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Emerge Energy Services Announces Second Quarter 2015 Results

Southlake, Texas - August 6, 2015 - Emerge Energy Services LP ("Emerge Energy") today announced second quarter 2015 financial and operating results.

Highlights

  • Adjusted EBITDA of $17.0 million for the three months ended June 30, 2015.
  • Distributable Cash Flow of $13.5 million for the three months ended June 30, 2015.
  • Cash available for distribution of $16.2 million, or $0.67 per unit, for the three months ended June 30, 2015.
  • Full quarter sales of 861,000 tons of sand.

Overview

Emerge Energy reported net income of $2.9 million, or $0.12 per diluted unit for the three months ended June 30, 2015.  For that same period, Emerge Energy reported Adjusted EBITDA of $17.0 million and Distributable Cash Flow of $13.5 million.  Net income, net income per diluted unit and Adjusted EBITDA for the three months ended June 30, 2014, were $20.1 million, $0.83 and $30.1 million, respectively.  Adjusted EBITDA and Distributable Cash Flow are non-GAAP financial measures that Emerge Energy uses to assess its performance on an ongoing basis.

Previously, Emerge Energy declared a distribution of $0.67 per unit for the second quarter of 2015, which includes $0.11 of distributable cash flow that was reserved in the first quarter of 2015 and the third quarter of 2014.  This total distribution represents a 33% decrease from the first quarter 2015 distribution of $1.00 per unit. 

"Emerge Energy had another solid quarter, especially given the current market environment," said Ted W. Beneski, Chairman of the Board of Directors of the general partner of Emerge Energy.  "After a challenging second half of 2014, our fuel segment improved its profitability and continues to build on early successes in 2015.  Our sand segment continued to increase market share in the first quarter of 2015 and was able to deliver solid volumes in the second quarter, but was again impacted from a weak pricing environment and the underutilization of our railcar fleet.  As a result of the current market conditions, we continue to expect to spend $30-40 million dollars in capital expenditures in 2015, including maintenance capital expenditures."

"Our sand segment once again performed very well, despite the decline in proppant demand and pricing," added Rick Shearer, CEO of Emerge Energy.  "The sand segment generated Adjusted EBITDA of $13.9 million for the three months ended June 30, 2015 on sales volume of 861,000 tons.  Our volumes were down approximately 25% from the first quarter of 2015; and based on our estimates of market demand, we believe we have continued to grow our market share despite lower quarter-over-quarter volumes on a sequential and year over year basis.  Market pricing, as well as the prices we have negotiated with our customers, have continued to decline, both at the plant and in basin.  While we have been able to significantly lower our production costs, and believe we will continue to do so in subsequent quarters, our fixed rail expense, which includes both our operating leases and railcar storage costs, were significant.  We are taking a number of steps to reduce that cost, including sub-leasing a portion of our railcar fleet.

"Our fuel segment generated Adjusted EBITDA of $5.4 million for the three months ended June 30, 2015, a significant sequential quarterly increase.  Our base margin on our wholesale and transmix improved, while the increase in refined product pricing contributed positively to EBITDA."

Conference Call

Emerge Energy will host its 2015 second quarter results conference call later today, Thursday, August 6, 2015 at 10 a.m. CDT.  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 93116080.  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 from 1:00 p.m. CDT on August 6 through 10:59 p.m. CDT on August 13, 2015.  The replay teleconference will be available by dialing (855) 859-2056 or (404) 537-3406 and the reservation number 393116080.


Operating Results

The following table summarizes Emerge Energy's unaudited consolidated operating results for the three and six months ended June 30, 2015 and 2014.

  Three Months Ended June 30,   Six Months Ended June 30,  
  2015   2014   2015   2014  
  ($ in thousands)  
REVENUES $ 200,852     $ 298,273     $ 404,813     $ 572,354    
OPERATING EXPENSES                
Cost of goods sold 176,933     261,395     345,263     501,191    
Depreciation, depletion and amortization 7,355     5,711     13,795     11,481    
Selling, general and administrative expenses 8,179     8,994     17,782     17,469    
Project termination 2,693     -     9,412     -    
Total operating expenses 195,160     276,100     386,252     530,141    
Operating income 5,692     22,173     18,561     42,213    
OTHER EXPENSE (INCOME)                
Interest expense, net 2,632     1,943     5,761     3,527    
Other (15 )   (32 )   (44 )   (151 )  
Total other expense 2,617     1,911     5,717     3,376    
Income before provision for income taxes 3,075     20,262     12,844     38,837    
Provision for income taxes 191     170     469     259    
NET INCOME $ 2,884     $ 20,092     $ 12,375     $ 38,578    
Adjusted EBITDA (a) $ 16,953     $ 30,137     $ 45,338     $ 58,116    

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

Sand Segment

  Three Months Ended June 30,   Six Months Ended June 30,  
  2015   2014   2015   2014  
  ($ in thousands)  
REVENUES $ 68,118     $ 77,470     $ 164,362     $ 141,804    
OPERATING EXPENSES                
Cost of goods sold 50,738     51,860     116,993     90,736    
Depreciation, depletion and amortization 4,713     2,688     8,507     5,446    
Selling, general and administrative expenses 3,686     2,448     7,403     5,664    
Project termination 2,693     -     9,412     -    
Operating income $ 6,288     $ 20,474     $ 22,047     $ 39,958    
Adjusted EBITDA (a) $ 13,935     $ 23,184     $ 40,226     $ 45,421    
                 
Volume of sand sold (tons in thousands) 861     1,045     2,012     1,927    
                 
Volume of sand produced (tons in thousands):                
Arland, Wisconsin facility 248     -     653     -    
Barron, Wisconsin facility 353     576     850     1,056    
New Auburn, Wisconsin facility 178     330     483     650    
Kosse, Texas facility 59     91     129     130    
Total volume of sand produced 838     997     2,115     1,836    

(a) See section entitled "Adjusted EBITDA and Distributable Cash Flow" that includes a definition of Adjusted EBITDA and provides reconciliation to GAAP net income.
For the quarter ended June 30, 2015, Emerge Energy sold 861,000 tons of sand, compared to 1,045,000 tons for the same period in the prior year.  The Barron facility produced 353,000 tons, compared to 576,000 tons for the same period in 2014, while the New Auburn facility produced 178,000 tons, compared to 330,000 tons for the same period in 2014.  After starting up in early December 2014, the Arland facility produced 248,000 tons, while the Kosse facility decreased production to 59,000 tons, down from 91,000 for the same period in 2014.  Sand segment Adjusted EBITDA was $13.9 million for the second quarter 2015, compared to $23.2 million for the same quarter in 2014.  This 40% decrease in Adjusted EBITDA was due to the decrease in total sand sales at all company facilities, lower realized pricing on an FOB plant-equivalent basis and as as-delivered basis, and higher logistics costs.

Fuel Segment

  Three Months Ended June 30,   Six Months Ended June 30,  
  2015   2014   2015   2014  
  ($ in thousands)  
REVENUES $ 132,734     $ 220,803     $ 240,451     $ 430,550    
OPERATING EXPENSES                
Cost of goods sold 126,195     209,535     228,270     410,455    
Depreciation, depletion and amortization 2,634     3,017     5,273     6,022    
Selling, general and administrative expenses 1,203     1,507     2,803     2,789    
Operating income $ 2,702     $ 6,744     $ 4,105     $ 11,284    
Adjusted EBITDA (a) $ 5,373     $ 9,799     $ 9,461     $ 17,381    
                 
Volume of refined fuels sold (gallons in thousands) 63,402     70,514     119,797     138,742    
Volume of terminal throughput (gallons in thousands) 40,796     57,877     80,027     114,751    
Volume of transmix refined (gallons in thousands) 25,245     28,479     46,599     63,695    
Refined transmix as a percent of total refined fuels sold 39.8 %   40.4 %   38.9 %   45.9 %  

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

For the quarter ended June 30, 2015, Emerge Energy sold 63 million gallons of refined fuel, compared to 71 million gallons for the same period last year, and had additional third-party volume of 41 million gallons pass through its terminals, compared to 58 million gallons for the same period last year.  Emerge Energy refined 25 million gallons of transmix for the three months ended June 30, 2015, compared to 28 million gallons for the same period last year.  Adjusted EBITDA for Fuel was $5.4 million for the second quarter, compared to $9.8 million for the comparable quarter in 2014.  This 45% decrease in Adjusted EBITDA was due to a lower base margin on our wholesale and transmix operations and lower volumes sold.

Capital Expenditures

For the three months ended June 30, 2015, Emerge Energy's capital expenditures totaled $7.7 million.  This includes approximately $0.5 million of maintenance capital expenditures.

Distributable Cash Flow

For the three months ended June 30, 2015, Emerge Energy generated $13.5 million in Distributable Cash Flow.  On July 23, 2015, we announced a distribution of $0.67 per unit, which includes $0.11 of distributable cash flow that was reserved in the first quarter of 2015 and the third quarter of 2014.  This distribution is scheduled to be paid on August 13, 2015 to common unitholders of record on August 5, 2015.

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 also processes transmix, distributes refined motor fuels, operates bulk motor fuel storage terminals, and provides complementary fuel services.  Emerge Energy operates its sand segment through its subsidiary Superior Silica Sands LLC and its fuel segment through its subsidiaries Direct Fuels LLC and Allied Energy Company LLC.

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) 865-5830


EMERGE ENERGY SERVICES LP
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands except per unit data)

  Three Months Ended June 30,   Six Months Ended June 30,  
  2015   2014   2015   2014  
REVENUES $ 200,852     $ 298,273     $ 404,813     $ 572,354    
OPERATING EXPENSES                
Cost of goods sold 176,933     261,395     345,263     501,191    
Depreciation, depletion and amortization 7,355     5,711     13,795     11,481    
Selling, general and administrative expenses 8,179     8,994     17,782     17,469    
Project termination 2,693     -     9,412     -    
Total operating expenses 195,160     276,100     386,252     530,141    
Operating income 5,692     22,173     18,561     42,213    
OTHER EXPENSE (INCOME)                
Interest expense, net 2,632     1,943     5,761     3,527    
Other (15 )   (32 )   (44 )   (151 )  
Total other expense 2,617     1,911     5,717     3,376    
Income before provision for income taxes 3,075     20,262     12,844     38,837    
Provision for income taxes 191     170     469     259    
NET INCOME $ 2,884     $ 20,092     $ 12,375     $ 38,578    
Earnings per common unit (basic) $ 0.12     $ 0.84     $ 0.51     $ 1.61    
Earnings per common unit (diluted) $ 0.12     $ 0.83     $ 0.51     $ 1.60    
Weighted average number of common units outstanding including participating securities (basic) 24,131,302     24,031,650     24,129,664     24,023,651    
Weighted average number of common units outstanding (diluted) 24,133,813     24,112,954     24,131,682     24,068,178    


EMERGE ENERGY SERVICES LP
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
($ in thousands)

  June 30, 2015   December 31, 2014  
ASSETS  
Current Assets:        
Cash and cash equivalents $ 3,241     $ 6,876    
Trade and other receivables, net 59,785     75,708    
Inventories 41,619     32,278    
Prepaid expenses and other current assets 12,317     9,262    
Total current assets 116,962     124,124    
Property, plant and equipment, net 233,266     238,657    
Intangible assets, net 27,684     31,158    
Goodwill 29,264     29,264    
Other assets, net 12,086     8,924    
Total assets $ 419,262     $ 432,127    
LIABILITIES AND PARTNERS' EQUITY  
Current Liabilities:        
Accounts payable $ 26,548     $ 21,341    
Accrued liabilities 17,345     24,411    
Current portion of long-term debt -     53    
Current portion of capital lease liability 155     930    
Total current liabilities 44,048     46,735    
Long-term debt, net of current portion 249,142     217,023    
Obligation for business acquisition, net of current portion 10,311     10,737    
Capital lease liability, net of current portion -     57    
Other long-term liabilities 3,763     2,386    
Total liabilities 307,264     276,938    
Commitments and contingencies        
Partners' Equity:        
General partner -     -    
Limited partner common units 111,998     155,189    
Total partners' equity 111,998     155,189    
Total liabilities and partners' equity $ 419,262     $ 432,127    


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, equity-based compensation and certain other non-cash charges, and charges that are unusual or non-recurring less interest income, income tax benefits and 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 revolving credit facility in determining our 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 tables  reconcile net income (loss) to Adjusted EBITDA ($ in thousands).

  Three Months Ended June 30,  
  Sand Segment   Fuel Segment   Corporate   Total  
  2015   2014   2015   2014   2015   2014   2015   2014  
Net income (loss) $ 6,288     $ 20,474     $ 2,702     $ 6,744     $ (6,106 )   $ (7,126 )   $ 2,884     $ 20,092    
Interest expense, net -     -     -     -     2,632     1,943     2,632     1,943    
Other (income) loss -     -     -     -     (15 )   (32 )   (15 )   (32 )  
Provision for income taxes -     -     -     -     191     170     191     170    
Operating income (loss) 6,288     20,474     2,702     6,744     (3,298 )   (5,045 )   5,692     22,173    
Depreciation, depletion and amortization 4,713     2,688     2,634     3,017     8     6     7,355     5,711    
Equity-based compensation expense -     -     -     -     935     2,193     935     2,193    
Loss (gain) on disposal of equipment -     19     -     -     -     -     -     19    
Provision for doubtful accounts 221     (7 )   37     38     -     -     258     31    
Accretion of asset retirement obligation 20     10     -     -     -     -     20     10    
Project termination 2,693     -     -     -     -     -     2,693     -    
Adjusted EBITDA $ 13,935     $ 23,184     $ 5,373     $ 9,799     $ (2,355 )   $ (2,846 )   $ 16,953     $ 30,137    

  Six Months Ended June 30,  
  Sand Segment   Fuel Segment   Corporate   Total  
  2015   2014   2015   2014   2015   2014   2015   2014  
Net income (loss) $ 22,047     $ 39,958     $ 4,105     $ 11,284     $ (13,777 )   $ (12,664 )   $ 12,375     $ 38,578    
Interest expense, net -     -     -     -     5,761     3,527     5,761     3,527    
Other (income) loss -     -     -     -     (44 )   (151 )   (44 )   (151 )  
Provision for income taxes -     -     -     -     469     259     469     259    
Operating income (loss) 22,047     39,958     4,105     11,284     (7,591 )   (9,029 )   18,561     42,213    
Depreciation, depletion and amortization 8,507     5,446     5,273     6,022     15     13     13,795     11,481    
Equity-based compensation expense -     -     -     -     3,227     4,330     3,227     4,330    
Loss (gain) on disposal of equipment -     19     8     -     -     -     8     19    
Provision for doubtful accounts 221     (12 )   75     75     -     -     296     63    
Accretion of asset retirement obligation 39     10     -     -     -     -     39     10    
Project termination 9,412     -     -     -     -     -     9,412     -    
Adjusted EBITDA $ 40,226     $ 45,421     $ 9,461     $ 17,381     $ (4,349 )   $ (4,686 )   $ 45,338     $ 58,116    

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.  The following table (in thousands) reconciles net income to Distributable Cash Flow.

  Three Months Ended
 June 30, 2015
 
  ($ in thousands)  
Net income $ 2,884    
     
Add (less) reconciling items post-IPO:    
Add depreciation, depletion and amortization expense 7,355    
Add amortization of deferred financing costs 291    
Add income taxes accrued, net of payments (44 )  
Add equity-based compensation expense 935    
Add provision for doubtful accounts 258    
Add unrealized loss on fair value of interest rate swaps (92 )  
Add accretion of asset retirement obligations 20    
Add project termination costs 2,693    
Less cash distribution on participating securities (410 )  
Less maintenance capital expenditures (500 )  
Other 110    
Distributable cash flow 13,500    
Add reserve for planned capital expenditures 2,660    
Cash available for distribution $ 16,160    

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