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Allegiant Travel Company Full Year and Fourth Quarter 2016 Financial Results

Full Year 2016 Fully Diluted Earnings per Share of $13.21
Fourth Quarter 2016 Fully Diluted Earnings per Share of $2.48

LAS VEGAS, Jan. 31, 2017 (GLOBE NEWSWIRE) -- Allegiant Travel Company (NASDAQ:ALGT) today reported the following financial results for the full year and fourth quarter 2016, as well as comparisons to prior year equivalents:

Three Months Ended
Year Ended
December 31,
December 31,
Unaudited 2016 2015 Change 2016
2015
Change
Total operating revenue (millions)$335.9 $310.9 8.0% $1,362.8 $1,262.2 8%
Operating income (millions)$68.1 $93.8 (27.4)% $370.6 $371.7 (0.3)%
Net income (millions)$41.3 $56.7 (27.2)% $219.6 $220.4 (0.4)%
Diluted earnings per share$2.48 $3.38 (26.6)% $13.21 $12.94 2.1%
Return on capital employed* 22.9% 25.6%

* - see appendix for calculation

“2016 has been a very transformational year for Allegiant,” stated Maurice J. Gallagher, Jr., chairman and CEO of Allegiant Travel Company. "During this year we finalized a single fleet type plan, signed our first pilot contract agreement, launched our credit card program, and announced the appointment of John Redmond as President of Allegiant. Each of these actions is critical in the evolution of our business model in the coming years. We have also had our share of challenges this past year but through the perseverance of our team members we were able to deliver our 56th consecutive profitable quarter and another successful year."

“I am also pleased to announce we have created an Executive Vice President (EVP) level in the company. Our Senior Vice Presidents - Jude Bricker, Scott Allard and Scott Sheldon will move to these positions. Concurrently we have promoted four Vice Presidents to Senior Vice Presidents - Greg Anderson, SVP and Principal Accounting Officer, Lukas Johnson, SVP Planning, Trent Porter, SVP Financial Planning and Rob Wilson, SVP Systems. These additional positions allow more pathways upward for our talented managers. One of the core strengths of our model is our management team. Over the years we have worked hard to develop our management talent internally and we are reaping the benefits of this strategy. These additional positions and promotions reflect this success.”

Notable highlights

  • $150 million additional unsecured debt - Added $150 million to the existing senior, unsecured notes due in 2019
  • Network growth - As of December 31, 2016 the company is operating 360 routes versus 296 at the same time last year

Percent change vs Q4 2015
ASMs*13%
Cities12%
Routes22%

* - ASMs are scheduled available seat miles

  • New routes - Announced two new routes that are expected to begin in the first quarter of 2017 and seventeen new routes that will begin in the second quarter of 2017
  • New cities - Began service to three new cities in the fourth quarter of 2016
    - Two new destinations: Newark, New Jersey, and San Juan, Puerto Rico
    - One new origination city: Trenton, New Jersey
  • Shareholder returns - $14.6 million was returned through a combination of the recurring dividend paid in December 2016 and share repurchases during the quarter
    - The Company will pay a first quarter 2017 dividend of $0.70 per share on March 15, 2017 to all shareholders of record as of March 3, 2017
    - The Company has $89 million of share repurchase authority remaining as of January 31, 2017

First quarter 2017 revenue trends

  • TRASM guidance - First quarter TRASM is expected to decrease between 3.5 and 1.5 percent versus the first quarter last year
    - Impact of Easter shifting from the first quarter to the second quarter is expected to negatively account for a half point of TRASM reduction in the first quarter
    - Elimination of the credit card surcharge is expected to positively account for a half point of TRASM improvement in the first quarter
    - Scheduled ASMs of flights that occur during both peak flying days and the peak flying season, the highest unit revenue flights, are expected to decline three percent versus first quarter of last year
    - New markets (markets operating less than one year) are expected to be almost twelve percent of ASMs for the first quarter which is approximately the same amount from last year

First quarter and full year 2017 cost trends

  • Full year 2017 CASM ex fuel - Consistent with prior guidance, full year 2017 CASM ex fuel is expected to increase between five and nine percent
  • First quarter 2017 CASM ex fuel - CASM ex fuel for the first quarter is expected to increase between ten and twelve percent versus the same period last year, driven by the implementation of the new pilot agreement, increased depreciation of MD-80s as previously guided, the elimination of the credit card surcharge, and amortization of Airbus major maintenance costs as the Company began capitalizing Airbus heavy maintenance in the second quarter of 2016
  • Maintenance and repairs expense - Consistent with prior guidance, maintenance and repair expense per in service aircraft per month is expected to be between $90 and $100 thousand for full year 2017
  • Total ownership expense per aircraft per month - Consistent with prior guidance, full year 2017 ownership expense per in service aircraft per month is expected to remain between $125 and $135 thousand

Balance sheet activity and full year 2017 trends

  • CAPEX guidance - Full year CAPEX (excluding Airbus heavy maintenance) is expected to increase to $521 million versus the previous guidance of $415 million
    - Increase is driven by timing of aircraft deliveries from both 2016 and 2018
  • Debt payments - During the fourth quarter, paid down $91 million of debt secured by aircraft and debt in the senior secured revolving credit facility
    - Currently have the ability to borrow up to $56 million under senior secured revolving credit facility
  • Debt proceeds - Raised over $200 million in debt during the fourth quarter
    - Added $150 million to existing senior, unsecured notes due in 2019
    - Raised approximately $50 million on five A320 aircraft. Currently have five unencumbered aircraft

Guidance, subject to revision
1Q17
Estimated TRASM year-over-year change (3.5) to (1.5)%
Fixed fee and other revenue guidance 1Q17
Fixed fee and other revenue (millions) $15 to $17
Capacity guidance
System1Q172Q17FY17
Departure year-over-year growth14 to 18%14 to 18%
ASM year-over-year growth10 to 14%11 to 15% 8 to 12%
Scheduled
Departure year-over-year growth14 to 18%14 to 18%
ASM year-over-year growth10 to 14%11 to 15%8 to 12%
Cost guidance1Q17 FY17
CASM ex fuel* – year-over-year change10 to 12% 5 to 9%
CAPEX guidance FY17
Capital expenditures (millions) $521
Capitalized Airbus heavy maintenance (millions) ** $30

* - CASM ex fuel – cost per available seat mile excluding fuel expense
** - Not included in capital expenditure total

Aircraft fleet plan by end of period
Aircraft - (seats per AC)YE161Q17
MD-80 (166 seats)4747
757 (215 seats)42
A319 (156 seats)1719
A320 (177 seats)1617
Total8485

Aircraft listed in table above include only in service aircraft, planned retirements and future aircraft under contract (subject to change)

Allegiant Travel Company will host a conference call with analysts at 4:30 p.m. ET Tuesday, January 31, 2017 to discuss its full year and fourth quarter 2016 financial results. A live broadcast of the conference call will be available via the Company’s Investor Relations website homepage at http://ir.allegiantair.com. The webcast will also be archived in the “Events & Presentations” section of the website.

Las Vegas-based Allegiant (NASDAQ:ALGT) is focused on linking travelers in underserved cities to world-class leisure destinations. The airline offers industry-low fares on an all-jet fleet while also offering other travel-related products such as hotel rooms, rental cars and attraction tickets. All can be purchased only through the company website, Allegiant.com. Beginning with one aircraft and one route in 1999, the company has grown to over 80 aircraft and more than 300 routes across the country with airfares less than half the cost of average domestic roundtrip ticket. For downloadable press kit, including photos, visit: http://gofly.us/YFuyb.

Under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, statements in this press release that are not historical facts are forward-looking statements. These forward-looking statements are only estimates or predictions based on our management's beliefs and assumptions and on information currently available to our management. Forward-looking statements include our statements regarding future unit revenue, future operating expense, ASM growth, departure growth, fixed-fee and other revenues, expected capital expenditures, number of contracted aircraft to be placed in service in the future, timing of aircraft retirements, as well as other information concerning future results of operations, business strategies, financing plans, industry environment and potential growth opportunities. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words "believe," "expect," “guidance,” "anticipate," "intend," "plan," "estimate", “project”, “hope” or similar expressions.

Forward-looking statements involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed in the forward-looking statements. Important risk factors that could cause our results to differ materially from those expressed in the forward-looking statements generally may be found in our periodic reports filed with the Securities and Exchange Commission at www.sec.gov. These risk factors include, without limitation, an accident involving, or problems with, our aircraft, our reliance on our automated systems, volatility of fuel costs, labor issues and costs, the ability to obtain regulatory approvals as needed, the effect of economic conditions on leisure travel, debt covenants, terrorist attacks, risks inherent to airlines, our competitive environment, our reliance on third parties who provide facilities or services to us, the possible loss of key personnel, economic and other conditions in markets in which we operate, governmental regulation, increases in maintenance costs and cyclical and seasonal fluctuations in our operating results.

Any forward-looking statements are based on information available to us today and we undertake no obligation to update publicly any forward-looking statements, whether as a result of future events, new information or otherwise.

Detailed financial information follows:

Allegiant Travel Company
Consolidated Statements of Income
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended December 31, Percent
2016
2015
change
OPERATING REVENUE:
Scheduled service revenue$185,325 $178,720 3.7
Ancillary revenue:
Air-related charges 122,598 108,262 13.2
Third party products 10,458 8,513 22.8
Total ancillary revenue 133,056 116,775 13.9
Fixed fee contract revenue 9,282 7,754 19.7
Other revenue 8,220 7,640 7.6
Total operating revenue 335,883 310,889 8.0
OPERATING EXPENSES:
Aircraft fuel 74,363 61,409 21.1
Salary and benefits 80,789 58,683 37.7
Station operations 27,739 27,525 0.8
Maintenance and repairs 29,054 22,087 31.5
Depreciation and amortization 29,254 24,499 19.4
Sales and marketing 3,753 4,442 (15.5)
Aircraft lease rentals 234 (100.0)
Other 22,816 18,248 25.0
Total operating expense 267,768 217,127 23.3
OPERATING INCOME 68,115 93,762 (27.4)
OTHER (INCOME) EXPENSE:
Interest income (908) (473) 92.0
Interest expense 7,269 5,979 21.6
Other, net (255) 12 NM
Total other (income) expense 6,106 5,518 10.7
INCOME BEFORE INCOME TAXES 62,009 88,244 (29.7)
PROVISION FOR INCOME TAXES 20,699 31,536 (34.4)
NET INCOME ATTRIBUTABLE TO ALLEGIANT TRAVEL COMPANY$41,310 $56,708 (27.2)
Earnings per share to common shareholders (1):
Basic$2.49 $3.38 (26.3)
Diluted$2.48 $3.38 (26.6)
Weighted average shares outstanding used in computing earnings per share to common shareholders (1):
Basic 16,382 16,728 (2.1)
Diluted 16,404 16,789 (2.3)

NM - Not meaningful
(1) The Company's unvested restricted stock awards are considered participating securities as they receive non-forfeitable rights to cash dividends at the same rate as common stock. The Basic and Diluted earnings per share for the periods presented reflect the two-class method mandated by accounting guidance for the calculation of earnings per share. The two-class method adjusts both the net income and the shares used in the calculation. Application of the two-class method did not have a significant impact on the Basic and Diluted earnings per share for the periods presented.

Allegiant Travel Company
Operating Statistics
(Unaudited)
Three Months Ended December 31, Percent
2016 2015 change*
OPERATING STATISTICS
Total system statistics:
Passengers2,717,769 2,360,735 15.1
Revenue passenger miles (RPMs) (thousands)2,451,391 2,210,736 10.9
Available seat miles (ASMs) (thousands)3,073,455 2,712,464 13.3
Load factor79.8% 81.5% (1.7)
Operating expense per ASM (CASM) (cents)8.71 8.00 8.9
Fuel expense per ASM (cents)2.42 2.26 7.1
Operating CASM, excluding fuel (cents)6.29 5.74 9.6
ASMs per gallon of fuel71.6 71.2 0.6
Departures21,070 17,677 19.2
Block hours48,191 41,432 16.3
Average stage length (miles)868 900 (3.6)
Average number of operating aircraft during period83.3 76.2 9.3
Average block hours per aircraft per day6.3 5.9 6.8
Full-time equivalent employees at end of period3,416 2,846 20.0
Fuel gallons consumed (thousands)42,933 38,071 12.8
Average fuel cost per gallon$1.73 $1.61 7.5
Scheduled service statistics:
Passengers2,682,148 2,320,853 15.6
Revenue passenger miles (RPMs) (thousands)2,416,503 2,173,930 11.2
Available seat miles (ASMs) (thousands)2,954,118 2,623,873 12.6
Load factor81.8% 82.9% (1.1)
Departures20,003 16,850 18.7
Block hours46,225 39,969 15.7
Total scheduled service revenue per ASM (TRASM)** (cents)10.78 11.26 (4.3)
Average fare - scheduled service$69.10 $77.01 (10.3)
Average fare - ancillary air-related charges$45.71 $46.65 (2.0)
Average fare - ancillary third party products$3.90 $3.67 6.3
Average fare - total$118.71 $127.33 (6.8)
Average stage length (miles)879 914 (3.8)
Fuel gallons consumed (thousands)41,237 36,817 12.0
Average fuel cost per gallon$1.70 $1.61 5.6
Percent of sales through website during period93.8% 94.4% (0.6)

* Except load factor and percent of sales through website, which is percentage point change.
** Various components of this measurement do not have a direct correlation to ASMs. These figures are provided on a per ASM basis to facilitate comparison with airlines reporting revenues on a per ASM basis.

Allegiant Travel Company
Consolidated Statements of Income
(in thousands, except per share amounts)
(Unaudited)
Year Ended December 31, Percent
2016
2015
change
OPERATING REVENUE:
Scheduled service revenue$753,414 $735,563 2.4
Ancillary revenue:
Air-related charges 499,542 434,317 15.0
Third party products 44,940 40,177 11.9
Total ancillary revenue 544,482 474,494 14.8
Fixed fee contract revenue 31,972 19,747 61.9
Other revenue 32,963 32,384 1.8
Total operating revenue 1,362,831 1,262,188 8.0
OPERATING EXPENSES:
Aircraft fuel 257,332 278,394 (7.6)
Salary and benefits 291,974 229,802 27.1
Station operations 124,052 102,294 21.3
Maintenance and repairs 111,070 92,575 20.0
Depreciation and amortization 105,216 98,097 7.3
Sales and marketing 20,527 21,349 (3.9)
Aircraft lease rentals 924 2,326 (60.3)
Other 81,178 65,649 23.7
Total operating expense 992,273 890,486 11.4
OPERATING INCOME 370,558 371,702 (0.3)
OTHER (INCOME) EXPENSE:
Interest income (3,010) (1,452) 107.3
Interest expense 28,836 26,510 8.8
Other, net (1,226) (75) NM
Total other (income) expense 24,600 24,983 (1.5)
INCOME BEFORE INCOME TAXES 345,958 346,719 (0.2)
PROVISION FOR INCOME TAXES 126,368 126,389
NET INCOME 219,590 220,330 (0.3)
Net loss attributable to noncontrolling interest (44) NM
NET INCOME ATTRIBUTABLE TO ALLEGIANT TRAVEL COMPANY$219,590 $220,374 (0.4)
Earnings per share to common shareholders (1):
Basic$13.23 $12.97 2.0
Diluted$13.21 $12.94 2.1
Weighted average shares outstanding used in computing earnings per share to common shareholders (1):
Basic 16,465 16,923 (2.7)
Diluted 16,489 16,962 (2.8)

NM - Not meaningful
(1) The Company's unvested restricted stock awards are considered participating securities as they receive non-forfeitable rights to cash dividends at the same rate as common stock. The Basic and Diluted earnings per share for the periods presented reflect the two-class method mandated by accounting guidance for the calculation of earnings per share. The two-class method adjusts both the net income and shares used in the calculation. Application of the two-class method did not have a significant impact on the Basic and Diluted earnings per share for the periods presented.

Allegiant Travel Company
Operating Statistics
(Unaudited)
Year Ended December 31, Percent
2016 2015 change*
OPERATING STATISTICS
Total system statistics:
Passengers11,128,191 9,500,611 17.1
Revenue passenger miles (RPMs) (thousands)10,282,827 8,944,952 15.0
Available seat miles (ASMs) (thousands)12,375,505 10,526,610 17.6
Load factor83.1% 85.0% (1.9)
Operating expense per ASM (CASM) (cents)***8.02 8.45 (5.1)
Fuel expense per ASM (cents)***2.08 2.64 (21.2)
Operating CASM, excluding fuel (cents)5.94 5.81 2.2
ASMs per gallon of fuel71.6 70.2 2.0
Departures82,341 68,653 19.9
Block hours190,706 160,431 18.9
Average stage length (miles)889 900 (1.2)
Average number of operating aircraft during period83.3 74.3 12.1
Average block hours per aircraft per day6.3 5.9 6.8
Full-time equivalent employees at end of period3,416 2,846 20.0
Fuel gallons consumed (thousands)172,796 149,951 15.2
Average fuel cost per gallon***$1.49 $1.86 (19.9)
Scheduled service statistics:
Passengers11,003,864 9,355,097 17.6
Revenue passenger miles (RPMs) (thousands)10,130,675 8,821,908 14.8
Available seat miles (ASMs) (thousands)11,921,733 10,236,075 16.5
Load factor85.0% 86.2% (1.2)
Departures78,747 65,683 19.9
Block hours183,290 155,403 17.9
Total scheduled service revenue per ASM (TRASM)** (cents)10.89 11.82 (7.9)
Average fare - scheduled service$68.47 $78.63 (12.9)
Average fare - ancillary air-related charges$45.40 $46.43 (2.2)
Average fare - ancillary third party products$4.08 $4.29 (4.9)
Average fare - total$117.95 $129.35 (8.8)
Average stage length (miles)895 915 (2.2)
Fuel gallons consumed (thousands)166,528 145,654 14.3
Average fuel cost per gallon***$1.48 $1.87 (20.9)
Percent of sales through website during period94.2% 95.1% (0.9)

* Except load factor and percent of sales through website, which is percentage point change.
** Various components of this measurement do not have a direct correlation to ASMs. These figures are provided on a per ASM basis to facilitate comparison with airlines reporting revenues on a per ASM basis.
*** Includes effect of fuel tax refund of $8.3 million in the second quarter of 2016.

Summary Balance Sheet
(millions)12/31/2016 12/31/2015 Change
(unaudited)
Unrestricted cash
Cash and cash equivalents$64.7 $87.1 (25.7)%
Short-term investments269.3 245.6 9.6
Long-term investments124.8 64.8 92.6
Total unrestricted cash458.8 397.5 15.4
Debt
Current maturities of long-term debt, net of related costs86.2 74.1 16.3
Long-term debt, net of current maturities and related costs722.0 567.6 27.2
Total debt808.2 641.7 25.9
Total Allegiant Travel Company shareholders’ equity$473.6 $350.0 35.3%


Summary Cash Flow
Year Ended December 31,
Unaudited (millions)2016 2015 Change
Cash provided by operating activities$346.9 $365.4 (5.1)%
Purchase of property and equipment, including capitalized interest*(325.2) (252.7) 28.7
Repurchase of common stock(66.4) (129.5) (48.7)
Cash dividends paid to shareholders(67.5) (62.4) 8.2
Proceeds from the issuance of long-term debt321.2 121.0 165.5
Principal payments on long-term debt(154.1) (67.9) 127.0%

* Includes aircraft pre-delivery deposits.

Appendix A
Additional Financial Information
(Unaudited)
Year Ended December 31,
Return on capital calculation (millions)2016
2015
Net income attributable to Allegiant Travel Company$219.6 $220.4
Income tax126.4 126.4
Interest expense28.8 26.5
Less interest income(3.0) (1.5)
371.8 371.8
Interest income3.0 1.5
Tax rate36.5% 36.5%
Numerator238.0 237.0
Total assets as of prior December 311,358.3 1,241.0
Less current liabilities as of prior December 31395.1 367.9
Plus short term debt as of prior December 3174.1 52.6
Denominator1,037.3 925.7
Return on capital employed22.9% 25.6%

Media Inquiries: mediarelations@allegiantair.com Investor Inquiries: ir@allegiantair.com

Source:Allegiant Travel Company