AMCF Andatee China Marine Fuel Services Corp (CE)

Andatee China Marine Fuel Services Corporation (Nasdaq:AMCF), a leading independent operator engaged in the production, storage, distribution, trading of blended marine fuel oil for cargo and fishing vessels in China, today announced its financial results for the first quarter of 2014 ended March 31, 2014.

First Quarter 2014 Financial Highlights:

• Total sales in Q1 2014 decreased by 22% to $42 million from $53.6 million in Q1 2013
• Gross profit in Q1 2014 decreased by 17.6% to $2.86 million from $3.47 million in Q1 2013. Gross margin increased from 6.5% in Q1 2013 to 6.8% in Q1, 2014
• Income from operations in Q1 2014 was $0.3 million as compared to $1.36 million in Q1 2013
• Net loss increased by $3.8 million, from net income of $334,972 for Q1 2013 to net loss of $3.42 million for Q1, 2014

Mr. Wang Hao, Chairman and Chief Executive Officer of Andatee China Marine Fuel Services Corporation, commented, "The general slow-down of the Chinese economy, seasonality's impact on the fishing industry, as well as the global crude oil price fluctuation in the aggregate resulted in a decrease in our sales in Q1 2014 and caused a net loss of $3.42 million. Notwithstanding the foregoing, however, we intend to remain active in the efforts to increase our share of retail sales, acquire our own retail facilities, build retail points in strategic locations to capture a majority of active local markets and add more products to our current product line."

"Going forward, with the fishing industry back to normal production conditions and our strategic strength being built up, we intend to improve our performance and realize sustainable long-term growth in 2014 and beyond."

First Quarter of 2014 Result

Revenue decreased by $11.7 million, or 22%, from $53.6 million in three months ended March 31, 2013 to $42 million in 2014. The decrease in revenue was mainly caused by decreased quantity sold and decreased selling price. The quantity sold decreased from 63,193 tons in three months ended March 31, 2013 to 54,205 tons in three months ended March 31, 2014, which was primarily caused by decreased sales demand for the Company's #2, #3 and #4 blended fuel oils due to reduced fishing activities as a result of holiday season's impact and severe winter weather in 2014. The average selling price for #1 fuel decreased from RMB 6,375 per ton in three months ended March 31, 2013 to RMB 4,480 per ton in three months ended March 31, 2014, a decrease of 29.7%, the average selling price for marine fuel #3 decreased 13.7% from RMB 4,953 per ton in three months ended March 31, 2013 to RMB 4,275 per ton in three months ended March 31, 2014. The decrease in selling price for these products led to the overall decrease in sales revenue. For the three months ended March 31, 2014, #1 marine fuel represented 24.4% of our sales, #2 marine fuel represented 8.6% of our sales, #3 marine fuel represented 5.9% of our sales, #4 marine fuel represented 50% of our sales, 180CST represented 5.8% of our sales and 120CST represented 5.4% of our sales, while for the three months ended March 31, 2013, #1 marine fuel represented 14.4% of our sales, #2 marine fuel represented 11.7% of our sales, #3 marine fuel represented 12.4% of our sales, #4 marine fuel represented 58.5% of our sales, 180CST represented 0.8% of our sales and 120CST represented 2.2% of our sales.

Cost of Revenue decreased by $11 million, or 22%, from $50.2 million for three months ended March 31, 2013 to $39.1 million for the three months ended March 31, 2014 primarily due to decreased sales volume and global oil price fluctuation.

Gross Margins decreased about $0.60 million, or 17% primarily due to decreased revenue. However, our gross profit% increased from 6.5% in three months ended March 31, 2013 to 6.8% in three months ended March 31, 2014. The increase in gross profit% for the quarter ended March 31, 2014 was affected by product mix sales changes (normally 120CST and 180CST only have gross profit% of 1% to 2%, #1 and #2 fuel have gross profit% of 6% to 7%, and #3 and #4 has gross profit% of 3% to 5%), because different product has different selling price, cost of sales and gross profit%. For three months ended March 31, 2014, about 24.4% of our sales were from higher margin #1 fuel oils, which was higher than the same period of 2013. In addition, we strengthened our efforts to import fuel oils from the overseas market since the second half of 2013, which enabled us to avoid incurring higher purchase costs from domestic suppliers only. This led to the costs of purchase to decrease and gross profit% to increase.

Selling Expenses decreased by $0.23 million, or 50%, from $459,055 for the three months ended March 31, 2013 to $231,321 for the three months ended March 31, 2014. This decrease is mainly due to reduced sales promotion and oil storage tank and other facility lease expenses. As a percentage of revenues, selling expenses decreased from 0.9% for the three months ended March 31, 2013 to 0.6% for the three months ended March 31, 2014.

General and Administrative Expenses increased $684,362, or 41%, from $1.65 million for the three months ended March 31, 2013 to $2.31 million for the three months ended March 31, 2014. The increase was due to an increase in depreciation expense, an increase in bad debt reserves, an increase in professional service fees and consulting fees. As a percentage of revenues, general and administrative expenses increased from 3.1% for the three months ended March 31, 2013 to 5.6% for the three months ended March 31, 2014.

Interest Expense increased by $3 million, from $0.9 million for the three months ended March 31, 2013 to $3.93 million for the three months ended March 31, 2014. The increase in interest was due to our increased borrowing of short-term loans and bank notes bills for working capital and capital expenditures.

Net Income (loss) Attributable to the Company increased by $3.8 million from net income of $334,972 for the three months ended March 31, 2013 to net loss of $3.42 million for the three months ended March 31, 2014. The increase in our net loss was mainly the result of our decrease in revenues, increase in general and administrative expense, and an increase in interest expense as discussed above.

About Andatee China Marine Fuel Services Corporation, Inc.

Andatee China Marine Fuel Services Corporation, through its subsidiaries, engages in the production, storage, distribution, and trading of blended marine fuel oil for cargo and fishing vessels in the People's Republic of China. It also produces customer specific products using its proprietary blending technology. The company sells its products through distributors to retail customers in Tianjin City, Liaoning, Shandong, Jiangsu, and Zhejiang Provinces. Andatee China Marine Fuel Services Corporation is based in Dalian, the People's Republic of China.

Safe Harbor Statement

This press release contains certain statements that may include "forward-looking statements." All statements other than statements of historical fact included herein are "forward-looking statements." These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involving known and unknown risks and uncertainties including, among others, our estimates of the Company's ability to attain and sustain growth in 2014 and beyond. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. These forward-looking statements are based upon our current expectations and projections about future events and generally relate to our plans, objectives and expectations for the development of our business. Although management believes that the plans and objectives reflected in or suggested by these forward-looking statements are reasonable, all forward-looking statements involve risks and uncertainties and actual future results may be materially different from the plans, objectives and expectations expressed in this press release. Accordingly, investors should not place any reliance on forward-looking statements as a prediction of actual results. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including the risk factors discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on the SEC's website (http://www.sec.gov). All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these risk factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.

 

ANDATEE CHINA MARINE FUEL SERVICES CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
	March 31, 2014	December 31, 2013
ASSETS
Current assets
Cash and cash equivalents	$ 3,578,161	$ 22,638,820
Restricted cash	102,891,963	99,659,597
Accounts receivable, net	45,327,389	45,818,721
Inventories, net	22,867,524	3,893,530
Advances to suppliers, net	16,942,585	25,930,533
Deposits for land use rights	714,065	720,084
Deferred financing costs, net of accumulated amortization of $5,217,076 and $3,779,111 as of March 31, 2014 and December 31, 2013, respectively	2,439,592	4,373,603
Other current assets	3,043,086	517,320
Total current assets	197,804,365	203,552,208
Property, plant and equipment, net	53,259,071	54,292,903
Construction in progress	34,525,512	17,781,162
Intangible assets, net	16,013,032	16,289,315
Equity investment	1,346,343	1,351,428
Total assets	$ 302,948,323	$ 293,267,016
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term bank borrowings	$ 25,560,298	$ 27,821,419
Bank note payable	193,716,224	191,257,528
Accounts payable and accrued liabilities	18,606,706	3,156,079
Advances from customers	202,256	1,693,875
Loan from third parties	97,373	98,193
Related party loans payable	2,309,622	1,595,594
Taxes payable	3,518,918	6,254,057
Other liabilities	2,739,325	1,149,298
Total current liabilities	246,750,722	233,026,043
Warrant liability	289,451	290,687
Total liabilities	247,040,173	233,316,730
Commitments and contingencies
Stockholders' equity
Common stock, $0.001 par value; 50,000,000 shares authorized; 10,255,813 shares issued; 10,164,621 shares outstanding	10,256	10,256
Treasury stock, at cost; 91,192 shares	(497,693)	(497,693)
Additional paid-in capital	30,033,119	29,998,994
Accumulated other comprehensive income	5,728,182	6,206,460
Retained earnings	14,568,857	17,990,881
Statutory reserve	3,932,585	3,932,585
Total stockholders' equity of the Company	53,775,306	57,641,483
Non-controlling interest	2,132,844	2,308,803
Total equity	55,908,150	59,950,286
Total liabilities and stockholders' equity	$ 302,948,323	$ 293,267,016

ANDATEE CHINA MARINE FUEL SERVICES CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
	Three months ended March 31,
	2014	2013
Revenues	$ 41,956,641	$ 53,631,654
Cost of revenues	39,092,392	50,164,236
Gross profit	2,864,249	3,467,418
Operating expenses
Selling expenses	231,321	459,055
General and administrative expenses	2,334,227	1,649,865
Total operating expenses	2,565,548	2,108,920
Income from operations	298,701	1,358,498
Other income (expense)
Interest income	192,000	211,420
Interest expense	(3,929,734)	(913,528)
Income from equity investment	6,257	24,916
Change in fair value of warrants	1,236	--
Other income (expense)	(8,357)	33,327
Total other expense	(3,738,598)	(643,865)
(Loss) income before income tax provision	(3,439,897)	714,633
Provision for income taxes	121,739	416,586
Net (loss) income	(3,561,636)	298,047
Less: net loss attributable to non-controlling interest	(139,612)	(36,925)
Net (loss) income attributable to Andatee China Marine Fuel Services Corporation	$ (3,422,024)	$ 334,972
Comprehensive (loss) income
Net (loss) income	(3,561,636)	298,047
Foreign currency translation adjustment	(514,624)	582,111
Comprehensive (loss) income	(4,076,260)	880,158
Less: comprehensive loss attributable to non-controlling interest	175,959	(231,388)
Comprehensive (loss) income attributable to Andatee China Marine Fuel Services Corporation	(3,900,301)	648,770
Weighted average number of shares:
Basic	10,255,813	9,610,159
Diluted	10,255,813	9,610,159
(Loss) earnings per share:
Basic	$ (0.33)	$ 0.03
Diluted	$ (0.33)	$ 0.03

ANDATEE CHINA MARINE FUEL SERVICES CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
	Three months ended March 31,
	2014	2013
Cash flows from operating activities
Net (loss) income for the period	$ (3,561,636)	$ 298,047
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation	608,825	479,794
Amortization	92,612	126,205
Provision for doubtful accounts	552,557	525,032
Change in inventory reserve	98,226	21,640
Deferred tax benefit	--	(253,353)
Amortization of deferred financing costs	3,929,387	--
Amortization of stock-based compensation	34,125	--
Income from equity investment	(6,257)	(24,916)
Change in fair value of warrants	(1,236)	--
Changes in operating assets and liabilities:
Accounts receivable	(748,970)	(2,629,394)
Inventories	(19,248,657)	(4,328,004)
Advances to suppliers	9,141,457	(5,030,883)
Other current assets	(2,497,715)	(523,678)
Accounts payable and accrued liabilities	16,986,116	221,888
Advances from customers	(1,488,648)	(1,935,473)
Taxes payable	(2,703,180)	691,875
Other liabilities	181,074	22,437
Net cash provided by (used in) operating activities	1,368,080	(12,338,783)
Cash flows from investing activities
Acquisition of equity method investee	--	(1,274,514)
Additions to construction in progress	(17,020,854)	--
Additions to property and equipment	(24,372)	(66,622)
Addition to intangible assets	(978)	--
Net cash used in investing activities	(17,046,204)	(1,341,136)
Cash flows from financing activities
Proceeds from short term loans	11,037,347	19,038,060
Repayments of short term loans	(13,081,300)	(1,752,457)
Proceeds from bank notes	40,610,897	11,470,630
Repayments on bank notes	(36,522,990)	(19,754,975)
Restricted cash, net	(4,096,080)	3,400,965
Deferred financing costs	(2,017,564)	--
Repayment of loans to third parties	--	(174,587)
Proceeds of loans from related parties	733,418	76,604
Net cash (used in) provided by financing activities	(3,336,272)	12,304,240
Effect of exchange rate changes on cash and cash equivalents	(46,263)	6,682
Net decrease in cash and cash equivalents	(19,060,659)	(1,368,997)
Cash and cash equivalents, beginning of period	$ 22,638,820	$ 1,625,705
Cash and cash equivalents, end of period	$ 3,578,161	$ 256,708
Supplemental cash flow information
Interest paid	$ 2,572,226	$ 227,259
Income taxes paid	$ 732,382	$ 312,676

CONTACT: Thomas Yang
         Andatee Marine Fuel Services Corporation Limited
         Unit C, No. 68 West Binhai Road, Xigang District,
         Dalian Liaoning, China (map)
         Phone: 011-86411-8240-8219
         Facsimile: 011-86411-8368-8835
         Website: www.andatee.com