UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JULY 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(D) OR THE SECURITIES EXCHANGE
ACT OF 1934
Commission File Number 000-21825
STREICHER MOBILE FUELING, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 65-0707824
(State of Incorporation) (IRS Employer Identification Number)
2720 NW 55TH COURT, FORT LAUDERDALE, FLORIDA, 33309
(Address of principal executive offices) (Zip Code)
(954) 739-3880
(Issuer's telephone number, including area code)
Check whether the issuer filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required requirements for the past 90
days. Yes X ___ No ___ ___.
As of July 31, 1998, 2,575,000 shares of the issuer's common stock were
outstanding.
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<CAPTION>
STREICHER MOBILE FUELING, INC.
FORM 10-Q
INDEX
FORM 10-Q PART AND ITEM NO.
<S> <C> <C> <C>
Part I-Financial Information
Item 1. Unaudited Financial Statements
Consolidated Balance Sheets as of
July 31, 1998 and January 31, 1998.........................3
Consolidated Statements of Operations for the three
and six months ended July 31, 1998 and 1997................5
Consolidated Statements of Cash Flows for the six
months ended July 31, 1998 and 1997........................6
Notes to Financial Statements..............................7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................8
Part II - Other Information
Items 1 - 6.................................................................12
Signatures..................................................................13
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2
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<CAPTION>
STREICHER MOBILE FUELING, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
JULY 31 JANUARY 31
ASSETS 1998 1998
------ ----------- -----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 331,874 $ 1,411,134
Investments -- 69,227
Accounts receivable, net of allowance for doubtful
accounts of $169,000 and $148,000 respectively 5,016,983 5,065,437
Inventories 75,374 133,924
Prepaid expenses and other current assets 367,858 351,531
----------- -----------
Total current assets 5,792,089 7,031,253
Property and Equipment:
Land 88,048 59,996
Leasehold improvements 176,398 152,664
Fuel trucks and automobiles 8,825,968 6,305,637
Machinery and equipment 883,407 799,858
Furniture and fixtures 66,933 66,139
Construction in process 169,946 173,797
----------- -----------
10,210,700 7,558,091
Less accumulated depreciation and amortization (1,721,852) (1,357,368)
----------- -----------
8,488,848 6,200,723
Deferred income tax assets 259,392 254,848
Note receivable from related party 418,602 451,806
Other assets 44,940 56,910
----------- -----------
Total assets $15,003,871 $13,995,540
=========== ===========
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3
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STREICHER MOBILE FUELING, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(CONTINUED)
JULY 31 JANUARY 31
LIABILITIES AND SHAREHOLDERS' EQUITY 1998 1998
- ------------------------------------ -------------- ------------
<S> <C> <C>
Current Liabilities:
Bank line of credit payable $3,596,325 $ --
Current portion of long-term debt 1,156,106 790,101
Accounts payable 1,603,666 2,313,581
Accrued expenses 420,857 415,664
Customer deposits 119,895 119,895
---------- -----------
Total current liabilities 6,896,849 3,639,241
Long-term Liabilities:
Bank line of credit payable -- 3,269,713
Long-term debt, excluding current portion 3,969,289 2,645,336
---------- -----------
Total liabilities 10,866,138 9,554,290
---------- -----------
Shareholders' Equity:
Preferred stock, $.01 par value, 1,000,000 shares
authorized, none issued and outstanding -- --
Common stock, $.01 par value, 20,000,000 shares
authorized, 2,575,000 shares issued and outstanding 25,750 25,750
Additional paid-in capital 5,195,758 5,195,758
Accumulated deficit (1,083,775) (780,258)
---------- -----------
Total shareholders' equity 4,137,733 4,441,250
---------- -----------
Total liabilities and shareholders' equity $15,003,871 $13,995,540
=========== ===========
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4
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<TABLE>
<CAPTION>
STREICHER MOBILE FUELING, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTH PERIODS ENDED JULY 31, 1998 AND 1997
THREE MONTH PERIODS SIX MONTH PERIODS
ENDED JULY 31, ENDED JULY 31,
------------------------------------ ----------------------------------
1998 1997 1998 1997
---------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Fuel sales revenues $4,697,844 $ 4,592,226 $9,739,365 $ 9,514,832
Mobile fueling service revenues 2,408,145 1,965,163 4,704,993 3,927,806
Fuel taxes 3,936,956 3,199,484 7,876,751 6,303,312
---------- ----------- ---------- ------------
Total revenues 11,042,945 9,756,873 22,321,109 19,745,950
Cost of fuel sales 4,322,329 4,405,259 8,879,625 9,164,973
Cost of mobile fueling service sales 1,833,714 1,368,783 3,753,333 2,967,640
Fuel taxes 3,936,956 3,199,484 7,876,751 6,303,312
---------- ----------- ---------- ------------
Total cost of sales 10,092,999 8,973,526 20,509,709 18,435,925
Gross profit 949,946 783,347 1,811,400 1,310,025
Operating expenses 962,775 870,817 1,803,538 1,668,000
----------- ---------- ----------- -----------
Operating income (loss) (12,829) (87,470) 7,862 (357,975)
Interest expense (197,731) (103,829) (357,159) (190,152)
Interest and other income 20,249 43,079 45,780 79,112
---------- ----------- ---------- ------------
Loss before benefit
for income taxes (190,311) (148,220) (303,517) (469,015)
Income tax benefit -- 46,000 -- 158,000
---------- ----------- ---------- ------------
Net loss $ (190,311) $ (102,220) $ (303,517) $ (311,015)
=========== ============ ============ =============
Basic loss per share $ ( 0.07) $ ( 0 .04) $ ( 0 .12) $ ( 0 .12)
=========== ============ ============ =============
Basic and diluted weighted average
common shares outstanding 2,575,000 2,575,000 2,575,000 2,575,000
=========== ============ ============ =============
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5
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<TABLE>
<CAPTION>
STREICHER MOBILE FUELING, INC, AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIODS ENDED JULY 31, 1998 AND 1997
1998 1997
------------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (303,517) $ (311,015)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 364,484 218,714
Deferred income tax benefit -- (158,000)
Provision for doubtful accounts 35,000 18,000
Changes in operating assets and liabilities:
Accounts receivable 13,454 237,114
Inventories 58,550 (1,991)
Prepaid expenses and other current assets (16,327) 58,428
Deferred income tax asset (4,544) --
Other assets 11,971 (124,486)
Accounts payable and accrued expenses (704,723) (696,256)
Customer deposits -- (9,500)
-------------- ----------
Net cash used in operating activities (545,652) (768,992)
-------------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of investment 69,227 --
Purchase of investment -- (1,571)
Purchases of property and equipment (2,652,609) (1,460,933)
Note receivable due from related party 33,204 9,478
-------------- ----------
Net cash used in investing activities (2,550,178) (1,453,026)
-------------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under line of credit 326,612 1,083,431
Borrowings under long-term debt 2,172,940 542,846
Principal payments on long-term debt (482,982) (340,784)
-------------- ----------
Net cash provided by financing activities 2,016,570 1,285,493
------------- ----------
NET DECREASE IN CASH AND CASH
EQUIVALENTS (1,079,260) (936,525)
CASH AND CASH EQUIVALENTS, beginning of period 1,411,134 2,848,000
------------- ----------
CASH AND CASH EQUIVALENTS, end of period $ 331,874 $1,911,475
============= ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for-
Interest $ 318,587 $ 150,656
============= ==========
Income taxes $ 4,544 $ --
============= ==========
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6
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STREICHER MOBILE FUELING, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) NATURE OF OPERATIONS
The Company delivers mechanized mobile fleet fueling and electronic
fuel management primarily to customers that operate large fleets of vehicles
(such as governmental agencies, utilities, major trucking lines, hauling and
delivery services, and national courier services). At July 31, 1998, the Company
had operations in Florida, Georgia, Tennessee, California, Louisiania and Texas.
(2) BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Streicher
Mobile Fueling, Inc. and its wholly owned subsidiaries, Streicher West, Inc.,
Streicher Realty, Inc. and Mobile Computer Systems, Inc. All significant
intercompany balances and transactions have been eliminated in consolidation.
The unaudited consolidated financial statements included herein have been
prepared in accordance with the instructions to Form 10-Q and do not include all
the information and footnotes required by generally accepted accounting
principles; however, they do include all adjustments of a normal recurring
nature which, in the opinion of management, are necessary to present fairly the
results of operations of the Company for the interim periods presented. Certain
amounts have been reclassified to conform with current quarter presentation.
These interim financial statements should be read in conjunction with the
Company's audited financial statements and related notes for the year ended
January 31, 1998 included in the Company's Annual Report on Form 10-K for the
year ended January 31, 1998. The results of operations for the interim periods
presented are not necessarily indicative of the results to be expected for the
entire year.
(3) COMMITMENTS AND CONTINGENCIES
At July 31, 1998, the Company had purchase commitments, excercisable over
the next seven months, for 11 custom fuel delivery vehicles costing
approximately $960,000.
7
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Form 10-Q contains "forward-looking statements" which involve risks
and uncertainties. The Company's actual results could differ materially from
those in the forward-looking statements as a result of certain factors,
including those set forth under the caption "Certain Factors Affecting Future
Operating Results" in Item 7 of the Company's Annual Report in Form 10-K for the
fiscal year ended January 31, 1998. The following Management's Discussion and
Analysis of Financial Condition and Results of Operations should be read in
conjunction with the Company's financial statements and notes thereto included
elsewhere in this Form 10-Q and the above described factors set forth in the
Company's Form 10-K.
GENERAL
The Company derives all of its revenue from providing mobile fueling
services. Revenue is comprised principally of sales of gasoline and diesel fuel
and related service charges. Cost of sales is comprised principally of the cost
of fuel and delivery costs (primarily payroll and equipment costs). Included in
both revenue and cost of sales are Federal and state fuel taxes, which are
generally paid by the Company when it pays for its fuel and are billed by the
Company to its customers upon billing for the related fuel and service charges.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JULY 31, 1998 COMPARED TO THREE MONTHS ENDED JULY 31,
1997
REVENUES
Revenues for the three months ended July 31, 1998 increased 12.2% to
$11.0 million, compared to $9.8 million for the same quarter a year ago. This
increase was due primarily to an increase in volume of fuel delivered, offset by
decreases in the average wholesale price per gallon of gasoline and diesel fuel.
For the three months ended July 31, 1998, the Company delivered 9.7 million
gallons of fuel compared to 7.4 million gallons for the same quarter of the
prior year, an increase of 31.1%. The increase in volume was attributable to an
increase in services to existing customers, acquisition of new customers in
existing locations and the introduction of mobile fueling operations into
additional metropolitan areas. The Company's revenue levels will fluctuate based
on the cost of fuel in a given period. The Company's sales price to its
customers is adjusted upward or downward for increases or decreases in fuel
costs each week. Significant changes in revenue levels between periods are
possible even if the volume of fuel delivered remains relatively stable.
GROSS PROFIT
Gross profit for the three months ended July 31, 1998 increased 21.3%, to
$950,000, compared to $783,000 for the same quarter a year ago. This increase is
primarily due to the higher volume of fuel delivered. The gross profit per
gallon on fuel sold in the three months ended July 31, 1998 was 3.9 cents
compared to a gross profit per gallon of 2.5 cents for the same period a year
ago. This improvement was due to greater efficiency in the purchasing of fuel,
modest increases in the fuel price markup and certain changes in the mix of
customers. The Company achieved a gross profit on mobile refueling operations of
23.9% in the three months ended July 31, 1998 compared to a gross profit on
mobile refueling operations of 30.3% for the same period a year ago. This
decline was due primarily to costs associated with the Company's continued
expansion, primarily increases in payroll and equipment ownership costs.
OPERATING EXPENSES
Operating expenses for the three months ended July 31, 1998 increased 10.6%,
to $963,000, compared to $871,000 for the same quarter a year ago. This increase
is primarily attributable to increases in payroll and related administrative
costs associated with additional personnel and facilities to support the
Company's expansion, increases in insurance costs and additional marketing
related costs, offset by decreases in financial consulting fees and debt
guarantee fees.
8
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INTEREST EXPENSE
Interest expense for the three months ended July 31, 1998 increased 90.4%,
to $198,000, compared to $104,000 for the same quarter a year ago. This increase
is a result of increases in the Company's outstanding borrowings due to the
purchase of additional equipment to support its expansion.
INTEREST INCOME
Interest income for the three months ended July 31, 1998 decreased to
$20,000, compared to $43,000 for the same quarter a year ago. This decrease is
primarily due to decreases in cash equivalents held by the Company. The invested
funds represent the remaining portion of the net proceeds of the Company's
initial public offering in December 1996.
INCOME TAXES
The Company recognized no income tax benefit or expense for the three months
ended July 31, 1998, compared to a benefit of $46,000, representing an effective
tax benefit rate of 31.0%, for the same quarter a year ago. The elimination of
the tax benefit in the current quarter resulted from the Company's fully
reserving any potential income tax benefit.
NET LOSS
Net loss for the three months ended July 31, 1998 was $190,000 or $.07 per
share, compared to a net loss of $102,000 or $.04 per share for the three months
ended July 31, 1997. The increase in net loss incurred is due to the combination
of factors discussed above.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JULY 31, 1998 COMPARED TO SIX MONTHS ENDED JULY 31, 1997
REVENUES
Revenues for the six months ended July 31, 1998 increased 13.2% to $22.3
million, compared to $19.7 million for the same period a year ago. This increase
was due primarily to an increase in volume of fuel delivered, offset by
decreases in the average wholesale price per gallon of gasoline and diesel fuel.
For the six months ended July 31, 1998, the Company delivered 19.2 million
gallons of fuel compared to 14.7 million gallons for the same period of the
prior year, an increase of 30.6%. The increase in volume was attributable to an
increase in services to existing customers, acquisition of new customers in
existing locations and the introduction of mobile fueling operations into
additional metropolitan areas. The Company's revenue levels will fluctuate based
on the cost of fuel in a given period. The Company's sales price to its
customers is adjusted upward or downward for increases or decreases in fuel
costs each week. Significant changes in revenue levels between periods are
possible even if the volume of fuel delivered remains relatively stable.
GROSS PROFIT
Gross profit for the six months ended July 31, 1998 increased 38.2%, to $1.8
million, compared to $1.3 million for the same period a year ago. This increase
is primarily due to the higher volume of fuel delivered. The gross profit per
gallon on fuel sold in the six months ended July 31, 1998 was 4.5 cents compared
to a gross profit per gallon of 2.4 cents for the same period a year ago. This
improvement was due to greater efficiency in the purchasing of fuel, modest
increases in the fuel price markup and certain changes in the mix of customers.
The Company achieved a gross profit on mobile refueling operations of 20.2% in
the six months ended July 31, 1998 compared to a gross profit on mobile
refueling operations of 24.4% for the same period a year ago. This decline was
due primarily to costs associated with the Company's continued expansion,
primarily increases in payroll and equipment ownership costs.
9
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OPERATING EXPENSES
Operating expenses for the six months ended July 31, 1998 increased 7.8%, to
$1.8 million, compared to $1.7 million for the same period a year ago. This
increase is primarily attributable to increases in payroll and related
administrative costs associated with additional personnel and facilities to
support the Company's expansion, increases in insurance costs, increases in
marketing expenses and other costs, offset by decreases in financial consulting
fees and debt guarantee fees.
INTEREST EXPENSE
Interest expense for the six months ended July 31, 1998 increased 87.9%, to
$357,000, compared to $190,000 for the same period a year ago. This increase is
a result of increases in the Company's outstanding borrowings due to the
purchase of additional equipment to support its expansion.
INTEREST INCOME
Interest income for the six months ended July 31, 1998 decreased to $46,000,
compared to $79,000 for the same period a year ago. This decrease is primarily
due to decreases in cash equivalents held by the Company. The invested funds
represent the remaining portion of the net proceeds of the Company's initial
public offering in December 1996.
INCOME TAXES
The Company recognized no income tax benefit or expense for the six months
ended July 31, 1998, compared to a benefit of $158,000, representing an
effective tax benefit rate of 33.7%, for the same period a year ago. The
elimination of the tax benefit in the current quarter resulted from the
Company's fully reserving any potential income tax benefit.
NET LOSS
Net loss for the six months ended July 31, 1998 was $304,000 or $.12 per
share, compared to a net loss of $311,000 or $.12 per share for the same period
a year ago. The decrease in loss incurred is due to the combination of factors
discussed above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's business requires it to expend considerable amounts of funds
for fuel, labor and equipment costs before any payments are received from the
Company's customers. The fuel purchased by the Company for resale to its
customers must generally be paid for within 10 to 15 days of purchase, labor
costs and related taxes are funded bi-weekly and equipment related costs are
generally satisfied within 30 days. The Company bills its customers weekly and
generally collects its accounts within 35 to 40 days. Days sales outstanding at
July 31, 1998 totaled 39 days as compared to 38 days sales outstanding at
January 31, 1998.
Continued revenue growth for the Company is dependent on its ability to
obtain necessary working capital from bank borrowings, equity transactions and
retained earnings in order to fund increases in accounts receivable and provide
the funds necessary to acquire additional custom fuel delivery trucks. To date,
the Company has relied on bank borrowings and sales of equity securities to
finance its growth. At July 31, 1998, the Company had $1.4 million of
availability under its $5.0 million line of credit and $332,000 of cash and cash
equivalents. The Company intends to seek the additional working capital it needs
to finance its growth by a combination of vendor financing, continued expansion
of its existing credit facility, and the use of its cash and cash equivalents on
hand. While the Company believes it can successfully obtain additional vendor
and bank financing to finance its growth, there is no assurance that any such
financing can be obtained or will be obtained on terms acceptable to the
Company. To the
10
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extent that the Company does not obtain additional financing, it will be forced
to curtail its expansion plans. The Company anticipates, based on its current
revenue levels, that its existing cash and cash equivalents as well as existing
lines of credit will be adequate to meet its needs for working capital and
capital expenditures for at least the next twelve months.
The Company has outstanding borrowings of $ 3.6 million as of July 31, 1998
under its $5.0 million line of credit. This line permits the Company to borrow
up to 85% of the total amount of eligible accounts receivable. Interest is
payable monthly at .75% over the prime rate (8.5% as of July 31, 1998). The line
of credit matures on October 31, 1999 and is secured by substantially all of the
Company's assets. The credit agreement contains customary covenants such as the
maintenance of certain financial ratios and minimum net worth and working
capital requirements. As of July 31, 1998, the Company was not in compliance
with the minimum net worth and working capital requirements. The Company has
requested waivers of these violations from the lender. Although there is no
assurance, the Company believes it will obtain waivers of these violations
from the lender.
Custom fuel trucks are ordered in advance of need and require a minimal down
payment with the balance due upon delivery. It is expected that this balance
will be funded through a combination of available cash and financing. In the
past, the Company has financed approximately 85% to 95% of the purchase price of
fuel trucks. The Company is unable to estimate the amount of cash required for
the acquisition of fuel trucks as such amount is dependent upon the terms and
conditions of financing available, if any, to the Company at the time of
delivery. At July 31, 1998, the Company had purchase commitments, to be executed
over the next seven months, for 11 custom fuel delivery vehicles costing
approximately $960,000.
A significant portion of the Company's outstanding debt bears interest at
variable interest rates. The Company's financial results will be impacted by
significant increases or decreases in interest rates.
YEAR 2000 ISSUE
The Company has developed plans to address the possible exposures related to
the impact on its computer systems to be Year 2000 compliant. The plan provides
for the conversion efforts to be completed by the end of fiscal 1999. The year
2000 problem is the result of computer programs being written using two digits
rather than four to define the applicable year. Management does not expect the
financial impact of making the required system changes to be material to the
Company's consolidated financial position, results of operations or cash flows.
The Company is expensing all costs associated with these systems changes as the
costs are incurred.
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PART II. OTHER INFORMATION
ITEM 1
LEGAL PROCEEDINGS
None.
ITEM 2
CHANGES IN SECURITIES
None.
ITEM 3
DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5
OTHER INFORMATION
None.
ITEM 6
EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: Financial Data Schedule: Ex. 27
(b) Reports on Form 8-K: None.
12
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
STREICHER MOBILE FUELING, INC.
September 10, 1998 By: /S/ STANLEY H. STREICHER
------------------------
Stanley H. Streicher
Chief Executive Officer
September 10, 1998 By: /S/ WALTER B. BARRETT
---------------------
Walter B. Barrett
Vice President, Finance and Chief Financial Officer
13
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EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> MAY-01-1998
<PERIOD-END> JUL-31-1998
<CASH> 331,874
<SECURITIES> 0
<RECEIVABLES> 5,185,983
<ALLOWANCES> (169,000)
<INVENTORY> 75,374
<CURRENT-ASSETS> 5,792,089
<PP&E> 10,210,700
<DEPRECIATION> (1,721,853)
<TOTAL-ASSETS> 15,003,871
<CURRENT-LIABILITIES> 6,896,849
<BONDS> 0
0
0
<COMMON> 25,750
<OTHER-SE> 4,111,983
<TOTAL-LIABILITY-AND-EQUITY> 15,003,871
<SALES> 22,321,109
<TOTAL-REVENUES> 22,321,109
<CGS> 20,509,709
<TOTAL-COSTS> 20,509,709
<OTHER-EXPENSES> 1,757,758
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 357,159
<INCOME-PRETAX> (303,517)
<INCOME-TAX> 0
<INCOME-CONTINUING> (303,517)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (303,517)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
