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8-K - CURRENT REPORT OF MATERIAL EVENTS OR CORPORATE CHANGES - Emerge Energy Services LPa13-18608_18k.htm

Exhibit 99.1

 

Emerge Energy Services Announces Second Quarter 2013 Results

 

Southlake, Texas — August 14, 2013 — Emerge Energy Services LP (“Emerge”) today announced second quarter 2013 financial and operating results.

 

Highlights

 

·                  Adjusted EBITDA of $17.4 million for the three months ended June 30, 2013.

·                  Distributable cash flow of $8.6 million, or $0.37 per unit, for the period beginning May 14, 2013, through June 30, 2013.

·                  Full quarter sales of 634,000 tons of sand, over 94% of which was Northern White Sand.

·                  Average utilization of over 48% of capacity at our Barron facility.

 

Overview

 

Emerge reported a net loss of $7.3 million, or ($0.32) per unit for the period beginning May 14, 2013, the date Emerge closed its initial public offering (IPO), through June 30, 2013.  For that same period, Emerge reported distributable cash flow of $8.6 million, or $0.37 per unit.  For the full quarter, Emerge reported Adjusted EBITDA of $17.4 million compared to $10.1 million for the same period of the prior year.  Adjusted EBITDA and Distributable Cash Flow are non-GAAP financial measures that Emerge uses to assess its performance on an ongoing basis.

 

Previously, Emerge had declared a prorated distribution of $0.37 per unit for the quarter ended June 30, 2013.  This equates to a full quarter distribution of $0.70 per unit.

 

“We were very pleased with our results from our first partial quarter as a public company,” said Ted Beneski, Chairman of the Board of Directors of the general partner of Emerge.  “Our initial distribution was well ahead of the forecast contained in our prospectus, and we believe we will meet or possibly exceed our distributable cash flow targets in the coming quarters.”

 

“The upside to our earnings was driven by the strong ramp up of operations at our Barron plant, whose capacity utilization is proceeding ahead of schedule,” added Rick Shearer, CEO of Emerge.  “New Auburn is still selling all of its production, but Barron has actually surpassed New Auburn in sand production over the past several weeks, and we have already reached a combined run rate of approximately 2.5 million tons per year, versus our initial projection of an average of 2.0 million tons per year for our first twelve months as a public company.  We have been able to expand our customer base, while virtually every one of our existing contract customers is purchasing sand at a rate that well exceeds their contracted minimums.

 

“In addition, our Dallas-based transmix facility continues to perform as expected, while our Birmingham terminal has outperformed expectations primarily due to improved margins with contract customers, a favorable pricing environment, and our ability to sell RINs, which are currently experiencing a strong pricing environment.”

 

Conference Call

 

Emerge will host its 2013 second quarter conference call later today, Wednesday, August 14, 2013 at 3 p.m. CDT. Callers may listen to the live presentation, which will be followed by a question and answer segment, by dialing (877) 474-9502 or (857) 244-7555 and entering pass code 63854004. An audio webcast of the call will be available at www.emergelp.com within the Investor Relations portion of the website. A replay will be available by audio webcast and teleconference from 5:00 p.m. CDT on August 14 through 11:59 p.m. CDT on September 14, 2013. The replay teleconference will be available by dialing (888) 286-8010 or (617) 801-6888 and the reservation number 62739784.

 



 

Operating Results

 

The following table summarizes our unaudited consolidated operating results for the three and six months ended June 30, 2013 and 2012 (in thousands).

 

 

 

For the Three Months
Ended June 30,

 

For the Six Months
Ended June 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

REVENUES

 

 

 

 

 

 

 

 

 

Revenues from fuel sales

 

$

168,910

 

$

134,889

 

$

287,633

 

$

243,046

 

Revenues from sand sales

 

30,891

 

15,760

 

59,209

 

30,066

 

Other revenues

 

5,128

 

1,761

 

10,142

 

3,318

 

 

 

204,929

 

152,410

 

356,984

 

276,430

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

Cost of product

 

171,676

 

135,429

 

294,181

 

243,517

 

Operations and maintenance

 

11,084

 

4,142

 

20,067

 

8,142

 

Depreciation, depletion and amortization

 

4,922

 

2,125

 

8,076

 

4,324

 

Selling, general and administrative expenses

 

4,832

 

2,775

 

8,206

 

5,206

 

IPO transaction-related costs

 

10,922

 

 

10,922

 

 

Stock-based compensation expense

 

1,221

 

 

1,221

 

 

Loss on disposal of equipment

 

 

 

 

5

 

Total operating expenses

 

204,657

 

144,471

 

342,673

 

261,194

 

Income from operations

 

272

 

7,939

 

14,311

 

15,236

 

OTHER EXPENSE (INCOME)

 

 

 

 

 

 

 

 

 

Interest expense

 

3,450

 

2,809

 

7,663

 

5,616

 

Loss on early extinguishment of debt

 

907

 

 

907

 

 

Other

 

(117

)

(9

)

(159

)

(16

)

Total other expense (income)

 

4,240

 

2,800

 

8,411

 

5,600

 

Income before provision for taxes

 

(3,968

)

5,139

 

5,900

 

9,636

 

Provision for taxes

 

95

 

20

 

125

 

41

 

NET INCOME (LOSS)

 

$

(4,063

)

$

5,119

 

$

5,775

 

$

9,595

 

ADJUSTED EBITDA (a)

 

$

17,371

 

$

10,094

 

$

34,594

 

$

19,618

 

 


(a) See section entitled “Adjusted EBITDA and Distributable Cash Flow” that includes a definition of Adjusted EBITDA and provides reconciliation to GAAP-based net income.

 



 

Sand Segment

 

 

 

For the Three Months
Ended June 30,

 

For the Six Months
Ended June 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

REVENUES

 

 

 

 

 

 

 

 

 

Revenues from sand sales

 

$

30,891

 

$

15,760

 

$

59,209

 

$

30,066

 

Other revenues

 

3,571

 

339

 

7,312

 

444

 

 

 

34,462

 

16,099

 

66,521

 

30,510

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

Cost of product

 

10,070

 

3,607

 

20,821

 

7,502

 

Operations and maintenance

 

8,193

 

2,021

 

14,618

 

3,802

 

Selling, general and administrative expenses

 

2,075

 

1,569

 

4,298

 

2,851

 

Total operating expenses

 

20,338

 

7,197

 

39,737

 

14,155

 

Segment income

 

$

14,124

 

$

8,902

 

$

26,784

 

$

16,355

 

Volume of sand sold (tons in thousands):

 

 

 

 

 

 

 

 

 

Kosse, Texas facility

 

36

 

43

 

68

 

80

 

New Auburn, Wisconsin facility

 

309

 

245

 

607

 

477

 

Barron, Wisconsin facility

 

289

 

 

477

 

 

Total volume of sand sold

 

634

 

288

 

1,152

 

557

 

 

For the full quarter ended June 30, 2013, Emerge sold 634,000 tons of sand, 598,000 of which were sold from its Wisconsin facilities.  The New Auburn facility sold 309,000 tons, compared to 245,000 tons for the same period last year, while the Barron facility, which commenced operations in late December 2012, sold 289,000 tons.  Sand segment income was $14.1 million for the full quarter, compared to $8.9 million for the same quarter in 2012.  This 59% increase in segment income was almost entirely due to the increase in volume and associated gross margin of sand sold, but was partially mitigated by increased SG&A from our Barron facility

 



 

Fuel Segment

 

 

 

For the Three Months
Ended June 30,

 

For the Six Months
Ended June 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

REVENUES

 

 

 

 

 

 

 

 

 

Revenues from fuel sales

 

$

168,910

 

$

134,889

 

$

287,633

 

$

243,046

 

Other revenues

 

1,557

 

1,422

 

2,830

 

2,874

 

 

 

170,467

 

136,311

 

290,463

 

245,920

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

Cost of product

 

161,606

 

131,822

 

273,360

 

236,015

 

Operations and maintenance

 

2,891

 

2,121

 

5,449

 

4,340

 

Selling, general and administrative expenses

 

1,513

 

1,206

 

2,589

 

2,355

 

Total operating expenses

 

166,010

 

135,149

 

281,398

 

242,710

 

Segment income

 

$

4,457

 

$

1,162

 

$

9,065

 

$

3,210

 

Volume of refined fuels sold (gallons in thousands)

 

55,404

 

44,410

 

91,427

 

77,850

 

Volume of terminal throughput (gallons in thousands)

 

60,717

 

48,404

 

95,882

 

99,191

 

Volume of transmix production (gallons in thousands)

 

18,073

 

6,176

 

24,483

 

12,657

 

Transmix production as a percent of total refined fuels sold

 

32.6

%

13.9

%

26.8

%

16.3

%

 

For the full quarter ended June 30, 2013, Emerge sold over 55 million gallons of refined fuel, compared to 44 million gallons for the same period last year, and had an additional third-party volume of 61 million gallons through its terminals, compared to 48 million gallons for the same period last year.  Transmix production was 18 million gallons for the three months ended June 30, 2013, compared to 6.2 million gallons for the same period last year.  The increase in volumes was primarily because of the acquisition of Direct Fuels, which the Partnership acquired at the close of its IPO May 14, 2013.  Segment income for Fuel was $4.5 million for the full quarter, which only included 48 days of contribution from Direct Fuels, compared to $1.2 million for the comparable quarter in 2012.  This 284% increase in segment income was because of the partial quarter results of operations of Direct Fuels, improved margin performance, and increased gross margin from RINS sales.

 

Capital Expenditures and Distributable Cash Flow

 

Excluding the acquisition of Direct Fuels at the close of the IPO, Emerge had $3.0 million of capital expenditures during the three months ended June 30, 2013, including $0.4 million in maintenance capital expenditures, of which $0.3 million was incurred from the period commencing May 14, 2013, through June 30, 2013.

 

For the period commencing with the close of the IPO on May 14, 2013, through June 30, 2013, Emerge generated $8.6 million in Distributable Cash Flow, or $0.37 per unit.  On July 16, 2013, Emerge declared a distribution of $0.37 per unit, which will be paid August 14, 2013 to common unitholders of record on August 6, 2014.

 



 

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 the registration statement filed with the SEC in connection with this initial public offering. The risk factors and other factors noted in our prospectus could cause our 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

Robert Lane

(817) 865-2541

 



 

EMERGE ENERGY SERVICES LP

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($ in thousands except per unit data)

 

 

 

For the Three Months
Ended June 30

 

For the Six Months
Ended June 30

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

REVENUES

 

 

 

 

 

 

 

 

 

Revenues from fuel sales

 

$

168,910

 

$

134,889

 

$

287,633

 

$

243,046

 

Revenues from sand sales

 

30,891

 

15,760

 

59,209

 

30,066

 

Other revenues

 

5,128

 

1,761

 

10,142

 

3,318

 

Total revenues

 

204,929

 

152,410

 

356,984

 

276,430

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

Cost of product

 

171,676

 

135,429

 

294,181

 

243,517

 

Operations and maintenance

 

11,084

 

4,142

 

20,067

 

8,142

 

Depreciation, depletion and amortization

 

4,922

 

2,125

 

8,076

 

4,324

 

Selling, general and administrative expenses

 

4,832

 

2,775

 

8,206

 

5,206

 

IPO transaction-related costs

 

10,922

 

 

10,922

 

 

Stock-based compensation expense

 

1,221

 

 

1,221

 

 

Loss on disposal of equipment

 

 

 

 

5

 

Total operating expenses

 

204,657

 

144,471

 

342,673

 

261,194

 

Income from operations

 

272

 

7,939

 

14,311

 

15,236

 

OTHER EXPENSE (INCOME)

 

 

 

 

 

 

 

 

 

Interest expense, net

 

3,450

 

2,809

 

7,663

 

5,616

 

Loss on early extinguishment of debt

 

907

 

 

907

 

 

Other

 

(117

)

(9

)

(159

)

(16

)

Total other expense (income)

 

4,240

 

2,800

 

8,411

 

5,600

 

Income (loss) before provision for income taxes

 

(3,968

)

5,139

 

5,900

 

9,636

 

Provision for income taxes

 

95

 

20

 

125

 

41

 

NET INCOME (LOSS)

 

$

(4,063

)

$

5,119

 

$

5,775

 

$

9,595

 

Less Predecessor net income before May 14, 2013

 

3,286

 

 

 

13,124

 

 

 

Net loss from May 14, 2013 through June 30, 2013

 

$

(7,349

)

 

 

$

(7,349

)

 

 

Loss per common unit (basic and diluted)

 

$

(0.32

)

 

 

$

(0.32

)

 

 

Weighted average number of common units outstanding (basic)

 

23,220

 

 

 

23,220

 

 

 

 



 

EMERGE ENERGY SERVICES LP

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

($ in thousands)

 

 

 

June 30, 2013

 

December 31,
2012

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash and equivalents

 

$

14,980

 

$

1,467

 

Restricted cash and equivalents

 

6,191

 

 

Trade and other receivables, net

 

46,398

 

26,781

 

Inventories

 

32,309

 

22,848

 

Direct financing lease receivable

 

1,627

 

1,579

 

Prepaid expenses and other current assets

 

6,344

 

2,602

 

Total current assets

 

107,849

 

55,277

 

Property, plant and equipment, net

 

135,831

 

120,851

 

Mineral resources, net

 

10,550

 

10,563

 

Intangible assets, net

 

44,876

 

1,426

 

Goodwill

 

29,264

 

 

Deferred financing and public offering costs, net

 

3,568

 

7,085

 

Deposits and other assets

 

534

 

587

 

Total assets

 

$

332,472

 

$

195,789

 

LIABILITIES AND PARTNERS’ EQUITY

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Accounts payable

 

$

30,355

 

$

27,622

 

Accrued liabilities

 

8,538

 

7,278

 

Deferred compensation and stock-based compensation liability

 

6,216

 

 

Deferred revenue

 

1,021

 

801

 

Current portion of long-term debt

 

481

 

9,321

 

Current portion of capital lease liability

 

2,028

 

1,548

 

Current portion of advances from customers

 

 

4,043

 

Total current liabilities

 

48,639

 

50,613

 

Long-term debt, net of current portion

 

112,566

 

129,641

 

Capital lease liability, net of current portion

 

3,853

 

5,428

 

Asset retirement obligations

 

690

 

690

 

Total liabilities

 

165,748

 

186,372

 

Commitments and contingencies

 

 

 

 

 

Partners’ Equity:

 

 

 

 

 

Predecessor members’ equity

 

 

9,417

 

General partner

 

 

 

Limited partner units

 

166,724

 

 

Total partners’ equity

 

166,724

 

9,417

 

Total liabilities and partners’ equity

 

$

332,472

 

$

195,789

 

 



 

Adjusted EBITDA and Distributable Cash Flow

 

We define Adjusted EBITDA generally as: net income (loss) plus interest expense, income tax expense, depreciation, depletion and amortization expense, non-cash charges and selected losses that are unusual or non-recurring less interest income, income tax benefits and selected gains that are unusual or non-recurring. We report Adjusted EBITDA (which as defined includes certain other adjustments, none of which impacted the calculation of Adjusted EBITDA herein) to our lenders under our new credit facility in determining compliance with the interest coverage ratio test and certain senior consolidated indebtedness to Adjusted EBITDA tests thereunder.  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.  The following table (in thousands) reconciles net income (loss) to Adjusted EBITDA.

 

 

 

Three Months

 

Six Months

 

 

 

Ended

 

Ended

 

 

 

June 30,

 

June 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

Reconciliation of Adjusted EBITDA to net income :

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(4,063

)

$

5,119

 

$

5,775

 

$

9,595

 

Depreciation, depletion and amortization expense

 

4,922

 

2,125

 

8,076

 

4,324

 

Provision for income taxes

 

95

 

20

 

125

 

41

 

Interest expense

 

3,450

 

2,809

 

7,663

 

5,616

 

IPO transaction-related costs

 

10,922

 

 

10,922

 

 

Stock-based compensation expense

 

1,221

 

 

1,221

 

 

Loss on early extinguishment of debt

 

907

 

 

907

 

 

Other expense (income)

 

(117

)

(9

)

(159

)

(16

)

Provision for doubtful accounts

 

34

 

30

 

64

 

53

 

Loss (gain) on disposal of equipment

 

 

 

 

5

 

Adjusted EBITDA

 

$

17,371

 

$

10,094

 

$

34,594

 

$

19,618

 

 

We define distributable cash flow as net income (loss) 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.  Distributable cash flow does not reflect changes in working capital balances.

 

 

 

For the Period May 14
through June 30,
2013

 

Post-IPO net income (loss)

 

$

(7,349

)

Add (less) reconciling items post-IPO:

 

 

 

Add depreciation, depletion and amortization expense

 

3,423

 

Add amortization of deferred of financing costs

 

104

 

Add transaction-related costs

 

10,922

 

Add stock-based compensation expense

 

1,221

 

Add loss from extinguishment of debt

 

907

 

Add provision for doubtful accounts

 

20

 

Less capital lease principal payments

 

(290

)

Less mandatory principal payments on miscellaneous notes and obligations

 

(80

)

Less maintenance capital expenditures

 

(258

)

Distributable cash flow

 

$

8,620