EXHIBIT 99.1
PINNACLE AIRLINES REPORTS FOURTH QUARTER 2005 FINANCIAL RESULTS
MEMPHIS, TN -- February 23, 2006 -- Pinnacle Airlines Corp. (Nasdaq: PNCL) today
reported fourth quarter 2005 earnings per fully diluted share ("EPS") of $0.45.
Fourth quarter net income was reduced by an after tax charge of approximately
$3.2 million, or $0.15 per fully diluted share, associated with the bankruptcy
filings of Northwest Airlines, Inc. ("Northwest") and Mesaba Aviation, Inc.
("Mesaba"). Excluding this charge, Pinnacle's fourth quarter pro forma EPS was
$0.60, an increase of 28% over EPS of $0.47 in the fourth quarter of 2004. Net
income in the fourth quarter of 2005 was $10.0 million ($13.2 million excluding
the above referenced charge).
For the full year 2005, Pinnacle reported net income of $25.7 million, or EPS of
$1.17, which includes after tax charges of approximately $37.8 million, or $1.73
per share, for items associated with the bankruptcy filings of Northwest and
Mesaba and an after tax gain of $11.3 million, or $0.52 per share, from
Pinnacle's purchase of its note payable to Northwest in February 2005. Excluding
the impact of these items, Pinnacle's pro forma net income for 2005 increased
28% to $52.2 million ($2.38 per fully diluted share), as compared to 2004 net
income of $40.7 million ($1.86 per fully diluted share).
The fourth quarter and full year after-tax charges of $3.2 million and $37.8
million, respectively, relate to provisions for uncollectible amounts owed by
Northwest to Pinnacle at the time of Northwest's bankruptcy filing, and a loss
provision related to Saab turboprop aircraft that have been returned to Pinnacle
by Mesaba as a result of Mesaba's bankruptcy filing. Mesaba had previously
subleased the aircraft from Pinnacle.
During the quarter, Northwest rejected the primary leases on 15 of Pinnacle's
CRJ aircraft and returned the aircraft to their lessors. As a result, Pinnacle's
operating fleet has been reduced to 124 aircraft.
In the fourth quarter of 2005, Pinnacle recorded operating revenue of $213.0
million, an increase of $31.7 million, or 17%, over the same period in 2004. For
the quarter, Pinnacle completed 107,098 block hours and 62,074 cycles, increases
of 12% and 10%, respectively, over the same period in 2004.
Excluding the Northwest and Mesaba bankruptcy charge, Pinnacle's pro forma
operating margin for the fourth quarter of 2005 was 10.4%, as compared to an
operating margin of 9.7% for the fourth quarter of 2004. Pinnacle's operating
margin in the fourth quarter of 2004 was negatively impacted by operating
performance penalties contained in Pinnacle's Airline Services Agreement ("ASA")
which were incurred during the second half of 2004. For the second half of 2005,
Pinnacle exceeded all performance levels required under its ASA with Northwest.
In addition, Pinnacle was able to reduce its costs during the fourth quarter of
2005 commensurate with the reduction in revenue associated with Northwest's
removal of 15 aircraft, thereby maintaining a pro forma operating margin in
excess of the 10% target operating margin contained in the ASA.
"2005 was an extraordinary year for Pinnacle Airlines. Despite the many
challenges we faced, including the sudden fleet reduction of 15 aircraft, our
People exceeded all performance goals and managed extremely effective cost
control," said Philip H. Trenary, Pinnacle's President and Chief Executive
Officer."
For the year, Pinnacle recorded operating revenue of $841.6 million, an increase
of 32% over 2004. Pinnacle completed 432,900 block hours and 249,262 cycles,
increases of 34% and 24%, respectively, over 2004.
Pinnacle ended the quarter with cash and short-term investments totaling $75.7
million. Due to the timing of payments from Northwest under the ASA, Pinnacle's
balance of cash and short-term investments is typically at its highest level at
the end of a month. Pinnacle's balance of cash and short-term investments can
decline by as much as $35 million intra-month as it meets regular operating cash
flow needs prior to receiving revenue payments from Northwest.
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, operating margin,
net income, EPS, operating cost per block hour and operating cost per available
seat mile ("ASM") for the three months ended December 31, 2005 regarding the
previously discussed charge associated with the bankruptcy filings of Northwest
and Mesaba. Similar tables have also been prepared for the year ended December
31, 2005 that exclude the nonrecurring gain on repurchase of the note payable
with Northwest and the charge associated with the bankruptcy filings of
Northwest and Mesaba. 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.
Auditor's Opinion
Pinnacle's independent registered public accounting firm, Ernst & Young LLP
("Ernst & Young") is now performing its annual audit of the Company's financial
statements for the year ended December 31, 2005. Due to the uncertainties
arising from the bankruptcy proceedings of Pinnacle's only customer, Northwest
Airlines, Ernst & Young has advised that its audit opinion will contain an
explanatory paragraph discussing going concern uncertainties (commonly
referred to as a "going concern opinion"). Pinnacle is in ongoing communications
with Northwest concerning the nature of the future relationship between the
companies, and Pinnacle intends to work with Northwest to determine mutually
satisfactory conditions under which Northwest will continue its business
relationship with Pinnacle.
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 110 cities in 36 states and three Canadian provinces.
Pinnacle Airlines maintains its headquarters in Memphis, Tennessee, and employs
approximately 3,450 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.
For further information, please contact Philip Reed at (901) 348-4257, or visit
our Web site at www.nwairlink.com.
PINNACLE AIRLINES CORP.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<Table>
<Caption>
THREE MONTHS ENDED DECEMBER 31,
--------------------------------
2005 2004
---------- ----------
Operating revenues:
Regional airline services $ 210,584 $ 179,400
Other 2,447 1,910
--------- ---------
Total operating revenues 213,031 181,310
Operating expenses:
Salaries, wages and benefits 34,613 29,619
Aircraft fuel 28,006 24,689
Aircraft maintenance, materials and repairs 8,319 6,618
Aircraft rentals 71,282 60,075
Other rentals and landing fees 10,304 10,119
Ground handling services 23,284 19,747
Depreciation 998 851
Other 14,107 12,068
Provision for losses associated with bankruptcy filings of
Northwest and Mesaba 5,685 --
--------- ---------
Total operating expenses 196,598 163,786
--------- ---------
Operating income 16,433 17,524
Operating income as a percentage of operating revenues 7.7% 9.7%
Nonoperating expense:
Interest expense, net (1,086) (1,048)
Miscellaneous income, net 17 119
--------- ---------
Total nonoperating expense (1,069) (929)
--------- ---------
Income before income taxes 15,364 16,595
Income tax expense 5,402 6,271
--------- ---------
Net income $ 9,962 $ 10,324
========= =========
Basic and diluted earnings per share $ 0.45 $ 0.47
========= =========
Shares used in computing basic earnings per share 21,934 21,892
========= =========
Shares used in computing diluted earnings per share 21,934 21,954
========= =========
PINNACLE AIRLINES CORP.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<Table>
<Caption>
YEARS ENDED DECEMBER 31,
-------------------------------
2005 2004
----------- ---------
(UNAUDITED)
Operating revenues:
Regional airline services $ 833,125 $ 631,504
Other 8,480 3,944
--------- ---------
Total operating revenues 841,605 635,448
Operating expenses:
Salaries, wages and benefits 134,277 105,143
Aircraft fuel 112,666 83,572
Aircraft maintenance, materials and repairs 31,865 23,545
Aircraft rentals 277,914 209,047
Other rentals and landing fees 42,972 37,101
Ground handling services 92,689 65,877
Depreciation 4,017 3,153
Other 58,677 40,707
Provision for losses associated with bankruptcy filings of
Northwest and Mesaba
59,599 --
--------- ---------
Total operating expenses 814,676 568,145
--------- ---------
Operating income 26,929 67,303
Operating income as a percentage of operating revenues 3.2% 10.6%
Nonoperating income (expense):
Interest income 1,239 301
Interest expense (4,772) (4,907)
Miscellaneous income, net 15 428
Gain on extinguishment of debt 18,000 --
--------- ---------
Total nonoperating income (expense) 14,482 (4,178)
--------- ---------
Income before income taxes 41,411 63,125
Income tax expense 15,713 22,400
--------- ---------
Net income $ 25,698 $ 40,725
========= =========
Basic and diluted earnings per share $ 1.17 $ 1.86
========= =========
Shares used in computing basic earnings per share 21,913 21,892
========= =========
Shares used in computing diluted earnings per share 21,932 21,911
========= =========
PINNACLE AIRLINES CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<Table>
<Caption>
DECEMBER 31,
------------------------------
2005 2004
----------- ---------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 31,567 $ 34,912
Short-term investments 44,160 --
Receivables, principally from Northwest, net of allowances of $51,523 in 2005
and $34 in 2004 30,190 25,139
Spare parts and supplies, net of allowances of $1,084 in 2005 and $494 in 2004 6,368 5,341
Prepaid expenses and other assets 5,623 5,644
Deferred income taxes, net of allowance 9,146 860
--------- ---------
Total current assets 127,054 71,896
Property and equipment:
Aircraft and rotable spares 39,362 35,837
Other property and equipment 19,209 16,161
Office furniture and fixtures 2,002 1,863
--------- ---------
60,573 53,861
Less accumulated depreciation (18,038) (14,445)
--------- ---------
Net property and equipment 42,535 39,416
Other assets, primarily aircraft deposits with Northwest 22,155 21,111
Debt issuance costs, net of amortization of $194 4,198 --
Goodwill, net of amortization of $4,027 18,422 18,422
Contractual rights acquired from Northwest, net of amortization of $680 in 2005
and $0 in 2004 14,435 15,115
--------- ---------
Total assets $ 228,799 $ 165,960
========= =========
</Table>
PINNACLE AIRLINES CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<Table>
<Caption>
DECEMBER 31,
------------------------------
2005 2004
----------- ---------
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable $ 12,945 $ 12,634
Accrued expenses 25,158 19,432
Line of credit 17,000 --
Income taxes payable 17,756 1,633
Other current liabilities 7,161 6,756
--------- ---------
Total current liabilities 80,020 40,455
Deferred income taxes 7,426 7,105
Senior convertible notes 121,000 --
Note payable and line of credit from Northwest -- 125,000
Other liabilities 1,735 948
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 in 2005 and 2004, respectively 219 220
Additional paid-in capital 85,550 85,603
Accumulated deficit (67,151) (92,849)
Unearned compensation on restricted stock -- (522)
--------- ---------
Total stockholders' equity (deficiency) 18,618 (7,548)
--------- ---------
Total liabilities and stockholders' equity (deficiency) $ 228,799 $ 165,960
========= =========
PINNACLE AIRLINES CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<Table>
<Caption>
YEARS ENDED DECEMBER 31,
------------------------------
2005 2004
----------- ---------
(UNAUDITED)
Cash provided by operating activities $ 27,284 $ 37,997
Cash used in investing activities (57,237) (17,590)
Cash provided by (used in) financing activities 26,608 (17,018)
--------- ---------
Net (decrease) increase in cash and cash equivalents (3,345) 3,389
Cash and cash equivalents at beginning of period 34,912 31,523
--------- ---------
Cash and cash equivalents at end of period $ 31,567 $ 34,912
========= =========
PINNACLE AIRLINES CORP.
RECONCILIATION OF NON-GAAP DISCLOSURES (UNAUDITED)
<Table>
<Caption>
THREE MONTHS ENDED DECEMBER 31,
------------------------------------------------
% INCREASE
2005 2004 (DECREASE)
---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
OPERATING INCOME:
Operating income in accordance with GAAP $ 16,433 $ 17,524 (6)%
Add: Provision for losses associated with Northwest
and Mesaba bankruptcy filings 5,685 -- 100%
---------- ---------- ----------
Pro forma operating income $ 22,118 $ 17,524 26%
---------- ---------- ----------
OPERATING MARGIN:
Operating margin in accordance with GAAP 7.7% 9.7% (2.0) pts.
Add: Provision for losses associated with Northwest
and Mesaba bankruptcy filings 2.7% -- 2.7 pts.
---------- ---------- ----------
Pro forma operating margin 10.4% 9.7% 0.7 pts.
---------- ---------- ----------
NET INCOME:
Net income in accordance with GAAP $ 9,962 $ 10,324 (4)%
Add: Provision for losses associated with Northwest
and Mesaba bankruptcy filings, net of tax 3,244 -- 100%
---------- ---------- ----------
Pro forma net income $ 13,206 $ 10,324 28%
---------- ---------- ----------
BASIC AND DILUTED EPS:
Basic and diluted EPS in accordance with GAAP $ 0.45 $ 0.47 (4)%
Add: Provision for losses associated with Northwest
and Mesaba bankruptcy filings, net of tax 0.15 -- 100%
---------- ---------- ----------
Pro forma basic and diluted EPS $ 0.60 $ 0.47 28%
---------- ---------- ----------
</Table>
<Table>
<Caption>
THREE MONTHS ENDED DECEMBER 31, 2005
-------------------------------------
Operating Cost Operating Cost
per Block Hour per ASM (in cents)
-------------- ------------------
SELECTED DATA:
Selected data derived from operating expenses in
accordance with GAAP $ 1,836 13.98
Deduct: Provision for losses associated with
Northwest and Mesaba bankruptcy filings (53) (0.40)
--------- ---------
Pro forma selected data $ 1,783 13.58
========= =========
PINNACLE AIRLINES CORP.
RECONCILIATION OF NON-GAAP DISCLOSURES (UNAUDITED)
<Table>
<Caption>
YEARS ENDED DECEMBER 31,
-----------------------------------------------
% INCREASE
2005 2004 (DECREASE)
---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
OPERATING INCOME:
Operating income in accordance with GAAP $ 26,929 $ 67,303 (60)%
Add: Provision for losses associated with Northwest
and Mesaba bankruptcy filings 59,599 -- 100%
---------- ---------- ----------
Pro forma operating income $ 86,528 $ 67,303 29%
---------- ---------- ----------
OPERATING MARGIN:
Operating margin in accordance with GAAP 3.2% 10.6% (7.4) pts.
Add: Provision for losses associated with Northwest
and Mesaba bankruptcy filings 7.1% -- 7.1 pts.
---------- ---------- ----------
Pro forma operating margin 10.3% 10.6% (0.3) pts.
---------- ---------- ----------
NET INCOME:
Net income in accordance with GAAP $ 25,698 $ 40,725 (37)%
Add: Provision for losses associated with Northwest
and Mesaba bankruptcy filings, net of
related tax 37,763 -- 100%
Deduct: Gain on repurchase of debt, net of related tax (11,302) -- (100)%
---------- ---------- ----------
Pro forma net income $ 52,159 $ 40,725 28%
---------- ---------- ----------
BASIC AND DILUTED EPS:
Basic and diluted EPS in accordance with GAAP $ 1.17 $ 1.86 (37)%
Add: Provision for losses associated with Northwest
and Mesaba bankruptcy filings, net of related tax 1.73 -- 100%
Deduct: Gain on repurchase of debt, net of
related tax (0.52) -- (100)%
---------- ---------- ----------
Pro forma basic and diluted EPS $ 2.38 $ 1.86 28%
---------- ---------- ----------
<Table>
<Caption>
YEAR ENDED DECEMBER 31, 2005
-------------------------------------
Operating Cost Operating Cost
per Block Hour per ASM (in cents)
-------------- ------------------
SELECTED DATA:
Selected data derived from operating expenses in
accordance with GAAP $ 1,882 14.21
Deduct: Provision for losses associated with
Northwest and Mesaba bankruptcy filings (138) (1.04)
--------- ---------
Pro forma selected data $ 1,744 13.17
========= =========
PINNACLE AIRLINES CORP.
OPERATING STATISTICS (UNAUDITED)
<Table>
<Caption>
THREE MONTHS ENDED DECEMBER 31,
--------------------------------------------------------
2005 2004 CHANGE
---------- ---------- -----------
OTHER DATA:
Revenue passengers (in thousands) 2,134 1,715 24%
Revenue passenger miles (in thousands) (1) 1,064,392 827,901 29%
Available seat miles (in thousands) 1,406,272 1,252,166 12%
Passenger load factor (2) 75.7% 66.1% 9.6 pts.
Operating revenue per available seat mile (in cents) 15.15 14.48 5%
Operating costs per available seat mile (in cents) 13.98 13.08 7%
Operating costs per available seat mile excluding the
provision for losses associated with the
bankruptcies of Northwest and Mesaba (in cents) 13.58 13.08 4%
Operating revenue per block hour $ 1,989 $ 1,892 5%
Operating costs per block hour $ 1,836 $ 1,709 7%
Operating costs per block hour excluding the provision
for losses associated with the bankruptcies of
Northwest and Mesaba $ 1,783 $ 1,709 4%
Block hours 107,098 95,834 12%
Cycles 62,074 56,338 10%
Average daily utilization (block hours) 8.69 9.21 (6)%
Average stage length (miles) 493 482 2%
Number of operating aircraft (end of period) 124 117 6%
Employees 3,436 3,056 12%
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
2005 2004 CHANGE
---------- ---------- -----------
OTHER DATA:
Revenue passengers (in thousands) 8,105 6,340 28%
Revenue passenger miles (in thousands) (1) 4,129,039 2,894,776 43%
Available seat miles (in thousands) 5,732,773 4,219,078 36%
Passenger load factor (2) 72.0% 68.6% 3.4 pts.
Operating revenue per available seat mile (in cents) 14.68 15.06 (3)%
Operating revenue per block hour $ 1,944 $ 1,962 (1)%
Operating costs per available seat mile (in cents) 14.21 13.47 5%
Operating costs per available seat mile excluding the
provision for losses associated with the
bankruptcies of Northwest and Mesaba (in cents) 13.17 13.47 (2)%
Operating costs per block hour $ 1,882 $ 1,754 7%
Operating costs per block hour excluding the provision
for losses associated with the bankruptcies of
Northwest and Mesaba $ 1,744 $ 1,754 (1)%
Block hours 432,900 323,810 34%
Cycles 249,262 201,816 24%
Average daily utilization (block hours) 9.07 8.98 1%
Average stage length (miles) 500 450 11%
Number of operating aircraft (end of period) 124 117 6%
Employees 3,436 3,056 12%
- -----------------
(1) Revenue passenger miles represent the number of miles flown by revenue
passengers.
(2) Passenger load factor equals revenue passenger miles divided by
available seat miles.