<PAGE> 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, 1998.
[ ] 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, 1998
----- ----------------------------
Common Stock, $.01 Par Value 6,576,746
<PAGE> 2
MERCURY AIR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1998 1998
------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,197,000 $ 7,836,000
Trade accounts receivable, net of allowance for doubtful
accounts of $1,703,000 at 9/30/98 and $1,686,000 at 6/30/98 40,737,000 38,387,000
Notes receivable - current portion 1,967,000 940,000
Inventories, principally aviation fuel 1,541,000 1,539,000
Prepaid expenses and other current assets 2,240,000 2,275,000
------------- -------------
Total current assets 47,682,000 50,977,000
CASH-RESTRICTED 5,305,000 9,161,000
PROPERTY, EQUIPMENT AND LEASEHOLDS, net 46,472,000 44,252,000
NOTES RECEIVABLE, net of current portion 54,000 56,000
OTHER ASSETS (Note 3) 10,611,000 7,295,000
------------- -------------
$ 110,124,000 $ 111,741,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 16,715,000 $ 16,403,000
Accrued expenses and other current liabilities 3,489,000 5,242,000
Income taxes payable 966,000 1,409,000
Current portion of long-term debt 4,185,000 3,732,000
------------- -------------
Total current liabilities 25,355,000 26,786,000
LONG-TERM DEBT (Note 4) 35,535,000 30,619,000
DEFERRED INCOME TAXES 196,000 196,000
CONVERTIBLE SUBORDINATED DEBENTURES (Note 7) 24,840,000 28,090,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (Notes 6):
Preferred Stock - $.01 par value; authorized 3,000,000 shares;
no shares outstanding
Common Stock - $ .01 par value; authorized 18,000,000 shares;
outstanding 6,613,146 shares 9/30/98;
outstanding 7,082,753 shares 6/30/98 66,000 71,000
Additional paid-in capital 19,743,000 20,465,000
Retained earnings 5,293,000 6,415,000
Cumulative translation adjustment (242,000) (239,000)
Notes receivable from sale of stock (662,000) (662,000)
------------- -------------
Total stockholders' equity 24,198,000 26,050,000
------------- -------------
$ 110,124,000 $ 111,741,000
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 3
MERCURY AIR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
-------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Sales and Revenues:
Sales $ 34,835,000 $ 54,428,000
Service revenues 17,765,000 14,737,000
------------ ------------
52,600,000 69,165,000
Costs and Expenses:
Cost of sales 27,929,000 48,420,000
Operating expenses 17,015,000 13,721,000
------------ ------------
44,944,000 62,141,000
------------ ------------
Gross Margin (Excluding depreciation
and amortization) 7,656,000 7,024,000
------------ ------------
Expenses (Income):
Selling, general and administrative 1,742,000 1,386,000
Provision for bad debts 451,000 453,000
Depreciation and amortization 1,831,000 1,166,000
Interest expense 984,000 856,000
Interest income (66,000) (228,000)
Loss resulting from bankruptcy of customer 7,050,000
------------ ------------
4,942,000 10,683,000
------------ ------------
Income (Loss) Before Provision for Income Taxes 2,714,000 (3,659,000)
Provision (Credit) for Income Taxes 1,055,000 (1,464,000)
------------ ------------
Net Income (Loss) Before Extraordinary Item $ 1,659,000 $ (2,195,000)
------------ ------------
Extraordinary Item (Note 7) (Less applicable
income taxes of $98,000) (153,000)
------------ ------------
Net Income (Loss) $ 1,506,000 $ (2,195,000)
============ ============
Net Income (Loss) Per Common Share (Note 5):
Basic:
Before extraordinary item $ 0.24 $ (0.29)
============ ============
Extraordinary item $ (0.02)
============ ============
Net income $ 0.22 $ (0.29)
============ ============
Diluted:
Before extraordinary item $ 0.18 $ (0.29)
============ ============
Extraordinary item $ (0.01)
============ ============
Net income $ 0.17 $ (0.29)
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
MERCURY AIR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
-----------------------------
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 1,506,000 $(2,195,000)
Adjustments to derive cash flow from
Operating activities:
Bad debt expense 451,000 7,253,000
Depreciation and amortization 1,831,000 1,166,000
Amortization of officers' loans 10,000 39,000
Changes in operating assets and liabilities:
Trade and other accounts receivable (2,801,000) (46,000)
Inventories (2,000) (991,000)
Prepaid expenses and other current assets 35,000 (1,546,000)
Accounts payable 312,000 463,000
Income taxes payable (443,000)
Accrued expenses and other current liabilities (1,753,000) (1,774,000)
----------- -----------
Net cash (used in) provided by operating activities (854,000) 2,369,000
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Restricted cash-tax exempt bond 3,856,000
Restricted cash-pledged certificates of deposit 1,000,000
(Increase) decrease in notes receivable (1,025,000) 521,000
Addition to other assets (37,000)
Acquisition of business, net of cash acquired (Note 3) (2,500,000)
Additions to property, equipment and leaseholds (3,880,000) (1,370,000)
----------- -----------
Net cash (used in) provided by investing activities (3,549,000) 114,000
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 6,150,000
Reduction of long-term debt (781,000) (1,399,000)
Reduction of convertible subordinated debentures (3,250,000)
Payment of dividend on common stock (94,000)
Repurchase and retire common stock (4,355,000) (1,066,000)
Proceeds from issuance of common stock
----------- -----------
Net cash used in financing activities (2,236,000) (2,559,000)
----------- -----------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (6,639,000) (76,000)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 7,836,000 2,889,000
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,197,000 $ 2,813,000
=========== ===========
CASH PAID DURING THE PERIOD:
Interest $ 1,570,000 $ 1,400,000
Income taxes $ 1,498,000 $ 129,000
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of notes payable for the acquisition of assets $ 4,250,000
Issuance of 124,224 shares of common stock for acquisition
of assets of Weather Data $ 1,000,000
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
MERCURY AIR GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(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, 1998 and the notes thereto. The results of operations for the three
months ended September 30, 1998 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 income tax rate for the respective years.
NOTE 3 - OTHER ASSETS:
On August 1, 1998, the Company acquired the weather observation
and forecasting and air traffic control government contracts and related assets
of Weather Dates Services, Inc. for $3,500,000, which consisted of $2,500,000 in
cash and $1,000,000 of the Company's stock. The purchase price has been
allocated to intangible assets including contracts and goodwill.
NOTE 4 - LONG-TERM DEBT:
At September 30, 1998, long-term debt includes $5,750,000
borrowed under the Company's $18,600,000 revolving credit line. This facility
matures in October 1999 and bears interest at prime or LIBOR plus 1.5%.
5
<PAGE> 6
NOTE 5- EARNINGS PER SHARE:
Basic income (loss) per common share is computed by
dividing net income by the weighted average number of common shares outstanding
during the period. Diluted income (loss) per share is computed by dividing net
income by the weighted average number of common shares and common stock
equivalents. Common stock equivalents include stock options and shares resulting
from the assumed conversion of subordinated debentures, when dilutive.
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
September 30, 1998 September 30, 1997
----------------------------- -----------------------------
Diluted Basic Diluted Basic
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Weighted average number of common
shares outstanding during the period 6,835,000 6,835,000 7,502,000 7,502,000
Common stock equivalents resulting from
the assumed exercise of stock options 362,000 -- -- --
Common shares resulting from the assumed
conversion of debentures 3,897,000 -- -- --
------------ ------------ ------------ ------------
Weighted average number of common and
common equivalent shares outstanding
during the period 11,094,000 6,835,000 7,502,000 7,502,000
============ ============ ============ ============
Net Income (Loss) Before Extraordinary
Item $ 1,659,000 $ 1,659,000 $ (2,195,000) $ (2,195,000)
Interest expense, net of tax, on convertible
debenture 335,000 -- -- --
------------ ------------ ------------ ------------
Adjusted Income (Loss) Before
Extraordinary Item $ 1,994,000 $ 1,659,000 $ (2,195,000) $ (2,195,000)
Extraordinary Item (153,000) (153,000) -- --
------------ ------------ ------------ ------------
Adjusted Income (Loss) $ 1,841,000 $ 1,506,000 $ (2,195,000) $ (2,195,000)
============ ============ ============ ============
Common and common share equivalents 11,094,000 6,835,000 7,502,000 7,502,000
Earnings (Loss) per share:
Before Extraordinary Item $ .18 $ .24 $ (.29) $ (.29)
============ ============ ============ ============
Extraordinary Item $ (.01) $ (.02) -- --
============ ============ ============ ============
Net Income $ .17 $ .22 $ (.29) $ (.29)
============ ============ ============ ============
</TABLE>
NOTE 6 - STOCKHOLDINGS' EQUITY:
During the period ended September 30, 1998, the Company
repurchased 593,831 shares of its common stock at a cost of approximately
$4,355,000 which was charged to: Common Stock $6,000; Additional paid in capital
$1,721,000; and Retained Earnings $2,628,000.
NOTE 7 - CONVERTIBLE SUBORDINATED DEBENTURES/ EXTRAORDINARY ITEM:
During the period the Company repurchased 3,250 bonds in the open
market at a cost $3,336,000 plus accrued interest. The excess of cost over par
value of $86,000 plus $165,000 in bond issuance costs have been charged to
extraordinary items, net of a tax benefit of $98,000, in the amount of $153,000.
6
<PAGE> 7
ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Results of operations-comparison of the Three Months ended September 30, 1998
and September 30, 1997.
The following tables set forth, for the periods indicated, the revenues and
gross margin for each of the Company's four operating units, as well as selected
other financial statement data.
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
($ In millions)
1998 1997
---- ----
% of Total % of Total
Amount Revenues Amount Revenues
------- ------ ------- ------
<S> <C> <C> <C> <C>
Revenues:
Fuel Sales and Services $ 29.4 55.9% $ 48.3 69.9%
FBOs 11.6 22.0% 11.2 16.2%
Cargo Operations 5.7 10.8% 4.8 6.9%
Government Contract Services 5.9 11.3% 4.8 7.0%
------- ------ ------- ------
Total Revenue $ 52.6 100.0% $ 69.2 100.0%
======= ====== ======= ======
</TABLE>
<TABLE>
<CAPTION>
% of Unit % of Unit
Amount Revenues Amount Revenues
------- ------ ------- ------
<S> <C> <C> <C> <C>
Gross Margin (1):
Fuel Sales and Services $ 2.3 7.7% $ 2.3 4.8%
FBOs 2.8 24.2% 2.2 19.7%
Cargo Operations 1.2 21.6% 1.4 28.9%
Government Contract Services 1.4 22.8% 1.1 23.0%
------- ------ ------- ------
Total Gross Margin $ 7.7 14.6% $ 7.0 10.2%
======= ====== ======= ======
</TABLE>
<TABLE>
<CAPTION>
% of Total % of Total
Amount Revenues Amount Revenues
------- ------ ------- ------
<S> <C> <C> <C> <C>
Selling general and administrative $ 1.7 3.3% $ 1.4 2.0%
Provision for bad debts .5 .9% 0.4 0.7%
Depreciation and amortization 1.8 3.5% 1.2 1.7%
Loss resulting from bankruptcy of customer -- -- 7.1 10.2%
Interest expense and other .9 1.7% 0 .6 0.9%
------- ------ ------- ------
Income (Loss) before Income Taxes 2.8 5.2% (3.7) (5.3)%
Provision (Credit) for Income Taxes 1.1 2.0% (1.5) (2.1)%
------- ------ ------- ------
Net Income (Loss) before Extraordinary Item $ 1.7 3.2% $ (2.2) (3.2)%
======= ====== ======= ======
Extraordinary Item (.2) (.3)% -- --
------- ------ ------- ------
Net Income (Loss) $ 1.5 2.9% $ (2.2) (3.2)%
======= ====== ======= ======
</TABLE>
(1) Gross margin as used here and throughout Management's Discussion excludes
depreciation and amortization and selling, general and administrative expense.
7
<PAGE> 8
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO SEPTEMBER 30, 1997.
Revenue fell by 24% to $52.6 million in the current period from $69.2 million a
year ago. Gross margin increased 9.0% to $7.7 million in the current period from
$7.0 million a year ago.
Revenues from fuel sales and services represented 55.9% of total revenues in the
current period compared to 69.9% of total revenues a year ago. Revenues from
fuel sales and services fell 39.2% to $29.4 million from $48.3 million last
year. The decline in revenues from fuel sales and services was due to a decrease
in the volume of fuel sold, a significant portion of which was due to the loss
of Western Pacific's fuel business in February 1998, and a decrease in the price
of fuel. Gross margin from fuel sales and service was $2.3 million in both
periods. 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. In addition, fuel sales and
services include the activities of Mercury's wholly owned subsidiary, RPA,
subsequent to it's acquisition in February 1998. Revenues from RPA were $1.2
million in the current period.
Revenues from FBOs increased by 3.5% in the current period to $11.6 million from
$11.2 million a year ago. Gross margin increased 27.0% in the current period to
$2.8 million from $2.2 million last year. The increase was attributable to an
increase in the number of gallons sold and higher per gallon fuel margins.
Revenues from cargo operations in the current period increased 18.6% to $5.7
million from $4.8 million a year ago. This increase was due to an increase in
cargo handling revenues at LAX and Atlanta, which was acquired in April 1998,
and partially offset by a decline in space brokerage revenue. Gross margin from
cargo operations in the current period decreased 11.3% to $1.2 million from $1.4
million in the year ago period primarily due to lower space brokerage revenues
and higher costs.
Revenues from government contract services increased 22.7% in the current period
to $5.9 million from $4.8 million in the year ago period. The increase in
revenues from government contract services was due primarily to the addition of
the Weather Data contracts as of August 1, 1998. Gross margin from government
contract services in the current period increased 21.5% to $1.4 million from
$1.1 million last year due to higher revenues.
Selling, general and administrative expenses in the current period increased
25.7% to $1.742 million from $1.386 million in last year's period due primary to
higher compensation expense.
Depreciation and amortization expense increased 57.0% in the current period to
$1.831 million from $1.166 million a year ago primarily due to the LAX Cargo
warehouse expansion during fiscal 1998, acquisitions during the past twelve
months and capital expenditures.
Interest expense increased by 15.0% in the current period to $.984 million from
$.856 million a year ago due to higher average outstanding bank borrowings.
Interest income decreased 71.1% in the current period to $.066 million from
$.228 million in the year ago period due primarily to lower cash balances
invested in the current period and lower income from notes receivable.
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<PAGE> 9
Loss resulting from the bankruptcy of a customer was $7,050,000 in the year ago
period and was related to the bankruptcy filing by Western Pacific Airlines,
Inc. (WPAI) on October 5, 1997. The charge includes a $5 million reduction in
restricted cash and approximately $2,050,000 accounts receivable write off. The
restricted cash consisted of pledged certificates of deposit which guaranteed
bank loans to WPAI.
Income tax expense approximated 38.9% of pre-tax income in the current period
and income tax credit approximated 40% of pretax loss a year ago, reflecting the
expected effective annual tax rate.
LIQUIDITY AND CAPITAL RESOURCES:
Mercury has financed its operations primarily through operating cash flow, bank
debt and the issuance of $19 million of tax exempt bonds in 1998 and $28 million
of convertible subordinated debentures in 1996. Mercury's cash balance at
September 30, 1998 totaled $1,197,000.
Net cash used in operating activities totaled $854,000 during the period ended
September 30, 1998. During this period, the primary sources of net cash provided
by operating activities was net income and depreciation and amortization
totaling $3,337,000. The primary uses of cash for operating activities in this
period was an increase in trade and other accounts receivable of $2,801,000 and
a decrease in accrued expenses and other current liabilities of $1,753,000.
Net cash used in investing activities totaled $3,549,000 during the current
period. The primary source of cash from investing activities included a
reduction of $3,856,000 in restricted cash. The primary use of cash from
investing activities included additions to property, equipment and leaseholds of
$3,880,000, acquisition of business, net of cash acquired, of $2,500,000 and
increase in notes receivable of $1,025,000.
Net cash used in financing activities totaled $2,236,000 during the current
period. The primary use of cash from financing activities from July 1998 through
September 1998 was the reduction in convertible subordinated debentures of
$3,250,000 and repurchases of 593,831 shares of common stock totaling
$4,355,000. The primary source of cash from financing activities were proceeds
from long-term debt totaling $6,150,000.
Subsequent to September 30, 1998, the Company repurchased 46,650 shares of its
common stock at a total cost of approximately $318,000 and $775,000 face value
of convertible subordinated debentures. Management is currently authorized by
Mercury's board of directors and under Mercury's loan agreements to repurchase
up to an additional approximately $2,085,000 in common stock and convertible
subordinated debentures.
The Company's senior unsecured bank credit facility consists of an $18,600,000
Revolver and various term facilities. At September 30, 1998, there was
$5,750,000 outstanding under the Revolver and the balance of the term loans
totalled $5,497,000. The Company is in the process of renegotiating its senior
credit facility.
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
9
<PAGE> 10
vendor credit should provide it with sufficient liquidity in the event of a
major temporary surge in oil prices.
The Company has the following significant contracts or commitments for the
purchase of equipment or installation of facilities. The Company has entered
into a new lease with respect to the Burbank, California FBO. Pursuant to the
terms of the lease, the Company will construct new hangar and terminal space and
refurbish some of its existing space at a cost of approximately $9.0 million.
Upon completion of the construction, the Company's lease will be extended
through April 2025. As of September 30, 1998 the Company has spent approximately
$4,875,000 on this project. The Company will also retrofit or replace a number
of fuel farms during fiscal 1999 at an estimated cost of $2,500,000. Amounts
drawn down in connection which the CEDFA bond financing is being used to finance
the Burbank FBO construction, while existing lines of credit will finance the
fuel farm modifications.
YEAR 2000 ISSUE
The Company has established a year 2000 compliance plan which is substantially
complete. The compliance program primarily involves information technology,
facilities and equipment and major suppliers of jet fuel. To date, the Company
has spent less than $100,000 and the total estimated cost related to year 2000
compliance is approximately $100,000.
The Company has substantially completed a year 2000 compliance program for
information technology and is currently in the testing phase. All required
information technology changes are anticipated to be operational by the third
quarter of fiscal 1999. The Company does not believe that year 2000 issues
affecting its facilities and equipment are substantial. The Company, however,
conducts most of its business on airport properties and, as such, is dependent
on various third parties to complete aspects of year 2000 compliance which will
ensure that airport operations are not significantly impacted or interrupted.
While the Company has no reason to believe that year 2000 compliance by these
third parties will not be substantially completed on time, the Company can give
no assurance to that effect. With respect to major suppliers, the Company
believes year 2000 compliance issues will not affect its ability to continue
purchasing jet fuel in sufficient quantities, given the number of alternative
sources.
No contingency plans have been developed for information technology since the
Company believes that its compliance program will be completed timely.
FORWARD-LOOKING STATEMENTS
Statements contained in this Quarterly Report on Form 10-Q which are not
historical facts are forward-looking statements. In addition, Mercury, from
time-to-time, makes forward-looking statements concerning its expected future
operations and performance and other developments. Such forward-looking
statements are necessarily estimates reflecting Mercury's best judgment based
upon current information and involve a number of risks and uncertainties, and
there can be no assurance that other factors will not affect the accuracy of
such forward-looking statements. While it is
10
<PAGE> 11
impossible to identify all such factors, factors which could cause actual
results to differ materially from those estimated by Mercury include, but are
not limited to, risks associated with acquisitions, the financial condition of
customers, non-renewal of contracts, government regulation, as well as operating
risks, general conditions in the economy and capital markets, and other factors
which may be identified from time-to-time in Mercury's Securities and Exchange
Commission filings and other public announcements.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Change in Securities
None
Item 3. Default Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
Exhibit No. Description
10.1 Amendment to Employment Agreement by and between Mercury Air
Group, Inc. and Joseph A. Czyzyk dated October 15, 1998.
11
<PAGE> 12
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
/s/ SEYMOUR KAHN
---------------------------------------
Seymour Kahn
Chairman and Chief
Executive Officer
/s/ RANDY AJER
---------------------------------------
Randy Ajer
Secretary/Treasurer
Chief Accounting Officer
Date: November 06, 1998
12
<PAGE> 1
EXHIBIT 10.1
AMENDMENT TO
EMPLOYMENT AGREEMENT
This Amendment is made as of October 15, 1998, by and between Mercury
Air Group, Inc., a New York corporation (hereinafter referred to as "Employer"),
and Mr. Joseph A. Czyzyk (hereinafter referred to as "Employee").
WHEREAS, Employer and Employee entered into that certain Employment
Agreement dated November 15, 1994 (the "Employment Agreement"); and
WHEREAS, Employer and Employee agree to amend the Employment Agreement
to reflect the wishes of the Compensation Committee of Employer with regard to
Employee's bonus plan calculation and to enable the Employment Agreement to
continue in full force and effect.
NOW, THEREFORE, the parties hereby agree to amend the Employment
Agreement as follows:
For purposes of all future bonus calculations pursuant to Paragraph Third,
subparagraph (b) Fiscal 1998 EBIT shall be deemed to be $15,156,000 (effectively
excluding the $7,050,000 loss attributable to Western Pacific Airlines) in
determining the three year trailing average of EBIT.
All other terms and conditions of the Employment Agreement remain
unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
day and year first above written.
MERCURY AIR GROUP, INC.
------------------------------------
Seymour Kahn, Chairman of the Board
------------------------------------
Joseph A. Czyzyk, Individually
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
CONSOLIDATED BALANCE SHEET OF SEPTEMBER 30, 1998 AND THE CONSOLIDATED STATEMENTS
OF INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH (B) FINANCIAL STATEMENTS CONTAINED IN FORM 10-Q
FOR THE PERIOD ENDED SEPTEMBER 30, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
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0
0
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</TABLE>
