Commerce Energy Group, Inc. (Amex: EGR), a leading U.S. electricity
and natural gas marketing company, today announced its financial
results for the fiscal 2008 second quarter and six months ended
January 31, 2008. Second Quarter Results The company reported a net
loss of $1.2 million, or $0.04 per share, compared with net income
of $2.5 million, or $0.09 per share, for the fiscal 2007 second
quarter. Net revenues increased 17% to $108.4 million from $92.6
million for the same period last year, driven primarily by higher
retail electricity sales to customers in Texas. Gross profit
increased to $19.3 million from $14.5 million for the second
quarter of fiscal 2008. Gross profit from electricity grew to $13.5
million compared with $10.4 million for the same quarter of fiscal
2007, due to customer growth in Texas. Gross profit from natural
gas increased to $5.8 million from $4.1 million in the second
quarter of fiscal 2007 primarily due to increased margins in
California and Ohio. �While second quarter revenues and gross
profit showed solid growth over the preceding quarter, our
bottom-line results were unacceptable,� said Gregory L. Craig,
Commerce Energy�s recently named chairman and chief executive
officer. �Commerce Energy has considerable strengths and
opportunities, and we believe that by refining the company�s
strategies and operations, we can enhance efficiencies and improve
our financial performance. To that end, we have identified a number
of areas for immediate action, including reducing expenses,
managing bad debt expenses, focusing sales and marketing efforts on
our most profitable and high-growth markets, and improving our
credit strength.� Selling and marketing expenses increased to $4.3
million from $2.6 million in the comparable quarter last year,
reflecting higher third-party sales expenses, increased personnel
expenses and higher advertising costs related to the company�s
expanded customer acquisition initiatives. General and
administrative expenses were $16.0 million compared with $9.6
million in the prior year second quarter, primarily reflecting $6.2
million in bad debt expenses (an increase of $4.9 million)
resulting from a 17% increase in net revenues and higher bad debt
reserves in Texas, increased personnel costs related to additional
customer service and information technology staff to support the
company�s growing customer base, increased professional service
fees, and higher depreciation and amortization expenses. Results
for the Six Months Ended January 31, 2008 The company reported a
net loss of $2.3 million, or $0.08 per share, versus net income of
$2.9 million, or $0.10 per share, for the comparable period last
year. Net revenues climbed 31% to $214.0 million from $163.2
million in the same period in fiscal 2007, driven primarily by
higher electricity volumes in Texas. Gross profit increased 45% to
$35.7 million from $24.6 million for the first half of fiscal 2007.
Gross profit from electricity increased 52% to $28.5 million
compared with the first six months of fiscal 2007, reflecting the
impact of customer growth. Gross profit from natural gas increased
to $7.2 million compared with gross profit of $5.8 million for the
six-month period ended January 31, 2007, reflecting higher margins
in California and Ohio. Selling and marketing expenses increased to
$8.2 million from $4.8 million in the comparable period last year,
reflecting higher third-party sales expenses, personnel costs and
advertising related to the company�s expanded customer acquisition
initiatives. General and administrative expenses were $29.4 million
compared with $17.5 million in the first half of 2007 primarily
reflecting increased bad debt expenses resulting from a 31%
increase in net revenues and higher bad debt reserves in Texas,
increased personnel costs related to additional customer service
and information technology staff to support the company�s growing
customer base, higher professional service fees resulting from the
company�s review of its strategic alternatives, and increased
depreciation and amortization expenses. Liquidity At January 31,
2008, the company had unrestricted cash and equivalents of $5.6
million, $48.0 million of working capital and no long-term debt.
The company believes that it will require additional capital
resources in fiscal 2008 to (i) meet its credit facility
requirement to have $10 million in excess availability at all times
on and after July 1, 2008; (ii) fund possible expansion of the
company�s business, either from internal growth or acquisition;
(iii) add liquidity if energy prices increase materially; and (iv)
respond to increased energy industry volatility and/or uncertainty
that create additional funding requirements. Effective March 12,
2008, Wachovia Capital Finance Corporation (Western), as Agent and
Lender, and The CIT Group/Business Credit, Inc., as Lender entered
into an amendment to our Credit Facility and granted us a waiver on
the EBITDA, fixed charge coverage and capital expenditure covenants
and adjusted upward the interest rate on both borrowings and
letters of credit by 0.05% until certain performance targets are
met. Revised Fiscal 2008 Outlook Commerce Energy revised its fiscal
2008 outlook and now expects to report a net loss per share in the
range of $0.10 to $0.15 for the fiscal year ending July 31, 2008.
The revised outlook reflects (i) increased bad debt expense in the
second quarter of fiscal 2008; (ii) increased third-party sales
expenses in the second quarter of fiscal 2008; (iii) anticipated
additional bad debt expense in the third and fourth quarters of
fiscal 2008; (iv) compensation expense related to severance
payments and stock option and restricted stock awards related to
the previously announced transition to a new CEO and a new COO in
the third quarter of fiscal 2008; and (v) anticipated increased
energy costs in the second half of fiscal 2008 adversely effecting
gross profits. Conference Call and Webcast Commerce will host a
conference call to review the results of operations for the second
quarter ended January 31, 2008 today at 5 p.m. ET (2 p.m. PT). The
call will be available to all interested parties through a live
audio webcast at www.CommerceEnergy.com and www.earnings.com. A
replay of the conference call will be archived and available at
www.CommerceEnergy.com for one year. A telephonic replay will be
available through March 20, 2008, and can be accessed by dialing
888-286-8010 (domestic) or 617-801-6888 (international) and using
the playback Passcode 28713700. About Commerce Energy Group, Inc.
Commerce Energy Group, Inc. (Commerce Energy) is a leading
independent U.S. electricity and natural gas marketing company,
operating through its wholly-owned subsidiaries, Commerce Energy,
Inc. and Skipping Stone Inc. Commerce Energy is publicly traded on
the American Stock Exchange (Amex) under the symbol: EGR. Commerce
Energy, Inc. is licensed by the Federal Energy Regulatory
Commission and by state regulatory agencies as an unregulated
retail marketer of natural gas and electricity to homeowners,
commercial and industrial consumers and institutional customers.
Headquartered in Orange County, California, Commerce Energy also
has an office in Dallas, Texas, as well as several area offices
located around the U.S. For nearly a decade, customers have relied
on Commerce Energy to deliver competitive pricing, innovative
product offerings and personalized customer service, in addition to
quality gas and electric services. For more information, visit
www.CommerceEnergy.com. Forward-Looking Statements Except for
historical information contained in this release, statements in
this release, including those of Mr. Craig, may constitute
forward-looking statements regarding the company�s assumptions,
projections, expectations, targets, intentions or beliefs about
future events. Words or phrases such as �anticipates,� �believes,�
�estimates,� �expects,� �intends,� �plans,� �predicts,� �projects,�
�targets,� �will likely result,� �will continue,� �may,� �could� or
similar expressions identify forward-looking statements.
Forward-looking statements are not guarantees of future performance
and involve risks and uncertainties which could cause actual
results or outcomes to differ materially from those expressed.
Commerce Energy Group, Inc. cautions that while such statements in
this news release, whether express or implied, are made in good
faith and the company believes such statements are based on
reasonable assumptions, including without limitation, management�s
examination of historical operating trends, data contained in
records, and other data available from third parties, the company
cannot assure that its projections will be achieved. In addition to
other factors and matters discussed from time to time in our
filings with the U.S. Securities and Exchange Commission (SEC),
some important factors that could cause actual results or outcomes
for Commerce Energy Group, Inc. or its subsidiaries to differ
materially from those discussed in forward-looking statements
include: higher than expected attrition of, and/or unforeseen
operating difficulties relating to, customer accounts, the
volatility of the energy market, competition, operating hazards,
uninsured risks, failure of performance by suppliers and
transmitters, changes in general economic conditions, seasonal
weather or force majeure events that adversely affect electricity
or natural gas supply or infrastructure, decisions by our energy
suppliers requiring us to post additional collateral for our energy
purchases, uncertainties in the capital markets should we seek to
raise additional capital, uncertainties relating to federal and
state proceedings relating to other issues in the 2000-2001
California energy crisis, accounts receivable collection issues
caused by unfavorable changes in regulations or economic trends,
increased or unexpected competition, adverse state or federal
legislation or regulation, or adverse determinations by regulators,
including failure to obtain regulatory approvals. Any
forward-looking statement speaks only as of the date on which such
statement is made, and, except as required by law, Commerce Energy
Group, Inc. undertakes no obligation to update any forward-looking
statement to reflect events or circumstances after the date on
which such statement is made or to reflect the occurrence of
unanticipated events. New factors emerge from time to time, and it
is not possible for management to predict all such factors.
COMMERCE ENERGY GROUP, INC. � CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (In thousands, except per share amounts) (Unaudited) � �
� Three Months Ended January 31, Six Months Ended January 31, 2008
� 2007 2008 � 2007 Net revenue $ 108,392 $ 92,644 $ 213,990 $
163,152 Direct energy costs � 89,126 � 78,112 � 178,336 � 138,563
Gross profit 19,266 14,532 35,654 24,589 Selling and marketing
expenses 4,260 2,607 8,192 4,845 General and administrative
expenses � 15,973 � 9,637 � 29,433 � 17,484 Income (loss) from
operations (967 ) 2,288 (1,971 ) 2,260 Other income (expense):
Interest income 87 251 317 662 Interest expense � (369 ) � � � (682
) � � Total other income and expenses � (282 ) � 251 � (365 ) � 662
Net income (loss) $ (1,249 ) $ 2,539 $ (2,336 ) $ 2,922 Income
(loss) per common share: Basic $ (0.04 ) $ 0.09 $ (0.08 ) $ 0.10
Diluted $ (0.04 ) $ 0.09 $ (0.08 ) $ 0.10 Weighted-average shares
outstanding: Basic � 30,397 � 29,687 � 30,391 � 29,663 Diluted �
30,397 � 29,721 � 30,391 � 29,693 Volume and Customer Count Data �
� � Three Months Ended January 31, Six Months Ended January 31,
2008 � � 2007 2008 � � 2007 Electric � Megawatt hour (MWh) �
598,000 � 448,000 � 1,314,000 � 906,000 Natural Gas � Dekatherms
(DTH) 4,492,000 4,855,000 7,499,000 6,985,000 Customer Count
175,000 164,000 175,000 164,000 Condensed Consolidated Balance
Sheets (In Thousands) � � � January 31, 2008 July 31, 2007
(Unaudited) ASSETS Cash and equivalents $ 5,637 $ 6,559 Accounts
receivable, net 72,915 65,231 Natural gas inventory 4,118 5,905
Prepaid expenses and other � 8,583 � 7,224 Total current assets
91,253 84,919 Restricted cash and equivalents � 10,457 Deposits and
other 1,886 1,906 Property and equipment, net 9,710 8,662 Goodwill
and other intangible assets, net � 9,753 � 10,632 Total assets $
112,602 $ 116,576 LIABILITIES AND STOCKHOLDERS� EQUITY Energy and
accounts payable $ 34,156 $ 37,926 Short-term borrowings 3,000 �
Accrued liabilities � 6,095 � 8,130 Total current liabilities
43,251 46,056 Total stockholders� equity � 69,351 � 70,520 Total
liabilities and stockholders� equity $ 112,602 $ 116,576
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