EXHIBIT 99.1
PINNACLE AIRLINES REPORTS 2004 EARNINGS OF $40.7 MILLION.
MEMPHIS, TENN. February 22, 2005--Pinnacle Airlines Corp. (NASDAQ: PNCL) today
reported annual net income of $40.7 million, or $1.86 per share. Net income
increased by $5.7 million, or 16.1%, over 2003 net income of $35.1 million, or
$1.60 per share. Net income for the fourth quarter of 2004 was $10.3 million, or
$0.47 per share. Net income during the fourth quarter increased 5.3% over the
fourth quarter of 2003.
"I would like to thank the People of Pinnacle Airlines for another year of
exceptional growth," said Philip Trenary, President and CEO. "I am very pleased
that we delivered financial results for 2004 that exceeded not only our
expectations, but also those targets provided in our operating agreement with
Northwest."
2004 FULL YEAR OPERATING RESULTS
Annual operating revenue of $635.4 million increased $178.6 million, or 39.1%,
over 2003 operating revenue of $456.8 million. Operating income for 2004 was
$67.3 million, a 4.9% increase over 2003 operating income of $64.2 million.
During 2004, Pinnacle achieved an operating margin of 10.6%, 0.6 points above
the target operating margin contained in its Airline Services Agreement ("ASA")
with Northwest Airlines. In connection with its initial public offering of stock
in November 2003, Pinnacle and Northwest amended the target operating margin
under the ASA from 14.0% to 10.0%. If the reduced target margin of 10.0% had
been in effect throughout the twelve months of 2003, Pinnacle's increase during
2004 in both passenger revenue and operating income would have been
approximately 46% compared to 2003. Net interest expense for 2004 decreased by
$2.6 million compared to 2003 due primarily to decreased borrowings.
In 2004, Pinnacle completed 323,810 block hours, an increase of 113,164, or 54%,
over 2003 and 201,816 cycles, an increase of 54,918, or 37%, over 2003. The term
"block hours" refers to the elapsed time between an aircraft leaving a gate and
arriving at a gate, and the term "cycles" refers to an aircraft's departure and
corresponding arrival.
Pinnacle added 41 Canadair Regional Jets ("CRJs") to its fleet in 2004, bringing
its total to 117 CRJs at December 31, 2004. Northwest Airlines has committed to
providing Pinnacle with 139 CRJs by the third quarter of 2005.
2004 FOURTH QUARTER OPERATING RESULTS
Operating revenue increased 42.7% to $181.3 million, from $127.1 million in the
same period of the prior year. Operating income of $17.5 million for the fourth
quarter of 2004 was unchanged from operating income for the same period in 2003.
If the ASA target margin of 10.0% had been in effect throughout the fourth
quarter of 2003, Pinnacle's increase during the fourth quarter of 2004 in
passenger revenue and operating income would have been approximately $57.2
million, or 47%, and $3.7 million, or 27%, respectively, compared to the same
period in 2003. Net interest expense for the fourth quarter of 2004 decreased
$0.7 million compared to the same period in 2003.
Completed block hours increased 34,125, or 55%, to 95,834, and completed cycles
increased 14,555, or 35%, to 56,338.
Fourth quarter 2004 financial results were negatively impacted by severe
weather. During the last week of December, adverse weather closed or reduced
operations at over 60% of the airports served by Pinnacle. These difficulties
were in part responsible for a drop in the Company's average performance
statistics for the six months ended December 31, 2004 falling below the
standards contained in the ASA. As a result, during the first quarter of 2005,
Pinnacle paid $1.4 million to Northwest Airlines in settlement of those
performance related penalties, an amount which was treated as a reduction in
revenue in the fourth quarter.
The Company is beginning to implement certain upgrades to those operational and
communication systems that were overburdened as a result of the adverse weather
and has also developed interim policies should additional severe weather impact
a large portion of the network prior to the completion of the systems upgrades.
Pinnacle had $34.9 million in cash and cash equivalents on December 31, 2004,
representing an increase of $3.4 million over 2003. The Company generated $38.0
million of cash from operations in 2004. Cash used for investing activities was
$17.6 million, and included a $10.0 million payment made to Northwest in
December 2004. The payment was made in connection with an amendment to the
Company's ASA with Northwest that now provides for a fleet of 139 aircraft.
Pursuant to the amendment, Pinnacle will pay an additional $5.1 million to
Northwest in 2005. Total payments by Pinnacle in 2004 on its outstanding line of
credit and note payable to Northwest were $5.0 million and $12.0 million,
respectively.
Subsequent Event
On February 8, 2005, Pinnacle announced the completion of a private sale of $110
million principal amount of its 3.25% senior convertible notes due 2025 (the
"Notes"). On February 11, 2005, Pinnacle announced the completion of the sale of
an additional $11 million principal amount of the Notes. The net proceeds from
the sales were used to purchase the outstanding $120 million note payable to
Northwest at a discounted purchase price of $101.6 million, to repay $5 million
of borrowings outstanding under the revolving line of credit with Northwest, in
each case, with accrued and unpaid interest, and for general corporate purposes.
Non-GAAP Disclosures
This release, and certain tables accompanying this release, includes certain
financial information not prepared in accordance with generally accepted
accounting principles ("GAAP"), regarding passenger revenue and operating income
for the three and twelve months ended 2003 as if the target operating margin
under the ASA with Northwest had been 10%. The Company believes that this
information is useful to investors as it indicates more clearly the Company's
comparative year-to-year operating results. Management may also use this
information to better understand the Company's underlying operating 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.
Pinnacle currently operates an all-jet fleet of 120 Canadair Regional Jets from
Northwest hubs at Detroit, Memphis and Minneapolis - St. Paul and offers
scheduled passenger service with 660 daily departures to 103 cities in 35 states
plus the District of Columbia, and four Canadian provinces. Pinnacle Airlines
maintains its headquarters in Memphis, Tenn., and employs approximately 3,200
People.
Forward Looking Statement
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.
For further information, please visit our web-site at www.nwairlink.com.
# # #
PINNACLE AIRLINES CORP.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED
DECEMBER 31, YEARS ENDED DECEMBER 31,
-------------------------- --------------------------
2004 2003 2004 2003
--------- --------- --------- ---------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
Operating revenues:
Passenger $ 179,400 $ 125,959 $ 631,504 $ 450,611
Other 1,910 1,136 3,944 6,159
--------- --------- --------- ---------
Total operating revenues 181,310 127,095 635,448 456,770
Operating expenses:
Salaries, wages and benefits 29,619 21,355 105,143 83,316
Aircraft fuel 24,689 16,143 83,572 55,007
Aircraft maintenance, materials and repairs 6,618 4,190 23,545 14,116
Aircraft rentals 60,075 38,286 209,047 136,273
Other rentals and landing fees 10,119 7,836 37,101 29,255
Ground handling services 19,747 12,907 65,877 44,622
Depreciation and amortization 851 680 3,153 2,912
Government reimbursements -- -- -- (1,114)
Other 12,068 8,136 40,707 28,214
--------- --------- --------- ---------
Total operating expenses 163,786 109,533 568,145 392,601
--------- --------- --------- ---------
Operating income 17,524 17,562 67,303 64,169
Operating income as a percentage of operating revenue 9.7% 13.8% 10.6% 14.0%
Nonoperating (expense) income
Interest expense, net (1,048) (1,713) (4,606) (7,157)
Miscellaneous income, net 119 173 428 387
--------- --------- --------- ---------
Total nonoperating expense (929) (1,540) (4,178) (6,770)
--------- --------- --------- ---------
16,595 16,022 63,125 57,399
Income before income taxes
Income tax expense 6,271 6,216 22,400 22,332
--------- --------- --------- ---------
Net income $ 10,324 $ 9,806 $ 40,725 $ 35,067
========= ========= ========= =========
Basic earnings per share $ 0.47 $ 0.45 $ 1.86 $ 1.60
========= ========= ========= =========
Diluted earnings per share $ 0.47 $ 0.45 $ 1.86 $ 1.60
========= ========= ========= =========
Shares used in computing basic earnings per share 21,892 21,892 21,892 21,892
========= ========= ========= =========
Shares used in computing diluted earnings per share 21,954 21,892 21,911 21,892
========= ========= ========= =========
PINNACLE AIRLINES CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
DECEMBER 31, DECEMBER 31,
2004 2003
------------ ------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 34,912 $ 31,523
Receivables, principally from Northwest, net 25,139 17,524
Spare parts and supplies, net 5,341 3,773
Prepaid expenses and other assets 5,644 6,810
Deferred income taxes 860 2,549
--------- ---------
Total current assets 71,896 62,179
Property and equipment:
Aircraft and rotable spares 35,837 32,779
Other property and equipment 16,161 14,081
Office furniture and fixtures 1,863 1,258
--------- ---------
53,861 48,118
Less accumulated depreciation (14,445) (13,832)
--------- ---------
Net property and equipment 39,416 34,286
Other assets, primarily aircraft deposits with Northwest 21,111 14,019
Goodwill and other intangibles 33,537 18,422
--------- ---------
Total assets $ 165,960 $ 128,906
========= =========
PINNACLE AIRLINES CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, DECEMBER 31,
2004 2003
------------ ------------
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable $ 16,983 $ 9,716
Accrued expenses 15,083 11,332
Line of credit(1) -- 10,000
Income taxes payable 1,633 5,596
Current portion of deferred credits 515 434
Other current liabilities 6,241 372
Current portion of note payable to Northwest(1) -- 12,000
--------- ---------
Total current liabilities 40,455 49,450
Deferred credits 922 1,438
Deferred income taxes 7,105 6,400
Debt refinanced subsequent to year end(1) 125,000 120,000
Capital lease obligations 26 --
Commitments and contingencies
Stockholders' 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, issued and outstanding -- --
Series common stock, par value $0.01 per share; 5,000,000 shares
authorized; no shares issued -- --
Common stock, $0.01 par value:
Authorized shares - 40,000,000
Issued and outstanding shares - 21,950,260 and 21,892,060 at
December 31, 2004 and 2003, respectively 220 219
Additional paid-in capital 85,603 84,973
Accumulated deficit (92,849) (133,574)
Unearned compensation on restricted stock (522) --
--------- ---------
Total stockholders' deficiency (7,548) (48,382)
--------- ---------
Total liabilities and stockholders' deficiency $ 165,960 $ 128,906
========= =========
(1) Items retired in February 2005 following the Company's sale of convertible
notes are included as non-current liabilities at December 31, 2004.
PINNACLE AIRLINES CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEARS ENDED DECEMBER 31,
-----------------------
2004 2003
-------- --------
(UNAUDITED)
Cash provided by operating activities $ 37,989 $ 50,082
Cash used in investing activities (17,582) (10,894)
Cash used in financing activities (17,018) (12,245)
-------- --------
Net increase in cash and cash equivalents 3,389 26,943
Cash and equivalents at beginning of year 31,523 4,580
-------- --------
Cash and equivalents at end of year $ 34,912 $ 31,523
======== ========
PINNACLE AIRLINES CORP.
OPERATING STATISTICS (UNAUDITED)
THREE MONTHS ENDED DECEMBER 31,
-----------------------------------
2004 2003 CHANGE
--------- ------- ------
OTHER DATA:
Revenue passengers (in thousands) 1,715 1,324 30%
Revenue passenger miles (in thousands)(1) 827,901 547,612 51%
Available seat miles (in thousands) 1,252,166 797,832 57%
Passenger load factor(2) 66.1% 68.6% (2.5) pts
Operating revenue per available seat mile (in cents) 14.48 15.93 (9%)
Operating costs per available seat mile (in cents) 13.08 13.73 (5%)
Block hours 95,834 61,709 55%
Cycles 56,338 41,783 35%
Average daily utilization (block hours) 9.21 9.19 0.02 hrs
Average stage length (miles) 482 405 19%
Number of operating aircraft (end of period) 117 76 54%
Employees at end of period 3,056 2,253 36%
- --------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
------------------------------------
2004 2003 CHANGE
--------- --------- ------
OTHER DATA:
Revenue passengers (in thousands) 6,340 4,540 40%
Revenue passenger miles (in thousands)(1) 2,894,776 1,797,631 61%
Available seat miles (in thousands) 4,219,078 2,678,000 58%
Passenger load factor(2) 68.6% 67.1% 1.5 pts
Operating revenue per available seat mile (in cents) 15.06 17.06 (12%)
Operating costs per available seat mile (in cents) 13.47 14.66 (8%)
Block hours 323,810 210,646 54%
Cycles 201,816 146,898 37%
Average daily utilization (block hours) 8.98 8.83 0.15 hrs
Average stage length (miles) 450 384 17%
Number of operating aircraft (end of period) 117 76 54%
Employees at end of period 3,056 2,253 36%
- ----------------------------------------------------------------------------------------------
(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)
THREE MONTHS ENDED DECEMBER 31,
------------------------------------
2004 2003 % INCREASE
-------- --------- ----------
PASSENGER REVENUE
Passenger revenue in accordance with GAAP $179,400 $ 125,959 42%
Adjustment to reduce target operating margin to 10% from 14% -- (3,733)
-------- --------- --
Adjusted passenger revenue with 10% target operating margin $179,400 $ 122,226 47%
======== ========= ==
OPERATING INCOME
Operating income in accordance with GAAP $ 17,524 $ 17,562 0%
Adjustment to reduce target operating margin to 10% from 14% -- (3,733)
-------- --------- --
Adjusted operating income with 10% target operating margin $ 17,524 $ 13,829 27%
======== ========= ==
YEARS ENDED DECEMBER 31,
------------------------------------
2004 2003 % INCREASE
-------- --------- ----------
PASSENGER REVENUE
Passenger revenue in accordance with GAAP $631,504 $ 450,611 40%
Adjustment to reduce target operating margin to 10% from 14% -- (18,183)
-------- --------- --
Adjusted passenger revenue with 10% target operating margin $631,504 $ 432,428 46%
======== ========= ==
OPERATING INCOME
Operating income in accordance with GAAP $ 67,303 $ 64,169 5%
Adjustment to reduce target operating margin to 10% from 14% -- (18,183)
-------- --------- --
Adjusted operating income with 10% target operating margin $ 67,303 $ 45,986 46%
======== ========= ==