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Mesa Air Group Inc.$7.27$.04.55%

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 Mesa Air Group Announces Third Quarter Fiscal Year 2019 Results
   Thursday, August 08, 2019 4:30:00 PM ET

PHOENIX, Aug. 08, 2019 (GLOBE NEWSWIRE) -- Mesa Air Group, Inc. (NASDAQ: MESA) today reported third quarter Fiscal Year 2019 financial and operating results.

Highlights for Third Quarter Fiscal Year 2019 (ending June 30, 2019)

  • Net Income of $3.0 million or $0.09 per diluted share
  • Adjusted Net Income1 of $10.4 million or $0.30 per diluted share
  • Pre-tax income of $3.9 million compared to ($14.6) million for Q3 FY 2018
  • Adjusted Pre-tax income1 of $13.4 million compared to $11.6 million for Q3 FY 2018
  • Block hours up 10.8% compared to Q3 FY 2018 and 14.3% compared to YTD FY 2018
  • Contract Revenue up by 6.5% compared to Q3 FY 2018 and 8.4% compared to YTD FY 2018 
  • Purchased and financed 10 CRJ-700 aircraft previously leased from GECAS

Mesa’s Q3 2019 results reflect net income of $3.0 million, or $0.09 per diluted share, compared to net income of ($11.1) million, or ($0.48) per diluted share for Q3 2018.  Excluding special items, which includes $9.5 million of non-cash one-time expense related to the termination of ten leased aircraft subsequently purchased, adjusted net income1 was $10.4 million for Q3 2019, compared to $8.8 million for Q3 2018. Mesa’s Q3 2019 pre-tax income was $3.9 million, compared to ($14.6) million for Q3 2018.  Excluding special items, adjusted pre-tax income1 was $13.4 million for Q3 2019, compared to $11.6 million for Q3 2018. In addition, Mesa’s Adjusted EBITDA1 for Q3 2019 was $45.9 million, compared to $41.7 million in Q3 2018 and Adjusted EBITDAR1 was $58.8 million, compared to $59.7 million in Q3 2018.

On June 14, 2019 the company finalized the purchase of 10 CRJ-700 aircraft, previously leased from GECAS, for $70.0 million and financed the entire purchase price of $70.0 million with a four-year term loan.

Mesa operated 114,042 block hours during Q3 2019, an increase of 10.8% from Q3 2018 of 102,939. Operationally, we ran a 99.4% controllable completion factor and a 95.9% total completion factor, which includes weather and other uncontrollable cancellations.

During the quarter, we experienced significant operational challenges in our American operation, with one aircraft unavailable following a ground damage incident and two aircraft unavailable due to extended c-check turn times caused by Bombardier labor shortages. These three aircraft were unavailable for nearly all of Q3, which resulted in us operating with an insufficient number of spare aircraft. These events, combined with an industry-wide avionics failure impacting CRJ-900 aircraft, resulted in us failing to meet the new performance criteria, and American elected to remove two aircraft from the capacity purchase agreement effective November 2, 2019

“Q3 presented a number of short term operational challenges.  Although our operational performance did not meet our expectations, I believe our employees achieved far better results than anticipated given the lack of spare aircraft.  We expect by the end of August to have the full fleet available.” said Brad Rich, Executive Vice President and Chief Operating Officer.  “During the quarter we implemented a number of initiatives that improved operational performance and, unfortunately, this short-term lack of spare aircraft negated our efforts.”

Mike Lotz, President and Chief Financial Officer continued, “Our Q3 FY 2019 year to date diluted EPS of $1.01 and adjusted diluted EPS1 of $1.30 compares favorably to Q3 FY 2018 year to date diluted EPS of $0.58 and adjusted diluted EPS1 of $0.52.  The decrease in financial performance for Q3 FY 2019 versus Q2 FY 2019 was primarily driven by the timing of heavy maintenance events, an increase in pilot and pilot training expense based on the expectation that we will require additional pilots going forward as well as an uptick in line maintenance expense. During the quarter we also finalized the purchase and financing of 10 CRJ-700 aircraft, reducing the total number of leased aircraft with third parties to 18.”

“I would like to thank our people for their performance in light of the obstacles we faced. Despite this quarter’s challenges, we believe we remain well positioned to take advantage of future opportunities.  For the first three quarters of fiscal year 2019 we increased block hours by 14.3%, contract revenue by $40 million and decreased total operating expense per block hour by 17.7% compared to the same period last year,” stated Jonathan Ornstein, Chairman and Chief Executive Officer. “We continue to make significant investments primarily in pilot training and our maintenance capabilities.”

1 See Reconciliation of non-GAAP financial measures

Outlook

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

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

   FY '18 Q4  FY '19 Q1  FY '19 Q2  FY '19 Q3  FY '19 Q4 
   Qtr Ended  Qtr Ended  Qtr Ended  Qtr Ended  Qtr Ended 
   Sep '18  Dec '18  Mar '19  Jun '19  Sep '19 
Fleet CountPartner (Actual)  (Actual)  (Actual)  (Actual)  (Forecast) 
E-175United  60   60   60   60   60 
CRJ-900American  64   64   64   62   62 
CRJ-700United  20   20   20   20   20 
Total CPA   144   144   144   142   142 
Non-CPA                     
CRJ-900Unassigned           2   2 
CRJ-200Unassigned  1   1   1   1   1 
Total Fleet   145   145   145   145   145 
                      
Production                     
Block Hours   112,475   115,000   112,030   114,042   116,600 
Block Hours per day per Aircraft   8.5   8.7   8.6   8.8   8.9 
                      
Non Pass-Through Engine Expense  $2.4  $2.6  $5.6  $9.5  $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 and nine months ended June 30, 2019 and the three and nine months ended June 30, 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 June 30, 2019 
  Income Before
Taxes
  Income Tax
(Expense)/Benefit
  Net
Income
  Net Income
per
Diluted Share
 
GAAP Income  3,863   (856)  3,007  $0.09 
FY19 Adjustments (1)  9,540   (2,114)  7,426     
Adjusted Income  13,403   (2,970)  10,433  $0.30 
                 
Interest Expense  13,496             
Interest Income  (733)            
Depreciation and Amortization  19,761             
Adjusted EBITDA  45,927             
                 
Aircraft Rent  12,875             
Adjusted EBITDAR  58,802             



  Three months ended June 30, 2018 
  Income Before
Taxes
  Income Tax
(Expense)/Benefit
  Net
Income
  Net Income
per
Diluted Share
 
GAAP Income/(Loss)  (14,630)  3,495   (11,135) $(0.48)
FY18 Adjustments (2)(3)  26,193   (6,257)  19,936     
Adjusted Income  11,563   (2,762)  8,801  $0.37 
                 
Interest Expense  14,118             
Interest Income  (11)            
Depreciation and Amortization  16,013             
Adjusted EBITDA  41,683             
                 
Aircraft Rent  17,975             
Adjusted EBITDAR  59,658             

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

  Nine months ended June 30, 2019 
                 
  Income Before
Taxes
  Income Tax
(Expense)/Benefit
  Net
income
  Net Income
per
Diluted Share
 
GAAP Income  46,228   (10,891)  35,337  $1.01 
FY19 Adjustments (1)(4)  13,156   (2,915)  10,240     
Adjusted Income  59,384   (13,805)  45,577  $1.30 
                 
Interest Expense  42,110             
Interest Income  (1,188)            
Depreciation and Amortization  57,528             
Adjusted EBITDA  157,834             
                 
Aircraft Rent  41,104             
Adjusted EBITDAR  198,938             


  Nine months ended June 30, 2018 
                 
  Income Before
Taxes
  Income Tax
(Expense)/Benefit
  Net
income
  Net Income
per
Diluted Share
 
GAAP Income/(Loss)  (10,815)  24,676   13,861  $0.58 
FY18 Adjustments (2)(3)(5)(6)  27,165   (28,640)  (1,475)    
Adjusted Income  16,350   (3,964)  12,386  $0.52 
                 
Interest Expense  41,592             
Interest Income  (30)            
Depreciation and Amortization  47,611             
Adjusted EBITDA  105,523             
                 
Aircraft Rent  54,557             
Adjusted EBITDAR  160,080             

Adjustments:

1) Includes lease termination expense of $9.5 million related to the acquisition of ten CRJ-700 aircraft previously leased during the three months ended June 30, 2019

2) Includes lease termination expense of $15.1 million related to the acquisition of nine CRJ-900 aircraft previously leased during the three months ended June 30, 2018

3) Includes an adjustment of $11.1 million in General and Administrative expense related to an increase in accrued compensation as a result of the increase in the fair value of the Company’s common stock during the three months ended June 30, 2018

4) Includes adjustment for loss on extinguishment of debt of $3.6 million related to repayment of the Company’s Spare Engine Facility during the nine months ended June 30, 2019

5) Includes adjustment for $1.0 million of financing fees written off during the nine months ended June 30, 2018

6) 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, August 9 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 138 cities in 42 states, the District of Columbia, Canada, Mexico, Cuba, and the Bahamas. As of July 31, 2019, Mesa operated a fleet of 145 aircraft with approximately 761 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 fourth quarter of fiscal 2019 and (ii) the major non pass-through engine overhaul expense forecast for the same fiscal periods. 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
June 30,
  Nine Months Ended
June 30,
 
  2019  2018  2019  2018 
Operating revenues:                
Contract revenue $170,366  $159,916  $510,586  $470,820 
Pass-through and other  9,858   11,823   24,941   33,243 
Total operating revenues  180,224   171,739   535,527   504,063 
                 
Operating expenses:                
Flight operations  53,025   51,795   155,636   155,602 
Fuel  211   151   433   349 
Maintenance  54,322   48,290   139,504   154,046 
Aircraft rent  12,875   17,975   41,104   54,557 
Aircraft and traffic servicing  978   848   2,977   2,592 
General and administrative  12,435   22,066   38,121   43,333 
Depreciation and amortization  19,761   16,013   57,528   47,611 
Lease termination  9,540   15,109   9,540   15,109 
Total operating expenses  163,147   172,247   444,843   473,199 
Operating income (loss)  17,077   (508)  90,684   30,864 
                 
Other (expenses) income, net:                
Interest expense  (13,496)  (14,118)  (42,110)  (41,592)
Interest income  733   11   1,188   30 
Loss on extinguishment of debt        (3,616)   
Other income (expense)  (451)  (15)  82   (117)
Total other (expense), net  (13,214)  (14,122)  (44,456)  (41,679)
                 
Income (loss) before taxes  3,863   (14,630)  46,228   (10,815)
Income tax expense (benefit)  856   (3,495)  10,891   (24,676)
Net income (loss) $3,007  $(11,135) $35,337  $13,861 
                 
Net income (loss) per share attributable to common shareholders                
Basic $0.09  $(0.48) $1.02  $0.59 
Diluted $0.09  $(0.48) $1.01  $0.58 
                 
Weighted-average common shares outstanding                
Basic  34,835   23,336   34,683   23,298 
Diluted  35,112   23,336   35,051   23,772 

MESA AIR GROUP, INC.
Condensed Consolidated Balance Sheets
(In thousands, except shares) (Unaudited)

  June 30,
2019
  September 30,
2018
 
ASSETS        
         
CURRENT ASSETS:        
Cash and cash equivalents $79,909  $103,311 
Marketable securities     19,921 
Restricted cash  3,647   3,823 
Receivables - less allowance for doubtful accounts  7,902   14,290 
Expendable parts and supplies - less obsolescence allowance  20,268   15,658 
Prepaid expenses and other current assets  46,425   40,914 
Total current assets  158,151   197,917 
         
PROPERTY AND EQUIPMENT, NET  1,286,022   1,250,829 
INTANGIBLES, NET  9,984   11,341 
LEASE AND EQUIPMENT DEPOSITS  1,977   2,598 
OTHER ASSETS  9,849   9,703 
TOTAL  1,465,983   1,472,388 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY       
         
CURRENT LIABILITIES:        
Current portion of debt and capital leases $163,623  $155,170 
Accounts payable  33,585   54,307 
Accrued compensation  14,492   12,208 
Other accrued expenses  34,152   29,696 
Total current liabilities  245,852   251,381 
         
NONCURRENT LIABILITIES:        
Long-term debt and capital leases - excluding current portion  717,546   760,177 
Deferred credits  13,401   15,393 
Deferred income taxes  50,695   39,797 
Other noncurrent liabilities  25,755   31,173 
Total noncurrent liabilities  807,397   846,540 
Total liabilities  1,053,249   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
  237,613   234,683 
Retained earnings  175,121   139,784 
Total stockholders' equity  412,734   374,467 
TOTAL $1,465,983  $1,472,388 
         

Operating Highlights (unaudited)

  Three months ended  Nine months ended 
  June 30  June 30 
  2019  2018  Change  2019  2018  Change 
Available Seat Miles (thousands)  2,724,961   2,440,278   11.7%   8,088,146   7,061,658   14.5% 
Block Hours  114,042   102,939   10.8%   341,071   298,498   14.3% 
Departures  61,798   57,782   7.0%   182,557   164,825   10.8% 
Average Stage Length (miles)  580   555   4.5%   582   563   3.2% 
Passengers  3,770,683   3,490,710   8.0%   10,874,745   9,823,231   10.7% 

Source: Mesa Air Group, Inc.

Mesa Air Group, Inc.
Investor Relations
Brian Gillman
Investor.Relations@mesa-air.com
(602) 685-4010

 

Mesa Air Group Logo (black background).png

Source: Mesa Air Group, Inc.


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