Excerpts from the 10-Q...
Refinery Operations:
During the three months ended June 30, 1999, the Company had revenues of approximately $2,157,000 compared to revenues of approximately $2,116,000 for the same period during 1998. Operating and inventory costs attributed to the related revenues for the three months ended June 30, 1999 were approximately $2,475,000 compared to approximately $2,116,000 for the same period in 1998. The increase in operating and inventory costs during the current quarter is partially attributable to the increase in world oil prices and the non-availability of certain types of crude oil during the first six months of 1999, the subsequent increase in asphalt feed stock prices that the Company has incurred for its asphalt, and to an increase in operating costs to maintain the refinery. Due to the significant increase in world oil prices during the first six months of 1999 it has not been economically feasible for the Company to purchase and process crude oil through its refining unit to manufacture asphalt at this time. The Company has been purchasing general grade asphalt on a spot basis to blend and supply various grades of asphalt to its customers. Even though the Company has not operated the refining unit since January of this year, the Company has had to maintain the unit in a state of readiness during this period and thus it is currently experiencing additional operating overhead costs attributed to maintaining the refining unit. Subject to favorable economic conditions, the Company plans to utilize the refining unit during the fourth quarter this year. If the refining unit does not commence operations at that time appropriate measures will be taken to reduce the operating costs to maintain the unit. Additionally, costs, and likewise, revenues and margins, will vary depending upon a number of factors, including but not limited to feedstock type and prices, and from the Company's product mix, which are determined over time as the Company's markets are developed and redefined in the different areas it services.
The Refinery's terminal in St. Marks Florida was not operational and had no revenues and incurred approximately $33,000 of maintenance costs for the three months ended June 30, 1999 compared to operating revenues of approximately $487,000 with associated operating costs of approximately $399,000 for the same period in 1998. Taking into consideration the increase in oil prices, as previously discussed, and its relative impact on product costs, the Company determined it to be more economically feasible to direct its sales efforts to the high demand, high quality and high margin asphalt in the Louisiana and Texas markets rather than shipping lower margin conventional asphalt for sale into the St. Marks, Florida market.
<snip!>
General and Administrative:
Actual General and Administrative expenses, ("G&A") increased approximately $584,000 excluding $186,000 of G&A expenses capitalized during the same quarter of 1998 in connection with construction at the Refinery during the second quarter of 1998. During the current quarter compared to the same quarter last year, payroll and related employee expenses increased by approximately $613,000 which includes approximately $180,000 of non-cash stock bonuses issued to key employees, general insurance costs increased approximately $47,000 due to increased coverage on new asset additions made during 1998, rent expenses increased by $91,000, property taxes decreased approximately $106,000 due to certain tax exemptions, and investor relations costs decreased by approximately $105,000 due to timing differences.
<snip!>
Since the Company is blending asphalt and not processing crude oil, its crude unit has been idle for most of 1999, consequently, the Company has had minimal light-end revenues. In addition, because of the resultant lower throughput volumes, increased costs for feedstock, and the fact that expected increases in its product prices resulting from high crude oil prices did not occur, cash flows derived from the Company's asphalt sales have been lower during the first half of 1999 compared to the same period last year. |
