SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-----------------------------
Commission file number: 333-59109
ABLE ENERGY, INC.
(Exact name of registrant as specified in its charter)
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<CAPTION>
<S> <C>
Delaware 22-3520840
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
</TABLE>
344 Route 46
Rockaway, NJ 07866
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (973) 625-1012
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check X whether registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
As of May 9, 2000, 2,000,000 shares, $.001 Par value per share, of Able
Energy, Inc. were issued and outstanding.
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TABLE OF CONTENTS
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PAGE
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS (UNAUDITED)
<S> <C>
Accountants' Report 3
Consolidated Balance Sheets as of December 31, 1999 and
March 31, 2000 4 - 5
Consolidated Statements of Income for the three
months ended March 31, 2000 and March 31, 1999 6
Consolidated Statement of Stockholders' Equity three months
ended March 31, 2000 7
Consolidated Statements of Cash Flows for the three months
ended March 31, 2000 and 1999 8
Notes to Unaudited Financial Statements 9 - 17
</TABLE>
<PAGE>
To the Board of Directors
Able Energy, Inc.
Rockaway, New Jersey 07866
Independent Accountants' Report
We have reviewed the condensed consolidated balance sheet of Able Energy, Inc.
and Subsidiaries as of March 31, 2000, and the related condensed consolidated
statements of income and cash flows for the three month periods ended March 31,
2000 and 1999. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with the standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists primarily of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1999, and the
related consolidated statements of income, retained earnings, and cash flows for
the year then ended (not presented herein); and in our report dated March 16,
2000, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 31, 1999, is fairly stated,
in all material respects, in relation to the consolidated balance sheet from
which it has been derived.
Rockaway, New Jersey
May 9, 2000
3
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ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS
March 31, December 31,
2000 1999
(Unaudited) Audited
Current Assets:
<S> <C> <C>
Cash $ 2,452,190 $ 2,926,412
Accounts Receivable (Less Allowance for Doubtful
Accounts of ($157,974) at 12/31/99 and ($157,974) 3/31/00 2,872,367 1,996,500
Inventory 296,211 229,979
Notes Receivable - Current Portion 16,798 61,748
Miscellaneous Receivable 25,653 22,640
Prepaid Expense 81,338 48,826
Prepaid Expense - Income Taxes - 119,951
Deferred income Tax 48,270 48,270
Due From Officer 44,690 44,690
------------- ------------
Total Current Assets 5,837,517 5,499,016
----------- ----------
Property and Equipment:
Land 451,925 451,925
Building 1,008,250 1,008,250
Trucks 2,264,345 2,236,508
Fuel Tanks 893,453 836,790
Machinery and Equipment 383,649 346,198
Leasehold Improvements 187,364 187,364
Cylinders 336,767 319,490
Office Furniture and Equipment 14,841 14,841
------------ -------------
5,540,594 5,401,366
Less: Accumulated depreciation 1,406,861 1,266,201
----------- -----------
Net Property and Equipment 4,133,733 4,135,165
----------- -----------
Other Assets:
Deposits 33,310 94,625
Notes Receivable - Less Current Portion 171,813 126,863
Customer List, Less Amortization of 1999 ($125,045), and
2000 ($134,229). 476,621 485,805
Covenant Not to Compete, Less Amortization of 1999
($125,123) and 2000 ($132,634). 150,932 158,444
------------ ------------
Total Other Assets 832,676 865,737
------------ ------------
Total Assets $10,803,926 $10,499,918
=========== ===========
</TABLE>
See Accompanying Notes
4
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (Cont'd)
LIABILITIES & STOCKHOLDERS' EQUITY
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<CAPTION>
March 31, December 31,
2000 1999
(Unaudited) (Audited)
Current Liabilities:
<S> <C> <C> <C>
Accounts Payable $ 1,442,674 $ 1,638 699
Note Payable - Bank 67,925 201,214
Current Portion of Long-Term Debt 707,642 789,978
Accrued Expenses 308,156 260,818
Taxes Payable 183,649
Customer Advance Payments 16,082 156,738
Current Portion of Deferred Income - 14,548
Escrow Deposits 15,000 15,000
------------ -----------
Total Current Liabilities 2,741,128 3,076,995
Deferred Income: less current portion 61,439 53,342
Deferred Income Taxes 58,201 56,201
Long Term Debt: less current portion 1,448,001 1,529,444
----------- ----------
Total Liabilities 4,308,769 4,715,982
----------- ----------
Stockholders' Equity:
Common Stock
Authorized 10,000,000 Shares, Par Value $.001 per
share Issued and Outstanding 2,000,000 shares 2,000 2,000
Paid in Surplus 5,662,775 5,662,775
Retained Earnings 830,382 119,161
------------ -----------
Total Stockholders' Equity 6,495,157 5,783,936
----------- ----------
Total Liabilities and Stockholders' Equity $10,803,926 $10,499,918
=========== ===========
</TABLE>
See Accompanying Notes
5
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
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<CAPTION>
THREE MONTHS ENDED MARCH 31,
UNAUDITED
2000 1999
---- ----
<S> <C> <C>
Net Sales $11,115,203 $6,180,935
Cost of Sales 9,037,314 4,427,177
----------- ----------
Gross Profit 2,077,889 1,753,758
----------- ----------
Expenses
Selling, General and Administrative Expenses 884,235 696,542
Depreciation and Amortization Expense 169,689 108,251
------------ ----------
Total Expenses 1,053,924 804,793
----------- ----------
Income From Operations 1,023,965 948,965
----------- ---------
Other Income (Expenses):
Interest Income 33,526 10,113
Miscellaneous Income 9,549 4,172
Interest Expense (50,219) (28,427)
----------- ----------
Total Other Income (Expenses) (7,144) (14,142)
----------- ----------
Income Before Provision for Income Taxes and Extra-
ordinary Item 1,016,821 934,823
Provision for Income Taxes 438,450 378,610
----------- ----------
Net Income - Continuing Operations 578,371 556,213
Extraordinary Item (132,850) -
---------- ----------
Net Income $ 711,221 $ 556,213
=========== ==========
Net Income Per Share - Continuing Operations $ .325 .556
---------- ----------
Extraordinary Item - Per Share $ .075 -
---------- ----------
Net Income Per Share $ .40 .556
---------- ----------
Weighted Average Number of Common Shares
Outstanding 1,778,082 1,000,000
========== ===========
</TABLE>
See Accompanying Notes
6
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
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<CAPTION>
Common Stock
.001 Par Value
Additional Total
Paid-in Retained Stockholders'
Shares Amount Surplus Earnings Equity
<S> <C> <C> <C> <C> <C> <C>
Balance - January 1, 2000 2,000,000 $ 2,000 $5,662,775 $ 119,161 $5,783,936
Net Income .............. 711,221 711,221
---------- ---------- ---------- ---------- ----------
Balance - March 31, 2000 2,000,000 $ 2,000 $5,662,775 $ 830,382 $6,495,157
========== ========== ========== ========== ==========
</TABLE>
See Accompanying Notes
7
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
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<CAPTION>
THREE MONTHS ENDED MARCH 31,
UNAUDITED
2000 1999
---- ----
Cash Flows From Operating Activities
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Net Income ...................................... $ 711,221 $ 556,213
Adjustments to Reconcile Net Income to Cash
used by Operating Activities:
Depreciation and Amortization ................ 169,689 108,251
(Increase) Decrease in:
Accounts Receivable ....................... (875,867) (141,542)
Inventory ................................. (66,232) (30,502)
Prepaid Expenses .......................... (32,512) 90,989
Prepaid income Taxes ...................... 119,951 --
Deposits .................................. 61,315 6,576
Increase (Decrease) in:
Accounts Payable .......................... (196,025) (236,384)
Accrued Expenses .......................... 47,338 (27,680)
Other Taxes Payable ....................... -- 11,103
Customer Advance Payments ................. (140,656) 537
Income Taxes Payable ...................... 183,649 268,485
Deferred Income Taxes ..................... 2,000 2,560
Deferred Income ........................... (6,451) (3,637)
----------- -----------
Net Cash Provided by Operating Activities (22,580) 604,969
----------- -----------
Cash Flows From Investing Activities
Purchase of Property and Equipment .............. (151,656) (145,206)
Decrease (Increase) Note Receivable - Sale of
Equipment .................................... -- 6,374
(Increase) Decrease in Shareholder's Loan ....... -- (6,395)
Increase in Other Receivables ................... (2,918) (761)
Decrease (Increase) in Note Receivable - Sale of
Subsidiary .................................... -- 7,000
----------- -----------
Net Cash Used By Investing Activities . (154,574) (138,988)
----------- -----------
Cash Flows From Financing Activities
(Decrease) Increase in Notes Payable ............ (133,289) 135,027
Decrease in Notes Payable ....................... (163,779) (260,399)
----------- -----------
Net Cash Used By Financing Activities .. (297,068) (125,372)
----------- -----------
Net Increase (Decrease) In Cash .................... (474,222) 340,609
Cash - Beginning of Period ......................... 2,926,412 125,844
----------- -----------
Cash - End of Period ............................... $ 2,452,190 $ 466,453
=========== ===========
The Company had Interest Cash Expenditures of: ..... $ 50,219 $ 28,427
The Company had Tax Cash Expenditures of: .......... -- $ 10,202
</TABLE>
See Accompanying Notes
8
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT
DECEMBER 31, 1999 AND MARCH 31, 2000
Note 1 Basis of Presentation
Able Energy, Inc. was incorporated in the state of
Delaware on March 13, 1997. Mr. Timothy Harrington exchanged
his stock in the following companies: Able Oil Company (a
New Jersey corporation), Able Oil Company Montgomery, Inc.
(a Pennsylvania corporation), A & O Environmental Services,
Inc. (a New Jersey corporation), Able Oil Melbourne, Inc. (a
Florida corporation) and his 99% interest in Able Propane,
LLC for 1,000 shares of Able Energy, Inc. and became its
sole shareholder. In December 1998, the Company sold A & O
Environmental Services, Inc. and Able Oil Company Montgomery,
Inc.
On August 27, 1999, the Company, through a newly formed wholly
owned subsidiary, Able Energy - New York, Inc., purchased the
assets of B & B Fuels of Warrensburg, New York. This
acquisition was treated as a purchase.
On August 31, 1999, the Company, through a newly formed wholly
owned subsidiary, Able Energy Terminal, LLC, purchased the
facility on Route 46, Rockaway, NJ. The facility has two
tenants.
The consolidated interim financial statements included herein
have been prepared by the Company, without audit, pursuant to
the rules and regulations of the Securities Exchange
Commission. Certain information and footnote disclosures
normally included in financial statements prepared in
accordance with generally accepted accounting principles have
been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the
disclosures are adequate to make the information presented not
misleading.
These statements reflect all adjustments, consisting of normal
recurring adjustments which, in the opinion of management, are
necessary for fair presentation of the information contained
therein. It is suggested that these consolidated financial
statements be read in conjunction with the financial
statements and notes thereto included in the Company's annual
report for the year ended December 31, 1999. The Company
follows the same accounting policies in preparation of interim
reports.
Results of operations for the interim periods are not
indicative of annual results.
9
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ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (cont'd)
DECEMBER 31, 1999 AND MARCH 31, 2000
Note 2 Summary of Significant Accounting Policies
Nature of Operations
Able Oil Company, Able Melbourne and Able Energy - New York,
Inc. are full service oil companies that market and distribute
home heating oil, diesel fuel and kerosene to residential and
commercial customers operating in the northern New Jersey and
Melbourne, Florida, and Warrensburg, New York respectively.
Able Propane, which was incorporated in July 1996, installs
propane tanks, which it owns, and sells propane gas for
heating and cooking along with other residential and
commercial uses.
The Company's operations are subject to seasonal fluctuations
with a majority of the Company's business occurring in the
late fall and winter months. Approximately 70% of the
Company's revenues are earned and received from October
through March, and the overwhelming majority of such revenues
are derived from the sale of home heating oil. However, the
seasonality of the Company's business is offset, in part, by
the increase in revenues from the sale of diesel and gasoline
fuels during the spring and summer months due to the increased
use of automobiles and construction apparatus.
Principles of Consolidation
The consolidated financial statements include the accounts of
Able Energy, Inc. and its subsidiaries. The minority interest
of 1% in Able Propane, LLC is so immaterial and has not been
shown separately. All material intercompany balances and
transactions were eliminated in consolidation.
Inventories
Inventories are valued at the lower of cost (first in, first
out method) or market.
Property and Equipment
Property and equipment are stated at cost less accumulated
depreciation. Depreciation is provided by using the
straight-line method based upon the estimated useful lives of
the assets (5 to 40 years).
For income tax basis, depreciation is calculated by a
combination of the straight-line and modified accelerated cost
recovery systems established by the Tax Reform Act of 1986.
Expenditures for maintenance and repairs are charged to
expense as incurred whereas expenditures for renewals and
betterments are capitalized.
The cost and related accumulated depreciation of assets sold
or otherwise disposed of during the period are removed from
the accounts. Any gain or loss is reflected in the year of
disposal.
10
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ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (Cont'd)
DECEMBER 31, 1999 AND MARCH 31, 2000
Note 2 Summary of Significant Accounting Policies (cont'd)
Intangible Assets
Intangibles are stated at cost and amortized as follows:
Customer Lists of $571,000 and Covenant Not To Compete of
$183,567 related to the Connell's Fuel Oil Company acquisition
on October 28, 1996, by Able Oil Company are being amortized
over a straight-line period of 15 and 5 years, respectively.
The current period amortization also includes a customer list
of $39,850 and Covenant Not To Compete of $100,000 relating to
the acquisition from B & B Fuels on August 27, 1999, is being
amortized over a straight-line period of 10 and 5 years,
respectively. The amortization for the three months ended
March 31, 2000 is $18,695.
For income tax basis, the Customer Lists and the Covenant Not
To Compete are being amortized over a straight-line method of
15 years as per the Tax Reform Act of 1993.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes.
Although these estimates are based on management's knowledge
of current events and actions it may undertake in the future,
they may ultimately differ from actual results.
Income Taxes
Effective January 1, 1997, all the subsidiaries, which were
S-Corporations, terminated their S- Corporation elections. The
subsidiaries are now filing a consolidated tax return with
Able Energy, Inc.
Effective January 1, 1997, the Company has elected to provide
for income taxes based on the provisions of Financial
Accounting Standards Board ("FASB") Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes", which requires recognition of deferred tax assets and
liabilities for the expected future tax consequences of events
that have been included in the financial statements and tax
returns in different years. Under this method, deferred income
tax assets and liabilities are determined based on the
difference between the financial statement and tax bases of
assets and liabilities using enacted tax rates in effect for
the year in which the differences are expected to reverse.
11
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ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (Cont'd)
DECEMBER 31, 1999 AND MARCH 31, 2000
Note 2 Summary of Significant Accounting Policies (cont'd)
Concentrations of Credit Risk
The Company performs on-going credit evaluations of its
customers' financial conditions and requires no collateral
from its customers.
Financial instruments which potentially subject the Company to
concentrations of credit risk consists of checking and savings
accounts with several financial institutions in excess of
insured limits. The excess above insured limits is
approximately $2,246,000. The Company does not anticipate
non-performance by the financial institution.
Cash
For the purpose of the statement of cash flows, cash is
defined as balance held in corporate checking accounts and
money market accounts.
Note 3 Notes Receivable
The Company has Notes Receivable from Able Montgomery, Inc.
related to the sale of the Company and a truck financed by
Able Energy, Inc. The Notes total $149,032. No payments of
principal or interest have been received in approximately one
year. The Company is currently working with the debtor on
restructuring the payment schedule. The income on the sale of
the Company in December 1998 is shown as deferred income to be
realized upon collection of the Notes. Due to the uncertainty
of the collection period, the note receivable and deferred
income are being shown as non-current.
Note 4 Inventories
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<CAPTION>
Items 2000 1999
----- ---- ----
<S> <C> <C>
Heating Oil $163,957 $ 89,419
Diesel Fuel 32,707 37,596
Kerosene 5,490 4,709
Propane 1,343 5,541
Parts and Supplies 92,714 92,714
--------- ---------
Total $296,211 $229,979
======== ========
</TABLE>
12
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (Cont'd)
DECEMBER 31, 1999 AND MARCH 31, 2000
Note 5 Notes Payable Bank
Notes payable to PNC Bank include a line of credit of $500,000
with interest at the rate of Prime minus 1/2%. The outstanding
balance on the Line of Credit is $67,924 at March 31, 2000.
The agreement with Able Oil Company, dated October 20, 1997,
and amended August 11, 1999, has a current expiration date of
June 30, 2000. There is also a term loan with PNC Bank. The
term loan was refinanced for a total of $675,000 on June 12,
1998. The balance as of March 31, 2000 is $281,250. The bank
has released as collateral the stock of the Company owned by
the prior sole shareholder and has released the subsidiaries
and Timothy Harrington as guarantors. The Company has replaced
this by granting the PNC Bank a first priority lien on
collateral consisting of Provident Institution Money Market
Fund containing no less than $972,000. The Company under a
guaranty and suretyship agreement will unconditionally
guarantee payment of the indebtedness to the bank. All other
collateral and covenants per the agreement have been deleted.
Note 6 Long-Term Debt
Mortgage note payable dated, August 27, 1999, related to the
purchase of B & B Fuels facility and equipment. The total note
is $145,000. The note is payable in the monthly amount of
principal and interest of $1,721.18 with and interest rate of
7.5% per annum. The initial payment was made on September 27,
1999, and continues monthly until August 27, 2009 which is the
final payment. The note is secured by a mortgage made by Able
Energy New York, Inc. on property at 2 and 4 Green Terrace and
4 Horican Avenue, Town of Warrensburg, Warren County, New
York. The balance due on this Note at March 31, 2000 was
$141,710.
Mortgage note payable dated, August 31, 1999, related to the
purchase of the facility and equipment in Rockaway, New Jersey
by Able Energy Terminal, LLC ("Terminal"). The note is in the
amount of $650,000.
Pursuant to Section 4.4 of the Agreement of Sale to purchase
the Terminal, the Principal Sum of the $650,000 note shall be
reduced by an amount equal to one-half of all sums expended by
Borrower on the investigation and remediation of the property
provided, however, that the amount of said reduction shall not
exceed $250,000 (the "Remediation Amount").
The "Principal Sum" less the "Remediation Amount" shall be an
amount equal to $400,000 (the "Reduced Principal Sum"). The
Reduced Principal Sum shall bear interest from the date hereof
at the rate of 8.25% per annum. Any portion of the Remediation
Amount not utilized in the investigation and remediation of
the property shall not begin to accrue interest until such
time that (i) a No Further Action Letter" is obtained from the
Department of Environmental Protection, and (ii) an
outstanding lawsuit concerning the property is resolved
through settlement or litigation (subject to no further
appeals). All payments on this Note shall be applied first to
the payment of interest, with any balance to the payment and
reduction of the Reduced Principal Sum.
13
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (Cont'd)
DECEMBER 31, 1999 AND MARCH 31, 2000
Note 6 Long-Term Debt (cont'd)
Interest shall be due and payable commencing on September 30,
1999 on the Reduced Principal Sum of the note on the last day
of each month up to and including July 31, 2004.
The Note is collateralized by the property and equipment
purchased and assignment of the leases. The balance due on
this Note at March 31, 2000 was $650,000.
Note 7 Income Taxes
Effective January 1, 1997, the Company adopted Statement of
Financial Accounting Standards No. 109, Accounting for Income
Taxes.
The differences between the statutory Federal Income Tax and
Income Taxes Continuing Operation is accounted for as follows:
<TABLE>
<CAPTION>
2000
Percent of
Pretax
Amount Income
<S> <C> <C>
Statutory Federal Income Tax $346,650 34.0%
Increase resulting from State Income
Tax, net of Federal Tax benefit 91,800 5.9%
-------- -----
Income Taxes $438,450 39.9%
======== =====
Income Taxes consist of:
Current $436,450
Deferred 2,000
---------
Total $438,450
========
</TABLE>
14
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (Cont'd)
DECEMBER 31, 1999 AND MARCH 31, 2000
Note 7 Income Taxes (cont'd)
<TABLE>
<CAPTION>
1999
Percent of
Pretax
Amount Income
<S> <C> <C>
Statutory Federal Income Tax $293,300 34.0%
Increase resulting from State Income
Tax, net of Federal Tax benefit 85,310 5.9%
-------- -----
Income Taxes $378,610 39.9%
======== =====
Income Taxes consist of:
Current $374,490
Deferred 4,120
---------
Total $378,610
========
</TABLE>
The types of temporary differences between the tax bases of
assets and liabilities and their financial reporting amounts
that give rise to a significant portion of the deferred tax
liability and deferred tax asset and their approximate tax
effects are as follows at:
<TABLE>
<CAPTION>
2000
Temporary Tax
Difference Effect
<S> <C> <C>
Depreciation $(184,389) $(58,201)
Allowance for Doubtful Accounts 157,974 44,235
Gain on Sale of Subsidiary 18,766 4,035
1999
Temporary Tax
Difference Effect
Depreciation $(179,389) $(56,201)
Allowance for Doubtful Accounts 157,974 44,235
Gain on Sale of Subsidiary 18,766 4,035
</TABLE>
15
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (Cont'd)
DECEMBER 31, 1999 AND MARCH 31, 2000
Note 8 Commitments and Contingencies
The Company is subject to laws and regulations relating to the
protection of the environment. While it is not possible to
quantify with certainty the potential impact of actions
regarding environmental matters, in the opinion of management,
compliance with the present environmental protection laws will
not have a material adverse effect on the financial condition,
competitive position, or capital expenditures of the Company.
In accordance with the agreement on the purchase of the
property on Route 46, Rockaway, New Jersey by Able Energy
Terminal, LLC, the purchaser shall commence after closing, the
investigation and remediation of the property and any
hazardous substances emanating from the property in order to
obtain a No Further Action letter from the New Jersey
Department of Environmental Protection (NJDEP). The purchaser
will also pursue recovery of all costs and damages related
thereto in the lawsuit by the seller against a former tenant
on the purchased property. Purchaser will assume all
responsibility and direction for the lawsuit, subject to the
sharing of any recoveries from the lawsuit with the seller,
50-50. The seller by reduction of its mortgage will pay costs
related to the above up to $250,000 (see Note 6). In the
opinion of management, the Company will not sustain costs in
this matter which will have a material adverse effect on its
financial condition.
Able Oil Company has been examined by the Internal Revenue
Service through the year ended December 31, 1995. The only
open year for Able Oil Company is December 31, 1996 and Able
Energy, Inc., et al, open years are December 31, 1997, 1998
and December 31, 1999.
Note 9 Operating Lease
Able Energy Terminal, LLC, has acquired the following lease on
the property it purchased on Route 46 in Rockaway, New Jersey.
The lease with Able Oil Company, a wholly owned subsidiary of
Able Energy, Inc., has an expiration date of July 31, 2004.
The lease provides for a monthly payment of $1,200 plus a one
cent per gallon through put, as per a monthly rack meter
reading.
Estimated future rents are $14,400 per year, plus the one cent
per gallon through put charges per the monthly rack meter
readings.
The Company leased an additional facility on Route 46 in
Rockaway, New Jersey. The lease has a term of one year from
September 1, 1999 to August 31, 2000. The rent is $1,300 per
month, $15,600 for the year, plus 10% of the increase in real
estate taxes over the base year, 1999. The Company has the
option to renew for five additional one-year terms. The
renewals are at an increase of $100 per month during each
renewal term. The estimated future rent upon one year renewal
is $16,800.
16
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (Cont'd)
DECEMBER 31, 1999 AND MARCH 31, 2000
Note 10 Per Share Information
Per share information has been computed based on the weighted
average number of shares. The shares give effect to a
1,000-for-1 stock spilt by the Company and its public offering
of 1,000,000 shares.
Note 11 Extraordinary Item
The Company utilized a net operating loss carryforward from
the year ended December 31, 1999 of approximately $318,000
which resulted in a tax reduction of approximately $132,850.
17
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
ITEM 2 Management's Discussion and Analysis of Financial Condition and Results
of Operations
Statements in this Quarterly Report on Form 10-QSB concerning
the Company's outlook or future economic performance,
anticipated profitability, gross billings, expenses or other
financial items, and statements concerning assumption made or
exceptions to any future events, conditions, performance or
other matter are "forward looking statements," as that term is
defined under the Federal Securities Laws. Forward-looking
statements are subject to risks, uncertainties, and other
factors which would cause actual results to differ materially
from those stated in such statements. Such risks, and
uncertainties and factors include, but are not limited to: (i)
changes in external competitive market factors or trends in
the Company's results of operation; (ii) unanticipated working
capital or other cash requirements and (iii) changes in the
Company's business strategy or an inability to execute its
competitive factors that may prevent the Company from
competing successfully in the marketplace.
Revenue Recognition
Sales of fuel and heating equipment are recognized at the time
of delivery to the customer, and sales of equipment are
recognized at the time of installation. Revenue from repairs
and maintenance service is recognized upon completion of the
service. Payments received from customers for heating
equipment service contracts are deferred and amortized into
income over the term of the respective service contracts, on a
straight line basis, which generally do not exceed one year.
Results of Operations
Three months ended March 31, 2000, compared to the three
months ended March 31, 1999.
The Company reported revenues of $11,115,203 for the three
months ended March 31, 2000, an increase of 79.83% over the
prior year's revenues of $6,180,935 for the same three month
period. This increase can be attributed to increased sales as
a result of cooler weather in the Northeast during this
quarter and an increase in the price of products sold by the
Company above the price of the prior year. The acquisition of
B & B Fuels increased sales for the quarter by approximately
$500,000. Increased revenues can also be attributable to
increased marketing efforts.
Gross profit margin, as a percentage of revenues, for the
three months ended March 31, 2000, decreased to 18.69% of net
revenues, representing a decrease of 9.68% over a margin of
28.37% for the same quarter on year ago. The reduction in
margin is primarily a result of raising unstable retail prices
for home heating oil caused by a large raise in product cost.
Selling, General and Administrative expenses increased by
$187,693 or 26.95% from $696,542 for the three months ended
March 31, 1999 to $884,235 for the three months ended March
31, 2000. This increase was attributable to the operations of
two subsidiaries formed in August 1999 of approximately
$80,000 and an increase in insurance, labor costs and
benefits.
18
<PAGE>
Operating Income for the three months ended March 31, 2000 as
$1,023,965, an increase of 7.90% over the Company's operating
income of $948,965 for the three months ended March 31, 1999.
This increase in operating income was attributable to
increased sales for home heating oil and other company
products greater then increased cost and from current and
prior marketing efforts. The company acquisitions in August
1999 resulted in operating income of approximately $101,000
for the current period.
Net income for the three months ended March 31, 2000 increased
by $155,008 or 28% to $711,221 as compared to the previous
year. This increase in net income is a direct result of
continued sales growth which more than offset the increased
product and operating costs. Income from the two new
subsidiaries formed in August 1999 was approximately $61,000.
Depreciation and amortization expense for the three months
ended March 31, 2000 was $169,689, an increase from $108,251
for the three months ended March 31, 1999. Amortization
relates to the amortization of customer lists, being amortized
over 15 years and two Non-Compete Agreements amortized over 5
years , per the agreements. The increased depreciation relates
to the purchase of additional trucks and other equipment in
1999 and the acquisition of equipment on the B & B Fuels
purchase and the purchase of the Company's facility in
Rockaway, New Jersey. Both acquisitions took place in August
1999.
Interest expense for the three months ended March 31, 2000 was
$50,219 as compared to $28,427 for the three months ended
March 31, 1999. This increase was due to debt incurred in
connection with the acquisitions of B & B Fuels (New York),
the property in Rockaway, New Jersey, and additional trucks
and other equipment.
Liquidity and Capital Resources
For the three months ended March 31, 2000, compared to the
three months ended March 31, 1999, the Company's cash position
increased by $1,985,737 from $466,453 to $2,452,190. For the
year ended December 31, 1999, cash of $5,867,100 was generated
from the Company's initial public offering. For the year ended
December 31, 1998, cash was generated through operations, net
income and collections of customer advance payments.
The Company has the following Agreement with its primary
financial institution. The company's credit line is $500,000
at 1/2% below prime, the outstanding balance is $67,925 at
March 31, 2000. The Company has a three year term loan of
$675,000 with a balance of approximately $280,000 at March 31,
2000. The Agreement with the bank has a current expiration
date of June 30, 2000.
The Company received net proceeds from its initial public
offering in an amount of $5,867,100. The Company believes that
the net proceeds of this offering, coupled with the bank
agreements and income from operations, will fulfill the
Company's working capital needs for the next 18 months. As the
Company continues to grow, and strengthens its infrastructure
to position itself for additional growth, bank borrowings, or
other debt placements and equity offerings may be considered,
in part, or in combination, as the Company's situation
warrants.
19
<PAGE>
Seasonality
The Company's operations are subject to seasonal fluctuations,
with a majority of the Company's business occurring in the
late fall and winter months. Approximately 70% of the
Company's revenues are earned and received from October
through March, and the overwhelming majority of such revenues
are derived from the sale of home heating products including
propane gas and fuel oil. However, the seasonality of the
Company's business is offset, in part, by an increase in
revenues from the sale of HVAC products and services, diesel
and gasoline fuels during the spring and summer months, due to
the increased use of automobiles and construction apparatus.
From May through September, Able Oil can experience
considerable reduction of retail heating oil sales. Similarly,
Able Propane can experience up to 80% decrease in heating
related propane sales during the months of April to September,
which is offset somewhat by an increase of pool heating and
cooking fuel.
Over 90% of Able Melbourne's revenues are derived from the
sale of diesel fuel for construction vehicles, and commercial
and recreational sea-going vessels during Florida's fishing
season which begins in April and ends in November. Only a
small percentage of Able Melbourne's revenues are derived from
the sale of home heating fuel. Most of these sales occur from
December through March, Florida's cooler months.
PART II
Items 1-5.
Not Applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 27. Financial Data Schedule
<PAGE>
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 thereunto duly authorized.
ABLE ENERGY, INC.
(Registrant)
By: /s/ Christopher P. Westad
Christopher P. Westad
President and Principal Financial Officer
20
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27 - Financial Data Schedule - Able Energy Inc. and Subsidiaries
This schedule contains summary financial information extracted from the
interim financial statements for the three month period ended March 31, 2000 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> dec-31-2000
<PERIOD-END> mar-31-2000
<CASH> 2,452
<SECURITIES> 0
<RECEIVABLES> 3,030
<ALLOWANCES> (158)
<INVENTORY> 296
<CURRENT-ASSETS> 5,838
<PP&E> 5,541
<DEPRECIATION> (1,407)
<TOTAL-ASSETS> 10,804
<CURRENT-LIABILITIES> 2,741
<BONDS> 0
0
0
<COMMON> 2
<OTHER-SE> 6,493
<TOTAL-LIABILITY-AND-EQUITY> 10,804
<SALES> 11,115
<TOTAL-REVENUES> 11,115
<CGS> 9,037
<TOTAL-COSTS> 1,054
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 50
<INCOME-PRETAX> 1,017
<INCOME-TAX> 438
<INCOME-CONTINUING> 578
<DISCONTINUED> 0
<EXTRAORDINARY> 133
<CHANGES> 0
<NET-INCOME> 711
<EPS-BASIC> 0.33
<EPS-DILUTED> 0.33
</TABLE>
