-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UoXBzRZjSMJiTZOEy1xFq+bJLMbyU3NvqgkqqgRRdB6lha1ryFJYLX4z2+wDe4Fb QsoqZT9knOE/W7230g/X9g== 0000950150-96-001280.txt : 19961111 0000950150-96-001280.hdr.sgml : 19961111 ACCESSION NUMBER: 0000950150-96-001280 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961108 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERCURY AIR GROUP INC CENTRAL INDEX KEY: 0000052532 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-PETROLEUM & PETROLEUM PRODUCTS (NO BULK STATIONS) [5172] IRS NUMBER: 111800515 STATE OF INCORPORATION: NY FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07134 FILM NUMBER: 96656323 BUSINESS ADDRESS: STREET 1: 5456 MCCONNELL AVE CITY: LOS ANGELES STATE: CA ZIP: 90066 BUSINESS PHONE: 3106462994 FORMER COMPANY: FORMER CONFORMED NAME: IPM TECHNOLOGY INC DATE OF NAME CHANGE: 19891225 FORMER COMPANY: FORMER CONFORMED NAME: IDEAL PRECISION METER CO INC DATE OF NAME CHANGE: 19690911 FORMER COMPANY: FORMER CONFORMED NAME: PRECISION METER CO INC DATE OF NAME CHANGE: 19670906 10-Q 1 FORM 10-Q DATED 9/30/96 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 1996 [ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 For the Transition period from to Commission File No. 1-7134 MERCURY AIR GROUP, INC. (Exact name of registrant as specified in its charter) New York 11-1800515 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 5456 McConnell Avenue, Los Angeles, CA 90066 (Address of principal executive offices) (Zip Code) (310) 827-2737 (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X No_____ Indicate the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. Number of Shares Outstanding Title As of November 1, 1996 ----- ---------------------- Common Stock, $.01 Par Value 6,007,721 2 PART I - FINANCIAL INFORMATION MERCURY AIR GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited)
ASSETS SEPTEMBER 30, JUNE 30, 1996 1996 -------------- ------------ CURRENT ASSETS: Cash and cash equivalents $ 4,693,000 $11,820,000 Trade accounts receivable, net of allowance for doubtful accounts of $1,084,000 at 9/30/96 and $809,000 at 6/30/96 50,951,000 41,377,000 Notes receivable - current portion 465,000 560,000 Inventories, principally aviation fuel 2,657,000 2,623,000 Prepaid expenses and other current assets 1,904,000 2,154,000 ------------ ----------- Total current assets 60,670,000 58,534,000 PROPERTY, EQUIPMENT AND LEASEHOLDS, net of accumulated depreciation and amortization of $23,201,000 at 9/30/96 and $22,491,000 at 6/30/96 (Note 3) 22,924,000 14,703,000 NOTES RECEIVABLE, net of current portion 144,000 158,000 OTHER ASSETS 6,368,000 5,728,000 ------------ ----------- $90,106,000 $79,123,000 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $21,292,000 $15,080,000 Accrued expenses and other current liabilities 2,464,000 3,794,000 Income taxes payable (Note 2) 953,000 198,000 Current portion of long-term debt 2,531,000 2,555,000 ------------ ----------- Total current liabilities 27,240,000 21,627,000 LONG-TERM DEBT (Note 3) 39,196,000 35,008,000 DEFERRED INCOME TAXES 256,000 256,000 ------------ ----------- 66,692,000 56,891,000 ------------ ----------- STOCKHOLDERS' EQUITY: Preferred Stock - $.01 par value; authorized 3,000,000 shares; no shares outstanding Common Stock - $ .01 par value; authorized 18,000,000 shares; outstanding 6,024,721 shares 9/30/96; outstanding 6,053,321 shares 6/30/96 60,000 60,000 Additional Paid-in Capital 20,808,000 20,910,000 Retained Earnings 3,254,000 2,040,000 Notes Receivable-Officers (662,000) (732,000) Cumulative translation adjustment (46,000) (46,000) ------------ ----------- Total stockholders' equity $23,414,000 $22,232,000 ------------ ----------- $90,106,000 $79,123,000 =========== ===========
See accompanying notes to consolidated financial statements. 3 MERCURY AIR GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
THREE MONTHS ENDED SEPTEMBER 30, ------------------------- 1996 1995 ------------------------- Sales and Revenues: Sales $56,851,000 $42,214,000 Service Revenues 12,532,000 9,666,000 ----------- ----------- 69,383,000 51,880,000 Costs and Expenses: Cost of Sales 52,657,000 38,747,000 Operating Expenses 11,154,000 8,536,000 ----------- ----------- 63,811,000 47,283,000 ----------- ----------- Gross Margin (Excluding depreciation and amortization) 5,572,000 4,597,000 Selling, General and Administrative 1,746,000 1,473,000 Depreciation and Amortization 809,000 623,000 ----------- ----------- Operating Income 3,017,000 2,501,000 ----------- ----------- Other Expenses (Income): Interest Expense 797,000 437,000 Interest Income (132,000) (12,000) ----------- ----------- Income Before Provision for Income Taxes 2,352,000 2,076,000 Provision for Income Taxes 940,000 844,000 ----------- ----------- Net Income $ 1,412,000 $1,232,000 =========== =========== Net Income Per Common Share and Common Equivalent Share (Primary) (Note 4) $0.22 $0.20 =========== =========== Net Income Per Common Share-Assuming Full Dilution (Note 4) $0.19 $0.20 =========== ===========
See accompanying notes to consolidated financial statements. 3 4 MERCURY AIR GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30 1996 1995 ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,412,000 $ 1,232,000 Adjustments to derive cash flow from Operating activities: Depreciation and amortization 809,000 623,000 Amortization of officers' loans 39,000 39,000 Changes in operating assets and liabilities: Trade and other accounts receivable (9,574,000) (2,377,000) Inventories (34,000) 212,000 Prepaid expenses and other current assets 250,000 249,000 Accounts payable 6,212,000 1,721,000 Income taxes payable 755,000 732,000 Accrued expenses and other current liabilities (1,330,000) (1,095,000) ----------- ----------- Net cash provided by (used in) operating activities (1,461,000) 1,336,000 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Decrease (Increase) in notes receivable 179,000 (71,000) Addition to other assets (760,000) (640,000) Additions to property, equipment and leaseholds (5,049,000) (561,000) ----------- ----------- Net cash used in investing activities (5,630,000) (1,272,000) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long-term debt 897,000 1,829,000 Reduction of long-term debt (633,000) (1,327,000) Payment of dividend on common stock (76,000) (55,000) Repurchase and retire common stock (228,000) (820,000) Proceeds from issuance of common stock 4,000 7,000 ----------- ----------- Net cash used in financing activities (36,000) (366,000) ----------- ----------- NET DECREASE IN CASH AND CASH EQUIVALENTS (7,127,000) (302,000) CASH AND CASH EQUIVALENTS, beginning of period 11,820,000 831,000 ----------- ----------- CASH AND CASH EQUIVALENTS, end of period $ 4,693,000 $ 529,000 =========== =========== CASH PAID DURING THE PERIOD: Interest $ 1,311,000 $ 437,000 Income taxes $185,000 $ 112,000 SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Issuance of Notes Payable for the acquisition of assets $ 3,900,000 $ 2,016,000
See accompanying notes to consolidated financial statements. 4 5 MERCURY AIR GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996 (Unaudited) Note 1 - Basis of Presentation: The accompanying unaudited financial statements reflect all adjustments (consisting of normal, recurring accruals only) which are necessary to fairly present the results for the interim periods. Such financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X and therefore do not include all the information or footnotes necessary for a complete presentation. They should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended June 30, 1996 and the notes thereto. The results of operations for the three months ended September 30, 1996 are not necessarily indicative of results for the full year. Note 2 - Income Taxes: Income taxes have been computed based on the estimated annual effective tax rate for the respective years. Note 3 - Acquisition of Assets: On August 28, 1996, the Company completed the acquisition of certain assets of five FBOs. The purchase price for the assets was $8,250,000 which consisted of $4,350,000 in cash and a promissory note in the principal amount of $3,900,000, bearing interest at the prime rate and payable over eight years. The purchase price of $8,250,000 is included in Property, Equipment and Leaseholds. 5 6 Note 4 - Earnings Per Share: Earnings per Common Share is computed by dividing net income available to common stockholders, by the weighted average number of Common Stock and Common Stock equivalents outstanding during the period.
1996 1995 --------- --------- Weighted average number of Common Shares outstanding during the period 6,048,000 5,957,000 Common Stock equivalents resulting from the assumed exercise of stock options 231,000 265,000 --------- --------- Weighted average number of common and common equivalent shares outstanding during the period - primary 6,279,000 6,222,000 Common shares resulting from the assumed conversion of debentures 3,215,000 -- --------- --------- Fully diluted weighted average number of common and common equivalent shares outstanding during the period 9,494,000 6,222,000 ========= =========
Interest expense on the convertible debentures of $345,000, net of income tax, has been added back to net income for purposes of computing fully diluted earnings per share for the three months ended September 30, 1996. 6 7 Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS-COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995 The following tables set forth, for the periods indicated, the revenues and gross margin for each of the Company's four operating units, as well as selected other financial statement data.
Three Months Ended September 30, ($ in millions) 1996 1995 Amount % of Total Amount % of Total Revenues Revenues Revenues: Fuel Sales and Services $54.3 78.3% $41.1 79.3% Cargo Operations 4.9 7.1% 2.9 5.6% Goverment Contract Services 3.6 5.2% 3.6 6.8% FBOs 6.6 9.4% 4.3 8.3% ---------- ---------- ---------- ---------- Total Revenues $69.4 100.0% $51.9 100.0% ---------- ---------- ---------- ----------
% of Unit % of Unit Amount Revenues Amount Revenues Gross Margin (1): Fuel Sales and Service $2.3 4.3% $2.0 4.7% Cargo Operations 1.5 30.4% 0.9 32.1% Goverment Contract Services 0.8 20.2% 0.9 24.7% FBOs 1.0 15.6% 0.8 19.5% ---------- ---------- ---------- ---------- Total Gross Margin $5.6 8.0% $4.6 8.9% ---------- ----------
% of Total % of Total Amount Revenues Amount Revenues Selling, General and Administrative $1.7 2.5% $1.5 2.8% Depreciation and Amortization 0.8 1.2% 0.6 1.2% Interest Expense and Other 0.7 0.9% 0.4 0.9% ---------- ---------- ---------- ---------- Income before Income Taxes 2.4 3.4% 2.1 4.0% Provision for Income Taxes 1.0 1.4% 0.9 1.6% ---------- ---------- ---------- ---------- Net Income $1.4 2.0% $1.2 2.4% ---------- ---------- ---------- ----------
(1) Gross Margin as used here and throughout Management's Discussion excludes depreciation and amortization and selling, general and administrative expense. Page 7 8 Three Months ended September 30, 1996 Compared to September 30, 1995. Revenue increased 33.7% to $69.4 million in the current period from $51.9 million a year ago. Gross margin increased 21.2% to $5.6 million in the current period from $4.6 million a year ago. Revenues from fuel sales and services represented 78.3% of total revenues in the current period compared to 79.3% of total revenues a year ago. Revenues from fuel sales and services increased to $54.3 million from $41.1 million last year. The increase in revenues from fuel sales and services was due to both an increase in the number of gallons sold and an increase in the price of fuel. Gross margin from fuel sales and services in the current period increased 19.7% to $2.3 million from $2.0 million a year ago. The increase in gross margin from fuel sales and services in the current period compared to last year was attributable primarily to an increase in the number of gallons sold. Revenues and operating income from fuel sales and services included the activities of Mercury's contract fueling business, as well as activities from a number of other commercial services including the provision of certain refueling services, non-aviation fuel brokerage and other services managed at LAX as part of Mercury's fuel sales and services operations. Revenues from cargo operations in the current period increased 68.7% to $4.9 million from $2.9 million a year ago. This increase was due in part to the acquisitions of Excel Cargo, Inc. and Floracool, Inc, during fiscal 1996 and due in part to a general increase in the volume of business from existing accounts. Gross margin from cargo operations in the current period increased 60.0% to $1.5 million from $0.9 million in the year ago period due to higher revenues. Revenues from government contract services in the current period were unchanged at $3.6 million from the year ago period. Gross margin from government contract services in the current period decreased 17.2% to $0.8 million from $0.9 million last year due to more competitive pricing and a lower number of active contracts. Revenues from FBOs increased by 52.4% in the current period to $6.6 million from $4.3 million a year ago due in part to an increase from existing locations and due to the addition of five new locations effective August 29, 1996. Gross margin increased 21.6% in the current period to $1.0 million from $0.8 million last year. The increase was attributable to higher revenues. Selling, general and administrative expenses in the current period increased 18.5% to $1.7 million from $1.5 million in last year's period. The increase was primarily due to higher compensation expense and higher professional fees. 8 9 Depreciation and amortization expense in the current period increased 29.9% to $809,000 from $623,000 a year ago due to acquisitions including Excel and Floracool in fiscal 1996 and the five FBO locations in August 1996. Interest expense (net) in the current period increased 56.5% to $0.67 million from $0.43 million last year. The increase was due to significantly higher average outstanding borrowing in the current period principally related to the Company's $28 million convertible debentures offering in February 1996. Income tax expense approximated 40.0% of pre-tax income in the current period and 40.7% a year ago, reflecting the expected effective annual tax rate. LIQUIDITY AND CAPITAL RESOURCES Until issuance of the convertible subordinated debentures in February 1996, Mercury had historically financed its operations primarily through operating cash flow and borrowings under its revolving line of credit ( the "Revolver"). Mercury's cash balance at September 30, 1996 totalled $4,693,000. Net cash used in operating activities totaled $1,461,000 during the period ended September 30, 1996. During this period, the primary sources of net cash provided by operating activities was net income plus depreciation and amortization totaling $2,221,000, an increase in accounts payable of $6,212,000 and an increase in income taxes payable of $755,000. The primary uses of cash for operating activities in this period was an increase in accounts receivable of $9,574,000 and a decrease in accrued expenses and other current liabilities of $1,330,000. Net cash used in investing activities totaled $5,630,000 during the current period. The primary use of cash from investing activities included additions to property, equipment and leaseholds of $5,049,000, principally related to the acquisition of certain assets of five FBOs, and additions to other assets of $760,000. Net cash used in financing activities totaled $36,000 during the current period. The primary source of cash from financing activities during this period was borrowing of $897,000. The primary use of cash in financing activities was the reduction in long-term debt of $633,000 and repurchases of 30,600 shares of common stock totaling $228,000, or $7.45 per share. On January 31, 1996, the Company issued $28,115,000 principal amount of 7 3/4% convertible subordinated debentures due February 1, 2006. The debentures are convertible into shares of the Company's Common Stock at a price of $9.1182 per share. Mercury's credit facility consists of the Revolver and the Term Loan. The credit facility is secured by substantially all of Mercury's assets. The original principal balance of the Term Loan was 9 10 $7,500,000, of which $ 3,059,000 was outstanding as of September 30, 1996. The Term Loan is amortized and paid on a monthly basis and matures in August 1998. Pursuant to the Revolver, funds may be obtained in an amount equal to the value of up to 85% of Mercury's eligible receivables, as determined by the lender, up to an aggregate of $16,000,000 with an initial term maturing in October 1997, subject to renewal by the parties. At September 30, 1996, Mercury had approximately $157,000 of borrowings under the Revolver and had approximately $15,000,000 of additional borrowing availability based on the 85% of eligible receivables test. During this period, Mercury repurchased 30,600 shares of Common Stock at a total cost of approximately $228,000. Management is currently authorized by Mercury's board of directors and under Mercury's loan agreements to repurchase up to an additional approximately $1,772,000 in Common Stock. Absent a major prolonged surge in oil prices or a capital intensive acquisition, the Company believes its operating cash flow, revolver, vendor credit and cash balance will provide it with sufficient liquidity during the next twelve months. In the event that fuel prices increase significantly for an extended period of time, the Company's liquidity could be adversely affected unless the Company is able to increase vendor credit or increase lending limits under its revolving credit facility. The company believes, however, its revolver and vendor credit should provide it with sufficient liquidity in the event of a major temporary surge in oil prices. The Company's only significant contract or commitment is for the purchase of equipment or installation of facilities relating to the remodeling and reconstruction of a 174,000 square foot cargo warehouse at a cost not to exceed $6,000,000. 10 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Mercury Air Group, Inc. Registrant ----------------------------------- Seymour Kahn Chairman and Chief Executive Officer ----------------------------------- Randy Ajer Secretary/Treasurer Chief Accounting Officer Date: November 7, 1996 11 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET OF SEPTEMBER 30, 1996 AND THE CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS CONTAINED IN FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1996. 1,000 3-MOS JUN-30-1997 JUL-1-1996 SEP-30-1996 4,693 0 52,500 1,084 2,657 60,670 46,125 23,201 90,106 27,240 39,196 0 0 60 23,354 90,106 56,851 12,532 52,657 63,811 3,220 272 797 2,352 940 1,412 0 0 0 1,412 .22 .19
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