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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 ended						September 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

Allegiant Travel Company

(Exact Name of Registrant as Specified in Its Charter)

Nevada						20-4745737
(State or Other Jurisdiction of Incorporation or Organization)						(IRS Employer Identification No.)
1201 North Town Center Drive
Las Vegas,			Nevada			89144
(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 class

Trading Symbol

Name of each exchange on which registered

Common stock, par value $.001

ALGT

NASDAQ 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 filer

☒

Accelerated filer

☐

Non-accelerated filer

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Smaller reporting company

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Emerging growth company

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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.

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ALLEGIANT TRAVEL COMPANY

FORM 10-Q

TABLE OF CONTENTS

PART I.			FINANCIAL INFORMATION
ITEM 1.			Consolidated Financial Statements			4
ITEM 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			21
ITEM 3.			Quantitative and Qualitative Disclosures About Market Risk			31
ITEM 4.			Controls and Procedures			32
PART II.			OTHER INFORMATION
ITEM 1.			Legal Proceedings			32
ITEM 1A.			Risk Factors			32
ITEM 2.			Unregistered Sales of Equity Securities and Use of Proceeds			32
ITEM 3.			Defaults Upon Senior Securities			32
ITEM 4.			Mine Safety Disclosures			32
ITEM 5.			Other Information			32
ITEM 6.			Exhibits			33
			Signatures			34

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PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

ALLEGIANT TRAVEL COMPANY

CONSOLIDATED BALANCE SHEETS

(in thousands)

			September 30, 2020						December 31, 2019
			(unaudited)
CURRENT ASSETS
Cash and cash equivalents			$	268,042					$	121,888
Restricted cash			17,426						14,897
Short-term investments			441,764						335,928
Accounts receivable			166,924						25,516
Expendable parts, supplies and fuel, net			26,305						28,375
Prepaid expenses and other current assets			30,742						35,617
TOTAL CURRENT ASSETS			951,203						562,221
Property and equipment, net			2,004,829						2,236,808
Long-term investments			—						15,542
Deferred major maintenance, net			127,457						129,654
Operating lease right-of-use assets, net			114,573						22,081
Deposits and other assets			25,031						44,497
TOTAL ASSETS:			$	3,223,093					$	3,010,803
CURRENT LIABILITIES
Accounts payable			$	64,674					$	27,667
Accrued liabilities			130,665						159,031
Current operating lease liabilities			13,814						2,662
Air traffic liability			334,061						249,950
Current maturities of long-term debt and finance lease obligations, net of related costs			233,680						173,274
TOTAL CURRENT LIABILITIES			776,894						612,584
Long-term debt and finance lease obligations, net of current maturities and related costs			1,316,171						1,248,579
Deferred income taxes			292,661						232,520
Noncurrent operating lease liabilities			101,864						21,290
Other noncurrent liabilities			23,805						12,279
TOTAL LIABILITIES:			2,511,395						2,127,252
SHAREHOLDERS' EQUITY
Common stock, par value $.001			23						23
Treasury shares			(648,118)						(617,579)
Additional paid in capital			315,150						289,933
Accumulated other comprehensive income, net			183						98
Retained earnings			1,044,460						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.

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ALLEGIANT TRAVEL COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

 (unaudited)

			Three Months Ended September 30,												Nine Months Ended September 30,
			2020						2019						2020						2019
OPERATING REVENUES:
Passenger			$	181,916					$	391,222					$	677,347					$	1,265,978
Third party products			11,337						18,207						35,756						53,557
Fixed fee contracts			5,284						19,797						17,440						42,859
Other			2,447						7,283						12,969						17,498
Total operating revenues			200,984						436,509						743,512						1,379,892
OPERATING EXPENSES:
Salary and benefits			95,829						107,586						303,264						340,589
Aircraft fuel			52,540						104,583						168,711						324,253
Depreciation and amortization			45,291						39,436						132,285						114,112
Station operations			39,954						43,522						108,359						128,357
Maintenance and repairs			14,038						24,768						48,866						68,470
Sales and marketing			7,967						17,591						35,331						59,057
Aircraft lease rental			3,015						—						5,404						—
Other			19,755						26,907						70,225						73,756
CARES Act grant recognition			(77,909)						—						(152,448)						—
Special charges			33,585						—						280,852						—
Total operating expenses			234,065						364,393						1,000,849						1,108,594
OPERATING INCOME (LOSS)			(33,081)						72,116						(257,337)						271,298
OTHER (INCOME) EXPENSES:
Interest expense			11,943						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, net			552						(57)						1,173						(41)
Total other expenses			11,627						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:
Basic			16,006						16,037						15,953						16,037
Diluted			16,006						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.

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ALLEGIANT TRAVEL COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

 

			Three Months Ended September 30,												Nine Months Ended September 30,
			2020						2019						2020						2019
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 adjustments			51						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.

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ALLEGIANT TRAVEL COMPANY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands)

(unaudited)

			Three Months Ended September 30, 2020
			Common stock outstanding						Par value						Additional paid-in capital						Accumulated other comprehensive income (loss)						Retained earnings						Treasury shares						Total shareholders' equity
Balance at June 30, 2020			16,240						$	23					$	310,628					$	424					$	1,073,603					$	(648,118)					$	736,560
Share-based compensation			58						—						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, 2020			16,298						$	23					$	315,150					$	183					$	1,044,460					$	(648,118)					$	711,698

			Nine Months Ended September 30, 2020
			Common stock outstanding						Par value						Additional paid-in capital						Accumulated other comprehensive income						Retained earnings						Treasury shares						Total shareholders' equity
Balance at December 31, 2019			16,303						$	23					$	289,933					$	98					$	1,211,076					$	(617,579)					$	883,551
Share-based compensation			171						—						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 plan			41						—						—						—						—						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, 2020			16,298						$	23					$	315,150					$	183					$	1,044,460					$	(648,118)					$	711,698

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			Three Months Ended September 30, 2019
			Common stock outstanding						Par value						Additional paid-in capital						Accumulated other comprehensive income (loss)						Retained earnings						Treasury shares						Total shareholders' equity
Balance at June 30, 2019			16,305						$	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, 2019			16,195						$	23					$	285,318					$	29					$	1,161,893					$	(620,655)					$	826,608

			Nine Months Ended September 30, 2019
			Common stock outstanding						Par value						Additional paid-in capital						Accumulated other comprehensive income (loss)						Retained earnings						Treasury shares						Total shareholders' equity
Balance at December 31, 2018			16,183						$	23					$	270,935					$	(661)					$	1,025,061					$	(605,037)					$	690,321
Share-based compensation			124						—						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 plan			20						—						—						—						—						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, 2019			16,195						$	23					$	285,318					$	29					$	1,161,893					$	(620,655)					$	826,608

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

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ALLEGIANT TRAVEL COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

			Nine Months Ended September 30,
			2020						2019
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 amortization			132,285						114,112
Special charges			279,114						—
Other adjustments			89,342						60,135
Changes in certain assets and liabilities:
Air traffic liability			84,111						55,446
Other - net			(152,872)						(79,862)
Net cash provided by operating activities			276,725						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 transactions			78,185						—
Other investing activities			1,247						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 debt			272,548						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 activities			4,609						325
Net cash provided by financing activities			81,102						15,257
NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH			148,683						12,678
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD			136,785						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 liabilities			19,294						6,091

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

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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.

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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)						Airline						Sunseeker Resort						Other 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

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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)			2020						2019						2020						2019
Scheduled service			$	79,464					$	200,233					$	325,404					$	672,690
Ancillary air-related charges			100,262						187,776						342,520						583,003
Co-brand redemptions			2,190						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)			2020						2019
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.

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Note 4 — Property and Equipment

The following table summarizes the Company's property and equipment as of the dates indicated:

(in thousands)			September 30, 2020						December 31, 2019
Flight equipment, including pre-delivery deposits			$	2,259,358					$	2,289,157
Computer hardware and software			151,602						171,516
Land and buildings/leasehold improvements			86,825						98,885
Other property and equipment			80,156						161,760
Total property and equipment			2,577,941						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, 2020						December 31, 2019
Fixed-rate debt and finance lease obligations due through 2029			$	363,080					$	235,071
Variable-rate debt due through 2029			1,186,771						1,186,782
Total long-term debt and finance lease obligations, net of related costs			1,549,851						1,421,853
Less current maturities, net of related costs			233,680						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 debt			3.9		%				3.7		%
Weighted average variable-interest rate on debt			2.4		%				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.

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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 Sheet			September 30, 2020						December 31, 2019
Assets
Operating lease assets(1)			Operating lease right-of-use assets			$	114,573					$	22,081
Finance lease assets(2)			Property and equipment, net			106,777						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 obligations			7,922						7,666
Noncurrent
Operating(1)			Noncurrent operating lease liabilities			101,864						21,290
Finance(2)			Long-term debt and finance lease obligations			101,955						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, 2020																		December 31, 2019
(in thousands)			Total						Level 1						Level 2						Total						Level 1						Level 2
Cash equivalents
Money market funds			$	80,121					$	80,121					$	—					$	42,653					$	42,653					$	—
Commercial paper			22,783						—						22,783						5,807						—						5,807
Municipal debt securities			10,205						—						10,205						1,202						—						1,202
Federal agency debt securities			1,340						—						1,340						—						—						—
Total cash equivalents			114,449						80,121						34,328						49,662						42,653						7,009
Short-term
Commercial paper			212,992						—						212,992						161,286						—						161,286
Corporate debt securities			139,659						—						139,659						145,975						—						145,975
Municipal debt securities			52,437						—						52,437						12,237						—						12,237
Federal agency debt securities			35,389						—						35,389						13,515						—						13,515
US Treasury bonds			1,287						—						1,287						2,915						—						2,915
Total short-term			441,764						—						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, 2020

December 31, 2019

(in thousands)

Carrying Value

Estimated Fair Value