Allegiant Travel CO - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - October 26, 2016

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Allegiant Q3 2016 Earnings
Page 1

Exhibit 99.1
 algtheaderq316.jpg
  
ALLEGIANT TRAVEL COMPANY THIRD QUARTER 2016
FINANCIAL RESULTS
Third Quarter 2016 Fully Diluted Earnings per Share of $2.75

LAS VEGAS. October 26, 2016 —Allegiant Travel Company (NASDAQ: ALGT) today reported the following financial results for the third quarter 2016, as well as comparisons to prior year equivalents:

 
Three Months Ended 
 September 30,
 
 
Nine Months Ended 
 September 30,
 
Unaudited
2016
2015
Change
 
2016
2015
Change
Total operating revenue (millions)

$333.5


$300.0

11.2
 %
 

$1,026.9


$951.3

8.0
%
Operating income (millions)

$76.8


$77.1

(0.3
)%
 

$302.4


$277.9

8.8
%
Net income (millions)

$45.5


$44.5

2.2
 %
 

$178.3


$163.7

8.9
%
Diluted earnings per share

$2.75


$2.62

5.0
 %
 

$10.73


$9.55

12.4
%
Return on capital employed (LTM)*
24.8
%
18.7
%
 
 
 
 
 
* - see appendix for calculation

“We had a very busy summer this year,” stated Maurice J. Gallagher, Jr., chairman and CEO of Allegiant Travel Company and I want to thank all of our team members for their tremendous effort and hard work through a challenging set of months. It is due to them that we can announce another profitable quarter, our 55th consecutive. In addition, John Redmond joined the company as President of Allegiant Travel Company. John has a terrific background in the hospitality space with years of executive experience at large organizations such as MGM Resorts International and Caesars Entertainment. We also are underway in our transition of the company to an all Airbus fleet with current expectations to operate over 90 aircraft by the end of the decade. Finally, we also launched the Allegiant World MasterCard Credit Card program in conjunction with Bank of America. While it is too early to determine any trends, we are excited about the opportunities from this program."

Notable highlights

•
Appointment of new President - Announced John Redmond, current board member and previously chief executive officer of MGM Grand Resorts, has assumed the role of President
•
Allegiant World Mastercard - Launched the Allegiant credit card issued by Bank of America
•
Pilot agreement - Implemented new pilot agreement on August 1


Allegiant Q3 2016 Earnings
Page 2

•
Network growth - As of September 30, 2016 the company is operating 337 routes versus 271 at the same time last year

 
Percent change vs Q3 2015

ASMs*
19
%
Cities
9
%
Routes
24
%

* - ASMs are scheduled available seat miles

•
New routes - Announced eighteen new routes that are expected to begin through the first quarter of 2017
•
New cities - Announced service to three new cities
◦
One new destination: San Juan, Puerto Rico beginning in the fourth quarter of 2016
◦
Two new origination cities: Trenton, New Jersey and Cleveland, Ohio beginning in the fourth quarter of 2016 and first quarter of 2017, respectively
•
Shareholder returns - $11.5 million was returned through the recurring dividend paid in September 2016 - year to date $28.2 million was returned to shareholders through recurring dividends
◦
The Company will pay a fourth quarter dividend of $0.70 per share on December 6, 2016 to all shareholders of record as of November 23, 2016
◦
The Company has $92 million of share repurchase authority remaining as of September 30, 2016
•
Dispatcher union vote - 34 Allegiant dispatchers voted to join the Teamsters union

Fourth quarter 2016 revenue trends

•
TRASM guidance - Fourth quarter TRASM is expected to decrease between 7.5 and 5.5 percent versus the fourth quarter last year
◦
Impact of Hurricane Matthew during Columbus Day weekend is expected to negatively account for a half point of TRASM reduction in the fourth quarter
◦
Impact of the later Christmas travel season in the year versus last year is expected to negatively account for one point of TRASM reduction in the fourth 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 grow 13 percent versus last year.
◦
New markets (markets operating less than one year) are expected to be almost 11 percent of ASMs for the fourth quarter versus approximately 15 percent last year

Fourth quarter and full year 2016 cost trends

•
Full year 2016 CASM ex fuel - Consistent with prior guidance, full year 2016 CASM ex fuel is expected to increase between one and three percent
•
Fourth quarter 2016 CASM ex fuel - CASM ex fuel for the fourth quarter is expected to increase between ten and twelve percent versus the same period last year, primarily driven by the implementation of the new pilot agreement and increased depreciation of MD-80s as the company has solidified its plan for MD-80 retirements through the end of the summer of 2019
◦
The MD80 retirement schedule will add incremental depreciation expense of three million dollars in the fourth quarter and seven million dollars for the full year 2017
•
Maintenance and repairs expense - Consistent with prior guidance, maintenance and repair expense per in service aircraft per month is expected to be between $105 and $110 thousand for full year 2016
•
Total ownership expense per aircraft per month - Consistent with prior guidance, full year 2016 ownership expense per in service aircraft per month is expected to remain between $105 and $110 thousand


Allegiant Q3 2016 Earnings
Page 3

Guidance, subject to revision
 
 
 
 
 
 
October 2016
4Q16
 
Estimated TRASM year-over-year change
(7) to (5)%
(7.5) to (5.5)%
 
 
 
 
 
Fixed fee and other revenue guidance
 
4Q16
 
Fixed fee and other revenue (millions)
 
$16 to $18
 
 
 
 
 
Capacity guidance
 
 
 
System
4Q16
1Q17
FY16
   Departure year-over-year growth
15 to 19%
14 to 18%
 
   ASM year-over-year growth
10 to 14%
10 to 14%
15 to 17%
Scheduled
 
 
 
   Departure year-over-year growth
15 to 19%
14 to 18%
 
   ASM year-over-year growth
10 to 14%
10 to 14%
15 to 17%
 
 
 
 
Cost guidance
4Q16
 
FY16
CASM ex fuel* – year-over-year change
10 to 12%
 
1 to 3%
 
 
 
 
CAPEX guidance
 
 
FY16
Capital expenditures (millions)
 
 
$386
* - CASM ex fuel – cost per available seat mile excluding fuel expense

Aircraft fleet plan by end of period
 
 
 
 
 
 
 
 
 
Aircraft - (seats per AC)
 
 
3Q16

YE16

MD-80 (166 seats)
 
 
48

48

757 (215 seats)
 
 
4

4

A319 (156 seats)
 
 
15

17

A320 (177 seats)
 
 
16

16

Total
 

83

85

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 Wednesday, October 26, 2016 to discuss its third 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.allegiant.com. The webcast will also be archived in the “Events & Presentations” section of the website.



Allegiant Q3 2016 Earnings
Page 4

Las Vegas-based Allegiant (NASDAQ: ALGT) is focused on linking travelers in small 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.

 
Media Inquiries: mediarelations@allegiantair.com
 
Investor Inquiries: ir@allegiantair.com
 
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, demand for air services to our leisure destinations from the markets served by us, our dependence on our leisure destination markets, 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 September 30,
 
Percent
 
2016
 
2015
 
change
OPERATING REVENUE:
 
 
 
 
 
Scheduled service revenue
$
177,361

 
$
170,002

 
4.3

Ancillary revenue:
 
 
 
 
 
Air-related charges
127,301

 
107,554

 
18.4

Third party products
11,259

 
9,890

 
13.8

Total ancillary revenue
138,560

 
117,444

 
18.0

Fixed fee contract revenue
9,183

 
4,640

 
97.9

Other revenue
8,377

 
7,870

 
6.4

Total operating revenue
333,481

 
299,956

 
11.2

OPERATING EXPENSES:
 
 
 
 
 
Aircraft fuel
69,305

 
68,272

 
1.5

Salary and benefits
73,424

 
58,968

 
24.5

Station operations
32,252

 
26,454

 
21.9

Maintenance and repairs
26,263

 
25,369

 
3.5

Depreciation and amortization
25,881

 
24,346

 
6.3

Sales and marketing
5,650

 
4,053

 
39.4

Aircraft lease rentals
472

 
695

 
(32.1
)
Other
23,394

 
14,717

 
59.0

Total operating expense
256,641

 
222,874

 
15.2

OPERATING INCOME
76,840

 
77,082

 
(0.3
)
OTHER (INCOME) EXPENSE:
 
 
 
 
 
Interest income
(1,028
)
 
(301
)
 
241.5

Interest expense
6,938

 
6,687

 
3.8

Other, net
(61
)
 
(67
)
 
(9.0
)
Total other (income) expense
5,849

 
6,319

 
(7.4
)
INCOME BEFORE INCOME TAXES
70,991

 
70,763

 
0.3

PROVISION FOR INCOME TAXES
25,538

 
26,305

 
(2.9
)
NET INCOME ATTRIBUTABLE TO ALLEGIANT TRAVEL COMPANY
$
45,453

 
$
44,458

 
2.2

Earnings per share to common shareholders (1):
 
 
 

 
 
Basic

$2.76

 

$2.63

 
4.9

Diluted

$2.75

 

$2.62

 
5.0

Weighted average shares outstanding used in computing earnings per share to common shareholders (1):
 

 
 

 
 
Basic
16,389

 
16,831

 
(2.6
)
Diluted
16,406

 
16,869

 
(2.7
)

(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 September 30,
 
Percent
 
2016
 
2015
 
change*
OPERATING STATISTICS
 
 
 
 
 
Total system statistics:
 
 
 
 
 
Passengers
2,939,055

 
2,420,819

 
21.4

Revenue passenger miles (RPMs) (thousands)
2,645,533

 
2,235,683

 
18.3

Available seat miles (ASMs) (thousands)
3,121,762

 
2,597,658

 
20.2

Load factor
84.7
%
 
86.1
%
 
(1.4
)
Operating expense per ASM (CASM) (cents)
8.22

 
8.58

 
(4.2
)
Fuel expense per ASM (cents)
2.22

 
2.63

 
(15.6
)
Operating CASM, excluding fuel (cents)
6.00

 
5.95

 
0.8

ASMs per gallon of fuel
70.6

 
69.2

 
2.0

Departures
21,384

 
17,330

 
23.4

Block hours
47,739

 
39,347

 
21.3

Average stage length (miles)
864

 
878

 
(1.6
)
Average number of operating aircraft during period
84.0

 
74.7

 
12.4

Average block hours per aircraft per day
6.2

 
5.7

 
8.8

Full-time equivalent employees at end of period
3,287

 
2,654

 
23.9

Fuel gallons consumed (thousands)
44,187

 
37,518

 
17.8

Average fuel cost per gallon
$
1.57

 
$
1.82

 
(13.7
)
Scheduled service statistics:
 
 
 
 
 
Passengers
2,904,295

 
2,383,556

 
21.8

Revenue passenger miles (RPMs) (thousands)
2,603,849

 
2,204,760

 
18.1

Available seat miles (ASMs) (thousands)
2,997,529

 
2,526,292

 
18.7

Load factor
86.9
%
 
87.3
%
 
(0.4
)
Departures
20,398

 
16,563

 
23.2

Block hours
45,740

 
38,094

 
20.1

Total scheduled service revenue per ASM (TRASM) (cents)**
10.54

 
11.38

 
(7.4
)
Average fare - scheduled service
$
61.07

 
$
71.32

 
(14.4
)
Average fare - ancillary air-related charges
$
43.83

 
$
45.12

 
(2.9
)
Average fare - ancillary third party products
$
3.88

 
$
4.15

 
(6.5
)
Average fare - total
$
108.78

 
$
120.59

 
(9.8
)
Average stage length (miles)
869

 
894

 
(2.8
)
Fuel gallons consumed (thousands)
42,439

 
36,458

 
16.4

Average fuel cost per gallon
$
1.59

 
$
1.83

 
(13.1
)
Percent of sales through website during period
94.6
%
 
95.2
%
 
(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)
 
 
Nine Months Ended September 30,
 
Percent
 
2016
 
2015
 
change
OPERATING REVENUE:
 
 
 
 
 
Scheduled service revenue
$
568,089

 
$
556,842

 
2.0

Ancillary revenue:
 
 
 
 
 
Air-related charges
376,944

 
326,055

 
15.6

Third party products
34,482

 
31,663

 
8.9

Total ancillary revenue
411,426

 
357,718

 
15.0

Fixed fee contract revenue
22,690

 
11,993

 
89.2

Other revenue
24,743

 
24,745

 
—

Total operating revenue
1,026,948

 
951,298

 
8.0

OPERATING EXPENSES:
 
 
 
 
 
Aircraft fuel
182,969

 
216,985

 
(15.7
)
Salary and benefits
211,185

 
171,119

 
23.4

Station operations
96,313

 
74,768

 
28.8

Maintenance and repairs
82,016

 
70,488

 
16.4

Depreciation and amortization
75,962

 
73,597

 
3.2

Sales and marketing
16,774

 
16,907

 
(0.8
)
Aircraft lease rentals
924

 
2,092

 
(55.8
)
Other
58,363

 
47,402

 
23.1

Total operating expense
724,506

 
673,358

 
7.6

OPERATING INCOME
302,442

 
277,940

 
8.8

OTHER (INCOME) EXPENSE:
 
 
 
 
 
Interest income
(2,932
)
 
(948
)
 
209.3

Interest expense
21,567

 
20,531

 
5.0

Other, net
(142
)
 
(117
)
 
21.4

Total other (income) expense
18,493

 
19,466

 
(5.0
)
INCOME BEFORE INCOME TAXES
283,949

 
258,474

 
9.9

PROVISION FOR INCOME TAXES
105,669

 
94,853

 
11.4

NET INCOME
178,280

 
163,621

 
9.0

Net loss attributable to noncontrolling interest
—

 
(44
)
 
(100.0
)
NET INCOME ATTRIBUTABLE TO ALLEGIANT TRAVEL COMPANY
$
178,280

 
$
163,665

 
8.9

Earnings per share to common shareholders (1):
 
 
 
 
 
Basic

$10.74

 

$9.57

 
12.2

Diluted

$10.73

 

$9.55

 
12.4

Weighted average shares outstanding used in computing earnings per share to common shareholders (1):
 
 
 
 
 
Basic
16,493

 
17,010

 
(3.0
)
Diluted
16,514

 
17,050

 
(3.1
)

(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) 
 
Nine Months Ended September 30,
 
Percent
 
2016
 
2015
 
change*
OPERATING STATISTICS
 
 
 
 
 
Total system statistics:
 
 
 
 
 
Passengers
8,410,422

 
7,139,876

 
17.8

Revenue passenger miles (RPMs) (thousands)
7,831,436

 
6,734,217

 
16.3

Available seat miles (ASMs) (thousands)
9,302,051

 
7,814,146

 
19.0

Load factor
84.2
%
 
86.2
%
 
(2.0
)
Operating expense per ASM (CASM) (cents)***
7.79

 
8.62

 
(9.6
)
Fuel expense per ASM (cents)***
1.97

 
2.78

 
(29.1
)
Operating CASM, excluding fuel (cents)
5.82

 
5.84

 
(0.3
)
ASMs per gallon of fuel
71.6

 
69.8

 
2.6

Departures
61,271

 
50,976

 
20.2

Block hours
142,515

 
118,999

 
19.8

Average stage length (miles)
896

 
900

 
(0.4
)
Average number of operating aircraft during period
83.4

 
73.6

 
13.3

Average block hours per aircraft per day
6.2

 
5.9

 
5.1

Full-time equivalent employees at end of period
3,287

 
2,654

 
23.9

Fuel gallons consumed (thousands)
129,862

 
111,881

 
16.1

Average fuel cost per gallon***
$
1.41

 
$
1.94

 
(27.3
)
Scheduled service statistics:
 

 
 

 
 
Passengers
8,321,716

 
7,034,244

 
18.3

Revenue passenger miles (RPMs) (thousands)
7,714,172

 
6,647,978

 
16.0

Available seat miles (ASMs) (thousands)
8,967,614

 
7,612,202

 
17.8

Load factor
86.0
%
 
87.3
%
 
(1.3
)
Departures
58,744

 
48,833

 
20.3

Block hours
137,066

 
115,434

 
18.7

Total scheduled service revenue per ASM (TRASM)(cents)**
10.92

 
12.01

 
(9.1
)
Average fare - scheduled service
$
68.27

 
$
79.16

 
(13.8
)
Average fare - ancillary air-related charges
$
45.30

 
$
46.35

 
(2.3
)
Average fare - ancillary third party products
$
4.14

 
$
4.50

 
(8.0
)
Average fare - total
$
117.71

 
$
130.01

 
(9.5
)
Average stage length (miles)
901

 
915

 
(1.5
)
Fuel gallons consumed (thousands)
125,291

 
108,837

 
15.1

Average fuel cost per gallon***
$
1.41

 
$
1.96

 
(28.1
)
Percent of sales through website during period
94.3
%
 
95.1
%
 
(0.8
)
 
* 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)
9/30/2016
 
12/31/2015
 
Change
 
(unaudited)
 
 
 
 
Unrestricted cash
 
 
 
 
 
Cash and cash equivalents
$
48.7

 
$
87.1

 
(44.1
)%
Short-term investments
269.3

 
245.6

 
9.6

Long-term investments
65.2

 
64.8

 
0.6

Total unrestricted cash
383.2

 
397.5

 
(3.6
)
Debt
 
 
 
 
 
Current maturities of long-term debt, net of related costs
137.4

 
74.1

 
85.4

Long-term debt, net of current maturities and related costs
561.5

 
567.6

 
(1.1
)
Total debt
698.9

 
641.7

 
8.9

Total Allegiant Travel Company shareholders’ equity
$
442.3

 
$
350.0

 
26.4
 %

Summary Cash Flow
 
Nine Months Ended September 30,
 
 
Unaudited (millions)
2016
 
2015
 
Change
Cash provided by operating activities
$
308.1

 
$
267.6

 
15.1
 %
Purchase of property and equipment, including capitalized interest*
(264.1
)
 
(173.9
)
 
51.9

Repurchase of common stock
(63.4
)
 
(121.1
)
 
(47.6
)
Cash dividends paid to shareholders
(55.9
)
 
(57.4
)
 
(2.6
)
Proceeds from the issuance of long-term debt
120.4

 
93.0

 
29.5

Principal payments on long-term debt
$
(63.5
)
 
$
(46.4
)
 
36.9
 %
* Includes aircraft pre-delivery deposits.


Appendix A
Additional Financial Information
(Unaudited)

 
Twelve Months Ended September 30,
Return on capital calculation (millions)
2016
 
2015
Net income attributable to Allegiant Travel Company
$
235.0

 
$
168.5

Income tax
137.2

 
97.8

Interest expense
27.5

 
27.9

Less interest income
(3.4
)
 
(1.2
)
 
396.3

 
293.0

 
 
 
 
Interest income
3.4

 
1.2

Tax rate
36.9
%
 
36.7
%
Numerator
252.2

 
186.2

 
 
 
 
Total assets as of prior September 30
1,303.9

 
1,269.9

Less current liabilities as of prior September 30
358.1

 
326.0

Plus short term debt as of prior September 30
69.6

 
51.9

Denominator
1,015.4

 
995.8

Return on capital employed
24.8
%

18.7
%


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