Pinnacle Airlines Management Discusses Q3 2010 Results - Earnings Call Transcript

Pinnacle Airlines Corporation ( PNCL)

Q3 2010 Earnings Conference Call

November 9, 2010 10:00 AM ET

Executives

Brian Hunt – VP and General Counsel

Peter Hunt – VP and CFO

Analysts

Michael Linenburg – Deutsche Bank

Bob McAdoo – Avondale Partners

Glenn Engle – Bank of America Merrill Lynch

Presentation

Operator

Good day ladies and gentlemen and welcome to the Third Quarter 2010 Pinnacle Airlines Corp. Earnings Conference Call. My name is Shequana [ph] and I will be your coordinator for today. (Operator Instructions).

I would now like to turn the presentation over to your host for today’s call, Mr. Brian Hunt with Pinnacle Airlines Corp. Please proceed, sir.

Brian Hunt

Good morning, everyone and welcome to the third quarter 2010 earnings conference call with Pinnacle Airlines Corp. On behalf of the more than 7,000 employees, I would like to thank you for your interest in our company. This call is being presented live over the Internet via webcast from our website, www.pncl.com. It will also be available on our site for 30 days after this call.

This presentation 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 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. These filings 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.

And at this time, I will turn the call over to Peter Hunt, Chief Financial Officer.

Peter Hunt

Thanks, Brian. Welcome everyone to our third quarter earnings conference call. Thanks again for joining us this morning. Phil Trenary, our Chief Executive Officer, couldn’t be here with us this morning. So, I will review our third quarter results and then with me to help answer questions after that are Doug Shockey, our Chief Operating Officer, and as you just heard Brian Hunt, our General Counsel is here with me as well.

First, I want to start off by thanking all the women and men at Pinnacle Airlines Corp. We turned in a great financial result for our shareholders this quarter and that really wouldn’t be possible without all the hard work of the people that we have here at all three subsidiaries, Pinnacle, Colgan and Mesaba as well as all of our support functions at Pinnacle Airlines Corp. It’s their dedication that helps us deliver increases in earnings as we did this year.

I specially want to thank our team at Mesaba and welcome to Mesaba to the Pinnacle family. We announced this deal in July and again on our second quarter earnings call, we told you that we thought that the deal we did from Mesaba would be accretive from day one and I’m very pleased to announce that in the third quarter it was accretive. Mesaba generated $3.1 million of operating income and if you take out depreciation and amortization expenses and look at earnings before interest, taxes, depreciation and amortization or EBITDA, Mesaba achieved $4.4 million of EBITDA and that is right in line with our target of $4.5 per quarter or $18 million a year under our contracts with Delta.

So, we’re very pleased with the result there. If you take out the interest that we paid on the note to Delta because Mesaba, the acquisition was fully financed by Delta, Mesaba actually generated $1 million of pre-tax income for us in the third quarter.

Second, I’d also like to congratulate our partners at United Airlines and Continental Airlines for completing their merger on October 1 st. With our planned Q400 hundred fleet growth, we will eventually have 29 Q400 aircraft and 20 Saab 340 aircraft operating in the United Express Network. The new United is a very important and a growing partner for us.

We took delivery of 2 Q400s in the late in the third quarter and we’ll add 13 more between now and April. So, it’s a great growing relationship. We’re really fortunate, I think, at Pinnacle that we have strong and growing relationships with the two largest global airlines, with United Airlines and with Delta. Both United and Delta are in good strong financial positions, they have superior networks globally and in the U.S. and we see a lot of opportunity with both of them.

Of course, our relationship with U.S. Airways is also important to us although it is smaller. U.S. Airways is also an important partner and we do see some good opportunities there as well.

With that, I’ll jump right into the actual financial results. We did report this morning, third quarter net income of $9.4 million, which was an increase year-over-year of $2.1 million. If you take out a one-time gain that we had last year on our auction rates securities portfolio, we actually did increase income $2.1 million.

Our fully diluted earnings per share for the third quarter was $0.51 and again excluding that one-time gain, that was an increase of $0.11 over our earnings per share of 40% last year. That’s a 28% increase in EPS.

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