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 has no independent assets or operations, and all guarantees of the Company's publicly held debt are full and unconditional and joint and several. Any subsidiaries of the parent company other than the subsidiary guarantors are minor. The Company's investments in unconsolidated affiliates, which are 50 percent or less owned, are accounted for under the equity or cost method. 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, 2018 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
Recently Adopted Standards
In February 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-02, Leases (Topic 842), (the "New Lease Standard"). This standard requires leases, other than short-term, to be recognized on the balance sheet as a lease liability and a corresponding right-of-use asset.
Lease payments include fixed payments, variable payments based on an index or rate, reasonably certain purchase options, termination penalties, and others as required by the standard. Lease payments do not include variable lease payments other than those that depend on an index or rate, any guarantee by the lessee of the lessor’s debt, or any amount allocated to non-lease components. This standard is effective for interim and annual reporting periods beginning after December 15, 2018 and the Company adopted the New Lease Standard as of January 1, 2019. The Company also elected the package of practical expedients, which among other things, does not require reassessment of lease classification.
The Company adopted the New Lease Standard using the modified retrospective transition approach as of the effective date as permitted by the amendments in ASU 2018-11, "Targeted Improvements - Leases (Topic 842)." Under this method, the cumulative effect adjustment to the opening balance of retained earnings is recognized at the adoption date. As a result, the Company was not required to adjust its comparative period financial information for effects of the standard or make the new required lease disclosures for periods before the date of adoption on January 1, 2019.
The Company's consolidated balance sheet was affected by this standard, but the consolidated statement of income and liquidity were not significantly impacted. The most significant change to the consolidated balance sheet upon adoption on January 1, 2019 relates to the recognition of new right-of-use (ROU) assets of
$18.0 million
and operating liabilities of
$19.1 million
. The Company's accounting for finance leases remains substantially unchanged.
See Note 5, "Leases," for more information.
Note 2 — 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 (includes passenger ticket sales and credit voucher breakage), revenue from ancillary air-related charges (includes seat fees, baggage fees, and other travel-related services performed in conjunction with a passenger’s flight), as well as co-brand point redemptions, as outlined below:
|
|
|
|
|
|
|
|
|
|
Three Months Ended March,
|
(in thousands)
|
2019
|
|
2018
|
Scheduled service
|
$
|
234,772
|
|
|
$
|
238,520
|
|
Ancillary air-related charges
|
181,700
|
|
|
154,717
|
|
Co-brand redemptions
|
3,505
|
|
|
3,534
|
|
Total passenger revenue
|
$
|
419,977
|
|
|
$
|
396,771
|
|
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.
The contract term of passenger tickets is 12 months and revenue associated with future travel will principally be recognized within this time frame.
$175.7 million
was recognized into passenger revenue during the three months ended
March 31, 2019
that was recorded in the air traffic liability balance of
$212.2 million
at
December 31, 2018
.
Co-brand redemptions
In relation to the travel component of the 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,
|
(in thousands)
|
2019
|
|
2018
|
Balance at January 1
|
$
|
10,708
|
|
|
$
|
8,903
|
|
Points awarded (deferral of revenue)
|
4,164
|
|
|
3,233
|
|
Points redeemed (recognition of revenue)
|
(3,505
|
)
|
|
(3,534
|
)
|
Balance at March 31
|
$
|
11,367
|
|
|
$
|
8,602
|
|
As of March 31, 2019 and March 31, 2018,
$8.9 million
and
$5.7 million
, respectively, of the current points liability is reflected in Accrued liabilities and represents our 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.
Note 3 — Property and Equipment
Property and equipment (in thousands):
|
|
|
|
|
|
|
|
|
|
As of March 31, 2019
|
|
As of December 31, 2018
|
Flight equipment, including pre-delivery deposits
|
$
|
2,002,777
|
|
|
$
|
1,905,157
|
|
Computer hardware and software
|
143,369
|
|
|
140,385
|
|
Land and buildings/leasehold improvements
|
85,925
|
|
|
85,925
|
|
Other property and equipment
|
106,159
|
|
|
89,778
|
|
Total property and equipment
|
2,338,230
|
|
|
2,221,245
|
|
Less accumulated depreciation and amortization
|
(397,750
|
)
|
|
(373,977
|
)
|
Property and equipment, net
|
$
|
1,940,480
|
|
|
$
|
1,847,268
|
|
Note 4 — Long-Term Debt
Long-term debt and finance lease obligations (in thousands):
|
|
|
|
|
|
|
|
|
|
As of March 31, 2019
|
|
As of December 31, 2018
|
Fixed-rate debt and finance lease obligations due through 2030
(1) (2)
|
$
|
325,353
|
|
|
$
|
640,806
|
|
Variable-rate debt due through 2028
|
1,032,383
|
|
|
630,927
|
|
Total long-term debt and finance lease obligations, net of related costs
|
1,357,736
|
|
|
1,271,733
|
|
Less current maturities, net of related costs
(1)
|
154,027
|
|
|
152,287
|
|
Long-term debt and finance lease obligations, net of current maturities and related costs
|
$
|
1,203,709
|
|
|
$
|
1,119,446
|
|
|
|
|
|
Weighted average fixed-interest rate on debt
|
3.9
|
%
|
|
5.3
|
%
|
Weighted average variable-interest rate on debt
|
5.5
|
%
|
|
4.2
|
%
|
(1) As of March 31, 2019, and December 31, 2018, respectively,
$80.1 million
and
$428.0 million
of the Company's Unsecured Senior Notes were classified as long-term as management refinanced the borrowings on a long-term basis in February 2019, as discussed below.
(2) Includes finance lease obligations secured by
five
A320 series aircraft.
Maturities of long-term debt and finance lease obligations for the remainder of
2019
and for the next four years and thereafter, in the aggregate, are:
remaining in 2019
-
$196.2 million
;
2020
-
$124.0 million
;
2021
-
$144.4 million
;
2022
-
$70.1 million
;
2023
-
$57.2 million
; and
$765.8 million
thereafter.
Consolidated Variable Interest Entity
The Company evaluates ownership, contractual lease arrangements and other interests in entities to determine if they are variable interest entities ("VIEs") based on the nature and extent of those interests. These evaluations can be complex and involve judgment and the use of estimates and assumptions based on available historical information and management’s judgment, among other factors. The Company consolidates a VIE when, among other criteria, it has the power to direct the activities that most significantly impact the VIE’s economic performance as well as the obligation to absorb losses or the right to receive benefits of the VIE, thus making the Company the primary beneficiary of the VIE.
In March 2019, the Company, through a wholly owned subsidiary, entered into agreements with a trust to borrow
$44.0 million
secured by
one
Airbus A320 series aircraft. The trust was funded on inception. These borrowings bear interest at a blended rate of
3.8 percent
, payable in quarterly installments through March 2029, at which time the Company will have a purchase option at a fixed amount. As this transaction is a common control transaction, the Company, as the primary beneficiary, has measured and recorded the assets and liabilities at their carrying values, which were
$39.1 million
and
$44.0 million
, respectively, at the time of borrowing.
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
, and
$46.9 million
is outstanding as of
March 31, 2019
. The facility has a current term of
24
months and is based on the value of Airbus A320 series aircraft placed in the collateral pool. Aircraft may remain in the collateral pool for up to two years, and, as of March 31, 2019, there were
nine
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 on March 31, 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"). 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 has a
five
-year term, bears interest based on LIBOR and provides for quarterly interest payments along with quarterly principal payments of
$1.1 million
through February 2024, at which time the Term Loan is due. The Term Loan may be prepaid at any time without penalty.
In connection with the Term Loan, the Company conducted a tender offer for its
5.5 percent
senior unsecured obligation, as outlined below.
General Unsecured Senior Notes
In June 2014, the Company completed an offering of
$300.0 million
aggregate principal amount of senior unsecured obligations (the "Notes") which will mature in July 2019. In December 2016, the Company completed an offering of an additional
$150.0 million
principal amount of these notes, which were issued at a price of
101.5 percent
of the principal amount, plus accrued interest from July 15, 2016. The Notes bear interest at a rate of
5.5 percent
per year, payable in cash semi-annually, on January 15th and July 15th of each year.
In connection with the Term Loan discussed above, the Company completed a tender offer, whereby it purchased
$347.9 million
of the Notes, and incurred related debt extinguishment costs of
$3.7 million
. The indenture governing the Notes was amended to eliminate most of the restrictive covenants and certain events of default, reduce the minimum notice period required for redemptions of the Notes from 30 days as previously required by the indenture to three business days, and amend certain other provisions applicable to the Notes. The
$428.0 million
net proceeds from the Term Loan have been, or will be, used to purchase the Notes. The Company expects to call the remaining balance of the Notes in advance of their July 2019 maturity.
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 may borrow up to
$175.0 million
(the “Loan”) to fund the construction of Phase 1 of Sunseeker Resort -Charlotte Harbor (the “Project”). No amount has been drawn under this agreement as of
March 31, 2019
.
Under the Construction Loan Agreement, the Lender is to provide the final
$175.0 million
of funding for the Project, with initial funding to come from the Company. The loan is secured by the Project and, for a period of time, the surrounding land owned by SFI. The Company has guaranteed one-third of the debt, has agreed to bear responsibility under a Non-Recourse Carve-Out Guaranty, and has agreed to guarantee completion of the Project in accordance with approved plans and specifications. All of the shares in SFI are also pledged to secure the loan. The Loan bears interest based on LIBOR and matures in March 2023.
Note 5 — Leases
The Company determines if an arrangement is a lease at inception and has lease agreements for office facilities, office equipment, certain airport and terminal facilities, and other space and assets. These commitments have remaining non-cancelable lease terms, with lease expirations which range from 2019 to 2036.
As a result of the New Lease Standard, certain real estate and property leases, and various other operating leases have been measured on the balance sheet with a lease liability and right-of-use asset ("ROU"). Airport terminal leases mostly include variable lease payments outside of those based on a fixed index, and are therefore excluded from consideration.
Application of this standard resulted in the recognition of
$23.3 million
in ROU assets and a corresponding lease liability of
$24.2 million
(with
$22.0 million
classified as long-term within Other non-current liabilities and the remainder classified as short-term within Accrued liabilities) as of
March 31, 2019
. Accounting for finance leases is substantially unchanged.
Operating leases are included in operating lease ROU assets, accrued liabilities, and other noncurrent liabilities on the consolidated balance sheets. Finance leases are included in property and equipment, current maturities of long-term debt and finance leases, and long-term debt and finance leases, net of current maturities, on the consolidated balance sheets. 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. ROU assets and liabilities are recognized on the lease commencement date based on the present value of lease payments over the lease term. The present value of lease payments is calculated using the incremental borrowing rate at lease commencement, which takes into consideration recent debt issuances as well as other applicable market data available.
Lease terms include options to extend when it is reasonably certain that the option will be exercised. Leases with a term of 12 months or less are not recorded on the balance sheet. Additionally, lease and non-lease components are accounted for as a single lease component for real estate agreements.
In addition to operating leases the Company leases certain aircraft and, as of
March 31, 2019
, had five aircraft under finance leases with remaining terms to 2029.
See Note 8, Commitments and Contingencies, for further detail.
Lease Costs
The components of lease expense were as follows:
|
|
|
|
|
|
|
|
Three Months Ended
|
(in thousands)
|
Classification on the Statements of Income
|
March 31, 2019
|
Finance lease costs:
|
|
|
Amortization of assets
|
Depreciation and amortization
|
$
|
1,629
|
|
Interest on lease liabilities
|
Interest expense
|
1,346
|
|
Operating lease cost
|
Station operations; Maintenance and repairs; Other operating expense
|
775
|
|
Variable lease cost
|
Station operations; Maintenance and repairs; Other operating expense
|
3,092
|
|
Total lease cost
|
|
$
|
6,842
|
|
Lease position as of
March 31, 2019
The table below presents the lease-related assets and liabilities recorded on the balance sheet.
|
|
|
|
|
|
(in thousands)
|
Classification on the Balance Sheet
|
As of March 31, 2019
|
Assets
|
|
|
Operating lease assets
|
Operating lease right-of-use assets, net
|
$
|
22,788
|
|
Finance lease assets
|
Property and equipment, net
|
116,553
|
|
Total lease assets
|
|
$
|
139,341
|
|
|
|
|
Liabilities
|
|
|
Current
|
|
|
Operating
|
Accrued liabilities
|
$
|
2,101
|
|
Finance
|
Current maturities of long-term debt and finance lease obligations
|
7,417
|
|
Noncurrent
|
|
|
Operating
|
Other noncurrent liabilities
|
22,049
|
|
Finance
|
Long-term debt and finance lease obligations
|
113,710
|
|
Total lease liabilities
|
|
$
|
145,277
|
|
|
|
|
Weighted-average remaining lease term
|
|
|
Operating leases
|
|
9.5 years
|
|
Finance leases
|
|
10.6 years
|
|
Weighted-average discount rate
|
|
|
Operating leases
|
|
4.2
|
%
|
Finance leases
|
|
4.4
|
%
|
Other Information
The table below presents supplemental cash flow information related to leases during the three months ended
March 31, 2019
.
|
|
|
|
|
|
Three Months Ended
|
(in thousands)
|
March 31, 2019
|
Cash paid for amounts included in the measurement of lease liabilities
|
|
Operating cash flows for operating leases
|
$
|
629
|
|
Operating cash flows for finance leases
|
1,346
|
|
Financing cash flows for finance leases
|
1,804
|
|
Maturities of Lease Liabilities
The table below indicates the future minimum payments of lease liabilities as of March 31, 2019.
|
|
|
|
|
|
|
|
|
(in thousands)
|
Operating Leases
|
|
Finance Leases
|
Remaining in 2019
|
$
|
2,269
|
|
|
$
|
9,450
|
|
2020
|
3,206
|
|
|
12,600
|
|
2021
|
3,249
|
|
|
12,600
|
|
2022
|
3,295
|
|
|
11,095
|
|
2023
|
3,147
|
|
|
10,500
|
|
Thereafter
|
14,325
|
|
|
103,458
|
|
Total lease payments
|
29,491
|
|
|
159,703
|
|
Less imputed interest
|
(5,341
|
)
|
|
(38,576
|
)
|
Total lease obligations
|
24,150
|
|
|
121,127
|
|
Less current obligations
|
(2,101
|
)
|
|
(7,417
|
)
|
Long-term lease obligations
|
$
|
22,049
|
|
|
$
|
113,710
|
|
The Company adopted the New Lease Standard on January 1, 2019 as noted above, and as required, the following disclosure is provided for periods prior to adoption. Future annual minimum lease payments as of December 31, 2018 were as follows:
|
|
|
|
|
|
|
|
|
(in thousands)
|
Operating Leases
|
|
Capital Leases
|
2019
|
$
|
8,102
|
|
|
$
|
12,600
|
|
2020
|
6,031
|
|
|
12,600
|
|
2021
|
3,643
|
|
|
12,600
|
|
2022
|
1,630
|
|
|
11,095
|
|
2023
|
1,626
|
|
|
10,500
|
|
Thereafter
|
8,297
|
|
|
103,458
|
|
Total lease payments
|
$
|
29,329
|
|
|
162,853
|
|
Less imputed interest
|
|
|
(39,922
|
)
|
Total lease obligations
|
|
|
122,931
|
|
Less current obligations
|
|
|
(7,336
|
)
|
Long-term lease obligations
|
|
|
$
|
115,595
|
|
Note 6 — Fair Value Measurements
The Company measures certain financial assets and liabilities at fair value on a recurring basis. Fair value is an exit price, representing the amount that would be received by selling an asset or paid to transfer a liability in an orderly transaction between market participants.
Accounting standards pertaining to fair value measurements establish a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets for identical assets or liabilities; Level 2, defined as inputs other than Level 1 inputs that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.
The Company uses the market approach valuation technique to determine fair value for investment securities. The assets classified as Level 1 consist of money market funds for which original cost approximates fair value. The assets classified as Level 2 consist of commercial paper, municipal debt securities, federal agency debt securities, US Treasury Bonds, and corporate debt securities, which are valued using quoted market prices or alternative pricing sources including transactions involving identical or comparable assets and models utilizing market observable inputs. The Company has no investment securities classified as Level 3.
For those assets classified as Level 2 that are not in active markets, the Company obtains fair value from pricing sources using quoted market prices for identical or comparable instruments, and uses pricing models which include all significant observable
inputs: maturity dates, issue dates, settlement dates, benchmark yields, reported trades, broker-dealer quotes, issue spreads, benchmark securities, bids, offers and other market related data. These inputs are observable or can be derived from, or corroborated by, observable market data for substantially the full term of the asset.
Financial instruments measured at fair value on a recurring basis (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2019
|
|
As of December 31, 2018
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Total
|
|
Level 1
|
|
Level 2
|
Cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
$
|
125,394
|
|
|
$
|
125,394
|
|
|
$
|
—
|
|
|
$
|
43,281
|
|
|
$
|
43,281
|
|
|
$
|
—
|
|
Commercial paper
|
80,760
|
|
|
—
|
|
|
80,760
|
|
|
29,138
|
|
|
—
|
|
|
29,138
|
|
Municipal debt securities
|
3,792
|
|
|
—
|
|
|
3,792
|
|
|
—
|
|
|
—
|
|
|
|
|
US Treasury Bonds
|
880
|
|
|
—
|
|
|
880
|
|
|
1,415
|
|
|
—
|
|
|
1,415
|
|
Total cash equivalents
|
210,826
|
|
|
125,394
|
|
|
85,432
|
|
|
73,834
|
|
|
43,281
|
|
|
30,553
|
|
Short-term
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper
|
182,608
|
|
|
—
|
|
|
182,608
|
|
|
180,846
|
|
|
—
|
|
|
180,846
|
|
Corporate debt securities
|
74,331
|
|
|
—
|
|
|
74,331
|
|
|
101,489
|
|
|
—
|
|
|
101,489
|
|
Municipal debt securities
|
13,927
|
|
|
—
|
|
|
13,927
|
|
|
14,252
|
|
|
—
|
|
|
14,252
|
|
Federal agency debt securities
|
11,367
|
|
|
—
|
|
|
11,367
|
|
|
11,887
|
|
|
—
|
|
|
11,887
|
|
US Treasury Bonds
|
4,722
|
|
|
—
|
|
|
4,722
|
|
|
5,990
|
|
|
—
|
|
|
5,990
|
|
Total short-term
|
286,955
|
|
|
—
|
|
|
286,955
|
|
|
314,464
|
|
|
—
|
|
|
314,464
|
|
Long-term
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities
|
20,300
|
|
|
—
|
|
|
20,300
|
|
|
37,334
|
|
|
—
|
|
|
37,334
|
|
US Treasury Bonds
|
3,050
|
|
|
—
|
|
|
3,050
|
|
|
2,901
|
|
|
—
|
|
|
2,901
|
|
Federal agency debt securities
|
1,255
|
|
|
—
|
|
|
1,255
|
|
|
11,291
|
|
|
—
|
|
|
11,291
|
|
Total long-term
|
24,605
|
|
|
—
|
|
|
24,605
|
|
|
51,526
|
|
|
—
|
|
|
51,526
|
|
Total financial instruments
|
$
|
522,386
|
|
|
$
|
125,394
|
|
|
$
|
396,992
|
|
|
$
|
439,824
|
|
|
$
|
43,281
|
|
|
$
|
396,543
|
|
The fair value of the Company’s publicly held long-term debt is determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets; therefore, the Company has categorized its publicly held debt as Level 2. The Company's remaining debt is not publicly held, and the Company has determined the estimated fair value of these notes to be Level 3, as certain inputs used to determine the 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 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2019
|
|
As of December 31, 2018
|
|
|
|
Carrying Value
|
|
Estimated Fair Value
|
|
Carrying Value
|
|
Estimated Fair Value
|
|
Hierarchy Level
|
Publicly held debt
|
$
|
102,133
|
|
|
$
|
102,389
|
|
|
$
|
450,463
|
|
|
$
|
451,026
|
|
|
2
|
Non-publicly held debt
|
1,160,772
|
|
|
937,134
|
|
|
703,372
|
|
|
619,379
|
|
|
3
|
Total long-term debt
|
$
|
1,262,905
|
|
|
$
|
1,039,523
|
|
|
$
|
1,153,835
|
|
|
$
|
1,070,405
|
|
|
|
Due to the short-term nature, carrying amounts of cash, cash equivalents, restricted cash, accounts receivable and accounts payable approximate fair value.
Note 7 — 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, 2019
and
2018
, 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.
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,
|
|
2019
|
|
2018
|
Basic:
|
|
|
|
Net income
|
$
|
57,124
|
|
|
$
|
55,193
|
|
Less net income allocated to participating securities
|
(799
|
)
|
|
(768
|
)
|
Net income attributable to common stock
|
$
|
56,325
|
|
|
$
|
54,425
|
|
Earnings per share, basic
|
$
|
3.52
|
|
|
$
|
3.43
|
|
Weighted-average shares outstanding
|
16,011
|
|
|
15,889
|
|
Diluted:
|
|
|
|
|
|
Net income
|
$
|
57,124
|
|
|
$
|
55,193
|
|
Less net income allocated to participating securities
|
(798
|
)
|
|
(768
|
)
|
Net income attributable to common stock
|
$
|
56,326
|
|
|
$
|
54,425
|
|
Earnings per share, diluted
|
$
|
3.52
|
|
|
$
|
3.42
|
|
Weighted-average shares outstanding
|
16,011
|
|
|
15,889
|
|
Dilutive effect of stock options and restricted stock
|
31
|
|
|
46
|
|
Adjusted weighted-average shares outstanding under treasury stock method
|
16,042
|
|
|
15,935
|
|
Participating securities excluded under two-class method
|
(29
|
)
|
|
(37
|
)
|
Adjusted weighted-average shares outstanding under two-class method
|
16,013
|
|
|
15,898
|
|
For the
three
months ended
March 31, 2019
and
2018
, respectively, anti-dilutive shares excluded from the calculation of earnings per share were
4,046
shares and
1,463
shares (not in thousands).
Note 8 — Commitments and Contingencies
As of
March 31, 2019
, the Company had firm commitments to purchase
twelve
Airbus A320 series aircraft and
four
CFM engines.
The Company's contractual purchase commitments consist primarily of aircraft and engine acquisitions. The total future commitments are as follows (in thousands):
|
|
|
|
|
|
As of March 31, 2019
|
Remaining in 2019
|
$
|
198,110
|
|
2020
|
33,800
|
|
2021
|
500
|
|
2022
|
18,000
|
|
Total commitments
|
$
|
250,410
|
|
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 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 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.
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. Plans for the resort include a 500-room hotel and two towers offering an estimated 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.
Other non-Airline Segment
The other non-airline segment includes the Teesnap golf course management solution and Allegiant Nonstop family entertainment centers, both of which fit with the Company's leisure focus. Allegiant Nonstop family entertainment centers are comprised of games, attractions, and food facilities.
Selected information for the Company's segments and the reconciliation to the consolidated financial statement amounts are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Airline
|
|
Sunseeker Resort
|
|
Other non- airline
|
|
Consolidated
|
Three Months Ended March 31, 2019
|
|
|
|
|
|
|
|
Operating revenue:
|
|
|
|
|
|
|
|
Passenger
|
$
|
419,977
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
419,977
|
|
Third party products
|
17,141
|
|
|
—
|
|
|
—
|
|
|
17,141
|
|
Fixed fee contract
|
10,575
|
|
|
—
|
|
|
—
|
|
|
10,575
|
|
Other
|
631
|
|
|
902
|
|
|
2,396
|
|
|
3,929
|
|
Operating income (loss)
|
98,490
|
|
|
(1,222
|
)
|
|
(6,190
|
)
|
|
91,078
|
|
Interest expense, net of capitalized interest and interest income
|
13,221
|
|
|
158
|
|
|
—
|
|
|
13,379
|
|
Depreciation and amortization
|
35,229
|
|
|
156
|
|
|
797
|
|
|
36,182
|
|
Total assets, end of period
|
2,640,003
|
|
|
68,742
|
|
|
41,732
|
|
|
2,750,477
|
|
Capital expenditures
|
108,920
|
|
|
5,275
|
|
|
8,356
|
|
|
122,551
|
|
Three Months Ended March 31, 2018
|
|
|
|
|
|
|
|
Operating revenue:
|
|
|
|
|
|
|
|
Passenger
|
$
|
396,771
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
396,771
|
|
Third party products
|
10,325
|
|
|
—
|
|
|
—
|
|
|
10,325
|
|
Fixed fee contract
|
10,556
|
|
|
—
|
|
|
—
|
|
|
10,556
|
|
Other
|
6,666
|
|
|
—
|
|
|
1,126
|
|
|
7,792
|
|
Operating income (loss)
|
81,950
|
|
|
(145
|
)
|
|
(1,837
|
)
|
|
79,968
|
|
Interest expense, net
|
10,817
|
|
|
—
|
|
|
—
|
|
|
10,817
|
|
Depreciation and amortization
|
27,766
|
|
|
7
|
|
|
376
|
|
|
28,149
|
|
Total assets, end of period
|
2,248,340
|
|
|
33,910
|
|
|
6,715
|
|
|
2,288,965
|
|
Capital expenditures
|
59,574
|
|
|
8,140
|
|
|
1,453
|
|
|
69,167
|
|