algt-20220630--12-31FALSE0001362468June 30, 20222022Q20.0010.001Recent Accounting PronouncementsImpact of the COVID-19 PandemicIn April 2021, the Company received $13.8 million in additional funds related to the PSP2 which included a loan of $1.7 million. In consideration for these additional funds, the Company issued warrants ( the "PSP2 Warrants") to the Treasury to acquire 924 shares of common stock at a price of $179.23 per share (based on the price of the Company's common stock on the Nasdaq Stock Market on December 24, 2020).
In April 2021, the Company through its airline operating subsidiary Allegiant Air, LLC entered into a Payroll Support Program 3 Agreement (the "PSP3") with the Treasury under section 7301 of the American Rescue Plan Act of 2021 and received a total of $98.4 million.
The funds received under PSP2 and PSP3 were used exclusively for wages, salaries and benefits.
Prior to January 1, 2022, all Payroll Support Program funds had been fully utilized.
13.81.7924179.2398.4The table below summarizes special charges recorded during the three and six months ended June 30, 2022, and 2021.
| | | | | | | | | | | | | | | | | | | | |
| | | | | | Three Months Ended June 30, | | |
(in thousands) | | | | | | 2022 | | 2021 | | | | |
Operating | | | | | | $ | 142 | | | $ | 1,738 | | | | | |
Non-operating | | | | | | — | | | — | | | | | |
Total special charges | | | | | | $ | 142 | | | $ | 1,738 | | | | | |
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UNITED STATES
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 June 30, 2022 |
| | |
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 $0.001 | | 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):
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Large accelerated filer | ☒ | | Accelerated filer | ☐ |
| | | | |
Non-accelerated filer | ☐ | | Smaller reporting company | ☐ |
| | | | |
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 July 22, 2022, the registrant had 18,181,322 shares of common stock, $0.001 par value per share, outstanding.
ALLEGIANT TRAVEL COMPANY
FORM 10-Q
TABLE OF CONTENTS
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PART I. | FINANCIAL INFORMATION | |
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ITEM 1. | | |
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ITEM 2. | | |
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ITEM 3. | | |
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ITEM 4. | | |
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PART II. | OTHER INFORMATION | |
| | |
ITEM 1. | | |
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ITEM 1A. | | |
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ITEM 2. | | |
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ITEM 3. | | |
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ITEM 4. | | |
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ITEM 5. | | |
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ITEM 6. | | |
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PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
ALLEGIANT TRAVEL COMPANY
CONSOLIDATED BALANCE SHEETS
(in thousands)
| | | | | | | | | | | |
| June 30, 2022 | | December 31, 2021 |
| (unaudited) | | |
CURRENT ASSETS | | | |
Cash and cash equivalents | $ | 396,091 | | | $ | 363,378 | |
Restricted cash | 21,960 | | | 37,323 | |
Short-term investments | 813,243 | | | 819,478 | |
Accounts receivable | 85,315 | | | 62,659 | |
Expendable parts, supplies and fuel, net | 35,566 | | | 27,500 | |
Prepaid expenses and other current assets | 50,270 | | | 28,073 | |
| | | |
TOTAL CURRENT ASSETS | 1,402,445 | | | 1,338,411 | |
Property and equipment, net | 2,555,334 | | | 2,259,507 | |
Long-term investments | — | | | 2,231 | |
Deferred major maintenance, net | 147,387 | | | 146,850 | |
Operating lease right-of-use assets, net | 121,078 | | | 130,087 | |
Deposits and other assets | 211,629 | | | 113,987 | |
TOTAL ASSETS: | $ | 4,437,873 | | | $ | 3,991,073 | |
CURRENT LIABILITIES | | | |
Accounts payable | $ | 63,558 | | | $ | 43,566 | |
Accrued liabilities | 226,083 | | | 162,892 | |
Current operating lease liabilities | 19,551 | | | 19,081 | |
Air traffic liability | 451,087 | | | 307,453 | |
Current maturities of long-term debt and finance lease obligations, net of related costs | 157,957 | | | 130,053 | |
TOTAL CURRENT LIABILITIES | 918,236 | | | 663,045 | |
Long-term debt and finance lease obligations, net of current maturities and related costs | 1,803,533 | | | 1,612,486 | |
Deferred income taxes | 345,118 | | | 346,137 | |
Noncurrent operating lease liabilities | 105,198 | | | 115,067 | |
Other noncurrent liabilities | 33,417 | | | 30,786 | |
TOTAL LIABILITIES: | 3,205,502 | | | 2,767,521 | |
SHAREHOLDERS' EQUITY | | | |
Common stock, par value $0.001 | 25 | | | 25 | |
Treasury shares | (633,332) | | | (638,057) | |
Additional paid in capital | 698,982 | | | 692,053 | |
Accumulated other comprehensive income, net | 2,744 | | | 2,056 | |
Retained earnings | 1,163,952 | | | 1,167,475 | |
TOTAL EQUITY: | 1,232,371 | | | 1,223,552 | |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY: | $ | 4,437,873 | | | $ | 3,991,073 | |
The accompanying notes are an integral part of these consolidated financial statements.
ALLEGIANT TRAVEL COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
OPERATING REVENUES: | | | | | | | |
Passenger | $ | 592,604 | | | $ | 443,747 | | | $ | 1,056,566 | | | $ | 700,441 | |
Third party products | 27,787 | | | 23,001 | | | 50,267 | | | 36,622 | |
Fixed fee contracts | 8,920 | | | 5,134 | | | 22,305 | | | 12,827 | |
Other | 536 | | | 551 | | | 818 | | | 1,667 | |
Total operating revenues | 629,847 | | | 472,433 | | | 1,129,956 | | | 751,557 | |
OPERATING EXPENSES: | | | | | | | |
Aircraft fuel | 257,288 | | | 109,456 | | | 421,425 | | | 192,305 | |
Salaries and benefits | 139,681 | | | 121,906 | | | 273,691 | | | 239,856 | |
Station operations | 66,909 | | | 57,210 | | | 132,652 | | | 100,303 | |
Depreciation and amortization | 49,183 | | | 44,522 | | | 95,526 | | | 87,696 | |
Maintenance and repairs | 31,123 | | | 22,597 | | | 58,943 | | | 45,968 | |
Sales and marketing | 27,297 | | | 17,632 | | | 49,647 | | | 29,241 | |
Aircraft lease rental | 5,451 | | | 5,117 | | | 11,584 | | | 9,837 | |
Other | 26,643 | | | 15,501 | | | 52,845 | | | 33,276 | |
Payroll Support Programs grant recognition | — | | | (61,213) | | | — | | | (152,971) | |
Special charges | 142 | | | 854 | | | 284 | | | 2,592 | |
Total operating expenses | 603,717 | | | 333,582 | | | 1,096,597 | | | 588,103 | |
OPERATING INCOME | 26,130 | | | 138,851 | | | 33,359 | | | 163,454 | |
OTHER (INCOME) EXPENSES: | | | | | | | |
Interest expense | 24,497 | | | 16,720 | | | 44,288 | | | 33,508 | |
Capitalized interest | (2,082) | | | — | | | (3,298) | | | — | |
Interest income | (2,218) | | | (500) | | | (2,991) | | | (963) | |
Loss on debt extinguishment | — | | | 71 | | | — | | | 71 | |
| | | | | | | |
Other, net | 101 | | | (11) | | | 95 | | | (404) | |
Total other expenses | 20,298 | | | 16,280 | | | 38,094 | | | 32,212 | |
INCOME (LOSS) BEFORE INCOME TAXES | 5,832 | | | 122,571 | | | (4,735) | | | 131,242 | |
INCOME TAX PROVISION (BENEFIT) | 1,474 | | | 27,544 | | | (1,212) | | | 29,346 | |
NET INCOME (LOSS) | $ | 4,358 | | | $ | 95,027 | | | $ | (3,523) | | | $ | 101,896 | |
Earnings (loss) per share to common shareholders: | | | | | | | |
Basic | $ | 0.24 | | | $ | 5.49 | | | $ | (0.20) | | | $ | 6.04 | |
Diluted | $ | 0.24 | | | $ | 5.49 | | | $ | (0.20) | | | $ | 6.04 | |
Shares used for computation: | | | | | | | |
Basic | 17,987 | | | 17,064 | | | 17,970 | | | 16,618 | |
Diluted | 18,006 | | | 17,073 | | | 17,970 | | | 16,632 | |
| | | | | | | |
Cash dividends declared per share: | $ | — | | | $ | — | | | $ | — | | | $ | — | |
The accompanying notes are an integral part of these consolidated financial statements.
ALLEGIANT TRAVEL COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
NET INCOME (LOSS) | $ | 4,358 | | | $ | 95,027 | | | $ | (3,523) | | | $ | 101,896 | |
Other comprehensive income: | | | | | | | |
Change in available for sale securities, net of tax | (2,667) | | | (126) | | | 688 | | | (98) | |
| | | | | | | |
| | | | | | | |
Total other comprehensive income | (2,667) | | | (126) | | | 688 | | | (98) | |
TOTAL COMPREHENSIVE INCOME (LOSS) | $ | 1,691 | | | $ | 94,901 | | | $ | (2,835) | | | $ | 101,798 | |
| | | | | | | |
| | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
ALLEGIANT TRAVEL COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2022 |
| Common stock outstanding | | Par value | | Additional paid-in capital | | Accumulated other comprehensive income (loss) | | Retained earnings | | Treasury shares | | Total shareholders' equity |
Balance at March 31, 2022 | 18,119 | | | $ | 25 | | | $ | 695,323 | | | $ | 5,411 | | | $ | 1,159,594 | | | $ | (638,057) | | | $ | 1,222,296 | |
Share-based compensation | 31 | | | — | | | 3,659 | | | — | | | — | | | — | | | 3,659 | |
| | | | | | | | | | | | | |
Stock issued under employee stock purchase plan | 30 | | | — | | | — | | | — | | | — | | | 4,725 | | | 4,725 | |
Other comprehensive (loss) | — | | | — | | | — | | | (2,667) | | | — | | | — | | | (2,667) | |
| | | | | | | | | | | | | |
Net income | — | | | — | | | — | | | — | | | 4,358 | | | — | | | 4,358 | |
Balance at June 30, 2022 | 18,180 | | | $ | 25 | | | $ | 698,982 | | | $ | 2,744 | | | $ | 1,163,952 | | | $ | (633,332) | | | $ | 1,232,371 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, 2022 |
| 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, 2021 | 18,111 | | | $ | 25 | | | $ | 692,053 | | | $ | 2,056 | | | $ | 1,167,475 | | | $ | (638,057) | | | $ | 1,223,552 | |
Share-based compensation | 39 | | | — | | | 6,929 | | | — | | | — | | | — | | | 6,929 | |
| | | | | | | | | | | | | |
Stock issued under employee stock purchase plan | 30 | | | — | | | — | | | — | | | — | | | 4,725 | | | 4,725 | |
Other comprehensive income | — | | | — | | | — | | | 688 | | | — | | | — | | | 688 | |
| | | | | | | | | | | | | |
Net (loss) | — | | | — | | | — | | | — | | | (3,523) | | | — | | | (3,523) | |
Balance at June 30, 2022 | 18,180 | | | $ | 25 | | | $ | 698,982 | | | $ | 2,744 | | | $ | 1,163,952 | | | $ | (633,332) | | | $ | 1,232,371 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2021 |
| Common stock outstanding | | Par value | | Additional paid-in capital | | Accumulated other comprehensive income (loss) | | Retained earnings | | Treasury shares | | Total shareholders' equity |
Balance at March 31, 2021 | 16,416 | | | $ | 23 | | | $ | 333,147 | | | $ | 1 | | | $ | 1,022,491 | | | $ | (646,008) | | | $ | 709,654 | |
Share-based compensation | 1 | | | — | | | 3,504 | | | — | | | — | | | — | | | 3,504 | |
Issuance of common stock, net of forfeitures | 1,553 | | | 2 | | | 335,137 | | | — | | | — | | | — | | | 335,139 | |
Stock issued under employee stock purchase plan | 16 | | | — | | | — | | | — | | | — | | | 3,831 | | | 3,831 | |
Other comprehensive (loss) | — | | | — | | | — | | | (126) | | | — | | | — | | | (126) | |
Payroll Support Programs warrant issuance | — | | | — | | | 105 | | | — | | | — | | | — | | | 105 | |
Net income | — | | | — | | | — | | | — | | | 95,027 | | | — | | | 95,027 | |
Balance at June 30, 2021 | 17,986 | | | $ | 25 | | | $ | 671,893 | | | $ | (125) | | | $ | 1,117,518 | | | $ | (642,177) | | | $ | 1,147,134 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, 2021 |
| Common stock outstanding | | Par value | | Additional paid-in capital | | Accumulated other comprehensive income | | Retained earnings | | Treasury shares | | Total shareholders' equity |
Balance at December 31, 2020 | 16,405 | | | $ | 23 | | | $ | 329,753 | | | $ | (27) | | | $ | 1,015,622 | | | $ | (646,008) | | | $ | 699,363 | |
Share-based compensation | 12 | | | — | | | 6,898 | | | — | | | — | | | — | | | 6,898 | |
Issuance of common stock, net of forfeitures | 1,553 | | | 2 | | | 335,137 | | | — | | | — | | | — | | | 335,139 | |
Stock issued under employee stock purchase plan | 16 | | | — | | | — | | | — | | | — | | | 3,831 | | | 3,831 | |
| | | | | | | | | | | | | |
Other comprehensive (loss) | — | | | — | | | — | | | (98) | | | — | | | — | | | (98) | |
Payroll Support Programs warrant issuance | — | | | — | | | 105 | | | — | | | — | | | — | | | 105 | |
Net income | — | | | — | | | — | | | — | | | 101,896 | | | — | | | 101,896 | |
Balance at June 30, 2021 | 17,986 | | | $ | 25 | | | $ | 671,893 | | | $ | (125) | | | $ | 1,117,518 | | | $ | (642,177) | | | $ | 1,147,134 | |
ALLEGIANT TRAVEL COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| | | | | | | | | | | |
| Six Months Ended June 30, |
| 2022 | | 2021 |
Cash flows from operating activities: | | | |
Net income (loss) | $ | (3,523) | | | $ | 101,896 | |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | |
Depreciation and amortization | 95,526 | | | 87,696 | |
Special charges | 284 | | | 2,592 | |
Other adjustments | 13,657 | | | 18,184 | |
Changes in certain assets and liabilities: | | | |
Air traffic liability | 143,634 | | | 129,220 | |
Deferred Payroll Support Programs grant recognition | — | | | 49,210 | |
Other - net | (21,796) | | | 16,175 | |
Net cash provided by operating activities | 227,782 | | | 404,973 | |
Cash flows from investing activities: | | | |
Purchase of investment securities | (672,318) | | | (673,722) | |
Proceeds from maturities of investment securities | 675,656 | | | 436,364 | |
Aircraft pre-delivery deposits | (51,111) | | | (3,300) | |
Purchase of property and equipment | (205,158) | | | (131,184) | |
| | | |
Other investing activities | 645 | | | 2,443 | |
Net cash (used in) investing activities | (252,286) | | | (369,399) | |
Cash flows from financing activities: | | | |
| | | |
Proceeds from the issuance of debt and finance lease obligations | 195,800 | | | 106,657 | |
| | | |
Principal payments on debt and finance lease obligations | (70,502) | | | (199,627) | |
Debt issuance costs | (669) | | | (606) | |
Proceeds from issuance of common stock | — | | | 335,137 | |
Other financing activities | (82,775) | | | 3,936 | |
Net cash provided by financing activities | 41,854 | | | 245,497 | |
NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | 17,350 | | | 281,071 | |
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD | 400,701 | | | 170,319 | |
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD | $ | 418,051 | | | $ | 451,390 | |
| | | |
| | | |
| | | |
CASH PAYMENTS (RECEIPTS) FOR: | | | |
Interest paid, net of amount capitalized | $ | 36,828 | | | $ | 26,379 | |
Income tax payments (refunds) | (46) | | | 4,873 | |
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS: | | | |
Right-of-use (ROU) assets acquired | $ | — | | | $ | 23,157 | |
Flight equipment acquired under finance leases | 90,476 | | | 13,833 | |
Purchases of property and equipment in accrued liabilities | 45,887 | | | 5,088 | |
| | | |
The accompanying notes are an integral part of these consolidated financial statements.
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 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, 2021 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.
The Company reclassified certain prior period amounts to conform to the current period presentation. Unless otherwise noted, all amounts disclosed are stated before consideration of income taxes.
Note 2 — Revenue Recognition
Passenger Revenue
Passenger revenue is the most significant category in the Company's reported operating revenues, as outlined below:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(in thousands) | 2022 | | 2021 | | 2022 | | 2021 |
Scheduled service | $ | 297,343 | | | $ | 225,613 | | | $ | 521,196 | | | $ | 357,540 | |
Ancillary air-related charges | 283,551 | | | 213,445 | | | 513,016 | | | 334,518 | |
Loyalty redemptions | 11,710 | | | 4,689 | | | 22,354 | | | 8,383 | |
Total passenger revenue | $ | 592,604 | | | $ | 443,747 | | | $ | 1,056,566 | | | $ | 700,441 | |
Sales of passenger tickets not yet flown are recorded in air traffic liability. Passenger revenue is recognized when transportation is provided. As of June 30, 2022, the air traffic liability balance was $451.1 million, of which approximately $392.5 million was related to forward bookings, with the remaining $58.6 million related to credit vouchers for future travel.
The normal contract term of passenger tickets is 12 months and passenger revenue associated with future travel will principally be recognized within this time frame. Of the $307.5 million that was recorded in the air traffic liability balance as of December 31, 2021, approximately 69.3 percent was recognized into passenger revenue during the six months ended June 30, 2022.
In 2020, the Company announced that credit vouchers issued for canceled travel beginning in January 2020 would have an extended expiration date of two years from the original booking date. This policy continued for vouchers issued through June 30, 2021. Effective July 1, 2021, vouchers issued have an expiration date of one year from the original booking date. Estimates of passenger revenue to be recognized from air traffic liability for credit voucher breakage may be subject to variability and differ from historical experience due to the change in contract duration and uncertainty regarding demand for future air travel.
The Company periodically evaluates the estimated amount of credit vouchers expected to expire unused and any adjustment is removed from air traffic liability and included in passenger revenue in the period in which the evaluation is complete.
Loyalty redemptions
In relation to the travel component of the Allways® Allegiant World Mastercard® 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 revenue when the points are redeemed and the transportation is provided. Similarly, in relation to the Allways Rewards program, points earned through the program are deferred based on the stand-alone selling price and recognized into revenue when the points are redeemed and the underlying service has been provided.
The following table presents the activity of the point liability for the periods indicated:
| | | | | | | | | | | |
| Six Months Ended June 30, |
(in thousands) | 2022 | | 2021 |
Points balance at January 1 | $ | 40,490 | | | $ | 21,841 | |
Points awarded (deferral of revenue) | 35,821 | | | 10,696 | |
Points redeemed (recognition of revenue) | (22,354) | | | (8,383) | |
Points balance at June 30 | $ | 53,957 | | | $ | 24,154 | |
As of June 30, 2022 and 2021, $29.4 million and $11.7 million, respectively, of the current points liability is reflected in accrued liabilities and represents the current estimate of revenue to be recognized in the next 12 months based on historical trends, with the remaining balance reflected in other noncurrent liabilities expected to be recognized into revenue in periods thereafter.
Note 3 — Property and Equipment
The following table summarizes the Company's property and equipment as of the dates indicated:
| | | | | | | | | | | |
(in thousands) | June 30, 2022 | | December 31, 2021 |
Flight equipment, including pre-delivery deposits | $ | 2,749,955 | | | $ | 2,573,657 | |
Computer hardware and software | 180,085 | | | 160,237 | |
Land and buildings/leasehold improvements | 59,897 | | | 59,735 | |
Other property and equipment | 88,137 | | | 78,192 | |
Sunseeker Resort | 221,240 | | | 83,864 | |
Total property and equipment | 3,299,314 | | | 2,955,685 | |
Less accumulated depreciation and amortization | (743,980) | | | (696,178) | |
Property and equipment, net | $ | 2,555,334 | | | $ | 2,259,507 | |
Accrued capital expenditures as of June 30, 2022 and December 31, 2021 were $45.9 million and $17.7 million, respectively.
Note 4 — Long-Term Debt
The following table summarizes the Company's long-term debt and finance lease obligations as of the dates indicated:
| | | | | | | | | | | |
(in thousands) | June 30, 2022 | | December 31, 2021 |
Fixed-rate debt and finance lease obligations due through 2032 | $ | 1,047,543 | | | $ | 827,382 | |
Variable-rate debt due through 2029 | 913,947 | | | 915,157 | |
Total debt and finance lease obligations, net of related costs | 1,961,490 | | | 1,742,539 | |
Less current maturities, net of related costs | 157,957 | | | 130,053 | |
Long-term debt and finance lease obligations, net of current maturities and related costs | $ | 1,803,533 | | | $ | 1,612,486 | |
| | | |
Weighted average fixed-interest rate on debt | 5.7% | | 5.8% |
Weighted average variable-interest rate on debt | 3.9% | | 2.5% |
Maturities of long-term debt and finance lease obligations for the remainder of 2022 and for the next four years and thereafter, in the aggregate, are: remaining in 2022 - $73.4 million; 2023 - $153.1 million; 2024 - $823.6 million; 2025 - $143.6 million; 2026 - $137.2 million; and $630.6 million thereafter.
Construction Loan Agreement
In October 2021, Sunseeker Florida, Inc. (“SFI”), a wholly-owned subsidiary of the Company, entered into a Credit Agreement pursuant to which SFI may borrow up to $350.0 million funded by one or more entities directly or indirectly managed by Castlelake, L.P. (“Lender”) to fund the remaining construction of the initial phases of Sunseeker Resort at Charlotte Harbor (the "Resort"). In 2021, the Company made a $30 million deposit into a construction disbursement account and in April 2022, the lender funded $87.5 million into the construction disbursement account for the Resort. As of June 30, 2022, $262.5 million has been advanced under this Credit Agreement.
Other Secured Debt
In April 2022, the Company borrowed $62.3 million under a loan agreement secured by Airbus A320 series aircraft. The notes bear interest at a fixed rate, payable in quarterly installments maturing in April 2027.
In April 2022, the Company borrowed $46.0 million under a loan agreement secured by Airbus A320 series aircraft. The notes bear interest at a variable rate, payable in quarterly installments maturing in April 2028.
Note 5 — Income Taxes
The Company recorded an effective tax rate of 25.3 percent and 22.5 percent for the three months ended June 30, 2022 and 2021, respectively. The effective tax rate for the three months ended June 30, 2022 differed from the statutory Federal income tax rate of 21.0 percent primarily due to state income taxes and the impact of permanent tax differences. While the Company expects its effective tax rate to be fairly consistent in the near term, it will vary depending on recurring items such as the amount of income earned in each state and the state tax rate applicable to such income. Discrete items during interim periods may also affect the Company's tax rates.
The Company recorded an effective tax rate of 25.6 percent and 22.4 percent for the six months ended June 30, 2022 and 2021, respectively. The effective tax rate for the six months ended June 30, 2022 differed from the statutory Federal income tax rate of 21.0 percent primarily due to state income taxes and the impact of permanent tax differences of which none are individually significant.
Note 6 — 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 six months ended June 30, 2022.
Financial instruments measured at fair value on a recurring basis:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2022 | | December 31, 2021 |
(in thousands) | Total | | Level 1 | | Level 2 | | Total | | Level 1 | | Level 2 |
Cash equivalents | | | | | | | | | | | |
Money market funds | $ | 64,859 | | | $ | 64,859 | | | $ | — | | | $ | 25,019 | | | $ | 25,019 | | | $ | — | |
Commercial Paper | 193,710 | | | — | | | 193,710 | | | 179,455 | | | — | | | 179,455 | |
Municipal debt securities | 43,267 | | | — | | | 43,267 | | | 63,875 | | | — | | | 63,875 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Total cash equivalents | 301,836 | | | 64,859 | | | 236,977 | | | 268,349 | | | 25,019 | | | 243,330 | |
Short-term | | | | | | | | | | | |
Commercial paper | 462,917 | | | — | | | 462,917 | | | 419,469 | | | — | | | 419,469 | |
| | | | | | | | | | | |
Corporate debt securities | 195,698 | | | — | | | 195,698 | | | 234,436 | | | — | | | 234,436 | |
Municipal debt securities | 103,272 | | | — | | | 103,272 | | | 165,573 | | | — | | | 165,573 | |
Federal agency debt securities | 51,356 | | | — | | | 51,356 | | | — | | | — | | | — | |
Total short-term | 813,243 | | | — | | | 813,243 | | | 819,478 | | | — | | | 819,478 | |
Long-term | | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Municipal debt securities | — | | | — | | | — | | | 2,231 | | | — | | | 2,231 | |
| | | | | | | | | | | |
Total long-term | — | | | — | | | — | | | 2,231 | | | — | | | 2,231 | |
Total financial instruments | $ | 1,115,079 | | | $ | 64,859 | | | $ | 1,050,220 | | | $ | 1,090,058 | | | $ | 25,019 | | | $ | 1,065,039 | |
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, excluding finance leases, including current maturities and without reduction for related costs, are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2022 | | December 31, 2021 | | |
(in thousands) | Carrying Value | | Estimated Fair Value | | Carrying Value | | Estimated Fair Value | | Hierarchy Level |
Non-publicly held debt | $ | 1,580,302 | | | $ | 1,275,697 | | | $ | 1,447,462 | | | $ | 1,261,170 | | | 3 |
Due to their short-term nature, the carrying amounts of cash, restricted cash, accounts receivable and accounts payable approximate fair value.
Note 7 — Earnings (Loss) per Share
Basic and diluted earnings (loss) per share are computed pursuant to the two-class method. Under this method, the Company attributes net income (loss) 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 June 30, 2022, the second method was used because it was more dilutive than the first method. For the six months ended June 30, 2022, basic and diluted (loss) per share are the same because of the (loss) position.
The following table sets forth the computation of net income (loss) per share, on a basic and diluted basis, for the periods indicated (share count and dollar amounts other than per-share amounts in the table are in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Basic: | | | | | | | |
Net income (loss) | $ | 4,358 | | | $ | 95,027 | | | $ | (3,523) | | | $ | 101,896 | |
Less income allocated to participating securities | (39) | | | (1,285) | | | — | | | (1,451) | |
Net income (loss) attributable to common stock | $ | 4,319 | | | $ | 93,742 | | | $ | (3,523) | | | $ | 100,445 | |
Earnings (loss) per share, basic | $ | 0.24 | | | $ | 5.49 | | | $ | (0.20) | | | $ | 6.04 | |
Weighted-average shares outstanding | 17,987 | | | 17,064 | | | 17,970 | | | 16,618 | |
Diluted: | | | | | | | |
Net income (loss) | $ | 4,358 | | | $ | 95,027 | | | $ | (3,523) | | | $ | 101,896 | |
Less income allocated to participating securities | (39) | | | (1,284) | | | — | | | (1,449) | |
Net income (loss) attributable to common stock | $ | 4,319 | | | $ | 93,743 | | | $ | (3,523) | | | $ | 100,447 | |
Earnings (loss) per share, diluted | $ | 0.24 | | | $ | 5.49 | | | $ | (0.20) | | | $ | 6.04 | |
Weighted-average shares outstanding | 17,987 | | | 17,064 | | | 17,970 | | | 16,618 | |
Dilutive effect of stock options and restricted stock | 31 | | | 123 | | | — | | | 128 | |
Adjusted weighted-average shares outstanding under treasury stock method | 18,018 | | | 17,187 | | | 17,970 | | | 16,746 | |
Participating securities excluded under two-class method | (12) | | | (114) | | | — | | | (114) | |
Adjusted weighted-average shares outstanding under two-class method | 18,006 | | | 17,073 | | | 17,970 | | | 16,632 | |
Note 8 — 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 9 — 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 two operating segments: Airline and Sunseeker Resort.
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.
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 renovation of Aileron Golf Course (formerly known as Kingsway Golf Course). Plans for the resort include a 500-room hotel and two towers offering more than 180 one, two and three-bedroom suites, bar and restaurant options, and other amenities. The golf course is a short drive from the resort site and is considered, from a planning and strategic perspective, to be an additional resort amenity. The construction of Sunseeker Resort is an extension of the Company's leisure travel focus and it is expected that many customers flying to Southwest Florida on Allegiant will elect to stay at this resort and enjoy its amenities.
Selected information for the Company's segments and the reconciliation to the consolidated financial statement amounts are as follows:
| | | | | | | | | | | | | | | | | | | | | | |
(in thousands) | | Airline | | Sunseeker Resort | | | | Consolidated |
Three Months Ended June 30, 2022 | | | | | | | | |
Operating revenue: | | | | | | | | |
Passenger | | $ | 592,604 | | | $ | — | | | | | $ | 592,604 | |
Third party products | | 27,787 | | | — | | | | | 27,787 | |
Fixed fee contract | | 8,920 | | | — | | | | | 8,920 | |
Other | | 536 | | | — | | | | | 536 | |
Operating income (loss) | | 27,882 | | | (1,752) | | | | | 26,130 | |
Interest expense, net | | 17,402 | | | 2,795 | | | | | 20,197 | |
Depreciation and amortization | | 49,170 | | | 13 | | | | | 49,183 | |
Capital expenditures | | 96,023 | | | 73,595 | | | | | 169,618 | |
Three Months Ended June 30, 2021 | | | | | | | | |
Operating revenue: | | | | | | | | |
Passenger | | $ | 443,747 | | | $ | — | | | | | $ | 443,747 | |
Third party products | | 23,001 | | | — | | | | | 23,001 | |
Fixed fee contract | | 5,134 | | | — | | | | | 5,134 | |
Other | | 551 | | | — | | | | | 551 | |
Operating income (loss) | | 141,233 | | | (2,382) | | | | | 138,851 | |
Interest expense, net | | 16,220 | | | — | | | | | 16,220 | |
Depreciation and amortization | | 44,485 | | | 37 | | | | | 44,522 | |
Capital expenditures | | 81,041 | | | — | | | | | 81,041 | |
| | | | | | | | | | | | | | | | | | | | | | |
(in thousands) | | Airline | | Sunseeker Resort | | | | Consolidated |
Six Months Ended June 30, 2022 | | | | | | | | |
Operating revenue: | | | | | | | | |
Passenger | | $ | 1,056,566 | | | $ | — | | | | | $ | 1,056,566 | |
Third party products | | 50,267 | | | — | | | | | 50,267 | |
Fixed fee contract | | 22,305 | | |