Attached files

file filename
8-K - CURRENT REPORT OF MATERIAL EVENTS OR CORPORATE CHANGES - Emerge Energy Services LPa13-24126_18k.htm

Exhibit 99.1

 

Emerge Energy Services LP Announces Third Quarter 2013 Results

 

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

 

Highlights

 

·                  Adjusted EBITDA of $26.0 million for the three months ended September 30, 2013.

·                  Distributable cash flow of $23.4 million for the three months ended September 30, 2013.

·                  Cash available for distribution of $19.9 million, or $0.86 per unit, for the three months ended September 30, 2013.

·                  Full quarter sales of 734,000 tons of sand, 96% of which was Northern White Sand.

·                  Average utilization of over 57% of capacity at our Barron facility.

 

Overview

 

Emerge reported net income of $15.4 million, or $0.64 per diluted unit for the three months ended September 30, 2013.  For that same period, Emerge reported Adjusted EBITDA of $26.0 million and distributable cash flow of $23.4 million.  Net income and Adjusted EBITDA for the three months ended September 30, 2012, were $4.7 million and $10.0 million, respectively.  Adjusted EBITDA and Distributable Cash Flow are non-GAAP financial measures that Emerge uses to assess its performance on an ongoing basis.

 

Previously, Emerge declared a distribution of $0.86 per unit for the quarter ended September 30, 2013.  This represents a 23% increase over the pro-rated second quarter distribution of $0.70 per unit.

 

“Emerge is proud to deliver another quarter of record performance,” said Ted Beneski, Chairman of the Board of Directors of the general partner of Emerge.  “Our distribution continues to exceed the forecast contained in our prospectus, thanks to our high-quality products, customer-focused services, and continued focus on operational improvements.  Further, we expect that the fourth quarter will once again exceed our projections contained in our IPO Prospectus, and are pleased to announce preliminary distribution guidance of $3.80 - $4.00 per unit for 2014.”

 

“Our Barron plant continues to exceed our expectations, as capacity utilization continues to proceed ahead of schedule,” added Rick Shearer, CEO of Emerge.  “The addition of another screen deck at our New Auburn operation brings that plant up to full utilization of its air permit.  We continue to broaden our customer base, including the addition of five new major customers over the past quarter, and we are happy to announce the execution of a major new multi-year supply contract at our New Auburn facility.  Our customers are demanding product quality, reliable delivery and superior customer service, and Emerge is working daily to meet those needs.  Our dramatic growth is proof that we are delivering on these high customer expectations. Our substantially increased sales to the Western Canadian Sedimentary Basin, as well as the Marcellus and Utica sales, have validated our strategy of having access to two Class One railroads.

 

“Our fuel segment continues to outperform our expectations, thanks in part to the incremental benefit of the Direct Fuels acquisition, solid third quarter margins, increased fuel volumes, and a temporary spike in RIN prices.  We are particularly pleased that our fuel segment recently added a major refiner to its terminal throughput customer list, and a business unit within our fuel segment obtained ‘shipper status’ on a major common carrier pipeline.  We believe both of these events will have a positive impact on our fuel segment results in the future.  Even though we benefited from high RIN prices in third quarter, we expect RIN pricing to return to its long-term average in the fourth quarter or early next year.  We continue to pursue fundamental improvements in fuel segment operations with an emphasis on lowering costs, new customer contracts, and advantageous purchasing arrangements.”

 



 

Conference Call

 

Emerge will host its 2013 second quarter conference call later today, Thursday, November 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 (866) 318-8614 or (617) 399-5133 and entering pass code 72026576. 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 7:00 p.m. CDT on November 14 through 11:59 p.m. CDT on December 14, 2013. The replay teleconference will be available by dialing (888) 286-8010 or (617) 801-6888 and the reservation number 66647937.

 

Operating Results

 

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

 

 

 

For the Three Months
Ended September 30,

 

For the Nine Months
Ended September 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

REVENUES

 

 

 

 

 

 

 

 

 

Revenues from fuel sales

 

$

221,227

 

$

157,705

 

$

508,860

 

$

400,751

 

Revenues from sand sales

 

36,613

 

16,941

 

95,822

 

47,007

 

Other revenues

 

12,401

 

1,356

 

22,543

 

4,674

 

Total revenues

 

270,241

 

176,002

 

627,225

 

452,432

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

Cost of product

 

221,073

 

159,041

 

515,254

 

402,558

 

Operations and maintenance

 

17,663

 

4,509

 

37,730

 

12,651

 

Depreciation, depletion and amortization

 

6,390

 

2,234

 

14,466

 

6,558

 

Selling, general and administrative expenses

 

5,673

 

2,475

 

13,879

 

7,681

 

IPO transaction-related costs

 

44

 

 

10,966

 

 

Equity-based compensation expense

 

2,300

 

 

3,521

 

 

Gain on disposal of equipment

 

(4

)

(8

)

(4

)

(3

)

Total operating expenses

 

253,139

 

168,251

 

595,812

 

429,445

 

Income from operations

 

17,102

 

7,751

 

31,413

 

22,987

 

OTHER EXPENSE (INCOME)

 

 

 

 

 

 

 

 

 

Interest expense

 

1,645

 

2,350

 

9,308

 

7,966

 

Loss from debt restructuring, net

 

 

674

 

 

674

 

Loss on early extinguishment of debt

 

 

 

907

 

 

Other

 

(118

)

(22

)

(277

)

(38

)

Total other expense

 

1,527

 

3,002

 

9,938

 

8,602

 

Income before provision for taxes

 

15,575

 

4,749

 

21,475

 

14,385

 

Provision for taxes

 

171

 

20

 

296

 

61

 

NET INCOME

 

$

15,404

 

$

4,729

 

$

21,179

 

$

14,324

 

ADJUSTED EBITDA (a)

 

$

25,967

 

$

10,007

 

$

60,565

 

$

29,625

 

 


(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 September 30,

 

For the Nine Months
Ended September 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

REVENUES

 

 

 

 

 

 

 

 

 

Revenues from sand sales

 

$

36,613

 

$

16,941

 

$

95,822

 

$

47,007

 

Other revenues

 

10,838

 

280

 

18,150

 

724

 

Total revenues

 

47,451

 

17,221

 

113,972

 

47,731

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

Cost of product

 

11,944

 

4,823

 

32,765

 

12,325

 

Operations and maintenance

 

13,809

 

2,151

 

28,427

 

5,953

 

Selling, general and administrative expenses

 

2,606

 

1,390

 

6,904

 

4,241

 

Total operating expenses

 

28,359

 

8,364

 

68,096

 

22,519

 

Segment income

 

$

19,092

 

$

8,857

 

$

45,876

 

$

25,212

 

Volume of sand sold (tons in thousands):

 

 

 

 

 

 

 

 

 

Kosse, Texas facility

 

30

 

56

 

98

 

136

 

New Auburn, Wisconsin facility

 

360

 

256

 

967

 

733

 

Barron, Wisconsin facility

 

344

 

 

821

 

 

Total volume of sand sold

 

734

 

312

 

1,886

 

869

 

 

For the quarter ended September 30, 2013, Emerge sold 734,000 tons of sand, 704,000 of which were sold from its Wisconsin facilities.  The New Auburn facility sold 360,000 tons, compared to 256,000 tons for the same period in 2012, while the Barron facility, which commenced operations in late December 2012, sold 344,000 tons.  Sand segment income was $19.1 million for the third quarter, compared to $8.9 million for the same quarter in 2012.  This 115% increase in segment income was due to the increase in volume and associated gross margin of sand sold, as well as an increase in income from our logistics services, but was partially mitigated by increased costs at our Barron facility and segment  selling, general and administrative costs.

 



 

Fuel Segment

 

 

 

For the Three Months
Ended September 30,

 

For the Nine Months
Ended September 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

REVENUES

 

 

 

 

 

 

 

 

 

Revenues from fuel sales

 

$

221,227

 

$

157,705

 

$

508,860

 

$

400,751

 

Other revenues

 

1,563

 

1,076

 

4,393

 

3,950

 

Total revenues

 

222,790

 

158,781

 

513,253

 

404,701

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

Cost of product

 

209,129

 

154,218

 

482,489

 

390,233

 

Operations and maintenance

 

3,854

 

2,358

 

9,303

 

6,698

 

Selling, general and administrative expenses

 

1,701

 

1,085

 

4,290

 

3,440

 

Total operating expenses

 

214,684

 

157,661

 

496,082

 

400,371

 

Segment income

 

$

8,106

 

$

1,120

 

$

17,171

 

$

4,330

 

Volume of refined fuels sold (gallons in thousands)

 

69,644

 

49,956

 

161,071

 

127,806

 

Volume of terminal throughput (gallons in thousands)

 

48,969

 

36,209

 

144,851

 

135,400

 

Volume of transmix refined (gallons in thousands)

 

34,909

 

5,718

 

59,392

 

18,375

 

Refined transmix as a percent of total refined fuels sold

 

50.1

%

11.4

%

36.9

%

14.4

%

 

For the quarter ended September 30, 2013, Emerge sold 70 million gallons of refined fuel, compared to 50 million gallons for the same period last year, and had additional third-party volume of 49 million gallons pass through its terminals, compared to 36 million gallons for the same period last year.  Emerge refined 35 million gallons of transmix for the three months ended September 30, 2013, compared to 6 million gallons for the same period last year.  The increase in volumes was primarily due to the acquisition of Direct Fuels, which Emerge acquired at the close of its IPO on May 14, 2013.  Segment income for Fuel was $8.1 million for the full quarter, compared to $1.1 million for the comparable quarter in 2012.  This 636% increase in segment income was due, in part, to the acquisition of Direct Fuels, general improvement in fuel-rated margins, and increased gross margin from higher-than-normal RINS prices.

 

Capital Expenditures

 

For the three months ended September 30, 2013, our capital expenditures totaled $2.6 million.  This includes approximately $0.8 million of maintenance capital expenditures.

 

Distributable Cash Flow

 

For the three months ended September 30, 2013, Emerge generated $23.4 million in Distributable Cash Flow.  Our Board of Directors reserved approximately $3.5 million for capital expenditures as we are in the process of expanding our credit facility.  After deducting this reserve, our cash available for distribution is $19.9 million.  Assuming that we are successful in establishing a larger facility, we intend to release this reserve back to investors in subsequent quarters.  On October 25, 2013, we announced the distribution of $0.86 per unit, which will be paid November 14, 2013 to common unitholders of record on November 6, 2014.

 



 

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 gas wells.  Emerge also processes transmix, distributes refined motor fuels and biodiesel, operates bulk motor fuel storage terminals, and provides complementary services.

 

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, including our statements relating to the anticipated expansion of our credit facility and our cash available for distribution in future quarters, 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 our initial public offering. The risk factors and other factors noted in the registration statement 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 September 30

 

For the Nine Months Ended 
September 30

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

REVENUES

 

 

 

 

 

 

 

 

 

Revenues from fuel sales

 

$

221,227

 

$

157,705

 

$

508,860

 

$

400,751

 

Revenues from sand sales

 

36,613

 

16,941

 

95,822

 

47,007

 

Other revenues

 

12,401

 

1,356

 

22,543

 

4,674

 

Total revenues

 

270,241

 

176,002

 

627,225

 

452,432

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

Cost of product

 

221,073

 

159,041

 

515,254

 

402,558

 

Operations and maintenance

 

17,663

 

4,509

 

37,730

 

12,651

 

Depreciation, depletion and amortization

 

6,390

 

2,236

 

14,466

 

6,558

 

Selling, general and administrative expenses

 

5,673

 

2,475

 

13,879

 

7,681

 

IPO transaction-related costs

 

44

 

 

10,966

 

 

Equity-based compensation expense

 

2,300

 

 

3,521

 

 

Gain on disposal of equipment

 

(4

)

(8

)

(4

)

(3

)

Total operating expenses

 

253,139

 

168,251

 

595,812

 

429,445

 

Income from operations

 

17,102

 

7,751

 

31,413

 

22,987

 

OTHER EXPENSE (INCOME)

 

 

 

 

 

 

 

 

 

Interest expense, net

 

1,645

 

2,350

 

9,308

 

7,966

 

Loss from debt restructuring, net

 

 

674

 

 

674

 

Loss on early extinguishment of debt

 

 

 

907

 

 

Other

 

(118

)

(22

)

(277

)

(38

)

Total other expense

 

1,527

 

3,002

 

9,938

 

8,602

 

Income before provision for income taxes

 

15,575

 

4,749

 

21,475

 

14,385

 

Provision for income taxes

 

171

 

20

 

296

 

61

 

NET INCOME

 

$

15,404

 

$

4,729

 

$

21,179

 

$

14,324

 

Less Predecessor net income before May 14, 2013

 

 

 

 

 

13,124

 

 

 

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

 

 

 

 

 

$

8,055

 

 

 

Earnings per common unit (basic)

 

$

0.64

 

 

 

$

0.34

 

 

 

Earnings per common unit (diluted)

 

$

0.64

 

 

 

$

0.34

 

 

 

Weighted average number of common units outstanding including participating securities (basic)

 

24,015,662

 

 

 

24,015,662

 

 

 

Weighted average number of common units outstanding (diluted)

 

24,021,289

 

 

 

24,020,700

 

 

 

 



 

EMERGE ENERGY SERVICES LP

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

($ in thousands)

 

 

 

September 30,
2013

 

December 31,
2012

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash and equivalents

 

$

22,658

 

$

1,467

 

Restricted cash and equivalents

 

6,190

 

 

Trade and other receivables, net

 

50,843

 

26,781

 

Inventories

 

29,797

 

22,848

 

Direct financing lease receivable

 

934

 

1,579

 

Prepaid expenses and other current assets

 

9,117

 

2,602

 

Total current assets

 

119,539

 

55,277

 

Property, plant and equipment, net

 

134,815

 

120,851

 

Mineral resources, net

 

10,540

 

10,563

 

Intangible assets, net

 

42,093

 

1,426

 

Goodwill

 

29,264

 

 

Deferred financing and public offering costs, net

 

3,431

 

7,085

 

Deposits and other assets

 

317

 

587

 

Total assets

 

$

339,999

 

$

195,789

 

 

 

 

 

 

 

LIABILITIES AND PARTNERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Accounts payable

 

$

31,803

 

$

27,622

 

Accrued liabilities

 

11,292

 

7,278

 

Deferred compensation and equity-based compensation liability

 

6,389

 

 

Deferred revenue

 

1,127

 

801

 

Current portion of long-term debt

 

388

 

9,321

 

Current portion of capital lease liability

 

2,897

 

1,548

 

Current portion of advances from customers

 

 

4,043

 

Total current liabilities

 

53,896

 

50,613

 

Long-term debt, net of current portion

 

108,566

 

129,641

 

Capital lease liability, net of current portion

 

1,414

 

5,428

 

Asset retirement obligations

 

693

 

690

 

Total liabilities

 

164,569

 

186,372

 

Commitments and contingencies

 

 

 

 

 

Partners’ Equity:

 

 

 

 

 

Predecessor members’ equity

 

 

9,417

 

General partner

 

 

 

Limited partner units

 

175,430

 

 

Total partners’ equity

 

175,430

 

9,417

 

Total liabilities and partners’ equity

 

$

339,999

 

$

195,789

 

 



 

Adjusted EBITDA and Distributable Cash Flow

 

We define Adjusted EBITDA generally as: net income plus interest expense, income tax expense, depreciation, depletion and amortization expense, non-cash charges and losses that are unusual or non-recurring less interest income, income tax benefits and gains that are unusual or non-recurring.  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 to Adjusted EBITDA.

 

 

 

Three Months
Ended
September 30,

 

Nine Months
Ended 
September 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

Reconciliation of Adjusted EBITDA to net income :

 

 

 

 

 

 

 

 

 

Net income

 

$

15,404

 

$

4,729

 

$

21,179

 

$

14,324

 

Depreciation, depletion and amortization expense

 

6,390

 

2,234

 

14,466

 

6,558

 

Provision for income taxes

 

171

 

20

 

296

 

61

 

Interest expense

 

1,645

 

2,350

 

9,308

 

7,966

 

IPO transaction-related costs

 

44

 

 

10,966

 

 

Equity-based compensation expense

 

2,300

 

 

3,521

 

 

Loss from debt restructuring, net

 

 

674

 

 

674

 

Loss on early extinguishment of debt

 

 

 

907

 

 

Other income

 

(118

)

(22

)

(277

)

(38

)

Provision for doubtful accounts

 

132

 

30

 

200

 

83

 

Gain on disposal of equipment

 

(4

)

(8

)

(4

)

(3

)

Asset retirement obligation

 

3

 

 

3

 

 

Adjusted EBITDA

 

$

25,967

 

$

10,007

 

$

60,565

 

$

29,625

 

 

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.  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.  Distributable cash flow does not reflect changes in working capital balances.

 

 

 

 

Three Months Ended 
September 30, 2013

 

Net income

 

$

15,404

 

 

 

 

 

Add (less) reconciling items post-IPO:

 

 

 

Add depreciation, depletion and amortization expense

 

6,390

 

Add amortization of deferred of financing costs

 

187

 

Add income taxes accrued

 

66

 

Add equity-based compensation expense (includes $21 of equity-based incentive plan)

 

2,321

 

Add provision for doubtful accounts

 

132

 

Add IPO-related transaction costs

 

44

 

Add accretion of asset retirement obligation

 

3

 

Less cash distribution on participating securities

 

(294

)

Less maintenance capital expenditures

 

(834

)

 

 

 

 

Distributable cash flow

 

$

23,420

 

Less reserve for planned capital expenditures

 

(3,451

)

Cash available for distribution

 

$

19,969