Mercury Air Group, Inc. Reports Net Loss for Its Fiscal 2004 Third
Quarter, Reduces Debt by $41.1 Million in April With Proceeds From
Sale of FBOs LOS ANGELES, May 13 /PRNewswire-FirstCall/ -- Mercury
Air Group, Inc. reported a net loss for the three-month period
ended March 31, 2004 of $1,819,000, or $0.63 per basic and diluted
share, as compared to a net loss for the three-month period ended
March 31, 2003 of $1,098,000, or $0.33 per basic and diluted share.
"The reported net loss for the third quarter of fiscal 2004
reflects the effect of our high debt service costs in addition to
lower margin contributions from the Air Centers and Air Cargo
segments. With the proceeds from the sale of Mercury Air Centers,
Inc. on April 12, we reduced the principal amount of outstanding
long-term debt by $41.1 million, to approximately $18.0 million,
which will significantly reduce our debt service costs going
forward," said Joseph A. Czyzyk, President and CEO of Mercury Air
Group, Inc. adding, "after satisfying all of the obligations
associated with retiring debt, paying transaction related expenses
and establishing escrow accounts, we netted $9.3 million in surplus
cash from the sale which improved our financial position. The
improved financial position and lower debt service costs provide us
with additional options to enhance shareholder value in the future,
including the growth of our remaining three business lines."
Mercury Air Group's revenue for the third quarter of fiscal 2004
was $125,536,000, an increase of 13.1% over the revenue for the
third quarter of fiscal 2003 of $111,027,000. The Company's gross
margin for the third quarter of fiscal 2004 was $4,836,000 as
compared to the gross margin of $6,119,000 in the third quarter of
fiscal 2003. MercFuel, Inc. ("MercFuel"), the Company's aviation
fuel reseller subsidiary, had revenue of $88,305,000 on sales
volume of 72,393,000 gallons, or 795,500 gallons per day, in the
third quarter of fiscal 2004 as compared to sales revenue of
$72,497,000 on sales volume of 63,286,000 gallons, or 703,200
gallons per day, for the comparable period last year. MercFuel's
average aviation fuel sales price per gallon sold in the third
quarter of fiscal 2004 was $1.220 as compared to last year's third
quarter per gallon average aviation fuel sales price per gallon
sold of $1.146. MercFuel's gross margin in the third quarter of
fiscal 2004 decreased to $1,506,000, equating to an average sales
margin of $0.021 per gallon, as compared to last year's third
quarter sales margin of $1,670,000, or $0.026 per gallon.
MercFuel's aviation fuel sales volume within the corporate and
fractional aviation segment increased to 11,750,000 gallons, or
16.2% of MercFuel's total sales volume in the third quarter of
fiscal 2004, as compared to 7,111,000 gallons, or 11.2% of
MercFuel's total sales volume for the same period last year. The
Company's Mercury Air Cargo, Inc. ("Air Cargo") subsidiary had
revenue of $9,729,000 in the third quarter of fiscal 2004, an
increase of $1,333,000 or 15.9% from last year's third quarter
revenue of $8,396,000. Air Cargo's gross margin was $60,000 in the
third quarter of fiscal 2004 versus a gross margin of $368,000 in
the third quarter of fiscal 2003 as both the cargo marketing
services and warehouse divisions' margins declined. Maytag
Aircraft, Inc. ("Maytag Aircraft"), the Company's wholly-owned
subsidiary engaged in U.S. government contract services, had
revenue of $5,747,000 in the third quarter of fiscal 2004 as
compared to $5,990,000 for the same period last year. The revenue
decline is primarily due to the loss of Maytag Aircraft's Air
Terminal contract at Eielson Air Force Base in Alaska that
generated revenue of $134,000 in the third quarter of fiscal 2003.
Maytag Aircraft's gross margin for the third quarter of fiscal 2004
was $1,166,000, a decrease of $45,000 from Maytag Aircraft's gross
margin of $1,211,000 for the same period last year. Revenue from
the Company's Mercury Air Centers, Inc ("Air Centers") subsidiary
in the third quarter of fiscal 2004 was $23,704,000 on sales volume
of 7,545,000 gallons, or 82,900 gallons per day, as compared to
last year's third quarter revenue of $24,479,000 on sales volume of
8,029,000 gallons, or 89,200 gallons per day. Air Centers' gross
margin was $2,104,000 and $2,870,000 for the third quarters of
fiscal 2004 and 2003, respectively. On April 12, 2004, after
receiving shareholder approval, the Company completed the sale of
Air Centers to Allied Capital Corporation for $76,349,000, subject
to adjustment upon the determination of Air Centers' closing net
working capital. The Company used the proceeds, among other things,
primarily to repay $41,070,000 of outstanding principal of its long
term debt. For the nine-month period ended March 31, 2004, the
Company reported a net loss of $3,638,000, or $1.18 per basic and
diluted share, as compared to a net loss of $2,283,000, or $0.70
per basic and diluted share, for the comparable fiscal 2003 period.
The fiscal 2004 loss includes an after-tax settlement expense of
$1,799,000 associated with the J O Hambro Settlement and an accrual
for debt premiums on the Senior Subordinated Note of $702,000, net
of income taxes. Revenue in fiscal 2004 was $340,436,000, an
increase of $7,552,000, or 2.3%, from revenue of $332,884,000 for
the same period in fiscal 2003. Gross margin for the first nine
months of fiscal 2004 was $18,463,000, a decrease of $494,000, or
2.6%, from $18,957,000 last year. MercFuel's revenue for the
nine-month period ended March 31, 2004 was $228,195,000 on sales
volume of 207,507,000 gallons, or 754,600 thousand gallons per day,
as compared to revenue of $218,111,000 on sales volume of
221,486,000 gallons, or 808,300 gallons per day, for the same
period last year. Despite the lower sales volume, revenue increased
primarily due to higher worldwide petroleum product prices and an
increase in the sales volume in the corporate and fractional
aviation segment, where MercFuel realizes a higher average sales
price and margin per gallon sold than in the commercial airlines
segment. The lower sales volume is primarily due to the cessation
of business by National Airlines in November 2002. Despite the
lower sales volume, MercFuel's gross margin for fiscal 2004
increased slightly to $4,806,000 from $4,741,000 in fiscal 2003.
The average per gallon fuel sales margin in fiscal 2004 was $0.0401
as compared to $0.0383 in fiscal 2003. MercFuel's aviation fuel
sales volume within the corporate and fractional aviation segment
increased to 28,536,000 gallons, or 13.8% of MercFuel's total sales
volume in fiscal 2004, as compared to 20,765,000 gallons, or 9.4%
of MercFuel's total sales volume last year. Air Cargo's revenue for
the first nine months of fiscal 2004 was $29,306,000 as compared to
$24,840,000 for fiscal 2003, an increase of 18%. Air Cargo's gross
margin in fiscal 2004 was $1,356,000 as compared to $2,072,000 in
fiscal 2003, a decrease of 34.6% primarily due to the lower
contributions from the cargo marketing services and the warehouse
divisions and the establishment of a reserve for executive
severance partially offset by improved results from Mercury World
Cargo. Maytag Aircraft's revenue for the first nine months of
fiscal 2004 was $17,489,000, a decrease of $1,021,000, or 5.5% from
last year's revenue of $18,510,000. Maytag Aircraft's gross margin
increased to $3,909,000, representing an increase of 16.3% from
last year's gross margin of $3,360,000. Air Centers' revenue for
the first nine months of fiscal 2004 was $69,687,000 resulting in a
gross margin of $8,392,000. This compares to revenue for the first
nine months of fiscal 2003 of $72,187,000 resulting in a gross
margin of $8,784,000. Aviation fuels sales volume in fiscal 2004
was 23,285,000 gallons, or 84,700 gallons per day, a decrease of
1,881,000 gallons from last year's sales volume of 25,166,000
gallons, or 91,800 gallons per day. About Mercury Air Group Los
Angeles-based Mercury Air Group (AMEX:MAX) provides aviation
petroleum products, air cargo services and transportation, and
support services for international and domestic commercial
airlines, general and government aircraft and specialized contract
services for the United States government. Mercury Air Group
operates four business segments worldwide: Mercury Air Centers,
Inc., MercFuel, Inc., Maytag Aircraft Corporation and Mercury Air
Cargo, Inc. On April 12, 2004, Mercury Air Group sold its entire
ownership interest in Mercury Air Centers, Inc. to Allied Capital
Corporation. For more information, please visit
http://www.mercuryairgroup.com/. Statements contained in this news
release which are not historical facts are forward looking
statements as that item is defined in the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are
subject to risks and uncertainties that could cause actual results
to differ materially from estimated results. Such risks and
uncertainties are detailed in the Company's filings with the
Securities and Exchange Commission. For further information, please
contact: Joseph Czyzyk of Mercury Air Group, Inc., +1-310-827-2737;
or investor relations, David Herbst or Larry Barrios, both of The
MWW Group, +1-213-486-6560, ext. 317, for Mercury Air Group, Inc.
MERCURY AIR GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
OPERATIONS (Unaudited) (all amounts in thousands of dollars, except
per share amounts) Nine Months Ended Three Months Ended March 31,
March 31, (unaudited) (unaudited) 2004 2003 2004 2003 Sales and
revenues: Sales $269,640 $263,487 $101,775 $88,151 Service revenues
70,796 69,397 23,761 22,876 340,436 332,884 125,536 111,027 Costs
and expenses: Cost of sales 241,307 234,647 93,722 78,400 Operating
expenses 80,666 79,280 26,978 26,508 321,973 313,927 120,700
104,908 Gross margin (excluding depreciation and amortization)
18,463 18,957 4,836 6,119 Expenses (income): Selling, general and
administrative 7,838 7,889 2,798 2,648 Provision for bad debts 421
1,201 361 442 Depreciation and amortization 6,405 6,121 2,126 2,072
Interest expense 6,240 5,536 1,715 2,621 Hambro settlement costs
1,799 Debt extinguishment costs 1,773 40 Other income (286) (77)
(41) (27) Total expenses 22,417 22,443 6,959 7,796 Loss before
income tax benefit (3,954) (3,486) (2,123) (1,677) Income tax
benefit (316) (1,203) (304) (579) Net loss (3,638) (2,283) (1,819)
(1,098) Accrued preferred stock dividends 28 9 Net loss applicable
to common stockholders ($3,666) ($2,283) ($1,828) ($1,098) Net loss
per common share: Basic: ($1.18) ($0.70) ($0.63) ($0.33) Diluted:
($1.18) ($0.70) ($0.63) ($0.33) MERCURY AIR GROUP, INC. SELECTED
BUSINESS SEGMENT DATA For the Nine and Three Month Periods Ended
March 31, 2004 and 2003 (Unaudited) (all amounts in thousands) Nine
Months Ended Three Months Ended March 31, March 31, 2004 2003 2004
2003 Revenue MercFuel $228,195 $218,111 $88,305 $72,497 Mercury Air
Centers 69,687 72,187 23,704 24,479 Mercury Air Cargo 29,306 24,840
9,729 8,396 Maytag Aircraft 17,489 18,510 5,747 5,990 Intersegment
elimination (4,241) (764) (1,949) (335) Total Revenue $340,436
$332,884 $125,536 $111,027 Gross Margin MercFuel $4,806 $4,741
$1,506 $1,670 Mercury Air Centers 8,392 8,784 2,104 2,870 Mercury
Air Cargo 1,356 2,072 60 368 Maytag Aircraft 3,909 3,360 1,166
1,211 Total Gross Margin $18,463 $18,957 $4,836 $6,119 Depreciation
and Amortization MercFuel $352 $213 $118 $105 Mercury Air Centers
4,004 3,963 1,306 1,382 Mercury Air Cargo 1,401 1,545 484 453
Maytag Aircraft 249 265 89 84 Other 399 135 129 48 Total
Depreciation & Amortization $6,405 $6,121 $2,126 $2,072 Sales
Volume (thousands of gallons) MercFuel 207,507 221,486 72,393
63,286 Mercury Air Centers 23,285 25,166 7,545 8,029 MERCURY AIR
GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
(Unaudited) (all amounts in thousands of dollars) ASSETS March 31,
June 30, 2004 2003 CURRENT ASSETS: Cash and cash equivalents $1,822
$2,802 Trade accounts receivable 58,954 46,753 Inventories,
principally aviation fuel 3,867 4,422 Prepaid expenses and other
current assets 9,017 5,241 Deferred taxes, current 901 901 TOTAL
CURRENT ASSETS 74,561 60,119 PROPERTY, EQUIPMENT AND LEASEHOLDS,
net 57,789 58,844 NOTES RECEIVABLE 1,034 1,815 DEFERRED INCOME
TAXES, LONG TERM 1,961 2,284 GOODWILL 4,389 4,389 OTHER INTANGIBLE
ASSETS 808 1,033 OTHER ASSETS 3,869 4,471 TOTAL ASSETS $144,411
$132,955 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES:
Accounts payable $38,358 $34,677 Accrued expenses and other current
liabilities 15,672 9,554 Current portion of long-term debt 3,145
4,194 TOTAL CURRENT LIABILITIES 57,175 48,425 LONG-TERM DEBT 29,286
25,501 SENIOR SUBORDINATED NOTE 23,697 23,445 SUBORDINATED NOTE
3,586 OTHER NONCURRENT LIABILITIES 1,057 608 DEFERRED RENT 1,414
1,885 MINORITY INTEREST 182 180 TOTAL LIABILITIES 116,397 100,044
MANDATORILY REDEEMABLE PREFERRED STOCK 509 481 STOCKHOLDERS'
EQUITY: Common Stock -- $ .01 par value; authorized 18,000,000
shares; 30 33 Additional paid-in capital 20,752 22,496 Retained
earnings 10,353 14,018 Accumulated other comprehensive loss 6 (86)
Notes receivable from officers (3,636) (4,031) TOTAL STOCKHOLDERS'
EQUITY 27,505 32,430 TOTAL LIABILITIES, PREFERRED STOCK, AND
STOCKHOLDERS' EQUITY $144,411 $132,955 DATASOURCE: Mercury Air
Group, Inc. CONTACT: Joseph Czyzyk of Mercury Air Group, Inc.,
+1-310-827-2737; or investor relations, David Herbst or Larry
Barrios, both of The MWW Group, +1-213-486-6560, ext. 317, for
Mercury Air Group, Inc. Web site: http://www.mercuryairgroup.com/
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