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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