Pinnacle Airlines Reports Third Quarter Financial Results
Posted on: Monday, 31 October 2005, 21:00 CST
Pinnacle Airlines Corp. (NASDAQ: PNCL) today reported a third quarter 2005 operating loss of $32.4 million and a net loss of $21.4 million, or $0.98 per fully diluted share. The third quarter loss is primarily due to an after tax charge of approximately $34.5 million for items related to the recent bankruptcy filings of Northwest Airlines ("Northwest") and Mesaba Airlines ("Mesaba"). For the three months ended September 30, 2004, Pinnacle reported operating income of $18.5 million and net income of $12.6 million, or $0.58 per fully diluted share. Pinnacle's third quarter 2004 results included a benefit of $0.08 per fully diluted share from reductions in previous estimates of income tax expense.
Excluding the charge associated with the Northwest and Mesaba bankruptcy filings, Pinnacle's pro forma operating income for the three months ended September 30, 2005 was $21.6 million, an increase of $3.0 million, or 16%, over the same period in 2004. Excluding the charge, Pinnacle reported pro forma net income of $13.1 million, or fully diluted earnings per share ("EPS") of $0.60. Pro forma operating margin was 9.8% for the three months ended September 30, 2005, as compared to 11.0% for the same period in 2004.
In the third quarter of 2005, Pinnacle recorded operating revenue of $220.9 million, an increase of $52.9 million, or 31%, over 2004. For the quarter, Pinnacle completed 115,358 block hours and 66,094 cycles, increases of 32% and 20%, respectively, over the same period in 2004.
Pinnacle's operating performance was significantly impacted by various events during the quarter, including major weather events and crew shortages. The Company also incurred higher administrative costs, partially related to ongoing strategic initiatives, that were also a key factor in reducing Pinnacle's third quarter pro forma operating margin to 9.8% from 11.0% in 2004.
The bankruptcy filings of Northwest and Mesaba had a significant impact on Pinnacle's third quarter results. Northwest has honored its obligations arising since the date of its bankruptcy filing on September 14, 2005, and Pinnacle expects Northwest to continue to do so until Northwest considers the status of its airline services agreement with Pinnacle.
"We faced a strike by Northwest's mechanics, Hurricanes Katrina and Rita, and Northwest's bankruptcy filing, yet our People stayed focused on running a safe and reliable operation," said Phil Trenary, President and Chief Executive Officer. "This dedication, combined with our low cost structure, will ensure our place in Northwest's restructured network."
Following its bankruptcy filing, Northwest requested that Pinnacle remove 15 CRJ aircraft from regularly scheduled service and place them into long-term storage. On October 31, 2005, Pinnacle removed 15 CRJ aircraft from service and is now operating 124 CRJ aircraft in regularly scheduled service. Pinnacle is taking steps to reduce its costs to compensate for the 15 aircraft schedule reduction.
During the quarter, Pinnacle incurred borrowings of $17.0 million under its revolving credit facility with First Tennessee Bank. Pinnacle ended the quarter with $62.6 million in cash and short-term investments.
"We regret that our airline partner, Northwest Airlines, and its other regional carrier, Mesaba Aviation, were forced to file for bankruptcy protection," said Peter Hunt, Pinnacle's Vice President and Chief Financial Officer. "We have taken steps to prepare for this challenging period by maximizing our liquidity."
Additional information regarding Pinnacle's results for the third quarter and other current developments, including those relating to Northwest, are included in its Form 10-Q that was filed today with the Securities and Exchange Commission.
Non-GAAP Disclosures
This release and certain tables accompanying this release, include certain financial information not prepared in accordance with generally accepted accounting principles ("GAAP"), regarding net income and EPS for the three months ended September 30, 2005 regarding the previously discussed charge associated with the bankruptcy filings of Northwest and Mesaba. Similar tables have also been prepared for the nine months ended September 30, 2005 that exclude the nonrecurring gain on extinguishment of the note payable with Northwest and the charge associated with the bankruptcy filings of Northwest and Mesaba. Pinnacle believes that this information is useful to investors as it indicates more clearly Pinnacle's comparative year-to-year results. None of this information should be considered a substitute for any measures prepared in accordance with GAAP. Pinnacle has included its reconciliations of these non-GAAP financial measures to the most comparable GAAP financial measures in the accompanying schedules.
About Pinnacle
Pinnacle Airlines Corp. operates through its wholly owned subsidiary, Pinnacle Airlines, Inc., as a regional airline that provides airline capacity to Northwest Airlines, Inc. Pinnacle operates as a Northwest Airlink carrier at Northwest's domestic hub airports in Detroit, Minneapolis/St. Paul and Memphis and the focus cities of Indianapolis and Milwaukee. Pinnacle currently operates an all-jet fleet of 124 Canadair Regional Jets and offers scheduled passenger service with 766 daily departures to 115 cities in 38 states and five Canadian provinces. Pinnacle Airlines maintains its headquarters in Memphis, Tennessee, and employs approximately 3,600 People.
Forward-Looking Statements
This press release contains various forward-looking statements that are based on management's beliefs, as well as assumptions made by and information currently available to management. Although Pinnacle believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Such statements are subject to certain risks, uncertainties and assumptions, including those set forth in our filings with the Securities and Exchange Commission, which are available to investors at our web-site or online from the Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove erroneous, actual results may vary materially from results that were anticipated or projected. Pinnacle does not intend to update these forward-looking statements before its next required filing with the Securities and Exchange Commission.
For further information, please contact Philip Reed at (901) 348-4257, or visit our Web site at www.nwairlink.com.
Pinnacle Airlines Corp. Condensed Consolidated Statements of Income (Unaudited) (in thousands, except per share data) Three Months Ended September 30, 2005 2004 ------------ ------------ Operating revenues Regional airline services $ 218,832 $ 167,063 Other 2,111 1,023 --------- --------- Total operating revenues 220,943 168,086 Operating expenses Salaries, wages and benefits 35,155 27,425 Aircraft fuel 30,555 22,816 Aircraft maintenance, materials and repairs 7,473 5,412 Aircraft rentals 73,737 55,290 Other rentals and landing fees 11,464 10,047 Ground handling services 23,616 17,777 Depreciation 1,041 812 Other 16,344 9,982 Provision for losses associated with bankruptcy filings of Northwest and Mesaba 53,914 - --------- --------- Total operating expenses 253,299 149,561 --------- --------- Operating income (loss) (32,356) 18,525 Operating income (loss) as a percentage of operating revenues (14.6%) 11.0% Nonoperating income (expense) Interest expense (1,109) (1,212) Interest income 402 83 Miscellaneous (expense) income, net (2) (7) --------- --------- Total nonoperating expense (709) (1,136) --------- --------- Income (loss) before income taxes (33,065) 17,389 Income tax (benefit) expense (11,673) 4,740 --------- --------- Net income (loss) $ (21,392) $ 12,649 ========= ========= Basic and diluted earnings (loss) per share $ (0.98) $ 0.58 ========= ========= Shares used in computing basic and diluted earnings (loss) per share 21,908 21,892 ========= ========= Pinnacle Airlines Corp. Condensed Consolidated Statements of Income (Unaudited) (in thousands, except per share data) Nine Months Ended September 30, 2005 2004 ---------- ---------- Operating revenues Regional airline services $ 622,541 $ 452,104 Other 6,033 2,034 ---------- ---------- Total operating revenues 628,574 454,138 Operating expenses Salaries, wages and benefits 99,664 75,524 Aircraft fuel 84,660 58,883 Aircraft maintenance, materials and repairs 23,546 16,927 Aircraft rentals 206,632 148,972 Other rentals and landing fees 32,668 26,982 Ground handling services 69,405 46,130 Depreciation 3,019 2,302 Other 44,570 28,639 Provision for losses associated with bankruptcy filings of Northwest and Mesaba 53,914 - ---------- ---------- Total operating expenses 618,078 404,359 ---------- ---------- Operating income 10,496 49,779 Operating income as a percentage of operating revenues 1.7% 11.0% Nonoperating income (expense) Interest expense (3,266) (3,752) Interest income 819 194 Miscellaneous (expense) income, net (2) 309 Gain on extinguishment of debt 18,000 - ---------- ---------- Total nonoperating income (expense) 15,551 (3,249) ---------- ---------- Income before income taxes 26,047 46,530 Income tax expense 10,311 16,129 ---------- ---------- Net income $ 15,736 $ 30,401 ========== ========== Basic and diluted earnings per share $ 0.72 $ 1.39 ========== ========== Shares used in computing basic earnings per share 21,908 21,892 ========== ========== Shares used in computing diluted earnings per share 21,923 21,897 ========== ========== Pinnacle Airlines Corp. Condensed Consolidated Balance Sheets (in thousands, except share data) September 30, December 31, 2005 2004 ---------- ---------- (Unaudited) Assets Current assets Cash and cash equivalents $ 58,550 $ 34,912 Short-term investments 4,000 - Receivables, net of allowance of $49,030 and $34, respectively 26,969 25,139 Spare parts and supplies, net 6,403 5,341 Prepaid expenses and other assets 5,452 5,644 Deferred income taxes, net of allowance 19,732 860 ---------- ---------- Total current assets 121,106 71,896 Property and equipment Aircraft and rotable spares 39,334 35,837 Other property and equipment 19,271 16,161 Office furniture and fixtures 1,941 1,863 ---------- ---------- 60,546 53,861 Less accumulated depreciation (17,393) (14,445) ---------- ---------- Net property and equipment 43,153 39,416 Other assets, primarily aircraft deposits 24,845 21,111 Debt issuance costs, net 4,252 - Contractual rights under airline services agreement, net 14,736 15,115 Goodwill, net 18,422 18,422 ---------- ---------- Total assets $ 226,514 $ 165,960 ========== ========== Pinnacle Airlines Corp. Condensed Consolidated Balance Sheets (in thousands, except share data) September 30, December 31, 2005 2004 ---------- ---------- (Unaudited) Liabilities and stockholders' equity (deficiency) Current liabilities Accounts payable $ 23,847 $ 16,983 Accrued expenses 20,532 15,083 Line of credit with First Tennessee 17,000 - Income taxes payable 21,430 1,633 Other current liabilities, including $2,793 of accrued sublease losses 4,572 6,756 ---------- ---------- Total current liabilities 87,381 40,455 Deferred income taxes 6,968 7,105 Other liabilities, including $2,092 of accrued sublease losses 2,542 948 Senior convertible notes 121,000 - Note payable and line of credit with Northwest - 125,000 Commitments and contingencies Stockholders' equity (deficiency) Preferred stock, par value $0.01 per share; 1,000,000 shares authorized, no shares issued - - Series A preferred stock, stated value $100 per share; one share authorized and issued - - Series common stock, par value $0.01 per share; 5,000,000 shares authorized; no shares issued - - Common stock, $0.01 par value; 40,000,000 shares authorized, 21,945,260 and 21,950,260 shares issued, respectively 219 220 Additional paid-in capital 85,549 85,603 Accumulated deficit (77,113) (92,849) Unearned compensation on restricted stock (32) (522) ---------- ---------- Total stockholders' equity (deficiency) 8,623 (7,548) ---------- ---------- Total liabilities and stockholders' equity (deficiency) $ 226,514 $ 165,960 ========== ========== Pinnacle Airlines Corp. Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands) Nine Months Ended September 30, 2005 2004 ---------- ---------- Cash provided by operating activities $ 13,214 $ 25,549 Cash used in investing activities (16,183) (4,978) Cash provided by (used in) financing activities 26,607 (14,000) ---------- ---------- Net increase in cash and cash equivalents 23,638 6,571 Cash and equivalents at beginning of period 34,912 31,523 ---------- ---------- Cash and equivalents at end of period $ 58,550 $ 38,094 ========== ========== Pinnacle Airlines Corp. Operating Statistics (Unaudited) Three Months Ended September 30, 2005 2004 Change -------- -------- -------- Other Data: Revenue passengers (in thousands) 2,192 1,777 23% Revenue passenger miles (in thousands) (1) 1,160,095 827,798 40% Available seat miles (in thousands) 1,555,520 1,159,265 34% Passenger load factor (2) 74.6% 71.4% 3.2 pts Operating revenue per available seat mile (in cents) 14.20 14.50 (2%) Operating costs per available seat mile (in cents) 16.29 12.90 26% Operating costs per available seat mile without losses associated with bankruptcy filings (in cents) 12.82 12.90 (1%) Operating revenue per block hour $ 1,915 $ 1,920 (0%) Operating costs per block hour $ 2,195 $ 1,708 29% Operating costs per block hour without losses associated with bankruptcy filings $ 1,728 $ 1,708 1% Block hours 115,358 87,540 32% Cycles 66,094 54,946 20% (0.12 Average daily utilization (block hours) 9.04 9.16 hrs) Average stage length (miles) 510 466 9% Number of operating aircraft (end of period) 139 109 28% Employees (end of period) 3,605 2,826 28% -------- -------- -------- Nine Months Ended September 30, 2005 2004 Change -------- -------- -------- Other Data: Revenue passengers (in thousands) 5,971 4,625 29% Revenue passenger miles (in thousands) (1) 3,064,647 2,066,875 48% Available seat miles (in thousands) 4,326,501 2,966,912 46% Passenger load factor (2) 70.8% 69.7% 1.1 pts Operating revenue per available seat mile (in cents) 14.53 15.31 (5%) Operating costs per available seat mile (in cents) 14.22 13.63 4% Operating costs per available seat mile without losses associated with bankruptcy filings (in cents) 13.04 13.63 (4%) Operating revenue per block hour $ 1,929 $ 1,992 (3%) Operating costs per block hour $ 1,888 $ 1,774 6% Operating costs per block hour without losses associated with bankruptcy filings $ 1,731 $ 1,774 (2%) Block hours 325,802 227,976 43% Cycles 187,188 145,478 29% 0.32 Average daily utilization (block hours) 9.20 8.88 hrs Average stage length (miles) 502 447 12% Number of operating aircraft (end of period) 139 109 28% Employees (end of period) 3,605 2,826 28% -------- -------- -------- (1) Revenue passenger miles represents the number of miles flown by revenue passengers. (2) Passenger load factor equals revenue passenger miles divided by available seat miles. Pinnacle Airlines Corp. Reconciliation of Non-GAAP Disclosures (Unaudited) (in thousands, except per share data) Three Months Ended September 30, % Increase 2005 2004 (decrease) -------- -------- -------- (in thousands) Operating and Net Income (Loss): Operating income (loss) in accordance with GAAP $(32,356) $ 18,525 (275)% Add: Provision for losses associated with Northwest and Mesaba bankruptcy filings 53,914 - 100% -------- -------- -------- Operating income $ 21,558 $ 18,525 16% ======== ======== ======== Net income (loss) in accordance with GAAP $(21,392) $ 12,649 (269)% Add: Provision for losses associated with Northwest and Mesaba bankruptcy filings, net of tax 34,519 - 100% -------- -------- -------- Net income $ 13,127 $ 12,649 4% ======== ======== ======== Basic and Diluted EPS: Basic and diluted EPS (LPS) in accordance with GAAP $ (0.98) $ 0.58 (269)% Add: Provision for losses associated with Northwest and Mesaba bankruptcy filings, net of tax 1.58 - 100% -------- -------- -------- Basic and diluted EPS $ 0.60 $ 0.58 3% ======== ======== ======== Nine Months Ended September 30, % Increase 2005 2004 (decrease) -------- -------- -------- (in thousands) Operating and Net Income (Loss): Operating income (loss) in accordance with GAAP $ 10,496 $ 49,779 (79)% Add: Provision for losses associated with Northwest and Mesaba bankruptcy filings 53,914 - 100% -------- -------- -------- Operating income $ 64,410 $ 49,779 29% ======== ======== ======== Net income (loss) in accordance with GAAP $ 15,736 $ 30,401 48% Add: Provision for losses associated with Northwest and Mesaba bankruptcy filings, net of tax 34,519 - 100% Deduct: Gain on extinguishment of debt, net of tax (11,302) - 100% -------- -------- -------- Net income $ 38,953 $ 30,401 28% ======== ======== ======== Basic and Diluted EPS: Basic and diluted EPS in accordance with GAAP $ 0.72 $ 1.39 (48)% Add: Provision for losses associated with Northwest and Mesaba bankruptcy filings, net of tax 1.58 - 100% Deduct: Gain on extinguishment of debt, net of related tax (0.52) - (100)% -------- -------- -------- Basic and diluted EPS $ 1.78 $ 1.39 28% ======== ======== ========
For further information, please contact: Philip Reed (901) 348-4257 www.nwairlink.com.
SOURCE: Pinnacle Airlines
Source: MARKET WIRE
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