United Fuel & Energy Reports First Quarter 2009 Results
May 18, 2009 7:00:00 AM
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View Additional ProfilesORANGE, Calif., May 18 /PRNewswire-FirstCall/ -- United Fuel & Energy Corporation (OTCQX: UFEN), a leading distributor of gasoline, diesel and lubricant products to customers in the southwestern and south central U.S. today announced its financial and operational results for the three months ended March 31, 2009.
"In the first quarter of 2009, our business continued to feel the effects of poor economic conditions and the continued slowdown in the oil fields of Texas, which had a significant impact on our volumes and gross profit," stated Frank Greinke, United Fuel & Energy's Chairman and Chief Executive Officer. "Our strategy is to continue to aggressively manage all the factors in our business that are within our control, while we wait for market conditions to improve. We believe that the downturn in the economy presents a great opportunity for our company to further right-size the business, consolidate operations and centralize processes so that we are well positioned for an upturn in our markets. Our markets are just now starting to show positive signs of stabilization, but we remain cautiously optimistic.
"While our volumes and revenues were down and we generated an operating and net loss in this year's first quarter, we made progress in strengthening our balance sheet as well as reducing our interest expense and our general and administrative expense. With the proceeds received from the sale of our propane assets and operating cash flow, we reduced our total long term debt by 49%, from $49.7 million at December 31, 2008 to $25.1 million at March 31, 2009."
First Quarter 2009 Results:
Net loss applicable to common stockholders was $1.7 million, net of a $243,000 preferred stock dividend for the first quarter, versus a net loss applicable to common stockholders of $1.2 million, net of a $246,000 preferred stock dividend, for the same period in 2008. Basic and diluted loss per share in the first quarter of 2009 was $0.04 on weighted average basic and diluted shares outstanding of 40.5 million shares compared to a net loss of $0.03 per basic and diluted share for the first quarter of 2008 on weighted average basic and diluted shares outstanding of 40.2 million shares.
Adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization and certain other non-cash items) for the first quarter of 2009 was negative $0.8 million, compared to Adjusted EBITDA of $2.1 million in the first quarter of 2008. A reconciliation of Adjusted EBITDA to net income is provided at the end of this release.
Total revenues decreased $130.3 million, or 62.6%, for the three months ended March 31, 2009, as compared to the same period in 2008. The decrease was primarily due to a 41.0% decrease in sales volumes, or 29.3 million gallons. Of the decrease in sales volumes, 39.9%, or 11.7 million gallons, was due to the divestiture of the propane assets in December 2008. The remaining decrease was mainly attributed to a reduction in demand from customers related to the drilling rig and oilfield services industry, as well as other commercial and industrial business sectors. In addition, the average price of products sold decreased $1.07 per gallon, or 37.1%, from $2.89 per gallon for the three months ended March 31, 2008 to $1.82 per gallon for the same period in 2009.
Cost of sales decreased $124.0 million, or 64.4%, for the three months ended March 31, 2009, as compared to the same period in 2008. Excluding the impact of the propane assets divestiture in December 2008, cost of sales decreased $92.5 million, or 57.4%, due primarily to a decrease in volume as mentioned above and a decrease in average unit cost. Average unit cost decreased by $1.07, or 39.6%, from $2.69 for the three months ended March 31, 2008 to $1.62 for the same period in 2009. Gross profit decreased $6.3 million, or 40.5%, from $15.5 million in 2008 to $9.2 million in 2009. Excluding the impact of the divestiture of our propane assets, gross profit decreased $3.9 million, or 29.9%. Gross profit per gallon decreased $0.01, or 2.9%, from $0.20 in 2008 to $0.19 in 2009. As a percentage of total revenues, gross profit increased from 7.4% in 2008 to 11.8% in 2009.
Total expenses decreased 28.4% from $15.2 million in the first quarter of 2008 to $10.9 million in the first quarter of 2009. Within total expenses, operating expenses decreased $0.2 million, or 2.9%, for the three months ended March 31, 2009, as compared to the same period in 2008. The decrease in operating expenses was due primarily to lower personnel related costs resulting from the propane assets divestiture in December 2008 and cost reduction efforts during 2008 and 2009, partially offset by higher transportation and repair and maintenance expenses. Operating expenses per gallon increased $0.07, or 64.5%, from $0.10 in 2008 to $0.17 in 2009. General and administrative expenses decreased $3.8 million, or 55.5%, for the three months ended March 31, 2009, as compared to the same period in 2008. The decrease in general and administrative expenses was due primarily to lower costs of personnel, information technology, insurance, travel and facilities expenses attributed to the propane assets divestiture in December 2008. Cost reduction efforts during 2008 and 2009 also contributed to the decrease in general and administrative expenses. Additionally, depreciation and amortization expense decreased 27.3% from $1.1 million in the first quarter of 2008 to $0.8 million in the first quarter of 2009.
For the first quarter of 2009, United Fuel posted an operating loss of $1.7 million as compared to an operating profit of $0.3 million in the 2008 comparable quarter. The operating loss in the first quarter of 2009 was due to the reduction in volumes and revenues while certain fixed-cost expenses did not decrease enough to offset the decline in revenues, as previously discussed.
Interest expense decreased $1.3 million, or 65.0%, for the three months ended March 31, 2009, as compared to the same period in 2008. The decrease in interest expense was attributed to a decrease in the average daily revolver loan balances and lower outstanding term loan debt resulting from the repayment of term loans in January 2009 from proceeds of the sale of propane assets.
Mr. Greinke continued, "Subsequent to the first quarter of 2009 and as announced last week, we have moved the listing of our common stock from the OTC Bulletin Board to the OTCQX tier market. We made this move primarily because we felt the costs associated with the reporting obligations and requirements associated with being an SEC registrant were disproportionately expensive and burdensome relative to the size of our company. We believe this decision will save us $600,000 to $800,000 in costs in the first year and enable management to focus more on operations of the company to deliver shareholder value. The OTCQX offers the potential for better trading liquidity and provides us the ability to continue to report on our progress as a company in a robust manner to all of our stakeholders."
In conclusion, Mr. Greinke added, "We are confident that United Fuel & Energy is taking the right steps to operate through these challenging times and importantly, is making the company a better company that is well positioned to capitalize on opportunities as operating conditions improve."
Conference Call
United Fuel & Energy will host a conference call to discuss its 2009 first quarter results at 2:00 p.m. Eastern (1:00 p.m. Central) on Monday, May 18, 2009. To participate in the call, please log on to www.ufeonline.com or dial (480) 629-9774 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 May 25, 2009, and may be accessed by calling (303) 590-3030 and using the pass code 4079019#. 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, 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).
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 OTCQX and 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.
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
March 31, 2009 March 31, 2008
Net loss applicable to common
stockholders $(1,710) $(1,182)
Preferred stock dividend 243 246
Net loss (1,467) (936)
Plus:
Depreciation and amortization 1,129 1,187
Interest expense 698 1,993
Income tax benefit (1,110) (482)
EBITDA (750) 1,762
Other noncash expenses - 297
Adjusted EBITDA $(750) $2,059
United Fuel & Energy Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Three Months Ended
March 31, March 31,
2009 2008
Revenues
Sales $76,885 $207,007
Other 982 1,113
Total revenues 77,867 208,120
Cost of sales 68,649 192,636
Gross profit 9,218 15,484
Expenses
Operating 7,045 7,253
General and administrative 3,054 6,862
Depreciation, amortization and accretion 786 1,081
Total expenses 10,885 15,196
Operating income (loss) (1,667) 288
Other income (expense)
Interest expense (698) (1,993)
Amortization of debt issuance costs (343) (106)
Other income, net 131 393
Total other expense, net (910) (1,706)
Loss before income taxes (2,577) (1,418)
Income tax benefit (1,110) (482)
Net loss $(1,467) $(936)
Cumulative preferred stock dividend $243 $246
Net loss applicable to common
stockholders $(1,710) $(1,182)
Net loss available per common share
applicable to common stockholders:
Basic and diluted $(0.04) $(0.03)
Weighted average common shares outstanding:
Basic and diluted 40,541 40,232
United Fuel & Energy Corporation
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
March 31, December 31,
2009 2008
ASSETS (Unaudited)
CURRENT ASSETS
Cash $129 $3,762
Accounts receivable, net of allowance
for doubtful accounts 32,878 50,120
Other receivables 1,561 10,232
Inventories, net of allowance 8,392 8,941
Prepaid and other current assets 434 557
Deferred tax assets, net 2,486 1,382
Total current assets 45,880 74,994
PROPERTY, PLANT AND EQUIPMENT, net 31,122 31,945
OTHER ASSETS
Notes receivable 1,730 1,868
Cash value of life insurance 2,961 2,941
Goodwill 27,961 27,961
Debt issuance costs, net 691 1,034
Deferred tax assets, noncurrent, net 258 253
Other long-term assets 1,013 1,472
Total other assets 34,614 35,529
$111,616 $142,468
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable to related parties $18,027 $17,271
Accounts payable 13,144 17,217
Accrued and other current liabilities 7,149 8,481
Current maturities of long-term debt,
other 2,323 7,326
Accrued income taxes 140 140
Total current liabilities 40,783 50,435
OTHER LIABILITIES
Long-term debt, revolving line of credit 19,491 38,468
Long-term debt, other less current
maturities 3,296 3,878
Life insurance policy borrowings 2,955 2,935
Other liabilities 1,648 1,691
Total other liabilities 27,390 46,972
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock - -
Common stock 41 41
Paid-in capital 54,810 54,718
Retained deficit (11,408) (9,698)
Total stockholders' equity 43,443 45,061
$111,616 $142,468
United Fuel & Energy Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended
March 31, March 31,
2009 2008
Cash flows from operating activities:
Net loss $(1,467) $(936)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Depreciation, amortization and accretion 786 1,081
Amortization of debt issuance costs 343 106
Stock-based compensation expense 92 58
Deferred income taxes (1,109) 2,027
Bad debt expense (138) -
Loss on disposal of assets (5) -
Changes in operating assets and
liabilities, net of effects from
acquisitions:
Decrease (increase) in:
Accounts receivable 17,380 (7,268)
Other receivables 1,063 (3,852)
Inventories 549 438
Prepaid and other current assets 123 (211)
Other long-term assets 915 (16)
Increase (decrease) in:
Accounts payable (3,317) 303
Accrued income taxes - 826
Accrued expenses and other current
liabilities (1,332) 197
Other liabilities (48) -
Net cash provided by (used in)
operating activities 13,835 (7,247)
Cash flows from investing activities:
Increase (decrease) in cash surrender
value of life insurance (20) (21)
Proceeds from the sale of fixed assets 55 -
Proceeds from note receivable related
to sale of propane assets 7,801 -
Capital expenditures, net (519) (679)
Net cash provided by (used in)
investing activities 7,317 (700)
Cash flows from financing activities:
Net borrowings on revolving line
of credit (18,977) 9,288
Repayment of long-term debt (5,585) (1,145)
Life insurance policy borrowings 20 -
Preferred stock dividends paid (243) (246)
Proceeds from issuance of capital
stock, net of issuance costs - 313
Net cash provided by (used in)
financing activities (24,785) 8,210
Net increase (decrease) in cash (3,633) 263
Cash at beginning of period 3,762 4,096
Cash at end of period $129 $4,359
Cash paid during period for:
Interest $1,027 $1,633
Income taxes - 175
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
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 of DRG&E
IR Counsel
+1-713-529-6600
lelliott@drg-e.com
for United Fuel & Energy Corporation
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