MAX Mercury Air Grp.

Mercury Air Group, Inc. Reports Final Fiscal 2003 Financial Results And Restates Fiscal 2002 Net Earnings LOS ANGELES, Dec. 31 /PRNewswire-FirstCall/ -- Mercury Air Group, Inc. has announced final operating results for its fiscal year ended June 30, 2003 and restated its financial results for fiscal 2002. Upon the completion of the fiscal 2003 audit and the re-audit of the fiscal 2002 and 2001 financial statements, the Company reported a net loss for the fiscal year ended June 30, 2003 of $2,798,000, or $0.86 per basic and diluted share, respectively. This compares to the estimated net loss for fiscal 2003 of $3,069,000, or $0.93 per basic and diluted share, respectively, that the Company announced in its press release on December 2, 2003. The Company also announced restated net earnings for the fiscal year ended June 30, 2002 of $4,517,000, or $1.38 and $1.35 per basic and diluted share, respectively. The restated results for fiscal 2002 represent a reduction of $516,000, or $0.15 and $0.16 per basic and diluted share, respectively, from the results reported last year. The restated results for fiscal 2002 compare to the estimated restated fiscal 2002 net earnings of $4,387,000, or $1.34 and $1.31 per basic and diluted share, respectively, announced in the Company's press release on December 2, 2003. The announcement of the restated operating results comes after the Company's current independent accounting firm completed a re-audit of its fiscal 2002 and 2001 financial statements, which were previously audited by other independent auditors. The restatement of fiscal 2002 net earnings was the result of the following items: 1) the recognition of a liability as of June 30, 2002 of $459,000 associated with a proposed rent increase retroactive to June 18, 2001 for one of the Company's Air Cargo warehouse facilities at Los Angeles International Airport; 2) the recognition of additional compensation expense in fiscal year 2002 of $430,000 associated with the 2002 Management Stock Purchase Program; and 3) the reversal of the sale-leaseback accounting treatment applied to the sale of a building housing the Company's corporate headquarters in January 2002 and the consolidation of the entity which acquired the building from the Company. In addition, the Company adjusted opening retained earnings as of July 1, 2000 by $363,000 to correct for income tax adjustments that should have been recorded in years prior to fiscal 2001. "With the completion of the re-audit of our fiscal 2002 and 2001 financial statements, we can now proceed with finalizing the closing requirements and conclude the sale of our FBO business to Allied Capital Corporation and refocus our efforts on our remaining three businesses. After the completion of this sale, combined with a new credit facility, I am more confident than ever with respect to the financial position of our Company going forward," said Joseph A. Czyzyk, President and Chief Executive Officer of Mercury Air Group, Inc. For fiscal 2003 revenue was $429,015,000, an increase of $45,673,000, or 11.9%, from fiscal 2002 revenue of $383,342,000. Gross margin for fiscal 2003 was $25,963,000, a decrease of $1,850,000, or 6.7%, from the restated gross margin for fiscal 2002 of $27,813,000. Revenue for the Air Centers business segment in fiscal 2003 was $96,249,000 as compared to $94,417,000 for fiscal 2002, representing an increase of $1,832,000, or 1.9%. Revenue for fiscal 2002 includes $7,476,000 from the Bedford FBO, which the Company sold at the end of June 2002. Excluding the revenue from the Bedford FBO from fiscal 2002 results, revenue in fiscal 2003 increased $9,308,000, or 10.7%, from the fiscal 2002 revenue for Air Centers' of $86,941,000. The Air Centers' gross margin in fiscal 2003 was $12,854,000, a reduction of $691,000, or 5.1%, from fiscal 2002 gross margin of $13,545,000, which includes $1,791,000 from the Bedford FBO. Excluding the gross margin contribution from the Bedford FBO from fiscal 2002 results, the Air Centers' gross margin in fiscal 2003 increased $1,100,000, or 9.4%, from the gross margin in fiscal 2002. The Air Centers' retail sales volume in fiscal 2003 was 33,800,000 gallons, a decrease of 2,225,000 gallons, or 6.2% from fiscal 2002 retail sales volume of 36,025,000 gallons, which includes 2,939,000 gallons from the Bedford FBO. Excluding the Bedford FBO sales volume from fiscal 2002 results, retail sales volume increased 714,000 gallons in fiscal 2003. Revenue for the MercFuel business segment in fiscal 2003 was $280,136,000 as compared to $232,573,000 for fiscal 2002, an increase of $47,563,000, or 20.5%, on sales volume of 286,873,000 gallons and 287,651,000 gallons for 2003 and 2002, respectively. Revenue for fiscal 2003 and 2002 includes $24,728,000 and $49,085,000, respectively, on sales volume of 28,966,000 gallons and 68,704,000 gallons for 2003 and 2002, respectively, for fuel sales to National Airlines, which ceased operations in November 2002. Excluding the sales to National Airlines from both years' results, MercFuel's revenue in fiscal 2003 would have been $255,408,000 on 257,907,000 gallons as compared to $183,488,000 on sales volume of 218,947,000 gallons for fiscal 2002. MercFuel's gross margin in fiscal 2003 was $5,926,000, a reduction of $655,000, or 10%, from fiscal 2002 gross margin of $6,581,000. The gross margin contribution from sales to National Airlines in fiscal 2003 and 2002 was $406,000 and $939,000, respectively. Excluding the gross margin contribution from sales to National Airlines from both years' results, MercFuel's gross margin would have been $5,520,000 and $5,642,000 in fiscal 2003 and 2002, respectively. MercFuel's bad debt expense in fiscal 2003 was $1,060,000, or 0.38% of total revenue as compared to $994,000 in fiscal 2002 representing 0.43% of total revenue. Revenue from Maytag Aircraft in fiscal 2003 was $24,421,000, a decrease of $3,807,000, or 13.5% from fiscal 2002 revenue of $28,228,000. The decline in revenue can be attributed to the non-renewal of the government contract in Yokota, Japan, which expired without an extension or renewal being awarded to the Company, resulting in lower revenue of $1,396,000, and two refueling contracts that also expired without a renewal being awarded to the Company reducing revenue by $1,935,000. Maytag Aircraft's gross margin in fiscal 2003 was $4,598,000, a reduction of $2,191,000 from fiscal 2002 gross margin of $6,789,000. Revenue from Air Cargo was $32,691,000 in fiscal 2003, representing an increase of $4,567,000, or 16.2%, from fiscal 2002 revenue of $28,124,000. Revenue in cargo handling increased $2,554,000 in fiscal 2003 as a result of higher air cargo volume due to the west coast dock strike in late 2002 and general improvement in the worldwide economy. Air Cargo's gross margin in fiscal 2003 was $2,585,000, representing an increase of $1,687,000 from the restated gross margin from fiscal 2002 of $898,000. The increase is primarily due to improved results from the cargo handling operations and improved margins from the space brokerage operations. Fiscal 2002 results include an after-tax gain of approximately $5,450,000 from the sale of the Company's Bedford FBO in late June 2002. This gain contributed $1.66 and $1.62 to fiscal 2002 basic and diluted earnings per share, respectively. Selling, general and administrative expenses in fiscal 2003 were $10,818,000 as compared to the restated expense for fiscal 2002 of $11,771,000. Interest expense in fiscal 2003 increased to $7,956,000 from $5,830,000 in fiscal 2002 primarily the result of the accrual of premiums associated with the Senior Secured Subordinated 12% Note of approximately $1,724,000. As announced on October 23, 2003, Allied Capital Corporation acquired the Senior Secured Subordinated 12% Note and waived many of the debt premiums included in the amended note. As a result of the Company's restructuring of its long term debt during fiscal 2003, the Company recognized debt issuance costs in the amount of $1,773,000 in fiscal 2003. About Mercury Air Group Los Angeles-based Mercury Air Group (AMEX:MAX)(PCX: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. For more information, please visit http://www.mercuryairgroup.com/ . Certain 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. The Company intends these forward looking statements to speak only as of the time of the news release and does not undertake to update or revise them, as more information becomes available. For further information please contact Joseph Czyzyk of Mercury Air Group, Inc. at (310) 827-2737 or Investors Relations, Larry Barrios of The MWW Group at (213) 486-6560. MERCURY AIR GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (all amounts in thousands of dollars, except per share amounts) Twelve Months Ended Three Months Ended June 30, June 30, 2003 2002 2003 2002 (Restated) (Restated) Sales and Revenues: Sales $337,217 $293,731 $73,730 $77,528 Service revenues 91,798 89,611 22,401 22,053 429,015 383,342 96,131 99,581 Costs and Expenses: Cost of sales 298,686 253,264 64,039 66,933 Operating expenses 104,366 102,265 25,086 26,878 403,052 355,529 89,125 93,811 Gross Margin (Excluding depreciation and amortization) 25,963 27,813 7,006 5,770 Expenses (Income): Selling, general and administrative 10,818 11,771 2,929 4,092 Provision for bad debts 1,648 1,358 447 111 Depreciation and amortization 7,963 9,258 1,842 2,205 Interest expense 7,956 5,830 2,420 1,450 Costs and expenses of stock offering 985 Debt extinguishment costs 1,773 Loss on Investment 196 196 Gain on sale of property (8,929) (9,000) Interest income (122) (77) (45) (23) 30,232 20,196 7,789 (1,165) Income (Loss) from Continuing Operations Before Provision for Income Taxes (4,269) 7,617 (783) 6,935 (Benefit from) Provision for Income Taxes (1,471) 2,930 (268) 2,667 Income (Loss) from Continuing Operations (2,798) 4,687 (515) 4,268 Loss from Discontinued Operations net of income tax benefit of $109 for twelve months and $82 for three months ended June 30, 2002 (170) (128) Net Income (Loss) ($2,798) $4,517 ($515) $4,140 Accrued preferred stock dividends 19 9 Net income (loss) applicable to common stockholders ($2,817) $4,517 ($524) $4,140 Net Income (Loss) Per Common Share: Basic: From Continuing Operations ($0.86) $1.43 ($0.16) $1.30 (Loss) from Discontinued Operations (0.05) 0.00 (0.04) Net income (loss) ($0.86) $1.38 ($0.16) $1.26 Diluted: From Continuing Operations ($0.86) $1.40 ($0.16) $1.27 (Loss) from Discontinued Operations (0.05) 0.00 (0.04) Net income (loss) ($0.86) $1.35 ($0.16) $1.23 Mercury Air Group, Inc. Selected Business Segment Data For the Twelve Month and Three Month Periods Ended June 30, 2003 and 2002 (all amounts in thousands of dollars) Unaudited Twelve Months Ended Three Months Ended June 30, June 30, 2003 2002 2003 2002 (Restated) (Restated) Revenue MercFuel $280,136 $232,573 $62,025 $61,220 Mercury Air Centers 96,249 94,417 24,062 24,842 Mercury Air Cargo 32,691 28,124 7,851 7,038 Maytag Aircraft 24,421 28,228 5,911 6,481 Intersegment elimination (4,482) (3,718) Total Revenue $429,015 $383,342 $96,131 $99,581 Gross Margin MercFuel $5,926 $6,581 $1,185 $1,412 Mercury Air Centers 12,854 13,545 4,070 3,090 Mercury Air Cargo 2,585 898 513 (110) Maytag Aircraft 4,598 6,789 1,238 1,378 Total Gross Margin $25,963 $27,813 $7,006 $5,770 Depreciation and Amortization MercFuel $318 $63 $105 $32 Mercury Air Centers 5,179 5,780 1,216 1,479 Mercury Air Cargo 1,887 2,292 342 612 Maytag Aircraft 349 715 84 331 Other 230 408 95 (249) Total Dep & Amort $7,963 $9,258 $1,842 $2,205 Sales Volume (thousands of gals) MercFuel 286,873 287,651 65,387 74,307 Mercury Air Centers 33,800 36,025 8,784 8,943 MERCURY AIR GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (all amounts in thousands of dollars) June 30, June 30, 2003 2002 (Restated) ASSETS CURRENT ASSETS: Cash and cash equivalents $2,802 $5,565 Restricted cash 3,780 Trade accounts receivable, net of allowance for doubtful accounts 46,753 47,570 Inventories, principally aviation fuel 4,422 2,985 Prepaid expenses and other current assets 5,241 3,042 Deferred income taxes 901 TOTAL CURRENT ASSETS 60,119 62,942 PROPERTY, EQUIPMENT AND LEASEHOLDS, net of accumulated depreciation and amortization 58,844 61,094 NOTES RECEIVABLE, net of allowance for doubtful accounts 1,815 2,158 DEFERRED INCOME TAXES 2,284 1,302 GOODWILL 4,389 4,389 OTHER INTANGIBLE ASSETS, NET 1,033 233 OTHER ASSETS, NET 4,471 4,096 TOTAL ASSETS $132,955 $136,214 LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $34,677 $35,449 Accrued expenses and other current liabilities 10,162 8,861 Current portion of long-term debt 4,194 14,677 Current portion of Senior Subordinated Notes 23,179 TOTAL CURRENT LIABILITIES 49,033 82,166 LONG-TERM DEBT 25,501 17,516 SENIOR SUBORDINATED NOTES 23,445 DEFERRED INCOME TAXES 169 DEFERRED RENT 1,885 1,943 MINORITY INTEREST 180 TOTAL LIABILITIES 100,044 101,794 COMMITMENTS AND CONTINGENCIES MANDATORILY REDEEMABLE PREFERRED STOCK, Series A 481 STOCKHOLDERS' EQUITY: Preferred Stock -- $.01 par value Common Stock -- $.01 par value; 33 33 Additional paid-in capital 22,496 22,266 Retained earnings 14,018 16,872 Accumulated other comprehensive loss (86) (316) Notes receivable from officers (4,031) (4,435) TOTAL STOCKHOLDERS' EQUITY 32,430 34,420 TOTAL LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK, AND STOCKHOLDERS' EQUITY $132,955 $136,214 DATASOURCE: Mercury Air Group, Inc. CONTACT: Joseph Czyzyk of Mercury Air Group, Inc., +1-310-827-2737; or Investor Relations, Larry Barrios of The MWW Group, +1-213-486-6560, for Mercury Air Group, Inc. Web site: http://www.mercuryairgroup.com/

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