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Pinnacle Airlines Corp. Reports Third Quarter 2008 Financial Results Company Reports Consolidated Net Income of $7.7 Million MEMPHIS, TN--(MARKET WIRE)--Nov 6, 2008 -- Pinnacle Airlines Corp. (NasdaqGS:PNCL - News) (the
"Company") today reported third quarter 2008 net income
of $7.7 million and
fully diluted earnings per share ("EPS") of $0.43. The Company
reported
net income and EPS of $10.9 million and $0.48, respectively,
for the third
quarter of 2007.
The Company reported consolidated operating income of $20.0 million during the third quarter of 2008, an increase of 33% over the third quarter of 2007. During the third quarter of 2008, Pinnacle Airlines, Inc. ("Pinnacle"), the Company's regional jet operating subsidiary, reported operating income and an operating margin of $12.0 million and 8.1%, respectively, while Colgan Air, Inc. ("Colgan"), the Company's regional turboprop operating subsidiary, reported operating income and an operating margin of $8.0 million and 10.9%, respectively. "We are very proud of our People at Colgan and Pinnacle," said Phil Trenary, the Company's chief executive officer. "Thanks to their focus, hard work, and dedication, Colgan's financial performance dramatically improved and Pinnacle led all regional carriers and most mainline carriers in the United States in on-time performance during the third quarter of 2008." Significant recent accomplishments of the Company and its two operating subsidiaries include the following: Recent Significant Events -- Colgan took delivery of two Q400 aircraft during the third quarter to be operated under its capacity purchase agreement with Continental Airlines. With the addition of these two aircraft, Colgan now operates 15 Q400 aircraft as Continental Connection, primarily out of Continental's hub at Newark Liberty International Airport. Operating and financial performance related to the Q400 was strong during the third quarter, contributing significantly to the improved operating income at Colgan. -- The Company entered into an agreement with Delta to operate on a short-term basis seven additional CRJ-900 aircraft that were formerly operated by another Delta Connection carrier. The Company's Pinnacle subsidiary will temporarily operate these seven CRJ-900 aircraft until Pinnacle's seven remaining permanent CRJ-900 aircraft begin operations under the Delta Connection Agreement in the first half of 2009. Pinnacle has received and is operating four of the additional seven temporary CRJ-900 aircraft, and expects to receive the remaining three in November 2008. In addition, Pinnacle accepted delivery of two of its permanent CRJ-900 aircraft fleet during the third quarter. These aircraft are being used as spares to support Pinnacle's Delta Connection operations until they are placed into full service under the Delta Connection Agreement in January 2009. -- Colgan continues to execute on its pro-rate turn-around plan, with six Saab 340 and three Beech 1900 aircraft scheduled to retire during the fourth quarter. The Company is negotiating with United to retain certain routes as a United Express carrier at United's hub at Washington Dulles International Airport that previously the Company intended to eliminate. The Company anticipates continuing to operate in these markets with a modified pro-rate agreement that provides for a connecting passenger incentive payment from United to mitigate the risk of volatile fuel costs. The Company is working to finalize this agreement with United during the fourth quarter. -- Pinnacle led the regional airline industry in operating performance during the third quarter of 2008, achieving the best on-time performance of all regional airlines reporting to the Department of Transportation. In addition, Pinnacle led all U.S. airlines reporting to the Department of Transportation in on-time performance for the month of July. -- In November 2008, the Company amended its revolving credit facility collateralized by the Company's auction rate securities portfolio. This amendment extends the maturity date from February 2009 to November 2009 and provides for additional borrowings of up to $10 million to be used to fund purchases or redemptions of other indebtedness of the Company. -- On October 29, 2008, Delta and Northwest completed their previously announced merger. The Company is the second largest independent corporate regional partner for the combined Delta/Northwest operation, with 139 aircraft in the Delta network. The Company does not believe that this merger will have a material adverse effect on its operations, as its capacity purchase agreements with Delta are relatively long-term and do not contain early termination provisions that could be triggered by consolidation. "On behalf of the Pinnacle family, I want to congratulate Delta and Northwest on merging to form the world's largest commercial airline company," said Phil Trenary. "Our industry-leading performance and competitive costs provide a solid foundation for continuing our strong relationship with Delta." Third Quarter 2008 Financial and Operating Results Pinnacle completed 107,632 block hours and 66,779 departures, decreases of 4% and 2%, respectively, over the same period in 2007. Pinnacle's capacity decreased due to the return of 15 CRJ-200 aircraft operating under its Airline Services Agreement ("ASA") with Northwest, partially offset by the addition of ten CRJ-900 aircraft operating under its Delta Connection Agreement ("DCA"). Colgan completed 43,004 block hours and 34,320 departures during the third quarter, increases of 22% and 14%, respectively, over the same period in 2007. The addition of Colgan's Q400 aircraft fleet was the primary factor in the growth in its operations. The Company recorded consolidated operating revenue of $221.8 million, an increase of $16.1 million, or 8%, over the same period in 2007. This increase is primarily related to revenue earned under the Company's new contracts with Delta and Continental, offset by a decrease in revenue in its Northwest Airlink and pro-rate operations. Consolidated operating income and operating margin were $20.0 million and 9.0%, respectively, during the third quarter of 2008. Consolidated operating income and operating margin for the third quarter of 2007 were approximately $15.0 million and 7.3%, respectively. Pinnacle reported operating income and operating margin of $12.0 million and 8.1%, a decline of $3.9 million from the third quarter of 2007. Operating income declined due to the previously mentioned reduction in capacity, and due to ongoing transitional costs associated with the start-up of Pinnacle's CRJ-900 operations for Delta. Pinnacle had planned to operate at a higher level of capacity in both its Delta Connection and Northwest Airlink operations, and hired and retained crews accordingly. These higher levels of staffing led to lower productivity and a higher unit labor cost during the third quarter of 2008 than expected. In addition, Pinnacle incurred approximately $0.75 million of unreimbursed costs associated with two CRJ-900 aircraft that delivered during the third quarter but that will not enter into service under the DCA until January 2009. Pinnacle also began certain upgrades to its CRJ-200 fleet during the third quarter to improve the mechanical reliability of the fleet during the upcoming winter months. These maintenance upgrades, which are not reimbursable maintenance costs under Pinnacle's ASA, also contributed to lower operating income. Colgan reported operating income and operating margin of $8.0 million and 10.9%, an increase of $8.9 million from the third quarter of 2007. The addition of Colgan's Q400 aircraft fleet contributed significantly to the improvement in operating income during the third quarter. In addition, Colgan's revenue per available seat mile within its pro-rate operations increased by 9% year over year. This increase in revenue was partially offset by a $4.0 million increase in fuel costs from the third quarter of 2007. Colgan's fuel cost per gallon during the third quarter of 2008 was $3.79. Colgan's third quarter 2008 results included a charge related to the previously announced retirement of a portion of the Company's Saab 340 and Beech 1900 fleet totaling $1.1 million ($0.7 million net of related income taxes), and a credit resulting from a correction of an error that reduced maintenance expense by $1.4 million ($0.9 million net of related income taxes). Together these two items increased the Company's third quarter 2008 EPS by $0.01. Net interest expense for the third quarter was approximately $9.0 million, as compared to net interest income of $1.4 million during the third quarter of 2007. The increase in net interest expense is driven by interest costs from the investments the Company has made in its new fleet of Q400 and CRJ-900 aircraft. Net income for the third quarter was $7.7 million, as compared to net income during the third quarter of 2007 of $10.9 million. Cash and Investments The Company ended the quarter with unrestricted cash and cash equivalents totaling $63.8 million. The Company generated $14.7 million in cash and cash equivalents from operating activities during the third quarter 2008. Cash used for investing activities of $5.8 million primarily related to non-aircraft capital expenditures and the net purchase of aircraft. Cash used in financing activities was $10.3 million, which included $4.8 million in debt repayments associated with the Company's aircraft pre-delivery payment financing facilities and $5.5 million of regularly scheduled principal payments on long-term debt and other items. 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 Delta Connection and operates 124 CRJ-200 and 15 CRJ-900 regional jet aircraft in the United States, Canada, the Bahamas, Mexico, U.S. Virgin Islands, and Turks and Caicos Islands. Colgan Air, Inc. operates as Continental Connection, United Express and US Airways Express and operates a fleet of 15 Q400, 37 Saab 340 and four Beech 1900 turboprop regional aircraft. 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. For further information, please contact Joe Williams, at (901) 346-6162, or visit our website at www.pncl.com.
Pinnacle Airlines Corp.
Condensed Consolidated Statements of Income (Unaudited)
(in thousands, except per share data)
Three Months Ended
September 30,
--------------------
2008 2007
--------- ---------
Operating revenues
Regional airline services $ 220,242 $ 203,271
Other 1,550 2,459
--------- ---------
Total operating revenues 221,792 205,730
Operating expenses
Salaries, wages and benefits 57,428 52,830
Aircraft fuel 14,831 10,785
Aircraft maintenance, materials and repairs 20,455 22,468
Aircraft rentals 31,411 35,049
Other rentals and landing fees 19,537 15,307
Ground handling services 21,651 24,520
Commissions and passenger related expense 7,183 7,120
Depreciation and amortization 7,586 2,448
Other 20,631 20,196
Impairment of goodwill and aircraft lease return
costs 1,069 -
--------- ---------
Total operating expenses 201,782 190,723
--------- ---------
Operating income 20,010 15,007
Operating income as a percentage of operating
revenues 9.0% 7.3%
Nonoperating (expense) income
Interest income 1,289 2,521
Interest expense (10,253) (1,128)
Miscellaneous income (expense) income 192 (11)
--------- ---------
Total nonoperating (expense) income (8,772) 1,382
--------- ---------
Income before income taxes 11,238 16,389
Income tax expense (3,521) (5,485)
--------- ---------
Net income $ 7,717 $ 10,904
========= =========
Basic earnings per share $ 0.43 $ 0.53
========= =========
Diluted earnings per share $ 0.43 $ 0.48
========= =========
Shares used in computing basic earnings per share 17,867 20,470
========= =========
Shares used in computing diluted earnings per share 17,891 22,544
========= =========
Pinnacle Airlines Corp.
Condensed Consolidated Statements of Income (Unaudited)
(in thousands, except per share data)
Nine Months Ended
September 30,
--------------------
2008 2007
--------- ---------
Operating revenues
Regional airline services $ 640,414 $ 578,696
Other 6,873 7,578
--------- ---------
Total operating revenues 647,287 586,274
Operating expenses
Salaries, wages and benefits 169,901 150,392
Aircraft fuel 41,603 26,718
Aircraft maintenance, materials and repairs 65,997 62,941
Aircraft rentals 97,439 103,997
Other rentals and landing fees 52,386 44,359
Ground handling services 72,712 73,236
Commissions and passenger related expense 21,436 17,935
Depreciation and amortization 18,566 6,820
Other 64,298 57,222
Impairment of goodwill and aircraft lease return
costs 13,688 -
--------- ---------
Total operating expenses 618,026 543,620
--------- ---------
Operating income 29,261 42,654
Operating income as a percentage of operating
revenues 4.5% 7.3%
Nonoperating (expense) income
Interest income 5,326 8,468
Interest expense (23,915) (6,109)
Impairment of auction rate securities (8,675) -
Loss on sale of unsecured claim - (4,144)
Miscellaneous income 166 325
--------- ---------
Total nonoperating expense (27,098) (1,460)
--------- ---------
Income before income taxes 2,163 41,194
Income tax expense (3,244) (13,263)
--------- ---------
Net income (loss) $ (1,081) $ 27,931
========= =========
Basic earnings (loss) per share $ (0.06) $ 1.31
========= =========
Diluted earnings (loss) per share $ (0.06) $ 1.17
========= =========
Shares used in computing basic (loss) earnings per
share 17,864 21,398
========= =========
Shares used in computing diluted (loss) earnings per
share 17,864 23,863
========= =========
Pinnacle Airlines Corp.
Condensed Consolidated Balance Sheets
(in thousands, except share data)
September December
30, 2008 31, 2007
----------- -----------
Assets (Unaudited)
Current assets
Cash and cash equivalents $ 63,829 $ 26,785
Restricted cash 4,558 5,327
Short-term investments - 186,850
Receivables, net 33,594 31,107
Spare parts and supplies, net 23,436 16,030
Prepaid expenses and other assets 10,836 16,535
Deferred income taxes, net of allowance 13,677 12,285
Income taxes receivable 26,979 -
----------- -----------
Total current assets 176,909 294,919
Property and equipment
Flight equipment 645,069 162,374
Aircraft pre-delivery payments 12,877 81,425
Other property and equipment 44,372 39,969
Less accumulated depreciation (46,252) (28,358)
----------- -----------
Net property and equipment 656,066 255,410
Investments 126,925 -
Deferred income taxes, net of allowance 53,004 79,856
Other assets, primarily aircraft lease deposits 33,470 28,528
Debt issuance costs, net 6,514 4,598
Goodwill 18,422 28,206
Intangible assets, net 15,002 17,071
----------- -----------
Total assets $ 1,086,312 $ 708,588
=========== ===========
Liabilities and stockholders' equity
Current liabilities
Short-term notes payable and current
maturities of long-term debt $ 37,522 $ 73,513
Bank lines of credit 88,275 8,375
Accounts payable 26,838 33,062
Deferred revenue 23,861 24,099
Accrued expenses and other current liabilities 82,498 104,410
----------- -----------
Total current liabilities 258,994 243,459
Senior convertible notes 121,000 121,000
Long-term debt, less current maturities 452,691 71,812
Deferred revenue, net of current portion 192,555 209,752
Other liabilities 7,904 4,743
Commitments and contingencies
Stockholders' equity
Common stock, $0.01 par value; 40,000,000
shares authorized; 22,514,782 and
22,402,999 shares issued, respectively 225 224
Treasury stock, at cost, 4,450,092 shares (68,152) (68,152)
Additional paid-in capital 93,241 91,165
Accumulated other comprehensive loss (15,850) (10,200)
Retained earnings 43,704 44,785
----------- -----------
Total stockholders' equity 53,168 57,822
----------- -----------
Total liabilities and stockholders' equity $ 1,086,312 $ 708,588
=========== ===========
Pinnacle Airlines Corp.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
Nine Months Ended
September 30,
--------------------
2008 2007
--------- ---------
Cash provided by operating activities $ 13,668 $ 277,022
Cash provided by (used in) investing activities 25,697 (257,840)
Cash used in financing activities (2,321) (14,020)
========= =========
Net increase in cash and cash equivalents 37,044 5,162
Cash and cash equivalents at beginning of period 26,785 705
--------- ---------
Cash and cash equivalents at end of period $ 63,829 $ 5,867
========= =========
Pinnacle Airlines Corp.
Operating Statistics (Unaudited)
Pinnacle Airlines, Inc.
--------------------------------------------------------------
Three Months Ended September Nine Months Ended September
30, 30,
------------------------------ ------------------------------
2008 2007 Change 2008 2007 Change
--------- --------- ------- --------- --------- -------
Other Data:
Revenue
passengers
(in
thousands) 2,619 2,636 (1)% 7,770 7,477 4 %
Revenue
passenger
miles
"RPMs" (in
thousands) 1,236,067 1,230,775 0 % 3,622,776 3,471,275 4 %
Available
seat miles
"ASMs" (in
thousands) 1,598,929 1,562,621 2 % 4,715,054 4,528,179 4 %
Passenger
load
factor 77.3% 78.8% (1.5) pts. 76.8% 76.7% 0.1 pts.
Operating
revenue
per ASM
(in cents) 9.27 9.64 (4)% 9.72 9.79 (1)%
Operating
cost per
ASM (in
cents) 8.52 8.62 (1)% 8.88 8.84 0 %
Operating
revenue
per block
hour $ 1,377 $ 1,340 3 % $ 1,382 $ 1,347 3 %
Operating
cost per
block hour $ 1,265 $ 1,198 6 % $ 1,262 $ 1,217 4 %
Block hours 107,632 112,378 (4)% 331,744 329,201 1 %
Departures 66,779 68,370 (2)% 200,568 199,598 0 %
Average
daily
utilizati-
on (block
hours) 8.74 8.77 0 % 8.91 8.79 1 %
Average
stage
length
(miles) 465 461 1 % 462 460 0 %
Number of
operating
aircraft
(end of
period)
CRJ-200 124 139 (11)%
CRJ-900 11 - 100 %
Employees
(end of
period) 4,164 4,061 3 %
Pinnacle Airlines Corp.
Operating Statistics (Unaudited)
Colgan Air, Inc.
----------------------------------------------------------
Three Months Ended September Nine Months Ended September
30, 30,
----------------------------- ---------------------------
2008 2007 Change 2008 2007 Change
------- ------- --------- ------- ------- --------
Pro Rate
Agreements:
Revenue
passengers (in
thousands) 356 425 (16)% 1,082 1,112 (3)%
RPMs (in
thousands) 65,192 78,475 (17)% 197,977 206,046 (4)%
ASMs (in
thousands) 146,997 164,907 (11)% 446,643 443,782 1 %
Passenger load
factor 44.3% 47.6% (3.3) pts. 44.3% 46.4% (2.1) pts.
Passenger yield
(in cents) 82.26 70.22 17 % 77.76 69.29 12 %
Operating
revenue per
ASM (in cents) 36.48 33.42 9 % 34.47 32.17 7 %
Operating
revenue per
block hour $ 1,804 $ 1,560 16 % $ 1,675 $ 1,512 11 %
Block hours 29,722 35,329 (16)% 91,888 94,433 (3)%
Departures 25,679 30,049 (15)% 77,147 79,982 (4)%
Fuel
consumption
(in thousands
of gallons) 3,918 4,459 (12)% 11,535 12,583 (8)%
Average price
per gallon $ 3.79 $ 2.39 59 % $ 3.61 $ 2.25 60 %
Average fare $ 151 $ 130 16 % $ 142 $ 128 11 %
Capacity
Purchase
Agreement:
Revenue
passengers (in
thousands) 394 - 100 % 770 - 100 %
Revenue
passenger
miles (in
thousands) 109,687 - 100 % 214,582 - 100 %
ASMs (in
thousands) 175,823 - 100 % 325,365 - 100 %
Passenger load
factor 62.4% - 62.4 pts. 66.0% - 66.0 pts.
Operating
revenue per
ASM (in cents) 11.36 - 100 % 10.74 - 100 %
Operating
revenue per
block hour $ 1,504 - 100 % $ 1,413 - 100 %
Block hours 13,282 - 100 % 24,741 - 100 %
Departures 8,641 - 100 % 15,927 - 100 %
Total Colgan:
Block hours 43,004 35,329 22 % 116,629 94,433 24 %
Departures 34,320 30,049 14 % 93,074 79,982 16 %
ASMs (in
thousands) 322,820 164,907 96 % 772,008 443,782 74 %
Total operating
cost per ASM
(in cents) 20.34 33.99 (40)% 25.83 32.27 (20)%
Total operating
cost per ASM
(in cents)
(excluding
impairment
of goodwill
and aircraft
lease return
costs) 20.01 33.99 (41)% 24.06 32.27 (25)%
Total operating
cost per block
hour $ 1,527 $ 1,587 (4)% $ 1,710 $ 1,517 13 %
Total operating
cost per block
hour
(excluding
impairment
of goodwill
and aircraft
lease return
costs) $ 1,502 $ 1,587 (5)% $ 1,593 $ 1,517 5 %
Average daily
utilization
(block hours) 10.76 7.95 35 % 8.63 7.36 17 %
Average stage
length (miles) 221 185 19 % 209 184 14 %
Number of
operating
aircraft (end
of period)
Saab 340 37 42 (12)%
Beech 1900 4 7 (43)%
Q400 15 - 100 %
Employees 1,389 1,244 12 %Contact: For further information, please contact:
Joe Williams
(901) 346-6162
http://www.pncl.com
Source: Pinnacle Airlines
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