Published:
Pinnacle Airlines Reports First Quarter 2006 Financial Results
Pinnacle Airlines Corp. (NASDAQ: PNCL)
("Pinnacle" or the "Company") today reported first quarter 2006 earnings
per fully diluted share ("EPS") of $0.61, 11% higher than pro forma EPS of
$0.55, excluding a nonrecurring after-tax gain of $0.51 recorded in the
first quarter of 2005. 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. Including this gain, first quarter 2005 EPS was $1.06.
Net income in the first quarter of 2006 was $13.3 million, 11% higher than
pro forma first quarter 2005 net income of $12.0 million, excluding the
aforementioned gain.
In the first quarter of 2006, Pinnacle recorded operating revenue of $207.1
million, an increase of $12.4 million, or 6%, over the same period in 2005.
For the quarter, Pinnacle completed 102,597 block hours and 61,265 cycles,
increases of 2% and 7%, respectively, over the same period in 2005.
Pinnacle's operating margin for the first quarter of 2006 was 10.4%, as
compared to an operating margin of 10.3% for the first quarter of 2005.
The improvement in operating margin is partially attributable to strong
operational performance in 2006. Pinnacle surpassed the operating
performance levels contained in its airline services agreement with
Northwest during the quarter. The Company ended the quarter with seven
consecutive days without a flight cancellation between March 24 and March
30.
"Once again, our People have delivered outstanding operational performance
at costs that are among the lowest in the industry," said Philip H.
Trenary, Pinnacle's President and Chief Executive Officer. "This
combination serves as an excellent foundation for long-term success with
Northwest Airlines."
A key goal for Pinnacle in the near future remains securing the Company's
existing business relationship with Northwest Airlines. While no time
frame for discussions with Northwest has been set, Pinnacle believes that
negotiations regarding the two parties' future relationship will begin
soon. However, the timeline upon which to begin those negotiations is
outside of the Company's control. Northwest Airlines has again extended
the deadline for requesting additional security deposits from Pinnacle
totaling $21.7 million related to aircraft subleases between Northwest and
Pinnacle to May 15, 2006. Pinnacle expects this matter to be resolved
during its discussions with Northwest.
Pinnacle ended the quarter with cash and short-term investments totaling
$90.7 million. Pinnacle's short-term obligations at March 31, 2006 include
$17 million outstanding on its revolving credit facility with First
Tennessee Bank (the "Revolver"). As of the end of the first quarter,
Pinnacle was not in compliance with one of the financial covenants
contained in the loan agreement, giving First Tennessee the right to
accelerate payment of the outstanding balance. Through discussions with
First Tennessee, Pinnacle believes that the bank will not seek to
accelerate repayment of the Revolver prior to its maturity in June 2006.
However, Pinnacle also believes that First Tennessee does not intend to
renew the Revolver upon its maturity. The Company expects to repay this
facility during the second quarter out of its existing cash and short-term
investments.
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 March 31, 2006 excluding 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 112
cities in 35 states and three Canadian provinces. Pinnacle Airlines
maintains its headquarters in Memphis, Tennessee, and employs approximately
3,550 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
March 31,
-----------------------
2006 2005
--------- ---------
Operating revenues
Regional airline services $ 205,005 $ 192,751
Other 2,084 1,981
--------- ---------
Total operating revenues 207,089 194,732
Operating expenses
Salaries, wages and benefits 34,427 31,482
Aircraft fuel 26,701 25,462
Aircraft maintenance, materials and repairs 10,262 7,238
Aircraft rentals 66,031 63,306
Other rentals and landing fees 11,251 10,142
Ground handling services 22,359 22,664
Depreciation 962 962
Other 13,567 13,405
--------- ---------
Total operating expenses 185,560 174,661
--------- ---------
Operating income 21,529 20,071
Operating income as a percentage of operating
revenues 10.4% 10.3%
Nonoperating income (expense)
Interest expense (1,500) (1,087)
Interest income 504 155
Miscellaneous income, net 28 -
Gain on extinguishment of debt - 18,000
--------- ---------
Total nonoperating income (expense) (968) 17,068
--------- ---------
Income before income taxes 20,561 37,139
Income tax expense 7,265 13,807
--------- ---------
Net income $ 13,296 $ 23,332
========= =========
Basic and diluted earnings per share $ 0.61 $ 1.06
========= =========
Shares used in computing basic earnings per share 21,945 21,908
========= =========
Shares used in computing diluted earnings per share 21,975 21,928
========= =========
Pinnacle Airlines Corp.
Condensed Consolidated Balance Sheets
(in thousands, except share data)
March 31, December 31,
2006 2005
--------- ---------
(Unaudited)
Assets
Current assets
Cash and cash equivalents $ 33,481 $ 31,567
Short-term investments 57,200 44,160
Receivables, net of allowance 33,694 30,190
Spare parts and supplies, net 6,593 6,368
Prepaid expenses and other assets 9,936 5,623
Deferred income taxes, net of allowance 9,308 9,146
--------- ---------
Total current assets 150,212 127,054
Property and equipment
Aircraft and rotable spares 39,136 39,362
Other property and equipment 19,641 19,209
Office furniture and fixtures 2,010 2,002
--------- ---------
60,787 60,573
Less accumulated depreciation (18,971) (18,038)
--------- ---------
Net property and equipment 41,816 42,535
Other assets, primarily aircraft deposits 22,010 22,155
Debt issuance costs, net 4,142 4,198
Contractual rights under airline services
agreement, net 14,135 14,435
Goodwill, net 18,422 18,422
--------- ---------
Total assets $ 250,737 $ 228,799
========= =========
Pinnacle Airlines Corp.
Condensed Consolidated Balance Sheets
(in thousands, except share data)
March 31, December 31,
2006 2005
--------- ---------
(Unaudited)
Liabilities and stockholders' equity
Current liabilities
Accounts payable $ 18,957 $ 12,945
Accrued expenses 24,618 25,158
Line of credit with First Tennessee 17,000 17,000
Income taxes payable 20,789 17,756
Other current liabilities 7,488 7,161
--------- ---------
Total current liabilities 88,852 80,020
Deferred income taxes 7,540 7,426
Other liabilities 1,298 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 85,681 85,550
Accumulated deficit (53,855) (67,151)
--------- ---------
Total stockholders' equity 32,047 18,618
--------- ---------
Total liabilities and stockholders' equity $ 250,737 $ 228,799
========= =========
Pinnacle Airlines Corp.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
Three Months Ended March 31,
-----------------------
2006 2005
--------- ---------
Cash provided by operating activities $ 15,466 $ 7,219
Cash used in investing activities (13,552) (2,152)
Cash provided by financing activities - 9,663
--------- ---------
Net increase in cash and cash equivalents 1,914 14,730
Cash and cash equivalents at beginning of period 31,567 34,912
--------- ---------
Cash and cash equivalents at end of period $ 33,481 $ 49,642
========= =========
Pinnacle Airlines Corp.
Reconciliation of Non-GAAP Disclosures (Unaudited)
Three Months Ended March 31,
----------------------------
% Increase
2006 2005 (Decrease)
--------- -------- -------
(in thousands, except per
share data)
Net Income:
Net income in accordance with GAAP $ 13,296 $ 23,332 (43)%
Deduct: Gain on repurchase of debt, net of
related tax - (11,302) 100%
--------- -------- -------
Pro forma net income $ 13,296 $ 12,030 11%
========= ======== =======
Basic and Diluted EPS:
Basic and diluted EPS in accordance with GAAP $ 0.61 $ 1.06 (42)%
Deduct: Gain on repurchase of debt, net of
related tax - (0.51) 100%
--------- -------- -------
Pro forma basic and diluted EPS $ 0.61 $ 0.55 11%
========= ======== =======
Pinnacle Airlines Corp.
Operating Statistics (Unaudited)
Three Months Ended March 31,
-------------------------------
2006 2005 Change
--------- --------- ---------
Other Data:
Revenue passengers (in thousands) 2,015 1,669 21%
Revenue passenger miles (in thousands) (1) 971,806 817,662 19%
Available seat miles (in thousands) 1,341,668 1,288,500 4%
Passenger load factor (2) 72.4% 63.5% 8.9 pts.
Operating revenue per available seat mile
(in cents) 15.44 15.11 2%
Operating costs per available seat mile
(in cents) 13.83 13.56 2%
Operating revenue per block hour $ 2,018 $ 1,945 4%
Operating costs per block hour $ 1,808 $ 1,744 4%
Block hours 102,597 100,143 2%
Cycles 61,265 57,096 7%
Average daily utilization (block hours) 9.19 9.34 (2%)
Average stage length (miles) 473 492 (4%)
Number of operating aircraft (end of
period) 124 123 1%
Employees (end of period) 3,548 3,350 6%
(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.
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