Sun Country Airlines Reports Second Quarter 2022 Results

·33 min read
Sun Country Airlines
Sun Country Airlines

Q2 2022 GAAP diluted EPS of $(0.07) and operating income of $3 million

Q2 2022 Adjusted diluted EPS of $(0.03)(1) and adjusted operating income of $4 million(1)

MINNEAPOLIS, Aug. 08, 2022 (GLOBE NEWSWIRE) -- Sun Country Airlines Holdings, Inc. (“Sun Country Airlines”, “Sun Country”, the “Company”) (NASDAQ: SNCY) today reported financial results for its second quarter ended June 30, 2022.

“Despite the second quarter being a historically seasonally weaker quarter, scheduled service TRASM in the quarter was up 29% versus the second quarter 2019 and 13% sequentially versus first quarter 2022. We generated a positive operating profit of $3.4 million and an adjusted operating profit of $4 million despite fuel prices averaging $4.39 per gallon during the quarter,” said Jude Bricker, Chief Executive Officer of Sun Country. "During the month of June, scheduled service TRASM was 44% higher than in 2019 and we generated a GAAP operating margin of almost 8%, all while we were paying $4.47 per gallon for jet fuel. We continued to see strong leisure demand in July and expect it to stay elevated through the summer travel period. We are facing the same training challenges that have impacted the rest of the industry, resulting in less scheduled service flying than we would like to have flown and negatively impacting results We are making progress on resolving these training challenges and fundamentally view them to be temporary in nature; I am as bullish as ever on all of the critical factors that will determine Sun Country’s long-term success.”

Overview of Second Quarter

Three Months Ended June 30,

 

(unaudited) (in millions, except per share amounts)

 

2022

 

2021(7)

% Change

Total Operating Revenue

$

219.1

 

$

149.2

46.8

 

Operating Income

 

3.4

 

 

49.8

(93.2

)

Income (Loss) Before Income Tax

 

(4.8

)

 

61.8

(107.8

)

Net Income (Loss)

 

(3.9

)

 

52.2

(107.5

)

Diluted earnings (Loss) per share

$

(0.07

)

$

0.84

(108.3

)


 

Three Months Ended June 30,

 

(unaudited) (in millions, except per share amounts)

 

2022

 

2021(7)

% Change

Adjusted Operating Income (1)

$

3.9

 

$

10.8

(63.4

)

Adjusted Income (Loss) Before Income Tax (1)

 

(2.6

)

 

4.7

NM

Adjusted Net Income (Loss) (1)

 

(1.8

)

 

3.9

NM

Adjusted diluted earnings (Loss) per share (1)

$

(0.03

)

$

0.06

NM


 

Six Months Ended June 30,

 

(unaudited) (in millions, except per share amounts)

 

2022

 

2021(7)

% Change

Total Operating Revenue

$

445.6

 

$

276.8

61.0

 

Operating Income

 

25.2

 

 

80.4

(68.7

)

Income Before Income Tax

 

1.6

 

 

85.3

(98.2

)

Net Income (Loss)

 

(0.3

)

 

69.0

(100.4

)

Diluted earnings (Loss) per share

$

0.00

 

$

1.20

(100.0

)


 

Six Months Ended June 30,

 

(unaudited) (in millions, except per share amounts)

 

2022

2021(7)

% Change

Adjusted Operating Income (1)

$

26.7

$

12.0

 

123.2

Adjusted Income Before Income Tax (1)

 

13.0

 

0.0

 

NM

Adjusted Net Income (Loss) (1)

 

10.5

 

(1.0

)

NM

Adjusted diluted earnings (Loss) per share (1)

$

0.18

$

(0.02

)

NM

“NM” stands for not meaningful

For the quarter ended June 30, 2022, Sun Country reported a net loss of $4 million and a loss before income tax of $5 million, on $219 million of revenue. Adjusted loss before income tax for the quarter was $3 million(1). GAAP operating income during the quarter was $3 million, producing an operating margin of 1.5%, while adjusted operating income was $4 million(1), resulting in an adjusted operating income margin of 1.8%(1).

“Demand continues to be at some of the strongest levels that we have seen,” said Dave Davis, President and Chief Financial Officer. "Unfortunately, despite growing second quarter block hours by 23% versus 2019, we were undersized in the quarter due to training challenges limiting our scheduled service and ad hoc charter growth. Since signing our new pilot agreement in December of last year, we have been able to attract all of the new hire pilots we need, and attrition has been greatly reduced.  We are making strong progress in expanding our training pipeline to accommodate our growth and we anticipate seeing the benefits later this year. Capacity constraints have pressured our unit costs by limiting aircraft utilization. As we hire and train new staff at a record pace for Sun Country, new flying will come at high marginal profitability as the needed assets already exist.”

Notable Highlights

  • Adding a third aircraft to its charter service for Caesars Entertainment in October 2022

  • Selected by the U.S. Department of Transportation to provide Essential Air Service (EAS) for Chippewa Valley Regional Airport (EAU) in Eau Claire, WI, beginning in December 2022

  • Announced new service to Grand Cayman beginning in December 2022

  • Airline Business awarded Sun Country with the Airline Strategy Award 2022 for Sector Leadership

Capacity

System block hours flown during the second quarter of 2022 grew by 10% year over year and by 23% versus the same period in 2019, driven by the growth in our cargo business. Staffing challenges impacted passenger service capacity with scheduled service block hours and charter block hours lower by 9% and 5% when compared to the second quarter of 2019.

Charter block hours under long term contracts remain the bulk of the charter flying performed in the second quarter. This composed 92% of total charter flying versus 51% in the second quarter of 2019. As the Company begins to normalize its aircraft utilization, it will be able to pursue more ad-hoc charter flying.

Revenue

For the second quarter of 2022, the Company reported total revenue of $219 million, which was 29% more than the second quarter of 2019. Excluding the $21 million in cargo revenue that did not exist in 2019, revenue still exceeded second quarter 2019 by $28.5 million. The Company’s scheduled service TRASM (3) of 11.6 cents in the second quarter of 2022 increased 29% from the second quarter of 2019 while scheduled service ASMs decreased 6%. The second quarter 2022 total fare of $173 exceeded second quarter 2019 by 23%, and included strong ancillary revenue per passenger of $50.

Charter service revenue is primarily generated through service provided to collegiate and professional sports teams, the U.S. Department of Defense, casinos, and other customers. In the second quarter of 2022, the Company’s charter service revenue was $43 million, an increase of 3% versus second quarter 2019. On a rate basis, second quarter 2022 charter revenue per block hour was 8% higher than the rate in the second quarter of 2019.

Cargo revenue consists of revenue earned from flying cargo aircraft under the Air Transportation Services Agreement (“ATSA”) with Amazon. In the second quarter of 2022, cargo revenue was $21 million, a 4% decrease versus the second quarter of 2021 due to the timing of planned heavy maintenance events.

Cost

For the second quarter of 2022, total GAAP operating expenses increased 35% versus the second quarter of 2019, primarily due to a 77% increase in aircraft fuel expense in the quarter. Adjusted CASM in the second quarter increased 15% in the second quarter 2022 versus the second quarter 2019 while total ASMs decreased 6% for the same period. Second quarter 2022 was also impacted by the new pilot agreement that was signed at the end of 2021.

Balance Sheet and Liquidity

The Company’s net debt(5) on June 30, 2022 was $362 million, while total liquidity(6) was $308 million.

(unaudited) (in millions)

June 30, 2022

 

December 31, 2021

Cash and Cash Equivalents

$

212.9

 

$

309.3

Available-for-Sale Securities

 

70.1

 

 

Amount Available Under Revolving Credit Facility

 

25.0

 

 

25.0

Total Liquidity

$

308.0

 

$

334.3

 

 

 

 

 

June 30, 2022

 

December 31, 2021

Long-term Debt

$

363.5

 

$

277.4

Finance Lease Obligations

 

249.6

 

 

192.2

Operating Lease Obligations

 

31.6

 

 

76.0

Total Debt and Lease Obligations

 

644.7

 

 

545.6

Cash and Cash Equivalents

 

212.9

 

 

309.3

Available-for-Sale Securities

 

70.1

 

 

Net Debt

$

361.7

 

$

236.3

Fleet

As of June 30, 2022, the Company had 41 aircraft in its passenger service fleet, and operated twelve freighter aircraft in its cargo operation.

Guidance for Third Quarter 2022

 

Q3 2022

H/(L) vs Q3 2019

Total revenue - millions

$215 to $220

25% to 28%

Economic fuel cost per gallon

$3.84

 

Operating income margin - percentage

3% - 5%

 

Effective tax rate

23%

 

Total system block hours - thousands

31 to 32

17% to 21%

 

 

 

Conference Call & Webcast Details
Sun Country Airlines will host a conference call to discuss its second quarter 2022 results at 10:00 a.m. Eastern Time on Tuesday, August 9, 2022. A live broadcast of the conference call will be available via the investor relations section of Sun Country Airlines’ website at https://ir.suncountry.com/news-events/events-and-presentations. The online replay will be available on the same website approximately one hour after the call. The conference call can also be listened to live by accessing https://register.vevent.com/register/BI2e6b0275b8fe4c78aceab592f270965f .

About Sun Country Airlines

Sun Country Airlines is a new breed of hybrid low-cost air carrier that dynamically deploys shared resources across our synergistic scheduled service, charter and cargo businesses. Based in Minnesota, we focus on serving leisure and visiting friends and relatives ("VFR") passengers and charter customers and providing cargo CMI services, with flights throughout the United States and to destinations in Mexico, Central America, Canada, and the Caribbean.

End Notes

1 -

See additional details in the tables below in the section titled “Non-GAAP financial measures”

2 -

Total system TRASM = total revenue – cargo revenue / system ASMs

3 -

Scheduled service TRASM = scheduled service revenue + ancillary revenue + other revenue / scheduled service ASMs

4 -

Adjusted CASM is a non-GAAP measure derived from CASM by excluding fuel costs, Special Items, non-cash management stock compensation expense, costs arising from its cargo operations (began in 2020 when the Company launched cargo operations), certain commissions, and other costs of selling its vacations product from this measure. See table titled “Reconciliation of Adjusted CASM to CASM”

5 -

Net debt = current portion of long-term debt + long-term debt + finance lease obligations + operating lease obligations – cash and cash equivalents - Available-for-Sale Securities

6 -

Total liquidity = cash and cash equivalents + available-for-sale securities + amount of undrawn revolver

7 -

Certain prior period amounts have been revised to correct an immaterial change related to the application of the Company’s accounting for its aircraft transactions, as reflected this in our in our Quarterly Report on Form 10-Q.


Forward Looking Statements

This press release contains forward-looking statements, which involve risks and uncertainties. These forward-looking statements are generally identified by the use of forward-looking terminology, including the terms “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “likely,” “may,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” and, in each case, their negative or other various or comparable terminology. All statements other than statements of historical facts contained in this press release, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management, and expected market growth are forward-looking statements. The forward-looking statements are relating to:

• our strategy, outlook and growth prospects;

• our operational and financial targets and dividend policy;

• general economic trends and trends in the industry and markets; and

• the competitive environment in which we operate.

These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements.

These forward-looking statements reflect our views with respect to future events as of the date of this press release and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. These forward-looking statements represent our estimates and assumptions only as of the date of this press release and, except as required by law, we undertake no obligation to update or review publicly any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this press release. We anticipate that subsequent events and developments will cause our views to change. You should read this press release completely and with the understanding that our actual future results may be materially different from what we expect. Our forward-looking statements do not reflect the potential impact of any future acquisitions, merger, dispositions, joint ventures, or investments we may undertake. We qualify all of our forward-looking statements by these cautionary statements. Additional information concerning certain factors is contained in the Company’s Securities and Exchange Commission filings, including but not limited to the Company’s Annual Reports on Form 10-K, Quarterly Report on Form 10-Q, and Current Reports on Form 8-K.

Non-GAAP Financial Measures

We sometimes use information that is derived from the condensed consolidated financial statements, but that is not presented in accordance with GAAP. We believe these non-GAAP measures provide a meaningful comparison of our results to others in the airline industry and our prior year results. Investors should consider these non-GAAP financial measures in addition to, and not as a substitute for, our financial performance measures prepared in accordance with GAAP. Further, our non-GAAP information may be different from the non-GAAP information provided by other companies. We believe certain charges included in our operating expenses on a GAAP basis make it difficult to compare our current period results to prior periods as well as future periods and guidance. The tables below show a reconciliation of non-GAAP financial measures used in this document to the most directly comparable GAAP financial measures.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)


 

Three Months Ended June 30,

 

 

 

 

2022

 

 

2021(7)

 

% Change

Operating Revenues:

 

 

 

 

 

Scheduled Service

$

108,412

 

 

$

67,073

 

 

61.6

 

Charter Service

 

42,749

 

 

 

28,898

 

 

47.9

 

Ancillary

 

44,201

 

 

 

29,159

 

 

51.6

 

Passenger

 

195,362

 

 

 

125,130

 

 

56.1

 

Cargo

 

21,190

 

 

 

22,098

 

 

(4.1

)

Other

 

2,515

 

 

 

1,961

 

 

28.3

 

Total Operating Revenue

 

219,067

 

 

 

149,189

 

 

46.8

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

Aircraft Fuel

 

76,947

 

 

 

29,709

 

 

159.0

 

Salaries, Wages, and Benefits

 

60,298

 

 

 

42,316

 

 

42.5

 

Aircraft Rent

 

2,211

 

 

 

3,815

 

 

(42.0

)

Maintenance

 

12,782

 

 

 

11,300

 

 

13.1

 

Sales and Marketing

 

7,881

 

 

 

5,822

 

 

35.4

 

Depreciation and Amortization

 

16,854

 

 

 

14,208

 

 

18.6

 

Ground Handling

 

8,212

 

 

 

6,551

 

 

25.4

 

Landing Fees and Airport Rent

 

9,496

 

 

 

8,752

 

 

8.5

 

Special Items, net

 

 

 

 

(39,819

)

 

(100.0

)

Other Operating, net

 

21,017

 

 

 

16,746

 

 

25.5

 

Total Operating Expenses

 

215,698

 

 

 

99,400

 

 

117.0

 

Operating Income

 

3,369

 

 

 

49,789

 

 

(93.2

)

 

 

 

 

 

 

Non-operating Income (Expense):

 

 

 

 

 

Interest Income

 

532

 

 

 

9

 

 

NM

Interest Expense

 

(7,042

)

 

 

(6,080

)

 

15.8

 

Other, net

 

(1,702

)

 

 

18,054

 

 

NM

Total Non-operating Income (Expense), net

 

(8,212

)

 

 

11,983

 

 

(168.5

)

 

 

 

 

 

 

Income (Loss) before Income Tax

 

(4,843

)

 

 

61,772

 

 

(107.8

)

Income (Benefit) Tax Expense

 

(921

)

 

 

9,595

 

 

(109.6

)

Net Income (Loss)

$

(3,922

)

 

$

52,177

 

 

(107.5

)

 

 

 

 

 

 

Net Income (Loss) per share to common stockholders:

 

 

Basic

$

(0.07

)

 

$

0.91

 

 

(107.7

)

Diluted

$

(0.07

)

 

$

0.84

 

 

(108.3

)

Shares used for computation:

 

 

 

 

 

Basic

 

58,060,716

 

 

 

57,156,159

 

 

1.6

 

Diluted

 

58,060,716

 

 

 

61,982,441

 

 

(6.3

)

“NM” stands for not meaningful

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)


 

Six Months Ended June 30,

 

 

 

 

2022

 

 

2021(7)

 

% Change

Operating Revenues:

 

 

 

 

 

Scheduled Service

$

232,479

 

 

$

121,693

 

 

91.0

 

Charter Service

 

75,628

 

 

 

54,703

 

 

38.3

 

Ancillary

 

89,287

 

 

 

52,929

 

 

68.7

 

Passenger

 

397,394

 

 

 

229,325

 

 

73.3

 

Cargo

 

42,243

 

 

 

43,684

 

 

(3.3

)

Other

 

5,954

 

 

 

3,793

 

 

57.0

 

Total Operating Revenue

 

445,591

 

 

 

276,802

 

 

61.0

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

Aircraft Fuel

 

141,492

 

 

 

53,984

 

 

162.1

 

Salaries, Wages, and Benefits

 

119,915

 

 

 

86,392

 

 

38.8

 

Aircraft Rent

 

5,397

 

 

 

9,414

 

 

(42.7

)

Maintenance

 

24,777

 

 

 

20,510

 

 

20.8

 

Sales and Marketing

 

16,509

 

 

 

10,932

 

 

51.0

 

Depreciation and Amortization

 

32,182

 

 

 

26,823

 

 

20.0

 

Ground Handling

 

16,170

 

 

 

11,781

 

 

37.3

 

Landing Fees and Airport Rent

 

19,782

 

 

 

17,537

 

 

12.8

 

Special Items, net

 

 

 

 

(72,355

)

 

(100.0

)

Other Operating, net

 

44,166

 

 

 

31,397

 

 

40.7

 

Total Operating Expenses

 

420,390

 

 

 

196,415

 

 

114.0

 

Operating Income

 

25,201

 

 

 

80,387

 

 

(68.7

)

 

 

 

 

 

 

Non-operating Income (Expense):

 

 

 

 

 

Interest Income

 

556

 

 

 

24

 

 

NM

Interest Expense

 

(15,604

)

 

 

(13,201

)

 

18.2

 

Other, net

 

(8,577

)

 

 

18,049

 

 

NM

Total Non-operating Income (Expense), net

 

(23,625

)

 

 

4,872

 

 

NM

 

 

 

 

 

 

Income before Income Tax

 

1,576

 

 

 

85,259

 

 

(98.2

)

Income Tax Expense

 

1,861

 

 

 

16,304

 

 

(88.6

)

Net Income (Loss)

$

(285

)

 

$

68,955

 

 

(100.4

)

 

 

 

 

 

 

Net Income (Loss) per share to common stockholders:

 

 

 

 

Basic

$

0.00

 

 

$

1.30

 

 

(100.0

)

Diluted

$

0.00

 

 

$

1.20

 

 

(100.0

)

Shares used for computation:

 

 

 

 

 

Basic

 

57,984,608

 

 

 

52,850,041

 

 

9.7

 

Diluted

 

57,984,608

 

 

 

57,403,593

 

 

1.0

 

“NM” stands for not meaningful


KEY OPERATING STATISTICS

The following table presents key operating statistics and metrics for the three and six months ended June 30, 2022 and 2021.

 

Three Months Ended June 30,

 

 

 

2022

 

2021(7)

% Change

Scheduled Service Statistics:

 

 

 

Revenue passenger miles (RPMs) – thousands

 

1,126,030

 

 

919,034

 

22.5

 

Available seat miles (ASMs) – thousands

 

1,343,116

 

 

1,198,768

 

12.0

 

Load factor

 

83.8

%

 

76.7

%

7.1

 

Revenue passengers carried

 

884,088

 

 

700,019

 

26.3

 

Departures

 

5,674

 

 

4,921

 

15.3

 

Block hours

 

18,205

 

 

15,900

 

14.5

 

Scheduled service TRASM(1) - cents

 

11.55

 

 

8.19

 

41.0

 

Average base fare per passenger

$

122.63

 

$

95.81

 

28.0

 

Ancillary revenue per passenger

$

50.00

 

$

41.66

 

20.0

 

Fuel gallons - thousands

 

14,187

 

 

12,267

 

15.7

 

 

 

 

 

Charter Statistics:

 

 

 

Departures

 

2,235

 

 

1,727

 

29.4

 

Block hours

 

4,573

 

 

3,656

 

25.1

 

Available seats miles (ASMs) - thousands

 

278,804

 

 

237,723

 

17.3

 

Fuel gallons - thousands

 

3,271

 

 

2,622

 

24.8

 

 

 

 

 

Cargo Statistics:

 

 

 

Departures

 

2,693

 

 

2,752

 

(2.1

)

Block hours

 

7,762

 

 

8,198

 

(5.3

)

 

 

 

 

Total System Statistics:

 

 

 

Average passenger aircraft

 

34.5

 

 

31.0

 

11.3

 

Passenger aircraft – end of period

 

41

 

 

33

 

24.2

 

Cargo aircraft – end of period

 

12

 

 

12

 

 

Available seat miles (ASMs) – thousands

 

1,632,501

 

 

1,442,744

 

13.2

 

Departures

 

10,687

 

 

9,445

 

13.1

 

Block hours

 

30,755

 

 

27,874

 

10.3

 

Daily utilization – hours

 

7.4

 

 

7.0

 

5.7

 

Average stage length – miles

 

1,120

 

 

1,179

 

(5.0

)

Total revenue per ASM (TRASM)(2) - cents

 

12.12

 

 

8.81

 

37.6

 

Cost per ASM (CASM) - cents

 

13.21

 

 

6.89

 

91.7

 

Adjusted CASM - cents

 

7.14

 

 

6.40

 

11.6

 

Fuel gallons - thousands

 

17,568

 

 

14,955

 

17.5

 

Fuel cost per gallon, excluding derivatives

$

4.39

 

$

2.07

 

112.1

 

Employees at end of period

 

2,282

 

 

1,815

 

25.7

 

1 – Scheduled service TRASM = scheduled service revenue + ancillary revenue + other revenue / scheduled service ASMs

2 – Total system TRASM = total revenue – cargo revenue / system ASMs


KEY OPERATING STATISTICS


 

Six Months Ended June 30,

 

 

 

2022

 

2021(7)

% Change

Scheduled Service Statistics:

 

 

 

Revenue passenger miles (RPMs) – thousands

 

2,464,490

 

 

1,694,033

 

45.5

 

Available seat miles (ASMs) – thousands

 

3,027,648

 

 

2,356,780

 

28.5

 

Load factor

 

81.4

%

 

71.9

%

9.5

 

Revenue passengers carried

 

1,806,740

 

 

1,253,051

 

44.2

 

Departures

 

11,901

 

 

9,244

 

28.7

 

Block hours

 

40,638

 

 

31,107

 

30.6

 

Scheduled service TRASM(1) - cents

 

10.82

 

 

7.57

 

42.9

 

Average base fare per passenger

$

128.67

 

$

97.12

 

32.5

 

Ancillary revenue per passenger

$

49.42

 

$

42.24

 

17.0

 

Fuel gallons - thousands

 

31,587

 

 

23,824

 

32.6

 

 

 

 

 

Charter Statistics:

 

 

 

Departures

 

3,855

 

 

3,238

 

19.1

 

Block hours

 

8,377

 

 

6,987

 

19.9

 

Available seats miles (ASMs) - thousands

 

514,509

 

 

449,444

 

14.5

 

Fuel gallons - thousands

 

6,029

 

 

4,979

 

21.1

 

 

 

 

 

Cargo Statistics:

 

 

 

Departures

 

5,267

 

 

5,317

 

(0.9

)

Block hours

 

15,152

 

 

16,440

 

(7.8

)

 

 

 

 

Total System Statistics:

 

 

 

Average passenger aircraft

 

34.3

 

 

31.0

 

10.6

 

Passenger aircraft – end of period

 

41

 

 

33

 

24.2

 

Cargo aircraft – end of period

 

12

 

 

12

 

 

Available seat miles (ASMs) – thousands

 

3,560,651

 

 

2,819,540

 

26.3

 

Departures

 

21,174

 

 

17,897

 

18.3

 

Block hours

 

64,560

 

 

54,806

 

17.8

 

Daily utilization – hours

 

8.0

 

 

6.8

 

17.6

 

Average stage length – miles

 

1,227

 

 

1,225

 

0.2

 

Total revenue per ASM (TRASM)(2) - cents

 

11.33

 

 

8.27

 

37.0

 

Cost per ASM (CASM) - cents

 

11.81

 

 

6.97

 

69.4

 

Adjusted CASM - cents

 

6.64

 

 

6.28

 

5.7

 

Fuel gallons - thousands

 

37,813

 

 

28,948

 

30.6

 

Fuel cost per gallon, excluding derivatives

$

3.76

 

$

1.99

 

88.9

 

Employees at end of period

 

2,282

 

 

1,815

 

25.7

 

1 – Scheduled service TRASM = scheduled service revenue + ancillary revenue + other revenue / scheduled service ASMs

2 – Total system TRASM = total revenue – cargo revenue / system ASMs


SUMMARY BALANCE SHEET
(Dollars in millions)
(amounts may not recalculate due to rounding)


 

June 30, 2022

 

December 31, 2021(7)

 

% Change

 

(Unaudited)

 

 

 

 

Cash & Cash Equivalents

$

212.9

 

$

309.3

 

(31.2

)

Other Current Assets

 

150.5

 

 

66.1

 

127.6

 

Total Current Assets

 

363.3

 

 

375.4

 

(3.2

)

Total Property & Equipment, net

 

745.6

 

 

578.5

 

28.9

 

Other

 

397.8

 

 

426.5

 

(6.7

)

Total Assets

 

1,506.7

 

 

1,380.4

 

9.2

 

 

 

 

 

 

 

Air Traffic Liabilities

 

124.0

 

 

118.6

 

4.6

 

Current Finance Lease Obligations

 

29.4

 

 

11.7

 

151.3

 

Current Operating Lease Obligations

 

10.2

 

 

17.2

 

(40.7

)

Current Maturities of Long-Term Debt

 

43.8

 

 

29.4

 

49.0

 

Other Current Liabilities

 

124.0

 

 

104.7

 

18.4

 

Total Current Liabilities

 

331.4

 

 

281.7

 

17.6

 

Finance Lease Obligations

 

220.2

 

 

180.5

 

22.0

 

Operating Lease Obligations

 

21.4

 

 

58.8

 

(63.6

)

Long-Term Debt

 

319.7

 

 

248.0

 

28.9

 

Income Tax Receivable Agreement Liability

 

106.2

 

 

98.8

 

7.5

 

Other

 

11.9

 

 

22.1

 

(46.1

)

Total Liabilities

 

1,010.9

 

 

889.8

 

13.6

 

 

 

 

 

 

 

Total Stockholders Equity

$

495.9

 

$

490.6

 

1.1

 


SUMMARY CASH FLOW
(Dollars in millions)

(Unaudited - amounts may not recalculate due to rounding)


 

Six Months Ended June 30,

 

 

 

 

2022

 

 

2021(7)

 

% Change

Net cash provided by operating activities

$

37.1

 

 

$

96.8

 

 

(61.7

)

 

 

 

 

 

 

Purchases of property & equipment

 

(137.6

)

 

 

(73.7

)

 

86.8

 

Other

 

(61.3

)

 

 

(0.5

)

 

NM

Net cash used in investing activities

 

(199.0

)

 

 

(74.2

)

 

168.3

 

 

 

 

 

 

 

Cash received from stock offering

 

 

 

 

235.9

 

 

(100.0

)

Proceeds from borrowing

 

172.5

 

 

 

80.5

 

 

114.3

 

Repayment of finance lease obligations

 

(24.3

)

 

 

(7.9

)

 

208.9

 

Repayment of borrowings

 

(86.0

)

 

 

(74.7

)

 

15.2

 

Other

 

(1.0

)

 

 

(11.4

)

 

(90.9

)

Net cash provided by financing activities

 

61.1

 

 

 

222.5

 

 

(72.5

)

 

 

 

 

 

 

Net Increase (Decrease) in cash

 

(100.8

)

 

 

245.1

 

 

(141.1

)

Cash, Cash Equivalents and Restricted Cash – Beginning of the Period

 

317.8

 

 

 

70.4

 

 

351.6

 

Cash, Cash Equivalents and Restricted Cash – End of the Period

$

217.0

 

 

$

315.5

 

 

(31.2

)

“NM” stands for not meaningful


Calculation of Special Items

Dollars in millions – Unaudited - amounts may not recalculate due to rounding

The following tables lists the items that are included as Special Items, net.

 

Three Months Ended June 30,

 

 

2022

 

2021(7)

CARES Act employee grant recognition (1)

$

 

$

(39.4

)

CARES Act employee retention credit (2)

 

 

 

(0.4

)

Total Special Items, net

$

 

$

(39.8

)


 

Six Months Ended June 30,

 

 

2022

 

2021(7)

CARES Act employee grant recognition (3)

$

 

$

(71.6

)

CARES Act employee retention credit (2)

 

 

 

(0.8

)

Total Special Items, net

$

 

$

(72.4

)


(1

)

In the quarter ended June 30, 2021, the United States Department of the Treasury awarded the Company a grant of $39.4 under the Payroll Support Program (“PSP2”) under the Consolidated Appropriations Act, 2021

(2

)

Relates to a credit recognized under the CARES Act Employee Retention credit which is a refundable tax credit against certain employee taxes

(3

)

In the first half of 2021, the United States Department of the Treasury awarded the Company a grant of $71.6 under the Payroll Support Program (“PSP2”) under the Consolidated Appropriations Act, 2021

 

 

 

NON-GAAP FINANCIAL MEASURES

Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted Income (Loss) Before Income Tax, Adjusted Pre-tax Margin, Adjusted Net Income (Loss), Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted Income (Loss) Before Income Tax, Adjusted Pre-tax Margin, Adjusted Net Income (Loss), Adjusted Net Income (Loss) per share, Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP measures included as supplemental disclosure because we believe they are useful indicators of our operating performance. Derivations of operating income and net income are well recognized performance measurements in the airline industry that are frequently used by our management, as well as by investors, securities analysts and other interested parties in comparing the operating performance of companies in our industry and facilitate comparisons among current, past and future periods. We believe that while items excluded from Adjusted EBITDA and Adjusted EBITDA Margin may be recurring in nature and should not be disregarded in evaluation of our earnings performance, Adjusted EBITDA and Adjusted EBITDA Margin is useful because its calculation isolates the effects of financing in general, the accounting effects of capital spending and acquisitions (primarily aircraft, which may be acquired directly, directly subject to acquisition debt, by finance lease or by operating lease, each of which is presented differently for accounting purposes), and income taxes, which may vary significantly between periods and for different companies for reasons unrelated to overall operating performance.

The presented non-GAAP measures have limitations as analytic tools, such as: these measures do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations and other companies in our industry may calculate these measures differently than we do, limiting each measure’s usefulness as a comparative measure. Because of these limitations, these non-GAAP measures should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. Accordingly, you are cautioned not to place undue reliance on this information. We encourage investors to review our financial statements and other filings with the Securities and Exchange Commission in their entirety and not to rely on any single financial measure.

Reconciliation of GAAP Operating Income to Adjusted Operating Income

Dollars in millions – Unaudited - amounts may not recalculate due to rounding

The following table presents the reconciliation of GAAP operating income to adjusted operating income.


 

Three Months Ended June 30,

 

 

2022

 

 

2021(7)

Operating Revenue

$

219.1

 

 

$

149.2

 

Operating Income

 

3.4

 

 

 

49.8

 

Special Items, net (1)

 

 

 

 

(39.8

)

Stock compensation expense

 

0.6

 

 

 

0.7

 

Tax Receivable Agreement expense (2)

 

 

 

 

0.1

 

Adjusted Operating Income

$

3.9

 

 

$

10.8

 

 

 

 

 

Operating Income Margin

 

1.5

%

 

 

33.4

%

Adjusted Operating Income Margin

 

1.8

%

 

 

7.2

%


 

Six Months Ended June 30,

 

 

2022

 

 

2021(7)

Operating Revenue

$

445.6

 

 

$

276.8

 

Operating Income

 

25.2

 

 

 

80.4

 

Special Items, net (1)

 

 

 

 

(72.4

)

Stock compensation expense

 

1.5

 

 

 

3.6

 

Tax Receivable Agreement expense (2)

 

 

 

 

0.3

 

Adjusted Operating Income

$

26.7

 

 

$

12.0

 

 

 

 

 

Operating Income Margin

 

5.7

%

 

 

29.0

%

Adjusted Operating Income Margin

 

6.0

%

 

 

4.3

%


(1

)

See special items table above for more details

(2

)

This represents the one-time costs to establish the Tax Receivable Agreement (“TRA”) liability with our pre-IPO stockholders


Reconciliation of GAAP Income (Loss) Before Income Tax to Adjusted Income (Loss) Before Income Tax

Dollars in millions – Unaudited - amounts may not recalculate due to rounding

The following table presents the reconciliation of GAAP income (loss) before income tax to adjusted income (loss) before income tax.


 

Three Months Ended June 30,

 

 

2022

 

 

2021(7)

Net Income (Loss)

$

(3.9

)

 

$

52.2

 

Add: Provision for Income Tax Expense (Benefit)

 

(0.9

)

 

 

9.6

 

Income (Loss) Before Income Tax, as reported

 

(4.8

)

 

 

61.8

 

Pre-tax margin

(2.2)%

 

 

41.4

%

 

 

 

 

Special Items, net (1)

 

 

 

 

(39.8

)

Stock compensation expense

 

0.6

 

 

 

0.7

 

Secondary offering expense

 

 

 

 

0.6

 

Gain on asset transactions, net

 

(0.1

)

 

 

 

Tax Receivable Agreement expense (2)

 

 

 

 

0.1

 

Tax Receivable Agreement adjustment (3)

 

1.7

 

 

 

(18.7

)

Adjusted Income (Loss) Before Income Tax

$

(2.6

)

 

$

4.7

 

 

 

 

 

Adjusted Pre-tax margin

(1.2)%

 

 

3.1

%


 

Six Months Ended June 30,

 

 

2022

 

 

2021(7)

Net Income (Loss)

$

(0.3

)

 

$

69.0

 

Add: Provision for income tax expense

 

1.9

 

 

 

16.3

 

Income Before Income Tax, as reported

 

1.6

 

 

 

85.3

 

Pre-tax margin

 

0.4

%

 

 

30.8

%

 

 

 

 

Special Items, net (1)

 

 

 

 

(72.4

)

Stock compensation expense

 

1.5

 

 

 

3.6

 

Secondary offering expense

 

 

 

 

0.6

 

Gain on asset transactions, net

 

(0.1

)

 

 

 

Early pay-off of US Treasury loan

 

 

 

 

0.8

 

Tax Receivable Agreement expense (2)

 

 

 

 

0.3

 

Tax Receivable Agreement adjustment (3)

 

8.5

 

 

 

(18.7

)

Loss on refinancing credit facility

 

1.6

 

 

 

0.4

 

Adjusted Income Before Income Tax

$

13.0

 

 

$

0.0

 

 

 

 

 

Adjusted Pre-tax margin

 

2.9

%

 

 

0.0

%


(1

)

See special items table above for more details

(2

)

This represents the one-time costs to establish the TRA liability with our pre-IPO stockholders

(3

)

This represents the adjustment to the TRA for the period, which is recorded in Non-Operating Income (Expense)


Reconciliation of GAAP Net Income (Loss) and Earnings per Share to Adjusted Net Income (Loss) and Adjusted Earnings per Share

Dollars and shares in millions, except for per share – Unaudited - amounts may not recalculate due to rounding

The following table presents the reconciliation of GAAP net income (loss) and earnings (loss) per share to adjusted net income (loss) and adjusted earnings per share.


 

Three Months Ended June 30,

 

 

2022

 

 

2021(7)

 

Dollars

 

Per Share -
diluted

 

Dollars

 

Per Share -
diluted

Net Income (Loss)

$

(3.9

)

 

$

(0.07

)

 

$

52.2

 

 

$

0.84

 

Special Items, net (1)

 

 

 

 

 

 

 

(39.8

)

 

 

(0.64

)

Stock Compensation Expense

 

0.6

 

 

 

0.01

 

 

 

0.7

 

 

 

0.01

 

Secondary offering expense

 

 

 

 

 

 

 

0.6

 

 

 

0.01

 

Gain on asset transactions, net

 

(0.1

)

 

 

0.00

 

 

 

 

 

 

 

Tax Receivable Agreement expense (2)

 

 

 

 

 

 

 

0.1

 

 

 

0.00

 

Tax Receivable Agreement adjustment (3)

 

1.7

 

 

 

0.03

 

 

 

(18.7

)

 

 

(0.30

)

Income tax effect of adjusting items, net (4)

 

(0.1

)

 

 

 

 

 

8.8

 

 

 

0.14

 

Adjusted Net Income (Loss)

$

(1.8

)

 

$

(0.03

)

 

$

3.9

 

 

$

0.06

 

 

 

 

 

 

 

 

 

Diluted share count

 

58.1

 

 

 

 

 

62.0

 

 

 


 

Six Months Ended June 30,

 

 

2022

 

 

2021(7)

 

Dollars

 

Per Share -
diluted

 

Dollars

 

Per Share -
diluted

Net Income (Loss)

$

(0.3

)

 

$

0.00

 

 

$

69.0

 

 

$

1.20

 

Special Items, net (1)

 

 

 

 

 

 

 

(72.4

)

 

 

(1.26

)

Stock Compensation Expense

 

1.5

 

 

 

0.03

 

 

 

3.6

 

 

 

0.06

 

Secondary offering expense

 

 

 

 

 

 

 

0.6

 

 

 

0.01

 

Gain on asset transactions, net

 

(0.1

)

 

 

0.00

 

 

 

 

 

 

 

Early pay-off of US Treasury loan

 

 

 

 

 

 

 

0.8

 

 

 

0.01

 

Tax Receivable Agreement expense (2)

 

 

 

 

 

 

 

0.3

 

 

 

0.01

 

Tax Receivable Agreement adjustment (3)

 

8.5

 

 

 

0.15

 

 

 

(18.7

)

 

 

(0.33

)

Loss on refinancing credit facility

 

1.6

 

 

 

0.03

 

 

 

0.4

 

 

 

0.01

 

Income tax effect of adjusting items, net (4)

 

(0.7

)

 

 

(0.01

)

 

 

15.3

 

 

 

0.27

 

Adjusted Net Income (Loss)

$

10.5

 

 

$

0.18

 

 

$

(1.0

)

 

$

(0.02

)

 

 

 

 

 

 

 

 

Diluted share count

 

58.0

 

 

 

 

 

57.4

 

 

 


(1

)

See special items table above for more details

(2

)

This represents the one-time costs to establish the TRA liability with our pre-IPO stockholders

(3

)

This represents the adjustment to the TRA for the period, which is recorded in Non-Operating Income (Expense)

(4

)

The tax effect of adjusting items, net is calculated at the Company’s statutory rate for the application period


Reconciliation of GAAP Net Income (Loss) to Adjusted EBITDA

Dollars in millions – Unaudited - amounts may not recalculate due to rounding

The following tables present the reconciliation of net income (loss) to adjusted EBITDA for the periods presented below.


 

Three Months Ended June 30,

 

 

2022

 

 

2021(7)

Net Income (Loss)

$

(3.9

)

 

$

52.2

 

Special Items, net (1)

 

 

 

 

(39.8

)

Interest Income

 

(0.5

)

 

 

 

Interest Expense

 

7.0

 

 

 

6.1

 

Stock Compensation Expense

 

0.6

 

 

 

0.7

 

Gain on asset transactions, net

 

(0.1

)

 

 

 

Secondary offering expense

 

 

 

 

0.6

 

Tax Receivable Agreement expense (2)

 

 

 

 

0.1

 

Tax Receivable Agreement adjustment (3)

 

1.7

 

 

 

(18.7

)

Provision for Income Taxes

 

(0.9

)

 

 

9.6

 

Depreciation and Amortization

 

16.9

 

 

 

14.2

 

Adjusted EBITDA

$

20.7

 

 

$

25.0

 

 

 

 

 

Adjusted EBITDA margin

 

9.5

%

 

 

16.7

%


 

Six Months Ended June 30,

 

 

2022

 

 

2021(7)

Net Income (Loss)

$

(0.3

)

 

$

69.0

 

Special Items, net (1)

 

 

 

 

(72.4

)

Interest Income

 

(0.6

)

 

 

 

Interest Expense

 

15.6

 

 

 

13.2

 

Stock Compensation Expense

 

1.5

 

 

 

3.6

 

Gain on asset transactions, net

 

(0.1

)

 

 

 

Secondary offering expense

 

 

 

 

0.6

 

Tax Receivable Agreement expense (2)

 

 

 

 

0.3

 

Tax Receivable Agreement adjustment (3)

 

8.5

 

 

 

(18.7

)

Provision for Income Taxes

 

1.9

 

 

 

16.3

 

Depreciation and Amortization

 

32.2

 

 

 

26.8

 

Adjusted EBITDA

$

58.7

 

 

$

38.8

 

 

 

 

 

Adjusted EBITDA margin

 

13.2

%

 

 

14.0

%


(1

)

See special items table above for more details

(2

)

This represents the one-time costs to establish the TRA liability with our pre-IPO stockholders

(3

)

This represents the adjustment to the TRA for the period, which is recorded in Non-Operating Income (Expense)

 

 

 

Adjusted CASM

Adjusted CASM is a non-GAAP measure derived from CASM by excluding fuel costs, costs related to our cargo operations (began in 2020 when we launched our cargo operations), stock based compensation, certain commissions and other costs of selling our vacations product from this measure as these costs are unrelated to our airline operations and improve comparability to our peers. Adjusted CASM is an important measure used by management and by our board of directors in assessing quarterly and annual cost performance. Adjusted CASM is also a measure commonly used by industry analysts and we believe it is an important metric by which they compare our airline to others in the industry, although other airlines may exclude certain other costs in their calculation of Adjusted CASM. The measure is also the subject of frequent questions from investors.

Adjusted CASM excludes fuel costs. By excluding volatile fuel expenses that are outside of our control from our unit metrics, we believe that we have better visibility into the results of operations and our non-fuel cost initiatives. Our industry is highly competitive and is characterized by high fixed costs, so even a small reduction in non-fuel operating costs can lead to a significant improvement in operating results. In addition, we believe that all domestic carriers are similarly impacted by changes in jet fuel costs over the long run, so it is important for management and investors to understand the impact and trends in company-specific cost drivers, such as labor rates, aircraft costs and maintenance costs, and productivity, which are more controllable by management.

Adjusted CASM also excludes special items and other adjustments, as defined in the relevant reporting period, that are not representative of the ongoing costs necessary to our airline operations and may improve comparability between periods. We also exclude stock compensation expense when computing Adjusted CASM. The Company’s compensation strategy includes the use of stock-based compensation to attract and retain employees and executives and is principally aimed at aligning their interests with those of our stockholders and at long-term employee retention, rather than to motivate or reward operational performance for any particular period. Thus, stock-based compensation expense varies for reasons that are generally unrelated to operational decisions and performance in any particular period.

As derivations of 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 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. Total operating expense less fuel and special items per block hour is derived by excluding fuel expense and special items from total operating expense. By excluding volatile fuel expenses that are outside of our control from our unit metrics and certain special items that we consider to not be indicative of our ongoing operations, we believe that we have better visibility into the results of operations and our non-fuel cost initiatives. Accordingly, you are cautioned not to place undue reliance on this information.

Reconciliation of CASM to Adjusted CASM

Amounts may not recalculate due to rounding, dollar amounts in millions

The following table presents the reconciliation of CASM to Adjusted CASM.


 

Three Months Ended June 30,

 

 

2022

 

2021(7)

 

Operating
Expenses

- mm

 

Per ASM
(cents)

 

Operating
Expenses

- mm

 

Per ASM
(cents)

CASM

$

215.7

 

13.21

 

$

99.4

 

 

6.89

 

Less:

 

 

 

 

 

 

 

Aircraft Fuel

 

76.9

 

4.71

 

 

29.7

 

 

2.06

 

Stock Compensation Expense

 

0.6

 

0.04

 

 

0.7

 

 

0.05

 

Special Items, net (1)

 

 

 

 

(39.8

)

 

(2.76

)

Tax Receivable Agreement expense (2)

 

 

 

 

0.1

 

 

 

Cargo expenses, not already adjusted above

 

21.3

 

1.31

 

 

16.2

 

 

1.13

 

Sun Country Vacations

 

0.2

 

0.01

 

 

0.2

 

 

0.01

 

Adjusted CASM

$

116.6

 

7.14

 

$

92.4

 

 

6.40

 

 

 

 

 

 

 

 

 

Available seat miles (ASMs) - mm

 

1,632.5

 

 

 

 

1,442.7

 

 

 


 

Six Months Ended June 30,

 

 

2022

 

2021(7)

 

Operating
Expenses

- mm

 

Per ASM
(cents)

 

Operating
Expenses

- mm

 

Per ASM
(cents)

CASM

$

420.4

 

11.81

 

$

196.4

 

 

6.97

 

Less:

 

 

 

 

 

 

 

Aircraft Fuel

 

141.5

 

3.97

 

 

54.0

 

 

1.91

 

Stock Compensation Expense

 

1.5

 

0.04

 

 

3.6

 

 

0.13

 

Special Items, net (1)

 

 

 

 

(72.4

)

 

(2.56

)

Tax Receivable Agreement expense (2)

 

 

 

 

0.3

 

 

0.01

 

Cargo expenses, not already adjusted above

 

40.4

 

1.14

 

 

33.4

 

 

1.19

 

Sun Country Vacations

 

0.6

 

0.02

 

 

0.4

 

 

0.01

 

Adjusted CASM

$

236.3

 

6.64

 

$

177.1

 

 

6.28

 

 

 

 

 

 

 

 

 

Available seat miles (ASMs) - mm

 

3,560.7

 

 

 

 

2,819.5

 

 

 


(1

)

See special items table above for more details

(2

)

This represents the one-time costs to establish the TRA liability with our pre-IPO stockholders


CONTACT: Contacts Investor Relations Chris Allen 651-681-4810 IR@suncountry.com Media Wendy Burt 651-900-8400 mediarelations@suncountry.com