Fort Worth, Texas -
May 1, 2018 - Emerge Energy Services LP ("Emerge Energy")
today announced first quarter 2018 financial and operating
results.
Highlights
· Total
volumes sold increased 7% sequentially to a record 1,503 thousand
tons in the first quarter.
· Net
income of $1.5 million and diluted earnings per unit of $0.05 for
the first quarter.
·
Adjusted EBITDA of $17.4 million for the first quarter.
· Net
income and Adjusted EBITDA were negatively impacted by one-time
charges and adjustments.
Overview
Emerge Energy reported net income
of $1.5 million, or $0.05 per diluted unit, for the three months
ended March 31, 2018, compared to a net loss of $11.4 million,
or $(0.38) per diluted unit for the three months ended
March 31, 2017. For the three months ended December 31,
2017, net income was $5.6 million, or $0.18 per diluted
unit.
First quarter 2018 results were
negatively impacted by $6.7 million in one-time charges, which
included a $3.9 million write-off of deferred financing costs
relating to the reduction of our revolving credit facility, a $1.7
million write-off of land owner agreements and related prepaid
royalties, and $1.1 million of professional fees related to the
refinancing in January 2018.
Adjusted EBITDA was $17.4 million
for the three months ended March 31, 2018, compared to $0.1
million for the three months ended March 31, 2017,
and $18.6 million for the three months ended December 31,
2017. The first quarter Adjusted EBITDA of $17.4 million
declined by $1.3 million sequentially due to a $4 million negative
adjustment as per our credit agreement for the repayment of rent
that was previously deferred. Excluding this adjustment, our
Adjusted EBITDA would have increased by $2.7 million
sequentially.
Emerge Energy generated
Distributable Cash Flow of $8.7 million for the three months ended
March 31, 2018. Adjusted EBITDA and Distributable Cash
Flow are non-GAAP financial measures that Emerge Energy uses to
assess its performance on an ongoing basis. Emerge Energy
will not make a cash distribution on its common units for the three
months ended March 31, 2018, as the board of directors of its
general partner did not approve a cash distribution.
"We are very proud of our
performance in the first quarter as we overcame significant
obstacles in the form of extreme winter weather and poor railroad
service," noted Ted W. Beneski, Chairman of the board of directors
of the general partner of Emerge Energy. "The 7% sequential
volume improvement is a testament to our newly enhanced rail
shipping outlets and the positive strides made by our two Texas
in-basin plants. This record-setting quarterly volume of over
1.5 million tons sold in the first quarter represents our ability
to respond to a changing market, in both our production and
logistics capabilities. We have increased our direct
shipments on the BNSF railroad as the Canadian National continues
to experience service issues. Our Kosse, Texas facility also
responded to strong demand with substantially higher production
compared to the fourth quarter, and the existing San Antonio
production circuit contributed nicely during the quarter. The
first quarter Adjusted EBITDA of $17.4 million included a $4
million negative adjustment as per our credit agreement for the
repayment of rent that was previously deferred. Excluding
this adjustment, our Adjusted EBITDA would have increased by $2.7
million sequentially."
"Our new San Antonio plant is now
officially online as we started the dry plant earlier this
week. We are very pleased that we beat our previously
communicated target start-up date of May 1st. We are now in
the process of quickly ramping up the production to the nameplate
capacity of 2.4 million tons per year as limited by our existing
permit. We have applied for our new permit that will expand
our capacity to 4.0 million tons per year, and we expect to receive
this permit by year end."
"The demand for frac sand remains
strong, and the market continues to face supply shortages due to
constrained railroad service and construction delays for several
new in-basin plants. We are proud that we delivered on our
construction timeline for the new San Antonio plant, and our
customers value our dependability as they have signed new
contracts. In response to the constructive supply and demand
picture, prices for frac sand increased in the first quarter, and
we have implemented further price increases for the second
quarter. We are highly confident that we will achieve the
2018 full year guidance of $120 million in Adjusted EBITDA and $60
million in net income. Our newly-opened San Antonio plant
will drive volume and margin growth while we expect the demand for
northern white sand will remain resilient."
Conference Call
Emerge Energy will host its 2018
first quarter results conference call on Tuesday, May 1, 2018, at
3:00 p.m. CT. Callers may listen to the live presentation,
which will be followed by a question and answer segment, by dialing
(855) 850-4275 or (720) 634-2898 and entering pass code
3288147. An audio webcast of the call will be available at
www.emergelp.com within the Investor Relations portion of the
website under the Webcasts & Presentations section. A
replay will be available by audio webcast and teleconference for
seven days following the conclusion of the call. The replay
teleconference will be available by dialing (855) 859-2056 or (404)
537-3406 and the reservation number 3288147.
Operating Results
The following table summarizes
Emerge Energy's operating results for the three months ended
March 31, 2018, and 2017, and three months ended December 31,
2017:
|
Three Months
Ended |
|
|
March 31, 2018 |
|
December 31, 2017 |
|
March 31, 2017 |
|
|
|
|
|
|
|
|
|
($ in thousands) |
|
Revenues: |
|
|
|
|
|
|
Frac
sand revenues |
$ |
105,971 |
|
|
$ |
102,194 |
|
|
$ |
75,182 |
|
|
Non-frac sand revenues |
779 |
|
|
947 |
|
|
162 |
|
|
Total
revenues |
106,750 |
|
|
103,141 |
|
|
75,344 |
|
|
Operating expenses |
|
|
|
|
|
|
Cost
of goods sold (excluding depreciation, depletion and
amortization) |
80,242 |
|
|
80,301 |
|
|
72,311 |
|
|
Depreciation, depletion and amortization |
4,861 |
|
|
5,490 |
|
|
4,656 |
|
|
Selling, general and administrative expenses |
8,571 |
|
|
6,766 |
|
|
5,878 |
|
|
Contract and project terminations |
1,689 |
|
|
- |
|
|
- |
|
|
Total
operating expenses |
95,363 |
|
|
92,557 |
|
|
82,845 |
|
|
Operating income (loss) |
11,387 |
|
|
10,584 |
|
|
(7,501 |
) |
|
Other
expense (income) |
|
|
|
|
|
|
Interest expense, net |
10,492 |
|
|
5,818 |
|
|
3,198 |
|
|
Other |
(688 |
) |
|
(989 |
) |
|
691 |
|
|
Total
other expense |
9,804 |
|
|
4,829 |
|
|
3,889 |
|
|
Income
(loss) from continuing operations before provision for income
taxes |
1,583 |
|
|
5,755 |
|
|
(11,390 |
) |
|
Provision (benefit) for income taxes |
97 |
|
|
129 |
|
|
- |
|
|
Net
income (loss) |
$ |
1,486 |
|
|
$ |
5,626 |
|
|
$ |
(11,390 |
) |
|
Adjusted EBITDA (a) |
$ |
17,386 |
|
|
$ |
18,638 |
|
|
$ |
68 |
|
|
|
|
|
|
|
|
|
Volume
of frac sand sold (tons in thousands) |
1,437 |
|
|
1,331 |
|
|
1,245 |
|
|
Volume
of non-frac sand sold (tons in thousands) |
66 |
|
|
79 |
|
|
6 |
|
|
Total
volume of sand sold (tons in thousands) |
1,503 |
|
|
1,410 |
|
|
1,251 |
|
|
|
|
|
|
|
|
|
Terminal sand sales (tons in thousands) |
655 |
|
|
645 |
|
|
588 |
|
|
|
|
|
|
|
|
|
Volume
of frac sand produced (tons in thousands): |
|
|
|
|
|
|
Arland, Wisconsin facility |
407 |
|
|
461 |
|
|
368 |
|
|
Barron, Wisconsin facility |
498 |
|
|
534 |
|
|
532 |
|
|
New
Auburn, Wisconsin facility |
345 |
|
|
307 |
|
|
317 |
|
|
San
Antonio, Texas facility (b) |
59 |
|
|
34 |
|
|
- |
|
|
Kosse,
Texas facility |
99 |
|
|
66 |
|
|
65 |
|
|
Total
volume of frac sand produced |
1,408 |
|
|
1,402 |
|
|
1,282 |
|
|
(a) See section
entitled "Adjusted EBITDA and Distributable Cash Flow" that
includes a definition of Adjusted EBITDA and provides
reconciliation to GAAP net income and cash flows.
(b) Emerge Energy
commenced frac sand production at the San Antonio facility in July
2017.
Despite record volumes and
revenues in the first quarter of 2018, net income declined $4.1
million in the first quarter of 2018, compared to the fourth
quarter of 2017. This decline was due to one-time non-cash
charges of $3.9 million write-off of deferred financing costs
relating to the reduction of our revolving credit facility, and
$1.7 million to write off the land owner agreements and related
prepaid royalties. We also incurred a one-time charge of $1.1
million of professional fees related to the refinancing in January
2018. Volumes sold through our terminals totaled 44% of
volume in the first quarter of 2018, compared to 46% in the fourth
quarter of 2017.
Adjusted EBITDA decreased $1.3
million in the first quarter of 2018 due to a $4 million repayment
of rent expense previously deferred.
Net income (loss) improved $12.9
million and Adjusted EBITDA improved $17.3 million for the first
quarter of 2018, compared to same quarter in 2017, mainly due to an
increase in total volumes sold, higher prices, and lower production
costs on a per-ton basis. This was offset by higher selling,
general and administrative expenses in 2018 due to higher
employee-related expenses for increased staffing levels and bonus
accruals.
Interest expense of $10.5 million
for the first quarter of 2018 includes among other charges, a
one-time $3.9 million write-off of deferred financing costs
relating to the reduction of our revolving credit facility in
January 2018.
Capital Expenditures
For the three months ended
March 31, 2018, Emerge Energy's capital expenditures totaled
$30.1 million. This includes approximately $1.1 million of
maintenance capital expenditures.
About Emerge Energy Services
LP
Emerge Energy Services LP (NYSE:
EMES) is a growth-oriented limited partnership engaged in the
businesses of mining, producing, and distributing silica sand, a
key input for the hydraulic fracturing of oil and natural gas
wells. Emerge Energy operates its Sand business through its
subsidiary Superior Silica Sands LLC. Emerge Energy also
processed transmix, distributed refined motor fuels, operated bulk
motor fuel storage terminals, and provided complementary fuel
services through its fuel division which was sold on August 31,
2016.
Forward-Looking
Statements
This release contains certain
statements that are "forward-looking statements." These statements
can be identified by the use of forward-looking terminology
including "may," "believe," "will," "expect," "anticipate," or
"estimate." These forward-looking statements involve risks and
uncertainties, and there can be no assurance that actual results
will not differ materially from those expected by management of
Emerge Energy Services LP. When considering these
forward-looking statements, you should keep in mind the risk
factors and other cautionary statements in Emerge Energy's Annual
Report on Form 10-K filed with the SEC. The risk factors and
other factors noted in the Annual Report could cause actual results
to differ materially from those contained in any forward-looking
statement. Except as required by law, Emerge Energy Services
LP does not undertake any obligation to update or revise such
forward-looking statements to reflect events or circumstances that
occur after the date hereof.
PRESS CONTACT
Investor Relations
(817) 618-4020
EMERGE ENERGY
SERVICES LP
CONSOLIDATED STATEMENTS OF
OPERATIONS
($ in thousands except per unit data)
|
Three Months
Ended March 31, |
|
|
2018 |
|
2017 |
|
Revenues |
$ |
106,750 |
|
|
$ |
75,344 |
|
|
Operating expenses: |
|
|
|
|
Cost
of goods sold (excluding depreciation, depletion and
amortization) |
80,242 |
|
|
72,311 |
|
|
Depreciation, depletion and amortization |
4,861 |
|
|
4,656 |
|
|
Selling, general and administrative expenses |
8,571 |
|
|
5,878 |
|
|
Contract and project terminations |
1,689 |
|
|
- |
|
|
Total
operating expenses |
95,363 |
|
|
82,845 |
|
|
Operating income (loss) |
11,387 |
|
|
(7,501 |
) |
|
Other
expense (income): |
|
|
|
|
Interest expense, net |
10,492 |
|
|
3,198 |
|
|
Other |
(688 |
) |
|
691 |
|
|
Total
other expense |
9,804 |
|
|
3,889 |
|
|
Income
(loss) from continuing operations before provision for income
taxes |
1,583 |
|
|
(11,390 |
) |
|
Provision (benefit) for income taxes |
97 |
|
|
- |
|
|
Net
income (loss) |
$ |
1,486 |
|
|
$ |
(11,390 |
) |
|
|
|
|
|
|
Earnings (loss) per common unit |
|
|
|
|
Basic
earnings (loss) per common unit |
$ |
0.05 |
|
|
$ |
(0.38 |
) |
|
Diluted earnings (loss) per common unit |
$ |
0.05 |
|
|
$ |
(0.38 |
) |
|
|
|
|
|
|
Weighted average number of common units outstanding - basic |
31,212,968 |
|
|
30,061,022 |
|
|
Weighted average number of common units outstanding - diluted |
31,371,382 |
|
|
30,061,022 |
|
|
Adjusted EBITDA and Distributable
Cash Flow
We calculate Adjusted EBITDA, a
non-GAAP measure, in accordance with our current Credit Agreement
as: net income (loss) plus consolidated interest expense (net of
interest income), income tax expense, depreciation, depletion and
amortization expense, non-cash charges and losses that are unusual
or non-recurring less income tax benefits and gains that are
unusual or non-recurring and other adjustments allowable under our
existing credit agreement. We report Adjusted EBITDA to our
lenders under our revolving credit facility in determining our
compliance with certain financial covenants. Adjusted EBITDA
should not be considered as an alternative to net income, operating
income, cash flow from operating activities or any other measure of
financial performance presented in accordance with GAAP.
Moreover, our Adjusted EBITDA as presented may not be comparable to
similarly titled measures of other companies. The following
table reconciles net income (loss) to Adjusted EBITDA for the three
months ended March 31, 2018, December 31, 2017, and
March 31, 2017:
|
Three Months
Ended |
|
|
March 31, 2018 |
|
December 31, 2017 |
|
March 31, 2017 |
|
|
|
|
|
|
|
|
|
($ in thousands) |
|
Net
income (loss) |
$ |
1,486 |
|
|
$ |
5,626 |
|
|
$ |
(11,390 |
) |
|
Interest expense, net |
10,492 |
|
|
5,818 |
|
|
3,198 |
|
|
Depreciation, depletion and amortization |
4,861 |
|
|
5,490 |
|
|
4,656 |
|
|
Provision (benefit) for income taxes |
97 |
|
|
129 |
|
|
- |
|
|
EBITDA |
16,936 |
|
|
17,063 |
|
|
(3,536 |
) |
|
Equity-based compensation expense |
434 |
|
|
403 |
|
|
347 |
|
|
Contract and project terminations |
1,689 |
|
|
- |
|
|
- |
|
|
Provision for doubtful accounts |
3 |
|
|
17 |
|
|
- |
|
|
Accretion expense |
31 |
|
|
30 |
|
|
29 |
|
|
Retirement of assets |
2 |
|
|
- |
|
|
(6 |
) |
|
Other
state and local taxes |
395 |
|
|
539 |
|
|
424 |
|
|
Non-cash deferred lease expense |
(2,576 |
) |
|
1,582 |
|
|
1,901 |
|
|
Unrealized (gain) loss on fair value of warrant |
(677 |
) |
|
(996 |
) |
|
696 |
|
|
Other
adjustments allowable under our Credit Agreement |
1,149 |
|
|
- |
|
|
213 |
|
|
Adjusted EBITDA |
$ |
17,386 |
|
|
$ |
18,638 |
|
|
$ |
68 |
|
|
The following table reconciles
Consolidated Adjusted EBITDA to our operating cash flows for the
three months ended March 31, 2018, and 2017, and December 31,
2017:
|
Three Months
Ended, |
|
|
March 31, 2018 |
|
December 31, 2017 |
|
March 31, 2017 |
|
|
|
|
|
|
|
|
|
($ in thousands) |
Adjusted EBITDA |
$ |
17,386 |
|
|
$ |
18,638 |
|
|
$ |
68 |
|
|
Interest expense, net |
(5,964 |
) |
|
(4,669 |
) |
|
(2,684 |
) |
|
Income
tax expense |
(493 |
) |
|
(668 |
) |
|
(424 |
) |
|
Other
adjustments allowable under our Credit Agreement |
(1,149 |
) |
|
- |
|
|
(213 |
) |
|
Non-cash deferred lease expense |
2,576 |
|
|
(1,582 |
) |
|
(1,901 |
) |
|
Change
in other operating assets and liabilities |
(1,612 |
) |
|
65 |
|
|
(7,785 |
) |
|
Cash
flows from operating activities: |
$ |
10,744 |
|
|
$ |
11,784 |
|
|
$ |
(12,939 |
) |
|
|
|
|
|
|
|
|
Cash
flows from investing activities: |
$ |
(30,093 |
) |
|
$ |
(2,009 |
) |
|
$ |
(1,392 |
) |
|
|
|
|
|
|
|
|
Cash
flows from financing activities: |
$ |
22,309 |
|
|
$ |
(4,594 |
) |
|
$ |
16,426 |
|
|
We define Distributable Cash Flow
generally as net income plus (i) non-cash net interest
expense, (ii) depreciation, depletion and amortization
expense, (iii) non-cash charges, and (iv) selected losses
that are unusual or non-recurring; less (v) selected principal
repayments, (vi) selected gains that are unusual or
non-recurring, and (vii) maintenance capital
expenditures. We believe that the presentation of
Distributable Cash Flow in this report provides information useful
to investors in assessing our financial condition and results of
operations. In addition, our Board of Directors utilizes
reserves for future capital expenditures, compliance with law or
debt agreements, and to provide funds for distributions to
unitholders in respect to any one or more of the next four
quarters. However, our Distributable Cash Flow may not be
comparable to similarly-titled measures that other companies
use. Distributable Cash Flow does not reflect changes in
working capital balances. The following table (in thousands)
reconciles net income to Distributable Cash Flows:
|
|
Three Months Ended March 31,
2018 |
|
|
|
|
|
Net
income (loss) |
|
$ |
1,486 |
|
|
|
|
|
|
Add
(less) reconciling items: |
|
|
|
Add
depreciation, depletion and amortization expense |
|
4,861 |
|
|
Add
amortization of deferred financing costs |
|
4,528 |
|
|
Add
non-cash project and contract termination costs |
|
1,689 |
|
|
Add
equity-based compensation, net |
|
434 |
|
|
Add
income taxes accrued, net of payments |
|
97 |
|
|
Add
accretion expense |
|
31 |
|
|
Add
allowance for doubtful accounts |
|
3 |
|
|
Add
loss on disposal of assets |
|
2 |
|
|
Less
unrealized gain on fair value of warrants |
|
(677 |
) |
|
Less
maintenance capital expenditures |
|
(1,133 |
) |
|
Less
non-cash deferred lease expense |
|
(2,576 |
) |
|
Distributable cash flow |
|
$ |
8,745 |
|
|
This
announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Emerge Energy Services LP via Globenewswire
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