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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023
Or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-40217
https://cdn.kscope.io/8af7fbdcb3bb326e5469cdd87ce87523-SNYC 1.jpg
Sun Country Airlines Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware82-4092570
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
2005 Cargo Road
Minneapolis, Minnesota
55450
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (651) 681-3900
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, par value $0.01 per shareSNCY
The Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated Filer
Accelerated Filer
Non-accelerated Filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes No
Number of shares outstanding by each class of common stock, as of September 30, 2023:
Common Stock, $0.01 par value – 54,133,851 shares outstanding


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Sun Country Airlines Holdings, Inc.
Form 10-Q
Table of Contents
Page
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PART I. Financial Information
ITEM 1. FINANCIAL STATEMENTS
SUN COUNTRY AIRLINES HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share and share amounts)
September 30, 2023December 31, 2022
(Unaudited)
ASSETS
Current Assets:
Cash and Cash Equivalents$26,967 $92,086 
Restricted Cash10,953 10,842 
Investments153,290 178,936 
  Accounts Receivable, net of an allowance for credit losses of $110 and $231, respectively
42,876 35,124 
Short-term Lessor Maintenance Deposits1,191 1,241 
  Inventory, net of a reserve for obsolescence of $1,076 and $1,107, respectively
7,678 7,659 
Prepaid Expenses13,358 11,423 
Other Current Assets3,992 8,179 
 Total Current Assets260,305 345,490 
Property & Equipment, net:
Aircraft and Flight Equipment679,145 636,584 
Aircraft and Flight Equipment Held for Operating Lease154,165  
Ground Equipment and Leasehold Improvements 39,316 35,948 
Computer Hardware and Software12,856 10,831 
Finance Lease Assets285,942 261,991 
Rotable Parts16,820 17,059 
Total Property & Equipment1,188,244 962,413 
Accumulated Depreciation & Amortization(231,501)(176,746)
Total Property & Equipment, net956,743 785,667 
Other Assets:
Goodwill222,223 222,223 
Other Intangible Assets, net of accumulated amortization of $22,757 and $18,890, respectively
84,984 85,110 
Operating Lease Right-of-use Assets15,475 22,182 
Aircraft Deposits9,589 9,134 
Long-term Lessor Maintenance Deposits41,172 32,433 
Deferred Tax Asset 12,956 
Other Assets10,577 9,217 
Total Other Assets384,020 393,255 
Total Assets$1,601,068 $1,524,412 
See accompanying Notes to Condensed Consolidated Financial Statements
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SUN COUNTRY AIRLINES HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share and share amounts)
September 30, 2023December 31, 2022
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable$55,680 $62,370 
Accrued Salaries, Wages, and Benefits30,451 26,521 
Accrued Transportation Taxes12,795 17,666 
Air Traffic Liabilities130,453 157,995 
Finance Lease Obligations32,096 17,990 
Loyalty Program Liabilities9,415 13,963 
Operating Lease Obligations2,286 6,296 
Current Maturities of Long-term Debt, net83,339 57,548 
Income Tax Receivable Agreement Liability1,511 2,260 
Other Current Liabilities12,849 14,519 
Total Current Liabilities370,875 377,128 
Long-term Liabilities:
Finance Lease Obligations231,185 233,306 
Loyalty Program Liabilities4,432 1,474 
Operating Lease Obligations17,108 19,836 
Long-term Debt, net351,766 294,687 
Deferred Tax Liability5,214  
Income Tax Receivable Agreement Liability99,509 101,540 
Other Long-term Liabilities1,618 3,729 
Total Long-term Liabilities710,832 654,572 
Total Liabilities1,081,707 1,031,700 
Commitments and Contingencies (see Note 12)
Stockholders' Equity:
Common stock, with $0.01 par value, 995,000,000 shares authorized, 58,815,139 and 58,217,647 issued and 54,133,851 and 57,325,238 outstanding at September 30, 2023 and December 31, 2022, respectively
588 582 
Preferred stock, with $0.01 par value, 5,000,000 shares authorized, no shares issued and outstanding at September 30, 2023 and December 31, 2022
  
Treasury stock, at cost, 4,681,288 and 892,409 shares held at September 30, 2023 and December 31, 2022, respectively
(80,681)(17,605)
Additional Paid-In Capital511,375 488,494 
Retained Earnings 88,585 22,048 
Accumulated Other Comprehensive Loss(506)(807)
Total Stockholders' Equity519,361 492,712 
Total Liabilities and Stockholders' Equity$1,601,068 $1,524,412 
See accompanying Notes to Condensed Consolidated Financial Statements
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SUN COUNTRY AIRLINES HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share and share amounts)
(Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Operating Revenues:
Passenger$214,355 $195,360 $709,490 $592,753 
Cargo26,059 23,687 74,437 65,930 
Other8,462 2,653 20,150 8,607 
Total Operating Revenues248,876 221,700 804,077 667,290 
Operating Expenses:
Aircraft Fuel61,179 64,843 185,829 206,334 
Salaries, Wages, and Benefits72,541 58,661 223,890 178,576 
Aircraft Rent22 1,949 2,281 7,347 
Maintenance15,330 11,018 44,311 35,794 
Sales and Marketing7,569 6,827 26,005 23,336 
Depreciation and Amortization22,762 17,181 64,577 49,364 
Ground Handling9,382 8,669 28,299 24,838 
Landing Fees and Airport Rent13,958 12,926 36,847 32,708 
Other Operating, net27,127 24,235 81,663 68,401 
Total Operating Expenses229,870 206,309 693,702 626,698 
  Operating Income19,006 15,391 110,375 40,592 
Non-operating Income (Expense):
Interest Income2,480 1,610 7,766 2,166 
Interest Expense(11,403)(7,493)(31,272)(23,097)
Other, net(15)3,422 (370)(5,156)
Total Non-operating Expense, net(8,938)(2,461)(23,876)(26,087)
  Income Before Income Tax10,068 12,930 86,499 14,505 
  Income Tax Expense2,477 2,253 19,963 4,113 
  Net Income$7,591 $10,677 $66,536 $10,392 
Net Income per share to common stockholders:
Basic$0.14 $0.18 $1.19 $0.18 
Diluted$0.13 $0.18 $1.12 $0.17 
Shares used for computation:
Basic55,435,386 58,146,606 56,051,173 58,039,201 
Diluted58,595,646 60,793,516 59,281,819 61,372,735 
See accompanying Notes to Condensed Consolidated Financial Statements
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SUN COUNTRY AIRLINES HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
(Unaudited)

Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Net Income$7,591 $10,677 $66,536 $10,392 
Other Comprehensive Income (Loss):
Net unrealized gains (losses) on Available-for-Sale securities, net of deferred tax expense (benefit) of $46, $(244), $90 and $(309), respectively
158 (562)301 (782)
Other Comprehensive Income (Loss)158 (562)301 (782)
Comprehensive Income$7,749 $10,115 $66,837 $9,610 

See accompanying Notes to Condensed Consolidated Financial Statements
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SUN COUNTRY AIRLINES HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Dollars in thousands, except share amounts)
(Unaudited)
Nine Months Ended September 30, 2023
WarrantsCommon Stock Treasury StockAdditional Paid-in CapitalRetained
Earnings
Accumulated Other Comprehensive (Loss) IncomeTotal
SharesAmountSharesAmount
December 31, 20222,402,268 58,217,647 $582 892,409 $(17,605)$488,494 $22,048 $(807)$492,712 
Stock Issued for Stock-Based Awards— 147,105 2 — — 554 — — 556 
Net Stock Settlement of Stock-Based Awards— — — 406 (8)— — — (8)
Common Stock Repurchases— — — 1,230,932 (22,549)7,501 — — (15,048)
Net Income— — — — — — 38,328 — 38,328 
Amazon Warrants189,652 — — — — 1,400 — — 1,400 
Stock-based Compensation— — — — — 2,678 — — 2,678 
Other Comprehensive Income— — — — — — — 389 389 
March 31, 20232,591,920 58,364,752 $584 2,123,747 $(40,162)$500,627 $60,376 $(418)$521,007 
Stock Issued for Stock-Based Awards— 187,975 2 — — 613 — — 615 
Common Stock Repurchases— — — 416,751 (7,511) — — (7,511)
Net Income— — — — — — 20,618 — 20,618 
Amazon Warrants252,869 — — — — 1,867 — — 1,867 
Stock-based Compensation— — — — — 4,415 — — 4,415 
Other Comprehensive Loss— — — — — — — (246)(246)
June 30, 20232,844,789 58,552,727 $586 2,540,498 $(47,673)$507,522 $80,994 $(664)$540,765 
Stock Issued for Stock-Based Awards— 262,412 2 — — 1,414 — — 1,416 
Common Stock Repurchases— — — 2,140,790 (33,008) — — (33,008)
Net Income— — — — — — 7,591 — 7,591 
Amazon Warrants189,652 — — — — 1,400 — — 1,400 
Stock-based Compensation— — — — — 1,039 — — 1,039 
Other Comprehensive Income— — — — — — — 158 158 
September 30, 20233,034,441 58,815,139 $588 4,681,288 $(80,681)$511,375 $88,585 $(506)$519,361 
Nine Months Ended September 30, 2022
WarrantsCommon Stock Treasury StockAdditional Paid-in CapitalRetained
Earnings
Accumulated Other Comprehensive (Loss)Total
SharesAmountSharesAmount
December 31, 20211,643,660 57,872,452 $579  $ $485,638 $4,372 $ $490,589 
Stock Issued for Stock-Based Awards— 91,868 1 — — 522 — — 523 
Net Income— — — — — — 3,637 — 3,637 
Amazon Warrants189,652 — — — — 1,400 — — 1,400 
Stock-based Compensation— — — — — 920 — — 920 
March 31, 20221,833,312 57,964,320 $580  $ $488,480 $8,009 $ $497,069 
Stock Issued for Stock-Based Awards— 181,404 1 — — 1,037 — — 1,038 
Net Stock Settlement of Stock-Based Awards— — — 1,823 (52)— — — (52)
Net Loss— — — — — — (3,922)— (3,922)
Amazon Warrants189,652 — — — — 1,400 — — 1,400 
Stock-based Compensation— — — — — 575 — — 575 
Other Comprehensive Loss— — — — — — — (220)(220)
June 30, 20222,022,964 58,145,724 $581 1,823 $(52)$491,492 $4,087 $(220)$495,888 
Stock Issued for Stock-Based Awards— 22,773 1 — — 114 — — 115 
Net Income— — — — — — 10,677 — 10,677 
Amazon Warrants189,652 — — — — 1,400 — — 1,400 
Stock-based Compensation— — — — — 487 — — 487 
Other Comprehensive Loss— — — — — — — (562)(562)
September 30, 20222,212,616 58,168,497 $582 1,823 $(52)$493,493 $14,764 $(782)$508,005 
See accompanying Notes to Condensed Consolidated Financial Statements
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SUN COUNTRY AIRLINES HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Nine Months Ended September 30,
20232022
Net Income$66,536 $10,392 
Adjustments to reconcile Net Income to Cash from Operating Activities:
Depreciation and Amortization64,577 49,364 
Deferred Income Taxes18,080 3,183 
Other, net14,433 10,235 
Changes in Operating Assets and Liabilities:  
Accounts Receivable(7,083)(88)
Inventory(1,478)(1,402)
Prepaid Expenses(1,929)(3,188)
Lessor Maintenance Deposits(8,689)(10,256)
Aircraft Deposits(482)(2,569)
Other Assets70 (5,478)
Accounts Payable(5,855)8,674 
Accrued Transportation Taxes(4,872)(1,736)
Air Traffic Liabilities(27,542)14,269 
Loyalty Program Liabilities(1,590)(3,401)
Operating Lease Obligations(3,858)(61)
Other Liabilities2,333 3,733 
Net Cash Provided by Operating Activities102,651 71,671 
Cash Flows from Investing Activities:  
Purchases of Property & Equipment(210,641)(177,658)
Purchases of Investments(82,574)(130,529)
Proceeds from the Maturities of Investments110,850  
Other, net4,087 10,577 
Net Cash Used in Investing Activities(178,278)(297,610)
Cash Flows from Financing Activities:  
Common Stock Repurchases(55,051) 
Proceeds from Borrowings119,200 188,277 
Repayment of Finance Lease Obligations(16,390)(37,842)
Repayment of Borrowings(35,475)(95,305)
Other, net(1,665)(901)
Net Cash Provided by Financing Activities10,619 54,229 
Net Decrease in Cash, Cash Equivalents and Restricted Cash(65,008)(171,710)
Cash, Cash Equivalents and Restricted Cash--Beginning of the Period102,928 317,785 
Cash, Cash Equivalents and Restricted Cash--End of the Period$37,920 $146,075 
Non-cash transactions:
Aircraft and Flight Equipment Acquired through Finance Leases$ $40,480 
Changes to Finance Lease Assets due to Lease Modifications$26,427 $46,311 
Aircraft and Flight Equipment Acquired From Exercise of Finance Lease Purchase Option, net of Accumulated Depreciation$2,386 $28,012 
The following provides a reconciliation of Cash, Cash Equivalents and Restricted Cash to the amounts reported on the Condensed Consolidated Balance Sheets:
September 30, 2023September 30, 2022
Cash and Cash Equivalents$26,967 $131,912 
Restricted Cash10,953 14,163 
Total Cash, Cash Equivalents and Restricted Cash$37,920 $146,075 

See accompanying Notes to Condensed Consolidated Financial Statements
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SUN COUNTRY AIRLINES HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share and share amounts)
(Unaudited)
1.    BASIS OF PRESENTATION
Sun Country Airlines Holdings, Inc. (together with its consolidated subsidiaries, "Sun Country" or the "Company") is the parent company of Sun Country, Inc., which is a certificated air carrier providing scheduled passenger service, air cargo service, charter air transportation and related services.
The Company has prepared the unaudited Condensed Consolidated Financial Statements according to U.S. Generally Accepted Accounting Principles (“GAAP”) and has included the accounts of Sun Country Airlines Holdings, Inc. and its subsidiaries. Certain information and footnote disclosures normally included in the audited annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC") for Form 10-Q. Therefore, the accompanying Condensed Consolidated Financial Statements of Sun Country Airlines Holdings, Inc. should be read in conjunction with the Consolidated Financial Statements contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 as filed with the SEC ("2022 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.
The preparation of financial statements in accordance with GAAP requires management to make certain 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.
The Company completed its public float calculation for SEC reporting purposes as of June 30, 2023, as required. The Company will be a large accelerated filer as of December 31, 2023.
Due to impacts from seasonal variations in the demand for air travel, the volatility of aircraft fuel prices, uncertainties in pilot staffing, the impact of macroeconomic conditions including inflationary pressures, and other factors, operating results for the nine months ended September 30, 2023 are not necessarily indicative of operating results for future quarters or for the year ending December 31, 2023.
2.    REVENUE
Sun Country is a certificated air carrier generating Operating Revenues from Scheduled Service, Charter service, Ancillary, Cargo and Other revenue. Scheduled Service revenue mainly consists of base fares. Charter service revenue is primarily generated through service provided to the U.S. Department of Defense, collegiate and professional sports teams, and casinos. Ancillary revenues consist of revenue earned from air travel-related services, such as: baggage fees, seat selection fees, other fees and on-board sales. Cargo consists of revenue earned from flying cargo aircraft for Amazon.com Services, Inc. (together with its affiliates, “Amazon”) under the Air Transportation Services Agreement (the “ATSA”). Other revenue consists primarily of revenue from services in connection with Sun Country Vacations products and rental revenue related to certain transactions where the Company acts as a lessor.
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SUN COUNTRY AIRLINES HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share and share amounts)
(Unaudited)
The significant categories comprising Operating Revenues are as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Scheduled Service$96,483 $102,200 $360,607 $334,679 
Charter Service47,437 42,899 143,250 118,526 
Ancillary70,435 50,261 205,633 139,548 
   Passenger214,355 195,360 709,490 592,753 
Cargo26,059 23,687 74,437 65,930 
Other8,462 2,653 20,150 8,607 
Total Operating Revenues$248,876 $221,700 $804,077 $667,290 
The Company attributes and measures its Operating Revenues by geographic region as defined by the Department of Transportation ("DOT") for airline reporting based upon the origin of each passenger and cargo flight segment.
The Company’s 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.
Total Operating Revenues by geographic region are as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Domestic$242,504 $214,904 $767,509 $634,963 
Latin America6,372 6,756 36,078 32,182 
Other 40 490 145 
Total Operating Revenues$248,876 $221,700 $804,077 $667,290 
Contract Balances
The Company’s contract assets primarily relate to costs incurred to get Amazon cargo aircraft ready for service. The balances are included in Other Current Assets and Other Assets on the Condensed Consolidated Balance Sheets.
The Company’s contract liabilities are comprised of: 1) ticket sales for transportation that has not yet been provided (reported as Air Traffic Liabilities on the Condensed Consolidated Balance Sheets), 2) outstanding loyalty points that may be redeemed for future travel and other non-air travel awards (reported as Loyalty Program Liabilities on the Condensed Consolidated Balance Sheets) and, 3) the Amazon Deferred Up-front Payment received (reported within Other Current Liabilities and Other Long-term Liabilities on the Condensed Consolidated Balance Sheets).
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SUN COUNTRY AIRLINES HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share and share amounts)
(Unaudited)
Contract Assets and Liabilities are as follows:
September 30, 2023December 31, 2022
Contract Assets
Costs to fulfill contract with Amazon$1,669 $2,195 
Total Contract Assets$1,669 $2,195 
Contract Liabilities
Air Traffic Liabilities$130,453 $157,995 
Loyalty Program Liabilities13,847 15,437 
Amazon Deferred Up-front Payment2,486 3,271 
Total Contract Liabilities$146,786 $176,703 
The balance in the Air Traffic Liabilities fluctuates with seasonal travel patterns. Most tickets can be purchased no more than twelve months in advance, therefore any revenue associated with tickets sold for future travel will be recognized within that timeframe. For the nine months ended September 30, 2023, $152,292 of revenue was recognized in Passenger revenue that was included in the Air Traffic Liabilities as of December 31, 2022.
Loyalty Program
The Sun Country Rewards program provides loyalty awards to program members based on accumulated loyalty points. The Company records a liability for loyalty points earned by passengers under the Sun Country Rewards program using two methods: 1) a liability for points that are earned by passengers on purchases of the Company’s services is established by deferring revenue based on the redemption value, net of estimated loyalty points that will expire unused, or breakage; and 2) a liability for points attributed to loyalty points issued to the Company’s Visa card holders is established by deferring a portion of payments received from the Company’s co-branded agreement. The balance of the Loyalty Program Liabilities fluctuates based on seasonal patterns, which impacts the volume of loyalty points awarded through travel or issued to co-branded credit card and other partners (deferral of revenue) and loyalty points redeemed (recognition of revenue). Due to these reasons, the timing of loyalty point redemptions can vary significantly.
Changes in the Loyalty Program Liabilities are as follows:
20232022
Balance – January 1$15,437 $19,718 
Loyalty Points Earned6,209 5,125 
Loyalty Points Redeemed (1)
(7,799)(8,526)
Balance – September 30
$13,847 $16,317 
______________________
(1)Loyalty points are combined in one homogenous pool, which includes both air and non-air travel awards, and are not separately identifiable. As such, the revenue recognized is comprised of points that were part of the Loyalty Program Liabilities balance at the beginning of the period, as well as points that were earned during the period.
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SUN COUNTRY AIRLINES HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share and share amounts)
(Unaudited)
3.    EARNINGS PER SHARE
The following table shows the computation of basic and diluted earnings per share:
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Numerator:
  Net Income$7,591 $10,677 $66,536 $10,392 
Denominator:
  Weighted Average Common Shares Outstanding - Basic55,435,386 58,146,606 56,051,173 58,039,201 
  Dilutive effect of Stock Options, RSUs and Warrants (1)
3,160,260 2,646,910 3,230,646 3,333,534 
  Weighted Average Common Shares Outstanding - Diluted58,595,646 60,793,516 59,281,819 61,372,735 
Basic earnings per share$0.14 $0.18 $1.19 $0.18 
Diluted earnings per share$0.13 $0.18 $1.12 $0.17 
______________________
(1)
There were 2,810,840 and 3,221,617 performance-based stock options outstanding at September 30, 2023 and 2022, respectively. As of September 30, 2023, 100% of the performance-based stock options have vested. As of September 30, 2022, 63% of the performance-based stock options were expected to vest.



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SUN COUNTRY AIRLINES HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share and share amounts)
(Unaudited)
4. AIRCRAFT
As of September 30, 2023, Sun Country's fleet consisted of 59 Boeing 737-NG aircraft, comprised of 54 Boeing 737-800s and five Boeing 737-900ERs.
The following tables summarize the Company’s aircraft fleet activity for the nine months ended September 30, 2023 and 2022, respectively:
December 31, 2022
AdditionsReclassificationsRemovals
September 30, 2023
Passenger:
Owned291  (1)

29
Finance leases (1)
11 2  13
Operating leases2  (2)  
Sun Country Airlines’ Fleet421  (1)42
Cargo:
Aircraft Operated for Amazon12   12
Other Owned:
Aircraft Held for Operating Lease5   5
Total Aircraft 546  (1)59
December 31, 2021AdditionsReclassificationsRemovalsSeptember 30, 2022
Passenger:
Owned21 5 4 (1)29 
Finance leases (2)
9 2   11 
Operating leases6  (4) 2 
Sun Country Airlines’ Fleet36 7  (1)42 
Cargo:
Aircraft Operated for Amazon12    12 
Total Aircraft 48 7  (1)54 
(1)
Two aircraft operating leases were reclassified into finance leases, as further described below.
(2)
Two aircraft operating leases were reclassified into finance leases and two separate aircraft finance lease purchase options were exercised, resulting in a net change of zero finance lease reclassifications.
During the nine months ended September 30, 2023, the Company acquired five 737-900ERs that are currently on lease to an unaffiliated airline ("Aircraft Held for Operating Lease"). The five Aircraft Held for Operating Lease were financed through a term loan arrangement. See Note 5 of these Condensed Consolidated Financial Statements for more information on this transaction. Additionally, during the nine months ended September 30, 2023, the Company acquired an incremental aircraft and executed two lease amendments to purchase two aircraft at the end of their respective lease terms. The lease amendments modified the classification of these leases from operating leases to finance leases and have expiration dates in fiscal year 2024. During the three months ended September 30, 2023, management approved a
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SUN COUNTRY AIRLINES HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share and share amounts)
(Unaudited)
plan to retire an owned aircraft. Certain parts of the aircraft were maintained for future use by the Company or held for sale. The impact of the retirement and the assets held for sale were not material to the Company's Condensed Consolidated Financial Statements. Of the 34 Owned aircraft and Aircraft Held for Operating Lease as of September 30, 2023, 31 aircraft were financed and three aircraft were unencumbered.
During the nine months ended September 30, 2022, the Company executed lease amendments to purchase two aircraft at the end of the lease term, which modified the lease classification from operating leases to finance leases with expiration dates in fiscal year 2026 and retired one aircraft. Further, the Company purchased two aircraft previously classified as finance leases using proceeds from the issuance of Class A and Class B pass-through trust certificates (the "2022-1 EETC") and purchased two aircraft previously classified as operating leases. The Company also acquired seven incremental 737-800 aircraft, five of which were financed using proceeds from the 2022-1 EETC and two through a finance lease arrangement that is set to expire in fiscal year 2030.
Depreciation, amortization, and rent expense on aircraft are as follows:
Three Months Ended September 30,Nine Months Ended September 30,
Aircraft StatusExpense Type2023202220232022
OwnedDepreciation$14,395 $10,179 $40,709 $29,027 
Finance LeasedAmortization5,183 4,419 14,741 12,533 
Operating Leased
Aircraft Rent (1)
22 1,949 2,281 7,347 
$19,600 $16,547 $57,731 $48,907 
(1)
Aircraft Rent expense includes credits for the amortization of over-market liabilities established at the Acquisition Date.
5. ASSET ACQUISITIONS
During the nine months ended September 30, 2023, the Company acquired five Aircraft Held for Operating Lease. The table below reflects the cumulative balances of the five aircraft as of the acquisition dates:

Asset Balance Sheet Classification
Aircraft Held for Operating LeaseAircraft and Flight Equipment Held for Operating Lease$114,632 
Maintenance Rights AssetAircraft and Flight Equipment Held for Operating Lease39,533 
Over-Market AssetOther Intangible Assets, net3,741 
Total$157,906 
The purchase price was assigned to the assets based upon their relative fair values as of the acquisition date. The Company estimated the fair value of the Aircraft Held for Operating Lease principally based on market appraisals. The appraisals were based on an analysis of the economic conditions impacting both the airline industry and broader economy, the current fuel price environment, aircraft order data, passenger traffic levels, and qualitative and quantitative characteristics impacting the value of the acquired aircraft.
The fair value of the Maintenance Rights Asset was determined using a discounted cash flow method based on aircraft utilization levels at the time of the acquisition and the applicable rates as specified within the lease agreements.
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SUN COUNTRY AIRLINES HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share and share amounts)
(Unaudited)
The fair value of the Over-Market Asset was determined using a discounted cash flow model that involves the comparison of contractual lease cash flows to the estimated at-market lease payments for an aircraft of the same type and age.
The purchase of the Aircraft Held for Operating Lease was financed using the proceeds from a term loan credit facility with a face amount of $119,200 and the Company's Cash and Cash Equivalents. For more information on the term loan credit facility, see Note 6 of these Condensed Consolidated Financial Statements.
Aircraft Held for Operating Lease
The Company obtained outright ownership of the Aircraft Held for Operating Lease upon purchase and assumed the position of lessor until the end of the lease terms. The Company is entitled to fixed payments over the remaining lease term for each aircraft, which expire at various dates between the fourth quarter of 2024 and the fourth quarter of 2025. On each lease expiry date, the Aircraft Held for Operating Lease will be redelivered to Sun Country and are expected to be inducted into the Company’s fleet. The rental revenue associated with the Aircraft Held for Operating Lease is recognized as it is earned and is included in Other revenue. The Company has recognized $5,870 and $11,742 of rental revenue during the three and nine months ended September 30, 2023, respectively.
Maintenance Rights Asset
Upon purchase of the Aircraft Held for Operating Lease, the Company recognized a Maintenance Rights Asset which represents the Company’s contractual right to receive the aircraft in a specified maintenance condition at the end of the lease. The acquired leases contain an end of lease compensation clause whereby the lessee is required to remit a cash payment to true-up the aircraft’s maintenance condition to full-life or perform the maintenance tasks needed to physically restore the airframe and engines to such a condition. The asset represents the difference between the Aircraft Held for Operating Lease’s physical maintenance condition as of the purchase date and the contractual return condition at the end of the lease term. The Maintenance Rights Asset is not depreciated over the lease term, nor will it accrete as additional life is consumed on the aircraft.
Over-Market Asset
Upon purchase of the Aircraft Held for Operating Lease, the Company recognized an intangible asset representing lease terms which are favorable to the lessor (unfavorable to the lessee), as compared with market terms of similar leases. The asset will be amortized over the remaining lease terms for the respective aircraft, which ranges from 1.2 to 2.2 years as of September 30, 2023. The amortization will be recognized as contra-revenue, offsetting the rental revenue associated with the Aircraft Held for Operating Lease included in Other revenue.
6.    DEBT
Credit Facilities
On February 10, 2021, the Company executed a five-year credit agreement (the “Credit Agreement”) with a group of lenders. The Credit Agreement includes a $25,000 Revolving Credit Facility (the "Revolving Credit Facility") and a $90,000 Delayed Draw Term Loan Facility (“DDTL”), which are collectively referred to as the “Credit Facilities.” The proceeds from the Revolving Credit Facility can be used for general corporate purposes, whereas the proceeds from the DDTL were to be used solely to finance the acquisition of aircraft or engines to be registered in the United States. The Credit Agreement includes financial covenants that
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SUN COUNTRY AIRLINES HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share and share amounts)
(Unaudited)
require a minimum trailing 12-month EBITDAR ($87,700 as of March 31, 2022 and beyond) and minimum liquidity, as defined within the Credit Agreement, of $30,000 at the close of any business day. The Company was in compliance with these covenants as of September 30, 2023.
During 2021, the Company drew $80,500 on the DDTL to purchase six aircraft, which were previously under operating leases. During 2022, the Company repaid the outstanding balance of the DDTL in full using proceeds received from the 2022-1 EETC, which terminated the DDTL. As a result, no amounts under the DDTL were available to the Company as of September 30, 2023. The Company recorded a $1,557 loss on extinguishment of debt in 2022 in connection with the repayment of the DDTL, which represents the write-off of the unamortized deferred financing costs. As of September 30, 2023, the Company had $24,650 of financing available through the Revolving Credit Facility, as $350 had been pledged to support a letter of credit.
Long-term Debt
Term Loan Credit Facility
During the nine months ended September 30, 2023, the Company executed a term loan credit facility with a face amount of $119,200 for the purpose of financing the five Aircraft Held for Operating Lease. The loan is to be repaid monthly through March 2030. During the lease term, payments collected from the lessee will be applied directly to the repayment of principal and interest on the term loan credit facility. The Aircraft Held for Operating Lease, as well as the related lease payments received from the lessee, are pledged as collateral. During the nine months ended September 30, 2023, the Company recorded $1,820 in debt issuance costs associated with the term loan credit facility.
The interest rate on the term loan credit facility is determined by using a base rate, which resets monthly, plus an applicable margin, and a fixed credit spread adjustment of 0.1%. The applicable margin during the lease term is fixed at 3.75%, and is subsequently reduced to 3.25% once the aircraft have been redelivered to the Company and a Loan-to-Value ("LTV") ratio calculation is completed at the end of the lease term. The interest rate in effect as of September 30, 2023 was 9.2%. To the extent that the LTV ratio exceeds 75% at the end of the lease term, a principal prepayment will be required in order to reduce the ratio to 75%. If at any point within 12 months of the end of the lease term for each respective aircraft the Company deems it probable that a principal prepayment will be required in order to reduce the LTV ratio to 75%, and such amount can be reasonably estimated, the estimated principal prepayment amount will be reclassified from Long-term Debt, net to Current Maturities of Long-Term Debt, net on the Company's Condensed Consolidated Balance Sheets. In the event a principal prepayment is required, amounts received under the end of lease maintenance compensation clause may be applied towards the prepayment.
Pass-Through Trust Certificates
During March 2022, the Company arranged for the issuance of the 2022-1 EETC in an aggregate face amount of $188,277 for the purpose of financing or refinancing 13 aircraft. The Company is required to make bi-annual principal and interest payments each March and September, through March 2031. These notes bear interest at an annual rate between 4.84% and 5.75%. The weighted average interest rate was 5.05% as of September 30, 2023.
In December 2019, the Company arranged for the issuance of Class A, Class B and Class C trust certificates Series 2019-1 (the “2019-1 EETC”), in an aggregate face amount of $248,587 for the purpose of financing or refinancing 13 used aircraft, which was completed in 2020. The Company is required to make bi-annual principal and interest payments each June and December, through December 2027. These notes bear
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SUN COUNTRY AIRLINES HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share and share amounts)
(Unaudited)
interest at an annual rate between 4.13% and 6.95%. The weighted average interest rate was 4.69% as of September 30, 2023.
Long-term Debt includes the following:
September 30, 2023December 31, 2022
 2019-1 EETC (see terms and conditions above)$168,598 $176,697 
 2022-1 EETC (see terms and conditions above)158,775 179,019 
Term Loan Credit Facility (see terms and conditions above)112,068  
  Total Debt439,441 355,716 
Less: Unamortized debt issuance costs(4,336)(3,481)
Less: Current Maturities of Long-term Debt, net(83,339)(57,548)
Total Long-term Debt, net$351,766 $294,687 
Future maturities of the outstanding Debt are as follows:
Debt Principal
Payments
Amortization of Debt
Issuance Costs
Net Debt
Remainder of 2023
$33,804 $(341)$33,463 
202475,403 (1,188)74,215 
202580,007 (956)79,051 
202661,146 (709)60,437 
202765,170 (525)64,645 
Thereafter123,911 (617)123,294 
Total as of September 30, 2023
$439,441 $(4,336)$435,105 
The fair value of Debt was $408,892 as of September 30, 2023 and $324,059 as of December 31, 2022. 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 estimated incremental borrowing rate for similar obligations. The estimates were primarily based on Level 3 inputs.
7. STOCK-BASED COMPENSATION
Stock compensation expense was $1,039 and $487, during the three months ended September 30, 2023 and September 30, 2022, respectively; and $8,132 and $1,981 during the nine months ended September 30, 2023 and September 30, 2022, respectively. During the nine months ended September 30, 2023, all conditions associated with the time-based and performance-based options granted under the SCA Acquisition Holdings, LLC Amended and Restated Equity Incentive Plan were met. As a result, 100% of the performance-based stock options and all remaining unvested time-based options vested. Therefore, during the nine months ended September 30, 2023, the Company recognized an acceleration of stock-based compensation expense for the time-based and performance-based stock options totaling $2,960.
As of September 30, 2023, there was $7,267 of total unrecognized compensation expense related to Restricted Stock Units ("RSUs"). This unrecognized compensation is expected to be fully recognized over a weighted average period of approximately 2.1 years.
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SUN COUNTRY AIRLINES HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share and share amounts)
(Unaudited)
8. INVESTMENTS
A summary of debt securities by major security type:
September 30, 2023
Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Available-for-Sale Securities: (1)
Municipal Debt Securities$17,071 $ $(50)$17,021 
Corporate Debt Securities55,514  (209)55,305 
U.S. Government Agency Securities74,591  (398)74,193 
Total $147,176 $ $(657)$146,519 
December 31, 2022
Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Available-for-Sale Securities: (1)
Municipal Debt Securities$47,897 $16 $(258)$47,655 
Corporate Debt Securities93,460 1 (683)92,778 
U.S. Government Agency Securities32,326 2 (126)32,202 
Total $173,683 $19 $(1,067)$172,635 
(1)
The Company also holds Certificates of Deposit that are included in Investments on the Condensed Consolidated Balance Sheets totaling $6,771 and $6,301 as of September 30, 2023 and December 31, 2022, respectively.
As of September 30, 2023, most of the Company's investments have been in a continuous unrealized loss position for less than 12 months. The unrealized losses were the result of increases in market interest rates and were not the result of a deterioration in the credit quality of the securities. As of September 30, 2023, the Company believes that any unrealized losses are recoverable prior to the investment's conversion to cash. As of September 30, 2023, the Company had the intent and ability to hold these investments until maturity. Therefore, the Company believes these losses to be temporary and no impairments have been recognized.
9.    FAIR VALUE MEASUREMENTS
The following table summarizes the assets measured at fair value on a recurring basis:
September 30, 2023
Level 1Level 2Level 3Total
Cash & Cash Equivalents$26,967 $