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CST: 18/09/2019 11:25:57   

Mesa Air Group Announces Second Quarter Fiscal Year 2019 Results

131 Days ago

PHOENIX, May 09, 2019 (GLOBE NEWSWIRE) -- Mesa Air Group, Inc. (NASDAQ: MESA) today reported second quarter Fiscal Year 2019 financial and operating results.

Highlights for Second Quarter Fiscal Year 2019 (ending March 31, 2019)

  • Net Income of $13.2 million or $0.38 per diluted share

  • Adjusted Net Income1 of $16.0 million or $0.46 per diluted share

  • Pre-tax income of $17.3 million compared to $3.0 million for Q2 FY 2018

  • Adjusted Pre-tax income1 of $21.0 million compared to $3.0 million for Q2 FY 2018

  • Block hours up 14.5% compared to Q2 FY 2018

  • Contract Revenue up by 8.5% compared to Q2 FY 2018

  • Extinguished existing and issued new spare engine debt at lower interest rates

Mesa’s Q2 2019 results reflect net income of $13.2 million, or $0.38 per diluted share, compared to net income of $2.4 million, or $0.10 per diluted share for Q2 2018. Excluding special items, adjusted net income1 was $16.0 million for Q2 2019, or $0.46 per diluted share, compared to $2.4 million, or $0.10 per diluted share for Q2 2018. Mesa’s Q2 2019 pre-tax income was $17.3 million, compared to $3.0 million for Q2 2018. Excluding special items, adjusted pre-tax income was $21.0 million for Q2 2019, compared to $3.0 million for Q2 2018. In addition, Mesa’s Adjusted EBITDA1 for Q2 2019 was $53.7 million, compared to $32.0 million in Q2 2018 and Adjusted EBITDAR1 was $67.8 million, compared to $50.3 million in Q2 2018. On January 29, 2019 the company closed on a $91.2 million five-year term loan at LIBOR +3.1%. The proceeds were used to pay down existing debt at LIBOR +7.25% plus yield enhancement of 1.5%.

Mesa operated 112,030 block hours during Q2 2019, an increase of 14.5% from Q2 2018 of 97,853. Operationally, we ran a 99.6% controllable completion factor and a 97.4% total completion factor, which includes weather and other uncontrollable cancellations. 

“We continue to execute our plan of increased block hours, which contributed to our nearly six-fold increase in pre-tax earnings year-over-year,” stated Jonathan Ornstein, Chairman and Chief Executive Officer. “We continue to make significant investments primarily in pilot training and our maintenance capabilities.”

Mike Lotz, President and Chief Financial Officer, continued, “Our Q2 year to date diluted EPS of $0.92 and adjusted diluted EPS1 of $1.00 is consistent with our plan. The decrease in diluted EPS for Q2 versus Q1 is primarily driven by the timing of heavy maintenance events. During the Quarter we finalized our purchase agreement with GECAS for ten (10) leased CRJ-700 aircraft currently operating at United and expect to finalize the financing this quarter. Upon completion of the transaction we will have reduced the number of leased aircraft with third parties to 18."

“I am delighted to have joined Mesa and believe the company has positioned itself to be a leading U.S. regional airline, given its cost structure and improving operational performance, as evidenced by our improvement in controllable completion factor from 98.8% in Q2 2018 to 99.6% in Q2 2019,” said Brad Rich, Mesa’s recently appointed Executive Vice President and Chief Operating Officer. Rich previously served as Senior Vice President of United Express Operations for United Airlines and prior to that was President of SkyWest, Inc. “I look forward to working with our partners at United and American.”

1 See Reconciliation of non-GAAP financial measures

Outlook

The Company is providing the following guidance for the third quarter of FY 2019:

Fleet, Block Hours, Engine Expenses – Actual and Forecast (unaudited)

     FY '18 Q3     FY '18 Q4     FY '19 Q1     FY '19 Q2     FY '19 Q3  
    Qtr Ended     Qtr Ended     Qtr Ended     Qtr Ended     Qtr Ended  
    Jun '18     Sep '18     Dec '18     Mar '19     Jun '19  
Fleet Count   (Actual)     (Actual)     (Actual)     (Actual)     (Forecast)  
  E-175     58       60       60       60       60  
  CRJ-900     64       64       64       64       62  
  CRJ-700     20       20       20       20       20  
Total CPA     142       144       144       144       142  
Non-CPA                                        
  CRJ-900     -       -       -       -       2  
  CRJ-200     1       1       1       1       1  
Total Fleet     143       145       145       145       145  
                                         
Production                                        
Block Hours     102,939       112,475       115,000       112,030       115,203  
Block Hours per day per Aircraft     8.0       8.5       8.7       8.6       8.9  
                                         
Non Pass-Through Engine Expense   $ 8.5     $ 2.4     $ 2.6     $ 5.6     $ 8.7  


Reconciliation of non-GAAP financial measures

Although these financial statements are prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”), certain non-GAAP financial measures may provide investors with useful information regarding the underlying business trends and performance of Mesa’s ongoing operations and may be useful for period-over-period comparisons of such operations. The tables below reflect supplemental financial data and reconciliations to GAAP financial statements for the three months ended March 31, 2019 and the three months ended March 31, 2018. Readers should consider these non-GAAP measures in addition to, not a substitute for, financial reporting measures prepared in accordance with GAAP. These non-GAAP financial measures exclude some, but not all items that may affect the Company’s net income. Additionally, these calculations may not be comparable with similarly titled measures of other companies.

Reconciliation of GAAP versus Non-GAAP Disclosures (unaudited)
(In thousands, except for per diluted share)

     Three months ended March 31, 2019  
    Income Before
Taxes
    Income Tax
Expense
    Net
Income
    Net Income
per
Diluted Share
 
GAAP Income     17,335       (4,086 )     13,249     $ 0.38  
FY19 Adjustments (1)     3,616       (852 )     2,763          
Adjusted Income     20,951       (4,938 )     16,012     $ 0.46  
                                 
Interest Expense     13,772                          
Interest Income     (299 )                        
Depreciation and Amortization     19,276                          
Adjusted EBITDA     53,700                          
                                 
Aircraft Rent     14,110                          
Adjusted EBITDAR     67,810                          


     Three months ended March 31, 2018  
    Income Before
Taxes
    Income Tax
Expense
    Net
Income
    Net Income
per
Diluted Share
 
GAAP Income     2,980       (608 )     2,372     $ 0.10  
FY18 Adjustments     -       -       -          
Adjusted Income     2,980       (608 )     2,372     $ 0.10  
                                 
Interest Expense     13,343                          
Interest Income     (10 )                        
Depreciation and Amortization     15,666                          
Adjusted EBITDA     31,979                          
                                 
Aircraft Rent     18,319                          
Adjusted EBITDAR     50,298                          


Reconciliation of GAAP versus Non-GAAP Disclosures (unaudited)

(In thousands, except for per diluted share)

    Six months ended March 31, 2019  
                                 
    Income Before
Taxes
    Income Tax
Expense
    Net
income
    Net Income
per
Diluted Share
 
GAAP Income     42,365       (10,035 )     32,330     $ 0.92  
FY19 Adjustments (1)     3,616       (852 )     2,763          
Adjusted Income     45,981       (10,887 )     35,093     $ 1.00  
                                 
Interest Expense     28,614                          
Interest Income     (455 )                        
Depreciation and Amortization     37,767                          
Adjusted EBITDA     111,907                          
                                 
Aircraft Rent     28,229                          
Adjusted EBITDAR     140,136                          


    Six months ended March 31, 2018  
                                 
    Income Before
Taxes
    Income Tax
Expense
    Net
income
    Net Income
per
Diluted Share
 
GAAP Income     3,815       21,181       24,996     $ 1.06  
FY18 Adjustments (2)     -       (22,438 )     (22,438 )        
Adjusted Income     3,815       (1,257 )     2,558     $ 0.11  
                                 
Interest Expense     27,474                          
Interest Income     (19 )                        
Depreciation and Amortization     31,598                          
Adjusted EBITDA     62,868                          
                                 
Aircraft Rent     36,582                          
Adjusted EBITDAR     99,450                          

Adjustments for three months and six months ended March 31, 2019 and 2018:

  1. Includes adjustment for loss on extinguishment of debt of $3.6 million related to repayment of the Company’s Spare Engine Facility.

  2. Includes adjustment for tax benefit resulting from the Tax Cuts and Jobs Act enacted during Q1 2018. The Act reduces the corporate tax rate to 21 percent, effective January 1, 2018.

Mesa Air Group will host a conference call with analysts on Friday, May 10 at 1:00pm EDT/10:00am PDT. The conference call number is 888-469-2054 (Passcode: Phoenix). The conference call can also be accessed live via the web by visiting https://edge.media-server.com/m6/p/ndxbvumn. A recorded version will be available on Mesa’s website approximately two hours after the call for approximately 14 days.

About Mesa Air Group, Inc.

Headquartered in Phoenix, Arizona, Mesa Air Group is the commercial aviation holding company of Mesa Airlines, a regional air carrier providing scheduled passenger service to 121 cities in 39 states, the District of Columbia, Canada, Mexico, Cuba, and the Bahamas. As of April 30, 2019, Mesa operated a fleet of 145 aircraft with approximately 601 daily departures and 3,400 employees. Mesa operates all of its flights as either American Eagle or United Express flights pursuant to the terms of capacity purchase agreements entered into with American Airlines, Inc. and United Airlines, Inc.

Forward-Looking Statements

This news release contains forward looking statements, including, but not limited to, (i) the fleet and block hours forecast of Mesa for the third quarter of fiscal 2019, (ii) the major non pass-through engine overhaul expense forecast for the same fiscal periods, and (iii) the Company’s expectations regarding completing the purchase of ten GECAS leased aircraft. These forward-looking statements are based on Mesa’s current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to changes in global, regional or local economic, business, competitive, market, regulatory and other factors, many of which are beyond Mesa’s control. Any forward-looking statement in this release speaks only as of the date of this release. Mesa undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by any applicable securities laws.


MESA AIR GROUP, INC.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts) (Unaudited)

     Three Months Ended
March 31,
    Six Months Ended
March 31,
 
    2019     2018     2019     2018  
Operating revenues:                                
Contract revenue   $ 169,771     $ 156,515     $ 340,220     $ 310,904  
Pass-through and other     7,376       11,125       15,083       21,420  
Total operating revenues     177,147       167,640       355,303       332,324  
                                 
Operating expenses:                                
Flight operations     49,366       54,647       102,611       103,807  
Fuel     101       130       222       198  
Maintenance     45,380       51,409       85,182       105,756  
Aircraft rent     14,110       18,319       28,229       36,582  
Aircraft and traffic servicing     1,065       783       1,999       1,744  
General and administrative     13,472       10,337       25,686       21,267  
Depreciation and amortization     19,276       15,666       37,767       31,598  
Total operating expenses     142,770       151,291       281,696       300,952  
Operating income     34,377       16,349       73,607       31,372  
                                 
Other (expenses) income, net:                                
Interest expense     (13,772 )     (13,343 )     (28,614 )     (27,474 )
Interest income     299       10       455       19  
Loss on extinguishment of debt     (3,616 )     -       (3,616 )     -  
Other income (expense)     47       (36 )     533       (102 )
Total other (expense), net     (17,042 )     (13,369 )     (31,242 )     (27,557 )
                                 
Income before taxes     17,335       2,980       42,365       3,815  
Income tax expense (benefit)     4,086       608       10,035       (21,181 )
Net income   $ 13,249     $ 2,372     $ 32,330     $ 24,996  
                                 
Net income per share attributable to common shareholders                                
Basic   $ 0.38     $ 0.10     $ 0.93     $ 1.07  
Diluted   $ 0.38     $ 0.10     $ 0.92     $ 1.06  
                                 
Weighted-average common shares outstanding                                
Basic     34,699       23,282       34,607       23,279  
Diluted     34,962       23,570       35,041       23,530  


MESA AIR GROUP, INC.

Condensed Consolidated Balance Sheets
(In thousands) (Unaudited)

     March 31,
2019
    September 30,
2018
 
ASSETS              
                 
CURRENT ASSETS:                
Cash and cash equivalents   $ 77,743     $ 103,311  
Marketable securities     -       19,921  
Restricted cash     3,646       3,823  
Receivables - less allowance for doubtful accounts     12,071       14,290  
Expendable parts and supplies - less obsolescence allowance     19,229       15,658  
Prepaid expenses and other current assets     47,451       40,914  
Total current assets     160,140       197,917  
                 
PROPERTY AND EQUIPMENT, NET     1,237,615       1,250,829  
INTANGIBLES, NET     10,437       11,341  
LEASE AND EQUIPMENT DEPOSITS     6,916       2,598  
OTHER ASSETS     10,178       9,703  
TOTAL   $ 1,425,286     $ 1,472,388  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY              
                 
CURRENT LIABILITIES:                
Current portion of debt and capital leases   $ 147,114     $ 155,170  
Accounts payable     40,527       54,307  
Accrued compensation     11,675       12,208  
Other accrued expenses     27,344       29,696  
Total current liabilities     226,660       251,381  
                 
NONCURRENT LIABILITIES:                
Long-term debt and capital leases - excluding current portion     696,856       760,177  
Deferred credits     14,680       15,393  
Deferred income taxes     49,836       39,797  
Other noncurrent liabilities     27,969       31,173  
Total noncurrent liabilities     789,341       846,540  
Total liabilities     1,016,001       1,097,921  
                 
STOCKHOLDERS' EQUITY:                
Preferred stock of no par value, 5,000,000 shares authorized; no shares issued
  and outstanding
           
Common stock of no par value and additional paid-in capital, 125,000,000
  shares authorized; 27,969,475 (2019) and 23,902,903 (2018) shares issued
  and outstanding, and 6,780,297 (2019) and 10,614,990 (2018) warrants
  issued and outstanding
    237,171       234,683  
Retained earnings     172,114       139,784  
Total stockholders' equity     409,285       374,467  
TOTAL   $ 1,425,286     $ 1,472,388  


Operating Highlights (unaudited)

     Three months ended     Six months ended  
    March 31     March 31  
    2019     2018     Change     2019     2018     Change  
Available Seat Miles (thousands)     2,654,286       2,313,068       14.8 %     5,363,185       4,621,380       16.1 %
Block Hours     112,030       97,853       14.5 %     227,030       195,559       16.1 %
Departures     59,225       51,679       14.6 %     120,759       107,043       12.8 %
Average Stage Length (miles)     589       588       0.2 %     583       567       2.8 %
Passengers     3,483,947       3,021,514       15.3 %     7,104,062       6,332,521       12.2 %


Mesa Air Group, Inc.


Investor Relations
Brian Gillman
Investor.Relations@mesa-air.com
(602) 685-4010

Media
Jack Hellie
media@mesa-air.com
(602) 685-4393

 

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