MAX Mercury Air Grp.

Mercury Air Group, Inc. Reports Second Quarter Results LOS ANGELES, Feb. 14 /PRNewswire-FirstCall/ -- Mercury Air Group, Inc. (AMEX:MAX), reported a net loss for the second quarter ended December 31, 2004 of $190,000, or $0.07 per basic and diluted share, which included a net gain from discontinued operations of $22,000 or $0.01 per basic and diluted share. For the second quarter of fiscal 2004, the Company reported a loss of $1,517,000 or $0.48 per basic and diluted share, which included a net loss from discontinued operations of $22,000 or $0.01 per basic and diluted share. Revenue from continuing operations for the second quarter of fiscal 2005 was $153.5 million, compared to $91.5 million for the same period last year, an increase of $62.0 million, or 67.8%. The increase in revenue from continuing operations is primarily due to the higher aviation fuel prices driven by higher worldwide petroleum product prices. The Company's gross margin from continuing operations for the second quarter of fiscal 2005 was $5.2 million, an increase of 34.7%, compared to $3.8 million in the second quarter of fiscal 2004. "Our three business segments remain on course as we stabilize earnings and begin allocating and budgeting significant resources for Sarbanes-Oxley Section 404 compliance," said Joseph A. Czyzyk, Chairman of the Board and Chief Executive Officer. For the second quarter of fiscal 2005, revenue for the Company's MercFuel, Inc. ("MercFuel") subsidiary was $137.0 million, up 82.9%, compared to revenue of $74.9 million for the second quarter last year. The increased revenue resulted from a 57.5% increase in the price of fuel and a 16.0% volume increase. For the quarter, gross margin increased 36.1% to $2.6 million compared to $1.9 million the prior year. The Company's Mercury Air Cargo, Inc. ("Air Cargo") subsidiary had revenue of $11.4 million in the second quarter of fiscal 2005, an increase of 6.6% from last year's second quarter of $10.7 million. Air Cargo's gross margin increased 174% to $1.4 million in the second quarter compared to $0.5 million in the prior year quarter. The Company's Maytag Aircraft Corporation ("Maytag") subsidiary had revenue in the second quarter of fiscal 2005 of $5.0 million, down 15.8% compared to last year's second quarter revenue of $5.9 million. Maytag's second quarter fiscal year 2005 gross margin of $1.2M was 15.1% lower than the prior years second quarter of $1.4M. The second quarter for fiscal 2005 includes a net gain from discontinued operations of $22,000, compared to a loss from discontinued operations, net of taxes, of $22,000 in the second quarter of fiscal 2004. The Company sold the stock in Mercury Air Centers, Inc., ("Air Centers") to Allied Capital in April 2004. The net gain in the current quarter resulted from the Closing Working Capital agreement between Allied Capital and the Company on December 6, 2004. The net loss from discontinued operations for the second quarter of fiscal 2004 is comprised of the results from operations from the Air Centers for the quarter less the debt service costs recognized during the quarter on the debt repaid with the proceeds from the sale. For the six month period ended December 31, 2004, the Company reported a net loss of $126,000, or $0.05 per basic and fully diluted share, as compared to a net loss of $1,819,000, or $0.57 per basic and fully diluted share for the comparable period in fiscal 2004. Revenue of $279.0 million for the first six months of fiscal 2005 was up $107.8 million, or 63%, compared to $171.2 million in the first six months of fiscal 2004. Gross margin of $9.4 million was up $2.1 million, or 28.7%, compared to $7.3 million in the same year prior period. For the first six months of fiscal 2005, revenue for the MercFuel subsidiary was up 75.7% to $245.8 million, compared to revenue of $139.9 million in the comparable prior year period. The higher revenue resulted from a 51.4% increase in the price of fuel and a 15.9% volume increase. For the first half, gross margin increased 27.0% to $4.2 million compared to the prior year of $3.3 million. The Air Cargo subsidiary had revenue of $22.6 million in the first half of fiscal 2005, an increase of 15.3% from prior year's first half of $19.6 million. Air Cargo's gross margin increased 113% to $2.8 million in the first half compared to $1.3 million in the prior year period. Maytag had revenue in the first half of fiscal 2005 of $10.3 million, down 11.9% compared to last year's first half revenue of $11.7 million. Gross margin for the first half of fiscal 2005 was $2.5 million, down 7.8%, when compared to the first half of fiscal 2004's $2.7 million. The first half for fiscal 2005 includes a net gain from discontinued operations of $22,000, or $0.01 per basic and diluted share, compared to a loss from discontinued operations, net of taxes, of $392,000, or $0.12 per basic and diluted share, in the first half of fiscal 2004. The Company sold the stock in Mercury Air Centers, Inc., ("Air Centers") to Allied Capital in April 2004. The loss from discontinued operations is comprised of the results from operations from the Air Centers for the quarter less the debt service costs recognized during the quarter on the debt repaid with the proceeds from the sale. 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 three business segments worldwide: MercFuel, 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 Mike Bilello of Mercury Air Group, Inc., +1-213-486-6560. MERCURY AIR GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Six Months Ended Three Months Ended December 31, December 31, 2004 2003 2004 2003 (Unaudited) (Unaudited) Sales and revenues: Sales $246,095,000 $139,890,000 $137,161,000 $74,901,000 Service revenues 32,928,000 31,319,000 16,371,000 16,598,000 Total sales and revenues 279,023,000 171,209,000 153,532,000 91,499,000 Costs and expenses: Cost of sales 239,390,000 134,299,000 133,350,000 71,850,000 Operating expenses 30,185,000 29,571,000 15,025,000 15,821,000 Total costs and expenses 269,575,000 163,870,000 148,375,000 87,671,000 Gross margin (excluding depreciation and amortization) 9,448,000 7,339,000 5,157,000 3,828,000 Expenses (income): Selling, general and administrative 7,028,000 5,044,000 4,317,000 2,763,000 Provision (recovery) for bad debts 364,000 (24,000) 87,000 (384,000) Depreciation and amortization 1,254,000 1,426,000 619,000 713,000 Interest and other expense 771,000 527,000 443,000 267,000 Hambro settlement costs 1,799,000 1,799,000 Interest and other income (241,000) (241,000) (17,000) (32,000) Asset impairment loss 626,000 Total expenses (income) 9,802,000 8,531,000 5,449,000 5,126,000 Loss from continuing operations before minority interest and income tax expense (354,000) (1,192,000) (292,000) (1,298,000) Minority interest 181,000 4,000 (2,000) Loss from continuing operations before income tax expense (173,000) (1,188,000) (292,000) (1,300,000) Income tax benefit (25,000) 239,000 (80,000) 195,000 Loss from continuing operations, net of taxes (148,000) (1,427,000) (212,000) (1,495,000) Discontinued operations: Loss from discontinued operation, net of income tax (benefit) of ($251,000) and ($14,000) for the six months and three months ended December 31, 2003, respectively (392,000) (22,000) Gain on sale of discontinued operations, net of income tax provision of $14,000 22,000 -- 22,000 -- Net loss (126,000) (1,819,000) (190,000) (1,517,000) Accrued preferred stock dividends 20,000 19,000 11,000 9,000 Net loss applicable to common stockholders $(146,000) $(1,838,000) $(201,000) $(1,526,000) Income (loss) per common share: Basic: From continuing operations, net of taxes $(0.06) $(0.45) $(0.08) $(0.47) From discontinued operations, net of taxes (0.12) (0.01) From sale of discontinued operations, net of taxes 0.01 -- 0.01 -- Net loss per share $(0.05) $(0.57) $(0.07) $(0.48) Diluted: From continuing operations, net of taxes $(0.06) $(0.45) $(0.08) $(0.47) From discontinued operations, net of taxes (0.12) (0.01) From sale of discontinued operations, net of taxes 0.01 -- 0.01 -- Net loss per share $(0.05) $(0.57) $(0.07) $(0.48) MERCURY AIR GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, June 30, 2004 2004 (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $6,316,000 $4,690,000 Restricted cash 15,414,000 Trade accounts receivable, net of allowance for doubtful accounts of $1,882,000 and $1,556,000 at December 31 and June 30, 2004, respectively 56,912,000 50,974,000 Inventories 1,619,000 1,165,000 Prepaid expenses and other current assets 3,657,000 5,696,000 Deferred income taxes 1,451,000 1,451,000 TOTAL CURRENT ASSETS 69,955,000 79,390,000 PROPERTY, EQUIPMENT AND LEASEHOLDS, net of accumulated depreciation and amortization of $24,830,000 and $24,836,000 at December 31 and June 30, 2004, respectively 7,564,000 10,349,000 NOTES RECEIVABLE, net of allowance for doubtful accounts of $921,000 and $1,025,000 at December 31 and June 30, 2004, respectively 1,296,000 521,000 DEFERRED INCOME TAXES 611,000 611,000 GOODWILL 4,411,000 4,389,000 OTHER INTANGIBLE ASSETS, NET 600,000 700,000 RESTRICTED CASH 8,418,000 8,989,000 OTHER ASSETS, NET 1,226,000 1,008,000 TOTAL ASSETS $94,081,000 $105,957,000 LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $36,390,000 $33,552,000 Accrued expenses and other current liabilities 8,559,000 11,825,000 Current portion of long-term debt 1,021,000 139,000 TOTAL CURRENT LIABILITIES 45,970,000 45,516,000 LONG-TERM DEBT 21,221,000 17,790,000 DEFERRED GAIN 9,444,000 8,130,000 OTHER LONG-TERM LIABILITY 335,000 669,000 DEFERRED RENT 943,000 1,257,000 MINORITY INTEREST -- 182,000 TOTAL LIABILITIES 77,913,000 73,544,000 COMMITMENTS AND CONTINGENT LIABILITIES (Note 4) MANDATORILY REDEEMABLE PREFERRED STOCK: Series A - $0.01 par value; 1,000,000 shares authorized; 462,627 shares outstanding at December 31 and June 30, 2004, respectively 468,000 518,000 STOCKHOLDERS' EQUITY: Preferred stock - $0.01 par value; authorized 2,000,000 shares; no shares outstanding Common stock - $0.01 par value; authorized 18,000,000 shares; 3,056,355 and 2,954,819 shares outstanding at December 31 and June 30, 2004, respectively 31,000 30,000 Additional paid-in capital 21,473,000 20,737,000 Retained earnings (accumulated deficit) (2,971,000) 14,596,000 Accumulated other comprehensive income (loss) 193,000 (46,000) Treasury stock, 8,750 and 24,500 shares at December 31 and June 30, 2004, respectively (43,000) (120,000) Notes receivable from officers (2,983,000) (3,302,000) TOTAL STOCKHOLDERS' EQUITY 15,700,000 31,895,000 TOTAL LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY $94,081,000 $105,957,000 DATASOURCE: Mercury Air Group, Inc. CONTACT: Mike Bilello of Mercury Air Group, Inc., +1-213-486-6560 Web site: http://www.mercuryairgroup.com/

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