Probex Reports Q2 Results; Advances Toward Start of Plant Construction
DALLAS--May 3, 2001--Probex Corp. (AMEX:PRB), an energy technology company specializing in environmental services, today reported revenues for the second fiscal quarter ended March 31, 2001, of approximately $4.1 million, compared with no revenues for the same period a year earlier, when Probex was a development stage company.The net loss for the second fiscal quarter was approximately $3.3 million, or 12 cents per basic and diluted share, compared with a net loss of approximately $1 million, or 5 cents per basic and diluted share in the year-ago quarter.
Revenues for the fiscal six months ended March 31, 2001, were approximately $7.7 million, compared with no revenues for the same period in 2000, when Probex was a development stage company. The net loss for the fiscal six months was approximately $9.6 million, or 36 cents per basic and diluted share, compared with a net loss of approximately $1.8 million, or 9 cents per basic and diluted share for the previous year.
Bruce A. Hall, Probex Senior Vice President and Chief Financial Officer, noted that the losses for the fiscal quarter and six months ended March 31, 2001, primarily reflect a combination of expenses and non-cash interest charges related to accelerated business and financing activities which are required as the Company prepares to initiate construction of its first used oil reprocessing facility. Hall added that while revenues were largely on target, cash flow generated by its expanding used oil collection system was below expectations for the second fiscal quarter due to stronger than anticipated seasonality impacts during the period. This market is expected to improve significantly during the spring and summer. As expected, cash flow from the used oil collection network continued to be more than offset by ongoing research, engineering and development activities necessary to bring the Company's environmentally beneficial lube base oil technology to market. Used oil from the collection system, which is currently being sold into the burner fuel market, will supply the feedstock for Probex reprocessing facilities following the planned commercialization of the first plant in Wellsville, Ohio, in the second half of 2002.
Charles M. Rampacek, Probex Chairman, President and Chief Executive Officer, noted "We are continuing to advance along a number of parallel paths involving our engineering, procurement and construction (EPC) contract, our technical performance coverage and our project financing, all of which when brought together will culminate with the start up of construction of our Wellsville reprocessing facility."
With regard to the project financing, Rampacek added that a number of new opportunities have presented themselves, which could lower the cost of financing. "The due diligence required with these new opportunities, coupled with a much poorer and more careful investment climate in the first calendar quarter of this year, is drawing out the financing process longer than we anticipated," he said. "However, we continue to make progress and are working with a number of prestigious institutions to secure all of our financing commitments. We believe that we can close on our financing activities near the end of this quarter, but it could take slightly longer."
"We have completed the process design work with Bechtel Corp. for our Wellsville facility and cost estimates continue to be in line with our original projections," Rampacek noted. "We are currently working to cross integrate the terms of our technical performance coverage and our EPC contract. Once this integration is completed, we will be able to finalize our EPC and technical performance coverage agreements, which are necessary to secure our project financing. As previously reported, site clearing work has been conducted at Wellsville and we received our key Air Permit from the Ohio Environmental Protection Agency. We are ready to begin ordering equipment and start construction activities as soon as our project financing is completed. We anticipate that production will begin approximately 16-17 months after our financing is obtained," he said.
Probex has received signed term sheets from manufacturers of blended lubricating oils to purchase approximately 75% of the lube base oil products which will be produced by the Wellsville plant and final contracts have been sent to these customers for their execution. "The quality of the Company's ProLube(TM) base oil products is being recognized in the market, and sales pricing is meeting expectations. Overall, Probex's anticipation of a firm market for its GF-3 level base oils continues to be supported as industry supply tightens further with the announced closing of a major refinery which makes GF-3 base oils," Rampacek noted.
Probex has commitments to provide 100% of the used oil feedstock required for the Wellsville facility through a combination of Company-owned feedstock and supply contracts.
Additionally, the Company is continuing to actively pursue potential acquisitions in the regions where it plans to build its first three domestic plants.
Finally, Probex expects to complete a definitive joint-venture agreement with a major multi-national European conglomerate for the construction and operation of the Company's first used motor oil reprocessing facility in Europe. If successfully entered into, the agreement would also provide an alliance for future European facilities and represent a significant step forward in the profitable penetration of the major European market, where proper disposal of used motor oil is a significant issue.
Outlook
Rampacek added, "We made solid strides on the Wellsville project in the second fiscal quarter of 2001 -- obtaining permits, securing feedstock supply, advancing product off-take contracts, completing project design work and integrating our EPC contract and technical performance agreements in order to finalize our project financing. We also significantly advanced work on our European joint-venture and are actively pursuing additional acquisitions of used oil collection companies. We remain confident that we will obtain project financing for Wellsville in the near future and execute the joint venture agreement with the European conglomerate. We will also continue a targeted market expansion of our used oil collection business and anticipate advancing discussions toward the acquisition of additional collection companies."
PROBEX CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended Mar. 31 Six Months Ended Mar. 31
2001 2000 2001 2000
----------------------------------------------------
REVENUES $4,077,374 $ -- $ 7,680,174 $ --
COST OF SALES 2,008,174 -- 3,059,029 --
----------------------------------------------------
GROSS PROFIT 2,069,200 -- 4,621,145 --
EXPENSES:
Operating 1,739,361 -- 3,571,243 --
Research and
development 866,458 346,792 1,731,960 618,143
Selling, general
and
administrative 1,876,142 681,138 3,589,334 1,133,192
Depreciation and
amortization 304,279 54,419 593,599 109,174
----------------------------------------------------
TOTAL EXPENSES 4,786,240 1,082,349 9,486,136 1,860,509
----------------------------------------------------
OPERATING LOSS (2,717,040) (1,082,349) (4,864,991) (1,860,509)
Interest - net (586,877) 30,264 (4,727,764) 40,388
Other - net -- 10,933 (1,821) 10,933
Provision for
income tax (13,000) -- (13,000) --
----------------------------------------------------
NET LOSS $(3,316,917) $(1,041,152) $(9,607,576) $(1,809,188)
=====================================================
NET LOSS PER
SHARE $ (0.12) $ (0.05) $ (0.36) $ (0.09)
=====================================================
PROBEX CORP.
CONSOLIDATED BALANCE SHEETS
March 31, September 30,
2001 2000
(unaudited) (audited)
------------------------------
ASSETS
Cash and cash equivalents $ 825,462 $ 434,812
Accounts and notes receivable 2,117,200 1,737,173
Inventories 197,313 98,161
Prepaid and other 152,881 115,848
------------------------------
Total current assets 3,292,856 2,385,994
Property, plant and equipment - net 13,206,540 6,382,595
Goodwill - net 6,691,417 6,925,837
Patents - net 296,225 148,106
Deferred financing costs - net 2,691,948 --
Other assets 390,267 417,683
------------------------------
TOTAL ASSETS $ 26,569,253 $ 16,260,215
==============================
LIABILITIES
Accounts payable $ 749,183 $ 1,158,936
Accrued liabilities 4,680,129 1,959,954
Current maturities of capital lease
obligations 136,415 25,732
Short-term debt 2,627,089 7,214,037
Current maturities of long-tem debt 268,747 300,000
------------------------------
Total current liabilities 8,461,563 10,658,659
Capital lease obligations, long-term 135,937 43,491
Long-term debt 13,625,415 1,200,000
------------------------------
TOTAL LIABILITIES 22,222,915 11,902,150
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY
Series A 10% Cumulative Convertible
Preferred Stock, $0.001 par
value, authorized 10,000,000 shares:
issued - 535,000 at Mar. 31, 2001 and
at Sep. 30, 2000 535 4,634,412
Common Stock, $0.001 par value,
authorized 100,000,000 shares:
issued-28,398,559 at Mar. 31, 2001 and
25,531,137 at Sep. 30, 2000 28,398 12,705,748
subscribed-None at Mar. 31, 2001 and at
Sep. 30, 2000 -- --
Additional Paid In Capital 29,720,261 2,889,731
Deferred stock compensation expense (889,816) (1,233,153)
Accumulated Deficit (24,512,413) (14,638,046)
Less: Treasury Stock (common: 62,690
shares at Mar. 31, 2001
and at Sep. 30, 2000) at cost (627) (627)
------------------------------
TOTAL STOCKHOLDERS' EQUITY 4,346,338 4,358,065
------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 26,569,253 $ 16,260,215
==============================
PROBEX CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended March 31,
2001 2000
--------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(9,607,576) $(1,809,188)
Adjustments:
Depreciation and amortization 593,599 109,174
Stock option compensation 342,295 --
Stock issued for consulting services 58,953 7,563
Stock issued for employee
compensation 1,042 2,084
Interest expense related to 7%
convertible notes 3,176,383 --
Amortization of deferred financing
costs 1,052,681 --
Changes in operating assets and
liabilities:
(Increase) decrease in accounts
and notes receivable (380,027) (22,864)
(Increase) decrease in inventories (99,152) --
(Increase) decrease in prepaid and
other (37,033) (43,795)
(Increase) decrease in other assets 27,416 --
Increase (decrease) in accounts
payable (409,753) 143,076
Increase (decrease) in accrued
liabilities 492,066 --
--------------------------------
NET CASH USED BY OPERATING ACTIVITIES (4,789,106) (1,613,950)
CASH FLOWS USED BY INVESTING
ACTIVITIES
Purchase of property, plant and
equipment (4,651,349) (1,019,454)
Cost of patents (156,150) (80,466)
--------------------------------
NET CASH USED BY INVESTING ACTIVITIES (4,807,499) (1,099,920)
CASH FLOWS PROVIDED BY FINANCING
ACTIVITIES
Principal payment on capital lease
obligation (51,258) (5,281)
Proceeds from short-term borrowings 4,550,000 --
Principal payment on short-term
borrowings (7,247,865) --
Proceeds from long-term borrowings 12,500,000 --
Principal payment on long-term
borrowing (74,585) --
Deferred financing costs (1,521,128) --
Proceeds from sale of preferred stock -- 3,216,327
Proceeds from sale of common stock 1,832,091 1,288,176
--------------------------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 9,987,255 4,499,222
NET DECREASE IN CASH 390,650 1,785,352
CASH AT BEGINNING OF YEAR 434,812 2,658,055
--------------------------------
CASH AT END OF YEAR $ 825,462 $4,443,407
================================
INTEREST PAID $ 237,054 $ 916
================================