POCC: Penn Octane Corporation Announces Results for the Year Ended December 31, 2005
Thursday April 6, 7:31 pm ET
Company Reports Net Loss of 13 Cents Per Share
PALM DESERT, Calif.--(BUSINESS WIRE)--April 6, 2006--Penn Octane Corporation (the "Company") (NASDAQ:POCC - News), a provider of liquefied petroleum gas ("LPG") for distribution to northeastern Mexico and a reseller of gasoline and diesel fuel ("Fuel Sales Business"), announced today its financial results for the year ended December 31, 2005. The Company reported a net loss of ($2.0) million or ($0.13) per share. During December 2004, the Company changed its fiscal year from July 31, to December 31. As a result, the Company's last reported fiscal year end was July 31, 2004. During the transition period August 1, 2004 through December 31, 2004 and the year ended July 31, 2004, the Company reported net income (loss) of ($1.2) million or ($0.08) per share and $1.8 million or $0.12 per share, respectively. Excluding losses allocable to minority interest in loss of Rio Vista Energy Partners L.P. ("Rio Vista"), for the year ended December 31, 2005 and the transition period August 1, 2004 through December 31, 2004, net loss was ($4.2) million and ($1.3) million, respectively. During the year ended July 31, 2004, there was not any minority interest in Rio Vista.
The following tables summarize the gross profit among the Company's LPG business and Fuel Sales Business for the year ended July 31, 2004, the transition period August 1, 2004 through December 31, 2004 and the year ended December 31, 2005. All amounts are in thousands.
For the year ended July 31, 2004
LPG Fuel Total
Sales
Revenues $172,559 $5,105 $177,664
Cost of goods sold 162,922 5,138 168,060
Gross profit (loss) $9,637 $(33) $9,604
For the transition period August 1, 2004 through December 31, 2004
LPG Fuel Total
Sales
Revenues $74,778 $33,475 $108,253
Cost of goods sold 72,099 33,475 105,574
Gross profit $2,679 $- $2,679
For the year ended December 31, 2005
LPG Fuel Total
Sales
Revenues $136,895 $123,419 $260,314
Cost of goods sold 134,682 120,211 254,893
Gross profit $2,213 $3,208 $5,421
The following discussion of revenues compares the results of operations for the year ended December 31, 2005 to the year ended July 31, 2004, the latest fiscal year prior to the Company's change in fiscal year-end from July 31 to December 31.
Revenues for the year ended December 31, 2005, were $260.3 million compared with $177.7 million for the year ended July 31, 2004, an increase of $82.7 million or 46.5%. Of this increase, $118.3 million was attributable to increases in revenues generated from the Company's Fuel Sales Business during the year ended December 31, 2005 compared to the year ended July 31, 2004, primarily the result of increases in Fuel Sales prices and volumes (the Company commenced operations of the Fuel Sales Business in June 2004), $58.4 million was attributable to increases in average sales prices of LPG sold to PMI Trading Ltd. ("PMI") during the year ended December 31, 2005 and $9.7 million was attributable to increased average sales prices of LPG sold to customers other than PMI during the year ended December 31, 2005, partially offset by $79.5 million attributable to decreased volumes of LPG sold to PMI during the year ended December 31, 2005 and $24.2 million was attributable to decreased volumes of LPG sold to customers other than PMI during the year ended December 31, 2005.
Included in the net loss for the year ended December 31, 2005 were non-cash charges for depreciation and amortization, interest expense and discount of note from a former officer totaling approximately $2.6 million. In addition, during the year ended December 31, 2005, the Company incurred charges of approximately $2.9 million which are expected to be non-recurring, including costs related to professional fees incurred on behalf of the proposed sale of assets, costs for repairs and maintenance of its facilities and minimum fees charged for use of certain pipeline facilities.
The following table shows the Company's volume sold and average sales price for LPG for the fiscal years ended July 31, 2003, 2004, the transition period August 1, 2004 through December 31, 2004 and the year ended December 31, 2005.
Year Year Transition Year
Ended Ended period Ended
July 31, July 31, Aug. 1, Dec. 31,
2003 2004 2004 - 2005
Dec. 31,
2004
Volume Sold
LPG (millions of gallons) -
PMI 211.1 197.9 61.5 119.3
LPG (millions of gallons) -
Other 56.4 49.6 21.2 19.9
267.5 247.5 82.7 139.2
Average sales price
LPG (per gallon) - PMI $0.63 $0.72 $0.93 $1.01
LPG (per gallon) - Other 0.52 0.62 0.82 0.81
The following table shows the Company's volume sold and delivered and average sales price for gasoline and diesel fuel ("Fuel Products") for the years ended July 31, 2003 and 2004, the transition period August 1, 2004 through December 31, 2004 and the year ended December 31, 2005.
Year Year Transition Year
Ended Ended period Ended
July 31, July 31, Aug. 1, Dec. 31,
2003(a) 2004(a) 2004 - 2005
Dec. 31,
2004
Volume Sold
Fuel Products (millions of
gallons) - 14.6 23.4 68.7
Average sales price
Fuel Products (per gallon) $- $1.35 $1.43 $1.80
(a) Fuel Sales Business operations commenced in June 2004.
Audit Opinion Going Concern Qualification
The independent auditor's opinion included in the Company's financial statements for the year ended December 31, 2005 included in its Form 10-K filed today with the Securities and Exchange Commission ("SEC") contained a "going concern" qualification. Each audit opinion received by the Company since its inception has contained such a qualification. The qualification states that "conditions exist which raise substantial doubt about the Company's ability to continue as a going concern." Factors contributing to the inclusion of the qualification include: reduced LPG sales volumes and margins to the Company's primary customer, which may result in insufficient cash flow to pay obligations when due; the pledge of substantially all the Company's assets as collateral on existing debt, which may render the Company unable to obtain additional financing collateralized by those assets; the fact that the Company's existing credit facility may be insufficient to finance its business and the Company's deficit in working capital. For further information, please refer to Penn Octane's Form 10-K filed with the SEC on April 6, 2006 (SEC file number 000-24394).
About Penn Octane Corporation
Until the transfer of its physical assets to Rio Vista in September 2004, Penn Octane was a supplier of liquefied petroleum gas (LPG) to northeastern Mexico. Since September 2004, Penn Octane has supplied Rio Vista with all of the LPG which Rio Vista supplies to northeastern Mexico. Unless the proposed sale of LPG assets to TransMontaigne is completed as proposed, Penn Octane intends to continue to lease the 132-mile, six-inch Seadrift pipeline which connects a gas plant in Kleberg County, Texas, to Rio Vista's terminal facility in Brownsville, Texas, and intends to continue to supply Rio Vista with LPG. Penn Octane began operations of its gasoline and diesel fuel reseller business in June 2004. By allocating portions of certain pipeline and terminal space located in California, Arizona, Nevada and Texas to Penn Octane, Penn Octane is able to sell gasoline and diesel fuel at rack loading terminals and through bulk and transactional exchanges.
Forward-Looking Statements
Certain of the statements in this news release are forward-looking statements, including statements regarding the completion of the proposed sale of LPG assets to TransMontaigne and prospects for the LPG business and gasoline and diesel fuel reseller business. Although these statements reflect Penn Octane's beliefs, they are subject to uncertainties and risks that could cause actual results to differ materially from expectations. The proposed LPG asset sale may not be completed, or may be completed on different terms, if any of the conditions to closing (including satisfactory completion of TransMontaigne's due diligence review) are not satisfied or if various governmental and third party approvals are not obtained. If Penn Octane is not able to obtain adequate financing or to continue to generate sales of its products at profitable levels, Penn Octane would suffer material adverse consequences to its LPG and/or fuel reseller business. Additional information regarding risks affecting Penn Octane's business may be found in Penn Octane's most recent reports on Form 8-K, Form 10-Q and Form 10-K and Rio Vista's most recent reports on Form 8-K, Form 10-Q, Form 10-K and Form 10 filed with the Securities and Exchange Commission.
Contact:
Penn Octane Corporation
Charles C. Handly or Ian T. Bothwell, 760-772-9080
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