Probex Reports Second Quarter/First Half Fiscal 2002 Results; Reaches Significant Milestones Towards Wellsville Construction
DALLAS--April 30, 2002--Probex Corp. (AMEX:PRB), an energy technology company, today reported revenues for the second fiscal quarter ended March 31, 2002, of approximately $2.5 million, compared with revenues of approximately $4.1 million for the same period a year earlier.The net loss for the second fiscal quarter was approximately $3.4 million, or 10 cents per basic and diluted share, compared with a net loss of approximately $3.3 million, or 12 cents per basic and diluted share, in the year-ago quarter.
Revenues for the fiscal six months ended March 31, 2002, were approximately $5.9 million, compared with $7.7 million for the same period in 2001. The net loss for the fiscal six months was approximately $7.8 million, or 24 cents per basic and diluted share, compared with a net loss of approximately $9.6 million, or 35 cents per basic and diluted share for the same period in the previous year.
Probex Chairman, President and Chief Executive Officer, Charles M. Rampacek, said: "The losses for the fiscal quarter and six months ended March 31, 2002, primarily reflect a combination of expenses and non-cash interest charges related to business and financing activities which are required as we commercialize our proprietary ProTerra(R) reprocessing technology." Rampacek added that: "Both revenues and cash flow generated by the Company's collection system were below expectations for the second quarter and first half. This was primarily due to intense competition and falling crude oil prices, which resulted in spent lubricant sales prices decreasing more rapidly than feedstock costs. Both the collections and burner fuel markets are now improving with increasing crude oil prices and the initiation of the asphalt paving season in the north and northeast."
He also noted: "We recognize that while we can't control the markets, it is imperative that we do everything we can to ensure we reduce our costs to the lowest levels necessary to properly run our business and commercialize our technology. We have put considerable effort over the past 15 months into analyzing every aspect of our operations from a cost standpoint. As a result, we have reduced our work force by approximately 40% and expect our 2002 general and administrative costs to be approximately 30% less than in 2001. We are continuing to make progress in further reducing our overhead expenses as we move forward."
However, Rampacek emphasized that: "Despite the difficult operating climate, this past quarter has been one of the most positive for the Company to date as we achieved two major milestones toward construction of our planned Wellsville facility. As reported, we executed a fixed-price, fixed-schedule engineering, procurement and construction (EPC) contract with the international engineering firm Petrofac. Because Petrofac specializes in modular construction, we anticipate that we will be able to realize significant cost and time savings over earlier estimates. As a result, the engineering and construction costs for our planned Wellsville facility will be approximately $67 million, and the actual construction period, including mechanical performance testing, will be 19 months. This lower contracted plant cost will allow us to reduce the estimated size of our project financing by approximately 15% from previous estimates. We now anticipate seeking to raise approximately $120 million through a combination of 70% debt and 30% equity, compared with previous estimates of over $140 million. Of the $120 million, approximately $100 million, including owners contingency costs, insurance and financing costs, will be used for the Wellsville facility, compared with $125 million previously estimated. The remainder will be used for general corporate purposes and to provide sufficient working capital until operational start-up of Wellsville," he said.
"In addition," Rampacek continued: "We also reported an agreement with Swiss Re Financial Products Corporation (SRFP), an affiliate of Swiss Reinsurance Company, to provide a technology and market risk facility (Risk Facility) for our planned Wellsville project. The Risk Facility, which is being fully coordinated with the EPC agreement, is designed to protect the senior lenders from certain deficiencies attributable to the technology process or from adverse market conditions. Finally, we expect the major independent engineering firm R. W. Beck, Inc., will release in early May its final engineering report on the Wellsville project. The report, which was commissioned by Credit Suisse First Boston (CSFB) on behalf of the project's potential senior lenders, will validate our technology, market opportunity and operating and profitability assumptions for the Wellsville facility," he said.
Rampacek added: "This extensive engineering report, coupled with the recent EPC and technology and market risk facility agreements, will provide CSFB, our financial advisor, the agreements and report that it needs to complete the financing package for distribution to potential project finance investors. The agreements and report should also provide further evidence to potential interim financing investors of the quality of our ProTerra(R) technology and the soundness of our business plan. While we cannot guarantee any specific timeframe, or that the necessary interim and project financing will be available to us in a timely manner or on terms acceptable to us, we are very encouraged. Looking at our path forward," Rampacek continued: "We anticipate that CSFB will launch the formal project financing process in the near future and are hopeful that project financing can be completed in the second half of this year. Plant construction activities will get under way as soon as we have our project financing in place."
Other Activities
In other activities, Nora Blum, a vice president with Bechtel Enterprises, Inc., (BEn) has resigned her position as an Advisory Director on the Company's Board. Ms. Blum has responsibility for development and financing of various projects for BEn's affiliate United Infrastructure Company, LLC.
Conference Call
Probex will conduct a conference call with securities analysts and any other interested persons to discuss these results and other Company activities today, April 30, at 9:30 A.M. CDST. Those who wish to participate in the call may telephone toll free in the U.S. 888/730-9138 or 712/257-3320 for international callers approximately 10 minutes before the 9:30 A.M. starting time (PASS CODE: Les Van Dyke, 20527). A replay will be available by telephone for 90 days commencing one hour after completion of the call at 888/562-6204 toll free in the United States or 402/280-9992 for international callers. The call will be web cast live by CCBN and can be accessed at PRB's web site at www.probex.com. A replay of the web cast will also be posted on the Company's web site for 90 days following the call at www.probex.com.
About Probex
Probex is a Dallas-based energy technology company that specializes in the production of high quality lubricating base oils and associated products from collected spent lubricating oils. The Company's patented, environmentally beneficial ProTerra(R) technology has demonstrated unparalleled advantages in the highly economic creation of premium quality base oils capable of meeting new motor oil standards without creation of waste by-products. The goal of Probex is to become a world leader in the production of premium quality lubricating base oils and associated products from collected spent lubricants through timely commercialization of its ProTerra technology. For more information about Probex, visit the company's web site at: www.probex.com.
This press release does not constitute an offer to sell or solicitation of an offer to purchase our securities. Any offer of securities made by us or any other person on our behalf may be made only pursuant to materials and other offering documents prepared by us and delivered to qualified purchasers expressly for use in connection with such placements, and any such offer shall be made in compliance with, or pursuant to an exemption from, Section 5 of the Securities Act of 1933. The securities offered by the company will not be registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an exemption from registration requirements.
Certain statements contained herein may be considered "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. These statements are based upon the belief of the Company's management, as well as assumptions made beyond information currently available to the Company's management, and may be, but not necessarily are, identified by such words as expect, plan, anticipate, target, and goal. Because such "forward-looking statements" are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from the Company's expectations include financial performance; conditions in the lubricating oil industry; the Company's ability to obtain financing for working capital and its anticipated acquisitions and plant development; failure to successfully or timely execute or conclude contracts, agreements and reports; market acceptance of the Company's products and technologies; changes in local, national or global economic conditions, and similar variables. Also refer to the cautionary statements contained in the most recent Forms 10-KSB and 10-QSB which may be obtained under "Investor Relations-SEC Filings" on the Company's web site or by writing or calling the Company at One Galleria Tower, 13355 Noel Rd., Suite 1200, Dallas, TX 75240; 972/788-4772.
PROBEX CORP.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended
March 31
2002 2001
--------------------------------------
REVENUES $ 2,452,630 $ 4,077,374
COST OF SALES 1,759,137 2,635,940
--------------------------------------
GROSS PROFIT 693,493 1,441,434
EXPENSES:
Operating 1,760,111 1,111,595
Research and development 330,428 866,458
Selling, general and
administrative 948,281 1,876,142
Depreciation and
amortization 249,756 304,279
--------------------------------------
TOTAL EXPENSES 3,288,576 4,158,474
--------------------------------------
OPERATING LOSS (2,595,083) (2,717,040)
Interest - net (824,161) (586,877)
Other - net (1,876) --
Equity in net income
in affiliate (24,124) --
--------------------------------------
NET LOSS BEFORE INCOME TAX (3,445,244) (3,303,917)
Provision for federal
income tax -- (13,000)
--------------------------------------
NET LOSS $ (3,445,244) $ (3,316,917)
======================================
NET LOSS PER SHARE $ (0.10) $ (0.12)
======================================
Six Months Ended
March 31
2002 2001
--------------------------------------
REVENUES $ 5,883,538 $ 7,680,174
COST OF SALES 3,911,936 4,179,938
--------------------------------------
GROSS PROFIT 1,971,602 3,500,236
EXPENSES:
Operating 3,318,405 2,450,334
Research and development 796,570 1,731,960
Selling, general and
administrative 2,274,022 3,589,334
Depreciation and
amortization 477,710 593,599
--------------------------------------
TOTAL EXPENSES 6,866,707 8,365,227
--------------------------------------
OPERATING LOSS (4,895,105) (4,864,991)
Interest - net (2,841,847) (4,727,764)
Other - net (230) (1,821)
Equity in net income
in affiliate (48,430) --
--------------------------------------
NET LOSS BEFORE INCOME TAX (7,785,612) (9,594,576)
Provision for federal
income tax -- (13,000)
--------------------------------------
NET LOSS $ (7,785,612) $ (9,607,576)
======================================
NET LOSS PER SHARE $ (0.24) $ (0.35)
======================================
PROBEX CORP.
CONSOLIDATED CONDENSED BALANCE SHEETS
(unaudited)
March 31, September 30,
2002 2001
ASSETS
Cash and cash equivalents $ 515,885 $ 586,173
Accounts and notes receivable 1,453,162 2,714,505
Inventories 511,506 614,374
Prepaid and other current assets 471,269 370,249
-------------------------------------
Total current assets 2,951,822 4,285,301
Property, plant and
equipment - net 15,247,473 15,317,481
Goodwill - net 5,808,841 5,808,841
Patents - net 388,702 419,861
Investments in affiliate -
at equity 671,274 719,704
Deferred debt offering
costs - net 1,420,294 1,677,099
Deferred offering costs 5,793,177 3,215,524
Other assets 366,330 357,930
-------------------------------------
TOTAL ASSETS $ 32,647,913 $ 31,801,741
=====================================
LIABILITIES
Accounts payable $ 1,237,506 $ 1,048,024
Accrued liabilities 3,189,512 2,443,055
Deferred plant design costs 8,456,397 6,454,197
Current maturities of capital
lease obligations 161,095 186,531
Short-term debt - net of
note discount 9,349,579 7,370,264
Current maturities of
long-term debt 283,223 279,496
Deferred Revenue 497,000 --
-------------------------------------
Total current liabilities 23,174,312 17,781,567
Capital lease obligations,
long-term 132,181 158,727
Long-term debt 13,433,531 13,482,927
-------------------------------------
TOTAL LIABILITIES 36,740,024 31,423,221
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY
Preferred Stock, $0.001 par
value, 10,000,000 authorized:
Series A 10% Cumulative
Convertible Preferred Stock,
authorized 550,000 shares:
issued - 532,500 at
Mar. 31, 2002 and at
Sep. 30, 2001 533 533
subscribed - None at
Mar. 31, 2001 and at
Sep. 30, 2001 -- --
Common Stock, $0.001 par value,
authorized 100,000,000 shares:
issued-35,110,071 at
Mar. 31, 2002 and 30,680,685
at Sep. 30, 2001 35,111 30,681
subscribed-None at
Mar. 31, 2002 and at
Sep. 30, 2001 -- --
Additional Paid In Capital 36,148,423 32,722,140
Deferred stock compensation
expense (313,326) (547,516)
Accumulated Deficit (39,698,445) (31,648,358)
Less: Treasury Stock
(common: 265,381 shares at
Mar. 31, 2002 and 167,011
shares at Sep. 30, 2001)
at cost (264,407) (178,960)
-------------------------------------
TOTAL STOCKHOLDERS' EQUITY (4,092,111) 378,520
-------------------------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 32,647,913 $ 31,801,741
=====================================
PROBEX CORP.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended March 31,
2002 2001
---------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (7,785,612) $ (9,607,576)
Adjustments:
Depreciation and amortization 477,710 593,599
Provision for doubtful accounts 209,199
Income from investment in affiliate 48,430
Stock option compensation 169,345 342,295
Gain on disposition of assets --
Stock issued for consulting services 90,082 58,953
Stock issued for employee compensation -- 1,042
Stock issued for interest expense 757,956
Interest expense related to 7%
convertible notes -- 3,176,383
Amortization of discount on notes 1,096,363
Amortization of deferred
financing costs 268,805 1,052,681
Changes in operating assets
and liabilities:
(Increase) decrease in accounts
and notes receivable 1,052,144 (380,027)
(Increase) decrease in inventories 102,868 (99,152)
(Increase) decrease in prepaid
and other (101,020) (37,033)
(Increase) decrease in other assets (8,400) 27,416
Increase (decrease) in
accounts payable 189,482 (409,753)
Increase (decrease) in accrued
liabilities 1,219,915 492,066
Increase (decrease) in deferred
revenue 497,000 --
---------------------------------
NET CASH USED BY OPERATING
ACTIVITIES (1,715,733) (4,789,106)
CASH FLOWS USED BY INVESTING
ACTIVITIES
Purchase of property, plant and
equipment (341,339) (4,651,349)
Cost of patents -- (156,150)
---------------------------------
NET CASH USED BY INVESTING
ACTIVITIES (341,339) (4,807,499)
CASH FLOWS PROVIDED BY
FINANCING ACTIVITIES
Principal payment on capital
lease obligation (94,285) (51,258)
Proceeds from short-term borrowings 1,500,000 4,550,000
Principal payment on short-term
borrowings (3,591) (7,247,865)
Proceeds from long-term borrowings -- 12,500,000
Principal payment on long-term
borrowings (45,669) (74,585)
Deferred financing costs (628,498) (1,521,128)
Proceeds from sale of common stock 1,258,827 1,832,091
---------------------------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 1,986,784 9,987,255
NET INCREASE IN CASH (70,288) 390,650
CASH AT BEGINNING OF PERIOD 586,173 434,812
---------------------------------
CASH AT END OF PERIOD $ 515,885 $ 825,462
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