Company Quick10K Filing
⚲
Allegiant Travel
Financials
Price149.02 EPS11
Shares16 P/E14
MCap2,391 P/FCF7
Net Debt1,105 EBIT284
TEV3,496 TEV/EBIT12
TTM 2019-09-30, in MM, except price, ratios
Filings
10-Q 2020-03-31 Filed 2020-05-22
10-K 2019-12-31 Filed 2020-02-27
10-Q 2019-09-30 Filed 2019-10-31
10-Q 2019-06-30 Filed 2019-07-31
10-Q 2019-03-31 Filed 2019-05-08
10-K 2018-12-31 Filed 2019-02-28
10-Q 2018-09-30 Filed 2018-10-31
10-Q 2018-06-30 Filed 2018-08-03
10-Q 2018-03-31 Filed 2018-05-08
10-K 2017-12-31 Filed 2018-03-01
10-Q 2017-09-30 Filed 2017-10-30
10-Q 2017-06-30 Filed 2017-07-31
10-Q 2017-03-31 Filed 2017-05-02
10-K 2016-12-31 Filed 2017-02-24
10-Q 2016-09-30 Filed 2016-11-01
10-Q 2016-06-30 Filed 2016-08-01
10-Q 2016-03-31 Filed 2016-05-02
10-K 2015-12-31 Filed 2016-02-22
10-Q 2015-09-30 Filed 2015-10-29
10-Q 2015-06-30 Filed 2015-07-31
10-Q 2015-03-31 Filed 2015-05-06
10-K 2014-12-31 Filed 2015-02-26
10-Q 2014-09-30 Filed 2014-11-10
10-Q 2014-06-30 Filed 2014-08-08
10-Q 2014-03-31 Filed 2014-05-09
10-K 2013-12-31 Filed 2014-02-28
10-Q 2013-09-30 Filed 2013-11-05
10-Q 2013-06-30 Filed 2013-08-07
10-Q 2013-03-31 Filed 2013-05-08
10-K 2012-12-31 Filed 2013-02-26
10-Q 2012-09-30 Filed 2012-11-07
10-Q 2012-06-30 Filed 2012-08-08
10-Q 2012-03-31 Filed 2012-05-07
10-K 2011-12-31 Filed 2012-02-27
10-Q 2011-09-30 Filed 2011-11-04
10-Q 2011-06-30 Filed 2011-08-09
10-Q 2011-03-31 Filed 2011-05-10
10-K 2010-12-31 Filed 2011-03-11
10-Q 2010-09-30 Filed 2010-11-08
10-Q 2010-06-30 Filed 2010-08-09
10-Q 2010-03-31 Filed 2010-05-07
10-K 2009-12-31 Filed 2010-03-09
Reports
8-K 2020-07-29 Earnings, Officers, Exhibits
8-K 2020-06-23
8-K 2020-05-06
8-K 2020-04-30
8-K 2020-04-27
8-K 2020-04-20
8-K 2020-04-07
8-K 2020-03-18
8-K 2020-02-13
8-K 2020-02-10
8-K 2020-01-29
8-K 2019-12-20
8-K 2019-11-12
8-K 2019-10-24
8-K 2019-10-23
8-K 2019-10-14
8-K 2019-07-24
8-K 2019-06-24
8-K 2019-06-18
8-K 2019-05-17
8-K 2019-05-10
8-K 2019-04-25
8-K 2019-04-24
8-K 2019-03-18
8-K 2019-03-18
8-K 2019-02-11
8-K 2019-02-05
8-K 2019-01-30
8-K 2019-01-09
8-K 2018-10-24
8-K 2018-10-04
8-K 2018-09-28
8-K 2018-09-13
8-K 2018-07-25
8-K 2018-07-19
8-K 2018-06-28
8-K 2018-05-23
8-K 2018-05-14
8-K 2018-04-25
8-K 2018-04-04
8-K 2018-01-31
8-K 2018-01-12
8-K 2018-01-05
8-K 2015-08-13
8-K 2015-07-29
8-K 2015-06-26
8-K 2015-06-18
8-K 2015-05-13
8-K 2015-04-22
8-K 2015-03-26
8-K 2015-03-02
8-K 2015-02-17
8-K 2015-02-03
8-K 2015-01-28

ALGT 10Q Quarterly Report

Content
Part I. Financial Information
Item 1. Consolidated Financial Statements
Note 1 - Summary of Significant Accounting Policies
Note 2 - Impact of The Covid - 19 Pandemic
Note 3 - Revenue Recognition
Note 4 - Property and Equipment
Note 5 - Long - Term Debt
Note 6 - Income Taxes
Note 7 - Leases
Note 8 - Fair Value Measurements
Note 9 - Earnings per Share
Note 10 - Commitments and Contingencies
Note 11 - Segments
Note 12 - Impairment
Note 13 - Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
Exhibits
EX-10.1 ex101pspagr.htm
EX-10.2 ex102notepsp.htm
EX-10.3 ex103warrantagrpsp.htm
EX-12 a2020q1exhibit12.htm
EX-31.1 a2020q1exhibit311.htm
EX-31.2 a2020q1exhibit312.htm
EX-32 a2020q1exhibit32.htm

Allegiant Travel Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
3.02.41.81.20.60.02012201420172020
Assets, Equity
 0.50.40.30.20.10.02012201420172020
Rev, G Profit, Net Income
 0.30.20.1-0.1-0.2-0.32012201420172020
Ops, Inv, Fin
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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
March 31, 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
algtheaderq417a14.jpg
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
☐
 
Smaller 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 May 21, 2020, the registrant had 16,200,067 shares of common stock, $.001 par value per share, outstanding.



EXPLANATORY NOTE
 
On March 25, 2020, the U.S. Securities and Exchange Commission (the “SEC”) issued an order (the "SEC Order") under Section 36 (Release No. 34-88465) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), granting exemptions from specified provisions of the Exchange Act and certain rules thereunder. The SEC Order provides conditional relief to public companies that are unable to timely comply with their filing obligations as a result of the novel coronavirus (“COVID-19”) outbreak. As described in our Form 8-K filed with the SEC on April 30, 2020, we are filing this Form 10-Q on a delayed basis, but within the period required by the SEC Order.

Allegiant Travel Company
Form 10-Q
Table of Contents




PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

ALLEGIANT TRAVEL COMPANY
CONSOLIDATED BALANCE SHEETS
(in thousands)

 
March 31, 2020
 
December 31, 2019
 
(unaudited)
 
 
CURRENT ASSETS
 
 
 
Cash and cash equivalents
$
138,361

 
$
121,888

Restricted cash
15,671

 
14,897

Short-term investments
314,946

 
335,928

Accounts receivable
190,108

 
25,516

Expendable parts, supplies and fuel, net
28,700

 
28,375

Prepaid expenses and other current assets
43,011

 
35,617

TOTAL CURRENT ASSETS
730,797

 
562,221

Property and equipment, net
2,210,721

 
2,236,808

Long-term investments
11,019

 
15,542

Deferred major maintenance, net
133,424

 
129,654

Operating lease right-of-use assets, net
70,260

 
22,081

Deposits and other assets
35,686

 
44,497

TOTAL ASSETS:
$
3,191,907

 
$
3,010,803

CURRENT LIABILITIES
 
 
 
Accounts payable
$
62,460

 
$
27,667

Accrued liabilities
154,009

 
161,693

Air traffic liability
303,835

 
249,950

Current maturities of long-term debt and finance lease obligations, net of related costs
223,600

 
173,274

TOTAL CURRENT LIABILITIES
743,904

 
612,584

Long-term debt and finance lease obligations, net of current maturities and related costs
1,264,389

 
1,248,579

Deferred income taxes
292,126

 
232,520

Other noncurrent liabilities
81,585

 
33,569

TOTAL LIABILITIES:
2,382,004

 
2,127,252

SHAREHOLDERS' EQUITY
 
 
 
Common stock, par value $.001
23

 
23

Treasury shares
(651,352
)
 
(617,579
)
Additional paid in capital
295,267

 
289,933

Accumulated other comprehensive income (loss), net
(624
)
 
98

Retained earnings
1,166,589

 
1,211,076

TOTAL EQUITY:
809,903

 
883,551

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY:
$
3,191,907

 
$
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 March 31,
 
2020
 
2019
OPERATING REVENUES:
 
 
 
Passenger
$
378,911

 
$
419,977

Third party products
15,976


17,141

Fixed fee contracts
8,919

 
10,575

Other
5,375

 
3,929

   Total operating revenues
409,181

 
451,622

OPERATING EXPENSES:
 
 
 
Salary and benefits
112,646

 
119,411

Aircraft fuel
88,813

 
99,682

Station operations
40,999

 
38,965

Depreciation and amortization
43,699

 
36,182

Maintenance and repairs
21,795

 
22,824

Sales and marketing
18,455

 
20,926

Aircraft lease rental
962

 
—

Other
26,717

 
22,554

Special charges
172,900

 
—

   Total operating expenses
526,986

 
360,544

OPERATING INCOME (LOSS)
(117,805
)
 
91,078

OTHER (INCOME) EXPENSES:
 
 
 
Interest expense
18,153

 
18,083

Capitalized interest
(4,067
)
 
(1,503
)
Interest income
(2,311
)
 
(3,201
)
Loss on debt extinguishment
1,222

 
3,677

Other, net
(76
)
 
103

   Total other expenses
12,921

 
17,159

INCOME (LOSS) BEFORE INCOME TAXES
(130,726
)
 
73,919

INCOME TAX PROVISION (BENEFIT)
(97,717
)
 
16,795

NET INCOME (LOSS)
$
(33,009
)
 
$
57,124

Earnings (loss) per share to common shareholders:
 
 
 
Basic
$
(2.08
)
 
$
3.52

Diluted
$
(2.08
)
 
$
3.52

Shares used for computation:
 
 
 
Basic
15,952

 
16,011

Diluted
15,952

 
16,013

 
 
 
 
Cash dividends declared per share:
$
0.70

 
$
0.70



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 March 31,
 
2020
 
2019
NET INCOME (LOSS)
$
(33,009
)
 
$
57,124

Other comprehensive income (loss):
 

 
 

Change in available for sale securities, net of tax
(733
)
 
477

Foreign currency translation adjustments
11

 
(6
)
Total other comprehensive income (loss)
(722
)
 
471

TOTAL COMPREHENSIVE INCOME (LOSS)
$
(33,731
)
 
$
57,595



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 March 31, 2020
 
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, 2019
16,303

 
$
23

 
$
289,933

 
$
98

 
$
1,211,076

 
$
(617,579
)
 
$
883,551

Share-based compensation
113

 
—

 
5,334

 
—

 
—

 
—

 
5,334

Shares repurchased by the Company and held as treasury shares
(217
)
 
—

 
—

 
—

 
—

 
(33,773
)
 
(33,773
)
Cash dividends declared, $0.70 per share for the year
—

 
—

 
—

 
—

 
(11,478
)
 
—

 
(11,478
)
Other comprehensive loss
—

 
—

 
—

 
(722
)
 
—

 
—

 
(722
)
Net loss
—

 
—

 
—

 
—

 
(33,009
)
 
—

 
(33,009
)
Balance at March 31, 2020
16,199

 
$
23

 
$
295,267

 
$
(624
)
 
$
1,166,589

 
$
(651,352
)

$
809,903



 
Three Months Ended March 31, 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
118

 
—

 
5,312

 
—

 
—

 
—

 
5,312

Shares repurchased by the Company and held as treasury shares
(17
)
 
—

 
—

 
—

 
—

 
(2,279
)
 
(2,279
)
Cash dividends declared, $0.70 per share
—

 
—

 
—

 
—

 
(11,394
)
 
—

 
(11,394
)
Other comprehensive income (loss)
—

 
—

 
—

 
471

 
(551
)
 
—

 
(80
)
Net income
—

 
—

 
—

 
—

 
57,124

 
—

 
57,124

Cumulative effect of the New Lease Standard
—

 
—

 
—

 
—

 
(550
)
 
—

 
(550
)
Balance at March 31, 2019
16,284


$
23


$
276,247


$
(190
)

$
1,069,690


$
(607,316
)

$
738,454



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

6


ALLEGIANT TRAVEL COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

 
Three Months Ended March 31,
 
2020
 
2019
Cash flows from operating activities:
 
 
 
Net income (loss)
$
(33,009
)
 
$
57,124

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
43,699

 
36,182

Special charges
163,360

 
—

Other adjustments
67,890

 
18,916

Changes in certain assets and liabilities:
 
 
 
Air traffic liability
53,885

 
64,011

Other - net
(189,508
)
 
(16,136
)
Net cash provided by operating activities
106,317

 
160,097

Cash flows from investing activities:
 
 
 
Purchase of investment securities
(105,382
)
 
(68,447
)
Proceeds from maturities of investment securities
130,720

 
124,472

Purchase of property and equipment, including capitalized interest
(134,483
)
 
(122,551
)
Other investing activities
2,283

 
6,973

Net cash used in investing activities
(106,862
)
 
(59,553
)
Cash flows from financing activities:
 
 
 
Cash dividends paid to shareholders
(11,478
)
 
(11,394
)
Proceeds from the issuance of debt
128,296

 
494,000

Repurchase of common stock
(33,773
)
 
(2,279
)
Principal payments on debt and finance lease obligations
(62,723
)
 
(386,329
)
Debt issuance costs
(2,530
)
 
(30,060
)
Other financing activities
—

 
(2,615
)
Net cash provided by financing activities
17,792

 
61,323

NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
17,247

 
161,867

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD
136,785

 
95,911

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD
$
154,032

 
$
257,778

 
 
 
 
CASH PAYMENTS (RECEIPTS) FOR:
 
 
 
Interest paid, net of amount capitalized
$
12,031

 
$
20,924

Income tax payments (refunds)
22

 
(4,490
)
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS:
 
 
 
Right-of-use (ROU) assets acquired
$
50,218

 
$
23,320

Purchases of property and equipment in accrued liabilities
46,452

 
3,565




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

7


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.

Note 2 — Impact of the COVID-19 Pandemic

In December 2019, a novel strain of coronavirus (“COVID-19”) was reported in Wuhan, China. The World Health Organization (“WHO”) declared COVID-19 a “pandemic” on March 11, 2020 and the U.S. government declared a national state of emergency on March 13, 2020. The U.S. government has implemented enhanced screenings, quarantine requirements and other travel restrictions in connection with the COVID-19 outbreak. U.S. state governments have instituted similar measures, such as “shelter-in-place” requirements, and declared states of emergency. In addition, the U.S. government has strongly recommended “social distancing” measures, including avoiding gathering in groups of more than 10 people and avoiding discretionary travel. Many attractions in the leisure destinations the Company serves, such as Walt Disney World in Orlando, Florida and Las Vegas hotels, have temporarily closed, also impacting travel to these destinations.

Government restrictions and consumer fears relating to COVID-19 have impacted flight loads, resulted in unprecedented cancellations of bookings and substantially reduced demand for new bookings. While the Company performed largely as expected in January and February of 2020, a severe reduction in air travel during March 2020 resulted in a 36.0 percent decline in operating revenues for March 2020 as compared to March 2019. To the date of this report, a steep decline in demand has continued throughout the airline industry, and 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.

8


The Company has taken many actions to mitigate the effects of COVID-19 on its business, as outlined below:

Network and Customer Experience

•
Reduced April capacity by 87.4 percent
•
Continually evaluating forward schedules to adjust capacity according to demand trends
•
Waived change and cancellation fees for all customers
•
Extended expiry on credit vouchers to two years
•
Offered refunds on all flights canceled by the Company and also on itineraries canceled by customers

Cash Outlay Reduction

•
Suspended all stock buybacks and dividends
•
Executives have reduced salaries by 50 percent and Board members are foregoing cash compensation
•
Enacted a hiring freeze and offering voluntary leave
–
More than 1,100 team members are currently participating in some form of pay reduction program
•
Suspended nearly all contractor positions, subscriptions, non-essential training and travel
•
Suspended all non-essential capital expenditures including, but not limited to, Sunseeker Resorts, Teesnap and Allegiant Nonstop family entertainment centers
•
Extended payment terms and renegotiating contracts with vendors

Liquidity Response

•
Implemented immediate and meaningful cash burn reductions, which is the Company's most effective way to manage liquidity
•
Received additional financing of $31.0 million in April 2020, secured by two aircraft
•
As of April 30, 2020 the Company had 28 unencumbered aircraft and eight unencumbered spare engines
•
In April 2020, signed payroll support agreement with U.S. Department of Treasury (the "Treasury") in the amount of $171.9 million comprised of $150.3 million in direct grants and a $21.6 million low-interest, unsecured 10-year loan
–
Received first installment of $86.0 million in April, with remainder expected over the next three months
–
The Company will issue warrants to the U.S. Department of the Treasury to purchase 25,898 shares at a strike price of $83.33 per share
•
Expect to receive federal income tax refunds in 2020 and 2021 of up to $194.0 million related to 2018, 2019, and 2020 net operating loss carrybacks due to the change in loss carryback period under the CARES Act
•
Submitted application under the Loan Program under CARES Act with the option to access up to $276.0 million secured loan by the end of September 2020

Given the above actions 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 as discussed above, and projected cash flows from operations.

Special Charges

The effects of COVID-19 triggered an impairment review as of March 31, 2020, and due to the uncertainty of our non-airline activity moving forward a non-cash impairment charge was recognized during the first quarter (see Note 12 for additional detail). The Company also identified expenses that were unique and specific to COVID-19. This includes salary expense, additional aircraft cleaning expense, and other various expenses. See below for a summary of charges by segment:
(in thousands)
 
Airline
 
Sunseeker Resort
 
Other
non-airline
 
Total
COVID-19 related expenses
 
$
9,540

 
$
—

 
$
—

 
$
9,540

Impairment of assets (non-cash)
 
—

 
136,793

 
26,567

 
163,360

Total special charges
 
$
9,540

 
$
136,793

 
$
26,567

 
$
172,900


9

Note 3 — Revenue Recognition

Passenger Revenue

Passenger revenue is the most significant category in our 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 March 31,
(in thousands)
2020
 
2019
Scheduled service
$
197,261

 
$
234,772

Ancillary air-related charges
176,964

 
181,700

Co-brand redemptions
4,686

 
3,505

Total passenger revenue
$
378,911

 
$
419,977

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 March 31, 2020, approximately 45 percent of the air traffic liability balance was related to forward bookings, with the remaining 55 percent related to credit vouchers for future travel.

The contract term of passenger tickets is twelve months and revenue associated with future travel will principally be recognized within this time frame. During the three months ended March 31, 2020, $191.6 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 which is two years from the original booking date. This change will be 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.

The following table presents the activity of the co-brand point liability as of the dates indicated:
 
Three Months Ended March 31,
(in thousands)
2020
 
2019
Balance at January 1
$
15,613

 
$
10,708

Points awarded (deferral of revenue)
6,354

 
4,164

Points redeemed (recognition of revenue)
(4,686
)
 
(3,505
)
Balance at March 31
$
17,281

 
$
11,367

As of March 31, 2020 and 2019, $12.5 million and $8.9 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.


10


Note 4 — Property and Equipment

Property and equipment:
(in thousands)
March 31, 2020
 
December 31, 2019
Flight equipment, including pre-delivery deposits
$
2,397,141

 
$
2,289,157

Computer hardware and software
153,842

 
171,516

Land and buildings/leasehold improvements
81,954

 
98,885

Other property and equipment
80,816

 
161,760

Total property and equipment
2,713,753

 
2,721,318

Less accumulated depreciation and amortization
(503,032
)
 
(484,510
)
Property and equipment, net
$
2,210,721

 
$
2,236,808
Accrued capital expenditures as of March 31, 2020 and December 31, 2019 were $46.5 million and $16.5 million, respectively.

Note 5 — Long-Term Debt

Long-term debt and finance lease obligations:
(in thousands)
March 31, 2020
 
December 31, 2019
Fixed-rate debt and finance lease obligations due through 2029
$
230,531

 
$
235,071

Variable-rate debt due through 2029
1,257,458

 
1,186,782

Total long-term debt and finance lease obligations, net of related costs
1,487,989

 
1,421,853

Less current maturities, net of related costs
223,600

 
173,274

Long-term debt and finance lease obligations, net of current maturities and related costs
$
1,264,389

 
$
1,248,579

 
 
 
 
Weighted average fixed-interest rate on debt
3.8
%
 
3.7
%
Weighted average variable-interest rate on debt
3.7
%
 
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 - $140.9 million; 2021 - $185.8 million; 2022 - $117.8 million; 2023 - $105.0 million; 2024 - $639.1 million; and $299.4 million thereafter.

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 $81.0 million under this facility. Aircraft remain in the collateral pool for up to two years, and, as of March 31, 2020, there were eight 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.

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.


11


Note 6 — Income Taxes

The Company recorded a $97.7 million tax benefit for the three months ended March 31, 2020, which was 74.7 percent of loss before taxes, compared to a $16.8 million tax provision, or 22.7 percent of income before taxes, for the three months ended March 31, 2019. The effective tax rate for the three months ended March 31, 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 $39.6 million discrete federal income tax benefit related to the full utilization of 2018 and 2019 net operating losses against taxable income in earlier years in which 35.0 percent was the enacted tax rate; the ability to carryback the 2020 net operating loss at a 35.0 percent rate applicable in earlier years; a deferred tax remeasurement related to the 2020 tax year; and state taxes.

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.
(in thousands)
Classification on the Balance Sheet
March 31, 2020
 
December 31, 2019
Assets
 
 
 
 
Operating lease assets(1) 
Operating lease right-of-use assets
$
70,260

 
$
22,081

Finance lease assets(2)
Property and equipment, net
110,036

 
111,665

Total lease assets
 
$
180,296

 
$
133,746

 
 
 
 
 
Liabilities
 
 
 
 
Current
 
 
 
 
Operating(1)
Accrued liabilities
$
5,954

 
$
2,662

Finance(2)
Current maturities of long-term debt and finance lease obligations
7,750

 
7,666

Noncurrent
 
 
 
 
Operating(1)
Other noncurrent liabilities
66,545

 
21,290

Finance(2)
Long-term debt and finance lease obligations
105,960

 
107,930

Total lease liabilities
 
$
186,209

 
$
139,548
(1) Represents assets and liabilities of three aircraft, office facilities, office equipment, certain airport and terminal facilities, and other assets under operating lease
(2) Represents assets and liabilities of five aircraft under finance lease

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 three months ended March 31, 2020.

12

Financial instruments measured at fair value on a recurring basis:
 
 
March 31, 2020
 
December 31, 2019
(in thousands)
Total
 
Level 1
 
Level 2
 
Total
 
Level 1
 
Level 2
Cash equivalents
 
 
 
 
 
 
 
 
 
 
 
Money market funds
$
47,774

 
$
47,774

 
$
—

 
$
42,653

 
$
42,653

 
$
—

Commercial paper
7,135

 
—

 
7,135

 
5,807

 
—

 
5,807

Municipal debt securities
4,547

 
—

 
4,547

 
1,202

 
—

 
1,202

Total cash equivalents
59,456

 
47,774

 
11,682

 
49,662

 
42,653

 
7,009

Short-term
 

 
 

 
 
 
 

 
 

 
 

Corporate debt securities
158,060

 
—

 
158,060

 
145,975

 
—

 
145,975

Commercial paper
142,667

 
—

 
142,667

 
161,286

 
—

 
161,286

Municipal debt securities
8,678

 
—

 
8,678

 
12,237

 
—

 
12,237

US Treasury bonds
3,076

 
—

 
3,076

 
2,915

 
—

 
2,915

Federal agency debt securities
2,465

 
—

 
2,465

 
13,515

 
—

 
13,515

Total short-term
314,946

 
—

 
314,946

 
335,928

 
—

 
335,928

Long-term
 

 
 

 
 

 
 

 
 

 
 

Federal agency debt securities
11,019

 
—

 
11,019

 
—

 
—

 
—

Corporate debt securities
—

 
—

 
—

 
15,396

 
—

 
15,396

US Treasury bonds
—

 
—

 
—

 
146

 
—

 
146

Total long-term
11,019

 
—

 
11,019

 
15,542

 
—

 
15,542

Total financial instruments
$
385,421

 
$
47,774

 
$
337,647

 
$
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:
 
March 31, 2020
 
December 31, 2019
 
 
(in thousands)
Carrying Value
 
Estimated Fair Value
 
Carrying Value
 
Estimated Fair Value
 
Hierarchy Level
Non-publicly held debt
$
1,397,339

 
$
1,235,274

 
$
1,329,882

 
$
1,140,232

 
3

Due to their short-term nature, the carrying amounts of cash, cash equivalents, restricted cash, accounts receivable and accounts payable approximate fair value.

Note 9 — Earnings per Share

Basic and diluted earnings per share are computed pursuant to the two-class method. Under this method, the Company attributes net income to two classes: common stock and unvested restricted stock. Unvested restricted stock awards granted to employees under the Company’s Long-Term Incentive Plan are considered participating securities as they receive non-forfeitable rights to cash dividends at the same rate as common stock.

Diluted net income per share is calculated using the more dilutive of the two methods. Under both methods, the exercise of employee stock options is assumed using the treasury stock method. The assumption of vesting of restricted stock, however, differs:

1.
Assume vesting of restricted stock using the treasury stock method.

2.
Assume unvested restricted stock awards are not vested, and allocate earnings to common shares and unvested restricted stock awards using the two-class method.

For the three months ended March 31, 2020 and 2019, respectively, the second method, which assumes unvested awards are not vested, was used in the computation because it was more dilutive than the first method.

13

The following table sets forth the computation of net income per share, on a basic and diluted basis, for the periods indicated (share count and dollar amounts other than per-share amounts in table are in thousands):
 
Three Months Ended March 31,
 
2020
 
2019
Basic:
 
 
 
Net income (loss)
$
(33,009
)
 
$
57,124

Less net income allocated to participating securities
(236
)
 
(799
)
Net income (loss) attributable to common stock
$
(33,245
)
 
$
56,325

Earnings (loss) per share, basic
$
(2.08
)
 
$
3.52

Weighted-average shares outstanding
15,952

 
16,011

Diluted:
 

 
 

Net income (loss)
$
(33,009
)
 
$
57,124

Less net income allocated to participating securities
(236
)
 
(798
)
Net income (loss) attributable to common stock
$
(33,245
)
 
$
56,326

Earnings (loss) per share, diluted
$
(2.08
)
 
$
3.52

Weighted-average shares outstanding
15,952

 
16,011

Dilutive effect of stock options and restricted stock
62

 
31

Adjusted weighted-average shares outstanding under treasury stock method
16,014

 
16,042

Participating securities excluded under two-class method
(62
)
 
(29
)
Adjusted weighted-average shares outstanding under two-class method
15,952

 
16,013

Note 10 — Commitments and Contingencies

As of March 31, 2020, the Company had commitments to purchase eight Airbus A320 aircraft as well as purchase agreements for four spare engines.

The Company's contractual purchase commitments consist primarily of aircraft and engine acquisitions. The total future commitments are as follows:
(in thousands)
March 31, 2020
Remaining in 2020
$
126,141

2021
37,900

2022
21,000

Total commitments
$
185,041

Contingencies

The Company is subject to certain legal and administrative actions it considers routine to its business activities. The Company believes the ultimate outcome of any potential and pending legal or administrative matters will not have a material adverse impact on its financial position, liquidity or results of operations.

Note 11 — Segments

Operating segments are components of a company for which separate financial and operating information is regularly evaluated and reported to the Chief Operating Decision Maker ("CODM"), and is used to allocate resources and analyze performance. The Company's CODM is the executive leadership team, which reviews information about the Company's three operating segments: the Airline, Sunseeker Resort, and other non-airline.

Airline Segment

The Airline segment operates as a single business unit and includes all scheduled service air transportation, ancillary air-related products and services, third party products and services, fixed fee contract air transportation and other airline-related revenue. The CODM evaluation includes, but is not limited to, route and flight profitability data, ancillary and third party product and service offering statistics, and fixed fee contract information when making resource allocation decisions with the goal of optimizing consolidated financial results.

14



Sunseeker Resort Segment

The Sunseeker Resort segment represents activity related to the development and construction of Sunseeker Resort in Southwest Florida, as well as the operation of Kingsway golf course. Due to the various impacts of COVID-19, the Company suspended construction of Sunseeker Resort and temporarily closed operation of Kingsway golf course. At this time, it is uncertain when construction will resume and when the golf course will re-open. The Company recognized a $136.8 million non-cash impairment charge related to Sunseeker assets in the first quarter 2020 (refer to Note 12 for additional information).

Other non-Airline Segment

The other non-airline segment includes the Teesnap golf course management solution and Allegiant Nonstop family entertainment centers. Allegiant Nonstop family entertainment centers are comprised of games, attractions, and food facilities.

Due to the impacts of COVID-19, the Company temporarily closed the Allegiant Nonstop location in Warren, MI, and permanently closed the Allegiant Nonstop location in Clearfield, Utah. The Company also permanently discontinued all activity for the Allegiant Nonstop location in West Jordan, Utah, which was being developed. An $18.3 million non-cash impairment charge was recognized in connection with these closures (refer to Note 12 for additional information).

In July 2019, management began evaluating strategic alternatives for Teesnap, and its business-to-business software as a service offering. In the first quarter of 2020, the Company recognized a non-cash $8.3 million impairment charge over Teesnap assets (refer to Note 12 for additional information). Teesnap remains an asset held for sale.

Selected information for the Company's segments and the reconciliation to the consolidated financial statement amounts are as follows:
(in thousands)
Airline(1)
 
Sunseeker Resort(2)
 
Other non- airline(3)
 
Consolidated
Three Months Ended March 31, 2020
 
 
 
 
 
 
 
Operating revenue:
 
 
 
 
 
 
 
    Passenger
$
378,911

 
$
—

 
$
—

 
$