SOURCE: Pinnacle Airlines

November 01, 2007 07:00 ET

Pinnacle Airlines Reports Third Quarter 2007 Financial Results

MEMPHIS, TN--(Marketwire - November 1, 2007) - Pinnacle Airlines Corp. (NASDAQ: PNCL) ("the "Company") today reported third quarter 2007 net income and fully diluted earnings per share ("EPS") of $10.9 million and $0.48, respectively. The Company's net income and EPS were $13.6 million and $0.62, respectively, for the third quarter of 2006, excluding nonrecurring items. The 2007 financial results reflect the contractual changes in the airline services agreement (the "ASA") between the Company's wholly owned subsidiary, Pinnacle Airlines, Inc. ("Pinnacle") and Northwest Airlines, Inc. ("Northwest") that became effective January 1, 2007, as further discussed under "Third Quarter 2007 Financial and Operating Results."

Third Quarter 2007 Significant Accomplishments

-- Pre-delivery Payment Financing Facilities: The Company successfully completed short-term financing facilities of up to $80 million to finance pre-delivery payments related to the purchase of Q400 and CRJ-900 aircraft. These facilities will increase the Company's liquidity for the rest of 2007 and 2008 as the Company's operating subsidiaries transition into their new Q400 and CRJ-900 aircraft fleets. The Company borrowed $35 million under these short-term facilities during September, increasing the September 30 balance of cash and short-term investments, and borrowed an additional $32.3 million in October 2007. The Company will borrow the remaining $12.7 million as it is required to make additional pre-delivery payments to the aircraft manufacturer over the next several quarters.

-- Share Repurchase Program: The Company purchased an additional 0.5 million shares of its common stock during the quarter for $8.0 million, bringing the total shares purchased since implementing its share repurchase program to 2.0 million. In total, the Company has returned approximately $35 million of capital to shareholders since May 2007 through its share repurchase program. With the completion of its pre-delivery payment financing facilities, the Company plans to continue making share repurchases in the near-term for up to the additional $25 million authorization remaining under the Company's share repurchase program.

-- Extension of 15 CRJ-200 Aircraft Return Date: The Company agreed with Northwest to delay the start of the return of 15 CRJ-200 aircraft by two additional months, to November 2007. This change will result in a slight increase in the Company's capacity for the fourth quarter of 2007 and first quarter of 2008, allowing the Company to earn additional income under its ASA. In addition, Northwest has agreed to pay the Company $1.5 million as additional compensation related to the amended transition period.

"As we begin to take delivery of our new aircraft in the fourth quarter, I want to congratulate our People for their recent accomplishments," said Philip Trenary, President and Chief Executive Officer of Pinnacle Airlines Corp. "Their outstanding performance contributes greatly to the confidence that our investors, lenders and airline partners place in us."

Third Quarter 2007 Financial and Operating Results

The Company's Pinnacle subsidiary completed 112,378 block hours and 68,370 departures, increases of 8% and 7%, respectively, over the same period in 2006. The primary reason was the addition of 15 CRJ-200 aircraft to Pinnacle's operating fleet during the first quarter of 2007. The Company's Colgan Air, Inc. ("Colgan") subsidiary completed 35,329 block hours and 30,049 departures during the third quarter.

The Company recorded operating revenue of $205.7 million, a decrease of $2.8 million, or 1%, over the same period in 2006. Operating revenue was reduced by approximately $82.4 million for contractual changes in the ASA. The increase in Pinnacle's level of operations accounted for an increase in revenue of approximately $18.7 million. The amortization of net deferred revenue associated with Pinnacle's ASA also increased revenue by approximately $5.8 million. The acquisition of Colgan increased the Company's consolidated revenue by approximately $55.1 million.

Operating income and operating margin were $15.0 million and 7.3%, respectively. The Company's Pinnacle subsidiary achieved an operating margin of 10.4%, while Colgan recorded an operating margin of (1.1)%. Consolidated operating income and operating margin for the third quarter of 2006 were approximately $22.0 million and 10.6%, respectively, excluding nonrecurring charges. The decrease in the Company's operating income was primarily attributable to contractual changes under the ASA that became effective January 1, 2007. These contractual changes reduced operating income by approximately $11.1 million for the three months ended September 30, 2007. The reduction in operating income from contractual ASA changes was offset by approximately $5.8 million of amortization of net deferred revenue associated with Pinnacle's ASA. This amortization is recorded as an increase in operating revenue in the Company's consolidated statements of income.

Total nonoperating income for the third quarter was approximately $1.4 million, an increase of approximately $2.0 million as compared to the third quarter of 2006. This is primarily attributable to a $1.8 million increase in interest income from our significantly larger short-term investment portfolio. In addition, interest expense increased by $1.5 million, primarily due to the addition of Colgan's interest expense. This increase was offset by the $1.5 million of capitalized interest, primarily related to the acquisition of our Q400 and CRJ-900 aircraft, as discussed in Note 1 to our condensed consolidated financial statements.

Year-to-Date 2007 Financial and Operating Results

Pinnacle completed 329,601 block hours and 199,598 departures, increases of 6% and 6%, respectively, over the same period in 2006. The Company's Colgan subsidiary completed 94,433 block hours and 79,982 departures from the acquisition date of January 18, 2007 through the end of the third quarter.

For the nine months ended September 30, 2007, the Company recorded operating revenue of $586.3 million, a decrease of $33.8 million, or 5%, over the same period in 2006. Operating revenue was reduced by approximately $242.0 million for contractual changes in the ASA. The increase in Pinnacle's level of operations accounted for an increase in revenue of approximately $51.5 million. The amortization of net deferred revenue associated with Pinnacle's ASA also increased revenue by approximately $10.8 million. The acquisition of Colgan increased the Company's consolidated revenue by approximately $142.9 million.

Operating income and operating margin were $42.7 million and 7.3%, respectively, year-to-date. Year-to-date, Pinnacle achieved an operating margin of 9.5%, while Colgan recorded an operating margin of 0.4%. Consolidated operating income and operating margin were approximately $65.7 million and 10.6%, respectively, excluding nonrecurring items, for the nine months ended September 30, 2006. The contractual changes in the ASA reduced operating income by approximately $32.7 million for the nine months ended September 30, 2007. The reduction in operating income from contractual ASA changes was offset by approximately $16.6 million of amortization of net deferred revenue associated with Pinnacle's ASA. This amortization is recorded as an increase in operating revenue in the Company's consolidated statements of income.

Net income and EPS for the nine months ended September 30, 2007 were $27.9 million and $1.17, respectively. Excluding nonrecurring items related to a $4.1 million loss on the Company's Northwest claim sale and a decrease in Saab return condition accruals of approximately $1.0 million, net income and EPS were $29.9 million and $1.25, respectively, for the nine months ended September 30, 2007. Excluding nonrecurring items, net income and EPS for the first nine months of 2006 were $40.5 million and $1.84, respectively.

Cash and Short-Term Investments

The Company ended the quarter with cash and short-term investments totaling $245.2 million. The Company's quarter-end cash balance was negatively impacted by the receipt of Pinnacle's September 30 ASA payment totaling $21.4 million from Northwest on October 1, as September 30 fell on a weekend. The Company's balance of cash and short-term investments increased by approximately $2.0 million during the third quarter.

About Pinnacle Airlines Corp.

Pinnacle Airlines Corp., an airline holding company, is the parent company of Pinnacle Airlines, Inc. and Colgan Air, Inc. Pinnacle Airlines, Inc. operates under the name Northwest Airlink and operates 139 Canadair Regional Jets in the United States and Canada. Colgan Air, Inc. operates as Continental Connection, United Express and US Airways Express and operates a fleet of 42 Saab 340 and 7 Beech 1900 turboprop regional aircraft.

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 operating income, operating margin, net income and EPS for the three and nine months ended September 30, 2007 and 2006 excluding the loss on sale of unsecured claim, increases and decreases in the provision for losses associated with the bankruptcy filings of Northwest and Mesaba and the nonrecurring charge related to the pilot post-retirement liability. The Company believes that this information is useful to investors as it indicates more clearly the Company's comparative year-to-year results. None of this information should be considered a substitute for any measures prepared in accordance with GAAP. The Company has included its reconciliations of these non-GAAP financial measures to the most comparable GAAP financial measures in the accompanying schedules.

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 the Company 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 website 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. The Company does not intend to update these forward-looking statements before its next required filing with the Securities and Exchange Commission.

                          Pinnacle Airlines Corp.
         Condensed Consolidated Statements of Income (Unaudited)
                   (in thousands, except per share data)

                                                     Three Months Ended
                                                        September 30,
                                                  ------------------------
                                                      2007         2006
                                                  -----------  -----------
Operating revenues
   Regional airline services                      $   199,023  $   206,827
   Other                                                6,707        1,673
                                                  -----------  -----------
Total operating revenues                              205,730      208,500

Operating expenses
   Salaries, wages and benefits                        52,830       34,567
   Aircraft maintenance, materials and repairs         22,396        8,691
   Aircraft rentals                                    35,049       66,031
   Aircraft fuel                                       10,856       28,041
   Other rentals and landing fees                      15,307       11,480
   Ground handling services                            24,520       21,663
   Commissions and passenger related expense            7,120          900
   Depreciation and amortization                        2,449        1,003
   Other                                               20,196       14,102
   Provision for decreases in losses associated
    with bankruptcy filings of Northwest and
    Mesaba                                                  -       (3,537)
                                                  -----------  -----------
Total operating expenses                              190,723      182,941
                                                  -----------  -----------
Operating income                                       15,007       25,559
Operating income as a percentage of operating
 revenues                                                 7.3%        12.3%
Nonoperating income (expense)
   Interest income                                      2,521          640
   Interest expense                                    (1,128)      (1,198)
   Miscellaneous (expense) income, net                    (11)          18
                                                  -----------  -----------
Total nonoperating income (expense)                     1,382         (540)
                                                  -----------  -----------
Income before income taxes                             16,389       25,019
Income tax expense                                      5,485        9,182
                                                  -----------  -----------
Net income                                        $    10,904  $    15,837
                                                  ===========  ===========

Basic earnings per share                          $      0.53  $      0.72
                                                  ===========  ===========

Diluted earnings per share                        $      0.48  $      0.72
                                                  ===========  ===========

Shares used in computing basic earnings per share      20,470       21,945
                                                  ===========  ===========
Shares used in computing diluted earnings per
 share                                                 22,544       21,990
                                                  ===========  ===========





                          Pinnacle Airlines Corp.
          Condensed Consolidated Statements of Income (Unaudited)
                   (in thousands, except per share data)

                                                      Nine Months Ended
                                                        September 30,
                                                  ------------------------
                                                      2007         2006
                                                  -----------  -----------
Operating revenues
   Regional airline services                      $   568,278  $   614,643
   Other                                               17,996        5,460
                                                  -----------  -----------
Total operating revenues                              586,274      620,103

Operating expenses
   Salaries, wages and benefits                       150,392      104,587
   Aircraft maintenance, materials and repairs         62,719       26,949
   Aircraft rentals                                   103,997      198,093
   Aircraft fuel                                       26,939       81,953
   Other rentals and landing fees                      44,359       33,954
   Ground handling services                            73,236       65,787
   Commissions and passenger related expense           17,935        2,688
   Depreciation and amortization                        6,821        2,932
   Other                                               58,270       38,749
   Provision for decreases in losses associated
    with bankruptcy filings of Northwest and
    Mesaba                                             (1,048)      (2,172)
                                                  -----------  -----------
Total operating expenses                              543,620      553,520
                                                  -----------  -----------
Operating income                                       42,654       66,583
Operating income as a percentage of operating
 revenues                                                 7.3%        10.7%
Nonoperating income (expense)
   Interest income                                      8,468        1,789
   Interest expense                                    (6,109)      (4,150)
   Loss on sale of unsecured claim                     (4,144)           -
   Miscellaneous income, net                              325           69
                                                  -----------  -----------
Total nonoperating expense                             (1,460)      (2,292)
                                                  -----------  -----------
Income before income taxes                             41,194       64,291
Income tax expense                                     13,263       23,267
                                                  -----------  -----------
Net income                                        $    27,931  $    41,024
                                                  ===========  ===========

Basic earnings per share                          $      1.31  $      1.87
                                                  ===========  ===========

Diluted earnings per share                        $      1.17  $      1.87
                                                  ===========  ===========

Shares used in computing basic earnings per share      21,398       21,945
                                                  ===========  ===========
Shares used in computing diluted earnings per
 share                                                 23,863       21,981
                                                  ===========  ===========




                          Pinnacle Airlines Corp.
                  Condensed Consolidated Balance Sheets
                    (in thousands, except share data)

                                              September 30,  December 31,
                                                  2007           2006
                                              -------------  -------------
Assets                                         (Unaudited)
Current assets
Cash and cash equivalents                     $       5,867  $         705
Short-term investments                              239,300         72,700
Receivables                                          58,383        100,925
Spare parts and supplies, net                        14,976          8,061
Prepaid expenses and other assets                    16,229         15,003
Deferred income taxes                                12,006              -
                                              -------------  -------------
Total current assets                                346,761        197,394
Property and equipment
Flight equipment                                     88,696         38,436
Aircraft pre-delivery payments                       70,400              -
Other property and equipment                         37,037         24,470
                                              -------------  -------------
                                                    196,133         62,906
Less accumulated depreciation                       (26,151)       (21,921)
                                              -------------  -------------

Net property and equipment                          169,982         40,985
Deferred income taxes                                72,265              -
Other assets, primarily aircraft deposits            32,028         31,240
Goodwill, net                                        28,027         18,422
Intangible assets, net                               17,510         13,232
                                              -------------  -------------
Total assets                                  $     666,573  $     301,273
                                              =============  =============

Liabilities and stockholders’ equity
Current liabilities
  Current maturities of debt and capital
   leases                                     $      11,874  $           -
  Pre-delivery payment facility                      35,011              -
  Bank line of credit                                 8,375              -
  Accounts payable                                   30,638         18,201
  Accrued expenses                                   67,265         26,190
  Income taxes payable                               24,187         16,658
  Deferred income taxes                                   -          6,815
  Deferred revenue                                   24,549              -
  Other current liabilities                          20,303          5,980
                                              -------------  -------------
    Total current liabilities                       222,202         73,844
Senior convertible notes                            121,000        121,000
Long-term debt, net of current maturities            11,068              -
Capital leases, net of current maturities             3,941              -
Deferred income taxes                                     -          7,112
Deferred revenue, net of current portion            214,594              -
Other liabilities                                     1,813          2,296
Commitments and contingencies

Stockholders’ equity
  Preferred stock, par value $0.01 per share;
   1,000,000 shares authorized, no shares
   issued                                                 -              -
  Series A preferred share, 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; 22,402,333 and
   22,080,585 shares issued                             224            221
  Treasury stock, at cost, 1,958,032 shares         (35,207)             -
  Additional paid-in capital                         88,859         86,152
  Retained earnings                                  38,079         10,648
                                              -------------  -------------
Total stockholders’ equity                           91,955         97,021
                                              -------------  -------------
Total liabilities and stockholders’ equity    $     666,573  $     301,273
                                              =============  =============




                          Pinnacle Airlines Corp.
        Condensed Consolidated Statements of Cash Flows (Unaudited)
                              (in thousands)

                                                      Nine Months Ended
                                                        September 30,
                                                  ------------------------
                                                      2007         2006
                                                  -----------  -----------

Cash provided by operating activities             $   277,022  $     2,590

Cash used in investing activities                    (257,840)     (15,827)

Cash used in financing activities                     (14,020)     (17,000)
                                                  -----------  -----------
Net change in cash and cash equivalents                 5,162      (30,237)

Cash and cash equivalents at beginning of period          705       31,567
                                                  -----------  -----------

Cash and cash equivalents at end of period        $     5,867  $     1,330
                                                  ===========  ===========




                          Pinnacle Airlines Corp.
            Reconciliation of Non-GAAP Disclosures (Unaudited)

                                       Three Months Ended September 30,
                                     =====================================
                                                               % Increase
                                         2007         2006     (Decrease)
                                     ===========  ===========  ===========
                                     (in thousands, except per share data)
Operating Income:

Operating income in accordance with
 GAAP                                $    15,007  $    25,559         (41)%
Add:  Provision for decreases in
      losses associated with
      bankruptcy filings of Northwest
      and Mesaba                               -       (3,537)        100 %
                                     -----------  -----------  ----------
Non-GAAP operating income            $    15,007  $    22,022         (32)%
                                     ===========  ===========  ==========

Operating Margin:

Operating margin in accordance with
 GAAP                                        7.3%        12.3% (5.0) pts.
Add:  Provision for decreases in
      losses associated with
      bankruptcy filings of Northwest
      and Mesaba                               -       (1.7%)    1.7 pts.
                                     -----------  -----------  ----------
Non-GAAP operating margin                    7.3%        10.6% (3.3) pts.
                                     ===========  ===========  ==========

Net Income:

Net income in accordance with GAAP   $    10,904  $    15,837         (31)%
Add:  Provision for decreases in
      losses associated with
      bankruptcy filings of Northwest
      and Mesaba, net of related tax           -       (2,227)        100 %
                                     -----------  -----------  ----------
Non-GAAP net income                  $    10,904  $    13,610         (20)%
                                     ===========  ===========  ==========
Diluted EPS:
Diluted EPS in accordance with GAAP  $      0.48  $      0.72         (33)%
Add:  Provision for decreases in
      losses associated with
      bankruptcy filings of Northwest
      and Mesaba, net of related tax           -        (0.10)        100 %
                                     -----------  -----------  ----------
Non-GAAP diluted EPS                 $      0.48  $      0.62         (23)%
                                     ===========  ===========  ==========




                        Pinnacle Airlines Corp.
             Reconciliation of Non-GAAP Disclosures (Unaudited)

                                          Nine Months Ended September 30,
                                         ================================
                                                               % Increase
                                           2007       2006     (Decrease)
                                         ========   ========   ----------
                                      (in thousands, except per share data)
Operating Income:
Operating income in accordance with
 GAAP                                    $ 42,654   $ 66,583          (36)%
Add: Pilot post-retirement liability            -      1,300         (100)%

Add: Provision for decreases in losses
     associated with bankruptcy
     filings of Northwest
     and Mesaba                            (1,048)    (2,172)         (52)%
                                         --------   --------   ----------
Non-GAAP operating income                $ 41,606   $ 65,711          (37)%
                                         ========   ========   ==========

Operating Margin:
Operating margin in accordance with GAAP      7.3 %     10.7 % (3.4) pts.
Add: Pilot post-retirement liability            -        0.2 % (0.2) pts.

Add: Provision for decreases in losses
     associated with bankruptcy
     filings of Northwest
     and Mesaba                              (0.2)%     (0.3)%   0.1 pts.
                                         --------   --------   ----------
Non-GAAP operating margin                     7.1 %     10.6 % (3.5) pts.
                                         ========   ========   ==========

Net Income:
Net income in accordance with GAAP       $ 27,931   $ 41,024          (32)%
Add: Loss on sale of unsecured claim,
     net of related tax                     2,627          -          100 %
Add: Provision for decreases in losses
     associated with
     bankruptcy filings of Northwest and
     Mesaba, net of related tax              (664)    (1,366)          51 %
Add: Pilot post-retirement liability,
     net of related tax                         -        830         (100)%
                                         --------   --------   ----------
Non-GAAP net income                      $ 29,894   $ 40,488          (26)%
                                         ========   ========   ==========
Diluted EPS:
Diluted EPS in accordance with GAAP      $   1.17   $   1.87          (37)%
Add: Loss on sale of unsecured claim,
     net of related tax                      0.11          -          100 %
Add: Provision for decreases in losses
     associated with
     bankruptcy filings of Northwest and
     Mesaba, net of related tax             (0.03)     (0.07)          57 %
Add: Pilot post-retirement liability,
     net of related tax                         -       0.04         (100)%
                                         --------   --------   ----------

Non-GAAP diluted EPS                     $   1.25   $   1.84          (32)%
                                         ========   ========   ==========




                        Pinnacle Airlines Corp.
                   Operating Statistics (Unaudited)

                                            CRJ                Turboprop
                              ------------------------------  ------------
                                       Three Months           Three Months
                                          Ended                  Ended
                                       September 30,          September 30,
                              ------------------------------  ------------
                                2007       2006      Change       2007
                              ---------  ---------  -------   ------------
Other Data:
Revenue passengers (in
 thousands)                       2,636      2,330       13 %          425
Revenue passenger miles (in
 thousands) (1)               1,230,775  1,110,898       11 %       78,475
Available seat miles (in
 thousands)                   1,562,621  1,459,943        7 %      164,907
Passenger load factor (2)          78.8%      76.1%   2.7 pts         47.6%
Operating revenue per
 available seat mile (in
 cents)                            9.64      14.28      (32)%        33.44
Operating cost per available
 seat mile (in cents)              8.64      12.53      (31)%        33.80
Operating revenue per block
 hour                         $   1,340  $   1,996      (33)% $      1,561
Operating cost per block hour $   1,201  $   1,752      (31)% $      1,578
Block hours                     112,378    104,435        8 %       35,329
Departures                       68,370     63,713        7 %       30,049
Average daily utilization
 (block hours)                     8.77       9.15       (4)%         7.95
Average stage length (miles)        461        471       (2)%          185
Number of operating aircraft
 (end of period)                    139        124       12 %           49


                                            CRJ                Turboprop
                              ------------------------------  ------------
                                       Nine Months            Nine Months
                                          Ended                  Ended
                                       September 30,          September 30,
                              ------------------------------  ------------
                                2007       2006      Change     2007 (3)
                              ---------  ---------  -------   ------------
Other Data:
Revenue passengers (in
 thousands)                       7,477      6,685       12 %        1,112
Revenue passenger miles (in
 thousands) (1)               3,471,275  3,193,715        9 %      206,046
Available seat miles (in
 thousands)                   4,528,179  4,173,150        9 %      443,782
Passenger load factor (2)          76.7%      76.5%   0.2 pts         46.4%
Operating revenue per
 available seat mile (in
 cents)                            9.79      14.86      (34)%        32.20
Operating cost per available
 seat mile (in cents)              8.86      13.26      (33)%        32.07
Operating revenue per block
 hour                         $   1,347  $   1,997      (33)% $      1,513
Operating cost per block hour $   1,219  $   1,783      (32)% $      1,507
Block hours                     329,201    310,503        6 %       94,433
Departures                      199,598    188,031        6 %       79,982
Average daily utilization
 (block hours)                     8.79       9.17       (4)%         7.36
Average stage length (miles)        460        471       (2)%          184
Number of operating aircraft
 (end of period)                    139        124       12 %           49


(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.
(3) The Company purchased Colgan on January 18, 2007, as discussed in Note
    2 to our condensed consolidated financial statements.  The "nine months
    ended" for turboprops implies the period from the date of purchase of
    Colgan through September 30, 2007.  We did not operate turboprops
    during 2006.
    The Company had 5,402 employees as of September 30, 2007, an increase
    of 52% over the 3,554 employees as of September 30, 2006.

Contact Information

  • For further information, please contact:
    Joe Williams
    (901) 346-6162
    Visit our website at www.pncl.com