Allegiant Travel Company Fourth Quarter and Full Year 2015 Financial Results

January 27, 2016 4:01 PM

Fourth Quarter 2015 Fully Diluted Earnings per Share of $3.38 Full Year Fully Diluted Earnings per Share of $12.94

LAS VEGAS, Jan. 27, 2016 (GLOBE NEWSWIRE) -- Allegiant Travel Company (NASDAQ: ALGT) today reported the following financial results for the fourth quarter and full year 2015, as well as comparisons to prior year equivalents:

	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
Unaudited	2015		2014		Change		2015			2014			Change
Total operating revenue (millions)	$	310.9	$	279.0	11.4	%	$	1,262.2		$	1,137.0		11.0	%
Operating income (millions)	$	93.8	$	14.8	534.0	%	$	371.7		$	157.3		136.2	%
Net income (millions)	$	56.7	$	4.8	1,082.9	%	$	220.4		$	86.7		154.2	%
Diluted earnings per share	$	3.38	$	0.27	1,151.9	%	$	12.94		$	4.86		166.3	%
Return on capital employed (LTM)*								25.6	%		19.2	%

* - see appendix for calculation

“I am happy to report that we had another profitable year,” stated Maurice J. Gallagher, Jr., chairman and CEO of Allegiant Travel Company. “The drop in global energy prices was a big contributor to these results, and once again the team executed on our unique model, generating operating margins just short of 30% for the year. We also faced operational challenges during the year. To that end, I have asked Scott Sheldon and Jude Bricker to take over certain of these areas. Scott will oversee our Inflight and Operations control areas. Jude will now lead the Flight operations and Maintenance teams, as well as taking on the title of COO of Allegiant Air. Over the past ten years, these gentlemen have demonstrated excellent managerial skills and have been critical to our success. I am confident these skills will benefit the operational groups they will be supervising. It is a great time to be at Allegiant. Once again, I want to thank every team member for their dedication and effort this past year. Thank you for all that you do."

Notable fourth quarter 2015 company highlights

Network growth - Fourth quarter scheduled service ASMs grew by 25 percent; cities by nine percent, routes by 27 percent
- As of December 31, 2015 the company is selling 296 routes versus 233 routes during the same time period last year
Airbus aircraft - Added seven Airbus A320 series aircraft into service during the fourth quarter
Share repurchase - Returned approximately $7.6 million to shareholders through the repurchase of 37,400 shares during the fourth quarter
Dividend - Declared dividends of $32.8 million during the quarter
- Paid a recurring dividend of $0.30 per share in early December 2015
- Paid a special dividend of $1.65 per share in early January 2016
Aircraft financing - Raised $28 million in debt secured by two A319 aircraft in December
- Entered into a senior secured revolving credit facility in December with the ability to borrow up to $56 million

Fourth quarter 2015 network trends

Airbus growth - Had 24 Airbus series aircraft in service on December 31, 2015 compared to 11 as of end of 2014
Airbus network - Airbus aircraft flew over 39 percent of the fourth quarter ASMs versus 23 percent a year ago
Additional bases - Added one new base in Pittsburgh, PA
Medium sized cities - Serve 18 medium sized cities on December 31, 2015 versus eight a year ago
757 fleet - Retired one 757 in October 2015
- Expect to have retired the remainder of the fleet by the end of the 2017 winter holiday period

Fourth quarter 2015 revenue performance

Average fare-scheduled service - Decreased by 14 percent versus last year
- Off peak flying was 24 percent of ASMs for the fourth quarter versus 20 percent a year ago
- New markets (markets operating less than one year) were 16 percent of ASMs for the fourth quarter versus six percent a year ago
Average fare-total - Decreased by seven percent versus last year
- Three dollar increase in the convenience fee occurred late in the fourth quarter of 2014
Other impacts on TRASM - Accounting for credit card surcharge as a reduction of cost had a two point negative impact on fourth quarter TRASM

First quarter 2016 revenue trends

TRASM guidance - First quarter TRASM is expected to decrease between 13 and 11 percent versus the first quarter last year
- Off peak flying is expected to be 26 percent of ASMs for the first quarter
- New markets (markets operating less than one year) are expected to be 12 percent of ASMs for the first quarter
- Accounting for credit card surcharge is expected to have a 0.6 point negative impact on first quarter TRASM

Fourth quarter 2015 cost performance

CASM - Declined 34.3 percent
- ASMs per gallon improved by three percent versus last year to 71.2
CASM ex fuel - Declined 32.4 percent
- Excluding the $43 million 757 write-down in December 2014, CASM ex fuel declined 11.7 percent
Salary and benefits - Total labor expense increased 23.5 percent versus the same period last year
- Full time equivalent employees increased by 18.0 percent associated with a 10.3 percent increase in average number of aircraft in service
- Pilot pay band increase in May 2015 resulted in higher pilot pay rates
- Bonus accrual increased by over 100 percent due to increased profitability
Station operations - Stations expense per departure increased four percent versus the same period last year

First quarter and full year 2016 cost trends

First quarter 2016 CASM ex fuel - CASM ex fuel is expected to decrease between four and two percent versus the same period last year
Full year CASM ex fuel - CASM ex fuel is expected to be between zero and an increase of four percent
Maintenance and repairs expense - Expected to be between $115 and $125 thousand per aircraft per month for full year 2016
- Expect 12 more heavy maintenance events than last year
- Expect the number of events to be spread relatively equally throughout the year
Total ownership expense per aircraft per month - Full year 2016 total of depreciation expense and aircraft lease rental expense per aircraft per month is expected to be between $100 and $110 thousand

Balance sheet highlights

2016 Capital expenditures - Expect CAPEX to be $188 million
Shareholder returns - $190 million of cash was returned to shareholders in 2015
- $62 million was returned through dividends
  - The Company intends to pay a dividend of $0.30 per share on March 15, 2016 to all shareholders of record as of March 4, 2016
- $128 million returned through share repurchases
  - Share repurchase authority as of January 27, 2016 is $54 million
Financing transactions - In December 2015, the Company raised $28 million in debt secured by two A319 aircraft
- In December 2015, the Company entered into a senior secured revolving credit facility under which it will be able to borrow up to $56 million

Unaudited (millions)	12/31/2015		12/31/2014		Change
Unrestricted cash*	$	397.4	$	416.8	(4.7	)%
Total debt	$	641.7	$	588.8	9.0	%
Total Allegiant Travel Company stockholders’ equity	$	350.0	$	292.9	19.5	%

* - Unrestricted cash includes investments in marketable securities.

	Twelve Months Ended
	December 31,
Unaudited (millions)		2015		2014	Change
Capital expenditures	$	252.7	$	421.4	(40.0	)%

At this time, Allegiant Travel Company provides the following guidance to investors, subject to revision.

Guidance, subject to revision

	January 2016	1Q16
Estimated TRASM year-over-year change	(15) to (13)%	(13) to (11)%

Fixed fee and other revenue guidance		1Q16
Fixed fee and other revenue (millions)		$11 to $13

Capacity guidance
System	1Q16	2Q16	FY16
Departure year-over-year growth	14 to 18%	13 to 17%
ASM year-over-year growth	15 to 19%	12 to 16%	12 to 16%
Scheduled
Departure year-over-year growth	14 to 18%	13 to 17%
ASM year-over-year growth	15 to 19%	12 to 16%	12 to 16%

Cost guidance	1Q16		FY16
CASM ex fuel – year-over-year change	(4) to (2)%		0 to 4%

CAPEX guidance			FY16
Capital expenditures (millions)			$	188

CASM ex fuel – cost per available seat mile excluding fuel expense

Aircraft fleet plan by end of period

Aircraft - (seats per AC)	4Q15	1Q16	YE16
MD-80 (166 seats)	51	50	46
757 (215 seats)	5	5	5
A319 (156 seats)	10	11	17
A320 (177 seats)	14	16	16
Total	80	82	84

Aircraft listed in table above include only in service aircraft, planned retirements and future aircraft under contract

Allegiant Travel Company will host a conference call with analysts at 4:30 p.m. ET Wednesday, January 27, 2016 to discuss its fourth quarter and full year 2015 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.

Allegiant, Travel is our deal.®Las Vegas-based Allegiant Travel Company® (NASDAQ: ALGT) is focused on linking travelers in small cities to world-class leisure destinations. Through its subsidiary, Allegiant Air, the company operates a low-cost, high-efficiency, all-jet passenger airline, and offers other travel-related products such as hotel rooms, rental cars, and attraction tickets through its website, allegiant.com. The company has been named one of America’s 100 Best Small Companies by Forbes Magazine for four consecutive years. ALGT/G

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, 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, volatility of fuel costs, labor issues, 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, an accident involving or problems with our aircraft, our reliance on our automated systems, 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, aging aircraft and other 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
Three Months Ended December 31, 2015 and 2014
(in thousands, except per share amounts)
(Unaudited)

	Three Months Ended December 31,								Percent
	2015				2014				change
OPERATING REVENUE:
Scheduled service revenue	$		178,720		$		172,434		3.6
Ancillary revenue:
Air-related charges		108,262				83,257			30.0
Third party products		8,513				8,248			3.2
Total ancillary revenue		116,775				91,505			27.6
Fixed fee contract revenue		7,754				6,894			12.5
Other revenue		7,640				8,117			(5.9	)
Total operating revenue		310,889				278,950			11.4
OPERATING EXPENSES:
Aircraft fuel		61,409				79,909			(23.2	)
Salary and benefits		58,683				47,500			23.5
Station operations		27,525				21,214			29.7
Maintenance and repairs		22,087				22,191			(0.5	)
Sales and marketing		4,442				6,223			(28.6	)
Aircraft lease rentals		234				3,048			(92.3	)
Depreciation and amortization		24,499				23,054			6.3
Other		18,248				17,741			2.9
Special charge			—			43,280			NM*
Total operating expenses		217,127				264,160			(17.8	)
OPERATING INCOME		93,762				14,790			534.0
OTHER (INCOME) EXPENSE:
Interest income		(443		)		(229		)	93.4
Interest expense		5,979				7,388			(19.1	)
Other - net		(18		)		(45		)	(19.1	)
Total other (income) expense		5,518				7,114			(22.4	)
INCOME BEFORE INCOME TAXES		88,244				7,676			1,049.6
PROVISION FOR INCOME TAXES		31,536				2,928			977.0
NET INCOME		56,708				4,748			1,094.4
Net loss attributable to noncontrolling interest			—			(46		)	NM*
NET INCOME ATTRIBUTABLE TO ALLEGIANT TRAVEL COMPANY	$		56,708		$		4,794		1,082.9
Earnings per share to common stockholders (1):
Basic	$	3.38			$	0.29			1,065.5
Diluted	$	3.38			$	0.27			1,151.9
Weighted average shares outstanding used in computing earnings per share to common stockholders (1):
Basic		16,728				17,377			(3.7	)
Diluted		16,789				17,450			(3.8	)

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 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
Three Months Ended December 31, 2015 and 2014
(Unaudited)

	Three Months Ended December 31,						Percent
	2015			2014			change*
OPERATING STATISTICS
Total system statistics:
Passengers	2,360,735			1,966,058			20.1
Revenue passenger miles (RPMs) (thousands)	2,210,736			1,846,164			19.7
Available seat miles (ASMs) (thousands)	2,712,464			2,169,062			25.1
Load factor	81.5		%	85.1		%	(3.6	)
Operating expense per ASM (CASM) (cents)	8.00			12.18			(34.3	)
Fuel expense per ASM (cents)	2.26			3.68			(38.6	)
Operating CASM, excluding fuel (cents)	5.74			8.49			(32.4	)
ASMs per gallon of fuel	71.2			69.0			3.2
Departures	17,677			14,178			24.7
Block hours	41,432			33,272			24.5
Average stage length (miles)	900			898			0.2
Average number of operating aircraft during period	76.2			69.1			10.3
Average block hours per aircraft per day	5.9			5.2			13.5
Full-time equivalent employees at end of period	2,846			2,411			18.0
Fuel gallons consumed (thousands)	38,071			31,422			21.2
Average fuel cost per gallon	$	1.61		$	2.54		(36.6	)
Scheduled service statistics:
Passengers	2,320,853			1,921,585			20.8
Revenue passenger miles (RPMs) (thousands)	2,173,930			1,810,322			20.1
Available seat miles (ASMs) (thousands)	2,623,873			2,093,833			25.3
Load factor	82.9		%	86.5		%	(3.6	)
Departures	16,850			13,423			25.5
Block hours	39,969			31,983			25.0
Total scheduled service revenue per ASM (TRASM)** (cents)	11.26			12.61			(10.7	)
Average fare — scheduled service	$	77.01		$	89.74		(14.2	)
Average fare — ancillary air-related charges	$	46.65		$	43.33		7.7
Average fare — ancillary third party products	$	3.67		$	4.29		(14.5	)
Average fare — total	$	127.33		$	137.36		(7.3	)
Average stage length (miles)	914			916			(0.2	)
Fuel gallons consumed (thousands)	36,817			30,298			21.5
Average fuel cost per gallon	$	1.61		$	2.57		(37.4	)
Percent of sales through website during period	94.4		%	94.5		%	(0.1	)

* 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
Twelve Months Ended December 31, 2015 and 2014
(in thousands, except per share amounts)
(Unaudited)

	Twelve Months Ended December 31,								Percent
	2015				2014				change
OPERATING REVENUE:
Scheduled service revenue	$		735,563		$		732,020		0.5
Ancillary revenue:
Air-related charges		434,317				331,689			30.9
Third party products		40,177				36,587			9.8
Total ancillary revenue		474,494				368,276			28.8
Fixed fee contract revenue		19,747				17,403			13.5
Other revenue		32,384				19,347			67.4
Total operating revenue		1,262,188				1,137,046			11.0
OPERATING EXPENSES:
Aircraft fuel		278,394				388,216			(28.3	)
Salary and benefits		229,802				193,345			18.9
Station operations		102,294				84,667			20.8
Maintenance and repairs		92,575				86,781			6.7
Sales and marketing		21,349				28,492			(25.1	)
Aircraft lease rentals		2,326				15,945			(85.4	)
Depreciation and amortization		98,097				83,409			17.6
Other		65,649				55,566			18.1
Special charge			—			43,280			NM*
Total operating expenses		890,486				979,701			(9.1	)
OPERATING INCOME		371,702				157,345			136.2
OTHER (INCOME) EXPENSE:
Interest income		(1,391		)		(774		)	79.7
Interest expense		26,510				21,205			25.0
Other - net		(136		)		(217		)	25.0
Total other (income) expense		24,983				20,214			23.6
INCOME BEFORE INCOME TAXES		346,719				137,131			152.8
PROVISION FOR INCOME TAXES		126,389				50,828			148.7
NET INCOME		220,330				86,303			155.3
Net loss attributable to noncontrolling interest		(44		)		(386		)	(88.6	)
NET INCOME ATTRIBUTABLE TO ALLEGIANT TRAVEL COMPANY	$		220,374		$		86,689		154.2
Earnings per share to common stockholders (1):
Basic	$	12.97			$	4.87			166.3
Diluted	$	12.94			$	4.86			166.3
Weighted average shares outstanding used in computing earnings per share to common stockholders (1):
Basic		16,923				17,729			(4.5	)
Diluted		16,962				17,782			(4.6	)

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
Twelve Months Ended December 31, 2015 and 2014
(Unaudited)

	Twelve Months Ended December 31,						Percent
	2015			2014			change*
OPERATING STATISTICS
Total system statistics:
Passengers	9,500,611			8,154,357			16.5
Revenue passenger miles (RPMs) (thousands)	8,944,952			7,825,962			14.3
Available seat miles (ASMs) (thousands)	10,526,610			8,945,616			17.7
Load factor	85.0		%	87.5		%	(2.5	)
Operating expense per ASM (CASM) (cents)	8.45			10.95			(22.8	)
Fuel expense per ASM (cents)	2.64			4.34			(39.2	)
Operating CASM, excluding fuel (cents)	5.81			6.61			(12.1	)
ASMs per gallon of fuel	70.2			69.4			1.2
Departures	68,653			56,961			20.5
Block hours	160,431			135,572			18.3
Average stage length (miles)	900			918			(2.0	)
Average number of operating aircraft during period	74.3			68.8			8.0
Average block hours per aircraft per day	5.9			5.4			9.3
Full-time equivalent employees at end of period	2,846			2,411			18.0
Fuel gallons consumed (thousands)	149,951			128,933			16.3
Average fuel cost per gallon	$	1.86		$	3.01		(38.2	)
Scheduled service statistics:
Passengers	9,355,097			8,017,442			16.7
Revenue passenger miles (RPMs) (thousands)	8,821,908			7,711,696			14.4
Available seat miles (ASMs) (thousands)	10,236,075			8,693,631			17.7
Load factor	86.2		%	88.7		%	(2.5	)
Departures	65,683			54,440			20.7
Block hours	155,403			131,210			18.4
Total scheduled service revenue per ASM (TRASM)** (cents)	11.82			12.66			(6.6	)
Average fare — scheduled service	$	78.63		$	91.30		(13.9	)
Average fare — ancillary air-related charges	$	46.43		$	41.37		12.2
Average fare — ancillary third party products	$	4.29		$	4.56		(5.9	)
Average fare — total	$	129.35		$	137.23		(5.7	)
Average stage length (miles)	915			934			(2.0	)
Fuel gallons consumed (thousands)	145,654			125,173			16.4
Average fuel cost per gallon	$	1.87		$	3.05		(38.7	)
Percent of sales through website during period	95.1		%	93.8		%	1.3

Appendix A
Additional Financial Information
(Unaudited)

	Twelve Months Ended December 31,
Return on capital calculation (millions)	2015			2014
Net income attributable to Allegiant Travel Company (1)	$	220.4		$	113.3
Income tax	126.4			66.8
Interest expense	26.5			21.2
Less interest income	(1.4		)	(0.8		)
	371.9			200.5

Interest income	1.4			0.8
Tax rate	36.5		%	37.1		%
Numerator	237.0			126.6

Total assets as of prior December 31	1,235.1			930.2
Less current liabilities as of prior December 31	362.0			290.7
Plus short term debt as of prior December 31	52.6			20.2
Denominator	925.7			659.7
*Return on capital employed*	*25.6*		%	*19.2*		%

(1) Net income attributable to Allegiant Travel Company for the twelve months ended December 31, 2014 is adjusted. Refer to calculation below for reconciliation.

	Twelve Months Ended
Reconciliation of net income attributable to Allegiant Travel Company adjusted for special item (in thousands)	December 31, 2014
Net income as reported	$	86,303
Add: provision for income taxes	50,828
Income before income taxes, as reported	137,131

Special item:
Write down of Boeing 757 fleet after tax	43,280
Adjusted income before income taxes	180,411
Provision for income taxes	66,752
Adjusted net income	113,659
Net loss attributable to noncontrolling interest	(386		)
Adjusted net income attributable to Allegiant Travel Company	$	113,273

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Source: Allegiant Travel Company

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Allegiant Travel Company Fourth Quarter and Full Year 2015 Financial Results

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