Pinnacle Airlines Corp. (NASDAQ: PNCL) ("Pinnacle" or the "Company") today reported second quarter 2006 earnings per fully diluted share ("EPS") of $0.54. Operating income and net income were $19.5 million and $11.9 million, respectively. For the six months ended June 30, 2006, Pinnacle reported EPS of $1.15. Operating income and net income were $41.0 million and $25.2 million, respectively.
Operating income during the second quarter was negatively affected by a one-time, noncash charge of $1.4 million related to the previously unrecorded obligation for Pilot post-retirement health care benefits. Pinnacle provides a benefit for its Pilots which enables them to continue coverage under the Company's health care plan after reaching the mandatory retirement age of 60 and prior to their eligibility for Medicare coverage. This charge negatively affected second quarter EPS by $0.04. The amounts were not material for any prior period. In addition, Pinnacle recorded a pre-tax charge of $1.4 million during the second quarter related to a change in estimate in its provision for sublease losses associated with the return of eleven Saab 340 aircraft from Mesaba Aviation, Inc., which also reduced second quarter EPS by $0.04. Pinnacle's second quarter 2006 EPS would have been $0.62 without these two nonrecurring items, as compared to second quarter 2005 EPS of $0.63.
EPS for the six months ended June 30, 2006 was $1.15. During the first quarter of 2005, the Company recorded a pre-tax gain of $18.0 million ($11.3 million net of related income taxes) associated with the repurchase of its note payable to Northwest Airlines. This gain increased EPS for the six months ended June 30, 2005 by $0.51. Excluding this gain, EPS for the six months ended June 30, 2005 was $1.18. EPS for the six months ended June 30, 2006 excluding the charges related to the pilot post-retirement liability and bankruptcy provisions was $1.23, a 4% increase over the same period in 2005, excluding the aforementioned gain.
For the three months ended June 30, 2006, Pinnacle recorded operating revenue of $204.5 million, a decrease of $8.4 million, or 4%, over the same period in 2005. Pinnacle completed 103,471 block hours and 63,053 cycles, decreases of 6% and 2%, respectively, over the same periods in 2005. The decrease in revenue, block hours and cycles was attributable to the decrease in fleet size after Northwest removed 15 aircraft from our CRJ fleet in November 2005. During the second quarter 2005, Pinnacle accepted deliveries of 14 aircraft and had an average fleet size of 131 aircraft, as opposed to the second quarter 2006 in which it maintained a fleet size of 124 throughout the quarter.
For the six months ended June 30, 2006, Pinnacle recorded operating revenue of $411.6 million, an increase of $4.0 million, or 1%, over the same period in 2005. For the six months ended June 30, 2006, Pinnacle completed 206,068 block hours and 124,318 cycles, a decrease of 2% and an increase of 3%, respectively, over the same periods in 2005. While block hours decreased due to the decrease in fleet size, cycles increased due to a decrease in the average length of Pinnacle's flights.
Pinnacle's operating margin for the three months ended June 30, 2006 was 9.5%. Excluding the aforementioned charges related to the pilot post-retirement liability and the bankruptcies of Northwest and Mesaba, Pinnacle's margin for the quarter was 10.9%, as compared to an operating margin of 10.7% for the three months ended June 30, 2005. This margin increase was primarily attributable to annual rate increases under the Company's airline services agreement with Northwest that were greater than Pinnacle's year-over-year unit cost increase. In addition, there was a reduction in costs related to services provided by outside vendors.
Pinnacle repaid in full the $17.0 million drawn under its revolving credit facility upon its expiration in June 2006. Pinnacle ended the quarter with cash and short-term investments totaling $78.2 million. Management believes that the Company's current liquidity is adequate, and the Company does not have immediate plans to seek a replacement credit facility.
A time frame for discussions to resolve the status of Pinnacle's contractual relationship with Northwest has still not been set, although Northwest has indicated that they expect such discussions will begin soon. Pinnacle also continues to negotiate with the Airline Pilots Association ("ALPA") to amend the collective bargaining agreement between the Company and ALPA, and believes that successful conclusion of this negotiation is necessary to complete discussions with Northwest.
"I want to thank our People for another successful quarter," said Phil Trenary, Pinnacle's President and Chief Executive Officer. "We have continued to exceed our already high standards, and our strong operating performance will help us retain Northwest Airlines as a Customer. Satisfactory conclusion of discussions with both Northwest and the negotiating committee representing our Pilots remains our top priority."
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, net income and EPS for the three and six months ended June 30, 2006 excluding the losses associated with the bankruptcy filings of Northwest and Mesaba, the nonrecurring charge related to the pilot post-retirement liability and the nonrecurring gain on repurchase of the note payable with Northwest. 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 city of Indianapolis. Pinnacle currently operates an all-jet fleet of 124 Canadair Regional Jets and offers scheduled passenger service with 709 daily departures to 113 cities in 37 states and six Canadian provinces. Pinnacle Airlines maintains its headquarters in Memphis, Tennessee, and employs approximately 3,570 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.
Pinnacle Airlines Corp.
Condensed Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data)
Three Months Ended
June 30,
--------------------
2006 2005
--------- ---------
Operating revenues
Regional airline services $ 202,811 $ 210,958
Other 1,703 1,941
--------- ---------
Total operating revenues 204,514 212,899
Operating expenses
Salaries, wages and benefits 35,593 33,027
Aircraft fuel 27,211 28,643
Aircraft maintenance, materials and repairs 7,996 8,835
Aircraft rentals 66,031 69,589
Other rentals and landing fees 11,223 11,062
Ground handling services 21,765 23,125
Depreciation 967 1,016
Other 12,885 14,821
Provision for losses associated with bankruptcy
filings of Northwest and Mesaba 1,348 -
--------- ---------
Total operating expenses 185,019 190,118
--------- ---------
Operating income 19,495 22,781
Operating income as a percentage of operating
revenues 9.5% 10.7%
Nonoperating income (expense)
Interest expense (1,452) (1,069)
Interest income 645 261
Miscellaneous income, net 23 -
--------- ---------
Total nonoperating expense (784) (808)
--------- ---------
Income before income taxes 18,711 21,973
Income tax expense 6,820 8,177
--------- ---------
Net income $ 11,891 $ 13,796
========= =========
Basic and diluted earnings per share $ 0.54 $ 0.63
========= =========
Shares used in computing basic earnings per share 21,945 21,908
========= =========
Shares used in computing diluted earnings per share 21,984 21,932
========= =========
Pinnacle Airlines Corp.
Condensed Consolidated Statements of Income (Unaudited)
(in thousands, except per share data)
Six Months Ended
June 30,
--------------------
2006 2005
--------- ---------
Operating revenues
Regional airline services $ 407,816 $ 403,709
Other 3,787 3,922
--------- ---------
Total operating revenues 411,603 407,631
Operating expenses
Salaries, wages and benefits 70,020 64,509
Aircraft fuel 53,912 54,105
Aircraft maintenance, materials and repairs 18,258 16,073
Aircraft rentals 132,062 132,895
Other rentals and landing fees 22,474 21,204
Ground handling services 44,124 45,789
Depreciation 1,929 1,978
Other 26,435 28,226
Provision for losses associated with bankruptcy
filings of Northwest and Mesaba 1,365 -
--------- ---------
Total operating expenses 370,579 364,779
--------- ---------
Operating income 41,024 42,852
Operating income as a percentage of operating
revenues 10.0% 10.5%
Nonoperating income (expense)
Interest expense (2,952) (2,157)
Interest income 1,149 417
Miscellaneous income, net 51 -
Gain on extinguishment of debt - 18,000
--------- ---------
Total nonoperating income (expense) (1,752) 16,260
--------- ---------
Income before income taxes 39,272 59,112
Income tax expense 14,085 21,984
--------- ---------
Net income $ 25,187 $ 37,128
========= =========
Basic and diluted earnings per share $ 1.15 $ 1.69
========= =========
Shares used in computing basic earnings per share 21,945 21,908
========= =========
Shares used in computing diluted earnings per share 21,979 21,930
========= =========
Pinnacle Airlines Corp.
Condensed Consolidated Balance Sheets
(in thousands, except share data)
June 30, December 31,
2006 2005
--------- -----------
(Unaudited)
Assets
Current assets
Cash and cash equivalents $ 32,790 $ 31,567
Short-term investments 45,450 44,160
Receivables, net of allowance 29,968 30,190
Spare parts and supplies, net 6,847 6,368
Prepaid expenses and other assets 11,349 5,623
Deferred income taxes, net of allowance 9,781 9,146
--------- ---------
Total current assets 136,185 127,054
Property and equipment
Aircraft and rotable spares 39,050 39,362
Other property and equipment 20,586 19,209
Office furniture and fixtures 2,018 2,002
--------- ---------
61,654 60,573
Less accumulated depreciation (19,922) (18,038)
--------- ---------
Net property and equipment 41,732 42,535
Other assets, primarily aircraft deposits 22,010 22,155
Debt issuance costs, net 4,088 4,198
Contractual rights under airline services agreement,
net 13,834 14,435
Goodwill, net 18,422 18,422
--------- ---------
Total assets $ 236,271 $ 228,799
========= =========
Pinnacle Airlines Corp.
Condensed Consolidated Balance Sheets
(in thousands, except share data)
June 30, December 31,
2006 2005
--------- ---------
(Unaudited)
Liabilities and stockholders equity
Current liabilities
Accounts payable $ 14,662 $ 12,945
Accrued expenses 25,066 25,158
Line of credit with First
Tennessee - 17,000
Income taxes payable 14,231 17,756
Other current liabilities 6,818 7,161
----------------- -----------------
Total current liabilities 60,777 80,020
Deferred income taxes 7,736 7,426
Other liabilities 2,677 1,735
Senior convertible notes 121,000 121,000
Commitments and contingencies
Stockholders equity
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,
22,080,585 and 21,945,260 shares
issued, respectively 221 219
Additional paid-in capital 85,824 85,550
Accumulated deficit (41,964) (67,151)
----------------- -----------------
Total stockholdersÂ
equity 44,081 18,618
----------------- -----------------
Total liabilities and
stockholders equity $ 236,271 $ 228,799
================= =================
Pinnacle Airlines Corp.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
Six Months Ended
June 30,
------------------
2006 2005
-------- --------
Cash provided by operating activities $ 21,101 $ 31,689
Cash used in investing activities (2,878) (9,604)
Cash (used in) provided by financing activities (17,000) 9,490
-------- --------
Net increase in cash and cash equivalents 1,223 31,575
Cash and cash equivalents at beginning of period 31,567 34,912
-------- --------
Cash and cash equivalents at end of period $ 32,790 $ 66,487
======== ========
Pinnacle Airlines Corp.
Reconciliation of Non-GAAP Disclosures (Unaudited)
Three Months Ended June 30,
----------------------------------
% Increase
2006 2005 (Decrease)
----------------------------------
(in thousands, except per share data)
Operating Income:
Operating income in accordance with
GAAP $ 19,495 $ 22,781 (14%)
Add: Pilot post-retirement liability 1,377 - 100%
Add: Provision for losses associated
with Northwest and Mesaba
bankruptcy filings 1,348 - 100%
---------- ---------- -----------
Non-GAAP operating income $ 22,220 $ 22,781 (2%)
========== ========== ===========
Operating Margin:
Operating margin in accordance with
GAAP 9.5% 10.7% (1.2) pts.
Add: Pilot post-retirement liability 0.7% 0.0% 0.7 pts.
Add: Provision for losses associated
with Northwest and Mesaba
bankruptcy filings 0.7% 0.0% 0.7 pts.
---------- ---------- -----------
Non-GAAP operating margin 10.9% 10.7% 0.2 pts.
========== ========== ===========
Net Income:
Net income in accordance with GAAP $ 11,891 $ 13,796 (14%)
Add: Pilot post-retirement
liability, net of related tax 883 - 100%
Add: Provision for losses
associated with Northwest and
Mesaba bankruptcy filings, net
of related tax 785 - 100%
---------- ---------- -----------
Non-GAAP net income $ 13,559 $ 13,796 (2%)
========== ========== ===========
Basic and Diluted EPS:
Basic and diluted EPS in accordance
with GAAP $ 0.54 $ 0.63 (14%)
Add: Pilot post-retirement liability,
net of related tax 0.04 - 100%
Add: Provision for losses associated
with Northwest and Mesaba
bankruptcy filings, net of
related tax 0.04 - 100%
---------- ---------- -----------
Non-GAAP basic and diluted EPS $ 0.62 $ 0.63 (2%)
========== ========== ===========
Pinnacle Airlines Corp.
Reconciliation of Non-GAAP Disclosures (Unaudited)
Six Months Ended June 30,
----------------------------------
% Increase
2006 2005 (Decrease)
----------------------------------
(in thousands, except per share data)
Operating Income:
Operating income in accordance with
GAAP $ 41,024 $ 42,852 (4%)
Add: Pilot post-retirement liability 1,377 - 100%
Add: Provision for losses associated
with Northwest and Mesaba bankruptcy
filings 1,365 - 100%
---------- ---------- ----------
Non-GAAP operating income $ 43,766 $ 42,852 2%
========== ========== ==========
Operating Margin:
Operating margin in accordance with
GAAP 10.0% 10.5% (0.5) pts.
Add: Pilot post-retirement liability 0.3% 0.0% 0.3 pts.
Add: Provision for losses associated
with Northwest and Mesaba bankruptcy
filings 0.3% 0.0% 0.3 pts.
---------- ---------- ----------
Non-GAAP operating margin 10.6% 10.5% 0.1 pts.
========== ========== ==========
Net Income:
Net income in accordance with GAAP $ 25,187 $ 37,128 (32%)
Add: Pilot post-retirement liability,
net of related tax 883 - 100%
Add: Provision for losses associated
with Northwest and Mesaba bankruptcy
filings, net of related tax 866 - 100%
Deduct: Gain on repurchase of debt,
net of related tax - (11,302) 100%
---------- ---------- ----------
Non-GAAP net income $ 26,936 $ 25,826 4%
========== ========== ==========
Basic and Diluted EPS:
Basic and diluted EPS in accordance
with GAAP $ 1.15 $ 1.69 (32%)
Add: Pilot post-retirement liability,
net of related tax 0.04 - 100%
Add: Provision for losses associated
with Northwest and Mesaba bankruptcy
filings, net of related tax 0.04 - 100%
Deduct: Gain on repurchase of debt,
net of related tax - (0.51) 100%
---------- ---------- ----------
Non-GAAP basic and diluted EPS $ 1.23 $ 1.18 4%
========== ========== ==========
Pinnacle Airlines Corp.
Operating Statistics (Unaudited)
Three Months Ended June 30,
-------------------------------
2006 2005 Change
--------- --------- ---------
Other Data:
Revenue passengers (in thousands) 2,340 2,111 11 %
Revenue passenger miles (in
thousands) (1) 1,111,012 1,086,890 2 %
Available seat miles (in thousands) 1,371,539 1,482,481 (8)%
Passenger load factor (2) 81.0% 73.3% 7.7pts.
Operating revenue per available seat mile
(in cents) 14.91 14.36 4 %
Operating costs per available seat mile
(in cents) 13.49 12.82 5 %
Operating revenue per block hour $ 1,977 $ 1,930 2 %
Operating costs per block hour $ 1,788 $ 1,724 4 %
Block hours 103,471 110,301 (6)%
Cycles 63,053 63,998 (2)%
Average daily utilization (block hours) 9.17 9.26 (1)%
Average stage length (miles) 467 504 (7)%
Number of operating aircraft (end of
period) 124 137 (10)%
Employees (end of period) 3,567 3,564 0 %
--------- --------- ---------
Six Months Ended June 30,
-------------------------------
2006 2005 Change
--------- --------- ---------
Other Data:
Revenue passengers (in thousands) 4,355 3,780 15 %
Revenue passenger miles (in
thousands)(1) 2,082,817 1,904,552 9 %
Available seat miles (in thousands) 2,713,207 2,770,981 (2)%
Passenger load factor (2) 76.8% 68.7% 8.1pts.
Operating revenue per available seat mile
(in cents) 15.17 14.71 3 %
Operating costs per available seat mile
(in cents) 13.66 13.16 4 %
Operating revenue per block hour $ 1,997 $ 1,937 3 %
Operating costs per block hour $ 1,798 $ 1,733 4 %
Block hours 206,068 210,444 (2)%
Cycles 124,318 121,094 3 %
Average daily utilization (block hours) 9.18 9.29 (1)%
Average stage length (miles) 470 498 (6)%
Number of operating aircraft (end of
period) 124 137 (10)%
Employees (end of period) 3,567 3,564 0 %
--------- --------- ---------
(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.
For further information, please contact:
Philip Reed
Vice President of Marketing
(901) 348-4257
www.nwairlink.com