MEMPHIS, Tenn., Nov. 3, 2011 /PRNewswire/ -- Pinnacle Airlines
Corp. (NASDAQ: PNCL) (the "Company") today reported financial
results for the third quarter of 2011. Highlights include the
following:
(Logo:
http://photos.prnewswire.com/prnh/20110112/CL29411LOGO )
- Net loss and net loss per share for the third quarter of 2011
were $3.5 million and $0.19, respectively. Excluding special
items, net loss and net loss per share for the third quarter of
2011 were $1.7 million and
$0.09, respectively.
- The Company recorded $2.9 million
during the third quarter of 2011 for integration, severance, and
contract implementation expenses, which were primarily attributable
to bonuses payable under a new collective bargaining agreement with
the flight attendants at Pinnacle Airlines, Inc. ("Pinnacle") as
well as severance expenses associated with the Company's
integration plan. Special items also include $0.8 million in previously disclosed severance
expenses not related to the Company's integration plan.
- The Company's new pilot contract with the Air Line Pilots
Association ("ALPA"), effective February
2011, increased pilot compensation and benefits and caused
an increase in pilot-related expenses of $4.9 million for the quarter, as compared to the
same period in 2010. Third quarter and year-to-date 2011
results do not reflect anticipated contractual rate increases under
the Company's contracts with Delta Air Lines, Inc. ("Delta").
These rate increases, which the Company expects to begin
receiving in mid-2012, are structured to compensate the Company for
the increase in pilot wage rates associated with the new ALPA
contract. (See further discussion below.)
- The distribution of our flight crews across the network due to
partner schedule changes and the expenses associated with staging
impacted flight crews at various destinations resulted in an
increase of $5.1 million in certain
crew-related expenses during the quarter, as compared to the same
period in 2010. These crew-related expenses include premium
pay, hiring, training, and crew overnight accommodations. The
Company has been working proactively with its partners to evaluate
more optimal network schedules, has adjusted near-term block hour
production, and has been increasing its pilot staffing levels to
address this issue. The Company expects some of these
inefficiencies and their related costs to be mitigated over the
next three to six months.
- The 40% year-over-year increase in the price per gallon of
aircraft fuel, which was partially offset by a 16% decrease in
gallons consumed, negatively impacted Colgan Air, Inc.'s ("Colgan")
Pro-Rate operations by $1.2 million
during the third quarter of 2011.
- In October 2011, the Company and
Delta reached a tentative settlement related to a dispute regarding
the reimbursement of certain heavy airframe maintenance
costs. As a result, the Company recognized approximately
$3.3 million less in revenue during
the third quarter of 2011 related to reimbursement of heavy
airframe maintenance costs. Beginning October 1, 2011, the Company and Delta have
agreed that while the majority of heavy maintenance costs will
continue to be reimbursable by Delta, a portion of heavy
maintenance costs will be treated as rate-based costs. The
Company estimates an annual reduction in 2012 revenue from
reimbursable costs of approximately $6.0
million related to this change. However, this increase
in unreimbursable costs will be factored into the increase in the
CRJ-200 ASA base rates during the contractual rate reset, which is
scheduled to occur as of January 1,
2013.
- The Company reported unrestricted cash and cash equivalents of
$82 million at September 30, 2011.
"First, I would like to thank all of my fellow team members at
Pinnacle Airlines Corp. for their efforts during the quarter.
Without a doubt we saw improved performance across each of
our subsidiaries in large part due to the dedication of these
professionals," said Sean Menke, the
Company's President and Chief Executive Officer. "The
financial results for the quarter are a disappointment, but are
reflective of the numerous changes underway. The Company made
significant progress during the third quarter on multiple fronts.
It has begun the implementation of the pilot integrated
seniority list, agreed to and, shortly after the quarter ended,
ratified a new five-year contract with Pinnacle's flight attendants
and completed over half of the move consolidating the corporate
staff into its new headquarters. Additionally, the Company
has nearly completed all of the FAA requirements to transfer all of
its regional jet operations under the Pinnacle Airlines certificate
by year-end. This is an important trigger setting into motion
the Company's move to its future-state structure. Following
the acquisition of Mesaba, numerous teams were developed to map out
our future management and professional organization. With the
pending transfer of jet aircraft to Pinnacle Airlines it is our
intent to move individuals to their new position by the end of the
first quarter. It is important to note that we have had many
dedicated employees who helped us manage numerous projects, but
elected not to take a position in our future organization.
This step is the first of many that will allow us to begin to
realize cost savings and synergies related to the growth of our
Company. Our current assessment is that the implementation
of the pilot integrated seniority list as well as the pilot
training necessary to transfer our jet operations onto a single
certificate will take all of 2012 to complete. Once again, I
would like to thank my team members for their efforts. They
are well aware of the challenges that lie ahead and the need to
become more efficient. I look forward to working with them to
accomplish the task at hand."
Third Quarter 2011 Financial and Operating Results
During the third quarter of 2011, the Company completed 207,902
block hours and 137,541 departures, decreases of 3% and 4%,
respectively, from the same period in 2010. The
decreases are mainly attributable to the wind-down of the Company's
Saab operations as well as reduced regional jet flying with Delta,
which were partially offset by an increase in the Company's Q400
operations with United Continental Holdings, Inc. ("United").
The Company recorded consolidated operating revenue during the
third quarter of 2011 of $319.8
million, an increase of $17.4
million, or 5.8%, over the same period in
2010. The increase in operating revenue was mainly
attributable to an increase in the Company's Q400 operations with
United and the year-over-year increase in the rates earned under
our operating contracts, which were partially offset by the
wind-down of our Saab operations with Delta as well as reduced
regional jet flying with Delta.
Pinnacle reported third quarter 2011 operating income and an
operating margin of $2.6 million and
1.6%, decreases of $12.9 million and
8.0 percentage points, respectively, from the third quarter of
2010. Pinnacle's financial results were negatively impacted
by an increase in pilot wage rates related to the new labor
agreement with ALPA, an increase in crew related expenses resulting
from scheduling changes by Delta, which resulted in the
reallocation of flight crews and increases in crew staging.
Also, the Company reached a tentative settlement of a dispute
with Delta related to the reimbursement of certain heavy airframe
maintenance costs.
Mesaba reported break-even operating results of $0.0 million and 0% during the third quarter of
2011 as compared to operating income and an operating margin of
$3.1 million and 4.3%, respectively,
during the third quarter of 2010. Mesaba's results were
adversely affected by the ALPA collective bargaining agreement,
which increased expenses by $0.9
million during the third quarter of 2011 as compared to the
same period in 2010. Also, the accelerated wind-down of the
Saab operations with Delta negatively impacted third quarter
results. However, the Company anticipates receiving a rate
adjustment from Delta in order to compensate the Company for the
overhead required to wind-down the Saab operation. Revenue
arising from the rate adjustment will not be recorded until final
determination of the amount with Delta, which the Company expects
to occur in the fourth quarter of 2011.
Colgan reported operating income and an operating margin of
$6.0 million and 7.1%, decreases of
$1.1 million and 3.0 percentage
points, respectively, from the third quarter of 2010. The
decrease in operating margin was mainly attributable to increased
pilot labor costs under the new ALPA pilot contract and a 40%
year-over-year increase in the price per gallon of aircraft
fuel.
Net nonoperating expense was $11.5
million for the third quarter of 2011, as compared to net
nonoperating expense of $10.3 million
for the same period in 2010.
Cash and Cash Equivalents
The Company ended the quarter with $81.8
million in unrestricted cash and cash equivalents. The
Company generated $11.4 million in
cash from operating activities during the third quarter of
2011. Net cash used in investing activities during the third
quarter of 2011 was $4.7 million,
which was primarily related to capital expenditures. Net
cash used in financing activities during the third quarter of 2011
totaled $13.7 million, primarily
related to scheduled payments on debt obligations and capital
leases.
Fiscal Year 2012 Contract Rate Adjustment with Delta
The Company's operating agreements with Delta provide for an
increase to revenue based on changes in the Company's pilot labor
costs after integrating the pilot groups and regional jet
operations of the Company's operating subsidiaries. This increase
will come in the form of a one-time payment to the Company,
expected to be received in mid-2012, tied to pilot labor and
training costs incurred during the integration process (as measured
over the previous 12 months), and a prospective rate increase based
on the Company's pilot labor costs after integration is complete.
Management currently estimates the one-time payment to be as
much as $18 million to $20 million,
and the prospective rate increase to be received post-integration
to be as much as $14 million to $17
million annually. The Company's year-to-date 2011
operating results do not reflect the one-time retrospective payment
or this expected revenue increase.
About Pinnacle Airlines Corp.
Pinnacle Airlines Corp. (NASDAQ: PNCL), a $1 billion airline holding company with 7,700
employees, is the parent company of Pinnacle Airlines, Inc.; Mesaba
Aviation, Inc.; and Colgan Air, Inc. flying as Delta Connection,
United Express and US Airways Express. Pinnacle Airlines
Corp. operating subsidiaries operate 199 regional jets and 82
turboprops on more than 1,540 daily flights to 188 cities and towns
in the United States, Canada, Mexico and Belize. Corporate offices are located in
Memphis, Tenn., and hub operations
are located at 11 major U.S. airports. Visit www.pncl.com for more
information.
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"), including
the Company's operating income, net loss, and diluted loss per
share for the three and nine months ended September 30, 2011, excluding nonrecurring
charges related to integration, severance, and contract
implementation expenses. The Company believes that this
information is useful to investors as it indicates more clearly the
Company's 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.
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 Operations (Unaudited)
(in
thousands, except per share data)
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
Operating revenues
|
|
|
|
|
|
|
|
|
Regional airline
services
|
$
314,839
|
|
$
297,197
|
|
$
922,979
|
|
$
717,530
|
|
Other
|
4,918
|
|
5,138
|
|
15,071
|
|
11,605
|
|
Total operating
revenues
|
319,757
|
|
302,335
|
|
938,050
|
|
729,135
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
Salaries, wages and
benefits
|
108,629
|
|
96,445
|
|
320,206
|
|
216,343
|
|
Aircraft
rentals
|
35,876
|
|
34,000
|
|
104,409
|
|
94,055
|
|
Ground handling
services
|
29,391
|
|
27,528
|
|
87,201
|
|
75,291
|
|
Aircraft maintenance,
materials and repairs
|
43,913
|
|
40,013
|
|
125,713
|
|
95,080
|
|
Other rentals and landing
fees
|
28,037
|
|
24,256
|
|
79,549
|
|
57,579
|
|
Aircraft fuel
|
9,963
|
|
6,814
|
|
28,145
|
|
19,234
|
|
Commissions and passenger
related expense
|
7,770
|
|
6,466
|
|
20,289
|
|
16,090
|
|
Depreciation and
amortization
|
12,791
|
|
10,293
|
|
38,062
|
|
27,927
|
|
Integration, severance,
and contract implementation expenses
|
2,125
|
|
-
|
|
8,477
|
|
-
|
|
Other
|
34,783
|
|
30,801
|
|
102,932
|
|
69,352
|
|
Total operating
expenses
|
313,278
|
|
276,616
|
|
914,983
|
|
670,951
|
|
Operating income
|
6,479
|
|
25,719
|
|
23,067
|
|
58,184
|
|
Nonoperating (expense)
income
|
|
|
|
|
|
|
|
|
Interest
expense, net
|
(12,727)
|
|
(10,693)
|
|
(38,489)
|
|
(29,294)
|
|
Miscellaneous income (expense),
net
|
1,203
|
|
357
|
|
3,200
|
|
(922)
|
|
Total nonoperating
expense
|
(11,524)
|
|
(10,336)
|
|
(35,289)
|
|
(30,216)
|
|
(Loss) income before income
taxes
|
(5,045)
|
|
15,383
|
|
(12,222)
|
|
27,968
|
|
Income tax benefit
(expense)
|
1,576
|
|
(5,942)
|
|
3,409
|
|
(10,948)
|
|
Net (loss) income
|
$
(3,469)
|
|
$
9,441
|
|
$
(8,813)
|
|
$
17,020
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) earnings per
share
|
$
(0.19)
|
|
$
0.52
|
|
$
(0.48)
|
|
$
0.94
|
|
Diluted (loss) earnings per
share
|
$
(0.19)
|
|
$
0.51
|
|
$
(0.48)
|
|
$
0.92
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing basic
(loss) earnings per share
|
18,494
|
|
18,137
|
|
18,451
|
|
18,121
|
|
Shares used in computing diluted
(loss) earnings per share
|
18,494
|
|
18,392
|
|
18,451
|
|
18,433
|
|
|
|
|
|
|
|
|
|
|
|
Pinnacle
Airlines Corp.
Consolidated
Operating Statistics (Unaudited)
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
|
2011
|
|
2010
|
|
%
Change
|
|
2011
|
|
2010
|
|
%
Change(1)
|
|
Revenue passengers (in
thousands)
|
5,492
|
|
5,137
|
|
7 %
|
|
15,204
|
|
11,579
|
|
31 %
|
|
Revenue passenger miles ("RPMs")
(in thousands)
|
2,375,015
|
|
2,293,283
|
|
4 %
|
|
6,652,938
|
|
4,832,476
|
|
38 %
|
|
Available seat miles ("ASMs")
(in thousands)
|
3,032,101
|
|
3,075,699
|
|
(1) %
|
|
8,904,835
|
|
6,600,483
|
|
35 %
|
|
Block hours
|
207,902
|
|
213,951
|
|
(3) %
|
|
622,381
|
|
489,835
|
|
27 %
|
|
Departures
|
137,541
|
|
142,797
|
|
(4) %
|
|
402,392
|
|
330,726
|
|
22 %
|
|
Passenger load factor
|
78.3 %
|
|
74.6%
|
|
3.7 pts.
|
|
74.7%
|
|
73.2%
|
|
1.5 pts.
|
|
Average daily utilization (block
hours)
|
7.97
|
|
7.71
|
|
3 %
|
|
8.01
|
|
7.88
|
|
2 %
|
|
Average stage length
(miles)
|
412
|
|
424
|
|
(3) %
|
|
417
|
|
395
|
|
6%
|
|
|
|
(1)
|
The increase in operations over
the nine months ended September 30, 2010 is mainly attributable to
the Company's acquisition of Mesaba on July 1, 2010 and the
Company's delivery of 16 Q400s since July 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pinnacle
Airlines Corp.
Reconciliation of Non-GAAP
Disclosures (Unaudited)
(in
thousands, except per share data)
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Consolidated operating
income:
|
|
|
|
|
|
|
|
|
Operating income in accordance
with GAAP
|
$
6,479
|
|
$ 25,719
|
|
$ 23,067
|
|
$ 58,184
|
|
Integration, severance, and
contract implementation expenses
|
2,864
|
|
-
|
|
9,216
|
|
-
|
|
Non-GAAP operating
income
|
$
9,343
|
|
$ 25,719
|
|
$ 32,283
|
|
$ 58,184
|
|
|
|
|
|
|
|
|
|
|
Consolidated net (loss)
income:
|
|
|
|
|
|
|
|
|
Net (loss) income in accordance
with GAAP
|
$ (3,469)
|
|
$ 9,441
|
|
$ (8,813)
|
|
$ 17,020
|
|
Integration, severance, and
contract implementation expenses
|
1,796
|
|
-
|
|
5,769
|
|
-
|
|
Non-GAAP net (loss)
income
|
$ (1,673)
|
|
$ 9,441
|
|
$ (3,044)
|
|
$ 17,020
|
|
|
|
|
|
|
|
|
|
|
Consolidated diluted (loss)
earnings per share:
|
|
|
|
|
|
|
|
|
Diluted (loss) earnings per
share in accordance with GAAP
|
$
(0.19)
|
|
$
0.51
|
|
$
(0.48)
|
|
$
0.92
|
|
Integration, severance, and
contract implementation expenses
|
0.10
|
|
-
|
|
0.31
|
|
-
|
|
Non-GAAP diluted (loss) earnings
per share
|
$
(0.09)
|
|
$
0.51
|
|
$
(0.17)
|
|
$
0.92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SOURCE Pinnacle Airlines Corp.