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☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
March 31, 2022
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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Delaware | 82-4092570 | |||||
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) | ||||
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2005 Cargo Road |
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Minneapolis, Minnesota |
| 55450 | ||||
(Address of principal executive offices) |
| (Zip Code) | ||||
Registrant’s telephone number, including area code: (651) 681-3900 | ||||||
Registrant’s telephone number, including area code: (651) 681-3900
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Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||||||||
Common Stock, par value $0.01 per share |
| SNCY |
| The Nasdaq Stock Market LLC |
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Large accelerated filer ☐ | Accelerated filer ☐ | Non-accelerated | |||||||||||
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| 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. ☐
March 31, 2022:
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Condensed Consolidated Statements of Changes in Stockholders’ Equity | 6 | ||
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 25 | ||
Item 3. Quantitative and Qualitative Disclosures About Market Risk | 55 | ||
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 56 | ||
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Page
March 31, 2022 | December 31, 2021 | ||||||||||
ASSETS | |||||||||||
Current Assets: | |||||||||||
Cash and Cash Equivalents | $ | 272,402 | $ | 309,338 | |||||||
Restricted Cash | 8,085 | 8,447 | |||||||||
Investments | 6,233 | 6,283 | |||||||||
Accounts Receivable, net of an allowance for credit losses of $376 and $250, respectively | 31,733 | 30,156 | |||||||||
Short-term Lessor Maintenance Deposits | 6,698 | 5,505 | |||||||||
Inventory, net of a reserve for obsolescence of $1,366 and $1,275, respectively | 5,624 | 5,405 | |||||||||
Prepaid Expenses | 10,166 | 8,511 | |||||||||
Other Current Assets | 8,302 | 1,798 | |||||||||
Total Current Assets | 349,243 | 375,443 | |||||||||
Property & Equipment, net: | |||||||||||
Aircraft and Flight Equipment | 486,374 | 440,356 | |||||||||
Ground Equipment and Leasehold Improvements | 24,451 | 20,876 | |||||||||
Computer Hardware and Software | 9,125 | 8,785 | |||||||||
Finance Lease Assets | 275,547 | 209,457 | |||||||||
Rotable Parts | 9,271 | 9,150 | |||||||||
Property & Equipment | 804,768 | 688,624 | |||||||||
Accumulated Depreciation & Amortization | (129,119) | (115,013) | |||||||||
Total Property & Equipment, net | 675,649 | 573,611 | |||||||||
Other Assets: | |||||||||||
Goodwill | 222,223 | 222,223 | |||||||||
Other Intangible Assets, net | 88,110 | 89,110 | |||||||||
Operating Lease Right-of-use Assets | 29,284 | 61,658 | |||||||||
Aircraft Deposits | 10,831 | 10,021 | |||||||||
Long-term Lessor Maintenance Deposits | 23,071 | 20,346 | |||||||||
Deferred Tax Asset | 15,955 | 18,737 | |||||||||
Other Assets | 5,226 | 5,495 | |||||||||
Total Other Assets | 394,700 | 427,590 | |||||||||
Total Assets | $ | 1,419,592 | $ | 1,376,644 |
| | | | | | |
|
| June 30, 2021 |
| December 31, 2020 | ||
| | (Unaudited) | | | | |
ASSETS | |
| | |
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Current Assets: |
| |
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| |
|
Cash and Equivalents | | $ | 310,723 | | $ | 62,028 |
Restricted Cash | |
| 4,762 | |
| 8,335 |
Investments | |
| 6,076 | |
| 5,624 |
Accounts Receivable, net of an allowance for credit losses of $297 and $224, respectively | |
| 25,989 | |
| 28,690 |
Short-term Lessor Maintenance Deposits | |
| 1,490 | |
| 3,101 |
Inventory, net of a reserve for obsolescence of $1,188 and $996, respectively | |
| 5,382 | |
| 5,407 |
Prepaid Expenses | |
| 14,447 | |
| 8,002 |
Derivative Assets | |
| 1,598 | |
| — |
Other Current Assets | |
| 779 | |
| 5,553 |
Total Current Assets | |
| 371,246 | |
| 126,740 |
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Property & Equipment, net: | |
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Aircraft and Flight Equipment | |
| 395,646 | |
| 331,685 |
Leasehold Improvements and Ground Equipment | |
| 14,025 | |
| 13,526 |
Computer Hardware and Software | |
| 8,331 | |
| 7,845 |
Finance Lease Assets | |
| 161,649 | |
| 117,833 |
Rotable Parts | |
| 9,094 | |
| 8,691 |
Property & Equipment | |
| 588,745 | |
| 479,580 |
Accumulated Depreciation & Amortization | |
| (88,704) | |
| (65,065) |
Total Property & Equipment, net | |
| 500,041 | |
| 414,515 |
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Other Assets: | |
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Goodwill | |
| 222,223 | |
| 222,223 |
Other Intangible Assets, net | |
| 91,110 | |
| 93,110 |
Operating Lease Right-of-use Assets | |
| 70,715 | |
| 121,269 |
Aircraft Lease Deposits | |
| 7,657 | |
| 10,253 |
Long-term Lessor Maintenance Deposits | |
| 19,493 | |
| 22,584 |
Deferred Tax Asset | |
| 21,342 | |
| 36,216 |
Other Assets | |
| 6,137 | |
| 6,357 |
Total Other Assets | |
| 438,677 | |
| 512,012 |
Total Assets | | $ | 1,309,964 | | $ | 1,053,267 |
SUN COUNTRY AIRLINES HOLDINGS, INC.
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| June 30, 2021 |
| December 31, 2020 | ||
| | (Unaudited) | | | | |
LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | |
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Current Liabilities: |
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Accounts Payable | | $ | 36,847 | | $ | 34,035 |
Accrued Salaries, Wages, and Benefits | |
| 17,855 | |
| 16,368 |
Accrued Transportation Taxes | |
| 12,907 | |
| 5,883 |
Air Traffic Liabilities | |
| 113,771 | |
| 101,075 |
Derivative Liabilities | |
| — | |
| 1,174 |
Over-market Liabilities | |
| 4,309 | |
| 9,281 |
Finance Lease Obligations | |
| 9,601 | |
| 11,460 |
Loyalty Program Liabilities | |
| 12,337 | |
| 7,016 |
Operating Lease Obligations | |
| 18,239 | |
| 34,492 |
Current Maturities of Long-term Debt | |
| 19,795 | |
| 26,118 |
Other Current Liabilities | |
| 5,145 | |
| 6,841 |
Total Current Liabilities | |
| 250,806 | |
| 253,743 |
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Long-term Liabilities: | |
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Over-market Liabilities | |
| 12,583 | |
| 28,128 |
Finance Lease Obligations | |
| 135,091 | |
| 95,710 |
Loyalty Program Liabilities | |
| 8,540 | |
| 15,053 |
Operating Lease Obligations | |
| 68,408 | |
| 112,707 |
Long-term Debt | |
| 267,684 | |
| 256,345 |
Income Tax Receivable Agreement Liability | |
| 96,500 | |
| — |
Other Long-term Liabilities | |
| 6,119 | |
| 7,764 |
Total Long-term Liabilities | |
| 594,925 | |
| 515,707 |
Total Liabilities | |
| 845,731 | |
| 769,450 |
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Commitments and Contingencies | |
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Stockholders' Equity: | |
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Common Stock | |
| 572 | |
| 468 |
Common stock with $0.01 par value, 995,000,000 shares authorized, 57,158,467 and 46,839,659 issued at June 30, 2021 and December 31, 2020, respectively. | |
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Loans to Stockholders | |
| — | |
| (3,500) |
Additional Paid In Capital | |
| 476,368 | |
| 248,525 |
Retained Earnings (Deficit) | |
| (12,707) | |
| 38,324 |
Total Stockholders' Equity | |
| 464,233 | |
| 283,817 |
Total Liabilities and Stockholders' Equity | | $ | 1,309,964 | | $ | 1,053,267 |
March 31, 2022 | December 31, 2021 | ||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
Current Liabilities: | |||||||||||
Accounts Payable | $ | 49,890 | $ | 39,805 | |||||||
Accrued Salaries, Wages, and Benefits | 24,484 | 28,527 | |||||||||
Accrued Transportation Taxes | 14,098 | 12,736 | |||||||||
Air Traffic Liabilities | 110,946 | 118,562 | |||||||||
Over-market Liabilities | 3,063 | 4,309 | |||||||||
Finance Lease Obligations | 31,106 | 11,705 | |||||||||
Loyalty Program Liabilities | 11,490 | 11,451 | |||||||||
Operating Lease Obligations | 10,176 | 17,231 | |||||||||
Current Maturities of Long-term Debt | 34,741 | 29,412 | |||||||||
Other Current Liabilities | 11,482 | 7,913 | |||||||||
Total Current Liabilities | 301,476 | 281,651 | |||||||||
Long-term Liabilities: | |||||||||||
Over-market Liabilities | 4,730 | 10,428 | |||||||||
Finance Lease Obligations | 239,035 | 180,450 | |||||||||
Loyalty Program Liabilities | 5,884 | 8,267 | |||||||||
Operating Lease Obligations | 23,864 | 58,810 | |||||||||
Long-term Debt | 242,544 | 248,014 | |||||||||
Income Tax Receivable Agreement Liability | 105,600 | 98,800 | |||||||||
Other Long-term Liabilities | 3,168 | 3,413 | |||||||||
Total Long-term Liabilities | 624,825 | 608,182 | |||||||||
Total Liabilities | 926,301 | 889,833 | |||||||||
0 | 0 | ||||||||||
Stockholders' Equity: | |||||||||||
Common Stock | |||||||||||
Common stock with $0.01 par value, 995,000,000 shares authorized, 57,964,320 and 57,872,452 issued and outstanding at March 31, 2022 and December 31, 2021, respectively. | 580 | 579 | |||||||||
Preferred Stock | |||||||||||
Preferred stock with $0.01 par value, 5,000,000 shares authorized, no shares issued and outstanding at March 31, 2022 and December 31, 2021. | — | — | |||||||||
Additional Paid-In Capital | 488,480 | 485,638 | |||||||||
Retained Earnings | 4,231 | 594 | |||||||||
Total Stockholders' Equity | 493,291 | 486,811 | |||||||||
Total Liabilities and Stockholders' Equity | $ | 1,419,592 | $ | 1,376,644 |
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| Three Months Ended June 30, | | Six Months Ended June 30, | ||||||||
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| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
Operating Revenues: |
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Passenger | | $ | 125,130 | | $ | 31,341 | | $ | 229,325 | | $ | 209,827 |
Cargo | |
| 22,098 | |
| 3,219 | | | 43,684 | |
| 3,219 |
Other | |
| 1,961 | |
| 816 | | | 3,793 | |
| 2,660 |
Total Operating Revenue | |
| 149,189 | |
| 35,376 | | | 276,802 | |
| 215,706 |
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Operating Expenses: | |
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| |
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| |
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Aircraft Fuel | |
| 29,709 | |
| 677 | |
| 53,984 | |
| 56,238 |
Salaries, Wages, and Benefits | |
| 42,316 | |
| 32,484 | |
| 86,392 | |
| 70,575 |
Aircraft Rent | |
| 3,815 | |
| 5,934 | |
| 9,414 | |
| 16,966 |
Maintenance | |
| 11,300 | |
| 2,426 | |
| 20,510 | |
| 8,904 |
Sales and Marketing | |
| 5,822 | |
| 1,630 | |
| 10,932 | |
| 10,202 |
Depreciation and Amortization | |
| 13,460 | |
| 12,175 | |
| 26,075 | |
| 22,702 |
Ground Handling | |
| 6,551 | |
| 1,614 | |
| 11,781 | |
| 10,906 |
Landing Fees and Airport Rent | |
| 8,752 | |
| 2,667 | |
| 17,537 | |
| 13,781 |
Special Items, net | |
| (38,520) | |
| (31,481) | |
| (65,392) | |
| (31,481) |
Other Operating, net | |
| 16,746 | |
| 9,484 | |
| 31,397 | |
| 23,917 |
Total Operating Expenses | |
| 99,951 | |
| 37,610 | |
| 202,630 | |
| 202,710 |
Operating Income (Loss) | |
| 49,238 | |
| (2,234) | |
| 74,172 | |
| 12,996 |
| | | | | | | | | | | | |
Non-operating Income (Expense): | |
|
| |
|
| |
|
| |
|
|
Interest Income | |
| 9 | |
| 63 | |
| 24 | |
| 314 |
Interest Expense | |
| (6,080) | |
| (5,442) | |
| (13,201) | |
| (11,058) |
Other, net | |
| 18,054 | |
| (325) | |
| 18,049 | |
| (494) |
Total Non-operating Income (Expense), net | |
| 11,983 | |
| (5,704) | |
| 4,872 | |
| (11,238) |
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Income (Loss) before Income Tax | |
| 61,221 | |
| (7,938) | |
| 79,044 | |
| 1,758 |
Income Tax Expense (Benefit) | |
| 9,468 | |
| (1,898) | |
| 14,875 | |
| 547 |
Net Income (Loss) | | $ | 51,753 | | $ | (6,040) | | $ | 64,169 | | $ | 1,211 |
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Net Income (Loss) per share to common stockholders: | |
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Basic | | $ | 0.91 | | $ | (0.13) | | $ | 1.21 | | $ | 0.03 |
Diluted | | $ | 0.83 | | $ | (0.13) | | $ | 1.12 | | $ | 0.02 |
Shares used for computation: | |
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Basic | |
| 57,156,159 | |
| 46,805,950 | |
| 52,850,041 | |
| 46,805,950 |
Diluted | |
| 61,982,441 | |
| 46,805,950 | |
| 57,403,593 | |
| 48,243,146 |
Three Months Ended March 31, | |||||||||||
2022 | 2021 | ||||||||||
Operating Revenues: | |||||||||||
Passenger | $ | 202,033 | $ | 104,195 | |||||||
Cargo | 21,053 | 21,585 | |||||||||
Other | 3,439 | 1,831 | |||||||||
Total Operating Revenue | 226,525 | 127,611 | |||||||||
Operating Expenses: | |||||||||||
Aircraft Fuel | 64,544 | 24,274 | |||||||||
Salaries, Wages, and Benefits | 59,617 | 44,075 | |||||||||
Aircraft Rent | 3,186 | 5,599 | |||||||||
Maintenance | 11,995 | 9,210 | |||||||||
Sales and Marketing | 8,628 | 5,110 | |||||||||
Depreciation and Amortization | 15,328 | 12,615 | |||||||||
Ground Handling | 7,958 | 5,230 | |||||||||
Landing Fees and Airport Rent | 10,286 | 8,785 | |||||||||
Special Items, net | — | (26,871) | |||||||||
Other Operating, net | 23,150 | 14,651 | |||||||||
Total Operating Expenses | 204,692 | 102,678 | |||||||||
Operating Income | 21,833 | 24,933 | |||||||||
Non-operating Income (Expense): | |||||||||||
Interest Income | 24 | 15 | |||||||||
Interest Expense | (8,562) | (7,121) | |||||||||
Other, net | (6,876) | (5) | |||||||||
Total Non-operating Income (Expense), net | (15,414) | (7,111) | |||||||||
Income Before Income Tax | 6,419 | 17,822 | |||||||||
Income Tax Expense | 2,782 | 5,406 | |||||||||
Net Income | $ | 3,637 | $ | 12,416 | |||||||
Net Income per share to common stockholders: | |||||||||||
Basic | $ | 0.06 | $ | 0.26 | |||||||
Diluted | $ | 0.06 | $ | 0.24 | |||||||
Shares used for computation: | |||||||||||
Basic | 57,907,655 | 48,496,077 | |||||||||
Diluted | 61,731,942 | 52,508,186 |
| | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2020 | |||||||||||||||||
| | | | Common Stock | | Loans to | | Additional | | Retained | | | | ||||||
|
| Warrants |
| Shares |
| Amount |
| Stockholders |
| Paid-in Capital |
| Earnings |
| Total | |||||
December 31, 2019 |
| 40,005,885 |
| 6,800,065 | | $ | 68 | | $ | (3,500) | | $ | 244,928 | | $ | 42,228 | | $ | 283,724 |
Exercise of Apollo Warrants |
| (40,005,885) |
| 40,005,885 | |
| 400 | |
| — | |
| (379) | |
| — | |
| 21 |
Net Income |
| — |
| — | |
| — | |
| — | |
| — | |
| 7,251 | |
| 7,251 |
Stock-based Compensation | | — | | — | | | — | | | — | | | 369 | | | — | | | 369 |
March 31, 2020 | | — | | 46,805,950 | | $ | 468 | | $ | (3,500) | | $ | 244,918 | | $ | 49,479 | | $ | 291,365 |
Net Loss | | — | | — | | | — | | | — | | | — | | | (6,040) | | | (6,040) |
Stock-based Compensation |
| — |
| — | |
| — | |
| — | |
| 388 | |
| — | |
| 388 |
June 30, 2020 |
| — |
| 46,805,950 | | $ | 468 | | $ | (3,500) | | $ | 245,306 | | $ | 43,439 | | $ | 285,713 |
| | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2021 | |||||||||||||||||
| | | | | | | | | | | | | | | Retained | | | | |
|
| | | Common Stock | | Loans to |
| Additional |
| Earnings | | | | ||||||
| | Warrants |
| Shares |
| Amount |
| Stockholders | | Paid-in Capital | | (Deficit) |
| Total | |||||
December 31, 2020 |
| — |
| 46,839,659 | | $ | 468 | | $ | (3,500) | | $ | 248,525 | | $ | 38,324 | | $ | 283,817 |
Shares Surrendered by Stockholders |
| — |
| (140,737) | |
| (1) | |
| 3,500 | |
| (3,499) | |
| — | |
| — |
Initial Public Offering |
| — |
| 10,454,545 | |
| 105 | |
| — | |
| 224,552 | |
| — | |
| 224,657 |
Net Income |
| — |
| — | |
| — | |
| — | |
| — | |
| 12,416 | |
| 12,416 |
Income Tax Receivable Agreement |
| — |
| — | |
| — | |
| — | |
| — | |
| (115,200) | |
| (115,200) |
Amazon Warrants |
| — |
| — | |
| — | |
| — | |
| 1,400 | |
| — | |
| 1,400 |
Stock-based Compensation |
| — |
| — | |
| — | |
| — | |
| 2,870 | |
| — | |
| 2,870 |
March 31, 2021 | | — | | 57,153,467 | | $ | 572 | | $ | — | | $ | 473,848 | | $ | (64,460) | | $ | 409,960 |
Initial Public Offering Expense Adjustment | | — | | — | | | — | | | — | | | 349 | | | — | | | 349 |
Exercise of Stock Options | | — | | 5,000 | | | — | | | — | | | 27 | | | — | | | 27 |
Net Income | | — | | — | | | — | | | — | | | — | | | 51,753 | | | 51,753 |
Amazon Warrants | | — | | — | | | — | | | — | | | 1,400 | | | — | | | 1,400 |
Stock-based Compensation | | — | | — | | | — | | | — | | | 744 | | | — | | | 744 |
June 30, 2021 |
| — |
| 57,158,467 | | $ | 572 | | $ | — | | $ | 476,368 | | $ | (12,707) | | $ | 464,233 |
Three Months Ended March 31, 2021 | |||||||||||||||||||||||||||||||||||
Common Stock | Loans to Stockholders | Additional Paid-in Capital | Retained Earnings (Deficit) | Total | |||||||||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||||||||||
December 31, 2020 | 46,839,659 | $ | 468 | $ | (3,500) | $ | 248,525 | $ | 38,324 | $ | 283,817 | ||||||||||||||||||||||||
Shares Surrendered by Stockholders | (140,737) | (1) | 3,500 | (3,499) | — | — | |||||||||||||||||||||||||||||
Initial Public Offering, net | 10,454,545 | 105 | — | 224,552 | — | 224,657 | |||||||||||||||||||||||||||||
Net Income | — | — | — | — | 12,416 | 12,416 | |||||||||||||||||||||||||||||
Income Tax Receivable Agreement | — | — | — | — | (115,200) | (115,200) | |||||||||||||||||||||||||||||
Amazon Warrants | — | — | — | 1,400 | — | 1,400 | |||||||||||||||||||||||||||||
Stock-based Compensation | — | — | — | 2,870 | — | 2,870 | |||||||||||||||||||||||||||||
March 31, 2021 | 57,153,467 | $ | 572 | $ | — | $ | 473,848 | $ | (64,460) | $ | 409,960 |
Three Months Ended March 31, 2022 | |||||||||||||||||||||||||||||
Common Stock | Additional Paid-in Capital | Retained Earnings | Total | ||||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||||
December 31, 2021 | 57,872,452 | $ | 579 | $ | 485,638 | $ | 594 | $ | 486,811 | ||||||||||||||||||||
Stock Option Exercises | 91,868 | 1 | 522 | — | 523 | ||||||||||||||||||||||||
Net Income | — | — | — | 3,637 | 3,637 | ||||||||||||||||||||||||
Amazon Warrants | — | — | 1,400 | — | 1,400 | ||||||||||||||||||||||||
Stock-based Compensation | — | — | 920 | — | 920 | ||||||||||||||||||||||||
March 31, 2022 | 57,964,320 | $ | 580 | $ | 488,480 | $ | 4,231 | $ | 493,291 |
| | | | | | |
|
| Six Months Ended June 30, | ||||
|
| 2021 |
| 2020 | ||
Net Income | | $ | 64,169 | | $ | 1,211 |
Adjustments to reconcile Net Income to Cash from Operating Activities: | |
|
| |
|
|
Depreciation and Amortization | |
| 26,075 | |
| 22,702 |
Tax Receivable Agreement Adjustment | | | (18,700) | | | — |
Reduction in Operating Lease Right-of-use Assets | |
| 9,419 | |
| 13,585 |
Non-Cash (Gain) Loss on Asset Transactions, net | |
| (12,668) | |
| 381 |
Unrealized (Gain) Loss on Fuel Derivatives | |
| (3,599) | |
| 16,056 |
Amortization of Over-market Liabilities | |
| (3,081) | |
| (5,781) |
Deferred Income Taxes | |
| 14,875 | |
| 570 |
Amazon Warrants Vested | |
| 2,800 | |
| — |
Stock-based Compensation Expense | |
| 3,613 | |
| 757 |
Amortization of Debt Issuance Costs | |
| 1,911 | |
| 903 |
| | | | | | |
Changes in Operating Assets and Liabilities: | |
|
| |
|
|
Accounts Receivable | |
| 4,265 | |
| 3,406 |
Inventory | |
| (224) | |
| (596) |
Prepaid Expenses | |
| (6,446) | |
| (797) |
Lessor Maintenance Deposits | |
| (3,220) | |
| (6,946) |
Aircraft Lease Deposits | |
| 1,496 | |
| 1,290 |
Other Assets | |
| 1,294 | |
| (3,033) |
Accounts Payable | |
| 3,546 | |
| (13,144) |
Accrued Transportation Taxes | |
| 7,024 | |
| (11,779) |
Air Traffic Liabilities | |
| 12,695 | |
| (20,587) |
Loyalty Program Liabilities | |
| (1,192) | |
| (775) |
Reduction in Operating Lease Obligations | |
| (15,826) | |
| (9,718) |
Other Liabilities | |
| 1,615 | |
| (600) |
Net Cash Provided by (Used in) Operating Activities | |
| 89,841 | |
| (12,895) |
| | | | | | |
Cash Flows from Investing Activities: | |
|
| |
|
|
Purchases of Property & Equipment | |
| (66,736) | |
| (93,677) |
Purchase of Investments | |
| (1,436) | |
| (190) |
Proceeds from the Sale of Investments | |
| 984 | |
| 227 |
Net Cash Used in Investing Activities | |
| (67,188) | |
| (93,640) |
| | | | | | |
Cash Flows from Financing Activities: | |
|
| |
|
|
Cash Received from Stock Offering | |
| 235,894 | |
| — |
Costs of Stock Offering | |
| (8,669) | |
| — |
Proceeds from Stock Option and Warrant Exercises | |
| 26 | |
| 21 |
Proceeds from Borrowings | |
| 80,500 | |
| 220,307 |
Repayment of Finance Lease Obligations | |
| (7,864) | |
| (85,976) |
Repayment of Borrowings | |
| (74,709) | |
| (54,879) |
Debt Issuance Costs | |
| (2,709) | |
| (2,764) |
Net Cash Provided by Financing Activities | |
| 222,469 | |
| 76,709 |
| | | | | | |
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash | |
| 245,122 | |
| (29,826) |
| | | | | | |
Cash, Cash Equivalents and Restricted Cash--Beginning of the Period | |
| 70,363 | |
| 64,478 |
| | | | | | |
Cash, Cash Equivalents and Restricted Cash--End of the Period | | $ | 315,485 | | $ | 34,652 |
| | | | | | |
Supplemental information: | |
|
| |
|
|
Cash Payments for Interest | | $ | 11,040 | | $ | 10,115 |
Cash Payments (Receipts) for Income Taxes, net | | $ | 40 | | $ | (22) |
Non-cash transactions: | |
|
| |
|
|
Lease Deposits Applied Against the Purchase of Aircraft | | $ | 3,296 | | $ | — |
Aircraft and Flight Equipment Acquired through Finance Leases | | $ | 42,911 | | $ | — |
Purchases of Property & Equipment in Accounts Payable | | $ | — | | $ | 555 |
Costs of Stock Offering in Accounts Payable | | $ | 38 | | $ | — |
| | | | | | |
The following provides a reconciliation of Cash, Cash Equivalents and Restricted Cash to the amounts reported on the Consolidated Balance Sheets: | ||||||
| | June 30, 2021 | | June 30, 2020 | ||
Cash and Equivalents | | $ | 310,723 | | $ | 32,084 |
Restricted Cash | |
| 4,762 | |
| 2,568 |
Total Cash, Cash Equivalents and Restricted Cash | | $ | 315,485 | | $ | 34,652 |
Three Months Ended March 31, | ||||||||||||||||||||||||||||||||||||||
2022 | 2021 | |||||||||||||||||||||||||||||||||||||
Net Income | $ | 3,637 | $ | 12,416 | ||||||||||||||||||||||||||||||||||
Adjustments to reconcile Net Income to Cash from Operating Activities: | ||||||||||||||||||||||||||||||||||||||
Depreciation and Amortization | 15,328 | 12,615 | ||||||||||||||||||||||||||||||||||||
Tax Receivable Agreement | 6,800 | — | ||||||||||||||||||||||||||||||||||||
Operating Lease Right-of-use Assets | 2,989 | 5,401 | ||||||||||||||||||||||||||||||||||||
Non-Cash Gain on Asset Transactions, net | (2) | (8,729) | ||||||||||||||||||||||||||||||||||||
Unrealized Gain on Fuel Derivatives | — | (2,386) | ||||||||||||||||||||||||||||||||||||
Amortization of Over-market Liabilities | (921) | (2,004) | ||||||||||||||||||||||||||||||||||||
Deferred Income Taxes | 2,782 | 5,406 | ||||||||||||||||||||||||||||||||||||
Amazon Warrants Vested | 1,400 | 1,400 | ||||||||||||||||||||||||||||||||||||
Stock-based Compensation Expense | 920 | 2,870 | ||||||||||||||||||||||||||||||||||||
Amortization of Debt Issuance Costs | 270 | 272 | ||||||||||||||||||||||||||||||||||||
Loss on Extinguishment of Debt | 1,557 | 1,224 | ||||||||||||||||||||||||||||||||||||
Changes in Operating Assets and Liabilities: | ||||||||||||||||||||||||||||||||||||||
Accounts Receivable | (1,577) | 2,358 | ||||||||||||||||||||||||||||||||||||
Inventory | (346) | (173) | ||||||||||||||||||||||||||||||||||||
Prepaid Expenses | (1,655) | (3,676) | ||||||||||||||||||||||||||||||||||||
Lessor Maintenance Deposits | (3,919) | (2,219) | ||||||||||||||||||||||||||||||||||||
Aircraft Deposits | (1,044) | 2,226 | ||||||||||||||||||||||||||||||||||||
Other Assets | (6,262) | 233 | ||||||||||||||||||||||||||||||||||||
Accounts Payable | 9,500 | 626 | ||||||||||||||||||||||||||||||||||||
Accrued Transportation Taxes | 1,362 | 4,519 | ||||||||||||||||||||||||||||||||||||
Air Traffic Liabilities | (7,616) | (6,343) | ||||||||||||||||||||||||||||||||||||
Loyalty Program Liabilities | (2,344) | (1,295) | ||||||||||||||||||||||||||||||||||||
Operating Lease Obligations | (3,240) | (10,722) | ||||||||||||||||||||||||||||||||||||
Other Liabilities | 594 | 1,820 | ||||||||||||||||||||||||||||||||||||
Net Cash Provided by Operating Activities | 18,213 | 15,839 | ||||||||||||||||||||||||||||||||||||
Cash Flows from Investing Activities: | ||||||||||||||||||||||||||||||||||||||
Purchases of Property & Equipment | (49,683) | (54,399) | ||||||||||||||||||||||||||||||||||||
Proceeds from the Sale of Property & Equipment | 5 | — | ||||||||||||||||||||||||||||||||||||
Purchase of Investments | (3) | (337) | ||||||||||||||||||||||||||||||||||||
Proceeds from the Sale of Investments | 53 | 184 | ||||||||||||||||||||||||||||||||||||
Net Cash Used in Investing Activities | (49,628) | (54,552) | ||||||||||||||||||||||||||||||||||||
Cash Flows from Financing Activities: | ||||||||||||||||||||||||||||||||||||||
Cash Received from Stock Offering | — | 235,894 | ||||||||||||||||||||||||||||||||||||
Costs of Stock Offering | — | (7,226) | ||||||||||||||||||||||||||||||||||||
Proceeds from Stock Option and Warrant Exercises | 523 | — | ||||||||||||||||||||||||||||||||||||
Proceeds from Borrowings | 77,986 | 68,000 | ||||||||||||||||||||||||||||||||||||
Repayment of Finance Lease Obligations | (4,466) | (3,911) | ||||||||||||||||||||||||||||||||||||
Repayment of Borrowings | (77,947) | (46,068) | ||||||||||||||||||||||||||||||||||||
Debt Issuance Costs | (1,979) | (2,721) | ||||||||||||||||||||||||||||||||||||
Net Cash (Used In) Provided by Financing Activities | (5,883) | 243,968 | ||||||||||||||||||||||||||||||||||||
Net (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash | (37,298) | 205,255 | ||||||||||||||||||||||||||||||||||||
Cash, Cash Equivalents and Restricted Cash--Beginning of the Period | 317,785 | 70,363 | ||||||||||||||||||||||||||||||||||||
Cash, Cash Equivalents and Restricted Cash--End of the Period | $ | 280,487 | $ | 275,618 | ||||||||||||||||||||||||||||||||||
SUN COUNTRY AIRLINES HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited) | ||||||||||||||||||||||||||||||||||||||
Three Months Ended March 31, | ||||||||||||||||||||||||||||||||||||||
2022 | 2021 | |||||||||||||||||||||||||||||||||||||
Non-cash transactions: | ||||||||||||||||||||||||||||||||||||||
Lease Deposits Applied Against the Purchase of Aircraft | $ | — | $ | 2,766 | ||||||||||||||||||||||||||||||||||
Aircraft and Flight Equipment Acquired through Finance Leases | $ | 19,928 | $ | — | ||||||||||||||||||||||||||||||||||
Finance Lease Asset Modifications | $ | 46,311 | $ | — | ||||||||||||||||||||||||||||||||||
The following provides a reconciliation of Cash, Cash Equivalents and Restricted Cash to the amounts reported on the Condensed Consolidated Balance Sheets: | ||||||||||||||||||||||||||||||||||||||
March 31, 2022 | March 31, 2021 | |||||||||||||||||||||||||||||||||||||
Cash and Cash Equivalents | $ | 272,402 | $ | 269,599 | ||||||||||||||||||||||||||||||||||
Restricted Cash | 8,085 | 6,019 | ||||||||||||||||||||||||||||||||||||
Total Cash, Cash Equivalents and Restricted Cash | $ | 280,487 | $ | 275,618 |
(Unaudited)
|
| |
Stock Split
In March 2021,
Approval of the Omnibus Incentive Plan
In March 2021, the stockholders approved the Sun Country Airlines Holdings, Inc. 2021 Omnibus Incentive Plan (the “Plan”). The Plan authorizes that no more than 3,600,000 shares of Common Stock may be deliveredincluded in Part II, Item 8 “Financial Statements” in the aggregate pursuant to Awards granted underCompany’s Annual Report on Form 10-K for the Plan. An “Award” means any Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Other Stock-Based Award, or Other Cash-Based Award granted underyear ended December 31, 2021 as filed with the Plan.
Upon implementation of this new Plan, there were 0 more grants under the October 2018 equity incentive plan. Awards already issued under the 2018 plan are not impacted by the new Plan.
U.S. Securities and Exchange Commission (“2021 10-K”).
- 8 -
SUN COUNTRY AIRLINES HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
aggregate purchase price of $50,000 and a price per share equal to 94% of the initial public offering price of $24.00 per share.
In
Consolidated Financial Statements included in Part II, Item 8 “Financial Statements” in the 2021 10-K.
|
|
issue date.
Certain prior period Stockholders’ Equity amounts were reclassified to conform to the current period presentation. This involved reducing the Common Stock values to $0.01 times the shares outstanding and reclassifying those dollars to Additional Paid-In Capital. These reclasses were $238,694 as of December 31, 2020, June 30, 2020 and March 31, 2020. The reclass as of December 31, 2019 was $239,073.
10-K. Management believes that all adjustments necessary for the fair presentation of results, consisting of normally recurring items, have been included in the unaudited Condensed Consolidated Financial Statements for the interim periods presented. The Company reclassified certain prior period amounts to conform to the current period presentation. All material intercompany balances and transactions have been eliminated in consolidation.
- 9 -
SUN COUNTRY AIRLINES HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. Significant areas of judgment relate to passenger revenue recognition, maintenance under the built-in overhaul method, equity-based compensation, tax receivable agreement, lease accounting, impairment of goodwill, impairment of long-lived and intangible assets, air traffic liabilities, the loyalty program, as well as the valuation of Amazon warrants.
During the three months ended March 31, 2022, there were no significant changes to the Company’s critical accounting policies.
The Company operates its fiscal year on a calendar year basis.
|
|
On March 11, 2020 the World Health Organization declared COVID-19 a global pandemic causing a massive market disruption to the aviation industry. While U.S. domestic passenger volumes have increased to date, those levels are still down when compared to the same time frame in 2019. The growth in the U.S. domestic air traffic since the trough in April 2020 has been led by leisure and visiting family and relatives (“VFR”) travelersmodifications or exchanges of freestanding equity-classified written call options (such as business travel remains more subdued with corporate workforces continuing to “work-from-home” and in-person meetings continuing to be conducted via videoconferencing and other virtual channels. Equity research analysts and other industry executives believewarrants) that the positive trends in leisure and VFR travel will continue as COVID-19 vaccines continue to become more widely distributed in 2021. COVID-19 vaccines have become widely available in the US according to the Centers for Disease Control and Prevention (“the CDC”). The initial beneficiaries of the travel rebound are expected to be leisure and VFR focused Low-Cost Carriers (“LCCs”) and Ultra Low-Cost Carriers (“ULCCs”), while the more international and business travel exposed legacy network airlines are expected to lag behind.
remain equity classified after modification or
As COVID-19 has spread globally, many countries have imposed strict international travel restrictions. The U.S. market has recovered markedly faster than most other countries as a result of widespread vaccine distribution igniting the leisure travel recovery. However, given the uncertainty regarding COVID-19 variants, including but not limited to the Delta variant, the demand recovery may be impacted in both international and domestic travel.
- 10 -
(Unaudited)
Since(Unaudited)
cannot be predicted at this time.
On March 27,
funds awarded.
Further, in the second quarter, the Company received a grant of $34,547 under the American Rescue Plan Act of 2021 (“PSP3”) which was enacted on March 11, 2021, and authorizes Treasury to provide additional assistance to passenger air carriers and contractors that received financial assistance under the CARES Act. The grant amount recognized under PSP3 of $34,547 was recorded in Special Items, net during the second quarter.
The CARES Act provides an employee retention credit (“CARES Employee Retention Credit”) which is a refundable tax credit against certain employment taxes. During the year ended DecemberMarch 31, 2020,2021, the Company recorded $2,328$334 related to the CARES Employee Retention Credit within Special Items, net. In the first and second quarters of 2021, an additional $334 and $446, respectively, was recognized within Special Items, net.
Under the CARES Act Loan Program, the Company received a $45,000 loan (the “CARES Act Loan”) from the Treasury, on October 26, 2020, which was repaid in full on March 24, 2021.
2021 using proceeds from the IPO. For more information on funds awarded through the CARES act, see Note 3 of Notes to the Consolidated Financial Statements included in Part II, Item 8 “Financial Statements” in the 2021 10-K.
(Unaudited)
|
| |
| | | | | | | | | | | | | |||||||||||
|
| Three Months Ended June 30, | | Six Months Ended June 30, | |||||||||||||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 | |||||||||||||||
Scheduled service | | $ | 67,073 | | $ | 17,882 | | $ | 121,693 | | $ | 132,110 | |||||||||||
Charter service | |
| 28,898 | |
| 8,491 | |
| 54,703 | |
| 37,718 | |||||||||||
Three Months Ended March 31, | |||||||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||
Scheduled Service | Scheduled Service | $ | 124,068 | $ | 54,620 | ||||||||||||||||||
Charter Service | Charter Service | 32,879 | 25,805 | ||||||||||||||||||||
Ancillary | |
| 29,159 | |
| 4,968 | |
| 52,929 | |
| 39,999 | Ancillary | 45,086 | 23,770 | ||||||||
Passenger | |
| 125,130 | |
| 31,341 | |
| 229,325 | |
| 209,827 | Passenger | 202,033 | 104,195 | ||||||||
Cargo | |
| 22,098 | |
| 3,219 | |
| 43,684 | |
| 3,219 | Cargo | 21,053 | 21,585 | ||||||||
Other | |
| 1,961 | |
| 816 | |
| 3,793 | |
| 2,660 | Other | 3,439 | 1,831 | ||||||||
Total Operating Revenue | | $ | 149,189 | | $ | 35,376 | | $ | 276,802 | | $ | 215,706 | Total Operating Revenue | $ | 226,525 | $ | 127,611 |
| | | | | | | | | | | | | |||||||||||
|
| Three Months Ended June 30, | | Six Months Ended June 30, | |||||||||||||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 | |||||||||||||||
Three Months Ended March 31, | |||||||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||
Domestic | | $ | 142,774 |
| $ | 34,307 | | $ | 262,020 |
| $ | 197,345 | Domestic | $ | 208,591 | $ | 119,312 | ||||||
Latin America | |
| 6,266 |
| | 1,038 | |
| 14,228 |
| | 18,114 | Latin America | 17,869 | 7,877 | ||||||||
Other | |
| 149 |
| | 31 | |
| 554 |
| | 247 | Other | 65 | 422 | ||||||||
Total Operating Revenue | | $ | 149,189 |
| $ | 35,376 | | $ | 276,802 |
| $ | 215,706 | Total Operating Revenue | $ | 226,525 | $ | 127,611 |
- 12 -
(Unaudited)
| | | | | | | |||||||||||
|
| June 30, 2021 |
| December 31, 2020 | |||||||||||||
March 31, 2022 | December 31, 2021 | ||||||||||||||||
Contract Assets | |
| | |
| | Contract Assets | ||||||||||
Costs to fulfill contract with Amazon | | $ | 3,203 | | $ | 3,614 | Costs to fulfill contract with Amazon | $ | 2,658 | $ | 2,819 | ||||||
Air Traffic Liabilities | | $ | 113,771 | | $ | 101,075 | Air Traffic Liabilities | 110,946 | 118,562 | ||||||||
Loyalty Program Liabilities | |
| 20,877 | |
| 22,069 | Loyalty Program Liabilities | 17,374 | 19,718 | ||||||||
Amazon Deferred Up-front Payment | |
| 4,772 | |
| 5,240 | Amazon Deferred Up-front Payment | 3,959 | 4,200 | ||||||||
Total Contract Liabilities | | $ | 139,420 | | $ | 128,384 | Total Contract Liabilities | $ | 132,279 | $ | 142,480 |
2021.
- 13 -
(Unaudited)
| | | | | | |
|
| 2021 |
| 2020 | ||
Balance - January 1 | | $ | 22,069 | | $ | 22,892 |
Loyalty Points Earned |
| | 1,904 |
| | 2,621 |
Loyalty Points Redeemed(1) |
| | (3,096) |
| | (3,395) |
Balance - June 30 | | $ | 20,877 | | $ | 22,118 |
2022 | 2021 | ||||||||||
Balance – January 1 | $ | 19,718 | $ | 22,069 | |||||||
Loyalty Points Earned | 1,819 | 857 | |||||||||
Loyalty Points Redeemed (1) | (4,163) | (2,152) | |||||||||
Balance – March 31 | $ | 17,374 | $ | 20,774 |
(1) |
The timing of loyalty point redemptions can vary significantly, however most new points, that are not left to expire, are redeemed within two years. Given the inherent uncertainty of the current operating environment due to COVID-19, the Company will continue to monitor redemption patterns and will adjust estimates in the future, which could be material.
|
|
Basic earnings per share, which excludes dilution, is computed by dividing Net Income available to common stockholders by the weighted average number of shares of common stock outstanding for the period.
Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. The number of incremental shares from the assumed issuance of shares relating to share based awards is calculated by applying the treasury stock method.
| | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, | ||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
Numerator: |
| |
|
| |
| | |
|
| |
|
Net Income (Loss) | | $ | 51,753 | | $ | (6,040) | | $ | 64,169 | | $ | 1,211 |
| | | | | | | | | | | | |
Denominator: | | |
| | |
| | |
| | |
|
Weighted Average Common Shares Outstanding - Basic | | | 57,156,159 | | | 46,805,950 | | | 52,850,041 | | | 46,805,950 |
Dilutive effect of Stock Options and Warrants (1) | | | 4,826,282 | | | — | | | 4,553,552 | | | 1,437,196 |
Weighted Average Common Shares Outstanding - Diluted | | | 61,982,441 | | | 46,805,950 | | | 57,403,593 | | | 48,243,146 |
| | | | | | | | | | | | |
Basic earnings (loss) per share | | $ | 0.91 | | $ | (0.13) | | $ | 1.21 | | $ | 0.03 |
Diluted earnings (loss) per share | | $ | 0.83 | | $ | (0.13) | | $ | 1.12 | | $ | 0.02 |
Three Months Ended March 31, | |||||||||||
2022 | 2021 | ||||||||||
Numerator: | |||||||||||
Net Income | $ | 3,637 | $ | 12,416 | |||||||
Denominator: | |||||||||||
Weighted Average Common Shares Outstanding - Basic | 57,907,655 | 48,496,077 | |||||||||
Dilutive effect of Stock Options, RSUs and Warrants (1) | 3,824,287 | 4,012,109 | |||||||||
Weighted Average Common Shares Outstanding - Diluted | 61,731,942 | 52,508,186 | |||||||||
Basic earnings per share | $ | 0.06 | $ | 0.26 | |||||||
Diluted earnings per share | $ | 0.06 | $ | 0.24 |
(1) | There were |
- 14 -
SUN COUNTRY AIRLINES HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
Prior to their exercise on January 31, 2020, all 40,005,885 warrants held by the Apollo Stockholder were included in basic and diluted weighted average shares outstanding as they were equity classified, had an exercise price of approximately $0.0005, and all necessary conditions for issuance were met.
Warrants held by Amazon are included in dilutive weighted average shares outstanding as of the date the warrants vest. The unvested warrants held by Amazon have not been included in dilutive shares as their performance condition had not been satisfied.
|
| |
Aircraft Fleet
December 31, 2021 | Additions | Removals | March 31, 2022 | ||||||||||||||||||||
Passenger: | |||||||||||||||||||||||
Owned | 21 | 1 | — | 22 | |||||||||||||||||||
Finance leases | 9 | 3 | — | 12 | |||||||||||||||||||
Operating leases | 6 | — | (2) | 4 | |||||||||||||||||||
Sun Country Airlines’ Fleet | 36 | 4 | (2) | 38 | |||||||||||||||||||
Cargo: | |||||||||||||||||||||||
Aircraft Operated for Amazon | 12 | — | — | 12 | |||||||||||||||||||
Total Aircraft Operated | 48 | 4 | (2) | 50 | |||||||||||||||||||
December 31, 2020 | Additions | Removals | March 31, 2021 | ||||||||||||||||||||
Passenger: | |||||||||||||||||||||||
Owned | 14 | 5 | — | 19 | |||||||||||||||||||
Finance leases | 5 | — | — | 5 | |||||||||||||||||||
Operating leases | 12 | — | (5) | 7 | |||||||||||||||||||
Sun Country Airlines’ Fleet | 31 | 5 | (5) | 31 | |||||||||||||||||||
Cargo: | |||||||||||||||||||||||
Aircraft Operated for Amazon | 12 | — | — | 12 | |||||||||||||||||||
Total Aircraft Operated | 43 | 5 | (5) | 43 |
Class B pass-through trust certificates (the "2022-1 EETC") and another through a finance lease arrangement that is set to expire in fiscal year 2030.
| | | | | | | | |
|
| December 31, 2020 |
| Additions |
| Removals |
| June 30, 2021 |
Passenger: | | | | | | | | |
Owned |
| 14 |
| 6 |
| — |
| 20 |
Finance leases |
| 5 |
| 2 |
| — |
| 7 |
Operating leases |
| 12 |
| — |
| (6) |
| 6 |
Sun Country Airlines' Fleet |
| 31 |
| 8 |
| (6) |
| 33 |
Cargo: | | | | | | | | |
Aircraft Operated for Amazon |
| 12 |
| — |
| — |
| 12 |
Total Aircraft Operated |
| 43 |
| 8 |
| (6) |
| 45 |
$2,220
per year. The 6Company expects to take delivery of the aircraft during fiscal year 2022. The Company also purchased an aircraft that was previously under a finance lease before the end of the lease term for a purchase price of $16,784 and took delivery of 4 incremental aircraft for a total purchase price of approximately $75,000. The Company financed these purchases using incremental 2022-1 EETC funds that were drawn upon subsequent to March 31, 2022.
| | | | | | | | |
|
| December 31, 2019 |
| Additions |
| Removals |
| June 30, 2020 |
Passenger: | | | | | | | | |
Owned |
| 5 |
| 9 |
| — |
| 14 |
Finance leases |
| 10 |
| — |
| (5) |
| 5 |
Operating leases |
| 14 |
| — |
| (2) |
| 12 |
Seasonal leases |
| 2 |
| — |
| (2) |
| — |
Sun Country Airlines' Fleet |
| 31 |
| 9 |
| (9) |
| 31 |
Cargo: | | | | | | | | |
Aircraft Operated for Amazon | | — | | 7 | | — | | 7 |
Total Aircraft Operated | | 31 | | 16 | | (9) | | 38 |
The 9 aircraft purchased during the six months ended June 30, 2020 were financed through equipment trust certificates (see Note 7). NaN of these aircraft were previously under operating leases, 5 were previously under finance leases, and the other 2 aircraft were new to the Company’s fleet. In addition, the Company refinanced 3 previously owned and financed aircraft in January 2020 utilizing equipment trust certificates (see Note 7).
- 15 -
(Unaudited)
As of June 30, 2021, Sun Country operated a fleet of Boeing 737-NG aircraft, consisting of 44 Boeing 737-800s(Unaudited)
The Accumulated Depreciation on owned assets was $67,495 and $52,048 as of June 30, 2021 and December 31, 2020, respectively. Depreciationrent expense on these assets was $9,642 and $6,370 for the three months ended June 30, 2021 and 2020, respectively. Depreciation expense was $18,442 and $11,491 for the six months ended June 30, 2021 and 2020, respectively.
The Accumulated Amortization on Finance Lease Assets was $21,209 and $13,018aircraft are as of June 30, 2021 and December 31, 2020, respectively. Amortization Expense on these assets was $2,692 and $4,665 for the three months ended June 30, 2021 and 2020, respectively. Amortization Expense was $5,384 and $8,955 for the six months ended June 30, 2021 and 2020, respectively.
follows:
Three Months Ended March 31, | ||||||||||||||||||||
Aircraft Status | Expense Type | 2022 | 2021 | |||||||||||||||||
Owned | Depreciation | $ | 8,673 | $ | 7,830 | |||||||||||||||
Finance Leased | Amortization | 4,069 | 2,435 | |||||||||||||||||
Operating Leased | Aircraft Rent (1) | 3,186 | 5,599 | |||||||||||||||||
$ | 15,928 | $ | 15,864 |
(1) | Aircraft Rent expense includes credits for the amortization of over-market liabilities established at the Acquisition Date. |
DuringMaintenance Deposits Contra-Assets
Aircraft Maintenance Deposits Contra-Assets
At April 11, 2018 (the “Acquisition Date”), the Company established ato the lessor that were kept as funds on deposit contra-asset tofor maintenance events and the contra-assets represent the Company’s obligation to perform planned maintenance events on leased aircraft held as of the Acquisition Date.date. As reimbursable maintenance events are performed and Maintenance Expense is incurred, a portion of the contra-asset is recognized as a reduction to Maintenance Expense on the Condensed Consolidated Statements of Operations due to the fact that the previously acquired maintenance deposit is partially funding the maintenance event. As of June 30, 2021March 31, 2022 and December 31, 2020,2021, the remaining balance of the contra-asset was $22,792 and $36,729, respectively. Of the $13,937 reduction in the contra-asset during the six months ended June 30, 2021, $12,749 related to the purchase of 6 aircrafts previously leased, whereupon the contra-assets and related maintenance deposits were written-off concurrently to Aircraft lease buy-out expense in Special Items, net (see Note 11). For the three months ended June 30, 2021 and 2020, the Company recognized $850 and NaN respectively, of the contra-asset as a reduction to Maintenance expense on the accompanying Condensed Consolidated Statements of Operations. For the six months ended June 30, 2021 and 2020, the Company recognized $850 and $328, respectively, of the contra-asset as a reduction to Maintenance expense.
$22,348.
- 16 -
SUN COUNTRY AIRLINES HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
use Assets.corresponding lease asset. The remaining unamortized balance of this contra-asset as of June 30, 2021March 31, 2022 and December 31, 20202021 was $11,444$383 and $16,501,$10,363, respectively and is recorded within the Operating Lease Right-of-Use Assets. During the sixthree months ended June 30, 2021,March 31, 2022, the Company purchased 6executed lease amendments which modified 2 aircraft which were previously underfrom operating leases with unfavorable terms, contributing to $3,765finance leases. As a result of the decrease.
modifications, the Company reclassified $9,687 of the over-market lease liability from Operating Lease Right-of-Use Assets to Finance Lease Assets. The resulting reclassification reduces the Depreciation and Amortization for the related Finance Lease Assets.
Aircraft Rent expense for the three months ended June 30, 2021 and 2020, includes creditsMarch 31, 2022, $6,023 was incorporated into the Finance Lease Assets in accordance with the terms of $1,618 and $3,726, respectively, for the amortizationexecuted lease amendments, as described above.
Contents
|
| |
Lines of
The Company was in compliance with these covenants as of March 31, 2022.
- 17 -
(Unaudited)
Under the CARES Act Loan Program, on October 26, 2020, the Company was awarded a $45,000 loan, which was secured by the Company’s loyalty program and certain cash deposit accounts. The loan bore interest at a rate per annum equal to the Adjusted LIBO Rate plus 6.50% and was due to be repaid on the earlier of (i) October 24, 2025 or (ii) six months prior to the expiration date of any material loyalty program securing the loan. On March 24, 2021, the CARES Act Loan was repaid in full, including outstanding principal and accrued interest for a total repayment amount of $46,260.
The Company was in compliance with all covenants in its debt agreements at June 30, 2021.
(Unaudited)
| | | | | | |
|
| June 30, 2021 |
| December 31, 2020 | ||
Notes payable under the Company's 2019-1 EETC agreement dated December 2019, with original loan amounts of $248,587 payable in bi-annual installments, in June and December, through December 2027. These notes bear interest at an annual rate of between 4.13% and 6.95% and the weighted average interest rate is 4.78%. | | $ | 211,605 | | $ | 227,347 |
| | | | | | |
Delayed Draw Term Loan Facility (see terms and conditions above) | |
| 79,494 | |
| — |
| | | | | | |
U. S. Department of the Treasury CARES Act Loan (see terms and conditions above) | |
| — | |
| 45,419 |
| | | | | | |
Notes payable to Wilmington Trust Company. Notes bear interest at an annual rate of 8.45% and were scheduled to mature Nov. 2023 to Feb. 2024. In April 2021, these notes were repaid. | |
| — | |
| 12,506 |
| | | | | | |
Other Notes payable. These notes bear interest at an annual rate of approximately 5.0% and mature March 2029. | |
| 493 | |
| 529 |
| | | | | | |
Total Debt | |
| 291,592 | |
| 285,801 |
| | | | | | |
Less: Unamortized debt issuance costs | |
| (4,113) | |
| (3,338) |
| | | | | | |
Less: Current Maturities of Long-term Debt | |
| (19,795) | |
| (26,118) |
Total Long-term Debt | | $ | 267,684 | | $ | 256,345 |
- 18 -
March 31, 2022 | December 31, 2021 | ||||||||||
Notes payable under the Company's 2019-1 EETC agreement dated December 2019, with original loan amounts of $248,587 payable in bi-annual installments, in June and December, through December 2027. These notes bear interest at an annual rate between 4.13% and 6.95% and the weighted average interest rate is 4.76% as of March 31, 2022. | $ | 202,984 | $ | 202,984 | |||||||
Notes payable under the Company's 2022-1 EETC agreement dated March 2022, with a face amount of $188,277 payable in bi-annual installments, in March and September, through March 2031. These notes bear interest at an annual rate between 4.84% and 5.75% and the weighted average interest rate is 5.06% as of March 31, 2022. | 77,986 | — | |||||||||
Delayed Draw Term Loan Facility (see terms and conditions above) | — | 77,481 | |||||||||
Other Notes payable. These notes bear interest at an annual rate of approximately 5.00% and were repaid in full in February 2022. | — | 466 | |||||||||
Total Debt | 280,970 | 280,931 | |||||||||
Less: Unamortized debt issuance costs | (3,685) | (3,505) | |||||||||
Less: Current Maturities of Long-term Debt | (34,741) | (29,412) | |||||||||
Total Long-term Debt | $ | 242,544 | $ | 248,014 |
SUN COUNTRY AIRLINES HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
| | | | | | | | | |
|
| Debt Principal |
| Amortization of Debt |
| | | ||
| | Payments | | Issuance Costs | | Net Debt | |||
Remainder of 2021 | | $ | 10,661 | | $ | (509) | | $ | 10,152 |
2022 | |
| 30,367 | |
| (983) | |
| 29,384 |
2023 | |
| 42,358 | |
| (908) | |
| 41,450 |
2024 | |
| 44,000 | |
| (785) | |
| 43,215 |
2025 | |
| 49,087 | |
| (670) | |
| 48,417 |
Thereafter | |
| 115,119 | |
| (258) | |
| 114,861 |
Total as of June 30, 2021 | | $ | 291,592 | | $ | (4,113) | | $ | 287,479 |
Debt Principal Payments | Amortization of Debt Issuance Costs | Net Debt | |||||||||||||||
Remainder of 2022 | $ | 30,917 | $ | (613) | $ | 30,304 | |||||||||||
2023 | 47,534 | (757) | 46,777 | ||||||||||||||
2024 | 49,173 | (633) | 48,540 | ||||||||||||||
2025 | 54,257 | (518) | 53,739 | ||||||||||||||
2026 | 34,684 | (348) | 34,336 | ||||||||||||||
Thereafter | 64,405 | (816) | 63,589 | ||||||||||||||
Total as of March 31, 2022 | $ | 280,970 | $ | (3,685) | $ | 277,285 |
| | | | | | |
|
| June 30, 2021 |
| December 31, 2020 | ||
Carrying Amount | | $ | 291,592 | | $ | 285,801 |
Fair Value | | $ | 281,640 | | $ | 279,119 |
was $271,837 as of March 31, 2022 and $272,004 as of December 31, 2021. The fair value of the Company’s debt was based on the discounted amount of future cash flows using the Company’s end-of-period incremental borrowing rate for similar obligations. The estimates were primarily based on Level 3 inputs.
|
| |
As of March 31, 2022 and December 31, 2021, the Company had no outstanding fuel derivative contracts.
Changes in Derivative Assets (Liabilities) were as follows:
| | | | | | |
| | Six Months Ended June 30, | ||||
|
| 2021 |
| 2020 | ||
Balance - January 1 | | $ | (1,174) | | $ | 2,233 |
Non-cash Gains (Losses) | |
| 3,599 | |
| (16,056) |
Contract Settlements | |
| (827) | |
| 4,990 |
Balance - June 30 | | $ | 1,598 | | $ | (8,833) |
- 19 -
SUN COUNTRY AIRLINES HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
Fuel Derivative Gains (Losses) consisted of the following:
| | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, | ||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
Non-cash Gains (Losses) | | $ | 1,213 | | $ | 5,695 | | $ | 3,599 | | $ | (16,056) |
Cash Premiums Paid | | | — | | | (1,617) | |
| — | |
| (1,901) |
Total Fuel Derivative Gains (Losses) | | $ | 1,213 | | $ | 4,078 | | $ | 3,599 | | $ | (17,957) |
Fuel derivative gains and losses are classified in Aircraft Fuel on the Condensed Consolidated Statements of Operations.
As
Three Months Ended March 31, | |||||||||||
2022 | 2021 | ||||||||||
Balance - January 1 | $ | — | $ | (1,174) | |||||||
Non-cash Gains | — | 2,386 | |||||||||
Contract Settlements | — | (7) | |||||||||
Balance - March 31 | $ | — | $ | 1,205 |
Three Months Ended March 31, | |||||||||||
2022 | 2021 | ||||||||||
Non-cash Gains | $ | — | $ | 2,386 | |||||||
Cash Premiums Paid | — | — | |||||||||
Total Fuel Derivative Gains | $ | — | $ | 2,386 |
|
|
Accounting standards defineare used to estimate the fair value asand determine the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The standards also establish a fair value hierarchy which requires an entityclassification of each class of financial instrument, see
Level 1 – Quoted prices for identicalwere no additional assets or liabilities in active markets.
Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The Company uses the following valuation methodologies for financial instruments measured at fair value on a recurring basis.
basis as of March 31, 2022 or December 31, 2021.
- 20 -
(Unaudited)
The following table summarizes the assets and liabilities measured at fair value on a recurring basis:
(Unaudited)
| | | | | | | | | | | | |
|
| June 30, 2021 | ||||||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Assets | | | | | | | | | | | | |
Fuel Derivative Contracts | | $ | — | | $ | 1,598 | | $ | — | | $ | 1,598 |
Total Assets measured at fair value on a recurring basis | | $ | — | | $ | 1,598 | | $ | — | | $ | 1,598 |
| | | | | | | | | | ��� | | |
|
| December 31, 2020 | ||||||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Liabilities | | | | | | | | | | | | |
Fuel Derivative Contracts | | $ | — | | $ | 1,174 | | $ | — | | $ | 1,174 |
Total Liabilities measured at fair value on a recurring basis | | $ | — | | $ | 1,174 | | $ | — | | $ | 1,174 |
– Certain assets are measured at fair value on a nonrecurring basis. The Company’s non-financial assets, which primarily consist of propertyProperty & Equipment, Goodwill and equipment, goodwill and other intangible assetsOther Intangible Assets are not required to be measured at fair value on a recurring basis and are reported at carrying value. However, on a periodic basis whenever events or changes in circumstances indicate that their carrying value may not be recoverable, non-financial assets are assessed for impairment and, if applicable, written down to fair value using significant unobservable inputs, classified as Level 3.
The Company’s debt portfolio consists of 2019-1 EETC certificates, borrowings under the Delayed Draw Term Loan Facility, and fixed-rate notes payable.
|
|
benefits.
Payments under the Tax Receivable Agreement will not begin until at least 12 months after the closing of the Company’s IPO. In the event that the Company is prohibited from making payments under the Tax Receivable Agreement for tax benefits utilized during any periods pursuant to the CARES Act or other
- 21 -
SUN COUNTRY AIRLINES HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
governmental programs, the Company is not required to make payments under the Tax Receivable Agreement for Pre-IPO Tax Attributes utilized in such periods. Based on our current participation in the CARES Act Program, the Company does not expect to make payments under the Tax Receivable Agreement until 2023.
If we do not generate sufficient taxable income in the aggregate over the term of the Tax Receivable Agreement to utilize the tax benefits, then we would not be required to make the related TRA payments. Upon the closing of the IPO in the first quarter of 2021, the Company recognized a non-current liability of $115,200, which represented undiscounted aggregate payments that wewere expected to paybe paid to the TRA holders under the Tax Receivable Agreement,TRA, with an offset to Stockholders'Stockholders’ Equity. Subsequent changes in the measurementThe TRA balance as of the liability are being adjusted through the Consolidated Statements of Operations.March 31, 2022 and December 31, 2021 was $105,600 and $98,800, respectively. The Tax Receivable AgreementTRA liability is an estimate and actual amounts payable under the Tax Receivable Agreement could differ from this estimate based on, among other things, (i) generation of future taxable income overestimate. During the term ofthree months ended March 31, 2022, the Tax Receivable Agreement, (ii) the Company’s participation in future government programs, (iii) stock option activity during periods priorCompany recorded an adjustment to the commencementestimated TRA liability of payments under the Tax Receivable Agreement and (iv) future changes in tax laws. These factors could result in an increase or decrease in the related liability which would be recognized in the Company’s earnings in the period of such change. In the second quarter of 2021, the Company reduced$6,800. Adjustments to the TRA liability balance by $18,700, from $115,200 to $96,500. The offsetting credit wasare recorded in Other, Non-operating Income. The decreasenet Non-Operating Income (Expense) on the Company’s Condensed Consolidated Statements of Operations.
|
|
amount.
| | | | | | | | | | | | |
|
| Three Months Ended June 30, | | Six Months Ended June 30, | ||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
CARES Act grant recognition (1) | | $ | (39,378) | | $ | (31,516) | | $ | (71,587) | | $ | (31,516) |
CARES Act employee retention credit (2) | |
| (446) | |
| — | |
| (780) | |
| — |
Aircraft lease buy-out expense (3) | |
| 1,299 | |
| — | |
| 6,963 | |
| — |
Other | |
| 5 | |
| 35 | |
| 12 | |
| 35 |
Total Special Items, net | | $ | (38,520) | | $ | (31,481) | | $ | (65,392) | | $ | (31,481) |
(1) | NaN aircraft were purchased in March 2021 that were previously under operating leases. |
- 22 -
SUN COUNTRY AIRLINES HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
the associated lease termination costs, write-off of previously capitalized maintenance deposits, and the write-off of over-market |
|
|
The Company has contractual obligations and commitments primarily with regard to lease arrangements, repayment of debt (see Note 7)7), payments under the TRA (see Note 10), and probable future purchases of aircraft.
|
|
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the Chief Operating Decision Maker and is used in resource allocation and performance assessments. The Company’s Chief Operating Decision Maker is considered to be the Company’s Chief Executive Officer. The Company’s Chief Operating Decision Maker makes resource allocation decisions to maximize the Company’s consolidated financial results. Substantially all the Company’s tangible assets are located in the U.S. or relate to flight equipment, which is mobile across geographic markets. The Company has 2 operating segments: Passenger and Cargo.
The Company’s Passenger segment has 2 internal passenger groups (Scheduled and Charter), but since they share resources and expenses are combined, they are considered one Passenger operating segment. The Company’s Passenger operations are highly concentrated in the U.S. but include service to many international locations, primarily based on scheduled service to Latin America during the winter season and on military charter services. All goodwill is related to the Passenger Operating Segment.
The Cargo segment began providing air cargo services under the ATSA in May 2020. Fuel consumed in Cargo operations is directly reimbursed by Amazon and therefore aircraft fuel revenue is presented net of such reimbursements on the Condensed Consolidated Statements of Operations. Fuel consumed in Cargo maintenance activities is included in the Cargo segment. Certain operating expenses are directly attributable to this operating segment.
Certain operating expenses are allocated between the operating segments. Non-Fuel operating expenses are allocated based on metrics such as block hours, fleet count and departures, which best align with the nature of the respective expense. CARES Act credits, included in Special Items, net, are allocated based on the respective segment salaries, wages, and benefits.
(Unaudited)
Company’s segments, see
| | | | | | | | | | | | | | | | | | |
|
| Three Months Ended June 30, 2021 | | Three Months Ended June 30, 2020 | ||||||||||||||
| | Passenger |
| Cargo |
| Consolidated |
| Passenger |
| Cargo(1) |
| Consolidated | ||||||
Operating Revenues | | $ | 127,091 | | $ | 22,098 | | $ | 149,189 | | $ | 32,157 | | $ | 3,219 | | $ | 35,376 |
Non-Fuel Operating Expenses |
| | 92,361 |
| | 16,401 |
| | 108,762 | | | 63,507 |
| | 4,907 |
| | 68,414 |
Aircraft Fuel |
| | 29,657 |
| | 52 |
| | 29,709 | | | 677 |
| | — |
| | 677 |
Special Items, net |
| | (28,784) |
| | (9,736) |
| | (38,520) | | | (28,111) |
| | (3,370) |
| | (31,481) |
Total Operating Expenses |
| | 93,234 |
| | 6,717 |
| | 99,951 | | | 36,073 |
| | 1,537 |
| | 37,610 |
Operating Income (Loss) | | $ | 33,857 | | $ | 15,381 |
| | 49,238 | | $ | (3,916) | | $ | 1,682 |
| | (2,234) |
Interest Income | | | | |
| | | | 9 | | | | |
| | | | 63 |
Interest Expense | | | | |
| | | | (6,080) | | | | |
| | | | (5,442) |
Other, net | | | | |
| | | | 18,054 | | | | |
| | | | (325) |
Income (Loss) before Income Tax | | | | |
|
|
| $ | 61,221 | | | | |
|
|
| $ | (7,938) |
of the Notes to the Consolidated Financial Statements in Part II, Item 8, “Financial Statements” in the 2021 10-K.
| | | | | | | | | | | | | | | | | | | |||||||||||||||||||||||||||||||||||
|
| Six Months Ended June 30, 2021 | | Six Months Ended June 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||
| | Passenger |
| Cargo |
| Consolidated |
| Passenger |
| Cargo(1) |
| Consolidated | |||||||||||||||||||||||||||||||||||||||||
Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Passenger | Cargo | Consolidated | Passenger | Cargo | Consolidated | ||||||||||||||||||||||||||||||||||||||||||||||||
Operating Revenues | | $ | 233,118 | | $ | 43,684 | | $ | 276,802 | | $ | 212,487 | | $ | 3,219 | | $ | 215,706 | Operating Revenues | $ | 205,472 | $ | 21,053 | $ | 226,525 | $ | 106,026 | $ | 21,585 | $ | 127,611 | ||||||||||||||||||||||
Non-Fuel Operating Expenses |
| | 179,566 |
| | 34,472 |
| | 214,038 | | | 173,046 |
| | 4,907 |
| | 177,953 | Non-Fuel Operating Expenses | 120,810 | 19,338 | 140,148 | 87,205 | 18,070 | 105,275 | ||||||||||||||||||||||||||||
Aircraft Fuel |
| | 53,912 |
| | 72 |
| | 53,984 | | | 56,238 |
| | — |
| | 56,238 | Aircraft Fuel | 64,544 | — | 64,544 | 24,253 | 21 | 24,274 | ||||||||||||||||||||||||||||
Special Items, net |
| | (46,991) |
| | (18,401) |
| | (65,392) | | | (28,111) |
| | (3,370) |
| | (31,481) | Special Items, net | — | — | — | (18,206) | (8,665) | (26,871) | ||||||||||||||||||||||||||||
Total Operating Expenses |
| | 186,487 |
| | 16,143 |
| | 202,630 | | | 201,173 |
| | 1,537 |
| | 202,710 | Total Operating Expenses | 185,354 | 19,338 | 204,692 | 93,252 | 9,426 | 102,678 | ||||||||||||||||||||||||||||
Operating Income | | $ | 46,631 | | $ | 27,541 |
| | 74,172 | | $ | 11,314 | | $ | 1,682 |
| | 12,996 | Operating Income | $ | 20,118 | $ | 1,715 | 21,833 | $ | 12,774 | $ | 12,159 | 24,933 | ||||||||||||||||||||||||
Interest Income | | | | |
| | | | 24 | | | | |
| | | | 314 | Interest Income | 24 | 15 | ||||||||||||||||||||||||||||||||
Interest Expense | | | | |
| | | | (13,201) | | | | |
| | | | (11,058) | Interest Expense | (8,562) | (7,121) | ||||||||||||||||||||||||||||||||
Other, net | | | | |
| | | | 18,049 | | | | |
| | | | (494) | Other, net | (6,876) | (5) | ||||||||||||||||||||||||||||||||
Income before Income Tax | | | | |
|
|
| $ | 79,044 | | | | |
|
|
| $ | 1,758 | |||||||||||||||||||||||||||||||||||
Income Before Income Tax | Income Before Income Tax | $ | 6,419 | $ | 17,822 |
|
|
|
|
(Unaudited)
2021 10-K.
- 25 -
SUN COUNTRY AIRLINES HOLDINGS, INC
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
high growth, high margins and strong cash flows with greater resilience than other passenger airlines. We focus on serving leisure and visiting friends and relatives (“VFR”("VFR") passengers and charter customers andas well as providing crew, maintenance and insurance (“CMI”) services to Amazon, with flights throughout the United States and to destinations in Canada, Mexico, Central America and the Caribbean. Based in Minnesota, we operate an agile network that includes our scheduled service business, and our synergistic charter, and cargo businesses. We share resources, such as flight crews, across our scheduled service, charter, and cargo business lines with the objective of generating higher returns and margins and mitigating the seasonality of our
- 26 -
SUN COUNTRY AIRLINES HOLDINGS, INC
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
Operations in Review
On February 10, 2021, Sun Country, Inc., our wholly-owned subsidiary (the “Borrower”), entered into a new Credit Agreement which provides for a $25,000 Revolving Credit Facility and a $90,000 Delayed Draw Term Loan Facility. We received CARES Act grants totaling $62,312 during 2020, and a CARES Act loan of $45,000 in October 2020. During the quarter ended March 31, 2021, we received a grant of $32,208 under the Payroll Support Program Extension under the Consolidated Appropriations Act of 2021. On April 22, 2021, we received $4,831 from the Treasury as a top-off grant under Payroll Support Program Extension (“PSP2”). Further, during the quarter ended June 30, 2021, the Company received a grant of $34,547 under the American Rescue Plan Act of 2021 (“PSP3”).
near term. While the COVID-19 inducedpandemic-induced industry downturn has delayed our growth in 2020 and 2021, to date, we believe that our investments have positioned us to profitably grow our business in the long term following a rebound in the U.S. airline industry.
Scheduled service. Scheduled service revenue consistsFor a more detailed discussion on the nature of base farestransactions included in the separate line items of our Condensed Consolidated Statement of Operations, see “Management’s Discussion and expired passenger travel credits.
Charter service. Charter service revenue consistsAnalysis of revenue earned fromOperations” in Part II, Item 7 in our charter operations, primarily generated through our service to the U.S. Department of Defense, collegiate and professional sports teams, and casinos.
Ancillary. Ancillary revenue consists of revenue generated from air travel-related services such as baggage fees, seat selection and upgrade fees, itinerary service fees and on-board sales.
Cargo. Cargo revenue consists of air cargo transportation services under the ATSA with Amazon, primarily related to e-commerce delivery services.
Other. Other revenue consists primarily of revenue from services in connection with our Sun Country Vacations products, including organizing ground services, such as hotel, car and transfers. Other revenue also includes services not directly related to providing passenger services such as the advertising, marketing and brand
(Unaudited)
elements resulting from our co-branded credit card program. This component(Unaudited)
Three Months Ended March 31, 2022 (1) | Three Months Ended March 31, 2021 (1) | ||||||||||||||||||||||||||||||||||||||||||||||
Scheduled Service | Charter | Cargo | Total | Scheduled Service | Charter | Cargo | Total | ||||||||||||||||||||||||||||||||||||||||
Departures (2) | 6,227 | 1,620 | 2,574 | 10,487 | 4,323 | 1,511 | 2,565 | 8,452 | |||||||||||||||||||||||||||||||||||||||
Block hours (2) | 22,433 | 3,804 | 7,390 | 33,805 | 15,207 | 3,331 | 8,242 | 26,932 | |||||||||||||||||||||||||||||||||||||||
Aircraft miles (2) | 9,100,714 | 1,379,448 | 2,809,782 | 13,334,873 | 6,233,184 | 1,222,451 | 3,285,525 | 10,784,543 | |||||||||||||||||||||||||||||||||||||||
Available seat miles (ASMs) (thousands) (2) | 1,684,532 | 235,705 | — | 1,928,149 | 1,158,012 | 211,721 | — | 1,376,796 | |||||||||||||||||||||||||||||||||||||||
Total revenue per ASM (TRASM) (cents) | 10.25 | 13.95 | 10.66 | 6.93 | 12.19 | 7.70 | |||||||||||||||||||||||||||||||||||||||||
Average passenger aircraft during the period (3) | 34.1 | 31.0 | |||||||||||||||||||||||||||||||||||||||||||||
Passenger aircraft at end of period (3) | 38 | 31 | |||||||||||||||||||||||||||||||||||||||||||||
Cargo aircraft at end of period | 12 | 12 | |||||||||||||||||||||||||||||||||||||||||||||
Average daily aircraft utilization (hours) (3) | 8.6 | 6.7 | |||||||||||||||||||||||||||||||||||||||||||||
Average stage length (miles) | 1,336 | 1,278 | |||||||||||||||||||||||||||||||||||||||||||||
Revenue passengers carried (4) | 922,652 | 553,032 | |||||||||||||||||||||||||||||||||||||||||||||
Revenue passenger miles (RPMs) (thousands) (4) | 1,338,459 | 774,999 | |||||||||||||||||||||||||||||||||||||||||||||
Load factor (4) | 79.5 | % | 66.9 | % | |||||||||||||||||||||||||||||||||||||||||||
Average base fare per passenger (4) | $ | 134.47 | $ | 98.77 | |||||||||||||||||||||||||||||||||||||||||||
Ancillary revenue per passenger (4) | $ | 48.87 | $ | 42.98 | |||||||||||||||||||||||||||||||||||||||||||
Charter revenue per block hour (4) | $ | 8,643 | $ | 7,747 | |||||||||||||||||||||||||||||||||||||||||||
Fuel gallons consumed (thousands) (2) | 17,401 | 2,758 | — | 20,245 | 11,557 | 2,357 | — | 13,993 | |||||||||||||||||||||||||||||||||||||||
Fuel cost per gallon, excluding derivatives | $ | 3.20 | $ | 1.91 | |||||||||||||||||||||||||||||||||||||||||||
Employees at end of period | 2,316 | 1,768 | |||||||||||||||||||||||||||||||||||||||||||||
Cost per available seat mile (CASM) (cents) (5) | 10.62 | 7.46 | |||||||||||||||||||||||||||||||||||||||||||||
Adjusted CASM (cents) (6) | 6.21 | 6.15 |
Operating Expenses
Aircraft Fuel. Aircraft fuel expense includes jet fuel, federalcounts and state taxes, other fees and the mark-to-market gains and losses associated with our fuel derivative contracts as we do not apply hedge accounting. Aircraft fuel expense can be volatile, even between quarters, due to price changes and mark-to-market gains and losses in the value of the underlying derivative instruments as crude oil prices and refining margins increase or decrease.
Salaries, Wages, and Benefits. Salaries, wages, and benefits expense includes salaries, hourly wages, bonuses, equity-based compensation, and profit sharing paid to employees for their services, as well as related expenses associated with medical benefits, employee benefit plans, employer payroll taxes and other employee related costs.
Aircraft Rent. Aircraft rent expense consists of monthly lease charges for aircraft and spare engines under the terms of the related operating leases and is recognizedutilization metrics are shown on a straight-line basis. Aircraft rent expense also includes supplemental rent, which consists of maintenance reserves paid to aircraft lessors in advance of the performance of significant maintenance activities thatsystem basis only.
Maintenance. Maintenance expense includes the cost of all parts, materials and fees for repairs performed by us and our third-party vendors to maintain our fleet. It excludes direct labor cost related to our own mechanics, whichcargo operations, special items, and certain other costs that are included in salaries, wages, and benefits expense. It also excludes maintenance expenses, which are deferred based on the built-in overhaul method for owned aircraft and subsequently amortized as a component of depreciation and amortization expense. Our maintenance expense is reduced due to recognizing a liability (or contra-asset) that offsets expenses for maintenance events incurred by the new owners of Sun Country but paid for by the previous owners. For more information on these maintenance expense credits, see Note 6unrelated to our Condensed Consolidated Financial Statements.
Sales and Marketing. Sales and marketing expense includes credit card processing fees, travel agent commissions and related global distribution systems fees, advertising, sponsorship and distribution costs, such as the costs of our call centers, and costs associated with our loyalty program. It excludes related salary and wages of personnel, which are included in salaries, wages, and benefits expense.
Depreciation and Amortization. Depreciation and amortization expense includes depreciation of fixed assets we own and leasehold improvements, amortization of finance leased assets, as well as the amortization of finite-lived intangible assets. It also includes the depreciation of significant maintenance expenses we deferred under the built-in overhaul method for owned and certain finance leased aircraft.
(Unaudited)
Ground Handling. Ground handling includes ground services at airports including baggage handling, ticket counter(Unaudited)
Landing Fees and Airport Rent. Landing fees and airport rent includes aircraft landing fees and charges2021
Three Months Ended March 31, | $ Change | % Change | |||||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||
Operating Revenues: | |||||||||||||||||||||||
Scheduled Service | $ | 124,068 | $ | 54,620 | $ | 69,448 | 127 | % | |||||||||||||||
Charter Service | 32,879 | 25,805 | 7,074 | 27 | % | ||||||||||||||||||
Ancillary | 45,086 | 23,770 | 21,316 | 90 | % | ||||||||||||||||||
Passenger | 202,033 | 104,195 | 97,838 | 94 | % | ||||||||||||||||||
Cargo | 21,053 | 21,585 | (532) | (2) | % | ||||||||||||||||||
Other | 3,439 | 1,831 | 1,608 | 88 | % | ||||||||||||||||||
Total Operating Revenues | 226,525 | 127,611 | 98,914 | 78 | % | ||||||||||||||||||
Operating Expenses: | |||||||||||||||||||||||
Aircraft Fuel | 64,544 | 24,274 | 40,270 | 166 | % | ||||||||||||||||||
Salaries, Wages, and Benefits | 59,617 | 44,075 | 15,542 | 35 | % | ||||||||||||||||||
Aircraft Rent | 3,186 | 5,599 | (2,413) | (43) | % | ||||||||||||||||||
Maintenance | 11,995 | 9,210 | 2,785 | 30 | % | ||||||||||||||||||
Sales and Marketing | 8,628 | 5,110 | 3,518 | 69 | % | ||||||||||||||||||
Depreciation and Amortization | 15,328 | 12,615 | 2,713 | 22 | % | ||||||||||||||||||
Ground Handling | 7,958 | 5,230 | 2,728 | 52 | % | ||||||||||||||||||
Landing Fees and Airport Rent | 10,286 | 8,785 | 1,501 | 17 | % | ||||||||||||||||||
Special Items, net | — | (26,871) | 26,871 | (100) | % | ||||||||||||||||||
Other Operating, net | 23,150 | 14,651 | 8,499 | 58 | % | ||||||||||||||||||
Total Operating Expenses | 204,692 | 102,678 | 102,014 | 99 | % | ||||||||||||||||||
Operating Income | 21,833 | 24,933 | (3,100) | (12) | % | ||||||||||||||||||
Non-operating Income (Expense): | |||||||||||||||||||||||
Interest Income | 24 | 15 | 9 | 60 | % | ||||||||||||||||||
Interest Expense | (8,562) | (7,121) | (1,441) | 20 | % | ||||||||||||||||||
Other, net | (6,876) | (5) | (6,871) | NM | |||||||||||||||||||
Total Non-operating Income (Expense), net | (15,414) | (7,111) | (8,303) | 117 | % | ||||||||||||||||||
Income Before Income Tax | 6,419 | 17,822 | (11,403) | (64) | % | ||||||||||||||||||
Income Tax Expense | 2,782 | 5,406 | (2,624) | (49) | % | ||||||||||||||||||
Net Income | $ | 3,637 | $ | 12,416 | $ | (8,779) | (71) | % |
(1) | "NM" stands for not meaningful |
Special Items, net. Special items, net reflects expenses, or credits to expense, that are not representative of our ongoing coststhree months ended March 31, 2022 from $127,611 for the period presented and may vary from period to periodthree months ended March 31, 2021. The increase was largely driven by an increase in nature, frequency and amount.
Other Operating. Other operating expenses include crew and other employee travel, interrupted trip expenses, information technology, property taxes and insurance, including hull-liability insurance, supplies, legal and other professional fees, facilities and all other administrative and operational overhead expenses.
Non-operating Income (Expense)
Interest Income. Interest income includes interest on our cash and equivalent and investment balances. Interest income is generally immaterial to our results of operations, reflecting the current low interest rate environment and our unrestricted cash balances.
Interest Expense. Interest expense includes interest and fees related to our outstanding debt and our finance/capital leases, as well as the amortization of debt financing costs.
Other, net. Other expenses include activities not classified in any other area of the Condensed Consolidated Statements of Operations, such as gain or loss on sale or retirement of assets and certain consulting expenses. The change in the TRA liability is also included here.
Income Taxes
We account for income taxes using the asset and liability method. We record a valuation allowance to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. We record deferred taxes based on differences between the financial statement basis and tax basis of assets and liabilities and available tax loss and credit carryforwards. In assessing our ability to utilize our deferred tax assets, we consider whether it is more likely than not that some or all of the deferred tax assets will be realized. We consider all available evidence, both positive and negative, in determining future taxable income on a jurisdiction by jurisdiction basis.
- 29 -
(Unaudited)
Operating Statistics
Key Operating Statistics and Metrics
| | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2021 (1) | | Three Months Ended June 30, 2020 (1) | ||||||||||||||||||
| | Scheduled | | | | | | | | | | Scheduled | | | | | | | | | ||
|
| Service |
| Charter |
| Cargo |
| Total |
| Service |
| Charter |
| Cargo |
| Total | ||||||
Departures (2) | | | 4,921 | | | 1,727 | | 2,752 | | | 9,445 | | | 1,376 | | | 520 | | 413 | | | 2,324 |
Block hours (2) | | | 15,900 | | | 3,656 | | 8,198 | | | 27,874 | | | 4,177 | | | 1,321 | | 1,076 | | | 6,604 |
Aircraft miles (2) | | | 6,478,328 | | | 1,360,043 | | 3,222,967 | | | 11,098,716 | | | 1,710,153 | | | 526,261 | | 454,980 | | | 2,700,328 |
Available seat miles (ASMs) (thousands) (2) | | | 1,198,768 | | | 237,723 | | — | | | 1,442,744 | | | 318,049 | | | 97,827 | | — | | | 417,538 |
Total revenue per ASM (TRASM) (cents) (3) | | |
| | |
| |
| | | 8.81 | | |
| | |
| | | | | 7.70 |
Average passenger aircraft during the period (3) | | |
| | |
| |
| | | 31.0 | | |
| | |
| | | | | 31.0 |
Passenger aircraft at end of period (3) | | |
| | |
| |
| | | 33 | | |
| | |
| | | | | 31 |
Cargo aircraft at end of period | | |
| | |
| |
| | | 12 | | |
| | |
| | | | | 7 |
Average daily aircraft utilization (hours) (3) | | |
| | |
| |
| | | 7.0 | | |
| | |
| | | | | 2.0 |
Average stage length (miles) | | |
| | |
| |
| | | 1,179 | | |
| | |
| | | | | 1,180 |
Revenue passengers carried (4) | | | 700,019 | | |
| |
| | |
| | | 121,922 | | |
| | | | |
|
Revenue passenger miles (RPMs) (thousands) (4) | | | 919,034 | | |
| |
| | |
| | | 153,098 | | |
| | | | |
|
Passenger revenue per ASM (PRASM) (cents) (4) | | | 5.60 | | |
| |
| | |
| | | 5.62 | | |
| | | | |
|
Load factor (4) | | | 76.7 | % | |
| |
| | |
| | | 48.1 | % | |
| | | | |
|
Average base fare per passenger (4) | | $ | 95.81 | | |
| |
| | |
| | $ | 146.66 | | |
| | | | |
|
Ancillary revenue per passenger (4) | | $ | 41.66 | | |
| |
| | |
| | $ | 40.74 | | |
| | | | |
|
Charter revenue per block hour | | |
| | $ | 7,904 | |
| | |
| | |
| | $ | 6,426 | | | | |
|
Fuel gallons consumed (thousands) (2) | | | 12,267 | |
| 2,622 | | — | | | 14,955 | | | 3,028 | | | 946 | | — | | | 3,991 |
Fuel cost per gallon, excluding derivatives | | |
| |
|
| |
| | $ | 2.07 | | |
| | |
| | | | $ | 1.17 |
Employees at end of period | | |
| |
|
| |
| | | 1,815 | | |
| | |
| | | | | 1,660 |
Cost per available seat mile (CASM) (cents) (5) | | | | |
|
| |
| | | 6.93 | | | | | |
| | | | | 9.01 |
Adjusted CASM (cents) (6) | | | | |
|
| |
| | | 6.35 | | | | | |
| | | | | 14.57 |
demand for passenger service during 2022 as compared to 2021, which was significantly impacted by a decline in passenger demand due to the COVID-19 pandemic. Scheduled Service. |
Scheduled |
- 30 -
SUN COUNTRY AIRLINES HOLDINGS, INC
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
Key Operating Statistics and Metrics
| | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2021 (1) | | Six Months Ended June 30, 2020 (1) | ||||||||||||||||||
| | Scheduled | | | | | | | | | | Scheduled | | | | | | | | | ||
|
| Service |
| Charter |
| Cargo |
| Total |
| Service |
| Charter |
| Cargo |
| Total | ||||||
Departures (2) | | | 9,244 | | | 3,238 | | 5,317 | | | 17,897 | | | 7,182 | | | 2,156 | | 413 | | | 9,847 |
Block hours (2) | | | 31,107 | | | 6,987 | | 16,440 | | | 54,806 | | | 24,419 | | | 4,933 | | 1,076 | | | 30,691 |
Aircraft miles (2) | | | 12,711,512 | | | 2,582,494 | | 6,508,492 | | | 21,883,259 | | | 9,867,739 | | | 1,837,794 | | 454,980 | | | 12,234,888 |
Available seat miles (ASMs) (thousands) (2) | | | 2,356,780 | | | 449,444 | | — | | | 2,819,540 | | | 1,826,245 | | | 334,690 | | — | | | 2,174,605 |
Total revenue per ASM (TRASM) (cents) (3) | | |
| | |
| |
| | | 8.27 | | |
| | |
| | | | | 9.77 |
Average passenger aircraft during the period (3) | | |
| | |
| |
| | | 31.0 | | |
| | |
| | | | | 31.5 |
Passenger aircraft at end of period (3) | | |
| | |
| |
| | | 33 | | |
| | |
| | | | | 31 |
Cargo aircraft at end of period | | |
| | |
| |
| | | 12 | | |
| | |
| | | | | 7 |
Average daily aircraft utilization (hours) (3) | | |
| | |
| |
| | | 6.8 | | |
| | |
| | | | | 5.2 |
Average stage length (miles) | | |
| | |
| |
| | | 1,225 | | |
| | |
| | | | | 1,254 |
Revenue passengers carried (4) | | | 1,253,051 | | |
| |
| | |
| | | 935,860 | | |
| | | | |
|
Revenue passenger miles (RPMs) (thousands) (4) | | | 1,694,033 | | |
| |
| | |
| | | 1,303,004 | | |
| | | | |
|
Passenger revenue per ASM (PRASM) (cents) (4) | | | 5.16 | | |
| |
| | |
| | | 7.23 | | |
| | | | |
|
Load factor (4) | | | 71.9 | % | |
| |
| | |
| | | 71.3 | % | |
| | | | |
|
Average base fare per passenger (4) | | $ | 97.12 | | |
| |
| | |
| | $ | 141.16 | | |
| | | | |
|
Ancillary revenue per passenger (4) | | $ | 42.24 | | |
| |
| | |
| | $ | 42.74 | | |
| | | | |
|
Charter revenue per block hour | | |
| | $ | 7,829 | |
| | |
| | |
| | $ | 7,646 | | | | |
|
Fuel gallons consumed (thousands) (2) | | | 23,824 | |
| 4,979 | | — | | | 28,948 | | | 18,779 | | | 3,646 | | — | | | 22,562 |
Fuel cost per gallon, excluding derivatives | | |
| |
|
| |
| | $ | 1.99 | | |
| | |
| | | | $ | 1.71 |
Employees at end of period | | |
| |
|
| |
| | | 1,815 | | |
| | |
| | | | | 1,660 |
Cost per available seat mile (CASM) (cents) (5) | | | | |
|
| |
| | | 7.19 | | | | | |
| | | | | 9.32 |
Adjusted CASM (cents) (6) | | | | |
|
| |
| | | 6.25 | | | | | |
| | | | | 7.81 |
- 31 -
SUN COUNTRY AIRLINES HOLDINGS, INC
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
Statement of Operations Analysis
Results of Operations
For the Three Months Ended June 30, 2021 and 2020
| | | | | | | | | | | | |
| | Three Months Ended June 30, | | $ | | % |
| |||||
|
| 2021 |
| 2020 |
| Change |
| Change |
| |||
Operating Revenues: | | | | | | | | | | | | |
Scheduled Service | | $ | 67,073 | | $ | 17,882 | | $ | 49,191 | | 275 | % |
Charter Service | |
| 28,898 | |
| 8,491 | |
| 20,407 | | 240 | % |
Ancillary | |
| 29,159 | |
| 4,968 | |
| 24,191 | | 487 | % |
Passenger | |
| 125,130 | |
| 31,341 | |
| 93,789 | | 299 | % |
Cargo | |
| 22,098 | |
| 3,219 | |
| 18,879 | | 586 | % |
Other | |
| 1,961 | |
| 816 | |
| 1,145 | | 140 | % |
Total Operating Revenue | |
| 149,189 | |
| 35,376 | |
| 113,813 | | 322 | % |
| | | | | | | | | | | | |
Operating Expenses: | |
|
| |
|
| |
|
| |
| |
Aircraft Fuel | |
| 29,709 | |
| 677 | |
| 29,032 | | 4,288 | % |
Salaries, Wages, and Benefits | |
| 42,316 | |
| 32,484 | |
| 9,832 | | 30 | % |
Aircraft Rent | |
| 3,815 | |
| 5,934 | |
| (2,119) | | (36) | % |
Maintenance | |
| 11,300 | |
| 2,426 | |
| 8,874 | | 366 | % |
Sales and Marketing | |
| 5,822 | |
| 1,630 | |
| 4,192 | | 257 | % |
Depreciation and Amortization | |
| 13,460 | |
| 12,175 | |
| 1,285 | | 11 | % |
Ground Handling | |
| 6,551 | |
| 1,614 | |
| 4,937 | | 306 | % |
Landing Fees and Airport Rent | |
| 8,752 | |
| 2,667 | |
| 6,085 | | 228 | % |
Special Items, net | |
| (38,520) | |
| (31,481) | |
| (7,039) | | 22 | % |
Other Operating, net | |
| 16,746 | |
| 9,484 | |
| 7,262 | | 77 | % |
Total Operating Expenses | |
| 99,951 | |
| 37,610 | |
| 62,341 | | 166 | % |
Operating Income (Loss) | |
| 49,238 | |
| (2,234) | |
| 51,472 | | (2,304) | % |
| | | | | | | | | | | | |
Non-operating Income (Expense): | |
|
| |
|
| |
|
| |
| |
Interest Income | |
| 9 | |
| 63 | |
| (54) | | (86) | % |
Interest Expense | |
| (6,080) | |
| (5,442) | |
| (638) | | 12 | % |
Other, net | |
| 18,054 | |
| (325) | |
| 18,379 | | (5,655) | % |
Total Non-operating Income (Expense), net | |
| 11,983 | |
| (5,704) | |
| 17,687 | | (310) | % |
| | | | | | | | | | | | |
Income (Loss) before Income Tax | |
| 61,221 | |
| (7,938) | |
| 69,159 | | (871) | % |
Income Tax Expense (Benefit) | |
| 9,468 | |
| (1,898) | |
| 11,366 | | (599) | % |
Net Income (Loss) | | $ | 51,753 | | $ | (6,040) | | $ | 57,793 | | (957) | % |
Total operating revenues increased by $113,813,$69,448, or 322%127%, to $149,189$124,068 for the three months ended June 30, 2021March 31, 2022 from $35,376$54,620 for the three months ended June 30, 2020. The increase is due to a significant decline in passenger service in 2020 as a result of the COVID-19 pandemic.
Scheduled Service. Scheduled service revenue increased by $49,191, or 275%, to $67,073 for the three months ended June 30, 2021 from $17,882 for the three months ended June 30, 2020. The increase in
- 32 -
SUN COUNTRY AIRLINES HOLDINGS, INC
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
scheduled service revenue was largely driven by a decline in passenger service demand for the three months ended June 30, 2020 due to government travel restrictions and quarantine requirements related to the COVID- 19 pandemic. Departures increased 258% in the second quarter of 2021, as compared to the second quarter of 2020.
March 31, 2021. The table below presents select operating data for scheduled service, expressed as quarter-over-quarter changes:
| | | | | | | | | | | |
| | Three Months Ended June 30, | | Increase | | % |
| ||||
|
| 2021 |
| 2020 |
| (Decrease) |
| Change |
| ||
Passengers |
| | 700,019 |
| | 121,922 |
| 578,097 |
| 474 | % |
Average base fare per passenger | | $ | 95.81 | | $ | 146.66 |
| (50.85) |
| (35) | % |
RPMs (thousands) | |
| 919,034 | |
| 153,098 |
| 765,936 |
| 500 | % |
ASMs (thousands) | |
| 1,198,768 | |
| 318,049 |
| 880,719 |
| 277 | % |
PRASM (cents) | |
| 5.60 | |
| 5.62 |
| (0.02) |
| (0) | % |
Passenger load factor | |
| 76.7 | % |
| 48.1 | % | 28.6 pts |
| na | |
Three Months Ended March 31, | Change | % Change | |||||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||
Departures | 6,227 | 4,323 | 1,904 | 44 | % | ||||||||||||||||||
Passengers | 922,652 | 553,032 | 369,620 | 67 | % | ||||||||||||||||||
Average base fare per passenger | $ | 134.47 | $ | 98.77 | $ | 35.70 | 36 | % | |||||||||||||||
RPMs (thousands) | 1,338,459 | 774,999 | 563,460 | 73 | % | ||||||||||||||||||
ASMs (thousands) | 1,684,532 | 1,158,012 | 526,520 | 45 | % | ||||||||||||||||||
TRASM (cents) | 10.25 | 6.93 | 3.32 | 48 | % | ||||||||||||||||||
Passenger load factor | 79.5 | % | 66.9 | % | 12.6 | pts | N/A |
Charter Service. Charter service revenue increased by $20,407, or 240%, to $28,898March 31, 2022, from $25,805 for the three months ended June 30, 2021, from $8,491 for the three months ended June 30, 2020. The COVID-19 pandemic drove a decrease in our 2020 quarter casino charter service revenue. There was a 177% increase in block hours for the 2021 quarter as compared to the 2020 quarter.March 31, 2021. Charter revenue per block hour was $7,904$8,643 for the three months ended June 30, 2021,March 31, 2022, as compared to $6,426$7,747 for the three months ended June 30, 2020,March 31, 2021, for an increase of 23%12%. ThisThe increase in Charter service revenue perwas driven by the increase in rates and a 14% increase in Charter block hour increase ishours due to the ongoingcontinued recovery from the impactsCOVID-19 pandemic and a new charter agreement with Caesars Entertainment, Inc. that began operations in the first quarter of COVID-19.
Ancillary.2022. Rates in 2021 suffered from significant competitive pressure because other carriers had excess aircraft, crew, and resources to operate charter capacity.
Cargo.March 31, 2021. The increase in ancillary revenue per passenger was due to increased demand for air-travel related services.
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(Unaudited)
Other. Other revenue was $1,961 for the three months ended June 30, 2021 compared to $816 for the three months ended June 30, 2020. This was mainly the result of an increase in revenue from Sun Country Vacations due to improved bookings and an increase in mail revenue due to increased departures.
(Unaudited)
Three Months Ended March 31, | Change | % Change | |||||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||
Total Aircraft Fuel Expenses | $ | 64,544 | $ | 24,274 | $ | 40,270 | 166 | % | |||||||||||||||
Exclude: Fuel Derivative Gains | — | 2,386 | (2,386) | (100) | % | ||||||||||||||||||
Other Excluded Items | 318 | 66 | 252 | 382 | % | ||||||||||||||||||
Aircraft Fuel Expenses, Excluding Derivatives and Other Items | $ | 64,862 | $ | 26,726 | $ | 38,136 | 143 | % | |||||||||||||||
Fuel Gallons Consumed (thousands) | 20,245 | 13,993 | 6,252 | 45 | % | ||||||||||||||||||
Fuel Cost per Gallon, Excluding Derivatives and Other Items | $ | 3.20 | $ | 1.91 | $ | 1.29 | 68 | % |
Aircraft Rent. Aircraft rent expense decreased by $2,119, or 36%, to $3,815$5,599 for the three months ended June 30, 2021, as compared to $5,934 for the three months ended June 30, 2020.March 31, 2021. Aircraft rentRent expense decreased primarily due to the composition of our aircraft fleet shifting from aircraft under operating leases (for which(the expense is recorded within aircraft rent)Aircraft Rent) to owned aircraft.aircraft or finance leases (expense is recorded through Depreciation and Amortization and Interest Expense). Specifically, in latethe first quarter 2021 to early second quarter, we purchased six aircraft previously under operating leases. During the three months ended June 30, 2020, oneof 2022, we executed lease amendments which modified two aircraft was purchased that was previously under anfrom operating lease.leases to finance leases. For the three months ended June 30,March 31, 2022 and 2021, there were four and 2020, there was an average of seven and twelve aircraft under operating leases, respectively.
respectively
.Sales and Marketing. Sales and marketing expense increased by $4,192, or 257%, to $5,822 for the three months ended June 30, 2021, as compared to $1,630 for the three months ended June 30, 2020. The passengerMarch 31, 2021. Passenger revenue increase between these two periods was 299%, and was primarily responsible for a $1,666 increase in credit card processing fees and $1,567 in global distribution system fees. The remaining increase primarily relates to higher advertising costs and travel agent commissions. Also, the 2020 costs were unusually low due to the COVID-19 pandemic.
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(Unaudited)
(Unaudited)
March 31, 2022.
For more information on Special Items, see
Note 11 of the Condensed Consolidated Financial Statements included in Part I, Item I of this report.Non-operating Income (Expense)
Interest Expense. Interest expense increased by $638, or 12%,compared to $6,080$7,121 for the three months ended June 30, 2021, as compared to $5,442 for the three months ended June 30, 2020.March 31, 2021. The increase was primarily due to debt issueda larger mix of owned aircraft and aircraft accounted for as finance leases during the three months ended March 31, 2022.
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(Unaudited)
Other, net. Other, net for(Unaudited)
Results of Operations
For the Six Months Ended June 30, 2021 and 2020
| | | | | | | | | | | | |
| | Six Months Ended June 30, | | $ | | % |
| |||||
|
| 2021 |
| 2020 |
| Change |
| Change |
| |||
Operating Revenues: | | | | | | | | | | | | |
Scheduled Service | | $ | 121,693 | | $ | 132,110 | | $ | (10,417) | | (8) | % |
Charter Service | |
| 54,703 | |
| 37,718 | |
| 16,985 | | 45 | % |
Ancillary | |
| 52,929 | |
| 39,999 | |
| 12,930 | | 32 | % |
Passenger | |
| 229,325 | |
| 209,827 | |
| 19,498 | | 9 | % |
Cargo | |
| 43,684 | |
| 3,219 | |
| 40,465 | | 1,257 | % |
Other | |
| 3,793 | |
| 2,660 | |
| 1,133 | | 43 | % |
Total Operating Revenue | |
| 276,802 | |
| 215,706 | |
| 61,096 | | 28 | % |
| | | | | | | | | | | | |
Operating Expenses: | |
|
| |
|
| |
|
| |
| |
Aircraft Fuel | |
| 53,984 | |
| 56,238 | |
| (2,254) | | (4) | % |
Salaries, Wages, and Benefits | |
| 86,392 | |
| 70,575 | |
| 15,817 | | 22 | % |
Aircraft Rent | |
| 9,414 | |
| 16,966 | |
| (7,552) | | (45) | % |
Maintenance | |
| 20,510 | |
| 8,904 | |
| 11,606 | | 130 | % |
Sales and Marketing | |
| 10,932 | |
| 10,202 | |
| 730 | | 7 | % |
Depreciation and Amortization | |
| 26,075 | |
| 22,702 | |
| 3,373 | | 15 | % |
Ground Handling | |
| 11,781 | |
| 10,906 | |
| 875 | | 8 | % |
Landing Fees and Airport Rent | |
| 17,537 | |
| 13,781 | |
| 3,756 | | 27 | % |
Special Items, net | |
| (65,392) | |
| (31,481) | |
| (33,911) | | 108 | % |
Other Operating, net | |
| 31,397 | |
| 23,917 | |
| 7,480 | | 31 | % |
Total Operating Expenses | |
| 202,630 | |
| 202,710 | |
| (80) | | (0) | % |
Operating Income | |
| 74,172 | |
| 12,996 | |
| 61,176 | | 471 | % |
| | | | | | | | | | | | |
Non-operating Income (Expense): | |
|
| |
|
| |
|
| |
| |
Interest Income | |
| 24 | |
| 314 | |
| (290) | | (92) | % |
Interest Expense | |
| (13,201) | |
| (11,058) | |
| (2,143) | | 19 | % |
Other, net | |
| 18,049 | |
| (494) | |
| 18,543 | | (3,754) | % |
Total Non-operating Income (Expense), net | |
| 4,872 | |
| (11,238) | |
| 16,110 | | (143) | % |
| | | | | | | | | | | | |
Income before Income Tax | |
| 79,044 | |
| 1,758 | |
| 77,286 | | 4,396 | % |
Income Tax Expense | |
| 14,875 | |
| 547 | |
| 14,328 | | 2,619 | % |
Net Income | | $ | 64,169 | | $ | 1,211 | | $ | 62,958 | | 5,199 | % |
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Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | ||||||||||||||||||||||||||||||||||
Passenger | Cargo | Total | Passenger | Cargo | Total | ||||||||||||||||||||||||||||||
Operating Revenues | $ | 205,472 | $ | 21,053 | $ | 226,525 | $ | 106,026 | $ | 21,585 | $ | 127,611 | |||||||||||||||||||||||
Operating Expenses: | |||||||||||||||||||||||||||||||||||
Aircraft Fuel | 64,544 | — | 64,544 | 24,253 | 21 | 24,274 | |||||||||||||||||||||||||||||
Salaries, Wages, and Benefits | 47,531 | 12,086 | 59,617 | 32,839 | 11,236 | 44,075 | |||||||||||||||||||||||||||||
Aircraft Rent | 3,186 | — | 3,186 | 5,599 | — | 5,599 | |||||||||||||||||||||||||||||
Maintenance | 9,103 | 2,892 | 11,995 | 6,603 | 2,607 | 9,210 | |||||||||||||||||||||||||||||
Sales and Marketing | 8,628 | — | 8,628 | 5,110 | — | 5,110 | |||||||||||||||||||||||||||||
Depreciation and Amortization | 15,302 | 26 | 15,328 | 12,589 | 26 | 12,615 | |||||||||||||||||||||||||||||
Ground Handling | 7,954 | 4 | 7,958 | 5,230 | — | 5,230 | |||||||||||||||||||||||||||||
Landing Fees and Airport Rent | 10,171 | 115 | 10,286 | 8,655 | 130 | 8,785 | |||||||||||||||||||||||||||||
Special Items, net | — | — | — | (18,206) | (8,665) | (26,871) | |||||||||||||||||||||||||||||
Other Operating, net | 18,935 | 4,215 | 23,150 | 10,580 | 4,071 | 14,651 | |||||||||||||||||||||||||||||
Total Operating Expenses | 185,354 | 19,338 | 204,692 | 93,252 | 9,426 | 102,678 | |||||||||||||||||||||||||||||
Operating Income | $ | 20,118 | $ | 1,715 | $ | 21,833 | $ | 12,774 | $ | 12,159 | $ | 24,933 | |||||||||||||||||||||||
Adjustment for Special Items, net | — | — | — | (18,206) | (8,665) | (26,871) | |||||||||||||||||||||||||||||
Operating Income, Excluding Special Items, net | $ | 20,118 | $ | 1,715 | $ | 21,833 | $ | (5,432) | $ | 3,494 | $ | (1,938) | |||||||||||||||||||||||
Operating Margin %, Excluding Special Items, net | 10% | 8% | 10% | (5)% | 16% | (2)% |
SUN COUNTRY AIRLINES HOLDINGS, INC
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
Total Passenger operating revenuesincome increased by $61,096, or 28%,$7,344 to $276,802 for the six months ended June 30, 2021, from $215,706 for the six months ended June 30, 2020. The increase is primarily due to $40,465 increase in cargo revenue and a $16,985 increase in charter service revenue.
Scheduled Service. Scheduled service revenue decreased by $10,417, or 8%, to $121,693 for the six months ended June 30, 2021, from $132,110 for the six months ended June 30, 2020. The decrease in scheduled service revenue was driven by a decline in passenger demand due to government travel restrictions and quarantine requirements related to the COVID-19 pandemic.
The table below presents select operating data for scheduled service:
| | | | | | | | | | | |
|
| Six Months Ended June 30, |
| Increase | | % |
| ||||
|
| 2021 |
| 2020 | | (Decrease) |
| Change |
| ||
Passengers |
| | 1,253,051 |
| | 935,860 |
| 317,191 |
| 34 | % |
Average base fare per passenger | | $ | 97.12 | | $ | 141.16 |
| (44.04) |
| (31) | % |
RPMs (thousands) | |
| 1,694,033 | |
| 1,303,004 |
| 391,029 |
| 30 | % |
ASMs (thousands) | |
| 2,356,780 | |
| 1,826,245 |
| 530,535 |
| 29 | % |
PRASM (cents) | |
| 5.16 | |
| 7.23 |
| (2.07) |
| (29) | % |
Passenger load factor | |
| 71.9 | % |
| 71.3 | % | 0.6 | pts | na | |
The 34% increase in the number of scheduled service passengers in the six months ended June 30, 2021, as compared to the six months ended June 30, 2020, was primarily due to 2020 COVID-19 pandemic related demand reductions. For the six months ended June 30, 2021, our average base fare was $97.12, compared to $141.16 for the six months ended June 30, 2020. The net change is the result of the impact of indirect revenue related transactions (such as deferred revenue breakage) spread over significantly fewer passengers during 2020.
Charter Service. Charter service revenue increased by $16,985, or 45%, to $54,703 for the six months ended June 30, 2021, from $37,718 for the six months ended June 30, 2020. There was a 42% increase in charter service block hours for the six months ended June 30, 2021 vs 2020. This block hour increase is due to the ongoing recovery from the impacts of COVID-19. Charter revenue per block hour was $7,829 for the six months ended June 30, 2021, as compared to $7,646 for the six months ended June 30, 2020, for an increase of 2%.
Ancillary. Ancillary revenue increased by $12,930, or 32%, to $52,929 for the six months ended June 30, 2021, from $39,999 for the six months ended June 30, 2020. The number of scheduled service passengers was 1.3 million in the six months ended June 30, 2021, up 34% from 936 thousand in the six months ended June 30, 2020. There was a small decline in ancillary revenue per passenger due to reductions in sales of air travel-related services such as baggage fees, seat selection and upgrade fees, and on-board sales. Specifically, ancillary revenue was $42.24 per passenger in the six months ended June 30, 2021, down from $42.74 per passenger in the six months ended June 30, 2020.
Cargo. Revenue from cargo services was $43,684 for the six months ended June 30, 2021, compared with $3,219 for the six months ended June 30, 2020. All of our 2021 and 2020 cargo service revenue is related to flights operated under the ATSA with Amazon. Cargo service began in May of 2020, so the increase is due to the year-over-year ramp up of operations . Cargo service departures were 5,317 in the six months ended June 30, 2021, as compared to 413 for the six months ended June 30, 2020.
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SUN COUNTRY AIRLINES HOLDINGS, INC
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
Other. Other revenue was $3,793 for the six months ended June 30, 2021 compared to $2,660 for the six months ended June 30, 2020. This was mainly the result of an increase in revenue from Sun Country Vacations due to improved bookings and an increase in mail revenue due to increased departures.
Operating Expenses
Aircraft Fuel. Aircraft fuel expense decreased by $2,254, or 4%, to $53,984 for the six months ended June 30, 2021, as compared to $56,238 for the six months ended June 30, 2020. The decrease was largely driven by a $21,556 change in the mark-to-market gains/losses from our fuel derivative contracts, consisting of a $3,599 gain in the six months ended June 30, 2021 compared to a $17,957 loss in the six months ended June 30, 2020. Offsetting this derivative gain 2021 vs 2020 was a 28% increase in fuel gallons consumed, due to our increased level of operations as demonstrated by a 27% increase in passenger service block hours and a 17 % increase in the average price per gallon of fuel.
Salaries, Wages, and Benefits. Salaries, wages, and benefits expense increased by $15,817, or 22%, to $86,392 for the six months ended June 30, 2021, as compared to $70,575 for the six months ended June 30, 2020. Approximately $2,100 of the increase relates to insourcing MSP ground handling operations starting in April 2020. The increase was also the result of increased stock-compensation expense. Our IPO made it probable that a portion of our performance-based stock options would vest over a specific timeframe. Therefore, we expensed $2,496 related to these options$20,118 for the three months ended March 31, 2021, plus an additional $3202022 from $12,774 for the three months ended June 30, 2021. No expense was recorded in the six months ended June 30, 2020 for performance-based stock options. Our cargo segment was responsible for $21,395 of the consolidated salaries, wages, and benefits expense for the six months ended June 30, 2021, compared to a $3,367 in the six months ended June 30, 2020. There has been increased pilot pay and per diems to support operations under the ATSA. The Cargo segment began in May 2020, driving additional headcount required to support the operations and aircraft under the ATSA.
Aircraft Rent. Aircraft rent expense decreased by $7,552, or 45%, to $9,414 for the six months ended June 30, 2021, as compared to $16,966 for the six months ended June 30, 2020. Aircraft rent expense decreased primarily due to the composition of our aircraft fleet shifting from aircraft under operating leases (for which expense is recorded within aircraft rent) to owned aircraft. Specifically, in late first quarter 2021 and early second quarter 2021, we purchased six aircraft previously under operating leases. There were also aircraft acquisitions completed in 2020 that reduced aircraft rent by $3,431 in the six months ended June 30, 2021 as compared to the six months ended June 30, 2020. For the six months ended June 30, 2021 and 2020, there was an average of nine and thirteen aircraft under operating leases, respectively.
Maintenance. Maintenance materials and repair expense increased by $11,606, or 130%, to $20,510 for the six months ended June 30, 2021, as compared to $8,904 for the six months ended June 30, 2020. The cost of heavy checks increased $4,030 due to ten heavy checks performed in the six months ended June 30, 2021, as compared to two for the six months ended June 30, 2020. There was a $1,344 increase in costs, including wheels, brakes, consumables, and expendables, driven by increased departures. Our cargo segment was responsible for $5,268 of the consolidated maintenance expense for the six months ended June 30, 2021, as compared to $509 for the prior year six-month period since cargo segment service did not begin until May 2020. The cargo segment expense primarily relates to line maintenance, since heavy maintenance is reimbursed under the ATSA.
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SUN COUNTRY AIRLINES HOLDINGS, INC
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
Sales and Marketing. Sales and marketing expense increased by $730, or 7%, to $10,932 for the six months ended June 30, 2021, as compared to $10,202 for the six months ended June 30, 2020. The passenger revenue increase between these two periods was 9%, which drove a $1,300 increase in global distribution system fees, partially offset by $700 lower interchange rates.
Depreciation and Amortization. Depreciation and amortization expense increased by $3,373, or 15%, to $26,075 for the six months ended June 30, 2021, as compared to $22,702 for the six months ended June 30, 2020. The increase was primarily due to the impact of a change in the composition of our aircraft fleet to an increased number of owned aircraft in connection with our 2019-1 EETC, Delayed Draw Term Loan Facility, and aircraft under finance leases (for which expense is recorded within depreciation and amortization). For the six months ended June 30, 2021 and 2020, there was an average of 17 and 10 owned aircraft, respectively.
Ground Handling. Ground handling expense increased by $875, or 8%, to $11,781 for the six months ended June 30, 2021, as compared to $10,906 for the six months ended June 30, 2020. There was an increase of $3,100, primarily due to the 29% increase in scheduled departures during the same time periods. However, we insourced our MSP operations in April 2020, contributing to a reduction of $2,200 in ground handling expenses for the six months ended June 30, 2021, compared to June 30, 2020, but resulting in higher salaries, wages, and benefits.
Landing Fees and Airport Rent. Landing fees and airport rent increased by $3,756, or 27%, to $17,537 for the six months ended June 30, 2021, as compared to $13,781 for the six months ended June 30, 2020. There was a $4,700 increase driven by the 29% increase in scheduled departures for the six months ended June 30, 2021, over 2020. During the six months ended June 30, 2021, we also received a $1,416 MSP terminal user fee airline relief credit, which partially offset the increase discussed above.
Special Items, net. Special items, net was a contra-expense of $65,392 for the six months ended June 30, 2021 and $31,481 for the six months ended June 30, 2020. For the six months ended June 30, 2021, Special items, net included $71,587 of contra-expense related to funds received under PSP2 and PSP3 of the CARES Act, to be used exclusively for the continuation of payments for salaries, wages, and benefits, and $780 in refundable tax credits related to employee retention under the CARES Act. This was partially offset by a $6,963 net charge relating to the purchase of six aircraft during the six months that were previously under operating leases. For the six months ended June 30, 2020, Special items, net included $31,516 of contra-expense related to funds received under PSP2 of the CARES Act, to be used exclusively for the continuation of payments for salaries, wages, and benefits. Our cargo segment was responsible for $18,401 of the consolidated income from Special items, net for the six months ended June 30, 2021, and $3,370 for the six months ended June 30, 2020. The segment allocation of these credits is based on the respective segment salaries, wages, and benefits.
Other Operating, net. Other operating, net expense increased by $7,480, or 31%, to $31,397 for the six months ended June 30, 2021, as compared to $23,917 for the six months ended June 30, 2020. A passenger segment increase of $949 was primarily driven by our higher level of operations for 2021, which resulted in increased crew and other employee travel costs, catering expenses, and other operational overhead costs. Our cargo segment was responsible for $7,498 and $967 of our consolidated Other Operating, net expense for the six months ended June 30, 2021 and 2020, respectively, driven by overhead expenses as well as crew and employee travel costs.
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SUN COUNTRY AIRLINES HOLDINGS, INC
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
Non-operating Income (Expense)
Interest Expense. Interest expense increased by $2,143, or 19%, to $13,201 for the six months ended June 30, 2021, as compared to $11,058 for the six months ended June 30, 2020. The increase was primarily due to debt issued for the acquisition of new aircraft and spare engines, including new debt incurred in connection with the 2019-1 EETC, and the Delayed Draw Term Loan Facility. During the six months ended June 30, 2021, the Company expensed $1,224 of debt financing costs due to the $46,260 pay-off of the CARES Act Loan and the replacement of the $25,000 ABL Facility.
Other, net. Other, net for the six months ended June 30, 2021 was $18,049 and includes a credit of $18,700 for the adjustment of our Tax Receivable Agreement liability. The decrease in the TRA liability was mainly due to the receipt of the PSP3 grant of $34,547, which extended the time period in which distributions made to shareholders are restricted from March 31, 2022 to September 30, 2022, and also resulted in an increase in forecasted 2021 pre-tax income.
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SUN COUNTRY AIRLINES HOLDINGS, INC
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
Segment Information
For the Three Months Ended June 30, 2021 and 2020
| | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2021 | | Three Months Ended June 30, 2020 (1) |
| ||||||||||||||
|
| Passenger | | Cargo | | Total | | Passenger | | Cargo |
| Total |
| ||||||
Operating Revenues | | $ | 127,091 | | $ | 22,098 | | $ | 149,189 | | $ | 32,157 | | $ | 3,219 |
| $ | 35,376 | |
| | | | | | | | | | | | | | | | | | | |
Operating Expenses: | | | | | | | | | | | | | | | | | | | |
Aircraft Fuel | |
| 29,657 | |
| 52 | |
| 29,709 | |
| 677 | |
| — |
| | 677 | |
Salaries, Wages, and Benefits | |
| 32,157 | |
| 10,159 | |
| 42,316 | |
| 29,117 | |
| 3,367 |
| | 32,484 | |
Aircraft Rent | |
| 3,815 | |
| — | |
| 3,815 | |
| 5,934 | |
| — |
| | 5,934 | |
Maintenance | |
| 8,638 | |
| 2,662 | |
| 11,300 | |
| 1,917 | |
| 509 |
| | 2,426 | |
Sales and Marketing | |
| 5,822 | |
| — | |
| 5,822 | |
| 1,630 | |
| — |
| | 1,630 | |
Depreciation and Amortization | |
| 13,434 | |
| 26 | |
| 13,460 | |
| 12,154 | |
| 21 |
| | 12,175 | |
Ground Handling | |
| 6,551 | |
| — | |
| 6,551 | |
| 1,614 | |
| — |
| | 1,614 | |
Landing Fees and Airport Rent | |
| 8,624 | |
| 128 | |
| 8,752 | |
| 2,624 | |
| 43 |
| | 2,667 | |
Special Items, net | |
| (28,784) | |
| (9,736) | |
| (38,520) | |
| (28,111) | |
| (3,370) |
| | (31,481) | |
Other Operating, net | |
| 13,320 | |
| 3,426 | |
| 16,746 | |
| 8,517 | |
| 967 |
| | 9,484 | |
Total Operating Expenses | |
| 93,234 | |
| 6,717 | |
| 99,951 | |
| 36,073 | |
| 1,537 |
| | 37,610 | |
Operating Income (Loss) | | $ | 33,857 | | $ | 15,381 | | $ | 49,238 | | $ | (3,916) | | $ | 1,682 | | $ | (2,234) | |
| | | | | | | | | | | | | | | | | | | |
Adjustment for Special Items | | | (28,784) | | | (9,736) | | | (38,520) | | | (28,111) | | | (3,370) | | | (31,481) | |
| | | | | | | | | | | | | | | | | | | |
Operating Income (Loss), Excluding Special Items | | $ | 5,073 | | $ | 5,645 | | $ | 10,718 | | $ | (32,027) | | $ | (1,688) | | $ | (33,715) | |
| | | | | | | | | | | | | | | | | | | |
Operating Margin %, Excluding Special Items | | | 4 | % | | 26 | % | | 7 | % | | (100) | % | | (52) | % | | (95) | % |
Passenger. Passenger operating income increased by $37,773 to $33,857 for the three months ended June 30, 2021 from a loss of $3,916 for the three months ended June 30, 2020.2021. For more information on the changes in the components of operating income for the passengerPassenger segment, refer to the consolidated resultsCondensed Consolidated Results of operationsOperations discussion above.
above.
- 41 -
SUN COUNTRY AIRLINES HOLDINGS, INC
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
Operations discussion above, where we more fully describe the cargo expenses embedded within each financial statement line item.
For the Six Months Ended June 30, 2021 and 2020
| | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2021 | | Six Months Ended June 30, 2020 (1) | | ||||||||||||||
|
| Passenger | | Cargo | | Total | | Passenger | | Cargo |
| Total | | ||||||
Operating Revenues | | $ | 233,118 | | $ | 43,684 | | $ | 276,802 | | $ | 212,487 | | $ | 3,219 |
| $ | 215,706 | |
Operating Expenses: | | | | | | | | | | | | | | | | | | | |
Aircraft Fuel | |
| 53,912 | |
| 72 | |
| 53,984 | |
| 56,238 | |
| — |
| | 56,238 | |
Salaries, Wages, and Benefits | |
| 64,997 | |
| 21,395 | |
| 86,392 | |
| 67,208 | |
| 3,367 |
| | 70,575 | |
Aircraft Rent | |
| 9,414 | |
| — | |
| 9,414 | |
| 16,966 | |
| — |
| | 16,966 | |
Maintenance | |
| 15,242 | |
| 5,268 | |
| 20,510 | |
| 8,395 | |
| 509 |
| | 8,904 | |
Sales and Marketing | |
| 10,932 | |
| — | |
| 10,932 | |
| 10,202 | |
| — |
| | 10,202 | |
Depreciation and Amortization | |
| 26,022 | |
| 53 | |
| 26,075 | |
| 22,681 | |
| 21 |
| | 22,702 | |
Ground Handling | |
| 11,781 | |
| — | |
| 11,781 | |
| 10,906 | |
| — |
| | 10,906 | |
Landing Fees and Airport Rent | |
| 17,279 | |
| 258 | |
| 17,537 | |
| 13,738 | |
| 43 |
| | 13,781 | |
Special Items, net | |
| (46,991) | |
| (18,401) | |
| (65,392) | |
| (28,111) | |
| (3,370) |
| | (31,481) | |
Other Operating, net | |
| 23,899 | |
| 7,498 | |
| 31,397 | |
| 22,950 | |
| 967 |
| | 23,917 | |
Total Operating Expenses | |
| 186,487 | |
| 16,143 | |
| 202,630 | |
| 201,173 | |
| 1,537 |
| | 202,710 | |
Operating Income | | $ | 46,631 | | $ | 27,541 | | $ | 74,172 | | $ | 11,314 | | $ | 1,682 | | $ | 12,996 | |
| | | | | | | | | | | | | | | | | | | |
Adjustment for Special Items | | | (46,991) | | | (18,401) | | | (65,392) | | | (28,111) | | | (3,370) | | | (31,481) | |
| | | | | | | | | | | | | | | | | | | |
Operating Income (Loss), Excluding Special Items | | $ | (360) | | $ | 9,140 | | $ | 8,780 | | $ | (16,797) | | $ | (1,688) | | $ | (18,485) | |
| | | | | | | | | | | | | | | | | | | |
Operating Margin %, Excluding Special Items | | | 0 | % | | 21 | % | | 3 | % | | (8) | % | | (52) | % | | (9) | % |
Passenger. Passenger operating income increased by $35,317, or 312%, to $46,631 for the six months ended June 30, 2021 from $11,314 for the six months ended June 30, 2020. For more information on the changes in the components of operating income for the passenger segment, refer to the consolidated results of operations discussion above.
Cargo. Cargo operating income was $27,541 for the six months ended June 30, 2021, as compared to $1,682 for the six months ended June 30, 2020. As air cargo operations commenced in May 2020, the cargo segment had limited comparable operations for the six months ended June 30, 2020. For more information on the
- 42 -
SUN COUNTRY AIRLINES HOLDINGS, INC
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
components of operating income for the cargo segment, refer to the consolidated results of operations discussion above, where we more fully describe the cargo expenses embedded within each financial statement line item.
Non-GAAP Financial Measures
As a derivation of Adjusted Operating Income Margin, Adjusted Net Income is not determined in accordance with GAAP such measure is susceptible to varying calculations and not all companies calculate the measure in the same manner. As a result, derivations of net income, including Adjusted Operating Income Margin and Adjusted Net Income, as presented may not be directlythe same as or comparable to similarly titled measures presented by other companies. companies due to the possible differences in the method of calculation and in the items being adjusted.
- 43 -
(Unaudited)
(Unaudited)
| | | | | | | | | | | | | |
| | Three Months Ended June 30, |
| Six Months Ended June 30, |
| ||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| ||||
Adjusted Operating Income Margin (Loss) reconciliation: | | | | | | | | | | | | | |
Operating Revenue | | $ | 149,189 | | $ | 35,376 | | $ | 276,802 | | $ | 215,706 | |
Operating Income (Loss) | |
| 49,238 | |
| (2,234) | |
| 74,172 | |
| 12,996 | |
| | | | | | | | | | | | | |
Special Items, net (a) | |
| (38,520) | |
| (31,481) | |
| (65,392) | |
| (31,481) | |
Stock compensation expense | |
| 744 | |
| 388 | |
| 3,613 | |
| 757 | |
Voluntary leave expense (b) | | | — | | | 2,541 | | | — | | | 2,541 | |
TRA establishment expense (c ) | |
| 51 | |
| — | |
| 315 | |
| — | |
Adjusted Operating Income (Loss) | | $ | 11,513 | | $ | (30,786) | | $ | 12,708 | | $ | (15,187) | |
| | | | | | | | | | | | | |
Operating Income Margin (Loss) | |
| 33.0 | % |
| (6.3) | % |
| 26.8 | % |
| 6.0 | % |
Adjusted Operating Income Margin (Loss) | |
| 7.7 | % |
| (87.0) | % |
| 4.6 | % |
| (7.0) | % |
Three Months Ended March 31, | |||||||||||
2022 | 2021 | ||||||||||
Adjusted Operating Income Margin Reconciliation: | |||||||||||
Operating Revenue | $ | 226,525 | $ | 127,611 | |||||||
Operating Income | 21,833 | 24,933 | |||||||||
Special Items, net (a) | — | (26,871) | |||||||||
Stock compensation expense | 920 | 2,870 | |||||||||
TRA expenses (b) | — | 264 | |||||||||
Adjusted Operating Income | $ | 22,753 | $ | 1,196 | |||||||
Operating Income Margin | 9.6 | % | 19.5 | % | |||||||
Adjusted Operating Income Margin | 10.0 | % | 0.9 | % |
| |||||
(a) | The adjustments include Special Items, net, as presented in Note 11 of the |
(b) |
|
| This represents the one-time costs to establish the |
- 44 -
(Unaudited)
(Unaudited)
| | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, | ||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
Adjusted Net Income (Loss) reconciliation: |
| |
|
| |
| | |
|
| |
|
Net Income (Loss) | | $ | 51,753 | | $ | (6,040) | | $ | 64,169 | | $ | 1,211 |
| | | | | | | | | | | | |
Special Items, net (a) | |
| (38,520) | |
| (31,481) | |
| (65,392) | |
| (31,481) |
Stock compensation expense | |
| 744 | |
| 388 | |
| 3,613 | |
| 757 |
Voluntary leave expense (b) | | | — | | | 2,541 | | | — | | | 2,541 |
Loss on asset transactions, net | |
| — | |
| 309 | |
| — | |
| 381 |
Early pay-off of US Treasury loan | |
| — | |
| — | |
| 842 | |
| — |
Loss on refinancing credit facility | |
| — | |
| — | |
| 382 | |
| — |
Secondary Offering Costs | | | 640 | | | — | | | 640 | | | — |
TRA establishment expense (c) | |
| 51 | |
| — | |
| 315 | |
| — |
TRA adjustment (d) | | | (18,700) | | | — | | | (18,700) | | | — |
Income tax effect of adjusting items, net (e) | |
| 8,530 | |
| 6,496 | |
| 13,708 | |
| 6,395 |
Adjusted Net Income (Loss) | | $ | 4,498 | | $ | (27,787) | | $ | (423) | | $ | (20,196) |
Three Months Ended March 31, | |||||||||||
2022 | 2021 | ||||||||||
Adjusted Net Income (Loss) Reconciliation: | |||||||||||
Net Income | $ | 3,637 | $ | 12,416 | |||||||
Special Items, net (a) | — | (26,871) | |||||||||
Stock Compensation Expense | 920 | 2,870 | |||||||||
Gain on Asset Transactions, net | (2) | — | |||||||||
Early pay-off of US Treasury loan | — | 842 | |||||||||
Loss on refinancing credit facility | 1,557 | 382 | |||||||||
TRA expenses (b) | — | 264 | |||||||||
TRA adjustment (c) | 6,800 | — | |||||||||
Income tax effect of adjusting items, net (d) | (568) | 5,178 | |||||||||
Adjusted Net Income (Loss) | $ | 12,344 | $ | (4,919) |
| |||||
(a) | The adjustments include Special Items, net, as presented in Note 11 of the |
(b) |
|
| This represents the one-time costs to establish the |
| This represents the adjustment to the TRA for the period, which is recorded in | ||||
(d) | The tax effect of adjusting items, net is calculated at the Company's statutory rate for the applicable period. The TRA adjustment is not included within the income tax effect calculation. |
(e)The tax effect of adjusting items, net is calculated at the Company’s statutory rate for the applicable period.
- 45 -
SUN COUNTRY AIRLINES HOLDINGS, INC
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
which may vary significantly between periods and for different companies for reasons unrelated to overall operating performance. Adjusted EBITDAR should not be viewed as a measure of overall performance or considered in isolation or as an alternative to net income because it excludes aircraft rent, which is a normal, recurring cash operating expense that is necessary to operate our business. We have historically incurred substantial rent expense due to our legacy fleet of operating leased aircraft, which are currently being transitioned to owned aircraft.
| | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, | ||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
Adjusted EBITDAR Reconciliation: | | | | | | | | | | | | |
Net Income (Loss) | | $ | 51,753 |
| $ | (6,040) | | $ | 64,169 |
| $ | 1,211 |
Special Items, net (a) | |
| (38,520) |
| | (31,481) | |
| (65,392) |
| | (31,481) |
Stock Compensation expense | |
| 744 |
| | 388 | |
| 3,613 |
| | 757 |
Voluntary leave expense (b) | |
| — |
| | 2,541 | |
| — |
| | 2,541 |
Loss on asset transactions, net | |
| — |
| | 309 | |
| — |
| | 381 |
Secondary Offering Costs | |
| 640 |
| | — | |
| 640 |
| | — |
TRA establishment expense (c) | |
| 51 |
| | — | |
| 315 |
| | — |
TRA adjustment (d) | |
| (18,700) |
| | — | |
| (18,700) |
| | — |
Interest Income | | | (9) | | | (63) | | | (24) | | | (314) |
Interest expense | | | 6,080 | | | 5,442 | | | 13,201 | | | 11,058 |
Provision for income taxes | | | 9,468 | | | (1,898) | | | 14,875 | | | 547 |
Depreciation and Amortization | |
| 13,460 |
| | 12,175 | |
| 26,075 |
| | 22,702 |
Aircraft rent | |
| 3,815 |
| | 5,934 | |
| 9,414 |
| | 16,966 |
Adjusted EBITDAR | | $ | 28,782 | | $ | (12,693) | | $ | 48,186 | | $ | 24,368 |
Three Months Ended March 31, | |||||||||||
2022 | 2021 | ||||||||||
Adjusted EBITDAR Reconciliation: | |||||||||||
Net Income | $ | 3,637 | $ | 12,416 | |||||||
Special Items, net (a) | — | (26,871) | |||||||||
Stock Compensation Expense | 920 | 2,870 | |||||||||
Gain on Asset Transactions, net | (2) | — | |||||||||
TRA expenses (b) | — | 264 | |||||||||
TRA adjustment (c) | 6,800 | — | |||||||||
Interest Income | (24) | (15) | |||||||||
Interest Expense | 8,562 | 7,121 | |||||||||
Provision for Income Taxes | 2,782 | 5,406 | |||||||||
Depreciation and Amortization | 15,328 | 12,615 | |||||||||
Aircraft Rent | 3,186 | 5,599 | |||||||||
Adjusted EBITDAR | $ | 41,189 | $ | 19,405 |
| |||||
(a) | The adjustments include Special Items, net, as presented in Note 11 of the |
- 46 -
SUN COUNTRY AIRLINES HOLDINGS, INC
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
(b) |
|
| This represents the one-time costs to establish the |
| This represents the adjustment to the TRA for the period, which is recorded in |
Starting in 2020 when we launched our cargo operations, we
- 47 -
SUN COUNTRY AIRLINES HOLDINGS, INC
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
As derivations of Adjusted CASM are not determined in accordance with GAAP, such measures are susceptible to varying calculations and not all companies calculate the measures in the same manner. As a result, derivations of Adjusted CASM as presented may not be directly comparable to similarly titled measures presented by other companies. Adjusted CASM should not be considered in isolation or as a replacement for CASM. For the foregoing reasons, Adjusted CASM has significant limitations which affect its use as an indicator of our profitability. Accordingly, youreaders are cautioned not to place undue reliance on this information.
| | | | | | | | | | |
| | Three Months Ended June 30, | ||||||||
| | 2021 | | 2020 | ||||||
| | Operating | | Per ASM | | Operating | | Per ASM | ||
|
| Expenses |
| (in cents) |
| Expenses |
| (in cents) | ||
CASM | | $ | 99,951 |
| 6.93 | | $ | 37,610 |
| 9.01 |
Less: | | | | | | | | | | |
Aircraft fuel | |
| 29,709 |
| 2.06 | |
| 677 |
| 0.17 |
Stock Compensation expense | |
| 744 |
| 0.05 | |
| 388 |
| 0.09 |
Special items, net (a) | |
| (38,520) |
| (2.67) | |
| (31,481) |
| (7.54) |
Voluntary leave expense (b) | | | — | | — | | | 2,541 | | 0.61 |
Tax Receivable Agreement Expense(c) | |
| 51 |
| — | |
| — |
| — |
Cargo expenses, not already adjusted above | |
| 16,183 |
| 1.12 | |
| 4,523 |
| 1.08 |
Sun Country Vacations | |
| 173 |
| 0.01 | |
| 144 |
| 0.03 |
Adjusted CASM | | $ | 91,611 |
| 6.35 | | $ | 60,818 |
| 14.57 |
| | | | | | | | | | |
Available Seat Miles (ASMs) | |
| 1,442,744 |
|
| |
| 417,538 |
|
|
| | | | | | | | | | |
| | Six Months Ended June 30, | ||||||||
| | 2021 | | 2020 | ||||||
| | Operating | | Per ASM | | Operating | | Per ASM | ||
|
| Expenses |
| (in cents) |
| Expenses |
| (in cents) | ||
CASM | | $ | 202,630 |
| 7.19 | | $ | 202,710 |
| 9.32 |
Less: | | | | | | | | | | |
Aircraft fuel | |
| 53,984 |
| 1.91 | |
| 56,238 |
| 2.59 |
Stock Compensation expense | |
| 3,613 |
| 0.13 | |
| 757 |
| 0.03 |
Special items, net (a) | |
| (65,392) |
| (2.32) | |
| (31,481) |
| (1.45) |
Voluntary leave expense (b) | | | — | | — | | | 2,541 | | 0.12 |
Tax Receivable Agreement Expense(c) | |
| 315 |
| 0.01 | |
| — |
| — |
Cargo expenses, not already adjusted above | |
| 33,379 |
| 1.18 | |
| 4,523 |
| 0.21 |
Sun Country Vacations | |
| 387 |
| 0.01 | |
| 332 |
| 0.02 |
Adjusted CASM | | $ | 176,344 |
| 6.25 | | $ | 169,800 |
| 7.81 |
| | | | | | | | | | |
Available Seat Miles (ASMs) | |
| 2,819,540 |
|
| |
| 2,174,605 |
|
|
Three Months Ended March 31, | |||||||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||
Operating Expenses | Per ASM (in cents) | Operating Expenses | Per ASM (in cents) | ||||||||||||||||||||
CASM | $ | 204,692 | 10.62 | $ | 102,678 | 7.46 | |||||||||||||||||
Less: | |||||||||||||||||||||||
Aircraft Fuel | 64,544 | 3.35 | 24,274 | 1.76 | |||||||||||||||||||
Stock Compensation Expense | 920 | 0.05 | 2,870 | 0.21 | |||||||||||||||||||
Special Items, net (a) | — | — | (26,871) | (1.95) | |||||||||||||||||||
TRA expense (b) | — | — | 264 | 0.02 | |||||||||||||||||||
Cargo expenses, not already adjusted above | 19,112 | 0.99 | 17,195 | 1.25 | |||||||||||||||||||
Sun Country Vacations | 402 | 0.02 | 214 | 0.02 | |||||||||||||||||||
Adjusted CASM | $ | 119,714 | 6.21 | $ | 84,732 | 6.15 | |||||||||||||||||
ASM | 1,928,149 | 1,376,796 |
| |||||
(a) | The adjustments include Special Items, net, as presented in Note 11 of the Company's Condensed Consolidated Financial Statements. | ||||
(b) | This represents the one-time costs to establish the TRA liability with our TRA holders. See Note 10 of the Company’s Condensed Consolidated Financial Statements. |
|
| |
|
|
debt financing.
We received a total of $62,312 in assistance from Treasury in 2020 as part of the Payroll Support Program under the CARES Act in response to the extensive impact of the COVID-19 pandemic on the U.S. airline industry. In accordance with any grants and/or loans received under the CARES Act, we are required to comply with the relevant provisions of the CARES Act and the related implementing agreements which, among other things, include the following: the requirement to use the Payroll Support Payments exclusively for the continuation of payment of crewmember and employee wages, salaries and benefits; the requirement that certain levels of commercial air service be maintained until March 1, 2021, or if ordered by the DOT, March 1, 2022; the prohibitions on share repurchases of listed securities and the payment of common stock (or equivalent) dividends until September 30, 2022 under PSP3; and restrictions on the payment of certain executive compensation until April 1, 2023 under PSP3. A portion of the proceeds from our initial public offering was used to repay in full all amounts outstanding under the CARES Act Loan.
During the first quarter of 2021, we received a grant of $32,208 under PSP2. On April 22, 2021, we received a PSP2 top-off grant of $4,831. All funds provided by Treasury to PSP2 participants may only be used for the continuation of payment of employee wages, salaries, and benefits. Further, during the second quarter of 2021, we received a grant of $34,547 under PSP3.
On February 10, 2021, Sun Country, Inc., our wholly-owned subsidiary (the “Borrower”), entered into the Credit Agreement, which provides for a $25,000 Revolving Credit Facility and a $90,000 Delayed Draw Term Loan
- 49 -
SUN COUNTRY AIRLINES HOLDINGS, INC
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
Facility, which we refer to collectively as the “Credit Facilities,” and repaid in full all borrowings outstanding under the ABL Facility. The Revolving Credit Facility matures on the earlier of (i) February 10, 2026 and (ii) to the extent the sum of (x) the amount unused commitments under the Delayed Draw Term Loan Facility and (y) the amount of loans under the Delayed Draw Term Loan Facility exceeds $25,000 on such date, the date that is 180 days prior to February 10, 2026. The Delayed Draw Term Loan Facility matures on February 10, 2026. The Delayed Draw Term Loan Facility is available only to finance the acquisition of aircraft and engines and is not available for working capital or other general corporate purposes. Only the $25,000 Revolving Credit Facility portion of the Credit Facilities is available for general corporate purposes and as a general source of liquidity. During the six months ended June 30, 2021, we drew $80,500 on the Delayed Draw Term Loan Facility and $79,494 remained outstanding at June 30, 2021.
Our primary uses of liquidity are for operating expenses, capital expenditures, lease rentals and maintenance reserve deposits, debt repayments and working capital requirements. Our single largest capital expenditure requirement relates to the acquisition of aircraft, which we have historically acquired through operating andleases, finance leases, and debt.
Our management team retains broad discretion to allocate liquidity.
For more information on our fleet, see
Note 6 of the Condensed Consolidated Financial Statements included in Part I, Item I of this report.- 50 -
(Unaudited)
(Unaudited)
| | | | | | |
|
| June 30, 2021 |
| December 31, 2020 | ||
Cash and Equivalents | | $ | 310,723 | | $ | 62,028 |
Investments | |
| 6,076 | |
| 5,624 |
| | | | | | |
Long-term Debt | |
| 287,479 | |
| 282,463 |
Finance Lease Obligations | |
| 144,692 | |
| 107,170 |
Operating Lease Obligations | |
| 86,647 | |
| 147,199 |
Total Debt and Lease obligations | | $ | 518,818 | | $ | 536,832 |
Stockholders' Equity | |
| 464,233 | |
| 283,817 |
Total Invested Capital | | $ | 983,051 | | $ | 820,649 |
| | | | | | |
Debt-to-Capital | |
| 0.53 | |
| 0.65 |
Sources and Uses of Liquidity
Cash Flow Activity
| | | | | | |
|
| Six Months Ended June 30, | ||||
| | 2021 | | 2020 | ||
Total Operating Activities |
| $ | 89,841 |
| $ | (12,895) |
Investing Activities: | |
| | | | |
Purchases of Property & Equipment | | | (66,736) | |
| (93,677) |
Other | |
| (452) | |
| 37 |
Total Investing Activities | |
| (67,188) | |
| (93,640) |
| | | | | | |
Financing Activities: | |
| | | | |
Cash from Stock Offering, net | | | 227,225 | |
| — |
Proceeds from Borrowings | |
| 80,500 | |
| 220,307 |
Repayment of Finance Leases | |
| (7,864) | |
| (85,976) |
Repayment of Borrowings | |
| (74,709) | |
| (54,879) |
Debt Issuance Costs | | | (2,709) | | | (2,764) |
Other | |
| 26 | |
| 21 |
Total Financing Activities | |
| 222,469 | |
| 76,709 |
| | | | | | |
Net Increase (Decrease) in Cash | | $ | 245,122 | | $ | (29,826) |
"Cash" consists of Cash, Cash Equivalents and Restricted Cash
Operating Cash Flow Activities
Operating activities in the six months ended June 30, 2021 provided $89,841, as compared to using $12,895 in the six months ended June 30, 2020. During those two six-month periods, Net Income was $64,169 and $1,211, respectively.
March 31, 2022 December 31, 2021 Cash and Cash Equivalents $ 272,402 $ 309,338 Amount Available Under Revolving Credit Facility 25,000 25,000 Long-term Debt 277,285 277,426 Finance Lease Obligations 270,141 192,155 Operating Lease Obligations 34,040 76,041 Total Debt and Lease obligations $ 581,466 $ 545,622 Stockholders' Equity 493,291 486,811 Total Invested Capital $ 1,074,757 $ 1,032,433 Debt-to-Capital 0.54 0.53
(Unaudited)
(Unaudited)
Three Months Ended March 31, | |||||||||||
2022 | 2021 | ||||||||||
Total Operating Activities | $ | 18,213 | $ | 15,839 | |||||||
Investing Activities: | |||||||||||
Purchases of Property & Equipment | (49,683) | (54,399) | |||||||||
Other, net | 55 | (153) | |||||||||
Total Investing Activities | (49,628) | (54,552) | |||||||||
Financing Activities: | |||||||||||
Cash Received from Stock Offering, net | — | 228,668 | |||||||||
Proceeds from Stock Option and Warrant Exercises | 523 | — | |||||||||
Proceeds from Borrowings | 77,986 | 68,000 | |||||||||
Repayment of Finance Lease Obligations | (4,466) | (3,911) | |||||||||
Repayment of Borrowings | (77,947) | (46,068) | |||||||||
Debt Issuance Costs | (1,979) | (2,721) | |||||||||
Total Financing Activities | (5,883) | 243,968 | |||||||||
Net (Decrease) Increase in Cash | $ | (37,298) | $ | 205,255 |
Additionally, the cost per gallon increased by 68% year-over-year. We expect fuel costs to be higher year over year for comparable periods.
employee retention tax credits.
Capital Expenditures. Our capital expenditures were $66,736$49,683 and $93,677$54,399 for the sixthree months ended June 30,March 31, 2022 and 2021, and 2020, respectively. Our capital expenditures during the sixthree months ended June 30,March 31, 2022 primarily included the purchase of one aircraft, the purchase of three spare engines, the first installment payment to purchase a flight simulator, and other miscellaneous projects. Our capital expenditures during the three months ended March 31, 2021 were primarily related to the purchases of five existing aircraft that were financed through draws on the Delayed Draw Term Loan Facility. We invested $63,118previously under operating leases. Subsequent to March 31, 2022, we used incremental 2022-1 EETC financing to purchase sixan aircraft in the first six monthspreviously under a finance lease for a purchase price $16,784 and took delivery of 2021, as compared to investing $88,473 on four incremental aircraft and one engine in the first six monthsfor a total purchase price of 2020.
approximately $75,000.
IPO. On In March 16, 2021, the Company offered 9,090,909 shares of common stock to the public at $24.00 per share. The underwriters had an option to purchase an additional 1,363,636 shares from the Company at the public offering price, which they exercised.we completed our IPO. In total, all 10,454,545 shares were issued and the net proceeds to the companyCompany were $225,006$225,329 after deducting underwriting discounts and commissions, and other offering expenses.
Debt. In The proceeds from the six months ended June 30, 2021, we incurred $80,500 in new debt under the $90,000 Delayed Draw Term Loan Facility, primarilyIPO were immediately used to purchase six aircraft which were previously under operating leases. In the first six months of 2020 we incurred $220,307 in debt under the 2019-1 EETC, primarily to purchase two aircraft new to the Company, purchase two aircraft which were previously under operating leases, purchase five aircraft which were previously under finance leases, as well as to refinance three other owned aircraft. In the first quarter of 2021, we repaidrepay our $45,000 loan with the Treasury, plus accrued interest. During
2022-1 EETC.
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SUN COUNTRY AIRLINES HOLDINGS, INC
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
Undrawn Lines of Credit
On February 10, 2021, we executed a new five-year credit agreement that provides for a $25,000 Revolving Credit Facility and a $90,000 Delayed Draw Term Loan Facility, which are collectively referred to as the “Credit Facilities.” During the six months ended June 30, 2021, we drew $80,500 on the Delayed Draw Term Loan Facility to purchase six aircraft. These activities resulted in approximately $34,500 undrawn on the Credit Facilities as of June 30, 2021. The Delayed Draw Term Loan Facility is available only to finance the acquisition of aircraft and engines and is not available for working capital or other general corporate purposes. Only the $25,000 Revolving Credit Facility portion of the Credit Facilities is available for general corporate purposes and as a general source of liquidity.
Covenants
For a description of certain covenants of our debt agreements, see Note 7 of the Notes to the Condensed Consolidated Financial Statements. We were in compliance with all covenants in these debt agreements as of June 30, 2021.
Off Balance Sheet Arrangements
of the Condensed Consolidated Financial Statements. As of March 31, 2022, $94,521 of financing was available to us through the 2022-1 EETC, but was not reported on our Condensed Consolidated Balance Sheets because we had not issued
- 53 -
SUN COUNTRY AIRLINES HOLDINGS, INC
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
Commitments and Contractual Obligations
aircraft.
In connection with the Company’s IPO, we entered into an income Tax Receivable Agreement with our pre-IPO stockholders. The agreement provides for the payment by the Company to the pre-IPO stockholders of 85% of the amount of cash savings, if any, in U.S. federal, state, local, and foreign income tax that the Company realizes. For additional information regarding this agreement, see Note 10 of the Notes to the Condensed Consolidated Financial Statements.
2021.
differ from the information provided below.
June 30, 2021,March 31, 2022, under the supervision and with the participation of our management, including our chief executive officer (“CEO”) and chief financial officer (“CFO”), we evaluated the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, or the “Exchange Act”) as of the end of the period covered by this report. Based on that evaluation, management, including our CEO and CFO, has concluded that our disclosure controls and procedures are designed, and are effective, to give reasonable assurance that the information we are required to disclose is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to the Company’s management, including the CEO and the CFO, as appropriate to allow timely decisions regarding required disclosure.sixthree months ended June 30, 2021,March 31, 2022, we did not make any changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.5541 -
“Risk Factors”“Risk Factors” in our Registration Statement on Form S-1 (File No. 333-252858), as amended, and the Final Prospectus included therein,2021 10-K, the risk factors which materially affect our business, financial condition or results of operations. There have been no material changes from the risk factors previously disclosed. You should carefully consider the risk factors set forth in the Registration Statement and the other information set forth elsewhere in this Quarterly Report on Form 10-Q. You should be aware that these risk factors and other information may not describe every risk facing our company.Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
Unregistered Sales of Equity SecuritiesDuring the three months ended June 30, 2021, we did not conduct any sales of equity securities that were not registered under the Securities Act of 1933, as amended.Use of ProceedsThe Registration Statement on Form S-1 (File No. 333-252858) for our initial public offering (“IPO”) of our common stock, par value $0.01 per share was declared effective by the SEC on March 16, 2021, pursuant to which we issued and sold 10,454,545 shares of our common stock at $24.00 per share, which included 1,363,636 shares issued upon the exercise of the underwriters’ over-allotment option to purchase additional shares. We received net proceeds of $225,006 after deducting underwriting discounts and commissions, and other offering expenses. The managing underwriters for our IPO were Barclays Capital Inc. and Morgan Stanley & Co. LLC. Shares of our common stock began trading on the NASDAQ on March 17, 2021. We used approximately $46,260 of the proceeds from the IPO to repay all amounts outstanding under the CARES Act Loan. A portion of the proceeds were used to pay fees and expenses in connection with the IPO and the remainder will be used for general corporate purposes, including the acquisition of additional aircraft. At June 30, 2021, $38 of expenses incurred in connection with our IPO had not yet been paid.Our management team will retain broad discretion to allocate the net proceeds of the IPO for general corporate purposes. Pending use as described above, we may invest the net proceeds from the IPO in short-term, investment-grade, interest-bearing securities, such as money market accounts, certificates of deposit, commercial paper and guaranteed obligations of the U.S. government. Issuer Purchases of Equity SecuritiesThe Company does not have a share repurchase program and no shares were repurchased during the three months ended June 30, 2021. Under the CARES Act, we are restricted from conducting certain share repurchases through the later of March 31, 2022 and one year following repayment.- 56 -
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