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SMF Energy Corporation Reports Net Income and Continuation of Improvement Trend for the First Quarter of Fiscal 2010 FT. LAUDERDALE, Fla., Nov. 12 /PRNewswire-FirstCall/ -- SMF ENERGY CORPORATION, (Nasdaq: FUEL - News; 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
Highlights of First quarter Fiscal Year 2010 vs. First quarter Fiscal Year 2009
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 - News) 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
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