MAX Mercury Air Grp.

Mercury Air Group, Inc. Reports Net Income of $615,000 for Fiscal 2004, Reduces Long-term Debt in Fourth Quarter by $39.7 Million LOS ANGELES, Sept. 28 /PRNewswire-FirstCall/ -- Mercury Air Group, Inc. (AMEX:MAX) reported net income of $615,000, or $0.19 per basic and diluted share, for the twelve-month period ended June 30, 2004. This compares to a net loss of $2,798,000, or $0.86 per basic and diluted share, for the comparable fiscal 2003 period. The net income for fiscal 2004 is comprised of a loss from continuing operations of $5,083,000, a gain on the sale of Mercury Air Centers, Inc., of $7,501,000 and a loss from discontinued operations of $1,803,000, all net of income taxes. The net loss for fiscal 2003 is comprised of a loss from continuing operations of $2,983,000 and income from discontinued operations of $185,000, both net of income taxes. The fiscal 2004 loss from continuing operations includes settlement expenses of $2,414,000 and an accrual of $1,680,000 for termination benefits due the Chairman of the Board of Directors. The loss from continuing operations for fiscal 2003 includes the write-off of deferred debt issuance costs of $1,773,000. "With the completion of the sale of Mercury Air Centers during the fourth quarter of fiscal 2004, we have significantly strengthened our financial position through the reduction of high cost debt," said Joseph A. Czyzyk, President and CEO of Mercury Air Group, Inc. adding, "With our improved financial condition and our new credit line with Bank of America, we are now well positioned to meet the cash requirements associated with the higher fuel costs and provide value to our stockholders." Revenue from continuing operations in fiscal 2004 was $385,461,000, an increase of $48,213,000, or 14.3%, as compared to revenue from continuing operations of $337,248,000 for the same period in fiscal 2003. Gross margin from continuing operations for the twelve-month period of fiscal 2004 was $13,026,000, essentially unchanged from $13,109,000 last year. MercFuel, Inc. ("MercFuel"), the Company's aviation fuel reseller subsidiary, reported revenue for the twelve-month period ended June 30, 2004 of $322,631,000 on sales volume of 278,448,000 gallons, or 760,800 gallons per day, as compared to revenue of $280,136,000 on sales volume of 286,873,000 gallons, or 786,000 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. 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 to $6,080,000 from $5,926,000 in fiscal 2003. MercFuel's aviation fuel sales volume within the corporate and fractional aviation segment increased to 39,204,000 gallons, or 14.1% of MercFuel's total sales volume in fiscal 2004, as compared to 28,418,000 gallons, or 9.9% of MercFuel's total sales volume last year. The Company's Mercury Air Cargo, Inc. ("Air Cargo") subsidiary reported revenue for fiscal 2004 of $39,549,000 as compared to $32,691,000 for fiscal 2003, an increase of 21%. Air Cargo's gross margin in fiscal 2004 was $1,800,000 as compared to $2,585,000 in fiscal 2003, a decrease of 30.4% primarily due to the lower contributions from the cargo marketing services and the warehouse divisions and the payment of executive severance partially offset by improved results from Mercury World Cargo. Maytag Aircraft, Inc. ("Maytag Aircraft"), the Company's wholly-owned subsidiary engaged in U.S. government contract services, reported revenue for fiscal 2004 of $23,281,000, a decrease of $1,140,000, or 4.7% from last year's revenue of $24,421,000. Maytag Aircraft's gross margin increased to $5,146,000, representing an increase of 11.9% from last year's gross margin of $4,598,000. The Company reported net income for the three-month period ended June 30, 2004 of $4,253,000, or $1.46 per basic and diluted share, as compared to a net loss for the three-month period ended June 30, 2003 of $515,000, or $0.17 per basic and diluted share. The net income for the latest quarter includes a loss from continuing operations of $2,735,000, a gain on the sale of Mercury Air Centers, Inc. of $7,501,000 and a loss from discontinued operations of $513,000, all net of income taxes. This compares to a loss from continuing operations of $683,000 and income from discontinued operations of $168,000, both net of income taxes, in the fourth quarter of fiscal 2003. The loss from continuing operations for the fourth quarter of fiscal 2004 includes settlement expense of $615,000 and an accrual of $1,680,000 for termination benefits due the Chairman of the Board of Directors. The Company's total revenue from continuing operations for the fourth quarter of fiscal 2004 was $110,471,000, an increase of 45.8% over the total revenue from continuing operations for the fourth quarter of fiscal 2003 of $75,787,000. The Company's gross margin from continuing operations for the fourth quarter of fiscal 2004 was $2,955,000 as compared to the gross margin from continuing operations of $2,936,000 in the fourth quarter of fiscal 2003. MercFuel had revenue of $94,436,000 on sales volume of 70,941,000 gallons, or 779,600 gallons per day, in the fourth quarter of fiscal 2004 as compared to sales revenue of $62,025,000 on sales volume of 65,387,000 gallons, or 718,500 gallons per day, for the comparable period last year. MercFuel's average aviation fuel sales price per gallon sold in the fourth quarter of fiscal 2004 was $1.331 as compared to last year's fourth quarter per gallon average aviation fuel sales price of $0.949. MercFuel's gross margin in the fourth quarter of fiscal 2004 increased to $1,274,000, equating to an average margin of $0.018 per gallon sold, as compared to last year's fourth quarter gross margin of $1,185,000, or $0.018 per gallon sold. MercFuel's aviation fuel sales volume within the corporate and fractional aviation segment increased to 10,668,000 gallons, or 15.0% of MercFuel's total sales volume in the fourth quarter of fiscal 2004, as compared to 7,653,000 gallons, or 11.7% of MercFuel's total sales volume for the same period last year. Air Cargo had revenue of $10,243,000 in the fourth quarter of fiscal 2004, an increase of $2,392,000 or 30.5% from last year's fourth quarter revenue of $7,851,000. Air Cargo's gross margin was $444,000 in the fourth quarter of fiscal 2004 versus a gross margin of $513,000 in the fourth quarter of fiscal 2003 as both the cargo marketing services and warehouse divisions' margins declined. Maytag Aircraft had revenue of $5,792,000 in the fourth quarter of fiscal 2004 as compared to $5,911,000 for the same period last year. Maytag Aircraft's gross margin for the fourth quarter of fiscal 2004 was $1,237,000, basically unchanged from the prior year's fourth quarter gross margin of $1,238,000. 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. MERCURY AIR GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (all amounts in thousands of dollars, except per share amounts) Twelve Months Ended Three Months Ended June 30, June 30, 2004 2003 2004 2003 Sales and revenues: Sales $322,631 $280,136 $94,436 $62,026 Service revenues 62,830 57,112 16,035 13,761 385,461 337,248 110,471 75,787 Costs and expenses: Cost of sales 311,728 269,238 91,860 59,603 Operating expenses 60,707 54,901 15,656 13,248 372,435 324,139 107,516 72,851 Gross margin (excluding depreciation and amortization) 13,026 13,109 2,955 2,936 Expenses (income): Selling, general and administrative 12,885 10,818 5,047 2,929 Provision for bad debts 506 1,192 201 113 Depreciation and amortization 2,828 2,782 659 624 Interest expense 972 997 188 154 Settlement costs 2,414 615 Debt extinguishment costs 1,773 Other (income) expense (318) 97 (46) 153 Total expenses (income) 19,287 17,659 6,664 3,973 Loss from continuing operations before income tax benefit (6,261) (4,550) (3,709) (1,037) Income tax benefit (1,178) (1,567) (974) (354) Loss from continuing operations, net of taxes (5,083) (2,983) (2,735) (683) Income (loss) from discontinued operations, net of taxes (1,803) 185 (513) 168 Gain on sale of discontinued business, net of taxes 7,501 7,501 Net income (loss) 615 (2,798) 4,253 (515) Accrued preferred stock dividend (37) (19) (9) (19) Net income (loss) applicable to common stockholders $578 ($2,817) $4,244 ($534) Income (loss) per common share : Basic & Diluted: From continuing operations, net of taxes ($1.67) ($0.92) ($0.95) ($0.22) From discontinued operations, net of taxes ($0.59) $0.06 ($0.18) $0.05 From sale of discontinued operations, net of taxes $2.45 $2.59 $0.00 Net income (loss) per share $0.19 ($0.86) $1.46 ($0.17) MERCURY AIR GROUP, INC. AND SUBSIDIARIES BUSINESS SEGMENT SELECTED DATA For the Twelve and Three Month Periods ended June 30, 2004 and 2003 (Unaudited) (all amounts in thousands) Twelve Months Ended Three Months Ended June 30, June 30, 2004 2003 2004 2003 Revenue MercFuel $322,631 $280,136 $94,436 $62,025 Mercury Air Cargo 39,549 32,691 10,243 7,851 Maytag Aircraft 23,281 24,421 5,792 5,911 Total Revenue $385,461 $337,248 $110,471 $75,787 Gross Margin MercFuel $6,080 $5,926 $1,274 $1,185 Mercury Air Cargo 1,800 2,585 444 513 Maytag Aircraft 5,146 4,598 1,237 1,238 Total Gross Margin $13,026 $13,109 $2,955 $2,936 Depreciation and Amortization MercFuel $469 $318 $117 $105 Mercury Air Cargo 1,725 1,887 324 342 Maytag Aircraft 414 349 165 84 Other 220 228 53 93 Total Dep & Amort $2,828 $2,782 $659 $624 Sales Volume (thousands of gals) MercFuel Commercial Aviation 239,244 258,455 60,273 57,734 Corporate/Fractional Ownership 39,204 28,418 10,668 7,653 Total 278,448 286,873 70,941 65,387 MERCURY AIR GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) (all amounts in thousands of dollars) ASSETS June 30, June 30, 2004 2003 CURRENT ASSETS: Cash and cash equivalents $4,690 $2,802 Restricted cash $15,414 Trade accounts receivable 50,974 46,753 Inventories, principally aviation fuel 1,165 4,422 Prepaid expenses and other current assets 5,696 5,241 Deferred taxes, current 1,451 901 TOTAL CURRENT ASSETS 79,390 60,119 PROPERTY, EQUIPMENT AND LEASEHOLDS, net 10,349 58,844 NOTES RECEIVABLE 521 1,815 DEFERRED INCOME TAXES, LONG TERM 611 2,284 GOODWILL 4,389 4,389 OTHER INTANGIBLE ASSETS 700 1,033 RESTRICTED CASH 8,989 OTHER ASSETS 1,008 4,471 TOTAL ASSETS $105,957 $132,955 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $33,552 $34,677 Accrued expenses and other current liabilities 11,825 9,244 Current portion of long-term debt 139 4,194 TOTAL CURRENT LIABILITIES 45,516 48,115 LONG-TERM DEBT 17,790 25,501 SENIOR SUBORDINATED NOTE 23,445 DEFERRED GAIN 8,130 OTHER NONCURRENT LIABILITIES 669 918 DEFERRED RENT 1,257 1,885 MINORITY INTEREST 182 180 TOTAL LIABILITIES 73,544 100,044 MANDATORILY REDEEMABLE PREFERRED STOCK 518 481 STOCKHOLDERS' EQUITY: Common Stock - $ .01 par value; authorized 18,000,000 shares; 30 33 Additional paid-in capital 20,737 22,496 Retained earnings 14,596 14,018 Accumulated other comprehensive loss (46) (86) Treasury stock (120) Notes receivable from officers (3,302) (4,031) TOTAL STOCKHOLDERS' EQUITY 31,895 32,430 TOTAL LIABILITIES, PREFERRED STOCK, AND STOCKHOLDERS' EQUITY $105,957 $132,955 For further information, please contact: Company, 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. DATASOURCE: Mercury Air Group, Inc. CONTACT: Company, 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/

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