United Fuel & Energy Reports Fourth Quarter and Full Year 2008 Results

ORANGE, Calif., April 7 /PRNewswire-FirstCall/ -- United Fuel & Energy
Corporation (OTC Bulletin Board: UFEN), a leading distributor of gasoline,
diesel, propane and lubricant products to customers in the southwestern and
south central U.S. today announced its financial and operational results for
the three and twelve months ended December 31, 2008.

Fourth Quarter 2008 Results:
Total revenue decreased by 22.4% to $142.1 million as compared to total
revenue of $183.1 million in the fourth quarter of 2007. The $41 million
decrease in revenue was primarily due to a 9.5% decrease in sales volume to
61.2 million gallons sold in the fourth quarter of 2008 compared to 67.6
million gallons sold in the fourth quarter of 2007. Also contributing to the
decline in total revenues was a reduction in the average product price per
gallon sold, which was $2.30 in the fourth quarter of 2008 as compared to
$2.70 in the same period of 2007, a nearly 15% price decline. The average
product selling price per gallon of $2.30 in the fourth quarter of 2008 was
down 37.2% sequentially from $3.66 per gallon in the third quarter of 2008.

Gross profit significantly improved in the fourth quarter of 2008 as compared
to the fourth quarter of 2007. Gross profit increased 10.3% to $15.6 million
in the fourth quarter of 2008 as compared to $14.1 million in the fourth
quarter of 2007. Gross profit improved due to the cost reductions and
operational efficiency initiatives that the company has been executing on for
the past few quarters. Gross profit per gallon in the fourth quarter of 2008
increased to $0.25 per gallon compared to $0.21 in the fourth quarter of 2007,
a 19% improvement.

Total expenses increased to $17.7 million in the 2008 fourth quarter compared
to total expenses of $17.3 million in the prior year's fourth quarter,
representing a net increase of $0.4 million. Our operating expenses decreased
$0.5 million to $8.5 million in the fourth quarter of 2008 compared to $9.0
million in the fourth quarter of 2007. This decrease reflects the cost
reduction efforts implemented during 2008. Our general and administrative
expenses increased $1.5 million to $8.5 million in the fourth quarter of 2008
compared to $7.0 million in the same quarter of 2007. This increase is
primarily related to additional reserves for bad debt related to general
economic conditions and declining credit markets. Additionally, we
experienced a decrease in depreciation and amortization of $0.6 million in the
fourth quarter of 2008 compared to the same quarter of 2007. In efforts to
manage our bad debt expenses in 2009, we have implemented several new credit
and collection policies, including increased approval standards for new
customers, enforcement of credit limits on delinquent accounts and active
collection efforts, including legal demands. Although these policies may
reduce our overall sales volumes, we believe the quality of customer accounts
will result in improved profitability in the long-term.

For the fourth quarter of 2008, United Fuel posted an operating loss of $2.1
million as compared to an operating loss of $3.2 million in the 2007
comparable quarter. The decrease in operating loss in 2008 is primarily due to
the cost reduction efforts implemented during 2008.

Net loss applicable to common stockholders was $1.0 million, net of a $243,000
preferred stock dividend for the fourth quarter, versus a net loss applicable
to common stockholders of $3.7 million, net of a $247,000 preferred stock
dividend, for the same period in 2007. Basic and diluted loss per share in
the fourth quarter of 2008 was $0.03 on weighted average basic and diluted
shares outstanding of 40.4 million shares compared to a net loss of $0.09 per
basic and diluted share for the fourth quarter of 2007 on weighted average
basic and diluted shares outstanding of 39.5 million shares.

Adjusted EBITDA (earnings before interest, income taxes, depreciation and
amortization and certain other non-cash items) for the fourth quarter of 2008
was $915,000, compared to an Adjusted EBITDA loss of $879,000 in the fourth
quarter of 2007. A reconciliation of Adjusted EBITDA to net income is provided
at the end of this release.

"During 2008 we developed goals and initiatives to institute a more efficient
platform from which to continue to efficiently operate and grow our
organization," stated Frank Greinke, United Fuel & Energy's Chairman and Chief
Executive Officer. "This included re-aligning our business units, instituting
processes to more effectively manage our costs, developing a company culture
focused on excellence and relocating our headquarters. These initiatives
helped us to manage through the challenging economic and operating conditions
throughout 2008, and in particular during the fourth quarter.

"On December 31, 2008, we completed the sale of our propane assets for an
aggregate price of $9.8 million, plus we retained approximately $3.9 million
of retail accounts receivable that we are collecting, realizing a gain of $1.9
million for the company. We sold the propane operations because we did not
view it as a core part of our business and felt that the transaction presented
an attractive and prudent opportunity for the company to streamline operations
and strengthen our balance sheet. We used the net proceeds from the sale to
reduce our debt levels in January 2009, which has been an ongoing initiative
for the company. Our total debt at the end of 2008 was $52.6 million compared
to total debt at the end of 2007 of $84.2 million, a reduction of $31.6
million, or 38%.

"2008 was a very challenging economic and operating environment. While we do
not know the timing of when operating and economic conditions will turn
favorable again, we are cautiously optimistic that our business is
experiencing signs of stability. We are confident that we have taken the steps
to make United Fuel a stronger and better company and will be well positioned
to capitalize on growth opportunities as conditions stabilize and improve,"
concluded Mr. Greinke.

Full Year 2008 Results:
For the full year of 2008, total revenues increased $376.4 million, or 84.4%,
to $822.4 million as compared to the same period in 2007. The increase was
largely due to a 50.7% increase in sales volumes, or 87.2 million gallons,
mainly attributable to acquisitions. The CFS acquisition, effective October
1, 2007, was the largest such acquisition and accounted for the majority of
the overall increase in volumes. In addition, the average price of products
sold increased $0.57 or 22.1% from $2.58 per gallon for the year ended
December 31, 2007 to $3.15 per gallon for the corresponding period in 2008.

Cost of sales increased $357.0 million or 89.3% for the year ended December
31, 2008, as compared to the same period in 2007, due to a large increase in
volume and an increase in average unit cost. Average unit cost increased by
$0.59 or 25.3% from $2.33 for the year ended December 31, 2007 to $2.92 for
the corresponding period in 2008. Gross profit increased $19.4 million or
42.0% to $65.5 million in 2008 from $46.1 million in 2007. As a percentage of
sales, gross margin decreased to 8.0% in the 2008 period, from 10.3% in 2007.
Gross profit per gallon decreased $0.02 to $0.23 from $0.25, or 8.0% as
compared to the same period in 2007. The decrease in profit margin is a
result of narrower cardlock margins and the increased sales of wholesale
propane, which provided a lower margin than other products.

Operating expenses increased $6.1 million, or 22.7% for 2008 over the same
period in 2007. The increase in operating expenses is primarily a result of
the acquisitions made during 2007. These acquisitions added significant
personnel expenses, transportation expenses, repair and maintenance expenses
and facilities expenses. The 2007 acquisitions added $2.5 million to operating
expenses in 2008. However, operating costs per gallon during the year ended
December 31, 2008 decreased $0.02 or 13.3% to $0.13 as compared to $0.15 for
the same period in 2007, as a result of increased volumes.

General and administrative expenses increased $13.4 million, or 72.3% during
the year ended December 31, 2008, from the same period in 2007. A majority of
the increased general and administrative expenses related to an increase in
bad debt expense of $5.3 million. Additionally, the 2007 acquisitions added
$8.1 million to general and administrative expenses in 2008.

Interest expense increased $1.6 million, or 30.5%, to $6.9 million from $5.3
million for the years ended December 31, 2008 and 2007, respectively. The
increase in interest expense as compared to the corresponding period in 2007
is attributed to an increase in the average daily revolver loan balances and
time outstanding for certain term loan debt originally entered into during
2007. Amortization of debt issuance costs increased $0.4 million for the
twelve months ended December 31, 2008 as compared to the corresponding period
in 2007 due to time outstanding for debt originally entered into during the
last six months of 2007.

Net loss decreased $0.5 million for the year ended December 31, 2008 to $4.7
million from a net loss of $5.2 million for the year ended December 31, 2007.
Net of cumulative preferred stock dividends of $991,000 and $1.0 million in
2008 and 2007 respectively, net loss available to common stockholders was $5.7
million in 2008 versus a net loss of $6.2 million in 2007. Basic and diluted
net loss per share was $0.14 in 2008 as compared to a basic and diluted net
loss per share of $0.30 in 2007. Adjusted EBITDA for the full year of 2008 was
$8.5 million compared to Adjusted EBITDA of $4.0 million for the full year of
2007. A reconciliation of Adjusted EBITDA to net income is provided at the end
of this release.

Conference Call
United Fuel will host a conference call to discuss its 2008 fourth quarter and
full year results at 11:00 a.m. Eastern (10:00 a.m. Central) on Tuesday, April
7, 2009. To participate in the call, please log on to www.ufeonline.com or
dial (303) 262-2125 and ask for the United Fuel & Energy call about 10 minutes
prior to the start time. For those who cannot listen to the live call, a
telephonic replay will be available through April 14, 2009, and may be
accessed by calling (303) 590-3000 and using the pass code 11129223#. A web
cast archive will also be available at www.ufeonline.com shortly after the
call is concluded.

About United Fuel & Energy Corporation
United Fuel & Energy is engaged in the business of distributing gasoline,
diesel, propane and lubricant products primarily in certain markets of Texas,
California, New Mexico, Arizona and Oklahoma. United Fuel represents the
consolidation of numerous companies, the most significant of which are the
Eddins-Walcher Company and Cardlock Fuels System. As a part of its long range
plan, United Fuel intends to continue to expand its business through strategic
acquisitions and organic growth initiatives.

United Fuel currently engages in the following activities:

-- Card-lock operation (unattended re-fueling of commercial vehicles).
-- Wholesale fuels and lubricants (to commercial customers).
-- Propane distribution (to commercial and residential users).

United Fuel conducts its operations through 11 branch locations and 109
card-lock (unattended) fuel sites. For more information, please visit the
Company's website at www.ufeonline.com or to request future press releases via
email, go to http://www.b2i.us/irpass.asp?BzID=1318&to=ea&Nav=1&S=0&L=1.

Safe Harbor Statement
Certain statements included in this press release may constitute
forward-looking statements. Actual outcomes could differ materially from such
statements expressed or implied herein as a result of a variety of factors
including, but not limited to: weather, levels of oil and gas drilling and
general industrial activity in United Fuel's area of operations, changes in
oil and gas prices, risks associated with acquiring other businesses, the
price of United Fuel's products, availability of financing and interest rates,
competition, changes in, or failure to comply with, government regulations,
costs, uncertainties and other effects of legal and other administrative
proceedings, general economic conditions and other risks and uncertainties.
As a result, this press release should be read in conjunction with periodic
filings United Fuel makes with the SEC. The forward-looking statements
contained herein are made only as of the date of this press release, and
United Fuel does not undertake any obligation to publicly update such forward
looking statements to reflect subsequent events or circumstances.

Contact:
Frank Greinke, Chairman and CEO
fgreinke@ufeonline.com / 714-923-3010

Lisa Elliott / IR Counsel - DRG&E
lelliott@drg-e.com / 713-529-6600

Supplemental Disclosure Regarding Non-GAAP Financial Information

EBITDA represents net income before income taxes, interest, and
depreciation and amortization. EBITDA is not a presentation made in
accordance with generally accepted accounting principles ("GAAP") and is
not a measure of financial condition or profitability. EBITDA should not
be considered in isolation or as a substitute for "net income," the most
directly comparable GAAP financial measure, or as an indicator of
operating performance.

By presenting EBITDA, United Fuel intends to provide investors with a
better understanding of its core operating results to measure past
performance as well as prospects for the future. United Fuel evaluates
operating performance based on several measures, including EBITDA, as
United Fuel believes it is an important measure of the operational
strength of its business.

EBITDA may not be comparable to similarly titled measures used by other
companies. EBITDA is not necessarily a measure of United Fuel's ability
to fund its cash needs, as it excludes certain financial information when
compared to "net income." Users of this financial information should
consider the types of events and transactions which are excluded. A
reconciliation of net income to EBITDA follows:

Reconciliation of Net Income to Adjusted EBITDA
(in thousands)

Three Months Ended Year Ended
------------------------ ------------------------
December 31, December 31, December 31, December 31,
2008 2007 2008 2007
----------- ----------- ----------- -----------
Net loss available
to common stockholders $(1,011) $(3,701) $(5,740) $(6,220)
Preferred stock dividend 243 247 991 1,007
------ ------- ------- -------
Net loss (768) (3,454) (4,749) (5,213)
Plus:
Depreciation and
amortization 1,033 1,381 4,305 3,611
Interest expense 1,278 1,685 6,896 5,284
Income tax benefit (628) (1,061) (2,316) (2,038)
------ ------- ------- -------
EBITDA 915 (1,449) 4,136 1,644
Other noncash expenses - 570 4,364 2,399
------ ------- ------- -------
Adjusted EBITDA $915 $(879) $8,500 $4,043
====== ======= ======= =======

United Fuel & Energy Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

Three Months Ended Year Ended
-------------------------- --------------------------
December 31, December 31, December 31, December 31,
2008 2007 2008 2007
------------ ------------ ------------ ------------
Revenues
Sales $140,766 $182,540 $816,521 $442,725
Other 1,301 511 5,907 3,313
------- ------- ------- -------
Total revenues 142,067 183,051 822,428 446,038

Cost of sales 126,495 168,929 756,944 399,927
------- ------- ------- -------

Gross profit 15,572 14,122 65,484 46,111
------- ------- ------- -------

Expenses
Operating 8,463 9,039 32,661 26,610
General and
administrative 8,456 6,970 32,046 18,603
Depreciation,
amortization
and accretion 736 1,280 3,482 3,185
------- ------- ------- -------
Total expenses 17,655 17,289 68,189 48,398
------- ------- ------- -------

Operating loss (2,083) (3,167) (2,705) (2,287)

Other income
(expense)
Interest expense (1,278) (1,685) (6,896) (5,284)
Amortization of
debt issuance
costs (297) (101) (823) (426)
Gain on disposal
of assets 1,986 - 1,660 -
Other income, net 276 438 1,699 746
------- ------- ------- -------
Total other
expense, net 687 (1,348) (4,360) (4,964)
------- ------- ------- -------

Loss before
income taxes (1,396) (4,515) (7,065) (7,251)

Income tax benefit (628) (1,061) (2,316) (2,038)
------- ------- ------- -------

Net loss $(768) $(3,454) $(4,749) $(5,213)
======= ======= ======= =======

Cumulative
preferred
stock dividend $243 $247 $991 $1,007
======= ======= ======= =======

Net loss available
to common
stockholders $(1,011) $(3,701) $(5,740) $(6,220)
======= ======= ======= =======

Net loss available
per common share
available to
common stockholders:
Basic and diluted $(0.03) $(0.09) $(0.14) $(0.30)
======= ======= ======= =======

Weighted average
common shares
outstanding:
Basic and diluted 40,421 39,466 40,189 20,796
======= ======= ======= =======

United Fuel & Energy Corporation
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)

December 31,
-------------------
2008 2007
---- ----

ASSETS
CURRENT ASSETS
Cash $3,762 $4,096
Accounts receivable, net of
allowance for doubtful accounts 50,120 94,510
Other receivables 10,232 421
Inventories, net of allowance 8,941 16,512
Prepaid and other current assets 557 1,738
Deferred tax assets, net 1,382 417
-------- --------
Total current assets 74,994 117,694
-------- --------

PROPERTY, PLANT AND EQUIPMENT, net 31,945 41,606
-------- --------

OTHER ASSETS
Notes receivable 1,868 -
Cash value of life insurance 2,941 2,839
Goodwill 27,961 24,844
Debt issuance costs, net 1,034 1,857
Deferred tax assets, noncurrent, net 253 2,626
Other long-term assets 1,472 1,439
-------- --------
Total other assets 35,529 33,605
-------- --------
$142,468 $192,905
======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable to related parties $17,271 $21,563
Accounts payable 17,217 25,602
Accrued and other current liabilities 8,481 8,234
Current maturities of long-term
debt, other 7,326 3,605
Accrued income taxes 140 1,563
-------- --------
Total current liabilities 50,435 60,567
-------- --------

OTHER LIABILITIES
Long-term debt - revolving
line of credit 38,468 68,655
Long-term debt, other less
current maturities 3,878 11,896
Life insurance policy borrowings 2,935 -
Other liabilities 1,691 1,718
-------- --------
Total other liabilities 46,972 82,269
-------- --------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
Preferred stock - -
Common stock 41 40
Paid-in capital 54,718 53,987
Retained deficit (9,698) (3,958)
-------- --------
Total stockholders' equity 45,061 50,069
-------- --------
$142,468 $192,905
======== ========

United Fuel & Energy Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

Year Ended December 31,
-----------------------
2008 2007
---- ----
Cash flows from operating activities:
Net income (loss) $(4,749) $(5,213)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities:
Depreciation, amortization and accretion 3,482 3,185
Amortization of debt issuance
costs 823 426
Stock-based compensation expense 419 757
Deferred income taxes (2,456) (3,311)
Provision for losses on
accounts receivable and
inventory 6,970 1,712
Loss on disposal of assets 217 -
Gain on sale of Propane (1,877) -
Impairment of goodwill 275 -
Changes in operating assets
and liabilities, net of
effects from acquisitions:
Decrease (increase) in:
Accounts receivable 35,533 (25,150)
Other receivables 42 1,282
Inventories 6,941 (3,209)
Prepaid and other current assets 1,304 519
Other long-term assets (34) (2)
Increase (decrease) in:
Accounts payable (13,509) 22,956
Accrued income taxes (1,423) 727
Accrued expenses and other
current liabilities 273 2,859
Other liabilities 26 465
------ ------
Net cash provided by (used
in) operating activities 32,257 (1,997)
------ ------

Cash flows from investing activities:
Increase in cash surrender
value of life insurance (102) (95)
Proceeds from the sale of fixed assets 892 -
CFS acquisition - (342)
Your Pumps, Inc. acquisition - (1,328)
Benton acquisition - (456)
Reamax Oil Company, Inc. acquisition - (7,835)
Propane Direct, LLC acquisition - (2,397)
Capital expenditures, net (1,397) (6,157)
------ ------
Net cash used in investing
activities (607) (18,610)
------ ------

Cash flows from financing activities:
Net borrowings on revolving
line of credit (30,187) 28,295
Issuance of new debt 6,500 12,500
Repayment of debt (10,797) (18,226)
Debt issuance costs - (1,746)
Proceeds from exercised warrants 313 -
Life insurance policy borrowings 2,935 -
Preferred stock dividends paid (748) (751)
Proceeds from issuance of capital stock,
net of issuance costs - 680
------ ------
Net cash provided by (used
in) financing activities (31,984) 20,752
------ ------

Net increase (decrease) in cash (334) 145
Cash at beginning of year 4,096 3,951
------ ------
Cash at end of year $3,762 $4,096
====== ======

Cash paid during year for:
Interest $8,634 $4,809
Income taxes 770 751

SOURCE United Fuel & Energy Corporation

Frank Greinke, Chairman and CEO of United Fuel & Energy Corporation,
+1-714-923-3010, fgreinke@ufeonline.com; or Lisa Elliott, IR Counsel of DRG&E,
+1-713-529-6600, lelliott@drg-e.com, for United Fuel & Energy Corporation