<PAGE>
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 December 31, 1995
[ ] 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 February 08, 1996
----- -----------------------
Common Stock, $.01 Par Value 5,380,087
<PAGE>
PART I - FINANCIAL INFORMATION
MERCURY AIR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS DECEMBER 31, JUNE 30,
1995 (UNAUDITED) 1995
------------------ ------------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 700,000 $ 831,000
Trade accounts receivable, net of allowance for doubtful
accounts of $904,000 at 12/31/95 and $610,000 at 6/30/95 42,196,000 33,269,000
Notes receivable - current portion 60,000 50,000
Inventories (Note 2) 1,761,000 3,283,000
Prepaid expenses and other current assets 2,301,000 1,822,000
---------------- ----------------
Total current assets 47,018,000 39,255,000
PROPERTY, EQUIPMENT AND LEASEHOLDS, net of accumulated
depreciation and amortization of $21,467,000 at 12/31/95 and
$20,391,000 at 6/30/95 14,628,000 12,219,000
NOTES RECEIVABLE, net of current portion 188,000 136,000
OTHER ASSETS 3,251,000 2,600,000
---------------- ----------------
$65,085,000 $54,210,000
---------------- ----------------
---------------- ----------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $16,983,000 $12,998,000
Accrued expenses and other current liabilities 3,802,000 3,008,000
Income taxes payable (Note 3) 297,000 114,000
Current portion of long-term debt 2,647,000 2,607,000
---------------- ----------------
Total current liabilities 23,729,000 18,727,000
LONG-TERM DEBT (Note 6) 21,255,000 17,104,000
DEFERRED INCOME TAXES 8,000 8,000
---------------- ----------------
Total liabilities 44,992,000 35,839,000
---------------- ----------------
COMMITMENTS AND CONTINGENCIES (Note 8)
STOCKHOLDERS' EQUITY (Note 4):
Preferred Stock - $.01 par value; authorized 3,000,000 shares;
no shares outstanding
Common Stock - $.01 par value; authorized 9,000,000 shares;
outstanding 5,380,087 shares at 12/31/95 and
5,524,257 shares at 6/30/95 54,000 55,000
Additional Paid-in Capital 14,637,000 14,992,000
Retained Earnings 5,557,000 3,479,000
Treasury Stock - 35,200 shares of common stock (155,000) (155,000)
---------------- ----------------
Total stockholders' equity 20,093,000 18,371,000
---------------- ----------------
$65,085,000 $54,210,000
---------------- ----------------
---------------- ----------------
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
MERCURY AIR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
--------------------------- --------------------------
1995 1994 1995 1994
--------------------------- --------------------------
<S> <C> <C> <C> <C>
Sales and Revenues:
Sales $ 86,616,000 $65,664,000 $44,402,000 $39,509,000
Service Revenues 20,660,000 19,055,000 10,994,000 9,656,000
------------ ----------- ----------- -----------
107,276,000 84,719,000 55,396,000 49,165,000
Costs and Expenses:
Cost of Sales 80,011,000 60,032,000 41,264,000 36,368,000
Operating Expenses 17,807,000 16,392,000 9,271,000 8,353,000
------------ ----------- ----------- -----------
97,818,000 76,424,000 50,535,000 44,721,000
------------ ----------- ----------- -----------
Gross Margin (Excluding depreciation
and amortization) 9,458,000 8,295,000 4,861,000 4,444,000
Selling, General and Administrative Expense 3,081,000 2,612,000 1,608,000 1,422,000
Depreciation and Amortization 1,353,000 1,195,000 730,000 589,000
------------ ----------- ----------- -----------
Operating Income 5,024,000 4,488,000 2,523,000 2,433,000
------------ ----------- ----------- -----------
Other Expenses (Income):
Interest Expense 927,000 664,000 490,000 362,000
Interest Income (22,000) (45,000) (10,000) (32,000)
Minority Interest 95,000 53,000
Gain-Sale of Options (274,000) (274,000)
------------ ----------- ----------- -----------
631,000 714,000 206,000 383,000
------------ ----------- ----------- -----------
Income Before Income Taxes 4,393,000 3,774,000 2,317,000 2,050,000
Provision for Income Taxes 1,775,000 1,572,000 931,000 850,000
------------ ----------- ----------- -----------
Net Income 2,618,000 2,202,000 1,386,000 1,200,000
Retained Earnings at Beginning of Period 3,479,000 4,555,000 4,225,000 5,187,000
Retirement of Common Stock (431,000) (900,000) (530,000)
Dividends on Common Stock (109,000) (54,000)
------------ ----------- ----------- -----------
Retained Earnings at End of Period $ 5,557,000 $ 5,857,000 $ 5,557,000 $ 5,857,000
------------ ----------- ----------- -----------
------------ ----------- ----------- -----------
Net Income Per Common Share and
Common Equivalent Share (Primary) (Note 5) $0.46 $0.39 $0.24 $0.21
------------ ----------- ----------- -----------
------------ ----------- ----------- -----------
Net Income Per Common Share-Assuming
Full Dilution (Note 5) $0.46 $0.39 $0.24 $0.21
------------ ----------- ----------- -----------
------------ ----------- ----------- -----------
Weighted Average Number of Shares of
Common Stock (Note 5) 5,395,000 5,368,000 5,375,000 5,382,000
------------ ----------- ----------- -----------
------------ ----------- ----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
MERCURY AIR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED DECEMBER 31,
1995 1994
----------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,618,000 $ 2,202,000
Adjustments to derive cash flow from
operating activities:
Depreciation and amortization 1,353,000 1,195,000
Minority interest 95,000
Amortization of officers' loans 77,000 88,000
Changes in operating assets and liabilities:
Trade and other accounts receivable (8,581,000) (12,220,000)
Inventories 1,522,000 (1,449,000)
Prepaid expenses and other current assets (479,000) (410,000)
Accounts payable 3,517,000 8,905,000
Income taxes payable 183,000 (419,000)
Accrued expenses and other current liabilities 794,000 (213,000)
----------- ------------
Net cash provided by (used in) operating activities 1,004,000 (2,226,000)
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) Decrease in notes receivable (62,000) 31,000
Addition to other assets (774,000) (153,000)
Additions to property, equipment and leaseholds (1,006,000) (463,000)
----------- ------------
Net cash used in investing activities (1,842,000) (585,000)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 3,540,000 6,458,000
Reduction of long-term debt (1,938,000) (1,350,000)
Payment of dividend on common stock (109,000) -
Repurchase and retire common stock (820,000) (1,301,000)
Redemption by subsidiary of a portion of its common stock
owned by minority shareholder (450,000)
Proceeds from issuance of common stock 34,000 56,000
----------- ------------
Net cash provided by financing activities 707,000 3,413,000
----------- ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (131,000) 602,000
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 831,000 1,770,000
----------- ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 700,000 $ 2,372,000
----------- ------------
----------- ------------
CASH PAID DURING THE PERIOD:
Interest $ 927,000 $ 664,000
Income taxes $ 1,592,000 $ 1,991,000
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
-
Issuance of 225,000 common shares in exchange for the
remaining minority interest of Mercury Air Cargo, Inc. $ 1,406,000
Issuance of notes payable for the acquisition of assets $ 2,016,000
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
MERCURY AIR GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(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 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,
1995 and the notes thereto. The results of operations for the six months
ended December 31, 1995 are not necessarily indicative of results for the
full year.
Note 2 - INVENTORIES:
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31, June 30,
1995 1995
---- ----
<S> <C> <C>
Aviation Fuel $1,620,000 $3,166,000
Supplies, Parts and other 141,000 117,000
---------- ----------
$1,761,000 $3,283,000
---------- ----------
---------- ----------
</TABLE>
Note 3 - INCOME TAXES:
Income taxes have been computed based on the estimated annual effective
tax rate for the respective years.
5
<PAGE>
Note 4 - STOCKHOLDERS' EQUITY:
In the six months ended December 31, 1995, the Company repurchased and
retired 155,420 shares of its Common Stock at a cost of approximately
$820,000, an average cost of $5.28 per share. The effect on Stockholders'
Equity was a charge to Additional Paid-In Capital of $387,000, a charge to
Retained Earnings of $431,000 and a charge to Common Stock of $2,000. In
addition, during the period ended December 31, 1995, certain Directors and
employees exercised stock options resulting in the issuance of 11,250 common
shares of the Company.
Note 5 - EARNINGS PER SHARE:
Earning 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.
<TABLE>
<CAPTION>
Six Months Three Months
December 31, 1995 December 31, 1995
----------------- -----------------
<S> <C> <C>
Weighted average number of common
shares outstanding during the period 5,395,000 5,375,000
Common stock equivalents resulting
from the assumed exercise of stock
options 240,000 239,000
--------- ---------
Weighted average number of common
and common equivalent shares
outstanding during the period 5,635,000 5,614,000
--------- ---------
--------- ---------
</TABLE>
Note 6 - LONG-TERM DEBT:
Amounts borrowed under the Company's line of credit were $13,194,000 at
December 31, 1995. Amounts borrowed under the revolving credit line bear
interest at prime plus one half percent (1/2%) or LIBOR plus 2%. The line of
credit permits borrowing of up to $16,000,000 subject to eligible available
collateral.
6
<PAGE>
Note 7 - SUBSEQUENT EVENT:
On January 31, 1996, pursuant to a public offering, the Company issued
$25,000,000 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 $10.03 per share.
Note 8 - TERMINATION OF LETTER OF INTENT:
On November 29, 1995, the Company and Carnival Air Lines terminated the
proposed merger between the two companies announced on October 18, 1995. The
transaction was not consummated as a result of the inability of the companies
to agree upon certain material terms and closing conditions.
7
<PAGE>
ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS-COMPARISON OF THE THREE MONTHS ENDED DECEMBER 31, 1995
AND DECEMBER 31, 1994 AND COMPARISON OF THE SIX MONTHS ENDED DECEMBER 31, 1995
AND DECEMBER 31, 1994:
The following tables set forth, for the periods indicated, the revenues and
gross margin for each of the Company's four operating units, as well as
selected other financial statement data.
<TABLE>
<CAPTION>
Six Months Ended December 31, Three Months Ended December 31,
($ in millions) 1995 1994 1995 1994
Amount % of Total Amount % of Total % of Total % of Total
Revenues Revenues Amount Revenues Amount Revenues
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Fuel Sales and Services (1) $84.7 79.0% $63.9 75.5% $43.6 78.7% $38.9 79.1%
Cargo Operations 7.1 6.6% 4.8 5.7% 4.2 7.5% 2.7 5.5%
Goverment Contract Services 7.2 6.7% 8.1 9.5% 3.6 6.6% 3.9 7.9%
FBOs (1) 8.3 7.7% 7.9 9.3% 4.0 7.2% 3.7 7.5%
------ ------ ----- ------ ----- ------ ----- ------
Total Revenues $107.3 100.0% $84.7 100.0% $55.4 100.0% $49.2 100.0%
------ ------ ----- ------ ----- ------ ----- ------
------ ------ ----- ------ ----- ------ ----- ------
% of Unit % of Unit % of Unit % of Unit
Amount Revenues Amount Revenues Amount Revenues Amount Revenues
Gross Margin (2):
Fuel Sales and Service (1) $3.8 4.5% $3.3 5.1% $1.9 4.3% $1.9 4.8%
Cargo Operations 2.4 33.7% 1.5 31.1% 1.5 34.9% 0.9 35.1%
Goverment Contract Services 1.8 24.2% 2.0 25.4% 0.9 23.8% 1.0 26.6%
FBOs (1) 1.5 18.0% 1.5 18.9% 0.6 16.4% 0.6 15.8%
------ ------ ----- ------ ----- ------ ----- ------
Total Gross Margin $9.5 8.8% $8.3 9.8% $4.9 8.8% $4.4 9.0%
------ ------ ----- ------ ----- ------ ----- ------
------ ------ ----- ------ ----- ------ ----- ------
% of Total % of Total % of Total % of Total
Amount Revenues Amount Revenues Amount Revenues Amount Revenues
Selling, General and
Administrative $3.1 2.9% $2.6 3.1% $1.6 2.9% $1.4 2.9%
Depreciation and Amortization 1.4 1.2% 1.2 1.4% 0.7 1.3% 0.6 1.2%
------ ------ ----- ------ ----- ------ ----- ------
Operating Income 5.0 4.7% 4.5 5.3% 2.5 4.6% 2.4 4.9%
Interest Expense and Other 0.6 0.6% 0.7 0.8% 0.2 0.4% 0.4 0.8%
------ ------ ----- ------ ----- ------ ----- ------
Income before Income Taxes 4.4 4.1% 3.8 4.5% 2.3 4.2% 2.0 4.1%
Provision for Income Taxes 1.8 1.7% 1.6 1.9% 0.9 1.7% 0.8 1.7%
------ ------ ----- ------ ----- ------ ----- ------
Net Income $2.6 2.4% $2.2 2.6% $1.4 2.5% $1.2 2.4%
------ ------ ----- ------ ----- ------ ----- ------
------ ------ ----- ------ ----- ------ ----- ------
</TABLE>
(1) Amounts for the three months ended December 31, 1994 and the six months
ended December 31, 1994 have been reclassified to conform to the fiscal 1996
presentation.
(2) Gross Margin as used here and throughout Management's Discussion excludes
depreciation and amortization.
Page 8
<PAGE>
Three Months ended December 31, 1995 Compared to December 31, 1994.
Revenue increased 12.7% to $55.4 million in the current period from $49.2
million a year ago. Gross margin increased 9.4% to $4.9 million in the
current period from $4.4 million a year ago.
Revenues from fuel sales and services represented 78.7% of total revenues in
the current period compared to 79.1% of total revenues a year ago. Revenues
from fuel sales and services increased to $43.6 million from $38.9 million
last year. The increase in revenues from fuel sales and services was
primarily due to an increase in the number of gallons sold.. Average fuel
prices were marginally higher in the current year compared with last year.
Gross margin from fuel sales and services was constant at $1.9 million in the
current period compared with last year. Higher volume offset lower per gallon
margins in the current period. Revenues and gross margin from fuel sales
and services include 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 54.1% to $4.2
million from $2.7 million a year ago. This increase was due in part to a
general increase in the volume of business from existing accounts and in part
to the addition of Excel Cargo, Inc. at the beginning of the current period.
Gross margin from cargo operations in the current period increased 53.3% to
$1.5 million from $.9 million in the year ago period.
Revenues from government contract services in the current period declined
5.8% to $3.6 million from $3.9 million in the year ago period. The decrease
in revenues from government contract services in the current period compared
to last year was primarily due to five contract terminations during fiscal
1995, which terminations were only partially offset by a new contract
received in November 1994 and a new contract in October 1995. Gross margin
from government contract services in the current period decreased 15.8% to
$.9 million from $1.0 million last year due to lower revenues. During the
period ended December 31, 1995 three contracts were terminated and two
additional contracts are scheduled for termination subsequent to December 31,
1995.
Revenues from FBOs increased by 7.9% in the current period to $4.0 million
from $3.7 million a year ago due to an increase in fuel sales and to
higher service revenues. Gross margin increased 11.6% in the current period
to $654,000 from $586,000 last year. The increase was primarily
attributable to an increase in sales and revenues.
Selling, general and administrative expenses in the current period increased
13.1% to $1.6 million from $1.4 million in last year's period. The increase
was primarily due to higher compensation expense and, to a lesser extent,
higher professional fees and facility expenses.
9
<PAGE>
Depreciation and amortization expense in the current period increased 23.9%
to $730,000 from $589,000 a year ago. The increase in the current period is
related to the acquisition of Excel Cargo, Inc.
Interest expense in the current period increased 35.4% to $.49 million from
$.36 million last year. The increase was due to significantly higher
average outstanding bank borrowings in the current period.
Charges for minority interest were eliminated in the current period as
compared to $53,000 last year. The elimination was due to the acquisition
of the remaining minority interest's share of Mercury Air Cargo in November
1994.
The Company recognized a gain of $274,000 in the current period from the sale
of options it held to acquire common shares of one of its airline customers.
Income tax expense approximated 40.2% of pre-tax income in the current period
and 41.5% a year ago, reflecting the expected effective annual tax rate.
Six Months Ended December 31, 1995 compared to December 31, 1994.
Revenue increased 26.6% to $107.3 million in the current period from $84.7
million a year ago. Gross margin increased 14% to $9.5 million in the
current period from $8.3 million a year ago.
Revenues from fuel sales and services represented 79% of total revenues in
the current period compared to 75.5% of total revenues a year ago. Revenues
from fuel sales and services increased to $84.7 million from $63.9 million
last year. The increase in revenue from fuel sales and services was primarily
due to an increase in the number of gallons sold. Average fuel prices were
marginally higher in the current year compared with last year. Gross margin
from fuel sales and services increased 17.4% in the current period to $3.8
million from $3.3 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 fuel sales.
Revenues from cargo operations in the current period increased 47.8% to $7.1
million from $4.8 million a year ago. The increase was primarily due to a
general increase in the volume of business from existing accounts and
partially due to the addition of Excel Cargo, Inc. during the current period.
Gross margin from cargo operations in the current period increased 60.3% to
$2.4 million from $1.5 million in the year ago period.
Revenues from government contract services in the current period declined 11%
to $7.2 million from $8.1 million in the year ago period. The decrease in
revenues from government contract services in the current period compared to
last year was primarily due to five contract terminations during fiscal 1995
and three contact terminations during the current period, which terminations
were only partially
10
<PAGE>
offset by two new contracts received, one in November 1994 and one in October
1995. Gross margin from government contract services in the current period
decreased 15.2% to $1.74 million from $2.05 million last year due to lower
revenues.
Revenues from FBOs increased 5.3% in the current period to $8.3 million from
$7.9 million a year ago due to an increase in fuel sales and higher services
revenues. Operating income remained relatively constant in the current
period at $1.5 million compared to the year ago period. Gross margin as a
percentage of revenues declined in the current period compared to the year
ago period due to lower per gallon fuel margins and higher operating expenses.
Selling, general and administrative expenses in the current period increased
18% to $3.1 million from $2.6 million in the year ago period. The increase
was primarily due to higher compensation expense and, to a lesser extent,
higher professional fees and facility expenses.
Depreciation and amortization expense in the current period increased 13.2%
to $1,353,000 from $1,195,000 a year ago. The increase in the current period
is related to the acquisition of Excel Cargo, Inc.
Interest expense in the current period increased 39.6% to $.93 million from
$.66 million last year. The increase was due to significantly higher average
outstanding bank borrowings in the current period.
Charges for minority interest were eliminated in the current period as
compared to $95,000 last year. The elimination was due to the acquisition of
the remaining minority interest's share of Mercury Air Cargo in November 1994.
The Company recognized a gain of $274,000 in the current period from the sale
of options it held to acquire common shares of one of its airline customers.
Income tax expense approximated 40.4% of pretax income in the current period
and 41.7% a year ago, reflecting the expected effective annual tax rate.
LIQUIDITY AND CAPITAL RESOURCES
Mercury has historically financed its operations primarily through operating
cash flow and borrowings under its revolving line of credit (the
"Revolver"). Mercury's cash balance at December 31, 1995 totaled $700,000.
Net cash provided by operating activities totaled $1,004,000 during the
period ended December 31, 1995. During this period, the primary source of
net cash provided by operating activities was net income plus depreciation
and amortization totaling $3,971,000, an increase in accounts payable of
$3,517,000, a decrease in inventories of $1,522,000 and an increase in
accrued expenses and other
11
<PAGE>
current liabilities of $794,000. The primary use of cash for operating
activities in this period was an increase in accounts receivable of
$8,581,000 and an increase in prepaid expenses and other current assets of
$479,000.
Net cash used in investing activities totaled $1,842,000 during the current
period. The primary use of cash from investing activities included additions
to other assets of $774,000, which includes Goodwill from the acquisition of
Excel Cargo, Inc. of $810,000, and additions to property, equipment and
leaseholds of $1,006,000.
Net cash provided by financing activities totaled $707,000 during the current
period. The primary source of cash from financing activities during this
period was proceeds from long-term debt of $3,540,000, which includes
borrowing under the revolver of $3,076,000. The primary use of cash in
financing activities was the reduction in long-term debt of $1,938,000 and
repurchases of common stock totaling $820,000.
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 $7,500,000, of which
$4,003,000 was outstanding as of December 31, 1995. 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 December 31, 1995, Mercury had
approximately $13,194,000 of borrowing under the revolver and had
approximately $2,000,000 of additional borrowing availability based on the
85% of eligible receivables test. See Note 6 of Notes to Consolidated
Financial Statements.
During this period, Mercury repurchased 155,420 shares of Common Stock at a
total cost of approximately $820,000 or an average cost of $5.28 per share.
Management is currently authorized by Mercury's board of directors and under
Mercury's loan agreements to repurchase up to an additional approximately
$240,000 in Common Stock.
On January 31, 1996 pursuant to a public offering, the Company issued
$25,000,000 of 7 3/4% convertible subordinated debentures due on February 1,
2006. Proceeds to the Company, net of underwriting discount, totaled
$23,750,000 of which approximately $14,000,000 was used to pay the Revolver.
The balance will be used for potential acquisitions and general corporate
purposes. The debentures are convertible into the Company's common stock at
a conversion rate of $10.03 per share.
Absent a major prolonged surge in oil prices or a capital intensive
acquisition, the Company believes its operating cash flow, revolver , recent
public offering of debentures and vendor credit will provide it with
sufficient liquidity during the next twelve months. In the event that fuel
prices increase
12
<PAGE>
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 has no significant outstanding contracts or commitments for the
purchase of equipment or installation of facilities.
PART 11-OTHER INFORMATION
Item 1. Legal proceedings
Not applicable
Item 2. Change in Securities
Not applicable
Item 3. Default Upon Senior Securities
Not applicable
Item 4. Submission of matters to a Vote of security Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
Exhibit 27 - Financial Data Schedule
13
<PAGE>
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
[CONFORMED]
----------------------------------------
Seymour Kahn
Chairman and Chief
Executive Officer
[/s/]
----------------------------------------
Randy Ajer
Secretary/Treasurer
Chief Accounting Officer
Date: February 8, 1996
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 1995 AND THE CONSOLIDATED
STATEMENTS OF INCOME AND RETAINED EARNINGS FOR THE SIX MONTHS ENDED
DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000052532
<NAME> MERCURY AIR GROUP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 700
<SECURITIES> 0
<RECEIVABLES> 43,160
<ALLOWANCES> 904
<INVENTORY> 1,761
<CURRENT-ASSETS> 47,018
<PP&E> 36,095
<DEPRECIATION> 21,467
<TOTAL-ASSETS> 65,085
<CURRENT-LIABILITIES> 23,729
<BONDS> 21,255
0
0
<COMMON> 54
<OTHER-SE> 20,039
<TOTAL-LIABILITY-AND-EQUITY> 65,085
<SALES> 86,616
<TOTAL-REVENUES> 20,660
<CGS> 80,011
<TOTAL-COSTS> 102,842
<OTHER-EXPENSES> 631
<LOSS-PROVISION> 495
<INTEREST-EXPENSE> 927
<INCOME-PRETAX> 4,393
<INCOME-TAX> 1,775
<INCOME-CONTINUING> 2,618
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,618
<EPS-PRIMARY> .46
<EPS-DILUTED> .46
</TABLE>
