Mercury Air (AMEX:MAX)
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Mercury Air Group, Inc. Reports Second Quarter Net Loss
MercFuels and Maytag Aircraft Report Improved Margins
LOS ANGELES, Feb. 17 /PRNewswire-FirstCall/ -- Mercury Air Group, Inc.
reported a net loss for the three-month period ended December 31, 2003 of
$1,517,000, or $0.47 per basic and diluted share. The results for the second
quarter of fiscal 2004 compare to the Company's net loss for the three-month
period ended December 31, 2002 of $596,000, or $0.18 per basic and diluted
share. The second fiscal quarter losses were primarily the result of a
settlement expense in the amount of $1,799,000, on both a pre-tax and after-tax
basis and due to the continued accrual of debt premiums of $287,000 associated
with our senior subordinated note.
"Our second quarter financial results were adversely impacted by settlement
expenses and the accrual of debt premiums associated with our Senior
Subordinated Note. These two items reduced our after-tax net income for the
quarter by approximately $2.0 million or $0.60 per basic and diluted share and
overshadowed otherwise improved operating results on a quarter to quarter
basis," said Joseph A. Czyzyk, President and CEO of Mercury Air Group, Inc.
adding, "Our future remains strong with Maytag being awarded the air terminal
and ground handling services contract at the Kuwait International Airport,
demand for aviation fuel from our MercFuels business increasing, an increase in
air cargo activity and the pending sale of our FBO business, which we expect to
close at the end of March or early April 2004. When complete, the sale of our
FBOs will result in a significant reduction of debt and debt service costs,
which will position Mercury for improved profitability."
On December 12, 2003 the Company announced that it had entered into a settlement
agreement with J O Hambro Capital Management and certain of its affiliates and
private clients (the "Hambro Settlement"). The settlement expense, which is a
non-deductible expense for income tax purposes, isthe difference between the
face value of the notes issued and the trading value of the stock purchased
based on the closing stock price on the American Stock Exchange on the day of
the settlement.
Revenue for the second quarters of fiscal 2004 and 2003 was $113,887,000 and
$113,962,000, respectively. The revenue for the second quarter of fiscal 2003
includes aviation fuel sales of $7,201,000 to National Airlines, Inc.
("National"), which ceased operations in November 2002. The Company's gross
margin for the second quarter of fiscal 2004 was $6,912,000 as compared to the
gross margin of $6,888,000 in the second quarter of fiscal 2003. Last year's
results include gross margin of $162,000 for the sales of aviation fuel to
National.
MercFuels, Inc. ("MercFuels"), the Company's aviation fuel reseller subsidiary,
had revenue of $74,901,000 on sales volume of 70,844,000 gallons in the second
quarter of fiscal 2004 as compared to sales revenue of $75,041,000 on sales
volume of 78,170,000 gallons last year, which includes sales revenue of
$7,201,000 on sales volume of 8,031,000 gallons to National. MercFuels' average
per gallon aviation fuel sales price in the second quarter of fiscal 2004 was
$1.057 as compared to last year's second quarter per gallon average aviation
fuel sales price of $0.96. MercFuels' gross margin in the second quarter of
fiscal 2004 increased 29.2% as compared to last year's second quarter to
$1,874,000 from $1,451,000 last year, which included $161,000 for aviation fuel
sales to National. The average sales margin per gallon on aviation fuel sales
was $0.043 as compared to $0.035 last year. MercFuels' aviation fuel sales
volume within the corporate airlines sector increased to 8,797,000 gallons, or
12.4% of MercFuels' total sales volume in the second quarter of fiscal 2004, as
compared to 8,125,000 gallons, or 10.4% of MercFuels' total sales volume last
year.
Revenue from the Company's Mercury Air Centers, Inc. ("Air Centers") subsidiary
was $23,450,000 and $23,882,000 in the second quarters of fiscal 2004 and 2003,
respectively. Air Centers' sales volume was 7,978,000 gallons and 8,381,000
gallons for the second quarters of fiscal 2004 and 2003, respectively. The Air
Centers' gross margin was $3,084,000 and $2,941,000 for the second quarters of
fiscal 2004 and 2003, respectively. On October 28, 2003, the Company announced
that it had entered into a definitive agreement to sell 100% of the outstanding
stock in Air Centers to Allied Capital Corporation ("Allied"), subject to the
Company's stockholders' approval, completion of due diligence and regulatory
agencies' approvals. According to the terms of the definitive agreement, as
amended, the transaction is to close on or before May 14, 2004. The Air
Centers' gross margin in the second quarter of fiscal 2004 was $3,084,000, an
increase of $143,000, or 4.9%, from last year's second quarter gross margin of
$2,941,000. The average sales margin per gallon on the sale of aviation fuel in
the second quarter of fiscal 2004 was $0.873 as compared to $0.836 last year.
The Company's Mercury Air Cargo, Inc. ("Air Cargo") subsidiary had revenue of
$10,683,000 in the second quarter of fiscal 2004, an increase of $1,529,000 or
16.7% from last year's second quarter revenue of $9,154,000. Air Cargo's gross
margin was $523,000 in the second quarter of fiscal 2004 versus a gross margin
of $1,300,000 in the second quarter of fiscal 2003. The gross margin in fiscal
2004 was adversely impacted due to a reserve for employee severance costs.
Maytag Aircraft, Inc., the Company's wholly-owned subsidiary engaged in
government contract services, had revenue of $5,915,000 in the second quarter of
fiscal 2004 as compared to $6,314,000 in the second quarter of fiscal 2003.
Maytag Aircraft's gross margin for the second quarters of fiscal 2004 and fiscal
2003 was $1,431,000 and $1,196,000, respectively, representing an increase in
fiscal 2004 of 19.6%.
The current quarter's income tax provision was increased by $702,000 dueto the
nondeductability of certain expenses associated with the Hambro Settlement
resulting in the Company reporting an income tax expense for the current quarter
despite reporting a loss before income taxes. Excluding the expenses associated
with theHambro Settlement from the Company's reported second quarter fiscal
2004 loss before income taxes, the current quarter's income tax benefit would
have been $521,000, or an effective income tax rate of 38.9% of the Company's
loss before income taxes excluding the Hambro Settlement.
For the six month period ended December 31, 2003, the Company reported a net
loss of $1,819,000, or $0.56 per basic and diluted share, as compared to a net
loss of $1,185,000, or $0.37 per basic and diluted share, for the comparable
fiscal 2003 period. The fiscal 2004 loss includes the 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 $214,900,000, a decrease of $6,957,000, or
3.1%, from revenue of $221,857,000 for same period in fiscal 2003. Last year's
revenue includes $24,660,000 for aviation fuel sales to National. Excluding the
sales revenue from National from last year's results, revenue increased in
fiscal 2004 by $17,703,000, or 9.0%. Gross margin for the first six months of
fiscal 2004 increased 6.1% to $13,627,000 from $12,838,000 last year.
MercFuels' aviation fuel sales volume for the first six months of fiscal 2004
was 135,114,000 gallons, a decrease of 23,086,000 from last year's sales volume
of 158,200,000 gallons, which includes 28,967,000 gallons sold to National.
Excluding the National sales volume from last year's results, MercFuels' sales
volume increased 5,881,000 gallons or 4.6%. Despite the lower sales volume,
MercFuels' gross margin for fiscal 2004 increased 7.5% to $3,300,000 from
$3,071,000 in fiscal 2003, which includes $406,000 for the National sales. The
average per gallon fuel sales margin in fiscal 2004 was $0.041 as compared to
$0.035 in fiscal 2003. MercFuels' aviation fuel sales volume within the
corporate airlines sector increased to 16,786,000 gallons, or 12.4% of
MercFuels' total sales volume in fiscal 2004, as compared to 13,654,000 gallons,
or 8.6% of MercFuels' total sales volume last year.
Air Centers' revenue for the first six months of fiscal 2004 was $45,983,000
producing a gross margin of $6,288,000. This compares to revenue for the first
six months of fiscal 2003 of $47,708,000 resulting in a gross margin of
$5,914,000. Aviation fuels sales volume in fiscal 2004 was 15,740,000 gallons,
a decrease of 1,397,000 gallons from last year's sales volume of 17,137,000
gallons.
Air Cargo's revenue for the first six months of fiscal 2004 was $19,577,000 as
compared to $16,444,000 for fiscal 2003, an increase of 19.1%. Air Cargo's gross
margin in fiscal 2004 was $1,296,000 as compared to $1,704,000 in fiscal 2003, a
decrease of 23.9% primarily due to the establishment of a reserve for employee
severance and an increase in bad debt expense.
Maytag Aircraft's revenue for the first six months of fiscal 2004 was
$11,742,000, a decrease of $778,000, or 6.2% from last year's revenue of
$12,520,000. Maytag Aircraft's gross margin increased to $2,743,000,
representing an increase of 27.6% from last year's gross margin of $2,149,000.
About Mercury Air Group
Los Angeles-based Mercury Air Group (AMEX:MAX) provides aviation petroleum
products, air cargoservices 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 segmentsworldwide: Mercury Air Centers, Inc.,
MercFuels, Inc., Maytag Aircraft Corporation and Mercury Air Cargo, Inc. 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, DavidHerbst or Larry Barrios 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)
Six Months Ended Three Months Ended
December 31, December 31,
(Unaudited) (Unaudited)
2003 2002 2003 2002
Sales and revenues:
Sales $167,865 $175,336 $89,289 $89,886
Service revenues 47,035 46,521 24,598 24,076
214,900 221,857 113,887 113,962
Costs and expenses:
Cost of sales 147,585 156,247 78,599 80,213
Operating expenses 53,688 52,772 28,376 26,861
201,273 209,019 106,975 107,074
Gross margin (excluding
depreciation and
amortization) 13,627 12,838 6,912 6,888
Expenses (income):
Selling, generaland
administrative 5,040 5,241 2,765 2,651
Provision for bad debts 60 759 (323) 407
Depreciation and
amortization 4,279 4,049 2,108 1,998
Interest expense 4,525 2,915 1,931 1,533
Hambro settlement costs 1,799 1,799
Debt extinguishment costs 1,733 1,208
Other (income) expense (245) (50) (32)
Total expenses (income) 15,458 14,647 8,248 7,797
Loss before income tax
provision (benefit) (1,831) (1,809) (1,336) (909)
Income tax provision
(benefit) (12) (624) 181 (313)
Net loss (1,819) (1,185) (1,517) (596)
Accrued preferred stock
dividends 19 9
Net loss applicable to
common stockholders ($1,838) ($1,185) ($1,526) ($596)
Net loss per common share:
Basic: ($0.56) ($0.37) ($0.47) ($0.18)
Diluted: ($0.56) ($0.37) ($0.47) ($0.18)
MERCURYAIR GROUP, INC.
SELECTED BUSINESS SEGMENT DATA
For the Three and Six Month Periods Ended December 31, 2003 and 2002
(Unaudited)
(all amounts in thousands)
Six Months Ended Three Months Ended
December 31, December 31,
2003 2002 2003 2002
Revenue
MercFuels $139,890$145,614 $74,901 $75,041
Mercury Air Centers 45,983 47,708 23,450 23,882
Mercury Air Cargo 19,577 16,444 10,683 9,154
Maytag Aircraft 11,742 12,520 5,915 6,314
Intersegment
elimination (2,292) (429) (1,062) (429)
Total Revenue $214,900 $221,857 $113,887 $113,962
Gross Margin
MercFuels $3,300 $3,071 $1,874 $1,451
Mercury Air Centers 6,288 5,914 3,084 2,941
Mercury Air Cargo 1,296 1,704 523 1,300
Maytag Aircraft 2,743 2,149 1,431 1,196
Total Gross Margin $13,627 $12,838 $6,912 $6,888
Depreciation and
Amortization
MercFuels $234 $108 $119 $54
Mercury Air Centers 2,699 2,581 1,319 1,328
Mercury Air Cargo 917 1,092 459 546
Maytag Aircraft 160 181 79 90
Other 269 87 132 (20)
Total Depreciation &
Amortization $4,279 $4,049 $2,108 $1,998
Sales Volume (thousands
of gallons)
MercFuels 135,114 158,200 70,844 78,170
Mercury Air Centers 15,740 17,137 7,978 8,381
MERCURY AIR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(all amounts in thousands of dollars)
ASSETS December 31, June 30,
2003 2003
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $3,387 $2,802
Trade accounts receivable 52,036 46,753
Inventories, principally aviation fuel 4,034 4,422
Prepaid expenses and other current assets 5,276 5,241
Deferred taxes, current 1,339 901
TOTAL CURRENT ASSETS 66,072 60,119
PROPERTY, EQUIPMENT AND LEASEHOLDS, net 57,649 58,844
NOTES RECEIVABLE 1,239 1,815
DEFERRED INCOME TAXES, LONG TERM 2,847 2,284
GOODWILL 4,389 4,389
OTHER INTANGIBLE ASSETS 883 1,033
OTHER ASSETS 3,937 4,471
TOTAL ASSETS $137,016 $132,955
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $37,349 $34,677
Accrued expenses and other current
liabilities 12,334 9,554
Current portion of long-term debt 4,143 4,194
TOTAL CURRENT LIABILITIES 53,826 48,425
LONG-TERM DEBT 23,273 25,501
SENIOR SUBORDINATED NOTE 23,533 23,445
SUBORDINATED NOTE 3,586
OTHER NONCURRENT LIABILITIES 1,265 608
DEFERRED RENT 1,571 1,885
MINORITY INTEREST 195 180
TOTAL LIABILITIES 107,249 100,044
MANDATORILY REDEEMABLE PREFERRED STOCK 500 481
STOCKHOLDERS' EQUITY:
Common Stock - $ .01 par value; authorized
18,000,000 shares; 30 33
Additional paid-in capital 20,726 22,496
Retained earnings 12,181 14,018
Accumulated other comprehensive loss 62 (86)
Notes receivable from officers (3,732) (4,031)
TOTAL STOCKHOLDERS' EQUITY 29,267 32,430
TOTAL LIABILITIES, PREFERRED STOCK, AND
STOCKHOLDERS' EQUITY $137,016 $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 of The MWW Group,
+1-213-486-6560 ext. 317, for Mercury Air Group, Inc.
Web site: http://www.mercuryairgroup.com/