SOURCE: Pinnacle Airlines

August 01, 2005 18:00 ET

Pinnacle Airlines Reports Second Quarter Earnings of $13.8 Million

MEMPHIS, TN -- (MARKET WIRE) -- August 1, 2005 -- Pinnacle Airlines Corp. (NASDAQ: PNCL) today reported second quarter 2005 fully diluted earnings per share ("EPS") of $0.63, an increase of 43% over fully diluted EPS of $0.44 in the second quarter of 2004. Net income was $13.8 million, an increase of 42% over the second quarter of 2004. Operating margin was 10.7% for the three months ended June 30, 2005 and 11.1% for the same period in 2004.

The year-over-year increase in earnings was primarily attributable to a significant growth in capacity. In the second quarter of 2005, Pinnacle completed 110,301 block hours and 63,998 cycles, increases of 46% and 32%, respectively, over the same period in 2004. Pinnacle ended the second quarter of 2005 with 137 CRJ aircraft in its fleet, 36 more than at June 30, 2004. With the addition of two CRJ aircraft during July 2005, Pinnacle is now operating 139 CRJ aircraft, the total number currently provided for under its operating agreement with Northwest Airlines ("Northwest").

For the six months ended June 30, 2005, the Company produced operating income of $42.9 million and an operating margin of 10.5%. Net income for the same period was $37.1 million, or fully diluted EPS of $1.69. Excluding a nonrecurring gain in the first quarter from the repurchase of its note payable to Northwest, the Company reported net income of $25.8 million, or fully diluted EPS of $1.18, an increase of 46% over fully diluted EPS of $0.81 in the same period in 2004.

"This quarter marks our tenth consecutive quarter of strong financial performance under our Airline Services Agreement with Northwest," said Phil Trenary, President and Chief Executive Officer. "We continue to provide our Customers with a valuable product, and I am proud of the work our People perform for Northwest day in and day out."

In May 2005, Pinnacle announced that it expected to incur certain operational performance penalties for the six months ended June 30, 2005 under its ASA with Northwest. Pinnacle's operating performance during May and June exceeded the Company's high expectations, and as a result, the Company did not record any net penalties related to its operating performance during the second quarter.

During the quarter, Pinnacle placed a new $17.0 million revolving credit facility with First Tennessee Bank, replacing the revolving credit agreement with Northwest that was set to expire on June 30, 2005. Advances under the credit facility will accrue interest at First Tennessee Bank's base rate, or, at Pinnacle's option, at LIBOR plus 2.50%. The revolving credit facility is a one-year commitment that is secured by Pinnacle's inventory of spare parts, ground equipment, and furniture and fixtures and also contains various financial covenants standard for this type of agreement. As of June 30, 2005, Pinnacle had no outstanding borrowings under its new revolving credit facility.

Pinnacle ended the quarter with $66.5 million in cash and cash equivalents, an increase of $31.6 million over the balance at December 31, 2004. The increase was attributable primarily to cash flow from operations and the sale of the Company's 3.25% senior convertible notes due 2025.

Additional information regarding Pinnacle's results for the second quarter and other current developments, including those relating to Northwest, are included in its Form 10-Q that will be filed shortly 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 six months ended June 30, 2005 excluding the nonrecurring gain on extinguishment of the note payable with Northwest. 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.

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. The Company 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 139 Canadair Regional Jets and offers scheduled passenger service with 742 daily departures to 111 cities in 37 states and four 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 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 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. 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 June 30,
                                                 2005            2004
                                              ---------        ---------
Operating revenues
  Regional airline services                   $ 210,958        $ 151,654
  Other                                           1,941              519
                                              ---------        ---------
Total operating revenues                        212,899          152,173

Operating expenses
  Salaries, wages and benefits                   33,027           24,880
  Aircraft fuel                                  28,643           19,527
  Aircraft maintenance, materials
   and repairs                                    8,835            5,869
  Aircraft rentals                               69,589           50,062
  Other rentals and landing fees                 11,062            8,858
  Ground handling services                       23,125           14,850
  Depreciation                                    1,016              769
  Other                                          14,821           10,448
                                              ---------        ---------
Total operating expenses                        190,118          135,263
                                              ---------        ---------
Operating income                                 22,781           16,910

Operating income as a percentage of
 operating revenues                                10.7%            11.1%

Nonoperating income (expense)
  Interest expense                               (1,069)          (1,252)
  Interest income                                   261               59
  Miscellaneous income, net                           -              230
                                              ---------        ---------
Total nonoperating expense                         (808)            (963)
                                              ---------        ---------

Income before income taxes                       21,973           15,947
Income tax expense                                8,177            6,249
                                              ---------        ---------
Net income                                    $  13,796        $   9,698
                                              =========        =========

Basic and diluted earnings per share          $    0.63        $    0.44
                                              =========        =========

Shares used in computing basic
 earnings per share                              21,908           21,892
                                              =========        =========
Shares used in computing diluted
 earnings per share                              21,932           21,892
                                              =========        =========


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

                                               Six Months Ended June 30,
                                                 2005             2004
                                              ---------        ---------
Operating revenues
  Regional airline services                   $ 403,709        $ 285,041
  Other                                           3,922            1,011
                                              ---------        ---------
Total operating revenues                        407,631          286,052

Operating expenses
  Salaries, wages and benefits                   64,509           48,099
  Aircraft fuel                                  54,105           36,067
  Aircraft maintenance, materials and repairs    16,073           11,515
  Aircraft rentals                              132,895           93,682
  Other rentals and landing fees                 21,204           16,935
  Ground handling services                       45,789           28,353
  Depreciation                                    1,978            1,490
  Other                                          28,226           18,657
                                              ---------        ---------
Total operating expenses                        364,779          254,798
                                              ---------        ---------
Operating income                                 42,852           31,254

Operating income as a percentage
 of operating revenues                             10.5%            10.9%

Nonoperating income (expense)
  Interest expense                               (2,157)          (2,540)
  Interest income                                   417              112
  Miscellaneous income, net                           -              315
  Gain on extinguishment of debt                 18,000                -
                                              ---------        ---------
Total nonoperating income (expense)              16,260           (2,113)
                                              ---------        ---------

Income before income taxes                       59,112           29,141
Income tax expense                               21,984           11,389
                                              ---------        ---------
Net income                                    $  37,128        $  17,752
                                              =========        =========

Basic and diluted earnings per share          $    1.69        $    0.81
                                              =========        =========

Shares used in computing basic
 earnings per share                              21,908           21,892
                                              =========        =========
Shares used in computing diluted
 earnings per share                              21,930           21,899
                                              =========        =========


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

                                                June 30,      December 31,
                                                 2005            2004
                                              ---------        ---------
                                              (Unaudited)
Assets

Current assets
Cash and cash equivalents                     $  66,487        $  34,912
Receivables, net                                 28,416           25,139
Spare parts and supplies, net                     6,034            5,341
Prepaid expenses and other assets                 7,442            5,644
Deferred income taxes                               967              860
                                              ---------        ---------
    Total current assets                        109,346           71,896

Property and equipment
  Aircraft and rotable spares                    37,758           35,837
  Other property and equipment                   18,363           16,161
  Office furniture and fixtures                   1,934            1,863
                                              ---------        ---------
                                                 58,055           53,861
  Less accumulated depreciation                 (16,389)         (14,445)
                                              ---------        ---------
Net property and equipment                       41,666           39,416

Other assets, primarily aircraft deposits        24,601           21,111
Debt issuance costs, net                          4,306                -
Contractual rights under airline services
 agreement, net                                  15,027           15,115
Costs in excess of net assets acquired, net      18,422           18,422
                                              ---------        ---------
Total assets                                  $ 213,368        $ 165,960
                                              =========        =========


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

                                               June 30,       December 31,
                                                 2005            2004
                                              ---------        ---------
                                             (Unaudited)
Liabilities and stockholders' equity
 (deficiency)

Current liabilities
  Accounts payable                            $  19,214        $  16,983
  Accrued expenses                               19,449           15,083
  Income taxes payable                           13,108            1,633
  Other current liabilities                       1,834            6,756
                                              ---------        ---------
         Total current liabilities               53,605           40,455

Deferred income taxes                             8,209            7,105
Other liabilities                                   636              948
Senior convertible notes                        121,000                -
Note payable and line of credit                       -          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                             (55,721)         (92,849)
Unearned compensation on restricted stock          (129)            (522)
                                              ---------        ---------
           Total stockholders' equity
            (deficiency)                         29,918           (7,548)
                                              ---------        ---------
           Total liabilities and
            stockholders' equity
            (deficiency)                      $ 213,368        $ 165,960
                                              =========        =========


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

                                              Six Months Ended June 30,
                                                2005             2004
                                              ---------        ---------

Cash provided by operating activities         $  31,689        $  16,735

Cash used in investing activities                (9,604)          (1,705)

Cash provided by (used in) financing
 activities                                       9,490           (6,000)
                                              ---------        ---------
Net increase in cash and cash equivalents        31,575            9,030
Cash and equivalents at beginning of period      34,912           31,523
                                              ---------        ---------
Cash and equivalents at end of period         $  66,487        $  40,553
                                              =========        =========


                         Pinnacle Airlines Corp.
                      Operating Statistics (Unaudited)

                                              Three Months Ended June 30,
                                             2005      2004          Change
Other Data:                                  ----      ----          ------
Revenue passengers (in thousands)              2,111     1,618         30%
Revenue passenger miles (in thousands) (1) 1,086,890   725,980         50%
Available seat miles (in thousands)        1,482,481   988,958         50%
Passenger load factor (2)                       73.3%     73.4%  (0.1) pts
Operating revenue per available seat mile
 (in cents)                                    14.36     15.39         (7%)
Operating costs per available seat mile
 (in cents)                                    12.82     13.68         (6%)
Operating revenue per block hour            $  1,930  $  2,011         (4%)
Operating costs per block hour              $  1,724  $  1,788         (4%)
Block hours                                  110,301    75,666         46%
Cycles                                        63,998    48,347         32%
Average daily utilization (block hours)         9.26      8.78    0.48 hrs
Average stage length (miles)                     504       449         12%
Number of operating aircraft (end of period)     137       101         36%
Employees (end of period)                      3,564     2,477         44%

                                                Six Months Ended June 30,
                                             2005      2004          Change
Other Data:                                  ----      ----          ------
Revenue passengers (in thousands)              3,780     2,847         33%
Revenue passenger miles (in thousands) (1) 1,904,552 1,239,077         54%
Available seat miles (in thousands)        2,770,981 1,807,647         53%
Passenger load factor (2)                       68.7%     68.5%    0.2 pts
Operating revenue per available seat mile
 (in cents)                                    14.71     15.82         (7%)
Operating costs per available seat mile
 (in cents)                                    13.16     14.10         (7%)
Operating revenue per block hour            $  1,937  $  2,037         (5%)
Operating costs per block hour              $  1,733  $  1,814         (4%)
Block hours                                  210,444   140,435         50%
Cycles                                       121,094    90,532         34%
Average daily utilization (block hours)         9.29      8.72    0.57 hrs
Average stage length (miles)                     498       435         14%
Number of operating aircraft (end of period)     137       101         36%
Employees (end of period)                      3,564     2,477         44%

(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)

                                                 Six Months Ended June 30,
                                              2005      2004     % Increase
                                              ----      ----     ----------
                                                   (in thousands)
Net Income

Net income in accordance with GAAP          $ 37,128  $ 17,752        109%
  Deduct: Gain on extinguishment of debt,
 net of related tax                          (11,302)        -
                                            --------  --------        ----
Net income excluding gain on
 extinguishment of debt                     $ 25,826  $ 17,752         45%
                                            ========  ========        ====
Basic and Diluted EPS

Basic and diluted EPS in accordance
 with GAAP                                  $   1.69  $   0.81        109%

  Deduct: Gain on extinguishment of debt,
 net of related tax                            (0.51)        -
                                            --------  --------        ----
Basic and diluted EPS excluding gain
 on extinguishment of debt                  $   1.18  $   0.81         46%
                                            ========  ========        ====

Contact Information

  • For further information, please contact:
    Philip Reed
    (901) 348-4257
    or visit our Web site at www.nwairlink.com