 $23 $285,318 $29 $1,161,893 $(620,655)$826,608 

The accompanying notes are an integral part of these consolidated financial statements.
7


ALLEGIANT TRAVEL COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 Nine Months Ended September 30,
 20202019
Cash flows from operating activities:
Net income (loss)$(155,255)$171,596 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization132,285 114,112 
Special charges279,114  
Other adjustments89,342 60,135 
Changes in certain assets and liabilities:
Air traffic liability84,111 55,446 
Other - net(152,872)(79,862)
Net cash provided by operating activities276,725 321,427 
Cash flows from investing activities:
Purchase of investment securities (511,667)(397,504)
Proceeds from maturities of investment securities 421,658 413,038 
Purchase of property and equipment(198,567)(350,187)
Proceeds from sale-leaseback transactions78,185  
Other investing activities1,247 10,647 
Net cash used in investing activities(209,144)(324,006)
Cash flows from financing activities:
Cash dividends paid to shareholders(11,361)(34,214)
Proceeds from the issuance of debt272,548 770,435 
Repurchase of common stock(33,773)(18,549)
Principal payments on debt and finance lease obligations(146,416)(670,148)
Debt issuance costs(4,505)(32,592)
Other financing activities4,609 325 
Net cash provided by financing activities81,102 15,257 
NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH148,683 12,678 
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD136,785 95,911 
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD$285,468 $108,589 
CASH PAYMENTS (RECEIPTS) FOR:
Interest paid, net of amount capitalized$36,801 $53,089 
Income tax refunds(95,258)(2,227)
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS:
Right-of-use (ROU) assets acquired$103,499 $2,213 
Purchases of property and equipment in accrued liabilities19,294 6,091 

The accompanying notes are an integral part of these consolidated financial statements.
8


ALLEGIANT TRAVEL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

Note 1 — Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements include the accounts of Allegiant Travel Company (the “Company”) and its majority-owned operating subsidiaries. The Company's investments in unconsolidated affiliates, which are 50 percent or less owned, are accounted for under the equity or cost method, and are insignificant to the consolidated financial statements. All intercompany balances and transactions have been eliminated.

These unaudited consolidated financial statements reflect all normal recurring adjustments which management believes are necessary to present fairly the financial position, results of operations, and cash flows of the Company for the respective periods presented. Certain reclassifications have been made to prior year financial statements to conform to classifications used in the current year. Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission for Form 10-Q. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company and notes thereto included in the annual report of the Company on Form 10-K for the year ended December 31, 2019 and filed with the Securities and Exchange Commission.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates.

Recent Accounting Pronouncements

On June 16, 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments. The standard requires the use of an “expected loss” model on certain types of financial instruments. The standard also amends the impairment model for available-for-sale debt securities and requires estimated credit losses to be recorded as allowances instead of reductions to amortized cost of the securities. The Company adopted this accounting standard prospectively as of January 1, 2020, and it did not have a significant impact on its consolidated financial statements.

On December 18, 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes. The standard simplifies the accounting and disclosure requirements for income taxes by clarifying existing guidance to improve consistency in application of ASC 740. The standard also removes the requirement to calculate income tax expense for the stand-alone financial statements of wholly-owned subsidiaries. The standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020, with early adoption permitted in any interim period within that year. The Company plans to adopt this accounting standard effective January 1, 2021.

Note 2 — Impact of the COVID-19 Pandemic

The rapid spread of COVID-19 and the related government restrictions, social distancing measures, and consumer fears have impacted flight loads, resulted in unprecedented cancellations of bookings and substantially reduced demand for new bookings throughout the airline industry. Starting in March 2020, the Company experienced a severe reduction in air travel, which has continued. Demand in the foreseeable future will continue to be affected by fluctuations in COVID-19 cases, hospitalizations, deaths, treatment efficacy and the availability of a vaccine. The Company is continuously reevaluating flight schedules based on demand trends.

The Coronavirus Aid, Relief and Economic Security Act (the "CARES Act") was enacted in March 2020, providing support for the airline industry and other businesses and individuals.

On April 20, 2020, the Company through its airline operating subsidiary Allegiant Air, LLC entered into a Payroll Support Program Agreement (the “PSPA”) with the U.S. Department of the Treasury ("Treasury") for an award Allegiant Air would receive under the CARES Act. The total amount initially allocated to Allegiant Air under the PSP was $171.9 million, all of which was received by the end of July 2020. On September 30, 2020, the Company received an additional installment of $5.0 million for a total aggregate of $176.9 million under the PSPA. The proceeds of the award were used exclusively for wages, salaries and benefits during the second and third quarters 2020, in accordance with the agreement.

The $176.9 million received under the PSPA during the second and third quarters of 2020 includes direct grants, a $23.1 million loan, and warrants to purchase 27,681 shares of the Company's common stock, as further discussed below.

9


In consideration for the grant, Allegiant Air issued to Treasury a low-interest rate, senior unsecured term promissory note (the “PSP Note”) which will mature 10 years after issuance. The principal amount of the PSP Note is $23.1 million. The PSP Note is guaranteed by the Company and is prepayable at any time at par (see Note 5).

Also in consideration for the grant, the Company issued warrants (the “PSP Warrants”) to Treasury to purchase 27,681 shares of common stock of the Company at a price of $83.33 per share (based on the closing price of the Company’s common stock on The Nasdaq Global Select Market on April 9, 2020). Warrants to purchase 19,700 shares (valued at $1.0 million) were issued in May and June 2020, and warrants for the remaining 7,981 shares (valued at $0.4 million) were issued in July and September 2020. The PSP Warrants expire five years after issuance, and will be exercisable either through net share settlement or cash, at the Company’s option. The PSP Warrants include customary anti-dilution provisions, do not have any voting rights and are freely transferable, with registration rights.

In connection with the PSPA, the Company is required to comply with the relevant provisions of the CARES Act, including those prohibiting the repurchase of common stock and the payment of common stock dividends until September 30, 2021, as well as those restricting the payment of certain executive compensation for periods through March 24, 2022.

Given the Company's efforts to conserve and raise liquidity and the Company's assumptions about the future impact of COVID-19 on travel demand, which could be materially different due to the inherent uncertainties of the current operating environment, the Company expects to meet its cash obligations as well as remain in compliance with the debt covenants in its existing financing agreements for the next 12 months based on its current level of unrestricted cash and short-term investments, its anticipated access to liquidity and tax refunds, and projected cash flows from operations.

Special Charges

The effects of COVID-19 triggered an impairment review, and a non-cash impairment charge was recognized during the nine months ended September 30, 2020 (see Note 12 - Impairment for additional detail). The Company also identified expenses that were unique and specific to COVID-19. The impairment charges and other expenses that resulted from the effects of COVID-19 are recorded as special charges within both operating and non-operating expenses during the nine months ended September 30, 2020. See the table below for a summary of operating and non-operating special charges recorded by segment during the three and nine months ended September 30, 2020.
(in thousands)AirlineSunseeker ResortOther
non-airline
Total
Three Months Ended September 30, 2020
Operating$32,617 $ $968 $33,585 
Non-operating    
Total special charges$32,617 $ $968 $33,585 
Nine Months Ended September 30, 2020
Operating$118,059 $135,443 $27,350 $280,852 
Non-operating 26,632  26,632 
Total special charges$118,059 $162,075 $27,350 $307,484 

Additional detail for the $307.5 million total special charges (operating and non-operating) for the nine months ended September 30, 2020 appears below:

$168.4 million in impairment charges
Includes Airline - $5.0 million; Sunseeker Resort - $136.8 million; Other non-airline - $26.6 million
$89.3 million adjustment resulting from the accelerated retirements of seven airframes and five engines, loss on sale leaseback transactions of seven aircraft, and write-offs of other aircraft related assets
$21.5 million adjustment for additional salary and benefits expense in relation to the elimination of positions as well as other non-recurring compensation expense associated with the acceleration of certain existing stock awards
Includes Airline - $21.1 million; Sunseeker Resort - $0.4 million
$19.8 million related to the termination of the loan agreement with Sixth Street Partners (formerly TSSP) intended to finance the development of Sunseeker Resorts Charlotte Harbor
$14.9 million paid during the third quarter 2020 and remaining $4.9 million recorded in accrued liabilities (subsequently paid in October 2020)
$5.0 million related to suspension of construction at Sunseeker
$3.5 million write-down on various non-aircraft assets and other various expenses

10


Note 3 — Revenue Recognition

Passenger Revenue

Passenger revenue is the most significant category in the Company's reported operating revenues. Passenger revenue is primarily composed of scheduled service revenue (including passenger ticket sales and credit voucher breakage), revenue from ancillary air-related charges (including seat fees, baggage fees, and other travel-related services performed in conjunction with a passenger’s flight), as well as co-brand credit card point redemptions, as outlined below:
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2020201920202019
Scheduled service$79,464 $200,233 $325,404 $672,690 
Ancillary air-related charges100,262 187,776 342,520 583,003 
Co-brand redemptions2,190 3,213 9,423 10,285 
Total passenger revenue$181,916 $391,222 $677,347 $1,265,978 

Sales of passenger tickets not yet flown are recorded in air traffic liability. Passenger revenue is recognized when transportation is provided or when ticket voucher breakage occurs, to the extent different from estimated breakage. As of September 30, 2020, approximately 34.7 percent of the air traffic liability balance was related to forward bookings, with the remaining 65.3 percent related to credit vouchers for future travel.

The normal contract term of passenger tickets is twelve months and revenue associated with future travel will principally be recognized within this time frame. During the nine months ended September 30, 2020, $204.1 million was recognized into passenger revenue that was recorded in the air traffic liability balance of $250.0 million at December 31, 2019.

In April 2020, the Company announced that credits issued for canceled travel in April through the end of the COVID-19 pandemic will have an extended expiration date of two years from the original booking date. This change has been considered in estimating the future breakage rate, which represents the value of credit vouchers that are not expected to be redeemed prior to their contractual expiration date.

Co-brand redemptions

In relation to the travel component of the co-branded credit card contract with Bank of America, the Company has a performance obligation to provide cardholders with points to be used for future travel award redemptions. Therefore, consideration received from Bank of America related to the travel component is deferred based on its relative selling price and is recognized into passenger revenue when the points are redeemed and the transportation is provided. In September 2020, the Company amended its existing co-brand agreement, which among other things extended the term of the agreement through August 2029 and provided for the pre-purchase of credit card points. This transaction was treated as a financing transaction for accounting purposes using an effective interest rate consistent with the Company’s credit rating.

The following table presents the activity of the co-brand point liability as of the dates indicated:
Nine Months Ended September 30,
(in thousands)20202019
Balance at January 1$15,613 $10,708 
Points awarded (deferral of revenue)15,018 14,308 
Points redeemed (recognition of revenue)(9,510)(10,285)
Balance at September 30$21,121 $14,731 

As of September 30, 2020 and 2019, $11.8 million and $10.6 million, respectively, of the current points liability is reflected in Accrued liabilities and represents the Company's current estimate of revenue to be recognized in the next twelve months based on historical trends, with the remaining balance reflected in other noncurrent liabilities expected to be recognized into revenue in periods thereafter. Given the inherent uncertainty of the current operating environment due to COVID-19, the Company will continue to monitor redemption patterns and may adjust its estimates in the future.

11


Note 4 — Property and Equipment

The following table summarizes the Company's property and equipment as of the dates indicated:
(in thousands)September 30, 2020December 31, 2019
Flight equipment, including pre-delivery deposits$2,259,358 $2,289,157 
Computer hardware and software151,602 171,516 
Land and buildings/leasehold improvements86,825 98,885 
Other property and equipment80,156 161,760 
Total property and equipment2,577,941 2,721,318 
Less accumulated depreciation and amortization(573,112)(484,510)
Property and equipment, net$2,004,829 $2,236,808 

Accrued capital expenditures as of September 30, 2020 and December 31, 2019 were $19.3 million and $16.5 million, respectively.

Note 5 — Long-Term Debt

The following table summarizes the Company's Long-term debt and finance lease obligations as of the dates indicated:
(in thousands)September 30, 2020December 31, 2019
Fixed-rate debt and finance lease obligations due through 2029$363,080 $235,071 
Variable-rate debt due through 20291,186,771 1,186,782 
Total long-term debt and finance lease obligations, net of related costs1,549,851 1,421,853 
Less current maturities, net of related costs233,680 173,274 
Long-term debt and finance lease obligations, net of current maturities and related costs$1,316,171 $1,248,579 
Weighted average fixed-interest rate on debt3.9 %3.7 %
Weighted average variable-interest rate on debt2.4 %4.5 %

Maturities of long-term debt and finance lease obligations for the remainder of 2020 and for the next four years and thereafter, in the aggregate, are: remaining in 2020 - $44.7 million; 2021 - $229.3 million; 2022 - $135.5 million; 2023 - $122.1 million; 2024 - $656.3 million; and $362.0 million thereafter.

CARES Act Payroll Support Program Loan

In April 2020 the Company entered into a low-interest rate, senior unsecured term promissory note (the "PSP" Note) with the Treasury under the CARES Act payroll support program. The PSP Note will mature 10 years after issuance and bears interest at a rate of 1.0 percent for the first five years, with interest at the secured overnight financing rate (SOFR) plus 2.0 percent thereafter. The PSP Note is prepayable at any time at par, without penalty.

During the second and third quarters 2020, the Company received $23.1 million in funds under the PSP Note, which is recorded within noncurrent debt on the balance sheet.

In connection with the PSP Note, the Company is required to comply with the relevant provisions of the CARES Act, including those prohibiting the repurchase of common stock and the payment of common stock dividends until September 30, 2021, as well as those restricting the payment of certain executive compensation for periods through March 24, 2022.

Senior Secured Revolving Credit Facility

The Company has a senior secured revolving credit facility under which it is able to borrow up to $81.0 million. The facility has a term of 24 months and the borrowing ability is based on the value of the Airbus A320 series aircraft placed in the collateral pool. In 2019 the Company drew down the entire $81.0 million under this facility. A principal payment of $11.7 million was made in September 2020, and the remaining balance as of September 30, 2020 is $69.3 million. Aircraft remain in the collateral pool for up to two years, and, as of September 30, 2020, there were six aircraft in the collateral pool. The notes for the amounts borrowed under the facility bear interest at a floating rate based on LIBOR and are due in March 2021.


12


Other Secured Debt

In September 2020, the Company borrowed $84.0 million under a loan agreement secured by two aircraft and eight spare engines. The note bears interest at a fixed rate, payable in monthly installments with maturity after five and six years for the spare engines and aircraft, respectively.

Term Loan

In February 2019, the Company entered into a Credit and Guaranty Agreement (the “Term Loan”) to borrow $450.0 million, guaranteed by all of the Company's subsidiaries, excluding Sunseeker Resorts Inc. and its subsidiaries, and other insignificant subsidiaries (the "Term Loan Guarantors"). In February 2020 the Company entered into an amendment to the Term Loan under which the interest rate was reduced by 150 basis points, and the principal amount of the debt was increased by a net amount of $100.0 million to $545.5 million. Quarterly principal payments increased under the amendment, but the remaining provisions were substantially unchanged, including the maturity date. The Term Loan is secured by substantially all property and assets of the Company and the Term Loan Guarantors, excluding aircraft and aircraft engines, and excluding certain other assets. The Term Loan bears interest based on LIBOR and provides for quarterly interest payments along with quarterly principal payments of $1.4 million through February 2024, at which time the Term Loan is due. The Term Loan may be prepaid at any time without penalty.

Construction Loan Agreement

In March 2019, Sunseeker Florida, Inc. (“SFI”), a wholly-owned subsidiary of the Company, entered into a Construction Loan Agreement with certain lenders affiliated with TPG Sixth Street Partners, LLC (the “Lender”). Under the Construction Loan Agreement, SFI would have been able to borrow up to $175.0 million (the “Loan”) to fund the construction of Phase 1 of Sunseeker Resort -Charlotte Harbor. No amount was ever drawn under this agreement.

Due to the various impacts of COVID-19, the Company suspended construction of Sunseeker Resort, and it is uncertain when construction will resume. In light of these conditions, the Company reached a $19.8 million settlement agreement with the Lender to terminate the Loan. During the third quarter 2020, the Company paid $14.9 million of the settlement, and the remaining $4.9 million was paid in October 2020. The expense is reflected within non-operating special charges on the statement of income for the nine months ended September 30, 2020.

Note 6 — Income Taxes

The Company recorded a $15.6 million tax benefit (34.8 percent effective tax rate) compared to a $13.0 million tax provision (22.8 percent effective tax rate) for the three months ended September 30, 2020 and 2019, respectively. The effective tax rate for the three months ended September 30, 2020 differed from the statutory federal income tax rate of 21.0 percent primarily due to the tax accounting impact of the CARES Act which allows the Company to carryback the 2020 net operating loss at the 35.0 percent tax rate applicable in earlier years.

The Company recorded a $166.6 million tax benefit (51.8 percent effective tax rate) compared to a $51.0 million tax provision (22.9 percent effective tax rate) for the nine months ended September 30, 2020 and 2019, respectively. The 51.8 percent effective tax rate for the nine months ended September 30, 2020 differed from the statutory federal income tax rate of 21.0 percent primarily due to the tax accounting impact of the CARES Act which includes a $40.9 million discrete federal income tax benefit related to the full utilization of 2018 and 2019 net operating losses as well as the ability to carryback the 2020 net operating loss at a 35.0 percent rate applicable in earlier years. The effective tax rate was also impacted by the remeasurement of deferred taxes and state taxes. 

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Note 7 — Leases

The Company evaluates all operating leases and they are measured on the balance sheet with a lease liability and right-of-use asset (“ROU”) at inception. ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make scheduled lease payments. Airport terminal leases mostly include variable lease payments outside of those based on a fixed index, and are therefore not recorded as ROU assets.

The following table summarizes the Company's total assets and liabilities related to leases as of the dates indicated:
(in thousands)Classification on the Balance SheetSeptember 30, 2020December 31, 2019
Assets
Operating lease assets(1)
Operating lease right-of-use assets$114,573 $22,081 
Finance lease assets(2)
Property and equipment, net106,777 111,665 
Total lease assets$221,350 $133,746 
Liabilities
Current
Operating(1)
Current operating lease liabilities$13,814 $2,662 
Finance(2)
Current maturities of long-term debt and finance lease obligations7,922 7,666 
Noncurrent
Operating(1)
Noncurrent operating lease liabilities101,864 21,290 
Finance(2)
Long-term debt and finance lease obligations101,955 107,930 
Total lease liabilities$225,555 $139,548 
(1) Represents assets and liabilities of ten aircraft, office equipment, certain airport and terminal facilities, and other assets under operating leases
(2) Represents assets and liabilities of five aircraft under finance leases

Sale-Leaseback Transaction

During the nine months ended September 30, 2020, the Company entered into two separate sale-leaseback transactions involving seven total aircraft. The transactions qualified as sales, and generated $78.2 million of proceeds. As a result of the sales, the aircraft were removed from property and equipment in the Company's balance sheet, resulting in a $49.8 million loss on the sales. The loss is reflected within operating special charges on the statement of income since the Company would not likely have completed the transactions absent cash conservation efforts as a result of COVID. The leased aircraft were subsequently recorded within operating lease right-of-use assets, with the related lease liabilities recorded within current and noncurrent operating lease liabilities on the balance sheet. The proceeds from the sales of aircraft in these transactions are treated as cash inflows from investing activities on the statement of cash flows.

Note 8 — Fair Value Measurements

The Company utilizes the market approach to measure the fair value of its financial assets. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets. The assets classified as Level 2 primarily utilize quoted market prices or alternative pricing sources including transactions involving identical or comparable assets and models utilizing market observable inputs for valuation of these securities. No changes in valuation techniques or inputs occurred during the nine months ended September 30, 2020.

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Financial instruments measured at fair value on a recurring basis:
September 30, 2020December 31, 2019
(in thousands)TotalLevel 1Level 2TotalLevel 1Level 2
Cash equivalents   
Money market funds$80,121 $80,121 $ $42,653 $42,653 $ 
Commercial paper22,783  22,783 5,807  5,807 
Municipal debt securities10,205  10,205 1,202  1,202 
Federal agency debt securities1,340  1,340    
Total cash equivalents114,449 80,121 34,328 49,662 42,653 7,009 
Short-term     
Commercial paper212,992  212,992 161,286  161,286 
Corporate debt securities139,659  139,659 145,975  145,975 
Municipal debt securities52,437  52,437 12,237  12,237 
Federal agency debt securities35,389  35,389 13,515  13,515 
US Treasury bonds1,287  1,287 2,915  2,915 
Total short-term441,764  441,764 335,928  335,928 
Long-term      
Corporate debt securities   15,396  15,396 
US Treasury bonds   146  146 
Total long-term   15,542  15,542 
Total financial instruments$556,213 $80,121 $476,092 $401,132 $42,653 $358,479 

None of the Company's debt is publicly held and as a result, the Company has determined the estimated fair value of these notes to be Level 3. Certain inputs used to determine fair value are unobservable and, therefore, could be sensitive to changes in inputs. The Company utilizes the discounted cash flow method to estimate the fair value of Level 3 debt.

Carrying value and estimated fair value of long-term debt, including current maturities and without reduction for related costs, are as follows:
September 30, 2020December 31, 2019
(in thousands)Carrying ValueEstimated Fair Value