SMF Energy Corporation Reports Net Income and Continuation of Improvement
Trend for the First Quarter of Fiscal 2010
CONFERENCE CALL SCHEDULED FOR NOVEMBER 13, 2009 AT 9:00 A.M. ET
FT. LAUDERDALE, Fla., Nov. 12 /PRNewswire-FirstCall/ -- SMF ENERGY
CORPORATION, (Nasdaq: FUEL) (the "Company"), a leading mobile fueling and
energy logistics company providing efficient, just in time distribution of
petroleum products and chemicals, today announced its financial results for
the first quarter of fiscal 2010 ended September 30, 2009.
(Logo: http://www.newscom.com/cgi-bin/prnh/20090513/SMFENERGYCORPLOGO )
During the first quarter of fiscal 2010, the Company reported quarter over
quarter improvements in its financial results, including a quarterly gross
profit of $4.1 million, net income of $20,000 and adjusted net income of
$300,000 before $280,000 in non-recurring, non-cash charges, and EBITDA of
$1.13 million (adjusted net income and EBITDA are non-GAAP measures). The
continuing improvement in operating results was bolstered by the
recapitalization of our debt and equity securities at the end of the preceding
quarter, which strengthened the Company's balance sheet and financial
position, lowering total debt by $4.5 million, increasing shareholders' equity
by $4.1 million and reducing the debt to equity ratio from approximately 9:1
at the end of fiscal 2008 to 2:1 at the end of fiscal 2009. The June
recapitalization is expected to reduce the Company's annual cash interest
expense as evidenced by the $453,000 decrease in interest expense during the
first quarter.
Richard E. Gathright, Chairman, Chief Executive Officer and President,
commented:
"We continue to strengthen our bottom-line financial performance with net
income of $20,000 in our first quarter of fiscal 2010 compared to a $1.95
million net loss in the fourth quarter of fiscal 2009. However, when
eliminating the non-recurring, non-cash charges in both periods, a more
insightful comparison reflects a $597,000 improvement with adjusted net income
of $300,000 in the current period as opposed to an adjusted net loss of
$297,000 in the fourth quarter of fiscal 2009.
We also reported a 29% increase in EBITDA to $1.1 million and a 13% increase
in net margin to $0.26 per gallon for the first quarter of fiscal 2010
compared to the fourth quarter of 2009, which are both strong improvements
considering they were achieved in spite of the continuing worst recession in
modern times. In fiscal 2009, we reported a reduction of 14% in our existing
customer base volume, or 10.4 million gallons, due to the recession prior to
stabilization of demand, approximately 50% of which volume reduction we were
able to offset by new business during the year. In the current quarter, we
have continued to gain ground on the recessionary loss in demand from existing
customers, with a 1.2% increase to 16.9 million gallons sold, almost all of
which is attributable to new business. Earlier this week, we issued a press
release announcing an expansion of our business in the Carolinas and
Tennessee, which we expect will yield at least 4 million gallons of new
business annually and we are closing significant additional new business
elsewhere in our system.
I believe that, when considering the upside potential for SMF, one should take
into account the 10.4 million gallon recessionary reduction in fiscal 2009
from existing customers. While we obviously cannot predict the timing of an
economic recovery, which has certainly not yet been experienced by our
customers, we have observed, through sensitivity analysis, that the average
net margin of $0.26 per gallon generated in fiscal 2009 and the first quarter
of fiscal 2010, a recovery of the 10.4 million gallon customer demand would
add $2.7 million in EBITDA to the $4.5 million generated last year, or a total
of $7.2 million. Using only a 50% recovery factor would have added $1.4
million of additional EBITDA for a total of $5.9 million. In short, we think
that we have a very significant upside potential when economic conditions
improve, which will accelerate the positive results we are already achieving
in these bleak economic conditions. We are delivering a service for which
there is an increasing demand in all economic conditions. As a result, we are
currently experiencing strong growth in new business on an efficient operating
platform which, coupled with our improved balance sheet and financial position
from our recent recapitalization, should place us squarely in the performance
category."
Highlights of First quarter Fiscal Year 2010 vs. Fourth quarter Fiscal Year
2009
-- As indicated above, during the first quarter of fiscal 2010, we
continued to deliver improvements in our financial results. In the
first quarter of fiscal 2010 we had net income of $20,000, which
included non-cash, non-recurring charges of $280,000. Without these
charges, adjusted net income for the period was $300,000, which is a
$597,000 improvement from the fourth quarter of fiscal 2009 in which
we
had a $297,000 net loss before the $1.7 million non-cash ASC 470-20
(formerly FAS No. 84) inducement charge for the extinguishment of the
convertible debt securities.
-- In the first quarter of fiscal 2010, as compared to the fourth quarter
of fiscal 2009, we experienced an improvement in gross profit of
$558,000, or 16%, an increase in operating income of $120,000, or 87%,
and an EBITDA increase of $258,000, or 29%. The net margin per gallon
increased to 25.6 cents in the first quarter of fiscal 2010 from 22.7
cents in the fourth quarter of fiscal 2009. We currently expect the
stabilization of customer demand that we saw emerging in the third
quarter of fiscal 2009 to continue in fiscal 2010 and believe that the
demand from new customers for our services is strong.
Highlights of First quarter Fiscal Year 2010 vs. First quarter Fiscal Year
2009
-- We are reporting net income for the first quarter of fiscal 2010 of
$20,000. In the first quarter of fiscal 2009, we reported net income
of
$512,000, however, the first quarter of fiscal 2010 included non-cash,
non-recurring charges of $187,000 for the write-off of unamortized
acquisition costs per application of ASC 805, and $93,000 related to
stock option expense incurred as a result of the stock options
repricing, and did not include income from emergency response work
which
did occur in the prior year. The adjusted net income before non-cash,
non-recurring charges was $300,000 during this period. The $20,000
net
income included $951,000 in non-cash charges, such as depreciation and
amortization of assets, debt costs, debt discounts, stock-based
compensation, write-off of unamortized acquisition costs due to
application of ASC 805, and provision for doubtful accounts. The net
income also included cash interest expense associated with servicing
of
our debt of $188,000, legal expenses of $339,000 and public company
costs of $167,000.
-- The net margin in the first quarter of fiscal 2010 and 2009 was $4.3
million and $6.2 million, respectively, on 16.9 million and 18.6
million
gallons sold during those periods. The net margins per gallon in the
first quarter of fiscals 2010 and 2009 were 25.6 cents and 33.2 cents,
respectively. The decrease in net margin per gallon can be attributed
partially due to lower emergency response services provided during
this
period as compared to the same period in the previous year when we
provided emergency response services in Louisiana and Texas. The
decrease is also partially due to lower volumes demanded by some of
our
existing customers in response to the weaker economy, with the overall
decrease partially offset by the volume generated from new customers.
-- As a result of our June 2009 Recapitalization, our interest expense
was
substantially lower in the first quarter of fiscal 2010. We incurred
interest expense of $230,000 this quarter compared to $683,000 in the
same quarter in the prior year, a decrease of $453,000 of which
$198,000
is related to lower debt and lower costs to service our existing debt.
Compared to the prior quarter, the fourth quarter of fiscal 2009,
interest expense decreased $316,000.
-- We continue to see increases in new customer business and prospective
business as companies seek to reduce their costs of operation with
mobile fueling and our other services. Naturally, we cannot be
certain
that this will continue in the future or that any new business will be
sufficient to offset possible future decreases in demand from our
existing customer base. We currently expect the stabilization of
customer demand that we saw emerging in the third quarter of fiscal
2009
to continue in fiscal 2010 and believe that the demand from new
customers for our services is strong. We recently announced new
business additions and three new locations, increasing our service
locations from 31 to 34.
-- In 2008, our shareholders approved a 1 for 4.5 reverse stock split,
which took effect on October 1, 2009. The reverse stock split
preserved
our Nasdaq Stock Market listing by increasing the market price of our
common stock above the $1.00 minimum bid price for the required period
of time. All share and per share information in the accompanying
selected data was retroactively adjusted to give effect to the reverse
stock split.
-- During this quarter, $1.1 million of the Series D Preferred stock,
which
was issued during the June 2009 Recapitalization, was converted into
594,012 shares of Common Stock, further reducing our fixed charge cash
requirements as future dividend payments were reduced.
Highlights of Results for Quarterly Periods ending March 31, 2008 through
September 30, 2009
The following table portrays the financial trends for the Company's seven most
recent quarters:
All amounts in thousands of dollars, except net margin per gallon
For the three months ended
Sept. 30, June 30, March 31, Dec. 31,
2009 2009 2009 2008
Revenues $43,686 $39,884 $34,982 $45,112
Gross profit $4,097 $3,539 $3,790 $3,292
Selling, general and
administrative $3,839 $3,401 $3,455 $3,267
Operating income (loss) $258 $138 $335 $25
Interest expense and
other income, net $(230) $(454) $(570) $(677)
Non-cash ASC 470-20 (formerly
FAS No. 84) inducement
on extinguishment $- $(1,651) $- $-
Gain (loss) on extinguishment
of promissory notes $- $27 $- $-
Net income (loss) $20 $(1,948) $(243) $(660)
Less: Non-cash write-off of
unamortized acquisition costs $187 $- $- $-
Less: Non-cash stock options
repricing costs $93 $- $- $-
Less: Non-cash ASC 470-20
(formerly FAS No. 84)
inducement on extinguishment (3) $- $1,651 $- $-
Adjusted net income (loss)
before non-cash,
non-recurring charges (4) $300 $(297) $(243) $(660)
EBITDA (1) $1,134 $876 $974 $690
Net margin $4,333 $3,795 $4,027 $3,534
Net margin per gallon (2) $0.26 $0.23 $0.25 $0.21
Gallons sold 16,945 16,709 16,041 16,602
For the three months ended
Sept. 30, June 30, March 31,
2008 2008 2008
Revenues $79,271 $82,036 $64,162
Gross profit $5,819 $4,290 $2,875
Selling, general and
administrative $4,632 $3,845 $3,445
Operating income (loss) $1,187 $445 $(570)
Interest expense and
other income, net $(667) $(811) $(720)
Non-cash ASC 470-20
(formerly FAS No. 84)
inducement on
extinguishment $ - $ - $ -
Gain (loss) on
extinguishment
of promissory notes $ - $ - $(108)
Net income (loss) $512 $(366) $(1,398)
Less: Non-cash
write-off of
unamortized
acquisition costs $ - $ - $ -
Less: Non-cash stock
options repricing costs $ - $ - $ -
Less: Non-cash ASC
470-20 (formerly FAS
No. 84) inducement on
extinguishment(3) $ - $ - $ -
Adjusted net income (loss)
before non-cash,
non-recurring
charges (4) $512 $(366) $(1,398)
EBITDA (1) $1,990 $1,154 $277
Net margin $6,161 $4,611 $3,228
Net margin per gallon (2) $0.33 $0.24 $0.18
Gallons sold 18,550 19,024 18,102
1 EBITDA is defined as earnings before interest, taxes, depreciation and,
amortization expense, a Non-GAAP financial measure within the meaning
of Regulation G promulgated by the Securities and Exchange Commission.
To the extent that gain or loss and the non-cash ASC 470-20 (formerly
FAS No. 84) inducement on extinguishment of promissory notes constitute
the recognition of previously deferred interest or finance cost, it is
considered interest expense for the calculation of certain interest
expense amounts. Both stock-based compensation amortization expense
and the write-off of unamortized acquisition costs are considered
amortization items to be excluded in the EBITDA calculation. We
believe that EBITDA provides useful information to investors because it
excludes transactions not related to the core cash operating business
activities. We believe that excluding these transactions allows
investors to meaningfully trend and analyze the performance of our core
cash operations.
2 Net margin per gallon is calculated by adding gross profit to the cost
of sales depreciation and amortization and dividing that sum by the
number of gallons sold.
3 Non-cash ASC 470-20 (formerly FAS No. 84) inducement on extinguishment
is a charge we incurred strictly as a result of the June 29, 2009
Recapitalization. The Company extinguished a portion of the August
2007 and the September 2008 Notes ("the Notes") through the issuance of
approximate 1.2 million shares and approximate 278,000 shares,
respectively, at the negotiated price of $1.71 per share, which was
greater than the $1.67 per share closing bid price the day prior to
the Recapitalization, but lower than the conversion price applicable to
the convertible debt instruments, which resulted in the issuance of
more shares in the exchange than would have been issued upon a
conversion. The practice of accounting in the interpretation of FAS
No. 84 is that an inducement occurs any time when additional shares are
issued in the extinguishment of convertible debt regardless of the
absence of an economic loss or economic intent of the parties to the
transaction. Irrespective of the economic reality of the transaction,
FAS No. 84 required the recording of a non-cash "conversion inducement"
charge of $1,651,109, based on the difference between the approximate
aggregate 471,000 common shares issuable to the applicable note holder
under the original conversion rights that existed upon a conversion and
the approximate 1.5 million common shares exchanged at $1.71 cents in
the transaction that extinguished all of the Notes. This non-cash
charge is deemed a financing expense to extinguish the Notes. To the
extent that the non cash FAS 84 inducement on extinguishment of
promissory notes constitutes the recognition of a finance cost, it is
considered interest expense for the calculation of certain interest
expense amounts.
4 Adjusted net income (loss) before non-cash, non-recurring charges is
shown to provide the reader with information regarding the economic
performance of the Company before the impact of charges that do not
reflect the on-going performance of the operations such as the
technical non-economic substantive accounting treatment charge of $1.7
million in the fourth quarter of fiscal 2009, and the first quarter of
fiscal 2010 write-off incurred as new accounting ruling was applied and
stock compensation expense that resulted from the repricing of stock
options. We believe that this is a meaningful Non-GAAP representation
of the ongoing performance of the operations.
Adjusted net income (loss) before non-cash, non-recurring charges (Non-GAAP
measure) Reconciliation to the Net income (loss) for Quarterly periods ending
March 31, 2008 through September 30, 2009
All amounts in thousands of dollars
For the three months ended
Sept. 30, June 30, March 31, Dec. 31,
2009 2009 2009 2008
Net income (loss) $20 $(1,948) $(243) $(660)
Less: Non-cash write-off of
unamortized acquisition costs $187 $- $- $-
Less: Non-cash stock options
repricing costs $93 $- $- $-
Less: Non-cash ASC 470-20
(formerly FAS No. 84)
inducement on extinguishment $- $1,651 $- $-
Adjusted net income (loss)
before non-cash ,
non-recurring charges (1) $300 $(297) $(243) $(660)
For the three months ended
Sept. 30, June 30, March 31,
2008 2008 2008
Net income (loss) $512 $(366) $(1,398)
Less: Non-cash write-off of
unamortized acquisition costs $- $- $-
Less: Non-cash stock options
repricing costs $- $- $-
Less: Non-cash ASC 470-20
(formerly FAS No. 84)
inducement on extinguishment $- $- $-
Adjusted net income (loss)
before non-cash ,
non-recurring charges (1) $512 $(366) $(1,398)
1 Adjusted net income (loss) before non-cash, non-recurring charges is
shown to provide the reader with information regarding the economic
performance of the Company before the impact of charges that do not
reflect the on-going performance of the operations such as the technical
non-economic substantive accounting treatment charge of $1.7 million in
the fourth quarter of fiscal 2009, and the first quarter of fiscal 2010
write-off incurred as new accounting ruling was applied and stock
compensation expense that resulted from the repricing of stock options.
We believe that this is a meaningful Non-GAAP representation of
the ongoing performance of the operations.
EBITDA (Non-GAAP measure) Reconciliation to the Net income (loss) for
Quarterly periods ending March 31, 2008 through September 30, 2009
All amounts in thousands of dollars
For the three months ended
Sept. 30, June 30, March 31, Dec. 31,
2009 2009 2009 2008
Net income (loss) $20 $(1,948) $(243) $(660)
Add back:
Interest expense, net 230 545 575 680
Income tax expense 8 8 8 8
Depreciation and amortization
expense within:
Cost of sales 236 254 239 242
Selling, general and
administrative expenses 320 344 334 342
Stock-based compensation expense 133 49 61 78
Write-off of unamortized
acquisition costs ASC 805 187 - - -
Non-cash ASC 470-20 (formerly
FAS No. 84) inducement
on extinguishment - 1,651 - -
(Gain) loss on extinguishment
of promissory notes - (27) - -
EBITDA (1) $1,134 $876 $974 $690
For the three months ended
Sept. 30, June 30, March 31,
2008 2008 2008
Net income (loss) $512 $(366) $(1,398)
Add back:
Interest expense, net 683 720 780
Income tax expense 8 - -
Depreciation and amortization expense
within:
Cost of sales 342 321 353
Selling, general and administrative
expenses 341 357 311
Stock-based compensation expense 104 122 123
Write-off of unamortized
acquisition costs ASC 805 - - -
Non-cash ASC 470-20 (formerly
FAS No. 84) inducement
on extinguishment - - -
(Gain) loss on extinguishment of
promissory notes - - 108
EBITDA (1) $1,990 $1,154 $277
1 EBITDA is defined as earnings before interest, taxes, depreciation,
amortization, and is a Non-GAAP financial measure within the meaning of
Regulation G promulgated by the Securities and Exchange Commission. To
the extent that gain or loss and the non-cash ASC 470-20 (formerly FAS
No. 84) inducement on extinguishment of promissory notes constitute the
recognition of previously deferred interest or finance cost, it is
considered interest expense for the calculation of certain interest
expense amounts. Both stock-based compensation amortization expense and
the write-off of unamortized acquisition costs are considered
amortization items to be excluded in the EBITDA calculation. We believe
that EBITDA provides useful information to investors because it excludes
transactions not related to the core cash operating business activities.
We believe that excluding these transactions allows investors to
meaningfully trend and analyze the performance of our core cash
operations.
Selected Income Statement and Financial Data
The following tables present comparative financial data for the periods noted:
All amounts in thousands of dollars, except per share, and net margin per
gallon
Three Months Ended
September 30,
2009 2008
Petroleum product sales and service
revenues $38,125 $72,962
Petroleum product taxes 5,561 6,309
Total revenues 43,686 79,271
Cost of petroleum product sales and
service 34,028 67,143
Petroleum product taxes 5,561 6,309
Total cost of sales 39,589 73,452
Gross profit 4,097 5,819
Selling, general and administrative
expenses 3,839 4,632
Operating income 258 1,187
Interest expense (230) (683)
Interest and other income - 16
Income before income taxes 28 520
Income tax expense (8) (8)
Net income $20 $512
Basic and diluted net income per share
computation:
Net income $20 $512
Less: Preferred stock dividends - (196)
Net income attributable to common
stockholders $20 $316
Net income per share attributable to
common stockholders:
Basic $0.00 $0.10
Diluted $0.00 $0.10
Weighted average common shares outstanding:
Basic 8,248 3,254
Diluted 8,681 3,254
EBITDA (non-GAAP measure)(1) $1,134 $1,990
Gallons sold 16,945 18,550
Net margin $4,333 $6,161
Net margin per gallon (in cents) (2) 0.26 0.33
1 EBITDA is defined as earnings before interest, taxes, depreciation,
amortization, and is a Non-GAAP financial measure within the meaning of
Regulation G promulgated by the Securities and Exchange Commission. To
the extent that gain or loss and the non-cash ASC 470-20 (formerly FAS
No. 84) inducement on extinguishment of promissory notes constitute the
recognition of previously deferred interest or finance cost, it is
considered interest expense for the calculation of certain interest
expense amounts. Both stock-based compensation amortization expense and
the write-off of unamortized acquisition costs are considered
amortization items to be excluded in the EBITDA calculation. We believe
that EBITDA provides useful information to investors because it excludes
transactions not related to the core cash operating business activities.
We believe that excluding these transactions allows investors to
meaningfully trend and analyze the performance of our core cash
operations.
2 Net margin per gallon is calculated by adding gross profit to the cost
of sales depreciation and amortization and dividing that sum by the
number of gallons sold.
Condensed Consolidated Balance Sheet
(Unaudited)
(All amounts in thousands of dollars) Sept. 30, June 30,
2009 2009
ASSETS
Current assets $17,921 $18,732
Property, plant and equipment,
net 8,166 8,569
Other assets, net 2,702 2,817
$28,789 $30,118
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $17,166 $18,336
Long-term debt, net and other
liabilities 4,981 5,253
Stockholders' equity 6,642 6,529
$28,789 $30,118
CONFERENCE CALL
Management will host a conference call on Friday, November 13, 2009, at 9:00
A.M. Eastern Time ("ET") to further discuss the results of the Company's three
months ended September 30, 2009. Interested parties can listen to the call
live on the Internet through the Company's Web site at www.mobilefueling.com
or by dialing 800-510-9836 (domestic) or 617-614-3670 (international), using
Pass Code 71551391. Listeners should dial in to the call at least 5-10
minutes prior to the start of the call or should go to the Web site at least
15 minutes prior to the call to download and install any necessary audio
software. The Web cast is also available through Thomson's investor portals.
Individual investors can listen to the call at www.earnings.com,
Thomson/CCBN's individual investor portal, powered by StreetEvents.
Institutional investors can access the call via Thomson's password-protected
event management site, StreetEvents (www.streetevents.com). A telephone
replay of the conference call will be available from November 13, 2009, at
12:00 P.M. ET until midnight ET on November 20, 2009, by dialing 888-286-8010
(domestic) or 617-801-6888 (international), using Pass Code 48215759. A web
archive will be available for 30 days at www.mobilefueling.com.
ABOUT SMF ENERGY CORPORATION (NASDAQ: FUEL)
The Company is a leading provider of petroleum product distribution services,
transportation logistics and emergency response services to the trucking,
manufacturing, construction, shipping, utility, energy, chemical,
telecommunication and government services industries. The Company provides
its services and products through 34 locations in the 11 states of Alabama,
California, Florida, Georgia, Louisiana, Nevada, Mississippi, North Carolina,
South Carolina, Tennessee and Texas. The broad range of services the Company
offers its customers includes commercial mobile and bulk fueling; the
packaging, distribution and sale of lubricants and chemicals; integrated
out-sourced fuel management; transportation logistics and emergency response
services. The Company's fleet of custom specialized tank wagons,
tractor-trailer transports, box trucks and customized flatbed vehicles
delivers diesel fuel and gasoline to customers' locations on a regularly
scheduled or as needed basis, refueling vehicles and equipment, re-supplying
fixed-site and temporary bulk storage tanks, and emergency power generation
systems; and distributes a wide variety of specialized petroleum products,
lubricants and chemicals to our customers. More information on the Company is
available at www.mobilefueling.com.
FORWARD LOOKING STATEMENTS
This press release includes "forward-looking statements" within the meaning of
the safe harbor provision of the Private Securities Litigation Reform Act of
1995. For example, predictions or statements of belief or expectation
concerning the future performance of the Company, the future trading prices of
the Company's common stock and the potential for further growth of the Company
are all "forward looking statements" which should not be relied upon. Such
forward-looking statements are based on the current beliefs of the Company and
its management based on information known to them at this time. Because these
statements depend on various assumptions as to future events, they should not
be relied on by shareholders or other persons in evaluating the Company.
Although management believes that the assumptions reflected in such
forward-looking statements are reasonable, actual results could differ
materially from those projected. In addition, there are numerous risks and
uncertainties that could cause actual results to differ from those anticipated
by the Company, including but not limited to those cited in the "Risk Factors"
section of the Company's Form 10-K for the year ended June, 30, 2009.
Contact: Robert W. Beard
Senior Vice President and Investor Relations Officer
954-308-4200
SOURCE SMF Energy Corporation
Robert W. Beard, Senior Vice President and Investor Relations Officer,
+1-954-308-4200
