pinnacle airlines: modefinance credit report

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modeFinanceTM HeadquarterBuilding A - AREA Science ParkPadriciano 99 - 34149 Trieste - ItalyPh.: +39 040 375 5337Fax: +39 040 375 [email protected]

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PINNACLE AIRLINES CORP.Monday, 02 April 2012

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D C CC CCC B BB BBB A AA AAA

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D C CC CCC B BB BBB A AA AAAnot

available

non return extremlypathological

pathological highdanger

weak sufficient adequate good very

strongextremely

strong

Company name PINNACLE AIRLINES CORP.

Identification number

Country United States of America

ZIP code and city 38132 - MEMPHIS

Address Suite 111

+1 901 348 4100

www.pncl.com

Legal form

Account Consolidated

Incorporation date 2003

NACE 2 Sector 5110 - Passenger air transport

Listed

Status Active

MORE Credit limit 3,500,000 e

31/12/2010 31/12/2009 31/12/2008

Turnover (th e) 763,534 586,914 621,388

Rating B B CCC

Probability of default 3.80% 3.80% 16.00%

Confidence Level 100% 100% 100%

Solvency ratios

Leverage ratio 11.54 11.61 19.23

Total asset/Total liabilities 1.09 1.09 1.05

Liquidity ratios

Current Ratio 0.83 1.14 0.98

Quick Ratio 0.69 1.03 0.88

Profitability and economic equili-

brium ratios

Return on investement ROI (%) 4.12 6.75 3.19

Return on equity ROE (%) 10.69 40.94 -19.73

Asset turnover 0.68 0.66 0.77

Interest paid weight 0.66 0.52 1.24

Gross Profit/Operating revenue 0.23 0.25 0.24

Interest Coverage ratios

EBIT interest coverage ratio 1.51 1.80 1.02

Analysis and trend of financial

strength


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modeFinance TM srlVAT number [email protected]

Area Science Park,Padriciano 99. 34149 Trieste, ItalyTel. +39 040 3755337Fax +39 040 3756741

Sector Analysis

Company Healthy Balanced Vulnerable Risky

Solvency ratios

Leverage ratio 11.54 0.54 2.59 4.35 -2.31

Total asset/Total liabilities 1.09 2.85 1.39 1.15 0.89

Liquidity ratios

Current Ratio 0.83 2.35 1.14 0.99 0.65

Quick Ratio 0.69 1.96 1.05 0.85 0.56

Profitability and economic equilibrium ratios

Return on investement ROI (%) 4.12 18.34 6.97 0.26 -15.69

Return on equity ROE (%) 10.69 21.21 10.10 -4.02 -100.70

Asset turnover 0.68 1.99 1.24 1.48 1.84

Interest paid weight 0.66 0.00 0.17 0.02 -0.06

Gross Profit/Operating revenue 0.23 0.20 0.20 0.09 0.02

Interest Coverage ratios

EBIT interest coverage ratio 1.51 391.30 5.07 0.05 -11.25

Cash Conversion Cycle (days)

Days Sales Of Inventory (DIO) 12 12 9 10 8

Days Sales Outstanding (DSO) 14 31 32 28 34

Days Payable Outstanding (DPO) 16 15 29 27 45

Cash Conversion Cycle (DIO + DSO - DPO) 10 19 15 6 -5

Numer of analyzed companies - 83 249 171 108

(Average) Rating B A BB B C

The sector has been chosen according to:

international companies in the sector NACE 2 5110 with financial data of year 2010.


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Sector Analysis - Graphs


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Balance Sheet

BALANCE SHEET (th e) 31/12/2010 31/12/2009 31/12/2008

Accounting practice Local GAAP Local GAAP Local GAAP

Exchange rate USD - EUR 0.748 0.69416 0.71855

Total assets 1,121,101 895,057 810,306

Fixed assets 968,558 753,869 681,268

Intangible fixed assets 33,352 21,524 23,717

Tangible fixed assets 699,483 507,478 517,304

Other fixed assets 235,723 224,867 140,247

Current assets 152,543 141,188 129,038

Stocks 25,578 13,517 12,291

Debtors 29,472 23,961 22,720

Other current assets 97,493 103,711 94,027

Cash & cash equivalent 74,863 63,567 49,917

Shareholders funds 89,381 70,968 40,047

Capital 173 158 162

Other shareholders funds 89,208 70,810 39,886

Total liabilities 1,031,720 824,089 770,258

Non current liabilities 847,458 700,538 637,923

Long term debt 496,889 360,429 431,432

Other non-current liabilities 350,569 340,110 206,491

Current liabilities 184,262 123,551 132,335

Loans 57,998 27,245 26,741

Creditors 33,203 16,872 21,866

Other current liabilities 93,061 79,434 83,728

Total shareh. funds & liab. 1,121,101 895,057 810,306

NET DEBT (th e) 31/12/2010 31/12/2009 31/12/2008

Short term debts 57,998 27,245 26,741

Long term debt 496,889 360,429 431,432

Cash & cash equivalent 74,863 63,567 49,917

Net debt 480,024 324,107 408,257

31/12/2010 31/12/2009 31/12/2008

Working capital 21,847 20,605 13,145

Net Current Assets -31,720 17,638 -3,297

31/12/2010 31/12/2009 31/12/2008

Days Sales Of Inventory (DIO) 12 8 7

Days Sales Outstanding (DSO) 14 15 13

Days Payable Outstanding (DPO) 16 10 13

Cash Conversion Cycle (DIO + DSO - DPO) 10 13 7


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Income Statement

INCOME STATEMENT (th e) 31/12/2010 31/12/2009 31/12/2008

Accounting practice Local GAAP Local GAAP Local GAAP

Exchange rate USD - EUR 0.748 0.69416 0.71855

Sales 751,363 580,486 614,830

Revenues growth (%) 29.4 -5.6 -

Other revenues +/- variation in inventories and contract in progress + Fixed assets

own construction capitalized12,171 6,427 6,557

Operating revenue / turnover 763,534 586,914 621,388

Total operating costs 717,507 530,889 588,617

Costs growth (%) 35 -10 -

Service costs - - -

Material costs - - -

Costs of employees - - -

EBITDA 75,309 81,971 61,560

Depreciation 29,282 25,947 28,789

EBIT 46,027 56,025 32,771

Financial P/L -30,406 -26,705 -38,942

Financial revenue 1,378 4,043 -7,135

Financial expenses 31,784 30,748 31,807

Interest paid 30,527 31,141 32,009

P/L before tax 15,620 29,320 -6,172

Extr. and other P/L - - -

Extr. and other revenue - - -

Extr. and other expenses - - -

P/L before tax + Extr. and other P/L - - -

Taxation 6,069 265 1,730

P/L for period 9,552 29,055 -7,902

31/12/2010 31/12/2009 31/12/2008

Costs of Good Sold 584,344 437,252 473,597

Gross Profit 179,190 149,661 147,791

Other Operating Expenses 133,163 93,637 115,020

31/12/2010 31/12/2009 31/12/2008

Cash flow 38,834 55,001 20,887

Added value - - -

31/12/2010 31/12/2009 31/12/2008

Number of employees 7,619 5,106 4,204


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Evolutions and trends


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Qualitative information

Full overview Pinnacle Airlines Corporation is an airline holding company primarily engaged in the management and administra-

tion of its subsidiaries. It is publicly - held and trades on the NASDAQ under the symbol PNCL. The company’s

corporate headquarters is located in Memphis, Tennessee in the United States of America. As a holding compa-

ny, Pinnacle Airlines Corporation provides group planning and strategy. In particular, the company also exercises

financial control over its subsidiaries, settles their general policy and appoints their top managements, and as well

as provides central services. Pinnacle Airlines Corporation operates through its two wholly owned subsidiaries:

Pinnacle Airlines Inc. and Colgan Air Inc. Pinnacle Airlines Inc., the jet - based operating subsidiary of Pinnacle

Airlines Corporation. Pinnacle Airlines Inc., operates as Northwest Airlink, flies more than 700 daily Northwest Air-

link flights to more than 100 cities in the United States and Canada on its modern fleet of 139 Canadair Regional

Jets. Colgan Air Inc. operates 39 Saab 340 and 11 Beech 1900 regional airliners and operates more than 350 daily

flights. Colgan Air is affiliated with three major airlines and operates as Continental Connection, United Express

and US Airways Express. The company’s subsidiaries operate as independent entities with separate missions. Each

day, the company’s operating units flies more than 1,000 daily flights, transporting in excess of 27,000 customers

to 134 cities and towns in North America.

History Not available.

Primary business line Airline holding company primarily engaged in the management and administration of its subsidiaries.

Secondary business line Not available.

Main activity Services.

Secondary activity Not available.

Main products and services Not available.

Size estimate Not available.

Strategy, organization and policy Not available.

Strategic alliances Not available.

Membership of a network Not available.

Main brand names Not available.

Main domestic country United States Of America.

Main foreign countries or regions Not available.

Main production sites Not available.

Main distribution sites Not available.

Main sales representation sites Not available.

Main customers Not available.


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Auditor/Advisor/Bank

name type address

ERNST & YOUNG LLP Auditor -

Computershare Investor Services Transfer Agent -

Board

name date of birth nationality function

Ms Susan M Coughlin - - Independent Director

Mr Ian Massey - - Independent Director

Mr James E Mcgehee - - Independent Director

Mr Sean E Menke - - President, Chief Executive Officer, Director

Mr Thomas S Schreier - - Independent Director

Mrs R. Philip Shannon - - Independent Director

Mr Alfred T Spain - - Independent Director

Mr Nicholas R Tomassetti - - Independent Director

Sharehoders (the first twenty shareholders ordered by Direct %))

MOHNISH PABRAI Rating: -

Country ISO code - Operating revenue (MIL $) -

NACE Rev. 2, Core code - Total Assets (MIL $) -

Direct % 15.26 Number of Employees -

Total % - Information date 2009/03

Address: Not available

FMR LLC via its funds Rating: -

Country ISO code US Operating revenue (MIL $) 3,591


Direct % - Number of Employees 41,050

Total % 14.64 Information date 2011/09



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DALAL STREET, INC. via its funds Rating: -

Country ISO code US Operating revenue (MIL $) 5


Direct % - Number of Employees 2



APOLLO GLOBAL MANAGEMENT LLC via its funds Rating: D


NACE Rev. 2, Core code - Total Assets (MIL $) 7,976




APOLLO CAPITAL MANAGEMENT LP Rating: -

Country ISO code US Operating revenue (MIL $) -


Direct % 8.39 Number of Employees -



DIMENSIONAL FUND ADVISORS LP via its funds Rating: A






CATALYST CAPITAL ADVISORS LLC via its funds Rating: -






VANGUARD GROUP, INC. THE via its funds Rating: -






BLACKROCK, INC. via its funds Rating: BB







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MESON CAPITAL PARTNERS LLC via its funds Rating: -



Direct % - Number of Employees -



RENAISSANCE TECHNOLOGIES LLC via its funds Rating: -


NACE Rev. 2, Core code - Total Assets (MIL $) 948




THE INDEPENDENT ORDER OF FORESTERS via its funds Rating: -

Country ISO code CA Operating revenue (MIL $) -





BRIDGEWAY CAPITAL MANAGEMENT INC via its funds Rating: -






RBF CAPITAL, LLC via its funds Rating: -






CITIGROUP INC via its funds Rating: -


NACE Rev. 2, Core code - Total Assets (MIL $) 1,873,878




WHITEBOX ADVISORS LLC via its funds Rating: -







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WILLIAMS FINANCIAL GROUP, INC via its funds Rating: -






GEODE CAPITAL MANAGEMENT, LLC via its funds Rating: -






SPARK LP via its funds Rating: -






CHARLES SCHWAB CORPORATION via its funds Rating: -






Subsidiaries (the first twenty subsidiaries ordered by Direct %)

MESABA AVIATION, INC. Rating: -



Direct % 100.00 Number of Employees 3,700


COLGAN AIR, INC. Rating: -



Direct % MO Number of Employees 1,300


PINNACLE AIRLINES, INC. Rating: BB



Direct % MO Number of Employees 54



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ASKMORE rating guide

General vision A credit rating is an opinion of the general creditworthiness of an obligor (issuer rating), or the creditworthiness of

an obligor in respect of a specific debt security, or other financial obligation (issue rating), based on relevant risk

factors.

The Multi Objective Rating Evaluation (MORE) model is essentially used to assess the level of distress of industrial

companies by using data included in financial statements.

The basic idea of the model is to analyze a set of financial and economic ratios in a predictive corporate bankruptcy

model with the purpose of creating a fundamental credit rating model for each industrial sector. Results of the

model are obtained by applying newly developed numerical methodologies, drawing together financial theory,

data mining and engineering design methodologies. The heart of MORE is a multi dimensional and multi objective

algorithm that produces a classification of each company, by taking into account any attributes (such as sector and

country) characterizing a firm.

The model gives the opportunity to assign a rating to a company even without considering a complete data analysis

and allows to process quality information. It induces a better understanding of a company’s strength and weakness

thanks to sophisticated data mining tools and taking into account the analyst knowledge.

The MORE rating vision is to look at the fundamental economics of the company. The main idea is to evaluate the

rating observing every aspect of the economical and financial behavior of the company: better is the equilibrium

between the different aspects, better will be the final rating.

This is done studying, evaluating and aggregating the most important sections of the financial and economic

behavior of a company such as: profitability, liquidity, solvency, interest coverage and efficiency.


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Rating scale

Rating class Rating macro class Assessment

AAA

Healthy

The company’s capacity to meet its financial commitments is extremely strong. The company shows an excellent

economic and financial flow and fund equilibrium.

AAThe company has very strong creditworthiness. It also has a good capital structure and economic and financial

equilibrium. Difference from AAA is slight.

AThe company has a high solvency. The company is however more susceptible to the adverse effects of changes in

circumstances and economic conditions than companies in higher rated categories.

BBB

Balanced

Capital structure and economic equilibrium are considered adequate. The company’s capacity to meet its financial

commitments could be affected by serious unfavourable events.

BBA company rated BB is more vulnerable than companies rated BBB. Furthermore the company faces major ongoing

uncertainties or exposure to adverse business, financial, or economic conditions.

B

Vulnerable

The company presents vulnerable signals with regards to its fundamentals. Adverse business, financial, or economic

conditions will be likely to impair the company’s capacity or willingness to meet its financial commitments.

CCC

A company rated CCC has a dangerous disequilibrium on the capital structure and on its economic and financial

fundamentals. Adverse market events and an inadequate management could affect with high probability the

company’s solvency.

CC

Risky

The company shows signals of high vulnerability. In the event of adverse market and economic conditions, the

company’s strong disequilibrium could increase.

CThe company shows considerable pathological situations. The company’s capacity to meet its financial

commitments is very low.

D The company has not any longer the capacity to meet its financial commitments.


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Fundamental Credit Rating Ratios

Analysis area Ratio Assessment

Solvency ratios

Leverage ratioThis measures the level of total liabilities of the company in comparison

with equity.

Assets to debtThis indicates company’s solvency. The company shows a level of deficit

when the value of this ratio is under one unit.

Financial ratios Fixed Assets coverage ratioThis is calculated only for holdings. It measures the capital structure i.e.

whether a company covers the fixed assets with long term capital.

Liquidity ratios

Current ratioThis measures whether a company has sufficient short-term assets to cover

its short-term liabilities.

Quick ratioThis compares current liabilities only to those assets that can be readily

turned into cash.

Profitability and economic ratios

Return on Investement(ROI)This measures the profitability of company investments without regard to

the way the investment is financed.

Return on Equity(ROE) This measures the profitability of the equity.

Asset turnover

This indicates the investments turnover with regards to sales. The level

assumed from the ratio depends on the sector in which the company

operates.

Profit margin This indicates the profitability of sales.

Interest coverage ratio Interest Paid coverage

This indicate the ability of the company to cover interest expenses through

the economic margins (Gross profit and EBIT) and through the cash flow

from operating activities.


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MORE Credit Limit, Probability of default and Confidence Level

MORE Credit Limit MORE Credit limit is the estimation of the amount of maximum credit that is possible to assign on a commercial

relationship with the analyzed company with an outlook of one year.

modeFinance used the following values associated with the company analyzed while computing the credit limit:

• Size;

• Years in Business;

• Average number of suppliers;

• Liquidity of the company and the comparison with its sector;

• The funds dedicated to be paid to suppliers;

• The likelihood that a company may pay its debts in the next 12 months (MORE Ratings).

The credit limit in this report is merely a suggested value of commercial credit limit calculated on the basis of annual

public data. This value should be reviewed by paying attention to the Confidence Level value and by using other

information such as other business information, news... etc; and private information such as the relationship with

client, history of payments, guarantees and the knowledge of the sector.

Probability of default e Confidence

Level

In addition to the MORE Rating, modeFinance also estimates the probability of default and provides a level of

confidence. The probability of default is the degree of certainty (in quantitative terms) that the company will go

into default.

As the probability of default is strongly affected by the economic climate that the company is operating in,

companies in the same MORE class will not necessarily have the same probability of default.

The MORE model can produce a MORE rating even if there is missing data by using an associated confidence level:

Confidence =

∑Available Information∑

Total Information

The level of confidence does not indicate financial confidence in the company. It is a reflection of the variations in

availability of financial data across Europe due to filing regulations and suggests the degree of financial detail the

MORE rating is able to take into account for each company.

For companies with fully populated records a confidence level of 100% would be applied: companies where no

financial data is provided, 0%. This puts the MORE rating in a context for the user and aids interpretation.


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Notes and disclaimer

NOTES modeFinance has based the present analysis on the company available financial statements, coming from one or

more of the following sources: local providers, Commercial Register (Companies House), websites, modeFinance’s

database etc.

DISCLAIMER All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any

form by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of

the publisher modeFinance. The facts of this report are believed to be correct at the time of publication but cannot

be guaranteed. Please note that the findings, conclusions and recommendations that modeFinance delivers will

be based on information gathered in good faith from both primary and secondary sources, whose accuracy we

are not always in a position to guarantee. As such modeFinance can accept no liability whatever for actions taken

based on any information that may subsequently prove to be incorrect.

Contacts

Company modeFinance

Products MORE rating

Where AREA Science Park

34149 Trieste, via Padriciano 99 - ITALY

Info [email protected]

web www.modefinance.com

Phone +39 040 3755337

pinnacle airlines: modefinance credit report

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