Probex Reports Third Quarter Results
DALLAS--July 31, 2001--Probex Corp. (AMEX:PRB), an energy technology company specializing in environmental services, today reported revenues for the third fiscal quarter ended June 30, 2001, of approximately $3.6 million, compared with revenues of approximately $1 million for the same period a year earlier.The net loss for the third fiscal quarter was approximately $3.3 million, or 12 cents per basic and diluted share, compared with a net loss of approximately $1.3 million, or 6 cents per basic and diluted share in the year-ago quarter.
Revenues for the fiscal nine months ended June 30, 2001, were approximately $11.3 million, compared with revenues of approximately $1 million for the same period in 2000. The net loss for the fiscal nine months ended June 30, 2001 was approximately $13 million, or 49 cents per basic and diluted share, compared with a net loss of approximately $3.1 million, or 14 cents per basic and diluted share for the same period in the previous year.
Bruce A. Hall, Probex Senior Vice President and Chief Financial Officer, noted that the losses for the fiscal quarter and nine months ended June 30, 2001, primarily reflect a combination of expenses and non-cash interest charges related to 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 within the targeted range, cash flow generated by the Company's used oil collection system was below expectations for the third fiscal quarter. This was primarily due to lower than anticipated sales volumes resulting from a longer than normal winter and heavy rains in the Company's Ohio collection region, which delayed the start of the more profitable asphalt paving season. This market is improving as asphalt contractors, which consume large quantities of used oil as burner fuel, move into the height of the summer paving season. As expected, cash flow from the used oil collection system 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 burner fuel markets, will supply the feedstock for the Company's reprocessing facilities following the construction of the first plant in Wellsville, Ohio.
Charles M. Rampacek, Probex Chairman, President and Chief Executive Officer, noted "We have advanced significantly from the end of our second fiscal quarter along a number of parallel paths involving our engineering, procurement and construction (EPC) contract, our technical and market performance coverage, an independent engineering report, product off-take contracts and our project financing, all of which are being brought together to culminate with the start of engineering and construction of our Wellsville reprocessing plant.
"We have resolved all issues surrounding the EPC contract, which contains a fixed cost, a fixed construction schedule and operating performance commitments that meet the lender requirements. The final document is now being readied for execution," Rampacek continued. "In addition, an agreement is being finalized with an AAA rated international insurance company, which will guarantee to our lenders, through technology risk and market risk coverage, the performance of our Wellsville reprocessing plant to design specifications. We have also reviewed a positive draft report from a major independent engineering firm on our Wellsville project, which was commissioned by our financial advisor, Credit Suisse First Boston (CSFB), on behalf of prospective lenders. The report validates Probex's technology, market opportunity and operating and profitability assumptions. Additionally, Probex has received signed term sheets from a diversified number of manufacturers of blended lubricating oils to purchase at least 75% of the lube base oil products which will be produced by the Wellsville plant and is in the process of executing multi-year contracts with these manufacturers. These contracts should all be executed in the near future. In that regard," Rampacek added, "prices now being posted for lube base oils of the quality Probex expects to produce, which will be capable of being blended into the newly required GF-3 motor oils, are carrying a 5 cent to 7 cent premium over base oils currently being blended into GF-2 motor oils, and demand is firm.
"All of these activities had to be accomplished before we could complete our project financing," Rampacek noted, "but that job is now essentially complete. CSFB is now integrating the various reports and agreements into a financial package, which is being prepared to go out to potential investors in the near future, and CSFB and Probex are working to finalize project financing for Wellsville. We remain confident that we will obtain project financing for Wellsville; though we can not predict with certainty how long the process may take. We are doing everything we can to expedite events within our control, and we are encouraged that the difficult market conditions appear to be showing signs of improvement. We are also very encouraged by the number and quality of investors who have indicated strong interest in participating in our project financing. Both Probex and Bechtel are ready to start engineering and construction activities as soon as project financing is completed.
"In the near term," Rampacek added, "we have been successfully securing interim financing, which we believe will provide sufficient working capital to support our activities through the close of project financing. This interim financing is a continuing affirmation of the strength of our technology, our management team and our business plan.
"Finally," he said, "we have made significant progress with regard to our anticipated joint-venture agreement with a major multi-national European conglomerate, including specifying the terms of the agreement, arranging for technology risk insurance and preparing to begin process design. We hope to resolve the remaining issues and sign a definitive agreement in the near future. If successfully entered into, the agreement would also provide an opportunity 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 concluded, "We have achieved a number of important and necessary milestones in the past quarter which have cleared the way for the Wellsville project financing to proceed to closure. Financing issues relating to the EPC contract, the independent engineer's report, the technology and market coverage, and product off-take contracts have been successfully resolved. We have received further affirmation of the strength of our technology and our business model, not only from the independent engineer, but also from investors who are committed to providing additional interim financing. We expect to receive in the near future international validation of our technology and business model from our European joint venture. With these milestones accomplished, we are aggressively working to bring our project financing on our Wellsville plant to a close as rapidly as the market will allow. We appreciate the continued support of our shareholders as we work to become a world leader in the collection and reprocessing of used lubricating oils into premium quality base lube oils."
PROBEX CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended Nine Months Ended
June 30 June 30
2001 2000 2001 2000
-----------------------------------------------------
REVENUES $ 3,647,828 $ 1,033,008 $ 11,328,002 $ 1,033,008
COST OF SALES 1,709,157 497,774 4,768,186 497,774
-----------------------------------------------------
GROSS PROFIT 1,938,671 535,234 6,559,816 535,234
EXPENSES:
Operating 1,746,056 213,998 5,317,299 213,998
Research and
development 870,264 543,798 2,602,224 1,161,941
Selling, general
and
administrative 1,292,184 930,514 4,881,518 2,063,706
Depreciation and
amortization 274,662 126,180 868,261 235,354
-----------------------------------------------------
TOTAL EXPENSES 4,183,166 1,814,490 13,669,302 3,674,999
-----------------------------------------------------
OPERATING LOSS (2,244,495) (1,279,256) (7,109,486) (3,139,765)
Interest -- net (1,083,196) 3,364 (5,810,960) 43,751
Other -- net 2,912 -- 1,091 10,933
Equity in net
income in
affiliate 18,486 -- 18,486 --
Provision for
income tax (23,800) -- (36,800) --
-----------------------------------------------------
NET LOSS $(3,330,093) $ (1,275,892) $(12,937,669) $(3,085,081)
=====================================================
NET LOSS PER
SHARE $ (0.12) $ (0.06) $ (0.49) $ (0.14)
=====================================================
PROBEX CORP.
CONSOLIDATED BALANCE SHEETS
(unaudited)
June 30, September 30,
2001 2000
-----------------------------------
ASSETS
Cash and cash equivalents $ 836,799 $ 434,812
Accounts and notes receivable 2,123,255 1,737,173
Inventories 840,915 98,161
Prepaid and other current assets 255,315 115,848
-----------------------------------
Total current assets 4,056,284 2,385,994
Property, plant and
equipment -- net 14,231,410 6,382,595
Goodwill -- net 5,914,479 6,925,837
Patents -- net 310,978 148,106
Investments in affiliate --
at equity 712,933 --
Deferred financing costs -- net 3,104,628 --
Other assets 391,765 417,683
-----------------------------------
TOTAL ASSETS $ 28,722,477 $ 16,260,215
===================================
LIABILITIES
Accounts payable $ 4,331,595 $ 1,158,936
Accrued liabilities 4,238,624 1,959,954
Current maturities of capital
lease obligations 140,962 25,732
Short-term debt --
net of note discount 3,969,952 7,214,037
Current maturities of long-term
debt 268,747 300,000
-----------------------------------
Total current liabilities 12,949,880 10,658,659
Capital lease obligations,
long-term 98,492 43,491
Long-term debt 13,625,415 1,200,000
-----------------------------------
TOTAL LIABILITIES 26,673,787 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 Jun. 30, 2001
and at Sep. 30, 2000 535 4,634,412
Common Stock, $0.001 par value,
authorized 100,000,000 shares:
issued -- 29,198,908 at Jun. 30,
2001 and 25,531,137 at Sep. 30,
2000 29,199 12,705,748
subscribed -- None at Jun. 30, 2001
and at Sep. 30, 2000 -- --
Additional Paid In Capital 30,892,468 2,889,731
Deferred stock compensation expense (718,666) (1,233,153)
Accumulated Deficit (27,975,886) (14,638,046)
Less: Treasury Stock (common:
167,011 shares at Jun.30, 2001
and 62,690 shares at Sep.30, 2000)
at cost (178,960) (627)
-----------------------------------
TOTAL STOCKHOLDERS' EQUITY 2,048,690 4,358,065
-----------------------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 28,722,477 $ 16,260,215
===================================
PROBEX CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended June 30,
2001 2000
--------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(12,937,669) $(3,085,081)
Adjustments:
Depreciation and amortization 868,261 235,354
Provision for doubtful accounts 50,000 --
Income from investment in
affiliate (18,486) --
Stock option compensation 513,445 --
Gain on disposition of assets -- --
Stock issued for consulting
services 96,223 82,563
Stock issued for employee
compensation 1,042 71,626
Stock issued for interest expense 51,383 --
Interest expense related to 7%
convertible notes 3,125,000 --
Amortization of deferred financing
costs 1,784,477 --
Changes in operating assets and
liabilities: -- --
(Increase) decrease in accounts
and notes receivable (431,811) (488,059)
(Increase) decrease in
inventories (742,754) (54,486)
(Increase) decrease in prepaid
and other (139,467) (62,898)
(Increase) decrease in other
assets 25,918 47,882
Increase (decrease) in accounts
payable 851,822 504,907
Increase (decrease) in accrued
liabilities 638,910 829,557
--------------------------------------
NET CASH USED BY OPERATING
ACTIVITIES (6,263,706) (1,918,635)
CASH FLOWS USED BY INVESTING ACTIVITIES
Business acquisitions -- (1,600,000)
Investments in affiliates (1) --
Purchase of property, plant and
equipment (3,889,359) (2,510,072)
Purchase of Goodwill -- 41,248
Cost of patents (175,560) --
--------------------------------------
NET CASH USED BY INVESTING
ACTIVITIES (4,064,920) (4,068,824)
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
Principal payment on capital
lease obligation (181,620) --
Proceeds from short-term
borrowings 5,780,000 140,318
Principal payment on short-term
borrowings (7,200,000) (3,339)
Proceeds from long-term
borrowings 12,500,000 --
Principal payment on long-term
borrowings (129,923) --
Deferred financing costs (2,066,210) --
Proceeds from sale of preferred
stock -- 3,026,185
Proceeds from sale of common
stock 2,028,366 1,288,176
NET CASH PROVIDED BY FINANCING
ACTIVITIES 10,730,613 4,451,340
NET INCREASE IN CASH 401,987 (1,536,119)
CASH AT BEGINNING OF PERIOD 434,812 2,658,055
--------------------------------------
CASH AT END OF PERIOD $ 836,799 $ 1,121,936
======================================
CASH INTEREST PAID $ 244,740 $ 195,652
======================================