SEC Filing | Mesa Air Group

Dated: December 6, 2018

MESA AIR GROUP, INC.

/s/ Brian S. Gillman

Brian S. Gillman

Executive Vice President and General Counsel

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8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): December 3, 2018

MESA AIR GROUP, INC.

(Exact name of registrant as specified in its charter)

Nevada

001-38626

85-0302351

(State or other jurisdiction

of incorporation)

(Commission

File Number)

(I.R.S. Employer

Identification Number)

410 North 44th Street, Suite 700

Phoenix, Arizona 85008

(Address of principal executive offices, including zip code)

(602) 685-4000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Item 2.02 Results of Operations and Financial Condition.

On December 3, 2018, Mesa Air Group, Inc. issued a press release announcing its financial and operating results for its fourth fiscal quarter and fiscal year ended September 30, 2018. A copy of the press release is furnished as Exhibit 99.1 to this report.

In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits.

(d)

Exhibits.


Exhibit Number		Description

99.1		Press Release, dated December 3, 2018, issued by Mesa Air Group, Inc.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

EX-99.1

Exhibit 99.1

Mesa Air Group Announces Fourth Quarter and Fiscal Year 2018 Results

December 3, 2018

PHOENIX, Dec. 3, 2018 (GLOBE NEWSWIRE)— Mesa Air Group, Inc. (NASDAQ: MESA) today reported fourth quarter and Fiscal Year 2018 financial and operating results.

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 Ornstein. “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

Mar ‘18

Jun ‘18

Sep ‘18

Dec ‘18

Fleet Count

(Actual)

(Forecast)

E-175

CRJ-900

CRJ-700

CRJ-200

Total

143

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
	Income Before Taxes			Income Tax Expense		Net Income		Net Income per Diluted 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:

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.

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 888-989-9808 (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