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Mesa Air Group Announces Fourth Quarter and Fiscal Year 2018 Results

PHOENIX, Dec. 03, 2018 (GLOBE NEWSWIRE) -- Mesa Air Group, Inc. (NASDAQ: MESA) today reported fourth quarter and Fiscal Year 2018 financial and operating results.

/EIN News/ -- Highlights for Fourth Quarter and Fiscal Year 2018 (ending September 30, 2018)

Mesa’s Q4 2018 results reflect net income of $19.4 million, or $0.65 per diluted share, compared to net income of $5.5 million, or $0.23 per diluted share for Q4 2017.  Mesa’s Q4 2018 income before taxes was $26.6 million, compared to $10.2 million for Q4 2017.  In addition, Mesa’s EBITDA1 for Q4 2018 was $59.3 million, compared to $38.5 million in Q4 2017 and EBITDAR1 was $73.6 million, compared to $56.7 million in Q4 2017.

Mesa reported net income of $33.3 million, or $1.32 per diluted share for the 2018 fiscal year, compared to net income of $32.8 million, or $1.40 per diluted share for the 2017 fiscal year. Excluding special items for both periods adjusted net income1 was $31.0 million for the 2018 fiscal year compared to $32.8 million for the 2017 fiscal year. Mesa reported income before taxes of $15.8 million for the 2018 fiscal year compared to $53.7 million in the 2017 fiscal year. Excluding special items for both periods adjusted income before taxes1 was $42.0 million compared to $53.7 million in the 2017 fiscal year. In addition, Adjusted EBITDA1 was $163.8 million, compared to $160.8 million in the 2017 fiscal year.  Similarly, Adjusted EBITDAR1 was $232.7 million, compared to $233.4 million in the 2017 fiscal year.

Mesa operated 112,475 block hours during the fourth quarter, an increase of 9.3% from Q3 2018 of 102,939 and an increase of 14.9% from Q2 2018 of 97,853.

“In spite of industry challenges, there were a number of positive developments in the quarter, most notably the progress we have made increasing the utilization of our aircraft through a combination of strong hiring and declining attrition among our pilots, reduced training backlog, and improved utilization of existing resources,” stated Jonathan Ornstein, Chairman and Chief Executive Officer of Mesa Air Group. “We appreciate the hard work and dedication of all of our employees for their very important and meaningful contribution to our improving operational capabilities.”

Mike Lotz, President and Chief Financial Officer continued, “On August 14, 2018, we successfully completed our IPO. Including the partial exercise of the underwriters’ option to purchase additional shares, we raised approximately $112 million and subsequently paid down $25.6 million outstanding on our revolving credit facility, reducing annual interest expense by $1.2 million per year. We are currently negotiating the purchase of ten additional aircraft currently on lease to us and hope to complete the transaction by the end of March 2019. In addition, we are finalizing negotiations to refinance our high-cost debt primarily associated with spare engine purchases by the end of this year. This is expected to result in a further reduction of interest expense going forward,” said Lotz.

__________
1 See Reconciliation of non-GAAP financial measures

Outlook

The Company is providing the following guidance for the fourth quarter of FY 2018:

Fleet, Block Hours, Engine Expense - Actual and Forecast for Q1 FY 2019

  FY '18 Q2   FY '18 Q3   FY '18 Q4   FY '19 Q1
  Qtr Ended   Qtr Ended   Qtr Ended   Qtr Ended
  Mar '18   Jun '18   Sep '18   Dec '18
Fleet Count (Actual)   (Actual)   (Actual)   (Forecast)
E-175   58     58     60     60
CRJ-900   64     64     64     64
CRJ-700   20     20     20     20
CRJ-200   1     1     1     1
Total   143     143     145     145
               
Production              
Block Hours   97,853     102,939     112,475     114,650
Block Hours per day per Aircraft   7.7     8.0     8.5     8.7
               
               
Non Pass-Through Engine Expense $ 10.8   $ 8.5   $ 2.4   $ 8.5
               

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 table below reflects supplemental financial data and reconciliations to GAAP financial statements for the three months and twelve months ended September 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 September 30, 2018
              Net Income
  Income     Income Tax   Net   per Diluted
  Before Taxes     Expense   Income   Share
Income 26,646     7,251   19,395   $ 0.65
               
Interest Expense 15,274              
Interest Income (85 )            
Depreciation and Amortization 17,420              
EBITDA 59,255              
               
Aircraft Rent 14,334              
EBITDAR 73,589              
               
Weighted-average Shares Outstanding    
               
      Three months ended
September 30, 2018
   
      Basic   Diluted    
GAAP weighted-average common shares outstanding2   18,663   29,675    
             

 

__________
2 As of 9/30/18 we had 23,902,903 common shares and 10,614,990 warrants outstanding for total diluted shares outstanding of 34,517,893.

  Twelve months ended September 30, 2018
  Income
Before Taxes
    Income Tax
Expense
(Benefit)
    Net
Income
    Net Income
per Diluted
Share

 
Income 15,829     (17,426 )   33,255     $ 1.32  
               
FY18 Adjustments (1) (2) 26,193     28,455     (2,262 )   $ (0.09 )
               
Non-GAAP Income 42,022     11,029     30,994     $ 1.23  
               
Interest Expense 56,867              
Interest Income (114 )            
Depreciation and Amortization 65,031              
Adjusted EBITDA 163,806              
               
Aircraft Rent 68,892              
Adjusted EBITDAR 232,698              
               
               
Weighted-average Shares Outstanding    
               
      Twelve months ended September 30, 2018    
      Basic   Diluted    
GAAP weighted-average common shares outstanding2     13,516   25,171    
               

2018 fiscal year special items:

  1. Includes one-time non-cash adjustments 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 at the S-1 filing date and $15.1 million related to the acquisition of nine CRJ-900 aircraft previously leased in Lease termination expense.

  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. Consequently, we have recorded a decrease related to our net deferred tax liabilities of $22.0 million.  The Company has also estimated an increase to its valuation allowance of $0.5 million due to the rate change.  We have recorded a corresponding net adjustment to deferred income tax benefit of $21.5 million for the period ending September 30, 2018. 

Mesa Air Group will host a conference call with analysts on Tuesday, December 4 at 11:00am EST/9:00am MST. The conference call number is 888-323-9808 (Passcode: Phoenix). The conference call can also be accessed live via the web by visiting https://edge.media-server.com/m6/p/3y279bbm. 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 is 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 November 30, 2018, Mesa operated a fleet of 145 aircraft with approximately 648 daily departures and 3,412 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 first quarter of fiscal 2019, (ii) the major non pass-through engine overhaul expense forecast for the same fiscal periods, (iii) the Company’s expectations regarding completing the purchase of ten additional GECAS leased aircraft by the end of this year, and (iv) the refinancing of high-cost debt associated with spare engines by the end of this year and the impact thereof on the Company’s future interest expense. 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 September 30, Twelve Months Ended September 30,
  2018     2017 2018 2017
Operating revenues:            
Contract revenue $ 168,444     $ 151,577   $ 639,264   $ 618,698  
Pass-through and other   9,088       5,717     42,331     24,878  
Total operating revenues   177,532       157,294     681,595     643,576  
             
Operating expenses:            
Flight operations   53,463       45,215     209,065     155,516  
Fuel   149       152     498     766  
Maintenance   39,118       46,488     193,164     210,729  
Aircraft rent   14,334       18,217     68,892     72,551  
Aircraft and traffic servicing   950       918     3,541     3,676  
General and administrative   10,314       7,786     53,647     38,996  
Depreciation and amortization   17,420       15,828     65,031     61,048  
Lease termination     -           -     15,109       -  
Total operating expenses   135,748       134,604     608,947     543,282  
Operating income   41,784       22,690     72,648     100,294  
             
Other (expenses) income, net:            
Interest expense   (15,274 )     (12,451 )   (56,867 )   (46,110 )
Interest income   85       9     114     32  
Other income (expense)   51       (67 )   (66 )   (514 )
Total other (expense), net   (15,138 )     (12,509 )   (56,819 )   (46,592 )
             
Income before taxes   26,646       10,181     15,829     53,702  
Income tax (benefit) expense   7,251       4,698     (17,426 )   20,874  
Net income $ 19,395     $ 5,483   $ 33,255   $ 32,828  
             
Net income per share attributable to common shareholders            
Basic $ 1.04     $ 0.49   $ 2.46   $ 3.01  
Diluted $ 0.65     $ 0.23   $ 1.32   $ 1.40  
             
Weighted-average common shares outstanding            
Basic   18,663       11,117     13,516     10,919  
Diluted   29,675       23,459     25,171     23,386  
             
MESA AIR GROUP, INC.
Condensed Consolidated Balance Sheets
(In thousands) (Unaudited)
               
        September 30,     September 30,
        2018     2017
ASSETS              
Current assets:              
Cash and cash equivalents       $ 103,311     $ 56,788
Marketable Securities         19,921       -
Restricted cash         3,823       3,559
Receivables, net         14,290       8,853
Expendable parts and supplies, net         15,658       15,114
Prepaid expenses and other current assets         40,914       61,525
Total current assets         197,917       145,839
               
Property and equipment, net         1,250,829       1,192,448
Intangibles, net         11,341       11,724
Lease and equipment deposits         2,598       1,945
Other assets         9,703       5,693
Total assets       $ 1,472,388     $ 1,357,649
               
LIABILITIES AND STOCKHOLDERS’ EQUITY              
Current liabilities:              
Current portion of long-term debt       $ 155,170     $ 140,466
Accounts payable         54,307       44,738
Accrued compensation         12,208       9,080
Other accrued expenses         29,696       23,929
Total current liabilities         251,381       218,213
               
Long-term debt, excluding current portion         760,177       803,874
Deferred credits         15,393       17,189
Deferred income taxes         39,797       56,436
Other noncurrent liabilities         31,173       39,713
Total noncurrent liabilities         846,540       917,212
Total liabilities         1,097,921       1,135,425
               
               
Stockholders' equity:              
Common stock         234,683       114,456
Retained earnings         139,784       107,768
Total stockholders' equity         374,467       222,224
Total liabilities and stockholders' equity       $ 1,472,388     $ 1,357,649
               

Operating Highlights (unaudited)

  Three months ended September 30
  2018   2017   Change
Available Seat Miles - ASMs (thousands) 2,652,219   2,258,060   17.5 %
Block Hours 112,475   95,109   18.3 %
Departures 63,153   55,517   13.8 %
Average Stage Length (miles) 552   535   3.2 %
Passengers 3,733,543   3,248,072   14.9 %
           
  Twelve months ended September 30
  2018   2017   Change
Available Seat Miles - ASMs (thousands) 9,713,877   9,471,914   2.6 %
Block Hours 410,974   395,084   4.0 %
Departures 227,978   221,990   2.7 %
Average Stage Length (miles) 560   561   -0.2 %
Passengers 13,556,774   13,005,844   4.2 %
             

Source: Mesa Air Group, Inc.

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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