FUEL Rocket Fuel Inc.

FT. LAUDERDALE, Fla., Sept. 28 /PRNewswire-FirstCall/ -- SMF ENERGY CORPORATION, (Nasdaq: FUEL) (the "Company"), a leading energy logistics company providing efficient, just in time distribution of petroleum products and chemicals, today announced its earnings and results for the fiscal year and fourth quarter ended June 30, 2010.  

Richard E. Gathright, Chairman, Chief Executive Officer and President, commented:

"For our fiscal year ended June 30, 2010, we posted net income of $465,000 versus a net loss of $2.3 million in fiscal year 2009.  This $2.8 million improvement in our financial performance for fiscal 2010 is a continuation of the $4.4 million improvement in fiscal 2009 over fiscal 2008.  We have outperformed all reasonable expectations in the face of an unprecedented global economic recession and financial meltdown over the past two years.  Despite facing the worst domestic and global economy since the Great Depression, we have increased our sales volumes by 2.6% or 1.8 million gallons in fiscal 2010 over the prior year.  

We have offset the reduction of demand from our customer base attributed to the recession with the addition of net new business, including the expansion of our business into three new markets.  We consider this achievement to be particularly noteworthy in light of the fact that the 14% drop in demand from our existing customer base at the onset of the economic downturn in the fall of 2008 has not yet been recovered.  Moreover, we have achieved profitability in fiscal 2010 notwithstanding not having any significant amount of emergency response work in the year compared to a year ago, as reflected by our net margin per gallon of 23.1 cents versus 25.8 cents per gallon in the prior year.

We have decreased our total debt by $1.9 million, our equity has increased by $527,000, and both improvements have contributed to a lower debt to equity ratio of 1.7 compared to 2.1 a year ago.

For fiscal 2010, our EBITDA was $4.0 million, our cash contribution which is EBITDA less fixed charges was $1.9 million and our fixed charge coverage ratio was 1.86.  These numbers are comparable to the $4.5 million, $1.8 million and 1.65, respectively, reported a year ago, when we suggested our EBITDA and other reported numbers were harbingers of further improvements in our operating results.  

Our selling, general and administrative expenses were $1.0 million lower in fiscal 2010 than last year.   Our cost cutting measures initiated in fiscal 2008 contributed to this year's significant reduction in personnel costs and professional fees.  That $1.0 million reduction was achieved notwithstanding $531,000 in SG&A costs that are not expected to recur in fiscal 2011, including:  1) a $187,000 write off of deferred acquisition costs; 2) a $93,000 stock option repricing charge; and 3) $251,000 in Sarbanes-Oxley Section 404(b) costs, preparing for auditor attestation of our internal controls assessment from which we were exempted by law after the costs were incurred; offset by a $584,000 SG&A reduction from the settlement of our litigation against the FAS Group.

Our successful June 2009 Recapitalization strengthened our balance sheet and impacted our bottom line performance as we replaced high yield notes for mostly common stock and low yield notes resulting in a $1.5 million interest expense savings and our further reduction of debt this year as we paid $1.0 million of scheduled principal payments on our bank term loan.

We are positioned, for the next fiscal year, to continue our growth and improvement.  We have ordered new trucks to modernize and increase the size of our fleet, which will create expanded capacity to our system, improve fuel economy and satisfy new emission standards, give us further opportunity to expand in new markets and reduce our repair and maintenance costs.

In light of the weak market conditions for our stock, we recently announced a stock repurchase program pursuant to which we may purchase up to $840,000 of capital stock.  While that program has only recently begun, we believe that, in light of the current prices for our common stock, the expenditure of corporate funds to acquire shares at these prices is a reasonable and prudent allocation of our financial resources.  

We believe that, in this economy, there are many opportunities available for us to acquire complementary businesses and achieve accelerated growth from those acquisitions.  A significant improvement in the trading price of our common stock would facilitate those acquisitions, since we could use shares of our stock to fund all or a portion of any such acquisition.  We are currently reluctant to use shares of our stock as consideration for acquisitions, however, because we believe acquisitions made with our stock at or near current prices would be unduly dilutive.  While we will consider using stock for acquisitions that are accretive on an earnings per share basis, we will do so only if we believe that the trading market for our stock is sufficiently related to the actual value and prospects of our Company to reflect the enhanced value from the acquisition."

Highlights of Fiscal Year 2010 vs. Fiscal Year 2009

• Revenues were $192.8 million in fiscal 2010 as compared to $199.2 million in fiscal 2009, a decrease of $6.4 million, or 3.2%, primarily as a result of an $11.3 million decrease attributable to lower market prices of petroleum products during fiscal 2010, as compared to fiscal 2009.  The number of gallons sold during fiscal 2010 and 2009 was 69.7 million and 67.9 million, respectively, an increase of 1.8 million gallons, or 2.7%.  In the first part of fiscal 2009, we provided emergency response services in Louisiana and Texas for Hurricanes Gustav and Ike.  This brief injection of higher margin emergency response business helped to sustain us through the dramatic contraction of the national economy at the time, which severely affected us in the second quarter of that year.  Since that time, we have witnessed a slow but steady increase in demand for our services from companies seeking to reduce their costs of operation with mobile fueling, leading to our decision to add three new service locations in fiscal 2010.  The 14% decrease in same customer sales demand that occurred during the economic downturn at that time, however, has still not been recovered by the Company.  Much like the reports of uneven and unsteady growth for the economy generally, our sales volume fluctuated during much of fiscal 2010.  We saw a much stronger demand from net new business from March 2010 through the end of the fiscal year and are optimistic about its continuation throughout this next fiscal year.

• Net income was $465,000 in fiscal 2010, compared to a net loss of $2.3 million in fiscal 2009, an improvement of $2.8 million.  The improvement was partially attributable to lower selling, general and administrative expenses of $1.0 million due to the cost cutting and business restructuring steps that were taken beginning in late November 2008 to meet the dramatic decrease in customer demand attributable to the international economic crisis.  Additionally, we incurred lower interest expense of $1.5 million attributable to the June 2009 Recapitalization and to lower fuel prices.  Net income in fiscal 2010 was reduced by the lower gross profit of $1.2 million partially resulting from the decrease in margin contribution from the emergency response services provided in the first quarter of fiscal 2009, higher direct operating expense this year including higher repairs and maintenance costs of our fleet, cost for storm water removal in our mid-continent division which cost was almost eliminated by May 2010, and new market start up costs as we expanded our business.  Additionally, this year we did not have the non recurrence of the benefit from last year's modification of certain personnel benefits programs.  The net loss in fiscal 2009 included a $1.7 million non-cash ASC 470-20 (formerly FAS No. 84) inducement on extinguishment charge that did not reoccur in fiscal 2010.

• EBITDA (a non-GAAP measure) was $4.0 million in fiscal 2010 compared to $4.5 million in fiscal 2009, a decrease of $520,000.  The decrease in EBITDA was principally due to the lower gross profit of $1.2 million, which was partially the result of decreases in margin contribution from the emergency response services provided in the first quarter of fiscal 2009 in Louisiana and Texas for Hurricanes Gustav and Ike, higher repairs and maintenance costs of our fleet, $244,000 of cost for storm water removal in our mid-continent division which cost was almost eliminated by May 2010, and new market start up costs of approximately $104,000.  The decrease in EBITDA was partially offset by the $1.0 million decrease in selling, general and administrative expenses as a result of the cost cutting and business restructuring steps taken beginning in late November 2008 to meet the dramatic decrease in customer demand attributable to the global economic crisis.

• Net margin per gallon decreased to 23.1 cents in the fiscal 2010 from 25.8 cents in the prior fiscal year.  The decrease was primarily due to the incremental margin contributions in fiscal 2009 from the emergency response services provided for hurricanes during the first quarter of fiscal 2009, as well as the higher direct operating expenses described above.

Highlights of Fourth Quarter Fiscal Year 2010 vs. Fourth Quarter Fiscal Year 2009

• Revenues were $53.7 million in the fourth quarter of fiscal 2010, an increase of $13.8 million, or a 35% increase from $39.9 million in the same period in fiscal 2009.  The increase consists primarily of an $8.9 million attributable to price variances as market fuel prices have increased approximately an average of 37% per gallon in the fourth quarter of fiscal 2010 compared to the same period the prior fiscal year.  Additionally, revenues increased $4.9 million due to a 10% incremental increase in gallons sold compared to the same period in the prior year.  

• Net income for the fourth quarter of fiscal 2010 was $419,000, compared to a net loss of $1.9 million in the fourth quarter of fiscal 2009.  The net loss in the prior year was primarily due to the $1.7 million non-cash ASC 470-20 conversion inducement on extinguishment of convertible notes, which did not reoccur in fiscal 2010.  The improvement was also attributable to higher gross profit of $781,000 resulting from the 1.9 cents increase in net margin per gallon, from 22.7 cents per gallon in the fourth quarter of fiscal 2009 to 24.6 cents per gallon in the fourth quarter of fiscal 2010, and lower interest expense of $318,000, offset by higher selling, general and administrative expenses of $277,000.

• EBITDA was $1.2 million for the fourth quarter of fiscal year 2010, an increase of $313,000 or 36% when compared to the $876,000 in EBITDA reported in the same period the prior year, attributable to higher gross profit partially offset by higher selling, general and administrative expenses as described above.

Adjusted basic and diluted net income (loss) per share attributable to common shareholders excluding non-cash ASC 470-20 inducement, deemed dividends on extinguishment of convertible notes and preferred shares, non-cash ASC 805 write-off of unamortized acquisition costs, and non-cash stock options repricing costs is a non-GAAP measure that excludes the effect of charges and dividends that are non-recurring.  We believe that excluding them in this non-GAAP calculation provides a meaningful representation of the ongoing performance of the operations of the Company.