MAX Mercury Air Grp.

Mercury Air Group, Inc. Reports First Quarter Results LOS ANGELES, Nov. 12 /PRNewswire-FirstCall/ -- Mercury Air Group, Inc. (AMEX:MAX), reported net income for the three-month period ended September 30, 2004 of $64,000, or $0.02 per basic and diluted share, $4,000 less than the income from continuing operations, net of taxes, reported for the same period last year of $68,000, or $0.02 per basic and diluted share. For the first quarter of fiscal 2004, the Company reported a net loss of $302,000, or $0.10 per basic and diluted share, which included a loss from discontinued operations, net of taxes, of $370,000, or $0.12 per basic and diluted share. Revenue from continuing operations for the first quarter of fiscal 2005 was $125,491,000 as compared to revenue from continuing operations of $79,710,000 for the same period last year, an increase of $45,781,000 or 57.4%. 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 first quarter of fiscal 2005 was $4,291,000, an increase of $780,000, or 22.2%, as compared to the gross margin from continuing operations of $3,511,000 in the first quarter of fiscal 2004. "Without the significant financing costs associated with our prior high levels of debt, we are pleased to report relatively stable earnings from continuing operations on a comparable quarter to quarter basis," said Joseph Czyzyk, President and CEO of Mercury Air Group, Inc. Revenue for the Company's MercFuel, Inc. ("MercFuel") subsidiary was $108,804,000 on sales volume of 74,429 thousand gallons, or 809 thousand gallons per day, in the first quarter of fiscal 2005 as compared to sales revenue of $64,990,000 on sales volume of 64,270 thousand gallons, or 699 thousand gallons per day, for the first quarter last year. MercFuel's average per gallon aviation fuel sales price in the first quarter of fiscal 2005 was $1.462 as compared to last year's first quarter per gallon average aviation fuel sales price of $1.011. MercFuel realized sales volume increases in both the commercial sales unit, where sales volume increased 7,335 thousand gallons, or 13%, to 63,616 thousand gallons, and in the corporate and fractional ownership aviation unit, where sales volume increased 2,824 thousand gallons, or 35.3%, to 10,813 thousand gallons. The Company's Mercury Air Cargo, Inc. ("Air Cargo") subsidiary had revenue of $11,190,000 in the first quarter of fiscal 2005, an increase of $2,296,000 or 25.8% from last year's first quarter revenue of $8,894,000. Air Cargo's gross margin was $1,326,000 in the first quarter of fiscal 2005 versus a gross margin of $773,000 in the first quarter of fiscal 2004. Air Cargo handled increased tonnage in both its warehouse handling and its cargo management operations. The cargo warehouse tonnage throughput was 45.5 million tons in the first quarter of fiscal 2005 as compared to 36.1 million tons during the same period last year. The tonnage of air freight managed by the cargo management operations was 2.7 million tons during the first quarter of fiscal 2005 as compared to 1.8 million tons during the same period last year. Maytag Aircraft Corporation ("Maytag"), Mercury's subsidiary engaged in government services, had revenue of $5,363,000 in the first quarter of fiscal 2005 as compared to $5,826,000 in the first quarter of fiscal 2004 resulting in gross margin of $1,311,000 in the first quarter of fiscal 2005, essentially unchanged from the gross margin of $1,312,000 for the first quarter of fiscal 2004. The first quarter results for fiscal 2004 include a loss from discontinued operations, net of taxes, of $370,000. 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 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. MERCURY AIR GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS All amounts in thousands, except per share amounts (Unaudited) Three Months Ended September 30, 2004 2003 Sales and revenues: Sales $108,934 $64,990 Service revenues 16,557 14,720 Total sales and revenues 125,491 79,710 Costs and expenses: Cost of sales 106,040 62,449 Operating expenses 15,160 13,750 Total costs and expenses 121,200 76,199 Gross margin (excluding depreciation and amortization) 4,291 3,511 Expenses (income): Selling, general and administrative 2,711 2,281 Provision for bad debts 277 360 Depreciation and amortization 635 713 Interest expense 327 260 Interest and other income (223) (209) Asset impairment loss 626 -- Total expenses (income) 4,353 3,405 Income (loss) from continuing operations before minority interest and income tax expense (62) 106 Minority interest 181 6 Income from continuing operations before income tax expense 119 112 Income tax expense 55 44 Income from continuing operations, net of taxes 64 68 Loss from discontinued operation, net of tax benefit of $237,000 for the three months ended September 30, 2003 -- (370) Net income (loss) 64 (302) Accrued preferred stock dividends 9 9 Net income (loss) applicable to common stockholders $55 $(311) Income (loss) per common share: Basic: From continuing operations, net of taxes $0.02 $0.02 From discontinued operations, net of taxes -- (0.12) Net income (loss) per share $0.02 $(0.10) Diluted: From continuing operations, net of taxes $0.02 $0.02 From discontinued operations, net of taxes -- (0.12) Net income (loss) per share $0.02 $(0.10) MERCURY AIR GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS All amounts in thousands September 30, June 30, 2004 2004 (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $12,297 $4,690 Restricted cash -- 15,414 Trade accounts receivable, net of allowance for doubtful accounts 55,911 50,974 Inventories 2,869 1,165 Prepaid expenses and other current assets 7,874 5,696 Deferred income taxes 1,450 1,451 TOTAL CURRENT ASSETS 80,401 79,390 PROPERTY, EQUIPMENT AND LEASEHOLDS - net 8,025 10,349 NOTES RECEIVABLE, net of allowance for doubtful accounts 516 521 DEFERRED INCOME TAXES 611 611 GOODWILL 4,403 4,389 OTHER INTANGIBLE ASSETS, NET 650 700 RESTRICTED CASH 9,062 8,989 OTHER ASSETS, NET 1,218 1,008 TOTAL ASSETS $104,886 $105,957 LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $38,857 $33,552 Accrued expenses and other current liabilities 7,448 11,825 Current portion of long-term debt 54 139 TOTAL CURRENT LIABILITIES 46,359 45,516 LONG-TERM DEBT 14,850 17,790 DEFERRED GAIN 10,224 8,130 OTHER LONG TERM LIABILITY 502 669 DEFERRED RENT 1,100 1,257 MINORITY INTEREST -- 182 TOTAL LIABILITIES 73,035 73,544 MANDATORILY REDEEMABLE PREFERRED STOCK 527 518 STOCKHOLDERS' EQUITY: Common stock 28 30 Additional paid-in capital 19,929 20,737 Retained earnings 14,650 14,596 Accumulated other comprehensive income (loss) 68 (46) Treasury stock (140) (120) Notes receivable from officers (3,211) (3,302) TOTAL STOCKHOLDERS' EQUITY 31,324 31,895 TOTAL LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY $104,886 $105,957 MERCURY AIR GROUP, INC. SELECTED BUSINESS SEGMENT DATA All dollar amounts in thousands (Unaudited) Three Months Ended September 30, 2004 2003 Revenue MercFuel $108,804 $64,990 Mercury Air Cargo 11,190 8,894 Maytag Aircraft 5,363 5,826 Other 134 -- Total revenue $125,491 $79,710 Gross margin MercFuel $1,640 $1,426 Mercury Air Cargo 1,326 773 Maytag Aircraft 1,311 1,312 Other 14 -- Total gross margin $4,291 $3,511 Depreciation and amortization MercFuel $121 $115 Mercury Air Cargo 384 458 Maytag Aircraft 81 81 Other 49 59 Total depreciation and amortization $635 $713 Sales volume (thousands of gals) MercFuel Commercial Aviation 63,616 56,281 Corporate/Fractional Ownership 10,813 7,989 Total 74,429 64,270 Cargo tonnage (thousands of tons) Warehouse handling 45,525 36,074 Cargo management 2,686 1,801 Total 48,211 37,875 Company Contact: Joseph Czyzyk Mercury Air Group, Inc. (310) 827-2737 Media Contact: David Herbst / Amado Zavala MWW Group (213) 486-6560 DATASOURCE: Mercury Air Group, Inc. CONTACT: Joseph Czyzyk of Mercury Air Group, Inc., +1-310-827-2737; or Media, David Herbst, or Amado Zavala of MWW Group, +1-213-486-6560, for Mercury Air Group, Inc. Web site: http://www.mercuryairgroup.com/

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