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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended: JANUARY 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: 0-21825
STREICHER MOBILE FUELING, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 65-0707824
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2720 N.W. 55TH COURT, FORT LAUDERDALE, FLORIDA 33309
(Address of principal executive offices) (Zip Code)
(954) 739-3880
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
REDEEMABLE COMMON STOCK PURCHASE WARRANTS
Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes [X] No [ ]
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the registrant's Common Stock held by
non-affiliates as of April 28, 2000 was $5,482,925 computed by reference to the
closing price of the Common Stock on such date.
As of April 28, 2000 there were 2,712,600 shares of the registrant's Common
Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
None.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
This Form 10-K contains "forward-looking statements" which involve
risks and uncertainties. The Company's actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including those set forth in Item 7, Management's Discussion
and Analysis and Plan of Operations under the caption "Certain Factors Affecting
Future Operating Results" and elsewhere in this Form 10-K.
The Company provides mobile fueling services, primarily to customers
which operate large fleets of vehicles (such as governmental agencies,
utilities, major trucking lines, hauling and delivery services and national
courier services). Company-owned custom fuel trucks deliver fuel on a regularly
scheduled or as needed basis directly to vehicles at customer locations,
assuring the Company's customers a dependable supply of fuel at competitive
rates. The Company utilizes its proprietary electronic fuel management system to
measure, record and track fuel dispensed to each vehicle fueled at a customer
location. This allows the Company to verify the amount of fuel delivered and
provides its customers with customized fleet fuel data for management analysis
and tax reporting. Additionally, the Company's fuel management system reduces
the risk of employee theft by dispensing fuel only to authorized vehicles. The
Company believes that mobile fueling provides several economic and other
advantages to its customers, including eliminating the costs and potential
environmental liabilities associated with equipping and maintaining fuel storage
and dispensing facilities, reducing labor and administrative costs associated
with fueling vehicles and providing centralized control over fuel inventories
and usage. The Company also believes that federal and state environmental
regulations have created opportunities for the Company to convert to mobile
fueling customers fleet operators that currently utilize underground storage
tanks.
Founded by Stanley H. Streicher, the Company's President and Chief
Executive Officer, the Company's predecessor commenced its mobile fueling
operations in 1983. The Company presently operates at seven Florida locations;
three California locations; Atlanta, Georgia; Chattanooga and Kingsport,
Tennessee; Dallas/Fort Worth and Houston, Texas; and Kenner, Louisiana. During
April 2000, the Company operated a fleet of 100 custom fuel trucks and was
delivering fuel at a rate of 5.0 million gallons per month.
THE MOBILE FUELING INDUSTRY
Traditionally, business and other entities that operate large fleets of
vehicles have met their fueling requirements by either maintaining their own
supply of fuel in on-site storage tanks or fueling vehicles with credit card
purchases or other credit arrangements at local retail gas stations. On-site
storage tanks and fueling facilities can be expensive to construct and maintain
and expose the property owner and operator to potential liability associated
with fuel leaks or spills. In addition, increasingly stringent federal and state
environmental regulation of underground storage tanks will require businesses
that maintain their own fuel supplies to spend significant amounts to remove or
retrofit underground storage tanks to meet regulatory standards. For example,
federal regulations designed to protect the nation's soil and groundwater from
contamination by leaking underground petroleum storage tanks currently require
that new and existing storage tanks comply with certain construction standards
and contain leak detection systems. Some states, including Florida, have
promulgated their own detailed criteria for new underground storage tanks and
the retrofitting of older underground storage tanks, and in some instances such
criteria are more stringent than the federal regulations. The Company believes
that many fleet operators currently utilizing underground storage tanks will
choose to meet their fueling requirements by other means, including mobile
fueling, instead of investing in upgrading existing facilities.
Fueling fleet vehicles at retail gas stations is an inefficient use of
employee time, creates a significant amount of unnecessary paperwork and exposes
the fleet operator to an increased risk of employee fraud. In addition, while
large users often are able to negotiate favorable fuel pricing from retail gas
stations, the labor time expended by having employees fuel their own vehicles as
well as the costs associated with management and administration of fuel
purchases can exceed the benefits associated with price discounts.
The Company believes that mobile fueling services, such as those
provided by the Company, offer several benefits over traditional fueling
methods:
o REDUCED OPERATING COSTS AND INCREASED LABOR PRODUCTIVITY.
Mobile fueling enables businesses to reduce operating costs by
eliminating the need for company employees to fuel vehicles
either on-site or at local retail gas stations. Overnight
fueling prepares fleet vehicles for operation at the beginning
of each work day and increases labor productivity by allowing
employees to use their vehicles during time that would
otherwise be spent fueling. Mobile fueling also reduces the
administrative burden required to oversee and administer fuel
purchases and inventories.
o PROVIDES CENTRALIZED INVENTORY CONTROL AND MANAGEMENT. The
Company's fuel management system provides customers with
weekly reports detailing, among other things, the location,
description and daily and weekly fuel consumption of each
vehicle fueled by the Company. This eliminates customers' need
to invest working capital to maintain adequate fuel supplies,
and allows customers to centralize their fuel inventory
controls and track and analyze vehicle movement and fuel
consumption for management and tax reporting purposes.
o PROVIDES TAX REPORTING BENEFITS. The Company's fuel management
system's ability to track fuel consumption to specific
vehicles and fuel tanks provides tax benefits to customers who
consume fuel in uses that are tax-exempt, such as for off-road
vehicles, government-owned vehicles and fuel used to run
refrigerator units on vehicles. For such uses, the customers
receive reports which provide them with the information
required to substantiate such tax exemptions.
o ELIMINATES EXPENSES AND LIABILITIES OF ON-SITE STORAGE. Fleet
operators who previously satisfied their fuel requirements
using on-site storage tanks can eliminate the capital
expenditures and operating costs required to equip and
maintain fuel storage and dispensing facilities and inventory
and to comply with increasingly stringent environmental
regulations. In addition, by removing on-site storage tanks
and relying on mobile fueling, customers avoid potential
liabilities associated with the handling and storage of fuel.
o PREVENTS FUEL THEFT. Fleet operators that rely on employees to
fuel vehicles, whether at on-site facilities or at retail gas
stations, often experience shrinkage of fuel inventories or
excess fuel purchases due to employee fraud. The Company's
fuel management system reduces the risk of employee theft by
dispensing fuel only to authorized vehicles. Utilizing an
independent contractor such as the Company for fueling
services rather than allowing employees to purchase fuel at
local retail stations also eliminates employee fraud due to
credit card abuse.
o EMERGENCY FUEL SUPPLIES. Emergency preparedness, including
fuel availability, is critical to the operation of utilities,
delivery services and other fleet operators. The Company
provides access to emergency fuel supplies to allow customers
to respond more effectively to severe local weather conditions
or other emergency situations.
MARKETING AND CUSTOMERS
The Company markets its services primarily to customers which operate
large fleets of vehicles in connection with their business (such as governmental
agencies, utilities, major trucking lines, hauling and delivery services and
national courier services). The Company also seeks to obtain the business of
smaller fleet operators which are in geographical proximity to its larger
customers. Once engaged to provide fueling services, the Company is usually the
exclusive service for the fueling of a customer's entire fleet or a particular
yard of vehicles. For potential customers with larger fleets, the Company
generally obtains approval from regional corporate offices to supply fuel within
a newly designated area. Whereas large fleet operators offer immediate market
penetration on a regional basis, small fleet operators are equally important
accounts because they provide geographic density which optimizes fuel delivery
efficiency and minimizes cost.
2
The Company's representatives focus their marketing efforts on fleet
operators within the Company's established service areas. The Company's
representatives identify and directly contact candidates for the Company's
services. Direct marketing, including telephone solicitation, has played a
primary role in the Company's development of new business. Another important
marketing source has been referrals from existing customers.
The Company distributes gas and diesel fuel to approximately 755
customers. Three customers accounted for approximately 26% of the Company's
revenue in the year ended January 31, 2000 and 23% of the company's revenue in
fiscal 1999. Although the Company has contracts to provide mobile fueling
services to several of its larger customers, generally the Company does not
obtain written agreements with its customers.
OPERATIONS
The Company currently operates from 17 locations in California,
Florida, Georgia, Tennessee, Louisiana and Texas. The Company delivers fuel
utilizing its own fleet of 100 custom fuel trucks, most of which are equipped
with the Company's proprietary electronic fuel tracking and reporting system.
The Company's vehicles have fuel capacities ranging from 2,800 to 4,400 gallons.
Generally, each vehicle services between five and fifteen customer locations per
day or night, depending on size of the customers, market density and the
individual customers' fuel requirements. Generally, the custom fuel trucks
acquire fuel inventory daily at local port facilities or large wholesale gas
distributor locations and are assigned to a specified delivery route. The
Company conducts all dispatch and billing functions from corporate headquarters.
Route drivers and service personnel operate from all the Company's offices.
The Company's fuel management system derives its data from the Fuel
Tracking Controller (the "FTC Computer"), which is a computer that the Company
installs on each customized fuel truck. The FTC Computer can be programmed to
control a variety of truck configurations; single or multiple storage container
trucks; and any number of pumps and hoses attached to the fuel truck. The FTC
Computer details fueling from the Company's trucks to each vehicle in the
customer's vehicle fleet to a measurement of 1/100 of a gallon by reading the
state-calibrated meter installed on the fuel trucks. To accomplish this
measurement, the FTC Computer interfaces with hand-held devices operated by the
Company's driver or operator. The Company has a patent registered with the
United States Patent and Trademark Office for its proprietary electronic fuel
management system.
To permit the Company's customers to track their use of fuel, each
fleet vehicle or piece of equipment fueled by the Company is electronically
identified from a list of the customer's asset number previously registered in
the Company's computer. For security and tracking purposes, the FTC Computer
will not permit fuel to be dispensed from the Company's truck unless both the
fleet yard and the individual vehicle to be fueled electronically correspond to
the FTC Computer registration. A hand-held radio connected to a scanning device
links the operator or driver of the fuel truck with the FTC Computer. Only after
verification of both the yard and the truck or piece of equipment will the FTC
Computer allow operation of the fuel pump on the fuel truck to dispense fuel.
All fuel dispensing from a fuel truck is recorded by the FTC Computer
and stored in a tamper free solid state memory cartridge ("SSC") for downloading
at an operations control center where the data is assimilated into reports and
invoices for the customer. The FTC Computer will not allow fuel to be dispensed
unless this removable SSC cartridge is inserted into the FTC Computer. The SSC
has no moving parts and is not susceptible to damage or data loss under normal
conditions. The SSC also is protected by a dual battery back-up system and a
dual disk system to protect data. The Company also maintains a backup computer
system in the event of failure of the primary system.
The Company also has adapted its FTC Computer for use with fixed site
tanks. Upon conversion of a customer tank, the Company services and manages fuel
delivery to the tank and provides the customer with reports detailing fuel
dispensed by the customer from the tank into each fleet vehicle.
FUEL SUPPLY
Gas and diesel fuel are commodities which are processed and sold by
various sources. The Company purchases fuel from several major suppliers at spot
market prices and often qualifies for volume discounts. The
3
Company monitors fuel prices and price trends in each of its markets on a daily
basis and seeks to purchase at the lowest available prices with the best terms
satisfactory to the Company.
CUSTOM FUEL TRUCK PURCHASES
The Company presently orders and purchases custom fuel trucks from
several manufacturers of trucks suitable for the Company's operations. These
companies provide their customers with the option of purchasing standard
equipment fuel trucks or custom designing a fuel truck to particular
specifications. The typical configuration of the Company's custom fuel trucks is
a Kenworth or International chassis with a 3,400 to 4,400 gallon
multi-compartment aluminum tank, a vapor recovery system and the Company's
proprietary FTC Computer, which records and regulates fuel flow from the storage
compartments. For maintenance of the fuel trucks, the Company relies upon
equipment warranties, fixed fee service contracts and on-site repairs. To date,
the Company has not experienced significant down-time on any of its customized
fuel trucks due to maintenance problems.
COMPETITION
The Company competes with other distributors of fuel, including several
regional distributors and numerous small independent operators. Some of the
Company's competitors have significantly greater financial or marketing
resources than the Company. The Company's competitors also could introduce
services that are superior to the Company's or that achieve greater market
acceptance. The Company also competes for customers whose drivers fuel their own
vehicles at retail gas stations. The Company also could encounter potential
competition from a number of well capitalized companies which distribute fuel
and other similar oil products, some of which are larger, more established and
have greater financial, marketing and other resources than the Company. In
addition, some of the Company's customers are capable of providing the same
services to their vehicles directly. The Company believes that its ability to
compete depends on a number of factors, including price, reliability, credit
terms, name recognition, delivery time and service and support. There can be no
assurance that the Company will be able to continue to compete successfully with
respect to these factors.
EXECUTIVE OFFICERS
The executive officers of the Company as of April 28, 2000 are as
follows:
NAME AGE POSITION
---- --- --------
Stanley H. Streicher....... 57 President and Chief Executive Officer
Walter B. Barrett.......... 42 Vice President, Finance; Chief Financial Officer; and
Treasurer
Timothy W. Koshollek....... 36 Vice President, Marketing
Steven M. Alford........... 34 Vice President, Operations
MR. STREICHER has served as President and Chief Executive Officer of
the Company since its inception. Mr. Streicher has also served as the President
and Chief Executive Officer of Streicher Enterprises, Inc. ("Enterprises"), the
Company's predecessor, since its inception in 1983. From 1979 to 1983, Mr.
Streicher operated a mobile fueling business which became the Company's
predecessor. From 1972 to 1979, Mr. Streicher served as supervisor of receiving
of AT&T's Montgomery Material Management Center, where he designed systems to
expedite material and equipment handling. From 1965 to 1972, Mr. Streicher
served to the rank of Captain in the United States Military in various
leadership capacities, including the command of an aviation division together
with the responsibility for scheduling aircraft and their refueling.
MR. BARRETT has served as Vice President, Finance and Chief Financial
Officer of the Company since July 1997. From 1991 to 1997 Mr. Barrett was Vice
President of Finance and Chief Financial Officer of Devcon International Corp.,
a supplier of construction materials and services throughout the Caribbean and
Southeastern Florida.
4
MR. KOSHOLLEK has served as the Vice President of Marketing of the
Company since March 1998. From 1994 to February 1998, Mr. Koshollek served as
Vice President of Marketing and Operations of Enterprises and the Company. From
1991 to 1994, Mr. Koshollek was responsible for sales and management of a
wholesale seafood company. From 1989 to 1991, he was the operations manager of
Enterprises responsible for its Southeast division fuel delivery operations.
MR. ALFORD has served as Vice President, Operations of the Company
since March 1998. From December 1992 to February 1998, Mr. Alford was employed
by Enterprises and the Company in various supervisory and managerial positions.
EMPLOYEES
At April 28, 2000, the Company had 250 full-time employees, of whom 37
were involved in executive, managerial, supervisory and sales capacities, 182
were route drivers and 31 served in various clerical and other capacities. None
of the Company's employees is covered by a collective bargaining agreement or is
a member of a union. The Company considers its relationship with its employees
to be good.
GOVERNMENTAL REGULATION
The Company's operations are affected by numerous federal, state and
local laws, including those relating to protection of the environment and worker
safety. The transportation of gasoline and diesel fuel is subject to regulation
by various federal, state and local agencies, including the U.S. Department of
Transportation ("DOT"). These regulatory authorities have broad powers, and the
Company is subject to regulatory and legislative changes that can affect the
economics of the industry by requiring changes in operating practices or
influencing the demand for, and the cost of providing, its services. The
regulations provide that, among other things, the Company's drivers must possess
a commercial drivers license with a hazardous materials endorsement. The Company
is also subject to the rules and regulations of the Hazardous Materials
Transportation Act. For example, the Company's drivers and their equipment must
comply with DOT's pre-trip inspection rules, documentation regulations
concerning hazardous materials (i.e., certificates of shipments which describe
type and amount of product transported), and limitations on the amount of fuel
transported as well as driver time limitations. Additionally, the Company is
subject to DOT inspections which occur at random intervals. Any material
violation of DOT rules or the Hazardous Materials Transportation Act may result
in citations and/or fines upon the Company. In addition, the Company depends on
the supply of gasoline and diesel fuel from the oil and gas industry and,
therefore, is affected by changing taxes, price controls and other laws and
regulations relating to the oil and gas industry generally. The Company cannot
determine the extent to which its future operations and earnings may be affected
by new legislation, new regulations or changes in existing regulations.
The technical requirements of these laws and regulations are becoming
increasingly expensive, complex and stringent. These laws may impose penalties
or sanctions for damages to natural resources or threats to public health and
safety. Such laws and regulations may also expose the Company to liability for
the conduct of or conditions caused by others, or for acts of the Company that
were in compliance with all applicable laws at the time such acts were
performed. Sanctions for noncompliance may include revocation of permits,
corrective action orders, administrative or civil penalties and criminal
prosecution. Certain environmental laws provide for joint and several liability
for remediation of spills and releases of hazardous substances. In addition,
companies may be subject to claims alleging personal injury or property damage
as a result of alleged exposure to hazardous substances, as well as damage to
natural resources.
Although the Company believes that it is in substantial compliance with
existing laws and regulations, there can be no assurance that substantial costs
for compliance will not be incurred in the future. There could be an adverse
affect upon the Company's operations if there were any continuing substantial
violations of these rules and regulations. Moreover, it is possible that other
developments, such as stricter environmental laws, regulations and enforcement
policies thereunder, could result in additional, presently unquantifiable, costs
or liabilities to the Company.
5
ITEM 2. DESCRIPTION OF PROPERTY
The following table sets forth certain information concerning the
property and facilities that are owned or leased by the Company for use in its
operations:
LEASE EXPIRATION WITH
DESCRIPTION LOCATION ALL OPTIONS NOTES
----------- -------- ----------- -----
Principal executive offices, truck yard Ft. Lauderdale, Florida 7/31/14 (1)
and warehouse space
Truck yard and office Ft. Myers, Florida 1/1/02 (2)
Truck yard and office Jacksonville, Florida 8/31/15 (1)
Truck yard and office Orlando, Florida Month to Month (1)
Truck yard and office Tampa, Florida -- (3)
Truck yard and office Tallahassee, Florida 8/31/00 (2)
Truck yard and office Melbourne, Florida Month to Month (2)
Truck yard and office Atlanta, Georgia 7/31/00 (2)
Truck yard and office Kingsport, Tennessee Month to Month (2)
Truck and yard office Chattanooga, Tennessee Month to Month (2)
Truck yard and office Kenner, Louisiana 7/31/00 (1)
Truck yard and office Houston, Texas Month to Month (2)
Truck yard and office Ft. Worth, Texas -- (3)
Truck yard and office Sacramento, California 4/15/02 (2)
Truck yard and office Gardena, California 1/31/01 (2)
Truck yard and office San Jose, California 4/01/02 (2)
- ---------------
(1) Leased from Stanley H. Streicher, Company President and Chief Executive
Officer.
(2) Leased
(3) Property owned by the Company.
ITEM 3. LEGAL PROCEEDINGS
The Company has no material legal proceedings pending. From time to
time, the Company may become a party to litigation incidental to its business.
There can be no assurance that any future legal proceedings will not have a
material adverse effect on the Company's business, reputation, financial
condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
6
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock, par value $.01 ("Common Stock") and
Redeemable Common Stock Purchase Warrants ("Warrants") have traded in the
National Association of Securities Dealers Automated Quotation System ("NASDAQ")
Small-Cap Market under the symbols "FUEL" and "FUELW", respectively, since
December 11, 1996, the date of the Company's initial public offering. The
following table sets forth, for the periods indicated, the high and low closing
prices for the Common stock and Warrants, as reported by NASDAQ.
COMMON STOCK WARRANTS
----------------------- -----------------------
HIGH LOW HIGH LOW
------ ------ ------ ------
YEAR ENDED JANUARY 31, 2000
1st quarter $ 4.63 $ 2.06 $ 0.66 $ 0.22
2nd quarter $ 8.50 $ 4.25 $ 2.50 $ 0.50
3rd quarter $ 8.63 $ 7.06 $ 2.25 $ 1.50
4th quarter $ 8.50 $ 6.25 $ 1.75 $ 1.03
YEAR ENDED JANUARY 31, 1999
1st quarter $ 5.13 $ 3.38 $ 1.38 $ 0.75
2nd quarter $ 4.88 $ 3.06 $ 0.81 $ 0.63
3rd quarter $ 3.50 $ 2.13 $ 0.64 $ 0.28
4th quarter $ 3.88 $ 2.06 $ 0.41 $ 0.13
As of April 28, 2000, there were 22 holders of record of the Company's
Common Stock and approximately 500 beneficial owners of the Company's Common
Stock. On April 28, 2000, the closing price of the Common Stock was $4.25 per
share and the closing price of the Warrants was $0.75 per Warrant.
To date, the Company has not declared or paid any dividends on its
Common Stock. The payment of dividends, if any, is within the discretion of the
Board of Directors and will depend upon the Company's earnings, its capital
requirements and financial condition and other relevant factors. The Board of
Directors does not intend to declare any dividends in the foreseeable future,
but instead intends to retain future earnings for use in the Company's business
operations.
7
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data of the Company and its
consolidated subsidiaries are qualified in their entirety by, and should be read
in conjunction with, the Consolidated Financial Statements and the notes thereto
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations." The data for each of the 5 years in the period ended January 31,
2000, are derived from the Consolidated Financial Statements of the Company or
the financial statements of the Mobile Fueling Division of Streicher
Enterprises, Inc. audited by KPMG LLP, independent certified public accountants
for the fiscal years ended January 31, 2000 and 1999 and by Arthur Andersen LLP,
independent certified public accountants, for the fiscal years ended January 31,
1998, 1997 and 1996. The Consolidated Financial Statements of the Company as of
January 31, 2000 and 1999 and for each of the years in the three year period
ended January 31, 2000 and the reports thereon appear elsewhere herein.
2000 1999 1998 1997 1996
----------- ----------- ----------- ----------- -----------
EARNINGS STATEMENT DATA:
Revenues $74,170,995 $47,375,571 $43,041,814 $33,844,969 $23,989,358
Cost of sales 68,557,201 43,821,496 39,736,507 31,458,794 21,752,350
----------- ----------- ----------- ----------- -----------
Gross profit 5,613,794 3,554,075 3,305,307 2,386,175 2,237,008
Operating expenses 4,035,785 3,601,278 3,575,368 2,640,609 1,752,485
----------- ----------- ----------- ----------- -----------
Operating income (loss) 1,578,009 (47,203) (270,061) (254,434) 484,523
Loss on asset disposal (18,965) (6,877) (62,399) (5,928) --
Interest expense (1,151,707) (839,907) (474,923) (432,498) (343,967)
Interest and other income 65,103 73,391 178,811 31,071 33,219
----------- ----------- ----------- ----------- -----------
Income (loss) before income taxes 472,440 (820,596) (628,572) (661,789) 173,775
Income tax benefit (expense) -- (261,018) 153,146 232,551 (75,169)
----------- ----------- ----------- ----------- -----------
Basic and diluted net income (loss) $ 472,440 $(1,081,614) $ (475,426) $ (429,238) $ 98,606
=========== =========== =========== =========== ===========
Basic net income (loss) per share $ .17 $ (.42) $ (.18) $ (.26) $ .07
=========== =========== =========== =========== ===========
Diluted net income (loss) per share $ .16 $ (.42) $ (.18) $ (.26) $ .07
=========== =========== =========== =========== ===========
Basic weighted average common shares
outstanding 2,710,400 2,575,000 2,575,000 1,631,250 1,500,000
=========== =========== =========== =========== ===========
Diluted weighted average common shares
outstanding 2,880,529 2,575,000 2,575,000 1,631,250 1,500,000
=========== =========== =========== =========== ===========
2000 1999 1998 1997 1996
----------- ----------- ----------- ----------- -----------
BALANCE SHEET DATA:
Working capital (deficit) $(1,932,015) $(2,324,495) $ 3,392,012 $ 2,495,181 $ 737,419
Total assets $23,930,924 $16,194,149 $13,995,540 $11,402,970 $ 6,357,936
Long term debt $ 6,470,171 $ 4,284,271 $ 5,915,049 $ 1,123,498 $ 3,172,737
Total stockholders' equity $ 4,289,172 $ 3,359,636 $ 4,441,250 $ 4,961,413 $ 385,066
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following Management's Discussion and Analysis of Financial
Condition and Results of Operations contains "forward-looking statements" which
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in the forward-looking statements as a result
of certain factors, including those set forth under the caption "Certain Factors
Affecting Future Operating Results," below, and elsewhere in this Form 10-K. The
following discussion also should be read in conjunction with the Company's
financial statements and notes thereto included elsewhere in this Form 10-K.
GENERAL
The Company was incorporated in the State of Florida in October 1996.
Prior to the effective date of the Company's registration statement for its
initial public offering on December 11, 1996, the Company's business was
conducted through the Mobile Fueling Division of Streicher Enterprises, Inc.,
which began mobile fueling operations
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in 1983. Streicher Enterprises, Inc. ("Enterprises") completed a corporate
reorganization as of such effective date, pursuant to which the Mobile Fueling
Division of Enterprises transferred its assets, liabilities and operations to
the Company. This corporate reorganization has been retroactively reflected in
the Company's Financial Statements and notes thereto as if such transfer had
occurred at inception of the former Mobile Fueling Division. See Note 1 of Notes
to the Company's Financial Statements included elsewhere in this Form 10-K.
The Company derives all of its revenue from selling fuel and 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 transportation costs (primarily payroll).
Included in both revenue and cost of sales are federal and state fuel taxes,
which are collected by the Company from its customers, when required, and
remitted to the appropriate taxing authority.
RESULTS OF OPERATIONS
COMPARISON OF FISCAL YEAR ENDED JANUARY 31, 2000 TO FISCAL YEAR ENDED
JANUARY 31, 1999
REVENUES
Revenue increased $26.8 million, or 56.5%, for the year ended January
31, 2000 ("fiscal 2000") compared to the year ended January 31, 1999 ("fiscal
1999"). The Company delivered 59.4 million gallons of fuel to its customers in
fiscal 2000, an increase of 41.8% over the 41.9 million gallons delivered in
fiscal 1999. The increase in revenue resulted from a higher volume of fuel sales
and services to existing customers, acquisition of new customers in existing
locations, the introduction of mobile fueling operations into additional
metropolitan areas and an overall increase in the wholesale price of gasoline
and diesel fuel.
GROSS PROFIT
Gross profit increased $2.1 million, or 58.0%, in fiscal 2000 compared
to fiscal 1999. This increase was due primarily to increases in volume, offset
by increases in driver payroll costs, repair and maintenance costs and other
costs associated with the Company's expansion into new markets in fiscal 2000.
OPERATING EXPENSES
Operating expenses increased $435,000, or 12.1%, in fiscal 2000
compared to fiscal 1999. The increase in operating expenses primarily resulted
from an increase in marketing, travel and entertainment and promotion expenses
associated with the expansion of the Company's mobile fueling operations.
INTEREST EXPENSE
Interest expense increased $312,000, or 37.1%, in fiscal 2000 compared
to fiscal 1999 as a result of increased borrowings to fund the Company's
expansion into new markets and to acquire new custom fuel trucks for existing
and new locations.
INCOME TAXES
The Company recorded no income tax expense in fiscal 2000 compared to
an income tax expense of $261,000 in fiscal 1999. The Company has sufficient net
operating loss carryforwards to offset any taxable income for the next several
years. The tax expense in fiscal 1999 resulted from the Company fully reserving
a deferred tax asset.
NET INCOME (LOSS)
The Company had net income of $472,000, or $.16 per diluted share, in
fiscal 2000 and a net loss of $1,082,000, or $.42 per share, in fiscal 1999. The
Company's net loss in fiscal 1999 resulted primarily from the Company's
expansion into new markets; underutilization of equipment in such markets; and
increases in personnel, equipment, and facilities to support current and future
growth. The increase in earnings in fiscal 2000 is due primarily to the
combination of factors discussed above.
9
COMPARISON OF FISCAL YEAR ENDED JANUARY 31, 1999 TO FISCAL YEAR ENDED
JANUARY 31, 1998
REVENUES
Revenue increased $4.3 million, or 10.1%, for the year ended January
31, 1999 ("fiscal 1999") compared to the year ended January 31, 1998 ("fiscal
1998"). The Company delivered 41.9 million gallons of fuel to its customers in
fiscal 1999, an increase of 25.8% over the 33.3 million gallons delivered in
fiscal 1998. The increase in revenue resulted from a higher volume of fuel sales
to existing customers, acquisition of new customers in existing locations, and
the introduction of mobile fueling operations into additional metropolitan
areas, offset by lower average sales prices due to declines in the wholesale
price of gasoline and diesel fuel.
GROSS PROFIT
Gross profit increased $249,000 or 7.5% in fiscal 1999 compared to
fiscal 1998, primarily as a result of increases in volume, increases in fuel
prices charged to customers, and certain cost reductions, offset by additional
payroll and equipment costs associated with the Company's growth during fiscal
1999.
OPERATING EXPENSES
Operating expenses increased $26,000, or 0.7%, in fiscal 1999 compared
to fiscal 1998. As a percentage of revenue, operating expenses decreased to 7.6%
in fiscal 1999 from 8.3% in fiscal 1998. The increase in operating expenses
primarily resulted from an increase in payroll and related administrative costs
associated with the addition of personnel to support expansion of the Company's
mobile fueling operations, offset by reductions in debt guarantee fees,
consulting expenses and professional fees.
INTEREST EXPENSE
Interest expense increased $365,000, or 76.8%, in fiscal 1999 compared
to fiscal 1998 as a result of increased borrowings to fund the Company's
expansion into new markets and to acquire new custom fuel trucks for existing
and new locations.
INCOME TAXES
The Company recorded an income tax charge of $261,000 in fiscal 1999
compared to an income tax benefit of $153,000 in fiscal 1998. The increase in
tax expense in fiscal 1999 resulted from the Company fully reserving a net
deferred tax asset.
NET LOSS
The Company had a net loss of $1,082,000, or $.42 per share, in fiscal
1999 and a net loss of $475,000, or $.18 per share, in fiscal 1998. The
Company's net losses in fiscal 1999 and 1998 resulted primarily from the
Company's expansion into new markets, underutilization of equipment in such
markets and increases in personnel, equipment and facilities to support current
and future growth, and the reserving, in fiscal 1999, of a net deferred tax
asset.
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 the majority of its accounts within 35 to 40 days. Days sales
outstanding at January 31, 2000 totaled 41 days as compared to 40 days sales
outstanding at January 31, 1999.
While the Company operated at a profit for the fiscal year 2000, the
Company incurred a net operating loss of $363,000 in the fourth quarter of
fiscal 2000 and has continued to incur operating losses in the periods
subsequent to January 31, 2000. Fourth quarter results were negatively impacted
by a greater than expected reduction in
10
deliveries over the Thanksgiving, Christmas and New Year's holidays, costs
incurred in preparing for potential Year 2000 service to customers, and
increases in fuel prices in the latter part of the quarter, which led to higher
operating costs for the Company. Higher fuel costs, costs associated with the
Company's continued expansion of its vehicle fleet, increases in interest rates,
marketing and promotion expenses and decreases in higher margin mobile fueling
gallonages have continued to affect operating results since year end. The
Company expects to report a loss for the first quarter of fiscal 2001, which
ends April 30, 2000. The losses incurred subsequent to the fiscal 2000 year end
have placed the Company in violation of the tangible net worth requirement in
the loan agreement with its principal lender. The lender has not provided a
waiver of the violation at this time.
In response to the losses incurred, the Company has taken a number of
steps to improve its operating results by reducing operating costs. The steps
taken include:
o Evaluations of individual customer profitability, with price
and service frequency adjustments implemented for unprofitable
accounts.
o Significant reductions in driver overtime wages as a result of
route restructurings and combinations.
o Significant reduction in the sales and marketing staffs, along
with related expenses and promotion costs.
o Implementing a program to institute a 10% reduction in ongoing
repair and maintenance costs.
o Selling certain high maintenance cost equipment and replacing
it with new equipment.
o Other cost reductions, primarily in the general and
administrative cost area.
The uncertainty surrounding the Company's relationship with its
principal lender, the current level of the Company's cash reserves, and its
ongoing operating losses have caused the Company's independent certified public
accountants to question the Company's ability to continue as a going concern.
The Company believes that the actions noted above, if successfully implemented,
will return the Company to profitability.
The Company has outstanding borrowings of $7.7 million as of January
31, 2000 under its $10.0 million line of credit. This line permits the Company
to borrow up to 85% of the total amount of eligible accounts receivable. Based
on eligible receivables outstanding at January 31, 2000 the line has been fully
drawn as of that date. Interest is payable monthly at 1.0% over the prime rate
(8.75% as of January 31, 2000). The line of credit matures on April 30, 2001 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 January 31, 2000,
the Company was in compliance with the minimum net worth and debt to equity
requirements.
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 January 31, 2000, the Company had purchase commitments, to be
executed over the next six months, for 4 custom fuel delivery vehicles with an
aggregate cost of approximately $600,000. 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.
CERTAIN FACTORS AFFECTING FUTURE OPERATING RESULTS
The following important factors have affected, and may in the future
continue to affect, the Company's business, results of operations and financial
condition, and could cause the Company's operating results to differ materially
from those expressed in any forward-looking statements made by or on behalf of
the Company.
11
NO ASSURANCES OF CONTINUED PROFITABILITY; LOSSES FROM OPERATIONS;
ACCUMULATED DEFICIT. While the Company operated at a profit in the year ended
January 31, 2000 it incurred net losses in the years ended January 31, 1999, and
1998 of $1,081,614 and $475,426, respectively, and there can be no assurance
that the Company will not incur net losses in the future. The Company's
expansion over the past several years and its negative cash flows from operating
activities have been financed by additional bank borrowings and, subsequent to
the Company's initial public offering, the net proceeds from the issuance of
Common Stock and Warrants in that offering. The Company's operating expenses
have increased as its business has grown and can be expected to increase as a
result of the Company's expansion efforts into new markets. There can be no
assurance that the Company will be able to continue to generate sufficient
revenue to meet its operating expenditures or to operate profitably. See
"Results of Operations - Liquidity and Capital Resources."
NEED FOR CAPITAL. The mobile fueling business is capital intensive and
the Company will continue to require substantial capital in order to operate and
expand its business. The Company's primary long-term and working capital
requirements have been to fund capital expenditures for custom fuel trucks and
related equipment and working capital for the financing of customer accounts
receivable. Historically, the Company has depended primarily on debt financing
for its purchases of custom fuel trucks. If the Company is unable to obtain
additional equity or debt financing in the future, the Company may have to limit
its growth. The Company expects that its debt could increase in the future if
the Company utilizes borrowed funds to acquire new vehicles, for acquisitions,
working capital or other corporate purposes. See "Results of Operations -
Liquidity and Capital Resources."
GROWTH DEPENDENT UPON EXPANSION; RISKS ASSOCIATED WITH EXPANSION INTO
NEW MARKETS. A significant element of the Company's future growth strategy
involves the expansion of the Company's business into new markets. The Company
intends to expand its business into additional major metropolitan areas.
Expansion of the Company's operations will be dependent on, among other things,
the Company's ability to demonstrate the benefits of mobile fueling to potential
new customers; successfully establish and operate new locations; hire and retain
qualified management; marketing and other personnel; obtain adequate financing
for vehicle purchases and working capital purposes; secure adequate sources of
supply on a timely basis and on commercially reasonable terms and successfully
manage growth (including monitoring operations, controlling costs and
maintaining effective quality controls). The Company's growth prospects will be
largely dependent upon its ability to achieve greater penetration in new
markets. The Company may also seek to expand its operations through the
acquisition of existing companies or their customer bases. There can be no
assurance that the Company will be able to successfully expand its operations.
POTENTIAL ACQUISITIONS; DIFFICULTY IN ASSIMILATING ACQUISITIONS. The
Company intends to pursue acquisition opportunities as a means of achieving its
growth objectives, although there can be no assurance that the Company will be
able to locate or acquire suitable acquisition candidates on acceptable terms or
that future acquired operations will be effectively and profitably integrated
into the Company. Acquisitions involve a number of risks that could adversely
affect the Company's operating results, including diverting management
attention, the assimilation of the operations and personnel of the acquired
operations, the amortization of acquired intangible assets and the potential
loss of key employees of the acquired operations. Properly managing any growth
through acquisitions, avoiding the problems often attendant therewith, and
continuing to operate in the manner which has proven successful to the Company
to date will be important to the future success of the Company's business.
RISKS ASSOCIATED WITH CUSTOMER CONCENTRATION; ABSENCE OF WRITTEN
AGREEMENTS. Revenue from three major customers totaled approximately $13.4
million, $10.8 million and $13.8 million in fiscal 2000, 1999, and 1998
respectively. Although the Company has contracts to provide mobile fuel services
to several of its larger customers, most of the Company's customers do not have
written agreements with the Company and can terminate the Company's mobile
fueling services at any time and for any reason. As a result of this customer
concentration and absence of written agreements, the Company's business, results
of operations and financial condition could be materially adversely affected by
the loss of one or more of its major customers or if the Company were to
experience a high rate of contract terminations.
MANAGEMENT OF GROWTH. The Company has experienced significant growth
over the past several years. For the Company to be able to continue to grow
effectively it will need to continue to improve its operational, financial
12
and other internal systems, and to attract, train, motivate, manage and retain
its employees. If the Company is unable to manage growth effectively, the
Company's results of operations will be adversely affected.
COMPETITION. The Company competes directly and indirectly with other
distributors of fuel, including several regional distributors and numerous small
independent operators. Some of the Company's competitors have significantly
greater financial or marketing resources than the Company. The Company's
competitors also could introduce services that are superior to the Company's or
that achieve greater market acceptance. The Company also competes for customers
whose drivers fuel their own vehicles at retail gas stations. The Company could
encounter potential competition from a number of well capitalized companies
which distribute fuel and other similar oil products, some of which are larger,
more established and have greater financial, marketing and other resources than
the Company. In addition, some of the Company's customers are capable of
providing the same services to their vehicles directly. The Company believes
that its ability to compete depends on a number of factors, including price,
reliability, credit terms, name recognition, delivery time and service and
support. There can be no assurance that the Company will be able to continue to
compete successfully with respect to these factors.
OPERATING RISKS MAY NOT BE COVERED BY INSURANCE. The Company's
operations are subject to all of the operating hazards and risks normally
incidental to handling, storing and transporting gasoline and diesel fuel, which
are classified as hazardous materials. The Company maintains insurance policies
in such amounts and with such coverages and deductibles as the Company believes
are reasonable and prudent. However, there can be no assurance that such
insurance will be adequate to protect the Company from liabilities and expenses
that may arise from claims for personal and property damage arising in the
ordinary course of business or that such levels of insurance will be maintained
by the Company or will be available at economical prices.
GOVERNMENTAL REGULATION. The Company's operations are affected by
numerous federal, state and local laws, including those relating to protection
of the environment and worker safety. The transportation of gasoline and diesel
fuel is subject to regulation by various federal, state and local agencies,
including the DOT. These regulatory authorities have broad powers, and the
Company is subject to regulatory and legislative changes that can affect the
economics of the industry by requiring changes in operating practices or
influencing the demand for, and the cost of providing, its services. The
regulations provide that, among other things, the Company's drivers must possess
a commercial drivers license with a hazardous materials endorsement thereon. The
Company is also subject to the rules and regulations of the Hazardous Materials
Transportation Act. For example, the Company's drivers and their equipment must
comply with DOT's pre-trip inspection rules, documentation regulations
concerning hazardous materials (i.e., certificates of shipments which describe
type and amount of product transported), and limitations on the amount of fuel
transported as well as driver time limitations. Additionally, the Company is
subject to DOT inspections which occur at random intervals. Any material
violation of DOT rules or the Hazardous Materials Transportation Act may result
in citations and/or fines upon the Company. In addition, the Company depends on
the supply of gasoline and diesel fuel from the oil and gas industry and,
therefore, is affected by changing taxes, price controls and other laws and
regulations relating to the oil and gas industry generally. The Company cannot
determine the extent to which its future operations and earnings may be affected
by new legislation, new regulations or changes in existing regulations.
The technical requirements of these laws and regulations are becoming
increasingly expensive, complex and stringent. These laws may impose penalties
or sanctions for damages to natural resources or threats to public health and
safety. Such laws and regulations may also expose the Company to liability for
the conduct of or conditions caused by others, or for acts of the Company that
were in compliance with all applicable laws at the time such acts were
performed. Sanctions for noncompliance may include revocation of permits,
corrective action orders, administrative or civil penalties and criminal
prosecution. Certain environmental laws provide for joint and several liability
for remediation of spills and releases of hazardous substances. In addition,
companies may be subject to claims alleging personal injury or property damage
as a result of alleged exposure to hazardous substances, as well as damage to
natural resources.
Although the Company believes that it is in substantial compliance with
existing laws and regulations, there can be no assurance that substantial costs
for compliance will not be incurred in the future. There could be an adverse
affect upon the Company's operations if there were any continuing substantial
violations of these rules and
13
regulations. Moreover, it is possible that other developments, such as stricter
environmental laws, regulations and enforcement policies thereunder, could
result in additional, presently unquantifiable, costs or liabilities to the
Company.
CHANGES IN ENVIRONMENTAL REQUIREMENTS. The Company expects to derive a
significant amount of its future business by converting to mobile fueling
customers fleet operators that currently utilize underground fuel storage tanks
for their fueling needs. Under current federal regulations, the owners of such
underground storage tanks were required, by December 1998, to remove or retrofit
such tanks to comply with technical requirements pertaining to their
construction and operation. If the date for compliance with such regulations is
extended, or if other, more economical means, of compliance are developed or
adopted by owners of underground storage tanks, the opportunity for the Company
to market its services to such persons may be adversely affected.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's exposure to market risk is limited primarily to the
fluctuating interest rates associated with variable rate debt outstanding to
finance working capital needs and a portion of the Company's fleet of delivery
vehicles. These debts bear interest at the United States prime interest rate
plus a fixed markup and are subject to change based upon interest rate changes
in the United States. The Company does not currently use, and has not
historically used, derivative instruments to hedge against such market interest
rate risk. Increases or decreases in market interest rates could have a material
impact on the financial condition, results of operations and cash flows of the
Company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements of the Company required by Form 10-K are
attached following Part III of this report, commencing on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
14
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
NAME AGE POSITION AND OFFICE
---- --- -------------------
Stanley H. Streicher 57 President and Chief Executive Officer, Director
Walter B. Barrett 42 Vice President, Finance; Chief Financial
Officer and Treasurer
Steven M. Alford 34 Vice President, Operations
Timothy W. Koshollek 36 Vice President, Marketing
E. Scott Golden 44 Director
Joseph M. Murphy 53 Director
John H. O'Neil, Jr. 70 Director
C. Rodney O'Connor 67 Director
MR. STREICHER has served as President and Chief Executive Officer of
the Company since its inception in October 1996. Mr. Streicher has also served
as the President and Chief Executive Officer of Streicher Enterprises, Inc.
("Enterprises") the Company's predecessor, since its inception in 1983. During
the period 1979 to 1983, Mr. Streicher operated a mobile fueling business which
became the Company's predecessor. From 1972 to 1979, Mr. Streicher served as
supervisor of receiving of AT&T's Montgomery Material Management Center, where
he designed systems to expedite material and equipment handling. From 1965 to
1972, Mr. Streicher served to the rank of Captain in the United States Military
in various leadership capacities, including the command of an aviation division
together with the responsibility for scheduling aircraft and their refueling.
MR. BARRETT has served as Vice President, Finance and Chief Financial
Officer of the Company since July 1997. From 1991 to 1997 Mr. Barrett was Vice
President of Finance and Chief Financial Officer of Devcon International Corp.,
a supplier of construction materials and services throughout the Caribbean and
Southeastern Florida.
MR. ALFORD has served as Vice President, Operations of the Company
since March 1998. From December 1992 to February 1998, Mr. Alford was employed
by Enterprises and the Company in various supervisory and managerial positions.
MR. KOSHOLLEK has served as the Vice President of Marketing since March
1998. Prior to that and from October 1996 Mr. Koshollek served as Vice President
of Marketing and Operations of Enterprises and the Company. From 1991 to 1994,
Mr. Koshollek was responsible for sales and management of a wholesale seafood
company. From 1989 to 1991, he was the operations manager of Enterprises
responsible for its Southeast division fuel delivery operations.
MR. GOLDEN has served as a Director of the Company since January 1997.
Mr. Golden has maintained his own law office since 1988.
15
MR. MURPHY has served as a Director of the Company since January 1997.
Since August 1983 Mr. Murphy has served as President and Chief Executive Officer
of Murphy Management, a management consulting and executive search firm he
founded, which specializes in the retail, general merchandise, supermarket and
food industries.
MR. O'NEIL, JR. has served as a Director of the Company since January
1997. Until February 2000, Mr. O'Neil served as Chairman and Chief Executive
Officer of Health Foundation of South Florida, a non-profit charitable
foundation. Mr. O'Neil has also served as Chairman of Cedars Medical Center
since May 1992.
MR. O'CONNOR has served as a Director of the Company since July 1999.
Since 1976, Mr. O'Connor has served as the Chairman and Chief Executive Officer
of Cameron Associates, Inc., a financial communications firm. Mr. O'Connor is
also a director of Atrix Laboratories, Inc., a publicly traded manufacturer and
distributor of dental, medical and veterinary drug delivery systems and
products.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires the Company's directors and executive officers and persons who
own more than ten percent of the Company's Common Stock, to file with the
Securities and Exchange Commission (the "SEC") initial reports of ownership and
reports of changes in ownership of Common Stock. Officers, directors and greater
than ten percent shareholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and representations that no other reports
were required, during the fiscal year ending January 31, 2000, all of the
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with except that one
Form 4 (Statement of Changes in Beneficial Ownership) was not filed on a timely
basis for a stock sale made by E. Scott Golden.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain summary information concerning
compensation paid or accrued by the Company and its subsidiaries to or on behalf
of the Company's Chief Executive Officer and Chief Financial Officer (the "Named
Executive Officers") for the fiscal years ended January 31, 2000, 1999, and
1998. No other executive officer's salary and bonus equaled or exceeded $100,000
for such years.
SUMMARY COMPENSATION TABLE
FISCAL YEAR
ENDED ALL OTHER
NAME AND PRINCIPAL POSITION JANUARY 31, SALARY BONUS COMPENSATION(1)
- --------------------------------- ----------- ----------------- --------- ---------------
Stanley H. Streicher,............ 2000 $ 279,760 $ 37,600 --
President and Chief Executive 1999 $ 270,240 -- --
Officer 1998 $ 275,000 -- --
Walter B. Barrett,............... 2000 $ 143,462 $ 17,000 --
Vice President of Finance and 1999 $ 136,539 -- --
Chief Financial Officer 1998 $ 75,885 -- --
- ---------------
(1) The column for "Other Annual Compensation" has been omitted because there
is no compensation required to be reported in such columns. The aggregate
amount of perquisites and other personal benefits provided to each named
Executive Officer is less that 10% of the total annual salary and bonus of
such officer.
16
EMPLOYMENT CONTRACTS
The Company entered into an employment agreement with Stanley H.
Streicher effective December 11, 1996, pursuant to which Mr. Streicher serves as
President and Chief Executive Officer of the Company. The term of the agreement
is five years. The term of agreement will automatically renew for two successive
two-year terms, unless notice of termination is given prior to a renewal period.
The agreement provides that Mr. Streicher shall receive an initial annual base
salary of $275,000 which shall be increased to reflect the change of the cost of
living, based upon the change, from the preceding January 1, in the consumer
price index for All Urban Consumers, as published by the U.S. Bureau of Labor
Statistics. In addition to salary, Mr. Streicher will be eligible to participate
in a bonus pool which will provide him additional compensation of up to 10% of
the Company's pre-tax earnings.
The agreement provides that if Mr. Streicher's employment is terminated
as a result of his death or disability, he or his estate will receive for a
period of six months his base salary in effect as of the date of termination and
a prorated amount of any bonuses. The agreement also provides that in the event
Mr. Streicher's employment is terminated "without cause" or for "good reason,"
Mr. Streicher will receive, in addition to any salary, bonus and other
compensation accrued through the date of termination, a lump sum equal to the
greater of the full amount of salary, bonuses and other compensation due under
the agreement for the remainder of the term and three times the then-existing
salary and most recent annual bonus. The agreement further provides that Mr.
Streicher will not compete with the Company (i) while employed by the Company,
and (ii) for a period of two years following termination of employment. In the
event that his employment is terminated without cause, as a result of his death
or disability, or upon a change of control (as defined in the employment
agreement), all options to purchase Common Stock held by Mr. Streicher shall
become immediately exercisable. The Company may terminate the agreement for
"justifiable cause" which as defined therein means Mr. Streicher's conviction of
felony involving moral turpitude, fraud, dishonesty, or any crime in connection
with his employment which causes the Company substantial detriment; continual
gross neglect of his duties; unauthorized dissemination or use of confidential
information of the company; or engaging in competition with the Company during
the term of the agreement. Pursuant to the agreement, the Company is obligated
to pay all legal expenses associated with any legal proceedings concerning the
interpretation of the agreement.
The agreement further provides Mr. Streicher with stock options that
will enable him to acquire up to an aggregate of 1,000,000 shares of Common
Stock at an exercise price equal to the initial offering price of the Company
following the closing of the Company's Public Offering. The exercise of the
stock options is contingent upon the Company achieving either a specified
earnings per share level or a specified stock price level (the "performance
threshold"), for the corresponding fiscal year-end. Commencing with fiscal
year-ended January 31, 1998 and at each of the four fiscal year ends thereafter,
200,000 of such options will become exercisable if the Company achieves earnings
per share of $.36, $.43, $.52, $.62 and $.74 for the fiscal years ended January
31, 1998, 1999, 2000, 2001 and 2002, respectively, (or cumulative earnings per
share after fiscal 1998 of $.66, $1.09, $1.61, $2.23 and $2.97, respectively,)
or the closing bid price of the Company's Common Stock on any 20 consecutive
trading days during such fiscal year is $7.25, $8.75, $10.50, $12.50 and $15.00,
respectively, or the Company has cumulative net income of $2 million, $3
million, $4 million, $5 million and $6 million, respectively. For any fiscal
year after January 31, 1998 in which the Company attains the foregoing earnings
per share, stock price or cumulative net income targets, any options eligible
for vesting in prior years which were not vested and exercisable because the
targets for such fiscal years were not achieved, shall become exercisable. In
addition, for any fiscal year in which the Company attains the earnings per
share, stock price or cumulative net income targets applicable to a subsequent
fiscal year, all options eligible for vesting in such subsequent fiscal year
shall vest and become exercisable. If any of the Company's publicly traded
Warrants are exercised, the options shall vest and become exercisable pro rata
(based on the number of Warrants exercised) to the extent not already vested in
accordance with the foregoing. Regardless of the Company's performance, all of
the stock options granted to Mr. Streicher shall vest and become exercisable ten
years from the date of the grant.
The Company entered into an employment agreement with Walter B. Barrett
effective July 7, 1997, pursuant to which Mr. Barrett serves as Vice President
of Finance and Chief Financial Officer of the Company. The term of the agreement
is for one year and automatically renews for successive one year terms unless
notice of termination is given by either party within 30 days of the annual
renewal date. The agreement provides that Mr. Barrett will receive
17
an annual base salary of $140,000, reimbursement for certain professional and
educational expenses, and an initial grant of 50,000 stock options. The
agreement provides that if Mr. Barrett's employment is terminated, due to
non-renewal of the agreement or without cause, he will receive as compensation
the greater of all salary remaining due under the agreement until its expiration
or five months salary. In addition, the unvested portion of any stock options
will immediately vest and become exercisable.
Mr. Barrett received a grant of 50,000 stock options in April 1999 at
an exercise price of $4.125 per share. Such options vest ratably over a five
year period.
STOCK OPTION EXERCISES AND YEAR-END OPTION VALUE TABLE
The following table sets forth certain information concerning option
exercises in fiscal year ending January 31, 2000, the number of options held by
the Named Executive Officers as of January 31, 2000 and the value (based on the
fair market value of a share of stock at fiscal year-end) of in-the-money
options outstanding as of such date.
NUMBER OF NUMBER OF VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED JANUARY 31, 2000 JANUARY 31, 2000 (1)
ON VALUE ----------------------------- -----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------ --------- ---------- ----------- ------------- ----------- -------------
Stanley H. Streicher.... 20,000 $ 37,500 180,000 800,000 $ 90,000 $ 400,000
Walter B. Barrett....... 30,000 $ 121,803 -- 70,000 $ -- $ 194,600
- ---------------
(1) The closing sale price for the Company's Common Stock as reported on the
NASDAQ SmallCap Market on January 31, 2000 was $6.50. Value is calculated
by multiplying (a) the difference between $6.50 and the option exercise
price by (b) the number of shares of Common Stock underlying the option.
COMPENSATION COMMITTEE REPORT ON COMPENSATION
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors which is composed of E. Scott
Golden and C. Rodney O'Connor. The Committee's general philosophy with respect
to compensation of the Company's executive officers has been to offer
competitive compensation designed to attract and retain key executives critical
to the long-term success of the Company and to recognize and individual's
contribution and personal performance. The principal component of executive
compensation has been base salary. Executive officers may also be granted
bonuses and stock options.
BASE SALARIES. Base salaries are initially determined by evaluating the
responsibilities of the position held and by reference to the competitive
marketplace for executive talent through review of an individual's background
and overall expertise in the Company's line of business and the salaries of
similarly situated executives. The Company believes that it is competitive with
respect to initial base salaries. Increases to base salaries are also influenced
by the performance of the Company and the individual against established goals
and objectives.
ANNUAL BONUS. The Company maintains an annual incentive bonus program
which provides for the payment of cash bonuses to executive officers and other
key employees of the Company based upon the Company's financial performance and
individual performance. While these bonus awards are based upon the Company's
pre-tax earnings, the Committee strived to align the bonus plan targets with the
Company's long-term goals so that strategic focus is maintained.
OPTIONS. The Company's Stock Option Plan provides such an incentive
through the award of stock options to executive officers and other key
employees. The Stock Option Plan is administered by the Board of Directors.
Ninety thousand stock options were granted to three of the Company's executive
officers during the fiscal year ended January 31, 2000.
18
EMPLOYMENT AGREEMENTS. In December of 1996, the Company entered into an
employment agreement with Stanley H. Streicher, the Company's President and
Chief Executive Officer. In July of 1997, the Company entered into an employment
agreement with Walter B. Barrett, the Company's Vice President of Finance and
Chief Financial Officer. Accordingly, the compensation payable to Mr. Streicher
and Mr. Barrett for fiscal 2000 and subsequent years will be determined pursuant
to their employment agreements. See "Executive Compensation -- Employment
Contracts." The Company also has entered into employment agreements with its
other two executive officers.
E. Scott Golden, C. Rodney O'Connor.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Golden performed legal services for the Company during the fiscal
year ended January 31, 2000 and may be retained to provide legal advice to the
Company from time to time in the future.
DIRECTOR COMPENSATION
The Company compensates each non-employee director a director's fee of
$500 per month. In addition, the company's directors are reimbursed for any
out-of-pocket expense incurred by them for attendance at meetings of the Board
of Directors or committees thereof. In February 1997, each non-employee director
was granted options to purchase 12,000 shares of common stock. On February 18,
1998, the Board of Directors lowered the exercise price of such options from
$8.375 per share to $3.69 per share (the closing price of the common stock on
the date of such action). Such options are callable by the Company at any time
(i) after February 1, 2002 or (ii) when the bid price for the common stock is at
least $20.00 per share.
PERFORMANCE TABLE
The following table shows the cumulative total shareholder return of
the Company's Common Stock over the fiscal periods ended January 31, 2000, 1999,
1998 and 1997 as compared to the total returns of the NASDAQ Stock Market Index
and Russell 2000 Index. Returns are based on the change in year-end to year-end
price and assume reinvested dividends. The table assumes $100 was invested on
December 11, 1996 (the date of the Company's inception) in the Company's common
stock, NASDAQ Stock Market Index and Russell 2000 Index.
JANUARY JANUARY JANUARY JANUARY DECEMBER 11,
2000 1999 1998 1997 1996
-------- -------- -------- -------- -----------
Streicher Mobile Fueling, Inc....... $ 81.00 $ 26.00 $ 47.00 $ 108.00 $ 100.00
NASDAQ Stock Market-- US............ $ 303.00 $ 198.00 $ 126.00 $ 107.00 $ 100.00
Russell 2000 Index.................. $ 122.00 $ 126.00 $ 124.00 $ 105.00 $ 100.00
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the
beneficial ownership of the Company's Common Stock as of April 28, 2000 by (a)
each person known to the Company to own beneficially more than five percent of
the Company's outstanding Common Stock, (b) each director (including nominees)
who owns any such shares, (c) each Named Executive Officer and (d) the directors
and executive officers of the Company as a group:
19
COMMON STOCK
BENEFICIALLY OWNED(2)
-------------------------
NAME OF BENEFICIAL OWNER(1) SHARES PERCENT
- ---------------------------------------------------------------------------- --------- -------
Stanley H. Streicher(3)..................................................... 1,501,500 54.4%
Walter B. Barrett(4)........................................................ 5,000 *
E. Scott Golden(5).......................................................... 11,388 *
Joseph M. Murphy(6)......................................................... 12,888 *
John H. O'Neil, Jr.(6)...................................................... 12,888 *
C. Rodney O'Connor(7)....................................................... 100,000 *
All directors and executive officers as a group (8 persons)(8).............. 1,651,664 56.2%
- ---------------
* Less than one percent.
(1) Unless otherwise indicated, the address of each of the beneficial owners
identified is c/o Streicher Mobile Fueling, Inc., 2720 N.W. 55th Court,
Fort Lauderdale, Florida 33309.
(2) Based on 2,712,600 shares of Common Stock outstanding. Pursuant to the
rules of the Securities and Exchange Commission (the "Commission"), certain
shares of Common Stock which a person has the right to acquire within 60
days of April 28, 2000 pursuant to the exercise of stock options are deemed
to be outstanding for the purpose of computing the percentage ownership of
any other person.
(3) Includes (i) 1,301,500 shares owned by Supreme Oil Company, Inc.
("Supreme"), of which Stanley H. Streicher owns 100% of the outstanding
capital stock, (ii) 20,000 shares owned by Stanley H. Streicher, and (iii)
180,000 shares issuable upon the exercise of options that are presently
exercisable. Excludes 800,000 shares issuable upon exercise of stock
options held by Mr. Streicher that are not exercisable within 60 days of
April 28, 2000.
(4) Includes 5,000 shares issuable upon the exercise of options that are
presently exercisable. Excludes 65,000 shares issuable upon the exercise of
options that are not presently exercisable.
(5) Includes (i) 1,000 shares owned directly by Mr. Golden and (ii) 10,388
shares issuable upon the exercise of options that are presently
exercisable.
(6) Includes 12,888 shares subject to presently exercisable options.
(7) Includes 100,000 shares owned directly by Mr. O'Connor. Excludes
100,000 shares owned by Mr. O'Connor's adult children, as to which
shares Mr. O'Connor disclaims any ownership interest.
(8) Includes 8,000 shares issuable upon the exercise of presently exercisable
options. Excludes 62,000 shares issuable upon the exercise of options that
are not presently exercisable.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company was incorporated in October 1996. Prior to the effective
date of the Company's Registration Statement for its initial public offering on
December 11, 1996, the Company's business was conducted through the Mobile
Fueling Division of Streicher Enterprises, Inc. ("Enterprises") which began
mobile fueling operations in 1983. On December 11, 1996, Enterprises completed a
corporate reorganization pursuant to which Enterprises transferred to the
Company all assets, liabilities and operations of its Mobile Fueling Division.
At January 31, 2000, the Company had a note receivable from Enterprises in the
amount of $500,952, which represents tax benefits of the Company used by
Enterprises and certain expenses of Enterprises paid by the Company prior to its
initial public offering. The note receivable bears interest at 8.25% per annum
and requires payment of interest only until January 31, 2007, when all accrued
interest and unpaid principal will become due and payable.
The Company has entered into four operating leases with Mr. Streicher
for the lease of the Company's headquarters and three division offices. These
leases expire at varying times through August 2015. Rental payments totaling
approximately $99,400 for the year ended January 31, 2000 were paid to Mr.
Streicher.
20
Mr. Golden performed legal services for the Company during the fiscal
year ended January 31, 2000 and may be retained to provide legal advice to the
Company from time to time in the future.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) EXHIBITS
EXHIBITS DESCRIPTION
-------- -----------
3.1 Articles of Incorporation (1)
3.2 Bylaws (1)
4.1 Form of Common Stock Certificate (1)
4.2 Form of Redeemable Common Stock Purchase Warrant (1)
4.3 Underwriters' Purchase Option Agreement between the
Registrant and Argent Securities, Inc. (1)
4.4 Warrant Agreement between the Registrant and American
Stock Transfer & Trust Company (1)
10.1 Employment Agreement between the Registrant and
Stanley H. Streicher (1)(2)
10.2 Registrant's Stock Option Plan (1)(2)
10.3 $10,000,000 Amended and Restated Loan Agreement,
dated May 25, 1999, between the Registrant and Bank
Atlantic and First Amendment, dated December 22,
1999, to Amended and Restated Loan Agreement (5)
10.4 Master Security Agreement, dated July 24, 1997,
between the Registrant and General Electric Capital
Corporation (3)
10.5 Form of Promissory Note with General Electric Capital
Corporation (3)
10.6 Employment Agreement between the Registrant and
Walter B. Barrett (2)(4)
10.7 $10,000,000 Promissory Note, dated December 22, 1999,
between the Registrant and Bank Atlantic(5)
23.1 Consent of KPMG LLP(5)
23.2 Consent of Arthur Andersen LLP(5)
27.1 Financial Data Schedules(5)
- ---------------
(1) Incorporated by reference to the exhibit of the same number filed with the
Company's Registration Statement on Form SB-2 (No. 333-11541)
(2) Management Contract or Compensatory Plan
(3) Incorporated by reference to the exhibit of the same number filed by the
Company with Form 10K for the fiscal year ended January 31, 1998.
(4) Incorporated by reference to the exhibit of the same number filed by the
Company with Form 10-K for the fiscal year ended December 31, 1999.
(5) Filed herewith.
21
(b) Financial statement schedule
(c) REPORTS ON FORM 8-K
None.
22
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: May 15, 2000 STREICHER MOBILE FUELING, INC.
By: /S/ STANLEY H. STREICHER
-------------------------------
Stanley H. Streicher,
Chairman of the Board and
Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
NAME TITLE DATE
---- ----- ----
By:/S/ STANLEY H. STREICHER Chairman of the Board and Chief May 15, 2000
--------------------------------------- Executive Officer (Principal Executive
Stanley H. Streicher Officer)
By:/S/ WALTER B. BARRETT Vice President-- Finance and Chief May 15, 2000
--------------------------------------- Financial Officer (Principal Financial and
Walter B. Barrett Accounting Officer)
By:/S/ E. SCOTT GOLDEN Director May 15, 2000
---------------------------------------
E. Scott Golden
By:/S/ JOSEPH M. MURPHY Director May 15, 2000
---------------------------------------
Joseph M. Murphy
By:/S/ JOHN H. O'NEIL, JR. Director May 15, 2000
---------------------------------------
John H. O'Neil, Jr.
By:/S/ C. RODNEY O'CONNOR Director May 15, 2000
---------------------------------------
C. Rodney O'Connor
23
INDEX TO FINANCIAL STATEMENTS
PAGE
Report of Independent Certified Public Accountants................................ F-2
Report of Independent Certified Public Accountants................................ F-3
Consolidated Balance Sheets as of January 31, 2000 and 1999....................... F-4
Consolidated Statements of Operations for Each of the Years in the Three Year
Period Ended January 31, 2000................................................ F-6
Consolidated Statements of Shareholders' Equity for Each of the Years in the
Three Year Period Ended January 31, 2000..................................... F-7
Consolidated Statements of Cash Flows for Each of the Years in the Three Year
Period Ended January 31, 2000................................................ F-8
Notes to Consolidated Financial Statements........................................ F-9
F-1
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
Streicher Mobile Fueling, Inc.:
We have audited the accompanying consolidated balance sheets of Streicher Mobile
Fueling, Inc. (a Florida corporation) and subsidiaries as of January 31, 2000
and 1999 and the related consolidated statements of operations, shareholders'
equity and cash flows for the years then ended. In connection with our audits of
the consolidated financial statements, we have also audited the financial
statement schedule for each of the years in the two year period ended January
31, 2000. These consolidated financial statements and financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Streicher Mobile
Fueling, Inc. and subsidiaries as of January 31, 2000 and 1999 and the results
of their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles. Also in our opinion, the related
consolidated financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.
The accompanying consolidated financial statements and financial statement
schedule have been prepared assuming the Company will continue as a going
concern. As discussed in Note 3 to the consolidated financial statements, the
Company incurred an operating loss for the fourth quarter of the current fiscal
year and these operating losses have continued in periods subsequent to year
end. These losses, the uncertainty surrounding the Company's relationship with
its principal lender due to a loan covenant violation and the reduction in the
Company's cash reserves have raised substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 3. The consolidated financial statements and financial
statement schedule do not include any adjustments that might result from the
outcome of this uncertainty.
KPMG LLP
Fort Lauderdale, Florida,
March 24, 2000
F-2
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
Streicher Mobile Fueling, Inc.:
We have audited the accompanying consolidated statements of operations,
shareholders' equity and cash flows of Streicher Mobile Fueling, Inc. (a Florida
corporation) and subsidiaries for the year ended January 31, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the result of operations and cash flows of
Streicher Mobile Fueling, Inc. and subsidiaries for the year ended January 31,
1998, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
April 10, 1998.
F-3
STREICHER MOBILE FUELING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 31, 2000 AND 1999
ASSETS 2000 1999
- -------------------------------------------------------------- -------------- -------------
Current Assets:
Cash and cash equivalents................................. $ 874,972 $ 122,961
Accounts receivable, net of allowance for doubtful
accounts of $111,600 and $79,000, respectively......... 9,587,686 5,774,912
Inventories............................................... 434,871 81,336
Prepaid expenses and other current assets................. 476,581 246,538
-------------- -------------
Total current assets................................ 11,374,110 6,225,747
Property and Equipment:
Land...................................................... 249,302 233,803
Leasehold improvements.................................... 189,684 189,684
Fuel trucks and automobiles............................... 12,280,350 10,150,453
Machinery and equipment................................... 956,980 894,146
Furniture and fixtures.................................... 79,157 69,779
Construction in process................................... 1,328,113 138,910
-------------- -------------
15,083,586 11,676,775
Less accumulated depreciation and amortization...... (3,098,177) (2,186,515)
-------------- -------------
11,985,409 9,490,260
Account receivable from related party (Note 7)................ 500,952 445,956
Other assets.................................................. 70,453 32,186
-------------- -------------
Total assets........................................ $ 23,930,924 $ 16,194,149
============== =============
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
F-4
STREICHER MOBILE FUELING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 31, 2000 AND 1999
(CONTINUED)
LIABILITIES AND SHAREHOLDERS' EQUITY 2000 1999
- -------------------------------------------------------------- -------------- -------------
Current Liabilities:
Bank line of credit payable (Note 4)...................... $ 7,679,219 $ 4,570,789
Current portion of long-term debt (Note 5)................ 1,560,893 1,411,984
Accounts payable.......................................... 3,058,460 1,970,099
Accrued expenses.......................................... 753,114 477,475
Customer deposits......................................... 119,895 119,895
-------------- -------------
Total current liabilities........................... 13,171,581 8,550,242
Long-term Liabilities:
Long-term debt, excluding current portion (Note 5)........ 6,470,171 4,284,271
-------------- -------------
Total liabilities................................... 19,641,752 12,834,513
-------------- -------------
Commitments and Contingencies (Note 9)
Shareholders' Equity (Notes 11 and 12)
Preferred stock, $.01 par value, 1,000,000 shares
authorized, none issued and outstanding................ -- --
Common stock, $.01 par value, 20,000,000 shares
authorized, 2,710,400 and 2,575,000 shares issued and
outstanding in 2000 and 1999, respectively............. 27,104 25,750
Additional paid-in capital................................ 5,651,500 5,195,758
Accumulated deficit....................................... (1,389,432) (1,861,872)
-------------- -------------
Total shareholders' equity.......................... 4,289,172 3,359,636
-------------- -------------
Total liabilities and shareholders' equity.......... $ 23,930,924 $ 16,194,149
============== =============
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-5
STREICHER MOBILE FUELING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR EACH OF THE YEARS IN THE THREE YEAR PERIOD ENDED JANUARY 31, 2000
2000 1999 1998
--------------- -------------- --------------
Fuel sales and service revenues...................... $ 50,801,184 $ 30,331,571 $ 29,399,547
Fuel taxes........................................... 23,369,811 17,044,000 13,642,267
--------------- -------------- --------------
Total revenues (Note 6)......................... 74,170,995 47,375,571 43,041,814
Cost of fuel sales and service....................... 45,187,390 26,777,496 26,094,240
Fuel taxes........................................... 23,369,811 17,044,000 13,642,267
--------------- -------------- --------------
Total cost of sales............................. 68,557,201 43,821,496 39,736,507
Gross profit.................................. 5,613,794 3,554,075 3,305,307
Operating expenses................................... 4,035,785 3,601,278 3,575,368
--------------- -------------- --------------
Operating income (loss)....................... 1,578,009 (47,203) (270,061)
Loss on asset disposal............................... (18,965) (6,877) (62,399)
Interest expense..................................... (1,151,707) (839,907) (474,923)
Interest and other income............................ 65,103 73,391 178,811
--------------- -------------- --------------
Income (loss) before income taxes............. 472,440 (820,596) (628,572)
Income tax benefit (provision)....................... -- (261,018) 153,146
--------------- -------------- --------------
Net income (loss)............................. $ 472,440 $ (1,081,614) $ (475,426)
--------------- -------------- --------------
Basic net income (loss) per share.................... $ .17 $ (.42) $ (.18)
--------------- -------------- --------------
Diluted net income (loss) per share.................. $ .16 $ (.42) $ (.18)
--------------- -------------- --------------
Basic weighted average common shares outstanding..... 2,710,400 2,575,000 2,575,000
--------------- -------------- --------------
Diluted weighted average common shares outstanding... 2,880,529 2,575,000 2,575,000
--------------- -------------- --------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-6
STREICHER MOBILE FUELING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR EACH OF THE YEARS IN THE THREE YEAR PERIOD ENDED JANUARY 31, 2000
COMMON STOCK ADDITIONAL
------------------------- PAID-IN COMPREHENSIVE
SHARES AMOUNT CAPITAL LOSS
--------- ---------- -------------- -------------
BALANCE, JANUARY 31, 1997....................... 2,575,000 $ 25,750 $ 5,220,758 $ --
Net loss........................................ -- -- -- (475,426)
Change in unrealized gain on investments........ -- -- -- (19,737)
Comprehensive loss.............................. (495,163)
Additional common stock offering expenses....... -- -- (25,000) --
--------- ---------- -------------- -------------
BALANCE, JANUARY 31, 1998....................... 2,575,000 25,750 5,195,758 --
Net loss........................................ -- -- -- --
--------- ---------- -------------- -------------
BALANCE, JANUARY 31, 1999....................... 2,575,000 25,750 5,195,758 --
Net income......................................
Proceeds from exercise of stock options and
warrants..................................... 105,400 1,054 412,292 --
Stock exchanged for services.................... 30,000 300 43,450 --
--------- ---------- -------------- -------------
BALANCE, JANUARY 31, 2000....................... 2,710,400 $ 27,104 $ 5,651,500 $ --
========= ========== ============== =============
ACCUMULATED
OTHER
COMPREHENSIVE ACCUMULATED
INCOME (LOSS) DEFICIT TOTAL
------------- ------------ -------------
BALANCE, JANUARY 31, 1997....................... $ 19,737 $ (304,832) $ 4,961,413
Net loss........................................ -- (475,426) (475,426)
Change in unrealized gain on investments........ (19,737) -- (19,737)
Comprehensive loss.............................. (495,163)
Additional common stock offering expenses....... -- -- (25,000)
------------- ------------ -------------
BALANCE, JANUARY 31, 1998....................... -- (780,258) 4,441,250
Net loss........................................ -- (1,081,614) (1,081,614)
------------- ------------ -------------
BALANCE, JANUARY 31, 1999....................... -- (1,861,872) 3,359,636
Net income...................................... -- 472,440 472,440
Proceeds from exercise of stock options and
warrants..................................... -- -- 413,346
Stock exchanged for services.................... -- -- 43,750
------------- ------------ -------------
BALANCE, JANUARY 31, 2000....................... $ -- $(1,389,432) $ 4,289,172
============= ============ -------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-7
STREICHER MOBILE FUELING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH OF THE YEARS IN THE THREE YEAR PERIOD ENDED JANUARY 31, 2000
2000 1999 1998
----------- ----------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)........................................... $ 472,440 $(1,081,614) $ (475,426)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Loss on asset disposal................................... 18,965 6,877 62,399
Gain on sale of investments.............................. -- -- (44,621)
Depreciation and amortization............................ 1,085,813 833,851 510,901
Deferred income tax (benefit) provision.................. -- 259,392 (153,146)
Provision for doubtful accounts.......................... 77,500 65,000 65,000
Amortization of stock exchanged for services............. 43,750 -- --
Changes in operating assets and liabilities..............
Increase in accounts receivable......................... (3,890,274) (774,475) (777,676)
(Increase) Decrease in inventories...................... (353,535) 52,588 (56,963)
(Increase) Decrease in prepaid expenses and
other current assets................................. (230,043) 104,993 (121,983)
Increase in deferred income tax asset................... -- (4,544) (266,921)
(Increase) Decrease in other assets..................... (38,268) 24,724 10,217
(Decrease) Increase in accounts payable and
accrued expenses..................................... 1,348,453 (281,670) (108,604)
Decrease in customer deposits........................... -- -- (49,775)
----------- ----------- ------------
Net cash used in operating activities................. (1,465,198) (794,878) (1,406,598)
----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of investment............................ -- -- 74,933
Purchase of investment...................................... -- 69,227 (3,525)
Purchases of property and equipment......................... (3,648,120) (4,143,743) (3,492,706)
Proceeds from disposal of equipment......................... 63,740 13,477 87,462
Note receivable due from related party...................... (54,996) 5,850 (132,763)
----------- ----------- ------------
Net cash used in investing activities..................... (3,639,376) (4,055,188) (3,466,599)
----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under line of credit......................... 3,108,430 1,301,076 1,865,244
Borrowings under long-term debt............................. 7,880,002 3,424,166 4,322,594
Principal payments on long-term debt........................ (5,545,193) (1,163,349) (2,751,507)
Net proceeds from issuance of common stock and common
stock warrants............................................ 413,346 -- --
----------- ----------- ------------
Net cash provided by financing activities................. 5,856,585 3,561,893 3,436,331
----------- ----------- ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........... 752,011 (1,288,173) (1,436,866)
CASH AND CASH EQUIVALENTS, beginning of year................... 122,961 1,411,134 2,848,000
----------- ----------- ------------
CASH AND CASH EQUIVALENTS, end of year......................... $ 874,972 $ 122,961 $ 1,411,134
----------- ----------- ------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for-
Interest................................................... $ 1,102,645 $ 800,222 $ 453,786
----------- ----------- ------------
Income taxes............................................... $ 1,791 $ 4,544 $ 234,296
----------- ----------- ------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-8
STREICHER MOBILE FUELING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 2000, 1999 AND 1998
(1) NATURE OF OPERATIONS
Streicher Mobile Fueling, Inc. (the "Company") was incorporated in the
State of Florida in October 1996. Prior to the effective date of the
Company's registration statement for its initial public offering on
December 11, 1996, the Company's business was conducted through the
Mobile Fueling Division of Streicher Enterprises, Inc. ("Enterprises"),
which began mobile fueling operations in 1983. Enterprises completed a
corporate reorganization as of such effective date, pursuant to which
the Mobile Fueling Division of Enterprises transferred its assets,
liabilities and operations to the Company. Such corporate
reorganization has been retroactively reflected in the accompanying
consolidated financial statements and notes thereto as if such transfer
had occurred at inception of the former Mobile Fueling Division.
Accordingly, accumulated deficit includes the cumulative results of the
former Mobile Fueling Division. Enterprises is wholly owned by the
president of the Company and through an affiliate company currently
owns 47.0% of the outstanding common stock of the Company.
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).
The Company currently has operations in Florida, Georgia, Louisiana,
Tennessee, California and Texas.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) 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 accompanying consolidated financial statements include the
operations of the former Mobile Fueling Division of
Enterprises on a retroactive basis as if the transfer
discussed in Note 1 had occurred at the date of inception of
the former Mobile Fueling Division since these entities were
under common control before and after the reorganization.
(b) Cash and Cash Equivalents
The Company considers all highly liquid investments with
original maturities of three months or less to be cash
equivalents. Included in cash and cash equivalents in the
accompanying consolidated balance sheets is interest bearing
cash of approximately $552,600 and $123,000 as of January 31,
2000 and 1999, respectively.
(c) Accounts Receivable
Accounts receivable are due from companies within a broad
range of industries and are generally unsecured. The Company
provides for credit losses based on management's evaluation of
collectibility based on current and historical performance of
the customer.
F-9
(d) Inventories
Inventories, consisting of gasoline and diesel fuel, are
stated at the lower of cost or market which approximates the
first-in, first-out method.
(e) Property and Equipment
Property and equipment is stated at cost less accumulated
depreciation and amortization. Ordinary maintenance and
repairs are expensed as incurred. Improvements which
significantly increase the value or useful life of property
and equipment are capitalized. Property and equipment is
depreciated or amortized using the straight-line method over
the following estimated useful lives:
YEARS
------------------
Mobile fuel delivery trucks 10
Mobile fuel delivery tanks 25
Machinery and equipment 3-5
Furniture and fixtures 10
Leasehold improvements Lesser of lease
term or useful
life
(f) Income Taxes
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences
between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases and
operating loss and tax credit carryforwards. Deferred tax
liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes
the enactment date. Income taxes are provided as if the
Company had been a separate taxable entity since the inception
of the former Mobile Fueling Division.
(g) Revenue Recognition
The Company recognizes revenue at the time services are
performed and fuel is delivered.
(h) Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions. These assumptions, if not
realized could affect the reported amounts of assets and
liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
(i) Fair Value of Financial Instruments
The Company's financial instruments, primarily consisting of
cash and cash equivalents, investments, accounts receivable,
note receivable from related party, accounts payable, bank
line of credit payable, and long-term debt, approximate fair
value due to their short-term nature or interest rates that
approximate current market rates.
F-10
(j) Net Income or Loss Per Share
Net income or loss per share is determined by dividing net
income or loss by the weighted average common shares
outstanding. Certain common stock equivalents, consisting of
employee stock options and common stock warrants in fiscal
2000 were dilutive and were included in the calculation of net
income per share in fiscal 2000. Common stock equivalents
consisting of employee stock options and common stock warrants
in 1999 and 1998 were antidilutive and were not included in
the computation of net loss per share in fiscal 1999 and 1998.
In fiscal 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings Per Share"
which simplifies the accounting for earnings per share by
presenting basic earnings per share including only outstanding
common stock and diluted earnings per share including the
effect of dilutive common stock equivalents.
(k) Accounting for Long-Lived Assets
The Company accounts for long-lived assets in accordance with
the provisions of SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." This Statement requires that long-lived assets and
certain identifiable intangibles be reviewed for impairment
whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net
cash flows expected to be generated by the asset. If such
assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying
amount of the assets exceed the fair market value of the
assets. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell.
(l) Stock Options
Statement of Financial Accounting Standards No. 123 ("SFAS
123"), "Accounting for Stock Based Compensation," allows
entities to choose between a fair value based method of
accounting for employee stock options or similar equity
instruments and the intrinsic value based method of accounting
prescribed by Accounting Principles Board Opinion No. 25 ("APB
No. 25"), "Accounting for Stock Issued to Employees." Entities
electing to account for employee stock options or similar
equity instruments under APB No. 25 must make pro forma
disclosures of net income and earnings per share as if the
fair value method of accounting had been applied. The Company
has elected to apply the provisions of APB No. 25 in the
preparation of its consolidated financial statements and
provide pro forma disclosure of net income (loss) and earnings
per share as required under SFAS 123 in the notes to the
consolidated financial statements.
(m) Comprehensive Income
In June 1997, the FASB issued Statement of Financial
Accounting Standards No 130, "Reporting Comprehensive Income"
("SFAS No. 130"), which establishes standards for reporting
and display of comprehensive income and its components
(revenues, expenses, gains, and losses) in a full set of
general-purpose financial statements. This Statement requires
that all items that are required to be recognized under
accounting standards as components of comprehensive income, be
reported in a financial statement that is displayed with the
same prominence as other financial statements. This Statement
is effective for fiscal years beginning after December 15,
1997. For the years ended January 31, 2000 and 1999,
comprehensive income or loss equaled net income or loss. Prior
year financial statements have been reclassified to conform to
the requirements of SFAS No. 130.
F-11
(n) Segment Reporting
Effective February 1, 1998, the Company adopted Statement of
Financial Accounting Standards No 131, "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS No.
131"), which establishes standards for reporting information
about operating segments in annual financial statements and
requires that selected information about operating segments be
reported in interim financial statements. It also establishes
standards for related disclosures about products and services,
geographic areas and major customers. The adoption of this
pronouncement did not have a significant effect on the
Company's consolidated financial position, results of
operations or cash flows. The Company operates in one
reporting segment as determined under the guidance in SFAS No.
131.
(o) Reclassifications
Certain prior year amounts have been reclassified to conform
to the current year presentation.
(3) LIQUIDITY AND WORKING CAPITAL
While the Company operated at a profit for the fiscal year 2000, the
Company incurred an unaudited net operating loss of $363,000 in the
fourth quarter of fiscal 2000 and has continued to incur operating
losses in the periods subsequent to January 31, 2000. The losses
incurred subsequent to the fiscal 2000 year end have placed the Company
in violation of the tangible net worth requirement in the loan
agreement with its principal lender. The lender has not provided a
waiver of the violation at this time.
In response to the losses incurred, the Company has taken a number of
steps to improve its operating results by reducing operating costs. The
steps taken include:
o Evaluations of individual customer profitability, with price
and service frequency adjustments implemented for unprofitable
accounts.
o Significant reductions on driver overtime wages as a result of
route restructurings and combinations.
o Significant reduction in the sales and marketing staffs, along
with related expenses and promotion costs.
o Implementing a program to institute a 10% reduction in ongoing
repair and maintenance costs.
o Selling certain high maintenance cost older equipment and
replacing it with new equipment.
o Other cost reductions, primarily in the general and
administrative cost area.
The uncertainty surrounding the Company's relationship with its
principal lender, the current level of the Company's cash reserves, and
its ongoing operating losses raises questions about the Company's
ability to continue as a going concern. Management believes that the
continued implementation of the Company's fiscal year 2001 operating
plan will enable the Company to continue as a going concern. The
Company's ability to successfully implement its plans to continue to
improve its operations is dependent upon a number of factors, some of
which are beyond its control. There can be no assurance that the
Company's operating results or financial conditions will improve in
fiscal year 2001.
(4) BANK LINE OF CREDIT PAYABLE
The Company has outstanding borrowings of $7.7 million as of January
31, 2000 under a $10.0 million bank line of credit. This line permits
the Company to borrow up to 85% of the total amount of eligible
accounts receivable. Based on eligible receivables outstanding at
January 31, 2000 the line has been fully drawn as of
F-12
that date. Interest is payable monthly at 1.0% over the prime rate
(8.75% as of January 31, 2000). The line of credit matures on April 30,
2001 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 January 31, 2000, the Company was in compliance
with the minimum net worth and debt to equity requirements. Operating
losses incurred subsequent to January 31, 2000 have caused the Company
to violate the minimum net worth requirement. See Footnote 3.
(5) LONG-TERM DEBT
Long-term debt consists of the following:
JANUARY 31,
------------------------------------
2000 1999
------------- -------------
Equipment loans payable (10.04% weighted average
interest rate at January 31, 2000) due in monthly
installments with varying maturities through $ 8,031,064 $ 5,696,255
January 2005
Less: current portion (1,560,893) (1,411,984)
------------- -------------
Long-term debt, excluding current portion $ 6,470,171 $ 4,284,271
============= =============
Future principal payments on long-term debt are due as follows as of
January 31, 2000:
YEAR ENDING JANUARY 31,
-----------------------
2001 $ 1,560,893
2002 1,690,958
2003 1,791,811
2004 1,633,819
2005 1,353,583
------------
$ 8,031,064
============
(6) MAJOR CUSTOMERS
Revenue from three major customers was approximately $13.4 million,
$10.8 million and $13.8 million in fiscal 2000, 1999 and 1998,
respectively. Accounts receivable from these customers totaled $2.0
million at January 31, 2000 and $1.2 million at January 31, 1999.
(7) RELATED PARTY TRANSACTIONS
The Company engages in certain transactions with Enterprises. An
account receivable from Enterprises totaled $500,952 and $445,956 as of
January 31, 2000 and 1999, respectively, and bears interest at 8.25
percent per annum. Such amounts represent tax benefits of the Company
used by Enterprises and certain expenses of Enterprises paid by the
Company prior to its initial public offering and cash advances to
Enterprises prior to the Company's initial public offering. Interest
income includes approximately $37,400 in fiscal 2000, $36,000 in fiscal
1999, and $25,000 in fiscal 1998 relating to the account receivable
from Enterprises. The terms of the agreement with Enterprises require
annual payments of interest only with a final payment of all accrued
interest and unpaid principal due on January 31, 2007. The account is
secured by a pledge of 100,000 shares of the Company's common stock,
which is owned by an affiliate of Enterprises.
F-13
The Company has entered into four operating leases with the sole
shareholder of Enterprises for the lease of the Company's headquarters
and three division offices. These leases expire at varying times
through August 2015. Rent expense totaling approximately $99,400,
$99,000 and $95,000 for the years ended January 31, 2000, 1999 and
1998, respectively, was paid to the sole shareholder of Enterprises.
(8) INCOME TAXES
The benefit (provision) for income taxes consists of the following for
the years ended January 31, 2000, 1999 and 1998:
2000 1999 1998
---- ---- ----
Federal $ -- $(236,725) $ 118,625
State -- (24,293) 34,521
-------- -------- -------
$ -- $(261,018) $ 153,146
-------- --------- -------
Current -- $ (1,626) $ --
Deferred -- (259,392) 153,146
-------- -------- -------
$ -- $(261,018) $ 153,146
======== ========= =======
The actual tax benefit (provision) of the Company for the years ended
January 31, 2000, 1999 and 1998 differs from the statutory Federal tax
rate of 34% due to the following:
2000 1999 1998
---- ---- ----
Expected benefit (provision) for income
taxes at statutory Federal income tax rates $(160,630) $ 279,003 $ 213,714
State income taxes (17,811) 30,940 22,783
Other 10,085 36,099 (66,439)
Deferred tax valuation allowance 185,441 (594,822) --
Nondeductible expenses (17,085) (12,238) (16,912)
---------- -------- -------
Actual benefit (provision) for income taxes $ -- $ (261,018) $ 153,146
========== ======== =======
Deferred income taxes reflect the net effects of (a) temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and their income tax bases, and (b)
operating loss carryforwards.
The tax effects of temporary differences and operating loss
carryforwards that give rise the significant portions of the deferred
tax assets and liabilities at January 31, 2000 and 1999 are presented
below:
2000 1999
---------- ----------
Deferred tax assets:
Net operating loss carryforwards $1,753,199 $1,078,758
Asset basis adjustment for Reorganization 384,223 416,241
---------- ----------
Total gross deferred tax assets 2,137,422 1,494,999
Less valuation allowance (884,470) (1,069,911)
---------- ----------
Total deferred tax assets 1,252,952 425,088
---------- ----------
Deferred tax liabilities:
Depreciation 1,215,322 406,273
Other 37,630 18,815
---------- ----------
Total deferred tax liabilities 1,252,952 425,088
---------- ----------
Net deferred tax assets $ -- $ --
========== ==========
Realization of deferred tax assets associated with net operating loss
and credit carryforwards is dependent upon generating sufficient
taxable income prior to their expiration. Management believes that
these net operating loss and credit carryforwards may expire unused and
will not meet the "more likely than not" criteria of SFAS No. 109, and,
accordingly has established a valuation allowance for the excess of
deferred tax assets over deferred tax liabilities.
The net change in the valuation allowance for the years ended January
31, 2000 and 1999 was a decrease of $185,411 and an increase of
$594,822, respectively. As of January 31, 2000, the Company has net
operating loss carryforwards of approximately $4.7 million available to
offset future taxable income through 2020.
F-14
(9) COMMITMENTS AND CONTINGENCIES
(a) Operating Leases
The Company leases real property and buildings under operating
leases that expire at various times through the year 2015.
Future minimum lease payments under non cancelable operating
leases as of January 31, 2000, including the related party
leases discussed in Note 7 are as follows:
YEAR ENDING OPERATING LEASE
JANUARY 31 PAYMENTS
----------- -------------
2001 $ 108,145
2002 79,281
2003 73,209
2004 73,209
2005 73,209
Thereafter 632,710
------------
$ 1,039,763
============
(b) Governmental Regulation
The Company's operations are affected by numerous Federal,
state and local laws, including those relating to protection
of the environment and worker safety. The transportation of
gasoline and diesel fuel is subject to regulation by various
Federal, state and local agencies. These regulatory
authorities have broad powers, and the Company is subject to
regulatory and legislative changes that can affect the
economics of the industry by requiring changes in operating
practices or influencing the demand for, and the cost of
providing, its services. The Company is also subject to the
rules and regulations of the Hazardous Materials
Transportation Act. In addition, the Company depends on the
supply of gasoline and diesel fuel from the oil and gas
industry and, therefore, is affected by changing taxes, price
controls and other laws and regulations relating to the oil
and gas industry. The Company cannot determine the extent to
which its future operations and results may be affected by new
legislation, new regulations or changes in existing
regulations.
The technical requirements of these laws and regulations are
becoming increasingly expensive, complex and stringent. These
laws may impose penalties or sanctions for damages to natural
resources or threats to public health and safety. Such laws
and regulations may also expose the Company to liability for
the conduct of or conditions caused by others, or for acts of
the Company that were in compliance with all applicable laws
at the time such acts were performed. Sanctions for
noncompliance may include revocation of permits, corrective
action orders, administrative or civil penalties and criminal
prosecution. Certain environmental laws provide for joint and
several liability for clean up of spills and releases of
hazardous substances. In addition, companies may be subject to
claims alleging personal injury or property damage as a result
of alleged exposure to hazardous substances, as well as damage
to natural resources. The Company carries liability insurance
of $30,000,000 in the event of such occurrences.
Although the Company believes that it is in substantial
compliance with existing laws and regulations, there can be no
assurance that substantial costs for compliance will not be
incurred in the future. Moreover, it is possible that other
developments, such as stricter environmental laws, regulations
and enforcement policies thereunder, could result in
additional, presently unquantifiable, costs or liabilities to
the Company.
F-15
(c) Employment Agreements
In December 1996, the Company entered into an employment
agreement with its president. The term of the agreement is
five years and will automatically renew for two successive
two-year terms, unless notice of termination is given by the
Company prior to a renewal period. The agreement provides that
if the president's employment is terminated as a result of his
death or disability, he or his estate will receive for a
period of six months, his base salary in effect as of the date
of such termination and a prorated amount of any bonuses. The
agreement also provides that in the event the president's
employment is terminated "without cause" the president will
receive, in addition to any salary, bonus and other
compensation accrued through the date of termination, a lump
sum equal to the greater of the full amount of salary, bonuses
and other compensation due under the agreement for the
remainder of the term or three times the then-existing salary
and most recent annual bonus. The agreement further provides
that the president will not compete with the Company while
employed by the Company and for a period of two years
following termination of employment. In the event that his
employment is terminated without cause, as a result of his
death or disability, or upon a change of control (as defined
in the employment agreement), all options to purchase common
stock held by the president shall become immediately
exercisable.
The agreement also provides for two percent per annum of the
outstanding balance of any Company debt personally guaranteed
by the president to be paid to the president in quarterly
installments. For the year ended January 31, 1998 payments
totalling $76,000 were made to the president of the Company
pursuant to this agreement. As of January 31, 1998, all debts
guaranteed by the president of the Company have been repaid or
the guarantees have been released by the lender.
The Company has also entered into written employment
agreements with certain other company officers. The agreements
vary in term from one to three years and automatically renew
for successive one year periods unless notice of termination
is given by the Company prior to a renewal period.
(d) Absence of Written Agreements
Most of the Company's customers do not have written agreements
with the Company and can terminate the Company's mobile
fueling services at any time and for any reason. If the
Company were to experience a high rate of terminations, the
Company's business and financial performance could be
adversely affected.
(e) Litigation
The Company may be subject to legal proceedings and claims
which arise in the ordinary course of its business. In the
opinion of management no litigation or claims exist that would
have a material effect on the consolidated financial position
or results of operations of the Company.
(f) Other Commitments
At January 31, 2000, the Company had purchase commitments for
four custom fuel delivery vehicles aggregating approximately
$600,000.
(10) EMPLOYEE BENEFIT PLAN
In May 1998, the Company adopted a 401(k) plan for all employees over
the age of 21 with 1,000 hours of service in the previous six months of
employment. The Plan provides for a discretionary match of employee
F-16
contributions as determined by the Board of Directors. No Company
contributions were made for the fiscal years ended January 31, 2000 or
1999.
(11) COMMON STOCK WARRANTS
The Company issued 1,150,000 common stock warrants in conjunction with
its initial public offering in December 1996. Each warrant entitles the
holder to purchase one share of common stock at a price of $6.90 per
share for a period of four years commencing in December 1997 (the
"First Exercise Date"). Each warrant is redeemable by the Company at a
redemption price of $0.01 per warrant, at any time after the First
Exercise Date, upon thirty days' prior written notice to the holders,
if the average closing bid price of the common stock, as reported on
the principal exchange on which the common stock is traded, equals or
exceeds $10.50 per share for 20 consecutive trading days ending three
days prior to the date of the notice of redemption. Any warrant holder
who does not exercise prior to the redemption date, as set forth in the
Company's notice of redemption, will forfeit the right to purchase the
common stock underlying the warrants, and after the redemption date or
upon conclusion of the exercise period any outstanding warrants will
become void and be of no further force or effect, unless extended by
the Board of Directors of the Company.
The number of shares of common stock that may be purchased is subject
to adjustment upon the occurrence of certain events including a
dividend distribution to the Company's shareholders, or a subdivision,
combination or reclassification of the outstanding shares of common
stock. Further, the warrant exercise price is subject to adjustment in
the event the Company issues additional stock or rights to acquire
stock at a price per share that is less than the current market price
per share of common stock on the record date established for the
issuance of additional stock or rights to acquire stock. The term
"current market price," is defined as the average of the daily closing
prices, will not be adjusted in the case of the issuance or exercise of
options pursuant to the Company's stock option plans, the issuance or
exercise of the underwriter's warrants (or the warrants included
therein) or any other options or warrants outstanding as of December
1996. The warrant exercise price is also subject to adjustment in the
event of a consolidation or merger where a distribution by the Company
is made to its stockholders of the Company's assets or evidences of the
indebtedness (other than cash or stock dividends) or pursuant to
certain subscription rights or other rights to acquire common stock.
The Company may at any time, and from time to time, extend the exercise
period of the warrants, provided that written notice of such extension
is given to the warrant holders prior to the expiration of the date
then in effect. Also, the Company may reduce the exercise price of the
warrants for limited periods or through the end of the exercise period
in accordance with the terms of the Company's warrant agreement with
the transfer agent if deemed appropriate by the Board of Directors. The
Company does not presently contemplate any extension of the exercise
period nor does it contemplate any reduction in exercise price of the
warrants.
(12) STOCK OPTION PLAN
The Company adopted a Stock Option Plan (the "Plan"), under which
500,000 shares of common stock are reserved for issuance upon exercise
of options. The Plan is designed to serve as an incentive for retaining
qualified and competent employees. The Company's Board of Directors
administers the Plan and is authorized to grant options thereunder to
all eligible employees of the Company, including officers and directors
(whether or not employees) of the Company and consultants. The Plan
provides for the granting of both "incentive stock options" (as defined
in Section 422A of the Internal Revenue Code) and nonqualified stock
options. Options are granted under the Plan on such terms and at such
prices as determined by the Board of Directors, except that the per
share exercise price of incentive stock options cannot be less than the
fair market value of the common stock on the date of grant and the per
share exercise price of nonqualified stock options will not be less
than 85% of the fair market value on the date of grant. Each option is
exercisable after the period or periods specified in the option
agreement, but no option can be exercised until six months after the
date of grant or after the expiration of 10 years from the date of
grant.
F-17
Options granted under the Plan are not transferable other than by will
or by the laws of descent and distribution. The Plan also authorizes
the Company to make loans to optionees to enable them to exercise their
options and to allow them to use common stock to pay for the exercise
of their options. Such loans must (i) provide for recourse to the
optionee, (ii) bear interest at a rate no less than the rate of
interest payable by the Company to its principal lender at the time the
loan is made, and (iii) be secured by the shares of common stock
purchased. The following table summarizes stock option activity for the
periods indicated:
WEIGHTED AVERAGE
SHARES EXERCISE PRICE
--------- ----------------
Options outstanding as of January 31, 1998.... 98,000 $ 3.34
---------
Granted..................................... 112,052 $ 3.68
---------
Exercised................................... --
Expired..................................... --
Options outstanding as of January 31, 1999.... 210,052
Granted..................................... 159,000 $ 5.49
---------
Exercised................................... (60,300) 3.44
---------
Expired..................................... (32,200) 4.60
--------- ---------
Options outstanding as of January 31, 2000.... 276,552 $ 4.55
======= =========
Exercisable................................... 51,952
========
Available for future grant.................... 163,148
=======
An employment agreement with the Company's president provides for the
issuance of options to acquire 1,000,000 shares of common stock at $6
per share. The timing of vesting of the stock options is contingent
upon the Company achieving either a specified earnings per share level
or a specified stock price level (the "performance threshold"), for the
corresponding fiscal year end. Commencing with fiscal year ending
January 31, 1998 and at each of the four fiscal year ends thereafter,
200,000 of such options will become exercisable if the Company achieves
earnings per share, as defined in the agreement, of $.36, $.43, $.52,
$.62 and $.74 for the fiscal years ending January 31, 1998, 1999, 2000,
2001 and 2002, respectively, (or cumulative earnings per share after
fiscal 1998 of $.66, $1.09, $1.61, $2.23 and $2.97, respectively), or
the closing bid price of the Company's common stock on any 20
consecutive trading days during such fiscal year is $7.25, $8.75,
$10.50, $12.50 and $15.00, respectively, or the Company has cumulative
net income of $2 million, $3 million, $4 million, $5 million and $6
million, respectively, as defined. For the fiscal year ended January
31, 1998 the Company's stock closing price exceeded $7.25 for more than
20 consecutive trading days and thus 200,000 of the options became
exercisable. For any fiscal year after January 31, 1998 in which the
Company attains the foregoing earnings, per share stock price or
cumulative net income targets, any options eligible for vesting in
prior years which were not vested and exercisable because the targets
for such fiscal years were not achieved, shall become exercisable. In
addition, for any fiscal year in which the Company attains the earnings
per share, stock price or cumulative net income targets applicable to a
subsequent fiscal year, all options eligible for vesting in such
subsequent fiscal year shall vest and become exercisable. If any of the
warrants (Note 11) are exercised, the options shall vest and become
exercisable pro rata (based on the number of warrants exercised) to the
extent not already vested in accordance with the foregoing. Regardless
of the Company's performance, all of the stock options granted to the
president shall vest and become exercisable ten years from the date of
the grant.
In connection with the Company's public offering in December 1996, the
underwriter was granted an option to purchase up to 100,000 shares of
common stock at $9.30 per share and 100,000 warrants at a price of
$.19375 per warrant. Each warrant entitles the underwriter to purchase
one share of common stock at $9.30 per share. The underwriter options
and warrants are exercisable for a period of four years, commencing on
December 11, 1997, and expire on December 11, 2001.
F-18
The Company has adopted SFAS No. 123, "Accounting for Stock-Based
Compensation." As permitted under the provisions of SFAS No. 123, the
Company applies the principles of APB Opinion 25 and related
interpretations in accounting for its stock option plans. If the
Company had elected to recognize compensation cost based on the fair
value of the options granted at grant date as prescribed by SFAS No.
123, net income (loss) and earnings (loss) per share would have been
reduced (increased) to the pro forma amounts indicated in the table
below. The fair value of each option grant was estimated at the date of
grant using the Black-Scholes option pricing model with the following
weighted-average assumptions used for all grants made to date:
risk-free interest rate of 7%, dividend yield of 0%, expected
volatility of 50% and expected life of 10 years.
2000 1999 1998
---- ---- ----
Net income (loss) as reported $ 472,440 $ (1,081,614) $ (475,426)
Net income (loss) pro forma $ (37,658) $ (1,526,401) $ (1,450,911)
Fully diluted net income (loss)
per share as reported $ .16 $ (.42) $ (.18)
Fully diluted net income (loss)
per share pro forma $ (.01) $ (.59) $ (.56)
The full impact of calculating compensation cost for stock options
under SFAS No. 123 is not reflected in the pro forma loss amounts
presented because compensation cost is reflected over the vesting
period of the options.
F-19
SCHEDULE II
STREICHER MOBILE FUELING, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
For each of the years in the two-year period
ended January 31, 2000
BALANCE AT BALANCE
BEGINNING OF (A) (B) AT END
YEAR CHARGES DEDUCTIONS OF YEAR
------------ ------- ---------- --------
Description:
Reserves and allowances deducted from
asset accounts
FYE 1/31/99
Allowance for doubtful accounts 148,149 65,000 (133,265) 79,884
============ ======== ========== ========
Description:
Reserves and allowances deducted from
asset accounts
FYE 1/31/00
Allowance for doubtful accounts 79,884 77,500 (45,810) 111,574
============ ======== ========== ========
(a) Charges to the reserve account represent increase in reserve levels and
establishment of specific reserves charge.
(b) Deductions to the reserve account represent write-offs net of recoveries
which occurred during the year
F-20
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
10.3 $10,000,000 Amended and Restated Loan Agreement,
dated May 25, 1999, between the Registrant and
Bank Atlantic and First Amendment dated December 22, 1999 to
Amended and Restated Loan Agreement
10.7 $10,000,000 Promissory Note, dated December 22, 1999,
between the Registrant and Bank Atlantic
23.1 Consent of KPMG LLP
23.2 Consent of Arthur Andersen LLP
27.1 Financial Data Schedule